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M omentum
2001 ANNUAL REPORT
EQUIFAX 2001 ANNUAL REPORT

Table of contents

  • Page 1
    2 0 0 1 A N N U A L R E P O R T M omentum

  • Page 2
    As the leading pro vider o f info rmatio n so lutio ns, Equifax enables and secures glo bal co mmerce thro ugh its info rmatio n management, marketing services, direct-to -co nsumer, co mmercial info rmatio n and authenticatio n businesses. Equifax serves custo mers acro ss a wide range o f ...

  • Page 3
    EQUIFAX has had a year filled with positive developments that are producing an unprecedented level of M omentum throughout our organization and building new value for our shareholders. 1

  • Page 4
    ... crime in America. This service alerts consumers within 24 hours of a change to credit information, such as new inquiries. Offering an affordable and effective means to fight this problem, it's easy to see why Credit Watch has been selected as one of Business Week 's "The Best Products of 2001." 2

  • Page 5
    .... There is no better place to generate sales and customer goodwill than at the pointof-sale. Equifax Decision Power ExpressSM, a standardized version of our highly customizable Decision Power solution, does so by enabling businesses to approve new accounts and offer additional services to qualified...

  • Page 6
    ... as part of the Company's new Consumer Direct initiative. It was a resounding success, with over $10 million net new revenue to Equifax. Score Power is another demonstration of Equifax's commitment to enlighten, enable and empower consumers about their credit health. Equifax climbs into Top 100 IT...

  • Page 7
    EQUIFAX translates M omentum into value EFX share price gained 45 percent during 2001 compared to a 13 percent decline for the S&P 500.

  • Page 8
    ... 31, 2001, $2.3 billio n in new market value fo r shareho lders. My sincere thanks to the emplo yees o f Equifax and Certegy fo r making this happen. Equifax is the o nly co mpany in the Standard & Po o r's 500 to po st eight co nsecutive quarters o f sto ck price gro wth. Equifax share price ro se...

  • Page 9
    ...and Chief Executive Officer VIRGIL P . GARDAYA General M anager Consumer Direct Our Innovative Initiatives We strengthened o ur po sitio n even further in 2001 by matching gro wth in established markets with substantial pro gress in o ur newest and mo st inno vative initiatives. We built the Small...

  • Page 10
    ..., analytics, mo deling, direct marketing, data and list services; • Direct-to -Co nsumer business. We will sustain momentum through 2002 by focusing on growth initiatives: Extending co re info rmatio n co mpetencies into emerging markets such as bro kerage, insurance, healthcare, go vernment and...

  • Page 11
    ... n. We are building o ur future o n the basis o f a ro bust business mo del and a stro ng capital structure that will suppo rt new investment and gro wth. Equifax peo ple, who have pro ven that they are " Mo mentum Makers, " are creating this future. Tho mas F. Chapman Chairman and Chief Executive...

  • Page 12

  • Page 13
    Growth Innovation Technology People

  • Page 14
    Growth WE CREATE a multi-dimensional growth dynamic by pursuing new markets, new industries and new territories. Operating Revenue* (IN M ILLIONS) Over the past decade, annual revenue has grow n at an average compound rate of 12%. $1,027 $857 $703 $917 $1,110 $422 $449 $347 $387 $515 $610 91...

  • Page 15
    ... line that not only has created a new business opportunity, but also is a pow erful tool that enl i ghtens, enabl es and em pow er s consu m er s about their credit history. With a suite of Internet-delivered products, this direct-to-consum er business experienced a groundbreaking year in 2001...

  • Page 16
    Innovation WE FOCUS new ideas toward identifying and meeting a market need. 14

  • Page 17
    ... risk and fraud assessm ent tools. Decision Pow er is a highly custom ized product that is used to approve new accounts and cross-sell additional services to existing accounts. A recent innovation has been the introduction of Equifax Decision Pow er ExpressSM, a standardized version for the m id...

  • Page 18
    Technology WE INVEST in technology that breaks new ground and earns its own return. 16

  • Page 19
    ...a degree of risk...how can businesses ensure the identity of participants in online transactions? Equifax technology developed a solution - its patented consumer authentication technology, eIDverifier TM. Using private, personal fi nancial inform ation know n only to the end-user and Equifax, this...

