Corelogic (CLGX) 10-Q2020 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

  

OR

For the transition period from              to

(Exact name of registrant as specified in its charter)

 

 

 

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

 

Indicate by check mark whether the registrant: is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

On April 28, 2020 there were 79,411,399 shares of common stock outstanding.

Table of Contents

 

 

Condensed Consolidated Balance Sheets

 

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

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

(Unaudited)

 

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

Condensed Consolidated Statements of Cash Flows

(Unaudited)

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

Condensed Consolidated Statement of Stockholders' Equity (Year-to-Date)

(Unaudited)

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

CoreLogic, Inc., together with its subsidiaries (collectively “the Company”, “we”, “us” or “our”), is a leading global property information, insight, analytics and data-enabled solutions provider operating in North America, Western Europe and Asia Pacific. Our combined data from public, contributory, and proprietary sources provides detailed coverage of property, mortgages and other encumbrances, property risk and replacement cost, consumer credit, tenancy, location, hazard risk and related performance information. The markets we serve include real estate and mortgage finance, insurance, capital markets, and the public sector. We deliver value to clients through unique data, analytics, workflow technology, advisory and managed solutions. Clients rely on us to help identify and manage growth opportunities, improve performance, and mitigate risk.

The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of only normal recurring items which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full year or for any future periods.

Client Concentration

We generate the majority of our operating revenues from clients with operations in the US residential real estate, mortgage origination, and mortgage servicing markets. Approximately 31% and 29% of our operating revenues for the three months ended March 31, 2020 and 2019, respectively, were generated from our top ten clients, who consist of the largest US mortgage originators and servicers. None of our clients individually accounted for greater than 10% of our operating revenues during these periods.

Cash, Cash Equivalents, and Restricted Cash

We deem the carrying value of cash, cash equivalents, and restricted cash to be a reasonable estimate of fair value due to the nature of these instruments. Restricted cash is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust. The following table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the statement of cash flows:

Operating Revenue Recognition

We derive our operating revenues primarily from US mortgage lenders, servicers, and insurance companies with good creditworthiness. Operating revenue arrangements are written and specify the products or services to be delivered, pricing, and payment terms. Operating revenue is recognized when the distinct good or service (also referred as "performance obligation"), is delivered and control has been transferred to the client. Generally, clients contract with us to provide products and services that are highly interrelated and not separately identifiable. Therefore, the entire contract is accounted for as one performance obligation. At times, some of our contracts have multiple performance obligations where we allocate the total price to each performance obligation based on the estimated relative standalone selling price using observable sales or the cost-plus-margin approach.

For products or services where delivery occurs at a point in time, we recognize operating revenue when the client obtains control of the products upon delivery. When delivery occurs over time, we generally recognize operating revenue ratably over the service period, once initial delivery has occurred. For certain of our products or services, clients may also pay upfront fees, which we defer and recognize as operating revenue over the longer of the contractual term or the expected client relationship period.

Licensing arrangements that provide our clients with the right to access or use our intellectual property are considered functional licenses for which we generally recognize operating revenue based on usage. For arrangements that provide a stand-ready obligation or substantive updates to the intellectual property which the client is contractually or practically required to use, we recognize operating revenue ratably over the contractual term.

Client payment terms are standard with no significant financing components or extended payment terms granted. In limited cases, we allow for client cancellations for which we estimate a reserve at the point-of-sale.

Comprehensive Income

Comprehensive income includes all changes in equity except those resulting from investments by shareholders and distributions to shareholders. Specifically, foreign currency translation adjustments, amounts related to supplemental benefit plans, unrealized gains and losses on interest rate swap transactions and investments are recorded in other comprehensive income. The following table shows the components of accumulated other comprehensive loss, net of taxes, as of March 31, 2020 and December 31, 2019:

Investment in Affiliates, net

Investments in affiliates are accounted for under the equity method of accounting when we are deemed to have significant influence over the affiliate but do not control or have a majority voting interest in the affiliate. Investments are carried at the cost of acquisition, including subsequent impairments, capital contributions and loans from us, plus our equity in undistributed earnings or losses since inception of the investment, less dividends received.

We recorded equity in earnings of affiliates, net of tax, of $0.5 million, and equity in losses of affiliates, net of tax, of $0.4 million for the three months ended March 31, 2020 and 2019, respectively. For both the three months ended March 31, 2020 and 2019, we had 0 operating revenues related to our investment in affiliates. We recorded operating expenses related to our investment in affiliates of $0.1 million for the three months ended March 31, 2020 and $0.2 million for the three months ended 2019, respectively. As of March 31, 2020, and December 31, 2019, we had insignificant accounts payable and accounts receivable with these affiliates.

Leases

We determine if an arrangement contains a lease at inception and determine the classification of the lease, as either operating or finance, at commencement.

Operating and finance lease assets and liabilities are recorded based on the present value of future lease payments over the lease term which factors in certain qualifying initial direct costs incurred as well as any lease incentives received. If an implicit rate is not readily determinable, we utilize our incremental borrowing rate and inputs from third-party lenders to determine the appropriate discount rate. Lease expense for operating lease payments are recognized on a straight-line basis over the lease term, which, if applicable, may factor in renewal or termination options. Finance leases incur interest expense using the effective interest method in addition to amortization of the leased asset on a straight-line basis, both over the applicable lease term. Lease terms may factor in options to extend or terminate the lease.

We adhere to the short-term lease recognition exemption for all classes of assets (i.e. facilities and equipment). As a result, leases with an initial term of twelve months or less are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term. In addition, for certain equipment leases, we account for lease and non-lease components, such as services, as a single lease component as permitted.

Dividends

We record cash dividends as reductions to retained earnings upon declaration, with a corresponding increase to current liabilities, based on common shares outstanding on the record date. In addition, as part of our share-based compensation program, the terms of our restricted stock units (“RSUs”) and performance-based restricted stock units (“PBRSUs”) stipulate that holders of these awards are credited with dividend equivalent units on each date that a cash dividend is paid to holders of common stock. These dividend equivalents are subject to the same vesting and performance requirements of the underlying units and therefore are forfeitable (i.e. non-participating). Upon declaration of a dividend, we record dividend equivalents as a reduction to retained earnings, derived from the number of eligible unvested shares, with a corresponding increase to additional paid-in-capital.

