UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K/A

Amendment No. 1


x        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

OR

o        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to                  

Commission file number 001-06605


EQUIFAX INC.

(Exact name of registrant as specified in its charter)

Georgia

58-0401110

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

1550 Peachtree Street, N.W.
Atlanta, Georgia

30309

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: 404-885-8000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

 

Name of each exchange on which registered

 

Common Stock, $1.25 par value per share

New York Stock Exchange

Common Stock Purchase Rights

New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act: None.

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.
                
x YES                 o NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
                
x YES                 o NO

The aggregate market value of the voting and non-voting common equity held by non-affiliates, based upon the closing price for the Common Stock as reported on the New York Stock Exchange composite tape on June 30, 2004, was $3,371,599,440. All executive offers, directors, and holders of 5% or more of the outstanding Common Stock of registrant have been deemed, solely for purposes of the foregoing calculation, to be “affiliates” of the registrant.

As of February 28, 2005, 134,804,062 shares of registrant’s Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxy statement for the Annual Meeting of Shareholders to be held on May 17, 2005, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the registrant’s fiscal year.

 




 

EXPLANATORY NOTE

The purpose of this Amendment No. 1 on Form 10-K/A is to amend our Annual Report on Form 10-K for the fiscal year ended December 31, 2004, which was filed on March 16, 2005. This Amendment is being filed solely to correct an inadvertent error in the Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements (the “Audit Opinion”), included in Part II, Item 8, Financial Statements and Supplementary Data, on page 48 of the original filing of this Form 10-K Report. Ernst & Young LLP has revised its Audit Opinion to delete an erroneous reference in the last paragraph to Note 2 of the Notes to our Consolidated Financial Statements, for information concerning the adoption by us in 2003 of Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Our adoption of Statement of Financial Accounting Standards No. 146, effective January 1, 2003, was previously disclosed in our Form 10-K for the fiscal year ended December 31, 2002, in Note 1 to the Notes to our Consolidated Financial Statements.

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, this Amendment contains the complete text of Item 8 and Item 15, and our principal executive officer and principal financial officer are providing re-executed Rule 13a-14 certifications dated as of the date of this Amendment and are also furnishing written statements pursuant to Title 18 United States Code, as added by Section 906 of the Sarbanes-Oxley Act of 2002. The certifications are attached as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Amendment. The Exhibit section also has been revised to include as Exhibit 23.1 the updated consent of the Independent Registered Public Accounting Firm. Unaffected Items or Exhibits are not included in this Amendment.

Except as described above, no other changes have been made to the original Form 10-K  and this Form 10-K/A does not amend, update or change the financial statements or any other items or disclosures in the original Form 10-K.

2




 

ITEM 8.                FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Management’s Report on Internal Control over Financial Reporting

4

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

5

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

6

Consolidated Statements of Income for each of the three years in the period ended December 31, 2004 

7

Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2004

8

Consolidated Balance Sheets at December 31, 2004 and 2003

9

Consolidated Statements of Shareholders’ Equity and Comprehensive Income for each of the three years in the period ended December 31, 2004

10

Notes to Consolidated Financial Statements

12

 

3




MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Equifax is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Equifax’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes those written policies and procedures that:

·  pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Equifax;

·  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States;

·  provide reasonable assurance that receipts and expenditures of Equifax are being made only in accordance with authorization of management and the Board of Directors of Equifax; and

·  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.

Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of Equifax’s internal control over financial reporting as of December 31, 2004. Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of Equifax’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors.

Based on this assessment, management determined that, as of December 31, 2004, Equifax maintained effective internal control over financial reporting.

Ernst & Young LLP, an independent registered public accounting firm, who audited and reported on the consolidated financial statements of Equifax included in this report, has issued an attestation report on management’s assessment of internal control over financial reporting which is included on page 5 of this report.

4




Report of Independent Registered Public Accounting Firm
on Internal Control OVER FINANCIAL REPORTING

The Board of Directors and
Stockholders of Equifax Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Equifax Inc. maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Equifax Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection  of unauthorized acquisition, use, or disposition of the company’s assets that could have a material  effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Equifax Inc. maintained effective internal control over financial reporting as of December 31, 2004 is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Equifax Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004 based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2004 of Equifax Inc. and our report dated March 15, 2005 expressed an unqualified opinion therein.

/s/ Ernst & Young LLP

Atlanta, Georgia
March 15, 2005

5




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors and
Stockholders of Equifax Inc.:

We have audited the accompanying consolidated balance sheets of Equifax Inc., as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2004. 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 standards of the Public Company Accounting Oversight Board (United States). 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 position. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Equifax Inc. at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Equifax Inc.’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2005 expressed an unqualified opinion therein.

/s/ Ernst & Young LLP

Atlanta, Georgia
March 15, 2005

6




EQUIFAX INC.
CONSOLIDATED STATEMENTS OF INCOME

 

 

Twelve Months Ended
December 31,

 

 

 

2004

 

2003

 

2002

 

 

 

(In millions,
except per share amounts)

 

Operating revenue

 

$

1,272.8

 

$

1,210.7

 

$

1,095.3

 

Costs and expenses:

 

 

 

 

 

 

 

Costs of services

 

531.5

 

499.7

 

416.4

 

Selling, general and administrative expenses

 

282.0

 

272.1

 

246.7

 

Depreciation

 

14.4

 

15.1

 

12.4

 

Amortization

 

66.7

 

79.0

 

67.3

 

Restructuring and impairment charges

 

2.4

 

30.6

 

 

Total costs and expenses

 

897.0

 

896.5

 

742.8

 

Operating income

 

375.8

 

314.2

 

352.5

 

Other income, net

 

47.5

 

14.0

 

6.8

 

Minority interests in earnings, net of tax

 

(3.2

)

(3.3

)

(2.0

)

Interest expense

 

(34.9

)

(39.6

)

(41.2

)

Income from continuing operations before income taxes

 

385.2

 

285.3

 

316.1

 

Provision for income taxes

 

(147.9

)

(104.6

)

(124.4

)

Income from continuing operations

 

237.3

 

180.7

 

191.7

 

Discontinued operations (Note 3):

 

 

 

 

 

 

 

Loss from discontinued operations, net of income tax benefit (expense) of $1.5, $0.0 and $(2.2) in 2004, 2003 and 2002

 

(2.6

)

(15.8

)

(13.7

)

Net income

 

$

234.7

 

$

164.9

 

$

178.0

 

Per common share (basic):

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.81

 

$

1.35

 

$

1.41

 

Discontinued operations

 

(0.02

)

(0.12

)

(0.10

)

Net income

 

$

1.79

 

$

1.23

 

$

1.31

 

Shares used in computing basic earnings per share

 

131.3

 

134.5

 

136.2

 

Per common share (diluted):

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.78

 

$

1.32

 

$

1.38

 

Discontinued operations

 

(0.02

)

(0.12

)

(0.10

)

Net income

 

$

1.76

 

$

1.20

 

$

1.28

 

Shares used in computing diluted earnings per share

 

133.5

 

136.7

 

138.5

 

Dividends per common share

 

$

0.11

 

$

0.08

 

$

0.08

 

 

See Notes to Consolidated Financial Statements.

7




EQUIFAX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Twelve Months Ended
December 31,

 

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

234.7

 

$

164.9

 

$

178.0

 

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:

 

 

 

 

 

 

 

Gain on sale of investment in Intersections Inc.

 

(36.8

)

 

 

Loss from discontinued operations

 

2.6

 

15.8

 

13.7

 

Depreciation and amortization

 

81.1

 

94.1

 

79.7

 

Restructuring and impairment charges

 

2.4

 

30.6

 

 

Income tax benefit from stock plans

 

5.9

 

4.3

 

6.6

 

Deferred income taxes

 

25.3

 

15.8

 

17.9

 

Changes in assets and liabilities, excluding effects of acquisitions:

 

 

 

 

 

 

 

Accounts receivable, net

 

(17.2

)

17.8

 

27.5

 

Current liabilities, excluding debt

 

7.6

 

(15.4

)

(31.7

)

Other current assets

 

7.9

 

(3.9

)

12.0

 

Other long-term liabilities, excluding debt

 

2.7

 

(3.4

)

(10.8

)

Other assets

 

(7.0

)

(27.7

)

(43.3

)

Other

 

(0.2

)

0.8

 

 

Cash provided by operating activities

 

309.0

 

293.7

 

249.6

 

Investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

(16.5

)

(14.2

)

(12.5

)

Additions to other assets, net

 

(31.0

)

(38.5

)

(42.9

)

Acquisitions, net of cash acquired

 

(17.4

)

(40.7

)

(321.2

)

Investments in unconsolidated companies

 

 

 

(0.1

)

Proceeds from sale of investments and businesses

 

59.4

 

 

41.0

 

Deferred payments on prior year acquisitions

 

(1.4

)

(5.4

)

(4.9

)

Other

 

0.4

 

 

 

Cash used by investing activities

 

(6.5

)

(98.8

)

(340.6

)

Financing activities:

 

 

 

 

 

 

 

Net short-term payments

 

(145.5

)

(16.0

)

(25.8

)

Additions to long-term debt

 

0.6

 

113.4

 

249.5

 

Payments on long-term debt

 

(15.6

)

(202.6

)

(75.0

)

Treasury stock purchases

 

(138.0

)

(94.9

)

(79.8

)

Dividends paid

 

(15.0

)

(11.3

)

(11.4

)

Proceeds from exercise of stock options

 

28.1

 

19.5

 

34.2

 

Other

 

(3.6

)

(3.4

)

0.9

 

Cash (used) provided by financing activities

 

(289.0

)

(195.3

)

92.6

 

Effect of foreign currency exchange rates on cash

 

(1.2

)

8.3

 

(2.8

)

Cash provided (used) by discontinued operations

 

1.7

 

0.8

 

(2.4

)

Increase (decrease) in cash and cash equivalents

 

14.0

 

8.7

 

(3.6

)

Cash and cash equivalents, beginning of year

 

38.1

 

29.4

 

33.0

 

Cash and cash equivalents, end of year

 

$

52.1

 

$

38.1

 

$

29.4

 

 

See Notes to Consolidated Financial Statements.

8




EQUIFAX INC.
CONSOLIDATED BALANCE SHEETS

 

 

December 31,

 

 

 

2004

 

2003

 

 

 

(In millions,
except par values)

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

52.1

 

$

38.1

 

Trade accounts receivable, net of allowance for doubtful accounts of $9.3 in 2004 and $11.9 in 2003

 

195.1

 

172.5

 

Other receivables

 

8.9

 

13.0

 

Deferred income tax assets

 

13.2

 

14.4

 

Other current assets

 

29.8

 

42.1

 

Current assets from discontinued operations

 

0.5

 

5.8

 

Total current assets

 

299.6

 

285.9

 

Property and Equipment:

 

 

 

 

 

Land, buildings and improvements

 

30.2

 

29.5

 

Data processing equipment and furniture

 

309.6

 

300.4

 

 

 

339.8

 

329.9

 

Less accumulated depreciation

 

198.0

 

183.3

 

 

 

141.8

 

146.6

 

Goodwill, net

 

747.5

 

724.3

 

Purchased Intangible Assets, net

 

281.3

 

296.2

 

Other Assets, net

 

87.0

 

91.4

 

Assets of Discontinued Operations

 

 

8.9

 

 

 

$

1,557.2

 

$

1,553.3

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Short-term debt and current maturities

 

$

255.7

 

$

160.5

 

Accounts payable

 

9.7

 

12.5

 

Accrued salaries and bonuses

 

28.8

 

32.8

 

Other current liabilities

 

162.4

 

144.9

 

Current liabilities from discontinued operations

 

0.3

 

4.1

 

Total current liabilities

 

456.9

 

354.8

 

Long-Term Debt

 

398.5

 

663.0

 

Deferred Revenue

 

9.8

 

12.0

 

Deferred Income Tax Liabilities

 

38.6

 

19.3

 

Other Long-Term Liabilities

 

129.8

 

124.1

 

Liabilities of Discontinued Operations

 

 

8.6

 

Total liabilities

 

1,033.6

 

1,181.8

 

Commitments and Contingencies

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

Preferred stock, $0.01 par value: Authorized—10.0; Issued—none

 

 

 

Common stock, $1.25 par value: Authorized shares—300.0; Issued shares—182.0 in 2004 and 180.4 in 2003; Outstanding shares—129.4 in 2004 and 132.7 in 2003

 

227.5

 

225.5

 

Paid-in capital

 

466.9

 

432.5

 

Retained earnings

 

1,298.8

 

1,079.0

 

Accumulated other comprehensive loss

 

(267.0

)

(296.1

)

Treasury stock, at cost, 47.7 shares in 2004 and 42.3 shares in 2003

 

(1,133.4

)

(995.5

)

Stock held by employee benefits trusts, at cost, 4.9 shares in 2004 and 5.4 shares in 2003 

 

(69.2

)

(73.9

)

Total shareholders’ equity

 

523.6

 

371.5

 

 

 

$

1,557.2

 

$

1,553.3

 

 

See Notes to Consolidated Financial Statements.

9




EQUIFAX INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME
(LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Held By

 

 

 

 

 

Common Stock:

 

 

 

 

 

Other

 

 

 

Employee

 

Total

 

 

 

Shares

 

 

 

Paid-In

 

Retained

 

Comprehensive

 

Treasury

 

Benefits

 

Shareholders’

 

 

 

Outstanding

 

Amount

 

 Capital 

 

 Earnings 

 

Loss

 

Stock

 

Trusts

 

Equity

 

 

 

(In millions)

 

Balance, December 31, 2001

 

 

136.2

 

 

 

$

223.0

 

 

 

$

376.7

 

 

 

$

758.8

 

 

 

$

(197.2

)

 

$

(828.0

)

 

$

(89.8

)

 

 

$

243.5

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

178.0

 

 

 

 

 

 

 

 

 

 

178.0

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(162.2

)

 

 

 

 

 

 

(162.2

)

 

Shares issued under stock plans

 

 

2.4

 

 

 

2.1

 

 

 

28.2

 

 

 

 

 

 

 

 

0.8

 

 

7.4

 

 

 

38.5

 

 

Treasury stock purchased

 

 

(2.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

(72.5

)

 

 

 

 

(72.5

)

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

(11.4

)

 

 

 

 

 

 

 

 

 

(11.4

)

 

Income tax benefit from stock plans

 

 

 

 

 

 

 

 

6.6

 

 

 

 

 

 

 

 

 

 

 

 

 

6.6

 

 

Dividends from employee
benefits trusts

 

 

 

 

 

 

 

 

0.5

 

 

 

 

 

 

 

 

 

 

 

 

 

0.5

 

 

Balance, December 31, 2002

 

 

135.7

 

 

 

$

225.1

 

 

 

$

412.0

 

 

 

$

925.4

 

 

 

$

(359.4

)

 

$

(899.7

)

 

$

(82.4

)

 

 

$

221.0

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

164.9

 

 

 

 

 

 

 

 

 

 

164.9

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63.3

 

 

 

 

 

 

 

63.3

 

 

Shares issued under stock plans

 

 

1.1

 

 

 

0.4

 

 

 

15.7

 

 

 

 

 

 

 

 

(0.8

)

 

8.5

 

 

 

23.8

 

 

Treasury stock purchased

 

 

(4.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

(95.0

)

 

 

 

 

(95.0

)

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

(11.3

)

 

 

 

 

 

 

 

 

 

(11.3

)

 

Income tax benefit from stock plans

 

 

 

 

 

 

 

 

4.3

 

 

 

 

 

 

 

 

 

 

 

 

 

4.3

 

 

Dividends from employee
benefits trusts

 

 

 

 

 

 

 

 

0.5

 

 

 

 

 

 

 

 

 

 

 

 

 

0.5

 

 

Balance, December 31, 2003

 

 

132.7

 

 

 

$

225.5

 

 

 

$

432.5

 

 

 

$

1,079.0

 

 

 

$

(296.1

)

 

$

(995.5

)

 

$

(73.9

)

 

 

$

371.5

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

234.7

 

 

 

 

 

 

 

 

 

 

234.7

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29.1

 

 

 

 

 

 

 

29.1

 

 

Shares issued under stock plans

 

 

2.1

 

 

 

2.0

 

 

 

34.0

 

 

 

 

 

 

 

 

 

 

4.7

 

 

 

40.7

 

 

Treasury stock purchased

 

 

(5.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

(138.0

)

 

 

 

 

(138.0

)

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

(15.0

)

 

 

 

 

 

 

 

 

 

(15.0

)

 

Dividends from employee
benefits trusts

 

 

 

 

 

 

 

 

0.4

 

 

 

 

 

 

 

 

 

 

 

 

 

0.4

 

 

Balance, December 31, 2004

 

 

129.4

 

 

 

$

227.5

 

 

 

$

466.9

 

 

 

$

1,298.8

*

 

 

$

(267.0

)

 

$

(1,133.4

)*

 

$

(69.2

)

 

 

$

523.6

*

 


*                      Does not total due to rounding

See Notes to Consolidated Financial Statements.

