1550 Peachtree Street, N.W. Atlanta, Georgia 30309
News Release
Contact:
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Jeff Dodge Investor Relations 404.885.8804 jeff.dodge@equifax.com |
Mitch Haws Public Relations 404.885.8093 mitch.haws@equifax.com |
FOR IMMEDIATE RELEASE
Equifax Reports Record Second Quarter Revenue of $317 Million
and Earnings Per Share of 36 Cents
ATLANTA, July 17, 2003Equifax Inc. (NYSE: EFX), the leading provider of critical information to businesses, consumers and the public sector, today reported record second quarter revenue of $317 million, an increase of 18 percent over the prior year. Earnings per share from continuing operations grew 6 percent to 36 cents, in-line with consensus analysts' estimates.
"Our company continued performing exceptionally well in a dynamic and very challenging economic environment," said Thomas F. Chapman, Equifax chairman and CEO. Our credit reporting business and decisioning platforms continue gaining momentum and new growth initiatives including predictive sciences and small business credit reporting contributed to North America's record performance in the quarter."
Operating highlights in the quarter include:
North America
International
EuropeSecond quarter revenue reached $32 million with operating margins of 18 percent. Equifax continues to benefit from its fraud and security services, including several contracts to provide ID verification solutions to UK financial institutions.
Latin AmericaLatin America revenues grew in local currency and totaled $20 million in the quarter. Operating margins were 25 percent.
Teleconference
Equifax's quarterly teleconference to discuss results will be held today at 9 a.m. (EDT). The live audio Webcast of the speakers' presentations will be available at www.equifax.com. Please note that Microsoft Media Player is required to access the Webcast. This can be downloaded from www.microsoft.com/windows/mediaplayer.
About Equifax
Equifax Inc. is the leading provider of critical information to businesses, consumers and the public sector. For businesses, it means faster and easier ways to find, approve and market to the right customers. For consumers, it means easier, instantaneous ways to buy products or services, and better insight into and management of their personal credit. For everyone, it means improved security against fraud, identity theft, and even terror. Equifax employs 5,000 people in 13 countries (United States, Canada, United Kingdom, Ireland, Spain, Portugal, Italy, Chile, Brazil, Argentina, Peru, Uruguay and El Salvador) and had $1.1 billion in revenue during 2002.
Statements in this press release that relate to Equifax's future plans, objectives, expectations, performance, events and the like are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Future events, risks and uncertainties, individually or in the aggregate, could cause actual results to differ materially from those expressed or implied in these statements. Those factors could include changes in worldwide and U.S. economic conditions that materially impact consumer spending and consumer debt, changes in demand for the Company's products and services, risks associated with the integration of acquisitions and other investments, and other factors discussed in the "forward-looking information" section and the "risk factor" section of the management's discussion and analysis included in the Company's annual report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission.
EQUIFAX INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three months ended June 30, |
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2003 |
2002 |
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(In millions, except per share amounts) |
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Operating revenue | $ | 317.0 | $ | 268.0 | |||||
Costs and expenses: | |||||||||
Costs of services | 137.7 | 104.7 | |||||||
Selling, general and administrative expenses | 69.9 | 56.3 | |||||||
Depreciation | 4.3 | 3.5 | |||||||
Amortization | 19.8 | 15.9 | |||||||
Total costs and expenses | 231.7 | 180.4 | |||||||
Operating income | 85.3 | 87.6 | |||||||
Other income, net | 5.4 | 1.8 | |||||||
Minority interests in earnings, net of tax | (1.1 | ) | (0.8 | ) | |||||
