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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
32 EQUIFAX 2006 ANNUAL REPORT
Selling, general and administrative expenses for the
twelve months ended December 31, 2005 increased $60.6
million, or 21%, to $345.0 million when compared to the
same period a year ago. This increase was mainly due to
higher salary, incentive and benefi t costs related to our CEO
transition, as well as increased year-over-year expenses
related to our annual incentive program which was based on
our 2005 fi nancial results. As part of the CEO transition,
effective September 19, 2005, Richard F. Smith became our
CEO, which, along with the retirement of our former CEO
Thomas F. Chapman in 2005, contributed to the higher sal-
ary, incentive and benefi t costs during the year. Additionally,
higher year-over-year advertising costs also contributed to
the increase in selling, general and administrative costs.
Consolidated operating margin for the twelve months
ended December 31, 2005 was 29.2%, as compared to
29.5% for the same period in 2004.
Other Income, Net
Consolidated other income, net, decreased $38.3 million to
$9.2 million for the twelve months ended December 31,
2005, as compared to $47.5 million in the same period in
2004. The decrease was primarily driven by a $36.8 million
gain recorded in 2004 related to the sale of our investment
in Intersections Inc. (for additional information regarding
this sale, see Note 10 of the Notes to Consolidated Financial
Statements). The decrease was partially offset by a $3.3 mil-
lion gain recorded during the third quarter of 2005 related
to an amendment to an agreement with RMA Holdings,
LLC. For additional information about this gain, see Note 6
of the Notes to Consolidated Financial Statements.
Income Taxes
Our effective income tax rate was 36.9% for the twelve
months ended December 31, 2005, down from 38.4% for the
same period in 2004. The favorable reduction was primarily
due to lower state income taxes and a reduction in the tax
contingency reserve, and partially offset by additional tax
expense related to non-deductible executive compensation.
Discontinued Operations
In 2002, we made the decision to exit our commercial ser-
vices business in Spain, which was part of our European
reportable segment. We disposed of this business in 2004.
We have reclassifi ed the 2004 results of our commercial
business in Spain to loss from discontinued operations.
Additionally, in 2004, we sold our Italian business and
have reclassifi ed the 2004 results of Italy to loss from dis-
continued operations. Accordingly, we recorded a $2.6 mil-
lion, net of tax, loss from discontinued operations for the
twelve months ended December 31, 2004. For additional
information about our discontinued operations, see Note 12
of the Notes to Consolidated Financial Statements.
Net Income
Net income for the twelve months ended December 31,
2005, was $246.5 million, compared to $234.7 million for
the twelve months ended December 31, 2004, which
includes the impact of discontinued operations. Earnings per
share increased to $1.86 for the twelve months ended
December 31, 2005, as compared to $1.76 for the twelve
months ended December 31, 2004. Income from con-
tinuing operations for the twelve months ended December
31, 2004 was $237.3 million and earnings per share was
$1.78. There were no discontinued operations in 2005.