In December 2019, we announced that our Board of Directors initiated and declared a cash dividend of $0.22 per common share. As a result, as of December 31, 2019, we recorded a liability of $17.4 million within accounts payable and other accrued expenses, as well as $0.4 million in dividend equivalents reflected in additional paid-in-capital within our accompanying consolidated balance sheets. The dividend declared was paid in January 2020 to shareholders of record at the close of business on January 10, 2020. In April 2020, the Board of Directors announced a cash dividend to common shareholders of $0.22 per share of common stock to be paid in June 2020.

Discontinued Operations

As of March 31, 2020, and December 31, 2019, we recorded assets of discontinued operations of $6.3 million within prepaid expenses and other current assets within our condensed consolidated balance sheets, mainly consisting of income tax-related assets. Additionally, as of March 31, 2020 and December 31, 2019, we recorded liabilities of $0.4 million within accounts payable and other accrued expenses, which mainly consisted of legal-related accruals.

Tax Escrow Disbursement Arrangements

These deposits generally remain in the accounts for a period of two to five business days. We record credits from these activities as a reduction to related administrative expenses, including the cost of bank fees and other administration costs.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued guidance to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform, in connection with the scheduled phase-out of LIBOR as a reference interest rate. The guidance provides practical expedients and exceptions in accounting for contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. Entities electing the practical expedients will be allowed, among other topics, to account for reference rate modification of debt and receivables prospectively; to not reassess lease classifications and discount rates in reference rate lease modifications; and ease cash-flow hedge effectiveness testing guidelines for hedges affected by reference rate reform. The guidance is effective as of March 12, 2020 through December 31, 2022 with adoption permitted as of any date within the aforementioned time frame from the beginning of the selected interim period on a prospective basis. We have elected to adopt the guidance in the current quarter which has not had a material effect on our condensed consolidated financial statements.

In December 2019, as part of a simplification initiative, the FASB issued guidance to remove certain exceptions and added further guidance to simplify the accounting for income taxes. The exceptions that were removed relate to recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods. The guidance reduces the complexity of recognizing deferred taxes for tax goodwill and allocating taxes to entities of a consolidated group. The guidance is effective for fiscal years beginning after December 15, 2020 with early adoption permitted. We elected to early adopt on January 1, 2020 via the modified retrospective method with a cumulative effect adjustment at the date of initial application, resulting in an increase to retained earnings of $16.8 million which represents the release of a deferred tax liability that had previously been established for the outside basis difference of an equity method investment that later became a subsidiary.

In November 2018, the FASB issued guidance to clarify the definition and interaction of collaborative arrangements with previously issued guidance on revenue recognition. This guidance is effective for fiscal years beginning after December 15, 2019 on a retrospective basis to the date of the initial adoption of the revenue standard. We have adopted this guidance in the current year as required, which has not had a material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued guidance that amends fair value disclosure requirements. The guidance removes disclosure requirements on the transfers between Level 1 and Level 2 of the fair value hierarchy in addition to the disclosure requirements on the policy for timing of transfers between levels and the valuation process for Level 3 fair value measurements. The guidance clarifies the measurement uncertainty disclosure and adds disclosure requirements for Level 3 unrealized gains and losses and significant unobservable inputs used to develop Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019. Entities were permitted to early adopt any removed or modified disclosures upon issuance and delay adoption of the additional disclosures until the effective date. We early adopted the removal of disclosure

provisions of the new guidance in 2018 and adopted the measurement uncertainty disclosure and additional Level 3 disclosures in the current year as required. Adoption of this guidance has not had a material impact on our condensed consolidated financial statements.

In June 2016, the FASB issued guidance for accounting of credit losses affecting the impairment model for most financial assets and certain other instruments. Entities are required to use a forward-looking current expected credit loss model for trade and other receivables, held-to-maturity debt securities, loans, and other instruments, which will generally lead to an earlier recognition of loss allowances. Entities will recognize expected losses on available-for-sale debt securities as allowances rather than a reduction in amortized cost of the security while the measurement process of such loss does not change. Disclosure requirements are expanded regarding an entity’s assumptions, models, and methods of estimations of the allowance. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. In November 2018 and 2019, the FASB issued updates to this standard which, amongst other items, clarified that impairment of receivables arising from operating leases should be accounted for under applicable leasing guidance. We have adopted this guidance in the current year as required, which has not had a material impact on our condensed consolidated financial statements.

Depreciation expense for property and equipment, net, was approximately $23.2 million and $23.4 million for the three months ended March 31, 2020 and 2019, respectively.

 

Other intangible assets, net consists of the following:

Amortization expense for other intangible assets, net was $14.3 million and $16.6 million for the three months ended March 31, 2020 and 2019, respectively.

Estimated amortization expense for other intangible assets, net is as follows:

Our long-term debt consists of the following:

Credit Agreement

In May 2019, we amended and restated our credit agreement (the “Credit Agreement”) with Bank of America, N.A., as the administrative agent, and other financial institutions. The Credit Agreement provides for a $1.8 billion 5-year term loan facility (the “Term Facility”), and a $750.0 million 5-year revolving credit facility (the “Revolving Facility”). The Term Facility matures, and the Revolving Facility expires, in May 2024. The Revolving Facility includes a $100.0 million multi-currency revolving sub-facility and a $50.0 million letter of credit sub-facility. The Credit Agreement also provides for the ability to increase the Term Facility and Revolving Facility by up to $300.0 million in the aggregate; however, the lenders are not obligated to do so. As of March 31, 2020, we had a remaining borrowing capacity of $750.0 million under the Revolving Facility and we were in compliance with all financial and restrictive covenants under the Credit Agreement.

