10-QPeriod: Q3 FY2001

EQUIFAX INC Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 13, 2001For Securities:EFX

Summary

Equifax Inc. reported its third-quarter and nine-month results for the period ending September 30, 2001. A significant event during this period was the completion of the spin-off of its Payment Services industry segment, Certegy Inc., which was finalized on July 7, 2001. Consequently, Certegy's financial results are presented as discontinued operations. The company's revenue for the third quarter saw a modest increase of 1% to $282.4 million, while the nine-month revenue increased by 9% to $857.1 million, driven primarily by growth in North American Information Services. However, net income for the third quarter decreased to $35.8 million ($0.26 per share) from $64.3 million ($0.47 per share) in the prior year, largely due to the absence of income from discontinued operations. For the nine-month period, net income was $113.4 million ($0.82 per share), down from $159.6 million ($1.18 per share) in the prior year. Financially, the company has reduced its long-term debt significantly following the Certegy spin-off. Total liabilities decreased, and shareholder equity also saw a reduction, partly due to a spin-off dividend of $230.9 million. The company also reported a small pre-tax loss on the sale of its City Directory business in October 2001. Management highlights strong revenue growth in North American Information Services, offset by slowdowns in Credit Marketing Services and Consumer Information Services due to the economic climate. Equifax Europe and Latin America faced challenges from slower economic growth and currency impacts.

Key Highlights

  • 1Revenue for Q3 2001 increased by 1% to $282.4 million, and for the nine months increased by 9% to $857.1 million, primarily driven by North American Information Services.
  • 2Net income for Q3 2001 decreased to $35.8 million ($0.26 EPS) from $64.3 million ($0.47 EPS) in Q3 2000 due to the spin-off of Certegy.
  • 3The spin-off of Certegy Inc. (Payment Services segment) was completed on July 7, 2001, with Certegy's results now reported as discontinued operations.
  • 4Total liabilities decreased significantly from $1.51 billion at December 31, 2000, to $1.19 billion at September 30, 2001, following the spin-off and debt reduction.
  • 5The company sold its City Directory business in October 2001, resulting in a pre-tax loss of $5.8 million.
  • 6Operating income for North American Information Services increased by 12% for the quarter and 15% for the nine-month period.
  • 7Equifax Europe and Latin America experienced revenue declines and reduced operating income due to slower economic growth and currency fluctuations.

Frequently Asked Questions

The primary driver for the decrease in net income was the spin-off of the Payment Services industry segment (Certegy Inc.) on July 7, 2001. Certegy's historical income is now reported as discontinued operations, meaning its contribution is not included in the current period's net income from continuing operations.

The company significantly reduced its debt following the Certegy spin-off. In July 2001, $275 million of debt was assumed by Certegy. The company also replaced its $750 million credit facility with a new $465 million multi-year revolving credit facility.

The company anticipates that the slowing U.S. economy will continue to impact the Credit Marketing Services and Consumer Information Services segments, leading to reduced customer expenditures for marketing initiatives. Revenue in these segments declined during the third quarter.

Effective January 1, 2002, Equifax will adopt SFAS 141 and SFAS 142. SFAS 142 will eliminate the amortization of goodwill and certain other intangible assets, requiring impairment testing instead. Amortization of goodwill was $19.0 million for the first nine months of 2001.