Equifax Reports Fourth Quarter and Full Year 2008 Results; Provides First Quarter 2009 Guidance
- Fourth quarter EPS increased 2 percent and fourth quarter adjusted EPS increased 3 percent over 2007.
- Fourth quarter revenue decreased 4 percent in local currency and declined 9 percent in U.S. dollars versus 2007.
- Full year 2008 revenue was up 5 percent over 2007.
- Full year EPS increased 4 percent and adjusted EPS increased 7 percent over 2007.
ATLANTA, Feb. 4 /PRNewswire-FirstCall/ -- Equifax Inc. (NYSE: EFX) today announced financial results for the quarter and year ended December 31, 2008. The company reported revenue of $446.6 million in the fourth quarter of 2008, a 9 percent decrease from the prior year period, of which 5 percent was due to the unfavorable effect of foreign exchange rates. Operating income for the fourth quarter of 2008 was $116.1 million, a 3 percent decrease from the same period of 2007. Fourth quarter 2008 net income was $64.0 million, a 2 percent decrease from the prior year. Diluted earnings per share ("EPS") for the fourth quarter of 2008 was $0.50 compared to $0.49 in the same period of the prior year, a 2 percent increase. On a non-GAAP basis, EPS, excluding the impact of acquisition-related amortization expense ("adjusted EPS"), was $0.61, up 3 percent from the same period of 2007.
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For the full year 2008, revenue increased 5 percent to $1.94 billion compared to 2007. Foreign currency did not have a material impact on 2008 full year revenue. Operating income for 2008 was $477.2 million, a 2 percent decrease from 2007. Full year net income for 2008 increased slightly from 2007 to $272.8 million. EPS was $2.09 compared to $2.02 for the full year 2007, a 4 percent increase. On a non-GAAP basis, EPS, excluding the impact of acquisition-related amortization expense, restructuring and asset write-down charges and an income tax benefit recorded in the third quarter of 2008, was $2.48, up 7 percent from the prior year period.
"2008 was one of the most challenging business environments we have ever faced. Although economic conditions deteriorated throughout the year, we concentrated our efforts on key revenue initiatives to help our clients meet their information and risk management needs in this difficult environment and to better position each of our business units for long-term growth. In 2008, new product innovation delivered over $70 million of revenue. We also launched four new business initiatives addressing opportunities in Capital Markets, Collections, Identity Management and Government. Settlement Services, our largest new business initiative grew four-fold in 2008, offsetting double digit declines in core Mortgage Reporting revenue. We continue to realize revenue synergies with The Work Number as we have closed sixty new deals in 2008," said Richard F. Smith, Equifax's Chairman and Chief Executive Officer. "We reallocated our resources and took the actions needed to reduce operating expenses and maintain strong operating margins. Our business model is resilient, our balance sheet remains strong, and we believe we are well positioned to deliver on our long-term growth objectives. Many challenges remain as we enter 2009. However, we have a diversified business portfolio and solid momentum with our new product initiatives that we expect will continue to deliver solid financial performance."
Fourth Quarter 2008 Highlights
-- Operating margin was 26.0 percent compared to 24.5 percent in the fourth
quarter of 2007.
-- EBITDA (a non-GAAP financial measure defined as operating income adding
back depreciation and amortization expense) was $154.2 million, down 2
percent from the fourth quarter of 2007.
-- The effective tax rate for the fourth quarter of 2008 was 36.6 percent,
up from 33.1 percent in the fourth quarter of 2007.
-- Total debt was $1.22 billion at December 31, 2008, a decrease of $89
million from September 30, 2008. Our revolving credit facility of $850
million, which currently matures in July 2011, had $420 million
outstanding at December 31, 2008.
U.S. Consumer Information Solutions (USCIS)
Total revenue was $208.4 million in the fourth quarter of 2008, a 9 percent decrease from the fourth quarter of 2007.
-- Online Consumer Information Solutions revenue was $135.2 million, down
10 percent;
-- Mortgage Solutions revenue was $18.2 million, up 43 percent;
-- Credit Marketing Services revenue was $30.8 million, down 17 percent;
and
-- Direct Marketing Services revenue was $24.2 million, down 14 percent.
