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8-K - FORM 8-K - Verisk Analytics, Inc.d428708d8k.htm

Exhibit 99.1

 

LOGO    LOGO

Verisk Analytics, Inc., Reports Third-Quarter 2012 Financial Results

Delivers 17.3% Revenue Growth and 20.0% Diluted Adjusted EPS Growth

JERSEY CITY, N.J., October 30, 2012 — Verisk Analytics, Inc. (Nasdaq:VRSK), a leading source of information about risk, today announced results for the fiscal quarter ended September 30, 2012:

Financial Highlights

See Tables 4 and 5 for a reconciliation of non-GAAP financial measures to the relevant GAAP measures.

 

   

Diluted GAAP earnings per share (diluted GAAP EPS) were $0.48 for third-quarter 2012. Diluted adjusted earnings per share (diluted adjusted EPS) were $0.54 for third-quarter 2012, an increase of 20.0% versus the same period in 2011.

 

   

Total revenue increased 17.3% and, excluding the impact of recent acquisitions, revenue grew 8.5% for third-quarter 2012. Revenue growth in the third quarter was driven by a 27.4% increase in Decision Analytics revenue, with additional contribution from the 2.8% growth in Risk Assessment revenue. Risk Assessment revenue growth, excluding the reclassification of $3.0 million of revenue to Decision Analytics in third-quarter 2012, was 4.9%.

 

   

EBITDA increased 21.1% to $182.9 million for third-quarter 2012, with an EBITDA margin of 45.9%.

 

   

Net income was $82.9 million for third-quarter 2012 and adjusted net income was $92.2 million, an increase of 16.8% and 20.9%, respectively, versus the comparable period in 2011.

 

   

In third-quarter 2012, the company repurchased a total of $20.8 million of its common stock under its existing repurchase program. As of September 30, 2012, the company had $179.0 million remaining under its share repurchase authorization.

 

   

On August 31, 2012, the company closed the acquisition of Argus Information & Advisory Services, LLC (“Argus”) for a purchase price of $425.0 million, including approximately $45 million in present value of tax benefits.

 

   

As part of its ongoing capital structure management, on September 12, 2012, the company issued $350.0 million of 4.125% senior notes due September 2022. The proceeds were used to repay outstanding credit facility borrowings. On September 28, 2012, the company also increased the size of its revolving credit facility to $850.0 million and extended the maturity to October 2017.

Frank J. Coyne, chairman and chief executive officer, said, “Our third-quarter results were strong and reflect the contributions from our existing businesses as well as recent acquisitions of MediConnect and Argus. We continue to be pleased by the performance of our healthcare businesses and their contributions to the strong organic growth in the vertical. The environment for the adoption of our tools is encouraging, and our team is executing well.”

 

1


“In our first 30 days of ownership of Argus, we have been pleased with the performance of the business and intrigued by the opportunities presented by connecting Argus with our other businesses.”

“Our insurance assets are performing well and we continue to build new innovative solutions that will support future sustainable growth. The mortgage market remains challenging as higher origination volumes have not been sufficient to offset the decline in volumes of our forensic tools,” concluded Coyne.

Summary of Results for Third-Quarter 2012

Table 1

 

     Three Months Ended
September 30,
     Change
%
    Year-to-Date
September 30,
     Change
%
 
     2012      2011        2012      2011     
     (in thousands, except per share amounts)     (in thousands, except per share amounts)  

Revenues

   $ 398,863       $ 340,098         17.3   $ 1,118,590       $ 980,247         14.1

EBITDA

   $ 182,905       $ 151,017         21.1   $ 506,337       $ 434,111         16.6

Net income

   $ 82,911       $ 70,987         16.8   $ 230,843       $ 202,440         14.0

Adjusted net income

   $ 92,177       $ 76,265         20.9   $ 252,573       $ 218,117         15.8

Diluted GAAP EPS

   $ 0.48       $ 0.41         17.1   $ 1.34       $ 1.16         15.5

Diluted adjusted EPS

   $ 0.54       $ 0.45         20.0   $ 1.47       $ 1.25         17.6

Revenue

Revenue grew 17.3% for the quarter ended September 30, 2012. Excluding the effect of recent acquisitions (MediConnect, Argus, and Aspect Loss Prevention), revenue grew 8.5%. Overall revenue growth was the result of continued double-digit growth in Decision Analytics and single-digit growth in Risk Assessment. For third-quarter 2012, Decision Analytics revenue represented approximately 64% of total revenue.

