As filed with the Securities and Exchange Commission on June 15, 2015
Registration No. 333-203110
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TransUnion
(Exact name of registrant as specified in its charter)
Delaware | 7320 | 61-1678417 | ||
(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
555 West Adams Street Chicago, Illinois 60661 (312) 985-2000 (Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
John W. Blenke, Esq. Executive Vice President, Corporate General Counsel and Corporate Secretary TransUnion 555 West Adams Street Chicago, Illinois 60661 (312) 985-2000 (Name, address, including zip code, and telephone number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered |
Amount to be Registered(1) |
Proposed Maximum Aggregate Offering Price Per Share(1)(2) |
Proposed Maximum Aggregate Offering Price(2) |
Amount of Registration Fee(3) |
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Common Stock, par value $0.01 per share |
33,977,273 | $23.00 | $781,477,279 | $90,808 | ||||
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(1) | Includes additional shares that the underwriters have the option to purchase to cover over-allotments. |
(2) | Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended (the Securities Act). |
(3) | $11,620 of such fee was previously paid. |
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated June 15, 2015
29,545,455 Shares
TransUnion
Common Stock
This is an initial public offering of shares of common stock of TransUnion. We are offering 29,545,455 shares of our common stock.
Prior to this offering, there has been no public market for our common stock. We currently estimate that the initial public offering price per share will be between $21.00 and $23.00. We have applied to list our common stock on The New York Stock Exchange (the NYSE) under the symbol TRU. After the completion of this offering, affiliates of Advent International Corporation (Advent) and Goldman, Sachs & Co. (GS, and together with Advent, the Sponsors) will continue to own a majority of the voting power of all outstanding shares of our common stock. As a result, we will be a controlled company within the meaning of the corporate governance standards of the NYSE. See Principal Stockholders.
Investing in our common stock involves risk. See Risk Factors on page 21 to read about factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share | Total | |||||||
Initial public offering price |
$ | $ | ||||||
Underwriting discounts and commissions |
$ | $ | ||||||
Proceeds, before expenses, to us (1) |
$ | $ |
(1) | See Underwriting Conflicts of Interest. |
To the extent that the underwriters sell more than 29,545,455 shares of common stock, the underwriters have the option to purchase up to an additional 4,431,818 shares from us at the initial price to public, less the underwriting discounts and commissions, within 30 days of the date of this prospectus.
The underwriters expect to deliver the shares against payment in New York, New York on , 2015.
Joint Book-Running Managers
Goldman, Sachs & Co. | J.P. Morgan | BofA Merrill Lynch | Deutsche Bank Securities |
RBC Capital Markets | Wells Fargo Securities | Credit Suisse |
Co-Managers
Drexel Hamilton | Evercore ISI | Loop Capital Markets | Stifel |
Prospectus dated , 2015.
TransUnion1 billionconsumer files65,00030+business customers countries35+ million consumers30+petabytes of data90,000data sources
Prospectus
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F-1 |
Through and including , 2015 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealers obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
Unless otherwise indicated or the context otherwise requires, financial data in this prospectus reflects the consolidated business and operations of TransUnion and its consolidated subsidiaries.
The consolidated financial statements of TransUnion included in this prospectus are presented in U.S. Dollars rounded to the nearest million, with amounts in this prospectus rounded to the nearest million. Therefore, discrepancies in the tables between totals and the sums of the amounts listed may
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occur due to such rounding. The accounting policies set out in the audited consolidated financial statements contained elsewhere in this prospectus have been consistently applied to all periods presented.
This prospectus includes industry and trade association data, forecasts and information that we have prepared based, in part, upon data, forecasts and information obtained from independent trade associations, industry publications and surveys and other information available to us. Some data is also based on our good faith estimates, which are derived from managements knowledge of the industry and independent sources.
This prospectus contains non-GAAP financial measures that are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP). Specifically, we make use of the non-GAAP financial measures Adjusted EBITDA and Adjusted Net Income.
Adjusted EBITDA
Adjusted EBITDA represents:
| net income or loss attributable to the Company, plus : |
| net interest expense; |
| income tax provision (benefit); |
| depreciation and amortization; |
| stock-based compensation, including cash-settled stock-based compensation; |
| discontinued operations, if any; and |
| other adjustments of the type described in note 4 to Selected Historical Consolidated Financial Data and Managements Discussion and Analysis of Financial Condition and Results of OperationsTwelve Months Ended December 31, 2014, 2013 and 2012Key Performance Measures. |
Adjusted Net Income
Adjusted Net Income represents:
| net income or loss attributable to the Company, plus : |
| amortization of certain intangible assets; |
| stock-based compensation, including cash-settled stock-based compensation; and |
| other adjustments of the type described in note 4 to Selected Historical Consolidated Financial Data. |
We believe Adjusted EBITDA and Adjusted Net Income are useful tools for investors and other users of our financial statements to help assess our operating performance, and our ability to incur and
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service indebtedness, maintain current operating levels of capital assets and acquire additional operations and businesses. We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our operating performance because they eliminate the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. Also, Adjusted EBITDA and Adjusted Net Income are measures frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours. In addition, our board of directors and executive management team use Adjusted EBITDA as a compensation measure under our incentive plan. Furthermore, under the credit agreement governing our senior secured credit facility and the indentures governing our senior notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to a ratio based on Adjusted EBITDA.
Adjusted EBITDA does not reflect our interest, income tax, depreciation, amortization, stock-based compensation, including cash-settled stock-based compensation, discontinued operations and certain other income and expense, and Adjusted Net Income does not reflect amortization of certain intangible assets, stock-based compensation, including cash-settled stock-based compensation, and certain other income and expense, all net of tax. Other companies in our industry may calculate Adjusted EBITDA and Adjusted Net Income differently than we do, limiting their usefulness as comparative measures. Because of these limitations, Adjusted EBITDA and Adjusted Net Income should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income are not measures of financial condition or profitability under GAAP. Adjusted EBITDA excludes capital expenditures and should not be considered as an alternative to cash flows from operating activities, as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance, and Adjusted Net Income should not be considered as an alternative to operating income or net income as an indicator of operating performance. We believe that the most directly comparable GAAP measure to Adjusted EBITDA and Adjusted Net Income is net income attributable to the Company. See note 4 to Selected Historical Consolidated Financial Data and Managements Discussion and Analysis of Financial Condition and Results of OperationsResults of OperationsTwelve Months Ended December 31, 2014, 2013 and 2012Key Performance Measures.
We own or have the right to use the trademarks, service marks and trade names that we use in connection with the operation of our business, including the TransUnion name and logo and other names and marks that identify our products and services. Other trademarks, service marks and trade names used in this prospectus are, to our knowledge, the property of their respective owners. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are listed without the ® and symbols, but such omissions are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names.
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This summary highlights certain significant aspects of our business and this offering. This is a summary of information contained elsewhere in this prospectus, is not complete and does not contain all of the information that you should consider before making your investment decision. You should carefully read the entire prospectus, including the information presented under the sections entitled Risk Factors and Special Note Regarding Forward-Looking Statements and the consolidated financial statements and the notes thereto, before making an investment decision. This summary contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from future results contemplated in the forward-looking statements as a result of certain factors such as those set forth in the sections entitled Risk Factors and Special Note Regarding Forward-Looking Statements.
Unless the context indicates otherwise, all references herein to TransUnion, the Company, we, us and our refers to TransUnion and its consolidated subsidiaries, including TransUnion Intermediate Holdings, Inc. (TransUnion Intermediate). The historical financial statements and financial data included in this prospectus are those of TransUnion and its consolidated subsidiaries or, prior to the formation of TransUnion, to TransUnion Intermediate and its consolidated subsidiaries.
Our Company
TransUnion is a leading global risk and information solutions provider to businesses and consumers. We provide consumer reports, risk scores, analytical services and decisioning capabilities to businesses. Businesses embed our solutions into their process workflows to acquire new customers, assess consumer ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud. Consumers use our solutions to view their credit profiles and access analytical tools that help them understand and manage their personal information and take precautions against identity theft. We are differentiated by our comprehensive and unique datasets, our next-generation technology and our analytics and decisioning capabilities, which enable us to deliver insights across the entire consumer lifecycle. We believe we are the largest provider of risk and information solutions in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data, which allows us to better predict behaviors, assess risk and address a broader set of business issues for our customers. We have deep domain expertise across a number of attractive industries, sometimes referred to as verticals, including financial services, insurance and healthcare. We have a global presence in over 30 countries across North America, Africa, Latin America and Asia.
Our addressable market includes the big data and analytics market, which continues to grow as companies around the world recognize the benefits of building an analytical enterprise where decisions are made based on data and insights, and as consumers recognize the importance that data and analytics play in their ability to procure goods and services and protect their identities. International Data Corporation (IDC) estimates worldwide spending on big data and analytics services to be approximately $52 billion in 2014, growing at a projected compounded annual growth rate (CAGR) of approximately 15% from 2014 through 2018. There are several underlying trends supporting this market growth, including the creation of large amounts of data, advances in technology and analytics that enable data to be processed more quickly and efficiently to provide business insights, and growing demand for these business insights across industries and geographies. Leveraging our 47-year operating history and our established position as a leading provider of risk and information solutions, we have evolved our business by investing in a number of strategic initiatives, such as transitioning to the latest big data and analytics technologies, expanding the breadth and depth of our data, strengthening our analytics capabilities and
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enhancing our business processes. As a result, we believe we are well positioned to expand our share within the markets we currently serve and capitalize on the larger big data and analytics opportunity.
We believe that we have the capabilities and assets, including comprehensive and unique datasets, advanced technology and analytics, to provide differentiated solutions to our customers. We have over 30 petabytes of data, growing at an average rate of over 25% each year since 2010, representing over one billion consumers globally. We obtain financial, credit, alternative credit, identity, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information from an average of 90,000 data sources, including financial institutions, private databases and public records repositories. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. Our next-generation technology allows us to quickly and efficiently integrate our data with our analytics and decisioning capabilities to create and deliver innovative solutions to our customers and to quickly adapt to changing customer needs. Our deep analytics expertise, which includes our people as well as tools such as predictive modeling and scoring, customer segmentation, benchmarking and forecasting, enables businesses and consumers to gain better insights into their risk and financial data. Our decisioning capabilities, which are generally delivered on a software-as-a-service platform, allow businesses to interpret data and apply their specific qualifying criteria to make decisions and take actions. Collectively, our data, analytics and decisioning capabilities allow businesses to authenticate the identity of consumers, effectively determine the most relevant products for consumers, retain and cross-sell to existing consumers, identify and acquire new consumers and reduce loss from fraud. Similarly, our capabilities allow consumers to see how their credit profiles have changed over time, understand the impact of financial decisions on their credit scores, manage their personal information and take precautions against identity theft.
We leverage our differentiated capabilities in order to serve a broad set of customers across multiple geographies and industry verticals. We have a global customer base of over 65,000 businesses and 35 million consumers. We offer our solutions to business customers in financial services, insurance, healthcare and other industries. Our customer base includes many of the largest companies in each of the primary industries we serve. For example, in the United States, we contract with nine of the ten largest banks, all of the top five credit card issuers, all of the top twenty-five auto lenders, fourteen of the fifteen largest auto insurance carriers, thousands of healthcare providers and federal, state and local government agencies. We have been successful in leveraging our brand, our expertise and our solutions in our global operations and have a leading presence in several high-growth international markets, including India, Hong Kong and Africa.
We believe we have an attractive business model that has highly recurring and diversified revenue streams, low capital requirements, significant operating leverage and strong and stable cash flows. The proprietary and embedded nature of our solutions and the integral role that we play in our customers decision-making processes have historically translated into high customer retention and revenue visibility. For example, our top ten financial institution customers have an average tenure of over ten years. We continue to demonstrate organic growth by further penetrating existing customers, innovating new solutions and gaining new customers. We have a diversified portfolio of businesses across our segments, reducing our exposure to cyclical trends in any particular industry or geography. We operate primarily on a contributory data model in which we typically obtain updated information at little or no cost and own most of our data. We augment this data with a growing set of public record and alternative data as we develop new solutions and expand into new industries and geographies. We also directly manage and control our technology, which provides us with an efficient cost structure and allows us to benefit from economies of scale. Additionally, our technology investments enable us to grow and expand our business with low incremental cost, providing significant operating leverage.
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Our total revenues increased from $1,183.2 million for the year ended December 31, 2013 to $1,304.7 million for the year ended December 31, 2014, representing year-over-year growth of 10.3%. Our net losses attributable to the Company decreased from $35.1 million for the year ended December 31, 2013 to $12.5 million for the year ended December 31, 2014. Our Adjusted EBITDA (as later defined in note 4 to Selected Historical Consolidated Financial Data) increased from $408.5 million for the year ended December 31, 2013 to $454.3 million for the year ended December 31, 2014, representing year-over-year growth of 11.2%. Our total revenues increased from $303.4 million for the three months ended March 31, 2014 to $353.1 million for the three months ended March 31, 2015, representing year-over-year growth of 16.4% for the period. Our net losses attributable to the Company decreased from $14.7 million for the three months ended March 31, 2014 to $6.6 million for the three months ended March 31, 2015. Our Adjusted EBITDA increased from $95.4 million for the three months ended March 31, 2014 to $114.9 million for the three months ended March 31, 2015, representing year-over-year growth of 20.3% for the period. As of March 31, 2015, we had approximately $2,976.4 million of total indebtedness.
Our Evolution
Our business has a 47-year operating history and a long track record of providing risk and information solutions to businesses and consumers while continuing to innovate to meet their changing needs. Since our founding as a provider of regional credit reporting services, we have built a comprehensive database of U.S. consumers and used that as a base to expand our operations. We have strengthened our analytics and decisioning capabilities and acquired complementary datasets enabling us to enhance our solutions, diversify our revenue base and expand into high-growth verticals. We have grown our global presence to over 30 countries and also expanded the reach of our consumer solutions by partnering with other market leaders and innovators.
As part of our continued evolution, we have invested in a number of strategic initiatives that we believe will allow us to cater to the growing demand for data and analytics, provide differentiated solutions and better serve our customers. These initiatives include:
| Investing in our Technology: Technology is at the core of our solutions. We have made significant investments since 2012 to modernize our infrastructure and to transition to the latest big data and analytics technologies. Our next-generation technology enhances our ability to organize and handle high volumes of disparate data, improves delivery speeds, provides better availability and strengthens product development capabilities, while lowering our overall cost structure and allowing us to maintain focus on information security. Our investment strategy has been to build capabilities and leverage them across multiple geographies and industry verticals. |
| Expanding our Data: We have continued to invest in the breadth and depth of our data. We introduced the concept of trended data to provide the trajectory of a consumers risk profile, used public records data to enhance the scope of business issues we can address and incorporated alternative data into our databases to better assess risk for banked and unbanked consumers. We believe we are the only provider of scale in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records datasets. All of these initiatives improve the quality of our data, provide deeper insights into risk and allow us to create differentiated solutions for our customers. |
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Strengthening our Analytics Capabilities: We have strengthened our analytics capabilities by leveraging our next-generation technology and expanded data, utilizing more advanced tools and growing our analytics team. This has allowed us to create solutions that produce |
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greater insights and more predictive results, which help our customers make better decisions. In addition, our strengthened analytics capabilities have shortened time-to-market to create and deliver these solutions to our customers. |
| Broadening our Target Markets: We have grown our target markets by establishing a presence in attractive high-growth international markets, entering new verticals and expanding the reach of our consumer offerings. Our capabilities enable us to develop scalable products that we are able to deploy across new markets and verticals. |
| Enhancing our Business Processes and Capabilities: We have enhanced our business processes and capabilities to support our growth. We have hired additional industry experts and implemented a global sales force effectiveness program, which have allowed us to create and sell new vertical-specific solutions. We have also recently refreshed our company brand to reinforce our global position as a trusted, consumer-friendly company. |
We believe that our ongoing focus on evolving with the market and with our customers needs ensures continued improvement in our overall services to businesses and consumers. Leveraging our trusted brand, global scale and strong market position in the verticals we serve will allow us to capitalize on business opportunities worldwide and contribute to our long-term growth.
Our Market Opportunity
We believe there is a long-term trend of businesses and consumers using data and analytics to make more informed decisions and manage risk more effectively, resulting in a large and rapidly growing market. According to a September 2014 report from IDC, spending on business analytics services worldwide is projected to reach approximately $52 billion in 2014 and is projected to grow at a CAGR of approximately 15% from 2014 through 2018. We believe there are several key trends in the global macroeconomic environment affecting the geographies and industry verticals we serve that will create increasing demand for our solutions:
| Rapid Growth in Data Creation and Application: Larger and more diversified datasets are now assembled faster while the breadth of analytical applications and solutions has expanded. Companies are increasingly relying on business analytics and big data technologies to help process this data in a cost-efficient manner. In addition, non-traditional sources of structured and unstructured data have become important in deriving alternative metrics. The proliferation of smartphones and other mobile devices also generates enormous amounts of data tied to consumers, activities and locations. We believe that the demand for targeted data and sophisticated analytical solutions will continue to grow meaningfully as businesses seek real-time access to more granular views of consumer populations and more holistic views on individual consumers. |
| Advances in Technology and Analytics Unlocking the Value of Data: Ongoing advances in data collection, storage and analytics technology have contributed to the greater use and value of data and analytics in decision making. As businesses have gained the ability to rapidly aggregate and analyze data, they increasingly expect access to real-time data and analytics from their information providers as well as solutions that fully integrate into their workflows. We believe this has made sophisticated technology critical for gaining and retaining business in the risk and information services industry. |
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Greater Adoption of Big Data Solutions across New and Existing Industry Verticals: With the proliferation of data, we believe companies across new and existing verticals recognize the value of risk information and analytical tools, particularly when tailored to their specific needs. For example, in financial services, there is an emergence of new specialty finance companies, |
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such as peer-to-peer lending platforms and online balance sheet lenders, which utilize sophisticated risk assessment tools that leverage data, such as behavioral data, transactional data and employment and credit information. In the insurance industry, as consumers increasingly obtain quotes from multiple insurers in an effort to lower their costs, insurers are trying to improve the accuracy of their risk assessments and initial quotes. In the healthcare industry, greater patient financial responsibility, focus on cost management and regulatory supervision are driving healthcare providers to use data and related analytics tools to better manage their revenue cycle. |
| Increasing Lending Activity in Emerging International Markets: As economies in emerging markets continue to develop and mature, we believe there will continue to be favorable socio-economic trends, such as an increase in the size of the middle class and a significant increase in the use of financial services by under-served and under-banked consumers. In addition, credit penetration is relatively low in emerging markets when compared to developed markets. The widespread adoption and use of mobile phones in emerging markets have also enabled greater levels of financial inclusion and access to banking and credit. We expect the populations in emerging markets to continue to become more credit active, resulting in increased demand for our services. |
| Increased Management and Monitoring of Personal Financial Information and Identity Protection by Consumers: Demand for consumer solutions is rising with higher consumer awareness of the importance and usage of their credit information, increased risk of identity theft due to data breaches and more readily available free credit information. The annual growth in the number of consumers subscribing to a credit monitoring or identity protection service has been almost 20% over the last several years. In addition, the proliferation of mobile devices has made data much more accessible and enabled consumers to manage their finances and monitor their information in real-time. We believe these trends will continue to fuel growth for our consumer business. |
| Heightened Risk Environment and Compliance Requirements for Businesses: The increasing number and complexity of regulations make operations for businesses more challenging. The granularity of information required and the frequency and timeliness of data to fulfill compliance requirements have also increased significantly, placing an additional burden on companies reporting systems. Further, there is a heightened focus on reducing fraud and losses and protecting consumer privacy, particularly given the increasing threat of cybercriminals. |
Our Competitive Strengths
Comprehensive and Unique Datasets
We have over 30 petabytes of data, growing at an average rate of over 25% each year since 2010, representing over one billion consumers globally. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. We believe that our data is unique and differentiates us from our competitors. We own several proprietary datasets such as consumer credit information, driver violation history, healthcare eligibility information, business data and rental payment history. Internationally, our data assets also encompass alternative data, such as the voter registry in India and the vehicle information databases in South Africa. We have also acquired public record datasets, which are time consuming and difficult for others to obtain and associate with the correct person. We believe we are the only provider of scale in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data, which allows us to better predict behaviors, assess risk and address a broader set of business issues for our customers.
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Next-generation Technology
Our transformation to next-generation technology allows us to continually improve our overall services to businesses and consumers and ensures that we are well positioned to differentiate our datasets and capabilities.
| Powerful Big Data Capabilities: Our technology gives us the ability to process, organize and analyze high volumes of data across multiple operating systems, databases and file types as well as to deal with both structured and unstructured data that changes frequently. |
| Enhanced Linking and Matching: Because our data matching technology is able to interrelate data across disparate sources, industries and time periods, we believe that we are able to create differentiated datasets and provide our customers with comprehensive insights that allow them to better evaluate risk. |
| Greater Efficiency: From ingestion of data to distribution of analytics and insights, our next-generation technology enables a faster time to market. |
| Advanced Platform Flexibility: Our technology offers a high degree of flexibility, speed and customization of our solutions, via capabilities like graphical development and business rules environments, and allows easy integration with our customers workflows. We manage and control our technology instead of outsourcing it, which provides us with the flexibility to prioritize changes and to quickly implement any updates to our applications and solutions. |
| Lower Operating Costs: Our technology investments have lowered our overall cost to maintain and develop our systems, allowing us to redeploy significantly more resources to support revenue generating initiatives, such as vertical expansion and new product development. |
Sophisticated and Flexible Analytics and Decisioning Capabilities
We have developed sophisticated and flexible analytics and decisioning capabilities by investing in technology, tools and people. Our technology allows us to quickly build sophisticated analytics and decisioning functionality that caters to our customers evolving needs. Our analysts leverage our next-generation technology and data matching capabilities to gain real-time access to our entire dataset across different data sources and run analyses across this data while remaining compliant with permitted data use. Our analysts are equipped with a diverse modeling and analytical toolkit which allows them to quickly build and deploy these capabilities. We have an experienced analytics team with substantial industry experience, complemented by a deep knowledge of consumer credit data. Our team is highly qualified with advanced degrees or doctorates in statistics, math, finance or engineering, and is instrumental in understanding customer requirements, sourcing raw data and turning that data into solutions that provide insights and decisions to solve our customers problems.
Innovative and Differentiated Solutions
We consistently focus on innovation to develop new and enhanced solutions that meet the evolving needs of our customers. We believe our specialized data, analytics and decisioning services and collaborative approach with our customers differentiate us from our competitors. Our solutions are often scalable across different customers, geographies and verticals. Recent examples of our innovative and differentiated solutions include:
| AdSurety: AdSurety is a digital marketing solution that allows our customers to identify an audience across a network of 135 million U.S. consumers, display personalized messages to that audience and measure the effect. The network leverages our offline-to-online matching technology, which increases reach with greater targeting certainty. |
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| CreditVision: We continue to enhance our credit data by including new data fields, enriching values in existing data fields and expanding account history. Our enhanced credit data has been combined with hundreds of algorithms to produce CreditVision , a market-leading solution that provides greater granularity and evaluates consumer behavior patterns over time. This results in a more predictive view of the consumer, increases the total population of consumers who can effectively be scored and helps consumers gain improved pricing. |
| Insurance Coverage Discovery: For our healthcare customers, we offer the Insurance Coverage Discovery solution, which enables the discovery of previously unidentified health insurance coverage to help our customers recover uncompensated care costs. Our proprietary technology identifies patient accounts covered by Medicaid, Supplemental Security Income, Medicare and TRICARE as well as commercial insurance benefits at the time of service and also monitors an account for up to three years for retroactive eligibility that providers may have missed. |
| TLOxp: TLOxp leverages our data matching capabilities across thousands of data sources to identify and investigate relationships among specific people, assets, locations and businesses. This allows us to offer enhanced due diligence, threat assessment, identity authentication and fraud prevention and detection solutions and to expand our solutions into new verticals such as government and law enforcement. |
Deep and Specialized Industry Expertise
We have deep expertise in a number of attractive industry verticals including financial services, insurance and healthcare. Our expertise has allowed us to develop sophisticated vertical-specific solutions within these targeted industries that play an integral role in our customers decision-making processes and are often embedded into their workflows. Our team includes industry experts with significant experience in the verticals that we target and relationships with leading companies in those verticals. We also possess regulatory compliance expertise across the industries that we serve. Together, this provides us with a comprehensive understanding of business trends and insights for customers in these verticals, allowing us to build solutions that cater to these customers specific requirements. We have been able to apply our industry knowledge, data assets, technology and analytics capabilities to develop new solutions and revenue opportunities within key verticals.
Leading Presence in Attractive International Markets
We have been operating internationally for over 30 years and have strong global brand recognition. We have strategically targeted attractive markets in both developed and emerging economies and have a diversified global presence in over 30 countries and a leading presence in several attractive international markets across North America, Africa, Latin America and Asia. We have local, senior management in many of our international markets, and we believe this provides us with deeper insights into these markets and stronger relationships with our customers. We have leveraged our brand, operating history, global footprint and technology infrastructure to establish new credit bureaus in several international markets, such as Canada in 1989, India in 2001 and the Philippines in 2011. Once established, our model is to expand the services we offer within these markets and then move into adjacent emerging markets. In addition, we have been able to leverage our technology and experience from our U.S. operations to develop and grow our international operations.
Proven and Experienced Management Team
Our senior management team has a track record of strong performance and significant expertise in the markets we serve, with an average of over twenty years of industry experience. We continue to
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attract and retain experienced management talent for our businesses. Our team has deep knowledge of the data and analytics sector and expertise across the various industries that we serve. Our team has overseen our expansion into new industries and geographies while managing ongoing strategic initiatives, including our significant technology investments. As a result of the sustained focus of our management team, we have been successful in consistently driving growth, both organically and through acquiring and integrating businesses.
Our Growth Strategy
Enhance Underlying Data, Technology and Analytics Capabilities to Develop Innovative Solutions
As the demand for big data and analytics solutions grows across industries and geographies, we will continue to expand the scope of our underlying data, improve our tools and technology and enhance our analytics and decisioning capabilities to provide innovative solutions that address this demand. As the needs of businesses and consumers evolve, we plan to continue to help them meet their challenges, which our recent investments in data, technology and analytics enable us to do more quickly and efficiently. For example, we enhanced our solutions with incremental data such as rental trade lines, additional contact data and auto asset data in order to address a broader set of customer requirements. Our recent technology investments have also reduced the time to market for new solutions, in certain instances from several weeks to a few days, which allow us to react quickly to customer requirements. We also intend to continue to take advantage of strategic partnerships to develop innovative services that differentiate us from our competitors.
Further Penetrate Existing Industry Verticals with Current and New Solutions
We are a leading provider of risk and information solutions in several industry verticals today, including financial services, insurance and healthcare. We believe there is significant opportunity for further growth within these industries by expanding the number of customers to whom we sell our current solutions as well as by creating innovative new solutions that we can use to grow our presence in these industries. We focus on developing new solutions that address evolving customer needs within our industry verticals. For example, in the financial services vertical, we developed CreditVision , which provides customers with a time-based risk trend and increases the total eligible population of consumers. In order to more effectively address these opportunities, we have redeployed and reallocated our sales resources to focus either on new customer opportunities or on selling additional services and solutions to existing customers. With our leading market positions, existing strong relationships in financial services, insurance and healthcare verticals and with our consumer partners, we believe we have the opportunity to further penetrate our existing customer base and capture a greater proportion of their spending across the consumer lifecycle.
Establish Positions in New, Adjacent Industry Verticals
In addition to increasing penetration in industries where we have a substantial presence, we also intend to create solutions that address customer needs in attractive new industries. Our strategy is to develop new solutions for a specific application, industry vertical or geography and then deploy them to other markets where they may be applicable. We believe that our capabilities allow us to quickly create and deliver solutions to new industries and geographies where information-based analytics and decisioning capabilities are currently underutilized. For example, our strong position in financial services and insurance verticals has allowed us to establish a presence in the healthcare vertical to capitalize on the increasing demand for data and analytics solutions. We have created innovative solutions that automate the insurance and payment processes at the beginning of the revenue cycle,
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help payers analyze claims-related data, facilitate performance reporting and help patients make informed decisions. Similarly, we are targeting other verticals such as government, rental screening and investigative services, where we see an opportunity to leverage our existing data, analytics and decisioning capabilities.
Expand our Presence in Attractive International Markets
We believe international markets present a significant opportunity for growth, as these economies continue to develop and their populations become more credit active. We leverage solutions developed in the United States and deploy them to international markets, after localizing them to individual market requirements. In markets where we have established a presence in a particular vertical, we will expand further into adjacent verticals, such as insurance and consumer solutions. We intend to expand into new geographic markets by forming alliances with financial services institutions, industry associations and other local partners, and by pursuing strategic acquisitions. Across all our international expansion initiatives, we will continue to leverage our next-generation technology to drive speed to market, scale and differentiation.
Continue to Broaden Reach in Consumer Market through Direct and Indirect Channels
Growth in our consumer business has outpaced the market. We expect this trend to continue, due to a rising consumer appetite for information and increasing demand for our solutions from existing and new partners. We currently serve over 35 million consumers in the United States directly and through indirect channels. We recognized that more consumers could be reached through multiple channels and business models. Therefore, our strategy is to enable partners by providing them with data and analytics to support their services. Our growth plans focus both on increasing our own member base as well as expanding our reach through partnerships. For our direct consumers, we continually develop new products, features and services. We will also continue to improve the consumer experience with more user-friendly interfaces, better customer service and education. For partners, we will leverage our flexible model, technology and innovative solutions to grow with new and existing customers and enter new industry verticals. We believe that partnerships not only enable us to build our own business quickly and effectively, but they also expand the market and provide us access to new consumer segments.
Pursue Strategic Acquisitions
We will continue to pursue acquisitions to accelerate growth within our existing businesses and diversify into new businesses. We are focused primarily on opportunities that are strategic to us, including opportunities that expand our geographic footprint, increase the breadth and depth of our datasets, enhance our services, provide us with industry expertise in our key verticals or deepen our presence in our international markets. From time to time we may also seek to increase our investments in foreign entities in which we hold a minority interest. We have a strong track record of integrating acquisitions and driving long-term value creation, and we will continue to maintain a disciplined approach to pursuing acquisitions.
Risks Related to Our Business and this Offering
Investing in our common stock involves substantial risk, and our ability to successfully operate our business is subject to numerous risks, including those that are generally associated with operating in the consumer credit and information management industry. Any of the factors set forth under Risk Factors may limit our ability to successfully execute our business strategy. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth under Risk Factors in deciding whether to invest in our common stock.
9
Corporate Information
TransUnion Holding Company, Inc. was formed in Delaware by affiliates of Advent International Corporation (Advent) and Goldman, Sachs & Co. (GS, and together with Advent, the Sponsors) on February 15, 2012. On April 30, 2012, TransUnion Corp. was acquired by TransUnion Holding Company, Inc. and became TransUnion Holding Company, Inc.s wholly-owned subsidiary. We refer to these transactions and related financing transactions as the 2012 Change in Control Transaction. As a result of the 2012 Change in Control Transaction, each of Advent and GS currently own approximately 48.9% of our common stock.
On March 26, 2015, TransUnion Holding Company, Inc. was renamed TransUnion and TransUnion Corp. was renamed TransUnion Intermediate Holdings, Inc. After giving effect to this offering, each of Advent and GS will beneficially own approximately 40.7% of our issued and outstanding common stock (assuming no exercise of the underwriters option to purchase additional shares) or 39.7% of our issued and outstanding common stock (assuming full exercise of the underwriters option to purchase additional shares).
Our principal executive offices are located at 555 West Adams Street, Chicago, Illinois, 60661, and our telephone number is (312) 985-2000. We maintain a website at www.transunion.com . The information contained on our website or that can be accessed through our website neither constitutes part of this prospectus nor is incorporated by reference herein.
Recent Developments
On June 2, 2015, Trans Union LLC, entered into an amendment (Amendment No. 8) to our senior secured credit facility that (a) refinanced our existing $1,881.0 million aggregate principal amount senior secured term loan with a new senior secured term loan in the same amount with lower pricing (the Refinanced Term Loan Facility) and (b) included other amendments to our senior secured credit facility to permit a further amendment to be entered into substantially concurrently with, and conditioned upon, the closing of this offering (Amendment No. 9 and, together with Amendment No. 8, the Credit Facility Refinancing) that will: (i) refinance our existing $190.0 million senior secured revolving credit facility with a new senior secured revolving credit facility in an amount of $210.0 million, which is expected to become effective substantially concurrently with the closing of this offering and (ii) allow for a new senior secured term loan facility of up to $500.0 million, $350.0 million of which is expected to be incurred substantially concurrently with the closing of this offering (the New Term Loan Facility). We have commitments for $350.0 million for the New Term Loan subject to customary conditions. See Description of IndebtednessSenior Secured Credit Facility.
We intend to use proceeds from this offering, the New Term Loan Facility and borrowings under our new senior secured revolving credit facility to redeem all of our outstanding 9.625%/10.375% Senior PIK Toggle Notes due 2018 (the 9.625% Senior Notes) and all of our outstanding 8.125%/8.875% Senior PIK Toggle Notes due 2018 (the 8.125% Senior Notes and, together with the 9.625% Senior Notes, the Senior Notes) following the consummation of this offering and to pay fees and expenses related to this offering. See Use of Proceeds.
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Corporate Structure
The following diagram illustrates our corporate structure after giving effect to (i) the Credit Facility Refinancing and (ii) the consummation of this offering and the redemption with proceeds from this offering and the New Term Loan Facility of all $600.0 million in aggregate principal amount of the 9.625% Senior Notes and all $400.0 million in aggregate principal amount of the 8.125% Senior Notes as described under Use of Proceeds. If the proceeds raised from this offering and the New Term Loan Facility are insufficient to redeem the full amount of the Senior Notes, we may only redeem a portion of the Senior Notes.
(1) | TransUnion Intermediate Holdings, Inc., along with certain wholly owned domestic subsidiaries, guarantee Trans Union LLCs senior secured credit facilities. |
(2) | At March 31, 2015, our senior secured credit facility consisted of (i) a $1,900.0 million term loan facility that matures on April 9, 2021 and (ii) a $190.0 million senior secured revolving credit facility maturing on April 9, 2019, including both a letter of credit sub-facility and a swingline loan sub-facility. As of March 31, 2015, we had $85.0 million in borrowings outstanding under the senior secured revolving credit facility and the aggregate outstanding principal amount of the senior secured term loan facility was $1,881.0 million. Additionally, on June 2, 2015, we completed Amendment No. 8 to our senior secured credit facility, which (i) refinanced our existing $1,881.0 million senior secured term loan with a new senior secured term loan in the same amount with lower pricing, (ii) permits us to, upon completion of Amendment No. 9, refinance our existing $190.0 million senior secured revolving credit facility with a new senior secured revolving credit facility in an amount of $210.0 million, which is expected to become effective substantially concurrently with the closing of this offering and (iii) permits us to, upon completion of Amendment No. 9, enter into a new senior secured term loan facility of up to $500.0 million, $350.0 million of which is expected to be incurred substantially concurrently with this offering. See Recent Developments, Description of IndebtednessSenior Secured Credit Facility and Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesDebtSenior Secured Credit Facility. |
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The Offering
Common stock offered |
29,545,455 shares. |
Underwriters option to purchase additional shares of common stock |
4,431,818 shares. |
Common stock to be outstanding immediately after this offering |
177,787,920 shares (or 182,219,738 shares if the underwriters exercise in full their option to purchase additional shares). |
Use of proceeds |
We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and commissions and expenses payable by us, will be approximately $610.6 million (or approximately $702.8 million, if the underwriters exercise in full their option to purchase additional shares), based on the assumed initial public offering price of $22.00 per share, which is the mid-point of the range set forth on the cover page of this prospectus. For a sensitivity analysis as to the offering price and other information, see Use of Proceeds. |
We intend to use the net proceeds from this offering, the New Term Loan Facility and borrowings under our new senior secured revolving credit facility to redeem all of the outstanding 9.625% Senior Notes and all of the outstanding 8.125% Senior Notes at redemption prices equal to 100.0% and 102.031% of their face value, respectively, plus accrued and unpaid interest to, but not including, the redemption date and to pay fees and expenses related to this offering. If the proceeds raised from this offering and the New Term Loan Facility are insufficient to redeem the full amount of the Senior Notes, we may only redeem a portion of the Senior Notes. See Use of Proceeds. |
Directed Share Program |
At our request, the underwriters have reserved up to 1,477,273 shares of common stock, or approximately 5% of the shares being offered by us pursuant to this prospectus, for sale at the initial public offering price to our directors, officers and employees and certain other persons associated with us, as designated by us. The number of shares available for sale to the general public will be reduced to the extent that these individuals purchase all or a portion of the reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the other |
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shares offered by this prospectus. For further information regarding our directed share program, please see Underwriting (Conflicts of Interest). |
Risk factors |
See Risk Factors beginning on page 21 and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock. |
Dividend policy |
After completion of this offering, we do not intend to pay cash dividends on our common stock. We may, in the future, decide to pay dividends on our common stock, subject to the discretion of our Board of Directors and other factors. In the event we decide to pay dividends in the future, our ability to pay dividends will be limited by covenants in our senior secured credit facility and the indentures governing our Senior Notes. See Dividend Policy and Description of Indebtedness. |
Proposed NYSE ticker symbol |
TRU |
Conflicts of interest |
Because Goldman, Sachs & Co. is an underwriter and its affiliates collectively own in excess of 10% of the our issued and outstanding common stock, Goldman, Sachs & Co. is deemed to have a conflict of interest under Rule 5121 of the Financial Industry Regulatory Authority (Rule 5121). Rule 5121 requires that a qualified independent underwriter meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence in respect thereto, subject to certain exceptions which are not applicable here. J.P. Morgan Securities LLC will serve as a qualified independent underwriter within the meaning of Rule 5121 in connection with this offering. For more information see Underwriting (Conflicts of Interest). |
Unless we indicate otherwise or the context otherwise requires, all information in this prospectus:
| assumes (1) no exercise of the underwriters option to purchase additional shares of our common stock; (2) an initial public offering price of $22.00 per share, the mid-point of the initial public offering range indicated on the cover of this prospectus; |
| does not reflect (1) 5,400,000 shares of common stock reserved for future issuance under our 2015 Omnibus Incentive Plan or (2) 2,400,000 shares of common stock reserved for future issuance under our 2015 Employee Stock Purchase Plan (the Employee Stock Purchase Plan); and |
| gives effect to the 1.333-for-one stock split of our common stock, which occurred on June 5, 2015. |
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Summary Historical Consolidated Financial Data
The table below presents our summary historical consolidated financial data as of the dates and for the periods indicated. We have derived the summary historical consolidated financial data for the four months ended April 30, 2012, the period from the date of our inception, February 15, 2012, through December 31, 2012 and for each of the twelve months ended December 31, 2013 and December 31, 2014 and as of December 31, 2013 and December 31, 2014 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary historical consolidated financial data as of December 31, 2012 from our audited historical financial statements, which are not included in this prospectus. We have derived the summary historical consolidated financial data as of March 31, 2015 and for each of the three months ended March 31, 2014 and March 31, 2015 from our unaudited consolidated financial statements included elsewhere in this prospectus, which have been prepared on the same basis as our audited consolidated financial statements. Share and per share data in the table below for successor periods has been retroactively adjusted to give effect to the 1.333-for-one stock split, which occurred on June 5, 2015.
As a result of the 2012 Change in Control Transaction, the accompanying historical financial statements and summary historical consolidated financial data are presented on a Successor and Predecessor basis. The historical financial information for TransUnion Intermediate reflects the consolidated results of TransUnion Intermediate and its subsidiaries prior to the 2012 Change in Control Transaction (the Predecessor). The historical financial information for TransUnion reflects the stand-alone results of its operations from its date of inception and the consolidated results of TransUnion Intermediate and its subsidiaries after April 30, 2012 (the Successor).
Our historical results are not necessarily indicative of future operating results. Because the data in this table is only a summary and does not provide all of the data contained in our consolidated financial statements, the information should be read in conjunction with Selected Historical Consolidated Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(in millions, other than per share data) |
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Income Statement Data: |
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Revenue |
$ | 373.0 | $ | 767.0 | $ | 1,183.2 | $ | 1,304.7 | $ | 303.4 | $ | 353.1 | ||||||||||||
Operating expenses |
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Cost of services |
172.0 | 298.2 | 472.4 | 499.1 | 120.9 | 125.6 | ||||||||||||||||||
Selling, general and administrative |
172.0 | 212.6 | 354.8 | 436.0 | 96.2 | 121.9 | ||||||||||||||||||
Depreciation and amortization |
29.2 | 115.0 | 186.8 | 241.2 | 51.5 | 69.1 | ||||||||||||||||||
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Total operating expenses |
373.2 | 625.8 | 1,014.0 | 1,176.3 | 268.6 | 316.6 | ||||||||||||||||||
Operating income (loss) |
(0.2 | ) | 141.2 | 169.2 | 128.4 | 34.8 | 36.5 | |||||||||||||||||
Non-operating income and expense |
(63.7 | ) | (138.5 | ) | (195.1 | ) | (130.2 | ) | (48.4 | ) | (43.9 | ) | ||||||||||||
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Income (loss) before income taxes |
(63.9 | ) | 2.7 | (25.9 | ) | (1.8 | ) | (13.6 | ) | (7.4 | ) | |||||||||||||
(Provision) benefit for income taxes |
11.5 | (6.6 | ) | (2.3 | ) | (2.6 | ) | 0.1 | 3.0 | |||||||||||||||
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Net income (loss) |
(52.4 | ) | (3.9 | ) | (28.2 | ) | (4.4 | ) | (13.5 | ) | (4.4 | ) | ||||||||||||
Less: net income attributable to noncontrolling interests |
(2.5 | ) | (4.9 | ) | (6.9 | ) | (8.1 | ) | (1.2 | ) | (2.2 | ) | ||||||||||||
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Net income (loss) attributable to the Company |
$ | (54.9 | ) | $ | (8.8 | ) | $ | (35.1 | ) | $ | (12.5 | ) | $ | (14.7) | $ | (6.6) | ||||||||
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Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(in millions, other than per share data) |
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Net earnings (loss) per share: |
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Basic |
$ | (1.84 | ) | $ | (0.06 | ) | $ | (0.24 | ) | $ | (0.09 | ) | $ | (0.10 | ) | $ | (0.04 | ) | ||||||
Diluted |
(1.84 | ) | (0.06 | ) | (0.24 | ) | (0.09 | ) | (0.10 | ) | (0.04 | ) | ||||||||||||
Weighted average shares outstanding: |
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Basic |
29.8 | 146.2 | 146.4 | 147.3 | 147.0 | 147.9 | ||||||||||||||||||
Diluted |
29.8 | 146.2 | 146.4 | 147.3 | 147.0 | 147.9 | ||||||||||||||||||
Cash Flow: |
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Net cash provided by (used in): |
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Operating activities |
$ | 52.4 | $ | 47.0 | $ | 143.4 | $ | 154.3 | $ | (6.1) | $ | 16.5 | ||||||||||||
Investing activities |
(19.6 | ) | (1,547.1 | ) | (367.0 | ) | (276.0 | ) | (69.9 | ) | (34.9 | ) | ||||||||||||
Financing activities |
(45.0 | ) | 1,655.1 | 187.3 | 91.9 | 24.8 | 29.1 | |||||||||||||||||
Balance sheet data (at end of period): |
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Cash and cash equivalents |
$ | 154.3 | $ | 111.2 | $ | 77.9 | $ | 59.4 | $ | 87.0 | ||||||||||||||
Working capital (1) |
182.3 | 102.1 | 71.1 | 47.6 | 97.3 | |||||||||||||||||||
Total assets |
4,378.8 | 4,492.3 | 4,665.8 | 4,452.7 | 4,614.3 | |||||||||||||||||||
Total debt (2) |
2,680.9 | 2,866.9 | 2,939.9 | 2,891.5 | 2,976.4 | |||||||||||||||||||
Total liabilities |
3,568.0 | 3,760.2 | 3,894.7 | 3,743.0 | 3,882.0 | |||||||||||||||||||
Total stockholders equity |
796.1 | 714.5 | 747.7 | 692.2 | 719.3 | |||||||||||||||||||
Other Financial Data: |
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Adjusted EBITDA (3) |
$ | 126.2 | $ | 277.4 | $ | 408.5 | $ | 454.3 | $ | 95.4 | $ | 114.9 | ||||||||||||
Adjusted Net Income (3) |
34.0 | 82.8 | 101.9 | 120.3 | 18.4 | 29.9 |
The summary financial data presented above is impacted by the 2012 Change in Control Transaction.
(1) | Working capital is defined as current assets less current liabilities. |
(2) | Total debt includes long-term debt, short-term debt and current maturities of long-term debt. |
(3) | Adjusted EBITDA is defined as net income (loss) attributable to the Company before net interest expense, income tax provision (benefit), depreciation and amortization and other adjustments noted below. Adjusted Net Income is defined as net income (loss) attributable to the Company before amortization of certain intangible assets and other adjustments noted below. We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our operating performance because they eliminate the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. Also, Adjusted EBITDA and Adjusted Net Income are measures frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours. In addition, our board of directors and executive management team use Adjusted EBITDA as a compensation measure under our incentive plan. Furthermore, under the credit agreement governing our senior secured credit facility and the indentures governing our Senior Notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to a ratio based on Adjusted EBITDA. See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesDebt and Description of Indebtedness. |
Adjusted EBITDA does not reflect our interest, income tax, depreciation, amortization, stock-based compensation, including cash-settled stock-based compensation, and certain other income and expense, and Adjusted Net Income does not reflect amortization of certain intangible assets, stock-based compensation, including cash-settled stock-based compensation, and certain other income and expense, all net of tax. Other companies in our industry may calculate Adjusted EBITDA and Adjusted Net Income differently than we do, limiting their usefulness as comparative measures. Because of these limitations, Adjusted EBITDA and Adjusted Net Income should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income are not measures of financial condition or profitability under GAAP. Adjusted EBITDA excludes capital expenditures and should not be considered as an alternative to cash flows from operating activities, as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance, and Adjusted Net Income should not be considered as an alternative to operating income or net income as an indicator of operating performance. We believe that the most directly comparable GAAP measure to Adjusted EBITDA and Adjusted Net Income is net income attributable to the Company.
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The following table provides a reconciliation from net income (loss) attributable to the Company to Adjusted EBITDA for the four months ended April 30, 2012, the period from the date of our inception through December 31, 2012, the twelve months ended December 31, 2013 and December 31, 2014 and the three months ended March 31, 2014 and March 31, 2015.
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Net income (loss) attributable to the Company |
$ | (54.9 | ) | $ | (8.8 | ) | $ | (35.1 | ) | $ | (12.5 | ) | $ | (14.7 | ) | $ | (6.6 | ) | ||||||
Net interest expense |
39.9 | 124.2 | 195.9 | 186.7 | 50.3 | 43.9 | ||||||||||||||||||
Income tax (benefit) provision |
(11.5 | ) | 6.6 | 2.3 | 2.6 | (0.1 | ) | (3.0 | ) | |||||||||||||||
Depreciation and amortization |
29.2 | 115.0 | 186.8 | 241.2 | 51.5 | 69.1 | ||||||||||||||||||
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EBITDA |
2.7 | 237.0 | 349.9 | 418.0 | 87.0 | 103.4 | ||||||||||||||||||
Stock-based compensation (a) |
92.7 | 2.3 | 6.3 | 10.7 | 2.1 | 3.1 | ||||||||||||||||||
Mergers and acquisitions, divestitures and business optimization (b) |
25.3 | 30.4 | 25.0 | 19.7 | 4.0 | 0.5 | ||||||||||||||||||
Technology transformation (c) |
| | 4.5 | 18.7 | 1.0 | 5.8 | ||||||||||||||||||
Other (d) |
5.5 | 7.7 | 22.8 | (12.8 | ) | 1.3 | 2.1 | |||||||||||||||||
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Adjusted EBITDA |
$ | 126.2 | $ | 277.4 | $ | 408.5 | $ | 454.3 | $ | 95.4 | $ | 114.9 | ||||||||||||
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The following table provides a reconciliation from net income (loss) attributable to the Company to Adjusted Net Income for the four months ended April 30, 2012, the period from the date of our inception through December 31, 2012, the twelve months ended December 31, 2013 and December 31, 2014 and the three months ended March 31, 2014 and March 31, 2015.
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Net income (loss) attributable to the Company |
$ | (54.9 | ) | $ | (8.8 | ) | $ | (35.1 | ) | $ | (12.5 | ) | $ | (14.7 | ) | $ | (6.6 | ) | ||||||
Stock-based compensation (a) |
92.7 | 2.3 | 6.3 | 10.7 | 2.1 | 3.1 | ||||||||||||||||||
Mergers and acquisitions, divestitures and business optimization (b) |
25.3 | 30.4 | 25.0 | 19.7 | 4.0 | 0.5 | ||||||||||||||||||
Technology transformation (c) |
| | 4.5 | 18.7 | 1.0 | 5.8 | ||||||||||||||||||
Other (d) |
2.2 | 5.1 | 20.9 | (16.0 | ) | 0.7 | 1.8 | |||||||||||||||||
Amortization of certain intangible assets (e) |
| 87.1 | 130.7 | 161.8 | 34.6 | 45.4 | ||||||||||||||||||
Change in provision for income taxes (f) |
(31.3 | ) | (33.3 | ) | (50.4 | ) | (62.1 | ) | (9.3 | ) | (20.1 | ) | ||||||||||||
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Adjusted Net Income |
$ | 34.0 | $ | 82.8 | $ | 101.9 | $ | 120.3 | $ | 18.4 | $ | 29.9 | ||||||||||||
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(a) | Stock-based compensation items consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Stock-based compensation (i) |
$ | 2.0 | $ | 2.3 | $ | 6.3 | $ | 10.7 | $ | 2.1 | $ | 3.1 | ||||||||||||
Accelerated stock-based compensation (ii) |
90.7 | | | | | | ||||||||||||||||||
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Total stock-based compensation items |
$ | 92.7 | $ | 2.3 | $ | 6.3 | $ | 10.7 | $ | 2.1 | $ | 3.1 | ||||||||||||
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(i) | For 2014, consisted of $8.0 million of stock-based compensation and $2.7 million of cash-settled stock-based compensation. For the three months ended March 31, 2014, consisted of $2.0 million of stock-based compensation and $0.1 million of cash-settled stock-based compensation. For the three months ended March 31, 2015, consisted of $2.4 million of stock-based compensation and $0.7 million of cash-settled stock-based compensation. Once our stock is publicly traded, the cash-settled stock-based compensation liability will be adjusted to market value based on the period end closing stock price, with the offsetting adjustment recorded to cash-settled stock-based compensation expense. |
(ii) | Represented accelerated stock-based compensation expenses as a result of the 2012 Change in Control Transaction. |
(b) | Mergers and acquisitions, divestitures and business optimization consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
|||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Mergers, acquisitions and divestitures (i) |
$ | 24.3 | $ | 19.7 | $ | 9.5 | $ | (11.9 | ) | $ | 1.0 | $ | 0.5 | |||||||||||
Mergers and acquisitions integration (ii) |
1.0 | 2.3 | 3.0 | 15.8 | 2.7 | | ||||||||||||||||||
Business optimization (iii) |
| 8.4 | 12.5 | 15.8 | 0.3 | | ||||||||||||||||||
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Total mergers and acquisitions, divestitures and business optimization items |
$ | 25.3 | $ | 30.4 | $ | 25.0 | $ | 19.7 | $ | 4.0 | $ | 0.5 | ||||||||||||
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(i) | For Predecessor and Successor 2012, consisted of acquisition-related expenses primarily related to the 2012 Change in Control Transaction and for Predecessor 2012 costs related to our abandoned initial public offering process. For the twelve months ended December 31, 2013, consisted of $10.5 million of acquisition-related expenses and a credit of $1.0 million for other miscellaneous items. For the twelve months ended December 31, 2014, consisted of $22.2 million of remeasurement gains of our previously held equity interests upon purchase and consolidation of Credit Information Bureau (India) Limited (CIBIL) and L2C, Inc. (L2C), partially offset by $2.9 million of acquisition-related expenses, a $4.1 million impairment charge for a cost-method investment that sold its assets and liquidated during 2014 and $3.3 million of other miscellaneous items. For the three months ended March 31, 2014, consisted of $0.5 million of contingent consideration expense from a previous acquisition and $0.5 million of acquisition expenses. For the three months ended March 31, 2015, consisted of $0.4 million of contingent consideration expense for a previous acquisition and $0.1 million of acquisition expenses. |
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(ii) | Represented merger and acquisition integration costs for companies and assets purchased subsequent to April 30, 2012. |
(iii) | For Successor 2012 and for 2013, primarily consisted of certain severance, sign-on, relocation and executive search costs. For 2014, primarily consisted of certain severance and facility wind-down costs. For the three months ended March 31, 2014, primarily consisted of facility wind-down costs. |
(c) | Technology transformation consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Technology transformation project (i) |
$ | | $ | | $ | 4.5 | $ | 8.5 | $ | 1.0 | $ | 5.8 | ||||||||||||
Acceleration of technology agreement (ii) |
| | | 10.2 | $ | | | |||||||||||||||||
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Total technology transformation items |
$ | | $ | | $ | 4.5 | $ | 18.7 | $ | 1.0 | $ | 5.8 | ||||||||||||
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(i) | Represented costs associated with a project to transform our technology infrastructure. |
(ii) | Represented accelerated fees for a data matching service contract that we have terminated and in-sourced as part of the transformation to our technology infrastructure. |
(d) | Other consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Debt refinance (i) |
$ | | $ | | $ | 2.5 | $ | (33.1 | ) | $ | | $ | | |||||||||||
Legal and regulatory matters |
2.4 | (2.4 | ) | 5.2 | 8.1 | 0.3 | | |||||||||||||||||
Operating expense tax matters (ii) |
| | 2.9 | 3.9 | | | ||||||||||||||||||
Consulting study fees (iii) |
| 4.4 | 5.3 | 1.8 | | | ||||||||||||||||||
Currency remeasurement (iv) |
(0.2 | ) | | 0.8 | 1.1 | | 0.7 | |||||||||||||||||
Hedge mark-to-market (v) |
| | | 0.3 | | 0.9 | ||||||||||||||||||
Other (vi) |
| 3.1 | 4.2 | 1.9 | 0.4 | 0.2 | ||||||||||||||||||
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Total other items affecting Adjusted Net Income |
2.2 | 5.1 | 20.9 | (16.0 | ) | 0.7 | 1.8 | |||||||||||||||||
Loan fees and unused line of credit fees |
3.1 | 1.9 | 1.4 | 1.9 | 0.6 | 0.4 | ||||||||||||||||||
Other non-operating income and expense |
0.2 | 0.7 | 0.5 | 1.3 | | (0.1 | ) | |||||||||||||||||
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Total other items affecting Adjusted EBITDA |
$ | 5.5 | $ | 7.7 | $ | 22.8 | $ | (12.8 | ) | $ | 1.3 | $ | 2.1 | |||||||||||
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(i) | For 2013, represented debt refinancing expenses. For 2014, represented debt refinancing activity consisting of a gain on the prepayment of debt, net of prepayment premium and expenses. |
(ii) | Represented expenses for sales and use tax matters and payroll tax matters. |
(iii) | Represented fees for consulting studies related to our strategic initiatives. |
(iv) | Represented currency remeasurement of our foreign operations. |
(v) | Represented mark-to-market activity related to ineffectiveness of our interest rate hedge. |
(vi) | For Successor 2012, represented $1.5 million in payment card industry (PCI) expenses and $1.6 million of other miscellaneous items. For 2013, represented $3.3 million in PCI expenses and $0.9 million of other miscellaneous items. For 2014, represented other miscellaneous items. For the three months ended March 31, 2014 and 2015, represented other miscellaneous items. |
(e) | Amortization of certain intangible assets consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Amortization of intangible assets from 2012 Change in Control |
$ | | $ | 86.9 | $ | 128.0 | $ | 142.2 | $ | 31.5 | $ | 39.3 | ||||||||||||
Amortization of intangible assets from acquisitions (i) |
| 0.2 | 2.7 | 19.6 | 3.1 | 6.1 | ||||||||||||||||||
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Total amortization of certain intangible assets |
$ | | $ | 87.1 | $ | 130.7 | $ | 161.8 | $ | 34.6 | $ | 45.4 | ||||||||||||
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(i) | Represented amortization of acquired intangible assets that were established through acquisitions subsequent to the 2012 Change in Control Transaction. |
(f) | Change in provision for income taxes consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Tax effect of adjustments in (a), (b), (c), (d) and (e) (i) |
$ | (40.6 | ) | $ | (41.8 | ) | $ | (62.6 | ) | $ | (76.4 | ) | $ | (15.2 | ) | $ | (22.0 | ) | ||||||
Eliminate impact of adjustments for unremitted foreign earnings (ii) |
8.4 | 7.8 | 10.5 | 0.5 | 1.7 | 1.5 | ||||||||||||||||||
Eliminate impact of acquisition-related items (iii) |
| | | 10.7 | 1.8 | | ||||||||||||||||||
Other (iv) |
0.9 | 0.7 | 1.7 | 3.1 | 2.4 | 0.4 | ||||||||||||||||||
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Total change in provision for income taxes |
$ | (31.3 | ) | $ | (33.3 | ) | $ | (50.4 | ) | $ | (62.1 | ) | $ | (9.3 | ) | $ | (20.1 | ) | ||||||
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(i) | Represented the tax effect of adjustments in (a), (b), (c), (d) and (e). The tax rates used to calculate the tax expense impact were based on the nature of each item. |
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(ii) | Represented elimination of the impact of certain adjustments related to our deferred tax liability for unremitted foreign earnings, including a discrete change from foreign tax credit to foreign tax deduction methodology in 2014 and accrued withholding taxes on earnings from lower-tier foreign subsidiaries. |
(iii) | Represented elimination of the impact of certain acquisition-related items, principally deferred taxes established related to our pre-consolidated CIBIL investment. |
(iv) | Represented elimination of the impact of state tax rate changes on deferred taxes, valuation allowances on foreign net operating losses and valuation allowances on capital losses. |
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An investment in our common stock involves risk. You should carefully consider the following risks as well as the other information included in this prospectus, including Selected Historical Consolidated Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and related notes, before investing in our common stock. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. However, the selected risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations. In such a case, the trading price of the common stock could decline and you may lose all or part of your investment in our Company.
Risks Related to Our Indebtedness
We have a substantial amount of debt which could adversely affect our financial position and prevent us from fulfilling our obligations under the debt instruments.
As of March 31, 2015, the book value of our debt was approximately $3.0 billion consisting of $1.0 billion aggregate principal amount of senior PIK toggle notes and $2.0 billion of outstanding borrowings under Trans Union LLCs senior secured credit facility. As described in SummaryRecent Developments, substantially simultaneously with this offering we plan to enter into a new senior secured term loan facility for up to $350.0 million and, following the consummation of this offering, use the proceeds from this offering, the New Term Loan Facility and borrowings under our new senior secured revolving credit facility to redeem all of our senior PIK toggle notes; however, we may be unable to redeem the senior PIK toggle notes as contemplated. We may also incur significant additional indebtedness in the future. Our substantial indebtedness may:
| make it difficult for us to satisfy our financial obligations, including with respect to the notes and our other indebtedness; |
| limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes; |
| limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes; |
| require us to use a substantial portion of our cash flow from operations to make debt service payments; |
| expose us to the risk of increased interest rates as certain of our borrowings, including Trans Union LLCs senior secured credit facility, are at variable rates of interest; |
| limit our flexibility to plan for, or react to, changes in our business and industry; |
| place us at a competitive disadvantage compared with our less-leveraged competitors; and |
| increase our vulnerability to the impact of adverse economic and industry conditions. |
In addition, the credit agreement governing Trans Union LLCs senior secured credit facility and the indentures governing the TransUnion senior unsecured PIK toggle notes contain restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interest. See Description of Indebtedness. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all of our debt.
Despite our current level of indebtedness, we may still be able to incur additional indebtedness. This could exacerbate the risks associated with our substantial indebtedness.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indentures and credit agreements governing our debt will limit, but not prohibit, us or our subsidiaries from incurring additional indebtedness, and the additional indebtedness incurred in
21
compliance with these restrictions could be substantial. If we incur any additional debt, the priority of that debt may impact the ability of existing debt holders to share ratably in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of us, subject to collateral arrangements. These restrictions will also not prevent us from incurring obligations that do not constitute indebtedness. In addition, the capacity under the Trans Union LLC senior secured credit facility may be increased by an additional $450.0 million plus an additional amount of indebtedness under the senior secured credit facility or separate facilities permitted by the senior secured credit facility so long as certain financial conditions are met, subject, in each case, to certain conditions and receipt of commitments by existing or additional financial institutions or institutional lenders. These additional amounts, as well as amounts outstanding under the existing senior secured credit facility, would be secured indebtedness and, therefore, effectively senior to our notes. If new indebtedness is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify.
We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments due on our debt obligations or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic, industry and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control as discussed above. Our scheduled principal and interest payments made for the year ended December 31, 2014 were $25.6 million and $191.0 million, respectively, and for the year ended December 31, 2013 were $11.9 million and $211.8 million, respectively. We may be unable to maintain a level of cash flow from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flow and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to implement any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The credit agreement governing Trans Union LLCs senior secured credit facility and the indentures governing our senior PIK toggle notes restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. In addition, under the covenants of the credit agreement governing our senior secured credit facility, TransUnion Intermediate is restricted from making certain payments, including dividend payments to TransUnion.
Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations.
If we cannot make our scheduled debt payments, we will be in default and all outstanding principal and interest on our debt may be declared due and payable, the lenders under Trans Union LLCs senior secured credit facility could terminate their commitments to loan money, Trans Union LLCs secured lenders (including the lenders under Trans Union LLCs senior secured credit facility) could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.
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Risks Related to Our Business
Our revenues are concentrated in the U.S. consumer credit and financial services industries. When these industries or the broader financial markets experience a downturn, demand for our services and revenues may be adversely affected.
Our largest customers, and therefore our business and revenues, depend on favorable macroeconomic conditions and are impacted by the availability of credit, the level and volatility of interest rates, inflation, employment levels, consumer confidence and housing demand. In addition, a significant amount of our revenues are concentrated among certain customers and in distinct geographic regions, particularly in the United States. Our product offerings are also concentrated by varying degrees across different industries, particularly the financial services and insurance industries in the United States where we derived approximately 66% of our U.S. Information Services (USIS) segment revenues in 2014. Our customer base suffers when financial markets experience volatility, illiquidity and disruption, which has occurred in the past and which could reoccur, including as a result of concerns regarding the debt ceiling and the government spending debate in the United States. Such market developments, and the potential for increased and continuing disruptions going forward, present considerable risks to our business and operations. Changes in the economy have resulted, and may continue to result, in fluctuations in volumes, pricing and operating margins for our services. For example, the banking and financial market downturn that began to affect our business in 2008 caused a greater focus on expense reduction by our customers and led to a decline in their account acquisition mailings, which resulted in reduced revenues from our marketing programs. In addition, financial institutions tightened lending standards and granted fewer mortgage loans, student loans, automobile loans and other consumer loans. As a result, we experienced a reduction in our credit report volumes. If businesses in these industries experience economic hardship, we cannot assure you that we will be able to generate future revenue growth. In addition, if consumer demand for financial services and products and the number of credit applications decrease, the demand for our services could also be materially reduced. These types of disruptions could lead to a decline in the volumes of services we provide our customers and could negatively impact our revenue and results of operations.
We are subject to significant competition in the markets in which we operate and we may face significant competition in the new markets that we plan to enter.
The market for our services is highly competitive, and we may not be able to compete successfully against our competitors, which could impair our ability to sell our services. We compete on the basis of differentiated solutions, datasets, analytics capabilities, ease of integration with our customers technology, stability of services, customer relationships, innovation and price. Our regional and global competitors vary in size, financial and technical capability, and in the scope of the products and services they offer. Some of our competitors may be better positioned to develop, promote and sell their products. Larger competitors may benefit from greater cost efficiencies and may be able to win business simply based on pricing. We consistently face downward pressure on the pricing of our products, which could result in reduced prices for certain products, or a loss of market share. Our competitors may also be able to respond to opportunities before we do, by taking advantage of new technologies, changes in customer requirements or market trends.
Our Consumer Interactive segment experiences competition from emerging companies. For example, prior to 2008, Equifax and Experian were our top competitors for direct-to-consumer credit services, such as credit reports and identity theft protection services. In the past few years, there has been an influx of other companies offering similar services, some of whom leverage the free services mandated by law to be provided by nationwide credit reporting agencies. These developments have resulted in increased competition.
23
Many of our competitors have extensive customer relationships, including relationships with our current and potential customers. New competitors, or alliances among competitors, may emerge and gain significant market share. Existing or new competitors may develop products and services that are superior to ours or that achieve greater market acceptance. If we are unable to respond to changes in customer requirements as quickly and effectively as our competition, our ability to expand our business and sell our services may be adversely affected.
Our competitors may be able to sell services at lower prices than us, individually or as part of integrated suites of several related services. This ability may cause our customers to purchase from our competitors rather than from us. Price reductions by our competitors could also negatively impact our operating margins or harm our ability to obtain new long-term contracts or renewals of existing contracts on favorable terms. Additionally, some of our customers may develop products of their own that replace the products they currently purchase from us, which would result in lower revenue.
We also expect that there will be significant competition in the new markets that we plan to enter. We cannot assure you that we will be able to compete effectively against current and future competitors. If we fail to successfully compete, our business, financial condition and results of operations may be adversely affected.
Our relationships with key long-term customers may be materially diminished or terminated.
We have long-standing relationships with a number of our customers, many of whom could unilaterally terminate their relationship with us or materially reduce the amount of business they conduct with us at any time. Market competition, customer requirements, customer financial condition and customer consolidation through mergers or acquisitions also could adversely affect our ability to continue or expand these relationships. There is no guarantee that we will be able to retain or renew existing agreements, maintain relationships with any of our customers on acceptable terms or at all or collect amounts owed to us from insolvent customers. Our customer agreements relating to our core credit reporting service offered through our USIS segment are terminable upon advance written notice (typically ranging from 30 days to six months) by either us or the customer, which provides our customers with the opportunity to renegotiate their contracts with us or to award more business to our competitors. The loss of one or more of our major customers could adversely affect our business, financial condition and results of operations.
Data security and integrity are critically important to our business, and breaches of security, unauthorized access to or disclosure of confidential information, disruption, including distributed denial of service (DDoS) attacks or the perception that confidential information is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.
We own and host a large amount of sensitive and confidential consumer information including financial information, personally identifiable information and protected health information. This data is often accessed through secure transmissions over public and private networks, including the internet. Despite our physical security, implementation of technical controls and contractual precautions to identify, detect and prevent the unauthorized access to and alteration and disclosure of our data, we cannot assure you that systems that access our services and databases will not be compromised or disrupted, whether as a result of criminal conduct, DDoS attacks or other advanced persistent attacks by malicious actors, including hackers, nation states and criminals, breaches due to employee error or malfeasance, or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or utility failures or natural disasters or other catastrophic events. We must continually monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access,
24
misuse, computer viruses and other events that could have a security impact. Several recent, highly publicized data security breaches and DDoS attacks have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems. Unauthorized disclosure, loss or corruption of our data or inability of our customers to access our systems could disrupt our operations, subject us to substantial legal liability, result in a material loss of business and significantly harm our reputation.
As a nationwide consumer credit reporting company in the United States and a global provider of risk and information solutions, we collect, store and transmit files on over one billion consumers. These files may contain non-public personal information, public health information and other information, and we have implemented technical and physical security policies, procedures and systems we believe are reasonably designed to protect this information from unauthorized access. However, due to the sensitive nature of the information we collect, store and transmit, it is not unusual for efforts to occur (coordinated or otherwise) by unauthorized persons to attempt to obtain access to our systems or data, or to inhibit our ability to deliver products or services to a consumer or a business customer.
In the fourth quarter of 2014, we were subjected to a DDoS attack on the network connectivity that we use to service our consumer customers and deliver products in North America. A DDoS attack is an attempt to intentionally paralyze a computer network by flooding it with data sent simultaneously from many individual computers. The impact on our business was minimal and we did not experience any loss of data as a result of the attack. In March 2013, one or more individuals illegally accessed several celebrities individual consumer files by obtaining considerable amounts of non-public personal information about those celebrities from other sources unaffiliated with TransUnion. With that information, the perpetrators were able to successfully impersonate these celebrities in online connections and fraudulently obtained their credit reports, principally from AnnualCreditReport.com , the website maintained by TransUnion and the other nationwide consumer credit reporting agencies through which consumers may obtain their free credit report once every twelve months from each of the nationwide consumer credit reporting companies. As a result of this incident, we added additional controls that strengthened our authentication parameters.
Due to concerns about data security and integrity, a growing number of legislative and regulatory bodies have adopted consumer notification and other requirements in the event that consumer information is accessed by unauthorized persons and additional regulations regarding the use, access, accuracy and security of such data are possible. In the United States, federal and state laws provide for over 40 disparate notification regimes, all of which we are subject to. Complying with such numerous and complex regulations in the event of unauthorized access would be expensive and difficult, and failure to comply with these regulations could subject us to regulatory scrutiny and additional liability.
If we experience system failures, personnel disruptions or capacity constraints, or our customers do not modify their systems to accept new releases of our distribution programs, the delivery of our services to our customers could be delayed or interrupted, which could harm our business and reputation and result in the loss of revenues or customers.
Our ability to provide reliable service largely depends on our ability to maintain the efficient and uninterrupted operation of our computer network, systems and data centers, some of which have been outsourced to third-party providers. In addition, we generate a significant amount of our revenues through channels that are dependent on links to telecommunications providers. Our systems, personnel and operations could be exposed to damage or interruption from fire, natural disasters, power loss, war, terrorist acts, civil disobedience, telecommunication failures, computer viruses, DDoS attacks or human error. We may not have sufficient redundant operations to cover a loss or failure of our systems in a timely manner. Any significant interruption could severely harm our business and reputation and result in
25
a loss of revenue and customers. Additionally, from time to time we send our customers new releases of our distribution programs, some of which contain security updates. Any failure by our customers to install these new releases could expose our customers to computer security risks.
We could lose our access to data sources which could prevent us from providing our services.
Our services and products depend extensively upon continued access to and receipt of data from external sources, including data received from customers, strategic partners and various government and public records repositories. In some cases, we compete with our data providers. Our data providers could stop providing data, provide untimely data or increase the costs for their data for a variety of reasons, including a perception that our systems are insecure as a result of a data security breach, budgetary constraints, a desire to generate additional revenue or for regulatory or competitive reasons. We could also become subject to increased legislative, regulatory or judicial restrictions or mandates on the collection, disclosure or use of such data, in particular if such data is not collected by our providers in a way that allows us to legally use the data. If we were to lose access to this external data or if our access or use were restricted or were to become less economical or desirable, our ability to provide services could be negatively impacted, which would adversely affect our reputation, business, financial condition and results of operations. We cannot provide assurance that we will be successful in maintaining our relationships with these external data source providers or that we will be able to continue to obtain data from them on acceptable terms or at all. Furthermore, we cannot provide assurance that we will be able to obtain data from alternative sources if our current sources become unavailable.
Our business is subject to various governmental regulations, laws and orders, compliance with which may cause us to incur significant expenses or reduce the availability or effectiveness of our solutions, and the failure to comply with which could subject us to civil or criminal penalties or other liabilities.
Our businesses are subject to regulation under the Fair Credit Reporting Act (together with regulations thereunder, FCRA), the Gramm-Leach-Bliley Act (the GLBA), the Drivers Privacy Protection Act (the DPPA), the Health Insurance Portability and Accountability Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), the Federal Trade Commission Act (the FTC Act) and various other international, federal, state and local laws and regulations. See BusinessLegal and Regulatory Matters for a description of select regulatory regimes to which we are subject. These laws and regulations, which generally are designed to protect the privacy of the public and to prevent the misuse of personal information available in the marketplace, are complex, change frequently and have tended to become more stringent over time. We already incur significant expenses in our attempt to ensure compliance with these laws. Currently, public concern is high with regard to the operation of credit reporting agencies in the United States, as well as the collection, use, accuracy, correction and sharing of personal information, including Social Security numbers, dates of birth, financial information, medical information, department of motor vehicle data and other behavioral data. In addition, many consumer advocates, privacy advocates, legislatures and government regulators believe that existing laws and regulations do not adequately protect privacy and have become increasingly concerned with the use of this type of personal information. As a result, they are lobbying for further restrictions on the dissemination or commercial use of personal information to the public and private sectors. Additional legislative or regulatory efforts in the United States, or an action by Executive Order of the President of the United States, could further regulate credit reporting agencies and the collection, use, communication, access, accuracy, obsolescence, sharing, correction and security of this personal information. Similar initiatives are underway in various other countries in which we do business. In addition, any perception that our practices or products are an invasion of privacy, whether or not consistent with current or future regulations and industry practices, may subject us to public criticism, private class actions, reputational harm, or claims by regulators, which could disrupt our business and expose us to increased liability.
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Public concern regarding identity theft also has led to more transparency for consumers as to what is in their credit reports. We provide credit reports and scores and monitoring services to consumers for a fee, and this income stream could be reduced or restricted by legislation that requires us to provide these services to consumers free of charge. For example, under U.S. federal law today, we are required to provide consumers with one credit report per year free of charge. Legislation has been introduced from time to time that would require us to provide credit scores to consumers without charge.
The following legal and regulatory developments also could have a material adverse effect on our business, financial condition or results of operations:
| amendment, enactment or interpretation of laws and regulations that restrict the access and use of personal information and reduce the availability or effectiveness of our solutions or the supply of data available to customers; |
| changes in cultural and consumer attitudes in favor of further restrictions on information collection and sharing, which may lead to regulations that prevent full utilization of our solutions; |
| failure of data suppliers or customers to comply with laws or regulations, where mutual compliance is required; |
| failure of our solutions to comply with current laws and regulations; and |
| failure of our solutions to adapt to changes in the regulatory environment in an efficient, cost-effective manner. |
Changes in applicable legislation or regulations that restrict or dictate how we collect, maintain, combine and disseminate information, or that require us to provide services to consumers or a segment of consumers without charge, could adversely affect our business, financial condition or results of operations. In the future, we may be subject to significant additional expense to ensure continued compliance with applicable laws and regulations and to investigate, defend or remedy actual or alleged violations. Any failure by us to comply with applicable laws or regulations could also result in significant liability to us, including liability to private plaintiffs as a result of individual or class action litigation, or may result in the cessation of our operations or portions of our operations or impositions of fines and restrictions on our ability to carry on or expand our operations. Moreover, our compliance with privacy laws and regulations and our reputation depend in part on our customers adherence to privacy laws and regulations and their use of our services in ways consistent with consumer expectations and regulatory requirements. Certain of the laws and regulations governing our business are subject to interpretation by judges, juries and administrative entities, creating substantial uncertainty for our business. We cannot predict what effect the interpretation of existing or new laws or regulations may have on our business. See BusinessLegal and Regulatory Matters.
The Consumer Financial Protection Bureau (the CFPB) has supervisory and examination authority over our business and may initiate enforcement actions with regard to our compliance with federal consumer financial laws.
The CFPB, which was established under the Dodd-Frank Act and commenced operations in July 2011, has broad authority over our business. This includes authority to issue regulations under federal consumer financial protection laws, such as under FCRA and other laws applicable to us and our financial customers. The CFPB is authorized to prevent unfair, deceptive or abusive acts or practices through its regulatory, supervisory and enforcement authority.
In 2012, credit reporting companies like us became subject to a federal supervision program for the first time under the CFPBs authority to supervise and examine certain nondepository institutions
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that are larger participants of the consumer credit reporting market. The CFPB conducts examinations and investigations, and may issue subpoenas and bring civil actions in federal court for violations of the federal consumer financial laws including FCRA. In these proceedings, the CFPB can seek relief that includes: rescission or reformation of contracts, restitution, disgorgement of profits, payment of damages, limits on activities and civil money penalties of up to $1.0 million per day for knowing violations. The CFPB has initiated periodic examinations of us and the consumer credit reporting industry, which could result in new regulations or enforcement actions or proceedings.
There continues to be uncertainty as to how the CFPBs strategies and priorities, including in both its examination and enforcement processes, will impact our business and our results of operations going forward. Actions by the CFPB could result in requirements to alter or cease offering affected products and services, making them less attractive and restricting our ability to offer them.
Although we have committed resources to enhancing our compliance programs, actions by the CFPB or other regulators against us could result in reputational harm. Our compliance costs and legal and regulatory exposure could increase materially if the CFPB or other regulators enact new regulations, change regulations that were previously adopted, modify through supervision or enforcement past regulatory guidance, or interpret existing regulations in a manner different or stricter than have been previously interpreted.
We are subject to banking regulations that may limit our business activities.
The Goldman Sachs Group, Inc., affiliates of which owned approximately 48.8% of the voting and economic interest in our business at June 5, 2015, is regulated as a bank holding company that has elected to be treated as a financial holding company under the Bank Holding Company Act of 1956, as amended (the BHC Act). The BHC Act imposes regulations and requirements on The Goldman Sachs Group, Inc. and on any company that is deemed to be controlled by The Goldman Sachs Group, Inc. for purposes of the BHC Act and the regulations of the Board of Governors of the Federal Reserve System (the Federal Reserve) promulgated thereunder. Due to the size of its voting and economic interest in us, we are deemed to be controlled by The Goldman Sachs Group, Inc. and, therefore, are considered to be a subsidiary of The Goldman Sachs Group, Inc. under the BHC Act. We will remain subject to this regulatory regime until The Goldman Sachs Group, Inc. is no longer deemed to control us for purposes of the BHC Act, which we do not have the ability to control and which will not occur until The Goldman Sachs Group, Inc. has significantly reduced its voting and economic interest in us.
As a subsidiary of The Goldman Sachs Group, Inc., we are restricted from engaging in activities that are not permissible for financial holding companies to engage in under the BHC Act, or the regulations promulgated thereunder. Permitted activities for a financial holding company or any of its controlled subsidiaries generally include activities that the Federal Reserve has previously determined to be financial in nature, closely related to banking, incidental to a financial activity, or complementary to a financial activity if the activity does not pose a safety and soundness risk, such as those that we provide. Restrictions placed on The Goldman Sachs Group, Inc. as a result of supervisory or enforcement actions under the BHC Act or otherwise may restrict us or our activities in certain circumstances, even if these actions are unrelated to our conduct or business. The Federal Reserve could exercise its power to restrict us from engaging in any activity that, in the Federal Reserves opinion, is unauthorized for us or constitutes an unsafe or unsound business practice. To the extent that the Federal Reserves regulations impose limitations on our business, we may be at a competitive disadvantage to those of our competitors that are not subject to such regulations.
Additionally, any failure of The Goldman Sachs Group, Inc. to maintain its status as a financial holding company could result in further limitations on our activities and our growth.
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As a subsidiary of a bank holding company, we are subject to examination by the Federal Reserve and required to provide information and reports for use by the Federal Reserve under the BHC Act. The Federal Reserve may also impose substantial fines and other penalties for violations of applicable banking laws, regulations and orders. In addition, as a subsidiary of The Goldman Sachs Group, Inc., we are considered a banking entity and subject to the restrictions of Section 13 of the BHC Act, otherwise known as the Volcker Rule. As such, we are restricted (subject to certain exemptions and exclusions) from engaging in proprietary trading and from acquiring or retaining any ownership interest in, or sponsoring, a covered fund (which includes most private equity funds and hedge funds), subject to satisfying certain conditions, and, in certain circumstances, from engaging in credit related and other transactions with such funds.
We have agreed to certain covenants in the Amended and Restated Major Stockholders Agreement (as later defined) for the benefit of The Goldman Sachs Group, Inc. that are intended to facilitate its compliance with the BHC Act, but that may impose certain obligations on our company. In particular, The Goldman Sachs Group, Inc. has rights to conduct audits on, and access certain information of, our company and certain rights to review the policies and procedures that we implement to comply with the laws and regulations that relate to our activities. In addition, we are obligated to provide The Goldman Sachs Group, Inc. with notice of certain events and business activities and cooperate with The Goldman Sachs Group, Inc. to mitigate potential adverse consequences resulting therefrom, as well as seek consent from them prior to expanding the nature of our activities.
Regulatory oversight of our contractual relationships with certain of our customers may adversely affect our business.
In October 2013, the Office of the Comptroller of the Currency (the OCC) issued updated guidance to national banks and federal savings associations on assessing and managing risks associated with third-party relationships, which include all business arrangements between a bank and another entity, by contract or otherwise. The guidance requires banks to exercise comprehensive oversight throughout each phase of a banks business arrangement with third-party service providers, and instructs banks to adopt risk management processes commensurate with the level of risk and complexity of its third-party relationships. The OCC expects especially rigorous oversight of third-party relationships that involve certain critical activities. In light of this guidance, our existing or potential financial services customers subject to OCC regulation may continue to revise their third-party risk management policies and processes and the terms on which they do business with us, which may adversely affect our relationship with such customers.
The outcome of litigation, inquiries, investigations, examinations or other legal proceedings in which we are involved, in which we may become involved, or in which our customers or competitors are involved could subject us to significant monetary damages or restrictions on our ability to do business.
Legal proceedings arise frequently as part of the normal course of our business. These may include individual consumer cases, class action lawsuits and inquiries, investigations, examinations, regulatory proceedings or other actions brought by federal (e.g., the CFPB and the United States Federal Trade Commission (FTC)) or state (e.g., state attorneys general) authorities or by consumers. The scope and outcome of these proceedings is often difficult to assess or quantify. Plaintiffs in lawsuits may seek recovery of large amounts and the cost to defend such litigation may be significant. There may also be adverse publicity and uncertainty associated with investigations, litigation and orders (whether pertaining to us, our customers or our competitors) that could decrease customer acceptance of our services or result in material discovery expenses. In addition, a court-ordered injunction or an administrative cease-and-desist order or settlement may require us to modify our business practices or may prohibit conduct that would otherwise be legal and in which our
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competitors may engage. Many of the technical and complex statutes to which we are subject, including state and federal credit reporting, medical privacy and financial privacy requirements, may provide for civil and criminal penalties and may permit consumers to maintain individual or class action lawsuits against us and obtain statutorily prescribed damages. Additionally, our customers might face similar proceedings, actions or inquiries, which could affect their business and, in turn, our ability to do business with those customers. While we do not believe that the outcome of any pending or threatened legal proceeding, investigation, examination or supervisory activity will have a material adverse effect on our financial position, such events are inherently uncertain and adverse outcomes could result in significant monetary damages, penalties or injunctive relief against us.
For example, in a matter captioned White, et al, v. Experian Information Solutions, Inc. , the plaintiffs sought class action status against Equifax, Experian and us in connection with the reporting of delinquent or charged-off consumer debt obligations on a consumer report after the consumer was discharged in a bankruptcy proceeding. Without admitting any wrongdoing, in 2009 we agreed to a settlement of this matter by paying money damages of $17.0 million per defendant and voluntarily changing certain of our operational practices. These changes require us to update certain delinquent records when we learn, through the collection of public records, that the consumer has received an order of discharge in a bankruptcy proceeding.
See BusinessLegal Proceedings for further information regarding other material pending litigation or investigations.
We are currently implementing a multi-year technology infrastructure transformation. If we do not successfully implement this transformation, we may not achieve anticipated cost savings.
We have made significant investments since 2012 to modernize our infrastructure. In the third quarter of 2013, we began a specific strategic initiative to transform our technology to the latest big data and analytics capabilities. We may not be able to implement our strategic initiative in accordance with our expectations, which may result in an adverse impact on our business and financial results. As an organization, we may not have the capacity or ability to successfully accomplish this initiative in the timeframe we desire, or at all. This initiative is complex, will require a continued commitment to investment that we may not be willing to provide and may cost more than we currently anticipate. In addition, our expectation for future income is based in part upon our assumptions regarding our ability to achieve this strategic initiative. If we fail to complete this strategic initiative, or if it takes longer to complete than we currently expect, we may not achieve the cost savings we currently anticipate.
Our ability to expand our operations in, and the portion of our revenue derived from, markets outside the United States is subject to economic, political and other inherent risks, which could adversely impact our growth rate and financial performance.
Over the last several years, we have derived a growing portion of our revenues from customers outside the United States, and it is our intent to continue to expand our international operations. We have sales and technical support personnel in numerous countries worldwide. We expect to continue to add personnel internationally to expand our abilities to deliver differentiated services to our international customers. Expansion into international markets will require significant resources and management attention and will subject us to new regulatory, economic and political risks. Moreover, the services we offer in developed and emerging markets must match our customers demand for those services. Due to price, limited purchasing power and differences in the development of consumer credit markets, there can be no assurance that our services will be accepted in any particular developed or emerging market, and we cannot be sure that our international expansion efforts will be successful. The results of our operations and our growth rate could be adversely affected by a variety of factors arising out of international commerce, some of which are beyond our control. These factors include:
| currency exchange rate fluctuations; |
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| foreign exchange controls that might prevent us from repatriating cash to the United States; |
| difficulties in managing and staffing international offices; |
| increased travel, infrastructure, legal and compliance costs of multiple international locations; |
| foreign laws and regulatory requirements; |
| terrorist activity, natural disasters and other catastrophic events; |
| restrictions on the import and export of technologies; |
| difficulties in enforcing contracts and collecting accounts receivable; |
| longer payment cycles; |
| failure to meet quality standards for outsourced work; |
| unfavorable tax rules; |
| political and economic conditions in foreign countries, particularly in emerging markets; |
| the presence and acceptance of varying level of business corruption in international markets; |
| varying business practices in foreign countries; and |
| reduced protection for intellectual property rights. |
For example, in 2014 and 2013, the revenues from our International segment were negatively impacted by 6.9% and 7.6%, respectively, primarily as a result of the weakening South African rand and the Canadian dollar. See Managements Discussion and Analysis of Financial Condition and Results of OperationsTwelve Months Ended December 31, 2014, 2013 and 2012RevenueInternational Segment. As we continue to expand our business, our success will partially depend on our ability to anticipate and effectively manage these and other risks. Our failure to manage these risks could adversely affect our business, financial condition and results of operations.
We depend, in part, on strategic alliances, joint ventures and acquisitions to grow our business. If we are unable to make strategic acquisitions and develop and maintain these strategic alliances and joint ventures, our growth may be adversely affected.
An important focus of our business is to identify business partners who can enhance our services and enable us to develop solutions that differentiate us from our competitors. We have entered into several alliance agreements or license agreements with respect to certain of our datasets and services and may enter into similar agreements in the future. These arrangements may require us to restrict our use of certain of our technologies among certain customer industries, or to grant licenses on terms that ultimately may prove to be unfavorable to us, either of which could adversely affect our business, financial condition or results of operations. Relationships with our alliance agreement partners may include risks due to incomplete information regarding the marketplace and commercial strategies of our partners, and our alliance agreements or other licensing agreements may be the subject of contractual disputes. If we or our alliance agreements partners are not successful in maintaining or commercializing the alliance agreements services, such commercial failure could adversely affect our business.
In addition, a significant strategy for our international expansion is to establish operations through strategic alliances or joint ventures with local financial institutions and other partners. We cannot provide assurance that these arrangements will be successful or that our relationships with our partners will continue to be mutually beneficial. If these relationships cannot be established or maintained, it could negatively impact our business, financial condition and results of operations. Moreover, our ownership in and control of our foreign investments may be limited by local law.
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We also selectively evaluate and consider acquisitions as a means of expanding our business and entering into new markets. We may not be able to acquire businesses we target due to a variety of factors such as competition from companies that are better positioned to make the acquisition. Our inability to make such strategic acquisitions could restrict our ability to expand our business and enter into new markets which would limit our ability to generate future revenue growth. Additionally, given some of our equity interests in various companies, we may be limited in our ability to require or influence such companies to make acquisitions or take other actions that we believe to be in our or their best interests. Our inability to take such actions could have a material impact on our revenues or earnings.
If we are unable to develop successful new services in a timely manner, or if the market does not adopt our new services, our ability to maintain or increase our revenue could be adversely affected.
In order to keep pace with customer demands for increasingly sophisticated service offerings, to sustain expansion into growth industries and to maintain our profitability, we must continue to innovate and introduce new services to the market. The process of developing new services is complex and uncertain. Our industry solutions require extensive experience and knowledge from within the relevant industry. We must commit significant resources to this effort before knowing whether the market will accept new service offerings. Additionally, our business strategy is dependent on our ability to expand into new markets and to bring new products to market. We may not successfully enter into new markets or execute on our new services because of challenges in planning or timing, technical hurdles, difficulty in predicting market demand, changes in regulation or a lack of appropriate resources. Additionally, even if we successfully develop new products, our existing customers might not accept these new products or new markets might not adopt our products due to operational constraints, high switching costs or general lack of market readiness. Failure to successfully introduce new services to the market could adversely affect our reputation, business, financial condition and results of operations.
If we fail to maintain and improve our systems, our data matching technology, and our interfaces with data sources and customers, demand for our services could be adversely affected.
In our markets, there are continuous improvements in computer hardware, network operating systems, programming tools, programming languages, operating systems, data matching, data filtering and other database technologies and the use of the internet. These improvements, as well as changes in customer preferences or regulatory requirements, may require changes in the technology used to gather and process our data and deliver our services. Our future success will depend, in part, upon our ability to:
| internally develop and implement new and competitive technologies; |
| use leading third-party technologies effectively; |
| respond to changing customer needs and regulatory requirements, including being able to bring our new products to the market quickly; and |
| transition customers and data sources successfully to new interfaces or other technologies. |
We cannot provide assurance that we will successfully implement new technologies, cause customers or data furnishers to implement compatible technologies or adapt our technology to evolving customer, regulatory and competitive requirements. If we fail to respond, or fail to cause our customers or data furnishers to respond, to changes in technology, regulatory requirements or customer preferences, the demand for our services, the delivery of our services or our market reputation could be adversely affected. Additionally, our failure to implement important updates could affect our ability to successfully meet the timeline for us to generate cost savings resulting from our investments in improved technology. Failure to achieve any of these objectives would impede our ability to deliver strong financial results.
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When we engage in acquisitions, investments in new businesses or divestitures of existing businesses, we will face risks that may adversely affect our business.
We may acquire or make investments in businesses that offer complementary services and technologies. Acquisitions may not be completed on favorable terms and acquired assets, data or businesses may not be successfully integrated into our operations. Any acquisitions or investments will include risks commonly encountered in acquisitions of businesses, including:
| failing to achieve the financial and strategic goals for the acquired business; |
| paying more than fair market value for an acquired company or assets; |
| failing to integrate the operations and personnel of the acquired businesses in an efficient and timely manner; |
| disrupting our ongoing businesses; |
| distracting management focus from our existing businesses; |
| acquiring unanticipated liabilities; |
| failing to retain key personnel; |
| incurring the expense of an impairment of assets due to the failure to realize expected benefits; |
| damaging relationships with employees, customers or strategic partners; |
| diluting the share value of existing stockholders; and |
| incurring additional debt or reducing available cash to service our existing debt. |
Any divestitures will be accompanied by the risks commonly encountered in the sale of businesses, which may include:
| disrupting our ongoing businesses; |
| reducing our revenues; |
| losing key personnel; |
| distracting management focus from our existing businesses; |
| indemnification claims for breaches of representations and warranties in sale agreements; |
| damaging relationships with employees and customers as a result of transferring a business to new owners; and |
| failure to close a transaction due to conditions such as financing or regulatory approvals not being satisfied. |
These risks could harm our business, financial condition or results of operations, particularly if they occur in the context of a significant acquisition or divestiture. Acquisitions of businesses having a significant presence outside the United States will increase our exposure to the risks of conducting operations in international markets.
We may be unable to protect our intellectual property adequately or cost-effectively, which may cause us to lose market share or force us to reduce our prices. We also rely on trade secrets and other forms of unpatented intellectual property that may be difficult to protect.
Our success depends, in part, on our ability to protect and preserve the proprietary aspects of our technology and services. If we are unable to protect our intellectual property, including trade secrets and
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other unpatented intellectual property, our competitors could use our intellectual property to market and deliver similar services, decreasing the demand for our services. We rely on the patent, copyright, trademark, trade secret and other intellectual property laws of the United States and other countries, as well as contractual restrictions, such as nondisclosure agreements, to protect and control access to our proprietary intellectual property. These measures afford limited protection, however, and may be inadequate. We may be unable to prevent third parties from using our proprietary assets without our authorization or from breaching any contractual restrictions with us. Enforcing our rights could be costly, time-consuming, distracting and harmful to significant business relationships. Claims that a third party illegally obtained and is using trade secrets can be difficult to prove, and courts outside the United States may be less willing to protect trade secrets. Additionally, others may independently develop non-infringing technologies that are similar or superior to ours. Any significant failure or inability to adequately protect and control our proprietary assets may harm our business and reduce our ability to compete.
We may face claims for intellectual property infringement, which could subject us to monetary damages or limit us in using some of our technologies or providing certain services.
There has been substantial litigation in the United States regarding intellectual property rights in the information technology industry. We cannot be certain that we do not infringe on the intellectual property rights of third parties, including the intellectual property rights of third parties in other countries, which could result in a liability to us. Historically, patent applications in the United States and some foreign countries have not been publicly disclosed until eighteen months following submission of the patent application, and we may not be aware of currently filed patent applications that relate to our products or processes. If patents are later issued on these applications, we may be liable for infringement. In the event that claims are asserted against us, we may be required to obtain licenses from third parties (if available on acceptable terms or at all). Any such claims, regardless of merit, could be time consuming and expensive to litigate or settle, divert the attention of management and materially disrupt the conduct of our business, and we may not prevail. Intellectual property infringement claims against us could subject us to liability for damages and restrict us from providing services or require changes to certain products or services. Although our policy is to obtain licenses or other rights where necessary, we cannot provide assurance that we have obtained all required licenses or rights. If a successful claim of infringement is brought against us and we fail to develop non-infringing products or services, or to obtain licenses on a timely and cost-effective basis, our reputation, business, financial condition and results of operations could be adversely affected.
If our outside service providers and key vendors are not able to or do not fulfill their service obligations, our operations could be disrupted and our operating results could be harmed.
We depend on a number of service providers and key vendors such as telecommunication companies, software engineers, data processors, software and hardware vendors and providers of credit score algorithms, who are critical to our operations. These service providers and vendors are involved with our service offerings, communications and networking equipment, computer hardware and software and related support and maintenance. Although we have implemented service-level agreements and have established monitoring controls, our operations could be disrupted if we do not successfully manage relationships with our service providers, if they do not perform or are unable to perform agreed-upon service levels, or if they are unwilling to make their services available to us at reasonable prices. If our service providers and vendors do not perform their service obligations, it could adversely affect our reputation, business, financial condition and results of operations.
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There may be further consolidation in our end-customer markets, which may adversely affect our revenues.
There has been, and we expect there will continue to be, merger, acquisition and consolidation activity in our customer markets. If our customers merge with, or are acquired by, other entities that are not our customers, or that use fewer of our services, our revenue may be adversely impacted. In addition, industry consolidation could affect the base of recurring transaction-based revenue if consolidated customers combine their operations under one contract, since most of our contracts provide for volume discounts. In addition, our existing customers might leave certain geographic markets, which would no longer require them to purchase certain products from us and, consequently, we would generate less revenue than we currently expect.
To the extent the availability of free or relatively inexpensive consumer information increases, the demand for some of our services may decrease.
Public and commercial sources of free or relatively inexpensive consumer information have become increasingly available and this trend is expected to continue. Public and commercial sources of free or relatively inexpensive consumer information, including free credit information from lead generation companies and from banks, may reduce demand for our services. To the extent that our customers choose not to obtain services from us and instead rely on information obtained at little or no cost from these public and commercial sources, our business, financial condition and results of operations may be adversely affected.
If we experience changes in tax laws or adverse outcomes resulting from examination of our tax returns, it could adversely affect our results of operations.
We are subject to federal, state and local income and other taxes in the United States and in foreign jurisdictions. From time to time the United States federal, state, local and foreign governments make substantive changes to tax rules and the application thereof, which could result in materially higher corporate taxes than would be incurred under existing tax law or interpretation and could adversely impact profitability. State and local tax authorities have strengthened their efforts to increase revenues through changes in tax law, including laws regarding nexus and apportionment for sales and income taxes.
Consequently, significant judgment is required in determining our worldwide provision for income taxes. Our future effective tax rates and the value of our deferred tax assets could be adversely affected by changes in tax laws. In addition, we are subject to the examination of our income tax returns and other tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from such examinations to determine the adequacy of our provision for income taxes and reserves for other taxes. Although we believe we have made appropriate provisions for taxes in the jurisdictions in which we operate, changes in the tax laws or challenges from tax authorities under existing tax laws could adversely affect our business, financial condition and results of operations.
We are subject to losses from risks for which we do not insure.
For certain risks, we do not maintain insurance coverage because of cost and/or availability. Because we retain some portion of insurable risks, and in some cases retain our risk of loss completely, unforeseen or catastrophic losses in excess of insured limits could materially adversely affect our business, financial condition and results of operations.
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We may not be able to attract and retain the skilled employees that we need to support our business.
Our success depends on our ability to attract and retain experienced management, sales, research and development, analytics, marketing and technical support personnel. If any of our key personnel were unable or unwilling to continue in their present positions, it may be difficult to replace them and our business could be seriously harmed. If we are unable to find qualified successors to fill key positions as needed, our business could be seriously harmed. The complexity of our services requires trained customer service and technical support personnel. We may not be able to hire and retain such qualified personnel at compensation levels consistent with our compensation structure. Some of our competitors may be able to offer more attractive terms of employment. In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expense replacing employees and our ability to provide quality services could diminish, resulting in a material adverse effect on our business. See Management for additional information.
Risks Related to this Offering and Ownership of Our Common Stock
An active public market for our common stock may not develop following this offering, which could limit your ability to sell your shares of our common stock at an attractive price, or at all.
Prior to this offering, there has been no public market for our common stock. We cannot predict the extent to which investor interest in our Company will lead to the development of an active trading market in our common stock or how liquid that market might become. An active public market for our common stock may not develop or be sustained after the offering. We have applied to have our common stock listed on the NYSE, but we cannot assure you that our application will be accepted. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all.
You will incur immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering.
Prior stockholders have paid substantially less per share for our common stock than the price in this offering. The initial public offering price of our common stock is substantially higher than the net tangible book deficit per share of outstanding common stock prior to completion of the offering. Based on our net tangible book deficit as of March 31, 2015 and upon the issuance and sale of 29,545,455 shares of common stock by us at an assumed initial public offering price of $22.00 per share, the mid-point of the estimated price range set forth on the cover page of this prospectus, if you purchase our common stock in this offering, you will pay more for your shares than the amounts paid by our existing stockholders for their shares and you will suffer immediate dilution of approximately $10.93 per share in net tangible book value. Dilution is the amount by which the offering price paid by purchasers of our common stock in this offering will exceed the pro forma net tangible book value per share of our common stock upon completion of this offering. If the underwriters exercise their option to purchase additional shares, or if outstanding options to purchase our common stock are exercised, you will experience additional dilution. You may experience additional dilution upon future equity issuances or the exercise of stock options to purchase common stock granted to our employees, executive officers and directors under our 2015 Omnibus Incentive Plan, our Employee Stock Purchase Plan or other omnibus incentive plans. See Dilution.
Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.
After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may
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fluctuate significantly, and you may not be able to resell your shares at or above the initial public offering price, in response to a number of factors, such as those listed in Risks Related to Our Business, and the following, most of which we cannot control:
| quarterly variations in our operating results compared to market expectations; |
| changes in preferences of our customers; |
| announcements of new products or significant price reductions by us or our competitors; |
| size of the public float; |
| stock price performance of our competitors; |
| publication of research reports about our industry; |
| changes in market valuations of our competitors; |
| fluctuations in stock market prices and volumes; |
| default on our indebtedness; |
| actions by competitors; |
| changes in senior management or key personnel; |
| changes in financial estimates by securities analysts; |
| negative earnings or other announcements by us or other credit reporting agencies; |
| downgrades in our credit ratings or the credit ratings of our competitors; |
| issuances of capital stock; and |
| global economic, legal and regulatory factors unrelated to our performance. |
The initial public offering price of our common stock will be determined by negotiations between us and the underwriters based upon a number of factors and may not be indicative of prices that will prevail following the consummation of this offering. Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the initial public offering price. As a result, you may suffer a loss on your investment.
In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
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Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares.
In connection with this offering, we, our executive officers and directors and the holders of substantially all of our common stock prior to this offering have agreed with the underwriters, other than shares being sold in this offering and subject to certain exceptions, not to dispose of or hedge any of the shares of common stock or securities convertible into or exchangeable for, or that represent the right to receive, shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of representatives of the underwriters, subject to certain exceptions and extensions. See Underwriting (Conflicts of Interest). Upon completion of this offering, we will have 177,787,920 shares of common stock outstanding (or 182,219,738 shares if the underwriters exercise in full their option to purchase additional shares). Of the outstanding shares, the 29,545,455 shares sold in this offering (or 33,977,273 shares if the underwriters exercise in full their option to purchase additional shares) will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the Securities Act), except for any shares of our common stock that may be held or acquired by us, our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. All of the remaining outstanding 148,242,465 shares, representing 83.4% of our total outstanding shares of common stock following this offering, will be deemed restricted securities, of which 147,267,013 shares will be subject to the lock-up period. Restricted securities may be sold in the public market only if they are registered under the Securities Act or they qualify for an exemption from registration, such as the exemptions available under Rule 144 or 701 under the Securities Act, which rules are summarized in Shares Eligible for Future Sale.
In addition, 1,242,845 shares of common stock will be eligible for sale upon exercise of vested options. As soon as practicable following this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register all shares of common stock subject to outstanding stock options and the shares of common stock subject to issuance under the 2015 Omnibus Incentive Plan and the Employee Stock Purchase Plan to be adopted in connection with this offering. Any such Form S-8 registration statements will automatically become effective upon filing. We expect that the initial registration statement on Form S-8 will cover shares of common stock. Once these shares are registered, they can be sold in the public market upon issuance, subject to restrictions under the securities laws applicable to resales by affiliates.
Upon the expiration of the lock-up agreements described above, 146,832,139 shares held by our affiliates would be subject to volume, manner of sale and other limitations under Rule 144. In addition, pursuant to a registration rights agreement entered into in connection the 2012 Change in Control Transaction, we granted the Sponsors the right, subject to certain conditions, to require us to register the sale of their shares of our common stock under the Securities Act and we granted the Sponsors and certain members of management piggyback registration rights providing them the right to have us include the shares of our common stock they own in any registration by the Company. By exercising their registration rights and selling a large number of shares, the selling stockholders could cause the prevailing market price of our common stock to decline. Following completion of this offering, the shares covered by registration rights would represent approximately 83.4% of our outstanding common stock (or 81.4%, if the underwriters exercise in full their option to purchase additional shares).
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Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. See Shares Eligible for Future Sale.
As restrictions on resale end or if these stockholders exercise their registration rights, the market price of our shares of common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of common stock or other securities.
In the future, we may also issue our securities if we need to raise capital in connection with a capital expenditure or acquisition. The amount of shares of our common stock issued in connection with a capital expenditure or acquisition could constitute a material portion of our then-outstanding shares of common stock. Any perceived excess in the supply of our shares in the market could negatively impact our share price and any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to you.
Anti-takeover provisions in our organizational documents might discourage, delay or prevent acquisition attempts for us that you might consider favorable.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.
These provisions provide for, among other things:
| a classified Board of Directors with staggered three-year terms; |
| the ability of our Board of Directors to issue one or more series of preferred stock; |
| advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; |
| certain limitations on convening special stockholder meetings; |
| the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2 ⁄ 3 % in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, if the Sponsors and their affiliates beneficially own, in the aggregate, less than 50% in voting power of the stock of the Company entitled to vote generally in the election of directors; and |
| that certain provisions may be amended only by the affirmative vote of at least 66 2 ⁄ 3 % in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, if the Sponsors and their affiliates beneficially own, in the aggregate, less than 50% in voting power of the stock of the Company entitled to vote generally in the election of directors. |
These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third partys offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. See Description of Capital Stock.
39
We do not expect to pay any cash dividends for the foreseeable future.
The continued operation along with the service of our debt will require substantial funding. Accordingly, we do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Additionally, our operating subsidiaries are currently restricted from paying cash dividends by the agreements governing our indebtedness, and we expect these restrictions to continue in the future. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.
Maintaining our financial controls and the requirements of being a public company may strain our resources, divert managements attention and affect our ability to attract and retain qualified board members, and any failure to maintain financial controls could result in our financial statements becoming unreliable.
In becoming a public company, we will incur significant legal, accounting, insurance and other expenses that we did not incur as a private company, including costs associated with public company governance and reporting requirements. We also have incurred and will continue to incur costs associated with the Sarbanes-Oxley Act of 2002 and related rules implemented by the Securities and Exchange Commission (SEC) and in the future will incur costs in connection with listing on the NYSE. The expenses incurred by public companies for reporting and corporate governance purposes have been generally increasing.
Our efforts to comply with these rules and regulations have significantly increased our legal and financial reporting costs, including costs associated with the hiring of additional personnel. In addition, these laws and regulations could also make it more difficult and costly for us to obtain or renew certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to the delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and related rules and regulations, our management is required to report on the effectiveness of our internal control over financial reporting. Our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in the second annual report we file with the SEC following completion of this offering. We will continue to test our internal controls in connection with the Section 404 requirements and could, as part of that documentation and testing, identify material weaknesses, significant deficiencies or other areas for further attention or improvement. Any failure to maintain the adequacy of internal control over financial reporting, or any consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to satisfy the requirements of Section 404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could cause the market value of our common stock to decline.
40
We will be a controlled company within the meaning of the NYSE rules and the rules of the SEC. As a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.
After completion of this offering, affiliates of the Sponsors will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a controlled company within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance requirements, including:
| the requirement that a majority of the Board of Directors consist of independent directors as defined under the rules of the NYSE; |
| the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; |
| the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; and |
| the requirement for an annual performance evaluation of the nominating/corporate governance and compensation committees. |
Following this offering, we intend to utilize these exemptions. As a result, we will not have a majority of independent directors, our nominating/corporate governance committee and compensation committee will not consist entirely of independent directors and such committees will not be subject to annual performance evaluations. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
In addition, on June 20, 2012, the SEC adopted Rule 10C-1 (Rule 10C-1) under the Securities Exchange Act of 1934, as amended (the Exchange Act), to implement provisions of the Dodd-Frank Act pertaining to compensation committee independence and the role and disclosure of compensation consultants and other advisers to the compensation committee. The NYSE has since adopted amendments to its existing listing standards to comply with provisions of Rule 10C-1, and on January 11, 2013, the SEC approved such amendments. The amended listing standards require, among others, that:
| compensation committees be composed of fully independent directors, as determined pursuant to new and existing independence requirements; |
| compensation committees be explicitly charged with hiring and overseeing compensation consultants, legal counsel and other committee advisers; and |
| compensation committees be required to consider, when engaging compensation consultants, legal counsel or other advisers, certain independence factors, including factors that examine the relationship between the consultant or advisers employer and us. |
As a controlled company, we will not be subject to these compensation committee independence requirements.
41
Affiliates of our Sponsors will own the majority of the equity interests in us and may have conflicts of interest with us or the holders of our common stock.
Investment funds affiliated with our Sponsors currently control our company interests and have the ability to elect a majority of the seats on our board of directors. The Amended and Restated Major Stockholders Agreement (as later defined) will provide, subject to certain requirements, that the Sponsors will collectively have the ability to designate for election four directors to our board of directors. As a result, affiliates of our Sponsors may have substantial control over whether we enter into any transaction that requires the approval of the board of directors regardless of whether our management believe that any such transaction is in our best interests. For example, affiliates of our Sponsors could collectively cause us to make acquisitions that increase the amount of our indebtedness or to sell assets, or could cause us to issue additional capital stock or declare dividends. So long as investment funds affiliated with our Sponsors continue to own a significant amount of our equity interests or otherwise have the ability to designate for election a certain number of directors to our board of directors, the Sponsors may continue to be able to effectively control our decisions. In addition, the Sponsors have no obligation to provide us with any additional debt or equity financing.
The Sponsors are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us or that supply us with goods and services. The Sponsors may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. Holders of our common stock should consider that the interests of the Sponsors may differ from their interests in material respects. See Certain Relationships and Related Party TransactionsMajor Stockholders Agreement.
42
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the exhibits hereto, contains forward-looking statements within the meaning of federal securities laws. Any statements made in this prospectus that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plans and strategies. These statements often include words such as anticipate, expect, suggest, plan, believe, intend, estimate, target, project, should, could, would, may, will, forecast and other similar expressions.
Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that factors affecting our actual financial results could cause actual results to differ materially from those expressed in the forward-looking statements. Factors that could materially affect our financial results or such forward-looking statements include, among others, the risks, uncertainties and factors set forth below under Risk Factors, and the following factors:
| macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets; |
| our ability to provide competitive services and prices; |
| our ability to retain or renew existing agreements with large or long-term customers; |
| our ability to maintain the security and integrity of our data; |
| our ability to deliver services timely without interruption; |
| our ability to maintain our access to data sources; |
| government regulation and changes in the regulatory environment; |
| litigation or regulatory proceedings; |
| regulatory oversight of certain critical activities; |
| our ability to effectively manage our costs; |
| economic and political stability in international markets where we operate; |
| our ability to effectively develop and maintain strategic alliances and joint ventures; |
| our ability to timely develop new services and the markets willingness to adopt our new services; |
| our ability to manage and expand our operations and keep up with rapidly changing technologies; |
| our ability to timely complete our multi-year technology transformation; |
| our ability to make acquisitions and integrate the operations of acquired businesses; |
| our ability to protect and enforce our intellectual property, trade secrets and other forms of unpatented intellectual property; |
| our ability to defend our intellectual property from infringement claims by third parties; |
| the ability of our outside service providers and key vendors to fulfill their obligations to us; |
| further consolidation in our end-customer markets; |
| the increased availability of free or inexpensive consumer information; |
| losses against which we do not insure; |
43
| our ability to make timely payments of principal and interest on our indebtedness; |
| our ability to satisfy covenants in the agreements governing our indebtedness; |
| our ability to maintain our liquidity; |
| our reliance on key management personnel; and |
| our Sponsors controlling us. |
There may be other factors, many of which are beyond our control, that may cause our actual results to differ materially from the forward-looking statements, including factors disclosed under the sections entitled Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations in this prospectus. You should evaluate all forward-looking statements made in this prospectus in the context of these risks and uncertainties.
The forward-looking statements contained in this prospectus speak only as of the date of this prospectus. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements, to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
44
We estimate that we will receive net proceeds of approximately $610.6 million from the sale of 29,545,455 shares of our common stock in this offering, assuming an initial public offering price of $22.00 per share, the mid-point of the estimated price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise in full their option to purchase additional shares, the net proceeds to us will be approximately $702.8 million.
We intend to use the net proceeds from this offering, the New Term Loan Facility and borrowings under our new senior secured revolving credit facility to redeem all of the outstanding 9.625% Senior Notes due 2018 and all of the outstanding 8.125% Senior Notes due 2018 at redemption prices equal to 100.0% and 102.031% of their face value, respectively, plus accrued and unpaid interest to, but not including, the redemption date and to pay fees and expenses related to this offering. If the proceeds raised from this offering and the New Term Loan Facility are insufficient to redeem the full amount of the Senior Notes, we may only redeem a portion of the Senior Notes.
An increase or decrease of 1,000,000 shares from the expected number of shares to be sold by us in this offering, assuming no change in the assumed initial offering price per share, the mid-point of the range on the cover of this prospectus, would increase or decrease our net proceeds from this offering by $22.0 million. A $1.00 increase or decrease in the assumed initial offering price of $22.00 per share, based on the mid-point of the estimated price range set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by $29.5 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We expect that any such increase or decrease would result in a corresponding decrease or increase in our outstanding debt, after giving effect to this offering.
45
We do not intend to pay cash dividends on our common stock in the foreseeable future. We may, in the future, decide to pay dividends on our common stock. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our financial condition, capital requirements, restrictions contained in current or future financing instruments and other factors that our board of directors deem relevant. Additionally our ability to pay dividends is limited by restrictions on the ability of our operating subsidiaries to make distributions, including restrictions under the terms of the agreements governing our debt. See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesDebt and Description of Indebtedness for a description of the restrictions on our ability to pay dividends. We did not declare or pay dividends to the holders of our common stock in the twelve months ended December 31, 2014 and December 31, 2013.
46
If you invest in our common stock in this offering, your ownership interest in us will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the adjusted net tangible book value per share of our common stock after this offering. Dilution results from the fact that the per share offering price of the common stock is substantially in excess of the book value per share attributable to the shares of common stock held by existing stockholders.
Our net tangible book deficit as of March 31, 2015 was approximately $(2,556.1) million, or $(17.28) per share of our common stock. We calculate net tangible book value per share by taking the amount of our total tangible assets, reduced by the amount of our total liabilities excluding deferred taxes related to intangible assets, and then dividing that amount by the total number of shares of common stock outstanding.
After giving effect to our sale of the shares in this offering at an initial public offering price of $22.00 per share, the mid-point of the estimated price range set forth on the cover page of this prospectus and after deducting estimated underwriting discounts and commissions, our adjusted net tangible book deficit on March 31, 2015 would have been $(1,941.0) million, or $(10.93) per share of our common stock. This amount represents an immediate decrease in net tangible book deficit of $6.35 per share to existing stockholders and an immediate and substantial dilution in net tangible book value of $(32.93) per share to new investors purchasing shares in this offering at the initial public offering price.
The following table illustrates this dilution on a per share basis:
Assumed initial public offering price per share |
$ | 22.00 | ||||||
Net tangible book value (deficit) per share as of March 31, 2015 |
$ | (17.28 | ) | |||||
Increase in tangible book value (deficit) per share attributable to new investors |
$ | 6.35 | ||||||
|
|
|||||||
Adjusted net tangible book value (deficit) per share after this offering |
$ | (10.93) | ||||||
|
|
|||||||
Dilution per share to new investors |
$ | (32.93) | ||||||
|
|
Dilution is determined by subtracting adjusted net tangible book value per share of common stock after the offering from the initial public offering price per share of common stock.
If the underwriters exercise in full their option to purchase additional shares, the adjusted net tangible book deficit per share after giving effect to the offering would be $(10.16) per share. This represents a decrease in net tangible book value deficit of $7.12 per share to the existing stockholders and dilution per share to new investors of $(32.16) per share to new investors.
Assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions and offering expenses payable by us, a $1.00 increase or decrease in the assumed initial offering price of $22.00 per share, the mid-point of the range set forth on the cover page of this prospectus, would increase or decrease the net tangible book value attributable to new investors purchasing shares in this offering by $0.16 per share and the dilution to new investors by $(0.84) per share and increase or decrease the adjusted net tangible book value per share after the offering by $0.16 per share.
The following table summarizes, as of March 31, 2015, the differences between the number of shares purchased from us, the total consideration paid to us, and the average price per share paid by existing stockholders and by new investors. As the table shows, new investors purchasing shares in this offering will pay an average price per share substantially higher than our existing stockholders
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paid. The table below assumes an initial public offering price of $22.00 per share, the mid-point of the range set forth on the cover of this prospectus, for shares purchased in this offering and excludes underwriting discounts and commissions and estimated offering expenses payable by us:
Shares Purchased | Total Consideration | |||||||||||||||||||
Number | % | Amount | % | Avg /Share | ||||||||||||||||
Existing stockholders |
147,964,047 | 83.4 | % | $ | 1,119,641,170 | 63.3 | % | $ | 7.57 | |||||||||||
New investors |
29,545,455 | 16.6 | % | 650,000,010 | 36.7 | % | $ | 22.00 | ||||||||||||
|
|
|
|
|||||||||||||||||
177,509,502 | 100 | % | $ | 1,769,641,180 | 100.0 | % | ||||||||||||||
|
|
|
|
If the underwriters were to fully exercise the underwriters option to purchase 4,431,818 additional shares of our common stock, the percentage of shares of our common stock held by existing stockholders would be 81.4% and the percentage of shares of our common stock held by new investors would be 18.6%.
The foregoing tables and calculations are based on the number of shares of our common stock outstanding as of March 31, 2015 and excludes:
| 1,441,975 shares of common stock issuable upon exercise of stock options outstanding as of March 31, 2015 at a weighted average exercise price of $5.16 per share under our equity incentive plans; |
| 5,400,000 additional shares of common stock reserved for future issuance under the 2015 Omnibus Incentive Plan; and |
| 2,400,000 additional shares of common stock reserved for future issuance under the Employee Stock Purchase Plan. |
To the extent any of these outstanding options are exercised, there will be further dilution to new investors. To the extent all of such outstanding options had been exercised as of March 31, 2015, the as adjusted net tangible book deficit per share after this offering would have been $(10.81), and dilution per share to new investors would be $(32.81).
