Document
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
___________________________________
Form 10-Q 
___________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018
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 1-15967
___________________________________
The Dun & Bradstreet Corporation

(Exact name of registrant as specified in its charter) 
___________________________________
Delaware
22-3725387
(State of
incorporation)
(I.R.S. Employer
Identification No.)
 
 
103 JFK Parkway, Short Hills, NJ
07078
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (973) 921-5500
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, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one:)
Large accelerated filer
ý
Accelerated filer
o
Non-accelerated filer (do not check if a smaller reporting company)
o
Smaller reporting company
o
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Title of Class
 
Shares Outstanding at March 31, 2018
Common Stock,
 
37,084,786
 par value $0.01 per share
 
 
 


Table of Contents

THE DUN & BRADSTREET CORPORATION
INDEX TO FORM 10-Q
 
 
 
Page
 
PART I. UNAUDITED FINANCIAL INFORMATION
 
 
 
 
Item 1.
 
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, 2018 and 2017
 
Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017
 
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017
 
Consolidated Statements of Shareholders’ Equity (Deficit) for the Three Months Ended March 31, 2018 and 2017
 
Item 2.
Item 3.
Item 4.
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
Item 1.
Item 2.
Item 6.
 
 
 
 

2

Table of Contents

PART I. UNAUDITED FINANCIAL INFORMATION
Item 1.
Financial Statements
The Dun & Bradstreet Corporation
Consolidated Statements of Operations and Comprehensive Income (Unaudited)
 
Three Months Ended
 
March 31,
 
2018
 
2017
 
(Amounts in millions, except per share data)
Revenue
$
418.2

 
$
381.5

Operating Expenses
139.2

 
141.6

Selling and Administrative Expenses
152.2

 
170.7

Depreciation and Amortization
21.1

 
18.9

Restructuring Charge
11.0

 
9.0

Operating Costs
323.5

 
340.2

Operating Income
94.7

 
41.3

Interest Income
0.8

 
0.4

Interest Expense
(14.1
)
 
(14.6
)
Other Income (Expense) - Net
(0.5
)
 
(2.2
)
Non-Operating Income (Expense) - Net
(13.8
)
 
(16.4
)
Income (Loss) Before Provision for Income Taxes and Equity in Net Income of Affiliates
80.9

 
24.9

Less: Provision for Income Taxes
15.9

 
8.2

Equity in Net Income of Affiliates
0.6

 
0.8

Net Income (Loss) from Continuing Operations
65.6

 
17.5

Less: Net Income Attributable to the Noncontrolling Interest
(1.7
)
 
(1.2
)
Net Income (Loss) from Continuing Operations Attributable to Dun & Bradstreet
$
63.9

 
$
16.3

Loss on Disposal of Business, no Tax Impact

 
(0.8
)
Loss from Discontinued Operations, no Tax Impact

 
(0.8
)
Net Income (Loss) Attributable to Dun & Bradstreet
$
63.9

 
$
15.5

Basic Earnings (Loss) Per Share of Common Stock:
 
 
 
Income (Loss) from Continuing Operations Attributable to Dun & Bradstreet Common Shareholders
$
1.73

 
$
0.44

Loss from Discontinued Operations Attributable to Dun & Bradstreet Common Shareholders

 
(0.02
)
Net Income (Loss) Attributable to Dun & Bradstreet Common Shareholders
$
1.73

 
$
0.42

Diluted Earnings (Loss) Per Share of Common Stock:
 
 
 
Income (Loss) from Continuing Operations Attributable to Dun & Bradstreet Common Shareholders
$
1.71

 
$
0.44

Loss from Discontinued Operations Attributable to Dun & Bradstreet Common Shareholders

 
(0.02
)
Net Income (Loss) Attributable to Dun & Bradstreet Common Shareholders
$
1.71

 
$
0.42

Weighted Average Number of Shares Outstanding-Basic
37.0

 
36.8

Weighted Average Number of Shares Outstanding-Diluted
37.3

 
37.1

Cash Dividend Paid Per Common Share
$
0.52

 
$
0.50

Other Comprehensive Income, Net of Income Taxes:
 
 
 
Net Income (Loss) from Continuing Operations
$
65.6

 
$
17.5

Loss from Discontinued Operations, no Tax Impact

 
(0.8
)
Net Income (Loss)
65.6

 
16.7

Foreign Currency Translation Adjustments (Note 9)
13.2

 
(0.5
)
Defined Benefit Pension Plans:
 
 
 
Prior Service Costs, Net of Tax Benefit (Expense) (1)

 
(0.2
)
Net Actuarial Gain, Net of Tax Benefit (Expense) (2)
7.9

 
6.4

Total Other Comprehensive Income (Loss)
21.1

 
5.7

Comprehensive Income (Loss), Net of Income Taxes
86.7

 
22.4

Less: Comprehensive Income Attributable to the Noncontrolling Interest
(2.0
)
 
(1.4
)
Comprehensive Income (Loss) Attributable to Dun & Bradstreet
$
84.7

 
$
21.0

(1)
Tax Benefit (Expense) of $0.1 million during the three months ended March 31, 2017.
(2)
Tax Benefit (Expense) of $(2.3) million and $(3.4) million during the three months ended March 31, 2018 and 2017, respectively.
 
The accompanying notes are an integral part of the unaudited consolidated financial statements.

3

Table of Contents


The Dun & Bradstreet Corporation
Consolidated Balance Sheets (Unaudited)
 
March 31,
2018
 
December 31,
2017
 
(Amounts in millions, 
except per share data)
ASSETS
 
 
 
Current Assets
 
 
 
Cash and Cash Equivalents
$
188.1

 
$
442.4

Accounts Receivable, Net of Allowance of $14.6 at March 31, 2018 and $24.2 December 31, 2017
225.9

 
596.8

Other Receivables
7.4

 
12.6

Prepaid Taxes
3.5

 
4.9

Other Prepaids
36.1

 
35.4

Other Current Assets
2.7

 
1.6

Total Current Assets
463.7

 
1,093.7

Non-Current Assets
 
 
 
Property, Plant and Equipment, Net of Accumulated Depreciation of $62.2 at March 31, 2018 and $59.1 at December 31, 2017
37.1

 
38.9

Computer Software, Net of Accumulated Amortization of $353.1 at March 31, 2018 and $341.5 at December 31, 2017
136.5

 
132.1

Goodwill (Note 15)
782.5

 
779.6

Deferred Income Tax
66.2

 
57.1

Other Receivables
1.8

 
1.8

Other Intangibles (Note 15)
309.0

 
316.9

Deferred Costs (Note 3)
82.8

 

Other Non-Current Assets
63.7

 
60.8

Total Non-Current Assets
1,479.6

 
1,387.2

Total Assets
$
1,943.3

 
$
2,480.9

LIABILITIES
 
 
 
Current Liabilities
 
 
 
Accounts Payable
$
60.8

 
$
37.4

Accrued Payroll
69.8

 
114.5

Accrued Income Tax
47.3

 
50.0

Short-Term Debt
35.0

 
32.5

Other Accrued and Current Liabilities (Note 7)
113.4

 
133.6

Short-Term Deferred Revenue
572.7

 
684.4

Total Current Liabilities
899.0

 
1,052.4

Pension and Postretirement Benefits
474.7

 
487.6

Long-Term Debt
1,293.9

 
1,645.6

Liabilities for Unrecognized Tax Benefits
3.5

 
5.8

Other Non-Current Liabilities (Note 7)
104.0

 
100.7

Total Liabilities
2,775.1

 
3,292.1

Contingencies (Note 8)

 

EQUITY
 
 
 
DUN & BRADSTREET SHAREHOLDERS’ EQUITY (DEFICIT)
 
 
 
Series A Junior Participating Preferred Stock, $0.01 par value per share, authorized - 0.5 shares; outstanding - none

 

Preferred Stock, $0.01 par value per share, authorized - 9.5 shares; outstanding - none

 

Series Common Stock, $0.01 par value per share, authorized - 10.0 shares; outstanding - none

 

Common Stock, $0.01 par value per share, authorized - 200.0 shares; issued - 81.9 shares
0.8

 
0.8

Capital Surplus
321.5

 
332.0

Retained Earnings
3,139.4

 
3,176.3

Treasury Stock, at cost, 44.9 shares at March 31, 2018 and 45.0 shares at December 31, 2017
(3,315.5
)
 
(3,319.5
)
Accumulated Other Comprehensive Income (Loss)
(996.1
)
 
(1,016.9
)
Total Dun & Bradstreet Shareholders’ Equity (Deficit)
(849.9
)
 
(827.3
)
Noncontrolling Interest
18.1

 
16.1

Total Equity (Deficit)
(831.8
)
 
(811.2
)
Total Liabilities and Shareholders’ Equity (Deficit)
$
1,943.3

 
$
2,480.9

The accompanying notes are an integral part of the unaudited consolidated financial statements.
The Dun & Bradstreet Corporation
Consolidated Statements of Cash Flows (Unaudited)
 
Three Months Ended
 
March 31,
 
2018
 
2017
 
(Amounts in millions)
Cash Flows from Operating Activities:
 
 
 
Net Income
$
65.6

 
$
16.7

Less:
 
 
 
Loss on Disposal of Business - Discontinued Operations

 
(0.8
)
Net Income from Continuing Operations
$
65.6

 
$
17.5

Reconciliation of Net Income to Net Cash Provided by Operating Activities:
 
 
 
Depreciation and Amortization
21.1

 
18.9

Amortization of Unrecognized Pension Loss
10.2

 
9.5

(Gain) Loss from Sales of Business

 
0.7

Income Tax Benefit from Stock-Based Awards
4.2

 
5.3

Equity-Based Compensation (Credit) Expense
(0.7
)
 
