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Equifax Inc · 10-Q · For 9/30/07

Filed On 10/30/07 5:14pm ET   ·   SEC File 1-06605   ·   Accession Number 1047469-7-8146

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10/30/07  Equifax Inc                       10-Q        9/30/07    5:66                                     Merrill Corp/New/- FA

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10-Q   ·   Quarterly Report
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11st Page
"Equifax Inc. Quarterly Report on Form 10-Q Quarter Ended September 30, 2007 Index
"Consolidated Statements of Income Three Months Ended September 30, 2007 and 2006
"Consolidated Financial Statements
"Consolidated Statements of Income Nine Months Ended September 30, 2007 and 2006
"Consolidated Balance Sheets September 30, 2007 and December 31, 2006
"Consolidated Statements of Cash Flows Nine Months Ended September 30, 2007 and 2006
"Consolidated Statements of Shareholders' Equity and Other Comprehensive Income Nine Months Ended September 30, 2007
"Notes to Consolidated Financial Statements
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Quantitative and Qualitative Disclosures About Market Risk
"Controls and Procedures
"Other Information
"Legal Proceedings
"Risk Factors
"Unregistered Sales of Equity Securities and Use of Proceeds
"Exhibits
"Signatures
"Index to Exhibits

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EQUIFAX INC. QUARTERLY REPORT ON FORM 10-Q QUARTER ENDED SEPTEMBER 30, 2007 INDEX

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

(Mark One)  

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

For the quarterly period ended September 30, 2007

OR

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

For the transition period from                             to                              .

Commission File Number: 001-06605

EQUIFAX INC.
(Exact name of registrant as specified in its charter)

Georgia
(State or other jurisdiction of
incorporation or organization)		   58-0401110
(I.R.S. Employer
Identification No.)

1550 Peachtree Street, N.W.,
Atlanta, Georgia
(Address of principal executive offices)
 
30309
(Zip Code)

404-885-8000
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes    o No

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (check one)

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o

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

        Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class
   Outstanding at October 26, 2007
Common Stock, $1.25 Par Value   131,838,520

 

 
EQUIFAX INC.

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2007

INDEX

 

 
    
   Page
PART I   Financial Information (Unaudited)    

Item 1.
 
Consolidated Financial Statements
 
 
    Consolidated Statements of Income—Three Months Ended September 30, 2007 and 2006   3
    Consolidated Statements of Income—Nine Months Ended September 30, 2007 and 2006   4
    Consolidated Balance Sheets—September 30, 2007 and December 31, 2006   5
    Consolidated Statements of Cash Flows—Nine Months Ended September 30, 2007 and 2006   6
    Consolidated Statements of Shareholders' Equity and Other Comprehensive Income—Nine
    Months Ended September 30, 2007		   7
    Notes to Consolidated Financial Statements   8

Item 2.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
26

Item 3.
 
Quantitative and Qualitative Disclosures About Market Risk
 
46

Item 4.
 
Controls and Procedures
 
46

PART II
 
Other Information
 
47

Item 1.
 
Legal Proceedings
 
47

Item 1A.
 
Risk Factors
 
48

Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
50

Item 6.
 
Exhibits
 
50

Signatures
 
51

Index to Exhibits
 
52

2

 

   
PART I. FINANCIAL INFORMATION

    ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS

    EQUIFAX INC.

CONSOLIDATED STATEMENTS OF INCOME

 
   Three Months Ended
September 30,
  
(In millions, except per share amounts)
   2007
   2006
  
 
   (Unaudited)

  
Operating revenue   $ 492.5   $ 394.6  
   
 
 
Operating expenses:              
  Cost of services (exclusive of depreciation and amortization below)     194.3     157.9  
  Selling, general and administrative expenses     130.1     95.7  
  Depreciation and amortization     38.9     20.4  
   
 
 
    Total operating expenses     363.3     274.0  
   
 
 
Operating income     129.2     120.6  
  Interest expense     (19.9 )   (7.9 )
  Minority interests in earnings, net of tax     (1.7 )   (1.0 )
  Other income, net     1.2     0.5  
   
 
 
Income before income taxes     108.8     112.2  
  Provision for income taxes     (40.9 )   (33.3 )
   
 
 
Net income   $ 67.9   $ 78.9  
   
 
 
Basic earnings per common share   $ 0.49   $ 0.62  
   
 
 
Weighted-average shares used in computing basic earnings per share     137.4     126.4  
   
 
 
Diluted earnings per common share   $ 0.48   $ 0.61  
   
 
 
Weighted-average shares used in computing diluted earnings per share     140.6     128.4  
   
 
 
Dividends per common share   $ 0.04   $ 0.04  
   
 
 

See Notes to Consolidated Financial Statements.

3

 

   
EQUIFAX INC.

