Equifax 2006 Annual Report Download - page 37

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EQUIFAX 2006 ANNUAL REPORT 35
revenue by $1.0 million, or 1%. Operating income for the
twelve months ended December 31, 2005 was $33.4 million,
an increase of $3.4 million, or 11%, when compared to the
same period in 2004. The improvement in operating income
was driven by expense reductions. However, softness in the
U.K. economy during 2005 continued to impact the overall
performance of our European operations. Europe’s operating
margin was 23.5% for the year ended December 31, 2005,
versus 21.1% for the same period in 2004.
Latin America
Latin America revenue for the twelve months ended
December 31, 2005 totaled $126.7 million, an increase of
$35.2 million, or 38%, as compared to the same period in
2004. Local currency fl uctuation against the U.S. dollar
favorably impacted our Latin America revenue by $15.1 mil-
lion and Latin America operating income by $3.4 million.
Six countries in Latin America experienced double-digit
revenue growth due to increased volume resulting from
strengthening local economies and higher pricing associ-
ated with better contract execution.
Operating income for the twelve months ended
December 31, 2005 totaled $33.3 million, an increase of
$16.3 million, or 96%, as compared to the same period in
2004. This change was primarily the result of higher sales
volumes and pricing, as well as favorable currency impact.
Latin America operating margin was 26.3% for the twelve
months ended December 31, 2005, versus 18.6% for the
same period in 2004.
General Corporate Expense
Our general corporate expenses are expenses that are
incurred at the corporate level and are not directly associ-
ated with activities of a particular reportable segment.
These expenses include shared services as well as adminis-
trative and legal expenses. General corporate expense was
$88.9 million for the twelve months ended December 31,
2005, an increase of $28.6 million, or 47%, compared to
$60.3 million for the same period in 2004. This increase
was mainly driven by higher salary, incentive and benefi t
costs related to our CEO transition (see previous discus-
sion), as well as increased year-over-year expenses regard-
ing our annual incentive program which is based on our
fi nancial results.
LIQUIDITY AND FINANCIAL CONDITION
As of December 31, 2006, we had $67.8 million in cash and
cash equivalents compared to $37.5 million at December 31,
2005. Our principal sources of liquidity are cash provided by
operating activities and our revolving credit facilities. Our
ability to generate cash from operating activities is one of our
fundamental fi nancial strengths. We believe that anticipated
cash provided by operating activities, together with current
cash and cash equivalents and access to committed and
uncommitted credit facilities and the capital markets, if
required, will be suffi cient to meet our projected cash
requirements for the next twelve months, and the foresee-
able future thereafter. However, any projections of future
liquidity needs and cash fl ows are subject to substantial
uncertainty. We have $250.0 million in principal relating to
our 4.95% senior unsecured notes due November 1, 2007.
Upon maturity, we intend to either (1) pay this obligation
through a combination of borrowings under our credit
facilities and cash and cash equivalents available at that
time, or (2) refi nance these notes, assuming such fi nanc-
ing is available to us on acceptable terms.
In the normal course of business, we will consider the
acquisition of, or investment in, complementary businesses
or joint ventures, products, services and technologies, capital
expenditures, payment of dividends, repurchase of outstand-
ing shares of common stock and the retirement of debt. We
may elect to use available cash and cash equivalents to fund
such activities in the future. In the event additional liquid-
ity needs arise, we may raise funds from a combination of
sources, including the potential issuance of debt or equity
securities. If adequate funds were not available to us, or
were not available on acceptable terms, our ability to meet
unanticipated working capital requirements or respond to
business opportunities and competitive pressures could
be limited.
Fund Transfer Limitations. The ability of certain of our
subsidiaries and associated companies to transfer funds to
us is limited, in some cases, by certain restrictions imposed
by foreign governments, which do not, individually or in the
aggregate, materially limit our ability to serve our indebted-
ness, meet our current obligations or pay dividends.
Cash Provided by Operating Activities
For the twelve months ended December 31, 2006, we
generated $374.3 million of cash from operating activities
compared to $337.8 million for the twelve months ended
December 31, 2005, an increase of $36.5 million. The
increase in cash provided by operating activities was pri-
marily due to the $28.0 million increase in net income.
For the twelve months ended December 31, 2005, we
generated $337.8 million of cash provided by operating
activities compared to $309.0 million for the twelve months
ended December 31, 2004, an increase of $28.8 million.
The major sources of cash provided by operating activities
for 2005 were net income of $246.5 million and the reduc-
tion within net income of non-cash charges for depreciation
and amortization, included in determining net income, of
$82.2 million.