Cannae Holdings, Inc. - Annual Report: 2019 (Form 10-K)

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Item 1.	Business

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•	changes in general economic, business, and political conditions, including changes in the financial markets;

•	compliance with extensive government regulation of our operating subsidiaries and adverse changes in applicable laws or regulations or in their application by regulators;

•	the effects of the Externalization and the Management Services Agreement;

•	our ability to successfully execute the Blue Ribbon Reorganization;

•	loss of key personnel that could negatively affect our financial results and impair our operating abilities;

•	our potential inability to find suitable acquisition candidates, as well as the risks associated with acquisitions in lines of business that will not necessarily be limited to our traditional areas of focus, or difficulties integrating acquisitions;

•	other risks detailed in "Risk Factors" below and elsewhere in this document and in our other filings with the SEC.

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•	obtain unauthorized access to confidential information;

•	manipulate or destroy data; or

•	disrupt, sabotage or degrade service on D&B's systems.

•	the techniques used in cyberattacks change frequently and may not be recognized until after the attacks have succeeded;

•	cyberattacks can originate from a wide variety of sources, including sophisticated threat actors involved in organized crime, sponsored by nation-states, or linked to terrorist or hacktivist organizations; and

•	third parties may seek to gain access to our systems either directly or using equipment or security passwords belonging to employees, clients, third-party service providers or other users.

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•	the breadth and complexity of its operations and the high volume of transactions that is processes;

•	the large number of clients, counterparties and third-party service providers with which D&B does business with;

•	the proliferation and increasing sophistication of cyberattacks; and

•	the possibility that a third party, after establishing a foothold on an internal network without being detected, might obtain access to other networks and systems.

•	it may be difficult for D&B to satisfy its obligations, including debt service requirements under its outstanding indebtedness;

•	D&B's ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions or other general corporate purposes may be impaired;

•	requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on its indebtedness, thereby reducing D&B's ability to use its cash flow to fund its operations, capital expenditures, future business opportunities and other purposes;

•	D&B will be more vulnerable to economic downturns and adverse industry conditions and its flexibility to plan for, or react to, changes in its business or industry will be more limited;

•	D&B's ability to capitalize on business opportunities and to react to competitive pressures, as compared to its competitors, may be compromised due to its high level of indebtedness and the restrictive covenants in its credit agreements and indentures;

•	D&B's ability to borrow additional funds or to refinance indebtedness may be limited; and

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•	it may cause potential or existing clients or vendors to not contract with D&B due to concerns over its ability to meet its financial obligations.

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•	involve our entry into geographic or business markets in which we have little or no prior experience;

•	involve difficulties in retaining the customers of the acquired business;

•	involve difficulties and expense associated with regulatory requirements, competition controls or investigations;

•	result in a delay or reduction of sales for both us and the business we acquire; and

•	disrupt our ongoing business, divert our resources and require significant management attention that would otherwise be available for ongoing development of our current business.

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•	authorize the issuance of "blank check" preferred stock that could be issued by us upon approval of our board of directors to increase the number of outstanding shares of capital stock, making a takeover more difficult and expensive;

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•	provide that directors may be removed from office only for cause and that any vacancy on our board of directors may only be filled by a majority of our directors then in office, which may make it difficult for other stockholders to reconstitute our board of directors;

•	provide that special meetings of the stockholders may be called only upon the request of a majority of our board of directors or by our executive chairman, chief executive officer or president, as applicable;

•	require advance notice to be given by stockholders for any stockholder proposals or director nominees;

•	provide that directors are elected by a plurality of the votes cast by stockholders, which results in each director nominee elected by a plurality winning his or her seat upon receiving one "for" vote; and

•	provide that the board of directors is divided into three classes, as nearly equal in number as possible, with one class being elected at each annual meeting of stockholders, which could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of Cannae.

Item 1B.	Unresolved Staff Comments

Item 2.	Properties

Item 3.	Legal Proceedings

Item 4.	Mine Safety Disclosures

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Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

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(1)	On September 19, 2019, our Board of Directors approved the 2019 Repurchase Program, under which we may purchase up to 5 million shares of our common stock through September 30, 2022.

(2)	As of the last day of the applicable month.

Item 6.	Selected Financial Data

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(1)

On November 17, 2017, the date of the consummation of the Split-Off, 70.6 million shares of our common stock were distributed to FNFV Group shareholders. For comparative purposes, the weighted average number of common shares outstanding and basic and diluted earnings per share for the years ended December 31, 2016 and 2015 were calculated using the number of shares distributed as if those shares were issued and outstanding beginning January 1, 2015.

(2)	Book value per share is calculated as total equity at December 31 of each year presented divided by actual shares outstanding at December 31 of each year presented.

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Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations

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Item 7A.	Quantitative and Qualitative Disclosure about Market Risk

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•	We tested the effectiveness of the Company's internal controls over goodwill and tradenames, including internal controls over management’s forecasts and the selection of the valuation methodologies, discount rates, earnings multiples, and royalty rates.