In connection with the amendment and restatement of the Credit Agreement, in May 2019, we incurred approximately $9.7 million of debt issuance costs of which $9.6 million were initially capitalized within long-term debt, net of current, in the accompanying condensed consolidated balance sheets. In addition, when we amended and restated the Credit Agreement, we wrote-off previously unamortized debt issuance costs of $1.5 million within (loss)/gain on investments and other, net, in the accompanying consolidated statement of operations, which resulted in a remaining $14.6 million of previously unamortized costs. We will amortize all of these costs over the term of the Credit Agreement. For the three months ended March 31, 2020 and 2019, $1.2 million and $1.3 million, respectively, were recognized in the accompanying condensed consolidated statements of operations related to the amortization of debt issuance costs.

In April 1998, we issued $100.0 million in aggregate principal amount of 7.55% senior debentures due 2028. The indentures governing these debentures, as amended, contain limited restrictions on us.

Interest Rate Swaps

We have entered into amortizing interest rate swaps (“Swaps”) in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The floating rates in our Swaps are based on the one-month London interbank offering rate ("LIBOR"). The notional balances, terms and maturities of our Swaps are designed to have the effect of fixing the rate of interest on at least 50% of the principal balance of our senior term debt.

As of March 31, 2020, the Swaps have a combined remaining notional balance of $1.3 billion, a weighted average fixed interest rate of 2.08% (rates range from 0.66% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease based on our expectations of the level of variable rate debt to be in effect in future periods. Currently, we have scheduled notional amounts of between $1.3 billion and $1.2 billion through September 2021, then $1.1 billion and $1.0 billion through August 2022, and $496.8 million and $465.0 million through December 2025. Approximate weighted average fixed interest rates for the aforementioned time periods are 2.51%, 2.64%, and 2.61%, respectively.

We have designated the Swaps as cash flow hedges. The estimated fair values of these cash flow hedges are recorded in prepaid expenses and other current assets or other assets as well as accounts payable and other accrued expenses or other liabilities in the accompanying condensed consolidated balance sheets. As of March 31, 2020, the estimated fair value of these cash flow hedges resulted in a liability of $96.3 million of which $6.2 million was recorded within accounts payable and other accrued expenses. As of December 31, 2019, the estimated fair value of these cash flow hedges resulted in an asset of $0.6 million which was recorded within prepaid expenses and other current assets, as well as a liability of $47.7 million recorded within other liabilities.

Unrealized losses of $36.9 million (net of $12.3 million in deferred taxes) and $12.2 million (net of $4.1 million in deferred taxes) for the three months ended March 31, 2020 and 2019, respectively, were recognized in other comprehensive loss related to the Swaps.

As a result of our Swap activity, for the three months ended March 31, 2020 and 2019, included within interest expense, on a pre-tax basis, we recognized interest expense of $15.8 million and interest income of $1.7 million, respectively. Estimated net losses included in accumulated other comprehensive loss related to the Swaps as of March 31, 2020, that will be reclassified into earnings as interest expense over the next 12 months, utilizing March 31, 2020 LIBOR, is estimated to be $21.1 million, on a pre-tax basis.

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable.

The market approach is applied for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value balances are classified based on the observability of those inputs.

A fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Level 2 measurements utilize observable inputs in active markets for similar assets and liabilities, or, quoted prices in markets that are not active.

In estimating fair value, we used the following methods and assumptions:

For cash and cash equivalents, the carrying value is a reasonable estimate of fair value due to the short-term nature of the instruments.

Restricted Cash

Restricted cash is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust. We deem the carrying value to be a reasonable estimate of fair value due to the nature of these instruments.

Other Investments

Other investments are currently comprised of a minority equity investment in a foreign enterprise which we measure at cost and adjust to fair value on a quarterly basis when there are observable price changes in orderly transactions for the identical, or similar, investments. Changes in fair value are recorded within (loss)/gain on investments and other, net, in our condensed consolidated statement of operations.

Contingent Consideration

The fair value of our contingent consideration was estimated using the Monte-Carlo simulation model, which relies on significant assumptions and estimates including discount rates and future market conditions, among others.

Long-Term Debt

The fair value of debt was estimated based on the current rates available to us for similar debt of the same remaining maturities and consideration of our default and credit risk.

Swaps

The fair values of the Swaps were estimated based on market-value quotes received from the counterparties to the agreements.

The fair values of our financial instruments as of March 31, 2020 are presented in the following table:

In connection with certain acquisitions in 2017, we entered into contingent consideration agreements for up to $20.5 million in cash by 2022 upon the achievement of certain revenue targets ending in fiscal year 2021. These contingent payments were originally recorded at a fair value of $6.2 million using the Monte-Carlo simulation model. In connection with the 2019 acquisition of National Tax Search, LLC (“NTS”), we entered into a contingent consideration agreement for up to $7.5 million in cash based upon certain revenue targets in fiscal years 2020 and 2021. This contingent consideration has been assessed with no fair value as of March 31, 2020 using the Monte-Carlo simulation model. The contingent payments are remeasured at fair value quarterly, and changes are recorded within (loss)/gain on investments and other, net, in our condensed consolidated statement of operations. During the three months ended March 31, 2020, we decreased the fair value of our contingent consideration by $0.8 million and recorded the gain in our condensed consolidated statement of operations. During the three months ended March 31, 2019, we increased the fair value of our contingent consideration by $0.4 million and recorded the loss in our condensed consolidated statement of operations.

Due to observable price changes in an inactive market, for the three months ended March 31, 2019 we recorded an unfavorable fair value adjustment of $2.3 million to a minority equity investment, within (loss)/gain on investments and other, net, in our condensed consolidated statement of operations. NaN adjustments were necessary for the three months ended March 31, 2020.

