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 12-31-95
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-6605
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EQUIFAX INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-0401110
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION IDENTIFICATION NO.)
P.O. BOX 4081
1600 PEACHTREE ST., N.W., ATLANTA, GA 30302
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (404) 885-8000
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK
($1.25 PAR VALUE) NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: NONE
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(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]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT, COMPUTED BY REFERENCE TO THE CLOSING SALES PRICE ON THE NEW YORK
STOCK EXCHANGE ON MARCH 25, 1996: $3,069,822,235.
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 MARCH 25, 1996
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COMMON STOCK, $1.25 PAR VALUE 153,621,594
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DOCUMENTS INCORPORATED BY REFERENCE
THE PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 1,
1996, IS INCORPORATED BY REFERENCE, TO THE EXTENT INDICATED UNDER ITEMS 10, 11,
12, AND 13, INTO PART III OF THIS FORM 10-K.
EQUIFAX INC.
PART I
ITEM 1. BUSINESS
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Equifax Inc. is structurally a holding company for its corporate
subsidiaries, which conduct the actual operations of the Company. The separate
business areas of the Company are conducted on a "profit center" basis with
self-contained functional integrity, although Equifax Inc. continues to supply
centralized overall financial, legal, public relations, tax and similar
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 and diversify by means of internal development and
strategic acquisitions. At the end of 1975, the Company changed its name from
Retail Credit Company to Equifax Inc. The specific products and services
presently offered by the Company are described below.
In January 1993, the Company implemented an open market stock repurchase
program. During 1995, the Company repurchased approximately 6,847,000 shares at
a cost of $132,668,000.
In December 1995, the Company, through its subsidiary Equifax South
America, Inc., purchased an additional 25 percent interest in DICOM S.A., a
Chilean credit reporting company, headquartered in Santiago, Chile. This
purchase increased the Company's ownership to 50 percent. DICOM S.A. provides
credit information services in Chile, Columbia and Peru.
In July 1995, the Company acquired Tecnicob S.A., a French credit card
processing software company headquartered in Paris, France. This operation is
owned by Equifax Europe (U.K.) Ltd.
In July 1995, the Company acquired The Infocheck Group Limited, a provider
of commercial credit referencing services in the United Kingdom. This
operation, headquartered in Godmersham, Canterbury, is owned and operated by
Equifax Europe (U.K.) Ltd.
Also, in July 1995, the Company through its subsidiary Equifax Europe Ltd.,
entered into an agreement with ASNEF-Equifax, the Company's Spanish joint
venture, and Association of Financial Companies, a Portuguese credit reporting
company, to provide the first automated credit reporting services in Portugal.
In April 1995, the Company acquired UCB Services, Inc., a provider of
mortgage credit reports, which is located in Glen Ellyn, Illinois, a suburb of
Chicago. These operations are owned and operated by Equifax Credit Information
Services, Inc.
In March 1995, the Company acquired Medical Review Systems, Inc., an
Atlanta, Georgia based healthcare cost containment company. These operations
are operated by Equifax Healthcare Information Services, Inc.
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In February 1995, the Company acquired Vallance and Associates, Inc., a
commercial inspection services company, located in Westerville, Ohio. These
operations are owned and operated by Equifax Services Inc.
Reference is made to industry segment information reported in Note 11 of
the Notes to Consolidated Financial Statements, included in Part II, Item 8 of
this report, which is hereby incorporated by reference.
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- 3 -
A description of the products or services provided by each industry segment
as captioned in the aforementioned information, together with information
regarding the companies included within each segment, is as follows:
Credit Services Segment
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This segment includes Equifax Credit Information Services, Inc. and its
wholly-owned subsidiary Credit Northwest Corporation, and Equifax Marketing
Decision Systems, Inc.
The Company's principal class of service for this segment is informational
services for consumer credit report purposes. Customers include retailers,
banks, financial institutions, utilities, petroleum companies, travel and
entertainment card companies, auto finance and leasing firms, educational
institutions and mortgage lenders. In 1995, this class of service accounted for
19.0% of the Company's total operating revenue, as compared with 20.9% in 1994,
and 23.6% in 1993.
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Companies in this segment primarily furnish consumer credit services, but
also provide decision support and credit management services designed to meet
specific customer needs. This includes consumer credit reporting information,
risk management, collection services, locate services, fraud detection and
prevention, credit card marketing programs, database marketing and database
management systems, mortgage loan origination information, pc-based marketing
systems, geo-demographic systems, mapping tools and modeling and analytical
services, both domestically and internationally. These companies distribute
information to customers through automated delivery, utilizing telephone
transmission facilities.
The Company's consumer credit services operations, including non-owned
affiliate bureaus, compete with two other large automated credit reporting
organizations - TRW Credit Data and Trans Union Corporation. There are also
numerous smaller local bureaus in this field.
Payment Services Segment
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This segment includes Equifax Payment Services, Inc. and its wholly-owned
subsidiaries Equifax Check Services, Inc.; Equifax Card Services, Inc.; Light
Signatures, Inc.; Financial Insurance Marketing Group, Inc.; and First Bankcard
Systems, Inc.
Companies in this segment provide services to national and regional retail
chains, banks, credit unions, savings institutions, automobile dealers and
rental companies, hotel and motels, and others.
The Company's principal class of service for this segment is check guarantee
and check verification services. In 1995, this class of service accounted for
8.6% of the Company's total revenue, as compared with 9.3% in 1994 and 10.1% in
1994.
These companies provide check guarantee services as well as credit card
marketing enhancements and credit and debit card processing services to
merchants and financial institutions. These services include on-line guarantees
or verification of checks written at the point of sale, credit card and debit
card processing for small to medium-size banks, credit unions, and other
financial institutions, flexible credit card marketing enhancements, and
software products for credit card, merchant and collection processing.
Companies in this segment are leading providers of their products and
services in the U.S. although competition is considerable.
Business in this segment is seasonal to some extent. The volume of check
payment services is highest during the Christmas shopping season and during
other periods of increased consumer spending.
International Operations Segment
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This segment consists of Acrofax Inc.; Equifax Canada Inc. and its wholly-
owned subsidiaries Equifax Canada (AFX) Inc. and Telecredit Canada, Inc.;
Equifax Europe (U.K.) Ltd.; Equifax Europe Ltd, UAPT-Infolink plc; Equifax South
America, Inc.; and Tecnicob, S.A. Also included in this segment are Transax
(50.1%)
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owned) and Scorex (U.K.) Ltd. (49% owned); ASNEF-Equifax (49% owned);
Organizacion Veraz (33.3% owned); and DICOM (50% owned).
The Company's principal class of service for this segment is consumer
credit reporting. In 1995, this class of service accounted for 6.3% for the
Company's total operating revenue, as compared with 6.2% in 1994 and 6.0% in
1993.
The companies in this segment primarily provide consumer credit services,
but also provide other financial services. In Canada, financial services
include automated business and consumer credit information, accounts receivable
and collection and check guarantee services. In the U.K., consumer and
commercial credit reporting, credit scoring, modeling services and check
guarantee and electronic authorization services are provided. In Spain and
Argentina, technology and expertise are provided to enhance credit information
services. In Chile, commercial, financial and medical information services are
provided.
Equifax Canada Inc. is clearly the market leader in providing consumer
credit in Canada. Telecredit Canada, Inc. faces strong competition. In the
U.K., CCN, a subsidiary of Great Universal Stores, PLC holds the majority share
of the consumer credit market, while Transax is the check guarantee market share
leader. ASNEF-Equifax is a leader in providing credit information services in
Spain. Veraz is the leading information providers in Argentina, while DICOM is
the leading provider in Chile, Columbia and Peru.
Insurance Services Segment
- --------------------------
This segment consists of various business units of Equifax Services Inc.;
Osborn Laboratories, Inc.; The Kit Factory, Inc.; Mid-American Technologies,
Inc.; and Programming Resources Company.
The Company's principal class of service for this segment is providing
information for insurance underwriting purposes. In 1995, this class of service
accounted for 26.4% of the Company's total operating revenue, as compared with
25.9 in 1994 and 25.8% in 1993.
Equifax Services Inc. provides most all major life and health insurance
companies with various informational services for help in determining the
classification of applicants as risks for life and health insurance and for
assistance in settling claims. Also, health data is provided to these companies
for their use in underwriting the health aspects of their risks. Osborn
Laboratories tests blood and urine for life and health insurance applicants.
The Company also provides similar informational services to major property and
casualty insurance companies including motor vehicle records, automated claim
information for automobile and property insurers, automobile reclassification
program management, workers' compensation audits and commercial inspections and
surveys. The Company also provides customized software rating applications for
commercial and personal line insurers. This information is used by insurance
companies in evaluating applicants as risks and as an aid in determining the
applicable rates. Automated information services are distributed through
telephone transmission facilities.
The Company currently ranks first and is the market leader providing
insurance related information services, while Osborn is the second largest
laboratory of its kind in the U.S. Many smaller organizations, which focus on a
limited number of services and which, in some cases, are concentrated in small
geographic areas, provide fragmented competition.
- 6 -
General Information Services Segment
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This segment consists of Equifax Healthcare Information Services, Inc.;
Equifax Healthcare EDI Services, Inc.; HealthChex, Inc.; Health Economics
Corporation; Equifax Government & Special Systems, Inc.; and High Integrity
Systems, Inc.
The Company's principal class of service for this segment is providing
healthcare information services. In 1995, this class of service accounted for
4.0% of the Company's total operating revenue, as compared with 3.9% in 1994 and
3.2% in 1993.
Companies in this segment providing health care services furnish a broad
range of informational and administrative services which include electronic
claim processing, on-line eligibility verification and claim status, physician
profiling, automatic claim audits, national medical credentials verification,
claims analysis, administration and utilization management, pre-admission
certification, managed care plan services, electronic remittance and hospital
bill audits.
Equifax Healthcare Information Services, Inc., HealthChex, Inc., Equifax
Healthcare EDI Services, Inc., and Health Economics Corporation provide services
to health care providers (hospitals and physicians), managed care organizations,
health plan managers, insurers, purchasers and payers of group health coverage
and governmental agencies.
High Integrity Systems, Inc., was formed to provide a lottery management
system for the California State Lottery.
Competition is strong in all of the above areas. Companies offering health
care services possess relatively small shares or are competing in young and
growing markets. Other than stated above, competition in these areas is
difficult to describe and information concerning such conditions is not material
to a general understanding of the Company's business.
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The principal methods of competition for the Company are price, scope,
speed and ease of service and reliability of the information furnished.
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 14,200 employees, as of December 31, 1995.
ITEM 2. PROPERTIES
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The Company is in a service industry and does not own any mines, extractive
properties or manufacturing plants. Thus, an understanding of the Company's
property holdings is not deemed to be material to an understanding of the
Company's business taken as a whole.
The Company owns a total of four office buildings, one of which is located
in La Habra, California and the other three located in England - one each in
London, Corsham and Salisbury. The Company also owns two office/laboratory
facilities, one of which with an adjoining 1.27 acres of vacant land, in a
suburb of Kansas City, Olathe, Kansas. These office/laboratory facilities are
utilized by the Company's subsidiary, Osborn Laboratories, Inc.
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The Company ordinarily leases office space of the general commercial type
for conducting its business and is obligated under approximately 378 lease and
other rental arrangements for its headquarters and field locations. The
Company's operating leases involve principally office space and office
equipment. Rental expense relating to these leases was $46,898,000 in 1995,
$46,534,000 in 1994 and $40,798,000 in 1993. In March 1994, the Company sold
and leased back under operating leases certain land and buildings. The net
sales price of $55.1 million approximated the net book value of the related
assets.
Future minimum payment obligations for noncancelable operating leases exceeding
one year are as follows as of December 31, 1995:
(In thousands) Amount
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1996 $38,201
1997 32,312
1998 27,260
1999 21,315
2000 18,697
Thereafter 95,248
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$233,033
========
ITEM 3. LEGAL PROCEEDINGS
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Reference is made to Lottery Contract Dispute, Litigation and Settlement
Information reported in Note 3 of the Notes to Consolidated Financial
Statements, included in Part II, Item 8 of this report, which is hereby
incorporated by reference.
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- 9 -
EXECUTIVE OFFICERS OF THE REGISTRANT
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The Company's executive officers, as of March 25, 1996, are listed below, with
certain information relating to each of them:
Executive
Name and Position Officer
With Company Age Since
----------------- --- ---------
D. W. McGlaughlin, President and Chief Executive Officer* 59 1989
Thomas F. Chapman, Executive Vice President* 52 1991
J. C. Chartrand, Executive Vice President* 61 1986
D. V. Smith, Executive Vice President 41 1990
D. J. Kohl, Senior Vice President 39 1995
D. U. Hallman, Senior Vice President and Chief Financial Officer 54 1991
J. T. Chandler, Corporate Vice President 48 1995
R. F. Haygood, Corporate Vice President 48 1993
T. H. Magis, Corporate Vice President, Secretary and General Counsel 55 1991
P. J. Mazzilli, Corporate Vice President & Controller 55 1995
M. E. Zakas, Corporate Vice President and Treasurer 37 1995
*Also serves as a Director
- 10 -
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 an officer or officers at any meeting of the Board. Each
elected officer is selected to serve until the date of the Annual Meeting of the
Shareholders in each year.
