Equifax 2007 Annual Report Download - page 13

EQUIFAX | 2007 ANNUAL REPORT 11
2007 2006
Diluted earnings per share – GAAP $2.02 $ 2.12
Aquisition-related amortization
expense, net of tax 0.30 0.15
Litigation loss contingencies, net of tax – 0.04
Litigation settlement – (0.11)
Income tax benefit – (0.07)
Charge related to organizational realignment,
net of tax – 0.03
Diluted earnings per share, adjusted
for certain items – Non-GAAP $2.32 $ 2.16
The references in the “Financial Highlights” section to “diluted
earnings per share, adjusted for certain items” on the inside cover,
to “adjusted earnings per share” on page 1, and to North America
Personal Solutions operating income for 2006, excluding a litigation
loss contingency, in the table on page 7 of this annual report, exclude
certain items from the nearest equivalent presentation under U.S.
generally accepted accounting principles, or GAAP. The non-
GAAP measures are provided to show the performance of our core
operations without the effect of the excluded items, consistent with
how our management reviews and assesses Equifax’s historical
performance when measuring operating profi tability, evaluating
performance trends and setting performance objectives. The non-
GAAP measures are not a measurement of fi nancial performance
under GAAP, should not be considered as an alternative to net
income, operating income, operating margin or earnings per share,
and may not be comparable to non-GAAP fi nancial measures used
by other companies.
Diluted Earnings per Share, Adjusted for Certain Items and Adjusted
Earnings per Share. These non-GAAP measures each exclude the
following items:
Acquisition-Related Amortization Expense. Excluding acquisition-
related amortization expense, net of tax, of $40.7 million and
$19.3 million in 2007 and 2006, respectively, provides meaningful
supplemental information regarding our fi nancial results for the
twelve months ended December 31, 2007 and 2006 as it allows
investors to evaluate our performance for different periods on a more
comparable basis by excluding items that relate to acquisition-related
intangible assets.
Litigation Loss Contingencies. During the fi rst nine months of 2006,
we recorded a $5.0 million, pretax, ($3.0 million, net of tax) loss
contingency related to certain legal matters. Of this $5.0 million,
a pretax loss of $4.0 million was recognized in selling, general
and administrative expenses and $1.0 million was recognized in
cost of services on our Consolidated Statements of Income. This
loss is included within our North America Personal Solutions
segment fi nancial results.
During the third quarter of 2006, we also recorded a $4.0 million,
pretax, ($2.5 million, net of tax) loss associated with certain litigation
matters within our U.S. Consumer Information Solutions segment.
Of this $4.0 million pretax loss, $3.5 million was recognized in
selling, general and administrative expenses and $0.5 million was
recognized in cost of services on our Consolidated Statements
of Income.
Management believes excluding these litigation matters from
certain fi nancial results provides meaningful supplemental informa-
tion regarding our fi nancial results for the twelve months ended
December 31, 2006, as compared to the same period in 2007,
since the litigation loss contingencies of such a material amount
during the period are not comparable to similar activity in the
subsequent period presented.
Litigation Settlement. In June 2006, we consummated a settlement
of claims against certain former selling shareholders of Naviant, Inc.
In 2004, we served a demand for arbitration alleging, among other
things, that the sellers were liable for rescission or for indemnifi -
cation as a result of breaches of various representations and
warranties concerning information furnished to us in connection
with our acquisition of Naviant, Inc. in 2002. As a result of this
settlement, we recognized a $14.1 million non-taxable gain in other
income, net, on our Consolidated Statement of Income for the
twelve months ended December 31, 2006.
Management believes excluding this litigation settlement from
certain fi nancial results provides meaningful supplemental infor-
mation regarding our fi nancial results for the twelve months ended
December 31, 2006, as compared to the same period in 2007, since
the gain related to the litigation settlement associated with our
previous acquisition of Naviant, Inc. is material and is not refl ective
of our core operations.
Income Tax Benefi t. During the third quarter of 2006, the applicable
statute of limitations related to uncertain tax positions expired,
resulting in the reversal of the related income tax reserve. The
reversal of the reserve resulted in a $9.5 million income tax benefi t.
The income tax benefi t was recorded in provision for income taxes
on our Consolidated Statements of Income for the twelve months
ended December 31, 2006.
Management believes excluding this income tax benefit
from certain fi nancial results provides meaningful supplemental
information regarding our fi nancial results for the twelve months
ended December 31, 2006, as compared to the same period in 2007,
since an income tax benefi t of such a material amount is not
comparable to similar activity in the subsequent period presented.
Organizational Realignment. During the fourth quarter of 2006,
we recorded a $6.4 million, pretax, ($4.0 million, net of tax)
severance charge related to our organizational realignment.
Management believes excluding this charge from certain fi nancial
results provides meaningful supplemental information regarding
our fi nancial results for the twelve months ended December 31,
2006, as compared to the same period in 2007, since a charge of
such a material amount during the periods is not comparable to
similar activity in the subsequent period presented.
2006 Operating Income of our North America Personal Solutions
Segment. Excludes the litigation loss contingency of $5.0 million
mentioned above, for the reasons noted.
RECONCILIATIONS RELATED TO NON-GAAP FINANCIAL MEASURES