Equifax 2007 Annual Report Download - page 69

EQUIFAX | 2007 ANNUAL REPORT 67
5.
COMMITMENTS AND CONTINGENCIES
Leases. Our operating leases principally involve offi ce space and
offi ce equipment. Other than leasing arrangements, we do not
engage in off-balance sheet fi nancing activities. Under the terms
of the $29.0 million operating lease for our headquarters building
in Atlanta, Georgia, which commenced in 1998 and expires in 2010,
we have guaranteed a portion of the residual value of the building
at the end of the lease. Total lease payments for the remaining term
total $4.1 million. In the event that the property were to be sold by
the lessor at the end of the lease term, we would be responsible
for any shortfall of the sales proceeds, up to a maximum amount
of $23.2 million, which equals 80% of the value of the property
at the beginning of the lease term. The liability for this estimated
shortfall, which was $1.9 million and $1.4 million December 31,
2007 and 2006, respectively, is recorded in other long-term liabilities
on our Consolidated Balance Sheets.
Rental expense for operating leases, which is recognized
on a straight-line basis over the lease term, was $22.0 million,
$17.9 million and $25.5 million for the twelve months ended
December 31, 2007, 2006 and 2005, respectively. Our headquarters
building operating lease has ground purchase options exercisable
beginning in 2019, ground renewal options exercisable in 2048
and escalation clauses beginning in 2009. Expected future minimum
payment obligations for non-cancelable operating leases exceeding
one year are as follows as of December 31, 2007:
Years Ending December 31,
(In millions) Amount
2008 $ 22.7
2009 20.7
2010 17.2
2011 13.3
2012 10.2
Thereafter 58.2
$142.3
We expect to receive $11.4 million under noncancelable sublease
agreements through February 2012, the date our last sublease agree-
ment is set to expire, $4.4 million of which represents operating
expenses that our sublessors are contractually obligated to pay us
over the remaining lease term. The expected sublease income is
not refl ected as a reduction in the total minimum rental obligations
under operating leases in the table above.
Data Processing, Outsourcing Services and Other Agreements.
We have separate agreements with International Business Machines
Corporation, or IBM, Acxiom, GenPact, TCS and others to outsource
portions of our computer data processing operations, applications
development, maintenance and related functions and to provide
certain other administrative and operational services. The agree-
ments expire between 2008 and 2013. The estimated aggregate
minimum contractual obligation remaining under these agreements
is approximately $305.0 million as of December 31, 2007, with
no future year expected to exceed approximately $90.0 million.
Annual payment obligations in regard to these agreements vary
due to factors such as the volume of data processed; changes in our
servicing needs as a result of new product offerings, acquisitions
or divestitures; the introduction of signifi cant new technologies;
foreign currency; or the general rate of inflation. In certain
circumstances (e.g., a change in control or for our convenience),
we may terminate these data processing and outsourcing agreements,
and, in doing so, certain of these agreements require us to pay a
signifi cant penalty.
Our data processing outsourcing agreement with IBM was
renegotiated in 2003 for a ten-year term. Under this agreement
(which covers our operations in North America, Europe, Brazil
and Chile), we have outsourced our mainframe and midrange
operations, help desk service and desktop support functions, and
the operation of our voice and data networks. The scope of such
services varies by location. During 2007, 2006 and 2005, we paid
$115.0 million, $112.1 million and $120.8 million, respectively,
for these services. The estimated future minimum contractual
obligation at December 31, 2007 under this agreement is approx-
imately $255.0 million, with no year expected to exceed
approximately $55.0 million. We may terminate certain portions
of this agreement without penalty in the event that IBM is in
material breach of the terms of the agreement.
Agreement with Computer Sciences Corporation. We have an
agreement with Computer Sciences Corporation, or CSC, and
certain of its affi liates, collectively CSC, under which CSC-owned
credit reporting agencies utilize our computerized credit database
services. CSC retains ownership of its credit fi les and the revenues
generated by its credit reporting activities. We receive a processing
fee for maintaining the database and for each report supplied. The
agreement will expire on July 31, 2018 and is renewable at the option
of CSC for successive ten-year periods. The agreement provides
us with an option to purchase CSC’s credit reporting business if
it does not elect to renew the agreement or if there is a change in
control of CSC while the agreement is in effect. Under the agreement
CSC also has an option, exercisable at any time, to sell its credit
reporting business to us. The option expires in 2013. The option
exercise price will be determined by a third-party appraisal process
and would be due in cash within 180 days after the exercise of the
option. We estimate that if the option were exercised at December 31,
2007, the price range would approximate $650.0 million to
$725.0 million. This estimate is based solely on our internal analysis
of the value of the business, current market conditions and other
factors, all of which are subject to constant change. Therefore, the
actual option exercise price could be materially higher or lower
than the estimated amount.
Change in Control Agreements. We have entered into change in
control severance agreements with certain key executives. The
agreements provide for, among other things, certain payments and
benefi ts in the event of a qualifying termination of employment
(i.e., termination of employment by the executive for “good reason”
or termination of employment by the Company without “cause,”
each as defi ned in the agreements) within six months prior to or
three years following a change in control of the Company. In the
event of a qualifying termination, the executive will become entitled