Exhibit 99.1

 

 

1550 Peachtree Street, N.W.  Atlanta, Georgia 30309

 

NEWS RELEASE

 

Contact:
Jeff Dodge	David Rubinger
Investor Relations	Media Relations
(404) 885-8804	(404) 885-8555
jeff.dodge@equifax.com	david.rubinger@equifax.com

 

Equifax Reports Solid, Broad-Based Results with

Record Revenue in Second Quarter of 2006

 

ATLANTA, July 20, 2006 — Equifax Inc. (NYSE: EFX) today reported second quarter of 2006 earnings with record revenue. In the quarter ended June 30, revenue was $387.7 million, a 7 percent increase from the second quarter of 2005. Net income was $69.6 million, an 11 percent increase from the same quarter in 2005. Diluted earnings per share totaled $0.53, a 13 percent increase from the second quarter of 2005.

 

On a non-GAAP basis, excluding the impact of certain litigation matters in the second quarter of 2006 and the incremental impact of adopting Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS 123R”), net income was $66.5 million, a 6 percent increase from the second quarter of 2005, and diluted earnings per share totaled $0.51, an 8 percent increase from the second quarter of 2005.

 

“Once again, North America, Europe and Latin America provided great momentum in a very challenging environment. I am also pleased with the growth of our commercial business in the U.S.,” said Richard F. Smith, Equifax Chairman and Chief Executive Officer.  “Our European operations improved significantly, while Personal Solutions made meaningful progress on its long-term targets for growth and profitability.”

 

Second Quarter 2006 Highlights

 

•      Operating margin was 25 percent in the second quarter of 2006 compared to 29 percent in the second quarter of 2005. On a non-GAAP basis, excluding the impact of certain litigation matters, operating margin was 28 percent in the second quarter of 2006.

•      Cash provided by operating activities for the second quarter of 2006 was $90.7 million.

•      Equifax repurchased 1.4 million shares of its common stock on the open market for $52.0 million.

•      In June 2006, Equifax consummated a settlement of claims against certain former selling shareholders of Naviant, Inc., an acquisition in 2002, which resulted in a $14.1 million non-taxable gain recorded in other income, net and $0.11 impact on diluted earnings per share.

 

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•      Equifax recognized a loss contingency in operating expenses associated with certain litigation matters related to Personal Solutions, which resulted in an $8.7 million loss, net of tax, and $0.07 impact on diluted earnings per share.

•      The negative incremental impact during the second quarter of 2006 due to our adoption on January 1, 2006 of SFAS 123R was $2.3 million, net of tax, of additional stock-based compensation expense and $0.02 on diluted earnings per share.

 

North America

Total revenue was $311.6 million in the second quarter, a 5 percent increase from the second quarter of 2005. Operating margin for North America was 33 percent in the second quarter of 2006 compared to 38 percent in the second quarter of 2005. On a non-GAAP basis, excluding the impact of certain litigation matters, operating margin was 37 percent in the second quarter of 2006.

 

•      North America Information Services revenue was $211.1 million, up 3 percent compared to the second quarter of 2005.

•      Marketing Services revenue was $69.3 million, up 10 percent compared to the second quarter of 2005.

•      Personal Solutions revenue was $31.2 million, up 7 percent compared to the second quarter of 2005.

 

Europe

Total revenue was $37.6 million, up 7 percent compared to the second quarter of 2005. In local currency, revenue was up 9 percent when compared to the same period in the prior year. Operating margin was 25 percent, up from 22 percent in the second quarter of 2005.

 

Latin America

Total revenue rose to $38.5 million, up 26 percent compared to the second quarter of 2005. In local currency, revenue was up 17 percent when compared to the same period in the prior year. Operating margin was 29 percent, up from 26 percent in the second quarter of 2005.

