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 March 31, 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 April 29, 2016, there were 168,166,371 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 March 31, 2016 and December 31, 2015
 
2016
 
2015
 
(In thousands, except for
share and per share data)
ASSETS
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
131,818

 
$
138,348

Available-for-sale securities
 
3,472

 
 
3,576

Accounts receivable, net of allowance for doubtful accounts of $2,803 and $2,642,
respectively
 
297,312

 
 
250,947

Prepaid expenses
 
30,828

 
 
34,126

Income taxes receivable
 
8,561

 
 
48,596

Other current assets
 
52,307

 
 
52,913

Current assets held-for-sale
 
62,485

 
 
76,063

Total current assets
 
586,783

 
 
604,569

Noncurrent assets:
 
 
 
 
 
Fixed assets, net
 
341,989

 
 
350,311

Intangible assets, net
 
1,191,470

 
 
1,245,083

Goodwill
 
2,703,914

 
 
2,753,026

Pension assets
 
36,188

 
 
32,922

Other assets
 
24,558

 
 
25,845

Noncurrent assets held-for-sale
 
574,245

 
 
581,896

Total assets
$
5,459,147

 
$
5,593,652

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
 
 
Accounts payable and accrued liabilities
$
179,671

 
$
222,112

Short-term debt and current portion of long-term debt
 
709,143

 
 
874,811

Pension and postretirement benefits, current
 
1,831

 
 
1,831

Deferred revenues
 
486,551

 
 
340,833

Income tax payable
 
7,918

 
 
—

Current liabilities held-for-sale
 
31,765

 
 
39,670

Total current liabilities
 
1,416,879

 
 
1,479,257

Noncurrent liabilities:
 
 
 
 
 
Long-term debt
 
2,271,879

 
 
2,270,904

Pension benefits
 
12,781

 
 
12,971

Postretirement benefits
 
2,015

 
 
1,981

Deferred income taxes, net
 
342,166

 
 
329,175

Other liabilities
 
53,302

 
 
58,360

Noncurrent liabilities held-for-sale
 
69,660

 
 
68,993

Total liabilities
 
4,168,682

 
 
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 167,980,063 and 169,424,981 outstanding, respectively
 
137

 
 
137

Additional paid-in capital
 
2,038,747

 
 
2,023,390

Treasury stock, at cost, 376,022,975 and 374,578,057 shares, respectively
 
(2,686,007
)
 
 
(2,571,190
)
Retained earnings
 
2,254,365

 
 
2,161,726

Accumulated other comprehensive losses
 
(316,777
)
 
 
(242,052
)
Total stockholders’ equity
 
1,290,465

 
 
1,372,011

Total liabilities and stockholders’ equity
$
5,459,147

 
$
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 Months Ended March 31, 2016 and 2015
 
 
Three Months Ended March 31,
 
2016
 
2015
 
(In thousands, except for share and per share data)
Revenues
$
492,701

 
$
384,293

Expenses:
 
 
 
 
 
Cost of revenues (exclusive of items shown separately below)
 
173,277

 
 
133,784

Selling, general and administrative
 
71,037

 
 
49,714

Depreciation and amortization of fixed assets
 
31,887

 
 
19,388

Amortization of intangible assets
 
23,871

 
 
7,455

Total expenses
 
300,072

 
 
210,341

Operating income
 
192,629

 
 
173,952

Other income (expense):
 
 
 
 
 
Investment income (loss) and others, net
 
44

 
 
(502
)
Interest expense
 
(32,032
)
 
 
(18,262
)
Total other expense, net
 
(31,988
)
 
 
(18,764
)
Income from continuing operations before income taxes
 
160,641

 
 
155,188

Provision for income taxes
 
(50,911
)
 
 
(58,815
)
Income from continuing operations
 
109,730

 
 
96,373

Discontinued operations (Note 6)
 


 
 


Income from discontinued operations
 
1,780

 
 
4,304

Provision for income taxes from discontinued operations
 
(18,871
)
 
 
(1,991
)
(Loss) income from discontinued operations
 
(17,091
)
 
 
2,313

Net income
$
92,639

 
$
98,686

Basic net income per share:
 
 
 
 
 
