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TMCNet:  TRANSUNION HOLDING COMPANY, INC. - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

[February 25, 2013]

TRANSUNION HOLDING COMPANY, INC. - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis of TransUnion Holding's and TransUnion Corp.'s financial condition and results of operations is provided on a combined basis as a supplement to, and should be read in conjunction with, Part II, Item 6, "Selected Financial Data," Part I, Item 1A, "Risk Factors," and Part II, Item 8, "Financial Statements and Supplementary Information," including TransUnion Holding's and TransUnion Corp.'s audited consolidated financial statements and the accompanying combined notes. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed in "Cautionary Notice Regarding Forward-Looking Statements" and Part I, Item 1A, "Risk Factors." References in this discussion and analysis to the "Company," "we," "us," and "our" refer to TransUnion Holding with its direct and indirect subsidiaries, including TransUnion Corp., or to TransUnion Corp. and its subsidiaries for periods prior to the formation of TransUnion Holding. When appropriate, TransUnion Holding and TransUnion Corp. are named explicitly for their specific related disclosures. Each registrant included herein is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information.



Where the information provided in this discussion and analysis is substantially the same for each company, such information has been combined. Where information is not substantially the same for each company, we have provided separate information. In addition, separate financial statements for each company are included in Part II, Item 8, "Financial Statements and Supplementary Data." We operate TransUnion Holding and TransUnion Corp. as one business, with one management team. Management believes combining this discussion and analysis provides the following benefits: • Enhances investors' understanding of TransUnion Holding and TransUnion Corp. by enabling investors to view the business as a whole, the same manner as management views and operates the business; • Provides a more readable presentation of required disclosures with less duplication, since a substantial portion of the Company's disclosures apply to both TransUnion Holding and TransUnion Corp.; and • Creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

Overview We are a leading global provider of information and risk management solutions.

We provide these solutions to businesses across multiple industries and to individual consumers. Our technology and services enable businesses to make more timely and informed credit granting, risk management, underwriting, fraud protection and customer acquisition decisions by delivering high quality data, integrated with analytics and decision-making capabilities. Our interactive website provides consumers with real-time access to their personal credit information and analytical tools that help them understand and proactively manage their personal finances. Over a million unique consumers visit our website each month. We have operations in the United States, Africa, Canada, Latin America, Asia Pacific and India and provide services in 33 countries.

Since our founding in 1968, we have built a diversified and stable customer base of approximately 45,000 businesses in multiple industries, including financial services, insurance, healthcare, automotive, retail and communications.

We generate revenues primarily from the sale of credit reports, credit marketing services, portfolio reviews and other credit-related services to qualified businesses both in the U.S. and internationally through direct and indirect channels. We maintain long-standing relationships with many of our largest customers, including relationships of over ten years with each of our top ten global financial services customers. We attribute the 39-------------------------------------------------------------------------------- Table of Contents length of our customer relationships to the critical nature of the services we provide, our consistency and reliability, and our innovative and collaborative approach to developing integrated solutions that meet our customers' continually changing needs. We also generate revenues by providing subscription-based interactive services to consumers that help them understand and manage their personal finances and that protect them from identity theft.

Recent Developments On November 1, 2012, TransUnion Holding issued $400.0 million principal amount of 8.125%/8.875% senior unsecured PIK toggle notes ("8.125% notes") due June 15, 2018, at an offering price of 99.5% in a private placement to certain investors.

In connection with the issuance of these notes, TransUnion Holding successfully completed a Consent Solicitation to amend the indenture governing its 9.625%/10.375% senior unsecured PIK toggle notes ("9.625% notes"). The amendment permitted the issuance of the additional $400 million of 8.125% notes and allowed TransUnion Holding to make a dividend payment to its shareholders. The amendment will also increase the interest rate applicable to the 9.625% notes by 0.50% if, prior to June 15, 2015, (a) the 9.625% notes are rated Caa1 or lower by Moody's Investors Service, Inc. and CCC+ or lower by Standard & Poor's, and (b) the Consolidated Debt Ratio as defined in the Consent Solicitation Statement is greater than or equal to 5.50 to 1.00. The 8.125% notes are subject to a registration rights agreement that will require us to exchange the notes for an equal amount of notes registered with the SEC. The indenture governing the 8.125% notes and the nonfinancial covenants are substantially similar to those governing the outstanding 9.625% notes described in Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 13, "Debt." The proceeds of the 8.125% notes were used to pay a $373.8 million dividend to our shareholders and to pay various costs associated with issuing the new debt and obtaining consents from our existing debt holders. In addition, as part of the transaction, on November 1, 2012, TransUnion LLC prepaid $10.0 million of the senior secured term loan with cash on hand.

On April 30, 2012, pursuant to the Merger Agreement, TransUnion Holding acquired 100% of the outstanding stock of TransUnion Corp. for the aggregate purchase price of $1,592.7 million plus the assumption of existing debt. In connection with the acquisition, all existing stockholders of TransUnion Corp. received cash consideration for their shares and all existing option holders received cash consideration based on the value of their options. Certain members of management continue to hold equity interests in the form of TransUnion Holding common stock. To partially fund the acquisition, TransUnion Holding issued $600 million principal amount of 9.625% notes. On April 30, 2012 TransUnion Holding was owned 49.5% by affiliates of Advent, 49.5% by affiliates of GSC and 1% by members of management.

Segments We manage our business and report our financial results in three operating segments: U.S. Information Services ("USIS"), International and Interactive.

• USIS provides credit reports, credit scores, verification services, analytical services and decisioning technology to businesses in the United States through both direct and indirect channels. In this segment, we intend to continue to focus on expansion into underpenetrated and growth industries, such as insurance and healthcare, and the introduction of innovative and differentiated solutions in the financial services and other industries.

• International provides services similar to our USIS and Interactive segments in several countries outside the United States. We believe our International segment represents a significant opportunity for growth as many of the countries in which we operate, such as India, Mexico and Brazil, continue to develop their economies and credit markets. We also seek to enter into and develop our business in new geographies.

• Interactive provides primarily subscription-based services to consumers, including credit reports, credit scores and credit and identity monitoring. As the U.S. economy continues to stabilize and improve, and consumer borrowing activity and concerns over identity theft continue to increase, we expect our Interactive segment to grow and represent an increasing portion of our overall revenue.

40 -------------------------------------------------------------------------------- Table of Contents In addition, Corporate provides shared services for the Company and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the operating segments remain in Corporate. These costs are typically for enterprise-level functions and are primarily administrative in nature.

Factors Affecting Our Results of Operations The following are certain key factors that affect, or have recently affected, our results of operations: Macroeconomic and Industry Trends Our revenues are significantly influenced by general macroeconomic conditions, including the availability of affordable credit and capital, interest rates, inflation, employment levels, consumer confidence and housing demand. During 2012 and 2011, in the United States and other markets, we have seen continuing signs of improved economic conditions and increased market stabilization. In the United States, we also saw improvement in the consumer lending market, including mortgage refinancings resulting from low long-term mortgage rates, increased auto loans and an increase in demand for our credit marketing services. These factors helped drive improved financial results in all of our segments during 2011 and 2012. The economic and market improvements, however, were tempered by continuing consumer uncertainty as concerns over both continuing high unemployment and an underperforming housing market have pressured growth in our businesses.

Our revenues are also significantly influenced by industry trends, including the demand for information services in the financial services, insurance, healthcare and other industries we serve. Companies increasingly rely on data and analytics to make more informed decisions, operate their businesses more effectively and manage risk. Similarly, consumers seek information to help them understand and proactively manage their personal finances and to better protect themselves against identity theft. We expect that increased demand for targeted data and sophisticated analytical tools will drive revenue growth in all of our segments.

2012 Change in Control Transaction In connection with the 2012 Change in Control Transaction, the Company recognized a significant increase in stock-based compensation due to the accelerated vesting of outstanding options and a significant increase in depreciation and amortization expense as a result of the step-up in basis to fair value of the assets and liabilities of the Company. See Note 2 "Change in Control Transactions," and the operating expense discussion below for additional information.

Debt Transactions On November 1, 2012, TransUnion Holding issued $400.0 million principal amount of 8.125% notes, the proceeds of which were used primarily to pay a dividend to our shareholders. On March 21, 2012, TransUnion Holding issued $600.0 million principal amount of 9.625% notes to partially fund the 2012 Change in Control Transaction. On February 10, 2011, TransUnion Corp. refinanced its senior secured credit facility, which resulted in a significant loss on the early extinguishment of debt. On June 15, 2010, Trans Union LLC and its wholly-owned subsidiary TransUnion Financing Corporation issued $645.0 million principal amount of 11.375% senior notes to partially fund the 2010 Change in Control Transaction. These debt transactions had a significant impact on interest expense and other income and expense. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," Note 13, "Debt," and the non-operating income and expense discussion below for additional information.

Recent Acquisitions and Partnerships We selectively evaluate acquisitions and partnerships as a means to expand our business and international footprint and to enter new markets.

• On May 29, 2012, we acquired an 85% ownership interest in Credit Reference Bureau (Holdings) Limited ("CRB"). CRB operates collections and credit bureau businesses and has locations in eight 41 -------------------------------------------------------------------------------- Table of Contents African countries, giving us a strategic presence in seven new African countries. The results of operations of CRB, which are not material, have been included as part of our International segment in our consolidated statements of income since the date of acquisition.