Operating margin for USCIS was 36.4 percent in the fourth quarter of 2008, down slightly from 36.6 percent in the fourth quarter of 2007.
International
Total revenue was $105.8 million in the fourth quarter of 2008, an 18 percent decrease from the fourth quarter of 2007. In local currency, revenue was flat when compared to the same period in the prior year. Compared to the fourth quarter of 2007:
-- Latin America revenue was $46.3 million, up 7 percent in local currency,
but down 10 percent in U.S. dollars;
-- Europe revenue was $35.9 million, down 8 percent in local currency and
down 27 percent in U.S. dollars; and
-- Canada Consumer revenue was $23.6 million, up 2 percent in local
currency, but down 17 percent in U.S. dollars.
Operating margin for International was 27.0 percent in the fourth quarter of 2008, down from 28.6 percent in the fourth quarter of 2007.
TALX
Total revenue was $75.4 million in the fourth quarter of 2008, a 2 percent increase from the fourth quarter of 2007. Compared to the fourth quarter of 2007:
-- The Work Number revenue was $31.3 million, up 12 percent;
-- Tax and Talent Management Services revenue was $44.1 million, down 4
percent; Tax Management Services revenue was up 6 percent largely
offsetting a decline in Talent Management Services.
Operating margin was 19.9 percent, down slightly from 20.0 percent in the fourth quarter of 2007. During the quarter, total records in the employment database grew to 188.9 million, up 14 percent from a year ago.
North America Personal Solutions
Total revenue was $37.1 million, a 3 percent decrease from the fourth quarter of 2007. Operating margin was 33.9 percent, up from 26.1 percent in the fourth quarter of 2007.
North America Commercial Solutions
Total revenue was $19.9 million, flat in local currency, but a 6 percent decrease in U.S. dollars compared to the fourth quarter of 2007. Operating margin was 28.3 percent, down from 30.2 percent in the fourth quarter of 2007.
Full Year 2008 Highlights
-- Revenue increased 5 percent to $1.9 billion.
-- Adjusted EBITDA (a non-GAAP financial measure defined as operating
income adding back depreciation and amortization expense and
restructuring charges) was $647.0 million for the full year 2008, up 5
percent from 2007.
-- Operating margin decreased to 24.7 percent for the full year 2008 from
26.4 percent for the full year 2007. On a non-GAAP basis, excluding the
impact of acquisition-related amortization expense and restructuring and
asset write-down charges recorded during the third quarter of 2008,
operating margin for the full year 2008 was flat at 30.0 percent when
compared to 2007.
-- The effective tax rate for the full year 2008 was 32.8 percent, down
from 35.8 percent in 2007.
-- Total debt was $1.22 billion at December 31, 2008, a decrease of $168
million from December 31, 2007.
-- We repurchased 4.5 million of our common shares on the open market for
$155.7 million during the full year 2008. At December 31, 2008, our
remaining authorization for future share repurchases was $158.2 million.
USCIS
Total revenue was $890.8 million in 2008, an 8 percent decrease from 2007.
-- Online Consumer Information Solutions revenue was $594.5 million, down 7
percent;
-- Mortgage Solutions revenue was $70.2 million, up 6 percent;
-- Credit Marketing Services revenue was $132.0 million, down 16 percent;
and
-- Direct Marketing Services revenue was $94.1 million, down 13 percent.
Operating margin for USCIS was 37.9 percent in the full year 2008, down from 39.6 percent in the full year 2007.
International
Total revenue was $505.7 million in 2008, a 7 percent increase from 2007. In local currency, revenue was also up 7 percent when compared to the same period in the prior year. Compared to the full year of 2007:
-- Latin America revenue was $219.9 million, up 15 percent in local
currency and up 20 percent in U.S. dollars;
-- Europe revenue was $175.0 million, flat in local currency, but down 5
percent in U.S. dollars; and
-- Canada Consumer revenue was $110.8 million, up 3 percent in local
currency and up 4 percent in U.S. dollars.
Operating margin for International was 29.6 percent in the full year 2008, down from 29.8 percent in the full year 2007.
TALX
Total revenue was $305.1 million and operating margin was 17.4 percent for the full year 2008.
North America Personal Solutions
Total revenue was $162.6 million in 2008, a 6 percent increase from 2007. Operating margin was 28.4 percent in the full year 2008, up from 22.1 percent in the full year 2007.