10




Accumulated Other Comprehensive Loss consists of the following components:

 

 

December 31,

 

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

Foreign currency translation

 

$

(148.2

)

$

(173.7

)

$

(239.6

)

Minimum pension liability, net of accumulated tax of $70.2, $70.7 and $70.2 in 2004, 2003 and 2002, respectively

 

(117.0

)

(120.1

)

(117.0

)

Cash flow hedging transactions, net of tax of $1.1, $1.4 and
$1.9 in 2004, 2003 and 2002, respectively

 

(1.8

)

(2.3

)

(2.8

)

 

 

$

(267.0

)

$

(296.1

)

$

(359.4

)

 

Comprehensive Income is as follows:

 

 

Twelve Months Ended
December 31,

 

 

 

2004

 

2003

 

2002

 

Net income

 

$

234.7

 

$

164.9

 

$

178.0

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

29.5

 

65.9

 

(47.8

)

Reclassification adjustment for the gain on sale of discontinued operations

 

(4.0

)

0

 

0

 

Change in cumulative loss from cash flow hedging transactions

 

0.5

 

0.5

 

(2.0

)

Minimum pension liability adjustment

 

3.1

 

(3.1

)

(112.4

)

 

 

$

263.8

 

$

228.2

 

$

15.8

 

 

See Notes to Consolidated Financial Statements.

11




1.   SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

Accounting Principles.   Our financial statements and the accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

Basis of Consolidation.   Our consolidated financial statements include Equifax and all subsidiaries. The Company consolidates all majority-owned and controlled subsidiaries, uses the equity method of accounting for investments in which the Company is able to exercise significant influence and uses the cost method for all other investments. All significant intercompany transactions and balances are eliminated. Certain prior year amounts have been reclassified to conform to current year presentation.

Nature of Operations.   We collect, organize and manage various types of financial, demographic and marketing information. Our products and services enable businesses to make credit and service decisions, manage their portfolio risk and develop marketing strategies concerning consumers and commercial enterprises. We serve customers across a wide range of industries, including the financial services, mortgage, retail, telecommunications, utilities, automotive, brokerage, healthcare and insurance industries, as well as state and federal governments. We also enable consumers to manage and protect their financial health through a portfolio of products offered directly to individuals. We have approximately 4,400 employees worldwide, and manage our business globally through the following three reporting segments: Equifax North America, Equifax Europe and Equifax Latin America. Our operations are predominantly located within the U.S., with foreign operations principally located in Canada, the U.K. and Brazil.

Our products and services are categorized as follows: Information Services, Marketing Services and Personal Solutions. Our Information Services products and services allow customers to make credit decisions about consumers and commercial enterprises. Our Marketing Services information products and databases enable customers to identify a target audience for marketing purposes, and our Personal Solutions products and services provide information to consumers which enable them to reduce their exposure to identity fraud and to monitor their credit health.

We develop, maintain and enhance secured proprietary information databases through compilation of accounts receivable information about consumers and businesses that we obtain from a variety of sources, such as credit granting institutions, public record information, including bankruptcies, liens and judgments, and marketing information from surveys and warranty cards. We process this information utilizing our proprietary information management systems and make it available to our customers in virtually any medium or format they choose.

Use of Estimates.   GAAP requires us to make estimates and assumptions. Accordingly, we make these estimates and assumptions after exercising judgment and we believe that the estimates and assumptions inherent in our financial statements are reasonable, based upon information available to us at the time they are made. 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. Estimates and assumptions are used for, but not limited to, the accounting for long-lived asset impairments, contingencies and the allowance for doubtful accounts, the use, recoverability and/or realizability of certain assets, including deferred tax and other assets, restructuring costs, the valuation of pension plan obligations and assets and the preliminary allocation of the purchase price of acquisitions. Actual results could differ from these estimates.

Revenue Recognition and Deferred Revenue.   We recognize revenue when persuasive evidence of an arrangement exists, for which the corresponding products have been delivered or services have been rendered, the pricing of which is either fixed or determinable and collectibility of the fee arrangement is reasonably assured. We consider the earnings process to be completed when we have fulfilled our specific obligations under the contract as demonstrated by evidence of product delivery or rendering of services.

12




Most of our revenues are based upon transactional activity generated by customers’ access to, or queries of, our proprietary databases. Revenues are typically usage-based and incorporate predetermined volume-tiered unit pricing. Some of our revenue is related to subscription-based contracts under which the customer pays a flat fee for a preset or unlimited volume of transactions or services. Revenue recognition in these cases is based upon pro-rating the related fee over the term of the contract. In conjunction with certain products and services, we charge non-refundable set-up and membership fees which are recognized on a straight-line basis over the term of the contract. Revenue from the sale of decision or statistical models is recognized upon customer installation and acceptance. For certain products and services sold on a subscription basis, we recognize revenue pro rata over the term of the contract.

Some of our sales contracts contain multiple elements pertaining to the delivery of distinct products and services such as decisioning models, prescreening services, and database management services.  These deliverables are divided into separate units of accounting to which we allocate the contract revenues based on specific evidence of their relative fair values. The individual deliverables are generally independent of each other and can be sold on a stand-alone basis without affecting their usefulness to the customer. If relative fair values cannot be established, revenue recognition is deferred until all elements within the contract have been delivered. Failure to satisfy a specific element in the arrangement does not result in the cancellation of the entire contract but rather would result in a pro rata refund to the customer.

Deferred revenue represents the liability for amounts billed in advance of service delivery, and is classified as either current or long-term deferred revenue, with the current portion representing services expected to be provided within the next twelve months. Current deferred revenue is included with other current liabilities in the accompanying Consolidated Balance Sheets, and totaled $33.8 million and $22.9 million respectively at December 31, 2004 and 2003. In conjunction with the divestiture of our risk management collections businesses in the U.S. and Canada in October 2000, certain of the proceeds received related to contracts to provide credit information products and services to the buyers over the next five to six years and were recorded in current and long-term deferred revenue. At December 31, 2004 and 2003, $10.1 million and $11.6 million, respectively, remained unrecognized, with $7.7 million and $9.2 million, respectively, included in long-term deferred revenue in the accompanying Consolidated Balance Sheets. This deferred revenue will be recognized as the contracted products and services are provided.

Accounts Receivable.   In September 2004, we entered into a new trade receivables-backed revolving credit facility. At December 31, 2004, $111.1 million of net accounts receivable had been sold to our wholly-owned subsidiary and is included in accounts receivable in the accompanying Consolidated Balance Sheets. We do not recognize interest income on our trade receivables.

Allowance for Doubtful Trade Accounts Receivable.   The provision for estimated losses on trade accounts receivable is based on historical write-off experience, an analysis of the aging of outstanding receivables, customer payment patterns and the establishment of specific reserves for customers in adverse financial condition or for existing contractual disputes wherein we are not assured of a favorable outcome. The allowance for doubtful accounts was $9.3 million and $11.9 million, respectively, at December 31, 2004 and 2003. Increases to the provision are recorded as bad debt expense and are included in selling, general and administrative expenses on the accompanying Consolidated Statements of Income. Bad debt expense was $2.9 million or 0.23% of revenue for 2004, $8.8 million or 0.72% of revenue for 2003 and $10.1 million or 0.91% of revenue for 2002. We reassess the adequacy of the allowance for doubtful accounts receivable each reporting period. During 2004, we wrote off $4.5 million of accounts receivable and recovered $3.4 of previously written-off accounts receivable. During 2003, we wrote-off $17.0 million of accounts receivable, which included $11.0 million from our eMarketing business unit, and recovered $0.6 million of previously written-off accounts receivable.

13




Costs of Services.   Costs of services consist primarily of data acquisition and royalties; customer service costs, which include: personnel costs to collect, maintain and update our proprietary databases, to develop and maintain software application platforms and to provide consumer and customer call center support; hardware and software expense associated with transaction processing systems; telecommunication and computer network expense; and occupancy costs associated with facilities where these functions are performed.

Selling, General and Administrative Expenses.   Selling, general and administrative expenses consist primarily of personnel related costs paid to sales and administrative employees and management, fees for professional and consulting services and advertising costs.

Advertising.   Advertising costs are expensed as incurred and totaled $15.7 million in 2004, $4.6 million in 2003 and $2.9 million in 2002.

Legal Contingencies.   We periodically review claims and legal proceedings and assess whether we have potential financial exposure. If the potential loss from any claim or legal proceeding is probable and can be estimated, we accrue a liability for estimated settlements and incurred but unpaid legal fees for services performed to date.

Income Taxes.   We base income tax expense on pre-tax financial accounting income, and recognize deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Significant judgment is required to determine our overall local, state, federal and foreign income tax expense due to transactions and calculations where the ultimate tax consequence is uncertain. We have recorded a valuation allowance to reduce our deferred tax assets to the amount of future tax benefit that we estimate is likely to be received. We believe that our estimates are reasonable, however, the final outcome of tax matters may be different than the estimates reflected on our financial statements.

Earnings Per Share.   Our basic earnings per share, or EPS, is calculated as income from continuing operations or net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated to reflect the potential dilution that would occur if stock options or other contracts to issue common stock were exercised and resulted in additional common shares outstanding. The income amount used in our EPS calculations is the same for both basic and diluted EPS. A reconciliation of the weighted average outstanding shares used in the two calculations is as follows:

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

Weighted average shares outstanding (basic)

 

131.3

 

134.5

 

136.2

 

Effect of dilutive securities:

 

 

 

 

 

 

 

Stock options

 

1.6

 

2.0

 

2.3

 

Long-term incentive plans

 

0.6

 

0.2

 

 

Weighted average shares outstanding (diluted)

 

133.5

 

136.7

 

138.5

 

 

Cash and cash equivalents.   We consider cash and cash equivalents to be short-term cash investments with original maturities of three months or less.

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 ten years for data processing equipment (including capitalized software); and five to seven years for other fixed assets.

Certain internal use software and systems development costs are deferred and capitalized in accordance with AICPA Statement of Position 98-1, “Accounting for the Costs of Computer Software

14




Developed or Obtained for Internal Use,” and Emerging Issues Task Force (“EITF”) 97-13 “Accounting for Costs Incurred with a Business Process Reengineering Project.” Accordingly the specifically identified costs incurred to develop or obtain software and accompanying hardware which is intended for internal use are not capitalized until the determination is made as to the availability of a technically feasible solution to solve the pre-defined user and operating performance requirements as established during the preliminary stage of an internal use software development project. Costs incurred during a software development project’s preliminary stage are expensed. Application development activities which are eligible for capitalization include software design and configuration, development of interfaces, coding, testing, installation and the development of training materials. Costs of business process reengineering are expensed as incurred. We monitor the activities undertaken in our various software and systems development projects and analyze the associated costs, making appropriate distinction between and accounting for costs to be capitalized and costs to be expensed. Internal use software and systems development project costs that are deferred and capitalized are subsequently amortized on a straight-line basis over a three to ten year period after project completion and when the related software or system is ready for its intended use.

Impairment of Long-Lived Assets.   We monitor the status of our long-lived assets annually or more frequently if necessary, in order to determine if conditions exist or events and circumstances indicate that an asset may be impaired in that its carrying amount may not be recoverable. Significant factors that are considered that could be indicative of an impairment include: changes in business strategy, market conditions or the manner in which an asset is used; underperformance relative to historical or expected future operating results; and negative industry or economic trends. If potential indicators of impairment exist, we estimate recoverability based on the assets ability to generate cash flows greater than the carrying value of the asset. We estimate the undiscounted future cash flows arising from the use and eventual disposition of the related long-lived asset group. If the carrying value of the long-lived asset group exceeds the estimated future undiscounted cash flows, an impairment loss is recorded based on the amount by which the asset’s carrying amount exceeds its fair value. We utilize the discounted present value of the associated future estimated cash flows to determine the asset’s fair value. During 2004, 2003 and 2002, we recognized a $2.4 million, $30.6 million and $0.0 million impairment charge, respectively. See Note 6 for further details.

Other Assets.   Other assets at December 31, 2004 and 2003 consist of the following:

 

 

2004

 

2003

 

 

 

(In millions)

 

Purchased software

 

$

20.4

 

$

14.8

 

Prepaid pension cost

 

18.2

 

17.0

 

Investments in unconsolidated companies

 

0.4

 

28.5

 

Data purchases

 

5.6

 

2.7

 

Other

 

42.4

 

28.4

 

 

 

$

87.0

 

$

91.4

 

 

As discussed above under “Impairment of Long-Lived Assets,” we regularly review these assets to determine if conditions or circumstances exist or events have occurred that would indicate that an asset could be impaired, and, if appropriate, we recognize impairments by recording a charge against income. We believe that the long-lived assets, as reflected in the above table and the accompanying Consolidated Balance Sheets, were appropriately valued at December 31, 2004 and 2003. Amortization expense for other assets was $8.0 million in 2004, $17.6 million in 2003 and $6.6 million in 2002. As of December 31, 2004 and 2003, related accumulated amortization balances were $23.2 million and $28.3 million, respectively.

15




Foreign Currency Translation.   The functional currency of our foreign subsidiaries is those subsidiaries’ local currencies. We translate the assets and liabilities of foreign subsidiaries at the year-end rate of exchange, and revenue and expenses at the average rates prevailing during the year. We record the resulting translation adjustment as a component of shareholders’ equity. We also record gains and losses resulting from the translation of inter-company balances of a long-term investment nature as a component of shareholders’ equity. We record foreign currency transaction gains and losses, which are not material, in the Consolidated Statements of Income.

Financial Instruments.   Our 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 debt, approximate their fair market values due to their short maturity. As of December 31, 2004, the fair value of our long-term debt (determined primarily by broker quotes) was $426.3 million compared to its carrying value of $398.5 million.

Accounting for Stock-Based Compensation.   In accordance with the accounting and disclosure provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148 “Accounting for Stock-Based Compensation-Transition and Disclosure,” we have elected to apply APB Opinion No. 25 and related interpretations in accounting for our stock option and performance share plans. Accordingly, by our use of the intrinsic value method to account for stock-based employee compensation, we do not recognize compensation cost in connection with our stock option plans.

We have computed the proforma disclosures required under SFAS No. 123 and SFAS No. 148 using the Black-Scholes option pricing model. The fair value of options granted in 2004, 2003 and 2002 is estimated on the date of grant using the Black-Scholes option pricing model based on the following weighted average assumptions:

 

 

2004

 

2003

 

2002

 

Dividend yield

 

0.5

%

0.4

%

0.3

%

Expected volatility

 

36.3

%

40.7

%

40.8

%

Risk-free interest rate

 

3.6

%

1.1

%

3.5

%

Expected life in years

 

4.5

 

2.8

 

2.9

 

 

The weighted-average grant date fair value per share of options granted in 2004, 2003 and 2002 is as follows:

 

 

2004

 

2003

 

2002

 

Grants (all at market price)

 

$

8.75

 

$

5.59

 

$

7.51

 

 

16




If we had elected to recognize compensation cost for these plans based on the fair value at grant date as prescribed by SFAS No. 123, net income and net income per share would have been reduced to the pro forma amounts indicated in the table below (in millions, except per share amounts):

 

 

Twelve Months Ended
December 31,

 

 

 

     2004     

 

     2003     

 

     2002     

 

 

 

(In millions, except per share data)

 

Net income, as reported

 

 

$

234.7

 

 

 

$

164.9

 

 

 

$

178.0

 

 

Add: Total stock-based employee compensation expense,
net of related tax effect, included in reported net income

 

 

1.5

 

 

 

2.3

 

 

 

2.0

 

 

Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects

 

 

(6.4

)

 

 

(14.4

)

 

 

(16.1

)

 

Pro forma net income

 

 

$

229.8

 

 

 

$

152.8

 

 

 

$

163.9

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic—as reported

 

 

$

1.79

 

 

 

$

1.23

 

 

 

$

1.31

 

 

Basic—pro forma

 

 

$

1.75

 

 

 

$

1.14

 

 

 

$

1.20

 

 

Diluted—as reported

 

 

$

1.76

 

 

 

$

1.21

 

 

 

$

1.29

 

 

Diluted—pro forma

 

 

$

1.72

 

 

 

$

1.12

 

 

 

$

1.18

 

 

 

Derivative Instruments and Hedging Activities.   We recognize derivatives as assets or liabilities on our balance sheet at fair value, and the gain or loss related to the effective portion of derivatives designated as cash flow hedges as a component of other comprehensive income.

We enter into hedging transactions in order to reduce financial volatility and manage the fixed-floating mix of our debt portfolio. As of December 31, 2004, the only hedging transactions to which we were a counterparty consisted of interest rate swap agreements.