Income from continuing operations
$
0.65

 
$
0.61

(Loss) income from discontinued operations
 
(0.10
)
 
 
0.01

Basic net income per share
$
0.55

 
$
0.62

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

 
$
0.60

(Loss) income from discontinued operations
 
(0.10
)
 
 
0.01

Diluted net income per share
$
0.54

 
$
0.61

Weighted average shares outstanding:
 
 
 
 
 
Basic
 
168,453,750

 
 
158,087,919

Diluted
 
171,480,884

 
 
161,481,213




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 Months Ended March 31, 2016 and 2015
 
 
Three Months Ended March 31,
 
2016
 
2015
 
(In thousands)
Net income
$
92,639

 
$
98,686

Other comprehensive income, net of tax:
 
 
 
 
 
Foreign currency translation adjustment
 
(75,343
)
 
 
(220
)
Unrealized holding gain on available-for-sale securities
 
111

 
 
62

Pension and postretirement liability adjustment
 
507

 
 
614

Total other comprehensive (loss) income
 
(74,725
)
 
 
456

Comprehensive income
$
17,914

 
$
99,142






















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 Three Months Ended March 31, 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 income
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
(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
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
92,639

 
 
—

 
 
92,639

Other comprehensive income
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
(74,725
)
 
 
(74,725
)
Treasury stock acquired (1,663,095 shares)
—

 
 
—

 
 
—

 
 
—

 
 
(116,363
)
 
 
—

 
 
—

 
 
(116,363
)
KSOP shares issued (54,874 shares reissued from treasury stock)
—

 
 
—

 
 
—

 
 
3,894

 
 
392

 
 
—

 
 
—

 
 
4,286

Stock options exercised, including tax benefit of $1,691
(140,440 shares reissued from treasury stock)
—

 
 
—

 
 
—

 
 
5,384

 
 
994

 
 
—

 
 
—

 
 
6,378

Restricted stock lapsed, including tax benefit of $2
(1,638 shares reissued from treasury stock)
—

 
 
—

 
 
—

 
 
(23
)
 
 
12

 
 
—

 
 
—

 
 
(11
)
Employee stock purchase plan (9,257 shares reissued
from treasury stock)
—

 
 
—

 
 
—

 
 
637

 
 
66

 
 
—

 
 
—

 
 
703

Stock based compensation
—

 
 
—

 
 
—

 
 
5,547

 
 
—

 
 
—

 
 
—

 
 
5,547

Other stock issuances (11,968 shares reissued
from treasury stock)
—

 
 
—

 
 
—

 
 
(82
)
 
 
82

 
 
—

 
 
—

 
 
—

Balance, March 31, 2016
544,003,038

 
$
137

 
$
—

 
$
2,038,747

 
$
(2,686,007
)
 
$
2,254,365

 
$
(316,777
)
 
$
1,290,465

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 Three Months Ended March 31, 2016 and 2015
 
2016
 
2015
 
(In thousands)
Cash flows from operating activities:
 
 
 
 
 
Net income
$
92,639

 
$
98,686

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization of fixed assets
 
38,874

 
 
24,442

Amortization of intangible assets
 
29,775

 
 
14,141

Amortization of debt issuance costs and original issue discount
 
1,128

 
 
1,195

Allowance for doubtful accounts
 
518

 
 
125

KSOP compensation expense
 
4,286

 
 
3,821

Stock based compensation
 
5,547

 
 
4,224

Realized loss on available-for-sale securities, net
 
190

 
 
6

Deferred income taxes
 
17,807

 
 
506

(Gain) loss on disposal of fixed assets
 
(93
)
 
 
15

Changes in assets and liabilities, net of effects from acquisitions:
 
 
 
 
 
Accounts receivable
 
(34,016
)
 
 
(6,094
)
Prepaid expenses and other assets
 
4,088

 
 
2,861

Income taxes
 
49,613

 
 
56,951

Accounts payable and accrued liabilities
 
(46,156
)
 
 
(33,169
)
Deferred revenues
 
146,477

 
 
106,935

Pension and postretirement benefits
 
(2,580
)
 
 
(3,264
)
Other liabilities
 
(4,218
)
 
 
(391
)
Net cash provided by operating activities
 
303,879

 
 
270,990

Cash flows from investing activities:
 