North America Commercial Solutions
Total revenue was $71.5 million in 2008, a 6 percent increase from 2007. Operating margin was 19.0 percent in the full year 2008, up from 17.7 percent in full year 2007.
First Quarter 2009 Outlook
Based on the current domestic and international business environment and current foreign exchange rates, Equifax expects consolidated revenue for the first quarter of 2009 to be in a similar range as reported revenue for the fourth quarter of 2008. Adjusted EPS is expected to be between $0.52 and $0.57. As a result of uncertainty about economic and market conditions, the Company is not providing financial guidance for the full year.
About Equifax Inc. (www.equifax.com)
Equifax empowers businesses and consumers with information they can trust. A global leader in information solutions, employment and income verification and human resources business process outsourcing services, 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.
Customers have trusted Equifax for over 100 years to deliver 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, HR/payroll services, 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(R) 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, February 5, 2009, at 8:30 a.m. (EST) 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 operating margin excluding acquisition-related amortization expense, restructuring and asset write-down charges; net income and diluted EPS excluding acquisition-related amortization expense, restructuring and asset write-down charges, all net of tax, and income tax benefit; EBITDA, which we define as operating income adding back depreciation and amortization expense; and Adjusted EBITDA, which is EBITDA adding back certain restructuring charges. 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. EBITDA and Adjusted EBITDA as we have calculated may not be comparable to similarly titled measures reported by other companies.
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, 2007 under Item 1A, "Risk Factors", and our other filings with the Securities and Exchange Commission.
EQUIFAX
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
Three Months
Ended
December 31,
------------
2008 2007
---- ----
(In millions, except per share amounts) (Unaudited)
-----------
Operating revenue $446.6 $490.9
------ ------
Operating expenses:
Cost of services (exclusive of depreciation and
amortization below) 181.3 198.5
Selling, general and administrative expenses 111.1 134.4
Depreciation and amortization 38.1 37.8
----- -----
Total operating expenses 330.5 370.7
----- -----
Operating income 116.1 120.2
Interest expense (17.4) (20.9)
Minority interests in earnings, net of tax (1.2) (1.7)
Other income, net 3.5 0.6
--- ---
Income before income taxes 101.0 98.2
Provision for income taxes (37.0) (32.5)
----- -----
Net income $64.0 $65.7
===== =====
Basic earnings per common share $0.51 $0.50
===== =====
Weighted-average shares used in computing basic
earnings per share 126.3 130.9
===== =====
Diluted earnings per common share $0.50 $0.49
===== =====
Weighted-average shares used in computing diluted
earnings per share 128.0 133.8
===== =====
Dividends per common share $0.04 $0.04
===== =====
EQUIFAX
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
Twelve Months Ended
December 31,
------------
2008 2007
---- ----
(In millions, except per share amounts) (Unaudited)
------------------
Operating revenue $1,935.7 $1,843.0
-------- --------
Operating expenses:
Cost of services (exclusive of depreciation and
amortization below) 778.8 752.0
Selling, general and administrative expenses 524.3 477.1
Depreciation and amortization 155.4 127.7
----- -----
Total operating expenses 1,458.5 1,356.8
------- -------
Operating income 477.2 486.2
Interest expense (71.3) (58.5)
Minority interests in earnings, net of tax (6.2) (6.1)
Other income, net 6.2 3.0
--- ---
Income before income taxes 405.9 424.6
Provision for income taxes (133.1) (151.9)
------ ------
Net income $272.8 $272.7
====== ======
Basic earnings per common share $2.13 $2.07
===== =====
Weighted-average shares used in computing basic
earnings per share 128.1 132.0
===== =====
Diluted earnings per common share $2.09 $2.02
===== =====
Weighted-average shares used in computing diluted
earnings per share 130.4 135.1
===== =====
Dividends per common share $0.16 $0.16
===== =====
EQUIFAX
CONSOLIDATED BALANCE SHEETS
----------------------------
December 31,
------------
2008 2007
---- ----
(In millions, except par values) (Unaudited)
