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The Business of Leadership
2004 Annual Report
Equifax 2004 Annual Report
The Business of Leadership
Equifax Inc.
1550 Peachtree Street, N.W.
Atlanta, GA 30309
www.equifax.com
The leadership and prosperity of Equifax refl ects
the dedication, commitment and integrity of our
employees around the world. We also extend our
gratitude to our customers, whom we regard as
partners in enabling global commerce. And to
our shareholders, we look forward to growing
our business and creating value on your behalf
for many years to come.
C O N T E N T S
Letter To Shareholders 2
THE EQUIFAX WAY 9
Business Overview 18
2004 Financial Review 23
Board of Directors, Corporate Officers and Contacts 80
Shareholder Information Inside Back Cover

Table of contents

  • Page 1
    2004 Annual Report The Business of Leadership

  • Page 2
    CONTENTS Letter To Shareholders THE EQUIFAX WAY Business Overview 2004 Financial Review Board of Directors, Corporate Officers and Contacts Shareholder Information 2 9 18 23 80 Inside Back Cover

  • Page 3
    ... and member of the Standard & Poor's (S&P) 500® Index, enables and secures global commerce among consumers and businesses. We are a global leader in turning information into intelligence, serving customers across a wide range of industries and markets in 12 countries throughout North America, Latin...

  • Page 4
    ...Ended December 31 2004 2003 2002 Compound Growth Rate GAAP Operating revenue Operating income Operating margin Income from continuing operations Diluted earnings per share from continuing operations Cash flow from operations Stock price...continuing operations, GAAP Sale of investment in ...

  • Page 5
    ... it is advancing a technology, growing a market, innovating a solution or simply inspiring people to achieve their potential, the best way to see leadership at Equifax is through our progress and achievements. In doing so, you will understand how the business of leadership serves our customers and...

  • Page 6
    ... data products and services into a world-class S&P 500 global information technology enterprise. Today, we continue to build new momentum in the marketplace with unique solutions that enable customers to operate their businesses more effectively, efficiently and securely. THE฀EQUIFAX฀FRANCHISE...

  • Page 7
    ...-leading position as the definitive source for riskmanagement solutions focused on small-business lending. Our second pillar is the analytics and modeling functions that enrich data to generate the intelligence and insight our clients need to manage customer acquisition, relationships and risk...

  • Page 8
    ... of the Equifax franchise, enabling technologies, transforms data through intelligence into an action - providing decision-making solutions wherever customers need them. Our enabling technologies range from innovative web-based delivery systems to powerful enterprise software decisioning platforms...

  • Page 9
    ... stream of products and services from our analytics and enabling technologies is the result of leveraging our own intellectual talent and technological assets into meaningful new businesses. 02 03 04 1994-95 1996-97 •฀฀ Launched฀Equifax฀Decision฀Power Entered฀Spain,฀Portugal...

  • Page 10
    ..., we waited patiently until the time was right. This patience and diligence have paid off handsomely. Personal Solutions today is a $100-million-plus business in the United States and Canada and is growing rapidly in Equifax markets in Europe and Latin America. 1998-99 2000-01 •฀฀ Created...

  • Page 11
    ...฀of฀trade฀and฀credit฀data •฀฀ Acquired฀Imperitek •฀฀ Acquired฀14฀credit฀bureaus Signed฀global฀outsourcing฀agreement฀with฀IBM •฀฀ Launched฀Personal฀Solutions฀business฀in฀Canada฀ and฀the฀United฀Kingdom •฀฀ Acquired฀complete...

  • Page 12
    ... tale of finding strength that lies within, epitomizes Equifax at this juncture in our history. As they traveled the Yellow Brick Road in...to our shareholders, our customers and our employees for making the journey with us. Thomas F. Chapman Chairman and Chief Executive Officer April 2005 ฀ 02฀...

  • Page 13
    ... new applications for our data, analytical and enabling technologies assets. • Innovation: Even when we are at the top of our game, we always reach for more and we achieve it. We are an organization of thinkers and doers, which makes us a results-driven business. • Technology: The value part...

