Equifax Reports Third Quarter 2009 Results
ATLANTA, Oct. 21, 2009 /PRNewswire-FirstCall/ --
-- Third quarter revenue was $451.9 million, down 1 percent from the second
quarter of 2009.
-- Third quarter EPS was $0.47 and third quarter adjusted EPS was $0.57.
-- Announced agreement to acquire IXI Corporation, a leading provider of
information on consumer financial assets, income and spending.
Equifax Inc. (NYSE: EFX) today announced financial results for the quarter ended September 30, 2009. The company reported revenue of $451.9 million in the third quarter of 2009, a 7 percent decrease from the third quarter of 2008, of which 3 percent was due to the unfavorable effect of foreign exchange rates. Diluted earnings per share ("EPS") for the third quarter of 2009 was $0.47 compared to $0.56 in the same period of the prior year. On a non-GAAP basis, adjusted EPS, which excludes the impact of acquisition-related amortization expense and the restructuring and asset write-down charges and income tax benefit in the prior year, was $0.57 compared to $0.63 in the third quarter of 2008.
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"Our business continues to perform well in a very challenging operating environment. Strong operating margins and the strength of our balance sheet enable us to pursue strategic acquisitions that will further enhance our competitive position while providing incremental revenue and EPS growth," said Richard F. Smith, Equifax's Chairman and Chief Executive Officer. "Earlier today we announced an agreement on an important strategic acquisition, IXI Corporation. The wealth and asset data, which IXI owns, significantly broadens and deepens the insight about consumers' capacity, ability and propensity to spend or to pay on their obligations. This unique consumer wealth data substantially enhances our strategy of providing differentiated data, best-in-class analytics, and technology for our customers' decisioning needs."
Third Quarter 2009 Report
-- Revenue decreased 1 percent on a reported basis versus the second
quarter of 2009.
-- Operating margin was 23.5 percent, flat when compared to the second
quarter of 2009, but down from an adjusted operating margin of 25.6
percent in the third quarter of 2008, excluding the impact of
restructuring and asset write-down charges in the prior year.
-- Total debt at September 30, 2009 decreased $84.9 million from June 30,
2009.
U.S. Consumer Information Solutions (USCIS)
Total revenue was $200.7 million in the third quarter of 2009, down 5 percent when compared to the second quarter of 2009 and down 9 percent from the third quarter of 2008.
-- Online Consumer Information Solutions revenue was $131.4 million, down
13 percent from a year ago.
-- Mortgage Solutions revenue was $22.5 million, up 35 percent from a year
ago.
-- Credit Marketing Services revenue was $25.7 million, down 14 percent
from a year ago.
-- Direct Marketing Services revenue was $21.1 million, down 7 percent from
a year ago.
Operating margin for USCIS was 34.6 percent in the third quarter of 2009, down from 35.2 percent in the second quarter of 2009. Third quarter 2008 operating margin was 38.2 percent.
International
Total revenue was $114.9 million in the third quarter of 2009, a 9 percent increase over the second quarter of 2009, but a 13 percent decrease from the third quarter of 2008. In local currency, revenue was up 4 percent when compared to the second quarter of 2009, but down 4 percent when compared to the same period in the prior year.
-- Latin America revenue was $52.3 million, down 2 percent in local
currency and down 12 percent in U.S. dollars from a year ago.
-- Europe revenue was $36.5 million, down 8 percent in local currency and
down 19 percent in U.S. dollars from a year ago.
-- Canada Consumer revenue was $26.1 million, down 3 percent in local
currency and down 8 percent in U.S. dollars from a year ago.
Operating margin for International was 27.0 percent in the third quarter of 2009, up from 25.3 percent in the second quarter of 2009, but down from 30.0 percent in the third quarter of 2008.
TALX
Total revenue was $83.1 million in the third quarter of 2009, a 13 percent increase over the third quarter of 2008.
-- The Work Number revenue was $37.0 million, up 13 percent from a year
ago.
-- Tax and Talent Management Services revenue was $46.1 million, also up 13
percent from a year ago.
Operating margin for TALX was 21.4 percent in the third quarter of 2009, up from 16.1 percent in the third quarter of 2008.
North America Personal Solutions
Total revenue was $37.1 million, a 1 percent decrease from the second quarter of 2009 and a 9 percent decrease from the third quarter of 2008. Operating margin was 27.3 percent, up from 21.5 percent in the second quarter of 2009, but down from 29.8 percent in the third quarter of 2008.
