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TMCNet:  CORELOGIC, INC. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

[February 25, 2013]

CORELOGIC, INC. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

(Edgar Glimpses Via Acquire Media NewsEdge) CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K and certain information incorporated herein by reference contain forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Annual Report, other than statements that are purely historical, are forward-looking statements. Words such as "anticipate," "expect," "intend," "plan," "believe," "seek," "estimate," "will," "should," "would," "could," "may," and similar expressions also identify forward-looking statements. The forward-looking statements include, without limitation, statements regarding our future operations, financial condition and prospects, operating results, revenues and earnings liquidity, our estimated income tax rate, unrecognized tax positions, amortization expenses, impact of recent accounting pronouncements, our acquisition and divestiture strategy and our growth plans for 2013, the Company's share repurchases, the level of aggregate U.S. mortgage originations and inventory of delinquent mortgage loans and loans in foreclosure and the reasonableness of the carrying value related to specific financial assets and liabilities.



Our expectations, beliefs, objectives, intentions and strategies regarding future results are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by our forward-looking statements. These risks and uncertainties include, but are not limited to: • limitations on access to or increase in prices for data from external sources, including government and public record sources; • changes in applicable government legislation, regulations and the level of regulatory scrutiny affecting our customers or us, including with respect to consumer financial services and the use of public records and consumer data; • compromises in the security of our data transmissions,including the transmission of confidential information or systems interruptions; • difficult conditions in the mortgage and consumer lending industries and the economy generally together with customer concentration and the impact of these factors thereon; • our ability to protect proprietary technology rights; • our indebtedness and the restrictions in our various debt agreements; • our growth strategies and cost reduction plans and our ability to effectively and efficiently implement them; • risks related to the outsourcing of services and our international operations; • impairments in our goodwill or other intangible assets; and • the inability to realize the benefits of the Separation as a result of the factors described immediately above, as well as, among other factors, increased borrowing costs, competition between the resulting companies, increased operating or other expenses or the triggering of rights and obligations by the transaction or any litigation arising out of or related to the Separation.

We assume no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Annual Report on Form 10-K. These risks and uncertainties, along with the risk factors above under "Item 1A. Risk Factors" should be considered in evaluating any forward-looking statements contained herein.

Business Overview We are a leading provider of property, financial and consumer information, analytics and services to mortgage originators and servicers, financial institutions and other businesses, government and government-sponsored enterprises. Our data, query, analytical and business outsourcing services help our customers to identify, manage and mitigate credit and interest rate risk. We have more than one million users who rely on our data and predictive decision analytics to reduce risk, enhance transparency and improve the performance of their businesses.

26-------------------------------------------------------------------------------- Table of Contents We believe that we offer our customers among the most comprehensive databases of public, contributory and proprietary data covering real property and mortgage information, judgments and liens, parcel and geospatial data, motor vehicle records, criminal background records, national coverage eviction information, non-prime lending records, credit information, and tax information, among other data types. Our databases include over 795 million historical property transactions, over 93 million mortgage applications and property-specific data covering over 99% of U.S. residential properties exceeding 147 million records.

We believe the quality of the data we offer is distinguished by our broad range of data sources and our core expertise in aggregating, organizing, normalizing, processing and delivering data to our customers.

With our data as a foundation, we have built strong analytics capabilities and a variety of value-added business services to meet our customers' needs for mortgage and automotive credit reporting, property tax, property valuation, flood plain location determination and other geospatial data, data, analytics and related services.

Critical Accounting Policies and Estimates Our significant accounting policies are discussed in Note 2- Significant Accounting Policies. We consider the accounting policies described below to be critical in preparing our consolidated financial statements. These policies require us to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures of contingencies. Our assumptions, estimates and judgments are based on historical experience, current trends and other factors that we believe to be relevant at the time we prepare the consolidated financial statements. Although we believe that our estimates and assumptions are reasonable, we cannot determine future events. As a result, actual results could differ materially from our assumptions and estimates.

Basis of presentation and consolidation. Our discussion and analysis of financial condition and results of operations is based upon our audited consolidated financial statements, which have been prepared in accordance with GAAP. Our operating results for the years ended December 31, 2012, 2011 and 2010 include results for any acquired entities from the applicable acquisition date forward and all prior periods have been adjusted to properly reflect discontinued operations. All significant intercompany transactions and balances have been eliminated.

Revenue recognition. We derive our revenues principally from U.S. mortgage originators and servicers with good creditworthiness. Our product and service deliverables are generally comprised of data or other related services. Our revenue arrangements with our customers generally include a work order or written agreement specifying the data products or services to be delivered and related terms of sale including payment amounts and terms. The primary revenue recognition-related judgments we exercise are to determine when all of the following criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) our price to the buyer is fixed or determinable; and (4) collectability is reasonably assured.

For products or services where delivery occurs at a point in time, we recognize revenue upon delivery. These products or services include sales of tenancy data and analytics, credit solutions for mortgage and automotive industries, under-banked credit services, flood and data services, real estate owned asset management, claims management, asset management and processing solutions, broker price opinions, and field services where we perform property preservation services.

For products or services where delivery occurs over time, we recognize revenue ratably on a subscription basis over the contractual service period once initial delivery has occurred. Generally these service periods range from one to three years. Products or services recognized on a license or subscription basis include information and analytic products, flood database licenses, realtor solutions, and lending solutions.

Tax service revenues are comprised of periodic loan fees and life-of-loan fees.

For periodic loans, we generate monthly fees at a contracted fixed rate for as long as we service the loan. Loans serviced with a one-time, life-of-loan fee are billed once the loan is boarded to our tax servicing system in accordance with a customer tax servicing agreement. Life-of-loan fees are then deferred and recognized ratably over the expected service period. The rates applied to recognize revenues assume a 10-year contract life and are adjusted to reflect prepayments. We review the tax service contract portfolio quarterly to determine if there have been changes in contract lives, deferred on-boarding costs, expected service period, and/or changes in the number and/or timing of prepayments. Accordingly, we may adjust the rates to reflect current trends.

Cost of services. Cost of services represents costs incurred in the creation and delivery of our products and services. Cost of services consists primarily of data acquisition and royalty fees; customer service costs, which include: personnel costs to collect, maintain and update our proprietary databases, to develop and maintain software application platforms and to provide consumer and customer call center support; hardware and software expense associated with transaction processing 27-------------------------------------------------------------------------------- Table of Contents systems; telecommunication and computer network expense; and occupancy costs associated with facilities where these functions are performed by employees.

Selling, general and administrative expenses. Selling, general and administrative expenses consist primarily of personnel-related costs, direct and indirect selling costs, restructuring costs, corporate costs, fees for professional and consulting services, advertising costs, uncollectible accounts and other costs of administration such as marketing, human resources, finance and administrative roles.

Purchase accounting. The purchase method of accounting requires companies to assign values to assets and liabilities acquired based upon their fair values.

In most instances there is not a readily defined or listed market price for individual assets and liabilities acquired in connection with a business, including intangible assets. The determination of fair value for assets and liabilities in many instances requires a high degree of estimation. The valuation of intangible assets, in particular, is very subjective. We generally obtain third-party valuations to assist us in estimating fair values. The use of different valuation techniques and assumptions could change the amounts and useful lives assigned to the assets and liabilities acquired, including goodwill and other identifiable intangible assets and related amortization expense.

Goodwill and other intangible assets. We perform an annual impairment test for goodwill and other indefinite-lived intangible assets for each reporting unit every fourth quarter. In addition to our annual impairment test, we periodically assess whether events or circumstances have occurred that potentially indicate the carrying amounts of these assets may not be recoverable. In assessing the overall carrying value of our goodwill and other intangibles, we first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Examples of such events or circumstances include the following: cost factors, financial performance, legal and regulatory factors, entity-specific events, industry and market factors, macroeconomic conditions and other considerations.

If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then management's impairment testing process may include two additional steps. The first step ("Step 1") compares the fair value of each reporting unit to its book value. The fair value of each reporting unit is determined by using discounted cash flow analysis and market approach valuations. If the fair value of the reporting unit exceeds its book value, then goodwill is not considered impaired and no additional analysis is required.

However, if the book value is greater than the fair value, a second step ("Step 2") must be completed to determine if the fair value of the goodwill exceeds the book value of the goodwill.