Messrs. McGlaughlin, Chapman and Chartrand have each served as an officer of
the Company for at least five years. Messrs. Smith, Magis, Hallman and Haygood
have served in various executive capacities with the Company or its subsidiaries
for more than five years before becoming an officer.
Mr. Kohl, prior to his election as Senior Vice President in July 1995, served
as an executive in the Company's healthcare information services group since
1993. Prior to joining the Company, he served as corporate vice president for
operations at Healthdyne, Inc., a home healthcare services company. Before
this, he served two years as president of HMSS, Inc., a home infusion therapy
company and three years as chief operating officer of Abbey Healthcare, Inc., a
home healthcare services company.
Ms. Zakas, prior to her election as Corporate Vice President and Treasurer in
January 1996, served as Corporate Vice President-Investor Relations since
October 1995. Prior to that, she served as Vice President and Director of
Investor Relations of the Company since September 1993. Prior to that, she
served at Holiday Inn Worldwide, an international hotel chain, as Director-
Strategic Planning and Analysis from 1992-1993 and as Director-Project Finance
from 1991-1992. From 1984 until 1991, she worked at Morgan Stanley and Co., an
investment banking firm, in the areas of capital market services and corporate
finance.
Mr. Chandler, prior to his election as Corporate Vice President in October
1995, served as Vice President-Compensation and Benefits Administration. Before
joining the Company in 1991, he served as vice president of executive
compensation and benefits for C&S/Sovran Corporation, a national bank, now known
as NationsBank, N.A., for a period of four years.
Mr. Mazzilli, prior to his election as Corporate Vice President and Controller
in October 1995, served as Vice President and Controller of the Company since
1992. Before joining the Company in 1992, he served as Vice President,
Management Services for the Equitable Life Insurance Company for a period of six
years.
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
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STOCKHOLDER MATTERS
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The Company's common stock is listed and traded on the New York Stock Exchange,
which is the principal market on which said stock is traded.
DIVIDENDS PER SHARE
Quarter 1990 1990 1992 1993 1994 1995
- --------------------- ------ ------ ------ ------ ------ ------
First $0.060 $0.065 $0.065 $0.070 $0.070 $0.078
Second 0.060 0.065 0.065 0.070 0.078 0.078
Third 0.060 0.065 0.065 0.070 0.078 0.078
Fourth 0.060 0.065 0.065 0.070 0.078 0.083
- --------------------- ------ ------ ------ ------ ------ ------
Annual $0.240 $0.260 $0.260 $0.280 $0.303 $0.315
- --------------------- ------ ------ ------ ------ ------ ------
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STOCK PRICES
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(In Dollars) 1992 1993 1994 1995
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High Low High Low High Low High Low
First Quarter 9.375 7.50 11.188 09.563 13.688 10.938 17 12.625
Second Quarter 9.688 7.188 10.500 8.688 15.188 11.563 17.5 15.313
Third Quarter 8.563 7.188 13.063 9.875 15.125 13.375 21.063 16.313
Fourth Quarter 10.313 7.313 13.688 11.438 15.25 12.000 21.75 18
Year 10.313 7.188 13.688 8.688 15.25 10.938 21.75 12.625
As of March 25, 1996, there were approximately 9,508 holders of record of
the Company's common stock.
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ITEM 6. SUMMARY OF SELECTED FINANCIAL DATA
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PART I (1995 - 1992)
(Dollars in thousands, except per share amounts)
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Year ended December 31 1995 1994 1993 1992
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SUMMARY OF OPERATIONS
Operating revenue $1,622,958 $1,421,996 $1,217,217 $1,134,333
Operating costs and expenses before unusual items 1,360,019 1,207,889 1,049,750 992,995
Unusual items - - (48,438) -
------------ ------------ ------------ ------------
Operating income 262,939 214,107 119,029 141,338
Other income 7,471 8,994 3,890 7,482
Interest expense (21,172) (15,624) (10,923) (4,029)
------------ ------------ ------------ ------------
Income before income taxes and accounting changes 249,238 207,477 111,996 144,791
Provision for income taxes 101,588 87,131 48,481 59,445
------------ ------------ ------------ ------------
Income before accounting changes 147,650 120,346 63,515 85,346
Cumulative prior years' effect of changes in
accounting principles* - - - -
------------ ------------ ------------ ------------
Net income $147,650 $120,346 $63,515 $5,346
============ ============ ============ ============
Dividends paid $50,223 $47,161 $42,041 $42,770
PER COMMON SHARE DATA
Income before accounting changes $0.98 $0.81 $0.42 $0.52
Cumulative prior years' effect of changes in
accounting principles - - - -
------------ ------------ ------------ ------------
Net income $0.98 $0.81 $0.42 $0.52
============ ============ ============ ============
Dividends $0.315 $0.303 $0.280 $0.260
Weighted average common shares outstanding 151,357,000 148,608,000 150,114,000 163,918,000
BALANCE SHEET DATA
Assets at December 31 $1,053,695 $1,021,174 $731,201 $708,882
Long-term debt at December 31 $302,665 $211,967 $200,070 $191,749
Shareholders' equity at December 31 $353,422 $361,859 $254,031 $257,990
Common shares outstanding at December 31 147,245,000 151,790,000 149,618,000 151,550,000
OTHER INFORMATION
Stock price per share at December 31 $21.38 $13.19 $13.69 $10.31
Book value per share at December 31 $2.40 $2.38 $1.70 $1.70
Market capitalization at December 31 $3,147,362 $2,001,731 $2,047,896 $1,562,859
Number of employees at December 31 14,200 14,200 12,800 12,400
* The 1991 accounting change is for SFAS No. 106, "Postretirement Benefits Other
Than Pensions".
The 1988 accounting change is for SFAS No. 96, "Accounting for Income Taxes".
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PART II (1991 - 1988)
(Dollars in thousands, except per share amounts)
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Year ended December 31 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
Operating revenue $1,093,827 $1,078,753 $1,001,617 $894,482
Operating costs and expenses before unusual items 969,136 941,976 881,606 801,785
Unusual items (32,044) (21,793) (14,656) (27,669)
------------ ------------ ------------ ------------
Operating income 92,647 114,984 105,355 65,028
Other income 8,128 11,055 9,712 5,648
Interest expense (7,253) (13,177) (10,365) (3,331)
------------ ------------ ------------ ------------
Income before income taxes and accounting changes 93,522 112,862 104,702 67,345
Provision for income taxes 39,424 48,932 41,170 33,295
------------ ------------ ------------ ------------
Income before accounting changes 54,098 63,930 63,532 34,050
Cumulative prior years' effect of changes in
accounting principles* (48,991) - - 5,400
------------ ------------ ------------ ------------
Net income $5,107 $63,930 $63,532 $39,450
============ ============ ============ ============
Dividends paid $42,623 $35,823 $32,003 $22,948
PER COMMON SHARE DATA
Income before accounting changes $0.33 $0.39 $0.40 $0.22
Cumulative prior years' effect of changes in
accounting principles (0.30) - - 0.04
Net income $0.03 $0.39 $0.40 $0.26
------------ ------------ ------------ ------------
Dividends $0.260 $0.240 $0.215 $0.195
============ ============ ============ ============
Weighted average common shares outstanding 163,856,000 161,930,000 160,552,000 154,380,000
BALANCE SHEET DATA
Assets at December 31 $716,103 $754,279 $685,188 $528,287
Long-term debt at December 31 $77,114 $143,050 $88,883 $30,169
Shareholders' equity at December 31 $350,314 $373,306 $339,918 $297,914
Common shares outstanding at December 31 164,294,000 162,424,000 161,058,000 159,974,000
OTHER INFORMATION
Stock price per share at December 31 $7.94 $8.13 $8.00 $6.78
Book value per share at December 31 $2.13 $2.30 $2.11 $1.86
Market capitalization at December 31 $1,304,084 $1,319,695 $1,288,464 $1,084,864
Number of employees at December 31 13,400 14,200 13,900 13,500
* The 1991 accounting change is for SFAS No. 106, "Postretirement Benefits Other
Than Pensions".
The 1988 accounting change is for SFAS No. 96, "Accounting for Income Taxes".
- 14 -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATION
----------------------------------
This discussion and analysis should be read in conjunction with the consolidated
financial statements and accompanying notes.
RESULTS OF OPERATIONS
Consolidated revenue for the year was $1.62 billion, an increase of $201.0
million or 14.1% over 1994. This increase is slightly less than the 16.8%
increase in 1994, due primarily to the divestitures occurring in 1995. Revenue
increased 7.9% in 1995 compared to 8.1% in 1994 after adjusting for acquisitions
and divestitures (Note 2). Revenue growth in 1996, excluding 1996 acquisitions,
should be slower than in 1995 or 1994, due to the full-year impact of 1995
divestitures and the slower pace of 1995 acquisitions over 1994.
Operating income of $262.9 million increased $48.8 million or 22.8% in 1995. In
1994, operating income increased $46.6 million before the 1993 unusual charge
(discussed below). The improvements in both years are the result of revenue
increases in the higher margin businesses as well as continuing expense controls
throughout the organization. The operating income margin in 1995 was 16.2%
compared to 15.1% in 1994. The gains in 1995 were achieved despite very
competitive conditions both domestically and internationally, as well as
investments in integrating acquisitions and new products. acquisitions and
divestitures increased 1995 operating income by about 2.7 percentage points, but
were slightly dilutive to net income and earnings per share due to higher
interest cost and outstanding shares. The effects of acquisitions on operating
income, net income and earnings per share were immaterial in 1994.
Earnings per share increased 21.0% to $.98 in 1995 from $.81 in 1994. For the
year, the average shares outstanding increased 1.8% primarily due to stock
issued in connection with 1994 acquisitions.
Net income was $147.6 million in 1995, an increase of 22.7% versus 1994's net
income of $120.3 million. During the third quarter of 1993, the Company
recorded an unusual charge of $48.4 million ($30.9 million after tax, or $.21
per share) to write down the assets of its subsidiary, High Integrity Systems,
Inc. (HISI), and accrue for costs related to litigation with the California
State Lottery. Equifax settled this litigation in July 1995, pending the
execution of a reinstated contract, which was completed in November 1995
(Note 3).
Equifax received a $25 million payment from the California State Lottery during
the fourth quarter 1995 in connection with the reinstatement of the lottery
contract with HISI. The $25 million payment was partially offset by certain
expenses associated with the contract, resulting in a net gain of $19.7 million.
In February 1996, Equifax's HISI announced that it had signed a subcontract with
GTECH for services on its California lottery contract. Under the agreement,
HISI subcontracted many of its obligations under the reinstated contract to
GTECH. In connection with this subcontract, Equifax received $58 million which
will be recognized as revenue net of related expenses over the 66-month life of
the contract.
Also, during the fourth quarter, the Company provided for certain restructuring
charges in the operating groups totaling $19.6 million, in connection with
reduced staffing levels, lease terminations and the discontinuance of a certain
product line.
There are five reporting segments: Credit Services, Payment Services and
International Operations
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(comprising the Financial Services Group), Insurance Services, and General
Information Services. These segments generally follow the Company's internal
management organization and are based on similarities in product lines and
industries served. The following discussion analyzes (1) revenue and operating
income by the five segments, (2) general corporate expense, (3) consolidated
other income, interest expense and effective income tax rates and (4) financial
condition. Note 10 breaks out the segment results by quarter for 1995 and 1994.
Credit Services
- ----------------------------------------------------------------------------
(in millions) 1995 1994 1993
- ----------------------------------------------------------------------------
Revenue $512.7 $476.4 $427.8
Operating income* $180.1 $149.9 $133.0
*before restructuring charge of $3.2 million in 1995 (Note 9)
Credit Services is part of Financial Services Group and comprises Credit
Reporting Services, Risk Management Services, Equifax National Decision Systems
and Mortgage Services. Revenue growth in Credit Services was 7.6% in 1995,
compared to 11.4% in 1994. Acquisitions accounted for 0.7 percentage points of
the 1995 revenue increase and 5.6 percentage points of the 1994 revenue
increase.
The revenue increase in 1995 was driven by Credit Reporting Services as a result
of growth in its prescreening business for credit card issuers, as well as
volume growth in the utilities, mortgage, national credit card and automotive
industries. Improved quality and turnaround time allowed Equifax to gain market
share in the competitive business of prescreening for credit card applicants.
Pricing pressure continues within Credit Reporting Services. As a result, unit
prices modestly declined. However, unit volume increases more than offset
declines, and market share growth continued. Pricing pressures are expected to
persist, but volume growth is expected to continue to more than offset declines.