Table 2A

 

     Three Months Ended            Year-to-Date         
     September 30,      Change
%
    September 30,      Change
%
 
     2012      2011        2012      2011     
     (in thousands)            (in thousands)         

Decision Analytics revenues by category:

                

Insurance

   $ 126,301       $ 116,281         8.6   $ 364,847       $ 333,915         9.3

Mortgage and financial services

     37,960         34,272         10.8     107,534         102,611         4.8

Healthcare

     69,324         30,277         129.0     150,153         65,216         130.2

Specialized markets

     21,411         19,291         11.0     63,031         57,455         9.7
  

 

 

    

 

 

      

 

 

    

 

 

    

Total Decision Analytics

   $ 254,996       $ 200,121         27.4 %    $ 685,565       $ 559,197         22.6 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Within the Decision Analytics segment, revenue grew 27.4% for third-quarter 2012, and growth excluding acquisitions and the reclassification of property-specific revenue to Decision Analytics was 11.0%. Growth in the quarter was driven by strong increases in healthcare revenue, including MediConnect, and good contributions from insurance-facing and specialized markets revenue categories, as well as the revenue from the acquisition of Argus on August 31, 2012, which is reported in the mortgage and financial services category.

Within the insurance category, revenue growth was 8.6% for the third quarter of 2012 and 8.3% excluding the recent acquisition, driven by double-digit growth in catastrophe modeling solutions, good growth in loss quantification, and solid growth from fraud solutions. Catastrophe modeling continued to benefit from new and expanded use of our models. Loss quantification solutions experienced good growth even in the face of lower storm activity versus third-quarter 2011. Insurance fraud claims solutions also continued satisfactory revenue growth, driven by annual invoice increases for certain solutions and increased adoption of existing and new solutions.

 

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In the mortgage and financial services vertical, revenue increased 10.8% in third-quarter 2012 but declined 11.9% after adjusting for the 2012 transition of appraisal tool revenue into the mortgage category from Risk Assessment and the acquisition of Argus. The decline in revenue reflected continued lower volumes in forensic audit solutions, which were not offset by growth from new customers. Underwriting solutions revenue growth continued to be positive and in line with market trends.

In the healthcare vertical, revenue in the third quarter grew 129.0%, with organic growth of 47.4%, driven by double-digit growth for payment accuracy fraud solutions, revenue integrity, and enterprise analytics. Total revenue growth included the 2012 acquisition of MediConnect. Organic growth reflected continued customer implementations and new customer sales.

In the specialized markets category, revenue grew 11.0% in third-quarter 2012, driven by growth in both environmental health and safety solutions and weather and climate analytics.

Table 2B

 

     Three Months Ended
September 30,
     Change
%
    Year-to-Date
September 30,
     Change
%
 
     2012      2011        2012      2011     
     (in thousands)            (in thousands)         

Risk Assessment revenues by category:

                

Industry-standard insurance programs

   $ 98,270       $ 92,894         5.8   $ 295,414       $ 278,140         6.2

Property-specific rating and underwriting information

     31,415         33,107         (5.1 %)      96,431         102,621         (6.0 %) 

Statistical agency and data services

     8,056         7,888         2.1     23,910         23,263         2.8

Actuarial services

     6,126         6,088         0.6     17,270         17,026         1.4
  

 

 

    

 

 

      

 

 

    

 

 

    

Total Risk Assessment

   $ 143,867       $ 139,977         2.8 %    $ 433,025       $ 421,050         2.8 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Within the Risk Assessment segment, revenue grew 2.8% for the quarter and 4.9% excluding the reclassification of property-specific revenue to Decision Analytics as discussed previously. The overall increase within the segment was due principally to 5.8% revenue growth in industry-standard insurance programs resulting primarily from growth in 2012 invoices effective from January 1 as well as continued strong performance from premium leakage solutions.

Property-specific rating and underwriting information revenue declined 5.1%. After adjusting for the reclassification of $3.0 million of revenue in third-quarter 2012 from the property-specific revenue category into the mortgage and financial services revenue category of Decision Analytics, property-specific rating and underwriting information revenue grew 4.0%. Growth was due to new sales and higher volumes from certain customers, as well as growth in appraisal tools. Statistical agency and data services increased 2.1% in the third quarter, and actuarial services were up 0.6%.

