Equifax Reports Record Fourth Quarter and Full Year 2012 Results; Board Approves a 22% Increase in Quarterly Dividend to $0.22
Equifax Reports Record Fourth Quarter and Full Year 2012 Results; Board
Approves a 22% Increase in Quarterly Dividend to $0.22 per share
PR Newswire
ATLANTA, Feb. 6, 2013
ATLANTA, Feb. 6, 2013 /PRNewswire/ -- Equifax Inc. (NYSE: EFX) today announced
financial results for the quarter and full year ended December 31, 2012. The
company reported revenue of $558.1 million in the fourth quarter of 2012, a
9.5 percent increase from the fourth quarter of 2011.
(Logo: http://photos.prnewswire.com/prnh/20060224/CLF037LOGO )
Fourth quarter diluted EPS from continuing operations attributable to Equifax
was $0.38 as compared to $0.60 in 2011. The company recorded a $24.1 million,
after tax, non-cash pension settlement charge related to lump sum buyouts of
certain pension plan participants during the fourth quarter. On a non-GAAP
basis, adjusted EPS from continuing operations attributable to Equifax,
excluding the impact of CSC Credit Services acquisition fees, the pension
settlement, certain income tax items and acquisition-related amortization
expense, net of tax, was $0.78, up 14 percent from the fourth quarter of
2011.
For the full year 2012, revenue was $2.2 billion, a 10.2 percent increase from
2011. Excluding Brazilian operating results in 2011, a non-GAAP measure, full
year revenue was up 12 percent. Diluted EPS from continuing operations
attributable to Equifax was $2.22 compared to $1.87 for the full year 2011.
On a non-GAAP basis, full year adjusted EPS from continuing operations, which
excludes the impact of CSC Credit Services acquisition fees, the pension
settlement, certain income tax items, and acquisition-related amortization
expense, was $2.97, up 18 percent from the prior year period.
"Our team's rigorous focus on executing key strategic initiatives enabled us
to deliver another quarter and full year of strong performance. We also
completed the acquisition of our largest affiliate, CSC Credit Services,
significantly enhancing our opportunities for both operating leverage and
profitability," said Richard F. Smith, Equifax's Chairman and Chief Executive
Officer. "We enter 2013 as a strong company with a broader base of
opportunities for growth in both revenue and earnings. As a result, we remain
confident in our long term business model, expecting to deliver topline growth
of 7% to 10%, attractive and expanding operating margins, and adjusted EPS
growth of 10% to 13%."
Quarterly Dividend Announcement
The Equifax Board of Directors has approved a 22% increase in the quarterly
cash dividend, increasing it to $0.22 per share from the previous quarterly
dividend of $0.18 per share. The cash dividend is payable on March 15, 2013,
to shareholders of record as of the close of business on February 22, 2013.
Equifax has paid cash dividends for 100 consecutive years.
Fourth Quarter 2012 Highlights
o On December 28, 2012, we completed the acquisition of certain business
assets and the operations of CSC Credit Services, Inc., a subsidiary of
Computer Sciences Corporation, for $1.0 billion. The results of this
acquisition have been included in our U.S. Consumer Information Solutions
segment subsequent to the December 28^th date of acquisition and are not
material for the fourth quarter of 2012. This acquisition was funded by
the proceeds of a $500 million in 10-year bonds issued in 2012, commercial
paper and cash on hand.
o Operating margin was 17.0 percent for the fourth quarter of 2012, compared
to 24.7 percent in the fourth quarter of 2011. On a non-GAAP basis,
adjusted operating margin, which excludes transaction-related expenses
associated with the acquisition of CSC Credit Services and the pension
settlement, was 24.9 percent for the fourth quarter of 2012, up 20 basis
points from 2011.
o Subsequent to year end, we disposed of two small, non-strategic business
units, Equifax Settlement Services and Talent Management Services. These
businesses will be reported as discontinued operations beginning in the
first quarter of 2013.
U.S. Consumer Information Solutions (USCIS)
Total revenue was $235.7 million in the fourth quarter of 2012 compared to
$215.6 million in the fourth quarter of 2011, an increase of 9 percent.
o Online Consumer Information Solutions revenue was $147.7 million, up 8
percent from a year ago.
o Mortgage Solutions revenue was $42.7 million, up 28 percent from a year
ago.
o Consumer Financial Marketing Services revenue was $45.3 million, down 1
percent when compared to a year ago.
Operating margin for USCIS was 37.4 percent in the fourth quarter of 2012
compared to 37.5 percent in the fourth quarter of 2011.
International
Total revenue was $124.7 million in the fourth quarter of 2012, a 7 percent
increase in both U.S. dollars and local currency from the fourth quarter of
2011.
o Latin America revenue was $47.9 million, up 9 percent in local currency
and 8 percent in U.S. dollars from a year ago.
o Europe revenue was $43.6 million, up 3 percent in local currency and 4
percent in U.S. dollars from a year ago.
o Canada Consumer revenue was $33.2 million, up 7 percent in local currency
and 10 percent in U.S. dollars from a year ago.
Operating margin for International was 29.8 percent in the fourth quarter of
2012 compared to 28.7 percent in the fourth quarter of 2011.