Credit Reporting Services continues to provide new services and products, such
as Decision Power, which contributed to the revenue growth in 1995 and are
expected to make an even greater contribution in 1996.
Revenue in Risk Management Services increased 11.5% as a result of new customers
from the outsourcing of many collections operations in the telecommunications
and national credit card industries. Revenue also increased as a result of
increased government student loan business.
National Decision Systems introduced several new products in 1995. the most
significant is expected to be those of Business Geometrics, which did incur
development expenses in 1995. Despite these costs, operating income in National
Decision Systems increased slightly for the year.
During the second quarter, UCB Services was acquired and integrated with
Mortgage Services. Driven by falling interest rates, the mortgage lending
industry had an unusually high level of activity over the last several months of
the year, although for the year, revenue in Mortgage Services decreased 14.9%.
Production volume remained strong, and the industry continues to move to UCB
Services' main lower-priced automated product.
Operating income increased 20.2% in 1995 following a 12.7% increase in 1994.
These increases were driven by revenue growth, operating leverage and ongoing
expense management. This segment reported continued margin increases.
During the fourth quarter of 1995, a restructuring charge of $3.2 million was
recorded primarily to reduce fixed expenses associated with Mortgage Services,
reflecting the increasingly automated nature of the
- 16 -
marketplace. The charge was taken to consolidate the number of offices from
seven to three and reduce staffing levels.
Payment Services
- ----------------------------------------------------------------------------
(In millions) 1995 1994 1993
- ----------------------------------------------------------------------------
Revenue $284.4 $246.6 $210.4
Operating income* $ 64.0 $ 57.5 $ 51.9
*before restructuring charge of $0.5 million in 1995 (Note 9)
Payment Services is part of Financial Services and consists of Check Services,
Card Services and FBS Software. Revenue increased 15.3% in 1995, with 3.8
percentage points attributable to the 1994 acquisitions of First Security
Processing Services (FSPS) and FBS Software. Check Services revenue increased
4.5%, while Card Services revenue increased 24.6%, with the FSPS acquisition
accounting for 5.1 percentage points of the increase in Card Services' revenue.
In 1994, Payment Services revenue increased 17.2% with 5.1 percentage points
attributable to the acquisitions of FSPS and FBS Software. In 1994, Check
Services revenue increased 8% and Card Services revenue, excluding FSPS,
increased 18%.
The dollar amount of checks guaranteed by Check Services and the average
discount rate remained unchanged versus 1994. At the end of the third quarter
1995, one of Check Services' larger customers began authorizing its own checks
in-house. Consequently, Check Services' fourth quarter 1995 revenue declined
versus 1994, and 1996 annual revenue and operating income are expected to
decline slightly from 1995 results. Equifax had expected to lose another large
customer beginning January 1996, however, the customer decided against
authorizing its own checks. Nevertheless, the possibility remains that other
customers could choose to move their check authorization in-house.
Growth within Card Services is attributable to the higher number of cardholder
accounts processed, due to business from new customers (i.e., credit unions and
IBAA member banks) that either converted to or began using Equifax Card Services
credit and debit card processing services, as well as growth in processing of
existing cardholder and merchant transactions. During 1994, a contract with
IBAA Bancard Inc. was renewed and a contract with Card Services for Credit
Unions, Inc. (CSCU) took effect, both for a five-year term with incremental
revenue due to increased service levels provided. IBAA Bancard is a service of
the IBAA Community Banking Network, a wholly-owned subsidiary of the Independent
Bankers' Association of America (the "Association"). Through a processing
agreement with Equifax Card Services, IBAA Bancard provides banks that are
members of the association with a comprehensive credit and debit card program.
Payment Services operating income increased $6.5 million in 1995 versus a $5.6
million increase in 1994. Operating income in Check Services was down modestly,
as a result of higher claims losses and higher operating and selling expenses.
Operating income for Card Services increased 33.8% in 1995, due to the operating
leverage achieved with the strong revenue growth, as well as the FSPS
acquisition. The increase in operating income for Payment Services in 1994
versus 1993 was driven primarily by higher profits resulting from higher revenue
in Card Services.
In 1996, the Company expects continued strong growth in the Card Services area
as a result of a growing customer base with the addition of banks and credit
unions that are members of the IBAA and CSCU organizations. This growth will be
tempered by an expected decline within Check Services. Payment Services is
expected to record modest operating income growth in 1996, despite the expected
decline
- 17 -
within Check Services and one-time expenses associated with a major move to a
new location in the Tampa area.
Insurance Services
- ----------------------------------------------------------------------------
(in millions) 1995 1994 1993
- ----------------------------------------------------------------------------
Revenue $516.9 $453.4 $396.5
Operating income* $ 43.9 $ 18.5 $ 5.5
*before restructuring charge of $9.2 million in 1995 (Note 9)
Revenue increased 14.0% in 1995 within Insurance Services versus an increase of
14.3% in 1994 as a result of the improved performance of all business units,
acquisitions and increased MVR (Motor Vehicle Records) registry revenue.
Insurance Services consists of Field Services, Data Services, Commercial
Specialists, PRC, CUE UK and Osborn Laboratories. Revenue from Field Services,
which includes Medical Products, Employment Services, Business Services and
Claims Services, increased 3.1% in 1995 versus a decline of $3 million in 1994.
The increase in 1995 is primarily the result of increased market share in
Medical Products due to a changing competitive landscape and continued growth
outside the traditional customer base in Employment and Business Services.
Revenue from Data Services products increased $5.7 million for 1995, despite
competitive pricing pressure which is expected to continue in 1996. The Data
Services revenue results were achieved through increased volume in most product
lines and higher market share. MVR registry revenue was up $19.8 million in
1995 due to continued growth in MVR units, but at a lower rate than experienced
in 1994. In 1994, unit growth in MVR Registry was primarily attributable to a
new contract that was entered into in mid-1993 with a large property and
casualty insurance company. Revenue in Commercial Specialists was up 5.7% for
the year. PRC and Osborn Laboratories accounted for the balance of the revenue
increase due to their inclusion for the full year in 1995 versus a partial year
in 1994.
In 1995, operating income more than doubled to $43.9 million. This increase
resulted from the strong performance of Data Services, cost controls within
Field Services, continued improvement in CUE UK and Commercial Specialists, and
the full year impact of 1994 acquisitions. Data Services posted an increase in
operating income due to the leverage inherent with increased market share. In
1994, operating income for Insurance Services increased $13.0 million versus
1993 due primarily to the strong performance of Data Services and Commercial
Specialists, the reduction in losses within Field Services and the impact of
acquisitions.
The focus on expense reduction and cost management within Field Services
continues to yield significantly improved results. Staffing levels are down by
15% over the last two years. Where applicable, services have been automatedor
discontinued. The overall cost structure has been improved while experiencing a
modest increase in revenue in 1995. The results are substantially improved
versus 1994, as this unit was slightly profitable for the year. The Company
believes that the continuation of these efforts is necessary as the demand for
labor-intensive products continues to diminish.
CUE UK, a database product for the United kingdom's insurance industry, was
developed pursuant to a contract signed in November 1993. Late in 1994, CUE
Home was introduced, and, during the fourth quarter of 1995, CUE Motor became
available. This business unit reported a profit in 1995, despite the
developmental costs for CUE Motor, and its performance is expected to continue
to improve in 1996.
During the fourth quarter, a charge of $9.2 million was taken, primarily in
Field Services, to reduce staffing levels and bring fixed expenses in line with
expected revenue levels. Technology initiatives have been
- 18 -
targeted for field and home office systems improvement in 1996.
International Operations
- ----------------------------------------------------------------------------
(in millions) 1995 1994 1993
- ----------------------------------------------------------------------------
Revenue $211.0 $143.4 $97.3
Operating income* $21.7 $16.5 $18.1
*before restructuring charge of $1.7 million in 1995 (Note 9)
International Operations consists of Credit Services and Payment Services
operations in Europe (primarily in the United Kingdom) and Canada. Equifax also
has Credit Services joint ventures in Europe and South America. Revenue for the
year was up 47.2% in 1995, primarily due to significant acquisition activity
which accounted for 42.7 percentage points of the 1995 revenue increase. In
1994, this segment's revenue was up 47.4% primarily due to acquisitions.
Canadian revenue, exclusive of acquisitions and the second quarter 1995 sale of
the Canadian field services insurance products business, was down 2.2% in 1995.
This resulted from lower revenues within Credit Reporting Services due primarily
to the sluggish Canadian economy and increased competition. Canada cheque
services continues to grow revenue and gain market share.
Revenue from European operations increased 12.0% in 1995 excluding acquisitions.
During the third quarter, Equifax acquired the Infocheck Group, a U.K.-based
commercial credit reporting company. the revenue gain in Europe in 1995
continued the trend of revenue growth due to market share gains in Credit
Services.
Operating income for International Operations increased 31.7% in 1995 versus a
decline of 8.9% in 1994 primarily due to improved results in Europe. Operations
in Canada posted an operating income increase in 1995 as a result of the
divestiture of its unprofitable field services insurance products business,
partially offset by lower profits due to the revenue decline in Canadian Credit
Reporting Services.
In Europe, operating efficiencies resulting from the integration of the Infolink
acquisition began to be realized during the last half of 1995. The combination
of Infolink and the existing credit reporting business has enhanced the value of
our databases and created substantial savings by eliminating duplicate costs.
The synergies from the combined businesses should result in continued cost
savings in 1996 and beyond.
During the fourth quarter, a restructuring charge of $1.7 million was taken
within Canadian operations to reduce staffing levels and other fixed expenses.
General Information Services
- ----------------------------------------------------------------------------
(in millions) 1995 1994 1993
- ----------------------------------------------------------------------------
Revenue $97.9 $102.2 $85.2
Operating income (loss)* $(11.7) $1.0 $(11.5)
*excludes income from lottery settlement of $19.7 million and restructuring
charge of $4.4 million in 1995 and lottery contract provision of $48.4 million
in 1993 (Notes 3 and 9)
This segment comprises recently-acquired healthcare operations, development
projects, marketing services operations and HISI, the lottery subsidiary. The
revenue decline in 1995 of $4.4 million is
- 19 -
attributable to the divestitures of two marketing companies during the third
quarter 1995, partially offset by acquisitions and growth within Healthcare
Information Services. During the third quarter of 1995, Equifax sold Elrick &
Lavidge and Quick Test, two of its marketing services companies. Equifax sold
these two companies to focus better on its core businesses. Excluding the
effects of non-comparable acquisitions and the divestitures of the two marketing
companies, General Information Services' 1995 revenue increased 8.3%, with
Healthcare Information Services increasing 6.4%. In 1994, revenue was up $17.0
million, largely due to acquisitions made during the year.
This segment's operating loss in 1995 was $11.7 million versus operating income
of $1.0 million in 1994. The 1995 operating loss is due primarily to higher
expenses associated with the integration of healthcare acquisitions and the
development of Medical Credentials Verification Service (MCVS). MCVS is an
internally developed database product which allows managed care organizations
and hospitals to verify physician credentials. Revenues and profits from MCVS
did not meet expectations in 1995, as market acceptance of this product was
slower than expected. As a result, this product has been redefined and
repriced, and MCVS is expected to see reasonable revenue growth, approaching
break-even later in 1996. In 1994, the segment realized a one-time $4.2 million
gain on the fourth quarter sale of its interest in FYI On-Line, a joint venture
with MCI.
Healthcare Information Services is composed of Healthcare Administrative
Services, Healthcare EDI Services, Healthcare Analytical Services, Healthcare
Database Services (MCVS) and Government and Special Systems. In total, we
expect the Healthcare Information Services business units to improve their
performance in 1996; however, they are still expected to show a modest loss. We
are optimistic that the need to reduce healthcare administrative costs and
improve the quality of care drives opportunity for our Healthcare Information
Services business units.
During the fourth quarter, Equifax received a $25 million payment from the
California State Lottery in connection with the reinstatement of the lottery
contract with Equifax's subsidiary, HISI. Partially offsetting this $25 million
payment were expenses associated with the contract, resulting in a net gain of
$19.7 million.
A restructuring charge of $4.4 million was taken during the fourth quarter
largely to reduce staffing levels within Healthcare Information Services and to
write off a discontinued product line.
General Corporate Expense
- ----------------------------------------------------------------------------
(in millions) 1995 1994 1993
- ----------------------------------------------------------------------------
Expense $35.1 $29.2 $29.6
*before restructuring charge of $0.5 million in 1995 (Note 9)
General corporate expense increased $5.9 million in 1995, due primarily to
higher performance share plan expense, driven by the Company's higher share
price. General corporate expense was essentially flat in 1994.
Other Income, Interest Expense And Effective Income Tax Rates
- ----------------------------------------------------------------------------
(dollars in millions) 1995 1994 1993
- ----------------------------------------------------------------------------
Other income $7.5 $9.0 $3.9
Interest expense $21.2 $15.6 $10.9
Effective income tax rate 40.8% 42.0% 43.3%
- 20 -
Other income consists primarily of investment interest and dividends.
