Exhibit 99.1
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1550 Peachtree Street, N.W. Atlanta, Georgia 30309 |
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NEWS RELEASE |
Contact: |
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|
|
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Jeff Dodge |
|
David Rubinger |
Investor Relations |
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Media Relations |
(404) 885-8804 |
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(404) 885-8555 |
jeff.dodge@equifax.com |
|
david.rubinger@equifax.com |
Equifax Delivers Solid Operating Performance for First Quarter 2008; $503 Million Revenue; Operating Margin in USCIS Improved to 38.6 Percent
ATLANTA, April 21, 2008 Equifax Inc. (NYSE: EFX) today reported financial results for the quarter ended March 31, 2008. Revenue of $503.1 million for the quarter increased 24 percent over the first quarter of 2007. Operating income for the quarter grew 8 percent to $126.2 million. EBITDA, a non-GAAP financial measure, grew to $164.1 million, up 19 percent from the first quarter of 2007. Diluted earnings per share (EPS) was $0.50 compared to $0.54 in the same period of the prior year. On a non-GAAP basis excluding the impact of acquisition-related amortization expense (adjusted EPS), EPS was $0.60.
Through continued double-digit organic growth in International, North America Personal Solutions and North America Commercial Solutions and the acquisition of TALX, our strong results in the first quarter demonstrate the diversity and resiliency of our business model. In addition, although USCIS revenue declined for the quarter, its operating margin improved significantly over the fourth quarter of 2007, said Richard F. Smith, Equifax Chairman and Chief Executive Officer. During the first quarter, we accelerated our new product revenue and launched 25 new products globally. We have closed or are working on numerous cross-sell opportunities between our USCIS and TALX business units. We have also developed strong interest in The Work Number with many credit card issuers. Given current economic conditions, we continue to believe 2008 full year revenue will grow between 9 to 12 percent and adjusted EPS will be between $2.48 and $2.58.
· Double-digit revenue growth in our North America Personal Solutions, North America Commercial Solutions and International operating segments and results from TALX contributed to a 24 percent increase in revenue in the first quarter of 2008, when compared to the same period in 2007.
· Operating margin was 25.1 percent compared to 28.9 percent in the first quarter of 2007 and up from 24.5 percent in the fourth quarter of 2007. On a non-GAAP basis, excluding the impact of acquisition-related amortization expense, operating margin was 29.4 percent in 2008 compared to 30.8 percent in the first quarter of 2007.
· Net income was $65.7 million, a 5 percent decrease from the first quarter of 2007. Year over year net income growth was negatively impacted by increased intangible amortization expense related to the acquisition of TALX and interest expense on additional debt incurred to finance this acquisition. On a non-GAAP basis, excluding the impact of acquisition-related amortization expense, net income increased 7 percent.
· On February 8, 2008, our Board of Directors authorized a $250.0 million increase to our common stock repurchase program. During the first quarter 2008, we repurchased 1.1 million of our common shares on the open market for $37.0 million. At March 31, 2008, $276.9 million remained authorized for future share repurchases.
U.S. Consumer Information Solutions (USCIS)
Total revenue was $233.2 million in the first quarter of 2008, a 6 percent decrease from the first quarter of 2007. Compared to the first quarter of 2007:
· Online Consumer Information Solutions revenue was $156.9 million, down 3 percent;
· Mortgage Reporting Solutions revenue remained flat at $17.5 million;
· Credit Marketing Services revenue was $35.4 million, down 12 percent; and
· Direct Marketing Services revenue was $23.4 million, down 14 percent.
Operating margin for USCIS was 38.6 percent in the first quarter of 2008, up from 36.6 percent in the fourth quarter of 2007. Operating margin in the first quarter of 2007 was 41.2 percent.
International
Total revenue was $129.9 million in the first quarter of 2008, a 23 percent increase from the first quarter of 2007. In local currency, revenue was up 11 percent when compared to the same period in the prior year. Compared to the first quarter of 2007:
· Europe revenue was $47.7 million, up 13 percent in U.S. dollars (10 percent in local currency);
· Latin America revenue was $53.2 million, up 34 percent in U.S. dollars (18 percent in local currency); and
· Canada Consumer revenue was $29.0 million, up 22 percent in U.S. dollars (4 percent in local currency).
