FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ended _________________________
Commission File Number 1-6605
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EQUIFAX INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-0401110
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(State or other jurisdiction of I.R.S.Employer
incorporation or organization) Identification No.)
1550 Peachtree Street, N.W. Atlanta, Georgia
P.O. Box 4081, Atlanta, Georgia 30302
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(Address of principal executive offices) (Zip Code)
404-885-8000
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(Registrant's telephone number, including area code)
None
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 2000
- ----------------------------- -----------------------------
Common Stock, $1.25 Par Value 141,154,302
INDEX
Page No.
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets --
March 31, 2000 and December 31, 1999 2 - 3
Consolidated Statements of Income --
Three Months Ended March 31, 2000 and 1999 4
Consolidated Statement of Shareholders'
Equity -- Three Months Ended March 31, 2000 5
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 - 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
1
PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
(In thousands) 2000 1999
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(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 108,542 $ 136,596
Trade accounts receivable, net 299,605 302,809
Other receivables 90,505 87,873
Deferred income tax assets 27,237 28,015
Other current assets 55,980 54,140
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Total current assets 581,869 609,433
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PROPERTY AND EQUIPMENT:
Land, buildings and improvements 34,385 39,140
Data processing equipment and furniture 260,985 258,314
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295,370 297,454
Less accumulated depreciation 189,311 181,964
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106,059 115,490
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GOODWILL 625,245 612,551
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PURCHASED DATA FILES 165,554 157,701
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OTHER ASSETS 357,964 344,606
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$1,836,691 $1,839,781
========== ==========
The notes on pages 7 through 9 are an integral part of these consolidated
balance sheets.
2
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
(In thousands, except par value) 2000 1999
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(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current maturities of long-term debt $ 78,198 $ 79,866
Accounts payable 177,302 177,427
Accrued salaries and bonuses 23,053 38,203
Income taxes payable 20,603 12,005
Other current liabilities 190,851 197,294
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Total current liabilities 490,007 504,795
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LONG-TERM DEBT, LESS CURRENT MATURITIES 913,342 933,708
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LONG-TERM DEFERRED REVENUE 19,948 22,547
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DEFERRED INCOME TAX LIABILITIES 76,071 73,132
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OTHER LONG-TERM LIABILITIES 86,617 89,974
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COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY:
Common stock, $1.25 par value; shares authorized -
300,000; issued - 174,586 in 2000 and 174,259 in 1999;
outstanding - 134,040 in 2000 and 134,001 in 1999 218,233 217,824
Preferred stock, $0.01 par value; shares authorized -
10,000; issued and outstanding - none in 2000 or 1999 -- --
Paid-in capital 308,572 304,532
Retained earnings 756,011 726,827
Accumulated other comprehensive loss (Note 4) (154,164) (161,982)
Treasury stock, at cost, 33,432 shares in 2000
and 34,640 shares in 1999 (787,298) (816,213)
Stock held by employee benefits trusts, at cost,
7,115 shares in 2000 and 5,619 shares in 1999 (90,648) (55,363)
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Total shareholders' equity 250,706 215,625
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$ 1,836,691 $ 1,839,781
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The notes on pages 7 through 9 are an integral part of these consolidated
balance sheets.
3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
(In thousands, except per share amounts) 2000 1999
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Operating revenue $ 451,081 $ 421,504
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Costs of services 270,087 248,758
Selling, general and administrative expenses 93,390 83,936
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Total operating expenses 363,477 332,694
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Operating income 87,604 88,810
Other income, net 953 482
Interest expense (16,374) (15,135)
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Income before income taxes 72,183 74,157
Provision for income taxes 29,956 30,256
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Net income $ 42,227 $ 43,901
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Per common share (basic):
Net income $ 0.32 $ 0.32
========= =========
Shares used in computing basic earnings per share 133,917 139,127
========= =========
Per common share (diluted):
Net income $ 0.31 $ 0.31
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Shares used in computing diluted earnings per share 135,150 141,656
========= =========
Dividends per common share $ 0.0925 $ 0.0900
========= =========
The notes on pages 7 through 9 are an integral part of these consolidated
statements.