 
 
 
 
Acquisitions, net of cash acquired of $0 and $232, respectively
 
—

 
 
(405
)
Purchase of non-controlling interest in non-public companies
 
—

 
 
(101
)
Capital expenditures
 
(30,763
)
 
 
(24,760
)
Purchases of available-for-sale securities
 
(3
)
 
 
(8
)
Proceeds from sales and maturities of available-for-sale securities
 
96

 
 
49

Other investing activities, net
 
(620
)
 
 
—

Net cash used in investing activities
 
(31,290
)
 
 
(25,225
)
Cash flows from financing activities:
 
 
 
 
 
Repayments of short-term debt, net
 
(165,000
)
 
 
(130,000
)
Payment of debt issuance costs
 
—

 
 
(9,100
)
Repurchases of common stock
 
(116,363
)
 
 
—

Proceeds from stock options exercised
 
4,727

 
 
8,336

Other financing activities, net
 
(1,169
)
 
 
(1,293
)
Net cash used in financing activities
 
(277,805
)
 
 
(132,057
)
Effect of exchange rate changes
 
(1,314
)
 
 
(220
)
(Decrease) increase in cash and cash equivalents
 
(6,530
)
 
 
113,488

Cash and cash equivalents, beginning of period
 
138,348

 
 
39,359

Cash and cash equivalents, end of period
$
131,818

 
$
152,847

Supplemental disclosures:
 
 
 
 
 
Taxes paid
$
2,780

 
$
3,258

Interest paid
$
17,517

 
$
17,328

Noncash investing and financing activities:
 
 
 
 
 
Tenant improvement included in other liabilities
$
34

 
$
—

Capital lease obligations
$
347

 
$
416

Capital expenditures included in accounts payable and accrued liabilities
$
1,681

 
$
856


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, 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"). As of 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 March 31, 2016 and December 31, 2015. In addition, the results of operations for 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 March 31, 2016 and for the three months ended March 31, 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 months ended March 31, 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 months ended March 31, 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. ASU No. 2015-05 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. The

6
Table of Contents

Company adopted the guidance during the three months ended March 31, 2016. The adoption of ASU No. 2015-05 did not have a material impact on the Company's condensed consolidated financial statements.

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, 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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Table of Contents

3. Investments:
Available-for-sale securities consisted of the following: 
 
Adjusted Cost
 
Gross Unrealized
Gain (Loss)
 
Fair Value
March 31, 2016
 
 
 
 
 
 
 
 
Registered investment companies
$
3,339

 
$
133

 
$
3,472

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 under the cost method in accordance with ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock. At March 31, 2016 and December 31, 2015, the carrying value of such securities was $8,487 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, accounts payable and accrued liabilities, fees received in advance, 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)
March 31, 2016
 
 
Registered investment companies (1)
$
3,472

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.

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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 fair value of the long-term debt would be a Level 2 liability if the long-term debt was measured at fair value on the condensed consolidated balance sheets. The following table summarizes the carrying value and estimated fair value of the long-term debt as of March 31, 2016 and December 31, 2015, respectively: 
 
2016
 
2015
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial instrument not carried at fair value:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt excluding capitalized
leases
$
2,274,955

 
$
2,390,542

 
$
2,274,144

 
$
2,328,134

5. Acquisitions:
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 year ended December 31, 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.
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, a Verisk Analytics business, 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.

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 months ended March 31, 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 months ended March 31:
 
2015
 
(unaudited)
Pro forma revenues
$
475,045

Pro forma income from continuing operations
$
114,751

Pro forma basic income from continuing operations per share
$
0.73

Pro forma diluted income from continuing operations per share
$
0.71


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 March 31,

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2016 and December 31, 2015, the current portion of the escrows amounted to $40,678 and $38,656, and the noncurrent portion of the escrows amounted to $718 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:

During the first quarter of 2016, the Company formally approved the plan to sell its healthcare business, Verisk Health. This represents a strategic shift in the Company's operations and will have a major effect in the Company's financial results. The Company has determined to explore alternative uses for shareholder capital that are more closely aligned with its strategy and global ambitions. The Company expects the sale of Verisk Health, previously included within the Decision Analytics segment, to occur within one year. The decision to sell the healthcare business met the criteria for assets held-for-sale, as well as reporting as a discontinued operation and therefore, has been segregated from continuing operations. Results of operations for the healthcare business are reported as a discontinued operation for the three months ended March 31, 2016 and for all prior periods presented.
  