Workforce Solutions
Total revenue was $117.2 million in the fourth quarter of 2012, an 11 percent
increase over the fourth quarter of 2011.
o Verification Services revenue was $69.6 million, up 27 percent when
compared to a year ago.
o Employer Services revenue was $47.6 million, down 6 percent when compared
to a year ago.
Operating margin for Workforce Solutions was 22.4 percent in the fourth
quarter of 2012 compared to 23.2 percent in the fourth quarter of 2011.
North America Personal Solutions
Revenue was $52.9 million, a 16 percent increase from the fourth quarter of
2011. Operating margin was 30.1 percent compared to 30.5 percent in the fourth
quarter of 2011.
North America Commercial Solutions
Revenue was $27.6 million, up 4 percent in U.S. dollars and local currency
compared to the fourth quarter of 2011. Operating margin was 34.4 percent
which was flat compared to the fourth quarter of 2011.
First Quarter and Full Year 2013 Outlook
Based on the current level of domestic and international business activity and
current foreign exchange rates as well as the continuing level of mortgage
activity, consolidated revenue for the first quarter of 2013 is expected to be
up 10 to 12 percent from the year-ago quarter. First quarter 2013 adjusted
EPS attributable to Equifax, which excludes the impact of acquisition-related
amortization expense, is expected to be between $0.84 and $0.87, up 20 to 24
percent from the first quarter of 2012. The outlook for adjusted EPS includes
a negative impact of approximately $0.01 resulting from the disposition of two
business units in the first quarter of 2013.
For the full year, revenue from continuing operations is expected to be up 10
to 12 percent and adjusted EPS from continuing operations attributable to
Equifax is expected to be between $3.56 and $3.64.
About Equifax
Equifax is a global leader in consumer, commercial and workforce information
solutions, that provides businesses of all sizes and consumers with insight
and information they can trust. Equifax organizes and assimilates data on more
than 500 million consumers and 81 million businesses worldwide, and uses
advanced analytics and proprietary technology to create and deliver customized
insights that enrich both the performance of businesses and the lives of
consumers.
Headquartered in Atlanta, Equifax operates or has investments in 18 countries
and is a member of Standard & Poor's (S&P) 500® Index. Its common stock is
traded on the New York Stock Exchange (NYSE) under the symbol EFX. For more
information, please visit www.equifax.com.
Earnings Conference Call and Audio Webcast
In conjunction with this release, Equifax will host a conference call
tomorrow, February 7, 2013, at 8:30 a.m. (EST) via a live audio webcast. To
access the webcast, go to the Investor Center of our website at
www.equifax.com. The discussion will be available via replay at the same site
shortly after the conclusion of the webcast. This press release is also
available at that website.
Non-GAAP Financial Measures
This news release contains certain non-GAAP financial measures which should be
reviewed in conjunction with the relevant GAAP financial measures and are not
presented as an alternative measure of operating revenue, operating income,
operating margin, or EPS as determined in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most directly
comparable GAAP financial measures and related notes are presented in the Q&A
section of this release. This information can also be found under "Investor
Center/GAAP/Non-GAAP Measures" on our website at www.equifax.com.
Forward-Looking Statements
This press release contains certain estimates and other forward-looking
statements regarding Equifax's performance, including future revenues and
earnings per share. These statements can be identified by expressions of
belief, expectation or intention, as well as statements that are not
historical fact. These statements are based on certain factors and
assumptions including with respect to foreign exchange rates, expected growth,
results of operations, performance, business prospects and opportunities and
effective tax rates. While Equifax believes these factors and assumptions to
be reasonable based on information currently available, they may prove to be
incorrect.
A number of factors could cause actual results to differ materially from those
expressed or implied in the forward-looking statements, including, but not
limited to actions taken by us, including restructuring or strategic
initiatives (including capital investments or asset acquisitions or
dispositions), as well as from developments beyond our control, including, but
not limited to, changes in worldwide and U.S. economic conditions that
materially impact consumer spending, consumer debt and employment and the
demand for Equifax's products and services. Other risk factors include our
ability to successfully develop and market new products and services, respond
to pricing and other competitive pressures, complete and integrate
acquisitions and other investments and achieve targeted cost efficiencies;
attempted cyber and other security breaches and other disruptions to our
information technology infrastructure; changes in, and the effects of, laws
and regulations and government policies governing our business, including the
Dodd-Frank Wall Street Reform and Consumer Protection Act, in particular the
establishment of the Consumer Financial Protection Bureau with expansive
authority to write rules impacting our business, conduct examinations of our
credit reporting and other consumer –facing businesses and enforce consumer
financial protection laws and regulations; federal or state responses to
identity theft concerns; adverse or uncertain economic conditions and changes
in credit and financial markets; the European sovereign debt crisis and issues
in the U.S. with respect to its credit ratings and political concerns over
related budgetary matters; exchange rates; timing and amount of capital
expenditures; changes in capital markets and corresponding effects on
Equifax's capital resources, level of indebtedness and benefit plan
obligations; earnings exchange rates and the decisions of taxing authorities,
all of which could affect our effective tax rates; and potential adverse
developments in new and pending legal proceedings or government
investigations. Additional risks and uncertainties can be found in our Annual
Report on Form 10-K for the year ended December 31, 2011 under captions
"Forward-Looking Statements" and "Item 1A, "Risk Factors", and in our other
filings with the U.S. Securities and Exchange Commission. Forward-looking
statements are given only as at the date of this release and Equifax disclaims
any obligation to update or revise the forward-looking statements, whether as
a result of new information, future events or otherwise, except as required by
law.