Cost of Revenue

Cost of revenue increased 13.9% in third-quarter 2012 and 4.4% excluding acquisitions. The year-over-year increase relates primarily to 2012 annual compensation adjustments and higher headcount in Decision Analytics in support of the growth of our business, partially offset by reduced pension costs related to the freeze of the pension plan in 2012. Cost of revenue decreased 8.5% for Risk Assessment, primarily related to reduced pension expense, and increased 26.4% for Decision Analytics (11.5% excluding recent acquisitions) in third-quarter 2012.

 

3


Selling, General, and Administrative

Selling, general, and administrative expense, or SG&A, increased 14.0% in third-quarter 2012 and 9.1% excluding recent acquisitions. The increase relates primarily to 2012 annual compensation adjustments and higher headcount in Decision Analytics in support of the growth of our business, which were partially offset by reduced pension costs related to the pension plan freeze. SG&A decreased 1.7% for Risk Assessment. SG&A grew 24.1% for Decision Analytics (16.0% excluding recent acquisitions), reflecting increased headcount and commissions related to the growth of the business.

EBITDA

For third-quarter 2012, consolidated EBITDA grew 21.1% to $182.9 million, with a consolidated EBITDA margin of 45.9%.

Table 3

 

     Three Months Ended
September 30,
    Change
%
    Year-to-Date
September 30,
    Change
%
 
     2012     2011       2012     2011    
     (in thousands)           (in thousands)        

Segment EBITDA:

            

Decision Analytics

   $ 104,316      $ 80,301        29.9   $ 271,279      $ 220,617        23.0

EBITDA margin

     40.9     40.1       39.6     39.5  

Risk Assessment

   $ 78,589      $ 70,716        11.1   $ 235,058      $ 213,494        10.1

EBITDA margin

     54.6     50.5       54.3     50.7  

Total EBITDA

   $ 182,905      $ 151,017        21.1 %    $ 506,337      $ 434,111        16.6 % 

EBITDA margin

     45.9     44.4       45.3     44.3  

Decision Analytics EBITDA grew 29.9% in third-quarter 2012 and Risk Assessment EBITDA grew 11.1% versus the previous year, as shown in Table 3.

The third-quarter 2012 EBITDA margin in Risk Assessment increased to 54.6% from 50.5% in third-quarter 2011 because revenue outpaced our primary costs, which were personnel-related, including pension.

The third-quarter 2012 EBITDA margin for Decision Analytics increased to 40.9% from 40.1% in third-quarter 2011 because of growth in the business as well as the benefit of recent higher-margin acquisitions.

 

4


Net Income and Adjusted Net Income

Net income increased 16.8% in third-quarter 2012, driven by growth in the business, which was partially offset by increased borrowing costs associated with higher debt levels due to acquisitions. Adjusted net income grew 20.9% for third-quarter 2012. The table below sets forth a reconciliation of net income to adjusted net income and adjusted EPS based on historical results:

Table 4

 

     Three Months Ended
September 30,
    Change
%
    Year-to-Date
September 30,
    Change
%
 
     2012     2011       2012     2011    
     (in thousands, except per share amounts)     (in thousands, except per share amounts)  

Net Income

   $ 82,911      $ 70,987        16.8   $ 230,843      $ 202,440        14.0

plus: Amortization of intangibles

     15,442        8,797          36,216        26,129     

less: Income tax effect on amortization of intangibles

     (6,176     (3,519       (14,486     (10,452  
  

 

 

   

 

 

     

 

 

   

 

 

   

Adjusted net income

   $ 92,177      $ 76,265        20.9 %    $ 252,573      $ 218,117        15.8 % 
  

 

 

   

 

 

     

 

 

   

 

 

   

Basic adjusted EPS

   $ 0.56      $ 0.46        21.7   $ 1.53      $ 1.31        16.8
  

 

 

   

 

 

     

 

 

   

 

 

   

Diluted adjusted EPS

   $ 0.54      $ 0.45        20.0   $ 1.47      $ 1.25        17.6
  

 

 

   

 

 

     

 

 

   

 

 

   

Weighted average shares outstanding

            

Basic

     165,978,080        164,195,325          165,587,027        166,728,786     
  

 

 

   

 

 

     

 

 

   

 

 

   

Diluted

     171,660,543        171,169,658          171,637,571        174,255,965     
  

 

 

   

 

 

     

 

 

   

 

 

   

Net Cash Provided by Operating Activities and Capital Expenditures

Net cash provided by operating activities was $321.0 million, a decrease of $2.8 million, or 0.9%, for the nine-month period ended September 30, 2012, compared with the same period in 2011. This change was the result of a $79.4 million increase caused by the improved profitability of the business and a $25.5 million decrease in working capital offset by a $73.4 million increase in pension and postretirement funding primarily due to the voluntary $72.0 million contribution to our pension completed in April 2012, an $18.1 million increase in taxes paid, and a $15.6 million increase in interest paid due to higher debt.

