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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
 
FORM 10-Q
______________

ý        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended September 30, 2018

OR

o        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period From          to         
 
Commission File Number 001-36486
______________

CDK Global, Inc.
(Exact name of registrant as specified in its charter)
______________
 
Delaware
46-5743146
(State or other jurisdiction of incorporation or
organization)
(IRS Employer Identification No.)
 
1950 Hassell Road, Hoffman Estates, IL
60169
(Address of principal executive offices) 
(Zip Code)

Registrant’s telephone number, including area code: (847) 397-1700
______________
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ý   No o

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  ý       No   o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
Accelerated filer o
Non-accelerated filer o 
Smaller reporting company o
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No  ý

The number of shares outstanding of the registrant’s common stock as of November 5, 2018 was 128,773,455.




Table of Contents

 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1


Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CDK Global, Inc.
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)

 
Three Months Ended
 
September 30,
 
2018
 
2017
Revenues
$
554.5

 
$
565.7

 
 
 
 
Expenses:
 

 
 

Cost of revenues
281.6

 
307.7

Selling, general and administrative expenses
98.3

 
113.7

Restructuring expenses
17.2

 
6.5

Total expenses
397.1

 
427.9

Operating earnings
157.4

 
137.8

 
 
 
 
Interest expense
(32.2
)
 
(23.3
)
Other income, net
2.6

 
5.3

 
 
 
 
Earnings before income taxes
127.8

 
119.8

 
 
 
 
Provision for income taxes
(35.5
)
 
(36.7
)
 
 
 
 
Net earnings
92.3

 
83.1

Less: net earnings attributable to noncontrolling interest
2.0

 
1.8

Net earnings attributable to CDK
$
90.3

 
$
81.3

 
 
 
 
Net earnings attributable to CDK per common share:
 
 
 
Basic
$
0.70

 
$
0.58

Diluted
$
0.69

 
$
0.57

 
 
 
 
Weighted-average common shares outstanding:
 
 
 
Basic
129.6

 
140.1

Diluted
130.4

 
141.4



See notes to the condensed consolidated financial statements.

2


CDK Global, Inc.
Condensed Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
 
Three Months Ended
 
September 30,
 
2018
 
2017
Net earnings
$
92.3

 
$
83.1

Other comprehensive income (loss):
 
 
 
Currency translation adjustments
(6.0
)
 
14.2

Other comprehensive income (loss)
(6.0
)
 
14.2

Comprehensive income
86.3

 
97.3

Less: comprehensive income attributable to noncontrolling interest
2.0

 
1.8

Comprehensive income attributable to CDK
$
84.3

 
$
95.5


See notes to the condensed consolidated financial statements.


3


CDK Global, Inc.
Condensed Consolidated Balance Sheets
(In millions, except per share par value)
(Unaudited)
 
September 30,
 
June 30,
 
2018
 
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
312.8

 
$
804.4

Accounts receivable, net of allowances of $5.3 and $7.4, respectively
383.6

 
374.6

Other current assets
115.6

 
188.3

Total current assets
812.0

 
1,367.3

Property, plant and equipment, net
141.2

 
131.9

Other assets
285.5

 
165.5

Goodwill
1,592.4

 
1,217.2

Intangible assets, net
259.8

 
126.5

Total assets
$
3,090.9

 
$
3,008.4

 
 
 
 
Liabilities and Stockholders' Deficit
 

 
 

Current liabilities:
 

 
 

Current maturities of long-term debt and capital lease obligations
$
17.9

 
$
45.2

Accounts payable
44.5

 
50.5

Accrued expenses and other current liabilities
253.0

 
198.0

Accrued payroll and payroll-related expenses
63.1

 
85.7

Short-term deferred revenues
122.1

 
169.0

Total current liabilities
500.6

 
548.4

Long-term debt and capital lease obligations
2,673.6

 
2,575.5

Long-term deferred revenues
68.6

 
110.4

Deferred income taxes
85.6

 
56.7

Other liabilities
62.1

 
64.7

Total liabilities
3,390.5

 
3,355.7

 
 
 
 
Stockholders' Deficit:
 

 
 

Preferred stock, $0.01 par value: Authorized, 50.0 shares; issued and outstanding, none

 

Common stock, $0.01 par value: Authorized, 650.0 shares; issued, 160.3 and 160.3 shares, respectively; outstanding, 128.8 and 130.1 shares, respectively
1.6

 
1.6

Additional paid-in-capital
654.6

 
679.8

Retained earnings
933.6

 
753.0

Treasury stock, at cost: 31.6 and 30.2 shares, respectively
(1,909.6
)
 
(1,810.7
)
Accumulated other comprehensive income
5.1

 
11.5

Total CDK stockholders' deficit
(314.7
)
 
(364.8
)
Noncontrolling interest
15.1

 
17.5

Total stockholder's deficit
(299.6
)
 
(347.3
)
Total liabilities and stockholders' deficit
$
3,090.9

 
$
3,008.4



See notes to the condensed consolidated financial statements.

4


CDK Global, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
Three Months Ended
 
September 30,
 
2018
 
2017
Cash Flows from Operating Activities:

 

Net earnings
$
92.3

 
$
83.1

Adjustments to reconcile net earnings to cash flows provided by operating activities:


 


Depreciation and amortization
19.7

 
19.5

Deferred income taxes
7.8

 
2.3

Stock-based compensation expense
3.3

 
8.1

Other
1.4

 
1.5

Changes in operating assets and liabilities, net of effect from acquisitions of businesses:
 

 
 

Decrease (increase) in accounts receivable
12.2

 
(1.8
)
Decrease in other assets
13.0

 
19.8

Decrease in accounts payable
(9.5
)
 
(3.8
)
Decrease in accrued expenses and other liabilities
(0.2
)
 
(0.9
)
Net cash flows provided by operating activities
140.0

 
127.8

 
 
 
 
Cash Flows from Investing Activities:


 


Capital expenditures
(8.8
)
 
(10.3
)
Capitalized software
(10.1
)
 
(9.6
)
Acquisitions of businesses, net of cash acquired
(513.2
)
 

Contributions to investments
(10.0
)
 

Proceeds from investments

 
0.8

Net cash flows used in investing activities
(542.1
)
 
(19.1
)
 
 
 
 
Cash Flows from Financing Activities:


 


Proceeds from long-term debt
860.0

 