-----------------
ASSETS
Current assets:
Cash and cash equivalents $58.2 $81.6
Trade accounts receivable, net of
allowance for doubtful accounts of
$14.5 and $8.9 at December 31, 2008
and 2007, respectively 253.4 295.8
Prepaid expenses 22.9 25.8
Other current assets 19.3 21.8
---- ----
Total current assets 353.8 425.0
----- -----
Property and equipment:
Capitalized internal-use software
and system costs 313.9 292.2
Data processing equipment and furniture 176.6 184.7
Land, buildings and improvements 124.0 89.5
----- ----
Total property and equipment 614.5 566.4
Less accumulated depreciation and amortization (328.2) (306.9)
------ ------
Total property and equipment, net 286.3 259.5
----- -----
Goodwill 1,760.0 1,834.6
Indefinite-lived intangible assets 95.1 95.7
Purchased intangible assets, net 682.2 764.5
Prepaid pension asset 8.3 72.2
Other assets, net 74.6 72.4
-------- --------
Total assets $3,260.3 $3,523.9
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current maturities $31.9 $222.1
Accounts payable 29.9 31.1
Accrued expenses 57.6 79.4
Accrued salaries and bonuses 54.2 63.5
Deferred revenue 65.7 69.9
Other current liabilities 78.7 80.9
---- ----
Total current liabilities 318.0 546.9
Long-term debt 1,187.4 1,165.2
Deferred income tax liabilities, net 215.3 277.1
Long-term pension and other
postretirement benefit liabilities 166.0 62.8
Other long-term liabilities 61.2 72.7
------- -------
Total liabilities 1,947.9 2,124.7
------- -------
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 - 189.2 and 188.5 at
December 31, 2008 and 2007, respectively;
Outstanding shares - 126.3 and 129.7
at December 31, 2008 and 2007, respectively 236.5 235.6
Paid-in capital 1,075.2 1,040.8
Retained earnings 2,281.0 2,030.0
Accumulated other comprehensive loss (390.6) (170.5)
Treasury stock, at cost, 59.7 shares
and 55.1 shares at December 31, 2008
and 2007, respectively (1,837.9) (1,679.0)
Stock held by employee benefits trusts,
at cost, 3.2 shares and 3.7 shares at
December 31, 2008 and 2007, respectively (51.8) (57.7)
----- -----
Total shareholders' equity 1,312.4 1,399.2
------- -------
Total liabilities and
shareholders' equity $3,260.3 $3,523.9
======== ========
EQUIFAX
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------
Twelve Months
Ended
December 31,
------------
2008 2007
---- ----
(In millions) (Unaudited)
Operating activities:
Net income $272.8 $272.7
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 155.4 127.7
Stock-based compensation expense 19.9 17.6
Tax effects of stock-based compensation plans 2.9 6.6
Excess tax benefits from
stock-based compensation plans (2.1) (7.0)
Deferred income taxes 7.7 7.9
Changes in assets and liabilities,
excluding effects of acquisitions:
Accounts receivable, net 24.2 (1.6)
Prepaid expenses and other current assets 3.5 (5.3)
Other assets (2.2) (18.7)
Current liabilities, excluding debt (23.4) 38.9
Other long-term liabilities, excluding debt (14.0) 11.1
----- ----
Cash provided by operating activities 444.7 449.9
----- -----
Investing activities:
Capital expenditures (110.5) (118.5)
Acquisitions, net of cash acquired (27.4) (303.8)
Investment in unconsolidated affiliates (3.7) -
----- -----
Cash used in investing activities (141.6) (422.3)
------ ------
Financing activities:
Net short-term (repayments) borrowings (184.8) 139.7
Net borrowings under long-term
revolving credit facilities 45.0 253.4
Proceeds from issuance of long-term debt 2.3 545.7
Payments on long-term debt (17.8) (250.0)
Treasury stock purchases (155.7) (718.7)
Dividends paid (20.5) (20.7)
Proceeds from exercise of stock options 14.7 31.6
Excess tax benefits from
stock-based compensation plans 2.1 7.0
Other (1.0) (5.6)
---- ----
Cash used in financing activities (315.7) (17.6)
------ -----
Effect of foreign currency exchange rates
on cash and cash equivalents (10.8) 3.8
----- ---
(Decrease) increase in cash and cash equivalents (23.4) 13.8
Cash and cash equivalents, beginning of period 81.6 67.8
---- ----
Cash and cash equivalents, end of period $58.2 $81.6
===== =====
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 December 31,
------------- -------------------------------
Local
Currency
Operating revenue: 2008 2007 $ Change % Change % Change*
---- ---- -------- -------- ---------
Online Consumer
Information Solutions $135.2 $150.6 $(15.4) -10%
Mortgage Solutions 18.2 12.7 5.5 43%
Credit Marketing
Services 30.8 37.1 (6.3) -17%
Direct Marketing
Services 24.2 28.3 (4.1) -14%
---- ---- ----
Total U.S.