Fluctuations between years was caused primarily by certain non-recurring items
recorded in each of the years.
The increase in interest expense reflects the higher levels of borrowing due to
acquisitions and share repurchases.
The effective tax rate of 40.8% in 1995 was lower than 1994's rate due in large
part to a change in the mix of foreign income between tax jurisdictions with
different effective tax rates. The effective tax rate of 42% in 1994 was lower
than in 1993 due to the limited state income tax benefits related to the HISI
write-off and operating losses in 1993.
FINANCIAL CONDITION
Equifax's financial condition remained strong in 1995. Net cash provided by
operations was $159.9 million, compared with $162.6 million in 1994. Normal
capital expenditures, working capital needs and dividend payments were all met
with internally generated funds. Working capital increased $40.2 million during
the year.
During 1995, the Company made acquisitions and equity investments totaling $28.8
million, $8.7 million in payments related to 1994 acquisitions, $10.0 million to
provide financing to Physician Computer Network (PCN) (Note 2) and also
repurchased 6.8 million of its own common shares in open market transactions
totaling $132.7 million. These transactions were principally financed by a
combination of $70.9 million net increase in long-term debt, excess cash
generated from operations and existing cash reserves.
Capital expenditures for 1995, exclusive of acquisitions and the PCN financing,
were $49.0 million. Capital expenditures for 1996 are projected to total
approximately $91 million, but other expenditures are possible as new investment
opportunities arise. Capital expenditures are expected to be higher in 1996 due
to investments in new products and services, improved systems, and the Payment
Services move to a new site in the Tampa area. Budgeted expenditures should be
met with internally generated funds.
In August 1995, the Company structured a new revolving credit facility with
eight banks totaling $550 million that will expire in the year 2000. It
replaces the old $450 million facility. At December 31, 1995, $550 million was
available under the new facility which remains available to fund future capital
requirements, including the possible purchase of the CSC collections and credit
reporting businesses (Note 8). The Company is also beginning to investigate
additional long-term notes to finance the potential share repurchases associated
with the Board of Directors authorization in 1995 (Note 6). Management feels
that the Company's liquidity will remain strong in both the short term and long
term, and that the Company has sufficient debt capacity to finance all of these
requirements, if necessary.
- 21 -
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
CONSOLIDATED BALANCE SHEETS
(In thousands)
- ----------------------------------------------------------------------------
December 31 1995 1994
- ----------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $26,136 $79,409
Accounts receivable, net of allowance for doubtful
accounts of $7,077 in 1995 and $6,516 in 1994 258,335 242,645
Deferred income tax assets 30,594 26,472
Other current assets 51,611 27,353
------- -------
Total current assets 366,676 375,879
------- -------
Property and Equipment:
Land, buildings and improvements 18,050 13,841
Data processing equipment and furniture 218,699 203,189
------- -------
236,749 217,030
Less-Accumulated depreciation 148,901 132,792
------- -------
87,848 84,238
------- -------
Goodwill 353,571 331,438
------- -------
Purchased Data Files 74,828 85,621
------- -------
Other 170,772 143,998
------- -------
$1,053,695 $1,021,174
========== ==========
The accompanying notes are an integral part of these balance sheets.
- 22 -
(In thousands, except par value)
- ------------------------------------------------------------------------------------
December 31 1995 1994
- ------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt and current maturities of long-term debt $20,384 $63,713
Accounts payable 62,194 53,561
Accrued salaries and bonuses 27,919 29,410
Income taxes payable - 21,204
Other current liabilities 140,123 132,158
-------- --------
Total current liabilities 250,620 300,046
-------- --------
Long-Term Debt, Less Current Maturities 302,665 211,967
------- -------
Postretirement Benefit Obligation 80,885 83,029
------- -------
Other Long-Term Liabilities 66,103 64,273
------- -------
Commitments and Contingencies (Note 8)
Shareholders' Equity:
Common stock, $1.25 par value; shares
authorized - 250,000; issued - 168,812 in 1995
and 166,777 in 1994; outstanding - 147,245 in
1995 and 151,790 in 1994 211,015 208,471
Paid-in capital 171,020 145,859
Retained earnings 269,986 175,894
Cumulative foreign currency translation adjustment (13,777) (13,386)
Treasury stock, at cost, 14,847 shares in 1995
and 8,187 shares in 1994 (Note 6) (218,613) (87,975)
Stock held by employee benefits trusts, at cost,
6,719 shares in 1995 and 6,800 shares in 1994 (Note 6) (66,209) (67,004)
---------- ----------
Total shareholders' equity 353,422 361,859
---------- ----------
$1,053,695 $1,021,174
========== ==========
- 23 -
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
- ---------------------------------------------------------------------------------------------------
Year Ended December 31 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
Operating revenue $1,622,958 $1,421,996 $1,217,217
---------- ---------- ----------
Costs and expenses:
Costs of services 1,038,881 905,307 780,429
Selling, general and administrative expenses 321,231 302,582 269,321
Provision (credit) related to lottery contract (Note 3) (19,665) - 48,438
Restructuring provision (Note 9) 19,572 - -
---------- ---------- ----------
Total costs and expenses 1,360,019 1,207,889 1,098,188
Operating income 262,939 214,107 119,029
Other income, net 7,471 8,994 3,890
Interest expense 21,172 15,624 10,923
---------- ---------- ----------
Income before income taxes 249,238 207,477 111,996
Provision for income taxes 101,588 87,131 48,481
---------- ---------- ----------
Net income $147,650 $120,346 $63,515
========== ========== ==========
Weighted average common shares outstanding 151,357 148,608 150,114
========== ========== ==========
Per common share:
Net income $0.98 $0.81 $0.42
========== ========== ==========
Dividends $0.315 $0.303 $0.280
========== ========== ==========
The accompanying notes are an integral part of these statements.
- 24 -
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
- -------------------------------------------------------------------------------------------------
Year Ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------------------------
Common Stock:
Balance at beginning of year $208,471 $206,554 $205,821
Shares issued under stock plans 2,544 1,917 733
-------- -------- --------
Balance at end of year $211,015 $208,471 $206,554
======== ======== ========
Paid-In Capital:
Balance at beginning of year $145,859 $108,807 $104,262
Shares issued under stock plans 17,243 12,930 4,545
Adjustment for treasury stock reissued for acquisitions 884 20,267 -
Other 7,034 3,855 -
-------- -------- --------
Balance at end of year $171,020 $145,859 $108,807
======== ======== ========
Retained Earnings:
Balance at beginning of year $175,894 $102,709 $81,235
Net income 147,650 120,346 63,515
Cash dividends (50,223) (47,161) (42,041)
Other (3,335) - -
-------- -------- --------
Balance at end of year $269,986 $175,894 $102,709
======== ======== ========
Cumulative Foreign Currency Translation Adjustment:
Balance at beginning of year $(13,386) $(10,077) $(6,349)
Adjustment during year (391) (3,309) (3,728)
--------- -------- --------
Balance at end of year $(13,777) $(13,386) $(10,077)
Treasury Stock:
Balance at beginning of year $(87,975) $(92,870) $(126,979)
Cost of shares repurchased (132,668) (57,985) (26,983)
Cost of shares transferred to employee benefits trusts - 5,912 61,092
Cost of shares reissued for acquisitions 2,030 56,968 -
--------- -------- ---------
Balance at end of year $(218,613) $(87,975) $(92,870)
========== ========= =========
Stock Held By Employee Benefits Trusts:
Balance at beginning of year $(67,004) $(61,092) $-
Cost of shares transferred from treasury stock - (5,912) (61,092)
Cost of shares reissued under stock plans 795 - -
--------- -------- ---------
Balance at end of year $(66,209) $(67,004) $(61,092)
========= ========= =========
The accompanying notes are an integral part of these statements.
- 25 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- --------------
Year Ended December 31 1995 1994 1993
- ---------------------- ---- ---- ----
Cash flows from operating activities:
Net income $147,650 $120,346 $63,515
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 77,045 66,496 54,924
Restructuring provision, net of cash payments 16,136 - -
Provision for lottery contract dispute and litigation - - 48,438
Changes in assets and liabilities, excluding effects of acquisitions:
Accounts receivable, net (20,618) (28,018) (25,077)
Current liabilities, excluding debt (40,585) 23,972 16,324
Other current assets (22,479) (5,035) 1,847
Deferred income taxes 10,373 (15,725) (24,361)
Other long-term liabilities, excluding debt 450 569 445
Other assets (8,024) - -
-------- -------- --------
Net cash provided by operating activities 159,948 162,605 136,055
-------- -------- --------
Cash flows from investing activities:
Additions to property and equipment (31,687) (20,173) (39,757)
Additions to other assets, net (27,344) (12,163) (14,616)
Acquisitions, net of cash acquired (14,716) (144,528) (23,784)
Investments in unconsolidated affiliates (14,066) (15,303) -
Deferred payments on prior year acquisitions (8,743) - -
Proceeds from sale of businesses 14,868 - -
Proceeds from sale of land and buildings - 57,079 -
Change in short-term investments - - 3,357
-------- --------- --------
Net cash used by investing activities (81,688) (135,088) (74,800)
-------- --------- --------
Cash flows from financing activities:
Net short-term borrowings (payments) (44,274) 62,227 -
Additions to long-term debt 82,402 - 198,980
Payments on long-term debt (11,462) (2,375) (191,209)
Treasury stock purchases (132,668) (57,985) (26,983)
Dividends paid (50,223) (47,161) (42,041)
Proceeds from exercise of stock options 16,596 11,786 3,481
Other 7,034 3,855 -
--------- -------- --------
Net cash used by financing activities (132,595) (29,653) (57,772)
Effect of foreign currency exchange rates on cash 1,062 (4,059) (1,865)
--------- -------- --------
Net cash provided (used) (53,273) (6,195) 1,618
Cash and cash equivalents, beginning of year 79,409 85,604 83,986
--------- -------- --------
Cash and cash equivalents, end of year $26,136 $79,409 $85,604
======= ======= =======
The accompanying notes are an integral part of these statements.
- 26 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Company and its majority-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated. Certain prior year
amounts have been reclassified to conform with the current year presentation.
NATURE OF OPERATIONS. The Company principally provides information services to
businesses that help them grant credit, authorize and process credit card and
check transactions, insure lives and property, and manage and control healthcare
costs. The principal lines of business are credit services, payment services,
insurance services and healthcare information services (see Note 11 for industry
segment information). The principal markets for credit and payment services are
retailers, banks and financial institutions, while those for insurance services
are life and health and property and casualty insurance companies. The principal
markets for healthcare information services are healthcare providers, payors,
and managed care organizations. The Company's operations are predominately
located within the United States.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
PROPERTY AND EQUIPMENT. The cost of property and equipment is depreciated
primarily on the straight-line basis over estimated asset lives of 30 to 50
years for buildings; useful lives, not to exceed lease terms, for leasehold
improvements; three to five years for data processing equipment and eight to 20
years for furniture.
GOODWILL. Goodwill is amortized on a straight-line basis primarily over 40
years. Amortization expense was $11,033,000 in 1995, $7,380,000 in 1994, and
$3,113,000 in 1993. As of December 31, 1995, and 1994, accumulated amortization
was $33,761,000 and $23,750,000, respectively. The Company regularly evaluates
whether events and circumstances have occurred that indicate the carrying amount
of goodwill may warrant revision or may not be recoverable. When factors
indicate that goodwill should be evaluated for possible impairment, the Company
uses an estimate of the future undiscounted net cash flows of the related
business over the remaining life of the goodwill in measuring whether the
goodwill is recoverable.
PURCHASED DATA FILES. Purchased data files are amortized on a straight-line
basis primarily over 15 years. Amortization expense was $11,029,000 in 1995,
$11,331,000 in 1994, and $9,674,000 in 1993. As of December 31, 1995, and 1994,
accumulated amortization was $63,528,000 and $52,293,000, respectively.
OTHER ASSETS. Other assets at December 31, 1995, and 1994, consist of the
following:
(In thousands) 1995 1994
- ------------------------------------------------------------------
Purchased software $ 43,692 $ 39,355
Systems development and other deferred costs 42,826 41,149
Investments in unconsolidated affiliates 39,998 26,876
Other 44,256 36,618
-------- --------
-27-
$170,772 $143,998
======== ========
Purchased software and systems development and other deferred costs are being
amortized on a straight-line basis over five to ten years. Amortization expense
for other assets was $22,390,000 in 1995, $18,138,000 in 1994, and $13,593,000
in 1993. As of December 31, 1995, and 1994, accumulated amortization was
$82,164,000 and $70,055,000, respectively.
FOREIGN CURRENCY TRANSLATION. The assets and liabilities of foreign
subsidiaries are translated at the year-end rate of exchange, and income
statement items are translated at the average rates prevailing during the year.
