10-QPeriod: Q3 FY2006

EQUIFAX INC Quarterly Report for Q3 Ended Sep 30, 2006

Filed November 1, 2006For Securities:EFX

Summary

Equifax Inc. reported solid financial results for the third quarter and the first nine months of 2006, demonstrating continued revenue growth and improved profitability. For the third quarter, operating revenue increased by 5% to $394.6 million, driven by growth in Personal Solutions, Europe, and Latin America. Net income for the quarter rose to $78.9 million, or $0.61 per diluted share, compared to $62.5 million, or $0.47 per diluted share, in the prior year's third quarter. Year-to-date performance also showed strength, with operating revenue up 7% to $1.156 billion and net income increasing to $211.4 million, or $1.62 per diluted share, from $183.7 million, or $1.39 per diluted share, in the first nine months of 2005. The company's operating margin improved in the third quarter, reflecting effective cost management and favorable legal contingency reversals. Equifax also highlighted its strategic growth initiatives, focusing on leveraging core competencies, enhancing customer decisioning capabilities, and disciplined acquisitions. The company's liquidity remains strong, supported by operating cash flows and available credit facilities.

Key Highlights

  • 1Operating revenue for Q3 2006 increased by 5% to $394.6 million, and by 7% to $1.156 billion for the first nine months of 2006.
  • 2Net income for Q3 2006 rose to $78.9 million, a significant increase from $62.5 million in Q3 2005, with diluted EPS of $0.61 compared to $0.47.
  • 3Year-to-date net income reached $211.4 million, up from $183.7 million in the comparable period of 2005, with diluted EPS of $1.62 compared to $1.39.
  • 4Operating margin improved to 30.6% in Q3 2006 from 28.6% in Q3 2005, driven by revenue growth and effective expense management.
  • 5The company's international segments (Europe and Latin America) showed robust revenue growth of 13% and 18% respectively in Q3 2006.
  • 6Equifax strengthened its financial flexibility by amending and restating its senior unsecured revolving credit facility, extending its maturity and increasing its borrowing capacity.
  • 7The company repurchased approximately 2 million shares of its common stock during the third quarter of 2006 under its authorized share repurchase program.

Frequently Asked Questions

The increase in net income for the third quarter of 2006 was driven by a combination of solid revenue growth across several segments, particularly Personal Solutions, Europe, and Latin America, along with a favorable reversal of loss contingencies related to legal matters. Improved operating margins also contributed to the stronger bottom line.

The adoption of SFAS No. 123R ('Share-Based Payment') on January 1, 2006, resulted in increased stock-based compensation expense recognized in the financial statements. For the nine months ended September 30, 2006, this adoption had an incremental negative impact of $6.6 million pre-tax and $4.5 million net of tax on net income, translating to a $0.04 impact on basic EPS and $0.03 on diluted EPS.

Equifax outlined a growth strategy through 2010 focused on leveraging its core competencies, enhancing customer decisioning capabilities through analytical tools and technology, diversifying through complementary acquisitions, and expanding into new geographic markets. The recent acquisition of Austin-Tetra in October 2006 is an example of their strategy to complement their commercial information business.

Equifax maintains strong liquidity through cash generated from operations and its revolving credit facilities. The company recently amended and restated its senior unsecured revolving credit facility, extending its maturity to July 2011 and increasing its flexibility. They also have a trade receivables-backed facility. The company expects its current resources to be sufficient for its projected needs and has indicated it could tap capital markets if additional liquidity is required.