Operating revenues by solution type consist of the following:

Property Insights

Our property insights solutions combine our patented predictive analytics with our proprietary and contributed data to enable our clients to improve customer acquisition and retention, detect and prevent fraud, improve mortgage transaction cycle time and cost efficiency, identify real estate trends and neighborhood characteristics, track market performance, and increase market share. Our data is comprised of real estate information, incorporating crime, site inspection, neighborhood, document images, and other information from proprietary sources. We also offer verification of applicant income, identity and employment services. We typically license data in one of two forms: bulk data licensing and transactional licensing. Operating revenue for bulk data licensing contracts that provide a stand-ready obligation or include substantive updates to the intellectual property is recognized ratably over the contractual term; otherwise, operating revenue is recognized upon delivery. For transactional licensing, we recognize operating revenue based on usage.

Insurance and Spatial Solutions

Our insurance and spatial solutions provide originators and property and casualty insurers the ability to more effectively locate, assess and manage property-level assets and risks through location-based data and analytics. We also provide cloud-based property claims workflow technology for property and casualty insurers. The licensed intellectual property data is generally provided to our clients on a subscription or usage basis. For subscription contracts, operating revenue is recognized ratably over the contractual term once initial delivery has occurred. For contracts to provide a license to data which is delivered via report or data file, operating revenue is recognized when the client obtains control of the products, which is upon delivery.

Property Tax Solutions

Our property tax solutions are built from aggregated property tax information from over 20,000 taxing authorities. We use this information to advise mortgage lenders and servicers of the property tax payment status of loans in their portfolio and to monitor that status over the life of the loans. If a mortgage lender or servicer requires tax payments to be impounded on behalf of its borrowers, we can also facilitate the transfer of these funds to the taxing authorities and provide the lender or servicer with payment confirmation. Property tax processing revenues are primarily comprised of periodic loan fees and life-of-loan fees. For periodic fee arrangements, we generate monthly fees at a contracted rate for as long as we service the loan. For life-

of-loan fee arrangements, we charge a one-time fee when the loan is set-up in our tax servicing system. Life-of-loan fees are deferred and recognized ratably over the expected service period of 10 years and adjusted for early loan cancellation. Revenue recognition rates of loan portfolios are regularly analyzed and adjusted monthly to reflect current trends.

Valuation Solutions

Our valuation solutions represent property valuation-related data driven services and analytics combined with collateral valuation workflow technologies which assist our clients in assessing risk of loss using both traditional and alternative forms of property valuation, driving process efficiencies as well as ensuring compliance with lender and governmental regulations. We provide collateral information technology and solutions that automate property appraisal ordering, tracking, documentation and review for lender compliance with government regulations. Revenue for the property appraisal service is recognized when the appraisal service is performed and delivered to the client. In addition, to the extent that we provide continuous access to the hosted software platform, we recognize operating revenue over the term of the arrangement.

Credit Solutions

Our credit solutions provide credit and income verification services to the mortgage and automotive industries. We provide comprehensive information, typically in the form of a report, about credit history, income verification, employment verification, and home address history. We normalize the data to provide a broad range of advanced business information solutions designed to reduce risk and improve business performance to mortgage and automotive lenders. Operating revenue is recognized when the report or information is delivered to the client.

Flood Data Solutions

Our flood data solutions provide flood zone determinations primarily to mortgage lenders in accordance with US Federal legislation passed in 1994, which requires that most lenders obtain a determination of the current flood zone status at the time each loan is originated and obtain applicable updates during the life of the loan if contracted to do so. We also provide flood zone determinations to insurance companies. We generally recognize operating revenue upon delivery of the initial determination. If contracted for life of loan monitoring, we recognize operating revenue over the estimated service period, as adjusted for early loan cancellation.

 

Incremental costs to obtain or fulfill client contracts are recognized as an asset. As of March 31, 2020, we had $10.3 million of current deferred contract costs which are presented in prepaid expenses and other current assets, as well as $23.2 million of long-term deferred contract costs which are presented in other assets in our condensed consolidated balance sheet. As of December 31, 2019, we had $9.8 million of current deferred contract costs and $23.1 million of long-term deferred contract costs. Our deferred contract costs primarily include certain set-up and acquisition costs related to property tax solutions, which amortize ratably over an expected 10-year life, adjusted for early loan cancellations. For the three months ended March 31, 2020 and 2019, we recorded amortization associated with deferred contract costs of $3.7 million and $3.1 million, respectively.

We record a contract liability when amounts are invoiced, which is generally prior to the satisfaction of the performance obligation. For property tax solutions, we invoice upfront fees to clients for services to be performed over time. For property insights and insurance and spatial solutions we invoice quarterly and annually, commencing upon execution of the contracts or at the beginning of the license term, as applicable.

As of March 31, 2020, we had $910.0 million in contract liabilities compared to $884.9 million as of December 31, 2019. The overall change of $25.1 million in contract liability balances are primarily due to $173.4 million of new deferred billings in the current year, partially offset by $147.1 million of operating revenue recognized, of which $100.2 million related to contracts previously deferred, and other decreases of $1.2 million.

We currently issue equity awards under the CoreLogic, Inc. 2018 Performance Incentive Plan (the “Plan”), which was approved by our stockholders at our Annual Meeting held in May 2018. The Plan includes the ability to grant share-based instruments such as RSUs, PBRSUs, and stock options. Prior to the approval of the Plan, we issued share-based awards under the CoreLogic, Inc. 2011 Performance Incentive Plan, as amended, which was preceded by the CoreLogic, Inc. 2006 Incentive Plan. The Plan provides for up to 15,139,084 shares of the Company's common stock to be available for award grants.

We have primarily utilized RSUs and PBRSUs as our share-based compensation instruments for employees and directors. The fair value of any share-based compensation instrument grant is based on the market value of our common stock on the date of grant and is recognized as compensation expense over its vesting period.

The performance and service period for the PBRSUs awarded in the first quarter of 2019 is from January 2019 to December 2021. These awards are generally subject to service-based, performance-based, and market-based vesting conditions with the performance metric as adjusted earnings per share. Additionally, within our unvested PBRSUs, there are prior year grants which do not include market-based conditions but have adjusted EBITDA margin or organic revenue growth rate as the performance metric.

