<PAGE>
FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended
12-31-99 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period
from _____________________ to _____________________
Commission file number 1-6605
----------------
EQUIFAX INC.
------------
(Exact name of Registrant as specified in its Charter)
<TABLE>
<CAPTION>
<S> <C>
GEORGIA 58-0401110
- ------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1550 Peachtree St., N.W., Atlanta, GA 30309
- ------------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (404) 885-8000
--------------------------
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock
($1.25 Par Value) New York Stock Exchange
----------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act:
None
----
(Title of class)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K (SECTION 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND
WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE
PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS
FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT, COMPUTED BY REFERENCE TO THE CLOSING SALES PRICE ON THE NEW YORK
STOCK EXCHANGE ON FEBRUARY 25, 2000: $2,809,657,446.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
Class Outstanding at February 25, 2000
----- --------------------------------
COMMON STOCK, $1.25 PAR VALUE 141,050,489
- ----------------------------------- --------------
DOCUMENTS INCORPORATED BY REFERENCE
THE PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL
27, 2000, IS INCORPORATED BY REFERENCE, TO THE EXTENT INDICATED UNDER ITEMS 10,
11, 12, 13 AND 14, INTO PARTS III AND IV OF THIS FORM 10-K.
THE ANNUAL REPORT TO SECURITY HOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999 IS INCORPORATED BY REFERENCE, TO THE EXTENT INDICATED UNDER ITEMS 3, 6, 7,
8 AND 14, INTO PARTS I, II AND IV.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to report to be
signed on its behalf by the undersigned duly authorized officer.
EQUIFAX, INC.
Date April 5, 2000 By /s/ Marietta Edmunds Zakas
--------------------------
Marietta Edmunds Zakas,
Corporate Vice President, Corporate
Secretary and Director of
Investor Relations
<PAGE>
This Report on Form 10-K/A is being filed solely for the purpose of filing the
Consolidated Statements of Income (one page) which was inadvertently omitted
during the ascii to edgar conversion process from electronic filing with the
Report on Form 10-K filed by the Registrant on March 30, 2000.
Item 8. Financial Statements and Supplementary Data
- ------ -------------------------------------------
INDEX TO EXHIBITS
EXHIBIT
NUMBER
- -------
13.3 Financial Statements and Supplementary Data (29 pages)
<PAGE>
EXHIBIT 13.3
EQUIFAX INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands)
-----------------------------------------------------------------------------------------------------------
December 31 1999 1998
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 136,596 $ 90,617
Trade accounts receivable, net of allowance for doubtful
accounts of $14,057 in 1999 and $12,811 in 1998 302,809 298,201
Other receivables 87,873 54,904
Deferred income tax assets 28,015 26,223
Other current assets 54,140 50,420
-------------- ---------------
Total current assets 609,433 520,365
-------------- ---------------
Property and Equipment:
Land, buildings and improvements 28,302 30,963
Data processing equipment and furniture 258,314 239,391
-------------- ---------------
286,616 270,354
Less accumulated depreciation 171,126 151,016
-------------- ---------------
115,490 119,338
-------------- ---------------
Goodwill 612,551 719,662
-------------- ---------------
Purchased Data Files 157,701 173,473
-------------- ---------------
Other Assets 344,606 295,957
-------------- ---------------
$ 1,839,781 $ 1,828,795
============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
<TABLE>
<CAPTION>
(In thousands, except par values)
- ----------------------------------------------------------------------------------------
December 31 1999 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt and current maturities of long-term debt $ 79,866 $ 47,387