Interest expense | (10.8 | ) | (10.1 | ) | |||||
Income from continuing operations before income taxes | 78.8 | 78.5 | |||||||
Provision for income taxes | (29.5 | ) | (30.7 | ) | |||||
Income from continuing operations | 49.3 | 47.8 | |||||||
Discontinued operations(1): | |||||||||
Loss from discontinued operations, net of income tax benefit of $0.0 in 2003 and $0.4 in 2002 | (7.4 | ) | (0.4 | ) | |||||
Net income | $ | 41.9 | $ | 47.4 | |||||
Per common share (basic): | |||||||||
Income from continuing operations | $ | 0.36 | $ | 0.35 | |||||
Discontinued operations | (0.05 | ) | (0.00 | ) | |||||
Net income | $ | 0.31 | $ | 0.35 | |||||
Shares used in computing basic earnings per share | 134.9 | 137.0 | |||||||
Per common share (diluted): | |||||||||
Income from continuing operations | $ | 0.36 | $ | 0.34 | |||||
Discontinued operations | (0.05 | ) | (0.00 | ) | |||||
Net income | $ | 0.31 | $ | 0.34 | |||||
Shares used in computing diluted earnings per share | 137.0 | 139.8 | |||||||
Dividends per common share | $ | 0.020 | $ | 0.020 | |||||
SEGMENT REVENUE & OPERATING INCOME
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Three months ended June 30, |
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2003 |
2002 |
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Equifax revenue: | ||||||||
North America | $ | 265.0 | $ | 213.1 | ||||
Europe | 32.0 | 32.1 | ||||||
Latin America | 20.0 | 20.8 | ||||||
Other | | 2.0 | ||||||
$ | 317.0 | $ | 268.0 | |||||
Equifax operating income: | ||||||||
North America | $ | 89.7 | $ | 86.4 | ||||
Europe | 5.7 | 4.8 | ||||||
Latin America | 5.1 | 5.5 | ||||||
Other | | 2.0 | ||||||
Corporate Expense | (15.2 | ) | (11.1 | ) | ||||
$ | 85.3 | $ | 87.6 | |||||
EQUIFAX INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
Six months ended June 30, |
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2003 |
2002 |
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(In millions, except per share amounts) |
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Operating revenue | $ | 618.6 | $ | 527.0 | |||||
Costs and expenses: | |||||||||
Costs of services | 264.7 | 209.2 | |||||||
Selling, general and administrative expenses | 140.6 | 112.2 | |||||||
Depreciation | 8.2 | 7.2 | |||||||
Amortization | 39.1 | 31.5 | |||||||
Total costs and expenses | 452.6 | 360.1 | |||||||
Operating income | 166.0 | 166.9 | |||||||
Other income, net | 9.2 | 3.2 | |||||||
Minority interests in earnings, net of tax | (1.7 | ) | (1.5 | ) | |||||
Interest expense | (22.5 | ) | (20.1 | ) | |||||
Income from continuing operations before income taxes | 151.0 | 148.5 | |||||||
Provision for income taxes | (56.6 | ) | (58.7 | ) | |||||
Income from continuing operations | 94.4 | 89.8 | |||||||
Discontinued operations(1): | |||||||||
Loss from discontinued operations, net of income tax benefit of $0.0 in 2003 and $0.6 in 2002 | (8.7 | ) | (0.7 | ) | |||||
Net income | $ | 85.7 | $ | 89.1 | |||||
Per common share (basic): | |||||||||
Income from continuing operations | $ | 0.69 | $ | 0.66 | |||||
Discontinued operations | (0.06 | ) | 0.00 | ||||||
Net income | $ | 0.63 | $ | 0.66 | |||||
Shares used in computing basic earnings per share | 135.2 | 136.7 | |||||||
Per common share (diluted): | |||||||||
Income from continuing operations | $ | 0.69 | $ | 0.64 | |||||
Discontinued operations | (0.06 | ) | 0.00 | ||||||
Net income | $ | 0.63 | $ | 0.64 | |||||
Shares used in computing diluted earnings per share | 137.0 | 139.5 | |||||||
Dividends per common share | $ | 0.040 | $ | 0.040 | |||||
SEGMENT REVENUE & OPERATING INCOME
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Six months ended June 30, |
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2003 |
2002 |
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Equifax revenue: | ||||||||
North America | $ | 520.3 | $ | 419.2 | ||||
Europe | 62.7 | 62.8 | ||||||
Latin America | 35.6 | 40.6 | ||||||
Other | | 4.4 | ||||||
$ | 618.6 | $ | 527.0 | |||||
Equifax operating income: | ||||||||
North America | $ | 180.8 | $ | 168.9 | ||||
Europe | 8.5 | 7.5 | ||||||
Latin America | 7.9 | 9.6 | ||||||
Other | | 4.4 | ||||||
Corporate Expense | (31.2 | ) | (23.5 | ) | ||||
$ | 166.0 | $ | 166.9 | |||||
EQUIFAX INC.