  • Page 20
    People WE GET IT DONE through discipline and dedication; passion and experience. 18

  • Page 21
    ... w ays: A Commitment to Learning We believe the investment of time and resources in our employees is the first step to producing returns in all areas of our business. Our em ployee developm ent program s center around three key strategies - assignm ents, coaching and education. We use assignm ents...

  • Page 22
    Equifax Overview M AJOR OPERATING UNITS INFORM ATION SERVICES Products and Services: Consum er and Com m ercial Credit Reporting, Fraud Prevention, Risk M anagem ent and Industry Data Exchanges Customer Base: Financial Institutions, Retailers, Autom otive M anufacturers and Dealers, ...

  • Page 23
    ... Statements of Shareholders Equity and Comprehensive Income Notes to Consolidated Financial Statements Report of Independent Public Accountants and Report of Management Board of Directors, Company Officers and Contacts Shareholder Information 36 38 97 98 99 00 01 55 EBITDA* * * IN...

  • Page 24
    ... consum er reporting volum es grew 20%. - The Consum er Direct business m ore than tripled revenues. - Free cash flow grew to $208 m illion, a 72% increase over 2000. Significant Transactions On July 7, 2001, Equifax completed the spin-off of Certegy into a separate, publicly traded company. The...

  • Page 25
    ... pact of the CIS acquisition, revenue Revenue Revenues of $1.1 billion in 2001 increased 8% over 2000, driven by our North Am erican Inform ation Services segm ent's record consum er credit reporting volum es and grow th in our Consum er Direct business. In 2001, North Am erica accounted for 77% of...

  • Page 26
    ... October 2001, the Com pany sold its City Directory business, w hich generated a pre-tax loss of $5.8 m illion. The sale of the risk m anagem ent and vehicle inform ation businesses generated pre-tax losses of $4.2 m illion in 2000. In 1999, the Com pany sold three risk m anagem ent offices located...

  • Page 27
    ... May 2000 acquisition, 2001 revenues declined 11% largely due to the econom ic im pact of com panies reducing advertising and m arketing expenditures. In Credit M arketing Services, w hich includes pre-screening, portfolio review, database and other m arketing products, 2001 revenues declined 6% 25

  • Page 28
    ... due to $10 million of increm ental sales from the new Score Pow er TM credit score product launched in March 2001 and increased sales of the Equifax Credit Profile ® credit report and Equifax Credit Watch TM credit monitoring service. Consum er Direct sales in 2000 totaled $5.5 m illion. Operating...

  • Page 29
    ... the Company reduced its quarterly dividend after the Certegy spin-off from $0.093 to $0.02 per share. At Decem ber 31, 2001, $367.5 m illion w as available to the Com pany under its new $465 m illion revolving credit facility. Should CSC exercise its option to sell its credit reporting business to...

  • Page 30
    ...assets in the future, the Com pany's effective tax rate could increase. M arket Risk The Company is exposed to market risk, primarily from changes in foreign currency exchange rates and changes in interest rates. In the norm al course of business, the balance sheets and results of operations of the...

  • Page 31
    ... or unforeseen factors including those described from time to time in the reports which the Company files with the Securities and Exchange Commission, including, but not lim ited to, the Annual Report on Form 10-K for the year ended Decem ber 31, 2001. This list of aforem entioned factors that m ay...

  • Page 32
    ...Dividends Weighted average common shares outstanding (diluted) BALANCE SHEET DATA (at December 31) Total assets Long-term debt Shareholders' equity Common shares outstanding OTHER INFORMATION (at December 31) Stock price per share (2) Market capitalization (2) Employees - continuing operations 2001...

  • Page 33
    2000 1999 1998 1997 $1,189.2 880.6 - $ 308.6 $ 141.1 $ 52.3 $1,092.7 806.4 - $ 286.3 $ 147.7 $ 52.0 $1,055.8 793.9 - $ 261.9 $ 135.2 $ 52.1 $ 880.8 640.1 (25.0) $ 215.7 $ 136.2 $ 52.0 $ 1.04 $ 0.370 136.0 $ 1.06 $ 0.363 139.6 $ 0.94 $ 0.353 144.4 $ 0.92 $ 0.345 147.8 $1,893.1 $ 993.4 $ ...

