CANNAE HOLDINGS, INC. For a description of our business, including descriptions of segments and recent business trends, see the discussion under Business in Item 1 of Part I of this Annual Report, which is incorporated by reference into this Part II, Item 7 of this Annual Report. The following discussion should also be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in Item 8 of Part II of this Annual Report.
Recent Developments
Ceridian
OnMay 20, 2021 , we completed the sale of 2.0 million shares of common stock of Ceridian pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended ("Rule 144"). In connection with the sale, we received proceeds of$175.0 million . InSeptember 2021 , we completed the sale of 1.0 million shares of common stock of Ceridian for proceeds of$100.0 million pursuant to the terms of a covered call agreement. OnOctober 21, 2021 , we completed the sale of an additional 1.0 million shares of common stock of Ceridian pursuant to Rule 144. In connection with the sale, we received proceeds of$125.8 million inOctober 2021 .
As of
InJanuary 2022 , we completed the sales of an additional 2.0 million shares of common stock of Ceridian pursuant to Rule 144. In connection with the sales, we received proceeds of$173.3 million inJanuary 2022 . As of the date of this Annual Report, we own 8.0 million shares of Ceridian common stock which represents approximately 5.3% of the outstanding common stock of Ceridian as of the date of this Annual Report.
Dun & Bradstreet
OnJanuary 8, 2021 , D&B completed its acquisition ofBisnode Business Information Group AB (the "Bisnode Acquisition"). In connection with theBisnode Acquisition, D&B issued an additional 6.2 million shares of its common stock, which resulted in a decrease in our ownership interest in D&B from approximately 18.1% to approximately 17.7% and a non-cash gain of$18.6 million in the year endedDecember 31, 2021 . OnJune 28, 2021 , we completed the sale of an aggregate of 8.5 million shares of common stock of D&B (the "D&B Share Sale") pursuant to Rule 144. In connection with the D&B Share Sale, we received aggregate proceeds of$186.0 million and recorded a gain of$111.1 million . As a result of the D&B Share Sale, we now own 68.1 million shares of D&B, which represents approximately 15.8% of its outstanding common stock as ofDecember 31, 2021 . OnFebruary 15, 2022 , we received 21.8 million shares of D&B as partial consideration for our sale of Optimal Blue. Subsequently, we transferred 1.6 million of the shares received to our Manager as part of our carried interest paid related to the sale. See discussion under the header Optimal Blue below for further information. Following the receipt of these additional shares of D&B and payment of carried interest, we own 88.3 million shares of D&B which represents approximately 20.5% of its outstanding common stock.
Alight
OnJanuary 25, 2021 ,Foley Trasimene Acquisition Corp. ("FTAC") entered into a business combination agreement with predecessor of Alight, a leading cloud-based provider of integrated digital human capital and business solutions, as amended and restatedApril 29, 2021 , by and among FTAC, Alight and other parties thereto (the "FTAC Alight Business Combination"). Also onJanuary 25, 2021 , Cannae entered into an agreement to purchase 25 million shares of Alight for$250.0 million as part of a private investment in public equity ("PIPE") raised in conjunction with the FTAC Alight Business Combination (the "Alight Subscription Agreement"). During the quarter endedJune 30, 2021 , Cannae funded the following: (a)$250.0 million pursuant to the Alight Subscription Agreement, (b)$150.0 million pursuant to a previously announced forward purchase agreement with FTAC (the "FTAC FPA") entered into onMay 8, 2020 and (c)$52.4 million for the purchase of 5.2 million shares of FTAC on the open market (the "Purchased Shares"). InJuly 2021 , we sold 1.0 million of the Purchased Shares for aggregate proceeds of$10.3 million . OnJuly 2, 2021 , FTAC completed the FTAC Alight Business Combination in accordance with the relevant business combination agreement. The combined company operates as Alight and is traded on the NYSE under the symbol ALIT. The FTAC Alight Business Combination was funded with the cash held in trust at FTAC, forward purchase commitments, PIPE commitments and equity of Alight. 26
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For Cannae's total net investment in Alight of$446.6 million , inclusive of our previous$4.5 million investment in the sponsor of FTAC (the "FTAC Sponsor") and net of the Purchased Shares sold, Cannae received 50,390,129 common shares and 5,000,000 warrants of Alight (the "Alight Warrants") and 3,026,666 LLC units of Alight's operating subsidiary with substantially the same terms as Alight's public warrants and indirectly held by the Company through its interest in the FTAC Sponsor. In connection with the investment in the PIPE and deal syndication, Cannae earned$6.1 million of fees which were deducted from the basis of our investment in Alight. OnNovember 29, 2021 , Alight announced the redemption of all of its outstanding warrants to purchase shares of the Alight's Class A common stock. In accordance with the warrant agreement, upon delivery of the notice of redemption, the warrants could be exercised either for cash or on a cashless basis in exchange for common shares of Alight. We elected the cashless exercise and inDecember 2021 we received 1,300,000 shares of Alight's Class A Common Stock directly and 786,933 shares indirectly through our ownership interest in the FTAC Sponsor. As ofDecember 31, 2021 , Cannae directly and indirectly through the FTAC Sponsor owns 52.5 million shares of Alight which represented approximately 10.0% of its outstanding common equity. We account for our direct ownership interest in common equity of Alight and ownership in the FTAC Sponsor as equity method investments.
Paysafe
OnMarch 30, 2021 ,Foley Trasimene Acquisition Corp. II ("FTAC II") completed its previously announced merger with Paysafe Limited ("Paysafe"), a leading integrated payments platform (the "FTAC II Paysafe Merger"), in accordance with the agreement and plan of merger datedDecember 7, 2020 . The combined company operates as Paysafe and is traded on the NYSE under the symbol PSFE. The FTAC II Paysafe Merger was funded with the cash held in trust at FTAC II, forward purchase commitments, PIPE commitments and equity of Paysafe. In conjunction with the FTAC II Paysafe Merger, Cannae funded: (a)$350.0 million as part of our subscription to the PIPE (the "Paysafe Subscription Agreement" and collectively with the Alight Subscription Agreement the "Subscription Agreements") and (b)$150.0 million as part of our forward purchase agreement with FTAC II entered into onJuly 31, 2020 (the "FTAC IIFPA "). For Cannae's total investment in Paysafe of$504.7 million , inclusive of our previous investment in the sponsor of FTAC II ("FTAC II Sponsor"), Cannae received 54,294,395 common shares and 5,000,000 Paysafe warrants and 3,134,067 LLC units of Paysafe's operating subsidiary with substantially the same terms as Paysafe's public warrants (collectively, the "Paysafe Warrants"). In connection with the investment in the PIPE, Paysafe paid Cannae a fee of$5.6 million as described in the agreement and plan of merger datedDecember 7, 2020 , which was deducted from the basis of our investment. InSeptember 2021 , the sponsor of FTAC II distributed all of its interest in Paysafe to its limited partners. As a result, Cannae now directly holds all of its interest in the common equity of Paysafe and Paysafe Warrants.
In
As of
Optimal Blue
OnFebruary 15, 2022 , we completed the disposition of our ownership interests in Optimal Blue to Black Knight, Inc. ("Black Knight") and its subsidiaries (the "Optimal Blue Disposition"), pursuant to a purchase agreement dated as ofFebruary 15, 2022 , by and among Black Knight, Cannae, and Optimal Blue, among others. In conjunction with the Optimal Blue Disposition, Cannae received aggregate consideration of (y)$144.5 million in cash and (z) 21.8 million shares of common stock, par value$0.0001 per share, of Dun & Bradstreet. Following the consummation of the Optimal Blue Disposition, Cannae no longer has any ownership interest in Optimal Blue.