CONSOLIDATED BALANCE SHEETS
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June 30, 2003 |
December 31, 2002 |
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(Unaudited) |
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(In millions, except par values) |
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ASSETS | |||||||||
Current Assets: | |||||||||
Cash and cash equivalents | $ | 30.8 | $ | 30.5 | |||||
Trade accounts receivable, net of allowance for doubtful accounts of $18.6 in 2003 and $17.3 in 2002 | 198.8 | 179.8 | |||||||
Other receivables | 14.6 | 20.8 | |||||||
Deferred income tax assets | 21.4 | 20.9 | |||||||
Other current assets | 38.2 | 33.6 | |||||||
Total current assets | 303.8 | 285.6 | |||||||
Property and Equipment: | |||||||||
Land, buildings and improvements | 31.3 | 29.3 | |||||||
Data processing equipment and furniture | 115.3 | 115.9 | |||||||
146.6 | 145.2 | ||||||||
Less accumulated depreciation | 98.1 | 94.6 | |||||||
48.5 | 50.6 | ||||||||
Goodwill | 703.0 | 650.5 | |||||||
Purchased Data Files | 271.4 | 265.4 | |||||||
Other Assets | 283.1 | 247.3 | |||||||
Assets of Discontinued Operations | 0.7 | 7.5 | |||||||
$ | 1,610.5 | $ | 1,506.9 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
Current Liabilities: | |||||||||
Short-term debt and current maturities | $ | 23.7 | $ | 233.9 | |||||
Accounts payable | 12.5 | 16.5 | |||||||
Accrued salaries and bonuses | 24.0 | 31.0 | |||||||
Other current liabilities | 158.1 | 146.5 | |||||||
Total current liabilities | 218.3 | 427.9 | |||||||
Long-Term Debt |
891.9 |
690.6 |
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Deferred Revenue | 10.6 | 11.7 | |||||||
Deferred Income Tax Liabilities | 31.7 | 25.9 | |||||||
Other Long-Term Liabilities | 125.8 | 122.6 | |||||||
Liabilities of Discontinued Operations | 6.4 | 7.2 | |||||||
Total liabilities | 1,284.7 | 1,285.9 | |||||||
Commitments and Contingencies | |||||||||
Shareholders' Equity: |
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Preferred stock, $0.01 par value: Authorized10.0; Issuednone | | | |||||||
Common stock, $1.25 par value: | |||||||||
Authorized shares300.0 | |||||||||
Issued shares179.8 in 2003 and 180.1 in 2002 | |||||||||
Outstanding shares134.9 in 2003 and 135.7 in 2002 | 224.8 | 225.1 | |||||||
Paid-in capital | 416.5 | 412.0 | |||||||
Retained earnings | 1,005.4 | 925.4 | |||||||
Accumulated other comprehensive loss | (317.5 | ) | (359.4 | ) | |||||
Treasury stock, at cost, 39.5 shares in 2003 and 38.1 shares in 2002 | (929.5 | ) | (899.7 | ) | |||||
Stock held by employee benefits trusts, at cost, 5.4 shares in 2003 and 6.3 shares in 2002 | (73.9 | ) | (82.4 | ) | |||||
Total shareholders' equity | 325.8 | 221.0 | |||||||
$ | 1,610.5 | $ | 1,506.9 | ||||||
EQUIFAX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
Six months ended June 30, |
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2003 |
2002 |
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(In millions) |
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Cash flows from operating activities: | ||||||||||
Net income | $ | 85.7 | $ | 89.1 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: | ||||||||||
Loss from discontinued operations | 8.7 | 0.7 | ||||||||
Depreciation and amortization | 47.3 | 38.7 | ||||||||
Deferred income taxes | 2.5 | 6.5 | ||||||||
Changes in assets and liabilities, excluding effects of acquisitions: | ||||||||||
Accounts receivable, net | (9.0 | ) | 16.2 | |||||||
Current liabilities, excluding debt | (12.0 | ) | (36.9 | ) | ||||||