Operating margin for International was 30.5 percent in the first quarter of 2008 versus 30.7 percent in the first quarter of 2007.
TALX
Total revenue was $79.6 million and operating margin was 16.0 percent for the first quarter of 2008. In the quarter, approximately 6.8 million total records were added to the employment database, bringing total records in the database to 174.2 million, up 19 percent from a year ago.
North America Personal Solutions
Total revenue rose to $43.1 million, a 14 percent increase from the first quarter of 2007. Operating margin was 25.7 percent, up from 16.5 percent in the first quarter of 2007.
2
North America Commercial Solutions
Total revenue rose to $17.3 million, a 20 percent increase from the first quarter of 2007. Operating margin was 15.3 percent, up from 9.4 percent in the first quarter of 2007.
About Equifax
Equifax empowers businesses and consumers with information they can trust. A global leader in information solutions, employment and income verification and human resources business process outsourcing services, we leverage one of the largest sources of consumer and commercial data, along with advanced analytics and proprietary technology, to create customized insights that enrich both the performance of businesses and the lives of consumers.
Customers have trusted Equifax for over 100 years to deliver innovative solutions with the highest integrity and reliability. Businesses large and small rely on us for consumer and business credit intelligence, portfolio management, fraud detection, decisioning technology, marketing tools, HR/payroll services, and much more. We empower individual consumers to manage their personal credit information, protect their identity and maximize their financial well-being.
Headquartered in Atlanta, Georgia, Equifax Inc. employs approximately 7,000 people in 14 countries throughout North America, Latin America and Europe. Equifax is a member of Standard & Poors (S&P) 500® Index. Our common stock is traded on the New York Stock Exchange under the symbol EFX.
www.equifax.com
Earnings Conference Call and Audio Webcast
In conjunction with this release, Equifax will host a conference call tomorrow, April 22, 2008, at 8:30 a.m. (EDT) via a live audio webcast. To access the webcast, go to the Investor Center of our website at www.equifax.com. The discussion will be available via replay at the same site shortly after the conclusion of the webcast. This press release is also available at that website.
Supplemental Financial Information
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. Reported results for the prior year quarter do not include revenue, operating income or operating expenses from TALX, which we acquired on May 15, 2007. To give investors further basis for comparison, in addition to the historical reported results, we have provided pro forma results for the year ended December 31, 2006 and three months ended March 31, 2007. These pro forma results combine financial results from Equifax and TALX and are available in our Form 8-K/A filed on June 25, 2007 and on our website at www.equifax.com/Investors/SEC Filings.
Non-GAAP Financial Measures
This earnings release presents operating income and operating margin excluding acquisition-related amortization expense; net income and diluted EPS excluding acquisition-related amortization expense; and EBITDA, which we define as operating income adding back depreciation and amortization expense, all of which are important financial measures for Equifax but are not financial measures defined by GAAP.
3
These measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as alternative measures of operating income, operating margin, net income or EPS as determined in accordance with GAAP. EBITDA as we have calculated it may not be comparable to similarly titled measures reported by other companies.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and related notes are presented in the Q&A. This information can also be found under Investors/GAAP/Non-GAAP Measures on our website at www.equifax.com.
Forward-Looking Statements
Management believes certain statements in this earnings release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of managements views and assumptions regarding future events and business performance as of the time the statements are made. Management does not undertake any obligation to update these statements.
Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by Equifax, including restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions), as well as from developments beyond Equifaxs control, including but not limited to changes in worldwide and U.S. economic conditions that materially impact consumer spending, consumer debt and employment, changes in demand for Equifaxs products and services, our ability to develop new products and services, pricing and other competitive pressures, our ability to achieve targeted cost efficiencies, risks relating to illegal third party efforts to access data, risks associated with our ability to complete and integrate acquisitions and other investments, changes in laws and regulations governing our business, including federal or state responses to identity theft concerns, and the outcome of pending litigation, the impact of tax audits by the IRS or other taxing authorities. Additional factors are set forth in Equifaxs Annual Report on Form 10-K for the year ended December 31, 2007 under Item 1A, Risk Factors.
