Equifax 2006 Annual Report Download - page 29

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EQUIFAX 2006 ANNUAL REPORT 27
Key Performance Indicators. Management focuses on a
variety of key indicators to monitor operating and fi nancial
performance. These performance indicators include mea-
surements of operating revenue, operating revenue growth,
operating income, operating margin, net income, diluted
earnings per share, cash provided by operating activities
and capital expenditures. The key performance indicators
for the twelve months ended December 31, 2006, 2005
and 2004, were as follows:
Key Performance Indicators
Twelve Months Ended
December 31,
(Dollars in millions, except per share data) 2006 2005 2004
Operating revenue $1,546.3 $1,443.4 $1,272.8
Operating revenue growth 7% 13% 5%
Operating income $ 436.1 $ 422.0 $ 375.8
Operating margin 28.2% 29.2% 29.5%
Income from continuing
operations $ 274.5 $ 246.5 $ 237.3
Diluted earnings per share
from continuing operations $ 2.12 $ 1.86 $ 1.78
Cash provided by
operating activities $ 374.3 $ 337.8 $ 309.0
Capital expenditures $ 52.0 $ 46.2 $ 47.5
Business Environment and Company Outlook
Our fi nancial condition and operating performance are
affected by the rate at which the U.S. economy grows, as
measured by the gross domestic product, as well as levels
of consumer spending and confi dence regarding jobs and
the health of the economy. Changes in overall economic
conditions in the U.S. and other countries in which we
operate, generally impact the demand for consumer credit
and accordingly for our credit information, as well as
other products and services. These effects are dynamic
and complex.
The credit information business is characterized by price
and service competition among a limited number of provid-
ers; investment in proprietary credit information databases;
changes in customer requirements; continued consolidation
in the lending, credit card and telecommunications industries;
emerging new market segments; and technological innova-
tion. Being competitive requires an emphasis on effi cient pro-
cessing to offset price compression; technological competence;
protection of sensitive data; devotion of signifi cant resources
to marketing; and developing applications to differentiate our
products and services from those of our competitors. Other
signifi cant factors include product cost, brand recognition,
customer responsiveness, ability to successfully integrate
acquisitions and regulatory compliance.
Organizational Realignment. Effective January 1, 2007, we
implemented certain organizational changes as a result of a
strategic review of our business. The changes to our internal
structure changed our operating segments to the following:
U.S. Consumer Information Solutions, North America
Personal Solutions, North America Commercial Solutions
and International. U.S. Consumer Information Solutions
consists of the former Marketing Services and North
America Information Services, excluding U.S. Commercial
Services and Canada. North America Commercial Solutions
represents our former commercial business for the U.S. and
Canada that was within North America Information Services
as well as our October 2006 acquisition of Austin-Tetra.
International consists of Canada (the consumer business),
Europe and Latin America. North America Personal
Solutions remains unchanged. We will present our fi nancial
results under this new organizational structure in our quar-
terly report for the period ending March 31, 2007. Our fi nan-
cial results for all periods presented are stated under the
prior organization structure since that is how the Company
was managed during all periods presented. The discussion
of operating results by segment below is based on the
organizational structure in place prior to January 1, 2007.
Long-Term Growth Strategy. During the twelve months
ended December 31, 2006, we analyzed our business to
develop our growth strategy through 2010. Based on
this analysis of our business, our growth strategy
includes the following:
• Increasing our share of our customers’ spending on
information-related services through the development
and introduction of new products, pricing our services
in accordance with the value they create for customers,
increasing the range of current services utilized by
customers, and improving the quality of sales and
customer support interactions with consumers;
• Increasing our customers’ use of our proprietary
analytical, predictive and enabling technology;
• Investing in and developing new, differentiated data
sources that provide unique value to customers in
their highest value decisioning needs; and
• Expanding into key emerging opportunities via
acquisitions, partnerships, and/or internal develop-
ment, including related markets in the United States,
such as initiatives in the commercial, collections, and
healthcare markets, as well as new geographic markets
outside the United States.