Forward Purchases of Equity of Special Purpose Acquisition Companies
OnFebruary 25, 2021 , we entered into a forward purchase agreement (the "AAIFPA ") with AAI, a special purpose acquisition company ("SPAC") whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities (the "AAI Initial Business Combination"). AAI is co-sponsored by entities affiliated with the chairman of our Board of Directors ("Board"), William P. Foley II. Additionally, Cannae invested$1.6 million in the sponsor of AAI for a 10% indirect economic interest in the founder shares and warrants held by the sponsor. The AAI FPA was contingent upon the closing of the AAI Initial Business Combination. 27
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OnMay 10, 2021 , AAI entered into a Business Combination Agreement (the "WIL Business Combination Agreement") by and among AAI,Wave Merger Sub Limited , an exempted company incorporated inBermuda and a direct, wholly owned subsidiary of AAI ("Merger Sub"), andWynn Interactive Ltd. , an exempted company incorporated inBermuda ("WIL"). In connection with the signing of the WIL Business Combination Agreement, we and AAI agreed to terminate the AAI FPA, and we entered into a backstop facility agreement (the "WIL Backstop Agreement") whereby we agreed, subject to the other terms and conditions included therein, to subscribe for AAI Class A Ordinary Shares in order to fund redemptions by shareholders of AAI in connection with the WIL Business Combination Agreement in an amount of up to$690.0 million (the "WIL Backstop Subscription"), in consideration for a placement fee of$3.5 million . OnNovember 11, 2021 , we and AAI entered into a mutual termination agreement (the "Mutual Termination Agreement") to terminate the WIL Business Combination Agreement. In conjunction with the Mutual Termination Agreement, AAI received$5.0 million as reimbursement for out-of-pocket expenses. As a result of the termination of the WIL Business Combination Agreement, the Backstop Agreement and the Amended and Restated Sponsor Agreement were automatically terminated. OnFebruary 25, 2021 , we entered into a forward purchase agreement (the "AAIIFPA " and collectively with the FTAC FPA and the FTAC II FPA, the "Forward Purchase Agreements") with AAII, a SPAC whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities (the "AAII Initial Business Combination"). AAII is co-sponsored by entities affiliated with William P. Foley II. Under the AAII FPA, we agreed to purchase an aggregate of 12,500,000 shares of AAII's Class A common stock, plus an aggregate of 3,125,000 redeemable warrants to purchase one share of AAII's Class A common stock at$11.50 per share for an aggregate purchase price of$125.0 million in a private placement to occur concurrently with the closing of the AAII Initial Business Combination. Additionally, Cannae directly invested$29.6 million for a 20% indirect economic interest in the founder shares held by the sponsor and a direct interest in 19,733,333 private placement warrants of AAII (the "AAII Warrants") at the initial public offering. The AAII FPA is contingent upon the closing of the AAII Initial Business Combination. OnJune 5, 2020 , we entered into a forward purchase agreement (the "Trebia FPA") withTrebia Acquisition Corp. ("Trebia"), a SPAC incorporated as aCayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the "Trebia Initial Business Combination"). Trebia is co-sponsored by entities affiliated with the chairman and a member of our Board, William P. Foley II andFrank R. Martire , respectively. OnJune 28, 2021 , Trebia entered into a Business Combination Agreement by and among Trebia,S1 Holdco LLC , aDelaware limited liability company ("S1Holdco "),System1 SS Protect Holdings, Inc. , aDelaware corporation ("Protected"), and the other parties named therein (the "Trebia S1 Business Combination Agreement"). The Trebia S1 Business Combination Agreement provides for, among other things, the consummation of certain transactions whereby each of (i)System1, LLC , aDelaware limited liability company and the current operating subsidiary of S1Holdco , and (ii)Protected.net Group Limited , a private limited company organized under the laws of theUnited Kingdom and the current operating subsidiary of Protected, will become subsidiaries of Trebia (the "Trebia S1 Business Combination"). In connection with the signing of the Trebia S1 Business Combination Agreement, we and Trebia terminated the Trebia FPA, and we entered into a backstop facility agreement (the "S1 Backstop Agreement" and together with the WIL Backstop Agreement, the "Backstop Agreements") whereby we agreed, subject to the other terms and conditions included therein, to subscribe for Trebia Class A Common Stock in order to fund redemptions by shareholders of Trebia in connection with the Business Combination, in an amount of up to$200.0 million (the "S1 Backstop Subscription"). In connection with Cannae's entry into the S1 Backstop Agreement, the sponsors of Trebia have agreed to forfeit up to 1,275,510 Trebia Class B Ordinary Shares (and Trebia has agreed to issue to Cannae a number of shares of Trebia Class A Common Stock equal to such forfeiture) as consideration in the event that the S1 Backstop Subscription is drawn due to redemptions. OnJanuary 10, 2022 , we entered into an amendment to the S1 Backstop Agreement pursuant to which our commitment to fund redemptions increased from$200.0 million to$250.0 million . Also onJanuary 10, 2022 , we entered into an amended and restated sponsor agreement with the sponsors of Trebia pursuant to which Trebia will forfeit up to an additional 1,352,941 Class B Ordinary Shares to Trebia, and Trebia will issue to Cannae an equal number of shares of Trebia Class A Common Stock in connection with, and based upon the extent of, Cannae's obligation with respect to the increase in our backstop commitment. OnJanuary 27, 2022 , the Trebia System1 Business Combination was completed and System1 merged with and into Trebia, with System1, Inc. ("System1") as the surviving corporation. Beginning onJanuary 28, 2022 , System1's common stock began trading on the NYSE under the ticker symbol "SST." Upon the completion of the Trebia System1 Business Combination, Cannae has invested a total of$248.3 million in System1 and directly and indirectly owns 28.2 million of System1 common shares and 1.2 million warrants to purchase System1 common shares. As a result, Cannae has an approximate 26% ownership of System1. 28
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QOMPLX
OnMarch 1, 2021 , Tailwind Acquisition Corp. ("Tailwind") entered into a business combination agreement to merge withQOMPLX, Inc. ("QOMPLX") (the "Tailwind QOMPLX Merger"). In conjunction with the Tailwind QOMPLX Merger, Cannae entered into an agreement to purchase 4.6 million shares of common stock of the combined company for$37.5 million as part of a subscription to the PIPE. Additionally, inMarch 2021 , Cannae funded a convertible note to QOMPLX for$12.5 million that matures onMarch 3, 2022 (the "QOMPLX Note"). During the quarter endedSeptember 30, 2021 , Cannae funded an additional$6.0 million , which was added to the existing QOMPLX Note. OnAugust 17, 2021 , QOMPLX and Tailwind mutually agreed to terminate the Tailwind QOMPLX Merger citing market conditions, which prevented certain closing conditions from being satisfied. The termination of the Tailwind QOMPLX Merger also terminated the Tailwind Subscription Agreement. The termination had no effect on the QOMPLX Note. InNovember 2021 , QOMPLX converted all of its outstanding convertible notes into preferred stock and redeemed$7.5 million of such preferred stock held by Cannae. As a result, Cannae holds approximately 14.5 million shares of preferred stock of QOMPLX representing approximately 19.3% of QOMPLX's outstanding equity.