Step 2 involves calculating an implied fair value of goodwill for each reporting unit for which Step 1 indicated impairment. The implied fair value of goodwill is determined in a manner similar to the amount of goodwill calculated in a business combination, by measuring the excess of the estimated fair value of the reporting unit, as determined in Step 1, over the aggregate estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment loss is recorded for the excess. An impairment loss cannot exceed the carrying value of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted. The valuation of goodwill requires assumptions and estimates of many critical factors including revenue growth, cash flows, market multiples and discount rates. Forecasts of future operations are based, in part, on operating results and our expectations as to future market conditions. These types of analysis contain uncertainties because they require us to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies. However, if actual results are not consistent with our estimates and assumptions, we may be exposed to an additional impairment loss that could be material.

These tests utilize a variety of valuation techniques, all of which require us to make estimates and judgments. Fair value is determined by employing an expected present value technique, which utilizes multiple cash flow scenarios that reflect a range of possible outcomes and an appropriate discount rate. The use of comparative market multiples (the "market approach") compares the reporting unit to other comparable companies (if such comparables are present in the marketplace) based on valuation multiples to arrive at a fair value. We also use certain of these valuation techniques in accounting for business combinations, primarily in the determination of the fair value of acquired assets and liabilities. In assessing the fair value, we utilize the results of the valuations (including the market approach to the extent comparables are available) and consider the range of fair values determined under all methods and the extent to which the fair value exceeds the book value of the equity. As of December 31, 2012, our reporting units are data and analytics, mortgage origination services, and asset management and processing solutions.

28-------------------------------------------------------------------------------- Table of Contents In connection with our acquisition of CDS Business Mapping, LLC ("CDS"), we separated our spatial solutions business line from our mortgage origination services segment and consolidated it with CDS, effectively creating the geospatial solutions business unit within the data and analytics segment. As a result, we revised our reporting for segment disclosure purposes and reassessed our reporting units for purposes of evaluating the carrying value of our goodwill. This assessment required us to perform a fourth quarter reassignment of our goodwill to each reporting unit impacted using the relative fair value approach, based on the fair values of the reporting units as of December 31, 2012.

Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others. Key assumptions used to determine the fair value of our mortgage origination services reporting unit and geospatial solutions business unit in our testing were: (a) expected cash flow for the period from 2013 to 2018; and (b) a discount rate ranging from 11.0% to 15.0%, which was based on management's best estimate of the after-tax weighted average cost of capital.

We performed a qualitative analysis on our reporting units and examined relevant events and circumstances such as: cost factors, financial performance, legal and regulatory factors, entity-specific events, industry and market factors, macroeconomic conditions and other considerations. We also considered the reassignment analysis of geospatial solutions' goodwill to each reporting unit impacted using the relative fair value approach. Based on the qualitative analysis performed, we determined that it is more likely than not that goodwill attributable to our reporting units is not impaired as of December 31, 2012. It is reasonably possible that changes in the facts, judgments, assumptions and estimates used in assessing the fair value of the goodwill could cause a reporting unit to become impaired.

Income taxes. We account for income taxes under the asset and liability method, whereby we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as expected benefits of utilizing net operating loss and credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates we expect to apply in the years in which we expect to recover or settle those temporary differences. We recognize in income the effect of a change in tax rates on deferred tax assets and liabilities in the period that includes the enactment date.

We recognize the effect of income tax positions only if sustaining those positions is more likely than not. We reflect changes in recognition or measurement of uncertain tax positions in the period in which a change in judgment occurs. We recognize interest and penalties, if any, related to uncertain tax positions within income tax expense. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet.

We evaluate the need to establish a valuation allowance based upon expected levels of taxable income, future reversals of existing temporary differences, tax planning strategies, and recent financial operations. We establish a valuation allowance to reduce deferred tax assets to the extent we believe it is more likely than not that some or all of the deferred tax assets will not be realized.

Useful lives of assets. We are required to estimate the useful lives of several asset classes, including capitalized data, internally developed software and other intangible assets. The estimation of useful lives requires a significant amount of judgment related to matters such as future changes in technology, legal issues related to allowable uses of data and other matters.

Stock-based compensation. We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized over the period during which an employee is required to provide services in exchange for the award. We used the binomial lattice option-pricing model to estimate the fair value for any options granted after December 31, 2006 through December 31, 2009. For the options granted in 2012, 2011 and 2010, we used the Black-Scholes model to estimate the fair value.

We utilize the straight-line single option method of attributing the value of stock-based compensation expense unless another expense attribution model is required. As stock-based compensation expense recognized in the results of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We apply the long-form method for determining the pool of windfall tax benefits.

Currently, our primary means of stock-based compensation is granting restricted stock units ("RSUs"). The fair value of any RSU grant is based on the market value of our shares on the date of grant and is generally recognized as compensation expense over the vesting period. RSUs granted to certain key employees have graded vesting and have a service and performance requirement, and are therefore expensed using the accelerated multiple-option method to record stock-based 29-------------------------------------------------------------------------------- Table of Contents compensation expense. All other RSU awards have graded vesting and service is the only requirement to vest in the award, and are therefore generally expensed using the straight-line single option method to record stock-based compensation expense.

In addition to stock options and RSUs, through September 2011 we had an employee stock purchase plan that allowed eligible employees to purchase common stock of the Company at 85.0% of the closing price on the last day of each quarter. We recognized an expense in the amount equal to the discount. The employee stock purchase plan expired in September 2011. Our 2012 employee stock purchase plan was approved by our stockholders at our 2012 annual meeting of stockholders and the first offering period commenced in October 2012.

Reclassifications. Prior to the Separation, we operated primarily as a title insurance company regulated under Article 7 of Regulation S-X and were not subject to the requirements of Article 5 of Regulation S-X. Rule 5-03 of Regulation S-X requires Article 5 companies, such as us, to classify expenses in a functional manner. We have reclassified external cost of revenues, salaries and benefits and other operating expenses into cost of services and selling, general and administrative ("SG&A") expenses, in our income statement within our annual report on Form 10-K for the years ended December 31, 2012, 2011 and 2010.

The reclassification of these expenses on a functional basis was not material to the financial statements as a whole, as it had no impact to operating revenues, total operating expenses, operating income, net income or earnings per share previously reported. In addition, there was no impact on our balance sheets or statements of cash flows.

Recent Accounting Pronouncements In August 2012, the Financial Accounting Standards Board ("FASB") issued updated guidance related to the testing of indefinite-lived intangible assets other than goodwill for impairment. The guidance provides that an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of an indefinite-lived intangible assets other than goodwill is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of an indefinite-lived intangible asset other than goodwill is less than its carrying amount, then performing the two-step impairment test is unnecessary. The updated guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In December 2011 and January 2013, the FASB issued updated guidance related to the presentation of offsetting (netting) assets and liabilities in the financial statements. The guidance requires the disclosure of both gross information and net information on instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. This scope would include derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities borrowing and securities lending arrangements. The updated guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management does not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In September 2011, the FASB issued updated guidance related to the testing of goodwill for impairment. The guidance provides that an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The updated guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

In June 2011, the FASB issued updated guidance related to the presentation of comprehensive income. The guidance provides that an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The updated guidance is effective for annual financial reporting periods beginning after December 15, 2011 and for interim periods within the fiscal year. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In May 2011, the FASB issued updated guidance related to fair value measurements and disclosures. The update provides amendments to achieve common fair value measurements and disclosure requirements in GAAP and International Financial Reporting Standards. The amendments in this update explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of 30-------------------------------------------------------------------------------- Table of Contents financial reporting. The updated guidance is effective during interim and annual financial reporting periods beginning after December 15, 2011. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Results of Operations Overview We generate the majority of our revenues from clients with operations in the U.S. residential real estate, mortgage origination and mortgage servicing markets. We believe the volume of real estate transactions is primarily affected by real estate prices, the availability of funds for mortgage loans, mortgage interest rates, employment levels and the overall state of the U.S. economy.

Throughout 2012 we benefited from the improvement in the U.S. residential real estate and mortgage lending industries, particularly from higher refinancing transactions, which resulted in higher levels of mortgage applications and originations. This, combined with recovering home prices and home purchase activity, created an improved market environment for our businesses in 2012.