CONSOLIDATED STATEMENTS OF INCOME

 
   Nine Months Ended
September 30,
  
(In millions, except per share amounts)
   2007
   2006
  
 
   (Unaudited)

  
Operating revenue   $ 1,352.2   $ 1,156.3  
   
 
 
Operating expenses:              
  Cost of services (exclusive of depreciation and amortization below)     553.5     466.5  
  Selling, general and administrative expenses     342.8     301.6  
  Depreciation and amortization     89.9     62.0  
   
 
 
    Total operating expenses     986.2     830.1  
   
 
 
Operating income     366.0     326.2  
  Interest expense     (37.7 )   (24.0 )
  Minority interests in earnings, net of tax     (4.4 )   (3.0 )
  Other income, net     2.5     16.0  
   
 
 
Income before income taxes     326.4     315.2  
  Provision for income taxes     (119.4 )   (103.8 )
   
 
 
Net income   $ 207.0   $ 211.4  
   
 
 
Basic earnings per common share   $ 1.56   $ 1.65  
   
 
 
Weighted-average shares used in computing basic earnings per share     132.4     127.8  
   
 
 
Diluted earnings per common share   $ 1.53   $ 1.62  
   
 
 
Weighted-average shares used in computing diluted earnings per share     135.5     130.1  
   
 
 
Dividends per common share   $ 0.12   $ 0.12  
   
 
 

See Notes to Consolidated Financial Statements.

4

 

   
EQUIFAX INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except par values)
   September 30,
 2007
   December 31,
 2006
  
 
   (Unaudited)

    
  
ASSETS              
Current assets:              
  Cash and cash equivalents   $ 87.0   $ 67.8  
  Trade accounts receivable, net of allowance for doubtful accounts of $7.8 and $8.7
    at September 30, 2007 and December 31, 2006, respectively		     302.7     244.8  
  Prepaid expenses     31.0     21.5  
  Other current assets     23.7     11.1  
   
 
 
    Total current assets     444.4     345.2  
   
 
 
Property and equipment:              
  Capitalized internal-use software and system costs     277.0     243.8  
  Data processing equipment and furniture     168.3     132.2  
  Land, buildings and improvements     84.0     29.7  
   
 
 
    Total property and equipment     529.3     405.7  
  Less accumulated depreciation and amortization     (290.3 )   (243.8 )
   
 
 
    Total property and equipment, net     239.0     161.9  
   
 
 
Goodwill     1,791.1     842.0  
Indefinite-lived intangible assets     95.6     95.2  
Purchased intangible assets, net     780.5     242.2  
Prepaid pension asset     59.2     47.7  
Other assets, net     70.9     56.4  
   
 
 
    Total assets   $ 3,480.7   $ 1,790.6  
   
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY              
Current liabilities:              
  Short-term debt and current maturities   $ 168.2   $ 330.0  
  Accounts payable     21.8     23.5  
  Accrued expenses     71.0     62.0  
  Accrued salaries and bonuses     51.6     41.9  
  Deferred revenue     67.5     62.7  
  Other current liabilities     91.2     62.0  
   
 
 
    Total current liabilities     471.3     582.1  
Long-term debt     1,240.9     173.9  
Deferred income tax liabilities, net     263.9     70.8  
Long-term pension and other postretirement benefit liabilities     60.5     65.3  
Other long-term liabilities     66.6     60.4  
   
 
 
  Total liabilities     2,103.2     952.5  
   
 
 
Shareholders' equity:              
  Preferred stock, $0.01 par value: Authorized shares—10.0; Issued shares—none     —     —  
  Common stock, $1.25 par value: Authorized shares—300.0; Issued shares—188.1
    and 186.3 at September 30, 2007 and December 31, 2006, respectively;
    Outstanding shares—131.9 and 124.7 at September 30, 2007 and December 31,
     2006, respectively		     235.1     232.9  
  Paid-in capital     996.6     609.2  
  Retained earnings     1,969.7     1,778.6  
  Accumulated other comprehensive loss     (185.8 )   (232.2 )
  Treasury stock, at cost, 52.5 shares and 57.7 shares at September 30, 2007 and
    December 31, 2006		     (1,580.5 )   (1,490.9 )
  Stock held by employee benefits trusts, at cost, 3.7 and 3.9 shares at September 30,
     2007 and December 31, 2006		     (57.6 )   (59.5 )
   
 
 
  Total shareholders' equity     1,377.5     838.1  
   
 
 
    Total liabilities and shareholders' equity   $ 3,480.7   $ 1,790.6  
   
 
 

See Notes to Consolidated Financial Statements.