5.4

Restructuring Charge
11.0

 
9.0

Restructuring Payments
(10.4
)
 
(4.5
)
Changes in Deferred Income Taxes, Net
8.4

 
(1.3
)
Changes in Accrued Income Taxes, Net
(3.6
)
 
(2.1
)
Changes in Operating Assets and Liabilities (1):
 
 
 
(Increase) Decrease in Accounts Receivable
57.8

 
120.7

(Increase) Decrease in Other Current Assets
(1.2
)
 
1.6

Increase (Decrease) in Deferred Revenue
26.0

 
13.5

Increase (Decrease) in Accounts Payable
10.7

 
(6.2
)
Increase (Decrease) in Accrued Liabilities
(74.1
)
 
(62.2
)
Increase (Decrease) in Other Accrued and Current Liabilities
6.7

 
10.8

(Increase) Decrease in Other Long-Term Assets
5.7

 
4.3

Net Increase (Decrease) in Long-Term Liabilities
(17.0
)
 
(17.2
)
Net, Other Non-Cash Adjustments
1.2

 
0.1

Net Cash Provided by Operating Activities
121.6

 
123.8

Cash Flows from Investing Activities:
 
 
 
Payments for Acquisitions of Businesses, Net of Cash Acquired

 
(150.0
)
Cash Settlements of Foreign Currency Contracts
2.7

 
1.0

Capital Expenditures
(1.0
)
 
(2.8
)
Additions to Computer Software and Other Intangibles
(13.9
)
 
(12.7
)
Net, Other
0.2

 
0.1

Net Cash Used in Investing Activities
(12.0
)
 
(164.4
)
Cash Flows from Financing Activities:
 
 
 
Net (Payment) Proceeds Related to Stock-Based Plans
(6.0
)
 
(5.3
)
Payments of Dividends
(19.3
)
 
(18.5
)
Proceeds from Borrowings on Credit Facilities
74.9

 
490.9

Payments of Borrowings on Credit Facilities
(417.0
)
 
(396.3
)
Payments of Borrowings on Term Loan Facilities
(7.5
)
 
(5.0
)
Net, Other
(0.1
)
 
(0.2
)
Net Cash (Used in) Provided by Financing Activities
(375.0
)
 
65.6

Effect of Exchange Rate Changes on Cash and Cash Equivalents
11.1

 
(2.2
)
Increase (Decrease) in Cash and Cash Equivalents
(254.3
)
 
22.8

Cash and Cash Equivalents, Beginning of Period
442.4

 
352.6

Cash and Cash Equivalents, End of Period
$
188.1

 
$
375.4

Supplemental Disclosure of Cash Flow Information:
 
 
 
Cash Paid for:
 
 
 
Income Taxes, Net of Refunds
$
6.8

 
$
6.3

Interest
$
7.6

 
$
3.2

(1)
Net of the effect of acquisitions and cumulative adjustments to the consolidated balance sheet as of January 1, 2018 due to the adoption of Topic 606. See Note 2 and Note 3 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Table of Contents

The Dun & Bradstreet Corporation
Consolidated Statements of Shareholders’ Equity (Deficit) (Unaudited)
 
 
 
 
 
For the Three Months Ended March 31, 2018 and 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
(Amounts in millions)
 
 
 
 
 
 
 
Common
Stock ($0.01
Par Value)
 
Capital
Surplus
 
Retained
Earnings
 
Treasury
Stock
 
Cumulative
Translation
Adjustment
 
Defined Benefit Postretirement Plans
 
Total Dun & Bradstreet
Shareholders’
Equity
(Deficit)
 
Noncontrolling
Interest
 
Total
Equity
(Deficit)
Balance, December 31, 2016
$
0.8

 
$
317.6

 
$
2,959.6

 
$
(3,330.4
)
 
$
(266.2
)
 
$
(683.4
)
 
$
(1,002.0
)
 
$
14.2

 
$
(987.8
)
Net Income

 

 
15.5

 

 

 

 
15.5

 
1.2

 
16.7

Payment to Noncontrolling Interest

 

 

 

 

 

 

 
(0.3
)
 
(0.3
)
Equity-Based Plans

 
0.7

 

 
4.2

 

 

 
4.9

 

 
4.9

Pension Adjustments, net of tax expense of $3.3

 

 

 

 

 
6.2

 
6.2

 

 
6.2

Dividend Declared

 

 
(18.7
)
 

 

 

 
(18.7
)
 

 
(18.7
)
Change in Cumulative Translation Adjustment

 

 

 

 
(0.7
)
 

 
(0.7
)
 
0.2

 
(0.5
)
Balance, March 31, 2017
$
0.8

 
$
318.3

 
$
2,956.4

 
$
(3,326.2
)
 
$
(266.9
)
 
$
(677.2
)
 
$
(994.8
)
 
$
15.3

 
$
(979.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2017
$
0.8

 
$
332.0

 
$
3,176.3

 
$
(3,319.5
)
 
$
(218.2
)
 
$
(798.7
)
 
$
(827.3
)
 
$
16.1

 
$
(811.2
)
Net Income

 

 
63.9

 

 

 

 
63.9

 
1.7

 
65.6

Equity-Based Plans

 
(10.5
)
 

 
4.0

 

 

 
(6.5
)
 

 
(6.5
)
Pension Adjustments, net of tax expense of $2.3

 

 

 

 

 
7.9

 
7.9

 

 
7.9

Dividend Declared

 

 
(19.4
)
 

 

 

 
(19.4
)
 

 
(19.4
)
Cumulative Adjustment for Topic 606, net of tax benefit of $25.7

 

 
(81.4
)
 

 

 

 
(81.4
)
 

 
(81.4
)
Change in Cumulative Translation Adjustment

 

 

 

 
12.9

 

 
12.9

 
0.3

 
13.2

Balance, March 31, 2018
$
0.8

 
$
321.5

 
$
3,139.4

 
$
(3,315.5
)
 
$
(205.3
)
 
$
(790.8
)
 
$
(849.9
)
 
$
18.1

 
$
(831.8
)



The accompanying notes are an integral part of the unaudited consolidated financial statements.

5

Table of Contents

THE DUN & BRADSTREET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Tabular dollar amounts in millions, except per share data)
Note 1 --
Basis of Presentation
These interim unaudited consolidated financial statements have been prepared in accordance with the instructions to the Quarterly Report on Form 10-Q. They should be read in conjunction with the consolidated financial statements and related notes, which appear in The Dun & Bradstreet Corporation’s (“Dun & Bradstreet” or “we” or “us” or “our” or the “Company”) Annual Report on Form 10-K for the year ended December 31, 2017. The unaudited consolidated results for interim periods do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements and are not necessarily indicative of results for the full year or any subsequent period. In the opinion of our management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the unaudited consolidated financial position, results of operations and cash flows at the dates and for the periods presented have been included.
All inter-company transactions have been eliminated in consolidation.
We manage and report our business through the following two segments:
Americas, which consists of our operations in the United States (“U.S.”), Canada, and our Latin America Worldwide Network; and
Non-Americas, which consists of our operations in the United Kingdom (“U.K.”), Greater China, India and our European and Asia Pacific Worldwide Networks.
The financial statements of the subsidiaries outside of the U.S. and Canada reflect results for the three months ended February 28 in order to facilitate the timely reporting of the unaudited consolidated financial results and unaudited consolidated financial position.
As a result of the adoption of ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” effective January 1, 2018, we have included only the service cost component of the net pension and postretirement benefit cost in our compensation cost and reported the other components of the net pension and postretirement benefit cost within Non-Operating Income (Expense) - Net. We have also reclassified all prior periods’ results accordingly. As a result, for the first quarter of 2017, total other components of the net pension and postretirement benefit cost of $0.4 million was reclassified from compensation cost to Non-Operating Income (Expense) - Net. See Note 10 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.
Where appropriate, we have reclassified certain prior year amounts to conform to the current year presentation.
Note 2 --
Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standards Updates (“ASUs”) and applicable authoritative guidance. The ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on our consolidated financial position and/or results of operations.
Recently Adopted Accounting Pronouncements
In May 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” The standard amends the scope of modification accounting for share-based payments arrangements. An entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. The standard was effective for annual and interim periods beginning after December 15, 2017. Early adoption was permitted, including adoption in any interim period. The adoption of this authoritative guidance did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefits Cost.” The standard amends the requirements in ASC Topic 715, “Compensation - Retirement Benefits” related to the income statement presentation of the components of net periodic benefit cost for an entity's sponsored defined benefit pension and other postretirement plans. The standard requires entities to disaggregate the current service-cost component from the other components of net benefit cost and present it with other current compensation costs for related employees in the income statement and present the other

