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Verisk Analytics, Inc. - Quarter Report: 2016 June (Form 10-Q)

Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     
Commission File Number: 001-34480
___________________________________
VERISK ANALYTICS, INC.
(Exact name of registrant as specified in its charter)
 ___________________________________
Delaware
 
26-2994223
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
545 Washington Boulevard
Jersey City, NJ
 
07310-1686
(Address of principal executive offices)
 
(Zip Code)
(201) 469-2000
(Registrant’s telephone number, including area code)
 ___________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
 
Accelerated filer
 
¨
 
 
 
 
 
 
 
Non-accelerated filer
 
o  (Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

As of July 29, 2016, there were 168,970,219 shares outstanding of the registrant's Common Stock, par value $.001.
 

Table of Contents

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

Table of Contents

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As of June 30, 2016 and December 31, 2015
 
2016
 
2015
 
 
 
 
 
 
 
(In thousands, except for
share and per share data)
ASSETS
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
196,402

 
$
138,348

Available-for-sale securities
 
3,372

 
 
3,576

Accounts receivable, net of allowance for doubtful accounts of $3,137 and $2,642,
respectively
 
241,326

 
 
250,947

Prepaid expenses
 
30,870

 
 
34,126

Income taxes receivable
 
5,748

 
 
48,596

Other current assets
 
19,199

 
 
52,913

Current assets held-for-sale
 
—

 
 
76,063

Total current assets
 
496,917

 
 
604,569

Noncurrent assets:
 
 
 
 
 
Fixed assets, net
 
334,631

 
 
350,311

Intangible assets, net
 
1,104,262

 
 
1,245,083

Goodwill
 
2,629,941

 
 
2,753,026

Pension assets
 
39,534

 
 
32,922

Other assets
 
119,778

 
 
25,845

Noncurrent assets held-for-sale
 
—

 
 
581,896

Total assets
$
4,725,063

 
$
5,593,652

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
 
 
Accounts payable and accrued liabilities
$
163,413

 
$
222,112

Short-term debt and current portion of long-term debt
 
2,256

 
 
874,811

Pension and postretirement benefits, current
 
1,831

 
 
1,831

Deferred revenues
 
431,171

 
 
340,833

Income tax payable
 
16,495

 
 
—

Current liabilities held-for-sale
 
—

 
 
39,670

Total current liabilities
 
615,166

 
 
1,479,257

Noncurrent liabilities:
 
 
 
 
 
Long-term debt
 
2,273,032

 
 
2,270,904

Pension benefits
 
12,698

 
 
12,971

Postretirement benefits
 
1,868

 
 
1,981

Deferred income taxes, net
 
314,705

 
 
329,175

Other liabilities
 
57,730

 
 
58,360

Noncurrent liabilities held-for-sale
 
—

 
 
68,993

Total liabilities
 
3,275,199

 
 
4,221,641

Commitments and contingencies
 

 
 

Stockholders’ equity:
 
 
 
 
 
Common stock, $.001 par value; 2,000,000,000 shares authorized; 544,003,038
shares issued and 168,719,149 and 169,424,981 shares outstanding, respectively
 
137

 
 
137

Additional paid-in capital
 
2,071,497

 
 
2,023,390

Treasury stock, at cost, 375,283,889 and 374,578,057 shares, respectively
 
(2,680,728
)
 
 
(2,571,190
)
Retained earnings
 
2,516,101

 
 
2,161,726

Accumulated other comprehensive losses
 
(457,143
)
 
 
(242,052
)
Total stockholders’ equity
 
1,449,864

 
 
1,372,011

Total liabilities and stockholders’ equity
$
4,725,063

 
$
5,593,652


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

1
Table of Contents

VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For The Three and Six Months Ended June 30, 2016 and 2015
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands, except for share and per share data)
Revenues
$
498,296

 
$
428,599

 
$
990,997

 
$
812,892

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of revenues (exclusive of items shown
separately below)
 
178,466

 
 
154,639

 
 
351,743

 
 
288,423

Selling, general and administrative
 
75,557

 
 
82,336

 
 
146,594

 
 
132,050

Depreciation and amortization of fixed assets
 
29,388

 
 
22,677

 
 
61,275

 
 
42,065

Amortization of intangible assets
 
23,806

 
 
22,904

 
 
47,677

 
 
30,359

Total expenses
 
307,217

 
 
282,556

 
 
607,289

 
 
492,897

Operating income
 
191,079

 
 
146,043

 
 
383,708

 
 
319,995

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Investment income (loss) and others, net
 
846

 
 
(259
)
 
 
890

 
 
(761
)
Gain on derivative instruments
 
—

 
 
85,187

 
 
—

 
 
85,187

Interest expense
 
(31,435
)
 
 
(37,662
)
 
 
(63,467
)
 
 
(55,924
)
Total other income (expense), net
 
(30,589
)
 
 
47,266

 
 
(62,577
)
 
 
28,502

Income from continuing operations before income
taxes
 
160,490

 
 
193,309

 
 
321,131

 
 
348,497

Provision for income taxes
 
(53,754
)
 
 
(34,392
)
 
 
(104,665
)
 
 
(93,207
)
Income from continuing operations
 
106,736

 
 
158,917

 
 
216,466

 
 
255,290

Discontinued operations:
 


 
 


 
 
 
 
 
 
Income from discontinued operations
 
254,745

 
 
7,717

 
 
256,525

 
 
12,021

Provision for income taxes from discontinued
operations
 
(99,745
)
 
 
(3,314
)
 
 
(118,616
)
 
 
(5,305
)
Income from discontinued operations
 
155,000

 
 
4,403

 
 
137,909

 
 
6,716

Net income
$
261,736

 
$
163,320

 
$
354,375

 
$
262,006

Basic net income per share:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
0.64

 
$
0.97

 
$
1.29

 
$
1.59

Income from discontinued operations
 
0.92

 
 
0.02

 
 
0.81

 
 
0.04

Basic net income per share
$
1.56

 
$
0.99

 
$
2.10

 
$
1.63

Diluted net income per share:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
0.62

 
$
0.95

 
$
1.26

 
$
1.55

Income from discontinued operations
 
0.91

 
 
0.02

 
 
0.81

 
 
0.04

Diluted net income per share
$
1.53

 
$
0.97

 
$
2.07

 
$
1.59

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
 
168,296,318

 
 
164,141,804

 
 
168,375,034

 
 
161,114,861

Diluted
 
171,218,782

 
 
167,586,100

 
 
171,349,833

 
 
164,533,656




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

2
Table of Contents

VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
For The Three and Six Months Ended June 30, 2016 and 2015
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
(In thousands)
Net income
$
261,736

 
$
163,320

 
$
354,375

 
$
262,006

Other comprehensive loss, net of tax:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 
(141,178
)
 
 
(4,209
)
 
 
(216,521
)
 
 
(4,429
)
Unrealized holding gain on available-for-sale securities
 
92

 
 
7

 
 
203

 
 
69

Pension and postretirement liability adjustment
 
720

 
 
387

 
 
1,227

 
 
1,001

Total other comprehensive loss
 
(140,366
)
 
 
(3,815
)
 
 
(215,091
)
 
 
(3,359
)
Comprehensive income
$
121,370

 
$
159,505

 
$
139,284

 
$
258,647






















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

3
Table of Contents

VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For The Year Ended December 31, 2015 and The Six Months Ended June 30, 2016
 
Common Stock
Issued
 
Par 
Value
 
Unearned
KSOP
Contributions
 
Additional
Paid-in
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other Comprehensive
Losses
 
Total
Stockholders’
Equity 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands, except for share data)
Balance, January 1, 2015
544,003,038

 
$
137

 
$
(161
)
 
$
1,171,196

 
$
(2,533,764
)
 
$
1,654,149

 
$
(80,514
)
 
$
211,043

Net income
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
507,577

 
 
—

 
 
507,577

Other comprehensive loss
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
(161,538
)
 
 
(161,538
)
Treasury stock acquired (1,088,474 shares)
—

 
 
—

 
 
—

 
 
100,000

 
 
(120,456
)
 
 
—

 
 
—

 
 
(20,456
)
KSOP shares earned (47,686 shares reissued from
treasury stock)
—

 
 
—

 
 
161

 
 
13,588

 
 
327

 
 
—

 
 
—

 
 
14,076

Shares issued from equity offering (10,604,000 shares
reissued from treasury stock)
—

 
 
—

 
 
—

 
 
651,258

 
 
69,590

 
 
—

 
 
—

 
 
720,848

Stock options exercised, including tax benefit of $27,992
(1,739,847 shares reissued from treasury stock)
—

 
 
—

 
 
—

 
 
57,503

 
 
11,730

 
 
—

 
 
—

 
 
69,233

Restricted stock lapsed, including tax benefit of $1,238
(177,252 shares reissued from treasury stock)
—

 
 
—

 
 
—

 
 
68

 
 
1,170

 
 
—

 
 
—

 
 
1,238

Employee stock purchase plan (25,599 shares reissued
from treasury stock)
—

 
 
—

 
 
—

 
 
1,625

 
 
173

 
 
—

 
 
—

 
 
1,798

Stock based compensation
—

 
 
—

 
 
—

 
 
30,116

 
 
—

 
 
—

 
 
—

 
 
30,116

Net share settlement from restricted stock awards (32,882
shares withheld for tax settlement)
—

 
 
—

 
 
—

 
 
(2,350
)
 
 
—

 
 
—

 
 
—

 
 
(2,350
)
Other stock issuances (5,844 shares reissued from treasury
stock)
—

 
 
—

 
 
—

 
 
386

 
 
40

 
 
—

 
 
—

 
 
426

Balance, December 31, 2015
544,003,038

 
 
137

 
 
—

 
 
2,023,390

 
 
(2,571,190
)
 
 
2,161,726

 
 
(242,052
)
 
 
1,372,011

Net income
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
354,375

 
 
—

 
 
354,375

Other comprehensive loss
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
(215,091
)
 
 
(215,091
)
Treasury stock acquired (1,663,095 shares)
—

 
 
—

 
 
—

 
 
—

 
 
(116,363
)
 
 
—

 
 
—

 
 
(116,363
)
KSOP shares issued (109,316 shares reissued from treasury stock)
—

 
 
—

 
 
—

 
 
7,433

 
 
781

 
 
—

 
 
—

 
 
8,214

Stock options exercised, including tax benefit of $9,944
(655,448 shares reissued from treasury stock)
—

 
 
—

 
 
—

 
 
25,542

 
 
4,673

 
 
—

 
 
—

 
 
30,215

Restricted stock lapsed, including tax benefit of $1,713
(163,574 shares reissued from treasury stock)
—

 
 
—

 
 
—

 
 
545

 
 
1,168

 
 
—

 
 
—

 
 
1,713

Employee stock purchase plan (16,390 shares reissued
from treasury stock)
—

 
 
—

 
 
—

 
 
1,135

 
 
117

 
 
—

 
 
—

 
 
1,252

Stock based compensation
—

 
 
—

 
 
—

 
 
16,423

 
 
—

 
 
—

 
 
—

 
 
16,423

Net share settlement of restricted stock awards (36,581
shares withheld for tax settlement)
—

 
 
—

 
 
—

 
 
(2,930
)
 
 
—

 
 
—

 
 
—

 
 
(2,930
)
Other stock issuances (12,535 shares reissued
from treasury stock)
—

 
 
—

 
 
—

 
 
(41
)
 
 
86

 
 
—

 
 
—

 
 
45

Balance, June 30, 2016
544,003,038

 
$
137

 
$
—

 
$
2,071,497

 
$
(2,680,728
)
 
$
2,516,101

 
$
(457,143
)
 
$
1,449,864

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

4
Table of Contents

VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For The Six Months Ended June 30, 2016 and 2015
 
2016
 
2015
 
 
 
(In thousands)
Cash flows from operating activities:
 
 
 
 
 
Net income
$
354,375

 
$
262,006

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization of fixed assets
 
68,331

 
 
53,070

Amortization of intangible assets
 
53,581

 
 
42,953

Amortization of debt issuance costs and original issue discount
 
2,472

 
 
10,634

Allowance for doubtful accounts
 
1,327

 
 
456

KSOP compensation expense
 
8,214

 
 
7,969

Stock based compensation
 
16,468

 
 
19,047

Gain on derivative instruments
 
—

 
 
(85,187
)
Gain on sale of discontinued operations
 
(269,385
)
 
 
—

Realized loss (gain) on available-for-sale securities, net
 
274

 
 
(14
)
Deferred income taxes
 
6,123

 
 
(7,390
)
Loss (gain) on disposal of fixed assets, net
 
811

 
 
(3
)
Excess tax benefits from exercised stock options and restricted stock awards
 
(6,570
)
 
 
(8,419
)
Changes in assets and liabilities, net of effects from acquisitions:
 
 
 
 
 
Accounts receivable
 
21,179

 
 
37,981

Prepaid expenses and other assets
 
(1,503
)
 
 
9,747

Income taxes
 
61,707

 
 
11,858

Accounts payable and accrued liabilities
 
(26,399
)
 
 
(27,393
)
Deferred revenues
 
92,581

 
 
38,305

Pension and postretirement benefits
 
(5,232
)
 
 
(7,129
)
Other liabilities
 
131

 
 
(2,990
)
Net cash provided by operating activities
 
378,485

 
 
355,501

Cash flows from investing activities:
 
 
 
 
 
Acquisitions, net of cash acquired of $1,034 and $35,398, respectively
 
(6,200
)
 
 
(2,811,759
)
Purchase of non-controlling interest in non-public companies
 
—

 
 
(101
)
Proceeds from sale of discontinued operations
 
719,374

 
 
—

Escrow funding associated with acquisition
 
—

 
 
(78,694
)
Proceeds from the settlement of derivative instruments
 
—

 
 
85,187

Capital expenditures
 
(62,231
)
 
 
(60,092
)
Purchases of available-for-sale securities
 
(25
)
 
 
(29
)
Proceeds from sales and maturities of available-for-sale securities
 
283

 
 
230

Other investing activities, net
 
(620
)
 
 
—

Net cash provided by (used in) investing activities
 
650,581

 
 
(2,865,258
)
Cash flows from financing activities:
 
 
 
 
 
Proceeds from issuance of long-term debt, net of original issue discount
 
—

 
 
1,243,966

(Repayment) proceeds of short-term debt, net
 
(870,000
)
 
 
30,000

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

 
 
830,000

Repayment of current portion of long-term debt
 
—

 
 
(170,000
)
Repayment of long-term debt
 
—

 
 
(50,000
)
Payment of debt issuance costs
 
—

 
 
(23,053
)
Repurchases of common stock
 
(116,363
)
 
 
—

Excess tax benefits from exercised stock options and restricted stock awards
 
6,570

 
 
8,419

Proceeds from stock options exercised
 
16,326

 
 
18,103

Proceeds from issuance of stock as part of a public offering
 
—

 
 
720,848

Net share settlement of restricted stock awards
 
(2,930
)
 
 
(2,350
)
Other financing activities, net
 
(3,536
)
 
 
(2,569
)
Net cash (used in) provided by financing activities
 
(969,933
)
 
 
2,603,364

Effect of exchange rate changes
 
(1,079
)
 
 
12,525

Increase in cash and cash equivalents
 
58,054

 
 
106,132

Cash and cash equivalents, beginning of period
 
138,348

 
 
39,359

Cash and cash equivalents, end of period
$
196,402

 
$
145,491

Supplemental disclosures:
 
 
 
 
 
Taxes paid
$
149,597

 
$
87,914

Interest paid
$
62,902

 
$
37,977

Noncash investing and financing activities:
 
