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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ___________________________________________________
FORM 10-Q
  ___________________________________________________
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2020

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 001-36495
 ___________________________________________________
IHS MARKIT LTD.
(Exact name of registrant as specified in its charter) 
 ___________________________________________________
Bermuda
001-36495
98-1166311
(State or Other Jurisdiction of Incorporation or Organization)
(Commission File Number)
(IRS Employer Identification Number)

4th Floor, Ropemaker Place
25 Ropemaker Street
London, England
EC2Y 9LY
(Address of Principal Executive Offices)

+44 20 7260 2000
(Registrant’s telephone number, including area code)
 ___________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Shares, $0.01 par value per share
 
INFO
 
New York Stock Exchange
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.    x  Yes    o  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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    o  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.
 





Large accelerated filer    ☒    Accelerated filer    
Non-accelerated filer    ☐    Smaller reporting company    
Emerging growth company    

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
As of May 31, 2020, there were 396,809,671 Common Shares outstanding (excluding 25,219,470 outstanding common shares held by the Markit Group Holdings Limited Employee Benefit Trust).



TABLE OF CONTENTS
 

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management’s current views concerning future business, events, trends, contingencies, financial performance, or financial condition, appear at various places in this report and use words like “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “see,” “seek,” “should,” “strategy,” “strive,” “target,” “will,” and “would” and similar expressions, and variations or negatives of these words. Examples of forward-looking statements include, among others, statements we make regarding: guidance and predictions relating to expected operating results, such as revenue growth and earnings; strategic actions such as acquisitions, joint ventures, and dispositions, the anticipated benefits therefrom, and our success in integrating acquired businesses; anticipated levels of capital expenditures in future periods; anticipated levels of indebtedness, capital allocation, dividends, and share repurchases in future periods; our belief that we have sufficient liquidity to fund our ongoing business operations; expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities, and governmental and regulatory investigations and proceedings; and our strategy for customer retention, growth, product development, market position, financial results, and reserves. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on management’s current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: operating in competitive markets, economic and financial conditions, including volatility in interest and exchange rates; our ability to develop new products and services; our ability to manage system failures or capacity constraints; our ability to manage fraudulent or unpermitted data access or other cyber-security or privacy breaches; our ability to successfully manage risks associated with changes in demand for our products and services; our ability to manage our relationships with third-party service providers; legislative, regulatory, and economic developments, including any new or proposed U.S. Treasury rule changes; the extent to which we are successful in gaining new long-term relationships with customers or retaining existing ones and the level of service failures that could lead customers to use competitors’ services; the anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion, and growth of our operations; our ability to retain and hire qualified personnel; our ability to satisfy our debt obligations and our other ongoing business obligations; the occurrence of any catastrophic events, including acts of terrorism or outbreak of war or hostilities; and risks related to public health and safety issues, including the COVID-19 pandemic, on our operations and the operations of our customers and suppliers. These risks, as well as other risks which would cause actual results to be significantly different from those expressed or implied by these forward-looking statements, are more fully discussed under the caption “Risk Factors” in our Annual Report on Form 10-K, along with our other filings with the U.S. Securities and Exchange Commission (“SEC”).

2


While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on our consolidated financial condition, results of operations, credit rating, or liquidity. Therefore, you should not rely on any of these forward-looking statements. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q is based only on information currently available to our management and speaks only as of the date of this report. We do not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

Website and Social Media Disclosure
 
We use our website (www.ihsmarkit.com) and corporate Twitter account (@IHSMarkit) as routine channels of distribution of company information, including news releases, analyst presentations, and supplemental financial information, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our website and our corporate Twitter account in addition to following press releases, SEC filings and public conference calls and webcasts. Additionally, we provide notifications of news or announcements as part of our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.

None of the information provided on our website, in our press releases, public conference calls, and webcasts, or through social media channels is incorporated into, or deemed to be a part of, this quarterly report on Form 10-Q or in any other report or document we file with the SEC, and any references to our website or our social media channels are intended to be inactive textual references only.

3


PART I.   FINANCIAL INFORMATION
Item 1.
Financial Statements
IHS MARKIT LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
 
As of
 
As of
 
May 31, 2020
 
November 30, 2019
 
(Unaudited)
 
(Audited)
Assets

 

Current assets:

 

Cash and cash equivalents
$
207.8

 
$
111.5

Accounts receivable, net
876.1

 
890.7

Deferred subscription costs
91.9

 
72.1

Assets held for sale

 
115.3

Other current assets
126.6

 
118.2

Total current assets
1,302.4

 
1,307.8

Non-current assets:

 

Property and equipment, net
687.3

 
658.2

Operating lease right-of-use assets, net
347.4

 

