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Equifax Delivers Solid Operating
Performance for First Quarter 2008; $503 Million Revenue; Operating Margin
in USCIS Improved to 38.6 Percent
ATLANTA, April 21 /PRNewswire-FirstCall/ -- Equifax Inc. (
NYSE:EFX
) today reported financial results for the quarter ended March 31, 2008.
Revenue of $503.1 million for the quarter increased 24 percent over the
first quarter of 2007. Operating income for the quarter grew 8 percent to
$126.2 million. EBITDA, a non-GAAP financial measure, grew to $164.1
million, up 19 percent from the first quarter of 2007. Diluted earnings
per share ("EPS") was $0.50 compared to $0.54 in the same period
of the prior year. On a non-GAAP basis excluding the impact of
acquisition-related amortization expense ("adjusted EPS"), EPS
was $0.60.
"Through continued double-digit organic growth in
International, North America Personal Solutions and North America
Commercial Solutions and the acquisition of TALX, our strong results in
the first quarter demonstrate the diversity and resiliency of our business
model. In addition, although USCIS' revenue declined for the quarter, its
operating margin improved significantly over the fourth quarter of
2007," said Richard F. Smith, Equifax Chairman and Chief Executive
Officer. "During the first quarter, we accelerated our new product
revenue and launched 25 new products globally. We have closed or are
working on numerous cross-sell opportunities between our USCIS and TALX
business units. We have also developed strong interest in The Work Number
with many credit card issuers. Given current economic conditions, we
continue to believe 2008 full year revenue will grow between 9 to 12
percent and adjusted EPS will be between $2.48 and $2.58."
First Quarter 2008 Highlights
-- Double-digit revenue growth in our North America Personal Solutions,
North America Commercial Solutions and International operating segments
and results from TALX contributed to a 24 percent increase in revenue
in the first quarter of 2008, when compared to the same period in 2007.
-- Operating margin was 25.1 percent compared to 28.9 percent in the first
quarter of 2007 and up from 24.5 percent in the fourth quarter of 2007.
On a non-GAAP basis, excluding the impact of acquisition-related
amortization expense, operating margin was 29.4 percent in 2008
compared to 30.8 percent in the first quarter of 2007.
-- Net income was $65.7 million, a 5 percent decrease from the first
quarter of 2007. Year over year net income growth was negatively
impacted by increased intangible amortization expense related to the
acquisition of TALX and interest expense on additional debt incurred to
finance this acquisition. On a non-GAAP basis, excluding the impact of
acquisition-related amortization expense, net income increased 7
percent.
-- On February 8, 2008, our Board of Directors authorized a $250.0 million
increase to our common stock repurchase program. During the first
quarter 2008, we repurchased 1.1 million of our common shares on the
open market for $37.0 million. At March 31, 2008, $276.9 million
remained authorized for future share repurchases.
U.S. Consumer Information Solutions ("USCIS")
Total revenue was $233.2 million in the first quarter of
2008, a 6 percent decrease from the first quarter of 2007. Compared to the
first quarter of 2007:
-- Online Consumer Information Solutions revenue was $156.9 million, down
3 percent;
-- Mortgage Reporting Solutions revenue remained flat at $17.5 million;
-- Credit Marketing Services revenue was $35.4 million, down 12 percent;
and
-- Direct Marketing Services revenue was $23.4 million, down 14 percent.
Operating margin for USCIS was 38.6 percent in the first
quarter of 2008, up from 36.6 percent in the fourth quarter of 2007.
Operating margin in the first quarter of 2007 was 41.2 percent.
International
Total revenue was $129.9 million in the first quarter of
2008, a 23 percent increase from the first quarter of 2007. In local
currency, revenue was up 11 percent when compared to the same period in
the prior year. Compared to the first quarter of 2007:
-- Europe revenue was $47.7 million, up 13 percent in U.S. dollars (10
percent in local currency);
-- Latin America revenue was $53.2 million, up 34 percent in U.S. dollars
(18 percent in local currency); and
-- Canada Consumer revenue was $29.0 million, up 22 percent in U.S.
dollars (4 percent in local currency).