 

About Equifax

 

Equifax Inc. is a global leader in information technology that enables and secures global commerce with consumers and businesses. We are one of the largest sources of consumer and commercial data. Utilizing our databases, advanced analytics and proprietary enabling technology, we provide real-time answers for our customers. This innovative ability to transform information into intelligence is valued by customers across a wide range of industries and markets. Headquartered in Atlanta, Georgia, Equifax employs approximately 4,700 people in 13 countries throughout North America, Latin America and Europe. Equifax was founded 107 years ago, and today is a member of Standard & Poor’s (S&P) 500® Index. Our common stock is traded on the New York Stock Exchange under the symbol EFX.

 

www.equifax.com

 

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Earnings Conference Call and Webcast

 

Equifax’s quarterly teleconference to discuss the second quarter earnings release will be held today at 9:00 a.m. (EDT). The live audio Webcast of the speakers’ presentations will be available at www.equifax.com and a replay will be available at the same site shortly after the conclusion of the Webcast. This press release, the financial tables, as well as other supplemental information, are also available at that Web site.

 

Supplemental Financial Information and Non-GAAP Financial Measures

 

The Common Questions and Answers (Unaudited) (“Q&A”) that are a part of this press release include supplemental financial information which Equifax believes is useful to assess its operating performance.  The following financial measures included herein or in the Q&A are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”): free cash flow; net income and diluted earnings per share, excluding certain litigation matters and incremental impact of SFAS 123R; and operating income (loss) and operating margin, excluding the litigation loss contingency for certain business segments.  A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is presented in the Q&A. This information can also be found under “Our Company/Investor Center/Non-GAAP/GAAP Financial Measures” on our Web site at www.equifax.com.  Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

 

Caution Concerning Forward-Looking Statements

 

Statements in this press release that relate to Equifax’s future plans, objectives, expectations, performance, events and the like may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Future events, risks and uncertainties, individually or in the aggregate, could cause our actual results to differ materially from those expressed or implied in these forward-looking statements. Those factors include, but are not limited to, changes in worldwide and U.S. economic conditions that materially impact consumer spending and consumer debt, changes in demand for Equifax’s products and services, our ability to develop new products and services, pricing and other competitive pressures, risks relating to illegal third party efforts to access data, risks associated with the integration of acquisitions and other investments, changes in laws and regulations governing our business, including federal or state responses to identity theft concerns, the outcome of pending litigation and certain other factors discussed under the caption “Risk Factors” in the Management’s Discussion and Analysis section of Equifax’s Annual Report on Form 10-K for the year ended December 31, 2005, and in our other filings with the Securities and Exchange Commission. Equifax assumes no obligation to update any forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made.

 

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EQUIFAX INC.

CONSOLIDATED STATEMENTS OF INCOME

 

		Three Months Ended June 30,
(In millions, except per share amounts)		2006			2005
		(Unaudited)
Operating revenue		$	387.7		$	363.4
Operating expenses:
Cost of services (exclusive of depreciation and amortization below)		161.8			147.8
Selling, general and administrative expenses		109.0			88.8
Depreciation and amortization		20.5			20.1
Total operating expenses		291.3			256.7
Operating income		96.4			106.7
Interest expense		(8.2		)	(9.8		)
Minority interests in earnings, net of tax		(1.1		)	(1.3		)
Other income, net		15.0			2.4
Income before income taxes		102.1			98.0
Provision for income taxes		(32.5		)	(35.4		)
Net income		$	69.6		$	62.6
Basic earnings per common share		$	0.54		$	0.48
Shares used in computing basic earnings per share		128.1			129.8
Diluted earnings per common share		$	0.53		$	0.47
Shares used in computing diluted earnings per share		130.4			132.7
Dividends per common share		$	0.04		$	0.04

 

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EQUIFAX INC.