At December 31, 2004, we have a $29.0 million notional amount floating-to-fixed interest rate swap agreement in place with a bank counterparty that fixes the interest rate on the $29.0 million synthetic lease related to our corporate headquarters through its maturity in 2010. This hedge has been designated as a cash flow hedge under SFAS 133, is fully effective, and at December 31, 2004, was marked to market and valued as a liability totaling $3.1 million. We determine the fair value of our interest rate swap derivative through the inquiry of the counterparty banks. This liability is included with other current liabilities in the accompanying Consolidated Balance Sheets, and the related loss of $1.8 million was recorded, net of income tax, as a component of accumulated other comprehensive loss. The termination of the lease, whenever that occurs, of our headquarters building will result in the reclassification of accumulated other comprehensive loss into earnings for the cash flow hedge.

At December 31, 2004, we also have interest rate swap agreements in place with a bank counterparty to float the interest rate on $250.0 million of our fixed rate senior unsecured notes through their maturity date in 2005. These derivatives have been designated as fair value hedges and are fully effective. The value of these swaps was $5.6 million at December 31, 2004, and is included with other current assets in the accompanying Consolidated Balance Sheets with a corresponding increase in the amount of currently maturing short-term debt. Changes in the fair value of these swaps and that of the related debt are recorded in interest expense in the accompanying Consolidated Statements of Income, the net of which is zero in 2004, 2003 and 2002.

Our maximum economic exposure to loss due to credit risk on these interest rate swap agreements approximates $2.5 million if all bank counterparties were to default. We manage this exposure by

17




monitoring the concentration of risk that we have with any one bank, and through the use of minimum credit quality standards for all counterparties.

2.   RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the EITF reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 provides guidance pertaining to the revenue recognition methodology to apply to revenue arrangements that involve the delivery or performance of multiple products, services, and/or rights to use assets. The provisions of EITF Issue No. 00-21 apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. We adopted EITF Issue No. 00-21 on July 1, 2003 and it did not have a material impact on our financial position or results of operations.

In December 2003, the Financial Accounting Standards Board (“FASB”) issued a revision to SFAS No. 132 “Employers Disclosures about Pensions and Other Postretirement Benefits.” The purpose of the revision is to require additional disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. These additional disclosures include information describing the types of plan assets, investment strategy, measurements date(s), plan obligations, cash flows and components of net periodic benefit cost recognized. As revised, SFAS 132 enhances disclosures by providing more relevant information about the plan assets available to finance benefit payments, the obligation to pay benefits and an entity’s obligation to fund the plan. This revised version of SFAS 132 is effective for fiscal years ending after December 15, 2003. We adopted the revisions to SFAS 132 and have included the additional disclosures in the Notes to our Consolidated Financial Statements.

In December 2003, the FASB issued its revision to FASB Interpretation No. 46, “Consolidation of Variable Interest Entities, (an Interpretation of ARB No. 51).” FIN 46 addresses the consolidation by a reporting entity of variable interest entities that either do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or in which the equity investors lack the characteristics of a controlling financial interest. Application of FIN 46 is required in financial statements of public entities that have interests in variable interest entities or potential variable interest entities (also referred to as special-purpose entities) for periods ending after December 15, 2003. The FASB subsequently issued FASB Staff Positions (“FSP’s”), which deferred the effective date for applying the provisions of FIN 46 for interests in certain variable interest entities or potential variable interest entities created before February 1, 2003 until the end of the first interim period ending after March 15, 2004. These FSP’s also required certain disclosures about variable interest entities and potential variable interest entities. We adopted the provisions of FIN 46 in March 2004 and it has not had a material impact on our financial position or results of operations.

In December 2003, the Staff of the Securities and Exchange Commission, or SEC, issued Staff Accounting Bulletin No. 104, or SAB 104, “Revenue Recognition,” which supersedes SAB 101, “Revenue Recognition in Financial Statements.” SAB 104’s primary purpose is to rescind the accounting guidance contained in SAB 101 related to multiple-element revenue arrangements that was superseded as a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” Additionally, SAB 104 rescinds the SEC’s related “Revenue Recognition in Financial Statements Frequently Asked Questions and Answers” issued with SAB 101 that had been codified in SEC Topic 13, “Revenue Recognition.” While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104, which was effective upon issuance. We implemented SAB 104 in December 2003 and it did not have a material effect on our financial position or results of operations.

18




In May 2004, the FASB issued FSP No. 106-2 “Accounting and Disclosure Requirements Related to the Medicare Modernization Act of 2003.” This staff position supersedes FSP No. 106-1 “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” by clarifying the guidance on the recognition of the effects of the Act on employers accumulated post-retirement benefit obligation. Employers that sponsor a postretirement health care plan that provides prescription benefits that are deemed actuarially equivalent to the Medicare Part D benefit are eligible for a federal subsidy. This subsidy is to be treated as an actuarial experience gain in the calculation of the accumulated post-retirement benefit obligation. FSP 106-2 is effective for the first interim period or annual period beginning after June 15, 2004. We adopted the accounting and disclosure provisions of FSP 106-2 in July 2004 and it did not have a material effect on our financial position or results of operations.

In July 2004, the EITF of the FASB reached consensus Issue No. 02-14 “Whether the Equity Method of Accounting Applies When an Investor Does Not Have an Investment in Voting Stock of an Investee but Exercises Significant Influence through Other Means.” EITF Issue No. 02-14 provides guidance pertaining to an investors accounting when the investor has significant influence over an investee through means other than voting stock. The provisions of EITF No. 02-14 apply to reporting periods beginning after September 15, 2004. The Company’s accounting for such investments has been consistent with EITF 02-14 and its adoption during the fourth quarter of 2004 did not have a material impact on our financial position or results of operations.

In December 2004, the FASB issued SFAS No. 123R “Share-Based Payments.” SFAS 123R is a revision to SFAS 123 “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25 “Accounting for Stock Issued to Employees.” SFAS 123R establishes standards for the accounting for all transactions in which an entity exchanges its equity instruments for goods or services from either employees or non-employees. This financial accounting standard requires the cost resulting from share-based payment transactions be recognized in the entity’s financial statements as the goods are received or the services are rendered, and establishes fair value as the measurement objective for the accounting for such transactions. SFAS 123R is effective for public entities as of the beginning of the first interim or annual reporting period beginning after June 15, 2005 and applies to (a) all new awards granted after June 15, 2005; (b) modifications, repurchases or cancellations occurring after June 15, 2005, but pertaining to awards granted before June 15, 2005; and (c) the unvested service component of outstanding awards granted prior to June 15, 2005. SFAS 123R requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. We will adopt the provisions of SFAS 123R in our third quarter beginning July 1, 2005 and expect that its impact on our financial position or results of operations will be in the range of our SFAS 123 pro forma amounts disclosed in Note 1.

In December 2004, the FASB issued SFAS 153 “Exchanges of Non-monetary Assets—An Amendment of APB Opinion No. 29, Accounting for Non-monetary Transactions.” SFAS 153 amends APB 29 to eliminate the fair value measurement principal exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that lack commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to significantly change as result of the exchange. SFAS 153 is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. We will adopt the provisions of SFAS 153 in July 2005 and do not expect that it will have a material impact on our financial position or results of operations.

In December 2004, the FASB issued FSP No. 109-2 “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (the Act). FSP 109-2 specifically addresses the one-time deduction of 85% of certain foreign earnings that are

19




repatriated. In accordance with this FSP an enterprise is allowed time beyond the financial reporting period covering the enactment of the Act, to evaluate the effect of the Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS 109. FSP 109-2 requires the following disclosures for an enterprise that has not completed its evaluation of the repatriation provisions: (a) a summary of the repatriation as it applies to the enterprise; (b) the expected completion date of the evaluation; (c) the expected effect on income tax expense or benefit; and (d) the amount of un-remitted earnings being considered for repatriation. FSP 109-2 is effective upon issuance. We are utilizing the time allowed by FSP 109-2 to evaluate the effect of the Act as it pertains to our foreign earnings and our application of SFAS 109, and have included the requisite disclosures in Note 8 to our Consolidated Financial Statements.

3.   DISCONTINUED OPERATIONS

In the third quarter of 2002, we made the decision to exit our commercial services business in Spain in our Equifax Europe segment. During 2003 and the first six months of 2004, this business component remained as held for sale. We completed the sale and final disposition of the business and recorded a $0.5 million gain in the third quarter of 2004, of which $1.7 million related to the recognition of a cumulative translation adjustment loss into income. In accordance with SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets to be Disposed Of,” the net assets, results of operations and cash flows of the Spain commercial business for 2004, 2003 and 2002 were classified as discontinued operations. For 2004, 2003 and 2002, revenues for this business component were $1.3 million, $8.6 million and $9.1 million, respectively. We had a $0.1 million gain on discontinued operations in 2004, a $13.6 million loss on discontinued operations in 2003 and $13.3 million loss on discontinued operations in 2002. Included in the 2003 losses was an estimated loss on disposal of $8.6 million recorded in the second and fourth quarters of 2003.

After incurring losses in each of the last four years, we decided to sell our Italian operations, which were formerly included in our Equifax Europe segment, in the fourth quarter of 2004. In accordance with SFAS 144, the net assets, results of operations and cash flows of the Italian business for 2004, 2003 and 2002 were classified as discontinued operations. For 2004, 2003 and 2002, revenues for this business component were $11.4 million, $14.7 million and $14.0, respectively. We recorded an impairment charge of $5.3 million related to the write-down of purchased data during the second quarter of 2004. We had a $2.7 million, $2.2 million and $0.4 million loss on discontinued operations in 2004, 2003 and 2002, respectively. We recorded a gain on the sale of $2.6 million during the fourth quarter of 2004, of which $5.7 million related to the recognition of a cumulative translation adjustment gain into income.

20




4.   GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill.   Goodwill allocated to our reporting units at January 1, 2003 and changes in the carrying amount of goodwill for the years ended December 31, 2003 and 2004, are as follows:

Reporting Units

 

 

 

 

 

Information
Services

 

Marketing
Services

 

European
Operations

 

Latin America
Operations

 

Total

 

 

 

(In millions)

 

Balance, January 1, 2003

 

 

$

185.7

 

 

 

$

267.7

 

 

 

$

94.1

 

 

 

$

103.0

 

 

$

650.5

*

Acquisitions

 

 

12.7

 

 

 

6.9

 

 

 

 

 

 

 

 

19.6

 

Adjustments to prior year’s purchase price allocation

 

 

1.0

 

 

 

10.1

 

 

 

 

 

 

 

 

11.1

 

Reclassifications

 

 

(0.3

)

 

 

1.5

 

 

 

0.3

 

 

 

 

 

1.5

 

Foreign currency translation

 

 

7.3

 

 

 

 

 

 

12.9

 

 

 

21.4

 

 

41.6

 

Balance, December 31, 2003

 

 

206.4

 

 

 

286.2

 

 

 

107.3

 

 

 

124.5

*

 

724.3

*

Acquisitions

 

 

4.1

 

 

 

 

 

 

 

 

 

 

 

4.1

 

Adjustments to prior year’s purchase price allocation

 

 

 

 

 

(4.5

)

 

 

1.6

 

 

 

 

 

(2.9

)

Foreign currency translation

 

 

3.5

 

 

 

 

 

 

8.8

 

 

 

9.7

 

 

22.0

 

Balance, December 31, 2004

 

 

$

214.0

 

 

 

$

281.7

 

 

 

$

117.7

 

 

 

$

134.2

 

 

$

747.5

*


*       Does not total due to rounding

Goodwill is the cost in excess of the fair value of the net assets of acquired businesses. At least annually we evaluate goodwill for impairment. This evaluation is performed on a reporting unit basis and involves the determination of the reporting unit fair values based on discounted cash flow analyses corroborated by market multiple comparables. An impairment charge would result if the carrying amount of goodwill exceeded its implied value. Reporting units combine two or more business components and were determined on the basis of similarities pertaining to market geography, product offerings, customer profile, economic characteristics, operating margins and product fulfillment and delivery and methodologies. We determined the existence of five reporting units, i.e., Information Services, Marketing Services, Personal Solutions, European Operations and Latin America Operations. There were no goodwill impairment charges during 2004, 2003 or 2002.

Prior to 2002, goodwill was amortized on a straight-line basis predominately over periods from twenty to forty years.  As of December 31, 2004 and 2003, accumulated amortization balances were $89.7 million and $87.7 million, respectively. The adjustments to prior year’s purchase price allocation in the table above relates primarily to revisions of Naviant and Italy deferred tax assets.

SFAS No. 142, “Goodwill and Other Intangible Assets,” requires that reporting unit goodwill be re-evaluated and tested for impairment at least on an annual basis. Accordingly, we have updated our impairment evaluation as of September 30, 2004 and determined that reporting unit goodwill remained unimpaired. However, future goodwill impairment tests could result in a charge to earnings. We will continue to evaluate goodwill annually or whenever events and circumstances indicate that there may be an impairment of the asset value.

21




Purchased Intangible Assets.   Purchased intangible assets, as recorded on the accompanying Consolidated Balance Sheets, represent the estimated fair value of acquired intangible assets used in our products and services.  Purchased data files, net, is the carrying value of files acquired primarily through the purchase of independent credit reporting agencies in the U.S. and Canada. We expense the cost of modifying and updating credit files in the period such costs are incurred.

 

 

2004

 

2003

 

 

 

Gross

 

Accumulated
amortization

 

Net

 

Gross

 

Accumulated
amortization

 

Net

 

 

 

(In millions)

 

Purchased data files

 

$

405.4

 

 

$

(171.7

)

 

$

233.7

 

$

424.9

 

 

$

(181.6

)

 

$

243.3

 

Acquired software

 

10.4

 

 

(8.2

)

 

2.2

 

26.1

 

 

(21.9

)

 

4.2

 

Non-compete agreements

 

11.7

 

 

(7.3

)

 

4.4

 

14.1

 

 

(6.4

)

 

7.7

 

Contractual/territorial rights

 

41.0

 

 

 

 

41.0

 

41.0

 

 

 

 

41.0

 

Total purchased intangible assets

 

$

468.5

 

 

$

(187.2

)

 

$

281.3

 

$

506.1

 

 

$

(209.9

)

 

$

296.2

 

 

We amortize purchased data files over a 15 year period on a straight line basis. Acquired software is amortized over a period of three to ten years; and non-compete agreements are amortized over a period of two to three years. Our contractual/territorial rights are perpetual in nature and, therefore, the useful lives are considered indefinite. Amortization expense related to purchased intangible assets was approximately $36.2 million, $51.8 million and $33.6 million for 2004, 2003 and 2002, respectively.

Estimated future amortization expense related to finite-lived purchased intangible assets at December 31, 2004 is as follows:

 

 

Amount

 

 

 

(In millions)

 

2005

 

 

$

28.5

 

 

2006

 

 

24.8

 

 

2007

 

 

23.4

 

 

2008

 

 

23.1

 

 

2009

 

 

21.8

 

 

Thereafter

 

 

118.7

 

 

 

 

 

$

240.3

 

 

 

We perform annual impairment tests for our purchased intangible assets with indefinite lives. Based on the results of our impairment tests, we determined that no impairment of the contractual/territorial rights existed at December 31, 2004 or December 31, 2003. However, future impairment tests could result in a charge to earnings. We will continue to evaluate our purchased intangible assets annually or whenever events and circumstances indicate that there may be an impairment of the asset value.

5.   ACQUISITIONS

During 2004, we acquired two independent credit reporting agencies located in the U.S. (also referred to as “Affiliates”) and one Affiliate located in Canada, that house their consumer information on our system. We acquired all of these businesses for $17.4 million in cash, allocating $11.7 million of the purchase price to purchased data files, $4.1 million to goodwill and $1.6 million to non-compete agreements. See Note 4 for a discussion of our purchased intangible assets. The results of operations for these acquisitions have been included in the accompanying Consolidated Statements of Income from the date of acquisition, and are not material.

During 2003, we acquired three Affiliates located in the U.S. and one Affiliate located in Canada, that house their consumer information on our system. Additionally, in April 2003 we completed the purchase of

22




a small eMarketing business for $10.0 million. We acquired all of these businesses for $41.0 million in cash and $1.9 million in liabilities, allocating $15.5 million of the purchase price to purchased data files, $19.6 million to goodwill and $5.9 million to non-compete agreements. In the case of the eMarketing business, the preliminary purchase price allocation did not include the involuntarily termination of certain employees of the acquired company during 2004. The results of operations for these acquisitions have been included in the accompanying Consolidated Statements of Income from the date of acquisition, and are not material.

The above acquisitions were accounted for as purchases and had a total cash purchase price of $58.4 million. The following table summarizes the estimated fair value of the net assets acquired and the liabilities assumed at the acquisition dates.

 

 

2004

 

2003

 

 

 

(In millions)

 

Other assets

 

$

1.6

 

$

5.9

 

Purchased data files

 

11.7

 

15.5

 

Goodwill

 

4.1

 

19.6

 

Total acquired assets

 

17.4

 

41.0

 

Total liabilities

 

 

1.9

 

Net assets acquired

 

$

17.4

 

$

39.1

 

 

The following unaudited pro forma information presents consolidated results of operations as if the above discussed acquisitions had occurred at the beginning of each year presented. The pro forma amounts may not necessarily be indicative of the operating revenues and results of operations had the acquisitions actually taken place at the beginning of each year presented. Furthermore, the pro forma information may not be indicative of future performance.