Restaurant Group
During the year endedDecember 31, 2021 , we commenced a plan to sell or dispose of the assets ofLegendary Baking Holdings I, LLC ("Legendary Baking") andVIBSQ Holdco, LLC ("VIBSQ") and their subsidiaries. OnJune 24, 2021 , we entered into a membership purchase agreement for the sale of certain net assets of VIBSQ and its subsidiaries for$13.5 million . OnJuly 30, 2021 , we closed on the sale of such VIBSQ net assets and recorded a loss of$9.4 million , which is included in Recognized gains (losses), net on the Consolidated Statement of Operations for the year endedDecember 31, 2021 . OnAugust 10, 2021 , we entered into an asset purchase agreement for the sale of certain net assets of Legendary Baking and its subsidiaries for$6.1 million and we recorded a loss of$7.0 million as a result of classifying Legendary Baking as held for sale. OnSeptember 7, 2021 , we closed on the sale and recorded an additional loss of$3.9 million . Both losses are included in Recognized gains (losses), net on the Consolidated Statement of Operations in the year endedDecember 31, 2021 .
Subsequent to the transactions, other than the winding down of certain immaterial retained assets and liabilities of Legendary Baking and VIBSQ, we have no further material involvement in Legendary Baking or VIBSQ.
Other Developments
Our Board authorized the 2021 Repurchase Program, effectiveFebruary 26, 2021 , under which we may repurchase up to 10 million shares of our common stock. Purchases may be made from time to time in the open market at prevailing prices or in privately negotiated transactions throughFebruary 26, 2024 . The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or terminated at any time. Pursuant to the 2019 Repurchase Program and the 2021 Repurchase Program, we repurchased 4,828,168 shares of CNNE common stock during the year endedDecember 31, 2021 for approximately$167.3 million in the aggregate, or an average of$34.65 per share. OnMarch 31, 2021 , we closed on a$32.0 million acquisition of an ownership interest inSightline Payments LLC ("Sightline"), a fintech company that enables cashless, mobile and omnichannel payment solutions for the gaming, lottery, sports betting, entertainment and hospitality businesses. OnAugust 16, 2021 , we acquired an additional$240.0 million of ownership interest in Sightline. Our total ownership interest represents 32.6% of the outstanding membership interests in Sightline and is accounted for under the equity method of accounting. During the year endedDecember 31, 2021 , we received distributions of$283.2 million from our joint venture (the "Senator JV") with affiliates ofSenator Investment Group, LP . In 2020, we received an aggregate of$198.6 million of distributions from the Senator JV. Of the distributions received in 2020,$25.8 million represented the return of our deposit previously held by the Senator JV and the remainder resulted from the Senator JV's sales ofCoreLogic, Inc. Using the cumulative earnings approach,$126.4 million of the distributions resulting from the Senator JV in the year endedDecember 31, 2020 are considered a return on our investment in the Senator JV and are classified as cash inflows from operating activities in our Consolidated Statement of Cash Flows for the year endedDecember 31, 2020 . We have no further material ownership interest in the Senator JV. OnMay 21, 2021 , Ceska zbrojovka Group SE ("CZG") acquired 100% of the outstanding equity ofColt Holdings, LLC ("Colt"). In conjunction with the transaction, we received$37.3 million for our holdings of Colt corporate debt securities, including accrued interest thereon,$1.4 million for our equity in Colt and received$0.4 million of cash and$3.6 million of CZG equity securities for our holdings of Colt equity interests inOctober 2021 . We recorded a gain of$20.3 million on the transaction, inclusive of$10.9 million (net of$2.9 million of deferred taxes) of gains reclassified from other comprehensive earnings. We have the opportunity to receive additional equity securities of CZG contingent on future operating results of Colt. Subsequent to the transaction, we have no further ownership interest in Colt debt or equity securities. 29
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In the year endedDecember 31, 2021 , we commenced a plan to sellRock Creek Idaho Holdings, LLC ("RC"). OnAugust 10, 2021 , we entered into an asset purchase agreement for the sale of certain net assets of RC and its subsidiaries for$44.2 million , consisting of cash of$9.2 million , net of transaction costs, and a note receivable of$35.0 million . We recorded a gain of$18.9 million as a result of the sale, which is included in Recognized gains (losses), net on the Consolidated Statement of Operations for the year endedDecember 31, 2021 . The chairman of our Board, William P. Foley II is a partner in the joint venture that purchased RC. The Company collected the full amount of the note receivable, plus interest, prior toDecember 31, 2021 . Subsequent to the transaction, we have no further involvement in RC. OnOctober 14, 2021 , Capital One Financial Corporation announced that it entered into a definitive agreement to purchaseTriple Tree, LLC ("Triple Tree"), the investment banking subsidiary ofTriple Tree Holdings, LLC ("TTH"). Cannae owns a 24.6% fully diluted interest in TTH. As a result of the sale, the two businesses comprising TTH became two separate organizations. TripleTree joined the Capital Markets group ofCapital One Commercial Bank as a wholly owned subsidiary, operating under the current TripleTree brand.TTCP Management Services, LLC , continues as an independent,Minneapolis -based principal investor focused on healthcare technology and services. The transaction closed inNovember 2021 and we received$35.2 million of distributions from TTH related to the sale. InJanuary 2022 , we received an additional distribution of$14.0 million .