Accounts payable 177,427 107,346
Accrued salaries and bonuses 38,203 37,973
Income taxes payable 12,005 9,518
Other current liabilities 197,294 216,955
----------- -----------
Total current liabilities 504,795 419,179
----------- -----------
Long-Term Debt, Less Current Maturities 933,708 869,486
----------- -----------
Long-Term Deferred Revenue 22,547 32,465
----------- -----------
Deferred Income Tax Liabilities 73,132 50,132
----------- -----------
Other Long-Term Liabilities 89,974 91,067
----------- -----------
Commitments and Contingencies (Note 9)
Shareholders' Equity:
Common stock, $1.25 par value; shares
authorized - 300,000; issued - 174,259 in 1999
and 173,722 in 1998; outstanding - 134,001 in
1999 and 140,042 in 1998 217,824 217,153
Preferred stock, $0.01 par value; shares
authorized - 10,000; issued and outstanding -
none in 1999 or 1998 -- --
Paid-in capital 304,532 286,511
Retained earnings 726,827 562,911
Accumulated other comprehensive income (Note 7) (161,982) (35,063)
Treasury stock, at cost, 34,640 shares in 1999
and 27,698 shares in 1998 (Note 7) (816,213) (606,092)
Stock held by employee benefits trusts, at cost,
5,619 shares in 1999 and 5,983 shares in 1998 (Note 7) (55,363) (58,954)
----------- -----------
Total shareholders' equity 215,625 366,466
----------- -----------
$ 1,839,781 $ 1,828,795
=========== ===========
</TABLE>
<PAGE>
EQUIFAX INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
--------------------------------------------------------------------------------------------------------------
Year Ended December 31 1999 1998 1997
- ---------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Operating revenue $ 1,772,694 $ 1,620,978 $ 1,366,087
------------- ------------- -------------
Costs and expenses:
Costs of services 1,032,389 943,833 778,936
Selling, general and administrative expenses 325,766 311,493 263,243
Valuation loss on pending acquisition (Note 9) -- -- 25,000
------------- ------------- -------------
Total costs and expenses 1,358,155 1,255,326 1,067,179
------------- ------------- -------------
Operating income 414,539 365,652 298,908
Other income, net 12,356 4,294 45,027
Interest expense 60,971 42,701 20,797
------------- ------------- -------------
Income from continuing operations before income
taxes and cumulative effect of accounting change 365,924 327,245 323,138
Provision for income taxes 150,047 133,812 137,613
------------- ------------- -------------
Income from continuing operations before
cumulative effect of accounting change 215,877 193,433 185,525
------------- ------------- -------------
Discontinued operations
(Note 2):
Income from discontinued operations, net of income
taxes of $10,179 -- -- 14,336
Costs associated with effecting the spinoff, net of
income tax benefit of $2,154 -- -- (12,887)
------------- ------------- -------------
Total discontinued operations -- -- 1,449
------------- ------------- -------------
Income before cumulative effect of accounting change 215,877 193,433 186,974
Cumulative effect of change in accounting
for business process reengineering, net of
income tax benefit of $2,061 (Note 1) -- -- (3,237)
------------- ------------- -------------
Net income $ 215,877 $ 193,433 $ 183,737
============= ============= =============
Per common share (basic):
Income from continuing operations before
cumulative effect of accounting change $ 1.57 $ 1.37 $ 1.29
Discontinued operations - - 0.01
Cumulative effect of accounting change - - (0.02)
------------- ------------- -------------
Net income $ 1.57 $ 1.37 $ 1.27
============= ============= =============
Shares used in computing basic earnings per share 137,457 141,397 144,233
============= ============= =============
Per common share (diluted):
Income from continuing operations before
cumulative effect of accounting change $ 1.55 $ 1.34 $ 1.26
Discontinued operations - - 0.01
Cumulative effect of accounting change - - (0.02)
------------- ------------- -------------
Net income $ 1.55 $ 1.34 $ 1.24