Consumer
Information
Solutions 208.4 228.7 (20.3) -9%
Europe 35.9 48.8 (12.9) -27% -8%
Latin America 46.3 51.6 (5.3) -10% 7%
Canada Consumer 23.6 28.5 (4.9) -17% 2%
---- ---- ----
Total International 105.8 128.9 (23.1) -18% 0%
The Work Number 31.3 28.1 3.2 12%
Tax and Talent
Management Services 44.1 45.7 (1.6) -4%
---- ---- ----
Total TALX 75.4 73.8 1.6 2%
North America
Personal Solutions 37.1 38.3 (1.2) -3%
North America
Commercial Solutions 19.9 21.2 (1.3) -6% 0%
---- ---- ----
Total operating
revenue $446.6 $490.9 $(44.3) -9% -4%
====== ====== ======
(in millions) Twelve Months Ended December 31,
------------- --------------------------------
Local
Currency
Operating revenue: 2008 2007 $ Change % Change % Change*
---- ---- -------- -------- ---------
Online Consumer
Information
Solutions $594.5 $639.0 $(44.5) -7%
Mortgage Solutions 70.2 66.1 4.1 6%
Credit Marketing
Services 132.0 156.4 (24.4) -16%
Direct Marketing
Services 94.1 108.2 (14.1) -13%
---- ----- -----
Total U.S.
Consumer
Information
Solutions 890.8 969.7 (78.9) -8%
Europe 175.0 183.8 (8.8) -5% 0%
Latin America 219.9 182.5 37.4 20% 15%
Canada Consumer 110.8 106.5 4.3 4% 3%
----- ----- ---
Total International 505.7 472.8 32.9 7% 7%
The Work Number** 131.9 72.6 59.3 82%
Tax and Talent
Management Services** 173.2 106.8 66.4 62%
----- ----- ----
Total TALX** 305.1 179.4 125.7 70%
North America
Personal Solutions 162.6 153.5 9.1 6%
North America
Commercial Solutions 71.5 67.6 3.9 6% 5%
---- ---- ---
Total operating
revenue $1,935.7 $1,843.0 $92.7 5% 5%
======== ======== =====
(in millions) Three Months Ended December 31,
---------- -------------------------------
Operating Operating Operating $ %
income: 2008 Margin 2007 Margin Change Change
---- ------ ---- ------ ------ ------
U.S. Consumer
Information
Solutions $75.9 36.4% $83.7 36.6% $(7.8) -9%
International 28.5 27.0% 36.9 28.6% (8.4) -23%
TALX 15.0 19.9% 14.8 20.0% 0.2 2%
North
America
Personal
Solutions 12.6 33.9% 10.0 26.1% 2.6 26%
North America
Commercial
Solutions 5.7 28.3% 6.4 30.2% (0.7) -12%
General
Corporate
Expense (21.6) nm (31.6) nm 10.0 31%
----- ----- ----
Total
operating
income $116.1 26.0% $120.2 24.5% $(4.1) -3%
====== ====== =====
(in millions) Twelve Months Ended December 31,
---------- --------------------------------
Operating Operating Operating $ %
income: 2008 Margin 2007 Margin Change Change
---- ------ ---- ------ ------ ------
U.S. Consumer
Information
Solutions $337.1 37.9% $383.5 39.6% $(46.4) -12%
International 149.9 29.6% 141.1 29.8% 8.8 6%
TALX** 53.1 17.4% 29.3 16.3% 23.8 81%
North
America
Personal
Solutions 46.3 28.4% 34.0 22.1% 12.3 36%
North America
Commercial
Solutions 13.6 19.0% 12.0 17.7% 1.6 13%
General
Corporate
Expense (122.8) nm (113.7) nm (9.1) -8%
------ ------ ----
Total
operating
income $477.2 24.7% $486.2 26.4% $(9.0) -2%
====== ====== =====
nm - not meaningful
* Reflects percentage change in revenue conforming 2008 results using
2007 exchange rates.
