Equifax 2010 Annual Report Download

Download and view the complete annual report

Please find the complete 2010 Equifax annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 80

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80

Growth through
Innovation and Execution
2010 ANNUAL REPORT

Table of contents

  • Page 1
    2010 ANNUAL REPORT Growth through Innovation and Execution

  • 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
    ...we฀acquired฀ Anakam,฀a฀leading฀provider฀of฀identity฀authentication฀solutions.฀Anakam฀holds฀a฀ strong฀position฀in฀the฀government฀and฀ healthcare฀markets,฀both฀of฀which฀are฀฀ targeted฀markets฀for฀Equifax.฀The฀acquisition฀added฀important...

  • Page 4
    ...Shareholders continued Revenue by business unit* (2010) 40% U.S. Consumer Information Solutions (USCIS) 26% International 21% TALX 9% North America Personal Solutions (PSOL) 4% North America Commercial Solutions (NACS) * From continuing operations market฀indices,฀a฀multi-year฀trend฀that...

  • Page 5
    ... launched฀a฀national฀credit฀reporting฀services฀company฀in฀India,฀which฀has฀the฀world's฀ fastest฀growing฀middle-class฀economy.฀ Achieving "speed to insight" The฀ultimate฀deliverable฀of฀our฀data฀assets,฀ analytics฀and฀decisioning฀technology฀is...

  • Page 6
    ... to฀just฀a฀few฀hours. The฀North฀America฀Personal฀Solutions฀ (PSOL)฀business฀unit฀introduced฀Equifax฀ Complete™,฀a฀highly฀informative฀and฀intuitive฀consumer฀scoring฀and฀credit฀service.฀ "With฀Equifax฀Complete,฀consumers฀now฀ have฀insight...

  • Page 7
    ...and market-related services are expanding their relationships and using The Work Number's income, verifications and process outsourcing services." - Dann Adams, President, TALX meet฀new฀government-mandated฀financial฀ services฀requirements. North฀America฀Commercial฀Solutions฀ (NACS...

  • Page 8
    ... seize฀opportunities฀to฀build฀the฀business.฀ "Our 360° Consumer View sets Equifax apart by integrating asset, income, credit and real estate data with analytics for identifying and understanding customers optimal prospects." - Rudy Ploder, President, U.S. Consumer Information Solutions

  • Page 9
    ...฀Program฀by฀creating฀ cross-functional฀teams฀of฀employees฀to฀ work฀closely฀with฀our฀large฀financial฀services฀clients฀to฀provide฀an฀array฀of฀solutions.฀Unique,฀current฀wealth฀and฀income฀ data฀from฀IXI฀and฀TALX฀allowed฀us฀to฀offer...

  • Page 10
    ... information. Rapid Reporting, a national provider of IRS tax transcript information. North America Personal Solutions (PSOL) PSOL is a leading provider of personalized online consumer credit, debt and identity management services. Its innovative suite of products, including Equifax Complete, Debt...

  • Page 11
    ... 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 Corporate Offices Equifax Inc. 1550 Peachtree Street, N.W. Atlanta, Georgia 30309 Telephone (404...

  • Page 12
    ...35. 36. 37. 38. 39. 40. 42. 73. 74. Selected Financial Data Management's Discussion & Analysis of Financial Condition and Results of Operations Management's Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm on Internal Control Over Financial...

  • Page 13
    ... 27, 2009, we acquired IXI Corporation for $124.0 million. On November 2, 2009, we acquired Rapid Reporting Verification Company for $72.5 million. The results of these acquisitions are included in our Consolidated Financial Statements subsequent to the acquisition dates. For additional information...

  • 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
    ... initiatives including new product innovation, differentiated decisioning solutions and analytics leveraging our diverse data assets and technology. • We have reorganized our sales force and have key customer teams dedicated to our largest accounts. • We have divested two product lines that were...

