VERISK ANALYTICS, INC., 10-K filed on 2/18/2020
Annual Report
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Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2019
Feb. 14, 2020
Jun. 30, 2019
Cover page.      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2019    
Document Transition Report false    
Entity File Number 001-34480    
Entity Registrant Name VERISK ANALYTICS, INC.    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 26-2994223    
Entity Address, Address Line One 545 Washington Boulevard    
Entity Address, City or Town Jersey City    
Entity Address, State or Province NJ    
Entity Address, Postal Zip Code 07310-1686    
City Area Code 201    
Local Phone Number 469-3000    
Title of 12(b) Security Common Stock $.001 par value    
Trading Symbol VRSK    
Security Exchange Name NASDAQ    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 22,756,706,943
Entity Common Stock, Shares Outstanding (in shares)   163,075,947  
Documents Incorporated by Reference
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part III of this annual report on Form 10-K is incorporated by reference to our definitive Proxy Statement for our 2020 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2019.
   
Entity Central Index Key 0001442145    
Current Fiscal Year End Date --12-31    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Amendment Flag false    
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CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Dec. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 184.6 $ 139.5
Accounts receivable, net 441.6 356.4
Prepaid expenses 60.9 63.9
Income taxes receivable 25.9 34.0
Other current assets 17.8 50.7
Current assets held for sale 14.1 0.0
Total current assets 744.9 644.5
Noncurrent assets:    
Fixed assets, net 548.1 555.9
Operating lease right-of-use assets, net 218.6 0.0
Intangible assets, net 1,398.9 1,227.8
Goodwill 3,864.3 3,361.5
Deferred income tax assets 9.8 11.1
Other noncurrent assets 159.8 99.5
Noncurrent assets held for sale 110.8 0.0
Total assets 7,055.2 5,900.3
Current liabilities:    
Accounts payable and accrued liabilities 375.0 250.9
Acquisition-related liabilities 111.2 12.6
Short-term debt and current portion of long-term debt 499.4 672.8
Deferred revenues 440.1 383.1
Operating lease liabilities 40.6 0.0
Income taxes payable 6.8 5.2
Current liabilities held for sale 18.7 0.0
Total current liabilities 1,491.8 1,324.6
Noncurrent liabilities:    
Long-term debt 2,651.6 2,050.5
Deferred income tax liabilities 356.0 350.6
Operating lease liabilities 208.1 0.0
Acquisition-related liabilities 0.2 28.3
Other noncurrent liabilities 48.6 75.7
Noncurrent liabilities held for sale 38.1 0.0
Total liabilities 4,794.4 3,829.7
Commitments and contingencies
Stockholders’ equity:    
Common stock, $.001 par value; 2,000,000,000 shares authorized; 544,003,038 shares issued; 163,161,564 and 163,970,410 shares outstanding, respectively 0.1 0.1
Additional paid-in capital 2,369.1 2,283.0
Treasury stock, at cost, 380,841,474 and 380,032,628 shares, respectively (3,849.9) (3,563.2)
Retained earnings 4,228.4 3,942.6
Accumulated other comprehensive loss (486.9) (591.9)
Total stockholders’ equity 2,260.8 2,070.6
Total liabilities and stockholders’ equity $ 7,055.2 $ 5,900.3
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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock authorized (in shares) 2,000,000,000 2,000,000,000
Common stock issued (in shares) 544,003,038 544,003,038
Common stock outstanding (in shares) 163,161,564 163,970,410
Treasury stock (in shares) 380,841,474 380,032,628
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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]      
Revenues $ 2,607.1 $ 2,395.1 $ 2,145.2
Operating expenses:      
Cost of revenues (exclusive of items shown separately below) 976.8 886.2 783.8
Selling, general and administrative 603.5 378.7 322.8
Depreciation and amortization of fixed assets 185.7 165.3 135.6
Amortization of intangible assets 138.0 130.8 101.8
Other operating expenses 6.2 0.0 0.0
Total operating expenses 1,910.2 1,561.0 1,344.0
Operating income 696.9 834.1 801.2
Other income (expense):      
Investment (loss) income and others, net (1.7) 15.3 9.2
Interest expense (126.8) (129.7) (119.4)
Total other expense, net (128.5) (114.4) (110.2)
Income before income taxes 568.4 719.7 691.0
Provision for income taxes (118.5) (121.0) (135.9)
Net income $ 449.9 $ 598.7 $ 555.1
Basic net income per share (in dollars per share) $ 2.75 $ 3.63 $ 3.36
Diluted net income per share (in dollars per share) $ 2.70 $ 3.56 $ 3.29
Weighted average shares outstanding:      
Basic (in shares) 163,535,438 164,808,110 165,168,224
Diluted (in shares) 166,560,115 168,297,836 168,688,868
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Comprehensive Income [Abstract]      
Net income $ 449.9 $ 598.7 $ 555.1
Other comprehensive income (loss), net of tax:      
Foreign currency translation adjustment 88.4 (154.1) 227.0
Unrealized holding gain on available-for-sale securities 0.0 0.0 0.4
Pension and postretirement adjustment 16.6 (24.8) 11.1
Total other comprehensive income (loss) 105.0 (178.9) 238.5
Comprehensive income $ 554.9 $ 419.8 $ 793.6
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)
$ in Millions
Total
Par Value [Member]
Additional Paid-in Capital [Member]
Treasury Stock [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Losses [Member]
Verisk Class A [Member]
Balance (in shares) at Dec. 31, 2016             544,003,038
Balance at Dec. 31, 2016 $ 1,332.4 $ 0.1 $ 2,121.6 $ (2,891.4) $ 2,752.9 $ (650.8)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income 555.1       555.1    
Other comprehensive income/loss 238.5         238.5  
Treasury stock acquired (269.8)     (269.8)      
Stock options exercised, including tax benefit 37.9   28.7 9.2      
Restricted stock lapsed, including tax benefit 0.0   (1.1) 1.1      
Stock based compensation 31.8   31.8        
Net share settlement from restricted stock awards (2.9)   (2.9)        
Other stock issuances 2.4   2.0 0.4      
Balance (in shares) at Dec. 31, 2017             544,003,038
Balance at Dec. 31, 2017 1,925.4 0.1 2,180.1 (3,150.5) 3,308.0 (412.3)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income 598.7       598.7    
Other comprehensive income/loss (178.9)         (178.9)  
Treasury stock acquired (438.6)     (438.6)      
Stock options exercised, including tax benefit 90.8   66.8 24.0      
Restricted stock lapsed, including tax benefit 0.0   (1.5) 1.5      
Stock based compensation 38.5   38.5        
Net share settlement from restricted stock awards (3.7)   (3.7)        
Other stock issuances 3.2   2.8 0.4      
Balance (in shares) at Dec. 31, 2018             544,003,038
Balance at Dec. 31, 2018 2,070.6 0.1 2,283.0 (3,563.2) 3,942.6 (591.9)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income 449.9       449.9    
Common stock dividend [1] (164.1)       (164.1)    
Other comprehensive income/loss 105.0         105.0  
Treasury stock acquired (300.0)     (300.0)      
Stock options exercised, including tax benefit 57.9   46.9 11.0      
Restricted stock lapsed, including tax benefit 0.0   (1.8) 1.8      
Stock based compensation 42.7   42.7        
Net share settlement from restricted stock awards (5.5)   (5.5)        
Other stock issuances 4.3   3.8 0.5      
Balance (in shares) at Dec. 31, 2019             544,003,038
Balance at Dec. 31, 2019 $ 2,260.8 $ 0.1 $ 2,369.1 $ (3,849.9) $ 4,228.4 $ (486.9)  
[1] Refer to Note 16. Stockholders' Equity for discussion related to quarterly cash dividends declared per share
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Common stock issued (in shares) 1,131,970 2,752,735 1,125,004
Other stock issuances (in shares) 45,266 44,602 50,957
Number of stock issued during period shares stock options exercised net of taxes (in shares) 40,578 35,637 36,067
Restricted Stock [Member]      
Common stock issued (in shares) 192,109 176,610 143,557
Employee Stock Purchase Plan [Member]      
Common stock issued (in shares) 40,578 35,637 36,067
Verisk Class A [Member]      
Treasury stock acquired (in shares) 2,178,151 3,882,467 3,356,360
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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities:      
Net income $ 449.9 $ 598.7 $ 555.1
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization of fixed assets 185.7 165.3 135.6
Amortization of intangible assets 138.0 130.8 101.8
Amortization of debt issuance costs and original issue discount, net of original issue premium 3.9 4.2 4.2
Provision for doubtful accounts 7.2 5.6 2.0
Realized gain on subordinated promissory note 0.0 (12.3) 0.0
Other operating expenses 6.2 0.0 0.0
Stock-based compensation expense 42.7 38.5 31.8
Realized (gain) loss on available-for-sale securities, net (0.9) 0.1 0.0
Deferred income taxes (29.3) 18.3 (73.6)
Loss on disposal of fixed assets, net 0.3 0.3 0.1
Changes in assets and liabilities, net of effects from acquisitions:      
Accounts receivable (70.3) (17.4) (45.5)
Prepaid expenses and other assets (19.7) (28.2) (30.6)
Operating lease right-of-use assets, net 51.3 0.0 0.0
Income taxes 15.0 (2.9) 22.7
Acquisition-related liabilities 70.4 9.7 0.0
Accounts payable and accrued liabilities 150.9 58.1 28.5
Deferred revenues 11.4 0.8 29.2
Operating lease liabilities (49.5) 0.0 0.0
Other liabilities (6.9) (35.2) (17.8)
Net cash provided by operating activities 956.3 934.4 743.5
