Equifax 2009 Annual Report Download

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DRIVING GROWTH
IN THE “NEW NORMAL”
2009 ANNUAL REPORT
EQUIFAX 2009 ANNUAL REPORT
11943 Equifax AR Cvr.indd 1 3/4/10 5:14 PM

Table of contents

  • Page 1
    2009 ANNUAL REPORT DRIVING GROWTH IN THE "NEW NORMAL"

  • Page 2
    ..., portfolio management, fraud detection, decisioning technology, marketing tools, and much more. We empower individual consumers to manage their personal credit information, protect their identities, and maximize their financial well-being. Headquartered in Atlanta, Georgia, Equifax Inc. operates in...

  • Page 3
    ... unique solutions that address customers' challenges. New products-such as Equifax SSN Affirmâ„¢ which combats identity fraud and enhances our customers' ability to manage risk-allow us to become increasingly embedded in our customers' operations. Our last pillar is using our deep data assets...

  • Page 4
    ..., our employee ideation forum, generated over 200 ideas in 2009 to support either revenue growth or improved operating processes. Our focus will remain on building share in markets that need our unique expertise, such as identity authentication and protection, where we are offering services that...

  • Page 5
    ... of revenue in 2009 from products launched in 2006-2008," said Paul Springman, Chief Marketing Officer. In 2009, Equifax launched 65 innovative products for existing markets as well as solutions for new markets. For example, we introduced UC Direct, a web-based solution that lets smaller businesses...

  • Page 6
    ...Work Number; $10 trillion in consumer wealth data from IXI; the National Consumer Telecom & Utilities Exchange (NCTUE); and the 26 million files of small business information-are unique and not replicable. As a result, we can offer more differentiated solutions to our customers. "Our unique insights...

  • Page 7
    ... its income verification capabilities when it acquired Rapid Reporting, a leader in IRS transcript information and Social Security number verification. This acquisition significantly enhanced Equifax's ability to quickly provide federal tax return data and ID verification solutions. "TALX's income...

  • Page 8
    ... and accountability. "We have cultivated a stronger team and deeper bench strength over the past few years ...we recently filled two business unit president positions from our pool of high-performance employees." - Coretha Rushing, Chief Human Resources Officer 6 EQUIFAX 2009 ANNUAL...

  • Page 9
    ... strategy to markets around the world," commented Rudy Ploder, President, International. For example, Equifax expanded the use of its highly successful, unique InterConnect data platform to banks and other financial customers in Canada and the U.K. The International business unit will begin...

  • Page 10
    ... credit-decisioning solutions. TALX Solving Customer Needs The TALX business unit includes The Work Number, Tax Management ï,§ With the acquisition of Rapid Reporting, we provide customers with tax Services and HR/Payroll services. The Work Number verifies employment and information from the IRS...

  • Page 11
    ...President, Chief Human Resources Officer Paul J. Springman Corporate Vice President, Chief Marketing Officer David C. Webb Chief Information Officer Dean C. Arvidson Corporate Secretary Nuala M. King Corporate Controller Mark E. Young Treasurer CONTACTS Corporate Offices Equifax Inc. 1550 Peachtree...

  • Page 12
    ... statements. Forward-lookong statements speak only as of the date when made. We undertake no oblogatoon to publocly update or revose any forward-lookong statements, whether as a result of new onformatoon, future events or otherwose, except as requored by law. 10 EQUIFAX 2009 ANNUAL REPORT

  • Page 13
    ... Financial Statements in this report. Twelve Months Ended December 31, (In millions, except per share data) Summary of Operations: Operating revenue Operating expenses Operating income Consolidated net income Net income attributable to Equifax Dividends paid to Equifax shareholders Diluted earnings...

  • Page 14
    ... business information, credit scores and portfolio analytics that enable customers to utilize our reports to make financial, marketing and purchasing decisions related to businesses. Geographic Information. We currently operate in the following countries: Argentina, Brazil, Canada, Chile, Costa Rica...

  • Page 15
    ... data, for $124.0 million. On November 2, 2009, we acquired Rapid Reporting Verification Company, a provider of IRS tax transcript information and social security number authentication services, for $72.5 million. • During the first and fourth quarters of 2009, we recorded restructuring charges...

  • Page 16
    ...to growth in demand for our settlement services products within our Mortgage Solutions business and increased postretirement employee benefit costs. We reclassified $13.2 million and $5.4 million of selling, general and administrative expense during the twelve months ended December 31, 2008 and 2007...

  • Page 17
    ..., was primarily due to lower operating income in our USCIS, International and North America Personal Solutions segments and $8.0 million of additional restructuring charges in 2009, partially offset by growth in our TALX operating income. The operating income declines for the aforementioned segments...