6

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


components elsewhere in the income statement outside of income from operations if such subtotal is presented. Entities are required to disclose the income statement lines that contain the other components if they are not presented on appropriately described lines. An entity is only allowed to capitalize the service-cost component of net benefit cost. The standard was effective for annual and interim periods beginning after December 15, 2017. Early adoption was permitted as of the beginning of any annual period for which an entity's financial statements (interim or annual) have not been issued or made available for issuance. The adoption of this authoritative guidance did not have a material impact on our consolidated financial statements. See Note 10 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The standard provides a framework to use in determining when a set of assets and activities is a business. The standard requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If the fair value meets this threshold, the set of transferred assets and activities is not a business. The standard also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The standard was effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Entities must apply the guidance prospectively to any transactions occurring within the period of adoption. Early adoption was permitted in any interim or annual reporting period for which financial statements have not yet been issued or have not been made available for issuance. The adoption of this authoritative guidance did not have a material impact on our consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” The standard eliminates the exception within Topic 740 of the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. As a result of the removal of the exception, a reporting entity would recognize the tax expense from the sale of the asset in the seller's tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer's jurisdiction would also be recognized at the time of the transfer. The standard was effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Early adoption was permitted but the guidance can only be adopted in the first interim period of a fiscal year. Entities must apply the modified retrospective approach, with a cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of the adoption. The adoption of this authoritative guidance did not have a material impact on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force).” The standard amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The standard was effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Early adoption was permitted. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. The adoption of this authoritative guidance did not have a material impact on our consolidated financial statements.
New Revenue Recognition Standard:
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers which replaces and supersedes the existing revenue standard (Topic 605). ASU No. 2014-09 was amended in 2015 and 2016 as described in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.
ASU No. 2014-09 and its related amendments (the new revenue standard or Topic 606) provides a single comprehensive model used in accounting for revenue from contracts with customers. The core principle of this guidance is that an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the transfer of promised goods and services to customers. The guidance also requires additional disclosure of information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. The new guidance also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer.
On January 1, 2018 we adopted the new revenue standard and applied it to all contracts using the modified retrospective method. We recognized the cumulative effect of applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods (Topic 605). The adoption of the new revenue standard does not have a material annual impact to our 2018 revenue. However, we anticipate material quarterly changes in our financial results. The cumulative effect

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


of the changes made to our consolidated balance sheet as of January 1, 2018 due to the adoption of the new revenue standard was as follows:
 
Balance at December 31, 2017
 
Adjustment Increase (Decrease)
 
Balance at January 1, 2018
ASSETS
 
 
 
 
 
Accounts Receivable (1)(3)
$
596.8

 
$
(318.9
)
 
$
277.9

Other Current Assets (2)
1.6

 
3.3

 
4.9

Deferred Income Tax (4)
57.1

 
25.8

 
82.9

Deferred Costs (5)

 
74.4

 
74.4

Other Non-Current Assets (2)
60.8

 
2.2

 
63.0

LIABILITIES
 
 
 
 
 
Accounts Payable (3)
$
37.4

 
$
12.1

 
$
49.5

Deferred Revenue - Current (1)(6)(7)
684.4

 
(145.2
)
 
539.2

Other Non-Current Liabilities (1)
100.7

 
1.3

 
102.0

EQUITY
 
 
 
 
 
Retained Earnings (4)(5)(6)(7)
$
3,176.3

 
$
(81.4
)
 
$
3,094.9

The adjustments relate to the following items:
1.
Under the new standard, we recognize a receivable when the right to consideration is unconditional and due, which is generally when we invoice. The adjustment to receivables reverses amounts where the right to the consideration was not unconditional and revenue was not recognized. Unconditional amounts received or due in advance of performance are presented as receivables and deferred revenue (contract liability). Deferred revenue represents our obligation to transfer products to a customer for which we have received consideration, or an amount is due.
2.
We recognize a contract asset when our right to consideration for products transferred to the customer is conditional on something other than the passage of time. We have non-cancelable multi-year contracts in which the consideration increases each contract year. This can result in a contract asset representing revenue we recognized before consideration is due and unconditional.
3.
Under the new standard, price concessions, refunds or credits are variable consideration representing an estimated reduction in the consideration we expect to receive from contracts with customers. This estimate is included in accounts payable because it does not relate to future performance. Under Topic 605 this amount was recognized as an allowance for sales cancellations as a reduction of receivables.
4.
The adjustment to retained earnings is net of income tax effects.
5.
Under the new standard, we deferred incremental sales commissions to obtain new contracts which are amortized over the estimated period of benefit.
6.
In contracts where we promise to provide the customer the latest set of data at scheduled intervals, we identified each data set as a distinct and separate performance obligation. Each performance obligation is satisfied at a point in time, on delivery of the data. Under Topic 605, we recognized the majority of revenue on delivering the initial data set and deferred an amount based on estimated changes to the data over the contract term.
7.
Contracts with customers are modified frequently as they purchase additional products or change products. We elected to use a transition practical expedient and aggregated the effect of all contract modifications that occurred prior to January 1, 2018 instead of accounting for each contract modification separately.

None of the adjustments described above affected net cash provided from operating, investing or financing activities.

8

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


The impact of the adoption of the new revenue standard on our consolidated financial statements for the three months ended March 31, 2018 was as follows:
 
For the Three Months Ended March 31, 2018
Income Statement
As Reported
 
Without Adoption of Topic 606
 
Effect of Change Higher (Lower)
Revenue
$
418.2

 
$
384.7

 
$
33.5

Selling and Administrative Expenses
152.2

 
161.4

 
(9.2
)
Operating Income
94.7

 
52.0

 
42.7

Income (Loss) Before Provision for Income Taxes and Equity in Net Income of Affiliates
80.9

 
38.2

 
42.7

Less: Provision for Income Taxes
15.9

 
6.2

 
9.7

Net Income (Loss) from Continuing Operations
65.6

 
32.6

 
33.0

Net Income (Loss) Attributable to Dun & Bradstreet
63.9

 
30.9

 
33.0

Basic Earnings (Loss) Per Share of Common Stock
$
1.73

 
$
0.83

 
$
0.90

Diluted Earnings (Loss) Per Share of Common Stock
$
1.71

 
$
0.83

 
$
0.88


 
At March 31, 2018
Balance Sheet
As Reported
 
Without Adoption of Topic 606
 
Effect of Change Higher (Lower)
ASSETS
 
 
 
 
 
Accounts Receivable
$
225.9

 
$
488.6

 
$
(262.7
)
Other Current Assets
2.7

 
0.7

 
2.0

Deferred Income Tax
66.2

 
49.1

 
17.1

Deferred Costs
82.8

 

 
82.8

Other Non-Current Assets
63.7

 
60.4

 
3.3

LIABILITIES
 
 
 
 

Accounts Payable
$
60.8

 
$
51.0

 
$
9.8

Accrued Income Taxes
47.3

 
47.8

 
(0.5
)
Other Accrued and Current Liabilities
113.4

 
113.9

 
(0.5
)
Short-Term Deferred Revenue
572.7

 
695.9

 
(123.2
)
Other Non-Current Liabilities
104.0

 
98.6

 
5.4

EQUITY
 
 
 
 

Retained Earnings
$
3,139.4

 
$
3,187.7

 
$
(48.3
)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


 
For the Three Months Ended March 31, 2018
Cash Flows
As Reported
 
Without Adoption of Topic 606
 
Effect of Change Higher (Lower)
Net Income from Continuing Operations
$
65.6

 
$
32.6

 
$
33.0

Changes in Deferred Income Taxes, Net
8.4

 
4.6

 
3.8

Changes in Accrued Income Taxes, Net
(3.6
)
 
(9.4
)
 
5.8

(Increase) Decrease in Accounts Receivable
57.8

 
114.5

 
(56.7
)
(Increase) Decrease in Other Current Assets
(1.2
)
 
(0.1
)
 
(1.1
)
Increase (Decrease) in Deferred Revenue
26.0

 
10.5

 
15.5

Increase (Decrease) in Accounts Payable
10.7

 
13.2

 
(2.5
)
Increase (Decrease) in Accrued Liabilities
(74.1
)
 
(73.9
)
 
(0.2
)
(Increase) Decrease in Other Long Term Assets
5.7

 
1.7

 
4.0

Net Increase (Decrease) in Long Term Liabilities
(17.0
)
 
(15.3
)
 
(1.7
)
Net, Other Non-Cash Adjustments
1.2

 
1.1

 
0.1

Net Cash Provided by Operating Activities
121.6

 
121.6

 


None of the adjustments described above affected net cash from operating, investing or financing activities.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The standard changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. Entities will have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. The guidance requires entities to apply the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). For certain assets (such as debt securities for which an other-than-temporary impairment has been recognized before the effective date), a prospective transition approach is required. We do not expect the adoption of this authoritative guidance will have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02 “Leases (Topic 842).” This standard requires entities that lease assets to recognize on the balance sheet, subject to certain exceptions, the assets and liabilities for the rights and obligations created by those leases. The standard is effective for fiscal years and the interim periods within those fiscal years beginning after December 15, 2018. The guidance is required to be applied by the modified retrospective transition approach. Early adoption is permitted. We are currently assessing the impact of the adoption of this authoritative guidance on our consolidated financial statements. However, we anticipate that the adoption of this standard will have a material impact on our consolidated balance sheet.
Note 3 -- Revenue
We generate revenue from licensing our data and providing related data services to our customers. Our data is integrated into our hosted or on-premise software applications. Data is also delivered directly into customer third-party applications (or our on-premise applications) using our application programming interfaces (“API”) or as computer files. Some of our data and reports can be purchased through our websites individually or in packages.
Most of our revenue comes from customers we contract with directly. We also license data, trademarks and related technology and support services to our Worldwide Network partners for exclusive distribution of our products to customers in their territories. We also license our data to our alliance partners who use the data to enhance their own products or enable it to be seamlessly delivered to their customers.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