Other current assets | 2.0 | 10.0 | ||||||||
Other long-term liabilities, excluding debt | 0.9 | (4.8 | ) | |||||||
Other assets | (24.0 | ) | (27.3 | ) | ||||||
Cash provided by operating activities | 102.1 | 92.2 | ||||||||
Investing activities: | ||||||||||
Additions to property and equipment | (8.3 | ) | (3.3 | ) | ||||||
Additions to other assets, net | (14.9 | ) | (13.1 | ) | ||||||
Acquisitions, net of cash acquired | (40.6 | ) | (87.7 | ) | ||||||
Investments in unconsolidated affiliates | | (0.1 | ) | |||||||
Proceeds on note receivable from sale of business | | 4.1 | ||||||||
Deferred payments on prior year acquisitions | (1.9 | ) | (4.5 | ) | ||||||
Cash used by investing activities | (65.7 | ) | (104.6 | ) | ||||||
Financing activities: | ||||||||||
Net short-term payments | (14.5 | ) | (7.1 | ) | ||||||
Additions to long-term debt | 200.0 | 44.5 | ||||||||
Payments on long-term debt | (201.1 | ) | | |||||||
Treasury stock purchases | (29.8 | ) | (52.0 | ) | ||||||
Dividends paid | (5.7 | ) | (5.8 | ) | ||||||
Proceeds from exercise of stock options | 12.3 | 29.5 | ||||||||
Other | (0.1 | ) | 0.4 | |||||||
Cash (used) provided by financing activities | (38.9 | ) | 9.5 | |||||||
Effect of foreign currency exchange rates on cash | 3.0 | (1.5 | ) | |||||||
Cash used by discontinued operations | (0.2 | ) | (0.7 | ) | ||||||
Increase (decrease) in cash and cash equivalents | 0.3 | (5.1 | ) | |||||||
Cash and cash equivalents, beginning of year | 30.5 | 33.2 | ||||||||
Cash and cash equivalents, end of period | $ | 30.8 | $ | 28.1 | ||||||
Common Questions & Answers (Unaudited)
June 30, 2003
(Dollars in Millions, except per share amounts)
1. Can you provide a further breakdown of revenue in the Equifax North America segment?
Equifax North America revenue consists of the following components:
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2002 |
2003 |
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Equifax North America Revenue: |
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1st Qtr |
2nd Qtr |
3rd Qtr |
4th Qtr |
12 Months |
1st Qtr |
2nd Qtr |
1st Half |
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U.S. Consumer and Commercial Services | $ | 109.1 | $ | 109.6 | $ | 119.9 | $ | 116.8 | $ | 455.4 | $ | 124.6 | $ | 134.7 | $ | 259.3 | |||||||||
Mortgage Services | 11.1 | 11.8 | 16.0 | 16.3 | 55.2 | 16.7 | 21.4 | 38.1 | |||||||||||||||||
Canadian Operations | 19.1 | 19.8 | 19.4 | 19.1 | 77.4 | 20.5 | 22.9 | 43.4 | |||||||||||||||||
Total North America Information Services | 139.3 | 141.2 | 155.3 | 152.2 | 588.0 | 161.8 | 179.0 | 340.8 | |||||||||||||||||
Credit Marketing Services | 38.6 | 41.9 | 42.2 | 41.5 | 164.2 | 40.3 | 41.7 | 82.0 | |||||||||||||||||
Direct Marketing Services | 20.4 | 21.3 | 30.1 | 38.7 | 110.4 | 38.3 | 26.9 | 65.2 | |||||||||||||||||
Total Marketing Services | 59.0 | 63.2 | 72.3 | 80.2 | 274.7 | 78.7 | 68.7 | 147.4 | |||||||||||||||||
Consumer Direct | 7.8 | 8.7 | 11.0 | 12.0 | 39.5 | 14.8 | 17.4 | 32.2 | |||||||||||||||||
$ | 206.2 | $ | 213.1 | $ | 238.6 | $ | 244.4 | $ | 902.2 | $ | 255.3 | $ | 265.0 | $ | 520.3 | ||||||||||
2. Can you provide a breakout of costs of services and SG&A as a percent of sales?
Operating expenses as a percent of revenue are as follows for continuing operations:
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2nd Qtr |
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Operating Expenses: |
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2002 |
2003 |
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Costs of services | 39 | % | 43 | % | |