** TALX 2007 results represent the period from its acquisition on
May 15, 2007 through December 31, 2007.
Common Questions & Answers (Unaudited)
(Dollars in millions)
2. What drove the fluctuation in the effective tax rate?
Our effective income tax rate was 36.6% for the three months ended
December 31, 2008, up from 33.1% for the same period in 2007,
due primarily to discrete items recorded during the fourth quarter 2007
including a $2.9 million benefit for refunds related to our 2002
and 2003 U.S. federal income tax filings.
Our effective income tax rate was 32.8% for the twelve months ended
December 31, 2008, down from 35.8% for the same period in 2007.
The 2008 rate reflects the reversal of a $14.6 million income tax reserve
related to an uncertain tax position regarding our Brazilian operations,
for which the statute of limitations expired in the third quarter of
2008.
3. Can you provide depreciation and amortization by segment?
Depreciation and amortization are as follows:
Three Twelve
Months Ended Months Ended
December 31, December 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
U.S. Consumer Information Solutions $11.9 $11.6 $46.2 $47.0
International 5.4 5.9 23.8 21.4
TALX 15.5 15.0 62.6 38.3
North America Personal Solutions 0.8 0.6 3.1 2.9
North America Commercial Solutions 1.4 1.4 5.4 5.5
General Corporate Expense 3.1 3.3 14.3 12.6
--- --- ---- ----
Total depreciation and amortization $38.1 $37.8 $155.4 $127.7
===== ===== ====== ======
4. 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
December 31, 2008
------------------
Operating Operating
Revenue Income
--------- ---------
Amount % Amount %
------ ---- ------ ----
Canada Consumer $(5.5) -19% $(2.1) -20%
Canada Commercial (1.3) -17% (0.5) -16%
Europe (9.1) -19% (1.7) -16%
Latin America (9.0) -18% (2.6) -17%
---- ----
$(24.9) -5% $(6.9) -5%
====== =====
Twelve Months Ended
December 31, 2008
-------------------
Operating Operating
Revenue Income
--------- ---------
Amount % Amount %
------ ---- ------ ----
Canada Consumer $1.2 1% $0.7 2%
Canada Commercial 0.3 1% 0.1 2%
Europe (8.4) -5% (1.9) -4%
Latin America 9.3 5% 2.8 5%
--- ---
$2.4 0% $1.7 0%
==== ====
Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP
Financial Measures (Unaudited)
(Dollars in millions, except per share amounts)
A. Reconciliation of operating income to adjusted operating income,
excluding acquisition-related amortization expense, restructuring and
asset write-down charges, and presentation of adjusted operating margin:
Twelve Months Ended
December 31,
--------------
2008 2007
---- ----
Revenue $1,935.7 $1,843.0
Operating income $477.2 $486.2
Acquisition-related amortization expense 86.7 65.8
Restructuring and asset write-down charges (1) 16.8 -
---- ----
Adjusted operating income, excluding
acquisition-related amortization expense,
restructuring and asset write-down charges $580.7 $552.0
====== ======
Adjusted operating margin 30.0% 30.0%
B. Reconciliation of net income to net income, adjusted for
acquisition-related amortization expense, restructuring and asset
write-down charges and income tax benefit, and net income to diluted
EPS, adjusted for acquisition-related amortization expense,
restructuring and asset write-down charges and income tax benefit:
Three Months Ended
December 31,
2008 2007 $ Change % Change
---- ---- -------- --------
Net income $64.0 $65.7 $(1.7) -3%
Acquisition-related amortization
expense, net of tax 13.7 13.3 0.4 3%
---- ---- ---
Net income, adjusted for
acquisition-related amortization
expense $77.7 $79.0 $(1.3) -2%
===== ===== =====
Diluted EPS, adjusted for
acquisition-related amortization
expense $0.61 $0.59 $0.02 3%
===== ===== =====
Weighted-average shares used in
computing diluted EPS 128.0 133.8
Twelve Months Ended
December 31,
2008 2007 $ Change % Change
---- ---- -------- --------
Net income $272.8 $272.7 $0.1 0%
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, adjusted for
restructuring and asset
write-down charges and income
tax benefit 268.7 272.7 (4.0) -1%
Acquisition-related
amortization expense, net
of tax 54.7 40.7 14.0 34%
---- ---- ----
Net income, adjusted for
acquisition-related amortization
expense, restructuring and asset
write-down charges and income
tax benefit $323.4 $313.4 $10.0 3%
====== ====== =====
Diluted EPS, adjusted for
acquisition-related amortization
expense, restructuring and asset
write-down charges and income
tax benefit $2.48 $2.32 $0.16 7%
===== ===== =====
Weighted-average shares used in
computing diluted EPS 130.4 135.1
nm - not meaningful
(1) Restructuring and asset write-down charges include severance of
$10.3 million, certain contractual costs of $4.1 million and asset
write-down charges of $2.4 million. See the Notes to this
reconciliation for additional detail.