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The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2015:
| on an actual basis; and |
| on an as adjusted basis to give effect to (1) the sale by us of approximately 29,545,455 shares of our common stock in this offering at an assumed initial public offering price of $22.00 per share, the mid-point of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us; (2) the payment of estimated fees and expenses (other than underwriting discounts and commissions) in connection with this offering at an assumed initial public offering price of $22.00 per share, the mid-point of the price range set forth on the cover page of this prospectus; (3) the Credit Facility Refinancing; and (4) the application of the estimated net proceeds from the offering, the New Term Loan Facility and borrowings under our new senior secured revolving credit facility, as described in Use of Proceeds. |
You should read this table in conjunction with the information contained in Use of Proceeds, Selected Historical Consolidated Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations and Description of Indebtedness, as well as the consolidated financial statements and the notes thereto included elsewhere in this prospectus.
As of March 31, 2015 | ||||||||
Actual | As adjusted (1) | |||||||
(dollars in millions, except par value) |
||||||||
Cash and cash equivalents |
$ | 87.0 | $ | 62.0 | ||||
|
|
|
|
|||||
Debt: |
||||||||
Senior Secured Credit Facilities (2) |
||||||||
Senior Secured Revolving Credit Facility |
$ | 85.0 | $ | 114.0 | ||||
New Term Loan Facility |
|
|
|
349.0 | ||||
Senior Secured Term Loan (3) |
1,876.9 | 1,876.9 | ||||||
9.625% Senior Notes due 2018 |
600.0 | | ||||||
8.125% Senior Notes due 2018 (4) |
398.7 | | ||||||
Other |
15.8 | 15.8 | ||||||
|
|
|
|
|||||
Total debt |
$ | 2,976.4 | $ | 2,355.7 | ||||
|
|
|
|
|||||
Stockholders equity: |
||||||||
Common stock, $0.01 par value (200.0 million shares authorized,
|
$ | 1.5 | $ | 1.8 | ||||
Additional paid-in capital |
1,140.8 | 1,751.1 | ||||||
Treasury stock at cost; 0.7 million shares |
(4.3 | ) | (4.3 | ) | ||||
Accumulated deficit |
(436.8 | ) | (444.9 | ) | ||||
Accumulated other comprehensive income (loss) |
(145.0 | ) | (145.0 | ) | ||||
|
|
|
|
|||||
Total TransUnion stockholders equity |
556.2 | 1,158.7 | ||||||
Noncontrolling interests |
163.1 | 163.1 | ||||||
|
|
|
|
|||||
Total equity |
719.3 | 1,321.8 | ||||||
|
|
|
|
|||||
Total capitalization |
$ | 3,695.7 | $ | 3,677.5 | ||||
|
|
|
|
49
(1) | To the extent we change the number of shares of common stock sold by us in this offering from the shares we expect to sell or we change the initial public offering price from the assumed initial offering price of $22.00 per share, the mid-point of the estimated price range set forth on the cover page of this prospectus, or any combination of these events occurs, the net proceeds to us from this offering and each of the total stockholders equity and total capitalization may increase of decrease. A $1.00 increase or decrease in the assumed initial public offering price per share of the common stock, assuming no change in the number of shares of common stock to be sold, would increase or decrease the net proceeds that we receive in this offering and each of total stockholders equity and total capitalization by approximately $29.5 million. An increase or decrease of 1,000,000 shares in the expected number of shares to be sold in the offering, assuming no change in the assumed initial offering price per share, would increase or decrease our net proceeds from this offering and our total stockholders equity and total capitalization by approximately $22.0 million. If the proceeds raised from this offering and the New Term Loan Facility are insufficient to redeem the full amount of the Senior Notes, we may only redeem a portion of the Senior Notes. |
(2) | At March 31, 2015, our senior secured credit facility consisted of (i) a $1,900.0 million term loan facility that matures on April 9, 2021 and (ii) a $190.0 million senior secured revolving credit facility maturing on April 9, 2019, including both a letter of credit sub-facility and a swingline loan sub-facility. As of March 31, 2015, we had $85.0 million in borrowings outstanding under the senior secured revolving credit facility and the aggregate outstanding principal amount of the senior secured term loan facility was $1,881.0 million. Additionally, on June 2, 2015, we completed Amendment No. 8 to our senior secured credit facility, which (i) refinanced our $1,881.0 million existing senior secured term loan with a new senior secured term loan in the same amount with lower pricing, (ii) permits us to, upon completion of Amendment No. 9, refinance our existing $190.0 million senior secured revolving credit facility with a new senior secured revolving credit facility in an amount of $210.0 million, which is expected to become effective substantially concurrently with the closing of this offering and (iii) permits us to, upon completion of Amendment No. 9, enter into a new senior secured term loan facility of up to $500.0 million, $350.0 million of which is expected to be incurred substantially concurrently with the closing of this offering. See Recent Developments, Description of IndebtednessSenior Secured Credit Facility and Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesDebtSenior Secured Credit Facility. |
(3) | Reflects unamortized original issue discount of $4.1 million. |
(4) | Reflects unamortized original issue discount of $1.3 million. |
50
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Set forth below is our selected historical consolidated financial data as of the dates and for the periods indicated.
We have derived the selected historical consolidated financial data for the four months ended April 30, 2012, the period from the date of our inception, February 15, 2012, through December 31, 2012 and for each of the twelve months ended December 31, 2013 and December 31, 2014 and as of December 31, 2013 and December 31, 2014 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the selected historical consolidated financial data as of December 31, 2012 from our audited historical consolidated financial statements, which are not included in this prospectus. We have derived the selected historical consolidated financial data for each of the twelve months ended December 31, 2010 and December 31, 2011 and as of December 31, 2010 and December 31, 2011 from the Predecessors audited historical consolidated financial statements, which are not included in this prospectus. We have derived the selected historical consolidated financial data as of March 31, 2015 and for each of the three months ended March 31, 2014 and March 31, 2015 from our unaudited consolidated financial statements included elsewhere in this prospectus, which have been prepared on the same basis as our audited consolidated financial statements. Share and per share data in the table below for successor periods has been retroactively adjusted to give effect to the 1.333-for-one stock split, which occurred on June 5, 2015.
As a result of the 2012 Change in Control Transaction, the accompanying historical financial statements and summary historical consolidated financial data are presented on a Successor and Predecessor basis. The historical financial information for TransUnion Intermediate reflects the consolidated results of the Predecessor. The historical financial information for TransUnion reflects the stand-alone results of its operations from its date of inception and the consolidated results of the Successor.
Our historical results are not necessarily indicative of future operating results. The following table should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.
Predecessor | Successor | |||||||||||||||||||||||||||||||
Twelve
Months Ended December 31, 2010 |
Twelve
Months Ended December 31, 2011 |
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(in millions, other than per share data) | ||||||||||||||||||||||||||||||||
Income Statement Data: |
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Revenue |
$ | 956.5 | $ | 1,024.0 | $ | 373.0 | $ | 767.0 | $ | 1,183.2 | $ | 1,304.7 | $ | 303.4 | $ | 353.1 | ||||||||||||||||
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Operating expenses |
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Cost of services |
395.8 | 421.5 | 172.0 | 298.2 | 472.4 | 499.1 | 120.9 | 125.6 | ||||||||||||||||||||||||
Selling, general and administrative |
263.0 | 264.5 | 172.0 | 212.6 | 354.8 | 436.0 | 96.2 | 121.9 | ||||||||||||||||||||||||
Depreciation and amortization |
81.6 | 85.3 | 29.2 | 115.0 | 186.8 | 241.2 | 51.5 | 69.1 | ||||||||||||||||||||||||
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Total operating expenses |
740.4 | 771.3 | 373.2 | 625.8 | 1,014.0 | 1,176.3 | 268.6 | 316.6 | ||||||||||||||||||||||||
Operating income (loss) |
216.1 | 252.7 | (0.2 | ) | 141.2 | 169.2 | 128.4 | 34.8 | 36.5 | |||||||||||||||||||||||
Non-operating income and expense |
(133.1 | ) | (185.6 | ) | (63.7 | ) | (138.5 | ) | (195.1 | ) | (130.2 | ) | (48.4 | ) | (43.9 | ) | ||||||||||||||||
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Income (loss) from continuing operations before income taxes |
83.0 | 67.1 | (63.9 | ) | 2.7 | (25.9 | ) | (1.8 | ) | (13.6 | ) | (7.4 | ) | |||||||||||||||||||
(Provision) benefit for income taxes |
(46.3 | ) | (17.8 | ) | 11.5 | (6.6 | ) | (2.3 | ) | (2.6 | ) | 0.1 | 3.0 | |||||||||||||||||||
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Income (loss) from continuing operations |
36.7 | 49.3 | (52.4 | ) | (3.9 | ) | (28.2 | ) | (4.4 | ) | (13.5 | ) | (4.4 | ) | ||||||||||||||||||
Discontinued operations, net of tax |
8.2 | (0.5 | ) | | | | | | | |||||||||||||||||||||||
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Net income (loss) |
44.9 | 48.8 | (52.4 | ) | (3.9 | ) | (28.2 | ) | (4.4 | ) | (13.5 | ) | (4.4 | ) | ||||||||||||||||||
Less: net income attributable to noncontrolling interests |
(8.3 | ) | (8.0 | ) | (2.5 | ) | (4.9 | ) | (6.9 | ) | (8.1 | ) | (1.2 | ) | (2.2 | ) | ||||||||||||||||
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Net income (loss) attributable to the Company |
$ | 36.6 | $ | 40.8 | $ | (54.9 | ) | $ | (8.8 | ) | $ | (35.1 | ) | $ | (12.5 | ) | $ | (14.7 | ) | $ | (6.6 | ) | ||||||||||
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Net earnings (loss) per share: |
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Basic |
$ | 0.72 | $ | 1.37 | $ | (1.84 | ) | $ | (0.06 | ) | $ | (0.24 | ) | $ | (0.09 | ) | $ | (0.10 | ) | $ | (0.04 | ) | ||||||||||
Diluted |
0.71 | 1.36 | (1.84 | ) | (0.06 | ) | (0.24 | ) | (0.09 | ) | (0.10 | ) | (0.04 | ) |
51
Predecessor | Successor | |||||||||||||||||||||||||||||||
Twelve
Months Ended December 31, 2010 |
Twelve
Months Ended December 31, 2011 |
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(in millions, other than per share data) | ||||||||||||||||||||||||||||||||
Dividends per share: |
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Basic |
| | | 2.56 | | | | | ||||||||||||||||||||||||
Diluted |
| | | 2.56 | | | | | ||||||||||||||||||||||||
Weighted average shares outstanding: |
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Basic |
51.1 | 29.8 | 29.8 | 146.2 | 146.4 | 147.3 | 147.0 | 147.9 | ||||||||||||||||||||||||
Diluted |
51.3 | 29.9 | 29.8 | 146.2 | 146.4 | 147.3 | 147.0 | 147.9 | ||||||||||||||||||||||||
Cash Flow: |
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Net cash provided by (used in): |
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Operating activities (1) |
$ | 204.6 | $ | 204.5 | $ | 52.4 | $ | 47.0 | $ | 143.4 | $ | 154.3 | $ | (6.1 | ) | $ | 16.5 | |||||||||||||||
Investing activities |
70.4 | (181.6 | ) | (19.6 | ) | (1,547.1 | ) | (367.0 | ) | (276.0 | ) | (69.9 | ) | (34.9 | ) | |||||||||||||||||
Financing activities |
(290.5 | ) | (41.2 | ) | (45.0 | ) | 1,655.1 | 187.3 | 91.9 | 24.8 | 29.1 | |||||||||||||||||||||
Balance sheet data (at end of period): |
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Cash and cash equivalents |
$ | 131.2 | $ | 107.8 | $ | 154.3 | $ | 111.2 | $ | 77.9 | $ | 59.4 | $ | 87.0 | ||||||||||||||||||
Working capital (2) |
128.1 | 105.2 | 182.3 | 102.1 | 71.1 | 47.6 | 97.3 | |||||||||||||||||||||||||
Total assets |
954.2 | 1,005.8 | 4,378.8 | 4,492.3 | 4,665.8 | 4,452.7 | 4,614.3 | |||||||||||||||||||||||||
Total debt (3) |
1,606.0 | 1,601.2 | 2,680.9 | 2,866.9 | 2,939.9 | 2,891.5 | 2,976.4 | |||||||||||||||||||||||||
Total liabilities |
1,816.2 | 1,830.2 | 3,568.0 | 3,760.2 | 3,894.7 | 3,743.0 | 3,882.0 | |||||||||||||||||||||||||
Total stockholders equity |
(862.0 | ) | (824.4 | ) | 796.1 | 714.5 | 747.7 | 692.2 | 719.3 | |||||||||||||||||||||||
Other Financial Data: |
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Adjusted EBITDA (4) |
$ | 126.2 | $ | 277.4 | $ | 408.5 | $ | 454.3 | $ | 95.4 | $ | 114.9 | ||||||||||||||||||||
Adjusted Net Income (4) |
34.0 | 82.8 | 101.9 | 120.3 | 18.4 | 29.9 |
The selected financial data presented above is impacted by the 2012 Change in Control Transaction.
(1) | Net cash provided by operating activities in the year ended December 31, 2011 does not include $1.3 million in cash used in operating activities of certain discontinued operations. |
(2) | Working capital is defined as current assets less current liabilities. |
(3) | Total debt includes long-term debt, short-term debt and current maturities of long-term debt. |
(4) | Adjusted EBITDA is defined as net income (loss) attributable to the Company before net interest expense, income tax provision (benefit), depreciation and amortization and other adjustments noted below. Adjusted Net Income is defined as net income (loss) attributable to the Company before amortization of certain intangible assets and other adjustments noted below, all net of tax. We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our operating performance because they eliminate the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. Also, Adjusted EBITDA and Adjusted Net Income are measures frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours. In addition, our board of directors and executive management team use Adjusted EBITDA as a compensation measure under our incentive plan. Furthermore, under the credit agreement governing our senior secured credit facility and the indentures governing our Senior Notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to a ratio based on Adjusted EBITDA. See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesDebt and Description of Indebtedness. |
Adjusted EBITDA does not reflect our interest, income tax, depreciation, amortization, stock-based compensation, including cash settled stock-based compensation, and certain other income and expense, and Adjusted Net Income does not reflect amortization of certain intangible assets, stock-based compensation, including cash settled stock-based compensation, and certain other income and expense, all net of tax. Other companies in our industry may calculate Adjusted EBITDA and Adjusted Net Income differently than we do, limiting their usefulness as comparative measures. Because of these limitations, Adjusted EBITDA and Adjusted Net Income should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income are not measures of financial condition or profitability under GAAP. Adjusted EBITDA excludes capital expenditures and should not be considered as an alternative to cash flows from operating activities, as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance, and Adjusted Net Income should not be considered as an alternative to operating income or net income as an indicator of operating performance. We believe that the most directly comparable GAAP measure to Adjusted EBITDA and Adjusted Net Income is net income attributable to the Company.
52
The following table provides a reconciliation from net income (loss) attributable to the Company to Adjusted EBITDA for the four months ended April 30, 2012, the period from the date of our inception through December 31, 2012, the twelve months ended December 31, 2013 and December 31, 2014 and the three months ended March 31, 2014 and March 31, 2015.
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Net income (loss) attributable to the Company |
$ | (54.9 | ) | $ | (8.8 | ) | $ | (35.1 | ) | $ | (12.5 | ) | $ | (14.7 | ) | $ | (6.6 | ) | ||||||
Net interest expense |
39.9 | 124.2 | 195.9 | 186.7 | 50.3 | 43.9 | ||||||||||||||||||
Income tax (benefit) provision |
(11.5 | ) | 6.6 | 2.3 | 2.6 | (0.1 | ) | (3.0 | ) | |||||||||||||||
Depreciation and amortization |
29.2 | 115.0 | 186.8 | 241.2 | 51.5 | 69.1 | ||||||||||||||||||
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EBITDA |
2.7 | 237.0 | 349.9 | 418.0 | 87.0 | 103.4 | ||||||||||||||||||
Stock-based compensation (a) |
92.7 | 2.3 | 6.3 | 10.7 | 2.1 | 3.1 | ||||||||||||||||||
Mergers and acquisitions, divestitures and business optimization (b) |
25.3 | 30.4 | 25.0 | 19.7 | 4.0 | 0.5 | ||||||||||||||||||
Technology transformation (c) |
| | 4.5 | 18.7 | 1.0 | 5.8 | ||||||||||||||||||
Other (d) |
5.5 | 7.7 | 22.8 | (12.8 | ) | 1.3 | 2.1 | |||||||||||||||||
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Adjusted EBITDA |
$ | 126.2 | $ | 277.4 | $ | 408.5 | $ | 454.3 | $ | 95.4 | $ | 114.9 | ||||||||||||
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The following table provides a reconciliation from net income (loss) attributable to the Company to Adjusted Net Income for the four months ended April 30, 2012, the period from the date of our inception through December 31, 2012, the twelve months ended December 31, 2013 and December 31, 2014 and the three months ended March 31, 2014 and March 31, 2015.
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Net income (loss) attributable to the Company |
$ | (54.9 | ) | $ | (8.8 | ) | $ | (35.1 | ) | $ | (12.5 | ) | $ | (14.7 | ) | $ | (6.6 | ) | ||||||
Stock-based compensation (a) |
92.7 | 2.3 | 6.3 | 10.7 | 2.1 | 3.1 | ||||||||||||||||||
Mergers and acquisitions, divestitures and business optimization (b) |
25.3 | 30.4 | 25.0 | 19.7 | 4.0 | 0.5 | ||||||||||||||||||
Technology transformation (c) |
| | 4.5 | 18.7 | 1.0 | 5.8 | ||||||||||||||||||
Other (d) |
2.2 | 5.1 | 20.9 | (16.0 | ) | 0.7 | 1.8 | |||||||||||||||||
Amortization of certain intangible assets (e) |
| 87.1 | 130.7 | 161.8 | 34.6 | 45.4 | ||||||||||||||||||
Change in provision for income taxes (f) |
(31.3 | ) | (33.3 | ) | (50.4 | ) | (62.1 | ) | (9.3 | ) | (20.1 | ) | ||||||||||||
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Adjusted Net Income |
$ | 34.0 | $ | 82.8 | $ | 101.9 | $ | 120.3 | $ | 18.4 | $ | 29.9 | ||||||||||||
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(a) | Stock-based compensation items consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Stock-based compensation (i) |
$ | 2.0 | $ | 2.3 | $ | 6.3 | $ | 10.7 | $ | 2.1 | $ | 3.1 | ||||||||||||
Accelerated stock-based compensation (ii) |
90.7 | | | | | | ||||||||||||||||||
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Total stock-based compensation items |
$ | 92.7 | $ | 2.3 | $ | 6.3 | $ | 10.7 | $ | 2.1 | $ | 3.1 | ||||||||||||
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(i) | For 2014, consisted of $8.0 million of stock-based compensation and $2.7 million of cash-settled stock-based compensation. For the three months ended March 31, 2014, consisted of $2.0 million of stock-based compensation and $0.1 million of cash-settled stock-based compensation. For the three months ended March 31, 2015, consisted of $2.4 million of stock-based compensation and $0.7 million of cash-settled stock-based compensation. Once our stock is publicly traded, the cash-settled stock-based compensation liability will be adjusted to market value based on the period end closing stock price, with the offsetting adjustment recorded to cash-settled stock-based compensation expense. |
(ii) | Represented accelerated stock-based compensation expenses as a result of the 2012 Change in Control Transaction. |
(b) | Mergers and acquisitions, divestitures and business optimization consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Mergers, acquisitions and divestitures (i) |
$ | 24.3 | $ | 19.7 | $ | 9.5 | $ | (11.9 | ) | $ | 1.0 | $ | 0.5 | |||||||||||
Mergers and acquisitions integration (ii) |
1.0 | 2.3 | 3.0 | 15.8 | 2.7 | | ||||||||||||||||||
Business optimization (iii) |
| 8.4 | 12.5 | 15.8 | 0.3 | | ||||||||||||||||||
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Total mergers and acquisitions, divestitures and business optimization items |
$ | 25.3 | $ | 30.4 | $ | 25.0 | $ | 19.7 | $ | 4.0 | $ | 0.5 | ||||||||||||
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(i) | For Predecessor and Successor 2012, consisted of acquisition-related expenses primarily related to the 2012 Change in Control Transaction and for Predecessor 2012 costs related to our abandoned initial public offering process. For the twelve months ended December 31, 2013, consisted of $10.5 million of acquisition-related expenses and a credit of $1.0 million for other miscellaneous items. For the twelve months ended December 31, 2014, consisted of $22.2 million of remeasurement gains of our previously held equity interests upon purchase and consolidation of CIBIL and L2C, partially offset by $2.9 million of acquisition-related expenses, a $4.1 million impairment charge for a cost-method investment that sold its assets and liquidated during 2014 and $3.3 million of other miscellaneous items. For the three months ended March 31, 2014, consisted of $0.5 million of contingent consideration expense from a previous acquisition and $0.5 million of acquisition expenses. For the three months ended March 31, 2015, consisted of $0.4 million of contingent consideration expense for a previous acquisition and $0.1 million of acquisition expenses. |
(ii) | Represented merger and acquisition integration costs for companies and assets purchased subsequent to April 30, 2012. |
(iii) | For Successor 2012 and for 2013, primarily consisted of certain severance, sign-on, relocation and executive search costs. For 2014, primarily consisted of certain severance and facility wind-down costs. For the three months ended March 31, 2014, primarily consisted of facility wind-down costs. |
54
(c) | Technology transformation consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Technology transformation project (i) |
$ | | $ | | $ | 4.5 | $ | 8.5 | $ | 1.0 | $ | 5.8 | ||||||||||||
Acceleration of technology agreement (ii) |
| | | 10.2 | | | ||||||||||||||||||
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Total technology transformation items |
$ | | $ | | $ | 4.5 | $ | 18.7 | $ | 1.0 | $ | 5.8 | ||||||||||||
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(i) | Represented costs associated with a project to transform our technology infrastructure. |
(ii) | Represented accelerated fees for a data matching service contract that we have terminated and in-sourced as part of the transformation to our technology infrastructure. |
(d) | Other consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Debt refinance (i) |
$ | | $ | | $ | 2.5 | $ | (33.1 | ) | $ | | $ | | |||||||||||
Legal and regulatory matters |
2.4 | (2.4 | ) | 5.2 | 8.1 | 0.3 | | |||||||||||||||||
Operating expense tax matters (ii) |
| | 2.9 | 3.9 | | | ||||||||||||||||||
Consulting study fees (iii) |
| 4.4 | 5.3 | 1.8 | | | ||||||||||||||||||
Currency remeasurement (iv) |
(0.2 | ) | | 0.8 | 1.1 | | 0.7 | |||||||||||||||||
Hedge mark-to-market (v) |
| | | 0.3 | | 0.9 | ||||||||||||||||||
Other (vi) |
| 3.1 | 4.2 | 1.9 | 0.4 | 0.2 | ||||||||||||||||||
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Total other items affecting Adjusted Net Income |
2.2 | 5.1 | 20.9 | (16.0 | ) | 0.7 | 1.8 | |||||||||||||||||
Loan fees and unused line of credit fees |
3.1 | 1.9 | 1.4 | 1.9 | 0.6 | 0.4 | ||||||||||||||||||
Other non-operating income and expense |
0.2 | 0.7 | 0.5 | 1.3 | | (0.1 | ) | |||||||||||||||||
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Total other items affecting Adjusted EBITDA |
$ | 5.5 | $ | 7.7 | $ | 22.8 | $ | (12.8 | ) | $ | 1.3 | $ | 2.1 | |||||||||||
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(i) | For 2013, represented debt refinancing expenses. For 2014, represented debt refinancing activity consisting of a gain on the prepayment of debt, net of prepayment premium and expenses. |
(ii) | Represented expenses for sales and use tax matters and payroll tax matters. |
(iii) | Represented fees for consulting studies related to our strategic initiatives. |
(iv) | Represented currency remeasurement of our foreign operations. |
(v) | Represented mark-to-market activity related to ineffectiveness of our interest rate hedge. |
(vi) | For Successor 2012, represented $1.5 million in PCI expenses and $1.6 million of other miscellaneous items. For 2013, represented $3.3 million in PCI expenses and $0.9 million of other miscellaneous items. For 2014, represented other miscellaneous items. For the three months ended March 31, 2014 and 2015, represented other miscellaneous items. |
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(e) | Amortization of certain intangible assets consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
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(dollars in millions) | ||||||||||||||||||||||||
Amortization of intangible assets from |
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2012 Change in Control |
$ | | $ | 86.9 | $ | 128.0 | $ | 142.2 | $ | 31.5 | $ | 39.3 | ||||||||||||
Amortization of intangible assets from acquisitions (i) |
| 0.2 | 2.7 | 19.6 | 3.1 | 6.1 | ||||||||||||||||||
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Total amortization of certain intangible assets |
$ | | $ | 87.1 | $ | 130.7 | $ | 161.8 | $ | 34.6 | $ | 45.4 | ||||||||||||
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(i) | Represented amortization of acquired intangible assets that were established through acquisitions subsequent to the 2012 Change in Control Transaction. |
(f) | Change in provision for income taxes consisted of the following: |
Predecessor | Successor | |||||||||||||||||||||||
Four
Months Ended April 30, 2012 |
From
Inception Through December 31, 2012 |
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2014 |
Three
Months Ended March 31, 2014 |
Three
Months Ended March 31, 2015 |
|||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Tax effect of adjustments in (a), (b), (c), (d) and (e) (i) |
$ | (40.6 | ) | $ | (41.8 | ) | $ | (62.6 | ) | $ | (76.4 | ) | $ | (15.2 | ) | $ | (22.0 | ) | ||||||
Eliminate impact of adjustments for unremitted foreign earnings (ii) |
8.4 | 7.8 | 10.5 | 0.5 | 1.7 | 1.5 | ||||||||||||||||||
Eliminate impact of acquisition-related items (iii) |
| | | 10.7 | 1.8 | | ||||||||||||||||||
Other (iv) |
0.9 | 0.7 | 1.7 | 3.1 | 2.4 | 0.4 | ||||||||||||||||||
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Total change in provision for income taxes |
$ | (31.3 | ) | $ | (33.3 | ) | $ | (50.4 | ) | $ | (62.1 | ) | $ | (9.3 | ) | $ | (20.1 | ) | ||||||
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(i) | Represented the tax effect of adjustments in (a), (b), (c), (d) and (e). The tax rates used to calculate the tax expense impact were based on the nature of each item. |
(ii) | Represented elimination of the impact of certain adjustments related to our deferred tax liability for unremitted foreign earnings, including a discrete change from foreign tax credit to foreign tax deduction methodology in 2014 and accrued withholding taxes on earnings from lower-tier foreign subsidiaries. |
(iii) | Represented elimination of the impact of certain acquisition-related items, principally deferred taxes established related to our pre-consolidated CIBIL investment. |
(iv) | Represented elimination of the impact of state tax rate changes on deferred taxes, valuation allowances on foreign net operating losses, and valuation allowances on capital losses. |
56
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion contains managements discussion and analysis of our financial condition and results of operations and should be read together with Summary Historical Consolidated Financial Data, Selected Historical Consolidated Financial Data and our consolidated financial statements and related notes thereto included elsewhere in this prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including but not limited to those described in the Risk Factors section of this prospectus. Actual results may differ materially from those contained in any forward-looking statements. You should read Special Note Regarding Forward-Looking Statements and Risk Factors.
Information presented for the twelve months ended December 31, 2014 and December 31, 2013, the period from the date of our inception through December 31, 2012 and the four months ended April 30, 2012 is derived from our audited consolidated financial statements for those periods included elsewhere in this prospectus. Information presented for the three months ended March 31, 2014 and March 31, 2015 is derived from our unaudited consolidated financial statements for those periods included elsewhere in this prospectus.
Overview
TransUnion is a leading global risk and information solutions provider to businesses and consumers. We provide consumer reports, risk scores, analytical services and decisioning capabilities to businesses. Businesses embed our solutions into their process workflows to acquire new customers, assess consumer ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud. Consumers use our solutions to view their credit profiles and access analytical tools that help them understand and manage their personal information and take precautions against identity theft. We are differentiated by our comprehensive and unique datasets, our next-generation technology and our analytics and decisioning capabilities, which enable us to deliver insights across the entire consumer lifecycle. We believe we are the largest provider of risk and information solutions in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data, which allows us to better predict behaviors, assess risk and address a broader set of business issues for our customers. We have deep domain expertise across a number of attractive industries, sometimes referred to as verticals, including financial services, insurance and healthcare. We have a global presence in over 30 countries across North America, Africa, Latin America and Asia.
We obtain financial, credit, alternative credit, identity, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information from an average of 90,000 data sources, including financial institutions, private databases and public records repositories. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. Our deep analytics expertise, which includes our people as well as tools such as predictive modeling and scoring, customer segmentation, benchmarking and forecasting, enables businesses and consumers to gain better insights into their risk and financial data. Our decisioning capabilities, which are generally delivered on a software-as-a-service platform, allows businesses to interpret data and apply their specific qualifying criteria to make decisions and take action with respect to their customers. Collectively, our data, analytics and decisioning capabilities allow businesses to authenticate the identity of consumers, effectively determine the most relevant products for consumers, retain and cross-sell to existing consumers, identify and acquire new consumers and reduce loss from fraud. Similarly, our capabilities allow consumers to see how their credit profiles have changed over time, understand the impact of financial decisions on their credit scores and manage their personal information as well as to take precautions against identity theft.
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Segments
We manage our business and report our financial results in three operating segments: USIS, International and Consumer Interactive.
| USIS provides consumer reports, risk scores, analytical and decisioning services to businesses. These businesses use our services to acquire new customers, assess consumer ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud. The core capabilities and delivery platforms in our USIS segment allow us to serve a broad set of customers and business issues. We offer our services to customers in financial services, insurance, healthcare and other industries. |
| The International segment provides services similar to our USIS segment to businesses in select regions outside the United States. Depending on the maturity of the credit economy in each country, services may include credit reports, analytics and decisioning services and other value-added risk management services. In addition, we have insurance, business and automotive databases in select geographies. These services are offered to customers in a number of industries including financial services, insurance, automotive, collections and communications, and are delivered through both direct and indirect channels. The International segment also provides consumer services similar to those offered by our Consumer Interactive segment that help consumers proactively manage their personal finances. |
| Consumer Interactive offers solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include credit reports and scores, credit monitoring, fraud protection and resolution and financial management. Our products are provided through user friendly online and mobile interfaces and supported by educational content and customer support. Our Consumer Interactive segment serves over 35 million consumers through both direct and indirect channels. |
In addition, Corporate provides shared services for the Company and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the operating segments remain in Corporate. These costs are typically for enterprise-level functions and are primarily administrative in nature.
Factors Affecting Our Results of Operations
The following are certain key factors that affect, or have recently affected, our results of operations:
Macroeconomic and Industry Trends
Our revenues are significantly influenced by general macroeconomic conditions, including the availability of affordable credit and capital, interest rates, inflation, employment levels, consumer confidence and housing demand. For the past three years, in the United States and other markets, we have seen continuing signs of improved economic conditions and increased market stabilization. In the United States, we also saw improvement in the consumer lending market, including mortgage refinancings resulting from low long-term mortgage rates, an improving housing market, increased auto loans, a decrease in unemployment, an increase in consumer confidence and an increase in demand for our marketing services. These factors helped drive improved financial results in all of our segments in for the first three months of 2015 and all of 2014 and 2013. The economic and market improvements were tempered by continuing concern about economic conditions that has limited consumer spending and has put pressure on growth in our businesses. In addition, the continued strengthening of the U.S.
58
dollar has diminished the operating results reported by our International operations during the first three months of 2015 and all of 2014 and 2013.
Our revenues are also significantly influenced by industry trends, including the demand for information services in financial services, insurance, healthcare and other industries we serve. Companies are increasingly relying on business analytics and big data technologies to help process this data in a cost-efficient manner. As customers have gained the ability to rapidly aggregate and analyze data generated by their own activities, they are increasingly expecting access to real-time data and analytics from their information providers as well as solutions that fully integrate into their workflows. As economies in emerging markets continue to develop and mature, we believe there will continue to be favorable socio-economic trends, such as an increase in the size of the middle class and a significant increase in the use of financial services by under-served and under-banked customers. Demand for consumer solutions is rising with higher consumer awareness of the importance and usage of their credit information, increased risk of identity theft due to data breaches and more readily available free credit information. The increasing number and complexity of regulations, including new capital requirements and the Dodd-Frank Act, make operations for businesses more challenging.
Effects of Inflation
We do not believe that inflation has had a material effect on our business, results of operations or financial condition.
2012 Change in Control Transaction
TransUnion was formed on February 15, 2012, as a vehicle to acquire TransUnion Intermediate on April 30, 2012. In connection with the 2012 Change in Control Transaction, the Company recognized significant stock-based compensation expense in 2012 due to the accelerated vesting of outstanding options, a significant increase in interest expense due to the issuance of $600.0 million of 9.625% Senior Notes to partially fund the acquisition and a significant increase in depreciation and amortization expense as a result of the step-up in basis to fair value of the assets and liabilities of the Company following the 2012 Change in Control Transaction. See the notes to our consolidated financial statements included in this prospectus and the operating expense discussion below for additional information.
Recent Developments
During the fourth quarter of 2014, the Company borrowed $50.0 million against the senior secured revolving line of credit to partially fund acquisitions as discussed under Recent Acquisitions and Partnerships below. In March 2015, the Company borrowed an additional $35.0 million to complete these funding requirements and replenish cash on hand.
On June 2, 2015, Trans Union LLC, entered into Amendment No. 8 to our senior secured credit facility that (a) refinanced our existing $1,881.0 million aggregate principal amount senior secured term loan with a new senior secured term loan in the same amount with lower pricing and (b) included other amendments to our senior secured credit facility to permit Amendment No. 9 to be entered into substantially concurrently with, and conditioned upon, the closing of this offering that will: (i) refinance our existing $190.0 million senior secured revolving credit facility with a new senior secured revolving credit facility in an amount up to $210.0 million and (ii) allow for a new senior secured term loan facility of up to $350.0 million. See Description of IndebtednessSenior Secured Credit Facility.
On June 5, 2015, we effected a 1.333-for-one stock split.
59
Recent Acquisitions and Partnerships
We selectively evaluate acquisitions and partnerships as a means to expand our business and international footprint and to enter new markets. During the past three years we completed the following acquisitions:
| During January 2015, we acquired the remaining equity interests in our two Brazilian subsidiaries, Data Solutions Serviços de Informática Ltda. (ZipCode) and Crivo Sistemas em Informática S.A. (Crivo). We will no longer record net income attributable to the noncontrolling interests in our consolidated statements of income or redeemable noncontrolling interests in our consolidated balance sheet from the date we acquired the remaining interests. |
| On November 12, 2014, we acquired an 87.5% ownership interest in Drivers History Information Sales, LLC (DHI). DHI collects traffic violation and criminal court data. The results of operations of DHI, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date of acquisition. |
| On October 17, 2014, we increased our equity interest in L2C from 11.6% to 100%. L2C provides predictive analytics generally focused on the unbanked market using alternative data. The results of operations of L2C, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date we obtained control. |
| In 2014, we increased our equity interest in CIBIL from 27.5% to 55.0%. This additional purchase resulted in our consolidation of CIBIL. CIBILs results of operations, which are not material, are included as part of our International segment in our consolidated statements of income since May 21, 2014, the date we obtained control. |
| Effective January 1, 2014, we acquired the remaining 30% equity interest in our Guatemala subsidiary, Trans Union Guatemala, S.A. (TransUnion Guatemala) from the minority shareholders. As a result of this acquisition, we no longer record net income attributable to noncontrolling interests for this subsidiary. |
| On December 16, 2013, we acquired a 100% ownership interest in certain assets of TLO, LLC (TLO). TLO provides data solutions for due diligence, threat assessment, identity authentication, fraud prevention, and debt recovery. The results of operations of TLO, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date of the acquisition. |
| On September 4, 2013, we acquired a 100% ownership interest in e-Scan Data Systems, Inc. (eScan). eScan provides data solutions for hospitals and healthcare providers to efficiently capture uncompensated care costs in their revenue management cycle programs. The results of operations of eScan, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date of the acquisition. |
| In 2011, we acquired an 80% ownership interest in Crivo, marking our entry into the Brazilian market. On March 1, 2013, we acquired an 80% ownership interest in ZipCode further expanding our footprint in Brazil. ZipCode provides data enrichment and registry information solutions for companies in Brazils information management, financial services, marketing and telecommunications industries. The results of operations of ZipCode, which are not material, have been included as part of our International segment in our consolidated statements of income since the date of the acquisition. In January 2015, we acquired the remaining ownership interests in ZipCode and Crivo. |
| On May 29, 2012, we acquired an 85% ownership interest in Credit Reference Bureau (Holdings) Limited (CRB). During the third quarter of 2013, we acquired the remaining 15% ownership interest. CRB operates collections and credit bureau businesses and has locations in eight African countries, giving us a strategic presence in seven new African countries. The results of operations of CRB, which are not material, have been included as part of our International segment in our consolidated statements of income since May 29, 2012. |
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Key Components of Our Results of Operations
Revenue
We derive our USIS segment revenue from three operating platforms: Online Data Services, Marketing Services and Decision Services. Online Data Services encompass services delivered in real-time using both credit and public record datasets. We also provide online reports that link public record datasets for qualified businesses seeking to locate consumers, specific assets or investigate relationships among consumers, businesses and locations. Collectively, the reports, characteristics and scores, with variations tailored for specific industries, form the basis of Online Data Services. We also provide online services to help businesses manage fraud and authenticate a consumers identity when they initiate a new business relationship. Additionally, we provide data to businesses to help them satisfy know your customer compliance requirements and to confirm an individuals identity. Marketing Services help our customers develop marketing lists of prospects via direct mail, web and mobile. Our databases are used by our customers to contact individuals to extend firm offers of credit or insurance. We provide portfolio review services, which are periodic reviews of our customers existing accounts, to help our customers develop cross-selling offers to their existing customers and monitor and manage risk in their existing consumer portfolios. We also provide trigger services which are daily notifications of changes to a consumer profile. Decision Services, our software-as-a-service offerings, includes a number of platforms that help businesses interpret data and predictive model results and apply their customer-specific criteria to facilitate real-time automated decisions at the time of customer interaction. Our customers use Decision Services to evaluate business risks and opportunities, including those associated with new consumer credit and checking accounts, insurance applications, account collection, patient registrations and apartment rental requests.
We report our International segment revenue in two categories: developed markets and emerging markets. Our developed markets are Canada and Hong Kong. Our emerging markets include Africa, Latin America, Asia Pacific and India. In 2014, we reclassified Puerto Rico to emerging markets to align it with the rest of the Latin America region. Prior years revenue has been reclassified accordingly.
Consumer Interactive offers solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include credit reports and scores, credit monitoring, fraud protection and resolution and financial management. Our products are provided through user friendly online and mobile interfaces and supported by educational content and customer support.
Cost of Services
Costs of services include data acquisition and royalty fees, costs related to our databases and software applications, consumer and call center support costs, hardware and software maintenance costs, telecommunication expenses and occupancy costs associated with the facilities where these functions are performed.
Selling, General and Administrative
Selling, general and administrative expenses include personnel-related costs for sales, administrative and management employees, costs for professional and consulting services, advertising and occupancy and facilities expense of these functions.
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Non-Operating Income and Expense
Non-operating income and expense includes interest expense, interest income, earnings from equity-method investments, dividends from cost-method investments, expenses related to successful and unsuccessful business acquisitions, loan fees, debt refinancing expenses, certain acquisition-related gains and losses and other non-operating income and expenses.
Results of OperationsThree Months Ended March 31, 2014 and 2015
The following table sets forth our historical results of operations for the periods indicated below:
Three months ended
March 31, |
Change | |||||||||||||||
2015 vs. 2014 | ||||||||||||||||
2015 | 2014 | $ | % | |||||||||||||
(dollars in millions) | ||||||||||||||||
Revenue |
$ | 353.1 | $ | 303.4 | $ | 49.7 | 16.4 | % | ||||||||
Operating expenses |
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Cost of services (exclusive of depreciation and amortization below) . |
125.6 | 120.9 | 4.7 | 3.9 | % | |||||||||||
Selling, general and administrative |
121.9 | 96.2 | 25.7 | 26.7 | % | |||||||||||
Depreciation and amortization |
69.1 | 51.5 | 17.6 | 34.2 | % | |||||||||||
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Total operating expenses |
316.6 | 268.6 | 48.0 | 17.9 | % | |||||||||||
Operating income expenses (loss) |
36.5 | 34.8 | 1.7 | 4.9 | % | |||||||||||
Non-operating income and expense |
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Interest expense |
(44.8 | ) | (50.8 | ) | 6.0 | 11.8 | % | |||||||||
Interest income |
0.9 | 0.5 | 0.4 | 80.0 | % | |||||||||||
Earnings from equity method investments |
2.3 | 3.6 | (1.3 | ) | (36.1 | )% | ||||||||||
Other income and (expense), net |
(2.3 | ) | (1.7 | ) | (0.6 | ) | (35.3 | )% | ||||||||
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Total non-operating income and expense |
(43.9 | ) | (48.4 | ) | 4.5 | 9.3 | % | |||||||||
Loss before income taxes |
(7.4 | ) | (13.6 | ) | 6.2 | 45.5 | % | |||||||||
Benefit for income taxes |
3.0 | 0.1 | 2.9 | nm | ||||||||||||
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Net loss |
(4.4 | ) | (13.5 | ) | 9.1 | 67.2 | % | |||||||||
Less: net income attributable to noncontrolling interests |
(2.2 | ) | (1.2 | ) | (1.0 | ) | (76.3 | )% | ||||||||
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Net loss attributable to the Company |
$ | (6.6 | ) | $ | (14.7 | ) | $ | 8.1 | 55.0 | % | ||||||
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nm: not meaningful
62
Key Performance Measures
Management, including our chief operating decision maker, evaluates the financial performance of our businesses based on a variety of key indicators. These indicators include the non-GAAP measure Adjusted EBITDA and the GAAP measures revenue, cash provided by operating activities and cash paid for capital expenditures. In order to more closely align the definition of Adjusted EBITDA to the definition we use as a supplemental measure of our operating performance as well as a compensation measure under our incentive plan, we have included additional adjustments to our previously defined Adjusted EBITDA. Such additional adjustments consist of expenses for mergers and acquisitions integration, business optimization, our technology transformation project, operating expense tax matters, consulting study fees related to our strategic initiatives and other expenses. All periods have been presented in the table below under our new definition of Adjusted EBITDA. For the three months ended March 31, 2015 and March 31, 2014, these key indicators were as follows:
Three months ended
March 31, |
Change | |||||||||||||||
2015 vs. 2014 | ||||||||||||||||
2015 | 2014 | $ | % | |||||||||||||
(dollars in millions) | ||||||||||||||||
Revenue |
$ | 353.1 | $ | 303.4 | $ | 49.7 | 16.4 | % | ||||||||
Reconciliation of net income (loss) attributable to the Company to Adjusted EBITDA (1) : |
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Net loss attributable to the Company |
$ | (6.6 | ) | $ | (14.7 | ) | $ | 8.1 | 55.0 | % | ||||||
Net interest expense |
43.9 | 50.3 | (6.4 | ) | (12.8 | )% | ||||||||||
Benefit for income taxes |
(3.0 | ) | (0.1 | ) | (2.9 | ) | nm | |||||||||
Depreciation and amortization |
69.1 | 51.5 | 17.6 | 34.0 | % | |||||||||||
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EBITDA |
103.4 | 87.0 | 16.4 | 18.7 | % | |||||||||||
Stock-based compensation (2) |
3.1 | 2.1 | 1.0 | 43.8 | % | |||||||||||
Mergers, acquisitions, divestitures and business optimization (3) |
0.5 | 4.0 | (3.5 | ) | (88.7 | )% | ||||||||||
Technology transformation project (4) |
5.8 | 1.0 | 4.8 | nm | ||||||||||||
Other (5) |
2.1 | 1.3 | 0.8 | 78.4 | % | |||||||||||
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Total adjustments |
11.5 | 8.4 | 3.1 | 35.8 | % | |||||||||||
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Adjusted EBITDA (1) |
$ | 114.9 | $ | 95.4 | $ | 19.5 | 20.3 | % | ||||||||
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Other metrics: |
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Cash provided by operating activities |
$ | 16.5 | $ | (6.1 | ) | $ | 22.6 | nm | ||||||||
Cash paid for capital expenditures |
30.1 | 38.8 | (8.7 | ) | (22.4 | )% |
nm: not meaningful
(1) |
Adjusted EBITDA is defined as net income (loss) attributable to the Company before net interest expense, income tax provision (benefit), depreciation and amortization and other adjustments noted in the table above. We present Adjusted EBITDA as a supplemental measure of our operating performance because it eliminates the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. Also, Adjusted EBITDA is a measure frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours. In addition, our board of directors and executive management team use Adjusted EBITDA as a compensation measure under our incentive plan. Furthermore, under the credit agreement governing our senior secured credit facility and the indentures governing our senior unsecured PIK toggle notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to a ratio based on Adjusted EBITDA. See Liquidity and Capital ResourcesDebt and Description of Indebtedness. Adjusted EBITDA does not reflect our capital |
63
expenditures, interest, income tax, depreciation, amortization, stock-based compensation, including cash-settled stock-based compensation, and certain other income and expense. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. Adjusted EBITDA is not a measure of financial condition or profitability under GAAP and should not be considered as an alternative to cash flows from operating activities, as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance. We believe that the most directly comparable GAAP measure to Adjusted EBITDA is net income attributable to the Company. The table above provides a reconciliation from net income (loss) attributable to the Company to Adjusted EBITDA for the three months ended March 31, 2015 and 2014. |
(2) | For the three months ended March 31, 2015, consisted of $2.4 million of stock-based compensation and $0.7 million of cash-settled stock-based compensation. For the three months ended March 31, 2014, consisted of $2.0 million of stock-based compensation and $0.1 million of cash-settled stock-based compensation. Cash-settled stock-based awards are granted to employees outside the United States and Canada. Once our stock is publicly traded, the cash-settled stock-based compensation liability will be adjusted to market value based on the period end closing stock price, with the offsetting adjustment recorded to cash-settled stock-based compensation expense. |
(3) | In 2015, consisted of a $0.4 million adjustment for contingent consideration expense and $0.1 million of acquisition expenses. In 2014, consisted of $2.7 million of merger and acquisition integration expenses, $0.5 million of contingent consideration expense, $0.5 million of acquisition expenses and $0.3 million of business optimization expenses. |
(4) | In 2015 and 2014, represented costs associated with a project to transform our technology infrastructure. |
(5) | In 2015, consisted of $0.9 million mark-to-market loss related to ineffectiveness on our interest rate hedge, $0.7 million of currency remeasurement, $0.4 million of loan fees and $0.1 million of miscellaneous. In 2014, consisted of $0.6 million of loan fees and $0.7 million of miscellaneous. |
Revenue
Total revenue increased $49.7 million for the three months ended March 31, 2015, compared with the same period in 2014, due to strong organic growth in all of our segments and revenue from our recent acquisitions of CIBIL, L2C and DHI in our USIS and International segments, partially offset by the impact of weakening foreign currencies on the 2014 revenue of our International segment. Acquisitions accounted for an increase in revenue of 4.7%. The impact of weakening foreign
64
currencies accounted for a decrease in revenue of 1.4%. Excluding revenue from the recent acquisitions and the impact of weakening foreign currencies, consolidated revenues grew 13.1%. Revenue by segment in the three-month periods was as follows:
Three months ended
March 31, |
Change | |||||||||||||||
2015 vs. 2014 | ||||||||||||||||
2015 | 2014 | $ | % | |||||||||||||
(dollars in millions) | ||||||||||||||||
USIS |
||||||||||||||||
Online Data Services |
$ | 149.7 | $ | 131.2 | $ | 18.5 | 14.2 | % | ||||||||
Marketing Services |
33.2 | 30.9 | 2.3 | 7.3 | % | |||||||||||
Decision Services |
39.3 | 32.1 | 7.2 | 22.3 | % | |||||||||||
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Total USIS |
222.2 | 194.2 | 28.0 | 14.4 | % | |||||||||||
International: |
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Developed Markets |
20.5 | 19.7 | 0.8 | 3.6 | % | |||||||||||
Emerging Markets |
42.4 | 34.4 | 8.0 | 23.3 | % | |||||||||||
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Total International |
62.9 | 54.1 | 8.8 | 16.1 | % | |||||||||||
Consumer Interactive |
68.0 | 55.1 | 12.9 | 23.5 | % | |||||||||||
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Total revenue |
$ | 353.1 | $ | 303.4 | $ | 49.7 | 16.4 | % | ||||||||
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USIS Segment
USIS revenue increased $28.0 million for the three months ended March 31, 2015, compared with the same period in 2014, due to organic increases in revenue for all platforms and the revenue from our recent acquisitions of DHI and L2C.
Online Data Services. Online Data Services revenue increased $18.5 million for the three-month period, compared with the same period in 2014, due to a 9.0% increase in credit report unit volume. Increases in credit report unit volume in the financial services, resellers, insurance and healthcare markets were partially offset by a small decrease in volume in other markets. Credit report unit volume was weakened in the first quarter of 2014 due to the extreme cold weather conditions experienced across large portions of the United States in early 2014. Also, a change in the mix of products sold resulted in an increase in average pricing for online credit reports in 2015.
Marketing Services. Marketing Services revenue increased $2.3 million for the three-month period, compared with the same period in 2014, due primarily to an organic increase in custom data sets and archive information and revenue from our recent acquisitions.
Decision Services. Decision Services revenue increased $7.2 million for the three-month period, compared with the same period in 2014, due primarily to an organic increase in revenue in healthcare, financial services and insurances markets and revenue from our recent acquisitions.
International Segment
International revenue increased $8.8 million, or 16.1%, for the three months ended March 31, 2015, compared with the same period in 2014. Higher local currency revenue from increased volumes in all regions and the inclusion of revenue from our CIBIL acquisition was partially offset by a 8.1% decrease in revenue from the impact of weakening foreign currencies. Incremental revenue from our acquisition of CIBIL accounted for an 18.0% increase in International revenue. Excluding the impact of foreign currencies and acquisitions, International revenue increased 6.2%.
65
Developed Markets. Developed markets revenue increased $0.8 million, or 3.6%, for the three-month period, compared with the same period in 2014, due to higher local currency revenue in both regions partially offset by a 7.8% decrease in revenue from the impact of a weakening Canadian dollar. Excluding the impact of foreign currencies, developed markets revenue increased 11.4%.
Emerging Markets. Emerging markets revenue increased $8.0 million, or 23.3%, for the three-month period, compared with the same period in 2014. Higher local currency revenue in all regions and the inclusion of revenue from our CIBIL acquisition was partially offset by a 8.2% decrease in revenue from the impact of weakening foreign currencies, primarily the South African rand and Brazilian real. Incremental revenue from our CIBIL acquisition accounted for a 28.3% increase in emerging markets revenue. Excluding the impact of foreign currencies and acquisitions, emerging markets revenue increased 3.2%.
Consumer Interactive Segment
Consumer Interactive revenue increased $12.9 million for the three months ended March 31, 2015, compared with the same period in 2014. This increase was due to an increase in revenue from our indirect channel and an increase in the average number of subscribers in our direct channel.
Operating Expenses
Operating expenses for the three-month periods were as follows:
Three months ended
March 31, |
Change | |||||||||||||||
2015 vs. 2014 | ||||||||||||||||
2015 | 2014 | $ | % | |||||||||||||
(dollars in millions) | ||||||||||||||||
Cost of services |
$ | 125.6 | $ | 120.9 | $ | 4.7 | 3.9 | % | ||||||||
Selling, general and administrative |
121.9 | 96.2 | 25.7 | 26.7 | % | |||||||||||
Depreciation and amortization |
69.1 | 51.5 | 17.6 | 34.2 | % | |||||||||||
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Total operating expenses |
$ | 316.6 | $ | 268.6 | $ | 48.0 | 17.9 | % | ||||||||
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Cost of Services
Cost of services increased $4.7 million for the three-month period, compared with the same period in 2014. The increase was due primarily to:
| operating and integration costs of our DHI, L2C and CIBIL acquisitions in our USIS and International segments; |
| incremental costs incurred as part of the transformation of our technology infrastructure; and |
| an increase in product costs resulting from the increase in revenue, |
partially offset by:
| the impact of weakening foreign currencies on the expenses of our International segment. |
Selling, General and Administrative
Selling, general and administrative expenses increased $25.7 million for the three-month period, compared with the same period in 2014. The increase was due primarily to:
| operating and integration costs from our DHI, L2C and CIBIL acquisitions in our USIS and International segments; and |
66
| an increase in advertising costs in our Consumer Interactive segment, |
partially offset by:
| the impact of weakening foreign currencies on the expenses of our International segment. |
Depreciation and Amortization
Depreciation and amortization increased $17.6 million for the three-month period, compared with the same period in 2014, primarily in our USIS and International segments. In July 2014, we revised the remaining useful lives of certain internal-use software, equipment, leasehold improvements and the corporate headquarters facility to align with the expected completion dates of our strategic initiatives to transform our technology platform and corporate headquarters facility. As a result, depreciation and amortization increased $8.0 million during the three months ended March 31, 2015. Depreciation and amortization also increased an additional $9.6 million for the three months ended March 31, 2015, due to the recent business acquisitions and increased capital expenditures related to our strategic initiatives made in 2014 and the first quarter of 2015.
Operating Income and Operating Margins
Three months ended
March 31, |
Change | |||||||||||||||
2015 vs. 2014 | ||||||||||||||||
2015 | 2014 | $ | % | |||||||||||||
(dollars in millions) | ||||||||||||||||
USIS operating income |
$ | 31.3 | $ | 32.4 | $ | (1.1 | ) | (3.4 | )% | |||||||
International operating income |
2.4 | 2.2 | 0.2 | 4.3 | % | |||||||||||
Consumer Interactive operating income |
23.6 | 19.0 | 4.6 | 24.4 | % | |||||||||||
Corporate operating loss |
(20.8 | ) | (18.8 | ) | (2.0 | ) | (10.2 | )% | ||||||||
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Total operating income |
$ | 36.5 | $ | 34.8 | $ | 1.7 | 4.9 | % | ||||||||
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Operating Margin: |
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USIS |
14.1 | % | 16.7 | % | (2.6 | )% | ||||||||||
International |
3.8 | % | 4.2 | % | (0.4 | )% | ||||||||||
Consumer Interactive |
34.7 | % | 34.5 | % | 0.2 | % | ||||||||||
Total operating margin |
10.3 | % | 11.5 | % | (1.2 | )% |
Total operating income increased $1.7 million for the three months ended March 31, 2015, compared with the same period in 2014. The increase was due primarily to:
| the increase in revenue in all segments, including revenue from the recent acquisitions, |
partially offset by:
| operating and integration costs from our DHI, L2C and CIBIL acquisitions in our USIS and International segments; |
| The increase in depreciation and amortization, primarily in our USIS and International segments; |
| the impact of weakening foreign currencies on the 2014 results of our International segment; |
| an increase in advertising costs in our Consumer Interactive segment; and |
| incremental costs incurred as part of the transformation of our technology infrastructure. |
Margins for the USIS segment decreased due primarily to incremental costs incurred as part of the strategic initiative to transform our technology platform, including additional depreciation and
67
amortization resulting from shortening the remaining useful lives of certain existing technology assets to align with the expected completion of this initiative, and operating and integration expenses from the recent acquisitions, partially offset by the increase in revenue. Margins for the International segment decreased due primarily to additional depreciation and amortization resulting from reassessing the remaining useful lives of certain assets, as well as integration and depreciation and amortization expenses of our CIBIL acquisition, partially offset by the increase in revenue. Margins for the Consumer Interactive segment increased slightly, as the increase in revenue was mostly offset by the increase in advertising costs.
Non-Operating Income and Expense
Three months ended
March 31, |
Change | |||||||||||||||
2015 vs. 2014 | ||||||||||||||||
2015 | 2014 | $ | % | |||||||||||||
(dollars in millions) | ||||||||||||||||
Interest expense |
$ | (44.8 | ) | $ | (50.8 | ) | $ | 6.0 | 11.8 | % | ||||||
Interest income |
0.9 | 0.5 | 0.4 | 80.0 | % | |||||||||||
Earnings from equity method investments |
2.3 | 3.6 | $ | (1.3 | ) | (36.1 | )% | |||||||||
Other income and expense, net: |
||||||||||||||||
Acquisition fees |
(0.1 | ) | (0.5 | ) | 0.4 | 80.0 | % | |||||||||
Loan fees |
(0.4 | ) | (0.6 | ) | 0.2 | 33.3 | % | |||||||||
Dividends from cost method investments |
| | | | % | |||||||||||
Other income, net |
(1.8 | ) | (0.6 | ) | (1.2 | ) | (200.0 | )% | ||||||||
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Total other income and expense, net |
(2.3 | ) | (1.7 | ) | (0.6 | ) | (35.3 | )% | ||||||||
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Non-operating income and expense |
$ | (43.9 | ) | $ | (48.4 | ) | $ | 4.5 | 9.3 | % | ||||||
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Interest expense decreased $6.0 million for the three-month period, compared with the same period in 2014. A decrease in interest expense due to the early redemption of the 11.375% notes in the second quarter of 2014 was partially offset by additional interest expense resulting from the increase in the average principal balance of the senior secured credit facility in 2015 compared with 2014. See note 8 to our March 31, 2015 unaudited consolidated financial statements appearing elsewhere in the prospectus for additional information about the early redemption of the 11.375% Senior Notes and the senior secured credit facility refinancing.
Earnings from equity method investments decreased $1.3 million because in the first quarter of 2015, we included CIBIL in our consolidated results, whereas in the first quarter of 2014, CIBIL was an equity method investment.
Acquisition fees represent costs we have incurred for acquisition-related efforts.
For the three months ended March 31, 2015, other income, net, included a loss of $0.9 million on the swap that no longer qualifies for hedge accounting.
Provision for Income Taxes
Effective January 1, 2015, the look-through provision under subpart F of the U.S. Internal Revenue Code expired. Consequently, in both periods presented, we recorded tax expense for the U.S. income tax we would incur in the absence of the look-through rule. This rule requires U.S. corporate shareholders to recognize current U.S. taxable income from passive income, including dividends, earned by certain foreign subsidiaries, regardless of whether that income is remitted to the United States. The look-through rule grants an exception to this recognition for subsidiary passive income attributable to an active business. When it is not in effect, we are required to accrue a tax liability for certain foreign earnings as if those earnings were distributed to the United States.
68
For the three months ended March 31, 2015, we reported a loss before income taxes and an effective tax rate benefit of 40.1%, which was higher than the 35% U.S. federal statutory rate due primarily to the benefit of state income taxes and the tax rate differential on foreign earnings, partially offset by the expiration of the look-through rule.
For the three months ended March 31, 2014, we reported a loss before income taxes and an effective tax rate benefit of 0.6%, which was lower than the 35% U.S. federal statutory rate due primarily to the additional tax expense associated with the expiration of the look-through rule, tax expense on unremitted foreign earnings not considered permanently reinvested, increased tax due to foreign dividends and a detrimental change in state tax rates, which primarily affected deferred tax expense.
Significant Changes in Assets and Liabilities
There were no significant changes in our assets or liabilities between December 31, 2014, and March 31, 2015.
Results of OperationsTwelve Months Ended December 31, 2014, 2013 and 2012
As a result of the 2012 Change in Control Transaction, the historical financial statements and information are presented on a Successor and Predecessor basis. The historical financial information for TransUnion Intermediate reflects the consolidated results of TransUnion Intermediate and its subsidiaries prior to the 2012 Change in Control Transaction (the Predecessor). The historical financial information for TransUnion reflects the stand-alone results of its operations from its date of inception and the consolidated results of TransUnion Intermediate and its subsidiaries after April 30, 2012 (the Successor).
The 2012 Change in Control Transaction was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. The guidance prescribes that the basis of the assets acquired and liabilities assumed be recorded at fair value to reflect the purchase price. Periods after the 2012 Change in Control Transaction are not comparable to prior periods due primarily to the additional amortization of intangibles resulting from the fair value adjustments of the assets acquired and liabilities assumed and interest expense resulting from the additional debt incurred to finance the transaction. In addition, the Predecessor incurred significant stock-based compensation expense and acquisition costs related to the 2012 Change in Control Transaction.
To facilitate comparability of 2013 to 2012, we present below the combination of TransUnion consolidated results from the date of inception, February 15, 2012, through December 31, 2012, TransUnion Intermediate Predecessor consolidated results for the four months ended April 30, 2012 and certain pro forma adjustments that give effect to the 2012 Change in Control Transaction as if it occurred on January 1, 2012 (pro forma results for the year ended December 31, 2012), and compare those pro forma results with the consolidated TransUnion 2013 results. We present the 2012 information in this format to assist readers in understanding and assessing the trends and significant changes in our results of operations on a comparable basis to 2013. We believe this presentation is appropriate because it provides a more meaningful comparison and more relevant analysis of our results of operations for 2013 compared with 2012, than a presentation of historical 2013 results for TransUnion compared with historical 2012 results of TransUnion from the date of inception through December 31, 2012, and a separate comparison of historical 2013 results for TransUnion compared with historical 2012 results of TransUnion Intermediate for the four months ended April 30, 2012, would provide. The following table sets forth our historical results of operations for the periods indicated below:
69
Twelve
Months Ended December 31, 2014 |
Twelve
Months Ended December 31, 2013 |
Successor
Date of Inception Through December 31, 2012 |
Predecessor
Four Months Ended April 30, 2012 |
2012 Pro
Forma Adjustments |
Pro Forma
Twelve Months Ended December 31, 2012 |
Change | ||||||||||||||||||||||||||||||||||
2014 vs. 2013 |
2013 vs. Pro
Forma 2012 |
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$ | % | $ | % | |||||||||||||||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Revenue |
$ | 1,304.7 | $ | 1,183.2 | $ | 767.0 | $ | 373.0 | $ | | $ | 1,140.0 | $ | 121.5 | 10.3 | % | $ | 43.2 | 3.8 | % | ||||||||||||||||||||
Operating expenses |
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Cost of services (exclusive of depreciation and amortization below) |
499.1 | 472.4 | 298.2 | 172.0 | | 470.2 | 26.7 | 5.7 | % | 2.2 | 0.5 | % | ||||||||||||||||||||||||||||
Selling, general and administrative |
436.0 | 354.8 | 212.6 | 172.0 | | 384.6 | 81.2 | 22.9 | % | (29.8 | ) | (7.7 | )% | |||||||||||||||||||||||||||
Depreciation and amortization (1) |
241.2 | 186.8 | 115.0 | 29.2 | 43.5 | 187.7 | 54.4 | 29.1 | % | (0.9 | ) | (0.5 | )% | |||||||||||||||||||||||||||
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Total operating expenses |
1,176.3 | 1,014.0 | 625.8 | 373.2 | 43.5 | 1,042.5 | 162.3 | 16.0 | % | (28.5 | ) | (2.7 | )% | |||||||||||||||||||||||||||
Operating income expenses (loss) |
128.4 | 169.2 | 141.2 | (0.2 | ) | (43.5 | ) | 97.5 | (40.8 | ) | (24.1 | )% | 71.7 | 73.5 | % | |||||||||||||||||||||||||
Non-operating income and expense |
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Interest expense (1) |
(190.0 | ) | (197.6 | ) | (125.0 | ) | (40.5 | ) | (13.0 | ) | (178.5 | ) | 7.6 | 3.8 | % | (19.1 | ) | (10.7 | )% | |||||||||||||||||||||
Interest income |
3.3 | 1.7 | 0.8 | 0.6 | | 1.4 | 1.6 | 94.1 | % | 0.3 | 21.4 | % | ||||||||||||||||||||||||||||
Earnings from equity method investments |
12.5 | 13.7 | 8.0 | 4.1 | | 12.1 | (1.2 | ) | (8.8 | )% | 1.6 | 13.2 | % | |||||||||||||||||||||||||||
Other income and (expense), net |
44.0 | (12.9 | ) | (22.3 | ) | (27.9 | ) | | (50.2 | ) | 56.9 | 441.1 | % | 37.3 | 74.3 | % | ||||||||||||||||||||||||
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Total non-operating income and expense |
(130.2 | ) | (195.1 | ) | (138.5 | ) | (63.7 | ) | (13.0 | ) | (215.2 | ) | 64.9 | 33.3 | % | 20.1 | 9.3 | % | ||||||||||||||||||||||
Income (loss) from operations before income taxes |
(1.8 | ) | (25.9 | ) | 2.7 | (63.9 | ) | (56.5 | ) | (117.7 | ) | 24.1 | 93.1 | % | 91.8 | 78.0 | % | |||||||||||||||||||||||
(Provision) benefit for income taxes (1)(2) |
(2.6 | ) | (2.3 | ) | (6.6 | ) | 11.5 | 21.5 | 26.4 | (0.3 | ) | (13.0 | )% | (28.7 | ) | (108.7 | )% | |||||||||||||||||||||||
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Net income (loss) |
(4.4 | ) | (28.2 | ) | (3.9 | ) | (52.4 | ) | (35.0 | ) | (91.3 | ) | 23.8 | 84.4 | % | 63.1 | 69.1 | % | ||||||||||||||||||||||
Less: net income attributable to noncontrolling interests |
(8.1 | ) | (6.9 | ) | (4.9 | ) | (2.5 | ) | | (7.4 | ) | (1.2 | ) | (17.4 | )% | 0.5 | 6.8 | % | ||||||||||||||||||||||
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Net income (loss) attributable to the Company |
$ | (12.5 | ) | $ | (35.1 | ) | $ | (8.8 | ) | $ | (54.9 | ) | $ | (35.0 | ) | $ | (98.7 | ) | $ | 22.6 | 64.4 | % | $ | 63.6 | 64.4 | % | ||||||||||||||
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nm: not meaningful
(1) | The depreciation and amortization, interest expense and income tax expense pro forma adjustments give effect to the 2012 Change in Control Transaction as if it had occurred on January 1, 2012. |
(2) | Estimated tax impact of pro forma adjustments at 38%. |
70
Key Performance Measures
Management, including our chief operating decision maker, evaluates the financial performance of our businesses based on a variety of key indicators. These indicators include the non-GAAP measure Adjusted EBITDA and the GAAP measures revenue, cash provided by operating activities and cash paid for capital expenditures. In order to more closely align the definition of Adjusted EBITDA to the definition we use as a supplemental measure of our operating performance as well as a compensation measure under our incentive plan, we have included additional adjustments to our previously defined Adjusted EBITDA. Such additional adjustments consist of expenses for mergers and acquisitions integration, business optimization, our technology transformation project, operating expense tax matters, consulting study fees related to our strategic initiatives and other expenses. All periods have been presented in the table below under our new definition of Adjusted EBITDA. For the twelve months ended December 31, 2014, 2013 and 2012, these key indicators were as follows:
Twelve months ended
December 31, |
Change | |||||||||||||||||||||||||||
2014 vs. 2013 |
2013 vs Pro
Forma 2012 |
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2014 | 2013 |
Pro Forma
2012 |
$ | % | $ | % | ||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||
Revenue |
$ | 1,304.7 | $ | 1,183.2 | $ | 1,140.0 | $ | 121.5 | 10.3 | % | $ | 43.2 | 3.8 | % | ||||||||||||||
Reconciliation of net income (loss) attributable to the Company to Adjusted EBITDA (1) : |
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Net income (loss) attributable to the Company |
$ | (12.5 | ) | $ | (35.1 | ) | $ | (98.7 | ) | $ | 22.6 | 64.4 | % | $ | 63.6 | 64.4 | % | |||||||||||
Net interest expense |
186.7 | 195.9 | 177.1 | (9.2 | ) | (4.7 | )% | 18.8 | 10.6 | % | ||||||||||||||||||
Income tax provision (benefit) |
2.6 | 2.3 | (26.4 | ) | 0.3 | 13.0 | % | 28.7 | 108.7 | % | ||||||||||||||||||
Depreciation and amortization |
241.2 | 186.8 | 187.7 | 54.4 | 29.1 | % | (0.9 | ) | (0.5 | )% | ||||||||||||||||||
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EBITDA |
418.0 | 349.9 | 239.7 | 68.1 | 19.5 | % | 110.2 | 46.0 | % | |||||||||||||||||||
Stock-based compensation (2) |
10.7 | 6.3 | 4.3 | 4.4 | 69.8 | % | 2.0 | 46.5 | % | |||||||||||||||||||
Accelerated stock-based compensation (3) |
| | 90.7 | | nm | (90.7 | ) | (100.0 | )% | |||||||||||||||||||
Mergers, acquisitions and divestitures (4) |
(11.9 | ) | 9.5 | 44.0 | (21.4 | ) | nm | (34.5 | ) | (78.4 | )% | |||||||||||||||||
Mergers and acquisitions integration (5) |
15.8 | 3.0 | 3.3 | 12.8 | nm | (0.3 | ) | (9.1 | )% | |||||||||||||||||||
Business optimization (6) |
15.8 | 12.5 | 8.4 | 3.3 | 26.4 | % | 4.1 | 48.8 | % | |||||||||||||||||||
Technology transformation project (7) |
8.5 | 4.5 | | 4.0 | 88.9 | % | 4.5 | nm | ||||||||||||||||||||
Acceleration of technology agreement (8) |
10.2 | | | 10.2 | nm | | nm | |||||||||||||||||||||
Debt refinance (9) |
(33.1 | ) | 2.5 | | (35.6 | ) | nm | 2.5 | nm | |||||||||||||||||||
Legal and regulatory matters |
8.1 | 5.2 | | 2.9 | 55.8 | % | 5.2 | nm | ||||||||||||||||||||
Operating expense tax matters (10) |
3.9 | 2.9 | | 1.0 | 34.5 | % | 2.9 | nm | ||||||||||||||||||||
Consulting study fees (11) |
1.8 | 5.3 | 4.4 | (3.5 | ) | (66.0 | )% | 0.9 | 20.5 | % | ||||||||||||||||||
Currency remeasurement (12) |
1.1 | 0.8 | (0.2 | ) | 0.3 | 37.5 | % | 1.0 | nm | |||||||||||||||||||
Hedge mark-to-market (13) |
0.3 | | | 0.3 | nm | | nm | |||||||||||||||||||||
Loan fees and unused line of credit |
1.9 | 1.4 | 5.3 | 0.5 | 35.7 | % | (3.9 | ) | (73.6 | )% | ||||||||||||||||||
Other non-operating income and expense |
1.3 | 0.6 | 0.6 | 0.7 | 116.7 | % | | | ||||||||||||||||||||
Other (14) |
1.9 | 4.1 | 3.1 | 2.2 | (53.7 | )% | 1.0 | 32.3 | % | |||||||||||||||||||
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Adjusted EBITDA (1) |
$ | 454.3 | $ | 408.5 | $ | 403.6 | $ | 45.8 | 11.2 | % | $ | 4.9 | 1.2 | % | ||||||||||||||
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Other metrics: |
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Cash provided by operating activities |
$ | 154.3 | $ | 143.4 | $ | 99.4 | $ | 10.9 | 7.6 | % | $ | 44.0 | 44.3 | % | ||||||||||||||
Cash paid for capital expenditures |
155.2 | 81.7 | 69.2 | 73.5 | 90.0 | % | 12.5 | 18.1 | % |
nm: not meaningful
(1) |
Adjusted EBITDA is defined as net income (loss) attributable to the Company before net interest expense, income tax provision (benefit), depreciation and amortization and other adjustments noted in the table above. We present Adjusted EBITDA as a supplemental measure of our operating performance because it eliminates the impact of certain items that we do not consider indicative of our cash operations and ongoing operating |
71
performance. Also, Adjusted EBITDA is a measure frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours. In addition, our board of directors and executive management team use Adjusted EBITDA as a compensation measure under our incentive plan. Furthermore, under the credit agreement governing our senior secured credit facility and the indentures governing our Senior Notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to a ratio based on Adjusted EBITDA. See Liquidity and Capital ResourcesDebt and Description of Indebtedness. Adjusted EBITDA does not reflect our capital expenditures, interest, income tax, depreciation, amortization, stock-based compensation, including cash-settled stock-based compensation, and certain other income and expense. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. Adjusted EBITDA is not a measure of financial condition or profitability under GAAP and should not be considered as an alternative to cash flows from operating activities, as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance. We believe that the most directly comparable GAAP measure to Adjusted EBITDA is net income attributable to the Company. The following table provides a reconciliation from net income (loss) attributable to the Company to Adjusted EBITDA for the twelve months ended December 31, 2014 and December 31, 2013, the period from the date of our inception through December 31, 2012 and the four months ended April 30, 2012 of the Predecessor. |
(2) | For 2014, consisted of $8.0 million of stock-based compensation and $2.7 million of cash-settled stock-based compensation. Cash-settled stock-based awards are granted to employees outside the United States and Canada. Once our stock is publicly traded, the cash-settled stock-based compensation liability will be adjusted to market value based on the period end closing stock price, with the offsetting adjustment recorded to cash-settled stock-based compensation expense. |
(3) | Represented accelerated stock-based compensation expenses as a result of the 2012 Change in Control Transaction. |
(4) | Consisted of acquisition-related expenses primarily related to the 2012 Change in Control Transaction. Also included costs related to our abandoned initial public offering process. For 2013, included $10.5 million of acquisition-related expenses and a credit of $1.0 million for other miscellaneous items. For 2014, included $22.2 million of remeasurement gains of our previously held equity interests upon purchase and consolidation of CIBIL and L2C partially offset by $2.9 million of acquisition-related expenses, a $4.1 million impairment charge for a cost-method investment that sold its assets and liquidated during 2014 and $3.3 million of other miscellaneous items. |
(5) | Consisted of merger and acquisition integration costs for companies and assets purchased between 2012 and 2014. |
(6) | For 2012 and 2013, primarily consisted of certain severance, sign-on, relocation and executive search costs. For 2014, primarily consisted of certain severance and facility wind-down costs. |
(7) | Represented costs associated with a project to transform our technology infrastructure. |
(8) | Represented accelerated fees for a data matching service contract that we have terminated and in-sourced as part of the transformation to our technology infrastructure. |
(9) | For 2013, represented debt refinancing expenses. For 2014, represented debt refinancing activity consisting of a gain on the prepayment of debt, net of prepayment premium and expenses. |
(10) | Represented expenses for sales and use tax matters and payroll tax matters. |
(11) | Represented fees for consulting studies related to our strategic initiatives. |
(12) | Represented currency remeasurement of our foreign operations. |
(13) | Represented mark-to-market activity related to ineffectiveness of our interest rate hedge. |
(14) | For 2012, represented $1.5 million in PCI expenses and $1.6 million of other miscellaneous items. For 2013, represented $3.3 million in PCI expenses and $0.9 million of other miscellaneous items. For 2014, represented other miscellaneous items. |
Revenue
For 2014, revenue increased $121.5 million, or 10.3%, compared with 2013 due to revenue from our 2014 and 2013 acquisitions in our USIS and International segments and organic growth in all of our segments, partially offset by the impact of weakening foreign currencies in our International segment. Acquisitions accounted for an increase in revenue of 6.4%. The impact of weakening foreign currencies accounted for a decrease in revenue of 1.4%. Excluding the impact of the recent
72
acquisitions and weakening foreign currencies, consolidated revenue increased 5.3% compared with the prior year. For 2013, revenue increased $43.2 million, or 3.8%, compared with 2012 due to revenue from our 2013 and 2012 acquisitions in our USIS and International segments and organic growth in all operating segments, partially offset by the impact of weakening foreign currencies in our International segment. The impact of weakening foreign currencies accounted for a decrease in revenue of 1.6%. Excluding the impact of the recent acquisitions and weakening foreign currencies, consolidated revenue increased 3.9% compared with the prior year. Revenue by segment and a more detailed explanation of revenue within each segment were as follows:
Twelve months ended
December 31, |
Change | |||||||||||||||||||||||||||
2014 vs. 2013 |
2013 vs. Pro
Forma 2012 |
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2014 | 2013 | Pro Forma 2012 | $ | % | $ | % | ||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||
U.S. Information Services: |
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Online Data Services |
$ | 545.6 | $ | 505.9 | $ | 495.6 | $ | 39.7 | 7.8 | % | $ | 10.3 | 2.1 | % | ||||||||||||||
Marketing Services |
134.5 | 126.0 | 132.3 | 8.5 | 6.7 | % | (6.3 | ) | (4.8 | )% | ||||||||||||||||||
Decision Services |
138.5 | 108.7 | 97.6 | 29.8 | 27.4 | % | 11.1 | 11.4 | % | |||||||||||||||||||
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Total U.S. Information Services |
818.6 | 740.6 | 725.5 | 78.0 | 10.5 | % | 15.1 | 2.1 | % | |||||||||||||||||||
International: |
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Developed Markets |
90.9 | 86.9 | 83.7 | 4.0 | 4.6 | % | 3.2 | 3.8 | % | |||||||||||||||||||
Emerging Markets |
164.6 | 152.0 | 150.7 | 12.6 | 8.3 | % | 1.3 | 0.9 | % | |||||||||||||||||||
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Total International |
255.5 | 238.9 | 234.4 | 16.6 | 6.9 | % | 4.5 | 1.9 | % | |||||||||||||||||||
Consumer Interactive |
230.6 | 203.7 | 180.1 | 26.9 | 13.2 | % | 23.6 | 13.1 | % | |||||||||||||||||||
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Total revenue |
$ | 1,304.7 | $ | 1,183.2 | $ | 1,140.0 | $ | 121.5 | 10.3 | % | $ | 43.2 | 3.8 | % | ||||||||||||||
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USIS Segment
For 2014, USIS revenue increased $78.0 million, or 10.5%, compared with 2013, with increases in all of the platforms due to improved market conditions and a 7.6% increase in revenue from our acquisitions of eScan and TLO in 2013 and L2C and DHI in 2014. For 2013, USIS revenue increased $15.1 million, or 2.1%, compared with 2012, with increases in online credit reports and decision services due to improved market conditions and an increase of 1.4% from our acquisitions of eScan in September of 2013 and TLO in December of 2013, partially offset by a decrease in marketing services.
Online Data Services. For 2014, online data services revenue increased $39.7 million, or 7.8%, compared with 2013 due primarily to revenue from our acquisition of TLO and a 3.2% increase in online credit report unit volume. Increases in credit report unit volume in the financial services, insurance and other markets were partially offset by a decrease in volume in the resellers market, primarily in the first six months of 2014, due to higher mortgage interest rates and the resulting decline in refinancings. A change in the mix of products sold resulted in a slight decrease in average pricing for online credit reports in 2014. For 2013, online data services revenue increased $10.3 million, or 2.1%, compared with 2012 due primarily to a 1.5% increase in online credit report unit volume, primarily in the financial services and resellers markets, as conditions in the consumer and housing credit markets improved throughout the year. A change in the mix of products sold resulted in a slight increase in average pricing for online credit reports in 2013.
Marketing Services. Marketing services revenue increased $8.5 million, or 6.7%, in 2014 and decreased $6.3 million, or 4.8%, in 2013 compared with prior periods. For 2014, the increase was due to an increase in custom datasets and archive information in the insurance and financial services markets. For 2013, the decrease was due to a decrease in demand for custom datasets and archive information and lower batch revenue, primarily in the financial services market.
73
Decision Services. For 2014 and 2013, decision services revenue increased $29.8 million, or 27.4%, and $11.1 million, or 11.4%, respectively, compared with prior periods. The increase in both years was due primarily to revenue from our acquisition of eScan.
International Segment
For 2014, International revenue increased $16.6 million, or 6.9%, compared with 2013. The increase was due to higher local currency revenue from increased volumes in all regions and revenue from our acquisitions of CIBIL and ZipCode, partially offset by a 6.9% decrease in revenue from the impact of weakening foreign currencies. Incremental revenue from our acquisition of CIBIL and ZipCode accounted for an 8.2% increase in International revenue in 2014. Excluding the impact of foreign currencies and acquisitions, International revenue increased 5.7% compared with the prior year. For 2013, International revenue increased $4.5 million, or 1.9%, compared with 2012. The increase was due to higher local currency revenue from increased volumes in most regions, substantially offset by a decrease of 7.6% from the impact of weakening foreign currencies. Incremental revenue from our acquisitions of ZipCode in March 2013 and CRB in May 2012 accounted for an increase in revenue of 2.9%. Excluding the impact of recent acquisitions and foreign currencies, International revenue increased 6.6% compared with the prior year.
Developed Markets. For 2014, developed markets revenue increased $4.0 million, or 4.6%, compared with 2013, due to higher volumes in both regions, partially offset by a decrease of 4.7% from the impact of the weakening Canadian dollar. Excluding the impact of weakening foreign currencies, developed markets revenue increased 9.3% compared with the prior year. For 2013, developed markets revenue increased $3.2 million, or 3.8%, compared with 2012, due to higher volumes in both regions, partially offset by a decrease of 2.0% from the impact of the weakening Canadian dollar. Excluding the impact of weakening foreign currencies, developed markets revenue increased 6.0% compared with the prior year.
Emerging Markets. For 2014, emerging markets revenue increased $12.6 million, or 8.3%, compared with 2013, due to higher volumes in all regions and the inclusion of revenue from our CIBIL and ZipCode acquisitions, partially offset by a decrease of 8.1% from the impact of weakening foreign currencies, primarily the South African rand. Incremental revenue from our acquisitions of CIBIL and ZipCode accounted for an increase in revenue of 12.8%. Excluding the impact of recent acquisitions and foreign currencies, emerging markets revenue increased 3.6% compared with the prior year. For 2013, emerging markets revenue increased $1.3 million, or 0.9%, compared with 2012, due to increased volumes in all regions and the revenue from our acquisitions of ZipCode and CRB, substantially offset by a decrease of 10.6% from the impact of weakening foreign currencies, primarily the South African rand. Incremental revenue from our acquisitions of ZipCode and CRB accounted for an increase in revenue of 4.4%. Excluding the impact of recent acquisitions and foreign currencies, emerging markets revenue increased 7.0% compared with the prior year.
Consumer Interactive Segment
For 2014 and 2013, Consumer Interactive revenue increased $26.9 million, or 13.2%, and $23.6 million, or 13.1%, respectively, compared with prior periods. These increases were due primarily to an increase in the average number of subscribers and volume in our indirect channel.
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Operating Expenses
Operating expenses for the periods reported were as follows:
Twelve months ended
December 31, |
Change | |||||||||||||||||||||||||||
2014 vs. 2013 |
2013 vs. Pro
Forma 2012 |
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2014 | 2013 |
Pro Forma
2012 |
$ | % | $ | % | ||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||
Cost of services |
$ | 499.1 | $ | 472.4 | $ | 470.2 | $ | 26.7 | 5.7 | % | $ | 2.2 | 0.5 | % | ||||||||||||||
Selling, general and administrative |
436.0 | 354.8 | 384.6 | 81.2 | 22.9 | % | (29.8 | ) | (7.7 | )% | ||||||||||||||||||
Depreciation and amortization |
241.2 | 186.8 | 187.7 | 54.4 | 29.1 | % | (0.9 | ) | 0.5 | % | ||||||||||||||||||
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Total operating expenses |
$ | 1,176.3 | $ | 1,014.0 | $ | 1,042.5 | $ | 162.3 | 16.0 | % | $ | (28.5 | ) | (2.7 | )% | |||||||||||||
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Cost of Services
For 2014, cost of services increased $26.7 million compared with 2013. The increase was due primarily to:
| operating and integration costs associated with our USIS and International acquisitions; |
| an acceleration of $10.2 million of fees recorded for a data matching service contract that we have terminated and in-sourced as part of the transformation to our technology infrastructure; |
| severance charges in our Corporate unit and USIS segment related to the consolidation and subsequent closure of our California-based contract center; and |
| costs associated with strategic initiatives; |
partially offset by:
| the impact of weakening foreign currencies on the 2014 expenses of our International segment. |
For 2013, cost of services increased $2.2 million compared with 2012. The increase was due primarily to:
| an increase in variable product costs in our Consumer Interactive segment resulting from the increase in revenue; |
| labor costs for investments in strategic initiatives primarily in our USIS segment; and |
| operating and integration costs associated with our USIS and International acquisitions; |
substantially offset by:
| $21.5 million of accelerated stock-based compensation expense recorded in 2012 by TransUnion Intermediate Predecessor resulting from the 2012 Change in Control Transaction; and |
| the impact of weakening foreign currencies on the 2013 expenses of our International segment. |
Selling, General and Administrative
For 2014, selling, general and administrative expenses increased $81.2 million compared with 2013. The increase was due primarily to:
| operating and integration costs associated with our USIS and International acquisitions; |
| expense of $8.1 million for certain legal and regulatory matters in our Corporate unit and International segment; and |
75
| severance charges in our Corporate unit and USIS segment related to the consolidation and subsequent closure of our California-based contract center; |
partially offset by:
| the impact of weakening foreign currencies on the 2014 expenses of our International segment. |
For 2013, selling, general and administrative expenses decreased $29.8 million compared with 2012. The decrease was due primarily to:
| $69.2 million of additional stock-based compensation expense recorded in 2012 by TransUnion Intermediate Predecessor resulting from the 2012 Change in Control Transaction; and |
| the impact of weakening foreign currencies on the 2013 expenses of our International segment; |
partially offset by:
| an increase in labor costs for investments in strategic initiatives primarily in our USIS and International segments; |
| an increase in advertising expense in our Consumer Interactive segment; |
| operating and integration costs associated with our USIS and International acquisitions; and |
| an increase in legal and regulatory costs in our USIS segment. |
See our consolidated financial statements and the related notes included in this prospectus for further information about the impact of the 2012 Change in Control Transaction.
Depreciation and amortization
For 2014, depreciation and amortization increased $54.4 million. In July 2014, we revised the remaining useful lives of certain internal-use software, equipment, leasehold improvements and the corporate headquarters facility to align with the expected completion dates of our strategic initiatives to transform our technology infrastructure and corporate headquarters facility. As a result, depreciation and amortization increased $17.5 million during 2014. Depreciation and amortization increases of $19.6 million from recent business acquisitions and other increases primarily related to additional capital expenditures for our strategic initiatives also impacted the increase in 2014.
For 2013, compared with pro forma 2012, depreciation and amortization was flat but 2012 included a $43.5 million pro forma adjustment to reflect additional depreciation and amortization that would have resulted had the 2012 Change in Control Transaction occurred on January 1, 2012, instead of April 30, 2012. See our consolidated financial statements and the related notes included in this prospectus for further information about the portion of the purchase price allocated to tangible and intangible assets and their estimated useful lives.
76
Operating Income and Operating Margins
Twelve months ended
December 31, |
Change | |||||||||||||||||||||||||||
2014 vs. 2013 |
2013 vs. Pro
Forma 2012 |
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2014 | 2013 |
Pro Forma
2012 |
$ | % | $ | % | ||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||
USIS operating income |
$ | 112.8 | $ | 154.7 | $ | 124.1 | $ | (41.9 | ) | (27.1 | )% | $ | 30.6 | 24.7 | % | |||||||||||||
International operating income |
22.2 | 19.5 | 13.6 | 2.7 | 13.8 | % | 5.9 | 43.4 | % | |||||||||||||||||||
Consumer Interactive operating income |
85.5 | 65.6 | 60.0 | 19.9 | 30.3 | % | 5.6 | 9.3 | % | |||||||||||||||||||
Corporate operating loss |
(92.1 | ) | (70.6 | ) | (100.2 | ) | (21.5 | ) | (30.5 | )% | 29.6 | 29.5 | % | |||||||||||||||
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Total operating income |
128.4 | 169.2 | 97.5 | (40.8 | ) | (24.1 | )% | 71.7 | 73.5 | % | ||||||||||||||||||
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Operating Margin: |
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USIS |
13.8 | % | 20.9 | % | 17.1 | % | (7.1 | )% | 3.8 | % | ||||||||||||||||||
International |
8.7 | % | 8.2 | % | 5.8 | % | 0.5 | % | 2.4 | % | ||||||||||||||||||
Consumer Interactive |
37.1 | % | 32.2 | % | 33.3 | % | 4.9 | % | (1.1 | )% | ||||||||||||||||||
Total operating margin |
9.8 | % | 14.3 | % | 8.6 | % | (4.5 | )% | 5.7 | % |
For 2014, consolidated operating income decreased $40.8 million. This decrease was due primarily to:
| operating and integration costs associated with our USIS and International acquisitions; |
| an increase of $54.4 million in depreciation and amortization due primarily to our recent acquisitions and our strategic initiative to transform our technology infrastructure and corporate headquarters facility; |
| an increase in variable product costs due to the increase in revenue; |
| an acceleration of $10.2 million of fees recorded in our USIS segment for a data matching service contract that we have terminated and in-sourced as part of the transformation of our technology infrastructure; |
| expense of $8.1 million for certain legal and regulatory matters in our Corporate unit and International segment; |
| severance charges in our Corporate unit and USIS segment related to the consolidation and subsequent closure of our California-based contract center; and |
| the impact of weakening foreign currencies on the 2014 results of our International segment; |
partially offset by:
| the increase in revenue in all segments, including revenue from the recent acquisitions. |
For 2014, margins for the USIS segment decreased due primarily to additional depreciation and amortization resulting from revising the remaining useful lives of certain assets, the operating, integration and depreciation and amortization expenses of our recent acquisitions, severance charges and the accelerated fees for canceling the data matching service, partially offset by the increase in revenue. Margins for the International segment were relatively flat as the additional depreciation and amortization from revising the remaining useful lives of certain asset and the operating, integration and depreciation and amortization expenses of our recent acquisitions was mostly offset by the increase in revenue. Margins in our Consumer Interactive segment increased due to the increase in revenue.
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For 2013 compared to pro forma 2012, consolidated operating income increased $71.7 million. This increase was due primarily to:
| accelerated stock-based compensation expense of $90.7 million recorded by TransUnion Intermediate Predecessor in 2012 as a result of the 2012 Change in Control Transaction; and |
| the increase in revenue; |
partially offset by:
| operating and integration costs association with our USIS and International acquisitions; |
| an increase in labor costs for investments in strategic initiatives primarily in our USIS and International segments; |
| an increase in variable product costs and advertising in our Consumer Interactive segment; |
| an increase in legal and regulatory costs in our USIS segment; and |
| the impact of weakening foreign currencies on the 2013 results of our International segment. |
For 2013 compared to pro forma 2012, margins for the USIS segment decreased due primarily to an increase in labor costs for investments in strategic initiatives including integration costs of recent acquisitions, and an increase in legal and regulatory costs, partially offset by the accelerated stock-based compensation expense recorded in 2012 and the increase in revenue. Margins for the International segment decreased due primarily to an increase in labor costs for investments in strategic initiatives including integration costs for our recent acquisitions, partially offset by the accelerated stock-based compensation expense recorded in 2012. Margins for the Consumer Interactive segment decreased due primarily to the increase in advertising, partially offset by the accelerated stock-based compensation recorded in 2012.
Non-Operating Income and Expense
Twelve months ended
December 31, |
Change | |||||||||||||||||||||||||||
2014 vs. 2013 |
2013 vs. Pro
Forma 2012 |
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2014 | 2013 |
Pro Forma
2012 |
$ | % | $ | % | ||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||
Interest expense |
$ | (190.0 | ) | $ | (197.6 | ) | $ | (178.5 | ) | $ | 7.6 | 3.8 | % | $ | (19.1 | ) | (10.7 | )% | ||||||||||
Interest income |
3.3 | 1.7 | 1.4 | 1.6 | 94.1 | % | 0.3 | 21.4 | % | |||||||||||||||||||
Earnings from equity method investments |
12.5 | 13.7 | 12.1 | $ | (1.2 | ) | (8.8 | )% | $ | 1.6 | 13.2 | % | ||||||||||||||||
Other income and expense, net: |
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Loan fees |
(14.6 | ) | (3.8 | ) | (5.0 | ) | (10.8 | ) | nm | 1.2 | 24.0 | % | ||||||||||||||||
Acquisition fees |
(2.9 | ) | (10.5 | ) | (42.2 | ) | 7.6 | 72.4 | % | 31.7 | 75.1 | % | ||||||||||||||||
Dividends from cost method investments |
0.8 | 0.7 | 0.6 | 0.1 | 14.3 | % | 0.1 | 16.7 | % | |||||||||||||||||||
Other income (expense), net |
60.7 | 0.7 | (3.6 | ) | 60.0 | nm | 4.3 | 119.4 | % | |||||||||||||||||||
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Total other income and expense, net |
44.0 | (12.9 | ) | (50.2 | ) | 56.9 | nm | 37.3 | 74.3 | % | ||||||||||||||||||
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Non-operating income and expense |
$ | (130.2 | ) | $ | (195.1 | ) | $ | (215.2 | ) | $ | 64.9 | 33.3 | % | $ | 20.1 | 9.3 | % | |||||||||||
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nm: not meaningful
Other income and expense, net, was significantly impacted by the 2014 Refinancing Transaction and the 2012 Change in Control Transaction. See our consolidated financial statements and the related notes included in this prospectus for additional information.
78
For 2014, interest expense decreased $7.6 million compared with 2013. A decrease in interest expense due to the early redemption of the 11.375% Senior Notes in the second quarter of 2014 was partially offset by additional interest expense resulting from the increase in the average principal balance of the senior secured credit facility in 2014 compared with 2013. For 2013 compared with pro forma 2012, interest expense increased $19.1 million, due primarily to interest on the 8.125% Senior Notes issued in November 2012, and interest on the additional borrowings under the Trans Union LLC senior secured term loan in 2013. Pro forma 2012 interest expense included a pro forma adjustment of $13.0 million to reflect additional interest expense that would have been incurred had the TransUnion Holding 9.625% notes that were issued to partially fund the 2012 Change in Control Transaction been issued on January 1, 2012, instead of in March 21, 2012. See our consolidated financial statements and the related notes included in this prospectus for additional information about our interest expense.
For 2014, loan fees included $12.7 million of refinancing fees and other net costs expensed as a result of refinancing our senior secured credit facility. For 2012, loan fees included a $2.7 million fee for a bridge loan commitment for the 2012 Change in Control Transaction.
Acquisition fees represent costs we have incurred for various acquisition-related efforts. For 2014, acquisition fees included costs related to our acquisitions of DHI, L2C and CIBIL and costs of other acquisition efforts. For 2013, acquisition fees included costs related to our acquisitions of ZipCode, eScan and TLO and other acquisition efforts. For 2012, acquisition fees include $36.5 million of costs related to the 2012 Change in Control Transaction and $3.0 million of initial public offering related expenses that were previously capitalized but written off in the first quarter of 2012 as we formally withdrew our registration statement on Form S-1 as a result of the 2012 Change in Control Transaction, and costs of other acquisition efforts. Of the $36.5 million 2012 Change in Control Transaction costs, $15.6 million was incurred by the Successor and $20.9 million was incurred by the Predecessor.
For 2014, other income (expense), net included a net gain of $45.8 million resulting from the early redemption of the 11.375% Senior Notes consisting of the unamortized 2012 Change in Control Transaction fair value increase in the notes of $89.4 million less an early redemption premium and other costs totaling $43.6 million, a $22.2 million gain resulting from remeasuring our previously held equity interests in CIBIL and L2C under the accounting guidance for acquisitions achieved in stages, an impairment charge of $4.1 million related to a cost-method investment that has sold its assets and liquidated, a loss of $0.6 million on the swap that no longer qualifies for hedge accounting and other income and expenses.
Provision for Income Taxes
For 2014 and 2013, we reported a loss before income taxes with income tax expense, resulting in a negative effective tax rate for both periods. This rate was lower than the 35% U.S. federal statutory rate due primarily to tax on our foreign earnings that are not considered indefinitely reinvested outside the United States.
For the pro forma twelve months ended December 31, 2012, pro forma income tax expense includes a pro forma reduction of income tax expense that would have resulted had the 2012 Change in Control Transaction occurred on January 1, 2012. See the pro forma 2012 depreciation and amortization and the interest expense discussions above for further information on the 2012 pro forma adjustments.
For the period of inception through December 31, 2012, the effective tax rate was 244.4%. This rate was higher than the 35% U.S. federal statutory rate due primarily to the lapse of the look-through rule and the reduction in available foreign tax credits, the unfavorable impact of changes to our accrual
79
on certain undistributed earnings of the Companys controlled foreign subsidiaries and tax non-deductibility of certain costs incurred in connection with the 2012 Change in Control Transaction, partially offset by a favorable tax rate differential on the Companys foreign earnings.
For the four months ended April 30, 2012, we reported a loss before income taxes. The effective tax rate for this period of 18.0% was lower than the 35% U.S. federal statutory rate due primarily to the impact of recording tax expense on our undistributed foreign earnings, the non-deductibility of certain costs incurred in connection with the 2012 Change in Control Transaction and limitations on our foreign tax credits.
Effective January 1, 2012, the look-through provision under subpart F of the United States Internal Revenue Code expired. Consequently, beginning in 2012, we recorded tax expense for the U.S. income tax we would incur in the absence of the look-through rule. As part of the American Taxpayer Relief Act of 2012 enacted into law on January 2, 2013, the look-through provision was retroactively reinstated to January 1, 2012, and we reversed the tax expense we recorded for subpart F in 2012 during the first quarter of 2013. The look-through rule is effective for 2013 and 2014 as well.
As a result of the 2012 Change in Control Transaction and increased debt service requirements resulting from the additional debt incurred by TransUnion, we asserted at December 31, 2012, that all undistributed foreign earnings from certain controlled foreign corporations accumulated as of April 30, 2012, were not indefinitely reinvested outside the United States. Accordingly, in 2012 we recorded a deferred tax liability for the full estimated U.S. tax cost, net of related foreign tax credits, associated with remitting these earnings back to the United States. In 2014, we modified this assertion due to changes in the Companys capital structure. We now assert that $118.7 million of earnings from our Canadian, South African and Netherlands subsidiaries and CIBIL are not indefinitely reinvested outside the United States.
Significant Changes in Assets and Liabilities
Goodwill increased $114.2 million at December 31, 2014, compared with December 31, 2013, due primarily to the purchase price allocations for CIBIL, DHI and L2C, partially offset by adjustments for foreign currency translation. See our consolidated financial statements and the related notes included in this prospectus for additional information.
Liquidity and Capital Resources
Overview
Our principal sources of liquidity are cash flows provided by operating activities, cash and cash equivalents on hand, and our senior secured revolving line of credit. Our principal uses of liquidity are working capital, capital expenditures, debt service and other general corporate purposes. We believe our cash on hand, cash generated from operations, and funds available under the senior secured revolving line of credit will be sufficient to fund our planned capital expenditures, debt service obligations and operating needs for the foreseeable future. We may, however, elect to raise funds through debt or equity financings in the future to fund significant investments or acquisitions that are consistent with our growth strategy. TransUnion Intermediate pays cash dividends to TransUnion to fund its debt service obligations.
Cash and cash equivalents totaled $87.0 million at March 31, 2015, of which $57.5 million was held outside the United States. Cash and cash equivalents totaled $77.9 million at December 31, 2014, of which $50.6 million was held outside the United States. The balance retained in cash and cash equivalents is consistent with our short-term cash needs and investment objectives. As of March 31, 2015, we had $85.0 million outstanding borrowings against the senior secured revolving line of credit
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and could have borrowed the remaining $105.0 million available. The Company is required to make additional principal payments on the senior secured term loan based on excess cash flows, as defined in the agreement, of the prior year. There were no excess cash flows for 2014 and therefore no additional payment was required in 2015. See our consolidated financial statements and the related notes included in this prospectus for additional information.
As of March 31, 2015, the Company intends to keep all foreign earnings of controlled entities except for approximately $119.9 million permanently reinvested in operations outside of the United States as these earnings are not needed to fund our current or expected domestic operations. Accordingly, under ASC 740-30 we have recorded a deferred tax liability of approximately $41.9 million as of March 31, 2015, on the earnings of the controlled entities that we expect to repatriate.
Sources and Uses of Cash
Three Months
Ended March 31, 2015 |
Three Months
Ended March 31, 2014 |
2015 vs.
2014 Change |
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Cash provided by (used in) operating activities |
$ | 16.5 | $ | (6.1 | ) | $ | 22.6 | |||||
Cash used in investing activities |
(34.9 | ) | (69.9 | ) | 35.0 | |||||||
Cash provided by (used in) financing activities |
29.1 | 24.8 | 4.3 | |||||||||
Effect of exchange rate changes on cash and cash equivalents |
(1.6 | ) | (0.6 | ) | (1.0 | ) | ||||||
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Net change in cash and cash equivalents |
$ | 9.1 | $ | (51.8 | ) | $ | 60.9 | |||||
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Twelve
Months Ended December 31, 2014 |
Twelve
Months Ended December 31, 2013 |
TransUnion
Successor Date of Inception Through December 31, 2012 (1) |
TransUnion
Intermediate Predecessor Four Months Ended April 30, 2012 |
2012 Pro
Forma Adjustments (2) |
Pro Forma
Twelve Months Ended December 31, 2012 |
2014 vs.
2013 Change |
2013 vs.
Pro Forma 2012 Change |
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(dollars in millions) | ||||||||||||||||||||||||||||||||
Cash provided by operating activities |
$ | 154.3 | $ | 143.4 | $ | 47.0 | $ | 52.4 | $ | (13.0 | ) | $ | 86.4 | $ | 10.9 | $ | 57.0 | |||||||||||||||
Cash used in investing activities |
(276.0 | ) | (367.0 | ) | (1,547.1 | ) | (19.6 | ) | | (1,566.7 | ) | 91.0 | 1,199.7 | |||||||||||||||||||
Cash provided by (used in) financing activities |
91.9 | 187.3 | 1,655.1 | (45.0 | ) | | 1,610.1 | (95.4 | ) | (1,422.8 | ) | |||||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
(3.5 | ) | (6.8 | ) | (0.7 | ) | 0.8 | | 0.1 | 3.3 | (6.9 | ) | ||||||||||||||||||||
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Net change in cash and cash equivalents |
$ | (33.3 | ) | $ | (43.1 | ) | $ | 154.3 | $ | (11.4 | ) | $ | (13.0 | ) | $ | 129.9 | $ | 9.8 | $ | (173.0 | ) | |||||||||||
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(1) | Cash used in investing activities for TransUnion date of inception through December 31, 2012, is net of the cash of TransUnion Intermediate Predecessor on April 30, 2012, acquired by TransUnion in connection with the 2012 Change in Control Transaction. |
(2) | The pro forma adjustment to 2012 cash provided by operating activities represents the additional interest expense that would have been incurred had the 2012 Change in Control Transaction occurred on January 1, 2012. No cash tax savings would have occurred because the additional interest expense would have increased the net loss. |
Operating Activities
For the three months ended March 31, 2015 compared with 2014, the increase in cash provided by operating activities was due primarily to the increase in cash operating margin and decrease in interest expense.
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For 2014, the increase in cash provided by operating activities was due primarily to the increase in revenue and decrease in interest expense, partially offset by the increase in cash operating expenses and working capital. For 2013 compared with pro forma 2012, the increase in cash provided by operating activities was due primarily to cash used in 2012 to pay option holders cash consideration based on the value of their options in connection with the 2012 Change in Control Transaction, partially offset by the increase in interest expense.
Investing Activities
For the three months ended March 31, 2015 compared with 2014, the decrease in cash used in investing activities was due primarily to a decrease in cash used for acquisitions and capital expenditures.
For 2014, the decrease in cash used in investing activities was due primarily to a decrease in cash used for acquisitions, partially offset by an increase in cash paid for capital expenditures. For 2013, the decrease in cash used in investing activities was due primarily to cash used in 2012 to fund the 2012 Change in Control Transaction, partially offset by cash used for acquisitions in 2013.
Financing Activities
For the three months ended March 31, 2015 compared with 2014, the increase in cash provided by financing activities was due primarily to the increase in net borrowings.
For 2014, the decrease in cash provided by financing activities was due primarily to the 2014 Refinancing Transaction prepayment premium and fees and a decrease in net borrowings. For 2013, the decrease in cash provided by financing activities was due primarily to equity and debt proceeds received in 2012 to fund the 2012 Change in Control Transaction, partially offset by the dividend paid in 2012 and proceeds from borrowings against our senior secured credit facility in 2013.
Capital Expenditures
We make capital expenditures to grow our business by developing new and enhanced capabilities, to increase the effectiveness and efficiency of the organization and to reduce risks. We make capital expenditures for product development, disaster recovery, security enhancements, regulatory compliance, and the replacement and upgrade of existing equipment at the end of its useful life. During the third quarter of 2013, we began a strategic initiative to transform our technology infrastructure to enable growth, promote innovation and provide a competitive advantage. We are also in the process of making improvements to our corporate headquarters facility.
For the three months ended March 31, 2015 compared with 2014, cash paid for capital expenditures decreased $8.7 million, from $38.8 million in 2014 to $30.1 million in 2015. Spending to transform our technology infrastructure and upgrade our corporate headquarters facility decreased from $11.4 million for the three months ended March 31, 2014 to $3.4 million for the three months ended March 31, 2015. We expect total expenditures to be lower in 2015 than 2014 as a percentage of revenue as we complete the improvements to our corporate headquarters in the first half of 2015.
For 2014, cash paid for capital expenditures increased $73.5 million compared with 2013. Spending to transform our technology infrastructure and to upgrade our corporate headquarters facility increased from $19.1 million for 2013 to $39.8 million for 2014. On an accrual basis, our capital expenditures were $163.0 million in 2014 compared with $96.3 million in 2013. For 2013, cash paid for capital expenditures increased $12.5 million, from $69.2 million in 2012 to $81.7 million in 2013. On an accrual basis, our capital expenditures were $96.3 million in 2013 compared with $66.7 million in 2012.
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Debt
Senior Secured Credit Facility
On June 15, 2010, our subsidiary, Trans Union LLC, entered into a senior secured credit facility with various lenders. The credit facility consists of a senior secured term loan and a senior secured revolving line of credit. On April 9, 2014, we refinanced and amended our senior secured credit facility. The refinancing resulted in an increase of the outstanding term loan from $1,120.5 million to $1,900.0 million. The amendment, among other things, reduced the interest rate floor and margins, reduced the amount available under the revolving line of credit from $210.0 million to $190.0 million, extended the maturity dates, and changed certain covenant requirements. The additional borrowings were used in part to repay all amounts outstanding under the existing revolving line of credit and to pay fees and expenses associated with the refinancing transaction. On May 9, 2014, the remaining borrowings were used to redeem the entire $645.0 million outstanding balance of the 11.375% Senior Notes issued by TransUnion Financing Corp and Trans Union LLC including unpaid accrued interest and a prepayment premium. We refer to these transactions collectively as the 2014 Refinancing Transaction. The 2014 Refinancing Transaction resulted in a net gain of $33.1 million recorded in the consolidated statement of income, consisting of a gain of $45.8 million on the early redemption of the 11.375% Senior Notes less $12.7 million of refinancing fees and other net costs expensed as a result of refinancing our senior secured credit facility. The 2014 Refinancing Transaction is expected to result in a reduction in cash paid for interest of approximately $45 million annually, less a reduction in the amortized fair value premium, for a net reduction to interest expense of approximately $20 million annually at current interest rates.
Interest rates on the refinanced term loan are based on the London Interbank Offered Rate (LIBOR) unless otherwise elected, and subject to a floor of 1.00%, plus a margin of 2.75% or 3.00% depending on our senior secured net leverage ratio. Under the refinanced term loan, the Company is required to make principal payments of 0.25% of the refinanced original principal balance at the end of each quarter, with the remaining balance due April 9, 2021. The Company will also be required to make additional payments beginning in 2015 based on excess cash flows of the prior year. Depending on the senior secured net leverage ratio for the year, a principal payment of between zero and fifty percent of the excess cash flows will be due the following year.
During the fourth quarter of 2014, the Company borrowed $50.0 million against the senior secured revolving line of credit to partially fund acquisitions. In March of 2015, the Company borrowed an additional $35.0 million to complete the funding requirements and replenish cash on hand. As of March 31, 2015, we had outstanding borrowings of $85.0 million under our senior secured revolving line of credit and could borrow up to an additional $105.0 million.
Under the covenants of the instruments governing our senior secured debt, TransUnion Intermediate is restricted from making certain distribution payments to TransUnion.
Interest rates on the refinanced revolving line of credit are based on LIBOR unless otherwise elected, and subject to a floor of 1.00%, plus a margin of 2.50% or 2.75% depending on our senior secured net leverage ratio. There is a 0.375% or 0.50% annual commitment fee, depending on our senior secured net leverage ratio, payable quarterly based on the undrawn portion of the revolving line of credit. The commitment under the revolving line of credit expires on April 9, 2019.
With certain exceptions, the obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, including its investment in subsidiaries. The credit facility contains various restrictions and nonfinancial covenants, along with a senior secured net leverage ratio test. The nonfinancial covenants include restrictions on dividends, investments, dispositions, future borrowings and other specified payments, as well as additional reporting and disclosure requirements. As of March 31, 2015, we were in compliance with all of the loan covenants.
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On April 30, 2012, we entered into swap agreements that effectively fixed the interest payments on a portion of the then existing term loan at 2.033%, plus the applicable margin, beginning March 28, 2013. Under the swap agreements, which we had designated as cash flow hedges, we paid a fixed rate of interest of 2.033% and received a variable rate of interest equal to the greater of 1.50% or the 3-month LIBOR. The net amount paid or received was recorded as an adjustment to interest expense. As a result of the April 9, 2014 credit facility amendment, the swaps were no longer expected to be highly effective and no longer qualify for hedge accounting. The total fair value of the swap instruments as of April 9, 2014 of $1.6 million was recorded in other liabilities in the consolidated balance sheet. The corresponding net of tax loss of $1.0 million was recorded in accumulated other comprehensive income and is being amortized to interest expense on a straight-line basis through December 29, 2017, the remaining life of the swaps. Changes in the fair value of the swaps after April 9, 2014 through December 31, 2014, resulted in a loss $0.3 million recorded in other income and expense for the year ended December 31, 2014.
On June 2, 2015, Trans Union LLC, entered into Amendment No. 8 to our senior secured credit that (a) refinanced our existing $1,881.0 million aggregate principal amount senior secured term loan with a new senior secured term loan in the same amount with lower pricing and (b) included other amendments to our senior secured credit facility to permit Amendment No. 9 to be entered into substantially concurrently with, and conditioned upon, the closing of this offering that will, substantially concurrently with the closing of this offering, (i) refinance our existing $190.0 million senior secured revolving credit facility with a new senior secured revolving credit facility in an amount of $210.0 million, proceeds of which may be used for working capital and general corporate purposes and (ii) allow for the five-year New Term Loan Facility in an aggregate principal amount of $350.0 million, proceeds of which will be used to repay a portion of the Senior Notes and pay fees and expenses incurred in connection with the Credit Facility Refinancing.
11.375% Senior Notes
In connection with a transaction in 2010 in which our previous owners sold a controlling stake in us, on June 15, 2010, we issued $645.0 million principal amount of 11.375% Senior Notes due on June 15, 2018. As a result of the 2012 Change in Control Transaction, a purchase accounting fair value adjustment increase of $124.2 million was allocated to the 11.375% Senior Notes . These notes were repaid in full on May 9, 2014, from the incremental proceeds borrowed on our senior secured credit facility resulting in a net gain of $45.8 million.
9.625% Senior Notes
In connection with the acquisition of TransUnion Intermediate, on March 21, 2012, TransUnion issued $600.0 million principal amount of 9.625% Senior Notes, in a private placement to certain investors. Pursuant to an exchange offer completed in October 2012, these notes were registered with the SEC. TransUnion is required to pay interest on the 9.625% Senior Notes in cash unless certain conditions described in the indenture governing the notes are satisfied, in which case TransUnion will be entitled to pay interest for such period by increasing the principal amount of the notes or by issuing new notes (such increase being referred to as PIK, or paid-in-kind interest) to the extent described in the indenture.
The indenture governing the 9.625% Senior Notes contains nonfinancial covenants that include restrictions on our ability to pay dividends or distributions, repurchase equity, prepay junior debt, make certain investments, incur additional debt, issue certain stock, incur liens on property, merge, consolidate or sell certain assets, enter into transactions with affiliates, and allow to exist certain restrictions on the ability of subsidiaries to pay dividends or make other payments to TransUnion. As of March 31, 2015, we were in compliance with all covenants under the indenture.
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We intend to use proceeds from this offering, the New Term Loan Facility and borrowings under our new senior secured revolving credit facility to redeem all of our outstanding 9.265% Senior Notes.
8.125% Senior Notes
On November 1, 2012, TransUnion issued $400.0 million principal amount of 8.125% Senior Notes at an offering price of 99.5% in a private placement to certain investors. The proceeds were used to pay a $373.8 million dividend to our shareholders and to pay various costs associated with issuing the debt and obtaining consents from our existing debt holders. Pursuant to an exchange offer completed in August 2013, these notes were registered with the SEC. TransUnion is required to pay interest on the 8.125% Senior Notes in cash unless certain conditions described in the indenture governing the notes are satisfied, in which case TransUnion will be entitled to pay interest for such period by increasing the principal amount of the notes or by issuing new notes to the extent described in the indenture.
The indenture governing the 8.125% Senior Notes and the nonfinancial covenants are substantially identical to those governing the 9.625% Senior Notes. As of March 31, 2015, we were in compliance with all covenants under the indenture.
We intend to use proceeds from this offering, the New Term Loan Facility and borrowings under our new senior secured revolving credit facility to redeem all of our outstanding 8.125% Senior Notes.
Effect of certain debt covenants
A breach of any of the covenants under the agreements governing our debt could limit our ability to borrow funds under the Trans Union LLC senior secured revolving line of credit and could result in a default under the Trans Union LLC senior secured credit facility or the indentures governing the TransUnion senior unsecured PIK toggle notes. Upon the occurrence of an event of default under the Trans Union LLC senior secured credit facility or the indentures governing the TransUnion senior unsecured PIK toggle notes, the Trans Union LLC lenders, or the holders of the TransUnion senior unsecured PIK toggle notes, as the case may be, could elect to declare all amounts outstanding under the applicable indebtedness to be immediately due and payable, and the lenders could terminate all commitments to extend further credit under our senior secured credit facility. If we were unable to repay the amounts declared due, the lenders could proceed against any collateral granted to them to secure that indebtedness. We have pledged substantially all of the Trans Union LLC assets as collateral under the senior secured credit facility. If the lenders under the senior secured credit facility accelerate the repayment of borrowings, or the holders of the TransUnion senior unsecured PIK toggle notes accelerate repayment of the notes, we may not have sufficient assets to repay the debt due. See Risk Factors.
TransUnions ability to meet its liquidity needs or to pay dividends on its common stock depends on its subsidiaries earnings, the terms of their indebtedness, and other contractual restrictions. Trans Union LLC, the borrower under the senior secured credit facility, is not permitted to declare any dividend or make any other distribution, subject to certain exceptions including compliance with a fixed charge coverage ratio and a basket that depends on TransUnion Intermediates consolidated net income.
Our senior secured credit facility includes a senior secured net leverage ratio covenant which must be tested as a condition to incur additional indebtedness. The ratio must also be tested at the end of any fiscal quarter for which we have a line of credit borrowing outstanding in excess of 30% of the revolving credit commitment. As of March 31, 2015, this covenant, if it applied, would have required us to maintain a senior secured net leverage ratio on a pro forma basis equal to, or less than, 6.00-to-1. As of March 31, 2015, we were in compliance with our senior secured net leverage ratio covenant.
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Under the covenants of the instruments governing our senior debt, TransUnion Intermediate is restricted from making certain distribution payments to TransUnion.
For additional information about our debt, see our consolidated financial statements and the related notes included in this prospectus.
Contractual Obligations
Consolidated future minimum payments for noncancelable operating leases, purchase obligations and debt repayments as of December 31, 2014, are payable as follows:
Operating
leases |
Purchase
obligations |
Debt
repayments (1) |
Loan fees and
interest payments (1) |
Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
2015 |
$ | 12.8 | $ | 182.0 | $ | 74.0 | $ | 169.7 | $ | 438.5 | ||||||||||
2016 |
9.9 | 31.9 | 23.4 | 164.2 | 229.4 | |||||||||||||||
2017 |
7.0 | 11.1 | 19.4 | 170.7 | 208.2 | |||||||||||||||
2018 |
5.4 | 6.7 | 1,019.0 | 123.8 | 1,154.9 | |||||||||||||||
2019 |
5.0 | 1.1 | 19.0 | 83.9 | 109.0 | |||||||||||||||
Thereafter |
11.8 | 2.5 | 1,790.7 | 108.8 | 1,913.8 | |||||||||||||||
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Totals |
$ | 51.9 | $ | 235.3 | $ | 2,945.5 | $ | 821.1 | $ | 4,053.8 | ||||||||||
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(1) | We intend to use the net proceeds from this offering, the New Term Loan Facility and borrowings under our new senior secured revolving credit facility to redeem all of the outstanding 9.625% Senior Notes and all of the outstanding 8.125% Senior Notes at redemption prices equal to 100.0% and 102.031% of their face value, respectively, plus accrued and unpaid interest to, but not including, the redemption date. We estimate that this, together with the Credit Facility Refinancing, will reduce our annual interest expense by approximately $86 million. |
Purchase obligations to be repaid in 2015 include $106.5 million of trade accounts payable that were included in the consolidated balance sheet as of December 31, 2014. Purchase obligations include commitments for outsourcing services, royalties, data licenses, maintenance and other operating expenses. Loan fees and interest payments are estimates based on the interest rates in effect at December 31, 2014, and the contractual principal paydown schedule, excluding any excess cash flow prepayments that may be required. See our consolidated financial statements and the related notes included in this prospectus for additional information about our interest payments.