  • Page 14
    It's Building On A Century Plus Six Years of Integrity

  • Page 15

  • Page 16
    It's Best-In-Class In Every Place You Compete

  • Page 17
    13

  • Page 18
    It's Transforming Great Thinking Into Great Businesses

  • Page 19
    15

  • Page 20
    It's Utilizing Know-How To Create New Value 16

  • Page 21
    17

  • Page 22
    BU S I N E S S OV E RV I E W NORTH฀AMERICAN฀INFORMATION฀SERVICES EU ROPE • • • • • • • • L AT IN฀A MERIC A • • • •

  • Page 23
    PERS ONA L ฀S OL U T IONS PREDIC T IV E฀S C IENC ES • • • • • • • • MA RK ET ING฀S ERV IC ES • • • • ENA BL ING฀T EC HNOL OGIES • • • •

  • Page 24
    ..., market planning, advertising, and our Predictive Sciences business. Prior to joining Equifax, Mr. Springman was with Mellon Bank Corporation. Kent฀E.฀Mast,฀61 Vincent฀C.฀Corica,฀57 Group฀Executive,฀ Personal฀Solutions Corporate฀Vice฀President฀and฀ Chief฀Legal฀Of...

  • Page 25
    ... Consolidated Statements of Cash Flows Consolidated Balance Sheets Consolidated Statements of Shareholders' Equity Consolidated Statements of Comprehensive Income (Loss) Notes to Consolidated Financial Statements Board of Directors, Corporate Officers and Contacts Shareholder Information Inside...

  • Page 26
    ...data is compiled and processed utilizing our proprietary software and systems and distributed to customers in a variety of user-friendly and value-add formats. Our products and services include consumer credit information, information database management, marketing information, small business credit...

  • Page 27
    ... help customers acquire new customers. Personal Solutions revenues are transaction related and are derived from our sales of credit reporting products and identity theft monitoring services, which we deliver to consumers electronically via the Internet and via mail. We see significant opportunities...

  • Page 28
    ... sale of investment, asset impairment and related charges were $1.62, up 9%. Overview Notes: • Consolidated revenue grew 5% for the year ended December 31, 2004 compared to 2003 due primarily to growth in North America Information Services, Personal Solutions, Europe and Latin America more...

  • Page 29
    ...increased data costs in our Brazilian operations. EQUIFAX฀NORTH฀AMERICA INFORMATION฀SERVICES U.S. Consumer and Commercial Services revenues for 2004 increased by $15.3 million, or 3%, when compared to 2003 due to increased sales for our small business services products and increased sales to...

  • Page 30
    ... was primarily the result of slower revenue growth and increased data-related costs in our Brazilian operations. Equifax Latin America profit margin was 19% for the year ended December 31, 2004, versus 25% for 2003. Personal Solutions revenues for 2004 increased $26.6 million, or 38%, compared to...

  • Page 31
    ...North America Information Services and Personal Solutions. • In North America Information Services, our largest operating segment, growth in our U.S. Consumer and Commercial information business was primarily in services provided to financial services, telecommunications and utility customers and...

  • Page 32
    ... of increased revenue offsetting increased costs in correlation to increased volume in our financial services, utilities and telecommunications vertical lines of business. MARKETING฀SERVICES EQUIFAX฀NORTH฀AMERICA INFORMATION฀SERVICES Credit Marketing Services revenues for 2003 decreased...

  • Page 33
    ...ficant opportunities to market additional Personal Solutions products and services to consumers. Additionally, we continue to observe positive trends in customers renewing subscriptions and ordering additional products and services. EQUIFAX฀LATIN฀AMERICA Revenues of our Equifax Latin America...

  • Page 34
    ... development associated with key technology platforms in our businesses. In the third quarter of 2002, our $41.0 million note receivable associated with the sale of our risk management collections business in 2000 was completely paid. FINANCING฀ACTIVITIES For the twelve months ended December 31...

  • Page 35
    ...the sale of its trade receivables to the subsidiary for general corporate purposes. The credit facility has an expiration date of September 6, 2005, but may be extended for an additional period of up to three years if specified conditions are satisfied. Loans will bear interest based on commercial...

  • Page 36
    ... sale of additional equity or convertible debt securities could result in additional dilution to our shareholders. In addition, we will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services and technologies, and the repurchase and retirement...