(2) See Question #2 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 operating income to EBITDA (operating income before
depreciation and amortization expense) and operating income to Adjusted
EBITDA (EBITDA adding back certain restructuring charges):
Three Months Ended
December 31,
2008 2007 $ Change % Change
---- ---- -------- --------
Operating income $116.1 $120.2 $(4.1) -3%
Depreciation
and amortization
expense 38.1 37.8 0.3 1%
------ ------ -----
EBITDA $154.2 $158.0 $(3.8) -2%
====== ====== =====
Twelve Months Ended
December 31,
2008 2007 $ Change % Change
---- ---- -------- --------
Operating income $477.2 $486.2 $(9.0) -2%
Depreciation
and amortization
expense 155.4 127.7 27.7 22%
Restructuring
charge (1) 14.4 - 14.4 nm
------ ------ -----
Adjusted EBITDA $647.0 $613.9 $33.1 5%
====== ====== =====
D. Reconciliation of our effective tax rate to an effective tax rate,
excluding certain items:
Twelve Months
Ended
December 31,
-------------
2008 2007
---- ----
Effective tax
rate 32.8% 35.8%
Income tax
benefit (2) 3.6% -
---- ----
Effective tax
rate, excluding
certain items 36.4% 35.8%
==== ====
nm - not meaningful
(1) Restructuring charge includes severance of $10.3 million and certain
contractual costs of $4.1 million. Asset write-down charges of
$2.4 million are included in Depreciation and Amortization expense.
See the Notes to this reconciliation for additional detail.
(2) See Question #2 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 third quarter of 2008, we realigned our business to better support our strategic objectives in the current economic environment. As a result, the company recorded $16.8 million of restructuring and asset write-down charges. Of this amount, $10.3 million relates to severance expenses and $4.1 million relates 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 year ended December 31, 2008, as compared to 2007 since charges of such a material amount are not comparable to similar activity in the prior year. 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 year ended December 31, 2008, as compared to 2007 since an income tax benefit of such a material amount is not comparable to similar activity in the prior period 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.
Adjusted operating income and operating margin, excluding acquisition-related amortization expense, restructuring and asset write-down charges - Management believes excluding acquisition-related amortization expense, 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 that impact comparability.
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 the 2008 items that impact comparability.
EBITDA and Adjusted EBITDA - We calculate EBITDA by adding back depreciation and amortization expense to operating income. We calculate Adjusted EBITDA by adding back certain restructuring charges to EBITDA. EBITDA and Adjusted EBITDA are not prepared in conformity with GAAP since they exclude depreciation and amortization expense, as well as interest expense, minority interest in earnings (net of tax), other income, net, provision for income taxes and the 2008 restructuring charges from earnings. These non-GAAP financial measures should not be considered as alternatives to net income, operating income, operating margin, or cash provided by operating activities. Management believes that EBITDA and Adjusted EBITDA are useful supplemental measures to investors because they are consistent with how management evaluates our financial performance and are frequently used by securities analysts and other interested parties to evaluate companies in our industry. Additionally, management uses these measures as important metrics for forecasting and analyzing future periods, as well as evaluating future investing and financing decisions.
SOURCE Equifax, Inc.
Released February 4, 2009