Revenue is net of any sales or indirect taxes collected from customers, which are subsequently remitted to government authorities.
Performance Obligations and Revenue Recognition
All our customers license our data and/or software applications. The license term is generally a minimum of 12 months and non-cancelable. If the customer can benefit from the license only in conjunction with a related service, the license is not distinct and is combined with the other services as a single performance obligation.
We recognize revenue when (or as) we satisfy a performance obligation by transferring promised licenses and or services underlying the performance obligation to the customer. Some of our performance obligations are satisfied over time as the product is transferred to the customer. Performance obligations which are not satisfied over time are satisfied at a point in time.
Determining whether the products and services in a contract are distinct and identifying the performance obligations requires significant judgment. When we assess contracts with customers we determine if the data we promise to transfer to the customer is individually distinct or is combined with other licenses or services which together form a distinct product or service and a performance obligation. We also consider if we promise to transfer a specific quantity of data or provide unlimited access to data.
We determined that when customers can purchase a specified quantity of data based on their selection criteria and data layout, each data record is distinct and a performance obligation, satisfied on delivery. If we promise to update the initial data set at specified intervals, each update is a performance obligation, which we satisfy when the update data is delivered.
When we provide customers continuous access to the latest data using our API-based and online products, the customer can consume and benefit from this content daily as we provide access to the data. We determined that for this type of offering our overall promise is a service of daily access to data which represents a single performance obligation satisfied over time. We recognize revenue ratably for this type of performance obligation.
Customers can purchase unlimited access to data in many of our products for the non-cancelable contract term. These contracts are priced based on their anticipated usage volume of the product and we have the right to increase the transaction price in the following contract year if usage in the current contract year exceeds certain prescribed limits. The limits are set at a level that the customer is unlikely to exceed so in general, we fully constrain any variable consideration until it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. For these contracts the performance obligation is satisfied over time as we provide continuous access to the data. We recognize revenue ratably over the contract term.
For products sold under our annual and monthly discount plans the customer receives a discount based on the amount they commit to spend annually, or the actual amount spent at the end of each monthly billing cycle. Each report or data packet purchased is a separate performance obligation which is satisfied when the report or data packet is delivered. The customer can also purchase a monitoring service on the report or data packet which is a performance obligation satisfied over time because the customer benefits from the service as we monitor the data and provide alerts when the data changes. We recognize revenue ratably over the monitoring period.
In some contracts, including annual discount plans, the customer commits to spend a fixed amount on the products. Breakage occurs if the customer does not exercise all their purchasing rights under the contract. We recognize breakage at the end of the contract when the likelihood of the customer exercising their remaining rights becomes remote.
Many of our contracts provide the customer an option to purchase additional products. If the option provides the customer a discount which is incremental to discounts typically given for those products, the contract provides the customer a material right that it would not receive without entering into the contract. An amount of the transaction price is allocated to the material right performance obligation and is recognized when the customer exercises the option or when the option expires.
We have long-term contracts with our Worldwide Network partners. These contracts are typically for an initial term of up to 10 years and automatically renew for further terms unless notice is given before the end of the initial or renewal term. We grant each Partner the exclusive right to sell our products in the countries that constitute their territory. We provide them access to data, use of our brand and technology and other services and support necessary for them to sell our products and services in their territory. We determined this arrangement is a series of distinct services and represents a single performance obligation satisfied over time. These contracts contain multiple streams of consideration, some of which are fixed and some are variable. These variable amounts are allocated to the specific service period during which the sales or usage occurred if the variable

11

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


amount is commensurate with the benefit to the customer of the additional service and is consistent with our customary pricing practices. Otherwise the variable amount is accounted for as a change in the transaction price for the contract. We recognize revenue ratably for this performance obligation.
We license our data to our alliance partners. Most contracts specify the number of licensed records or data sets to be delivered. If the licenses are distinct and performance obligations, we satisfy them on delivery of the data. Contract consideration is often a sales or usage-based royalty, sometimes accompanied by a guaranteed minimum amount. Any fixed consideration is allocated to each performance obligation based on the standalone selling price of the data. We apply the variable consideration exception for license revenue in the form of royalties when the license is the sole or predominant item to which the royalty relates. Royalty revenue is recognized when the later of the following events have occurred: (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all the royalty has been allocated has been satisfied (or partially satisfied).
Revenue disaggregated by major product category is as follows:
 
For the Three Months Ended March 31, 2018
 
Total
 
Americas
 
Non-Americas
Risk Management Solutions:
 
 
 
 
 
Trade Credit
$
170.3

 
$
127.9

 
$
42.4

Other Enterprise Risk Management
73.9

 
59.3

 
14.6

Sales & Marketing Solutions:
 
 
 
 
 
Sales Acceleration
79.4

 
73.1

 
6.3

Advanced Marketing Solutions
94.6

 
85.4

 
9.2

Total Revenue
$
418.2

 
$
345.7

 
$
72.5

 
For the Three Months Ended March 31, 2017
 
Total
 
Americas
 
Non-Americas
Risk Management Solutions:
 
 
 
 
 
Trade Credit
$
165.1

 
$
124.2

 
$
40.9

Other Enterprise Risk Management
71.3

 
57.8

 
13.5

Sales & Marketing Solutions:
 
 
 
 
 
Sales Acceleration
74.1

 
69.3

 
4.8

Advanced Marketing Solutions
71.0

 
63.2

 
7.8

Total Revenue
$
381.5

 
$
314.5

 
$
67.0

See Note 11 for additional information on the disaggregation of revenue by customer solution set and geographical market.
Contracts with Multiple Performance Obligations
Our contracts with customers often include promises to transfer multiple performance obligations. For these contracts we allocate the transaction price to each performance obligation in the contract on a relative standalone selling price basis. The standalone selling price is the price at which we would sell the promised service separately to a customer. We use the observable price based on prices in contracts with similar customers in similar circumstances.
We allocate variable consideration to a performance obligation or a distinct product if the terms of the variable payment relate specifically to our efforts to satisfy the performance obligation or transfer the distinct product and the allocation is consistent with the allocation objective. If these conditions are not met or the transaction price changes for other reasons after contract inception, we allocate the change on the same basis as at contract inception.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


Contract Combinations and Modifications
Many of our customers have multiple contracts for various products. Contracts entered into at or near the same time with the same customer are combined into a single contract when they are negotiated together with a single commercial objective or the contracts are related in other ways.
Contract modifications are accounted for as a separate contract if additional products are distinct and the transaction price increases by an amount that reflects the standalone selling prices of the additional products. Otherwise, we generally account for the modifications as if they were the termination of the existing contracts and creation of new contracts if the remaining products are distinct from the products transferred before the modification. The new transaction price is the unrecognized revenue from the existing contracts plus the new consideration. This amount is allocated to the remaining performance obligations based on the relative standalone selling prices.
The total amount of the transaction price for our revenue contracts allocated to performance obligations that are unsatisfied (or partially unsatisfied) is as follows:
 
Rest of 2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
Future Revenue
$
964.0

 
$
507.6

 
$
232.6

 
$
96.9

 
$
368.9

 
$
2,170.0

The table of future revenue does not include any amount of variable consideration that is a sales or usage-based royalty in exchange for distinct data licenses or that is allocated to a distinct service period within a single performance obligation that is a series of distinct service periods.
Contract Balances
 
 
 At March 31, 2018
 
At January 1, 2018
Accounts Receivable
 
$
225.9

 
$
277.9

Short-Term Contract Assets
 
2.0

 
3.3

Long-Term Contract Assets
 
3.3

 
2.2

Deferred Revenue - Short Term
 
572.7

 
539.2

Deferred Revenue - Long Term
 
10.4

 
6.2

We recognize a receivable when we have an unconditional right to consideration and only the passage of time is required before payment of that consideration is due. If we recognize a receivable before we transfer products to the customer, we also recognize deferred revenue, which is also defined as a contract liability under the new revenue guidance. Deferred revenue represents our obligation to transfer products to the customer for which we have received consideration (or an amount of consideration is due) from the customer. When we transfer products or services to the customer before payment is received or is due, and our right to consideration is conditional on future performance or other factors in the contract, we recognize a contract asset. We assess each contract to determine if the net contract position is a net contract liability or net contract asset.
The increase in deferred revenues and decrease in contract assets of $37.7 million and $0.2 million, respectively, for the three months ended March 31, 2018 is primarily due to the following factors: The increase in deferred revenue is primarily due to cash payments received or due in advance of satisfying our performance obligations, offset by approximately $232 million of revenues recognized that were included in the deferred revenue balance at January 1, 2018. The decrease in contract assets is primarily due to approximately $5 million of contract assets included in the balance at January 1, 2018 that were reclassified to receivables when they became unconditional, offset by new contract assets recognized in the period, net of new amounts reclassified to receivables.
Assets Recognized for the Costs to Obtain a Contract
We have annual incentive plans under which we pay commissions to our sales people for initial and renewal contracts with customers. These commissions are incremental costs of obtaining these contracts and when recoverable are capitalizable as

13

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


commission assets. We capitalize the commissions paid on new business which we expect to renew when the amount paid is proportionately higher than the amount paid on renewals. Commission assets are amortized on a straight-line basis over the period of benefit which is estimated at 2 to 7 years. We elected to use the practical expedient to expense commissions paid on renewals because the expected period of benefit is 12 months or less.
At March 31, 2018, commission assets, net of accumulated amortization included in Deferred Costs were $82.8 million. Amortization of commission assets for the three months ended March 31, 2018 were $6.6 million.
Note 4 -- Restructuring Charge
We incurred restructuring charges (which generally consist of employee severance and termination costs, contract terminations and/or costs to terminate lease obligations less assumed sublease income). These charges were incurred as a result of eliminating, consolidating, standardizing and/or automating our business functions.
Restructuring charges have been recorded in accordance with ASC 712-10, “Nonretirement Postemployment Benefits,” or “ASC 712-10” and/or ASC 420-10, “Exit or Disposal Cost Obligations,” or “ASC 420-10”, as appropriate.
We record severance costs provided under an ongoing benefit arrangement once they are both probable and reasonably estimable in accordance with the provisions of ASC 712-10.
We account for one-time termination benefits, contract terminations and/or costs to terminate lease obligations less assumed sublease income in accordance with ASC 420-10, which addresses financial accounting and reporting for costs associated with restructuring activities. Under ASC 420-10, we establish a liability for costs associated with an exit or disposal activity, including severance and lease termination obligations, and other related costs, when the liability is incurred, rather than at the date that we commit to an exit plan. We reassess the expected cost to complete the exit or disposal activities at the end of each reporting period and adjust our remaining estimated liabilities, if necessary.
The determination of when we accrue for severance costs and which standard applies depends on whether the termination benefits are provided under an ongoing arrangement as described in ASC 712-10 or under a one-time benefit arrangement as defined by ASC 420-10. Inherent in the estimation of the costs related to the restructurings are assessments related to the most likely expected outcome of the significant actions to accomplish the exit or disposal activities. In determining the charges related to the restructurings, we had to make estimates related to the expenses associated with the restructurings. These estimates may vary significantly from actual costs depending, in part, upon factors that may be beyond our control. We will continue to review the status of our restructuring obligations on a quarterly basis and, if appropriate, record changes to these obligations in current operations based on management’s most current estimates.