Approximately 42.6% of our operating revenues for the year ended December 31, 2012 were generated from the ten largest United States mortgage originators. Based on statistics published by the Mortgage Bankers' Association ("MBA") and data from significant mortgage originators, we estimate that total mortgage originations increased approximately 32.0% in 2012 relative to the same period of 2011. MBA estimates that mortgage applications increased 24% in 2012 relative to the same period of 2011. Given that many of our origination-related products and services are provided early in the origination cycle, application volumes are a leading indicator of demand for these products and services. In 2012, the level of mortgage originations, particularly refinancing transactions, were relatively high due to historical lows in long-term interest rates, the accommodative policy stance of the Federal Reserve, and the presence of Federal Government programs targeting mortgage loan refinancing and modification activity. We anticipate the level of mortgage originations to modestly decline in the near term.

Based on our internal estimates, the level of loans seriously delinquent (loans delinquent 90 days or more) or in foreclosure decreased approximately 15% in the year ended December 31, 2012 relative to the same period of 2011. Additionally, based on our internal analysis and market estimates, we believe the inventory of seriously delinquent mortgage loans and loans in foreclosure will continue to decline.

In December 2012, we completed our acquisition of CDS, a leading provider of geographic underwriting information for the property and casualty insurance industry, for a cash purchase price of $78.8 million. CDS is included in our data and analytics reporting segment.

In the third quarter of 2012, we completed the disposition of our transportation services business (American Driving Records) and completed the shutdown of our appraisal management company and consumer services businesses.

As part of our on-going cost efficiency programs, in July 2012, we announced the launch of our TTI with Dell Services. The objective of the TTI is to convert our existing technology infrastructure to a new platform which is expected to provide new functionality, increased performance, and a reduction in application management and development costs. Following an initial transition period of thirty months, we expect net operating expense reductions of approximately $35.0 to $40.0 million per year compared to 2012 cost levels. For the year ended December 31, 2012, expenses incurred related to the initiative were $33.2 million, of which $16.3 million are non-cash charges.

On a consolidated basis, our operating revenues increased $229.1 million, or 17.1%, for the year ended December 31, 2012 compared to 2011. Data and analytics segment operating revenues increased $68.0 million, or 12.4%, in 2012 compared to 2011, primarily due to higher document retrieval services and the impact of acquisition activity. Mortgage origination services segment operating revenues increased $153.5 million, or 31.8%, in 2012 compared to 2011, primarily due to higher mortgage origination volumes and the impact of acquisition activity.

Asset management and processing solutions segment operating revenues increased $6.0 million, or 1.8%, in 2012 compared to 2011, due to higher loss mitigation services and higher field services revenues, partially offset by a decrease in other revenues. On a consolidated basis, operating revenues increased $58.3 million, or 4.6%, for the year ended December 31, 2011 compared to 2010. Data and analytics segment operating revenues increased $84.6 million, or 18.3%, in 2011 compared to 2010, due to higher analytical revenues, growth in advisory projects and the impact of acquisition activity. Mortgage origination services segment revenues increased $16.0 million, or 3.4%, in 2011 compared to 2010, due to the impact of acquisition activity, partially offset by lower origination volumes. Asset management and processing solutions segment revenues decreased $39.3 million, or 10.7%, in 2011 compared to 2010, primarily due to lower default-related activity and the exit of unprofitable product lines.

31-------------------------------------------------------------------------------- Table of Contents Our total operating expense increased $95.5 million, or 7.6%, for the year ended December 31, 2012 compared to 2011, primarily due to higher cost of services from increased volumes, higher depreciation and amortization from the impact from acquisitions, partially offset by lower selling, general and administrative expenses from our cost-reduction initiatives. Our total operating expense increased $83.3 million, or 7.1%, for the year ended December 31, 2011 compared to 2010, primarily due to higher cost of services from increased volumes, higher depreciation and amortization due to the impact of write-offs of certain non-performing assets and the impact of acquisitions, partially offset by lower selling, general and administrative expenses from our cost-reduction initiatives.

Total interest expense, net decreased $5.8 million, or 10.0%, for the year ended December 31, 2012 compared to 2011, due to lower write-offs of deferred financing costs of $9.9 million, partially offset by higher interest expense due to higher average outstanding debt balances as a result of the issuance of $400.0 million principal amount of senior notes in May 2011. Total interest expense, net increased $28.1 million, or 92.9%, for the year ended December 31, 2011 compared to 2010, due to a $10.2 million write-off of unamortized debt issuance costs related to our extinguished bank debt facilities to interest expense and increased levels of total debt and capitalized debt issuance cost.

Loss on investments and other income totaled $2.5 million and $10.9 million for the year ended December 31, 2012 and 2010, respectively. Gain on investments and other income was $60.0 million for the year ended December 31, 2011. The variance in 2012 compared to 2011 and the variance in 2011 compared to 2010 are primarily due to the $24.9 million pre-tax gain on the sale of our remaining investment in DealerTrack Holdings, Inc. in January 2011 and the $58.9 million pre-tax gain from our acquisition of the remaining interest in RP Data Limited ("RP Data") in May 2011. The variance in 2011 compared to 2010 was partially offset by non-cash impairment charges in our investments in affiliates, net, due to other than temporary loss in value and continued changes in regulatory environment.

Net income attributable to CoreLogic increased from a net loss by $186.9 million, or 250.5%, for the year ended December 31, 2012 compared to 2011, primarily due to higher net income from continuing operations of $69.4 million, lower losses from discontinued operations of $112.1 million due to the exit of various discontinued operations during 2012, partially offset by higher loss from sale of discontinued operations of $3.8 million and lower non-controlling interests of $1.6 million. Net loss increased $18.3 million, or 32.5%, for the year ended December 31, 2011 compared to 2010, primarily due to higher losses from discontinued operations of $43.6 million, lower net income from continuing operations of $30.4 million, partially offset by lower non-controlling interests of $36.7 million and lower loss from sale of discontinued operations of $19.0 million. For the year ended December 31, 2011, losses from discontinued operations included impairment charges of $165.4 million, of which $137.7 million was for goodwill, $17.1 million was for intangibles, and a non-cash impairment charge of $10.6 million for internally-developed software. In addition, we incurred bad debt expense of $8.9 million for accounts receivable we deemed to be uncollectible. Finally, we incurred $1.8 million in expense to write off various other assets and to accrue for expenses related to the closure of businesses. The decrease in net income attributed to noncontrolling interests was largely due to our purchase of the remaining redeemable noncontrolling interests of CoreLogic Information Solutions Holdings, Inc. during the first quarter of 2011.

For additional information related to our results of operations for each of our reportable segments please see the discussions under "Data and Analytics," "Mortgage Origination Services" and ""Asset Management and Processing Solutions" below.

Our historical consolidated financial statements have been recast to account for our marketing services business and our consumer services, transportation services, and appraisal management company businesses, FAFC and our employer and litigation services business, each as discontinued operations for all periods presented. Accordingly, we have reflected the results of operations of these businesses as discontinued operations in the consolidated statements of operations and the consolidated statements of cash flows.

Unless otherwise indicated, the Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K relate solely to the discussion of our continuing operations.

32-------------------------------------------------------------------------------- Table of Contents Data and Analytics 2012 vs. 2011 2011 vs. 2010 (in thousands, except percentages) 2012 2011 2010 $ Change % Change $ Change % Change Operating revenue $ 616,110 $ 548,146 $ 463,513 $ 67,964 12.4 % $ 84,633 18.3 % Cost of services (exclusive of depreciation and amortization below) 287,910 242,474 202,520 45,436 18.7 % 39,954 19.7 % Selling, general and administrative expenses 146,786 163,005 124,011 (16,219 ) -10.0 % 38,994 31.4 % Depreciation and amortization 72,391 67,230 48,722 5,161 7.7 % 18,508 38.0 % Total operating expenses 507,087 472,709 375,253 34,378 7.3 % 97,456 26.0 % Operating income 109,023 75,437 88,260 33,586 44.5 % (12,823 ) -14.5 % Total interest expense, net (1,553 ) (365 ) (293 ) (1,188 ) 325.5 % (72 ) 24.6 % Gain/(loss) on investments and other, net 2,488 (821 ) 280 3,309 -403.0 % (1,101 ) -393.2 % Income from continuing operations before income taxes 109,958 74,251 88,247 35,707 48.1 % (13,996 ) -15.9 % Income from continuing operations before equity in earnings of affiliates 109,958 74,251 88,247 35,707 48.1 % (13,996 ) -15.9 % Equity in earnings of affiliates 2,197 1,512 4,606 685 45.3 % (3,094 ) -67.2 % Income from continuing operations $ 112,155 $ 75,763 $ 92,853 $ 36,392 48.0 % $ (17,090 ) -18.4 % Operating Revenues Data and analytics segment operating revenues were $616.1 million, $548.1 million and $463.5 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $68.0 million, or 12.4%, in 2012 compared to 2011; and an increase of $84.6 million, or 18.3%, in 2011 compared to 2010.