The fair values of the awards containing market-based vesting conditions were estimated using Monte-Carlo simulation with the following weighted-average assumptions:

Stock Options

The table above includes $0.5 million and $0.8 million of share-based compensation expense within cost of services in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019, respectively.

We have been named in various lawsuits and we are from time to time subject to audit or investigation by governmental agencies arising in the ordinary course of business.

With respect to matters where we determine that a loss is both probable and reasonably estimable, we record a liability representing our best estimate of the financial exposure based on known facts. For matters where a settlement has been reached, we record the expected amount of such settlements. With respect to audits, investigations or lawsuits that are ongoing, although their final dispositions are not yet determinable, we do not believe that the ultimate resolution of such matters, either individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. The actual outcome of such matters could differ materially from management’s estimates. We record expenses for legal fees as incurred.

Fair Credit Reporting Act Class Actions

    

In July 2017, Rental Property Solutions, LLC (“RPS”) was named as a defendant in Claudinne Feliciano, et. al., v. CoreLogic SafeRent, LLC, a putative class action lawsuit in the US District Court for the Southern District of New York. The named plaintiff alleges that RPS prepared a background screening report about her that contained a record of a New York Housing Court action without noting that the action had previously been dismissed. On this basis, she seeks damages under the Fair Credit Reporting Act and the New York Fair Credit Reporting Act on behalf of herself and a class of similarly situated consumers with respect to reports issued during the period of July 2015 to the present. In July 2019, the District Court issued an order certifying a class of approximately 2,000 consumers. We filed a petition for review of the certification order to the Second Circuit Court of Appeals, which was denied in November 2019.

Separation

Following the Separation, we are responsible for a portion of First American Financial Corporation's ("FAFC") contingent and other corporate liabilities. In the Separation and Distribution Agreement we entered into in connection with the Separation, we agreed with FAFC to share equally in the cost of resolution of a small number of corporate-level lawsuits, including certain consolidated securities litigation matters from which we have since been dropped. There were no liabilities incurred in connection with the consolidated securities matters. Responsibility to manage each case has been assigned to either FAFC or us, with the managing party required to update the other party regularly and consult with each other prior to certain important decisions, such as settlement. The managing party will also have primary responsibility for determining the ultimate total liability, if any, related to the applicable case. We will record our share of any such liability when the responsible party determines a reserve is necessary. As of March 31, 2020, 0 reserves were considered necessary.

In addition, the Separation and Distribution Agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our predecessor, The First American Corporation's ("FAC") financial services business, with FAFC and financial responsibility for the obligations and liabilities of FAC's information solutions business with us. Specifically, each party will, and will cause its subsidiaries and affiliates to, indemnify, defend and hold harmless the other party, its respective affiliates and subsidiaries and each of its respective officers, directors, employees and agents for any losses arising out of or otherwise in connection with the liabilities each such party assumed or retained pursuant to the Separation.

The effective income tax rate for income taxes as a percentage of income from continuing operations before equity in earnings/(losses) of affiliates and income taxes was 28.0% and 32.9% for the three months ended March 31, 2020 and 2019, respectively.

For the three months ended March 31, 2020, when compared to the three months ended 2019, the decrease in the effective income tax rate was primarily due to nonrecurring charges recorded in 2019 related to uncertain tax benefits.

We are currently under examination for the years 2010 through 2012 and 2016, by the US Internal Revenue Service ("IRS"), our primary taxing authority, and for other years by various other taxing authorities. It is reasonably possible the amount of the unrecognized benefits, as well as the valuation allowance with respect to certain tax attributes, could be significantly impacted which would have an impact on net income. In the next 12 months we expect expiration of statutes of limitations on reserves of approximately $1.3 million and the release of reserves and allowances of approximately $17 million to $20 million upon the conclusion of the IRS examination for years 2010 through 2012.

The following is a reconciliation of net income per share:

The dilutive effect of share-based compensation awards has been calculated using the treasury-stock method. For the three months ended March 31, 2020 and 2019, an aggregate of 0.1 million and 0.5 million, respectively, of PBRSUs and RSUs were excluded from the weighted-average diluted common shares outstanding due to their anti-dilutive effect.

In January 2020, we acquired the remaining 66% of Location for $11.5 million, subject to certain working capital adjustments. Location is a leading provider of geographic location indicators for crime and non-weather related events connected to underwriting risk assessment. This acquisition further progresses our long-term strategic plan by adding scale to our insurance and spatial businesses. Location is included as a component of our Property Intelligence & Risk Management Solutions ("PIRM") segment. The purchase price was allocated to the assets acquired and liabilities assumed using a variety of valuation techniques including discounted cash flow analysis, which included significant unobservable inputs. We have preliminarily recorded proprietary technology of $6.0 million with an estimated useful life of 10 years, client lists of $0.3 million with an estimated useful life of 5 years, trademarks of $0.8 million with an estimated useful life of 8 years, non-compete agreements of $0.4 million with an estimated useful life of 5 years, and goodwill of $12.3 million. In connection with this acquisition, we remeasured our then-existing 34% investment ownership in Location which resulted in a $0.6 million step-up gain that we recorded within (loss)/gain on investments and other, net, in our condensed consolidated statement of operations in the first quarter of 2020.

These business combinations did not have a material impact on our condensed consolidated statements of operations.

We incurred $0.9 million and less than $0.1 million of acquisition-related costs within selling, general and administrative expenses on our condensed consolidated statement of operations for the three months ended March 31, 2020 and 2019, respectively.

We have organized into 2 reportable segments: PIRM and UWS.

The operating results of our PIRM segment included intercompany revenues of $4.0 million and $1.8 million for the three months ended March 31, 2020 and 2019, respectively. The segment also included intercompany expenses of $0.8 million for both the three months ended March 31, 2020 and 2019.

solutions, credit solutions, and flood data solutions in North America. The segment’s primary clients are large, national mortgage lenders and servicers, but we also serve regional mortgage lenders and brokers, credit unions, commercial banks, fixed-income investors, government agencies, and property and casualty insurance companies.