Off-Balance Sheet Arrangements
As of March 31, 2015, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
Application of Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with GAAP. The notes to our consolidated financial statements include disclosures about our significant accounting policies. These accounting policies require us to make certain judgments and estimates in reporting our operating results and our assets and liabilities. The following paragraphs describe the accounting policies that require significant judgment and estimates due to inherent uncertainty or complexity.
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Goodwill and Indefinite-Lived Intangibles
Due to the 2012 Change in Control Transaction, the value of goodwill increased significantly, as the excess of the purchase price paid for TransUnion Intermediate over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill and allocated to each of our reporting units.
As of December 31, 2014, our consolidated balance sheet included goodwill of $2,023.9 million. As of December 31, 2014, we had no other indefinite-lived intangible assets. We test goodwill and indefinite-lived intangible assets for impairment on an annual basis, in the fourth quarter, or on an interim basis if an indicator of impairment is present. For goodwill, we compare the fair value of each reporting unit to its carrying amount to determine if there is potential goodwill impairment. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value of its goodwill. For other indefinite-lived intangibles, if any, we compare the fair value of the asset to its carrying value to determine if there is an impairment. If the fair value of the asset is less than its carrying value, an impairment loss is recorded.
We use discounted cash flow techniques to determine the fair value of our reporting units, goodwill and other indefinite-lived intangibles. The discounted cash flow calculation requires a number of significant assumptions, including projections of future cash flows, exchange rates and an estimate of the appropriate discount rates. The projections of future cash flows used to assess the fair value of the reporting units are based on the internal operating plans reviewed by management and significant shareholders. The projections of future exchange rates were based on the current exchange rates at the time the projections were prepared. The estimated discount rates were based on the risk-free rate of interest and estimated risk premiums for the reporting units at the time the impairment analysis was prepared. We believe our current estimates of fair value are based on assumptions that are reasonable and consistent with assumptions that would be used by other marketplace participants. Such estimates are, however, inherently uncertain, and estimates using different assumptions could result in significantly different results, and a potential impairment charge for one or more of our reporting units that could adversely affect our results of operations.
During 2014, 2013 and 2012, there were no impairments of goodwill or other indefinite-lived intangible assets. As of December 31, 2014, our estimates of fair value for each reporting unit exceeded the carrying amount of the corresponding reporting unit. The estimated fair value of our Latin America reporting unit exceeded its carrying amount by 5%. A 10% increase in the discount rate or a 10% decrease in the estimated cash flows of the reporting unit could not have resulted in an impairment in any reporting unit other than the Latin America reporting unit.
Long-Lived Depreciable and Amortizable Assets
In connection with the 2012 Change in Control Transaction, all long-lived depreciable and amortizable assets were recorded at fair value and the carrying value of certain fixed assets and all intangible assets increased significantly.
As of December 31, 2014, our consolidated balance sheet included fixed assets of $304.8 million, $181.4 million net of accumulated depreciation, and long-lived intangible assets of $2,347.4 million, $1,939.6 million net of accumulated amortization. We review long-lived assets subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized equal to the amount by which the carrying amount of
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the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the consolidated balance sheet, and reported at the lower of the carrying amount or fair value, less costs to sell, and are no longer depreciated. When a long-lived asset group is tested for recoverability, we also review depreciation estimates and methods. Any revision to the remaining useful life of a long-lived asset resulting from that review is also considered in developing estimates of future cash flows used to test the asset for recoverability. We typically use a discounted cash flow model when assessing the fair value of our asset groups. The discounted cash flow calculation requires a number of significant assumptions, including projections of future cash flows and an estimate of our discount rate.
When events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, we use estimates of future cash flows to determine recoverability and base such estimates on assumptions that are reasonable and consistent with assumptions that would be used by other marketplace participants. Such estimates, however, are inherently uncertain and estimates using different assumptions, or different valuation techniques, could result in significantly different results. During 2014, 2013 and 2012, there were no material impairment charges.
Legal Contingencies
As of December 31, 2014, our consolidated balance sheet included an accrual of $17.8 million for pending or anticipated claims of our operations. In the ordinary course of business, we are involved in various legal proceedings relating to our current or past business operations. In the ordinary course of business, we are also subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both form and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. We regularly review all litigation and regulatory matters to determine whether a loss is probable and, if probable, can be reasonably estimated. If a loss is probable and can be reasonably estimated, an appropriate reserve is accrued and included in other current liabilities. We make a number of significant judgments and estimates related to these contingencies, including the likelihood that a liability has been incurred, and an estimate of that liability. See our consolidated financial statements and the related notes included in this prospectus for additional information about our legal contingencies.
We believe the judgments and estimates used are reasonable, but events may arise that were not anticipated and the outcome of a contingency may differ significantly from what is expected.
Income Taxes
As of December 31, 2014, TransUnions consolidated balance sheet included current deferred tax assets of $51.2 million, noncurrent deferred tax liabilities of $676.8 million and unrecognized tax benefits of $0.3 million. Certain deferred tax assets (including net operating loss carryforwards) may be deducted from taxable income in computing our federal income tax liability. If, in the future, we undergo an ownership change as described in Section 382(g) of the United States Internal Revenue Code, our ability to recover such deferred tax assets may be limited. Additionally, we are required to record current and deferred tax expense, deferred tax assets and liabilities resulting from temporary differences, and unrecognized tax benefits for uncertain tax positions. We make certain judgments and estimates to determine the amounts recorded, including future tax rates, future taxable income, whether it is more likely than not a tax position will be sustained, and the amount of the unrecognized tax benefit to record.
We believe the judgments and estimates used are reasonable, but events may arise that were not anticipated and the outcome of tax audits may differ significantly from what is expected.
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Stock-Based Compensation
For the year ended December 31, 2014, we recorded $10.6 million of stock-based compensation expense. For the year ended December 31, 2013, we recorded $6.9 million of stock-based compensation expense. For the year ended December 31, 2012, we recorded $93.0 million of stock-based compensation expense, including $88.0 million in connection with the 2012 Change in Control Transaction. The fair value of each award was determined by various methods including independent valuations of our common stock based on discounted cash flow and selected comparable public company analysis, the Black-Scholes valuation model, and risk-neutral Monte Carlo valuation models. The various valuation models required management to make a number of significant assumptions, including the fair value of our stock, projections of future cash flows and an estimate of our cost of capital, volatility rates, expected life of awards and risk-free interest rates. We believe the determination of fair value was based on assumptions and estimates that are reasonable and consistent with what would be used by other marketplace participants to determine fair value. Valuations, however, are inherently uncertain and valuations using different assumptions and estimates, or different valuation techniques, could result in significantly different values. See our consolidated financial statements and the related notes included in this prospectus.
Recent Accounting Pronouncements
For information about recent accounting pronouncements and the potential impact on our consolidated financial statements, see the related notes to our consolidated financial statements included in this prospectus.
Quantitative And Qualitative Disclosures About Market Risk
In the normal course of business we are exposed to market risk, primarily from changes in variable interest rates and foreign currency exchange rates, which could impact our results of operations and financial position. We manage the exposure to this market risk through our regular operating and financing activities. We may use derivative financial instruments, such as foreign currency and interest rate hedges, but only as a risk management tool and not for speculative or trading purposes.
Interest Rate Risk
Our senior secured credit facility consists of a seven-year senior secured term loan (term loan) and a $190.0 million senior secured revolving line of credit (revolving line of credit). Interest rates on these borrowings are based, at Trans Union LLCs election, on LIBOR or an alternate base rate, subject to a floor, plus an applicable margin based on the senior secured net leverage ratio. As of December 31, 2014, 65.7% of TransUnions outstanding debt was variable-rate debt. As of December 31, 2014, our variable-rate debt had a weighted-average interest rate of 3.99% and a weighted-average life of 6.20 years. For all of 2014, the variable rate on our senior secured term loan was below the floor, and a 10% change in the interest rate on that loan would not have changed our interest expense. During 2014, during the time the revolving line of credit had an outstanding balance, the variable rate was below the floor, and a 10% change in the interest rate on that loan would not have changed our interest expense.
On April 30, 2012, we entered into swap agreements that effectively fixed the interest payments on a portion of the term loan at 2.033%, plus the applicable margin, beginning March 28, 2013. Under the swap agreements, which we have designated as cash flow hedges, we pay a fixed rate of interest and receive a variable rate of interest equal to the greater of 1.50% or the 3-month LIBOR. The net amount to be paid or received has been and will continue to be recorded as an adjustment to interest expense. As a
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result of the April 9, 2014 credit facility amendment, the swaps were no longer expected to be highly effective and no longer qualify for hedge accounting. The total fair value of the swap instruments as of April 9, 2014 of $1.6 million was recorded in other liabilities in the consolidated balance sheet. The corresponding net of tax loss of $1.0 million was recorded in accumulated other comprehensive income and is being amortized to interest expense on a straight-line basis through December 29, 2017, the remaining life of the swaps. Changes in the fair value of the swaps after April 9, 2014, resulted in a loss of $0.3 million recorded in other income and expense for the year ended December 31, 2014.
The total notional amount of the swaps at December 31, 2014, was $412.5 million and is scheduled to decrease as scheduled principal payments are made on the term loan. The cash flows on the hedge instrument began on June 28, 2013, and we do not expect to elect a non-LIBOR loan or to pay down our term loan below the notional amount of the swaps in the next 12 months.
Based on the amount of outstanding variable-rate debt, we have a material exposure to interest rate risk. In the future our exposure to interest rate risk may change due to changes in the amount borrowed, changes in interest rates, or changes in the amount we have hedged. The amount of our outstanding debt, and the ratio of fixed-rate debt to variable-rate debt, can be expected to vary as a result of future business requirements, market conditions or other factors.
See Liquidity and Capital ResourcesDebtSenior Secured Credit Facility for additional information about interest rates on our debt.
Foreign Currency Exchange Rate Risk
A substantial majority of our revenue, expense and capital expenditure activities are transacted in U.S. dollars. However, we transact business in a number of foreign currencies, including the South African rand, Canadian dollar, Indian rupee and Brazilian real. We have minimal euro-based transactions. In reporting the results of our foreign operations, we benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to the foreign currencies.
We are required to translate the assets and liabilities of our foreign subsidiaries that are measured in foreign currencies at the applicable period-end exchange rate in our consolidated balance sheets. We are required to translate revenue and expenses at the average exchange rates prevailing during the year in our consolidated statements of income. The resulting translation adjustment is included in other comprehensive income, as a component of stockholders equity. We include transactional foreign currency gains and losses in other income and expense in our consolidated statements of income.
In 2014, revenue from foreign operations was $255.5 million, and foreign operating income was $22.2 million. A 10% change in the value of the U.S. dollar relative to a basket of the currencies for all foreign countries in which we had operations during 2014 would have changed our revenue by $25.6 million and our operating income by $2.2 million.
A 10% change in the value of the U.S. dollar relative to a basket of currencies for all foreign countries in which we had operations would not have had a significant impact on our 2014 realized foreign currency transaction gains and losses.
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Overview
TransUnion is a leading global risk and information solutions provider to businesses and consumers. We provide consumer reports, risk scores, analytical services and decisioning capabilities to businesses. Businesses embed our solutions into their process workflows to acquire new customers, assess consumer ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud. Consumers use our solutions to view their credit profiles and access analytical tools that help them understand and manage their personal information and take precautions against identity theft. We are differentiated by our comprehensive and unique datasets, our next-generation technology and our analytics and decisioning capabilities, which enable us to deliver insights across the entire consumer lifecycle. We believe we are the largest provider of risk and information solutions in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data, which allows us to better predict behaviors, assess risk and address a broader set of business issues for our customers. We have deep domain expertise across a number of attractive industries, sometimes referred to as verticals, including financial services, insurance and healthcare. We have a global presence in over 30 countries across North America, Africa, Latin America and Asia.
Our addressable market includes the big data and analytics market, which continues to grow as companies around the world recognize the benefits of building an analytical enterprise where decisions are made based on data and insights, and as consumers recognize the importance that data and analytics play in their ability to procure goods and services and protect their identities. IDC estimates worldwide spending on big data and analytics services to be approximately $52 billion in 2014, growing at a projected compounded annual growth rate (CAGR) of approximately 15% from 2014 through 2018. There are several underlying trends supporting this market growth, including the creation of large amounts of data, advances in technology and analytics that enable data to be processed more quickly and efficiently to provide business insights, and growing demand for these business insights across industries and geographies. Leveraging our 47-year operating history and our established position as a leading provider of risk and information solutions, we have evolved our business by investing in a number of strategic initiatives, such as transitioning to the latest big data and analytics technologies, expanding the breadth and depth of our data, strengthening our analytics capabilities and enhancing our business processes. As a result, we believe we are well positioned to expand our share within the markets we currently serve and capitalize on the larger big data and analytics opportunity.
We believe that we have the capabilities and assets, including comprehensive and unique datasets, advanced technology and analytics to provide differentiated solutions to our customers. We have over 30 petabytes of data, growing at an average rate of over 25% each year since 2010, representing over one billion consumers globally. We obtain financial, credit, alternative credit, identity, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information from an average of 90,000 data sources, including financial institutions, private databases and public records repositories. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. Our next-generation technology allows us to quickly and efficiently integrate our data with our analytics and decisioning capabilities to create and deliver innovative solutions to our customers and to quickly adapt to changing customer needs. Our deep analytics expertise, which includes our people as well as tools such as predictive modeling and scoring, customer segmentation, benchmarking and forecasting, enables businesses and consumers to gain better insights into their risk and financial data. Our decisioning capabilities, which are generally delivered on a software-as-a-service platform, allow businesses to interpret data and apply their specific qualifying criteria to make decisions and take actions. Collectively, our data, analytics and decisioning capabilities allow businesses to authenticate the identity of consumers, effectively determine the most relevant products for consumers, retain and cross-sell to existing consumers, identify and acquire new consumers and
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reduce loss from fraud. Similarly, our capabilities allow consumers to see how their credit profiles have changed over time, understand the impact of financial decisions on their credit scores and manage their personal information as well as to take precautions against identity theft.
We leverage our differentiated capabilities in order to serve a broad set of customers across multiple geographies and industry verticals. We have a global customer base of over 65,000 businesses and 35 million consumers. We offer our solutions to business customers in financial services, insurance, healthcare and other industries. Our customer base includes many of the largest companies in each of the primary industries we serve. For example, in the United States, we contract with nine of the ten largest banks, all of the top five credit card issuers, all of the top twenty-five auto lenders, fourteen of the fifteen auto insurance carriers, thousands of healthcare providers and federal, state and local government agencies. We have been successful in leveraging our brand, our expertise and our solutions in our global operations and have a leading presence in several high-growth international markets, including India, Hong Kong and Africa.
We believe we have an attractive business model that has highly recurring and diversified revenue streams, low capital requirements, significant operating leverage and strong and stable cash flows. The proprietary and embedded nature of our solutions and the integral role that we play in our customers decision-making processes have historically translated into high customer retention and revenue visibility. For example, our top ten financial institution customers have an average tenure of over ten years. We continue to demonstrate organic growth by further penetrating existing customers, innovating new solutions and gaining new customers. We have a diversified portfolio of businesses across our segments, reducing our exposure to cyclical trends in any particular industry or geography. We operate primarily on a contributory data model in which we typically obtain updated information at little or no cost and own most of our data. We augment this data with a growing set of public record and alternative data as we develop new solutions and expand into new industries and geographies. We also directly manage and control our technology, which provides us with an efficient cost structure and allows us to benefit from economies of scale. Additionally, our technology investments enable us to grow and expand our business with low incremental cost, providing significant operating leverage.
Our total revenues increased from $1,183.2 million for the year ended December 31, 2013 to $1,304.7 million for the year ended December 31, 2014, representing year-over-year growth of 10.3%. Our net losses attributable to the Company decreased from $17.3 million for the year ended December 31, 2013 to $12.5 million for the year ended December 31, 2014. Our Adjusted EBITDA increased from $408.5 million for the year ended December 31, 2013 to $454.3 million for the year ended December 31, 2014, representing year-over-year growth of 11.2%. Our total revenues increased from $303.4 million for the three months ended March 31, 2014 to $353.1 million for the three months ended March 31, 2015, representing year-over-year growth of 16.4% for the period. Our net losses attributable to the Company decreased from $14.7 million for the three months ended March 31, 2014 to $6.6 million for the three months ended March 31, 2015. Our Adjusted EBITDA increased from $95.4 million for the three months ended March 31, 2014 to $114.9 million for the three months ended March 31, 2015, representing year-over-year growth of 20.3% for the period. As of March 31, 2015, we had approximately $2,976.4 million of total indebtedness.
Our Evolution
Our business has a 47-year operating history and a long track record of providing risk and information solutions to businesses and consumers while continuing to innovate to meet their changing needs. Since our founding as a provider of regional credit reporting services, we have built a comprehensive database of U.S. consumers, which created a unique and highly valuable base to build solutions that span many industry verticals and customer processes. From this base, we expanded our
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operations by targeting new customers, industry verticals and geographies and also entering into the consumer space. We have strengthened our analytics and decisioning capabilities and acquired complementary datasets enabling us to enhance our solutions, diversify our revenue base and expand into high-growth verticals, such as healthcare and insurance. We have grown our global presence to over 30 countries, creating credit reporting agencies in new geographies and establishing strong international footholds from which we could expand into other emerging markets. We also expanded the reach of our consumer solutions by partnering with other market leaders and innovators.
As part of our continued evolution, we have invested in a number of strategic initiatives that we believe will allow us to cater to the growing demand for data and analytics, provide differentiated solutions and better serve our customers. These initiatives include:
| Investing in our Technology: Technology is at the core of the solutions we provide to our customers. We have made significant investments since 2012 to modernize our infrastructure and to transition to the latest big data and analytics technologies which enable us to be quicker, more efficient and more cost-effective. Our next-generation technology enhances our ability to organize and handle high volumes of disparate data, improves delivery speeds, provides better availability and strengthens product development capabilities, while lowering our overall cost structure and allowing us to maintain our focus on information security. Our investment strategy has been to build capabilities and leverage them across multiple geographies and industry verticals. |
| Expanding our Data: We have continued to invest in the breadth and depth of our data. We introduced the concept of trended data to provide the trajectory of a consumers risk profile, used public records data to enhance the scope of business issues we can address and incorporated alternative data into our databases to better assess risk for banked and unbanked consumers. We believe we are the only provider of scale in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data. All of these initiatives improve the quality of our data, provide deeper insights into risk and allow us to create differentiated solutions for our customers. |
| Strengthening our Analytics Capabilities: We have strengthened our analytics capabilities by leveraging our next-generation technology and expanded data, utilizing more advanced tools and growing our analytics team. This has allowed us to create solutions that produce greater insights and more predictive results, which help our customers make better decisions. In addition, our strengthened analytics capabilities have shortened our time-to-market to create and deliver these solutions to our customers. |
| Broadening our Target Markets: We have grown our target markets by establishing a presence in attractive high-growth international markets such as India and the Philippines, entering new verticals such as government and investigative services in the United States and expanding the reach of our consumer offerings by partnering with traditional and emerging providers in new verticals. Our capabilities enable us to develop scalable products that we are able to deploy across new markets and verticals. |
| Enhancing our Business Processes and Capabilities: We have enhanced our business processes and capabilities to support our growth. We have hired additional industry experts, which has allowed us to create and sell new vertical-specific solutions that address our customers needs. Our global sales force effectiveness program reallocates our sales resources more effectively and increases our sales teams coverage of customers across our target markets. In conjunction with our other initiatives, we have also recently refreshed our company brand to reinforce our global position as a trusted, consumer-friendly company. |
We believe that our ongoing focus on evolving with the market and with our customers needs ensures continued improvement in our overall services to businesses and consumers. Leveraging our
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trusted brand, global scale and strong market position in the verticals we serve will allow us to capitalize on business opportunities worldwide and contribute to our long-term growth.
Our Market Opportunity
We believe there is a long-term trend of businesses and consumers using data and analytics to make more informed decisions and manage risk more effectively, resulting in a large and rapidly growing market. According to a September 2014 report from IDC, spending on business analytics services worldwide is projected to reach approximately $52 billion in 2014 and is projected to grow at a CAGR of approximately 15% from 2014 through 2018.
(1) | Numbers have been rounded |
Source: IDC Worldwide Business Analytics Services 2014-2018 Forecast, September 2014
We believe there are several key trends in the global macroeconomic environment affecting the geographies and industry verticals we serve that will create increasing demand for our solutions:
| Rapid Growth in Data Creation and Application: Larger and more diversified datasets are now assembled faster while the breadth of analytical applications and solutions has expanded. Companies are increasingly relying on business analytics and big data technologies to help process this data in a cost-efficient manner. In addition, non-traditional sources of structured and unstructured data have become important in deriving alternative metrics. The proliferation of smartphones and other mobile devices also generates enormous amounts of data tied to consumers, activities and locations. We believe that the demand for targeted data and sophisticated analytical solutions will continue to grow meaningfully as businesses seek real-time access to more granular views of consumer populations and more holistic views on individual consumers. |
| Advances in Technology and Analytics Unlocking the Value of Data: Ongoing advances in data collection, storage and analytics technology have contributed to the greater use and value of data and analytics in decision making. As businesses have gained the ability to rapidly aggregate and analyze data, they increasingly expect access to real-time data and analytics from their information providers as well as solutions that fully integrate into their workflows. We believe this has made sophisticated technology critical for gaining and retaining business in the risk and information services industry. |
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| Greater Adoption of Big Data Solutions across New and Existing Verticals: With the proliferation of data, we believe companies across new and existing verticals recognize the value of risk information and analytical tools, particularly when tailored to their specific needs. |
| Financial Services Industry: The combination of increased regulatory capital, additional compliance costs and the overhang of legacy assets is pushing large segments of small-to-medium-sized business and consumer lending out of the banking sector, and resulting in the creation of new specialty finance companies, such as peer-to-peer lending platforms and online balance sheet lenders, which are actively filling the void. These technology-enabled lending platforms provide access to credit in a fast and efficient manner by utilizing sophisticated risk assessment tools that leverage data, such as behavioral data, transactional data and employment and credit information. At the same time, traditional financial services companies are also increasing the use of applications and data in order to address regulatory requirements, lower operating costs and better serve their customers. |
| Insurance Industry: As consumers increasingly obtain quotes from multiple insurers in an effort to lower their costs, insurers are trying to improve the accuracy of their risk assessments and initial quotes. For example, insurance carriers are using driver violation data to uncover offenses that will impact pricing earlier in the quoting process so consumers have a more accurate view of the premiums they will be charged. |
| Healthcare Industry: Greater patient financial responsibility, focus on cost management and regulatory supervision are driving healthcare providers to use data and related analytics tools to better manage their revenue cycle. For example, to reduce collection risks, healthcare providers seek information about their patients insurance coverage and ability to pay at the time of registration. In addition, insurance discovery tools are being utilized to optimize accounts receivable management, maximize collections and minimize uncompensated care |
| Increasing Lending Activity in Emerging International Markets: As economies in emerging markets continue to develop and mature, we believe there will continue to be favorable socio-economic trends, such as an increase in the size of the middle class and a significant increase in the use of financial services by under-served and under-banked consumers. In addition, credit penetration is relatively low in emerging markets when compared to developed markets. For example, using our database of information compiled from financial institutions as a benchmark of credit activity, we estimate that less than 15% of the adult population in India is currently credit active. Furthermore, the widespread adoption and use of mobile phones in emerging markets have enabled greater levels of financial inclusion and access to banking and credit. We expect the populations in emerging markets to continue to become more credit active, resulting in increased demand for our services. |
| Increased Management and Monitoring of Personal Financial Information and Identity Protection by Consumers: Demand for consumer solutions is rising with higher consumer awareness of the importance and usage of their credit information, increased risk of identity theft due to data breaches and more readily available free credit information. The annual growth in the number of consumers subscribing to a credit monitoring or identity protection service has been almost 20% over the last several years. In addition, the proliferation of mobile devices has made data much more accessible, enabling consumers to manage their finances and monitor their information in real-time. We believe these trends will continue to fuel growth for our consumer business. |
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Heightened Risk Environment and Compliance Requirements for Businesses: The increasing number and complexity of regulations, including new capital requirements and the Dodd-Frank Wall Street Reform and Consumer Protection Act, make operations for businesses more challenging. The granularity of information required and the frequency and timeliness of |
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data to fulfill compliance requirements have also increased significantly, placing an additional burden on companies reporting systems. Further, there is a heightened focus on reducing fraud and losses and protecting consumer privacy, particularly given the increasing threat of cybercriminals. |
Our Competitive Strengths
Comprehensive and Unique Datasets
Our long operating history and leadership in the industry have allowed us to build comprehensive and unique data assets that would be difficult for a new market entrant to replicate. We have over 30 petabytes of data, growing at an average rate of over 25% each year since 2010, representing over one billion consumers globally. We obtain financial, credit, alternative credit, identity, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information from an average of 90,000 data sources, including financial institutions, private databases and public records repositories. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. We keep our data current by processing approximately 3.6 billion updates each month, and we continue to identify opportunities to acquire additional data. We believe that our data is unique and differentiates us from our competitors. We own several proprietary datasets such as consumer credit information, driver violation history, healthcare eligibility information, business data and rental payment history. Internationally, our data assets also encompass alternative data, such as the voter registry in India with over 750 million records and the vehicle information database in South Africa with over 18 million vehicle records. We have also acquired public record datasets, which are time consuming and difficult for others to obtain and associate with the correct person. We believe we are the only provider of scale in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data, which allows us to better predict behaviors, assess risk and address a broader set of business issues for our customers.
Next-generation Technology
Our transformation to next-generation technology allows us to continually improve our overall services to businesses and consumers and ensures that we are well positioned to differentiate our datasets and capabilities. We believe that our strategic initiative to build next-generation technology capabilities has resulted in increased throughput, improved data matching, greater efficiency, advanced platform flexibility and lower operating costs.
| Powerful Big Data Capabilities: Our technology gives us the ability to process, organize and analyze high volumes of data across multiple operating systems, databases and file types as well as to deal with both structured and unstructured data that changes frequently. We process billions of transactions and trillions of data transformations on a daily basis. |
| Enhanced Linking and Matching: Because our data matching technology is able to interrelate data across disparate sources, industries and time periods, we believe that we are able to create differentiated datasets and provide our customers with comprehensive insights that allow them to better evaluate risk. For example, our TLOxp solution leverages these data matching capabilities across various datasets to identify and investigate relationships among people, assets, locations and businesses, allowing us to offer enhanced due diligence, threat assessment, identity authentication and fraud prevention and detection solutions. |
| Greater Efficiency: From ingestion of data to distribution of analytics and insights, our next-generation technology enables a faster time to market. For example, a portion of our platform now allows for data profiling, cleansing and ingestion of data at least ten times faster and can be done in a self-service approach by non-IT power users, allowing us to significantly reduce overall production times for new products. |
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| Advanced Platform Flexibility: Our technology offers a high degree of flexibility, speed and customization of our solutions, via capabilities like graphical development and business rules environments, and allows easy integration with our customers workflows. We manage and control our technology instead of outsourcing it, which provides us with the flexibility to prioritize changes and to quickly implement any updates to our applications and solutions. |
| Lower Operating Costs: Our technology investments have lowered our overall cost to maintain and develop our systems, allowing us to redeploy significantly more resources to support revenue generating initiatives, such as vertical expansion and new product development. |
Sophisticated and Flexible Analytics and Decisioning Capabilities
We have developed sophisticated and flexible analytics and decisioning capabilities by investing in technology, tools and people. Our technology allows us to quickly build sophisticated analytics and decisioning functionality that caters to our customers evolving needs. Our analysts leverage our next-generation technology and data matching capabilities to gain real-time access to our entire dataset across different data sources and run analyses across this data while remaining compliant with permitted data use. Our analysts are typically able to create data samples for model development, model validations and custom analyses in less than one day using self-serve data access. Our analysts are equipped with a diverse modeling and analytical toolkit, such as visualization and machine learning, which allows them to quickly build and deploy these capabilities. For example, our team was able to build a new loan consolidation model in our CreditVision solution in less than one day using our advanced tools, instead of a typical development time of four to five weeks with legacy tools and technology. We have an experienced analytics team with substantial industry experience, complemented by a deep knowledge of consumer credit data. Our team is highly qualified with advanced degrees or doctorates in statistics, math, finance or engineering, and is instrumental in understanding customer requirements, sourcing raw data and turning that data into solutions that provide insights and decisions to solve our customers problems.
Innovative and Differentiated Solutions
We consistently focus on innovation to develop new and enhanced solutions that meet the evolving needs of our customers. We believe our specialized data, analytics and decisioning services and collaborative approach with our customers differentiate us from our competitors. Our solutions are often scalable across different customers, geographies and verticals. Recent examples of our innovative and differentiated solutions include:
| AdSurety : AdSurety is a digital marketing solution that allows our customers to identify an audience across a network of 135 million U.S. consumers, display personalized messages to that audience and measure the effect. The network leverages our offline-to-online matching technology, which increases reach with greater targeting certainty. |
| CreditView : CreditView is a first-to-market interactive dashboard that provides consumers with credit education and information in a comprehensive, user-friendly format. Consumers are able to easily see how their credit profiles have changed over time as well as simulate the impact of financial decisions on their credit score. |
| CreditVision : We continue to enhance our credit data by including new data fields, enriching values in existing data fields and expanding account history. Our enhanced credit data has been combined with hundreds of algorithms to produce CreditVision , a market-leading solution that provides greater granularity and evaluates consumer behavior patterns over time. This results in a more predictive view of the consumer, increases the total population of consumers who can effectively be scored and helps consumers gain improved pricing. |
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| DecisionEdge : DecisionEdge is a software-as-a-service decisioning offering which allows businesses to identify and authenticate customers, interpret data and predictive model results, and apply customer-specific criteria to facilitate real-time, automated decisions at the point of consumer interaction. |
| Insurance Coverage Discovery : For our healthcare customers, we offer the Insurance Coverage Discovery solution, which enables the discovery of previously unidentified health insurance coverage to help our customers recover uncompensated care costs. Our proprietary technology identifies patient accounts covered by Medicaid, Supplemental Security Income, Medicare and TRICARE as well as commercial insurance benefits at the time of service and monitors an account for up to three years for retroactive eligibility that providers may have missed. |
| SmartMove : SmartMove allows independent landlords to screen applicants on a real-time basis by pushing the screening information of the individual renter to the landlord, based on the consent of the renter. The solution is delivered through our mobile channel and through our partners and provides independent landlords with convenient access to the same quality information provided to large property management firms. |
| TLOxp : TLOxp leverages our data matching capabilities across thousands of data sources to identify and investigate relationships among specific people, assets, locations and businesses. This allows us to offer enhanced due diligence, threat assessment, identity authentication and fraud prevention and detection solutions and to expand our solutions into new verticals such as government and law enforcement. |
Deep and Specialized Industry Expertise
We have deep expertise in a number of attractive industry verticals including financial services, insurance and healthcare. Our expertise has allowed us to develop sophisticated vertical-specific solutions within these targeted industries that play an integral role in our customers decision-making processes and are often embedded into their workflows. Our team includes industry experts with significant experience in the verticals that we target and relationships with leading companies in those verticals. We also possess regulatory compliance expertise across the industries that we serve. Together, this provides us with a comprehensive understanding of business trends and insights for customers in these verticals, allowing us to build solutions that cater to these customers specific requirements. We have been able to apply our industry knowledge, data assets, technology and analytics capabilities to develop new solutions and revenue opportunities within key verticals. For example, in financial services, our differentiated position allowed us to anticipate the increased demand for alternative consumer lending providers such as peer-to-peer lending platforms, and we created solutions that catered to these emerging providers. In insurance, we partnered with a vehicle history data provider to launch a vehicle history score that helps insurance carriers further segment risk based on the attributes of a specific automobile. In healthcare, we developed a solution that allows healthcare providers to search for additional health insurance coverage and recover additional uncompensated care costs, lowering their overall cost of operation.
Leading Presence in Attractive International Markets
We have been operating internationally for over 30 years and have strong global brand recognition. We have strategically targeted attractive markets in both developed and emerging economies and have a diversified global presence in over 30 countries and a leading presence in several attractive international markets across North America, Africa, Latin America and Asia. We have local, senior management in many of our international markets, and we believe this provides us with deeper insights into these markets and stronger relationships with our customers. We have leveraged our brand, operating history, global footprint and technology infrastructure to establish new credit
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bureaus in several international markets, such as Canada in 1989, India in 2001 and the Philippines in 2011. Once established, our model is to expand the services we offer within these markets and then move into adjacent emerging markets. For example, we have used our operations in Hong Kong to expand into other ASEAN countries, and we have used our operations in South Africa to expand into neighboring African countries. In addition, we have been able to leverage our technology and experience from our U.S. operations to develop and grow our international operations. For example, we have expanded our CreditVision product into Canada and Hong Kong, expanded our interactive business in Hong Kong and South Africa and implemented DecisionEdge across more than 600 active solutions in over 10 countries.
Proven and Experienced Management Team
Our senior management team has a track record of strong performance and significant expertise in the markets we serve, with an average of over twenty years of industry experience. We continue to attract and retain experienced management talent for our businesses. Our team has deep knowledge of the data and analytics sector and expertise across the various industries that we serve. Our team has overseen our expansion into new industries and geographies while managing ongoing strategic initiatives, including our significant technology investments. As a result of the sustained focus of our management team, we have been successful in consistently driving growth, both organically and through acquiring and integrating businesses.
Our Growth Strategy
Enhance Underlying Data, Technology and Analytics Capabilities to Develop Innovative Solutions
As the demand for big data and analytics solutions grows across industries and geographies, we will continue to expand the scope of our underlying data, improve our tools and technology and enhance our analytics and decisioning capabilities to provide innovative solutions that address this demand. As the needs of businesses and consumers evolve, we plan to continue to help them meet their challenges, which our recent investments in data, technology and analytics enable us to do more quickly and efficiently. For example, we enhanced our solutions with incremental data such as rental trade lines, additional contact data and auto asset data in order to address a broader set of customer requirements. Our recent technology investments have also reduced the time to market for new solutions, in certain instances from several weeks to a few days, which allow us to react quickly to customer requirements. We also intend to continue to take advantage of strategic partnerships to develop innovative services that differentiate us from our competitors.
Further Penetrate Existing Industry Verticals with Current and New Solutions
We are a leading provider of risk and information solutions in several industry verticals today, including financial services, insurance and healthcare. We believe there is significant opportunity for further growth within these industries by expanding the number of customers to whom we sell our current solutions as well as by creating innovative new solutions that we can use to grow our presence in these industries. We focus on developing new solutions that address evolving customer needs within our industry verticals. For example, in the financial services vertical, we developed CreditVision , which provides customers with a time-based risk trend and increases the total eligible population of consumers. Similarly, in the insurance vertical, we introduced the DriverRisk solution that integrates with the Drivers History violation database to cost effectively identify drivers with ratable violations, resulting in unique insights into driver risk and reduced costs and higher returns for insurance carriers. In order to more effectively address these opportunities, we have redeployed and reallocated our sales resources to focus either on new customer opportunities or on selling additional services and solutions to existing customers. With our leading market positions, existing strong relationships in financial
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services, insurance and healthcare verticals and with our consumer partners, we believe we have the opportunity to further penetrate our existing customer base and capture a greater proportion of their spending across the consumer lifecycle.
Establish Positions in New, Adjacent Industry Verticals
In addition to increasing penetration in industries where we have a substantial presence, we also intend to create solutions that address customer needs in attractive new industries. Our strategy is to develop new solutions for a specific application, industry vertical or geography and then deploy them to other markets where they may be applicable. We believe that our capabilities allow us to quickly create and deliver solutions to new industries and geographies where information-based analytics and decisioning capabilities are currently underutilized. For example, our strong position in financial services and insurance verticals has allowed us to establish a presence in the healthcare vertical to capitalize on the increasing demand for data and analytics solutions. We have created innovative solutions that automate the insurance and payment processes at the beginning of the revenue cycle, help payers analyze claims-related data, facilitate performance reporting and help patients make informed decisions. Similarly, we are targeting other verticals such as government, rental screening and investigative services, where we see an opportunity to leverage our existing data, analytics and decisioning capabilities.
Expand our Presence in Attractive International Markets
We believe international markets present a significant opportunity for growth, as these economies continue to develop and their populations become more credit active. We have significant scale in some of the worlds fastest growing markets, which positions us well to take advantage of the favorable dynamics in these regions. We leverage solutions developed in the United States and deploy them to international markets, after localizing them to individual market requirements. For example, after launching CreditVision in the United States, we expanded our offerings with a similar solution in Canada and Hong Kong. In markets where we have established a presence in a particular vertical, we will expand further into adjacent verticals, such as insurance and consumer solutions. We intend to expand into new geographic markets by forming alliances with financial services institutions, industry associations and other local partners, and by pursuing strategic acquisitions. Across all our international expansion initiatives, we will continue to leverage our next-generation technology to drive speed to market, scale and differentiation.
Continue to Broaden Reach in Consumer Market through Direct and Indirect Channels
Growth in our consumer business has outpaced the market. We expect this trend to continue, due to a rising consumer appetite for information and increasing demand for our solutions from existing and new partners. We currently serve over 35 million consumers in the United States directly and through indirect channels. We recognized that more consumers could be reached through multiple channels and business models. Therefore, our strategy is to enable partners by providing them with data and analytics to support their services. Our growth plans focus both on increasing our own member base as well as expanding our reach through partnerships. For our direct consumers, we continually develop new products, features and services. We will also continue to improve the consumer experience with more user-friendly interfaces, better customer service, and education. For partners, we will leverage our flexible model, technology and innovative solutions to grow with new and existing customers and enter new industry verticals. We believe that partnerships not only enable us to build our own business quickly and effectively, but they also expand the market and provide us access to new consumer segments.
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Pursue Strategic Acquisitions
We will continue to pursue acquisitions to accelerate growth within our existing businesses and diversify into new businesses. We are focused primarily on opportunities that are strategic to us, including opportunities that expand our geographic footprint, increase the breadth and depth of our datasets, enhance our services, provide us with industry expertise in our key verticals or deepen our presence in our international markets. For example, we expanded into new countries such as Brazil and Chile and enhanced our domestic healthcare offerings through various acquisitions. Other recent examples include our December 2013 acquisition of TLOs assets, providing data solutions leveraging proprietary public records data for identity authentication, fraud prevention and debt recovery, our November 2014 acquisition of DHI, a provider of traffic violations and criminal court data, and our October 2014 acquisition of L2C, an innovator in predictive analytics using alternative data that is able to provide risk perspectives on non-traditional and non-credit active consumers. From time to time, we may also seek to increase our investments in foreign entities in which we hold a minority interest, as we did with CIBIL in India in 2014. We have a strong track record of integrating acquisitions and driving long-term value creation, and we will continue to maintain a disciplined approach to pursuing acquisitions.
Segment Overview
We manage our business and report our financial results in three operating segments: USIS, International and Consumer Interactive. We also report expenses for Corporate, which provides shared services and conducts enterprise functions. See Managements Discussion and Analysis of Financial Condition and Results of Operations and note 17 to our consolidated financial statements included elsewhere in this prospectus for further information about our segments.
USIS
USIS provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. These businesses use our services to acquire new customers, assess consumer ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud.
USIS leverages our comprehensive data assets, data matching expertise and predictive analytics to develop and deliver solutions across multiple vertical markets.
| Comprehensive Data Assets: Our credit database contains the name and address of substantially all of the U.S. credit-active population, a listing of their existing credit relationships and their timeliness in repaying debt obligations. The information in our database is voluntarily provided by thousands of credit-granting institutions and other data furnishers. We enhance our data assets with alternative credit sources such as rental payments and utility payments. We also actively source information from courts, government agencies and other public records including suits, liens, judgments, bankruptcies, professional licenses, real property, vehicle ownership, other assets, driver violations, criminal records and contact information. Our databases are updated, reviewed and monitored on a regular basis. |
| Data Matching Expertise: We have data matching capabilities and expertise that allow us to build and maintain comprehensive consumer credit profiles from disparate data sources, enhancing the value of our databases and resulting in better prediction of risk. We have also developed data fusion capabilities that allow us to interrelate relevant data and identify relationships among individuals, locations, assets and businesses across our datasets. |
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| Predictive Analytics: Our predictive analytics capabilities allow us to analyze our proprietary datasets and provide insights to our customers to allow them to drive better business decisions. Our tools allow customers to investigate past behavior, reasonably predict the likelihood of future events and strategize actions based on those predictions. We have numerous tools such as predictive modeling and scoring, customer segmentation, benchmarking, forecasting, fraud modeling and campaign optimization, all of which caters to specific customer requirements. Our predictive analytics capabilities are developed by an analytics team with deep industry experience and a broad array of specialized qualifications. |
Our core capabilities leverage our next-generation technology, which has a common code base and allows us to build solutions once and deploy them multiple times across different verticals. We use varying combinations of these core capabilities and provide services to our customers through three delivery platforms, which are Online Data Services, Marketing Services and Decision Services.
Online Data Services
Online Data Services encompass services delivered in real-time, using both credit and public record datasets. These services include credit reports and predictive scores delivered to qualified businesses to help them assess the risk of prospective consumers seeking to access credit or insurance. We also provide online reports that link public record datasets for qualified businesses that seek to locate consumers or specific assets, or investigate relationships among consumers, businesses and locations. Collectively, the reports, characteristics and scores, with variations tailored for specific industries, form the basis of Online Data Services. We also provide online services to help businesses manage fraud and authenticate a consumers identity when they initiate a new business relationship. Our fraud database, which is updated daily, contains data elements such as addresses and Social Security numbers from multiple sources that alert businesses to identities associated with known or suspected fraudulent activity. Additionally, we provide data to businesses to help them satisfy know your customer compliance requirements and to confirm an individuals identity. Revenue from Online Data Services accounted for approximately 67% of our USIS revenue in 2014.
Marketing Services
Marketing Services help businesses proactively acquire new customers, cross-sell to existing customers and monitor and manage risk in their existing portfolios. We help our customers develop marketing lists of prospects via direct mail, web and mobile. Our databases are used by our customers to contact individuals to extend firm offers of credit or insurance. We provide portfolio review services, which are periodic reviews of our customers existing accounts, to help our customers develop cross-selling offers to their existing customers and monitor and manage risk in their existing consumer portfolios. We also provide trigger services which are daily notifications of changes to a consumer profile. Revenue from Marketing Services accounted for approximately 16% of our USIS revenue in 2014.
Decision Services
Decision Services, our software-as-a-service offerings, include a number of platforms that help businesses interpret data and predictive model results and apply their customer-specific criteria to facilitate real-time automated decisions at the time of customer interaction. Our customers use Decision Services to evaluate business risks and opportunities, including those associated with new consumer credit and checking accounts, insurance applications, account collection, patient registrations and apartment rental requests. Revenue from Decision Services accounted for approximately 17% of our USIS revenue in 2014.
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These core capabilities and delivery platforms in our USIS segment allow us to serve a broad set of customers and business issues. We offer our services to customers in the financial services, insurance, healthcare and other industries. In financial services we serve nine of the top ten banks in all facets of the customer lifecycle from acquisition through account management to collections. For example, our customers use our CreditVision solutions, which is based on 30 months of time series data and delivered across all our platforms, to bring insight to the velocity and magnitude of change in consumer risk over time, allowing them to segment risk with greater precision. We also recently introduced AdSurety digital marketing capabilities that allow banks to deliver personalized messages on the Internet, increasing reach with measurable results. In insurance, fourteen of the top fifteen auto insurance carriers use TransUnion services to improve the speed and accuracy of quoting and underwriting policies, improving the consumer shopping experience and lowering costs for the carriers. We do this by providing pre-fill services that use our data assets to populate an application once basic identity information is supplied by the consumer, then use our driver violation data, insurance and asset risk scores, and fraud detection tools to provide a quote that is more consistent with the final premium than previous methods used. In healthcare, thousands of healthcare providers and over 1,000 hospitals use our revenue cycle management solutions to verify patients identity, check insurance eligibility and the patients capacity to pay, estimate patient payment amounts and if needed, qualify patients for federal, state and local entitlement programs.
International
The International segment provides services similar to our USIS segment to businesses in select regions outside the United States. Depending on the maturity of the credit economy in each country, services may include credit reports, analytics and decisioning services and other value-added risk management services. In addition, we have insurance, business and automotive databases in select geographies. These services are offered to customers in a number of industries including financial services, insurance, automotive, collections and communications, and are delivered through both direct and indirect channels. The International segment also provides consumer services similar to those offered by our Consumer Interactive segment to help consumers proactively manage their personal finances. The two market groups in the International segment are as follows:
Developed Markets
We offer online data services, marketing services and decision services in Canada and Hong Kong. Revenue from these developed markets accounted for approximately 36% of our International revenue in 2014.
Canada : We have operated in Canada since 1989 and are one of only two nationwide consumer reporting agencies in the Canadian market. We operate across multiple verticals in Canada with leading positions in insurance, collections and automotive and a growing presence in financial services. Our Canadian customer base encompasses some of the largest companies in their verticals, including two of the three largest banks, the top seven credit card issuers, seven of the top ten insurance companies and four of the top automotive manufacturers. We have recently grown our operations in Canada by acquiring new customers and we expect to continue to grow by introducing innovative new solutions, such as CreditVision and DecisionEdge , by increasing our presence with existing customers and by growing our market share with businesses and consumers.
Hong Kong: We have had a majority ownership interest in the principal consumer credit reporting company in Hong Kong since 1998. We are a primary supplier of data and value-added solutions to the top ten banks in Hong Kong. Additionally, we use our established operations in Hong Kong as a base to expand into other emerging markets in the Asia Pacific region. We expect to continue to grow and transform the Hong Kong business by offering analytics, identity management, decisioning and consumer solutions.
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Emerging Markets
Together with our unconsolidated subsidiaries, we also provide online data services, marketing services and decision services in emerging markets, such as South Africa, Brazil, India and other countries in the Africa, Latin America and Asia Pacific regions. Once credit databases are established in these markets, we can introduce services that have demonstrated success in developed markets. We believe that our flexible approach to forming local partnerships has allowed us to establish a foothold in certain emerging markets where our major competitors have not, such as in India and the Philippines. We also believe that our presence in emerging markets helps foster the growth and development of economies in these markets, thereby resulting in an accelerated demand for credit information services and analytics. Revenue from emerging markets accounted for approximately 64% of our International revenue in 2014.
Africa: We launched our operations in Africa by entering South Africa in 1993. We are highly diversified and serve a variety of industries through traditional consumer credit reporting services, insurance solutions, auto information solutions, commercial credit information services and consumer solutions in South Africa. We are a primary risk and information solutions provider in South Africa for the top four leading banks, the top ten retailers, the top seven dealer groups and the top five insurers. We manage the database of all personal claims, policy and vehicle information on behalf of the South African Insurance Association and offer innovative solutions throughout the policy lifecycle. Our extensive vehicle information database in South Africa, which has over 18 million vehicle records and includes unique vehicle identifier codes, differentiates us from other providers. Our leading presence in South Africa has allowed us to expand into surrounding countries including Kenya, Namibia, Swaziland, Botswana, Mozambique, Zambia, Rwanda, Malawi and Uganda. We intend to roll out our next-generation technology to our African operations, which will make us the only provider with a big data platform in Africa and will provide us with further competitive advantages.
Latin America: We have been active in Latin America since 1985 when we entered the Puerto Rican market, and we have operations in several Central and South American countries, including a strong presence in the Dominican Republic and a 26% ownership interest in Trans Union de México, S.A., the primary credit reporting agency in Mexico. In Guatemala, we maintain a centralized database that services Guatemala, Honduras, Nicaragua and Costa Rica. We expanded our footprint in Latin America through our acquisition of majority interests in a Chilean credit reporting agency in 2010, a Brazilian decisioning services provider in 2011 and a Brazilian data enrichment and registry information services provider in 2013. In Brazil, which is our largest operation in Latin America, we are a leading provider in decisioning with over 100 customers and over 25 million transactions processed monthly across key industry verticals. Our customer base in Brazil includes three of the top four private banks, eighteen of the top twenty automotive insurance carriers, five of the top ten telecommunication companies and the largest Latin America online sales site. One of our differentiated capabilities in Brazil is our data driver technology, which allows us to access hundreds of public data sources, such as the Receita Federal (tax record information). We also own ZipCode, which we believe is the most extensive alternative database in Brazil with information on over 190 million consumers and 29 million companies, and is a leading industry data source for collections and marketing.
India: In 2003, we partnered with prominent Indian financial institutions to create CIBIL, the first consumer and business credit reporting agency in India. In 2014, we acquired a majority interest in CIBIL and now include their results in our consolidated financial statements. We are CIBILs sole technology, analytics and decision services provider for its consumer risk information services business. In the absence of a comprehensive national ID, we created an innovative matching algorithm that allowed us to create the most extensive consumer credit database in India. Our credit database includes information on over 200 million consumers and over 10 million business entities. In addition, we own or have access to several non-credit data sources that we use to enhance our solutions.
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These include the national voters registry with over 750 million records and the national ID database with over 500 million records, as well as other sources such as the confirmed and suspected fraud registry, property registry and tax ID database. We offer a suite of risk and information solutions across the credit lifecycle for banks, telecommunication companies and insurance companies. Our suite of offerings includes analytics and decisioning solutions that enable our customers to make faster decisions. We are the primary risk and information solutions provider for financial institutions in India and our customers include all of the top fifteen private banks. We developed and launched the first generic credit score for India in 2007, which is the most widely used and adopted credit score across the financial services industry in India. In addition to our business solutions, we also offer online credit scores and reports to consumers and are in the process of building additional capabilities in the consumer interactive area.
Asia Pacific: Our operations in Asia Pacific include markets such Thailand, Singapore, Malaysia, China and the Philippines. Asia Pacific is a growing market with increasing demand for credit driven by a rising middle class that offers significant growth potential in analytics and decisioning. Using Hong Kong as a base, we have leveraged our global intellectual property to expand to other countries in the Asia Pacific region. For example, we launched the first consumer credit reporting agency in the Philippines in 2011 in partnership with the top-five credit card issuers in that market. We leverage our global intellectual property to scale very quickly and our solutions are now used for lending decisions by over 25% of the major banks in the Philippines. We have built credit risk scores for the National Credit Bureau of Thailand, in which we have a 12% ownership interest, Credit Bureau of Singapore and Credit Bureau of Malaysia. We also have a presence in China, where we currently provide fraud and authentication solutions to financial institutions.
Consumer Interactive
Consumer Interactive offers solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include credit reports and scores, credit monitoring, fraud protection and resolution and financial management. Our products are provided through user friendly online and mobile interfaces and are supported by educational content and customer support. Our Consumer Interactive segment serves over 35 million consumers through both direct and indirect channels.
Direct: We offer services directly to consumers, primarily on a subscription basis through websites and mobile applications. Product features include credit reports, credit scores and analysis, alerts to changes in credit information, debt analysis, identity protection services, insurance scores and the ability to restrict third-party access to a consumers TransUnion credit report. We complement these features with educational content that explains how credit and financial data is used in various industries to evaluate consumers and how a consumers financial choices impact this evaluation. Our integrated, data-driven marketing strategy spans multiple channels including television, paid search, online display and email, which allows us to acquire high quality consumers cost effectively.
Indirect: We also offer our services to business partners who combine them with their own offerings and sell them to consumers and businesses in such areas as financial services, retail credit monitoring, identity protection and insurance. We have a broad suite of products and services that include many of the product features, educational content and customer support offered in our direct channel. We have taken a proactive and flexible partnership approach which has resulted in many long-standing relationships with other market leaders and innovators. We currently provide services to the largest providers of free credit information, the leading identity protection provider and the leading credit monitoring retailer. Through these partnerships, we have significantly expanded the overall market as well as the reach of our business.
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Corporate
Corporate provides support services to each operating segment, holds investments and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the operating segments remain in Corporate. These costs are primarily enterprise-level costs and are administrative in nature.
Markets and Customers
We have a highly diversified customer base, with our largest customer accounting for approximately 3% of revenue in 2014 and 3% of revenue in 2013. Our top ten customers accounted for approximately 20% of revenue in 2014 and 20% of revenue in 2013. Our customers include companies across multiple industries, including financial services, insurance and healthcare. A substantial portion of our revenue is derived from companies in the financial services industry.
We have a presence in over 30 countries including the United States, South Africa, Brazil, Canada, Hong Kong, India, and other countries in Africa, Asia and Latin America. The following table summarizes our revenue based on the region where the revenue was earned:
Approximate percent of consolidated revenue | ||||||||||||||||
Three months
ended March 31, |
Twelve months
ended December 31, |
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2015 | 2014 | 2013 | 2012 | |||||||||||||
United States |
82 | % | 80 | % | 80 | % | 79 | % | ||||||||
International |
18 | % | 20 | % | 20 | % | 21 | % |
The following table summarizes our assets based on the segment in which such assets are held as of the dates shown below:
Three months
ended March 31, 2015 |
Twelve months
ended December 31, |
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2014 | 2013 | 2012 | ||||||||||||||
(in millions) | ||||||||||||||||
U.S. Information Services |
$ | 2,925.0 | $ | 2,932.8 | $ | 2,894.7 | $ | 2,685.3 | ||||||||
International |
1,222.1 | 1,268.1 | 1,166.8 | 1,199.0 | ||||||||||||
Consumer Interactive |
275.6 | 268.8 | 268.3 | 271.9 | ||||||||||||
Corporate |
191.6 | 196.1 | 162.5 | 164.5 | ||||||||||||
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Total |
$ | 4,614.3 | $ | 4,665.8 | $ | 4,492.3 | $ | 4,320.7 | ||||||||
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We market our services primarily through our own sales force. We have dedicated sales teams for our largest customers focused by industry group and geography. These dedicated sales teams provide strategic account management and direct support to customers. We use shared sales teams to sell our services to mid-size customers. These sales teams are based in our headquarters office and in field offices strategically located throughout the United States and abroad. Smaller customers sales needs are serviced primarily through call centers. We also market our services through indirect channels such as resellers, who sell directly to businesses and consumers. Our interactive direct-to-consumer services are sold primarily through our website.
Seasonality
Seasonality in the USIS segment is correlated to volumes of online credit data purchased by our financial services and mortgage customers, and our sales have generally been higher during the second and third quarters. Seasonality in our International segment is driven by local economic conditions and relevant macroeconomic market trends. In our Consumer Interactive segment, demand
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for our products is usually higher in the first half of the year, impacted by seasonality and our advertising spend.
Competition
The market for our services is highly competitive. We primarily compete on the basis of differentiated solutions, datasets, analytics capabilities, ease of integration with our customers technology, stability of services, customer relationships, innovation and price. We believe that we compete favorably in each of these categories. Our competitors vary based on the business segment, industry vertical and geographical market that our solutions address.
In our USIS segment, our competition generally includes Equifax, Experian and LexisNexis, in addition to certain competitors whom we only compete with in specific verticals. For example, we compete with FICO in the financial services vertical, with Solera and Verisk in the insurance vertical, with Emdeon, IMS Health, Inovalon and Trizetto in the healthcare vertical and with LifeLock in the fraud solutions market.
In our International segment, we generally compete with Equifax and Experian directly or indirectly through their subsidiaries or investments. We also compete with other competitors that may focus on a particular vertical, country or region.
In our Consumer Interactive segment, we generally compete with Equifax, Experian, FICO and LifeLock as well as emerging businesses, some of whom offer free credit information.
In addition to these competitors, we also compete with a number of other companies that may offer niche solutions catering to more specific customer requirements.
We believe the services we provide to our customers reflect our understanding of our customers businesses, the depth and breadth of our data and the quality of our analytics and decisioning capabilities. By integrating our services into our customers workflows, we ensure efficiency, continuous improvement and long-lasting relationships.
Information Technology
Technology
The continuous operation of our information technology systems is fundamental to our business. Our information technology systems collect, refine, access, process, deliver and store the data that is used to provide our solutions. Customers connect to our systems using a number of different technologies, including secured internet connections, virtual private networks and dedicated network connections. Control and management of the technology that operates our business is critical to our success and to this end, we directly control and manage all of our technology and infrastructure. Our technology relies on several third-party best-of-breed solutions as well as proprietary software and tools which we integrate into our platforms. We control our technology and infrastructure, which allows us to prioritize any changes and control the roll-out of any upgrades or changes. We contract with various third-party providers to help us maintain and support our systems.
We have established technology Centers-of-Excellence that utilize similar tools and technology in order to provide scale and efficiency in modifying existing applications and developing new applications for our businesses. We deploy new development methodologies to enable rapid delivery of solutions and increase our speed-to-market. Our technology team includes both our own employees as well as additional resources from third-party providers.
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We believe that our technology is at the core of our innovative solutions, and we have continued to invest in our technology to ensure our market leadership. We have recently made significant investments to transition our technology infrastructure to the latest big data and analytics technologies. We believe that our next-generation platform enables us to be quicker, more efficient and more cost-effective across each step of our process chain, including receiving, consolidating and updating data, implementing analytics and decisioning capabilities, creating innovative solutions, delivering those solutions to our customers and incorporating customer feedback. Our platform has significant scale and capacity and enables us to deliver high-quality solutions to our customers. Our next-generation technology infrastructure gives us the ability to organize and handle high volumes of disparate data, improves our delivery speeds, increases availability and enhances our product development capabilities, while at the same time lowering our overall cost structure.
Data Centers and Business Continuity
In order to create redundancy and increase resiliency, we utilize multiple data centers in all of our major markets. We generally employ similar technologies and infrastructures in each data center to enable the optimal sharing of technical resources across geographies.
We maintain a framework for business continuity that includes written policies requiring each business and operating unit to identify critical functions. Our businesses and operating units have processes in place that are designed to maintain such functions in case there is a disruptive event. We also have a specific disaster recovery plan that will take effect if critical infrastructure or systems fail or become disabled.
As part of our program, each business units continuity plan is periodically updated and stored in a centralized database. These plans are monitored and reviewed by our compliance team. From time to time, our compliance team tests one or more of these plans using desktop exercises or in connection with actual events, for example during recent severe weather events in Chicago, Illinois. We also periodically test the state of preparedness of our most critical disaster recovery procedures. For our primary U.S. data center we have system redundancy plans that allow for the transfer of capacity in the event there is a failure of computer hardware or a loss of our primary telecommunications line or power source. We maintain a recovery site in Northlake, Illinois, which is designed to recover the majority of our operational capacity in a scenario which makes our primary data center inoperable.
Security
The security and protection of non-public consumer information is one of our highest priorities. We have a written information security program based on the ISO/IEC 27001:2013 standard with dedicated personnel charged with overseeing that program. Our information security program incorporates continuous improvement methodology and evaluates threats, industry events and asset values to help us appropriately adjust security controls. We employ a wide range of physical and technical safeguards that are designed to provide security around the collection, storage, use, access and delivery of information we have in our possession. These safeguards include firewalls, intrusion protection and monitoring, anti-virus and malware protection, vulnerability threat analysis, management and testing, advanced persistent threat monitoring, forensic tools, encryption technologies, data transmission standards, contractual provisions, customer credentialing, identity and access management, data loss, access and anomaly reports and training programs for associates. We, with other global financial services organizations, including U.S. nationwide consumer credit reporting companies, share cyber threat and attack information through our participation in the Financial Information Sharing and Analysis Council (FS-ISAC) and other forums that may be targeted at our industry to better understand and monitor our systems and our connectivity to our customers, as well as how specific solutions that were implemented to protect against such attacks are performing. We
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undergo SSAE 16 reviews annually, and several of our major customers routinely audit our security controls. We conduct an annual Payment Card Industry Data Security Standard (PCI-DSS) compliance program and remain PCI certified. Additionally, we also hire third parties to conduct independent information security assessments.
Intellectual Property and Licensing Agreements
Our intellectual property is a strategic advantage and protecting it is critical to our business. Because of the importance of our intellectual property, we treat our brand, software, technology, know-how, concepts and databases as proprietary. We attempt to protect our intellectual property rights under the trademark, copyright, patent, trade secret and other intellectual property laws of the United States and other countries, as well as through the use of licenses and contractual agreements, such as nondisclosure agreements. While we hold various patents, we do not rely primarily on patents to protect our core intellectual property. Through contractual arrangements, disclosure controls and continual associate training programs, our principal focus is to treat our key proprietary information and databases as trade secrets. Also, we have registered certain trademarks, trade names, service marks, logos, internet URLs and other marks of distinction in the United States and foreign countries, the most important of which is the trademark TransUnion name and logo. This trademark is used in connection with most of the services we sell and we believe it is a known mark in the industry.
We own proprietary software that we use to maintain our databases and to develop and deliver our services. We develop and maintain business-critical software that transforms data furnished by various sources into databases upon which our services are built. We also develop and maintain software to manage our consumer interactions, including providing disclosures and resolving disputes. In all business segments, we develop and maintain software applications that we use to deliver services to our customers, through a software-as-a-service model. In particular, we develop and maintain decisioning technology infrastructure that we host and integrate into our customers workflow systems to improve the efficiency of their operations.
We license certain data and other intellectual property to other companies on arms-length terms that are designed to protect our rights to our intellectual property. We generally use standard licensing agreements and do not provide our intellectual property to third parties without a nondisclosure and license agreement in place.
We also license certain intellectual property that is important for our business from third parties. For example, we license credit-scoring algorithms and the right to sell credit scores derived from those algorithms from third parties for a fee.
Employees
As of March 31, 2015, we employed approximately 4,100 employees throughout the world. Other than certain employees in Brazil, none of our employees is currently represented by a labor union or have terms of employment that are subject to a collective bargaining agreement. We consider our relationships with our employees to be good and have not experienced any work stoppages.
Properties
Our corporate headquarters and main data center are located in Chicago, Illinois, in an office building that we own. We also own a data center building in Hamilton, Ontario, Canada. As of March 31, 2015, we lease space in approximately 80 other locations, including office space and additional data centers. These locations are geographically dispersed to meet our sales and operating
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needs. We anticipate that suitable additional or alternative space will be available at commercially reasonably terms for future expansion.
Our History
TransUnion Corp. was spun-off from its parent, Marmon Holdings, Inc. (Marmon), in 2005 to the Pritzker family. On June 15, 2010, an affiliate of Madison Dearborn Partners, LLC, on behalf of certain of its investment funds, acquired 51.0% of our outstanding common stock from the Pritzker family and certain employee and director stockholders of TransUnion Corp. On April 30, 2012, TransUnion Corp. was acquired by TransUnion Holding Company, Inc., substantially all the common stock of which was and is owned by the Sponsors, and became TransUnion Holding Company, Inc.s wholly-owned subsidiary. On March 26, 2015, TransUnion Holding Company, Inc. was renamed TransUnion and TransUnion Corp. was renamed TransUnion Intermediate Holdings, Inc.
Legal and Regulatory Matters
Compliance with legal and regulatory requirements is a top priority. Numerous laws govern the collection, protection, dissemination and use of the non-public personal information we have in our possession. These laws are enforced by federal, state and local regulatory agencies, foreign regulatory authorities and, in some instances, through private civil litigation.
We proactively manage our compliance with laws and regulations through a dedicated legal and compliance team that is generally locally sourced and tasked to ensure that enterprise standards are followed. To that end, we have legal and compliance personnel situated at business operations in the United States, Brazil, Canada, Hong Kong and South Africa. All such personnel report directly to the functional department leaders, who are located in our corporate offices in Chicago, Illinois. Through the legal and compliance functions, we provide training to our associates, monitor all material laws and regulations, routinely review internal processes to determine whether business practice changes are warranted, assist in the development of new services, and promote regular meetings with principal regulators and legislators to establish transparency of our operations and create a means to understand and react should any issues arise. In addition, as a controlled financial company of a U.S. bank holding company, we have committed to implement certain compliance programs as directed by that bank holding company pursuant to the Amended and Restated Major Stockholders Agreement (as later defined) entered into by the Company and our principal shareholders.
U.S. Data and Privacy Protection
Our U.S. operations are subject to numerous laws that regulate privacy, data security and the use of consumer credit or an individuals healthcare information. Certain of these laws provide for civil and criminal penalties for the unauthorized release of, or access to, this protected information. The laws and regulations that affect our U.S. business include, but are not limited to, the following:
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FCRA : FCRA applies to consumer credit reporting agencies, including us, as well as data furnishers and users of consumer reports. FCRA promotes the accuracy, fairness and privacy of information in the files of consumer reporting agencies that engage in the practice of assembling or evaluating information relating to consumers for certain specified purposes. FCRA limits what information may be reported by consumer reporting agencies, limits the distribution and use of consumer reports, establishes consumer rights to access and dispute their own credit files, requires consumer reporting agencies to make available to consumers a free annual credit report and imposes many other requirements on consumer reporting agencies, data furnishers and users of consumer report information. Violation of FCRA can result in civil and criminal penalties. The law contains an attorney fee shifting provision to provide an incentive to consumers to bring individual or class action lawsuits against a |
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consumer reporting agency for violations of FCRA. Regulatory enforcement of FCRA is under the purview of the FTC, the CFPB and state attorneys general, acting alone or in concert with one another. |
| State Fair Credit Reporting Acts : Many states have enacted laws with requirements similar to FCRA. Some of these state laws impose additional, or more stringent, requirements than FCRA. FCRA preempts some of these state laws but the scope of preemption continues to be defined by the courts. |
| The Dodd-Frank Act : A central purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) is to protect consumers from abusive financial services practices, and for other purposes. An important new regulatory body created by Title X of the Dodd-Frank Act is the CFPB. The CFPB, through rulemaking, confirmed that the Company is subject to the examination and supervision of the CFPB, and such examinations began in 2012. In addition to transferring authority under certain existing laws to the CFPB and providing it with examination and supervisory authority, the Dodd-Frank Act also prohibits unfair or deceptive acts or practices (UDAAP) with respect to consumer finance and provides the CFPB with authority to enforce those provisions. The CFPB has stated that its UDAAP authority may allow it to find statutory violations even where a specific regulation does not prohibit the relevant conduct. |
| GLBA : The GLBA regulates the receipt, use and disclosure of non-public personal information of consumers that is held by financial institutions, including us. Several of our datasets are subject to GLBA provisions, including limitations on the use or disclosure of the underlying data and rules relating to the technological, physical and administrative safeguarding of non-public personal information. Violation of the GLBA can result in civil and criminal liability. Regulatory enforcement of the GLBA is under the purview of the FTC, the federal prudential banking regulators, the SEC and state attorneys general, acting alone or in concert with each other. |
| DPPA : The DPPA requires all states to safeguard certain personal information included in licensed drivers motor vehicle records from improper use or disclosure. Protected information includes the drivers name, address, phone number, Social Security Number, driver identification number, photograph, height, weight, gender, age, certain medical or disability information and, in some states, fingerprints, but does not include information on vehicular accidents, driving violations and drivers status. The DPPA limits the use of this information sourced from State departments of motor vehicles to certain specified purposes, and does not apply if a driver has consented to the release of their data. The DPPA imposes criminal fines for non-compliance and grants individuals a private right of action, including actual and punitive damages and attorneys fees. The DPPA provides a federal baseline of protections for individuals, and is only partially preemptive, meaning that except in a few narrow circumstances, state legislatures may pass laws to supplement the protections made by the DPPA. Many States are more restrictive than the federal law. |
| Data security breach laws : Most states have adopted data security breach laws that require notice be given to affected consumers in the event of a breach of personal information, and in some cases the provision of additional benefits such as free credit monitoring to affected individuals. Some of these laws require additional data protection measures over and above the GLBA data safeguarding requirements. If data within our system is compromised by a breach, we may be subject to provisions of various state security breach laws. |
| Identity theft laws : In order to help reduce the incidence of identity theft, most states and the District of Columbia have passed laws that give consumers the right to place a security freeze on their credit reports to prevent others from opening new accounts or obtaining new credit in their name. Generally, these state laws require us to respond to requests for a freeze within a certain period of time, to send certain notices or confirmations to consumers in connection with a security freeze and to unfreeze files upon request within a specified time period. |
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| FTC Act : The FTC Act prohibits unfair methods of competition and unfair or deceptive acts or practices. We must comply with the FTC Act when we market our services, such as consumer credit monitoring services through our Consumer Interactive segment. The security measures we employ to safeguard the personal data of consumers could also be subject to the FTC Act, and failure to safeguard data adequately may subject us to regulatory scrutiny or enforcement action. There is no private right of action under the FTC Act. |
| The Credit Repair Organizations Act (CROA): CROA regulates companies that claim to be able to assist consumers in improving their credit standing. There have been efforts to apply CROA to credit monitoring services offered by consumer reporting agencies and others. CROA allows for a private right of action and permits consumers to recover all money paid for alleged credit repair services in the event of violation. We, and others in our industry, have settled purported consumer class actions alleging violations of CROA without admitting or denying liability. |
| The Health Insurance Portability and Accountability Act of 1996, as amended by the American Recovery and Reinvestment Act of 2009 (HIPAA) and the Health Information Technology for Economic and Clinical Health Act (HITECH) : HIPAA and HITECH require companies to implement reasonable safeguards to prevent intentional or unintentional misuse or wrongful disclosure of protected health information. In connection with receiving data from and providing services to healthcare providers, we may handle data subject to HIPAA and HITECH requirements. We obtain protected health information from healthcare providers and payers of healthcare claims that are subject to the privacy, security and transactional requirements imposed by HIPAA. We are frequently required to secure HIPAA-compliant business associate agreements with the providers and payers who supply data to us. As a business associate, we are obligated to limit our use and disclosure of health-related data to certain statutorily permitted purposes, HIPAA regulations, as outlined in our business associate agreements, and to preserve the confidentiality, integrity and availability of this data. HIPAA and HITECH also require, in certain circumstances, the reporting of breaches of protected health information to affected individuals and to the United States Department of Health and Human Services. A violation of any of the terms of a business associate agreement or noncompliance with HIPAA or HITECH data privacy or security requirements could result in administrative enforcement action and/or imposition of statutory penalties by the United States Department of Health and Human Services or a state Attorney General. HIPAA and HITECH requirements supplement but do not preempt state laws regulating the use and disclosure of health-related information; state law remedies, which can include a private right of action, remain available to individuals affected by an impermissible use or disclosure of health-related data. |
We are also subject to federal and state laws that are generally applicable to any U.S. business with national or international operations, such as antitrust laws, the Foreign Corrupt Practices Act, the Americans with Disabilities Act, state unfair or deceptive practices act and various employment laws. We continuously monitor federal and state legislative and regulatory activities that involve credit reporting, data privacy and security to identify issues in order to remain in compliance with all applicable laws and regulations.
International Data and Privacy Protection
We are subject to data protection, privacy and consumer credit laws and regulations in the foreign countries where we conduct business. These laws and regulations include, but are not limited to, the following:
|
South Africa: National Credit Act of 2005 (the NCA)The NCA and its implementing regulations govern credit bureaus and consumer credit information. The NCA sets standards for filing, retaining and reporting consumer credit information. The Act also defines consumers |
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rights with respect to accessing their own information and addresses the process for disputing information in a credit file. The NCA is enforced by The National Credit Regulator who has authority to supervise and examine credit bureaus. |
| Canada: Personal Information Protection and Electronic Documents Act of 2000 (PIPEDA)The PIPEDA and substantially similar provincial laws govern how private sector organizations collect, use and disclose personal information in the course of commercial activities. The PIPEDA gives individuals the right to access and request correction of their personal information collected by such organizations. The PIPEDA requires compliance with the Canadian Standard Association Model Code for the Protection of Personal Information. Most Canadian provinces also have laws dealing with consumer reporting. These laws typically impose an obligation on credit reporting agencies to have reasonable processes in place to maintain the accuracy of the information, place limits on the disclosure of the information and give consumers the right to have access to, and challenge the accuracy of, the information. |
| India: Credit Information Companies Regulation Act of 2005 (CICRA)The CICRA requires entities that collect and maintain personal credit information to ensure that it is complete, accurate and protected. Entities must adopt certain privacy principles in relation to collecting, processing, preserving, sharing and using credit information. In addition, India has privacy legislation that would allow individuals to sue for damages in the case of a data breach, if the entity negligently failed to implement reasonable security practices and procedures to protect personal data. |
| Hong Kong: Personal Data (Privacy) Ordinance (PDPO) and The Code of Practice on Consumer Credit Data (COPCCD)The PDPO and the COPCCD regulate the operation of consumer credit reference agencies. They prescribe the methods and security controls under which credit providers and credit reference agencies may collect, access and manage credit data. In April 2011, the COPCCD was amended to permit credit providers to share limited positive mortgage payment data. In June 2012, the PDPO was amended to increase penalties and create criminal liabilities for repeat contravention of PDPO under which enforcement notices have been served. |
We are also subject to various laws and regulations generally applicable to all businesses in the other countries where we operate.
Legal Proceedings
General
In addition to the matters described below, we are routinely named as defendants in, or parties to, various legal actions and proceedings relating to our current or past business operations. These actions generally assert claims for violations of federal or state credit reporting, consumer protection or privacy laws, or common law claims related to privacy, libel, slander or the unfair treatment of consumers, and may include claims for substantial or indeterminate compensatory or punitive damages, or injunctive relief, and may seek business practice changes. We believe that most of these claims are either without merit or we have valid defenses to the claims, and we vigorously defend these matters or seek non-monetary or small monetary settlements, if possible. However, due to the uncertainties inherent in litigation, we cannot predict the outcome of each claim in each instance.
In the ordinary course of business, we also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In connection with formal and informal inquiries by these regulators, we routinely receive
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requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of our activities. See Legal and Regulatory Matters.
In view of the inherent unpredictability of litigation and regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings or investigations are in the early stages, we cannot determine with any degree of certainty the timing or ultimate resolution of litigation and regulatory matters or the eventual loss, fines, penalties or business impact, if any, that may result. We establish reserves for litigation and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. The actual costs of resolving litigation and regulatory matters, however, may be substantially higher than the amounts reserved for those matters, and an adverse outcome in certain of these matters could have a material adverse effect on our consolidated financial statements in particular quarterly or annual periods.
On a regular basis, we accrue reserves for litigation and regulatory matters based on our historical experience and our ability to reasonably estimate and ascertain the probability of any liability. See note 19 to our consolidated financial statements included elsewhere in this prospectus for additional information about these reserves. However, for certain of the matters described below, we are not able to reasonably estimate our exposure because damages have not been specified and (i) the proceedings are in early stages, (ii) there is uncertainty as to the likelihood of a class being certified or the ultimate size of the class, (iii) there is uncertainty as to the outcome of similar matters pending against our competitors, (iv) there are significant factual issues to be resolved, and/or (v) there are legal issues of a first impression being presented. However, for these matters we do not believe based on currently available information that the outcomes will have a material adverse effect on our financial condition, though the outcomes could be material to our operating results for any particular period.
To reduce our exposure to an unexpected significant monetary award resulting from an adverse judicial decision, we maintain insurance that we believe is appropriate and adequate based on our historical experience. We regularly advise our insurance carriers of the claims (threatened or pending) against us in the course of litigation and generally receive a reservation of rights letter from the carriers when such claims exceed applicable deductibles. We are not aware of any significant monetary claim that has been asserted against us in the course of pending litigation that would not have some level of coverage by insurance after the relevant deductible, if any, is met.
Bankruptcy Tradeline Litigation
In a matter captioned White, et al, v. Experian Information Solutions, Inc. (No. 05-cv-01070-DOC/MLG, filed in 2005 in the United States District Court for the Central District of California), plaintiffs sought class action status against Equifax, Experian and us in connection with the reporting of delinquent or charged-off consumer debt obligations on a consumer report after the consumer was discharged in a bankruptcy proceeding. The claims allege that each national consumer reporting company did not automatically update a consumers file after their discharge from bankruptcy and such non-action was a failure to employ reasonable procedures to assure maximum file accuracy, a requirement of FCRA.
Without admitting any wrongdoing, we have agreed to a settlement of this matter. On August 19, 2008, the Court approved an agreement whereby we and the other industry defendants voluntarily changed certain operational practices. These changes require us to update certain delinquent records when we learn, through the collection of public records, that the consumer has received an order of discharge in a bankruptcy proceeding. These business practice changes did not have a material adverse impact on our operations or those of our customers.
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In 2009, we also agreed, with the other two defendants, to settle the monetary claims associated with this matter for $17.0 million each ($51.0 million in total), which amount will be distributed from a settlement fund to pay the class counsels attorney fees, all administration and notice costs of the fund to the purported class, and a variable damage amount to consumers within the class based on the level of harm the consumer is able to confirm. Our share of this settlement was fully covered by insurance. Final approval of this monetary settlement by the Court occurred in July 2011. Certain objecting plaintiffs appealed the Courts final approval of the monetary settlement and, in April 2013, the United States Court of Appeals for the Ninth Circuit reversed the final approval order and remanded the matter to the District Court. The rationale provided by the United States Court of Appeals was not that the proposed settlement was unfair or defective, but that named class counsel and certain named plaintiffs did not adequately represent the interests of the class because of certain identified conflicts. Objecting counsel to the settlement has sought to become new class counsel and the District Court has denied this request. Objecting counsel is currently seeking an interlocutory appeal of this ruling to the United States Court of Appeals for the Ninth Circuit.
If the monetary settlement is not ultimately upheld, we expect to vigorously litigate this matter and to assert what we believe are valid defenses to the claims made by the plaintiffs. Regardless of what occurs next, we believe we have not violated any law, have valid defenses and are willing to aggressively litigate this matter. We do not believe any final resolution of this matter will have a material adverse effect on our financial condition.
OFAC Alert Service
As a result of a decision by the United States Third Circuit Court of Appeals in 2010 ( Cortez v. Trans Union LLC ), we modified one of our add-on services we offer to our business customers that was designed to alert our customer that the consumer, who was seeking to establish a business relationship with the customer, may potentially be on the Office of Foreign Assets Control, Specifically Designated National and Blocked Persons alert list (the OFAC Alert). The OFAC Alert service is meant to assist our customers with their compliance obligations in connection with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001.
In Ramirez v. Trans Union LLC , (No. 3:12-cv-00632-JSC, United States District Court for the Northern District of California) that was filed in 2012, the plaintiff has alleged that: the OFAC Alert service does not comply with the Cortez ruling; we have willfully violated FCRA and the corresponding California state-FCRA based on the Cortez ruling by continuing to offer the OFAC Alert service; and there are one or more classes of individuals who should be entitled to statutory damages (i.e., $100 to $5,000 per person) based on the allegedly willful violations. In addition to the Ramirez action, the same lawyers representing Ramire z (who also represented the plaintiff in Cortez ) filed two additional alleged class actions in 2012 ( Miller v. Trans Union, LLC , No. 12-1715-WJN, United States District Court for the Middle District of Pennsylvania; and Larson v. Trans Union, LLC , No. 12-5726-JSC, United States District Court for the Northern District of California) and one in 2014 ( Amit Patel, et al. v. TransUnion LLC, TransUnion Rental Screening Solutions, Inc. and TransUnion Background Data Solutions , No. 14-cv-0522-LB, United States District Court for the Northern District of California) claiming that our process for disclosing OFAC information to consumers, or how we match OFAC information to a consumers name or other identifying information, violates FCRA and, in some instances, the corresponding California state-FCRA. In addition to the OFAC allegations, the plaintiff in the Patel action seeks to collapse all TransUnion FCRA regulated entities into a single entity. In July 2014, the Court in Ramirez certified a class of approximately 8,000 individuals solely for purposes of statutory damages if TransUnion is ultimately found to have willfully violated FCRA, and a sub-class of California residents solely for purposes of injunctive relief under the California Consumer Credit Reporting Agencies Act. While the Court noted that the plaintiff is not seeking any actual monetary damage, the
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class certification order was predicated on a disputed question of Ninth Circuit law (currently there is a conflict between the federal circuits) that is awaiting action by the United States Supreme Court. Class action certification proceedings are progressing with respect to the Miller and Larson actions. We intend to vigorously defend these matters as we believe we have acted in a lawful manner.
AG Investigations
In 2012, the Columbus Dispatch, a daily newspaper in Columbus, Ohio, published a series of four articles allegedly exposing improper or questionable practices by the three nationwide credit reporting agencies (the NCRAs), including us. As a result of these articles, the Attorney General of the State of Ohio initiated a multi-state Attorneys General investigation into certain practices of the NCRAs, which was commenced in late 2012. In connection with this effort, the Attorneys General for the State of New York and the State of Mississippi commenced separate investigations into the same matters being reviewed by the multi-state attorney general investigation. TransUnion and the other nationwide consumer reporting agencies have been engaged in active discussions with the multi-state group and with the New York Attorney General with respect to industry-wide initiatives addressing the concerns of the various Attorneys General. Based on discussions to date, we have estimated the potential impact on TransUnion associated with a proposed resolution of the multi-state and New York matters and accrued for this estimated potential impact in our year-end 2014 financial statements.
On March 9, 2015, the NCRAs, announced a National Consumer Assistance Plan that will enhance the NCRAs ability to collect complete and accurate consumer information and will provide consumers more transparency and a better experience interacting with credit bureaus about their credit reports. The plan was announced after cooperative discussions and an agreement with New York Attorney General Eric Schneiderman, and focuses on enhancements in two primary areas: consumer interaction with the NCRAs and data accuracy and quality. The National Consumer Assistance Plan will be implemented in phases over the next three years and 90 days.
On May 20, 2015, TransUnion, together with the other NCRAs, announced that the attorneys general of 31 states have agreed to join in the National Consumer Assistance Plan launched in March. With the exception of the financial payments the NCRAs are making to the attorneys general to cover the costs of their investigations, consumer education and other purposes, the settlement of the multi-state matter essentially adopts the National Consumer Assistance Plan as announced with the New York Attorney General in March.
On April 20, 2015, the Attorney General for the State of Mississippi filed an action in the Chancery Court of Jackson County Mississippi with respect to certain of the matters reviewed in its investigation. The complaint in State of Mississippi ex rel. Jim Hood, Attorney General of the State of Mississippi v. TransUnion Corp., Trans Union LLC and TransUnion Interactive, Inc. (No. 2015-0716-MLF) alleges that certain marketing practices with respect to credit monitoring services sold to Mississippi residents, and certain procedures used to ensure the accuracy of the information in the credit reports of Mississippi residents, constitute unfair and deceptive practices in violation of Mississippi law. We do not believe we have violated any law and intend to vigorously defend this matter.
With respect to all of the investigations, we do not believe we have violated any law and intend to vigorously defend any private claim that may result from any of these investigations.
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Guatemala Amparo
A constitutional action ( Amparo 01161-2013-00084-OF. 3o. Juzgado Decimo Primero de Primera Instancia del Ramo Civil del Departamento de Guatemala, Constituido en Tribunal de Amparo ) was filed in Guatemala on February 1, 2013, against Trans Union Guatemala, S.A. and five other unrelated consumer data information companies by a Guatemalan government official (in his official capacity) alleging that TransUnion and the other entities are violating the fundamental rights of privacy, freedom of action, and right to work of Guatemalan citizens because they may collect and use personal information without obtaining the consent of the individual to which that information pertains. In July 2014, the amparo was granted with respect to the segment of our consumer database, if any, for which we have not obtained adequate consent from the individual consumer. We appealed that decision and, in February 2015, the Constitutional Court of Guatemala denied the appeal. We do not currently believe that compliance with the terms of the amparo will have a material adverse effect on our financial condition or results of operations.
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Below is a list of our directors and executive officers who will be in the positions indicated below upon consummation of this offering, as well as their respective ages and positions and a brief account of the business experience of each of them.
Name |
Age |
Position |
||
James M. Peck |
52 | Director, President and Chief Executive Officer | ||
Samuel A. Hamood |
46 | Executive Vice President & Chief Financial Officer | ||
John W. Blenke |
59 | Executive Vice President, Corporate General Counsel & Corporate Secretary | ||
Christopher A. Cartwright |
49 | Executive Vice PresidentU.S. Information Services | ||
John T. Danaher |
50 | Executive Vice PresidentConsumer Interactive | ||
Gerald M. McCarthy, Jr. |
46 | Executive Vice PresidentHealthcare | ||
David M. Neenan |
49 | Executive Vice PresidentInternational | ||
George M. Awad |
55 | Director | ||
Christopher Egan |
38 | Director | ||
Gilbert H. Klemann* |
36 | Director | ||
Siddharth N. (Bobby) Mehta |
57 | Director | ||
Leo F. Mullin |
72 | Director, Chairman of the Board of Directors | ||
Andrew Prozes |
69 | Director | ||
Sumit Rajpal |
39 | Director | ||
Steven M. Tadler |
55 | Director |
* | Mr. Klemann is currently a director nominee and will be appointed as a director upon consummation of this offering. |
James M. Peck joined the Company in December 2012 as President and Chief Executive Officer. Mr. Peck has more than 20 years of information management, global product development and engineering experience. From March 2004 through December 2012, Mr. Peck was Chief Executive Officer for the LexisNexis Risk Solutions business of Reed Elsevier, where he successfully integrated LexisNexis acquisitions of Seisint in 2004 and ChoicePoint in 2008. From 2001 through 2004, Mr. Peck was Senior Vice President and Chief Product Officer of the Global Electronic Product Development Organization for LexisNexis, where he was responsible for product development and online solutions to serve global markets. Prior to 2001, Mr. Peck was the Senior Vice President of Product Development with Celera Genomics, a bio-technology firm that sequenced the human genome. Prior to that, he spent a decade at LexisNexis in engineering and executive roles to manage and build information solutions.
Samuel A. Hamood joined the Company in February 2008. Since Mr. Hamood joined, he has served as Executive Vice President and Chief Financial Officer. From 2000 through January 2008, he held a variety of positions at Electronic Data Systems. From January 2007 to January 2008, he was the Chief Financial Officer for the U.S. Region. From April 2004 to December 2006, he was the Vice President of Investor Relations. From 2002 through March 2004, he was the Senior Director of Corporate Strategy and Planning. Prior to that, he spent six years with the Walt Disney Company in a variety of finance and strategy roles with increasing levels of responsibility. He also spent five years in the audit practice of Deloitte and Touche, LLP.
John W. Blenke joined the Company in May 2003. Since Mr. Blenke joined, he has served as the Executive Vice President, Corporate General Counsel and Corporate Secretary. From 1989 through April 2003, he held a variety of positions with Household International, Inc. (predecessor to HSBC North America), including most recently the Vice President of Corporate Law, where he managed the corporate legal functions responsible for mergers and acquisitions, corporate finance and consumer finance branch-based and wholesale lending.
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Christopher A. Cartwright joined the Company in August 2013 as Executive Vice PresidentU.S. Information Services. From December 2010 through March 2013, he was the Chief Executive Officer of Decision Insight Information Group, a portfolio of independent businesses providing real property information, software and services to insurance, finance, legal and real estate professionals in the United States, Canada and Europe. From June 1997 through October 2010, he held a variety of positions at Wolters Kluwer, a global information services and workflow solutions company, where he led the business services and software division. Prior to Wolters Kluwer, he was Senior Vice President, Strategic Planning & Operations for Christies Inc. and Strategy Consultant for Coopers and Lybrand.
John T. Danaher joined the Company in November 2002 and is currently Executive Vice PresidentConsumer Interactive. Mr. Danaher has more than 25 years of financial services industry expertise and direct marketing experience and has served as the president of the consumer subsidiary of TransUnion since 2004. Prior to TransUnion, from 2001 to 2002, Mr. Danaher was Chief Operating Officer of TrueLink, Inc., which was acquired by TransUnion. Mr. Danaher joined TrueLink, Inc. from Citibank, where he held several roles including Vice President of E-Commerce, where he was responsible for planning and executing Citibanks e-commerce strategy for home equity loan products. He also served in a variety of leadership roles in operations and technology.
Gerald M. McCarthy, Jr. joined the Company as Executive Vice PresidentHealthcare in July 2014. From January 2012 through June 2014, Mr. McCarthy was the Chief Strategy Officer of HealthMEDX, a leading software provider for long-term care, home care and rehabilitation organizations. Prior to joining HealthMEDX, Mr. McCarthy held a number of executive positions at McKesson Provider Technologies, including Senior Vice President, Product Management and Marketing from July 2007 to December 2011; Vice President, Physician Solutions from January 2005 to June 2007; Division Vice President of Sales, Clinical and Imaging Solutions from January 2004 to December 2005; and Clinical Solution Specialist from December 2001 to December 2003.
David M. Neenan joined the Company in September 2012 as Executive Vice PresidentInternational. From October 1998 through September 2012, he held a variety of positions at HSBC. From 2011 through August 2012, he served as the Global Chief Operations Officer for HSBCs insurance division. From 2009 through 2011, he served as the Global Head of Sales and marketing for the insurance division. From July 2006 through 2008, he served as President and CEO of HSBC Finance, Canada.
George M. Awad has served as a director since November 2013. Mr. Awad created and is the principal of Gibraltar Capital Corporation, a wealth management and advisory firm providing investment and business advice to wealthy, internationally-based families. He is a highly accomplished executive with exceptional operating experience in running large, global businesses across the full suite of consumer financial services products, including senior leadership roles with GE Capital (1988-2006) and Citigroup, Inc. (2006-2011), with focus on domestic and global markets. Most recently, Mr. Awad served as CEO, Consumer Finance for Citigroup, with prior positions as CEO, North America Cards and CEO, Global Consumer Group EMEA.
Christopher Egan has served as a director since April 2012. Mr. Egan is a Managing Director at Advent, having joined the firm in 2000. He has co-led Advents investments in nine companies, including Equiniti, BondDesk Group, National Bankruptcy Services, Datek Online Holdings, CETIP, Sophis, RedPrairie, GFI Group and P2 Energy Group. Mr. Egan previously worked at UBS Warburg in the financial sponsors group. Mr. Egan also serves as a director on the board of P2 Energy Group.
Gilbert H. Klemann is currently a director nominee and will be appointed as a director upon consummation of this offering. Mr. Klemann is a Managing Director in the Merchant Banking Division (GS MBD) of Goldman, Sachs & Co., where he focuses on investments in financial services. He
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joined Goldman, Sachs & Co. in 2001 in the Investment Banking Division, rejoined in 2006 in the Merchant Banking Division and became a Managing Director in 2013. Mr. Klemann also serves as a director on the board of Safe-Guard Products International LLC.
Siddharth N. (Bobby) Mehta has served as a director since April 2012 and is the former President and Chief Executive Officer of TransUnion. He joined the Company in August 2007 and served as the President & Chief Executive Officer until December 31, 2012. From May 2007 through July 2007, he was a consultant to our board of directors. From 1998 through February 2007, he held a variety of positions with HSBC Finance Corporation and HSBC North America Holdings, Inc., including Chairman and Chief Executive Officer of HSBC Finance Corporation. He also serves on the board of directors of The Allstate Corporation, Piramal Enterprises Limited, DataCard Group, Avant Credit Corporation, The Chicago Public Education Fund, The Field Museum, the Myelin Repair Foundation and The Lab School.
Leo F. Mullin has served as a director since 2012. Mr. Mullin is a Senior Advisor, on a part-time basis, to GS MBD, including board service on companies in which GS MBD has invested. Mr. Mullin retired from Delta Airlines in May 2004, after having served as Chief Executive Officer of Delta since 1997 and Chairman since 1999. Delta Airlines subsequently filed for bankruptcy protection in September 2005. Mr. Mullin was Vice Chairman of Unicom Corporation and its principal subsidiary, Commonwealth Edison Company, from 1995 to 1997. He was an executive of First Chicago Corporation, the nations tenth largest bank, from 1981 to 1995, serving as that companys President and Chief Operating Officer from 1993 to 1995, and as Chairman and Chief Executive Officer of American National Bank, a subsidiary of First Chicago Corporation, from 1991 to 1993. He has also served as a senior vice president at Conrail for five years, and as a consultant with McKinsey and Company for nine years, the last three years as a partner. Mr. Mullin previously served as a Director of the publicly held company, Johnson & Johnson, from 1999 to April 2015, and currently serves as a Director of the publicly held companies ACE, Ltd. and Educational Management Corporation.
Andrew Prozes has served as a director since January 2014. Mr. Prozes currently serves as Executive Chairman of Alert Global Media Holdings, LLC and Scribestar Limited, and on the boards of Interactive Data Corporation, Asset International Inc. and Ethoca Limited. He also serves as a director and chairs the Compensation Committee for Cott Corporation. Mr. Prozes served as the Chief Executive Officer of LexisNexis and on the board of directors of Reed Elsevier PLC from 2000 until December 2010. Prior to joining Reed Elsevier, Mr. Prozes served as Executive Vice President and Chief Operating Officer of West Group, part of the Thomson Reuters Corporation, from 1997 to 2000. From 1988 to 1996, he served as President of Southams City Newspapers and was responsible for thirteen daily newspapers and Southams business information. Mr. Prozes is a past Chairman of The U.S. Information Industry Association and has served on the boards of the Information Technology Association of Canada and the Canadian Newspaper Association. He is also a board member of the National Executive Services Corporation and a board and Executive Committee member of The Atlantic Council in Washington, D.C.
Sumit Rajpal has served as a director since April 2012. Mr. Rajpal is a Managing Director in GS MBD, where he leads the financial services investment practice globally. He joined Goldman, Sachs & Co. in 2000 and became a Managing Director in 2007. Mr. Rajpal also serves as a director on the boards of Safe-Guard Products International LLC, Hastings Insurance Services Limited, ProSight Specialty Insurance Holdings, SKBHC Holdings, LLC (where he is an observer on the board), Enstar Group Limited and Ipreo Parent Holdco LLC.
Steven M. Tadler has served as a director since April 2012. Mr. Tadler is a Managing Partner at Advent, having joined the firm in 1985 and becoming Managing Director of the North American buyouts group in 1994. From 1997 to 2006, Mr. Tadler headed Advents European Operations. Mr. Tadler also serves as a director on the boards of Bojangles, Inc., wTe Corporation, and Advent.
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There are no family relationships among any of the Companys directors and executive officers.
Composition of the Board of Directors
Our business and affairs are managed under the direction of our Board of Directors. Upon consummation of this offering, our Board of Directors will consist of Messrs. Mullin, Awad, Egan, Mehta, Klemann, Prozes, Rajpal, Tadler and Peck. Following the completion of this offering, we expect (i) our Board to initially consist of nine directors, three of whom will be independent and (ii) that there will be three vacancies on the Board. In connection with this offering, we will be amending and restating our certificate of incorporation to provide for a classified board of directors, with 3 directors in Class I (expected to be Messrs. Awad, Mehta and Prozes), 3 directors in Class II (expected to be Messrs. Klemann, Mullin and Tadler) and 3 directors in Class III (expected to be Messrs. Egan, Peck and Rajpal). Once appointed, directors serve until they resign or are removed by the stockholders. See Description of Capital StockAnti-Takeover Effects of Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws and Certain Provisions of Delaware LawClassified Board of Directors.
Background and Experience of Directors
When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our Board of Directors to satisfy its oversight responsibilities effectively in light of our business and structure, the Board of Directors focused primarily on each persons background and experience as reflected in the information discussed in each of the directors individual biographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. In particular, the members of our Board of Directors considered the following important characteristics: (i) Mr. Egan and Mr. Tadler are representatives appointed by affiliates of Advent, one of our principal stockholders, and have significant financial, investment and operational experience from their involvement in Advents investment in numerous portfolio companies and have played active roles in overseeing those businesses, (ii) Mr. Rajpal is, and Mr. Klemann will be, representatives appointed by affiliates of GS, one of our principal stockholders, and have significant financial, investment and operational experience from their involvement in GS investment in numerous portfolio companies and have played active roles in overseeing those businesses, (iii) Mr. Awad and Mr. Prozes each have had significant executive level experience throughout their careers in leading consumer financial services companies, (iv) Mr. Peck, our President and Chief Executive Officer, previously served as Chief Executive Officer for the risk solutions business of LexisNexis and (v) Mr. Mullin, Chairman of the Board of Directors, has extensive experience in large, multinational corporations, having served as Chief Executive Officer and Chairman of Delta Airlines, Vice Chairman of Unicom Corporation and President and Chief Operating Officer of First Chicago Corporation and (vi) Mr. Mehta previously served as our President and Chief Executive Officer and, in addition, previously held a variety of positions with HSBC North America Holdings, Inc., including Chairman and Chief Executive Officer of HSBC North America Holdings, Inc. and Chief Executive Officer of HSBC Finance Corporation.
Board Leadership Structure
Our Board of Directors is led by Mr. Mullin, our Non-Executive Chairman. We do not have a policy on whether the role of Chairman and Chief Executive Officer should be separate or combined. At this time, the Chief Executive Officer position is separate from the Chairman position. We believe that the separation of the Chairman and Chief Executive Officer positions is appropriate corporate governance for us at this time.
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Role of Board in Risk Oversight
The Board of Directors has extensive involvement in the oversight of risk management related to us and our business and accomplishes this oversight through the regular reporting by the Audit and Compliance Committee. The Audit and Compliance Committee represents the Board by periodically reviewing our accounting, reporting and financial practices, including the integrity of our financial statements, the oversight of administrative and financial controls and our compliance with legal and regulatory requirements. Through its regular meetings with management, including the finance, legal, and internal audit functions, the Audit and Compliance Committee reviews and discusses all significant areas of our business and summarizes for the Board of Directors all areas of risk and the appropriate mitigating factors. In addition, our Board receives periodic detailed operating performance reviews from management.
Controlled Company Exception
After the completion of this offering, affiliates of the Sponsors will continue to beneficially own more than 50% of our common stock and voting power. As a result, (i) we expect that under the terms of the Major Stockholders Agreement, as amended, affiliates of the Sponsors will have agreed to vote for one anothers respective Board nominees (see Certain Relationships and Related Party TransactionsMajor Stockholders Agreement) and (ii) we will be a controlled company within the meaning of the corporate governance standards of the NYSE. Under the NYSE corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance standards, including (1) the requirement that a majority of the Board of Directors consist of independent directors, (2) the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities, (3) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities, and (4) the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees. Following this offering, we intend to utilize these exemptions. As a result, following this offering, we will not have a majority of independent directors on our Board of Directors (although our Board of Directors has determined that Messrs. Awad, Mullin and Prozes qualify as independent directors under the corporate governance standards of the NYSE); and we will not have a nominating and corporate governance committee or a compensation committee that is composed entirely of independent directors. Also, such committees will not be subject to annual performance evaluations. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE. In the event that we cease to be a controlled company, we will be required to comply with these provisions within the transition periods specified in the corporate governance rules of the NYSE.
Board Committees
After the completion of this offering, the standing committees of our Board of Directors will consist of an Audit and Compliance Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and an Executive Committee.
Our Chief Executive Officer and other executive officers will regularly report to the non-executive directors and the Audit and Compliance, the Compensation, the Nomination and Corporate Governance and the Executive Committees to ensure effective and efficient oversight of our activities and to assist in proper risk management and the ongoing evaluation of management controls. The vice
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president of internal audit will report functionally and administratively to our Chief Financial Officer and directly to the Audit and Compliance Committee. We believe that the leadership structure of our Board of Directors provides appropriate risk oversight of our activities given the controlling interests held by the Sponsors.
Audit and Compliance Committee
Upon the completion of this offering, our Audit and Compliance Committee will consist of Messrs. Mehta (Chairman), Awad and Mullin. Our Board of Directors has determined that Messrs. Awad and Mullin qualify as independent directors under the corporate governance standards of the NYSE and the independence requirements of Rule 10A-3 of the Exchange Act. We expect new independent members will be placed on the Audit and Compliance Committee within one year of the completion of this offering so that all of our Audit and Compliance Committee members will be independent, as such term is defined in Rule 10A-3(b)(i) under the Exchange Act and under the NYSE. Our Board of Directors has determined that each of Messrs. Mehta, Awad and Mullin qualify as an audit committee financial expert as such term is defined in Item 407(d)(5) of Regulation S-K.
The purpose of the Audit and Compliance Committee will be to prepare the audit committee report required by the SEC to be included in our proxy statement and to assist our Board of Directors in overseeing and monitoring among other things, (1) the quality and integrity of our financial statements and our financial reporting and disclosure practices, (2) our compliance with applicable legal and regulatory requirements, (3) our independent registered public accounting firms qualifications and independence and (4) the performance of our internal audit function.
We are amending the charter for the Audit and Compliance Committee to comply with the rules and regulations governing a public company. Upon completion of this offering, the amended Audit and Compliance Committee charter will be available on our website.
Compensation Committee
Upon the completion of this offering, our Compensation Committee will consist of Messrs. Prozes (Chairman), Tadler and Rajpal.
The purpose of the Compensation Committee is to assist our Board of Directors in discharging its responsibilities relating to (1) setting our compensation program and compensation of our executive officers and directors, (2) monitoring our incentive and equity-based compensation plans and (3) preparing the compensation committee report required to be included in our proxy statement under the rules and regulations of the SEC.
We are amending the charter for the Compensation Committee to comply with the rules and regulations governing a public company. Upon completion of this offering, the amended Compensation Committee charter will be available on our website.
Nominating and Corporate Governance Committee
Upon the completion of this offering, our Nominating and Corporate Governance Committee will consist of Messrs. Mullin (Chairman), Egan, Peck and Rajpal. The purpose of our Nominating and Corporate Governance Committee will be to assist our Board of Directors in discharging its responsibilities relating to (1) subject to the Amended and Restated Major Stockholders Agreement (as later defined), as applicable, identifying individuals qualified to become new Board members, consistent with criteria approved by the Board of Directors; (2) reviewing the qualifications of incumbent directors to determine whether to recommend them for reelection and selecting, or
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recommending that the Board select, the director nominees for the next annual meeting of stockholders; (3) subject to the Amended and Restated Major Stockholders Agreement (as later defined), as applicable, identifying Board members qualified to fill vacancies on any Board committee and recommending that the Board appoint the identified member or members to the applicable committee; (4) reviewing and recommending to the Board of Directors corporate governance guidelines applicable to us; (5) overseeing the evaluation of the Board of Directors and management; and (6) handling such other matters that are specifically delegated to the committee by the Board of Directors from time to time.
Our Board of Directors will adopt a written charter for the Nominating and Corporate Governance Committee, which will be available on our website upon completion of this offering.
Executive Committee
Upon the completion of this offering, our Executive Committee will consist of Messrs. Mullin (Chairman), Peck, Egan and Rajpal. The purpose of our Executive Committee will be to possess and exercise, during the intervals between meetings of the full Board of Directors, the powers and authority of the Board of Directors to the extent permitted by our Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, any stockholders agreement then in effect and governing law. The Committee shall also perform such other duties as may be directed by the Board of Directors from time to time.
Our Board of Directors will adopt a written charter for the Executive Committee, which will be available on our website upon completion of this offering.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee are current or former officers or employees of our Company. We are parties to certain transactions with the Sponsors described in Certain Relationship and Related Transactions section of this prospectus.
Code of Business Conduct and Ethics
We are amending our Code of Business Conduct and Ethics that applies to all of our officers and employees, including our principal executive officer, principal financial officer and principal accounting officer to comply with the rules and regulations governing a public company. Upon completion of this offering, our Code of Business Conduct and Ethics will be available on our website. Our Code of Business Conduct and Ethics will be a code of ethics, as defined in Item 406(b) of Regulation S-K. Please note that our website address is provided as an inactive textual reference only. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on our website.
Compensation Discussion and Analysis
The information contained in this Compensation Discussion and Analysis describes the material elements of compensation paid or awarded to our principal executive officer, principal financial officer and the other three most highly compensated executive officers (collectively, our named executive officers or NEOs) for the twelve months ended December 31, 2014.
For 2014 our named executive officers are:
| Mr. James M. Peck President and Chief Executive Officer |
| Mr. Samuel A. Hamood Executive Vice President and Chief Financial Officer |
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| Mr. Christopher A. Cartwright Executive Vice PresidentU.S. Information Services |
| Mr. Gerald M. McCarthy, Jr. Executive Vice PresidentHealthcare |
| Mr. John T. Danaher Executive Vice PresidentConsumer Interactive |
The specific amounts and material terms of such compensation paid, payable or awarded for 2014 to the named executive officers are disclosed under Executive CompensationSummary Compensation Table2014 and the subsequent tables and narrative. The Compensation Committee of the board of directors of TransUnion (the Compensation Committee) oversees the compensation program for our named executive officers.
Executive Summary
The Compensation Committee has adopted an executive compensation program that is intended to align the interests of our executives, stockholders and other stakeholders by rewarding executives for the achievement of strategic goals that successfully impact our operations and business results and, thereby, enhance stockholder value without encouraging excessive risk-taking. The primary components of our executive compensation program for the named executives are base salary, annual cash incentives, employee benefits (health and retirement) and long-term equity awards, which consist of stock options.
Key Compensation Elements
We provide named executive officers and other employees with a base salary to compensate them for services rendered during the fiscal year. The Compensation Committee annually evaluates the performance of our NEOs and determines their base salaries and other compensation in light of our strategic goals and objectives, the available market information for their positions and the goals of our executive compensation program. Our CEO recommended, and the Compensation Committee approved, salary increases for Mr. Hamood and Mr. Danaher in 2014. The increases are described later in the section under 2014 CompensationBase Salary. No other NEOs received an increase in their base salary for the twelve months ended December 31, 2014.
Our annual cash incentives are designed to reward executive officers based on individual performance (as measured against individual goals) and our overall financial results (as measured against financial targets). The incentive targets, which are set annually with the review and approval of the Compensation Committee, are intended to highlight key strategic priorities and financial metrics. The percentage of target total cash compensation for the NEOs approved by the Compensation Committee as performance-based pay (the annual incentive bonus) represented 50% of the total cash compensation for Mr. Peck and 47% on average for the other NEOs.
We have used stock options or restricted stock as a long-term incentive vehicle to create a strong alignment between managements interests and those of our stockholders and other stakeholders. In connection with the sale of the Company on April 30, 2012, most executives received a stock option or restricted stock grant on August 1, 2012. NEOs that joined the Company after that initial grant were granted options upon their employment. In all cases, vesting in those options is based on the passage of time and attainment of certain pre-determined performance metrics, as discussed below under 2014 CompensationLong-Term Equity Plan. In 2014, Mr. McCarthy received a stock option grant in connection with his employment (with the service vesting start date tied to his date of employment). Mr. Danaher also received a grant in 2014, the purpose of which was to better align his total equity awards with similar positions in the market. The service vesting start of the 2014 award began at the time of the grant, April 15, 2014. All stock option grants made in 2014 were made with the intention of providing equity compensation for approximately a five-year period of time.
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Compensation Philosophy and Objectives
We design the compensation program for our NEOs to attract, motivate and retain the key executives who drive the success of our company. In connection therewith, the Compensation Committee has identified the following key components of our compensation philosophy, which are used to guide the Compensation Committee in making compensation decisions. The Compensation Committee evaluates these objectives on an annual basis to confirm the appropriateness of each objective in light of the overall corporate strategy and typical market practices.
| Attract, motivate and retain highly experienced executives who are vital to our short- and long-term success, profitability and growth. |
| Create alignment with executives, our stockholders and our other stakeholders by rewarding executives for the achievement of strategic goals that successfully drive our strategy, operations and business performance and, thereby, enhance shareholder value. |
| Differentiate rewards based on actual individual performance while also rewarding executives for our overall results. |
| Discourage unnecessary and excessive risk-taking. |
Role of Compensation Committee, Management and Compensation Consultant in Compensation Decisions
The Compensation Committee was created to provide stewardship over our compensation and benefit programs, including executive compensation and equity plans. Pursuant to its Charter, the Compensation Committee is responsible for overseeing our executive compensation program, developing and reviewing our executive compensation philosophy and approving decisions regarding executive compensation. As part of this responsibility, the Compensation Committee evaluates the performance of our President and Chief Executive Officer (the CEO) and determines his compensation in light of our strategic goals and objectives and the executive compensation program. The Compensation Committee also annually reviews and approves all compensation decisions affecting our executive officers who report directly to our CEO, including our named executive officers.
Additionally, the Compensation Committee performs the following functions in carrying out its responsibilities:
| Reviews annually the components of our executive compensation programs to determine whether they are consistent with our compensation philosophy; |
| Reviews and approves corporate goals and objectives relevant to the CEOs compensation, including annual performance objectives; |
| Recommends to the Board of Directors the creation or amendment of any compensation or employee benefit program which permits participation of the named executive officers or any other executive whose compensation is determined by the Compensation Committee; and |
| Reviews, approves, and monitors any employment, separation or change-in-control severance agreements. |
The Compensation Committee is ultimately responsible for making the compensation decisions. However, in making its decisions, the Committee seeks and considers input from senior management and Meridian Compensation Partners, LLC (Meridian), an independent compensation consultant.
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The executive officers play an important role in the compensation decision-making process because management has direct involvement with and in-depth knowledge of our business strategy, goals, and performance. Executive management regularly participates in the compensation decision-making process in the following specific respects:
| The CEO reports to the Compensation Committee with respect to his evaluation of the performance of our senior executives, including the other named executive officers (other than the CEO). Together with the Executive Vice President of Human Resources, the CEO makes recommendations as to compensation decisions for these individuals, including base salary levels and the amount and mix of incentive awards; |
| The CEO develops recommended performance objectives and targets for our incentive compensation programs; and |
| The CEO and the Executive Vice President of Human Resources recommend long-term equity grants for executive officers, other than the CEO, as well as modifications to our employee benefit programs, for approval by the Compensation Committee. |
Meridians engagement includes reviewing and advising on executive compensation matters principally related to the CEO, the executive officers, and outside directors. For 2014, Meridian assisted the Compensation Committee by (a) recommending a peer group for benchmarking purposes and (b) providing peer group data, including an analysis of total direct compensation (base salary, annual cash incentives and long-term equity awards). Meridian also assists the Compensation Committee in review of general market practices and management compensation proposals.
Market Analysis and Benchmarking
The Compensation Committee uses various tools and methods, such as benchmarking reports and tally sheets, to evaluate whether each named executive officers level of pay is appropriate. Base salary, annual bonus goals and long-term equity awards, which are reflected in these tally sheets, are each specifically designed to meet our compensation objectives.
Benchmarking
Percentile Goals
The Compensation Committee has approved the following target percentile for each pay component to support our compensation objectives.
Pay component |
Target percentile of custom peer group |
|
Base salary |
50 th Percentile | |
Target annual bonus |
50 th Percentile | |
Long-term equity |
65 th Percentile |
We recognize the 50 th percentile market value for cash compensation as a point of reference and not necessarily the definitive compensation level. Consequently, our NEOs compensation may be positioned at a level less than or greater than the target percentiles noted here based on time in position, experience and competitive pay objectives, as well as other factors.
The Compensation Committee has also determined that targeting the 65 th percentile for long-term equity grants is appropriate to attract and retain the desired level of management talent, as well as aligning management incentives to focus on our long-term objectives, by having a greater percentage of pay aligned to longer term value creation.
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Peer Group
The following peer group was approved by the Compensation Committee (the Custom Peer Group) in 2013 and again in 2014 to be used in reviewing and benchmarking the various 2014 pay components against the targeted percentiles above.
Acxiom Corporation |
Experian Group Limited | Solera, Inc. | ||
Cardtronics, Inc. |
Fair Isaac Corporation | Synovus Financial Corporation | ||
Convergys Corporation |
Global Payments, Inc. | TeleTech Holdings, Inc. | ||
CoreLogic, Inc. |
IFC International, Inc. | Total System Services, Inc. | ||
Deluxe Corporation |
IHS, Inc. | Valassis Communications, Inc. | ||
DST Systems, Inc. |
Moodys Corporation | Verisk Analytics, Inc. | ||
The Dun & Bradstreet Corporation |
On Assignment, Inc. | |||
Equifax, Inc. |
Paychex, Inc. |
The median revenue of these companies was approximately $1.4 billion, compared with the Companys 2014 revenue of $1.3 billion. The Custom Peer Group was selected to be representative of the business services, technology and financial services sectors in which we compete and participate. Criteria that were considered in order to properly select component companies for the Custom Peer Group are:
| industry competitors; |
| labor market competitors; |
| competitors for capital; and |
| revenue size. |
Use of Tally Sheets
In 2014, the Compensation Committee reviewed individual worksheets and corresponding tally sheets for each senior executive officer, including the named executive officers. These worksheets, which are prepared by management, provide a summary of the current and historical amounts of each component of pay. In 2014, the Committee did not recommend or approve changes to our named executive officers compensation based on its review of this information. Rather, the Committee reviewed the tally sheets as a tool to confirm that pay objectives continue to be aligned with the long-term interests of the stockholders and our other stakeholders.
Independence of the Compensation Consultant
Meridian performs services solely on behalf of the Compensation Committee and does not provide any other services to us. The Compensation Committee has assessed the independence of Meridian and concluded that no conflict of interest exists that would prevent Meridian from independently representing the Compensation Committee.
2014 Compensation
Base Salary
As described above, we provide each of the named executive officers with a base salary to compensate them for services rendered in their position during the year. Each year, the Compensation Committee evaluates the performance of the CEO and determines his base salary and other compensation in light of our goals and objectives and the executive compensation program. The Compensation Committee also reviews each other named executive officers base salary annually based on a recommendation from the CEO and in light of current market conditions, and adjusts the
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base salary where appropriate. The CEO generally recommends a base salary increase for the other named executive officers when supported by strong individual performance and/or executive promotion, or when supported by the external market data.
For 2014, the CEO recommended a base pay increase for two NEOs. Based upon Mr. Hamoods expansion of responsibilities beyond that of CFO to include the management of our call center and shared services function, the Compensation Committee approved a $30,000 increase to his base salary. The Compensation Committee also approved increasing Mr. Danahers base salary by $40,000, with the goal of better aligning his salary to our comparators. Both of these base salary increases were effective February 22, 2014. The Compensation Committee did not increase the base salary for the CEO position since it fell within a reasonable range of the target percentile for the Custom Peer Group. For 2015, Mr. Danahers salary was increased by $50,000, with an effective date of January 1, 2015. This increase was granted to position his salary closer to the 50th percentile of our comparator group, which is our stated philosophy. Effective June 1, 2015, Mr. Pecks base salary will be increased by $50,000 and Mr. Hamoods base salary will be increased by $50,000. In approving the increase for Mr. Peck, the Compensation Committee took into account that his base salary had not been increased since joining the Company in 2012 and that the increase will bring his base salary better in line with our peer group. Mr. Hamoods base salary increase was granted to better align his base salary with our peer group and in recognition of his role in our Companys transformation over the last several years.
2014 Annual Bonus Plan
Annual bonus compensation is designed to reward executive officers based on actual individual performance and our overall financial results. Our overall financial performance is measured by our achievement of financial targets established under the annual incentive plan by the Compensation Committee. Additionally, individual and other qualitative goals are set to successfully drive our operations and business results to achieve the overall corporate strategy. All of the named executive officers participate in the annual incentive plan. Under the plan, the named executive officers are paid cash incentive awards to the extent we meet or exceed financial and non-financial performance goals set by the Compensation Committee at the beginning of each year. Under the annual incentive plan, each officers bonus is determined by multiplying his target bonus percentage by his annual salary as of the beginning of the year and then by multiplying this result by his percentage achievement with respect to his bonus targets and goals, so long as a threshold level of performance is achieved. Individual awards may then be adjusted by the Compensation Committee, based on a recommendation from the CEO. However, no adjustments were made in 2014.
Target bonus levels
Each executive is assigned a target bonus expressed as a percentage of their base pay at the beginning of the year. The target is determined by the Compensation Committee after consideration of several factors, including the individual executives duties and responsibilities and market data. The bonus targets for 2014 were set within a reasonable range of the target percentile for the Custom Peer Group. The following table illustrates the target bonus as a percentage of base pay for each named executive officer for the 2014 performance period.