Acquisition activity accounted for $34.2 million and $47.9 million of the increase in 2012 and 2011, respectively. For the year ended December 31, 2012, excluding acquisition activity, the increase of $33.8 million was due to higher document retrieval services revenues of $17.9 million, growth in analytics revenues of $15.4 million, higher data licensing revenues of $6.1 million, higher Multiple Listing Services solutions revenues of $2.0 million, partially offset by decreased information report revenues of $1.1 million, and lower other revenues of $6.5 million. Information report revenues for 2012 were negatively impacted by challenging market conditions in our tenancy services business and regulatory conditions affecting certain customers of our under-banked credit services business. For the year ended December 31, 2011, excluding acquisition activity, the increase of $36.8 million was due to growth in advisory revenues including project-based revenues of $16.2 million and document retrieval services revenues of $14.7 million. In addition, we experienced higher data licensing revenues of $7.7 million, higher geospatial solutions services revenues of $4.0 million and higher other revenues of $1.3 million; these were partially offset by the decline in information reports revenues of $4.5 million and service revenues of $2.6 million.

Cost of Services Data and analytics segment cost of services were $287.9 million, $242.5 million and $202.5 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $45.4 million, or 18.7%, for 2012 compared to 2011 and an increase of $40.0 million, or 19.7%, for 2011 compared to 2010.

Acquisition activity accounted for $11.3 million and $15.3 million of the increase in 2012 and 2011, respectively. For the year ended December 31, 2012, excluding acquisition activity, the increase of $34.1 million was due to higher revenues and a shift in product mix primarily related to higher document retrieval services. For the year ended December 31, 2011, excluding acquisition activity, the increase of $24.6 million was due to product mix shift relating to the increase in project-based revenues and document retrieval services.

33-------------------------------------------------------------------------------- Table of Contents Selling, General and Administrative Expense Data and analytics segment selling, general and administrative expenses were $146.8 million, $163.0 million and $124.0 million for the years ended December 31, 2012, 2011 and 2010, respectively, a decrease of $16.2 million, or 10.0%, in 2012 compared to 2011 and an increase of $39.0 million, or 31.4%, in 2011 compared to 2010. Acquisition activity accounted for $13.1 million and $18.4 million of the increase in 2012 and 2011, respectively. For the year ended December 31, 2012, excluding acquisition activity, the decrease of $29.4 million was due to lower corporate shared service costs of $18.7 million in connection with our cost-reduction initiatives, lower legal expense due to proceeds from the settlement of litigation to enforce patent and other intellectual property rights of $7.0 million, lower external services of $3.4 million, lower other expense of $3.9 million, lower marketing expense of $1.3 million, partially offset by higher compensation expenses of $2.5 million and higher licensing software expense of $2.4 million. We allocate expenses, from corporate, to our business segments for various shared service costs such as human resources, legal, accounting and finance, and technology infrastructure cost. For the year ended December 31, 2011, excluding acquisition activity, selling, general and administrative expense increased $20.6 million due to higher corporate shared service costs of $32.3 million, partially offset by lower professional fees of $8.6 million, lower compensation expenses of $2.3 million and lower other expense of $0.8 million.

Depreciation and Amortization Data and analytics segment depreciation and amortization expense were $72.4 million, $67.2 million and $48.7 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $5.2 million or 7.7%, in 2012 compared to 2011, and an increase of $18.5 million, or 38.0%, in 2011 compared to 2010. Acquisition activity accounted for $9.2 million and $13.7 million of the increase in 2012 and 2011, respectively. For the years ended December 31, 2012 and 2011, excluding acquisition activity, the decrease of $4.1 million and the increase of $4.8 million, respectively, were primarily due to write-offs of certain non-performing assets in 2011.

Gain/(Loss) on Investments and Other, Net Data and analytics segment gain on investments and other, net were $2.5 million and $0.3 million for the years ended December 31, 2012 and 2010, respectively, and a loss of $0.8 million for the year ended 2011; a variance of $3.3 million, or 403.0%, in 2012 compared to 2011, and a variance of $1.1 million, or 393.2%, in 2011 compared to 2010. Acquisition activity accounted for $1.2 million and $0.1 million of the variance in 2012 and 2011, respectively. For the year ended December 31, 2012, excluding acquisition activity, the increase of $2.1 million was due to the gain on sale of an investment in an affiliate. For the year ended December 31, 2011, excluding acquisition activity, the decrease of $1.2 million, was primarily related to a loss on sale of affiliate of $0.8 million during the third quarter of 2011.

Equity in Earnings of Affiliates Data and analytics segment equity in earnings of affiliates were $2.2 million, $1.5 million and $4.6 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $0.7 million, or 45.3%, in 2012 compared to 2011, and a decrease of $3.1 million, or 67.2%, in 2011 compared to 2010.

Acquisition activity accounted for $0.9 million and $0.3 million of the increase in 2012 and 2011, respectively. For the year ended December 31, 2011, excluding acquisition activity, the decrease of $3.4 million was due to lower volumes in minority investments related to market conditions and the acquisition of the remaining controlling interest in RP Data in May of 2011.

34-------------------------------------------------------------------------------- Table of Contents Mortgage Origination Services 2012 vs. 2011 2011 vs. 2010 (in thousands, except percentages) 2012 2011 2010 $ Change % Change $ Change % Change Operating revenue $ 635,615 $ 482,076 $ 466,117 $ 153,539 31.8 % $ 15,959 3.4 % Cost of services (exclusive of depreciation and amortization below) 335,769 284,914 259,152 50,855 17.8 % 25,762 9.9 % Selling, general and administrative expenses 102,338 102,810 106,346 (472 ) -0.5 % (3,536 ) -3.3 % Depreciation and amortization 26,013 22,510 17,844 3,503 15.6 % 4,666 26.1 % Total operating expenses 464,120 410,234 383,342 53,886 13.1 % 26,892 7.0 % Operating income 171,495 71,842 82,775 99,653 138.7 % (10,933 ) -13.2 % Total interest (expense)/income, net (591 ) 2,895 1,483 (3,486 ) -120.4 % 1,412 95.2 % Gain/(loss) on investments and other, net 263 (1,519 ) (1,183 ) 1,782 -117.3 % (336 ) 28.4 % Income from continuing operations before income taxes 171,167 73,218 83,075 97,949 133.8 % (9,857 ) -11.9 % Income from continuing operations before equity in earnings of affiliates 171,167 73,218 83,075 97,949 133.8 % (9,857 ) -11.9 % Equity in earnings of affiliates 55,571 47,673 64,588 7,898 16.6 % (16,915 ) -26.2 % Income from continuing operations $ 226,738 $ 120,891 $ 147,663 $ 105,847 87.6 % $ (26,772 ) -18.1 % Operating Revenues Mortgage origination services segment operating revenues were $635.6 million, $482.1 million and $466.1 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $153.5 million, or 31.8%, in 2012 compared to 2011; and an increase of $16.0 million, or 3.4%, in 2011 compared to 2010. Acquisition activity accounted for $11.8 million and $30.0 million of the increase in 2012 and 2011, respectively. For the year ended December 31, 2012, excluding acquisition activity, the increase of $141.8 million was due to higher mortgage origination volumes from higher refinancing activity, which increased credit services revenues by $64.6 million, tax services revenues by $56.2 million, flood certification revenues by $18.9 million and other revenues by $2.1 million. For the year ended December 31, 2011, excluding acquisition activity, the decrease of $14.1 million was primarily due to lower tax services revenues which were impacted by lower mortgage origination activity and lower deferred revenue recognition as we experienced a smaller life-of-loan servicing pool.

Cost of Services Mortgage origination services segment cost of services were $335.8 million, $284.9 million and $259.2 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $50.9 million, or 17.8%, in 2012 compared to 2011; and an increase of $25.8 million, or 9.9%, in 2011 compared to 2010.

Acquisition activity accounted for $8.9 million and $21.5 million of the increase in 2012 and 2011, respectively. For the year ended December 31, 2012, excluding acquisition activity, the increase of $42.0 million was due to higher origination volumes which resulted in higher credit bureau-related expense of $38.9 million primarily for our credit services business and higher other costs of services of $3.1 million. For the year ended December 31, 2011, excluding acquisition activity, the increase of $4.3 million was due to higher credit bureau-related expenses of $4.8 million related to our credit services business, partially offset by declines in other costs of services of $0.5 million.