Intangible assets, net
3,925.7

 
4,169.0

Goodwill
9,747.3

 
9,836.3

Deferred income taxes
17.8

 
17.8

Other
101.0

 
98.1

Total non-current assets
14,826.5

 
14,779.4

Total assets
$
16,128.9

 
$
16,087.2

Liabilities and equity


 


Current liabilities:

 

Short-term debt
$
251.0

 
$
251.1

Accounts payable
20.5

 
59.7

Accrued compensation
95.4

 
215.2

Other accrued expenses
413.0

 
479.1

Income tax payable

 
58.5

Deferred revenue
945.9

 
879.7

Operating lease liabilities
65.4

 

Liabilities held for sale

 
25.9

Total current liabilities
1,791.2

 
1,969.2

Long-term debt, net
5,136.5

 
4,874.4

Deferred income taxes
651.8

 
667.2

Operating lease liabilities
324.3

 

Other liabilities
103.5

 
145.5

Commitments and contingencies

 

Redeemable noncontrolling interests
13.2

 
15.1

Shareholders' equity:

 

Common shares, $0.01 par value, 3,000.0 authorized, 479.9 and 476.3 issued, and 396.8 and 398.3 outstanding at May 31, 2020 and November 30, 2019, respectively
4.8

 
4.8

Additional paid-in capital
7,759.9

 
7,769.4

Treasury shares, at cost: 83.1 and 78.0 at May 31, 2020 and November 30, 2019, respectively
(2,921.9
)
 
(2,391.8
)
Retained earnings
3,677.8

 
3,295.0

Accumulated other comprehensive loss
(412.2
)
 
(261.6
)
Total shareholders' equity
8,108.4

 
8,415.8

Total liabilities and equity
$
16,128.9

 
$
16,087.2

See accompanying notes.

4


IHS MARKIT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except for per-share amounts)
 
 
Three months ended May 31,
 
Six months ended May 31,
 
2020
 
2019
 
2020
 
2019
Revenue
$
1,026.6

 
$
1,135.5

 
$
2,107.4

 
$
2,181.9

Operating expenses:
 
 
 
 
 
 
 
Cost of revenue
388.3

 
428.0

 
804.1

 
827.8

Selling, general and administrative
258.1

 
293.3

 
574.3

 
593.6

Depreciation and amortization
149.4

 
144.0

 
294.7

 
286.3

Restructuring and impairment charges
81.3

 
1.7

 
85.8

 
9.9

Acquisition-related costs
6.6

 
21.4

 
7.5

 
44.2

Other (income) expense, net
(1.2
)
 
8.4

 
(374.0
)
 
6.4

Total operating expenses
882.5

 
896.8

 
1,392.4

 
1,768.2

Operating income
144.1

 
238.7

 
715.0

 
413.7

Interest income
0.2

 
0.6

 
0.6

 
1.0

Interest expense
(60.0
)
 
(65.8
)
 
(121.2
)
 
(132.7
)
Net periodic pension and postretirement expense
(8.9
)
 
(0.2
)
 
(30.4
)
 
(0.5
)
Non-operating expense, net
(68.7
)
 
(65.4
)
 
(151.0
)
 
(132.2
)
Income from continuing operations before income taxes and equity in income of equity method investees
75.4

 
173.3

 
564.0

 
281.5

Provision for income taxes
(4.7
)
 
(24.2
)
 
(9.0
)
 
(23.3
)
Equity in income (loss) of equity method investees
0.1

 
(0.2
)
 
(0.2
)
 
(0.3
)
Net income
70.8

 
148.9

 
554.8

 
257.9

Net loss attributable to noncontrolling interest
0.9

 
0.9

 
1.9

 
1.6

Net income attributable to IHS Markit Ltd.
$
71.7

 
$
149.8

 
$
556.7

 
$
259.5

 
 
 
 
 
 
 
 
Basic earnings per share attributable to IHS Markit Ltd.
$
0.18

 
$
0.37

 
$
1.40

 
$
0.65

Weighted average shares used in computing basic earnings per share
397.0

 
400.5

 
396.4

 
399.3

 
 
 
 
 
 
 
 
Diluted earnings per share attributable to IHS Markit Ltd.
$
0.18

 
$
0.37

 
$
1.38

 
$
0.63

Weighted average shares used in computing diluted earnings per share
400.1

 
409.3

 
402.1

 
408.7


See accompanying notes.


5




IHS MARKIT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in millions)


 
 
Three months ended May 31,
 
Six months ended May 31,
 
 
2020
 
2019
 
2020
 
2019
Net income
 
$
70.8

 
$
148.9

 
$
554.8

 
$
257.9

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Net hedging activities (1)
 
0.3

 
(1.9
)
 
0.4

 
(3.4
)
Net pension liability adjustment (2)
 
10.7

 

 
15.6

 

Foreign currency translation adjustment
 
(131.0
)
 
(175.7
)
 
(166.6
)
 
(40.0
)
Total other comprehensive loss
 
(120.0
)
 
(177.6
)
 
(150.6
)
 
(43.4
)
Comprehensive (loss) income
 
$
(49.2
)
 
$
(28.7
)
 
$
404.2

 
$
214.5

Comprehensive loss attributable to noncontrolling interest
 
0.9

 
0.9

 
1.9

 
1.6

Comprehensive (loss) income attributable to IHS Markit Ltd.
 