Cash flows from investing activities:      
Acquisitions, net of cash acquired of $10.4 million, $3.1 million and $29.9 million, respectively (699.2) (138.2) (873.3)
Escrow funding associated with acquisitions (4.5) (14.9) (41.6)
Proceeds from subordinated promissory note 0.0 121.4 0.0
Capital expenditures (216.8) (231.0) (183.5)
Other investing activities, net (7.4) (2.7) (7.1)
Net cash used in investing activities (927.9) (265.4) (1,105.5)
Cash flows from financing activities:      
Proceeds (repayment) of short-term debt, net 80.0 (300.0) 160.0
Repayments of current portion of long-term debt (250.0) 0.0 0.0
Proceeds from issuance of long-term debt, inclusive of original issue premium and net of original issue discount 619.7 0.0 0.0
Proceeds from issuance of short-term debt with original maturities greater than three months 0.0 0.0 455.0
Payment of debt issuance costs (6.3) 0.0 (0.5)
Repurchases of common stock (300.0) (438.6) (276.3)
Net share settlement of taxes from restricted stock awards (5.5) (3.7) (2.9)
Proceeds from stock options exercised 52.4 87.3 35.0
Dividends paid (163.5) 0.0 0.0
Other financing activities, net (15.9) (14.8) (7.8)
Net cash provided by (used in) financing activities 10.9 (669.8) 362.5
Effect of exchange rate changes 6.1 (2.0) 6.7
Net increase (decrease) in cash and cash equivalents, including cash classified within current assets held for sale 45.4 (2.8) 7.2
Less: Decrease in cash classified within current assets held for sale 0.3 0.0 0.0
Increase (decrease) in cash and cash equivalents 45.1 (2.8) 7.2
Cash and cash equivalents, beginning of period 139.5 142.3 135.1
Cash and cash equivalents, end of period 184.6 139.5 142.3
Supplemental disclosures:      
Income taxes paid 139.8 103.2 186.3
Interest paid 119.9 125.2 113.9
Noncash investing and financing activities:      
Deferred tax liability established on date of acquisitions 43.4 5.6 74.4
Right-of-use assets obtained in exchange for new operating lease liabilities 247.6 0.0 0.0
Finance lease additions 20.2 21.3 10.9
Operating lease additions, net of terminations 13.7 0.0 0.0
Tenant improvement 1.7 0.3 0.0
Fixed assets included in accounts payable and accrued liabilities 1.6 0.3 2.9
Dividend payable included in other liabilities $ 0.6 $ 0.0 $ 0.0
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Cash Flows [Abstract]      
Net of cash acquired from acquisitions $ 10.4 $ 3.1 $ 29.9
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Organization
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization Organization:
Verisk Analytics, Inc. and its consolidated subsidiaries (“Verisk” or the “Company”) is a data analytics provider serving customers in insurance, energy and specialized markets, and financial services. Using various technologies to collect and analyze billions of records, Verisk draws on numerous data assets and domain expertise to provide first-to-market innovations that are integrated into customer workflows. Verisk 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. Around the world, Verisk helps customers protect people, property, and financial assets.
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 property and casualty ("P&C") insurance industry to provide statistical and actuarial services, to develop insurance programs and to assist insurance companies in meeting state regulatory requirements. Over the past decade, the Company 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.
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Basis of Presentation and Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Summary of Significant Accounting Policies:
The accompanying consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“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, 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, acquisition-related liabilities, fair value of stock-based compensation for equity awards granted, and assets and liabilities for pension and postretirement benefits. Actual results may ultimately differ from those estimates. Effective the first quarter of 2018, the operating segments of the Company are Insurance, Energy and Specialized Markets, and Financial Services. Previously, its operating segments were Decision Analytics and Risk Assessment. (See Note 19.). Certain reclassifications, including reflecting acquisition-related liabilities as a separate line item in 2019, have been made within the consolidated balance sheets, consolidated statements of cash flows and in the notes to conform to the respective 2019 presentation.
Significant accounting policies include the following:
(a)    Intercompany Accounts and Transactions
The consolidated financial statements include the accounts of Verisk. All intercompany accounts and transactions have been eliminated.
(b)    Revenue Recognition
The following describes the Company’s primary types of revenues and the applicable revenue recognition policies. The Company recognizes revenues through recurring and non-recurring long-term agreements (generally one to five years) for hosted subscriptions, advisory/consulting services, and for transactional solutions. Each of our reportable segments, Insurance, Energy and Specialized Markets, and Financial Services, has a portion of its revenue from more than one of these revenue types. The Company’s revenues are primarily derived from the sale of services where revenue is recognized when control of the promised services is transferred to customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those services. Fees for services provided by the Company are non-refundable. Revenue is recognized net of applicable sales tax withholdings.
Hosted Subscriptions
The Company offers two forms of hosted subscriptions. The first and most prevalent form of hosted subscription is where customers access content only through the online portal (the "Hosted Subscription"). The Company grants a license to the customer to enter the online portal. The license is a contractual mechanism that allows the customer to access the online portal for a defined period of time. As the license alone does not provide utility to the customer, the customer has no contractual right to take possession of the online portal at any time, and the customer cannot engage another party to host the online portal and related content, it is not considered a functional license under Topic 606. The Company's promise to the customer is to provide continuous access to the online portal and to update the content throughout the subscription period. Hosted Subscription is a single performance obligation that represents a series of distinct services (daily access to the online portal and related content) that are substantially the same and that have the same pattern of transfer to the customer. The Company recognizes revenue for Hosted Subscriptions ratably over the subscription period on a straight-line basis as services are performed and continuous access to information in the online portal is provided over the entire term of the agreements.
The second form of hosted subscription is where customers have access to the Company's online portals combined with software content that is delivered via disk drive/download to the customer (“Hosted Subscription with Disk Drive/Download”) and is offered only on a limited basis. For this form of hosted subscription, the Company also grants the customer a license to enter the online portal as well as access the software content as needed and acts as the same contractual mechanism as described for Hosted Subscriptions. The Hosted Subscription with Disk Drive/Download works in such a manner that the customer gains significant benefit, functionality and overall utility only when the online portal and the software content are used together. The disk drive/download contains the models while the online portal contains the latest data and research which is updated throughout the subscription period. The models within the disk drive/download depend on the data and research contained within the online portal. The data and research within the online portal is only useful when the customer can utilize it within the models (e.g., queries, projections, etc.) so that they may use the most current information and alerts to forecast potential future losses. The software content is only sold together with the online portal to provide a highly interdependent and interrelated promise and therefore represents a single performance obligation. As the customer has no contractual right to take possession of the online portal at any time, and the customer cannot engage another party to host the online portal and related software content, it is not considered a functional license under Topic 606. The Company's promise to the customer is to deliver the disk drive/download, to provide continuous access to the online portal, and to update the software content throughout the subscription period. The Company recognizes revenue for Hosted Subscriptions with Disk Drive/Download ratably over the subscription period on a straight-line basis as services are performed and continuous access to information is provided over the entire term of the agreements.
Subscriptions are generally paid in advance of rendering services either quarterly or annually upon commencement of the subscription period, which is usually for one year and in most instances automatically renewed each year.
               Advisory/Consulting Services