Repayments of long-term debt and capital lease obligations
(792.3
)
 
(11.6
)
Dividends paid to stockholders
(19.3
)
 
(19.7
)
Repurchases of common stock
(114.1
)
 
(14.6
)
Proceeds from exercises of stock options
1.0

 
2.6

Withholding tax payments for stock-based compensation awards
(14.9
)
 
(8.5
)
Dividend payments to noncontrolling owners
(4.4
)
 

Payments of deferred financing costs
(4.4
)
 
(0.4
)
Acquisition-related payments
(1.1
)
 
(0.9
)
Net cash flows used in financing activities
(89.5
)
 
(53.1
)
 
 
 
 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(3.5
)
 
6.9

 
 
 
 
Net change in cash, cash equivalents, and restricted cash
(495.1
)
 
62.5

 
 
 
 
Cash, cash equivalents, and restricted cash, beginning of period
817.1

 
734.0

 
 
 
 
Cash, cash equivalents, and restricted cash end of period
$
322.0

 
$
796.5

 
 
 
 
Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets
 
 
 
Cash and cash equivalents
$
312.8

 
$
788.6

Restricted cash in funds held for clients included in other current assets
9.2

 
7.9

Total cash, cash equivalents, and restricted cash
$
322.0

 
$
796.5

Supplemental Disclosure:
 
 
 
Cash paid for:
 
 
 
Income taxes and foreign withholding taxes, net of refunds
$
11.8

 
$
8.7

Interest
6.8

 
6.5


See notes to the condensed consolidated financial statements.

5



CDK Global, Inc.
Condensed Consolidated Statement of (Deficit) Equity
(In millions)
(Unaudited)

 
Common Stock
 
Additional Paid-in-Capital
 
Retained Earnings
 
Treasury Stock
 
Accumulated Other Comprehensive Income
 
Total CDK Stockholders' Deficit
 
Non-controlling Interest
 
Total Stockholders' Deficit
 
Shares Issued
 
Amount
 
 
 
 
 
 
 
Balance as of June 30, 2018
160.3

 
$
1.6

 
$
679.8

 
$
753.0

 
$
(1,810.7
)
 
$
11.5

 
$
(364.8
)
 
$
17.5

 
$
(347.3
)
Net earnings

 

 

 
90.3

 

 

 
90.3

 
2.0

 
92.3

Foreign currency translation adjustments

 

 

 

 

 
(6.0
)
 
(6.0
)
 

 
(6.0
)
Stock-based compensation expense and related dividend equivalents

 

 
3.9

 
(0.1
)
 

 

 
3.8

 

 
3.8

Common stock issued for the exercise and vesting of stock-based compensation awards, net

 

 
(29.1
)
 

 
15.2

 

 
(13.9
)
 

 
(13.9
)
Dividends paid to stockholders ($0.15 per share)

 

 

 
(19.3
)
 

 

 
(19.3
)
 

 
(19.3
)
Repurchases of common stock

 

 


 

 
(114.1
)
 

 
(114.1
)
 

 
(114.1
)
Dividend payments to noncontrolling owners

 

 

 

 

 

 

 
(4.4
)
 
(4.4
)
Cumulative impact of adopting ASC 606 (Note 5)

 

 

 
109.7

 

 
(0.4
)
 
109.3

 

 
109.3

Balance as of September 30, 2018
160.3

 
$
1.6

 
$
654.6

 
$
933.6

 
$
(1,909.6
)
 
$
5.1

 
$
(314.7
)
 
$
15.1

 
$
(299.6
)

 
Common Stock
 
Additional Paid-in-Capital
 
Retained Earnings
 
Treasury Stock
 
Accumulated Other Comprehensive Income
 
Total CDK Stockholders' Deficit
 
Non-controlling Interest
 
Total Stockholders' (Deficit)Equity
 
Shares Issued
 
Amount
 
 
 
 
 
 
 
Balance as of June 30, 2017
160.3

 
$
1.6

 
$
608.6

 
$
452.7

 
$
(1,144.7
)
 
$
8.0

 
$
(73.8
)
 
$
17.0

 
$
(56.8
)
Net earnings

 

 

 
81.3

 

 

 
81.3

 
1.8

 
83.1

Foreign currency translation adjustments

 

 

 

 

 
14.2

 
14.2

 

 
14.2

Stock-based compensation expense and related dividend equivalents

 

 
6.9

 
(0.1
)
 

 

 
6.8

 

 
6.8

Common stock issued for the exercise and vesting of stock-based compensation awards, net

 

 
(17.6
)
 

 
11.7

 

 
(5.9
)
 

 
(5.9
)
Dividends paid to stockholders ($0.14 per share)

 

 

 
(19.7
)
 

 

 
(19.7
)
 

 
(19.7
)
Repurchase of common stock

 

 
66.9

 

 
(81.5
)
 

 
(14.6
)
 

 
(14.6
)
Balance as of September 30, 2017
160.3

 
$
1.6

 
$
664.8

 
$
514.2

 
$
(1,214.5
)
 
$
22.2

 
$
(11.7
)
 
$
18.8

 
$
7.1

See notes to the condensed consolidated financial statements.