4
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED
(In thousands) MARCH 31, 2000
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COMMON STOCK:
Balance at beginning of period $ 217,824
Shares issued under stock plans 409
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Balance at end of period $ 218,233
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PAID-IN CAPITAL:
Balance at beginning of period $ 304,532
Shares issued under stock plans 3,525
Dividends from employee benefits trusts 515
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Balance at end of period $ 308,572
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RETAINED EARNINGS:
Balance at beginning of period $ 726,827
Net income 42,227
Cash dividends (13,043)
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Balance at end of period $ 756,011
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ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 4):
Balance at beginning of period $(161,982)
Adjustment during period 7,818
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Balance at end of period $(154,164)
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TREASURY STOCK:
Balance at beginning of period $(816,213)
Cost of shares repurchased (6,517)
Shares issued under stock plans 108
Cost of shares transferred to employee benefits trusts 35,324
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Balance at end of period $(787,298)
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STOCK HELD BY EMPLOYEE BENEFITS TRUSTS:
Balance at beginning of period $ (55,363)
Cost of shares transferred from treasury stock (35,324)
Cost of shares reissued under stock plans 39
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Balance at end of period $ (90,648)
=========
The notes on pages 7 through 9 are an integral part of this consolidated
statement.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED
MARCH 31,
(In thousands) 2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 42,227 $ 43,901
Adjustments to reconcile net income to net cash
cash provided by operating activities:
Depreciation and amortization 35,230 29,675
Changes in assets and liabilities:
Accounts receivable, net 608 (5,091)
Current liabilities, excluding debt (9,661) (704)
Other current assets (5,401) 1,489
Deferred income taxes 2,406 2,163
Other long-term liabilities, excluding debt (5,229) (5,226)
Other assets (689) 3,282
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Net cash provided by operating activities 59,491 69,489
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (5,558) (8,845)
Additions to other assets, net (15,787) (20,041)
Acquisitions, net of cash acquired (35,951) (5,253)
Investments in unconsolidated affiliates (4,000) --
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Net cash used in investing activities (61,296) (34,139)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on short-term debt (58) (22)
Net (payments) borrowings on long-term debt (11,424) 68,032
Dividends paid (13,043) (13,039)
Treasury stock purchases (6,517) (60,834)
Proceeds from exercise of stock options 3,586 1,858
Other 718 694
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Net cash used in financing activities (26,738) (3,311)
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Effect of foreign currency exchange rates on cash 489 (5,178)
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Net cash (used) provided (28,054) 26,861
Cash and cash equivalents, beginning of period 136,596 90,617
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Cash and cash equivalents, end of period $ 108,542 $ 117,478
========= =========
The notes on pages 7 through 9 are an integral part of these consolidated
statements.
6
EQUIFAX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2000
1. BASIS OF PRESENTATION:
The financial statements included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
This information reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of the statement of financial
position of the Company as of March 31, 2000, and the results of operations and
cash flows for the three month periods ending March 31, 2000 and 1999. All
adjustments made have been of a normal recurring nature. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. The Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1999.
2. NATURE OF OPERATIONS:
The Company principally provides information services to businesses to help them
grant credit and authorize and process credit card and check transactions. The
principal lines of business are information services and payment services (see
Note 7 for segment information). The principal markets for both information and
payment services are retailers, banks, and other financial institutions, with
information services also serving the telecommunications and utility industries.
The Company's operations are predominately located within the United States,
with foreign operations principally located within Canada, the United Kingdom
and Brazil.
3. USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
4. SHAREHOLDERS' EQUITY:
Treasury Stock. During the first three months of 2000, the Company repurchased
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296,000 of its common shares through open market transactions at an aggregate
cost of $6,517,000. As of March 31, 2000, approximately $94 million remained
authorized for future share repurchases.
Stock Held by Employee Benefits Trusts. During the first quarter of 2000, the
- ----------------------------------------
Company established its third employee benefits trust and transferred 1.5
million treasury shares into that trust. The shares were transferred at the
average cost of shares in treasury, and totaled $35,324,000.