 

 

2004

 

2003

 

 

 

As Reported

 

 Pro Forma 

 

As Reported

 

 Pro Forma 

 

 

 

(In millions, except per share data)

 

Revenues

 

 

$

1,272.8

 

 

 

$

1,273.3

 

 

 

$

1,210.7

 

 

 

$

1,213.9

 

 

Income from continuing operations

 

 

$

237.3

 

 

 

$

237.6

 

 

 

$

180.7

 

 

 

$

180.2

 

 

Income from continuing operations per share (basic)

 

 

$

1.81

 

 

 

$

1.81

 

 

 

$

1.35

 

 

 

$

1.34

 

 

Income from continuing operations per share (diluted)

 

 

$

1.78

 

 

 

$

1.78

 

 

 

$

1.32

 

 

 

$

1.32

 

 

 

6.   RESTRUCTURING AND IMPAIRMENT CHARGES

In the second quarter of 2004, we determined that continued difficulties with our eMarketing operations indicated that certain remaining assets may not be fully recoverable. Subsequently, we estimated their recoverability using undiscounted future cash flows from the use and eventual disposition of the related eMarketing long-lived asset. The carrying value of the asset exceeded the estimated undiscounted future cash flows and an impairment loss was recorded based on the amount by which the asset’s carrying amount exceeded its estimated value. We estimated the fair value of the asset by discounting the present value of the future cash flows of the asset. We recorded asset impairment and related charges of $2.4 million ($1.5 million after tax, or $0.01 per diluted share). The asset impairment charges are primarily for purchased data in our Marketing Services segment. No restructuring charges were associated with this asset impairment. An analysis of the impairment charges taken is as follows (in millions):

 

 

Purchased Data

 

 Other 

 

 Totals 

 

Marketing Services

 

 

$

1.4

 

 

 

$

1.0

 

 

 

$

2.4

 

 

 

23




In the fourth quarter of 2003, we recorded restructuring, impairment and other related charges related to our eMarketing business of $25.9 million ($16.3 million after tax, or $0.12 per diluted share). The restructuring charges, which totaled $3.3 million, were associated with reducing headcount, consolidating multiple locations and eliminating our bulk e-mail product. The asset impairment charges, which totaled $22.6 million, reflected our write-down of amortizable intangible assets, indefinite lived intangible assets and fixed assets of our eMarketing business. At December 31, 2003, our remaining reserve balance was $3.3 million. During 2004, we paid $2.1 million against the reserve, leaving a remaining balance of $1.2 million. An analysis of 2004 activity in the reserve is as follows (in millions):

 

 

Severance

 

Facilities
and Other

 

Total

 

Balance, December 31, 2003

 

 

$

1.1

 

 

 

$

2.2

 

 

$

3.3

 

Less, current period payments

 

 

(0.8

)

 

 

(1.3

)

 

(2.1

)

Balance, December 31, 2004

 

 

$

0.3

 

 

 

$

0.9

 

 

$

1.2

 

 

7.   LONG-TERM DEBT AND SHORT-TERM BORROWINGS

Long-term debt at December 31, 2004 and 2003 was as follows:

 

 

December 31,
2004

 

December 31,
2003

 

 

 

(In millions)

 

Notes, 6.3%, due 2005, net of unamortized discount of $0.1 million and $0.3 million at December 31, 2004 and December 31, 2003, respectively

 

 

$

249.9

 

 

 

$

249.7

 

 

Notes, 4.95%, due 2007, net of unamortized discount of $0.3 million and $0.4 million at December 31, 2004 and December 31, 2003, respectively

 

 

249.7

 

 

 

249.6

 

 

Debentures, 6.9%, due 2028, net of unamortized discount of $1.2 million at December 31, 2004 and December 31, 2003

 

 

148.8

 

 

 

148.8

 

 

Borrowings under U.S. revolving credit facilities, weighted-average rate of 1.6% at December 31, 2003

 

 

 

 

 

137.1

 

 

Other

 

 

5.8

 

 

 

16.8

 

 

 

 

 

654.2

 

 

 

802.0

 

 

Less current maturities

 

 

255.7

 

 

 

139.0

 

 

 

 

 

$398.5

 

 

 

$

663.0

 

 

 

In July 2004, $249.9 million of our 6.3% Notes due 2005 became current. These notes are classified as short-term debt in our accompanying Consolidated Balance Sheets at December 31, 2004. On July 1, 2005, we expect to retire our 6.3% notes by utilizing our cash flow from operations and by borrowing under our revolving credit and asset securitization agreements.

In August 2004, we entered into a new five-year, $500.0 million senior unsecured revolving credit agreement. The new facility provides for a variable interest rate tied to a Base Rate, LIBOR plus a specified margin or competitive bid options similar to those contained in the previous facility. The new facility replaces a $465.0 million revolving credit facility. Under our senior credit agreement, we must comply with various financial and non-financial covenants. The financial covenants require us to maintain a leverage ratio, consolidated funded debt divided by consolidated EBITDA (as defined by the agreement) from the preceding four quarters, of not more than 3.0 to 1.0 (raised to 3.25 to 1.0 for four fiscal quarters if the CSC Put option described in Note 11 below is exercised) and a minimum interest coverage ratio of consolidated EBITDA (as defined by the agreement) for the preceding four quarters divided by consolidated interest expense for the preceding four quarters, of not less than 4.0 to 1.0.  Compliance with

24




these financial covenants is tested quarterly on a rolling four quarters basis. At December 31, 2004, our maximum leverage ratio was 1.4 and our minimum interest coverage ratio was 14.4. The non-financial covenants include limitations on liens, cross defaults subsidiary debt, mergers, liquidations, asset dispositions and acquisitions. Our borrowings under this facility, which have not been guaranteed by any of our subsidiaries, are unsecured and will rank on parity in right of payment with all of our other unsecured and unsubordinated indebtedness from time to time outstanding. As of December 31, 2004, $500.0 million was available and there were no borrowings outstanding under this facility. As of December 31, 2004, we were in compliance with our covenants under the senior credit agreement.

In September 2004, we entered into a new trade receivables-backed revolving credit facility. Under the terms of the transaction, a wholly-owned subsidiary of Equifax may borrow up to $125.0 million, subject to borrowing base availability and other terms and conditions. Equifax will use the net proceeds received from the sale of its trade receivables to the subsidiary for general corporate purposes. The credit facility has an expiration date of September 6, 2005, but may be extended for an additional period of up to three years if specified conditions are satisfied. Loans will bear interest at commercial paper rates, LIBOR or Base Rate plus a specified margin. Outstanding debt under the facility will be consolidated on our balance sheet for financial reporting purposes. As of December 31, 2004, $84.0 million was available and no amounts were outstanding under this facility.

In October 2002, we issued new 4.95% fixed rate five-year senior unsecured notes with a face value of $250.0 million. The notes, which expire in 2007, were sold at a discount of $0.5 million. The discount, and related issuance costs, will be amortized on a straight-line basis over the term of the notes. Our $200.0 million 6.5% senior unsecured notes, originally issued in 1993, matured in June 2003. We borrowed $200.0 million under our revolving credit facility to retire the maturing notes. The indebtedness evidenced by our 4.95% senior unsecured notes, our 6.3% senior unsecured notes and our 6.9% senior unsecured debentures, none of which has been guaranteed by any of our subsidiaries, is unsecured, and ranks on parity in right of payment with all of our other unsecured and unsubordinated indebtedness from time to time outstanding.

Scheduled maturities of long-term debt during the five years subsequent to December 31, 2004, are as follows:

 

 

Amount

 

 

 

(In millions)

 

2005

 

 

$

255.7

 

 

2006

 

 

 

 

2007

 

 

249.7

 

 

2008

 

 

 

 

2009

 

 

 

 

Thereafter

 

 

148.8

 

 

 

 

 

$

654.2

 

 

 

Our short-term borrowings at December 31, 2004 and 2003, totaled $0.0 million and $21.5 million, respectively, and consisted primarily of notes payable to banks. These notes had a weighted average interest rate of 1.8% at December 31, 2003. One of our Canadian subsidiaries had an unsecured, 364-day C$100.0 million revolving credit facility that expired on September 30, 2004. The agreement provided for borrowings tied to the Prime Rate, Base Rate, LIBOR or Canadian Banker’s Acceptances, and contains financial covenants related to interest coverage, funded debt to cash flow and limitations on subsidiary indebtedness. We guaranteed the indebtedness of our Canadian subsidiary under this credit facility. The bank agreed to carry the amounts outstanding under the facility on a demand basis following the expiration of the revolver on September 30, 2004, and the remaining balance was paid in October 2004. Borrowings under this loan (which are included in the 2003 short-term borrowings totals above) at December 31, 2003 were $15.4 million.

25




In November 2004, we entered into a C$25.0 million revolving credit facility that replaced the C$100.0 million facility that expired in September 2004. The C$25.0 million facility expires in September 2005. There were no borrowings outstanding under this facility at December 31, 2004.

Cash paid for interest was $34.9 million in 2004, $39.6 million in 2003 and $41.8 million in 2002.

8.   INCOME TAXES

We record 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 from continuing operations consists of the following:

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

Current:

 

 

 

 

 

 

 

Federal

 

$

74.7

 

$

63.5

 

$

71.9

 

State

 

12.9

 

5.7

 

10.0

 

Foreign

 

24.7

 

22.8

 

21.4

 

 

 

112.3

 

92.0

 

103.3

 

Deferred:

 

 

 

 

 

 

 

Federal

 

30.9

 

11.4

 

23.3

 

State

 

2.7

 

 

(1.9

)

Foreign

 

2.0

 

1.2

 

(0.3

)

 

 

35.6

 

12.6

 

21.1

 

 

 

$147.9

 

$

104.6

 

$

124.4

 

 

Domestic and foreign income from continuing operations before income taxes was as follows:

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

United States

 

$

302.8

 

$

214.9

 

$

264.5

 

Foreign

 

82.4

 

70.4

 

51.6

 

 

 

$385.2

 

$

285.3

 

$

316.1

 

 

The provision for income taxes from continuing operations is reconciled with the federal statutory rate, as follows:

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

Federal statutory rate

 

35.0

%

35.0

%

35.0

%

Provision computed at federal statutory rate

 

$

134.8

 

$

99.9

 

$

110.6

 

State and local taxes, net of federal tax benefit

 

10.3

 

0.6

 

5.0

 

Foreign

 

2.0

 

(9.1

)

(8.4

)

Valuation allowance

 

(13.0

)

7.4

 

21.1

 

Tax reserves

 

12.9

 

(0.8)

 

 

Other

 

0.9

 

6.6

 

(3.9

)

 

 

$147.9

 

$

104.6

 

$

124.4

 

 

26




Components of the deferred income tax assets and liabilities at December 31, 2004 and 2003 are as follows:

 

 

2004

 

2003

 

 

 

(In millions)

 

Deferred income tax assets:

 

 

 

 

 

Reserves and accrued expenses

 

$

18.9

 

$

17.1

 

Postretirement benefits

 

71.1

 

71.5

 

Employee compensation programs

 

17.1

 

12.6

 

Deferred revenue

 

4.8

 

7.0

 

Depreciation

 

 

0.2

 

Net operating loss carryforwards of subsidiaries

 

26.7

 

40.1

 

Foreign tax credits

 

21.9

 

19.1

 

Unrealized foreign exchange loss

 

41.4

 

58.5

 

Valuation allowance

 

(88.0

)

(111.9

)

Other

 

4.2

 

3.6

 

 

 

118.1

 

117.8

 

Deferred income tax liabilities:

 

 

 

 

 

Data files and other assets

 

(62.2

)

(50.5

)

Depreciation

 

(1.5

)

 

Pension expense

 

(70.2

)

(61.9

)

Undistributed earnings of foreign subsidiaries

 

(7.9

)

(8.0

)

Other

 

(1.7

)

(1.2

)

 

 

(143.5

)

(121.6

)

Net deferred income tax liability

 

$

(25.4

)

$

(3.8

)

 

Our deferred income tax assets and liabilities at December 31, 2004 and 2003, are included in the accompanying Consolidated Balance Sheets as follows:

 

 

2004

 

2003

 

 

 

(In millions)

 

Current deferred income tax assets

 

$

13.2

 

$

15.5

 

Deferred income tax liabilities

 

(38.6

)

(19.3

)

Net deferred income tax liability

 

$

(25.4

)

$

(3.8

)

 

We record deferred income tax on the temporary differences of our foreign subsidiaries and branches, except for the temporary differences attributable to pre-2004 undistributed earnings of Canadian and Chilean subsidiaries which we consider to be indefinitely invested that amounted to approximately $74.5 million and $93.6 million at December 31, 2003 and December 31, 2004, respectively. We recorded a deferred tax benefit of approximately $1.9 million in 2004 attributable to our Chilean subsidiary to reflect our determination that the pre-2004 undistributed earnings are indefinitely invested. If the pre-2004 earnings were not considered indefinitely invested, approximately $7.0 million of deferred income taxes would have been provided. Such taxes, if ultimately paid, may be recoverable as foreign tax credits in the U.S.

A provision for Canadian withholding taxes of approximately $1.1 million has been made on the 2004 retained earnings of Canadian subsidiaries of approximately $23.4 million. We have determined that the 2004 earnings of our Canadian subsidiaries are not indefinitely invested.

As of December 31, 2004, we had a deferred tax asset of $41.4 million related to accumulated foreign currency translation loss for foreign locations, excluding adjustments for current year Canadian and

27




Chilean earnings. A full valuation allowance, included in accumulated other comprehensive loss, has been provided due to uncertainty of future realization of this deferred tax asset.

At December 31, 2004, we had net operating loss and capital loss carryforwards of approximately $194.1 million of which $135.4 million related to U.S. federal and state and $58.8 million to foreign jurisdictions. Of the total net operating loss and capital loss carryforwards, $22.1 million will expire in 2005, $35.9 million will expire in 2006 and $136.1 million will begin to expire at various times beginning in 2012. Additionally, we had foreign tax credit carryforwards of approximately $21.9 million of which $15.3 million will begin to expire in 2010 and the remaining $6.6 million will be utilized upon repatriation of foreign earnings. Tax effected state net operating loss, capital loss, foreign tax credit carryforwards and other foreign deferred tax assets of $46.6 million have been fully reserved in the deferred tax valuation allowance due to the uncertainty resulting from a lack of previous foreign taxable income within certain foreign tax jurisdictions and uncertainty that sufficient capital gains will be generated.

A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. We released valuation allowance of $12.9 million in 2004 for capital loss carryovers in the U.S. and foreign net operating loss carryforwards relating to Spain. In addition, we released valuation allowance of $3.9 million in 2004 associated with acquired net operating losses. The tax benefit of the $3.9 million release was recorded as a reduction to goodwill.

On October 22, 2004, the American Jobs Creation Act (“AJCA”) was signed into law. The AJCA includes a tax deduction of 85% of certain foreign earnings that are repatriated, as defined in the AJCA. Equifax may elect to apply this provision to qualifying earnings repatriations during its 2005 tax year. Equifax has started an evaluation of the effects of the repatriation provision; however, we do not expect to be able to complete this evaluation until after Congress or the Treasury Department provides additional clarifying language on key elements of the provision. Equifax expects to complete its evaluation of the effects of the repatriation provision within a reasonable period of time following the publication of the additional clarifying language. The range of possible amounts that we are considering for repatriation under this provision is between zero and $100.0 million. Due to complexity of the provisions of the AJCA and pending additional clarifying language, the range of possible income tax effects of potential repatriation cannot be reasonably estimated at this time.

Cash paid for income taxes, net of amounts refunded was $102.2 million in 2004, $84.6 million in 2003 and $92.6 million in 2002.

9.   SHAREHOLDERS’ EQUITY

Rights Plan.   In 1995, our Board of Directors adopted a Shareholder’s Rights Plan (“Rights Plan”). Our Rights Plan contains provisions to protect our shareholders in the event of an unsolicited offer to acquire us, 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 our Board to represent shareholders’ interests fully. Pursuant to the Rights Plan, our Board declared a dividend of one Share Purchase Right for each outstanding share of our common stock, with distribution to be made to shareholders of record as of November 24, 1995. The Rights, which will expire in November 2005 unless renewed by the Board of Directors, initially will be represented by, and traded together with, our 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 our 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.

28




Treasury Stock.   During 2004, 2003 and 2002, we repurchased 5.4 million, 4.2 million and 2.9 million of our common shares through open market transactions at an aggregate investment of $138.0 million, $95.0 million and $72.5 million, respectively. In addition to the remaining authorized shares from our Board of Director’s previous authorization in February 2002, the Board authorized an additional $250.0 million in share repurchases in August 2004. At December 31, 2004, approximately $239.3 million remained available for future purchases from prior authorizations of our Board of Directors.