6


CDK Global, Inc.
Notes to the Condensed Consolidated Financial Statements
(Tabular amounts in millions, except per share amounts)
(Unaudited)
Note 1. Basis of Presentation
A. Description of Business
CDK Global, Inc. (the "Company" or "CDK") enables end-to-end automotive commerce across the globe. For over 40 years, the Company has served automotive retailers and original equipment manufacturers ("OEMs") by providing innovative solutions that allow them to better connect, manage, analyze, and grow their businesses. The Company's solutions automate and integrate all parts of the buying process, including the advertising, acquisition, sale, financing, insuring, parts supply, repair, and maintenance of vehicles, in more than 100 countries around the world, for approximately 28,000 retail locations and most OEMs.
The Company is organized into two main operating groups. The Company's first operating group is CDK North America which is comprised of two reportable segments, Retail Solutions North America ("RSNA") and Advertising North America ("ANA"). The second operating group, which is also a reportable segment, is CDK International ("CDKI"). In addition, the Company has an Other segment, the primary components of which are corporate allocations and other expenses not recorded in the segment results. Refer to Note 15 for further information.
B. Basis of Preparation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect assets, liabilities, revenues, and expenses that are reported in the accompanying financial statements and footnotes thereto. Actual results may differ from those estimates and assumptions.
The accompanying condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. Interim financial results are not necessarily indicative of financial results for a full year. The financial statements in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2018.
Certain prior year amounts have been reclassified to conform to current year presentation. See the discussion in Note 3, New Accounting Pronouncements for the impact of adopting Accounting Standards Update ("ASU") 2016-18 on the presentation of changes in restricted cash in the statement of cash flows.
Note 2. Summary of Significant Accounting Policies
A. Revenue Recognition and Deferred Costs
Effective July 1, 2018, the Company adopted the Financial Accounting Standard Board (“FASB”) Accounting Standards Update ("ASU") 2014-09, “Revenue from Contracts with Customers,” and related ASUs ("ASC 606") using the modified retrospective approach. The comparative information has not been restated and continues to be reported under the accounting standards in effect for the period presented. Refer to Note 5, Revenue for the required disclosures related to the impact of adopting ASC 606 and a discussion of the Company's updated policy related to revenue recognition and deferred costs. Refer to Note 2, Summary of Significant Accounting Policies in the Company's Annual Report on Form 10-K for the Company's revenue recognition and deferred costs policies prior to adoption of ASC 606.
B. Funds Receivable and Funds Held for Clients and Client Fund Obligations
Funds receivable and funds held for clients represent amounts received or expected to be received from clients in advance of performing titling and registration services on behalf of those clients. These amounts are classified within other current assets on the condensed consolidated balance sheets. The total amount due to remit for titling and registration obligations with the department of motor vehicles is recorded to client fund obligations which is classified as accrued expenses and other current liabilities on the condensed consolidated balance sheets. Funds receivable was $30.1 million and $33.1 million, and funds held for clients was $9.2 million and $12.7 million as of September 30, 2018 and June 30, 2018,

7


respectively. Client fund obligation was $39.3 million and $45.8 million as of September 30, 2018 and June 30, 2018, respectively.
C. Internal Use Software and Computer Software to be Sold, Leased, or Otherwise Marketed
The Company’s policy provides for the capitalization of external direct costs of materials and services associated with developing or obtaining internal use computer software. In addition, the Company’s policy also provides for the capitalization of certain payroll and payroll-related costs for employees who are directly associated with the internal use computer software projects. The amount of capitalizable payroll costs with respect to these employees is limited to the time directly spent on such projects. Costs associated with preliminary project stage activities, training, maintenance, and all other post-implementation stage activities are expensed as incurred. The Company also expenses internal costs related to minor upgrades and enhancements, as it is impracticable to separate these costs from normal maintenance activities. The Company amortizes internal use software typically over a three to five year life.
The Company's policy provides for the capitalization of certain costs of computer software to be sold, leased, or otherwise marketed. The Company's policy provides for the capitalization of all software production costs upon reaching technological feasibility for a specific product. Technological feasibility is attained when software products have a completed working model whose consistency with the overall product design has been confirmed by testing. Costs incurred prior to the establishment of technological feasibility are expensed as incurred. The establishment of technological feasibility requires judgment by management and in many instances is only attained a short time prior to the general release of the software. Maintenance-related costs are expensed as incurred.
Pursuant to this policy, the Company recognized expenses of $19.9 million and $38.0 million for the three months ended September 30, 2018 and 2017, respectively. These expenses were classified within cost of revenues on the condensed consolidated statements of operations. Additionally, we had cash flows used for qualifying capitalized software development cost of $10.1 million and $9.6 million for the three months ended September 30, 2018 and 2017, respectively.
D. Fair Value of Financial Instruments
The Company determines the fair value of financial instruments in accordance with accounting standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value in accordance with GAAP. Cash and cash equivalents, accounts receivable, other current assets, accounts payable, and other current liabilities are reflected in the condensed consolidated balance sheets at cost, which approximates fair value due to the short-term nature of these instruments. The carrying value of the Company's term loan facilities (as described in Note 9), including accrued interest, approximates fair value based on the Company's current estimated incremental borrowing rate for similar types of arrangements. The approximate aggregate fair value of the Company's senior notes as of September 30, 2018 was $1,863.1 million based on quoted market prices for the same or similar instruments and the carrying value was $1,850.0 million. The term loan facilities and senior notes are considered Level 2 fair value measurements in the fair value hierarchy.
Note 3. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other.” ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test, which required a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning after December 15, 2019. The Company adopted this standard on July 1, 2018 with no impact on our condensed consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, “Restricted Cash.” ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for financial statements issued for fiscal years, and interim periods beginning after December 15, 2017. The Company adopted ASU 2016-18 retrospectively during the first quarter of fiscal year 2019, and as a result included restricted cash with cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts presented on the Condensed Consolidated Statements of Cash Flows. Accordingly, the Condensed Consolidated Statement of Cash Flows has been revised to include restricted cash associated with funds held for clients as a component of cash, cash equivalents, and restricted cash.

8


As a result of the adoption, the Company adjusted the Condensed Consolidated Statements of Cash Flows from previously reported amounts as follows:
 
 
Three Months Ended September 30, 2017
 
 
Originally Reported
 
Adjustments due to ASU 2016-18
 
As Adjusted
Cash, cash equivalents, and restricted cash, beginning of period
 
$
726.1

 
$
7.9

 
$
734.0

Net cash flows provided by operating activities
 
127.8

 

 
127.8

Cash, cash equivalents, and restricted cash end of period
 
788.6

 
7.9

 
796.5


In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230).” ASU 2016-15 addresses eight specific cash flow issues where there is diversity in practice in how these certain cash receipts and cash payments are presented and classified in the statements of cash flows. ASU 2016-15 is effective for financial statements issued for fiscal years, and interim periods beginning after December 15, 2017. The adoption of ASU 2016-15 did not have a material impact on the Company's condensed consolidated statements of cash flows.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” Refer to Note 5, Revenue, for the required disclosures related to the impact of adopting ASC 606.
Recently Issued Accounting Pronouncements    
In August 2018, the FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," which aligns the accounting for implementation cost incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset. ASU 2018-15 is effective for fiscal years, and interim periods beginning after December 15, 2019, and can be applied either prospectively to implementation costs incurred after the date of adoption or retrospectively to all arrangements. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2018-18 on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." ASU 2016-02 requires that lessees recognize right-of-use assets and lease liabilities for any lease classified as either a finance or operating lease that is not considered short-term. The accounting applied by lessors is largely consistent with the existing lease standard. ASU 2016-02 is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2018. The Company has obligations under lease agreements for facilities and equipment, which are classified as operating leases under the existing lease standard. While the Company is still evaluating the impact that ASU 2016-02 will have on the consolidated results of operations, financial condition, or cash flows, the Company's financial statements will reflect an increase in both assets and liabilities due to the requirement to recognize right-of-use assets and lease liabilities on the consolidated balance sheets for its facility and equipment leases.

