FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended 12-31-00 or
[ ] 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 1-6605
--------------------------------------------------------
EQUIFAX INC.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
GEORGIA 58-0401110
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1550 Peachtree St., N.W., Atlanta, GA 30309
- ------------------------------------------ --------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (404) 885-8000
------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock
($1.25 Par Value) New York Stock Exchange
- ------------------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
None
----
(Title of class)
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. YES [X] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K (SECTION 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND
WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE
PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS
FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES (WHICH FOR
PURPOSES HEREOF ARE ALL HOLDERS OTHER THAN CURRENT EXECUTIVE OFFICERS, DIRECTORS
AND HOLDERS OF 5% OR MORE OF THE OUTSTANDING COMMON STOCK) OF THE REGISTRANT AS
OF FEBRUARY 28, 2001 WAS $4,030,522,322 BASED ON THE CLOSING SALE PRICE OF THE
COMMON STOCK AS REPORTED BY THE NEW YORK STOCK EXCHANGE ON SUCH DATE. SEE ITEM
12.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
Class Outstanding at February 28, 2001
----- --------------------------------
COMMON STOCK, $1.25 PAR VALUE 143,127,560
- ----------------------------------- --------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
THE PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 2,
2001, IS INCORPORATED BY REFERENCE, TO THE EXTENT INDICATED UNDER ITEMS 10, 11,
12, 13 AND 14, INTO PARTS III AND IV OF THIS FORM 10-K.
THE ANNUAL REPORT TO SECURITY HOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31,
2000 IS INCORPORATED BY REFERENCE, TO THE EXTENT INDICATED UNDER ITEMS 3, 6, 7,
8 AND 14, INTO PARTS I, II AND IV.
PART I
ITEM 1. BUSINESS
- ------- --------
Equifax is a leader in facilitating and securing commerce by bringing buyers and
sellers together world-wide through information, transaction processing and
Internet businesses. Global operations include consumer and commercial credit
information services, credit card marketing and processing services, check
guarantee and authorization, software, modeling, database management, marketing
solutions, analytics, direct to consumer services, Internet identity
verification and digital certificate services; and, through September 2000, risk
management and collection services.
The Company was founded as a credit reporting agency under the name "Retail
Credit Company" in Atlanta, Georgia, in 1899. Over the next several years, the
Company established itself in the area of investigation of applicants for
insurance. The business grew, and by 1920, the Company had numerous branch
offices throughout the United States and Canada. Since that time, the Company
has continued to expand on a domestic and international basis and diversify by
means of internal development and strategic acquisitions. In late 1975, the
Company changed its name from "Retail Credit Company" to "Equifax Inc." In mid-
1997, the Company divested its insurance services operations which was
accomplished through the spinoff of a subsidiary company to shareholders.
Equifax Inc. is a holding company which conducts its business operations through
subsidiary companies. The Company's business areas are divided into separate
groups and are conducted on a "profit center" basis with self-contained
functional integrity, although Equifax Inc. supplies centralized overall
financial, legal, communications, media relations, tax and similar services. The
specific products and services presently offered by the Company are described
below under the respective Company segment headings.
In January 2000, the Company acquired Procard S.A., the second largest card
processor in Chile.
In May 2000, the Company acquired the Consumer Information Solutions group of
R.L. Polk & Co. for approximately $260 million in cash. These businesses are
reported under the Consumer Information Services segment.
In June 2000, the Company announced that it had entered into a five-year
agreement (projected revenues of $100 million) with National Australia Bank to
process cards in Australia, United Kingdom, New Zealand and Ireland.
In October 2000, Equifax announced its intention to spin-off its Payment
Services division, which conducts credit card processing and check management
operations, by a tax free stock distribution. Equifax believes that separating
Information Services from Payment Services will create two very strong
companies, each with its own management team and board of directors focused on
taking advantage of growth opportunities in each respective market. The spin-off
is expected to be completed during the summer of 2001. The spin-off is subject
to favorable ruling from the Internal Revenue Service (the "IRS"), confirming
the tax-free status of the share distribution, and the filing of a satisfactory
registration statement with the Securities and Exchange Commission ("SEC").
In October 2000, the Company sold its collection services business, Equifax Risk
Management Services, to Risk Management Alternatives Parent, Inc. ("RMA") in the
United States, and in Canada and United Kingdom to IntelliRisk Management
Corporation. The aggregate sales price was approximately $150 million.
As part of these transactions the Company provided $41 million of acquisition
financing to RMA and guaranteed approximately $60 million of RMA's other
acquisition financing.
In October 2000, the Company acquired for approximately $12 million in cash and
stock Compliance Data Center, Inc., the leader in customer information services
to the brokerage industry.
In November 2000, the Company acquired SEK S.r.l., a leading Italian online
information company.
Since January 1993, the Company has had an open market share repurchase program.
During 2000, the Company repurchased 296,400 shares at a cost of approximately
$6.5 million.