Operating margin for International was 30.5 percent in the
first quarter of 2008 versus 30.7 percent in the first quarter of 2007.
TALX
Total revenue was $79.6 million and operating margin was
16.0 percent for the first quarter of 2008. In the quarter, approximately
6.8 million total records were added to the employment database, bringing
total records in the database to 174.2 million, up 19 percent from a year
ago.
North America Personal Solutions
Total revenue rose to $43.1 million, a 14 percent increase
from the first quarter of 2007. Operating margin was 25.7 percent, up from
16.5 percent in the first quarter of 2007.
North America Commercial Solutions
Total revenue rose to $17.3 million, a 20 percent increase
from the first quarter of 2007. Operating margin was 15.3 percent, up from
9.4 percent in the first quarter of 2007.
About Equifax
Equifax empowers businesses and consumers with information
they can trust. A global leader in information solutions, employment and
income verification and human resources business process outsourcing
services, we leverage one of the largest sources of consumer and
commercial data, along with advanced analytics and proprietary technology,
to create customized insights that enrich both the performance of
businesses and the lives of consumers.
Customers have trusted Equifax for over 100 years to
deliver innovative solutions with the highest integrity and reliability.
Businesses - large and small - rely on us for consumer and business credit
intelligence, portfolio management, fraud detection, decisioning
technology, marketing tools, HR/payroll services, and much more. We
empower individual consumers to manage their personal credit information,
protect their identity and maximize their financial well-being.
Headquartered in Atlanta, Georgia, Equifax Inc. employs
approximately 7,000 people in 14 countries throughout North America, Latin
America and Europe. Equifax is a member of Standard & Poor's (S&P)
500(R) Index. Our common stock is traded on the New York Stock Exchange
under the symbol EFX.
Supplemental Financial Information
The Common Questions and Answers (Unaudited)
("Q&A") that are a part of this press release include
supplemental financial information which Equifax believes is useful to
assess its operating performance. Reported results for the prior year
quarter do not include revenue, operating income or operating expenses
from TALX, which we acquired on May 15, 2007. To give investors further
basis for comparison, in addition to the historical reported results, we
have provided pro forma results for the year ended December 31, 2006 and
three months ended March 31, 2007. These pro forma results combine
financial results from Equifax and TALX and are available in our Form
8-K/A filed on June 25, 2007 and on our website at
www.equifax.com/Investors/SEC
Filings
.
Non-GAAP Financial Measures
This earnings release presents operating income and
operating margin excluding acquisition-related amortization expense; net
income and diluted EPS excluding acquisition-related amortization expense;
and EBITDA, which we define as operating income adding back depreciation
and amortization expense, all of which are important financial measures
for Equifax but are not financial measures defined by GAAP.
These measures should be reviewed in conjunction with the
relevant GAAP financial measures and are not presented as alternative
measures of operating income, operating margin, net income or EPS as
determined in accordance with GAAP. EBITDA as we have calculated it may
not be comparable to similarly titled measures reported by other
companies.
Reconciliations of these non-GAAP financial measures to
the most directly comparable GAAP financial measures and related notes are
presented in the Q&A. This information can also be found under
"Investors/GAAP/Non-GAAP Measures" on our website at
www.equifax.com
.
Forward-Looking Statements
Management believes certain statements in this earnings
release may constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are made on the basis of management's views and assumptions
regarding future events and business performance as of the time the
statements are made. Management does not undertake any obligation to
update these statements.
Actual results may differ materially from those expressed
or implied. Such differences may result from actions taken by Equifax,
including restructuring or strategic initiatives (including capital
investments or asset acquisitions or dispositions), as well as from
developments beyond Equifax's control, including but not limited to
changes in worldwide and U.S. economic conditions that materially impact
consumer spending, consumer debt and employment, changes in demand for
Equifax's products and services, our ability to develop new products and
services, pricing and other competitive pressures, our ability to achieve
targeted cost efficiencies, risks relating to illegal third party efforts
to access data, risks associated with our ability to complete and
integrate acquisitions and other investments, changes in laws and
regulations governing our business, including federal or state responses
to identity theft concerns, and the outcome of pending litigation, the
impact of tax audits by the IRS or other taxing authorities. Additional
factors are set forth in Equifax's Annual Report on Form 10-K for the year
ended December 31, 2007 under Item 1A, "Risk Factors".