4
EQUIFAX
CONSOLIDATED STATEMENTS OF INCOME
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Three Months Ended |
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March 31, |
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2008 |
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2007 |
|
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(In millions, except per share amounts) |
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(Unaudited) |
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||||
Operating revenue |
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$ |
503.1 |
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$ |
405.1 |
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Operating expenses: |
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|
|
|
|
||
Cost of services (exclusive of depreciation and amortization below) |
|
202.8 |
|
169.3 |
|
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Selling, general and administrative expenses |
|
136.2 |
|
97.4 |
|
||
Depreciation and amortization |
|
37.9 |
|
21.4 |
|
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Total operating expenses |
|
376.9 |
|
288.1 |
|
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Operating income |
|
126.2 |
|
117.0 |
|
||
Interest expense |
|
(19.7 |
) |
(7.4 |
) |
||
Minority interests in earnings, net of tax |
|
(1.7 |
) |
(1.4 |
) |
||
Other income, net |
|
0.3 |
|
0.2 |
|
||
Income before income taxes |
|
105.1 |
|
108.4 |
|
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Provision for income taxes |
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(39.4 |
) |
(39.4 |
) |
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Net income |
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$ |
65.7 |
|
$ |
69.0 |
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|
|
|
|
|
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Basic earnings per common share |
|
$ |
0.51 |
|
$ |
0.55 |
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Weighted-average shares used in computing basic earnings per share |
|
129.6 |
|
124.9 |
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Diluted earnings per common share |
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$ |
0.50 |
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$ |
0.54 |
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Weighted-average shares used in computing diluted earnings per share |
|
132.1 |
|
127.3 |
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Dividends per common share |
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$ |
0.04 |
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$ |
0.04 |
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5
EQUIFAX
CONSOLIDATED BALANCE SHEETS
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March 31, |
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December 31, |
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2008 |
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2007 |
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(In millions, except par values) |
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(Unaudited) |
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ASSETS |
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Current assets: |
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|
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Cash and cash equivalents |
|
$ |
85.0 |
|
$ |
81.6 |
|
Trade accounts receivable, net of allowance for doubtful accounts of $8.8 and $8.9 at March 31, 2008 and December 31, 2007, respectively |
|
305.1 |
|
295.8 |
|
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Prepaid expenses |
|
34.2 |
|
25.8 |
|
||
Other current assets |
|
21.0 |
|
21.8 |
|
||
Total current assets |
|
445.3 |
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425.0 |