CONSOLIDATED STATEMENTS OF INCOME

 

		Six Months Ended June 30,
(In millions, except per share amounts)		2006			2005
		(Unaudited)
Operating revenue		$	761.7		$	706.8
Operating expenses:
Cost of services (exclusive of depreciation and amortization below)		311.7			290.3
Selling, general and administrative expenses		202.8			167.8
Depreciation and amortization		41.6			40.0
Total operating expenses		556.1			498.1
Operating income		205.6			208.7
Interest expense		(16.1		)	(18.9		)
Minority interests in earnings, net of tax		(2.0		)	(2.6		)
Other income, net		15.5			5.1
Income before income taxes		203.0			192.3
Provision for income taxes		(70.5		)	(71.1		)
Net income		$	132.5		$	121.2
Basic earnings per common share		$	1.03		$	0.93
Shares used in computing basic earnings per share		128.6			129.8
Diluted earnings per common share		$	1.01		$	0.91
Shares used in computing diluted earnings per share		131.0			132.6
Dividends per common share		$	0.08		$	0.07

 

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EQUIFAX INC.

CONSOLIDATED BALANCE SHEETS

 

		June 30,			December 31,
(In millions, except par values)		2006			2005
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	48.2		$	37.5
Trade accounts receivable, net of allowance for doubtful accounts of $10.6 at June 30, 2006 and $9.6 at December 31, 2005		239.0			216.0
Prepaid expenses		24.9			17.9
Other current assets		10.4			9.0
Total current assets		322.5			280.4
Property and equipment:
Capitalized internal-use software and system costs		225.3			205.9
Data processing equipment and furniture		131.4			124.5
Land, buildings and improvements		29.2			29.1
Total property and equipment		385.9			359.5
Less accumulated depreciation		(227.6		)	(202.7		)
Total property and equipment, net		158.3			156.8
Goodwill		804.8			791.2
Indefinite-lived intangible assets		95.3			95.0
Purchased intangible assets, net		250.2			263.4
Prepaid pension asset		191.5			183.7
Other assets, net		61.1			61.0
Total assets		$	1,883.7		$	1,831.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current maturities		$	95.6		$	92.3
Accounts payable		16.8			5.9
Accrued expenses		51.4			54.0
Accrued salaries and bonuses		26.1			40.7
Deferred revenue		63.9			49.2
Accrued legal expenses		20.0			6.1
Other current liabilities		38.8			46.3
Total current liabilities		312.6			294.5
Long-term debt		433.8			463.8
Deferred income tax liabilities, net		129.8			126.1
Other long-term liabilities		114.8			126.8
Total liabilities		991.0			1,011.2
Shareholders’ equity:
Preferred stock, $0.01 par value: Authorized shares - 10.0; Issued shares - none		—			—
Common stock, $1.25 par value: Authorized shares - 300.0; Issued shares - 185.9 at June 30, 2006 and 185.2 at December 31, 2005; Outstanding shares - 127.3 at June 30, 2006 and 129.2 at December 31, 2005		232.4			231.5
Paid-in capital		587.5			559.0
Retained earnings		1,647.0			1,525.1
Accumulated other comprehensive loss		(138.3		)	(157.8		)
Treasury stock, at cost, 54.4 shares at June 30, 2006 and 51.7 shares at December 31, 2005		(1,374.2		)	(1,274.6		)
Stock held by employee benefits trusts, at cost, 4.2 shares at June 30, 2006 and 4.3 shares at December 31, 2005		(61.7		)	(62.9		)
Total shareholders’ equity		892.7			820.3
Total liabilities and shareholders’ equity		$	1,883.7		$	1,831.5

 

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EQUIFAX INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Six Months Ended June 30,
(In millions)		2006			2005
		(Unaudited)
Operating activities:
Net income		$	132.5		$	121.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		41.6			40.0
Stock-based compensation expense		10.8			3.8
Tax effects of stock-based compensation plans		4.2			7.4
Excess tax benefits from stock-based compensation plans		(2.9		)	—
Deferred income taxes		0.3			13.3
Changes in assets and liabilities, excluding effects of acquisitions:
Accounts receivable, net		(20.5		)	(16.8		)
Prepaid expenses and other current assets		(6.6		)	0.2
Other assets		(4.7		)	(13.6		)
Current liabilities, excluding debt		14.3			(15.2		)
Other long-term liabilities, excluding debt		(13.0		)	(8.0		)
Cash provided by operating activities		156.0			132.3
Investing activities:
Capital expenditures		(26.5		)	(22.1		)
Acquisitions, net of cash acquired		—			(104.5		)
Other		(0.1		)	10.1
Cash used in investing activities		(26.6		)	(116.5		)
Financing activities:
Net short-term borrowings		3.3			11.4
Net repayments under long-term revolving credit facilities		(30.0		)	—
Treasury stock purchases		(98.6		)	(55.0		)
Dividends paid		(10.3		)	(9.4		)
Proceeds from exercise of stock options		13.4			31.0
Excess tax benefits from stock-based compensation plans		2.9			—
Other		0.1			0.5
Cash used in financing activities		(119.2		)	(21.5		)
Effect of foreign currency exchange rates on cash and cash equivalents		0.5			(1.7		)
Increase (decrease) in cash and cash equivalents		10.7			(7.4		)
Cash and cash equivalents, beginning of period		37.5			52.1
Cash and cash equivalents, end of period		$	48.2		$	44.7

