SEC Filing | Cannae Holdings, Inc.

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cnne-20200630

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-38300

CANNAE HOLDINGS, INC.

______________________________________________________________________________________________________________________________________________________

(Exact name of registrant as specified in its charter)

Delaware

82-1273460

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

1701 Village Center Circle,

Las Vegas,

Nevada

89134

(Address of principal executive offices)

(Zip Code)

(702) 323-7330

___________________________________________________________________

(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

Cannae Common Stock, $0.0001 par value

CNNE

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. Yes ☑ NO ☐

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). Yes ☑ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer," “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

☑

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 July 31, 2020 there were 91,656,245 shares of the Registrant's common stock outstanding.

FORM 10-Q

QUARTERLY REPORT

Quarter Ended June 30, 2020

TABLE OF CONTENTS



			Page
Part I: FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
A. Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019			1
B. Condensed Consolidated Statements of Operations for the three and six-month periods ended June 30, 2020 and 2019			2
C. Condensed Consolidated Statements of Comprehensive Earnings for the three and six-month periods ended June 30, 2020 and 2019			3
D. Condensed Consolidated Statements of Equity for the three and six-month periods ended June 30, 2020 and 2019			4
E. Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2020 and 2019			6
F. Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Item 3. Quantitative and Qualitative Disclosure About Market Risk			38
Item 4. Controls and Procedures			38
Part II: OTHER INFORMATION
Item 1. Legal Proceedings			38
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
Item 6. Exhibits			41

Table of Contents

Part I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)


	June 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	922.7	$	533.7
Short-term investments	100.0		0.5
Trade receivables	4.2		16.0
Inventory	6.6		16.3


Prepaid expenses and other current assets	49.9		64.4

Total current assets	1,083.4		630.9
Equity securities, at fair value - see Note A	1,446.5		—
Investments in unconsolidated affiliates	799.7		836.5
Lease assets	139.4		192.9
Property and equipment, net	132.5		162.6
Other intangible assets, net	37.9		63.1
Goodwill	53.5		66.1
Fixed maturity securities available for sale, at fair value	33.9		19.2
Deferred tax asset	—		54.5
Other long term investments and non-current assets	61.8		66.4

Total assets	$	3,788.6	$	2,092.2
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and other accrued liabilities, current	$	64.5	$	86.4
Lease liabilities, current	27.1		41.5
Income taxes payable	75.5		37.4
Deferred revenue	15.7		26.4
Notes payable, current	6.0		7.0

Total current liabilities	188.8		198.7
Lease liabilities, long term	132.0		199.7
Deferred tax liability	226.0		—

Notes payable, long term	64.4		120.1

Accounts payable and other accrued liabilities, long term	43.6		43.9

Total liabilities	654.8		562.4
Commitments and contingencies - see Note G
Equity:
Cannae common stock, 0.0001 par value; authorized 115,000,000 shares as of June 30, 2020 and December 31, 2019; outstanding of 91,656,245 and 79,516,833 shares as of June 30, 2020 and December 31, 2019, respectively, and issued of 92,377,972 and 79,727,972 shares as of June 30, 2020 and December 31, 2019, respectively	—		—
Preferred stock, 0.0001 par value; authorized 10,000,000 shares; issued and outstanding, none as of June 30, 2020 and December 31, 2019	—		—
Retained earnings	1,266.6		143.6
Additional paid-in capital	1,868.4		1,396.7
Less: Treasury stock, 721,727 and 211,139 shares as of June 30, 2020 and December 31, 2019, respectively, at cost	(20.3)		(5.9)
Accumulated other comprehensive earnings (loss)	3.2		(45.9)
Total Cannae shareholders' equity	3,117.9		1,488.5
Noncontrolling interests	15.9		41.3
Total equity	3,133.8		1,529.8
Total liabilities and equity	$	3,788.6	$	2,092.2

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions)

(Unaudited)