9


Note 4. Acquisitions
Fiscal 2019 Acquisition
ELEAD1ONE
On September 14, 2018, the Company acquired the equity interests of ELEAD1ONE. ELEAD1ONE’s automotive customer relationship management ("CRM") software and call center solutions enable interaction between sales, service and marketing operations to provide dealers with an integrated customer acquisition and retention platform. The acquisition was made pursuant to an equity purchase agreement, which contains customary representations, warranties, covenants, and indemnities by the sellers and the Company. The Company acquired all of the outstanding stock of ELEAD1ONE for an initial cash purchase price of $513.2 million, net of cash acquired of $7.0 million.
The purchase price for this acquisition was provisionally allocated to the assets acquired and liabilities assumed based on their estimated fair values as follows:
Cash and cash equivalents
$
7.0

Accounts receivable
19.1

Other current assets
3.4

Property, plant and equipment
13.4

Intangible assets
130.3

Accrued expenses and other current liabilities
(18.7
)
Short-term deferred revenues
(6.5
)
Capital lease obligations
(6.1
)
Total identifiable net assets
141.9

Goodwill
378.3

Net assets acquired
$
520.2


The intangible assets acquired primarily relate to customer lists, software, and trademarks, which will be amortized over a weighted-average useful life of 12.3 years. The goodwill resulting from this acquisition reflects expected synergies resulting from adding ELEAD1ONE products and processes to the Company's products and processes. The acquired goodwill is allocated to the RSNA reportable segment. The acquired goodwill is deductible for tax purposes.
Given the timing of the acquisition, the fair value estimate of assets acquired and liabilities assumed are pending completion of multiple elements, including gathering further information about the identification and completeness of all assets acquired and liabilities assumed, the finalization of an independent appraisal and valuations of fair value of the assets acquired and liabilities assumed and final review by the Company's management. The fair values of assets acquired and liabilities assumed were based on a preliminary valuation analysis and are considered provisional. These estimates and assumptions are subject to change within the one-year measurement period if additional information, which existed as of the acquisition date, becomes known to the Company. Accordingly, there could be material adjustments to the consolidated financial statements, including changes in our depreciation and amortization expense related to the valuation of property, plant and equipment and intangible assets acquired and their respective useful lives among other adjustments.
In October 2018, CDK began exploring the possibility of selling the airplane acquired as part of the ELEAD1ONE acquisition. As a result of the activities, CDK concluded the airplane met the criteria for held for sale in the second quarter of fiscal year 2019, and a completed sale is expected before the end of fiscal year 2019. The purchase price allocation for the airplane will be adjusted to reflect the fair value of the airplane less estimated costs to sell.
The results of operations for ELEAD1ONE have been included in the condensed consolidated results of operations from the date of acquisition. The pro forma effects of this acquisition are not significant to the Company's reported results for any period presented. Accordingly, no pro forma financial statements have been presented herein.
In addition to the acquisition, the Company entered into a joint venture agreement with the sellers. Under the terms of the joint venture agreement, the Company contributed $10.0 million to the venture at the ELEAD1ONE acquisition closing and has an obligation to contribute an additional $10.0 million in the future based on defined milestones in the joint venture agreement

10


and will own 50% of the joint venture. The Company’s contributions are expected to fund the initial operations of the joint venture. The Company does not have an obligation to fund the operations of the joint venture beyond this initial commitment. Under ASC 810 "Consolidation," the joint venture was determined to be a variable interest entity ("VIE"); however, the Company is not the primary beneficiary. As such, the joint venture will be accounted for as an equity method investment. The initial $10.0 million contribution was recorded as an investment and is included on the condensed consolidated balance sheets within other assets. The Company has assessed the maximum exposure to loss related to the joint venture to be the $20.0 million contributed and committed to be contributed. The Company has assessed the risk of loss equal to its maximum exposure to be remote and, accordingly, the Company has not recognized a liability associated with any portion of the maximum exposure to loss.
For the three months ended September 30, 2018, the Company incurred $1.2 million of costs in connection with the ELEAD1ONE acquisition and integration-related activities that were included within selling, general and administrative expenses, respectively.
Fiscal 2018 Acquisitions
Progressus Media LLC
On April 3, 2018, the Company acquired the membership interests of Progressus Media LLC ("Progressus"), a specialty provider of mobile advertising solutions for dealerships, agencies, and automotive marketing companies. The acquisition was made pursuant to a membership interest purchase agreement, which contains customary representations, warranties, covenants, and indemnities by the sellers and the Company. The acquisition date fair value of the total consideration transferred was $22.2 million which consists primarily of an initial cash price of $16.2 million, net of cash acquired, the fair value of the holdback provision of $0.3 million and the fair value of contingent consideration of $5.7 million, which is payable upon achievement of certain milestones and metrics over a three year period ending on March 31, 2021. Prior to the acquisition, a CDK officer had an existing advisory relationship with Progressus which entitled the individual to a portion of the proceeds from a sale of Progressus under a unit appreciation rights agreement. At the time of closing, $0.5 million of the total consideration transferred by CDK was paid to the officer to settle Progressus’ obligation under the terms of the officer’s unit appreciation rights agreement.
The fair value of acquired intangibles assets and other net assets was $8.7 million and $2.2 million, respectively. The excess of the acquisition consideration over the estimated fair value of the acquired net assets of $11.3 million was allocated to goodwill. The acquired net assets and goodwill are included in the RSNA segment. The intangible assets will be amortized over a weighted-average useful life of approximately 9 years. The goodwill recognized from this acquisition reflects expected synergies resulting from direct ownership of the products and processes, allowing greater flexibility for future product development. The acquired goodwill is deductible for tax purposes. As of June 30, 2018, the Company recorded $1.6 million of accrued expenses and other current liabilities and $4.4 million of other liabilities for the holdback and contingent consideration. The contingent consideration payments will be classified as financing activities on the statement of cash flows as the payments will occur more than three months after the acquisition date.
Dashboard Dealership Enterprises    
On October 20, 2017, the Company acquired the outstanding stock of Dashboard Dealership Enterprises ("DDE"), a provider of executive reporting solutions for auto dealers. The acquisition was made pursuant to a stock purchase agreement, which contains customary representations, warranties, covenants, and indemnities by the sellers and the Company. The acquisition date fair value of total consideration to be transferred was $21.3 million, which consists primarily of an initial cash price of $12.8 million, the fair value of the holdback provision of $1.9 million, and the fair value of contingent consideration of $6.6 million, which is payable upon achievement of certain milestones and metrics if achieved by December 31, 2018. As of June 30, 2018, the Company recorded $7.6 million of accrued expenses and other current liabilities and $0.9 million of other liabilities for the holdback and contingent consideration.
The fair value of acquired intangibles assets and liabilities assumed, including deferred tax liabilities, was $3.9 million and $1.6 million, respectively. The excess of the acquisition consideration over the estimated fair value of the acquired assets of $19.0 million was allocated to goodwill. The acquired assets and goodwill are included in the RSNA segment. The intangible assets will be amortized over a weighted-average useful life of approximately 8 years. The goodwill recognized from this acquisition reflects expected synergies resulting from direct ownership of the products and processes, allowing greater flexibility for future product development. The acquired goodwill is not deductible for tax purposes.

