10-QPeriod: Q3 FY2010

EQUIFAX INC Quarterly Report for Q3 Ended Sep 30, 2010

Filed October 28, 2010For Securities:EFX

Summary

Equifax Inc. (EFX) reported solid financial results for the third quarter and the first nine months of 2010, demonstrating a rebound from the previous year. Operating revenue increased by 11% for the quarter and 8% year-to-date, driven by growth across most segments, particularly U.S. Consumer Information Solutions, International, and TALX. This top-line growth translated into improved profitability, with operating income rising 10% for the quarter and 7% year-to-date. Notably, net income attributable to Equifax saw a significant surge of 28% for the quarter and 18% year-to-date, largely boosted by gains from the divestiture of non-strategic businesses, APPRO and Direct Marketing Services (DMS). The company's strategic initiatives, including product innovation, sales force reorganization, and international expansion, appear to be gaining traction. Equifax also continued to manage its expenses effectively, with operating expenses growing at a slightly slower pace than revenue, leading to stable operating margins. The company maintained a strong liquidity position, with ample availability under its senior credit facility. The divestiture of non-core assets indicates a strategic focus on core competencies and potentially signals a positive outlook for future performance and shareholder value.

Financial Highlights

52 data points
Beta

Revenue

$473.80M

Net Income

$76.50M

16.1% Net Margin

EPS (Diluted)

$0.61

Total Assets

$3.40B

Cash & Equivalents

$115.60M

Free Cash Flow

$68.50M

Financial Statements
Beta
Revenue$473.80M
SG&A Expenses$134.00M
Operating Expenses$363.60M
Operating Income$110.20M
Interest Expense$14.00M
Net Income$76.50M
EPS (Basic)$0.62
EPS (Diluted)$0.61
Shares Outstanding (Basic)124.30M
Shares Outstanding (Diluted)125.80M

Key Highlights

  • 1Operating revenue increased by 11% for the third quarter to $473.8 million and by 8% for the first nine months to $1,377.5 million, indicating a recovery and growth trajectory.
  • 2Net income attributable to Equifax surged by 28% for the third quarter to $76.5 million and by 18% for the nine months to $204.5 million, demonstrating improved profitability.
  • 3Significant gains from the divestiture of non-strategic businesses (APPRO and DMS) contributed substantially to net income, boosting reported results.
  • 4Diluted earnings per share attributable to Equifax increased to $0.61 for the quarter and $1.61 for the nine months, up from $0.47 and $1.36 respectively in the prior year.
  • 5Operating margins remained stable, indicating effective cost management alongside revenue growth.
  • 6The company maintained a strong liquidity position with $848.3 million available under its Senior Credit Facility as of September 30, 2010.
  • 7Goodwill impairment testing indicated no impairment, with the fair value of all reporting units exceeding their carrying value.

Frequently Asked Questions

The primary driver of Equifax's net income growth was a combination of increased operating income and significant gains from the divestiture of non-strategic businesses, specifically the APPRO loan origination software and the Direct Marketing Services division. These divestitures resulted in substantial after-tax gains, significantly boosting the reported net income.

The divestiture of non-core assets like APPRO and DMS had a positive impact on Equifax's financial performance by generating significant cash proceeds and recording substantial gains, which boosted net income. This strategic move also allowed the company to focus on its core information solutions and HR business process outsourcing services, potentially leading to improved operational efficiency and profitability in the long run.

Equifax is experiencing improving revenue growth, with an 11% increase in the third quarter and 8% year-to-date. Management notes that demand from financial institutions has begun to increase following new credit card regulations and the commencement of new lending activity. The company is also focused on strategic initiatives like new product innovation, differentiated decisioning solutions, and international expansion to drive future growth.

Equifax maintains a strong liquidity position, with $848.3 million available under its Senior Credit Facility as of September 30, 2010. The company expects operating cash flows to be sufficient for its foreseeable needs. Approximately 71% of its debt was fixed-rate, and it was in compliance with all debt covenants. The company intends to renew its Senior Credit Facility before its July 2011 expiration.