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COMMITMENTS AND CONTINGENCIES
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6 Months Ended |
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Jun. 30, 2011
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| COMMITMENTS AND CONTINGENCIES |
6. COMMITMENTS AND CONTINGENCIES
Data Processing, Outsourcing Services and Other
Agreements. We have separate agreements with
IBM, Tata Consultancy Services and others to outsource portions of
our computer data processing operations, applications development,
maintenance and related functions and to provide certain other
administrative and operational services. The agreements expire
between 2011 and 2016. The estimated aggregate minimum contractual
obligation remaining under these agreements was approximately $100
million at December 31, 2010, with no future year’s minimum
contractual obligation expected to exceed approximately $40
million. Annual payment obligations in regard to these agreements
vary due to factors such as the volume of data or transactions
processed; changes in our servicing needs as a result of new
product offerings, acquisitions or divestitures; the introduction
of significant new technologies; foreign currency; or the general
rate of inflation. 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, or CSC, 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 activities. We receive a
processing fee for maintaining the database and for each report
supplied. The agreement will expire on July 31, 2018, and is
renewable at the option of CSC for successive ten-year periods. The
agreement provides us with an option to purchase CSC’s credit
reporting business if it 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 December 31, 2010, the price range would
be approximately $625 million to $700 million. This estimate is
based solely on our internal analysis of the value of the business,
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 our
estimate.
Guarantees and General Indemnifications. We may
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 letters of credit was
not material at June 30, 2011, and all have a remaining maturity of
one year or less. The maximum potential future payments we could be
required to make under the guarantees is not material at June 30,
2011.
We
have agreed to standard indemnification clauses in many of our
lease agreements for office space, covering such things as tort,
environmental and other liabilities that arise out of or relate to
our use or occupancy of the leased premises. Certain of our credit
agreements include provisions which require us to make payments to
preserve an expected economic return to the lenders if that
economic return is diminished due to certain changes in law or
regulations. In conjunction with certain transactions, such as
sales or purchases of operating assets or services in the ordinary
course of business, or the disposition of certain assets or
businesses, we sometimes provide routine indemnifications, the
terms of which range in duration and sometimes are not limited.
Additionally, the Company has entered into indemnification
agreements with its directors and executive officers to indemnify
such individuals to the fullest extent permitted by applicable law
against liabilities that arise by reason of their status as
directors or officers. The Company maintains directors and officers
liability insurance coverage to reduce its exposure to such
obligations.
We
cannot reasonably estimate our potential future payments under the
indemnities and related provisions described above because we
cannot predict when and under what circumstances these provisions
may be triggered. We had no accruals related to indemnifications on
our Consolidated Balance Sheets at June 30, 2011 or December 31,
2010.
Contingencies. We are involved in legal
proceedings, claims and litigation arising in the ordinary course
of business. We periodically assess our exposure related to these
matters based on the information which is available. We have
recorded accruals in our Consolidated Financial Statements for
those matters in which it is probable that we have incurred a loss
and the amount of the loss, or range of loss, can be reasonably
estimated.
For
other legal proceedings, claims and litigation, we have recorded
loss contingencies that are immaterial, or we cannot reasonably
estimate the potential loss because of uncertainties about the
outcome of the matter and the amount of the loss or range of loss.
Although the final outcome of these other matters cannot be
predicted with certainty, any possible adverse outcome arising from
these matters is not expected to have a material impact on our
Consolidated Financial Statements, either individually or in the
aggregate. However, our evaluation of the likely impact of these
matters may change in the future.
Tax Matters. In 2003, the Canada Revenue Agency,
or CRA, issued Notices of Reassessment, asserting that Acrofax,
Inc., a wholly-owned Canadian subsidiary of Equifax, was liable for
additional tax for the 1995 through 2000 tax years, related to
certain intercompany capital contributions and loans. Subsequently
in 2003, we made a statutorily-required deposit for a portion of
the claim. On May 31, 2011, we settled this CRA claim for $1.1
million (1.1 million in Canadian dollars) and received a net refund
of the deposit and accrued interest in the amount of $9.9 million
(9.7 million in Canadian dollars).
For
additional information about these and other commitments and
contingencies, see Note 6 of the Notes to Consolidated Financial
Statements in our 2010 Form 10-K. For additional
information about commitments related to the Brazilian Transaction,
see Note 2 of the Notes to Consolidated Financial Statements in
this 10-Q.
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