  • Page 34
    Equifax Consolidated Statements of Income (In m illions, except per share am ounts) Year Ended December 31 Operating revenue Costs and expenses: Costs of services Selling, general and administrative expenses Restructuring and other charges... benefit ...per share Dividends per common share 2001 $1,139...

  • Page 35
    ... and other charges Income tax benefit from stock plans Loss (gain) from sale of businesses Changes in assets and liabilities, excluding effects of acquisitions: Accounts receivable, net Current liabilities, excluding debt Other current assets Deferred income taxes Other long-term liabilities...

  • Page 36
    ... assets 2001 2000 $ 33.2 197.0 69.2 26.4 32.2 358.0 $ 59.6 226.0 66.2 18.4 33.6 403.8 Property and Equipment: Land, buildings and improvements Data processing equipment and furniture Less accumulated depreciation 32.3 134.9 167.2 112.0 55.2 31.0 150.5 181.5 115.5 66.0 Goodwill Purchased Data...

  • Page 37
    ... 2000 Outstanding shares - 136.2 in 2001 and 135.8 in 2000 Paid-in capital Retained earnings Accumulated other comprehensive income Treasury stock, at cost, 35.2 shares in 2001 and 33.1 shares in 2000 (Note 8) Stock held by employee benefits trusts, at cost, 7.0 shares in 2001 and 7.1 shares in 2000...

  • Page 38
    ...Am ount Paid-In Capital Retained Earnings Balance, December 31, 1998 Net income Other comprehensive income Shares issued under stock plans Shares contributed to U.S. retirement plan Treasury stock purchased Cash dividends Income tax benefit from stock plans Dividends from employee benefits trusts...

  • Page 39
    Accumulated Other Comprehensive Income Treasury Stock Stock Held By Employee Benefits Trusts Total Shareholders' Equity $ (35.1) - (...2001 2000 1999 Net income Other comprehensive income: Foreign currency translation adjustment Adjustment for minimum liability under supplemental retirement plan...

  • Page 40
    ... data is delivered and accepted by the custom er. Revenues from direct marketing products and services are based on the num ber of records processed or delivered and are recognized when products are delivered or services are performed. The Company also licenses its direct marketing data to customers...

  • Page 41
    ... pension cost Risk management purchased paper (Note 4) Investments in unconsolidated companies Other 2001 2000 Property and Equipment The cost of property and equipm ent is depreciated prim arily on the straight-line basis over estim ated asset lives of 30 to 50 years for buildings; useful lives...

  • Page 42
    ... recorded - $ 6.0 10.6 $ 22.8 - $ 2.6 2001 $50.4 44.4 2000 $368.2 334.8 1999 $24.8 22.2 Financial Instruments The Com pany's financial instrum ents consist prim arily of cash and cash equivalents, accounts and notes receivable, accounts payable, and short-term and long-term debt. The carrying am...

  • Page 43
    ... In 2001, the Com pany acquired the credit files of five affiliated credit reporting agencies located in the United States and 13 agencies in Canada, as w ell as an inform ation services business in Uruguay. These acquisitions w ere accounted for as purchases and had a total purchase price of...

  • Page 44
    ...Percentage Ow nership 79.5% 1 100.0% 100.0% 100.0% 100.0% Business Organizacion Veraz S.A. (Argentina) SEK S.r.l. and AIF Gruppo Securitas S.r.l. (Italy) Com pliance Data Center, Inc. Consum er Inform ation Solutions (CIS) Group of R.L. Polk & Co. Propago, S.A. (Chile) 1 Increased to 79.5% from 66...

  • Page 45
    ... recorded an im pairm ent charge of $23.2 m illion to w rite dow n certain technology investm ents, including $6.9 m illion of investm ents in several third party technology com panies. 6. Long-Term Debt and Short-Term Borrowings Long-term debt at Decem ber 31, 2001, and 2000 w as as follow s: (in...

  • Page 46
    ...used to hedge the im pacts of foreign exchange rate fluctuations related to intercompany advances between the Company and several of its foreign subsidiaries. Scheduled m aturities of long-term debt during the five years subsequent to Decem ber 31, 2001, are as follow s: (in millions) 2002 2003 2004...

  • Page 47
    ... taxes, if ultim ately paid, m ay be recoverable as foreign tax credits in the United States. 8. Shareholders' Equity Rights Plan In 1995, the Com pany's Board of Directors adopted a Shareholder Rights Plan (Rights Plan). The Rights Plan contains provisions to protect the Com pany's shareholders in...