EQUIFAX
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
December 31,
2012 2011
(In millions, except per share amounts) (Unaudited)
Operating revenue $ $
558.1 509.7
Operating expenses:
Cost of services (exclusive of depreciation 215.8 191.5
and amortization below)
Selling, general and administrative 206.5 151.3
expenses
Depreciation and amortization 40.6 41.2
Total operating expenses 462.9 384.0
Operating income 95.2 125.7
Interest expense (14.3) (13.9)
Other (expense) income, net 1.1 1.0
Consolidated income before income taxes 82.0 112.8
Provision for income taxes (33.8) (38.3)
Consolidated income from continuing 48.2 74.5
operations
Discontinued operations, net of tax - 1.5
Consolidated net income 48.2 76.0
Less: Net income attributable to (1.9) (1.6)
noncontrolling interests
Net income attributable to Equifax $ $
46.3 74.4
Amounts attributable to Equifax:
Income from continuing operations $ $
attributable to Equifax 46.3 72.9
Discontinued operations, net of tax - 1.5
Net income $ $
46.3 74.4
Basic earnings per common share:
Income from continuing operations $ $
attributable to Equifax 0.39 0.61
Discontinued operations attributable to - 0.01
Equifax
Net income attributable to Equifax $ $
0.39 0.62
Weighted-average shares used in computing 119.8 120.3
basic earnings per share
Diluted earnings per common share:
Income from continuing operations $ $
attributable to Equifax 0.38 0.60
Discontinued operations attributable to - 0.01
Equifax
Net income attributable to Equifax $ $
0.38 0.61
Weighted-average shares used in computing 122.4 122.2
diluted earnings per share
Dividends per common share $ $
0.18 0.16
EQUIFAX
CONSOLIDATED STATEMENTS OF INCOME
Twelve Months Ended
December 31,
2012 2011
(In millions, except per share amounts) (Unaudited)
Operating revenue $ $
2,160.5 1,959.8
Operating expenses:
Cost of services (exclusive of depreciation 829.1 758.8
and amortization below)
Selling, general and administrative 678.7 564.5
expenses
Depreciation and amortization 163.7 165.5
Total operating expenses 1,671.5 1,488.8
Operating income 489.0 471.0
Interest expense (55.4) (55.1)
Other income (expense), net 6.6 (7.7)
Consolidated income from continuing operations 440.2 408.2
before income taxes
Provision for income taxes (159.4) (168.0)
Consolidated income from continuing 280.8 240.2
operations
Discontinued operations, net of tax - 1.5
Consolidated net income 280.8 241.7
Less: Net income attributable to (8.7) (8.8)
noncontrolling interests
Net income attributable to Equifax $ $
272.1 232.9
Amounts attributable to Equifax:
Income from continuing operations $ $
attributable to Equifax 272.1 231.4
Discontinued operations, net of tax - 1.5
Net income $ $
272.1 232.9
Basic earnings per common share:
Income from continuing operations $ $
attributable to Equifax 2.27 1.90
Discontinued operations attributable to - 0.01
Equifax
Net income attributable to Equifax $ $
2.27 1.91
Weighted-average shares used in computing 119.9 121.9
basic earnings per share
Diluted earnings per common share:
Income from continuing operations $ $
attributable to Equifax 2.22 1.87
Discontinued operations attributable to - 0.01
Equifax
Net income attributable to Equifax $ $
2.22 1.88
Weighted-average shares used in computing 122.5 123.7
diluted earnings per share
Dividends per common share $ $
0.72 0.64
EQUIFAX
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2012 2011
(In millions, except par values) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ $
146.8 127.7
Trade accounts receivable, net of
allowance for doubtful accounts of $6.3 and
$5.9 at
December 31, 2012 and 2011, 317.0 284.4
respectively
Prepaid expenses 26.2 24.6
Other current assets 39.7 20.2
Total current assets 529.7 456.9
Property and equipment:
Capitalized internal-use software and 369.9 332.2
system costs
Data processing equipment and furniture 198.4 183.1
Land, buildings and improvements 177.0 178.4
Total property and equipment 745.3 693.7
Less accumulated depreciation and (461.6) (400.8)
amortization
Total property and equipment, net 283.7 292.9
Goodwill 2,290.4 1,961.2
Indefinite-lived intangible assets 254.5 95.6
Purchased intangible assets, net 987.7 550.2
Other assets, net 165.1 161.9
Total assets $ $
4,511.1 3,518.7
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt and current maturities $ $
of long-term debt 283.3 47.2
Accounts payable 25.1 27.5