The Company provides certain discrete project based advisory/consulting services, which are recognized over time by measuring the progress toward complete satisfaction of the performance obligation, based on the input method of consulting hours worked; this aligns with the results achieved and value transferred to the customer. The hours consumed are most reflective of the measure of progress towards satisfying the performance obligation, as the resources hours worked directly tie to the progress of the services to be provided. In general, they are billed over the course of the project.

Transactional Solutions

Certain solutions are also paid for by customers on a transactional basis. The Company recognizes these revenues as the solutions are delivered or services performed at a point in time. In general, the customers are billed monthly at the end of each month.

    
(c) Deferred Revenues
The Company invoices its customers in annual, quarterly, monthly, or milestone installments. Amounts billed and/or collected in advance of services being provided are recorded as “Deferred revenues” and “Other noncurrent liabilities” in the accompanying consolidated balance sheets and are recognized as the services are performed, control is transferred to customers, and the applicable revenue recognition criteria is met.

(d) Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are generally recorded at the invoiced amount. The allowance for doubtful accounts is estimated based on an analysis of the aging of the accounts receivable, historical write-offs, customer payment patterns, individual customer credit worthiness, current economic trends, and/or establishment of specific reserves for customers in adverse financial condition. The Company assesses the adequacy of the allowance for doubtful accounts on a quarterly basis.
(e) Deferred Commissions
The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that certain sales incentive programs meet the requirements to be capitalized. The incremental costs of obtaining a contract with a customer, which primarily consist of sales commissions, are deferred and amortized over a useful life of five years that is consistent with the transfer to the customer the services to which the asset relates. The Company classifies deferred commissions as current or noncurrent based on the timing of expense recognition. The current and noncurrent portions of deferred commissions are included in prepaid expenses and other assets, respectively, in the consolidated balance sheets as of December 31, 2019. Amortization expense related to deferred commissions is computed on a straight-line basis over its estimated useful lives and included in "Selling, general and administrative" within the accompanying consolidated statements of operations.    
(f)    Fixed Assets and Finite-lived Intangible Assets
Fixed assets and finite-lived intangibles are stated at cost less accumulated depreciation and amortization, which are computed on a straight-line basis over their estimated useful lives. Leasehold improvements are amortized over the shorter of the useful life of the asset or the lease term.
The Company’s internal software development costs primarily relate to internal-use software. Such costs are capitalized in the application development stage in accordance with ASC 350-40, Internal-use Software ("ASC 350-40"). The Company also capitalizes software development costs upon the establishment of technological feasibility for a product in accordance with ASC 985-20, Software to be Sold, Leased, or Marketed (“ASC 985-20”). Software development costs are amortized on a straight-line basis.
In accordance with ASC 360, Property, Plant & Equipment, whenever events or changes in circumstances indicate that the carrying amount of long-lived assets and finite-lived intangible assets may not be recoverable, the Company reviews its long-lived assets and finite-lived intangible assets for impairment by first comparing the carrying value of the assets to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. If the carrying value exceeds the sum of the assets’ undiscounted cash flows, the Company estimates and recognizes an impairment loss by taking the difference between the carrying value and fair value of the assets.
(g)    Leases

The Company has operating and finance leases for corporate offices, data centers, and certain equipment that are accounted for under ASC 842. The leases have remaining lease terms ranging from one year to fourteen years, some of which include the options to extend the leases for up to twenty years, and some of which include the options to terminate the leases within one year. Extension and termination options are considered in the calculation of the right-of-use (“ROU”) assets and lease liabilities when the Company determines it is reasonably certain that it will exercise those options.

The Company determines if an arrangement is a lease at inception. The Company considers any contract where there is an identified asset and that it has the right to control the use of such asset in determining whether the contract contains a lease. A ROU asset represents the Company’s right to use an underlying asset for the lease term and the lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets
and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s operating leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the adoption date in determining the present value of lease payments. The incremental borrowing rate was calculated by using the Company's credit rating on its publicly-traded U.S. unsecured bonds and estimating an appropriate credit rating for similar secured debt instruments. The Company's calculated credit rating on secured debt instruments determined the yield curve used. The Company calculated an implied spread and applied the spreads to the risk-free interest rates based on the yield of the U.S. Treasury zero coupon securities with a maturity equal to the remaining lease term in determining the borrowing rates for all operating leases. The operating lease ROU assets include any lease payments made prior to the rent commencement date and exclude lease incentives. Lease expense for lease payments are recognized on a straight-line basis over the lease term. Operating lease transactions are included in "Operating lease right-of-use assets, net", and "Operating lease liabilities", current and noncurrent, within the accompanying consolidated balance sheets. Finance leases are included in property and equipment under "Fixed assets, net", "Short-term debt and current portion of long-term debt", and "Long-term debt" within the accompanying consolidated balance sheets.
(h)    Fair Value of Financial and Non-financial Instruments
The Company follows the provisions of ASC 820-10, Fair Value Measurements (“ASC 820-10”), which defines fair value, establishes a framework for measuring fair value under U.S. GAAP and expands fair value measurement disclosures. The Company follows the provisions of ASC 820-10 for its financial assets and liabilities recognized or disclosed at fair value on a recurring basis. The Company follows the provisions of ASC 820-10 for its non-financial assets and liabilities recognized or disclosed at fair value.
(i)    Foreign Currency
The Company has determined local currencies are the functional currencies of the foreign operations. The assets and liabilities of foreign subsidiaries are translated at the period-end rate of exchange and statement of operations items are translated at the average rates prevailing during the year. The resulting translation adjustment is recorded as a component of “Accumulated other comprehensive losses” in the accompanying consolidated statements of changes in stockholders’ equity.
(j)    Stock Based Compensation
The Company follows ASC 718, Stock Compensation (“ASC 718”). Under ASC 718, stock based compensation cost is measured at the grant date, based on the fair value of the awards granted, and is recognized as expense over the requisite service period.
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 expected term for the stock options granted for a majority of the awards 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 the Company's historical daily closing prices over the most recent period that is commensurate with the expected term of the stock option awards. The expected dividend yield was based on the Company’s expected annual dividend rate on the date of grant.
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. Restricted stock generally has a service vesting period of four years and the Company recognizes the expense ratably over this service vesting period.
Performance share units (“PSU”) vest at the end of a three-year performance period, subject to the recipient’s continued service. Each PSU represents the right to receive one share of Verisk common stock and the ultimate realization is based on the Company’s achievement of certain market performance criteria. The Company determined the grant date fair value of PSUs with the assistance of a third-party valuation specialist and based on estimates provided by the Company. The valuation of the PSUs employed the Monte Carlo simulation model, which includes certain key assumptions that were applied to the Company and its peer group. Those key assumptions included valuation date stock price, expected volatility, correlation coefficients, risk-free rate of return, and expected dividend yield.  The valuation date stock price is based on the dividend-adjusted closing price on the grant date. Expected
volatility is calculated using historical daily closing prices over a period that is commensurate with the length of the performance period. The correlation coefficients are based on the price data used to calculate the historical volatilities. The risk-free rate of return is based on the yield of U.S. Treasury zero coupon securities with a maturity equal to the length of the performance period. The expected dividend yield was based on the Company and its peer group’s expected dividend rate over the performance period.
The Company estimates expected forfeitures of equity awards at the date of grant and recognizes compensation expense only for those awards expected to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. Estimated forfeiture is ultimately adjusted to actual forfeiture. Changes in the forfeiture assumptions may impact the total amount of expense ultimately recognized, as well as the timing of expense recognized over the requisite service period.