11


The result of operations for Progresses and DDE have been included in the condensed consolidated results of operation from the date of acquisition. The pro forma effects of these acquisitions are not significant to the Company's reported results for any period presented. Accordingly, no pro forma financial statements have been presented herein.
Note 5. Revenue
A. Adoption of ASC 606, "Revenue from Contracts with Customers"
On July 1, 2018, the Company adopted ASC 606 applying the modified retrospective method to all contracts that were not completed as of July 1, 2018. For contracts that were modified before the effective date, the Company reflected the aggregate effect of all modifications when identifying performance obligations and allocating transaction price in accordance with the available practical expedient, which did not have a material effect on the adjustment to accumulated deficit. Results for reporting periods beginning after July 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period.
Upon adoption, recognition of revenue and costs for on-site licenses and installation was changed from recognition ratably over the software license term to recognition upon installation of the software. Additionally, the Company began deferring costs to obtain and costs to fulfill the contract which for the Company consists primarily of direct sales commissions and implementation costs for service arrangements. The cumulative effects of the changes made to the consolidated July 1, 2018 balance sheet for the adoption of ASC 606 were as follows:
 
Balance at June 30, 2018
 
Adjustments due to ASC 606
 
Balance at
 July 1, 2018
Assets
 
 
 
 
 
Accounts receivable
$
374.6

 
$
2.6

 
$
377.2

Other current assets
188.3

 
(61.8
)
 
126.5

Other assets
165.5

 
112.8

 
278.3

Liabilities
 
 
 
 
 
Accrued expenses and other current liabilities
198.0

 
0.4

 
198.4

Short-term deferred revenues
169.0

 
(38.4
)
 
130.6

Long-term deferred revenues
110.4

 
(41.0
)
 
69.4

Deferred income taxes
56.7

 
23.2

 
79.9

Other liabilities
64.7

 
0.1

 
64.8

Stockholders' Deficit
 
 
 
 
 
Retained earnings
753.0

 
109.7

 
862.7

Accumulated other comprehensive income
11.5

 
(0.4
)
 
11.1

Impact on Consolidated Financial Statements
Adoption of ASC 606 had no impact to net cash (used in) or provided by operating, financing, or investing activities on the Company’s condensed consolidated statements of cash flows. The following tables summarize the effects of ASC 606 on selected unaudited line items within our condensed consolidated statement of operations and balance sheet:
 
Three Months Ended September 30, 2018
 
As Reported ASC 606
 
Impact of ASC 606
 
ASC 605
Revenues
554.5

 
(11.4
)
 
565.9

Cost of revenues
281.6

 
(8.6
)
 
290.2

Selling, general and administrative expenses
98.3

 
(0.3
)
 
98.6

Total expenses
397.1

 
(8.9
)
 
406.0

Operating earnings
157.4

 
(2.5
)
 
159.9


12


Earnings before income taxes
127.8

 
(2.5
)
 
130.3

Provision for income taxes
(35.5
)
 
0.7

 
(36.2
)
Net earnings
92.3

 
(1.8
)
 
94.1

Net earnings attributable to CDK
90.3

 
(1.8
)
 
92.1

Net earnings attributable to CDK per common share:
 
 
 
 
 
Basic
0.70

 
(0.01
)
 
0.71

Diluted
0.69

 
(0.02
)
 
0.71

 
September 30, 2018
 
As Reported ASC 606
 
Impact of ASC 606
 
ASC 605
Assets
 
 
 
 
 
Accounts receivable
383.6

 
(3.0
)
 
380.6

Other current assets
115.6

 
55.7

 
171.3

Other assets
285.5

 
(116.7
)
 
168.8

Liabilities
 
 
 
 
 
Accrued expenses and other current liabilities
253.0

 
(3.7
)
 
249.3

Short-term deferred revenues
122.1

 
32.3

 
154.4

Long-term deferred revenues
68.6

 
34.5

 
103.1

Deferred income taxes
85.6

 
(20.0
)
 
65.6

Other liabilities
62.1

 
(0.2
)
 
61.9

Stockholders' Deficit
 
 
 
 
 
Retained earnings
933.6

 
(107.9
)
 
825.7

Accumulated other comprehensive income
5.1

 
1.0

 
6.1


B. Revenue Recognition
The Company determines the amount of revenue to be recognized through the following steps:
Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the Company satisfies the performance obligations.
The majority of the Company’s revenue is generated from contracts with multiple performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company is required to estimate the total consideration expected to be received from contracts with customers. In limited circumstances, the consideration expected to be received may be variable based on the specific terms of the contract.
The Company rarely licenses or sells products or services on a standalone basis. As such, the Company is required to develop its best estimate of standalone selling price of each distinct good or service as the basis for allocating the total transaction price. The primary method used to estimate standalone selling price is the adjusted market assessment approach, with some product categories using the expected cost plus a margin approach. When establishing standalone selling price, the Company considers various factors which may include geographic region, current market trends, customer class, its market share and position, its general pricing practices for bundled products and services, and recent contract sales data.
The Company applies significant judgment in order to identify and determine the number of performance obligations, estimate the total transaction price, determine the allocation of the transaction price to each identified performance obligation, and determine the appropriate method and timing of revenue recognition.