Accrued expenses 84.9 56.3
Accrued salaries and bonuses 104.7 79.2
Deferred revenue 57.9 55.8
Other current liabilities 90.6 98.9
Total current liabilities 646.5 364.9
Long-term debt 1,447.4 966.0
Deferred income tax liabilities, net 227.7 235.9
Long-term pension and other postretirement 176.3 176.4
benefit liabilities
Other long-term liabilities 54.0 53.4
Total liabilities 2,551.9 1,796.6
Equifax shareholders' equity:
Preferred stock, $0.01 par value:
Authorized shares - 10.0; Issued shares - - -
none
Common stock, $1.25 par value: Authorized
shares - 300.0;
Issued shares - 189.3 at December 31,
2012 and 2011;
Outstanding shares - 120.4 and 119.6 236.6 236.6
at December 31, 2012 and 2011, respectively
Paid-in capital 1,139.6 1,118.0
Retained earnings 3,064.6 2,879.2
Accumulated other comprehensive loss (362.0) (391.8)
Treasury stock, at cost, 68.3 shares and
69.1 shares at December 31, 2012 and 2011, (2,139.7) (2,133.7)
respectively
Stock held by employee benefits trusts, at (5.9) (5.9)
cost, 0.6 shares at December 31, 2012 and 2011
Total Equifax shareholders' equity 1,933.2 1,702.4
Noncontrolling interests 26.0 19.7
Total equity 1,959.2 1,722.1
Total liabilities and equity $ $
4,511.1 3,518.7
EQUIFAX
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Months Ended
December 31,
2012 2011
(In millions) (Unaudited)
Operating activities:
Consolidated net income $ 280.8 $ 241.7
Adjustments to reconcile consolidated net
income to net cash provided
by operating activities:
Loss on divestitures - 26.3
Depreciation and amortization 163.4 164.9
Stock-based compensation expense 28.0 24.4
Excess tax benefits from stock-based (1.7) (1.2)
compensation plans
Deferred income taxes (26.5) 3.6
Pension settlement charge 38.7 -
Changes in assets and liabilities,
excluding effects of acquisitions:
Accounts receivable, net (17.2) (26.6)
Prepaid expenses and other current (22.5) 2.4
assets
Other assets (4.0) 15.0
Current liabilities, excluding debt 53.3 1.3
Other long-term liabilities, excluding 4.0 (43.1)
debt
Cash provided by operating activities 496.3 408.7
Investing activities:
Capital expenditures (66.0) (75.0)
Acquisitions, net of cash acquired (1,016.4) (127.4)
Proceeds received from divestitures 2.5 2.5
Investment in unconsolidated affiliates, (3.7) (4.2)
net
Cash used in investing activities (1,083.6) (204.1)
Financing activities:
Net short-term borrowings 234.1 24.4
Payments on long-term debt (15.2) (16.7)
Proceeds from issuance of long-term debt 499.2 -
Treasury stock purchases (85.1) (142.3)
Dividends paid to Equifax shareholders (86.0) (78.1)
Dividends paid to noncontrolling interests (4.8) (5.6)
Proceeds from exercise of stock options 68.3 23.7
Excess tax benefits from stock-based 1.7 1.2
compensation plans
Other (5.9) (2.5)
Cash provided by (used in) financing 606.3 (195.9)
activities
Effect of foreign currency exchange rates on cash 0.1 (0.4)
and cash equivalents
Increase in cash and cash equivalents 19.1 8.3
Cash and cash equivalents, beginning of period 127.7 119.4
Cash and cash equivalents, end of period $ 146.8 $ 127.7
Common Questions & Answers
(Unaudited)
(Dollars in
millions)
1. Can you provide a further analysis of operating revenue and
operating income by operating segment?
Operating revenue and operating income
consist of the following components:
(in millions) Three Months Ended December 31,
Local
Operating 2012 2011 $ Change % Change Currency
revenue: %
Change*
Online Consumer $ $ $
Information 136.5 8%
Solutions 147.7 11.2
Mortgage 42.7 33.3 9.4 28%
Solutions
Consumer
Financial 45.3 45.8 (0.5) -1%
Marketing
Services
Total U.S.
Consumer 235.7 215.6 20.1 9%
Information
Solutions
Latin America 47.9 44.5 3.4 8% 9%
Europe 43.6 41.7 1.9 4% 3%
Canada Consumer 33.2 30.1 3.1 10% 7%
Total 124.7 116.3 8.4 7% 7%
International
Verification 69.6 54.9 14.7 27%
Services
Employer 47.6 50.9 (3.3) -6%
Services
Total
Workforce 117.2 105.8 11.4 11%
Solutions
North America
Personal 52.9 45.6 7.3 16%
Solutions
North America
Commercial 27.6 26.4 1.2 4% 4%
Solutions
Total $ $ $
operating 509.7 9% 9%
revenue 558.1 48.4
(in millions) Twelve Months Ended December 31,
Local
Operating 2012 2011 $ Change % Change Currency
revenue: %
Change*
Online Consumer $ $ $
Information 519.8 17%
Solutions 607.0 87.2
Mortgage 161.0 119.5 41.5 35%
Solutions
Consumer
Financial 148.8 153.3 (4.5) -3%
Marketing
Services
Total U.S.