Reference is made to acquisitions and investments in unconsolidated affiliates
reported in Note 3 and industry segment information reported in Note 11 of the
Notes to Consolidated Financial Statements, included as Exhibit 13.3 in Part IV,
Item 14 of this report, which are incorporated by reference.
A description of the Company's products or services by segment follows:
North American Information Services Segment
- -------------------------------------------
The Company's principal classes of service for this segment are consumer credit
information; credit card marketing services; fraud detection and prevention
services; mortgage loan analytics; account acquisition services; notification
services; mortgage information and consumer direct products. In Canada, services
also include commercial credit information. Distribution of information to
customers is made primarily through electronic data interfaces. Expanding
businesses in this segment include database solutions for customer relationship
management, services for direct consumer purchase, brokerage account
facilitation and a variety of e-commerce solutions including online identity
verification services and digital certificate products. Customers include banks,
financial institutions, retailers, credit card issuers, utilities and
telecommunications companies, transportation companies, mortgage lenders,
healthcare administration companies, insurance companies, consumers and
government.
Informational services and commercial credit reporting in the U.S. and Canada
accounted for 34% of the Company's 2000 total revenue, as compared with 35% in
1999 and 37% in 1998. Risk management services in the U.S. and Canada, operated
by the Company until September 2000 when this business was sold, is now included
in the Divested Operations Segment.
In the U.S., the Company's consumer credit services operations, including non-
owned affiliate bureaus, compete with two other automated credit reporting
companies -- Experian Information Solutions, Inc. and Trans Union LLC. Equifax
Canada Inc., is the leading provider of both consumer and commercial credit
information in Canada.
This segment includes Equifax Credit Information Services, Inc.; Compliance Data
Center, Inc.; Credit Northwest Corporation; Acrofax Inc.; Equifax Consumer
Services, Inc.; Equifax Secure, Inc.; Equifax Knowledge Engineering, Inc.; and
Equifax Canada Inc.
2
Consumer Information Services Segment
- -------------------------------------
This segment is comprised of the Consumer Information Services group that the
Company purchased from R. L. Polk in 2000 and provides consumer, demographic and
lifestyle information and directories of residents and businesses. Direct
marketing products include data capture, database management and registration
card programs for consumer durable goods manufacturers. Its customers include
credit services users, insurers, catalogers, publishers, technology companies,
travel and manufacturing clients.
Equifax Europe Segment
- ----------------------
The businesses in this segment primarily provide consumer and commercial credit
services, as well as other financial services, including credit application
processing, credit scoring, consumer marketing lists and related services,
modeling and analytics. The dominant means of distribution is through electronic
data interfaces. This segment operates in the United Kingdom, Spain, Portugal,
Ireland and due to the acquisition of SEK S.r.l. in fourth quarter 2000, in
Italy.
Customers include banks, financial institutions, retailers, automobile
manufacturers, utilities and telecommunications companies, auto finance and
leasing firms, automobile dealers and rental companies and mortgage lenders. The
Company also sells to small and medium-size businesses operating in a variety of
diverse markets.
This segment includes The Infocheck Group Ltd.; Dicodi, S.A.; Equifax Decision
Systems B.V.; Information Tecnica Del Credito, S.L. (Incresa); Via Ejectiva,
S.A.; Credinformacoes, Informacoes de Credito, LDA; Precision Marketing
Information Ltd. (49% owned); and Equifax Commercial Services Ltd.. Also
included in this segment are The Database Company Ltd., Equifax Iberica, S.A.,
SEK S.r.l. and ASNEF-Equifax Servicios de Informacion Sobre Solvencia y Credito,
S.L. (95% owned).
Equifax Latin America Segment
- -----------------------------
The principal class of service for this segment is consumer and commercial
credit information services, delivered largely through electronic distribution.
SCI is a leading commercial credit information vendor in Brazil, and provides
consumer credit information. DICOM and Veraz are the leading providers of
consumer and commercial credit information in Chile and Argentina respectively.
DICOM also provides import/export data, legal, trademark, stock market and other
consumer information. Equifax Latin America also has operations in Peru and El
Salvador. Customers include retailers, banks, financial institutions, utilities,
telecommunications companies, manufacturers and individual consumers.
This segment includes Equifax de Chile, S.A.; DICOM S.A.; Organizacion Veraz
S.A. (79%); Propago S.A.; Equifax do Brasil, Ltda.; Infocorp S.A. (51%); and
Dicom CentroAmerica (51%).
Divested Operations Segment
- ---------------------------
This segment includes the Company's collection services business, Equifax Risk
Management Services, in the U.S., Canada and the United Kingdom, as well as an
automobile lien business in the U.K. All of these
3
were divested in fourth quarter 2000. Revenue from this segment as a percentage
of the Company's total operating revenue was 7% in 2000, 10% in 1999 and 12% in
1998.
Other Segment
- -------------
The Company's single class of service for this segment is lottery services. In
1996, the Company subcontracted many of its lottery obligations to GTECH
Corporation, and as a result, these operations are not material to a general
understanding of the Company's business. Other than this subcontract, which
extends until mid 2002, the Company is no longer in the lottery business. This
segment includes High Integrity Systems, Inc.
