Equifax 2006 Annual Report Download - page 38

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
36 EQUIFAX 2006 ANNUAL REPORT
Capital Expenditures
Capital expenditures, which consist of additions to property
and equipment as well as certain other long-term assets,
totaled $52.0 million, $46.2 million and $47.5 million for
the twelve months ended December 31, 2006, 2005 and
2004, respectively. Our capital expenditures are used for
developing, enhancing and deploying new and existing
internally-developed software and technology platforms,
replacing or adding equipment, updating systems for regu-
latory compliance, the licensing of software applications,
data security and investing in disaster recovery systems. In
2007, we expect total capital expenditures to be approxi-
mately $70 million to $100 million, primarily relating to
new product development and technological infrastructure.
Acquisitions
On October 6, 2006, we acquired Austin Consolidated
Holdings, Inc., known as Austin-Tetra, for $34.4 million
in cash. Austin-Tetra is a provider of business-to-business
data management and enhancement services to the com-
mercial market. They provide companies and government
agencies with information to help them better understand
existing customers, target new customers, and effectively
manage their vendors. This acquisition is part of our long-
term growth strategy, complementing our commercial
information business. Austin-Tetra will be reported within
our North America Information Services segment. We
fi nanced this acquisition through borrowings under our
long-term revolving credit facility.
In March 2005, we acquired APPRO to broaden and fur-
ther strengthen our enabling technologies capabilities in our
North America Information Services business. Additionally, in
August 2005, we acquired BeNow to enhance our Marketing
Services business and add to our enabling technology capabili-
ties. During the twelve months ended December 31, 2005, in
order to continue to grow our credit data franchise, we also
acquired the credit fi les, contractual rights to territories (gen-
erally states or integration areas) and customer relationships
and related businesses of two independent credit reporting
agencies in the U.S. and one in Canada that housed consumer
information on our system. We acquired all of these busi-
nesses for $121.8 million in cash, net of cash acquired, and the
issuance of 0.4 million shares of Equifax treasury stock, which
had a value of $14.7 million on the date of issuance.
During the twelve months ended December 31, 2004,
in order to continue to grow our credit data franchise, we
also acquired the credit fi les, contractual rights to territo-
ries (generally states or integration areas) and customer
relationships and related businesses of two independent
credit reporting agencies in the U.S. and one in Canada
that housed consumer information on our system. We
acquired these businesses for a total of $17.4 million in
cash, net of cash acquired.
For additional information about our acquisitions, see
Note 3 of the Notes to Consolidated Financial Statements.
TALX Acquisition. On February 14, 2007, we agreed to
acquire TALX Corporation (“TALX”), a leading provider
of workplace verifi cation information and employment ser-
vices, in a transaction valued at approximately $1.4 billion,
including the assumption of debt, based on the $41.91 per
share closing price of Equifax stock on February 14, 2007.
The acquisition of TALX equity is structured to consist of
75% Equifax common stock and 25% cash, together valued
at approximately $1.2 billion. TALX shareholders may
elect to receive for each share of TALX stock either a fi xed
exchange ratio of .861 shares of Equifax stock, $35.50 in
cash or a combination of stock and cash equivalent value,
subject to proration to achieve the 75% Equifax common
stock and 25% cash consideration described above. In the
aggregate, upon the closing of the acquisition, we will issue
approximately 22 million shares of Equifax stock and pay
approximately $300 million in cash for the stock of TALX.
We also will assume TALX’s outstanding debt, which was
$191.5 million at December 31, 2006. We plan to fi nance
the acquisition with cash provided by operating activities
and borrowings under our senior revolving credit facility,
of which no amounts were outstanding at February 14,
2007. The transaction has been approved by the Board of
Directors of each company and also must be approved by
the stockholders of TALX. The transaction is also subject to
review by regulatory authorities and other customary clos-
ing conditions. We currently expect the transaction to close
by the end of the third quarter of 2007. This transaction
will be accounted for as a purchase in accordance with
SFAS No. 141, “Business Combinations.”
In February 2007, our Board of Directors authorized us
to repurchase an increased number of shares of our common
stock. We announced our intention to repurchase approxi-
mately $700 million of the stock issued in the acquisition.
We expect to fi nance these share repurchases using cash
provided by operating activities, as well as the issuance of
new debt.
Borrowings and Credit Facility Availability
Short-Term Borrowings. Net short-term (repayments)
borrowings during the twelve months ended December 31,
2006, 2005 and 2004, totaled ($12.2) million, $92.3 million
and ($22.5) million, respectively, activity under our trade
receivables-backed, revolving credit facility. Under this
facility, a wholly-owned subsidiary of Equifax may borrow up
to $125.0 million, subject to borrowing base availability and
other terms and conditions, for general corporate purposes.
The amended credit facility is scheduled to expire on
November 29, 2007, with the option to extend the term for
an additional period of up to one year if specifi ed conditions
are satisfi ed. Outstanding debt under the facility is consoli-
dated on our Balance Sheet for fi nancial reporting purposes.
Based on the calculation of the borrowing base applicable at
December 31, 2006, $19.4 million was available for borrow-
ing and $80.0 million was outstanding under this facility,
which is included in short-term debt and current maturities
on our Consolidated Balance Sheet.