Consumer 916.8 792.6 124.2 16%
Information
Solutions
Latin America 187.4 208.8 (21.4) -10% -7%
Europe 169.7 158.7 11.0 7% 10%
Canada Consumer 129.1 125.4 3.7 3% 4%
Total 486.2 492.9 (6.7) -1% 1%
International
Verification 258.5 192.5 66.0 34%
Services
Employer 204.6 211.8 (7.2) -3%
Services
Total
Workforce 463.1 404.3 58.8 15%
Solutions
North America
Personal 204.5 180.7 23.8 13%
Solutions
North America
Commercial 89.9 89.3 0.6 1% 1%
Solutions
Total $ $ $
operating 1,959.8 10% 11%
revenue 2,160.5 200.7
(in millions) Three Months Ended December 31,
Operating Operating
Operating 2012 Margin 2011 Margin $ Change %
income: Change
U.S. Consumer $ $ $
Information 37.4% 37.5% 7.3 9%
Solutions 88.1 80.8
International 37.2 29.8% 33.5 28.7% 3.7 11%
Workforce 26.2 22.4% 24.6 23.2% 1.6 7%
Solutions
North America
Personal 16.0 30.1% 13.9 30.5% 2.1 15%
Solutions
North America
Commercial 9.5 34.4% 9.1 34.4% 0.4 4%
Solutions
General
Corporate (81.8) nm (36.2) nm (45.6) -126%
Expense
Total $ $ $
operating income 17.0% 24.7% (30.5) -24%
95.2 125.7
(in millions) Twelve Months Ended December 31,
Operating Operating
Operating 2012 Margin 2011 Margin $ Change %
income: Change
U.S. Consumer $ $ $
Information 37.3% 36.2% 54.4 19%
Solutions 341.7 287.3
International 143.8 29.6% 132.2 26.8% 11.6 9%
Workforce 107.9 23.3% 90.7 22.4% 17.2 19%
Solutions
North America
Personal 61.6 30.1% 54.1 29.9% 7.5 14%
Solutions
North America
Commercial 19.8 22.0% 23.6 26.5% (3.8) -16%
Solutions
General
Corporate (185.8) nm (116.9) nm (68.9) -59%
Expense
Total $ $ $
operating income 22.6% 24.0% 18.0 4%
489.0 471.0
nm - not meaningful
* Reflects percentage change in revenue conforming 2012
results using 2011 exchange rates.
Common Questions & Answers (Unaudited)
(Dollars in millions)
2. What drove the fluctuation in the effective tax rate?
Our effective tax rate from continuing operations was 41.2% for the three
months ended December 31, 2012, up from 33.9% for the same period in 2011.
During the fourth quarter of 2011, we recognized a $4.2 million cumulative
income tax benefit resulting from the recognition of an income tax
deduction related to several prior years. Also, in the fourth quarter of
2012, we incurred a $20.5 million tax charge resulting from the completion
of an international tax restructuring completed during the current quarter.
Additionally, we recognized a $15.3 million benefit as a result of the
approval of a tax method change during the quarter.
3. Can you provide depreciation and amortization by segment?
Depreciation and amortization are as follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
U.S. Consumer $ $ $ $
Information 11.0 41.7
Solutions 9.8 44.1
International 6.1 6.4 24.8 26.9
Workforce 17.5 16.8 68.8 66.6
Solutions
North America 1.7 1.6 7.0 6.0
Personal Solutions
North America
Commercial 1.2 1.2 4.7 5.1
Solutions
General Corporate 4.3 4.2 16.7 16.8
Expense
Total $ $ $ $
depreciation and 40.6 41.2 163.7
amortization 165.5
4. What was the currency impact on the foreign operations?
The U.S. dollar impact on operating revenue and operating income is as
follows:
Three Months Ended December 31, 2012
Operating Revenue Operating Income
Amount % Amount %
$ $
Canada Consumer 3% 4%
1.0 0.4
Canada Commercial 0.2 0% 0.1 1%
Europe 0.4 1% 0.1 1%
Latin America (0.7) -1% (0.6) -4%
Twelve Months Ended December 31, 2012
Operating Revenue Operating Income
Amount % Amount %
$ $
Canada Consumer -1% -1%
(1.4) (0.6)
Canada Commercial (0.3) -1% (0.1) -1%
Europe (4.4) -3% (1.0) -3%
Latin America (6.5) -3% (3.5) -5%
Common Questions & Answers (Unaudited)
(Dollars in millions)
Subsequent to year end, Equifax disposed of two, non-strategic business
5. units which will be reported as discontinued operations beginning with
the first quarter of 2013. Also beginning in 2013, a realignment of our
account management responsibilities resulted in transferring the
responsibility for selected wholesale accounts from North America Personal
Solutions to USCIS, for which we will make conforming adjustments to
historic segment results for comparability.
a) What will be the annual 2012 and 2011 as well as the quarterly 2012
revenue, operating income and net income from continuing operations
attributable to Equifax when historical results are adjusted to reflect the
treatment of Equifax Settlement Services and Talent Management Services as
discontinued operations?
YTD 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 YTD
2012
$ $ $ $ $ $
Proforma revenue
1,893.2 505.9 513.2 520.0 533.9 2,073.0
Proforma operating $ $ $ $ $ $
income
469.3 128.3 128.9 130.7 92.2 480.1
YTD 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 YTD
2012
Net income from
continuing
operations
attributable to $ $ $ $ $ $
Equifax (as
reported) 231.4 71.5 76.4 77.9 46.3 272.1
Operating income (1.7) (0.7) (3.8) (1.4) (3.0) (8.9)
from disposals
Other expense from 0.1 0.0 0.0 0.0 0.1 0.1
disposals
Income tax effect 0.6 0.3 1.4 0.5 1.1 3.3
of disposals
Proforma net income
from continuing
operations
attributable to $ $ $ $ $ $
Equifax
230.4 71.1 74.0 77.0 44.5 266.6
b) What will be the annual 2012 and 2011 as well as the quarterly 2012
adjusted EPS of Equifax when historical results are adjusted to reflect
the
treatment of Equifax Settlement Services and Talent Management Services as
discontinued operations?