35-------------------------------------------------------------------------------- Table of Contents Selling, General and Administrative Expenses Mortgage origination services segment selling, general and administrative expenses were $102.3 million, $102.8 million and $106.3 million for the years ended December 31, 2012, 2011 and 2010, respectively, a decrease of $0.5 million, or 0.5%, in 2012 compared to 2011; and a decrease of $3.5 million, or 3.3%, in 2011 compared to 2010. Acquisition activity accounted for $6.3 million and $9.0 million in 2012 and 2011, respectively. For the year ended December 31, 2012, excluding acquisition activity, the decrease of $6.7 million was due to lower corporate shared service costs of $20.1 million in connection with our cost-reduction initiatives, lower facilities costs of $5.8 million, partially offset by higher external services costs of $10.4 million, higher compensation expenses of $6.8 million and higher other expenses of $2.0 million. For the year ended December 31, 2011, excluding acquisition activity, the decrease of $12.5 million was primarily attributable to lower compensation expenses of $10.0 million from decreased headcount, lower management fees for investment in affiliates of $5.4 million, lower other expenses of $4.7 million, lower facilities costs of $2.3 million, lower external services of $1.9 million, partially offset by higher corporate shared service costs of $9.1 million and higher professional fees of $2.7 million.

Depreciation and Amortization Mortgage origination services segment depreciation and amortization expense were $26.0 million, $22.5 million and $17.8 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $3.5 million, or 15.6%, in 2012 compared to 2011; and an increase of $4.7 million, or 26.1%, in 2011 compared to 2010. Acquisition activity accounted for $1.2 million and $4.8 million of the increase in 2012 and 2011, respectively. The remaining variances relative to the prior periods are not significant.

Gain/(Loss) on Investments and Other, Net Mortgage origination services segment gain on investments and other was $0.3 million for the year ended December 31, 2012 and losses of $1.5 million and $1.2 million for the years ended December 31, 2011 and 2010, respectively, a variance of $1.8 million, or 117.3%, in 2012 compared to 2011; and a variance of $0.3 million, or 28.4%, in 2011 compared to 2010. For the year ended December 31, 2012, the gain was primarily comprised of excess distribution from the closure of an investment in affiliate. For the year ended December 31, 2011, the increase was primarily related to the $24.9 million pre-tax gain on the sale of our remaining investment in DealerTrack Holdings, Inc., which was sold during the first quarter of 2011, partially offset by $29.6 million in non-cash impairments due to other-than-temporary loss in value from the absence of an ability to recover the carrying amount of the investment from the under-performance of several investments in affiliates and continued changes in the regulatory environment.

Equity in Earnings of Affiliates Mortgage origination services segment equity in earnings of affiliates were $55.6 million, $47.7 million and $64.6 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $7.9 million, or 16.6%, in 2012 compared to 2011; and a decrease of $16.9 million, or 26.2%, in 2011 compared to 2010. For the year ended December 31, 2012, the increase was primarily due to higher mortgage loan refinance activity in 2012. For the year ended December 31, 2011, the decrease was due to lower loan origination activity and the closure by a major joint venture customer of an origination division that focused on Federal Housing Administration loans.

36-------------------------------------------------------------------------------- Table of Contents Asset Management and Processing Solutions 2012 vs. 2011 2011 vs. 2010 (in thousands, except percentages) 2012 2011 2010 $ Change % Change $ Change % Change Operating revenue $ 335,224 $ 329,273 $ 368,536 $ 5,951 1.8 % $ (39,263 ) -10.7 % Cost of services (exclusive of depreciation and amortization below) 230,417 235,596 239,966 (5,179 ) -2.2 % (4,370 ) -1.8 % Selling, general and administrative expenses 44,777 41,107 45,919 3,670 8.9 % (4,812 ) -10.5 % Depreciation and amortization 11,930 7,484 5,446 4,446 59.4 % 2,038 37.4 % Total operating expenses 287,124 284,187 291,331 2,937 1.0 % (7,144 ) -2.5 % Operating income 48,100 45,086 77,205 3,014 6.7 % (32,119 ) -41.6 % Total interest income/(expense), net 284 214 (3 ) 70 32.7 % 217 -7,233.3 % (Loss)/gain on investment and other, net - (745 ) 3,353 745 -100.0 % (4,098 ) -122.2 % Income from continuing operations before income taxes 48,384 44,555 80,555 3,829 8.6 % (36,000 ) -44.7 % Income from continuing operations before equity in earnings of affiliates 48,384 44,555 80,555 3,829 8.6 % (36,000 ) -44.7 % Equity in earnings/(losses) of affiliates - (245 ) 755 245 -100.0 % (1,000 ) -132.5 % Income from continuing operations $ 48,384 $ 44,310 $ 81,310 $ 4,074 9.2 % $ (37,000 ) -45.5 % Operating Revenues Asset management and processing solutions segment operating revenues were $335.2 million, $329.3 million and $368.5 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $6.0 million, or 1.8%, in 2012 compared to 2011; and a decrease of $39.3 million, or 10.7%, in 2011 compared to 2010. Acquisition activity accounted for $8.3 million of the variance in 2011.

For the year ended December 31, 2012, the increase was due to higher loss mitigation services revenues of $22.3 million from stronger volumes and pricing and higher field services revenues of $7.2 million, partially offset by lower volumes in real estate owned asset management and other default revenues of $12.6 million, lower claims management revenue of $3.4 million, lower other revenues of $3.1 million, lower technology revenues of $2.9 million and lower broker price opinion revenues of $1.5 million. For the year ended December 31, 2011, excluding acquisition activity, the decrease of $47.6 million was primarily driven by a $27.5 million decline in broker price opinion revenues as two major customers moved to in-source their business and as changing market conditions reduced the demand for our services. Further, the continued slow-down in the processing of delinquent mortgages by servicers and the previously disclosed loss of a technology solutions customer negatively impacted our default services revenues by $15.1 million and other businesses by $16.5 million in 2011. Revenues for this segment were also impacted negatively by the exit of our second lien outsourcing service line in the first quarter of 2011, which contributed approximately $8.1 million of the decline in revenue in 2011 compared to 2010. These decreases were partially offset by an improvement in revenues of $19.6 million from greater volume, new customer signings and pricing improvements in our field services business.

Cost of Services Asset management and processing solutions segment cost of services were $230.4 million, $235.6 million and $240.0 million for the years ended December 31, 2012, 2011 and 2010, respectively, a decrease of $5.2 million, or 2.2%, in 2012 compared to 2011; and a decrease of $4.4 million, or 1.8%, in 2011 compared to 2010. Acquisition activity accounted for $3.1 million of the variance for the year ended December 31, 2011. For the year ended December 31, 2012, the decrease was primarily due to a shift in product mix with higher margin services provided during the year and the impact of lower headcount 37-------------------------------------------------------------------------------- Table of Contents and higher efficiency in connection with our cost-reduction initiatives. For the year ended December 31, 2011, excluding acquisition activity, the decrease of $7.5 million was due to significantly decreased volumes of services.

Selling, General and Administrative Expenses Asset management and processing solutions segment selling, general and administrative expenses were $44.8 million, $41.1 million and $45.9 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $3.7 million, or 8.9%, in 2012 compared to 2011; and a decrease of $4.8 million, or 10.5%, in 2011 compared to 2010. Acquisition activity accounted for $1.2 million of the variance for the year ended December 31, 2011. For the year ended December 31, 2012, the increase was primarily due to higher corporate shared service costs of $7.2 million, higher other expenses of $0.7 million, partially offset by lower compensation expenses of $2.5 million and lower marketing expenses of $1.7 million. For the year ended December 31, 2011, excluding acquisition activity, the decrease of $5.9 million was due to lower professional fees of $2.7 million, lower compensation expenses of $2.4 million, lower corporate shared service costs of $1.8 million, partially offset by higher other expenses of $1.0 million.

Depreciation and Amortization Asset management and processing solutions segment depreciation and amortization expense were $11.9 million, $7.5 million and $5.4 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $4.4 million, or 59.4%, in 2012 compared to 2011; and an increase of $2.0 million, or 37.4%, in 2011 compared to 2010. For the year ended December 31, 2012, the increase was primarily due to write-offs of certain non-performing assets. Acquisition activity accounted for $1.1 million of the increase for the year ended December 31, 2011.

