Equifax 2002 Annual Report Download - page 49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
hardware and software expense associated with transaction pro-
cessing systems; telecommunication and computer network
expense; and occupancy costs associated with facilities where
these functions are performed.
Selling, General and Administrative Expenses Selling,
general and administrative expenses consist primarily of personnel
costs paid to sales and administrative employees and management.
Legal Contingencies We periodically review claims and legal
proceedings and assess whether we have potential financial expo-
sure. If the potential loss from any claim or legal proceeding is
probable and can be estimated, we accrue a liability for estimated
legal fees and settlements.
Income Taxes We base income tax expense on pre-tax financial
accounting income, and recognize deferred tax assets and liabili-
ties for the expected tax consequences of temporary differences
between the tax bases of assets and liabilities and their reported
amounts. Significant judgment is required to determine our global
income tax expense due to transactions and calculations where
the ultimate tax consequence is uncertain, and we record a valua-
tion allowance to reduce our deferred tax assets to the amount of
future tax benefit that is likely to be received. We believe that our
estimates are reasonable, however, the final outcome of tax mat-
ters may be different than the estimates reflected on our financials.
Earnings Per Share Our basic earnings per share, or EPS is cal-
culated as income available to common stockholders divided by
the weighted average number of common shares outstanding
during the period. Diluted EPS is calculated to reflect the potential
dilution that would occur if stock options or other contracts to
issue common stock were exercised and resulted in additional
common shares outstanding. The income amount used in our EPS
calculations is the same for both basic and diluted EPS. A recon-
ciliation of the weighted average outstanding shares used in the
two calculations is as follows:
(In millions) 2002 2001 2000
Weighted average shares
outstanding (basic) 136.2 136.8 134.4
Effect of dilutive securities:
Stock options 2.3 2.1 1.4
Long-term incentive plans –0.1 0.2
Weighted average shares
outstanding (diluted) 138.5 139.0 136.0
Property and Equipment The cost of property and equipment
is depreciated primarily on the straight-line basis over estimated
asset lives of 30 to 50 years for buildings; useful lives, not to
exceed lease terms, for leasehold improvements; three to five
years for data processing equipment; and eight to 20 years for
other fixed assets.
Goodwill Prior to 2002, goodwill was amortized on a straight-
line basis predominantly over periods from 20 to 40 years. In 2001,
the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 142,
“Goodwill and Other Intangible Assets,” or SFAS 142. SFAS 142
eliminates the amortization of goodwill and certain other intangi-
ble assets and requires that goodwill be evaluated for impairment
by applying a fair value-based test. We adopted the standard effec-
tive June 30, 2001, for all subsequent acquisitions, and adopted
the standard effective January 1, 2002 for all acquisitions that
occurred prior to June 30, 2001. We completed fair value-based
impairment tests and in doing so, we determined that goodwill
was not impaired; therefore no transitional impairment charge
was recorded.
Amortization expense was $25.4 million in 2001 and $24.4 million
in 2000. As of December 31, 2002 and 2001, accumulated amorti-
zation balances were $88.2 million and $94.5 million, respectively.
A reconciliation of 2001 and 2000 reported earnings with pro
forma earnings excluding goodwill amortization is shown on the
table below (in millions, except per share amounts):
As Amortization
Year Ended December 31, 2001: Reported (Net of Tax) Pro Forma
Income from continuing
operations $117.3 $18.5 $135.8
Income from continuing
operations per share
(diluted) $ 0.84 $0.13 $ 0.98
Net income $122.5 $22.0 $144.5
Net income per share
(diluted) $ 0.88 $0.16 $ 1.04
Year Ended December 31, 2000:
Income from continuing
operations $141.1 $19.6 $160.7
Income from continuing
operations per share
(diluted) $ 1.04 $0.14 $ 1.18
Net income $228.0 $25.6 $253.6
Net income per share (diluted) $ 1.68 $0.18 $ 1.86
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