Comprehensive Income. For the three-month periods ending March 31, 2000 and
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1999, comprehensive income (loss) is as follows:
Three Months Ended
March 31
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(in thousands) 2000 1999
- -------------- ---- ----
Net income $ 42,227 $ 43,901
Change in cumulative foreign
currency translation adjustment 7,818 (118,576)
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Comprehensive income (loss) $ 50,045 $ (74,675)
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7
Accumulated other comprehensive loss at March 31, 2000 and December 31, 1999
consists of the following components:
(in thousands) March 31, 2000 December 31, 1999
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Cumulative foreign currency
translation adjustment $(149,462) $(157,280)
Adjustment for minimum liability
under supplemental retirement plan (4,702) (4,702)
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Accumulated other comprehensive loss $(154,164) $(161,982)
========= =========
5. AGREEMENT WITH COMPUTER SCIENCES CORPORATION:
The Company has an agreement with Computer Sciences Corporation (CSC) under
which CSC-owned credit bureaus and certain CSC affiliate bureaus utilize the
Company's credit database service. CSC and these affiliates retain ownership of
their respective credit files and the revenues generated by their credit
reporting activity. The Company receives a processing fee for maintaining the
database and for each report supplied. The initial term of the agreement expired
in July 1998, and was renewable at the option of CSC for successive ten-year
periods. CSC has renewed the agreement for the ten-year period beginning August
1, 1998. The agreement provides CSC with an option to sell its credit reporting
businesses to the Company, and provides the Company with an option to purchase
CSC's credit reporting businesses 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. Both
options expire in 2013. As of August 1, 1998, the option price is determined by
appraisal.
6. ACQUISITIONS:
During the first three months of 2000, the Company acquired the credit files of
three affiliates located in the United States and seven affiliates in Canada, as
well as a card processing business in Chile. These acquisitions were accounted
for as purchases, had a total purchase price of $35.9 million, and were acquired
for cash. They resulted in $22.1 million of goodwill and $11.6 million of
purchased data files. Their results of operations have been included in the
consolidated statements of income from the dates of acquisition and were not
material.
On May 1, 2000, the Company acquired the Consumer Information Services group
from R.L. Polk & Co. for approximately $260 million in cash. This acquisition
will be accounted for as a purchase and is not expected to be material to the
Company's results of operations.
7. SEGMENT INFORMATION:
Operating revenue and operating income by segment for the first quarter of 2000
and 1999 are as follows (in thousands):
First Quarter
Operating Revenue: 2000 1999
- ------------------ ---- ----
North American Information Services $ 196,917 $ 191,992
Payment Services 177,384 151,129
Equifax Europe 45,428 46,053
Equifax Latin America 28,943 29,921
Other 2,409 2,409
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$ 451,081 $ 421,504
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Operating Income (Loss):
- ------------------------
North American Information Services $ 65,103 $ 65,679
Payment Services 26,485 28,637
Equifax Europe 587 (1,688)
Equifax Latin America 4,703 4,187
Other 2,217 2,217
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Operating Contribution 99,095 99,032
General Corporate Expense (11,491) (10,222)
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$ 87,604 $ 88,810
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8
Total assets by segment at March 31, 2000 and December 31, 1999 are as follows:
March 31, December 31,
(in thousands) 2000 1999
- -------------- ---- ----
North American Information Services $ 637,159 $ 612,002
Payment Services 508,883 499,646
Equifax Europe 277,066 297,048
Equifax Latin America 269,997 277,015
Other 3,736 3,951
Corporate 139,850 150,119
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$1,836,691 $1,839,781
========== ==========
The decline in total assets within the Equifax Europe segment was due primarily
to declines in the U.K. and Spain currency exchange rates between periods. The
decline in General Corporate assets related primarily to a decrease in cash and
cash equivalents.