 
 
 
 
Promissory note received for sale of discontinued operations
$
82,900

 
$
—

Equity interest received for sale of discontinued operations 
$
8,400

 
$
—

Deferred tax liability established on date of acquisition
$
293

 
$
258,976

Tenant improvement included in other liabilities
$
34

 
$
448

Capital lease obligations
$
637

 
$
905

Capital expenditures included in accounts payable and accrued liabilities
$
1,629

 
$
4,658

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

5
Table of Contents

VERISK ANALYTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Amounts in thousands, except for share and per share data, unless otherwise stated)
1. Organization:
Verisk Analytics, Inc. and its consolidated subsidiaries (“Verisk” or the “Company”) enable risk-bearing businesses to better understand and manage their risks. The Company provides its customers proprietary data that, combined with analytic methods, create embedded decision support solutions. The Company is one of the largest aggregators and providers of data pertaining to property and casualty (“P&C”) insurance risks in the United States of America (“U.S.”). The Company offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields.
Verisk was established to serve as the parent holding company of Insurance Services Office, Inc. (“ISO”) upon completion of the initial public offering ("IPO"), which occurred on October 9, 2009. ISO was formed in 1971 as an advisory and rating organization for the P&C insurance industry to provide statistical and actuarial services, to develop insurance programs and to assist insurance companies in meeting state regulatory requirements. For over the past decade, the Company has broadened its data assets, entered new markets, placed a greater emphasis on analytics, and pursued strategic acquisitions. Verisk trades under the ticker symbol “VRSK” on the NASDAQ Global Select Market.
2. Basis of Presentation and Summary of Significant Accounting Policies:
The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the U.S. (“U.S. GAAP”). The preparation of financial statements in conformity with these accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include acquisition purchase price allocations, the fair value of goodwill, the realization of deferred tax assets and liabilities, fair value of stock based compensation, assets and liabilities for pension and postretirement benefits, and the estimate for the allowance for doubtful accounts. Actual results may ultimately differ from those estimates. Certain reclassifications have been made related to the debt disclosure within the condensed consolidated financial statements and the notes to conform to the respective 2016 presentation in connection with the adoption of Accounting Standards Update ("ASU") 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU No. 2015-03"). On March 31, 2016, the Company's healthcare business qualified as assets held-for-sale. Accordingly, the respective assets and liabilities have been classified as held-for-sale in the condensed consolidated balance sheet at December 31, 2015. The Company's healthcare business was sold on June 1, 2016. The results of operations and the gain on sale of the Company's healthcare business are reported as a discontinued operation for the periods presented herein (See Note 6).
The condensed consolidated financial statements as of June 30, 2016 and for the three and six months ended June 30, 2016 and 2015, in the opinion of management, include all adjustments, consisting of normal recurring items, to present fairly the Company’s financial position, results of operations and cash flows. The operating results for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements and related notes for the three and six months ended June 30, 2016 have been prepared on the same basis as and should be read in conjunction with the annual report on Form 10-K for the year ended December 31, 2015. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”). The Company believes the disclosures made are adequate to keep the information presented from being misleading.
Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company adopted the guidance on January 1, 2016 and as a result, debt issuance costs of $22,275 were reclassified from "Other assets" to "Long-term debt" on the Company's condensed consolidated balance sheet as of December 31, 2015.

In April 2015, the FASB issued ASU No. 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement ("ASU No. 2015-05"). This guidance is intended to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement, primarily to determine whether the arrangement includes a sale or license of software. The Company adopted the guidance on January 1, 2016. The adoption of ASU No. 2015-05 did not have a material impact on the Company's condensed consolidated financial statements.

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In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments ("ASU No. 2015-16"). ASU No. 2015-16 requires, for business combinations, that the acquirer record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The Company adopted the guidance on January 1, 2016. Adoption of this guidance did not have a material impact on the results of operations or financial position (see Note 5).

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU No. 2016-01”). The amendments in this update require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon occurrence of an observable price change or upon identification of an impairment. The amendments in ASU No. 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For amendments applicable to the Company, early adoption is not permitted. The Company will conform to ASC No. 2016-01 in the condensed consolidated financial statements in future periods.
In February 2016, the FASB issued ASU No. 2016-02, Leases ("ASU No. 2016-02"). This ASU amends the existing accounting considerations and treatments for leases through the creation of Topic 842, Leases, to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. The amendments in ASU No. 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments is permitted for all entities. The Company has decided not to early adopt ASU No. 2016-02 and is currently evaluating the impact the amendments may have on its condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, Equity Method and Joint Ventures (“ASU No. 2016-07”).  The amendments in the update eliminate the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence.  The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of account as of the date the investment becomes qualified for equity method accounting.  The amendments in ASU No. 2016-07 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.  Early adoption is permitted. The Company has not elected to early adopt.  The adoption of ASU No. 2016-07 is not expected to have a material impact on the Company’s condensed consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-08, Principal Versus Agent Considerations (“ASU No. 2016-08”). The amendments to this update are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The amendments in ASU No. 2016-08 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating ASU No. 2016-08 and has not determined the impact this standard may have on its financial statements nor decided upon the method of adoption.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU No. 2016-09”). The objective of this update is to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in ASU No. 2016-09 are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. The Company has not elected to early adopt. The Company is currently evaluating ASU No. 2016-09 and has not determined the impact this amendment may have on its financial statements.
In April 2016, the FASB issued ASU No. 2016-10, Identifying Performance Obligations and Licensing (“ASU No. 2016-10”). The amendments in this update clarify the following two aspects of Accounting Standards Codification ("ASC") 606 ("ASC 606"), Revenue From Contracts With Customers: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The amendments in ASU No. 2016-10 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating ASU No. 2016-10 and has not determined the impact this standard may have on its financial statements nor decided upon the method of adoption.

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In May 2016, the FASB issued ASU No. 2016-11, Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update) ("ASU No. 2016-11"). Specifically, registrants should not rely on the following SEC Staff Observer comments upon adoption of ASC 606: a. Revenue and Expense Recognition for Freight Services in Process, b. Accounting for Shipping and Handling Fees and Costs, c. Accounting for Consideration Given by a Vendor to a Customer, and d. Accounting for Gas-Balancing Arrangements. The adoption of ASU No. 2016-11 is not expected to have a material impact on the Company’s condensed consolidated financial statements.
In May 2016, the FASB issued ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients ("ASU No. 2016-12"). ASU No. 2016-12 does not change the core principle of the guidance in ASC 606. Rather, this update affects only the narrow scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. The effective date and transition requirements for ASU 2016-12 are the same as the effective date and transition requirements for ASC 606. The adoption of ASU No. 2016-12 is not expected to have a material impact on the Company’s condensed consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU No. 2016-13"). Financial assets measured at amortized cost basis, including but not limited to loans, debt securities and trade receivables , that have the contractual right to receive cash are within the scope of this guidance. Under ASU No. 2016-13, these financial assets should be presented at the net amount expected to be collected. The income statement should reflect the measurement of credit losses that have taken place during the period. The amendments in ASU No. 2016-13 are effective for fiscal years beginning after December 15, 2019. Earlier adoption is permitted. The Company has decided not to early adopt ASU No. 2016-13. The adoption of ASU No. 2016-13 is not expected to have a material impact on the Company’s condensed consolidated financial statements.
3. Investments:
Available-for-sale securities consisted of the following: 
 
Adjusted Cost
 
Gross Unrealized
Gain (Loss)
 
Fair Value
June 30, 2016
 
 
 
 
 
 
 
 
Registered investment companies
$
3,090

 
$
282

 
$
3,372

December 31, 2015
 
 
 
 
 
 
 
 
Registered investment companies
$
3,622

 
$
(46
)
 
$
3,576

In addition to the available-for-sale securities above, the Company has equity investments in non-public companies in which the Company acquired non-controlling interests and for which no readily determinable market value exists. These securities were accounted for in accordance with ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock ("ASC 323-10-25"). At June 30, 2016 and December 31, 2015, the carrying value of such securities was $16,887 and $8,487, respectively, and has been included in “Other assets” in the accompanying condensed consolidated balance sheets.
4. Fair Value Measurements:
Certain assets and liabilities of the Company are reported at fair value in the accompanying condensed consolidated balance sheets. To increase consistency and comparability of assets and liabilities recorded at fair value, ASC 820-10, Fair Value Measurements (“ASC 820-10”), established a three-level fair value hierarchy to prioritize the inputs to valuation techniques used to measure fair value. ASC 820-10 requires disclosures detailing the extent to which companies measure assets and liabilities at fair value, the methods and assumptions used to measure fair value and the effect of fair value measurements on earnings. In accordance with ASC 820-10, the Company applied the following fair value hierarchy: 
Level 1 -
 
Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded
   instruments.
 
 
 
Level 2 -
 
Assets and liabilities valued based on observable market data for similar instruments.
 
 
 
Level 3 -
 
Assets or liabilities for which significant valuation assumptions are not readily observable in the market;
   instruments valued based on the best available data, some of which are internally-developed, and considers
   risk premiums that market participants would require.
The fair values of cash and cash equivalents (other than money-market funds, which are recorded on a reported net asset value basis disclosed below), accounts receivable, securities accounted for under ASC 323-10-25, accounts payable and accrued

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liabilities, deferred revenues, and short-term debt approximate their carrying amounts because of the short-term nature of these instruments.
The following table summarizes fair value measurements by level for cash equivalents and registered investment companies that were measured at fair value on a recurring basis:
 
Quoted Prices
in Active Markets
for Identical
Assets (Level 1)
June 30, 2016
 
 
Registered investment companies (1)
$
3,372

December 31, 2015
 
 
Registered investment companies (1)
$
3,576

______________________
(1) Registered investment companies are classified as available-for-sale securities and are valued using quoted prices in active markets multiplied by the number of shares owned.
The Company has not elected to carry its long-term debt at fair value. The carrying value of the long-term debt represents amortized cost. The Company assesses the fair value of its long-term debt based on quoted market prices if available, and if not, an estimate of interest rates available to the Company for debt with similar features, the Company’s current credit rating and spreads applicable to the Company. The following table summarizes the carrying value and estimated fair value of the long-term debt as of June 30, 2016 and December 31, 2015, respectively: 
 
 
 
2016
 
2015
 
Fair Value Hierarchy
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial instrument not carried at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
Subordinated promissory note receivable
Level 2
 
$
83,078

 
$
82,900

 
$
—

 
$
—

Long-term debt excluding capitalized
leases
Level 2
 
$
2,275,767

 
$
2,462,613

 
$
2,274,144

 
$
2,328,134

5. Acquisitions:
2016 Acquisition
On April 14, 2016, the Company acquired 100 percent of the stock of Risk Intelligence Ireland ("RII"), a leading provider of fraud detection, compliance, risk control, and process automation services to the Irish insurance industry, for a net cash purchase price of $6,200. RII enhances the ability of the Company's Risk Assessment segment to serve the international insurance market. The allocations of the purchase price will be finalized once all information is obtained, but not to exceed one year from the acquisition date.
2015 Acquisitions
On May 19, 2015, the Company acquired 100 percent of the stock of Wood Mackenzie Limited ("Wood Mackenzie") for a net cash purchase price of $2,889,629, including $78,694 of an indemnity escrow, which the Company financed through a combination of debt and equity offerings, borrowings under the Company's credit facility, and cash on hand. Due to the fact that a portion of the purchase price was funded in pounds sterling and the remainder in U.S. dollars, the Company entered into a foreign currency hedging instrument to purchase pounds sterling. The Company recorded a gain on the hedge of $85,187 for the three and six months ended June 30, 2015. The proceeds from the gain were utilized to partially fund the acquisition of Wood Mackenzie. Wood Mackenzie is a global provider of data analytics and commercial intelligence for the energy, chemicals, metals and mining verticals. This acquisition advances the Company’s strategy to expand internationally and positions the Company in the global energy market. Wood Mackenzie is included in the energy and specialized markets vertical, formerly named the specialized markets vertical, of the Decision Analytics segment.

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As of June 30, 2016, the Company finalized the purchase accounting for the acquisition of Wood Mackenzie. The final purchase price allocations of the acquisition resulted in the following:

Wood Mackenzie
Cash and cash equivalents
$
35,398

Accounts receivable

80,307

Current assets

97,397

Fixed assets

71,929

Intangible assets

1,111,950

Goodwill and other

2,002,418

Other assets

1,993

Total assets acquired

3,401,392

Current liabilities

121,996

Deferred revenues

142,457

Deferred income taxes, net

204,289

Other liabilities

7,623

Total liabilities assumed

476,365

Net assets acquired

2,925,027

Cash acquired

(35,398
)
Net cash purchase price
$
2,889,629

The impact of finalization of the purchase accounting for Wood Mackenzie was not material to the condensed consolidated statements of operations for the three and six months ended June 30, 2016 and 2015.
The Company determined the fair values of the assets and liabilities of Wood Mackenzie with the assistance of valuations performed by third party specialists, discounted cash flow analysis and estimates made by management. The final amounts assigned to intangible assets by type for the Wood Mackenzie acquisition are summarized in the table below:
 
 
Weighted Average Useful Life
 
Total
Technology-related
 
7 years
 
$
104,663

Marketing-related
 
20 years
 
 
232,935

Customer-related
 
15 years
 
 
278,106

Database-related
 
20 years
 
 
496,246

Total intangible assets
 
 
 
$
1,111,950



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Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of Wood Mackenzie occurred at the beginning of 2015. The pro forma information for the three and six months ended June 30, 2015 presented below is based on estimates and assumptions, which the Company believes to be reasonable but not necessarily indicative of the condensed consolidated financial position or results of operations in future periods or the results that actually would have been realized had this acquisition been completed at the beginning of 2015. The unaudited pro forma information includes intangible asset amortization charges and incremental borrowing costs as a result of the acquisition, net of related tax, estimated using the Company’s effective tax rate for continuing operations for the three and six months ended June 30, 2015:

Three Months Ended 
 June 30, 2015
 
Six Months Ended 
 June 30, 2015
 
(unaudited)
Pro forma revenues
$
477,561


$
952,606

Pro forma income from continuing operations
$
140,378


$
255,129

Pro forma basic income from continuing operations per share
$
0.86


$
1.58

Pro forma diluted income from continuing operations per share
$
0.84


$
1.55

On November 6, 2015, the Company acquired 100 percent of the stock of Infield Systems Limited ("Infield"). Infield is a provider of business intelligence, analysis, and research to the oil, gas, and associated marine industries. Infield has become part of Wood Mackenzie and continues to provide services to enhance Wood Mackenzie's upstream and supply chain capabilities in the Decision Analytics segment. The Company paid a net cash purchase price of $13,804.
On November 20, 2015, the Company acquired 100 percent of the stock of The PCI Group ("PCI"). PCI is a consortium of five specialist companies that offer integrated data and subscriptions research in the chemicals, fibers, films, and plastics sectors. PCI has become part of Wood Mackenzie and continues to provide services to enhance Wood Mackenzie's chemicals capabilities in the Decision Analytics segment. The Company paid a net cash purchase price of $37,387.
The preliminary allocations of the purchase prices for the acquisitions of Infield and PCI are subject to revisions as additional information is obtained about the facts and circumstances that existed as of the acquisition dates. The revisions may have a significant impact on the condensed consolidated financial statements. The allocations of the purchase prices will be finalized once all information is obtained, but not to exceed one year from the acquisition dates. The primary areas of the purchase price allocations that are not yet finalized relate to fixed assets and operating leases, income and non-income taxes, deferred revenues, the valuation of intangible assets acquired, and residual goodwill.