The following table summarizes the results from the discontinued operation for the three months ended March 31:
 
Three Months Ended March 31,
 
2016

2015
Revenues from discontinued operations
$
69,151

 
$
75,104

Expenses:
 


 
 

Cost of revenues (exclusive of items shown separately below)
 
44,479

 
 
50,432

Selling, general and administrative
 
10,111

 
 
8,592

Depreciation and amortization of fixed assets
 
6,987

 
 
5,054

Amortization of intangible assets
 
5,904

 
 
6,686

Total expenses
 
67,481

 
 
70,764

Operating income
 
1,670

 
 
4,340

Other income (expense):
 


 
 

Investment income and others, net
 
110

 
 
(36
)
Total other income (expense)
 
110

 
 
(36
)
Income from discontinued operations before income taxes
 
1,780

 

4,304

Provision for income taxes (1)
 
(18,871
)
 
 
(1,991
)
(Loss) income from discontinued operations, net of tax
$
(17,091
)
 
$
2,313


(1) Included in the provision for income taxes, for the three months ended March 31, 2016, is a charge of $18,195 primarily resulting from the recognition of a deferred tax liability of $17,645 associated with the estimated stock basis difference in Verisk Health.




10
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The following table summarizes the assets held-for-sale and the liabilities held-for-sale as of March 31, 2016 and December 31, 2015:

March 31, 2016
 
December 31, 2015
Accounts receivable, net of allowance for doubtful accounts of $2,456 and $2,428, respectively
$
55,979

 
$
69,152

Prepaid expenses

6,104

 

6,615

Income tax receivable

368

 

257

Other current assets

34

 

39

Total current assets held-for-sale
$
62,485

 
$
76,063




 

 
Fixed assets, net
$
66,243

 
$
67,857

Intangible assets, net

125,759

 

131,662

Goodwill

381,800

 

381,800

Other assets

443

 

577

Total noncurrent assets held-for-sale
$
574,245

 
$
581,896




 

 
Accounts payable and accrued liabilities
$
15,305

 
$
23,552

Deferred revenues

16,382

 

16,118

Income tax payable

78

 

—

Total current liabilities held-for-sale
$
31,765

 
$
39,670




 

 
Deferred income taxes, net
$
67,255

 
$
67,255

Other liabilities

2,405

 

1,738

Total noncurrent liabilities held-for-sale
$
69,660

 
$
68,993


Net cash provided by operating activities and net cash used in investing activities from the discontinued operation or the three months ended March 31 are presented below:


Three Months Ended March 31,
 
2016

2015
Net cash provided by operating activities
$
22,118


$
36,636

Net cash used in investing activities
$
(5,496
)

$
(4,173
)
7. Goodwill and Intangible Assets:
The following is a summary of the change in goodwill from December 31, 2015 through March 31, 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

Foreign currency translation
 
—

 
 
(49,112
)
 
 
(49,112
)
Goodwill at March 31, 2016 (1)
$
55,555

 
$
2,648,359

 
$
2,703,914

______________________
(1)
These balances are net of the reclassification of goodwill to noncurrent assets held-for-sale of $381,800.
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 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, 2015, and concluded that there was no impairment of goodwill.


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The Company’s intangible assets and related accumulated amortization consisted of the following: 
 
Weighted
Average
Useful Life
 
Cost
 
Accumulated
Amortization
 
Net
March 31, 2016
 
 
 
 
 
 
 
 
 
 
Technology-based
7 years
 
$
324,219

 
$
(181,421
)
 
$
142,798

Marketing-related
18 years
 
 
252,673

 
 
(40,726
)
 
 
211,947

Contract-based
6 years
 
 
4,996

 
 
(4,996
)
 
 
—

Customer-related
14 years
 
 
505,693

 
 
(105,464
)
 
 
400,229

Database-related
20 years
 
 
456,563

 
 
(20,067
)
 
 
436,496

Total intangible assets
 
 
$
1,544,144

 
$
(352,674
)
 