Excess tax benefit from exercised stock options, lapsing of restricted stock and PSUs is recorded as an income tax benefit in the accompanying consolidated statements of operations. This tax benefit is calculated as the excess of the intrinsic value of options exercised and of the market value of restricted stock lapsed over the compensation recognized for financial reporting purposes.
(k)    Research and Development Costs
Research and development costs, which are primarily related to personnel and related overhead costs incurred in developing new services for customers, are expensed as incurred. Such costs were $65.6 million, $47.6 million and $37.4 million for the years ended December 31, 2019, 2018 and 2017, respectively, and were included in the accompanying consolidated statements of operations.
(l)    Advertising Costs
Advertising costs, which are primarily associated with promoting the Company’s brand, names and solutions provided, are expensed as incurred. Such costs were $10.7 million, $9.0 million and $6.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.
(m)    Income Taxes
The Company accounts for income taxes under the asset and liability method under ASC 740, Income Taxes (“ASC 740”), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
Deferred tax assets are recorded to the extent these assets are more likely than not to be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and recent financial operations. Valuation allowances are recognized to reduce deferred tax assets if it is determined to be more likely than not that all or some of the potential deferred tax assets will not be realized.
The Company follows ASC 740-10, Income Taxes (“ASC 740-10”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements. ASC 740-10 provides that a tax benefit from an uncertain tax position may be recognized based on the technical merits when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes. Income tax positions must meet a more likely than not recognition threshold in accordance with ASC 740-10. This standard also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of operations. Accrued interest and penalties are included within “Other liabilities” on the accompanying consolidated balance sheets.
(n)    Earnings Per Share
Basic and diluted earnings per share (“EPS”) are determined in accordance with ASC 260, Earnings per Share, which specifies the computation, presentation and disclosure requirements for EPS. Basic EPS excludes all dilutive common stock equivalents. It is based upon the weighted average number of common shares outstanding during the period. Diluted EPS, as calculated using the treasury stock method, reflects the potential dilution that would occur if the Company’s dilutive outstanding stock options and stock awards were issued.
(o)    Pension and Postretirement Benefits
The Company accounts for its pension and postretirement benefits under ASC 715, Compensation — Retirement Benefits (“ASC 715”). ASC 715 requires the recognition of the funded status of a benefit plan in the balance sheet, the recognition in other comprehensive income (loss) of gains or losses and prior service costs arising during the period, but which are not included as components of periodic benefit cost or credit, and the measurement of defined benefit plan assets and obligations as of the balance sheet date. The Company utilizes a valuation date of December 31.
(p)    Product Warranty Obligations
The Company provides warranty coverage for certain of its solutions. The Company recognizes a product warranty obligation when claims are probable and can be reasonably estimated. As of December 31, 2019 and 2018, product warranty obligations were not material.
In the ordinary course of business, the Company enters into numerous agreements that contain standard indemnities whereby the Company indemnifies another party for breaches of confidentiality, infringement of intellectual property or gross negligence. Such indemnifications are primarily granted under licensing of computer software. Most agreements contain provisions to limit the maximum potential amount of future payments that the Company could be required to make under these indemnifications; however, the Company is not able to develop an estimate of the maximum potential amount of future payments to be made under these indemnifications as the triggering events are not subject to predictability.
(q)    Loss Contingencies
The Company accrues for costs relating to litigation, claims and other contingent matters when such liabilities become probable and reasonably estimable. Such estimates are based on management’s judgment. Actual amounts paid may differ from amounts estimated, and such differences will be charged to operations in the period in which the final determination of the liability is made.
(r)    Goodwill
Goodwill represents the excess of acquisition costs over the fair value of tangible net assets and identifiable intangible assets of the businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized. Intangible assets determined to have finite lives are amortized over their useful lives. 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. The Company completed the required annual impairment test as of June 30, 2019, which resulted in no impairment of goodwill in 2019. This test 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 the goodwill.
(s)    Recent Accounting Pronouncements
Accounting Standard
Description
Effective Date
Effect on Consolidated Financial Statements or Other Significant Matters
Revenue from Contracts with Customers ("Topic 606")

In May 2014, Financial Accounting Standards Board ('FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)"
Refer to Note 6. Revenue
Fiscal years beginning after December 15, 2017 with early adoption permitted. The Company adopted on January 1, 2018.
Refer to Note 6. Revenue
Financial Instruments—Overall (Subtopic 825-10)

In January 2016, FASB issued ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 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.
Fiscal years beginning after December 15, 2017. The Company adopted on January 1, 2018.
The impact of adoption associated with ASU No. 2016-01 was immaterial to the Company's consolidated financial statements.


Income Statement—Reporting Comprehensive Income (Topic 220)

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”).

The guidance in ASU 2018-02 allows an entity to elect to reclassify the stranded tax effects related to the Tax Cuts and Jobs Act of 2017 (the “Act”) from accumulated other comprehensive income into retained earnings.

Fiscal years beginning after December 15, 2018 with early adoption permitted. The Company adopted on January 1, 2019.
The Company elected not to reclassify any amounts recognized in other comprehensive income into retained earnings.

Leases ("Topic 842")

In July 2018, FASB issued ASU No. 2018-10, "Codification Improvements to Topic 842, Lease"
Refer to Note 8. Leases
Fiscal years beginning after December 15, 2018 with early adoption permitted. The Company adopted on January 1, 2019.
Refer to Note 8. Leases
Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Financial Instruments (Topic 825)

In April 2019, FASB issued ASU No. ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments"
Topics addressed by the updates include recoveries in estimating expected credit losses, accrued interest accounting policy elections and practical expedients, transfers between loan classifications and debt security categories, contractual term extensions and renewal options, vintage disclosures for revolving line-of credit arrangements, reinsurance recoverables, expected prepayments in determining the discount rate used to estimate credit losses, and interest rate projections for variable-rate instruments. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief ("ASU No. 2019-05"). ASU No. 2019-05 amends the transition guidance in the new credit losses standard, ASC 326, Financial Instruments—Credit Losses. In November 2019, the FASB issued 1) ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326, Derivative and Hedging (Topic 815) and Leases (Topic 842): Effective Dates ("ASU No. 2019-10"), which clarified various effective dates for these topics; and 2) ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses ("ASU No. 2019-11"), which addressed stakeholders’ specific issues about certain aspects of the amendments in Update 2016-13.
Fiscal years beginning after December 15, 2019 with early adoption permitted.
The Company has decided not to early adopt the amendments. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.

Income Tax (Topic 740)

In December 2019, FASB issued ASU No. 2019-12, "Simplifying the Accounting for Income Taxes" ("ASU No. 2019-12")
The amendments in this guidance reflect the FASB’s effort to reduce the complexity of accounting standards while maintaining or enhancing the helpfulness of information provided to financial statement users.  Changes include treatment of Hybrid tax regimes, tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of legal entities not subject to tax, intraperiod tax allocation, ownership changes in investments, interim-period accounting for enacted changes in tax law, year-to-date loss limitation in interim-period tax accounting, income statement presentation of tax benefits of tax-deductible dividends, and impairment of investment in qualified affordable housing projects accounted for under the equity method.
Fiscal years beginning after December 15, 2020 with early adoption permitted.