Related Party Transactions
Our financial statements for all years presented reflect transactions with FNF and our Manager. See Note R to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for further discussion.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance withU.S. GAAP. See Note A to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for discussion of all our significant accounting policies. The accounting policies and estimates described below are those we consider critical in preparing our Consolidated Financial Statements. Management is required to make estimates and assumptions that can affect the reported amounts of assets and liabilities and disclosures with respect to contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. Investments in unconsolidated affiliates - applicability ofFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 323. Investments in unconsolidated affiliates are recorded using the equity method of accounting. If an investor does not possess a controlling financial interest over an investee but has the ability to exercise significant influence over the investee's operating and financial policies, the investor must account for such an investment under the equity method of accounting. For investments in common stock or in-substance common stock of an investee, which an investor does not control, the general but rebuttable presumption exists that an ownership of greater than 20% of the outstanding equity of an investee indicates the investor has significant influence. For investments in partnerships and similar entities for which an investor does not control, equity method of accounting for the investment is generally required unless the investor's interest is so minor that the investor has virtually no influence. In the ordinary course of our business, we make investments in companies that provide us with varying degrees of control and influence over the underlying investees through our level of ownership of the outstanding equity of the investee, participation in management of the investee, participation on the board of directors of investees, and/or legal agreements with other investors with control implications. As a result, our analysis of the appropriate accounting for our various ownership interests often requires judgment regarding the level of control, significant influence or lack thereof the Company has over each investee. If we are required to account at fair value for certain of our ownership interests in which we have concluded the Company has significant influence resulting in the application of the equity method of accounting, the impact of such change could significantly impact the Company's Consolidated Financial Statements. For example, as ofMarch 31, 2020 , our voting agreement with Ceridian was terminated and, as a result, we are no longer able to exert influence over the composition and quantity of Ceridian's board of directors. In combination with the reduction in our ownership of Ceridian resulting from the sale of shares inFebruary 2020 , we no longer exercise significant influence over Ceridian. As ofMarch 31, 2020 , we began accounting for our investment in Ceridian at fair value pursuant to the investment in equity security guidance of ASC 321. The change resulted in the revaluation of our investment in Ceridian to its fair value of$993.4 million as ofMarch 31, 2020 and recording a gain on such revaluation of$684.9 million (net of$47.1 million of before-tax losses reclassified from other comprehensive earnings), which is included in Recognized gains and losses, net on the Consolidated Statement of Operations for the year endedDecember 31, 2020 . As ofDecember 31, 2021 , we hold less than 20% of the outstanding common equity of Dun & Bradstreet but continue to account for our ownership interest under the equity method because we continue to exert significant influence through our 15.8% ownership, because certain of our senior management and directors serve on Dun & Bradstreet's board of directors, and 30
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because we are party to an agreement with other of its equity sponsors pursuant to which we have agreed to collectively vote together on all matters related to the election of directors to the Dun & Bradstreet board of directors for a period of three years. As ofDecember 31, 2021 , the book value of our investment in D&B accounted for under the equity method of accounting is$595.0 million . Based on quoted market prices, the aggregate fair market value of our ownership of Dun & Bradstreet common stock was approximately$1.4 billion as ofDecember 31, 2021 . As ofDecember 31, 2021 , we hold less than 20% of the outstanding common equity of Paysafe but we account for our ownership interest under the equity method because we exert significant influence: (a) through our 8.3% direct ownership, (b) because certain of our senior management and directors serve on Paysafe's board of directors, including the chairman of our Board, William P. Foley II, who is also the chairman of Paysafe's board of directors, and (c) because we are party to an agreement with other of its equity investors pursuant to which we have the ability to appoint or be consulted on the election of the majority of the total directors of Paysafe. As ofDecember 31, 2021 , the book value of our investment in Paysafe accounted for under the equity method of accounting is$431.1 million . Based on quoted market prices, the aggregate fair market value of our ownership of Paysafe common stock was approximately$233.7 million as ofDecember 31, 2021 . As ofDecember 31, 2021 , we hold less than 20% of the outstanding common equity of Alight but we account for our ownership under the equity method because we exert significant influence: (a) through our 10.0% direct and indirect ownership, (b) because certain of our senior management and directors serve on Alight's board of directors, including the chairman of our Board, William P. Foley II, who is also the chairman of Alight's board of directors, and (c) because we are party to an agreement with other of its equity investors pursuant to which we have the ability to appoint or be consulted on the election of the majority of the total directors of Alight. As ofDecember 31, 2021 , the book value of our investment in Alight accounted for under the equity method of accounting is$505.0 million . Based on quoted market prices, the aggregate fair market value of direct and indirect our ownership of Alight common stock was approximately$567.3 million as ofDecember 31, 2021 . Investments in unconsolidated affiliates - impairment monitoring. On an ongoing basis, management monitors our investments in unconsolidated affiliates to determine whether there are indications that the fair value of an investment may be other-than-temporarily below our recorded book value of the investment. Factors considered when determining whether a decline in the fair value of an investment is other-than-temporary include but are not limited to: the length of time and the extent to which the market value has been less than book value, the financial condition and near-term prospects of the investee, and the intent and ability of the Company to retain its investment in the investee for a period of time sufficient to allow for any anticipated recovery in market value. As ofSeptember 30, 2021 , the fair value of our investment in Paysafe based on quoted market prices was$418.8 million and the book value of our investment in Paysafe was$810.6 million prior to any impairment. Due to significant impairments recorded by Paysafe to its intangible assets in the three months endedSeptember 30, 2021 and the quantum of the decrease in the fair market value of our investment, management determined the decrease in value of our investment in Paysafe was other-than-temporary. Accordingly, we recorded an impairment of$391.8 million in the three months endedSeptember 30, 2021 which is included in Recognized (losses) gains, net, on our Consolidated Statement of Operations for the year endedDecember 31, 2021 . As ofDecember 31, 2021 , the fair value of our investment in Paysafe based on quoted market prices has decreased to$233.7 million . As of the date of this Annual Report, management believes the decrease in the fair value of our investment in Paysafe is temporary and expects to recover the recorded book value of our investment. If Paysafe's results of operations, financial condition or market conditions in the payment processing industry deteriorate, we may be required to record an impairment to our recorded investment for Paysafe in future periods. Valuation of investments. The fair values of financial instruments presented in the Consolidated Financial Statements are estimates of the fair values at a specific point in time using available market information and appropriate valuation methodologies. Estimates that utilize unobservable inputs are subjective in nature and involve uncertainties and significant judgment in the interpretation of current market data. The fair value hierarchy established by the accounting standards on fair value measurements includes three levels, which are based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities that are recorded in the Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows: Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we have the ability to access. 31
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Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.
Level 3. Financial assets and liabilities whose values are based on model inputs that are unobservable.
Recurring Fair Value Measurements
The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as ofDecember 31, 2021 and 2020, respectively: December 31, 2021 Level 1 Level 2 Level 3 Total (In millions) Assets: Equity securities: Ceridian$ 1,044.6 $ - $ -$ 1,044.6 AAII FPA - - 0.5 0.5 Total equity securities 1,044.6 - 0.5 1,045.1 Other noncurrent assets: S1 Backstop Agreement - 12.0 - 12.0 Paysafe Warrants 5.4 - - 5.4 AAII Warrants - 19.3 - 19.3 Total other noncurrent assets 5.4 31.3 - 36.7 Total Assets$ 1,050.0 $ 31.3 $ 0.5 $ 1,081.8 December 31, 2020 Level 1 Level 2 Level 3 Total (In millions) Fixed-maturity securities available for sale: Corporate debt securities $ - $ -$ 35.2 $ 35.2 Equity securities: Ceridian 1,491.8 - - 1,491.8 Forward Purchase Agreements - - 136.1 136.1 Paysafe Subscription Agreement - - 169.6 169.6 Other 1.6 - - 1.6 Total assets$ 1,493.4 $ -$ 340.9 $ 1,834.3 AAII FPA The AAII FPA is accounted for at fair value pursuant to ASC Topic 321. We utilized a Monte Carlo Simulation in determining the fair value of this agreement, which is considered to be a Level 3 fair value measurement. The Monte Carlo Simulation model simulates the current security price to a simulated date for the consummation of the underlying initial business combination based on probabilities of consummation. The value of the agreement is then calculated as the difference between the future simulated price and the fixed purchase price for the underlying security to be purchased. The primary unobservable input utilized in determining the fair value of the AAII FPA is the probability of consummation of the AAII Initial Business Combination. The probability assigned to the consummation of the AAII Initial Business Combination was 80%. Determination of such probability is based on a hybrid approach which considers observed success rates of business combinations for SPACs, the sponsor of AAII's track record for consummating similar transactions and the current market for SPAC transactions. Based on the total fair value of the AAII FPA as ofDecember 31, 2021 , changes in the probability utilized will not result in a change in fair value that is significant or material to the Company's financial position or results of operations.
AAII Warrants
The AAII Warrants are accounted for at fair value pursuant to ASC Topic 815 Derivatives and Hedging. These private placement warrants are valued using the trading price of AAII's publicly traded warrants (NYSE: ASZ-WT) and are considered a Level 2 fair value measurement.
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S1 Backstop Agreement
The S1 Backstop Agreement is considered a written option and accounted for at fair value. We utilized a Black-Scholes option pricing formula to determine the fair value of the S1 Backstop Agreement, which is considered to be a Level 2 fair value measurement. The value is calculated based on the common stock price of Trebia, the amount of time the S1 Backstop Agreement is expected to be outstanding, risk free rates and the volatility of the underlying common stock of Trebia.