The goodwill associated with the stock purchases of Wood Mackenzie, Infield and PCI is not deductible for tax purposes. For the six months ended June 30, 2015, the Company incurred transaction costs related to the Wood Mackenzie acquisition of $26,617 included within "Selling, general and administrative" expenses and $13,336 included within "Interest expense" in the accompanying condensed consolidated statements of operations.

Acquisition Escrows

Pursuant to the related acquisition agreements, the Company has funded various escrow accounts to satisfy pre-acquisition indemnity and tax claims arising subsequent to the acquisition date, as well as a portion of the contingent payments. At June 30, 2016 and December 31, 2015, the current portion of the escrows amounted to $4,856 and $38,656, and the noncurrent portion of the escrows amounted to $0 and $4,591, respectively. The current and noncurrent portions of the escrows have been included in “Other current assets” and "Other assets" in the accompanying condensed consolidated balance sheets, respectively.
6. Discontinued Operations:

On June 1, 2016, the Company sold 100 percent of the stock of its healthcare business, Verisk Health ("Verisk Health"), in exchange for a purchase price that consisted of $719,374 of cash consideration after a working capital adjustment of $626, a subordinated promissory note with a face value of $100,000 and an eight year maturity (the "Note"), and other contingent consideration (collectively, the "Sale"). The Company recognized income from the discontinued operation, net of tax, of $155,000 and $137,909 for the three and six months ended June 30, 2016, respectively. Results of operations for the healthcare business are reported as a discontinued operation for the three and six months ended June 30, 2016 and for all prior periods presented.

The Note has a stated interest rate of 9.0% per annum, increasing to 11.0% per annum at the earlier of specified refinancings or acquisitions, or the fourth anniversary of the closing of the Sale. Interest shall accrue from the closing date and on each anniversary of the Sale until the Note is paid in full on the unpaid principal amount of the Note outstanding at the interest rate in effect (computed

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on the basis of a 360-day year of twelve 30-day months). On each anniversary of the Sale, accrued interest shall be paid in kind by adding the amount of such accrued interest to the outstanding principal amount of the Note. The issuer of the Note may, at its option at any time prior to the maturity date, prepay any, or all, of the principal amount of the Note, plus accrued but unpaid interest as of the elected prepayment date, without any premium or penalty. There is a mandatory prepayment of the Note as a result of (i) the proceeds of a specified dividend recapitalization received by the issuer, (ii) the consummation of a change of control of the issuer, or (iii) the sale, transfer or other disposition by the parent of the issuer of more than 10.0% of the capital stock of the issuer. As of June 30, 2016, the Company had a receivable of $83,078 outstanding under the Note. The fair value of the Note is based on management estimates with the assistance of valuations performed by third party specialists, discounted cash flow analysis based on current market conditions and assumptions that the Note would be paid in full at maturity, including accrued interest, with no prepayment election.

The Company also received a 10.0% interest in the issuer's stock, the exercise value of which will be contingent on the parent of the issuer realizing a specified rate of return on its investment. As of June 30, 2016, the Company had an equity investment of $8,400 related to such interest accounted for in accordance with ASC 323-10-25. The value of the equity investment is based on management estimates with the assistance of valuations performed by third party specialists. Refer to Note 3. Investments for further discussion.

The following table summarizes the results from the discontinued operation for the three and six months ended June 30:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016

2015
 
2016

2015
Revenues from discontinued operations
$
43,173

 
$
69,051

 
$
112,323


$
144,155

Expenses:
 


 
 

 
 
 
 
 
 
Cost of revenues (exclusive of items shown
separately below)
 
31,399

 
 
40,557

 
 
75,878

 
 
90,989

Selling, general and administrative
 
26,448

 
 
8,956

 
 
36,559

 
 
17,548

Depreciation and amortization of fixed assets
 
70

 
 
5,951

 
 
7,056

 
 
11,005

Amortization of intangible assets
 
—

 
 
5,908

 
 
5,904

 
 
12,594

Total expenses
 
57,917

 
 
61,372

 
 
125,397

 
 
132,136

Operating income
 
(14,744
)
 
 
7,679

 
 
(13,074
)
 
 
12,019

Other income (expense):
 


 
 

 
 
 
 
 
 
Gain on sale
 
269,385

 
 
—

 
 
269,385

 
 
—

Investment income and others, net
 
104

 
 
38

 
 
214

 
 
2

Total other income
 
269,489

 
 
38

 
 
269,599

 
 
2

Income from discontinued operations before
income taxes
 
254,745

 

7,717

 

256,525



12,021

Provision for income taxes (including tax on
gain of $118,019)
 
(99,745
)
 
 
(3,314
)
 

(118,616
)


(5,305
)
Income from discontinued
operations, net of tax
$
155,000

 
$
4,403

 
$
137,909


$
6,716





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The following table summarizes the assets held-for-sale and the liabilities held-for-sale as of December 31, 2015:

December 31, 2015
Accounts receivable, net of allowance for doubtful accounts of $2,428
$
69,152

Prepaid expenses

6,615

Income tax receivable

257

Other current assets

39

Total current assets held-for-sale
$
76,063



 
Fixed assets, net
$
67,857

Intangible assets, net

131,662

Goodwill

381,800

Other assets

577

Total noncurrent assets held-for-sale
$
581,896



 
Accounts payable and accrued liabilities
$
23,552

Deferred revenues

16,118

Total current liabilities held-for-sale
$
39,670



 
Deferred income taxes, net
$
67,255

Other liabilities

1,738

Total noncurrent liabilities held-for-sale
$
68,993


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

Six Months Ended June 30,
 
2016

2015
Net cash provided by operating activities
$
21,443


$
54,017

Net cash used in investing activities
$
(10,649
)

$
(10,800
)

The Company has also entered into a transitional service agreement ("TSA") with the buyer of Verisk Health. Under the TSA, the Company provides various services for terms generally up to 12 months and receives a level of cost reimbursement from the buyer.
7. Goodwill and Intangible Assets:
The following is a summary of the change in goodwill from December 31, 2015 through June 30, 2016, both in total and as allocated to the Company’s operating segments:
 
Risk
Assessment
 
Decision
Analytics
 
Total
Goodwill at December 31, 2015 (1)
$
55,555

 
$
2,697,471

 
$
2,753,026

Current year acquisition
 
4,639

 
 
—

 
 
4,639

Purchase accounting reclassification
 
—

 
 
8,641

 
 
8,641

Foreign currency translation
 
(66
)
 
 
(136,299
)
 
 
(136,365
)
Goodwill at June 30, 2016 (1)
$
60,128

 
$
2,569,813

 
$
2,629,941

______________________
(1)
The balances at December 31, 2015 are net of the reclassification of goodwill to noncurrent assets held-for-sale of $381,800. Refer to Note 6. Discontinued Operations for further discussion.
Goodwill and intangible assets with indefinite lives are subject to impairment testing annually as of June 30, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Goodwill impairment testing compares the carrying value of each reporting unit to its fair value. If the fair value of the reporting unit exceeds the carrying value of the net assets, including goodwill assigned to that reporting unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, then the Company will determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an

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impairment loss is recorded for the difference between the carrying amount and the implied fair value of goodwill. The Company completed the required annual impairment test as of June 30, 2016, and concluded that there was no impairment of goodwill.

The Company’s intangible assets and related accumulated amortization consisted of the following: 
 
Weighted
Average
Useful Life
 
Cost
 
Accumulated
Amortization
 
Net
June 30, 2016
 
 
 
 
 
 
 
 
 
 
Technology-based
7 years
 
$
318,501

 
$
(186,321
)
 
$
132,180

Marketing-related
18 years
 
 
238,075

 
 
(42,932
)
 
 
195,143

Contract-based
6 years
 
 
4,996

 
 
(4,996
)
 
 
—

Customer-related
14 years
 
 
488,605

 
 
(113,093
)
 
 
375,512

Database-related
20 years
 
 
425,488

 
 
(24,061
)
 
 
401,427

Total intangible assets
 
 
$
1,475,665

 
$
(371,403
)
 
$
1,104,262

December 31, 2015
 
 
 
 
 
 
 
 
 
 
Technology-based
7 years
 
$
327,767

 
$
(175,746
)
 
$
152,021

Marketing-related
18 years
 
 
259,158

 
 
(37,798
)
 
 
221,360

Contract-based
6 years
 
 
4,996

 
 
(4,996
)
 
 
—

Customer-related
14 years
 
 
512,632

 
 
(96,549
)
 
 
416,083

Database-related
20 years
 
 
470,367

 
 
(14,748
)
 
 
455,619

Total intangible assets
 
 
$
1,574,920

 
$
(329,837
)
 
$
1,245,083

Amortization expense related to intangible assets for the three months ended June 30, 2016 and 2015 was $23,806 and $22,904, respectively. Amortization expense related to intangible assets for the six months ended June 30, 2016 and 2015 was $47,677 and $30,359, respectively. Estimated amortization expense for the remainder of 2016 and the years through 2021 and thereafter for intangible assets subject to amortization is as follows:
Year
Amount
2016
$
45,410

2017
 
90,393

2018
 
90,260

2019
 
89,727

2020
 
89,047

2021 and thereafter
 
699,425

 
$
1,104,262

8. Income Taxes:
The Company’s effective tax rate for the three and six months ended June 30, 2016 was 33.49% and 32.59% , respectively, compared to the effective tax rate for the three and six months ended June 30, 2015 of 17.79% and 26.75%. The effective tax rate for the three and six months ended June 30, 2016 is higher than the June 30, 2015 effective tax rate primarily due to non-recurring tax benefits related to the Wood Mackenzie acquisition in 2015. The difference between statutory tax rates and the Company’s effective tax rate is primarily attributable to state taxes and tax benefits related to the Wood Mackenzie acquisition.

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9. Debt:
The following table presents short-term and long-term debt by issuance as of June 30, 2016 and December 31, 2015: 
 
Issuance
Date
 
Maturity
Date
 
2016
 
2015
Short-term debt and current portion of long-term debt:
 
 
 
 
 
 
 
 
 
Syndicated revolving credit facility
Various
 
Various
 
$
—

 
$
870,000

Capital lease obligations
Various
 
Various
 
 
2,256

 
 
4,811

Short-term debt and current portion of long-term
debt
 
 
 
 
 
2,256

 
 
874,811

Long-term debt:
 
 
 
 
 
 
 
 
 
Senior notes:
 
 
 
 
 
 
 
 
 
4.000% senior notes, less unamortized discount
and debt issuance costs of $10,999 and
$11,619, respectively
5/15/2015

6/15/2025
 
 
889,001

 
 
888,381

5.500% senior notes, less unamortized discount
and debt issuance costs of $5,138 and $5,226,
respectively
5/15/2015

6/15/2045
 
 
344,862

 
 
344,774

4.125% senior notes, less unamortized discount
and debt issuance costs of $3,809 and $4,117,
respectively
9/12/2012
 
9/12/2022
 
 
346,191

 
 
345,883

4.875% senior notes, less unamortized discount
and debt issuance costs of $1,670 and $2,002,
respectively
12/8/2011
 
1/15/2019
 
 
248,330

 
 
247,998

5.800% senior notes, less unamortized discount
and debt issuance costs of $2,617 and $2,892,
respectively
4/6/2011

5/1/2021
 
 
447,383

 
 
447,108

Capital lease obligations
Various
 
Various
 
 
1,973

 
 
2,317

Syndicated revolving credit facility debt issuance
costs
Various

Various
 
 
(4,708
)
 
 
(5,557
)
Long-term debt
 
 
 
 
 
2,273,032

 
 
2,270,904

Total debt
 
 
 
 
$
2,275,288

 
$
3,145,715

As of June 30, 2016 and December 31, 2015, the Company had senior notes with an aggregate principal amount of $2,300,000 outstanding and was in compliance with their financial debt covenants.
As of June 30, 2016, the Company had a borrowing capacity of $1,500,000 under the committed senior unsecured Syndicated Revolving Credit Facility (the "Credit Facility") with Bank of America N.A., JP Morgan Chase, N.A., Sun Trust Bank, Wells Fargo Bank N.A., Citizens Bank, N.A., Morgan Stanley Senior Funding, Inc., HSBC Bank USA, N.A., Royal Bank of Canada, BNP Paribas, TD Bank, N.A., The Northern Trust Company, and Capital One N.A. The Credit Facility may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions and the share repurchase program (the "Repurchase Program"). The Company was in compliance with all financial debt covenants under the Credit Facility as of June 30, 2016. As of June 30, 2016 and December 31, 2015, the Company had outstanding borrowings under the Credit Facility of $0 and $870,000, respectively. During the six months ended June 30, 2016, the Company utilized a portion of the proceeds from the sale of Verisk Health and cash flows from operations to repay the outstanding borrowings under the Credit Facility. On May 26, 2016, the Company entered into the Second Amendment to the Credit Facility, which reduced the borrowing capacity from $1,750,000 to $1,500,000 and amended the pricing grid.
10. Stockholders’ Equity:
The Company has 2,000,000,000 shares of authorized common stock. The common shares have rights to any dividend declared by the board of directors (the "Board"), subject to any preferential or other rights of any outstanding preferred stock, and voting rights to elect all twelve members of the Board.
The Company has 80,000,000 shares of authorized preferred stock, par value $0.001 per share. The preferred shares have preferential rights over the common shares with respect to dividends and net distribution upon liquidation. The Company did not issue any preferred shares as of June 30, 2016.


15
Table of Contents

Share Repurchase Program

Since the introduction of the Repurchase Program as a feature of the Company's capital management strategies in 2010, the Company has authorized repurchases of up to $2,300,000 of its common stock and has repurchased shares with an aggregate value of $1,947,011. The Company repurchased 1,663,095 shares of common stock with an aggregate value of $116,363 during the six months ended June 30, 2016. As of June 30, 2016, the Company had $352,989 available to repurchase shares. The Company has no obligation to repurchase stock under this program and intends to use this authorization as a means of offsetting dilution from the issuance of shares under the KSOP, the Verisk 2013 Equity Incentive Plan (the “2013 Incentive Plan”), the Verisk 2009 Equity Incentive Plan (the “2009 Incentive Plan”), and the ISO 1996 Incentive Plan (the “1996 Incentive Plan”), while providing flexibility to repurchase additional shares if warranted. This authorization has no expiration date and may be increased, reduced, suspended, or terminated at any time. Shares that are repurchased under the Repurchase Program will be recorded as treasury stock and will be available for future issuance.

Treasury Stock

As of June 30, 2016, the Company’s treasury stock consisted of 375,283,889 shares of common stock. During the six months ended June 30, 2016, the Company reissued 957,263 shares of common stock from the treasury shares at a weighted average price of $7.13 per share.

Earnings Per Share (“EPS”)

Basic EPS is computed by dividing income from continuing operations, income from discontinued operations and net income, respectively, by the weighted average number of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding, using the treasury stock method, if the dilutive potential common shares, including stock options, nonvested restricted stock, and nonvested restricted stock units, had been issued.
The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the three and six months ended June 30, 2016 and 2015:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Numerator used in basic and diluted EPS:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
106,736

 
$
158,917

 
$
216,466

 
$
255,290

Income from discontinued operations (Note 6)
 
155,000

 
 
4,403

 
 
137,909

 
 
6,716

Net income
$
261,736

 
$
163,320

 
$
354,375

 
$
262,006

Denominator:
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares used
in basic EPS
 
168,296,318

 
 
164,141,804

 
 
168,375,034

 
 
161,114,861

Effect of dilutive shares:
 
 
 
 

 
 
 
 
 

Potential common shares issuable from stock
options and stock awards
 
2,922,464

 
 
3,444,296

 
 
2,974,799

 
 
3,418,795

Weighted average number of common shares
and dilutive potential common shares used
in diluted EPS
 
171,218,782

 
 
167,586,100

 
 
171,349,833

 
 
164,533,656

The potential shares of common stock that were excluded from diluted EPS were 2,757,489 and 1,784,103 for the three months ended June 30, 2016 and 2015, and 2,215,987 and 892,981 for the six months ended June 30, 2016 and 2015, respectively, because the effect of including these potential shares was anti-dilutive.