• On December 28, 2011, we acquired an 80% ownership interest in Crivo Sistemas em Informática S.A. ("Crivo"), a Brazilian company. Crivo provides software and services to companies in Brazil to help them make credit, risk and fraud-related decisions. The results of operations of Crivo, which are not material, have been included as part of our International segment in our consolidated statements of income since the date of the acquisition.

• On December 20, 2011, we acquired an additional 7.51% ownership interest in Credit Information Bureau (India) Limited ("CIBIL"), bringing our total ownership to 27.5%.

• On October 13, 2011, we acquired a 100% ownership interest in Financial Healthcare Systems, LLC ("FHS"), a Colorado limited liability company. FHS provides software-as-a-service solutions to the healthcare industry that helps healthcare providers inform patients about their out-of-pocket costs prior to providing healthcare services. The results of operations of FHS, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date of the acquisition.

Key Components of Our Results of Operations Revenue We derive our USIS segment revenue from three operating platforms: Online Data Services, Credit Marketing Services and Decision Services. Revenue in Online Data Services is driven primarily by the volume of credit reports that our customers purchase. Revenue in Credit Marketing Services is driven primarily by demand for customer acquisition, portfolio review and archive information services. Revenue in Decision Services is driven primarily by demand for services that provide our customers with online, real-time, automated decisions at the point of consumer interaction.

We report our International segment revenue in two categories: developed markets and emerging markets. Our developed markets are Canada, Hong Kong and Puerto Rico. Our emerging markets include Africa, Latin America, Asia Pacific and India.

We derive revenue in our Interactive segment from both direct and indirect channels. Our Interactive revenue is primarily subscription based.

Cost of Services Costs of services include data acquisition and royalty fees, costs related to our databases and software applications, consumer and call center support costs, hardware and software maintenance costs, telecommunication expenses and occupancy costs associated with the facilities where these functions are performed.

Selling, General and Administrative Selling, general and administrative expenses include personnel-related costs for sales, administrative and management employees, costs for professional and consulting services, advertising and occupancy and facilities expense of these functions.

Non-Operating Income and Expense Non-operating income and expense includes interest expense, interest income, earnings from equity-method investments, dividends from cost-method investments and other non-operating income and expenses.

42-------------------------------------------------------------------------------- Table of Contents Results of Operations-Twelve Months Ended December 31, 2012, 2011 and 2010 TransUnion Holding's consolidated 2012 results include the stand-alone results of TransUnion Holding from the date of inception through December 31, 2012, and the consolidated results of TransUnion Corp. and subsidiaries after April 30, 2012, the date of acquisition.

As a result of the 2012 Change in Control Transaction, TransUnion Corp.'s historical financial statements are presented on a Successor and Predecessor basis. Periods prior to May 1, 2012, reflect the financial position, results of operations, and changes in financial position of TransUnion Corp. prior to the 2012 Change in Control Transaction (the "Predecessor") and periods after April 30, 2012, reflect the financial position, results of operations, and changes in financial position of TransUnion Corp. after the 2012 Change in Control Transaction (the "Successor").

The 2012 Change in Control Transaction was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations. The guidance prescribes that the basis of the assets acquired and liabilities assumed be recorded at fair value to reflect the purchase price. Periods after the 2012 Change in Control Transaction are not comparable to prior periods primarily due to significant additional stock-based compensation and transaction costs incurred by TransUnion Corp. predecessor and the additional amortization of intangibles in the Successor period resulting from the fair value adjustments of the assets acquired and liabilities assumed and the additional interest on the notes issued in connection with the transaction. In addition, the Predecessor incurred significant stock-based compensation and acquisition costs related to the 2012 Change in Control Transaction.

43 -------------------------------------------------------------------------------- Table of Contents We operate TransUnion Holding and TransUnion Corp. as one business and to facilitate comparability with the prior years, we present below the combination of TransUnion Holding consolidated results from inception through December 31, 2012, and TransUnion Corp. Predecessor consolidated results for the four months ended April 30, 2012 (combined results for the year 2012), and compare this to the TransUnion Corp. consolidated results for 2011 and 2010. We present the information in this format to assist readers in understanding and assessing the trends and significant changes in our results of operations on a comparable basis. We believe this presentation is appropriate because it provides a more meaningful comparison and more relevant analysis of our results of operations for 2012 compared to 2011 and 2010, than a presentation of separate historical results for TransUnion Holding and TransUnion Corp. Predecessor and Successor periods would provide. The following table sets forth our historical results of operations for the periods indicated below: TransUnion Holding and TransUnion Corp. TransUnion TransUnion TransUnion Predecessor Corp. Corp.

TransUnion Corp. Combined Predecessor Predecessor Holding Predecessor Twelve Twelve Twelve Change Inception Four Months Months Months Through Months Ended Ended Ended Ended 2012 vs. 2011 2011 vs. 2010 December 31, April 30, December 31, December 31, December 31, (dollars in millions) 2012 2012 2012 2011 2010 $ % $ % Revenue $ 767.0 $ 373.0 $ 1,140.0 $ 1,024.0 $ 956.5 $ 116.0 11.3 % $ 67.5 7.1 % Operating expenses Cost of services (exclusive of depreciation and amortization below) 298.2 172.0 470.2 421.5 395.8 48.7 11.6 % 25.7 6.5 % Selling, general and administrative 212.6 172.0 384.6 264.5 263.0 120.1 45.4 % 1.5 0.6 % Depreciation and amortization 115.0 29.2 144.2 85.3 81.6 58.9 69.1 % 3.7 4.5 % Total operating expenses 625.8 373.2 999.0 771.3 740.4 227.7 29.5 % 30.9 4.2 % Operating income (loss) 141.2 (0.2 ) 141.0 252.7 216.1 (111.7 ) (44.2 )% 36.6 16.9 % Non-operating income and expense Interest expense (125.0 ) (40.5 ) (165.5 ) (126.4 ) (90.1 ) (39.1 ) (30.9 )% (36.3 ) (40.3 )% Interest income 0.8 0.6 1.4 0.7 1.0 0.7 100.0 % (0.3 ) (30.0 )% Other income and (expense), net (14.3 ) (23.8 ) (38.1 ) (59.9 ) (44.0 ) 21.8 36.4 % (15.9 ) (36.1 )% Total non-operating income and expense (138.5 ) (63.7 ) (202.2 ) (185.6 ) (133.1 ) (16.6 ) (8.9 )% (52.5 ) (39.4 )% Income (loss) from continuing operations before income taxes 2.7 (63.9 ) (61.2 ) 67.1 83.0 (128.3 ) nm (15.9 ) (19.2 )% (Provision) benefit for income taxes (6.6 ) 11.5 4.9 (17.8 ) (46.3 ) 22.7 nm 28.5 61.6 % Income (loss) from continuing operations (3.9 ) (52.4 ) (56.3 ) 49.3 36.7 (105.6 ) nm 12.6 34.3 % Discontinued operations, net of tax - - - (0.5 ) 8.2 0.5 100.0 % (8.7 ) nm Net income (loss) (3.9 ) (52.4 ) (56.3 ) 48.8 44.9 (105.1 ) nm 3.9 8.7 % Less: net income attributable to noncontrolling interests (4.9 ) (2.5 ) (7.4 ) (8.0 ) (8.3 ) 0.6 7.5 % 0.3 3.6 % Net income (loss) attributable to the Company $ (8.8 ) $ (54.9 ) $ (63.7 ) $ 40.8 $ 36.6 $ (104.5 ) nm $ 4.2 11.5 % nm: not meaningful 44 -------------------------------------------------------------------------------- Table of Contents Key Performance Measures Management, including our chief operating decision maker, evaluates the financial performance of our businesses based on a variety of key indicators.