  • Page 18
    ...34 billion in 2008. For additional information about our debt agreements, see Note 4 of the Notes to the Consolidated Financial Statements in this report. Other income, net, for 2009 primarily includes a $2.2 million mark-to-market adjustment on certain insurance policies, a $1.1 million gain on our...

  • Page 19
    ... Financial Marketing Services Direct Marketing Services Total operating revenue % of consolidated revenue Total operating income Operating margin $ 525.6 99.5 111.3 84.3 $ 820.7 45% $ 285.2 34.8% America Commercial Solutions, and lower income tax expense were offset by higher general corporate...

  • Page 20
    ... management of their existing customer portfolios as opposed to new account acquisitions. Direct Marketing Services. For 2009 and 2008, as compared to the prior year periods, revenue declined primarily due to reduced mailing volumes for existing customers reflecting the slowdown in retail sales...

  • Page 21
    ... to our online solutions, decisioning technologies and marketing products, as well as a new contract in Brazil to provide data to a large regional consumer services data provider. The increases were also impacted by acquisitions of several small businesses in Argentina, Brazil, Chile, Ecuador and...

  • Page 22
    ... credit activity, and lower corporate data breach revenues. These declines were partially offset by direct to consumer, Equifax-branded subscription service revenue, which was up 4% for 2009, as compared to the prior year, driven by higher new sales and higher average revenue per subscription...

  • Page 23
    ... offset by increased revenue from our data management products. Online transaction volume for U.S. commercial credit information products decreased 21% for 2009, as compared to the prior year, due to a slowdown in loan origination to small businesses. Operating margin increased for 2009, as compared...

  • Page 24
    ... sources of liquidity. We believe that funds generated from expected results of operations will be sufficient to finance our anticipated working capital and other cash requirements (such as capital expenditures, interest payments, potential pension funding contributions, dividend payments and stock...

  • Page 25
    ... our income and identity verification service offerings, we acquired Rapid Reporting Verification Company, a provider of IRS tax transcript information and social security number authentication services, for $72.5 million. The results of this acquisition have been included in our TALX operating...

  • Page 26
    ... and Investments. To further enhance our market share and grow our credit data business, during the twelve months ended December 31, 2008, we completed nine acquisitions and investments in a number of small businesses totaling $27.4 million, net of cash acquired. Six of the transactions were in...

  • Page 27
    ...long-term revolving credit facilities primarily represents our pay down of $216.5 million of CP outstanding at December 31, 2007 from cash from operations and borrowings under our Senior Credit Facility to lower the average cost of our debt and due to the adverse conditions in the CP market. In 2007...

  • Page 28
    ... the twelve months ended December 31, 2009, 2008 and 2007 were as follows: • Under share repurchase programs authorized by our Board of Directors, we purchased 0.9 million, 4.5 million, and 17.9 million common shares on the open market during the twelve months ended December 31, 2009, 2008 and...

  • Page 29
    ...make a reasonably reliable estimate of the period of cash settlement with the respective taxing authorities. A potential significant future use of cash would be the payment to Computer Sciences Corporation, or CSC, if it were to exercise its option to sell its credit reporting business to us at any...

  • Page 30
    ... (the U.S. Retirement Income Plan, or USRIP) who terminated or retired besore January 1, 2005 and a desined benesit plan sor most salaried and hourly employees in Canada (the Canadian Retirement Income Plan, or CRIP). On December 31, 2009, the plan assets and obligations os the EIPP were merged with...

  • Page 31
    ...fixed or determinable, revenue is deferred until the arrangement fee becomes estimable, assuming all other revenue recognition criteria have been met. We have certain information solution offerings that are sold as multiple element arrangements. To account for each of these elements separately, the...

  • Page 32
    ...America Canada Consumer North America Personal Solutions North America Commercial Solutions The Work Number Tax Management Services Talent Management Services Total goodwill 2009 require assumptions about short- and long-term revenue growth rates, operating margins for each reporting unit, discount...

  • Page 33
    ... planned business initiatives and prevailing trends exhibited by these units, such as cgntinued demand fgr emplgyment verificatign services and unemplgyment claims management in The Wgrk Number and Tax Management Services repgrting units. The anticipated revenue grgwth, hgwever, is partially gffset...

  • Page 34
    ... Talent Management Services business. This reporting unit has been impactex by rexucex hiring activity among key clients anx, as a result, we have lowerex our revenue growth projections. In axxition, we are projecting lower margins xue, in part, to our plan to reinvest in the business by expanxing...