Executive |
2014 Target Bonus as Percent
of Base Salary |
|
Mr. Peck |
100% | |
Mr. Hamood |
90% | |
Mr. Cartwright |
100% | |
Mr. McCarthy (1) |
75% | |
Mr. Danaher |
75% |
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(1) | Mr. McCarthy began his employment with TransUnion on July 1, 2014, and as a component of his employment offer from the Company, his target bonus (to be paid in 2015) will be 75% of his base salary in 2014, prorated based upon his employment date. |
Objectives, weighting and potential payouts
Each executives individual goals and objectives vary based on their individual roles within our company. The following table defines the various financial and non-financial objectives that the Compensation Committee approved for the 2014 performance period. For each objective, the named executive officer has the opportunity to achieve a maximum of two times the individual weighting associated with that objective. If threshold performance is not achieved, no payment is made on that objective.
Objective |
Definition |
|
Further Adjusted Corporate EBITDA |
Earnings before interest, taxes, depreciation and amortization, and other adjustments deemed by management and the board to be extraordinary for bonus plan purposes | |
Further Adjusted Corporate Revenue |
The overall corporate revenues adjusted by management and the board for items deemed to be extraordinary for bonus plan purposes | |
Further Adjusted USIS EBITDA |
Earnings before interest, taxes, depreciation and amortization, and other adjustments for bonus plan purposes for the USIS business | |
Further Adjusted USIS Revenue |
The revenues and other adjustments for bonus plan purposes for the USIS business | |
Further Adjusted Healthcare EBITDA |
Earnings before interest, taxes, depreciation and amortization, and other adjustments for bonus plan purposes for the Healthcare business | |
Further Adjusted Healthcare Revenue |
The revenues and other adjustments for bonus plan purposes for the Healthcare business | |
Further Adjusted Consumer Interactive EBITDA |
Earnings before interest, taxes, depreciation and amortization, and other adjustments for bonus plan purposes for the Consumer Interactive business | |
Further Adjusted Consumer Interactive Revenue |
The revenues and other adjustments for bonus plan purposes for the Consumer Interactive business | |
Growth Strategy Initiatives |
Projects that support the development of growth strategy initiatives, including business cases, action plans and specific, budgeted growth targets that are accretive in 2015 with a plan to additional growth in future years. | |
Major Project Deliverables |
Ability to deliver specific tangible projects within a performance period |
The objectives of Further Adjusted Corporate EBITDA and Further Adjusted Corporate Revenue were selected by the Compensation Committee to appropriately provide incentive rewards to executives based on achievement of corporate goals in the context of our overall corporate strategy. Similarly on a business level, Further Adjusted Corporate EBITDA and Further Adjusted Corporate Revenue were deemed to be the appropriate financial measures. The Compensation Committee set the performance measures in the table above at targets that were reasonably difficult to achieve given the business environment at the time the targets were established.
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Mr. Peck recommended the use of non-financial objectives related to key projects as goals for the 2014 performance period. The Compensation Committee approved these goals because they were aligned to our corporate strategy and achievement of these goals was intended to aid in creating shareholder value. The goals were set in a manner that would ensure that, if delivered, they would significantly advance our strategic objectives. Each executive had a set of Growth Strategy Initiatives and/or Major Project Deliverables specifically tied to his ability to affect our corporate strategy. Additionally, stretch goals were designed to provide the executive the opportunity to achieve payouts for performance that exceeded 100% of these non-financial goals. The stretch goals were set to be attainable only with superior performance.
The following table is a summary of how each of the above objectives was weighted for each named executive officer and their actual achievement against each objective for the 2014 performance period. Each individual executives objective weightings are determined based on his specific roles, duties, and responsibilities. The various weightings are meant to reflect the influence that the executives performance may actually have on the metric. The Compensation Committee believes this strengthens the direct link between pay and performance.
Executive |
Objective |
Weighting | Achievement | |||||||
Mr. Peck, President & Chief Executive Officer |
Further Adjusted Corporate EBITDA | 50 | % | 146 | % | |||||
Further Adjusted Corporate Revenue | 20 | % | 74 | % | ||||||
Growth Strategy Initiatives | 30 | % | 100 | % | ||||||
Mr. Hamood,
|
Further Adjusted Corporate EBITDA | 50 | % | 146 | % | |||||
Further Adjusted Corporate Revenue | 20 | % | 74 | % | ||||||
Growth Strategy Initiatives | 30 | % | 100 | % | ||||||
Mr. Cartwright,
|
Further Adjusted Corporate EBITDA | 20 | % | 146 | % | |||||
Further Adjusted USIS EBITDA | 25 | % | 82.5 | % | ||||||
Further Adjusted USIS Revenue | 20 | % | 54 | % | ||||||
Growth Strategy Initiatives | 25 | % | 100 | % | ||||||
Major Project Deliverables | 10 | % | 100 | % | ||||||
Mr. McCarthy,
|
Further Adjusted Corporate EBITDA | 20 | % | 146 | % | |||||
Further Adjusted Healthcare EBITDA | 25 | % | 200 | % | ||||||
Further Adjusted Healthcare Revenue | 20 | % | 156 | % | ||||||
Growth Strategy Initiatives | 25 | % | 100 | % | ||||||
New Product Growth | 5 | % | 100 | % | ||||||
Acquisition Integration | 5 | % | 200 | % | ||||||
Mr. Danaher,
|
Further Adjusted Corporate EBITDA | 20 | % | 146 | % | |||||
Further Adjusted Consumer Interactive EBITDA | 25 | % | 200 | % | ||||||
Further Adjusted Consumer Interactive Revenue | 20 | % | 200 | % | ||||||
Growth Strategy Initiatives | 25 | % | 200 | % | ||||||
Major Project Deliverables | 10 | % | 200 | % |
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Based upon the weightings above, each named executive officer had the ability to achieve 100% of his target bonus if target performance was achieved. However, a named executive officers actual bonus payout increased or decreased based on individual performance, and Company and specific business financial performance. The maximum bonus payout was 200% of target bonus and no bonus was payable if threshold performance was not met.
The following tables represent what the payout, as a percentage of target, would be if our financial performance was achieved at threshold, target, or maximum levels for two objectives: Further Adjusted Corporate EBITDA and Further Adjusted Corporate Revenue. No payout would result if performance was below threshold levels. The tables include the dollar amount that was required for achievement at each level in 2014.
Further Adjusted Corporate EBITDA (dollars in millions)
The Compensation Committees intent with establishing both the financial and non-financial goals and target percentages is to provide a comparable level of difficulty in achieving the goals and receiving annual incentive awards for each named executive officer annually. However, payment of annual incentives will vary from year to year and may or may not be consistent with historical payment trends.
Twelve Months Ended December 31, 2014 Company Performance
For the year ended December 31, 2014, TransUnion reported Further Adjusted Corporate EBITDA, as defined in the Objectives, weighting and potential payouts table included above under the description of our 2014 Annual Bonus Plan, of $452.4 million on Further Adjusted Corporate Revenue, as defined in the Objectives, weighting and potential payouts table, of $1,322.4 million compared with Further Adjusted Corporate EBITDA of $418.3 million on Further Adjusted Corporate Revenue of $1,202.6 million for the year ended December 31, 2013, an increase of 8.2% in Further Adjusted Corporate EBITDA and 10.0% in Further Adjusted Corporate Revenue. While we achieved our EBITDA target, and despite Further Adjusted Corporate Revenue growth of 10.0%, we did not achieve our revenue target in 2014 as set by the Compensation Committee. However, Further Adjusted Corporate Revenue was achieved at a level above the threshold level of performance.
U.S. Information Services (USIS) reported Further Adjusted USIS EBITDA, as defined in the Objectives, weighting and potential payouts table included above under the description of our 2014 Annual Bonus Plan, of $347.9 million on $740.1 million of Further Adjusted USIS Revenue, the Healthcare business reported Further Adjusted Healthcare EBITDA, as defined in the Objectives, weighting and potential payouts table included above of $37.6 million on $81.0 million of Further Adjusted Healthcare
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Revenue and the Consumer Interactive business reported Further Adjusted Consumer Interactive EBITDA, as defined in the Objectives, weighting and potential payouts table included above of $90.3 million on $230.6 million of Further Adjusted Consumer Interactive Revenue.
As a result of this financial performance and achievement of non-financial corporate objectives, our named executives achieved annual cash incentives of 96% to 189% of their target opportunities.
Actual Payout Under 2014 Annual Bonus Plan
At the end of the performance period, Mr. Peck evaluated each of the named executive officers in conjunction with the individuals own self-evaluation. Based on Mr. Pecks evaluation, with input from others including the named executive officer, Mr. Peck rated the executives individual objectives against the executives performance goals. Based on this assessment, Mr. Peck recommended to the Compensation Committee a performance evaluation rating, as a percentage of total qualified goal bonus opportunity, for each executive. Additionally, the Compensation Committee reviewed Mr. Pecks performance and determined a level of performance against his qualitative performance goals.
Taking into account the financial performance results and Mr. Pecks evaluation and recommendation, the Compensation Committee met in February 2015 to set and approve annual bonus payments to each of the named executive officers and evaluate Mr. Pecks 2014 performance. In February 2015, the Compensation Committee approved annual bonus payments to the named executive officers ranging from 96% to 189% of the named executive officers target opportunity based upon 2014 performance. The annual bonus payments were paid in February 2015. The payouts are also reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
All of our named executive officers had financial goals related to our overall consolidated Further Adjusted Corporate EBITDA. The following describes the additional goals and performance results for each of our NEOs.
Mr. Pecks annual incentive payout was $1,060,200, or 118% of his target award. Mr. Peck received a bonus based upon Further Adjusted Corporate EBITDA, Further Adjusted Corporate Revenue and delivering EBITDA growth strategy plans for 2015 and 2016, which he was deemed to have attained the target for that goal.
Mr. Hamoods annual incentive payout was $530,100, or 118% of his target award. Mr. Hamood had financial goals related to our overall consolidated Further Adjusted Corporate EBITDA, Further Adjusted Corporate Revenue performance and delivering EBITDA growth in line with our strategic plans for 2015 and 2016. Embedded in our 2015 and 2016 plans were Growth Strategy Initiatives related to executing on key M&A deals, and the closure of one call center and migration of responsibilities to another. Mr. Hamood was deemed to have met these goals by successfully delivering a growth strategy plan with business cases and monitoring processes and was paid at 100% of the target payout. In addition, the CEO recommended, and the Compensation Committee approved, a $50,000 discretionary bonus for Mr. Hamood based upon his contributions throughout the year on various initiatives, which was paid with the bonus payment in February 2015.
Mr. Cartwrights annual incentive payout was $669,375, or 96% of his target award. Mr. Cartwright had additional financial goals related to Further Adjusted USIS EBITDA and Further Adjusted USIS Revenue. The threshold for the Further Adjusted USIS EBITDA target was exceeded and as a result, he achieved 82.5% of the targeted payout for this goal. Mr. Cartwright also exceeded the threshold target for Further Adjusted USIS Revenue and therefore received 54% of the targeted payout for this goal. It was also determined that Mr. Cartwright achieved the Growth Strategy Initiatives set for USIS and therefore that goal was paid at 100%. In addition, Mr. Cartwright achieved his goal of successfully integrating an acquisition and delivering upon a goal related to human capital. For those efforts, he was paid at target for Major Project Deliverables.
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Mr. McCarthys annual incentive payout was $240,640, or 150% of his target award, which was pro-rated based upon his employment date. Mr. McCarthy had additional financial goals related to Further Adjusted Healthcare EBITDA and Further Adjusted Healthcare Revenue. The threshold Further Adjusted Healthcare EBITDA target was exceeded and as a result, Mr. McCarthy achieved 200% of the targeted payout for this goal. The threshold target was also exceeded for Further Adjusted Healthcare Revenue and therefore Mr. McCarthy received 156% of the targeted payout for this goal. It was determined that Mr. McCarthy achieved the Growth Strategy and New Product Growth targets, and therefore was paid at target for these goals. Mr. McCarthy exceeded his goal of successfully integrating an acquisition and delivering on its business case. For those efforts, he was paid the maximum for that goal.
Mr. Danahers annual incentive payout was $496,650, or 189% of his target award. Mr. Danaher had additional financial goals related to Further Adjusted Consumer Interactive EBITDA and Further Adjusted Consumer Interactive Revenue. The threshold for the Further Adjusted Consumer Interactive EBITDA target was exceeded and as a result, he achieved 200% of the targeted payout for this goal. Mr. Danaher also exceeded the target for Further Adjusted Consumer Interactive Revenue and therefore received 200% of the targeted payout for this goal. It was also determined that Mr. Danaher exceeded the Growth Strategy Initiatives set for Consumer Interactive and therefore that goal was paid at 200%. In addition, Mr. Danaher exceeded his goal of implementing new approaches to improve direct-to-consumer growth and upgrading key talent. For those efforts, he was paid at maximum for these goals.
Long-Term Equity Plan
Stock Option Grants
Stock options align the interests of our named executive officers with those of stockholders because the options only have value if the price of our stock increases after the options are granted. In general, we have granted stock options to the NEOs with the intention of providing equity compensation for approximately a five-year period of time.
In connection with the 2012 Change in Control Transaction, on August 1, 2012, Mr. Hamood and Mr. Danaher received a stock option grant. Messrs. Peck, Cartwright and McCarthy received their respective grants upon joining us. These grants were the results of negotiations between management, GS and Advent (in connection with the 2012 Change in Control Transaction), or as negotiated at time of hire and approved by the Compensation Committee, and are designed to reward executives for increasing shareholder and stakeholder value, by providing them an incentive to keep focused on our long-term value. Mr. McCarthy received a grant in 2014, in connection with his employment with TransUnion, and Mr. Danaher received a grant to align him with our comparators. Beyond these two individuals, no other NEO received a grant in 2014.
Forty percent (40%) of each option grant to an NEO is subject to time-based vesting and shall vest as follows: twenty percent (20%) shall vest on the later of the first anniversary date of the 2012 Change in Control Transaction or on the first anniversary of the NEOs hire date. Thereafter, five percent (5%) shall vest on the last day of each subsequent full calendar quarter until all the time-vested options have vested. For Mr. Hamoods and Mr. Danahers 2012 grants, the first anniversary was April 30, 2013. For Messrs. Peck, Cartwright and McCarthy, the first anniversary was or will be December 31, 2013, August 19, 2014 and July 1, 2015, respectively. For Mr. Danahers 2014 grant, the first anniversary was April 15, 2015. The remaining sixty percent (60%) of the options are subject to performance-based vesting. The options will vest according to the time vesting schedule set forth above and upon the attainment of performance criteria as defined in the Stock Option Agreement.
For Messrs. Peck, Hamood and Danaher, the option exercise price equals the per share price in the 2012 Change in Control Transaction, as adjusted for a November 1, 2012 dividend payment to
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stockholders, which the Board determined to be fair market value. Mr. Cartwrights, Mr. McCarthys and Mr. Danahers (his 2014 grant) exercise price was equal to the fair market value of the Companys common stock as of the date of their respective grants. All options granted to our NEOs expire ten years from the date of the grant.
Managements Stock Ownership Requirements
In connection with the 2012 Change in Control Transaction, any named executive officer (who was employed by us at the time of the transaction) was required by GS and Advent to roll over a portion of their option proceeds and common stock holdings, which would otherwise have been cashed out, into shares of TransUnion common stock. Mr. Hamood rolled-over a value equal to approximately 30% of his after-tax proceeds received in the 2012 Change in Control Transaction. As a component of Mr. Pecks employment agreement, Mr. Peck purchased $1.325 million of common stock in TransUnion on December 31, 2012 and an additional $0.175 million on March 26, 2013. In addition, as a component of Mr. Cartwrights employment offer, Mr. Cartwright purchased $1.0 million of common stock in TransUnion. This required equity rollover and the stock purchases were intended to further align management with stockholder and other stakeholder interests.
Executive Benefits and Perquisites
The named executive officers do not receive any additional benefits or perquisites beyond what is provided on a broad basis, other than the opportunity to participate in a self-directed deferred compensation program designed to defer currently earned compensation to enhance payments made to the executive upon their retirement or termination from the Company. Providing any other additional benefits or perquisites would not support our compensation philosophy.
Retirement Plan
We maintain a broad-based 401(k) savings and retirement plan (the 401(k) Plan) in which all associates, including the named executive officers, may participate. The Internal Revenue Code of 1986, as amended (the Code) places certain limits on the amount of contributions that may be made by and on behalf of the named executive officers to the 401(k) Plan. To extend the named executive officers retirement benefit beyond the contribution limits set under the Code, we created the Nonqualified Retirement and 401(k) Supplemental Plan (the Supplemental Plan). Under the Supplemental Plan, each named executive officer may defer all or some portion of their cash compensation that the executive officer was not otherwise permitted to defer under the 401(k) Plan to provide additional retirement savings. We make a matching contribution to the Supplemental Plan consistent with our 401(k) matching contributions. Additionally, similar to the 401(k) Plan, the Compensation Committee may authorize us to make a discretionary contribution on behalf of the named executive officers to the Supplemental Plan at the end of the year.
Employment Agreement with Mr. Peck
Mr. Peck entered into an employment agreement with the Company which reflected his agreement to become CEO effective as of December 31, 2012. The initial term of the agreement expires on December 31, 2015, but will continue to renew automatically for twelve-month intervals, unless either party to the agreement provides notice of non-renewal at least 180 days before the day that would be the last day of the agreement.
Mr. Pecks agreement provides a minimum base salary, the eligibility to participate in our annual incentive plan for executive officers, a sign-on bonus and payment for expenses associated with his relocation. In addition, the agreement provides for severance provisions, which are identical to those provided to the other named executive officers. The severance provisions are discussed under 2014 CompensationSeverance and Change-in-Control Compensation.
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The agreement includes confidentiality and nonsolicitation provisions intended to protect our interests. The specifics of the compensation provided under Mr. Pecks employment agreement are detailed in the narrative accompanying Executive CompensationPayments Upon Termination or Change-in-Control2014.
Severance and Change-in-Control Compensation
In connection with the 2012 Change in Control Transaction or upon employment, and as required by and negotiated with our owners, select named executive officers, other than Mr. Peck, continued or entered into a Severance and Restrictive Covenant Agreement (the Severance Agreement). These Severance Agreements are designed to maximize retention of the named executive officers. The terms of the Severance Agreements are summarized under Executive CompensationPayments Upon Termination or Change-in-Control2014 and the accompanying narrative.
Federal Income Tax Considerations
We have not been subject to the federal income tax provisions of Code Section 162(m). Therefore, we have not made compensation decisions based on the deductibility limitations of the compensation under this section of the Code. Although the Compensation Committee will strive to have all compensation be deemed deductible, deductibility does not drive the compensation decisions for our executive team.
Risk Assessment in Compensation Programs
We have designed our compensation programs, including our incentive compensation plans, with specific features to address potential risks while rewarding employees for achieving long-term financial and strategic objectives through appropriate risk taking. The following elements have been incorporated in our programs available for our named executive officers:
| A Balanced Mix of Compensation Components The target compensation mix for our executive officers is composed of salary, annual cash incentives and long-term equity awards, representing a mix that is not overly weighted toward short-term cash incentives. |
| Multiple Performance Factors Our incentive compensation plans use both company-wide metrics and individual performance, which encourage focus on the achievement of objectives for the overall benefit of the company: |
| The annual cash incentive is dependent on multiple performance metrics including Further Adjusted Corporate EBITDA and Further Adjusted Corporate Revenue, as well as individual goals related to specific strategic or operational objectives. |
| The option grants vest over a five-year period of time, complementing our annual cash based incentives. |
| Capped Incentive Awards Annual incentive awards are capped at 200% of target. |
| Stock Ownership Each named executive officer employed by us prior to 2014 has purchased a significant amount of our common stock in connection with their status as a senior executive officer of the Company. We believe this ownership aligns the interests of our executive officers with the long-term interests of stockholders and other stakeholders. |
Based on these factors, the Compensation Committee, in consultation with management and Meridian, concluded that our compensation programs are appropriate for our industry and do not create risks that are reasonably likely to have a material adverse effect on TransUnion.
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Compensation Committee Report
The Compensation Committee of the Board of Directors of TransUnion has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Prospectus.
Steven Tadler, Chairperson
Sumit Rajpal, Committee Member
Andrew Prozes, Committee Member
Executive Compensation
Summary Compensation Table2014
The following table presents information regarding the annual compensation for services to us, in all capacities, of our named executive officers. The amounts in the Stock Awards and Option Awards and Non-Equity Incentive Plan Compensation columns are further explained in the narrative following Grants of Plan-Based Awards2014.
Name and Principal Position |
Year |
Salary
(1)
($) |
Bonus
($) |
Stock
Awards ($) |
Option
Awards (2) ($) |
Non-Equity
Incentive Plan Compensation (3) ($) |
Change in
Pension Value and Nonqualified Deferred Compensation Earnings ($) |
All Other
Compensation (4) ($) |
Total
($) |
|||||||||||||||||||||||||||
James M. Peck (5) |
2014 | 900,000 | | | | 1,060,200 | | 221,995 | 2,182,195 | |||||||||||||||||||||||||||
President & CEO |
2013 | 865,385 | 2,100,000 | | | 900,000 | | 81,998 | 3,947,383 | |||||||||||||||||||||||||||
2012 | | 2,100,000 | | 5,455,415 | | | | 7,555,415 | ||||||||||||||||||||||||||||
Samuel A. Hamood (6) |
2014 | 494,231 | 50,000 | | | 530,100 | | 77,705 | 1,152,036 | |||||||||||||||||||||||||||
Executive Vice |
2013 | 470,000 | | | | 352,500 | | 77,726 | 900,226 | |||||||||||||||||||||||||||
President & Chief Financial Officer |
2012 | 466,154 | | | 1,554,328 | 687,375 | | 69,744 | 2,777,601 | |||||||||||||||||||||||||||
Christopher A. Cartwright (7) |
2014 | 700,000 | | | | 669,375 | | 1,190,804 | 2,560,179 | |||||||||||||||||||||||||||
Executive Vice President, U.S. Information Services |
2013 | 228,846 | 2,231,408 | | 3,168,720 | 209,344 | | 26,381 | 5,864,699 | |||||||||||||||||||||||||||
Gerald M. McCarthy, Jr. (8) |
2014 | 194,519 | | | 1,719,549 | 240,640 | | 135 | 2,155,216 | |||||||||||||||||||||||||||
Executive Vice President, Healthcare |
||||||||||||||||||||||||||||||||||||
John T. Danaher |
2014 | 342,281 | | | 380,188 | 496,650 | | 18,752 | 1,237,871 | |||||||||||||||||||||||||||
Executive Vice President, Consumer Interactive |
2013 | 307,293 | | | | 176,806 | | 18,210 | 502,309 | |||||||||||||||||||||||||||
2012 | 286,870 | | | 477,033 | 237,322 | | 17,860 | 1,019,085 | ||||||||||||||||||||||||||||
(1) | The amounts shown in this column represent annual base salary. These amounts are not reduced to reflect the NEOs elections, if any, to defer receipt of salary under the TransUnion 401(k) & Savings Plan and/or the Trans Union LLC 401(k) and Supplemental Retirement Plan. |
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(2) | The amounts shown in this column represent the aggregate grant date fair value of option awards granted to the NEO during 2014 and, where applicable, the incremental fair value of the subsequent modification computed in accordance with (ASC) Topic 718, CompensationStock Compensation . Further details regarding these grants and the assumptions used to determine their fair value can be found in the narrative disclosure following the Grants of Plan-Based Awards table below. |
(3) | The amounts shown in this column represent amounts paid under the Annual Incentive Plan for the year shown and are paid at the beginning of the following year. Amounts shown are not reduced to reflect the NEOs elections, if any, to defer receipt of salary under the TransUnion 401(k) & Savings Plan and/or the Trans Union LLC 401(k) and Supplemental Retirement Plan. |
(4) | Information regarding the amounts shown in this column can be found in the Detailed Analysis of All Other Compensation Column table and accompanying narrative to that table. |
(5) | Mr. Peck joined us on December 31, 2012 and therefore received no base salary for 2012. Per his employment agreement, Mr. Peck was paid a base salary of $900,000 in both 2013 and 2014, but due to his start date and the timing of payroll processing cycles, the actual amount he received was $34,615 less in 2013 than in 2014. |
(6) | In addition to Mr. Hamoods Annual Incentive Plan payout, he was paid a discretionary bonus based upon his contributions throughout the year. |
(7) | Mr. Cartwright joined us on August 19, 2013 and thus his annual base salary of $700,000 was prorated based upon his start date. |
(8) | Mr. McCarthy joined us on July 1, 2014 and thus his annual base salary of $425,000 was prorated based upon his start date. |
Detailed Analysis of All Other Compensation Column
Name |
Company
Match & Retirement Contribution to Qualified 401(k) Savings Plan (1) ($) |
Company
Match & Retirement Contribution to Non-Qualified Retirement Plan (2) ($) |
Group
Term Life Imputed Income (3) ($) |
Payment &
gross-up on Medicare Tax related to contributions into Non- Qualified Retirement Plan (4) ($) |
Company
Contributions to Charitable Matching Program (5) ($) |
Company
Reimbursed Relocation Expenses (6) ($) |
Total
($) |
|||||||||||||||||||||
James M. Peck |
18,200 | 42,730 | 552 | 1,713 | | 158,800 | 221,995 | |||||||||||||||||||||
Samuel A. Hamood |
18,200 | 56,582 | 360 | 938 | 1,625 | | 77,705 | |||||||||||||||||||||
Christopher A. Cartwright |
18,200 | 66,158 | 360 | 1,975 | | 1,104,111 | 1,190,804 | |||||||||||||||||||||
Gerald M. McCarthy, Jr. |
| | 135 | | | | 135 | |||||||||||||||||||||
John T. Danaher |
18,200 | | 552 | | | | 18,752 |
(1) | For 2014, we matched 100% of the first 3% and 50% of the next 2% percent of recognizable compensation (subject to the 2014 Internal Revenue Code limit of $260,000) contributed on a pre-tax basis to the tax-qualified TransUnion 401(k) & Savings Plan. Additionally, in 2014, we made a discretionary 3% retirement contribution of recognizable 2013 compensation, as shown above, to the TransUnion 401(k) & Savings Plan. |
(2) | For recognized compensation above the Internal Revenue Code limit of $260,000, we matched 100% of the first 3% and 50% of the next 2% contributed on a pre-tax basis to the TransUnion Retirement and 401(k) Supplemental Plan. Additionally, in 2014 for the 2013 plan year, we made a discretionary 3% retirement contribution of recognizable compensation to the TransUnion Retirement and 401(k) Supplemental Plan. |
(3) |
We provide life insurance to all full time employees in an amount equal to their annual salary, up to a maximum of $250,000. Internal Revenue Code Section 79 provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or |
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indirectly by an employer. The table notes the imputed cost of coverage in excess of $50,000, which is based on the named executive officers age and coverage they receive. |
(4) | Executive contributions made into the non-qualified deferred compensation plan are subject to Medicare tax at a rate of 1.45% (2.35% with the Medicare surcharge). We provide this payment on behalf of the NEO and since the amount paid on behalf of the NEO is taxable to the executive, we gross up that payment to cover the tax. |
(5) | We provide a dollar for dollar match on all recognized charitable contributions made by all employees, up to a maximum match of $2,000 per calendar year. |
(6) | The Company reimbursed Mr. Peck and Mr. Cartwright for all qualified expenses associated with their respective relocations. In addition, the Company provides a tax gross-up on all reimbursed relocation expenses that otherwise would be taxable to the employee. |
Grants of Plan-Based Awards2014
Name |
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards (1) |
Grant Date |
All Other
Option Awards: Number of Securities Underlying Options (2) (#) |
Exercise or
Base Price of Option Awards ($/Sh) |
Grant Date
Fair Value of Stock and Option Awards (3) ($) |
|||||||||||||||||||||||
Threshold
($) |
Target
($) |
Maximum
($) |
||||||||||||||||||||||||||
James M. Peck |
281,250 | 900,000 | 1,800,000 | |||||||||||||||||||||||||
Samuel A. Hamood |
140,625 | 450,000 | 900,000 | |||||||||||||||||||||||||
Christopher Cartwright |
231,875 | 700,000 | 1,400,000 | |||||||||||||||||||||||||
Gerald M. McCarthy, Jr. (4) |
53,000 | 160,000 | 320,000 | 7/1/2014 | 248,337 | 13.06 | 1,719,549 | |||||||||||||||||||||
John T. Danaher |
86,953 | 262,500 | 525,000 | 4/15/2014 | 86,365 | 8.57 | 380,188 |
(1) | Reflects payment opportunities for the twelve months ended December 31, 2014 under the Annual Bonus Plan described above under 2014 Annual Bonus Plan. The Annual Bonus Plan is an annual cash incentive opportunity. The threshold amount is the lowest payment opportunity reflecting the lowest level of performance described by the plan (12.5% of target payout opportunity for any corporate or business Further Adjusted EBITDA measure, 50% of target payout opportunity for any corporate or business Further Adjusted Revenue measure and 50% of target payout opportunity for an individual performance measure). The target amount reflects a 100% payout of target opportunity if both Company and individual performance are at target levels. The maximum reflects 200% payout of target opportunity, payable only upon maximum achievement of all payout components, both financial and individual goals. These amounts are based on the individuals current salary and position (prorated for employment date). There is no minimum payment. EBITDA, as Further Adjusted for bonus plan purposes, was $452.4 million for 2014, resulting in a payout of 146% of target performance since the actual results exceeded targeted performance. Our Further Adjusted Revenue was approximately 98.7% of 2014s plan, which resulted in a payout of 74% of target performance. |
(2) | Reflects nonqualified stock options granted during 2014 under the TransUnion Holding Company, Inc. 2012 Management Equity Plan. The size of the equity award granted to Mr. McCarthy was negotiated as a component of his employment offer. The award to Mr. McCarthy was based on external market data and his overall compensation opportunity prior to joining us. The grant to Mr. Danaher was to align him more favorably to our comparator group when added to the grant he received in 2012. The Compensation committee approved the awards, as well as Mr. McCarthys base salary and target bonus, as a component of his employment offer. The vesting provisions of each award have been described above in the Long Term Equity PlanStock Option Grants. |
(3) | The amounts shown in this column represent the aggregate grant date fair value of option awards granted to the NEO during 2014. For assumptions used in determining these values, see note 15 to our consolidated financial statements included elsewhere in this prospectus. |
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(4) | The non-equity incentive plan award was prorated based upon Mr. McCarthys start date with the Company of July 1, 2014. |
Outstanding Equity Awards at Year-End
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name |
Number of
Securities Underlying Unexercised Options Exercisable (#) |
Number of
Securities Underlying Unexercised Options Unexercisable (1) (#) |
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option
Exercise Price (2) |
Option
Expiration Date |
Number of
Shares or Units of Stock That Have Not Vested (#) |
Market
Value of Shares or Units of Stock That Have Not Vested ($) |
Equity
Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) |
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) |
|||||||||||||||||||||||||||
James M. Peck |
295,763 | 1,552,754 | | $ | 4.99 | 12/31/2022 | | | | | ||||||||||||||||||||||||||
Samuel A. Hamood |
80,369 | 321,476 | | $ | 4.99 | 8/1/2022 | | | | | ||||||||||||||||||||||||||
Christopher A. Cartwright |
71,982 | 647,838 | | $ | 8.57 | 8/27/2023 | | | | | ||||||||||||||||||||||||||
Gerald M. McCarthy, Jr. |
| 248,337 | | $ | 13.06 | 7/1/2024 | | | | | ||||||||||||||||||||||||||
John T. Danaher |
24,665 | 98,663 | | $ | 4.99 | 8/1/2022 | | | | | ||||||||||||||||||||||||||
| 86,365 | | $ | 8.57 | 4/15/2024 | | | | |
(1) | Forty percent (40%) of the options are time vested options and shall vest as follows: twenty percent (20%) shall generally vest on the later of the first anniversary of the award date, or on the first anniversary of the NEOs hire date. Thereafter, five percent (5%) shall vest on the last day of each subsequent full calendar quarter until all the time vested options have vested. For Mr. Hamoods and Mr. Danahers 2012 awards, the first anniversary was April 30, 2013. For Messrs. Peck, Cartwright and McCarthy, the first anniversary was or will be December 31, 2013, August 19, 2014 and July 1, 2015, respectively. For Mr. Danahers 2014 award, the first anniversary was April 15, 2015. The remaining sixty percent (60%) of the options are performance based options and will vest according to the time vesting schedule set forth above and upon attainment of performance criteria as defined in the Stock Option Agreement. |
(2) | For Messrs. Peck, Hamood and Danaher, the option exercise price equals the per share price in the 2012 Change in Control transaction, as adjusted for a November 1, 2012, dividend payment to stockholders, which the Board determined to be fair market value. Mr. Cartwrights, Mr. McCarthys grant exercise price was equal to the fair market value of the Companys common stock as of the date of their respective grants, as was Mr. Danahers 2014 award. |
Options Exercised and Stock Vested
The following table sets forth information regarding the exercise of any time-based vested options by payment made to the named executive officers during 2014. However, no options were exercised by the NEOs during the twelve months ended December 31, 2014.
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of
Shares Converted (#) |
Value
Realized On Conversion (1) ($) |
Number of
Shares Acquired on Vesting (#) |
Value
Realized on Vesting ($) |
||||||||||||
James M. Peck |
| | | | ||||||||||||
Samuel A. Hamood |
| | | | ||||||||||||
Christopher Cartwright |
| | | | ||||||||||||
Gerald M. McCarthy, Jr. |
| | | | ||||||||||||
John T. Danaher |
| | | |
(1) | Represents the difference between the exercise price of the stock options and the fair market value at time of exercise. |
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Nonqualified Deferred Compensation
Name |
Executive
Contributions in 2014 (1) |
Registrant
Contributions in 2014 (2) |
Aggregate
Earnings in 2014 (3) |
Aggregate
Withdrawals/ Distributions |
Aggregate
Balance at December 31, 2014 |
|||||||||||||||
James M. Peck |
$ | 88,269 | $ | 42,730 | $ | 6,946 | $ | | $ | 168,465 | ||||||||||
Samuel A. Hamood |
33,375 | 56,582 | 33,627 | | 596,988 | |||||||||||||||
Christopher A. Cartwright |
219,488 | 66,158 | 10,253 | | 295,899 | |||||||||||||||
Gerald M. McCarthy, Jr. |
| | | | | |||||||||||||||
John T. Danaher |
| | | | |
(1) | Includes amounts reflected under Salary and Non-Equity Incentive Plan Compensation in the Summary Compensation Table above for 2014. |
(2) | Amounts included in this column are reflected under All Other Compensation in the Summary Compensation Table for 2014. |
(3) | Amounts included in this column do not constitute above-market or preferential earnings and accordingly such amounts are not reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column of the Summary Compensation Table for 2014. Each NEO self-directs the investment of their non-qualified deferred compensation plan account balance into one or more of the available investment funds. Consequently, the value of an NEOs plan account balance may go up or down based on the performance of the selected investment funds. |
Deferred Compensation Plan
This nonqualified plan is a tax deferred compensation program for a limited number of executives, including the named executive officers, and provides a favorable tax vehicle for deferring cash compensation (base salary and annual incentive payments). Pursuant to the plan, the NEO is able to defer up to 100% of cash compensation received. Amounts deferred are self-directed into one or more of the available investment funds and are credited with gains or losses of the various funds selected by the participant. The plan does not offer any above-market rate of return to the NEO. Upon termination of employment, amounts deferred are paid, at the participants option, either in a lump sum or in annual installments over a period of either 5 or 10 years. Executives are not permitted to take loans from the account. We contribute a match equal to 100% of the first 3% and 50% on the next 2% of the executives contributions. Additionally, in 2014, the Compensation Committee approved a discretionary retirement contribution of an additional 3% of qualified 2013 earnings. Assets in this plan are held in a rabbi trust.
Payments upon Termination and Change-in-Control2014
The following charts illustrate benefits that the named executive officers would receive upon the occurrence of certain separation scenarios, which are assumed to occur on December 31, 2014. No special payments are made upon resignation or retirement, and the named executive officers are not entitled to increased severance payments in the event they are terminated in connection with a change of control. In addition, we do not provide for any gross-up provision on severance payments. Descriptions of the provisions that govern these benefits are set forth following the charts.
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Separation (1)
James M. Peck (1)
Type of Payment |
Involuntary
Termination ($) |
Death
($) |
Disability
($) |
Change In
Control ($) |
||||||||||||
Severance Payments (2) |
2,700,000 | 2,700,000 | ||||||||||||||
Outplacement (3) |
35,000 | 35,000 | ||||||||||||||
Welfare Benefits (4) |
26,172 | 26,172 | ||||||||||||||
Life Insurance Payout (5) |
250,000 | |||||||||||||||
Disability Payments (6) |
1,920,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
2,761,172 | 250,000 | 1,920,000 | 2,761,172 | ||||||||||||
|
|
|
|
|
|
|
|
(1) | The table excludes (a) any amounts accrued through December 31, 2014, that would be paid in the normal course of employment, such as accrued but unpaid salary and earned annual bonus for 2014, and (b) vested account balances in our 401(k) Savings & Retirement Plan that are generally available to all of our U.S. associates. Actual amounts to be paid can only be determined at the time of such executives termination of service. |
(2) | If Mr. Peck is terminated without Cause or he resigns for Good Reason (both defined in the Peck Employment Agreement), he receives a Base Salary Multiple in an amount equal to 1.5 times his annualized base salary during the year of covered termination and the target bonus under the annual bonus plan. This amount is calculated and noted in the Severance Payments line. |
(3) | Reflects the cost to provide executive-level outplacement services for a period of one year. |
(4) | If Mr. Peck is terminated without Cause or he resigns for Good Reason (both defined in the Peck Employment Agreement), he receives a lump sum amount equal to COBRA premiums for 18 months. This amount reflects the present value of 18 months of family PPO health and dental coverage using our 2015 COBRA premium rate. |
(5) | Reflects the present value of life insurance provided as a benefit to all associates; equal to one times their annual base salary (rounded up to the next highest $1,000), with a maximum benefit of $250,000. In addition, we provide Accidental Death & Dismemberment protection to all associates; the present value of the principal sum is $50,000, but this amount is not included above. TransUnion also maintains a travel accident insurance policy for most associates, including executive officers, that would provide an additional benefit equal to five times the associates annual salary, subject to a maximum amount of $5,000,000 for all losses arising out of one accident. This amount is not included above. |
(6) | Reflects the value of the executives disability benefit as of December 31, 2014 (a) assuming full disability at December 31, 2014 and continuing through age 65, and (b) in todays dollars without any discounting or increase. |
Samuel A. Hamood (1)
Type of Payment |
Involuntary
Termination ($) |
Death
($) |
Disability
($) |
Change
In Control ($) |
||||||||||||
Severance Payments (2) |
1,449,450 | 1,449,450 | ||||||||||||||
Outplacement (3) |
35,000 | 35,000 | ||||||||||||||
Welfare Benefits (4) |
26,542 | 26,542 | ||||||||||||||
Life Insurance Payout (5) |
250,000 | |||||||||||||||
Disability Payments (6) |
2,652,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
1,510,992 | 250,000 | 2,652,000 | 1,510,992 | ||||||||||||
|
|
|
|
|
|
|
|
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(1) | The table excludes (a) any amounts accrued through December 31, 2014, that would be paid in the normal course of employment, such as accrued but unpaid salary and earned annual bonus for 2014, and (b) vested account balances in our 401(k) Savings & Retirement Plan that are generally available to all of our U.S. associates. Actual amounts to be paid can only be determined at the time of such executives termination of service. |
(2) | Mr. Hamood entered into a Severance and Restrictive Covenant Agreement on June 15, 2010 (the Hamood Severance Agreement), which was assumed by the new ownership on April 30, 2012. If Mr. Hamood is terminated without Cause or he resigns for Good Reason (both defined in the Hamood Severance Agreement), he receives a Base Salary Multiple in an amount equal to 1.5 times his annualized base salary during the year of covered termination and the average of his two previous years of actual bonuses under the annual bonus plan. This amount is calculated and noted in the Severance Payments line. |
(3) | Reflects the cost to provide executive-level outplacement services for a period of one year. |
(4) | If Mr. Hamood is terminated without Cause or he resigns for Good Reason (both defined in the Hamood Severance Agreement), he receives a lump sum amount equal to COBRA premiums for 18 months. This amount reflects the present value of 18 months of family PPO health and dental coverage using our 2015 COBRA premium rate. |
(5) | Reflects the present value of life insurance provided as a benefit to all associates; equal to one times their annual base salary (rounded up to the next highest $1,000), with a maximum benefit of $250,000. In addition, we provide Accidental Death & Dismemberment protection to all associates; the present value of the principal sum is $50,000, but this amount is not included above. TransUnion also maintains a travel accident insurance policy for most associates, including executive officers, that would provide an additional benefit equal to five times the associates annual salary, subject to a maximum amount of $5,000,000 for all losses arising out of one accident. This amount is not included above. |
(6) | Reflects the value of the executives disability benefit as of December 31, 2014 (a) assuming full disability at December 31, 2014 and continuing through age 65, and (b) in todays dollars without any discounting or increase. |
Christopher A. Cartwright (1)
Type of Payment |
Involuntary
Termination ($) |
Death
($) |
Disability
($) |
Change In
Control ($) |
||||||||||||
Severance Payments (2) |
1,709,039 | 1,709,039 | ||||||||||||||
Outplacement (3) |
35,000 | 35,000 | ||||||||||||||
Welfare Benefits (4) |
26,542 | 26,542 | ||||||||||||||
Life Insurance Payout (5) |
250,000 | |||||||||||||||
Disability Payments (6) |
2,232,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
1,770,581 | 250,000 | 2,232,000 | 1,770,581 | ||||||||||||
|
|
|
|
|
|
|
|
(1) | The table excludes (a) any amounts accrued through December 31, 2014, that would be paid in the normal course of employment, such as accrued but unpaid salary and earned annual bonus for 2014, and (b) vested account balances in our 401(k) Savings & Retirement Plan that are generally available to all of our U.S. associates. Actual amounts to be paid can only be determined at the time of such executives termination of service. |
(2) |
Mr. Cartwright entered into a Severance and Restrictive Covenant Agreement on August 19, 2013 (the Cartwright Severance Agreement). If Mr. Cartwright is terminated without Cause or he resigns for Good Reason (both defined in the Cartwright Severance Agreement), he receives a Base Salary Multiple in an amount equal to 1.5 times his annualized base salary during the year |
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of covered termination and the average of his two previous years of actual bonuses under the annual bonus plan. This amount is calculated and noted in the Severance Payments line. |
(3) | Reflects the cost to provide executive-level outplacement services for a period of one year. |
(4) | If Mr. Cartwright is terminated without Cause or he resigns for Good Reason (both defined in the Cartwright Severance Agreement), he receives a lump sum amount equal to COBRA premiums for 18 months. This amount reflects the present value of 18 months of family PPO health and dental coverage using our 2015 COBRA premium rate. |
(5) | Reflects the present value of life insurance provided as a benefit to all associates; equal to one times their annual base salary (rounded up to the next highest $1,000), with a maximum benefit of $250,000. In addition, we provide Accidental Death & Dismemberment protection to all associates; the present value of the principal sum is $50,000, but this amount is not included above. TransUnion also maintains a travel accident insurance policy for most associates, including executive officers, that would provide an additional benefit equal to five times the associates annual salary, subject to a maximum amount of $5,000,000 for all losses arising out of one accident. This amount is not included above. |
(6) | Reflects the value of the executives disability benefit as of December 31, 2014, (a) assuming full disability at December 31, 2014, and continuing through age 65, and (b) in todays dollars without any discounting or increase. |
Gerald M. McCarthy, Jr. (1)
Type of Payment |
Involuntary
Termination ($) |
Death
($) |
Disability
($) |
Change In
Control ($) |
||||||||||||
Severance Payments (2) |
998,460 | 998,460 | ||||||||||||||
Outplacement (3) |
35,000 | 35,000 | ||||||||||||||
Welfare Benefits (4) |
26,542 | 26,542 | ||||||||||||||
Life Insurance Payout (5) |
250,000 | |||||||||||||||
Disability Payments (6) |
2,796,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
1,060,002 | 250,000 | 2,796,000 | 1,060,002 | ||||||||||||
|
|
|
|
|
|
|
|
(1) | The table excludes (a) any amounts accrued through December 31, 2014, that would be paid in the normal course of employment, such as accrued but unpaid salary and earned annual bonus for 2014, and (b) vested account balances in our 401(k) Savings & Retirement Plan that are generally available to all of our U.S. associates. Actual amounts to be paid can only be determined at the time of such executives termination of service. |
(2) | Mr. McCarthy entered into a Severance and Restrictive Covenant Agreement on March 23, 2015 (the McCarthy Severance Agreement). If Mr. McCarthy is terminated without Cause or he resigns for Good Reason (both defined in the McCarthy Severance Agreement), he receives a Base Salary Multiple in an amount equal to 1.5 times his annualized base salary during the year of covered termination and the average of his two previous years of actual bonuses under the annual bonus plan, or if covered termination occurs prior to two years of actual bonuses, an amount equal to the prior years bonus. This amount is calculated and noted in the Severance Payments line. |
(3) | Reflects the cost to provide executive-level outplacement services for a period of one year. |
(4) | If Mr. McCarthy is terminated without Cause or he resigns for Good Reason, he receives a lump sum amount equal to COBRA premiums for 18 months. This amount reflects the present value of 18 months of family PPO health and dental coverage using our 2015 COBRA premium rate. |
(5) |
Reflects the present value of life insurance provided as a benefit to all associates equal to one times their annual base salary (rounded up to the next highest $1,000), with a maximum benefit of $250,000. In addition, we provide Accidental Death & Dismemberment protection to all associates; the present value of the principal sum is $50,000, but this amount is not included above. TransUnion also maintains a travel accident insurance policy for most associates, |
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including executive officers, that would provide an additional benefit equal to five times the associates annual salary, subject to a maximum amount of $5,000,000 for all losses arising out of one accident. This amount is not included above. |
(6) | Reflects the value of the executives disability benefit as of December 31, 2014, (a) assuming full disability at December 31, 2014, and continuing through age 65, and (b) in todays dollars without any discounting or increase. |
John T. Danaher (1)
Type of Payment |
Involuntary
Termination ($) |
Death
($) |
Disability
($) |
Change In
Control ($) |
||||||||||||
Severance Payments (2) |
1,105,092 | 1,105,092 | ||||||||||||||
Outplacement (3) |
35,000 | 35,000 | ||||||||||||||
Welfare Benefits (4) |
26,542 | 26,542 | ||||||||||||||
Life Insurance Payout (5) |
250,000 | |||||||||||||||
Disability Payments (6) |
2,088,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
1,166,634 | 250,000 | 2,088,000 | 1,166,634 | ||||||||||||
|
|
|
|
|
|
|
|
(1) | The table excludes (a) any amounts accrued through December 31, 2014, that would be paid in the normal course of employment, such as accrued but unpaid salary and earned annual bonus for 2014, and (b) vested account balances in our 401(k) Savings & Retirement Plan that are generally available to all of our U.S. associates. Actual amounts to be paid can only be determined at the time of such executives termination of service. |
(2) | Mr. Danaher entered into a Severance and Restrictive Covenant Agreement on March 23, 2015 (the Danaher Severance Agreement). If Mr. Danaher is terminated without Cause or he resigns for Good Reason (both defined in the Danaher Severance Agreement), he receives a Base Salary Multiple in an amount equal to 1.5 times his annualized base salary during the year of covered termination and the average of his two previous years of actual bonuses under the annual bonus plan. This amount is calculated and noted in the Severance Payments line. |
(3) | Reflects the cost to provide executive-level outplacement services for a period of one year. |
(4) | If Mr. Danaher is terminated without Cause or he resigns for Good Reason, he receives a lump sum amount equal to COBRA premiums for 18 months. This amount reflects the present value of 18 months of family PPO health and dental coverage using our 2015 COBRA premium rate. |
(5) | Reflects the present value of life insurance provided as a benefit to all associates equal to one times their annual base salary (rounded up to the next highest $1,000), with a maximum benefit of $250,000. In addition, we provide Accidental Death & Dismemberment protection to all associates; the present value of the principal sum is $50,000, but this amount is not included above. TransUnion also maintains a travel accident insurance policy for most associates, including executive officers, that would provide an additional benefit equal to five times the associates annual salary, subject to a maximum amount of $5,000,000 for all losses arising out of one accident. This amount is not included above. |
(6) | Reflects the value of the executives disability benefit as of December 31, 2014, (a) assuming full disability at December 31, 2014, and continuing through age 65, and (b) in todays dollars without any discounting or increase. |
Compensation Arrangements to be Adopted In Connection with This Offering
2015 Omnibus Incentive Plan
In connection with this offering, our board of directors expects to adopt, and our stockholders expect to approve, the 2015 Omnibus Incentive Plan prior to the completion of the offering.
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Purpose
The purpose of the 2015 Omnibus Incentive Plan is to provide a means through which to attract and retain key personnel and to provide a means whereby current directors, officers, employees, consultants and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the value of our common stock, thereby strengthening their commitment to our welfare and aligning their interests with those of our stockholders.
Administration
The 2015 Omnibus Incentive Plan will be administered by the compensation committee of our board of directors or such other committee of our board of directors to which it has delegated power, or if no such committee or subcommittee thereof exists, the board of directors (as applicable, the Committee). The Committee has the sole and plenary authority to establish the terms and conditions of any award consistent with the provisions of the 2015 Omnibus Incentive Plan. The Committee is authorized to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the 2015 Omnibus Incentive Plan and any instrument or agreement relating to, or any award granted under, the 2015 Omnibus Incentive Plan; establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee deems appropriate for the proper administration of the 2015 Omnibus Incentive Plan; and to make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the 2015 Omnibus Incentive Plan. Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it in accordance with the terms of the 2015 Omnibus Incentive Plan. Any such allocation or delegation may be revoked by the Committee at any time. Unless otherwise expressly provided in the 2015 Omnibus Incentive Plan, all designations, determinations, interpretations, and other decisions under or with respect to the 2015 Omnibus Incentive Plan or any award or any documents evidencing awards granted pursuant to the 2015 Omnibus Incentive Plan are within the sole discretion of the Committee, may be made at any time and are final, conclusive and binding upon all persons or entities, including, without limitation, us, any holder or beneficiary of any award, and any of our stockholders.
Shares Subject to the 2015 Omnibus Incentive Plan
The 2015 Omnibus Incentive Plan provides that the total number of shares of common stock that may be issued under the 2015 Omnibus Incentive Plan is 5,400,000. Of this amount, the maximum number of shares for which incentive stock options may be granted is 5,400,000; the maximum number of shares for which options or stock appreciation rights may be granted to any individual participant during any single fiscal year is 1,333,000; the maximum number of shares for which performance compensation awards denominated in shares may be granted to any individual participant in respect of a single fiscal year is 1,333,000 (or if any such awards are settled in cash, the maximum amount may not exceed the fair market value of such shares on the last day of the performance period to which such award relates); the maximum number of shares of common stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year, shall not exceed $1,500,000 in total value; and the maximum amount that may be paid to any individual for a single fiscal year under a performance compensation award denominated in cash is $25,000,000. Except for substitute awards (as described below), in the event any award terminates, lapses, or is settled without the payment of the full number of shares subject to such award, including as a result of net settlement of the award or as a result of the award being settled in cash, the undelivered shares may be granted again under the 2015 Omnibus Incentive Plan, unless
146
the shares are surrendered after the termination of the 2015 Omnibus Incentive Plan, and only if stockholder approval is not required under the then-applicable rules of the exchange on which the shares of common stock are listed. Awards may, in the sole discretion of the Committee, be granted in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by us or with which we combine (referred to as substitute awards), and such substitute awards shall not be counted against the total number of shares that may be issued under the 2015 Omnibus Incentive Plan, except that substitute awards intended to qualify as incentive stock options shall count against the limit on incentive stock options described above. No award may be granted under the 2015 Omnibus Incentive Plan after the tenth anniversary of the effective date (as defined therein), but awards theretofore granted may extend beyond that date.
Options
The Committee may grant non-qualified stock options and incentive stock options under the 2015 Omnibus Incentive Plan, with terms and conditions determined by the Committee that are not inconsistent with the 2015 Omnibus Incentive Plan; provided that all stock options granted under the 2015 Omnibus Incentive Plan are required to have a per share exercise price that is not less than 100% of the fair market value of our common stock underlying such stock options on the date an option is granted (other than in the case of options that are substitute awards). All stock options that are intended to qualify as incentive stock options must be granted pursuant to an award agreement expressly stating that the option is intended to qualify as an incentive stock option, and will be subject to the terms and conditions that comply with the rules as may be prescribed by Section 422 of the Code. The maximum term for stock options granted under the 2015 Omnibus Incentive Plan will be ten years from the initial date of grant, or with respect to any stock options intended to qualify as incentive stock options, such shorter period as prescribed by Section 422 of the Code. However, if a non-qualified stock option would expire at a time when trading of shares of common stock is prohibited by the Companys insider trading policy (or Company-imposed blackout period), the term will automatically be extended to the 30th day following the end of such period. The purchase price for the shares as to which a stock option is exercised may be paid to us, to the extent permitted by law (1) in cash or its equivalent at the time the stock option is exercised, (2) in shares having a fair market value equal to the aggregate exercise price for the shares being purchased and satisfying any requirements that may be imposed by the Committee, or (3) by such other method as the Committee may permit in its sole discretion, including without limitation (A) in other property having a fair market value on the date of exercise equal to the purchase price, (B) if there is a public market for the shares at such time, through the delivery of irrevocable instructions to a broker to sell the shares being acquired upon the exercise of the stock option and to deliver to us the amount of the proceeds of such sale equal to the aggregate exercise price for the shares being purchased, or (C) through a net exercise procedure effected by withholding the minimum number of shares needed to pay the exercise price. Any fractional shares of common stock will be settled in cash.
Stock Appreciation Rights
The Committee may grant stock appreciation rights, with terms and conditions determined by the Committee that are not inconsistent with the 2015 Omnibus Incentive Plan. Generally, each stock appreciation right will entitle the participant upon exercise to an amount (in cash, shares or a combination of cash and shares, as determined by the Committee) equal to the product of (1) the excess of (A) the fair market value on the exercise date of one share of common stock, over (B) the strike price per share, times (2) the numbers of shares of common stock covered by the stock appreciation right, less an amount equal to any statutory withholding amounts or taxes required to be withheld. The strike price per share of a stock appreciation right will be determined by the Committee at the time of grant but in no event may such amount be less than the fair market value of a share of
147
common stock on the date the stock appreciation right is granted (other than in the case of stock appreciation rights granted in tandem with or in substitution of previously granted awards).
Restricted Shares and Restricted Stock Units
The Committee may grant restricted shares of our common stock or restricted stock units, representing the right to receive, upon the expiration of the applicable restricted period, one share of common stock for each restricted stock unit, or, in its sole discretion of the Committee, the cash value thereof (or any combination thereof). As to restricted shares of our common stock, subject to the other provisions of the 2015 Omnibus Incentive Plan, the holder will generally have the rights and privileges of a stockholder as to such restricted shares of common stock, including without limitation the right to vote such restricted shares of common stock (except, that if the lapsing of restrictions with respect to such restricted shares of common stock is contingent on satisfaction of performance conditions other than or in addition to the passage of time, any dividends payable on such restricted shares of common stock will be retained and delivered without interest to the holder of such shares when the restrictions on such shares lapse). To the extent provided in the applicable award agreement, the holder of outstanding restricted stock units will be entitled to be credited with dividend equivalent payments (upon the payment by us of dividends on shares of common stock) either in cash or, at the sole discretion of the Committee, in shares of common stock having a value equal to the amount of such dividends (and interest may, at the sole discretion of the Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Committee), which will be payable at the same time as the underlying restricted stock units are settled following the release of restrictions on such restricted stock units.
Other Stock-Based Awards and other Cash-Based Awards
The Committee may issue unrestricted common stock, rights to receive grants of awards at a future date, or other awards denominated in shares of common stock (including, without limitation, performance shares or performance units), and other awards denominated in cash, including, without limitation, cash bonuses, under the 2015 Omnibus Incentive Plan, including performance-based awards.
Performance Compensation Awards
The Committee may also designate any award as a performance compensation award intended to qualify as performance-based compensation under Section 162(m) of the Code. The Committee has sole discretion to select the length of any applicable performance periods, the types of performance compensation awards to be issued, the applicable performance criteria and performance goals, and the kinds and/or levels of performance goals that are to apply. The performance criteria that will be used to establish the performance goals may be based on the attainment of specific levels of performance of the Company (and/or one or more affiliates, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing) and will be set forth in the 2015 Omnibus Incentive Plan. Unless otherwise determined by the Committee at the time a performance compensation award is granted, the Committee shall, during the first 90 days of a performance period (or, within any other maximum period allowed under Section 162(m) of the Code), or at any time thereafter to the extent the exercise of such authority at such time would not cause the performance compensation awards granted to any participant for such performance period to fail to qualify as performance-based compensation under Section 162(m) of the Code, specify adjustments or modifications to be made to the calculation of a performance goal for such performance period, based on and to appropriately reflect the following events: (1) asset write-downs; (2) litigation or claim judgments or settlements; (3) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (4) any reorganization and restructuring programs; (5) extraordinary nonrecurring items as described in Accounting Standards
148
Codification Topic 225-20 (or any successor pronouncement thereto) and/or in managements discussion and analysis of financial condition and results of operations appearing in our annual report to stockholders for the applicable year; (6) acquisitions or divestitures; (7) any other specific, unusual or nonrecurring events, or objectively determinable category thereof; (8) foreign exchange gains and losses; (9) discontinued operations and nonrecurring charges; and (10) a change in our fiscal year.
Following the completion of a performance period, the Committee will review and certify in writing whether, and to what extent, the performance goals for the performance period have been achieved and, if so, calculate and certify in writing that amount of the performance compensation awards earned for the period based upon the performance formula. In determining the actual amount of an individual participants performance compensation award for a performance period, the Committee has the discretion to reduce or eliminate the amount of the performance compensation award consistent with Section 162(m) of the Code. Unless otherwise provided in the applicable award agreement, the Committee does not have the discretion to (A) grant or provide payment in respect of performance compensation awards for a performance period if the performance goals for such performance period have not been attained; or (B) increase a performance compensation award above the applicable limitations set forth in the 2015 Omnibus Incentive Plan.
Effect of Certain Events on 2015 Omnibus Incentive Plan and Awards
In the event of (a) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of common stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of our shares of common stock or other securities, issuance of warrants or other rights to acquire our shares of common stock or other securities, or other similar corporate transaction or event that affects the shares of common stock (including a change in control, as defined in the 2015 Omnibus Incentive Plan), or (b) unusual or nonrecurring events affecting us, including changes in applicable rules, rulings, regulations or other requirements that the Committee determines, in its sole discretion, could result in substantial dilution or enlargement of the rights intended to be granted to, or available for, participants (an adjustment event) the Committee shall, in respect of any such adjustment event, make such proportionate substitution or adjustment, if any, as it deems equitable, to any or all of: (i) the share limits applicable under the 2015 Omnibus Incentive Plan with respect to the number of awards which may be granted hereunder, (ii) the number of our shares of common stock or other securities which may be delivered in respect of awards or with respect to which awards may be granted under the 2015 Omnibus Incentive Plan and (iii) the terms of any outstanding award, including, without limitation, (A) the number of shares of common stock subject to outstanding awards or to which outstanding awards relate (with any increase requiring the approval of our board of directors), (B) the exercise price or strike price with respect to any award or (C) any applicable performance measures.
In connection with any adjustment event, the committee may, in its discretion, provide for any one or more of the following: (i) providing for (A) a substitution or assumption of awards (which we refer to as successor awards), (B) accelerating the exercisability of, lapse of restrictions on, or termination of, awards or (C) providing for a period of time for participants to exercise outstanding awards prior to the occurrence of such event; and (ii) cancelling any one or more outstanding awards and causing to be paid to the holders holding vested awards (including any awards that would vest as a result of the occurrence of such event but for such cancellation) the value of such awards, if any, as determined by the Committee (which if applicable may be based upon the price per share of common stock received or to be received by other stockholders of the Company in such event), including without limitation, in the case of options and stock appreciation rights, a cash payment equal to the excess, if any, of the fair market value of the shares of common stock subject to the option or stock appreciation right over the aggregate exercise price thereof. For the avoidance of doubt, the Committee may cancel any stock
149
option or stock appreciation right for no consideration if the fair market value of the shares subject to such option or stock appreciation right is less than or equal to the aggregate exercise price or strike price of such stock option or stock appreciation right.
In the event of (a) any sale, transfer, disposition, or other transaction which results in an award holder ceasing to provide services to us or any of our affiliates, or (b) a change in control, unless otherwise provided for under the terms of an award granted under the 2015 Omnibus Incentive Plan: (i) any successor awards issued in connection with such transaction will become fully vested and exercisable (to the extent applicable) upon specified qualifying terminations of the award holders employment following such transaction; (ii) with respect to any unvested performance-vesting awards, satisfaction of performance criteria will be measured based on actual performance through such event (or if performance levels cannot be measured, such criteria will be deemed to have been satisfied at target levels), and a successor award may be granted in respect of the vested portion of such awards.
Nontransferability of Awards
An award will not be transferable or assignable by a participant (including, without limitation, except as may be prohibited by applicable law, pursuant to a domestic relations order) other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance will be void and unenforceable against us or any affiliate. However, the Committee may, in its sole discretion, permit awards (other than incentive stock options) to be transferred, including transfers to a participants family members, any trust established solely for the benefit of participant or such participants family members, any partnership or limited liability company of which participant, or participant and participants family members, are the sole member(s), and a beneficiary to whom donations are eligible to be treated as charitable contributions for tax purposes.
Amendment and Termination
The board of directors may amend, alter, suspend, discontinue, or terminate the 2015 Omnibus Incentive Plan or any portion thereof at any time; provided, that no such amendment, alteration, suspension, discontinuation or termination may be made without stockholder approval if (1) such approval is necessary to comply with any regulatory requirement applicable to the 2015 Omnibus Incentive Plan or for changes in GAAP to new accounting standards, (2) it would materially increase the number of securities which may be issued under the 2015 Omnibus Incentive Plan (except for adjustments in connection with certain corporate events), or (3) it would materially modify the requirements for participation in the 2015 Omnibus Incentive Plan; provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any participant or any holder or beneficiary of any award shall not to that extent be effective without such individuals consent. The Committee may also, to the extent consistent with the terms of any applicable award agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any award granted or the associated award agreement, prospectively or retroactively, subject to the consent of the affected participant if any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination would materially and adversely affect the rights of any participant with respect to such award; provided, further, that without stockholder approval, except as otherwise permitted in the 2015 Omnibus Incentive Plan, (1) no amendment or modification may reduce the exercise price of any option or the strike price of any stock appreciation right, (2) the Committee may not cancel any outstanding option or stock appreciation right and replace it with a new option or stock appreciation right (with a lower exercise price or strike price, as the case may be) or other award or cash payment that is greater than the value of the cancelled option or stock appreciation right, and (3) the Committee may not take any other action which is considered a repricing for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which our securities are listed or quoted.
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Dividends and Dividend Equivalents
The Committee in its sole discretion may provide part of an award with dividends, dividend equivalents, or similar payments in respect of awards, on such terms and conditions as may be determined by the Committee in its sole discretion; provided, that no dividend equivalents shall be payable in respect of outstanding (1) options or stock appreciation rights or (2) unearned performance compensation awards or other unearned awards subject to performance conditions (other than or in addition to the passage of time) (although dividend equivalents may be accumulated in respect of unearned awards and paid within 15 days after such awards are earned and become earned, payable or distributable).
Clawback/Forfeiture, Other Detrimental Activity
All awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with any clawback, forfeiture, or other similar policy adopted by the board or committee, and applicable law. In addition, to the extent a participant receives any amount in excess of what the participant should have received under the terms of an award (including by reason of a financial restatement, mistake in calculations, or other administrative error) the committee may require the participant to repay any such excess amount.
If the participant, while employed by or providing services to us or any affiliate or after termination of such employment or service, violates a non-competition, non-solicitation or non-disclosure covenant or agreement or otherwise has engaged in or engages in other detrimental activity that is in conflict with or adverse to our interests or the interests of any affiliate, as determined by the Committee in its sole discretion, the committee may cancel any or all of such participants outstanding awards, or require the participant to forfeit any gain realized on the vesting or exercise of such award, and must repay any such gain to us.
Summary of 2015 Employee Stock Purchase Plan
Prior to the effectiveness of this offering, our board of directors (our board) intends to adopt, and we expect our stockholders to approve, our 2015 Employee Stock Purchase Plan (the ESPP). We believe that allowing our employees to participate in the ESPP provides them with an opportunity to share in our future success by acquiring shares of our common stock.
The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Code.
Authorized shares . A total of 2,400,000 shares of our common stock will be made available for sale.
Plan administration . Two or more individuals appointed by our board (the plan administrator) will administer the ESPP, provided that, notwithstanding such an appointment, our board can take any action that the plan administrator is permitted to exercise pursuant to the ESPP. The plan administrator will have full and plenary authority, subject to the provisions of the ESPP, to (1) promulgate such rules and regulations as it deems necessary for the proper administration of the ESPP, (2) interpret the provisions and supervise the administration of the ESPP, and (3) take all action in connection therewith or in relation thereto as it deems advisable.
Eligibility . Generally, all of our employees are eligible to participate in the ESPP if they are employed by us, or any participating affiliate, and have completed at least six (6) months of service with us or any participating affiliate, except (1) employees who are not employed by us or an affiliate prior to the beginning of an offering period or prior to such other time period specified by the plan administrator, (ii) individuals who provide services to us or an affiliate as independent contractors who are reclassified as
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common law employees for any reason except for federal income and employment tax purposes, and (iii) employees who reside in countries for whom such employees participation in the ESPP would result in a violation under any corporate or securities laws of such country of residence.
Offering periods . The ESPP will be intended to qualify under Section 423 of the Code and will generally provide for six (6) month offering periods commencing on the first trading day after each January 1 and July 1, as determined by the plan administrator. The first offering period is expected to commence on January 1, 2016.
Contributions . The ESPP will permit participants to purchase shares of common stock through payroll deductions from eligible compensation in an amount selected by participants. Eligible compensation includes a participants base straight-time gross earnings, exclusive of payments for overtime, incentive compensation, commissions, incentive payments, premiums, bonuses, stock or other equity-based compensation, and any other special remuneration to participants during an applicable offering period. Following the start of the offering period, a participant may withdraw from the offering but may not otherwise change his or her level of payroll deduction with respect to such offering. A participant may not make any separate cash payment into his or her ESPP account.
Exercise of purchase right . Amounts deducted and accumulated by the participant are used to purchase shares of our common stock at the end of each offering period. The purchase price of the shares, or the methodology for determination of the purchase price, will be determined by the plan administrator not less than thirty (30) days prior to the commencement of any offering period, but will in no event be less than the lesser of eighty-five percent (85%) of the fair market value of our common stock on either of (1) the commencement date of the applicable offering period, or (2) the end date of a given offering period (or, in the event that the plan administrator shortens the applicable offering period in progress, a new purchase date, as applicable). Participants may end their participation at any time during an offering period and will be paid their accrued contributions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment with us.
Non-transferability . A participant may not transfer rights granted under the ESPP other than by will, the laws of descent and distribution, or as otherwise provided under the ESPP.
Change in control . In the event of a change in control, as defined under the ESPP, our board may take any action it deems necessary or desirable with respect to the ESPP, including terminating the ESPP and returning all contributions, establishing a new purchase date to occur prior to the date of the proposed change in control, or providing that each outstanding option will be assumed or substituted by the successor corporation.
Amendment; termination . Our board can terminate the ESPP at any time and for any reason. The ESPP will also terminate by its own terms upon the earlier of (1) the issuance of all of the shares of our stock available for issuance under the ESPP, or (2) the tenth (10 th ) anniversary of the ESPPs approval by our board.
Director Compensation
The following tables and narrative footnotes discuss the compensation earned by our directors who are not employed by TransUnion, either of the Sponsors or any of the Sponsors respective affiliates (each, an unaffiliated director). Messrs. Egan, Mullin, Klemann, Rajpal and Tadler will not be considered unaffiliated directors because of their relationships with our Sponsors, which hold significant interests in TransUnion, and, accordingly, received no compensation for their service on the Board of Directors in 2014. See ManagementBoard of Directors. Mr. Peck is not included in the
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table below because, as President and Chief Executive Officer, disclosure in respect of his compensation is presented in the Summary Compensation Table. Mr. Peck does not receive any additional compensation for his service on the Board of Directors.
In 2014, annualized compensation rates for the unaffiliated directors related to service on our Board of Directors and Committees were as follows:
Board of Directors |
||||
Annual Retainer |
$ | 85,000 | ||
Audit and Compliance Committee |
||||
Audit and Compliance Committee Chair |
$ | 10,000 | ||
Audit and Compliance Committee Member |
$ | | ||
Compensation Committee |
||||
Compensation Committee Chair |
$ | 5,000 | ||
Compensation Committee Member |
$ | |
In addition, our unaffiliated directors receive stock options pursuant to the 2012 Management Equity Plan, which vest pro rata over a five-year period (or such shorter term as may be set by the Compensation Committee) and have such other terms and conditions as the Compensation Committee may specify.
Total compensation paid to our unaffiliated directors in 2014 is shown in the table below. Annual retainer amounts are prorated based on dates of service for newly-appointed unaffiliated directors.
Name |
Fees Earned
or Paid in Cash |
Stock
Awards |
Option
Awards |
Non-Equity
Incentive Plan Compensation |
Change in
Pension Value and Nonqualified Deferred Compensation Earnings |
All Other
Compensation |
Total | |||||||||||||||||||||
George M. Awad (1) |
$ | 106,250 | $ | | $ | | $ | | $ | | $ | | $ | 106,250 | ||||||||||||||
Siddharth N. (Bobby) Mehta (2) |
85,000 | | | | | 150,000 | 235,000 | |||||||||||||||||||||
Andrew Prozes (3) |
85,000 | | 201,192 | | | | 286,192 |
(1) | Mr. Awad was appointed to the Board of Directors on November 11, 2013. Fees paid in cash in 2014 include $21,250 earned in 2013. |
(2) | In connection with his resignation as President and Chief Executive Officer of the Company, Mr. Mehta, a director of the Company, entered into a Consulting Agreement with TransUnion pursuant to which Mr. Mehta provides advice and consultation to assist Mr. Peck in the transition of duties as Chief Executive Officer and to Mr. Peck and the Board of Directors with respect to the Companys strategic operating plan and strategic opportunities or transactions considered by the Company from time to time. Pursuant to the terms of the agreement, Mr. Mehta receives a consulting services fee of $150,000 on or before January 10 of each year during the term of the agreement. Either party may terminate the agreement by providing notice of non-renewal at least sixty (60) days prior to the end of the then-current term. |
(3) | Mr. Prozes was appointed to the Board of Directors on January 28, 2014. Mr. Prozes received 43,186 stock options during 2014 with an aggregate grant date fair value of $201,192. All of the options were outstanding at December 31, 2014. |
In 2015, the chairperson of the board will receive an additional $100,000 and members and chairs of board committees will receive an additional $10,000 to $20,000 for their committee and/or chair service. In addition, our unaffiliated directors will receive an annual restricted stock grant.
Business Expenses
Our directors are reimbursed for their business expenses related to their attendance at our meetings, including room, meals and transportation to and from Board and committee meetings. On rare occasions, a directors spouse may accompany a director when traveling on TransUnion business.
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Director and Officer Liability (or D&O) Insurance
D&O insurance insures our individual directors and officers against certain losses that they are legally required to bear as a result of their actions while performing duties on our behalf. Our D&O insurance policy does not break out the premium for directors versus officers and, therefore, a dollar amount cannot be assigned to the coverage provided for individual directors.
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The following table and accompanying footnotes set forth certain information regarding the beneficial ownership of our common stock as of June 5, 2015, by (1) each individual or entity known by us to be the beneficial owner of more than 5% of our outstanding common stock, (2) each member or nominee of our board of directors, (3) each of our named executive officers and (4) all of the members of our board of directors and our executive officers as a group. We had 148,242,465 shares of our common stock outstanding as of June 5, 2015, which were owned by 103 holders of record.
A person is a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security or has the right to acquire such powers within 60 days.
To our knowledge, unless otherwise noted in the footnotes to the following table, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to their beneficially owned common stock.
Securities subject to option grants that have vested or will vest within 60 days are deemed outstanding for calculating the percentage ownership of the person holding the options, but are not deemed outstanding for calculating the percentage ownership of any other person. Percentage computations are based on 148,242,465 shares of our common stock beneficially outstanding as of June 5, 2015 and 177,787,920 outstanding following this offering (or 182,219,738 shares if the underwriters exercise in full their option to purchase additional shares).
Except as otherwise indicated in the footnotes below, the address of each beneficial owner is c/o TransUnion, 555 West Adams Street, Chicago, Illinois, 60661.
Common Stock
Beneficially Owned Prior to this Offering |
Common Stock Beneficially Owned After this
Offering |
|||||||||||||||||||||||
Assuming the
Underwriters Option is not Exercised |
Assuming the
Underwriters Option is Exercised in Full (1) |
|||||||||||||||||||||||
Name of Beneficial Owner |
Number | % | Number | % | Number | % | ||||||||||||||||||
Investment funds affiliated with Advent International Corporation (2) |
72,355,341 | 48.8 | % | 72,355,341 | 40.7 | % | 72,355,341 | 39.7 | % | |||||||||||||||
Investment funds affiliated with The Goldman Sachs Group, Inc. (3) |
72,355,340 | 48.8 | % | 72,355,340 | 40.7 | % | 72,355,340 | 39.7 | % | |||||||||||||||
George M. Awad |
56,143 | * | 56,143 | * | 56,143 | * | ||||||||||||||||||
Christopher Egan (4) |
| | | | | | ||||||||||||||||||
Gilbert H. Klemann (3)(5) |
72,355,340 | 48.8 | % | 72,355,340 | 40.7 | % | 72,355,340 | 39.7 | % | |||||||||||||||
Siddharth N. (Bobby) Mehta (6) |
422,768 | * | 422,768 | * | 422,768 | * | ||||||||||||||||||
Leo F. Mullin (7) |
52,244 | * | 52,244 | * | 52,244 | * | ||||||||||||||||||
Andrew Prozes |
69,158 | * | 69,158 | * | 69,158 | * | ||||||||||||||||||
Sumit Rajpal (3)(8) |
72,355,340 | 48.8 | % | 72,355,340 | 40.7 | % | 72,355,340 | 39.7 | % | |||||||||||||||
Steven M. Tadler (9) |
| | | | | | ||||||||||||||||||
James M. Peck (10) |
765,657 | * | 765,657 | * | 765,657 | * | ||||||||||||||||||
Samuel A. Hamood (11) |
262,561 | * | 262,561 | * | 262,561 | * | ||||||||||||||||||
Christopher A. Cartwright (12) |
271,125 | * | 271,125 | * | 271,125 | * | ||||||||||||||||||
Gerald M. McCarthy, Jr. (13) |
35,188 | * | 35,188 | * | 35,188 | * | ||||||||||||||||||
John T. Danaher (14) |
44,167 | * | 44,167 | * | 44,167 | * | ||||||||||||||||||
David M. Neenan (15) |
424,059 | * | 424,059 | * | 424,059 | * | ||||||||||||||||||
John W. Blenke (16) |
188,503 | * | 188,503 | * | 188,503 | * | ||||||||||||||||||
All Directors and Executive Officers as a Group (15 persons) |
2,591,573 | 1.7 | % | 2,591,573 | 1.5 | % | 2,591,573 | 1.4 | % |
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* | Less than 1%. |
(1) | The underwriters have the option to purchase up to an additional 4,431,818 shares from us at the initial public offering price, less the underwriting discounts and commissions, within 30 days of the date of this prospectus. |
(2) |
The funds managed by Advent International Corporation own 100% of Advent-TransUnion Acquisition Limited Partnership, which in turn owns 48.8% of TransUnion, for a 48.8% indirect ownership for the funds managed by Advent International Corporation. This 48.8% indirect ownership consists of 31,892,746 shares deemed to be beneficially owned by Advent International GPE VI Limited Partnership, 20,439,990 shares deemed to be beneficially owned by Advent International GPE VI-A Limited Partnership, 1,612,352 shares deemed to be beneficially owned by Advent International GPE VI-B Limited Partnership, 1,641,273 shares deemed to be beneficially owned by Advent International GPE VI-C Limited Partnership, 1,438,825 shares deemed to be beneficially owned by Advent International GPE VI-D Limited Partnership, 3,962,191 shares deemed to be beneficially owned by Advent International GPE VI-E Limited Partnership, 6,008,359 shares deemed to be beneficially owned by Advent International GPE VI-F Limited Partnership, 3,781,434 shares deemed to be beneficially owned by Advent International GPE VI-G Limited Partnership, 1,171,305 shares deemed to be beneficially owned by Advent Partners GPE VI 2008 Limited Partnership, 43,382 shares deemed to be beneficially owned by Advent Partners GPE VI 2009 Limited Partnership, 101,224 shares deemed to be beneficially owned by Advent Partners GPE VI 2010 Limited Partnership, 101,224 shares deemed to be beneficially owned by Advent Partners GPE VI-A Limited Partnership and 108,454 shares deemed to be beneficially owned by Advent Partners GPE VI-A 2010 Limited Partnership. Advent International Corporation is the manager of Advent International LLC, which in turn is the general partner of GPE VI GP Limited Partnership and GPE VI GP (Delaware) Limited Partnership. GPE VI GP Limited Partnership is the general partner of Advent International GPE VI Limited Partnership, Advent International GPE VI-A Limited Partnership, Advent International GPE VI-B Limited Partnership, Advent International GPE VI-F Limited Partnership and Advent International GPE VI-G Limited Partnership. GPE VI GP (Delaware) is the general partner of Advent International GPE VI-C Limited Partnership, Advent International GPE VI-D Limited Partnership and Advent International GPE VI-E Limited Partnership. Advent International Corporation is the manager of Advent International LLC, which in turn is the general partner of Advent Partners GPE VI 2008 Limited Partnership, Advent Partners GPE VI 2009 Limited Partnership, Advent Partners GPE VI 2010 Limited Partnership, Advent Partners GPE VI-A Limited Partnership and Advent Partners GPE VI-A 2010 Limited Partnership. Advent International Corporation exercises voting and investment power over the shares held by each of these entities and may be deemed to have beneficial ownership of any shares held by them. With respect to any shares of common stock of the Company held by the funds managed by Advent International Corporation, a group of individuals currently composed of David M. Mussafer, Steven M. Tadler and David M. McKenna, none of whom have individual voting or investment power, exercises voting and investment power over any shares beneficially owned by Advent International Corporation. Each of Mr. Mussafer, Mr. Tadler and Mr. McKenna disclaims beneficial ownership of any shares held by the funds managed by Advent International Corporation, except to the extent of their respective pecuniary interest therein. In addition, Harry Gambill, an Industry Advisor for Advent International Corporation, holds 52,582 shares of common stock. Through a written agreement with Mr. Gambill, Advent International Corporation has sole voting power and, at times, investment power over these shares. The shares reported in the table above do not include shares held by members of management of the Company which are subject to an agreement pursuant to which the management stockholders have appointed the Company as their attorney-in-fact to vote, provide a written consent or take any other action with respect to all matters with respect to such shares in the same proportion as shares held by the investment funds affiliated with Advent International Corporation. Advent International Corporation and its affiliated funds disclaim beneficial ownership of all such shares. The address of Advent International Corporation and each of the funds listed above is c/o Advent International Corporation, 75 State Street, Floor 29, Boston, MA 02109. |
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(3) | Shares shown as beneficially owned by investment funds affiliated with The Goldman Sachs Group, Inc. reflect an aggregate of the following record ownership: (i) 28,236,935 shares held by GS Capital Partners VI Fund, L.P.; (ii) 7,764,675 shares held by GS Capital Partners VI Parallel, L.P.; and (iii) 36,353,730 shares held by SpartanShield Holdings. GS Capital Partners VI Offshore Fund, L.P., GS Capital Partners VI GmbH & Co. KG, MBD 2011 Holdings, L.P., Bridge Street 2012 Holdings, L.P. and Opportunity Partners Offshore-B Co-Invest AIV, L.P. (together with GS Capital Partners VI Fund, L.P. and GS Capital Partners VI Parallel, L.P., the Goldman Sachs Funds) own partnership interests of SpartanShield Holdings. Goldman, Sachs & Co. is a direct and indirect wholly owned subsidiary of The Goldman Sachs Group, Inc. Goldman, Sachs & Co. is the investment manager of certain of the Goldman Sachs Funds. The Goldman Sachs Group, Inc., and Goldman, Sachs & Co. may be deemed to beneficially own indirectly, in the aggregate, all of the common stock owned by SpartanShield Holdings because (i) the Goldman Sachs Funds, of which affiliates of Goldman, Sachs & Co. and The Goldman Sachs Group, Inc. are the general partner, managing general partner or investment manager, share voting and investment power with certain of its respective affiliates and (ii) the Goldman Sachs Funds control SpartanShield Holdings and have the power to vote or dispose of all of the common stock of the company owned by SpartanShield Holdings. Shares of common stock that may be deemed to be beneficially owned by the Goldman Sachs Funds that correspond to the Goldman Sachs Funds partnership interests of SpartanShield Holdings consist of: (1) 23,486,489 shares of common stock deemed to be beneficially owned by GS Capital Partners VI Offshore Fund, L.P., (2) 1,003,541 shares of common stock deemed to be beneficially owned by GS Capital Partners VI GmbH & Co. KG, (3) 866,450 shares of common stock deemed to be beneficially owned by MBD 2011 Holdings, L.P., (4) 999,750 shares of common stock deemed to be beneficially owned by Bridge Street 2012 Holdings, L.P., and (5) 9,997,500 shares of common stock deemed to be beneficially owned by Opportunity Partners Offshore-B Co-Invest AIV, L.P. Each of Mr. Gilbert H. Klemann and Mr. Sumit Rajpal is a Managing Director in the Merchant Banking Division of Goldman, Sachs & Co., and therefore each of Messrs. Klemann (upon his appointment as director) and Rajpal may be deemed to have beneficial ownership of the shares held by the Goldman Sachs Funds. The Goldman Sachs Group, Inc., Goldman, Sachs & Co. and Messrs. Klemann (upon his appointment as director) and Rajpal each disclaim beneficial ownership of the shares of common stock owned directly or indirectly by SpartanShield Holdings and the Goldman Sachs Funds, except to the extent of their pecuniary interest therein, if any. The shares reported in the table above do not include shares held by members of management of the Company which are subject to an agreement pursuant to which the management stockholders have appointed the Company as their attorney-in-fact to vote, provide a written consent or take any other action with respect to all matters with respect to such shares in the same proportion as shares held by the Goldman Sachs Funds. The Goldman Sachs Funds and its affiliated funds disclaim beneficial ownership of all such shares. The address of the Goldman Sachs Funds, The Goldman Sachs Group, Inc. and Goldman, Sachs & Co. is 200 West Street, New York, NY 10282. |
(4) | Christopher Egan is a managing director at Advent International Corporation and may be deemed to beneficially own the shares held by the funds managed by Advent. Mr. Egan disclaims beneficial ownership of the shares of the common stock held by such funds, except to the extent of his pecuniary interest therein. Mr. Egan holds no shares directly. The address of Mr. Egan is c/o Advent International Corporation, 75 State Street, Floor 29, Boston, MA 02109. |
(5) | Gilbert H. Klemann is a managing director of Goldman, Sachs & Co. As such, upon Mr. Klemanns appointment and consummation of this offering, he may be deemed to have shared voting and investment power over, and therefore, may be deemed to beneficially own, shares of common stock of the Company owned by the Goldman Sachs Funds and SpartanShield Holdings. Mr. Klemann will disclaim beneficial ownership of these shares except to the extent of his pecuniary interest therein, if any. Mr. Klemann will hold no shares directly. The address of Mr. Klemann is c/o Goldman, Sachs & Co., 200 West Street, New York, NY 10282. |
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(6) | Represents 397,174 shares of common stock held of record and 25,594 options exercisable within 60 days. |
(7) | Leo F. Mullin is a senior advisor, on a part-time basis, to the Merchant Banking Division of Goldman, Sachs & Co. The address of Mr. Mullin is c/o Goldman, Sachs & Co., 200 West Street, New York, NY 10282. |
(8) | Sumit Rajpal is a managing director of Goldman, Sachs & Co. As such, Mr. Rajpal may be deemed to have shared voting and investment power over, and therefore, may be deemed to beneficially own, shares of common stock of the Company owned by the Goldman Sachs Funds and SpartanShield Holdings. Mr. Rajpal disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein, if any. Mr. Rajpal holds no shares directly. The address of Mr. Rajpal is c/o Goldman, Sachs & Co., 200 West Street, New York, NY 10282. |
(9) | Steven M. Tadler is a managing partner at Advent International Corporation and may be deemed to beneficially own the shares held by the funds managed by Advent. Mr. Tadler disclaims beneficial ownership of the shares of common stock held by such funds, except to the extent of his pecuniary interest therein, if any. Mr. Tadler holds no shares directly. Mr. Tadlers address is c/o Advent International Corporation, 75 State Street, Floor 29, Boston, MA 02109. |
(10) | Represents 562,320 shares of common stock held of record and 203,337 options exercisable within 60 days. |
(11) | Represents 166,118 shares of common stock held of record and 96,442 options exercisable within 60 days. |
(12) | Represents 170,350 shares of common stock held of record and 100,774 options exercisable within 60 days. |
(13) | Represents 15,321 shares of common stock held of record and 19,867 option exercisable within 60 days. |
(14) | Represents 32,326 shares of common stock held of record and 11,841 options exercisable within 60 days. |
(15) | Represents 424,059 shares of common stock held of record. |
(16) | Represents 105,881 shares of common stock held of record, including 82,622 unvested restricted stock units. |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related Person Transaction Policy
Our Board of Directors has adopted a written Related Person Transaction Policy, which provides that any Related Person Transaction must be reviewed and approved or ratified in accordance with specified procedures. The term Related Person Transaction includes any transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships, in which (1) the aggregate dollar amount involved exceeds $120,000 in any fiscal year, (2) the Company is, or is proposed to be, a participant, and (3) any person who is or was (since the beginning of the last fiscal year) a director, a nominee for director, an executive officer or a beneficial owner of more than five percent of any class of the Companys voting securities, or a member of the immediate family of any such person, had, has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10 percent beneficial owner of another entity).
The policy requires each director, nominee and executive officer to notify the general counsel in writing of any Related Person Transaction in which the director, nominee, executive officer or an immediate family member has or will have an interest and to provide specified details of the transaction. The general counsel will deliver a copy of the notice to the Audit and Compliance Committee. The Audit and Compliance Committee will review the material facts of each proposed Related Person Transaction and approve, ratify or disapprove the transaction.
The vote of a majority of disinterested members of the Audit and Compliance Committee is required for the approval or ratification of any Related Person Transaction. The Audit and Compliance Committee may approve or ratify a Related Person Transaction if the Audit and Compliance Committee determines, in its business judgment, based on the review of all available information, that the transaction is fair and reasonable to the Company, that there is a business or corporate interest supporting the Related Person Transaction, and that the Related Person Transaction is in the best interests of the Company. In making this determination, the Audit and Compliance Committee will consider, among other things, (i) the business or corporate purpose of the transaction, (ii) whether the transaction is entered into on an arms-length basis and on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances, (iii) whether the interest of the director, nominee, executive officer, beneficial owner or family member in the transaction is material, (iv) whether the transaction would impair the independence of the director or executive officer (v) whether the transaction would otherwise present an improper conflict of interest and (vi) whether the transaction would violate any law or regulation applicable to the Company or any provision of the Companys Code of Business Conduct. The policy also contains categories of preapproved transactions that the Board has identified as not having a significant potential for an actual or potential conflict of interest or improper benefit.
In any case where the Audit and Compliance Committee determines not to approve or ratify a Related Person Transaction, the matter will be referred to the General Counsel for review and consultation regarding the appropriate disposition of such transaction, arrangement or relationship including, but not limited to, termination of the transaction, rescission or modification of the transaction in a manner that would permit it to be ratified and approved.
Registration Rights Agreement
In connection with the 2012 Change in Control Transaction, we entered into a registration rights agreement (the Registration Rights Agreement) with certain affiliates of the Sponsors and certain members of management. This Registration Rights Agreement provides the Sponsors an unlimited
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number of demand registrations, which require us to register shares of our common stock under the Securities Act of 1933, as amended (the Securities Act), held by the Sponsors and, if requested, to maintain a shelf registration statement effective with respect to such shares. Each of the Sponsors and members of management party to the Registration Rights Agreement is also entitled to customary piggyback registration rights and entitled to participate on a pro rata basis in any registration of our common stock under the Securities Act that we may undertake. The Registration Rights Agreement also provides that we will pay certain expenses relating to such registrations and indemnify the Sponsors and the members of management party thereto against certain liabilities which may arise under the Securities Act.
Major Stockholders Agreement
In connection with the 2012 Change in Control Transaction, we, GS (as later defined) and Advent (as later defined) entered into a major stockholders agreement, as amended on each of January 28, 2014 and January 1, 2015 (the Major Stockholders Agreement). The Major Stockholders Agreement will be amended in connection with this offering (the Amended and Restated Major Stockholders Agreement). The following is a description of the Amended and Restated Major Stockholders Agreement as will be in effect upon the consumation of the offering:
Board of Directors
The Amended and Restated Major Stockholders Agreement will, among other things, provide that two directors shall be designated for election to the board of directors by GS Capital Partners VI Fund, L.P., GS Capital Partners VI Parallel, L.P., SpartanShield Holdings, GS Capital Partners Offshore Fund, L.P., GS Capital Partners VI GmbH & Co. KG, MBD 2011 Holding, L.P. and Opportunity Partners Offshore-B Co-Invest AIV, L.P. (collectively, GS) or their affiliates and two directors shall be designated for election to the board of directors by Advent-TransUnion Acquisition Limited Partnership (Advent and, together with GS, the Sponsors) or its affiliates (so long as neither of GS nor Advent have transferred more than 75% of their initial ownership interest in the Company). If either Sponsor transfers more than 75% of their respective initial ownership interests in the Company, then such Sponsor shall only be entitled to designate for election one director; and if either Sponsor transfers more than 90% of their respective initial ownership interest in the Company, then that Sponsor shall not be entitled to designate any directors for election. Moreover, the Amended and Restated Major Stockholders Agreement provides that GS is entitled to appoint Messrs. Rajpal and Klemann as Class III and Class II directors, respectively, and Advent is entitled to appoint Messrs. Egan and Tadler as Class III and Class II directors, respectively. Additionally, so long as the GS Capital Partners VI Parallel, L.P. beneficially owns at least 5% of its initial ownership interest in the Company, it is permitted to designate for election one non-voting observer to our board of directors and any committee thereof. See Management. The current size of our board of directors is eleven directors. Upon consummation of this offering, there will be three vacancies on the board of directors.
Additional Matters
Additionally, because of The Goldman Sachs Group, Inc.s status as a bank holding company and election to be treated as a financial holding company under the BHC Act, we have agreed to be subject to certain covenants in the Amended and Restated Major Stockholders Agreement for the benefit of The Goldman Sachs Group, Inc. that are intended to facilitate compliance with the BHC Act. In particular, The Goldman Sachs Group, Inc. has rights to conduct audits on, and access certain information of, us and has certain rights to review the policies and procedures that we implement to comply with the laws and regulations that relate to our activities. In addition, we are obligated to provide The Goldman Sachs Group, Inc. with notice of certain events and business activities and
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cooperate with The Goldman Sachs Group, Inc. to mitigate potential adverse consequences resulting therefrom, as well as seek consent from them prior to expanding the nature of our activities. These covenants will remain in effect as long as the Federal Reserve deems us to be a subsidiary of The Goldman Sachs Group, Inc. under the BHC Act.
The Amended and Restated Major Stockholders Agreement also requires each of GS and Advent to consult with one another regarding the transfer of their equity securities of the Company, so long as either of them own at least 20% of its initial ownership interest in the Company.
Stockholders Agreement
We, the Sponsors, members of our management or of TransUnion Intermediates management and certain other of our key employees are party to a stockholders agreement (the Stockholders Agreement). This agreement restricts employee holders (including management) of our equity securities from transferring those securities, or shares of our equity securities received by such employee holders upon exercise of options or other awards received pursuant to our equity incentive plan, prior to our first underwritten public offering of our equity securities, including the offering of securities in this proposed offering, subject to certain exceptions. Following completion of this offering, such employee holders may transfer our equity securities that they hold, subject to certain volume and other limitations. The Stockholders Agreement also gives us and the Sponsors customary drag-along rights in connection with a change of control transaction, which rights, as discussed under Major Stockholders Agreement above, will terminate upon completion of this offering, unless amended by the Amended and Restated Major Stockholders Agreement. In addition, the Stockholders Agreement provides employee holders certain tag-along rights to participate on a pro rata basis with the Sponsors in certain transfers or sales of our equity securities that the Sponsors effect; the employee holders may not participate in this proposed offering. Additionally, until the date on the earliest to occur of the lapse of the lock-up restrictions entered into in connection with this proposed offering, assuming such offering is successful, or a change in control transaction, upon the termination of employment of an employee holder for any reason, we have the right, but not the obligation, to purchase all or a portion of such employee holders shares of our equity securities for a specified period of time and for a specified price or to assign such repurchase right to the Sponsors; moreover, each employee holder has appointed us as its attorney-in-fact and proxy to vote, provide a written consent or take any other action with respect to all matters in the same proportion as our shares held by the Sponsors or their affiliates are voted on with respect to all such matters.
Consulting Agreements
In connection with the 2012 Change in Control Transaction, TransUnion, GS and Advent entered into a Consulting Agreement, dated April 30, 2012 (the Sponsor Consulting Agreement). Upon the completion of an initial public offering of our equity securities, such as this proposed offering, the Sponsor Consulting Agreement automatically terminates. In the event of such a termination, we are required to pay in cash to each of GS and Advent all unpaid advisory fees, as described below, payable to GS and Advent, respectively, under the Sponsor Consulting Agreement and all expenses due under the Sponsor Consulting Agreement to each of GS and Advent with respect to periods prior to the termination date.
Pursuant to the terms of the agreement, GS and Advent receive an annual advisory fee of $250,000 each, increasing 5% annually, in exchange for services provided, including (i) general executive and management services; (ii) identification, support, negotiation and analysis of acquisitions and dispositions; (iii) support, negotiation and analysis of financing alternatives, including in connection with acquisitions, capital expenditures and refinancing of existing debt; (iv) finance functions, including assistance in the preparation of financial projections and monitoring of compliance with financing
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agreements; (v) human resources functions, including searching and recruiting of executives; and (vi) other services as mutually agreed upon. During 2012, 2013 and 2014, GS and Advent each provided consulting services to TransUnion totaling $125,000, $262,500 and $262,500, respectively.
In connection with his resignation as President and Chief Executive Officer of the Company, TransUnion and Siddharth N. (Bobby) Mehta, a director of the Company, entered into a Consulting Agreement, dated December 6, 2012 (the Mehta Consulting Agreement and, together with the Sponsor Consulting Agreement, the Consulting Agreements), pursuant to which Mr. Mehta provides advice and consultation to assist Mr. Peck in the transition of duties as Chief Executive Officer and to Mr. Peck and the Board of Directors with respect to the Companys strategic operating plan and strategic opportunities or transactions considered by the Company from time to time. Pursuant to the terms of the agreement, Mr. Mehta receives a consulting services fee of $150,000 on or before January 10 th of each year during the term of the agreement. Either party may terminate the agreement by providing notice of non-renewal at least sixty (60) days prior to the end of the then-current term.
The Consulting Agreements were entered into prior to the adoption of the Related Person Transaction Policy and were approved by the Companys Board of Directors.
Directed Share Program
At our request, the underwriters have reserved up to 1,477,273 shares of common stock, or approximately 5% of the shares being offered by us pursuant to this prospectus, for sale at the initial public offering price to our directors, officers and employees and certain other persons associated with us, as designated by us. The directed share program will not limit the ability of our directors, officers and their family members, or holders of more than 5% of our capital stock, to purchase more than $120,000 in value of our common stock. We do not currently know the extent to which these related persons will participate in our directed share program, if at all, or the extent to which they will purchase more than $120,000 in value of our common stock.
Debt and Interest Expense
As of March 31, 2015, December 31, 2014 and December 31, 2013, interest accrued on debt to related parties was less than $0.1 million, less than $0.1 million and $0, respectively, and was recorded within other current liabilities in the consolidated balance sheets. As of March 31, 2015, December 31, 2014 and December 31, 2013, $17.9 million, $10.5 million and $0, respectively, of our senior secured revolving credit facility was owed to affiliates of GS. Related party interest paid to affiliates of GS for the three months ended March 31, 2015 twelve months ended December 31, 2014 and December 31, 2013 was less than $0.1 million for each period.
The Change in Control Transaction
On April 30, 2012, we were acquired by the Sponsors in the 2012 Change in Control Transaction. The series of transactions comprising the 2012 Change in Control transaction included an equity contribution by the Sponsors to us of $1,093.2 million, as a result of which the Sponsors became our controlling shareholders. In connection with the 2012 Change in Control Transaction, affiliates of GS were paid $8.1 million in underwriting fees and $0.6 million in bridge commitment fees.
Financing Transactions
On November 1 2012, we issued $400.0 million of 8.125%/8.875% Senior PIK Toggle Notes, the proceeds of which were primarily used to pay a dividend to the Sponsors. In connection with such financing transaction, affiliates of GS were paid $4.2 million in underwriting fees and $0.5 million in consent solicitation agent fees.
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On April 9, 2014, we refinanced and amended our senior secured credit facility, which resulted in an increase of the outstanding term loan and other changes to such facility. In connection with such refinancing transaction, affiliates of GS were paid $4.1 million in term loan arrangement fees and $0.4 million in revolver arrangement fees.
Management Stock Sales and Repurchases
On December 21, 2012, the Company issued an aggregate of 300,675 shares of common stock to David M. Neenan, an executive officer of the Company, at a purchase price of $4.99 per share.
On December 31, 2012, the Company issued an aggregate 265,582 shares of common stock to James M. Peck, the President and Chief Executive Officer of the Company.
On January 7, 2013, the Company purchased an aggregate 397,174 shares of common stock from Siddharth N. (Bobby) Mehta, the former President and Chief Executive Officer of the Company, at a purchase price of $4.99 per share. On August 28, 2013, the Company purchased an aggregate 101,591 shares of common stock from Mark Marinko, a former executive officer, at a purchase price of $8.57 per share. On October 14, 2013, the Company purchased an aggregate 44,535 shares of common stock from Jeff Hellinga, a former executive officer, at a purchase price of $8.57 per share. All such purchases were made pursuant to the terms of the Stockholders Agreement.
On March 26, 2013, as a component of James M. Pecks employment agreement, Mr. Peck purchased an additional 35,092 shares of common stock at a purchase price of $4.99 per share.
On August 30, 2013, as a component of Christopher Cartwrights employment offer, Mr. Cartwright purchased 116,725 shares of common stock at a purchase price of $8.57 per share. Mr. Cartwright is an executive officer of the Company.
On March 19, 2014, Andy Prozes, a Director of the Company, purchased 58,361 shares of common stock at a purchase price of $8.57 per share.
On March 31, 2014, as a component of James M. Pecks employment agreement, Mr. Peck purchased an additional 13,204 shares of common stock at a purchase price of $8.57 per share.
On April 11, 2014, George Awad, a director of the Company, purchased 43,186 shares of common stock at a purchase price of $8.57 per share.
On April 24, 2014 and October 1, 2014, David M. Neenan, an executive officer of the Company, exercised options to purchase a total of 24,665 shares of common stock at a purchase price of $4.99 per share.
In October of 2014, the following executive officers of the Company purchased common stock at a purchase price of $13.06 under a one-time management stock purchase plan: James M. Peck, 68,948 shares; Gerald M. McCarthy Jr., 15,321 shares; Christopher A. Cartwright, 53,625 shares; Samuel A. Hamood, 29,302 shares; John T. Danaher, 7,660 shares; and David M. Neenan, 32,941 shares.
On December 30, 2014, Mary Krupka, a former executive officer of the Company, exercised options to purchase 22,692 shares of common stock at a purchase price of $4.99 per share.
On February 6, 2015, Leo F. Mullin, a director of the Company, purchased 19,151 shares of common stock at a purchase price of $13.06 per share.
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On February 25, 2015, as a component of James M. Pecks employment agreement, Mr. Peck purchased 13,126 shares of common stock at a purchase price of $13.06 per share
On March 4, 2015, John T. Danaher, an executive officer of the Company, exercised options to purchase 24,665 shares of common stock at $4.99 per share.
On April 7, 2015, David M. Neenan, an executive officer of the Company, exercised options to purchase 32,889 shares of common stock at $4.99 per share.
On April 29, 2015, James M. Peck, the President and Chief Executive Officer of the Company, exercised options to purchase 166,366 shares of common stock at $4.99 per share.
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Senior Secured Credit Facility
In June 2010, Trans Union LLC entered into its senior secured credit facility. On April 9, 2014, Trans Union LLC refinanced and amended the senior secured credit facility, which resulted in an increase of the outstanding term loan from $1,120.5 million to $1,900.0 million, reduced the interest rate floor and margins, reduced the amount available under the revolving line of credit from $210.0 million to $190.0 million, extended the maturity dates, and changed certain covenant requirements. The additional borrowings were used in part to repay all amounts outstanding under the existing revolving line of credit and pay fees and expenses associated with the refinancing transaction. The remaining borrowings were used to redeem our 11.375% Senior Notes.
As of March 31, 2015 the senior secured credit facility consisted of:
| a $1,900.0 million senior secured term loan maturing on April 9, 2021; and |
| a $190.0 million senior secured revolving credit facility maturing on April 9, 2019, including both a letter of credit sub-facility and a swingline loan sub-facility. |
In addition, Trans Union LLC may request additional tranches of term loans or increases to the senior secured revolving credit facility in an aggregate amount up to a minimum of $450.0 million, plus an additional amount of indebtedness under the senior secured credit facility or separate facilities permitted by the senior secured credit facility so long as certain financial conditions are met, subject, in each case, to certain conditions and receipt of commitments by existing or additional financial institutions or institutional lenders.
Trans Union LLC is the borrower under this facility. All borrowings under the senior secured credit facility are subject to the satisfaction of customary conditions, including the absence of a default and the accuracy of representations and warranties.
On June 2, 2015, our subsidiary, Trans Union LLC, entered into Amendment No. 8 to our senior secured credit facility that (a) refinanced our existing $1,881.0 million aggregate principal amount senior secured term loan with a new senior secured term loan in the same amount with lower pricing and (b) included other amendments to our senior secured credit facility to permit Amendment No. 9 to be entered into substantially concurrently with, and conditioned upon, the closing of this offering that will substantially concurrently with the closing of this offering: (i) refinance our existing $190.0 million senior secured revolving credit facility with a new senior secured revolving credit facility in an amount of $210.0 million, proceeds of which may be used for working capital and general corporate purposes and (ii) allow for the five-year New Term Loan Facility in an aggregate principal amount of $350.0 million, proceeds of which will be used to repay a portion of the Senior Notes and pay fees and expenses incurred in connection with the Credit Facility Refinancing.
Interest and Fees
Interest rates on borrowings under the senior secured credit facility are based, at our election, on LIBOR or an alternate base rate. The interest rate of the Refinanced Term Loan Facility is subject to a floor of 0.75% for LIBOR loans and 2.00% for alternate base rate loans, plus an applicable margin of between 2.75% and 3.00% for LIBOR loans and 1.75% and 2.00% for base rate loans, based on the senior secured net leverage ratio. The alternate base rate is the highest of (a) the Federal Funds Rate plus 1/2 of 1.00%, (b) the Prime Lending Rate at such time and (c) LIBOR for an Interest Period of one month commencing on such day plus 1.00% per annum.
We anticipate that the interest rate on the New Term Loan and borrowings under our new senior secured revolving credit facility will be LIBOR plus an amount between 2.00% and 2.25% depending on the amount of leverage we have as of the end of the prior quarter.
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Any incremental term facility may have a different interest rate, provided that the interest rate of the incremental term facility, other than with respect to unsecured and junior lien incremental facilities, cannot exceed the interest rate on the existing senior secured term loan by greater than 0.50% without a corresponding increase in the senior secured term loan interest rate.
Swingline loans bear interest at the interest rate applicable to alternate base rate revolving loans.
In addition, Trans Union LLC is required to pay each lender a commitment fee quarterly and equal to 0.50% or 0.375% of the unused portion of the revolving line of credit, based on the senior secured net leverage ratio. Trans Union LLC is required to pay letter of credit fees equal to the applicable margin of LIBOR loans to be shared proportionately by the lenders as well as a fronting fee to be paid to the letter of credit issuer for its own account.
Prepayments
Subject to exceptions, the senior secured credit facility requires mandatory prepayments of senior secured term loans in amounts equal to:
| between 0% and 50% of the prior years excess cash flows with such percentage determined based on the senior secured net leverage ratio for such prior year, each as defined in the senior secured credit facility; |
| 100% of the net cash proceeds from asset sales and insurance recovery and condemnation events, subject to reinvestment rights and certain other exceptions; and |
| 100% of the net cash proceeds from certain incurrences of debt. |
Voluntary prepayments and commitment reductions are permitted, in whole or in part, in minimum amounts, with a 1% prepayment premium until the first anniversary of the amendment and extension (payable upon a repricing transaction whereby the senior secured credit facility is either refinanced or amended to reduce the effective yield of such indebtedness) and without premium or penalty thereafter, other than customary breakage costs with respect to LIBOR rate loans.
Amortization of Principal
The Trans Union LLC senior secured credit facility requires scheduled quarterly payments on the senior secured term loans equal to 0.25% of the aggregate principal amount of senior secured term loans outstanding, with the balance paid at maturity.
Collateral and Guarantors
The Trans Union LLC senior secured credit facility is guaranteed by TransUnion Intermediate and certain of its current and future domestic wholly-owned subsidiaries, and is secured by a perfected security interest in certain of Trans Union LLCs existing and future property and assets and by a pledge of the capital stock of Trans Union LLC and its domestic subsidiaries and up to 65% of the capital stock of certain of its foreign subsidiaries.
Restrictive Covenants and Other Matters
As a condition to borrowing and as of the end of any fiscal quarter for which Trans Union LLC has borrowings outstanding under the senior secured revolving credit facility, the senior secured credit facility requires that Trans Union LLC has a senior secured net leverage ratio equal to or less than 6.0
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to 1.0 calculated on a pro forma basis. In addition, the senior secured credit facility includes negative covenants, subject to significant exceptions, restricting or limiting Trans Union LLCs ability and the ability of Trans Union LLCs restricted subsidiaries to, among other things:
| incur, assume or permit to exist additional indebtedness or guarantees; |
| incur liens and engage in sale and leaseback transactions; |
| make loans and investments; |
| declare dividends, make payments or redeem or repurchase capital stock; |
| engage in mergers, acquisitions and other business combinations; |
| prepay, redeem or purchase certain indebtedness; |
| amend or otherwise alter the terms of certain of our indebtedness; |
| enter into agreements limiting subsidiary distributions; |
| sell assets (including sale-leaseback transactions); |
| conduct transactions with affiliates; |
| change the business that we conduct; |
| issue disqualified equity interests; |
| change its fiscal year; and |
| enter into any agreement containing a restriction that limits the ability to grant liens in favor of the lenders under the senior secured credit facility. |
The senior secured credit facility contains certain customary representations and warranties, affirmative covenants and events of default, including payment defaults, breach of representations and warranties, covenant defaults, change of control, cross-defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any guaranty or material security document supporting the senior secured credit facility to be in full force and effect. If such an event of default occurs, the lenders under the senior secured credit facility would be entitled to take various actions, including the acceleration of amounts due under the senior secured credit facility and all actions permitted to be taken by a secured creditor.
Indentures
General
On March 21, 2012, we issued $600.0 million of the 9.625% Senior Notes to partially fund the 2012 Change in Control Transaction. On November 1, 2012, we issued $400.0 million of the 8.125% Senior Notes, the proceeds of which were primarily used to pay a dividend to our shareholders.
As of March 31, 2015 we had outstanding $600.0 million of the 9.625% Senior Notes and $400.0 million of the 8.125% Senior Notes.
Interest on the Senior Notes is payable semi-annually.
The Senior Notes are our senior unsecured obligations and:
| rank senior in right of payment to all existing and future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the Senior Notes; |
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| rank equally in right of payment to all existing and future senior debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the Senior Notes; and |
| are effectively subordinated in right of payment to all existing and future secured debt (including obligations under the Senior Secured Credit Facilities), to the extent of the value of the assets securing such debt, and are structurally subordinated to all obligations of each of our subsidiaries that is not a guarantor of the Senior Notes. |
We intend to use proceeds from this offering, the New Term Loan Facility and borrowings under our new senior secured revolving credit facility to redeem all of our outstanding Senior Notes at the redemption prices listed below under Optional Redemption. If the proceeds raised from this offering and the New Term Loan Facility are insufficient to redeem the full amount of the Senior Notes, we may only redeem a portion of the Senior Notes. See Use of Proceeds.
Covenants
The indentures governing the Senior Notes contain a number of significant covenants that, among other things, restrict our ability to dispose of certain assets, incur additional indebtedness, pay dividends, prepay subordinated indebtedness, incur liens, make capital expenditures, investments or acquisitions, engage in mergers or consolidations, engage in certain types of transactions with affiliates and otherwise restrict our activities.
These covenants are subject to a number of important limitations and exceptions. During any period in which the Senior Notes have investment grade ratings from both Moodys Investors Service, Inc. and Standard & Poors and no default has occurred and is continuing under the indenture governing the Senior Notes, we will not be subject to many of the covenants.
Optional Redemption
We may redeem the 9.625% Senior Notes and the 8.125% Senior Notes at the redemption prices listed below, if redeemed during the twelve-month period beginning on the dates indicated below:
9.625% Senior Notes
Year |
Percentage | |||
June 15, 2014 |
104.8125 | % | ||
June 15, 2015 and thereafter |
100.000 | % |
8.125% Senior Notes
Year |
Percentage | |||
June 15, 2014 |
104.063 | % | ||
June 15, 2015 |
102.031 | % | ||
June 15, 2016 and thereafter |
100.000 | % |
Change of Control Offer
Upon the occurrence of a change of control, we will be required to offer to repurchase some or all of the Senior Notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Additional Interest (as defined in the indentures), if any, to the repurchase date.
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The following is a description of the material terms of, and is qualified in its entirety by, our amended and restated certificate of incorporation and amended and restated bylaws, each of which will be in effect upon the consummation of this offering, the forms of which are filed as exhibits to the registration statement of which this prospectus is a part.
Our purpose is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the General Corporation Law of the State of Delaware (the DGCL). Upon the consummation of this offering, our authorized capital stock will consist of 1,000,000,000 shares of common stock, par value $0.01 per share and 100,000,000 shares of preferred stock, par value $0.01 per share. No shares of preferred stock will be issued or outstanding immediately after the public offering contemplated by this prospectus. Unless our Board of Directors determines otherwise, we will issue all shares of our capital stock in uncertificated form.
Common Stock
In connection with this offering, we will amend and restate our certificate of incorporation.
Holders of our common stock are entitled to one vote for each share held of record on all matters to which stockholders are entitled to vote generally, including the election or removal of directors. The holders of our common stock do not have cumulative voting rights in the election of directors.
Upon our liquidation, dissolution or winding up and after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of our common stock will be entitled to receive pro rata our remaining assets available for distribution. Holders of our common stock do not have preemptive, subscription, redemption or conversion rights. The common stock will not be subject to further calls or assessment by us. There will be no redemption or sinking fund provisions applicable to the common stock. All shares of our common stock that will be outstanding at the time of the completion of the offering will be fully paid and non-assessable. The rights, powers, preferences and privileges of holders of our common stock will be subject to those of the holders of any shares of our preferred stock we may authorize and issue in the future.
Preferred Stock
Our amended and restated certificate of incorporation authorizes our Board of Directors to establish one or more series of preferred stock (including convertible preferred stock). Unless required by law or by the NYSE, the authorized shares of preferred stock will be available for issuance without further action by you. Our Board of Directors is able to determine, with respect to any series of preferred stock, the powers (including voting powers), preferences and relative participations, optional or other special rights, and the qualifications, limitations or restrictions thereof, of that series, including, without limitation:
| the designation of the series; |
| the number of shares of the series, which our Board of Directors may, except where otherwise provided in the preferred stock designation, increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares then outstanding); |
| whether dividends, if any, will be cumulative or non-cumulative and the dividend rate of the series; |
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| the dates at which dividends, if any, will be payable; |
| the redemption rights and price or prices, if any, for shares of the series; |
| the terms and amounts of any sinking fund provided for the purchase or redemption of shares of the series; |
| the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of our Company; |
| whether the shares of the series will be convertible into shares of any other class or series, or any other security, of our Company or any other corporation, and, if so, the specification of the other class or series or other security, the conversion price or prices or rate or rates, any rate adjustments, the date or dates as of which the shares will be convertible and all other terms and conditions upon which the conversion may be made; |
| restrictions on the issuance of shares of the same series or of any other class or series; and |
| the voting rights, if any, of the holders of the series. |
We could issue a series of preferred stock that could, depending on the terms of the series, impede or discourage an acquisition attempt or other transaction that some, or a majority, of you might believe to be in your best interests or in which you might receive a premium for your common stock over the market price of the common stock. Additionally, the issuance of preferred stock may adversely affect the holders of our common stock by restricting dividends on the common stock, diluting the voting power of the common stock or subordinating the liquidation rights of the common stock. As a result of these or other factors, the issuance of preferred stock could have an adverse impact on the market price of our common stock.
Dividends
The DGCL permits a corporation to declare and pay dividends out of surplus or, if there is no surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Surplus is defined as the excess of the net assets of the corporation over the amount determined to be the capital of the corporation by the Board of Directors. The capital of the corporation is typically calculated to be (and cannot be less than) the aggregate par value of all issued shares of capital stock. Net assets equals the fair value of the total assets minus total liabilities. The DGCL also provides that dividends may not be paid out of net profits if, after the payment of the dividend, capital is less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets.
Declaration and payment of any dividend will be subject to the discretion of our Board of Directors. The time and amount of dividends will be dependent upon our financial condition, operations, cash requirements and availability, debt repayment obligations, capital expenditure needs and restrictions in our debt instruments, industry trends, the provisions of Delaware law affecting the payment of distributions to stockholders and any other factors our Board of Directors may consider relevant.
Anti-Takeover Effects of Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws and Certain Provisions of Delaware Law
Our amended and restated certificate of incorporation, amended and restated bylaws and the DGCL, which are summarized in the following paragraphs, contain provisions that are intended to enhance the likelihood of continuity and stability in the composition of our Board of Directors. These
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provisions are intended to avoid costly takeover battles, reduce our vulnerability to a hostile change of control and enhance the ability of our Board of Directors to maximize stockholder value in connection with any unsolicited offer to acquire us. However, these provisions may have an anti-takeover effect and may delay, deter or prevent a merger or acquisition of our Company by means of a tender offer, a proxy contest or other takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the prevailing market price for the shares of common stock held by stockholders.
Authorized but Unissued Capital Stock
Delaware law does not require stockholder approval for any issuance of authorized shares. However, the listing requirements of the NYSE, which would apply if and so long as our common stock remains listed on the NYSE, require stockholder approval of certain issuances equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of common stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.
Our Board of Directors may generally issue preferred shares on terms calculated to discourage, delay or prevent a change of control of our Company or the removal of our management. Moreover, our authorized but unissued shares of preferred stock will be available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans.
One of the effects of the existence of unissued and unreserved common stock or preferred stock may be to enable our Board of Directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our Company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive our stockholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices.
Classified Board of Directors
Our amended and restated certificate of incorporation provides that our Board of Directors will be divided into three classes of directors, with the classes to be as nearly equal in number as possible, and with the directors serving three-year terms. As a result, approximately one-third of our Board of Directors will be elected each year. The classification of directors will have the effect of making it more difficult for stockholders to change the composition of our Board of Directors. Our amended and restated certificate of incorporation and amended and restated bylaws provide that, subject to any rights of holders of preferred stock to elect additional directors under specified circumstances, the number of directors will be fixed from time to time exclusively pursuant to a resolution adopted by the Board of Directors.
Business Combinations
We have opted out of Section 203 of the DGCL; however, our amended and restated certificate of incorporation contains similar provisions providing that we may not engage in certain business combinations with any interested stockholder for a three-year period following the time that the stockholder became an interested stockholder, unless:
| prior to such time, our Board of Directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
| upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding certain shares; or |
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| at or subsequent to that time, the business combination is approved by our Board of Directors and by the affirmative vote of holders of at least 66 2 / 3 % of the outstanding voting stock that is not owned by the interested stockholder. |
Generally, a business combination includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an interested stockholder is a person who, together with that persons affiliates and associates, owns, or within the previous three years owned, 15% or more of our voting stock. For purposes of this section only, voting stock has the meaning given to it in Section 203 of the DGCL.