Capital expenditures were $56.8 million in the nine months ended September 30, 2012, an increase of $8.6 million over the same period in 2011. Capital expenditures were 5.1% of revenue in the nine months ended September 30, 2012. Net cash provided by operating activities less capital expenditures represented 52.2% of EBITDA in the first nine months of 2012. The conversion rate was lower due to the voluntary pension funding of $72.0 million discussed above.

Share Repurchases and Financing Activities

The company continued to balance its internal investment and acquisition initiatives with share repurchases. In third-quarter 2012, the company repurchased shares for a total cost of $20.8 million at an average price of $48.91. At September 30, 2012, the company had $179.0 million remaining under its share repurchase authorization.

The company executed two transactions in the quarter, capitalizing on market opportunities to enhance its capital structure. On September 12, the company issued $350.0 million of 4.125% senior notes due September 2022 and used the proceeds to repay a portion of borrowings under its revolving credit facility. On September 28, the company exercised an expansion feature under its revolving credit facility to increase the total facility to $850.0 million and extend the maturity until October 2017. The company also increased the maximum permitted Debt to EBITDA covenant to 3.50x from 3.25x. Prior to this amendment, the total facility size was $725.0 million with a maturity date of October 2016.

The committed facility is available for general corporate purposes, including the company’s acquisition program.

 

5


Conference Call

Verisk’s management team will host a live audio webcast on Wednesday, October 31, 2012, at 8:30 a.m. Eastern time (5:30 a.m. Pacific time) to discuss the financial results and business highlights. All interested parties are invited to listen to the live event via webcast on the Verisk investor website at http://investor.verisk.com. The discussion is also available through dial-in number 1-877-755-3792 for U.S./Canada participants or 706-758-8912 for international participants.

A replay of the webcast will be available on the Verisk investor website for 30 days and also through the conference call number 1-855-859-2056 for U.S./Canada participants or 404-537-3406 for international participants using Conference ID #41998930.

About Verisk Analytics

Verisk Analytics (Nasdaq:VRSK) is a leading provider of information about risk to professionals in insurance, healthcare, financial services, government, and risk management. Using advanced technologies to collect and analyze billions of records, Verisk Analytics draws on vast industry expertise and unique proprietary data sets to provide predictive analytics and decision support solutions in fraud prevention, actuarial science, insurance coverages, fire protection, catastrophe and weather risk, data management, and many other fields. In the United States and around the world, Verisk Analytics helps customers protect people, property, and financial assets. For more information, visit www.verisk.com.

Forward-Looking Statements

This release contains forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “target,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements.

Other factors that could materially affect actual results, levels of activity, performance, or achievements can be found in Verisk’s quarterly reports on Form 10-Q, annual reports on Form 10-K, and current reports on Form 8-K filed with the Securities and Exchange Commission. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement in this release reflects our current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, growth strategy, and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise.

Notes Regarding the Use of Non-GAAP Financial Measures

The company has provided certain non-GAAP financial information as supplemental information regarding its operating results. These measures are not in accordance with, or an alternative for, U.S. GAAP and may be different from non-GAAP measures reported by other companies. The company believes that its presentation of non-GAAP measures, such as EBITDA, EBITDA margin, adjusted net income, and adjusted EPS, provides useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. In addition, the company’s management uses these measures for reviewing the financial results of the company and for budgeting and planning purposes.

 

6


EBITDA

Table 5 below sets forth a reconciliation of net income to EBITDA based on our historical results:

Table 5

 

     Three Months Ended
September 30,
     Change
%
    Year-to-Date
September 30,
     Change
%
 
     2012      2011        2012      2011     
     (in thousands)            (in thousands)         

Net income

   $ 82,911       $ 70,987         16.8   $ 230,843       $ 202,440         14.0

Depreciation and amortization of fixed and intangible assets

     28,156         19,595         43.7     73,664         59,087         24.7

Interest expense

     18,133         14,593         24.3     51,895         39,093         32.7

Provision for income taxes

     53,705         45,842         17.2     149,935         133,491         12.3
  

 

 

    

 

 

      

 

 

    

 

 

    

EBITDA

   $ 182,905       $ 151,017         21.1 %    $ 506,337       $ 434,111         16.6 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

EBITDA is a financial measure that management uses to evaluate the performance of our segments. In all periods shown here and going forward, the company defines “EBITDA” as net income before interest expense, income taxes, and depreciation and amortization of fixed and intangible assets. In previous periods, this measure also excluded investment income and realized gain on securities, net.