Selling, general and administrative | 21 | % | 22 | % | |
Depreciation & amortization | 7 | % | 8 | % | |
67 | % | 73 | % | ||
3. Can you give depreciation and amortization by segment?
Depreciation and amortization is as follows:
|
2002 |
2003 |
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Depreciation & Amortization: |
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1st Qtr |
2nd Qtr |
3rd Qtr |
4th Qtr |
12 Months |
1st Qtr |
2nd Qtr |
1st Half |
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Equifax North America | $ | 12.0 | $ | 12.3 | $ | 13.7 | $ | 15.7 | $ | 53.8 | $ | 16.2 | $ | 16.6 | $ | 32.8 | ||||||||
Equifax Europe | 3.7 | 3.5 | 2.3 | 3.4 | 12.9 | 2.6 | 2.9 | 5.5 | ||||||||||||||||
Equifax Latin America | 1.5 | 1.5 | 1.4 | 1.1 | 5.4 | 1.3 | 1.3 | 2.6 | ||||||||||||||||
General Corporate | 2.1 | 2.1 | 2.1 | 2.2 | 8.4 | 3.1 | 3.3 | 6.4 | ||||||||||||||||
$ | 19.3 | $ | 19.4 | $ | 19.5 | $ | 22.4 | $ | 80.5 | $ | 23.2 | $ | 24.1 | $ | 47.3 | |||||||||
4. What was the currency impact on the foreign operations?
The favorable (unfavorable) US dollar impact on revenue and operating income is as follows:
|
2003 Revenue |
2003 Operating Income |
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|
2nd Qtr |
% |
2nd Qtr |
% |
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Canada | $ | 2.4 | 11.9 | % | $ | 0.9 | 12.9 | % | |||
Europe | 3.8 | 12.0 | % | 0.7 | 14.3 | % | |||||
Latin America | (2.7 | ) | -13.0 | % | (0.7 | ) | -13.5 | % | |||
$ | 3.5 | 1.3 | % | $ | 0.8 | 0.9 | % | ||||
5. What was your cash flow from operations in 2003 and 2002?
Cash provided by operating activities was $73.7 million and $54.4 million for the second quarter of 2003 and 2002, respectively, due primarily to improved working capital management.
6. What was the level of debt?
Total debt was comprised of the following:
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Dec 31 2002 |
Mar 31 2003 |
Jun 30 2003 |
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Senior Notes and DebenturesLong-term | $ | 647.8 | $ | 648.0 | $ | 648.0 | |||
Senior Notes and DebenturesCurrent | 199.9 | 200.6 | | ||||||
Revolving Credit Facility | 21.8 | 27.2 | 222.9 | ||||||
Other Long-term Obligations | 21.0 | 18.6 | 21.0 | ||||||
Other Short-term Debt & Current Maturities | 34.0 | 42.4 | 23.7 | ||||||
$ | 924.5 | $ | 936.8 | $ | 915.6 | ||||
7. What was the level of capital spending?
Capital expenditures, excluding property and equipment and other assets purchased in acquisitions, were as follows:
|
2002 |
2003 |
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1st Qtr |
2nd Qtr |
3rd Qtr |
4th Qtr |
12 Months |
1st Qtr |
2nd Qtr |
1st Half |
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Capital Expenditures | $ | 5.4 | $ | 11.0 | $ | 19.0 | $ | 20.4 | $ | 55.8 | $ | 12.8 | $ | 10.4 | $ | 23.2 | ||||||||
We still expect the level of capital spending for the year 2003 to fall between $45.0 million and $55.0 million.
8. Why did Corporate Expense increase from $11.1 million for the 2nd Quarter 2002 to $15.2 million for the 2nd Quarter 2003?
The increases are primarily due to increased consulting and legal fees.
9. Why did other income increase?
The primary reason for the increase in other income is the cash proceeds we are receiving on the purchased paper from the sale of our risk management business in October 2000.
10. Why did the second quarter's estimated effective tax rate decline to 37.5%?
We have been able to reduce our estimated effective tax rate for 2003 1 percent through effective state tax planning. We have implemented state tax planning strategies related to the apportionment of state income taxes and franchise taxes. The reduced state income taxes payable is the primary reason for the one percent reduction in the overall effective state tax rate.
11. What is the current authorization amount for stock buyback?
As of June 30, 2003, approximately $192.4 million remained authorized for future share repurchases. We invested $10.4 million on Treasury Stock purchases during the 2nd Quarter 2003.
12. What is the discontinued operations loss in the 2nd Quarter?
During the third quarter of 2002, we made the decision to exit our commercial business in Spain. In the quarter just ended June 30, 2003, we entered into a letter of intent with a prospective buyer. The results of the Spain commercial business for the quarter ended June 30, 2003, includes our updated estimate of the loss upon final disposition. The results of the Spain commercial business are classified as discontinued operations in 2002 and 2003.