Card Solutions Segment
- ----------------------
This segment provides "card issuer" services that enable banks, credit unions,
retailers and others to issue Visa and MasterCard credit and debit cards,
private label cards, and other electronic payment cards. It also provides
"merchant processing" services that enable retailers and other businesses to
accept credit, debit and other electronic payment cards from purchasers of their
goods and services.
A broad range of card processing solutions is offered, ranging from full service
card programs, to more limited transaction processing services. The majority of
card issuer customers subscribe to "full service" programs, wherein the Company
provides essentially all of the operations and support necessary to support a
card issuer's credit and debit card issuing program, including cardholder
transaction processing, authorization, and "back office" support functions.
These back office functions include, among others, invoicing the credit
cardholders, receiving and posting cardholder payments, and providing customer
service. Services are menu driven, and offer flexibility for those customers
that require less than our full service program. Such customers include large
card issuing banks that contract with us to provide transaction processing, but
choose to invest the capital and human resources necessary to provide their own
back office program support.
Card Solutions' merchant processing services include "front-end" authorization
and data capture services, and "back-end" accounting and settlement services.
The Company provides these services both directly to retailers and other
merchants who accept electronic payment cards, and through contracts and
financial institutions and others where the Company's solutions enable them to
service the card processing needs of their merchant customers.
In addition to card processing programs, Card Solutions also provides e-banking
solutions that enable banks to provide electronic banking services to their
customers, allowing them to compete for and retain customers more effectively
and to generate non-interest fee income.
In 2000, Card Solutions had operations in the U.S., U.K. and Brazil, and through
September a joint venture in India. In January 2000 it purchased Procard S.A.
in Chile and in June it contracted to process cards in Australia, New Zealand
and Ireland pursuant to a contract with National Australia Bank. This class of
service accounted for 26% of the Company's 2000 total operating revenue, as
compared with 25% in 1999 and 22% in 1998.
This segment includes Equifax Card Services, Inc.; Credit Union Card Services,
Inc.; Financial Insurance Marketing Group, Inc.; First Bankcard Systems, Inc.;
Equifax Card Solutions Australia Pty Ltd.; Equifax
4
Card Solutions, S.A.; Equifax E-Banking Solutions, Inc.; Equifax Card Solutions
Limited; Unnisa Solucoes en Meios de Pagamento Ltda. (59%); and Procard S.A.;
Check Solutions Segment
- -----------------------
This segment's businesses are a leading provider of check risk management and
related processing services. Check risk management solutions, which utilize
proprietary check authorization systems and risk assessment decision platforms,
enable retailers, hotels, automotive dealers, telecommunications companies,
supermarkets, casinos, mail order houses and other businesses to minimize losses
from dishonored checks, maximize check acceptance, and improve customer service.
A diverse and flexible portfolio of check risk management services allows the
Company to tailor solutions to meet the specific needs of the customer.
Services include check guarantee, where the Company accepts the risk of bad
checks presented to our customers, verification services, where the Company
determines the likelihood that a check will clear and the customer retains the
risk, and certain combinations of guarantee and verification services. Related
service offerings, including risk management consulting and market services,
which enable retailers to cross-sell and increase their customer relations are
also provided.
Check Solutions now includes operations in the U.S., U.K., Canada, Ireland,
France, New Zealand, and Australia. Our companies in this segment are leading
providers of their products and services in the United States. Check Solutions
accounted for 13% of the Company's 2000 total operating revenue, as compared
with 13% in 1999 and 13% in 1998.
This segment includes Equifax Check Services, Inc.; Equifax Payment Recovery
Services, Inc.; Light Signatures, Inc.; Equifax SNC; Financial Institution
Benefit Association, Inc.; Telecredit Canada, Inc.; Transax (Ireland) Ltd.;
Equifax Australia Plc, and Equifax Ltd. (New Zealand).
General
- -------
Business in the Card Solutions and Check Solutions segments are somewhat
seasonal. The volume of check and credit and debit card processing is highest
during the holiday shopping season and during other periods of increased
consumer spending. Other businesses are not significantly impacted by
seasonality.
The principal methods of competition for the Company are product innovation,
value added, price, speed of delivery, ease of use, and quality of the
information and services provided.
None of the Company's segments is dependent on any single customer, and the
Company's largest customer provides less than 10% of the Company's total
revenues.
The Company had approximately 12,200 employees as of December 31, 2000.