  • Page 35
    ... We consider accounting for our U.S. and Canadian pension and other postretirement plans critical because management is required to make significant subjective judgments about a number of actuarial assumptions, which include discount rates, salary growth, expected return on plan assets, interest...

  • Page 36
    ...lould have resulted in similar decreases to our revenue and pre-tax operating profit for 2009 and 2008. Interest Rate Risk Our exposure to market risk for changes in interest rates relates to our variable-rate, long-term Senior Credit Facility and commercial paper borrolings, as lell as our interest...

  • Page 37
    ... the Audit Committee of its Board of Directors. Based on this assessment, management determined that, as of December 31, 2009, Equifax maintained effective internal control over financial reporting. Ernst & Young LLP, the Company's independent registered public accounting firm, has issued an audit...

  • Page 38
    ...' equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2009 of Equifax Inc. and our report dated February 23, 2010 expressed an unqualified opinion thereon. 3MAR200912401731 Atlanta, Georgia February 23, 2010 36 EQUIFAX 2009 ANNUAL REPORT

  • Page 39
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Equifax Inc.: We have audited the accompanying consolidated balance sheets of Equifax Inc. as of December 31, 2009 and 2008, and the related consolidated statements of income, shareholders' equity and...

  • Page 40
    ... OF INCOME Twelve Months Ended December 31, (In millions, except per share amounts) Operating revenue Operating expenses: Cost of services (exclusive of depreciation and amortization below) Selling, general and administrative expenses Depreciation and amortization Total operating expenses Operating...

  • Page 41
    ... Indefinite-lived intangible assets Purchased intangible assets, net Other assets, net Total assets LIABILITIES AND EQUITY Current liabilities: Short-term debt and current maturities Capitalized lease obligation Accounts payable Accrued expenses Accrued salaries and bonuses Deferred revenue Other...

  • Page 42
    ...-term revolving credit facilities Payments on long-term debt Proceeds from issuance of long-term debt Treasury stock purchases Dividends paid to Equifax shareholders Dividends paid to noncontrolling interests Proceeds from exercise of stock options Excess tax benefits from stock-based compensation...

  • Page 43
    ... income Other comprehensive income Shares issued under stock and benefit plans, net of minimum tax withholdings Equity consideration issued for TALX acquisition Treasury stock purchased under share repurchase program ($40.12 per share)* Cash dividends ($0.16 per share) Reclassification of director...

  • Page 44
    ... actuarial losses and prior service cost related to our pension and other postretirement benefit plans, net of accumulated tax of $124.9, $119.2 and $61.3 in 2009, 2008 and 2007, respectively Cash flow hedging transactions, net of tax of $1.7, $2.1 and $2.2 in 2009, 2008 and 2007, respectively...

  • Page 45
    ... of Operations. We collect, organize and manage various types of financial, demographic, employment and marketing information. Our products and services enable businesses to make credit and service decisions, manage their portfolio risk, automate or outsource certain payroll, tax and human resources...

  • Page 46
    ... client contract. We have certain information solution offerings that are sold as multiple element arrangements. The multiple elements may include consumer or commercial information, file updates for certain solutions, services provided by our decisioning technologies personnel, training services...

  • Page 47
    ... services consist primarily of (1) data acquisition and royalty fees; (2) customer service costs, which include: personnel costs to collect, maintain and update our proprietary databases, to develop and maintain software application platforms and to provide consumer and customer call center support...

  • Page 48
    ... The title to these assets will revert back to us upon retirement or cancellation of the applicable bonds. These fixed assets are still recognized in the Company's Consolidated Balance Sheets as all risks and rewards remain with the Company. Impairment of Long-Lived Assets. We monitor the status of...

  • Page 49
    ... officers of the pompany, employee benefit trust assets, a statutorily-required tax deposit and data purchases, net of related amortization. Benefit Plans. We sponsor various pension and defined contribution plans. We also maintain certain healthcare and life insurance EQUIFAX 2009 ANNUAL REP...

  • Page 50
    ... information about pension asset valuations, investment allocation decisions, and major categories of plan assets. These disclosure requirements are effective for years ending after December 15, 2009. Our adoption did not have a material impact on our Consolidated Financial Statements. 48 EQUIFAX...

  • Page 51
    ...income and identity verification service offerings, we acquired Rapid Reporting Verification Company, or Rapid, a provider of IRS tax transcript information and social security number authentication services, for $72.5 million. The results of this acquisition have been included in our TALX operating...

  • Page 52
    ... the stock of a credit reporting business located in Peru for cash consideration of $8.0 million. On May 15, 2007, we completed the acquisition of all of the outstanding shares of TALX, a leading provider of employment and income verification and human resources business process outsourcing services...