============= ============= =============
Shares used in computing
diluted earnings per share 139,603 144,403 147,818
============= ============= =============
Dividends per common share $ 0.363 $ 0.353 $ 0.345
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
EQUIFAX INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Accumulated Other Comprehensive Income:
--------------------------------------------
Common Stock: Minimum
------------------- Foreign Liability Under
Shares Paid-In Retained Currency Supplemental
(In thousands) Outstanding Amount Capital Earnings Translation Retirement Plan Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 144,876 $213,573 $207,142 $ 401,233 $ (3,913) $(4,893) $ (8,806)
1997 changes:
Net income - - - 183,737 - - -
Foreign currency translation adjustment - - - - (9,771) - (9,771)
Adjustment for minimum liability under
supplemental retirement plan - - - - - (1,499) (1,499)
Shares issued under stock plans 1,606 2,008 22,800 - - - -
Treasury stock purchased (4,143) - - - - - -
Treasury stock reissued for acquisitions 270 - 3,468 - - - -
Cash dividends - - - (52,030) - - -
Spinoff dividend - - - (111,396) - - -
Income tax benefit from stock plans - - 8,825 - - - -
Dividends from employee benefits trusts - - 2,261 - - - -
Other - - - (3) - - -
------- -------- -------- --------- --------- ------- ---------
Balance, December 31, 1997 142,609 215,581 244,496 421,541 (13,684) (6,392) (20,076)
1998 changes:
Net income - - - 193,433 - - -
Foreign currency translation adjustment - - - - (15,313) - (15,313)
Adjustment for minimum liability under
supplemental retirement plan - - - - - 326 326
Shares issued under stock plans 1,451 1,572 18,952 - - - -
Shares contributed to U.S. retirement plan 390 - 10,392 - - - -
Treasury stock purchased (4,555) - - - - - -
Treasury stock reissued for acquisitions 147 - 2,346 - - - -
Cash dividends - - - (52,063) - - -
Income tax benefit from stock plans - - 8,085 - - - -
Dividends from employee benefits trusts - - 2,240 - - - -
------- -------- -------- --------- --------- ------- ---------
Balance, December 31, 1998 140,042 217,153 286,511 562,911 (28,997) (6,066) (35,063)
1999 changes:
Net income - - - 215,877 - - -
Foreign currency translation adjustment - - - - (128,283) - (128,283)
Adjustment for minimum liability under
supplemental retirement plan - - - - - 1,364 1,364
Shares issued under stock plans 599 671 6,945 - - - -
Shares contributed to U.S. retirement plan 304 - 7,003 - - - -
Treasury stock purchased (6,944) - - - - - -
Cash dividends - - - (51,961) - - -
Income tax benefit from stock plans - - 2,046 - - - -
Dividends from employee benefits trusts - - 2,027 - - - -
------- -------- -------- --------- --------- ------- ---------
Balance, December 31, 1999 134,001 $217,824 $304,532 $ 726,827 $(157,280) $(4,702) $(161,982)
======= ======== ======== ========= ========= ======= =========
<CAPTION>
Stock Held
By Employee Total
Treasury Benefits Shareholders' Comprehensive
(In thousands) Stock Trusts Equity Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 (323,625) $(64,567) $ 424,950
1997 changes:
Net income - - 183,737 $ 183,737
Foreign currency translation adjustment - - (9,771) (9,771)
Adjustment for minimum liability under
supplemental retirement plan - - (1,499) (1,499)
Shares issued under stock plans - - 24,808 -
Treasury stock purchased (129,085) - (129,085) -
Treasury stock reissued for acquisitions 5,132 - 8,600 -
Cash dividends - - (52,030) -
Spinoff dividend - - (111,396) -
Income tax benefit from stock plans - - 8,825 -
Dividends from employee benefits trusts - - 2,261 -
Other - - (3) -
--------- -------- --------- ---------
Balance, December 31, 1997 (447,578) (64,567) 349,397 $ 172,467
=========
1998 changes:
Net income - - 193,433 $ 193,433
Foreign currency translation adjustment - - (15,313) (15,313)
Adjustment for minimum liability under
supplemental retirement plan - - 326 326
Shares issued under stock plans 279 1,770 22,573 -
Shares contributed to U.S. retirement plan - 3,843 14,235 -
Treasury stock purchased (161,797) - (161,797) -