5
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The Company's executive officers, as of March 17, 2001, are listed below, with
certain information relating to each of them:
Name and Position Officer
With Company Age Since
----------------- --- -------
Thomas F. Chapman, Chairman and Chief Executive Officer(1)(2) 57 1991
Lee A. Kennedy, President and Chief Operating Officer(1)(2) 50 1997
William V. Catucci, Executive Vice President - The Americas(3) 62 1999
John T. Chandler, Senior Vice President and General Manager - 53 1995
City Directory(2)
C. Richard Crutchfield, Executive Vice President - Europe, 53 1997
Asia Pacific and Internet(2)
Virgil P. Gardaya, Corporate Vice President and Chief Technology 54 2000
Officer(4)
Karen H. Gaston, Corporate Vice President, Human Resources 48 1998
and Community Relations(2)
Kent E. Mast, Corporate Vice President, General Counsel 58 2000
and Secretary(5)
Philip J. Mazzilli, Executive Vice President and Chief Financial Officer(6) 60 2000
William R. Phinney, Senior Vice President and Group Executive - 62 1997
Latin America(2)
Bruce S. Richards, Corporate Vice President(2) 46 1996
Michael G. Schirk, Vice President and Treasurer(2) 51 1999
Larry J. Towe, Executive Vice President - Payment Services(2) 53 1999
Michael T. Vollkommer, Corporate Vice President and Controller(7) 42 1999
- -----------------------------
(1) Also serves as a Director.
(2) Has been employed with the Company in an executive position for the previous
five years.
(3) Mr. Catucci joined the Company in October 1999 as Group Executive, North
America Information Services and was promoted to his current position in October
2000. Prior to joining the Company, Mr. Catucci served as President and Chief
Executive Officer of Unitel/AT&T Canada Long Distance Services from 1996 to 1999
and as a Vice President of AT&T for more than five years.
(4) Prior to being promoted to his current position in March 2000, Mr. Gardaya
served as Senior Vice President, Global Communications Micro/LAN Services, since
joining the Company in November 1998. Prior to that, Mr. Gardaya served as
6
Vice President and Chief Information Officer with dual responsibility for GTE
Wireless and GTE Airfone and in various executive positions with GTE for more
than 30 years.
(5) Prior to joining the Company, in November 2000, Mr. Mast served as a Senior
Partner of Kilpatrick Stockton LLP, an international law firm, from 1990.
(6) From 1992 through June 1999, Mr. Mazzilli served as Corporate Vice
President, Treasurer and Controller of the Company. In 1999, he became Executive
Vice President and Chief Financial Officer of Nova Corporation, which provides
transaction processing and related software application products to small
merchants. He rejoined the Company in his current position in February 2000.
(7) Mr. Vollkommer joined the Company in 1999 in his current position. Prior to
joining the Company, he served as Vice President-Finance for Superior TeleCom
Inc., a manufacturer of copper wire and cable products, from 1998 to 1999. Prior
to that, he held executive financial officer positions with Alumax Inc., a
producer of primary aluminum and fabricated aluminum products, from 1994 to
1998.
There are no family relationships among the officers of the Company, nor are
there any arrangements or understandings between any of the officers and any
other persons pursuant to which they were selected as officers. The Board of
Directors may elect one or more officers at any meeting of the Board, however,
election of officers has generally occurred each year at the Board of Directors
meeting held in conjunction with the Annual Meeting of the Shareholders. Each
elected officer serves until their successors have been elected and duly
qualified subject to earlier termination in accordance with the Bylaws.
ITEM 2. PROPERTIES
- ------- ----------
The Company ordinarily leases office space of the general commercial type for
conducting its business and is obligated under approximately 335 leases and
other rental arrangements for its headquarters and field locations. The
Company's operating leases involve principally office space.
The Company owns four office buildings, one of which is located in Wexford,
Ireland; one in Salisbury, England; one in Sao Paolo, Brazil; and one in
Santiago, Chile. The Company owns approximately 23.5 acres in Windward Office
Park located in Alpharetta, Georgia adjacent to office space currently under
lease by the Company.
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
Reference is made to Note 8 of the Notes to Consolidated Financial Statements
(Commitments and Contingencies - Litigation), included in Part IV, Item 14 of
this report, which is incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
No matters were submitted during the fourth quarter 2000 to a vote of security
holders.
CERTAIN FACTORS AFFECTING
--------------------------
FORWARD LOOKING STATEMENTS
--------------------------
Statements in this annual report that relate to Equifax's future plans,
objectives, expectations, performance, events, and the like are "forward-looking
statements" within the meaning of the Private Securities Litigation Reporting
Act of 1995 and the Securities Exchange Act of 1934. These statements are based
on a number of assumptions that are inherently subject to significant
uncertainties. Many of these
7
uncertainties are beyond Equifax's control. Factors that could cause actual
results to differ from those expressed or implied by forward-looking statements
include, but are not limited to, those set forth below:
We depend on our customers' requirements for consumer credit information. If
- -----------------------------------------------------------------------------
these requirements decrease, our business might be adversely affected.
- ----------------------------------------------------------------------
Our core product is our consumer credit profiles. In general, the usage of
credit profiles (and related services) is driven by consumer demand for credit
(via new credit cards, automobile loans, home mortgages and refinancings and
other consumer loans) and lenders' efforts to develop new, and monitor existing,
credit relationships. Consumer demand for credit tends to increase during
periods of economic expansion. On the other hand, lenders' efforts to monitor
existing credit relationships tend to increase during periods of economic
contraction. Consequently, revenue from consumer credit information products is
influenced by cyclical economic trends related to consumer debt.