Under certain circumstances, this provision will make it more difficult for a person who would be an interested stockholder to effect various business combinations with a corporation for a three-year period. This provision may encourage companies interested in acquiring our Company to negotiate in advance with our Board of Directors because the stockholder approval requirement would be avoided if our Board of Directors approves either the business combination or the transaction which results in the stockholder becoming an interested stockholder. These provisions also may have the effect of preventing changes in our Board of Directors and may make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.
Our restated certificate of incorporation provides that the Sponsors and their affiliates and any of their respective direct or indirect transferees and any group as to which such persons are a party do not constitute interested stockholders for purposes of this provision.
Removal of Directors; Vacancies
Under the DGCL, unless otherwise provided in our amended and restated certificate of incorporation, directors serving on a classified board may be removed by the stockholders only for cause. Our amended and restated certificate of incorporation provides that directors may be removed with or without cause upon the affirmative vote of a majority in voting power of all outstanding shares of stock entitled to vote thereon, voting together as a single class; provided , however , at any time when the Sponsors and their affiliates beneficially own, in the aggregate, less than 50% in voting power of the stock of the Company entitled to vote generally in the election of directors, directors may only be removed for cause, and only by the affirmative vote of holders of at least 66 2 / 3 % in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class. In addition, our amended and restated certificate of incorporation also provides that, subject to the rights granted to one or more series of preferred stock then outstanding, any vacancies on our Board of Directors will be filled only by the affirmative vote of a majority of the remaining directors, even if less than a quorum, by a sole remaining director or by the stockholders; provided , however , at any time when the Sponsors and their affiliates beneficially own, in the aggregate, less than 50% in voting power of the stock of the Company entitled to vote generally in the election of directors, any newly created directorship on the Board of Directors that results from an increase in the number of directors and any vacancy occurring in the Board of Directors may only be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director (and not by the stockholders).
No Cumulative Voting
Under Delaware law, the right to vote cumulatively does not exist unless the certificate of incorporation specifically authorizes cumulative voting. Our amended and restated certificate of incorporation does not authorize cumulative voting. Therefore, stockholders holding a majority in voting power of the shares of our stock entitled to vote generally in the election of directors will be able to elect all our directors.
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Special Stockholder Meetings
Our amended and restated certificate of incorporation provides that special meetings of our stockholders may be called at any time only by or at the direction of the Board of Directors or the chairman of the Board of Directors; provided, however, at any time when GS beneficially owns, in the aggregate, at least 20% in voting power of the stock of the Company entitled to vote generally in the election of directors, special meetings of the stockholders of the Company for any purpose or purposes shall also be called by or at the direction of the Board of Directors or the chairman of the Board of Directors at the request of GS, and at any time when Advent beneficially owns at least 20% in voting power of the stock of the Company entitled to vote generally in the election of directors, special meetings of the stockholders of the Company for any purpose or purposes shall also be called by or at the direction of the Board of Directors or the chairman of the Board of Directors at the request of Advent. Our amended and restated bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our Company.
Requirements for Advance Notification of Director Nominations and Stockholder Proposals
Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the Board of Directors or a committee of the Board of Directors. In order for any matter to be properly brought before a meeting, a stockholder will have to comply with advance notice requirements and provide us with certain information. Generally, to be timely, a stockholders notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the immediately preceding annual meeting of stockholders. Our amended and restated bylaws also specify requirements as to the form and content of a stockholders notice. Our amended and restated bylaws allow the chairman of the meeting at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions will not apply to the Sponsors and their affiliates so long as the Major Stockholders Agreement, as amended, remains in effect. See Certain Relationships and Related Party TransactionsMajor Stockholders Agreement. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirers own slate of directors or otherwise attempting to influence or obtain control of our Company.
Stockholder Action by Written Consent
Pursuant to Section 228 of the DGCL, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted, unless our amended and restated certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation will preclude stockholder action by written consent at any time when the Sponsors and their affiliates beneficially own, in the aggregate, less than 40% in voting power of the stock of the Company entitled to vote generally in the election of directors.
Supermajority Provisions
Our amended and restated certificate of incorporation and amended and restated bylaws will provide that the Board of Directors is expressly authorized to make, alter, amend, change, add to, rescind or repeal, in whole or in part, our bylaws without a stockholder vote in any matter not inconsistent with the laws of the State of Delaware or our amended and restated certificate of
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incorporation. For as long as the Sponsors and their affiliates beneficially own, in the aggregate, at least 50% in voting power of the stock of the Company entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our bylaws by our stockholders will require the affirmative vote of a majority in voting power of the outstanding shares of our stock present in person or represented by proxy and entitled to vote on such amendment, alteration, rescission or repeal. At any time when the Sponsors and their affiliates beneficially own, in the aggregate, less than 50% in voting power of the stock of the Company entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our bylaws by our stockholders will require the affirmative vote of the holders of at least 66 2 / 3 % in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class.
The DGCL provides generally that the affirmative vote of a majority of the outstanding shares entitled to vote thereon, voting together as a single class, is required to amend a corporations certificate of incorporation, unless the certificate of incorporation requires a greater percentage.
Our amended and restated certificate of incorporation provides that at any time when the Sponsors and their affiliates beneficially own, in the aggregate, less than 50% in voting power of the stock of the Company entitled to vote generally in the election of directors, the following provisions:
| the provision requiring a 66 2 / 3 % supermajority vote for stockholders to amend our bylaws; |
| the provisions providing for a classified Board of Directors (the election and term of our directors); |
| the provisions regarding resignation and removal of directors; |
| the provisions regarding competition and corporate opportunities; |
| the provisions regarding entering into business combinations with interested stockholders; |
| the provisions regarding calling special meetings of stockholders; |
| the provisions regarding filling vacancies on our Board of Directors and newly created directorships; |
| the provisions eliminating monetary damages for breaches of fiduciary duty by a director; and |
| the amendment provision requiring that the above provisions be amended only with a 66 2 / 3 % supermajority vote. |
Additionally, our amended and restated certificate of incorporation provides that any time when the Sponsors and their affiliates beneficially own, in the aggregate, less than 40% in voting power of the stock of the Company entitled to vote generally in the election of directors, the provisions in our amended and restated certificate of incorporation regarding stockholder action by written consent may be amended, altered, repealed or rescinded only by the affirmative vote of the holders of at least 66 2 / 3 % in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class.
The combination of the classification of our Board of Directors, the lack of cumulative voting and the supermajority voting requirements will make it more difficult for our existing stockholders to replace our Board of Directors as well as for another party to obtain control of us by replacing our Board of Directors. Because our Board of Directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. These provisions may have the effect of deterring hostile takeovers, delaying, or preventing changes in control of our management or our Company, such as a merger, reorganization or tender offer. These provisions are intended to enhance the likelihood of continued stability in the composition of our Board of Directors and its policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of us.
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These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions are also intended to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our shares that could result from actual or rumored takeover attempts. Such provisions may also have the effect of preventing changes in management.
Dissenters Rights of Appraisal and Payment
Under the DGCL, with certain exceptions, our stockholders will have appraisal rights in connection with a merger or consolidation of us. Pursuant to the DGCL, stockholders who properly request and perfect appraisal rights in connection with such merger or consolidation will have the right to receive payment of the fair value of their shares as determined by the Delaware Court of Chancery.
Stockholders Derivative Actions
Under the DGCL, any of our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the stockholder bringing the action is a holder of our shares at the time of the transaction to which the action relates or such stockholders stock thereafter devolved by operation of law.
Exclusive Forum
Our amended and restated certificate of incorporation will provide that unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of our Company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director or officer of our Company to the Company or the Companys stockholders, creditors or other constituents, (iii) action asserting a claim against the Company or any director or officer of the Company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. An action against or on behalf of any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of our company shall be deemed to have notice of and consented to the forum selection provisions in our amended and restated certificate of incorporation. However, the enforceability of similar forum selection provisions in other companies certificates of incorporation and bylaws, respectively, has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be unenforceable.
Conflicts of Interest
Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders. Our amended and restated certificate of incorporation will, to the maximum extent permitted from time to time by Delaware law, renounce any interest or expectancy that we have in, or right to be offered an opportunity to participate in, specified business opportunities that are from time to time presented to our officers, directors or stockholders or their respective affiliates, other than those officers, directors, stockholders or affiliates who are our or our subsidiaries employees. Our amended and restated certificate of incorporation will provide that, to the fullest extent permitted by law, each of the Sponsors or any of their affiliates or any director who is not employed by us (including any non-employee director
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who serves as one of our officers in both his director and officer capacities) or his or her affiliates will have no duty to refrain from (i) engaging in a corporate opportunity in the same or similar lines of business in which we or our affiliates now engage or propose to engage or (ii) otherwise competing with us or our affiliates. In addition, to the fullest extent permitted by law, in the event that the Sponsors or any non-employee director acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for themselves or himself or their or his affiliates or for us or our affiliates, such person will have no duty to communicate or offer such transaction or business opportunity to us or any of our affiliates and they may take any such opportunity for themselves or offer it to another person or entity. Our amended and restated certificate of incorporation will not renounce our interest in any business opportunity that is expressly offered to a non-employee director solely in his or her capacity as a director or officer of the Company. To the fullest extent permitted by law, no business opportunity will be deemed to be a potential corporate opportunity for us unless we would be permitted to undertake the opportunity under our amended and restated certificate of incorporation, we have sufficient financial resources to undertake the opportunity and the opportunity would be in line with our business.
Limitations on Liability and Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors fiduciary duties, subject to certain exceptions. Our amended and restated certificate of incorporation includes a provision that eliminates the personal liability of directors for monetary damages for any breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL. The effect of these provisions is to eliminate the rights of us and our stockholders, through stockholders derivative suits on our behalf, to recover monetary damages from a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director if the director has acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or her actions as a director.
Our amended and restated bylaws provide that we must generally indemnify, and advance expenses to, our directors and officers to the fullest extent authorized by the DGCL. We also are expressly authorized to carry directors and officers liability insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification and advancement provisions and insurance are useful to attract and retain qualified directors and executive officers.
The limitation of liability, indemnification and advancement provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
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Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.
Listing
An application has been made to list our common stock on the NYSE under the symbol TRU.
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SHARES ELIGIBLE FOR FUTURE SALE
General
Prior to this offering, there has not been a public market for our common stock, and we cannot predict what effect, if any, market sales of shares of common stock or the availability of shares of common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of common stock, including shares issued upon the exercise of outstanding options, in the public market, or the perception that such sales could occur, could materially and adversely affect the market price of our common stock and could impair our future ability to raise capital through the sale of our equity or equity-related securities at a time and price that we deem appropriate. See Risk FactorsRisks Related to this Offering and Ownership of Our Common StockFuture sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
Upon the consummation of this offering, we will have 177,787,920 shares of common stock outstanding, or 182,219,738 shares, if the underwriters exercise in full their option to purchase additional shares. Of these shares, only 29,545,455 shares of common stock (or 33,977,273 shares if the underwriters exercise in full their option to purchase additional shares) sold in this offering by us will be freely tradable without registration under the Securities Act and without restriction by persons other than our affiliates (as defined under Rule 144). In addition, options to purchase an aggregate of approximately 10,247,006 shares of our common stock will be outstanding as of the closing of this offering. Of these options, 1,242,845 will have vested at or prior to the closing of this offering, 2,519,469 will vest over the next 5 years and 6,484,690 will vest over the next 5 years subject to performance conditions. The 148,242,465 shares of common stock held by the Sponsors, certain of our directors and officers and other existing stockholders after this offering will be restricted securities under the meaning of Rule 144 and may not be sold in the absence of registration under the Securities Act, unless an exemption from registration is available, including the exemptions pursuant to Rule 144 and Rule 701 under the Securities Act. In addition, to the extent such other existing stockholders are otherwise permitted to sell their shares, they may not reduce their relative ownership of our shares at a faster rate than the Sponsors reduction of their relative ownership. Furthermore, 5,400,000 shares of common stock will be authorized and reserved for issuance in relation to potential future awards under the 2015 Omnibus Incentive Plan to be adopted in connection with this offering, and 2,400,000 shares of common stock will be authorized and reserved for issuance under the Employee Stock Purchase Plan to be adopted in connection with this offering.
Rule 144
In general, under Rule 144, as currently in effect, a person (or persons whose shares are aggregated) who is not deemed to be or have been one of our affiliates for purposes of the Securities Act at any time during 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than an affiliate, is entitled to sell such shares without registration, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of a prior owner other than an affiliate, then such person is entitled to sell such shares without complying with any of the requirements of Rule 144.
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In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates, who have met the six month holding period for beneficial ownership of restricted shares of our common stock, are entitled to sell within any three-month period, a number of shares that does not exceed the greater of:
| 1% of the number of shares of our common stock then outstanding, which will equal approximately 1,777,879 shares immediately after this offering or (1,822,198 shares if the underwriters exercise in full their option to purchase additional shares); or |
| the average reported weekly trading volume of our common stock on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. The sale of these shares, or the perception that sales will be made, could adversely affect the price of our common stock after this offering because a great supply of shares would be, or would be perceived to be, available for sale in the public market.
Rule 701
In general, under Rule 701 as currently in effect, any of our employees, directors, officers, consultants or advisors who purchase shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering and during a period when we were not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act are entitled to sell such shares 90 days after the effective date of this offering in reliance on Rule 144, in the case of affiliates, without having to comply with the holding period requirements of Rule 144 and, in the case of non-affiliates, without having to comply with the public information, holding period, volume limitation or notice filing requirements of Rule 144. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and under Underwriting (Conflicts of Interest) and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.
Lock-Up Agreements
In connection with this offering, we, our executive officers and directors and the holders of substantially all of our common stock prior to this offering have agreed with the underwriters, subject to certain exceptions, not to sell, dispose of or hedge any of our common stock or securities convertible into or exchangeable for shares of common stock during the period ending 180 days after the date of this prospectus, except with the prior written consent of the representatives of the underwriters.
The 180-day restricted period described in the preceding paragraph will be automatically extended if:
| during the last 17 days of the 180-day restricted period we issue an earnings release or announce material news or a material event; or |
| prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, |
in which case the restrictions described in this paragraph will continue to apply until the expiration of the 18-day period beginning on (and including) the issuance of the earnings release or the announcement of the material news or material event. See Underwriting (Conflicts of Interest).
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Registration Rights
Pursuant to a Registration Rights Agreement, we have granted the Sponsors the right to cause us, in certain instances, at our expense, to file registration statements under the Securities Act covering resales of our common stock held by them and we have granted the Sponsors and certain members of management piggyback registration rights providing them the right to have us include the shares of our common stock they own in any registration by the Company. Following completion of this offering, the shares covered by registration rights would represent approximately 83.4% of our outstanding common stock (or 81.4%, if the underwriters exercise in full their option to purchase additional shares). These shares also may be sold under Rule 144 under the Securities Act, depending on their holding period and subject to restrictions in the case of shares held by persons deemed to be our affiliates.
For a description of rights some holders of common stock have to require us to register the shares of common stock they own, see Certain Relationships and Related Party TransactionsRegistration Rights Agreement.
Registration Statement on Form S-8
We intend to file a registration statement on Form S-8 under the Securities Act to register all of the shares of common stock issued or reserved for issuance under the 2015 Omnibus Incentive Plan and the Employee Stock Purchase Plan. We expect to file this registration statement as promptly as possible after the completion of this offering. We also intend to file another registration statement on Form S-8 under the Securities Act to register all of the shares of common stock reserved for issuance under the 2012 Plan. We expect to file this registration statement 90 days after the completion of this offering. Shares covered by these registration statements will be eligible for sale in the public market, subject to the Rule 144 limitations applicable to affiliates, vesting restrictions and any applicable lock-up agreements and market standoff agreements.
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CERTAIN UNITED STATES FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summary of certain United States federal income and estate tax consequences to a non-U.S. holder (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering.
A non-U.S. holder means a person (other than a partnership) that is not for United States federal income tax purposes any of the following:
| an individual citizen or resident of the United States; |
| a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
| an estate the income of which is subject to United States federal income taxation regardless of its source; or |
| a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. |
This summary is based upon provisions of the Internal Revenue Code of 1986, as amended (the Code), and regulations, rulings and judicial decisions as of the date hereof. Those authorities may change or be subject to differing interpretations, and any such change or differing interpretation may be applied retroactively in a manner that could affect the accuracy of the statements and conclusions set forth in this summary. This summary does not address all aspects of United States federal income and estate taxes and does not deal with foreign, state, local or other tax considerations that may be relevant to non-U.S. holders in light of their particular circumstances. This discussion also does not address any tax consequences arising under the Medicare contribution tax on net investment income. Except where noted, this summary deals only with common stock that is held as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). In addition, it does not address all United States federal income tax consequences relevant to a non-U.S. holder subject to special treatment under the United States federal income tax laws (including United States expatriates, controlled foreign corporations, passive foreign investment companies or partnerships or other pass-through entities for United States federal income tax purposes). We cannot assure you that a change in law will not alter significantly the tax considerations that we describe in this summary.
If a partnership holds our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner, activities of the partnership and certain determinations made at the partner level. If you are a partner of a partnership holding our common stock, you should consult your tax advisors.
If you are considering the purchase of our common stock, you should consult your own tax advisors concerning the particular United States federal income and estate tax consequences to you of the ownership of the common stock, as well as the consequences to you arising under the laws of any other taxing jurisdiction.
Dividends
As described in the section entitled Dividend Policy, we do not anticipate paying cash dividends to holders of our common stock in the foreseeable future. If, however, we do make distributions of cash
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or property on our common stock, such distributions will constitute dividends for United States federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under United States federal income tax principles. Dividends paid to a non-U.S. holder of our common stock generally will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, if required by an applicable income tax treaty, are attributable to a United States permanent establishment) are not subject to the withholding tax, provided certain certification and disclosure requirements are satisfied. Instead, such dividends are subject to United States federal income tax on a net income basis in the same manner as if the non-U.S. holder were a United States person as defined under the Code. A non-U.S. holder that is a corporation may also be subject to a branch profits tax at a 30% rate (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items.
A non-U.S. holder of our common stock who wishes to claim the benefit of an applicable treaty rate and avoid backup withholding, as discussed below, for dividends will be required (a) to complete an Internal Revenue Service Form W-8BEN or W-8BEN-E (or other applicable documentation) and certify under penalty of perjury that such holder is not a United States person as defined under the Code and is eligible for treaty benefits or (b) if our common stock is held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable United States Treasury regulations. Special certification and other requirements apply to certain non-U.S. holders that are pass-through entities rather than corporations or individuals.
A non-U.S. holder of our common stock eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the Internal Revenue Service.
Gain on Disposition of Common Stock
Any gain realized on the disposition of our common stock generally will not be subject to United States federal income tax unless:
| the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment of the non-U.S. holder); |
| the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or |
| we are or have been a United States real property holding corporation (USRPHC) for United States federal income tax purposes. |
A non-U.S. holder described in the first bullet point immediately above will be subject to tax on its net gain in the same manner as if it were a United States person as defined under the Code. In addition, if a non-U.S. holder that is a foreign corporation falls under the first bullet point immediately above, it may be subject to the branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits, subject to adjustments.
An individual non-U.S. holder described in the second bullet point immediately above will be subject to a flat 30% tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, which may be offset by United States source capital losses (even though the individual is not considered a resident of the United States), provided the non-U.S. holder has timely filed United States federal income tax returns with respect to such losses.
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With respect to the third bullet point immediately above, we believe we are not and do not anticipate becoming a USRPHC for United States federal income tax purposes.
Federal Estate Tax
Common stock held by an individual non-U.S. holder at the time of death will be included in such holders gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
We must report annually to the Internal Revenue Service and to each non-U.S. holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable income tax treaty.
A non-U.S. holder will be subject to backup withholding for dividends paid to such holder unless such holder certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a United States person as defined under the Code), or such holder otherwise establishes an exemption.
Proceeds of a disposition of our common stock conducted through a non-United States office of a non-United States broker generally will not be subject to information reporting or backup withholding. However, information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a disposition of our common stock within the United States or conducted through certain United States-related financial intermediaries, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code), or such owner otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holders United States federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.
Additional Withholding Requirements
Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or FATCA), a 30% United States federal withholding tax may apply to any dividends paid on our common stock and, for a disposition of our common stock occurring after December 31, 2016, the gross proceeds from such disposition, in each case paid to (i) a foreign financial institution (as specifically defined in the Code) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption from FATCA, or (y) its compliance (or deemed compliance) with FATCA (which may alternatively be in the form of compliance with an intergovernmental agreement with the United States) in a manner which avoids withholding, or (ii) a non-financial foreign entity (as specifically defined in the Code) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption from FATCA, or (y) adequate information regarding certain substantial United States beneficial owners of such entity (if any). If a dividend payment is both subject to withholding under FATCA and subject to the withholding tax discussed above under Dividends, the withholding under FATCA may be credited against, and therefore reduce, such other withholding tax. You should consult your own tax advisor regarding these requirements and whether they may be relevant to your ownership and disposition of our common stock.
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UNDERWRITING (CONFLICTS OF INTEREST)
The Company and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc. are the representatives of the underwriters.
Underwriters |
Number of
Shares |
|
Goldman, Sachs & Co. |
||
J.P. Morgan Securities LLC |
||
Merrill Lynch, Pierce, Fenner & Smith Incorporated |
||
Deutsche Bank Securities Inc. |
||
RBC Capital Markets, LLC |
||
Wells Fargo Securities, LLC |
||
Credit Suisse Securities (USA) LLC |
||
Drexel Hamilton, LLC |
||
Evercore Group L.L.C. |
||
Loop Capital Markets LLC |
||
Stifel, Nicolaus & Company, Incorporated |
||
|
||
Total |
||
|
The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.
The underwriters have an option to buy up to an additional 4,431,818 shares from the company to cover sales by the underwriters of a greater number of shares than the total number set forth in the table above. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters by the Company. Such amounts are shown assuming both no exercise and full exercise of the underwriters option to purchase 4,431,818 additional shares.
Paid by the Company
No Exercise | Full Exercise | |||||||
Per Share |
$ | $ | ||||||
Total |
$ | $ |
Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. After the initial offering of the shares, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters right to reject any order in whole or in part. Sales of shares made outside the United States may be made by affiliates of the underwriters.
A prospectus in electronic format may be made available on the websites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may
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agree to allocate a number of shares to underwriters and the selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.
The Company and its officers, directors, and holders of substantially all of the Companys common stock have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of the representatives. This agreement does not apply to any existing employee benefit plans. See Shares Available for Future Sale for a discussion of certain transfer restrictions.
The 180-day restricted period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the 180-day restricted period the Company issues an earnings release or announces material news or a material event; or (2) prior to the expiration of the 180-day restricted period, the Company announces that it will release earnings results during the 15-day period following the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.
Prior to the offering, there has been no public market for the shares. The initial public offering price has been negotiated among the Company and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be the Companys historical performance, estimates of the business potential and earnings prospects of the Company, an assessment of the Companys management, the consideration of the above factors in relation to market valuation of companies in related businesses, information in this prospectus and otherwise available to the representatives, the recent market prices of, and demand for, publicly traded common stock of generally comparable companies and other factors deemed relevant by the underwriters and us.
An application has been made to list the common stock on the NYSE under the symbol TRU.
In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering, and a short position represents the amount of such sales that have not been covered by subsequent purchases. A covered short position is a short position that is not greater than the amount of additional shares for which the underwriters option described above may be exercised. The underwriters may cover any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to cover the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option described above. Naked short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriters must cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.
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The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the Companys stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of these activities at any time. These transactions may be effected on the NYSE, in the over-the-counter market or otherwise.
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction where any such offer or a solicitation is unlawful.
Directed Share Program
At our request, the underwriters have reserved up to 1,477,273 shares of common stock, or approximately 5% of the shares being offered by us pursuant to this prospectus, for sale at the initial public offering price to our directors, officers and employees and certain other persons associated with us, as designated by us. The sales will be made by Fidelity Brokerage Services LLC and Fidelity Capital Markets, a division of National Financial Services LLC, through a directed share program. We do not know if these persons will choose to purchase all or any portion of these reserved shares, but any purchases they do make will reduce the number of shares available to the general public. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of common stock.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), an offer of shares to the public may not be made in that Relevant Member State, except that an offer of shares to the public may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
(a) | to any legal entity which is a qualified investor as defined in the Prospectus Directive; |
(b) | to fewer than 100 or, if the Relevant Member State has implemented the relevant provisions of the 2010 Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or |
(c) | in any other circumstances falling within Article 3(2) of the Prospectus Directive, |
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provided that no such offer of shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a Relevant Member State and each person who initially acquires any shares or to whom an offer is made will be deemed to have represented, warranted and agreed to and with the underwriters that it is a qualified investor within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive. |
For the purposes of this provision, the expression an offer of shares to the public in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State.
In the case of any shares being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, such financial intermediary will also be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of shares to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters has been obtained to each such proposed offer or resale.
United Kingdom
In the United Kingdom, this prospectus is only addressed to and directed as qualified investors who are (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order); or (ii) high net worth entities and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons). Any investment or investment activity to which this prospectus relates is available only to relevant persons and will only be engaged with relevant persons. Any person who is not a relevant person should not act or relay on this prospectus or any of its contents.
Hong Kong
The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (Companies (Winding Up and Miscellaneous Provisions) Ordinance) or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (Securities and Futures Ordinance), or (ii) to professional investors as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a prospectus as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.
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Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined under Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (the SFA)) under Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for 6 months after that corporation has acquired the shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporations securities pursuant to Section 275(1A) of the SFA, (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore (Regulation 32).
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries rights and interest (howsoever described) in that trust shall not be transferable for 6 months after that trust has acquired the shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.
Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA. The securities may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.
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Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (ASIC), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the Corporations Act), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons (the Exempt Investors) who are sophisticated investors (within the meaning of section 708(8) of the Corporations Act), professional investors (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (DFSA). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
The Company estimates that its share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $4.5 million.
The Company has agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act of 1933.
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to the issuer and to persons and entities with relationships with the issuer, for which they received or will receive customary fees and expenses.
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In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the issuer (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with the issuer. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
Conflicts of Interest
Because Goldman, Sachs & Co. is an underwriter and its affiliates collectively own in excess of 10% of our issued and outstanding common stock, Goldman, Sachs & Co. is deemed to have a conflict of interest under Rule 5121 of the Financial Industry Regulatory Authority.
Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. Rule 5121 requires that a qualified independent underwriter meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence in respect thereto, subject to certain exceptions which are not applicable here. J.P. Morgan Securities LLC will serve as a qualified independent underwriter within the meaning of Rule 5121 in connection with this offering. J.P. Morgan Securities LLC will not receive any additional compensation for acting as a qualified independent underwriter. In addition, no underwriter with a conflict of interest will confirm sales to any accounts over which it exercises discretionary authority without first receiving a written consent from those accounts. We have agreed to indemnify J.P. Morgan Securities LLC against certain liabilities incurred in connection with acting as a qualified independent underwriter, including liabilities under the Securities Act.
190
The validity of the shares of common stock offered by this prospectus will be passed upon for us by Simpson Thacher & Bartlett LLP, New York, New York. Certain legal matters relating to this offering will be passed upon for the underwriters by Latham & Watkins LLP, Chicago, Illinois.
The consolidated financial statements of TransUnion as of December 31, 2014 and 2013 and for each of the two years in the period ended December 31, 2014 and the period from February 15, 2012 (the date of inception) through December 31, 2012 and the consolidated statements of income, comprehensive income, stockholders equity, and cash flows of TransUnion Holding Intermediate Holding, Inc. (Predecessor) for the period from January 1, 2012 through April 30, 2012 appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The financial position of Trans Union de México, S.A., Sociedad de Información Crediticia, and Subsidiary at December 31, 2014 and 2013, and the consolidated result of their operations and their cash flows for the years then ended, appearing in this Prospectus and Registration Statement have been audited by Mancera, S.C., a member practice of Ernst and Young Global Limited, as set forth in their report thereon appearing elsewhere herein and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The financial statements of Credit Information Bureau (India) Limited as of and for the year ended March 31, 2013, included in this Prospectus, have been audited by Deloitte Haskins & Sells, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the SEC) a registration statement on Form S-1 under the Securities Act with respect to the common stock offered by this prospectus. This prospectus is a part of the registration statement and does not contain all of the information set forth in the registration statement and its exhibits and schedules, portions of which have been omitted as permitted by the rules and regulations of the SEC. For further information about us and our common stock, you should refer to the registration statement and its exhibits and schedules. Statements in this prospectus about the contents of any contract, agreement or other document are not necessarily complete and in each instance that a copy of such contract, agreement or document has been filed as an exhibit to the registration statement, we refer you to the copy that we have filed as an exhibit.
Upon the effectiveness of the registration statement and as a result of our stock being traded on the NYSE, we will be subject to the informational requirements of the Exchange Act and the listing requirements of the NYSE. In accordance with the Exchange Act and the NYSE, we will file annual, quarterly and special reports, proxy and information statements and other information with the SEC. Our filings with the SEC are available to the public on the SECs website at http://www.sec.gov . Those filings are also available to the public on, or accessible through, our corporate web site under the heading Investors, at http://www.transunion.com . The information we file with the SEC or contained on or accessible through our corporate web site or any other web site that we may maintain is not part of this prospectus or the registration statement of which this prospectus is a part. You may also read
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and copy, at SEC prescribed rates, any document we file with the SEC, including the registration statement (and its exhibits) of which this prospectus is a part, at the SECs Public Reference Room located at 100 F Street, N.E., Washington D.C. 20549. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room.
We intend to make available to our common stockholders annual reports containing consolidated financial statements audited by an independent registered public accounting firm.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
MANAGEMENTS REPORT ON FINANCIAL STATEMENTS AND ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING
Financial Statements
Management of TransUnion is responsible for the preparation of the TransUnion financial information included in this registration Statement on Form S-1. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include amounts that are based on the best estimates and judgments of management.
Assessment of Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. TransUnions internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:
| pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of TransUnion; |
| provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles; |
| provide reasonable assurance that receipts and expenditures of TransUnion are being made only in accordance with the authorizations of management and directors of TransUnion; and |
| provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements. |
Because of its inherent limitations in any control, no matter how well designed, internal control over financial reporting may not prevent or detect misstatements. Accordingly, even effective internal control over financial reporting can only provide reasonable assurance with respect to financial statement preparation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of TransUnions internal control over financial reporting as of December 31, 2014. Management based this assessment on the criteria for effective internal control over financial reporting described in Internal ControlIntegrated Framework as issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Managements assessment included an evaluation of the design of TransUnions internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit and Compliance Committee of TransUnions Board of Directors.
Based on this assessment, management determined that, as of December 31, 2014, TransUnions internal control over financial reporting was effective.
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
TransUnion
We have audited the accompanying consolidated balance sheets of TransUnion and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, stockholders equity, and cash flows for each of the two years in the period ended December 31, 2014 and the period from February 15, 2012 (the date of inception) through December 31, 2012 and the consolidated statements of income, comprehensive income, stockholders equity and cash flows of TransUnion Intermediate Holdings, Inc. (Predecessor) for the period from January 1, 2012 through April 30, 2012. Our audit also included the financial statement schedules listed in the Index at Item 15 to the consolidated financial statements. These financial statements and schedules are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TransUnion and subsidiaries at December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2014 and the period from February 15, 2012 (the date of inception) through December 31, 2012 and the results of operations and cash flows of TransUnion Intermediate Holdings, Inc. (Predecessor) for the period from January 1, 2012 through April 30, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP |
Ernst & Young LLP |
Chicago, IL
March 30, 2015 (except for Note 23, as to which the date is June 15, 2015)
F-3
TRANSUNION AND SUBSIDIARIES
Successor | ||||||||
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions, except
per share data) |
||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 77.9 | $ | 111.2 | ||||
Trade accounts receivable, net of allowance of $2.4 and $0.7 |
200.4 | 165.0 | ||||||
Other current assets |
122.7 | 73.5 | ||||||
|
|
|
|
|||||
Total current assets |
401.0 | 349.7 | ||||||
Property, plant and equipment, net of accumulated depreciation and amortization of $123.4 and $70.2 |
181.4 | 150.4 | ||||||
Goodwill |
2,023.9 | 1,909.7 | ||||||
Other intangibles, net of accumulated amortization of $407.8 and $227.5 |
1,939.6 | 1,934.0 | ||||||
Other assets |
119.9 | 148.5 | ||||||
|
|
|
|
|||||
Total assets |
$ | 4,665.8 | $ | 4,492.3 | ||||
|
|
|
|
|||||
Liabilities and stockholders equity |
||||||||
Current liabilities: |
||||||||
Trade accounts payable |
$ | 106.5 | $ | 100.3 | ||||
Short-term debt and current portion of long-term debt |
74.0 | 13.8 | ||||||
Other current liabilities |
149.4 | 133.5 | ||||||
|
|
|
|
|||||
Total current liabilities |
329.9 | 247.6 | ||||||
Long-term debt |
2,865.9 | 2,853.1 | ||||||
Deferred taxes |
676.8 | 636.9 | ||||||
Other liabilities |
22.1 | 22.6 | ||||||
|
|
|
|
|||||
Total liabilities |
3,894.7 | 3,760.2 | ||||||
Redeemable noncontrolling interests |
23.4 | 17.6 | ||||||
Stockholders equity: |
||||||||
Common stock, $0.01 par value; 200.0 million shares authorized at December 31, 2014 and December 31, 2013, 148.5 million and 147.6 million shares issued as of December 31, 2014 and December 31, 2013, respectively; and 147.9 million and 147.0 million shares outstanding as of December 31, 2014 and December 31, 2013, respectively |
1.5 | 1.5 | ||||||
Additional paid-in capital |
1,137.6 | 1,121.4 | ||||||
Treasury stock at cost; 0.7 million shares at December 31, 2014 and December 31, 2013 |
(4.3 | ) | (4.1 | ) | ||||
Accumulated deficit |
(430.2 | ) | (417.7 | ) | ||||
Accumulated other comprehensive income (loss) |
(117.5 | ) | (73.2 | ) | ||||
|
|
|
|
|||||
Total TransUnion stockholders equity |
587.1 | 627.9 | ||||||
Noncontrolling interests |
160.6 | 86.6 | ||||||
|
|
|
|
|||||
Total stockholders equity |
747.7 | 714.5 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 4,665.8 | $ | 4,492.3 | ||||
|
|
|
|
See accompanying notes to consolidated financial statements.
F-4
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Income
Successor | Predecessor | |||||||||||||||
Twelve
Months Ended December 31, 2014 |
Twelve
Months Ended December 31, 2013 |
From the Date
of Inception through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||
(in millions, except per share data) | ||||||||||||||||
Revenue |
$ | 1,304.7 | $ | 1,183.2 | $ | 767.0 | $ | 373.0 | ||||||||
Operating expenses |
||||||||||||||||
Cost of services (exclusive of depreciation and amortization below) |
499.1 | 472.4 | 298.2 | 172.0 | ||||||||||||
Selling, general and administrative |
436.0 | 354.8 | 212.6 | 172.0 | ||||||||||||
Depreciation and amortization |
241.2 | 186.8 | 115.0 | 29.2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
1,176.3 | 1,014.0 | 625.8 | 373.2 | ||||||||||||
Operating income (loss) |
128.4 | 169.2 | 141.2 | (0.2 | ) | |||||||||||
Non-operating income and expense |
||||||||||||||||
Interest expense |
(190.0 | ) | (197.6 | ) | (125.0 | ) | (40.5 | ) | ||||||||
Interest income |
3.3 | 1.7 | 0.8 | 0.6 | ||||||||||||
Earnings from equity method investments |
12.5 | 13.7 | 8.0 | 4.1 | ||||||||||||
Other income and (expense), net |
44.0 | (12.9 | ) | (22.3 | ) | (27.9 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total non-operating income and expense |
(130.2 | ) | (195.1 | ) | (138.5 | ) | (63.7 | ) | ||||||||
Income (loss) before income taxes |
(1.8 | ) | (25.9 | ) | 2.7 | (63.9 | ) | |||||||||
(Provision) benefit for income taxes |
(2.6 | ) | (2.3 | ) | (6.6 | ) | 11.5 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
(4.4 | ) | (28.2 | ) | (3.9 | ) | (52.4 | ) | ||||||||
Less: net income attributable to noncontrolling interests |
(8.1 | ) | (6.9 | ) | (4.9 | ) | (2.5 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to TransUnion |
$ | (12.5 | ) | $ | (35.1 | ) | $ | (8.8 | ) | $ | (54.9 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | (0.09 | ) | $ | (0.24 | ) | $ | (0.06 | ) | $ | (1.84 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
$ | (0.09 | ) | $ | (0.24 | ) | $ | (0.06 | ) | $ | (1.84 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average shares outstanding: |
||||||||||||||||
Basic |
147.3 | 146.4 | 146.2 | 29.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
147.3 | 146.4 | 146.2 | 29.8 | ||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Successor | Predecessor | |||||||||||||||
Twelve
Months Ended December 31, 2014 |
Twelve
Months Ended December 31, 2013 |
From the Date
of Inception Through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||
(in millions) | ||||||||||||||||
Net loss |
$ | (4.4 | ) | $ | (28.2 | ) | $ | (3.9 | ) | $ | (52.4 | ) | ||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation: |
||||||||||||||||
Foreign currency translation adjustment |
(58.9 | ) | (59.6 | ) | (24.2 | ) | 2.5 | |||||||||
Benefit for income taxes |
5.2 | 3.2 | 1.5 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Foreign currency translation, net |
(53.7 | ) | (56.4 | ) | (22.7 | ) | 2.5 | |||||||||
Interest rate swaps: |
||||||||||||||||
Net unrealized gain (loss) |
(0.6 | ) | 4.8 | (5.9 | ) | | ||||||||||
Amortization of accumulated loss |
0.3 | | | | ||||||||||||
Benefit (provision) for income taxes |
0.1 | (1.8 | ) | 2.2 | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Interest rate swaps, net |
(0.2 | ) | 3.0 | (3.7 | ) | | ||||||||||
Available-for-sale securities: |
||||||||||||||||
Net unrealized gain |
0.2 | | | | ||||||||||||
Provision for income taxes |
(0.1 | ) | | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Available-for-sale securities, net |
0.1 | | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other comprehensive income (loss), net of tax |
(53.8 | ) | (53.4 | ) | (26.4 | ) | 2.5 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive loss |
(58.2 | ) | (81.6 | ) | (30.3 | ) | (49.9 | ) | ||||||||
Less: comprehensive income (loss) attributable to noncontrolling interests |
1.5 | (2.3 | ) | (2.9 | ) | (2.8 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive loss attributable to TransUnion |
$ | (56.7 | ) | $ | (83.9 | ) | $ | (33.2 | ) | $ | (52.7 | ) | ||||
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-6
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Successor | Predecessor | |||||||||||||||||
Twelve
Months Ended December 31, 2014 |
Twelve
Months Ended December 31, 2013 |
From the Date
of Inception Through December 31, 2012 |
Four
Months Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||
Net loss |
$ | (4.4 | ) | $ | (28.2 | ) | $ | (3.9 | ) | $ | (52.4 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||||||||||||
Depreciation and amortization |
241.2 | 186.8 | 115.0 | 29.2 | ||||||||||||||
Net gain on 2014 Refinancing Transaction |
(33.1 | ) | | | | |||||||||||||
Gain on fair value adjustment of cost and equity method investment |
(22.2 | ) | | | | |||||||||||||
Impairment of cost method investment |
4.1 | | | | ||||||||||||||
Amortization and loss on fair value of interest rate swaps |
0.6 | | | | ||||||||||||||
Equity in net income of affiliates, net of dividends |
(3.3 | ) | (3.6 | ) | 1.3 | (3.7 | ) | |||||||||||
Deferred taxes |
(20.8 | ) | (16.2 | ) | (5.1 | ) | (18.3 | ) | ||||||||||
Amortization of senior notes purchase accounting fair value adjustment and note discount |
(5.8 | ) | (17.1 | ) | (10.8 | ) | | |||||||||||
(Gains) / losses on sale of other assets |
| (1.0 | ) | | 0.1 | |||||||||||||
Amortization of deferred financing fees |
7.3 | 8.2 | 2.1 | 3.9 | ||||||||||||||
Stock-based compensation |
8.0 | 6.3 | 2.7 | 2.0 | ||||||||||||||
Provision (reduction) for losses on trade accounts receivable |
3.2 | 0.8 | (1.9 | ) | 3.1 | |||||||||||||
Change in control transaction fees |
| | | 20.9 | ||||||||||||||
Other |
1.3 | (0.9 | ) | 2.6 | (0.7 | ) | ||||||||||||
Changes in assets and liabilities: |
||||||||||||||||||
Trade accounts receivable |
(36.3 | ) | (3.1 | ) | (1.0 | ) | (24.7 | ) | ||||||||||
Other current and long-term assets |
2.0 | (8.6 | ) | (78.8 | ) | 1.5 | ||||||||||||
Trade accounts payable |
6.1 | 5.9 | (0.8 | ) | 1.6 | |||||||||||||
Other current and long-term liabilities |
6.4 | 14.1 | 25.6 | 89.9 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by operating activities |
154.3 | 143.4 | 47.0 | 52.4 | ||||||||||||||
Cash flows from investing activities: |
||||||||||||||||||
Capital expenditures |
(155.2 | ) | (81.7 | ) | (48.8 | ) | (20.4 | ) | ||||||||||
Proceeds from sale of trading securities |
1.5 | 4.4 | | 1.1 | ||||||||||||||
Purchases of trading securities |
(2.1 | ) | (1.8 | ) | (0.5 | ) | (1.1 | ) | ||||||||||
Proceeds from sale of other investments |
9.7 | | | | ||||||||||||||
Purchases of other investments |
(15.1 | ) | | | | |||||||||||||
Acquisition of TransUnion Intermediate Holdings, Inc., net of cash acquired |
| | (1,485.9 | ) | | |||||||||||||
Proceeds from sale of other assets |
1.0 | 4.3 | | | ||||||||||||||
Acquisitions and purchases of noncontrolling interests, net of cash acquired |
(119.9 | ) | (282.3 | ) | (14.2 | ) | (0.1 | ) | ||||||||||
Acquisition-related deposits, net |
4.1 | (10.0 | ) | 3.7 | | |||||||||||||
Other |
| 0.1 | (1.4 | ) | 0.9 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Cash used in investing activities |
(276.0 | ) | (367.0 | ) | (1,547.1 | ) | (19.6 | ) |
See accompanying notes to consolidated financial statements.
F-7
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Cash FlowsContinued
Successor | Predecessor | |||||||||||||||||
Twelve
Months Ended December 31, 2014 |
Twelve
Months Ended December 31, 2013 |
From the Date
of Inception Through December 31, 2012 |
Four
Months Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
Cash flows from financing activities: |
||||||||||||||||||
Proceeds from senior secured term loan |
1,895.3 | 1,133.4 | | | ||||||||||||||
Extinguishment of senior secured term loan |
(1,120.5 | ) | (923.4 | ) | | | ||||||||||||
Extinguishment of 11.375% senior unsecured notes |
(645.0 | ) | | | | |||||||||||||
Proceeds from revolving line of credit |
78.5 | 65.0 | | | ||||||||||||||
Payment on revolving line of credit |
(28.5 | ) | (65.0 | ) | | | ||||||||||||
Proceeds from 9.625% notes |
| | 600.0 | | ||||||||||||||
Proceeds from 8.125% notes |
| | 398.0 | | ||||||||||||||
Repayments of debt |
(25.6 | ) | (11.9 | ) | (17.2 | ) | (14.6 | ) | ||||||||||
Debt financing fees (2014 fees include prepayment premium on early termination of 11.375% notes) |
(61.5 | ) | (5.2 | ) | (41.3 | ) | (6.1 | ) | ||||||||||
Change in control transaction fees |
| | | (20.9 | ) | |||||||||||||
Proceeds from issuance of common stock and exercise of stock options |
9.6 | 5.8 | 1,097.3 | | ||||||||||||||
Treasury stock purchases |
(0.2 | ) | (3.4 | ) | (0.7 | ) | (1.3 | ) | ||||||||||
Distribution of merger consideration |
| | | (1.3 | ) | |||||||||||||
Dividends |
| | (373.8 | ) | | |||||||||||||
Distributions to noncontrolling interests |
(10.4 | ) | (8.0 | ) | (7.2 | ) | (0.4 | ) | ||||||||||
Other |
0.2 | | | (0.4 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) financing activities |
91.9 | 187.3 | 1,655.1 | (45.0 | ) | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
(3.5 | ) | (6.8 | ) | (0.7 | ) | 0.8 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net change in cash and cash equivalents |
(33.3 | ) | (43.1 | ) | 154.3 | (11.4 | ) | |||||||||||
Cash and cash equivalents, beginning of period |
111.2 | 154.3 | | 107.8 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Cash and cash equivalents, end of period |
$ | 77.9 | $ | 111.2 | $ | 154.3 | $ | 96.4 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Noncash investing activities: |
||||||||||||||||||
Property and equipment acquired through capital lease obligations |
$ | | $ | 2.0 | $ | |
$
|
|
|
|||||||||
Noncash financing activities: |
||||||||||||||||||
Finance arrangements |
$ | 12.9 | $ | | $ | | $ | | ||||||||||
Exchange of TransUnion common stock for ownership interest in TransUnion Intermediate Holdings, Inc. |
$ | | $ | | $ | 10.4 | $ | | ||||||||||
Supplemental disclosure of cash flow information: |
||||||||||||||||||
Cash paid during the period for: |
||||||||||||||||||
Interest |
$ | 191.0 | $ | 211.8 | $ | 140.4 | $ | 12.7 | ||||||||||
Income taxes, net of refunds |
25.2 | 23.3 | 14.9 | 5.6 |
See accompanying notes to consolidated financial statements.
F-8
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Stockholders Equity
Common Stock |
Paid-In
Capital |
Treasury
Stock |
Accumulated
Deficit |
Accumulated
Other Comprehensive Income (Loss) |
Non-
controlling Interests |
Total |
Redeemable
Non- controlling Interests |
|||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||||||
Predecessor balance, December 31, 2011 |
29.8 | $ | 0.3 | $ | 893.9 | $ | (0.2 | ) | $ | (1,739.0 | ) | $ | (3.6 | ) | $ | 24.2 | $ | (824.4 | ) | $ | | |||||||||||||||
Net income (loss) |
| | | | (54.9 | ) | | 2.5 | (52.4 | ) | | |||||||||||||||||||||||||
Other comprehensive income |
| | | | | 2.2 | 0.3 | 2.5 | | |||||||||||||||||||||||||||
Stock-based compensation |
| | 2.0 | | | | | 2.0 | | |||||||||||||||||||||||||||
Exercise of stock options |
| | 0.1 | | | | | 0.1 | | |||||||||||||||||||||||||||
Impact of share-based awards modification |
| | (3.3 | ) | | | | | (3.3 | ) | | |||||||||||||||||||||||||
Distributions to noncontrolling interests |
| | | | | | (0.4 | ) | (0.4 | ) | | |||||||||||||||||||||||||
Treasury stock purchased |
| | | (1.3 | ) | | | | (1.3 | ) | | |||||||||||||||||||||||||
Effects of merger transaction |
| | | | (0.4 | ) | | | (0.4 | ) | | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Predecessor balance, April 30, 2012 |
29.8 | $ | 0.3 | $ | 892.7 | $ | (1.5 | ) | $ | (1,794.3 | ) | $ | (1.4 | ) | $ | 26.6 | $ | (877.6 | ) | $ | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Successor balance, February 15, 2012 (inception) |
| $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||||||||
Net income (loss) |
| | | | (8.8 | ) | | 4.9 | (3.9 | ) | | |||||||||||||||||||||||||
Other comprehensive loss |
| | | | | (24.4 | ) | (2.0 | ) | (26.4 | ) | | ||||||||||||||||||||||||
Acquisition of noncontrolling interests in subsidiaries |
| | | | | | 26.6 | 26.6 | | |||||||||||||||||||||||||||
Purchase accounting adjustments related to acquisition of TransUnion Intermediate Holdings, Inc. |
| | | | | | 87.0 | 87.0 | (0.3 | ) | ||||||||||||||||||||||||||
Reclassification of redeemable non-controlling interests |
| | | | | | (17.9 | ) | (17.9 | ) | 17.9 | |||||||||||||||||||||||||
Acquisition of Africa subsidiary |
| | | | | | 1.9 | 1.9 | | |||||||||||||||||||||||||||
Additional acquisition price for Brazil subsidiary |
| | | | | | | | 0.4 | |||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| | | | | | (7.2 | ) | (7.2 | ) | | |||||||||||||||||||||||||
Purchase of noncontrolling interests |
| | 0.1 | | | | | 0.1 | (3.3 | ) | ||||||||||||||||||||||||||
Dividends |
| | | | (373.8 | ) | | | (373.8 | ) | | |||||||||||||||||||||||||
Stock-based compensation |
| | 2.7 | | | | | 2.7 | | |||||||||||||||||||||||||||
Issuance of stock |
146.9 | 1.5 | 1,106.2 | | | | | 1,107.7 | | |||||||||||||||||||||||||||
Treasury stock purchased |
(0.1 | ) | | | (0.7 | ) | | | | (0.7 | ) | | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Successor balance December 31, 2012 |
146.8 | $ | 1.5 | $ | 1,109.0 | $ | (0.7 | ) | $ | (382.6 | ) | $ | (24.4 | ) | $ | 93.3 | $ | 796.1 | $ | 14.7 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net income (loss) |
| $ | | $ | | $ | | $ | (35.1 | ) | $ | | $ | 6.8 | $ | (28.3 | ) | $ | 0.1 | |||||||||||||||||
Other comprehensive loss |
| | | | | (48.8 | ) | (1.9 | ) | (50.7 | ) | (2.7 | ) | |||||||||||||||||||||||
Acquisition of Brazil subsidiary |
| | | | | | | | 7.6 | |||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| | | | | | (7.8 | ) | (7.8 | ) | (0.2 | ) | ||||||||||||||||||||||||
Purchase of noncontrolling interests |
| | 0.3 | | | | | 0.3 | (1.9 | ) | ||||||||||||||||||||||||||
Stock-based compensation |
| | 6.3 | | | | | 6.3 | | |||||||||||||||||||||||||||
Issuance of stock |
0.7 | | 5.2 | | | | | 5.2 | | |||||||||||||||||||||||||||
Exercise of stock options |
0.1 | | 0.6 | | | | | 0.6 | | |||||||||||||||||||||||||||
Treasury stock purchased |
(0.6 | ) | | | (3.4 | ) | | | | (3.4 | ) | | ||||||||||||||||||||||||
Purchase accounting adjustments related to acquisition of TransUnion Intermediate Holdings, Inc. subsidiaries |
| | | | | | (3.3 | ) | (3.3 | ) | | |||||||||||||||||||||||||
Disposal of noncontrolling interests |
| | | | | | (0.6 | ) | (0.6 | ) | | |||||||||||||||||||||||||
Stockholder contribution |
| | | | | | 0.1 | 0.1 | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Successor balance December 31, 2013 |
147.0 | $ | 1.5 | $ | 1,121.4 | $ | (4.1 | ) | $ | (417.7 | ) | $ | (73.2 | ) | $ | 86.6 | $ | 714.5 | $ | 17.6 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net income (loss) |
| $ | | $ | | $ | | $ | (12.5 | ) | $ | | $ | 8.4 | $ | (4.1 | ) | $ | (0.3 | ) | ||||||||||||||||
Other comprehensive loss |
| | | | | (44.3 | ) | (7.5 | ) | (51.8 | ) | (2.0 | ) | |||||||||||||||||||||||
Establishment of noncontrolling and redeemable noncontrolling interests |
| | | | | | 85.1 | 85.1 | 8.4 | |||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| | | | | | (10.1 | ) | (10.1 | ) | (0.3 | ) | ||||||||||||||||||||||||
Purchase of noncontrolling interests |
| | (1.4 | ) | | | | (2.0 | ) | (3.4 | ) | | ||||||||||||||||||||||||
Stockholder contribution from noncontrolling interests |
| | | | | | 0.1 | 0.1 | | |||||||||||||||||||||||||||
Stock-based compensation |
| | 8.0 | | | | | 8.0 | | |||||||||||||||||||||||||||
Issuance of stock |
0.7 | | 8.5 | | | | | 8.5 | | |||||||||||||||||||||||||||
Exercise of stock options |
0.2 | | 1.1 | | | | | 1.1 | | |||||||||||||||||||||||||||
Treasury stock purchased |
| | | (0.2 | ) | | | | (0.2 | ) | | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Successor balance December 31, 2014 |
147.9 | $ | 1.5 | $ | 1,137.6 | $ | (4.3 | ) | $ | (430.2 | ) | $ | (117.5 | ) | $ | 160.6 | $ | 747.7 | $ | 23.4 | ||||||||||||||||
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See accompanying notes to consolidated financial statements.
F-9
TRANSUNION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2014, 2013, and 2012
1. Significant Accounting and Reporting Policies
Description of Business
TransUnion is a leading global risk and information solutions provider. Our mission is to help people worldwide access opportunities that lead to a higher quality of life. We accomplish this by helping businesses optimize their risk-based decisions and by enabling consumers to better understand and manage their personal information. Businesses embed our solutions into their process workflows to manage risk and to drive better business outcomes. Consumers use our solutions to view their credit profiles and access analytical tools that help them understand and manage their personal information and take precautions against identity theft. We have deep domain expertise across a number of attractive industry verticals, including financial services, insurance and healthcare, as well as a global presence in over 30 countries across North America, Africa, Latin America and Asia.
We obtain financial, credit, alternative credit, identity, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information from over 90,000 data sources, including financial institutions, private databases and public records repositories. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. Our deep analytics expertise, which includes our people as well as tools such as predictive modeling and scoring, customer segmentation, benchmarking and forecasting, enables businesses and consumers to gain better insights into their risk and financial data. Our decisioning capability, which is generally delivered on a software-as-a-service platform, allows businesses to interpret data and apply their specific qualifying criteria to make decisions and take action with their customers. Collectively, our data, analytics and decisioning capabilities allow businesses to authenticate the identity of consumers, effectively determine the most relevant products for consumers, retain and cross-sell to existing consumers, identify and acquire new consumers and reduce loss from fraud. Similarly, our capabilities allow consumers to see how their credit profiles have changed over time, understand the impact of financial decisions on their credit score and manage their personal information as well as to take precautions against identity theft.
Basis of Presentation
The accompanying consolidated financial statements of TransUnion and subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). Our consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the periods presented. All significant intercompany transactions and balances have been eliminated.
TransUnion Holding Company, Inc. was formed on February 15, 2012, as a vehicle to acquire TransUnion Corp. on April 30, 2012. On March 26, 2015, TransUnion Holding Company, Inc. was renamed TransUnion and TransUnion Corp. was renamed TransUnion Intermediate Holdings, Inc. (TransUnion Intermediate). The historical financial statements and information are presented on a Successor and Predecessor basis. The historical financial information for TransUnion Intermediate reflects the consolidated results of TransUnion Intermediate and its subsidiaries prior to the 2012 Change in Control Transaction (the Predecessor). The historical financial information for TransUnion reflects the stand-alone results of its operations from its date of inception and the consolidated results of TransUnion Intermediate and its subsidiaries after April 30, 2012 (the Successor).
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Unless the context indicates otherwise, any reference in this report to TransUnion, the Company, we, us, and our refers to TransUnion with its direct and indirect subsidiaries, including TransUnion Intermediate, or to TransUnion Intermediate and its subsidiaries for periods prior to the forming of TransUnion.
2012 Change in Control Transaction
TransUnion was formed by affiliates of Advent International Corporation (Advent) and Goldman, Sachs & Co. (GS) on February 15, 2012, as a vehicle to acquire 100% of the outstanding common stock of TransUnion Intermediate. On April 30, 2012, pursuant to an Agreement and Plan of Merger, TransUnion acquired TransUnion Intermediate. To partially fund the acquisition, TransUnion issued $600.0 million aggregate principal amount of 9.625%/10.375% senior PIK toggle notes due 2018 (9.625% notes). We refer to these transactions collectively as the 2012 Change in Control Transaction.
The 2012 Change in Control Transaction was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations, with the basis of the assets acquired and liabilities assumed recorded at fair value to reflect the purchase price.
Subsequent Events
Events and transactions occurring through the date of issuance of the financial statements have been evaluated by management, and when appropriate, recognized or disclosed in the consolidated financial statements.
Principles of Consolidation
The consolidated financial statements of TransUnion include the accounts of TransUnion and all of its majority-owned or controlled subsidiaries. Investments in unconsolidated entities in which the Company has at least a 20% ownership interest, or where it is able to exercise significant influence, are accounted for using the equity method. Nonmarketable investments in unconsolidated entities in which the Company has less than a 20% ownership interest, or where it is not able to exercise significant influence, are accounted for using the cost method and periodically reviewed for impairment.
Use of Estimates
The preparation of consolidated financial statements and related disclosures in accordance with GAAP requires management to make estimates and judgments that affect the amounts reported. We believe that the estimates used in preparation of the accompanying consolidated financial statements are reasonable, based upon information available to management at this time. These estimates and judgments affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the balance sheet date, as well as the amounts of revenue and expense during the reporting period. Estimates are inherently uncertain and actual results could differ materially from the estimated amounts.
Change in Accounting Estimate
Effective July 1, 2014, we revised the remaining useful lives of certain internal use software, equipment, leasehold improvement and corporate headquarters facility assets to align with the expected completion dates of our strategic initiatives to transform our technology infrastructure and corporate headquarters facility. As a result, depreciation and amortization expense increased by $17.5
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million. The impact of this change decreased net income attributable to TransUnion by $11.2 million, or $0.10 per share.
Reclassifications
We have reclassified certain items, which are not material, that are presented in our prior period consolidated financial statements to conform to the current years presentation.
Segments
We manage our business and report our financial results in three operating segments: U.S. Information Services (USIS); International; and Consumer Interactive (formerly Interactive). We also report expenses for Corporate, which provides support services to each operating segment. Details of our segment results are discussed in Note 17, Operating Segments.
Revenue Recognition and Deferred Revenue
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the pricing is fixed or determinable and the collectability is reasonably assured. For multiple element arrangements, we separate deliverables into units of accounting and recognize revenue for each unit of accounting based on evidence of each units relative selling price to the total arrangement consideration, assuming all other revenue recognition criteria have been met.
A significant portion of our revenue is derived from providing information services to our customers. This revenue is recognized when services are provided, assuming all criteria for revenue recognition are met. A smaller portion of our revenue relates to subscription-based contracts where a customer pays a predetermined fee for a predetermined, or unlimited, number of transactions or services during the subscription period. Revenue related to subscription-based contracts having a preset number of transactions is recognized as the services are provided, using an effective transaction rate as the actual transactions are completed. Any remaining revenue related to unfulfilled units is not recognized until the end of the related contracts subscription period. Revenue related to subscription-based contracts having an unlimited volume is recognized straight-line over the contract term.
Deferred revenue generally consists of amounts billed in excess of revenue recognized for the sale of data services, subscriptions and set up fees. Deferred revenue is included in other current liabilities.
Costs of Services
Costs of services include data acquisition and royalty fees, personnel costs related to our databases and software applications, consumer and call center support costs, hardware and software maintenance costs, telecommunication expenses, research and development costs and occupancy costs associated with the facilities where these functions are performed.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include personnel-related costs for sales, administrative and management employees, costs for professional and consulting services, advertising and occupancy and facilities expense of these functions. Advertising costs are expensed as incurred. Advertising costs for the years ended December 31, 2014 and December 31, 2013, and from the date
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of inception through December 31, 2012, were $31.3 million, $32.3 million and $19.2 million, respectively. Advertising costs of TransUnion Intermediate Predecessor for the four months ended April 30, 2012 were $15.5 million.
Stock-Based Compensation
Compensation expense for all stock-based compensation awards is determined using the grant date fair value and includes an estimate for expected forfeitures. Expense is recognized on a straight-line basis over the requisite service period of the award, which is generally equal to the vesting period. The details of our stock-based compensation program are discussed in Note 15, Stock-Based Compensation.
Income Taxes
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statement and tax basis of assets and liabilities, as measured by current enacted tax rates. The effect of a tax rate change on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date of the change. We periodically assess the recoverability of our deferred tax assets, and a valuation allowance is recorded against deferred tax assets if it is more likely than not that some portion of the deferred tax assets will not be realized. See Note 14, Income Taxes, for additional information.
Foreign Currency Translation
The functional currency for each of our foreign subsidiaries is generally that subsidiarys local currency. We translate the assets and liabilities of foreign subsidiaries at the year-end exchange rate, and translate revenues and expenses at the monthly average rates during the year. We record the resulting translation adjustment as a component of other comprehensive income in stockholders equity.
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. The exchange rate loss for the years ended December 31, 2014 and December 31, 2013, was $1.1 million and $0.8 million respectively. The exchange rate gain from the date of inception through December 31, 2012 was less than $0.1 million. The exchange rate gain of TransUnion Intermediate Predecessor for the four months ended April 30, 2012 was $0.2 million.
Cash and Cash Equivalents
We consider investments in highly liquid debt instruments with original maturities of three months or less to be cash equivalents.
Trade Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is based on our historical write-off experience, analysis of the aging of outstanding receivables, customer payment patterns and the establishment of specific reserves for customers in adverse financial condition or for existing contractual disputes. Adjustments to the allowance are recorded as a bad debt expense in selling, general and administrative expenses. Trade receivables are written off against the allowance when they are determined to be no longer collectible. We reassess the adequacy of the allowance for doubtful accounts each reporting period.
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Long-Lived Assets
Property, Plant, Equipment and Intangibles
Property, plant and equipment was adjusted to fair value on the date of the 2012 Change in Control Transaction. All subsequent purchases of property, plant and equipment have been recorded at cost. Property, plant and equipment is depreciated primarily using the straight-line method over the estimated useful lives of the assets. Buildings and building improvements are generally depreciated over twenty years. Computer equipment and purchased software are depreciated over three to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the lease term. Other assets are depreciated over five to seven years. Intangibles, other than indefinite-lived intangibles, are amortized using the straight-line method over their economic life, generally three to forty years. Assets to be disposed of are separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value, less costs to sell, and are no longer depreciated. See Note 2, Change in Control Transaction, Note 5, Property, Plant and Equipment, and Note 7, Intangible Assets, for additional information about these assets.
Internal Use Software
We monitor the activities of each of our internal use software and system development projects and analyze the associated costs, making an appropriate distinction between costs to be expensed and costs to be capitalized. Costs incurred during the preliminary project stage are expensed as incurred. Many of the costs incurred during the application development stage are capitalized, including costs of software design and configuration, development of interfaces, coding, testing and installation of the software. Once the software is ready for its intended use, it is amortized on a straight-line basis over its useful life, generally three to seven years.
Impairment of Long-Lived Assets
We review long-lived assets that are subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized equal to the amount by which the carrying amount of the asset exceeds the fair value of the asset. No significant impairment charges were recorded during 2014, 2013, or 2012.
Marketable Securities
We classify our investments in debt and equity securities in accordance with our intent and ability to hold the investments. Held-to-maturity securities are carried at amortized cost, which approximates fair value, and are classified as either short-term or long-term investments based on the contractual maturity date. Earnings from these securities are reported as a component of interest income. Available-for-sale securities are carried at fair market value, with the unrealized gains and losses, net of tax, included in accumulated other comprehensive income. Trading securities are carried at fair value, with unrealized gains and losses included in income.
At December 31, 2014 and 2013, the Companys marketable securities consisted of trading securities and available-for-sale securities. The trading securities relate to a nonqualified deferred compensation plan held in trust for the benefit of plan participants. The available-for-sale securities relate to foreign exchange-traded corporate bonds. There were no significant realized or unrealized gains or losses for these securities for any of the periods presented. We follow fair value guidance to measure the fair value of our financial assets as further described in Note 16, Fair Value.
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We periodically review our marketable securities to determine if there is an other-than-temporary impairment on any security. If it is determined that an other-than-temporary decline in value exists, we write down the investment to its market value and record the related impairment loss in other income. There were no other-than-temporary impairments of marketable securities in 2014, 2013, or 2012.
Goodwill and Other Indefinite-Lived Intangibles
Goodwill and other indefinite-lived intangible assets are allocated to various reporting units, which are an operating segment or one level below an operating segment. We test goodwill and indefinite-lived intangible assets for impairment on an annual basis, in the fourth quarter, or on an interim basis if an indicator of impairment is present. For goodwill, we compare the fair value of each reporting unit to its carrying amount to determine if there is potential goodwill impairment. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value of its goodwill. For other indefinite-lived intangibles, we compare the fair value of the asset to its carrying value to determine if there is an impairment. If the fair value of the asset is less than its carrying value, an impairment loss is recorded. We use discounted cash flow techniques to determine the fair value of our reporting units and other indefinite-lived intangibles. See Note 6, Goodwill, and Note 7, Intangible Assets, for additional information about these assets.
Benefit Plans
We maintain a 401(k) defined contribution profit sharing plan for eligible employees. We provide a partial matching contribution and a discretionary contribution based on a fixed percentage of a participants eligible compensation. Contributions to this plan for the years ended December 31, 2014 and December 31, 2013, and from the date of inception through December 31, 2012, were $14.1 million, $12.4 million and $6.9 million, respectively. Contributions to this plan by TransUnion Intermediate Predecessor for the four months ended April 30, 2012, were $4.8 million. We also maintain a nonqualified deferred compensation plan for certain key employees. The deferred compensation plan contains both employee deferred compensation and company contributions. These investments are held in the TransUnion Rabbi Trust, and are included in marketable securities in the consolidated balance sheets. The assets held in the Rabbi Trust are for the benefit of the participants in the deferred compensation plan, but are available to our general creditors in the case of our insolvency. The liability for amounts due to these participants is included in other current liabilities and other liabilities in the consolidated balance sheets.
Recently Adopted Accounting Pronouncements
On July 18, 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11 , Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exist. ASU No. 2013-11 provides guidance on the presentation of unrecognized tax benefits to better reflect the manner in which an entity would settle at the reporting date any income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses or tax credit carryforwards exist. ASU No. 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. This guidance was adopted by the Company effective January 1, 2014, and did not result in a material change in the Companys consolidated financial statements. See Note 14, Income Taxes, for further details regarding the impact of this adoption.
Recent Accounting Pronouncement Not Yet Adopted
On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) . This comprehensive guidance will replace all existing revenue recognition guidance and is
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effective for annual reporting periods beginning after December 15, 2016, and interim periods therein. We are currently assessing the impact this guidance will have on our consolidated financial statements once it is adopted.
On June 19, 2014, the FASB issued ASU No. 2014-12, CompensationStock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This update clarifies the accounting for share-based awards with performance targets and is effective for years beginning after December 15, 2015. We are currently assessing the impact this guidance will have on our consolidated financial statements.
2. Change in Control Transaction
2012 Change in Control Transaction
On April 30, 2012, TransUnion Intermediate was acquired by affiliates of Advent and GS for the aggregate purchase price of $1,592.7 plus the assumption of existing debt. As a result, TransUnion Intermediate became a wholly-owned subsidiary of TransUnion In connection with the acquisition, all existing stockholders of TransUnion Intermediate received cash consideration for their shares and all existing option holders received cash consideration based on the value of their options. To partially fund the acquisition, TransUnion issued $600.0 million aggregate principal amount of the 9.625% notes. At the time of the transaction, TransUnion was owned 49.5% by affiliates of Advent, 49.5% by affiliates of GS and 1% by members of management.
Purchase Price Allocation
The fair value of identifiable intangible assets acquired and liabilities assumed was based on many factors including an analysis of historical financial performance and estimates of future performance, and was determined using analytical approaches appropriate to the facts and circumstances, including discounted cash flow and market-based approaches. The allocation of the purchase price to the identifiable assets acquired and liabilities assumed as of April 30, 2012, consisted of the following:
Fair Value | ||||
(in millions) | ||||
Trade accounts receivable |
$ | 162.4 | ||
Property and equipment |
112.9 | |||
Identifiable intangible assets |
1,986.4 | |||
Goodwill (1) |
1,794.8 | |||
All other assets |
302.3 | |||
|
|
|||
Total assets acquired |
$ | 4,358.8 | ||
Existing debt (including fair value adjustment) |
(1,710.8 | ) | ||
All other liabilities |
(945.4 | ) | ||
Noncontrolling interests |
(109.9 | ) | ||
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|
|||
Net assets of acquired company |
$ | 1,592.7 | ||
|
|
(1) | For tax purposes, $128.8 million of goodwill is tax deductible. |
The excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill. The purchase price of TransUnion Intermediate exceeded the fair value of the net assets acquired due primarily to growth opportunities and operational efficiencies.
F-16
Identifiable Intangible Assets
The fair values of the intangible assets acquired consisted of the following:
Fair Value |
Estimated
Useful Life |
|||||||
(in millions) | ||||||||
Database and credit files |
$ | 765.0 | 15 years | |||||
Technology and software |
364.6 | 7 years | ||||||
Trade names and trademarks |
546.1 | 40 years | ||||||
Customer relationships |
308.0 | 20 years | ||||||
Other |
2.7 | 5 years | ||||||
|
|
|||||||
Total identifiable intangible assets |
$ | 1,986.4 | ||||||
|
|
The weighted-average useful life of identifiable intangible assets is approximately 21 years.
Acquisition Costs
The Company incurred $36.5 million of acquisition-related costs, including investment banker fees, legal fees, due diligence and other external costs recorded in other income and expense. Of this total, $15.6 million was incurred by the Successor and $20.9 million was incurred by the Predecessor. The Predecessor also incurred $2.7 million of loan fees for a bridge loan prior to the date of acquisition.
3. Business Combinations
TLO
On December 16, 2013, we acquired a 100% ownership interest in certain net assets of TLO, LLC (TLO) for $153.4 million in cash. TLO provides data solutions for identity authentication, fraud prevention, and debt recovery. The results of operations of this business have been included as part of the USIS segment in the accompanying consolidated statements of income since the date of acquisition.
Purchase Price Allocation
The fair value of the assets acquired and liabilities assumed consisted of the following:
Fair Value | ||||
(in millions) | ||||
Other current assets |
$ | 0.3 | ||
Property and equipment |
6.8 | |||
Identifiable intangible assets |
83.1 | |||
Goodwill (1) |
69.2 | |||
|
|
|||
Total assets acquired |
$ | 159.4 | ||
Total liabilities assumed |
(6.0 | ) | ||
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|||
Net assets of acquired company |
$ | 153.4 | ||
|
|
(1) | All of the goodwill is deductible for tax purposes. |
The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. The purchase price of TLO exceeded the fair value of the net assets acquired due primarily to growth opportunities, synergies associated with its internal use software and our existing customer base and brand name, and other technological and operational synergies. Goodwill has been allocated to the USIS segment.
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Identifiable Intangible Assets
The fair values of the intangible assets acquired consisted of the following:
Fair Value |
Estimated
Useful Life |
|||||||
(in millions) | ||||||||
Technology and software |
$ | 45.8 | 7 years | |||||
Trade names and trademarks |
13.2 | 20 years | ||||||
Customer relationships |
24.1 | 15 years | ||||||
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|
|||||||
Total identifiable intangible assets |
$ | 83.1 | ||||||
|
|
The weighted-average useful life of identifiable intangible assets is approximately 11 years.
Acquisition Costs
During 2013, the Company incurred $3.7 million of acquisition-related costs for TLO, including banking fees, legal fees, due diligence and other external costs, which were expensed and recorded in other income and expense in the fourth quarter of 2013. Additional TLO acquisition-related costs of $0.5 million were incurred and expensed during 2014.
DHI
On November 12, 2014, we acquired an 87.5% ownership interest in Drivers History Information Sales, LLC (DHI). DHI provides traffic violations and criminal court data. The results of operations of DHI, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date of acquisition.
L2C
On October 17, 2014, we increased our equity interest in L2C, Inc. (L2C) from 11.6% to 100%. L2C provides predictive analytics using alternative data. The results of operations of L2C, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date we obtained control.
CIBIL
During 2014, we increased our equity interest in Credit Information Bureau (India) Limited (CIBIL) from 27.5% to 55.0%. This additional purchase gave us control and resulted in our consolidation of CIBIL. CIBILs results of operations, which are not material, are included as part of our International segment in our consolidated statements of income since May 21, 2014, the date we obtained control. See note 9, Investments in Affiliated Companies, for additional information.
eScan
On September 4, 2013, we acquired 100% ownership of e-Scan Data Systems, Inc. (eScan), a business that provides services to healthcare providers to capture uncompensated care costs in their revenue management programs. This acquisition is in line with our strategic objective to invest in the growing healthcare industry. The results of operations of eScan, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date of the acquisition.
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ZipCode
On March 1, 2013, we acquired 80% ownership in Data Solutions Serviços de Informática Ltda. (ZipCode), a Brazilian company that provides data enrichment and registry information services. This acquisition is in line with our strategic objective to invest in growing international regions. The results of operations of ZipCode, which are not material, have been included as part of our International segment in our consolidated statements of income since the date of the acquisition.
4. Other Current Assets
Other current assets consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions) | ||||||||
Deferred income tax assets |
$ | 51.2 | $ | 22.1 | ||||
Prepaid expenses |
43.4 | 34.9 | ||||||
Other investments |
8.8 | | ||||||
Deferred financing fees |
8.2 | 6.8 | ||||||
Marketable securities |
3.0 | | ||||||
Income taxes receivable |
2.8 | 6.8 | ||||||
Other |
5.3 | 2.9 | ||||||
|
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|
|
|||||
Total other current assets |
$ | 122.7 | $ | 73.5 | ||||
|
|
|
|
Other investments are foreign non-negotiable certificates of deposit that we acquired with CIBIL. The majority of these certificates of deposits are in denominations of greater than $0.1 million. As of December 31, 2014, these investments were recorded at their carrying value.
5. Property, Plant and Equipment
Property, plant and equipment, including those acquired by capital lease, consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions) | ||||||||
Computer equipment and furniture |
$ | 153.1 | $ | 107.8 | ||||
Building and building improvements |
89.0 | 64.3 | ||||||
Purchased software |
59.5 | 45.3 | ||||||
Land |
3.2 | 3.2 | ||||||
|
|
|
|
|||||
Total cost of property, plant and equipment |
304.8 | 220.6 | ||||||
Less: accumulated depreciation |
(123.4 | ) | (70.2 | ) | ||||
|
|
|
|
|||||
Total property, plant and equipment, net of accumulated depreciation |
$ | 181.4 | $ | 150.4 | ||||
|
|
|
|
Depreciation expense, including depreciation of assets recorded under capital leases, for the years ended December 31, 2014 and December 31, 2013, and from the date of inception through December 31, 2012, was $56.7 million, $44.0 million and $26.7 million, respectively. Depreciation expense for the Predecessor four months ended April 30, 2012, was $12.4 million.
6. Goodwill
Goodwill is tested for impairment at the reporting unit level on an annual basis, in the fourth quarter, or on an interim basis if changes in circumstances could reduce the fair value of a reporting
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unit below its carrying value. Our reporting units are consistent with our operating segments for the U.S. Information Services and Consumer Interactive segments. The reporting units for our International segment are the geographic regions of Africa, Canada, Latin America and Asia.
Our impairment tests are performed using a discounted cash flow analysis that requires certain assumptions and estimates regarding economic factors and future profitability. Goodwill impairment tests performed during 2014, 2013 and 2012 resulted in no impairment. At December 31, 2014, there was no accumulated goodwill impairment loss.
As a result of the 2012 Change in Control Transaction, the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. See Note 2, 2012 Change in Control Transaction.
Goodwill allocated to our segments as of December 31, 2014, December 31, 2013, and December 31, 2012, and the changes in the carrying amount of goodwill during those periods consisted of the following:
USIS | International |
Consumer
Interactive |
Total | |||||||||||||
(in millions) | ||||||||||||||||
Balance, December 31, 2012 |
$ | 1,135.3 | $ | 532.1 | $ | 136.8 | $ | 1,804.2 | ||||||||
Purchase accounting adjustments |
(4.7 | ) | (3.8 | ) | (0.6 | ) | (9.1 | ) | ||||||||
Acquisitions |
125.9 | 25.4 | | 151.3 | ||||||||||||
Tax deductible goodwill adjustment |
| (2.1 | ) | | (2.1 | ) | ||||||||||
Foreign exchange rate adjustment |
| (33.9 | ) | | (33.9 | ) | ||||||||||
Sale of Africa subsidiary |
| (0.7 | ) | | (0.7 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, December 31, 2013 |
$ | 1,256.5 | $ | 517.0 | $ | 136.2 | $ | 1,909.7 | ||||||||
Purchase accounting adjustments |
10.3 | | | 10.3 | ||||||||||||
Acquisitions |
40.8 | 92.9 | | 133.7 | ||||||||||||
Foreign exchange rate adjustment |
| (29.8 | ) | | (29.8 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, December 31, 2014 |
$ | 1,307.6 | $ | 580.1 | $ | 136.2 | $ | 2,023.9 | ||||||||
|
|
|
|
|
|
|
|
As of December 31, 2014, our estimates of fair value for each reporting unit exceeded the carrying amount of the corresponding reporting unit. The estimated fair value of our Latin America reporting unit exceeded its carrying amount by 5%. A 10% increase in the discount rate or a 10% decrease in the estimated cash flows of the reporting unit could not have resulted in an impairment in any reporting unit other than the Latin America reporting unit.
See Note 2, Change in Control Transaction, and Note 3, Business Combinations, for information on our purchase accounting adjustments and business acquisitions.
7. Intangible Assets
Intangible assets are initially recorded at their acquisition cost, or fair value if acquired as part of a business combination, and amortized over their estimated useful lives. Increases to the gross amount of intangible assets during 2014 included expenditures to develop internal use software and increases due to business acquisitions, partially offset by the impact of foreign exchange rate adjustments.
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Intangible assets consisted of the following:
December 31, 2014 | December 31, 2013 | |||||||||||||||||||||||
Gross |
Accumulated
Amortization |
Net | Gross |
Accumulated
Amortization |
Net | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Database and credit files |
$ | 801.3 | $ | (135.8 | ) | $ | 665.5 | $ | 761.8 | $ | (84.3 | ) | $ | 677.5 | ||||||||||
Internal use software |
580.0 | (187.3 | ) | 392.7 | 510.4 | (94.7 | ) | 415.7 | ||||||||||||||||
Customer relationships |
392.4 | (46.0 | ) | 346.4 | 336.1 | (25.8 | ) | 310.3 | ||||||||||||||||
Trademarks, copyrights and patents |
571.5 | (37.9 | ) | 533.6 | 550.7 | (22.2 | ) | 528.5 | ||||||||||||||||
Noncompete and other agreements |
2.2 | (0.8 | ) | 1.4 | 2.5 | (0.5 | ) | 2.0 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total intangible assets |
$ | 2,347.4 | $ | (407.8 | ) | $ | 1,939.6 | $ | 2,161.5 | $ | (227.5 | ) | $ | 1,934.0 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
All amortizable intangibles are amortized on a straight-line basis over their estimated useful lives. Database and credit files are amortized over a twelve- to fifteen-year period. Internal use software is amortized over a three- to seven-year period. Customer relationships are amortized over a ten- to twenty-year period. Trademarks are generally amortized over a forty-year period. Copyrights, patents, noncompete and other agreements are amortized over varying periods based on their estimated economic life. The increase in gross intangible assets is primarily a result of business acquisitions during 2014. See Note 3, Business Combinations, for information on our business acquisitions.
Amortization expense related to intangible assets for the years ended December 31, 2014 and 2013, and from inception through December 31, 2012, was $184.5 million, $142.8 million, and $88.3 million, respectively. Amortization expense for the Predecessor four months ended April 30, 2012, was $16.8 million.
Estimated future amortization expense related to purchased intangible assets at December 31, 2014, is as follows:
Annual
Amortization Expense |
||||
(in millions) | ||||
2015 |
$ | 214.3 | ||
2016 |
180.1 | |||
2017 |
146.2 | |||
2018 |
134.0 | |||
2019 |
115.6 | |||
Thereafter |
1,149.4 | |||
|
|
|||
Total future amortization expense |
$ | 1,939.6 | ||
|
|
F-21
8. Other Assets
Other assets consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions) | ||||||||
Investments in affiliated companies |
$ | 52.8 | $ | 92.4 | ||||
Deferred financing fees |
25.8 | 29.7 | ||||||
Other investments |
18.8 | | ||||||
Deposits |
11.5 | 15.8 | ||||||
Marketable securities |
10.9 | 9.9 | ||||||
Other |
0.1 | 0.7 | ||||||
|
|
|
|
|||||
Total other assets |
$ | 119.9 | $ | 148.5 | ||||
|
|
|
|
The decrease in investments in affiliated companies was primarily due to our acquisition of a controlling equity interest in CIBIL, which we now consolidate. Other investments include foreign non-negotiable certificates of deposit that we acquired with CIBIL. The majority of these certificates of deposits are in denominations of greater than $0.1 million. As of December 31, 2014, these investments are recorded at their carrying value. See Note 3, Business Combinations, and Note 9, Investments in Affiliated Companies, for additional information regarding the CIBIL acquisition.
9. Investments in Affiliated Companies
Investments in affiliated companies represent our investment in non-consolidated domestic and foreign entities. These entities are in businesses similar to ours, such as credit reporting, credit scoring and credit monitoring services. These investments are included in other assets in the consolidated balance sheets.
We use the equity method to account for investments in affiliates where we have at least a 20% ownership interest or where we are able to exercise significant influence. For these investments, we adjust the carrying value for our proportionate share of the affiliates earnings, losses and distributions, as well as for purchases and sales of our ownership interest.
We use the cost method to account for nonmarketable investments in affiliates where we have less than a 20% ownership interest or where we are not able to exercise significant influence. For these investments, we adjust the carrying value for purchases and sales of our ownership interests.
For all investments, we adjust the carrying value if we determine that an other-than-temporary impairment has occurred. During 2014, we incurred a loss of $4.1 million recorded in our USIS segment on a cost method investment that was liquidated. The loss was included in other income and expense in the consolidated statements of income. We had no impairments of investments in affiliated companies during 2013 or 2012.
F-22
Investments in affiliated companies consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions) | ||||||||
Trans Union de México, S.A. (25.69% ownership interest) |
$ | 45.0 | $ | 50.0 | ||||
Credit Information Bureau (India) Ltd. (CIBIL, 27.5% ownership interest in 2013) |
| 28.4 | ||||||
All other equity method investments |
6.9 | 6.1 | ||||||
|
|
|
|
|||||
Total equity method investments |
$ | 51.9 | $ | 84.5 | ||||
Total cost method investments |
0.9 | 7.9 | ||||||
|
|
|
|
|||||
Total investments in affiliated companies |
$ | 52.8 | $ | 92.4 | ||||
|
|
|
|
These balances are included in other assets in the consolidated balance sheets.
During 2014, we increased our equity interest in CIBIL to 55.0%, obtained control and began consolidating results of operations of CIBIL as part of our International segment. As a result, CIBIL is no longer an equity method investment.
We remeasured our previously held equity interest in CIBIL at fair value as of the date we obtained control in accordance with the accounting guidance for acquisitions achieved in stages. As a result, we recognized a gain of $21.7 million in other income and expense in the second quarter of 2014.
Earnings from equity method investments, which are included in other non-operating income and expense, and dividends received from equity method investments consisted of the following:
Successor | Predecessor | |||||||||||||||||
Twelve Months
Ended December, 2014 |
Twelve Months
Ended December, 2013 |
From the Date of
Inception through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
Earnings from equity method investments |
$ | 12.5 | $ | 13.7 | $ | 8.0 | $ | 4.1 | ||||||||||
Dividends received from equity method investments |
$ | 9.2 | $ | 10.1 | $ | 9.3 | $ | 0.4 |
Under SEC Regulation S-X, Rule 4-08(g), our investment in Trans Union de México, S.A. is considered a significant equity method investment. The summarized financial information and earnings for our equity method investments as required by SEC Regulation S-X, Rule 1-02(bb)(i) and (ii) consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions) | ||||||||
Current assets |
$ | 57.8 | $ | 83.0 | ||||
Noncurrent assets |
$ | 14.7 | $ | 24.6 | ||||
Current liabilities |
$ | 18.0 | $ | 26.3 | ||||
Noncurrent liabilities |
$ | 0.1 | $ | 1.4 |
F-23
Successor |
|
Predecessor | ||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From the Date of
Inception through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
Revenue |
$ | 124.9 | $ | 132.6 | $ | 82.4 | $ | 40.9 | ||||||||||
Operating income |
$ | 55.7 | $ | 57.7 | $ | 34.4 | $ | 16.9 | ||||||||||
Income from continuing operations |
$ | 43.9 | $ | 48.2 | $ | 28.6 | $ | 14.1 | ||||||||||
Net income |
$ | 43.9 | $ | 48.2 | $ | 28.6 | $ | 14.1 |
Dividends received from cost method investments were $0.8 million, $0.7 million, and $0.6 million in 2014 and 2013 and from the date of inception through December 31, 2012, respectively. We received no dividends from cost method investments for the four months ended April 30, 2012. Dividends received from cost method investments have been included in other income and expense.
10. Other Current Liabilities
Other current liabilities consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions) | ||||||||
Accrued payroll |
$ | 71.5 | $ | 63.7 | ||||
Accrued interest |
20.5 | 23.1 | ||||||
Accrued legal and regulatory |
17.8 | 13.8 | ||||||
Accrued employee benefits |
13.0 | 9.6 | ||||||
Deferred revenue |
8.6 | 9.1 | ||||||
Other |
18.0 | 14.2 | ||||||
|
|
|
|
|||||
Total other current liabilities |
$ | 149.4 | $ | 133.5 | ||||
|
|
|
|
11. Other Liabilities
Other liabilities consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions) | ||||||||
Retirement benefits |
$ | 10.8 | $ | 10.4 | ||||
Unrecognized tax benefits |
0.3 | 4.6 | ||||||
Other |
11.0 | 7.6 | ||||||
|
|
|
|
|||||
Total other liabilities |
$ | 22.1 | $ | 22.6 | ||||
|
|
|
|
F-24
12. Debt
Debt outstanding consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions) | ||||||||
Senior secured term loan, payable in quarterly installments through April 9, 2021, including variable interest (4.00% at December 31, 2014) at LIBOR or alternate base rate, plus applicable margin, including original discount (premium) of $4.3 million and $(0.2) million at December 31, 2014, and December 31, 2013, respectively |
$ | 1,881.5 | $ | 1,123.5 | ||||
Senior secured revolving line of credit, due on April 9, 2019, variable interest (3.75% at December 31, 2014) at LIBOR or alternate base rate, plus applicable margin |
50.0 | | ||||||
11.375% notesSenior notes, principal due June 15, 2018, (paid in full in May 2014) semi-annual interest payments, 11.375% fixed interest per annum, including unamortized fair value adjustment of $95.9 million as of December 31, 2013 |
| 740.9 | ||||||
9.625% notesSenior unsecured PIK toggle notes, principal due June 15, 2018, semi-annual interest payments, 9.625% fixed interest per annum |
600.0 | 600.0 | ||||||
8.125% notesSenior unsecured PIK toggle notes, principal due June 15, 2018, semi-annual interest payments, 8.125% fixed interest per annum, including original issuance discount of $1.3 million and $1.7 million at December 31, 2014, and December 31, 2013, respectively |
398.7 | 398.3 | ||||||
Other notes payable |
7.4 | | ||||||
Capital lease obligations |
2.3 | 4.2 | ||||||
|
|
|
|
|||||
Total debt |
$ | 2,939.9 | $ | 2,866.9 | ||||
Less short-term debt and current portion of long-term debt |
(74.0 | ) | (13.8 | ) | ||||
|
|
|
|
|||||
Total long-term debt |
$ | 2,865.9 | $ | 2,853.1 | ||||
|
|
|
|
Excluding potential additional principal payments due on the senior secured credit facility based on excess cash flows of the prior year, scheduled future maturities of total debt at December 31, 2014, was as follows:
(in millions) | ||||
2015 |
$ | 74.0 | ||
2016 |
23.4 | |||
2017 |
19.4 | |||
2018 |
1,019.0 | |||
2019 |
19.0 | |||
Thereafter |
1,790.7 | |||
Unamortized premiums and discounts on notes |
(5.6 | ) | ||
|
|
|||
Total |
$ | 2,939.9 | ||
|
|
Senior Secured Credit Facility
On June 15, 2010, the Company entered into a senior secured credit facility with various lenders. The credit facility consists of a senior secured term loan and a senior secured revolving line of credit. On April 9, 2014, we refinanced and amended the senior secured credit facility. The refinancing resulted in an increase in the outstanding senior secured term loan from $1,120.5 million to $1,900.0
F-25
million. The amendment, among other things, reduced the interest rate floor and margins, reduced the amount available under the senior secured revolving line of credit from $210.0 million to $190.0 million, extended the maturity dates, and changed certain covenant requirements. The additional borrowings were used in part to repay all amounts outstanding under the existing senior secured revolving line of credit and pay fees and expenses associated with the refinancing transaction. On May 9, 2014, the remaining borrowings were used to redeem the entire $645.0 million outstanding balance of the 11.375% notes issued by Trans Union LLC and its wholly-owned subsidiary, TransUnion Financing Corporation, including a prepayment premium and unpaid accrued interest through June 15, 2014. We refer to these transactions collectively as the 2014 Refinancing Transaction. The early redemption of the 11.375% notes resulted in a net gain of $45.8 million recorded in other income and expense in the consolidated statements of income consisting of the unamortized 2012 Change in Control Transaction fair value increase in the notes of $89.4 million less an early redemption premium and other costs totaling $43.6 million. The senior secured credit facility refinancing resulted in $12.7 million of refinancing fees and other net costs expensed and recorded in other income and expense in the consolidated statements of income.
Interest rates on the refinanced senior secured term loan are based on the London Interbank Offered Rate (LIBOR) unless otherwise elected, and subject to a floor of 1.00%, plus a margin of 2.75% or 3.00% depending on our senior secured net leverage ratio. Under the refinanced senior secured term loan, the Company is required to make principal payments of 0.25% of the refinanced original principal balance at the end of each quarter, with the remaining balance due April 9, 2021. The Company will also be required to make additional payments beginning in 2015 based on excess cash flows of the prior year. Depending on the senior secured net leverage ratio for the year, a principal payment of between zero and fifty percent of the excess cash flows will be due the following year.
During the fourth quarter of 2014, the Company borrowed $50.0 million against the senior secured revolving line of credit to partially fund acquisitions. As of December 31, 2014, the entire $50.0 million borrowed against the senior secured revolving line of credit remained outstanding.
Interest rates on the refinanced senior secured revolving line of credit are based on LIBOR unless otherwise elected, and subject to a floor of 1.00%, plus a margin of 2.50% or 2.75% depending on our senior secured net leverage ratio. There is a 0.375% or 0.50% annual commitment fee, depending on our senior secured net leverage ratio, payable quarterly based on the undrawn portion of the senior secured revolving line of credit. The commitment under the senior secured revolving line of credit expires on April 9, 2019.
With certain exceptions, the obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, including its investment in subsidiaries. The senior secured credit facility contains various restrictions and nonfinancial covenants, along with a senior secured net leverage ratio test. The nonfinancial covenants include restrictions on dividends, investments, dispositions, future borrowings and other specified payments, as well as additional reporting and disclosure requirements. We are in compliance with all of the loan covenants.
On April 30, 2012, we entered into swap agreements that effectively fixed the interest payments on a portion of the then existing senior secured term loan at 2.033%, plus the applicable margin, beginning March 28, 2013. Under the swap agreements, which we had designated as cash flow hedges, we pay a fixed rate of interest of 2.033% and receive a variable rate of interest equal to the greater of 1.50% or the three-month LIBOR. The net amount paid or received was recorded as an adjustment to interest expense. As a result of the April 9, 2014, senior secured credit facility amendment, the swaps were no longer expected to be highly effective and no longer qualify for hedge accounting. The total fair value of the swap instruments as of April 9, 2014, of $1.6 million was recorded in other liabilities in the consolidated balance sheet. The corresponding net of tax loss of $1.0
F-26
million was recorded in accumulated other comprehensive income and is being amortized to interest expense on a straight-line basis through December 29, 2017, the remaining life of the swaps. Changes in the fair value of the swaps after April 9, 2014 through December 31, 2014, resulted in a loss of $0.3 million recorded in other income and expense.
11.375% Notes
Trans Union LLC and its wholly-owned subsidiary TransUnion Financing Corporation issued $645.0 million principal amount of 11.375% senior unsecured notes due June 15, 2018. On May 9, 2014, the 11.375% notes were fully repaid using proceeds received on the new senior secured term loan.
9.625% Notes
On March 21, 2012, the Company issued $600.0 million principal amount of 9.625%/10.375% senior unsecured PIK toggle notes (9.625% notes) due June 15, 2018, in a private placement to certain investors. Pursuant to an exchange offer completed in October 2012, these notes were subsequently registered with the SEC. The Company is required to pay interest on the 9.625% notes in cash unless certain conditions described in the indenture governing the notes are satisfied, in which case the Company will be entitled to pay interest for such period by increasing the principal amount of the notes or by issuing new notes (such increase being referred to as PIK, or paid-in-kind interest) to the extent described in the indenture.
The indenture governing the 9.625% notes contains nonfinancial covenants that include restrictions on our ability to pay dividends or distributions, repurchase equity, prepay junior debt, make certain investments, incur additional debt, issue certain stock, incur liens on property, merge, consolidate or sell certain assets, enter into transactions with affiliates, and allow to exist certain restrictions on the ability of subsidiaries to pay dividends or make other payments to TransUnion. We are in compliance with all covenants under the indenture.
8.125% Notes
On November 1, 2012, the Company issued $400.0 million principal amount of 8.125%/8.875% senior unsecured PIK toggle notes (8.125% notes) due June 15, 2018, at an offering price of 99.5% in a private placement to certain investors. Pursuant to an exchange offer completed in August 2013, these notes were subsequently registered with the SEC. The Company is required to pay interest on the 8.125% notes in cash unless certain conditions described in the indenture governing the notes are satisfied, in which case the Company will be entitled to pay interest for such period by increasing the principal amount of the notes or by issuing new notes to the extent described in the indenture.
The indenture governing the 8.125% notes and the nonfinancial covenants are substantially identical to those governing the 9.625% notes. We are in compliance with all covenants under the indenture.
Fair Value of Debt
The estimated fair values of our 9.625% and 8.125% notes as of December 31, 2014, were $613.7 million and $410.2 million, respectively, compared with book values of $600.0 million and $398.7 million, respectively. The fair values of these fixed-rate notes, as determined under Level 2 of the fair-value hierarchy, are measured using quoted market prices of these publicly traded securities. The book value of our variable-rate debt approximates its fair value. The estimated fair value of our debt may not represent the actual settlement value due to redemption premiums and prepayment penalties that we may incur in connection with extinguishing our debt before its stated maturity.
F-27
13. Earnings Per Share
Basic earnings per share represents income available to common stockholders divided by the weighted average number of shares of common stock during the reported period. Diluted earnings per share reflects the effect of the increase in shares outstanding determined by using the treasury stock method for awards issued under our long-term incentive stock plans. There were 10.2 million, 9.5 million, and 8.7 million anti-dilutive stock based awards outstanding at December 31, 2014, December 31, 2013 and December 31 2012, respectively, including contingently issuable market-based stock options. These awards were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive. Basic and diluted weighted average shares outstanding and earnings per share for the years ended December 31, 2014 and 2013, from the date of inception through December 31, 2012, and four months ended April 30, 2012, were as follows:
Successor | Predecessor | |||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From the Date of
Inception through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
Earnings per sharebasic |
||||||||||||||||||
Earnings available to common shareholders |
$ | (12.5 | ) | $ | (35.1 | ) | $ | (8.8 | ) | $ | (54.9 | ) | ||||||
Weighted average shares outstanding |
147.3 | 146.4 | 146.2 | 29.8 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Earnings per sharebasic |
$ | (0.09 | ) | $ | (0.24 | ) | $ | (0.06 | ) | $ | (1.84 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||||
Earnings per sharediluted |
||||||||||||||||||
Earnings available to common shareholders |
$ | (12.5 | ) | $ | (35.1 | ) | $ | (8.8 | ) | $ | (54.9 | ) | ||||||
Dilutive impact of stock-based awards |
| | | | ||||||||||||||
Weighted average shares outstanding |
147.3 | 146.4 | 146.2 | 29.8 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Earnings per sharediluted |
$ | (0.09 | ) | $ | (0.24 | ) | $ | (0.06 | ) | $ | 1.84 | |||||||
|
|
|
|
|
|
|
|
14. Income Taxes
The provision (benefit) for income taxes on income (loss) from operations consisted of the following:
Successor | Predecessor | |||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From Date of
Inception Through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
Federal |
||||||||||||||||||
Current |
$ | (0.1 | ) | $ | 0.1 | $ | 0.1 | $ | 1.0 | |||||||||
Deferred |
(15.9 | ) | (15.5 | ) | (3.0 | ) | (16.1 | ) | ||||||||||
State |
||||||||||||||||||
Current |
0.4 | | (0.5 | ) | 0.1 | |||||||||||||
Deferred |
0.1 | (0.3 | ) | (0.3 | ) | (1.5 | ) | |||||||||||
Foreign |
||||||||||||||||||
Current |
23.1 | 18.4 | 12.1 | 5.7 | ||||||||||||||
Deferred |
(5.0 | ) | (0.4 | ) | (1.8 | ) | (0.7 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total provision (benefit) for income taxes |
$ | 2.6 | $ | 2.3 | $ | 6.6 | $ | (11.5 | ) | |||||||||
|
|
|
|
|
|
|
|
F-28
The components of income (loss) from operations before income taxes consisted of the following:
Successor | Predecessor | |||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From Date of
Inception Through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
Domestic |
$ | (54.1 | ) | $ | (72.9 | ) | $ | (33.3 | ) | $ | (79.5 | ) | ||||||
Foreign |
52.3 | 47.0 | 36.0 | 15.6 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total income (loss) from operations before income taxes |
$ | (1.8 | ) | $ | (25.9 | ) | $ | 2.7 | $ | (63.9 | ) | |||||||
|
|
|
|
|
|
|
|
The effective income tax rate reconciliation consisted of the following:
Successor | Predecessor | |||||||||||||||||||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From Date of
Inception Through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||||
Income taxes at 35% statutory rate |
$ | (0.6 | ) | 35.0 | % | $ | (9.1 | ) | 35.0 | % | $ | 0.9 | 35.0 | % | $ | (22.4 | ) | 35.0 | % | |||||||||||||||
Increase (decrease) resulting from: |
||||||||||||||||||||||||||||||||||
State taxes |
0.4 | (23.9 | )% | (0.1 | ) | 0.4 | % | (0.9 | ) | (35.0 | )% | (1.4 | ) | 2.2 | % | |||||||||||||||||||
Foreign rate differential |
(1.8 | ) | 98.7 | % | (0.9 | ) | 3.5 | % | (4.0 | ) | (148.1 | )% | (1.2 | ) | 1.9 | % | ||||||||||||||||||
Change in control transaction expenses |
| | | | 1.8 | 66.7 | % | 2.7 | (4.2 | )% | ||||||||||||||||||||||||
Application of indefinite reinvestment assertion to foreign earnings |
5.6 | (308.4 | )% | 15.1 | (58.0 | )% | 4.3 | 159.2 | % | 8.1 | (12.7 | )% | ||||||||||||||||||||||
Impact of foreign dividends |
| (1.6 | )% | (1.7 | ) | 6.4 | % | 5.0 | 185.2 | % | 2.0 | (3.1 | )% | |||||||||||||||||||||
Other |
(1.0 | ) | 56.0 | % | (1.0 | ) | 3.9 | % | (0.5 | ) | (18.6 | )% | 0.7 | (1.1 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 2.6 | (144.2 | )% | $ | 2.3 | (8.8 | )% | $ | 6.6 | 244.4 | % | $ | (11.5 | ) | 18.0 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
For 2014 and 2013, we reported a loss before income taxes with income tax expense, resulting in a negative effective tax rate for both periods. This rate was lower than the 35% U.S. federal statutory rate due primarily to tax on our foreign earnings that are not considered indefinitely reinvested outside the United States.
For the period of inception through December 31, 2012, the effective tax rate was 244.4%. This rate was higher than the 35% U.S. federal statutory rate due primarily to the lapse of the look-through rule and the reduction in available foreign tax credits, the unfavorable impact of changes to our accrual on certain undistributed earnings of the Companys controlled foreign subsidiaries and tax non-deductibility of certain costs incurred in connection with the 2012 Change in Control Transaction, partially offset by a favorable tax rate differential on the Companys foreign earnings.
For the four months ended April 30, 2012, TransUnion Intermediate Predecessor reported a loss before income taxes. The effective tax rate for this period of 18.0% was lower than the 35% U.S. statutory rate due primarily to the impact of recording tax expense on our undistributed foreign
F-29
earnings, the non-deductibility of certain costs incurred in connection with the 2012 Change in Control Transaction and limitations on our foreign tax credits.
Effective January 1, 2012, the look-through provision under subpart F of the United States Internal Revenue Code expired. Consequently, beginning in 2012, we recorded tax expense for the U.S. income tax we would incur in the absence of the look-through rule. As part of the American Taxpayer Relief Act of 2012 enacted into law on January 2, 2013, the look-through provision was retroactively reinstated to January 1, 2012, and we reversed the tax expense we recorded for subpart F in 2012 during the first quarter of 2013. The look-through rule is effective for 2014 as well.
As a result of the 2012 Change in Control Transaction and increased debt service requirements resulting from the additional debt incurred by TransUnion, we asserted at December 31, 2012, that all undistributed foreign earnings from certain controlled foreign corporations accumulated as of April 30, 2012, were not indefinitely reinvested outside the United States. Accordingly, in 2012 we recorded a deferred tax liability for the full estimated U.S. tax cost, net of related foreign tax credits, associated with remitting these earnings back to the United States. In 2014, we modified this assertion due to changes in the Companys capital structure. We now assert that $118.7 million of earnings from our Canadian, South African and Netherlands subsidiaries and CIBIL are not indefinitely reinvested outside the United States.
Components of net deferred income tax consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions) | ||||||||
Deferred income tax assets: |
||||||||
Compensation |
$ | 9.8 | $ | 6.8 | ||||
Employee benefits |
7.8 | 6.3 | ||||||
Legal reserves and settlements |
5.3 | 3.5 | ||||||
Hedge investments |
0.7 | 0.4 | ||||||
Financing related costs |
3.6 | 39.4 | ||||||
Loss and credit carryforwards |
110.7 | 72.5 | ||||||
Other |
8.6 | 8.6 | ||||||
|
|
|
|
|||||
Gross deferred income tax assets |
146.5 | 137.5 | ||||||
Valuation allowance |
(42.1 | ) | (25.9 | ) | ||||
|
|
|
|
|||||
Total deferred income tax assets, net |
$ | 104.4 | $ | 111.6 | ||||
|
|
|
|
|||||
Deferred income tax liabilities: |
||||||||
Depreciation and amortization |
$ | (663.3 | ) | $ | (647.3 | ) | ||
Investments in affiliated companies |
(15.0 | ) | (17.1 | ) | ||||
Taxes on undistributed foreign earnings |
(50.4 | ) | (57.1 | ) | ||||
Other |
(1.3 | ) | (4.9 | ) | ||||
|
|
|
|
|||||
Total deferred income tax liability |
(730.0 | ) | (726.4 | ) | ||||
|
|
|
|
|||||
Net deferred income tax liability |
$ | (625.6 | ) | $ | (614.8 | ) | ||
|
|
|
|
The temporary differences resulting from differing treatment of items for tax and accounting purposes results in deferred tax assets and liabilities. If deferred tax assets are not likely to be recovered in future years, a valuation allowance is recorded. During 2014, our valuation allowance increased $16.2 million primarily due to the current year foreign tax credit carryforward. As of December 31, 2014 and 2013, a valuation allowance of $42.1 million and $25.9 million, respectively, was recorded against the deferred tax assets generated by capital loss, foreign loss and foreign tax
F-30
credit carryforwards. Our capital loss carryforwards will expire over the next five years, our U.S. net operating loss carryforward will expire in twenty years, and our foreign loss and foreign credit carryforwards will expire over the next ten years.
No provision has been made for U.S. income taxes or foreign withholding taxes on $141.7 million of unremitted earnings from certain non-U.S. subsidiaries since these earnings are intended to be permanently reinvested in operations outside the United States. It is impractical at this time to determine the tax impact if these earnings were distributed. Remitting these earnings to the United States would result in additional tax expense.
The total amount of unrecognized tax benefits as of December 31, 2014 and 2013, was $1.9 million and $4.6 million, respectively. The amount of unrecognized tax benefits as of December 31, 2014 and 2013, which would affect the effective tax rate if recognized, was $0.3 million and $4.6 million, respectively.
The total amount of unrecognized tax benefits consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||
(in millions) | ||||||||
Balance as of beginning of period |
$ | 4.6 | $ | 4.9 | ||||
Reductions for tax positions of prior years |
| (0.1 | ) | |||||
Reductions relating to settlement and lapse of statute |
(2.7 | ) | (0.2 | ) | ||||
|
|
|
|
|||||
Balance as of end of period |
$ | 1.9 | $ | 4.6 | ||||
|
|
|
|
We classify interest on unrecognized tax benefits as interest expense and tax penalties as other income or expense in the consolidated statements of income. We classify any interest or penalties related to unrecognized tax benefits as other liabilities in the consolidated balance sheets. Interest expense related to taxes was insignificant for the years ended December 31, 2014 and 2013. The accrued interest payable for taxes as of December 31, 2014 and 2013, was $0.9 million and $0.7 million, respectively. There was no significant expense recognized, or significant liability recorded, for tax penalties as of December 31, 2014 or 2013.
We are regularly audited by federal, state, local and foreign taxing authorities. Given the uncertainties inherent in the audit process, it is reasonably possible that certain audits could result in a significant increase or decrease in the total amount of unrecognized tax benefits. An estimate of the range of the increase or decrease in unrecognized tax benefits due to audit results cannot be made at this time. As of December 31, 2014, tax years 2006 and forward remained open for examination in some state and foreign jurisdictions and tax years 2009 and forward remained open for the federal purposes. The Internal Revenue Service has issued its final Revenue Agents Report to the Company for its 2009 through 2011 tax years. We have evaluated the issues raised and, where appropriate, made adjustments in 2014 where we determined that we did not have a more likely than not probability of prevailing upon appeal.
15. Stock-Based Compensation
In connection with the 2012 Change in Control Transaction, the 2010 Management Equity Plan (the 2010 Plan) was cancelled and replaced with the TransUnion Holding Company, Inc. 2012 Management Equity Plan (the 2012 Plan) as approved by stockholders. Under the 2012 Plan, stock-based awards may be issued to executive officers, employees and independent directors of the Company. A total of 12.1 million shares have been authorized for grant under the 2012 Plan. As of December 31, 2014, 0.5 million shares remain available for future issuance under the 2012 plan.
F-31
For the years ended December 31, 2014, and December 31, 2013, and from the date of inception through December 31, 2012, we recognized stock-based compensation of $10.6 million, $6.9 million, and $3.0 million, respectively, with related income tax benefits of approximately $3.8 million, $2.5 million and $1.1 million, respectively. For the four months ended April 30, 2012, TransUnion Intermediate Predecessor recognized $90.0 million stock-based compensation with related income tax benefits of approximately $32.4 million.
In connection with the 2012 Change in Control Transaction, all outstanding awards under the 2010 Plan immediately vested and TransUnion Intermediate Predecessor recognized $88.0 million of accelerated stock-based compensation, with a related income tax benefit of approximately $31.7 million. All options outstanding were then cancelled and existing option holders received $91.2 million in cash consideration for the value of their options.
Stock Options
Stock-options granted under the 2012 Plan have a ten-year term. For stock options granted to employees, 40% generally vest based on the passage of time (service condition options), and 60% vest based on the passage of time and meeting certain shareholder return on investment conditions (market condition options). All stock options granted to independent directors vest based on the passage of time.
Service condition options are valued using the Black-Scholes valuation model and vest over a five-year service period, with 20% generally vesting one year after the grant date, and 5% vesting each quarter thereafter. Compensation costs for the service condition awards are recognized on a straight-line basis over the requisite service period for the entire award. Market condition options are valued using a risk-neutral Monte Carlo valuation model, with assumptions similar to those used to value the service condition awards, and vest over a five-year service period, contingent on meeting the market conditions.
The assumptions used to value the service condition options and the weighted-average grant date fair value for the periods presented were as follows:
Successor | Predecessor | |||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From Date of
Inception Through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
Service condition options: |
||||||||||||||||||
Dividend yield |
| | | | ||||||||||||||
Expected volatility |
55%-60 | % | 60%-70 | % | 59 | % | 30 | % | ||||||||||
Risk-free interest rate |
0.9%-2.3 | % | 0.9%-1.0 | % | 0.9 | % | 2.4 | % | ||||||||||
Expected life, in years |
5.9-6.4 | 5.9-6.1 | 6.2 | 6.5 | ||||||||||||||
Weighted-average grant date fair value |
$ | 6.12 | $ | 4.21 | $ | 3.73 | 15.74 | |||||||||||
Market condition options: |
||||||||||||||||||
Weighted-average grant date fair value |
$ | 5.59 | $ | 3.89 | $ | 3.06 | 15.15 |
The dividend yield was estimated to be zero because we do not expect to pay dividends in the future. The expected volatility was estimated based on comparable company volatility. The risk-free interest rate was derived from the constant maturity treasury curve for terms matching the expected life of the award. The expected life was calculated using the simplified method described in SAB No. 110 because we do not have sufficient historical data related to exercise behavior.
F-32
In connection with a special dividend of $2.57 per common share paid on November 1, 2012, the Compensation Committee of the Board of Directors approved an equitable adjustment to reduce the exercise price of options outstanding at November 9, 2012, from $7.56 to $4.99 per share. Since the Companys options do not contain mandatory anti-dilution provisions, the adjustment was treated as a modification of the options terms and conditions, resulting in $2.8 million of additional compensation expense that is being recognized over the remaining requisite service period as of the modification date.
Stock option activity as of and for the years ended December 31, 2014 and December 31, 2013, consisted of the following:
Shares |
Weighted
Average Exercise Price |
Weighted
Average Remaining Contractual Term (in years) |
Aggregate
Intrinsic Value (in millions) |
|||||||||||||
(in millions, except share and per share information) | ||||||||||||||||
Outstanding at December 31, 2013 |
9,472,817 | $ | 5.60 | 8.8 | $ | 28.2 | ||||||||||
Granted |
1,948,666 | $ | 11.07 | |||||||||||||
Exercised |
(219,257 | ) | $ | 4.99 | ||||||||||||
Forfeited |
(957,058 | ) | $ | 6.48 | ||||||||||||
Expired |
(1,800 | ) | $ | 4.99 | ||||||||||||
|
|
|||||||||||||||
Outstanding at December 31, 2014 |
10,243,368 | $ | 6.62 | 8.2 | $ | 65.8 | ||||||||||
|
|
|||||||||||||||
Vested and expected to vest at December 31, 2014 |
9,361,280 | $ | 6.62 | 8.2 | $ | 60.2 | ||||||||||
Exercisable at December 31, 2014 |
1,326,892 | $ | 5.38 | 7.9 | $ | 10.3 |
As of December 31, 2014, stock-based compensation expense remaining to be recognized in future years related to options, excluding an estimate for forfeitures, was $11.3 million for service condition options and $15.5 million for market condition options, with weighted-average recognition periods of 3.5 years and 2.7 years, respectively. During 2014, cash received from the exercise of stock options was $1.1 million with a tax benefit realized from these exercises of approximately $0.1 million.
The intrinsic value of options exercised and the fair value of options vested for the periods presented are as follows:
Successor | Predecessor | |||||||||||||||||
Year Ended
December 31, 2014 |
Year Ended
December 31, 2013 |
From Date of
Inception Through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
Intrinsic value of options exercised |
$ | 1.1 | $ | 0.5 | $ | | $ | | ||||||||||
Total fair value of options vested |
$ | 3.0 | $ | 3.7 | $ | | $ | 18.2 |
For the four months ended April 30, 2012, the total fair value of options vested includes the fair value of options that vested in connection with the 2012 Change in Control Transaction.
Stock Appreciation Rights
During the years ended December 31, 2014, and December 31, 2013, and from the date of inception through December 31, 2012, the Company granted 0.1 million, 0.1 million and 1.2 million stock appreciation rights (SARs), respectively, with weighted-average exercise prices of $10.94,
F-33
$7.14 and $4.99, respectively. The SARs have a ten-year term, with 40% vesting over a five-year service period and 60% vesting over a five-year service period contingent on meeting certain market conditions. The SARs provide for cash settlement and are being accounted for as liability awards, with expense recognized based on the awards fair value and the percentage of requisite service rendered at the end of each reporting period.
In connection with a special dividend of $2.57 per common share paid on November 1, 2012, the Compensation Committee of the Board of Directors approved an equitable adjustment to reduce the exercise price of the SARs outstanding at November 9, 2012, from $7.56 to $4.99 per share.
As of December 31, 2014, 0.2 million SARs had vested, 0.3 million SARs had been forfeited, and 0.1 million SARs had been exercised. During 2014, $0.1 million of share-based liabilities were paid for SARs that were exercised during the year. Stock-based compensation expense remaining to be recognized in future years related to SARs was $3.9 million based on the fair value of the awards at December 31, 2014.
Restricted Stock
During 2012, the Company granted 33,434 shares of restricted stock that cliff vest after three years under the 2012 Management Equity Plan. During 2014 and 2013, there we no new grants or forfeitures and none of the restricted stock vested. The weighted average grant date fair value was $4.99. As of December 31, 2014, stock-based compensation expense remaining to be recognized in future years related to restricted stock was $0.1 million with a weighted-average recognition period of one year.
In connection with a special dividend of $2.57 per common share paid on November 1, 2012, the grant date fair value of restricted stock issued was reset from $7.56 to $4.99 per share.
16. Fair Value
The following table summarizes financial instruments measured at fair value, on a recurring basis, as of December 31, 2014:
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
(in millions) | ||||||||||||||||
Assets |
||||||||||||||||
Trading securities |
$ | 10.9 | $ | 6.6 | $ | 4.3 | $ | | ||||||||
Available for sale securities |
3.0 | | 3.0 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 13.9 | $ | 6.6 | $ | 7.3 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Contingent obligation |
$ | (5.0 | ) | $ | | $ | | $ | (5.0 | ) | ||||||
Interest rate swaps |
(2.0 | ) | | (2.0 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | (7.0 | ) | $ | | $ | (2.0 | ) | $ | (5.0 | ) | |||||
|
|
|
|
|
|
|
|
Level 1 instruments consist of exchange-traded mutual funds. Exchange-traded mutual funds are trading securities valued at their current market prices. These securities relate to a nonqualified deferred compensation plan held in trust for the benefit of plan participants.
Level 2 instruments consist of pooled separate accounts, foreign exchange-traded corporate bonds and interest rate swaps. Pooled separate accounts are designated as trading securities valued
F-34
at net asset values. These securities relate to the nonqualified deferred compensation plan held in trust for the benefit of plan participants. Foreign exchange-traded corporate bonds are available-for-sale securities valued at their current quoted prices. These securities mature between 2027 and 2033. Interest rate swaps fair values are determined using standard valuation models with market-based observable inputs including forward and spot exchange rates and interest rate curves. See Note 12, Debt for additional information regarding interest rate swaps.
Unrealized gains and losses on trading securities are included in net income, while unrealized gains and losses on available for sale securities are included in other comprehensive income. There were no significant realized or unrealized gains or losses on our securities for any of the periods presented.
Level 3 instruments consist of contingent obligations related to recent acquisitions with maximum payouts totaling $19.5 million. These obligations are contingent upon meeting certain performance requirements in 2015 and 2016. The fair values of these obligations were determined based on an income approach, using our current expectations of the future earnings of the acquired entities. We assess the fair value of these obligations each reporting period with any changes reflected as gains or losses in selling, general and administrative expenses in the consolidated statements of income. During 2014, we recorded an expense of $1.5 million as a result of changes to the fair value of these obligations.
17. Operating Segments
Operating segments are businesses for which separate financial information is available and evaluated regularly by the chief operating decision-maker in deciding how to allocate resources. This segment financial information is reported on the basis that is used for the internal evaluation of operating performance. The accounting policies of the segments are the same as described in Note 1, Significant Accounting and Reporting Policies.
We evaluate the performance of segments based on revenue and operating income. Intersegment sales and transfers have been eliminated and were not material.
The following is a more detailed description of the three operating segments and the Corporate unit, which provides support services to each operating segment:
U.S. Information Services
U.S. Information Services (USIS) provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. These businesses use our services to acquire new customers, assess consumer ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud. These core capabilities and delivery platforms in our USIS segment allow us to serve a broad set of customers and business issues. We offer our services to customers in the financial services, insurance, healthcare and other industries.