  • Page 16
    ...2010, 2009 AND 2008 Consolidated Financial Results Operating Revenue Operating Revenue (Dollars in millions) U.S. Consumer Information Solutions International TALX North America Personal Solutions North America Commercial Solutions Consolidated operating revenue Twelve Months Ended December 31, 2010...

  • Page 17
    ... Consolidated other expense, net Average cost of debt Total consolidated debt, net, at year end 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...

  • Page 18
    ... operations attributable to Equifax Discontinued operations attributable to Equifax Net income attributable to Equifax Weighted-average shares used in computing diluted earnings per share tax benefit in the fourth quarter of 2009 related to our ability to utilize foreign tax credits beyond 2009...

  • Page 19
    ... for portfolio management services at a time of significant uncertainty in the consumer credit market. This decline was partially offset by approximately $6 million of incremental revenue from our acquisition of IXI Corporation in October 2009. U.S. Consumer Information Solutions Operating Margin...

  • Page 20
    ... by weakness in the U.K. economy affecting customer demand, which was partially offset by higher volumes and new customers for our online services and new collections products in Spain and Portugal. Canada Consumer. The $14.1 million increase in revenue for 2010, as compared to the prior year, was...

  • Page 21
    ... screening, social services and collections sectors; and due to the impact of our acquisition of Rapid Reporting Verification Company in the fourth quarter of 2009. Revenue increased in 2009, as compared to 2008, due to the increased volumes of verifications of consumer employment from government...

  • Page 22
    ... and marketing service revenue and revenue from our data management products. Online transaction volume for U.S. commercial credit information products for 2010 increased when compared to the prior year. Operating margin increased for 2010, as compared to 2009, as the rapid rate in revenue growth...

  • Page 23
    ... of restructuring charges recorded in 2009 that did not recur in 2010. This was partially offset by increased salary, benefit and incentive costs, upgrades in shared corporate technology, and acquisition-related expenses. General corporate expenses decreased slightly for 2009, as compared to 2008...

  • Page 24
    ...or adding equipment, updating systems for regulatory compliance, the licensing of software applications and investing in system reliability, security and disaster recovery enhancements. Capital expenditures in 2010 were higher than 2009 due to the purchase of our headquarters building in Atlanta, GA...

  • Page 25
    ... a broad range of credit data and information solutions in India. We paid cash consideration of $5.2 million for our 49 percent equity interest in ECIS. On November 2, 2009, to further enhance our income and identity verification service offerings, we acquired Rapid Reporting Verification Company...

  • Page 26
    ...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 2009, we purchased $7.5 million principal amount of our outstanding ten-year senior notes due 2017 for $6.3 million...

  • Page 27
    ... of cash related to equity during the twelve months ended December 31, 2010, 2009 and 2008 were as follows: • Under share repurchase programs authorized by our Board of Directors, we purchased 5.2 million, 0.9 million, and 4.5 million common shares on the open market during the twelve months ended...

  • Page 28
    ... sell its credit reporting business to us at any time prior to 2013. The option exercise price would 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 exercised at December 31, 2010...

  • Page 29
    ...GAAP. For additional information about our benefit plans, see Note 10 of the Notes to Consolidated Financial Statements in this report. Seasonality We experience seasonality in certain of our revenue streams. Revenue generated from The Work Number business unit within the TALX operating segment is...

  • Page 30
    ... 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, statistical models and other services. To account...

  • Page 31
    ... 31, 2010, for our nine reporting units was as follows: (In millions) Consumer Information Solutions (including Mortgage Solutions and Consumer Financial Marketing Services) Europe Latin America Canada Consumer North America Personal Solutions North America Commercial Solutions The Work Number Tax...

  • Page 32
    ... that we expect from planned business initiatives including new product initiatives, client service and retention standards, and cost management programs. At the end of the forecast period, the longterm growth rate we used to determine the terminal value of each reporting unit was generally 3% to...