$
(48.3
)
 
$
(27.8
)
 
$
406.1

 
$
216.1

 
 
 
 
 
 
 
 
 
(1) Net of tax (expense) benefit of $(0.1) million, $0.4 million, $(0.1) million, and $0.8 million for the three and six months ended May 31, 2020, and May 31, 2019, respectively.
(2) Net of tax expense of $2.9 million and $5.0 million for the three and six months ended May 31, 2020.


See accompanying notes.

6



IHS MARKIT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
 
Six months ended May 31,
 
2020
 
2019
Operating activities:

 

Net income
$
554.8

 
$
257.9

Reconciliation of net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
294.7

 
286.3

Stock-based compensation expense
153.8

 
113.3

Gain on sale of assets
(370.9
)
 

Payments for acquisition-related performance compensation
(75.9
)
 

Net periodic pension and postretirement expense
30.4

 
0.5

Undistributed earnings of affiliates, net
0.5

 
0.2

Pension and postretirement contributions
(31.1
)
 
(0.9
)
Deferred income taxes
(10.8
)
 
(43.4
)
Change in assets and liabilities:
 
 
 
Accounts receivable, net
7.0

 
(27.6
)
Other current assets
(51.2
)
 
(54.0
)
Accounts payable
(22.5
)
 
(11.1
)
Accrued expenses
(119.9
)
 
(58.3
)
Income tax
(70.1
)
 
32.0

Deferred revenue
78.7

 
88.6

Other liabilities
30.2

 
29.2

Net cash provided by operating activities
397.7

 
612.7

Investing activities:

 

Capital expenditures on property and equipment
(147.6
)
 
(129.9
)
Acquisitions of businesses, net of cash acquired
(3.2
)
 
(32.6
)
Payments to acquire cost- and equity-method investments
(7.2
)
 
(5.6
)
Proceeds from sale of assets
466.2

 

Change in other assets
(0.9
)
 
(1.8
)
Settlements of forward contracts
(20.0
)
 
(2.2
)
Net cash provided by (used in) investing activities
287.3

 
(172.1
)
Financing activities:

 

Proceeds from borrowings
541.4

 
1,339.2

Repayment of borrowings
(283.9
)
 
(1,762.9
)
Payment of debt issuance costs

 
(8.9
)
Proceeds from noncontrolling interests

 
12.5

Contingent consideration payments

 
(2.2
)
Dividends paid
(135.3
)
 

Repurchases of common shares
(750.0
)
 

Proceeds from the exercise of employee stock options
177.2

 
57.6

Payments related to tax withholding for stock-based compensation
(111.7
)
 
(62.7
)
Net cash used in financing activities
(562.3
)
 
(427.4
)
Foreign exchange impact on cash balance
(26.4
)
 
(23.7
)
Net increase (decrease) in cash and cash equivalents
96.3

 
(10.5
)
Cash and cash equivalents at the beginning of the period
111.5

 
120.0

Cash and cash equivalents at the end of the period
$
207.8

 
$
109.5


See accompanying notes.

7


IHS MARKIT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited, in millions)

 
Common Shares
 
Additional
Paid-In
Capital
 
 
 
 
 
Accumulated Other
Comprehensive
Loss
 
Total Shareholders’ Equity
 
 
Redeemable Noncontrolling Interests
 
Shares Outstanding
 
Amount
 
 
Treasury
Shares
 
Retained
Earnings
 
 
 
 
Balance at November 30, 2018 (Audited)
397.1

 
$
4.7

 
$
7,680.4

 
$
(2,108.8
)
 
$
2,743.1

 
$
(298.9
)
 
$
8,020.5

 
 
$
5.9

Adjustment to opening retained earnings related to adoption of ASC Topic 606

 

 

 

 
56.0

 

 
56.0

 
 

Share-based award activity
1.7

 
0.1

 
8.5

 
(18.0
)
 
(2.4
)
 

 
(11.8
)
 
 

Option exercises
0.9

 

 
23.7

 

 

 

 
23.7

 
 

Net income (loss)

 

 

 

 
109.7

 

 
109.7

 
 
(0.7
)
Issuance of noncontrolling interests

 

 

 

 

 

 

 
 
12.5

Other comprehensive income

 

 

 

 

 
134.2

 
134.2

 
 

Balance at February 28, 2019
399.7


$
4.8


$
7,712.6


$
(2,126.8
)

$
2,906.4


$
(164.7
)