These indicators include the non-GAAP measures Adjusted Operating Income and Adjusted EBITDA, and the GAAP measures revenue, cash provided by operating activities and cash paid for capital expenditures. For the twelve months ended December 31, 2012, 2011 and 2010, these key indicators were as follows: Change Twelve months ended December 31, 2012 vs. 2011 2011 vs. 2010 (dollars in millions) 2012 2011 2010 $ % $ % Revenue $ 1,140.0 $ 1,024.0 $ 956.5 $ 116.0 11.3 % $ 67.5 7.1 % Reconciliation of operating income to Adjusted Operating Income: Operating income $ 141.0 $ 252.7 $ 216.1 $ (111.7 ) (44.2 )% $ 36.6 16.9 % Adjustments(1) 90.7 6.3 17.5 84.4 nm (11.2 ) (64.0 )% Adjusted Operating Income(2) $ 231.7 $ 259.0 $ 233.6 $ (27.3 ) (10.5 )% $ 25.4 10.9 % Reconciliation of net income (loss) attributable to the Company to Adjusted EBITDA: Net income (loss) attributable to the Company $ (63.7 ) $ 40.8 $ 36.6 $ (104.5 ) nm $ 4.2 11.5 % Discontinued operations - 0.5 (8.2 ) (0.5 ) (100.0 )% 8.7 nm Net income (loss) from continuing operations attributable to the Company $ (63.7 ) $ 41.3 $ 28.4 $ (105.0 ) nm $ 12.9 45.4 % Net interest expense 164.1 125.7 89.1 38.4 30.5 % 36.6 41.1 % Income tax provision (benefit) (4.9 ) 17.8 46.3 (22.7 ) nm (28.5 ) (61.6 )% Depreciation and amortization(3) 144.2 85.3 81.6 58.9 69.1 % 3.7 4.5 % Stock-based compensation 4.3 4.6 10.8 (0.3 ) (6.5 )% (6.2 ) (57.4 )% Other (income) and expense(4) 50.8 71.8 52.9 (21.0 ) (29.2 )% 18.9 35.7 % Adjustments(1) 90.7 6.3 17.5 84.4 nm % (11.2 ) (64.0 )% Adjusted EBITDA(2) $ 385.5 $ 352.8 $ 326.6 $ 32.7 9.3 % $ 26.2 8.0 % Other metrics: Cash provided by operating activities of continuing operations of TransUnion Corp. $ 144.1 $ 204.5 $ 204.6 $ (60.4 ) (29.5 )% $ (0.1 ) - % Cash paid for capital expenditures(5) $ 69.2 $ 74.0 $ 46.8 $ (4.8 ) (6.5 )% $ 27.2 58.1 % nm: not meaningful (1) For the twelve months ended December 31, 2012, adjustments included $90.7 million of accelerated stock-based compensation and related expense resulting from the 2012 Change in Control Transaction that were recorded in each segment and Corporate as follows: USIS $41.0 million; International $14.4 million; Interactive $2.3 million; and Corporate $33.0 million. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," and Note 15, "Stock-Based Compensation," for further information about the impact of the 2012 Change in Control Transaction. For the twelve months ended December 31, 2011, adjustments included a $3.6 million outsourcing vendor contract early termination fee and a $2.7 million software impairment and related restructuring charge due to a regulatory change requiring a software platform replacement. Both of these expenses were recorded in our USIS segment. For the twelve months ended December 31, 2010, adjustments included a $3.9 million gain on the trade in of mainframe computers recorded in our USIS segment and $21.4 million of accelerated stock-based compensation and related expenses resulting from the 2010 Change in Control Transaction that were recorded in each segment and in Corporate as follows: USIS $12.2 million; International $2.6 million; Interactive $1.2 million; and Corporate $5.4 million. See Part II, 45 -------------------------------------------------------------------------------- Table of Contents Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," and Note 15, "Stock-Based Compensation," for further information about the impact of the 2010 Change in Control Transaction.

(2) Adjusted Operating Income and Adjusted EBITDA are non-GAAP measures. We present Adjusted Operating Income and Adjusted EBITDA as supplemental measures of our operating performance because they eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. In addition to its use as a measure of our operating performance, our board of directors and executive management team focus on Adjusted EBITDA as a compensation measure. The annual variable compensation for members of senior management is based in part on Adjusted EBITDA.

Adjusted Operating Income does not reflect certain stock-based compensation and certain other income and expense. Adjusted EBITDA does not reflect interest, income tax, depreciation, amortization, stock-based compensation or certain other income and expense. Other companies in our industry may calculate Adjusted Operating Income and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures. Because of these limitations, Adjusted Operating Income and Adjusted EBITDA should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. Adjusted Operating Income and Adjusted EBITDA are not measures of financial condition or profitability under GAAP and should not be considered alternatives to cash flow from operating activities, as measures of liquidity or as alternatives to operating income or net income as indicators of operating performance. We believe that the most directly comparable GAAP measure to Adjusted Operating Income is operating income and the most directly comparable GAAP measure to Adjusted EBITDA is net income attributable to the Company. The reconciliations of Adjusted Operating Income and Adjusted EBITDA to their nearest GAAP measures are included in the table above.

(3) For the twelve months ended December 31, 2012, operating income included additional depreciation and amortization as a result of the purchase accounting fair value adjustments to the tangible and intangible assets recorded in connection with the 2012 Change in Control Transaction. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," for further information about the impact of the 2012 Change in Control Transaction.

(4) Other income and expense above includes all amounts included on our consolidated statement of income in other income and expense, net, except for earnings from equity method investments and dividends received from cost method investments. For the twelve months ended December 31, 2012, other income and expense included $42.2 million of acquisition-related expenses, primarily related to the 2012 Change in Control Transaction and the abandoned initial public offering process, and $8.6 million of other income and expense. Of the $42.2 million of acquisition-related expenses, $15.2 million was incurred by TransUnion Holding and $27.0 million was incurred by TransUnion Corp. For the twelve months ended December 31, 2011, other income and expense included a $59.3 million loss on the early extinguishment of debt consisting of a write-off of $49.8 million of previously unamortized deferred financing fees and a prepayment premium of $9.5 million as a result of refinancing our senior secured credit facility in February 2011, and $12.5 million of other income and expense. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 13, "Debt," for further information about the refinancing. For the twelve months ended December 31, 2010, other income and expense included $28.7 million of acquisition fees, an $11.0 million loss on the early extinguishment of debt and $10.0 million of loan fees, all primarily related to the 2010 Change in Control Transaction, and $3.2 million of other income and expense. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," for further information about the impact of the 2012 Change in Control Transaction and the 2010 Change in Control Transaction.

(5) Capital expenditures for the twelve months ended December 31, 2011, included $18.8 million paid in the first quarter of 2011 for assets purchased and accrued for in the fourth quarter of 2010. Capital expenditures for the 2012 combined period consisted of $20.4 million for TransUnion Corp. Predecessor for the four months ended April 30, 2012, and $48.8 million for TransUnion Corp. Successor for the eight months ended December 31, 2012.

46 -------------------------------------------------------------------------------- Table of Contents Revenue For 2012, revenue increased $116.0 million compared to 2011 due to increases in revenue in all operating segments as a result of improving economic conditions and increases in the USIS and International segments from our recent acquisitions, partially offset by the impact of weakening foreign currencies in our International segment. For 2011, revenue increased $67.5 million compared to 2010, due to organic growth in all of our segments, acquisitions in our USIS and International segments, and the impact of strengthening foreign currencies in our International segment. Revenue by segment and a more detailed explanation of revenue within each segment follows: Change Twelve months ended December 31, 2012 vs. 2011 2011 vs. 2010 (dollars in millions) 2012 2011 2010 $ % $ % U.S. Information Services: Online Data Services $ 495.6 $ 451.2 $ 438.2 $ 44.4 9.8 % $ 13.0 3.0 % Credit Marketing Services 132.3 127.1 120.3 5.2 4.1 % 6.8 5.7 % Decision Services 97.6 81.8 77.5 15.8 19.3 % 4.3 5.5 % Total U.S. Information Services $ 725.5 $ 660.1 $ 636.0 $ 65.4 9.9 % $ 24.1 3.8 % International: Developed Markets $ 91.4 $ 88.9 $ 86.5 $ 2.5 2.8 % $ 2.4 2.8 % Emerging Markets 143.0 127.2 109.3 15.8 12.4 % 17.9 16.4 % Total International $ 234.4 $ 216.1 $ 195.8 $ 18.3 8.5 % $ 20.3 10.4 % Interactive $ 180.1 $ 147.8 $ 124.7 $ 32.3 21.9 % $ 23.1 18.5 % Total revenue $ 1,140.0 $ 1,024.0 $ 956.5 $ 116.0 11.3 % $ 67.5 7.1 % USIS Segment For 2012, USIS revenue increased $65.4 million compared to 2011, with increases in all platforms due to improved market conditions and the inclusion of revenue from our acquisition of FHS in October 2011. For 2011, USIS revenue increased $24.1 million compared to 2010, primarily due to an increase in online data services revenue that began in the second half of 2010 and continued throughout 2011, growth of our customers' credit marketing programs, especially during the first six months of 2011, and an increase in decision services revenue due to growth in our healthcare business.

Online Data Services. For 2012 and 2011, online data services revenue increased $44.4 million and $13.0 million, respectively, due to a 13.4% and 3.9% increase in online credit report unit volume in each respective year, primarily in the financial services and resellers markets, as conditions in the consumer and housing credit markets continued to improve.

Credit Marketing Services. For 2012 and 2011, credit marketing services revenue increased $5.2 million and $6.8 million, respectively. Overall requests for Credit Marketing Services increased due to an increase in demand for custom data sets and archive information as our customers increased their credit marketing programs beginning the third quarter of 2010.

Decision Services. For 2012 and 2011, decision services revenue increased $15.8 million and $4.3 million, respectively. The increase in 2012 was primarily due to an increase in healthcare insurance eligibility verification revenue, an increase of 6.6% from our acquisition of FHS, and an increase in the financial services market. The increase in 2011 was primarily due to an increase in healthcare insurance eligibility verification revenue and an increase of 1.7% from our acquisition of FHS in October 2011.

47-------------------------------------------------------------------------------- Table of Contents International Segment For 2012, International revenue increased $18.3 million, or 8.5%, compared to 2011, due to higher local currency revenue from increased volumes in all regions, partially offset by a decrease of 6.2% from the impact of weakening foreign currencies. Revenue increased 10.5% due to our acquisitions of Crivo in December 2011 and CRB in May 2012. Excluding the impact of foreign currencies, revenue increased 15.7% between years. For 2011, International revenue increased $20.3 million, or 10.4%, compared to 2010, due to higher revenue from increased volumes in most countries, an increase of 2.3% from the impact of strengthening foreign currencies and an increase of 2.6% from our acquisition of Databusiness in August 2010.

