10-QPeriod: Q3 FY2003

EQUIFAX INC Quarterly Report for Q3 Ended Jul 30, 2003

Filed August 8, 2003For Securities:EFX

Summary

Equifax Inc. (EFX) reported its second quarter and first six months results for 2003. For the second quarter, operating revenue increased by 18% year-over-year to $317.0 million, driven primarily by the Equifax North America segment. Income from continuing operations rose to $49.3 million, a 3% increase from the prior year, resulting in diluted EPS of $0.36, up 6% from $0.34 in Q2 2002. However, overall net income decreased to $41.9 million ($0.31 per diluted share) from $47.4 million ($0.34 per diluted share) due to a higher loss from discontinued operations. For the first six months of 2003, operating revenue grew 17% to $618.6 million, with Equifax North America again being the primary driver. Income from continuing operations increased to $94.4 million, up 5% from $89.8 million in the prior year, leading to diluted EPS of $0.69. Net income for the six-month period was $85.7 million ($0.63 per diluted share), a slight decrease from $89.1 million ($0.66 per diluted share) in the comparable period of 2002, also impacted by discontinued operations. The company continues to invest in growth initiatives, particularly in its Marketing Services and Consumer Direct businesses, which are impacting current operating margins but are expected to drive future revenues and profits.

Key Highlights

  • 1Operating revenue for Q2 2003 increased 18% to $317.0 million, and for the first six months of 2003 increased 17% to $618.6 million, primarily driven by strong performance in the Equifax North America segment.
  • 2Income from continuing operations grew by 3% in Q2 2003 to $49.3 million and by 5% for the six-month period to $94.4 million, showing underlying business strength.
  • 3Diluted EPS from continuing operations increased by 6% in Q2 2003 to $0.36, indicating improved profitability on core operations.
  • 4Net income decreased in both Q2 ($41.9M vs $47.4M) and the six-month period ($85.7M vs $89.1M) compared to the prior year, largely due to increased losses from discontinued operations, specifically the Spain commercial business.
  • 5The company is actively investing in growth initiatives, particularly in its Marketing Services and Consumer Direct segments (e.g., eMarketing, Fraud, Safety & Security, Small Business), which led to increased operating expenses and a decrease in overall operating margins.
  • 6Debt increased to $915.6 million as of June 30, 2003, up from $803.8 million in the prior year, mainly to fund acquisitions and share repurchases.
  • 7The company's cash flow from operations increased to $102.1 million for the first six months of 2003, up from $92.2 million in the prior year, demonstrating solid cash generation capabilities.

Frequently Asked Questions

Revenue growth was primarily driven by the Equifax North America segment, with significant increases in U.S. Consumer and Commercial Services (23%), Mortgage Services (81% due to refinancing volumes), and Consumer Direct (101% due to new subscriptions and renewals). Marketing Services also saw growth, particularly Direct Marketing Services which benefited from the integration of eMarketing businesses.

The decrease in net income was mainly due to a higher loss from discontinued operations, specifically the Spain commercial business. For the second quarter, the loss from discontinued operations was $7.4 million in 2003 compared to $0.4 million in 2002. For the six-month period, the loss was $8.7 million in 2003 compared to $0.7 million in 2002. This significantly impacted the overall net income figures.

Equifax is investing in growth initiatives, particularly in Marketing Services (like eMarketing) and Consumer Direct. While these investments are driving revenue growth and are expected to contribute to future profits, they are also increasing operating expenses and contributing to a decrease in current operating margins. The company anticipates that margins in these new initiatives will improve as they mature.

Total debt increased to $915.6 million as of June 30, 2003, from $803.8 million a year prior, primarily to fund acquisitions and share repurchases. However, cash flow from operations remained strong, increasing to $102.1 million for the first six months of 2003 from $92.2 million in the prior year, indicating healthy cash generation from the core business.