EQUIFAX
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
2008 2007
(In millions, except per share amounts) (Unaudited)
Operating revenue $503.1 $405.1
Operating expenses:
Cost of services (exclusive of depreciation
and amortization below) 202.8 169.3
Selling, general and administrative expenses 136.2 97.4
Depreciation and amortization 37.9 21.4
Total operating expenses 376.9 288.1
Operating income 126.2 117.0
Interest expense (19.7) (7.4)
Minority interests in earnings, net of tax (1.7) (1.4)
Other income, net 0.3 0.2
Income before income taxes 105.1 108.4
Provision for income taxes (39.4) (39.4)
Net income $65.7 $69.0
Basic earnings per common share $0.51 $0.55
Weighted-average shares used in computing basic
earnings per share 129.6 124.9
Diluted earnings per common share $0.50 $0.54
Weighted-average shares used in computing
diluted earnings per share 132.1 127.3
Dividends per common share $0.04 $0.04
EQUIFAX
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2008 2007
(In millions, except par values) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $85.0 $81.6
Trade accounts receivable, net of allowance
for doubtful accounts of $8.8 and $8.9 at
March 31, 2008 and December 31, 2007,
respectively 305.1 295.8
Prepaid expenses 34.2 25.8
Other current assets 21.0 21.8
Total current assets 445.3 425.0
Property and equipment:
Capitalized internal-use software and system
costs 303.6 292.2
Data processing equipment and furniture 182.2 184.7
Land, buildings and improvements 107.8 89.5
Total property and equipment 593.6 566.4
Less accumulated depreciation and
amortization (320.9) (306.9)
Total property and equipment, net 272.7 259.5
Goodwill 1,844.3 1,834.6
Indefinite-lived intangible assets 95.6 95.7
Purchased intangible assets, net 745.3 764.5
Prepaid pension asset 72.6 72.2
Other assets, net 74.1 72.4
Total assets $3,549.9 $3,523.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current maturities $23.3 $222.1
Accounts payable 30.6 31.1
Accrued expenses 73.2 79.4
Accrued salaries and bonuses 35.2 63.5
Deferred revenue 73.2 69.9
Income taxes payable 28.5 0.2
Other current liabilities 65.2 80.7
Total current liabilities 329.2 546.9
Long-term debt 1,363.8 1,165.2
Deferred income tax liabilities, net 272.8 277.1
Long-term pension and other postretirement
benefit liabilities 65.9 62.8
Other long-term liabilities 75.2 72.7
Total liabilities 2,106.9 2,124.7
Shareholders' equity:
Preferred stock, $0.01 par value:
Authorized shares - 10.0; Issued shares
- none - -
Common stock, $1.25 par value: Authorized
shares - 300.0;
Issued shares - 188.9 and 188.5 at
March 31, 2008 and December 31, 2007,
respectively;
Outstanding shares - 129.2 and 129.7 at
March 31, 2008 and December 31, 2007,
respectively 235.9 235.6
Paid-in capital 1,052.2 1,040.8
Retained earnings 2,089.5 2,030.0
Accumulated other comprehensive loss (162.6) (170.5)
Treasury stock, at cost, 56.1 shares and
55.1 shares at March 31, 2008 and
December 31, 2007, respectively (1,716.1) (1,679.0)
Stock held by employee benefits trusts, at
cost, 3.6 shares and 3.7 shares at March
31, 2008 and December 31, 2007,
respectively (55.9) (57.7)
Total shareholders' equity 1,443.0 1,399.2
Total liabilities and shareholders'
equity $3,549.9 $3,523.9
EQUIFAX
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