The operating results of our UWS segment included intercompany revenues of $0.8 million for both the three months ended March 31, 2020 and 2019. The segment also included intercompany expenses of $1.8 million for both the three months ended March 31, 2020 and 2019.

We also separately report on our corporate and eliminations. Corporate consists primarily of corporate personnel and other expenses associated with our corporate functions and facilities, investment gains and losses, equity in earnings/(losses) of affiliates, net of tax, and interest expense. The results of our Corporate segment included intercompany expenses of $2.2 million for the three months ended March 31, 2020 and NaN for 2019.

Selected financial information by reportable segment is as follows:

Our expectations, beliefs, objectives, intentions and strategies regarding future results are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by our forward-looking statements. These risks and uncertainties include, but are not limited to:

We urge you to carefully consider risks and uncertainties and review the additional disclosures we make concerning risks and uncertainties that may materially affect the outcome of our forward-looking statements and our future business and operating results, including those made in Item 1A of Part II of this Quarterly Report on Form 10-Q and Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019, as such risk factors may be amended, supplemented, or superseded from time to time by other reports we file with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Quarterly Report on Form 10-Q.

We are a leading global property information, analytics and data-enabled software platforms and services provider operating in North America, Western Europe and Asia Pacific. Our combined data from public, contributory and proprietary sources provides detailed coverage of property, mortgages, other encumbrances, property risk and replacement cost, consumer credit, tenancy, location, hazard risk and related performance information. We have more than one million users who rely on our data and predictive decision analytics to reduce risk, enhance transparency and improve the performance of their businesses.

We offer our clients a comprehensive national database covering real property and mortgage information, judgments and liens, building and replacement costs, parcel and geospatial data, criminal background records, eviction information, non-prime lending records, credit information, and tax information, among other data types. Our structured property-specific data consisting of over 150 million parcel records covers 99% of the United States ("US"), includes both residential and commercial real estate data and is enriched by over 1 billion historical sales, mortgage, and pre-foreclosure transactions. Our consortium data covers loan level mortgage performance, appraisal, as well as mortgage application data and is in excess of 300 million records. We are also the industry's first parcel-based geocoder and have developed a proprietary spatial database covering more than 150 million parcel polygons across the US. We believe the quality of the data we offer is distinguished by our broad range of data sources and our experience in aggregating, organizing, normalizing, processing, and delivering data to our clients.

With our data as a foundation, we have built strong analytics capabilities and a variety of value-added business services to meet our clients’ needs for property tax processing, property valuation, mortgage and automotive credit reporting, tenancy screening, hazard risk, property risk and replacement cost, flood plain location determination, other geospatial data analytics, and related services.

We have organized into the following two reportable segments:

Our Property Intelligence & Risk Management (“PIRM”) segment combines property information, mortgage information, and consumer information to deliver unique housing market and property-level insights, predictive analytics and risk management capabilities. We have also developed proprietary technology and software platforms to access, automate or track this information and assist our clients with decision-making and compliance tools in the real estate industry, insurance industry and the single and multifamily industry. We deliver this information directly to our clients in a standard format over the web, through hosted software platforms or in bulk data form. Our solutions include property insights as well as insurance and spatial solutions in North America, Western Europe and Asia Pacific.

Our Underwriting & Workflow Solutions (“UWS”) segment combines property information, mortgage information and consumer information to provide comprehensive mortgage origination and monitoring solutions, including underwriting-related solutions and data-enabled valuations and appraisals. We have also developed proprietary technology and software platforms to access, automate or track this information and assist our clients with vetting and on-boarding prospects, meeting compliance regulations and understanding, diagnosing and monitoring property values. Our solutions include property tax solutions, valuation solutions, credit solutions and flood services in North America.

COVID-19

The global coronavirus ("COVID-19") pandemic and the mitigation efforts by governments to attempt to control its spread have adversely impacted the global economy, leading to disruptions and volatility in the global financial markets. As there is no comparable recent event that provides guidance to the effects or duration of COVID-19, we are not able to predict the long-term impact on our business at this time. Most states and many countries have issued policies intended to stop or slow the further spread of the disease. Our first priority remains ensuring the safety and health of our employees, clients, and others with whom we partner in conducting our business. We have deployed risk mitigation activities, safety practices, and business continuity strategies so that we can continue offering our clients consistent service offerings while continuing to protect our employees.

The volume of US mortgage loan originations serves as a key market driver for more than half of our business. We believe the volume and related volatility of real estate and mortgage transactions is primarily affected by real estate prices, the availability of funds for mortgage loans, mortgage interest rates, housing supply, employment levels, actions by the Federal Reserve, and the overall state of the US economy. Mortgage interest rates are extremely low by historical standards, and are resulting in higher demand for refinance activity, while the purchase market has been adversely impacted by reduced construction and sales of new and existing homes, and more recently, due to the COVID-19 pandemic and resulting economic instability. For the quarter ended March 31, 2020, we experienced unfavorable business and revenue impacts related to the COVID-19 pandemic of approximately $6 million. As of March 31, 2020 we did not experience any significant impacts to our financial condition, cash flows, control environment, or any related disclosures.

We will continue to monitor our business trends, financial condition, liquidity, and are taking steps to manage our operating cash flows, by prioritizing our investments, and evaluating our capital needs and activities. Our liquidity as of March 31, 2020 consisted primarily of $152.8 million of cash and $750.0 million of unused committed capacity under our revolving credit facility, and we are in compliance will all financial covenants.

Business Environment

We believe mortgage origination unit volumes increased by approximately 35% to 40% in the first quarter of 2020 relative to the same period in 2019, primarily due to higher mortgage refinance volumes resulting from lower interest rates. For 2020, we expect 2020 mortgage unit volumes to be flat relative to 2019 levels as lower interest rates are expected to enable higher refinance volumes; however, we anticipate mortgage purchase volumes to decline due to COVID-19.

We generate the majority of our operating revenues from clients with operations in the US residential real estate, mortgage origination, and mortgage servicing markets. Approximately 31% and 29% of our operating revenues for the three months ended March 31, 2020 and 2019, respectively, were generated from our top ten clients, who consist of the largest US mortgage originators and servicers. None of our clients individually accounted for greater than 10% of our operating revenues for the three months ended March 31, 2020 nor 2019.

