Equifax 2006 Annual Report Download - page 46

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
44 EQUIFAX 2006 ANNUAL REPORT
Foreign Currency Exchange Rate Risk
A substantial majority of our revenue, expense and capital
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 significant 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 within other
comprehensive income, as a component of our sharehold-
ers’ equity. Other immaterial foreign currency transaction
gains and losses are recorded in our Consolidated
Statements of Income. We do not, as a matter of policy,
hedge translational foreign currency exposure. We may,
however, hedge transactional foreign currency exchange
rate risks associated with material transactions which
are denominated in a foreign currency.
At December 31, 2006, a 10% weaker U.S. dollar against
the currencies of all foreign countries in which we had oper-
ations during 2006 would have increased our revenue by
$42.2 million and our pre-tax operating profi t by $12.8 mil-
lion. At December 31, 2005, a 10% weaker U.S. dollar
against the currencies of all foreign countries in which we
had operations during 2005 would have increased our reve-
nue by $37.8 million and our pre-tax operating profi t by
$11.1 million. A 10% stronger U.S. dollar would have resulted
in similar decreases to our revenue and pre-tax operating
profi t for 2006 and 2005.
Interest Rate Risk
Our exposure to market risk for changes in interest rates
relates to our variable-rate, long-term revolving credit facil-
ity and trade receivables-backed revolving credit facility.
We attempt to achieve the lowest all-in weighted-average
cost of debt while simultaneously taking into account the
mix of our fi xed- and fl oating-rate debt, and the average life
and scheduled maturities of our debt. At December 31,
2006, our weighted average cost of debt was 5.7% and
weighted-average life of debt was 7.2 years. At December 31,
2006, 79% of our debt was fi xed rate, and the remaining
21% was variable rate. Occasionally we use derivatives to
manage our exposure to changes in interest rates by entering
into interest rate swaps.
Based on current mix of fi xed-rate and variable-rate
debt, which is comparable to the prior year, we do not have
material exposure to interest rate risk. In the future, if our
mix of fi xed-rate and variable-rate debt were to change due
to additional borrowings under existing variable-rate credit
facilities or new variable-rate debt instruments, we could
have exposure to interest rate risk. The nature and amount
of our long term and short-term debt, as well as the propor-
tionate amount of fi xed-rate and variable-rate debt, can be
expected to vary as a result of future business requirements,
market conditions and other factors.
For additional information about our debt, including
interest rates at December 31, 2006, see Note 5 of the
Notes to Consolidated Financial Statements.
FORWARD-LOOKING STATEMENTS
This annual report contains “forward-looking statements”
under the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933, and Section 21E of the Securities Exchange Act
of 1934. Forward-looking statements include all statements
that are not historical or current facts; relate to our expec-
tations about future events or results based on the informa-
tion that is currently available to us; involve assumptions,
risks and uncertainties; and speak only as of the date on
which such statements are made. Words such as “may,”
“could,” “should,” “would,” “believe,” “expect,” “anticipate,”
“estimate,” “intend,” “seeks,” “plan,” “project,” “continue,”
“predict,” and other words or expressions of similar mean-
ing are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. Examples of forward-looking statements
include, among others, information concerning our outlook
for 2007; growth strategies and strategic actions, including
acquisitions and dispositions; future intergration of acquired
businesses and technologies; fi nancing plans; future fi nan-
cial performance; potential operating performance improve-
ments; objectives for products and services; and numerous
other matters of national, regional and global scale, includ-
ing those of a political, economic, business and competitive
nature. We disclaim any intention or obligation to update or
revise any forward-looking statements, whether as a result
of new information, future events or otherwise. Our actual
results may differ materially from those expressed or implied
in those statements. Some factors that could cause actual
results to differ materially from those discussed in the for-
ward-looking statements include, but are not limited to,
those described under “Forward-Looking Statements” and
Item IA, “Risk Factors” of our Annual Report on Form 10-K
for the year ended December 31, 2006. You should not place
undue reliance on these forward-looking statements and
should carefully review the disclosures and the risk factors
described in the Form 10-K and other documents we fi le
from time to time with the SEC.