Treasury stock reissued for acquisitions 3,004 - 5,350 -
Cash dividends - - (52,063) -
Income tax benefit from stock plans - - 8,085 -
Dividends from employee benefits trusts - - 2,240 -
--------- -------- --------- ---------
Balance, December 31, 1998 (606,092) (58,954) 366,466 $ 178,446
=========
1999 changes:
Net income - - 215,877 $ 215,877
Foreign currency translation adjustment - - (128,283) (128,283)
Adjustment for minimum liability under
supplemental retirement plan - - 1,364 1,364
Shares issued under stock plans 54 594 8,264 -
Shares contributed to U.S. retirement plan - 2,997 10,000 -
Treasury stock purchased (210,175) - (210,175) -
Cash dividends - - (51,961) -
Income tax benefit from stock plans - - 2,046 -
Dividends from employee benefits trusts - - 2,027 -
--------- -------- --------- ---------
Balance, December 31, 1999 $(816,213) $(55,363) $ 215,625 $ 88,958
========= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
EQUIFAX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands)
- -------------------------------------------------------------------------------------------------------------------------
Year Ended December 31 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 215,877 $ 193,433 $ 183,737
Adjustments to reconcile net income to net cash provided
by operating activities of continuing operations:
Depreciation and amortization 125,263 103,825 77,069
Gain from sale of businesses (7,095) - (42,798)
Income from discontinued operations - - (14,336)
Costs associated with effecting the spinoff - - 12,887
Cumulative effect of accounting change - - 3,237
Valuation loss on pending acquisition - - 25,000
Changes in assets and liabilities, excluding effects of acquisitions:
Accounts receivable, net (45,110) (40,179) (45,982)
Current liabilities, excluding debt 53,703 38,949 11,909
Other current assets 3,541 (336) (3,827)
Deferred income taxes 20,885 34,595 9,726
Other long-term liabilities, excluding debt (3,609) (16,831) 4,894
Other assets (38,743) (24,328) (11,431)
---------- --------- ---------
Net cash provided by operating activities of
continuing operations 324,712 289,128 210,085
---------- --------- ---------
Cash flows from investing activities:
Additions to property and equipment (39,033) (44,921) (34,587)
Additions to other assets, net (81,838) (74,411) (51,452)
Acquisitions, net of cash acquired (22,162) (478,463) (96,630)
Investments in unconsolidated affiliates (700) (22,752) (18,839)
Proceeds from sale of businesses 25,957 12,874 80,998
---------- --------- ---------
Net cash used by investing activities of continuing operations (117,776) (607,673) (120,510)
---------- --------- ---------
Cash flows from financing activities:
Net short-term borrowings 33,114 28,988 8,556
Additions to long-term debt 70,244 524,068 67,285
Payments on long-term debt (6,256) (3,692) (92,582)
Treasury stock purchases (210,175) (161,797) (129,085)
Dividends paid (51,961) (52,063) (52,030)
Proceeds from exercise of stock options 6,996 12,245 18,343
Other 5,011 11,704 11,085
---------- ---------- ---------
Net cash (used) provided by financing
activities of continuing operations (153,027) 359,453 (168,428)
---------- --------- ---------
Effect of foreign currency exchange rates on cash (7,930) (2,542) 196
Net cash provided by discontinued operations - - 82,748
---------- --------- ---------
Net cash provided 45,979 38,366 4,091
Cash and cash equivalents, beginning of year 90,617 52,251 48,160
---------- --------- ---------
Cash and cash equivalents, end of year $136,596 $90,617 52,251
========== ========= =========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
EXHIBIT C
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and its majority-owned and controlled subsidiaries. All
significant intercompany transactions and balances have been eliminated. Certain
prior year amounts have been reclassified to conform with the current year
presentation. The historical financial statements presented reflect the spinoff
of ChoicePoint Inc. as a discontinued operation (Note 2).