  • Page 37
    ...time to time to support the needs of our operating units. Except for our guarantee of the synthetic lease referred to above, our only outstanding guarantee that is not reï¬,ected as a liability on our balance sheets was extended in connection with the sale of our risk management collections business...

  • Page 38
    ... superseded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." Additionally, SAB 104 rescinds the SEC's related "Revenue Recognition in Financial Statements Frequently Asked Questions and Answers" issued with SAB 101 that had been codified...

  • Page 39
    ...'s financial statements as the goods are received or the services are rendered, and establishes fair value as the measurement objective for the accounting for such transactions. SFAS 123R is effective for public entities as of the beginning of the first interim or annual reporting period beginning...

  • Page 40
    ... models, and the sale of Marketing Service products such as demographic data lists, data queries and market research, is recognized upon completion, customer installation and acceptance. For sales contracts having multiple elements that can be divided into separate units of accounting, we allocate...

  • Page 41
    ... CONDITION AND RESULTS OF OPERATIONS involve delivery of multiple product lines. These product lines are distinct enough to be separated into separate units of accounting. Each product line does not impact the value or usage of other deliverables in the arrangement, and each can be sold alone or...

  • Page 42
    ... to Equifax Inc., a Georgia corporation, and its consolidated subsidiaries as a combined entity, except where it is clear that the terms mean only Equifax Inc. This Annual Report contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act...

  • Page 43
    ... terrorist acts. Readers should carefully review the disclosures and the risk factors described in this and other documents we file from time to time with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2004, our future reports on Forms 10-K, 10-Q and 8-K, and...

  • Page 44
    ... counterparties. Our variable rate indebtedness consists primarily of our $500.0 million unsecured revolving credit facility and a separate C$25.0 million revolving credit facility in Canada. The rate of interest we pay on our $500.0 million facility is based on a ï¬,oating rate pricing grid tied to...

  • Page 45
    ...fies the accounting for business combinations, goodwill and identifiable intangible assets. As of January 1, 2002, all goodwill amortization ceased. (3) Stock prices and market capitalization in 2000 have been adjusted to reï¬,ect the spin-off of Certegy. (4) In 2003, we recorded asset impairment...

  • Page 46
    ... internal control over financial reporting. Ernst & Young LLP, an independent registered public accounting firm, who audited and reported on the consolidated financial statements of Equifax included in this report, has issued an attestation report on management's assessment of internal control...

  • Page 47
    ... management's assessment and an opinion on the effectiveness of the company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan...

  • Page 48
    ...of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the...

  • Page 49
    ...STATEMENTS OF INCOME Twelve Months Ended December 31, (in millions, except per share amounts) 2004 $1,272.8 2003 $1,210.7 2002 $1,095.3 Operating revenue Costs and expenses: Costs of services...earnings per share Dividends per common share See Notes to Consolidated Financial Statements. 531.5 282...

  • Page 50
    ... companies Proceeds from sale of investments and businesses Deferred payments on prior year acquisitions Other Cash used by investing activities Financing activities: Net short-term payments Additions to long-term debt Payments on long-term debt Treasury stock purchases Dividends paid Proceeds from...

  • Page 51
    ... value: Authorized shares - 300.0; Issued shares - 182.0 in 2004 and 180.4 in 2003; Outstanding shares - 129.4 in 2004 and 132.7 in 2003 Paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock, at cost, 47.7 shares in 2004 and 42.3 shares in 2003 Stock held by employee...

  • Page 52
    ... Amount Capital Accumulative Other Retained Comprehensive Earnings Loss Stock Held By Employee Total Treasury Benefits Shareholders' Stock Trusts Equity Balance, December 31, 2001 Net income Other comprehensive income Shares issued under stock plans Treasury stock purchased Cash dividends Income...

  • Page 53
    ...is as follows: Twelve Months Ended December 31, (in millions) 2004 $234.7 29.5 (4.0) 0.5 3.1 $263.8 See Notes to Consolidated Financial Statements. 2003 $164.9 65.9 ... on sale of discontinued operations Change in cumulative loss from cash ï¬,ow hedging transactions Minimum pension liability ...

  • Page 54
    ... various types of financial, demographic and marketing information. Our products and services enable businesses to make credit and service decisions, manage their portfolio risk and develop marketing strategies concerning consumers and commercial enterprises. We serve customers across a wide range...