Developed Markets. For 2012, developed markets revenue increased $2.5 million, or 2.8%, compared to 2011, due to higher volumes in Canada and Hong Kong, partially offset by a decrease of 0.8% from the impact of weakening foreign currencies, primarily the Canadian dollar. For 2011, developed markets revenue increased $2.4 million, or 2.8%, compared to 2010, due to an increase of 3.4% from the impact of strengthening foreign currencies, primarily the Canadian dollar, and higher revenue from increased volume in Hong Kong, partially offset by lower revenue from decreased volume in Canada.

Emerging Markets. For 2012, emerging markets revenue increased $15.8 million, or 12.4%, compared to 2011, due to increased volumes in all regions, partially offset by a decrease of 9.9% from the impact of weakening foreign currencies, primarily the South African rand. Revenue increased 17.8% from our acquisitions of Crivo and CRB. For 2011, emerging markets revenue increased $17.9 million, or 16.4%, compared to 2010, due to higher revenue from increased volumes in all regions, an increase of 4.7% from our acquisition of Databusiness, and an increase of 1.2% from the impact of strengthening foreign currencies, primarily the South African rand. In 2012 and 2011, approximately 58% and 71%, respectively, of the emerging markets revenue was from South Africa.

Interactive Segment For 2012, Interactive revenue increased $32.3 million compared to 2011, due to an increase in the average numbers of subscribers in our indirect channel and an increase in our average revenue per subscriber in our direct channel. For 2011, Interactive revenue increased $23.1 million compared to 2010, due to an increase in the average number of subscribers in both our direct and indirect channels.

Operating Expenses For 2012, total operating expenses increased $227.7 million compared to 2011, primarily due to $90.7 million of accelerated stock-based compensation and related expenses recorded by TransUnion Corp. Predecessor resulting from the 2012 Change in Control Transaction, $58.9 million of additional depreciation and amortization primarily resulting from the purchase accounting fair value adjustments, the inclusion of $30.3 million of costs from our FHS, Crivo and CRB operations and an increase in labor and product costs resulting from the growth in revenue, partially offset by cost reductions from our operational excellence program and the impact of weakening foreign currencies in our International segment. For 2011, total operating expenses increased $30.9 million compared to 2010, primarily due to an increase in labor and product costs, the inclusion of costs from our Chile and FHS operations, certain charges in our USIS segment as discussed below, and the impact of strengthening foreign currencies in our International segment, partially offset by lower stock-based compensation expense.

Change Twelve months ended December 31, 2012 vs. 2011 2011 vs. 2010 (dollars in millions) 2012 2011 2010 $ % $ % Cost of services $ 470.2 $ 421.5 $ 395.8 $ 48.7 11.6 % $ 25.7 6.5 % Selling, general and administrative 384.6 264.5 263.0 120.1 45.4 % 1.5 0.6 % Depreciation and amortization 144.2 85.3 81.6 58.9 69.1 % 3.7 4.5 % Total operating expenses $ 999.0 $ 771.3 $ 740.4 $ 227.7 29.5 % $ 30.9 4.2 % 48 -------------------------------------------------------------------------------- Table of Contents Cost of Services For 2012, cost of services increased $48.7 million compared to 2011.

Labor-related costs increased $48.6 including $21.5 million of additional stock-based compensation and related expenses recorded by TransUnion Corp.

Predecessor resulting from the 2012 Change in Control Transaction, additional variable compensation costs resulting from the increase in revenue and expansion costs including our acquisitions of FHS, Crivo and CRB. Royalty, data and product costs increased $21.7 million due to the increased volumes, primarily in our Interactive and USIS segments. Costs also increased due to the inclusion of other costs from our acquisitions of FHS, Crivo and CRB. These increases were partially offset by a $20.7 million decrease in data center operating and maintenance costs in our USIS segment due to insourcing these operations and the impact of weakening foreign currencies in our International segment. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," and Note 15, "Stock-Based Compensation," for further information about the impact of the 2012 Change in Control Transaction.

For 2011, cost of services increased $25.7 million compared to 2010. Royalty, data and other product costs increased $13.5 million as a result of the increased volume across all segments. Labor-related costs, excluding stock-based compensation, increased $10.5 million, primarily in our USIS and International segments. These labor-related increases were primarily due to increases in variable compensation costs resulting from the increase in revenue and expansion costs as we entered new markets. The labor, royalty and data cost increases also included the impact of strengthening foreign currencies. Cost of services for 2011 also included a $3.6 million fee for the early termination of an outsourcing vendor contract and a $2.7 million software impairment and related restructuring charge. Cost of services for 2010 included a $3.9 million gain on the trade in of mainframe computers recorded in our USIS segment. These increases were partially offset by a decrease in our recurring stock-based compensation expense due to a change in our stock-based compensation program and a one-time $8.0 million charge for additional stock-based compensation and related expense incurred in 2010 as a result of the 2010 Change in Control Transaction.

Selling, General and Administrative For 2012, selling, general and administrative expenses increased $120.1 million compared to 2011. Labor-related costs increased $97.7 million including $69.2 million of additional stock-based compensation and related expenses recorded by TransUnion Corp. Predecessor resulting from the 2012 Change in Control Transaction, additional variable compensation costs resulting from the increase in revenue and expansion costs including labor costs from our acquisitions of FHS, Crivo and CRB. Selling, general and administrative costs also increased due to the inclusion of other costs associated with our acquisitions. These increases were partially offset by the impact of weakening foreign currencies in our International segment.

For 2011, selling, general and administrative costs increased $1.5 million compared to 2010. Labor-related costs, excluding stock-based compensation, increased $9.3 million, primarily in our USIS and International segments and Corporate. This increase was primarily due to increases in variable compensation as a result of the increase in revenue and additional costs due to expansion into new markets, as well as the impact of strengthening foreign currencies. The increase in labor-related costs was partially offset by a decrease in stock-based compensation due to a change in our recurring stock-based compensation program and a $13.4 million charge for additional stock-based compensation and related expense incurred in 2010 as a result of the 2010 Change in Control Transaction.

Depreciation and amortization For 2012, depreciation and amortization increased $58.9 million compared to 2011 due to additional depreciation and amortization resulting from the fair value basis adjustments to the tangible and intangible assets made in connection with the 2012 Change in Control Transaction. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," for further information about the portion of the purchase price allocated to tangible and intangible assets and their estimated useful lives.

49-------------------------------------------------------------------------------- Table of Contents Operating Income and Operating Margins Change Twelve months ended December 31, 2012 vs. 2011 2011 vs. 2010 (dollars in millions) 2012 2011 2010 $ % $ % Operating income: U.S. Information Services(1)(2) $ 155.1 $ 185.8 $ 177.1 $ (30.7 ) (16.5 )% $ 8.7 4.9 % International(1)(2) 24.4 66.7 62.7 (42.3 ) (63.4 )% 4.0 6.4 % Interactive(1) 61.7 56.5 37.7 5.2 9.2 % 18.8 49.9 % Corporate(1)(2) (100.2 ) (56.3 ) (61.4 ) (43.9 ) (78.0 )% 5.1 8.3 % Total operating income(1)(2) $ 141.0 $ 252.7 $ 216.1 $ (111.7 ) (44.2 )% $ 36.6 16.9 % Operating margin: U.S. Information Services 21.4 % 28.1 % 27.8 % nm 0.3 % International 10.4 % 30.9 % 32.0 % nm (1.1 )% Interactive 34.3 % 38.2 % 30.2 % nm 8.0 % Total operating margin 12.4 % 24.7 % 22.6 % nm 2.1 % Adjusted Operating Income:(3) U.S. Information Services $ 196.1 $ 192.1 $ 185.4 $ 4.0 2.1 % $ 6.7 3.6 % International 38.8 66.7 65.3 (27.9 ) (41.8 )% 1.4 2.1 % Interactive 64.0 56.5 38.9 7.5 13.3 % 17.6 45.2 % Corporate (67.2 ) (56.3 ) (56.0 ) (10.9 ) (19.4 )% (0.3 ) (0.5 )% Total Adjusted Operating Income $ 231.7 $ 259.0 $ 233.6 $ (27.3 ) (10.5 )% $ 25.4 10.9 % Adjusted Operating Margin: U.S. Information Services 27.0 % 29.1 % 29.2 % (2.1 )% (0.1 )% International 16.6 % 30.9 % 33.4 % (14.3 )% (2.5 )% Interactive 35.5 % 38.2 % 31.2 % (2.7 )% 7.0 % Total adjusted operating margin 20.3 % 25.3 % 24.4 % (5.0 )% 0.9 % (1) For 2012, operating income included $90.7 million of accelerated stock-based compensation and related expense recorded primarily by TransUnion Corp.