Three Months Ended March 31, 2018 vs. Three Months Ended March 31, 2017
During the three months ended March 31, 2018, we recorded an $11.0 million restructuring charge. This charge was comprised of:

Severance costs of $10.4 million in accordance with the provisions of ASC 712-10. Approximately 140 employees were impacted and exited the Company by the end of the first quarter of 2018. The cash payments for these employees will be substantially completed by the end of the fourth quarter of 2018; and

Contract termination, lease termination obligations and other exit costs, including those to consolidate or close facilities of $0.6 million.
During the three months ended March 31, 2017, we recorded a $9.0 million restructuring charge. This charge was comprised of:

Severance costs of $6.1 million and $1.6 million in accordance with the provisions of ASC 712-10 and ASC 420-10, respectively. Approximately 190 employees were impacted. Of these 190 employees, approximately 75 employees exited the Company by the end of the first quarter of 2017, with the remaining primarily having exited by the end of the fourth quarter of 2017. The cash payments for these employees were substantially completed by the end of the fourth quarter of 2017; and

Contract termination, lease termination obligations and other exit costs, including those to consolidate or close facilities of $1.3 million.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


The following tables set forth, in accordance with ASC 712-10 and/or ASC 420-10, the restructuring reserves and utilization:
 
 
Severance
and
Termination
 
Contract Termination, Lease
Termination
Obligations
and Other
Exit Costs
 
Total
Restructuring Charges:
 
 
 
 
 
Balance Remaining as of December 31, 2017
$
12.7

 
$
3.5

 
$
16.2

Charge Taken during the First Quarter 2018
10.4

 
0.6

 
11.0

Payments Made during the First Quarter 2018
(9.1
)
 
(1.3
)
 
(10.4
)
Balance Remaining as of March 31, 2018
$
14.0

 
$
2.8

 
$
16.8

 
 
Severance
and
Termination
 
Contract Termination, Lease
Termination
Obligations
and Other
Exit Costs
 
Total
Restructuring Charges:
 
 
 
 
 
Balance Remaining as of December 31, 2016
$
8.3

 
$
1.7

 
$
10.0

Charge Taken during the First Quarter 2017
7.7

 
1.3

 
9.0

Payments Made during the First Quarter 2017
(4.1
)
 
(0.4
)
 
(4.5
)
Balance Remaining as of March 31, 2017
$
11.9

 
$
2.6

 
$
14.5

Note 5 -- Notes Payable and Indebtedness
Our borrowings are summarized in the following table:
 
 
 
March 31, 2018
 
At December 31, 2017
 
Maturity
 
Principal Amount
 
Debt Issuance Costs and Discount*
 
Carrying Value
 
Principal Amount
 
Debt Issuance Costs and Discount*
 
Carrying Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Maturing Within One Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
Term Loan Facility
 
 
$
35.0

 
$

 
$
35.0

 
$
32.5

 
$

 
$
32.5

Total Short-Term Debt
 
 
$
35.0

 
$

 
$
35.0

 
$
32.5

 
$

 
$
32.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Maturing After One Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
Ten Year 4.37% senior notes (1) (2)
December 1, 2022
 
300.0

 
2.5

 
297.5

 
300.0

 
2.6

 
297.4

Five Year 4.00% senior notes (1) (3)
June 15, 2020
 
300.0

 
1.8

 
298.2

 
300.0

 
2.0

 
298.0

Term Loan Facility
November 13, 2020
 
310.0

 
0.8

 
309.2

 
320.0

 
0.9

 
319.1

Revolving Credit Facility
July 23, 2019
 
389.0

 

 
389.0

 
731.1

 

 
731.1

Total Long-Term Debt
 
 
$
1,299.0

 
$
5.1

 
$
1,293.9

 
$
1,651.1

 
$
5.5

 
$
1,645.6

*Represents unamortized portion of debt issuance costs and discounts.
(1) The notes contain certain covenants that limit our ability to create liens, enter into sale and leaseback transactions and consolidate, merge or sell assets to another entity. We were in compliance with these non-financial covenants at March 31, 2018 and December 31, 2017. The notes do not contain any financial covenants.
(2)
The interest rates are subject to an upward adjustment if our debt ratings decline three levels below the Standard & Poors® and/or Fitch® BBB+ credit ratings that we held on the date of issuance. After a rate adjustment, if our debt ratings are subsequently upgraded, the adjustment(s) would reverse. The maximum adjustment is 2.00% above the initial interest rates and the rates cannot adjust below the initial interest rates (see further discussion below).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


(3) The interest rate is subject to an upward adjustment if our debt ratings decline one level below the Standard & Poor’s BBB- credit rating and/or two levels below the Fitch BBB credit rating that we held on the date of issuance. After a rate adjustment, if our debt ratings are subsequently upgraded, the adjustment(s) would reverse. The maximum adjustment is 2.00% above the initial interest rate and the rate cannot adjust below the initial interest rate (see further discussion below).

On March 27, 2017, Standard & Poor’s Ratings Services downgraded our corporate credit rating to BB+ from BBB-. As a result, and in accordance with the provisions of their indentures, the interest rates on each of our senior notes were adjusted above their initial stated coupons (shown above) by 25 basis points commencing with the interest period during which the downgrade occurred. On May 22, 2017, Fitch Ratings downgraded our corporate credit rating to BBB- from BBB. The interest rates on each of our senior notes were not impacted as a result of the downgrade. Any further downgrade in our corporate credit rating by either rating agency would result in additional increases in the interest rates of our senior notes. In addition, further downgrades may increase our overall cost of borrowing and/or may negatively impact our ability to raise additional debt capital.
In accordance with ASC 470, “Debt,” a short-term obligation that will be refinanced with successive short-term obligations may be classified as non-current as long as the cumulative period covered by the financing agreement is uninterrupted and extends beyond one year. Accordingly, the outstanding balances associated with the revolving credit facility were classified as “Long-Term Debt” as of March 31, 2018 and December 31, 2017.
Term Loan Facility

On May 14, 2015, we entered into a delayed draw unsecured term loan facility which provided for borrowings in the form of up to two drawdowns in an aggregate principal amount of up to $400 million at any time up to and including November 15, 2015 (the “term loan facility”). The term loan facility matures five years from the date of the initial drawdown. Proceeds under the term loan facility were designated to be used for general corporate purposes including the refinancing of the 2.875% senior notes that matured in November 2015 and the repayment of borrowings outstanding under the $1 billion revolving credit facility. Borrowings under the term loan facility bear interest at a rate of LIBOR plus a spread. On March 27, 2017, Standard & Poor’s Ratings Services downgraded our corporate credit rating to BB+ from BBB-. As a result, and in accordance with the terms of the term loan facility, the spread under the term loan facility increased from 137.5 basis points to 150.0 basis points. Our initial draw down under the term loan facility in the amount of $400 million was made in November 2015, establishing a facility maturity of November 2020. We also committed to repay the borrowings in prescribed installments over the five-year period. Repayments expected to be made within one year are classified as “Short-Term Debt” and the remaining outstanding balance is classified as “Long-Term Debt.” The weighted average interest rates associated with the outstanding balances as of March 31, 2018 and December 31, 2017 were 3.38% and 2.91%, respectively.
The term loan facility requires the maintenance of interest coverage and total debt to Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”) ratios, which are defined in the term loan facility credit agreement and which are generally identical to those contained in the $1 billion revolving credit facility. We were in compliance with the term loan facility financial and non-financial covenants at March 31, 2018 and December 31, 2017.
Revolving Credit Facility

We currently have a $1 billion revolving credit facility maturing in July 2019. Borrowings under the $1 billion revolving credit facility bear interest at a rate of LIBOR plus a spread. On March 27, 2017, Standard & Poor’s Rating Services downgraded our corporate credit rating to BB+ from BBB-. As a result, and in accordance with the terms of the facility, the spread under the $1 billion revolving credit facility increased from 110.0 basis points to 120.0 basis points. The facility requires the maintenance of interest coverage and total debt to EBITDA ratios which are defined in the $1 billion revolving credit facility credit agreement. We were in compliance with the $1 billion revolving credit facility financial and non-financial covenants at March 31, 2018 and December 31, 2017. The weighted average interest rates associated with the outstanding balances as of March 31, 2018 and December 31, 2017 were 3.01% and 2.80%, respectively.
We borrowed under this facility from time to time during the three months ended March 31, 2018 and the year ended December 31, 2017 to supplement the timing of receipts in order to fund our working capital. We also borrowed under this facility during the first quarter of 2017 to fund a portion of the consideration for our purchase of Avention and during the fourth quarter of 2017 to repay our then outstanding $450 million senior notes at maturity.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