  • Page 33
    ... in revenue from the addition of sales staff and from new product and new customer segment initiatives, and our planned spending on operating improvement initiatives in 2011 to drive improving growth and profitability, particularly in Brazil, followed by growth for all of Latin America in 2012. If...

  • Page 34
    ... as of the measurement date. Discount rates are updated annually on the measurement date to reï¬,ect current market conditions. We use a publicly published yield curve to develop our discount rates. The yield curve provides discount rates related to a dedicated high-quality bond portfolio whose cash...

  • Page 35
    ... have resulted in similar decreases to our revenue and pre-tax operating profit for 2010 and 2009. 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 borrowings, as well as our interest...

  • Page 36
    .... Based on this assessment, management determined that, as of December 31, 2010, Equifax maintained effective internal control over financial reporting. Ernst & Young LLP, the Company's independent registered public accounting firm, has issued an audit report on the Company's internal control over...

  • Page 37
    ...the related consolidated statements of income, shareholders' equity and comprehensive income, and cash ï¬,ows for each of the three years in the period ended December 31, 2010 of Equifax Inc. and our report dated February 23, 2011 expressed an unqualified opinion thereon. Atlanta, Georgia February...

  • Page 38
    ... in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Equifax Inc.'s internal control over financial reporting as of December 31, 2010, based on criteria established in...

  • Page 39
    ... 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 income...

  • Page 40
    ... and cash equivalents Trade accounts receivable, net of allowance for doubtful accounts of $7.5 and $15.1 at December 31, 2010 and 2009, respectively Prepaid expenses Other current assets Total current assets Property and equipment: Capitalized internal-use software and system costs Data processing...

  • Page 41
    ... acquisitions: Accounts receivable, net Prepaid expenses and other current assets Other assets Current liabilities, excluding debt Other long-term liabilities, excluding debt Cash provided by operating activities Investing activities: Capital expenditures Acquisitions, net of cash acquired Proceeds...

  • Page 42
    ... 31, 2009 Net income Other comprehensive income (loss) Shares issued under stock and benefit plans, net of minimum tax withholdings Treasury stock purchased under share repurchase program ($32.28 per share)* Cash dividends ($0.28 per share) Dividends paid to employee benefits trusts Stock-based...

  • Page 43
    ... 2009 Noncontrolling Interests Total Equifax Shareholders 2008 Noncontrolling Interests Total Net income Other comprehensive income: Foreign currency translation adjustment Recognition of prior service cost and actuarial gains (losses) related to our pension and other postretirement benefit plans...

  • Page 44
    ... and marketing information. Our products and services enable businesses to make credit and service decisions, manage their portfolio risk, automate or outsource certain payroll-related, tax and human resources business processes, and develop marketing strategies concerning consumers and commercial...

  • Page 45
    ... 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 46
    ... the two calculations is as follows: Twelve Months Ended December 31, (In millions) Weighted-average shares outstanding (basic) Effect of dilutive securities: Stock options and restricted stock units Long-term incentive plans Weighted-average shares outstanding (diluted) 2010 124.8 2009 126.3 2008...

  • Page 47
    ... rights represent 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 rights are perpetual in nature and, therefore, the useful lives are considered inde...

  • Page 48
    ... on age at retirement and years of service and for some pension plans, benefits are also based on the employee's annual earnings. The net periodic cost of our pension and other postretirement plans is determined using several actuarial assumptions, the most significant of which are the discount...

  • Page 49
    ...On October 1, 2010, to broaden our portfolio of solutions, we acquired Anakam, Inc., a provider of large-scale, software-based, multi-factor authentication solutions, for $64.3 million. The results of this acquisition have been included in our U.S. Consumer Information Solutions segment. E QU I FAX...

  • Page 50
    ...range of credit data and information solutions in India. We paid cash consideration of $5.2 million for our 49 percent equity interest in ECIS. On November 2, 2009, to further enhance our income and identity verification service offerings, we acquired Rapid Reporting Verification Company, or Rapid...