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Table of Contents

Accumulated Other Comprehensive Losses
The following is a summary of accumulated other comprehensive losses as of June 30, 2016 and December 31, 2015:
 
2016

2015
Foreign currency translation adjustment
$
(382,349
)
 
$
(165,828
)
Unrealized holding gains on available-for-sale securities, net of tax
 
206

 
 
3

Pension and postretirement adjustment, net of tax
 
(75,000
)
 
 
(76,227
)
Accumulated other comprehensive losses
$
(457,143
)
 
$
(242,052
)

The before tax and after tax amounts of other comprehensive income for the three and six months ended June 30, 2016 and 2015 are summarized below:

Before Tax

Tax Benefit 
(Expense)

After Tax
For the Three Months Ended June 30, 2016








Foreign currency translation adjustment
$
(141,178
)

$
—


$
(141,178
)
Unrealized holding gain on available-for-sale securities before
reclassifications

(315
)


120



(195
)
Amount reclassified from accumulated other comprehensive losses
(1)

464



(177
)


287

Unrealized holding loss on available-for-sale securities

149



(57
)


92

Pension and postretirement adjustment before reclassifications

1,807



(544
)


1,263

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

(883
)


340



(543
)
Pension and postretirement adjustment

924



(204
)


720

Total other comprehensive loss
$
(140,105
)

$
(261
)

$
(140,366
)
For the Three Months Ended June 30, 2015








Foreign currency translation adjustment
$
(4,209
)

$
—


$
(4,209
)
Unrealized holding gain on available-for-sale securities before
reclassifications

(8
)


3



(5
)
Amount reclassified from accumulated other comprehensive losses
(1)

19



(7
)


12

Unrealized holding loss on available-for-sale securities

11



(4
)


7

Pension and postretirement adjustment before reclassifications

1,460



(623
)


837

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

(730
)


280



(450
)
Pension and postretirement adjustment

730



(343
)


387

Total other comprehensive loss
$
(3,468
)

$
(347
)

$
(3,815
)

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Table of Contents


 
Before Tax
 
 
Tax Benefit 
(Expense)
 
 
After Tax
For the Six Months Ended June 30, 2016
 


 


 

Foreign currency translation adjustment
$
(216,521
)

$
—


$
(216,521
)
Unrealized holding loss on available-for-sale securities before
reclassifications
 
54


 
(21
)

 
33

Amount reclassified from accumulated other comprehensive losses
(1)
 
274


 
(104
)

 
170

Unrealized holding loss on available-for-sale securities
 
328


 
(125
)

 
203

Pension and postretirement adjustment before reclassifications
 
3,532


 
(1,217
)

 
2,315

Amortization of net actuarial loss and prior service benefit
reclassified from accumulated other comprehensive losses (2)
 
(1,766
)

 
678


 
(1,088
)
Pension and postretirement adjustment
 
1,766


 
(539
)

 
1,227

Total other comprehensive loss
$
(214,427
)

$
(664
)

$
(215,091
)
For the Six Months Ended June 30, 2015
 


 


 

Foreign currency translation adjustment
$
(4,429
)

$
—


$
(4,429
)
Unrealized holding loss on available-for-sale securities before
reclassifications
 
97


 
(37
)

 
60

Amount reclassified from accumulated other comprehensive losses
(1)
 
14


 
(5
)

 
9

Unrealized holding loss on available-for-sale securities
 
111


 
(42
)

 
69

Pension and postretirement adjustment before reclassifications
 
3,288


 
(1,274
)

 
2,014

Amortization of net actuarial loss and prior service benefit
reclassified from accumulated other comprehensive losses (2)
 
(1,644
)

 
631


 
(1,013
)
Pension and postretirement adjustment
 
1,644


 
(643
)

 
1,001

Total other comprehensive loss
$
(2,674
)

$
(685
)

$
(3,359
)
_______________
(1)
This accumulated other comprehensive loss component, before tax, is included under “Investment income and others, net” in the accompanying condensed consolidated statements of operations.
(2)
These accumulated other comprehensive loss components, before tax, are included under “Cost of revenues” and “Selling, general and administrative” in the accompanying condensed consolidated statements of operations. These components are also included in the computation of net periodic (benefit) cost (see Note 12 Pension and Postretirement Benefits for additional details).
11. Equity Compensation Plans:
All of the Company’s outstanding stock options and restricted stock awards are covered under the 2013 Incentive Plan, 2009 Incentive Plan or the 1996 Incentive Plan. Awards under the 2013 Incentive Plan may include one or more of the following types: (i) stock options (both nonqualified and incentive stock options), (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units, (v) performance awards, (vi) other share based awards, and (vii) cash. Employees, directors and consultants are eligible for awards under the 2013 Incentive Plan. The Company issued common stock under these plans from the Company’s treasury shares. As of June 30, 2016, there were 8,678,784 shares of common stock reserved and available for future issuance under the 2013 Incentive Plan. Cash received from stock option exercises for the six months ended June 30, 2016 and 2015 was $16,326 and $18,103, respectively.

18
Table of Contents

The Company granted equity awards to key employees of the Company. The nonqualified stock options have an exercise price equal to the closing price of the Company’s common stock on the grant date, with a ten-year contractual term. The fair value of the restricted stock is determined using the closing price of the Company’s common stock on the grant date. The restricted stock is not assignable or transferable until it becomes vested. The Company recognizes the expense of the equity awards ratably over the vesting period. A summary of the equity awards granted for the six months ended June 30, 2016 is presented below.
Grant Date
 
Service Vesting Period
 
Stock Options
 
Restricted Stock
 
Common Stock
April 1, 2016
 
Four-year graded vesting
 
1,219,096

 
244,244

 
—

April 1, 2016
 
Not applicable
 
—

 
—

 
567

April 4, 2016

Four-year graded vesting
 
2,212

 
415

 
—

April 18, 2016
 
Four-year graded vesting
 
1,266

 
239

 
—

April 25, 2016
 
Three-year graded vesting
 
3,344

 
946

 
—

May 2, 2016
 
Four-year graded vesting
 
12,931

 
2,438

 
—

May 3, 2016

Four-year graded vesting
 
3,379

 
632

 
—

June 6, 2016

Four-year graded vesting
 
4,029

 
751

 
—

 
 
 
 
1,246,257

 
249,665

 
567


On July 1, 2016, the Company granted 2,471 shares of common stock, 26,417 nonqualified stock options that were immediately vested, 51,381 nonqualified stock options with a one-year service period, and 10,968 deferred stock units to the directors of the Company.  The nonqualified stock options have an exercise price equal to the closing price of the Company’s common stock at the grant date and a ten-year contractual term.
The fair value of the stock options granted for the six months ended June 30, 2016 and 2015 was estimated using a Black-Scholes valuation model that uses the weighted average assumptions noted in the following table:

2016
 
2015
Option pricing model
 
Black-Scholes


 
Black-Scholes

Expected volatility
 
20.29
%

 
20.25
%
Risk-free interest rate
 
1.15
%

 
1.51
%
Expected term in years
 
4.5


 
4.6

Dividend yield
 
—
%

 
—
%
Weighted average grant date fair value per stock option
$
15.33


$
12.91

The expected term for the stock options granted was estimated based on studies of historical experience and projected exercise behavior. However, for certain awards granted, for which no historical exercise pattern exists, the expected term was estimated using the simplified method. The risk-free interest rate is based on the yield of U.S. Treasury zero coupon securities with a maturity equal to the expected term of the equity award. The volatility factor is calculated using historical daily closing prices over the most recent period that is commensurate with the expected term of the stock option award. The volatility factor for stock options granted in 2016 was based on the volatility of the Company's stock. The expected dividend yield was based on the Company’s expected annual dividend rate on the date of grant.

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Table of Contents

A summary of the stock options outstanding and exercisable as of December 31, 2015 and June 30, 2016 and changes during the interim period are presented below:
 
Number
of Options
 
Weighted
Average
Exercise Price
 
Aggregate
Intrinsic
Value
Outstanding at December 31, 2015
9,117,733

 
$
40.17

 
$
334,691

Granted
1,246,257

 
$
80.15

 
 

Exercised
(655,448
)
 
$
30.93

 
$
30,973

Cancelled or expired
(137,177
)
 
$
71.53

 
 


Outstanding at June 30, 2016
9,571,365

 
$
45.55

 
$
340,039

Exercisable at June 30, 2016
6,765,200

 
$
34.17

 
$
317,357

Exercisable at December 31, 2015
6,541,229

 
$
29.81

 
$
307,924

Intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the quoted price of Verisk common stock as of the reporting date. In accordance with ASC 718, Stock Compensation ("ASC 718"), excess tax benefit from exercised stock options and restricted stock lapsed is recorded as an increase to additional paid-in capital and a corresponding reduction in income taxes payable. This tax benefit is calculated as the excess of the intrinsic value of options exercised and restricted stock lapsed in excess of compensation recognized for financial reporting purposes. The amount of the tax benefit that has been realized, as a result of those excess tax benefits, is presented as a financing cash inflow within the accompanying condensed consolidated statements of cash flows. For the six months ended June 30, 2016 and 2015, the Company recorded excess tax benefits of $11,657 and $7,848, respectively. The Company realized $6,570 and $8,419 of tax benefit within the Company’s quarterly tax payments through June 30, 2016 and 2015, respectively. Stock based compensation expense for the six months ended June 30, 2016 and 2015 was $16,468 and $19,047, respectively.
The Company estimates expected forfeitures of equity awards at the date of grant and recognizes compensation expense only for those awards that the Company expects to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. Changes in the forfeiture assumptions may impact the total amount of expense ultimately recognized over the requisite service period and may impact the timing of expense recognized over the requisite service period.
A summary of the status of the restricted stock awarded under the 2013 Incentive Plan as of December 31, 2015 and June 30, 2016 and changes during the interim period are presented below: 
 
Number
of Shares
 
Weighted Average Grant
Date Fair Value Per Share
Outstanding at December 31, 2015
533,768

 
$
66.25

Granted
249,665

 
$
80.15

Vested
(212,123
)
 
$
63.80

Forfeited
(26,145
)
 
$
71.24

Outstanding at June 30, 2016
545,165

 
$
72.77

As of June 30, 2016, there was $75,229 of total unrecognized compensation costs, exclusive of the impact of vesting upon retirement eligibility, related to nonvested share-based compensation arrangements granted under the 2009 and 2013 Incentive Plans. That cost is expected to be recognized over a weighted average period of 2.98 years. As of June 30, 2016, there were 2,806,165 and 544,885 nonvested stock options and restricted stock, respectively, of which 2,353,193 and 457,990 are expected to vest. The total grant date fair value of options vested during the six months ended June 30, 2016 and 2015 was $6,807 and $10,191, respectively. The total grant date fair value of restricted stock vested during the six months ended June 30, 2016 and 2015 was $6,889 and $9,727, respectively.
The Company’s employee stock purchase plan (“ESPP”) offers eligible employees the opportunity to purchase shares of the Company’s common stock at a discount of its fair market value at the time of purchase. During the six months ended June 30, 2016 and 2015, the Company issued 16,390 and 11,404 shares of common stock at a weighted discounted price of $76.41 and $68.51 for the ESPP, respectively.
12. Pension and Postretirement Benefits:
The Company maintained a frozen qualified defined benefit pension plan for certain of its employees through membership in the Pension Plan for Insurance Organizations (the “Pension Plan”), a multiple-employer trust. The Company has applied a cash balance formula to determine future benefits. Under the cash balance formula, each participant has an account, which is credited

20
Table of Contents

annually based on the interest earned on the previous year-end cash balance. The Company also has a frozen non-qualified supplemental cash balance plan (“SERP”) for certain employees. The SERP is funded from the general assets of the Company.
The Company also provides certain healthcare and life insurance benefits to certain qualifying active and retired employees. The Postretirement Health and Life Insurance Plan (the “Postretirement Plan”), which has been frozen, is contributory, requiring participants to pay a stated percentage of the premium for coverage. The components of net periodic (benefit) cost for the three and six months ended June 30, are summarized below: 
 
Pension Plan and SERP

Postretirement Plan

For the Three Months Ended June 30,

2016

2015

2016

2015
Interest cost
$
4,781

 
$
4,487

 
$
120

 
$
134

Expected return on plan assets
 
(7,952
)
 
 
(8,657
)
 
 
(124
)
 
 
(142
)
Amortization of prior service credit
 
—

 
 
—

 
 
(36
)
 
 
(38
)
Amortization of net actuarial loss
 
794

 
 
612

 
 
125

 
 
156

Net periodic (benefit) cost
$
(2,377
)
 
$
(3,558
)
 
$
85

 
$
110

Employer contributions, net
$
218

 
$
278

 
$
144

 
$
139


For the Six Months Ended June 30,

2016

2015

2016

2015
Interest cost
$
9,562


$
9,044


$
240


$
268

Expected return on plan assets
 
(15,904
)

 
(17,216
)

 
(248
)

 
(285
)
Amortization of prior service credit
 
—


 
—


 
(72
)

 
(75
)
Amortization of net actuarial loss
 
1,588


 
1,407


 
250


 
312

Net periodic (benefit) cost
$
(4,754
)

$
(6,765
)

$
170


$
220

Employer contributions, net
$
543


$
495


$
105


$
91

The expected contributions to the Pension Plan, SERP and Postretirement Plan for the year ending December 31, 2016 are consistent with the amounts previously disclosed as of December 31, 2015.
13. Segment Reporting:
ASC 280-10, Disclosures About Segments of an Enterprise and Related Information (“ASC 280-10”), establishes standards for reporting information about operating segments. ASC 280-10 requires that a public business enterprise reports financial and descriptive information about its operating segments.
Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s President and Chief Executive Officer is identified as the CODM as defined by ASC 280-10. Consistent with the internal management of the Company’s business operations based on service offerings, the Company is organized into the following two operating segments, which are also the Company’s reportable segments:
Decision Analytics: The Company develops solutions that its customers use to analyze the key processes in managing risk: ‘prediction of loss’, ‘detection and prevention of fraud’ and ‘quantification of loss’. The Company’s combination of algorithms and analytic methods incorporates its proprietary data to generate solutions. In most cases, the Company’s customers integrate the solutions into their models, formulas or underwriting criteria in order to predict potential loss events, such as hurricanes and earthquakes claims. The Company develops catastrophe and extreme event models and offers solutions covering natural and man-made risks, including acts of terrorism. The Company also develops solutions that allow customers to quantify costs after loss events occur. Fraud solutions include data on claim histories, analysis of claims to find emerging patterns of fraud, and identification of suspicious claims in the insurance sectors. The Company offers services and a suite of solutions to a client base that includes credit and debit card issuers, retail bank and other consumer financial services providers, payment processors, insurance companies and other industry stakeholders. The Company further leverages predictive models and proprietary data to advise customers to make asset investment and portfolio allocation decisions in the global energy market. The Company discloses revenue within this segment based on the industry vertical groupings of insurance, financial services, and energy and specialized markets. On June 1, 2016, the Company sold its healthcare business, Verisk Health, which was part of the Decision Analytics segment. Results of operations for the healthcare business are reported as a discontinued operation for the three and six months ended June 30, 2016 and 2015. Refer to Note 6 for more information.