While the majority of our revenues are generated in the US, continued strengthening of the US dollar versus other currencies in 2020 unfavorably impacted the translation of the financial results of our international operating revenues by $2.5 million for the three months ended March 31, 2020.

Dividends

In April 2020, the Board of Directors announced a cash dividend to common shareholders of $0.22 per share of common stock to be paid in June 2020. We paid a cash dividend of $0.22 per share of common stock in January, 2020 to shareholders of record on the close of business January 10, 2020.

Acquisitions

In September 2018, we announced the adoption of the Google Cloud Platform (“GCP”) as a foundational element of our ongoing technology transformation program to further expand infrastructure capabilities and drive efficiencies. Successful deployment of this technology has already begun and we expect to complete the initial transformation phase of GCP by December 2020. After the initial deployment, we will continue transitioning our technology over the foreseeable future on an opportunistic basis. As we transition to GCP, we will continue to leverage the capabilities of the cloud platform to achieve best-in-class system performance and reliability and to facilitate the deployment of unique business insights fueled by gold-standard data, information, and analytics. Additionally, we expect to realize cost efficiencies and enhanced security as we transition.

In December 2018, we announced our intent to exit a loan origination software unit and its remaining legacy default management related platforms, as well as accelerate an appraisal management company ("AMC") transformation program. We believe these actions have expanded our overall profit margins and provide for enhanced long-term organic growth trends. In September 2019, we divested our default management related platforms and received proceeds of $3.8 million. The AMC transformation was concluded in December 2019. Operating revenues attributable to the aforementioned business exits and AMC transformation were $20.8 million for the quarter ended March 31, 2019.

Operating Revenues

Our consolidated operating revenues were $443.9 million for the three months ended March 31, 2020, an increase of $26.2 million, or 6.3%, when compared to 2019, and consisted of the following:

Our PIRM segment revenues decreased by $2.8 million, or 1.6%, for the three months ended March 31, 2020, when compared to 2019. Excluding acquisition activity of $0.5 million, the decrease of $3.3 million was primarily due to unfavorable foreign exchange translation of $2.5 million within property insights, lower other revenues of $2.6 million, and lower revenue due to COVID-19. These revenue decreases were offset by higher property insights revenues of $0.7 million on a constant-currency basis and higher insurance and spatial solutions revenues of $1.1 million.

Our UWS segment revenues increased by $31.1 million, or 12.7%, for the three months ended March 31, 2020, when compared to 2019. Excluding acquisition activity of $1.6 million, the increase of $29.5 million was primarily due to higher property tax solutions of $13.9 million, higher credit solutions revenues of $13.3 million, and higher flood data solutions revenues of $10.6 million primarily related to increased volumes. These increases were partially offset by lower valuation solutions revenue of $5.1 million, and lower other revenues of $3.2 million, due to the impacts of the sale of our non-core default technology business units and the completion of our AMC transformation program in 2019, and lower revenue related to COVID-19. Operating revenues attributable to the aforementioned business exits and AMC transformation were $20.8 million for the quarter ended March 31, 2019.

Our corporate and eliminations were comprised of intercompany revenue eliminations between our operating segments.

Cost of Services (excluding depreciation and amortization)

Our consolidated cost of services was $215.6 million for the three months ended March 31, 2020, a decrease of $3.5 million, or 1.6%, when compared to 2019. Excluding acquisition activity of $1.6 million, the decrease of $5.1 million was primarily due to favorable product mix.

Selling, General and Administrative Expenses

Our consolidated selling, general and administrative expenses were $114.4 million for the three months ended March 31, 2020, a decrease of $13.8 million, or 10.8%, when compared to 2019. Excluding acquisition activity of $0.8 million, the decrease of $14.6 million was primarily due to lower compensation costs of $17.7 million and lower professional fees of $7.1 million, offset by higher external services of $2.8 million, higher foreign exchange remeasurements of $4.8 million, and higher other expenses of $2.6 million.

Depreciation and Amortization

Our consolidated depreciation and amortization expense was $46.8 million for the three months ended March 31, 2020, a decrease of $2.4 million, or 4.8%, when compared to 2019. Excluding acquisition activity of $0.5 million, the decrease of $2.9 million is primarily due to assets that were fully impaired during the prior year.

Operating Income

Our consolidated operating income was $67.1 million for the three months ended March 31, 2020, an increase of $45.9 million, or 216.3%, when compared to 2019, and consisted of the following:

Our PIRM segment operating income increased by $4.0 million, or 27.6%, for the three months ended March 31, 2020, when compared to 2019. Excluding acquisition activity of $0.4 million, operating income increased by $4.4 million and margins increased by 269 basis points primarily due to favorable product mix and the impact of our ongoing operational efficiency programs.

Our UWS segment operating income increased by $29.8 million, or 64.9%, for the three months ended March 31, 2020, when compared to 2019. Excluding acquisition activity of $0.3 million, operating income increased by $30.1 million and margins increased by 895 basis points, primarily impacted by higher revenues, improved product mix, and the impact of our ongoing operational efficiency programs.

Corporate and eliminations had a favorable variance of $12.1 million, or 31.1%, for the three months ended March 31, 2020, primarily due to lower investments in data and technology capabilities as well as lower compensation costs.

Total Interest Expense, net

Our consolidated total interest expense, net, was $17.8 million for the three months ended March 31, 2020, a decrease of $0.9 million, or 5.1%, when compared to 2019. The decrease was primarily due to lower interest rates as well as lower average outstanding principal balances.

(Loss)/Gain on Investments and Other, net

Our consolidated loss on investments and other, net, was $3.0 million for the three months ended March 31, 2020, an unfavorable variance of $3.8 million, when compared to 2019. The net loss for the 2020 period was primarily due to losses related to our supplemental benefit plans of $7.5 million, partially offset by gains of $1.4 million related to acquisition activities. The 2019 period reflected a loss of $2.3 million related to revaluation of an equity investment.

