10-QPeriod: Q2 FY2007

EQUIFAX INC Quarterly Report for Q2 Ended Jun 30, 2007

Filed August 1, 2007For Securities:EFX

Summary

Equifax Inc. reported solid revenue growth in the second quarter of 2007, driven by strong performance across most of its operating segments and the significant impact of the recently acquired TALX Corporation. Revenue increased by 17% year-over-year to $454.5 million, while net income saw a slight increase of 1% to $70.1 million. The company's strategic acquisition of TALX, completed in May 2007, contributed $35.3 million in revenue during the partial quarter and is expected to be a key driver of future growth. Despite a rise in operating expenses, largely due to integration costs and increased depreciation and amortization from acquisitions, Equifax maintained a healthy operating margin of 26.4%. The company also strengthened its financial position by issuing new debt, totaling $550 million, to repay short-term borrowings incurred for the TALX acquisition. Investors should note the increased debt load but also the strategic expansion into new markets and services through the TALX acquisition.

Key Highlights

  • 1Operating revenue increased 17% to $454.5 million for the three months ended June 30, 2007, compared to $387.7 million in the prior year period.
  • 2Net income for the quarter was $70.1 million, a slight increase of 1% from $69.6 million in the second quarter of 2006.
  • 3The acquisition of TALX Corporation, completed on May 15, 2007, contributed $35.3 million in revenue and $4.5 million in operating income for the partial quarter.
  • 4Consolidated operating expenses increased 15% to $334.7 million, driven by higher cost of services, selling, general and administrative expenses, and depreciation and amortization, partly due to the TALX acquisition and other recent acquisitions.
  • 5The company issued $550 million in new senior notes in June 2007 to repay short-term debt incurred in connection with the TALX acquisition.
  • 6Diluted earnings per share were $0.51 for the quarter, a decrease from $0.53 in the prior year period, primarily due to an increase in weighted-average shares outstanding.
  • 7The U.S. Consumer Information Solutions segment remains the largest, with revenue increasing 2% to $250.0 million, while the International segment showed strong growth of 15%.

Frequently Asked Questions

The acquisition of TALX, completed on May 15, 2007, contributed $35.3 million in revenue and $4.5 million in operating income for the partial quarter. It also increased operating expenses, including cost of services, selling, general and administrative expenses, and depreciation and amortization, by $14.3 million, $9.0 million, and $7.4 million, respectively, for the quarter.

Equifax significantly increased its debt in the second quarter of 2007. The company issued $550 million in new senior notes and assumed $75.0 million in TALX Notes. This was partly to finance the TALX acquisition and repay short-term borrowings. Total debt increased from $505.1 million at December 31, 2006, to $1,202.2 million at June 30, 2007.

Revenue growth was strong across most segments. U.S. Consumer Information Solutions, the largest segment, grew 2% to $250.0 million. The International segment saw robust growth of 15% to $115.3 million. North America Personal Solutions and North America Commercial Solutions also experienced significant revenue increases of 24% and 41%, respectively. The newly acquired TALX segment contributed $35.3 million in revenue for the partial quarter.

Operating expenses increased by 15% to $334.7 million. Key drivers included the cost of services ($28.1 million increase), selling, general and administrative expenses ($6.2 million increase), and depreciation and amortization ($9.1 million increase). These increases were influenced by the integration of TALX, higher production costs due to revenue growth, investments in IT platforms, and costs associated with other recent acquisitions like Austin-Tetra.