21
Table of Contents

Risk Assessment: The Company is the leading provider of statistical, actuarial and underwriting data for the U.S. P&C insurance industry. The Company’s databases include cleansed and standardized records describing premiums and losses in insurance transactions, casualty and property risk attributes for commercial buildings and their occupants and fire suppression capabilities of municipalities. The Company uses this data to create policy language and proprietary risk classifications that are industry standards and to generate prospective loss cost estimates used to price insurance policies.
The two aforementioned operating segments represent the segments for which discrete financial information is available and upon which operating results are regularly evaluated by the CODM in order to assess performance and allocate resources. The Company uses EBITDA as the profitability measure for making decisions regarding ongoing operations. EBITDA is net income before interest expense, provision for income taxes, depreciation and amortization of fixed and intangible assets. EBITDA is the measure of operating results used to assess corporate performance and optimal utilization of debt and acquisitions. Operating expenses consist of direct and indirect costs principally related to personnel, facilities, software license fees, consulting, travel, and third-party information services. Indirect costs are generally allocated to the segments using fixed rates established by management based upon estimated expense contribution levels and other assumptions that management considers reasonable. The Company does not allocate interest expense and provision for income taxes, since these items are not considered in evaluating the segment’s overall operating performance. In addition, the CODM does not evaluate the financial performance of each segment based on assets. On a geographic basis, revenues from countries outside of the U.S. accounted for 22.3% and 12.7% of the Company's consolidated revenues for the six months ended June 30, 2016 and 2015, respectively. No individual country outside of the U.S. accounted for 5.0% or more of the Company's consolidated revenues for the six months ended June 30, 2016 or 2015.
The following table provides the Company’s revenue and EBITDA by reportable segment for the three and six months ended June 30, 2016 and 2015, and the reconciliation of EBITDA to operating income as shown in the accompanying condensed consolidated statements of operations:
 
 
For the Three Months Ended

For the Three Months Ended

June 30, 2016

June 30, 2015
 
Decision
Analytics

Risk
Assessment

Total

Decision
Analytics

Risk
Assessment

Total
Revenues
$
317,179


$
181,117


$
498,296


$
256,869


$
171,730


$
428,599

Expenses:





















Cost of revenues (exclusive of items
shown separately below)

(123,443
)


(55,023
)


(178,466
)


(104,225
)


(50,414
)


(154,639
)
Selling, general and administrative

(54,005
)


(21,552
)


(75,557
)


(62,442
)


(19,894
)


(82,336
)
Investment income and others, net

880



(34
)


846



(380
)


121



(259
)
Gain on derivative instruments

—



—



—



85,187



—



85,187

EBITDA from discontinued operations
(including the gain on sale in 2016)
 
254,814

 
 
—

 
 
254,814

 
 
19,576

 
 
—

 
 
19,576

EBITDA

395,425



104,508



499,933



194,585



101,543



296,128

Depreciation and amortization of fixed
assets

(22,492
)


(6,896
)


(29,388
)


(16,326
)


(6,351
)


(22,677
)
Amortization of intangible assets

(23,647
)


(159
)


(23,806
)


(22,815
)


(89
)


(22,904
)
Less: Investment income and others, net

(880
)


34



(846
)


380



(121
)


259

Gain on derivative instruments

—



—



—



(85,187
)


—



(85,187
)
EBITDA from discontinued
operations (including the gain on
sale in 2016)
 
(254,814
)
 
 
—

 
 
(254,814
)
 
 
(19,576
)
 
 
—

 
 
(19,576
)
Operating income
$
93,592


$
97,487



191,079


$
51,061


$
94,982



146,043

Investment income and others, net







846









(259
)
Gain on derivative instruments
 
 
 
 
 
 
 
—

 
 
 
 
 
 
 
 
85,187

Interest expense







(31,435
)








(37,662
)
Income from continuing operations
before income taxes






$
160,490








$
193,309



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Table of Contents

 
For the Six Months Ended
 
For the Six Months Ended

June 30, 2016
 
June 30, 2015
 
Decision
Analytics

Risk
Assessment

Total

Decision
Analytics

Risk
Assessment

Total
Revenues
$
630,124


$
360,873


$
990,997


$
470,220


$
342,672


$
812,892

Expenses:
 



 



 


 



 



 

Cost of revenues (exclusive of items
shown separately below)
 
(245,032
)

 
(106,711
)

 
(351,743
)

 
(187,037
)

 
(101,386
)

 
(288,423
)
Selling, general and administrative
 
(106,389
)

 
(40,205
)

 
(146,594
)

 
(93,087
)

 
(38,963
)

 
(132,050
)
Investment income and others, net
 
992


 
(102
)

 
890


 
(949
)

 
188


 
(761
)
Gain on derivative instruments
 
—


 
—


 
—


 
85,187


 
—


 
85,187

EBITDA from discontinued operations
(including the gain on sale in 2016)
 
269,485


 
—


 
269,485


 
35,620


 
—


 
35,620

EBITDA
 
549,180


 
213,855


 
763,035


 
309,954


 
202,511


 
512,465

Depreciation and amortization of fixed
assets
 
(47,393
)

 
(13,882
)

 
(61,275
)

 
(29,752
)

 
(12,313
)

 
(42,065
)
Amortization of intangible assets
 
(47,430
)

 
(247
)

 
(47,677
)

 
(30,182
)

 
(177
)

 
(30,359
)
Less: Investment income and others, net
 
(992
)

 
102


 
(890
)

 
949


 
(188
)

 
761

Gain on derivative instruments
 
—


 
—


 
—


 
(85,187
)

 
—


 
(85,187
)
EBITDA from discontinued
operations (including the gain on
sale in 2016)
 
(269,485
)

 
—


 
(269,485
)

 
(35,620
)

 
—


 
(35,620
)
Operating income
$
183,880


$
199,828


 
383,708


$
130,162


$
189,833


 
319,995

Investment income and others, net
 


 


 
890


 


 


 
(761
)
Gain on derivative instruments
 


 


 
—


 


 


 
85,187

Interest expense
 


 


 
(63,467
)

 


 


 
(55,924
)
Income from continuing operations
before income taxes
 


 


$
321,131


 


 


$
348,497


Operating segment revenues by type of service is provided below:
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2016

2015

2016

2015
Decision Analytics:
 
 
 
 
 
 
 
 
 
 
 
Insurance
$
175,476

 
$
165,276

 
$
347,021

 
$
319,009

Financial services
 
30,585

 
 
26,380

 
 
59,059

 
 
61,550

Energy and specialized markets
 
111,118

 
 
65,213

 
 
224,044

 
 
89,661

Total Decision Analytics
 
317,179

 
 
256,869

 
 
630,124

 
 
470,220

Risk Assessment:
 
 
 
 
 
 
 
 
 
 
 
Industry-standard insurance programs
 
138,599

 
 
130,776

 
 
276,026

 
 
261,372

Property-specific rating and underwriting information
 
42,518

 
 
40,954

 
 
84,847

 
 
81,300

Total Risk Assessment
 
181,117

 
 
171,730

 
 
360,873

 
 
342,672

Total revenues
$
498,296

 
$
428,599

 
$
990,997

 
$
812,892


Long-lived assets by country are provided below:

June 30, 2016
 
December 31, 2015
Long-lived assets:
 

 
 

United States of America
$
1,590,865

 
$
2,178,142

United Kingdom
 
2,345,761

 
 
2,799,392

Other countries
 
276,147

 
 
11,549

Total long-lived assets
$
4,212,773

 
$
4,989,083


23
Table of Contents

14. Related Parties:
The Company considers its stockholders that own more than 5.0% of the outstanding common stock to be related parties as defined within ASC 850, Related Party Disclosures. As of June 30, 2016 and December 31, 2015, the Company had no transactions with related parties owning more than 5.0% of its common stock, except for transactions with the KSOP as disclosed in Note 16 Compensation Plans of the Company's consolidated financial statements included in the 2015 Form 10-K filing.
15. Commitments and Contingencies:
The Company is a party to legal proceedings with respect to a variety of matters in the ordinary course of business, including the matters described below. With respect to ongoing matters, the Company is unable, at the present time, to determine the ultimate resolution of or provide a reasonable estimate of the range of possible loss attributable to these matters or the impact they may have on the Company’s results of operations, financial position or cash flows. This is primarily because the matters are generally in early stages and discovery has either not commenced or been completed. Although the Company believes it has strong defenses and intends to vigorously defend these matters, the Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations, financial position or cash flows.
Intellicorp Records, Inc. Litigation
On September 9, 2015, the Company was served with a nationwide putative class action complaint filed in the Court of Common Pleas, Cuyahoga County in Ohio naming the Company’s subsidiary Intellicorp Records, Inc. (“Intellicorp.”) titled Sherri Legrand v. Intellicorp Records, Inc. and The Cato Corporation et al. Defendants removed the case to the United States District Court for the Northern District of Ohio on October 8, 2015. Plaintiffs filed their First Amended Class Action Complaint on November 5, 2015 (“Amended Complaint”), which like the prior complaint claims violations of the Fair Credit Reporting Act ("FCRA") and alleges two putative class claims against Intellicorp, namely (i) a  section 1681k(a)  claim on behalf of all individuals  who were the subjects of  consumer reports furnished  by Intellicorp, which contained  public record  information in the “Government Sanctions” section of the report on or after September 4, 2013 and continuing through the date the class list is prepared, and (ii) a section 1681e(b) claim  on behalf of all individuals  who were the subjects of  consumer reports furnished  by Intellicorp, which contained  public record  information in the “Government Sanctions” section of the report where the address or social security number of the subject of the report do not match the social security number or address contained in the government database on or after September 4, 2013 and continuing through the date the class list is prepared. Count I of the Amended Complaint alleges that defendant Cato violated the FCRA by procuring  consumer reports on the plaintiff and other class members without making the stand-alone disclosure required by FCRA section 1681b(b)(2)(A)(i). Counts II and III allege that Intellicorp violated the FCRA section 1681e (b) by failing to follow reasonable procedures to assure maximum accuracy of the adverse information included in its consumer reports and FCRA section 1681k (a) by failing to maintain strict procedures to assure that the public record information reported, which was likely to have an adverse effect on the consumer was complete and up to date, respectively. The Amended Complaint alleges that defendants acted willfully and seeks statutory damages for the classes in an amount not less than one hundred dollars and not more than one thousand dollars per violation, punitive damages, equitable relief, costs and attorney’s fees. 
At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.

On February 1, 2016, the Company was served with a nationwide putative class action complaint filed in the United States District Court for the Eastern District of North Carolina naming Intellicorp. The complaint titled Frank DiSalvo v. Intellicorp Records, Inc. claims violations of the FCRA and alleges a  section 1681b(b)(1)  claim on behalf of all individuals residing in the United States who were the subjects of  consumer reports furnished  by Intellicorp for employment purposes within the period prescribed by the FCRA, 15 U.S.C. Section 1681p without first obtaining from the user of the report a certification that such user had complied with the obligations under Section 1681b(b)(2) as to the subject of the consumer report. The  class complaint alleges that Intellicorp violated the FCRA section 1681b(b)(1) by failing to obtain the required specific certification from its customers to whom Intellicorp furnished consumer reports as to each consumer report provided before providing the specific consumer report that was the subject of the certification. The complaint alleges that the violations were willful or in the alternative negligent and seeks statutory damages for the class in an amount not less than one hundred dollars and not more than one thousand dollars per violation, punitive damages, equitable relief, costs and attorney’s fees. On April 18, 2016, the parties filed a joint motion to stay all proceedings pending the resolution of the United States Supreme Court’s decision in Spokeo v. Robins, No. 13-1339. After Spokeo was decided on May 16, 2016, plaintiffs voluntarily dismissed their federal court complaint and filed a virtually identical complaint in Ohio State court on May 27, 2016. Defendants removed that complaint to the United States District Court for the Northern District of Ohio on July 1, 2016.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.

24
Table of Contents

Xactware Solutions, Inc. Patent Litigation
On October 8, 2015, the Company was served with a summons and complaint in an action titled Eagle View Technologies, Inc. and Pictometry International Group, Inc. v. Xactware Solutions, Inc. and Verisk Analytics, Inc. filed in the United States District Court for the District of New Jersey. The complaint alleges that the Company’s Roof InSight, Property InSight and Aerial Sketch products infringe seven patents owned by Eagle View and Pictometry namely, Patent Nos. 436, 840, 152, 880, 770, 732 and 454 (collectively the “Patents-in-Suit.”) On November 30, 2015, plaintiffs filed a First Amended Complaint (“First Amended Complaint”) adding Patent Nos. 376 and 737 to the Patents in Suit. The First Amended Complaint seeks an entry of judgment by the Court that defendants have and continue to directly infringe and/or indirectly infringe, by way of inducement the Patents-in-Suit, permanent injunctive relief, damages, costs and attorney’s fees.
At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.
Interthinx, Inc. Litigation
On April 20, 2015, the Company was served with a putative class action titled John Weber v. Interthinx, Inc. and Verisk Analytics, Inc. The plaintiff, a former employee of the Company’s former subsidiary Interthinx, Inc. in Missouri, filed the class action complaint in the United States District Court for the Eastern District of Missouri on behalf of all review appraisers and individuals holding comparable positions with different titles who were employed by Interthinx for the last three years nationwide and who were not paid overtime wages. The class complaint claims that the review appraiser employees were misclassified as exempt employees and, as a result, were denied certain wages and benefits that would have been received if they were properly classified as non-exempt employees. It pleads a Collective Action under section 216(b) of the Fair Labor Standards Act for unpaid overtime and seeks overtime wages, liquidated damages, declaratory relief, interest, costs and attorneys’ fees.
On March 11, 2014, the Company sold 100 percent of the stock of Interthinx, Inc. At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.
Insurance Services Office, Inc. Litigation
On August 1, 2014 the Company was served with an Amended Complaint filed in the United States District Court for the District of Colorado titled Snyder, et. al. v. ACORD Corp., et al. The action is brought by nineteen individual plaintiffs, on their own behalf and on behalf of a putative class, against more than 120 defendants, including the Company and ISO. Except for the Company, ISO and the defendant Acord Corporation, which provides standard forms to assist in insurance transactions, most of the other defendants are property and casualty insurance companies that plaintiffs claim conspired to underpay property damage claims. Plaintiffs claim that the Company and ISO, along with all of the other defendants, violated state and federal antitrust and racketeering laws as well as state common law. On September 8, 2014, the Court entered an Order striking the Amended Complaint and granting leave to the plaintiffs to file a new complaint. On October 13, 2014, plaintiffs filed their Second Amended Complaint, which was re-filed by plaintiffs to correct errors as the Third Amended Complaint. The Third Amended Complaint similarly alleges that the defendants conspired to underpay property damage claims, but does not specifically allege what role the Company or ISO played in the alleged conspiracy. It claims that the Company and ISO, along with all of the other defendants, violated state and federal antitrust and racketeering laws as well as state common law, and seeks all available relief including injunctive, statutory, actual and punitive damages as well as attorneys’ fees. On January 15, 2016, the Court granted defendants’ motions to dismiss all claims asserted in the Third Amended Complaint. Plaintiffs filed a motion for reconsideration of this dismissal on February 16, 2016. The Court granted defendants’ motion to strike the motion for reconsideration on March 2, 2016 and gave plaintiffs leave to file another motion for reconsideration in accordance with the rules which plaintiffs filed on March 11, 2016 and, which was denied by the Court on April 25, 2016. On April 1, 2016, plaintiffs also filed a Notice of Appeal of the Court’s January 15, 2016 Order, which dismissed all claims in the Third Amended Complaint. Plaintiffs also filed an appeal of the Court’s denial of the motion for reconsideration, which the Court of Appeals for the 10th Circuit consolidated with the appeal of the Court’s January 15, 2016 dismissal. Appellants filed their brief in support of the consolidated appeal on July 20, 2016.
At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.
On February 19, 2016, the Company was served with a notice of a summons and complaint filed on January 29, 2016 against ISO in the U.S. District Court for the District of Connecticut titled Halloran et al. v. Harleysville Preferred Insurance Co. et al.   As alleged in the First Amended Complaint, the putative class action is brought by four policyholders on behalf of a class of similarly situated policyholders in eastern Connecticut who allege that their homeowner’s insurance carriers have denied or will deny their claims for damage to their homes caused by defective concrete.  The lawsuit alleges a breach of contract claim against certain insurers and seeks declaratory relief as to more than 100 other insurers. It also alleges that  ISO as the drafter of the standardized policy language at issue violated the Connecticut Unfair Trade Practices ("CUTPA") and the Connecticut Unfair Insurance Practices Act ("CUIPA"). The plaintiffs ask that the Court certify a class of persons similarly situated and seek relief in