$
8,332.3



$
17.7

Share-based award activity
0.2

 

 
0.5

 
50.5

 
(1.4
)
 

 
49.6

 
 

Option exercises
1.2

 

 
32.3

 

 

 

 
32.3

 
 

Net income (loss)

 

 

 

 
149.8

 

 
149.8

 
 
(0.9
)
Other comprehensive loss

 

 

 

 

 
(177.6
)
 
(177.6
)
 
 

Balance at May 31, 2019
401.1

 
$
4.8

 
$
7,745.4

 
$
(2,076.3
)
 
$
3,054.8

 
$
(342.3
)
 
$
8,386.4

 
 
$
16.8


 
Common Shares
 
Additional
Paid-In
Capital
 
 
 
 
 
Accumulated Other
Comprehensive
Loss
 
Total Shareholders’ Equity
 
 
Redeemable Noncontrolling Interests
 
Shares Outstanding
 
Amount
 
 
Treasury
Shares
 
Retained
Earnings
 
 
 
 
Balance at November 30, 2019 (Audited)
398.3

 
$
4.8

 
$
7,769.4

 
$
(2,391.8
)
 
$
3,295.0

 
$
(261.6
)
 
$
8,415.8

 
 
$
15.1

Repurchases of common shares
(6.5
)
 

 

 
(500.0
)
 

 

 
(500.0
)
 
 

Share-based award activity
2.2

 

 
(175.8
)
 
134.3

 
$
(21.6
)
 

 
(63.1
)
 
 

Option exercises
4.9

 

 
130.9

 

 

 

 
130.9

 
 

Dividends and dividend equivalents

 

 

 

 
(69.0
)
 

 
(69.0
)
 
 

Net income (loss)

 

 

 

 
485.0

 

 
485.0

 
 
(1.0
)
Other comprehensive income

 

 

 

 

 
(30.6
)
 
(30.6
)
 
 

Balance at February 29, 2020
398.9


$
4.8


$
7,724.5


$
(2,757.5
)

$
3,689.4


$
(292.2
)

$
8,369.0



$
14.1

Repurchases of common shares
(4.0
)
 

 

 
(250.0
)
 

 

 
(250.0
)
 
 

Share-based award activity
0.2

 

 
(10.9
)
 
85.6

 
(14.5
)
 

 
60.2

 
 

Option exercises
1.7

 

 
46.3

 

 

 

 
46.3

 
 

Dividends and dividend equivalents

 

 

 

 
(68.8
)
 

 
(68.8
)
 
 

Net income (loss)

 

 

 

 
71.7

 

 
71.7

 
 
(0.9
)
Other comprehensive loss

 

 

 

 

 
(120.0
)
 
(120.0
)
 
 

Balance at May 31, 2020
396.8


$
4.8


$
7,759.9


$
(2,921.9
)

$
3,677.8


$
(412.2
)

$
8,108.4

 
 
$
13.2


See accompanying notes.

8


IHS MARKIT LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.
Basis of Presentation and Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of IHS Markit have been prepared on substantially the same basis as our annual consolidated financial statements and should be read in conjunction with our Annual Report on Form 10-K for the year ended November 30, 2019. In our opinion, these condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented, and such adjustments are of a normal, recurring nature.

Our business has seasonal aspects. Our first quarter generally has our lowest quarterly levels of revenue and profit. We also experience event-driven seasonality in our business; for instance, CERAWeek, an annual energy conference, is typically held in the second quarter of each year; however, this event was cancelled in 2020 due to the COVID-19 pandemic. Another example is the biennial release of the Boiler Pressure Vessel Code (“BPVC”) engineering standard, which generates revenue for us predominantly in the third quarter of every other year. The most recent BPVC release was in the third quarter of 2019.

The preparation of financial statements in conformity with U.S. GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well the reported amounts of revenue and expense during the reporting period. We have considered the impact of the COVID-19 pandemic in determining our estimates. Actual results could differ from those estimates.

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, which requires that lease assets and lease liabilities be recognized on the balance sheet, and that key information about leasing arrangements be disclosed. In July 2018, the FASB issued ASU 2018-11, which provides targeted improvements to ASU 2016-02 by providing an additional optional transition method and a lessor practical expedient for lease and nonlease components. These standards have been codified in the FASB’s Accounting Standards Codification (“ASC”) Topic 842, “Leases.”

We adopted the standard in the first quarter of our fiscal year 2020 using the modified retrospective transition method applied to our lease contracts as of the adoption date. We elected to use the transition relief package of practical expedients, but we did not elect to use the hindsight practical expedient in determining a lease term and impairment of the right-of-use (“ROU”) assets at the adoption date. We did not apply the lease accounting recognition requirements to leases with a term of one year or less.