The resulting translation adjustment is recorded as a component of shareholders'
equity. Exchange gains and losses on intercompany balances of a long-term
investment nature are also recorded as a component of shareholders' equity.
Other foreign currency translation gains and losses, which are not material, are
recorded in the consolidated statements of income.
CONSOLIDATED STATEMENTS OF CASH FLOWS. The Company considers cash equivalents
to be short-term cash investments with original maturities of three months or
less.
Cash paid for income taxes and interest is as follows:
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------
Income taxes, net of amounts refunded $118,645 $91,643 $62,666
Interest $ 21,127 $14,604 $10,846
In 1995, 1994 and 1993, the Company acquired various businesses that were
accounted for as purchases (Note 2). In conjunction with these transactions,
liabilities were assumed as follows:
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------
Fair value of assets acquired $60,187 $330,898 $32,484
Cash paid for acquisitions 14,836 153,143 26,949
Value of treasury shares reissued for acquisitions - 77,235 -
Notes and deferred payments 13,369 16,974 400
------- -------- -------
Liabilities assumed $31,982 $ 83,546 $ 5,135
======= ======== =======
FINANCIAL INSTRUMENTS. The Company's financial instruments consist primarily of
cash and cash equivalents, accounts and notes receivable, accounts payable and
short-term and long-term debt. The carrying amounts of these items, other than
long-term notes receivable and long-term debt, approximate their fair market
value due to their short maturity. As of December 31, 1995, the fair value of
the Company's long-term notes receivable (determined primarily by contractual
terms and market prices) was $18,538,000 compared to its carrying value of
$11,331,000. As of December 31, 1995, the fair value of the Company's long-term
debt (determined primarily by broker quotes) was $309,671,000 compared to its
carrying value of $304,666,000. During 1995, the Company did not hold any
derivative financial instruments.
ACCOUNTING STANDARDS CHANGE. In March 1995, the Financial Accounting Standards
Board issued Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used, as well as for long-lived assets and certain identifiable intangibles
to be disposed of. The Company will be required to adopt the new Standard in the
first quarter of 1996, and management does not expect its effect to be material
to the Company's consolidated financial position.
-28-
2. ACQUISITIONS, DIVESTITURES, AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES AND
NOTES RECEIVABLE
During 1995, 1994 and 1993, the Company acquired or made equity investments in
the following businesses:
Date Industry Percentage
Business Acquired Segment Ownership
- ---------------------------------------------------------------------------------------------
DICOM S.A. (Chile) December 1995 International 50.0%/(1)/
Tecnicob S.A. (France) July 1995 Payment Services 100.0%
The Infocheck Group Limited (U.K.) July 1995 International 100.0%
UCB Services, Inc. April 1995 Credit 100.0%
Medical Review Systems, L.P. March 1995 General 100.0%
Vallance and Associates, Inc. February 1995 Insurance 100.0%
Osborn Laboratories, Inc. November 1994 Insurance 100.0%
UAPT - Infolink plc (U.K.) October 1994 International 100.0%
Electronic Tabulating Service September 1994 General 100.0%
DICOM S.A. (Chile) August 1994 International 25.0%
Canadian Bonded Credits August 1994 International 100.0%
FBS Software (First Bankcard Systems, Inc.) July 1994 Payment Services 100.0%
First Security Processing Services July 1994 Payment Services 100.0%
Organizacion Veraz (Argentina) May 1994 International 33.3%
ASNEF - Equifax Servicios
de Informacion de Credito, S.L. (Spain) May 1994 International 49.0%
HealthChex May 1994 General 100.0%
Programming Resources Company April 1994 Insurance 100.0%
Transax plc (U.K.) April 1994 International 50.1%/(2)/
Charlotte Credit Bureau February 1994 Credit 100.0%
Cooperative Healthcare Networks January 1994 General 100.0%
Newbridge, Inc. Insurance Services October 1993 General 100.0%
Credit Bureau of Ocala Inc. September 1993 Credit 100.0%
Integratec, Inc. August 1993 Credit 100.0%
/(1)/ Increased to 50.0% from the 25.0% ownership position acquired in 1994.
/(2)/ Increased to 50.1% from the 20.0% ownership position acquired in 1992.
The 1995 acquisitions of greater than 50% ownership were accounted for as
purchases, and had an aggregate purchase price of $28,205,000, with $33,147,000
allocated to goodwill and $11,337,000 to other assets (primarily purchased
software). Their results of operations have been included in the consolidated
statements of income from the dates of acquisition and were not material. They
were purchased using a combination of cash totaling $14,836,000 and notes
payable to sellers of $13,369,000. Additional consideration may be paid for
certain of the acquisitions based on their future operating performance.
During 1995, the Company increased its investment in DICOM S.A. from 25% to 50%
at a total cost of $11,502,000, and made investments in several other
unconsolidated affiliates totaling $2,564,000. These investments, accounted for
under the equity method, were purchased with cash and recorded as other assets.
-29-
In 1995, the Company also invested $10 million to provide financing to Physician
Computer Network, Inc. (PCN), a national network of medical practice management
systems. The PCN financing is in the form of a five-year subordinated promissory
note, convertible into shares of PCN common stock at a conversion price of $5.20
per share (subject to certain conditions and adjustments). The note is recorded
in other assets. In conjunction with the financing, the Company entered into an
exclusive marketing agreement with PCN, whereby PCN will integrate certain of
the Company's healthcare services into its product line and promote the Company
as its exclusive claims clearinghouse for PCN customers.
During the third quarter of 1995, the Company sold its two market research
businesses in the General Information Services segment, Elrick & Lavidge and
Quick Test. Cash proceeds from these sales totaled $14,868,000 and resulted in
an immaterial gain, recorded in other income.
The 1994 acquisitions of greater than 50% ownership were accounted for as
purchases, and had an aggregate purchase price of $247,352,000, with
$212,765,000 allocated to goodwill, $19,987,000 to purchased data files, and
$37,883,000 to other assets (primarily purchased software). Their results of
operations have been included in the consolidated statements of income from the
dates of acquisition. They were purchased using a combination of cash totaling
$153,143,000, notes and deferred payments of $16,974,000, and the reissuance of
treasury shares with a market value of $77,235,000. Additional consideration
may be paid for certain of the acquisitions based on their future operating
performance. During 1995, additional consideration of $1,633,000 was paid by the
reissuance of treasury shares for guarantees made by the Company related to the
value to be realized by certain sellers upon their disposition of treasury
shares received in 1994.
The 1994 acquisitions of less than 50% ownership were accounted for under the
equity method and had an aggregate purchase price of $15,303,000. They were
purchased with cash and recorded as other assets.
The 1993 acquisitions, which were accounted for as purchases, had an aggregate
purchase price of $27,349,000, of which $14,002,000 was allocated to goodwill
and $5,007,000 to purchased data files. Their results of operations have been
included in the consolidated statements of income from the dates of acquisition
and were not material to the results of operations of the Company.
3. LOTTERY CONTRACT DISPUTE, LITIGATION, AND SETTLEMENT
High Integrity Systems, Inc. (HISI), a Company subsidiary, entered into a
contract in July 1992 to provide lottery services to the state of California,
whereby HISI agreed to provide a system to automate the processing of instant
lottery tickets and a system to sell on-line game tickets through 10,000 low-
volume terminals.
On April 26, 1993, the California State Lottery (CSL) filed suit against HISI in
Superior Court, Sacramento County, California, with said complaint amended May
7,1993 naming Equifax Inc., et al. and Federal Insurance Company as additional
defendants. The CSL sought unspecified damages for alleged breach of contract
and injunctive relief. On May 7, 1993, HISI filed a cross-complaint against the
CSL seeking compensatory and general damages in an amount not less than $65
million and special and consequential damages in an amount not less than $100
million alleging breach of contract and seeking recovery of the reasonable value
of the labor and materials expended on behalf of the CSL based on the theory of
quantum meruit and unjust enrichment.
In September 1993, the Company recorded a provision of $48,438,000 ($30,939,000
after tax, or $.21 per
-30-
share) related to the lottery contract to write down data processing equipment
and other assets to their estimated net realizable value and to accrue for
estimated costs related to litigation with the CSL.
On July 14, 1995, the CSL and HISI jointly announced a renewed business
agreement which allowed the litigation between the parties to be settled pending
execution of the terms of the contract. On November 9, 1995, the CSL and HISI
finalized the terms of the reinstated contract. The final settlement was
approved by the trial court on December 19, 1995, and provides that the CSL and
HISI shall file dismissals with prejudice of their respective claims no later
than 365 days following the trial court's approval.
The settlement provides for a reinstated contract whereby HISI will install its
system to automate the processing of instant lottery tickets, with the CSL
purchasing 6,700 terminals, related security hardware and licensing various
software applications developed to support the system from HISI for $25,000,000.
In the fourth quarter of 1995, the Company recorded a credit of $19,665,000
($11,996,000 after tax, or $.08 per share) to reflect the financial impact of
this settlement net of related legal expenses and additional costs to be
incurred by the Company to complete the system software and install the
terminals. Under the reinstated contract, HISI will initially install a minimum
of 6,000 terminals with HISI retaining an option to install up to 4,000
additional terminal locations, with CSL approval. HISI is also guaranteed to
receive 66 months of revenue for each of the 6,000 terminals at the rate of 5%
on each dollar of lottery ticket sales occurring from each terminal. If HISI
completes the system and acceptance testing within specified dates, an incentive
payment of up to $4,000,000 may be earned. HISI and the CSL have established an
oversight committee and engaged an independent technical advisor who will
consult in the design and implementation of acceptance testing and start-up
activities.
On February 6, 1996, HISI and GTECH Corporation (GTECH) entered into an
agreement whereby HISI subcontracted many of its obligations under the
reinstated contract to GTECH. This subcontract provides for a one-time payment
of $58,000,000 by GTECH to HISI, and also provides that future payments received
by HISI from the CSL for lottery ticket sales and incentives earned be paid to
GTECH. The $58,000,000 received by HISI will be recognized as revenue over the
term of the reinstated CSL contract, net of related expenses.
4. LONG-TERM DEBT AND SHORT-TERM BORROWINGS
Long-term debt at December 31, 1995 and 1994 is as follows:
(In thousands) 1995 1994
- ------------------------------------------------------------------------------------------------
Senior Notes, 6.5%, due 2003, net of unamortized
discount of $765 in 1995 and $867 in 1994 $199,235 $199,133
Term loan, varying interest rate, 6.1% at December 31,1995, due 1997 50,000 -
Term loan, denominated in Pounds Sterling, varying interest rate, 7.01% at
December 31, 1995, due 2000 31,890 -
Other 23,541 14,994
-------- --------
304,666 214,127
Less current maturities 2,001 2,160
-------- --------
$302,665 $211,967
======== ========
The Company has available a committed $550 million revolving credit facility
with a group of commercial banks that expires August 2000. The agreement
provides interest rate options tied to Base Rate, LIBOR,
-31-
or Money Market indexes, and contains certain financial covenants related to
fixed charge coverage, funded debt to cash flow and limitations on subsidiary
indebtedness. Scheduled maturities of long-term debt during the five years
subsequent to December 31, 1995, are as follows: $2,001,000 in 1996, $57,361,000
in 1997, $886,000 in 1998, zero in 1999, and $44,935,000 in 2000.
Short-term borrowings at December 31, 1995, consist of $18,383,000 in notes
payable to banks, and have a weighted average interest rate of 6.72%. These
notes are primarily denominated in Pounds Sterling.
5. INCOME TAXES
The Company records deferred income taxes using enacted tax laws and rates for
the years in which the taxes are expected to be paid. Deferred income tax
assets and liabilities are recorded based on the differences between the
financial reporting and income tax bases of assets and liabilities.