Stock Options.   Our shareholders have approved several stock option plans which provide that qualified and nonqualified options may be granted to officers and employees. Our Board of Directors has also approved a nonqualified stock option plan that cannot be used to grant shares to directors or executive officers. In addition, options remain outstanding under two plans from which no new grants may be made, one of which was approved by shareholders. In October 2004, the Board of Directors approved that authorized grants would only be made from shareholder approved plans, resulting in cancellation of shares previously available for future grants. All plans require that options be granted at exercise prices not less than market value on the date of grant. Generally, options vest over periods of up to 3 years and are exercisable for ten years from grant date. Certain of the plans also provide for awards of restricted shares of our common stock. At December 31, 2004, there were 1.4 million shares available for future option grants and restricted stock awards.

A summary of changes in outstanding options and the related weighted average exercise price per share is shown in the following table:

 

 

2004

 

2003

 

2002

 

(Shares in thousands)

 

 

 

Shares

 

Average Price

 

Shares

 

Average Price

 

Shares

 

Average Price

 

Balance, December 31, 2003

 

11,126

 

 

$

19.65

 

 

10,554

 

 

$

18.47

 

 

10,824

 

 

$

16.35

 

 

Granted (all at market price)

 

935

 

 

25.70

 

 

2,984

 

 

21.06

 

 

2,398

 

 

25.05

 

 

Cancelled

 

(270

)

 

20.17

 

 

(738

)

 

21.53

 

 

(354

)

 

18.74

 

 

Exercised

 

(2,307

)

 

17.47

 

 

(1,674

)

 

13.93

 

 

(2,314

)

 

15.31

 

 

Balance, December 31, 2004

 

9,484

 

 

$

20.76

 

 

11,126

 

 

$

19.65

 

 

10,554

 

 

$

18.47

 

 

Exercisable at end of year

 

7,891

 

 

$

20.16

 

 

9,076

 

 

$

19.14

 

 

8,217

 

 

$

17.58

 

 

 

The following table summarizes information about stock options outstanding at December 31, 2004 (shares in thousands):

Options Outstanding

 

Options Exercisable

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

Weighted

 

 

 

Weighted

 

 

 

 

 

Contractual

 

Average

 

 

 

Average

 

 

 

 

 

Life in

 

Exercise

 

 

 

Exercise

 

Range of exercise prices

 

 

 

Shares

 

Years

 

Price

 

Shares

 

Price

 

$7.40 to $15.24

 

2,003

 

 

4.23

 

 

 

$

13.53

 

 

2,003

 

 

$

13.53

 

 

$15.47 to $20.87

 

1,509

 

 

5.63

 

 

 

18.13

 

 

1,386

 

 

18.03

 

 

$21.11 to $24.18

 

2,977

 

 

6.87

 

 

 

21.85

 

 

2,447

 

 

21.97

 

 

$24.30 to $25.50

 

1,886

 

 

7.09

 

 

 

25.43

 

 

1,566

 

 

25.46

 

 

$25.55 to $37.25

 

1,109

 

 

7.60

 

 

 

26.52

 

 

489

 

 

27.42

 

 

 

 

9,484

 

 

6.25

 

 

 

$

20.76

 

 

7,891

 

 

$

20.16

 

 

 

Restricted stock awards generally vest over a period of three to five years. The unearned compensation is recognized as compensation expense ratably over the applicable vesting period of the restricted stock award. The restricted stock awards granted to Thomas F. Chapman, chairman and chief executive officer, will fully vest in 2005 due to his retirement. See Item 7. Management’s Discussion and Analysis of general condition and Results of Operations—CEO Transition. Restricted Stock expense of

29




$2.4 million in 2004, $3.7 million in 2003 and $3.3 million in 2002 was recorded in the accompanying Consolidated Statements of Income.

The following table summarizes information about restricted stock grants for 2004, 2003 and 2002:

Year

 

 

 

 

 

Number
of Shares

 

Average
Fair Value

 

2004

 

Grants

 

486,500

 

 

$

25.86

 

 

 

Cancellations

 

6,500

 

 

$

25.60

 

 

2003

 

Grants

 

103,000

 

 

$

20.84

 

 

 

 

Cancellations

 

110,000

 

 

$

20.62

 

 

2002

 

Grants

 

185,000

 

 

$

24.73

 

 

 

Cancellations

 

 

 

 

 

 

Long-Term Incentive Plan.   We have a Key Management Long-Term Incentive Plan for certain key officers that provides for annual or long term cash awards at the end of various measurement periods based on the earnings per share and/or various other criteria over the measurement period. For certain awards, the employee may elect to receive some or all of their distribution as an equity interest. This feature of the plan ended with the 2002 payout. The total long-term related expense under this plan was $1.6 million in 2002.

In December 2003, the Board approved a new Supplemental Executive Retirement Plan for executives of Equifax that covers designated executives of Equifax Officers, effective January 1, 2004. The total expense under this plan was $0.7 million and $0.0 million in 2004 and 2003, respectively.

10.   EMPLOYEE BENEFITS

Pension Benefits.   Pension benefits are provided through U.S. and Canadian defined benefit pension plans and two supplemental executive defined benefit pension plans.

U.S. and Canadian Retirement Plans.   We have a non-contributory qualified retirement plan covering most U.S. salaried employees (the U.S. Retirement Income Plan, or “USRIP”) and maintain a defined benefit plan for most salaried employees in Canada (the Canadian Retirement Income Plan, or “CRIP”). Benefits of both plans are primarily a function of salary and years of service.

Supplemental Retirement Plans.   We maintain two supplemental executive retirement programs for certain key employees. The plans, which are unfunded, provide supplemental retirement payments based on salary and years of service.

Other Benefits.   We maintain certain health care and life insurance benefit plans for eligible retired employees. Substantially all of our U.S. employees may become eligible for the health care benefits if they reach retirement age while working for us and satisfy certain years of service requirements. The retiree life insurance program was frozen to new participants on December 31, 2003. We accrue the cost of providing these benefits over the active service period of the employee.

30




Obligations and Funded Status.   A reconciliation of the benefit obligations, plan assets and funded status of the plans are as follows (in millions):

 

 

Pension Benefits

 

Other Benefits

 

 

 

2004

 

2003

 

2004

 

2003

 

 

 

(In millions)

 

(In millions)

 

Change in Benefit Obligation

 

 

 

 

 

 

 

 

 

Benefit obligation at January 1,

 

$

514.4

 

$

477.2

 

$

24.2

 

$

28.0

 

Service cost

 

7.3

 

6.0

 

0.4

 

0.6

 

Interest cost

 

31.3

 

31.0

 

1.7

 

1.7

 

Amendments

 

6.2

 

0.0

 

2.3

 

3.4

 

Actuarial (gain) loss

 

24.7

 

29.9

 

1.3

 

(4.9

)

Foreign currency exchange rate changes

 

2.5

 

5.4

 

0.0

 

0.0

 

Medicare Act of 2003

 

0.0

 

0.0

 

0.0

 

(2.0

)

Benefits paid

 

(34.9

)

(35.1

)

(2.7

)

(2.6

)

Benefit obligation at December 31,

 

551.5

 

514.4

 

27.2

 

24.2

 

Change in Plan Assets

 

 

 

 

 

 

 

 

 

Fair value of plan assets at January 1,

 

438.6

 

375.5

 

9.0

 

3.5

 

Actual return on plan assets

 

54.0

 

68.4

 

1.3

 

1.1

 

Employer contributions

 

22.3

 

23.0

 

2.0

 

4.4

 

Foreign currency exchange rate changes

 

3.2

 

6.8

 

0.0

 

0.0

 

Benefits paid

 

(34.9

)

(35.1

)

0.0

 

0.0

 

Fair value of plan assets at December 31,

 

483.2

 

438.6

 

12.3

 

9.0

 

Funded status of plan

 

(68.3

)

(75.8

)

(14.9

)

(15.2

)

Unrecognized prior service cost

 

6.4

 

0.7

 

4.8

 

3.1

 

Unrecognized actuarial (gain) loss

 

213.6

 

212.5

 

0.9

 

0.0

 

Prepaid (accrued) benefit cost

 

$

151.7

 

$

137.4

 

$

(9.2

)

$

(12.1

)

Amounts recognized in the statement of financial position consist of:

 

 

 

 

 

 

 

 

 

Prepaid benefit cost

 

$

18.2

 

$

16.9

 

$

0.0

 

$

0.0

 

Accrued benefit liability

 

(60.7

)

(71.0

)

(9.2

)

(12.1

)

Intangible asset

 

6.0

 

0.7

 

0.0

 

0.0

 

Accumulated other comprehensive income

 

188.2

 

190.8

 

0.0

 

0.0

 

Net amount recognized

 

$

151.7

 

$

137.4

 

$

(9.2

)

$

(12.1

)

 

The accumulated benefit obligation for the U.S., Canadian and Supplemental Retirement Plans was $530.4 million and $495.9 million at December 31, 2004 and December 31, 2003, respectively.

The USRIP and the Supplemental Retirement Plans both have accumulated benefit obligations in excess of those plans’ respective assets as of December 31, 2004. The aggregate projected benefit obligation, accumulated benefit obligation and fair value of plan assets for these two plans are $515.4 million, $499.1 million and $438.4 million, respectively, as of December 31, 2004, and $483.9 million, $469.2 million and $398.3 million, respectively, as of December 31, 2003.

Other comprehensive income includes a $2.6 million decrease in the minimum pension liability as of December 31, 2004 and a $3.6 million increase as of December 31, 2003.

31




Components of Net Periodic Benefit Cost:

 

 

Pension Benefits

 

Other Benefits

 

 

 

2004

 

2003

 

2002

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

(In millions)

 

Components of net periodic benefit cost

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

7.3

 

$

6.0

 

$

4.8

 

$

0.4

 

$

0.6

 

$

0.7

 

Interest cost

 

31.3

 

31.0

 

30.8

 

1.6

 

1.7

 

1.6

 

Expected return on plan assets

 

(43.8

)

(43.7

)

(47.3

)

(0.9

)

(0.5

)

(0.4

)

Amortization of prior service cost

 

0.5

 

0.1

 

0.0

 

0.7

 

(0.1

)

(0.2

)

Recognized actuarial (gain) loss

 

14.0

 

4.8

 

0.2

 

0.0

 

0.5

 

0.0

 

Total net periodic benefit cost

 

$

9.3

 

$

(1.8

)

$

(11.5

)

$

1.8

 

$

2.2

 

$

1.7

 

 

Assumptions:

 

 

Pension Benefits

 

Other Benefits

 

 

 

      2004      

 

      2003      

 

      2004      

 

      2003      

 

Weighted-average assumption to determine benefit obligations at the end of the year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

 

5.92%

 

 

 

6.25%

 

 

 

5.92%

 

 

 

6.25%

 

 

Rate of compensation increase

 

 

4.34%

 

 

 

4.25%

 

 

 

N/A

 

 

 

N/A

 

 

 

 

 

Pension Benefits

 

Other Benefits

 

 

 

2004

 

2003

 

2002

 

2004

 

2003

 

2002

 

Weighted-average assumption to determine net periodic benefit cost for years ending

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

6.25%

 

6.75%

 

7.25%

 

6.25%

 

6.75%

 

7.25%

 

Expected return on plan assets

 

8.68%

 

8.75%

 

9.50%

 

8.75%

 

8.75%

 

9.50%

 

Rate of compensation increase

 

4.25%

 

4.25%

 

4.25%

 

N/A

 

N/A

 

N/A

 

 

The decrease in the liability discount rate was the primary cause for the increase in the pension benefit obligation for 2004. The increase in the value of the pension plan assets was primarily related to a 13.2% investment return which was greater than the 8.75% expected rate of return set at December 31, 2003. The calculation of the net periodic benefit cost for the USRIP utilizes a market-related value of assets. The market-related value of assets recognizes the difference between actual returns and expected returns over five years at a rate of 20% per year.

An initial 12% annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2005. The rate was assumed to decrease gradually to an ultimate rate of 5% by 2010. Assumed healthcare cost trend rates have a significant effect on the amounts reported for the healthcare plan. A one-percentage point change in assumed healthcare cost trend rates would have the following effects:

 

 

1-
Percentage

 

1-
Percentage

 

 

 

Point
Increase

 

Point
Decrease

 

Sensitivity to assumed health care cost trend rate

 

 

 

 

 

 

 

 

 

Effect on total 2004 service cost and interest cost components

 

 

$

0.2

 

 

 

$

(0.2

)

 

Effect on December 31, 2004 accumulated postretirement benefit obligation

 

 

2.1

 

 

 

(1.8

)

 

 

On December 8, 2003, President Bush signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003. As provided for in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the obligations reflect that we will recognize the 28% subsidy for post-65 drug

32




coverage as an offset to healthcare plan costs. The reduction in obligations due to the subsidy is reflected as an unrecognized net gain to the plan. The gain was reflected in net periodic benefit cost for the first time in 2004. For current and future retirees, the 28% subsidy is expected to reduce our prescription drug plan costs by $567 per individual in 2006 and this amount is expected to increase by the valuation trend rates. Our actuaries have determined that our prescription drug plan provides a benefit that is at least actuarially equivalent to the Medicare prescription drug plan. The calculations do not reflect the final regulations issued in January 2005.

Equifax estimates that the future benefits payable for the retirement and post-retirement plans in place are as follows at December 31, 2004:

 

 

U.S. Defined
Benefit Plans

 

Non-U.S. Defined
Benefit Plans

 

Post-Retirement
Benefit Plans

 

 

 

(in millions)

 

Fiscal year ending December 31

 

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

 

$

32.4

 

 

 

$

2.0

 

 

 

$

3.0

 

 

2006

 

 

$

33.7

 

 

 

$

2.0

 

 

 

$

3.3

 

 

2007

 

 

$

33.6

 

 

 

$

2.0

 

 

 

$

3.4

 

 

2008

 

 

$

33.9

 

 

 

$

2.1

 

 

 

$

3.6

 

 

2009

 

 

$

34.1

 

 

 

$

2.1

 

 

 

$

3.6

 

 

Next five fiscal years to December 31, 2014

 

 

$

175.7

 

 

 

$

11.0

 

 

 

$

15.7

 

 

 

USRIP (the “Plan”) Investment and Asset Allocation Strategies

The primary goal of the asset allocation strategy of the Plan is to produce a total investment return, employing the lowest possible level of financial risk, which will: (1) satisfy annual cash benefits payments to Plan participants and (2) maintain and increase the total market value of the USRIP, after cash benefits payments, on a real (inflation adjusted) basis.

Maximization of total investment return is not, taken in isolation, a goal of the asset allocation strategy of the USRIP. Return maximization is pursued subject to the asset allocation risk control constraints noted previously.

The Plan’s investment managers are required to abide by the provisions of the Employee Retirement Income Security Act (“ERISA”). Standards of performance for each manager include an expected return, a measure of volatility, and a time period of evaluation.

USRIP asset allocation strategy is determined based upon guidelines provided by our external advisor. This forecasting process takes into account projected investment returns by asset category, the correlation among those returns, the standard deviation of those returns and the future pattern of actuarial liabilities to which the plan is obligated. Asset/liability forecasting is conducted at regular intervals during the year, as needed, utilizing input from our in-house and external consulting actuaries, and our external investment advisor. All USRIP asset targets and ranges are approved by two in-house Plan Administrators, who are Named Fiduciaries under ERISA. Investment recommendations are made by our external advisor, working in conjunction with our in-house Investment Officer, who is also an ERISA Named Fiduciary. The 8.75% expected return on plan assets assumption for 2004 is based on the 50th percentile return from our asset/liability forecasting process.

33




The following USRIP asset allocation ranges, targets and actual allocations were in effect as of December 31, 2004 and 2003:

 

 

Target

 

Range

 

Actual 2004

 

Actual 2003

 

Large-Cap equity

 

25

%

20-35

%

20.5

%

30.5

%

Mid-Cap equity

 

10

%

5-15

%

10.3

%

5.4

%

Small-Cap equity

 

8

%

5-15

%

14.7

%

15.8

%

International equity

 

12

%

6-18

%

15.8

%

13.6

%

Alternative Assets

 

15

%

5-20

%

15.8

%

9.4

%

Venture Capital

 

10

%

5-15

%

5.7

%

5.8

%

Real Estate

 

5

%

0-12

%

3.5

%

3.2

%

Fixed Income

 

15

%

10-35

%

12.8

%

15.7

%

Cash

 

minimal

 

0-2

%

0.9

%

0.7

%

 

*Note: New USRIP asset allocation targets and ranges were put into place during 2003.

The USRIP, in an effort to meet its asset allocation objectives, utilizes a variety of asset classes which have historically produced returns which are relatively uncorrelated to those of the S&P 500. Asset classes included in this category are alternative assets (hedge funds-of-funds), venture capital (including secondary private equity) and real estate. The primary benefits to the USRIP of using these types of asset classes are: (1) their non-correlated returns reduce the over-all volatility of the USRIP’s portfolio of assets, and (2) they produce superior risk-adjusted returns.