The Company has decided not to early adopt the amendments. The Company is currently evaluating ASU No. 2019-12 and has not yet determined the impact of these amendments may have on its consolidated financial statements.

v3.19.3.a.u2
Cash and Cash Equivalents
12 Months Ended
Dec. 31, 2019
Cash and Cash Equivalents [Abstract]  
Cash and Cash Equivalents Cash and Cash Equivalents:
Cash and cash equivalents consist of cash in banks, commercial paper, money-market funds, and other liquid instruments with original maturities of 90 days or less at the time of purchase.
v3.19.3.a.u2
Accounts Receivable
12 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
Accounts Receivable Accounts Receivable:
Accounts receivable, net consisted of the following at December 31:
 
 
2019
 
 
2018
Billed receivables
$
372.7

 
$
299.7

Unbilled receivables
 
80.6

 
 
62.4

Total receivables
 
453.3

 
 
362.1

Less allowance for doubtful accounts
 
(11.7
)
 
 
(5.7
)
Accounts receivable, net
$
441.6

 
$
356.4


v3.19.3.a.u2
Concentration of Credit Risk
12 Months Ended
Dec. 31, 2019
Risks and Uncertainties [Abstract]  
Concentration of Credit Risk Concentration of Credit Risk:
Financial instruments that potentially expose the Company to credit risk consist primarily of cash and cash equivalents as well as accounts receivable, net which are generally not collateralized. The Company maintains its cash and cash equivalents in higher credit quality financial institutions in order to limit the amount of credit exposure. The total domestic cash balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) to a maximum amount of $250.0 thousand per bank as of December 31, 2019 and 2018. As of December 31, 2019 and 2018, the Company had cash balances on deposit with ten and eight banks that exceeded the balance insured by the FDIC limit by approximately $36.4 million and $16.8 million, respectively. As of December 31, 2019 and 2018, the Company also had cash on deposit with foreign banks of approximately $145.7 million and $121.1 million, respectively.
The Company considers the concentration of credit risk associated with its accounts receivable to be commercially reasonable and believes that such concentration does not result in the significant risk of near-term severe adverse impacts. The Company’s top fifty customers represent approximately 33% of revenues for 2019 and 34% for 2018 as well as for 2017, respectively, with no individual customer accounting for more than approximately 3% of revenues for the years ended December 31, 2019, 2018, and 2017. No individual customer comprised more than approximately 3% of accounts receivable as of December 31, 2019 and 2018.
v3.19.3.a.u2
Revenues
12 Months Ended
Dec. 31, 2019
Revenue from Contract with Customer [Abstract]  
Revenues Revenues:
In May 2014, the FASB issued Topic 606, which replaces numerous requirements under Topic 605, Revenue Recognition ("Topic 605"), in U.S. GAAP, including industry-specific requirements, and provides companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Revenue is recognized in a five-step model: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contract; and 5) recognize revenue when or as the company satisfies a performance obligation. Effective January 1, 2018, the Company
adopted the requirements of Topic 606 using the modified retrospective method in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The results of operations for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under Topic 605. The accounting policies related to Topic 605 were presented in the Form 10-K for the year ended December 31, 2017, for which the Company recognized revenue when the following four criteria were met: persuasive evidence of an arrangement existed, delivery had occurred or services had been rendered, fees and/or price was fixed or determinable, and collectability was reasonably assured.
In accordance with Topic 606, the disclosure of the impact of adoption on the accompanying consolidated statement of operations and the accompanying consolidated balance sheet for and as of the year ended December 31, 2018 are as follows:
 
For the year ended December 31, 2018 under Topic 605
 
Adjustments due to ASU 2014-09
 
For the year ended December 31, 2018 under Topic 606
Revenues
$
2,394.4

 
$
0.7

 
$
2,395.1

Selling, general and administrative (3)
$
384.0

 
$
(5.3
)
 
$
378.7

Provision for income taxes
$
(119.5
)
 
$
(1.5
)
 
$
(121.0
)
Net income
$
594.2

 
$
4.5

 
$
598.7

_______________
(3)Includes deferred commission amortization under Topic 606
 
As of December 31, 2018 under Topic 605
 
Adjustments due to ASU 2014-09
 
As of December 31, 2018 under Topic 606
Accounts receivable
$
351.7

 
$
4.7

 
$
356.4

Prepaid expenses
$
47.0

 
$
16.9

 
$
63.9

Other assets
$
66.9

 
$
32.6

 
$
99.5

Accounts payable and accrued liabilities
$
248.6

 
$
2.3

 
$
250.9

Deferred revenues
$
383.6

 
$
(0.5
)
 
$
383.1

Deferred income tax liabilities
$
337.9

 
$
12.7

 
$
350.6

Retained earnings
$
3,902.9

 
$
39.7

 
$
3,942.6


Disaggregated revenues by type of service and by country are provided below for the years ended December 31, 2019, 2018 and 2017. No individual country outside of the U.S. accounted for more than 10.0% of the Company's consolidated revenues for the years ended December 31, 2019, 2018 or 2017.
 
2019

2018

2017
Insurance:
 
 
 
 
 
 
 

Underwriting & rating
$
1,244.6


$
1,144.5


$
1,046.9

Claims
 
610.9


 
561.4


 
503.7

Total Insurance
 
1,855.5


 
1,705.9


 
1,550.6

Energy and Specialized Markets
 
573.6


 
513.3


 
444.6

Financial Services
 
178.0


 
175.9


 
150.0

Total revenues
$
2,607.1


$
2,395.1


$
2,145.2

 
2019

2018

2017
Revenues:
 


 


 

United States ("U.S.")
$
2,005.6


$
1,849.4


$
1,679.4

United Kingdom ("U.K.")
 
177.3


 
148.2


 
111.3

Other countries
 
424.2


 
397.5


 
354.5

Total revenues
$
2,607.1


$
2,395.1

 
$
2,145.2



Contract assets are defined as an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time. As of December 31, 2019 and 2018, the Company had no contract assets.
Contract liabilities are defined as an entity's obligation to transfer goods or services to a customer for which the entity has received consideration (an amount of consideration is due) from the customer. As of December 31, 2019 and 2018, the Company had contract liabilities that primarily related to unsatisfied performance obligations to provide customers with the right to use and update the online content over the remaining contract term of $443.2 million and $385.1 million, respectively. The $58.1 million increase in contract liabilities from December 31, 2018 to December 31, 2019 was primarily due to billings of $357.8 million that were paid in advance, partially offset by $299.7 million of revenue recognized for the year ended December 31, 2019. Contract liabilities, which are current and noncurrent, are included in "Deferred revenues" and "Other liabilities" in the consolidated balance sheets, respectively, as of December 31, 2019 and 2018.

The Company’s most significant remaining performance obligations relate to providing customers with the right to use and update the online content over the remaining contract term. Revenues expected to be recognized in the future related to performance obligations, included within our deferred revenue and other liabilities, that are unsatisfied were $443.2 million and $385.1 million as of December 31, 2019 and 2018, respectively. Our disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. These performance obligations, which are expected to be satisfied within one year, comprised approximately 99% of the balance as of December 31, 2019 and 2018.
The Company recognizes an asset for incremental costs of obtaining a contract with a customer if it expects the benefits of those costs to be longer than one year. As of December 31, 2019 and 2018, the Company had deferred commissions of $63.7 million and $49.5 million, respectively, which have been included in "Prepaid expenses" and "Other assets" in the accompanying consolidated balance sheets.
v3.19.3.a.u2
Fair Value Measurements
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements  Fair Value Measurements:
Certain assets and liabilities of the Company are reported at fair value in the accompanying consolidated balance sheets. Such assets and liabilities include amounts for both financial and non-financial instruments. To increase consistency and comparability of assets and liabilities recorded at fair value, 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 is internally-developed, and considers risk premiums that a market participant would require.
The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and short-term debt approximate their carrying amounts because of the short-term nature of these instruments. The investments in registered investment companies, which are Level 1 assets measured at fair value on a recurring basis using quoted prices in active markets multiplied by the number of shares owned, were $3.6 million and $3.3 million as of December 31, 2019 and 2018, respectively. The investments in registered investment companies have been included in "Other current assets" in the consolidated balance sheets as of December 31, 2019 and 2018.
The Company elected not to carry its long-term debt at fair value. The carrying value of the long-term debt represents the amortized cost, inclusive of unamortized premium, and net of unamortized discount and debt issuance costs. The Company assesses the fair value of these financial instruments based on an estimate of interest rates available to the Company for financial instruments 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 these financial instruments as of December 31, 2019 and 2018 respectively:
 