North America Commercial Solutions
Total revenue was $16.1 million, flat in local currency and up 2 percent in U.S. dollars from the second quarter of 2009. Revenue was down 2 percent in local currency and down 4 percent in U.S. dollars compared to the third quarter of 2008. Operating margin was 17.8 percent, up from 15.4 percent in the second quarter of 2009 and up from 14.8 percent in the third quarter of 2008.
Fourth Quarter 2009 Outlook
Based on the current level of domestic and international business activity and current foreign exchange rates, adjusted EPS for the fourth quarter of 2009 is expected to be between $0.53 and $0.58.
About Equifax (www.equifax.com)
Equifax empowers businesses and consumers with information they can trust. A global leader in information solutions, we leverage one of the largest sources of consumer and commercial data, along with advanced analytics and proprietary technology, to create customized insights that enrich both the performance of businesses and the lives of consumers.
With a strong heritage of innovation and leadership, Equifax continuously delivers innovative solutions with the highest integrity and reliability. Businesses - large and small - rely on us for consumer and business credit intelligence, portfolio management, fraud detection, decisioning technology, marketing tools, and much more. We empower individual consumers to manage their personal credit information, protect their identity, and maximize their financial well-being.
Headquartered in Atlanta, Georgia, Equifax Inc. operates in the U.S. and 14 other countries throughout North America, Latin America and Europe. Equifax is a member of Standard & Poor's (S&P) 500® Index. Our common stock is traded on the New York Stock Exchange under the symbol EFX.
Earnings Conference Call and Audio Webcast
In conjunction with this release, Equifax will host a conference call tomorrow, October 22, 2009, at 8:30 a.m. (EDT) via a live audio webcast. To access the webcast, go to the Investor Center of our website at www.equifax.com. The discussion will be available via replay at the same site shortly after the conclusion of the webcast. This press release is also available at that website.
Non-GAAP Financial Measures
This earnings release presents operating income and margin excluding the 2008 third quarter restructuring and asset write-down charges and net income and diluted EPS excluding acquisition-related amortization expense, the 2008 restructuring and asset write-down charges, both net of tax, and the 2008 third quarter income tax benefit. These are important financial measures for Equifax but are not financial measures as defined by GAAP.
These non-GAAP financial measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as alternative measures of operating income, operating margin, net income or EPS as determined in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and related notes are presented in the Q&A. This information can also be found under "Investors/GAAP/Non-GAAP Measures" on our website at www.equifax.com.
Forward-Looking Statements
Management believes certain statements in this earnings release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management's views and assumptions regarding future events and business performance as of the time the statements are made. Management does not undertake any obligation to update any forward-looking statements.
Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by Equifax, including restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions), as well as from developments beyond Equifax's control, including but not limited to changes in worldwide and U.S. economic conditions that materially impact consumer spending, consumer debt and employment, changes in demand for Equifax's products and services, our ability to develop new products and services, pricing and other competitive pressures, our ability to achieve targeted cost efficiencies, risks relating to illegal third party efforts to access data, risks associated with our ability to complete and integrate acquisitions and other investments, changes in laws and regulations governing our business, including federal or state responses to identity theft concerns, and the outcome of our pending litigation. Certain additional factors are set forth in Equifax's Annual Report on Form 10-K for the year ended December 31, 2008 under Item 1A, "Risk Factors", and our other filings with the Securities and Exchange Commission.