25
Table of Contents

the form of the cost for the replacement of their concrete foundations, and a declaratory judgment that all of the defendant insurance carriers are obligated to provide coverage for claims resulting from the defective concrete as well as, attorneys’ fees, costs and interest. On March 17, 2016 plaintiffs filed their first amended complaint asserting federal jurisdiction under the Class Action Fairness Act, adding a number of insurer defendants and amending their damages claim to include punitive damages. After defendants indicated that they would be filing motions to dismiss the first amended complaint at a Rule 16 Conference on April 12, 2016, the Court gave plaintiffs until May 6, 2016 to move for leave to file a second amended complaint. On May 6, 2016, plaintiffs filed a Motion to amend the first amended complaint with a proposed second amended complaint, which did not name ISO or the Company as a defendant. No opposition was filed to the motion to amend, which remains pending.
At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.
16. Subsequent Events:

On July 26, 2016, the Company completed the acquisition of Greentech Media, Inc. (“Greentech Media”),  an information services provider for the electricity and renewables sector, for a net cash purchase price of $37,000, which was funded from the general assets of the Company. The Company used $4,400 of the net cash purchase price to fund the indemnity escrows. The cash paid will be adjusted subsequent to close to reflect final balances of certain working capital accounts and other closing adjustments. Greentech Media will become part of Wood Mackenzie within the Decision Analytics segment and enables Wood Mackenzie to provide its clients with market intelligence across several categories, including solar generation, energy storage, and smart grids that react to changes in supply and demand. Due to the limited time since the acquisition date and limitations on access to Greentech information prior to the acquisition date, the initial accounting for the business combination is incomplete at this time. As a result, the Company is unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired and resulting from the transaction, including the information required for contingencies, intangible assets and goodwill. This information is expected to be included in the quarterly report on Form 10-Q for the nine months ending September 30, 2016.


26
Table of Contents

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our historical financial statements and the related notes included in our annual report on Form 10-K, or 2015 10-K, dated and filed with the Securities and Exchange Commission on February 24, 2016. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in or implied by any of the forward-looking statements as a result of various factors, including but not limited to those listed under “Risk Factors” and “Special Note Regarding Forward Looking Statements” in our 2015 10-K.
We enable risk-bearing businesses to better understand and manage their risks and opportunities associated with those risks. We provide value to our customers by supplying proprietary data that, combined with our analytic methods, creates embedded decision support solutions. We are one of the largest aggregators and providers of data and analytics pertaining to U.S. property and casualty, or P&C, insurance risks. We offer predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other field.
Our customers use our solutions to make better risk decisions with greater efficiency and discipline. We refer to these products and services as “solutions” due to the integration among our products and the flexibility that enables our customers to purchase components or the comprehensive package of products. These solutions take various forms, including data, statistical models or tailored analytics, all designed to allow our clients to make more logical decisions. We believe our solutions for analyzing risk positively impact our customers' revenues and help them better manage their costs.
We organize our business in two segments: Risk Assessment and Decision Analytics. Our Risk Assessment segment provides statistical, actuarial and underwriting data for the U.S. P&C insurance industry. Our Risk Assessment segment revenues represented approximately 36.4% and 42.2% of our revenues for the six months ended June 30, 2016 and 2015, respectively. Our Decision Analytics segment provides solutions to our customers within three vertical market-related groupings of insurance, financial services, and energy and specialized markets. Our Decision Analytics segment revenues represented approximately 63.6% and 57.8% of our revenues for the six months ended June 30, 2016 and 2015, respectively.

Discontinued Operations

On June 1, 2016, we sold 100 percent of the stock of the healthcare business, or Verisk Health, in exchange for a purchase price that consisted of $719.4 million of cash consideration after a working capital adjustment of $0.6 million, a subordinated promissory note with a face value of $100.0 million and an eight year maturity, or the Note, and other contingent consideration, or collectively, the Sale. We recognized income from the discontinued operation, net of tax, of $155.0 million and $137.9 million for the three and six months ended June 30, 2016, respectively. Results of operations for the healthcare business are reported as a discontinued operation for the three and six months ended June 30, 2016 and for all prior periods presented. See Note 6 of our condensed consolidated financial statements included in this Form 10-Q. As necessary, all amounts have been retroactively adjusted in all periods presented to give recognition to this discontinued operation.    

27
Table of Contents

Executive Summary
Key Performance Metrics    
We believe our business' ability to generate recurring revenue and positive cash flow is the key indicator of the successful execution of our business strategy. We use year-over-year revenue growth and EBITDA margin as metrics to measure our performance. EBITDA and EBITDA margin are non-GAAP financial measures (See footnote 1 within the Condensed Consolidated Results of Operations section of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations).
Revenue growth. We use year-over-year revenue growth as a key performance metric. We assess revenue growth based on our ability to generate increased revenue through increased sales to existing customers, sales to new customers, sales of new or expanded solutions to existing and new customers, and strategic acquisitions of new businesses.
EBITDA margin. We use EBITDA margin as a metric to assess segment performance and scalability of our business. We assess EBITDA margin based on our ability to increase revenues while controlling expense growth.
Revenues
We earn revenues through subscriptions, long-term agreements and on a transactional basis. Subscriptions for our solutions are generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year and automatically renewed each year. As a result, the timing of our cash flows generally precedes our recognition of revenues and income and our cash flow from operations tends to be higher in the first quarter as we receive subscription payments. Examples of these arrangements include subscriptions that allow our customers to access our standardized coverage language, our claims fraud database or our actuarial services throughout the subscription period. In general, we experience minimal revenue seasonality within the business. Our long-term agreements are generally for periods of three to five years. We recognize revenue from subscriptions ratably over the term of the subscription and most long-term agreements are recognized ratably over the term of the agreement.
Approximately 90.6% and 89.9% of the revenues in our Risk Assessment segment for the six months ended June 30, 2016 and 2015, respectively, were derived from subscriptions and long-term agreements for our solutions. Our customers in this segment include most of the P&C insurance providers in the United States. Approximately 77.5% and 75.9% of the revenues in our Decision Analytics segment, for the six months ended June 30, 2016 and 2015, respectively, were derived from subscriptions and long-term agreements for our solutions. In this segment, our customer bases are within the insurance, financial services, and energy and specialized markets verticals.
Certain of our solutions are also paid for by our customers on a transactional basis. For example, we have solutions that allow our customers to access property-specific rating and underwriting information to price a policy on a commercial building, or compare a P&C insurance, or workers' compensation claim with information in our databases. For the six months ended June 30, 2016, and 2015, approximately 17.7% and 18.2%, respectively, of our revenues were derived from providing transactional solutions. We earn transactional revenues as our solutions are delivered or services performed. In general, transactions are billed monthly at the end of each month.
Principal Operating Costs and Expenses
Personnel expenses are the major component of both our cost of revenues and selling, general and administrative expenses. Personnel expenses, which represented 62.4% and 61.6% of our total expenses for the six months ended June 30, 2016 and 2015, respectively, include salaries, benefits, incentive compensation, equity compensation costs, sales commissions, employment taxes, recruiting costs, and outsourced temporary agency costs.
We allocate personnel expenses between two categories, cost of revenues and selling, general and administrative expense, based on the actual costs associated with each employee. We categorize employees who maintain our solutions as cost of revenues, and all other personnel, including executive managers, sales people, marketing, business development, finance, legal, human resources, and administrative services, as selling, general and administrative expenses. A significant portion of our other operating costs, such as facilities and communications, is also either captured within cost of revenues or selling, general and administrative expenses based on the nature of the work being performed.
While we expect to grow our headcount over time to take advantage of our market opportunities, we believe that the economies of scale in our operating model will allow us to grow our personnel expenses at a lower rate than revenues. Historically, our EBITDA margin has improved because we have been able to increase revenues without a proportionate corresponding increase in expenses. However, part of our corporate strategy is to invest in new solutions which may offset margin expansion.
Cost of Revenues. Our cost of revenues consists primarily of personnel expenses. Cost of revenues also includes the expenses

28
Table of Contents

associated with the acquisition and verification of data, the maintenance of our existing solutions and the development and enhancement of our next-generation solutions. Our cost of revenues excludes depreciation and amortization.
Selling, General and Administrative Expenses. Our selling, general and administrative expenses consist primarily of personnel costs. A portion of the other operating costs such as facilities, insurance and communications is also allocated to selling, general and administrative expenses based on the nature of the work being performed by the employee. Our selling, general and administrative expenses exclude depreciation and amortization.
    

29
Table of Contents

Condensed Consolidated Results of Operations
 
Three Months Ended June 30,
 
Percentage
Change
 
Six Months Ended June 30,
 
Percentage
Change
 
2016
 
2015
 
2016
 
2015
 
 
 
 
(In thousands, except for share and per share data)
Statement of income data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Decision Analytics revenues
$
317,179

 
$
256,869

 
23.5
 %
 
$
630,124

 
$
470,220

 
34.0
 %
Risk Assessment revenues
 
181,117

 
 
171,730

 
5.5
 %
 
 
360,873

 
 
342,672

 
5.3
 %
Revenues
 
498,296

 
 
428,599

 
16.3
 %
 
 
990,997

 
 
812,892

 
21.9
 %
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenues (exclusive of items shown
   separately below)
 
178,466

 
 
154,639

 
15.4
 %
 
 
351,743

 
 
288,423

 
22.0
 %
Selling, general and administrative
 
75,557

 
 
82,336

 
(8.2
)%
 
 
146,594

 
 
132,050

 
11.0
 %
Depreciation and amortization of fixed assets
 
29,388

 
 
22,677

 
29.6
 %
 
 
61,275

 
 
42,065

 
45.7
 %
Amortization of intangible assets
 
23,806

 
 
22,904

 
3.9
 %
 
 
47,677

 
 
30,359

 
57.0
 %
Total expenses
 
307,217

 
 
282,556

 
8.7
 %
 
 
607,289

 
 
492,897

 
23.2
 %
Operating income
 
191,079

 
 
146,043

 
30.8
 %
 
 
383,708

 
 
319,995

 
19.9
 %
Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment income (loss) and others, net
 
846

 
 
(259
)
 
(427.3
)%
 
 
890

 
 
(761
)
 
(217.1
)%
Gain on derivative instruments
 
—

 
 
85,187

 
(100.0
)%
 
 
—

 
 
85,187

 
(100.0
)%
Interest expense
 
(31,435
)
 
 
(37,662
)
 
(16.5
)%
 
 
(63,467
)
 
 
(55,924
)
 
13.5
 %
Total other expense, net
 
(30,589
)
 
 
47,266

 
(164.7
)%
 
 
(62,577
)
 
 
28,502

 
(319.6
)%
Income before income taxes
 
160,490

 
 
193,309

 
(17.0
)%
 
 
321,131

 
 
348,497

 
(7.9
)%
Provision for income taxes
 
(53,754
)
 
 
(34,392
)
 
56.3
 %
 
 
(104,665
)
 
 
(93,207
)
 
12.3
 %
Income from continuing operations
 
106,736

 
 
158,917

 
(32.8
)%
 
 
216,466

 
 
255,290


(15.2
)%
Discontinued operations
 
 
 
 
 
 


 
 
 
 
 
 
 


Income from discontinued operations
 
254,745

 
 
7,717

 
3,201.1
 %
 
 
256,525

 
 
12,021

 
2,034.0
 %
Provision for income taxes
 
(99,745
)
 
 
(3,314
)
 
2,909.8
 %
 
 
(118,616
)
 
 
(5,305
)
 
2,135.9
 %
Income from discontinued operations (2)

 
155,000

 
 
4,403

 
3,420.3
 %
 
 
137,909

 
 
6,716

 
1,953.4
 %
    Net Income
$
261,736

 
$
163,320

 
60.3
 %
 
$
354,375

 
$
262,006

 
35.3
 %
Basic net income per share:
 
 
 
 
 
 


 
 
 
 
 
 
 


Income from continuing operations
$
0.64

 
$
0.97

 
(34.0
)%
 
$
1.29

 
$
1.59

 
(18.9
)%
Income from discontinued operations
 
0.92

 
 
0.02

 
4,500.0
 %
 
 
0.81

 
 
0.04

 
1,925.0
 %
Basic net income per share
$
1.56

 
$
0.99

 
57.6
 %
 
$
2.10

 
$
1.63

 
28.8
 %
Diluted net income per share:
 
 
 
 
 
 


 
 
 
 
 
 
 


Income from continuing operations
$
0.62

 
$
0.95

 
(34.7
)%
 
$
1.26

 
$
1.55

 
(18.7
)%
Income from discontinued operations
 
0.91

 
 
0.02

 
4,450.0
 %
 
 
0.81

 
 
0.04

 
1,925.0
 %
Diluted net income per share
$
1.53

 
$
0.97

 
57.7
 %
 
$
2.07

 
$
1.59

 
30.2
 %
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
168,296,318

 
 
164,141,804

 
2.5
 %
 
 
168,375,034

 
 
161,114,861

 
4.5
 %
Diluted
 
171,218,782

 
 
167,586,100

 
2.2
 %
 
 
171,349,833

 
 
164,533,656

 
4.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The financial operating data below sets forth the information we believe is useful for investors in evaluating our overall financial performance:
Other data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA (1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Decision Analytics EBITDA
$
395,425

 
$
194,585

 
103.2
 %
 
$
549,180

 
$
309,954

 
77.2
 %
Risk Assessment EBITDA
 
104,508

 
 
101,543

 
2.9
 %
 
 
213,855

 
 
202,511

 
5.6
 %
EBITDA
$
499,933

 
$
296,128

 
68.8
 %
 
$
763,035

 
$
512,465

 
48.9
 %
The following is a reconciliation of net income to EBITDA:
Net income
$
261,736

 
$
163,320

 
60.3
 %
 
$
354,375

 
$
262,006

 
35.3
 %
Depreciation and amortization of fixed assets and
intangible assets from continuing operations
 
53,194

 
 
45,581

 
16.7
 %
 
 
108,952

 
 
72,424

 
50.4
 %
Interest expense from continuing operations
 
31,435

 
 
37,662

 
(16.5
)%
 
 
63,467

 
 
55,924

 
13.5
 %
Provision for income taxes from continuing operations
 
53,754

 
 