Fair Value Hierarchy
 
2019
 
2018
 
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial instrument not carried at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt excluding finance lease liabilities and syndicated revolving credit facility debt issuance costs
Level 2
 
$
2,650.4

 
$
2,902.2

 
$
2,033.9

 
$
2,347.4

 As of December 31, 2019 and 2018, the Company had securities of $14.0 million and $11.5 million, which were accounted for as cost-based investments under ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock ("ASC 323-10-25"). The Company does not have the ability to exercise significant influence over the investees’ operating and financial policies. As of December 31, 2019 and 2018, the Company also had an investment in a limited partnership of $13.1 million and $5.9 million, respectively, accounted for in accordance with ASC 323-10-25 as an equity method investment. These investments were included in "Other assets" in the accompanying consolidated balance sheet.
v3.19.3.a.u2
Leases
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Leases Leases:

In February 2016, the FASB established ASC 842, which focused on increasing transparency and comparability related to leases among organizations by requiring the recognition of ROU assets and lease liabilities on the balance sheet. The core principle of ASC 842 is that a lessee should recognize the assets and liabilities that arise from leases. This concept requires a lessee to recognize on the balance sheet a ROU asset representing the lessee’s right to use the underlying asset over the duration of the lease term and a liability to make lease payments. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company is also required to recognize and measure leases existing at, or entered into after the adoption date using a modified retrospective approach, with certain practical expedients available.

The Company adopted ASC 842 on January 1, 2019 using the modified retrospective approach and elected the transition relief package of practical expedients by applying previous accounting conclusions under ASC 840 to all leases that existed prior to the transition date. As a result, the Company did not reassess 1) whether existing or expired contracts contain leases, 2) lease classification for any existing or expired leases, and 3) whether lease origination costs qualified as initial direct costs. The Company did not elect the practical expedient to use hindsight in determining a lease term and impairment of the ROU assets at the adoption date. The Company did not separate lease components from non-lease components for leased corporate offices and data centers. The election applies to all operating leases where fixed rent payments incorporate common area maintenance. For leases where the election does not apply, the common area maintenance is billed by the landlord separately. Additionally, the Company did not capitalize any short-term leases, generally defined as a lease term of less than one year, in accordance with ASC 842.
The following table presents the cumulative effect of the changes made to the accompanying consolidated balance sheets as of January 1, 2019 as a result of the adoption of ASC 842:
 
 
December 31, 2018
 
Adjustments due to ASC 842
 
January 1, 2019
Prepaid expenses
 
$
63.9

 
$
(0.2
)
 
$
63.7

Operating lease right-of-use assets, net
 
$

 
$
247.8

 
$
247.8

Accounts payable and accrued liabilities
 
$
250.9

 
$
(2.0
)
 
$
248.9

Current operating lease liabilities
 
$

 
$
39.5

 
$
39.5

Noncurrent operating lease liabilities
 
$

 
$
236.4

 
$
236.4

Other liabilities
 
$
75.7

 
$
(26.3
)
 
$
49.4


The following table presents the lease cost, cash paid for amounts included in the measurement of lease liabilities, ROU assets obtained, weighted-average remaining lease terms, and weighted-average discount rates for finance and operating leases for the year ended December 31, 2019.
 
2019
Lease cost:
 
 
Operating lease cost (1)
$
48.4

Finance lease cost
 
 
Depreciation of finance lease assets (2)
 
13.2

Interest on finance lease liabilities (3)
 
1.8

Total lease cost
$
63.4

 
 
 
Other information:
 
 
Cash paid for amounts included in the measurement of lease liabilities
 
 
Operating cash outflows from operating leases
$
(48.4
)
Operating cash outflows from finance leases
$
(1.8
)
Financing cash outflows from finance leases
$
(15.1
)
Weighted-average remaining lease term - operating leases
 
9.4 years

Weighted-average remaining lease term - finance leases
 
2.6 years

Weighted-average discount rate - operating leases
 
4.0
%
Weighted-average discount rate - finance leases
 
4.4
%
_______________
(1) Included in "Cost of revenues" and "Selling, general and, administrative" expenses in the accompanying consolidated statements of operations
(2) Included in "Depreciation and amortization of fixed assets" in the accompanying consolidated statements of operations
(3) Included in "Interest expense" in the accompanying consolidated statements of operations
The ROU assets and lease liabilities for finance leases were $9.9 million and $7.7 million, respectively, as of December 31, 2019. The ROU assets for finance leases were included in "Fixed assets, net" in the accompanying consolidated balance sheets. The lease liabilities for finance leases were included in the "Short-term debt and current portion of long-term debt" and "Long-term debt" in the accompanying consolidated balance sheets (see Note 15. Debt).
Maturities of lease liabilities for the years through 2025 and thereafter are as follows:
Years Ending
 
Operating Leases
 
Finance Leases
2020
 
$
48.7

 
$
5.2

2021
 
 
39.2

 
 
2.5

2022
 
 
35.6

 
 
0.3

2023
 
 
31.0

 
 
0.1

2024
 
 
21.4

 
 

2025 and thereafter
 
 
128.8

 
 

Total lease payments
 
 
304.7

 
 
8.1

Less: Amount representing interest
 
 
(56.0
)
 
 
(0.4
)
Present value of total lease payments
 
$
248.7

 
$
7.7


The following table summarizes the minimum rentals under long-term noncancelable leases for all leased premises, computer equipment and automobiles under ASC 840, Leases, as of December 31, 2018:
Years Ending
Operating Leases
 
Capital Leases
2019
$
46.0

 
$
8.3

2020
 
46.3

 
 
9.5

2021
 
37.2

 
 
8.6

2022
 
33.8

 
 
2.8

2023
 
28.9

 
 

2024 and thereafter
 
147.6

 
 

Net minimum lease payments
$
339.8

 
 
29.2

Less: Amount representing interest
 
 
 
 
(1.9
)
Present value of net minimum lease capital payments
 
 
 
$
27.3

 
Rent expense on operating leases approximated $44.9 million, and $39.0 million for the years ended December 31, 2018 and 2017, respectively.
Leases Leases:

In February 2016, the FASB established ASC 842, which focused on increasing transparency and comparability related to leases among organizations by requiring the recognition of ROU assets and lease liabilities on the balance sheet. The core principle of ASC 842 is that a lessee should recognize the assets and liabilities that arise from leases. This concept requires a lessee to recognize on the balance sheet a ROU asset representing the lessee’s right to use the underlying asset over the duration of the lease term and a liability to make lease payments. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company is also required to recognize and measure leases existing at, or entered into after the adoption date using a modified retrospective approach, with certain practical expedients available.

The Company adopted ASC 842 on January 1, 2019 using the modified retrospective approach and elected the transition relief package of practical expedients by applying previous accounting conclusions under ASC 840 to all leases that existed prior to the transition date. As a result, the Company did not reassess 1) whether existing or expired contracts contain leases, 2) lease classification for any existing or expired leases, and 3) whether lease origination costs qualified as initial direct costs. The Company did not elect the practical expedient to use hindsight in determining a lease term and impairment of the ROU assets at the adoption date. The Company did not separate lease components from non-lease components for leased corporate offices and data centers. The election applies to all operating leases where fixed rent payments incorporate common area maintenance. For leases where the election does not apply, the common area maintenance is billed by the landlord separately. Additionally, the Company did not capitalize any short-term leases, generally defined as a lease term of less than one year, in accordance with ASC 842.
The following table presents the cumulative effect of the changes made to the accompanying consolidated balance sheets as of January 1, 2019 as a result of the adoption of ASC 842:
 
 
December 31, 2018
 
Adjustments due to ASC 842
 
January 1, 2019
Prepaid expenses
 
$
63.9

 
$
(0.2
)
 
$
63.7

Operating lease right-of-use assets, net
 
$

 
$
247.8

 
$
247.8

Accounts payable and accrued liabilities
 
$
250.9

 
$
(2.0
)
 
$
248.9

Current operating lease liabilities
 
$

 
$
39.5

 
$
39.5

Noncurrent operating lease liabilities
 
$

 
$
236.4

 
$
236.4

Other liabilities
 
$
75.7

 
$
(26.3
)
 
$
49.4


The following table presents the lease cost, cash paid for amounts included in the measurement of lease liabilities, ROU assets obtained, weighted-average remaining lease terms, and weighted-average discount rates for finance and operating leases for the year ended December 31, 2019.
 