|
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Property and equipment: |
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|
|
|
|
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Capitalized internal-use software and system costs |
|
303.6 |
|
292.2 |
|
||
Data processing equipment and furniture |
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182.2 |
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184.7 |
|
||
Land, buildings and improvements |
|
107.8 |
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89.5 |
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Total property and equipment |
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593.6 |
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566.4 |
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Less accumulated depreciation and amortization |
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(320.9 |
) |
(306.9 |
) |
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Total property and equipment, net |
|
272.7 |
|
259.5 |
|
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Goodwill |
|
1,844.3 |
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1,834.6 |
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Indefinite-lived intangible assets |
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95.6 |
|
95.7 |
|
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Purchased intangible assets, net |
|
745.3 |
|
764.5 |
|
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Prepaid pension asset |
|
72.6 |
|
72.2 |
|
||
Other assets, net |
|
74.1 |
|
72.4 |
|
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Total assets |
|
$ |
3,549.9 |
|
$ |
3,523.9 |
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|
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|
|
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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|
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|
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Short-term debt and current maturities |
|
$ |
23.3 |
|
$ |
222.1 |
|
Accounts payable |
|
30.6 |
|
31.1 |
|
||
Accrued expenses |
|
73.2 |
|
79.4 |
|
||
Accrued salaries and bonuses |
|
35.2 |
|
63.5 |
|
||
Deferred revenue |
|
73.2 |
|
69.9 |
|
||
Income taxes payable |
|
28.5 |
|
0.2 |
|
||
Other current liabilities |
|
65.2 |
|
80.7 |
|
||
Total current liabilities |
|
329.2 |
|
546.9 |
|
||
Long-term debt |
|
1,363.8 |
|
1,165.2 |
|
||
Deferred income tax liabilities, net |
|
272.8 |
|
277.1 |
|
||
Long-term pension and other postretirement benefit liabilities |
|
65.9 |
|
62.8 |
|
||
Other long-term liabilities |
|
75.2 |
|
72.7 |
|
||
Total liabilities |
|
2,106.9 |
|
2,124.7 |
|
||
Shareholders equity: |
|
|
|
|
|
||
Preferred stock, $0.01 par value: Authorized shares - 10.0; Issued shares - none |
|
|
|
|
|
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Common stock, $1.25 par value: Authorized shares - 300.0; Issued shares - 188.9 and 188.5 at March 31, 2008 and December 31, 2007, respectively; Outstanding shares - 129.2 and 129.7 at March 31, 2008 and December 31, 2007, respectively |
|
235.9 |
|
235.6 |
|
||
Paid-in capital |
|
1,052.2 |
|
1,040.8 |
|
||
Retained earnings |
|
2,089.5 |
|
2,030.0 |
|
||
Accumulated other comprehensive loss |
|
(162.6 |
) |
(170.5 |
) |
||
Treasury stock, at cost, 56.1 shares and 55.1 shares at March 31, 2008 and December 31, 2007, respectively |
|
(1,716.1 |
) |
(1,679.0 |
) |
||
Stock held by employee benefits trusts, at cost, 3.6 shares and 3.7 shares at March 31, 2008 and December 31, 2007, respectively |
|
(55.9 |
) |
(57.7 |
) |
||
Total shareholders equity |
|
1,443.0 |
|
1,399.2 |
|
||
Total liabilities and shareholders equity |
|
$ |
3,549.9 |
|
$ |
3,523.9 |
|
6
EQUIFAX
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Three Months Ended |