34,392

 
56.3
 %
 
 
104,665

 
 
93,207

 
12.3
 %
Depreciation, amortization, interest and provision for
income taxes from discontinued operations
 
99,814

 
 
15,173

 
557.8
 %
 
 
131,576

 
 
28,904

 
355.2
 %
EBITDA
$
499,933

 
$
296,128

 
68.8
 %
 
$
763,035

 
$
512,465

 
48.9
 %

30
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(1)
EBITDA is the financial measure which management uses to evaluate the performance of our Company. “EBITDA” is defined as net income before interest expense, provision for income taxes, and depreciation and amortization of fixed and intangible assets. In addition, this Management’s Discussion and Analysis of Financial Condition and Results of Operations includes references to EBITDA margin, which is computed as EBITDA divided by revenues. See Note 13 of our condensed consolidated financial statements included in this Form 10-Q filing. Although EBITDA is a non-GAAP financial measure, 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 results of operations or cash flows from operating activities reported under GAAP. Management uses EBITDA in conjunction with GAAP operating performance measures as part of its overall assessment of company performance. Some of these limitations are:
•
EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
•
EBITDA does not reflect changes in, or cash requirements 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; and
•
Other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure. Please note because EBITDA is calculated from net income, this presentation included EBITDA from discontinued operations of our healthcare business.
(2)
On June 1, 2016, we sold our healthcare business, Verisk Health. Results of operations for the healthcare business are reported as a discontinued operation for the three and six months ended June 30, 2016 and for all prior periods presented. See Note 6 of our condensed consolidated financial statements included in this Form 10-Q. As necessary, all amounts have been retroactively adjusted in all periods presented to give recognition to this discontinued operation.    
Consolidated Results of Continuing Operations
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Revenues
Revenues were $991.0 million for the six months ended June 30, 2016 compared to $812.9 million for the six months ended June 30, 2015, an increase of $178.1 million or 21.9%. Excluding revenues of $138.1 million from Wood Mackenzie, Infield and PCI, our recent acquisitions within the Decision Analytics segment, and Risk Intelligence Ireland, or RII, our recent acquisition within the Risk Assessment segment, or collectively referred to as our recent acquisitions, our consolidated revenue growth was $40.0 million or 5.2%. Revenues within our Decision Analytics segment, excluding our recent acquisitions of Wood MacKenzie, Infield, and PCI, increased by $22.1 million or 5.2% and revenues in our Risk Assessment segment, excluding our recent acquisition of RII, increased by $17.9 million or 5.2%. Revenue growth within Decision Analytics, excluding recent acquisitions, was primarily driven by increases in our insurance category. Within Risk Assessment, both industry-standard insurance programs and property-specific rating and underwriting information contributed to its revenue growth. Refer to the Results of Continuing Operations by Segment within this section for further information regarding our revenues.
Cost of Revenues
Cost of revenues was $351.7 million for the six months ended June 30, 2016 compared to $288.3 million for the six months ended June 30, 2015, an increase of $63.4 million or 22.0%. Our recent acquisitions accounted for an increase of $48.2 million in cost of revenues, primarily related to salaries and employee benefits. Excluding the impact of our recent acquisitions, our cost of revenues increased $15.2 million or 5.7%. The increase was primarily due to increases in salaries and employee benefits of $15.2 million and information technology expenses of $1.3 million. These increases were offset by decreases in data costs of $0.3 million and other operating costs of $1.0 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses, or SGA, were $146.6 million for the six months ended June 30, 2016 compared to $132.2 million for the six months ended June 30, 2015, an increase of $14.4 million or 11.0%. Our recent acquisitions accounted for an increase of $10.2 million in SGA, which was primarily related to salaries and employee benefits partially offset by 2015 transaction costs of the Wood Mackenzie acquisition which were non-recurring. Excluding costs associated with our recent acquisitions, SGA increased $4.2 million or 4.4%. The increase was primarily due to increases in salaries and employee benefits of $4.3 million, information technology expenses of $0.7 million and other general expenses of $0.6 million. These increases were offset by a decrease in professional consulting costs of $1.4 million.

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Depreciation and Amortization of Fixed Assets
Depreciation and amortization of fixed assets was $61.2 million for the six months ended June 30, 2016 compared to $42.1 million for the six months ended June 30, 2015, an increase of $19.1 million or 45.7%. The increase in depreciation and amortization of fixed assets includes depreciation and amortization related to our recent acquisitions of $11.8 million.
Amortization of Intangible Assets
Amortization of intangible assets was $47.7 million for the six months ended June 30, 2016 compared to $30.3 million for the six months ended June 30, 2015, an increase of $17.4 million or 57.0%. The increase was primarily related to our recent acquisitions of Wood Mackenzie, Infield, PCI and RII which amounted to $34.1 million, offset by intangible assets that had been fully amortized of $16.7 million.
Investment Income (Loss) and Others, net
Investment income (loss) and others, net was a gain of $0.9 million for the six months ended June 30, 2016 as compared to a loss of $0.8 million for the six months ended June 30, 2015. The increase was mostly attributable by interest income generated from the subordinated promissory note received in connection with to the divestiture of our healthcare business and net gain on foreign currency transactions.
Interest Expense
Interest expense was $63.5 million for the six months ended June 30, 2016, compared to $55.9 million for the six months ended June 30, 2015, an increase of $7.6 million or 13.5%. The increase is primarily due to the interest costs on the debt incurred in connection with the acquisition of Wood Mackenzie.
Provision for Income Taxes
The provision for income taxes was $104.7 million for the six months ended June 30, 2016 compared to $93.2 million for the six months ended June 30, 2015, an increase of $11.5 million or 12.3%. The effective tax rate was 32.59% for the six months ended June 30, 2016 compared to 26.75% for the six months ended June 30, 2015. The effective rate for the six months ended June 30, 2016 was higher than the June 30, 2015 effective tax rate primarily due to non-recurring tax benefits related to the Wood Mackenzie acquisition in 2015.
Net Income Margin
The net income margin for our consolidated results, including discontinued operations, was 32.1% for the six months ended June 30, 2016 compared to 27.4% for the six months ended June 30, 2015. The discontinued operations, including the gain on sale of our healthcare business, increased our net income margin by 10.3% for the six months ended June 30, 2016. The discontinued operations lowered our net income margin by 4.0% for the six months ended June 30, 2015.
EBITDA Margin
The EBITDA margin for our consolidated results, including discontinued operations, was 69.2% for the six months ended June 30, 2016 compared to 53.5% for the six months ended June 30, 2015. The discontinued operations, including the gain on sale of our healthcare business, increased our EBITDA margin by 19.4% for the six months ended June 30, 2016. The discontinued operations lowered our EBITDA margin by 5.2% for the six months ended June 30, 2015.
Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015
Revenues
Revenues were $498.3 million for the three months ended June 30, 2016 compared to $428.6 million for the three months ended June 30, 2015, an increase of $69.7 million or 16.3%. Excluding revenues of $48.8 million from Wood Mackenzie, Infield and PCI, our recent acquisitions within the Decision Analytics segment, and Risk Intelligence Ireland, or RII, our recent acquisition within the Risk Assessment segment, or collectively referred to as our recent acquisitions, our consolidated revenue growth increased $20.9 million or 5.4%. Revenues within our Decision Analytics segment, excluding our recent acquisitions of Wood Mackenzie, Infield, and PCI, increased by $11.9 million or 5.5% and revenues in our Risk Assessment segment, excluding our recent acquisition of RII, increased by $9.0 million or 5.3%. Revenue growth within Decision Analytics, excluding recent acquisitions, was primarily driven by increases in our insurance category. Within Risk Assessment, both industry-standard insurance programs and property-specific rating and underwriting information contributed to its revenue growth. Refer to the Results of Continuing Operations by Segment within this section for further information regarding our revenues.

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Cost of Revenues
Cost of revenues was $178.4 million for the three months ended June 30, 2016 compared to $154.6 million for the three months ended June 30, 2015, an increase of $23.8 million or 15.4%. Our recent acquisitions accounted for an increase of $14.6 million in cost of revenues, primarily related to salaries and employee benefits. Excluding the impact of our recent acquisitions, our cost of revenues increased $9.2 million or 6.9%. The increase was primarily due to increases in salaries and employee benefits of $8.2 million and information technology expenses of $2.0 million. These increases were offset by a decrease in other operating costs of $1.0 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses, or SGA, were $75.6 million for the three months ended June 30, 2016 compared to $82.5 million for the three months ended June 30, 2015, a decrease of $6.9 million or 8.2%. Our recent acquisitions accounted for a decrease of $11.8 million in SGA, which was primarily related to 2015 transaction costs of the Wood Mackenzie acquisition which were non-recurring. Excluding costs associated with our recent acquisitions, SGA increased $4.9 million or 10.4%. The increase was primarily due to increases in salaries and employee benefits of $1.5 million, professional consulting costs of $2.2 million, information technology expenses of $0.2 million and other general expenses of $1.0 million.
Depreciation and Amortization of Fixed Assets
Depreciation and amortization of fixed assets was $29.3 million for the three months ended June 30, 2016 compared to $22.7 million for the three months ended June 30, 2015, an increase of $6.6 million or 29.6%. The increase in depreciation and amortization of fixed assets includes depreciation and amortization related to our recent acquisitions of $4.6 million.
Amortization of Intangible Assets
Amortization of intangible assets was $23.8 million for the three months ended June 30, 2016 compared to $22.8 million for the three months ended June 30, 2015, an increase of $1.0 million or 3.9%. The increase was primarily related to our recent acquisitions of Wood Mackenzie, Infield, PCI and RII which amounted to $17.1 million, offset by intangible assets that had been fully amortized of $16.1 million.
Investment Income (Loss) and Others, net
Investment income (loss) and others, net was a gain of $0.9 million for the three months ended June 30, 2016 as compared to a loss of $0.2 million for the three months ended June 30, 2015. The increase was mostly attributable by interest income generated from the subordinated promissory note related to the divestiture of our healthcare business.
Interest Expense
Interest expense was $31.5 million for the three months ended June 30, 2016, compared to $37.7 million for the three months ended June 30, 2015, a decrease of $6.2 million or 16.5%. The decrease is primarily due to repayments on the Credit Facility partially funded by the net proceed from the divestiture of our healthcare business.
Provision for Income Taxes
The provision for income taxes was $53.8 million for the three months ended June 30, 2016 compared to $34.4 million for the three months ended June 30, 2015, an increase of $19.4 million or 56.3%. The effective tax rate was 33.49% for the three months ended June 30, 2016 compared to 17.79% for the three months ended June 30, 2015. The effective rate for the three months ended June 30, 2016 was higher than the June 30, 2015 effective tax rate primarily due to non-recurring tax benefits related to the Wood Mackenzie acquisition in 2015.
Net Income Margin
The net income margin for our consolidated results, including discontinued operations, was 48.3% for the three months ended June 30, 2016 compared to 32.8% for the three months ended June 30, 2015. The discontinued operations, including the gain on sale of our healthcare business, increased our net income margin by 26.9% for the three months ended June 30, 2016. The discontinued operations lowered our net income margin by 4.3% for the three months ended June 30, 2015.

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EBITDA Margin
The EBITDA margin for our consolidated results, including discontinued operations, was 92.3% for the three months ended June 30, 2016 compared to 59.5% for the three months ended June 30, 2015. The discontinued operations, including the gain on sale of our healthcare business, increased our EBITDA margin by 43.1% for the three months ended June 30, 2016. The discontinued operations lowered our EBITDA margin by 5.0% for the three months ended June 30, 2015.
Results of Continuing Operations by Segment
Decision Analytics
Revenues
Revenues for our Decision Analytics segment were $630.1 million for the six months ended June 30, 2016 compared to $470.3 million for the six months ended June 30, 2015, an increase of $159.8 million or 34.0%. Excluding revenue of $137.7 million from our recent acquisitions, Decision Analytics revenue increased by $22.1 million or 5.2%. Our revenue by category for the periods presented is set forth below:

For the Six Months Ended June 30,

Percentage

2016
 
2015

Change
 
 
 
 

(In thousands)


Insurance
$
347,021


$
319,009


8.8
 %
Financial services
 
59,059


 
61,550


(4.0
)%
Energy and specialized markets
 
224,044


 
89,661


149.9
 %
Total Decision Analytics
$
630,124


$
470,220


34.0
 %
Our insurance revenue increased $28.0 million or 8.8%, primarily due to increases within our loss quantification solutions, insurance fraud revenue and underwriting solutions and catastrophe modeling services. Loss quantification in 2016 benefited from a non-recurring partnership revenue.
Our financial services revenue decreased $2.5 million or 4.0%, primarily due to a media effectiveness project revenue that occurred in the first quarter 2015. The decrease was partially offset by the continued demand for our analytic solutions and services.
Our energy and specialized markets revenue increased $134.3 million or 149.9%; excluding Wood Mackenzie, Infield and PCI revenues of $137.7 million, our energy and specialized markets revenue decreased $3.4 million or 6.7% due to declines in our weather risk solutions and our environmental health and safety services.
Revenues for our Decision Analytics segment were $317.2 million for the three months ended June 30, 2016 compared to $256.9 million for the three months ended June 30, 2015, an increase of $60.3 million or 23.5%. Excluding revenue of $48.4 million from our recent acquisitions, Decision Analytics revenue increased by $11.9 million or 5.5%. Our revenue by category for the periods presented is set forth below:

For the Three Months Ended June 30,

Percentage

2016
 
2015

Change
 
 
 
 

(In thousands)


Insurance
$
175,476


$
165,276


6.2
%
Financial services
 
30,585


 
26,380


15.9
%
Energy and specialized markets
 
111,118


 
65,213


70.4
%
Total Decision Analytics
$
317,179


$
256,869


23.5
%
Our insurance revenue increased $10.2 million or 6.2%, primarily due to increases within our loss quantification solutions, insurance fraud revenue and underwriting solutions. These increases were slightly offset by catastrophe modeling solutions' modest decline.