  • Page 55
    .... Costs of services consist primarily of data acquisition and royalties; customer service costs, which include: personnel costs to collect, maintain and update our proprietary databases, to develop and maintain software application platforms and to provide consumer and customer call center support...

  • Page 56
    ...Stock options Long-term incentive plans Weighted average shares outstanding (diluted) Certain internal use software and systems development costs are deferred and capitalized in accordance with American Institute of Certified Public Accountants Statement of Position 98-1, "Accounting for the Costs...

  • Page 57
    ... value method to account for stock-based employee compensation, we do not recognize compensation cost in connection with our stock option plans. We have computed the pro forma disclosures required under SFAS No. 123 and SFAS No. 148 using the BlackScholes option pricing model. The fair value...

  • Page 58
    ...fair value of these swaps and that of the related debt are recorded in interest expense in the accompanying Consolidated Statements of Income, the net of which is zero in 2004, 2003 and 2002. Our maximum economic exposure to loss due to credit risk on these interest rate swap agreements approximates...

  • Page 59
    ... superseded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." Additionally, SAB 104 rescinds the SEC's related "Revenue Recognition in Financial Statements Frequently Asked Questions and Answers" issued with SAB 101 that had been codified...

  • Page 60
    ... the decision to exit our commercial services business in Spain in our Equifax Europe segment. During 2003 and the first six months of 2004, this business component remained as held for sale. We completed the sale and final disposition of the business and recorded a $0.5 million gain in the third...

  • Page 61
    ... product offerings, customer profile, economic characteristics, operating margins and product fulfillment and delivery, and methodologies. We determined the existence of five reporting units, i.e., Information Services, Marketing Services, Personal Solutions, European Operations and Latin America...

  • Page 62
    ... During 2004, we acquired two independent credit reporting agencies located in the U.S. (also referred to as "Affiliates") and one Affiliate located in Canada, that house their consumer information on our system. We acquired all of these Other assets Purchased data files Goodwill Total...

  • Page 63
    ... value of the asset by discounting the present value of the future cash ï¬,ows of the asset. We recorded asset impairment and related charges of $2.4 million ($1.5 million after tax, or $0.01 per diluted share). The asset impairment charges are primarily for purchased data in our Marketing Services...

  • Page 64
    ... sale of its trade receivables to the subsidiary for general corporate purposes. The credit facility has an expiration date of September 6, 2005, but may be extended for an additional period of up to three years if specified conditions are satisfied. Loans will bear interest at commercial paper...

  • Page 65
    ... Employee compensation programs Deferred revenue Depreciation Net operating loss carryforwards of subsidiaries Foreign tax credits Unrealized foreign exchange loss Valuation allowance Other 30.9 2.7 2.0 35.6 $147.9 Deferred income tax liabilities: Data files and other assets Depreciation Pension...

  • Page 66
    ... the Treasury Department provides additional clarifying language on key elements of the provision. Equifax expects to complete its evaluation of the effects of the repatriation provision within a reasonable period of time following the publication of the additional clarifying language. The range of...

  • Page 67
    ...to represent shareholders' interests fully. Pursuant to the Rights Plan, our Board declared a dividend of one Share Purchase Right for each outstanding share of our common stock, with distribution to be made to shareholders of record as of November 24, 1995. The Rights, which will expire in November...

  • Page 68
    ...plan for most salaried employees in Canada (the Canadian Retirement Income Plan, or "CRIP"). Benefits of both plans are primarily a function of salary and years of service. Supplemental Retirement Plans. We maintain two supplemental executive retirement programs for certain key employees. The plans...

  • Page 69
    ... Foreign currency exchange rate changes Benefits paid Fair value of plan assets at December 31, Funded Status of Plan Unrecognized prior service cost Unrecognized actuarial (gain) loss Prepaid (accrued) benefit cost Amounts Recognized in the Statement of Financial Position Consist of: Prepaid bene...

  • Page 70
    ... 4.34% 6.25% 4.25% 5.92% 6.25% N/A N/A (in millions) Pension Benefits 2004 2003 2002 2004 Other Benefits 2003 2002 Weighted-Average Assumption to Determine Net Periodic Benefit Cost for Years Ending Discount rate Expected return on plan assets Rate of compensation increase 6.25% 8.68% 4.25...