  • Page 51
    ... 31, 2010 Intangible asset category Customer relationships Proprietary database Acquired software and technology Non-compete agreements Trade names and other intangible assets Total acquired intangibles Fair value (in millions) $11.5 - 13.9 3.8 1.4 $30.6 Weighted-average useful life (in years...

  • Page 52
    ...2010, 2009, and 2008, respectively. Estimated future amortization expense related to definite-lived purchased intangible assets at December 31, 2010 is as follows: Years ending December 31, (In millions) 2011 2012 2013 2014 2015 Thereafter Amount $ 94.8 84.7 60.0 46.8 43.1 264.5 $593.9 50 EQUIFAX...

  • Page 53
    ... Plus fair value adjustments Total long-term debt, net of discount $ 2010 - 4.7 60.0 275.0 272.5 125.0 250.0 2009 $ 135.0 7.6 75.0 275.0 272.5 125.0 250.0 $850.0 million to $500.0 million under the Second Amended and Restated Credit Agreement (the ''Amended Agreement''). For additional information...

  • Page 54
    ... Atlanta, Georgia, data center, we assumed a $12.5 million mortgage obligation from the prior owner of the building. The mortgage obligation has a fixed rate of interest of 4.25% per annum and is payable in annual installments until March 1, 2012. TALX Debt. At the closing of the TALX acquisition...

  • Page 55
    ... agreement CSC also has an option, exercisable at any time, to sell its credit reporting business to us. The option expires in 2013. The option exercise price will be determined by a third-party appraisal process and would be due in cash within 180 days after the exercise of the option. We estimate...

  • Page 56
    ... Balance Sheets at December 31, 2010 and 2009. Subsidiary Dividend and Fund Transfer Limitations. The ability of some of our subsidiaries and associated companies to transfer funds to us is limited, in some cases, by certain restrictions imposed by foreign governments, which do not, individually or...

  • Page 57
    ... at December 31, 2010 and 2009, were as follows: December 31, (In millions) Deferred income tax assets: Employee pension benefits Net operating and capital loss carryforwards(1) Foreign tax credits Employee compensation programs Reserves and accrued expenses Deferred revenue Other Gross deferred...

  • Page 58
    ... related to prior year tax positions Increases related to current year tax positions Decreases related to settlements Expiration of the statute of limitations for the assessment of taxes Currency translation adjustment Ending balance (December 31) 2010 $19.4 3.6 (0.5) 2.7 (3.4) (1.6) 0.3 $20.5 2009...

  • Page 59
    ...was as follows: Twelve Months Ended December 31, (in millions) Cost of services Selling, general and administrative expenses Stock-based compensation expense, before income taxes 2010 $ 3.6 18.2 2009 $ 2.6 17.0 2008 $ 2.4 17.5 and three non-shareholder-approved plans from which no new grants may be...

  • Page 60
    ... cost related to stock options was $7.0 million with a weighted-average recognition period of 1.5 years. The following table summarizes changes in outstanding options and the related weighted-average exercise price per share for the twelve months ended December 31, 2009 and 2008: December 31, 2009...

  • Page 61
    ... limitations. Supplemental Retirement Plans. We maintain two supplemental 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...

  • Page 62
    ... benefit obligation and fair value of plan assets for these plans in the aggregate were $583.6 million, $557.9 million and $459.4 million, respectively, at December 31, 2009. The following table represents the net amounts recognized, or the funded status of our pension and other postretirement bene...

  • Page 63
    ...fits Prior service (credit) cost, net of taxes of $0.2 for pension benefits in 2010 Amounts recognized in net periodic benefit cost during the period: Recognized actuarial loss, net of taxes of $(3.4) and $(3.2) in 2010 and 2009, respectively, for pension benefits and $(0.4) in 2010 and 2009 for...

  • Page 64
    ... measurement date. Discount rates are reset annually on the measurement date to reï¬,ect current market conditions. We use a publicly published yield curve updated monthly to develop our discount rates. The yield curve provides discount rates related to a dedicated high-quality bond portfolio whose...

