10-QPeriod: Q2 FY2010

EQUIFAX INC Quarterly Report for Q2 Ended Jun 30, 2010

Filed July 29, 2010For Securities:EFX

Summary

Equifax Inc. reported a solid increase in its second-quarter and year-to-date financial performance for 2010 compared to the same periods in 2009. Total operating revenue grew by 7% and 6% respectively, driven by strong performance in its International, TALX, North America Personal Solutions, and North America Commercial Solutions segments. While the U.S. Consumer Information Solutions segment saw a slight decline in revenue for the six-month period, overall revenue growth was robust. The company also benefited significantly from income generated by discontinued operations, primarily due to a gain on the sale of its APPRO loan origination software. Net income attributable to Equifax increased by 20% for the quarter and 12% year-to-date, with diluted earnings per share also showing substantial improvement. This positive financial trend, coupled with a healthy cash flow from operations and significant availability under its credit facilities, positions Equifax well for continued operations and strategic investments.

Financial Highlights

52 data points
Beta

Revenue

$460.70M

Net Income

$71.30M

15.5% Net Margin

EPS (Diluted)

$0.56

Total Assets

$3.43B

Cash & Equivalents

$70.10M

Free Cash Flow

$101.20M

Financial Statements
Beta
Revenue$460.70M
SG&A Expenses$126.90M
Operating Expenses$354.90M
Operating Income$105.80M
Interest Expense$14.10M
Net Income$71.30M
EPS (Basic)$0.57
EPS (Diluted)$0.56
Shares Outstanding (Basic)125.70M
Shares Outstanding (Diluted)127.30M

Key Highlights

  • 1Total operating revenue increased by 7% to $460.7 million in Q2 2010 and by 6% to $903.7 million for the first six months of 2010, compared to the prior year periods.
  • 2Net income attributable to Equifax rose by 20% to $71.3 million in Q2 2010 and by 12% to $128.0 million year-to-date.
  • 3Diluted earnings per share attributable to Equifax increased to $0.56 in Q2 2010 and $1.00 year-to-date, up from $0.47 and $0.89 respectively in the prior year.
  • 4The company recognized a $12.3 million gain (after-tax) from the sale of its APPRO loan origination software, contributing significantly to the reported net income from discontinued operations.
  • 5Operating income from continuing operations grew by 4% to $105.8 million in Q2 2010 and by 6% to $210.1 million year-to-date.
  • 6Cash provided by operating activities remained strong, totaling $138.9 million for the first six months of 2010, though slightly down from $145.6 million in the prior year.
  • 7Equifax maintained a strong liquidity position with $781.2 million available under its Senior Credit Facility as of June 30, 2010.

Frequently Asked Questions

Revenue growth was driven by strong performance across several segments, including International (up 12% in Q2, 14% year-to-date), TALX (up 15% in Q2, 12% year-to-date), North America Personal Solutions (up 8% in Q2, 5% year-to-date), and North America Commercial Solutions (up 18% in both Q2 and year-to-date). The International segment's growth was particularly boosted by Latin America and favorable foreign exchange rates, while TALX saw significant contributions from The Work Number service. The U.S. Consumer Information Solutions segment was relatively flat for the quarter but saw a 3% decline year-to-date, primarily due to weakness in online credit reporting.

The sale of discontinued operations, specifically the APPRO loan origination software for approximately $72 million, contributed positively to net income. Equifax recorded a $12.3 million after-tax gain from this sale in the second quarter of 2010. The Direct Marketing Services division was also sold, with an estimated post-tax gain of $10-$12 million expected in the third quarter of 2010. These disposals significantly boosted the 'Discontinued operations, net of tax' line item, leading to a substantial increase in consolidated net income.

Equifax maintains a strong liquidity position. Funds generated from operating activities are considered sufficient to meet anticipated working capital needs, capital expenditures, debt payments, dividends, and potential stock repurchases. As of June 30, 2010, the company had $781.2 million available under its Senior Credit Facility, providing significant financial flexibility. Management expects to renew this facility prior to its maturity in July 2011, though potentially at higher fees and borrowing spreads.

While overall operating expenses increased, partly due to acquisitions and foreign currency impacts, the company did benefit from the absence of certain charges compared to the prior year. Specifically, an $8.4 million restructuring charge incurred in the first quarter of 2009 was not present in 2010, which favorably impacted year-to-date results. Amortization expense related to the acquisition of IXI Corporation did put some pressure on operating margins in the U.S. Consumer Information Solutions segment.