Predecessor as a result of the 2012 Change in Control Transaction that were recorded in each segment and in Corporate as follows: USIS $41.0 million; International $14.4 million; Interactive $2.3 million; and Corporate $33.0 million. For 2012, operating income also included additional depreciation and amortization as a result of the purchase accounting fair value adjustments to the tangible and intangible assets recorded in connection with the 2012 Change in Control Transaction. The $58.9 million increase in depreciation and amortization, which is primarily related to the purchase accounting fair value adjustment, was recorded in each segment and in Corporate as follows: USIS $34.3 million; International $21.8 million; Interactive $2.2 million; and Corporate $0.6 million. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," and Note 15, "Stock-Based Compensation," for further information about the impact of the acquisition of TransUnion Corp. For 2011, operating income included a $3.6 million fee for the early termination of an outsourcing vendor contract and a $2.7 million software impairment and related restructuring charge due to a regulatory change requiring a software platform replacement. Both of these expenses were recorded in our USIS segment. For 2010, operating income included a $3.9 million gain on the trade in of mainframe computers recorded in our USIS segment and $21.4 million of accelerated stock-based compensation and related expenses resulting from the 2010 Change in Control Transaction that were recorded in each segment and in Corporate as follows: USIS $12.2 million; International $2.6 million; Interactive $1.2 million; and Corporate $5.4 million.

(2) For 2010, a $2.2 million legal settlement with a global vendor impacted segment and corporate operating income as follows: USIS a $1.9 million increase; International a $2.2 million increase; and Corporate a $1.9 million decrease.

(3) See footnote 2 to the "Key Performance Measures" table above for a discussion about Adjusted Operating Income, why we use it, its limitations, and the reconciliation to its most directly comparable GAAP measure, operating income.

50 -------------------------------------------------------------------------------- Table of Contents For 2012, consolidated operating income decreased $111.7 million, resulting in a significant decrease in our operating margin compared to 2011. This decrease was primarily due to the increase in stock-based compensation and related expenses, the additional depreciation and amortization, and the increase in labor costs from revenue growth and expansion, partially offset by the increase in revenue discussed above. Margins for the USIS segment decreased primarily due to the increase in stock-based compensation and related expense, depreciation and amortization, and an increase in labor costs resulting from the growth in revenue and expansion, partially offset by the increase in revenue and cost reductions from our operational excellence program. Margins for the International segment decreased primarily due to increases in stock-based compensation and related expenses, depreciation and amortization, and labor and product costs, including integration costs for our acquisitions of Crivo and CRB and investments in start-up operations such as those in the Philippines, partially offset by the increase in revenue. Margins for the Interactive segment decreased primarily due to the increase in stock-based compensation and related expenses, data costs, and depreciation and amortization, partially offset by the increase in revenue.

For 2011, consolidated operating income increased $36.6 million and operating margin increased by 210 basis points compared to 2010, due to the increase in revenue partially offset by the increase in operating expenses as discussed above. Margins for the USIS segment increased as the increase in revenue and decrease in stock-based compensation were partially offset by an increase in labor and litigation costs and the impact of the early termination fee and the impairment charge discussed above. Margins for the International segment decreased as increases in labor and product costs more than outweighed the increase in revenue. Margins for the Interactive segment increased due to the increase in revenue.

Non-Operating Income and Expense Twelve months ended December 31, $ Change (in millions) 2012 2011 2010 2012 vs. 2011 2011 vs. 2010 Interest expense $ (165.5 ) $ (126.4 ) $ (90.1 ) $ (39.1 ) $ (36.3 ) Interest income 1.4 0.7 1.0 0.7 (0.3 ) Other income and expense, net: Loan fees (5.0 ) (60.9 ) (21.6 ) 55.9 (39.3 ) Acquisition fees (42.2 ) (8.5 ) (28.7 ) (33.7 ) 20.2 Earnings from equity method investments 12.1 11.4 8.4 0.7 3.0 Loss on sale of investments - - (2.1 ) - 2.1 Dividends from cost method investments 0.6 0.6 0.5 - 0.1 Other (3.6 ) (2.5 ) (0.5 ) (1.1 ) (2.0 ) Total other income and expense, net (38.1 ) (59.9 ) (44.0 ) 21.8 (15.9 ) Non-operating income and expense $ (202.2 ) $ (185.6 ) $ (133.1 ) $ (16.6 ) $ (52.5 ) Other income and expense, net, was significantly impacted by the 2012 Change in Control Transaction, the 2010 Change in Control Transaction and the refinancing of Trans Union LLC's senior secured credit facility in February, 2011. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," and Note 13, "Debt," for additional information.

For 2012, interest expense increased $39.1 million compared to 2011, primarily due to the issuance of the TransUnion Holding 9.625% notes used to partially fund the 2012 Change in Control Transaction and the issuance of the TransUnion Holding 8.125% notes used to pay a distribution to shareholders in November 2012. Of the total interest expense in 2012, $52.2 million was interest on the TransUnion Holding notes. For 2011, interest expense increased $36.3 million compared to 2010, due to a full year's interest expense in 2011 compared to a partial year's interest expense in 2010 on the debt incurred to finance the 2010 Change in Control Transaction in June 2010.

51-------------------------------------------------------------------------------- Table of Contents For 2012, loan fees included a $2.7 million fee for a bridge loan commitment for the 2012 Change in Control Transaction, the amortization of deferred financing fees allocated to our revolving line of credit, and the payment of fees for the unused revolving line of credit. For 2011, loan fees included a $59.3 million loss on the early extinguishment of debt, consisting of a write-off of $49.8 million of previously unamortized deferred financing fees and a prepayment premium of $9.5 million as a result of refinancing our senior secured credit facility, the amortization of deferred financing fees allocated to our revolving line of credit, and the payment of fees for the unused revolving line of credit.

For 2010, loan fees included a $10.0 million fee for the lender's commitment to provide a bridge loan for the 2010 Change in Control Transaction that we did not utilize, $8.9 million of previously unamortized deferred financing fees related to the senior unsecured credit facility that was repaid as part of the 2010 Change in Control Transaction, and $2.7 million of commitment fees and amortization of deferred financing fees related to the undrawn portion of the lines of credit that were outstanding during 2010.

Acquisition fees represent costs we have incurred for various acquisition-related efforts. For 2012, acquisition fees include $36.5 million of costs related to the 2012 Change in Control Transaction and $3.0 million of initial public offering related expenses that were previously capitalized but written off in the first quarter of 2012 as we formally withdrew our registration statement on Form S-1 as a result of the 2012 Change in Control Transaction. Of the $36.5 million 2012 Change in Control Transaction costs, $15.2 million was incurred by TransUnion Holding and $21.3 million was incurred by TransUnion Corp. For 2011, acquisition fees of $8.5 million included fees related to our acquisition of FHS and Crivo as discussed in Note 17, "Business Acquisitions," as well as fees related to unsuccessful acquisition activity. For 2010, acquisition fees of $28.7 million were primarily due to transaction fees for the 2010 Change in Control Transaction.

For 2012, earnings from equity method investments increased $0.7 million compared to 2011, primarily due to our purchase of an additional 7.51% ownership interest in CIBIL on December 20, 2011. For 2011, earnings from equity method investments increased $3.0 million compared to 2010, primarily due to an increase in the net income of our Mexico affiliate.

For 2010, the $2.1 million loss on sale of investments was due to a loss realized on the settlement of the swap instruments we held as an interest rate hedge on our old senior unsecured credit facility that was repaid in connection with the 2010 Change in Control Transaction.

Provision for Income Taxes Effective January 1, 2012, the look-through rule under subpart F of the U.S.

Internal Revenue Code expired. The subpart F provisions require U.S. corporate shareholders to recognize current U.S. taxable income from passive income, such as dividend income, at certain foreign subsidiaries regardless of whether that income is remitted to the U.S. The look-through rule had provided an exception to this recognition for subsidiary passive income attributable to an active business. Beginning in 2012, under ASC 740-30, we recorded tax expense for the income tax we would incur if our foreign earnings were distributed up our foreign chain of ownership, but not remitted to the U.S. In calculating the U.S.

tax expense on unremitted foreign earnings, we offset the increase in tax with the benefit of related foreign tax credits. As part of the American Taxpayer Relief Act of 2012 enacted into law on January 2, 2013, the look-through rule was retroactively reinstated to January 1, 2012, and we expect to reverse the tax expense we recorded for Subpart F in 2012 during the first quarter of 2013.

The increase in tax deductible transaction costs and interest expense resulting from the 2012 Change in Control Transaction and the related increase in debt significantly reduced the amount of foreign tax credits available to offset our tax expense on both foreign dividends received and unremitted foreign earnings.

TransUnion Holding As a result of the 2012 Change in Control Transaction and increased debt service requirements resulting from the additional debt incurred by TransUnion Holding, we asserted under ASC 740-30 that all unremitted foreign 52-------------------------------------------------------------------------------- Table of Contents earnings of TransUnion Corp. accumulated as of April 30, 2012, were not indefinitely reinvested outside the U.S. Accordingly, we recorded a deferred tax liability for the full estimated U.S. tax cost, net of related foreign tax credits, associated with remitting these earnings back to the U.S.

The effective tax rate was 244.4% for the year ended December 31, 2012. This rate was higher than the 35% U.S. federal statutory rate primarily due to the lapse of the look-through rule and the reduction in available foreign tax credits, the unfavorable impact of ASC 740-30 and the non-deductibility of certain costs incurred in connection with the 2012 Change in Control Transaction, partially offset by a favorable tax rate differential on the Company's foreign earnings.