YTD 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 YTD
2012
Adjusted EPS (see $ $ $ $ $ $
non-GAAP
reconciliations) 2.52 0.70 0.74 0.75 0.78 2.97
Impact of disposals (0.02) (0.01) (0.02) (0.01) (0.02) (0.06)
Proforma adjusted $ $ $ $ $ $
EPS
2.50 0.69 0.72 0.74 0.76 2.91
Weighted-average
shares used in
computing
diluted EPS 123.7 122.4 122.8 122.2 122.4 122.5
c) What will be the annual 2012 and 2011 as well as the quarterly 2012
revenue and operating income for USCIS, Workforce Solutions and North
America Personal Solutions segments when historical results are adjusted
to reflect the treatment of Equifax Settlement Services and Talent
Management Services as discontinued operations as well as change in
reporting of certain wholesale revenue?
USCIS
YTD 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 YTD
2012
Revenue (as $ $ $ $ $ $
reported)
792.6 217.7 230.1 233.3 235.7 916.8
Equifax Settlement (44.4) (12.0) (17.1) (18.7) (18.7) (66.5)
Services revenue
Revenue
reclassification 16.9 4.6 4.5 5.3 4.6 19.0
from PSOL
$ $ $ $ $ $
Proforma revenue
765.1 210.3 217.5 219.9 221.6 869.3
Operating income $ $ $ $ $ $
(as reported)
287.3 79.4 88.1 86.1 88.1 341.7
Equifax Settlement
Services operating (0.5) (0.7) (3.5) (1.3) (2.2) (7.7)
income
Operating income
reclassification 12.8 2.7 2.7 3.4 2.4 11.2
from PSOL
Proforma operating $ $ $ $ $ $
income
299.6 81.4 87.3 88.2 88.3 345.2
Workforce Solutions
YTD 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 YTD
2012
Revenue (as $ $ $ $ $ $
reported)
404.3 113.7 115.2 117.0 117.2 463.1
Talent Management (22.1) (4.8) (5.5) (5.2) (5.5) (21.0)
Services revenue
$ $ $ $ $ $
Proforma revenue
382.2 108.9 109.7 111.8 111.7 442.1
Operating income $ $ $ $ $ $
(as reported)
90.7 26.2 26.9 28.6 26.2 107.9
Talent Management
Services operating (1.2) 0.0 (0.3) (0.1) (0.8) (1.2)
income
Proforma operating $ $ $ $ $ $
income
89.5 26.2 26.6 28.5 25.4 106.7
North America
Personal Solutions
YTD 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 YTD
2012
Revenue (as $ $ $ $ $ $
reported)
180.7 49.5 50.7 51.4 52.9 204.5
Revenue
reclassification to (16.9) (4.6) (4.5) (5.3) (4.6) (19.0)
USCIS
$ $ $ $ $ $
Proforma revenue
163.8 44.9 46.2 46.1 48.3 185.5
Operating income $ $ $ $ $ $
(as reported)
54.1 14.0 15.1 16.5 16.0 61.6
Operating income
reclassification to (12.8) (2.7) (2.7) (3.4) (2.4) (11.2)
USCIS
Proforma operating $ $ $ $ $ $
income
41.3 11.3 12.4 13.1 13.6 50.4
Reconciliations of Non-GAAP Financial Measures to the Comparable
GAAP Financial Measures (Unaudited)
(Dollars in millions, except per
share amounts)
Reconciliation of net income from continuing operations attributable to
A. Equifax to diluted EPS attributable to Equifax, adjusted for
CSC acquisition fees, a pension settlement, certain income tax items, the
loss on the deconsolidation of our Brazilian
business and acquisition-related amortization expense:
Three Months Ended
December 31,
2012 2011 $ Change %
Change
Net income from continuing $ $ $
operations attributable to Equifax -36%
46.3 72.9 (26.6)
Fees associated with the
acquisition of CSC Credit
Services, 3.2 - 3.2 nm
net of tax (1)
Pension settlement, net of tax 24.1 - 24.1 nm
(2)
Income tax impact of
international tax restructuring 20.5 - 20.5 nm
(3)
Income tax benefits (4) (15.3) (4.2) (11.1) nm
Net income from continuing
operations attributable to
Equifax,
adjusted for acquisition fees,
pension settlement
and income tax items above 78.8 68.7 10.1 15%
Acquisition-related amortization
expense, net of tax, and
cash income tax benefit of
acquisition-related amortization
expense of certain 16.1 14.3 1.8 12%
acquired intangibles
Net income from continuing
operations attributable to
Equifax,
adjusted for CSC acquisition
fees, pension settlement,
certain income tax items and
acquisition-related
$ $ $
amortization expense 14%
94.9 83.0 11.9
Diluted EPS from continuing
operations attributable to
Equifax,
adjusted for CSC acquisition
fees, pension settlement,
certain income tax items and
acquisition-related
$ $ $
amortization expense 14%
0.78 0.68 0.10
Weighted-average shares used in 122.4 122.2
computing diluted EPS
Twelve Months
Ended
December 31,
2012 2011 $ Change %
Change
Net income from continuing $ $ $
operations attributable to Equifax 18%
272.1 231.4 40.7
Fees associated with the
acquisition of CSC Credit
Services, 3.2 - 3.2 nm
net of tax (1)
Pension settlement, net of tax 24.1 - 24.1 nm
(2)
Income tax impact of
international tax restructuring 20.5 - 20.5 nm
(3)
Income tax benefits (4) (15.3) (4.2) (11.1) nm
Loss on deconsolidation of - 27.8 (27.8) nm
Brazilian business (5)
Net income from continuing
operations attributable to
Equifax,
adjusted for CSC acquisition
fees, pension settlement, loss
on deconsolidation of Brazilian 304.6 255.0 49.6 19%
business and income
tax items
Acquisition-related amortization
expense, net of tax, and
cash income tax benefit of
acquisition-related amortization
expense of certain acquired 59.0 57.0 2.0 3%
intangibles
Net income from continuing
operations attributable to
Equifax,
adjusted for CSC acquisition
fees, pension settlement,
certain income tax items, loss on
the deconsolidation of Brazilian
business and acquisition-related $ $ $
amortization expense 17%
363.6 312.0 51.6
Diluted EPS from continuing
operations attributable to
Equifax,
adjusted for CSC acquisition
fees, pension settlement,
certain income tax items, loss on
the deconsolidation of Brazilian
business and acquisition-related $ $ $
amortization expense 18%
2.97 2.52 0.45
Weighted-average shares used in 122.5 123.7
computing diluted EPS
nm - not
meaningful
(1) Fees associated with the acquisition of CSC Credit Services includes
the fees incurred as a direct result of the acquisition, net of tax. See
the Notes to
this reconciliation for additional detail.