$
1,191,470

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 March 31, 2016 and 2015 was $23,871 and $7,455, 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
$
71,352

2017
 
94,709

2018
 
94,577

2019
 
94,043

2020
 
93,363

2021 and thereafter
 
743,426

 
$
1,191,470

8. Income Taxes:
The Company’s effective tax rate for the three months ended March 31, 2016 and 2015 was 31.69% and 37.90% , respectively. The effective tax rate for the three months ended March 31, 2016 is lower than the March 31, 2015 effective tax rate primarily due to tax benefits related to the Wood Mackenzie acquisition. 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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Table of Contents

9. Debt:
The following table presents short-term and long-term debt by issuance as of March 31, 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
 
$
705,000

 
$
870,000

Capital lease obligations
Various
 
Various
 
 
4,143

 
 
4,811

Short-term debt and current portion of long-term
debt
 
 
 
 
 
709,143

 
 
874,811

Long-term debt:
 
 
 
 
 
 
 
 
 
Senior notes:
 
 
 
 
 
 
 
 
 
4.000% senior notes, less unamortized discount
and debt issuance costs of $11,309 and
$11,619, respectively
5/15/2015

6/15/2025
 
 
888,691

 
 
888,381

5.500% senior notes, less unamortized discount
and debt issuance costs of $5,182 and $5,226,
respectively
5/15/2015

6/15/2045
 
 
344,818

 
 
344,774

4.125% senior notes, less unamortized discount
and debt issuance costs of $3,963 and $4,117,
respectively
9/12/2012
 
9/12/2022
 
 
346,037

 
 
345,883

4.875% senior notes, less unamortized discount
and debt issuance costs of $1,836 and $2,002, respectively
12/8/2011
 
1/15/2019
 
 
248,164

 
 
247,998

5.800% senior notes, less unamortized discount
and debt issuance costs of $2,755 and $2,892,
respectively
4/6/2011

5/1/2021
 
 
447,245

 
 
447,108

Capital lease obligations
Various
 
Various
 
 
2,164

 
 
2,317

Syndicated revolving credit facility debt issuance
costs
Various

Various
 
 
(5,240
)
 
 
(5,557
)
Long-term debt
 
 
 
 
 
2,271,879

 
 
2,270,904

Total debt
 
 
 
 
$
2,981,022

 
$
3,145,715

As of March 31, 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 March 31, 2016, the Company had a borrowing capacity of $1,750,000 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 March 31, 2016. As of March 31, 2016 and December 31, 2015, the Company had outstanding borrowings under the Credit Facility of $705,000 and $870,000, respectively. In April 2016, the Company repaid a total of $25,000 of the $705,000 outstanding borrowings at March 31, 2016 under the Credit Facility.
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 March 31, 2016.


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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 three months ended March 31, 2016. As of March 31, 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 March 31, 2016, the Company’s treasury stock consisted of 376,022,975 shares of common stock. During the three months ended March 31, 2016, the Company reissued 218,177 shares of common stock from the treasury shares at a weighted average price of $7.09 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 months ended March 31, 2016 and 2015:
 
Three Months Ended March 31,
 
2016
 
2015
Numerator used in basic and diluted EPS:
 
 
 
 
 
Income from continuing operations
$
109,730

 
$
96,373

(Loss) income from discontinued operations (Note 6)
 
(17,091
)
 
 
2,313

Net income
$
92,639

 
$
98,686

Denominator:
 
 
 
 
 
Weighted average number of common shares used in basic EPS
 
168,453,750

 
 
158,087,919

Effect of dilutive shares:
 
 
 
 
 
Potential common shares issuable from stock options and stock awards
 
3,027,134

 
 
3,393,294

Weighted average number of common shares and dilutive potential common
shares used in diluted EPS
 
171,480,884

 
 
161,481,213

The potential shares of common stock that were excluded from diluted EPS were 1,674,484 and 1,604 for the three months ended March 31, 2016 and 2015, respectively, because the effect of including these potential shares was anti-dilutive.
Accumulated Other Comprehensive Losses
The following is a summary of accumulated other comprehensive losses as of March 31, 2016 and December 31, 2015:
 
2016

2015
Foreign currency translation adjustment
$
(241,171
)
 
$
(165,828
)
Unrealized holding gains on available-for-sale securities, net of tax
 