2019
Lease cost:
 
 
Operating lease cost (1)
$
48.4

Finance lease cost
 
 
Depreciation of finance lease assets (2)
 
13.2

Interest on finance lease liabilities (3)
 
1.8

Total lease cost
$
63.4

 
 
 
Other information:
 
 
Cash paid for amounts included in the measurement of lease liabilities
 
 
Operating cash outflows from operating leases
$
(48.4
)
Operating cash outflows from finance leases
$
(1.8
)
Financing cash outflows from finance leases
$
(15.1
)
Weighted-average remaining lease term - operating leases
 
9.4 years

Weighted-average remaining lease term - finance leases
 
2.6 years

Weighted-average discount rate - operating leases
 
4.0
%
Weighted-average discount rate - finance leases
 
4.4
%
_______________
(1) Included in "Cost of revenues" and "Selling, general and, administrative" expenses in the accompanying consolidated statements of operations
(2) Included in "Depreciation and amortization of fixed assets" in the accompanying consolidated statements of operations
(3) Included in "Interest expense" in the accompanying consolidated statements of operations
The ROU assets and lease liabilities for finance leases were $9.9 million and $7.7 million, respectively, as of December 31, 2019. The ROU assets for finance leases were included in "Fixed assets, net" in the accompanying consolidated balance sheets. The lease liabilities for finance leases were included in the "Short-term debt and current portion of long-term debt" and "Long-term debt" in the accompanying consolidated balance sheets (see Note 15. Debt).
Maturities of lease liabilities for the years through 2025 and thereafter are as follows:
Years Ending
 
Operating Leases
 
Finance Leases
2020
 
$
48.7

 
$
5.2

2021
 
 
39.2

 
 
2.5

2022
 
 
35.6

 
 
0.3

2023
 
 
31.0

 
 
0.1

2024
 
 
21.4

 
 

2025 and thereafter
 
 
128.8

 
 

Total lease payments
 
 
304.7

 
 
8.1

Less: Amount representing interest
 
 
(56.0
)
 
 
(0.4
)
Present value of total lease payments
 
$
248.7

 
$
7.7


The following table summarizes the minimum rentals under long-term noncancelable leases for all leased premises, computer equipment and automobiles under ASC 840, Leases, as of December 31, 2018:
Years Ending
Operating Leases
 
Capital Leases
2019
$
46.0

 
$
8.3

2020
 
46.3

 
 
9.5

2021
 
37.2

 
 
8.6

2022
 
33.8

 
 
2.8

2023
 
28.9

 
 

2024 and thereafter
 
147.6

 
 

Net minimum lease payments
$
339.8

 
 
29.2

Less: Amount representing interest
 
 
 
 
(1.9
)
Present value of net minimum lease capital payments
 
 
 
$
27.3

 
Rent expense on operating leases approximated $44.9 million, and $39.0 million for the years ended December 31, 2018 and 2017, respectively.
v3.19.3.a.u2
Fixed Assets
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Fixed Assets Fixed Assets
The following is a summary of fixed assets:
 
Useful Life
 
Cost
 
Accumulated
Depreciation and
Amortization
 
Net
December 31, 2019
 
 
 
 
 
 
 
 
 
 
Furniture and office equipment
3-10 years
 
$
268.9

 
$
(210.1
)
 
$
58.8

Leasehold improvements
Lease term
 

103.9

 

(41.7
)
 

62.2

Purchased software
3 years
 

89.8

 

(77.7
)
 

12.1

Software development costs
3-7 years
 

773.7

 

(373.7
)
 

400.0

Leased equipment
3-4 years
 

38.5

 

(28.6
)
 

9.9

Aircraft equipment
2-10 years
 
 
5.2

 
 
(0.1
)
 
 
5.1

Total fixed assets
 
 
$
1,280.0

 
$
(731.9
)
 
$
548.1

December 31, 2018
 
 
 
 
 
 
 
 
 
 
Furniture and office equipment
3-10 years
 
$
260.1

 
$
(198.8
)
 
$
61.3

Leasehold improvements
Lease term
 

111.9

 

(46.6
)
 

65.3

Purchased software
3 years
 

122.6

 

(104.4
)
 

18.2

Software development costs
3-7 years
 

654.6

 

(316.6
)
 

338.0

Leased equipment
3-4 years
 

36.2

 

(31.7
)
 

4.5

Aircraft equipment
2-10 years
 
 
81.1

 
 
(12.5
)
 
 
68.6

Total fixed assets
 
 
$
1,266.5

 
$
(710.6
)
 
$
555.9


Depreciation and amortization of fixed assets for the years ended December 31, 2019, 2018 and 2017 were $185.7 million, $165.3 million and $135.6 million, of which $100.2 million, $85.4 million and $58.0 million related to amortization of internal-use software development costs, respectively. Amortization expense related to development of software for sale in accordance with ASC 985-20 was $12.8 million, $9.7 million and $9.5 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company had unamortized software development costs that had been capitalized in accordance with ASC 350-40 of $353.3 million and $295.3 million as of December 31, 2019 and 2018, respectively. The Company had unamortized software development costs that had been capitalized in accordance with ASC 985-20 of $46.7 million and $42.7 million as of December 31, 2019 and 2018, respectively. Leased assets include amounts held under capital leases for automobiles, computer software, computer equipment and aircraft equipment.
v3.19.3.a.u2
Acquisitions
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Acquisitions Acquisitions
2019 Acquisitions
On December 23, 2019, the Company acquired 100 percent of the stock of Flexible Architecture and Simplified Technology, LLC ("FAST"), a software company for the life insurance and annuity industry, for a net cash purchase price of $192.4 million, of which $1.9 million represents indemnity escrows. FAST offers a flexible policy administration system that helps insurers accelerate underwriting and claims to enhance the customer experience and support profitable growth. FAST has become part of the underwriting & rating category within the Company's Insurance segment, and expanded and enhanced the suite of solutions the Company is developing across the enterprise for life insurers looking to transform the customer experience throughout the life of the policy, from quote to claims. The preliminary purchase price allocation of the acquisition is presented in the table below.
On December 19, 2019, the Company acquired selected assets of Commerce Signals, Inc. ("Commerce Signals"), a software company that offers a data sharing platform for retail, restaurant and entertainment marketers, for a net cash purchase price of $3.8 million, which consists of a holdback of $1.1 million as security for the indemnification obligations of the seller. Commerce Signals has become part of the Company's Financial Services segment, and enhanced the existing solutions the Company currently offer. The preliminary purchase price allocation of the acquisition is presented as part of "Others' in the table below.
On November 5, 2019, the Company acquired 100 percent of the stock of Genscape, Inc. (“Genscape”), a global provider of real-time data and intelligence for commodity and energy markets, for a net cash purchase price of $353.2 million. Genscape has become part of the Energy and Specialized Markets segment, and enhanced the Company’s existing sector intelligence in energy data and analytics. The preliminary purchase price allocation of the acquisition is presented in the table below.
On October 10, 2019, the Company acquired 100 percent of the stock of BuildFax, Inc. ("BuildFax") for a net cash purchase price of $40.4 million, which consists a holdback of $1.0 million.  BuildFax uses building permit, contractor, and inspection data to provide information about the condition of properties to insurance and financial institutions. The data from BuildFax enhances property analytics under the underwriting & rating category within the Company's Insurance segment while helping underwriters gain insight into changes in the property insured. The preliminary purchase price allocation of the acquisition is presented in the table below.
On August 28, 2019, the Company acquired substantially all of the assets of Property Pres Wizard, LLC. ("PPW"), for a net cash purchase price of $15.0 million, of which $1.5 million represents indemnity escrows. PPW is a web and mobile application that manages work order details and property status in the field services industry throughout the supply chain. PPW has become part of the claims category within the Company's Insurance segment, and added a service order and project management application to the Company’s PropTech suite of solutions. The preliminary purchase price allocation of the acquisition is presented as part of "Others" in the table below.
On July 31, 2019, the Company acquired 100 percent of the stock of Keystone Aerial Surveys, Inc. ("Keystone"), for a net cash purchase price of $29.8 million, of which $3.0 million represents indemnity escrows, to expand its remote imagery business. Keystone sourced imagery by providing customers geospatial solutions and had become part of the claims category within the Company's Insurance segment. Keystone was a component within the aerial imagery sourcing group, which was qualified as assets held for sale on December 2, 2019. On February 1, 2020, the sale of the aerial imagery sourcing group was closed. See Note 10. Businesses Held for Sale and Disposition for further discussion. The final purchase price allocation of the acquisition is presented as part of "Others" in the table below.
On March 29, 2019, the Company entered into an agreement with an enterprise application software provider to acquire their Content as a Service (“CaaS”) business, which included the Environmental Health and Safety Regulatory Content and Environmental Health and Safety Regulatory Documentation teams and data assets, for a net cash purchase price of $69.1 million. The CaaS business has become part of the Company's Energy and Specialized Markets segment. This transaction strengthened the Company’s environmental health and safety services business and extended its global customer footprint and European operations. The preliminary purchase price allocation of the acquisition is presented in the table below.
The preliminary purchase price allocation of the 2019 acquisitions resulted in the following:
 
