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2011 Annual Report
GROWTH
you can count on
EQUIFAX 2011 ANNUAL REPORT

Table of contents

  • Page 1
    2011 Annual Report GROWTH you can count on

  • 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 operates or...

  • Page 3
    ...drove 9% growth in adjusted earnings per share from continuing operations. The foundation of our business is the market's need for sophisticated platforms for making critical decisions in such areas as lending, marketing, customer management and human resource applications. In 2011, we bolstered our...

  • Page 4
    ... credit information. Customers are increasingly eager to leverage our industry- and data-unique Decision360â„¢ products. These solutions integrate current data sets that show a multi-dimensional view of the consumer based on credit and payment history, capacity-to-pay built on income and employment...

  • Page 5
    ... new data through acquisitions such as Workload in the United Kingdom; adding leading operations in targeted regions such as the acquisition of DATUM in Costa Rica; and developing our position beyond financial verticals such as telcos. The merger of our Brazil operations with Boa Vista Servi...

  • Page 6
    ... ways to capture share in the mortgage, insurance, Human Resources analytics and telco markets. In addition, our New Product Initiative (NPI), which is now in its fifth year, generated $181 million in 2011 revenues from products introduced during the previous three years (2008-2010). Delivering on...

  • Page 7
    ... in annual potential fraud of these healthcare programs. Rudy Ploder, President, U.S. Consumer Information Solutions (USCIS) USCIS serves a diversity of businesses: consumer credit reports; analytical services, such as credit scoring; risk management tools; fraud services including identity veri...

  • Page 8
    ... and cost-effective to operate. These acquisitions add more value to our offerings while further differentiating Equifax in the industry. The year demonstrated our evolving strategy for this business segment, emphasizing product bundling and greater cross-selling with the USCIS and North America...

  • Page 9
    ... version of the Equifax Mobile application, incorporating location-based information as well as credit score access. Trey Loughran, President, North America Personal Solutions (PSOL) PSOL is a leading provider of personalized online credit information products. It offers consumers awardwinning...

  • Page 10
    ... America in which Equifax is operating. Paulino Barros, President, International The International business unit provides a varying combination of credit and other data services deployed in the United States to businesses and consumers in Argentina, Canada, Chile, Costa Rica, Ecuador, El Salvador...

  • Page 11
    ...Vice 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 Corporate Offices Equifax Inc. 1550 Peachtree...

  • Page 12
    ... growth, and customer acceptance of our business solutions referenced under ''Business Environment, Company Outlook and Strategy.'' These risks and uncertainties include, but are not limited to, those described elsewhere in this Annual Report, in our 2011 Annual Report on Form 10-K, and those...

  • Page 13
    ... transaction, we issued 20.6 million shares of Equifax common stock and 1.9 million fully-vested options to purchase Equifax common stock, and paid approximately $288.1 million in cash, net of cash acquired. We also assumed TALX's outstanding debt, which had a fair value totaling $177.6 million at...

  • Page 14
    ... America Commercial Solutions revenue is principally transaction based, with the remainder project based, and is derived from the sale of business information, credit scores and portfolio analytics that enable customers to utilize our reports to make financial, marketing and purchasing decisions...

  • Page 15
    ... consumer and commercial credit information company in Brazil. • On August 2, 2011, we acquired DataVision Resources, which provides data and business solutions to the mortgage, insurance and financial services industries, for $50.0 million. DataVision Resources is part of our TALX Workforce...

  • Page 16
    ...OF OPERATIONS - TWELVE MONTHS ENDED DECEMBER 31, 2011, 2010 AND 2009 Consolidated Financial Results Operating Revenue Operating Revenue (Dollars in millions) U.S. Consumer Information Solutions International TALX Workforce Solutions North America Personal Solutions North America Commercial Solutions...

  • Page 17
    ... impact of our fourth quarter 2009 acquisitions of IXI Corporation and Rapid Reporting Verification Company. Selling, General and Administrative Expenses. Selling, general and administrative expense from continuing operations increased $47.4 million compared to 2010. The increase was primarily due...

  • Page 18
    ... other expense, net Average cost of debt Total consolidated debt, net, at year end nm - not meaningful Interest expense decreased slightly in 2011, when compared to the same period in 2010, due to lower average debt balances outstanding for 2011 as compared to 2010. Our consolidated debt balance has...

  • Page 19
    ... of 2010 and a $12.3 million gain, net of tax, on the sale of the APPRO product line recorded in the second quarter of 2010. Net income attributed to Equifax for 2010 also benefited from higher operating income, which grew generally in line with higher revenue. EQUIFAX 2011 ANNUAL REPORT 17

  • Page 20
    ... all of our USCIS business lines. The increase in revenue for 2010, as compared to 2009, was due to growth in Mortgage Solutions along with growth due to our acquisition of IXI Corporation in the fourth quarter of 2009 partially offset by a small decline in online credit reporting revenue. OCIS. The...