TransUnion Corp.

As a result of the 2012 Change in Control Transaction, TransUnion Corp. has two taxable years in 2012, one for the Predecessor and one for the Successor.

TransUnion Corp.'s current and deferred taxes have been allocated as if it were a separate taxpayer, notwithstanding that it will join in the consolidated federal income tax return of TransUnion Holding after April 30, 2012.

The effective tax rate was 33.7% for the eight months ended December 31, 2012.

This rate was lower than the U.S. federal statutory rate of 35% primarily due to the favorable tax rate differential on foreign earnings and the favorable impact on the ASC 740-30 deferred tax liability due to a reduction in the Dominican Republic withholding tax, partially offset by the lapse of the look-through rule and the reduction in available foreign tax credits.

For the four months ended April 30, 2012, we reported a loss from continuing operations before income taxes. The effective tax benefit rate for this period of 18.0% was lower than the U.S. federal statutory rate of 35% primarily due to the application of ASC 740-30 to our unremitted foreign earnings, the non-deductibility of certain costs incurred in connection with the 2012 Change in Control Transaction and limitations on our foreign tax credits.

For 2011, the effective tax rate of 26.5% was lower than the U.S. federal statutory rate of 35% primarily due to the additional tax-deductible transaction costs resulting from our analysis of the fees incurred in the 2010 Change in Control Transaction and lower tax rates in foreign countries, primarily Canada and Puerto Rico, partially offset by the impact of foreign dividends and foreign tax credits.

For 2010, the effective tax rate of 55.8% was higher than the U.S. federal statutory rate of 35% primarily due to the nondeductible expenses related to the 2010 Change in Control Transaction and the limitation on our foreign tax credit.

Discontinued Operations, Net of Tax Change Twelve months ended December 31, 2012 vs. 2011 2011 vs. 2010 (in millions) 2012 2011 2010 $ $ Discontinued operations, net of tax $ - $ (0.5 ) $ 8.2 $ 0.5 $ (8.7 ) During the first quarter of 2010, we completed the sale of the remaining business comprising our real estate services business. During the second quarter of 2010, we completed the sale of our third-party collection business in South Africa to the existing minority shareholders. We will have no significant ongoing relationship with either of these businesses.

Revenue for the discontinued real estate services operations was $3.7 million in 2010. The net loss from these discontinued operations for 2011 of $0.5 million was a result of expenses incurred to wind down the operations. Net income from these discontinued operations for 2010 included an operating loss of $2.7 million and a gain on the final disposal of the business of $5.2 million.

53-------------------------------------------------------------------------------- Table of Contents Revenue for the discontinued South Africa collection business was $1.3 million in 2010. Net income from these discontinued operations was $5.7 million in 2010.

The 2010 net income included an operating loss of less than $0.1 million and a gain of $3.7 million, $5.7 million after tax benefit, on the final disposal of this business.

See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 18, "Discontinued Operations," for additional information on discontinued operations.

Significant Changes in Assets and Liabilities Our balance sheet at December 31, 2012, as compared to December 31, 2011, was impacted by the 2012 Change in Control Transaction, which was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations. The guidance prescribes that the basis of the assets acquired and liabilities assumed be recorded at fair value to reflect the purchase price. Accordingly, all of our assets and liabilities were recorded at fair value as of April 30, 2012, resulting in a significant change to our balance sheet. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," for additional information.

Liquidity and Capital Resources Overview Our principal sources of liquidity are cash flows provided by operating activities, cash and cash equivalents on hand, and Trans Union LLC's senior secured revolving credit facility. Our principal uses of liquidity are working capital, capital expenditures, debt service and other general corporate purposes. TransUnion Corp. will also pay future cash dividends to TransUnion Holding to fund their debt service obligations. We believe our cash on hand, cash generated from operations, and funds available under the senior secured revolving credit facility will be sufficient to fund our planned capital expenditures, debt service obligations and operating needs for the foreseeable future. We may, however, elect to raise funds through debt or equity financing in the future to fund significant investments or acquisitions that are consistent with our growth strategy.

Cash and cash equivalents totaled $154.3 million at December 31, 2012, of which $72.2 million was held outside the United States. Cash and cash equivalents totaled $107.8 million at December 31, 2011, of which $68.5 million was held outside the United States. The balance retained in cash and cash equivalents is consistent with our short-term cash needs and investment objectives. As of December 31, 2012, we had no outstanding borrowings under our senior secured revolving line of credit and could borrow up to the full amount. Beginning in 2014, under the amended senior secured term loan we will be required to make additional principal payments based on the previous year's excess cash flows.

See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 13, "Debt," and Note 26, "Subsequent Event," for additional information.

The Company intends to keep all foreign earnings recognized after the 2012 Change in Control Transaction permanently reinvested in operations outside of the United States as these earnings are not needed to fund our current or expected domestic operations. In connection with the 2012 Change in Control Transaction, the Company has asserted that undistributed foreign earnings recognized prior to the transaction are not permanently reinvested outside of the United States. Accordingly, under ASC 740-30 we recorded a liability for the increase in tax that would result from a distribution to the United States of the accumulated foreign earnings as of April 30, 2012.

Sources and Uses of Cash TransUnion Holding In connection with the 2012 Change in Control Transaction, TransUnion Holding received $1,093.2 million from GSC and Advent and $600.0 million from the proceeds of the 9.625% notes and distributed the cash to pay the prior stockholders, option holders, and deal-related costs. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 2, "Change in Control Transactions," for additional information.

54-------------------------------------------------------------------------------- Table of Contents On November 1, 2012, TransUnion Holding issued $400.0 million principal amount of 8.125% notes, at an offering price of 99.5% in a private placement to certain investors. The proceeds were used to pay a $373.8 million dividend to our shareholders, with the balance used to pay various costs associated with issuing the new debt and obtaining consents from our existing debt holders.

TransUnion Corp.

TransUnion TransUnion Corp. Corp. TransUnion TransUnion TransUnion Successor Combined Corp. Corp.

Corp. Eight Twelve Twelve Twelve Predecessor Months Months Months Months Four Months Ended Ended Ended Ended 2012 vs. 2011 vs.

Ended April 30, December 31, December 31, December 31, December 31, 2011 2010 (in millions) 2012 2012 2012 2011 2010 Change Change Cash provided by operating activities of continuing operations $ 52.4 $ 91.7 $ 144.1 $ 204.5 $ 204.6 $ (60.4 ) $ (0.1 ) Cash used in operating activities of discontinued operations - - - (1.3 ) (4.2 ) 1.3 2.9 Cash (used in) provided by investing activities (19.6 ) (61.2 ) (80.8 ) (181.6 ) 70.4 100.8 (252.0 ) Cash (used in) provided by financing activities (45.0 ) 28.1 (16.9 ) (41.2 ) (290.5 ) 24.3 249.3 Effect of exchange rate changes on cash and cash equivalents 0.8 (0.7 ) 0.1 (3.8 ) 1.8 3.9 (5.6 ) Net change in cash and cash equivalents $ (11.4 ) $ 57.9 $ 46.5 $ (23.4 ) $ (17.9 ) $ 69.9 $ (5.5 ) Operating Activities Cash provided by operating activities decreased $60.4 million in 2012, from $204.5 million in 2011 to $144.1 million in 2012. The decrease was primarily due to cash used to fund working capital and higher cash interest expense resulting from the new debt. Cash provided by operating activities decreased $0.1 million in 2011, from $204.6 million in 2010 to $204.5 million in 2011. Cash flows for additional interest expense paid on our debt were offset by higher cash flows from operating income.

Investing Activities Cash used in investing activities decreased $100.8 million, from $181.6 million in 2011 to $80.8 million in 2012. The decrease was primarily due to the decrease in cash paid for acquisitions partially offset by a decrease in proceeds from sale of trading securities. Cash used in investing activities increased $252.0 million, from a source of cash of $70.4 million in 2010 to a use of cash of $181.6 million in 2011. The increase in cash used was primarily due to an increase in cash paid for our acquisitions, lower net proceeds from the sale of our securities and increased cash expenditures on property and equipment.

Financing Activities Cash used in financing activities decreased $24.3 million, from $41.2 million in 2011 to $16.9 million in 2012. The decrease was primarily due to the stockholder contribution received in 2012 partially offset by the dividends, the 2012 Change in Control Transaction fees and an increase in the amount of debt repaid. Cash used in 55 -------------------------------------------------------------------------------- Table of Contents financing activities decreased $249.3 million, from $290.5 million in 2010 to $41.2 million in 2011. The decrease in cash used was primarily due to the net cash used to finance the 2010 Change in Control Transaction.

Capital Expenditures We make capital expenditures to grow our business by developing new and enhanced capabilities, to increase our effectiveness and efficiency and to reduce risks.

Our capital expenditures include product development, disaster recovery, security enhancements, regulatory compliance, and the replacement and upgrade of existing equipment at the end of its useful life.