The following table presents a summary of the changes in the fair values of Level 3 assets, measured on a recurring basis.
Year Ended
Forward
Corporate debt Purchase Subscription AAII
securities Agreements Agreements Warrants Total
Fair value, beginning of period $ 35.2 $ 136.1 $ 169.6 $ - 340.9
Recognized gain on settlement (1) 1.5 - - - 1.5
Net valuation (loss) gain included in
earnings (1) - (24.2) 7.7 (8.9) (25.4)
Reclassification to investments in
unconsolidated affiliates and Warrants - (111.4) (177.3) - (288.7)
Purchase of AAII Warrants - - - 29.6 29.6
Net valuation gain included in other
comprehensive earnings (2) 0.6 - - - 0.6
Transfers to Level 2 - - - (20.7) (20.7)
Redemption of corporate debt securities (37.3) - - - (37.3)
Fair value, end of period $ - $ 0.5 $ - $ - $ 0.5
Year Ended December 31, 2020
Corporate debt Forward Purchase Subscription
securities Agreements Agreements Total
Fair value, beginning of period $ 19.2 $ - $ - $ 19.2
Paid-in-kind dividends 1.3 - - 1.3
Net valuation gain included in earnings (1) - 136.1 169.6 305.7
Net valuation gain included in other
comprehensive earnings (2) 14.7 - - 14.7
Fair value, end of period $ 35.2 $ 136.1 $ 169.6 $ 340.9 ___________________________________
(1) Included in Recognized gains and (losses), net on the Consolidated Statements of Operations (2) Included in Unrealized gain on investments and other financial instruments, net (excluding investments in unconsolidated affiliates) on the Consolidated Statements of Comprehensive Earnings (Loss) Accounting for Income Taxes. We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities and expected benefits of utilizing net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The impact of changes in tax rates and laws on deferred taxes, if any, is applied to the years during which temporary differences are expected to be settled and reflected in the financial statements in the period enacted.
Refer to Note L to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for further discussion of our accounting for income taxes.
Certain Factors Affecting Comparability
Year endedDecember 31, 2021 . OnJuly 30, 2021 , we closed on the sale of VIBSQ's net assets. OnSeptember 1, 2021 , we closed on the sale of certain net assets of RC and its subsidiaries. OnSeptember 3, 2021 , we closed on the sale of Legendary Baking. Our consolidated results of operations for the year endedDecember 31, 2021 include the results of operations of VIBSQ, RC and Legendary Baking through their respective dates of sale. 33
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Year endedDecember 31, 2020 . OnJanuary 27, 2020 ,American Blue Ribbon Holdings, LLC ("Blue Ribbon") began a reorganization under Chapter 11 of the United States Bankruptcy Code (the "Blue Ribbon Reorganization") and we deconsolidated Blue Ribbon. OnOctober 2, 2020 , the Chapter 11 Plan became effective and Blue Ribbon emerged from bankruptcy as a set of reorganized companies. Upon Blue Ribbon's emergence from bankruptcy, we acquired the assets and uncompromised liabilities of Legendary Baking and VIBSQ in exchange for$15.5 million of the outstanding balance under the previously outstanding debtor-in-possession loan. Subsequent to Blue Ribbon's emergence from bankruptcy, we owned 100% of the equity of VIBSQ and Legendary Baking. Our consolidated results of operations for the year endedDecember 31, 2020 include the consolidated results of operations of Blue Ribbon fromJanuary 1, 2020 throughJanuary 27, 2020 and of Legendary Baking and VIBSQ fromOctober 2, 2020 throughDecember 31, 2020 . Year endedDecember 31, 2019 . OnDecember 31, 2019 , we completed the contribution ofT-System Holdings, Inc. ("T-System") to CorroHealth. As a result of the contribution, we reclassified the results of operations of T-System to discontinued operations for the year endedDecember 31, 2019 in our Consolidated Statements of Operations. 34
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Results of Operations
Consolidated Results of Operations
Net earnings. The following table presents certain financial data for the years indicated:
Year ended December 31,
2021 2020 2019
(In millions)
Revenues:
Restaurant revenue $ 704.7 $ 559.7 $ 1,043.3
Other operating revenue 37.5 26.0 26.7
Total operating revenues 742.2 585.7 1,070.0
Operating expenses:
Cost of restaurant revenue 617.4 524.3 912.8
Personnel costs 80.1 94.8 90.3
Depreciation and amortization 26.6 30.7 40.7
Other operating expenses, including asset impairments 151.6 116.6 133.4
Goodwill impairment - 7.8 10.4
Total operating expenses 875.7 774.2 1,187.6
Operating loss (133.5) (188.5) (117.6)
Other income (expense):
Interest, investment and other income 21.1 17.2 15.6
Interest expense (9.8) (9.0) (17.8)
Recognized (losses) gains, net (310.8) 2,362.2 357.7
Total other (expense) income (299.5) 2,370.4 355.5
(Loss) earnings from continuing operations before income taxes and equity in (losses) earnings of unconsolidated affiliates
(433.0) 2,181.9 237.9
Income tax (benefit) expense (74.0) 481.2 24.2
(Loss) earnings from continuing operations before equity in earnings (losses) of unconsolidated affiliates
(359.0) 1,700.7 213.7
Equity in earnings (losses) of unconsolidated affiliates 72.6 59.1 (115.1)
(Loss) earnings from continuing operations (286.4) 1,759.8 98.6
Net loss from discontinued operations, net of tax - - (51.8)
Net (loss) earnings (286.4) 1,759.8 46.8
Less: Net earnings (loss) attributable to non-controlling interests
0.6 (26.4) (30.5)
Net (loss) earnings attributable to Cannae Holdings, Inc. common
shareholders $ (287.0) $ 1,786.2 $ 77.3
Revenues
Total revenue in 2021 increased $156.5 million compared to 2020, primarily
driven by an increase in revenue in the Restaurant Group segment. Total revenue
in 2020 decreased $484.3 million compared to 2019, primarily driven by a decline
in revenue in our Restaurant Group segment.
The change in revenues from our segments is discussed in further detail at the segment level below.
Expenses
Our operating expenses consist primarily of personnel costs, cost of restaurant revenue, other operating expenses, and depreciation and amortization.
Personnel costs include base salaries, commissions, benefits, stock-based compensation and bonuses paid to employees, and are one of our most significant operating expenses. Personnel costs that are directly attributable to the operations of the Restaurant Group are included in Cost of restaurant revenue.
Cost of restaurant revenue includes cost of food and beverage, primarily the
costs of beef, groceries, produce, seafood, poultry and alcoholic and
non-alcoholic beverages, net of vendor discounts and rebates, payroll and
related costs and expenses directly relating to restaurant level activities, and
restaurant operating costs including occupancy and other operating expenses at
the restaurant level.
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Other operating expenses include professional fees, advertising costs, travel expenses and impairments of operating assets.
Depreciation and amortization expense consists of our depreciation related to investments in property and equipment as well as amortization of intangible assets.
The change in expenses from our segments is discussed in further detail at the segment level below.
Income tax (benefit) expense on continuing operations was$(74.0) million ,$481.2 million , and$24.2 million for the years endedDecember 31, 2021 , 2020, and 2019, respectively. The effective tax rate for the years endedDecember 31, 2021 , 2020, and 2019 was 17.1%, 22.1%, and 10.2%, respectively. The change in the effective tax rate in all periods is primarily attributable to the varying impact of earnings or losses from unconsolidated affiliates on our consolidated pretax earnings or losses. The fluctuation in income tax benefit as a percentage of earnings from continuing operations before income taxes is attributable to our estimate of ultimate income tax liability and changes in the characteristics of net earnings year to year, such as the weighting of operating income versus investment income.