We rely on demand for consumer information services. Our business might be
- ---------------------------------------------------------------------------
negatively affected by a decline in demand.
- -------------------------------------------
We provide value-added consumer information services including direct marketing
products and services to our traditional customers, as well as to catalog,
publishing, high tech, travel and manufacturing clients. Direct marketing
products also include data capture, database management, and registration card
programs for consumer durable goods manufacturers. In the event that consumers
begin to buy fewer of the types of products and services that have in the past
been marketed and sold through direct marketing, or if direct marketing loses
effectiveness in comparison to other methods of advertising, use of our direct
marketing products and services could lessen and, consequently, our revenues and
profits could decline.
We depend on our customers' demand for our card and check solutions. If
- ------------------------------------------------------------------------
consumer use of credit cards, debit cards or checks declines, either due to
- ---------------------------------------------------------------------------
decreased consumer spending or for other reasons, our business might be
- -----------------------------------------------------------------------
adversely affected.
- -------------------
Demand for credit card, debit card and check authorization services is driven by
the level of non-cash consumer spending. Consumer demand for credit tends to
increase during periods of economic expansion and declines in times of economic
contraction. Decrease in consumer spending could result in decline in the number
of transactions processed. Also, increase in the use of competitive
technologies, such as e-banking, pay-by-phone, and smartcard transactions, may
decrease the number of checking transactions processed and reduce our revenue
and profits.
We rely on external data sources. Loss of access to credit and other data from
- -------------------------------------------------------------------------- ----
external sources could negatively impact our business.
- ------------------------------------------------------
We rely extensively upon data from external sources to maintain our proprietary
and non-proprietary databases, including data received from customers and
various government and public record services. The continued availability of
such data sources cannot be assured. Although we have no reason to believe that
access to current data sources will become restricted, loss of access to, or the
availability of, data in the future due to government regulation or otherwise
could have a material adverse effect on our business, financial condition and
results of operations.
Changes in government regulation could increase our costs or otherwise affect
- -----------------------------------------------------------------------------
our profits.
- ------------
Our business involves collection of consumer and business data and distribution
of such information to businesses making credit and marketing decisions. Equifax
Payment Services processes information
8
reflecting consumers' spending and payment activities. Consequently, certain of
our activities and services are subject to regulation under various federal laws
including the Fair Credit Reporting Act, Fair Debt Collection Practices Act,
Gramm-Leach-Bliley Act, Equal Credit Opportunity Act, Truth in Lending Act and
Fair Credit Billing Act, as well as similar state laws. We are also subject to
privacy and consumer credit laws and regulations in foreign countries where we
do business.
We have no reason to believe that additional regulations will be imposed that
will have a material adverse effect on our business. However, further federal,
state and local data use regulations may affect our operations with increased
compliance requirements and potential loss of revenue.
Competition could hurt our business.
- ------------------------------------
Equifax operates in a number of geographic, product and service markets, which
are highly competitive. We primarily compete with two national consumer credit
reporting companies, Experian Information Solutions, Inc. and Trans Union LLC,
which offer credit reporting products that are similar to those we offer. We
also compete with these and other companies that offer marketing information
products and services, including Acxiom Corporation and Info USA, Inc. Primary
competitors of Payment Services are First Data Corporation, Total System
Services, Payment Services Credit Union, Scan and International Check Solutions.
In each of our markets, we compete on the basis of responsiveness to customer
needs as well as the quality and range of products and services offered.
Although we believe that we offer a broader range of products and services in
more geographic markets than our competitors, we face strong competition in
certain geographic, product and service markets which, if successful, may have
adverse effects on our operations.
If not accomplished in a timely and tax-free manner, the proposed spin-off of
- -----------------------------------------------------------------------------
Payment Services may negatively impact our business.
- ---------------------------------------------------
On October 2, 2000 the Company announced its intention to spin-off its Payment
Services division to its shareholders in a tax-free stock dividend. We believe
that separating Information Services from Payment Services will create two very
strong companies, each with its own management team and Board of Directors
focused on taking advantage of growth opportunities in their respective markets.
We expect to complete the spin-off by the summer of 2001. However, prior to that
time, there is a significant amount of work that must be completed to separate
the two companies, much of which will require the time and attention of our
management.
The spin-off is subject to a favorable ruling from the Internal Revenue Service
(the "IRS") confirming the tax-free status of the distribution of dividend
shares. It is possible, however, that IRS may not issue such a ruling and or
that the spin-off could be rendered taxable as a result of subsequent actions or
events, or as a result of a determination that Equifax failed to disclose
properly to the IRS all material facts related to the spin-off. While we expect
that the spin-off will be completed as a tax-free transaction, the inability to
complete the spin-off as a tax-free transaction could have a negative effect on
the trading price of Equifax's Common Stock, our operations and financial
results, and or on our decision to complete the spin-off.
9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------- -----------------------------------------------------------------
MATTERS
-------
The Company's common stock is listed and traded on the New York Stock Exchange,
which is the principal market on which the stock is traded.