For 2012, cash paid for capital expenditures decreased $4.8 million, from $74.0 million in 2011 to $69.2 million in 2012. On an accrual basis, our capital expenditures were $66.7 million in 2012 compared to $66.9 million in 2011. For 2011, cash paid for capital expenditures increased $27.2 million, from $46.8 million in 2010, to $74.0 million in 2011, due in part to a payment of $18.8 million in the first quarter of 2011 for assets purchased and accrued for in the fourth quarter of 2010. On an accrual basis, our capital expenditures were $66.9 million in 2011 compared to $65.2 million in 2010. On an accrual basis, we expect total capital expenditures for 2013 to be comparable to 2012 as a percent of revenue.

Debt TransUnion Holding 8.125% notes On November 1, 2012, TransUnion Holding issued $400.0 million principal amount of 8.125% notes due June 15, 2018, at an offering price of 99.5% in a private placement to certain investors. The proceeds were used to pay a $373.8 million dividend to our shareholders and to pay various costs associated with issuing the new debt and obtaining consents from our existing debt holders. TransUnion Holding is required to pay interest on the notes in cash unless certain conditions described in the indenture governing the notes are satisfied, in which case the Company will be entitled to pay interest for such period by increasing the principal amount of the notes or by issuing new notes (such increase being referred to as "PIK," or paid-in-kind interest) to the extent described in the indenture.

In connection with the issuance of these notes, TransUnion Holding successfully completed a Consent Solicitation to amend the indenture governing its 9.625% notes. The amendment permitted the issuance of the additional $400 million of notes and allowed TransUnion Holding to make a dividend payment to its shareholders. The 8.125% notes are subject to a registration rights agreement that will require us to exchange the 8.125% notes for an equal amount of notes registered with the SEC. The indenture governing these notes and the nonfinancial covenants are substantially similar to those governing the outstanding 9.625% notes. We are in compliance with all covenants under the indenture governing the 8.125% notes.

9.625% notes On March 21, 2012, in connection with the 2012 Change in Control Transaction, TransUnion Holding issued $600.0 million principal amount of 9.625% notes due June 15, 2018. TransUnion Holding is required to pay interest on the notes in cash unless certain conditions described in the indenture governing the notes are satisfied, in which case the Company will be entitled to pay interest for such period by increasing the principal amount of the notes or by issuing new notes to the extent described in the indenture.

The indenture governing the 9.625% notes contains nonfinancial covenants that include restrictions on our ability to pay dividends or distributions, repurchase equity, prepay junior debt, make certain investments, incur additional debt, issue certain stock, incur liens on property, merge, consolidate or sell certain assets, enter into transactions with affiliates, and allow to exist certain restrictions on the ability of subsidiaries to pay dividends or make other payments to the Company. We are in compliance with all covenants under the indenture governing the 9.625% notes.

56-------------------------------------------------------------------------------- Table of Contents TransUnion Corp. and its subsidiaries do not guarantee any of the above TransUnion Holding PIK toggle notes and do not have any contractual obligations to repay the notes. TransUnion Corp. has, however, paid and expects to continue to pay cash dividends to TransUnion Holding to enable funding of the cash interest payments due on the notes. The ability of TransUnion Corp. to pay dividends and make other payments to TransUnion Holding will depend on its earnings and may be restricted by, among other things, the covenants in the indentures governing the notes, applicable laws and regulations and by the terms of the agreements into which it enters. The terms of the credit agreement governing the TransUnion LLC senior secured credit facility and the indenture governing the Trans Union LLC senior notes significantly restrict TransUnion Corp. from paying dividends and otherwise transferring assets to TransUnion Holding.

TransUnion Corp.

Senior Secured Credit Facility On February 5, 2013, the Company signed amendment No. 4 to its senior secured credit facility, which will be effective March 1, 2013. The amendment, among other things, lowered the floor on the term loan from 1.50% to 1.25%, lowered the margin on the term loan from 4.00% to 3.00%, extended the term loan maturity date one year to February 2019, delayed the first required excess cash payment until 2014, and relaxed certain covenant requirements.

In connection with the 2010 Change in Control Transaction, on June 15, 2010, Trans Union LLC entered into a senior secured credit facility with various lenders, which was amended and restated on February 10, 2011. On April 30, 2012, in connection with the 2012 Change in Control Transaction, the senior secured credit facility was further amended to, among other things, change the applicable margin on LIBOR based borrowings from 3.25% to 4.00%, increase the revolving line of credit by $10 million, and extend the term on a portion of the revolving line of credit.

The credit facility consists of a seven-year $950.0 million senior secured term loan and a five-year $210.0 million senior secured revolving line of credit, with $25.0 million expiring June 15, 2015, $30.0 million expiring February 10, 2016, and $155.0 million expiring February 10, 2017. Interest rates on the borrowings are based, at Trans Union LLC's election, on LIBOR or an alternate base rate, subject to a floor, plus an applicable margin based on the senior secured net leverage ratio. There is a commitment fee payable quarterly, based on the undrawn portion of the revolving line of credit. With certain exceptions, the obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, which is our principal operating subsidiary, including its investment in subsidiaries. The credit facility contains various restrictive covenants including restrictions on dividends, investments, indebtedness, liens, dispositions, future borrowings and other restricted payments, and a senior secured net leverage ratio covenant. As of December 31, 2012, Trans Union LLC was in compliance with all of the loan covenants.

Under the term loan, Trans Union LLC is required to make principal payments of 0.25% of the original principal balance at the end of each quarter, with the remaining principal balance due February 10, 2018. In connection with the recent credit agreement amendment, Trans Union LLC will also be required to make additional principal payments beginning in 2014, of between zero and fifty percent of the prior year's excess cash flows with such percentage determined based on the net leverage ratio as of the end of such prior year. Trans Union LLC did not borrow or repay any funds under the revolving line of credit during the twelve months ended December 31, 2012.

On November 1, 2012, TransUnion LLC prepaid $10.0 million of the senior secured term loan with cash on hand in connection with the transaction to issue the TransUnion Holding 8.125% notes 11.375% notes In connection with the 2010 Change in Control Transaction, on June 15, 2010, Trans Union LLC and its wholly-owned subsidiary TransUnion Financing Corporation issued $645.0 million 11.375% senior notes due June 15, 2018. The indenture governing the Trans Union LLC senior notes contains restrictive covenants, including 57 -------------------------------------------------------------------------------- Table of Contents restrictions on dividends, investments, indebtedness, liens, dispositions, future borrowings and other restricted payments. As of December 31, 2012, we were in compliance with all covenants under the indenture governing the 11.375% notes.

RFC loan On June 15, 2010, we borrowed $16.7 million under the RFC loan to finance a portion of the 2010 Change in Control Transaction. The loan was an unsecured, non-interest bearing note, of which $2.5 million of the $16.7 million borrowed was treated as imputed interest. The loan required repayments of principal annually based on foreign excess cash flows. Interest expense was calculated under the effective interest method using an imputed interest rate of 11.625%.

In connection with the 2012 Change in Control Transaction, the RFC loan was repaid in full.

Senior unsecured credit facility and interest rate swap On November 16, 2009, we entered into a senior unsecured credit facility with JPMorgan Chase Bank, N.A and various lenders and borrowed $500.0 million to fund the purchase of our common stock. On November 19, 2009, we entered into swap agreements with financial institutions that effectively fixed the interest payments on a portion of this loan. In connection with the 2010 Change in Control Transaction, on June 15, 2010, we repaid the remaining balance of our senior unsecured credit facility and cash settled the swap instruments, realizing a $2.1 million loss that was included in other expense.

Effect of certain debt covenants A breach of any of the covenants under the agreements governing our debt could limit our ability to borrow funds under the TransUnion LLC senior secured revolving line of credit and could result in a default under the TransUnion LLC senior secured credit facility, the indenture governing the Trans Union LLC senior notes or the indentures governing the TransUnion Holding senior unsecured PIK toggle notes. Upon the occurrence of an event of default under the TransUnion LLC senior secured credit facility, the indenture governing the Trans Union LLC senior notes, or the indentures governing the TransUnion Holding senior unsecured PIK toggle notes, the TransUnion LLC lenders, the holders of the TransUnion Corp. senior notes, or the holders of the TransUnion Holding senior unsecured PIK toggle notes, as the case may be, could elect to declare all amounts outstanding under the applicable indebtedness to be immediately due and payable, and the lenders could terminate all commitments to extend further credit under our secured credit facility. If we were unable to repay the amounts declared due, the lenders could proceed against any collateral granted to them to secure that indebtedness. We have pledged substantially all of the TransUnion LLC assets as collateral under the senior secured credit facility. If the lenders under the senior secured credit facility accelerate the repayment of borrowings, or the holders of the TransUnion Corp. senior notes or TransUnion Holding senior unsecured PIK toggle notes accelerate repayment of the notes, we may not have sufficient assets to repay the debt due. See Part I, Item 1A, "Risk Factors." TransUnion Corp. is a holding company and its ability to meet its liquidity needs or to pay dividends on its common stock depends on its subsidiaries' earnings, the terms of their indebtedness, and other contractual restrictions.

Trans Union LLC, the borrower under the senior secured credit facility and the co-issuer of the Trans Union LLC senior notes, is not permitted to declare any dividend or make any other distribution, subject to certain exceptions including compliance with a fixed charge coverage ratio and a basket that depends on TransUnion Corp.'s consolidated net income.