International
The International segment provides services similar to our USIS segment to businesses in select regions outside the U.S. Depending on the maturity of the credit economy in each country; services may include credit reports, analytics and decisioning services and other value-added risk management services. In addition, we have insurance, business and automotive databases in select geographies. These services are offered to customers in a number of industries including financial services,
F-35
insurance, automotive, collections and communications, and are delivered through both direct and indirect channels. The International segment also provides consumer services similar to those offered by our Consumer Interactive segment that help consumers proactively manage their personal finances.
Consumer Interactive
Consumer Interactive offers solutions in the United States that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include credit reports and scores, credit monitoring, fraud protection and resolution and financial management. Our products are provided through user friendly online and mobile interfaces and supported by educational content and customer support. Our Consumer Interactive segment serves over 35 million consumers through both direct and indirect channels.
Corporate
Corporate provides shared services for the Company and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the operating segments remain in Corporate. These costs are typically for enterprise-level functions and are primarily administrative in nature.
Selected financial information consisted of the following:
Successor | Predecessor | |||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From the Date of
Inception through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
Revenue |
||||||||||||||||||
U.S. Information Services |
$ | 818.6 | $ | 740.6 | $ | 487.4 | $ | 238.1 | ||||||||||
International |
255.5 | 238.9 | 157.8 | 76.6 | ||||||||||||||
Consumer Interactive |
230.6 | 203.7 | 121.8 | 58.3 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 1,304.7 | $ | 1,183.2 | $ | 767.0 | $ | 373.0 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
||||||||||||||||||
U.S. Information Services |
$ | 112.8 | $ | 154.7 | $ | 121.9 | $ | 33.2 | ||||||||||
International |
22.2 | 19.5 | 19.1 | 5.3 | ||||||||||||||
Consumer Interactive |
85.5 | 65.6 | 48.7 | 13.0 | ||||||||||||||
Corporate |
(92.1 | ) | (70.6 | ) | (48.5 | ) | (51.7 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 128.4 | $ | 169.2 | $ | 141.2 | $ | (0.2 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||||
Reconciliation of operating income (loss) to income (loss) from operations before income tax: |
||||||||||||||||||
Operating income from segments |
$ | 128.4 | $ | 169.2 | $ | 141.2 | $ | (0.2 | ) | |||||||||
Non-operating income and expense |
(130.2 | ) | (195.1 | ) | (138.5 | ) | (63.7 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from operations before income tax |
$ | (1.8 | ) | $ | (25.9 | ) | $ | 2.7 | $ | (63.9 | ) | |||||||
|
|
|
|
|
|
|
|
F-36
Earnings from equity method investments, included in non-operating income and expense was as follows:
Successor | Predecessor | |||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From the Date of
Inception through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
U.S. Information Services |
$ | 1.2 | $ | 1.4 | $ | 0.9 | $ | 0.5 | ||||||||||
International |
11.3 | 12.3 | 7.1 | 3.6 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 12.5 | $ | 13.7 | $ | 8.0 | $ | 4.1 | ||||||||||
|
|
|
|
|
|
|
|
Total assets, by segment, consisted of the following:
December 31,
2014 |
December 31,
2013 |
|||||||||
(in millions) | ||||||||||
U.S. Information Services |
$ | 2,932.8 | $ | 2,894.7 | ||||||
International |
1,268.1 | 1,166.8 | ||||||||
Consumer Interactive |
268.8 | 268.3 | ||||||||
Corporate |
196.1 | 162.5 | ||||||||
|
|
|
|
|||||||
Total |
$ | 4,665.8 | $ | 4,492.3 | ||||||
|
|
|
|
Cash paid for capital expenditures, by segment, was as follows:
Successor | Predecessor | |||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From the Date of
Inception through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
U.S. Information Services |
$ | 99.6 | $ | 46.9 | $ | 30.8 | $ | 14.3 | ||||||||||
International |
30.1 | 17.1 | 8.6 | 2.4 | ||||||||||||||
Consumer Interactive |
5.3 | 3.9 | 2.8 | 1.3 | ||||||||||||||
Corporate |
20.2 | 13.8 | 6.6 | 2.4 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 155.2 | $ | 81.7 | $ | 48.8 | $ | 20.4 | ||||||||||
|
|
|
|
|
|
|
|
Depreciation and amortization expense by segment was as follows:
Successor | Predecessor | |||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From the Date of
Inception Through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
U.S. Information Services |
$ | 174.3 | $ | 129.3 | $ | 78.9 | $ | 22.3 | ||||||||||
International |
51.0 | 39.9 | 25.8 | 3.7 | ||||||||||||||
Consumer Interactive |
10.3 | 8.9 | 5.2 | 1.3 | ||||||||||||||
Corporate |
5.6 | 8.7 | 5.1 | 1.9 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 241.2 | $ | 186.8 | $ | 115.0 | $ | 29.2 | ||||||||||
|
|
|
|
|
|
|
|
F-37
Percentage of revenue based on the country where it was earned, was as follows:
Successor | Predecessor | |||||||||||||||||
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From the Date of
Inception Through December 31, 2012 |
Four Months
Ended April 30, 2012 |
|||||||||||||||
(in millions) | ||||||||||||||||||
United States |
80 | % | 80 | % | 79 | % | 79 | % | ||||||||||
South Africa |
6 | % | 6 | % | 7 | % | 8 | % | ||||||||||
Canada |
5 | % | 5 | % | 5 | % | 6 | % | ||||||||||
Other |
9 | % | 9 | % | 9 | % | 7 | % |
Percentage of long-lived assets, other than financial instruments and deferred tax assets, based on the location of the legal entity that owns the asset, was as follows:
Percent of Long-Lived Assets | ||||||||||||
Country |
2014 | 2013 | 2012 | |||||||||
United States |
82 | % | 85 | % | 81 | % | ||||||
South Africa |
3 | % | 3 | % | 5 | % | ||||||
Canada |
3 | % | 3 | % | 4 | % | ||||||
Other |
12 | % | 9 | % | 10 | % |
18. Commitments
Future minimum payments for noncancelable operating leases, purchase obligations and other liabilities of the Company in effect as of December 31, 2014, are payable as follows:
Operating
Leases |
Purchase
Obligations |
Total | ||||||||||
(in millions) | ||||||||||||
2015 |
$ | 12.8 | $ | 182.0 | $ | 194.8 | ||||||
2016 |
9.9 | 31.9 | 41.8 | |||||||||
2017 |
7.0 | 11.1 | 18.1 | |||||||||
2018 |
5.4 | 6.7 | 12.1 | |||||||||
2019 |
5.0 | 1.1 | 6.1 | |||||||||
Thereafter |
11.8 | 2.5 | 14.3 | |||||||||
|
|
|
|
|
|
|||||||
Totals |
$ | 51.9 | $ | 235.3 | $ | 287.2 | ||||||
|
|
|
|
|
|
Purchase obligations include $106.5 million of trade accounts payable that were included in our balance sheet as of December 31, 2014. Purchase obligations include commitments for outsourcing services, royalties, data licenses, maintenance and other operating expenses. Rental expense related to operating leases was $13.4 million, $11.0 million, and $7.4 million for the years ended December 31, 2014, and December 31, 2013, and from date of inception through December 31, 2012, respectively. Rental expense related to operating leases was $3.7 million of TransUnion Intermediate Predecessor for the four months ended April 30, 2012.
Licensing Agreements
We have agreements with Fair Isaac Corporation to license credit-scoring algorithms and the right to sell credit scores derived from those algorithms. Payment obligations under these agreements vary due to factors such as the volume of credit scores we sell, what type of credit scores we sell, and how our customers use the credit scores. There are no minimum payments required under these licensing agreements. However, we do have a significant level of sales volume related to these credit scores.
F-38
19. Contingencies
Litigation
In the ordinary course of business, we are routinely named as defendants in, or parties to, various legal actions and proceedings relating to our current or past business operations. These actions generally assert claims for violations of federal or state credit reporting, consumer protection or privacy laws, or common law claims related to privacy, libel, slander or the unfair treatment of consumers, and may include claims for substantial or indeterminate compensatory or punitive damages, or injunctive relief, and may seek business practice changes. In the ordinary course of business, we also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In connection with formal and informal inquiries by these regulators, we routinely receive requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of our activities. We regularly review all litigation and regulatory matters to determine whether a loss is probable and, if probable, whether the loss can be reasonably estimated. If a loss is probable and can be reasonably estimated, an appropriate reserve is accrued, taking into consideration legal positions, contractual obligations and applicable insurance coverages, and included in other current liabilities. We believe that the reserves established for pending or threatened legal and regulatory matters are appropriate based on the facts currently known. Due to the uncertainties inherent in the investigation and resolution of legal and regulatory matters, however, the actual costs of resolving litigation and regulatory matters may be substantially higher than the amounts reserved for those matters, and an adverse outcome in certain of these matters could have a material adverse effect on our financial results. Legal fees incurred in connection with ongoing litigation are considered a period cost and are expensed as incurred.
As of December 31, 2014 and 2013, we accrued $17.8 million and $13.8 million, respectively, for anticipated claims. These amounts were recorded in other accrued liabilities in the consolidated balance sheets and the associated expenses were recorded in selling, general and administrative expenses in the consolidated statements of income.
20. Related-Party Transactions
Stockholder Agreement
In connection with the 2012 Change in Control Transaction, TransUnion, GS and Advent entered into the Major Stockholders Agreement. Under the terms of the agreement, GS and Advent have the right to appoint all members of TransUnions board of directors.
Consulting Agreement
In connection with the 2012 Change in Control Transaction, TransUnion, GS and Advent entered into a consulting agreement. Under the terms of the agreement, GS and Advent are to receive an advisory fee of $0.3 million each, increasing 5% annually, in exchange for services provided, including (i) general executive and management services; (ii) identification, support, negotiation and analysis of acquisitions and dispositions; (iii) support, negotiation and analysis of financing alternatives, including in connection with acquisitions, capital expenditures and refinancing of existing debt; (iv) finance functions, including assistance in the preparation of financial projections and monitoring of compliance with financing agreements; (v) human resources functions, including searching and recruiting of executives; and (vi) other services as mutually agreed upon. For the years ended December 31, 2014 and December 31, 2013, and from the date of inception through December 31, 2012, we incurred fees from Advent totaling $0.3 million, $0.3 million, and $0.1 million, respectively. For the years ended
F-39
December 31, 2014 and December 31, 2013, and from the date of inception through December 31, 2012, we incurred fees from GS totaling $0.3 million, $0.3 million, and $0.1 million, respectively.
In connection with his resignation as President and Chief Executive Officer of the Company, TransUnion and Siddharth N. (Bobby) Mehta, a director of the Company, entered into a consulting agreement, dated December 6, 2012, pursuant to which Mr. Mehta provides advice and consultation to assist Mr. Peck in the transition of duties as Chief Executive Officer and to Mr. Peck and the Board of Directors with respect to the Companys strategic operating plan and strategic opportunities or transactions considered by the Company from time to time. Pursuant to the terms of the agreement, Mr. Mehta receives a consulting services fee of $0.2 million on or before January 10 of each year during the term of the agreement. Either party may terminate the agreement by providing notice of non-renewal at least sixty (60) days prior to the end of the then-current term.
Other Fees
In connection with the 2012 Change in Control Transaction and the issuance of the 8.125% notes, in 2012, we paid acquisition-related and underwriting fees of $11.9 million and $0.2 million to affiliates of GS and Advent, respectively, and TransUnion Intermediate Predecessor paid $1.4 million of acquisition-related fees to affiliates of GS.
Legal Services
TransUnion paid $0.5 million from the date of inception through December 31, 2012, and TransUnion Intermediate Predecessor paid $0.1 million for the four months ended April 30, 2012, to the law firm of Neal, Gerber & Eisenberg LLP for legal services. Marshall E. Eisenberg, a partner in the law firm, is a co-trustee of certain Pritzker family U.S.-based trusts that beneficially owned in excess of 5% of the Companys common stock prior to the 2012 Change in Control Transaction.
TransUnion paid $0.4 million from the date of inception through December 31, 2012, and TransUnion Intermediate Predecessor paid $3.5 million for the four months ended April 30, 2012, to the law firm of Latham and Watkins LLP. Michael A. Pucker, a partner in the law firm, is an immediate family member of a co-trustee of certain Pritzker family U.S.-based trusts that beneficially owned in excess of 5% of the Companys common stock prior to the 2012 Change in Control Transaction.
Payables
Other liabilities at December 31, 2014 and 2013, included $3.2 million, owed to certain Pritzker family business interests related to tax indemnification payments arising in connection with the 2010 change in control transaction. This amount is subject to future adjustments based on a final determination of tax expense.
Issuances of Common Stock
During 2014, the Company sold an aggregate of 257,576 shares of common stock at a purchase price of $17.40 per share to Executive Officers of the Company.
During 2013, the Company sold an aggregate of 87,566 and 26,326 shares of common stock at a purchase price of $11.42 and $6.65 per share, respectively, to Executive Officers of the Company. During 2012, the Company sold an aggregate of 424,800 shares of common stock at a price of $6.65 per share to Executive Officers of the Company.
F-40
Investment Purchase
During 2014, the Company had no purchases of common stock from current or former Executive Officers of the Company. During 2013, the Company purchased an aggregate of 109,623 and 297,955 shares of common stock at a price of $11.42 and $6.65 per share, respectively, from former Executive Officers of the Company. During 2012, the Company purchased an aggregate of 69,625 shares of common stock at a price of $10.07 from a former Executive Officer of the Company.
21. Quarterly Financial Data (Unaudited)
The quarterly financial data for 2013 and 2014 consisted of the following:
Three Months Ended | ||||||||||||||||
December 31,
2014 |
September 30,
2014 |
June 30,
2014 |
March 31,
2014 |
|||||||||||||
(in millions) | ||||||||||||||||
Revenue |
$ | 335.6 | $ | 338.2 | $ | 327.5 | $ | 303.4 | ||||||||
Operating income |
20.4 | 40.8 | 32.4 | 34.8 | ||||||||||||
Net income (loss) |
(10.7 | ) | (0.1 | ) | 19.9 | (13.5 | ) | |||||||||
Net income (loss) attributable to TransUnion |
(13.1 | ) | (2.6 | ) | 17.9 | (14.7 | ) | |||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | (0.09 | ) | $ | (0.02 | ) | $ | 0.12 | $ | (0.10 | ) | |||||
Diluted |
$ | (0.09 | ) | $ | (0.02 | ) | $ | 0.12 | $ | (0.10 | ) |
Three Months Ended | ||||||||||||||||
December 31,
2013 |
September 30,
2013 |
June 30,
2013 |
March 31,
2013 |
|||||||||||||
(in millions) | ||||||||||||||||
Revenue |
$ | 292.4 | $ | 299.5 | $ | 300.8 | $ | 290.5 | ||||||||
Operating income |
36.2 | 49.3 | 39.5 | 44.2 | ||||||||||||
Net income (loss) |
(15.7 | ) | (1.4 | ) | (6.1 | ) | (5.0 | ) | ||||||||
Net income (loss) attributable to TransUnion |
(17.6 | ) | (3.4 | ) | (7.8 | ) | (6.3 | ) | ||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | (0.12 | ) | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.04 | ) | ||||
Diluted |
$ | (0.12 | ) | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.04 | ) |
F-41
22. Accumulated Other Comprehensive Income (Loss)
The following table sets forth the changes in each component of accumulated other comprehensive income (loss), net of tax:
Foreign
Currency Translation Adjustment |
Net
Unrealized Gain/(Loss) On Hedges |
Net Unrealized
Gain/(Loss) On Available-for- sale |
Accumulated
Other Comprehensive Income / (Loss) |
|||||||||||||
(in millions) | ||||||||||||||||
Predecessor balance, December 31, 2011 |
$ | (3.6 | ) | $ | | $ | | $ | (3.6 | ) | ||||||
Change |
2.2 | | | 2.2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Predecessor balance, April 30, 2012 |
$ | (1.4 | ) | $ | | $ | | $ | (1.4 | ) | ||||||
Purchase accounting adjustments |
1.4 | | | 1.4 | ||||||||||||
Change |
(20.7 | ) | (3.7 | ) | | (24.4 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Successor balance, December 31, 2012 |
$ | (20.7 | ) | $ | (3.7 | ) | $ | | $ | (24.4 | ) | |||||
Change |
(51.9 | ) | 3.1 | | (48.8 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Successor balance, December 31, 2013 |
$ | (72.6 | ) | $ | (0.6 | ) | $ | | $ | (73.2 | ) | |||||
Change |
(44.2 | ) | (0.2 | ) | 0.1 | (44.3 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Successor balance, December 31, 2014 |
$ | (116.8 | ) | $ | (0.8 | ) | $ | 0.1 | $ | (117.5 | ) | |||||
|
|
|
|
|
|
|
|
23. Subsequent Events
On March 26, 2015, TransUnion Holding Company, Inc. was renamed TransUnion and TransUnion Corp. was renamed TransUnion Intermediate Holdings, Inc., as reflected in these financial statements.
On June 5, 2015, the Companys Board of Directors approved a 1.333 to 1 split of the Companys common stock, including outstanding options to purchase common stock, effective June 5, 2015. All share and per share information for all periods of TransUnion, but not the predecessor, presented in the consolidated financial statements and related footnotes have been adjusted to reflect the stock split.
On June 11, 2015, the Companys Board of Directors approved an increase in the common shares authorized to 1 billion and authorized the issuance of up to 100 million preferred shares.
F-42
TRANSUNION AND SUBSIDIARIES
(in millions, except per share data)
March 31,
2015 |
December 31,
2014 |
|||||||
Unaudited | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 87.0 | $ | 77.9 | ||||
Trade accounts receivable, net of allowance of $3.0 and $2.4 |
211.7 | 200.4 | ||||||
Other current assets |
129.6 | 122.7 | ||||||
|
|
|
|
|||||
Total current assets |
428.3 | 401.0 | ||||||
Property, plant and equipment, net of accumulated depreciation and amortization of $132.9 and $123.4 |
176.1 | 181.4 | ||||||
Goodwill, net |
2,009.0 | 2,023.9 | ||||||
Other intangibles, net of accumulated amortization of $459.5 and $407.8 |
1,891.9 | 1,939.6 | ||||||
Other assets |
109.0 | 119.9 | ||||||
|
|
|
|
|||||
Total assets |
$ | 4,614.3 | $ | 4,665.8 | ||||
|
|
|
|
|||||
Liabilities and stockholders equity |
||||||||
Current liabilities: |
||||||||
Trade accounts payable |
$ | 102.8 | $ | 106.5 | ||||
Short-term debt and current portion of long-term debt |
112.8 | 74.0 | ||||||
Other current liabilities |
115.4 | 149.4 | ||||||
|
|
|
|
|||||
Total current liabilities |
331.0 | 329.9 | ||||||
Long-term debt |
2,863.6 | 2,865.9 | ||||||
Deferred taxes |
663.4 | 676.8 | ||||||
Other liabilities |
24.0 | 22.1 | ||||||
|
|
|
|
|||||
Total liabilities |
3,882.0 | 3,894.7 | ||||||
Redeemable noncontrolling interests |
13.0 | 23.4 | ||||||
Stockholders equity: |
||||||||
Common stock, $0.01 par value; 200.0 million shares authorized at March 31, 2015 and December 31, 2014, 148.6 million and 148.5 shares issued at March 31, 2015 and December 31, 2014, respectively, and 148.0 million shares and 147.9 million shares outstanding as of March 31, 2015 and December 31, 2014, respectively |
1.5 | 1.5 | ||||||
Additional paid-in capital |
1,140.8 | 1,137.6 | ||||||
Treasury stock at cost; 0.7 million shares at March 31, 2015 and December 31, 2014, respectively |
(4.3 | ) | (4.3 | ) | ||||
Accumulated deficit |
(436.8 | ) | (430.2 | ) | ||||
Accumulated other comprehensive loss |
(145.0 | ) | (117.5 | ) | ||||
|
|
|
|
|||||
Total TransUnion stockholders equity |
556.2 | 587.1 | ||||||
Noncontrolling interests |
163.1 | 160.6 | ||||||
|
|
|
|
|||||
Total stockholders equity |
719.3 | 747.7 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 4,614.3 | $ | 4,665.8 | ||||
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
F-43
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Income (Loss) (Unaudited)
(in millions, except per share data)
Three Months Ended
March 31, |
||||||||
2015 | 2014 | |||||||
Revenue |
$ | 353.1 | $ | 303.4 | ||||
Operating expenses |
||||||||
Cost of services (exclusive of depreciation and amortization below) |
125.6 | 120.9 | ||||||
Selling, general and administrative |
121.9 | 96.2 | ||||||
Depreciation and amortization |
69.1 | 51.5 | ||||||
|
|
|
|
|||||
Total operating expenses |
316.6 | 268.6 | ||||||
Operating income |
36.5 | 34.8 | ||||||
Non-operating income and expense |
||||||||
Interest expense |
(44.8 | ) | (50.8 | ) | ||||
Interest income |
0.9 | 0.5 | ||||||
Earnings from equity method investments |
2.3 | 3.6 | ||||||
Other income and (expense), net |
(2.3 | ) | (1.7 | ) | ||||
|
|
|
|
|||||
Total non-operating income and expense |
(43.9 | ) | (48.4 | ) | ||||
Loss before income taxes |
(7.4 | ) | (13.6 | ) | ||||
Benefit for income taxes |
3.0 | 0.1 | ||||||
|
|
|
|
|||||
Net loss |
(4.4 | ) | (13.5 | ) | ||||
Less: net income attributable to the noncontrolling interests |
(2.2 | ) | (1.2 | ) | ||||
|
|
|
|
|||||
Net loss attributable to TransUnion |
$ | (6.6 | ) | $ | (14.7 | ) | ||
|
|
|
|
|||||
Earnings per share: |
||||||||
Basic |
$ | (0.04 | ) | $ | (0.10 | ) | ||
|
|
|
|
|||||
Diluted |
$ | (0.04 | ) | $ | (0.10 | ) | ||
|
|
|
|
|||||
Weighted average shares outstanding: |
||||||||
Basic |
147.9 | 147.0 | ||||||
|
|
|
|
|||||
Diluted |
147.9 | 147.0 | ||||||
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
F-44
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(in millions)
Three Months Ended
March 31, |
||||||||
2015 | 2014 | |||||||
Net loss |
$ | (4.4 | ) | $ | (13.5 | ) | ||
Other comprehensive income (loss): |
||||||||
Foreign currency translation: |
||||||||
Foreign currency translation adjustment |
(26.9 | ) | (11.2 | ) | ||||
(Expense) Benefit for income taxes |
(0.1 | ) | 3.5 | |||||
|
|
|
|
|||||
Foreign currency translation, net |
(27.0 | ) | (7.7 | ) | ||||
Interest rate swaps: |
||||||||
Net unrealized loss |
| (0.2 | ) | |||||
Amortization of accumulated loss |
(0.1 | ) | | |||||
Benefit for income taxes |
| 0.1 | ||||||
|
|
|
|
|||||
Interest rate swaps, net |
(0.1 | ) | (0.1 | ) | ||||
Total other comprehensive loss, net of tax |
(27.1 | ) | (7.8 | ) | ||||
|
|
|
|
|||||
Comprehensive loss |
(31.5 | ) | (21.3 | ) | ||||
Less: comprehensive income attributable to noncontrolling interests |
(2.5 | ) | (1.4 | ) | ||||
|
|
|
|
|||||
Comprehensive loss attributable to TransUnion |
$ | (34.0 | ) | $ | (22.7 | ) | ||
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
F-45
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in millions)
Three Months Ended
March 31, |
||||||||
2015 | 2014 | |||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | (4.4 | ) | $ | (13.5 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
69.1 | 51.5 | ||||||
Amortization and loss on fair value of interest rate swaps |
1.1 | | ||||||
Amortization of deferred financing fees |
2.0 | 1.7 | ||||||
Stock-based compensation |
2.4 | 2.0 | ||||||
Provision for losses on trade accounts receivable |
0.6 | 0.6 | ||||||
Equity in net income of affiliates, net of dividends |
(0.9 | ) | (3.3 | ) | ||||
Deferred taxes |
(9.5 | ) | (4.0 | ) | ||||
Amortization of senior notes purchase accounting fair value adjustment and note discount |
0.2 | (4.4 | ) | |||||
Other |
0.2 | (0.4 | ) | |||||
Changes in assets and liabilities: |
||||||||
Trade accounts receivable |
(14.5 | ) | (18.4 | ) | ||||
Other current and long-term assets |
6.4 | 1.5 | ||||||
Trade accounts payable |
0.5 | 0.8 | ||||||
Other current and long-term liabilities |
(36.7 | ) | (20.2 | ) | ||||
|
|
|
|
|||||
Cash provided by (used in) operating activities |
16.5 | (6.1 | ) | |||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(30.1 | ) | (38.8 | ) | ||||
Proceeds from sale of trading securities |
0.3 | 0.9 | ||||||
Purchases of trading securities |
(1.0 | ) | (1.7 | ) | ||||
Proceeds from sale of other investments |
3.9 | | ||||||
Purchases of other investments |
(7.2 | ) | | |||||
Acquisitions and purchases of noncontrolling interests, net of cash acquired |
(9.9 | ) | (39.1 | ) | ||||
Acquisition-related deposits |
9.1 | 8.8 | ||||||
|
|
|
|
|||||
Cash used in investing activities |
(34.9 | ) | (69.9 | ) | ||||
Cash flows from financing activities: |
||||||||
Proceeds from senior secured revolving line of credit |
35.0 | 28.5 | ||||||
Repayments of debt |
(6.6 | ) | (3.8 | ) | ||||
Proceeds from issuance of common stock and exercise of stock options |
0.8 | 0.7 | ||||||
Debt financing fees |
| (0.2 | ) | |||||
Distributions to noncontrolling interests |
(0.1 | ) | (0.5 | ) | ||||
Other |
| 0.1 | ||||||
|
|
|
|
|||||
Cash provided by financing activities |
29.1 | 24.8 | ||||||
Effect of exchange rate changes on cash and cash equivalents |
(1.6 | ) | (0.6 | ) | ||||
|
|
|
|
|||||
Net change in cash and cash equivalents |
9.1 | (51.8 | ) | |||||
Cash and cash equivalents, beginning of period |
77.9 | 111.2 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ | 87.0 | $ | 59.4 | ||||
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
F-46
TRANSUNION AND SUBSIDIARIES
Consolidated Statement of Stockholders Equity (Unaudited)
(in millions)
Common Stock |
Paid-In
Capital |
Treasury
Stock |
Accumulated
Deficit |
Accumulated
Other Comprehensive Loss |
Non-controlling
Interests |
Total |
Redeemable
Non- controlling Interests |
|||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||
Balance December 31, 2014 |
147.9 | $ | 1.5 | $ | 1,137.6 | $ | (4.3 | ) | $ | (430.2 | ) | $ | (117.5 | ) | $ | 160.6 | $ | 747.7 | $ | 23.4 | ||||||||||||||||
Net income (loss) |
| | | | (6.6 | ) | | 2.0 | (4.6 | ) | 0.2 | |||||||||||||||||||||||||
Other comprehensive income (loss) |
| | | | | (27.5 | ) | 0.4 | (27.1 | ) | | |||||||||||||||||||||||||
Distributions to noncontrolling interests |
| | | | | | (0.1 | ) | (0.1 | ) | | |||||||||||||||||||||||||
Reclassification of redeemable noncontrolling interest |
| | | | | | 0.2 | 0.2 | (0.2 | ) | ||||||||||||||||||||||||||
Purchase of noncontrolling interests |
| | (0.1 | ) | | | | | (0.1 | ) | (10.4 | ) | ||||||||||||||||||||||||
Excess tax benefit |
| | 0.1 | | | | | 0.1 | | |||||||||||||||||||||||||||
Stock-based compensation |
| | 2.4 | | | | | 2.4 | | |||||||||||||||||||||||||||
Issuance of stock |
| | 0.4 | | | | | 0.4 | | |||||||||||||||||||||||||||
Exercise of stock options |
0.1 | | 0.4 | | | | | 0.4 | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance March 31, 2015 |
148.0 | $ | 1.5 | $ | 1,140.8 | $ | (4.3 | ) | $ | (436.8 | ) | $ | (145.0 | ) | $ | 163.1 | $ | 719.3 | $ | 13.0 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
F-47
TRANSUNION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. Significant Accounting and Reporting Policies
Basis of Presentation
Any reference in this report to the Company, we, us, and our refers to TransUnion (formerly known as TransUnion Holding Company, Inc.) and its direct and indirect subsidiaries.
The accompanying unaudited consolidated financial statements of TransUnion have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation have been included. All significant intercompany transactions and balances have been eliminated. The operating results of TransUnion for the periods presented are not necessarily indicative of the results that may be expected for the full year ending December 31, 2015. These unaudited consolidated financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission (SEC) on March 30, 2015.
Principles of Consolidation
The consolidated financial statements of TransUnion include the accounts of TransUnion and all of its majority-owned or controlled subsidiaries. Investments in unconsolidated entities in which the Company has at least a 20% ownership interest, or where it is able to exercise significant influence, are accounted for using the equity method. Nonmarketable investments in unconsolidated entities in which the Company has less than a 20% ownership interest, or where it is not able to exercise significant influence, are accounted for using the cost method and are periodically reviewed for impairment.
Change in Accounting Estimate
Effective July 1, 2014, we revised the remaining useful lives of certain internal use software, equipment, leasehold improvement and corporate headquarters facility assets to align with the expected completion dates of our strategic initiatives to transform our technology infrastructure and corporate headquarters facility. As a result, depreciation and amortization expense increased by $8.0 million in the three months ended March 31, 2015. The net-of-tax impact of this change decreased net income attributable to TransUnion by $5.2 million, or $0.05 per share for the period.
Subsequent Events
Events and transactions occurring through the date of issuance of the financial statements have been evaluated by management and, when appropriate, recognized or disclosed in the financial statements or notes to the consolidated financial statements.
Recently Adopted Accounting Pronouncements
There are no recent accounting pronouncements that have been adopted.
F-48
Recent Accounting Pronouncement Not Yet Adopted
On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) . This comprehensive guidance will replace all existing revenue recognition guidance and is effective for annual reporting periods beginning after December 15, 2016, and interim periods therein. We are currently assessing the impact this guidance will have on our consolidated financial statements.
On June 19, 2014, the FASB issued ASU No. 2014-12, CompensationStock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period . This update clarifies the accounting for share-based awards with performance targets and is effective for years beginning after December 15, 2015. We are currently assessing the impact this guidance will have on our consolidated financial statements.
On April 7, 2015, the FASB issued ASU No. 2015-03, InterestImputation of Interest (Subtopic 835-30). Simplifying the Presentation of Debt Issuance Costs . The update requires debt issuance costs to be presented in the balance sheet as a direct reduction of the carrying amount of the corresponding debt. This guidance is effective for fiscal years beginning after December 15, 2015, and interim periods therein. Early adoption is permitted. The impact of this guidance will reduce the net carrying value of debt disclosed in our consolidated balance sheet.
2. Fair Value
The following table summarizes financial instruments measured at fair value, on a recurring basis, as of March 31, 2015:
(in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets |
||||||||||||||||
Trading securities |
$ | 11.7 | $ | 7.3 | $ | 4.4 | $ | | ||||||||
Available for sale securities |
3.0 | | 3.0 | | ||||||||||||
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Total |
$ | 14.7 | $ | 7.3 | $ | 7.4 | $ | | ||||||||
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Liabilities |
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Contingent obligation |
$ | (5.4 | ) | $ | | $ | | $ | (5.4 | ) | ||||||
Interest rate swaps |
(2.9 | ) | | (2.9 | ) | | ||||||||||
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Total |
$ | (8.3 | ) | $ | | $ | (2.9 | ) | $ | (5.4 | ) | |||||
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Level 1 instruments consist of exchange-traded mutual funds. Exchange-traded mutual funds are trading securities valued at their current market prices. These securities relate to a nonqualified deferred compensation plan held in trust for the benefit of plan participants.
Level 2 instruments consist of pooled separate accounts, foreign exchange-traded corporate bonds and interest rate swaps. Pooled separate accounts are designated as trading securities valued at net asset values. These securities relate to the nonqualified deferred compensation plan held in trust for the benefit of plan participants. Foreign exchange-traded corporate bonds are available-for-sale securities valued at their current quoted prices. These securities mature between 2027 and 2033. Interest rate swaps fair values are determined using standard valuation models with market-based observable inputs including forward and spot exchange rates and interest rate curves. See Note 8, Debt for additional information regarding interest rate swaps.
F-49
Unrealized gains and losses on trading securities are included in net income, while unrealized gains and losses on available for sale securities are included in other comprehensive income. There were no significant realized or unrealized gains or losses on our securities for any of the periods presented.
Level 3 instruments consist of contingent obligations related to acquisitions with maximum payouts totaling $19.5 million. These obligations are contingent upon meeting certain performance requirements in 2015 and 2016. The fair values of these obligations were determined based on an income approach, using our current expectations of the future earnings of the acquired entities. We assess the fair value of these obligations each reporting period with any changes reflected as gains or losses in selling, general and administrative expenses in the consolidated statements of income. During the first quarter of 2015, we recorded an expense of $0.4 million as a result of changes to the fair value of these obligations.
3. Other Current Assets
Other current assets consisted of the following:
(in millions) |
March 31,
2015 |
December 31,
2014 |
||||||
Deferred income tax assets |
$ | 48.3 | $ | 51.2 | ||||
Prepaid expenses |
48.0 | 43.4 | ||||||
Other investments |
12.3 | 8.8 | ||||||
Deferred financing fees |
8.3 | 8.2 | ||||||
Income taxes receivable |
5.0 | 2.8 | ||||||
Marketable securities |
3.0 | 3.0 | ||||||
Other |
4.7 | 5.3 | ||||||
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Total other current assets |
$ | 129.6 | $ | 122.7 | ||||
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Other investments are non-negotiable certificates of deposit of which the majority are in denominations of greater than $0.1 million. As of March 31, 2015, these investments were recorded at their carrying value.
4. Other Assets
Other assets consisted of the following:
(in millions) |
March 31,
2015 |
December 31,
2014 |
||||||
Investments in affiliated companies |
$ | 52.0 | $ | 52.8 | ||||
Deferred financing fees |
23.7 | 25.8 | ||||||
Other investments |
18.9 | 18.8 | ||||||
Marketable securities |
11.7 | 10.9 | ||||||
Deposits |
2.4 | 11.5 | ||||||
Other |
0.3 | 0.1 | ||||||
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Total other assets |
$ | 109.0 | $ | 119.9 | ||||
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Other investments include non-negotiable certificates of deposit of which the majority are in denominations of greater than $0.1 million. As of March 31, 2015, these investments were recorded at their carrying value.
F-50
5. Investments in Affiliated Companies
Investments in affiliated companies represent our investment in non-consolidated domestic and foreign entities. These entities are in businesses similar to ours, such as credit reporting, credit scoring and credit monitoring services. These investments are included in other assets in the consolidated balance sheets.
We use the equity method to account for investments in affiliates where we have at least a 20% ownership interest or where we are able to exercise significant influence. For these investments, we adjust the carrying value for our proportionate share of the affiliates earnings, losses and distributions, as well as for purchases and sales of our ownership interest.
We use the cost method to account for nonmarketable investments in affiliates where we have less than a 20% ownership interest or where we are not able to exercise significant influence. For these investments, we adjust the carrying value for purchases and sales of our ownership interests.
For all investments, we adjust the carrying value if we determine that an other-than-temporary impairment has occurred. There were no impairments of investments in affiliated companies during the three months ended March 31, 2015 or March 31, 2014.
Investments in affiliated companies consisted of the following:
(in millions) |
March 31,
2015 |
December 31,
2014 |
||||||
Total equity method investments |
$ | 51.1 | $ | 51.9 | ||||
Total cost method investments |
0.9 | 0.9 | ||||||
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Total investments in affiliated companies |
$ | 52.0 | $ | 52.8 | ||||
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Earnings from equity method investments, which are included in other income and expense, and dividends received from equity method investments consisted of the following:
(in millions) |
Three Months
Ended March 31, 2015 |
Three Months
Ended March 31, 2014 |
||||||
Earnings from equity method investments |
$ | 2.3 | $ | 3.6 | ||||
Dividends received from equity method investments |
$ | 1.4 | $ | 0.3 |
There were no dividends received from cost method investments for the three months ended March 31, 2015 and March 31, 2014.
6. Other Current Liabilities
Other current liabilities consisted of the following:
(in millions) |
March 31,
2015 |
December 31,
2014 |
||||||
Accrued payroll |
$ | 42.6 | $ | 71.5 | ||||
Accrued legal and regulatory |
17.8 | 17.8 | ||||||
Accrued interest |
14.3 | 20.5 | ||||||
Accrued employee benefits |
9.4 | 13.0 | ||||||
Deferred revenue |
8.3 | 8.6 | ||||||
Other |
23.0 | 18.0 | ||||||
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Total other current liabilities |
$ | 115.4 | $ | 149.4 | ||||
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F-51
The decrease in accrued payroll was due primarily to the payment of accrued bonuses during the first quarter of 2015.
7. Other Liabilities
Other liabilities consisted of the following:
(in millions) |
March 31,
2015 |
December 31,
2014 |
||||||
Retirement benefits |
$ | 11.8 | $ | 10.8 | ||||
Unrecognized tax benefits |
0.2 | 0.3 | ||||||
Other |
12.0 | 11.0 | ||||||
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Total other liabilities |
$ | 24.0 | $ | 22.1 | ||||
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8. Debt
Debt outstanding consisted of the following:
(in millions) |
March 31,
2015 |
December 31,
2014 |
||||||
Senior secured term loan, payable in quarterly installments through April 9, 2021, including variable interest (4.00% at March 31, 2015) at LIBOR or alternate base rate, plus applicable margin, including original discount of $4.1 million and $4.3 million at March 31, 2015, and December 31, 2014, respectively |
$ | 1,876.9 | $ | 1,881.5 | ||||
Senior secured revolving line of credit, due on April 9, 2019, variable interest (3.75% at March 31, 2015) at LIBOR or alternate base rate, plus applicable margin |
85.0 | 50.0 | ||||||
9.625% Senior NotesSenior unsecured PIK toggle notes, principal due June 15, 2018, semi-annual interest payments, 9.625% fixed interest per annum |
600.0 | 600.0 | ||||||
8.125% Senior NotesSenior unsecured PIK toggle notes, principal due June 15, 2018, semi-annual interest payments, 8.125% fixed interest per annum, including original issuance discount of $1.3 million at March 31, 2015, and December 31, 2014 |
398.7 | 398.7 | ||||||
Other notes payable |
13.8 | 7.4 | ||||||
Capital lease obligations |
2.0 | 2.3 | ||||||
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Total debt |
$ | 2,976.4 | $ | 2,939.9 | ||||
Less short-term debt and current portion of long-term debt |
(112.8 | ) | (74.0 | ) | ||||
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Total long-term debt |
$ | 2,863.6 | $ | 2,865.9 | ||||
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Senior Secured Credit Facility
On June 15, 2010, the Company entered into a senior secured credit facility with various lenders. The senior secured credit facility consists of a senior secured term loan and a senior secured revolving line of credit. On April 9, 2014, we refinanced and amended the senior secured credit facility. The refinancing resulted in an increase in the outstanding senior secured term loan from $1,120.5 million to $1,900.0 million. The amendment, among other things, reduced the interest rate floor and margins, reduced the amount available under the senior secured revolving line of credit from $210.0 million to
F-52
$190.0 million, extended the maturity dates, and changed certain covenant requirements. The additional borrowings were used in part to repay all amounts outstanding under the existing senior secured revolving line of credit and pay fees and expenses associated with the refinancing transaction. On May 9, 2014, the remaining borrowings were used to redeem the entire $645.0 million outstanding balance of the 11.375% notes issued by Trans Union LLC and its wholly-owned subsidiary, TransUnion Financing Corporation, including a prepayment premium and unpaid accrued interest through June 15, 2014. We refer to these transactions collectively as the 2014 Refinancing Transaction.
Interest rates on the refinanced senior secured term loan are based on the London Interbank Offered Rate (LIBOR) unless otherwise elected, and subject to a floor of 1.00%, plus a margin of 2.75% or 3.00% depending on our senior secured net leverage ratio. Under the refinanced senior secured term loan, the Company is required to make principal payments of 0.25% of the refinanced original principal balance at the end of each quarter, with the remaining balance due April 9, 2021. The Company is also required to make additional payments based on excess cash flows, as defined in the agreement, of the prior year. There were no excess cash flows for 2014 and therefore no payment was required in 2015. Depending on the senior secured net leverage ratio for the year, a principal payment of between zero and fifty percent of the excess cash flows will be due the following year.
During the fourth quarter of 2014, the Company borrowed $50.0 million against the senior secured revolving line of credit to partially fund acquisitions made in 2014. In March of 2015, the Company borrowed an additional $35.0 million to complete these funding requirements and replenish cash on hand.
Interest rates on the refinanced senior secured revolving line of credit are based on LIBOR unless otherwise elected, and subject to a floor of 1.00%, plus a margin of 2.50% or 2.75% depending on our senior secured net leverage ratio. There is a 0.375% or 0.50% annual commitment fee, depending on our senior secured net leverage ratio, payable quarterly based on the undrawn portion of the senior secured revolving line of credit. The commitment under the senior secured revolving line of credit expires on April 9, 2019.
With certain exceptions, the obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, including its investment in subsidiaries. The senior secured credit facility contains various restrictions and nonfinancial covenants, along with a senior secured net leverage ratio test. The nonfinancial covenants include restrictions on dividends, investments, dispositions, future borrowings and other specified payments, as well as additional reporting and disclosure requirements. We are in compliance with all of the loan covenants.
On April 30, 2012, we entered into swap agreements that effectively fixed the interest payments on a portion of the then existing senior secured term loan at 2.033%, plus the applicable margin, beginning March 28, 2013. Under the swap agreements, which we had designated as cash flow hedges, we pay a fixed rate of interest of 2.033% and receive a variable rate of interest equal to the greater of 1.50% or the three month LIBOR. The net amount paid or received was recorded as an adjustment to interest expense. As a result of the April 9, 2014, senior secured credit facility amendment, the swaps were no longer expected to be highly effective and no longer qualify for hedge accounting. The total fair value of the swap instruments as of April 9, 2014, of $1.6 million was recorded in other liabilities in the consolidated balance sheet. The corresponding net of tax loss of $1.0 million was recorded in accumulated other comprehensive income and is being amortized to interest expense on a straight-line basis through December 29, 2017, the remaining life of the swaps. Changes in the fair value of the swaps after April 9, 2014, are being recorded in other income and expense. The change in the fair value of the swaps resulted in a loss of $0.9 million for the three-months ended March 31, 2015.
F-53
9.625% Senior Notes
On March 21, 2012, the Company issued $600.0 million principal amount of 9.625%/10.375% senior unsecured PIK toggle notes (9.625% Senior Notes) due June 15, 2018, in a private placement to certain investors. Pursuant to an exchange offer completed in October 2012, these notes were subsequently registered with the SEC. The Company is required to pay interest on the 9.625% Senior Notes in cash unless certain conditions described in the indenture governing the notes are satisfied, in which case the Company will be entitled to pay interest for such period by increasing the principal amount of the notes or by issuing new notes (such increase being referred to as PIK, or paid-in-kind interest) to the extent described in the indenture.
The indenture governing the 9.625% Senior Notes contains nonfinancial covenants that include restrictions on our ability to pay dividends or distributions, repurchase equity, prepay junior debt, make certain investments, incur additional debt, issue certain stock, incur liens on property, merge, consolidate or sell certain assets, enter into transactions with affiliates, and allow to exist certain restrictions on the ability of subsidiaries to pay dividends or make other payments to TransUnion. We are in compliance with all covenants under the indenture.
8.125% Senior Notes
On November 1, 2012, the Company issued $400.0 million principal amount of 8.125%/8.875% senior unsecured PIK toggle notes (8.125% Senior Notes and together with the 9.625% Senior Notes, the senior unsecured PIK toggle notes) due June 15, 2018, at an offering price of 99.5% in a private placement to certain investors. Pursuant to an exchange offer completed in August 2013, these notes were subsequently registered with the SEC. The Company is required to pay interest on the 8.125% Senior Notes in cash unless certain conditions described in the indenture governing the notes are satisfied, in which case the Company will be entitled to pay interest for such period by increasing the principal amount of the notes or by issuing new notes to the extent described in the indenture.
The indenture governing the 8.125% Senior Notes and the nonfinancial covenants are substantially identical to those governing the 9.625% Senior Notes. We are in compliance with all covenants under the indenture.
Fair Value of Debt
The estimated fair values of our 9.625% and 8.125% Senior Notes as of March 31, 2015, were $607.5 million and $412.4 million, respectively, compared with book values of $600.0 million and $398.7 million, respectively. The fair values of these fixed-rate notes, as determined under Level 2 of the fair-value hierarchy, are measured using quoted market prices of these publicly traded securities. The book value of our variable-rate debt approximates its fair value. The estimated fair value of our debt may not represent the actual settlement value due to redemption premiums and prepayment penalties that we may incur in connection with extinguishing our debt before its stated maturity.
F-54
9. Earnings Per Share
Basic earnings per share represents income available to common stockholders divided by the weighted average number of common shares outstanding during the reported period. Diluted earnings per share reflects the effect of the increase in shares outstanding determined by using the treasury stock method for awards issued under our long-term incentive stock plans. There were 10.4 million and 9.9 million anti-dilutive stock-based awards outstanding at March 31, 2015 and March 31, 2014, respectively, including contingently issuable market-based stock options. These awards were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive since we reported a net loss in both periods. Basic and diluted weighted average shares outstanding and earnings per share for the years ended March 31, 2015 and March 31, 2014, were as follows:
(in millions, except per share data) |
Three Months
Ended March 31, 2015 |
Three Months
Ended March 31, 2014 |
||||||
Earnings per sharebasic |
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Earnings available to common shareholders |
$ | (6.6 | ) | $ | (14.7 | ) | ||
Weighted average shares outstanding |
147.9 | 147.0 | ||||||
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Earnings per sharebasic |
$ | (0.04 | ) | $ | (0.10 | ) | ||
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Earnings per sharediluted |
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Earnings available to common shareholders |
$ | (6.6 | ) | $ | (14.7 | ) | ||
Weighted average shares outstanding |
147.9 | 147.0 | ||||||
Dilutive impact of stock based awards |
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Weighted average dilutive shares outstanding |
147.9 | 147.0 | ||||||
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Earnings per sharediluted |
$ | (0.04 | ) | $ | (0.10 | ) | ||
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10. Income Taxes
Effective January 1, 2015, the look-through provision under subpart F of the U.S. Internal Revenue Code expired. Consequently, in both periods presented, we recorded tax expense for the U.S. income tax we would incur in the absence of the look-through rule. This rule requires U.S. corporate shareholders to recognize current U.S. taxable income from passive income, including dividends, earned by certain foreign subsidiaries, regardless of whether that income is remitted to the United States. The look-through rule grants an exception to this recognition for subsidiary passive income attributable to an active business. When it is not in effect, we are required to accrue a tax liability for certain foreign earnings as if those earnings were distributed to the United States.
For the three months ended March 31, 2015, we reported a loss before income taxes and an effective tax rate benefit of 40.1%, which was higher than the 35% U.S. federal statutory rate due primarily to the benefit of state income taxes and the tax rate differential on foreign earnings, partially offset by the expiration of the look-through rule.
For the three months ended March 31, 2014, we reported a loss before income taxes and an effective tax rate benefit of 0.6%, which tax rate was lower than the 35% U.S. federal statutory rate due primarily to the additional tax expense associated with the expiration of the look-through rule, tax expense on unremitted foreign earnings not considered permanently reinvested, increased tax due to foreign dividends and a detrimental change in state tax rates, which primarily affected deferred tax expense.
F-55
The total amount of unrecognized tax benefits was $1.9 million as of both March 31, 2015 and December 31, 2014, and these same amounts would affect the effective tax rate, if recognized. The accrued interest payable for taxes as of March 31, 2015, and December 31, 2014, was $1.0 million and $0.9 million, respectively. There was no significant liability for tax penalties as of March 31, 2015 or December 31, 2015. We are regularly audited by federal, state and foreign taxing authorities. Given the uncertainties inherent in the audit process, it is reasonably possible that certain audits could result in a significant increase or decrease in the total amounts of unrecognized tax benefits. An estimate of the range of the increase or decrease in unrecognized tax benefits due to audit results cannot be made at this time. As of March 31, 2015, tax years 2006 and forward remained open for examination in some state and foreign jurisdictions and tax years 2009 and forward remained open for federal purposes. The Internal Revenue Service issued its final Revenue Agents Report to the Company during December 2014 for its audit of 2009 through 2011 tax years. We evaluated the issues raised and, where appropriate, made adjustments where we determined that we did not have a more likely than not probability of prevailing upon appeal.
11. Operating Segments
Operating segments are businesses for which separate financial information is available and evaluated regularly by the chief operating decision maker in deciding how to allocate resources. This segment financial information is reported on the basis that is used for the internal evaluation of operating performance. The accounting policies of the segments are the same as described in Note 1, Significant Accounting and Reporting Policies included in our Annual Report on Form 10-K for the year ended December 31, 2014.
We evaluate the performance of segments based on revenue and operating income. Intersegment sales and transfers have been eliminated and were not material.
The following is a more detailed description of the three operating segments and the Corporate unit, which provides support services to each operating segment:
U.S. Information Services
U.S. Information Services (USIS) provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. These businesses use our services to acquire new customers, assess consumer ability to pay for services, identify cross selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud. These core capabilities and delivery platforms in our USIS segment allow us to serve a broad set of customers and business issues. We offer our services to customers in the financial services, insurance, healthcare and other industries.
International
The International segment provides services similar to our USIS segment to businesses in select regions outside the United States. Depending on the maturity of the credit economy in each country, these services may include credit reports, analytics and decisioning services and other value-added risk management services. In addition, we have insurance, business and automotive databases in select geographies. These services are offered to customers in a number of industries including financial services, insurance, automotive, collections and communications, and are delivered through both direct and indirect channels. The International segment also provides consumer services similar to those offered by our Consumer Interactive segment that help consumers proactively manage their personal finances.
F-56
Consumer Interactive
Consumer Interactive offers solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include credit reports and scores, credit monitoring, fraud protection and resolution and financial management. Our products are provided through user friendly online and mobile interfaces and supported by educational content and customer support. Our Consumer Interactive segment serves over 35 million consumers through both direct and indirect channels.
Corporate
Corporate provides shared services for the Company and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the operating segments remain in Corporate. These costs are typically for enterprise-level functions and are primarily administrative in nature.
Selected financial information consisted of the following:
Three Months Ended
March 31, 2015 |
Three Months Ended
March 31, 2014 |
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(in millions) | Revenue |
Operating
income (loss) |
Revenue |
Operating
income (loss) |
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USIS |
$ | 222.2 | $ | 31.3 | $ | 194.2 | $ | 32.4 | ||||||||
International |
62.9 | 2.4 | 54.1 | 2.2 | ||||||||||||
Consumer Interactive |
68.0 | 23.6 | 55.1 | 19.0 | ||||||||||||
Corporate |
| (20.8 | ) | | (18.8 | ) | ||||||||||
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Total |
$ | 353.1 | $ | 36.5 | $ | 303.4 | $ | 34.8 | ||||||||
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A reconciliation of operating income to income (loss) before income taxes for the periods ended as presented was as follows:
(in millions) |
Three Months
Ended March 31, 2015 |
Three Months
Ended March 31, 2014 |
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Operating income from segments |
$ | 36.5 | $ | 34.8 | ||||
Non-operating income and expense |
(43.9 | ) | (48.4 | ) | ||||
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Income (loss) before income taxes |
$ | (7.4 | ) | $ | (13.6 | ) | ||
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Earnings from equity method investments included in other income and expense, net, for the periods presented were as follows:
(in millions) |
Three Months
Ended March 31, 2015 |
Three Months
Ended March 31, 2014 |
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USIS |
$ | 0.4 | $ | 0.3 | ||||
International |
1.9 | 3.3 | ||||||
Consumer Interactive |
| | ||||||
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Total |
$ | 2.3 | $ | 3.6 | ||||
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12. Subsequent Event
On June 5, 2015, the Companys Board of Directors approved a 1.333 to 1 split of the Companys common stock, including outstanding options to purchase common stock, effective June 5, 2015. All share and per share information presented in the consolidated financial statements and related footnotes have been adjusted to reflect the stock split.
On June 11, 2015, the Companys Board of Directors approved an increase in the common shares authorized to 1 billion and authorized the issuance of up to 100 million preferred shares.
F-57
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
Trans Union de México, S.A.,
Sociedad de Información Crediticia
We have audited the accompanying consolidated financial statements of Trans Union de México, S.A., Sociedad de Información Crediticia, and Subsidiary, which comprise the consolidated statements of financial position as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2014, 2013 and 2012, and the related notes to the consolidated financial statements.
Managements responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with the International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditors responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trans Union de México, S.A., Sociedad de Información Crediticia, and Subsidiary at December 31, 2014 and 2013, and the consolidated result of their operations and their cash flows for the years ended December 31, 2014, 2013 and 2012, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Mancera, S.C. A member practice of Ernst and Young Global Limited |
/s/Jorge Senties |
Jorge Senties |
Mexico City, Mexico
March 25, 2015
F-58
SOCIEDAD DE INFORMACIÓN CREDITICIA AND SUBSIDIARY
Consolidated Statements of Financial Position
(Amounts in thousands of Mexican pesos)
(Notes 1 and 2)
At December 31, | ||||||||
2014 | 2013 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents (Note 3) |
Ps. 559,701 | Ps. 469,967 | ||||||
Debt securities at fair value through profit or loss |
| 15,098 | ||||||
Accounts receivable: |
||||||||
Trade (Note 12) |
48,125 | 44,642 | ||||||
Related parties (Note 4) |
79,539 | 52,380 | ||||||
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127,664 | 97,022 | |||||||
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Prepaid expenses |
11,405 | 3,851 | ||||||
Recoverable taxes and others |
| 2,863 | ||||||
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698,770 | 588,801 | |||||||
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|
|||||
Non-current assets: |
||||||||
Property, furniture and equipment, net (Note 5) |
117,473 | 101,492 | ||||||
Deferred income tax (Note 9) |
66,557 | 48,903 | ||||||
Other assets |
462 | 590 | ||||||
|
|
|
|
|||||
184,492 | 150,985 | |||||||
|
|
|
|
|||||
Total assets |
Ps. 883,262 | Ps. 739,786 | ||||||
|
|
|
|
|||||
Liabilities and equity |
||||||||
Short-term liabilities: |
||||||||
Accrued liabilities and other taxes payable (Note 6) |
Ps. 169,243 | Ps. 153,179 | ||||||
Income tax payable (Note 9) |
39,955 | 7,247 | ||||||
Related parties (Note 4) |
41,130 | 24,013 | ||||||
Advances from customers |
71,399 | 45,808 | ||||||
Dividends payable |
2,464 | 3,387 | ||||||
|
|
|
|
|||||
Total current liabilities |
324,191 | 233,634 | ||||||
Long term liabilities: |
||||||||
Employee retirement benefits (Note 2k) |
6,833 | 5,446 | ||||||
|
|
|
|
|||||
Total liabilities |
331,024 | 239,080 | ||||||
|
|
|
|
|||||
Equity (Note 7): |
||||||||
Capital stock |
16,000 | 16,000 | ||||||
Legal reserve |
3,497 | 3,497 | ||||||
Retained earnings |
540,505 | 488,080 | ||||||
Accumulated other comprehensive income (loss) |
(8,210 | ) | (7,239 | ) | ||||
|
|
|
|
|||||
Equity attributable to equity holders of the parent |
551,792 | 500,338 | ||||||
Non-controlling interest |
446 | 368 | ||||||
|
|
|
|
|||||
Total equity |
552,238 | 500,706 | ||||||
|
|
|
|
|||||
Total liabilities and equity |
Ps. 883,262 | Ps. 739,786 | ||||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-59
SOCIEDAD DE INFORMACIÓN CREDITICIA AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Amounts in thousands of Mexican pesos)
(Notes 1 and 2)
For the years ended
December 31, |
||||||||||||
2014 | 2013 | 2012 | ||||||||||
Operating revenues: |
||||||||||||
Sale of credit reports, net |
Ps. 1,003,016 | Ps. 894,646 | Ps. 875,108 | |||||||||
Other operating revenues |
47,856 | 61,941 | 51,042 | |||||||||
|
|
|
|
|
|
|||||||
1,050,872 | 956,587 | 926,150 | ||||||||||
Operating and administrative expenses (Note 8) |
507,291 | 430,042 | 453,948 | |||||||||
|
|
|
|
|
|
|||||||
Operating income |
543,581 | 526,545 | 472,202 | |||||||||
|
|
|
|
|
|
|||||||
Finance income |
14,833 | 18,530 | 18,605 | |||||||||
Exchange gain (loss), net |
(1,394 | ) | 945 | 2,463 | ||||||||
|
|
|
|
|
|
|||||||
13,439 | 19,475 | 21,068 | ||||||||||
|
|
|
|
|
|
|||||||
Income before income tax |
557,020 | 546,020 | 493,270 | |||||||||
Income tax (Note 9) |
166,716 | 157,073 | 148,076 | |||||||||
|
|
|
|
|
|
|||||||
Net income |
390,304 | 388,947 | 345,194 | |||||||||
Other comprehensive income not to be reclassified to profit or loss in subsequent periods: |
||||||||||||
Re-measurement of actuarial losses on defined employee retirement benefit plan |
(1,387 | ) | (4,258 | ) | | |||||||
Income tax effect |
416 | 1,277 | | |||||||||
|
|
|
|
|
|
|||||||
(971 | ) | (2,981 | ) | | ||||||||
|
|
|
|
|
|
|||||||
Total comprehensive income for the year |
Ps. 389,333 | Ps. 385,966 | Ps. 345,194 | |||||||||
|
|
|
|
|
|
|||||||
Comprehensive income for the year attributable to: |
||||||||||||
Controlling interest |
Ps. 389,255 | Ps. 385,897 | Ps. 345,107 | |||||||||
Non-controlling interest |
78 | 69 | 87 | |||||||||
|
|
|
|
|
|
|||||||
Ps. 389,333 | Ps. 385,966 | Ps. 345,194 | ||||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-60
SOCIEDAD DE INFORMACIÓN CREDITICIA AND SUBSIDIARY
Consolidated Statements of Changes in Equity
For the Years Ended December 31, 2014, 2013 and 2012
(Amounts in thousands of Mexican pesos)
(Notes 1, 2 and 7)
Attributable to the equity holders of the parent | ||||||||||||||||||||||||||||
Capital
stock |
Legal
reserve |
Retained
earnings |
Accumulated
other comprehensive income (loss) |
Total equity
attributable to equity holders of the parent |
Non-
controlling interest |
Total equity | ||||||||||||||||||||||
Balance at December 31, 2011 |
Ps. | 16,000 | Ps. | 3,497 | Ps. | 412,859 | Ps. | | Ps. | 432,356 | Ps. | 212 | Ps. | 432,568 | ||||||||||||||
Dividends paid |
(317,737 | ) | (317,737 | ) | (317,737 | ) | ||||||||||||||||||||||
Comprehensive income for the year |
345,107 | | 345,107 | 87 | 345,194 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2012 |
16,000 | 3,497 | 440,229 | | 459,726 | 299 | 460,025 | |||||||||||||||||||||
Adoption of IAS 19(R) (Note 2k) |
4,258 | (4,258 | ) | | | |||||||||||||||||||||||
Dividends paid |
(345,285 | ) | (345,285 | ) | (345,285 | ) | ||||||||||||||||||||||
Comprehensive income for the year |
388,878 | (2,981 | ) | 385,897 | 69 | 385,966 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2013 |
16,000 | 3,497 | 488,080 | (7,239 | ) | 500,338 | 368 | 500,706 | ||||||||||||||||||||
Dividends paid |
(337,801 | ) | (337,801 | ) | (337,801 | ) | ||||||||||||||||||||||
Comprehensive income for the year |
390,226 | (971 | ) | 389,255 | 78 | 389,333 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2014 |
PS. | 16,000 | Ps. | 3,497 | Ps. | 540,505 | Ps. | (8,210 | ) | Ps. | 551,792 | Ps. | 446 | Ps. | 552,238 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-61
SOCIEDAD DE INFORMACIÓN CREDITICIA AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Amounts in thousands of Mexican pesos)
(Notes 1 and 2)
For the years ended
December 31 |
||||||||||||
2014 | 2013 | 2012 | ||||||||||
Operating activities |
||||||||||||
Income before income tax |
Ps. 557,020 | Ps. 546,020 | Ps. 493,270 | |||||||||
Items not requiring the use of cash: |
||||||||||||
Depreciation (Note 5b) |
37,327 | 31,725 | 24,256 | |||||||||
Employee retirement benefits (Note 2k) |
2,455 | 1,730 | 1,191 | |||||||||
Finance income |
(28,102 | ) | (25,368 | ) | (24,234 | ) | ||||||
|
|
|
|
|
|
|||||||
568,700 | 554,107 | 494,483 | ||||||||||
Changes in operating assets and liabilities: |
||||||||||||
Interest received |
28,102 | 25,368 | 24,234 | |||||||||
Debt securities at fair value through profit or loss |
15,098 | (80 | ) | 89 | ||||||||
Trade receivables |
(3,483 | ) | (9,675 | ) | 4,232 | |||||||
Related parties, net |
(10,042 | ) | (18,365 | ) | 25,617 | |||||||
Prepaid expenses |
(7,554 | ) | (730 | ) | 1,434 | |||||||
Other assets |
2,467 | 105 | 314 | |||||||||
Accrued liabilities and other taxes payable |
16,063 | (20,815 | ) | 25,210 | ||||||||
Income tax paid |
(151,245 | ) | (158,636 | ) | (131,501 | ) | ||||||
Advances from customers |
25,591 | 41,842 | 2,593 | |||||||||
Employee retirement benefits paid |
(1,068 | ) | (306 | ) | (374 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash flow provided by operating activities |
482,629 | 412,815 | 446,331 | |||||||||
|
|
|
|
|
|
|||||||
Investing activities |
||||||||||||
Investments in property, furniture and equipment (Note 5b) |
(55,094 | ) | (23,975 | ) | (26,564 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash flow used in investing activities |
(55,094 | ) | (23,975 | ) | (26,564 | ) | ||||||
|
|
|
|
|
|
|||||||
Financing activities |
||||||||||||
Dividends paid (Note 7c) |
(337,801 | ) | (345,285 | ) | (317,737 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash flow used in financing activities |
(337,801 | ) | (345,285 | ) | (317,737 | ) | ||||||
|
|
|
|
|
|
|||||||
Net increase in cash and cash equivalents |
89,734 | 43,555 | 102,030 | |||||||||
Cash and cash equivalents at beginning of year |
469,967 | 426,412 | 324,382 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents at end of year |
Ps. 559,701 | Ps. 469,967 | Ps. 426,412 | |||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-62
SOCIEDAD DE INFORMACIÓN CREDITICIA AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Amounts in thousands of Mexican pesos)
1. Description of the Business
Trans Union de México, S.A., Sociedad de Información Crediticia (the Company) was incorporated in Mexico on October 4, 1995 and is primarily engaged in providing credit information services. Specifically, the Company compiles, stores, processes, analyzes and sells information related to the credit histories of individuals and it provides other credit information services related to its database. The Company operations are governed by the Mexican Law Regulating Credit Bureaus.
The registered office is located at Jaime Balmes 8, 10 th floor, in Mexico City.
Trans Union LLC (a U.S. company) is the Companys largest shareholder (25.69% equity interest), and the remaining shareholders are Mexican credit institutions, none of whom hold more than an 18% equity interest in the Company. These shareholders generate a significant portion of the Companys revenue (Note 4 and Note 12).
At December 31, 2014 and 2013, the Company holds a 98% equity interest in Servicios y Asesoría SCOBC, S.A. de C.V. (the Subsidiary), who provides the Company with professional services and was incorporated in Mexico on October 22, 2007.
On March 25, 2015, the accompanying consolidated financial statements and these notes were authorized for its issuance by the Companys Chief Executive Officer and Chief Finance Officer. Subsequent events have been considered through that date.
2. Basis of Preparation of the Financial Statements and Summary of Significant Accounting Policies
a) Basis of preparation
The accompanying financial statements have been prepared in conformity with International Financing Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).
The accompanying financial statements were prepared on an historical-cost basis except for the investments in debt securities which have been measured at fair value.
The statement of profit or loss has been prepared by nature as the Company believes that such presentation is most reliable and relevant to the readers of the consolidated financial statements.
b) Consolidation and investment in subsidiary
The accompanying consolidated financial statements include the financial information of the Company and that of its Subsidiary.
The Subsidiarys financial statements have been prepared for the same accounting period and following the same accounting policies as those of the Company. The intercompany balances, equity investments and transactions were eliminated in the consolidation process.
F-63
Non-controlling interest represents the equity interest in the operating results and net assets of the Subsidiary that does not pertain to the Company. Non-controlling interest is presented as a separate component of consolidated shareholders equity.
c) Current versus non-current classification
The Company presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is classified as current when it is:
| Expected to be realized or intended to sold or consumed in normal operating cycle of the Company. |
| Expected to be realized within twelve months after the reporting period, or |
| Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. |
All other assets are classified as non-current. A liability is classified as current when:
| It is expected to be settled in normal operating cycle of the Company. |
| It is due to be settled within twelve months after the reporting period, or |
| There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. |
The Company classifies all other liabilities as non-current.
Deferred income tax assets are classified as non-current.
d) Recognition of revenues
Service revenues are recognized at the time the Company renders the credit information services, provided that such revenues can be reliably measured, it is likely that the Company will receive economic benefits from the transaction, the stage of completion of the transaction can be reliably measured and it is highly probable that it will completed, regardless of when the related fees are actually collected.
Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements, has pricing latitude and is also exposed to credit risks.
Revenue from sale of credit reports
Since the Company compiles, stores, processes, analyzes and sells information related to the credit histories of individuals, it provides credit information services related to its database through sale of credit reports. The Company has developed several types of credit reports based on the characteristics and risk profile of its credit database. The Companys credit information database is maintained and updated based on the exchange of credit information with its clients (credit institutions and the financial and non-financial entities) based on the corresponding service agreements.
Trade receivables are non-interest bearing and are generally on terms of 30 to 90 days.
F-64
Sales discounts
The Company grants discounts to its customers based on the number of reports they order, quality of credit information exchanged and timely payment. The discounts require authorization from top management. Such discounts are reflected as part of the caption Sale of credit reports and are accounted for on a monthly basis based on the Companys discount policies.
Sales tax
The Company recognizes its revenues net of value added tax. The net amount of value added tax payable to the Mexican Tax Authority is recognized in the statement of financial position under the caption Accrued liabilities and other taxes payable.
e) Operating and administrative expenses
Operating and administrative expenses are those costs related to maintaining, developing and managing the databases used to generate the Companys credit information. These expenses consist primarily of salaries and wages, annual bonuses, social security expenses, professional fees, royalties, software licenses, equipment depreciation and general administrative expenses.
f) Accounting judgments, estimates and assumptions
The preparation of the Companys consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
- Allowance for doubtful accounts
The Companys policy is to evaluate the age of its accounts receivable and their collectability, creating an allowance for doubtful accounts for each customer as needed. This evaluation is made based on the type of client, recurrence of solicitation of credit services, age of the account receivable, collection experience, among others.
At December 31, 2014 the allowance for doubtful accounts aggregates Ps.471. Whereas, at December 31, 2013, the Company did not record any allowance. At December 31, 2014 and 2013 most of the Companys accounts receivable were collected within thirty days and management did not identify any potential risks that would reduce the certainty of their recovery. See Note 12.
- Defined benefit plans
The cost of the defined benefit pension plan and the present value of the pension obligation and seniority premiums are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases.
F-65
Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
- Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flows model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
- Taxes
Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deferred tax assets will be applied; management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. At December 31, 2014 and 2013, management concluded that is probable that deferred tax assets will be recoverable; as a result, management deems that a valuation allowance is not necessary.
- Property, furniture and equipment
Useful lives and methods of depreciation of property, furniture and equipment are reviewed each financial year end and adjusted prospectively, if appropriate. Those estimates are disclosed in Note 2i.
g) Cash and cash equivalents
Cash and cash equivalents principally consist of bank deposits and highly liquid investments with purchased maturities of less than three months.
h) Financial assets
- Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Loans and receivables
This category is the most relevant to the Company. Loans and receivables are non-derivative financial assets with fixed payments that are not quoted in an active market. After initial measurement, such financial assets are adjusted for any impairment losses. This category generally applies to trade and other receivables. For more information on receivables, refer to Note 12.
F-66
As of December 31, 2014, the Company does not hold debt securities classified as at fair value through profit or loss. As of December 31, 2013, the Company invested solely in debt securities, which are carried in the statement of financial position at fair value with net changes in fair value presented as a component of finance income in the statement of comprehensive income.
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. During the years ended December 31, 2014 and 2013, the Company did not invest in financial instruments for trading.
For the years ended December 31, 2014 and 2013, the Company does not have any derivative financial instruments.
- Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: 1) in the principal market for the asset or liability, or 2) in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
At December 31, 2014 and 2013, all investments in debt securities have been valuated using quoted prices in active markets (Level 1).
F-67
i) Long-lived assets
- Property, furniture and equipment
Property, furniture and equipment are initially recorded at acquisition cost and depreciation is computed using the straight-line method based on the estimated useful lives of the related assets and at the following annual depreciation rates:
Building |
2.5% | |
Adaptations and property and leasehold improvements |
10% and 20% | |
Computer equipment |
30% | |
Automotive equipment |
25% | |
Furniture and equipment |
10% | |
Communication equipment |
10% |
In the normal course of business, the Company purchases various software licenses from third parties to facilitate the use and upkeep of its purchased and leased computer systems, as well as its credit tracking databases. Such licenses are for a period of 12 months or less, and most are paid for monthly although certain licenses are paid for on an annual basis. The Company follows an accounting policy of expensing all such license purchases as they are incurred as it believes that such approach represents a systematic and rational approach towards its financial reporting under IFRS.
- Impairment
The carrying value of the Companys long-term fixed assets is reviewed whenever there are indicators of impairment in the value of such assets. When the recoverable amount of an asset, which is the higher of its fair value less cost of disposal and its value in use (the present value of future cash flows that the Company expects the asset to generate) is less than its carrying value, the difference is recognized as an impairment loss. For the years ended December 31, 2014 and 2013, there were no indicators of impairment in such assets.
j) Accrued liabilities, provisions, contingent assets and liabilities and commitments
Accrued liabilities are recognized whenever (i) the Company has current obligations (legal or constructive) resulting from a past event, (ii) when it is probable the obligation will give rise to a future cash disbursement for its settlement, and (iii) the amount of the obligation can be reasonably estimated.
Contingent liabilities are recognized only when it is probable they will give rise to a future cash disbursement for their settlement. Also, commitments are only recognized when they will generate a loss.
k) Employee benefits
Employee retirement benefits
The Company has a defined benefit pension plan that covers all of its employees, which is determined based on the employees compensations in their final year of service, the number of years they have worked for the Company, and their age at retirement.
Labor obligations related to retirement benefits are presented net of the corresponding asset, which is carried out at fair value.
Seniority premiums are paid to workers as required under Mexican labor law.
The Company recognizes the liability for seniority premiums and termination benefits based on independent actuarial computations using the projected unit credit method and nominal hypotheses. The latest actuarial computation was prepared in December 2014.
F-68
Re-measurements, comprising of actuarial gains and losses, excluding net interest and the return on plan assets (excluding net interest), are recognized immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income (OCI) in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
The net interest on benefit obligation is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation under operating and administrative expenses in the consolidated statement of comprehensive income:
| Service costs comprising current service costs, past-service costs, gains and losses on curtailments and no-routine settlements. |
| Net interest expense or income. |
The Company calculates termination benefit costs based on Mexican Labor Law and recognizes them in operating results when incurred.
The Company annually evaluates the reasonableness of the assumptions used in its employee benefits computations. Actuarial calculations, as well as the associated cost for the period, were determined using the following long-term assumptions:
2014 | 2013 | |||||||
Rate of salary increase |
6.09 | % | 5.88 | % | ||||
Expected working lifetime |
18.45 | 18.57 | ||||||
Discount rate used to calculate the defined benefit obligation |
7.00 | % | 7.50 | % | ||||
Minimum wage increase rate |
3.76 | % | 3.76 | % | ||||
Expected return on plan assets |
7.00 | % | 7.5 | % | ||||
Long-term inflation rate |
3.50 | % | 3.50 | % |
Adoption of IAS 19R
On January 1, 2013, the Company adopted IAS 19 Employee benefits (Revised), this Standard includes a number of amendments to the accounting for defined benefit plans, including actuarial gains and losses that are now recognized in Other Comprehensive Income and permanently excluded from profit and loss. Expected returns on plan assets are no longer recognized in profit or loss; instead, there is a requirement to recognize interest on the net defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit obligation and; Unvested past service costs are now recognized in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination costs are recognized.
The adoption by the Company of IAS 19(R) generated an effect of Ps.1,149 over the Companys net liability balance of the defined benefit plans at December 31, 2013 and the accumulated OCI at such date resulted Ps.4,258. Based on this (effects of the adoption being insignificant in relation with the financial statements taken as a whole), the Company decided to recognize such effects prospectively, rather than retrospectively.
Year end balances
At December 31, 2014 and 2013, the defined benefit obligations are Ps.31,863 and Ps.26,043, respectively, and the plan assets are Ps.24,835 and Ps.20,597, respectively. Plan assets consist of government debt, and were measured using a Level 1 fair value concept. None of the plan assets were invested in securities of related parties.
F-69
For the years ended December 31, 2014, 2013 and 2012 the corresponding cost of such defined benefits was Ps.2,455, Ps.1,730 and Ps.1,191, respectively.
Employee profit sharing
Employee profit sharing is basically computed at 10% rate of the Companys taxable income, except for depreciation of historical rather than restated values and other effects of inflation which are excluded. Employee profit sharing is presented in the statement of income as an ordinary expense.
Compensated absences
The costs related to compensated absences, such as vacations, are recognized on cumulative basis creating the respective provision.
l) Foreign currencies
The Companys functional currency is the Mexican peso. Transactions in foreign currency are recorded at the prevailing exchange rate on the day of the related transactions. Foreign currency denominated assets and liabilities are valued at the prevailing exchange rate at the statement of financial position date. Exchange differences from the transaction date to the time foreign currency denominated assets and liabilities are settled, as well as those arising from the translation of foreign currency denominated balances at the statement of financial position date, are charged or credited to the consolidated statement of comprehensive income.
m) Comprehensive income
The comprehensive income shown in the consolidated statement of comprehensive income consists of the Companys net income or loss for the year, plus re-measurement gains and losses arising on defined benefit pension plans.
n) Income tax
Current-year income tax is recognized as a short-term liability, net of prepayments made during the year.
Deferred income tax is recognized using the asset and liability method. Under this method, deferred taxes are recognized on all temporary differences between financial reporting and tax values of assets and liabilities, applying the enacted income tax rate or flat-rate business tax rate effective as of the statement of financial position date, or the enacted rate at the statement of financial position date that will be in effect when the temporary differences giving rise to deferred tax assets and liabilities are expected to be recovered or settled.
o) New accounting pronouncements
IFRS 9 Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before February 1, 2015. The Company has yet to determine the impact that the adoption of this new standard might have on its consolidated financial statements.
F-70
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognize such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. This amendment is effective for annual periods beginning on or after July 1, 2014. The Company has yet to determine the impact that the adoption of this new standard might have on its consolidated financial statements.
IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets
The amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that the asset may be revalued by reference to observable data on either the gross or the net carrying amount.
IAS 24 Related Party Disclosures
The amendment is applied retrospectively and clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services.
IFRS 13 Fair Value Measurement
The amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of IFRS 9 (or IAS 39, as applicable). The exception permits an entity to measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position for a particular risk exposure or paid to transfer a net short position for a particular risk exposure.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue.
The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after January 1, 2017 with early adoption permitted. The Company is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date. The Company has yet to determine the impact that the adoption of this new standard might have on its consolidated financial statements.
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortization
The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based
F-71
method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets. The amendments are effective prospectively for annual periods beginning on or after January 1, 2016, with early adoption permitted. The Company has yet to determine the impact that the adoption of this new standard might have on its consolidated financial statements.
Annual Improvements 2010-2012 Cycle
In the 2010-2012 annual improvements cycle, the IASB issued seven amendments to six standards, which included an amendment to IFRS 13 Fair Value Measurement. The amendment to IFRS 13 is effective immediately and, thus, for periods beginning at 1 January 2014, and it clarifies in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. This amendment to IFRS 13 has no impact on the Company.
Annual Improvements 2011-2013 Cycle
In the 2011-2013 annual improvements cycle, the IASB issued four amendments to four standards, which included an amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards. The amendment to IFRS 1 is effective immediately and, thus, for periods beginning at 1 January 2014, and clarifies in the Basis for Conclusions that an entity may choose to apply either a current standard or a new standard that is not yet mandatory, but permits early application, provided either standard is applied consistently throughout the periods presented in the entitys first IFRS financial statements. This amendment to IFRS 1 has no impact on the Company, since the Company is an existing IFRS preparer.
3. Cash and Cash Equivalents
An analysis of this caption at December 31, 2014 and 2013 is as follows:
2014 | 2013 | |||||||
Cash and cash in banks |
Ps. 13,074 | Ps. 13,830 | ||||||
Cash equivalents: |
||||||||
Security repurchase agreements(a) |
546,627 | 456,137 | ||||||
|
|
|
|
|||||
Ps. 559,701 | Ps. 469,967 | |||||||
|
|
|
|
a) | At December 31, 2014 and 2013, these investments have maturities of less than thirty days and annual rates of return of 3.18% and 3.85%, respectively. |
F-72
4. Related Parties
An analysis of balances due from and to related parties (shareholders) at December 31, 2014 and 2013, is as follows:
2014 | 2013 | |||||||
Accounts receivables from shareholders (credit institutions): |
||||||||
Credit information services |
Ps. | 79,539 | Ps. | 52,380 | ||||
|
|
|
|
|||||
Payables to technological shareholders: |
||||||||
Technical assistance and royalties: |
||||||||
Trans Union LLC |
Ps. | 29,220 | Ps. | 15,901 | ||||
Trans Union Crif |
4,014 | 3,152 | ||||||
Fair Isaac |
605 | | ||||||
|
|
|
|
|||||
33,839 | 19,053 | |||||||
Other accounts payable to shareholders |
7,291 | 4,960 | ||||||
|
|
|
|
|||||
Ps. | 41,130 | Ps. | 24,013 | |||||
|
|
|
|
Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the years ended December 31, 2014, 2013 and 2012, the Company has not recorded any impairment of receivables relating to amounts owed by related parties.
An analysis of transactions carried out with related parties at December 31, 2014, 2013 and 2012 is as follows:
2014 | 2013 | 2012 | ||||||||||
Revenues: |
||||||||||||
Sale of credit reports (Shareholderscredit institutions) |
Ps. | 585,774 | Ps. | 535,583 | Ps. | 499,316 | ||||||
Reimbursed expenses(a) |
46,303 | 44,098 | 42,624 | |||||||||
|
|
|
|
|
|
|||||||
Ps. | 632,077 | Ps. | 579,681 | Ps. | 541,940 | |||||||
|
|
|
|
|
|
|||||||
Expenses: |
||||||||||||
Royalties(b) |
Ps. | 47,049 | Ps. | 58,441 | Ps. | 59,493 | ||||||
Technical assistance(b) |
15,537 | 2,366 | | |||||||||
|
|
|
|
|
|
|||||||
Ps. | 62,586 | Ps. | 60,807 | Ps. | 59,493 | |||||||
|
|
|
|
|
|
(a) | For the years ended December 31, 2014, 2013 and 2012, reimbursed expenses relate to administrative and operating services provided to Dun & Bradstreet, S.A., Credit Bureau (this entity is considered as an affiliate because it has shareholders in common). The amount is accounted for in the Other operating revenue caption in the statements of comprehensive income. |
(b) | Royalties and technical assistance correspond to payments made for the use and development of specialized credit reports. Primary, these payments are made to Trans Union International Inc. and Trans Union LLC and are based on specific percentages over the sale of credit reports (by type). The Agreement is for an indefinite term. |
F-73
5. Property, Furniture and Equipment, net
a) An analysis of this caption at December 31, 2014 and 2013 is as follows:
At December 31 | ||||||||
2014 | 2013 | |||||||
Land |
Ps. 8,642 | Ps. 8,642 | ||||||
Buildings, adaptations and property and leasehold improvements |
75,999 | 63,507 | ||||||
Computer equipment |
199,322 | 167,391 | ||||||
Furniture and equipment |
11,127 | 11,215 | ||||||
Communication equipment |
19,755 | 18,944 | ||||||
Automotive equipment |
4,690 | 4,524 | ||||||
|
|
|
|
|||||
319,535 | 274,223 | |||||||
Accumulated depreciation |
(202,062 | ) | (172,731 | ) | ||||
|
|
|
|
|||||
Ps. 117,473 | Ps. 101,492 | |||||||
|
|
|
|
b) An analysis of the changes in the Companys property, furniture and equipment for the years ended December 31, 2014, 2013 and 2012 is as follows:
Balance at
December 31, 2013 |
Additions | Retirements |
Depreciation
of the year |
Balance at
December 31, 2014 |
||||||||||||||||
Investment |
||||||||||||||||||||
Land |
Ps. | 8,642 | Ps. | 8,642 | ||||||||||||||||
Building, adaptations and leasehold improvements |
63,507 | Ps. | 12,913 | Ps. | (421 | ) | 75,999 | |||||||||||||
Computer equipment |
167,391 | 38,264 | (6,333 | ) | 199,322 | |||||||||||||||
Furniture and equipment |
11,215 | 87 | (175 | ) | 11,127 | |||||||||||||||
Communication equipment |
18,944 | 2,136 | (1,325 | ) | 19,755 | |||||||||||||||
Automotive equipment |
4,524 | 1,694 | (1,528 | ) | 4,690 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
274,223 | 55,094 | (9,782 | ) | 319,535 | ||||||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||
Accumulated depreciation |
||||||||||||||||||||
Buildings, adaptations and property and leasehold improvements |
(22,365 | ) | 421 | (8,269 | ) | (30,213 | ) | |||||||||||||
Computer equipment |
(132,864 | ) | 5,023 | (25,456 | ) | (153,297 | ) | |||||||||||||
Furniture and equipment |
(8,118 | ) | 144 | (865 | ) | (8,839 | ) | |||||||||||||
Communication equipment |
(7,090 | ) | 1,215 | (1,771 | ) | (7,646 | ) | |||||||||||||
Automotive equipment |
(2,294 | ) | 1,193 | (966 | ) | (2,067 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(172,731 | ) | 7,996 | (37,327 | ) | (202,062 | ) | ||||||||||||||
|
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|
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|
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|
|||||||||||
Ps. | 101,492 | Ps. | 55,094 | Ps. | (1,786 | ) | Ps. | (37,327 | ) | Ps. | 117,473 | |||||||||
|
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|
F-74
The Company does not own many of its computer systems, but rather pays the use of such systems from third parties. This includes systems owned by TransUnion which are used for credit report processing purposes. The Company makes payments monthly for the use of such systems. Amounts paid to technological shareholders are disclosed in Note 4 above.
F-75
6. Accrued Liabilities and Other Taxes Payable
An analysis of this caption at December 31, 2014 and 2013 is as follows:
2014 | 2013 | |||||||
Accrued liabilities: |
||||||||
Suppliers and creditors |
Ps. | 18,984 | Ps. | 29,143 | ||||
Employee compensation and other benefits |
62,969 | 19,888 | ||||||
Consulting, legal and other fees |
35,870 | 38,829 | ||||||
Maintenance and licenses |
3,177 | 26,526 | ||||||
Other |
2,937 | 1,913 | ||||||
|
|
|
|
|||||
123,937 | 116,299 | |||||||
|
|
|
|
|||||
Taxes and others: |
||||||||
Value added tax |
36,921 | 20,827 | ||||||
Social security contributions |
2,982 | 2,763 | ||||||
Income tax withheld from salaries |
4,386 | 9,224 | ||||||
Other taxes and withholdings |
1,017 | 4,066 | ||||||
|
|
|
|
|||||
45,306 | 36,880 | |||||||
|
|
|
|
|||||
Ps. | 169,243 | Ps. | 153,179 | |||||
|
|
|
|
7. Equity
a) Capital stock
The Companys capital stock is represented by 19,466,321 common registered shares, issued and outstanding, with no par value, as outlined below. The shares are divided into two series: series A shares (70% shares) representing fixed minimum capital, and series B shares (30% shares) representing the variable portion of capital stock.
Each ordinary share of the Series A and B entitles the holder to one vote at general shareholders meetings.
In accordance with the Mexican Income Tax Law, capital contributions must be controlled in the so-called Restated contributed capital account (CUCA), which is restated for inflation. If there are capital reductions that exceed the CUCA balance, the difference will be subject to income tax payable by the Company at the tax rate in force at that time.
b) Legal reserve
In conformity with the Mexican Corporations Act, the Company is required to appropriate at least 5% of the net income of each year to increase the legal reserve. This practice must be continued until the legal reserve reaches 20% of the value of capital stock. The legal reserve at December 31, 2014 and 2013 is Ps.3,497.
c) Dividends
At regular shareholders meetings held on May 8, 2014, April 16, 2013 and April 23, 2012, respectively, the shareholders declared the following dividends:
2014 | 2013 | 2012 | ||||||||||
Dividends declared |
Ps. | 337,801 | Ps. | 345,285 | Ps. | 317,737 | ||||||
Number of shares |
19,466,321 | 19,466,321 | 19,466,321 | |||||||||
|
|
|
|
|
|
|||||||
Dividend per share (pesos) |
Ps. | 17.35 | Ps. | 17.74 | Ps. | 16.32 | ||||||
|
|
|
|
|
|
F-76
The Mexican Income Tax Law establishes that dividends declared from income on which corporate income tax has already been paid shall not be subject to further taxation; therefore, taxable income must be controlled in a so-called Net taxed profits account (CUFIN). Any distribution of earnings in excess of this account will be subject to corporate income tax at the tax rate in effect at that time. The afore-aforementioned dividends did not exceed the Companys CUFIN balance.
d) Tax balances
At December 31, 2014 and 2013, the Company has the following tax balances:
2014 | 2013 | |||||||
Restated contributed capital account (CUCA) |
Ps. | 26,758 | Ps. | 24,709 | ||||
Net taxed profits account (CUFIN) |
542,486 | 497,881 |
8. Operating and administrative expenses
An analysis of this caption at for the years ended December 31, 2014, 2013 and 2012 is as follows:
2014 | 2013 | 2012 | ||||||||||
Wages and other employee benefits |
Ps. 217,060 | Ps. 186,496 | 190,071 | |||||||||
Professional services |
93,221 | 49,985 | 103,613 | |||||||||
Royalties and licenses |
87,650 | 107,390 | 107,755 | |||||||||
Depreciation |
37,327 | 31,725 | 24,256 | |||||||||
Maintenance |
24,634 | 17,524 | 13,069 | |||||||||
Other |
47,399 | 36,922 | 15,184 | |||||||||
|
|
|
|
|
|
|||||||
Ps. 507,291 | Ps. 430,042 | Ps. 453,948 | ||||||||||
|
|
|
|
|
|
9. Income tax
Income tax
As a part of the 2014 Mexican Tax Reform, the Mexican Income Tax Law and Mexican Flat-rate Business Tax Law in effect during 2013 and 2012 have been repealed, and a new Mexican Income Tax Law has been enacted and became effective as of January 1, 2014. The entry into force of the new Mexican Income Tax Law had no effect on the Companys financial situation, except for a new cap on the deduction of payroll-related expenses that are tax-exempt for employees.
Income tax is computed considering taxable income minus authorized deductions. These items include certain inflationary effects, such as the restatement of depreciation expense and the effects of inflation on certain monetary assets and liabilities by means of the annual inflation adjustment.
For the years ended December 31, 2014, 2013 and 2012, income tax was computed by applying the 30% rate to the Companys taxable income.
Flat-rate business tax (FRBT)
Current-year flat-rate business tax is computed by applying the 17.5% rate to income determined on the basis of cash flows, net of authorized credits. For the years ended December 31, 2013 and 2012, the Company and its subsidiary had no FRBT payable since their income tax payable was higher than their FRBT payable for the year.
F-77
For the years ended December 31, 2014, 2013 and 2012, the Company determined income tax as follows:
2014 | 2013 | 2012 | ||||||||||
Taxable income of the Company and subsidiary |
Ps. | 614,930 | Ps. | 552,947 | Ps. | 534,610 | ||||||
Statutory income tax rate |
30 | % | 30 | % | 30 | % | ||||||
|
|
|
|
|
|
|||||||
Current year income tax |
184,479 | 165,883 | 160,385 | |||||||||
Tax prepayments |
(144,524 | ) | (158,636 | ) | (131,501 | ) | ||||||
|
|
|
|
|
|
|||||||
Income tax payable |
Ps. | 39,955 | Ps. | 7,247 | Ps. | 28,884 | ||||||
|
|
|
|
|
|
An analysis of income tax charged to the statement of comprehensive income for the years ended December 31, 2014, 2013 and 2012 is as follows:
2014 | 2013 | 2012 | ||||||||||
Current year income tax |
Ps. | 184,479 | Ps. | 165,883 | Ps. | 160,385 | ||||||
Deferred income tax |
(17,763 | ) | (10,328 | ) | (12,309 | ) | ||||||
Other income tax items |
| 1,518 | | |||||||||
|
|
|
|
|
|
|||||||
Ps. | 166,716 | Ps. | 157,073 | Ps. | 148,076 | |||||||
|
|
|
|
|
|
A reconciliation of the statutory income tax rate to the effective rate recognized by the Company for the years ended December 31, 2014, 2013 and 2012 is as follows:
2014 | 2013 | 2012 | ||||||||||
Income before income tax |
Ps. | 577,020 | Ps. | 546,020 | Ps. | 493,270 | ||||||
Plus (less): |
||||||||||||
Annual tax inflation adjustment |
(17,883 | ) | (15,375 | ) | (10,947 | ) | ||||||
Non-deductible expenses |
9,526 | 3,155 | 3,828 | |||||||||
Other items |
(12,944 | ) | (10,225 | ) | 7,438 | |||||||
|
|
|
|
|
|
|||||||
555,719 | 523,575 | 493,589 | ||||||||||
Statutory income tax rate |
30 | % | 30 | % | 30 | % | ||||||
|
|
|
|
|
|
|||||||
Total current-year and deferred income tax |
Ps. | 166,716 | Ps. | 157,073 | Ps. | 148,076 | ||||||
|
|
|
|
|
|
|||||||
Effective income tax rate |
29 | % | 29 | % | 30 | % | ||||||
|
|
|
|
|
|
The temporary differences in statement of financial position accounts for financial and tax reporting purposes that give rise to the deferred income tax are as follows:
At December 31 | ||||||||
2014 | 2013 | |||||||
Deferred tax assets: |
||||||||
Accrued liabilities |
Ps. 39,103 | Ps. 30,061 | ||||||
Advances from customers |
21,285 | 12,104 | ||||||
Employee retirement benefits |
2,049 | 1,633 | ||||||
Property, furniture and equipment |
5,813 | 5,795 | ||||||
|
|
|
|
|||||
68,250 | 49,593 | |||||||
Deferred tax liabilities: |
||||||||
Prepaid expenses |
(1,693 | ) | (690 | ) | ||||
|
|
|
|
|||||
Deferred tax asset, net |
Ps. 66,557 | Ps. 48,903 | ||||||
|
|
|
|
F-78
Reconciliation of deferred tax asset, net:
2014 | 2013 | |||||||
Opening balance as of January 1, |
Ps. 48,903 | Ps. 37,200 | ||||||
Tax benefit during the period recognized in profit or loss |
17,238 | 10,426 | ||||||
Tax benefit during the period recognized in OCI |
416 | 1,277 | ||||||
|
|
|
|
|||||
Closing balance as at December 31, |
Ps. 66,557 | Ps. 48,903 | ||||||
|
|
|
|
The Company computed deferred income tax by applying the 30% income tax rate to the principal temporary differences between the accounting and tax values of its statement of financial position accounts, since this is the rate that the Company expects that most of the deferred income tax assets and liabilities will be materialized.
10. Other Financial Assets and Liabilities
Set out below is the categorization of the financial instruments, other than cash and short-term deposits, held by the Company as at December 31, 2014 and 2013:
December 31, 2014 | ||||||||
Loans and receivables | Fair value through profit or loss | |||||||
Financial Assets: |
||||||||
Trade receivables |
Ps. 48,125 | Ps | ||||||
Related parties receivables |
79,539 | |||||||
|
|
|
|
|||||
Ps. 127,664 | ||||||||
|
|
|
|
|||||
Financial Liabilities: |
||||||||
Related parties |
Ps. 41,130 | Ps | ||||||
Accrued liabilities |
123,937 | | ||||||
|
|
|
|
|||||
Ps. 165,067 | Ps | |||||||
|
|
|
|
December 31, 2013 | ||||||||
Loans and receivables | Fair value through profit or loss | |||||||
Financial Assets: |
||||||||
Debt securities |
Ps. | 15,098 | ||||||
Trade receivables |
Ps. | 44,642 | | |||||
Related parties receivables |
52,380 | | ||||||
|
|
|
|
|||||
Ps. | 97,022 | Ps. | 15,098 | |||||
|
|
|
|
|||||
Financial Liabilities: |
||||||||
Related parties |
Ps. | 24,013 | Ps. | | ||||
Accrued liabilities |
116,299 | | ||||||
|
|
|
|
|||||
Ps. | 140,312 | Ps. | | |||||
|
|
|
|
F-79
The fair value for the financial assets (excluding cash and cash equivalents) and financial liabilities shown in the consolidated statement of financial position at December 31, 2014 and 2013 is as follows:
Measurement of fair value at December 31, 2014 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Pension plan assets (government debt) |
Ps. | 24,835 | Ps. | | Ps. | | Ps. | 24,835 | ||||||||
|
|
|
|
|
|
|
|
Measurement of fair value at December 31, 2013 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Debt securities at fair value through profit or loss |
Ps. | 15,098 | Ps. | | Ps. | | Ps. | 15,098 | ||||||||
Pension plan assets (government debt) |
20,597 | | | 20,597 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Ps. | 35,695 | Ps. | | Ps. | | Ps. | 35,695 | |||||||||
|
|
|
|
|
|
|
|
For the years ended December 31, 2014 and 2013, no transfers were made between Level 1 and Level 2 fair value measurement hierarchies.
11. Commitments
The Company has entered in four operating leases of facilities for operating and administrative purposes. Such lease agreements are for an average of 4 years term and it can be extended automatically. Rents value is restated by inflation. For the period ended December 31, 2014, 2013 and 2012, the rent expense is Ps.5,700, Ps.5,223 and Ps.4,685, respectively.
12. Risk Management and Contingencies
- Risk management and contingencies
The Company is primarily exposed to credit, liquidity and market risks, which the Board of Directors reviews and monitors through the Corporate Practices Committee.
Credit risk
Credit risk represents the potential loss from the failure of the customer or financial instrument counterparty to meet all of its payment obligations. This risk is primarily due to cash and cash equivalents and trade receivables.
The Company believes that its credit risk is limited due to the nature of its operations and the profile of its customers, which are mostly shareholders. For the years ended December 31, 2014 and 2013, the Companys accounts receivable reflect no risk of collectability or considerably old accounts. The Companys policy is to maintain its surplus cash in demand bank deposits in Mexican banks with strong credit ratings. At December 31, 2014 and 2013, the Company has not identified any risks related to impairment or uncollectability of its cash and cash equivalents.
As at December 31 2014, and 2013, the aging analysis of trade receivables is, as follows:
Past due but not impaired | ||||||||||||||||||||||||
Total |
Neither past due nor
impaired |
< 30 days | 30-60 days | 61-90 days | > 91days | |||||||||||||||||||
2014 |
Ps. | 48,125 | Ps. | 46,602 | Ps. | 1,477 | Ps. | 46 | Ps. | | Ps. | | ||||||||||||
2013 |
Ps. | 44,642 | Ps. | 37,387 | Ps. | 2,677 | Ps. | 541 | Ps. | 265 | Ps. | 3,772 |
F-80
Liquidity risk
Liquidity risk is the risk that the Company will be unable to cover its financial obligations when they mature. The Companys goal is to ensure, insofar as possible, that it always has sufficient liquidity to settle its financial liabilities when they mature, under both normal and adverse conditions, without incurring unacceptable losses or putting the entitys financial position at risk. At December 31, 2014 and 2013, the Company has no financial liabilities and management has the necessary levels of cash, cash equivalents and marketable securities in hand to meet its obligations.
Market risk
Market risk is the risk of fluctuation in market prices, such as interest rates and exchange rates.
At December 31, 2014 and 2013, the Companys foreign currency denominated position (U.S. dollars) is considered immaterial and is USD 428 (short) and USD 1,313 (short), respectively. At such dates, the Company is not exposed to any material interest rate risks since it has financial liabilities and its investments in cash and cash equivalents have short-term maturities and are conducted at market rates. The Company does not carry out transactions with derivative financial instruments.
Operational risk
Operational risk is the risk of loss from potential internal control failures or deficiencies due to errors in the Companys data processes and storage or in its data transmissions. The Company believes its exposure to operational risk is low, since it has various process certifications that it needs to carry out its business activities. In addition, its accounting and internal audit area focuses on identifying risks and following up on the implementation of process controls aimed at minimizing the likelihood of any risks actually materializing. The Corporate Practices Committee and the Audit Committee review and follow up on the Companys operating activities, including any potential incidents.
Technological risk
Technological risk is the risk of loss from damage, interruption, alterations or failures in the Companys hardware, software, systems, applications, networks or any other information distribution channel used by the Company to provide its services. The Company has several policy and procedures manuals in place that establish, among other measures, controls for reducing the Companys exposure to technological risk. The IT area continually monitors cases of failures in the Companys computer equipment, software or other technological resources used by the Company caused by programming errors, technological obsolescence or other factors, and the IT area addresses any issues identified by requesting from the Companys management the funds needed to do so. Management submits these investment proposals to the Corporate Practices Committee for review and subsequent approval of each project.
Legal risk
Legal risk is the risk of loss caused by the Companys non-compliance with the rules and laws to which it is subject, and by the effects of rulings issued against it by the courts and authorities. The Companys legal and financial areas and its Corporate Practices Committee all address the Companys legal, tax and regulatory matters, and the Companys internal audit area assesses the Companys compliance with those matters. Based on an analysis of the frequency of events and the amounts involved, the Companys exposure to legal risk is considered low.
F-81
Capital management
The Companys Corporate Practices Committee monitors the liquidity risk, it establishes internal policies for capital management, and reviews the expected cash receipts and disbursements based on the approved annual budget. Historically, the Company has not required external financing for its operations (for example, bank borrowings). Such Committee also evaluates the level of operating cash flows needed in order to determine the amount of the dividends available for shareholders on annual basis.
Risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Companys performance to developments affecting a particular industry.
A significant component of the Companys revenue is generated from its shareholders (58% in 2014, 61% in 2013 and 59% in 2012). For the years ended December 31, 2014, 2013 and 2012, the revenue earned from four shareholders represent over 43%, 45%, and 49% respectively, of the Companys total revenues. See Note 4 for further disclosure.
At December 31, 2014, 2013 and 2012, the Company has no other customers that represent significant portion of the Companys revenues and accounts receivable.
- Contingencies
The Company is party to several civil lawsuits in the normal course of business. The Company, after consultation with its lawyers, believes that the ultimate resolution of such matters will not have a material impact on its consolidated financial statements.
F-82
CREDIT INFORMATION BUREAU (INDIA) LIMITED
BALANCE SHEET AS AT MARCH 31, 2014
Note No. |
Mar 31, 2014
Rs. (000s) |
Mar 31, 2013
Rs. (000s) |
||||||||||
EQUITY AND LIABILITIES |
||||||||||||
Shareholders funds |
||||||||||||
Share capital |
3 | 250,000 | 250,000 | |||||||||
Reserves and surplus |
4 | 1,492,342 | 1,189,552 | |||||||||
|
|
|
|
|||||||||
1,742,342 | 1,439,552 | |||||||||||
Non-current liabilities |
||||||||||||
Deferred tax liabilities (net) |
5 | 8,851 | 15,217 | |||||||||
Other long-term liabilities |
6 | | 42 | |||||||||
Long-term provisions |
7 | 70,899 | 50,050 | |||||||||
|
|
|
|
|||||||||
79,750 | 65,309 | |||||||||||
Current liabilities |
||||||||||||
Trade payables |
8 | 139,891 | 111,653 | |||||||||
Other current liabilities |
9 | 16,739 | 23,640 | |||||||||
Short-term provisions |
7 | 214,199 | 83,880 | |||||||||
|
|
|
|
|||||||||
370,829 | 219,173 | |||||||||||
|
|
|
|
|||||||||
TOTAL |
2,192,921 | 1,724,034 | ||||||||||
|
|
|
|
|||||||||
ASSETS |
||||||||||||
Non-current assets |
||||||||||||
Fixed assets |
10 | |||||||||||
Tangible assets |
122,706 | 101,361 | ||||||||||
Intangible assets |
146,780 | 99,933 | ||||||||||
Intangible assets under development |
7,562 | | ||||||||||
|
|
|
|
|||||||||
277,048 | 201,294 | |||||||||||
Non-current investments |
11 | (a) | 180,000 | 120,000 | ||||||||
Long-term loans and advances |
12 | 280,418 | 142,101 | |||||||||
|
|
|
|
|||||||||
737,466 | 463,395 | |||||||||||
|
|
|
|
|||||||||
Current assets |
||||||||||||
Current investments |
11 | (b) | 10,000 | | ||||||||
Trade receivables |
13 | 281,786 | 197,855 | |||||||||
Cash and bank balances |
14 | 1,053,933 | 928,234 | |||||||||
Short-term loans and advances |
12 | 91,764 | 115,974 | |||||||||
Other current assets |
15 | 17,972 | 18,576 | |||||||||
|
|
|
|
|||||||||
1,455,455 | 1,260,639 | |||||||||||
|
|
|
|
|||||||||
TOTAL |
2,192,921 | 1,724,034 | ||||||||||
|
|
|
|
|||||||||
Summary of significant accounting policies |
2 |
Notes 1 to 30 annexed hereto form an integral part of the financial statements.
For and on behalf of the Board |
||||||
M. V. Nair |
Arun Thukral | Vivek Kumar Aggarwal | Swati Naik | |||
Chairman |
Managing Director | CFO & Exec. VP | Company Secretary | |||
Mumbai, June 10, 2014 |
F-83
CREDIT INFORMATION BUREAU (INDIA) LIMITED
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2014
Note No. |
Mar 31, 2014
Rs. (000s) |
Mar 31, 2013
Rs. (000s) |
Mar 31, 2012
Rs. (000s) |
|||||||||||
Income |
||||||||||||||
Revenue from operations |
16 | 1,666,181 | 1,304,041 | 1,030,123 | ||||||||||
Other income |
17 | 140,486 | 119,523 | 86,041 | ||||||||||
|
|
|
|
|
|
|||||||||
Total revenue |
1,806,667 | 1,423,564 | 1,116,164 | |||||||||||
|
|
|
|
|
|
|||||||||
Expenses |
||||||||||||||
Employee benefits expense |
18 | 255,000 | 188,222 | 166,859 | ||||||||||
Establishment and other expenses |
19 | 345,879 | 306,257 | 263,352 | ||||||||||
Royalty & software technology fees |
198,825 | 186,604 | 147,603 | |||||||||||
Finance costs |
20 | 544 | 1,175 | 1,211 | ||||||||||
Depreciation and amortisation expense |
10 | 100,735 | 83,461 | 55,522 | ||||||||||
|
|
|
|
|
|
|||||||||
Total expenses |
900,983 | 765,719 | 634,547 | |||||||||||
|
|
|
|
|
|
|||||||||
Profit before tax |
905,684 | 657,845 | 481,617 | |||||||||||
|
|
|
|
|
|
|||||||||
Less: Tax expense |
||||||||||||||
Current tax expense |
316,773 | 215,506 | 161,683 | |||||||||||
Deferred tax charge/ (credit) |
(6,366 | ) | (1,286 | ) | (5,092 | ) | ||||||||
Net tax expense |
310,407 | 214,220 | 156,591 | |||||||||||
|
|
|
|
|
|
|||||||||
Profit for the year |
595,277 | 443,625 | 325,026 | |||||||||||
|
|
|
|
|
|
|||||||||
Earning per equity share-basic and diluted (refer note 28) |
23.81 | 17.74 | 13.00 | |||||||||||
(nominal value Rs. 10 per share) |
||||||||||||||
Summary of significant accounting policies |
2 | |||||||||||||
Notes 1 to 30 annexed hereto form an integral part of the financial statements. |
|
For and on behalf of the Board | ||||||
M. V. Nair | Arun Thukral | Vivek Kumar Aggarwal | Swati Naik | |||
Chairman | Managing Director | CFO & Exec. VP | Company Secretary | |||
Mumbai, June 10, 2014 |
F-84
CREDIT INFORMATION BUREAU (INDIA) LIMITED
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2014
Mar 31, 2014
Rs. (000s) |
Mar 31, 2013
Rs. (000s) |
Mar 31, 2012
Rs. (000s) |
||||||||||
CASH FLOW FROM OPERATING ACTIVITIES |
||||||||||||
Profit before tax |
905,684 | 657,845 | 481,617 | |||||||||
Adjustments for: |
||||||||||||
Depreciation and amortisation expense |
100,735 | 83,461 | 55,522 | |||||||||
Loss/(profit) on sale of assets write off |
75 | (422 | ) | 2,119 | ||||||||
Interest income |
(124,232 | ) | (108,412 | ) | (81,661 | ) | ||||||
Provision for employee benefits |
30,263 | 17,220 | 19,826 | |||||||||
Grant income recognised |
(4,050 | ) | (5,320 | ) | (3,593 | ) | ||||||
Interest expense |
544 | 1,175 | 1,211 | |||||||||
Doubtful advances written off /provided |
8 | 1,732 | 895 | |||||||||
|
|
|
|
|
|
|||||||
Operating profit before working capital changes |
909,027 | 647,279 | 475,936 | |||||||||
|
|
|
|
|
|
|||||||
Changes in working capital: |
||||||||||||
Adjustments for decrease/(increase) in operating assets: |
||||||||||||
Trade receivables |
(83,931 | ) | (62,351 | ) | (39,471 | ) | ||||||
Short-term loans and advances |
6,710 | 3,552 | (7,453 | ) | ||||||||
Long-term loans and advances |
919 | 517 | (2,266 | ) | ||||||||
Other current assets |
3,323 | (2,120 | ) | 8,121 | ||||||||
Adjustments for (decrease)/increase in operating liabilities: |
||||||||||||
Trade payables |
28,238 | 31,047 | 5,801 | |||||||||
Other current liabilities |
(2,893 | ) | 3,460 | (28,271 | ) | |||||||
|
|
|
|
|
|
|||||||
Cash generated from operations |
(47,634 | ) | (25,895 | ) | (63,539 | ) | ||||||
Less: Taxes paid |
(278,035 | ) | (219,397 | ) | (146,908 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash flow from operating activities(A) |
583,358 | 401,987 | 265,489 | |||||||||
|
|
|
|
|
|
|||||||
CASH FLOW FROM INVESTING ACTIVITIES |
||||||||||||
Capital expenditure on tangible assets |
(71,251 | ) | (36,828 | ) | (33,437 | ) | ||||||
Capital expenditure on intangible assets, including intangible assets under development and capital advances |
(130,696 | ) | (30,492 | ) | (40,863 | ) | ||||||
Proceeds from sale of fixed assets |
78 | 1,974 | 424 | |||||||||
Purchase of non-current investments |
(60,000 | ) | (120,000 | ) | | |||||||
Purchase of current investments |
(10,000 | ) | | | ||||||||
Fixed deposits with financial institutions: |
||||||||||||
Placed |
(335,000 | ) | (223,000 | ) | (118,000 | ) | ||||||
Matured |
232,500 | 141,000 | 62,500 | |||||||||
Fixed deposits with banks with maturity more than 3 months: |
||||||||||||
Placed |
(1,163,000 | ) | (1,236,500 | ) | (1,109,100 | ) | ||||||
Matured |
1,035,000 | 1,217,100 | 877,700 | |||||||||
Interest received on tax refund |
| 216 | 2,223 | |||||||||
Interest received on fixed deposits |
121,514 | 103,393 | 101,149 | |||||||||
|
|
|
|
|
|
|||||||
Cash used in investing activities(B) |
(380,855 | ) | (183,137 | ) | (257,404 | ) | ||||||
|
|
|
|
|
|
|||||||
CASH FLOW FROM FINANCING ACTIVITIES |
||||||||||||
Dividends paid |
(175,000 | ) | (175,000 | ) | (25,000 | ) | ||||||
Tax on dividend |
(29,741 | ) | (28,389 | ) | (4,056 | ) | ||||||
Interest paid on overdraft |
(63 | ) | (8 | ) | | |||||||
Cash used in financing activities(C) |
(204,804 | ) | (203,397 | ) | (29,056 | ) | ||||||
|
|
|
|
|
|
|||||||
Net Increase / (Decrease) in cash equivalent(A+B+C) |
(2,301 | ) | 15,453 | (20,971 | ) | |||||||
Add: Cash and cash equivalents at the beginning of the year |
36,834 | 21,381 | 42,352 | |||||||||
Cash and cash equivalents at the end of the year (refer note 14) |
34,533 | 36,834 | 21,381 | |||||||||
|
|
|
|
|
|
For and on behalf of the Board | ||||||
M. V. Nair | Arun Thukral | Vivek Kumar Aggarwal | Swati Naik | |||
Chairman | Managing Director | CFO & Exec. VP | Company Secretary | |||
Mumbai, June 10, 2014 |
F-85
CREDIT INFORMATION BUREAU (INDIA) LIMITED
Notes forming part of financial statements for the year ended Mar 31, 2014
1. Corporate Information
CIBIL is a credit information company. It creates value for financial institutions by providing objective data and tools to help them manage risk, and devise appropriate lending. CIBIL benefits both credit grantors and consumers by collecting, analyzing, and delivering information on credit histories of borrowers. It provides its members with risk management tools on both consumer and commercial borrowers.
These financial statements have been prepared in accordance with generally accepted accounting principles in India and authorized by the Board of Directors of the Company on June 10, 2014 on the basis of a request and undertaking received from one of its shareholders viz; TransUnion International Inc; to be included, in accordance with Rule SX 3-09 in the Form 10-K of Transunion Holding Company Inc., USA (ultimate parent company of TransUnion International Inc.) for the year ended 31 st December, 2013 to be filed with the U.S. Securities and Exchange Commission (SEC). In reliance of an exemption granted by the Securities and Exchange Commission to Transunion Holding Company, these financial statements have not been reconciled to US GAAP for the year ended March 31, 2013.
We have reclassified certain income statement amounts in the prior years to conform to the current years presentation.
2. Significant Accounting Policies
2.1 System of Accounting
The financial statements of the Company are prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 (the 1956 Act) (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 (the 2013 Act) in terms of General Circular 15/2013 dated 13 September, 2013 of the Ministry of Corporate Affairs) and the relevant provisions of the 1956 Act / 2013 Act, as applicable. The financial statements are prepared on accrual basis under the historical convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.
2.2 Use of Estimates
The preparation of the financial statements in conformity with the Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as on the date of the financial statements and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual result could differ from the estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialised. Any changes in such estimates are recognised prospectively.
2.3 Revenue Recognition
a) | Initial Membership Fees are recognised on admission of members. |
b) | Annual Membership Fees are recognised proportionately for the period of such membership. |
F-86
c) | Service Report fees and Decision Centre Service credits are recognised on rendering of services. |
d) | Interest and other dues are recognised on accrual basis. |
2.4 Grants
Grants received and accrued are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, based on the claims made as laid down in Accounting Standard Accounting for Government Grants (AS-12) notified by the Companies (Accounting Standards) Rules, 2006.
2.5 Foreign Currency Translation
Foreign currency transactions are recorded at rates as on the date of the transaction. Exchange differences arising on foreign currency transactions settled during the year are recognised in the Statement of Profit and Loss.
All foreign currency denominated monetary assets and liabilities are translated at the exchange rates prevailing on the Balance Sheet date. The resultant exchange differences are recognised in the Statement of Profit and Loss.
2.6 Tangible Assets and Depreciation
a) | Tangible assets have been stated at purchase/acquisition cost inclusive of installation cost less accumulated depreciation. |
b) | Leasehold improvements are amortised over the period of the lease. |
c) | The Company adopts Straight Line Method of depreciation at the rates prescribed under Schedule XIV to the Companies Act, 1956 or Managements experience and estimate of useful life of assets, whichever is higher, as detailed below: |
Asset Head |
Depreciation Rates | |
Computers |
20.00% | |
ComputersLaptop and end user equipment* |
33.33% | |
Office equipment* |
20.00% | |
Furniture and fixtures |
16.67% | |
Electrical Installations |
16.67% | |
Vehicles |
25.00% | |
Mobile Phones |
50.00% |
* | The Company has revised the estimated useful life of Laptop and End user Equipments from 5 years to 3 years and office equipments from 6 years to 5 years. |
d) | Capital work-in-progress: |
Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost comprising of direct cost, related incidental expenses and attributable interest (if any).
2.7 Intangible Assets and Amortisation
a) | Intangible assets are stated at cost less accumulated amortisation. |
b) |
Intangible assets are amortised on the straight line basis over the useful life. System Softwares (including related Application Softwares) are amortised over the estimated useful |
F-87
life or five years whichever is lower. Trademark cost is amortised over 5 years. Any expenses on Software for support and maintenance are charged to the Statement of Profit and Loss. |
c) | Intangible assets under development: |
Projects under which intangible assets are not ready for their intended use and intangible assets under development are carried at cost, comprising direct cost, related incidental expenses and attributable interest (if any).
2.8 Operating Leases
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis.
2.9 Impairment of Assets
The carrying values of assets / cash generating units at each Balance Sheet date are reviewed for impairment of assets. If any indication of such impairment exists, then the recoverable amount of such assets is estimated and impairment is recognized, for the excess of the carrying amount of these assets vs their recoverable amount. The recoverable amount is considered as the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset in prior accounting periods no longer exists or may have decreased such reversal of impairment loss is recognised.
2.10 Investments
a) | Long term Investments are carried at cost less provision (if any) for diminution (other than temporary) in value of such investments. |
b) | Current Investments are carried at the lower of cost or fair value on an individual basis. |
2.11 Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
2.12 Employee Benefits
Defined Contribution Plans:
a) | The Companys contribution to Employees Provident Fund paid / payable during the year is recognised in the Statement of Profit and Loss based on the amount of contribution required to be made and when services are rendered by the employees. |
Defined Benefits Plan:
b) | Liability for compensated absences in respect of sick leave and privilege Leave which is of long-term nature is actuarially determined based on the Projected Unit Credit method. |
F-88
c) | The Companys liability towards gratuity is determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Actuarial gains and losses based on actuarial valuation done by an independent actuary carried out annually are recognised immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation. |
Short-term Employee Benefits:
d) | Liability in respect of Privileged Leave which is of short-term in nature and Leave Travel Allowance is recognized in the Statement of Profit and Loss based on the expected cost and period of service which entitles the employee to such benefits. |
Long-Term Employee Benefits / Incentive Plan:
e) | The Company has a long term incentive plan for eligible employees whereby they are entitled for cash payment against appreciation in notional value of share units (that is determined based on EPS and benchmarked multiple) over long term. Provision is made for any such appreciation at end of every year, till the grant is either exercised or lapsed, and the cost is fully charged to the Statement of Profit and Loss as part of Employees benefits expense. |
2.13 Taxes on Income
Current Tax is the amount of the tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961.
Deferred Tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods.
Deferred Tax Assets in respect of unabsorbed depreciation and carry forward of losses are recognised if there is virtual certainty that there will be sufficient future taxable income available to realise such losses. Other Deferred Tax Assets are recognised if there is reasonable certainty that there will be sufficient future taxable income to realise such assets. Deferred tax assets are reviewed at each balance sheet date for their realisabilty.
2.14 Provisions and Contingencies
A provision is recognised when the Company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding employee benefits) are not discounted to their present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in Notes.