(2) Pension settlement includes the non-cash charge incurred related to the
voluntary settlement offer in the fourth quarter of 2012, net of tax. See
the Notes
to this reconciliation for additional detail.
(3) We recorded $20.5 million of tax expense as a result of an
international tax restructuring completed in the fourth quarter of 2012.
See the Notes to this
reconciliation for additional detail.
(4) During the fourth quarter of 2012, we recorded a $15.3 million tax
benefit as a result of an approved tax method change. During the fourth
quarter of 2011,
we recorded a $4.2 million cumulative income tax benefit resulting from the
recognition of an income tax deduction related to several prior years. See
the
Notes to the reconciliation for additional detail.
(5) Loss on the deconsolidation of Brazilian business includes the loss
recognized on the merger, net of tax. See the Notes to this reconciliation
for additional
detail.
Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP
Financial Measures (Unaudited)
(Dollars in millions, except per share amounts)
B. Reconciliation of operating income to adjusted operating income, excluding
CSC acquisition fees and pension settlement, and presentation of adjusted
operating margin:
Three Months Ended
December 31,
2012 2011 $ Change %
Change
$ $ $
Revenue 9%
558.1 509.7 48.4
$ $ $
Operating income -24%
95.2 125.7 (30.5)
Fees associated with the
acquisition of CSC Credit 5.0 - 5.0 nm
Services (1)
Pension settlement (2) 38.7 - 38.7 nm
Adjusted operating income,
excluding CSC acquisition fees
$ $ $
and pension settlement 11%
138.9 125.7 13.2
Adjusted operating margin 24.9% 24.7%
Twelve Months Ended
December 31,
2012 2011 $ Change %
Change
$ $ $
Revenue 1,959.8 10%
2,160.5 200.7
$ $ $
Operating income 4%
489.0 471.0 18.0
Fees associated with the
acquisition of CSC Credit 5.0 - 5.0 nm
Services (1)
Pension settlement (2) 38.7 - 38.7 nm
Adjusted operating income,
excluding CSC acquisition fees
$ $ $
and pension settlement 13%
532.7 471.0 61.7
Adjusted operating margin 24.7% 24.0%
nm - not meaningful
(1) Fees associated with the acquisition of CSC Credit Services includes
the fees incurred as a direct result of the acquisition. See the Notes
to this reconciliation for additional detail.
(2) Pension settlement includes the non-cash charge incurred related to
the voluntary settlement offer in the fourth quarter of 2012. See the
Notes to this reconciliation for additional detail.
Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP
Financial Measures (Unaudited)
(Dollars in millions, except per share
amounts)
C. Reconciliation of operating revenue to adjusted operating revenue for
Equifax Inc., International and Latin America,
excluding the results of our Brazilian operations:
Equifax Inc.
Twelve Months Ended Local
December 31, Currency
2012 2011 $ Change % % Change*
Change
Operating $ $ $
revenue 1,959.8 10% 11%
2,160.5 200.7
Brazil - (35.4) 35.4
revenue (1)
Adjusted $ $ $
operating 1,924.4 12% 13%
revenue 2,160.5 236.1
International
Twelve Months Ended Local
December 31, Currency
2012 2011 $ Change % % Change*
Change
Operating $ $ $
revenue 492.9 -1% 1%
486.2 (6.7)
Brazil - (35.4) 35.4
revenue (1)
Adjusted $ $ $
operating 457.5 6% 9%
revenue 486.2 28.7
Latin America
Twelve Months Ended Local
December 31, Currency
2012 2011 $ Change % % Change*
Change
Operating $ $ $
revenue 208.8 -10% -7%
187.4 (21.4)
Brazil - (35.4) 35.4
revenue (1)
Adjusted $ $ $
operating 173.4 8% 12%
revenue 187.4 14.0
* Reflects percentage change in revenue conforming 2012 results using
2011 exchange rates.