EQUIFAX
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
Three Months Ended
September 30,
-------------
2009 2008
------ ------
(In millions, except
per share amounts) (Unaudited)
--------------
Operating revenue $451.9 $484.1
------ ------
Operating expenses:
Cost of services
(exclusive of
depreciation and
amortization below) 190.3 197.0
Selling, general and
administrative
expenses 115.7 138.5
Depreciation and
amortization 39.6 41.4
------ ------
Total operating
expenses 345.6 376.9
------ ------
Operating income 106.3 107.2
Interest expense (14.1) (16.9)
Other income, net 0.2 1.5
------ ------
Consolidated income
before income taxes 92.4 91.8
Provision for income
taxes (31.0) (18.0)
------ ------
Consolidated net income 61.4 73.8
Less: Net income
attributable to
noncontrolling
interest (1.7) (1.5)
------ ------
Net income attributable
to Equifax $59.7 $72.3
====== ======
Basic earnings per
common share $0.47 $0.57
====== ======
Weighted-average shares
used in computing basic
earnings per share 126.4 127.5
====== ======
Diluted earnings per
common share $0.47 $0.56
====== ======
Weighted-average shares
used in computing
diluted earnings per
share 128.0 129.8
====== ======
Dividends per common
share $0.04 $0.04
====== ======
EQUIFAX
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
Nine Months Ended
September 30,
-------------
2009 2008
------ ------
(In millions, except
per share amounts) (Unaudited)
-------------
Operating revenue $1,360.2 $1,489.1
-------- --------
Operating expenses:
Cost of services
(exclusive of
depreciation and
amortization below) 571.7 607.6
Selling, general and
administrative
expenses 355.4 403.1
Depreciation and
amortization 116.9 117.3
-------- --------
Total operating
expenses 1,044.0 1,128.0
-------- --------
Operating income 316.2 361.1
Interest expense (42.9) (53.9)
Other income, net 5.7 2.7
-------- --------
Consolidated income
before income taxes 279.0 309.9
Provision for income
taxes (100.4) (96.1)
-------- --------
Consolidated net income 178.6 213.8
Less: Net income
attributable to
noncontrolling
interest (4.9) (5.0)
-------- --------
Net income attributable
to Equifax $173.7 $208.8
======== ========
Basic earnings per
common share $1.38 $1.62
======== ========
Weighted-average shares
used in computing basic
earnings per share 126.3 128.7
======== ========
Diluted earnings per
common share $1.36 $1.59
======== ========
Weighted-average shares
used in computing
diluted earnings per
share 127.8 131.1
======== ========
Dividends per common
share $0.12 $0.12
======== ========
EQUIFAX
CONSOLIDATED BALANCE SHEETS
----------------------------
September 30, December 31,
------------- ------------
2009 2008
-------- --------
(In millions, except
par values) (Unaudited)
-----------
ASSETS
Current assets:
Cash and cash
equivalents $77.7 $58.2
Trade accounts receivable,
net of allowance for
doubtful accounts of $15.6
and $14.5 at September 30,
2009 and December 31, 2008,
respectively 251.7 253.4
Prepaid expenses 39.6 22.9
Other current assets 16.6 19.3
-------- --------
Total current
assets 385.6 353.8
-------- --------
Property and equipment:
Capitalized internal-
use software and system
costs 304.8 313.9
Data processing
equipment and
furniture 180.0 176.6
Land, buildings and
improvements 164.8 124.0
-------- --------
Total property and
equipment 649.6 614.5
Less accumulated
depreciation and
amortization (333.5) (328.2)
-------- --------
Total property and
equipment, net 316.1 286.3
-------- --------
Goodwill 1,813.9 1,760.0
Indefinite-lived
intangible assets 95.4 95.1
Purchased intangible
assets, net 626.1 682.2
Other assets, net 89.4 82.9
-------- --------
Total assets $3,326.5 $3,260.3
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt and
current maturities $299.7 $31.9
Capital lease
obligation 29.0 -
Accounts payable 25.6 29.9
Accrued expenses 51.0 57.6
Accrued salaries and
bonuses 51.4 54.2
Deferred revenue 59.4 65.7
Other current
liabilities 62.6 78.7
-------- --------
Total current
liabilities 578.7 318.0
Long-term debt 740.4 1,187.4
Deferred income tax
liabilities, net 248.7 215.3
Long-term pension and
other postretirement
benefit liabilities 139.9 166.0
Other long-term
liabilities 55.3 50.1
-------- --------
Total liabilities 1,763.0 1,936.8
-------- --------
Equifax 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 - 189.3 and
189.2 at September 30, 2009
and December 31, 2008,
respectively;
Outstanding shares - 126.4