NATURE OF OPERATIONS The Company principally provides information services to
businesses to help them grant credit and authorize and process credit card and
check transactions. The principal lines of business are information services and
payment services (see Note 11 for segment information). The principal markets
for both information and payment services are retailers, banks, and other
financial institutions, with information services also serving the
telecommunication and utility industries. The Company's operations are
predominantly located within the United States, with foreign operations
principally located within Canada, the United Kingdom, and Brazil.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
REVENUE RECOGNITION Revenue is recognized principally as services are provided
to customers. Amounts billed in advance are recorded as current or long-term
deferred revenue on the balance sheet, with current deferred revenue reflecting
services expected to be provided within the next twelve months. Current deferred
revenue is included with other current liabilities in the accompanying
consolidated balance sheets, and as of December 31, 1999 and 1998 totaled
$31,523,000 and $45,140,000, respectively. In 1996, the Company received a
one-time payment of $58,000,000 related to a lottery subcontract and recognized
$5,400,000 in revenue. The remaining balance is being recognized as revenue over
the term of the contract, with $9,636,000 per year recognized in 1999, 1998 and
1997. The unrecognized balance at December 31, 1999 totaled $23,692,000, with
$14,056,000 included in long-term deferred revenue in the accompanying
consolidated balance sheets.
EARNINGS PER SHARE Basic EPS is calculated as income available to common
stockholders divided by the weighted average number of common shares outstanding
during the period. Diluted EPS is calculated to reflect the potential dilution
that would occur if stock options or other contracts to issue common stock were
exercised and resulted in additional common shares outstanding. The income
amount used in the Company's EPS calculations is the same for both basic and
diluted EPS. A reconciliation of the average outstanding shares used in the two
calculations is as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average shares outstanding (basic) 137,457 141,397 144,233
Effect of dilutive securities:
Stock options 1,880 2,714 3,099
Performance share plan 266 292 486
- ----------------------------------------------------------------------------------------------
Weighted average shares outstanding (diluted) 139,603 144,403 147,818
==============================================================================================
</TABLE>
PROPERTY AND EQUIPMENT The cost of property and equipment is depreciated
primarily on the straight-line basis over estimated asset lives of 30 to 50
years for buildings; useful lives, not to exceed lease terms, for leasehold
improvements; three to five years for data processing equipment, and eight to 20
years for furniture.
GOODWILL Goodwill is amortized on a straight-line basis predominantly over
periods from 20 to 40 years. Amortization expense was $26,926,000 in 1999,
$21,536,000 in 1998, and $12,221,000 in 1997. As of December 31, 1999 and 1998,
accumulated amortization was $87,533,000 and $62,352,000, respectively. The
Company regularly evaluates whether events and circumstances have occurred which
indicate that the carrying amount of goodwill may warrant revision or may not be
recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company uses an estimate of the future undiscounted net
cash flows of the related business over the remaining life of the goodwill in
measuring whether the goodwill is recoverable.
PURCHASED DATA FILES Purchased data files are amortized on a straight-line
basis primarily over 15 years. Amortization expense was $17,566,000 in 1999,
$14,982,000 in 1998, and $11,506,000 in 1997. As of December 31, 1999 and 1998,
accumulated amortization was $109,269,000 and $91,235,000, respectively.
OTHER ASSETS Other assets at December 31, 1999 and 1998 consist of the
following:
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Systems development and other deferred costs $154,301 $127,912
Purchased software 55,013 47,691
Prepaid pension cost 86,764 58,518
Investments in unconsolidated affiliates 5,558 21,027
Other 42,970 40,809
- --------------------------------------------------------------------------------
$344,606 $295,957
================================================================================
<PAGE>
Purchased software and systems development and other deferred costs are being
amortized on a straight-line basis over five to ten years. Amortization expense
for other assets was $43,156,000 in 1999, $32,078,000 in 1998, and $23,018,000
in 1997. As of December 31, 1999 and 1998, accumulated amortization was
$159,840,000 and $120,286,000, respectively.