For a detailed breakout of our effective tax rate and further discussion on changes in our taxes, see Note L to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report.
Other
Recognized gains and (losses), net totaled$(310.8) million ,$2,362.2 million , and$357.7 million for the years endedDecember 31, 2021 , 2020, and 2019, respectively. The net recognized loss for the year endedDecember 31, 2021 is primarily attributable to a$391.8 million impairment on our equity ownership interest in Paysafe, mark to market adjustments on our equity securities, and mark to market adjustments of$35.1 million to our Paysafe and AAII warrants, partially offset by a gain of$111.1 million on our sale of shares of D&B. The net recognized gain for the year endedDecember 31, 2020 is primarily attributable to gains on equity securities, a gain of$223.1 million on the sale of a portion of our investment in Ceridian inFebruary 2020 , and a non-cash gain of$117.0 million recorded in conjunction with the D&B's initial public offering ("IPO"). See Note D to our Consolidated Financial Statements included in Item 8 of this Annual Report for further details on gains and losses recognized on equity securities in the years endedDecember 31, 2021 and 2020. The$223.1 million gain on sale of Ceridian inFebruary 2020 occurred prior to our change in accounting for our investment in Ceridian as an equity security at fair value inMarch 2020 . The net recognized gain for the year endedDecember 31, 2019 is primarily attributable to$342.1 million of gains on sales of Ceridian shares.
Equity in earnings (losses) of unconsolidated affiliates for the periods indicated consisted of the following (in millions):
Year Ended December 31,
2021 2020 2019
Dun & Bradstreet $ (13.5) $ (46.8) $ (132.8)
Paysafe/FTAC II Sponsor 53.3 - -
Alight/FTAC Sponsor 38.2 - -
Ceridian (1) - 1.5 16.4
Optimal Blue (13.8) (9.4) -
Senator JV (1.2) - -
AmeriLife (8.7) (4.0) -
Sightline (2.4) - -
Other 20.7 117.8 1.3
Total $ 72.6 $ 59.1 $ (115.1) _____________________________________
(1) The amount for the year endedDecember 31, 2020 represents the Company's equity in earnings of Ceridian in the three months endedMarch 31, 2020 prior to the change in accounting for the investment beginningMarch 31, 2020 .
Net Earnings
Net earnings attributable to Cannae decreased$2,073.2 million in the year endedDecember 31, 2021 , compared to 2020. Total net earnings attributable to Cannae increased$1,708.9 million in the year endedDecember 31, 2020 , compared to 2019. The change in net earnings is attributable to the factors discussed above and net earnings from the segments is discussed in further detail at the segment level below. 36
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Segment Results of Operations
Restaurant Group
The following table presents the results from operations of our Restaurant Group
segment:
Year Ended December 31,
2021 2020 2019
(In millions)
Revenues:
Restaurant revenue $ 704.7 $ 559.7 $ 1,043.3
Operating expenses:
Cost of restaurant revenue 617.4 524.3 912.8
Personnel costs 34.5 31.2 52.1
Depreciation and amortization 24.0 27.7 38.5
Other operating expenses, including asset impairments 40.4 53.1 108.9
Goodwill impairment - 7.8 10.4
Total operating expenses 716.3 644.1 1,122.7
Operating loss (11.6) (84.4) (79.4)
Other expense:
Interest expense (8.8) (8.6) (5.4)
Recognized gains and losses, net 2.1 7.5 3.9
Total other expense (6.7) (1.1) (1.5)
Loss from continuing operations before income taxes and equity in earnings (losses) of unconsolidated affiliates
(18.3) (85.5) (80.9)
Total revenues for the Restaurant Group segment increased $145.0 million , or
25.9%, in the year ended December 31, 2021 from 2020. The increase was primarily
driven by an increase in comparable store sales driven by the reduced impact of
social restrictions imposed by state and local governments in connection with
COVID-19 in 2021 compared to 2020. Total revenues for the Restaurant Group
segment decreased $483.6 million , or 46.4%, in the year ended December 31, 2020
from 2019. The decrease was primarily driven by: (1) decreased revenue related
to the Blue Ribbon Reorganization, which resulted in the deconsolidation of Blue
Ribbon for the period from January 27, 2020 through October 2, 2020 , (2) the
closing or sale of company-owned restaurants primarily associated with our
O'Charley's, Village Inn and Bakers Square concepts subsequent to December 31,
2019 and (3) a decrease in comparable store sales driven by social restrictions
imposed by state and local governments in connection with COVID-19 in March
2020 , which resulted in the closing of dining rooms for substantially all of our
restaurants from late March 2020 and into May 2020 . The decrease was partially
offset by an overall increase in the average guest check in the year ended
December 31, 2020 compared to 2019.
Revenue associated with our Legendary Baking, Village Inn , and Baker's Square
brands was $62.0 million , $53.1 million , and $312.5 million , respectively, in
the years ended December 31, 2021 , 2020, and 2019, respectively. Revenue
recorded for these brands in the year ended December 31, 2021 represents these
brands' revenues through their respective dates of sales in the third quarter of
2021 and subsequent run-off sales of the remaining inventory of Legendary
Baking. Revenue recorded for these brands in the year ended December 31, 2020
represents Blue Ribbon's revenue for the period from January 1, 2020 through
January 27, 2020 , the date of Blue Ribbon's filing for bankruptcy, and the
brands' revenues for the period from October 2, 2020 through December 31, 2020 .
Comparable Store Sales. One method we use in evaluating the performance of our
restaurants is to compare sales results for restaurants period over period. A
new restaurant is included in our comparable store sales figures starting in the
first period following the restaurant's first seventy-eight weeks of operations.
Changes in comparable store sales reflect changes in sales for the comparable
store group of restaurants over a specified period of time. This measure
highlights the performance of existing restaurants, as the impact of new
restaurant openings is excluded. Comparable store sales for our 99 Restaurants
brand changed 39.4%, (32.8)%, and (0.4)% in the years ended December 31, 2021 ,
2020 and 2019, respectively, from the prior fiscal years. The increase in 2021
is primarily attributable to increased guest counts resulting from the loosening
of COVID-19 restrictions and an increase in the average amount spent by
customers each visit. The decrease in 2020 is primarily attributable COVID-19
restrictions. Comparable store sales for our O'Charley's brand changed 24.7%,
(22.5)% and (2.5)% in the years ended December 31, 2021 , 2020 and 2019,
respectively, from the prior fiscal years. The increase in 2021 is primarily
attributable to increased guest counts resulting from the abatement of COVID-19
restrictions and an increase in the average amount spent by customers each
visit. The decrease in 2020 is primarily attributable to lower guest counts
resulting from COVID-19.