We utilize operating leases for our various workplaces worldwide, and we also utilize operating leases for our data centers. These leases have remaining terms ranging from one to 12 years, many of which include renewal and early termination options. As of May 31, 2020, we have not considered extension and early termination options in our calculation of the ROU assets and lease liabilities because we do not believe that it is reasonably certain that we will exercise those options. We do not have any significant finance leases.

We determine if an arrangement is a lease at inception. We consider any contract where there is an identified asset that we have the right to control in determining whether the contract contains a lease. A ROU asset represents our right to use an underlying asset for the lease term, and the lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our operating leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. We calculate our incremental borrowing rates by extrapolating our current unsecured bond portfolio across the maturity ladder and adjusting the resultant corporate rate for the estimated spread for a secured borrowing and for foreign currencies, as appropriate. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Operating lease transactions are included in operating lease right-of-use assets, net, and current and non-current operating lease liabilities in the condensed consolidated balance sheets.


9


The following table shows the cumulative effect of the changes made to the December 1, 2019 consolidated balance sheet for the adoption of ASC Topic 842 related to lease contracts that were in effect at the time of adoption (in millions):
 
November 30, 2019
 
Adjustments due to adoption of ASC Topic 842
 
December 1, 2019
Other current assets
3.4

 
(3.4
)
 

Operating lease right-of-use assets, net

 
380.7

 
380.7

Other accrued expenses
(9.6
)
 
9.6

 

Operating lease liabilities, current

 
(63.9
)
 
(63.9
)
Operating lease liabilities, non-current

 
(350.6
)
 
(350.6
)
Other liabilities
(27.6
)
 
27.6

 



Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, which replaces the existing incurred loss impairment model with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The standard will be effective for us in the first quarter of our fiscal year 2021. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, which removes Step 2 from the goodwill impairment test. The standard will be effective for us in the first quarter of our fiscal 2021, although early adoption is permitted. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, which addresses the accounting for implementation costs associated with a hosted service. The standard provides that implementation costs be evaluated for capitalization using the same criteria as that used for internal-use software development costs, with amortization expense being recorded in the same income statement expense line as the hosted service costs and over the expected term of the hosting arrangement. The standard will be effective for us in the first quarter of our fiscal 2021, although early adoption is permitted. The amendments will be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. The standard will be effective for us in the first quarter of our fiscal year 2022, although early adoption is permitted. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements.

2.
Business Combinations and Divestitures

Aerospace & Defense divestiture. On December 2, 2019, we completed the sale of our Aerospace & Defense (“A&D”) business line to Montagu Private Equity for approximately $466 million. The A&D assets were previously included in our Transportation segment. We recognized a gain of approximately $372 million on the sale, subject to final working capital adjustments. The gain is included in other (income) expense, net, in the condensed consolidated statements of operations. The transaction resulted in the divestiture of the following assets and liabilities (in millions):
Current assets
$
18.9

Property and equipment
$
4.5

Intangible assets
$
4.2

Goodwill
$
87.7

Current liabilities
$
(1.1
)
Deferred revenue
$
(24.8
)


automotiveMastermind equity interests acquisition. In September 2017, we acquired automotiveMastermind (“aM”), a leading provider of predictive analytics and marketing automation software for the automotive industry. We purchased approximately 78 percent of aM at that time. In exchange for the remaining 22 percent of aM, we issued equity interests in aM’s immediate parent holding company to aM’s founders and certain employees. We agreed to pay cash to acquire the

10


interests over the next five years based on put/call provisions that tie the valuation to underlying adjusted EBITDA performance of aM. Since the purchase of the remaining 22 percent of the business requires continued service of the founders and employees, we are accounting for the arrangement as compensation expense that is remeasured based on changes in the fair value of the equity interests. We have classified this expense as acquisition-related costs within the condensed consolidated statements of operations and we have classified the associated accrued liability within other accrued expenses and other liabilities in the condensed consolidated balance sheets. In November 2019, the option holders exercised the put provision on 62.5 percent of their remaining 22 percent interest in the business for $75.9 million in cash, which we paid in December 2019. We estimate the compensation expense associated with the remaining equity interests to be approximately $70 to $75 million, of which approximately $34.6 million has been recognized as of May 31, 2020. During the first quarter of 2020, due to a forfeiture and subsequent reallocation of equity interests to the remaining option holders, we reversed previously recognized expense for the forfeited interests, which resulted in negligible total first quarter 2020 acquisition-related performance compensation. We will recognize the expense associated with the reallocated interests over the remaining life of the options, through September 2022.

3.
Revenue

We disaggregate our revenue by segment (as described in Note 16) and by transaction type according to the following categories:

Recurring fixed revenue represents revenue generated from contracts specifying a relatively fixed fee for services delivered over the life of the contract. The initial term of these contracts is typically annual (with some longer-term arrangements) and non-cancellable for the term of the subscription, and may contain provisions for minimum monthly payments. The fixed fee is typically paid annually or more periodically in advance. These contracts typically consist of subscriptions to our various information offerings and software maintenance, which provide continuous access to our platforms and associated data over the contract term. Subscription revenue is usually recognized ratably over the contract term or, for term-based software license arrangements, annually on renewal.