(1) Revenue generated from our Brazilian operations that were merged with
Boa Vista Servicos, S.A. in the second quarter of 2011. See
the Notes to this reconciliation for additional
detail.
Notes to Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP
Financial Measures
Fees associated with the acquisition of CSC Credit Services – During the
fourth quarter of 2012, the Company acquired certain business assets and the
operations of CSC Credit Services, Inc., a subsidiary of Computer Sciences
Corporation. In conjunction with this acquisition, the Company incurred
approximately $5.0 million of transaction fees ($3.2 million, net of tax).
Management believes excluding these fees from certain financial results
provides meaningful supplemental information regarding our financial results
for the three and twelve months ended December 31, 2012, as compared to 2011,
since an acquisition and fees of such an amount are not comparable among the
periods. This is consistent with how our management reviews and assesses
Equifax's historically performance and is useful when planning, forecasting
and analyzing future periods.
Pension settlement – During the fourth quarter of 2012, the Company offered
certain employees a voluntary lump sum payment option of their pension
benefits or a reduced monthly annuity. The Company recorded a non-cash
settlement charge of $38.7 million ($24.1 million, net of tax). Management
believes excluding this charge from certain financial results provides
meaningful supplemental information regarding our financial results for the
three and twelve months ended December 31, 2012, as compared to 2011, since
this charge is unusual in nature and not comparable among the periods. This
is consistent with how our management reviews and assesses Equifax's
historically performance and is useful when planning, forecasting and
analyzing future periods.
International tax restructuring - During the fourth quarter of 2012, the
Company completed an international tax restructuring resulting in the
recognition of tax expense of $20.5 million. Management believes excluding
this income tax expense from certain financial results provides meaningful
supplemental information regarding our financial results for the three and
twelve months ended December 31, 2012, as compared to 2011, since income tax
expense associated with tax restructuring of such an amount is not comparable
among the periods. This is consistent with how our management reviews and
assesses Equifax's historical performance and is useful when planning,
forecasting and analyzing future periods.
Income tax benefits – During the fourth quarter of 2012, the Company recorded
a tax benefit as a result of tax authorities approving a tax method change
which impacted the tax expense recorded in connection with the merger of our
Brazilian business in the second quarter of 2011. During the fourth quarter
of 2011, the Company recorded a cumulative income tax benefit resulting from
the recognition of an income tax deduction related to several prior years.
Management believes excluding these income tax benefits from certain financial
results provides meaningful supplemental information regarding our financial
results for the three and twelve months ended December 31, 2012, as compared
to 2011, since these specific income tax benefits of such an amount are not
comparable among the periods. This is consistent with how our management
reviews and assesses Equifax's historical performance and is useful when
planning, forecasting and analyzing future periods.
Loss on the deconsolidation of Brazilian business – During the second quarter
of 2011, the Company completed the merger of our Brazilian business with and
into Boa Vista Servicos, S.A. ("BVS") in exchange for a 15 percent equity
interest in BVS. The Company recorded a $27.8 million loss on the
transaction. Management believes excluding the loss from certain financial
results provides meaningful supplemental information regarding our financial
results for the twelve months ended December 31, 2011, as compared to 2012,
since a deconsolidation and loss of such an amount is not comparable among the
periods. This is consistent with how our management reviews and assesses
Equifax's historical performance and is useful when planning, forecasting and
analyzing future periods.
Diluted EPS and net income from continuing operations attributable to Equifax,
adjusted for CSC acquisition fees, pension settlement, certain income tax
items, the loss on the deconsolidation of Brazilian business and
acquisition-related amortization expense - We calculate this financial measure
by excluding the impact of acquisition-related amortization expense and
including a benefit to reflect the material cash income tax savings resulting
from the income tax deductibility of amortization for certain acquired
intangibles. These financial measures are not prepared in conformity with
GAAP. Management believes excluding the impact of amortization expense is
useful because excluding acquisition-related amortization, and other items
that are not comparable, allows investors to evaluate our performance for
different periods on a more comparable basis. Certain acquired intangibles
result in material cash income tax savings which are not reflected in
earnings. Management believes that including a benefit to reflect the cash
income tax savings is useful as it allows investors to better value Equifax.
Management makes these adjustments to earnings when measuring operating
profitability, evaluating performance trends, setting performance objectives
and calculating our return on invested capital.
Adjusted operating income and operating margin, excluding CSC acquisition fees
and pension settlement - Management believes excluding the CSC acquisition
fees and the pension settlement from the calculation of operating income and
margin, on a non-GAAP basis, is useful because management excludes items that
are not comparable when measuring operating profitability, evaluating
performance trends, and setting performance objectives, and it allows
investors to evaluate our performance for different periods on a more
comparable basis by excluding items that impact comparability.
Adjusted operating revenue, excluding the results of our Brazilian operations
- Management believes excluding the Brazilian revenue from the calculation of
operating revenue, on a non-GAAP basis, is useful because it allows investors
to evaluate the Company's growth on a basis consistent with the current
composition of our business.
SOURCE Equifax Inc.
Website: http://www.equifax.com
Contact: Jeff Dodge, Investor Relations, +1-404-885-8804,
jeff.dodge@equifax.com, or Tim Klein, Media Relations, +1-404-885-8555,
tim.klein@equifax.com
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