13


Taxes collected from customers and remitted to governmental authorities are presented on a net basis; that is, such taxes are excluded from revenues.
The Company generates revenues from the following five categories: subscription, on-site licenses and installation, digital advertising, transaction services, and other. The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer.
Subscription. In the RSNA and CDKI segments, CDK provides software and technology solutions for automotive retailers and OEMs, which includes:
Dealer Management Systems (“DMSs”) and layered applications, where the software is hosted and provided on a software-as-a-service (“SaaS”) basis;
Interrelated services such as installation, initial training, and data updates;
Ongoing maintenance and support related to on-site software;
Websites, search marketing, and reputation management services (RSNA only); and
Hardware on a service basis, meaning no specific assets are identified or a substantive right of substitution exists, that provides the customer continuous access to hardware owned by the Company.
SaaS and other hosted service arrangements, which allow the customer continuous access to the software over the contract period without taking possession, are provided on a subscription basis. The Company has concluded that under its SaaS and hosted service arrangements, the customer obtains access to the Company’s software which resides and is maintained on its managed servers. The customer does not obtain the right to take possession of the software. As such, the Company has concluded that its SaaS and hosted services arrangements do not include a software license. Furthermore, the Company has concluded that while the support and maintenance and hosting services are capable of being distinct performance obligations, the obligations are not distinct within the context of the contract. In addition, as the support and maintenance and hosting services are provided over the same period and have the same pattern of transfer of control, the support and maintenance and hosting services are combined and recognized as a single performance obligation. The Company may provide new customers with interrelated setup activities such as installation, initial training and data updates that the Company must undertake to fulfill the contract. These are considered fulfillment activities that do not transfer the service to the customer. In addition to the core DMS software application, the customer may also contract for layered applications, which are each considered a distinct performance obligation.
Revenues for SaaS and other hosted service arrangements, are recognized ratably over the duration of the contract. The Company has determined its obligation under these arrangements is to stand ready to perform the underlying services as required by the customer. The customer receives the benefit of the services and the Company has the right to payment as the services are performed. A time-elapsed output method is used to measure progress as the Company transfers control evenly over the duration of the contract.
On-site licenses and installation. In the RSNA and CDKI segments, on-site software arrangements include a license of intellectual property as the customer has the contractual right to take possession of the software and the customer can either run the software on its own hardware or contract with another party unrelated to the Company to host the software. The customer receives the right to use the software license upon its installation for the term of the arrangement. As such, the Company has concluded that the software license is a distinct performance obligations and recognized the transaction price allocated to on-site software upon installation. The Company also provides maintenance and support of the software applications. Such maintenance and support services may include server and desktop support, bug fixes, and support resolving other issues a customer may encounter in utilizing the software. Revenue allocated to support and maintenance is generally recognized ratably over the contract period as customers simultaneously consume and receive benefits, given the support and maintenance comprise distinct performance obligations that are satisfied ratably over time. A time-elapsed output method is used to measure progress as the Company transfers control evenly over the duration of the contract.
Advertising services. In the ANA segment, the Company receives revenues from the placement of internet advertising for automotive retailers and OEMs. Advertising contracts generally have a one year term and contain a single performance obligation recognized over time as the services are performed. The Company reports advertising revenues on a gross basis, that is, the amounts billed to our customers are recorded as revenues and amounts paid to publishers are recorded as cost of revenues. The Company provides a single optimized advertising service to its customers and controls the advertising, fulfills the advertising services, and establishes pricing.
Transaction revenues. The Company receives fees per transaction for providing auto retailers interfaces with third parties to process credit reports, vehicle registrations, and automotive equity mining. Transaction revenues are variable based on the volume of transactions processed. For these transaction revenues, the Company has a right to payment as the transactions are performed in an amount that corresponds directly with the value to the customer. As such, the Company

14


recognizes transaction revenues as the services are rendered and in the amount to which it has the right to invoice. Transaction revenues for credit report processing and automotive equity mining are recorded in revenues gross of costs incurred when the Company is substantively and contractually responsible for providing the service, software, and/or connectivity to the customer, and controls the specified good or service before it is transferred to the customer. The Company recognizes vehicle registration revenues net of the state registration fee when it is acting as an agent and does not control the related goods and services before they are transferred to the customer.
Other. The Company provides consulting and professional services, including mobile advertising and marketing campaign solutions, and sells hardware such as laser printers, networking and telephony equipment, and related items. Consulting and professional services are either billed on a time and materials basis or on a fixed monthly, quarterly or semi-annual basis based on the amount of services contracted. Revenue from these services are recorded when the Company’s obligation is satisfied. Where the Company’s obligation is to provide continuous services throughout the contract period and the customer receives the benefit of those services as they are performed, the Company recognizes these services revenues over time using a time-elapsed output method as the Company believes the passage of time faithfully depicts the transfer of services to its customers. Where the professional service represents a single performance obligation, the customer receives the benefit of the services only upon their completion, and the Company does not have the right to payment as the services are performed, such services revenue are recognized upon completion.
The Company often sells hardware bundled with maintenance services and has concluded that these bundles include two distinct performance obligations. The first performance obligation is to transfer the hardware product and the second performance obligation is to provide maintenance on the hardware and its embedded software. As such, the transaction price allocated to the sold hardware is recognized upon delivery at which point the customer is able to direct the use of, and obtain substantially all of the remaining benefits of the hardware. Upon delivery of the hardware, the Company generally has the right to payment, the customer has legal title, physical possession of, and control of the hardware. The transaction price allocated to the maintenance of hardware and its embedded software is recognized ratably over the duration of the contract as the customer simultaneously consumes and receives the benefit of this maintenance. The Company has determined its obligation under these arrangements is to stand ready to perform the underlying services as required by the customer. A time-elapsed output method is used to measure progress as the Company transfers control evenly over the duration of the contract. Hardware maintenance is included in subscription revenues.
C. Disaggregation of Revenue
The following table presents segment revenues by revenue category:
 