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019

Revenues:
Restaurant revenue	$	99.4	$	266.5	$	269.3	$	524.3
Other operating revenue	3.2		5.7		6.3		10.2
Total operating revenues	102.6		272.2		275.6		534.5
Operating expenses:
Cost of restaurant revenue	100.8		231.6		253.9		458.6
Personnel costs	23.3		23.1		52.5		39.2
Depreciation and amortization	7.3		9.9		15.7		20.3
Other operating expenses	16.9		29.0		44.8		48.9
Goodwill impairment	—		—		7.7		—
Total operating expenses	148.3		293.6		374.6		567.0
Operating loss	(45.7)		(21.4)		(99.0)		(32.5)
Other income (expense):
Interest, investment and other income	8.3		1.4		10.5		12.4
Interest expense	(1.0)		(5.5)		(4.8)		(9.2)
Realized and other gains and losses, net	578.1		75.1		1,493.2		76.7
Total other income	585.4		71.0		1,498.9		79.9
Earnings before income taxes and equity in losses of unconsolidated affiliates	539.7		49.6		1,399.9		47.4
Income tax expense	131.1		7.1		300.5		1.1
Earnings before equity in earnings (losses) of unconsolidated affiliates	408.6		42.5		1,099.4		46.3
Equity in earnings (losses) of unconsolidated affiliates	57.5		(21.1)		4.8		(42.5)
Earnings from continuing operations	466.1		21.4		1,104.2		3.8
Net losses from discontinued operations, net of tax - see Note L	—		(2.5)		—		(4.8)
Net earnings (loss)	466.1		18.9		1,104.2		(1.0)
Less: Net loss attributable to non-controlling interests	(9.2)		(4.5)		(18.8)		(7.6)
Net earnings attributable to Cannae Holdings, Inc. common shareholders	$	475.3	$	23.4	$	1,123.0	$	6.6
Amounts attributable to Cannae Holdings, Inc. common shareholders
Net earnings from continuing operations attributable to Cannae Holdings, Inc. common shareholders	$	475.3	$	25.8	$	1,123.0	$	11.0
Net loss from discontinued operations attributable to Cannae Holdings, Inc. common shareholders	—		(2.4)		—		(4.4)
Net earnings attributable to Cannae Holdings, Inc. common shareholders	$	475.3	$	23.4	$	1,123.0	$	6.6
Earnings per share
Basic
Net earnings per share from continuing operations	$	5.88	$	0.36	$	14.06	$	0.15
Net loss per share from discontinued operations	—		(0.03)		—		(0.06)
Net earnings per share	$	5.88	$	0.33	$	14.06	$	0.09
Diluted
Net earnings per share from continuing operations	$	5.87	$	0.36	$	14.00	$	0.15
Net loss per share from discontinued operations	—		(0.03)		—		(0.06)
Net earnings per share	$	5.87	$	0.33	$	14.00	$	0.09
Weighted Average Shares Outstanding
Weighted average shares outstanding Cannae Holdings common stock, basic basis	80.8		71.6		79.9		71.6
Weighted average shares outstanding Cannae Holdings common stock, diluted basis	81.0		71.9		80.2		71.8

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In millions)

(Unaudited)


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Net earnings (loss)	$	466.1	$	18.9	$	1,104.2	$	(1.0)
Other comprehensive earnings (loss), net of tax:
Unrealized gain (loss) on investments and other financial instruments, net (excluding investments in unconsolidated affiliates) (1)	5.9		0.1		11.2		(0.1)
Unrealized (loss) gain relating to investments in unconsolidated affiliates (2)	(2.5)		2.3		(6.4)		8.2

Reclassification adjustments for unrealized gains and losses on unconsolidated affiliates, net of tax, included in net earnings (3)	—		4.1		44.3		4.7
Other comprehensive earnings	3.4		6.5		49.1		12.8
Comprehensive earnings	469.5		25.4		1,153.3		11.8
Less: Comprehensive loss attributable to noncontrolling interests	(9.2)		(4.5)		(18.8)		(7.6)
Comprehensive earnings attributable to Cannae Holdings, Inc.	$	478.7	$	29.9	$	1,172.1	$	19.4

_________________________________

(1)Net of income tax expense (benefit) of $1.6 million and less than $0.1 million for the three months ended June 30, 2020 and 2019, respectively, and $3.0 million and less than $(0.1) million for the six months ended June 30, 2020 and 2019, respectively.

(2)Net of income tax (benefit) expense of $(0.7) million and $0.6 million for the three months ended June 30, 2020 and 2019, respectively, and $(1.7) million and $2.2 million for the six months ended June 30, 2020 and 2019, respectively.

(3)Net of income tax expense of $1.0 million for the three months ended June 30, 2019 and $11.8 million and $1.2 million for the six months ended June 30, 2020 and 2019, respectively.