  • Page 21
    ... technology and analytical services products primarily due to growth in the customer base for a new fraud mitigation product. International Operating Margin. Operating margin increased in 2011 as compared to the prior year period primarily due to the deconsolidation of our Brazilian business, whose...

  • Page 22
    ..., social services and collections sectors; and due to the impact of our acquisition of Rapid Reporting Verification Company in the fourth quarter of 2009. Employer Services. Revenue for 2011 as compared to 2010 slightly decreased. Declines in our talent recruitment and management services business...

  • Page 23
    ... 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 of revenue growth...

  • Page 24
    ...recur in 2010. This was partially offset by increased salary, benefit and incentive costs, upgrades in shared corporate technology, and acquisition-related expenses. LIQUIDITY AND FINANCIAL CONDITION Management assesses liquidity in terms of our ability to generate cash to fund operating, investing...

  • Page 25
    ... our product offerings, during the twelve months ended December 31, 2011, we completed a number of smaller acquisitions of information services businesses in the European and Latin American regions of our International segment as well as our U.S. Consumer Information Solutions and TALX Workforce...

  • Page 26
    ... 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 Workforce Solutions...

  • Page 27
    ... economic and credit market environment. For additional information about our debt, including the terms of our financing arrangements, basis for variable interest rates and debt covenants, see Note 6 of the Notes to Consolidated Financial Statements in this report. EQUIFAX 2011 ANNUAL REPORT 25

  • Page 28
    ... $ 2.2 Sources and uses of cash related to equity during the twelve months ended December 31, 2011, 2010 and 2009 were as follows: • Under share repurchase programs authorized by our Board of Directors, we purchased 4.2 million, 5.2 million, and 0.9 million common shares on the open market during...

  • Page 29
    ... 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 time prior to August 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...

  • Page 30
    ...calendar quarters. Revenues in our North America Commercial business and the Consumer Financial Marketing Services business line within USCIS are typically highest in the fourth quarter each year due to the timing of certain significant annual renewals of project-based agreements. On a consolidated...

  • Page 31
    ... and each service can be sold alone or, in most cases, purchased from another vendor without affecting the quality of use or value to the customer of the other information services included in the arrangement. Some of our products require the development of interfaces or platforms by our decisioning...

  • Page 32
    ... Solutions and Consumer Financial Marketing Services), Identity Management (part of Online Consumer Information Solutions), Europe, Latin America, Canada Consumer, North America Personal Solutions, North America Commercial Solutions, Verification Services, Tax Management Services (part of Employer...

  • Page 33
    ...of our 2011 Annual Report on Form 10-K. Data for the benchmark companies was obtained from publicly available information. ID Management has benchmark companies that conduct operations of businesses of a similar type, such as Experian Group Limited and The Dun & Bradstreet Corporation. Verification...

  • Page 34
    ... of fair value over carrying value for the Company's reporting units that were valued as of September 30, 2011, ranged from approximately 19% to 86%. The reporting unit having the lowest absolute dollar excess of fair value over carrying value is our Talent Management Services business which has...

  • Page 35
    ... 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 cost...

  • Page 36
    ... our weighted average cost of debt was 5.3% and weighted-average life of debt was 10.8 years. At December 31, 2011, 68% of our debt was fixed rate, and the remaining 32% was variable rate after giving effect to the interest rate swaps on our 2014 bonds. Occasionally we use derivatives to manage our...

  • Page 37
    ... of Directors. Based on this assessment, management determined that, as of December 31, 2011, 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...

  • Page 38
    ... PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING The Board of Directors and Shareholders of Equifax Inc.: We have audited Equifax Inc.'s (''Equifax'' or ''the Company'') internal control over financial reporting as of December 31, 2011, based on criteria established in Internal...

  • Page 39
    ... 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, 2011, based on criteria established in...

  • Page 40
    ... earnings per common share: Income from continuing operations attributable to Equifax Discontinued operations Net income attributable to Equifax Weighted-average shares used in computing diluted earnings per share Dividends per common share See Notes to Consolidated Financial Statements. 2011...

  • Page 41
    ... Retained earnings Accumulated other comprehensive loss Treasury stock, at cost, 69.1 shares and 64.6 shares at December 31, 2011 and 2010, respectively Stock held by employee benefits trusts, at cost, 0.6 shares and 2.1 shares at December 31, 2011 and 2010, respectively Total Equifax shareholders...

  • Page 42
    ... Net (repayments) borrowings under long-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...