Other
We were contingently liable under open standby letters of credit and bank guarantees issued by our banks in favor of third parties totaling $2.7 million at March 31, 2018 and $2.9 million at December 31, 2017.
Interest paid for all outstanding debt totaled $7.6 million and $3.2 million during the three months ended March 31, 2018 and 2017, respectively.
Note 6 -- Earnings Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding restricted stock unit awards, stock options, and contingently issuable shares using the treasury stock method.
The following table sets forth the computation of basic and diluted earnings (loss) per share:
 
Three Months Ended March 31,
 
2018
 
2017
Income (Loss) from Continuing Operations Attributable to Dun & Bradstreet Common Shareholders – Basic and Diluted
$
63.9

 
$
16.3

Loss from Discontinued Operations – Net of Income Taxes

 
(0.8
)
Net Income (Loss) Attributable to Dun & Bradstreet Common Shareholders – Basic and Diluted
$
63.9

 
$
15.5

Weighted Average Number of Shares Outstanding – Basic
37.0

 
36.8

Dilutive Effect of Our Stock Incentive Plans
0.3

 
0.3

Weighted Average Number of Shares Outstanding – Diluted
37.3

 
37.1

Basic Earnings (Loss) Per Share of Common Stock:
 
 
 
Income (Loss) from Continuing Operations Attributable to Dun & Bradstreet Common Shareholders
$
1.73

 
$
0.44

Loss from Discontinued Operations Attributable to Dun & Bradstreet Common Shareholders

 
(0.02
)
Net Income (Loss) Attributable to Dun & Bradstreet Common Shareholders
$
1.73

 
$
0.42

Diluted Earnings (Loss) Per Share of Common Stock:
 
 
 
Income (Loss) from Continuing Operations Attributable to Dun & Bradstreet Common Shareholders
$
1.71

 
$
0.44

Loss from Discontinued Operations Attributable to Dun & Bradstreet Common Shareholders

 
(0.02
)
Net Income (Loss) Attributable to Dun & Bradstreet Common Shareholders
$
1.71

 
$
0.42

The weighted average number of shares outstanding used in the computation of diluted earnings per share excludes the effect of outstanding common shares potentially issuable totaling 33,827 shares and 25,000 shares at the three months ended March 31, 2018 and 2017, respectively. These potentially issuable common shares were not included in the calculation of diluted earnings per share because their effect would be anti-dilutive.
No shares were repurchased during the three months ended March 31, 2018 and 2017. We currently have in place a $100 million share repurchase program to mitigate the dilutive effect of shares issued under our stock incentive plans and Employee Stock Purchase Program, and to be used for discretionary share repurchases from time to time. This program was approved by our Board of Directors in August 2014 and will remain open until it has been fully utilized. There is currently no definitive timeline under which the program will be completed. As of March 31, 2018, we had not yet commenced repurchasing under this program.
See Note 2 and Note 3 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for the discussion of the impact of our adoption of the new revenue recognition standard.

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(Tabular dollar amounts in millions, except per share data)



Note 7 -- Other Liabilities

Other Accrued and Current Liabilities
 
March 31,
2018
 
December 31, 2017
Restructuring Accruals
$
16.8

 
$
16.2

Professional Fees
36.2

 
30.8

Operating Expenses
40.6

 
38.3

Other Accrued Liabilities (1)
19.8

 
48.3

 
$
113.4

 
$
133.6

(1)
The decrease in other accrued liabilities from December 31, 2017 to March 31, 2018 was primarily due to a payment in the first quarter of 2018 for a service-based award related to the acquisition of Dun and Bradstreet Credibility Corp (“DBCC”) and a payment for settlement of China legal matters.
Other Non-Current Liabilities
 
March 31,
2018
 
December 31, 2017
Deferred Compensation
$
7.5

 
$
10.4

U.S. Tax Liability Associated with the 2017 Act
50.4

 
50.4

Deferred Rent Incentive
21.0

 
22.0

Deferred Revenue - Long-Term
10.4

 

Other
14.7

 
17.9

 
$
104.0

 
$
100.7

Note 8 -- Contingencies
We are involved in legal proceedings, regulatory matters, claims and litigation arising in the ordinary course of business for which we believe that we have adequate reserves, and such reserves are not material to the consolidated financial statements. We record a liability when management believes that it is both probable that a liability has been incurred and we can reasonably estimate the amount of the loss. For such matters where management believes a liability is not probable but is reasonably possible, a liability is not recorded; instead, an estimate of loss or range of loss, if material individually or in the aggregate, is disclosed if reasonably estimable, or a statement will be made that an estimate of loss cannot be made. Once we have disclosed a matter that we believe is or could be material to us, we continue to report on such matter until there is finality of outcome or until we determine that disclosure is no longer warranted. Further, other than specifically stated below to the contrary, we believe our estimate of the aggregate range of reasonably possible losses, in excess of established reserves, for our legal proceedings was not material at March 31, 2018. In addition, from time to time, we may be involved in additional matters, which could become material and for which we may also establish reserve amounts, as discussed below. In accordance with ASC 450, “Contingencies,” or “ASC 450,” as of March 31, 2018, we have no reserve.
China Operations
On March 18, 2012, we announced we had temporarily suspended our Shanghai Roadway D&B Marketing Services Co. Ltd. (“Roadway”) operations in China, pending an investigation into allegations that its data collection practices may have violated local Chinese consumer data privacy laws. Thereafter, the Company decided to permanently cease the operations of Roadway. In addition, we had been reviewing certain allegations that we may have violated the Foreign Corrupt Practices Act and certain other laws in our China operations. As previously reported, we voluntarily contacted the Securities and Exchange Commission (“SEC”) and the United States Department of Justice (“DOJ”) to advise both agencies of our investigation, which has now ended.

Our discussions with both the SEC and DOJ have concluded. The ultimate outcome of the settlement is not material to our business, financial condition or results of operations. The DOJ has decided not to take any action on the matter and has issued a written declination of prosecution. The SEC has approved the final settlement, entered an administrative order resolving the investigation, and received payment of the settlement funds. As of March 31, 2018, we no longer have an accrual with respect to this matter.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


Other Matters
In addition, in the normal course of business, and including without limitation, our merger and acquisition activities, strategic relationships and financing transactions, Dun & Bradstreet indemnifies other parties, including customers, lessors and parties to other transactions with Dun & Bradstreet, with respect to certain matters. Dun & Bradstreet has agreed to hold the other parties harmless against losses arising from a breach of representations or covenants, or arising out of other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. Dun & Bradstreet has also entered into indemnity obligations with its officers and directors.
Additionally, in certain circumstances, Dun & Bradstreet issues guarantee letters on behalf of our wholly-owned subsidiaries for specific situations. It is not possible to determine the maximum potential amount of future payments under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by Dun & Bradstreet under these agreements have not had a material impact on the consolidated financial statements.

Note 9 -- Income Taxes
For the three months ended March 31, 2018, our effective tax rate was 19.6% as compared to 33.0% for the three months ended March 31, 2017. Our 2018 tax provision reflects the impact of the adoption of Topic 606 which resulted in a higher pretax income of $42.7 million for the three months ended March 31, 2018. The effective tax rate for the three months ended March 31, 2018, was positively impacted by the reduction of the U.S. statutory tax rate due to the 2017 Tax Cuts and Jobs Act (“2017 Act”) enacted in the fourth quarter of 2017 and by the settlement of an audit in a non-U.S. jurisdiction. The effective tax rate for the three months ended March 31, 2017, was negatively impacted by the non-deductible contingent consideration cost (which is treated as a service-based award for accounting purposes) related to the acquisition of DBCC in 2015 and by lower earnings from non-U.S. jurisdictions with lower tax rates. For the quarter ended March 31, 2018, there are no known changes in our effective tax rate that either have had or that we expect may reasonably have a material impact on our operations or future performance.
The total amount of gross unrecognized tax benefits as of March 31, 2018 was $5.9 million. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $5.7 million, net of related tax benefits. We or one of our subsidiaries file income tax returns in the U.S. federal, and various state, local and foreign jurisdictions. In the U.S. federal jurisdiction, we are no longer subject to examination by the Internal Revenue Service (“IRS”) for years prior to 2014. In state and local jurisdictions, with a few exceptions, we are no longer subject to examinations by tax authorities for years prior to 2014. In foreign jurisdictions, with a few exceptions, we are no longer subject to examinations by tax authorities for years prior to 2012.
We recognize accrued interest expense related to unrecognized tax benefits in income tax expense. The total amount of interest expense recognized for the three months ended March 31, 2018 was $0.1 million, net of tax benefits, as compared to less than $0.1 million, net of tax benefits, for the three months ended March 31, 2017. The total amount of accrued interest as of March 31, 2018 was $0.4 million, net of tax benefits, as compared to $0.3 million, net of tax benefits, as of March 31, 2017.
On December 22, 2017, the SEC issued Staff Accounting Bulletin (“SAB”) No. 118 (“SAB No. 118”), which provided guidance on accounting for the tax effects of the 2017 Act. SAB No.118 provides for a measurement period of up to one year from the enactment date for companies to complete the accounting for the income tax effects of the 2017 Act. In accordance with SAB No. 118, a registrant must reflect the income tax effects of those aspects of the 2017 Act for which the accounting is complete and provide a provisional estimate (where determinable) of the income tax effects of the 2017 Act where the accounting is incomplete. The provisional estimate is required to be updated throughout the measurement period.
In connection with the 2017 Act, as discussed in Note 5 to our consolidated financial statements included in Item 8. of our Annual Report on Form 10-K for the year ended December 31, 2017, we were able to determine the tax effect related to the remeasurement of deferred taxes, but we have not finalized the accounting for the tax impact on deemed repatriation related to accumulated undistributed foreign earnings through December 31, 2017. The final impact of the 2017 Act may differ from our initial estimate, due to, among other things, changes in our interpretations and assumptions, additional guidance that may be issued by the IRS, and actions we may take. We are continuing to gather additional information to determine the final impact. During the first quarter of 2018, we repatriated approximately $295 million from our overseas operations, for which we recorded an additional $1.7 million current tax liability, included in “Accrued Income Tax,” reflecting changes in foreign currency exchange rates between December 31, 2017 and the dates of the repatriations. In addition, we recorded a deferred tax liability of $1.0 million related to changes in foreign currency exchange rates between December 31, 2017 and March 31, 2018, for the undistributed foreign earnings at March 31, 2018.