and 126.3 at September 30,
2009 and December 31,
2008, respectively 236.6 236.5
Paid-in capital 1,088.4 1,075.2
Retained earnings 2,439.2 2,281.0
Accumulated other
comprehensive loss (317.7) (390.6)
Treasury stock, at cost,
60.2 shares and 59.7 shares
at September 30, 2009 and
December 31, 2008,
respectively (1,848.9) (1,837.9)
Stock held by employee
benefits trusts, at cost,
2.7 shares and 3.2 shares
at September 30, 2009 and
December 31, 2008,
respectively (46.9) (51.8)
-------- --------
Total Equifax
shareholders' equity 1,550.7 1,312.4
Noncontrolling interest 12.8 11.1
-------- --------
Total equity 1,563.5 1,323.5
-------- --------
Total liabilities and
equity $3,326.5 $3,260.3
======== ========
EQUIFAX
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------
Nine Months Ended
September 30,
-----------------
2009 2008
------ ------
(In millions) (Unaudited)
Operating activities:
Consolidated net income $178.6 $213.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 116.9 117.3
Stock-based compensation expense 13.5 15.9
Tax effects of stock-based compensation
plans 0.1 2.9
Excess tax benefits from stock-
based compensation plans (0.5) (1.9)
Deferred income taxes 24.6 (14.6)
Changes in assets and liabilities, excluding
effects of acquisitions:
Accounts receivable, net 11.8 15.9
Prepaid expenses and other current
assets (13.0) 0.2
Other assets (4.3) (4.7)
Current liabilities, excluding
debt (46.4) (8.7)
Other long-term liabilities, excluding
debt (12.5) (8.0)
------ ------
Cash provided by operating activities 268.8 328.1
------ ------
Investing activities:
Capital expenditures (51.2) (89.3)
Dividends from (investment
in) unconsolidated affiliates 1.8 (4.4)
Acquisitions, net of cash acquired (3.5) (17.8)
------ ------
Cash used in investing activities (52.9) (111.5)
------ ------
Financing activities:
Net short-term borrowings
(repayments) 247.5 (165.9)
Net (repayments) borrowings under long-
term revolving credit facilities (420.0) 90.0
Proceeds from issuance of long-term
debt - 2.2
Payments on long-term debt (6.6) (3.3)
Treasury stock purchases (9.1) (143.9)
Dividends paid to Equifax
shareholders (15.1) (15.4)
Dividends paid to noncontrolling
interests (3.3) (3.3)
Proceeds from exercise of stock
options 5.9 14.1
Excess tax benefits from stock-based
compensation plans 0.5 1.9
Other (0.9) (0.8)
------ ------
Cash used in financing activities (201.1) (224.4)
------ ------
Effect of foreign currency exchange
rates on cash and cash equivalents 4.7 (4.8)
------ ------
Increase (decrease) in cash and cash
equivalents 19.5 (12.6)
Cash and cash equivalents, beginning of
period 58.2 81.6
------ ------
Cash and cash equivalents, end of period $77.7 $69.0
====== ======
Common Questions & Answers (Unaudited)
(Dollars in millions)
1. Can you provide a further analysis of operating revenue and operating
income by operating segment?
Operating revenue and operating income consist of the following
components:
(in millions) Three Months Ended September 30,
------------- --------------------------------
Local Currency
Operating revenue: 2009 2008 $ Change % Change % Change*
------ ------ -------- -------- ---------
Online Consumer
Information
Solutions $131.4 $151.1 $(19.7) -13%
Mortgage
Reporting
Solutions 22.5 16.7 5.8 35%
Credit Marketing
Services 25.7 30.0 (4.3) -14%
Direct Marketing
Services 21.1 22.8 (1.7) -7%
------- ------- -------
Total U.S.
Consumer
Information
Solutions 200.7 220.6 (19.9) -9%
Europe 36.5 44.9 (8.4) -19% -8%
Latin America 52.3 59.3 (7.0) -12% -2%
Canada Consumer 26.1 28.3 (2.2) -8% -3%
---- ---- ----
Total
International 114.9 132.5 (17.6) -13% -4%
The Work Number 37.0 32.6 4.4 13%
Tax and Talent
Management
Services 46.1 40.8 5.3 13%
------- ------- -------
Total TALX 83.1 73.4 9.7 13%
North America
Personal
Solutions 37.1 40.9 (3.8) -9%
North America
Commercial
Solutions 16.1 16.7 (0.6) -4% -2%
------- ------- -------
Total operating
revenue $451.9 $484.1 $(32.2) -7% -4%
======== ======= =======
(in millions) Nine Months Ended September 30,
------------- -------------------------------
Local Currency
Operating revenue: 2009 2008 $ Change % Change % Change*
------ ------ -------- -------- ---------
Online Consumer
Information
Solutions $403.4 $459.3 $(55.9) -12%
Mortgage
Reporting
Solutions 76.5 52.0 24.5 47%
Credit Marketing
Services 80.4 101.2 (20.8) -21%
Direct Marketing
Services 61.4 69.9 (8.5) -12%
------- ------- -------
Total U.S.