Additionally, the USRIP allows certain of its managers, subject to specific risk constraints, to utilize derivative instruments, in order to enhance asset return, reduce volatility or both. Derivatives are primarily employed by the Plan in its fixed income portfolio and in the hedge fund-of-funds area.

The USRIP is prohibited from investing additional amounts in Equifax Inc. stock once the market value of stock held by the plan exceeds 10% of the total market value of the USRIP. At December 31, 2004 and 2003, the USRIP’s assets included 1.8 million shares of Equifax common stock, with a market value of approximately $49.6 million and $43.2 million, respectively.

Additionally, the USRIP is subject to the transaction prohibitions imposed by ERISA. Not more than 5% of the portfolio (at cost) shall be invested in the securities of any one issuer with the exception of Equifax common stock, and U.S. Treasury and Government Agency securities.

Foreign Retirement Plans.   We also maintain defined contribution plans for certain employees in the U.K. For the years ended December 31, 2004, 2003 and 2002, our expenses related to these plans were $1.4 million, $0.7 million and $1.2 million for each year, respectively.

Employee Retirement Savings Plans.   Our retirement savings plans provide for annual contributions by us, within specified ranges, determined at the discretion of the Group Plans Administrative Committee, for the benefit of eligible employees in the form of units of Equifax common stock. Employees may transfer all or a part of these Equifax common stock investments into other available investments within the plan, at any time. Our matching contributions are expensed. Expenses for these plans were $3.2 million in 2004, $3.1 million in 2003 and $3.0 million in 2002.

34




11.   COMMITMENTS AND CONTINGENCIES

Leases.   Our operating leases involve principally office space and office equipment. Under the terms of the $29.0 million operating lease for our headquarters building in Atlanta, Georgia, which commenced in 1998 and expires in 2010, we have guaranteed a portion of the residual value of the building at the end of the lease. Total lease payments for the remaining term total $9.7 million. In the event that the property were to be sold by the lessor at the end of the lease term, we would be responsible for any shortfall of the sales proceeds, up to a maximum amount of $23.2 million, which equals 80% of the value of the property at the beginning of the lease term. Based on a current appraisal of the property, we determined that its fair value is $25.0 million. The $4.0 million short-fall against the residual value guarantee will be subsequently recognized as an expense ratably over the remaining lease term.

Rental expense related to our operating leases was $22.3 million in 2004, $18.0 million in 2003 and $22.0 million in 2002. Our headquarters building operating lease has ground purchase options exercisable beginning in 2019, ground renewal options exercisable in 2048 and escalation clauses beginning in 2009. Our technology center lease in Alpharetta, Georgia expires in 2012 and includes renewal options through 2039. Future minimum payment obligations for non-cancelable operating leases exceeding one year are as follows as of December 31, 2004:

 

 

Amount

 

 

 

(In millions)

 

2005

 

 

$

14.6

 

 

2006

 

 

11.0

 

 

2007

 

 

8.9

 

 

2008

 

 

9.2

 

 

2009

 

 

52.0

 

 

Thereafter

 

 

12.2

 

 

 

 

 

$

107.9

 

 

 

Data Processing and Outsourcing Services Agreements.   We have separate agreements with IBM, Polk/Acxiom and others with which we outsource portions of our computer data processing operations and related functions, and certain administrative functions. The agreements expire between 2005 and 2013. The estimated aggregate minimal contractual obligation remaining under these agreements is $389.4 million as of December 31, 2004, with no future year expected to exceed $70.8 million. Annual payment obligations in regards to these agreements vary due to factors such as the volume of data processed, changes in our servicing needs as a result of new product offerings, acquisitions or divestitures, the introduction of significant new technologies or the general rate of inflation. Our data processing outsourcing agreement with IBM was renegotiated in 2003 for a ten-year term. Under this agreement (which covers our operations in North America, the U.K., Ireland and Spain), we have outsourced our mainframe and midrange operations, help service and desktop support functions and the operation of our voice and data networks. During 2004, we paid $110.5 million for these services. The estimated future minimum contractual obligation under this agreement is $361.8 million, with no year expected to exceed $54.5 million. In certain circumstances (e.g., a change in control, or for our convenience), we may terminate these data processing and outsourcing agreements, and in doing so certain of these agreements require us to pay a significant penalty.

Agreement with Computer Sciences Corporation.   We have an agreement with Computer Sciences Corporation and certain of its affiliates, collectively, CSC, under which CSC-owned credit reporting agencies utilize our computerized credit database services. CSC retains ownership of its credit files and the revenues generated by its credit reporting activity. We receive a processing fee for maintaining the database and for each report supplied. The agreement was renewed by CSC for a ten-year period beginning August 1, 1998. The agreement provides us with an option to purchase CSC’s credit reporting

35




business if CSC does not elect to renew the agreement or if there is a change in control of CSC while the agreement is in effect. Under the agreement CSC also has an option, exercisable at any time, to sell its credit reporting business to us. The option expires in 2013. The option exercise price will be determined by a third-party appraisal process and would be due in cash within 180 days after the exercise of the option. We estimate that if the option were exercised at this time, the price range would approximate $650.0 - $700.0 million. This estimate is based solely on our internal analysis of the value of the businesses, current market conditions and other factors, all of which are subject to constant change. Therefore, the actual option exercise price could be materially higher or lower than the estimated amount. If CSC were to exercise its option, we would have to obtain additional sources of funding. We believe that this funding would be available from sources such as additional bank lines of credit and the issuance of public debt and/or equity. However, the availability and terms of any such capital financing would be subject to a number of factors, including credit market conditions, the state of the equity markets, general economic conditions, and our financial performance and condition. See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors included in our annual report on Form 10-K for the year ended December 31, 2004.

Change in Control Agreements.   We have Change in Control Agreements with certain of our key officers. These agreements have renewable five-year terms and become effective only upon a change in control of Equifax. A “change in control” is generally defined by the agreements to mean (i) an accumulation by any person, entity or group of 20% or more of the combined voting power of Equifax’s voting stock, or (ii) a business combination resulting in the shareholders immediately prior to the combination owning less than two-thirds of the common stock and combined voting power of the new company, (iii) a sale or disposition of all or substantially all of Equifax’s assets, or (iv) a complete liquidation or dissolution of Equifax. If any of these events occur and the officer’s employment terminates within three years after the date of the change in control, other than from death, disability or termination for cause or voluntary termination other than for “good reason,” the officer will be entitled to receive: (a) unpaid compensation accrued through the date of termination; (b) three times the sum of (i) the officer’s highest annual salary for the twelve months prior to termination, and (ii) the officer’s highest bonus for the three years prior to termination; (c) additional compensation and service credit under retirement plans to age 62 (five years maximum additional service credit); and (d) continuation of group health, dental, vision, life, disability, 401(k) and similar coverages for three years. Benefits payable under these agreements and other compensation or benefit plans of Equifax are not reduced to satisfy the limits of Section 280G of the Internal Revenue Code. As a result, any payments the officer receives will be increased, if necessary, so that after taking into account all taxes the officer would incur as a result of those payments, the officer would receive the same after-tax amount he or she would have received had no excise tax been imposed under Section 4999 of the Code.

Assuming a change in control had occurred on December 31, 2004, and employment had been terminated on that date, the approximate payments that would have been made under the Change in Control Agreements (not including the gross-up portion) would have been $31 million, and the officers’ unvested outstanding stock options and restricted stock units would have become fully vested. The amount of the gross-up, if any, to be paid may be substantial and will depend upon numerous factors, including the price per share of Equifax common stock and the extent, if any, that payments or benefits made to the officers constitute “excess parachute payments” within the meaning of Section 280G of the Internal Revenue Code.

Guarantees.   We will from time to time issue standby letters of credit, performance bonds or other guarantees in the normal course of business. The aggregate notional amount of all performance bonds and standby of all letters of credit is less than $8.0 million and all have a maturity of less than one year. Guarantees are issued from time to time to support the needs of operating units. The only outstanding guarantee that is not reflected as a liability on our Consolidated Balance Sheets was extended in

36




connection with the sale of our risk management collections business to RMA Holdings, LLC (“RMA”) in October 2000, at which time we guaranteed the operating lease payments of a partnership affiliated with RMA to a lender of the partnership pursuant to a term loan. The operating lease, which expires December 11, 2011, has a remaining balance of $8.4 million based on the undiscounted value of remaining lease payments at December 31, 2004. Our obligations under such guarantee are not secured. We believe the likelihood of demand for payment under these instruments is minimal and expect no material losses to occur in connection with these instruments.

Subsidiary Dividends and Fund Transfers.   The ability of certain of our subsidiaries and associated companies to transfer funds to us is limited by certain restrictions imposed by foreign governments, which do not, individually or in the aggregate, materially limit our ability to service our indebtedness, meet our current obligations or pay dividends.

Litigation.   In November 2001, the landlord of our former headquarters facility brought an action, 1600 Peachtree, L.L.C. v. Equifax Inc., against us in the Superior Court of Fulton County, Georgia, which asserted claims related to our guaranty obligations under our lease termination agreement. This lawsuit seeks damages, of approximately $28.0 million, substantially all of which represents future rent contingencies, and punitive damages. On motions for summary judgment, the Superior Court ruled against our discharge defense and against plaintiff’s fraud claim. On June 29, 2004, the Georgia Court of Appeals affirmed the Superior Court’s rulings. Both parties appealed these rulings to the Georgia Supreme Court, which on September 27, 2004 declined to hear the appeals. The remaining issues in the case will now be tried in Superior Court. Trial is set to commence on May 4, 2005. We intend to continue to contest in the Superior Court the damages claimed by the plaintiff.

In the third quarter of 2003, the Canada Revenue Agency (“CRA”) issued Notices of Reassessment asserting that Acrofax, Inc., a wholly owned Canadian subsidiary of Equifax, is liable for additional tax for the 1995 through 2000 tax years, related to certain intercompany capital contributions and loans. In 1995, Acrofax invested U.K. 30 million pounds in Luxembourg S.A., a Luxembourg subsidiary of Equifax (“LUX”), which subsequently lent that amount to Equifax PLC, a U.K. subsidiary of Equifax. In June 2000, Acrofax distributed via dividend shares of LUX to Equifax Credit Information Services, Inc. another subsidiary of Equifax. The CRA claimed that (1) by using LUX as an intermediary, Acrofax avoided paying tax on interest earned on the loan to Equifax PLC and is therefore taxable on the dividends it received from LUX; and (2) in the alternative, the transactions should be recharacterized as a loan directly from Acrofax to Equifax PLC and tax should be paid by Acrofax on the amount of interest income that it would have received from such a loan as well as withholding tax on the loan principal. The additional tax sought by the CRA for these periods ranges, based on alternative theories, from $7.1 million to $15.8 million, plus interest and penalties. Acrofax has filed Notices of Objection in response to the Notices. On September 2, 2003, we paid a statutorily-required deposit of $5.7 million against the CRA’s primary assessment theory. We intend to vigorously contest these reassessments and do not believe we have violated any statutory provision or rule.

On December 30, 2003, Equifax and Naviant served a demand for arbitration alleging, among other things, that the shareholder sellers of Naviant had breached various representations and warranties concerning information furnished to us in connection with our acquisition of Naviant in 2002. The arbitration demand seeks rescission of our Naviant purchase and the recovery of the purchase price or, in the alternative, recovery of monetary damages on various grounds. On March 22, 2004, we recommenced our demand for arbitration in order to utilize the procedures of the American Arbitration Association. Some of the respondents have answered and denied liability. The arbitration has been stayed by agreement pending determination of the motions noted in the litigation described in the next paragraph. We cannot at this time predict the probable outcome of this matter.

37




On April 28, 2004, in a case captioned Softbank Capital Partners LP, et al. v. Equifax Inc. and Naviant, Inc., certain of the former shareholders of Naviant filed suit in the U.S. District Court for the Southern District of Florida seeking declaratory relief to prevent Equifax and Naviant from proceeding with the arbitration discussed in the the preceding paragraph, except for claims asserted against Softbank Capital Partners LP, as Shareholders’ Representative, for certain indemnified losses capped at the amount of a $10.0 million escrow fund specified in the agreement pursuant to which Equifax acquired Naviant. The parties are awaiting rulings on the issues presented by the motion for summary judgment filed by plaintiffs and the motion to dismiss filed by Equifax and Naviant. Although Equifax believes it and Naviant have substantial factual and legal defenses to plaintiffs’ claims, we cannot at this time predict the probable outcome of this matter.

On August 13, 2004, in a case captioned Equifax Inc. v. Austin Ventures VIII, L.P., et al., Equifax filed suit in the U.S. District Court for the Southern District of Florida to preserve its claims against the shareholder sellers of Naviant pending the arbitration proceeding described above.

We are involved in other lawsuits, claims and proceedings as is normal in the ordinary course of our business. Any possible adverse outcome arising from these matters is not expected to have a material impact on our results of operations or financial position, either individually or in the aggregate. However, our evaluation of the likely impact of these pending lawsuits could change in the future.

If the potential loss from any claim or legal proceeding is probable and can be estimated, we accrue a liability for estimated settlements and incurred but unpaid legal fees for services performed to date. In our opinion, the ultimate resolution of these matters will not have a materially adverse effect on our financial position, liquidity or results of operations.

12.   SALE OF INVESTMENT IN INTERSECTIONS INC.

On May 5, 2004, Equifax, through its wholly owned subsidiary CD Holdings, Inc., completed the sale of 3,755,792 shares of common stock it owned in Intersections Inc., a provider of identity theft protection and credit management services, in an underwritten public offering of common stock for net proceeds of $59.4 million. Immediately prior to the public offering, CD Holdings converted a $20.0 million senior secured convertible note issued to it by Intersections in November 2001 into 3,755,792 shares of Intersections common stock, or approximately 26.9% of Intersections’ outstanding stock. The book value of our investment in Intersections was $22.3 million, including accrued interest of $2.3 million. In the second quarter of 2004, we recorded, net of income taxes of $13.8 million, a net gain of $23.0 million or $0.17 per diluted share.

13.   RELATED PARTY TRANSACTIONS

We maintain lending, foreign exchange, debt underwriting, cash management, trust, investment management, acquisition valuation, derivative counterparty and shareholder services relationships with SunTrust Banks, Inc. (“SunTrust”) whom we consider a related party due to (a) L. Phillip Humann, a member of our board of directors, currently is the Chairman, President, and Chief Executive Officer of SunTrust, and (b) Larry L. Prince, member of our board of directors, is a director of SunTrust. We paid SunTrust $2.8 million, $2.4 million and $3.3 million respectively during the years 2004, 2003 and 2002 for these services. We also provide credit management services to SunTrust, as a customer, from whom we received $4.3 million, $2.9 million and $2.5 million, respectively during the years 2004, 2003 and 2002, and had $0.3 million and $0.2 million of corresponding outstanding receivables with, as of at December 31, 2004 and 2003, respectively. Our relationships with SunTrust are described more fully below:

·       On August 20, 2004, Equifax entered into a new five-year $500.0 million senior unsecured revolving credit agreement with a group of banks. This facility replaced a prior $465.0 million revolving credit agreement which was composed of a $305.0 million multi-year portion, scheduled to expire on

38




October 4, 2004, and a $160.0 million 364-day portion, which would have expired on September 30, 2004. As of December 31, 2004, no borrowings were outstanding under the new $500.0 million credit facility. Borrowings outstanding under the prior $465.0 revolving credit facility totaled $137.1 million at December 31, 2003.

·       SunTrust Bank (“SunTrust”), a subsidiary of SunTrust Banks, Inc., is the Administrative Agent for the aforementioned new $500.0 million revolving credit agreement, and also provides a $92.5 million committed portion of that facility. SunTrust Robinson Humphrey, a division of SunTrust Capital Markets, Inc., served as Joint Lead Arranger of the new facility. SunTrust Capital Markets, Inc. is a subsidiary of SunTrust Banks, Inc. As of December 31, 2003, SunTrust provided us a $100.0 committed portion of the prior $465.0 million U.S. revolving credit agreement. SunTrust’s total commitment of $100.0 million at December 31, 2003 was allocated 65.6% ($65.6 million) to the multi-year portion and 34.4% ($34.4 million) to the 364-day portion. Total borrowings outstanding under SunTrust’s 364-day and multi-year portions of this facility were $29.5 million at December 31, 2003.

·       SunTrust extends financing in the form of an amortizing term loan to a leveraged real estate limited partnership which owns our Atlanta data center located in Alpharetta, Georgia. We are the primary operating lease tenant in the data center. An unrelated bank leasing company is the equity owner of this partnership. Although this term loan is considered to be non-recourse financing to Equifax, SunTrust is dependent on the operating lease payments made by Equifax to the partnership to service interest expense and amortize principal on the term loan’s debt. The term loan is fully amortized in 2012. As of December 31, 2004, and December 31, 2003, $21.5 million and $24.3 million, respectively, were outstanding under the term loan.

·       SunTrust provides the $29.0 million synthetic lease facility related to our Atlanta corporate headquarters building. As of December 31, 2004 and December 31, 2003, the amount of this facility was $29.0 million.