  • Page 43
    ... under stock and benefit plans, net of minimum tax withholdings Treasury stock purchased under share repurchase program ($26.41 per share)* Treasury stock purchased from the Equifax Employee Stock Benefits Trust ($29.29 per share)** Cash dividends ($0.16 per share) Dividends paid to employee bene...

  • Page 44
    ... actuarial losses and prior service cost related to our pension and other postretirement benefit plans, net of accumulated tax of $172.1, $138.6 and $124.9 in 2011, 2010 and 2009, respectively Cash ï¬,ow hedging transactions, net of tax of $1.4, $1.6 and $1.7 in 2011, 2010 and 2009, respectively...

  • Page 45
    ..., 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-related, tax and human resources business processes, and develop marketing strategies concerning consumers and...

  • Page 46
    ... 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 47
    ... securities: Stock options and restricted stock units Weighted-average shares outstanding (diluted) 2011 121.9 2010 124.8 2009 126.3 Cash Equivalents. We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Trade Accounts Receivable and...

  • Page 48
    ... value of acquired intangible assets used in our business. Purchased data files represent the estimated fair value of consumer credit files acquired primarily through the purchase of independent credit reporting agencies in the U.S. and Canada. We expense the cost of modifying and updating credit...

  • Page 49
    ... postretirement benefit plans are generally based 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...

  • Page 50
    ... consumer and commercial credit information company in Brazil. Our investment in BVS was valued at 130 million Brazilian Reais ($69.4 million and $82.3 million at December 31, 2011 and May 31, 2011, respectively) is recorded in other assets, net on the Consolidated Balance Sheets and is accounted...

  • Page 51
    ... 2011. To further broaden our product offerings, during the twelve months ended December 31, 2011, we completed smaller acquisitions of information services businesses in the European and Latin American regions of our International segment as well as our U.S. Consumer Information Solutions and TALX...

  • Page 52
    ... 6.8 Intangible asset category Customer relationships Acquired software and technology Purchased data files Non-compete agreements Trade names and other intangible assets Total acquired intangibles Fair value (in millions) $29.9 13.4 3.2 2.3 3.4 $52.2 The 2011 and 2010 acquisitions did not have...

  • Page 53
    ... Personal Solutions $1.8 - - - - 1.8 - - - - $1.8 North America Commercial Solutions $37.3 - - 0.3 - 37.6 - - (0.1) - $37.5 (In millions) Balance, December 31, 2009 Acquisitions Adjustments to initial purchase price allocation Foreign currency translation Businesses sold Balance, December 31, 2010...

  • Page 54
    ... debt and current maturities Less unamortized discounts Plus fair value adjustments Total long-term debt, net of discount 2011 $ 30.0 - 45.0 275.0 272.5 125.0 250.0 1.1 0.6 999.2 (47.2) (1.8) 15.8 $966.0 $ 2010 - 4.7 60.0 275.0 272.5 125.0 250.0 2.0 1.0 990.2 (20.7) (2.1) 11.5 $978.9 Senior Credit...

  • Page 55
    ... 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 the final payment on the obligation was made in 2011. TALX Debt. At the closing of the TALX acquisition...

  • Page 56
    ... our operations support services agreement in North America with IBM. The amended agreement extends the term one year through December 2014 and changes certain variable cost to fixed cost intended to provide financial savings to the Company. During 2010, we amended our data processing outsourcing...

  • Page 57
    ...under the agreements would occur, subject to certain exceptions, if (1) any person acquires 20% or more of our voting stock; (2) upon a merger or other business combination, our shareholders receive less than two-thirds of the common stock and combined voting power of the new company; (3) we sell or...

  • Page 58
    ... million, and $9.5 million for the years ended December 31, 2011, 2010 and 2009, respectively. Domestic and foreign income from continuing operations before income taxes was as follows: Twelve Months Ended December 31, (In millions) U.S. Foreign 2011 $275.5 132.7 $408.2 2010 $203.3 171.9 $375.2 2009...

  • Page 59
    ... at December 31, 2011 and 2010, were as follows: December 31, (In millions) Deferred income tax assets: Employee pension benefits Net operating and capital loss carryforwards Foreign tax credits Employee compensation programs Reserves and accrued expenses Deferred revenue Other Gross deferred...

  • Page 60
    ... following weightedaverage assumptions: Twelve Months Ended December 31, (in millions) Dividend yield Expected volatility Risk-free interest rate Expected term (in years) Weighted-average fair value of stock options granted 2011 1.8% 32.7% 1.2% 4.8 $7.85 2010 0.5% 29.9% 1.6% 4.6 $8.28 2009 0.6% 32...