8. EARNINGS PER SHARE (EPS):
The income amount used in the numerator of the Company's EPS calculations is the
same for both basic and diluted EPS. A reconciliation of the average outstanding
shares used in the denominator of the calculations is as follows:
First Quarter
(in thousands) 2000 1999
- -------------- ---- ----
Weighted average shares
outstanding (basic) 133,917 139,127
Effect of dilutive securities:
Stock options 1,043 2,232
Performance share plan 190 297
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Weighted average shares
outstanding (diluted) 135,150 141,656
======= =======
9. RECENT ACCOUNTING PRONOUNCEMENT:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities, and is
effective (as amended by SFAS No. 137) on January 1, 2001 for the Company. Based
on its current level of derivative instruments and hedging activities, the
Company does not believe the adoption of SFAS 133 will have a significant impact
on its financial statements or reported earnings.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations - (first quarter of 2000 compared to the first quarter of
1999)
Revenue for the first quarter of 2000 increased 7.0% over the prior year.
Acquisitions, net of divestitures, contributed approximately 0.4 percentage
points of the increase, while changes in foreign currency exchange rates
negatively impacted revenue growth by about 0.5 percentage points. Operating
income of $87.6 million declined $1.2 million, or 1.4% from the prior year. The
first quarter of 2000 includes $11.0 million of losses related to investments in
emerging businesses within the North American Information Services and Payment
Services segments, compared with $4.0 million of losses in the first quarter of
1999. The 1999 quarter also includes non-recurring "year 2000" expenses of
approximately $3.5 million, and $7.0 million of pretax profit from software
license sales in the Payment Services segment.
Net income declined 3.8% to $42.2 million in the first quarter due primarily to
lower operating income and $1.2 million of higher interest expense. Diluted
earnings per share were $0.31 in both periods. Average outstanding diluted
shares declined 4.6% between quarters, primarily the result of 1999 share
repurchases.
The following discussion analyzes operating results for the Company's reportable
segments, general corporate expense, and consolidated other income and interest
expense.
North American Information Services
- -----------------------------------
Revenue in North American Information Services, which includes U.S. Credit
Information and Marketing Services, U.S. Risk Management Services, Mortgage
Information Services, Canadian Operations, and three emerging businesses
(Knowledge Engineering, Consumer Direct, and Equifax Secure) increased 2.6% with
growth tempered by lower revenue within U.S. Risk Management Services and
Mortgage Services. Acquisitions and divestitures had only a minimal impact on
this segment's revenue growth in the quarter.
U.S. Credit Information and Marketing Services revenue was up 6.1% in the
quarter driven by growth in both marketing services and credit information
services. The growth in marketing services revenue was due to higher volume from
financial services and telecommunication industry customers, while the growth in
credit information services revenue was driven by increased volume from
telecommunications and automotive industry customers. Within credit information
services, unit volumes increased 11% compared with the first quarter of 1999,
while average prices declined 7.5%. The decline in average prices resulted from
a change in the mix of customer business, as the majority of unit growth was
generated by large volume customers at lower than average unit prices.
Revenue in U.S. Risk Management Services was down 13.0% in the quarter due to
the June 1999 sale of three non-strategic offices as well as lower revenue from
the receivables outsourcing business resulting from reduced volumes and the
attrition of a customer that took its business in house in 1999. Mortgage
Information Services revenue declined 24.5% in the quarter due to higher
interest rates, which adversely impacted refinancing activity. Canadian revenues
were up 5.7% (1.6% in local currency).
Emerging business revenue increased $2.1 million in the quarter, with 74% of
this growth coming from the Internet related activities of Consumer Direct and
Equifax Secure.
Operating income for North American Information Services was down .9% in the
quarter due to $5.2 million of increased losses in emerging businesses. These
losses included developmental expenses within Equifax Secure related to remote
authentication and digital certificate services, as well as increased
investments in Knowledge Engineering and Consumer Direct. Absent these three
emerging businesses, this segment's operating income increased 6.7%, driven by a
10.2% increase in profit from U.S. Credit Information and Marketing Services and
a 15.8% increase in Canadian profits. These increases were partially offset by
lower operating income within U.S. Risk Management and Mortgage Services due to
their revenue declines.