Recurring variable revenue represents revenue from contracts that specify a fee for services, which is typically not fixed. The variable fee is usually paid monthly in arrears. Recurring variable revenue is based on, among other factors, the number of trades processed, assets under management, or the number of positions we value, and revenue is recognized based on the specific factor used (e.g., for usage-based contracts, we recognize revenue in line with usage in the period). Most of these contracts have an initial term ranging from one to five years, with auto-renewal periods thereafter. Recurring variable revenue was derived entirely from the Financial Services segment for all periods presented.

Non-recurring revenue represents consulting, services, single-document product sales, perpetual license sales and associated services, conferences and events, and advertising. Revenue for services and other non-recurring revenue is recognized upon completion of the associated performance obligation.

The following table presents our revenue by transaction type (in millions):
 
Three months ended May 31,
 
Six months ended May 31,
 
2020
 
2019
 
2020
 
2019
Recurring fixed revenue
$
755.2

 
$
785.2

 
$
1,559.3

 
$
1,552.4

Recurring variable revenue
158.0

 
145.0

 
304.8

 
281.0

Non-recurring revenue
113.4

 
205.3

 
243.3

 
348.5

Total revenue
$
1,026.6

 
$
1,135.5

 
$
2,107.4

 
$
2,181.9



Our customer contracts may include multiple performance obligations; for example, we typically sell software licenses with maintenance and other associated services. For these transactions, we recognize revenue based on the relative fair value to the customer of each performance obligation as each performance obligation is completed.

We record a receivable when a customer is billed or when revenue is recognized prior to billing a customer. Contract assets include unbilled amounts for multi-year customer contracts where payment is not yet due and where services have been provided up-front but have not yet been billed. Contract assets were approximately $25.7 million as of May 31, 2020 and $39.8 million as of November 30, 2019, and are recorded in accounts receivable, net, in the condensed consolidated balance sheets.


11


Contract liabilities primarily include our obligations to transfer goods or services for which we have received consideration (or an amount of consideration is due) from the customer. Billings represent amounts that were paid in advance or due from customers. We record our contract liabilities as deferred revenue in the condensed consolidated balance sheets.

The following table provides a reconciliation of our contract liabilities as of May 31, 2020 (in millions):
Balance at November 30, 2019
 
$
879.7

Billings
 
1,680.2

Revenue recognized
 
(1,614.0
)
Balance at May 31, 2020
 
$
945.9



We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to exceed one year. Certain sales commission programs are designed to promote the sale of products and services to new customers, and we therefore defer the incremental costs related to these programs over the expected customer life related to those products underlying the contracts. We record these expenses as selling, general and administrative expense within the condensed consolidated statements of operations.

4.
Leases

The following table presents lease cost, cash paid for amounts included in the measurement of lease liabilities, the weighted-average remaining lease term, and the weighted-average discount rate for our operating leases for the three and six months ended May 31, 2020 (in millions):
 
Three months ended May 31, 2020
 
Six months ended May 31, 2020
Lease cost:
 
 
 
Operating lease cost
$
16.3

 
$
32.4

Variable lease cost
$
1.5

 
$
3.2

 
 
 
 
Other information:
 
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
Operating cash outflows from operating leases
$
15.9

 
$
31.4

 
 
 
 
As of May 31, 2020:
 
 
 
Weighted-average remaining lease term
 
 
8.2 years

Weighted-average discount rate
 
 
2.0
%


As of May 31, 2020, maturities of operating lease liabilities under non-cancellable arrangements were as follows (in millions):
Year
 
Amount
Remainder of 2020
 
$
74.2

2021
 
62.7

2022
 
51.6

2023
 
45.0

2024
 
40.0

Thereafter
 
147.5

Total future minimum operating lease payments
 
421.0

Imputed interest
 
(31.3
)
Total operating lease liability
 
$
389.7




12


5.
Intangible Assets

The following table presents details of our intangible assets, other than goodwill, as of May 31, 2020 and November 30, 2019 (in millions): 
 
As of May 31, 2020
 
As of November 30, 2019
 
Gross
 
Accumulated
Amortization
 
Net
 
Gross
 
Accumulated
Amortization
 
Net
Intangible assets subject to amortization:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
3,418.0

 
$
(705.5
)
 
$
2,712.5

 
$
3,476.1

 
$
(628.7
)
 
$
2,847.4

Developed technology
936.5

 
(243.5
)
 
693.0

 
949.6

 
(208.9
)
 
740.7

Information databases
588.6

 
(336.5
)
 