The provision for income taxes consists of the following:
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
Current:
Federal $ 69,274 $ 75,736 $ 54,373
State 14,548 13,904 9,193
Foreign 7,914 10,713 9,670
-------- -------- --------
91,736 100,353 73,236
======== ======== ========
Deferred:
Federal 8,161 (10,774) (22,935)
State 1,163 (1,437) (1,920)
Foreign 528 (1,011) 100
-------- -------- --------
9,852 (13,222) (24,755)
-------- -------- --------
Total $101,588 $ 87,131 $ 48,481
======== ======== ========
The provision for income taxes is based upon income before income taxes as
follows:
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
United States $232,871 $191,332 $ 92,593
Foreign 16,367 16,145 19,403
-------- -------- --------
$249,238 $207,477 $111,996
======== ======== ========
The provision for income taxes is reconciled with the federal statutory rate as
follows:
(Dollars in thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
======== ======== ========
Provision computed at federal statutory rate $ 87,233 $ 72,617 $ 39,199
State and local taxes, net of federal tax benefit 10,212 8,104 4,728
Other 4,143 6,410 4,554
-------- -------- --------
$101,588 $ 87,131 $ 48,481
======== ======== ========
-32-
Components of the Company's deferred income tax assets and liabilities at
December 31, 1995 and 1994 are as follows:
(In thousands) 1995 1994
- -------------------------------------------------------------------------------
Deferred income tax assets:
Postretirement benefits $ 32,868 $ 34,082
Reserves and accrued expenses 33,420 30,850
Provision for lottery contract dispute and litigation 1,210 17,499
Employee compensation programs 15,561 10,737
Other 10,547 8,615
-------- --------
93,606 101,783
-------- --------
Deferred income tax liabilities:
Data files and other assets (41,300) (48,062)
Depreciation (4,401) (5,034)
Pension expense (7,128) (4,216)
Safe harbor lease agreements (3,557) (4,602)
Other (11,419) (11,156)
-------- --------
(67,805) (73,070)
-------- --------
Net deferred income tax asset $ 25,801 $ 28,713
======== ========
The Company's deferred income tax assets and liabilities at December 31, 1995
and 1994 are included in the balance sheet as follows:
(In thousands) 1995 1994
- -------------------------------------------------------------------------------
Deferred income tax assets $30,594 $26,472
Other assets 4,454 9,286
Other long-term liabilities (9,247) (7,045)
------- -------
Net deferred income tax asset $25,801 $28,713
======= =======
Accumulated undistributed retained earnings of Canadian subsidiaries amounted to
approximately $100,334,000 at December 31, 1995. No provision for Canadian
withholding taxes or United States federal income taxes is made on foreign
earnings because they are considered by management to be permanently invested in
those subsidiaries and, under the tax laws, are not subject to such taxes until
distributed as dividends. If the earnings were not considered permanently
invested, approximately $10,033,000 of deferred income taxes would have been
provided. Such taxes, if ultimately paid, may be recoverable as foreign tax
credits in the United States.
6. SHAREHOLDERS' EQUITY
STOCK SPLIT AND RIGHTS PLAN. In October 1995, the Company's Board of Directors
approved a two-for-one stock split payable December 15, 1995, to shareholders of
record on November 24, 1995. Accordingly, all share and per share data have been
restated to give effect to this split.
Also in October 1995, the Company's Board of Directors adopted a Shareholder
Rights Plan (Rights Plan). The Rights Plan contains provisions to protect the
Company's shareholders in the event of an unsolicited offer to acquire the
Company, including offers that do not treat all shareholders equally, the
acquisition in the open market of shares constituting control without offering
fair value to all shareholders, and other coercive, unfair or inadequate
takeover bids and practices that could impair the ability of the Board of
-33-
Directors to represent shareholders' interests fully. Pursuant to the Rights
Plan, the Board of Directors declared a dividend of one Share Purchase Right (a
Right) for each outstanding share of the Company's common stock, with
distribution to be made to shareholders of record as of November 24, 1995. The
Rights, which will expire in November 2005, initially will be represented by,
and trade together with, the Company's common stock. The Rights are not
currently exercisable and do not become exercisable unless certain triggering
events occur. Among the triggering events is the acquisition of 20% or more of
the Company's common stock by a person or group of affiliated or associated
persons. Unless previously redeemed, upon the occurrence of one of the specified
triggering events, each Right that is not held by the 20% or more shareholder
will entitle its holder to purchase one share of common stock or, under certain
circumstances, additional shares of common stock at a discounted price.
TREASURY SHARES. During 1995, 1994, and 1993, the Company repurchased
6,847,000, 4,780,000, and 2,519,000 of its own common shares through open market
transactions at an aggregate cost of $132,668,000, $57,985,000, and $26,983,000,
respectively. During 1995, the Company's Board of Directors authorized an
additional $250,000,000 in share repurchases, and at December 31, 1995,
approximately $157,000,000 remained available for future purchases. During 1994,
the Company reissued 5,417,000 treasury shares in connection with four
acquisitions (Note 2).
In April 1993, the Company established the Equifax Inc. Employee Stock Benefits
Trust to fund various employee benefit plans and compensation programs. In
November 1993, the Company transferred 6,200,000 treasury shares to the Trust.
During the first quarter of 1994, the Company transferred 600,000 treasury
shares to another employee benefits trust. Shares held by the trusts are not
considered outstanding for earnings per share calculations until released to the
employee benefit plans or programs. During 1995, 80,720 shares were transferred
from the Employee Stock Benefits Trust and used for stock option exercises and
restricted share grants.
STOCK OPTIONS. The Company's shareholders have approved several stock option
plans which provide that qualified and nonqualified options may be granted to
officers and employees at exercise prices not less than market value on the date
of grant. Grants in 1995 and 1993 include 2,913,000 and 2,123,000 options
awarded under programs which included essentially all full-time salaried
employees. Options are generally exercisable for five to ten years from grant
date, subject to any vesting provisions. Certain of the plans also provide for
awards of restricted shares of the Company's common stock.
A summary of changes in outstanding options is as follows:
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
Balance, beginning of year 5,874 6,270 3,610
Granted 4,799 1,376 3,702
Canceled (848) (354) (552)
Exercised (1,838) (1,418) (490)
-------- -------- --------
Balance, end of year 7,987 5,874 6,270
======== ======== ========
Exercisable at end of year 2,561 2,670 1,522
======== ======== ========
Other information related to stock options is as follows:
1995 1994 1993
- -------------------------------------------------------------------------------
Price range of outstanding options $5.74-$18.94 $4.93-$15.00 $4.93-$12.32
Price range of exercised options $4.93-$15.00 $5.74-$12.32 $ 5.72-$9.94
Average exercise price $ 10.06 $ 9.25 $ 8.29
-34-
Stock options outstanding at December 31, 1995, expire at various dates through
2005. At December 31, 1995, there were 6,626,000 shares available for future
option grants and restricted stock awards. In January 1996, 1,971,000 shares
were granted with exercise prices ranging from $18.63 to $27.94.
PERFORMANCE SHARE PLAN. The Company has a performance share plan for certain
key officers which provides for distribution of the Company's common stock at
the end of three-year measurement periods based upon the growth in earnings per
share and certain other criteria. Recipients may elect to receive up to 50
percent of their distribution in cash. The total expense under the plan was
$9,870,000 in 1995, $3,987,000 in 1994, and $5,732,000 in 1993. At December 31,
1995, 943,130 shares of common stock were available for future awards under the
plan.
7. EMPLOYEE BENEFITS
The Company and its subsidiaries have non-contributory qualified retirement
plans covering most salaried employees, including certain employees in Canada.
Under the plans, retirement benefits are primarily a function of years of
service and the level of compensation during the final years of employment.
Total pension expense for all qualified plans was $7,275,000 in 1995, $7,143,000
in 1994 and $7,833,000 in 1993.
U.S. RETIREMENT PLAN. The following table sets forth the U.S. plan's funded
status at December 31, 1995, and 1994:
(In thousands) 1995 1994
- -----------------------------------------------------------------------------------------
Accumulated plan benefits:
Vested benefits $320,784 $281,468
Nonvested benefits 10,286 11,302
-------- --------
331,070 292,770
Effect of projected future compensation levels 41,680 21,249
-------- --------
Projected benefit obligation 372,750 314,019
Plan assets at fair value 332,726 285,312
-------- --------
Projected benefit obligation in excess of plan assets (40,024) (28,707)
Unrecognized net losses 38,610 20,233
Prior service cost not yet recognized in period pension cost 6,488 8,125
Net asset at transition being amortized through 1996 (528) (994)
Adjustment to recognize minimum liability - (6,115)
-------- --------
Prepaid (accrued) pension cost $ 4,546 $ (7,458)
======== ========
The plan's assets consist primarily of listed common stocks and fixed income
obligations. At December 31, 1995, the plan's assets included 824,972 shares of
the Company's common stock with a market value of approximately $17,634,000.
Pension expense for the plan includes the following components:
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
Service cost $ 5,627 $ 7,694 $ 6,048
Interest cost on projected benefit obligation 26,805 24,058 24,096
Actual return on plan assets (58,539) (2,064) (36,863)
Net amortization and deferrals 32,995 (23,168) 14,235
-------- -------- --------
-35-
Pension expense $ 6,888 $ 6,520 $ 7,516
======== ======== ========
Assumptions used in the accounting for the U.S. Retirement Plan are as follows:
1995 1994 1993
- -----------------------------------------------------------------------------
Discount rate used to determine projected
benefit obligation at December 31 7.25% 8.75% 7.5%
Rate of increase in future compensation levels 4.25% 5.0% 5.0%
Expected long-term rate of return on plan assets 9.5% 9.0% 9.0%
CANADIAN RETIREMENT PLAN. The Company's Canadian subsidiaries also have a
retirement plan that covers approximately 800 employees. The plan's assets
consist primarily of fixed income obligations and equity securities, and their
aggregate fair market value approximates the projected benefit obligation at
December 31, 1995.
SUPPLEMENTAL RETIREMENT PLAN. The Company maintains a supplemental executive
retirement program for certain key employees. The plan, which is unfunded,
provides supplemental retirement payments based on salary and years of service.
The expense for this plan was $2,982,000 in 1995, $2,609,000 in 1994, and
$2,205,000 in 1993. The accrued liability for this plan at December 31, 1995 and
1994, was $20,926,000 and $16,270,000, respectively, and is included in other
long-term liabilities in the accompanying balance sheets.
EMPLOYEE THRIFT PLAN. The Company's thrift plan provides for annual
contributions, within specified ranges, determined at the discretion of the
Board of Directors for the benefit of eligible employees in the form of cash or
shares of the Company's common stock. Expense for this plan was $4,454,000 in
1995, $4,739,000 in 1994 and $4,286,000 in 1993.
POSTRETIREMENT BENEFITS. The Company provides certain healthcare and life
insurance benefits for eligible retired employees. Healthcare benefits are
provided through a trust, while life insurance benefits are provided through an
insurance company. Substantially all of the Company's U.S. employees may become
eligible for these benefits if they reach normal retirement age while working
for the Company and satisfy certain years of service requirements. The Company
accrues the cost of providing postretirement benefits for medical and life
insurance coverage over the active service period of the employee.
The following table presents a reconciliation of the plan's status at December
31, 1995, and 1994:
(In thousands) 1995 1994
- -------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 71,581 $ 63,349
Fully eligible active plan participants 9,730 6,467
Other active participants 10,340 6,856
--------- ---------
91,651 76,672
Plan assets at fair value - -
--------- ---------
Accumulated benefit obligation in excess of plan assets (91,651) (76,672)
Unrecognized prior service credit due to plan amendments (10,103) (13,417)
Unrecognized net losses 17,462 3,994
--------- ---------
(84,292) (86,095)
Less: Current portion (3,407) (3,066)
--------- ---------
Accrued postretirement benefit obligation $(80,885) $(83,029)
========= =========
-36-
Net periodic postretirement benefit expense includes the following components:
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
Service cost $ 2,079 $ 2,264 $ 1,770
Interest cost on accumulated benefit obligation 6,439 5,908 5,724
Amortization of prior service credit (3,315) (3,839) (4,337)
Amortization of losses - 656 -
------- ------- -------
Net periodic postretirement benefit expense $ 5,203 $ 4,989 $ 3,157
======= ======= =======
Assumptions used in the computation of postretirement benefit expense and the
related obligation are as follows:
1995 1994 1993
- --------------------------------------------------------------------------------
Discount rate used to determine accumulated
postretirement benefit obligation at December 31 7.25% 8.75% 7.5%
Initial healthcare cost trend rate 11.0% 11.0% 11.0%
Ultimate healthcare cost trend rate 6.0% 6.0% 6.0%
Year ultimate healthcare cost trend rate reached 2005 2005 2005
If the healthcare cost trend rate were increased 1% for all future years, the
accumulated postretirement benefit obligation as of December 31, 1995, would
have increased 6.2 percent. The effect of such a change on the aggregate of
service and interest cost for 1995 would have been an increase of 7.3 percent.
The Company continues to evaluate ways in which it can better manage these
benefits and control their costs. Any changes in the plan, revisions to
assumptions, or changes in the Medicare program that affect the amount of
expected future benefits may have a significant effect on the amount of the
reported obligation and future annual expense.
8. COMMITMENTS AND CONTINGENCIES
LEASES. The Company's operating leases involve principally office space and
office equipment. Rental expense relating to these leases was $46,898,000 in
1995, $46,534,000 in 1994 and $40,798,000 in 1993. In March 1994, the Company
sold and leased back under operating leases certain land and buildings. The net
sales price of $55.1 million approximated the net book value of the related
assets.
Future minimum payment obligations for noncancelable operating leases exceeding
one year are as follows as of December 31, 1995:
(In thousands) Amount
- --------------------------------------------------------
1996 $ 38,201
1997 32,312
1998 27,260
1999 21,315
2000 18,697
Thereafter 95,248
--------
$233,033
========
-37-
AGREEMENT WITH COMPUTER SCIENCES CORPORATION. The Company has an agreement with
Computer Sciences Corporation (CSC) under which CSC-owned credit bureaus and
certain CSC affiliate bureaus utilize the Company's credit database service.