  • Page 61
    ... in outstanding options and the related weighted-average exercise price per share for the twelve months ended December 31, 2010 and 2009: December 31, 2010 Shares Outstanding at the beginning of the year Granted (all at market price) Exercised Forfeited and cancelled Outstanding at the end of the...

  • Page 62
    ... from these plans are primarily a function of salary and years of service. On September 14, 2011, the Compensation Committee of the Board of Directors approved a redesign of our retirement plans for our currently active Canadian employees, effective January 1, 2013, and for our new hires hired on or...

  • Page 63
    .... We accrue the cost of providing healthcare benefits over the active service period of the employee. Obligations and Funded Status. A reconciliation of the projected benefit obligations, plan assets and funded status of the plans is as follows: Pension Benefits 2011 2010 $ 678.0 6.4 34.5 - - 70...

  • Page 64
    .... The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the CRIP were $46.7 million, $40.7 million and $50.7 million, respectively, at December 31, 2010. The following table represents the net amounts recognized, or the funded status of our pension and...

  • Page 65
    ...$(0.1) in 2011 and 2010, respectively, for pension benefits 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 $(4.4) and $(3.4) in 2011 and 2010, respectively...

  • Page 66
    ...in 2011 and 2010. The calculation of the net periodic benefit cost for the USRIP and CRIP utilizes a market-related value of assets. The market-related value of assets recognizes the difference between actual returns and expected returns over five years at a rate of 20% per year. Healthcare Costs...

  • Page 67
    ... categorized as Level 3, fair value is reported by the fund manager based on a combination of the following valuation approaches: current replacement cost less deterioration and obsolescence, a discounted cash ï¬,ow model of income streams and comparable market sales. EQUIFAX 2011 ANNUAL REPORT 65

  • Page 68
    ... owned by the USRIP were sold and none were directly owned by the Plan at December 31, 2011. At December 31, 2010, the USRIP's assets included 0.4 million shares of Equifax common stock, with a market value of $13.7 million. Not more than 5% of the portfolio (at cost) shall be invested in the...

  • Page 69
    .... We manage our business and report our financial results through the following five reportable segments, which are the same as our operating segments: • U.S. Consumer Information Solutions • TALX Workforce Solutions • International • North America Personal Solutions • North America...

  • Page 70
    ... 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 71
    ..., (in millions) 2011 2010 2009 (in millions) Twelve Months Ended December 31, 2011 2010 2009 Depreciation and amortization expense: U.S. Consumer Information Solutions International TALX Workforce Solutions North America Personal Solutions North America Commercial Solutions General Corporate Total...

  • Page 72
    ... and 2010 was as follows: Three Months Ended (In millions, except per share data) 2011 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* Net...

  • Page 73
    ... quarter of 2011, and Anakam, Inc. during the fourth quarter of 2010. For additional information about our acquisitions, see Note 4 of the Notes to Consolidated Financial Statements. • During the second quarter of 2011, we completed the merger of our Brazilian business with Boa Vista Serviços...

  • Page 74
    ...) Description Reserves deducted in the balance sheet from the assets to which they apply: Trade accounts receivable Deferred income tax asset valuation allowance Deductions $14.5 37.8 $52.3 $7.6 2.0 $9.6 $- 6.8 $6.8 $ (7.0) (14.9) $(21.9) $15.1 31.7 $46.8 72 EQUIFAX 2011 ANNUAL REPORT

  • Page 75
    ... revenue or earnings per share, and may not be comparable to non-GAAP financial measures used by other companies. Diluted earnings per share from continuing operations attributable to Equifax - GAAP Acquisition-related amortization expense, net of tax Loss on deconsolidation of Brazilian business...

  • Page 76
    ..., American Stock Transfer & Trust Company. Shareholders may reinvest their quarterly dividends and may make optional cash investments weekly in amounts up to $10,000 per month. A brochure and enrollment form are available by calling toll-free (866) 665-2279. 74 EQUIFAX 2011 ANNUAL REPORT

  • Page 77
    ... graph assumes that value of the investment in our Common Stock and each index was $100 on the last trading day of 2006 and that all quarterly dividends were reinvested without commissions. Our past performance may not be indicative of future performance. COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN...

  • Page 78
    ... of Equifax Inc. Inform > Enrich > Empower, Decision360, Undisclosed Debt Monitoring, Self-Employed Verification, Equifax Complete, Small Business Navigator, Small Business Assets, QTC Advantage, Lending Trends Benchmarking are trademarks of Equifax Inc. All other trademarks and service marks...

  • Page 79
    ... 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 Citrix Systems, Inc. Photo, left to right...

  • Page 80
    Equifax Inc. 1550 Peachtree Street, N.W. Atlanta, GA 30309 404-885-8000 www.equifax.com Form #3201-11