Consumer
Information
Solutions 621.7 682.4 (60.7) -9%
Europe 102.5 139.1 (36.6) -26% -10%
Latin America 145.3 173.6 (28.3) -16% -1%
Canada Consumer 73.1 87.2 (14.1) -16% -4%
------- ------- -------
Total
International 320.9 399.9 (79.0) -20% -5%
The Work Number 116.6 100.6 16.0 16%
Tax and Talent
Management
Services 140.4 129.1 11.3 9%
------- ------- -------
Total TALX 257.0 229.7 27.3 12%
North America
Personal
Solutions 113.0 125.5 (12.5) -10%
North America
Commercial
Solutions 47.6 51.6 (4.0) -8% -3%
------- ------- -------
Total operating
revenue $1,360.2 $1,489.1 $(128.9) -9% -4%
======== ======== =======
(in millions) Three Months Ended September 30,
------------- --------------------------------
Operating income: Operating Operating
2009 Margin 2008 Margin $ Change % Change
---- ------ ---- ------ -------- --------
U.S. Consumer
Information
Solutions $69.4 34.6% $84.2 38.2% $(14.8) -18%
International 31.1 27.0% 39.8 30.0% (8.7) -22%
TALX 17.7 21.4% 11.8 16.1% 5.9 50%
North America
Personal
Solutions 10.1 27.3% 12.2 29.8% (2.1) -17%
North America
Commercial
Solutions 2.9 17.8% 2.5 14.8% 0.4 16%
General
Corporate
Expense (24.9) nm (43.3) nm 18.4 42%
------- ------- ------
Total
operating
income $106.3 23.5% $107.2 22.2% $(0.9) -1%
======== ======== =======
(in millions) Nine Months Ended September 30,
------------- -------------------------------
Operating income: Operating Operating
2009 Margin 2008 Margin $ Change % Change
---- ------ ---- ------ -------- --------
U.S. Consumer
Information
Solutions $219.2 35.3% $261.2 38.3% $(42.0) -16%
International 86.6 27.0% 121.4 30.3% (34.8) -29%
TALX 56.5 22.0% 38.1 16.6% 18.4 48%
North America
Personal
Solutions 24.1 21.3% 33.7 26.8% (9.6) -28%
North America
Commercial
Solutions 7.6 15.9% 7.9 15.4% (0.3) -4%
General
Corporate
Expense (77.8) nm (101.2) nm 23.4 23%
------- ------- ------
Total
operating
income $316.2 23.2% $361.1 24.2% $(44.9) -12%
======== ======== =======
nm - not meaningful
* Reflects percentage change in revenue conforming 2009 results using
2008 exchange rates.
Common Questions & Answers (Unaudited)
(Dollars in millions)
2. Can you provide the percentage change in revenue from the second
quarter of 2009 in U.S. dollars and local currency?
Local
U.S. Dollars Currency
Operating revenue: % Change % Change*
-------- ---------
U.S. Consumer Information Solutions -5%
International 9% 4%
TALX -3%
North America Personal Solutions -1%
North America Commercial Solutions 2% 0%
Total operating revenue -1% -2%
* Reflects percentage change in revenue conforming Q3 2009 results
using Q2 2009 exchange rates.
3. What drove the fluctuation in the effective tax rate?
Our effective income tax rate was 33.6% for the three months ended
September 30, 2009, up from 19.6% for the same period in 2008, due
primarily to the reversal of a $14.6 million income tax reserve during
2008 related to the expiration of the statute of limitations for an
uncertain tax position regarding our Brazilian operations. During the
third quarter of 2009, we recorded a discrete item related to an
investment loss in a subsidiary which favorably affected our third
quarter of 2009 tax rate by approximately 3 percentage points. The
effective income tax rate was 36.0% for the nine months ended
September 30, 2009, up from 31.0% for the same period in 2008, due
primarily to the items described above.