FAST
 
Genscape
 
BuildFax
 
CaaS
 
 
Others
 
 
Total
Cash and cash equivalents
$
3.0

 
$
0.2

 
$
0.4

 
$
3.7

 
$
3.1

 
$
10.4

Accounts receivable

7.8

 

13.4

 

1.8

 


 

3.9

 

26.9

Other current assets

0.4

 

7.4

 

0.2

 

3.1

 

0.9

 

12.0

Fixed assets

2.6

 

22.3

 

0.9

 


 

6.4

 

32.2

Operating lease right-of-use assets, net

1.4

 

7.4

 

0.4

 


 

0.6

 

9.8

Intangible assets

69.0

 

152.9

 

21.9

 

34.4

 

13.8

 

292.0

Goodwill

116.9

 

245.6

 

19.7

 

42.9

 

28.4

 

453.5

Other assets


 


 


 


 

5.2

 

5.2

Total assets acquired

201.1

 

449.2

 

45.3

 

84.1

 

62.3

 

842.0

Current liabilities

1.1

 

18.9

 

0.8

 

1.3

 

1.4

 

23.5

Deferred revenues

2.2

 

30.2

 

1.9

 

10.0

 

0.1

 

44.4

Operating lease liabilities

1.4

 

7.4

 

0.4

 


 

0.4

 

9.6

Deferred income tax, net

1.0

 

39.3

 

0.5

 


 

2.9

 

43.7

Other liabilities


 


 

0.9

 


 

5.8

 

6.7

Total liabilities assumed

5.7

 

95.8

 

4.5

 

11.3

 

10.6

 

127.9

Net assets acquired

195.4

 

353.4

 

40.8

 

72.8

 

51.7

 

714.1

Cash acquired

(3.0
)
 

(0.2
)
 

(0.4
)
 

(3.7
)
 

(3.1
)
 

(10.4
)
Net cash purchase price
$
192.4

 
$
353.2

 
$
40.4

 
$
69.1

 
$
48.6

 
$
703.7


The preliminary amounts assigned to intangible assets by type for the 2019 acquisitions are summarized in the table below:
 
Weighted Average Useful Life
 
Total
Technology
6 years
 
$
81.9

Marketing
4 years
 
 
3.9

Customer
12 years
 
 
185.5

Database
10 years
 
 
20.7

Total intangible assets
 
 
$
292.0


The preliminary allocations of the purchase price for the 2019 acquisitions with less than a year ownership are subject to revisions as additional information is obtained about the facts and circumstances that existed as of each acquisition date. The revisions may have a significant impact on the accompanying consolidated financial statements. The allocations of the purchase price will be finalized once all information is obtained and assessed, but not to exceed one year from the acquisition date. The primary areas of the purchase price allocation that are not yet finalized relate to operating leases, income and non-income taxes, deferred revenues, the valuation of intangible assets acquired, and residual goodwill. The goodwill associated with the Company’s acquisitions include the acquired assembled work force, the value associated with the opportunity to leverage the work force to continue to develop the technology and content assets, as well as the ability to grow the Company through adding additional customer relationships or new solutions in the future. Goodwill of $307.1 million associated with the 2019 acquisitions is not deductible for tax purposes. The preliminary amounts assigned to intangible assets by type for these acquisitions were based upon the Company's valuation model and historical experiences with entities with similar business characteristics. For the year ended December 31, 2019, the Company incurred transaction costs of $3.0 million which were included within "Selling, general and administrative" expenses in the accompanying consolidated statements of operations. Refer to Note 12. Goodwill and Intangible Assets for further discussion.
The 2019 acquisitions were not significant, both individually and in the aggregate, to the Company's consolidated financial statements for the years ended December 31, 2019, 2018 and 2017, and therefore, supplemental information disclosure on an unaudited pro forma basis is not presented.
2018 Acquisitions
On December 14, 2018, the Company acquired Rulebook for a net cash purchase price of $86.5 million, of which $8.6 million represents contingent escrows. Rulebook’s proprietary pricing engine can be used for internal pricing and underwriting as well as external distribution for the insurance market through its platform. Rulebook furthers the Company's goal of providing solutions to the global insurance market, including a comprehensive chain of solutions to specialty insurers for mitigating risk and optimizing total cost of operations. Rulebook is part of the underwriting and ratings category within the Insurance segment. The final purchase price allocation of the acquisition is presented in the table below.
On June 20, 2018, the Company acquired 100 percent of the stock of Validus-IVC Limited ("Validus"), a provider of claims management solutions and developer of the subrogation portal in the UK, verifyTM, for a net cash purchase price of $46.1 million, of which $5.9 million represents contingent escrows. Validus has become part of the claims category within the Company's Insurance segment. The integration of Validus' verifyTM platform with the Company's global claims analytic services allows insurers to take advantage of enhanced analytic and technology tools to help improve and automate the claims settlement process. The final purchase price allocation of the acquisition is presented in the table below.
On February 21, 2018, the Company acquired 100 percent of the stock of Business Insight Limited (“Business Insight”), a provider of predictive analytics for insurers in the U.K. and Ireland, for a net cash purchase price of $18.0 million. Business Insight has become part of the underwriting and ratings category within the Insurance segment. Business Insight offers a comprehensive set of peril models to support underwriting and rating for the commercial property and homeowners insurance market. The final purchase price allocation of the acquisition is presented as part of "Others" in the table below.
On January 5, 2018, the Company acquired 100 percent of the stock of Marketview Limited ("Marketview") for a net cash purchase price of $4.0 million, of which $0.4 million represents indemnity escrows. Marketview is a provider of consumer spending analysis and insights across the retail, hospitality, property, and government sectors in New Zealand. Marketview has become part of the Financial Services segment. The acquisition helps expand the Company's solutions related to consumer spending analytics across the Australasia and Oceania regions by combining its domain expertise and proprietary data assets with those of Marketview. The final purchase price allocation of the acquisition is presented as part of "Others" in the table below.
The final purchase price allocations of the 2018 acquisitions resulted in the following:

Rulebook
 
Validus
 
Others
 
Total
Cash and cash equivalents
$

 
$
0.9