5

 

   
EQUIFAX INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
   Nine Months Ended
September 30,
  
(In millions)
   2007
   2006
  
 
   (Unaudited)

  
Operating activities:              
  Net income   $ 207.0   $ 211.4  
  Adjustments to reconcile net income to net cash provided by operating
    activities:		              
    Depreciation and amortization     89.9     62.0  
    Stock-based compensation expense     13.2     14.4  
    Tax effects of stock-based compensation plans     12.9     6.9  
    Excess tax benefits from stock-based compensation plans     (12.5 )   (5.2 )
    Deferred income taxes     (4.2 )   3.7  
    Changes in assets and liabilities, excluding effects of acquisitions:              
      Accounts receivable, net     (4.5 )   (29.3 )
      Prepaid expenses and other current assets     (9.6 )   (6.7 )
      Other assets     (16.7 )   (3.9 )
      Current liabilities, excluding debt     (8.9 )   26.1  
      Other long-term liabilities, excluding debt     5.2     (25.7 )
   
 
 
Cash provided by operating activities     271.8     253.7  
   
 
 
Investing activities:              
  Capital expenditures     (85.3 )   (34.1 )
  Acquisitions, net of cash acquired     (291.0 )   —  
  Other     (3.8 )   (0.1 )
   
 
 
Cash used in investing activities     (380.1 )   (34.2 )
   
 
 
Financing activities:              
  Net short-term borrowings (repayments)     88.1     (0.6 )
  Net borrowings (repayments) under long-term revolving credit facilities     78.4     (47.0 )
  Treasury stock purchases     (605.7 )   (163.9 )
  Dividends paid     (15.4 )   (15.3 )
  Proceeds from exercise of stock options     27.1     19.8  
  Excess tax benefits from stock-based compensation plans     12.5     5.2  
  Proceeds from issuance of long-term debt     543.9     —  
  Other     (5.3 )   (0.2 )
   
 
 
Cash provided by (used in) financing activities     123.6     (202.0 )
   
 
 
Effect of foreign currency exchange rates on cash and cash equivalents     3.9     0.7  
   
 
 
Increase in cash and cash equivalents     19.2     18.2  
Cash and cash equivalents, beginning of period     67.8     37.5  
   
 
 
Cash and cash equivalents, end of period   $ 87.0   $ 55.7  
   
 
 

See Notes to Consolidated Financial Statements.

6

 

   
EQUIFAX INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

AND COMPREHENSIVE INCOME

(UNAUDITED)

 
   Common Stock
    
    
    
    
   Stock
Held By
Employee
Benefits
Trusts
    
  
 
    
    
   Accumulated
Other
Comprehensive
Loss
    
    
  
 
   Shares
Outstanding
   Amount
   Paid-In
Capital
   Retained
Earnings
   Treasury
Stock
   Total
Shareholders'
Equity
  
 
   (In millions, except per share amounts)

  
Balance, December 31, 2006   124.7   $ 232.9   $ 609.2   $ 1,778.6   $ (232.2 ) $ (1,490.9 ) $ (59.5 ) $ 838.1  
Net income   —     —     —     207.0     —     —     —     207.0  
Other comprehensive income   —     —     —     —     46.4     —     —     46.4  
Shares issued under stock plans   1.6     2.0     22.8     —     —     —     —     24.8  
Shares issued under benefits plans   0.3     0.2     1.8     —     —     —     1.9     3.9  
Treasury stock exchanged for
    option price		   —     —     —     —     —     (0.5 )   —     (0.5 )
Treasury stock exchanged for
    minimum tax withholdings		   —     —     —     —     —     (1.1 )   —     (1.1 )
Equity consideration issued for
    TALX acquisition		   20.6     —     330.7     —     —     532.9     —     863.6  
Treasury stock purchased ($40.51
    per share)*		   (15.3 )   —     —     —     —     (620.9 )   —     (620.9 )
Cash dividends ($0.04 per share)   —     —     —     (15.9 )   —     —     —     (15.9 )
Reclassification of director
    deferred compensation plan
    from liabilities to shareholders'
    equity based on plan
    amendments		   —     —     5.5     —     —     —     —     5.5  
Stock-based compensation
    expense		   —     —     13.2     —     —     —     —     13.2  
Tax effects of stock-based
    compensation plans		   —     —     12.9     —     —     —     —     12.9  
Dividends paid to employee
    benefits trusts		   —     —     0.5     —     —     —     —     0.5  
   
 
 
 
 
 
 
 
 
Balance, September 30, 2007   131.9   $ 235.1   $ 996.6   $ 1,969.7   $ (185.8 ) $ (1,580.5 ) $ (57.6 ) $ 1,377.5  
   
 
 
 
 
 
 
 
 
*
At September 30, 2007, approximately $161.7 million was authorized for future repurchases of our common stock.

Accumulated Other Comprehensive Loss consists of the following components:

 
   September 30,
 2007
   December 31,
 2006
  
 
   (In millions)

  
Foreign currency translation   $ (68.7 ) $ (113.2 )
Unrecognized actuarial losses and prior service cost related to our pension and other postretirement
    benefit plans, net of accumulated tax of $65.7 at September 30, 2007		     (113.4 )   —  
Minimum pension liability, net of accumulated tax of $4.5 at December 31, 2006     —     (7.7 )
Adjustment to initially apply SFAS 158, net of accumulated tax of $63.8 at December 31, 2006     —     (110.7 )
Cash flow hedging transactions, net of tax of $2.2 and $0.4 at September 30, 2007 and December 31,
     2006, respectively		     (3.7 )   (0.6 )
   
 
 
  Accumulated other comprehensive loss  </