Provision for Income Taxes

Our consolidated provision for income taxes from continuing operations before equity in earnings/(losses) of affiliates and income taxes was $13.0 million and $1.1 million for the three months ended March 31, 2020 and 2019, respectively. The effective tax rate was 28.0% and 32.9% for the three months ended March 31, 2020 and 2019, respectively. The decrease in the effective income tax rate was primarily due to nonrecurring charges recorded in 2019 related to uncertain tax benefits.

Cash and cash equivalents as of March 31, 2020 totaled $152.8 million, an increase of $47.6 million from December 31, 2019. As of March 31, 2020, our cash balances held in foreign jurisdictions totaled $41.1 million and are primarily related to our international operations. We plan to maintain significant cash balances outside of the US for the foreseeable future.

Restricted cash of $9.9 million as of March 31, 2020 and $10.5 million as of December 31, 2019 is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust.

Cash Flow

Financing and Financing Capacity

We had total debt outstanding of $1.7 billion for both periods as of March 31, 2020 and December 31, 2019. Our significant debt instruments and borrowing capacity are described below.

Credit Agreement

Interest Rate Swaps

We have entered into amortizing interest rate swaps (“Swaps”) in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The floating rates in our Swaps are based on the one-month London interbank offering rate. The notional balances, terms and maturities of our Swaps are designed to have the effect of fixing the rate of interest on at least 50% of the principal balance of our senior term debt.

As of March 31, 2020, the Swaps have a combined remaining notional balance of $1.3 billion, a weighted average fixed interest rate of 2.08% (rates range from 0.66% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease based on our expectations of the level of variable rate debt to be in effect in future periods. Currently, we have scheduled notional amounts of between $1.3 billion and $1.2 billion through September 2021, then $1.1 billion and $1.0 billion through August 2022, and $496.8 million and $465.0 million through December 2025. Approximate weighted average fixed interest rates for the aforementioned time periods are 2.51%, 2.64%, and 2.61%, respectively.

Liquidity and Capital Strategy

We expect that cash flow from operations and current cash balances, together with available borrowings under our Revolving Facility, will be sufficient to meet operating requirements through the next twelve months. Cash available from operations, however, could be affected by any general economic downturn, such as financial impacts related to COVID-19, or any decline or adverse changes in our business such as a loss of clients, challenges collecting payments from clients, competitive pressures, or other significant change in our business environment.

We strive to pursue a balanced approach to capital allocation and have recently initiated a dividend distribution. We will also continue to evaluate the repurchase of shares, management of outstanding debt, and the pursuit of strategic acquisitions and investments on an opportunistic basis.

In April 2020, the Board of Directors announced a cash dividend to common shareholders of $0.22 per share of common stock to be paid in June 2020. We paid a cash dividend of $0.22 per share of common stock in January 2020 to shareholders of record on the close of business January 10, 2020. We expect to make regular quarterly dividend payments for the foreseeable future. The timing, declaration, and payment of future dividends, however, falls within the discretion of the Board of Directors and will depend upon many factors, including the Company’s financial condition and earnings, the capital requirements of our businesses, restrictions imposed by applicable law, and any other factors the Board of Directors deems relevant from time to time.

Availability of Additional Capital

Our access to additional capital fluctuates as market conditions change. There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources. Based on current market conditions and our financial condition (including our ability to satisfy the conditions contained in our debt instruments that are required to be satisfied to permit us to incur additional indebtedness), we believe that we have the ability to effectively access these liquidity sources for new borrowings. However, continued general economic instability, such as financial impacts resulting from COVID-19 which has caused, and may continue to cause, disruptions in the financial markets or a weakening of our financial condition, including a significant decrease in our profitability, or cash flows, or a material increase in our leverage, could adversely affect our ability to access these markets on acceptable terms or at all and/or increase our cost of borrowings.

Our primary exposure to market risk relates to interest-rate risk associated with certain financial instruments. We monitor our risk associated with fluctuations in interest rates and currently use derivative financial instruments to hedge some of these risks.

To manage our interest rate risk we have entered into Swaps in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The notional balances, terms and maturities of our Swaps are designed to have the effect of fixing the rate of interest on at least 50% of the principal balance of our senior term debt. As of March 31, 2020, the combined remaining notional balance of the Swaps was $1.3 billion, with a weighted average fixed interest rate of 2.08% (rates range from 0.66% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease over their contract lengths based on our expectations of the level of variable rate debt to be in effect in future periods. After giving effect to the Swaps, a hypothetical 1% increase or decrease in interest rates would result in an approximately $1.0 million change to interest expense on our existing indebtedness as of March 31, 2020, on a quarterly basis.

Although we are subject to foreign currency exchange rate risk as a result of our operations in certain foreign countries, the foreign exchange exposure related to these operations, in the aggregate, is not material to our financial condition or results of operations.

Our principal executive officer and principal financial officer have concluded that, as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, were effective, based on the evaluation of these controls and procedures required by Rule 13a-15(b).

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the quarter ended March 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

During the quarter ended March 31, 2020, we did not issue any shares of our common stock in any transaction that was not registered under the Securities Act of 1933, as amended.

Under our Credit Agreement, our stock repurchase capacity is restricted to $150.0 million per fiscal year, with the ability to undertake an additional amount of repurchases in such fiscal year provided that, on a pro forma basis after giving effect to the stock repurchase, our total leverage ratio does not exceed 3.5 to 1.0. While we continue to preserve the capacity to execute stock repurchases under our existing share repurchase authorization, going forward we will strive to pursue a balanced approach to capital allocation and will consider the repurchase of shares of our common stock, the retirement of outstanding debt and the pursuit of strategic acquisitions on an opportunistic basis.

During the quarter ended March 31, 2020, we repurchased less than 0.1 million shares of our common stock in an open market purchase pursuant to the terms of our stock repurchase authorization.

(1) Calculated inclusive of commissions.

Item 6.  Exhibits.

SIGNATURES

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