Three Months Ended September 30, 2018
 
Retail Solutions North America
 
Advertising North America
 
CDK International
 
Total
Revenue:
 
 
 
 
 
 
 
Subscription
$
334.3

 
$

 
$
66.6

 
$
400.9

On-site license and installation
1.4

 

 
8.0

 
9.4

Transaction
41.0

 

 

 
41.0

Advertising

 
65.8

 

 
65.8

Other
33.4

 

 
4.0

 
37.4

Total revenue
$
410.1

 
$
65.8

 
$
78.6

 
$
554.5


D. Contract Balances
The Company receives payments from customers based upon contractual billing schedules. Payment terms can vary by contract but the period between invoicing and when payments are due is not significant. The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in unbilled receivables (included in accounts receivable), contract assets, or contract liabilities, (included in deferred revenue), on the Company’s condensed consolidated balance sheet. Unbilled receivables (included in accounts receivable) are recorded when the right to consideration becomes unconditional based only on the passage of time. Contract assets include amounts related to our contractual right to consideration for completed performance when the right to consideration is conditional. The Company records contract liabilities when cash payments are received or due in advance of performance.

15


The following table provides information about accounts receivables, contract assets, and contract liabilities from contracts with customers:
 
September 30, 2018
 
July 1, 2018
Accounts receivable (including unbilled receivables)
383.6

 
377.2

Short-term contract assets (included in other current assets)
31.0

 
28.0

Long-term contract assets (included in other assets)
23.3

 
26.0

Short-term contract liabilities (included in short-term deferred revenues)
122.1

 
130.6

Long-term contract liabilities (included in long-term deferred revenues)
68.6

 
69.4


During the three months ended September 30, 2018, the Company recognized $122.4 million in revenue which was included in deferred revenue in the accompanying condensed consolidated balance sheet as of July 1, 2018. During the three months ended September 30, 2018, $113.3 million was invoiced and removed from contract assets in the accompanying condensed consolidated balance sheet as of July 1, 2018. The Company had no asset impairment charges related to contract assets in the period.
The Company may occasionally recognize an adjustment in revenue in the current period for performance obligations partially or fully satisfied in the previous periods resulting from changes in estimates for the transaction price, including any changes to our assessment of whether an estimate of variable consideration is constrained. For the three months ended September 30, 2018, the impact on revenue recognized in the current period, from performance obligations partially or fully satisfied in the previous period, was not significant.
E. Remaining Performance Obligations
As of September 30, 2018, the Company had $2.9 billion of remaining performance obligations which represent contracted revenue that has not yet been recognized, including contracted revenue where the contracts original expected duration is one year or less. We expect to recognize approximately $840 million of the remaining performance obligation as revenue during the remainder of fiscal 2019, $820 million for the fiscal year ended June 30, 2020, $580 million for the fiscal year ended June 30, 2021, and $370 million for the fiscal year ended June 30, 2022. We expect to recognize the remaining $290 million as revenue thereafter. The remaining performance obligations exclude future transaction revenue where revenue is recognized as the services are rendered and in the amount to which the Company has the right to invoice.
F. Costs to Obtain and Fulfill a Contract
In connection with the adoption of ASC 606, the Company capitalizes certain contract acquisition costs consisting primarily of commissions incurred when contracts are signed. The Company does not capitalize commissions related to contracts with a duration of less than one year; such commissions are expensed within selling, general and administrative expenses when incurred. Costs to fulfill contracts are capitalized when such costs are direct, incremental, and related to transition or installation activities for hosted software solutions. Capitalized costs to fulfill primarily include travel and employee compensation and benefit related costs for the Company's implementation and training teams. Capitalized costs to obtain a contract and most costs to fulfill a contract are amortized over a period of five years which represents the expected period of benefit of these costs. In instances where the contract term is significantly less than five years, costs to fulfill are amortized over the contract term which the Company believes best reflects the period of benefit of these costs.
As of July 1, 2018, the company capitalized $193.4 million in contract acquisition and fulfillment costs. Management expects that incremental commission fees incurred as a result of obtaining contracts and fulfillment costs are recoverable and, therefore, the Company recognized a deferred cost asset in the amount of $194.8 million as of September 30, 2018. During the three months ended September 30, 2018, $19.5 million of cost amortization was recognized and there were no significant impairment losses.
Note 6. Restructuring
During the fiscal year ended June 30, 2015 ("fiscal 2015"), the Company initiated a business transformation plan intended to increase operating efficiency and improve the Company's cost structure within its global operations through its completion in fiscal 2019. The Company estimated cost to execute the plan through fiscal 2019 to be approximately $100.0 million.

16


Restructuring expenses associated with the business transformation plan included employee-related costs, which represent severance and other termination-related benefits calculated based on long-standing benefit practices and local statutory requirements, and contract termination costs, which include costs to terminate facility leases. The Company recognized $17.2 million and $6.5 million of restructuring expenses for the three months ended September 30, 2018 and 2017, respectively. Since the inception of the business transformation plan in the fourth quarter of fiscal 2015, the Company has recognized cumulative restructuring expenses of $79.1 million. Restructuring expenses are presented separately on the condensed consolidated statements of operations. Restructuring expenses are recorded in the Other segment, as these initiatives are predominantly centrally directed and are not included in internal measures of segment operating performance.
Accruals for restructuring expenses were included within accrued expenses and other current liabilities on the condensed consolidated balance sheets as of September 30, 2018 and June 30, 2018. The following table summarizes the activity for the restructuring accrual for the three months ended September 30, 2018:
 
Employee-Related Costs
 
Contract Termination Costs
 
Total Costs
Balance as of June 30, 2018
$
4.4

 
$
0.8

 
$
5.2

Charges
17.2

 

 
17.2

Cash payments
(11.9
)
 
(0.1
)
 
(12.0
)
Balance as of September 30, 2018
$
9.7

 
$
0.7

 
$
10.4



Note 7. Earnings per Share
The numerator for both basic and diluted earnings per share is net earnings attributable to CDK. The denominator for basic and diluted earnings per share is based upon the weighted-average number of shares of the Company's common stock outstanding during the reporting periods. Diluted earnings per share also reflects the dilutive effect of unexercised in-the-money stock options and unvested restricted stock.
Holders of certain stock-based compensation awards are eligible to receive dividends as described in Note 10. Net earnings allocated to participating securities were not significant for the three months ended September 30, 2018 and 2017.
The following table summarizes the components of basic and diluted earnings per share:
 
Three Months Ended
 
September 30,

2018

2017
Net earnings attributable to CDK
$
90.3

 
$
81.3







Weighted-average shares outstanding:





Basic
129.6


140.1

Effect of employee stock options
0.3


0.4

Effect of employee restricted stock
0.5


0.9

Diluted
130.4


141.4







Basic earnings attributable to CDK per share
$
0.70


$
0.58

Diluted earnings attributable to CDK per share
$
0.69


$
0.57


The weighted-average number of shares outstanding used in the calculation of diluted earnings per share does not include the effect of the following anti-dilutive securities.
 