114

 
 
3

Pension and postretirement adjustment, net of tax
 
(75,720
)
 
 
(76,227
)
Accumulated other comprehensive losses
$
(316,777
)
 
$
(242,052
)

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Table of Contents

The before tax and after tax amounts of other comprehensive income for the three months ended March 31, 2016 and 2015 are summarized below:

Before Tax

Tax Benefit 
(Expense)

After Tax
For the Three Months Ended March 31, 2016








Foreign currency translation adjustment
$
(75,343
)

$
—


$
(75,343
)
Unrealized holding gain on available-for-sale securities before
reclassifications

369



(141
)


228

Amount reclassified from accumulated other
comprehensive losses (1)

(190
)


73



(117
)
Unrealized holding gain on available-for-sale securities

179



(68
)


111

Pension and postretirement adjustment before reclassifications

1,725



(673
)


1,052

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

(883
)


338



(545
)
Pension and postretirement adjustment

842



(335
)


507

Total other comprehensive loss
$
(74,322
)

$
(403
)

$
(74,725
)
For the Three Months Ended March 31, 2015








Foreign currency translation adjustment
$
(220
)

$
—


$
(220
)
Unrealized holding gain on available-for-sale securities before
reclassifications

105



(40
)


65

Amount reclassified from accumulated other comprehensive
losses (1)

(5
)


2



(3
)
Unrealized holding gain on available-for-sale securities

100



(38
)


62

Pension and postretirement adjustment before reclassifications

1,828



(651
)


1,177

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

(914
)


351



(563
)
Pension and postretirement adjustment

914



(300
)


614

Total other comprehensive income
$
794


$
(338
)

$
456

_______________
(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).

15
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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 March 31, 2016, there were 10,378,225 shares of common stock reserved and available for future issuance under the 2013 Incentive Plan. Cash received from stock option exercises for the three months ended March 31, 2016 and 2015 was $4,727 and $8,336, respectively.
The Company granted equity awards to key employees of the Company on April 1, 2016. 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 10-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 on April 1, 2016 is presented below.
Grant Date
 
Service Vesting Period
 
Stock Options
 
Restricted Stock
 
Common Stock
April 1, 2016
 
Four-year graded vesting
 
1,220,956

 
244,599

 
—

April 1, 2016
 
Not applicable
 
—

 
—

 
567

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.
A summary of the stock options outstanding and exercisable as of December 31, 2015 and March 31, 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

Exercised
(140,440
)
 
$
33.38

 
$
5,678

Cancelled or expired
(21,439
)
 
$
65.07

 
 


Outstanding at March 31, 2016
8,955,854

 
$
40.21

 
$
355,631

Exercisable at March 31, 2016
6,397,323

 
$
29.70

 
$
321,249

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 three months ended March 31, 2016 and 2015, the Company recorded excess tax benefits of $1,693 and $4,421, respectively. The Company did not realize any tax benefit within the Company’s quarterly tax payments through March 31, 2016 and 2015. Stock based compensation expense for the three months ended March 31, 2016 and 2015 was $5,547 and $4,224, 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.

16
Table of Contents

A summary of the status of the restricted stock awarded under the 2013 Incentive Plan as of December 31, 2015 and March 31, 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

Vested
(13,781
)
 
$
60.92

Forfeited
(3,499
)
 
$
62.65

Outstanding at March 31, 2016
516,488

 
$
65.87

As of March 31, 2016, there was $46,487 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 2.51 years. As of March 31, 2016, there were 2,558,531 and 515,586 nonvested stock options and restricted stock, respectively, of which 2,110,758 and 424,590 are expected to vest. The total grant date fair value of options vested during the three months ended March 31, 2016 and 2015 was $3,256 and $3,005, respectively. The total grant date fair value of restricted stock vested during the three months ended March 31, 2016 and 2015 was $3,320 and $2,502, 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 three months ended March 31, 2016 and 2015, the Company issued 9,257 and 5,453 shares of common stock at a weighted discounted price of $75.92 and $67.83 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 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 months ended March 31, are summarized below: 
 