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Our financial services revenue increased $4.2 million or 15.9%, primarily due to the continued demand for our analytic solutions and services.
Our energy and specialized markets revenue increased $45.9 million or 70.4%; excluding Wood Mackenzie, Infield and PCI revenues of $48.4 million, our energy and specialized markets revenue decreased $2.5 million or 9.6% due to declines in our weather risk solutions and in our environmental health and safety services.
Cost of Revenues
Cost of revenues for our Decision Analytics segment were $245.0 million for the six months ended June 30, 2016 compared to $187.0 million for the six months ended June 30, 2015, an increase of $58.0 million or 31.0%. Our recent acquisitions within the Decision Analytics segment, represented an increase of $47.8 million in cost of revenues, which was primarily related to salaries and employee benefits. Excluding the impact of our recent acquisitions, our cost of revenues increased $10.2 million or 6.1%. The increase was primarily due to increases in salaries and employee benefits of $10.6 million and information technology expenses of $1.0 million. These increases were offset by decreases in data costs of $0.9 million and other operating costs of $0.5 million
Cost of revenues for our Decision Analytics segment were $123.4 million for the three months ended June 30, 2016 compared to $104.2 million for the three months ended June 30, 2015, an increase of $19.2 million or 18.4%. Our recent acquisitions within the Decision Analytics segment, represented an increase of $14.2 million in cost of revenues, which was primarily related to salaries and employee benefits. Excluding the impact of our recent acquisitions, our cost of revenues increased $5.0 million or 5.8%. The increase was primarily due to increases in salaries and employee benefits of $5.0 million and information technology expenses of $1.1 million. These increases were offset by a decrease in other operating costs of $1.1 million
Selling, General and Administrative Expenses
Selling, general and administrative expenses for our Decision Analytics segment were $106.4 million for the six months ended June 30, 2016 compared to $93.2 million for the six months ended June 30, 2015, an increase of $13.2 million or 14.3%. Our recent acquisitions within the Decision Analytics segment, accounted for an increase of $10.2 million in SGA, which was primarily related to salaries and employee benefits. Excluding costs associated with our recent acquisitions, SGA increased $3.0 million or 5.2%. The increase was primarily due to increases in salaries and employee benefits of $4.1 million and information technology expenses of $0.5 million. These increases were offset by a decrease in professional consulting fees of $1.6 million.
Selling, general and administrative expenses for our Decision Analytics segment were $54.1 million for the three months ended June 30, 2016 compared to $62.5 million for the three months ended June 30, 2015, a decrease of $8.4 million or 13.5%. Our recent acquisitions within the Decision Analytics segment, accounted for the decrease of $11.8 million in SGA, which was primarily related to transaction costs of the Wood Mackenzie acquisition. Excluding costs associated with our recent acquisitions, SGA increased $3.4 million or 11.9%. The increase was primarily due to increases in salaries and employee benefits of $1.6 million, professional consulting fees of $1.3 million, information technology expenses of $0.3 million and other general expenses of $0.2 million.
     EBITDA Margin
The EBITDA margin for our Decision Analytics segment, including discontinued operations, was 74.0% for the six months ended June 30, 2016 compared to 50.5% for the six months ended June 30, 2015. The discontinued operations, including the gain on sale of our healthcare business, increased our EBITDA margin by 29.6% for the six months ended June 30, 2016. The discontinued operations lowered our EBITDA margin by 7.9% for the six months ended June 30, 2015.
Risk Assessment
Revenues
Revenues for our Risk Assessment segment were $360.9 million for the six months ended June 30, 2016 compared to $342.6 million for the six months ended June 30, 2015, an increase of $18.3 million or 5.3%. Excluding the acquisition of RII, revenue for our Risk Assessment increased $17.9 million or 5.2% for the six months ended June 30, 2016. Revenues for our Risk Assessment segment were $181.1 million for the three months ended June 30, 2016 compared to $171.7 million for the three months ended June 30, 2015, an increase of $9.4 million or 5.5%. Excluding the acquisition of RII, revenue for our Risk Assessment increased $9.0 million or 5.3% for the three months ended June 30, 2016. The overall increase within this segment primarily resulted from an increase in prices derived from continued enhancements to the content of our industry-standard insurance programs' solutions as well as selling expanded solutions to existing customers.

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Our revenue by category for the periods presented is set forth below:
 
Three Months Ended 
 June 30,
 
Percentage
 
Six Months Ended 
 June 30,
 
Percentage
 
2016

2015
 
Change
 
2016

2015
 
Change
 
 
 
 
 
 
 
 
 
(In thousands)
 
 
 
(In thousands)
 
 
Industry-standard insurance
programs
$
138,599

 
$
130,776

 
6.0
%
 
$
276,026

 
$
261,372

 
5.6
%
Property-specific rating and
underwriting information
 
42,518

 
 
40,954

 
3.8
%
 
 
84,847

 
 
81,300

 
4.4
%
Total Risk Assessment
$
181,117

 
$
171,730

 
5.5
%
 
$
360,873

 
$
342,672

 
5.3
%
Cost of Revenues
Cost of revenues for our Risk Assessment segment was $106.7 million for the six months ended June 30, 2016 compared to $101.3 million for the six months ended June 30, 2015, an increase of $5.4 million or 5.3%. The increase was primarily due to increases in salaries and employee benefits costs of $4.6 million, information technology expenses of $0.3 million, data costs of $0.6 million and recent acquisition of $0.4 million. These increases were offset by a decrease in other operating costs of $0.5 million.
Cost of revenues for our Risk Assessment segment was $55.0 million for the three months ended June 30, 2016 compared to $50.4 million for the three months ended June 30, 2015, an increase of $4.6 million or 9.1%. The increase was primarily due to increases in salaries and employee benefits costs of $3.2 million, information technology expenses of $0.9 million, recent acquisition of $0.4 million and other operating costs of $0.1 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for our Risk Assessment segment were $40.2 million for the six months ended June 30, 2016 compared to $39.0 million for the six months ended June 30, 2015, an increase of $1.2 million or 3.2%. The increase was primarily due to increases in salaries and employee benefits of $0.2 million, professional consulting costs of $0.2 million, information technology expenses of $0.2 million and other general expense of $0.6 million.
Selling, general and administrative expenses for our Risk Assessment segment were $21.5 million for the three months ended June 30, 2016 compared to $20.0 million for the three months ended June 30, 2015, an increase of $1.5 million or 8.3%. The increase was primarily due to increases in professional consulting costs of $0.9 million and other general expense of $0.8 million. These increases were offset by decreases in salaries and employee benefits of $0.1 million and information technology expenses of $0.1 million.
EBITDA Margin
EBITDA margin for our Risk Assessment segment was 59.3% for the six months ended June 30, 2016 compared to 59.1% for the six months ended June 30, 2015. The increase in our EBITDA margin was primarily attributed to operating leverage in the segment as well as cost efficiencies.
Liquidity and Capital Resources
As of June 30, 2016 and December 31, 2015, we had cash and cash equivalents and available-for-sale securities of $199.8 million and $141.9 million, respectively. Subscriptions for our solutions are billed and generally paid in advance of rendering services either quarterly or upon commencement of the annual or multi-year subscription period in annual amounts. Most of our subscriptions are automatically renewed at the beginning of each calendar year. We have historically generated significant cash flows from operations. As a result of this factor, as well as the availability of funds under our $1,500.0 million Syndicated Revolving Credit Facility, or the Credit Facility, we believe that we will have sufficient cash to meet our working capital and capital expenditure needs, and to fuel our future growth plans.
We have historically managed the business with a working capital deficit due to the fact that, as described above, we offer our solutions and services primarily through annual subscriptions or long-term contracts, which are generally prepaid quarterly or annually in advance of the services being rendered. When cash is received for prepayment of invoices, we record an asset (cash and cash equivalents) on our balance sheet with the offset recorded as a current liability (fees received in advance). This current liability is deferred revenue that does not require a direct cash outflow since our customers have prepaid and are obligated to purchase the services. In most businesses, growth in revenue typically leads to an increase in the accounts receivable balance

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Table of Contents

causing a use of cash as a company grows. Unlike those businesses, our cash position is favorably affected by revenue growth, which results in a source of cash due to our customers prepaying for most of our services.
Our capital expenditures as a percentage of consolidated revenues for the six months ended June 30, 2016 and 2015, were 5.6% and 6.3%, respectively. The expected capital expenditures for the year ending December 31, 2016 will be approximately $155.0 million, which we expect to primarily include expenditures on our technology infrastructure and our continuing investments in developing and enhancing our solutions. Expenditures related to developing and enhancing our solutions are predominately related to internal use software and are capitalized in accordance with ASC 350-40, "Accounting for Costs of Computer Software Developed or Obtained for Internal Use." We also capitalize amounts in accordance with ASC 985-20, "Software to be Sold, Leased or Otherwise Marketed."
We have also historically used a portion of our cash for repurchases of our common stock from our stockholders. During the six months ended June 30, 2016 and 2015, we repurchased $116.4 million and $0 million of our common stock, respectively. 
Financing and Financing Capacity
We had total debt, excluding capital lease obligations and the discounts and debt issuance costs on our senior notes, of $2,300.0 million and $3,170.0 million at June 30, 2016 and December 31, 2015, respectively. The debt at June 30, 2016 was primarily issued under senior notes in May 2015 and during 2012 and 2011. As of June 30, 2016, we had senior notes with an aggregate principal amount of $2,300.0 million outstanding, and we were in compliance with our financial debt covenants.
As of June 30, 2016, we had a borrowing capacity of $1,500.0 million of which $1,497.5 million was available for borrowings under the Credit Facility with Bank of America N.A., JP Morgan Chase, N.A., and a syndicate of banks. The Credit Facility may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions and the share repurchase program.
The Credit Facility contains certain financial and other covenants that, among other things, impose certain restrictions on indebtedness, liens, investments, and capital expenditures. These covenants also place restrictions on mergers, asset sales, sale/leaseback transactions, payments between us and our subsidiaries, and certain transactions with affiliates. The financial covenants require that, at the end of any fiscal quarter, we have a consolidated interest coverage ratio of at least 3.0 to 1.0 and that we maintain, during any period of four fiscal quarters, a consolidated funded debt leverage ratio of 3.5 to 1.0. We were in compliance with all financial debt covenants under the Credit Facility as of June 30, 2016. During the six months ended June 30, 2016, we had total combined borrowings under the Credit Facility of $40.0 million and repaid $910.0 million. Interest on borrowings under the Credit Facility is payable at an interest rate of LIBOR plus 1.125% to 1.625%, depending upon the consolidated funded debt leverage ratio. A commitment fee on any unused balance is payable periodically and will range from 12.5 to 25 basis points based upon the consolidated funded debt leverage ratio. As of June 30, 2016 and December 31, 2015, we had outstanding borrowings under the Credit Facility of $0.0 million and $870.0 million, respectively. During the six months ended June 30, 2016, we utilized a portion of the proceeds from the sale of Verisk Health and cash flows from operations to repay the outstanding borrowings under the Credit Facility. On May 26, 2016, we entered into the Second Amendment to the Credit Facility which reduced the borrowing capacity from $1,750.0 million to $1,500.0 million and amended the pricing grid. All borrowings under the Credit Facility continue to remain unsecured.
Cash Flow
The following table summarizes our cash flow data for the six months ended June 30, 2016 and 2015:
 
 
Six Months Ended June 30,
 
Percentage
Change
 
2016
 
2015
 
 
 
 
 
 
(In thousands)
 
 
Net cash provided by operating activities
$
378,485

 
$
355,501

 
6.5
 %
Net cash provided by (used in) investing activities
$
650,581

 
$
(2,865,258
)
 
(122.7
)%
Net cash (used in) provided by financing activities
$
(969,933
)
 
$
2,603,364

 
(137.3
)%

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Operating Activities
Net cash provided by operating activities was $378.5 million for the six months ended June 30, 2016 compared to $355.5 million for the six months ended June 30, 2015. Excluding the discontinued operations of Verisk Health, net cash provided by operating activities was $357.0 million for the six months ended June 30, 2016 compared to $301.5 million for the six months ended June 30, 2015, an increase of 18.4%. The increase in net cash provided by operating activities was primarily due to an increase in cash receipts from customers driven by an increase in revenues and operating income and additional operating cash flow from Wood Mackenzie.
Investing Activities
Net cash provided by investing activities was $650.6 million for the six months ended June 30, 2016 and net cash used in investing activities of $2,865.3 million for the six months ended June 30, 2015. The change in investing activities was primarily due to the net of cash acquisition of Wood Mackenzie of $2,889.6 million on May 19, 2015.
Financing Activities
Net cash used in financing activities was $969.9 million for the six months ended June 30, 2016 and net cash provided by financing activities was $2,603.4 million for the six months ended June 30, 2015, respectively. Net cash used in financing activities for the six months ended June 30, 2016 was primarily related to net repayments of our Credit Facility of $870.0 million partially funded by the net proceed from the divestiture of our healthcare business and the current year repurchases of common stock of $116.4 million. Net cash provided by financing activities for the six months ended June 30, 2015 was primarily related to the net proceeds from the debt and equity offerings of $1,244.0 million and $720.8 million, respectively, and other borrowings from our Credit Facility, net of repayments, of $640.0 million.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Contractual Obligations
There have been no material changes to our contractual obligations outside the ordinary course of our business from those reported in our annual report on Form 10-K and filed with the Securities and Exchange Commission on February 24, 2016.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements require management to make estimates and judgments that affect reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, including those related to acquisition purchase price allocations, revenue recognition, goodwill and intangible assets, pension and other post retirement benefits, stock-based compensation, income taxes and allowance for doubtful accounts. Actual results may differ from these assumptions or conditions. Some of the judgments that management makes in applying its accounting estimates in these areas are discussed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K dated and filed with the Securities and Exchange Commission on February 24, 2016. Since the date of our annual report on Form 10-K, there have been no material changes to our critical accounting policies and estimates.

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Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Market risks at June 30, 2016 have not materially changed from those discussed under Item 7A in our annual report on Form 10-K dated and filed with the Securities and Exchange Commission on February 24, 2016.
Item 4.
Controls and Procedures
Disclosure Controls and Procedures
We are required to maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives at the reasonable assurance level.
Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report on Form 10-Q. Based upon the foregoing assessments, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2016, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting

We integrated Wood Mackenzie into our overall internal control over financial reporting process. Other than this integration, during the six months ended June 30, 2016, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




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PART II — OTHER INFORMATION
Item 1.
Legal Proceedings
We are party to legal proceedings with respect to a variety of matters in the ordinary course of business. See Part I Item I. Note 15 to our condensed consolidated financial statements for the six months ended June 30, 2016 for a description of our significant current legal proceedings, which is incorporated by reference herein.
Item 1A.
Risk Factors
There has been no material change in the information provided under the heading “Risk Factors” in our annual report on Form 10-K dated and filed with the Securities and Exchange Commission on February 24, 2016.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
There were no unregistered sales of equity securities by the Company during the period covered by this report.
Issuer Purchases of Equity Securities
Our board of directors has authorized a share repurchase program of up to $2.3 billion. As of June 30, 2016, we had $353.0 million available to repurchase shares. These authorizations have no expiration dates and may be suspended or terminated at any time. Since the introduction of share repurchase as a feature of our capital management strategies in 2010, we have repurchased shares with an aggregate value of $1.9 billion. We did not repurchase any shares for the quarter ended June 30, 2016.
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
Mine Safety Disclosures
None.
Item 5.
Other Information
None.
Item 6.
Exhibits
See Exhibit Index.

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


 
Verisk Analytics, Inc.
 
(Registrant)
 
 
 
 
 
 
 
 
 
Date: August 2, 2016
By:
/s/ Eva F. Huston
 
 
     Eva F. Huston
 
 
     Senior Vice President and Chief Financial Officer
 
 
     (Principal Financial Officer and Duly Authorized Officer)


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EXHIBIT INDEX
 
Exhibit
Number
 
Description
10.1
 
Agreement of Purchase and Sale dated April 25, 2016 among Verisk Analytics, Inc., Argus Information and Advisory Services, LLC, Verisk Health, Inc., MediConnect Global, Inc., VCVH Holding Corp., VCVH Holdings LLC, VCVH Intermediate Holding Corp. and VCVH Holding II Corp. incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated April 28, 2016.
 
 
 
10.2
 
Second Amendment dated May 26, 2016 to the Second Amended Restated Credit Agreement dated April 22, 2015 among Verisk Analytics, Inc., as borrower, and the lenders and agents party thereto incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8K, dated May 26, 2016.
 
 
 
31.1
 
Certification of the Chief Executive Officer of Verisk Analytics, Inc. pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.*
 
 
 
31.2
 
Certification of the Chief Financial Officer of Verisk Analytics, Inc. pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.*
 
 
 
32.1
 
Certification of the Chief Executive Officer and Chief Financial Officer of Verisk Analytics, Inc. pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*
 
 
 
101.INS
 
XBRL Instance Document.*
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema.*
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase.*
 
 
 
101.DEF
 
XBRL Taxonomy Definition Linkbase.*
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase.*
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase.*
 
*
Filed herewith.



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