4. Can you provide depreciation and amortization by segment?
Depreciation and amortization are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- -------------
2009 2008 2009 2008
------ ------ ------ ------
U.S. Consumer Information
Solutions $12.0 $11.7 $35.7 $34.3
International 6.0 6.2 17.1 18.4
TALX 15.5 16.0 46.4 47.1
North America Personal
Solutions 1.3 0.9 3.5 2.3
North America Commercial
Solutions 1.5 1.2 4.3 4.0
General Corporate Expense 3.3 5.4 9.9 11.2
----- ----- ----- ------
Total depreciation and
amortization $39.6 $41.4 $116.9 $117.3
===== ===== ====== ======
5. What was the currency impact on the foreign operations?
The U.S. dollar impact on operating revenue and operating income
is as follows:
Three Months Ended September 30, 2009
-------------------------------------
Operating Revenue Operating Income
----------------- -----------------
Amount % Amount %
------ ----- ------ -----
Canada Consumer $(1.4) -5% $(0.6) -6%
Canada Commercial (0.4) -5% (0.1) -6%
Europe (4.7) -11% (1.0) -10%
Latin America (5.9) -10% (1.9) -10%
------ -----
$(12.4) -3% $(3.6) -3%
====== =====
Nine Months Ended September 30, 2009
-------------------------------------
Operating Revenue Operating Income
----------------- -----------------
Amount % Amount %
------ ----- ------ -----
Canada Consumer $(10.5) -12% $(4.2) -12%
Canada Commercial (2.5) -12% (1.0) -14%
Europe (23.3) -16% (4.6) -15%
Latin America (26.2) -15% (7.8) -14%
------ ------
$(62.5) -5% $(17.6) -5%
====== ======
6. 2008 expense reclassification
Certain prior year amounts have been reclassified to conform to
current year presentation. $3.3 million and $10.1 million of selling,
general and administrative expense for the three and nine months ended
September 30, 2008, respectively, have been reclassified to cost of
services.
Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP
Financial Measures (Unaudited)
(Dollars in millions, except per share amounts)
A. Reconciliation of net income attributable to Equifax to diluted EPS,
adjusted for acquisition-related amortization expense, restructuring
and asset write-down charges and income tax benefit:
Three Months Ended
September 30,
---------------
2009 2008 $ Change % Change
------ ------ -------- --------
Net income attributable to Equifax $59.7 $72.3 $(12.6) -17%
Restructuring and asset write-
down charges, net of tax (1) - 10.5 (10.5) nm
Income tax benefit (2) - (14.6) 14.6 nm
----- ----- ------
Net income attributable to Equifax,
adjusted for restructuring and
asset write-down charges and
income tax benefit 59.7 68.2 (8.5) -12%
Acquisition-related amortization
expense, net of tax 13.7 13.9 (0.2) -2%
----- ----- ------
Net income attributable to Equifax,
adjusted for restructuring and
asset write-down charges, income
tax benefit and acquisition-related
amortization expense $73.4 $82.1 $(8.7) -11%
===== ===== =====
Diluted EPS, adjusted for
restructuring and asset write-down
charges, income tax benefit and
acquisition-related amortization
expense $0.57 $0.63 $(0.06) -9%
===== ===== ======
Weighted-average shares used in
computing diluted EPS 128.0 129.8
Nine Months Ended
September 30,
--------------
2009 2008 $ Change % Change
------ ------ -------- --------
Net income attributable to Equifax $173.7 $208.8 $(35.1) -17%
Restructuring and asset write-
down charges, net of tax (1) 5.4 10.5 (5.1) -49%
Income tax benefit (2) - (14.6) 14.6 nm
----- ----- ------
Net income attributable to Equifax,
adjusted for restructuring and
asset write-down charges and
income tax benefit 179.1 204.7 (25.6) -13%
Acquisition-related amortization
expense, net of tax 40.6 41.0 (0.4) -1%
----- ----- ------
Net income attributable to Equifax,
adjusted for restructuring and
asset write-down charges, income
tax benefit and acquisition-related
amortization expense $219.7 $245.7 $(26.0) -11%
====== ====== ======
Diluted EPS, adjusted for
restructuring and asset write-down
charges, income tax benefit and
acquisition-related amortization
expense $1.72 $1.87 $(0.15) -8%
===== ===== ======
Weighted-average shares used in
computing diluted EPS 127.8 131.1
B. Reconciliation of operating income to adjusted operating income,
excluding restructuring and asset write-down charges, and
presentation of adjusted operating margin:
Three Months Ended
September 30,
--------------
2009 2008 $ Change % Change
------ ------ -------- --------
Revenue $451.9 $484.1 $(32.2) -7%
Operating income $106.3 $107.2 $(0.9) -1%
Restructuring and asset write-
down charges (1) - 16.8 (16.8) nm
----- ----- ------
Adjusted operating income,
excluding restructuring and asset
write-down charges $106.3 $124.0 $(17.7) -14%
====== ====== ======
Adjusted operating margin 23.5% 25.6%
nm - not meaningful
(1) Restructuring and asset write-down charges include severance of
$8.4 million in the first quarter of 2009 and severance of $10.3
million, certain contractual costs of $4.1 million and asset
write-down charges of $2.4 million in the third quarter of 2008.