2.15 Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or
F-89
accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
2.16 Operating Cycle
Based on the nature of the services / activities of the Company and the normal time between acquisition of the assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
Note 3
Share Capital
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||
Authorised capital |
||||||||
50,000,000 (31st Mar 2013: 50,000,000) equity shares of Rs. 10/- each |
500,000 | 500,000 | ||||||
|
|
|
|
|||||
Issued, Subscribed and fully paid up shares |
||||||||
25,000,000 (31st Mar 2013: 25,000,000) equity shares of Rs. 10/- each |
250,000 | 250,000 | ||||||
|
|
|
|
|||||
TOTAL |
250,000 | 250,000 | ||||||
|
|
|
|
a. Reconciliation of equity shares at the beginning and at the end of the year.
March 14 | March 13 | |||||||||||||||
No (000s) | Rs. (000s) | No (000s) | Rs. (000s) | |||||||||||||
Particulars |
||||||||||||||||
Equity shares at the beginning of the year |
25,000 | 250,000 | 25,000 | 250,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Equity shares outstanding at the end of the year |
25,000 | 250,000 | 25,000 | 250,000 | ||||||||||||
|
|
|
|
|
|
|
|
b. Details of shareholders holding more than 5% shares in the company
March 14 | March13 | |||||||||||||||
No (000s) | % of Holding | No (000s) | % of Holding | |||||||||||||
Name of the shareholder |
||||||||||||||||
TransUnion International Inc (USA) |
11,875 | 47.50 | % | 6,875 | 27.50 | % | ||||||||||
State Bank of India |
2,500 | 10.00 | % | 2,500 | 10.00 | % | ||||||||||
ICICI Bank Ltd. |
2,500 | 10.00 | % | 2,500 | 10.00 | % |
c. Details of rights, preferences and restrictions attached to the equity shareholders.
The Company has only one class of equity shares having a par value of Rs. 10 per share. Members of the Company holding equity shares capital therein have a right to vote, on every resolution placed before the Company and right to receive dividend. The voting rights on a poll is in proportion to the share of the paid up equity capital of the Company held by the shareholders. The Company declares dividends in Indian rupees. The interim and final dividend is proposed by the Board of Directors. However, the final dividend is subject to the approval of the Shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company in proportion to their shareholding.
F-90
Note 4
Reserves and Surplus
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||
General Reserve |
||||||||
Balance as per last balance sheet |
68,740 | 24,377 | ||||||
Add: transfer from the statement of profit and loss |
60,000 | 44,363 | ||||||
|
|
|
|
|||||
Closing Balance |
128,740 | 68,740 | ||||||
|
|
|
|
|||||
Surplus in the statement of profit and loss |
||||||||
Balance as per last balance sheet |
1,120,812 | 925,326 | ||||||
Add: Profit for the year |
595,277 | 443,625 | ||||||
Less: Appropriations: |
||||||||
General Reserve |
60,000 | 44,363 | ||||||
Interim dividend |
125,000 | 125,000 | ||||||
Final dividend |
125,000 | 50,000 | ||||||
Tax on dividend |
42,487 | 28,776 | ||||||
|
|
|
|
|||||
Total |
352,487 | 248,139 | ||||||
|
|
|
|
|||||
Closing balance |
1,363,602 | 1,120,812 | ||||||
|
|
|
|
|||||
1,492,342 | 1,189,552 | |||||||
|
|
|
|
Note 5
Deferred tax liabilities (net)
The major components of deferred tax liabilities and deferred tax assets are as under :
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||
Deferred tax liabilities(A) |
||||||||
Difference between the book balance and tax balance of fixed assets |
46,890 | 34,987 | ||||||
Deferred tax assets(B) |
||||||||
Provision for employee benefits |
31,852 | 14,203 | ||||||
Provision for claims and others |
1,886 | | ||||||
Disallowance under Section 40(a)(ia) of Income Tax Act, 1961 |
4,301 | 5,567 | ||||||
|
|
|
|
|||||
Net deferred tax liabilities(A-B) |
8,851 | 15,217 | ||||||
|
|
|
|
|||||
Charge / (credit) for the year |
(6,366 | ) | (1,286 | ) | ||||
|
|
|
|
Note 6
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||
Other long-term liabilities |
||||||||
Deferred income |
| 42 | ||||||
|
|
|
|
|||||
| 42 | |||||||
|
|
|
|
F-91
Note 7
Provisions
Long-term | Short-term | |||||||||||||||
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||||||||
Provision for employee benefits |
||||||||||||||||
Provision for gratuity |
1,000 | 1,000 | | | ||||||||||||
Provision for compensated absences |
50,438 | 37,340 | 5,272 | 3,447 | ||||||||||||
Provision for employee stock appreciation rights (refer note 21(iv)) |
19,461 | 11,710 | 17,539 | 9,950 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
70,899 | 50,050 | 22,811 | 13,397 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other provisions |
||||||||||||||||
Provision for income tax (net) |
| | 45,114 | 11,986 | ||||||||||||
Provision for wealth tax |
| | 30 | | ||||||||||||
Provision for proposed equity dividend |
| | 125,000 | 50,000 | ||||||||||||
Provision for tax on proposed dividend |
| | 21,244 | 8,497 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
| | 191,388 | 70,483 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
70,899 | 50,050 | 214,199 | 83,880 | |||||||||||||
|
|
|
|
|
|
|
|
Note 8
Trade payables
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||
Due to: |
||||||||
Micro and small enterprises (refer footnote) |
| 74 | ||||||
Others. |
139,891 | 111,579 | ||||||
|
|
|
|
|||||
139,891 | 111,653 | |||||||
|
|
|
|
Footnote
Trade payables include Rs. Nil (000s) (Previous Year Rs. 74(000s)) payable to Suppliers who have confirmed that they are registered under the Micro, Small and Medium Enterprises Development Act, 2006. This has been relied upon by the auditors. No interest has been paid / payable by the Company during the year to these Suppliers(Previous Year Rs. Nil (000s)) .
Note 9
Other current liabilities
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||
Other payables |
||||||||
Advance from customers |
5,515 | 7,946 | ||||||
Unearned income |
4,299 | 3,986 | ||||||
Deferred income |
42 | 4,050 | ||||||
Taxes payable |
2,369 | 7,491 | ||||||
Provident fund payable |
1,512 | | ||||||
Others |
3,002 | 167 | ||||||
|
|
|
|
|||||
16,739 | 23,640 | |||||||
|
|
|
|
F-92
Note 10 |
Rs. (000s) |
Fixed assets
Gross block | Depreciation and amortization | Net block | ||||||||||||||||||||||||||||||||||||||
Description |
As at
Apr 1, 2013 |
Additions | Deductions |
As at
Mar 31, 2014 |
As at
Apr 1, 2013 |
Charge | Deductions |
As at
Mar 31, 2014 |
As at
Mar 31, 2014 |
As at
Mar 31, 2013 |
||||||||||||||||||||||||||||||
during the period | during the period | |||||||||||||||||||||||||||||||||||||||
Tangible assets |
||||||||||||||||||||||||||||||||||||||||
Leasehold improvements |
26,371 | 1,460 | 70 | 27,761 | 18,128 | 3,988 | 70 | 22,046 | 5,715 | 8,243 | ||||||||||||||||||||||||||||||
(27,931 | ) | ( | ) | (1,560 | ) | (26,371 | ) | (16,283 | ) | (3,405 | ) | (1,560 | ) | (18,128 | ) | (8,243 | ) | (11,648 | ) | |||||||||||||||||||||
Computers & other hardware |
200,698 | 68,802 | 2,887 | 266,613 | 121,100 | 41,017 | 2,882 | 159,235 | 107,378 | 79,598 | ||||||||||||||||||||||||||||||
[refer footnote (i) & (ii)] |
(172,714 | ) | (28,124 | ) | (140 | ) | (200,698 | ) | (84,536 | ) | (36,667 | ) | (103 | ) | (121,100 | ) | (79,598 | ) | (88,178 | ) | ||||||||||||||||||||
Office equipments |
10,094 | 785 | 1,216 | 9,663 | 6,849 | 1,557 | 1,068 | 7,338 | 2,325 | 3,245 | ||||||||||||||||||||||||||||||
[refer footnote (i)] |
(10,066 | ) | (96 | ) | (68 | ) | (10,094 | ) | (5,824 | ) | (1,074 | ) | (49 | ) | (6,849 | ) | (3,245 | ) | (4,242 | ) | ||||||||||||||||||||
Furniture and fixtures |
4,737 | 204 | | 4,941 | 3,185 | 441 | | 3,626 | 1,315 | 1,552 | ||||||||||||||||||||||||||||||
(4,856 | ) | (471 | ) | (590 | ) | (4,737 | ) | (3,368 | ) | (407 | ) | (590 | ) | (3,185 | ) | (1,552 | ) | (1,488 | ) | |||||||||||||||||||||
Electrical installations |
398 | | | 398 | 237 | 49 | | 286 | 112 | 161 | ||||||||||||||||||||||||||||||
(392 | ) | (6 | ) | ( | ) | (398 | ) | (189 | ) | (48 | ) | ( | ) | (237 | ) | (161 | ) | (203 | ) | |||||||||||||||||||||
Vehicles |
10,800 | | | 10,800 | 2,238 | 2,701 | | 4,939 | 5,861 | 8,562 | ||||||||||||||||||||||||||||||
(7,244 | ) | (8,131 | ) | (4,575 | ) | (10,800 | ) | (2,902 | ) | (2,414 | ) | (3,078 | ) | (2,238 | ) | (8,562 | ) | (4,342 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Tangible assets totalcurrent yr |
253,098 | 71,251 | 4,173 | 320,176 | 151,737 | 49,753 | 4,020 | 197,470 | 122,706 | 101,361 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
(223,203 | ) | (36,828 | ) | (6,933 | ) | (253,098 | ) | (113,102 | ) | (44,015 | ) | (5,380 | ) | (151,737 | ) | (101,361 | ) | (110,101 | ) | |||||||||||||||||||||
Intangible assets |
||||||||||||||||||||||||||||||||||||||||
Software |
261,797 | 97,829 | 2,628 | 356,998 | 161,954 | 50,945 | 2,628 | 210,271 | 146,727 | 99,843 | ||||||||||||||||||||||||||||||
[refer footnote (ii)] |
(215,500 | ) | (46,297 | ) | ( | ) | (261,797 | ) | (122,543 | ) | (39,411 | ) | ( | ) | (161,954 | ) | (99,843 | ) | (92,957 | ) | ||||||||||||||||||||
Trade mark |
176 | | | 176 | 86 | 37 | | 123 | 53 | 90 | ||||||||||||||||||||||||||||||
(176 | ) | ( | ) | ( | ) | (176 | ) | (51 | ) | (35 | ) | ( | ) | (86 | ) | (90 | ) | (125 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Intangible assets total -current yr |
261,973 | 97,829 | 2,628 | 357,174 | 162,040 | 50,982 | 2,628 | 210,394 | 146,780 | 99,933 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
(215,676 | ) | (46,297 | ) | ( | ) | (261,973 | ) | (122,594 | ) | (39,446 | ) | ( | ) | (162,040 | ) | (99,933 | ) | (93,082 | ) | |||||||||||||||||||||
Intangible assets under development |
| 7,562 | | 7,562 | | | | | 7,562 | | ||||||||||||||||||||||||||||||
(10,863 | ) | ( | ) | (10,863 | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | (10,863 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Current PeriodTOTAL |
515,071 | 176,642 | 6,801 | 684,912 | 313,777 | 100,735 | 6,648 | 407,864 | 277,048 | 201,294 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
(449,742 | ) | (83,125 | ) | (17,796 | ) | (515,071 | ) | (235,696 | ) | (83,461 | ) | (5,380 | ) | (313,777 | ) | (201,294 | ) | (214,046 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes:
(i) | The Company has revised the estimated useful life of Laptop and End user Equipments from 5 years to 3 years and office equipments from 6 years to 5 years. Consequently, the depreciation charge for the year is higher by Rs. 20 (000s). |
(ii) | The Company had revised the estimated useful life of Computers & softwares from 6 years to 5 years in the previous year. Consequently, the depreciation charge for the previous year was higher by Rs. 13,310 (000s). |
(iii) | The figures in bracket indicates previous year. |
F-93
Note 11
Investments
(a) Non-current investments
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||||||||||
Quoted investments (refer footnote) |
No of Bonds | Face Value | ||||||||||||||
7.38%, Rural Electrification Corporation Ltd. |
20,000 | Rs. - 1000 | 20,000 | 20,000 | ||||||||||||
7.36%, Power Finance Corporation Ltd. |
20,000 | Rs. - 1000 | 20,000 | 20,000 | ||||||||||||
7.08%, Indian Infrastructure Finance Co. Ltd. |
20,000 | Rs. - 1000 | 20,000 | 20,000 | ||||||||||||
7.40%, Indian Infrastructure Finance Co. Ltd. |
20,000 | Rs. - 1000 | 20,000 | 20,000 | ||||||||||||
7.34%, Indian Railway Finance Corpn. Ltd. |
20,000 | Rs. - 1000 | 20,000 | 20,000 | ||||||||||||
7.04%, Indian Railway Finance Corpn. Ltd. |
20,000 | Rs. - 1000 | 20,000 | 20,000 | ||||||||||||
8.48%, Indian Infrastructure Finance Co. Ltd. |
20,000 | Rs. - 1000 | 20,000 | | ||||||||||||
8.50%, National Highway Authority of India |
20,000 | Rs. - 1000 | 20,000 | | ||||||||||||
8.63%, Rural Electrification Corporation Ltd. |
20,000 | Rs. - 1000 | 20,000 | | ||||||||||||
|
|
|
|
|||||||||||||
180,000 | 120,000 | |||||||||||||||
|
|
|
|
Footnote
Aggregate market value of quoted securities as on 31.03.14 is Rs. 178,214 (000s) (Previous year Rs. 121,080 (000s)
(b) Current investments
Unquoted investments (refer footnote)
ICICI Prudential FMPSeries 69 |
10,000 | | ||||||
|
|
|
|
|||||
10,000 | | |||||||
|
|
|
|
Footnote
Market Value as on 31.03.2014 Rs. 10,663 (000s).
F-94
Note 12
Loans and advances
Unsecured, considered good; (unless otherwise stated)
Long-term | Short-term | |||||||||||||||
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||||||||
(a) Capital advances |
29,228 | 3,923 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
29,228 | 3,923 | | | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(b) Other loans & advances |
||||||||||||||||
Advance income tax (doubtful) |
2,548 | 2,550 | | | ||||||||||||
Less: Provision for doubtful TDS |
(2,548 | ) | (2,550 | ) | | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Advance income tax |
14,087 | 20,147 | | | ||||||||||||
Deposit with Financial Institution |
225,000 | 105,000 | 77,500 | 95,000 | ||||||||||||
Advance wealth tax |
19 | 19 | | | ||||||||||||
Deposits |
11,894 | 10,908 | | | ||||||||||||
Prepaid expenses |
190 | 2,104 | 9,979 | 18,223 | ||||||||||||
Employee advances (refer footnote) |
| | 1,656 | 1,921 | ||||||||||||
Other advances |
| | 2,629 | 830 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
251,190 | 138,178 | 91,764 | 115,974 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
280,418 | 142,101 | 91,764 | 115,974 | |||||||||||||
|
|
|
|
|
|
|
|
Footnote:
Employee advances includes advance against salary outstanding of ` Nil (000s) due from Mr. Arun Thukral (Managing Director) as on March 31, 2014 (Previous Year Rs. 971(000s).
Note 13
Trade receivables
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||
Unsecured, considered good: |
||||||||
Trade receivables outstanding for a period exceeding 6 months from the date they were due for payment |
1 | | ||||||
Less: provision for doubtful debts |
(1 | ) | | |||||
Other trade receivables |
281,786 | 197,855 | ||||||
|
|
|
|
|||||
281,786 | 197,855 | |||||||
|
|
|
|
F-95
Note 14
Cash and bank balances
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||
Cash and cash equivalents as per Accounting Standard 3 |
||||||||
Cash on hand |
| 18 | ||||||
Cheques in Hand |
352 | | ||||||
Remittance in transit |
| 33,100 | ||||||
Balances with Banks: |
||||||||
Current accounts |
34,181 | 3,716 | ||||||
|
|
|
|
|||||
34,533 | 36,834 | |||||||
|
|
|
|
|||||
Other bank balances |
||||||||
Deposits with remaining maturity less than 12 months (refer footnote) |
278,000 | 313,500 | ||||||
Deposits with remaining maturity more than 12 months |
741,400 | 577,900 | ||||||
|
|
|
|
|||||
1,019,400 | 891,400 | |||||||
|
|
|
|
|||||
1,053,933 | 928,234 | |||||||
|
|
|
|
Footnote:
Includes deposit of Rs. 20,000 (000s) [Previous year Rs. 15,000 (000s)] held as security against bank overdraft facility. The balance outstanding of the overdraft facility as at balance sheet date is Nil. (Previous year Nil).
Note 15
Other current assets
March 14
Rs. (000s) |
March 13
Rs. (000s) |
|||||||
Unsecured, considered good; |
||||||||
Interest accrued on fixed deposits |
17,915 | 15,196 | ||||||
Service tax advance |
57 | 3,380 | ||||||
|
|
|
|
|||||
17,972 | 18,576 | |||||||
|
|
|
|
Note 16
Revenue from operations
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Sale of services |
||||||||||||
Membership fees |
30,849 | 29,196 | 30,522 | |||||||||
Service reports fees |
1,574,041 | 1,245,710 | 988,596 | |||||||||
Other operating income |
||||||||||||
Grants |
4,050 | 5,320 | 7,184 | |||||||||
Decision centre service credits |
9,022 | 6,615 | 3,821 | |||||||||
Convenience charges |
48,219 | 17,200 | | |||||||||
|
|
|
|
|
|
|||||||
1,666,181 | 1,304,041 | 1,030,123 | ||||||||||
|
|
|
|
|
|
F-96
Note 17
Other income
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Interest income: |
||||||||||||
Interest income on fixed deposits |
114,044 | 106,337 | 79,231 | |||||||||
Interest on non-current investments |
9,335 | 1,258 | | |||||||||
Interest from customers |
487 | 71 | | |||||||||
Interest on tax refunds |
| | 2,430 | |||||||||
Interest Others |
366 | 746 | | |||||||||
Other non-operating income |
||||||||||||
Profit on sale of fixed assets (net) |
| 422 | | |||||||||
Miscellaneous income |
16,254 | 10,689 | 4,380 | |||||||||
|
|
|
|
|
|
|||||||
140,486 | 119,523 | 86,041 | ||||||||||
|
|
|
|
|
|
Note 18
Employees benefits expense
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Salaries and allowances |
210,249 | 161,319 | 137,696 | |||||||||
Contribution to provident and other funds |
10,449 | 8,108 | 6,814 | |||||||||
Provision for employee stock appreciation rights |
21,995 | 7,825 | 11,500 | |||||||||
Staff welfare expenses |
12,307 | 10,970 | 10,849 | |||||||||
|
|
|
|
|
|
|||||||
255,000 | 188,222 | 166,859 | ||||||||||
|
|
|
|
|
|
F-97
Note 19
Establishment and other expenses
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Office rent |
58,048 | 58,065 | 58,048 | |||||||||
Electricity charges |
2,580 | 3,040 | 4,963 | |||||||||
Repairs and maintenance: |
||||||||||||
Computers and server expenses |
21,188 | 30,012 | 26,590 | |||||||||
Software support expenses |
45,419 | 44,058 | 29,111 | |||||||||
Building repairs |
716 | 597 | 616 | |||||||||
Office maintenance and services |
5,231 | 3,940 | 3,968 | |||||||||
Other repairs |
27 | 27 | 152 | |||||||||
Insurance charges |
601 | 696 | 654 | |||||||||
Rates and taxes |
296 | 759 | 889 | |||||||||
Travelling and conveyance |
11,930 | 10,785 | 8,561 | |||||||||
Data centre fees |
33,104 | 28,623 | 18,187 | |||||||||
Legal and professional services |
97,362 | 78,311 | 76,910 | |||||||||
Auditors remuneration (refer footnote) |
1,250 | 1,507 | 1,008 | |||||||||
Advertising and business development expenses |
42,158 | 29,547 | 17,287 | |||||||||
Other operating expenses |
18,923 | 11,759 | 11,635 | |||||||||
Wealth Tax |
67 | | 10 | |||||||||
Directors commission and sitting fees (refer note 29) |
2,084 | 1,215 | 570 | |||||||||
Donation |
5 | 5 | 355 | |||||||||
Bank charges |
1,781 | 1,562 | 822 | |||||||||
Provision for customer claims |
3,000 | | | |||||||||
Provision for doubtful advances |
8 | 1,732 | 895 | |||||||||
Loss on sale of fixed assets (net) |
75 | | 2,119 | |||||||||
Loss on account of foreign exchange fluctuations (net) |
26 | 17 | 3 | |||||||||
|
|
|
|
|
|
|||||||
345,879 | 306,257 | 263,352 | ||||||||||
|
|
|
|
|
|
|||||||
Footnote: |
||||||||||||
Auditors remuneration: |
||||||||||||
i) For statutory audit |
800 | 800 | 700 | |||||||||
ii) For tax audit |
240 | 240 | 210 | |||||||||
iii) For taxation matters |
110 | 115 | 20 | |||||||||
iv) For other services |
100 | 350 | 75 | |||||||||
v) For reimbursement of expenses |
| 2 | 3 | |||||||||
|
|
|
|
|
|
|||||||
1,250 | 1,507 | 1,008 | ||||||||||
|
|
|
|
|
|
Service tax which has been claimed as set off for input credit has not been included in the expenditure above.
F-98
Note 20
Finance costs
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Interest on delayed / deferred payment of income tax |
481 | | 1,009 | |||||||||
Interest on bank overdraft |
63 | 8 | | |||||||||
Interest on tax refund, reversed |
| 1,167 | | |||||||||
Interest on overdue fees reversed |
| | 202 | |||||||||
|
|
|
|
|
|
|||||||
544 | 1,175 | 1,211 | ||||||||||
|
|
|
|
|
|
Note 21
In accordance with the Accounting Standard on Employee Benefits (AS -15) (Revised 2005) notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures are made:
(i) | Salaries and allowances includes Rs. 21,435 (000s)- [(FY 2012-13 Rs. 20,068 (000s) and FY 2011-12 (unaudited) Rs. 8,633 (000s)] towards provision made in respect of accumulated compensated absences which is in the nature of long term employee benefits and has been actuarially determined as per the AS 15 (Revised). |
(ii) | Contribution to Provident Fund of Rs. 8,403 (000s) [(FY 12-13 Rs. 6,179 (000s)) and (FY 11-12 (Unaudited) Rs. 5,604 (000s))] have been recognised in the Statement of Profit and Loss. |
(iii) | Defined benefit plans: The Company offers Gratuity to its employees as defined benefit plan. The following table sets out the funded status of the defined benefit schemes and the amount recognized in the financial statements: |
Net employee benefit expense:
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Current service cost |
1,479 | 1,305 | 1,159 | |||||||||
Interest cost on benefit obligation |
747 | 610 | 444 | |||||||||
Expected / actual return on plan Assets |
(614 | ) | (561 | ) | (513 | ) | ||||||
Net actuarial losses / (gains) recognized in the year |
282 | 520 | 105 | |||||||||
Past service cost |
| 76 | 76 | |||||||||
Other effects of limit of Para 59(b) |
| (21 | ) | 7 | ||||||||
|
|
|
|
|
|
|||||||
Net benefit expense |
1,894 | 1,929 | 1,278 | |||||||||
|
|
|
|
|
|
|||||||
Charge to Statement of Profit & Loss |
1,894 | 1,929 | 1,278 | |||||||||
|
|
|
|
|
|
|||||||
Actual return on plan assets |
764 | 686 | 585 |
F-99
Changes in present value of the defined benefit obligation:
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Opening defined benefit obligation |
8,004 | 6,026 | 4,297 | |||||||||
Interest cost |
747 | 610 | 444 | |||||||||
Current service cost |
1,479 | 1,305 | 1,159 | |||||||||
Benefits paid |
(127 | ) | (637 | ) | (51 | ) | ||||||
Actuarial (gains)/losses on obligations |
432 | 700 | 177 | |||||||||
Past service cost |
| | | |||||||||
|
|
|
|
|
|
|||||||
Closing defined benefit obligation |
10,535 | 8,004 | 6,026 | |||||||||
Expected Employers contribution for next year |
2,500 | 2,500 | 2,000 |
Changes in fair value of plan assets:
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Opening fair value of plan assets |
8,390 | 7,645 | 4,284 | |||||||||
Expected return on plan assets |
614 | 561 | 513 | |||||||||
Actuarial gain / (losses) |
150 | 125 | 72 | |||||||||
Contributions by employer |
2,500 | 696 | 2,827 | |||||||||
Benefits Paid |
(127 | ) | (637 | ) | (51 | ) | ||||||
|
|
|
|
|
|
|||||||
Closing fair value of plan assets |
11,527 | 8,390 | 7,645 | |||||||||
|
|
|
|
|
|
Net Asset / (Liability) recognized in the Balance Sheet:
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Present value of the defined benefit obligation at the end of the year |
(10,535 | ) | (8,004 | ) | (6,026 | ) | ||||||
Fair value of plan assets at the end of the year |
11,527 | 8,390 | 7,645 | |||||||||
Net asset / (liability) |
992 | 386 | 1,619 | |||||||||
Unrecognized past service cost |
| | 76 | |||||||||
Excess provision for earlier years. |
| | (7 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net asset / (liability) recognized in the Balance Sheet |
992 | 386 | 1,688 | |||||||||
|
|
|
|
|
|
Experience Adjustments:
31.03.2014 | 31.03.2013 | 31.03.2012 | 31.03.2011 | 31.03.2010 | ||||||||||||||||
Rs. (000s) | Rs. (000s) | Rs. (000s) | Rs. (000s) | Rs. (000s) | ||||||||||||||||
Defined benefit obligation |
10,535 | 8,004 | 6,026 | 4,297 | 2,716 | |||||||||||||||
Plan assets |
11,527 | 8,390 | 7,645 | 4,284 | 2,011 | |||||||||||||||
Surplus / (deficit) |
992 | 386 | 1,619 | (13 | ) | (705 | ) | |||||||||||||
Exp. adjustment on plan liabilities |
1,959 | (206 | ) | 337 | 779 | 71 | ||||||||||||||
Exp. adjustment on plan assets |
150 | 14 | 72 | 161 | 49 |
F-100
Investment details of insurer managed funds:
March 14
% |
March 13
% |
March 12
% |
||||||||||
Central and state government securities |
47 | 53 | 53 | |||||||||
Bonds / debenture |
32 | 43 | 43 | |||||||||
Equity shares |
5 | 4 | 4 | |||||||||
Money market instruments / FD |
15 | | | |||||||||
Other government approved securities |
1 | | | |||||||||
|
|
|
|
|
|
|||||||
TOTAL |
100 | 100 | 100 | |||||||||
|
|
|
|
|
|
The principal assumptions used in determining gratuity and pension benefit obligations for the Companys plans are shown below:
March 14 | March 13 | March 12 | ||||
Discount rate |
9.15% | 8.05% | 8.30% | |||
Expected rate of return on assets |
8.00% | 7.50% | 7.50% | |||
Salary escalation |
10.50% | 10.00% | 9.00% | |||
Mortality |
Indian Assured
Lives (2006-08) ULT Table |
Indian Assured
Lives (2006-08) ULT Table |
LIC (1994-96)
Mortality Table |
The discount rate is based on the prevailing market yields of Government of India securities as at the balance sheet date for the estimated term of the obligations. The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors. such as supply and demand in the employment markets.
(iv) | The Company has a long term incentive plan for eligible employees whereby they are entitled for cash payment against appreciation in notional value of share units (that is determined based on EPS and benchmarked multiple). Current year provision is Rs. 21,995 (000s), [(FY 12-13 Rs. 7,825 (000s)) and (FY 11-12 (Unaudited) Rs. 11,500 (000s))], for such appreciation in value. |
F-101
Note 22
Expenditure in foreign currency
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Net Dividend remitted in foreign exchange: |
||||||||||||
Final Dividend: |
||||||||||||
Period to which it relates |
Apr 12 to Mar 13 | Apr 11 to Mar 12 | Apr 10 to Mar 11 | |||||||||
No of non-resident shareholders |
1 | 1 | 1 | |||||||||
Number of equity shares held by them (Nos. 000s) |
6,875 | 6,875 | 4,998 | |||||||||
Amount in Rs. (000s) |
13,750 | 13,750 | 4,998 | |||||||||
Interim Dividend: |
||||||||||||
Period to which it relates |
Apr 13 to Mar 14 | Apr 12 to Mar 13 | | |||||||||
No of non-resident shareholders |
1 | 1 | | |||||||||
Number of equity shares held by them (Nos. 000s) |
6,875 | 6,875 | | |||||||||
Amount in Rs. (000s) |
34,375 | 34,375 | | |||||||||
Others Matters: |
||||||||||||
Software expenses |
6,434 | | | |||||||||
Director fees |
210 | 229 | 110 | |||||||||
Professional fees |
762 | 941 | 376 | |||||||||
|
|
|
|
|
|
|||||||
7,406 | 1,170 | 486 | ||||||||||
|
|
|
|
|
|
Note 23
Operating Lease
The Company has taken office premises on operating lease.
Future minimum rentals payable under non-cancellable operating lease are as under:
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Not later than one year |
58,048 | 24,187 | 58,048 | |||||||||
Later than one year but not later than five years |
24,187 | | 24,187 | |||||||||
Later than five years |
| | |
Note 24
Contingent Liabilities
March 14
Rs. (000s) |
March 13
Rs.(000s) |
March 12
Rs. (000s) |
||||||||||
(i) Claims against Company not acknowledged as debts |
||||||||||||
(a) In respect of service tax matters |
| 1,770 | 1,770 | |||||||||
(b) Other claims |
3,500 | 3,500 | 3,500 |
(ii) | The Company is a defendant in various legal actions and a party to claims which arose during the ordinary course of business. The Companys Management believes based on the facts presently known, that the results of these actions will not have a material impact on the Companys financial statements. |
F-102
Note 25
Capital and Other Commitments
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
(i) Estimated amount of contracts remaining to be executed on Capital account and not provided for: |
||||||||||||
Tangible assets |
17,701 | 2,149 | | |||||||||
Intangible assets |
49,323 | 22,682 | 466 | |||||||||
|
|
|
|
|
|
|||||||
Total commitments |
67,024 | 24,831 | 466 | |||||||||
|
|
|
|
|
|
|||||||
Advances paid against such contracts |
29,228 | 3,923 | 8,865 | |||||||||
(ii) Other commitments |
||||||||||||
(a) Operating leases (refer note 23) |
Note 26
Segment reporting
As the Company has no activities other than that of providing Credit Information Services primarily in India, there are no separate segments in terms of Accounting Standards on Segment Reporting (AS-17) notified under the Companies 2006 (Accounting Standards) Rules.
Note 27
As per the Accounting Standard on Related Party Disclosures (AS18) , notified by the Companies (Accounting Standards) Rules, 2006, the related parties of the Company are as follows :
(i) Details of related parties:
Description of Relationship |
Name of Related Parties |
|||||
(a) Company holding more than 20% shares | Transunion International Inc. (w.e.f. 21.12.2011) | |||||
(b) Key management personnel | Mr. Arun Thukral (Managing Director) |
(ii) Details of related party transactions during the year ended Mar 31, 2014 and outstanding balance as on Mar 31, 2014:
March 14
Rs. (000s) |
March 12
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
(a) Key Management Personnel |
||||||||||||
Managing Director |
||||||||||||
Mr. Arun Thukral |
||||||||||||
Remuneration* |
21,273 | 18,063 | 13,224 | |||||||||
Outstanding advances |
| 971 | 146 |
* | Leave encashment, Gratuity and ESAR are included on payment basis |
F-103
Note 28
Earnings Per Share
In accordance with the Accounting Standard on Earnings Per Share (AS-20) notified by the Companies (Accounting Standards) Rules, 2006, the Earnings Per Share has been computed as under:
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Profit for the year after tax (Rs. 000s)(a) |
595,277 | 443,625 | 325,026 | |||||||||
Weighted average number of |
||||||||||||
Equity shares outstanding (No 000s)(b) |
25,000 | 25,000 | 25,000 | |||||||||
Earnings per share (Rs.) |
23.81 | 17.74 | 13.00 | |||||||||
(a)/(b) {Basic and Diluted} |
Note 29
Directors commission which is subject to shareholders approval
Commission paid/payable to Directors which is subject to Shareholders approval:
March 14
Rs. (000s) |
March 13
Rs. (000s) |
March 12
Rs. (000s) |
||||||||||
Particulars. |
||||||||||||
Managing Director |
83 | | | |||||||||
Non-Executive Directors |
644 | | |
Note 30
Previous years figures has been regrouped/ reclassified wherever necessary to correspond with the current years classification/ disclosure.
For and on behalf of the Board
M. V. Nair | Arun Thukral | Vivek Kumar Aggarwal | Swati Naik | |||
Chairman | Managing Director | CFO & Exec. VP | Company Secretary | |||
Mumbai, June 10, 2014 |
F-104
Deloitte Haskins & Sells
Chartered Accountants
Tower 3, 27th32nd Floor
Indiabulls Finance Centre
Elphinstone Mill Compound
Senapati Bapat Marg
Elphinstone (W), Mumbai400 013
India
Tel: +91 (22) 6185 4000
Fax: +91 (22) 6185 4501/4601
To the Board of Directors of
Credit Information Bureau (India) Limited
We have audited the accompanying financial statements of Credit Information Bureau (India) Limited, which comprise the balance sheet as of March 31, 2013, and the related statements of profit and loss, and cash flow for the year then ended, and the related notes to the financial statements, which, as described in Note 2 to the financial statements, have been prepared in accordance with the provisions contained in Section 211(3C) of the Companies Act, 1956, read with Revised Schedule VI thereto, which are the generally accepted accounting principles in India.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with generally accepted accounting principles in India; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
F-105
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Credit Information Bureau (India) Limited as of March 31, 2013, and the results of its operations and its cash flows for the year then ended in accordance with generally accepted accounting principles in India.
Emphasis of Matter
As discussed in Note 1 to the financial statements, the Company prepares its financial statements in accordance with generally accepted accounting principles in India, which differs from accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
/s/ Deloitte Haskins & Sells
CHARTERED ACCOUNTANTS
Mumbai, India
June 11, 2013
F-106
CREDIT INFORMATION BUREAU (INDIA) LIMITED
BALANCE SHEET AS AT MAR 31, 2013
F-107
CREDIT INFORMATION BUREAU (INDIA) LIMITED
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MAR 31, 2013
Note No. |
Mar 31, 2013
Rs. (000s) |
Mar 31, 2012
Rs. (000s) |
Mar 31, 2011
Rs.(000s) |
|||||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||||||
Income |
||||||||||||||||
Revenue from operations |
16 | 1,304,041 | 1,030,123 | 756,532 | ||||||||||||
Other income |
17 | 119,523 | 86,041 | 50,074 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total revenue |
1,423,564 | 1,116,164 | 806,606 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Expenses |
||||||||||||||||
Employee benefits expense |
18 | 189,518 | 167,662 | 122,043 | ||||||||||||
Establishment and other expenses |
19 | 304,961 | 262,549 | 210,461 | ||||||||||||
Royalty & Software Technology Fees |
186,604 | 147,603 | 99,376 | |||||||||||||
Finance costs |
20 | 1,175 | 1,211 | 1,220 | ||||||||||||
Depreciation and amortisation expense |
10 | 83,461 | 55,522 | 49,720 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total expenses |
765,719 | 634,547 | 482,820 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Profit before tax |
657,845 | 481,617 | 323,786 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Less: Tax expense |
||||||||||||||||
Current tax |
222,100 | 161,839 | 109,100 | |||||||||||||
Earlier years tax written back |
(6,594 | ) | (156 | ) | (258 | ) | ||||||||||
Deferred tax charge / (credit) |
(1,286 | ) | (5,092 | ) | 25 | |||||||||||
|
|
|
|
|
|
|||||||||||
214,220 | 156,591 | 108,867 | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Profit for the year |
443,625 | 325,026 | 214,919 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Earning per equity share-Basic and Diluted |
17.74 | 13.00 | 8.60 | |||||||||||||
(nominal value Rs10 per share) |
||||||||||||||||
Summary of significant accounting policies |
2 |
F-108
CREDIT INFORMATION BUREAU (INDIA) LIMITED
CASH FLOW FOR THE YEAR ENDED MAR 31, 2013
F-109
CREDIT INFORMATION BUREAU (INDIA) LIMITED
CASH FLOW FOR THE YEAR ENDED MAR 31, 2013(Continued)
Mar 31, 2013
Rs. (000s) |
Mar 31, 2012
Rs. (000s) |
Mar 31, 2011
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
CASH FLOW FROM FINANCING ACTIVITIES |
||||||||||||
Dividend paid on equity shares |
(175,000 | ) | (25,000 | ) | | |||||||
Tax on equity dividend paid |
(28,389 | ) | (4,056 | ) | | |||||||
Interest paid on overdraft |
(8 | ) | | | ||||||||
Cash used in Financing Activities(C) |
(203,397 | ) | (29,056 | ) | | |||||||
|
|
|
|
|
|
|||||||
Net Increase / (Decrease) in cash equivalent(A+B+C) |
15,453 | (20,971 | ) | 28,595 | ||||||||
Add: Opening cash and cash equivalents |
21,381 | 42,352 | 13,757 | |||||||||
|
|
|
|
|
|
|||||||
Closing cash and cash equivalents at the end of the year |
36,834 | 21,381 | 42,352 | |||||||||
|
|
|
|
|
|
F-110
CREDIT INFORMATION BUREAU [INDIA] LIMITED
Notes forming part of financial statements for the year ended Mar 31, 2013
1. Background
CIBIL is Indias pioneer credit information company. It creates immense value for financial institutions by providing objective data and tools to help them manage risk, and devise appropriate lending strategies thus reducing cost and maximizing portfolio profitability. CIBIL benefits both credit grantors and consumers by collecting, analyzing, and delivering information on credit histories of millions of borrowers. It provides its members with advanced risk management tools on both consumer and commercial borrowers, thus enabling them make sound credit decisions across both individuals and businesses.
These financial statements have been prepared and authorized by the Board of Directors of the Company on June 11, 2013 on the basis of a request and undertaking received from one of its shareholders viz., TransUnion International Inc., to be included, in accordance with Rule SX 3-09 in the Form 10-K of TransUnion Holding Company Inc., USA (ultimate parent company of TransUnion International Inc.) for the year ended 31st December, 2012 to be filed with the U.S. Securities and Exchange Commission (SEC). These financial statements have been prepared in accordance with generally accepted accounting principles in India. In reliance of an exemption granted by the Securities and Exchange Commission to TransUnion Holding Company, these financial statements have not been reconciled to US GAAP in any of the years presented.
2. Significant Accounting Policies
2.1 System of Accounting
The Company follows the accrual concept in the preparation of accounts. The Balance Sheet and the Profit and Loss Account of the Company are prepared in accordance with the provisions contained in Section 211 of the Companies Act, 1956, read with Revised Schedule VI thereto.
The preparation of the financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as on the date of the financial statements and the reported income and expenses. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual result could differ from the estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialised. Any changes in such estimates are recognised prospectively.
2.2 Revenue Recognition
a) | Initial Membership Fees are recognised on admission of members. |
b) | Annual Membership Fees are recognised proportionately for the period of such membership. |
c) | Service Report Fees and Decision Centre Service credits are recognised on rendering of services. |
d) | Interest and other dues are recognised on accrual basis. |
2.3 Grants
Grants received and accrued are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, based on the claims made as laid down in Accounting Standard Accounting for Government Grants (AS-12) notified by the Companies (Accounting Standards) Rules, 2006.
F-111
2.4 Foreign Currency Translation
Foreign currency transactions are recorded at rates as on the date of the transaction. Exchange differences arising on foreign currency transactions settled during the year are recognised in the Statement of Profit and Loss.
All foreign currency denominated monetary assets and liabilities are translated at the exchange rates prevailing on the Balance Sheet date. The resultant exchange differences are recognised in the Statement of Profit and Loss.
2.5 Tangible Assets and Depreciations
a) | Tangible assets have been stated at purchase/acquisition cost inclusive of installation cost less accumulated depreciation. |
b) | Leasehold improvements are amortised over the period of the lease. |
c) | The Company adopts Straight Line Method of depreciation at the rates prescribed under Schedule XIV to the Companies Act, 1956 or Managements experience and estimate of useful life of assets, whichever is higher, as detailed below: |
Asset Head |
Depreciation Rates | |||
Computers* |
20.00 | % | ||
Office Equipment |
16.67 | % | ||
Furniture & Fixtures |
16.67 | % | ||
Electrical Installations |
16.67 | % | ||
Vehicles |
25.00 | % | ||
Mobile Phones |
50.00 | % |
* | During the year the estimated useful life of computers is revised to 5 years from 6 years in the previous year. |
d) | Capital work-in-progress: |
Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest (if any).
2.6 Intangible Assets and Amortisation
a) | Intangible assets are stated at cost less accumulated amortisation. |
b) | Intangible assets are amortised on the Straight Line Basis over the useful life. System Softwares (including related Application Softwares) are amortised over the estimated useful life or five years (six years in the previous year) whichever is lower. Trademark cost is amortised over 5 years. Any expenses on Software for support and maintenance are charged to the Statement of Profit and Loss. |
c) | Intangible assets under development: |
Projects under which intangible assets are not ready for their intended use and intangible assets under development are carried at cost, comprising direct cost, related incidental expenses and attributable interest (if any).
2.7 Operating Leases
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis.
F-112
2.8 Impairment of Assets
The carrying values of assets / cash generating units at each Balance Sheet date are reviewed for impairment of assets. If any indication of such impairment exists, then the recoverable amount of such assets is estimated and impairment is recognized, for the excess of the carrying amount of these assets vs their recoverable amount. The recoverable amount is considered as the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset in prior accounting periods no longer exists or may have decreased such reversal of impairment loss is recognised.
2.9 Investments
a) | Long term Investments are carried at cost less provision (if any) for diminution (other than temporary) in value of such investments. |
b) | Current Investments are carried at the lower of cost or fair value on an individual basis. |
2.10 Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with a maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
2.11 Employee Benefits
a) | Liability in respect of Privilege Leave which is of short term nature and Leave Travel Allowance is provided based on the expected cost and period of service which entitles the employee to such benefits. |
b) | The Companys contribution to Employees Provident Fund paid / payable during the year is recognised in the statement of profit and loss. |
c) | The Company has a long term incentive plan for eligible employees whereby they are entitled for cash payment against appreciation in notional value of share units (that is determined based on EPS and benchmarked multiple) over long term. Provision is made for any such appreciation at end of every year, till the grant is either exercised or lapsed, and the cost is fully charged to the Statement of Profit and Loss as part of Employees benefits expense. |
Defined Benefits Plan:
d) | Liability for compensated absences in respect of sick leave and privilege Leave which is of long term nature is actuarially determined based on the Projected Unit Credit method. |
e) | The Companys liability towards gratuity is determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Actuarial gains and losses based on actuarial valuation done by an independent actuary carried out annually are recognised immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation. |
F-113
2.12 Taxes on Income
Current Tax is the amount of the tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961. Deferred Tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods.
Deferred Tax Assets in respect of unabsorbed depreciation and carry forward of losses are recognised if there is virtual certainty that there will be sufficient future taxable income available to realise such losses. Other Deferred Tax Assets are recognised if there is reasonable certainty that there will be sufficient future taxable income to realise such assets. Deferred tax assets are reviewed at each balance sheet date for their realisabilty.
2.13 Provisions and Contingencies
A provision is recognised when the Company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding employee benefits) are not discounted to their present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in Notes to Accounts.
2.14 Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
Note 3
Share Capital
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | |||||||
Authorised capital |
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50,000,000 (31st March 2012: 50,000,000) equity shares of Rs. 10/- each |
500,000 | 500,000 | ||||||
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Issued, Subscribed and fully paid up shares |
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25,000,000 (31st March 2012: 25,000,000) equity shares of Rs. 10/- each |
250,000 | 250,000 | ||||||
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TOTAL |
250,000 | 250,000 | ||||||
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a. | Reconciliation of equity shares at the beginning and at the end of the year. |
Mar 31, 2013 | Mar 31, 2012 | |||||||||||||||
(Audited) | (Unaudited) | |||||||||||||||
No (000s) | Rs. (000s) | No (000s) | Rs. (000s) | |||||||||||||
Particulars |
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Equity shares at the beginning of the year |
25,000 | 250,000 | 25,000 | 250,000 | ||||||||||||
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Equity shares outstanding at the end of the year |
25,000 | 250,000 | 25,000 | 250,000 | ||||||||||||
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F-114
b. | Details of shareholders holding more than 5% shares in the Company |
Mar 31, 2013 | Mar 31, 2012 | |||||||||||||||
(Audited) | (Unaudited) | |||||||||||||||
No (000s) | % of Holding | No (000s) | % of Holding | |||||||||||||
Name of the shareholder |
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TransUnion International Inc. (USA) |
6,875 | 27.5 | % | 6,875 | 27.5 | % | ||||||||||
State Bank of India |
2,500 | 10.0 | % | 2,500 | 10.0 | % | ||||||||||
ICICI Bank Ltd |
2,500 | 10.0 | % | 2,500 | 10.0 | % |
c. | Details of rights, preferences and restrictions attached to the equity shareholders: |
The Company has only one class of equity shares having a par value of Rs. 10 per share. Members of the Company holding equity shares capital therein have a right to vote, on every resolution placed before the Company and right to receive dividend. The voting rights on a poll is in proportion to the share of the paid up equity capital of the Company held by the shareholders. The Company declares dividends in Indian rupees. The interim and final dividend is proposed by the Board of Directors. However, the final dividend is subject to the approval of the Shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company in proportion to their shareholding.
Note 4
Reserves and Surplus
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | |||||||
General Reserve |
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Balance as per last balance sheet |
24,377 | | ||||||
Add: transfer from Statement of Profit and Loss |
44,363 | 24,377 | ||||||
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Closing Balance |
68,740 | 24,377 | ||||||
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Surplus in the Statement of Profit and Loss |
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Balance as per last balance sheet |
925,326 | 682,788 | ||||||
Add: Profit for the year |
443,625 | 325,026 | ||||||
Less: Transferred to: |
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General Reserve |
44,363 | 24,377 | ||||||
Interim dividend |
125,000 | | ||||||
Final dividend |
50,000 | 50,000 | ||||||
Tax on dividend |
28,776 | 8,111 | ||||||
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Total |
248,139 | 82,488 | ||||||
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Closing balance |
1,120,812 | 925,326 | ||||||
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1,189,552 | 949,703 | |||||||
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F-115
Note 5
Deferred tax liabilities (net)
The major components of deferred tax liabilities and deferred tax assets are as under:
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | |||||||
Deferred tax liabilities(A) |
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Difference between the book balance and tax balance of fixed assets. |
34,987 | 34,669 | ||||||
Deferred tax assets(B) |
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Provision for employee benefits |
14,203 | 14,998 | ||||||
Provision for expenses |
5,567 | 3,168 | ||||||
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Net deferred tax liabilities(A-B) |
15,217 | 16,503 | ||||||
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Charge / (credit) for the year |
(1,286 | ) | (5,092 | ) | ||||
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Note 6
Other long-term liabilities
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | |||||||
Deferred income |
42 | 6,002 | ||||||
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42 | 6,002 | |||||||
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Note 7
Provisions
Long-term | Short-term | |||||||||||||||
Mar 13
Rs (000s) |
Mar 12
Rs. (000s) |
Mar 13
Rs. (000s) |
Mar 12
Rs (000s) |
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(Audited) | (Unaudited) | (Audited) | (Unaudited) | |||||||||||||
Provision for employee benefits |
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Provision for gratuity |
1,000 | 1,000 | | | ||||||||||||
Provision for compensated absences |
37,340 | 24,890 | 3,447 | 2,837 | ||||||||||||
Provision for employee stock appreciation rights (refer note 21 (iv)) |
11,710 | 11,300 | 9,950 | 6,200 | ||||||||||||
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50,050 | 37,190 | 13,397 | 9,037 | |||||||||||||
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Other provisions |
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Provision for income tax |
| | 11,986 | 18,605 | ||||||||||||
Provision for wealth tax |
| | | 10 | ||||||||||||
Provision for proposed dividend |
| | 50,000 | 50,000 | ||||||||||||
Provision for dividend tax |
| | 8,497 | 8,111 | ||||||||||||
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| | 70,483 | 76,726 | |||||||||||||
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50,050 | 37,190 | 83,880 | 85,763 | |||||||||||||
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F-116
Note 8
Trade payables
Mar 13 Rs.
(000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | |||||||
Due to: |
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Micro and small enterprises [refer footnote [i] ] |
74 | | ||||||
Others |
111,579 | 80,606 | ||||||
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111,653 | 80,606 | |||||||
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Footnote
(i) | Trade payables includes Rs. 74(000s) (Previous Year Rs. Nil/-) payable to Suppliers who have confirmed that they are registered under the Micro, Small and Medium Enterprises Development Act, 2006. This has been relied upon by the auditors. No interest has been due to be paid/ payable by the Company during the year to these Suppliers (Previous Year Rs. Nil/-). |
Note 9
Other current liabilities
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | |||||||
Other payables |
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Advance from customers |
7,946 | 12,053 | ||||||
Unearned income |
3,986 | 1,669 | ||||||
Deferred income |
4,050 | 3,410 | ||||||
Taxes payable |
7,491 | 2,238 | ||||||
Others |
167 | 170 | ||||||
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23,640 | 19,540 | |||||||
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F-117
Note 10
Fixed assets Rs. (000s)
Gross block | Depreciation and Amortisation | Net block | ||||||||||||||||||||||||||||||||||||||
Description |
As at
Mar 31, |
Additions | Deductions |
As at
Mar 31, |
As at
Mar 31, |
Charges | Deductions |
As at
Mar 31, |
As at
Mar 31, |
As at
Mar 31, |
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2012 | during the period | 2013 | 2012 | during the period | 2013 | 2013 | 2012 | |||||||||||||||||||||||||||||||||
Tangible assets |
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Leasehold improvements |
27,931 | | 1,560 | 26,371 | 16,283 | 3,405 | 1,560 | 18,128 | 8,243 | 11,648 | ||||||||||||||||||||||||||||||
(28,405 | ) | ( | ) | (474 | ) | (27,931 | ) | (13,352 | ) | (3,405 | ) | (474 | ) | (16,283 | ) | (11,648 | ) | (15,053 | ) | |||||||||||||||||||||
Computers (Refer note i) |
172,714 | 28,124 | 140 | 200,698 | 84,536 | 36,667 | 103 | 121,100 | 79,598 | 88,178 | ||||||||||||||||||||||||||||||
(165,605 | ) | (24,145 | ) | (17,036 | ) | (172,714 | ) | (76,629 | ) | (24,383 | ) | (16,476 | ) | (84,536 | ) | (88,178 | ) | (88,976 | ) | |||||||||||||||||||||
Office equipments |
10,066 | 96 | 68 | 10,094 | 5,824 | 1,074 | 49 | 6,849 | 3,245 | 4,242 | ||||||||||||||||||||||||||||||
(11,836 | ) | (1,353 | ) | (3,123 | ) | (10,066 | ) | (5,498 | ) | (1,558 | ) | (1,232 | ) | (5,824 | ) | (4,242 | ) | (6,338 | ) | |||||||||||||||||||||
Furniture and fixtures |
4,856 | 471 | 590 | 4,737 | 3,368 | 407 | 590 | 3,185 | 1,552 | 1,488 | ||||||||||||||||||||||||||||||
(4,840 | ) | (16 | ) | ( | ) | (4,856 | ) | (3,014 | ) | (354 | ) | ( | ) | (3,368 | ) | (1,488 | ) | (1,826 | ) | |||||||||||||||||||||
Electrical installations |
392 | 6 | | 398 | 189 | 48 | | 237 | 161 | 203 | ||||||||||||||||||||||||||||||
(418 | ) | ( | ) | (26 | ) | (392 | ) | (167 | ) | (48 | ) | (26 | ) | (189 | ) | (203 | ) | (251 | ) | |||||||||||||||||||||
Vehicles |
7,244 | 8,131 | 4,575 | 10,800 | 2,902 | 2,414 | 3,078 | 2,238 | 8,562 | 4,342 | ||||||||||||||||||||||||||||||
(6,315 | ) | (929 | ) | ( | ) | (7,244 | ) | (1,126 | ) | (1,776 | ) | ( | ) | (2,902 | ) | (4,342 | ) | (5,190 | ) | |||||||||||||||||||||
Tangible assets totalcurrent year |
223,203 | 36,828 | 6,933 | 253,098 | 113,102 | 44,015 | 5,380 | 151,737 | 101,361 | 110,101 | ||||||||||||||||||||||||||||||
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(217,419 | ) | (26,443 | ) | (20,659 | ) | (223,203 | ) | (99,786 | ) | (31,524 | ) | (18,208 | ) | (113,102 | ) | (110,101 | ) | (117,634 | ) | |||||||||||||||||||||
Intangible assets |
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Software (Refer note i) |
215,500 | 46,297 | | 261,797 | 122,543 | 39,411 | | 161,954 | 99,843 | 92,957 | ||||||||||||||||||||||||||||||
(233,993 | ) | (37,540 | ) | (56,033 | ) | (215,500 | ) | (154,529 | ) | (23,956 | ) | (55,942 | ) | (122,543 | ) | (92,957 | ) | (79,464 | ) | |||||||||||||||||||||
Trademark |
176 | | ( | ) | 176 | 51 | 35 | | 86 | 90 | 125 | |||||||||||||||||||||||||||||
(176 | ) | ( | ) | ( | ) | (176 | ) | (9 | ) | (42 | ) | ( | ) | (51 | ) | (125 | ) | (166 | ) | |||||||||||||||||||||
Intangible assets totalcurrent year |
215,676 | 46,297 | | 261,973 | 122,594 | 39,446 | | 162,040 | 99,933 | 93,082 | ||||||||||||||||||||||||||||||
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(234,169 | ) | (37,540 | ) | (56,033 | ) | (215,676 | ) | (154,538 | ) | (23,998 | ) | (55,942 | ) | (122,594 | ) | (93,082 | ) | (79,630 | ) | |||||||||||||||||||||
Intangible assets under Development |
10,863 | | 10,863 | | | | | | | 10,863 | ||||||||||||||||||||||||||||||
(8,504 | ) | (8,869 | ) | (6,510 | ) | (10,863 | ) | ( | ) | ( | ) | ( | ) | ( | ) | (10,863 | ) | (8,504 | ) | |||||||||||||||||||||
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Current PeriodTOTAL |
449,742 | 83,125 | 17,796 | 515,071 | 235,696 | 83,461 | 5,380 | 313,777 | 201,294 | 214,046 | ||||||||||||||||||||||||||||||
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Previous Year |
(460,092 | ) | (72,852 | ) | (83,202 | ) | (449,742 | ) | (254,324 | ) | (55,522 | ) | (74,150 | ) | (235,696 | ) | (214,046 | ) | (205,768 | ) | ||||||||||||||||||||
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Note:
(i) | The Company has revised the estimated useful life of Computers and Software from 6 years to 5 years in the current year. Consequently, the depreciation charge for the year is higher by Rs. 13,310(000s) (Previous year Rs. Nil/-(000s)). |
(ii) | The figures in brackets indicate Previous Year (unaudited). |
F-118
Note 11
Non-current investments
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | |||||||||||||
Quoted Investments |
No of Bonds | Face Value (Rs.) | ||||||||||||
7.38%, Rural Electrification Corporation Ltd. |
20,000 | 1,000 | 20,000 | | ||||||||||
7.36%, Power Finance Corporation Ltd. |
20,000 | 1,000 | 20,000 | | ||||||||||
7.08%, Indian Infrastructure Finance Co. Ltd. |
20,000 | 1,000 | 20,000 | | ||||||||||
7.40%, Indian Infrastructure Finance Co. Ltd. |
20,000 | 1,000 | 20,000 | | ||||||||||
7.34%, Indian Railway Finance Corpn. Ltd. |
20,000 | 1,000 | 20,000 | | ||||||||||
7.04%, Indian Railway Finance Corpn. Ltd. |
20,000 | 1,000 | 20,000 | | ||||||||||
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120,000 | | |||||||||||||
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(Aggregate market value of quoted securities as on 31.03.13 is Rs. 121,080 (000s) ) All Investments are made in the current year |
Note 12
Loans and advances
Long-term | Short-term | |||||||||||||||
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | (Audited) | (Unaudited) | |||||||||||||
Unsecured, considered good (unless otherwise stated) |
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(a) Capital advances |
3,923 | 8,865 | | | ||||||||||||
(b) Other loans & advances |
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Advance income tax (doubtful) |
2,550 | 1,227 | | | ||||||||||||
Less: Provision for doubtful TDS |
(2,550 | ) | (1,227 | ) | | | ||||||||||
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Advance income tax |
20,147 | 24,617 | | | ||||||||||||
Deposit with Financial Institution |
105,000 | 105,000 | 95,000 | 13,000 | ||||||||||||
Advance wealth tax |
19 | 19 | | | ||||||||||||
Deposits |
10,908 | 10,908 | | | ||||||||||||
Prepaid expenses |
2,104 | 2,621 | 18,223 | 22,534 | ||||||||||||
Employee advances (refer footnote (i)) |
| | 1,921 | 786 | ||||||||||||
Other advances |
| | 830 | 1,206 | ||||||||||||
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142,101 | 152,030 | 115,974 | 37,526 | |||||||||||||
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Footnote:
(i) | Employee advances includes advance against salary outstanding of Rs. 971 (000s) due from Mr. Arun Thukral (Managing Director) as on Mar 31, 2013 (Previous Year Rs. 146 (000s) |
F-119
Note 13
Trade receivables
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | |||||||
Unsecured, considered good: |
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Trade receivables outstanding for a period exceeding 6 months from the date they were due for payment |
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Other trade receivables |
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197,855 |
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135,504 |
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197,855 | 135,504 | |||||||
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Note 14
Cash and bank balances
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | |||||||
Cash and cash equivalents as per Accounting Standard 3 |
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Cash on hand |
18 | | ||||||
Remittance in transit |
33,100 | | ||||||
Balances with Banks: |
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Current accounts |
3,716 | 21,381 | ||||||
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36,834 | 21,381 | |||||||
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Other bank balances |
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Deposits with remaining maturity more than 3 months but less than 12 months |
313,500 | 729,500 | ||||||
Deposits with remaining maturity more than 12 months |
577,900 | 142,500 | ||||||
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891,400 | 872,000 | |||||||
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928,234 | 893,381 | |||||||
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Note 15
Other current assets
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
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(Audited) | (Unaudited) | |||||||
Unsecured, considered good; |
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Interest accrued on fixed deposits |
15,196 | 10,177 | ||||||
Service tax recoverable |
3,380 | 1,260 | ||||||
Interest on income tax refund |
| 1,383 | ||||||
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18,576 | 12,820 | |||||||
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F-120
Note 16
Revenue from operations
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
Mar 11
Rs. (000s) |
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(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Sale of Services |
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Membership fees |
29,196 | 30,522 | 27,671 | |||||||||
Service reports fees |
1,262,910 | 988,596 | 707,579 | |||||||||
Other operating income |
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Grants |
5,320 | 7,184 | 21,282 | |||||||||
Decision centre service credits |
6,615 | 3,821 | | |||||||||
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1,304,041 | 1,030,123 | 756,532 | ||||||||||
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Note 17
Other income
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
Mar 11
Rs. (000s) |
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(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Interest income comprises of: |
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Interest income on fixed deposits |
106,337 | 79,231 | 46,645 | |||||||||
Interest on tax free bonds |
1,258 | | | |||||||||
Interest from customers |
71 | | 378 | |||||||||
Interest on tax refunds |
| 2,430 | 1,176 | |||||||||
Interest Others |
746 | | | |||||||||
Other non-operating income |
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Profit on Sale of Assets (net) |
422 | | | |||||||||
Miscellaneous income |
10,689 | 4,380 | 1,585 | |||||||||
Reversal of provision for doubtful debts |
| | 290 | |||||||||
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119,523 | 86,041 | 50,074 | ||||||||||
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Note 18
Employees benefits expense
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
Mar 11
Rs. (000s) |
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(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Salaries and allowances |
161,319 | 137,696 | 99,858 | |||||||||
Contribution to provident and other funds |
8,108 | 6,814 | 6,335 | |||||||||
Provision for employee stock appreciation rights |
7,825 | 11,500 | 6,000 | |||||||||
Staff welfare expenses |
12,266 | 11,652 | 9,850 | |||||||||
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189,518 | 167,662 | 122,043 | ||||||||||
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F-121
Note 19
Establishment and other expenses
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
Mar 11
Rs. (000s) |
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(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Office rent |
58,065 | 58,048 | 57,802 | |||||||||
Electricity charges |
3,040 | 4,963 | 6,665 | |||||||||
Repairs and maintenance: |
||||||||||||
Computers and server expenses |
33,592 | 30,628 | 32,244 | |||||||||
Software support expenses |
44,058 | 29,111 | 21,287 | |||||||||
Building repairs |
597 | 616 | 1,224 | |||||||||
Office maintenance and services |
3,940 | 3,968 | 2,514 | |||||||||
Other repairs |
27 | 152 | | |||||||||
Insurance charges |
696 | 654 | 400 | |||||||||
Rates and taxes |
759 | 889 | 1,813 | |||||||||
Travelling and conveyance |
10,785 | 8,561 | 7,685 | |||||||||
Data centre fees |
25,043 | 14,149 | | |||||||||
Legal and professional services |
78,311 | 76,910 | 55,483 | |||||||||
Auditors remuneration (refer footnote (i)) |
1,507 | 1,008 | 885 | |||||||||
Advertising and business development expenses |
29,547 | 17,287 | 9,303 | |||||||||
Other operating expenses |
10,463 | 10,841 | 10,756 | |||||||||
Directors sitting fees |
1,215 | 570 | 515 | |||||||||
Donation |
5 | 355 | 56 | |||||||||
Bank charges |
1,562 | 822 | 307 | |||||||||
Provision for doubtful advances and TDS |
1,732 | 895 | 743 | |||||||||
Loss on sale of fixed assets |
| 2,119 | 779 | |||||||||
Loss on foreign exchange fluctuations (net) |
17 | 3 | | |||||||||
|
|
|
|
|
|
|||||||
304,961 | 262,549 | 210,461 | ||||||||||
|
|
|
|
|
|
|||||||
Footnote: |
||||||||||||
(i) Auditors remuneration: |
||||||||||||
a) For audit |
800 | 700 | 600 | |||||||||
b) For tax audit |
240 | 210 | 180 | |||||||||
c) For taxation matters |
15 | 20 | | |||||||||
d) For other services |
450 | 75 | 100 | |||||||||
e) For reimbursement of expenses |
2 | 3 | 5 | |||||||||
|
|
|
|
|
|
|||||||
1,507 | 1,008 | 885 | ||||||||||
|
|
|
|
|
|
Service tax which is being claimed as set-off for input credit has not been included in the expenditure above.
Note 20
Finance costs
Mar 13
Rs. (000s) |
Mar 12
Rs. (000s) |
Mar 11
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Interest on delayed / deferred payment of income tax |
| 1,211 | 1,220 | |||||||||
Interest on Bank Overdraft |
8 | | | |||||||||
Interest on tax refund reversed |
1,167 | | | |||||||||
|
|
|
|
|
|
|||||||
1,175 | 1,211 | 1,220 | ||||||||||
|
|
|
|
|
|
F-122
Note 21
In accordance with the Accounting Standard on Employee Benefits (AS -15) (Revised 2005) notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures are made:
(i) | Salaries and allowances includes Rs. 20,068 (000s)[(FY 2011-12 (Unaudited) Rs. 8,633 (000s) and (FY 2010-11 (Unaudited) Rs. 6,746 (000s)] towards provision made in respect of accumulated Compensated Absences which is in the nature of Long Term Employee Benefits and has been actuarially determined as per the AS 15 (Revised). |
(ii) | Contribution to Provident Fund of Rs. 6,179 (000s) [(FY 2011-12 (Unaudited) Rs. 5,604 (000s) and ((FY 2010-11 (Unaudited) Rs. 4,242 (000s)) have been recognised in the Statement of Profit and Loss. |
(iii) | Gratuity is currently valued on estimated basis and the Gratuity valuation is certified by the actuary and relied upon by the auditors. |
Net employee benefit expense :
Current Year
Rs. (000s) |
FY 2011-12
Rs. (000s) |
FY 2010-11
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Current service cost |
1,305 | 1,159 | 835 | |||||||||
Interest cost on benefit obligation |
610 | 444 | 290 | |||||||||
Expected/Actual Return on Plan Assets |
(561 | ) | (513 | ) | (158 | ) | ||||||
Net actuarial Losses / (Gains) recognised in the year |
520 | 105 | 619 | |||||||||
Past Service Cost |
76 | 76 | 76 | |||||||||
Other effects of limit of Para 59(b) |
(21 | ) | 7 | | ||||||||
|
|
|
|
|
|
|||||||
Net benefit expense |
1,929 | 1,278 | 1,662 | |||||||||
|
|
|
|
|
|
|||||||
Charge to Statement of Profit & Loss |
1,929 | 1,278 | 1,662 | |||||||||
|
|
|
|
|
|
|||||||
Actual return on plan assets |
686 | 585 | 318 |
Changes in present value of the defined benefit obligation:
Current Year
Rs. (000s) |
FY 2011-12
Rs. (000s) |
FY 2010-11
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Opening defined obligation |
6,026 | 4,297 | 2,716 | |||||||||
Interest cost |
610 | 444 | 290 | |||||||||
Current service cost |
1,305 | 1,159 | 835 | |||||||||
Benefits paid |
(637 | ) | (51 | ) | (323 | ) | ||||||
Actuarial (Gains)/Losses on obligations |
700 | 177 | 779 | |||||||||
Past service cost |
| | | |||||||||
|
|
|
|
|
|
|||||||
Closing defined benefit obligation |
8,004 | 6,026 | 4,297 | |||||||||
|
|
|
|
|
|
|||||||
Expected Employers contribution for next year |
2,500 | 2,000 | 2,400 |
F-123
Changes in fair value of plan assets:
Current Year
Rs. (000s) |
FY 2011-12
Rs. (000s) |
FY 2010-11
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Opening fair value of plan assets |
7,645 | 4,284 | 2,011 | |||||||||
Expected Return on plan assets |
561 | 513 | 158 | |||||||||
Actuarial Gain / (Losses) |
125 | 72 | 161 | |||||||||
Contributions by employer |
696 | 2,827 | 2,277 | |||||||||
Benefits Paid |
(637 | ) | (51 | ) | (323 | ) | ||||||
|
|
|
|
|
|
|||||||
Closing fair value of plan assets |
8,390 | 7,645 | 4,284 | |||||||||
|
|
|
|
|
|
Net Asset / (Liability) recognised in the Balance Sheet:
Current Year
Rs. (000s) |
FY 2011-12
Rs. (000s) |
FY 2010-11
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Present value of the defined benefit obligation at the end of the year |
(8,004 | ) | (6,026 | ) | (4,297 | ) | ||||||
Fair value of plan assets at the end of the year |
8,390 | 7,645 | 4,284 | |||||||||
|
|
|
|
|
|
|||||||
Net Asset/(Liability) |
386 | 1,619 | (13 | ) | ||||||||
Unrecognised past service cost |
| 76 | 152 | |||||||||
Excess provision for earlier years |
| (7 | ) | | ||||||||
|
|
|
|
|
|
|||||||
Net Asset / (Liability) recognised in the Balance Sheet |
386 | 1,688 | 139 | |||||||||
|
|
|
|
|
|
Experience Adjustments:
31.03.2013
Rs. (000s) |
31.03.2012
Rs. (000s) |
31.03.2011
Rs. (000s) |
31.03.2010
Rs. (000s) |
31.03.2009
Rs. (000s) |
||||||||||||||||
(Audited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
Defined benefit obligation |
8,004 | 6,026 | 4,297 | 2,716 | 1,633 | |||||||||||||||
Plan assets |
8,390 | 7,645 | 4,284 | 2,011 | 990 | |||||||||||||||
Surplus /(Deficit) |
386 | 1,619 | (13 | ) | (705 | ) | (643 | ) | ||||||||||||
Exp. Adjustment on plan liabilities |
(206 | ) | 337 | 779 | 71 | (72 | ) | |||||||||||||
Exp. Adjustment on plan assets |
14 | 72 | 161 | 49 | 17 |
Investment Details of Insurer Managed Funds
Current Year | FY 2011-12 | FY 2010-11 | ||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
% | % | % | ||||||||||
Central and State Government Securities |
53 | 53 | 53 | |||||||||
Bonds/ Debenture |
43 | 43 | 43 | |||||||||
Equity Shares |
4 | 4 | 4 | |||||||||
Money Market Instruments / FD |
| | | |||||||||
|
|
|
|
|
|
|||||||
TOTAL |
100 | 100 | 100 | |||||||||
|
|
|
|
|
|
F-124
The principal assumptions used in determining gratuity and pension benefit obligations for the Companys plans are shown below:
Current Year | FY 2011-12 | FY 2010-11 | ||||
(Audited) | (Unaudited) | (Unaudited) | ||||
Discount Rate |
8.05% | 8.30% | 8.30% | |||
Expected rate of return on assets |
7.50% | 7.50% | 7.50% | |||
Salary escalation |
10.00% | 9.00% | 9.00% | |||
Mortality |
Indian Assured
Lives (2006-08) ULT Table |
LIC (1994-96)
Mortality Table |
LIC (1994-96)
Mortality Table |
The estimates of future salary increases, considered in actuarial, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment markets.
(iv) | The Company has a long term incentive plan for eligible employees whereby they are entitled for cash payment against appreciation in notional value of share units (that is determined based on EPS and benchmarked multiple). Current year provision is Rs. 7,824(000s), (FY2011- 12 (Unaudited): Rs. (11,500 (000s)) and FY 2010-11 (Unaudited): Rs. (6,000 (000s))], for such appreciation in value. |
Note 22
Expenditure in foreign currency:
Current Year
Rs. (000s) |
FY 2011-12
Rs. (000s) |
FY 2010-11
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Net Dividend remitted in foreign exchange: |
||||||||||||
Final Dividend: |
||||||||||||
Period to which it relates |
Apr 11 to Mar 12 | Apr 10 to Mar 11 | NA | |||||||||
No of non resident shareholders |
1 | 1 | | |||||||||
Number of equity shares held by them (Nos 000s) |
6,875 | 4,998 | | |||||||||
Amount in Rs. (000s) |
13,750 | 4,998 | NA | |||||||||
Interim Dividend: |
||||||||||||
Period to which it relates |
Apr 12 to Mar 13 | NA | NA | |||||||||
No of non resident shareholders |
1 | | | |||||||||
Number of equity shares held by them (Nos 000s) |
6,875 | | | |||||||||
Amount in Rs. (000s) |
34,375 | NA | NA | |||||||||
Other Matters: |
||||||||||||
Director Fees |
229 | 110 | | |||||||||
Professional Fees |
941 | 376 | | |||||||||
Travelling Expenses |
| | 183 | |||||||||
Training Expenses |
| | 1,801 | |||||||||
|
|
|
|
|
|
|||||||
1,170 | 486 | 1,984 | ||||||||||
|
|
|
|
|
|
F-125
Note 23
Operating Lease
The Company has taken office premises on operating lease.
Future minimum rentals payable under non-cancellable operating lease are as under:
Mar 31, 2013
Rs. (000s) |
Mar 31, 2012
Rs. (000s) |
Mar 31, 2011
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
not later than one year |
24,187 | 58,048 | 58,048 | |||||||||
later than one year but not later than five years |
| 24,187 | 82,234 | |||||||||
later than five years |
| | |
Note 24
Contingent Liabilities
Mar 31, 2013
Rs. (000s) |
Mar 31, 2012
Rs. (000s) |
Mar 31, 2011
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
(i) Claims against Company not acknowledged as debts: |
||||||||||||
(a) In respect of Service Tax matters |
1,770 | 1,770 | 1,770 | |||||||||
(b) Other Claims |
3,500 | 3,500 | |
(ii) | The Company is a defendant in various legal actions and a party to claims which arose during the ordinary course of business. The Companys Management believes based on the facts presently known, that the results of these actions will not have a material impact on the Companys financial statements. |
Note 25
Capital and Other Commitments
Mar 31, 2013
Rs. (000s) |
Mar 31, 2012
Rs. (000s) |
|||||||
(Audited) | (Unaudited) | |||||||
(i) Estimated amount of contracts remaining to be executed on |
||||||||
Capital account and not provided for: |
||||||||
Tangible Assets |
2,149 | | ||||||
Intangible Assets |
22,682 | 466 | ||||||
|
|
|
|
|||||
Total Commitments |
24,831 | 466 | ||||||
|
|
|
|
|||||
Advances paid against such contracts |
3,923 | 8,865 |
(ii) | Other commitments |
(a) | Operating Leases (refer note 23) |
Note 26
Segment reporting
As the Company has no activities other than that of providing Credit Information Services primarily in India, there are no separate segments in terms of Accounting Standards on Segment Reporting (AS-17) notified under the Companies 2006 (Accounting Standards) Rules.
F-126
Note 27
As per the Accounting Standard on Related Party Disclosures (AS-18), notified by the Companies (Accounting Standards) Rules, 2006, the related parties of the Company are as follows:
(i) | Details of related parties: |
Description of Relationship |
Name of Related Parties |
|
(a) Company holding more than 20% shares |
TransUnion International Inc. (w.e.f 21.12.2011) | |
(b) Key Management Personnel |
Mr Arun Thukral (Managing Director) |
(ii) | Details of related party transactions during the year ended Mar 31, 2013 and outstanding balance as on Mar 31, 2013: |
(a) | Key management Personnel |
Mar 31, 2013
Rs. (000s) |
Mar 31, 2012
Rs. (000s) |
Mar 31, 2011
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Managing Director |
||||||||||||
Mr Arun Thukral |
||||||||||||
Remuneration* |
18,063 | 13,224 | 13,396 | |||||||||
Outstanding Advances |
971 | 146 | |
* | Leave encashment, Gratuity and ESAR are included on payment basis |
Note 28
Earnings Per Share
In accordance with the Accounting Standard on Earnings Per Share (AS-20) notified by the Companies (Accounting Standards) Rules, 2006, the Earnings Per Share has been computed as under:
Mar 31, 2013
Rs. (000s) |
Mar 31, 2012
Rs. (000s) |
Mar 31, 2011
Rs. (000s) |
||||||||||
(Audited) | (Unaudited) | (Unaudited) | ||||||||||
Profit for the year after tax Rs.(000s) |
443,625 | 325,026 | 214,919 | |||||||||
Weighted average number of |
||||||||||||
Equity shares outstanding (No. 000s) |
25,000 | 25,000 | 25,000 | |||||||||
Earnings per share (Rs.) |
17.74 | 13.00 | 8.60 | |||||||||
(a)/(b) {Basic and Diluted} |
Note 29
Previous years figure has been regrouped/ reclassified wherever necessary to correspond with the current years classification/ disclosure.
For and on behalf of the Board
sd | sd | |
M.V. Nair |
Arun Thukral | |
Chairman |
Managing Director | |
sd |
sd | |
Vivek Kumar Aggarwal |
Swati Naik | |
CFO and Exec. VP |
Company Secretary | |
Mumbai, June 11, 2013 |
F-127
At TransUnion we see information differentlynot just for what it is, but for what it can help people accomplish. Smarter brighter Stronger Personal Thriving Healthier greater decisions futures communities empowerment economies bottom lines certaintyWe call this information for good
29,545,455 Shares
TransUnion
Common Stock
Joint Book-Running Managers
Goldman, Sachs & Co. | J.P. Morgan | BofA Merrill Lynch | Deutsche Bank Securities |
RBC Capital Markets | Wells Fargo Securities | Credit Suisse |
Co-Managers
Drexel Hamilton |
Evercore ISI |
Loop Capital Markets | Stifel |
Through and including the 25 th day after the date of this prospectus, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligations to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses payable by the registrant expected to be incurred in connection with the issuance and distribution of common stock being registered hereby (other than underwriting discounts and commissions). All of such expenses are estimates, except for the Securities and Exchange Commission (SEC) registration fee, the Financial Industry Regulatory Authority (FINRA) filing fee and listing fee.
SEC registration fee |
$ | 90,808 | ||
FINRA filing fee |
117,722 | |||
NYSE listing fee |
250,000 | |||
Printing fees and expenses |
800,000 | |||
Legal fees and expenses |
2,750,000 | |||
Blue sky fees and expenses |
5,000 | |||
Registrar and transfer agent fees |
2,500 | |||
Accounting fees and expenses |
400,000 | |||
Miscellaneous |
83,970 | |||
|
|
|||
Total |
4,500,000 | |||
|
|
Item 14. Indemnification of Directors and Officers.
TransUnion is incorporated under the laws of Delaware.
Section 102(b)(7) of the Delaware General Corporation Law (the DGCL) allows a corporation to provide in its certificate of incorporation that a director of the corporation will not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except where the director breached the duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our amended and restated certificate of incorporation will provide for this limitation of liability. We will enter into indemnification agreements with our director nominees that provide for us to indemnify them to the fullest extent permitted by Delaware law.
Section 145 of the DGCL, or Section 145, provides, among other things, that a Delaware corporation may indemnify any person who was, is or is threatened to be made, party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporations best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful. A Delaware corporation may indemnify any persons who were or are a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted
II-1
in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporations best interests, provided further that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses (including attorneys fees) which such officer or director has actually and reasonably incurred.
Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would otherwise have the power to indemnify such person under Section 145.
Our amended and restated bylaws will provide that we must indemnify our directors and officers to the full extent authorized by the DGCL.
The indemnification rights set forth above shall not be exclusive of any other right which an indemnified person may have or hereafter acquire under any statute, provision of our amended and restated certificate of incorporation, our amended and restated bylaws, agreement, vote of stockholders or disinterested directors or otherwise. Notwithstanding the foregoing, we shall not be obligated to indemnify a director or officer in respect of a proceeding (or part thereof) instituted by such director or officer, unless such proceeding (or part thereof) has been authorized by the Board of Directors pursuant to the applicable procedure outlined in the amended and restated bylaws.
Section 174 of the DGCL provides, among other things, that a director, who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption, may be held jointly and severally liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time may avoid liability by causing his or her dissent to such actions to be entered in the books containing the minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.
We expect to maintain standard policies of insurance that provide coverage (1) to our directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act and (2) to us with respect to indemnification payments that we may make to such directors and officers.
The underwriting agreement provides for indemnification by the underwriters of us and our officers and directors, and by us of the underwriters, for certain liabilities arising under the Securities Act or otherwise in connection with this offering.
Item 15. Recent Sales of Unregistered Securities.
Within the past three years, the registrant has granted or issued the following securities of the registrant which were not registered under the Securities Act of 1933, as amended (the Securities Act).
Equity Securities
During the year ended December 31, 2012, we sold an aggregate of (i) 72,355,340 shares of common stock to affiliates of Goldman, Sachs & Co. in connection with its and Advent International Corporations (Advent) 2012 change of control acquisition of our predecessor entity (the 2012 Change in Control Transaction), (ii) 72,355,341 shares of common stock to affiliates of Advent in
II-2
connection with the 2012 Change in Control Transaction and (iii) 2,152,203 shares of common stock to existing and former employees at a weighted-average price of $6.88 per share. During the year ended December 31, 2013, we sold an aggregate of 748,495 shares of common stock to existing and former employees and directors at a weighted-average price of $7.83 per share. During the year ended December 31, 2014, we sold an aggregate of 909,833 shares of common stock to existing and former employees and directors at a weighted-average price of $10.34 per share. During the three months ended March 31, 2015, we sold an aggregate of 112,457 shares of common stock to existing and former employees and directors at a weighted-average price of $7.34 per share.
These securities were issued without registration in reliance on the exemptions afforded by Section 4(a)(2) of the Securities Act and Rules 505, 506 and 701 promulgated thereunder. No sales involved underwriters, underwriting discounts or commissions or public offerings of our securities.
Debt Securities
On March 21, 2012, we issued $600,000,000 principal amount of 9.625% Senior Notes due June 15, 2018 at a price of 100% of their face value resulting in approximately $600,000,000 of gross proceeds, which we used to partially fund the 2012 Change in Control Transaction. The initial purchasers for these notes were Goldman, Sachs & Co., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and RBC Capital Markets, LLC. On October 5, 2012, we completed an exchange offer in which we offered $600,000,000 aggregate principal amount of registered senior notes in exchange for 100% of the $600,000,000 aggregate principal outstanding of the unregistered senior notes.
On November 1, 2012, we issued $400,000,000 8.125%/8.875% Senior PIK Toggle Notes due June 15, 2018 at a price of 99.5% of their face value resulting in approximately $398,000,000 of gross proceeds, which we used primarily to pay a dividend to our shareholders. The initial purchasers for these notes were Goldman, Sachs & Co., Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. On August 16, 2013, we completed an exchange offer in which we offered $400,000,000 aggregate principal amount of registered 8.125%/8.875% Senior PIK Toggle Notes in exchange for 100% of the $400,000,000 aggregate principal outstanding of the unregistered 8.125%/8.875% Senior PIK Toggle Notes. We also registered an additional $191,245,974 in 8.125%/8.875% Senior PIK Toggle Notes, which we are able to use if we elect to pay all or a portion of the interest due with respect to any interest period in the form of additional 8.125%/8.875% Senior PIK Toggle Notes.
Each of the above offerings of debt securities was offered and sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act or to non-U.S. investors outside the United States in compliance with Regulation S of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) | Exhibits |
See the Exhibit Index immediately following the signature page hereto, which is incorporated by reference as if fully set forth herein.
(b) | Financial Statement Schedules |
The following Financial Statements Schedule is included herein:
Schedule ICondensed Financial Information of the registrant.
Schedule INotes to Financial Information of TransUnion
Schedule IIValuation and Qualifying Accounts.
II-3
Item 17. Undertakings.
The undersigned registrant hereby undertakes that:
(1) | The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. |
(2) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. |
(3) | (A) |
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
(B) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, Illinois, on June 15, 2015.
TransUnion | ||
By: |
/s/ Samuel A. Hamood |
|
Name: Samuel A. Hamood | ||
Title: Executive Vice President and Chief
Financial Officer |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on June 15, 2015.
*By: | /s/ Michael J. Forde | |
Michael J. Forde Attorney-in-fact |
II-5
EXHIBIT INDEX
Exhibit
|
Description |
|
1.1* | Form of Underwriting Agreement by and among TransUnion and the underwriters named therein | |
3.1*** | Form of Amended and Restated Certificate of Incorporation of TransUnion | |
3.2*** | Form of Amended and Restated Bylaws of TransUnion | |
4.1 | Indenture, dated March 21, 2012, among TransUnion (formerly TransUnion Holding Company, Inc.) and Wells Fargo Bank, National Association, as Trustee, for the 9.625%/10.375% Senior PIK Toggle Notes Due 2018 (Incorporated by reference to Exhibit 4.1 to TransUnions Registration Statement on Form S-4 filed July 31, 2012) | |
4.2 | First Supplemental Indenture dated as of October 22, 2012, among TransUnion (formerly TransUnion Holding Company, Inc.), and Wells Fargo Bank, National Association, as Trustee, for the 9.625%/10.375% Senior PIK Toggle Notes due 2018 (Incorporated by reference to Exhibit 10.1 to TransUnions Current Report on Form 8-K filed October 23, 2012) | |
4.3 | Form of TransUnion (formerly TransUnion Holding Company, Inc.) 9.625%/10.375% Senior PIK Toggle Notes Due 2018, Series B (Incorporated by reference to Exhibit 4.2 to TransUnions Registration Statement on Form S-4 filed July 31, 2012) | |
4.4 | Indenture, dated November 1, 2012, between TransUnion (formerly TransUnion Holding Company, Inc.), and Wells Fargo Bank, National Association, as Trustee, for the 8.125%/8.875% Senior PIK Toggle Notes due 2018 (Incorporated by reference to Exhibit 4.1 to TransUnions Current Report on Form 8-K filed November 6, 2012) | |
4.5 | Form of TransUnion (formerly TransUnion Holding Company, Inc.) 8.125%/8.875% Senior PIK Toggle Notes Due 2018, Series B (Incorporated by reference to Exhibit 4.1 to TransUnions Current Report on Form 8-K filed November 6, 2012) | |
4.6* | Form of Stock Certificate for Common Stock | |
5.1* | Opinion of Simpson Thacher & Bartlett LLP | |
10.1 | Amendment No. 7 to Credit Agreement, dated as of April 9, 2014, by and among TransUnion Intermediate Holdings, Inc. (formerly TransUnion Corp.), Trans Union LLC, the guarantors party thereto, Deutsche Bank Trust Company Americas, as Existing Administrative Agent, Existing Collateral Agent, Existing Swing Line Lender and Existing L/C Issuer, Deutsche Bank AG New York Branch, as Successor Administrative Agent, Successor Collateral Agent, Successor Swing Line Lender, Successor L/C Issuer and as 2014 Replacement Term Lender, and each other Lender party thereto. (Incorporated by reference to Exhibit 10.1 to TransUnions Current Report on Form 8-K filed April 9, 2014) | |
10.2 | Amendment No. 8 to Credit Agreement, dated as of June 2, 2015, among TransUnion Corp., Trans Union LLC, the guarantors from time to time party thereto, Deutsche Bank AG New York Branch, as administrative agent and as collateral agent, Deutsche Bank AG New York Branch, as L/C issuer and swing line lender, the other lenders party thereto, Goldman Sachs Lending Partners LLC, as syndication agent, Bank of America, N.A., Royal Bank of Canada and Credit Suisse AG, as documentation agents, Deutsche Bank Securities Inc., Goldman Sachs Lending Partners LLC, Merrill Lynch, Pierce, Fenner and Smith Incorporated, RBC Capital Markets and Credit Suisse Securities (USA) LLC, as joint lead arrangers and joint bookrunners (Incorporated by reference to Exhibit 10.1 to TransUnions Current Report on Form 8-K filed June 8, 2015) |
E-1
Exhibit
|
Description |
|
10.3 | Second Amended and Restated Credit Agreement, dated as of April 9, 2014, by and among TransUnion Intermediate Holdings, Inc. (formerly TransUnion Corp.), Trans Union LLC, the guarantors party thereto, Deutsche Bank AG New York Branch, as Administrative Agent and as Collateral Agent, Deutsche Bank AG New York Branch, as L/C Issuer and Swing Line Lender, the other lenders from time to time party thereto, Goldman Sachs Lending Partners LLC, as Syndication Agent, and Bank of America, N.A., Royal Bank of Canada and Credit Suisse AG, as Documentation Agents. (Incorporated by reference to Exhibit 10.2 to TransUnions Current Report on Form 8-K filed April 9, 2014) | |
10.4 | TransUnion Holding Company, Inc. 2012 Management Equity Plan (Effective April 30, 2012) (Incorporated by reference to Exhibit 10.1 to TransUnions Registration Statement on Form S-4 filed July 31, 2012) | |
10.5 | TransUnion Holding Company, Inc. 2012 Management Equity Plan Stock Option Agreement (Effective April 30, 2012) (Incorporated by reference to Exhibit 10.2 to TransUnions Registration Statement on Form S-4 filed July 31, 2012) | |
10.6 | Major Stockholders Agreement made as of April 30, 2012, among TransUnion (formerly TransUnion Holding Company, Inc.), the Advent Investor (as defined therein), the GS Investors (as defined therein), and any other Person who becomes a party thereto (Incorporated by reference to Exhibit 10.3 to TransUnions Registration Statement on Form S-4 filed July 31, 2012) | |
10.7 | Amendment No. 1 to Major Stockholders Agreement, dated as of January 28, 2014, among TransUnion (formerly TransUnion Holding Company, Inc.), the Advent Investor (as defined therein) and the GS Investors (as defined therein) (Incorporated by reference to Exhibit 10.5 to TransUnions Annual Report on Form 10-K for the year ended December 31, 2014) | |
10.8 | Amendment No. 2 to Major Stockholders Agreement, dated as of January 1, 2015, among TransUnion (formerly TransUnion Holding Company, Inc.), the Advent Investor (as defined therein) and the GS Investors (as defined therein) (Incorporated by reference to Exhibit 10.6 to TransUnions Annual Report on Form 10-K for the year ended December 31, 2014) | |
10.9*** | Form of Amended and Restated Major Stockholders Agreement | |
10.10 | Stockholders Agreement made as of April 30, 2012, among TransUnion (formerly TransUnion Holding Company, Inc.), the members of the management or other key persons of TransUnion or of TransUnion Intermediate Holdings, Inc. (formerly TransUnion Corp.), that are signatories thereto, any other person who becomes a party thereto, and the GS Investors (as defined therein) and the Advent Investor (as defined therein) (for specific purposes) (Incorporated by reference to Exhibit 10.4 to TransUnions Registration Statement on Form S-4 filed July 31, 2012) | |
10.11 | Registration Rights Agreement dated as of April 30, 2012, by and among TransUnion (formerly TransUnion Holding Company, Inc.), the Advent Investors (as defined therein), the GS Investors (as defined therein), certain Key Individuals (as defined therein) and any other person who becomes a party thereto (Incorporated by reference to Exhibit 10.5 to TransUnions Registration Statement on Form S-4 filed July 31, 2012) | |
10.12 | Form of Director Indemnification Agreement for directors of TransUnion (Incorporated by reference to Exhibit 10.6 to TransUnions Registration Statement on Form S-4 filed July 31, 2012) | |
10.13 | Employment Agreement with Siddharth N. (Bobby) Mehta, former President and Chief Executive Officer of TransUnion and TransUnion Intermediate Holdings, Inc., dated October 3, 2007 (Incorporated by reference to Exhibit 10.6 to TransUnion Intermediate Holdings, Inc.s Registration Statement on Form S-4 filed March 1, 2011) |
E-2
Exhibit
|
Description |
|
10.14 | Amendment to Employment Agreement of Siddharth N. (Bobby) Mehta, former President and Chief Executive Officer of TransUnion and TransUnion Intermediate Holdings, Inc., dated December 6, 2012 (Incorporated by reference to Exhibit 10.11 to TransUnions Annual Report on Form 10-K for the year ended December 31, 2012) | |
10.15 | Consulting Agreement with Siddharth N. (Bobby) Mehta, dated December 6, 2012 (Incorporated by reference to Exhibit 10.12 to TransUnions Annual Report on Form 10-K for the year ended December 31, 2012) | |
10.16 | Amendment dated December 6, 2012 to the Stockholders Agreement of TransUnion (formerly TransUnion Holding Company, Inc.) made as of April 30, 2012 with Siddharth N. (Bobby) Mehta (Incorporated by reference to Exhibit 10.13 to TransUnions Annual Report on Form 10-K for the year ended December 31, 2012) | |
10.17 | Stock Repurchase Agreement dated December 6, 2012 between Siddharth N. (Bobby) Mehta and TransUnion (formerly TransUnion Holding Company, Inc.) (Incorporated by reference to Exhibit 10.14 to TransUnions Annual Report on Form 10-K for the year ended December 31, 2012) | |
10.18 | Employment Agreement with James M. Peck, President and Chief Executive Officer of TransUnion and TransUnion Intermediate Holdings, Inc., dated December 6, 2012 (Incorporated by reference to Exhibit 10.15 to TransUnions Annual Report on Form 10-K for the year ended December 31, 2012) | |
10.19 | Letter Agreement between TransUnion (formerly TransUnion Holding Company, Inc.) and Reed Elsevier with respect to the employment of James M. Peck as the President and Chief Executive Officer of TransUnion and TransUnion Intermediate Holdings, Inc., dated December 6, 2012 (Incorporated by reference to Exhibit 10.16 to TransUnions Annual Report on Form 10-K for the year ended December 31, 2012) | |
10.20 | Consulting Agreement dated April 30, 2012 with Goldman, Sachs & Co. and Advent International Corporation (Incorporated by reference to Exhibit 10.17 to TransUnions Annual Report on Form 10-K for the year ended December 31, 2012) | |
10.21* | Form of TransUnion 2015 Omnibus Incentive Plan | |
10.22* | Form of TransUnion 2015 Employee Stock Purchase Plan | |
21.1 | Subsidiaries of TransUnion (Incorporated by reference to Exhibit 21 to TransUnions Annual Report on Form 10-K for the year ended December 31, 2014) | |
23.1* | Consent of Simpson Thacher & Bartlett LLP (included in Exhibit 5.1) | |
23.2* | Consent of Ernst & Young LLP | |
23.3* | Consent of Mancera, S.C. | |
23.4* | Consent of Deloitte Haskins & Sells LLP** | |
23.5*** | Consent of Gilbert H. Klemann | |
24.1*** | Omnibus Powers of Attorney | |
101.INS | XBRL Instance Document (Incorporated by reference to Exhibit 101.INS to TransUnions Annual Report on Form 10-K for the fiscal year ended December 31, 2014) | |
101.SCH | XBRL Taxonomy Extension Schema Document (Incorporated by reference to Exhibit 101.SCH to TransUnions Annual Report on Form 10-K for the fiscal year ended December 31, 2014) |
E-3
Exhibit
|
Description |
|
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (Incorporated by reference to Exhibit 101.CAL to TransUnions Annual Report on Form 10-K for the fiscal year ended December 31, 2014) | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document (Incorporated by reference to Exhibit 101.DEF to TransUnions Annual Report on Form 10-K for the fiscal year ended December 31, 2014) | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document (Incorporated by reference to Exhibit 101.LAB to TransUnions Annual Report on Form 10-K for the fiscal year ended December 31, 2014) | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (Incorporated by reference to Exhibit 101.PRE to TransUnions Annual Report on Form 10-K for the fiscal year ended December 31, 2014) | |
101.INS | XBRL Instance Document (Incorporated by reference to Exhibit 101.INS to TransUnions Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) | |
101.SCH | XBRL Taxonomy Extension Schema Document (Incorporated by reference to Exhibit 101.SCH to TransUnions Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (Incorporated by reference to Exhibit 101.CAL to TransUnions Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document (Incorporated by reference to Exhibit 101.DEF to TransUnions Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document (Incorporated by reference to Exhibit 101.LAB to TransUnions Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (Incorporated by reference to Exhibit 101.PRE to TransUnions Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) |
* | Filed herewith |
** | Effective November 20, 2013, Deloitte Haskins & Sells (referred to as DHS) has been converted to a limited liability partnership as Deloitte Haskins & Sells LLP (referred to as DHS LLP). DHS LLP has succeeded DHS and retains and assumes all the responsibility of DHS as if DHS LLP were the independent auditors of Credit Information Bureau (India) Limited for the year ended March 31, 2013 and as of March 31, 2013. |
*** | Previously filed |
E-4
SCHEDULE ICONDENSED FINANCIAL INFORMATION OF TRANSUNION
TRANSUNION
Parent Company Only
Balance Sheet
(in millions, except per share data)
December 31,
2014 |
December 31,
2013 |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Due from TransUnion Intermediate Holdings, Inc. |
$ | 86.2 | $ | 52.7 | ||||
Other current assets |
22.7 | 7.5 | ||||||
|
|
|
|
|||||
Total current assets |
108.9 | 60.2 | ||||||
Investment in TransUnion Intermediate Holdings, Inc. |
1,505.6 | 1,584.6 | ||||||
Other assets |
20.9 | 28.1 | ||||||
|
|
|
|
|||||
Total assets |
$ | 1,635.4 | $ | 1,672.9 | ||||
|
|
|
|
|||||
Liabilities and stockholders equity |
||||||||
Current liabilities: |
||||||||
Trade accounts payable |
$ | 0.1 | $ | 0.2 | ||||
Other current liabilities |
18.3 | 33.4 | ||||||
|
|
|
|
|||||
Total current liabilities |
18.4 | 33.6 | ||||||
Long-term debt |
998.7 | 998.3 | ||||||
Other liabilities |
31.2 | 13.1 | ||||||
|
|
|
|
|||||
Total liabilities |
1,048.3 | 1,045.0 | ||||||
Stockholders equity: |
||||||||
Common stock, $0.01 par value; 200.0 million shares authorized at December 31, 2014 and December 31, 2013, 148.5 million and 147.6 million shares issued as of December 31, 2014 and December 31, 2013, respectively; and 147.9 million and 147.0 million shares outstanding as of December 31, 2014 and December 31, 2013, respectively |
1.5 | 1.5 | ||||||
Additional paid-in capital |
1,137.6 | 1,121.4 | ||||||
Treasury stock at cost; 0.7 million shares at December 31, 2014 and December 31, 2013 |
(4.3 | ) | (4.1 | ) | ||||
Accumulated deficit |
(430.2 | ) | (417.7 | ) | ||||
Accumulated other comprehensive income (loss) |
(117.5 | ) | (73.2 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
587.1 | 627.9 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 1,635.4 | $ | 1,672.9 | ||||
|
|
|
|
See accompanying notes to condensed financial statements.
SCHEDULE ICONDENSED FINANCIAL INFORMATION OF TRANSUNION
TRANSUNION
Parent Company Only
Statement of Income
(in millions)
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From the Date
of Inception Through December 31, 2012 |
||||||||||
Revenue |
$ | | $ | | $ | | ||||||
Operating expenses |
||||||||||||
Selling, general and administrative |
1.4 | 1.3 | 0.9 | |||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
1.4 | 1.3 | 0.9 | |||||||||
Operating loss |
(1.4 | ) | (1.3 | ) | (0.9 | ) | ||||||
Non-operating income and expense |
||||||||||||
Interest expense |
(97.0 | ) | (96.3 | ) | (52.2 | ) | ||||||
Equity Income from TransUnion Intermediate Holdings, Inc. |
49.1 | 43.2 | 43.0 | |||||||||
Other income and (expense), net |
(0.2 | ) | (0.2 | ) | (16.5 | ) | ||||||
|
|
|
|
|
|
|||||||
Total non-operating income and expense |
(48.1 | ) | (53.3 | ) | (25.7 | ) | ||||||
Loss from operations before income taxes |
(49.5 | ) | (54.6 | ) | (26.6 | ) | ||||||
Benefit for income taxes |
37.0 | 37.3 | | |||||||||
Net loss |
$ | (12.5 | ) | $ | (17.3 | ) | $ | (26.6 | ) | |||
|
|
|
|
|
|
See accompanying notes to condensed financial statements.
SCHEDULE ICONDENSED FINANCIAL INFORMATION OF TRANSUNION
TRANSUNION
Parent Company Only
Statements of Comprehensive Income
(in millions)
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From the Date
of Inception Through December 31, 2012 |
||||||||||
Net loss |
$ | (12.5 | ) | $ | (17.3 | ) | $ | (26.6 | ) | |||
Other comprehensive loss: |
||||||||||||
Foreign currency translation: |
||||||||||||
Foreign currency translation adjustment |
(47.9 | ) | (54.8 | ) | (22.1 | ) | ||||||
Benefit for income taxes |
3.8 | 3.0 | 1.4 | |||||||||
|
|
|
|
|
|
|||||||
Foreign currency translation, net |
(44.1 | ) | (51.8 | ) | (20.7 | ) | ||||||
Interest rate swaps: |
||||||||||||
Net unrealized gain (loss) |
(0.6 | ) | 4.8 | (5.9 | ) | |||||||
Amortization of accumulated loss |
0.3 | | | |||||||||
Benefit (provision) for income taxes |
0.1 | (1.8 | ) | 2.2 | ||||||||
|
|
|
|
|
|
|||||||
Interest rate swaps, net |
(0.2 | ) | 3.0 | (3.7 | ) | |||||||
Available-for-sale securities: |
||||||||||||
Net unrealized gain |
0.2 | | | |||||||||
Provision for income taxes |
(0.1 | ) | | | ||||||||
|
|
|
|
|
|
|||||||
Available-for-sale securities, net |
0.1 | | | |||||||||
|
|
|
|
|
|
|||||||
Total other comprehensive loss, net of tax |
(44.2 | ) | (48.8 | ) | (24.4 | ) | ||||||
|
|
|
|
|
|
|||||||
Comprehensive loss attributable to TransUnion |
$ | (56.7 | ) | $ | (66.1 | ) | $ | (51.0 | ) | |||
|
|
|
|
|
|
SCHEDULE ICONDENSED FINANCIAL INFORMATION OF TRANSUNION
TRANSUNION
Parent Company Only
Statement of Cash Flows
(in millions)
Twelve Months
Ended December 31, 2014 |
Twelve Months
Ended December 31, 2013 |
From the Date of
Inception Through December 31, 2012 |
||||||||||
Cash used in operating activities |
$ | (9.4 | ) | $ | (1.5 | ) | $ | (16.4 | ) | |||
Cash flows from investing activities: |
||||||||||||
Acquisition of TransUnion Intermediate Holdings, Inc. |
| | (1,582.3 | ) | ||||||||
Capital investment in TransUnion Intermediate Holdings, Inc. |
| | (80.8 | ) | ||||||||
|
|
|
|
|
|
|||||||
Cash used in investing activities |
| | (1,663.1 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from 9.625% notes |
| | 600.0 | |||||||||
Proceeds from 8.125% notes |
| | 398.0 | |||||||||
Debt financing fees |
| (0.9 | ) | (41.3 | ) | |||||||
Proceeds from issuance of common stock |
9.6 | 5.8 | 1,097.3 | |||||||||
Treasury stock purchases |
(0.2 | ) | (3.4 | ) | (0.7 | ) | ||||||
Dividends |
| | (373.8 | ) | ||||||||
|
|
|
|
|
|
|||||||
Cash provided by financing activities |
9.4 | 1.5 | 1,679.5 | |||||||||
|
|
|
|
|
|
|||||||
Net change in cash and cash equivalents |
| | | |||||||||
Cash and cash equivalents, beginning of period |
| | | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ | | $ | | $ | | ||||||
|
|
|
|
|
|
See accompanying notes to condensed financial statements.
SCHEDULE ICONDENSED FINANCIAL INFORMATION OF TRANSUNION
TRANSUNION
Parent Company Only
Notes To Financial Statements
Note 1. Basis of Presentation
In the TransUnion parent company only financial statements, TransUnions investment in subsidiaries is stated at cost plus equity in the undistributed earnings of subsidiaries since the date of acquisition. The Companys share of net income of its subsidiaries is included in consolidated income using the equity method. The parent company only financial information should be read in conjunction with TransUnions consolidated financial statements.
Note 2. Income tax
TransUnion entered into an intercompany tax allocation agreement with TransUnion Intermediate Holdings, Inc. in 2013, effective for all taxable periods from May 1, 2012, forward, in which they are members of the same consolidated federal or state tax groups. The agreement allocates the consolidated tax liability from those filings among the various members of the group. We recorded the cumulative effect of the intercompany tax allocation agreement to TransUnions balance sheet and statement of income during 2013.
Note 3. Dividends from subsidiaries
Cash dividends paid to TransUnion from its consolidated subsidiaries were $90.3 million, $94.2 million and $27.9 million for the years ended December 31, 2014 and 2013, and from inception through December 31, 2012, respectively.
SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS
TRANSUNION
Balance at
Beginning of year |
Charged to
Costs and Expenses |
Charged to
Other Accounts |
Deductions |
Balance at
End of Year |
||||||||||||||||
(in millions) | ||||||||||||||||||||
Allowance for doubtful accounts: |
||||||||||||||||||||
Year ended December 31, |
||||||||||||||||||||
2014 |
$ | 0.7 | $ | 3.2 | $ | | $ | (1.5 | ) | $ | 2.4 | |||||||||
2013 |
$ | 1.7 | $ | 0.8 | $ | | $ | (1.8 | ) | $ | 0.7 | |||||||||
2012 |
$ | | $ | (1.9 | ) | $ | 3.7 | $ | (0.1 | ) | $ | 1.7 | ||||||||
Allowance for deferred tax assets: |
||||||||||||||||||||
Year ended December 31, |
||||||||||||||||||||
2014 |
$ | 25.9 | $ | 19.5 | $ | | $ | (3.3 | ) | $ | 42.1 | |||||||||
2013 |
$ | 27.2 | $ | 4.8 | $ | | $ | (6.1 | ) | $ | 25.9 | |||||||||
2012 |
$ | | $ | 5.0 | $ | 24.8 | $ | (2.6 | ) | $ | 27.2 |
Exhibit 1.1
TransUnion
Common Stock, Par Value $0.01 Per Share
Underwriting Agreement
[ ], 2015
Goldman, Sachs & Co.,
J.P. Morgan Securities LLC,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated and
Deutsche Bank Securities Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
TransUnion, a Delaware corporation (the Company), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the Underwriters) an aggregate of [ ] shares (the Firm Shares) and, at the election of the Underwriters, subject to the terms and conditions stated herein, the Company shall issue and sell up to [ ] additional shares (the Optional Shares) of common stock, par value $0.01 per share (Stock) of the Company (the Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof being collectively called the Shares). Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc. have agreed to act as representatives of the several Underwriters (in such capacity, the Representatives or you) in connection with the offering and sale of the Shares.
The Representatives agree that up to [ ] shares of the Firm Shares to be purchased by the Underwriters (the Directed Shares) shall be reserved for sale to certain eligible directors, officers and employees of the Company (collectively, the Participants), as part of the distribution of the Shares by the Underwriters (the Directed Share Program) subject to the terms of this
Agreement, the applicable rules, regulations and interpretations of the Financial Industry Regulatory Authority, Inc. (FINRA) and all other applicable laws, rules and regulations. The Directed Share Program shall be administered by Fidelity Capital Markets, a division of National Financial Services LLC (Fidelity). To the extent that the Directed Shares are not orally confirmed for purchase by the Participants by the end of the first business day after the date of this Agreement, such Directed Shares may be offered to the public by the Underwriters as part of the public offering contemplated hereby.
1(a). The Company represents and warrants to, and agrees with, each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-203110) (the Initial Registration Statement) in respect of the Shares has been filed with the Securities and Exchange Commission (the Commission); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto, to you for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a Rule 462(b) Registration Statement), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the Act), which became effective upon filing, no other document with respect to the Initial Registration Statement has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Act is hereinafter called a Preliminary Prospectus; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 6(a)(i) hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial Registration Statement at the time it was declared effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective, are hereinafter collectively called the Registration Statement; the Preliminary Prospectus relating to the Shares that was included in the Registration Statement immediately prior to the Applicable Time (as defined in Section 1(a)(iii) hereof) is hereinafter called the Pricing Prospectus; and such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the Prospectus; and any issuer free writing prospectus as defined in Rule 433 under the Act relating to the Shares is hereinafter called an Issuer Free Writing Prospectus).
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(ii) No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein.
(iii) For the purposes of this Agreement, the Applicable Time is [ ] (Eastern time) on the date of this Agreement. The Pricing Prospectus, as supplemented by the information listed on Schedules III(b) and III(c) hereto, taken together (collectively, the Pricing Disclosure Package), as of the Applicable Time, did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Free Writing Prospectus listed on Schedule III(a) hereto does not conflict with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus and each such Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to statements or omissions made in an Issuer Free Writing Prospectus in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein.
(iv) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus will conform, in all material respects, to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to each part of the Registration Statement and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided , however , that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein;
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(v) At the time of filing the Initial Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Act) of the Shares and at the date hereof, the Company was not and is not an ineligible issuer, as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.
(vi) The consolidated financial statements of the Company included in the Registration Statement, the Pricing Prospectus and the Prospectus, together with the related notes, present fairly in all material respects (A) the financial position of the Company and its consolidated subsidiaries at the dates indicated and (B) the statement of operations, stockholders equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) applied on a consistent basis throughout the periods involved, except as may be stated in the related notes thereto. The financial data included in the Registration Statement, the Pricing Prospectus and the Prospectus under the captions Prospectus SummarySummary Historical Consolidated Financial Data and Selected Historical Consolidated Financial Data present fairly in all material respects the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included therein. All disclosures contained in the Registration Statement, the Pricing Prospectus or the Prospectus that constitute non-GAAP financial measures (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of the Securities Exchange Act of 1934, as amended (the Exchange Act) and Item 10 of Regulation S-K of the Act, to the extent applicable.
(vii) Neither the Company nor any of its subsidiaries has sustained since the date of the last audited financial statements included in the Pricing Prospectus any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus; and, since the respective dates as of which information is given in the Registration Statement and Pricing Prospectus, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries (other than in the ordinary course of business) or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders equity, properties or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Pricing Prospectus.
(viii) Except (i) as described in the Pricing Prospectus or (ii) as would not, individually or in the aggregate, have (or reasonably be expected to have) a
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material adverse effect, or a prospective material adverse effect, on the business, properties, management, financial position, stockholders equity or results of operations of the Company and its subsidiaries, taken as a whole (a Material Adverse Effect), the Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects; and any real property and buildings held under lease or sublease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases or subleases.
(ix) Except (in the case of clauses (B) and (C) of this sentence) as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Company (A) has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, (B) has corporate power and authority to own, lease and operate its properties and conduct its business as described in the Pricing Prospectus and to enter into and perform its obligations under this Agreement; and (C) is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction (to the extent applicable in such jurisdiction) in which such qualification is required.
(x) Except (in the case of clauses (B) and (C) of this sentence) as would not reasonably be expected to result in a Material Adverse Effect, each significant subsidiary of the Company (as such term is defined in Rule 1-02 of Regulation S-X promulgated by the Commission) (each, a Subsidiary and, collectively, the Subsidiaries) (A) has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its incorporation or organization, (B) has corporate or similar power and authority to own, lease and operate its properties and to conduct its business as described in the Pricing Prospectus and (C) is duly qualified to transact business and is in good standing in each jurisdiction (to the extent applicable in such jurisdiction) in which such qualification is required.
(xi) The only subsidiaries of the Company are (x) the subsidiaries listed on Exhibit 21.1 to the Registration Statement and (y) certain other subsidiaries that do not constitute a significant subsidiary as defined in Rule 1-02 of Regulation S-X promulgated by the Commission.
(xii) The Company has an authorized capitalization as set forth in the Pricing Prospectus under the heading Capitalization in the Actual column (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the Registration Statement, the Pricing Prospectus and the Prospectus or pursuant to the exercise of convertible securities or options referred to in the Registration Statement, the Pricing Prospectus and the Prospectus) and of all of the issued shares of capital stock of the Company have been duly and
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validly authorized and issued and are fully paid and non-assessable and conform to the description of the Stock contained in the Pricing Prospectus and Prospectus; and all of the issued shares of capital stock or limited liability company interests of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and, except as otherwise disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, restrictions on voting or transfer or claims (except for any such liens, encumbrances or restrictions arising by virtue of the Senior Secured Credit Facilities (as defined under the caption Prospectus SummaryCorporate Structure in the Pricing Prospectus)).
(xiii) The Shares to be purchased by the Underwriters from the Company have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform to the description of the Stock contained in the Pricing Disclosure Package and the Prospectus.
(xiv) This Agreement has been duly authorized, executed and delivered by the Company.
(xv) There are no persons with registration rights or other similar rights to have any securities registered for sale pursuant to the Registration Statement or otherwise registered for sale or sold by the Company under the Act, other than those rights (1) that have been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (2) that have been waived or (3) that are subject to the Lock-up Agreements referred to in Section 9(i) hereof.
(xvi) Neither the Company nor any of its subsidiaries has taken, nor will the Company or any of its subsidiaries take, directly or indirectly, any action which is designed, or would reasonably be expected, to cause or result in, or which constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares or to result in a violation of Regulation M under the Exchange Act.
(xvii) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein and in the Registration Statement, the Pricing Disclosure Package and the Prospectus (including the issuance and sale of the Shares and the use of the proceeds from the sale of the Shares as described therein under the heading Use of Proceeds) and compliance by the Company with its obligations hereunder have been duly authorized by the Company and do not and will not, whether with or without the giving of notice or passage of time or both, (A) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of the Company or any subsidiary pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to
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which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (B) result in any violation of the provisions of the Second Amended and Restated Certificate of Incorporation (the Certificate of Incorporation) or Second Amended and Restated Bylaws (the Bylaws) of the Company, or (C) result in the violation of any applicable statute or any applicable order, rule or regulation of any court or governmental agency or regulatory authority having jurisdiction over the Company or any of its subsidiaries or any of their properties, except in the case of clauses (A) and (C) above, as would not, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect or materially adversely affect the consummation of the transactions hereunder.
(xviii) No consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or regulatory authority is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except (1) for such consents, approvals, authorizations, registrations or qualifications as may be required under the Act, the Exchange Act, state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters or (2) as shall have been obtained or made prior to the Time of Delivery.
(xix) Neither the Company nor any of its subsidiaries is (A) in violation of its Certificate of Incorporation or Bylaws, in the case of the Company, or its charter, bylaws or similar organizational document, in the case of a subsidiary, (B) in default of the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound or to which any of the properties or assets of the Company or any subsidiaries is subject, or (C) in violation of any statute or any order, rule or regulation of any court or governmental agency or regulatory authority having jurisdiction over the Company or any of its subsidiaries or any of their properties, assets or operations except, in the case of clauses (B) and (C) above, as would not, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect.
(xx) The statements set forth in the Pricing Prospectus and Prospectus under the heading Description of Capital Stock, insofar as they purport to constitute a summary of the terms of the Stock and under the heading Certain United States Federal Income and Estate Tax Consequences to Non-U.S. Holders insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair in all material respects.
(xxi) (A) Other than as set forth in the Pricing Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its
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subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect or materially adversely affect the consummation of the transactions hereunder, and, to the knowledge of the Company, no such proceedings are threatened by governmental authorities or others; and (B) the aggregate of all pending legal or governmental proceedings to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which is not described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, including ordinary routine litigation incidental to the business, would not reasonably be expected to result in a Material Adverse Effect.
(xxii) There are no contracts or documents which are required to be described in the Registration Statement, the Pricing Prospectus or the Prospectus or to be filed as exhibits to the Registration Statement which have not been so described and filed as required.
(xxiii) Except as would not, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect, (A) the Company and its subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, Governmental Licenses) issued by the appropriate court or governmental agency or regulatory authority having jurisdiction over the Company or any of its subsidiaries or any of their properties, assets or operations necessary to conduct the business now operated by them and are in compliance with the terms and conditions of all Governmental Licenses; (B) all of the Governmental Licenses are valid and in full force and effect; and (C) neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any Governmental Licenses.
(xxiv) The Company is not, and after giving effect to the offering and sale of the Shares and the application of the proceeds thereof, will not be an investment company, as such term is defined in the United States Investment Company Act of 1940, as amended.
(xxv) The Company and its subsidiaries on a consolidated basis maintain a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by the Companys principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Except as disclosed in the Pricing Prospectus, the Companys internal control over financial reporting is effective and the Company is not aware of any material weaknesses in its internal control over financial reporting.
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(xxvi) Since the date of the latest audited financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there has been no change in the Companys and its subsidiaries internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
(xxvii) The Company and its subsidiaries on a consolidated basis maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made known to the Companys principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective.
(xxviii) There is and has been no failure on the part of the Company or any of the Companys directors or officers, in their capacities as such, to comply in all material respects with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the Sarbanes-Oxley Act) that are applicable to the Company and its directors or officers as of the Applicable Time.
(xxix) Ernst & Young LLP, who have audited certain financial statements of the Company and its subsidiaries, Deloitte Haskins & Sells, who have audited certain financial statements of Credit Information Bureau (India) Limited, and Mancera, S.C., who have audited certain financial statements of Trans Union de México, S.A., Sociedad de Información Crediticia, are each an independent registered public accounting firm as required by the Act and the rules and regulations of the Commission thereunder.
(xxx) The operations of the Company and its subsidiaries are and have been conducted at all times in material compliance with applicable financial recordkeeping and reporting requirements, including those of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where the Company or any of its subsidiaries conducts business, the applicable rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any governmental or regulatory agency (collectively, the Anti-Money Laundering Laws) and no action, suit or proceeding by or before any court or governmental or regulatory agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(xxxi) Neither the Company nor any of its subsidiaries, directors or officers, nor, to the knowledge of the Company, any employee, agent, or controlled affiliate or other person acting on behalf of the Company or any of its subsidiaries is currently the subject or the target of any sanctions administered or enforced by the U.S. Government, (including, without limitation, the Office of Foreign Assets
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Control of the U.S. Department of the Treasury (OFAC) or the U.S. Department of State and including, without limitation, the designation as a specially designated national or blocked person), the United Nations Security Council (UNSC), the European Union, or Her Majestys Treasury (HMT), or other relevant sanctions authority (collectively, Sanctions), nor is the Company, any of its subsidiaries located, organized or resident in a country or territory that is the subject or the target of Sanctions, including, without limitation, Cuba, Iran, North Korea, Sudan, Syria or the Crimean region of Ukraine (each, a Sanctioned Country); and the Company will not directly or indirectly use the proceeds of the offering of the Securities hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity (A) for the purpose of funding or facilitating any activities of or business with any person that, at the time of such funding or facilitation, is the subject or the target of Sanctions, (B) for the purpose of funding or facilitating any activities of or business in any Sanctioned Country or (C) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions. To the knowledge of the Company, neither the Company nor its subsidiaries has, in the past five years, knowingly engaged in any dealings or transactions with any person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country.