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(Tabular dollar amounts in millions, except per share data)


Note 10 -- Pension and Postretirement Benefits
The following table sets forth the components of the net periodic cost (income) associated with our pension plans and our postretirement benefit obligations:
 
Pension Plans
 
Postretirement Benefit Obligations
 
For the Three Months Ended March 31,
 
For the Three Months Ended March 31,
 
2018
 
2017
 
2018
 
2017
Components of Net Periodic Cost (Income):
 
 
 
 
 
 
 
Service Cost
$
1.0

 
$
0.7

 
$
0.2

 
$
0.2

Interest Cost
14.3

 
14.2

 
0.1

 
0.1

Expected Return on Plan Assets
(24.3
)
 
(23.4
)
 

 

Amortization of Prior Service Cost (Credit)
0.1

 
0.1

 

 
(0.4
)
Recognized Actuarial Loss (Gain)
10.5

 
10.0

 
(0.4
)
 
(0.2
)
Net Periodic Cost (Income)
$
1.6

 
$
1.6

 
$
(0.1
)
 
$
(0.3
)
As a result of the adoption of ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” effective January 1, 2018, we have included only the service cost component of the net pension and postretirement benefit cost in our compensation cost and reported the other components of the net pension and postretirement benefit cost within Non-Operating Income (Expense) - Net. We have also reclassified all historical results accordingly. As a result, for the first quarter of 2017, total other components of the net pension and postretirement benefit cost of $0.4 million was reclassified from compensation cost to “Non-Operating Income (Expense) - Net.”
We previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017 that we expected to contribute approximately $19 million to our U.S. Non-Qualified plans and non-U.S. pension plans and approximately $2 million to our postretirement benefit plan for the year ended December 31, 2018. As of March 31, 2018, we have made contributions to our U.S. Non-Qualified plans and non-U.S. pension plans of $4.9 million and we have made contributions of $1.1 million to our postretirement benefit plan.
Note 11 -- Segment Information
    
Below are our segments for which separate financial information is available and upon which operating results are evaluated by management on a timely basis to assess performance and to allocate resources.
Americas, which currently consists of our operations in the U.S., Canada, and our Latin America Worldwide Network; and
Non-Americas, which currently consists of our operations in the U.K., Greater China, India and our European and Asia Pacific Worldwide Networks.
Our customer solution sets are D&B Risk Management Solutions™ and D&B Sales & Marketing Solutions™. Inter-segment sales are immaterial, and no single customer accounted for 10% or more of our total revenue. For management reporting purposes, we evaluate business segment performance before restructuring charges, other non-core gains and charges that are not in the normal course of business and intercompany transactions, because these charges and transactions are not a component of our ongoing income or expenses and may have a disproportionate positive or negative impact on the results of our ongoing underlying business.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


 
For the Three Months Ended March 31,
 
2018
 
2017
Revenue:
 
 
 
Americas
$
345.7

 
$
314.5

Non-Americas
72.5

 
67.0

Consolidated Total
$
418.2

 
$
381.5

Operating Income (Loss):
 
 
 
Americas
$
106.4

 
$
57.6

Non-Americas
20.4

 
18.2

Total Segments
126.8

 
75.8

Corporate and Other (1)
(32.1
)
 
(34.5
)
Consolidated Total
94.7

 
41.3

Non-Operating Income (Expense) - Net (2)
(13.8
)
 
(16.4
)
Income (Loss) Before Provision for Income Taxes and Equity in Net Income of Affiliates
$
80.9

 
$
24.9

 
(1)
The following table summarizes “Corporate and Other:”
 
For the Three Months Ended March 31,
 
2018
 
2017
Corporate Costs
$
(20.9
)
 
$
(21.4
)
Restructuring Expense
(11.0
)
 
(9.0
)
Acquisition-Related Costs (a)
(0.1
)
 
(3.8
)
Legal and Other Professional Fees and Shut-Down (Costs) Recoveries Related to Matters in China
(0.1
)
 
(0.3
)
Total Corporate and Other
$
(32.1
)
 
$
(34.5
)

(a) The acquisition-related costs (e.g., banker's fees) for the three months ended March 31, 2018 and 2017 were primarily related to the acquisition of Avention in January 2017. See Note 14 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

(2)
The following table summarizes “Non-Operating Income (Expense) - Net:”
 
For the Three Months Ended March 31,
 
2018
 
2017
Interest Income
$
0.8

 
$
0.4

Interest Expense
(14.1
)
 
(14.6
)
Other Income (Expense) - Net (a)
(0.5
)
 
(2.2
)
Non-Operating Income (Expense) - Net
$
(13.8
)
 
$
(16.4
)
 
(a) The decrease in Other Expense - Net for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017, was primarily due to higher losses in the prior year period related to divested businesses and investment.


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(Tabular dollar amounts in millions, except per share data)


Supplemental Geographic and Customer Solution Set Information:
 
 
For the Three Months Ended March 31,
 
2018
 
2017
Customer Solution Set Revenue:
 
 
 
Americas:
 
 
 
Risk Management Solutions
$
187.2

 
$
182.0

Sales & Marketing Solutions
158.5

 
132.5

Total Americas Revenue
$
345.7

 
$
314.5

 
 
 
 
Non-Americas:
 
 
 
Risk Management Solutions
$
57.0

 
$
54.4

Sales & Marketing Solutions
15.5

 
12.6

Total Non-Americas Revenue
$
72.5

 
$
67.0

 
 
 
 
Consolidated Total:
 
 
 
Risk Management Solutions
$
244.2

 
$
236.4

Sales & Marketing Solutions
174.0

 
145.1

Consolidated Total Revenue
$
418.2

 
$
381.5

 
 
At March 31, 2018
 
At December 31, 2017
Assets:
 
 
 
Americas (3)
$
1,352.2

 
$
1,585.7

Non-Americas (4)
449.6

 
735.0

Total Segments
1,801.8

 
2,320.7

Corporate and Other (5)
141.5

 
160.2

Consolidated Total
$
1,943.3

 
$
2,480.9

Goodwill:
 
 
 
Americas
$
635.1

 
$
635.7

Non-Americas
147.4

 
143.9

Consolidated Total (6)
$
782.5

 
$
779.6

 
(3)
Total assets in the Americas segment at March 31, 2018 decreased by $233.5 million compared to December 31, 2017, primarily driven by the impact of the adoption of Topic 606 (See Note 2 and Note 3 to the unaudited consolidated financial statements in this Quarterly Report on Form 10-Q for further details), and a decrease in accounts receivable due to the cyclical sales pattern of our Americas business, partially offset by a net increase in operating cash.

(4)
Total assets in the Non-Americas segment at March 31, 2018 decreased by $285.4 million compared to December 31, 2017, primarily driven by a net decrease in cash due to repatriations of overseas cash back to the U.S. in the first quarter of 2018, and the adoption of Topic 606 (See Note 2 and Note 3 to the unaudited consolidated financial statements in this Quarterly Report on Form 10-Q for further details), partially offset by the positive impact of foreign currency translation.

(5)
Total assets in Corporate and Other at March 31, 2018 decreased by $18.7 million compared to December 31, 2017,
primarily due to a net decrease in cash driven by payments of borrowing on our credit facility, partially offset by cash remitted from our foreign operations during the first quarter of 2018.

(6)
Goodwill increased by $2.9 million at March 31, 2018 compared to December 31, 2017, primarily due to the positive impact of foreign currency translation.

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(Tabular dollar amounts in millions, except per share data)


Note 12 -- Financial Instruments
We employ established policies and procedures to manage our exposure to changes in interest rates and foreign currencies. We use foreign exchange forward and option contracts to hedge short-term foreign currency denominated loans and certain third-party and intercompany transactions. We may also use foreign exchange forward contracts to hedge our net investments in our foreign subsidiaries. In addition, we may use interest rate derivatives to hedge a portion of the interest rate exposure on our outstanding debt or in anticipation of a future debt issuance, as discussed under “Interest Rate Risk Management” below.
We do not use derivative financial instruments for trading or speculative purposes. If a hedging instrument ceases to qualify as a hedge in accordance with hedge accounting guidelines, any subsequent gains and losses are recognized currently in income. Collateral is generally not required for these types of instruments.
By their nature, all such instruments involve risk, including the credit risk of non-performance by counterparties. However, at March 31, 2018 and December 31, 2017, there was no significant risk of loss in the event of non-performance of the counterparties to these financial instruments. We control our exposure to credit risk through monitoring procedures.
Our trade receivables do not represent a significant concentration of credit risk at March 31, 2018 and December 31, 2017, because we sell to a large number of customers in different geographical locations and industries.
Interest Rate Risk Management
Our objective in managing our exposure to interest rates is to limit the impact of interest rate changes on our earnings, cash flows and financial position, and to lower our overall borrowing costs. To achieve these objectives, we maintain a policy that floating-rate debt be managed within a minimum and maximum range of our total debt exposure. To manage our exposure and limit volatility, we may use fixed-rate debt, floating-rate debt and/or interest rate swaps. We recognize all derivative instruments as either assets or liabilities at fair value in the statement of financial position. As of March 31, 2018 and December 31, 2017, we did not have any interest rate derivatives outstanding.
Foreign Exchange Risk Management
Our objective in managing exposure to foreign currency fluctuations is to reduce the volatility caused by foreign exchange rate changes on the earnings, cash flows and financial position of our international operations. We follow a policy of hedging balance sheet positions denominated in currencies other than the functional currency applicable to each of our various subsidiaries. In addition, we are subject to foreign exchange risk associated with our international earnings and net investments in our foreign subsidiaries. We use short-term, foreign exchange forward and, from time to time, option contracts to execute our hedging strategies. Typically, these contracts have maturities of 12 months or less. These contracts are denominated primarily in the British pound sterling, the Euro, the Canadian dollar and the Hong Kong dollar. The gains and losses on the forward contracts associated with our balance sheet positions are recorded in “Other Income (Expense) – Net” in the unaudited consolidated statements of operations and comprehensive income and are essentially offset by the losses and gains on the underlying foreign currency transactions. Our foreign exchange forward contracts are not designated as hedging instruments under authoritative guidance.
As in prior years, we have hedged substantially all balance sheet positions denominated in a currency other than the functional currency applicable to each of our various subsidiaries with short-term, foreign exchange forward contracts. In addition, we may use foreign exchange forward contracts to hedge certain net investment positions. The underlying transactions and the corresponding foreign exchange forward contracts are marked to market at the end of each quarter and the fair value impacts are reflected within the unaudited consolidated financial statements.
As of March 31, 2018 and December 31, 2017, the notional amounts of our foreign exchange contracts were $230.8 million and $239.2 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