•	We assessed the sensitivity of the Company’s impairment conclusions to changes in the forecasts, discount rates, earnings multiples, and royalty rates.

•	We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

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We evaluated the reasonableness of management’s forecasts by: (1) comparing the forecasts to historical results; (2) obtaining supporting evidence for assumptions and estimates related to management’s planned operational initiatives and restructurings that were incorporated into the forecasts; (3) corroborating assumptions and estimates with management’s communications to the Board of Directors; and (4) comparing forecast assumptions and estimates with information included in Company press releases, analyst reports of the Company and companies in its peer group, and restaurant industry reports.

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With the assistance of our valuation specialists, we evaluated the valuation methodologies, discount rates, earnings multiples, and royalty rates selected by management, by assessing the impact of the uncertainty in management's forecast due to deteriorating operating results and cash flows on these valuation assumptions, testing the underlying market-based source information and the mathematical accuracy of the valuation assumptions, and developing a range of independent valuation assumptions and comparing those to the discount rate, earnings multiples, and royalty rate valuation assumptions selected by management.

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(1)	Net of income tax expense (benefit) of less than $0.1 million, $0.3 million and $(3.1) million for the years ended December 31, 2019, 2018 and 2017, respectively.

(2)	Net of income tax expense (benefit) of $1.9 million, $(3.2) million and $2.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.

(3)	Net of income tax benefit of $5.1 million and $6.4 million for the years ended December 31, 2019 and 2018, respectively.

(4)	Net of income tax (benefit) expense of $(1.9) million and $1.9 million for the years ended December 31, 2018 and 2017, respectively.

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Note A.	Business and Summary of Significant Accounting Policies

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Note C.	Fair Value Measurements

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Note E.	Property and Equipment

Note F.	Goodwill

Note G.	Variable Interest Entities

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Note H.	Other Intangible Assets

Note I.	Inventory

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Note J.	Accounts Payable and Other Accrued Liabilities

Note K.	Notes Payable

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Note L.	Income Taxes

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Note M.	Commitments and Contingencies

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Note O.	Employee Benefit Plans

Note P.	Concentration of Risk

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Restaurant Group.  This segment consists of the operations of Blue Ribbon, O'Charley's and 99 Restaurants, in which we have 65.4%, 65.4% and 88.5% ownership interests, respectively. Blue Ribbon and its affiliates are the owners and operators of the Village Inn and Bakers Square food service and restaurant concepts, as well as the Legendary Baking bakery operation. O'Charley's and its affiliates are the owners and operators of the O'Charley's restaurant concept. 99 Restaurants and its affiliates are the owners and operators of Ninety Nine Restaurants restaurant concept.

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Dun & Bradstreet. This segment consists of our 24.3% ownership interest in Dun & Bradstreet. Dun & Bradstreet is a leading global provider of business decisioning data and analytics. Its mission is to deliver a global network of trust, enabling clients to transform uncertainty into confidence, risk into opportunity and potential into prosperity. Clients embed D&B's trusted, end-to-end solutions into their daily workflows to enhance salesforce productivity, gain visibility into key markets, inform commercial credit decisions and confirm that suppliers are financially viable and compliant with laws and regulations. Dun & Bradstreet's solutions support its clients’ mission critical business operations by

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Ceridian.  This segment consists of our 16.4% ownership interest in Ceridian. Ceridian is a global human capital management (“HCM”) software company. Dayforce, Ceridian's flagship cloud HCM platform, provides human resources (“HR”), payroll, benefits, workforce management, and talent management functionality. Dayforce is a single application that provides continuous real-time calculations across all modules to enable, for example, payroll administrators access to data through the entire pay period, and managers access to real-time data to optimize work schedules. Dayforce offers a comprehensive range of functionality, including global HR, payroll, benefits, workforce management, and talent management on web and native iOS and Android platforms. Ceridian's Dayforce mobile app enables employees not only to request and to trade schedules, but also to see the real-time impact of schedule changes on their pay. Our chief operating decision maker reviews the full financial results of Ceridian for purposes of assessing performance and allocating resources. Thus, we consider Ceridian a reportable segment and have included the full financial results of Ceridian in the table above. We account for our investment in Ceridian under the equity method of accounting and therefore its results of operations do not consolidate into ours. Accordingly, we have presented the elimination of Ceridian's results in the Ceridian and Dun & Bradstreet Elimination section of the segment presentation above.

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Corporate and Other.  This aggregation of nonreportable segments consists of our share in the operations of certain controlled portfolio companies and other equity investments, activity of the corporate holding company and certain intercompany eliminations and taxes. Total assets for this segment as of December 31, 2018 and 2017 also include the assets of T-System. See Note N Discontinued Operations for further details.

Note S.	Recent Accounting Pronouncements

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Note T.	Supplementary Cash Flow Information

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Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A.	Controls and Procedures

Item 9B.	Other Information

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Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K

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Item 16.	Form 10-K Summary

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