  • Page 48
    ... 0.3 million treasury shares in connection with an acquisition (Note 3). In 1993, the Company established the Equifax Inc. Employee Stock Benefits Trust to fund various employee benefit plans and compensation programs and transferred 6.2 million treasury shares to the Trust. In 1994 and 2000, the...

  • Page 49
    ...: 2001 Dividend yield Expected volatility Risk-free interest rate Expected life in years 0.5% 41.0% 4.2% 2.6 2000 1.7% 6.5% 2.3 1999 1.4% 5.6% 4.0 42.0% 42.4% Long-Term Incentive Plans The Com pany has key m anagem ent long-term incentive plans for certain key officers that provide for cash aw...

  • Page 50
    ... risk m anagem ent offices. At Decem ber 31, 2001, the plan's assets included 1.76 m illion shares of the Com pany's com m on stock w ith a m arket value of approxim ately $42.6 m illion. Foreign Retirement Plans The Com pany m aintains a defined benefit plan for m ost salaried em ployees in Canada...

  • Page 51
    ... Plans The Com pany's retirem ent savings plans provide for annual contributions, w ithin specified ranges, determ ined at the discretion of the Board of Directors for the benefit of eligible employees in the form of cash or shares of the Com pany's com m on stock. Em ployees m ay sell their Company...

  • Page 52
    ... Corporation and certain of its affiliates (CSC) under which CSC-owned credit reporting agencies utilize the Company's computerized credit database services. CSC retains ownership of its credit files and the revenues generated by its credit reporting activity. The Com pany receives a processing fee...

  • Page 53
    ... Data (unaudited) Quarterly financial data for 2001 and 2000 are as follow s (in m illions, except per share am ounts): 2001 Operating revenue before divested operations Divested operations Operating revenue, as reported Operating income before divested operations and restructuring and other charges...

  • Page 54
    ... credit scoring and m odeling services. Equifax Latin America Consum er and com m ercial credit inform ation and other com m ercial, financial, and consum er inform ation. Other Lottery services. Divested Operations Includes businesses divested in the fourth quarter of 2001 and 2000 (City Directory...

  • Page 55
    ...illions): 2001 Operating Revenue: North American Information Services Equifax Europe Equifax Latin America Other Divested Operations $ 852.4 141.1 106.7 9.6 1,109.8 29.2 $1,139.0 Operating Income (Loss): North American Information Services Equifax Europe Equifax Latin America Other General Corporate...

  • Page 56
    ... 14.6 10.1 - 5.7 65.9 4.8 $ 70.7 Financial inform ation by geographic area is as follow s: 2001 Amount Operating Revenue % 2000 1999 Am ount % Am ount % (based on location of custom er): United States Canada United Kingdom Brazil Other $ 813.8 77.5 97.6 49.5 100.6 $1,139.0 Long-Lived Assets of...

  • Page 57
    ... consistent w ith cost effectiveness, and the application of form al policies and procedures that are consistent w ith good standards of accounting and adm inistrative practices. Philip J. M azzilli Executive Vice President and Chief Financial Officer Atlanta, Georgia February 13, 2002 55

  • Page 58
    Equifax Board of Directors, Company Officers and Contacts DIRECTORS* Thom as F. Chapm an Chairm an of the Board & Chief Executive Officer Equifax Inc., 1994 Lee A. Ault, III Chairm an of the Board In-Q-Tel, Inc., 1991 John L. Clendenin Retired Chairm an BellSouth Corporation, 1982 A. William ...

  • Page 59
    ... Sm all Business Financial Exchange, Equifax Credit Watch, EXPERTO, Score Pow er, OFAC Alert, Equifax Connexus and Equifax ePORT are tradem arks of Equifax Inc. Equifax APPLY and Equifax Decision Pow er Express are service m arks of Equifax Inc. Copyright © 2002, Equifax Inc., Atlanta, Georgia. All...

  • Page 60
    ....co m The year 2001 has been one of the most successful years in the 102-year history of Equifax. This success is the result of more than 5,200 Equifax " M omentum M akers" w ho w ork tirelessly to bring value to millions of consumers and customers in 13 countries. To these employees, w e thank you...