(Loss)/Gain on Investments and Other, Net Asset management and processing solutions segment loss on investments and other was $0.7 million and a gain of $3.4 million for the years ended December 31, 2011 and 2010, respectively. No gain or loss was recorded for the year ended December 31, 2012. The 2011 balance reflects the loss incurred on the exit of our second lien outsourcing service line. The 2010 balance primarily represents a gain associated with the acquisition of a controlling interest in an investment that was previously accounted for as an investment in an affiliate.

Equity in Earnings/(Losses) of Affiliates Asset management and processing solutions segment equity in losses of affiliates was $0.2 million and equity in earnings of affiliates was $0.8 million for the years ended December 31, 2011 and 2010, respectively. No equity in earnings/(losses) of affiliates was recorded for the year ended December 31, 2012. Equity in earnings of affiliates is not a significant balance for the asset management and processing solutions segment.

38-------------------------------------------------------------------------------- Table of Contents Corporate 2012 vs. 2011 2011 vs. 2010 (in thousands, except percentages) 2012 2011 2010 $ Change % Change $ Change % Change Operating revenue $ 640 $ 41,789 $ 59,125 $ (41,149 ) -98.5 % $ (17,336 ) -29.3 % Cost of services (exclusive of depreciation and amortization below) - 33,934 44,587 (33,934 ) -100.0 % (10,653 ) -23.9 % Selling, general and administrative expenses 83,618 93,213 126,226 (9,595 ) -10.3 % (33,013 ) -26.2 % Depreciation and amortization 23,515 19,163 23,676 4,352 22.7 % (4,513 ) -19.1 % Total operating expenses 107,133 146,310 194,489 (39,177 ) -26.8 % (48,179 ) -24.8 % Operating loss (106,493 ) (104,521 ) (135,364 ) (1,972 ) 1.9 % 30,843 -22.8 % Total interest expense, net (50,608 ) (61,034 ) (31,412 ) 10,426 -17.1 % (29,622 ) 94.3 % (Loss)/gain on investment and other, net (5,267 ) 63,090 (13,335 ) (68,357 ) -108.3 % 76,425 -573.1 % Loss from continuing operations before income taxes (162,368 ) (102,465 ) (180,111 ) (59,903 ) 58.5 % 77,646 -43.1 % Provision for income taxes 80,396 67,175 30,323 13,221 19.7 % 36,852 121.5 % Loss from continuing operations before equity in earnings of affiliates (242,764 ) (169,640 ) (210,434 ) (73,124 ) 43.1 % 40,794 -19.4 % Equity in losses of affiliates (21,785 ) (18,670 ) (28,308 ) (3,115 ) 16.7 % 9,638 -34.0 % Net loss from continuing operations $ (264,549 ) $ (188,310 ) $ (238,742 ) $ (76,239 ) 40.5 % $ 50,432 -21.1 % Operating Revenues Corporate operating revenues were $0.6 million, $41.8 million and $59.1 million for the years ended December 31, 2012, 2011 and 2010, respectively. For the years ended December 31, 2012 and 2011, the decrease in corporate operating revenues was related to the outsourcing of certain IT and business process functions in connection with the sale of CoreLogic Global Services Private Limited ("CoreLogic India"), our India-based back-office operations, to Cognizant in August 2011. We also had an allocation of $3.4 million in purchase accounting reserves to revenue in the first quarter of 2010.

Cost of Services Corporate cost of services were $33.9 million and $44.6 million for the years ended December 31, 2011 and 2010, respectively. There was no cost of services record in corporate for the year ended December 31, 2012. For the years ended December 31, 2012 and 2011, the decrease in corporate cost of services is related to the outsourcing of certain IT and business process functions in connection with the sale of CoreLogic India in August 2011.

Selling, General and Administrative Expenses Corporate selling, general and administrative expenses were $83.6 million, $93.2 million and $126.2 million for the years ended December 31, 2012, 2011 and 2010, respectively, a decrease of $9.6 million, or 10.3%, in December 31, 2012 compared to 2011; and a decrease of $33.0 million, or 26.2%, in 2011 compared to 2010. For the year ended December 31, 2012, the decrease was primarily due to our cost-reduction initiatives which resulted in reduced salaries and benefits of $14.9 million related to corporate workforce reductions and the outsourcing of our technology infrastructure to Dell as part of our TTI in July 2012, lower facility costs of $18.0 million related to our prior year exit from certain leased buildings in Westlake, Texas and decreased professional fees of $23.4 million. During 2011, we incurred significant professional fees associated with the outsourcing of our business process functions and other corporate initiatives. Offsetting these decreases during 2012 were 39-------------------------------------------------------------------------------- Table of Contents lower corporate costs of 23.8 million being allocated to our operating segments, increased services fees of $11.1 million, an early equipment lease termination fee of $3.1 million related to the TTI, a gain of $8.1 million on the sale of a building in Poway, California in 2011 and other expense increases of $0.6 million. For the year ended December 31, 2011, the decrease was due to reduced compensation-related expenses of $10.1 million, a gain of $8.1 million on the sale of a building in Poway, California and higher corporate cost allocated to our operating segments of $40.7 million. Offsetting these decreases during 2011 were higher salaries of $11.1 million in connection with the transfer of segment level employees effective January 1, 2011 to our new corporate shared service function, a $14.2 million charge related to our exit from certain leased buildings in Westlake, Texas and other expense increases of $0.6 million.

Depreciation and Amortization Corporate group depreciation and amortization expense were $23.5 million, $19.2 million and $23.7 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $4.4 million, or 22.7%, in 2012 compared to 2011; and a decrease of $4.5 million, or 19.1%, in 2011 compared to 2010. The 2012 increase related to accelerated depreciation of technology infrastructure assets as part of our TTI. The 2011 decrease was primarily due to the amortization in the prior year of certain corporate deferred assets with useful lives that have since expired.

Total Interest Expense, net Net interest expense was $50.6 million, $61.0 million and $31.4 million for the years ended December 31, 2012, 2011 and 2010, respectively, a decrease of $10.4 million, or 17.1%, in 2012 compared to 2011; and an increase of $29.6 million, or 94.3%, in 2011 compared to 2010. For the year ended December 31, 2012, the decrease was due to the expensing of deferred financing costs of $10.2 million in the prior year in connection with the refinancing of our new credit facility.

For the year ended December 31, 2011, the increase was primarily due to higher average outstanding debt balances as a result of new credit facilities and the issuance of $400 million of our senior unsecured notes in May 2011. In addition, deferred financing costs in the amount of $10.2 million associated with our prior credit facility were expensed in the second quarter of 2011.

(Loss)/Gain on Investments and Other, Net Loss on investments and other, net was $5.3 million and $13.3 million for the years ended December 31, 2012 and 2010, respectively, and a gain on investment and other, net of $63.1 million for the year ended December 31, 2011, a variance of $68.4 million, or 108.3%, in 2012 compared to 2011; and a variance of $76.4 million, or 573.1%, in 2011 compared to 2010. For the year ended December 31, 2012, the variance was primarily due to an impairment loss of $7.5 million on land held for investment and a gain in the prior year of $58.9 million upon step-up of our initial investment in RP Data to fair value following our acquisition of the remaining outstanding shares in May 2011. For the year ended December 31, 2011, the variance is primarily due to a gain of $58.9 million upon step-up of our initial investment in RP Data to fair value following our acquisition of the remaining outstanding shares in May 2011 and an impairment loss of $14.5 million on an investment in 2010.

Equity in Losses of Affiliates Equity in losses of affiliates were $21.8 million, $18.7 million and $28.3 million for the years ended December 31, 2012, 2011 and 2010, respectively, an increase of $3.1 million, or 16.7%, in 2012 compared to 2011; and a decrease of $9.6 million, or 34.0%, in 2011 compared to 2010. Corporate recognizes the income tax expense on the equity in earnings from our investment in affiliates.

The 2012 and 2011 variances are directly correlated to income taxes on the equity in earnings of our affiliates held as investment in our operating segments.

