10-QPeriod: Q3 FY2002

EQUIFAX INC Quarterly Report for Q3 Ended Sep 30, 2002

Filed November 12, 2002For Securities:EFX

Summary

Equifax Inc. reported increased revenue and operating income for the third quarter of 2002 compared to the same period in 2001, driven by strong performance in its North America segment, particularly within U.S. Credit Information Services and Consumer Direct. For the nine-month period, revenue saw a slight decline, primarily due to foreign currency fluctuations and the impact of acquisitions, though operating income saw growth. The company also strategically divested its commercial reporting business in Spain and continued to integrate recent acquisitions, such as Naviant, Inc. The adoption of new accounting standards like SFAS 142 (eliminating goodwill amortization) positively impacted reported earnings. Financially, Equifax maintained a solid liquidity position with available credit facilities and successfully issued new senior notes to manage its debt structure and fund strategic initiatives. While facing economic challenges in Latin America, the company demonstrated resilience by improving margins in its European segment. Management remains confident in the company's financial health, with no anticipated material adverse effects from ongoing litigation.

Key Highlights

  • 1Third-quarter revenue increased by 6% to $289.7 million, and operating income rose to $89.7 million from $80.5 million year-over-year.
  • 2North America segment revenue grew by 13% in the third quarter, driven by strong performance in U.S. Credit Information Services and Consumer Direct, with Consumer Direct revenues doubling.
  • 3The company adopted SFAS 142, eliminating goodwill amortization, which positively impacted reported earnings for both the quarter and the nine-month period.
  • 4Equifax made strategic acquisitions, notably Naviant, Inc. for approximately $135 million, and purchased consumer credit files from CBC Companies, Inc. for $95 million.
  • 5The company is exiting its commercial reporting business in Spain, classifying its results as discontinued operations.
  • 6Debt management included the successful issuance of $250 million in senior notes and the reclassification of $200 million in maturing senior notes to short-term debt.
  • 7Free cash flow for the nine months ended September 30, 2002, was $114.6 million, a decrease from $127.7 million in the prior year, but operating cash flows funded dividends and capital expenditures.

Frequently Asked Questions

Effective January 1, 2002, Equifax adopted SFAS 142, which eliminates the amortization of goodwill. This change has positively impacted reported earnings by removing a significant expense. For the nine months ended September 30, 2001, pro forma net income excluding goodwill amortization was $130.6 million, compared to the reported $113.4 million. This also positively affects the effective tax rate.

International operations show mixed results. While Europe has improved its profit and margins through expense reductions, Latin America's revenue has declined, primarily due to the economic collapse in Argentina. Brazil's operations showed moderate growth in local currency. Despite these challenges, Latin America maintained operating margins of 28% in the quarter and 25% year-to-date.

In the first nine months of 2002, Equifax acquired several U.S. and Canadian credit reporting agencies, completed the purchase of its information services company in Brazil, and acquired Naviant, Inc. for approximately $135 million to boost its marketing services business. Most recently, in November 2002, the company purchased consumer credit files and customer contracts from CBC Companies, Inc. for $95 million. The company also decided to exit its commercial reporting business in Spain, which is now held for sale.

Equifax is actively managing its debt structure. In October 2002, it issued $250 million in senior notes to pay down its revolving credit facility and fund general corporate purposes. The company has reclassified $200 million in senior notes maturing in June 2003 to short-term debt. At September 30, 2002, approximately $231 million was available under its $465 million revolving credit facility, indicating a strong liquidity position.