See the Notes to this reconciliation for additional detail.
(2) See Question #3 in the Q&A section of this document.
Reconciliations of Non-GAAP Financial Measures to the Comparable
GAAP Financial Measures (Unaudited)
(Dollars in millions, except per share amounts)
C. Reconciliation of our effective tax rate to an effective tax rate,
excluding certain items:
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Effective tax rate 33.6% 19.6% 36.0% 31.0%
Income tax benefit (1) - 15.9% - 4.7%
---- ---- ---- ----
Effective tax rate, excluding
certain items 33.6% 35.5% 36.0% 35.7%
==== ==== ==== ====
(1) See Question #3 in the Q&A section of this document.
Notes to Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP Financial Measures
Restructuring and Asset Write-Down Charges - During the first quarter of 2009, the company recorded an $8.4 million, pretax, ($5.4 million, net of tax) restructuring charge primarily related to severance expense in selling, general and administrative expenses on our Consolidated Statements of Income. During the third quarter of 2008, we recorded restructuring and asset write-down charges of $16.8 million, pretax, ($10.5 million, net of tax). Of this amount, $10.3 million related to severance expense and $4.1 million related to certain contractual costs, including office exit and cancellation fees, both of which were recorded in selling, general and administrative expenses on our Consolidated Statements of Income. The remaining $2.4 million represents software asset write-down charges that were recorded in depreciation and amortization on our Consolidated Statements of Income.
Management believes excluding these charges from certain financial results provides meaningful supplemental information regarding our financial results for the three and nine months ended September 30, 2009, as compared to the same periods in 2008, since charges of such material amounts are not comparable among the periods. This is consistent with how our management reviews and assesses Equifax's historical performance and is useful when planning, forecasting and analyzing future periods.
Income Tax Benefit - During the third quarter of 2008, the applicable statute of limitations related to an uncertain tax position regarding our Brazilian operations expired resulting in the reversal of the related income tax reserves. The reversal of the reserves resulted in the recognition of a $14.6 million income tax benefit. The income tax benefit was recorded in provision for income taxes on our Consolidated Statements of Income. Management believes excluding this income tax benefit from certain financial results provides meaningful supplemental information regarding our financial results for the three and nine months ended September 30, 2008, since an income tax benefit of such a material amount is not comparable to similar activity in the subsequent periods presented. This is consistent with how our management reviews and assesses Equifax's historical performance and is useful when planning, forecasting and analyzing future periods.
Net income and diluted EPS, adjusted for acquisition-related amortization expense, restructuring and asset write-down charges and income tax benefit - We calculate these financial measures by excluding acquisition-related amortization expense, restructuring and asset write-down charges, all net of tax, and the 2008 income tax benefit from the determination of net income in the calculation of diluted EPS. These financial measures are not prepared in conformity with GAAP. Management believes that these measures are useful because management excludes acquisition-related amortization expense and other items that are not comparable when measuring operating profitability, evaluating performance trends, and setting performance objectives, and it allows investors to evaluate our performance for different periods on a more comparable basis by excluding items that relate to acquisition-related intangible assets and items that impact comparability.
Adjusted operating income and operating margin, excluding restructuring and asset write-down charges - Management believes excluding the 2008 third quarter restructuring and asset write-down charges from the calculation of operating income and margin, on a non-GAAP basis, is useful because management excludes items that are not comparable when measuring operating profitability, evaluating performance trends, and setting performance objectives, and it allows investors to evaluate our performance for different periods on a more comparable basis by excluding items that impact comparability.
SOURCE Equifax Inc.
Released October 21, 2009