  • Page 65
    ... the sale of underlying fund assets. The Plan intends to hold these investments through each fund's normal life cycle and wind down period. As of December 31, 2010, we had $16.4 million of remaining commitments related to these private equity investments. Fair value is reported by the fund manager...

  • Page 66
    ... are initially valued at cost. Fund managers periodically review the valuations utilizing subsequent company- specific transactions or deterioration in the company's financial performance to determine if fair value adjustments are necessary. Private equity investments are typically viewed as long...

  • Page 67
    ... 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 are ''related-party'' in...

  • Page 68
    ....8 million and $6.7 million, respectively. Foreign Retirement Plans. We also maintain defined contribution plans for certain employees in the U.K., Ireland and Canada. For the years ended December 31, 2010, 2009 and 2008, our expenses related to these plans were not material. Deferred Compensation...

  • Page 69
    ...relationships. • We also provide credit management services to SunTrust, as a customer, from whom we recognized revenue of $6.6 million during the twelve months ended December 31, 2008. • SunTrust is a dealer under our commercial paper program. Fees paid to the dealers related to our issuance of...

  • Page 70
    ...directors until that date was President and Chief Executive Officer and a Director of FNIS. We sell certain consumer credit information services to FNIS. Revenue from FNIS, as a customer, for credit disclosure reports and portfolio reviews was not material during the twelve months ended December 31...

  • Page 71
    ... monitoring and identity theft 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...

  • Page 72
    ... TO CONSOLIDATED FINANCIAL STATEMENTS continued Financial information by geographic area is as follows: Twelve Months Ended December 31, 2010 (in millions) Operating revenue (based on location of customer): U.S. Canada U.K. Brazil Other Total operating revenue Amount $1,352.2 138.4 104.7 84.1 180...

  • Page 73
    ... 2010 and 2009 was as follows: Three Months Ended (In millions, except per share data) 2010 Operating revenue Operating income Consolidated income from continuing operations Discontinued operations, net of tax Consolidated net income Net income attributable to Equifax Basic earnings per common share...

  • Page 74
    ... events, as follows: • During 2010 and 2009, we made several acquisitions, including Anakam, Inc. during the fourth quarter of 2010, and IXI Corporation and Rapid Reporting Verification Company during the fourth quarter of 2009. For additional information about our acquisitions, see Note 3 of the...

  • Page 75
    ... ACCOUNTS 2010 Column A Column B Balance at Beginning of Period Column C Additions Charged to Costs and Expenses Charged to Other Accounts Balance at End of Period Column D Column E (In millions) Description Reserves deducted in the balance sheet from the assets to which they apply: Trade accounts...

  • Page 76
    ... million income tax benefit related to our ability to utilize foreign tax credits beyond 2009. Management believes excluding these income tax benefits provides meaningful supplemental information regarding our financial results for the years ended December 31, 2010 and 2009, since income tax bene...

  • Page 77
    ... may be faxed to (404) 885-8988. Shareholders may obtain a copy of our Annual Report on Form 10-K for the year ended December 31, 2010, without charge, by writing to the Corporate Secretary, P.O. Box 4081, Atlanta, Georgia 30302, or online from our website, www.equifax.com. STOCK PRICES 2010 Quarter...

  • Page 78
    ... Equifax Inc. The Work Number is a registered trademark of TALX Corporation. EFX, Small Business Market Navigator, Undisclosed Debt Monitoring, Equifax Complete, Enhanced DTI are trademarks of Equifax Inc. IXI, WalletIXInsights are trademarks of IXI Corporation. Point In Time is a trademark of TALX...

  • Page 79
    ...L. Phillip Humann Retired 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 Chief Technology Officer News Corporation Mark B. Templeton President and Chief Executive Officer...

  • Page 80
    Equifax Inc. 1550 Peachtree Street, N.W. Atlanta, GA 30309 404-885-8000 www.equifax.com Form #3201-10