FOREIGN CURRENCY TRANSLATION The assets and liabilities of foreign
subsidiaries are translated at the year-end rate of exchange, and income
statement items are translated at the average rates prevailing during the year.
The resulting translation adjustment is recorded as a component of shareholders'
equity. Exchange gains and losses on intercompany balances of a long-term
investment nature are also recorded as a component of shareholders' equity.
Other foreign currency translation gains and losses, which are not material, are
recorded in the consolidated statements of income.
CONSOLIDATED STATEMENTS OF CASH FLOWS The Company considers cash equivalents
to be short-term cash investments with original maturities of three months or
less.
Cash paid for income taxes and interest from continuing operations is as
follows:
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Income taxes, net of amounts refunded $127,611 $98,905 $123,670
Interest 60,379 28,885 21,593
In 1999, 1998, and 1997, the Company acquired various businesses that were
accounted for as purchases (Note 3). In conjunction with these transactions,
liabilities were assumed as follows:
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Fair value of assets acquired $24,783 $540,078 $127,724
Cash paid for acquisitions 24,182 485,076 102,903
Value of treasury shares reissued
for acquisitions -- 6,000 8,600
Notes and deferred payments -- -- 5,800
- --------------------------------------------------------------------------------
Liabilities assumed $ 601 $49,002 $10,421
================================================================================
FINANCIAL INSTRUMENTS The Company's financial instruments consist primarily of
cash and cash equivalents, accounts and notes receivable, accounts payable, and
short-term and long-term debt. The carrying amounts of these items, other than
long-term debt, approximate their fair market values due to their short
maturity. As of December 31, 1999, the fair value of the Company's long-term
debt (determined primarily by broker quotes) was $896,028,000 compared to its
carrying value of $933,708,000. During 1999, the Company did not hold any
material derivative financial instruments.
RECENT ACCOUNTING PRONOUNCEMENTS AND ACCOUNTING CHANGE In November 1997, the
Financial Accounting Standards Board (FASB) Emerging Issues Task Force released
Issue No. 97-13 "Accounting for Costs Incurred in Connection with a Consulting
Contract or an Internal Project That Combines Business Process Reengineering and
Information Technology Transformation" (EITF 97-13). This issue requires that
the cost of business process reengineering activities that are a part of a
systems development project be expensed as incurred, and that any costs
previously capitalized be written off net of tax as a change in accounting
principle in the current period. Prior to the issuance of EITF 97-13, the
Company had capitalized certain costs of business process reengineering related
to several of its systems development projects. Accordingly, during the fourth
quarter 1997, the Company recorded an expense of $5,298,000 ($3,237,000 after
tax, or $.02 per share) to reflect the write off of these previously capitalized
costs in accordance with EITF 97-13.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities."
SFAS 133 establishes accounting and reporting standards for derivative
instruments and hedging activities and is effective (as amended by SFAS No. 137)
on January 1, 2001 for the Company. Based on its current level of derivative
instruments and hedging activities, the Company does not believe the adoption of
SFAS 133 will have a significant impact on its financial statements or reported
earnings.
2. DISCONTINUED OPERATIONS
On December 9, 1996, the Company announced its intention to split into two
independent, publicly traded companies by spinning off its Insurance Services
industry segment, contingent on receiving a favorable ruling from the IRS
regarding the tax-free status of the dividend for U.S. shareholders. In July
1997, the Company received the favorable IRS ruling and on August 7, 1997,
completed the spinoff of its Insurance Services industry segment. The spinoff
was accomplished by the Company's contribution of the business units that
comprised the Insurance Services segment into one wholly owned subsidiary,
ChoicePoint Inc. All of the common stock of ChoicePoint was then distributed to
Equifax shareholders as a dividend, with one share of ChoicePoint common stock
distributed for each ten shares of Equifax common stock held.