·       SunTrust provides investment management services for our USRIP through two of its subsidiaries, Trusco Capital and the Lighthouse Group. As of December 31, 2004 and December 31, 2003, a total of $48.4 million and $37.6 million, respectively, of USRIP assets were managed by these two subsidiaries of SunTrust.

·       During 2004 and 2003, SunTrust was the counterparty on $90.0 million, notional value, of interest rate swaps with Equifax Inc.

Bank of America, N.A. (“B of A”), through its various subsidiaries, provides Equifax and our subsidiaries cash management, foreign exchange, lending and debt underwriting services. We consider B of A a related party because Jacquelyn M. Ward, a member of our board of directors, is also a director of B of A. We paid B of A $0.8 million, $0.8 million and $2.0 million respectively during the years 2004, 2003 and 2002 for these services. We also provide credit management services to B of A, as a customer, from whom we received $18.3 million, $15.3 million and $11.2 million, respectively during the years 2004, 2003 and 2002, and had $2.0 million and $1.7 million of corresponding outstanding receivables with, as of December 31, 2004 and 2003, respectively. Our relationships with B of A are described more fully below:

·       As of December 31, 2003, and through the facility’s termination on August 20, 2004, B of A served as the Administrative Agent on Equifax Inc.’s $465.0 million revolving credit agreement, and provided a $100.0 committed portion of that facility. B of A’s total commitment of $100.0 million at December 31, 2003 was allocated 65.6% ($65.6 million) to the multi-year portion and 34.4% ($34.4 million) to the 364-day portion. Total borrowings outstanding under B of A’s 364-day and multi-year portions of this facility were $29.5 million at December 31, 2003.

39




·       B of A was the Syndication Agent for the new $500.0 million revolving credit agreement referenced above under SunTrust and executed in August 2004, and also provides a $92.5 million committed portion of that facility. Banc of America Securities LLC, a subsidiary of Bank of America Corporation, served as a Joint Lead Arranger of the new facility.

·       B of A extends an uncommitted $25.0 million working capital line of credit to Equifax. The facility is cancelable at the discretion of either party. The uncommitted working capital line, at December 31, 2004 and December 31, 2003, had outstanding balances of $0.0 million and $5.4 million, respectively.

·       Bank of America Corporation provides investment management services for the USRIP through its subsidiary, Bank of America Capital Advisors, LLC. As of December 31, 2004, a total of $5.2 million of USRIP assets was managed by this subsidiary.

·       At December 31, 2004 and December 31, 2003, B of A was the counterparty on $124.0 million, notional value, of interest rate swaps with Equifax.

We sell telecommunication credit information reports and customer portfolio reviews to Certegy, Inc (“Certegy”). In addition Certegy provides customer invoice and disclosure notification printing/mailing services to us. We consider Certegy a related party because Lee A. Kennedy, a member of our board of directors, is also Chairman and Chief Executive Officer of Certegy. Amounts paid to Certegy for fulfillment services were $9.2 million, $3.7 million and $0.1 million, respectively for the years 2004, 2003 and 2002. Fees received from Certegy, as a customer, for credit disclosure reports and portfolio reviews were $1.0 million, $0.6 million and $0.3 million, respectively during the years 2004, 2003 and 2002. The corresponding outstanding accounts receivable balances due from Certegy at December 31, 2004 and 2003, respectively, were $0.1 million and $0.2 million.

40




 

14.   QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial data for 2004 and 2003 are as follows:

 

 

First

 

Second

 

Third

 

Fourth

 

2004

 

 

 

 Reported 

 

Italy

 

Restated

 

 Reported 

 

Italy

 

Restated

 

 Reported 

 

Italy

 

Restated

 

 Reported 

 

Italy

 

Restated

 

 

 

(In millions, except per share data)

 

Operating revenue 

 

 

$ 313.6

 

 

$ 3.7

 

$ 309.9

 

 

$ 318.9

 

 

$ 3.5

 

$ 315.4

 

 

$ 323.0

 

 

$ 3.1

 

$ 319.9

 

 

$ 327.6

 

 

$   —

 

$ 327.6

 

Operating income 

 

 

$ 87.8

 

 

$ (0.6

)

$ 88.4

 

 

$ 86.3

 

 

$ (5.7

)

$ 92.0

 

 

$ 95.4

 

 

$ (0.3

)

$ 95.7

 

 

$ 99.7

 

 

$   —

 

$ 99.7

 

Income from continuing operations

 

 

$ 51.2

 

 

$ (0.6

)

$ 51.8

 

 

$ 73.2

 

 

$ (3.8

)

$ 77.0

 

 

$ 52.7

 

 

$ (0.6

)

$ 53.3

 

 

$ 55.2

 

 

$   —

 

$ 55.2

 

Discontinued operations

 

 

$ (0.4

)

 

$   —

 

$ (1.0

)

 

$   —

 

 

$   —

 

$ (3.8

)

 

$  0.5

 

 

$   —

 

$ (0.1

)

 

$  2.3

 

 

$   —

 

$  2.3

 

Net income

 

 

$ 50.8

 

 

$ (0.6

)

$ 50.8

 

 

$ 73.2

 

 

$ (3.8

)

$ 73.2

 

 

$ 53.2

 

 

$ (0.6

)

$ 53.2

 

 

$ 57.5

 

 

$   —

 

$ 57.5

 

Per common share (basic):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

$ 0.39

 

 

$ (0.01

)

$ 0.40

 

 

$ 0.56

 

 

$ (0.03

)

$ 0.59

 

 

$ 0.40

 

 

$ (0.01

)

$ 0.41

 

 

$ 0.43

 

 

$   —

 

$ 0.43

 

Net income

 

 

$ 0.39

 

 

$ (0.00

)

$ 0.39

 

 

$ 0.56

 

 

$ 0.00

 

$ 0.56

 

 

$ 0.40

 

 

$ (0.00

)

$ 0.40

 

 

$ 0.44

 

 

$   —

 

$ 0.44

 

Per common share (diluted):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

$ 0.38

 

 

$ (0.00

)

$ 0.38

 

 

$ 0.55

 

 

$ (0.03

)

$ 0.58

 

 

$ 0.40

 

 

$ (0.00

)

$ 0.40

 

 

$ 0.42

 

 

$   —

 

$ 0.42

 

Net income

 

 

$ 0.38

 

 

$ (0.00

)

$ 0.38

 

 

$ 0.55

 

 

$ 0.00

 

$ 0.55

 

 

$ 0.40

 

 

$ (0.00

)

$ 0.40

 

 

$ 0.43

 

 

$   —

 

$ 0.43

 

 

 

 

First

 

Second

 

Third

 

Fourth

 

2003

 

 

 

 Reported 

 

Italy

 

Restated

 

 Reported 

 

Italy

 

Restated

 

 Reported 

 

Italy

 

Restated

 

 Reported 

 

Italy

 

Restated

 

 

 

(In millions, except per share data)

 

Operating revenue 

 

 

$ 301.6

 

 

$ 4.1

 

$ 297.5

 

 

$ 317.0

 

 

$ 4.2

 

$ 312.8

 

 

$ 309.8

 

 

$ 3.1

 

$ 306.7

 

 

$ 297.0

 

 

$ 3.3

 

$ 293.7

 

Operating income 

 

 

$ 80.7

 

 

$ (0.2

)

$ 80.9

 

 

$ 85.3

 

 

$   —

 

$ 85.3

 

 

$ 88.9

 

 

$ (0.8

)

$ 89.7

 

 

$ 57.2

 

 

$ (1.1

)

$ 58.3

 

Income from continuing operations

 

 

$ 45.1

 

 

$ (0.2

)

$ 45.3

 

 

$ 49.3

 

 

$ (0.1

)

$ 49.4

 

 

$ 52.8

 

 

$ (0.8

)

$ 53.6

 

 

$ 31.3

 

 

$ (1.1

)

$ 32.4

 

Discontinued operations

 

 

$ (1.3

)

 

$   —

 

$ (1.5

)

 

$ (7.4

)

 

$   —

 

$ (7.5

)

 

$ (1.6

)

 

$   —

 

$ (2.4

)

 

$ (3.3

)

 

$   —

 

$ (4.4

)

Net income

 

 

$ 43.8

 

 

$ (0.2

)

$ 43.8

 

 

$ 41.9

 

 

$ (0.1

)

$ 41.9

 

 

$ 51.2

 

 

$ (0.8

)

$ 51.2

 

 

$ 28.0

 

 

$ (1.1

)

$ 28.0

 

Per common share (basic):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

$ 0.33

 

 

$ (0.00

)

$ 0.33

 

 

$ 0.37

 

 

$ (0.00

)

$ 0.37

 

 

$ 0.39

 

 

$ (0.01

)

$ 0.40

 

 

$ 0.24

 

 

$ (0.01

)

$ 0.25

 

Net income

 

 

$ 0.32

 

 

$ (0.00

)

$ 0.32

 

 

$ 0.31

 

 

$ (0.00

)

$ 0.31

 

 

$ 0.38

 

 

$ 0.00

 

$ 0.38

 

 

$ 0.21

 

 

$ 0.00

 

$ 0.21

 

Per common share (diluted):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

$ 0.33

 

 

$ (0.00

)

$ 0.33

 

 

$ 0.36

 

 

$ (0.00

)

$ 0.36

 

 

$ 0.39

 

 

$ (0.01

)

$ 0.40

 

 

$ 0.23

 

 

$ (0.01

)

$ 0.24

 

Net income

 

 

$ 0.32

 

 

$ (0.00

)

$ 0.32

 

 

$ 0.31

 

 

$ (0.00

)

$ 0.31

 

 

$ 0.38

 

 

$ 0.00

 

$ 0.38

 

 

$ 0.21

 

 

$ 0.00

 

$ 0.21

 

 

15.   SEGMENT INFORMATION

Our operations are organized into four reportable segments, with three primary reportable segments (i.e., “Equifax North America,” “Equifax Europe” and “Equifax Latin America”) dedicated to the marketing and selling of our core product lines (i.e., Information Services, Marketing Services and Personal Solutions) and related business operations within finite geographic regions. The fourth reportable segment (“Other”) pertains to an inactive product line. We also separately disclose the financial information pertaining to our divested operations. The accounting policies of the segments are the same as those described in our summary of significant accounting and reporting policies (Note 1). We evaluate the performance of these segments based on their operating revenues, operating income and operating margins, excluding any unusual or infrequent items (if any). Inter-segment sales and transfers are not material. The measurement criteria for segment profit or loss and segment assets are substantially the same for each reportable segment. All transactions between segments are accounted for at cost, and no timing differences occur between segments.

41




The 2004, 2003 and 2002 operating results for our Italian business and the commercial services business component in Spain have been reclassified to discontinued operations and are not included in the Equifax Europe’s reported segment results as shown below. (Note 3)

A more detailed description of these reportable segment and their products and services is as follows:

Equifax North America.   Comprises the Information Services, Marketing Services and Personal Solutions operating segments. Products and services are provided in the U.S. and Canada and consist of Information Services which includes consumer and commercial services such as credit information and credit scoring, credit modeling services, locate service, fraud detection and prevention services, mortgage loan origination information services, identity verification services and other consulting services; Marketing Services which includes credit card marketing services and consumer demographic and lifestyle information services; Predictive Analytical Science Services which includes consulting in the formulation and execution of decision strategies to maximize revenue opportunities for the customers of our Information and Marketing Services businesses; and Personal Solutions credit and finance products sold directly to individuals.

Equifax Europe.   Comprises the U.K. and Spain operating segments. Products and services offerings consist of Information Services including consumer and commercial services such as credit and financial information, credit scoring and credit modeling services; and Credit Marketing Services.

Equifax Latin America.   Comprises the Argentina, Brazil, Chile, El Salvador, Peru and Uruguay operating segments. Product and service offerings consist of Information Services including consumer and commercial services such as credit and financial information, credit scoring and credit modeling services and Credit Marketing Services.

Other.   Pertains to lottery services relating solely to a contract to provide services to the state of California. Services under this contract ceased during 2002. No further revenue or operating income has been received since the second quarter 2002 or is expected to reoccur.

Divested Operations.   Pertains to the Italian mortgage information services business divested in the fourth quarter of 2004 and the commercial services business component of Spain divested in the third quarter of 2002.

Segment information for 2004, 2003 and 2002 is as follows:

 

 

Twelve Months Ended
December 31,

 

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

Operating Revenue:

 

 

 

 

 

 

 

Equifax North America

 

 

 

 

 

 

 

Information Services

 

$

707.1

 

$

679.8

 

$

588.0

 

Marketing Services

 

236.1

 

265.7

 

274.8

 

Personal Solutions

 

96.1

 

69.5

 

39.4

 

Equifax North America

 

1,039.3

 

1,015.0

 

902.2

 

Equifax Europe

 

142.0

 

115.8

 

112.1

 

Equifax Latin America

 

91.5

 

79.9

 

76.6

 

Other

 

 

 

4.4

 

 

 

$

1,272.8

 

$

1,210.7

 

$

1,095.3

 

 

42




 

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

Operating Income (Loss):

 

 

 

 

 

 

 

Equifax North America

 

 

 

 

 

 

 

Information Services

 

$

299.5

 

$

296.9

 

$

267.2

 

Marketing Services

 

74.4

 

48.8

 

85.4

 

Marketing Services asset impairment & related charges

 

(2.4

)

(30.6

)

 

Marketing Services, net

 

72.0

 

18.2

 

85.4

 

Personal Solutions

 

17.6

 

9.2

 

9.0

 

Equifax North America

 

389.1

 

324.3

 

361.6

 

Equifax Europe

 

30.0

 

22.9

 

13.9

 

Equifax Latin America

 

17.0

 

20.0

 

20.3

 

Other

 

 

 

4.4

 

General corporate expense

 

(60.3

)

(53.0

)

(47.7

)

 

 

$

375.8

 

$

314.2

 

$

352.5

 

 

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

Total Assets at December 31:

 

 

 

 

 

 

 

Equifax North America

 

$

1,092.2

 

$

1,060.9

 

$

1,064.8

 

Equifax Europe

 

182.3

 

153.2

 

142.5

 

Equifax Latin America

 

214.5

 

198.7

 

161.8

 

Other

 

 

2.2

 

3.5

 

General corporate expense

 

67.8

 

102.2

 

94.9

 

 

 

1,556.8

 

1,517.2

 

1,467.5

 

Divested operations

 

0.4

 

36.1

 

39.4

 

 

 

$

1,557.2

 

$

1,553.3

 

$

1,506.9

 

 

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

Depreciation and amortization:

 

 

 

 

 

 

 

Equifax North America

 

$

54.6

 

$

66.0

 

$

53.8

 

Equifax Europe

 

10.1

 

10.6

 

12.1

 

Equifax Latin America

 

6.8

 

5.5

 

5.4

 

General corporate expense

 

9.6

 

12.0

 

8.4

 

 

 

$

81.1

 

$

94.1

 

$

79.7

 

 

 

 

2004

 

2003

 

2002

 

 

 

(In millions)

 

Capital expenditures (excluding property & equipment & other assets acquired in acquisitions):

 

 

 

 

 

 

 

Equifax North America

 

$

37.6

 

$

41.0

 

$

42.9

 

Equifax Europe

 

4.7

 

6.2

 

5.8

 

Equifax Latin America

 

2.5

 

5.3

 

5.3

 

General corporate expense

 

2.7

 

0.2

 

1.4

 

 

 

$

47.5

 

$

52.7

 

$

55.4

 

 

43




Financial information by geographic area is as follows:

 

 

2004

 

2003

 

2002

 

 

 

Amount

 

%

 

Amount

 

%

 

Amount

 

%

 

 

 

(In millions)

 

Operating Revenue (based on location of customer):

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

939.2

 

74

%

$

924.1

 

76

%

$

826.0

 

75

%

Canada

 

100.1

 

8

%

90.9

 

8

%

80.4

 

7

%

United Kingdom

 

124.3

 

10

%

101.6

 

8

%

97.6

 

9

%

Brazil

 

47.3

 

4

%

45.9

 

4

%

43.4

 

4

%

Other

 

61.9

 

5

%

48.2

 

4

%

47.9

 

4

%

 

 

$

1,272.8

 

100

%*

$

1,210.7

 

100

%

$

1,095.3

 

99

%*


*                    Does not total due to rounding

 

 

2004

 

2003

 

2002

 

 

 

Amount

 

%

 

Amount

 

%

 

Amount

 

%

 

 

 

(In millions)

 

Long-lived assets of continuing operations at December 31:

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

812.2

 

65

%

$

832.7

 

66

%

$

844.1

 

70

%

Canada

 

126.7

 

10

%

114.5

 

9

%

99.9

 

8

%

United Kingdom

 

122.5

 

10

%

91.6

 

7

%

84.0

 

7

%

Brazil

 

118.8

 

9

%

111.9

 

9

%

89.0

 

7

%

Other

 

77.4

 

6

%

107.8

 

9

%

96.2

 

8

%

 

 

$

1,257.6

 

100

%

$

1,258.5

 

100

%

$

1,213.2

 

100

%

 

16.   SUBSEQUENT EVENTS

On March 15, 2005, we completed the acquisition of APPRO Systems, Inc. (“APPRO”), a privately-held corporation headquartered in Baton Rouge, Louisiana. APPRO is a provider of automated credit risk management and financial technologies for consumer, commercial and retail banking lending operations. We paid a total of approximately $92.0 million in cash to the stockholders and optionholders of APPRO. The net cash impact to Equifax of the Merger will be approximately $74.0 million after disposition of certain assets.