 

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Common Questions & Answers (Unaudited)

(Dollars in millions)

 

1.     Can you provide a further analysis of operating revenue and operating income?

 

Operating revenue and operating income consist of the following components:

 

		Three Months Ended June 30,
					% of					% of
		2006			Revenue		2005			Revenue		$ Change			% Change
Operating revenue:
North America
Information Services		$	211.1		54	%	$	205.8		57	%	$	5.3		3	%
Marketing Services		69.3			18	%	62.8			17	%	6.5			10	%
Personal Solutions		31.2			8	%	29.3			8	%	1.9			7	%
North America - Total		311.6			80	%	297.9			82	%	13.7			5	%
Europe		37.6			10	%	35.0			10	%	2.6			7	%
Latin America		38.5			10	%	30.5			8	%	8.0			26	%
Total operating revenue		$	387.7		100	%	$	363.4		100	%	$	24.3		7	%

 

		Three Months Ended June 30,
					Profit					Profit
		2006			Margin		2005			Margin		$ Change			% Change
Operating income:
North America
Information Services		$	88.4		42	%	$	88.1		43	%	$	0.3		0	%
Marketing Services		24.4			35	%	19.9			32	%	4.5			22	%
Personal Solutions		(11.3		)	-36	%	4.3			15	%	(15.6		)	-361	%
North America - Total		101.5			33	%	112.3			38	%	(10.8		)	-10	%
Europe		9.5			25	%	7.7			22	%	1.8			24	%
Latin America		11.0			29	%	8.1			26	%	2.9			36	%
General Corporate Expense		(25.6		)	nm		(21.4		)	nm		(4.2		)	-20	%
Total operating income		$	96.4		25	%	$	106.7		29	%	$	(10.3	)	-10	%

 

		Six Months Ended June 30,
					% of					% of
		2006			Revenue		2005			Revenue		$ Change			% Change
Operating revenue:
North America
Information Services		$	419.0		55	%	$	398.3		56	%	$	20.7		5	%
Marketing Services		134.9			17	%	121.6			17	%	13.3			11	%
Personal Solutions		61.8			8	%	59.1			9	%	2.7			5	%
North America - Total		615.7			80	%	579.0			82	%	36.7			6	%
Europe		72.5			10	%	71.7			10	%	0.8			1	%
Latin America		73.5			10	%	56.1			8	%	17.4			31	%
Total operating revenue		$	761.7		100	%	$	706.8		100	%	$	54.9		8	%

 

		Six Months Ended June 30,
					Profit					Profit
		2006			Margin		2005			Margin		$ Change			% Change
Operating income:
North America
Information Services		$	177.5		42	%	$	172.4		43	%	$	5.1		3	%
Marketing Services		44.9			33	%	38.2			31	%	6.7			18	%
Personal Solutions		(10.4		)	-17	%	7.3			12	%	(17.7		)	-243	%
North America - Total		212.0			34	%	217.9			38	%	(5.9		)	-3	%
Europe		18.3			25	%	15.7			22	%	2.6			17	%
Latin America		20.4			28	%	14.4			26	%	6.0			42	%
General Corporate Expense		(45.1		)	nm		(39.3		)	nm		(5.8		)	-15	%
Total operating income		$	205.6		27	%	$	208.7		29	%	$	(3.1	)	-2	%

 

nm - - not meaningful

 

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2.     Can you provide a further analysis of operating revenue in the North America segment?