Three Months Ended
 
September 30,
 
2018
 
2017
Stock-based awards
0.2

 
0.4



17



Note 8. Goodwill and Intangible Assets, Net
In first the quarter fiscal 2019, the Company revised segment reporting to reclassify the assets and liabilities and operating results of the April 2018 acquisition of Progressus Media LLC to the RSNA segment. The results were previously reported in the ANA segment. Goodwill has been restated as of June 30, 2018 to reflect the reclassification of the assets and liabilities for this acquisition.
Changes in goodwill for the three months ended September 30, 2018 were as follows:
 
Retail Solutions North America
 
Advertising North America
 
CDK International
 
Total
Balance as of June 30, 2018
$
634.6

 
$
214.3

 
$
368.3

 
$
1,217.2

Additions (Note 4)
378.3

 

 

 
378.3

Currency translation adjustments
0.4

 

 
(3.5
)
 
(3.1
)
Balance as of September 30, 2018
$
1,013.3

 
$
214.3

 
$
364.8

 
$
1,592.4

The Company performs its annual impairment testing for goodwill balances as of April 1 each year; however, the Company may test for impairment between annual tests if an event occurs or circumstances change that indicate that the fair value of the reporting unit may fall below its carrying amount. During fiscal 2018, the ANA segment and reporting unit was at risk of failing step one of the goodwill impairment test. The impairment test indicated that the fair value of the reporting unit exceeded the carrying value by less than 10%. Declines in advertising revenue from certain OEM contracts and changes in revenue mix were the primary drivers of the decline in fair value. In the first quarter of fiscal 2019, ANA updated its estimates regarding operating results and growth rate due to continued changes to the business primarily related to certain OEM contracts. Therefore, the Company determined that the carrying amount of goodwill should be evaluated for impairment at September 30, 2018. The impairment test indicated that the fair value of the ANA reporting unit exceeds its carrying value by approximately 7% which is lower than the fourth quarter of fiscal 2018. No goodwill impairment was recorded. The valuation of the reporting unit requires significant judgment and is highly sensitive to underlying assumptions including forecasted revenue growth and operating earnings and discount rates. Further declines in advertising revenue or changes in advertising revenue mix could negatively impact the estimated fair value and result in an impairment for the reporting unit which could be material to consolidated earnings. Details on the fair value computation are included in our Annual Report on Form 10-K in the Critical Accounting Policies section of Management's Discussion and Analysis of Financial Condition and Results of Operations.
Components of intangible assets, net were as follows:
 
September 30, 2018
 
June 30, 2018
 
Original Cost
 
Accumulated Amortization
 
Intangible Assets, net
 
Original Cost
 
Accumulated Amortization
 
Intangible Assets, net
Software
$
260.9

 
$
(129.6
)
 
$
131.3

 
$
208.6

 
$
(124.3
)
 
$
84.3

Customer lists
262.5

 
(144.2
)
 
118.3

 
181.3

 
(142.4
)
 
38.9

Trademarks
32.2

 
(24.7
)
 
7.5

 
25.0

 
(24.6
)
 
0.4

Other intangibles
6.3

 
(3.6
)
 
2.7

 
6.9

 
(4.0
)
 
2.9

 
$
561.9

 
$
(302.1
)
 
$
259.8

 
$
421.8

 
$
(295.3
)
 
$
126.5


Other intangibles primarily consist of purchased rights, covenants, and patents (acquired directly or through acquisitions). All of the intangible assets have finite lives and, as such, are subject to amortization. The weighted-average remaining useful life of intangible assets is 8 years (5 years for software and software licenses, 12 years for customer lists, and 7 years for trademarks). Amortization of intangible assets was $7.1 million and $8.0 million for the three months ended September 30, 2018 and 2017, respectively.

18



Estimated amortization expenses of the Company's existing intangible assets as of September 30, 2018 were as follows:
 
Amount
Nine months ending June 30, 2019
$
31.7

Twelve months ending June 30, 2020
46.0

Twelve months ending June 30, 2021
41.8

Twelve months ending June 30, 2022
34.0

Twelve months ending June 30, 2023
18.9

Twelve months ending June 30, 2024
15.1

Thereafter
72.3

 
$
259.8



Note 9. Debt
Debt was comprised of the following:
 
September 30, 2018
 
June 30, 2018
Revolving credit facility
$
260.0

 
$

Three year term loan facility, due 2021
300.0

 

Five year term loan facility, due 2023
300.0

 

2019 term loan facility

 
203.1

2020 term loan facility

 
218.8

2021 term loan facility

 
370.0

3.30% senior notes, due 2019
250.0

 
250.0

4.50% senior notes, due 2024
500.0

 
500.0

5.875% senior notes, due 2026
500.0

 
500.0

4.875% senior notes, due 2027
600.0

 
600.0

Capital lease obligations
6.1

 
0.2

Unamortized debt financing costs
(24.6
)
 
(21.4
)
Total debt and capital lease obligations
2,691.5

 
2,620.7

Current maturities of long-term debt and capital lease obligations
17.9

 
45.2

Total long-term debt and capital lease obligations
$
2,673.6

 
$
2,575.5


Revolving Credit Facility
On August 17, 2018, the Company entered into a five-year senior unsecured revolving credit facility. The credit facility replaced the previous unsecured revolving credit facility agreement, which was undrawn as of June 30, 2018. The revolving credit facility provides up to $750.0 million of borrowing capacity and includes a sub-limit of up to $100.0 million for loans in Euro, Pound Sterling, and, if approved by the revolving lenders, other currencies. The Company drew $260.0 million of the $750.0