We financed the purchase price of the acquisition through available cash and approximately $72.0 million in borrowings under our existing trade-receivables backed revolving credit facility.

Credit Bureau of Baton Rouge, Inc. (“CBBR”) is a 5% shareholder of APPRO and receives computerization services for its credit files from Equifax Information Services LLC, a subsidiary of Equifax, in the ordinary course of business. Steve Uffman is the founder, Chairman and Chief Executive Officer of APPRO and is the Chief Executive Officer of CBBR. Mr. Uffman will become Group Executive, Enabling Technologies of Equifax.

44




PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)           List of Documents Filed as a Part of This Report:

(1)         Financial Statements.   The following financial statements are included in Item 8 of Part II:

·        Consolidated Balance Sheets—December 31, 2004 and 2003;

·        Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002;

·        Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002;

·        Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the Years Ended December 31, 2004, 2003 and 2002;

·        Notes to Consolidated Financial Statements; and

·        Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements.

(2)         Financial Statement Schedules.   All schedules have been omitted because they are not required or applicable, or because the required information is included in the Consolidated Financial Statements or notes to these statements.

(3)         Exhibits.   A list of the exhibits required to be filed as part of this Report by Item 601 of Regulation S-K is set forth in the Exhibit Index on page 48 of this Form 10-K/A, which immediately precedes such exhibits, and is incorporated herein by reference.

(b)          Exhibits.   See Item 15(a)(3).

(c)    Financial Statement Schedules.   See Item 15(a)(2).

45




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, on April 1, 2005.

EQUIFAX INC.

 

(Registrant)

 

By:

*

 

 

Thomas F. Chapman

 

 

Chairman of the Board and Chief Executive Officer

 

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 indicated on April 1, 2005.

 

*

 

Thomas F. Chapman, Chairman of the Board and Chief Executive Officer

 

 

/s/ DONALD T. HEROMAN

 

 

Donald T. Heroman, Corporate Vice President and Chief Financial Officer (Principal Financial Officer)

 

 

*

 

 

Nuala M. King, Vice President and Corporate Controller (Principal Accounting Officer)

 

 

*

 

 

Lee A. Ault III, Director

 

 

*

 

 

John L. Clendenin, Director

 

 

*

 

 

James E. Copeland, Jr., Director

 

46




 

 

*

 

 

A. W. Dahlberg, Director

 

 

*

 

 

L. Phillip Humann, Director

 

 

*

 

 

Lee A. Kennedy, Director

 

 

*

 

 

Larry L. Prince, Director

 

 

*

 

 

D. Raymond Riddle, Director

 

 

*

 

 

Jacquelyn M. Ward, Director

*By:

/s/ DONALD T. HEROMAN

 

 

Donald T. Heroman, as Attorney-in-Fact

 

 

47




2004 Form 10-K/A
EXHIBIT INDEX

Exhibit
Number

 

 

 

Description

 

 

Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession

2.1*

 

Agreement and Plan of Merger dated as of February 3, 2005 between Equifax Inc. and APPRO Systems, Inc. including a schedule of omitted exhibits. Equifax agrees to furnish to the SEC, upon request, a copy of each exhibit to this Agreement and Plan of Merger.

 

 

Articles of Incorporation and Bylaws

3.1

 

Amended and Restated Articles of Incorporation of Equifax Inc. as amended to date (incorporated by reference to Exhibit B to Equifax’s Schedule 14A filed March 27, 1996).

3.2

 

Bylaws of Equifax Inc. as amended to date (incorporated by reference to Exhibit 3.2 to Equifax’s Form 10-K filed March 11, 2004).

 

 

Instruments Defining the Rights of Security Holders, Including Indentures

4.1

 

Rights Agreement dated as of October 25, 1995 between Equifax Inc. and SunTrust Bank, Atlanta, which includes as Exhibit A the form of Rights Certificate and as Exhibit B the Summary of Rights (incorporated by reference to Exhibit 4.3 to Equifax’s Form 10-K filed March 29, 2001).

4.2

 

Form of Rights Certificate (included in Exhibit 4.1).

4.3

 

Amendment to Rights Agreement, dated as of July 7, 2001, amending the Rights Agreement dated as of October 25, 1995 between Equifax Inc. and SunTrust Bank (incorporated by reference to Exhibit 99.1 to Equifax’s Form 8-A/A, Amendment No. 1 filed July 9, 2001).

4.4

 

Form of Indenture dated as of June 29, 1998 between Equifax Inc. and The First National Bank of Chicago, Trustee (under which Equifax’s 6.3% Notes due 2005 and 6.9% Debentures due 2028 were issued) (incorporated by reference to Exhibit 4.4 to Equifax’s Form 10-K filed March 31, 1999).

4.5

 

Indenture dated as of October 29, 2002 between Equifax Inc. and The Bank of New York, Trustee, relating to Equifax’s 4.95% Notes due November 1, 2007 (incorporated by reference to Exhibit 99.3 to Equifax’s Form 10-Q filed November 12, 2002).

4.6

 

Credit Agreement dated as of August 20, 2004 among Equifax Inc., Equifax PLC, the Lenders named therein and SunTrust Bank as Administrative Agent (incorporated by reference to Exhibit 4.1 to Equifax’s Form 8-K filed August 20, 2004).

4.7

 

Except as set forth in the preceding Exhibits 4.1 through 4.6, instruments defining the rights of holders of long-term debt securities of Equifax have been omitted where the total amount of securities authorized does not exceed 10% of the total assets of Equifax Inc. and its subsidiaries on a consolidated basis. Equifax agrees to furnish to the SEC, upon request, a copy of such instruments with respect to issuances of long-term debt of Equifax and its subsidiaries.

 

 

Management Contracts and Compensatory Plans or Arrangements

10.1

 

Equifax Inc. 1988 Performance Share Plan for Officers, as amended (incorporated by reference to Exhibit 10.1 to Equifax’s Form 10-K filed March 31, 1998).

48




 

10.2

 

Equifax Inc. 1997 Incentive Compensation Plan (incorporated by reference to Exhibit 10.2 to Equifax’s Form 10-K filed March 31, 1998).

10.3

 

Equifax Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.3 to Equifax’s Form 10-K filed March 31, 1998).

10.4*

 

Form of Tier 1 Change in Control Agreement.

10.5*

 

Form of Tier 2 Change in Control Agreement.

10.6

 

Equifax Inc. Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.8 to Equifax’s Form 10-K filed March 31, 1998).

10.7

 

Equifax Inc. Non-Employee Director Stock Option Plan and Form of Non-Employee Director Stock Option Agreement (incorporated by reference to Exhibit 10.16 to Equifax’s Form 10-K filed March 31, 1999).

10.8

 

Equifax Inc. Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.7 to Equifax’s Form 10-K filed March 29, 2001).

10.9

 

Supplemental Retirement Plan for Executives of Equifax Inc. (incorporated by reference to Exhibit 10.1 to Equifax’s Form 8-K filed November 15, 2004).

10.10

 

Equifax Inc. Executive Life and Supplemental Retirement Benefit Plan (incorporated by reference to Exhibit 10.8 to Equifax’s Form 10-K filed March 29, 2001).

10.11

 

Equifax Inc. Key Management Long-Term Incentive Plan (incorporated by reference to Exhibit 10.22 to Equifax’s Form 10-K filed March 29, 2001).

10.12

 

Equifax Inc. 2000 Stock Incentive Plan as amended (incorporated by reference to Exhibit 10.1 to Equifax’s Form 8-K filed November 3, 2004).

10.13

 

Form of Non-Qualified Stock Option Agreement under the Equifax Inc. 2000 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to Equifax’s Form 8-K filed September 9, 2004).

10.14

 

Form of Non-Qualified Stock Option Agreement under the Equifax Inc. 2000 Stock Incentive Plan (U.K. approved option version) (incorporated by reference to Exhibit 10.6 to Equifax’s Form 8-K filed September 9, 2004).

10.15

 

Form of Non-Qualified Stock Option Agreement under the Equifax Inc. 2000 Stock Incentive Plan (U.K. unapproved option version) (incorporated by reference to Exhibit 10.7 to Equifax’s Form 8-K filed September 9, 2004).

10.16

 

Form of Incentive Stock Option Agreement under the Equifax Inc. 2000 Stock Incentive Plan (incorporated by reference to Exhibit 10.8 to Equifax’s Form 8-K filed September 9, 2004).

10.17

 

Form of Deferred Share Award Agreement (restricted stock units) under the Equifax Inc. 2000 Stock Incentive Plan (incorporated by reference to Exhibit 10.9 to Equifax’s Form 8-K filed September 9, 2004).

10.18

 

Equifax Inc. Bonus Exchange Program (incorporated by reference to Exhibit 10.24 to Equifax’s Form 10-K filed March 29, 2001).

10.19

 

Bonus Deferral Arrangement (incorporated by reference to Exhibit 10.25 to Equifax’s Form 10-K filed March 12, 2002).

49




 

10.20

 

Equifax Inc. Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.27 to Equifax’s Form 10-K filed March 28, 2003).

10.21

 

Equifax Inc. Director Deferred Compensation Plan (incorporated by reference to Exhibit 10.28 to Equifax’s Form 10-K filed March 28, 2003).

10.22

 

Equifax Grantor Trust dated as of January 1, 2003 between Equifax Inc. and Wachovia Bank, N.A., Trustee (incorporated by reference to Exhibit 10.30 to Equifax’s Form 10-K filed March 28, 2003).

10.23

 

Employment Agreement dated as of October 25, 2002 between Equifax Inc. and Donald T. Heroman and form of Employee Confidentiality, Non-Solicitation and Assignment Agreement (incorporated by reference to Exhibit 10.32 to Equifax’s Form 10-K filed March 28, 2003).

10.24

 

Equifax Inc. Director and Executive Stock Deferral Plan as amended through March 31, 2003 (incorporated by reference to Exhibit 4 to Equifax’s Registration Statement on Form S-8 filed November 12, 2003).

10.25*

 

Separation Agreement and General Release of Claims dated as of November 10, 2003 between Equifax Inc. and Mark E. Miller.

10.26*

 

Transition Agreement dated as of December 17, 2004 between Equifax Inc. and Thomas F. Chapman.

10.27*

 

Form of Executive Officer Deferred Share Award Agreement.

10.28*

 

Form of Director Deferred Share Award Agreement.

10.29*

 

Compensation Arrangements for Non-Employee Directors.

10.30*

 

Summary of Executive Officer Compensation.

10.31*

 

Deferred Share Award Agreement dated February 3, 2005 of Thomas F. Chapman under Equifax Inc. 2000 Stock Incentive Plan and Transition Agreement dated December 17, 2004.

10.32*

 

Summary of Annual Incentive Plan.

 

 

Material Contracts

10.33

 

Agreement for Computerized Credit Reporting Services and Options to Purchase and Sell Assets dated as of August 1, 1988 among The Credit Bureau, Incorporated of Georgia, Equifax Inc., Computer Sciences Corporation, CSC Credit Services, Inc., Credit Bureau of Greater Cincinnati, Inc., Credit Bureau of Greater Kansas City, Inc., Johns Holding Company, CSC Credit Services of Minnesota, Inc. and CSC Accounts Management, Inc. (incorporated by reference to Exhibit 10.18 to Equifax’s Form 10-K filed March 30, 2000).

10.34

 

First through Third Amendments dated as of December 28, 1990, 1991 and September 27, 1991, respectively, to Agreement for Computerized Credit Reporting Services and Options to Purchase and Sell Assets (incorporated by reference to Exhibit 10.26 to Equifax’s Form 10-K filed March 31, 1997).

10.35

 

Fourth Amendment dated as of December 31, 1992 to Agreement for Computerized Services and Options to Purchase and Sell Assets (incorporated by reference to pages 8 through 16 and Exhibit 4.1 to Amendment No. 1 to Form S-3, Registration Statement No. 33-62820 filed June 17, 1993).

50




 

10.36

 

Fifth Amendment dated as of September 7, 1993 to Agreement for Computerized Credit Reporting Services and Options to Purchase and Sell Assets (incorporated by reference to Exhibit 10.21 to Equifax’s Form 10-K filed March 30, 2000).

10.37

 

Sixth Amendment dated as of 1994 to Agreement for Computerized Credit Reporting Services and Options to Purchase and Sell Assets (incorporated by reference to Exhibit 10.25 to Equifax’s Form 10-K filed March 30, 1995).

10.38

 

Lease Agreement dated as of March 18, 1994 between Equifax Inc. and William J. Wade, Individual Owner Trustee of Equifax Business Trust No. 1994-A, related to leveraged lease of JV White Technology Center (incorporated by reference to Exhibit 10.24 to Equifax’s Form 10-K filed March 30, 2000).

10.39

 

Groundlease Agreement dated as of March 5, 1998 between Rhodes Center Property, L.L.C. and Equifax Inc. related to lease of Equifax’s corporate headquarters (incorporated by reference to Exhibit 10.29 to Equifax’s Form 10-K filed March 31, 1999).

10.40

 

Sale, Sublease, Assignment and License Agreement dated as of November 15, 2002 between Equifax Inc. and Seisint, Inc. (incorporated by reference to Exhibit 10.33 to Equifax’s Form 10-K filed March 28, 2003).

10.41

 

Analytic Products and Services Master Contract Agreement between Equifax Inc. and Fair, Isaac and Company, Incorporated (incorporated by reference to Exhibit 10.34 to Equifax’s Form 10-K filed March 28, 2003).

10.42

 

Global Amendments between Equifax Credit Information Services, Inc. and Fair, Isaac and Company, Incorporated (incorporated by reference to Exhibit 10.35 to Equifax’s Form 10-K filed March 28, 2003).

10.43**

 

Agreement for Operations Support dated as of July 1, 2003 between International Business Machines Corporation and Equifax Inc. (incorporated by reference to Exhibit 10.1 to Equifax’s Form 10-Q/A filed April 29, 2004).

10.44

 

Credit and Security Agreement dated as of September 7, 2004, among Equifax Receivables Finance LLC, as Borrower, Equifax Capital Management, Inc., as Servicer, Blue Ridge Asset Funding Corporation, the Liquidity Banks from time to time party thereto, and Wachovia Bank, National Association, as Agent (incorporated by reference to Exhibit 10.1 to Equifax’s Form 8-K filed September 9, 2004).

10.45

 

(First Step) Receivables Sale Agreement dated as of September 7, 2004, among Equifax Inc., Equifax Information Services LLC, Equifax Direct Marketing Solutions LLC, Equifax Information Services of Puerto Rico Inc. and Compliance Data Center, Inc., as Originators and Equifax Capital Management, Inc., as Buyer (incorporated by reference to Exhibit 10.2 to Equifax’s Form 8-K filed September 9, 2004).

10.46

 

(Second Step) Receivables Sale Agreement dated as of September 7, 2004 between Equifax Capital Management, Inc., as Seller and Equifax Receivables Finance LLC, as Buyer (incorporated by reference to Exhibit 10.3 to Equifax’s Form 8-K filed September 9, 2004).

10.47

 

Performance Undertaking dated as of September 7, 2004 between Equifax Capital Management, as Seller and Equifax Receivables Finance LLC, as Buyer (incorporated by reference to Exhibit 10.4 to Equifax’s Form 8-K filed September 9, 2004).

51




 

 

Other Exhibits and Certifications

11.1

 

Calculation of earnings per share (The calculation of per share earnings is in Part II, Item 8, Note 1 to the Consolidated Financial Statements and is omitted in accordance with Section (b)(11) of Item 601 of Regulation S-K).

14.1

 

Code of Ethics (The Equifax Business Ethics and Compliance Program) (incorporated by reference to Exhibit 14 to Equifax’s Form 10-K filed March 11, 2004).

21.1*

 

Subsidiaries of Equifax Inc.

23.1***

 

Consent of Independent Registered Public Accounting Firm.

24.1*

 

Powers of Attorney (included on signature page).

31.1***

 

Rule 13a-14(a) Certification of Chief Executive Officer.

31.2***

 

Rule 13a-14(a) Certification of Chief Financial Officer.

32.1***

 

Section 1350 Certification of Chief Executive Officer.

32.2***

 

Section 1350 Certification of Chief Financial Officer.

99.1*

 

Financial measures that supplement generally accepted accounting principles.


*                    Filed with the original filing of this Report.

**             Document omits information pursuant to a Request for Confidential Treatment under  Rule 406 of the Securities Act of 1933 which has been granted by the SEC. Omitted portions have been filed separately with the SEC.

***  Filed electronically herewith.

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