10
Payment Services
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Revenue in Payment Services, which consists of Card Solutions, Check Solutions
and Card Software, increased 17.4% in the first quarter. In January 2000,
Payment Services expanded its operations in Latin America by acquiring a card
processing business in Chile. Exclusive of this acquisition, this segment's
revenue was up 16.5% in the first quarter, with the June 1999 start-up of a card
processing operation in the U.K contributing 4.0 percentage points of the
increase. First quarter revenue growth, however, was tempered by a $7.0 million
reduction in license sales within Card Software.
Excluding the effects of the acquisition in Chile, revenue within Card Solutions
increased 28.1%, with 6.8 percentage points of the increase attributable to the
card processing operation in the U.K. The remaining growth was driven by higher
revenue within the U.S. card business, which increased 21.5% in the quarter due
to growth in processing of both merchant and cardholder transactions. Revenue
from the Brazilian card processing operation was up 20.5% (23.9% in local
currency) due to growth in the cardholder account base.
Revenue in Check Solutions was up 15.3% in the quarter, driven by an 18.1%
increase in revenue from the U.S. check business. The increase in U.S. check
revenue was due to volume growth, with approximately one half of the increase
due to new business from Sears, Roebuck and Co. resulting from a 1999 agreement
to provide check authorization services at the retailer's U.S. locations. This
contract will become comparable on a year-to-year basis in the last half of
2000. Revenue from the U.K. check business was up 5.0% (6.7% in local currency),
while revenue from Canadian operations increased 17.7% (13.1% in local
currency).
Revenue in Card Software was down in the quarter due to a $7.0 million reduction
in license sales between quarters. Going forward, the Company is de-emphasizing
card software sales as it grows its global card processing operations which will
utilize this proprietary software to generate a recurring revenue stream.
However, future software sales are likely to occur from time to time, as
circumstances arise.
Payment Services operating income declined 7.5% in the first quarter. Operating
income benefited from a 13.9% increase in profit from the U.S. card operations
and a 45.8% profit improvement from Check Solutions. These increases resulted
from the revenue improvements as well as continued cost management. However,
this segment's operating income was adversely affected by the $7.0 million
reduction in software license sales between periods and $1.8 million increased
operating loss attributable to emerging international card operations,
substantially related to start-up costs associated with the U.K. card operation.
Equifax Europe
- --------------
Equifax Europe consists of operations primarily in the United Kingdom and Spain.
First quarter revenue declined 1.4% from the prior year. Excluding the impact of
exchange rate declines in the U.K. and Spain, revenue increased 2.4%, with
improvements in U.K. consumer and commercial information services and Spain
partially offset by lower U.K. auto lien and risk management revenue. The
decline in auto lien information services resulted from increased competition
within that market.
This segment reported operating income of $.6 million in the first quarter, a
$2.3 million improvement from 1999's $1.7 million operating loss as a result of
continued cost management. The first quarter operating income marks the third
consecutive quarter of profitable results in this segment, and profits are
expected to continue to improve.
Equifax Latin America
- ---------------------
Equifax Latin America consists of a commercial information company in Brazil as
well as credit information companies in Chile and Argentina and majority
interests in credit information companies in Peru and El Salvador. This
segment's first quarter revenue declined $1.0 million or 3.3% from the prior
year due primarily to moderate exchange rate declines in Brazil and Chile. In
local currency, Brazil revenue increased 7.7%, while revenue in Chile and
Argentina continued to be negatively impacted by their economies. Operations in
Mexico were shut down during the quarter due to its poor outlook for future
returns. The shut down had only a minimal financial impact in the quarter.
This segment's operating income increased 12.3% in the first quarter, as higher
income from Brazil and lower losses from Mexico resulting from its shutdown were
partially offset by lower income from Argentina and Chile due to from their
declines in revenue.
11
Other
- -----
This segment's revenue and operating income remained comparable between periods.
Its operations consist solely of a subcontract expiring in 2002 related to HISI,
the Company's lottery subsidiary.
General Corporate Expense
General corporate expense increased $1.3 million in the first quarter versus the
prior year. This increase resulted primarily from higher administrative,
marketing, and technology expenses.
Other Income and Interest Expense
- ---------------------------------
The increase in other income between years resulted primarily from increased
interest income from invested funds in Latin America. Interest expense increased
$1.2 million in the quarter due to the higher level of borrowing associated with
1999 share repurchases.
