Equifax 2006 Annual Report Download - page 41

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EQUIFAX 2006 ANNUAL REPORT 39
A potential signifi cant use of cash would be the payment
to Computer Sciences Corporation (“CSC”) if they were to
exercise their option to sell their credit reporting business
to us at any time prior to 2013. The option exercise price
will be determined by agreement or by an appraisal process
and would be due in cash within 180 days after the exercise
of the option. We estimate that if the option had been exer-
cised at December 31, 2006, the price range would have
approximated $650 million to $725 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 our estimate. Our agreement with CSC, which expires
on July 31, 2008, also provides us with an option to pur-
chase its 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. If CSC were to exer-
cise its option, or if we were able to and decided to exercise
our option, then we would have to obtain additional sources
of funding. We believe that this funding would be available
from sources such as additional bank lines of credit and the
capital markets for debt and/or equity fi nancing. 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 equity markets, general
economic conditions, credit ratings and our fi nancial perfor-
mance and condition.
In the preceding table, we have not included amounts
related to future pension and other postretirement benefi t
plan contributions, as such required funding amounts have
not been determined. For additional information about our
pension and other benefi t plans, see Note 9 of the Notes to
Consolidated Financial Statements.
Off-Balance Sheet Transactions
Other than facility leasing arrangements, we do not engage
in off-balance sheet fi nancing activities. In 1998, we entered
into a synthetic lease on our Atlanta corporate headquarters
building in order to obtain favorable fi nancing terms with
regard to this facility. This $29.0 million lease expires in
2010. Lease payments for the remaining term totaled
$6.0 million at December 31, 2006. Under this synthetic
lease arrangement, we have guaranteed the residual value of
the leased property to the lessor. In the event that the prop-
erty were to be sold by the lessor at the end of the lease term,
we would be responsible for any shortfall of the sales pro-
ceeds, 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 shortfall, which was
$1.4 million and $4.0 million at December 31, 2006 and
2005, respectively, is recorded in other long-term liabilities
on our Consolidated Balance Sheets.
Letters of Credit and Guarantees
We will from time to time issue standby letters of credit,
performance bonds or other guarantees in the normal
course of business. The aggregate notional amount of all
performance bonds and standby letters of credit was not
material at December 31, 2006, and all have a maturity of
one year or less. Guarantees are issued from time to time
to support the needs of the operating units. In connection
with the sale of our risk management collections business
to RMA Holdings, LLC in October 2000, we guaranteed
the operating lease payments of a partnership affi liated
with RMA to a lender of the partnership pursuant to a term
loan. The operating lease, which expires December 31, 2011,
has a remaining balance of $6.6 million, based on the undis-
counted value of remaining lease payments, including real
estate taxes, at December 31, 2006.
In September 2005, RMA sold substantially all of its
assets to NCO Group, Inc. (“NCO”), after obtaining
approval from the U.S. Bankruptcy Court for the Northern
District of Ohio, Eastern Division. In conjunction with this
sale, NCO agreed to assume the operating lease obligations
discussed above, which we will continue to guarantee. We
believe that the likelihood of demand for payment by us is
minimal and expect no material losses to occur related to
this guarantee. Accordingly, we do not have a liability on
our Consolidated Balance Sheets at December 31, 2006 or
2005 related to this guarantee. For additional information
regarding this transaction see Note 6 of the Notes to the
Consolidated Financial Statements.
Other Contingencies
There are other matters which we are involved in, such as
legal proceedings, claims and litigation, for which the fi nal
outcome and impact to our Consolidated Financial
Statements is uncertain at December 31, 2006. For addi-
tional information about these matters, see Note 6 of the
Notes to Consolidated Financial Statements.
Pension Plans
Pension benefi ts are provided through U.S. and Canadian
defi ned benefi t pension plans and two supplemental executive
defi ned benefi t pension plans. Substantially all employees par-
ticipate in one or more of these plans. The measurement date
for our defi ned benefi t pension plans is December 31st of
each year.
Prior to January 1, 2005, we had one non-contributory
qualifi ed retirement plan covering most U.S. salaried
employees (the U.S. Retirement Income Plan, or “USRIP”)
and a defi ned benefi t plan for most salaried employees in
Canada (the Canadian Retirement Income Plan, or
“CRIP”). Benefi ts of both plans are primarily a function of
salary and years of service. On January 1, 2005, we sepa-
rated the USRIP into two defi ned benefi t plans subject to