252.1

 
591.6

 
(310.9
)
 
280.7

Trademarks
485.9

 
(229.6
)
 
256.3

 
487.0

 
(203.0
)
 
284.0

Developed computer software
67.9

 
(58.5
)
 
9.4

 
76.3

 
(62.9
)
 
13.4

Other
4.1

 
(1.7
)
 
2.4

 
4.1

 
(1.3
)
 
2.8

Total intangible assets
$
5,501.0

 
$
(1,575.3
)
 
$
3,925.7

 
$
5,584.7

 
$
(1,415.7
)
 
$
4,169.0



Intangible assets amortization expense was $93.0 million and $187.2 million for the three and six months ended May 31, 2020, compared to $94.6 million and $190.3 million for the three and six months ended May 31, 2019. The following table presents the estimated future amortization expense related to intangible assets held as of May 31, 2020 (in millions):
Year
 
Amount
Remainder of 2020
 
$
184.8

2021
 
$
365.5

2022
 
$
348.8

2023
 
$
336.7

2024
 
$
318.1

Thereafter
 
$
2,371.8


Goodwill, gross intangible assets, and net intangible assets are all subject to foreign currency translation effects. The change in net intangible assets from November 30, 2019 to May 31, 2020 was primarily due to current year amortization.


13


6.
Debt

The following table summarizes total indebtedness, including unamortized premiums, as of May 31, 2020 and November 30, 2019 (in millions):
 
 
 
 
May 31, 2020
 
November 30, 2019
 
 
Maturity Date
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Credit Facilities:
 
 
 
 
 
 
 
 
 
 
2019 revolving facility
 
November 2024
 
$
497.0

 
$
497.0

 
$
237.0

 
$
237.0

2019 credit agreement
 
April 2021
 
250.0

 
250.0

 
250.0

 
250.0

Senior Unsecured Notes:
 
 
 
 
 
 
 
 
 
 
5% senior notes due 2022
 
November 1, 2022
 
748.2

 
803.0

 
748.2

 
798.2

4.125% senior notes due 2023
 
August 1, 2023
 
499.1

 
543.3

 
498.9

 
528.8

3.625% senior notes due 2024
 
May 1, 2024
 
399.1

 
423.4

 
398.9

 
416.4

4.75% senior notes due 2025
 
February 15, 2025
 
810.8

 
871.3

 
811.8

 
873.6

4.00% senior notes due 2026
 
March 1, 2026
 
500.0

 
533.6

 
500.0

 
530.2

4.75% senior notes due 2028
 
August 1, 2028
 
747.7

 
860.4

 
747.6

 
838.4

4.25% senior notes due 2029
 
May 1, 2029
 
972.7

 
1,053.0

 
974.2

 
1,026.7

Debt issuance costs
 
 
 
(43.1
)
 

 
(47.7
)
 
 
Finance leases
 
 
 
6.0

 
 
 
6.6

 
 
Total debt
 
 
 
$
5,387.5

 
 
 
$
5,125.5

 
 
Current portion
 
 
 
(251.0
)
 
 
 
(251.1
)
 
 
Total long-term debt
 
 
 
$
5,136.5

 
 
 
$
4,874.4

 
 

2019 revolving facility. On November 29, 2019, we entered into a $1.25 billion senior unsecured revolving credit agreement (“2019 revolving facility”). Subject to certain conditions, the 2019 revolving facility may be expanded by up to an aggregate of $750 million in additional commitments. Borrowings under the 2019 revolving facility mature in November 2024. The interest rates for borrowings under the 2019 revolving facility are the applicable LIBOR plus a spread of 1.00 percent to 1.625 percent, depending upon our corporate credit rating. A commitment fee on any unused balance is payable periodically and ranges from 0.10 percent to 0.25 percent based upon our corporate credit rating. We had approximately $1.3 million of outstanding letters of credit under the 2019 revolving facility as of May 31, 2020, which reduced the available borrowing under the facility by an equivalent amount.

2019 credit agreement. In September 2019, we entered into a 364-day credit agreement (the “2019 credit agreement”) for a term loan credit facility in an aggregate principal amount of $250.0 million. In April 2020, we amended the 2019 credit agreement to extend the term through April 2021. The interest rate for borrowing under the 2019 credit agreement is the applicable LIBOR plus a spread of 1.00 percent.

The 2019 revolving facility and the 2019 credit agreement are subject to certain financial and other covenants, including a maximum Leverage Ratio and a minimum Interest Coverage Ratio, which is defined as the ratio of Consolidated EBITDA to Consolidated Interest Expense, as such terms are defined in the agreements.

As of May 31, 2020, we had approximately $497.0 million of outstanding borrowings under the 2019 revolving facility at a current annual interest rate of 1.47 percent and $250.0 million of outstanding borrowings under the 2019 credit agreement at a current weighted average annual interest rate of 1.17 percent.