  • Page 53
    ..., and the acquisition of intellectual property and workforce that are not recognized as assets apart from goodwill. December 31, 2009 Intangible asset category Customer relationships Proprietary database Purchased data files Acquired software and technology Non-compete agreements Trade names and...

  • Page 54
    ...Intangible Assets. Indefinite-lived intangible assets consist of contractual/territorial rights representing the estimated fair value of rights to operate in certain territories acquired through the purchase of independent credit reporting agencies in the U.S. and Canada. Our contractual/territorial...

  • Page 55
    ... Intangible Assets. Purchased intangible assets net, recorded on our Consolidated Balance Sheets at December 31, 2009 and 2008, are as follows: December 31, 2009 (In millions) Definite-lived intangible assets: Purchased data files Acquired software and technology Customer relationships Proprietary...

  • Page 56
    ...and current maturities Less capitalized lease obligation Less unamortized discounts Plus fair halue adjustments Total long-term debt, net of discount $ $ 2009 135.0 $ 2008 3.0 4. - 7.6 75.0 275.0 272.5 125.0 250.0 25.8 10.1 75.0 - 280.0 150.0 250.0 Senior Credit Facility. We are party to an $850...

  • Page 57
    ...under our Senior Credit Facility. At December 31, 2009, $135.0 million in CP notec were outctanding, at a weighted-average fixed interect rate of 0.4% per annum, all with maturitiec of lecc than 90 dayc. 4.25% Notes. Upon our July 26, 2007 acquicition of our Atlanta, Georgia, data center, we accumed...

  • Page 58
    ... 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. The...

  • Page 59
    .... If these change in control agreements had been triggered as of December 31, 2009, payments of approximately $54.6 million would have been made (excluding tax gross-up amounts of $12.8 million). Under the Company's existing director and employee stock benefit plans, a change in control generally...

  • Page 60
    ... of these credit agreements, we also bear the risk of certain changes in tax laws that would subject payments to non-U.S. lenders to withholding taxes. In conjunction with certain transactions, such as sales or purchases of operating assets or services in the ordinary course of business, or the...

  • Page 61
    ... a $7.3 million income tax benefit related to our ability to utilize foreign tax credits beyond 2009. This reduced our 2009 effective tax rate by 2.1%. Includes the benefit related to an investment loss in a subsidiary recognized during the third quarter of 2009. EQUIFAX 2009 ANNUAL REPORT 59

  • Page 62
    ... 31, 2009 and 2008, were as follows: December 31, (In millions) Deferred income tax assets: Employee pension benefits Net operating and capital loss carryforwards Unrealized foreign exchange loss Foreign tax credits Employee compensation programs Reserves and accrued expenses Deferred revenue Other...

  • Page 63
    ...based on service, with 33% vesting for each year of completed service, and expire ten years from the grant date. 7. STOCK-BASED COMPENSATION We have one active share-based award plan, the 2008 Omnibus Incentive Plan which was approved by our shareholders in 2008, EQUIFAX 2009 ANNUAL REPORT 61

  • Page 64
    ... the difference between the closing price of Equifax's common stock on December 31, 2009 and the exercise price, multiplied by the number of in-the-money stock options as of the same date. This represents the amount that would have been received by the stock option holders if they had all exercised...

  • Page 65
    ... (divcounted uving the appropriate rivk-free interevt rate). The following table vummarizev changev in our nonvevted vtock during the twelve monthv ended December 21, 2009, 2008 and 2007 and the related weighted-average grant date fair value: Weighted-Average Grant Date Fair Value $ 21.64 $ 40...

  • Page 66
    ... (the U.S. Retirement Income Plan, or USRIP) who terminated or retired before January 1, 2005 and a defined benefit plan for most salaried and hourly employees in Canada (the Canadian Retirement Income Plan, or CRIP). On December 31, 2009, the plan assets and obligations of the EIPP were merged with...

  • Page 67
    ... executive retirement programs for certain key employees. The plans, which are unfunded, provide supplemental retirement payments, based on salary and years of service. Other Benefits. We maintain certain healthcare and life insurance benefit plans for eligible retired employees. Substantially...

  • Page 68
    ... amounts 3ecognized in othe3 comp3ehensive income du3ing the twelve months ended Decembe3 31, 2009 and 2008: Pension Benefits (In millions) Amounts arising during the period: Net actua3ial loss, net of taxes of $8.1 and $59.7 in 2009 and 2008, 3espectively, fo3 pension benefits and $0.9 and $3.5 in...