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Cost of restaurant revenue increased$93.1 million , or 17.8%, in the year endedDecember 31, 2021 from 2020. Cost of restaurant revenue decreased$388.5 million , or 42.6%, in the year endedDecember 31, 2020 from 2019. Cost of restaurant revenue as a percentage of restaurant revenue was approximately 87.6%, 93.7%, and 87.5% in the years endedDecember 31, 2021 , 2020 and 2019, respectively. The decrease in cost of restaurant revenue as a percentage of restaurant revenue in 2021 compared to 2020 and the increase in cost of restaurant revenue as a percentage of restaurant revenue in 2020 compared to 2019 is primarily attributable to the impact of unavoidable costs on the substantial decrease in revenue in 2020 discussed above. Personnel costs decreased by$20.9 million , or 40.1%, in the year endedDecember 31, 2020 from 2019. The decrease is primarily attributable to the Blue Ribbon Reorganization. Other operating expenses decreased by$12.7 million , or 23.9%, in the year endedDecember 31, 2021 from 2020. The decrease is primarily attributable to a decrease of$11.0 million related to lower impairments of assets and a decrease of$8.6 million in professional fees. The decreases were offset by increased expenses associated with consolidating VIBSQ and LB's results of operations for approximately 9 months in 2021 compared to approximately 3 months in 2020. Other operating expenses decreased by$55.8 million , or 51.2%, in the year endedDecember 31, 2020 from 2019. The decrease is primarily attributable to the Blue Ribbon Reorganization and cost saving measures taken in response to COVID-19. Loss from continuing operations before income taxes decreased$67.2 million in the year endedDecember 31, 2021 from 2020. Loss from continuing operations before income taxes increased$4.6 million in the year endedDecember 31, 2020 from 2019. The change in losses is primarily attributable to the factors discussed above.
Dun & Bradstreet
We own a 15.8% interest in Dun & Bradstreet and account for our ownership interest in D&B under the equity method of accounting; therefore, its results of operations do not consolidate into ours.
Summarized financial information for Dun &Bradstreet andStar Parent, L.P. ("Star Parent"), the former parent of D&B through which we acquired our ownership position prior to D&B's IPO, for the relevant dates and time periods included in Equity in earnings (losses) of unconsolidated affiliates in our Consolidated Statements of Operations is presented below. We acquired our initial interest in Star Parent onFebruary 8, 2019 . The results of operations for the year endedDecember 31, 2019 presented below represent Star Parent's results of operations subsequent to our acquisition. For the period Year ended December 31, from February 8, 2019 to December 31, 2021 2020 2019 (In millions) Total revenues$ 2,165.6 $ 1,738.7 $ 1,413.9 Loss before income taxes (45.2) (226.4) (540.0) Net loss (65.9) (111.6) (425.8) Dividends attributable to preferred equity and noncontrolling interest expense (5.8) (69.0) (120.5)
Net loss attributable to Dun & Bradstreet and Star Parent (71.7)
(180.6) (546.3)
Details relating to the results of operations of Dun & Bradstreet (NYSE: "DNB")
can be found in its periodic reports filed with the
Paysafe
OnMarch 30, 2021 , we closed on the acquisition of our 8.3% ownership interest in Paysafe. We account for our ownership of Paysafe under the equity method of accounting and report our equity in the earnings or loss of Paysafe on a three-month lag; therefore, its results do not consolidate into ours. Accordingly, our net loss for the year endedDecember 31, 2021 includes our equity in Paysafe's losses for the period fromMarch 30, 2021 throughSeptember 30, 2021 . 38
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Summarized financial information for Paysafe for the relevant dates and time
periods included in Equity in earnings (losses) of unconsolidated affiliates in
our Consolidated Statements of Operations is presented below.
For the period
from March 30,
2021 to
September 30,
2021
(In millions)
Total revenues $ 737.9
Operating loss (261.6)
Net loss (140.3)
Net earnings attributable to noncontrolling interest 0.3
Net loss attributable to Paysafe (140.6)
Details relating to the results of operations of Paysafe (NYSE: "PSFE") can be
found in its periodic reports filed with the
Alight
OnJuly 2, 2021 , we closed on the acquisition of our 10% ownership interest in Alight. We account for our ownership of Alight under the equity method of accounting and report our equity in earnings or loss of Alight on a three-month lag; therefore, its results do not consolidate into ours. Accordingly, our net loss for the year endedDecember 31, 2021 includes our equity in Alight's losses for the period fromJuly 2, 2021 throughSeptember 30, 2021 .
Summarized financial information for Alight for the relevant dates and time periods included in Equity in earnings (losses) of unconsolidated affiliates in our Consolidated Statements of Operations is presented below.
For the period
from July 2,
2021 through
September 30,
2021
(In millions)
Total revenues $ 690.0
Operating income 25.0
Net loss (120.0)
Net loss attributable to noncontrolling interests (13.0)
Net loss attributable to Alight (107.0)
Details relating to the results of operations of Alight (NYSE: "ALIT") can be
found in its periodic reports filed with the
Corporate and Other
The Corporate and Other segment consists of our share in the operations of certain controlled businesses and other equity investments, activity of the corporate holding company and certain intercompany eliminations and taxes.
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The following table presents the results from operations of our Corporate and Other segment:
Year ended
2021 2020 2019
(In millions)
Revenues:
Other operating revenue $ 37.5 $ 26.0 $ 26.7
Operating expenses:
Personnel costs 45.6 63.6 38.2
Depreciation and amortization 2.6 3.0 2.2
Other operating expenses 111.2 63.5 24.5
Total operating expenses 159.4 130.1 64.9
Operating loss (121.9) (104.1) (38.2)
Other income (expense):
Interest, investment and other income 21.1 17.2 15.6
Interest expense (1.0) (0.4) (12.4)
Recognized gains and losses, net (312.9) 2,354.7 353.8
Total other (expense) income (292.8) 2,371.5 357.0
(Loss) earnings from continuing operations before income taxes and equity in losses of unconsolidated affiliates
(414.7) 2,267.4 318.8
Personnel costs decreased $18.0 million , or 28.3%, in the year ended
December 31, 2021 compared to 2020, and increased $25.4 million , or 66.5%, in
the year ended December 31, 2020 compared to 2019. The change in both periods is
primarily driven by a change in investment success bonuses paid related to our
sales of shares of Ceridian.
Other operating expenses increased $47.7 million , or 75.1%, in the year ended
December 31, 2021 compared to 2020 and increased $39.0 million , or 159.2%, in
the year ended December 31, 2020 compared to 2019. The increase in 2021 from
2020 was primarily attributable to an increase in management fees and carried
interest incurred with our Manager. The increase in 2020 from 2019 is primarily
attributable to $20.8 million of management fee expenses and $11.3 million of
carried interest on distributions from the Senator JV and sales of other
investments incurred with our Manager.
Interest expense decreased $12.0 million in the year ended December 31, 2020
from 2019. The decrease was attributable to a decrease in corporate debt
outstanding. See Note K to our Consolidated Financial Statements included in
Item 8 of Part II of this Annual Report for further discussion of our
outstanding debt.
The net recognized loss for the year ended December 31, 2021 is primarily
attributable to a $391.8 million impairment on our equity ownership interest in
Paysafe, mark to market adjustments on our equity securities, and mark to market
losses of $35.1 million on our Paysafe and AAII warrants, partially offset by a
gain of $111.1 million on our sale of shares of D&B. The net recognized gain for
the year ended December 31, 2020 is primarily attributable to gains on equity
securities, a gain of $223.1 million on the sale of a portion of our investment
in Ceridian in February 2020 and a non-cash gain of $117.0 million recorded in
conjunction with the D&B IPO. See Note D to our Consolidated Financial
Statements included in Item 8 of this Annual Report for further details on gains
and losses recognized on equity securities in the years ended December 31, 2021
and 2020. The $223.1 million gain on sale of Ceridian in February 2020 occurred
prior to our change in accounting for our investment in Ceridian as an equity
security at fair value in March 2020 . The net recognized gain for the year ended
December 31, 2019 is primarily attributable to $342.1 million of gains on sales
of Ceridian shares.