Fair Values of Derivative Instruments in the Consolidated Balance Sheet
 
 
Asset Derivatives
 
Liability Derivatives
 
March 31, 2018
 
December 31, 2017
 
March 31, 2018
 
December 31, 2017
 
Balance Sheet
Location
 
Fair Value
 
Balance Sheet
Location
 
Fair Value
 
Balance Sheet
Location
 
Fair Value
 
Balance Sheet
Location
 
Fair Value
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
Other Current
Assets
 
$
0.6

 
Other Current
Assets
 
$
1.5

 
Other Accrued &
Current Liabilities
 
$
1.7

 
Other Accrued &
Current Liabilities
 
$
2.1

Total derivatives not designated as hedging instruments
 
 
$
0.6

 
 
 
$
1.5

 
 
 
$
1.7

 
 
 
$
2.1

Total Derivatives
 
 
$
0.6

 
 
 
$
1.5

 
 
 
$
1.7

 
 
 
$
2.1

Our foreign exchange forward contracts are not designated as hedging instruments under authoritative guidance.
The Effect of Derivative Instruments on the Consolidated Statement of Operations and Comprehensive Income (Loss)
 
Derivatives Not Designated as Hedging
Instruments
Location of Gain or (Loss) Recognized in
Income on Derivatives
 
Amount of Gain or (Loss) Recognized in Income on Derivatives
 
 
 
For the Three Months Ended March 31,
 
 
 
2018
 
2017
Foreign exchange forward contracts
Non-Operating Income (Expenses) – Net
 
$
2.2

 
$
1.6

Fair Value of Financial Instruments
Our financial assets and liabilities that are reflected in the consolidated financial statements include derivative financial instruments, cash and cash equivalents, accounts receivable, other receivables, accounts payable, short-term borrowings and long-term borrowings. We use short-term foreign exchange forward contracts to hedge short-term foreign currency-denominated intercompany loans and certain third-party and intercompany transactions. Fair value for derivative financial instruments is determined utilizing observable market data.
We have a process for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, we use quotes from independent pricing vendors based on recent trading activity and other relevant information including market interest rate curves and referenced credit spreads.
In addition to utilizing external valuations, we conduct our own internal assessment of the reasonableness of the external valuations by utilizing a variety of valuation techniques including Black-Scholes option pricing and discounted cash flow models that are consistently applied. Inputs to these models include observable market data, such as yield curves, and foreign exchange rates where applicable. Our assessments are designed to identify prices that do not accurately reflect the current market environment, those that have changed significantly from prior valuations and other anomalies that may indicate that a price may not be accurate. We also follow established routines for reviewing and reconfirming valuations with the pricing provider, if deemed appropriate. In addition, the pricing provider has an established challenge process in place for all valuations, which facilitates identification and resolution of potentially erroneous prices. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality and our own creditworthiness and constraints on liquidity. For inactive markets that do not have observable pricing or sufficient trading volumes, or for positions that are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate will be used.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

24

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


The following table presents information about our assets and liabilities measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017, and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value. Level inputs, as defined by authoritative guidance, are as follows:
 
Level Input:
Input Definition:
Level I
Observable inputs utilizing quoted prices (unadjusted) for identical assets or liabilities in active markets at the measurement date.
 
 
Level II
Inputs other than quoted prices included in Level I that are either directly or indirectly observable for the asset or liability through corroboration with market data at the measurement date.
 
 
Level III
Unobservable inputs for the asset or liability in which little or no market data exists therefore requiring management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The following table summarizes fair value measurements by level at March 31, 2018 for assets and liabilities measured at fair value on a recurring basis:
 
 
Quoted Prices in
Active Markets
for Identical
Assets (Level I)
 
Significant Other
Observable
Inputs (Level II)
 
Significant
Unobservable
Inputs
(Level III)
 
Balance at March 31, 2018
Assets:
 
 
 
 
 
 
 
Cash Equivalents (1)
$
13.8

 
$

 
$

 
$
13.8

Other Current Assets:
 
 
 
 
 
 
 
Foreign Exchange Forwards (2)
$

 
$
0.6

 
$

 
$
0.6

Liabilities:
 
 
 
 
 
 
 
Other Accrued and Current Liabilities:
 
 
 
 
 
 
 
Foreign Exchange Forwards (2)
$

 
$
1.7

 
$

 
$
1.7

(1)
Cash equivalents represent fair value as it consists of highly liquid investments with an initial term from the date of purchase by the Company to maturity of three months or less.
(2)
Primarily represents foreign currency forward contracts. Fair value is determined based on observable market data and considers a factor for nonperformance in the valuation.
There were no transfers between Levels I and II or transfers in or transfers out of Level III in the fair value hierarchy for the three months ended March 31, 2018.

25

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


The following table summarizes fair value measurements by level at December 31, 2017 for assets and liabilities measured at fair value on a recurring basis:
 
 
Quoted Prices in
Active Markets
for Identical
Assets (Level I)
 
Significant Other
Observable
Inputs (Level II)
 
Significant
Unobservable
Inputs
(Level III)
 
Balance at December 31, 2017
Assets:
 
 
 
 
 
 
 
Cash Equivalents (1)
$
216.9

 
$

 
$

 
$
216.9

Other Current Assets:
 
 
 
 
 
 
 
Foreign Exchange Forwards (2)
$

 
$
1.5

 
$

 
$
1.5

Liabilities:
 
 
 
 
 
 
 
Other Accrued and Current Liabilities:
 
 
 
 
 
 
 
Foreign Exchange Forwards (2)
$

 
$
2.1

 
$

 
$
2.1

(1)
Cash equivalents represent fair value as it consists of highly liquid investments with an initial term from the date of purchase by the Company to maturity of three months or less.
(2)
Primarily represents foreign currency forward contracts. Fair value is determined based on observable market data and considers a factor for nonperformance in the valuation.
There were no transfers between Levels I and II or transfers in or transfers out of Level III in the fair value hierarchy for the year ended December 31, 2017.
At March 31, 2018 and December 31, 2017, the fair value of cash and cash equivalents, accounts receivable, other receivables and accounts payable approximated carrying value due to the short-term nature of these instruments. The estimated fair values of other financial instruments subject to fair value disclosures, determined based on valuation models using discounted cash flow methodologies with market data inputs from globally recognized data providers and third-party quotes from major financial institutions (categorized as Level II in the fair value hierarchy), are as follows:
 
 
Balance at
 
March 31, 2018
 
December 31, 2017
 
Carrying
Amount (Asset)
Liability
 
Fair Value
(Asset) Liability
 
Carrying
Amount (Asset)
Liability
 
Fair Value
(Asset) Liability
Short-term and Long-term Debt
$
595.7

 
$
605.4

 
$
595.4

 
$
606.4

Revolving Credit Facility
$
389.0

 
$
391.9

 
$
731.1

 
$
729.0

Term Loan Facility
$
344.2

 
$
348.5

 
$
351.6

 
$
355.3

Items Measured at Fair Value on a Nonrecurring Basis
In addition to assets and liabilities that are recorded at fair value on a recurring basis, we are required to record assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges.
During the three months ended March 31, 2018 and 2017, we did not measure any assets or liabilities at fair value on a nonrecurring basis.

26

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)


Note 13 -- Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (“AOCI”) as of March 31, 2018 and 2017:
 
 
Foreign Currency Translation Adjustments
 
Defined Benefit Pension Plans
 
Total
Balance, December 31, 2016
 
$
(266.2
)
 
$
(683.4
)
 
$
(949.6
)
Other Comprehensive Income Before Reclassifications
 
(0.7
)
 

 
(0.7
)
Amounts Reclassified From Accumulated Other Comprehensive Income, net of tax
 

 
6.2

 
6.2

Balance, March 31, 2017
 
$
(266.9
)
 
$
(677.2
)
 
$
(944.1
)
 
 
 
 
 
 
 
Balance, December 31, 2017
 
$
(218.2
)
 
$
(798.7
)
 
$
(1,016.9
)
Other Comprehensive Income Before Reclassifications
 
12.9

 

 
12.9

Amounts Reclassified From Accumulated Other Comprehensive Income, net of tax
 

 
7.9

 
7.9

Balance, March 31, 2018
 
$
(205.3
)
 
$
(790.8