  • Page 69
    ..., fixed-income investments and yield-to-maturity analysis specific to our estimated future benefit payments available as of the measurement date. Discount rates are reset annually on the measurement date to reflect current market conditions. We use a publicly published yield curve updated monthly to...

  • Page 70
    ... Plans Non-U.S. Defined Benefit Plans Other Benefit Plans Years ending December 31, (In millions) Fair value is based on observable market prices for the assets. Private equity investments are initially valued at cost. Fund managers periodically review the valuations utilizing subsequent company...

  • Page 71
    ... our in-house Investment Officer. The asset allocation and ranges are approved by in-house Plan Administrators, who are Named Fiduciaries under ERISA. The fair value of the postretirement assets at December 31, 2009, is as follows: Fair Value Measurements at Reporting Date Using: Quoted Prices in...

  • Page 72
    ... or transactions such as (1) Equifax common stock or securities, except as might be incidental to any pooled funds which the plan may have, (2) commodities or loans, (3) short sales and the use of margin accounts, (4) put and call options, (5) private placements, and (6) transactions which...

  • Page 73
    ...ice Index, alsm mve. successive fmu.-yea. pe.imds. Equifax Retirement Savings Plans. Equifax spmnsm.ed a tax qualified defined cmnt.ibutimn plan in 2009, the Equifax Inc. 401(k) Plan, m. the Plan. The Cmmpany assumed spmnsm.ship mf the TALX Cm.pm.atimn Savings and Reti.ement Plan, m. TALX Plan, upmn...

  • Page 74
    ... employees receive a lump sum severance payment for their benefit. Accordingly, we expect the majority of the payments to be completed by December 2010. Payments related to this charge totaled $1.7 million for the twelve months ended December 31, 2009. During the first quarter of 2009, we recorded...

  • Page 75
    ... protection products sold directly to consumers via the Internet and in various hard-copy formats. North America Commercial Solutions. This segment includes commercial products and services such as business credit and demographic information, credit scores and portfolio analytics (decisioning tools...

  • Page 76
    ... $ 2007 23.3 23.0 6.4 5.0 1.0 59.8 Twelve Months Ended December 31, (in millions) Operating income: U.S. Consumer Information Solutions International TALX North America Personal Solutions North America Commercial Solutions General Corporate Expense Total operating income $ 285.2 118.9 75.4 34.3 15...

  • Page 77
    ... DATA (UNAUDITED) Quarterly financial data for 2009 and 2008 was as follows: Three Months Ended (In millions, except per share data) 2009 Operating revenue Operating income Consolidated net income Net income attributable to Equifax Basic earnings per common share Diluted earnings per common share...

  • Page 78
    ... in the weighted-average shares between periods. The comparability of our quarterly financial results during 2009 and 2008 was impacted by certain events, as follows: • During 2009, we made several acquisitions, including IXI Corporation and Rapid Reporting Verification Company during the fourth...

  • Page 79
    ... the assets to which they apply: Trade accounts receivable Deferred income tax asset valuation allowance $ 8.9 60.8 $ 69.7 2007 Column A Column B Column C Additions Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Accounts Balance at End of Period Column D Column E $ 11...

  • Page 80
    ... we recorded $16.8 million of restructuring and asset-write down charges ($10.5 million, net of tax) related to our business realignment. Management believes excluding these charges provides meaningful supplemental information regarding our financial results for the years ended December 31, 2009 and...

  • Page 81
    ... may obtain a copy of our Annual Report on Form 10-K for the year ended December 31, 2009, without charge, by writing to the Corporate Secretary, P.O. Box 4081, Atlanta, Georgia 30302, or online from our web site, www.equifax.com. STOCK PRICES 2009 Quarter First Second Third Fourth Year High...

  • Page 82
    ... of TALX Corporation. ABS Credit Risk Insight, Account Advantage, Business Credit Monitoring, Citadel, Debt Wise, Equifax Credit Report, Equifax ID Patrol, Equifax SSN Affirm and Identity Report are trademarks of Equifax Inc. Premium Customer Portfolio Review (CPR) is a service mark of Equifax Inc...

  • Page 83
    ...Chairman and Chief Executive Officer SunTrust Banks, Inc. Siri S. Marshall Retired Senior Vice President, General Counsel and Secretary General Mills, Inc. John A. McKinley Co-founder, LaunchBox Digital Mark B. Templeton President and Chief Executive Officer Citrix Systems, Inc. EQUIFAX 2009 ANNUAL...

  • Page 84
    Equifax Inc. 1550 Peachtree Street, N.W. Atlanta, GA 30309 404-885-8000 www.equifax.com Form #3201-09