Equifax 2007 Annual Report Download - page 36

34 EQUIFAX | 2007 ANNUAL REPORT
The 2006 increase in selling, general and administrative expenses
was mainly due to (1) a $7.6 million incremental negative impact
of adopting Statement of Financial Accounting Standards, or SFAS,
No. 123R, “Share-Based Payment,” or SFAS 123R, on January 1,
2006; (2) $9.0 million in loss contingencies related to certain pending
legal matters noted above; (3) a $6.4 million severance charge recog-
nized during the fourth quarter of 2006 related to our organizational
realignment; (4) a $3.2 million negative impact of the retirement
of several executive offi cers in 2006; (5) higher salary expenses
due to increased headcount; and (6) increased professional fees.
The 2007 increase in depreciation and amortization expense
was mainly due to $38.3 million in incremental depreciation and
amortization expense related to our acquisition of TALX. The
remainder of the increase is primarily due to depreciation expense
related to increased 2007 capital expenditures, including the purchase
of the facility that houses our Atlanta, Georgia data center on
July 26, 2007, and intangible amortization expense related to our
acquisitions of Austin-Tetra in October 2006 and of three mortgage
affi liates in the fi rst quarter of 2007. Depreciation and amortization
expense in 2006 remained consistent with the previous year.
The 2007 decline in operating margin was primarily due to
declines in the margins of our USCIS business units and the impact
of acquisition-related amortization expense from our acquisition of
TALX. This amortization expense represented 2% of 2007 consoli-
dated revenue. The 2006 decline in operating margin was primarily
driven by the loss contingencies related to certain legal matters,
the negative incremental impact of adopting SFAS 123R and the
charge related to our organizational realignment.
The 2007 increase in other expense, net, was primarily due to
increased interest expense driven by a higher level of debt during
2007 which was used to fund the acquisition of TALX and our share
buy back activity in 2007. See Note 4 for additional information
about debt agreements initiated or acquired during 2007.
The 2006 decrease in other expense, net, was primarily due to
a favorable settlement of claims against certain former shareholders
of Naviant, Inc. during the third quarter of 2006. In 2004, we served
a demand for arbitration, alleging, among other things, that the
sellers had breached various representations and warranties
concerning information furnished to us in connection with our
acquisition of Naviant, Inc. in 2002. As a result of this settlement,
we recognized a $14.1 million non-taxable gain in other income,
net, on our Consolidated Statement of Income in 2006.
Operating Income and Operating Margin
Consolidated Operating Income Twelve Months Ended December 31, Change
2007 vs. 2006 2006 vs. 2005
(Dollars in millions) 2007 2006 2005 $ % $ %
Consolidated operating revenue $1,843.0 $1,546.3 $1,443.4 $296.7 19% $102.9 7%
Consolidated operating expenses 1,356.8 1,110.2 1,021.4 246.6 22% 88.8 9%
Consolidated operating income $ 486.2 $ 436.1 $ 422.0 $ 50.1 11% $ 14.1 3%
Consolidated operating margin 26.4% 28.2% 29.2% nm nm nm nm
nm - not meaningful
Other Expense, Net
Consolidated Other Expense, Net Twelve Months Ended December 31, Change
2007 vs. 2006 2006 vs. 2005
(Dollars in millions) 2007 2006 2005 $ % $ %
Consolidated interest expense $ 58.5 $ 31.9 $ 35.6 $ 26.6 83% $ (3.7) (10)%
Consolidated minority interests
in earnings, net of tax 6.1 4.5 4.9 1.6 36% (0.4) (8)%
Consolidated other income, net (3.0) (16.2) (9.2) 13.2 (81)% (7.0) 76%
Consolidated other expense, net $ 61.6 $ 20.2 $ 31.3 $ 41.4 205% $ (11.1) (35)%
Weighted-average cost of debt 6.1% 5.7% 5.4% nm nm nm nm
Total consolidated debt $1,387.3 $503.9 $556.1 $883.4 175% $(52.2) (9)%
nm - not meaningful