Provision for Income Taxes Provision for income taxes from continuing operations was $80.4 million, $67.2 million and $30.3 million for the years ended December 31, 2012, 2011 and 2010, respectively. Our effective income tax rate was 47.9% for 2012, 75.0% for 2011 and 71.3% for 2010. In addition to our normal recurring rate impacting items, such as our state and foreign income taxes, uncertain tax positions, and return to provision items, we have non recurring rate impacting items. During the year ended December, 31, 2012, we recorded out of period adjustments primarily for periods prior to 2010. We also increased our valuation allowance on federal and state capital loss carryovers, state net operating loss carryovers, and foreign deferred tax assets and net operating loss carryovers principally as a result of valuation allowances provided on a foreign subsidiary. For the year ended December 31, 2011, we had a reversal of deferred taxes related to our interest in Dorado when it was held as an equity method investment and excess tax gain on the sale of CoreLogic India. For the year ended December 31, 2010, we had 40-------------------------------------------------------------------------------- Table of Contents non-deductible transaction costs incurred in connection with the Separation and the taxes associated with the restructuring of our India subsidiary.

Liquidity and Capital Resources Cash and cash equivalents totaled $148.9 million and $259.3 million as of December 31, 2012 and 2011, respectively; a decrease of $110.4 million compared to 2011 and a decrease of $166.9 million compared to 2010.

We hold our cash balances inside and outside of the U.S. Our cash balances held outside of the U.S. are primarily related to our international operations. At December 31, 2012, we held $34.1 million in foreign jurisdictions. Most of the amounts held outside of the U.S. could be repatriated to the U.S. but, under current law, would be subject to U.S. federal income taxes, less applicable foreign tax credits. We plan to maintain significant cash balances outside the U.S. for the foreseeable future.

Restricted cash of $22.1 million and $22.0 million at December 31, 2012 and 2011, respectively, represents cash pledged for various letters of credit secured by the Company.

Cash Flow Operating Activities. Cash provided by operating activities reflects net income adjusted for certain non-cash items and changes in operating assets and liabilities. Total cash provided by operating activities was $363.1 million, $160.9 million and $206.2 million for the years ended December 31, 2012, 2011 and 2010, respectively. Cash provided by discontinued operating activities was approximately $0.8 million and $42.0 million for the years ended December 31, 2012 and 2010, respectively, and cash used in by discontinued operating activities was $10.7 million for the year ended December 31, 2011. The increase in cash provided by operating activities in 2012 compared to 2011 was primarily due to higher profitability levels in the current period, higher dividends received from investments in affiliates and timing of payments for accounts payable and accrued expenses. The decrease in cash provided by continuing operating activities in 2011 compared to 2010 was primarily due to lower profitability levels and declining dividends from our investments in affiliates experienced in 2011.

Investing Activities. Total cash used in investing activities consists primarily of capital expenditures, acquisitions and dispositions. Cash used in investing activities was approximately $146.9 million, and $188.0 million for the years ended December 31, 2012 and 2011, respectively. Cash provided by investing activities was $61.2 million for the year ended 2010. Cash used in discontinued investing activities was approximately $4.1 million, $4.5 million, and $82.7 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Cash used in investing activities during 2012 was primarily related to investments in property and equipment and capitalized data of $52.6 million and $31.9 million, respectively, and the acquisition of CDS for $78.8 million in December, 2012; partially offset by net proceeds of $10.0 million from the sale of subsidiaries, proceeds of $8.0 million from the sale of our investment in Lone Wolf Real Estate Technologies and proceeds from the sale of property and equipment of $1.9 million.

Cash used in investing activities during 2011 was primarily related to greater acquisition activity in 2011 including the acquisition of Dorado Network Systems Corporation for $31.6 million in cash in March 2011, the investment in STARS for $20.0 million in cash in March 2011, $157.2 million used to acquire the remaining interest in RP Data in May 2011 and the acquisition of Tarasoft Corporation in September 2011 for $30.3 million. The use of cash was partially offset by proceeds from the sale of our investments of $74.6 million, primarily DealerTrack Holdings Inc., our sale of CoreLogic India for net proceeds of $28.1 million after working capital adjustments, and the sale of certain land and buildings located in Poway, California for $25.0 million. In addition, we invested cash for property and equipment and capitalized data of $45.2 million and $27.0 million, respectively. The 2011 increase in cash used in investing activities compared to 2010 was primarily due to proceeds from sale of discontinued operations of $265.0 million in 2010, which did not recur in 2011 and cash paid for 2011 acquisitions.

For the year ending December 31, 2013, the Company anticipates investing between $80 million and $90 million in capital expenditures for property and equipment, and capitalized data. Capital expenditures are expected to be funded by existing cash balances, cash generated from operations or additional borrowings.

Financing Activities. Total cash used in financing activities was approximately $332.4 million, $149.9 million and $311.9 million for the years ended December 31, 2012, 2011 and 2010, respectively. Cash used in discontinued financing activities was $0.1 million for the year ended December 31, 2012 and cash provided by discontinued financing activities was approximately $0.1 million, and $29.1 million for the years ended December 31, 2011 and 2010, respectively.

41-------------------------------------------------------------------------------- Table of Contents Net cash used in financing activities during 2012 was primarily comprised of repayment of long-term debt of $166.7 million and share repurchases of $226.6 million, partially offset by proceeds from issuance of stock related to stock options and employee benefit plans of $13.5 million and proceeds from issuance of long-term debt of $50.0 million to replace our A$50.0 million borrowed under the multicurrency revolving sub-facility.

For the year ended December 31, 2011, we repurchased $176.5 million of our common stock and purchased the remaining noncontrolling interest in CoreLogic Information Solutions Holdings, Inc. for $72.0 million in February 2011. In May 2011, we issued $400.0 million aggregate principal amount of senior notes in a private placement and entered into a credit agreement which provides for a $350.0 million five-year term loan facility and a $550.0 million five-year revolving credit facility (which includes a $100.0 million multicurrency revolving sub-facility and a $50.0 million letter of credit sub-facility). The credit agreement also provides for the ability to increase the term loan facility and revolving facility commitments provided that the total credit exposure thereunder does not exceed $1.4 billion in the aggregate. Proceeds from the aforementioned senior notes and credit agreement were partially used to repay interest-bearing acquisition notes, and to repay the previous revolving line of credit and term loan facility. Proceeds from these financing activities for the year ended December 31, 2011 were $858.2 million and repayments were $733.4 million for the year ended December 31, 2011. Net cash used in continuing financing activities was lower primarily due to lower purchases of redeemable noncontrolling interest of $313.8 million, partially offset by higher levels of share repurchases relative to 2010.

Financing and Financing Capacity We had total debt outstanding of $792.4 million and $908.3 million as of December 31, 2012 and 2011, respectively. Our significant debt instruments are described below.

Senior Notes On May 20, 2011, we issued $400.0 million aggregate principal amount of 7.25% senior notes due 2021 (the "Notes"). The Notes are guaranteed on a senior unsecured basis by each of our existing and future direct and indirect subsidiaries that guarantee our Credit Agreement. The Notes bear interest at 7.25% per annum and mature on June 1, 2021. Interest is payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2011.

The Notes are our senior unsecured obligations and: (i) rank equally with any of our existing and future senior unsecured indebtedness; (ii) rank senior to all our existing and future subordinated indebtedness; (iii) are subordinated to any of our secured indebtedness (including indebtedness under our credit facility) to the extent of the value of the assets securing such indebtedness; and (iv) are structurally subordinated to all of the existing and future liabilities (including trade payables) of each of our subsidiaries that do not guarantee the Notes. The guarantees will: (i) rank equally with any existing and future senior unsecured indebtedness of the guarantors; (ii) rank senior to all existing and future subordinated indebtedness of the guarantors; and (iii) are subordinated in right of payment to any secured indebtedness of the guarantors (including the guarantee of our credit facility) to the extent of the value of the assets securing such indebtedness.

The Notes are redeemable by us, in whole or in part on or after June 1, 2016 at a price up to 103.63% of the aggregate principal amount of the Notes, plus accrued and unpaid interest, if any, to the applicable redemption date, subject to other limitations. We may also redeem up to 35.00% of the original aggregate principal amount of the Notes at any time prior to June 1, 2014 with the proceeds from certain equity offerings at a price equal to 107.25% of the aggregate principal amount of the Notes, together with accrued and unpaid interest, if any, to the applicable redemption date, subject to certain other limitations. We may also redeem some or all of the Notes before June 1, 2016 at a redemption price equal to 100.00% of the aggregate principal amount of the Notes, plus a "make-whole premium," plus accrued and unpaid interest, if any, to the redemption date.