FINANCIAL CONDITION
Net cash provided by operations for the first three months of 2000 totaled $59.5
million. Dividend payments and capital expenditures, exclusive of acquisitions,
were met with these internally generated funds.
Other significant outlays in the first three months of 2000 included $6.5
million of treasury stock purchases (Note 4) and $40.0 million for acquisitions
(Note 6) and equity investments, as well as $11.5 million in debt repayments.
These items were principally financed by excess cash from operations and the use
of existing cash reserves.
Capital expenditures for 2000 are currently estimated to be approximately $120
million, with $21.3 million spent in the first three months. Additional
expenditures may occur as opportunities arise. In February 2000, the Company
signed an agreement to purchase the Consumer Information Solutions (CIS) Group
from R.L. Polk & Co. for approximately $260 million in cash. The CIS Group
provides consumer marketing information services to a wide range of industries.
The transaction was completed on May 1, 2000, and the CIS Group operations are
expected to be slightly dilutive to the Company's earnings in the year 2000 and
accretive to earnings thereafter.
At March 31, 2000, approximately $94 million remained authorized under the
Company's share repurchase program. However, the Company does not expect to
repurchase additional shares during 2000. The remaining 2000 capital
expenditures, exclusive of acquisitions, are expected to be met with internally
generated funds. At March 31, 2000, $440 million remained available under the
Company's $750 million revolving credit facility to fund future capital
requirements, including the CIS Group acquisition mentioned above. Should CSC
exercise its option to sell its credit reporting business to the Company (Note
5), additional sources of financing would be required. However, the CSC
agreement calls for a six-month notice period, and management believes the
Company would have alternative sources of liquidity available to fund this
potential purchase through the public debt markets and bank lines of credit.
Management believes that the Company's liquidity will remain strong in both the
short and long terms, and that the Company has sufficient sources of external
funding to finance all of its capital needs, if necessary.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, primarily from changes in
foreign currency exchange rates and interest rates.
In the normal course of business, the balance sheets and results of
operations of foreign subsidiaries can be impacted by changes in exchange rates.
The Company's position is to not hedge against this risk due to the significant
cost involved. At March 31, 2000, the Company had no material intercompany
balances with foreign affiliates that were short-term in nature or material
obligations in a foreign currency. From time to time, as such balances or
obligations arise, the Company may consider hedging to minimize its exposure for
these transactions.
12
The Company chooses to have a mix of fixed-rate and variable-rate debt
in its portfolio of debt obligations. Accordingly, the Company's earnings can be
affected by the impact that changes in interest rates have on its variable-rate
obligations. At March 31, 2000, approximately $379 million (38%) of the
Company's short-term and long-term debt was in variable-rate facilities. At this
level, if market interest rates increased 1%, interest expense would increase
approximately $3.8 million per year (pre-tax).
PART II. OTHER INFORMATION
--------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
A list of exhibits included as part of this report is set forth
in the Exhibit Index appearing elsewhere in this report, and is
incorporated by reference.
(b) Reports on Form 8-K
Registrant did not file any reports on Form 8-K during the
quarter for which this report is filed.
13
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized officers.
EQUIFAX INC.
(Registrant)
Date: May 11, 2000 /s/Thomas F. Chapman
--------------------------
Thomas F. Chapman, Chairman
and Chief Executive Officer
Date: May 11, 2000 /s/Philip J. Mazzilli
---------------------------
Philip J. Mazzilli
Executive Vice President and
Chief Financial Officer
14
EXHIBIT INDEX
Exhibit Number Description of Index
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10.1 Equifax Inc. Executive Life and Supplemental
Retirement Benefit Plan (U.S.)
10.2 Form of Equifax Inc. Executive Life and
Supplemental Retirement Benefit Plan (U.S.)
Split Dollar Life Insurance Agreement
10.3 Equifax Inc. Stock Option Exchange Program
Terms and Conditions
10.4 Grantor Trust Agreement
27 Financial Data Schedule, submitted to the
Securities and Exchange Commission in
electronic format