DIVIDENDS PER SHARE
- ---------------------------------------------------
Quarter 1999 2000 2001*
- ---------------------------------------------------
First $0.090 $0.093 $0.093
Second 0.090 $0.093 N/A
Third 0.090 $0.093 N/A
Fourth 0.093 $0.093 N/A
- ---------------------------------------------------
Annual $0.363 $0.370 $0.093
- ---------------------------------------------------
*Through March 20, 2001.
STOCK PRICE
- -------------------------------------------------------------------------------
(In Dollars) 1999 2000 2001*
- -------------------------------------------------------------------------------
High Low High Low High Low
First Quarter 39.875 31.375 25.500 19.875 33.063 27.438
Second Quarter 38.438 33.250 29.688 23.375 N/A N/A
Third Quarter 36.938 26.750 27.250 23.250 N/A N/A
Fourth Quarter 28.313 20.125 36.500 26.000 N/A N/A
- -------------------------------------------------------------------------------
Annual 39.875 20.125 36.500 19.875
- -------------------------------------------------------------------------------
*Through March 20, 2001.
As of February 28, 2001, there were approximately 10,611 holders of record of
the Company's common stock.
Recent Sales of Unregistered Securities
- ---------------------------------------
In October 2000, the Company acquired Compliance Data Center, Inc. ("CDC") for
approximately $12 million, paid in cash and shares of the Company's common
stock. In connection with the acquisition, 340,545 shares of common stock were
issued to the seller pursuant to an exemption from the registration requirements
of the Securities Act of 1933, as amended, provided by Section 4(2) and the
regulations promulgated thereunder. The Company received no cash proceeds in
connection with the issuance of the shares. The shares were registered for
resale by the former shareholders of CDC (which was liquidated) pursuant to a
registration statement filed by the Company with the Securities and Exchange
Commission on February 1, 2001. The Company will receive no cash proceeds from
the resale of the shares by the former CDC shareholders.
10
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
Reference is made to Exhibit 13.1, included in Part IV, Item 14 of this report,
which is incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
- ------- ----------------------------------------------------------------------
OF OPERATIONS
-------------
Reference is made to Exhibit 13.2, included in Part IV, Item 14 of this report,
which is incorporated by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- -------- ---------------------------------------------------------
The Company is exposed to market risk, primarily from changes in foreign
currency exchange rates and interest rates.
In the normal course of business, the balance sheets and results of operations
of the Company's foreign subsidiaries can be impacted by changes in foreign
currency exchange rates. The Company's position is to not hedge against this
risk due to the significant cost involved. At December 31, 2000, the Company
had no material intercompany balances with foreign affiliates that were short-
term in nature or material obligations in a foreign currency, other than
intercompany advances to its U.K. operations and intercompany balances
associated with funding an acquisition in Italy and a startup operation in
Australia. From time to time, as such balances or obligations arise, the
Company may consider hedging to minimize its exposure for these transactions.
At December 31, 2000, the exchange risk associated with the Company's
intercompany advances to its U.K. operations, as well as the intercompany
balances associated with funding the Italy acquisition and startup operation in
Australia were partially hedged by having a portion of borrowings under its
revolving credit facility denominated in those respective currencies.
The Company chooses to have a mix of fixed-rate and variable-rate debt in its
portfolio of debt obligations. Accordingly, the Company's earnings can be
affected by the impact that changes in interest rates have on its variable-rate
obligations. At December 31, 2000 approximately $251 million (24%) of the
Company's short-term and long-term debt was in variable-rate facilities. At
this level, if market interest rates increased 1%, interest expense would
increase approximately $2.5 million per year (pre-tax). In July 2000 and in
January 2001, the Company entered into six-month interest rate swap arrangements
to fix the interest rate for $200 million of its variable rate revolver debt.
That portion of the Company's revolver debt has been excluded from the $251
million amount of variable rate debt mentioned above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
Reference is made to Exhibit 13.3, included in Part IV, Item 14 of this report,
which is incorporated by reference.
11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
The Company's Proxy Statement for the Annual Meeting of Shareholders to be held
on May 2, 2001, contains, on pages 4 through 7 thereof and on page 14 (under the
heading "Stock Ownership Reporting Compliance"), information relating to the
Company's Directors and persons nominated to become Directors, which is
incorporated by reference. Information relating to the Executive Officers of the
Company is included in Item 1 of this Report.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The Company's Proxy Statement for the Annual Meeting of Shareholders to be held
on May 2, 2001, contains, on page 8 thereof (under the heading "Compensation of
Directors"), on pages 17 through 27 thereof (under the heading "Executive
Officer Compensation"), information relating to Executive Officer compensation,
which is incorporated by reference. In no event shall the information contained
in the Proxy Statement under the heading "Report of the Compensation and Human
Resources Committee on Executive Compensation" be deemed incorporated herein by
such reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
The Company's Proxy Statement for the Annual Meeting of Shareholders to be held
on May 2, 2001, contains on page 13 thereof, information relating to security
ownership of certain beneficial owners and management, which is incorporated by
reference.