 

North America operating revenue consists of the following components:

 

		Three Months Ended June 30,
					% of					% of
		2006			Revenue		2005			Revenue		$ Change			% Change
North America operating revenue:
U.S. Consumer and Commercial Services		$	162.0		52	%	$	156.2		53	%	$	5.8		4	%
Mortgage Services		19.3			6	%	21.8			7	%	(2.5		)	-12	%
Canadian Operations		29.8			10	%	27.8			9	%	2.0			7	%
Total Information Services		211.1			68	%	205.8			69	%	5.3			3	%
Credit Marketing Services		40.7			13	%	38.4			13	%	2.3			6	%
Direct Marketing Services		28.6			9	%	24.4			8	%	4.2			17	%
Total Marketing Services		69.3			22	%	62.8			21	%	6.5			10	%
Personal Solutions		31.2			10	%	29.3			10	%	1.9			7	%
Total North America operating revenue		$	311.6		100	%	$	297.9		100	%	$	13.7		5	%

 

		Six Months Ended June 30,
					% of					% of
		2006			Revenue		2005			Revenue		$ Change			% Change
North America operating revenue:
U.S. Consumer and Commercial Services		$	321.5		52	%	$	300.6		52	%	$	20.9		7	%
Mortgage Services		39.4			6	%	43.2			8	%	(3.8		)	-9	%
Canadian Operations		58.1			10	%	54.5			9	%	3.6			7	%
Total Information Services		419.0			68	%	398.3			69	%	20.7			5	%
Credit Marketing Services		80.4			13	%	73.0			13	%	7.4			10	%
Direct Marketing Services		54.5			9	%	48.6			8	%	5.9			12	%
Total Marketing Services		134.9			22	%	121.6			21	%	13.3			11	%
Personal Solutions		61.8			10	%	59.1			10	%	2.7			5	%
Total North America operating revenue		$	615.7		100	%	$	579.0		100	%	$	36.7		6	%

 

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3.     Can you provide an analysis of the components of operating expenses as a percentage of operating revenue?

 

Components of operating expenses as a percentage of operating revenue are as follows:

 

		Three Months Ended June 30,				Six Months Ended June 30,
		2006		2005		2006		2005
Cost of services		42	%	41	%	41	%	41	%
Selling, general and administrative expenses		28	%	24	%	27	%	24	%
Depreciation and amortization		5	%	6	%	5	%	6	%
Total operating expenses		75	%	71	%	73	%	71	%

 

4.     Can you provide depreciation and amortization by segment?

 

Depreciation and amortization are as follows:

 

		Three Months Ended June 30,						Six Months Ended June 30,
		2006			2005			2006			2005
North America		$	14.5		$	14.4		$	29.5		$	28.5
Europe		1.4			1.4			2.8			3.0
Latin America		1.9			1.7			3.7			3.4
General Corporate		2.7			2.6			5.6			5.1
Total depreciation and amortization		$	20.5		$	20.1		$	41.6		$	40.0

 

5.     What was the currency impact on the foreign operations?

 

The U.S. dollar impact on operating revenue and operating income is as follows:

 

		Three Months Ended June 30, 2006
		Operating Revenue					Operating Income
		Amount			%		Amount			%
Canada		$	3.0		10	%	$	1.1		9	%
Europe		(0.5		)	-2	%	(0.1		)	-1	%
Latin America		2.9			9	%	0.7			8	%
		$	5.4		1	%	$	1.7		2	%

 

		Six Months Ended June 30, 2006
		Operating Revenue					Operating Income
		Amount			%		Amount			%
Canada		$	4.6		8	%	$	1.7		8	%
Europe		(3.3		)	-5	%	(0.8		)	-5	%
Latin America		6.7			12	%	1.5			10	%
		$	8.0		1	%	$	2.4		1	%

 

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