(xxxii) Neither the Company nor any of its subsidiaries nor any director or officer of the Company or any of its subsidiaries nor, to the knowledge of the Company, any employee of the Company or any of its subsidiaries, any agent, controlled affiliate or other person associated with or acting on behalf of the Company or any of its subsidiaries has (A) used any corporate funds for any unlawful contribution, unlawful gift, unlawful entertainment or other unlawful expense relating to political activity; (B) made or taken an act in furtherance of an offer, promise or authorization of any direct or indirect unlawful payment or benefit to any foreign or domestic government or regulatory official or employee, including of any government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office; (C) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an offence under the Bribery Act 2010 of the United Kingdom, or any other applicable anti-bribery or anti-corruption laws; or (D) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit. The Company and its subsidiaries maintain and enforce, policies and procedures designed to promote and ensure compliance with all applicable anti-bribery and anti-corruption laws.
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(xxxiii) Except as described in the Registration Statement, the Pricing Disclosure Package or the Prospectus or as would not, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect, the Company and its subsidiaries have insurance, which insurance is in amounts and insures against such losses and risks, in the Companys reasonable judgment, as are adequate to protect the Company and its subsidiaries and their respective businesses; and neither the Company nor any of its subsidiaries has (A) received written notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (B) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers.
(xxxiv) Except as would not, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect or as set forth in the Pricing Prospectus, (A) the Company and its subsidiaries own, possess, license or have other rights to use or can acquire on reasonable terms all patents, trade and service marks, trade names, copyrights, domain names (in each case including all registrations and applications to register same), inventions, trade secrets, technology and other intellectual property (collectively, the Intellectual Property) necessary for the conduct of the Companys business as now conducted or as proposed in the Pricing Prospectus to be conducted, free and clear of all liens or other similar encumbrances; (B) to the knowledge of the Company, there is no infringement or other violation by third parties of any Intellectual Property owned by the Company or any of its subsidiaries; (C) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by any third party challenging the Companys or its subsidiaries rights in or to any Intellectual Property, and to the knowledge of the Company, there is no reasonable basis for any such claim; (D) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by any third party against the Company or any of its subsidiaries challenging the validity, scope or enforceability of any Intellectual Property owned by the Company or any of its subsidiaries, and to the knowledge of the Company, there is no reasonable basis for any such claim; (E) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by any third party that the Company or that any subsidiary of the Company infringes or otherwise violates any Intellectual Property of any third party, and to the knowledge of the Company, there is no reasonable basis for any such claim; and (F) the Company and its subsidiaries have taken commercially reasonable steps to protect and maintain their confidential information and trade secrets, and to the knowledge of the Company, there has been no unauthorized disclosure or misappropriation of such confidential information or trade secrets.
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(xxxv) Except as (A) described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or (B) would not, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect, (x) the Company and each of its subsidiaries have filed all United States federal, state, local and foreign income tax returns required by law to be filed through the date hereof and all taxes shown by such returns or otherwise assessed, which are due and payable, have been paid other than any taxes that the Company or any of its subsidiaries are contesting in good faith and as to which adequate reserves have been established in accordance with GAAP; and (y) there is no deficiency that has been, or could reasonably be expected to be, asserted against the Company or any of its subsidiaries or any of their respective properties or assets other than tax deficiencies that the Company or any of its subsidiaries are contesting in good faith and as to which adequate reserves have been established in accordance with GAAP.
(xxxvi) Except as would not, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect, no labor disturbance by or dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent.
(xxxvii) The Company and its subsidiaries are (A) in compliance with any and all applicable laws and regulations relating to the protection of human health and safety as affected by exposure to hazardous or toxic substances, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (Environmental Laws); (B) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses as presently conducted; and (C) have not received written notice of any actual or potential liability under any Environmental Law, except where such non-compliance with Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect.
(xxxviii) Except as would not, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect, neither the Company nor any of its subsidiaries is in material breach or violation of any laws or regulations applicable to their respective businesses that regulate the use of consumer credit information, including, as applicable, any state law or regulation that imposes obligations similar to those imposed by applicable Federal statutes.
(xxxix) Except (A) as described in the Pricing Prospectus or (B) as would not, individually or in the aggregate, have (or reasonably be expected to have) a Material Adverse Effect: (1) each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (ERISA) that the Company or any member of its Controlled Group (defined as any organization which is under common control with the Company
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within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the Code)) sponsors or maintains (each, a Plan) has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code; (2) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan excluding transactions effected pursuant to a statutory or administrative exemption; (3) each Plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, has complied with the funding requirements of Section 412 and 430 of the Code and Sections 302 and 303 of ERISA; (4) the fair market value of the assets of each Plan exceeds the present value of all benefits accrued under such Plan (determined based on those assumptions used to fund such Plan); (5) no reportable event (within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur; and (6) neither the Company nor any member of the Controlled Group has incurred, nor reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the PBGC, in the ordinary course and without default) in respect of a Plan or a multiemployer plan, within the meaning of Section 4001(a)(3) of ERISA.
(xl) No forward-looking statement (within the meaning of Section 27A of the Act and Section 21E of the Exchange Act) contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
(xli) Any statistical and market-related data included in the Registration Statement, the Pricing Disclosure Package or the Prospectus are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate in all material respects and, to the extent required, the Company has obtained the written consent to the use of such data from such sources.
(xlii) To the Companys knowledge, the audited consolidated financial statements of Trans Union de México, S.A., Sociedad de Información Crediticia, and Subsidiary (TU Mexico) present fairly the financial position of TU Mexico and have been prepared in accordance with the International Financial Reporting Standards as issued by the International Accounting Standards Board applied on a consistent basis.
(xliii) No consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or regulatory authority is required in connection with the offering of the Directed Shares in any jurisdiction where the Directed Shares are being offered, except (1) for such consents, approvals, authorizations, registrations or qualifications as may be required under the Act, the Exchange Act, state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters or (2) as shall have been obtained or made prior to the Time of Delivery.
(xliv) The Company has not offered, or caused the Underwriters to offer, Shares to any person pursuant to the Directed Share Program with the specific intent to unlawfully influence (A) a customer or supplier of the Company to alter the customers or suppliers level or type of business with the Company, or (B) a trade journalist or publication to write or publish favorable information about the Company or its products.
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2. Subject to the terms and conditions herein set forth, (a) the Company agrees to issue and to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per share of $[ ], the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, the Company agrees to issue and to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at the purchase price per share set forth in clause (a) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction, the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder .
The Company on the basis of the representations, warranties and agreements set forth herein and subject to the terms and conditions set forth herein, hereby grants to the Underwriters the right to purchase at their election up to [ ] Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering sales of shares in excess of the number of Firm Shares, provided that the purchase price per Optional Share shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Firm Shares but not payable on the Optional Shares. Any such election to purchase Optional Shares may be exercised only by written notice from the Representatives to the Company, given within a period of 30 calendar days after the date of this Agreement, setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 5 hereof) or, unless the Representatives and the Company otherwise agree in writing, earlier than two or later than ten business days after the date of such notice.
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3 The Company hereby confirms the engagement of J.P. Morgan Securities LLC as, and J.P. Morgan Securities LLC hereby confirms its agreement with the Company to render services as, a qualified independent underwriter within the meaning of Rule 5121 (Rule 5121) of FINRA with respect to the offering and sale of the Shares. J.P. Morgan Securities LLC, in its capacity as qualified independent underwriter and not otherwise, is referred to herein as the QIU. No compensation will be paid to the QIU for its services.
4. Upon the authorization by the Representatives of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus.
5. (a) The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as the Representatives may request upon at least forty-eight hours prior notice to the Company shall be delivered by or on behalf of the Company to the Representatives, through the facilities of the DTC, for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Company to the Representatives at least twenty-four hours in advance. The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on [ ], 2015 or such other time and date as the Representatives and the Company may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date specified by the Representatives in the written notice given by the Representatives of the Underwriters election to purchase such Optional Shares, or such other time and date as the Representatives and the Company may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the First Time of Delivery, such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the Second Time of Delivery, and each such time and date for delivery is herein called a Time of Delivery.
(b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 9 hereof, including the cross receipt for the Shares, will be delivered at the offices of Latham & Watkins LLP, 330 North Wabash Avenue, Suite 2800, Chicago, Illinois 60611 (the Closing Location) at such Time of Delivery. A meeting will be held at the Closing Location at [ ] p.m., New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 5, New York Business Day shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.
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6. (a) The Company agrees with each of the Underwriters:
(i) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commissions close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the last Time of Delivery to which the Representatives shall reasonably object promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any amendment or supplement to the Prospectus has been filed and to furnish you with copies thereof; to file promptly all material required to be filed by the Company with the Commission pursuant to Rule 433(d) under the Act; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus in respect of the Shares, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus or suspending any such qualification, to promptly use its reasonable best efforts to obtain the withdrawal of such order;
(ii) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation, to file a general consent to service of process in any jurisdiction or to subject itself to taxation in any such jurisdiction if it is not otherwise so subject;
(iii) To furnish the Underwriters with written and electronic copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus (or in lieu thereof, the notice
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referred to in Rule 173(a) under the Act) is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus in order to comply with the Act, to notify you and upon your request to prepare and furnish without charge to each Underwriter and to any dealer in securities as many written and electronic copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance; and in case any Underwriter is required to deliver a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many written and electronic copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(iv) To make generally available to its securityholders as soon as practicable (which may be satisfied by filing its annual report on Form 10-K with the Commissions EDGAR system), but in any event not later than sixteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158);
(v) (A) During the period beginning from the date hereof and continuing to and including the date 180 days after the date of the Prospectus (the Lock-Up Period), not to (x) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any securities of the Company that are substantially similar to the Shares, including but not limited to any options or warrants to purchase shares of Stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing or (y) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Stock or any such other securities, whether any such transaction described in clause (x) or (y) above is to be settled by delivery of Stock or such other securities, in cash or otherwise (other than the Shares to be sold hereunder or pursuant to employee stock option plans existing on, or upon the conversion or exchange of convertible or exchangeable securities outstanding as of, the date of this Agreement), without your prior written consent; provided, however , that if (1) during the last 17 days of the initial Lock-Up Period, the Company releases earnings results or announces material news or a material event or (2) prior to the expiration of the initial Lock-Up Period, the Company announces that it will release earnings results during the 15-day period
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following the last day of the initial Lock-Up Period, then in each case the Lock-Up Period will be automatically extended until the expiration of the 18-day period beginning on the date of release of the earnings results or the announcement of the material news or material event, as applicable, unless (A) the Representatives waive, in writing, such extension or (B) the changes to NASD Rule 2711(f)(4) contemplated by the proposed FINRA Rule 2241 as of the date hereof are approved and FINRA (i) establishes an effective date with respect to such changes that is prior to the original expiration date of the Lock-Up Period and (ii) makes clear that such changes are applicable to lock-up agreements that are entered into prior to such effective date; the Company will provide the Representatives and each stockholder subject to the Lock-Up Period pursuant to the lockup letters described in Section 9(i) with prior notice of any such announcement that gives rise to an extension of the Lock-up Period. The foregoing sentence shall not apply to (A) the Shares to be sold hereunder, (B) any shares of Stock issued by the Company upon the exercise of options to purchase shares of Stock or upon the vesting of restricted stock awards, in each case as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, (C) the grant of awards pursuant to employee benefit plans or arrangements described in the Registration Statement, the Pricing Prospectus and the Prospectus, (D) the issuance of shares of Stock, of restricted stock awards or of options to purchase shares of Stock, in each case, to be registered pursuant to any registration statement on Form S-8 pursuant to employee benefit plans or arrangements described in the Registration Statement, the Pricing Prospectus and the Prospectus, (E) the issuance of shares of Stock in connection with the acquisition by the Company or any of its subsidiaries of the securities, business, property or other assets of another person or business entity or pursuant to any employee benefit plan assumed by the Company in connection with any such acquisition or (F) the issuance of shares of Stock, of restricted stock awards or of options to purchase shares of Stock, in each case, in connection with joint ventures, commercial relationships or other strategic transactions; provided that, in the case of immediately preceding clauses (E) and (F), the aggregate number of restricted stock awards and shares of Stock issued in connection with, or issuable pursuant to the exercise of any options issued in connection with, all such acquisitions and other transactions does not exceed five percent (5%) of the aggregate number of shares of Stock outstanding immediately following the offering of the Offered Shares pursuant to this Agreement and the recipient of the shares of Stock agrees in writing to be bound by the same terms described in the Lock-Up Agreements referred to in Section 9(i) hereof.
(B) If the Representatives, in their sole discretion, agree to release or waive the restrictions set forth in a lock-up letter described in Section 9(i) hereof for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the
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impending release or waiver by a press release substantially in the form of Annex II hereto through a major news service at least two business days before the effective date of the release or waiver;
(vi) To use the net proceeds received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Pricing Prospectus under the caption Use of Proceeds;
(vii) To use its best efforts to list, subject to notice of issuance, the Shares on the Exchange;
(viii) To file with the Commission such information relating to the issuance of the Shares on Form 10-Q or Form 10-K as may be required by Rule 463 under the Act; and
(ix) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
(x) To cause the Directed Shares to be restricted from sale, transfer, assignment, pledge or hypothecation to such extent as may be required by FINRA and its rules.
(xi) To comply with all applicable securities and other laws, rules and regulations in each jurisdiction in which the Directed Shares are offered in connection with the Directed Share Program.
7. (a) The Company represents and agrees that, without the prior consent of the Representatives, it has not made and will not make any offer relating to the Shares that would constitute a free writing prospectus as defined in Rule 405 under the Act; each Underwriter represents and agrees that, without the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the Shares that would constitute a free writing prospectus; any such free writing prospectus the use of which has been consented to by the Company and the Representatives is listed on Schedule III(a) hereto;
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(b) The Company has complied and will comply with the requirements of Rule 433 under the Act applicable to any Issuer Free Writing Prospectus, including timely filing with the Commission or retention where required and legending; and the Company represents that it has satisfied and agrees that it will satisfy the conditions under Rule 433 under the Act to avoid a requirement to file with the Commission any electronic road show;
(c) The Company agrees that if at any time following issuance of an Issuer Free Writing Prospectus any event occurred or occurs as a result of which such Issuer Free Writing Prospectus would conflict with the information in the Registration Statement, the Pricing Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing, not misleading, the Company will give prompt notice thereof to the Representatives and, if requested by the Representatives, will prepare and furnish without charge to each Underwriter an Issuer Free Writing Prospectus or other document which will correct such conflict, statement or omission; provided, however , that this representation and warranty shall not apply to any statements or omissions in an Issuer Free Writing Prospectus made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein.
8. The Company covenants and agrees with the several Underwriters that the Company will pay or cause to be paid the following: (a) the fees, disbursements and expenses of the Companys counsel and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing, reproduction and filing of the Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (b) the cost of printing or producing this Agreement, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (c) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws as provided in Section 6(b) hereof, including the reasonable and documented fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey (d) all fees and expenses in connection with listing the Shares on the Exchange; (e) the filing fees incident to, and the reasonable and documented fees and disbursements of counsel for the Underwriters in an amount not to exceed $30,000 in connection with, any required review by FINRA of the terms of the sale of the Shares; (f) the cost of preparing stock certificates, if applicable; (g) the cost and charges of any transfer agent or registrar; (h) all costs and expenses of the Underwriters in connection with the Directed Share Program, including the
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reasonable and documented fees and disbursements of counsel for the Underwriters in an amount not to exceed $15,000 and stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters, in each case, in connection with the Directed Share Program; (i) the reasonable and documented expenses of the QIU solely in its capacity as QIU, and (j) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section 8. It is understood, however, that, except as provided in this Section 8, and Sections 10 and 13 hereof, (i) the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Shares by them, and any advertising expenses connected with any offers they may make, (ii) the Company will bear all of the Companys (but not the Underwriters) travel expenses and the Underwriters will bear all of the Underwriters (but not the Companys) travel expenses, in each case, in connection with any roadshow presentation to investors and (iii) notwithstanding clause (ii), the Company, on the one hand, and the Underwriters, on the other hand, shall each pay 50% of the cost of any chartered plane, jet or other aircraft used in connection with any roadshow presentation to investors.
9. The obligations of the Underwriters hereunder , as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company herein are, at and as of such Time of Delivery, true and correct in all material respects (except to the extent already qualified by materiality or Material Adverse Effect, in which case, such representations and warranties shall be true and correct in all respects), the condition that the Company shall have performed in all material respects all of its and their obligations hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) under the Act within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 6(a)(i) hereof; all material required to be filed by the Company pursuant to Rule 433(d) under the Act shall have been filed with the Commission within the applicable time period prescribed for such filing by Rule 433; if the Company has elected to rely upon Rule 462(b) under the Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; no stop order suspending or preventing the use of the Prospectus or any Issuer Free Writing Prospectus shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction;
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(b) Latham & Watkins LLP, counsel for the Underwriters, shall have furnished to you their written opinion and negative assurance letter, dated as of such Time of Delivery, in form and substance reasonably satisfactory to you;
(c) (1) Simpson Thacher & Bartlett LLP, counsel for the Company, shall have furnished to you their written opinion and negative assurance letter dated as of such Time of Delivery, in form and substance reasonably satisfactory to you and in the form of Annex III;
(d) On the date of the Prospectus at a time prior to the execution of this Agreement, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, each of Ernst & Young LLP and Deloitte Haskins & Sells shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you;
(e) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Pricing Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus, and (ii) since the respective dates as of which information is given in the Pricing Prospectus there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries (other than in the ordinary course of business) or any material adverse change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders equity or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Pricing Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in your judgment so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in this Agreement and the Prospectus;
(f) On or after the Applicable Time (i) no downgrading shall have occurred in the rating accorded the Companys debt securities by any nationally recognized statistical rating organization, as that term is defined by the Commission for purposes of Section 3(a)(62) under the Exchange Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Companys debt securities;
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(g) On or after the Applicable Time there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the Exchange or in the NASDAQ; (ii) a suspension or material limitation in trading in the Companys securities on the Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) is, in your judgment, material and adverse and, in your judgment, makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus;
(h) The Shares to be sold at such Time of Delivery shall have been duly listed, subject to notice of issuance, on the Exchange;
(i) The Company shall have obtained and delivered to the Underwriters executed copies of an agreement from each stockholder, director and officer of the Company set forth on Schedule IV, substantially to the effect set forth in Annex IV hereto;
(j) The Company shall have complied with the provisions of Section 6(a)(iii) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement;
(k) The Company shall have furnished or caused to be furnished to you at such Time of Delivery certificates signed by the Chief Financial Officer and General Counsel of the Company reasonably satisfactory to you as to the accuracy of the representations and warranties of the Company herein at and as of such Time of Delivery, as to the performance by the Company of all of its and their obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (a) and (e) of this Section 9 and as to such other matters as you may reasonably request; and
(l) On the date of the Prospectus at a time prior to the execution of this Agreement, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, the Company shall have furnished or caused to be furnished to you a certificate of the Chief Financial Officer,
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dated the respective dates of delivery thereof and addressed to the Underwriters, with respect to certain financial data contained in the Pricing Disclosure Package and the Prospectus, providing management comfort with respect to such information, in form and substance reasonably satisfactory to you.
10. (a) The Company will indemnify and hold harmless each Underwriter and each Underwriters directors, officers, employees and affiliates against any losses, claims, damages or liabilities, joint or several, to which such Underwriter and/or such Underwriters directors, officers, employees and affiliates may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading or (ii) an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus, any prospectus wrapper material distributed in connection with the Directed Share Program or any issuer information filed or required to be filed pursuant to Rule 433(d) under the Act, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and will reimburse each Underwriter and each Underwriters directors, officers, employees and affiliates for any legal or other expenses reasonably incurred by such Underwriter and/or such Underwriters directors, officers, employees and affiliates in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however , that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives expressly for use therein.
(b) [RESERVED]
(c) Each Underwriter, severally and not jointly, will indemnify and hold harmless the Company and the Companys directors and officers who have signed the Registration Statement against any losses, claims, damages or liabilities, to which the Company and/or the Companys directors and officers who have signed the Registration Statement may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) an untrue statement or alleged
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untrue statement of a material fact contained in the Registration Statement or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading or (ii) an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representatives expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection (a) or (c) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from (i) any liability which it may have to any indemnified party under such subsection unless and to the extent it has been materially prejudiced through the forfeiture by the indemnifying party of substantive rights and defenses or (ii) any liability which it may have to any indemnified party otherwise than under such subsection (including, for the avoidance of doubt, any liability under subsection (e) below). In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party) and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof (other than reasonable costs of investigation) unless (i) such indemnified party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the indemnifying party, (ii) the indemnifying party has failed within a reasonable
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time to retain counsel reasonably satisfactory to the indemnified party, or (iii) the named parties in any such proceeding (including any impleaded parties) include both the indemnifying person and the indemnified person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interest between them. It is understood and agreed that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all indemnified parties, and that all such fees and expenses shall be paid or reimbursed as they are incurred; provided, however , that if indemnity may be sought pursuant to Section 10(g) below in respect of a proceeding, then in addition to such separate firm of the Underwriters and their affiliates, the indemnifying party shall be liable for the fees and expenses of not more than one separate firm (in addition to local counsel) for the QIU in its capacity as a qualified independent underwriter, its directors, officers, employees and affiliates. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release in form and substance reasonably satisfactory to such indemnified party of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 10 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (c) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (d) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting
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expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. Benefits received by the QIU shall be deemed to be equal to the compensation received by the QIU for acting in such capacity. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e),(i) no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission; and (ii) the QIU, in its capacity as such, shall not be responsible for any amount in excess of the compensation received by the QIU for acting in such capacity. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint.
(f) (i) The obligations of the Company under this Section 10 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Underwriter and to each person, if any, who controls any Underwriter within the meaning of the Act and each broker-dealer affiliate of any Underwriter; and (ii) the obligations of the Underwriters under this Section 10 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company) and to each person, if any, who controls the Company within the meaning of the Act.
27
(g) Without limitation of and in addition to its obligations under the other paragraphs of this Section 10, the Company will indemnify and hold harmless the QIU and/or the QIUs directors, officers, employees and agents and each person who controls the QIU (within the meaning of either the Act or the Exchange Act) in connection with the offering of the Shares, against any losses, claims, damages or liabilities, joint or several, to which the QIU and/or the QIUs directors, officers, employees and affiliates may become subject, insofar as such losses, claims, damages or liabilities (or action in respect thereof) arise out of or are based upon the QIUs acting as a qualified independent underwriter (within the meaning of Rule 5121) in connection with the offering of the Shares contemplated by this Agreement, and will reimburse the QIU and the QIUs directors, officers, employees and affiliates for any legal or other expenses reasonably incurred by the QIU and/or the QIUs directors, officers, employees and affiliates in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however , that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon the gross negligence or willful misconduct of the QIU.
11. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Shares, or the Company notifies you that it has so arranged for the purchase of such Shares, you or the Company shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments or supplements to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term Underwriter as used in this Agreement shall include any person substituted under this Section 11 with like effect as if such person had originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you, the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of shares which such Underwriter agreed to purchase hereunder at such Time of
28
Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you, the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Company to sell the Optional Shares), shall thereupon terminate, without liability on the part of any non-defaulting Underwriter, the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 8 hereof and the indemnity and contribution agreements in Section 10 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default.
12. The respective indemnities, rights of contribution, agreements, representations, warranties and other statements of the Company and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, or any officer or director or controlling person of the Company, and shall survive delivery of and payment for the Shares.
13. If this Agreement shall be terminated pursuant to Section 11 hereof, the Company shall not then be under any liability to any Underwriter except as provided in Sections 8 and 10 hereof; but, if for any other reason, any Shares are not delivered by or on behalf of the Company to the Underwriters as provided herein, the Company will reimburse the Underwriters through you for all reasonable and documented out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company shall then be under no further liability to any Underwriter except as provided in Sections 8 and 10 hereof.
14. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by the Representatives on behalf of you as the Representatives.
29
All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the Representatives at Goldman, Sachs & Co., 200 West Street, New York, New York 10282, Attention: Registration Department; J.P. Morgan Securities LLC, 383 Madison Avenue, New York, New York 10179, Facsimile: (212) 622-8358), Attention: Equity Syndicate Desk; Merrill Lynch, Pierce, Fenner & Smith Incorporated, One Bryant Park, New York, New York 10036, Facsimile: (646) 855-3073, Attention: Syndicate Department with a copy to Facsimile: (212) 230-8730, Attention: ECM Legal; and Deutsche Bank Securities Inc., 60 Wall Street, 4 th Floor, New York, New York, 10005 Attention: Equity Capital Markets Syndicate Desk, with a copy to General Counsel, 60 Wall Street, 36th Floor, New York, New York 10005 and if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Secretary; and if to any stockholder that has delivered a lock-up letter described in Section 9(i) hereof shall be delivered or sent by mail to his or her respective address provided in Schedule IV hereto or such other address as such stockholder provides in writing to the Company; provided, however , that any notice to an Underwriter pursuant to Section 10(d) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company by you upon request; provided, however , that notices under subsection 6(a)(v) shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the Representatives at Goldman, Sachs & Co., 200 West Street, New York, New York 10282, Attention: Control Room; J.P. Morgan Securities LLC, 383 Madison Avenue, New York, New York 10179, Facsimile: (212) 622-8358), Attention: Equity Syndicate Desk; Merrill Lynch, Pierce, Fenner & Smith Incorporated, One Bryant Park, New York, New York 10036, Facsimile: (646) 855-3073, Attention: Syndicate Department with a copy to Facsimile: (212) 230-8730, Attention: ECM Legal; and Deutsche Bank Securities Inc., 60 Wall Street, 4 th Floor, New York, New York, 10005 Attention: Equity Capital Markets Syndicate Desk, with a copy to General Counsel, 60 Wall Street, 36th Floor, New York, New York 10005. Any such statements, requests, notices or agreements shall take effect upon receipt thereof.
In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Company, which information may include the name and address of their respective clients, as well as other information that will allow the Underwriters to properly identify their respective clients.
15. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company and, to the extent provided in Sections 10 and
30
12 hereof, the officers and directors of the Company and each person who controls the Company or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase.
16. Time shall be of the essence of this Agreement. As used herein, the term business day shall mean any day when the Commissions office in Washington, D.C. is open for business.
17. The Company acknowledges and agrees that (i) the purchase and sale of the Shares pursuant to this Agreement is an arms-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other, (ii) in connection therewith and with the process leading to such transaction each Underwriter is acting solely as a principal and not the agent or fiduciary of the Company, (iii) no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement and (iv) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate. The Company agrees that it will not claim that the Underwriters, or any of them, has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.
18. This Agreement supersedes all prior agreements and understandings (whether written or oral) among the Company and the Underwriters, or any of them, with respect to the subject matter hereof, except as otherwise noted herein.
19. THIS AGREEMENT AND ANY MATTERS RELATED TO THIS TRANSACTION SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The Company agrees that any suit or proceeding arising in respect of this Agreement or the transactions contemplated hereby will be tried exclusively in the U.S. District Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state court located in The City and County of New York and the Company agrees to submit to the jurisdiction of, and to venue in, such courts.
20. The Company and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
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21. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.
22. Notwithstanding anything herein to the contrary, the Company is authorized to disclose to any persons the U.S. federal and state income tax treatment and tax structure of the potential transaction and all materials of any kind (including tax opinions and other tax analyses) provided to the Company relating to that treatment and structure, without the Underwriters imposing any limitation of any kind. However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to enable any person to comply with securities laws. For this purpose, tax structure is limited to any facts that may be relevant to that treatment.
If the foregoing is in accordance with your understanding, please sign and return to us ten counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement among each of the Underwriters and the Company. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of agreement among Underwriters, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof.
Very truly yours, | ||
TRANSUNION | ||
By: |
|
|
Name: | ||
Title: |
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Accepted as of the date hereof: | ||
GOLDMAN, SACHS & CO. | ||
By: |
|
|
Name: | ||
Title: | ||
J.P. MORGAN SECURITIES LLC | ||
By: |
|
|
Name: | ||
Title: | ||
MERRILL LYNCH, PIERCE, FENNER & SMITH | ||
INCORPORATED |
||
By: |
|
|
Name: | ||
Title: | ||
DEUTSCHE BANK SECURITIES INC. | ||
By: |
|
|
Name: | ||
Title: | ||
By: |
|
|
Name: | ||
Title: |
For themselves and as Representatives on behalf of each of the Underwriters.
33
SCHEDULE I
Underwriter |
Total
Number of Firm Shares to be Purchased |
Number of
Optional Shares to be Purchased if Maximum Option Exercised |
||
|
|
|||
Total |
||||
|
|
SCHEDULE II
[RESERVED]
SCHEDULE III
(a) | Issuer Free Writing Prospectuses: |
(b) | Additional Documents Incorporated by Reference: |
None.
(c) | Information other than the Pricing Prospectus that comprise the Pricing Disclosure Package |
The initial public offering price per share for the Shares is $[ ].
The number of Shares purchased by the Underwriters is [ ].
SCHEDULE IV
Lock-Up Parties
ANNEX I
[RESERVED]
ANNEX II
[Form of Press Release]
TransUnion
[Date]
TransUnion (Company) announced today that Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., the lead book-running managers in the Companys recent public sale of shares of common stock, is [waiving] [releasing] a lock-up restriction with respect to shares of the Companys common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on , 20 , and the shares may be sold on or after such date.
This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.
ANNEX III
[Form of Company Counsel Opinion]
ANNEX IV
[Form of Lock-Up Agreement]
TransUnion
Lock-Up Agreement
[ ● ], 2015
Goldman, Sachs & Co.
J.P. Morgan Securities LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Deutsche Bank Securities Inc.
as Representatives of the several Underwriters
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Re: | TransUnion - Lock-Up Agreement |
Ladies and Gentlemen:
The undersigned understands that Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., as representatives (the Representatives), propose to enter into an underwriting agreement (the Underwriting Agreement) on behalf of the several Underwriters named in Schedule I to such agreement (collectively, the Underwriters), with TransUnion, a Delaware corporation (the Company) providing for a public offering of the common stock, par value $0.01 per share (the Common Stock) of the Company (the Shares) pursuant to a Registration Statement on Form S-1 (the Registration Statement) to be filed with the Securities and Exchange Commission (the SEC).
In consideration of the agreement by the Underwriters to offer and sell the Shares, and of other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees that, during the period specified in the following paragraph (the Lock-Up Period), the undersigned will not, without the prior written consent of the Representatives, offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, pledge, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock of the Company, or any options or warrants to purchase any shares of Common Stock of the Company, or any securities convertible into, exchangeable for or that represent the right to receive shares of Common Stock of the Company, whether now owned or hereafter acquired, owned directly by the undersigned (including holding as a custodian) or with respect to which the undersigned has or hereafter acquires beneficial ownership within the rules and regulations of the SEC (collectively the Undersigneds Shares). The foregoing restriction is expressly agreed to preclude the undersigned from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Undersigneds Shares even if such Shares would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Undersigneds Shares or with respect to any security that includes, relates to, or derives any significant part of its value from
such Shares. If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing provisions shall be equally applicable to any Company-directed Shares the undersigned may purchase in the public offering (the Directed Shares).
The Lock-Up Period will commence on the date of this agreement (the Lock-Up Agreement) and continue for 180 days after the public offering date set forth on the final prospectus used to sell the Shares (the Public Offering Date) pursuant to the Underwriting Agreement. If (1) during the last 17 days of the Lock-Up Period, the Company releases earnings results or announces material news or a material event or (2) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 15-day period following the last day of the Lock-Up Period, then in each case the Lock-Up Period will be automatically extended until the expiration of the 18-day period beginning on the date of release of the earnings results or the announcement of the material news or material event, as applicable, unless (A) the Representatives waive, in writing, such extension or (B) the changes to NASD Rule 2711(f)(4) contemplated by proposed FINRA Rule 2241 are approved and FINRA (i) establishes an effective date with respect to such changes that is prior to the original expiration date of the Lock-Up Period and (ii) makes clear that such changes are applicable to lock-up agreements that are entered into prior to such effective date.
If the undersigned is an officer or director of the Company, (i) the Representatives agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, the Representatives will notify the Company of the impending release or waiver, and (ii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by the Representatives hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this Lock-Up Agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.
The undersigned hereby acknowledges that the Company has agreed in the Underwriting Agreement to provide written notice of any event that would result in an extension of the Lock-Up Period pursuant to the previous paragraph to the undersigned (in accordance with Section 6 of the Underwriting Agreement) and agrees that any such notice properly delivered will be deemed to have been given to, and received by, the undersigned.
Notwithstanding the foregoing, the undersigned may transfer the Undersigneds Shares without the prior written consent of the Representatives:
(i) | as a bona fide gift or gifts, or by will or intestacy upon the death of the undersigned; provided , that the donee or donees, beneficiary or beneficiaries, heir or heirs or legal representatives thereof agree to be bound in writing by the restrictions set forth herein; |
(ii) | to any trust, partnership, limited liability company or other entity for the direct or indirect benefit of the undersigned or the immediate family of the undersigned; provided , that the trustee of the trust or the partnership, limited liability company or other entity agrees to be bound in writing by the restrictions set forth herein; and provided further , that any such transfer shall not involve a disposition for value; |
(iii) | to any immediate family member or other dependent; provided , that the transferee agrees to be bound in writing by the restrictions set forth herein; and provided further , that any such transfer shall not involve a disposition for value; |
(iv) | as a distribution to any wholly-owned subsidiary, partners, members or stockholders of the undersigned, provided that the transferee agrees to be bound in writing by the restrictions set forth herein, and provided further , that any such transfer shall not involve a disposition for value; |
(v) | to the undersigneds affiliates, shareholders, members, partners, subsidiaries or to any investment fund or other entity controlled or managed by the undersigned, provided that the transferee agrees to be bound in writing by the restrictions set forth herein, and provided further , that any such transfer shall not involve a disposition for value |
(vi) | to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (v) above; provided , that the transferee agrees to be bound in writing by the restrictions set forth herein; |
(vii) | pursuant to an order of a court or regulatory agency or to comply with any regulations related to the undersigneds ownership of the shares of Common Stock of the Company; provided , if the undersigned is required to file a report under the Securities Exchange Act of 1934, as amended (the Exchange Act), the undersigned shall include a statement in such report to the effect that the filing relates to the transfer of securities pursuant to an order of a court or regulatory agency or to comply with any regulations related to the ownership of the shares of Common Stock of the Company unless such a statement would be prohibited by any applicable law, regulation or order of a court or regulatory authority unless such a statement would be prohibited by any applicable law, regulation or order of a court or regulatory agency; |
(viii) | to the Company as the result of a conversion, exercise or exchange of any security convertible into or exercisable or exchangeable for shares of Common Stock pursuant to any existing employee benefit plans described in the Registration Statement, the Pricing Disclosure Package and the Prospectus (in each case, as defined in the Underwriting Agreement); provided , that any shares of Common Stock received upon such conversion, exercise or exchange shall be subject to the restrictions set forth herein; and provided further , if the undersigned is required to file a report under the Exchange Act, the undersigned shall include a statement in such report to the effect that the filing relates to the conversion, exercise or exchange of securities convertible into or exercisable or exchangeable for shares of Common Stock pursuant to existing employee benefit plans; |
(ix) | to the Company pursuant to the call provisions of Section 4.2 of that certain Stockholders Agreement, dated as of April 30, 2012, by and among the Company and the stockholders party thereto (the Stockholders Agreement); provided , that such shares shall be subject to Section 6(a)(v) of the Underwriting Agreement; provided further , if the undersigned is required to file a report under the Exchange Act, the undersigned shall include a statement in such report to the effect that the filing relates to a transfer of securities to the Company pursuant to the call provisions of the Stockholders Agreement; |
(x) | if the undersigned is an officer, to the Company upon death, disability or termination of employment, in each case, of such officer; |
(xi) | that were acquired in open market transactions following the date of the Underwriting Agreement; |
(xii) | to the Underwriters in connection with the public offering pursuant to the Underwriting Agreement; |
(xiii) | to the undersigneds general partner or to certain officers of the general partner in connection with such officers donation to charitable organizations, family foundations or donor-advised funds at sponsoring organizations; provided that if any reports under the Exchange Act are required to be filed as a result of such transfer, such reports shall include a statement to the effect that such filing relates to a transfer in connection with a donation to a charitable organization, family foundation or donor-advised fund at a sponsoring organization; and |
(xiv) | pursuant to a bona fide third-party tender offer made to all holders of the Common Stock, merger, consolidation or other similar transaction involving a change of control (as defined below) of the Company; provided , that in the event that such tender offer, merger, consolidation or other such transaction is not completed, the Undersigneds Shares shall remain subject to the restrictions contained in this Lock-Up Agreement; |
provided , that in connection with any transfer pursuant to clauses (i)-(vi) and (xi) above, the undersigned (A) shall not be required to report such transfer with the SEC in accordance with Section 16(a) of the Exchange Act and (B) shall agree to not voluntarily make, any filing or public announcement of the transfer or disposition, in each case, prior to the expiration of the Lock-Up Period; provided , however , that if the Lock-Up Period extends past February 11, 2016, the undersigned may report such transfer on or after February 12, 2016 with the SEC on Form 5 in accordance with Section 16(a) of the Exchange Act if such a filing is required by the Exchange Act. For purposes of this Lock-Up Agreement, immediate family shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. For the purposes of clause (xiv) above, change of control shall mean the consummation of any bona fide third party tender offer, merger, purchase, consolidation or other similar transaction the result of which is that any person (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a majority of total voting power of the voting stock of the Company.
Nothing in this Lock-Up Agreement shall prevent the establishment by the undersigned of any contract, instruction or plan (a Plan) that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act; provided , that it shall be a condition to the establishment of any such Plan that no sales of Common Stock shall be made pursuant to such a Plan prior to the expiration of the Lock-Up Period; and provided further , such a Plan may only be established if no public announcement of the establishment or the existence thereof, and no filing with SEC under the Exchange Act shall be required or shall be made voluntarily by the undersigned, the Company or any other person, prior to the expiration of the Lock-Up Period.
The undersigned also agrees and consents to the entry of stop transfer instructions with the Companys transfer agent and registrar against the transfer of the Undersigneds Shares except in compliance with the foregoing restrictions.
[Notwithstanding anything herein to the contrary, Goldman, Sachs & Co. and its affiliates, other than the undersigned, may engage in brokerage, investment advisory, financial advisory, anti-raid advisory, merger advisory, financing, asset management, trading, market making, arbitrage, principal investing and other similar activities conducted in the ordinary course of their affiliates business.] 1
[If any record or beneficial owner of any securities of the Company is granted an early release from the restrictions described herein during the Lock-Up Period with respect to shares of Common Stock of the Company having a fair market value in excess of $2.5 million in the aggregate (whether in one or multiple releases), then the undersigned shall also be granted an early release upon similar terms and conditions from its obligations hereunder of the same percentage of the total number of outstanding shares of Common Stock held by the undersigned (the Pro-Rata Release) as the percentage of the total number of outstanding shares of Common Stock held by such record or beneficial owner that are the subject of such release; provided , however , that in the case of an early release from the restrictions described herein during the Lock-Up Period in connection with an underwritten public offering, whether or not such offering or sale is wholly or partially a secondary offering of the Companys Common Stock (an Underwritten Sale) conducted in compliance with Registration Rights Agreement, dated April 30, 2012, among the Company, the undersigned and the other parties thereto, such early release shall only apply with respect to the undersigneds participation in such Underwritten Sale. The Representatives shall use commercially reasonable efforts to provide notice to the undersigned within 3 business days upon the occurrence of a release of a stockholder of its obligations under any lock-up agreement executed in connection with the public offering of the Companys Common Stock that gives rise to a corresponding release of the undersigneds lock-up agreement pursuant to the terms of this paragraph; provided , that the failure to give such notice shall not give rise to any claim or liability against the Underwriters.] 2
In furtherance of the foregoing, the Company, and any duly appointed transfer agent for the registration or transfer of the securities described herein, are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Agreement.
The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Agreement. All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or personal representatives of the undersigned.
The undersigned understands that the Company and the Underwriters are relying upon this Lock-Up Agreement in proceeding toward consummation of the public offering. The undersigned further understands that this Lock-Up Agreement is irrevocable and shall be binding upon the undersigneds heirs, legal representatives, successors and assigns.
The undersigned understands that the undersigned shall be released from all obligations under this Lock-Up Agreement if any of the following occurs: (a) the Registration Statement is withdrawn, (b) the Company notifies the Representatives in writing that it does not intend to proceed with the public offering, (c) the Representatives notify the Company in writing that they have determined not to proceed with the public offering, (d) the Underwriting Agreement does not become effective by December 31, 2015 or (e) the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Common Stock to be sold thereunder.
1 | Only to be included in Lock-Up Agreements for Goldman, Sachs & Co. entities. |
2 | Only to be included in Lock-Up Agreements for Goldman, Sachs & Co. and Advent International Corporation entities. |
This Lock-Up Agreement and any claim, controversy or dispute arising under or related to this Lock-Up Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof.
Very truly yours, |
|
Exact Name of Stockholder |
|
Authorized Signature |
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Title |
Exhibit 4.6
COMMON STOCK
SEE REVERSE SIDE FOR CERTAIN DEFINITIONS
CUSIP 89400J 10 7
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES, $0.01 PAR VALUE, OF TransUnion transferable on the books of the Corporation by the holder hereof in person or by Attorney upon surrender of this certificate properly endorsed. This COMMON certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. IN WITNESS WHEREOF, the said Corporation has caused this certificate to be signed by facsimile signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(Brooklyn, New York)
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
TITLE
TITLE
AMERICAN FINANCIAL PRINTING INCORPORATED MINNEAPOLIS
THE BOARD OF THIS CORPORATION HAS THE AUTHORITY TO CREATE AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF CLASSES OR SERIES OF SHARES OF CAPITAL STOCK OTHER THAN COMMON STOCK. THIS CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON WRITTEN REQUEST SENT TO ITS PRINCIPAL EXECUTIVE OFFICES, AND WITHOUT CHARGE, A FULL STATEMENT OF THE BOARDS AUTHORITY TO CREATE AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF CLASSES OR SERIES OF SHARES OF CAPITAL STOCK AS WELL AS THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES THEN OUTSTANDING OR AUTHORIZED TO BE ISSUED. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: UTMA CustodianTEN COM as tenants in common (Cust) (Minor) TEN ENT as tenants by entireties under Uniform Transfers to Minors JT TEN as joint tenants with right of survivorship Act and not as tenants in common (State) Additional abbreviations may also be used though not in the above list. For value receivedhereby sell, assign, and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE) Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. SIGNATURE GUARANTEED ALL GUARANTEES MUST BE MADE BY A FINANCIAL INSTITUTION (SUCH AS A BANK OR BROKER) WHICH IS A PARTICIPANT IN THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM (STAMP), THE NEW YORK STOCK EXCHANGE, INC. MEDALLION SIGNATURE PROGRAM (MSP), OR THE STOCK EXCHANGES MEDALLION PROGRAM (SEMP) AND MUST NOT BE DATED. GUARANTEES BY A NOTARY PUBLIC ARE NOT ACCEPTABLE.
Exhibit 5.1
June 15, 2015
TransUnion
555 West Adams Street
Chicago, IL 60661
Ladies and Gentlemen:
We have acted as counsel to TransUnion, a Delaware corporation (the Company), in connection with the Registration Statement on Form S-1 (File No. 333-203110) (as amended, the Registration Statement) filed by the Company with the Securities and Exchange Commission (the Commission) under the Securities Act of 1933, as amended (the Act), relating to the issuance and sale by the Company of an aggregate of 33,977,273 shares of common stock, par value $0.01 per share (the Common Stock) of the Company (together with any additional shares of such stock that may be issued by the Company pursuant to Rule 462(b) (as prescribed by the Commission pursuant to the Act) in connection with the offering described in the Registration Statement, the Shares).
We have examined the Registration Statement, a form of the share certificate for the Common Stock and a form of the Second Amended and Restated Certificate of Incorporation of the Company (the Amended Certificate), which has been filed with the Commission as an exhibit to the Registration Statement. We also have examined the originals, or duplicates or certified or conformed copies, of such records, agreements, documents and other instruments and have made such other investigations as we have deemed relevant and necessary in connection with the opinions hereinafter set forth. As to questions of fact material to this opinion, we have relied upon certificates or comparable documents of public officials and of officers and representatives of the Company.
In rendering the opinion set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies and the authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that (A) when the Pricing Committee of the Board of Directors of the Company has taken all necessary corporate action to authorize and approve the issuance of the Shares, (B) the Amended Certificate has been duly filed with the Secretary of State of the State of Delaware and (C) upon payment and delivery in accordance with the applicable definitive underwriting agreement approved by the Pricing Committee of the Board of Directors of the Company, the Shares will be validly issued, fully paid and nonassessable.
We do not express any opinion herein concerning any law other than the Delaware General Corporation Law.
We hereby consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the use of our name under the caption Legal Matters in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ Simpson Thacher & Bartlett LLP
SIMPSON THACHER & BARTLETT LLP
Exhibit 10.21
TRANSUNION
2015 OMNIBUS INCENTIVE PLAN
1. Purpose . The purpose of the TransUnion 2015 Omnibus Incentive Plan is to provide a means through which the Company and other members of the Company Group may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company Group and aligning their interests with those of the Companys stockholders.
2. Definitions . The following definitions shall be applicable throughout the Plan.
(a) Absolute Share Limit has the meaning given such term in Section 5(b) of the Plan.
(b) Affiliate means any Person that directly or indirectly controls, is controlled by or is under common control with the Company. The term control (including, with correlative meaning, the terms controlled by and under common control with), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting or other securities, by contract or otherwise.
(c) Award means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Award, Other Cash-Based Award and Performance Compensation Award granted under the Plan.
(d) Award Agreement means the document or documents by which each Award is evidenced, which may be in written or electronic form.
(e) Board means the Board of Directors of the Company.
(f) Cause means, as to any Participant, unless the applicable Award Agreement states otherwise, (i) Cause, as defined in any employment, consulting or similar agreement between the Participant and any member of the Company Group in effect at the time of such Termination, or (ii) in the absence of any such employment, consulting or similar agreement (or the absence of any definition of Cause contained therein), the Participants (A) the breach by Participant of the terms of any employment or severance agreement to which Participant is a party with any member of the Company Group, (B) if Participant has no such agreement, a breach of the terms of Participants employment (including, without limitation, the material policies of the Service Recipient, as applicable relating to sexual harassment or the disclosure or misuse of confidential information, or those set forth in the manuals or statements of policy of the Service Recipient), (C) the willful failure or refusal to perform Participants material duties for the Service Recipient or any member of the Company Group, as applicable, (D) the insubordination or disregard of the legal directives of the Board or senior management of the Company, as applicable, which are not inconsistent with the scope, ethics and nature of
Participants duties and responsibilities, (E) engaging in misconduct that has, or could reasonably be expected to have, a material and adverse impact on the reputation, business, business relationships or financial condition of any member of the Company Group, (F) the commission of an act of fraud or embezzlement or acts of personal dishonesty involving personal profit against any member of the Company Group or (G) commission of acts constituting, any conviction of, or plea of guilty or nolo contendere to, a felony or of a crime involving fraud or misrepresentation, or any other crime that results, or could reasonably be expected to result in, material harm to the business or reputation of any member of the Company Group.
(g) Change in Control means:
(i) the acquisition (whether by purchase, merger, consolidation, combination or other similar transaction) by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% (on a fully diluted basis) of either (A) the then outstanding shares of Common Stock, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however , that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (I) any acquisition by the Company or any Affiliate; (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate; or (III) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of Persons including the Participant);
(ii) during any period of twelve (12) months, individuals who, at the beginning of such period, constitute the Board (the Incumbent Directors ) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however , that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; or
(iii) the sale, transfer or other disposition of all or substantially all of the assets of the Company Group (taken as a whole) to any Person that is not an Affiliate of the Company.
(h) Code means the Internal Revenue Code of 1986, as amended, and any successor thereto. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance.
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(i) Committee means the Compensation Committee of the Board or any properly delegated subcommittee thereof or, if no such Compensation Committee or subcommittee thereof exists, the Board.
(j) Common Stock means the common stock, par value $0.01 per share, of the Company (and any stock or other securities into which such Common Stock may be converted or into which it may be exchanged).
(k) Company means TransUnion, a Delaware corporation, and any successor thereto.
(l) Company Group means, collectively, the Company and any of its Subsidiaries.
(m) Date of Grant means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization.
(n) Designated Foreign Subsidiaries means all members of the Company Group that are organized under the laws of any jurisdiction or country other than the United States of America that may be designated by the Board or the Committee from time to time.
(o) Detrimental Activity means any of the following: (i) unauthorized disclosure of any confidential or proprietary information of any member of the Company Group; (ii) any activity that would be grounds to terminate the Participants employment or service with the Service Recipient for Cause; (iii) the breach of any noncompetition, nonsolicitation or other agreement containing restrictive covenants, with any member of the Company Group; or (iv) fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion.
(p) Disability means, as to any Participant, unless the applicable Award Agreement states otherwise, (i) Disability, as defined in any employment, consulting or similar agreement between the Participant and the Service Recipient in effect at the time of determination; or (ii) in the absence of any such employment, consulting or similar agreement (or the absence of any definition of Disability contained therein), a condition entitling the Participant to receive benefits under a long-term disability plan of the Service Recipient or other member of Company Group in which such Participant is eligible to participate, or, in the absence of such a plan, the complete and permanent inability of the Participant by reason of illness or accident to perform the duties of the occupation at which the Participant was employed or served when such disability commenced. Any determination of whether Disability exists shall be made by the Company (or designee) in its sole and absolute discretion.
(q) Effective Date means [insert effective date] , 2015.
(r) Eligible Director means a person who is (i) with respect to actions intended to obtain an exemption from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 under the Exchange Act, a non-employee director within the meaning of Rule 16b-3 under the
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Exchange Act; (ii) with respect to actions intended to obtain the exception for performance-based compensation under 162(m) of the Code, an outside director within the meaning of Section 162(m) of the Code; and (iii) with respect to actions undertaken to comply with the rules of the NYSE or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, an independent director under the rules of the NYSE or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, or a person meeting any similar requirement under any successor rule or regulation.
(s) Eligible Person means any (i) individual employed by any member of the Company Group; provided, however, that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director or officer of any member of the Company Group; or (iii) consultant or advisor to any member of the Company Group who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act, who, in the case of each of clauses (i) through (iii) above has entered into an Award Agreement or who has received written notification from the Committee or its designee that they have been selected to participate in the Plan.
(t) Exchange Act means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.
(u) Exercise Price has the meaning given such term in Section 7(b) of the Plan.
(v) Fair Market Value means, on a given date, if (i) the Common Stock is listed on a national securities exchange, the closing sales price of the Common Stock reported on the primary exchange on which the Common Stock is listed and traded on such date, or, if there are no such sales on that date, then on the last preceding date on which such sales were reported; (ii) the Common Stock is not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; or (iii) the Common Stock is not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last sale basis, the amount determined by the Committee in good faith to be the fair market value of the Common Stock; provided , however , as to any Awards granted on or with a Date of Grant of the date of the pricing of the Companys initial public offering, Fair Market Value shall be equal to the per share price the Common Stock is offered to the public in connection with such initial public offering.
(w) GAAP has the meaning given such term in Section 14(b) of the Plan
(x) Immediate Family Members has the meaning given such term in Section 14(b) of the Plan.
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(y) Incentive Stock Option means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan.
(z) Indemnifiable Person has the meaning given such term in Section 4(e) of the Plan.
(aa) Negative Discretion means the discretion authorized by the Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award consistent with Section 162(m) of the Code.
(bb) Nonqualified Stock Option means an Option which is not designated by the Committee as an Incentive Stock Option.
(cc) Non-Employee Director means a member of the Board who is not an employee of any member of the Company Group.
(dd) NYSE means the New York Stock Exchange.
(ee) Option means an Award granted under Section 7 of the Plan.
(ff) Option Period has the meaning given such term in Section 7(c) of the Plan.
(gg) Other Cash-Based Award means an Award granted under Section 10 of the Plan that is payable without reference to the value of Common Stock.
(hh) Other Stock-Based Award means an Award granted under Section 10 of the Plan that is payable by reference to the value of Common Stock.
(ii) Participant means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to the Plan.
(jj) Performance Compensation Award means any Award designated by the Committee as a Performance Compensation Award pursuant to Section 11 of the Plan.
(kk) Performance Criteria means the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goals for a Performance Period with respect to any Performance Compensation Award under the Plan.
(ll) Performance Formula means, for a Performance Period, the one or more objective formulae applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.
(mm) Performance Goals means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.
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(nn) Performance Period means the one or more periods of time of not less than 12 months, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participants right to, and the payment of, a Performance Compensation Award.
(oo) Permitted Transferee has the meaning given such term in Section 14(b) of the Plan.
(pp) Person means any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act).
(qq) Plan means this TransUnion 2015 Omnibus Incentive Plan, as it may be amended from time to time.
(rr) Qualifying Termination means a Termination of a Participants employment or service with a Successor Company and its Subsidiaries without Cause during the period beginning on a Change in Control, and ending on the first anniversary of such Change in Control.
(ss) Restricted Stock means Common Stock, subject to certain specified restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.
(tt) Restricted Stock Unit means an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.
(uu) SAR Period has the meaning given such term in Section 8(c) of the Plan.
(vv) Securities Act means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.
(ww) Service Recipient means, with respect to a Participant holding a given Award, the member of the Company Group by which the original recipient of such Award is, or following a Termination was most recently, principally employed or to which such original recipient provides, or following a Termination was most recently providing, services, as applicable.
(xx) Stock Appreciation Right or SAR means an Award granted under Section 8 of the Plan.
(yy) Strike Price has the meaning given such term in Section 8(b) of the Plan.
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(zz) Subsidiary means, with respect to any specified Person:
(i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of such entitys voting securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(ii) any partnership (or any comparable foreign entity) (A) the sole general partner (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (B) the only general partners (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).
(aaa) Substitute Award has the meaning given such term in Section 5(e) of the Plan.
(bbb) Sub-Plans means any sub-plan to this Plan that has been adopted by the Board or the Committee for the purpose of permitting the offering of Awards to employees of certain Designated Foreign Subsidiaries or otherwise outside the United States of America, with each such sub-plan designed to comply with local laws applicable to offerings in such foreign jurisdictions. Although any Sub-Plan may be designated a separate and independent plan from the Plan in order to comply with applicable local laws, the Absolute Share Limit and the other limits specified in Section 5(b) shall apply in the aggregate to the Plan and any Sub-Plan adopted hereunder.
(ccc) Successor Award has the meaning given such term in Section 12(b)(i) of the Plan.
(ddd) Successor Company means an acquiring company or successor to the Company, or the surviving company of a Change in Control, or, if any, the parent or holding company thereof.
(eee) Termination means the termination of a Participants employment or service, as applicable, with the Service Recipient.
(fff) Vesting Period means the period of time determined by the Committee during which an Award is subject to restrictions or, as applicable, the period of time within which performance is measured for purposes of determining whether an Award has been earned.
3. Effective Date; Duration . The Plan shall be effective as of the Effective Date. The expiration date of the Plan, on and after which date no Awards may be granted hereunder, shall be the tenth anniversary of the Effective Date; provided, however , that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards.
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4. Administration .
(a) The Committee shall administer the Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan) or necessary to obtain the exception for performance-based compensation under Section 162(m) of the Code, as applicable, it is intended that each member of the Committee shall, at the time he or she takes any action with respect to an Award under the Plan that is intended to qualify for the exemptions provided by Rule 16b-3 or to qualify as performance-based compensation under Section 162(m) of the Code, as applicable, be an Eligible Director. However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.
(b) Subject to the provisions of the Plan and applicable law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by the Plan, to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of shares of Common Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled in, or exercised for, cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, shares of Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant or of the Committee; (vii) interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan; and (x) adopt Sub-Plans.
(c) Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of any member of the Company Group, the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of, or which is allocated to, the Committee herein, and which may be so delegated as a matter of law, except for grants of Awards to Non-Employee Directors. Notwithstanding the foregoing in this Section 4(c), it is intended that any action under the Plan intended to qualify for the exemptions provided by Rule 16b-3 under the Exchange Act, and/or the exceptions under Section 162(m) of the Code related to persons who are subject to Section 16 of the Exchange Act and/or who are, or who are
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reasonably expected to be, covered employees for purposes of Section 162(m) of the Code, will be taken only by the Board or by a committee or subcommittee of two or more Eligible Directors. However, the fact that any member of such committee or subcommittee shall fail to qualify as an Eligible Director shall not invalidate any action that is otherwise valid under the Plan.
(d) Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award or any documents evidencing Awards granted pursuant to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons or entities, including, without limitation, the Company, any other member of the Company Group, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company.
(e) No member of the Board, the Committee or any employee or agent of any member of the Company Group (each such Person, an Indemnifiable Person ) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made with respect to the Plan or any Award granted hereunder and against and from any and all amounts paid by such Indemnifiable Person with the Companys approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined, as provided below, that the Indemnifiable Person is not entitled to be indemnified); provided , that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Companys choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts, omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Persons fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the organizational documents of any member of the Company Group. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the organizational documents of any member of the Company Group, as a matter of law, under an individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold such Indemnifiable Person harmless.
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(f) Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to such Awards. Any such actions by the Board shall be subject to the applicable rules of the NYSE or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted. In any such case, the Board shall have all the authority granted to the Committee under the Plan.
5. Grant of Awards; Shares Subject to the Plan; Limitations .
(a) The Committee may, from time to time, grant Awards to one or more Eligible Persons.
(b) Awards granted under the Plan shall be subject to the following limitations: (i) subject to Section 12 of the Plan, no more than 5,400,000 shares of Common Stock (the Absolute Share Limit ) shall be available for Awards under the Plan; (ii) subject to Section 12 of the Plan, grants of Options or SARs under the Plan in respect of no more than 1,333,000 shares of Common Stock may be made to any individual Participant during any single fiscal year of the Company (for this purpose, if a SAR is granted in tandem with an Option (such that the SAR expires with respect to the number of shares of Common Stock for which the Option is exercised), only the shares underlying the Option shall count against this limitation); (iii) subject to Section 12 of the Plan, no more than the number of shares of Common Stock equal to the Absolute Share Limit may be issued in the aggregate pursuant to the exercise of Incentive Stock Options granted under the Plan; (iv) subject to Section 12 of the Plan, no more than 1,333,000 shares of Common Stock may be issued in respect of Performance Compensation Awards denominated in shares of Common Stock granted pursuant to Section 11 of the Plan to any individual Participant for a single fiscal year during a Performance Period (or with respect to each single fiscal year in the event a Performance Period extends beyond a single fiscal year), or in the event such share denominated Performance Compensation Award is paid in cash, other securities, other Awards or other property, no more than the Fair Market Value of such shares of Common Stock on the last day of the Performance Period to which such Award relates; (v) the maximum number of shares of Common Stock subject to Awards granted during a single fiscal year to any Non-Employee Director, taken together with any cash fees paid to such Non-Employee Director during the fiscal year, shall not exceed $1,500,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes); and (vi) the maximum amount that can be paid to any individual Participant for a single fiscal year during a Performance Period (or with respect to each single fiscal year in the event a Performance Period extends beyond a single fiscal year) pursuant to a Performance Compensation Award denominated in cash (described in Section 11(a) of the Plan) shall be $25,000,000.
(c) Other than with respect to Substitute Awards, to the extent that an Award expires or is canceled, forfeited, terminated, settled in cash, or otherwise is settled without delivery to the Participant of the full number of shares of Common Stock to which the Award related, the undelivered shares will again be available for grant. Shares of Common Stock withheld in payment of the exercise price or taxes relating to an Award and shares equal to the number of shares surrendered in payment of any Exercise Price or Strike Price, or taxes relating to an Award, shall be deemed to constitute shares not issued to the Participant and shall be deemed to
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again be available for Awards under the Plan; provided , however , that such shares shall not become available for issuance hereunder if either: (i) the applicable shares are withheld or surrendered following the termination of the Plan; or (ii) at the time the applicable shares are withheld or surrendered, it would constitute a material revision of the Plan subject to stockholder approval under any then-applicable rules of the national securities exchange on which the Common Stock is listed.
(d) Shares of Common Stock issued by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase or a combination of the foregoing.
(e) Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by the Company or with which the Company combines ( Substitute Awards ). Substitute Awards shall not be counted against the Absolute Share Limit; provided , that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as incentive stock options within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares of Common Stock available for Awards of Incentive Stock Options under the Plan. Subject to applicable stock exchange requirements, available shares under a stockholder approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect the acquisition or combination transaction) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock available for issuance under the Plan.
6. Eligibility . Participation in the Plan shall be limited to Eligible Persons.
7. Options .
(a) General . Each Option granted under the Plan shall be evidenced by an Award Agreement, in written or electronic form, which agreement need not be the same for each Participant. Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option. Incentive Stock Options shall be granted only to Eligible Persons who are employees of the Company Group, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code, provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to, and comply with, such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.
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(b) Exercise Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the exercise price ( Exercise Price ) per share of Common Stock for each Option shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant); provided, however , that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of any member of the Company Group, the Exercise Price per share shall be no less than 110% of the Fair Market Value per share on the Date of Grant.
(c) Vesting and Expiration; Termination .
(i) Options shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee; provided , however , that notwithstanding any such vesting dates or events, the Committee may in its sole discretion accelerate the vesting of any Options at any time and for any reason. Options shall expire upon a date determined by the Committee, not to exceed ten (10) years from the Date of Grant (the Option Period ); provided , that if the Option Period (other than in the case of an Incentive Stock Option) would expire at a time when trading in the shares of Common Stock is prohibited by the Companys insider trading policy (or Company-imposed blackout period), then the Option Period shall be automatically extended until the 30 th day following the expiration of such prohibition. Notwithstanding the foregoing, in no event shall the Option Period exceed five (5) years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns stock representing more than 10% of the voting power of all classes of stock of any member of the Company Group.
(ii) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of: (A) a Participants Termination by the Service Recipient for Cause, all outstanding Options granted to such Participant shall immediately terminate and expire; (B) a Participants Termination due to death or Disability, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for one year thereafter (but in no event beyond the expiration of the Option Period); and (C) a Participants Termination for any other reason, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for ninety (90) days thereafter (but in no event beyond the expiration of the Option Period).
(d) Method of Exercise and Form of Payment . No shares of Common Stock shall be issued pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. Options which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company (or telephonic instructions to the
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extent provided by the Committee) in accordance with the terms of the Option accompanied by payment of the Exercise Price. The Exercise Price shall be payable: (i) in cash, check, cash equivalent and/or shares of Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual issuance of such shares to the Company); provided , that such shares of Common Stock are not subject to any pledge or other security interest and have been held by the Participant for not less than six months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying GAAP); or (ii) by such other method as the Committee may permit in its sole discretion, including, without limitation: (A) in other property having a fair market value on the date of exercise equal to the Exercise Price; (B) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted cashless exercise pursuant to which the Company is delivered (including telephonically to the extent permitted by the Committee) a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise issuable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price; or (C) a net exercise procedure effected by withholding the minimum number of shares of Common Stock otherwise issuable in respect of an Option that are needed to pay the Exercise Price. Any fractional shares of Common Stock shall be settled in cash.
(e) Notification upon Disqualifying Disposition of an Incentive Stock Option . Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date he or she makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (A) two years after the Date of Grant of the Incentive Stock Option or (B) one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Common Stock.
(f) Compliance With Laws, etc . Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, as it may be amended from time to time, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded.
8. Stock Appreciation Rights .
(a) General . Each SAR granted under the Plan shall be evidenced by an Award Agreement. Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Any Option granted under the Plan may include tandem SARs. The Committee also may award SARs to Eligible Persons independent of any Option.
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(b) Strike Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the strike price ( Strike Price ) per share of Common Stock for each SAR shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant). Notwithstanding the foregoing, a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price equal to the Exercise Price of the corresponding Option.
(c) Vesting and Expiration; Termination .
(i) A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable in such manner and on such date or dates or upon such events as determined by the Committee; provided , however , that notwithstanding any such vesting dates or events, the Committee may, in its sole discretion, accelerate the vesting of any SAR at any time and for any reason. SARs shall expire upon a date determined by the Committee, not to exceed ten (10) years from the Date of Grant (the SAR Period ); provided , that if the SAR Period would expire at a time when trading in the shares of Common Stock is prohibited by the Companys insider trading policy (or Company-imposed blackout period), then the SAR Period shall be automatically extended until the 30th day following the expiration of such prohibition.
(ii) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of: (A) a Participants Termination by the Service Recipient for Cause, all outstanding SARs granted to such Participant shall immediately terminate and expire; (B) a Participants Termination due to death or Disability, each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for one (1) year thereafter (but in no event beyond the expiration of the SAR Period); and (C) a Participants Termination for any other reason, each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for ninety (90) days thereafter (but in no event beyond the expiration of the SAR Period).
(d) Method of Exercise . SARs which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded.
(e) Payment . Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of shares subject to the SAR that is being exercised multiplied by the excess of the Fair Market Value of one (1) share of Common Stock on the exercise date over the Strike Price, less an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. The Company shall pay
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such amount in cash, in shares of Common Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee. Any fractional shares of Common Stock shall be settled in cash.
9. Restricted Stock and Restricted Stock Units .
(a) General . Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement. Each Restricted Stock and Restricted Stock Unit so granted shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.
(b) Stock Certificates and Book-Entry; Escrow or Similar Arrangement . Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Companys directions and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than issued to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute and deliver (in a manner permitted under Section 14(a) of the Plan or as otherwise determined by the Committee) an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9 and the applicable Award Agreement, a Participant generally shall have the rights and privileges of a stockholder as to shares of Restricted Stock, including, without limitation, the right to vote such Restricted Stock; provided , that if the lapsing of restrictions with respect to any grant of Restricted Stock is contingent on satisfaction of performance conditions (other than, or in addition to, the passage of time), any dividends payable on such shares of Restricted Stock shall be held by the Company and delivered (without interest) to the Participant within fifteen (15) days following the date on which the restrictions on such Restricted Stock lapse (and the right to any such accumulated dividends shall be forfeited upon the forfeiture of the Restricted Stock to which such dividends relate). To the extent shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company. A Participant shall have no rights or privileges as a stockholder as to Restricted Stock Units.
(c) Vesting; Termination .
(i) Restricted Stock and Restricted Stock Units shall vest, and any applicable Vesting Period shall lapse, in such manner and on such date or dates or upon such event
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or events as determined by the Committee; provided , however , that, notwithstanding any such dates or events, the Committee may, in its sole discretion, accelerate the vesting of any Restricted Stock or Restricted Stock Unit or the lapsing of any applicable Vesting Period at any time and for any reason.
(ii) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of a Participants Termination for any reason prior to the time that such Participants Restricted Stock or Restricted Stock Units, as applicable, have vested, (A) all vesting with respect to such Participants Restricted Stock or Restricted Stock Units, as applicable, shall cease and (B) unvested shares of Restricted Stock and unvested Restricted Stock Units, as applicable, shall be forfeited to the Company by the Participant for no consideration as of the date of such Termination.
(d) Issuance of Restricted Stock and Settlement of Restricted Stock Units .
(i) Upon the expiration of the Vesting Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall issue to the Participant, or his or her beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book-entry notation) evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Vesting Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.
(ii) Unless otherwise provided by the Committee in an Award Agreement or otherwise, upon the expiration of the Vesting Period with respect to any outstanding Restricted Stock Units, the Company shall issue to the Participant or his or her beneficiary, without charge, one (1) share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit; provided , however , that the Committee may, in its sole discretion, elect to (A) pay cash or part cash and part shares of Common Stock in lieu of issuing only shares of Common Stock in respect of such Restricted Stock Units; or (B) defer the issuance of shares of Common Stock (or cash or part shares of Common Stock and part cash, as the case may be) beyond the expiration of the Vesting Period if such extension would not cause adverse tax consequences under Section 409A of the Code. If a cash payment is made in lieu of issuing shares of Common Stock in settlement of such Restricted Stock Units, the amount of such payment shall be equal to the Fair Market Value per share of the Common Stock as of the date on which the Vesting Period lapsed with respect to such Restricted Stock Units. To the extent provided in an Award Agreement, the holder of outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in
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cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends (and interest may, at the sole discretion of the Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Committee), which accumulated dividend equivalents (and interest thereon, if applicable) shall be payable at the same time as the underlying Restricted Stock Units are settled following the date on which the Vesting Period lapses with respect to on such Restricted Stock Units, and, if such Restricted Stock Units are forfeited, the Participant shall have no right to such dividend equivalent payments (or interest thereon, if applicable).
(e) Legends on Restricted Stock . Each certificate, if any, or book entry representing Restricted Stock awarded under the Plan, if any, shall bear a legend or book entry notation substantially in the form of the following, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect to such shares of Common Stock:
TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE TRANSUNION 2015 OMNIBUS INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT BETWEEN TRANSUNION AND PARTICIPANT. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF TRANSUNION.
10. Other Stock-Based Awards and Other Cash-Based Awards. The Committee may issue unrestricted Common Stock, rights to receive grants of Awards at a future date, or other Awards denominated in Common Stock, valued by reference to, or are otherwise based on the Fair Market Value per share of Common Stock, including, without limitation, performance shares or performance units, or other Awards denominated in cash, (including, without limitation, cash bonuses), under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts and dependent on such conditions as the Committee shall from time to time in its sole discretion determine. Each Other Stock-Based Award granted under the Plan shall be evidenced by an Award Agreement, and each Other Cash-Based Awards shall be evidenced such form as the Committee may determine from time to time. Each Other Stock-Based Award or Other Cash-Based Award, as applicable, so granted shall be subject to such conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement or other form evidencing such Award, including, without limitation, those set forth in Section 14(c) of the Plan.
11. Performance Compensation Awards .
(a) General . The Committee shall have the authority, at or before the time of grant of any Award, to designate such Award as a Performance Compensation Award intended to qualify as performance-based compensation under Section 162(m) of the Code. Notwithstanding anything in the Plan to the contrary, if the Company determines that a Participant who has been granted an Award designated as a Performance Compensation Award
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is not (or is no longer) a covered employee (within the meaning of Section 162(m) of the Code), the terms and conditions of such Award may be modified without regard to any restrictions or limitations set forth in this Section 11 (but subject otherwise to the provisions of Section 13 of the Plan).
(b) Discretion of Committee with Respect to Performance Compensation Awards . With regard to a particular Performance Period, the Committee shall have sole discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goal(s) that is (are) to apply and the Performance Formula(e). Within the first ninety (90) days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing.
(c) Performance Criteria . The Performance Criteria that will be used to establish the Performance Goal(s) may be based on the attainment of specific levels of performance of the Company (and/or one or more members of the Company Group, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing) and shall be limited to the following, which may be determined in accordance with generally accepted accounting principles ( GAAP ) or on a non-GAAP basis: (i) net earnings, net income (before or after taxes) or consolidated net income; (ii) basic or diluted earnings per share (before or after taxes); (iii) net revenue or net revenue growth; (iv) gross revenue or gross revenue growth, gross profit or gross profit growth; (v) net operating profit (before or after taxes); (vi) return measures (including, but not limited to, return on investment, assets, capital, employed capital, invested capital, equity, or sales); (vii) cash flow measures (including, but not limited to, operating cash flow, free cash flow, or cash flow return on capital), which may but are not required to be measured on a per share basis; (viii) actual or adjusted earnings before or after interest, taxes, depreciation and/or amortization (including EBIT and EBITDA); (ix) gross or net operating margins; (x) productivity ratios; (xi) share price (including, but not limited to, growth measures and total stockholder return); (xii) expense targets or cost reduction goals, general and administrative expense savings; (xiii) operating efficiency; (xiv) objective measures of customer/client satisfaction; (xv) working capital targets; (xvi) measures of economic value added or other value creation metrics; (xvii) enterprise value; (xviii) sales; (xix) stockholder return; (xx) customer/client retention; (xxi) competitive market metrics; (xxii) employee retention; (xxiii) objective measures of personal targets, goals or completion of projects (including but not limited to succession and hiring projects, completion of specific acquisitions, dispositions, reorganizations or other corporate transactions or capital-raising transactions, expansions of specific business operations and meeting divisional or project budgets); (xxiv) comparisons of continuing operations to other operations; (xxv) market share; (xxvi) cost of capital, debt leverage year-end cash position or book value; (xxvii) strategic objectives; or (xxviii) any combination of the foregoing. Any one or more of the Performance Criteria may be stated as a percentage of another Performance Criteria, or used on an absolute or relative basis to measure the performance of the Company and/or one or more members of the Company Group as a whole or any divisions or operational and/or business units, product lines, brands, business segments, administrative departments of the Company
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and/or one or more members of the Company Group or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph. To the extent required under Section 162(m) of the Code, the Committee shall, within the first ninety (90) days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period.
(d) Modification of Performance Goal(s) . In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such alterations, the Committee shall have sole discretion to make such alterations without obtaining stockholder approval. Unless otherwise determined by the Committee at the time a Performance Compensation Award is granted, the Committee shall, during the first ninety (90) days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), or at any time thereafter to the extent the exercise of such authority at such time would not cause the Performance Compensation Awards granted to any Participant for such Performance Period to fail to qualify as performance-based compensation under Section 162(m) of the Code, specify adjustments or modifications to be made to the calculation of a Performance Goal for such Performance Period, based on and in order to appropriately reflect the following events: (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) extraordinary nonrecurring items as described in Accounting Standards Codification Topic 225-20 (or any successor pronouncement thereto) and/or in managements discussion and analysis of financial condition and results of operations appearing in the Companys annual report to stockholders for the applicable year; (vi) acquisitions or divestitures; (vii) any other specific, unusual or nonrecurring events, or objectively determinable category thereof; (viii) foreign exchange gains and losses; (ix) discontinued operations and nonrecurring charges; and (x) a change in the Companys fiscal year.
(e) Payment of Performance Compensation Awards .
(i) Condition to Receipt of Payment . Unless otherwise provided in the applicable Award agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.
(ii) Limitation . Unless otherwise provided in the applicable Award agreement, a Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period
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are achieved; and (B) all or some of the portion of such Participants Performance Compensation Award has been earned for the Performance Period based on the application of the Performance Formula to such achieved Performance Goals.
(iii) Certification . Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the amount of each Participants Performance Compensation Award actually payable for the Performance Period and, in so doing, may apply Negative Discretion.
(iv) Use of Negative Discretion . In determining the actual amount of an individual Participants Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion. Unless otherwise provided in the applicable Award Agreement, the Committee shall not have the discretion to: (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained; or (B) increase a Performance Compensation Award above the applicable limitations set forth in Section 5 of the Plan.
(f) Timing of Award Payments . Unless otherwise provided in the applicable Award Agreement, Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 11. Any Performance Compensation Award that has been deferred shall not (between the date as of which the Award is deferred and the payment date) increase (i) with respect to a Performance Compensation Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Committee or (ii) with respect to a Performance Compensation Award that is payable in shares of Common Stock, by an amount greater than the appreciation of a share of Common Stock from the date such Award is deferred to the payment date. Any Performance Compensation Award that is deferred and is otherwise payable in shares of Common Stock shall be credited (during the period between the date as of which the Award is deferred and the payment date) with dividend equivalents (in a manner consistent with the methodology set forth in the last sentence of Section 9(d)(ii) of the Plan).
12. Changes in Capital Structure and Similar Events. Notwithstanding any other provision in this Plan to the contrary, the following provisions shall apply to all Awards granted hereunder (except Other Cash-Based awards):
(a) General . In the event of (i) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate
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transaction or event that affects the shares of Common Stock (including a Change in Control), or (ii) unusual or nonrecurring events affecting the Company, including changes in applicable rules, rulings, regulations or other requirements, that the Committee determines, in its sole discretion, could result in substantial dilution or enlargement of the rights intended to be granted to, or available for, Participants (any event in (i) or (ii), an Adjustment Event ), the Committee shall, in respect of any such Adjustment Event, make such proportionate substitution or adjustment, if any, as it deems equitable, to any or all of (A) the Absolute Share Limit, or any other limit applicable under the Plan with respect to the number of Awards which may be granted hereunder, (B) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) which may be issued in respect of Awards or with respect to which Awards may be granted under the Plan, and (C) the terms of any outstanding Award, including, without limitation, (1) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the Exercise Price or Strike Price with respect to any Award, or (3) any applicable performance measures (including, without limitation, Performance Criteria and Performance Goals); provided , that in the case of any equity restructuring (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment made under this Section 12 shall be conclusive and binding for all purposes.
(b) Adjustment Events . Without limiting the foregoing, except as may otherwise be provided in an Award Agreement, in connection with any Adjustment Event, the Committee may, in its sole discretion, provide for any one or more of the following:
(i) providing for (A) subject to Section 12(c), a substitution or assumption of Awards (any substituted Award or assumed Award, a Successor Award ), (B) accelerating the exercisability of, lapse of restrictions on, or termination of, Awards, or (C) providing for a period of time (which shall not be required to be more than ten (10) days) for Participants to exercise outstanding Awards prior to the occurrence of such event (and any such Award not so exercised shall terminate upon the occurrence of such event); and
(ii) subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, cancelling any one or more outstanding Awards and causing to be paid to the holders of such Awards that are vested as of such cancellation (including, without limitation, any Awards that would vest as a result of the occurrence of such event but for such cancellation or for which vesting is accelerated by the Committee in connection with such event), the value of such Awards, if any, as determined by the Committee (which value, if applicable, may be based upon the price per share of Common Stock received or to be received by other stockholders of the Company in such event), including without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the shares of Common Stock subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR (it being understood that, in such event, any Option or SAR having a per share Exercise Price or
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Strike Price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor), or, in the case of Restricted Stock, Restricted Stock Units or Other Stock-Based Awards that are not vested as of such cancellation, a cash payment or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Restricted Stock, Restricted Stock Units or Other Stock-Based Awards prior to such cancellation, or the underlying shares in respect thereof;
(c) Corporate Transactions . Except as may otherwise be provided in an Award Agreement or otherwise determined by the Committee, in the event of (x) any sale, transfer, disposition, or other transaction of assets to any Person that is not an Affiliate of the Company which results in the Participants ceasing to provide services to any member of the Company Group, or (y) a Change in Control of the Company:
(i) with respect to each Successor Award issued pursuant to the first clause of Section 12(b)(i) which vests solely based upon the continued employment or service of the Participant, if the Participant experiences a Qualifying Termination, such Successor Award shall become fully vested and exercisable (to the extent applicable), and any forfeiture provisions will lapse; and
(ii) with respect to each outstanding and unvested Award that is subject to any performance-based vesting conditions or criteria, (A) satisfaction of the performance-based conditions or criteria shall be measured based on actual performance through the date of such Change in Control (and to the extent the Committee cannot determine whether a performance level has been achieved, satisfaction shall be deemed to have occurred at target levels), and (B) a Successor Award may be issued with respect to a prorated portion of such Award (with such proration determined based on the satisfaction of the performance-based conditions or criteria), provided , that , any such Successor Award shall become fully vested and exercisable (to the extent applicable), and any forfeiture provisions will lapse, on the last day of the performance period that was applicable to such Award prior to the Change in Control, subject to the Participants continued employment with the Successor Company and its Subsidiaries through such date, or, if earlier, on the date the Participant experiences a Qualifying Termination.
Payments to holders pursuant to clause (b)(ii) above shall be made in cash or, in the sole discretion of the Committee, in the form of such other consideration necessary for a Participant to receive property, cash, or securities (or combination thereof) as such Participant would have been entitled to receive upon the occurrence of the transaction if the Participant had been, immediately prior to such transaction, the holder of the number of shares of Common Stock covered by the Award at such time (less any applicable Exercise Price or Strike Price).
(d) Other Requirements . Prior to any payment or adjustment contemplated under this Section 12, the Committee may require a Participant to (A) represent and warrant as to the unencumbered title to his or her Awards, (B) bear such Participants pro rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Common Stock, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, and (C) deliver customary transfer documentation as reasonably determined by the Committee.
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13. Amendments and Termination.
(a) Amendment and Termination of the Plan . The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided , that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if: (i) such approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company may be listed or quoted) or for changes in GAAP to new accounting standards; (ii) it would materially increase the number of securities which may be issued under the Plan (except for increases pursuant to Section 5 or 12 of the Plan) or (iii) it would materially modify the requirements for participation in the Plan; provided, further , that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary. Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section 13(b) of the Plan without stockholder approval.
(b) Amendment of Award Agreements . The Committee may, to the extent consistent with the terms of any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively (including after a Participants Termination); provided , that, other than pursuant to Section 12, any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant; provided, further , that without stockholder approval, except as otherwise permitted under Section 12 of the Plan, (i) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR; (ii) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash payment that is greater than the intrinsic value (if any) of the cancelled Option or SAR and (iii) the Committee may not take any other action which is considered a repricing for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted.
14. General.
(a) Award Agreements . Each Award under the Plan shall be evidenced by an Award Agreement, which shall be delivered to the Participant to whom the award was granted, and shall specify the terms and conditions of the Award and any rules applicable thereto, including, without limitation, the effect on such Award of the death, Disability or Termination of a Participant, or of such other events as may be determined by the Committee. For purposes of the Plan, an Award Agreement may be in any such form (written or electronic) as determined
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by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter) evidencing the Award. The Committee need not require an Award Agreement to be signed by the Participant or a duly authorized representative of the Company.
(b) Nontransferability .
(i) Each Award shall be exercisable only by such Participant to whom the award was granted during the Participants lifetime, or, if permissible under applicable law, by the Participants legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant (including, without limitation, except as may be prohibited by applicable law, pursuant to a domestic relations order) other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any other member of the Company Group; provided , that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
(ii) Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of the Plan, to: (A) any person who is a family member of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the Immediate Family Members ); (B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated as charitable contributions for federal income tax purposes (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a Permitted Transferee ); provided , that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.
(iii) The terms of any Award transferred in accordance with clauses (ii), above, shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that: (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, that such a registration statement is necessary or appropriate; (C) neither the Committee nor the Company shall be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the
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consequences of a Participants Termination under the terms of the Plan and the applicable Award Agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement.
(c) Dividends and Dividend Equivalents . The Committee, in its sole discretion, may provide a Participant as part of an Award with dividends, dividend equivalents, or similar payments in respect of Awards, payable in cash, shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole discretion, including, without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards; provided , that no dividends, dividend equivalents or other similar payments shall be payable in respect of outstanding (i) Options or SARs; or (ii) unearned Performance Compensation Awards or other unearned Awards subject to performance conditions (other than, or in addition to, the passage of time) (although dividends, dividend equivalents or other similar payments may be accumulated in respect of unearned Awards and paid within fifteen (15) days after such Awards are earned and become payable or distributable).
(d) Tax Withholding .
(i) A Participant shall be required to pay to the Company or any other member of the Company Group, and the Company or any other member of the Company Group shall have the right and is hereby authorized to withhold, from any cash, shares of Common Stock, other securities or other property issuable or deliverable under any Award or from any compensation or other amounts owing to a Participant, the amount (in cash, shares of Common Stock, other securities or other property) of any required withholding or any other applicable taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding or any other applicable taxes.
(ii) Without limiting the generality of clause (i) above, the Committee may (but is not obligated to), in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest) that have been held by the Participant for not less than six months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying GAAP) having a Fair Market Value equal to such withholding liability or (B) having the Company withhold from the number of shares of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value equal to such withholding liability, provided that with respect to shares withheld pursuant to clause (B), the number of such shares may not have a Fair Market Value greater than the minimum required statutory withholding liability.
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(e) Data Protection . By participating in the Plan or accepting any rights granted under it, each Participant consents to the collection and processing of personal data relating to the Participant so that the Company and its Affiliates can fulfill their obligations and exercise their rights under the Plan and generally administer and manage the Plan. This data will include, but may not be limited to, data about participation in the Plan and shares offered or received, purchased, or sold under the Plan from time to time and other appropriate financial and other data (such as the date on which the Awards were granted) about the Participant and his or her participation in the Plan.
(f) No Claim to Awards; No Rights to Continued Employment; Waiver . No employee of the Company or any other member of the Company Group, or other person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committees determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Service Recipient or any other member of the Company Group, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Company or any other member of the Company Group may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or any Award Agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award Agreement, except to the extent of any provision to the contrary in any written employment contract or other agreement between the Company and any member of the Company Group and the Participant, whether any such agreement is executed before, on or after the Date of Grant.
(g) International Participants . With respect to Participants who reside or work outside of the United States of America and who are not (and who are not expected to be) covered employees within the meaning of Section 162(m) of the Code, the Committee may, in its sole discretion, amend the terms of the Plan and create or amend Sub-Plans or amend outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant, the Company or any other member of the Company Group.
(h) Designation and Change of Beneficiary . Each Participant may file with the Committee a written designation of one or more Persons as the beneficiary(ies) who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon his or her death. A Participant may, from time to time, revoke or change his or her beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however , that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participants death, and in no event shall it be
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effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate.
(i) Termination . Except as otherwise provided in an Award Agreement, unless determined otherwise by the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National Guard unit) nor a transfer from employment or service with one Service Recipient to employment or service with another Service Recipient (or vice-versa) shall be considered a Termination; and (ii) if a Participant undergoes a Termination of employment, but such Participant continues to provide services to the Company Group in a non-employee capacity, such change in status shall not be considered a Termination for purposes of the Plan. Further, unless otherwise determined by the Committee, in the event that any Service Recipient ceases to be a member of the Company Group (by reason of sale, divestiture, spin-off or other similar transaction), unless a Participants employment or service is transferred to another entity that would constitute a Service Recipient immediately following such transaction, such Participant shall be deemed to have suffered a Termination hereunder as of the date of the consummation of such transaction.
(j) No Rights as a Stockholder . Except as otherwise specifically provided in the Plan or any Award Agreement, no Person shall be entitled to the privileges of ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered to such Person.
(k) Government and Other Regulations .
(i) The obligation of the Company to settle Awards in shares of Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel (if the Company has requested such an opinion), satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other securities of the Company or any other member of the Company Group issued under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award Agreement, the Federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted and any other applicable Federal, state,
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local or non-U.S. laws, rules, regulations and other requirements, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on certificates representing shares of Common Stock or other securities of the Company or any other member of the Company Group issued under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of the Company or any other member of the Company Group issued under the Plan in book-entry form to be held subject to the Companys instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that it, in its sole discretion, deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.
(ii) The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Companys acquisition of shares of Common Stock from the public markets, the Companys issuance of Common Stock to the Participant, the Participants acquisition of Common Stock from the Company and/or the Participants sale of Common Stock to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, the Company shall, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, (A) pay to the Participant an amount equal to the excess of (I) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or issued, as applicable), over (II) the aggregate Exercise Price or Strike Price (of an Option or SAR, respectively) or any amount payable as a condition of issuance of shares of Common Stock (in the case of any other Award), and such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof, or (B) in the case of Restricted Stock, Restricted Stock Units or Other Stock-Based Awards, provide the Participant with a cash payment or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Restricted Stock, Restricted Stock Units or Other Stock-Based Awards, or the underlying shares in respect thereof.
(l) No Section 83(b) Elections Without Consent of Company . No election under Section 83(b) of the Code or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award Agreement or by action of the Committee in writing prior to the making of such election. If a Participant, in connection with the acquisition of shares of Common Stock under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision.
(m) Payments to Persons Other Than Participants . If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his or her affairs
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because of illness or accident, or is a minor, or has died, then any payment due to such person or his or her estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.
(n) Nonexclusivity of the Plan . Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting equity awards otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.
(o) No Trust or Fund Created . Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any other member of the Company Group, on the one hand, and a Participant or other person or entity, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company be obligated to maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other service providers under general law.
(p) Reliance on Reports . Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of the Company or any other member of the Company Group and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, other than himself or herself.
(q) Relationship to Other Benefits . No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan or as required by applicable law.
(r) Governing Law . The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof. EACH PARTICIPANT WHO ACCEPTS AN AWARD IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION, OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTICIPANT IN RESPECT OF HIS OR HER RIGHTS OR OBLIGATIONS HEREUNDER.
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(s) Severability . If any provision of the Plan or any Award or Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
(t) Obligations Binding on Successors . The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
(u) 409A of the Code .
(i) Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of this Plan comply with Section 409A of the Code and any Treasury Regulations promulgated thereunder (collectively, Section 409A of the Code ), and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with this Plan (including any taxes and penalties under Section 409A of the Code), and neither the Service Recipient nor any other member of the Company Group shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties. With respect to any Award that is considered deferred compensation subject to Section 409A of the Code, references in the Plan to termination of employment (and substantially similar phrases) shall mean separation from service within the meaning of Section 409A of the Code. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as separate payments.
(ii) Notwithstanding anything in the Plan to the contrary, if a Participant is a specified employee within the meaning of Section 409A(a)(2)(B)(i) of the Code, no payments in respect of any Awards that are deferred compensation subject to Section 409A of the Code and which would otherwise be payable upon the Participants separation from service (as defined in Section 409A of the Code) shall be made to such Participant prior to the date that is six months after the date of such Participants separation from service or, if earlier, the Participants date of death. Following any applicable six month delay, all such delayed payments will be paid in a single lump sum on the earliest date permitted under Section 409A of the Code that is also a business day.
(iii) Unless otherwise provided by the Committee in an Award Agreement or otherwise, in the event that the timing of payments in respect of any Award (that would otherwise be considered deferred compensation subject to Section 409A of the Code) would be accelerated upon the occurrence of (A) a Change in Control, no such
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acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of Disability pursuant to Section 409A of the Code.
(v) Clawback/Forfeiture . All Awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with (i) any clawback, forfeiture or other similar policy adopted by the Board or Committee and as in effect from time to time; and (ii) applicable law. Further, to the extent that the Participant receives any amount in excess of the amount that the Participant should otherwise have received under the terms of the Award for any reason (including, without limitation, by reason of a financial restatement, mistake in calculations or other administrative error), the Company may require the Participant to repay any such excess amount to the Company.
(w) Detrimental Activity . Notwithstanding anything to the contrary contained herein, if a Participant has engaged in any Detrimental Activity, as determined by the Committee, the Committee may, in its sole discretion, provide for one or more of the following:
(i) cancel any or all of such Participants outstanding Awards; or
(ii) require such Participant to forfeit any gain realized on the vesting or exercise of Awards, and to repay any such gain promptly to the Company.
(x) Right of Offset . The Company will have the right to offset against its obligation to deliver shares of Common Stock (or other property or cash) under the Plan or any Award Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans, repayment obligations under any Awards, or amounts repayable to the Company pursuant to tax equalization, housing, automobile or other employee programs) that the Participant then owes to the Company or any other member of the Company Group, as applicable, and any amounts the Committee otherwise deems appropriate pursuant to any tax equalization policy or agreement. Notwithstanding the foregoing, if an Award is deferred compensation subject to Section 409A of the Code, the Committee will have no right to offset against its obligation to deliver shares of Common Stock (or other property or cash) under the Plan or any Award Agreement if such offset could subject the Participant to the additional tax imposed under Section 409A of the Code in respect of an outstanding Award.
(y) Expenses; Gender; Titles and Headings . The expenses of administering the Plan shall be borne by the Company Group. Masculine pronouns and other words of masculine gender shall refer to both men and women. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
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Exhibit 10.22
TRANSUNION
2015 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I PURPOSE
1.01 | Purpose. |
The purpose of the Plan is to provide a means by which Eligible Employees can share in the Companys future success by acquiring shares of Common Stock. It is the Companys intention to have the Plan qualify as an employee stock purchase plan under Section 423 of the Code. Accordingly, the provisions of the Plan shall be administered in a manner that is consistent with the requirements of Section 423 of the Code.
ARTICLE II DEFINITIONS
2.01 | Affiliate. |
Affiliate means any parent corporation or subsidiary corporation of the Company (as determined in accordance with Section 424 of the Code).
2.02 | Base Compensation. |
Base Compensation means regular base straight-time gross earnings annualized as of the relevant Offering Commencement Date, excluding (i) payments, if any, for overtime, incentive compensation, commissions, incentive payments, premiums, bonuses, stock or other equity-based compensation, and (ii) any other special remuneration of a Participant during an Offering Period. Notwithstanding the foregoing, the Plan Administrator may, in its discretion, on a uniform and nondiscriminatory basis, establish a different definition of Base Compensation for a subsequent Offering Period prior to the Offering Commencement Date of such subsequent Offering Period.
2.03 | Board. |
Board means the Board of Directors of the Company.
2.04 | Change in Control. |
Change in Control has the meaning set forth in the Companys 2015 Omnibus Incentive Plan, as amended from time to time, or any successor plan thereto.
2.05 | Code. |
Code means the Internal Revenue Code of 1986, as amended, and any successor thereto. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretive guidance under such section, and any amendments or successor provisions to such section, regulations or guidance.
2.06 | Common Stock. |
Common Stock means the common stock, par value $0.01 per share, of the Company (and any stock or other securities into which such Common Stock may be converted or into which it may be exchanged).
2.07 | Company. |
Company means TransUnion, a Delaware corporation.
2.08 | Eligible Employees. |
Eligible Employees means, subject to the limitations set forth in Section 4.02, any individual employed by the Company or an Affiliate who has completed at least six (6) months of service with the Company or an Affiliate, except (i) employees who are not employed by the Company or an Affiliate prior to the beginning of an Offering Period or prior to such other time period specified by the Plan Administrator, (ii) individuals who provide services to the Company or any of its Affiliates as independent contractors who are reclassified as common law employees for any reason except for federal income and employment tax purposes, and (iii) employees who reside in countries for whom such employees participation in the Plan would result in a violation under any corporate or securities laws of such country of residence.
2.09 | Exchange Act. |
Exchange Act means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretive guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or other interpretive guidance.
2.10 | Fair Market Value. |
Fair Market Value means, on a given date, (i) if the Common Stock is listed on a national securities exchange, the closing sales price of the Common Stock reported on the primary exchange on which the Common Stock is listed and traded on such date, or, if there are no such sales on that date, then on the last preceding date on which such sales were reported, (ii) if the Common Stock is not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported, or (iii) if the Common Stock is not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last sale basis, the amount determined by the Plan Administrator in good faith to be the fair market value of the Common Stock.
2.11 | New Purchase Date. |
New Purchase Date means a new Purchase Date, as designated by the Plan Administrator, if the Plan Administrator shortens any Offering Period then in progress.
2.12 | Notice Period. |
Notice Period means (i) the two (2) year period following the Offering Commencement Date relating to the applicable shares of Common Stock, or (ii) the one (1) year period following the Purchase Date related to the applicable shares of Common Stock that were purchased.
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2.13 | Offering Commencement Date. |
Offering Commencement Date means the first day of each Offering Period.
2.14 | Offering End Date. |
Offering End Date means the last day of each Offering Period.
2.15 | Offering Period. |
Offering Period means a six (6) month period established by the Plan Administrator in accordance with Section 5.01.
2.16 | Participant. |
Participant means, with respect to an Offering Period, an Eligible Employee who is participating in such Offering Period, as provided in Section 4.01.
2.17 | Plan. |
Plan means this TransUnion 2015 Employee Stock Purchase Plan, as may be amended from time to time.
2.18 | Plan Administrator. |
Plan Administrator means two or more individuals appointed by the Board to administer the Plan; provided , that notwithstanding appointment of a Plan Administrator, the Board may take any action permitted to be exercised by the Plan Administrator under the Plan in accordance with Section 10.01 hereof.
2.19 | Purchase Date. |
Purchase Date means with respect to any Offering Period, the Offering End Date associated with such Offering Period (or such other date established by the Plan Administrator prior to the applicable Offering Commencement Date or pursuant to Section 9.02); provided , however , if any such date is not a Trading Day, the Purchase Date shall be the next business day that is a Trading Day.
2.20 | Purchase Price. |
Purchase Price means an amount per share of Common Stock, or methodology for determination of calculating an amount per share of Common Stock, as determined by the Plan Administrator not less than thirty (30) days prior to the commencement of any Offering Period, which shall in no event be less than the lesser of eighty-five percent (85%) of the Fair Market Value of such Common Stock on either of (i) the Offering Commencement Date of such Offering Period, or (ii) the Purchase Date (or New Purchase Date, as applicable) for such Offering Period.
2.21 | Reserves. |
Reserves has the meaning set forth in Section 9.01.
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2.22 | Rule 16b-3. |
Rule 16b-3 has the meaning set forth in Section 10.01.
2.23 | Securities Act. |
Securities Act means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretive guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or other interpretive guidance.
2.24 | Subscription. |
Subscription means an Eligible Employees authorization for payment to be made by the Eligible Employee for Common Stock purchases under this Plan in the form and manner specified by the Plan Administrator (which may include enrollment by submitting forms, by voice response, internet access or other electronic means).
2.25 | Trading Day. |
Trading Day means a day on which the national stock exchange upon which the Common Stock is listed is open for trading.
ARTICLE III SHARES OF COMMON STOCK
3.01 | Shares of Common Stock Reserved For the Plan. |
(a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 9.01, the maximum number of shares of Common Stock which may be issued under the Plan shall be 2,400,000.
(b) In connection with each Offering Period, the Plan Administrator may specify a maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during such Offering Period, and/or all Participants on any Purchase Date during such Offering Period. If the total number of shares of Common Stock to be issued on any Purchase Date exceeds the maximum number of shares of Common Stock available for issuance under the Plan, the Company shall (i) make a pro-rata allocation of the shares of Common Stock available for delivery and distribution in as nearly a uniform manner as shall be practicable and the Plan Administrator determines to be equitable, (ii) return the balance of payroll deductions credited to the account of each Participant under the Plan as promptly as practicable, and (iii) have the discretion to terminate any or all Offering Periods then in effect pursuant to Section 5.01(a). If any rights granted under the Plan terminate for any reason without having been exercised, the shares of Common Stock not purchased under such rights shall again become available for issuance under the Plan.
3.02 | Participants Interest in Rights to Purchase Common Stock. |
(a) Until the applicable shares of Common Stock are issued (as evidenced by the appropriate entry on the books of the Company), a Participant shall only have the rights of an unsecured creditor with respect to such shares of Common Stock, and no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to such shares of Common Stock.
(b) The Participant shall have no interest in the shares of Common Stock covered by a right to purchase such shares of Common Stock under the Plan until such right has been exercised.
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ARTICLE IV ELIGIBILITY AND PARTICIPATION
4.01 | Enrollment and Participation. |
(a) Any individual who, on the day preceding an Offering Commencement Date, qualifies as an Eligible Employee may elect to become a Participant in the Plan for such Offering Period by submitting a Subscription, in the form prescribed for this purpose by the Company (including, if requested by the Company, a payroll deduction authorization form). The Subscription shall be filed with the Company in accordance with the procedures as established by the Company. Eligible Employees may not have more than one (1) Subscription in effect with respect to any Offering Period.
(b) Once enrolled in the Plan, a Participant shall continue to participate in the Plan until such Participant ceases to be an Eligible Employee or withdraws from the Offering Period or the Plan in accordance with Section 6.03. Under the foregoing automatic enrollment provisions, payroll deductions will continue at the level in effect immediately prior to any new Offering Commencement Date, unless changed in advance by the Participant in accordance with Section 6.03. A Participant who withdraws from the Plan in accordance with Section 6.03 may again become a Participant if such person is then an Eligible Employee, by following the procedure described in Section 4.01(a).
4.02 | Limitations on Participation. |
Notwithstanding any provisions of the Plan to the contrary, no Eligible Employee shall be granted a right to purchase shares of Common Stock pursuant to the Plan:
(a) if, immediately after the option is granted, such Eligible Employee owns shares of Common Stock possessing five percent (5%) or more of the total combined voting power or value of all classes of Common Stock (for purposes of this Section 4.02(a), the rules of Section 424 of the Code shall apply in determining stock ownership of any Eligible Employee), pursuant to the requirements of Section 423(b)(3) of the Code.
(b) which permits such Eligible Employee to purchase shares of Common Stock under all employee stock purchase plans of the Company and its Affiliates that shall accrue at a rate which exceeds $25,000 in Fair Market Value of the Common Stock (determined at the time such right to purchase Common Stock is granted) for each calendar year in which such right is outstanding, pursuant to the requirements of Section 423(b)(8) of the Code. When applying the limitations of this Section 4.02(b), the right to purchase Common Stock under an option accrues when the option (or any portion thereof) first becomes exercisable during the calendar year, the right to purchase Common Stock under an option accrues at the rate provided in the option, but in no case may such rate exceed $25,000 of Fair Market Value of such Common Stock (determined at the time such option is granted) for any one (1) calendar year, and a right to purchase Common Stock which has accrued under one option granted pursuant to the Plan may not be carried over to any other option to purchase Common Stock.
ARTICLE V OFFERING PERIODS
5.01 | Offering Periods. |
(a) The Plan shall be implemented by consecutive Offering Periods with new Offering Commencement Dates commencing on the first Trading Day on or after January 1 and July 1 of each year (or at such other times as may be determined by the Plan Administrator). Each Offering Period shall comply with the requirements of Section 423(b)(5) of the Code. The Plan Administrator shall have the power to terminate or change the duration and/or frequency of the Offering Periods (including the Offering Commencement Date) with respect to future Offering Periods without shareholder approval. Any such changes shall be announced prior to the scheduled beginning of the affected Offering Period.
(b) A Subscription that is in effect on an Offering End Date will automatically be deemed to be a Subscription for the Offering Period that commences immediately following such Offering End Date, provided that the Participant is still an Eligible Employee and has not withdrawn such Participants Subscription in accordance with Section 6.03. Payroll deductions will continue at the level in effect immediately prior to the new Offering Commencement Date, unless changed in advance by the Participant in accordance with Section 6.03.
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5.02 | Grant of Option. |
On each Offering Commencement Date, each Participant shall be automatically granted an option to purchase as many shares of Common Stock (rounded down to the nearest whole share of Common Stock) as may be purchased with such Participants payroll deductions during the related Offering Period at the Purchase Price, subject to the limitations set forth in Sections 3.01 and 4.02.
ARTICLE VI PAYROLL DEDUCTIONS
6.01 | Amount of Payroll Deductions. |
An Eligible Employees Subscription shall authorize payroll deductions at a rate, in whole percentages, of no less than one percent (1%) and no more than fifteen percent (15%), as elected by the Participant, of such Participants Base Compensation on each payroll date that the Subscription is in effect. Payroll deductions shall commence on the first payroll date following the Offering Commencement Date and shall continue until the Participant changes the rate of such Participants payroll deductions or terminates such Participants participation in the Plan, in each case, as provided in Section 6.03.
6.02 | Participants Account. |
All payroll deductions made with respect to a Participant shall be credited to such Participants recordkeeping account under the Plan. A Participant may not make any separate cash payment into such account. No interest shall accrue or be paid on any amount withheld from a Participants pay under the Plan or credited to the Participants account, unless required by law. Except as provided in this Section 6.02, all amounts in a Participants account shall be used to purchase whole shares of Common Stock and no cash refunds shall be made from such account. Any amounts that are insufficient to purchase whole shares shall be credited to the Participants account, and added to any fractional amounts resulting on subsequent Purchase Dates. Upon liquidation or other closing of a Participants account, any fractional amounts shall be paid in cash to the Participant based on the then-current Fair Market Value of the Common Stock. In addition, any amounts that are withheld but unable to be applied to the purchase of Common Stock because of the limitations of Section 4.02 shall be returned to the Participant without interest and shall not be used to purchase shares of Common Stock with respect to any other Offering Period under the Plan.
6.03 | No Changes in Payroll Deductions; Termination of Subscription. |
(a) Except as may be permitted by the Plan Administrator in its sole discretion, following the Offer Commencement Date associated with an Offering Period, a Participant may terminate such Participants Subscription for the Offering Period (but may not otherwise increase or decrease such Participants level of elected payroll deductions under the Subscription with respect to such Offering Period).
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(b) Any termination of a Subscription shall only be deemed effective if such Subscription is executed pursuant to procedures established by the Plan Administrator. If a Participant terminates such Participants Subscription with respect to an Offering Period, the accumulated payroll deductions in such Participants account at the time the Subscription is withdrawn shall be paid without interest to such Participant as soon as practicable after receipt of such Participants notice of withdrawal and such Participants Subscription for the current Offering Period will be automatically terminated, and no further contributions for the purchase of shares of Common Stock will be made during the Offering Period or subsequent Offering Periods until such Participant re-enrolls in the Plan pursuant to Section 4.01(a). Any re-enrollment in the Plan shall be effective only at the commencement of a subsequent Offering Period.
ARTICLE VII TERMINATION OF EMPLOYMENT
7.01 | Termination of Employment. |
Termination of a Participants employment for any reason, including retirement, death or the failure of such Participant to remain an Eligible Employee of the Company or its Affiliates, shall immediately terminate such Participants participation in the Plan. In such event, the accumulated payroll deductions in such Participants account at the termination of such Participants employment shall be paid without interest to such Participant (or such Participants beneficiary) as soon as practicable after such termination of such Participants employment and such Participants Subscription for the current Offering Period will be automatically terminated, and no further contributions for the purchase of shares of Common Stock will be made during the Offering Period or subsequent Offering Periods. For purposes of this Section 7.01, an Eligible Employee shall not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or an Affiliate in the case of sick leave, military leave, or any other leave of absence approved by the Plan Administrator; provided, however, that such leave of absence is for a period of not more than ninety (90) days or re-employment upon the expiration of such leave is guaranteed by contract or statute.
ARTICLE VIII EXERCISE OF RIGHTS TO PURCHASE COMMON STOCK
8.01 | Automatic Exercise. |
(a) Unless a Participant terminates such Participants Subscription as provided in Section 6.03, a Participants right to purchase shares of Common Stock will be automatically exercised on each Purchase Date for the applicable Offering Period. The right to purchase shares of Common Stock will be exercised by using the accumulated payroll deductions in such Participants account as of each such Purchase Date to purchase the maximum number of whole shares of Common Stock that may be purchased at the Purchase Price (rounded down to the nearest whole share). The number of shares of Common Stock that will be purchased for each Participant on the Purchase Date shall be determined by dividing (i) such Participants accumulated payroll deductions in such Participants account as of the Purchase Date by (ii) the Purchase Price.
(b) At the time an option granted under the Plan is exercised, in whole or in part, or at the time some or all of the shares of Common Stock issued to a Participant under the Plan are disposed of, the Participant must make adequate provisions for any applicable federal, state or other tax withholding obligations, if any, which arise upon the Purchase Date or the disposition of the shares of Common Stock. At any time, the Company or an Affiliate may, but will not be obligated to, withhold from the Participants compensation the amount necessary to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to the sale or disposition of shares of Common Stock by the Participant earlier than as described in Section 423(a)(1) of the Code.
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8.02 | Delivery of Common Stock. |
(a) As promptly as practicable after each Purchase Date, the number of shares of Common Stock purchased by each Participant pursuant to Section 8.01 shall be deposited into an account established in the Participants name with the broker designed by the Plan Administrator for such purpose.
(b) Shares of Common Stock that are purchased under the Plan will be held in an account in the Participants name in uncertificated form. Furthermore, shares of Common Stock to be delivered to a Participant under the Plan will be registered in the street name of such Participant.
ARTICLE IX CHANGES IN CAPITALIZATION; ADJUSTMENTS UPON CHANGE IN CONTROL
9.01 | Changes in Capitalization. |
Subject to any required action by the stockholders of the Company, (i) the number of shares of Common Stock covered by each option under the Plan that has not yet been exercised, (ii) the number of shares of Common Stock that have been authorized for issuance under the Plan but have not yet been placed under option (collectively, the Reserves ), (iii) the number of shares of Common Stock set forth in Section 3.01, (iv) the Purchase Price per share, and (v) the maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during an Offering Period, shall, if applicable, be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, subdivision, combination or reclassification of the Common Stock (including any such change in the number of shares of Common Stock effected in connection with a change in domicile of the Company), or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company, or any increase or decrease in the value of a share of Common Stock resulting from a spinoff or split-up; provided , however , that conversion of any convertible securities of the Company shall not be deemed to have been effected without receipt of consideration. Such adjustment shall be made by the Plan Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option.
9.02 | Adjustments Upon Change in Control. |
(a) In the event of a Change in Control, the Board may take any action it deems necessary or desirable with respect to any option or ongoing Offering Period, including, but not limited to: (i) terminating the Plan and returning all contributions made by Participants in connection with such termination of the Plan, and (ii) establishing a New Purchase Date and providing that each outstanding option under the Plan will be assumed or an equivalent option will be substituted by the successor corporation or a parent or subsidiary of the successor corporation.
(b) For purposes of this Section 9.02, an option granted under the Plan shall be deemed to be assumed upon a change in control, without limitation, if, at the time of issuance of the stock or other consideration, each holder of an option under the Plan would be entitled to receive the same number and kind of shares of stock or the same amount of property, cash or securities as such holder would have been entitled to receive upon the occurrence of the transaction if the holder had been, immediately prior to the transaction, the holder of the same number of shares of Common Stock covered by the option at such time (after giving effect to any adjustments in the number of shares of Common Stock covered by the option as provided for in Section 9.01); provided , however , that if the consideration received in the transaction is not solely common stock of the successor corporation or its parent (as
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defined in Section 424(e) of the Code), the Plan Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon exercise of the option to be solely common stock of the successor corporation or its parent equal in Fair Market Value to the per share consideration received by holders of shares of Common Stock in the transaction.
ARTICLE X ADMINISTRATION
10.01 | Appointment of Plan Administrator. |
The Plan Administrator shall administer the Plan. To the extent required for transactions under the Plan to qualify for the exemptions available under Rule 16b-3 promulgated under the Exchange Act ( Rule 16b-3 ), all actions relating to awards to persons subject to Section 16 of the Exchange Act shall be taken by the Board unless each person who serves on the Plan Administrator is a non-employee director within the meaning of Rule 16b-3 or such actions are taken by a sub-Plan Administrator of the Plan Administrator (or the Board) comprised solely of non-employee directors.
10.02 | Authority of Plan Administrator. |
The Plan Administrator shall have full and plenary authority, subject to the provisions of the Plan, to (i) promulgate such rules and regulations as it deems necessary for the proper administration of the Plan, (ii) interpret the provisions and supervise the administration of the Plan, and (iii) take all action in connection therewith or in relation thereto as it deems advisable. All determinations by the Plan Administrator under the Plan shall, to the full extent permitted by law, be final and binding on upon all parties. The Company shall pay all expenses incurred in the administration of the Plan. No member of the Plan Administrator shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan, and all members of the Plan Administrator shall be fully indemnified by the Company with respect to any such action, determination or interpretation.
ARTICLE XI MISCELLANEOUS
11.01 | Amendment and Termination. |
(a) The Board may at any time and for any reason terminate the Plan. Except as provided in Article IX, no such termination of the Plan may affect options previously granted, provided that the Plan or an Offering Period may be terminated by the Plan Administrator on a Purchase Date or by the Boards setting a New Purchase Date with respect to an Offering Period then in progress if the Board determines that termination of the Plan and/or the Offering Period is in the best interests of the Company and the stockholders or if continuation of the Plan and/or the Offering Period would cause the Company to incur adverse accounting charges as a result of a change after the effective date of the Plan in the generally accepted accounting principles applicable to the Plan. Either the Board or the Plan Administrator may amend the Plan. Except as provided in Section 9.01 and in this Section 11.01, no amendment to the Plan shall make any change in any option previously granted that adversely affects the rights of any Participant. In addition, to the extent necessary to comply with Rule 16b-3 or Section 423 of the Code (or any successor rule or provision or any applicable law or regulation), the Company shall obtain stockholder approval in such a manner and to such a degree as so required.
(b) Without stockholder consent and without regard to whether any Participants rights may be considered to have been adversely affected, the Board or the Plan Administrator shall be entitled to change the Offering Period, limit the frequency and/or number of changes in the amount withheld during an Offering Period, permit payroll tax withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Companys processing of properly completed withholding
9
elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participants compensation, and establish such other limitations or procedures as the Board or the Plan Administrator determines, in its sole discretion, are advisable and consistent with the Plan.
(c) Upon termination of the Plan, the date of termination shall be considered a Purchase Date, and any cash remaining in Participant accounts will be applied to the purchase of Common Stock, unless determined otherwise by the Board. Upon termination of the Plan, the Board shall have authority to establish administrative procedures regarding the exercise of outstanding rights to purchase shares of Common Stock or to determine that such rights shall not be exercised.
11.02 | Use of Funds. |
All payroll deductions received or held by the Company or any Affiliate under this Plan may be used by the Company or such Affiliate for any corporate purpose and neither the Company nor any Affiliate shall be obligated to segregate such payroll deductions.
11.03 | Transferability; Notice of Disposition. |
(a) Neither payroll deductions credited to a Participants account nor any rights with regard to the exercise of a right to purchase Common Stock or to receive shares of Common Stock under the Plan may be assigned, transferred, pledged, or otherwise disposed of in any way by the Participant other than by will or the laws of descent and distribution or as provided in Section 7.01. Any such attempted assignment, transfer, pledge, or other disposition shall be void ab initio . During a Participants lifetime, rights to purchase shares of Common Stock that are held by such Participant shall be exercisable only by such Participant.
(b) Each Participant shall notify the Company, in writing, if such Participant disposes of any of the shares of Common Stock purchased in any Offering Period pursuant to the Plan if such disposition occurs within the Notice Period. The Company may, at any time during the Notice Period, place a legend or legends on any book entry representing shares of Common Stock acquired pursuant to the Plan requesting that the Companys transfer agent notify the Company of any transfer of such shares of Common Stock. The obligation of the Participant to provide such notice shall continue notwithstanding the placement of any such legend on the book entry.
11.04 | Term; Stockholder Approval of the Plan. |
The Plan shall be effective upon its approval by the Board and shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the Plan is adopted by the Board. No purchase of shares of Common Stock pursuant to the Plan shall occur prior to such stockholder approval. The Plan shall terminate on the earliest of (i) termination of the Plan by the Plan Administrator (which termination may be effected by the Board at any time), (ii) the tenth (10 th ) anniversary of the approval of the Plan by the stockholders or (iii) issuance of all of the shares of Company Stock available for issuance under the Plan.
11.05 | No Employment Rights; Effect of the Plan. |
(a) The Plan does not, directly or indirectly, create in any employee or class of employees, any right with respect to continuation of employment with the Company or any of its Affiliates, and it shall not be deemed to interfere in any way with the right of the Company or any Affiliate employing such person to terminate, or otherwise modify, an employees employment at any time.
(b) The provisions of the Plan shall, in accordance with its terms, be binding upon, and inure to the benefit of, all successors of each Participant, including, without limitation, such Participants estate and the executors, administrators or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy or representative of creditors of such Participant.
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11.06 | Governing Law. |
The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof.
11.07 | Miscellaneous. |
(a) Notices . All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
(b) Conditions Upon Issuance of Shares of Stock . Shares of Common Stock shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares of Common Stock pursuant thereto shall comply with all applicable provisions of law, including, without limitation, the Securities Act, the Exchange Act, applicable state securities laws and the requirements of any stock exchange upon which the shares of Common Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares of Common Stock are being purchased only for investment and without any present intention to sell or distribute such Common Stock if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.
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Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Experts and to the use of our report dated March 30, 2015 (except for Note 23, as to which the date is June 15, 2015), in Amendment No. 3 to the Registration Statement (Form S-1 No. 333-203110) and related Prospectus of TransUnion dated June 15, 2015.
/s/ Ernst & Young LLP
Chicago, Illinois
June 15, 2015
Exhibit 23.3
Consent of Independent Auditors
We consent to the reference to our firm under the caption Experts and to the use of our report dated March 25, 2015, with respect consolidated financial statements of Trans Union de México, S.A., Sociedad de Información Crediticia and Subsidiary, included in the Registration Statement (Form S-1 - File No.: 333-203110) and related Prospectus of TransUnion for the registration of shares of its common stock.
Mancera, S.C.
A member practice of
Ernst & Young Global Limited
/s/ C.P.C. Jorge M. Senties
Mexico City, Mexico |
June 12, 2015 |
Exhibit 23.4
Consent of Independent Auditors
We consent to the use in this Amendment No. 3 to Registration Statement No. 333-203110 of TransUnion of our report dated June 11, 2013, relating to the financial statements of Credit Information Bureau (India) Limited as of and for the year ended March 31, 2013 (which report expresses an unmodified opinion and includes an emphasis-of-matter paragraph relating to the preparation of the financial statements in accordance with generally accepted accounting principles in India which differs from accounting principles generally accepted in the United States of America), appearing in the prospectus, which is part of such Registration Statement, and to the reference to us under the heading Experts in such prospectus.
/s/ Deloitte Haskins & Sells LLP
Mumbai
June 12, 2015