Equifax 2002 Annual Report Download - page 39

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We have interest rate swap agreements in place to float the inter-
est rate on $250.0 million of our fixed rate, 6.3% senior unsecured
notes through their maturity date in 2005. These swaps have been
designated as fair value hedges, were documented as fully effec-
tive under SFAS 133, and were valued on a mark-to-market basis as
an asset totaling $18.3 million at December 31, 2002. The offset-
ting liability of $18.3 million is included as an addition to long-term
debt. These swaps give us the right to receive fixed rate payments
from the counterparties, in exchange for floating rate payments
from us. The floating rate payments on these interest rate swaps
are tied to 6-month LIBOR plus a spread, with net settlements paid
semi-annually. The final maturity of these interest rate swaps is
July 2005, coinciding with the final maturity of the associated notes.
We also have a $29.0 million floating-to-fixed interest rate swap,
maturing 2010, which fixes the effective rate of interest on the
$29.0 million synthetic lease for our Atlanta corporate headquar-
ters. This derivative instrument is designated as a cash flow hedge,
was documented as fully effective under SFAS 133, and was val-
ued on a mark-to-market basis as a liability totaling $4.7 million at
December 31, 2002. This interest rate swap gives us the right to
receive a floating rate payment tied to 3-month LIBOR plus a spread
from the counterparty, in exchange for a fixed rate payment from
us. The net settlements occur quarterly.
A 1% increase in the average rate of interest on the variable rate
debt outstanding under our revolving credit facilities during 2002
would have increased our pre-tax interest expense by $2.0 million.
A 1% increase in the average rate of interest associated with the
floating rate payments due under our interest rate swap agreements
during 2002 would have increased our pre-tax interest expense by
$2.5 million. Since all of our interest rate swaps are fully effective,
our income statement is unaffected by the non-cash quarterly
mark-to-market adjustments associated with these derivatives.
35