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||||
|
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March 31, |
|
||||
|
|
2008 |
|
2007 |
|
||
(In millions) |
|
(Unaudited) |
|
||||
Operating activities: |
|
|
|
|
|
||
Net income |
|
$ |
65.7 |
|
$ |
69.0 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
||
Depreciation and amortization |
|
37.9 |
|
21.4 |
|
||
Stock-based compensation expense |
|
6.1 |
|
4.0 |
|
||
Tax effects of stock-based compensation plans |
|
1.5 |
|
1.8 |
|
||
Excess tax benefits from stock-based compensation plans |
|
(0.8 |
) |
(1.7 |
) |
||
Deferred income taxes |
|
(5.8 |
) |
(1.7 |
) |
||
Changes in assets and liabilities, excluding effects of acquisitions: |
|
|
|
|
|
||
Accounts receivable, net |
|
(6.8 |
) |
(6.9 |
) |
||
Prepaid expenses and other current assets |
|
(4.1 |
) |
(15.8 |
) |
||
Other assets |
|
(1.4 |
) |
(10.7 |
) |
||
Current liabilities, excluding debt |
|
(20.6 |
) |
6.8 |
|
||
Other long-term liabilities, excluding debt |
|
3.4 |
|
(1.3 |
) |
||
Cash provided by operating activities |
|
75.1 |
|
64.9 |
|
||
Investing activities: |
|
|
|
|
|
||
Capital expenditures |
|
(30.0 |
) |
(14.6 |
) |
||
Acquisitions, net of cash acquired |
|
(6.0 |
) |
(3.9 |
) |
||
Cash used in investing activities |
|
(36.0 |
) |
(18.5 |
) |
||
Financing activities: |
|
|
|
|
|
||
Net short-term repayments |
|
(199.5 |
) |
(23.0 |
) |
||
Net borrowings (repayments) under long-term revolving credit facilities |
|
200.0 |
|
(25.0 |
) |
||
Proceeds from issuance of long-term debt |
|
2.1 |
|
|
|
||
Payments on long-term debt |
|
(2.9 |
) |
|
|
||
Treasury stock purchases |
|
(37.0 |
) |
(0.4 |
) |
||
Dividends paid |
|
(5.2 |
) |
(5.0 |
) |
||
Proceeds from exercise of stock options |
|
5.6 |
|
6.5 |
|
||
Excess tax benefits from stock-based compensation plans |
|
0.8 |
|
1.7 |
|
||
Other |
|
(0.2 |
) |
0.1 |
|
||
Cash used in financing activities |
|
(36.3 |
) |
(45.1 |
) |
||
Effect of foreign currency exchange rates on cash and cash equivalents |
|
0.6 |
|
0.5 |
|
||
Increase in cash and cash equivalents |
|
3.4 |
|
1.8 |
|
||
Cash and cash equivalents, beginning of period |
|
81.6 |
|
67.8 |
|
||
Cash and cash equivalents, end of period |
|
$ |
85.0 |
|
$ |
69.6 |
|
7
Common Questions & Answers (Unaudited) |
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(Dollars in millions) |
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|
|
1. |
Can you provide a further analysis of operating revenue and operating income by operating segment? |
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Operating revenue and operating income consist of the following components: |
|
|
Three Months Ended March 31, |
|
||||||||||||||
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|
|
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% of |
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|
|
% of |
|
|
|
|
|
||||
(in millions) |
|
2008 |
|
Revenue |
|
2007 |
|
Revenue |
|
$ Change |
|
% Change |
|
||||
Operating revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Consumer Information Solutions |
|
$ |
233.2 |
|
46 |
% |
$ |
247.1 |
|
61 |
% |
$ |
(13.9 |
) |
-6 |
% |
|
International |
|
129.9 |
|
26 |
% |
105.6 |
|
26 |
% |
24.3 |
|
23 |
% |
||||
TALX |
|
79.6 |
|
16 |
% |
|
|
nm |
|
79.6 |
|
nm |
|
||||
North America Personal Solutions |
|
43.1 |
|
9 |
% |
38.0 |
|
9 |
% |
5.1 |
|
14 |
% |
||||
North America Commercial Solutions |
|
17.3 |
|
3 |
% |
14.4 |
|
4 |
% |
2.9 |
|
20 |
% |
||||
Total operating revenue |
|
$ |
503.1 |
|
100 |
% |
$ |
405.1 |
|
100 |
% |
$ |
98.0 |
|
24 |
% |
|
|
|
Three Months Ended March 31, |
|
||||||||||||||
|
|
|
|
Operating |
|
|
|
Operating |
|
|
|
|
|
||||
(in millions) |
|
2008 |
|
Margin |
|
2007 |
|
Margin |
|
$ Change |
|
% Change |
|
||||
