Equifax 2006 Annual Report Download - page 69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EQUIFAX 2006 ANNUAL REPORT 67
Cash paid for interest, net of capitalized interest, was
$30.4 million, $38.3 million and $34.9 million during the
twelve months ended December 31, 2006, 2005 and
2004, respectively.
6.
COMMITMENTS AND CONTINGENCIES
Leases. Our operating leases principally involve offi ce space
and offi ce equipment. Other than leasing arrangements,
we do not engage in off-balance sheet fi nancing activities.
Under the terms of the $29.0 million operating lease for
our headquarters building in Atlanta, Georgia, which com-
menced in 1998 and expires in 2010, we have guaranteed a
portion of the residual value of the building at the end of
the lease. Total lease payments for the remaining term total
$6.0 million. Under this synthetic lease arrangement, we
have also guaranteed the residual value of the leased prop-
erty to the lessor. In the event that the property were to be
sold by the lessor at the end of the lease term, we would be
responsible for any shortfall of the sales proceeds, 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 estimated shortfall, which was $1.4 mil-
lion and $4.0 million at December 31, 2006 and 2005,
respectively, is recorded in other long-term liabilities on our
Consolidated Balance Sheets.
Rental expense for operating leases, which is recognized
on a straight-line basis over the lease term, was $26.1 mil-
lion, $24.6 million and $22.3 million for the twelve months
ended December 31, 2006, 2005 and 2004, respectively. Our
headquarters building operating lease has ground purchase
options exercisable beginning in 2019, ground renewal
options exercisable in 2048 and escalation clauses beginning
in 2009. Our technology center lease in Alpharetta, Georgia
expires in 2012 and includes renewal options through 2039.
Expected future minimum payment obligations for non-can-
celable operating leases exceeding one year are as follows as
of December 31, 2006:
(In millions)
Years Ending December 31, Amount
2007 $ 18.3
2008 14.4
2009 12.2
2010 9.6
2011 7.5
Thereafter 46.2
$108.2
We expect to receive $17.0 million under noncancelable
sublease agreements, $7.5 million of which represents oper-
ating expenses the sublessor is contractually obligated to pay
us over the remaining lease term. The expected sublease
income is not refl ected as a reduction in the total minimum
rental obligations under operating leases in the table above.
Data Processing, Outsourcing Services and Other
Agreements. We have separate agreements with
International Business Machines Corporation (“IBM”), R.L
Polk and Company, Acxiom and others to outsource por-
tions of our computer data processing operations and
related functions and to provide certain other administra-
tive and operational services. The agreements expire
between 2007 and 2013. The estimated aggregate minimal
contractual obligation remaining under these agreements is
approximately $330 million as of December 31, 2006, with
no future year expected to exceed approximately $75 mil-
lion. Annual payment obligations in regard to these
agreements vary due to factors such as the volume of data
processed; changes in our servicing needs as a result of new
product offerings, acquisitions or divestitures; the intro-
duction of signifi cant new technologies; foreign currency;
or the general rate of infl ation. Our data processing out-
sourcing agreement with IBM was renegotiated in 2003 for
a ten-year term. Under this agreement (which covers our
operations in North America, Europe, Brazil and Chile), we
have outsourced our mainframe and midrange operations,
help desk service and desktop support functions, and the
operation of our voice and data networks. The scope of such
services varies by location. During the twelve months ended
December 31, 2006, 2005 and 2004, we paid $112.1 million,
$120.8 million and $110.5 million, respectively, for these
services. The estimated future minimum contractual obli-
gation at December 31, 2006 under this agreement is
$290.7 million, with no year expected to exceed approxi-
mately $45 million. In certain circumstances (e.g., a change
in control or for our convenience), we may terminate these
data processing and outsourcing agreements, and, in doing
so, certain of these agreements require us to pay a signifi -
cant penalty. Additionally, we may terminate these
agreements without penalty in the event that IBM is in
material breach of the terms of the agreement.