In addition, TransUnion LLC's senior secured revolving line of credit includes a senior secured net leverage ratio covenant as a condition to borrowing and as of the end of any fiscal quarter for which we have line of credit borrowings outstanding. This covenant requires us to maintain a senior secured net leverage ratio on a pro forma basis equal to, or less than, 4.25 to 1 from January 1, 2012, through June 30, 2012, and 4.00 to 1 thereafter. The covenants exclude any impact of the purchase accounting fair value adjustments or the increased amortization 58 -------------------------------------------------------------------------------- Table of Contents expense resulting from the 2012 Change in Control Transaction. Although TransUnion Corp. was not subject to the covenant at December 31, 2012, because it did not have borrowings outstanding on the senior secured revolving line of credit, the senior secured net leverage ratio for TransUnion Corp. as of December 31, 2012, was 1.84 to 1. The senior secured net leverage ratio is the ratio of consolidated senior secured net debt to consolidated EBITDA for the trailing twelve months as defined in the credit agreement governing our senior secured credit facility ("Covenant EBITDA"). Covenant EBITDA for the trailing twelve-month period ended December 31, 2012, totaled $421.4 million. Covenant EBITDA was higher than Adjusted EBITDA by $35.9 million for the trailing twelve-month period ended December 31, 2012, because of adjustments for noncontrolling interests, equity investments and other adjustments as defined in the credit agreement governing our senior secured credit facility.

Under the covenants of the indenture governing the Trans Union LLC 11.375% notes, TransUnion Corp. is restricted from making certain payments, including dividend payments to TransUnion Holding. As of December 31, 2012 and 2011, TransUnion Corp.'s capacity to make these distributions was restricted to approximately $160 million and $115 million, respectively.

For additional information about our debt, see Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 13, "Debt." Contractual Obligations Consolidated future minimum payments for noncancelable operating leases, purchase obligations and debt repayments as of December 31, 2012, are payable as follows: Loan fees Operating Purchase Debt and interest (in millions) leases obligations repayments payments Total 2013 $ 10.1 $ 136.9 $ 10.6 $ 218.1 $ 375.7 2014 8.8 53.5 9.5 218.0 289.8 2015 7.2 38.6 9.5 217.1 272.4 2016 5.6 16.4 9.5 216.3 247.8 2017 4.5 4.8 9.5 216.5 235.3 Thereafter 13.3 5.7 2,520.9 83.8 2,623.7 Totals $ 49.5 $ 255.9 $ 2,569.5 $ 1,169.8 $ 4,044.7 Purchase obligations to be repaid in 2013 include $78.4 million of trade accounts payable that were included on the consolidated balance sheet of TransUnion Holding as of December 31, 2012. We had no significant capital leases as of December 31, 2012. Loan fees and interest payments are estimates based on the interest rates in effect at December 31, 2012, and the contractual principal paydown schedule, excluding any excess cash flow prepayments that may be required. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 13, "Debt," for additional information about our interest payments.

Off-Balance Sheet Arrangements As of December 31, 2012, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Application of Critical Accounting Estimates We prepare our consolidated financial statements in conformity with GAAP. The notes to our consolidated financial statements include disclosures about our significant accounting policies. These accounting policies require us to make certain judgments and estimates in reporting our operating results and our assets and liabilities. The following paragraphs describe the accounting policies that require significant judgment and estimates due to inherent uncertainty or complexity.

59 -------------------------------------------------------------------------------- Table of Contents Goodwill and Indefinite-Lived Intangibles Due to the 2012 Change in Control Transaction, the value of goodwill increased significantly, as the excess of the purchase price paid for TransUnion Corp.

over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill and allocated to each of our reporting units.

As of December 31, 2012, our consolidated balance sheet included goodwill of $1,804.2 million. As of December 31, 2012, we had no other indefinite-lived intangible assets. We test goodwill and indefinite-lived intangible assets, if any, for impairment on an annual basis, in the fourth quarter, or on an interim basis if an indicator of impairment is present. For goodwill, we compare the fair value of each reporting unit to its carrying amount to determine if there is potential goodwill impairment. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value of its goodwill. For other indefinite-lived intangibles, if any, we compare the fair value of the asset to its carrying value to determine if there is an impairment. If the fair value of the asset is less than its carrying value, an impairment loss is recorded. We use discounted cash flow techniques to determine the fair value of our reporting units, goodwill and other indefinite-lived intangibles. The discounted cash flow calculation requires a number of significant assumptions, including projections of future cash flows and an estimate of our discount rate.

We believe our current estimates of fair value are based on assumptions that are reasonable and consistent with assumptions that would be used by other marketplace participants. Such estimates are, however, inherently uncertain, and estimates using different assumptions could result in significantly different results. As of December 31, 2012, our estimates of fair value for each reporting unit exceeded the carrying amount of the corresponding reporting unit by at least 18% and a 10% increase in our discount rate or a 10% decrease in our estimated cash flows would still not have resulted in an impairment of goodwill.

During 2012, 2011 and 2010, there was no impairment of goodwill or other indefinite-lived intangible assets.

Long-Lived Depreciable and Amortizable Assets In connection with the 2012 Change in Control Transactions, all long-lived depreciable and amortizable assets were recorded at fair value and the carrying value of certain fixed assets and all intangible assets increased significantly.

As of December 31, 2012, our consolidated balance sheet included fixed assets of $147.6 million, $121.2 million net of accumulated depreciation, and long-lived intangible assets of $1,998.2 million, $1,911.6 million net of accumulated amortization. We review long-lived assets subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized equal to the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the consolidated balance sheet, and reported at the lower of the carrying amount or fair value, less costs to sell, and are no longer depreciated. When a long-lived asset group is tested for recoverability, we also review depreciation estimates and methods. Any revision to the remaining useful life of a long-lived asset resulting from that review is also considered in developing estimates of future cash flows used to test the asset for recoverability. We typically use a discounted cash flow model when assessing the fair value of our asset groups. The discounted cash flow calculation requires a number of significant assumptions, including projections of future cash flows and an estimate of our discount rate.

When events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, we use estimates of future cash flows to determine recoverability and base such estimates on assumptions that are reasonable and consistent with assumptions that would be used by other marketplace participants. Such estimates, however, are inherently uncertain and estimates using different assumptions, or different valuation techniques, could result in significantly different results. During 2012, 2011 and 2010 there were no material impairment charges.

60 -------------------------------------------------------------------------------- Table of Contents Legal Contingencies As of December 31, 2012, our consolidated balance sheet included accrued litigation costs of $5.6 million. We are involved in various legal proceedings resulting from our normal business operations. We regularly review all claims to determine whether a loss is probable and can be reasonably estimated. If a loss is probable and can be reasonably estimated, an appropriate reserve is accrued and included in other current liabilities. We make a number of significant judgments and estimates related to these contingencies, including the likelihood that a liability has been incurred, and an estimate of that liability. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 21, "Contingencies," for additional information about our legal contingencies.

We believe the judgments and estimates used are reasonable, but events may arise that were not anticipated and the outcome of a contingency may differ significantly from what is expected.

Income Taxes As of December 31, 2012, TransUnion Holding's consolidated balance sheet included current deferred tax assets of $36.3 million, noncurrent deferred tax liabilities of $657.5 million and unrecognized tax benefits of $4.9 million. As of December 31, 2012, TransUnion Corp.'s consolidated balance sheet included current deferred tax assets of $18.9 million, noncurrent deferred tax liabilities of $645.8 million and unrecognized tax benefits of $4.8 million. We are required to record current and deferred tax expense, deferred tax assets and liabilities resulting from temporary differences, and unrecognized tax benefits for uncertain tax positions. We make certain judgments and estimates to determine the amounts recorded, including future tax rates, future taxable income, whether it is more likely than not a tax position will be sustained, and the amount of the unrecognized tax benefit to record.

We believe the judgments and estimates used are reasonable, but events may arise that were not anticipated and the outcome of tax audits may differ significantly from what is expected.

Stock-Based Compensation For the year ended December 31, 2012, we recorded $93.0 million of stock-based compensation expense, including $88.0 million in connection with the 2012 Change in Control Transaction. For the year ended December 31, 2011, we recorded $4.6 million of stock-based compensation expense. For the year ended December 31, 2010, we recorded $31.8 million of stock-based compensation expense, including $20.7 million in connection with the 2010 Change in Control Transaction. The fair value of each award was determined by various methods including independent valuations of our common stock based on discounted cash flow and selected comparable public company analyses, a Black-Scholes valuation model, and a risk-neutral Monte Carlo valuation model. The various valuation models required management to make a number of significant assumptions, including the fair value of our stock, projections of future cash flows and an estimate of our cost of capital, volatility rates, expected life of awards and risk-free interest rates.

We believe the determination of fair value was based on assumptions and estimates that are reasonable and consistent with what would be used by other marketplace participants to determine fair value. Valuations, however, are inherently uncertain and valuations using different assumptions and estimates, or different valuation techniques, could result in significantly different values. See Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 15, "Stock-Based Compensation," for additional information.

Recent Accounting Pronouncements For information about recent accounting pronouncements and the potential impact on our consolidated financial statements, see Part II, Item 8, "Combined Notes to Consolidated Financial Statements," Note 1, "Significant Accounting and Reporting Policies." 61 -------------------------------------------------------------------------------- Table of Contents

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