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Consumer Information Solutions |
|
$ |
90.1 |
|
38.6 |
% |
$ |
101.7 |
|
41.2 |
% |
$ |
(11.6 |
) |
-11 |
% |
|
International |
|
39.6 |
|
30.5 |
% |
32.4 |
|
30.7 |
% |
7.2 |
|
22 |
% |
||||
TALX |
|
12.7 |
|
16.0 |
% |
|
|
nm |
|
12.7 |
|
nm |
|
||||
North America Personal Solutions |
|
11.1 |
|
25.7 |
% |
6.3 |
|
16.5 |
% |
4.8 |
|
76 |
% |
||||
North America Commercial Solutions |
|
2.6 |
|
15.3 |
% |
1.4 |
|
9.4 |
% |
1.2 |
|
95 |
% |
||||
General Corporate Expense |
|
(29.9 |
) |
nm |
|
(24.8 |
) |
nm |
|
(5.1 |
) |
-21 |
% |
||||
Total operating income |
|
$ |
126.2 |
|
25.1 |
% |
$ |
117.0 |
|
28.9 |
% |
$ |
9.2 |
|
8 |
% |
|
2. |
Can you provide a further analysis of operating revenue in the product and services lines, or geographic regions within each operating segment? |
|
Operating revenue consists of the following components: |
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
|
|
% of |
|
|
|
% of |
|
|
|
|
|
|||
(in millions) |
|
2008 |
|
Revenue |
|
2007 |
|
Revenue |
|
$ Change |
|
% Change |
|
|||
Operating revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Online Consumer Information Solutions |
|
$ |
156.9 |
|
31 |
% |
$ |
162.1 |
|
40 |
% |
$ |
(5.2 |
) |
-3 |
% |
Mortgage Reporting Solutions |
|
17.5 |
|
3 |
% |
17.5 |
|
4 |
% |
|
|
0 |
% |
|||
Credit Marketing Services |
|
35.4 |
|
7 |
% |
40.4 |
|
10 |
% |
(5.0 |
) |
-12 |
% |
|||
Direct Marketing Services |
|
23.4 |
|
5 |
% |
27.1 |
|
7 |
% |
(3.7 |
) |
-14 |
% |
|||
Total U.S. Consumer Information Solutions |
|
233.2 |
|
46 |
% |
247.1 |
|
61 |
% |
(13.9 |
) |
-6 |
% |
|||
Europe |
|
47.7 |
|
9 |
% |
42.2 |
|
10 |
% |
5.5 |
|
13 |
% |
|||
Latin America |
|
53.2 |
|
11 |
% |
39.6 |
|
10 |
% |
13.6 |
|
34 |
% |
|||
Canada Consumer |
|
29.0 |
|
6 |
% |
23.8 |
|
6 |
% |
5.2 |
|
22 |
% |
|||
Total International |
|
129.9 |
|
26 |
% |
105.6 |
|
26 |
% |
24.3 |
|
23 |
% |
|||
The Work Number |
|
36.3 |
|
7 |
% |
|
|
nm |
|
36.3 |
|
nm |
|
|||
Tax and Talent Management Services |
|
43.3 |
|
9 |
% |
|
|
nm |
|
43.3 |
|
nm |
|
|||
Total TALX |
|
79.6 |
|
16 |
% |
|
|
nm |
|
79.6 |
|
nm |
|
|||
North America Personal Solutions |
|
43.1 |
|
9 |
% |
38.0 |
|
9 |
% |
5.1 |
|
14 |
% |
|||
North America Commercial Solutions |
|
17.3 |
|
3 |
% |
14.4 |
|
4 |
% |
2.9 |
|
20 |
% |
|||
Total operating revenue |
|
$ |
503.1 |
|
100 |
% |
$ |
405.1 |
|
100 |
% |
$ |
98.0 |
|
24 |
% |
nm - not meaningful
8
Common Questions & Answers (Unaudited)
(Dollars in millions)
3. |
What drove the fluctuation in the effective tax rate? |
|
|
|
Our effective income tax rate was 37.5% for the three months ended March 31, 2008, up from 36.3% for the same period in 2007 which included favorable discrete items recorded during 2007 related to state and foreign taxes. |
4. |
Can you provide depreciation and amortization by segment? |
|
|
|
Depreciation and amortization are as follows: |
|
|
Three Months Ended |
|
||||
|
|
March 31, |
|
||||
|
|
2008 |
|
2007 |
|
||
U.S. Consumer Information Solutions |
|
$ |
11.3 |
|
$ |
11.6 |
|
International |
|
6.1 |
|
4.8 |
|
||
TALX |
|
15.7 |
|
|
|
||
North America Personal Solutions |
|
0.7 |
|
0.9 |
|
||
North America Commercial Solutions |
|
1.3 |
|
1.4 |
|
||
General Corporate Expense |
|
2.8 |
|
2.7 |
|
||
Total depreciation and amortization |
|
$ |
37.9 |
|
$ |
21.4 |
|
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 March 31, 2008 |
|
||||||||
|
|
Operating Revenue |
|
Operating Income |
|
||||||
|
|
Amount |
|
% |
|
Amount |
|
% |
|
||
Canada * |
|
$ |
5.1 |
|
17 |
% |
$ |
2.1 |
|
19 |
% |
Europe |
|
1.5 |
|
4 |
% |
0.4 |
|
3 |
% |
||
Latin America |
|
6.6 |
|
17 |
% |
1.9 |
|
15 |
% |
||
Total Equifax |
|
$ |
13.2 |
|
3 |
% |
$ |
4.4 |
|
4 |
% |
* Canada financial results are split between our North America Commercial Solutions and International operating segments.