  • Page 71
    ...on the amounts reported for the healthcare plan. A one-percentage point change in assumed healthcare cost trend rates would have the following effects: 1-Percentage Point Increase Sensitivity to Assumed Health Care Cost Trend Rate Effect on total 2004 service cost and interest cost components Effect...

  • Page 72
    ... the portfolio (at cost) shall be invested in the securities of any one issuer with the exception of Equifax common stock, and U.S. Treasury and Government Agency securities. Foreign Retirement Plans. We also maintain defined contribution plans for certain employees in the U.K. For the years ended...

  • Page 73
    ... that this funding would be available from sources such as additional bank lines of credit and the issuance of public debt and/or equity. However, the availability and terms of any such capital financing would be subject to a number of factors, including credit market conditions, the state of the...

  • Page 74
    ... are issued from time to time to support the needs of operating units. The only outstanding guarantee that is not reï¬,ected as a liability on our Consolidated Balance Sheets was extended in connection with the sale of our risk management collections business to RMA Holdings, LLC ("RMA") in October...

  • Page 75
    ...certain indemnified losses capped at the amount of a $10.0 million escrow fund specified in the agreement pursuant to which Equifax acquired Naviant. The parties are awaiting rulings on the issues presented by the motion for summary judgment filed by plaintiffs and the motion to dismiss filed by...

  • Page 76
    .... On May 5, 2004, Equifax, through its wholly owned subsidiary CD Holdings, Inc., completed the sale of 3,755,792 shares of common stock it owned in Intersections Inc., a provider of identity theft protection and credit management services, in an underwritten public offering of common stock for net...

  • Page 77
    ... telecommunication credit information reports and customer portfolio reviews to Certegy Inc. ("Certegy"). In addition Certegy provides customer invoice and disclosure notification printing/mailing services to us. We consider Certegy a related party because Lee A. Kennedy, a member of our board of...

  • Page 78
    ... FINANCIAL STATEMENTS 14.฀QUARTERLY฀FINANCIAL฀DATA฀(UNAUDITED) Quarterly financial data for 2004... operations Net income Reported Italy Restated Reported (in millions, except per share amounts) Second Italy Restated Reported Third Italy Restated Reported Fourth Italy Restated $313.6...

  • Page 79
    ..., with three primary reportable segments (i.e. "Equifax North America," "Equifax Europe" and "Equifax Latin America") dedicated to the marketing and selling of our core product lines (i.e. Information Services, Marketing Services and Personal Solutions) and related business operations within finite...

  • Page 80
    ...Operating Income (Loss): Equifax North America Information Services $299.5 Marketing Services 74.4 Marketing Services asset impairment & related charges (2.4) Marketing Services, net Personal Solutions Equifax North America Equifax Europe Equifax Latin America Other General corporate expense 72.0 17...

  • Page 81
    ...its credit files from Equifax Information Services LLC, a subsidiary of Equifax, in the ordinary course of business. Steve Uffman is the founder, Chairman and Chief Executive Officer of APPRO and is the Chief Executive Officer of CBBR. Mr. Uffman will become Group Executive, Enabling Technologies...

  • Page 82
    ... [email protected] SunTrust Bank Stock Transfer Department P.O. Box 4625 Atlanta, Georgia 30302 Telephone (800) 568-3476 INDEPENDENT฀REGISTERED฀ PUBLIC฀ACCOUNTING฀FIRM Kathryn J. Harris Office of the Corporate Secretary [email protected] Ernst & Young LLP 600 Peachtree Street Suite...

  • Page 83
    ... online from our website, www.equifax.com. STOCK PRICES (in dollars) Designed and produced by Corporate Reports Inc./Atlanta www.corporatereport.com The Investors' Service Plan provides shareholders and other investors with a convenient and economical way to purchase shares of Equifax common stock...

  • Page 84
    ... also extend our gratitude to our customers, whom we regard as partners in enabling global commerce. And to our shareholders, we look forward to growing our business and creating value on your behalf for many years to come. Equifax Inc. 1550 Peachtree Street, N.W. Atlanta, GA 30309 www.equifax.com