For purposes of determining the aggregate market value of the Company's voting
stock held by nonaffiliates, shares held by all current directors, executive
officers and holders of 5% or more of the outstanding Common Stock of the
Company have been excluded. The exclusion of such shares is not intended to, and
shall not, constitute a determination as to which persons or entities may be
"affiliates" of the Company as defined by the Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The Company's Proxy Statement for the Annual Meeting of Shareholders to be held
on May 2, 2001, contains, on page 10 thereof (under the heading "Certain
Relationships and Related Transactions"), information relating to certain
relationships and related transactions between the Company and certain of its
directors and executive officers, which is incorporated by reference.
12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------- ---------------------------------------------------------------
(a) DOCUMENTS FILED WITH THIS REPORT
(1) Financial Statements
--------------------
The following financial statements are filed with this Report.
. Consolidated Balance Sheets - December 31, 2000 and 1999
. Consolidated Statements of Income for the Years Ended December 31,
2000, 1999 and 1998
. Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998
. Consolidated Statements of Shareholders' Equity and Comprehensive
Income for the Years Ended December 31, 2000, 1999 and 1998
. Notes to Consolidated Financial Statements
. Report of Independent Public Accountants and Report of Management
(2) Financial Statement Schedules
-----------------------------
All schedules have been omitted because they are not applicable or the required
information is included in the consolidated financial statements or notes to
these statements.
(3) Exhibits
--------
The following is a complete list of exhibits included as part of this Report
including those incorporated by reference. A list of those documents filed with
this Report is set forth on the Exhibit Index appearing elsewhere in this Report
and is incorporated by reference.
Exhibit No. Description
- ----------- -----------
2.1 Distribution Agreement, Plan of Reorganization and Distribution
previously filed as an exhibit to Pre-effective Amendment No. 1 to
Registration Statement on Form S-1, Registration No. 333-30297,
filed July 16, 1997, and incorporated by reference.
3.1 Amended and Restated Articles of Incorporation previously filed as an
exhibit on Schedule 14A, filed, March 26, 1996, and incorporated by
reference.
3.2 Bylaws previously field as an Exhibit on Form 10-K filed March 30,
2000 and incorporated by reference.
4.1 Loan Agreement previously filed as an exhibit on Form 10-K, filed
March 31, 1998, and incorporated by reference.
4.2 Portion of Prospectus and Trust Indenture previously filed as pages 8
through 16 and Exhibit 4.1 on Amendment No. 1 to Form S-3,
Registration Statement No. 33-62820, filed June 17, 1993, and
incorporated by reference.
13
4.3 Rights Agreement, dated October 25, 1995, between Equifax Inc. and
SunTrust Bank, Atlanta with Form of Right Certificate attached as
Exhibit "A".
4.4 Indenture Relating to Debt Securities previously filed as an exhibit
on Form 10-K, filed March 31, 1999, and incorporated by reference.
10.1 Equifax Inc. 1988 Performance Share Plan for Officers, as amended
previously filed as an exhibit on Form 10-K, filed March 31, 1998,
and incorporated by reference.(1)
10.2 Equifax Inc. Executive Incentive Plan previously filed as an exhibit
on Form 10-K, filed March 31, 1998, and incorporated by reference.(1)
10.3 Deferred Compensation Plan previously filed as an exhibit on
Form 10-K, filed April 1, 1996, as amended on Form 10-K/A, filed
April 4, 1996, and incorporated by reference.(1)
10.4 Form of Change in Control Agreement previously filed as an Exhibit to
Form 10-K, filed March 31, 1998, and incorporated by reference.(1)
10.5 Equifax Inc. Omnibus Stock Incentive Plan, as amended previously
filed as an exhibit on Form 10-K, filed March 31, 1998, and
incorporated by reference.(1)
10.6 Equifax Inc. Non-Employee Director Stock Option Plan and Agreement
previously filed as an exhibit on Form 10-K, filed March 31, 1999,
and incorporated by reference.(1)
10.7 Equifax Inc. Supplemental Executive Retirement Plan and subsequent
Amendments.(1)
10.8 Equifax Inc. Executive Life and Supplemental Retirement Benefit Plan
(U.S.)
10.9 Agreement For Computerized Credit Reporting Services previously field
as an Exhibit on Form 10-K filed March 30, 2000 and incorporated by
reference.
10.10 Amendments to Agreement for Computerized Credit Reporting Services
and related documents previously filed as an exhibit on Form 10-K,
filed March 31, 1997, and incorporated by reference.
10.11 Amendment to Agreement for Computerized Credit Reporting Services
previously filed as pages 8 through 16 and Exhibit 4.1 on Amendment
No. 1 to Form S-3, Registration Statement No. 33-62820, filed June
17, 1993, and incorporated by reference.
10.12 Fifth Amendment to Agreement for Computerized Credit Reporting
Services previously field as an Exhibit on Form 10-K filed March 30,
2000 and incorporated by reference.