Senior Unsecured Notes. All of our senior unsecured notes (“Senior Notes”) are unsecured and bear interest at a fixed rate payable semiannually. The Senior Notes were issued in registered offerings under the Securities Act or in offerings not subject to the registration requirements of the Securities Act, and all the Senior Notes have been admitted for trading to the official list of The International Stock Exchange in the Channel Islands. The indentures governing the Senior Notes all provide that, at the option of the respective holders of the Senior Notes, we may be required to purchase all or a portion of such Senior Notes upon occurrence of a change of control triggering event as defined in the respective indentures, at a price equal to 101 percent of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. All the indentures also contain (i) covenants that limit our ability to, among other things, incur or create liens and enter into sale and leaseback transactions, (ii) covenants

14


that limit our ability to consolidate or merge with another entity or to sell all or substantially all of our assets to another entity, and (iii) customary default provisions.

As of May 31, 2020, we were in compliance with all of our debt covenants. We have classified short-term debt based on scheduled loan payments and intended repayments on our revolving facility based on expected cash availability over the next 12 months.

The carrying value of our variable rate debt instruments approximate their fair value because of the variable interest rates associated with those instruments. The fair values of the senior notes were measured using observable inputs in markets that are not active; consequently, we have classified those notes within Level 2 of the fair value hierarchy.

7.
Derivatives

Our business is exposed to various market risks, including interest rate and foreign currency risks. We utilize derivative instruments to help us manage these risks. We do not hold or issue derivatives for speculative purposes.

Interest Rate Swaps

To mitigate interest rate exposure on our outstanding revolving facility debt, we utilize interest rate derivative contracts that effectively swap $300 million of floating rate debt at a 2.93 percent weighted-average fixed interest rate, plus the applicable spread on our floating rate debt. We entered into these swap contracts in November 2013 and January 2014, and the contracts expire between August and November 2020.

Because the terms of these swaps and the variable rate debt (as amended or extended over time) effectively coincide, we do not expect any ineffectiveness. We have designated and accounted for these instruments as cash flow hedges, with changes in fair value being deferred in accumulated other comprehensive loss (“AOCI”) in our condensed consolidated balance sheets.

Foreign Currency Forwards

To mitigate foreign currency exposure, we utilize short-term foreign currency forward contracts that manage market risks associated with fluctuations in balances that are denominated in currencies other than the local functional currency. We account for these forward contracts at fair value and recognize the associated realized and unrealized gains and losses in other (income) expense, net, since we have not designated these contracts as hedges for accounting purposes. The notional amount of these outstanding foreign currency forward contracts was $397.3 million and $695.0 million as of May 31, 2020 and November 30, 2019, respectively.

Fair Value of Derivatives

Since our derivative instruments are not listed on an exchange, we have evaluated fair value by reference to similar transactions in active markets; consequently, we have classified all of our derivative instruments within Level 2 of the fair value measurement hierarchy. As of May 31, 2020, and November 30, 2019, we had assets of $3.7 million and $3.5 million, respectively, which were classified within other current assets, and we had liabilities of $3.2 million and $3.9 million, respectively, which were classified within other accrued expenses and other liabilities.
 

15


8.
Restructuring and Impairment Charges

In the second quarter of 2020, as a result of efforts to moderate the impact of the COVID-19 pandemic on our business, we incurred restructuring charges of approximately $73.4 million across all segments, comprised primarily of employee severance charges. For the six months ended May 31, 2020, we incurred approximately $77.9 million of restructuring charges.

The following table provides a reconciliation of the restructuring liability, recorded in other accrued expenses, as of May 31, 2020 (in millions):
 
Employee Severance and
Other Termination
Benefits
 
Contract
Termination
Costs
 
Total
Balance at November 30, 2019
$
2.9

 
$
0.8

 
$
3.7

Add: Restructuring costs incurred
71.3

 
6.8

 
78.1

Revision to prior estimates
(0.2
)
 

 
(0.2
)
Less: Amount paid
(15.4
)
 
(3.8
)
 
(19.2
)
Balance at May 31, 2020
$
58.6

 
$
3.8

 
$
62.4



As of May 31, 2020, approximately $14.6 million of the remaining restructuring liability was in Resources, $13.0 million in Transportation, $18.2 million in Shared Services, $14.4 million in Financial Services, and the remainder in CMS.

As part of our effort to moderate the impact of the COVID-19 pandemic, we also evaluated our office facilities to determine where we could exit, consolidate, or otherwise optimize our use of office space throughout the company. During the second quarter of 2020, we fully or partially abandoned multiple office locations, recording approximately $7.9 million of impairment charges in accordance with the impairment provisions of ASC Topic 360.

9.
Acquisition-Related Costs

During the six months ended May 31, 2020, we incurred approximately $7.5 million