Equifax 2003 Annual Report Download - page 25

M ANAGEM ENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
22 EQUIFAX. INFORMATION THAT EMPOWERS.
Our ability to generate cash from our operations is one of our
fundamental financial strengths. We use cash flows from opera-
tions, along with borrowings, to fund capital expenditures, growth
initiatives, make acquisitions, retire outstanding indebtedness, pay
dividends, and purchase outstanding shares of our common stock.
CASH FROM OPERATIONS
For the twelve months ended December 31, 2003, we generated
$289.9 million of cash flow from operating activities compared
to $248.8 million for the twelve months ended December 31,
2002. The major source of cash flow for 2003 was net income of
$164.9 million, net of loss from discontinued operations in Spain
of $13.6 million, asset impairment and restructuring charges of
$30.6 million and $95.3 million for depreciation and amortization.
Total working capital at December 31, 2003, was a negative
$68.9 million versus a negative $142.3 million at December 31,
2002. Total working capital, excluding debt, at December 31, 2003
and December 31, 2002, was $91.6 million for both periods.
Our net cash provided by operating activities in 2002 was $248.8 mil-
lion compared to $255.1 million in 2001. Increased cash flows
generated from lower trade receivable balances were offset by
payments associated with our fourth quarter restructuring plan in
2001, ongoing data purchases, and a $20.0 million contribution to
our U.S. defined benefit pension plan. Our operating cash flow in
2002 was driven by operating margin performance and aggressive
working capital management (days sales outstanding declined
from 63 days in 2001 to 55 days in 2002).
INVESTING ACTIVITIES
Investing activities for 2003 and 2002 used cash of $99.7 million
and $341.0 million, respectively. Capital expenditures used cash in
the amounts of $53.6 million and $55.8 million for 2003 and 2002,
respectively. Our capital expenditures are used for developing,
enhancing, and deploying new and existing technology platforms,
replacing or adding equipment, updating systems for regulatory
compliance, the licensing of software applications and investing
in disaster recovery systems. We expect to use approximately
$55.0 million for capital expenditures in 2004.
In addition to capital expenditures, we used cash of $40.7 million and
$321.2 million in 2003 and 2002, respectively, for acquisitions. We
acquired consumer credit files, contractual rights to territories, and
customer relationships and related businesses from four Affiliates
in the United States and one in Canada, and a small email marketing
business, all for $42.9 million, primarily in cash. Eight Affiliates in the
United States, three in Canada, the remaining 20% interest of our
information services company in Brazil, a small technology develop-
ment company and an email marketing business were acquired for
cash in 2002.
In 2002, net cash used in investing activities totaled $341.0 million,
an increase of $234.5 million compared to 2001. The increase was
primarily a result of our acquisition of Naviant and acquisition of
assets from CBC. Our acquisitions, net of cash acquired, accounted
for $321.2 million of total cash invested in 2002. Capital expendi-
tures exclusive of acquisitions totaled $55.8 million, which princi-
pally represented development associated with key technology
platforms in our businesses.
In the third quarter of 2002, our $41.0 million note receivable
associated with the sale of our risk management collections
business in 2000 was completely paid.
FINANCING ACTIVITIES
Net cash used by financing activities during 2003 totaled
$193.6 million, compared with net cash provided by financing
activities during 2002 that totaled $92.6 million, and net cash used
by financing activities during 2001 that totaled $325.5 million.
Net payments for short-term debt were $16.0 million for 2003.
Additions to our long-term debt were $113.4 and payments on our
long-term debt were $202.6 million during 2003. We increased the
amount outstanding under our credit facility in 2003 for purposes
of retiring the $200.0 million aggregate principal amount of our
outstanding 6.5% senior notes that matured in June 2003. In
addition, we used $94.9 million during 2003 for the purchase of
4,174,800 shares of our common stock at an average price of
$22.74. Our dividend policy has remained consistent; we paid cash
dividends of $11.2 million for 2003. We received cash of $19.5 mil-
lion during 2003 for the exercise of stock options. At December 31,
2003, our remaining authorized share repurchase was approxi-
mately $127.3 million. During 2004, we expect to purchase our
own common stock at a rate similar to that of 2003.
In 2002, we received $249.5 million in proceeds from the sale of
$250.0 million aggregate principal amount of our 4.95% senior
unsecured notes, which mature November 1, 2007. During 2002 we
invested $79.8 million to repurchase 2.9 million shares of our com-
mon stock, and received $34.2 million in proceeds from the exercise
of stock options. At December 31, 2001, our remaining authoriza-
tion for share repurchases was approximately $45.0 million, and
in February 2002, our Board of Directors approved an additional
$250.0 million for share repurchases. We also continued our 90-year
history of paying dividends, which totaled $11.4 million in 2002.
In 2001, we reduced our long-term debt $298.9 million through the
repayment of borrowings under our $465.0 million revolving credit
facility. Debt repayments were funded through operating cash
flows and the cash dividend received from Certegy in conjunction
with the spin-off. During 2001, we invested $42.3 million to repur-
chase 2.2 million shares of our common stock and we received
$36.4 million in proceeds from the exercise of stock options. In
2001, our payment of dividends totaled $32.3 million.