2008 2007
(In millions) (Unaudited)
Operating activities:
Net income $65.7 $69.0
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 37.9 21.4
Stock-based compensation expense 6.1 4.0
Tax effects of stock-based compensation plans 1.5 1.8
Excess tax benefits from stock-based
compensation plans (0.8) (1.7)
Deferred income taxes (5.8) (1.7)
Changes in assets and liabilities,
excluding effects of acquisitions:
Accounts receivable, net (6.8) (6.9)
Prepaid expenses and other current assets (4.1) (15.8)
Other assets (1.4) (10.7)
Current liabilities, excluding debt (20.6) 6.8
Other long-term liabilities, excluding
debt 3.4 (1.3)
Cash provided by operating activities 75.1 64.9
Investing activities:
Capital expenditures (30.0) (14.6)
Acquisitions, net of cash acquired (6.0) (3.9)
Cash used in investing activities (36.0) (18.5)
Financing activities:
Net short-term repayments (199.5) (23.0)
Net borrowings (repayments) under long-term
revolving credit facilities 200.0 (25.0)
Proceeds from issuance of long-term debt 2.1 -
Payments on long-term debt (2.9) -
Treasury stock purchases (37.0) (0.4)
Dividends paid (5.2) (5.0)
Proceeds from exercise of stock options 5.6 6.5
Excess tax benefits from stock-based
compensation plans 0.8 1.7
Other (0.2) 0.1
Cash used in financing activities (36.3) (45.1)
Effect of foreign currency exchange rates on
cash and cash equivalents 0.6 0.5
Increase in cash and cash equivalents 3.4 1.8
Cash and cash equivalents, beginning of period 81.6 67.8
Cash and cash equivalents, end of period $85.0 $69.6
Common Questions & Answers (Unaudited)
(Dollars in millions)
1. Can you provide a further analysis of operating revenue and operating
income by operating segment?
Operating revenue and operating income consist of the following
components:
(in millions) Three Months Ended March 31,
% of % of
Operating revenue: 2008 Revenue 2007 Revenue $ Change % Change
U.S. Consumer
Information
Solutions $233.2 46% $247.1 61% $(13.9) -6%
International 129.9 26% 105.6 26% 24.3 23%
TALX 79.6 16% - nm 79.6 nm
North America
Personal
Solutions 43.1 9% 38.0 9% 5.1 14%
North America
Commercial
Solutions 17.3 3% 14.4 4% 2.9 20%
Total
operating
revenue $503.1 100% $405.1 100% $98.0 24%
(in millions) Three Months Ended March 31,
Operating Operating
Operating income: 2008 Margin 2007 Margin $ Change % Change
U.S. Consumer
Information
Solutions $90.1 38.6% $101.7 41.2% $(11.6) -11%
International 39.6 30.5% 32.4 30.7% 7.2 22%
TALX 12.7 16.0% - nm 12.7 nm
North America
Personal
Solutions 11.1 25.7% 6.3 16.5% 4.8 76%
North America
Commercial
Solutions 2.6 15.3% 1.4 9.4% 1.2 95%
General Corporate
Expense (29.9) nm (24.8) nm (5.1) -21%
Total
operating
income $126.2 25.1% $117.0 28.9% $9.2 8%
2. Can you provide a further analysis of operating revenue in the product
and services lines, or geographic regions within each operating
segment?
Operating revenue consists of the following components:
(in millions) Three Months Ended March 31,
% of % of
Operating revenue: 2008 Revenue 2007 Revenue $ Change % Change
Online Consumer
Information
Solutions $156.9 31% $162.1 40% $(5.2) -3%
Mortgage Reporting
Solutions 17.5 3% 17.5 4% - 0%
Credit Marketing
Services 35.4 7% 40.4 10% (5.0) -12%
Direct Marketing
Services 23.4 5% 27.1 7% (3.7) -14%
Total U.S.
