Equifax 2004 Annual Report Download - page 43

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S
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Our actual results may differ materially from the results
discussed in such forward-looking statements. Factors that
may cause such a difference include, but are not limited to:
declines in the rate of growth, or absolute declines, in con-
sumer spending and consumer debt in our market areas;
interest rate increases or other factors that reduce mortgage
refi nancings or new mortgages; changes in the marketing
techniques of credit card issuers; competitive products and
pricing pressures and the Company’s ability to gain or main-
tain share of sales as a result of actions by competitors and
others; changes in estimates in critical accounting judgments;
changes in or failure to comply with laws and regulations,
including changes in the Fair Credit Reporting Act, the
Gramm-Leach-Bliley Act, accounting standards, taxation
requirements (including tax rate changes, new tax laws and
revised tax interpretations) in domestic or foreign jurisdic-
tions; costs associated with compliance with the Fair and
Accurate Credit Transactions Act of 2003; ability to suc-
cessfully integrate acquisitions; exchange rate fl uctuations
and other risks associated with investments and operations
in foreign countries; our ability to successfully develop and
market new products and services, incorporate new tech-
nology and adapt to technological change; equity markets,
including market disruptions and signifi cant interest rate
fl uctuations, which may impede our access to, or increase
the cost of, external fi nancing; increased competitive pres-
sures both domestically and internationally; and interna-
tional confl ict, including terrorist acts.
Readers should carefully review the disclosures and the risk
factors described in this and other documents we fi le 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 any
amendments thereto.
QUANTITATIVE฀AND฀QUALITATIVE฀
DISCLOSURES฀ABOUT฀MARKET฀RISK
In the normal course of our business, we are exposed to mar-
ket risk, primarily from changes in foreign currency exchange
rates and changes in interest rates, that could impact our
results of operations and fi nancial position. We manage our
exposure to these market risks through our regular operat-
ing and fi nancing activities, and when deemed appropriate,
through the use of derivative fi nancial instruments, such as
interest rate swaps, to hedge certain of these exposures. We
use derivative fi nancial instruments as risk management tools
and not for speculative or trading purposes.
FOREIGN฀CURRENCY฀EXCHANGE฀RATE฀RISK
A substantial majority of our revenue, expense and capi-
tal expenditure activities are transacted in U.S. dollars.
However, we do transact business in other currencies, pri-
marily the British pound, the euro, the Canadian dollar and
the Brazilian real. For most of these foreign currencies, we
are a net recipient, and therefore, benefi t from a weaker U.S.
dollar and are adversely affected by a stronger U.S. dollar
relative to the foreign currencies in which we transact signifi -
cant amounts of business.
We are required to translate, or express in U.S. dollars,
the assets and liabilities of our foreign subsidiaries that
are denominated or measured in foreign currencies at the
applicable year-end rate of exchange on our Consolidated
Balance Sheets, and income statement items of our foreign
subsidiaries at the average rates prevailing during the year.
We record the resulting translation adjustment, and gains
and losses resulting from the translation of intercompany
balances of a long-term investment nature, as components
of our shareholders’ equity. Other immaterial foreign
currency transaction gains and losses are recorded in our
Consolidated Statements of Income. We do not, as a mat-
ter of policy, hedge translational foreign currency expo-
sure. We will, however, hedge foreign currency exchange
rate risks associated with material transactions that are
denominated in a foreign currency.
At December 31, 2004, a 10% weaker U.S. dollar against
the currencies of all foreign countries in which we had
operations during 2004, would have resulted in an increase
of our revenues by $34.3 million, and an increase of our
pre-tax operating profi t by $7.8 million. A 10% stronger
U.S. dollar would have resulted in similar decreases to our
revenues and pre-tax operating profi t.
INTEREST฀RATE฀RISK
Our exposure to market risk for changes in interest rates
primarily relates to our variable rate revolving credit debt
and the interest rate swap agreements associated with por-
tions of our fi xed rate public debt. The nature and amount
of our long-term and short-term debt as well as the propor-
tionate amount of fi xed rate and fl oating rate debt can be
expected to vary as a result of future business requirements,
market conditions and other factors.