9
Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP Financial Measures (Unaudited)
(Dollars in millions, except per share amounts)
A. |
Reconciliation of operating income to adjusted operating income, excluding acquisition-related amortization expense and presentation of adjusted operating margin: |
|
|
Three Months Ended |
|
||||
|
|
March 31, |
|
||||
|
|
2008 |
|
2007 |
|
||
|
|
|
|
|
|
||
Revenue |
|
$ |
503.1 |
|
$ |
405.1 |
|
Operating income |
|
$ |
126.2 |
|
$ |
117.0 |
|
Acquisition-related amortization expense |
|
21.7 |
|
7.8 |
|
||
Adjusted operating income, excluding acquisition-related amortization expense |
|
$ |
147.9 |
|
$ |
124.8 |
|
Adjusted operating margin |
|
29.4 |
% |
30.8 |
% |
B. |
Reconciliation of net income to net income, adjusted for acquisition-related amortization expense and net income to diluted EPS, adjusted for acquisition-related amortization expense: |
|
|
Three Months Ended |
|
|
|
|
|
|||||
|
|
March 31, |
|
|
|
|
|
|||||
|
|
2008 |
|
2007 |
|
$ Change |
|
% Change |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
65.7 |
|
$ |
69.0 |
|
$ |
(3.3 |
) |
-5 |
% |
Acquisition-related amortization expense, net of tax |
|
13.6 |
|
5.0 |
|
8.6 |
|
172 |
% |
|||
Net income, adjusted for acquisition-related amortization expense |
|
$ |
79.3 |
|
$ |
74.0 |
|
$ |
5.3 |
|
7 |
% |
Diluted EPS, adjusted for acquisition-related amortization expense |
|
$ |
0.60 |
|
$ |
0.58 |
|
$ |
0.02 |
|
3 |
% |
Weighted-average shares used in computing diluted EPS |
|
132.1 |
|
127.3 |
|
|
|
|
|
C. |
Reconciliation of operating income to EBITDA (operating income before depreciation and amortization expense): |
|
|
Three Months Ended |
|
|
|
|
|
|||||
|
|
March 31, |
|
|
|
|
|
|||||
|
|
2008 |
|
2007 |
|
$ |
Change |
|
% Change |
|
||
|
|
|
|
|
|
|
|
|
|
|||
Operating income |
|
$ |
126.2 |
|
$ |
117.0 |
|
$ |
9.2 |
|
8 |
% |
Depreciation and amortization expense |
|
37.9 |
|
21.4 |
|
16.5 |
|
77 |
% |
|||
EBITDA |
|
$ |
164.1 |
|
$ |
138.4 |
|
$ |
25.7 |
|
19 |
% |
10
Notes to Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP Financial Measures
Adjusted operating income and operating margin, excluding acquisition-related amortization expense - Management believes excluding the acquisition-related amortization expense from the calculation of operating income and margin is useful because management excludes acquisition-related amortization expense when measuring operating profitability, evaluating performance trends, and setting performance objectives, and it allows investors to evaluate our performance for different periods on a more comparable basis by excluding items that relate to acquisition-related intangible assets.
Net income and diluted EPS, adjusted for acquisition-related amortization expense - - We calculate these financial measures by excluding acquisition-related amortization expense, net of tax, from the determination of net income and also in the calculation of diluted EPS. These financial measures are not prepared in conformity with GAAP. Management believes that these measures are useful because management excludes acquisition-related amortization expense when measuring operating profitability, evaluating performance trends, and setting performance objectives, and it allows investors to evaluate our performance for different periods on a more comparable basis by excluding items that relate to acquisition-related intangible assets.
EBITDA - - We calculate EBITDA by adding back depreciation and amortization expense to operating income. This financial measure is not prepared in conformity with GAAP since it excludes depreciation and amortization expense, as well as interest expense, minority interest in earnings (net of tax), other income, net, and provision for income taxes from earnings. This non-GAAP financial measure should not be considered as an alternative to net income, operating income, operating margin, or cash provided by operating activities. Management believes that EBITDA is a useful supplemental measure to investors because it is consistent with how management evaluates our financial performance and is frequently used by securities analysts and other interested parties to evaluate companies in our industry. Additionally, management uses this measure as an important metric for forecasting and analyzing future periods, as well as evaluating future investing and financing decisions.
11