Pension Plan and SERP
 
Postretirement Plan
 
For the Three Months Ended March 31,
 
2016

2015

2016

2015
Interest cost
$
4,781

 
$
4,557

 
$
120

 
$
134

Expected return on plan assets
 
(7,952
)
 
 
(8,559
)
 
 
(124
)
 
 
(143
)
Amortization of prior service credit
 
—

 
 
—

 
 
(36
)
 
 
(37
)
Amortization of net actuarial loss
 
794

 
 
795

 
 
125

 
 
156

Net periodic (benefit) cost
$
(2,377
)
 
$
(3,207
)
 
$
85

 
$
110

Employer contributions, net
$
325

 
$
217

 
$
(39
)
 
$
(48
)
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

17
Table of Contents

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 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. In 2016, the Company approved the plan to sell 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 months ended March 31, 2016 and 2015. Refer to Note 6 for more information.
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. The CODM does not evaluate the financial performance of each segment based on assets. On a geographic basis, no individual country outside of the U.S. accounted for 10.0% or more of the Company’s consolidated revenues for the three months ended March 31, 2016 or 2015.
The following table provides the Company’s revenue and EBITDA by reportable segment for the three months ended March 31, 2016 and 2015, and the reconciliation of EBITDA to operating income as shown in the accompanying condensed consolidated statements of operations:

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Table of Contents

 
 
For the Three Months Ended

For the Three Months Ended

March 31, 2016

March 31, 2015
 
Decision
Analytics

Risk
Assessment

Total

Decision
Analytics

Risk
Assessment

Total
Revenues
$
312,945


$
179,756


$
492,701


$
213,351


$
170,942


$
384,293

Expenses:

















Cost of revenues (exclusive of
items shown separately below)

(121,589
)


(51,688
)


(173,277
)


(82,812
)


(50,972
)


(133,784
)
Selling, general and administrative

(52,384
)


(18,653
)


(71,037
)


(30,645
)


(19,069
)


(49,714
)
Investment income and others, net

112



(68
)


44



(569
)


67



(502
)
EBITDA from discontinued
operations
 
14,671

 
 
—

 
 
14,671

 
 
16,044

 
 
—

 
 
16,044

EBITDA

153,755



109,347



263,102



115,369



100,968



216,337

Depreciation and amortization of
fixed assets

(24,901
)


(6,986
)


(31,887
)


(13,426
)


(5,962
)


(19,388
)
Amortization of intangible assets

(23,783
)


(88
)


(23,871
)


(7,367
)


(88
)


(7,455
)
Less: Investment income and
others, net

(112
)


68



(44
)


569



(67
)


502

EBITDA from discontinued
operations
 
(14,671
)
 
 
—

 
 
(14,671
)
 
 
(16,044
)
 
 
—

 
 
(16,044
)
Operating income
$
90,288


$
102,341



192,629


$
79,101


$
94,851



173,952

Investment income and others, net







44









(502
)
Interest expense







(32,032
)








(18,262
)
Income from continuing operations before income taxes






$
160,641








$
155,188


Operating segment revenue by type of service is provided below:
 
 
For the Three Months Ended March 31,
 
2016
 
2015
Decision Analytics:
 
 
 
 
 
Insurance
$
171,545

 
$
153,733

Financial services
 
28,474

 
 
35,170

Energy and specialized markets
 
112,926

 
 
24,448

Total Decision Analytics
 
312,945

 
 
213,351

Risk Assessment:
 
 
 
 
 
Industry-standard insurance programs
 
137,427

 
 
130,596

Property-specific rating and underwriting information
 
42,329

 
 
40,346

Total Risk Assessment
 
179,756

 
 
170,942

Total revenues
$
492,701

 
$
384,293


Long-lived assets by country are provided below:

March 31, 2016
 
December 31, 2015
Long-lived assets:
 

 
 

U.S.
$
2,165,662

 
$
2,178,142

U.K.
 
2,685,784

 
 
2,799,392

Other countries
 
20,918

 
 
11,549

Total long-lived assets
$
4,872,364

 
$
4,989,083


19
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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 March 31, 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 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 the Company’s subsidiary Intellicorp Records, Inc. (“Intellicorp.”) The complaint titled Frank DiSalvo v. Intellicorp Records, Inc. claims violations of the Fair Credit Reporting Act 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 l