Upon the occurrence of specific kinds of change of control events, holders of the Notes have the right to cause us to purchase some or all of the Notes at 101.00% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

The indenture governing the Notes contains restrictive covenants that limit, among other things, our ability and that of our restricted subsidiaries to incur additional indebtedness or issue certain preferred equity, pay dividends or make other distributions or other restricted payments, make certain investments, create restrictions on distributions from restricted subsidiaries, create liens on properties and certain assets to secure debt, sell certain assets, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into certain transactions with affiliates and designate our subsidiaries as unrestricted subsidiaries. The indenture also contains customary events of default, including upon the failure to make timely payments on the Notes or other material indebtedness, the failure to satisfy certain covenants and specified events of 42-------------------------------------------------------------------------------- Table of Contents bankruptcy and insolvency. If we have a significant increase in our outstanding debt or if our EBITDA decreases significantly, we may be unable to incur additional amounts of indebtedness, and the holders of the notes may be unwilling to permit us to amend the restrictive covenants to provide additional flexibility. In addition, the indenture contains a financial covenant for the incurrence of additional indebtedness that requires that the interest coverage ratio be at least 2.00 to 1.00 on a pro forma basis after giving effect to any new indebtedness. There are carve-outs that permit us to incur certain indebtedness notwithstanding satisfaction of this ratio, but they are limited.

Based on our EBITDA and interest charges as of December 31, 2012, we would be able to incur additional indebtedness without breaching the limitation on indebtedness covenant contained in the indenture and we are in compliance with all of our covenants under the indenture.

Credit Agreement On May 23, 2011, the Company, CoreLogic Australia Pty Limited and the guarantors named therein entered into a senior secured credit facility agreement (the "Credit Agreement") with Bank of America, N.A. as administrative agent and other financial institutions. The Credit Agreement provides for a $350.0 million five-year term loan facility (the "Term Facility") and a $550.0 million revolving credit facility (the "Revolving Facility"). The Revolving Facility includes a $100.0 million multicurrency revolving sub-facility and a $50.0 million letter of credit sub-facility. As of December 31, 2011, A$50.0 million, or $51.0 million, was outstanding under the multicurrency revolving sub-facility related to our acquisition of RP Data . As of December 31, 2012, we replaced our A$50.0 million under the multicurrency revolving sub-facility through our domestic revolving sub-facility. The Credit Agreement also provides for the ability to increase the Term Facility and Revolving Facility commitments provided that the total credit exposure under the Credit Agreement does not exceed $1.4 billion in the aggregate.

The loans under the Credit Agreement bear interest, at our election, at (i) the Alternate Base Rate (as defined in the Credit Agreement) plus the Applicable Rate (as defined in the Credit Agreement) or (ii) the London interbank offering rate for Eurocurrency borrowings, or the LIBO Rate, adjusted for statutory reserves, or the Adjusted LIBO Rate plus the Applicable Rate. The initial Applicable Rate for Alternate Base Rate borrowings is 1.00% and for Adjusted LIBO Rate borrowings is 2.00%. Starting with the full fiscal quarter after the closing date, the Applicable Rate will vary depending on our leverage ratio. The minimum Applicable Rate for Alternate Base Rate borrowings will be 0.75% and the maximum will be 1.75%. The minimum Applicable Rate for Adjusted LIBO Rate borrowings will be 1.75% and the maximum will be 2.75%. The Credit Agreement also requires us to pay commitment fees for the unused portion of the Revolving Facility, which will be a minimum of 0.30% and a maximum of 0.50%, depending on our leverage ratio.

The Company's and the guarantors' senior secured obligations under the Credit Agreement are collateralized by a lien on substantially all of our and the guarantors' personal property assets and mortgages or deeds of trust on our and the guarantors' real property with a fair market value of $10.0 million or more (collectively, the "Collateral") and rank senior to any of our and the guarantors' unsecured indebtedness (including the Notes) to the extent of the value of the Collateral.

The Credit Agreement provides that loans under the Term Facility shall be repaid in quarterly installments, commencing on September 30, 2011 and continuing on each three-month anniversary thereafter until and including March 31, 2016 in an amount equal to $4.4 million on each repayment date from September 30, 2011 through June 30, 2013, $8.8 million on each repayment date from September 30, 2013 through June 30, 2014 and $13.1 million on each repayment date from September 30, 2014 through March 31, 2016. For the year ended December 31, 2012, we paid $61.3 million of outstanding indebtedness under the Term Facility of which $43.8 million was a prepayment. This prepayment was applied to the most current portion of the term loan amortization schedule. The outstanding balance of the term loan will be due on the fifth anniversary of the closing date of the Credit Agreement. The Term Facility is also subject to prepayment from (i) the net cash proceeds of certain debt incurred or issued by us and the guarantors and (ii) the net cash proceeds received by us or the guarantors from certain asset sales and recovery events, subject to certain reinvestment rights.

The Credit Agreement contains financial maintenance covenants, including a (i) maximum total leverage ratio not to exceed 4.25 to 1.00 (stepped down to 4.00 to 1.00 starting in the fourth quarter of 2012, with a further step down to 3.50 to 1.00 starting in the fourth quarter of 2013), (ii) a minimum interest coverage ratio of not less than 3.00 to 1.00, and (iii) a maximum senior secured leverage ratio not to exceed 3.25 to 1.00 (stepped down to 3.00 to 1.00 in the fourth quarter of 2012).

The Credit Agreement also contains restrictive covenants that limit, among other things, our ability and that of our subsidiaries to, incur additional indebtedness or issue certain preferred equity, pay dividends or make other distributions or other restricted payments, make certain investments, create restrictions on distributions from subsidiaries, to enter into sale leaseback transactions, amend the terms of certain other indebtedness, create liens on certain assets to secure debt, sell certain assets, consolidate, merge, sell or otherwise dispose of all or substantially all of our assets and enter into certain transactions with affiliates. The Credit Agreement also contains customary events of default, including upon the failure to make timely payments under the Term Facility and the Revolving Facility or other material indebtedness, the failure to satisfy certain 43-------------------------------------------------------------------------------- Table of Contents covenants, the occurrence of a change of control and specified events of bankruptcy and insolvency. If we have a significant increase in our outstanding debt or if our EBITDA decreases significantly, we may be unable to incur additional amounts of indebtedness, and the lenders under the Credit Agreement may be unwilling to permit us to amend the financial or restrictive covenants described above to provide additional flexibility. At December 31, 2012, we had borrowing capacity under the revolving lines of credit of $500.0 million, and were in compliance with the financial and restrictive covenants of our Credit Agreement.

Debt Issuance Costs In connection with issuing the Notes and entering into the Credit Agreement and the related extinguishment of our previously outstanding bank debt, we wrote-off $0.3 million of unamortized debt issuance costs related to our extinguished bank debt facilities to interest expense in the accompanying consolidated statements of operations for the year ended December 31, 2012. We amortize debt issuance costs to interest expense over the term of the Notes and Credit Agreement, as applicable.

Liquidity and Capital Strategy We believe that cash flow from operations and current cash balances, together with currently available lines of credit, will be sufficient to meet operating requirements through the next twelve months. Cash available from operations could be affected by any general economic downturn or any decline or adverse changes in the Company's business such as a loss of customers, competitive pressures or other significant change in business environment.

The Company strives to pursue a balanced approach to capital allocation and will consider the repurchase of common shares and the retirement of outstanding debt, and will pursue strategic acquisitions on an opportunistic basis.

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

Contractual Obligations A summary, by due date, of our total contractual obligations at December 31, 2012, is as follows: Less than 1 More than 5 (in thousands) Year 1-3 Years 3-5 Years Years Total Operating leases $ 41,583 $ 53,224 $ 31,577 $ 26,196 $ 152,580 Long-term debt (1) 102 84,676 256,250 452,645 793,673 Interest payments related to debt (2) 14,342 85,795 69,063 176,503 345,703 Service agreement (3) 62,012 122,087 93,525 - 277,624 Total (4) $ 118,039 $ 345,782 $ 450,415 $ 655,344 $ 1,569,580 (1) Includes an acquisition-related note payable of $15.0 million, which is non-interest bearing and discounted to $8.8 million.

(2) Estimated interest payments are calculated assuming current interest rates over minimum maturity periods specified in debt agreements.

(3) Net minimum commitment with Cognizant.

(4) Excludes a net tax liability of $8.5 million related to uncertain tax positions and deferred compensation of $32.2 million due to uncertainty of payment period.

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