10.14 Computer and network operations agreement (redacted version)
previously filed as an exhibit on Form 10-Q, filed November 16, 1998,
and incorporated by reference.(2)
10.15 Lease Agreement previously field as an Exhibit on Form 10-K filed
March 30, 2000 and incorporated by reference.
14
10.16 Lease Agreement previously filed as an exhibit on Form 10-K, filed
March 31, 1999, and incorporated by reference.
10.17 Transaction Document #1 previously field as an Exhibit on Form 10-K
filed March 30, 2000 and incorporated by reference.(2)
10.18 Master Agreement previously field as an Exhibit on Form 10-K filed
March 30, 2000 and incorporated by reference.(2)
10.19 Human Resources Business Process and Support Services Agreement with
First Amendment and schedule of omitted exhibits previously field as
an Exhibit on Form 10-K filed March 30, 2000 and incorporated by
reference.
10.20 Finance & Accounting Business Process and Support Services Agreement,
with First amendment and schedule of omitted exhibits previously
field as an Exhibit on Form 10-K filed March 30, 2000 and
incorporated by reference.
10.21 Employment Agreement(1)
10.22 Equifax Inc. Key Management Long-Term Incentive Plan(1)
10.23 Equifax Inc. 2000 Stock Incentive Plan(1)
10.24 Bonus Exchange Program(1)
13.1 Summary of Selected Financial Data
13.2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
13.3 Financial Statements and Supplementary Data
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants to incorporation by
reference
24 Power of Attorney-Set forth on Signature Page
99.1 Form of Proxy Statement for the Annual Meeting of Shareholders, to be
held May 2, 2001.
____________________________
(1) Management Contract or Compensatory Plan
(2) Document omits information pursuant to a Request for Confidential Treatment
under Rule 406 of the Securities Act of 1933
(b) REPORTS ON FORM 8-K
On October 5, 2000, the Company filed a report on Form 8-K filing the press
release announcing its intention to spin-off its Payment Services Division
to its shareholders as a tax free stock dividend.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized officer.
Date: March 23, 2001 /s/Kent E. Mast
-----------------------------------------
By: Kent E. Mast
Corporate Vice President, General Counsel
and Secretary
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears below
constitutes and appoints Thomas F. Chapman, Kent E. Mast and Philip J. Mazzilli
and either of them, as attorneys-in-fact, with power of substitution, for him in
any and all capacities, to sign any amendments to this Report on Form 10-K, and
to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: March 23, 2001 /s/Thomas F. Chapman
---------------------------------------------
Thomas F. Chapman, Chairman of the Board
and Chief Executive Officer
Date: March 23, 2001 /s/Lee A. Kennedy
---------------------------------------------
Lee A. Kennedy, President and
Chief Operating Officer
Date: March 23, 2001 /s/Philip J. Mazzilli
---------------------------------------------
Philip J. Mazzilli, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: March 23, 2001 /s/Michael T. Vollkommer
---------------------------------------------
Michael T. Vollkommer, Corporate Vice
President and Controller
(Principal Accounting Officer)
16
Date: March 23, 2001 /s/Lee A. Ault
---------------------------------------------
Lee A. Ault, III, Director
Date: March 24, 2001 /s/John L. Clendenin
---------------------------------------------
John L. Clendenin, Director
Date: March 26, 2001 /s/A. W. Dahlberg
---------------------------------------------
A. W. Dahlberg, Director
Date: March 29, 2001 /s/Robert P. Forrestal
---------------------------------------------
Robert P. Forrestal, Director
Date: March 26, 2001 /s/L. Phillip Humann
---------------------------------------------
L. Phillip Humann, Director
Date: March 26, 2001 /s/Larry L. Prince
---------------------------------------------
Larry L. Prince, Director
Date: March 26, 2001 /s/Louis W. Sullivan
---------------------------------------------
Dr. Louis W. Sullivan, Director
Date: March 26, 2001 /s/Jacquelyn M. Ward
---------------------------------------------
Jacquelyn M. Ward, Director
17
INDEX TO EXHIBITS
The following documents are being filed with this Report.
Exhibit No. Description
- ----------- -----------
4.3 Rights Agreement, dated October 25, 1995, between Equifax Inc. and
SunTrust Bank, Atlanta with Form of Right Certificate attached as
Exhibit "A"
10.7 Equifax Inc. Supplement Executive Retirement Plan and
subsequent Amendments(1)
10.8 Equifax Inc. Executive Life and Supplemental Retirement Benefit
Plan (U.S.)
10.21 Employment Agreement(1)
10.22 Equifax Inc. Key Management Long-Term Incentive Plan(1)
10.23 Equifax Inc. 2000 Stock Incentive Plan(1)
10.24 Bonus Exchange Program(1)
13.1 Summary of Selected Financial Data
13.2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
13.3 Financial Statements and Supplementary Data
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants to incorporation by
reference
99 Form of Proxy Statement for the Annual Meeting of Shareholders to
be held May 2, 2001
________________________________________________________________
(1) Management Contract or Compensatory Plan
18