Although EBITDA is frequently used by securities analysts, lenders, and others in their evaluation of companies, EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our statement of cash flow reported under U.S. GAAP. Management uses EBITDA in conjunction with traditional U.S. GAAP operating performance measures as part of its overall assessment of company performance. Some of these limitations are as follows:

 

   

EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments.

 

   

EBITDA does not reflect changes in, or cash requirement for, our working capital needs.

 

   

Although depreciation and amortization are noncash charges, the assets being depreciated and amortized often will have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements.

 

   

Other companies in our industry may calculate EBITDA differently than we do, limiting the usefulness of their calculations as comparative measures.

Attached Financial Statements

Please refer to the full Form 10-Q filing for the complete financial statements and related notes.

 

7


VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2012 (Unaudited) and December 31, 2011

 

     2012
unaudited
    2011  
     (In thousands, except for share and per share data)  
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 97,770      $ 191,603   

Available-for-sale securities

     4,895        5,066   

Accounts receivable, net of allowance for doubtful accounts as of September 30, 2012 and December 31, 2011 of $4,203 and $4,158, respectively

     175,520        153,339   

Prepaid expenses

     25,387        21,905   

Deferred income taxes, net

     15,614        3,818   

Federal and foreign income taxes receivable

     8,538        25,242   

State and local income taxes receivable

     —          11,433   

Other current assets

     33,613        41,248   
  

 

 

   

 

 

 

Total current assets

     361,337        453,654   

Noncurrent assets:

    

Fixed assets, net

     144,799        119,411   

Intangible assets, net

     530,023        226,424   

Goodwill

     1,220,384        709,944   

Deferred income taxes, net

     —          10,480   

Other assets

     46,890        21,193   
  

 

 

   

 

 

 

Total assets

   $ 2,303,433      $ 1,541,106   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)     

Current liabilities:

    

Accounts payable and accrued liabilities

   $ 176,464      $ 162,992   

Acquisition related liabilities

     —          250   

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

     265,794        5,554   

Pension and postretirement benefits, current

     2,912        4,012   

Fees received in advance

     219,800        176,842   

State and local income taxes payable

     3,287        —     
  

 

 

   

 

 

 

Total current liabilities

     668,257        349,650   

Noncurrent liabilities:

    

Long-term debt

     1,301,683        1,100,332   

Pension benefits

     22,522        109,161   

Postretirement benefits

     5,369        18,587   

Deferred income taxes, net

     80,755        —     

Other liabilities

     82,799        61,866   
  

 

 

   

 

 

 

Total liabilities

     2,161,385        1,639,596   
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ equity/(deficit):

    

Common stock, $.001 par value; 1,200,000,000 shares authorized; 544,003,038 shares issued and 166,259,163 and 164,285,227 outstanding as of September 30, 2012 and December 31, 2011, respectively

     137        137   

Unearned KSOP contributions

     (544     (691

Additional paid-in capital

     991,739        874,808   

Treasury stock, at cost, 377,743,875 and 379,717,811 shares as of September 30, 2012 and December 31, 2011, respectively

     (1,579,859     (1,471,042

Retained earnings

     807,428        576,585   

Accumulated other comprehensive losses

     (76,853     (78,287
  

 

 

   

 

 

 

Total stockholders’ equity/(deficit)

     142,048        (98,490
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity/(deficit)

   $ 2,303,433      $ 1,541,106   
  

 

 

   

 

 

 

 

8


VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the Three Months and Nine Months Ended September 30, 2012 and 2011

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2012     2011     2012     2011  
     (In thousands, except for share and per share data)  

Revenues

   $ 398,863      $ 340,098      $ 1,118,590      $ 980,247   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Cost of revenues (exclusive of items shown separately below)

     156,749        137,619        437,153        393,360   

Selling, general and administrative

     58,707        51,475        175,159        156,640   

Depreciation and amortization of fixed assets

     12,714        10,798        37,448        32,958   

Amortization of intangible assets

     15,442        8,797        36,216        26,129   

Acquisition related liabilities adjustment

     —          —          —          (3,364
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     243,612        208,689        685,976        605,723   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     155,251        131,409        432,614        374,524   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income/(expense):

        