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In millions)

(Unaudited)


	Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comp (Loss) Earnings	Treasury Stock								Non-controlling Interests	Total Equity
	Shares	$											Shares			$

Balance, March 31, 2019	72.2	$	—	$	1,147.5	$	49.5	$	(65.9)	—	$	(0.2)		$	71.6		$	1,202.5

Other comprehensive earnings — unrealized gain on investments and other financial instruments, net of tax	—	—		—		—		0.1		—	—			—			0.1
Other comprehensive earnings — unrealized earnings of investments in unconsolidated affiliates, net of tax	—	—		—		—		2.3		—	—			—			2.3

Reclassification adjustments for unrealized gains and losses on unconsolidated affiliates, net of tax, included in net earnings	—	—		—		—		4.1		—	—			—			4.1


Stock-based compensation, consolidated subsidiaries	—	—		1.0		—		—		—	—			—			1.0
Contribution of CSA services from FNF	—	—		0.4		—		—		—	—			—			0.4
Stock-based compensation, unconsolidated affiliates	—	—		3.1		—		—		—	—			—			3.1
Subsidiary dividends paid to noncontrolling interests	—	—		—		—		—		—	—			(0.2)			(0.2)
Net earnings (loss)	—	—		—		23.4		—		—	—			(4.5)			18.9
Balance, June 30, 2019	72.2	$	—	$	1,152.0	$	72.9	$	(59.4)	—	$	(0.2)		$	66.9		$	1,232.2

Balance, March 31, 2020	79.7	$	—	$	1,406.1	$	791.3	$	(0.2)	0.6	$	(16.7)		$	24.5		$	2,205.0
Equity offering, net of offering costs	12.7	—		455.0		—		—		—	—			—			455.0
Other comprehensive earnings — unrealized gain on investments and other financial instruments, net of tax	—	—		—		—		5.9		—	—			—			5.9
Other comprehensive earnings — unrealized losses of investments in unconsolidated affiliates, net of tax	—	—		—		—		(2.5)		—	—			—			(2.5)



Sale of noncontrolling interest in consolidated subsidiary	—	—		—		—		—		—	—			0.6			0.6
Treasury stock repurchases	—	—		—		—		—		0.1	(3.6)			—			(3.6)
Stock-based compensation, consolidated subsidiaries	—	—		1.1		—		—		—	—			—			1.1
Contribution of CSA services from FNF	—	—		0.3		—		—		—	—			—			0.3
Stock-based compensation, unconsolidated affiliates	—	—		5.9		—		—		—	—			—			5.9

Net earnings (loss)	—	—		—		475.3		—		—	—			(9.2)			466.1
Balance, June 30, 2020	92.4	$	—	$	1,868.4	$	1,266.6	$	3.2	0.7	$	(20.3)		$	15.9		$	3,133.8

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - CONTINUED

(In millions)

(Unaudited)


	Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comp (Loss) Earnings	Treasury Stock								Non-controlling Interests	Total Equity
	Shares	$											Shares			$

Balance, December 31, 2018	72.2	$	—	$	1,146.2	$	45.8	$	(67.2)	—	$	(0.2)		$	75.1		$	1,199.7
Adjustment for cumulative effect of adoption of accounting standards by unconsolidated affiliates	—	—		—		20.5		(5.0)		—	—			—			15.5
Other comprehensive earnings — unrealized loss on investments and other financial instruments, net of tax	—	—		—		—		(0.1)		—	—			—			(0.1)
Other comprehensive earnings — unrealized earnings of investments in unconsolidated affiliates, net of tax	—	—		—		—		8.2		—	—			—			8.2

Reclassification adjustments for unrealized gains and losses on unconsolidated affiliates, net of tax, included in net earnings	—	—		—		—		4.7		—	—			—			4.7
Dun & Bradstreet equity issuance costs	—	—		(1.4)		—		—		—	—			—			(1.4)

Stock-based compensation, consolidated subsidiaries	—	—		1.9		—		—		—	—			—			1.9
Contribution of CSA services from FNF	—	—		0.7		—		—		—	—			—			0.7
Stock-based compensation, unconsolidated affiliates	—	—		4.6		—		—		—	—			—			4.6
Subsidiary dividends paid to noncontrolling interests	—	—		—		—		—		—	—			(0.6)			(0.6)
Net earnings (loss)	—	—		—		6.6		—		—	—			(7.6)			(1.0)
Balance, June 30, 2019