Consumer
Information
Solutions 233.2 46% 247.1 61% (13.9) -6%
Europe 47.7 9% 42.2 10% 5.5 13%
Latin America 53.2 11% 39.6 10% 13.6 34%
Canada Consumer 29.0 6% 23.8 6% 5.2 22%
Total
International 129.9 26% 105.6 26% 24.3 23%
The Work Number 36.3 7% - nm 36.3 nm
Tax and Talent
Management
Services 43.3 9% - nm 43.3 nm
Total TALX 79.6 16% - nm 79.6 nm
North America
Personal
Solutions 43.1 9% 38.0 9% 5.1 14%
North America
Commercial
Solutions 17.3 3% 14.4 4% 2.9 20%
Total
operating
revenue $503.1 100% $405.1 100% $98.0 24%
nm - not meaningful
Common Questions & Answers (Unaudited)
(Dollars in millions)
3. What drove the fluctuation in the effective tax rate?
Our effective income tax rate was 37.5% for the three months ended
March 31, 2008, up from 36.3% for the same period in 2007 which
included favorable discrete items recorded during 2007 related to state
and foreign taxes.
4. Can you provide depreciation and amortization by segment?
Depreciation and amortization are as follows:
Three Months Ended
March 31,
2008 2007
U.S. Consumer Information Solutions $11.3 $11.6
International 6.1 4.8
TALX 15.7 -
North America Personal Solutions 0.7 0.9
North America Commercial Solutions 1.3 1.4
General Corporate Expense 2.8 2.7
Total depreciation and amortization $37.9 $21.4
5. What was the currency impact on the foreign operations?
The U.S. dollar impact on operating revenue and operating income is as
follows:
Three Months Ended March 31, 2008
Operating Revenue Operating Income
Amount % Amount %
Canada * $5.1 17% $2.1 19%
Europe 1.5 4% 0.4 3%
Latin America 6.6 17% 1.9 15%
Total Equifax $13.2 3% $4.4 4%
* Canada financial results are split between our North America Commercial
Solutions and International operating segments.
Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP
Financial Measures (Unaudited)
(Dollars in millions, except per share amounts)
A. Reconciliation of operating income to adjusted operating income,
excluding acquisition-related amortization expense and presentation of
adjusted operating margin:
Three Months Ended
March 31,
2008 2007
Revenue $503.1 $405.1
Operating income $126.2 $117.0
Acquisition-related amortization expense 21.7 7.8
Adjusted operating income, excluding
acquisition-related amortization expense $147.9 $124.8
Adjusted operating margin 29.4% 30.8%
B. Reconciliation of net income to net income, adjusted for
acquisition-related amortization expense and net income to diluted EPS,
adjusted for acquisition-related amortization expense:
Three Months Ended
March 31,
2008 2007 $ Change % Change
Net income $65.7 $69.0 $(3.3) -5%
Acquisition-related
amortization expense,
net of tax 13.6 5.0 8.6 172%
Net income, adjusted for
acquisition-related
amortization expense $79.3 $74.0 $5.3 7%
Diluted EPS, adjusted
for acquisition-related
amortization expense $0.60 $0.58 $0.02 3%
Weighted-average shares
used in computing
diluted EPS 132.1 127.3
C. Reconciliation of operating income to EBITDA (operating income before
depreciation and amortization expense):
Three Months Ended
March 31,
2008 2007 $ Change % Change
Operating income $126.2 $117.0 $9.2 8%
Depreciation and
amortization expense 37.9 21.4 16.5 77%
EBITDA $164.1 $138.4 $25.7 19%
Notes to Reconciliations of Non-GAAP Financial Measures to the
Comparable GAAP Financial Measures
Adjusted operating income and operating margin, excluding acquisition-
related amortization expense -- Management believes excluding the
acquisition- related amortization expense from the calculation of
operating income and margin is useful because management excludes
acquisition-related amortization expense when measuring operating
profitability, evaluating performance trends, and setting performance
objectives, and it allows investors to evaluate our performance for
different periods on a more comparable basis by excluding items that
relate to acquisition-related intangible assets.
Net income and diluted EPS, adjusted for acquisition-related
amortization expense -- We calculate these financial measures by excluding
acquisition- related amortization expense, net of tax, from the
determination of net income and also in the calculation of diluted EPS.
These financial measures are not prepared in conformity with GAAP.
Management believes that these measures are useful because management
excludes acquisition-related amortization expense when measuring operating
profitability, evaluating performance trends, and setting performance
objectives, and it allows investors to evaluate our performance for
different periods on a more comparable basis by excluding items that
relate to acquisition-related intangible assets.
Source: Equifax Inc. |