CSC and these affiliates retain ownership of their respective credit files and
the revenues generated by their credit reporting activity. The Company receives
a processing fee for maintaining the database and for each report supplied. The
agreement expires in 1998, is renewable at the option of CSC for successive ten-
year periods, and provides CSC with an option to sell its collection and credit
reporting businesses to the Company. The option is currently exercisable and
expires in 2013. In the event CSC does not exercise its option to sell and does
not renew the agreement, or if there is a change in control of CSC, the Company
has the option to purchase CSC's collection and credit reporting businesses.
The option price is determined, for all purposes, in accordance with the
following schedule: on or before July 31,1998, at a price determined by certain
financial formulas (currently estimated at approximately $400 million); and
after July 31, 1998, at appraised value.
DATA PROCESSING SERVICES AGREEMENT. In April 1993, the Company outsourced a
portion of its computer data processing operations and related functions to
Integrated Systems Solutions Corporation (ISSC), a subsidiary of IBM. Under the
terms of the agreement, the Company will pay ISSC an estimated $650 million over
the ten-year term of the agreement, although this amount could be more or less
depending upon various factors such as the inflation rate, the introduction of
significant new technologies or changes in the Company's data processing needs
as a result of acquisitions or divestitures. Under certain circumstances (e.g.,
a change in control of the Company), the Company may cancel the ISSC agreement;
however, the agreement provides that the Company must pay a significant penalty
in the event of such a cancellation.
EMPLOYMENT AGREEMENTS. The Company has employment agreements with eight of its
officers which provide certain severance pay and benefits in the event of a
"change in control" of the Company, which is defined as the acquisition of more
than 50% of the Company's outstanding common stock by an entity or a concerted
group of entities. In the event of a "change in control," the Company's
performance share plan provides that all shares designated for future
distribution will become fully vested and payable, subject to the achievement of
certain levels of growth in earnings per share. At December 31, 1995, the
maximum contingent liability under the agreements and plan was approximately
$20,461,000.
LITIGATION. A number of lawsuits seeking damages are brought against the
Company each year, largely as a result of reports issued by the Company. The
Company provides for estimated legal fees and settlements relating to pending
lawsuits. In the opinion of management, the ultimate resolution of these
matters will not have a materially adverse effect on the Company's financial
position, liquidity or results of operations.
9. RESTRUCTURING
In the fourth quarter of 1995, the Company initiated a restructuring program
designed to streamline operations by reducing staffing levels and consolidating
facilities (see Note 11 for industry segment information). The total cost of
this program was $19,572,000 ($11,939,000 net of tax, or $.08 per share).
Components of the restructuring provision and utilization through December 31,
1995, are as follows:
(Dollars in thousands) Original Provision Utilized Remaining Reserve
- -----------------------------------------------------------------------------------------
Severance and termination benefits for
approximately 750 employees 13,813 $2,521 $11,292
Asset write-offs 2,994 2,994 -
-38-
Lease costs 2,765 915 1,850
------- ------ -------
$19,572 $6,430 $13,142
======= ====== =======
The reserve balance at December 31, 1995, is included in other current
liabilities in the accompanying balance sheets.
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly operating revenue and operating income by industry segment and other
summarized quarterly financial data for 1995 and 1994 are as follows (in
thousands, except per share amounts; see Note 11 regarding restatement):
1995: First Second Third Fourth
- -----------------------------------------------------------------------------
Revenue:
Credit Services $119,320 $125,682 $129,836 $137,885
Payment Services 60,878 68,831 72,645 82,028
Insurance Services 127,099 132,439 130,362 127,046
International Operations 48,932 50,199 55,532 56,381
General Information Services 27,964 30,255 23,652 15,992
-------- -------- -------- --------
$384,193 $407,406 $412,027 $419,332
======== ======== ======== ========
Operating income (loss): *
Credit Services $ 40,615 $ 42,123 $ 45,069 $ 49,057
Payment Services 11,003 15,660 16,090 20,707
Insurance Services 9,558 11,141 11,353 2,669
International Operations 2,280 4,507 7,939 5,233
General Information Services (1,481) (2,275) (3,560) 10,828
-------- -------- -------- --------
Operating Contribution 61,975 71,156 76,891 88,494
General Corporate Expense (8,740) (7,638) (10,791) (8,408)
-------- -------- -------- --------
$ 53,235 $ 63,518 $ 66,100 $ 80,086
======== ======== ======== ========
Income before income taxes $ 50,492 $ 60,586 $ 62,935 $ 75,225
======== ======== ======== ========
Net income $ 29,472 $ 35,814 $ 37,981 $ 44,383
======== ======== ======== ========
Net income per common share $0.19 $0.23 $0.25 $0.30
======== ======== ======== ========
*See Industry Segment Information (Note 11) regarding the effects of
restructuring provision and lottery settlement on fourth quarter 1995 operating
income.
1994: First Second Third Fourth
- -------------------------------------------------------------------------------
Revenue:
Credit Services $116,339 $115,314 $119,625 $125,119
Payment Services 50,557 56,184 62,599 77,257
Insurance Services 106,978 114,142 113,603 118,686
International Operations 22,458 32,736 37,563 50,614
General Information Services 23,027 24,311 25,897 28,987
-------- -------- -------- --------
$319,359 $342,687 $359,287 $400,663
======== ======== ======== ========
Operating income (loss):
Credit Services $ 36,348 $ 34,773 $ 39,434 $ 39,312
Payment Services 9,844 13,631 13,913 20,072
Insurance Services 3,517 6,068 5,569 3,350
-39-
International Operations 3,349 5,362 4,169 3,578
General Information Services (903) (1,100) (866) 3,893
-------- -------- -------- --------
Operating Contribution 52,155 58,734 62,219 70,205
General Corporate Expense (8,214) (7,865) (6,640) (6,487)
-------- -------- -------- --------
$ 43,941 $ 50,869 $ 55,579 $ 63,718
======== ======== ======== ========
Income before income taxes $ 41,541 $ 49,088 $ 53,724 $ 63,124
======== ======== ======== ========
Net income $ 24,302 $ 28,716 $ 30,956 $ 36,372
======== ======== ======== ========
Net income per common share $0.16 $0.20 $0.21 $0.24
======== ======== ======== ========
11. INDUSTRY SEGMENT INFORMATION
In the fourth quarter of 1995, the Company changed its segment reporting
structure by moving its National Decision Systems business unit from the General
Information Services segment to the Credit Services segment. Prior year
information has been restated to conform with the 1995 presentation.
1995 1994 1993
(Dollars in thousands) Amount % of Total Amount % of Total Amount % of Total
- ---------------------------------------------------------------------------------------------------------------
Operating revenue:
Credit Services $ 512,723 32 $ 476,39 34% $ 427,777 35%
Payment Services 284,382 17 246,597 17 210,416 17
Insurance Services 516,946 32 453,409 32 396,519 33
International Operations 211,044 13 143,371 10 97,296 8
General Information Services 97,863 6 102,222 7 85,209 7
---------- ---- ---------- ---- ---------- ----
$1,622,958 100% $1,421,996 100% $1,217,217 100%
========== ==== ========== ==== ========== ====
Operating income (loss):
Credit Services $ 176,864 59% $ 149,867 61% $ 133,004 89%
Payment Services 63,460 21 57,460 24 51,910 35
Insurance Services 34,721 12 18,504 8 5,537 4
International Operations 19,959 7 16,458 7 18,056 12
General Information Services 3,512 1 1,024 - (59,916)* (40)
---------- ---- ---------- ---- ---------- ----
Operating Contribution 298,516 100% 243,313 100% 148,591 100%
==== ==== ====
General Corporate Expense (35,577) (29,206) (29,562)
---------- ----------
$ 262,939 $ 214,107 $ 119,029
========== ========== ==========
Identifiable assets at
December 31:
Credit Services $ 298,095 28% $ 293,947 29% $ 302,983 41%
Payment Services 122,925 12 115,929 11 70,806 10
Insurance Services 171,499 16 171,904 17 83,390 11
International Operations 307,864 29 293,318 29 128,027 18
General Information Services 82,874 8 84,352 8 42,833 6
Corporate 70,438 7 61,724 6 103,162 14
---------- ---- ---------- ---- ---------- ----
$1,053,695 100% $1,021,174 100% $ 731,201 100%
========== ==== ========== ==== ========== ====
*Includes a provision for lottery contract dispute and litigation of $48,438
(Note 3).
Description of Segments:
CREDIT SERVICES: Consumer credit reporting information; credit card marketing
services; risk management and collection services; locate services; fraud
detection and prevention services; mortgage loan origination information; and
PC-based marketing systems, geodemographic systems and mapping tools.
-40-
PAYMENT SERVICES: Check guarantee and verification services; credit and debit
card authorization and processing; credit card marketing enhancement; and
software products for managing credit card operations.
INSURANCE SERVICES: Underwriting and claims reporting services; inspection and
loss control services; workers' compensation audits, software for commercial
insurers; specimen testing for life and health insurance applicants; and
employment evaluation services.
INTERNATIONAL OPERATIONS: In Canada, consumer and business credit reporting
information; accounts receivable and collection services; underwriting services
for property and casuality insurance companies; and check guarantee services. In
Europe (primarily the United Kingdom), credit reporting and marketing services;
credit scoring and modeling services; check guarantee services; and auto lien
information. In South America, credit information services and commercial,
financial and medical information.
GENERAL INFORMATION SERVICES: Healthcare Information Services includes
electronic claims processing; physician profiling; claims auditing; claims
analysis, administration and utilization management; electronic remittance;
hospital bill audits; and medical credentials verification. Marketing Services,
through August 1995, included research and analysis; and custom opinion surveys.
Notes to Industry Segment Information:
(1) Operating revenue is to unaffiliated customers only.
(2) Operating income is operating revenue less operating costs and expenses,
excluding interest expense, other income and income taxes.
(3) Depreciation and amortization by industry segment are as follows:
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------
Credit Services $26,624 $29,412 $28,563
Payment Services 7,000 4,970 3,230
Insurance Services 13,514 10,680 8,077
International Operations 16,844 10,986 5,583
General Information Services 9,361 6,990 3,971
Corporate 3,702 3,458 5,500
------- ------- -------
$77,045 $66,496 $54,924
======= ======= =======
(4) Capital expenditures by industry segment, excluding property and equipment
and other assets acquired in acquisitions, are as follows:
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------
Credit Services $ 8,225 $ 7,251 $12,864
Payment Services 12,719 9,422 3,735
Insurance Services 9,487 5,734 7,311
International Operations 4,125 5,306 5,341
General Information Services 16,800* 3,277 24,630
Corporate 7,675 1,346 492
------- ------- -------
$59,031 $32,336 $54,373
======= ======= =======
*Includes $10 million investment for PCN financing (Note 2).
(5) In the fourth quarter of 1995, the Company recorded a restructuring
provision (Note 9) and a settlement with the California State Lottery (Note 3).
Operating income by industry segment
-41-
decreased (increased) as a result of these items as follows:
(In thousands) Restructuring Provision Lottery Settlement Total
- --------------------------------------------------------------------------------------------------------
Credit Services $ 3,243 $ - $ 3,243
Payment Services 521 - 521
Insurance Services 9,150 - 9,150
International Operations 1,716 - 1,716
General Information Services 4,442 (19,665) (15,223)
Corporate 500 - 500
---------- ---------- --------
$ 19,572 $ (19,665) $ (93)
========== ========== ========
(6) Financial information by geographic area is as follows:
1995 1994 1993
(Dollars in thousands) Amount % of Total Amount % of Total Amount % of Total
- ----------------------------------------------------------------------------------------------------------------------------
Operating revenue:
United States $1,405,560 87% $1,277,196 90% $1,119,921 92%
Canada 78,952 5 78,277 5 76,285 6
Europe 138,446 8 66,523 5 21,011 2
---------- ---- ---------- ---- ---------- ----
$1,622,958 100% $1,421,996 100% $1,217,217 100%
========== ==== ========== ==== ========== ====
Operating contribution (loss):
United States $ 277,070 93% $ 228,280 94% $ 130,995 88%
Canada 15,065 5 15,476 6 19,169 13
Europe 5,389 2 (851) - (1,573) (1)
South America 992 - 408 - - -
---------- ---- ---------- ---- ---------- ----
$ 298,516 100% $ 243,313 100% $ 148,591 100%
========== ==== ========== ==== ========== ====
Identifiable assets at December 31:
United States $ 737,575 70% $ 723,466 71% $ 603,174 83%
Canada 70,984 7 109,004 11 102,559 14
Europe 217,903 21 173,054 17 25,468 3
South America 27,233 2 15,650 1 - -
---------- ---- ---------- ---- ---------- ----
$1,053,695 100% $1,021,174 100% $ 731,201 100%
========== ==== ========== ==== ========== ====
-42-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Equifax Inc.:
We have audited the accompanying consolidated balance sheets of Equifax Inc. (a
Georgia corporation) and subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Equifax Inc. and subsidiaries
as of December 31, 1995 and 1994 and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 16, 1996
-43-
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 1, 1996, contains, on pages 2 through 4 and 12 thereof,
information relating to the Company's Officers, Directors and persons nominated
to become Directors. Said information is incorporated herein by reference and
made a part hereof. See also information concerning the Company's executive
officers in Part I, above.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The Company's Proxy Statement for the Annual Meeting of Shareholders to be
held on May 1, 1996, contains, on pages 8 through 17 thereof, information
relating to executive compensation. Said information is incorporated herein by
reference and made a part hereof.