Investment income

     136        99        397        99   

Realized (loss)/gain on securities, net

     (638     (86     (338     401   

Interest expense

     (18,133     (14,593     (51,895     (39,093
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     (18,635     (14,580     (51,836     (38,593
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     136,616        116,829        380,778        335,931   

Provision for income taxes

     (53,705     (45,842     (149,935     (133,491
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 82,911      $ 70,987      $ 230,843      $ 202,440   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income per share

   $ 0.50      $ 0.43      $ 1.39      $ 1.21   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per share

   $ 0.48      $ 0.41      $ 1.34      $ 1.16   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     165,978,080        164,195,325        165,587,027        166,728,786   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     171,660,543        171,169,658        171,637,571        174,255,965   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

9


VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the Nine Months Ended September 30, 2012 and 2011

 

     2012     2011  
     (In thousands)  

Cash flows from operating activities:

    

Net income

   $ 230,843      $ 202,440   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization of fixed assets

     37,448        32,958   

Amortization of intangible assets

     36,216        26,129   

Amortization of debt issuance costs and original issue discount

     1,649        1,206   

Allowance for doubtful accounts

     576        852   

KSOP compensation expense

     9,481        9,630   

Stock based compensation

     19,303        17,288   

Noncash charges associated with performance-based appreciation awards

     —          627   

Acquisition related liabilities adjustment

     —          (3,364

Realized loss/(gain) on securities, net

     338        (401

Deferred income taxes

     (526     (2,083

Loss on disposal of assets

     88        635   

Excess tax benefits from exercised stock options

     (55,056     (5,470

Other operating

     215        133   

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

    

Accounts receivable

     (3,026     (24,445

Prepaid expenses and other assets

     7,126        (3,229

Federal and foreign income taxes

     84,621        48,925   

State and local income taxes

     14,887        5,382   

Accounts payable and accrued liabilities

     3,168        12,509   

Fees received in advance

     39,588        24,841   

Pension and postretirement benefits

     (97,809     (15,216

Other liabilities

     (8,133     (5,593
  

 

 

   

 

 

 

Net cash provided by operating activities

     320,997        323,754   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisitions, net of cash acquired for 2012 and 2011 of $36,113 and $590, respectively

     (743,091     (121,721

Purchase of non-controlling equity investment in non-public companies

     (2,000     —     

Earnout payments

     (250     (3,500

Escrow funding associated with acquisitions

     (37,800     (19,560

Purchases of fixed assets

     (55,724     (41,925

Purchases of available-for-sale securities

     (1,317     (1,422

Proceeds from sales and maturities of available-for-sale securities

     1,478        1,722   
  

 

 

   

 

 

 

Net cash used in investing activities

     (838,704     (186,406
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of long-term debt, net of original issue discount

     347,224        448,956   

Repayment of current portion of long-term debt

     —          (125,000

Repayment of short-term debt refinanced on a long-term basis

     (347,224     (295,000

Proceeds from issuance of short-term debt with original maturities greater than three months

     —          120,000   

Proceeds from of short-term debt, net

     462,224        22,311   

Payment of debt issuance costs

     (3,623     (4,542

Repurchase of Class A common stock

     (128,073     (340,122

Proceeds from stock options exercised

     43,571        28,433   

Excess tax benefits from exercised stock options

     55,056        5,470   

Other financing, net

     (5,151     —     
  

 

 

   

 

 

 

Net cash provided by/(used in) financing activities

     424,004        (139,494
  

 

 

   

 

 

 

Effect of exchange rate changes

     (130     18   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (93,833     (2,128

Cash and cash equivalents, beginning of period

     191,603        54,974   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 97,770      $ 52,846   
  

 

 

   

 

 

 

Supplemental disclosures:

    

Taxes paid

   $ 51,017      $ 82,526   
  

 

 

   

 

 

 

Interest paid

   $ 41,431      $ 25,876   
  

 

 

   

 

 

 

Noncash investing and financing activities:

    

Repurchase of Class A common stock included in accounts payable and accrued liabilities

   $ 953      $ 2,244   
  

 

 

   

 

 

 

Deferred tax (liability)/asset established on date of acquisition

   $ (78,832   $ 1,280   
  

 

 

   

 

 

 

Capital lease obligations

   $ 3,544      $ 7,683   
  

 

 

   

 

 

 

Capital expenditures included in accounts payable and accrued liabilities

   $ 998      $ 778   
  

 

 

   

 

 

 

Increase in goodwill due to acquisition related escrow distributions

   $ 4,128      $ —     
  

 

 

   

 

 

 

 

10