Discontinued Operations
As a result of our contribution of T-System to CorroHealth, the financial
results of T-System have been reclassified to discontinued operations. See
Note N to our Consolidated Financial Statements included in Item 8 of Part II of
this Annual Report for further details on amounts included in discontinued
operations for the year ended
Liquidity and Capital Resources
Cash Requirements. Our current cash requirements include personnel costs,
operating expenses, taxes, capital expenditures, the AAII FPA and business
acquisitions. There are no restrictions on our retained earnings regarding our
ability to pay dividends to stockholders, although there are limits on the
ability of certain subsidiaries to pay dividends to us, as a result of
provisions in certain debt agreements. The declaration of any future dividends
is at the discretion of our Board of Directors. Additional uses of cash flow are
expected to include stock repurchases, acquisitions, and debt repayments.
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As ofDecember 31, 2021 , we had cash and cash equivalents of$85.8 million , of which$48.1 million was cash held by the corporate holding company, and$300.0 million of available borrowing capacity under our existing holding company credit facilities with the ability to add an additional$200.0 million of borrowing capacity by amending our 2020 Margin Facility. We continually assess our capital allocation strategy, including decisions relating to reducing debt, repurchasing our stock, and/or conserving cash. We believe that all anticipated cash requirements for current operations will be met from internally generated funds, cash dividends from subsidiaries, cash generated by investment securities, potential sales of non-strategic assets, and borrowings on existing credit facilities. Our short-term and long-term liquidity requirements are monitored regularly to ensure that we can meet our cash requirements. We forecast the needs of all of our subsidiaries and periodically review their short-term and long-term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying such forecasts. The Company believes the holding company's balances of cash, cash equivalents and unrestricted marketable securities, which totaled$575.8 million as ofDecember 31, 2021 (excluding marketable securities we account for as unconsolidated affiliates), along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements over the next 12 months and beyond.
We are focused on evaluating our assets and investments as potential vehicles for creating liquidity. Our intent is to use that liquidity for general corporate purposes, including, funding future investments, other strategic initiatives and/or conserving cash.
Operating Cash Flows. Our cash flows used in operations for the years endedDecember 31, 2021 , 2020, and 2019 were$176.1 million ,$113.9 million and$84.2 million , respectively. The increase in cash used in operations of$62.2 million from 2021 to 2020 is primarily attributable to increased management fees and carried interest paid to our Manager. The decrease in cash provided by operations of$29.7 million from 2020 to 2019 is primarily attributable to increased payments for income taxes of$59.0 million and increased losses in our Restaurant Group, excluding non-cash impairments, partially offset by a decrease in operating lease payments of$21.3 million . The remainder of the variance is attributable to the timing of payment and receipt of accounts payable and receivable. Investing Cash Flows. Our cash flows used in investing activities for the years endedDecember 31, 2021 , 2020, and 2019 were$272.4 million ,$74.2 million and$24.2 million , respectively. The increase in cash used in investing activities of$198.2 million from 2021 to 2020 is primarily attributable to increased investments in new businesses including Paysafe, Alight and Sightline, and decreased proceeds from sales of Ceridian stock, partially offset by increased distributions from unconsolidated affiliates and a partial sale of D&B shares. The increase in cash used in investing activities of$50.0 million from 2020 to 2019 is primarily attributable to an increase in new investments in unconsolidated investments, including our investments inAmeriLife , Optimal Blue and in a private placement associated with D&B's IPO, partially offset by an increase in proceeds from sales of Ceridian stock in 2020 compared to 2019. Capital Expenditures. Total capital expenditures for property and equipment and other intangible assets were$13.7 million ,$22.3 million and$28.3 million for the years endedDecember 31, 2021 , 2020, and 2019, respectively. Capital expenditures in in all years primarily consisted of purchases of property and equipment in our Restaurant Group segment and property improvements at our real estate operations. Expenditures in 2020 also include the Company's purchase of our corporate headquarters for$9.3 million . Financing Cash Flows. Our cash flows (used in) provided by financing activities for the years endedDecember 31, 2021 , 2020, and 2019 were$(190.4) million ,$379.1 million and$319.1 million , respectively. The decrease in cash provided by (increase in cash used in) financing activities of$569.5 million from 2021 compared to 2020 is primarily attributable to proceeds from our equity offering in 2020 and increased purchases of treasury stock in 2021. The increase in cash provided by financing activities of$60.0 million from 2020 compared to 2019 is primarily attributable to$455.0 million of net proceeds from our equity offering in 2020 compared to$236.0 million from our 2019 equity offering, partially offset by a net decrease in debt proceeds net of service payments of$140.1 million in 2020 compared to 2019, and a$9.5 million increase in cash paid for purchases ofTreasury stock in 2020 compared to 2019.
Financing Arrangements. For a description of our historical financing arrangements see Note K to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report.
Contractual Obligations. Our long term contractual obligations generally include our credit agreements and debt facilities, lease payments and financing obligations on certain of our premises and equipment, purchase obligations of the Restaurant Group and payments to our Manager.
See Note B to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for further discussion of our leasing arrangements.
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Pursuant to the terms of the Management Services Agreement betweenCannae LLC and our Manager,Cannae LLC is obligated to pay our Manager a quarterly management fee equal to 0.375% (1.5% annualized) of the Company's cost of invested capital (as defined in the Management Services Agreement) as of the last day of each fiscal quarter, payable in arrears in cash, as may be adjusted pursuant to the terms of the Management Services Agreement. Management fees payable to our Manager are included for the initial 5-year term of the Management Services Agreement that began inSeptember 2019 and are based on our cost of invested capital of$2,569.9 million as ofDecember 31, 2021 . Purchase obligations include agreements to purchase goods or services that are enforceable, are legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The Restaurant Group has unconditional purchase obligations with various vendors, primarily related to food and beverage obligations with fixed commitments in regards to the time period of the contract and the quantities purchased with annual price adjustments that can fluctuate. Future purchase obligations are estimated by assuming historical purchase activity over the remaining, non-cancellable terms of the various agreements. For agreements with minimum purchase obligations, at least the minimum amounts we are legally required to purchase are included. These agreements do not include fixed delivery terms. We used both historical and projected volume and pricing as ofDecember 31, 2021 to determine the amount of the obligations.
Restaurant Group financing obligations include its agreements to lease its corporate office and certain O'Charley's restaurant locations that are accounted for as failed sale and leaseback transactions.
As of
2022 2023 2024 2025 2026 Thereafter Total
Unconditional purchase obligations
6.4$ 6.3 $ 6.4 $ 0.8 $ 122.8 Operating lease payments 36.1 32.9 25.1 22.1 20.2 132.6 269.0 Notes payable 2.2 0.8 1.1 0.8 10.6 1.6 17.1 Management fees payable to Manager 38.5 38.5 32.1 - - - 109.1 Restaurant Group financing obligations 3.3 3.4 3.4 3.4 3.5 24.2 41.2 Total$ 174.4 $ 84.2 $ 68.1 $ 32.6 $ 40.7 $ 159.2 $ 559.2 Capital Stock Transactions. For information on our 2019 Repurchase Program and 2021 Repurchase Program, see discussion under the header Purchases ofEquity Securities by the Issuer included in Item 5 of Part II of this Annual Report.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note S to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report.
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