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 1, 1996, contains, on pages 6 and 7, information relating to
security ownership of certain beneficial owners and management. Said
information is incorporated herein by reference and made a part hereof.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The Company's Proxy Statement for the Annual Meeting of Shareholders to be
held on May 1, 1996, contains, on pages 4 and 5 thereof, information relating
to certain relationships and related transactions. Said information is
incorporated herein by reference and made a part hereof.
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
- -------- ---------------------------------------------------
ON FORM 8-K
-----------
The following documents are filed as part of this report:
(A)1. FINANCIAL STATEMENTS
[S] [C]
. Consolidated Balance Sheets - December 31, 1995 and 1994
-44-
. Consoldiated Statements of Income for the Years Ended December 31,
1995, 1994 and 1993
. Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1995, 1994 and 1993
. Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1994 and 1993
. Notes to Consolidated Financial Statements
(A)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 thereto.
(A)3. EXHIBITS
Articles of Incorporation and By-laws
. Articles of Incorporation (72 pages) (P-Filed under Form SE)
. By-Laws (13 pages)
Instruments Defining the Rights of Security Holders, Including
Indentures
. Loan Agreement (132 pages)
. Portion of Prospectus and Trust Indenture (134 pages)/(1)/
Material Contracts and Compensation Plans
. Equifax Inc. 1988 Performance Share Plan for Officers, as amended (14
pages)/(5)(6)/
. Equifax Inc. Incentive Compensation Plan (5 pages)/(6)/
. Deferred Compensation Plan (22 pages)/(6)/
. Change in Control Agreement (10 pages)/(4)(6)/
. Executive Employment Agreement, dated June 22, 1989 (7 pages)/(2)(6)/
. Executive Employment Agreement, dated July 1, 1991 (3 pages)/(2)(6)/
. Executive Employment Agreement, dated December 29, 1995/(6)/
. Consulting Agreement, dated January 1, 1996/(6)/
. Executive Letter Agreement and Promissory Note, dated July 31, 1995 (2
pages)/(6)/
-45-
. Equifax Inc. Omnibus Stock Incentive Plan, as amended (14
pages)/(6)/
. Equifax Inc. Omnibus Stock Incentive Plan 1994 Incentive and Non-
Qualified Stock Option Agreements (8 pages)/(4)(6)/
. Equifax Inc. Omnibus Stock Incentive Plan 1995 Incentive and Non-
Qualified Stock Option Agreements (8 pages)/(5)(6)/
. Equifax Inc. Omnibus Stock Incentive Plan 1995 Non-Qualified Stock
Option Agreement (4 pages)/(5)(6)/
. Equifax Inc. Omnibus Stock Incentive Plan Restricted Stock Award
Agreement (16 pages)/(2)//(6)/
. Equifax Inc. Omnibus Stock Incentive Plan 1994 Restricted Stock
Award Agreement (4 pages)/(4)(6)/
. Equifax Inc. Omnibus Stock Incentive Plan 1995 Restricted Stock
Award Agreement (3 pages)/(5)(6)/
. Equifax Inc. Non-Employee Director Stock Option Plan and Agreement
(10 pages)/(5)(6)/
. Equifax Inc. Supplemental Executive Retirement Plan (24
pages)/(5)(6)/
. Equifax Inc. Supplemental Executive Retirement Plan Amendments (26
pages)/(4)//(6)/
. Equifax Inc. Severance Pay Plan for Salaried Employees (18
pages)/(4)(6)/
. Agreement For Computerized Credit Reporting Services (204
pages)/(4)/
. Amendments to Agreement for Computerized Credit Reporting Services
and related documents (66 pages)/(2)/
. Amendment to Agreement for Computerized Credit Reporting Services (8
pages)/(3)/
. Amendment to Agreement for Computerized Credit Reporting Services (9
pages)/(4)/
. Amendment to Agreement for Computerized Credit Reporting Services
(14 pages)/(5)/
. Computer and network operations agreement (31 pages)/(4)/
. Purchase and Lease Agreement (109 pages)/(4)/
. Headquarters Facility Lease (77 pages)/(4)/
-46-
. Participation Agreement (148 pages)/(4)/
. Lease Agreement (71 pages)/(4)/
. Compensation of Directors - The Company's by-laws, which are filed as
an exhibit to this Form 10-K Annual Report, describe, on page 4 thereof,
under Section III, "Compensation of Directors," the fees paid to
Directors of the Company. Said information is hereby incorporated by
reference.
. Life Insurance - Messrs. C. B. Rogers, Jr. and L. A. Ault, III each
own a personal life insurance policy in the face amount of $1,000,000 and
$2,000,000, respectively. The Company pays the annual premiums on said
policies.
Subsidiaries of the Registrant (3 pages)
Consent of Independent Public Accountants to incorporation by reference (1 page)
Financial Data Schedule (1 page)
/(1)/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
hereby incorporated by reference.
/(2)/Previously filed as an exhibit on Form 10-K, filed March 27, 1992, and
hereby incorporated by reference.
/(3)/Previously filed as an exhibit on Form 10-K, filed March 30, 1993, and
hereby incorporated by reference.
/(4)/Previously filed as an exhibit on Form 10-K, filed March 31, 1994, as
amended on Form 10-K/A, filed October 14, 1994, and hereby incorporated by
reference.
/(5)/Previously filed as an exhibit on Form 10-K, filed March 30, 1995 and
hereby incorporated by reference.
/(6)/Management Contract or Compensatory Plan
Copies of the Company's Form 10-K which are furnished pursuant to the written
request of the Company's shareholders do not include the exhibits listed above.
Any shareholder desiring copies of one or more such exhibits should write the
Secretary of the Company at P.O. Box 4081, Atlanta, Georgia 30302, specifying
the exhibit or exhibits and enclosing a check for the amount resulting from
multiplying $.50 times the number of pages (as indicated above) of the
exhibit(s) requested.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fourth quarter
of the year ended December 31, 1995.
-47-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
EQUIFAX INC.
Date March 28, 1996 By /s/ T. H. Magis
---------------------------------
T. H. Magis, Corporate Vice
President, Secretary and General
Counsel
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 28, 1996 /s/ C. B. Rogers, Jr.
-----------------------------------
C. B. Rogers, Jr., Chairman of the
Board
Date March 28, 1996 /s/ D. W. McGlaughlin
-----------------------------------
D. W. McGlaughlin, President, Chief
Executive Officer and Director
Date March __, 1996
-----------------------------------
Thomas F. Chapman, Executive Vice
President and Director
Date March 28, 1996 /s/ D. U. Hallman
-----------------------------------
D. U. Hallman, Senior Vice
President and Chief Financial
Officer
Date March 28, 1996 /s/ P. J. Mazzilli
-----------------------------------
P. J. Mazzilli, Corporate Vice
President and Controller
(Principal Accounting Officer)
Date March 28, 1996 /s/ J. L. Clendenin
-----------------------------------
J. L. Clendenin, Director
-48-
Date March 28, 1996 /s/ Larry Prince
-----------------------------------
Larry Prince, Director
Date March 28, 1996 /s/ D. Raymond Riddle
-----------------------------------
D. Raymond Riddle, Director
Date March , 1996
-----------------------------------
A. W. Dahlberg, Director
Date March 28, 1996 /s/ L. Phillip Humann
-----------------------------------
L. Phillip Humann, Director
Date March , 1996
-----------------------------------
Dr. L. W. Sullivan, Director
Date March 28, 1996 /s/ Lee A. Ault
-----------------------------------
Lee A. Ault, III, Director
Date March 28, 1996 /s/ Dr. Betty L. Siegel
-----------------------------------
Dr. Betty L. Siegel, Director
Date March , 1996
-----------------------------------
Ron D. Barbaro, Director
Date March 28, 1996 /s/ J.C. Chartrand
-----------------------------------
J. C. Chartrand, Executive
Vice President and Director
Date March 28, 1996 /s/ Tinsley H.Irvin
-----------------------------------
Tinsley H. Irvin, Director
-49-
INDEX TO EXHIBITS
EXHIBIT
NUMBER
- -------
Articles of Incorporation and By-laws
3.1 . Articles of Incorporation (P-Filed under Form SE)
3.2 . By-Laws
Instruments Defining the Rights of Security Holders, Including
Indentures
4.1 . Loan Agreement
4.2 . Portion of Prospectus and Trust Indenture /(1)/
Material Contracts and Compensation Plans
10.1 . Equifax Inc. 1988 Performance Share Plan for Officers, as
amended/(5)(6)/
10.2 . Equifax Inc. Incentive Compensation Plan/(6)/
10.3 . Deferred Compensation Plan/(6)/
10.4 . Change in Control Agreement/(4)(6)/
10.5 . Executive Employment Agreement, dated June 22, 1989/(2)(6)/
10.6 . Executive Employment Agreement, dated July 1, 1991/(2)(6)/
10.7 . Executive Employment Agreement, dated December 29, 1995/(6)/
10.8 . Consulting Agreement, dated January 1, 1996/(6)/
10.9 . Executive Letter Agreement and
Promissory Note, dated July 31, 1995
10.10 . Equifax Inc. Omnibus Stock Incentive Plan, as amended /(6)/
10.11 . Equifax Inc. Omnibus Stock Incentive Plan 1994 Incentive and Non-
Qualified Stock Option Agreements/(4)(6)/
10.12 . Equifax Inc. Omnibus Stock Incentive Plan 1995 Incentive and Non-
Qualified Stock Option Agreements/(5)(6)/
-50-
10.13 . Equifax Inc. Omnibus Stock Incentive Plan 1995 Non-Qualified Stock
Option Agreement/(5)(6)/
10.14 . Equifax Inc. Omnibus Stock Incentive Plan Restricted Stock Award
Agreement/(2)(6)/
10.15 . Equifax Inc. Omnibus Stock Incentive Plan 1994 Restricted Stock Award
Agreement/(4)(6)/
10.16 . Equifax Inc. Omnibus Stock Incentive Plan 1995 Restricted Stock Award
Agreement/(5)(6)/
10.17 . Equifax Inc. Non-Employee Director Stock Option Plan and
Agreement/(5)(6)/
10.18 . Equifax Inc. Supplemental Executive Retirement Plan/(5)(6)/
10.19 . Equifax Inc. Supplemental Executive Retirement Plan
Amendments/(4)(6)/
10.20 . Equifax Inc. Severance Pay Plan for Salaried Employees/(4)(6)/
10.21 . Agreement For Computerized Credit Reporting Services/(4)(5)/
10.22 . Amendments to Agreement for Computerized Credit Reporting Services
and related documents/(2)/
10.23 . Amendment to Agreement for Computerized Credit Reporting
Services/(3)/
10.24 . Amendment to Agreement for Computerized Credit Reporting
Services/(4)/
10.25 . Amendment to Agreement for Computerized Credit Reporting
Services/(5)/
10.26 . Computer and network operations agreement/(4)/
10.27 . Purchase and Lease Agreement/(4)/
10.28 . Headquarters Facility Lease/(4)/
10.29 . Participation Agreement/(4)/
10.30 . Lease Agreement/(4)/
. Compensation of Directors - The Company's by-laws, which are filed as
an exhibit to this Form 10-K Annual Report, describe, on page 4
thereof, under Section III, "Compensation of Directors," the fees
paid to Directors of the Company. Said information is hereby
incorporated by reference.
-51-
. Life Insurance - Messrs. C. B. Rogers, Jr. and L. A. Ault, III each
own a personal life insurance policy in the face amount of
$1,000,000 and $2,000,000 respectively. The Company pays the annual
premiums on said policies.
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants to incorporation by
reference
27 Financial Data Schedule
/(1)/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
hereby incorporated by reference.
/(2)/Previously filed as an exhibit on Form 10-K, filed March 27, 1992 and
hereby incorporated by reference.
/(3)/Previously filed as an exhibit on Form 10-K, filed March 30, 1993, and
hereby incorporated by reference.
/(4)/Previously filed as an exhibit on Form 10-K, filed March 31, 1994, as
amended on Form 10-K/A, filed October 14, 1994, and hereby incorporated by
reference.
/(5)/Previously filed as an exhibit on Form 10-K, filed March 30, 1995, and
hereby incorporated by reference.
/(6)/Management Contract or Compensatory Plan
-52-