As a result of the spinoff, the Company's December 31, 1997 financial statements
have been prepared with the Insurance Services segment results of operations and
cash flows shown as "discontinued operations." All historical financial
statements presented conform to this presentation. During the second quarter of
1997, the Company recorded an expense of $15,041,000 to reflect the net costs
associated with effecting the spinoff ($12,887,000 after tax, or $.09 per
share). These costs include duplicate software licenses, severance, legal and
investment banker fees, and other related costs, partially offset by a $17.1
million curtailment gain related to the U.S. retirement plan caused by the
spinoff and the pretax earnings of ChoicePoint for July 1997.
<PAGE>
Summarized financial information for the discontinued operation is as follows:
(In thousands) 1997
- ---------------------------------------------------------------------------
Revenue $340,251
Income before income taxes 24,515
Net income 14,336
The results of operations of ChoicePoint in the table above include its
operations only through June 30, 1997. ChoicePoint's results after June 30, 1997
through the spinoff date (July 31, 1997 for accounting purposes) are included
with "Costs associated with effecting the spinoff" in the accompanying
consolidated statements of income. The July results totaled $4.5 million of
income before income taxes and $2.6 million of net income.
The Company's intercompany receivable from ChoicePoint totaled $85.6 million at
July 31, 1997, and was repaid to the Company by ChoicePoint in August 1997.
Other significant spinoff-related transactions occurring near the date of the
spinoff included ChoicePoint's assumption of $29.0 million of the Company's
long-term debt and a $13.0 million capital contribution made by the Company to
ChoicePoint. These transactions, net of cash payments related to spinoff costs,
have been included in "Net cash provided by discontinued operations" in the
accompanying consolidated statements of cash flows.
3. ACQUISITIONS AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES
In 1999, the Company acquired the credit files of fourteen credit affiliates
located in the United States and three credit affiliates in Canada. They were
accounted for as purchases and had an aggregate purchase price of $24,182,000,
with $7,508,000 allocated to goodwill and $15,954,000 allocated to purchased
data files. Their results of operations have been included in the consolidated
statements of income from the dates of acquisition and were not material. In
February 2000, the Company signed an agreement to purchase the Consumer
Information Solutions (CIS) Group from R.L. Polk & Co. for approximately $260
million in cash. The CIS Group provides consumer marketing information services
to a wide range of industries. This transaction, which is subject to certain
terms and closing conditions, is expected to be completed by April 30, 2000, and
will be accounted for as a purchase.
During 1998 and 1997, the Company acquired, made equity investments, or
increased its ownership in the following businesses:
<TABLE>
<CAPTION>
Date Industry Percentage
Business Acquired Segment Ownership
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unnisa Ltda. (Brazil) September 1998 Payment Services 59.3%
Proceda S.A. (Brazil) September 1998 Payment Services 34.0%
Seguranca ao Credito e Informacoes (SCI-Brazil) August 1998 Latin America 80.0%
Credit Bureau of Vancouver (Canada) July 1998 North America 100.0%
Equifax Canada Inc. July 1998 North America 100.0%(1)
Decisioneering Group, Inc. July 1998 North America 100.0%
ASNEF-Equifax Servicios de Informacion de Credito, S.L. May 1998 Europe 58.0%(2)
(Spain)
Infocorp (Peru) April 1998 Latin America 51.0%(3)
CCI Group Plc (U.K.) March 1998 Europe 100.0%
Goldleaf Technologies, Inc. December 1997 Payment Services 100.0%
Organizacion VERAZ S.A. (Argentina) December 1997 Latin America 66.7%(4)
Equifax Venture Infotek (India) November 1997 Payment Services 50.0%
Group Incresa (Spain) July 1997 Europe 100.0%
DICOM S.A. (Chile) March 1997 Latin America 100.0%(5)
HLS Financial Group, Inc. February 1997 North America 100.0%
Foothill Collection Services, Inc. February 1997 North America 100.0%
</TABLE>
1 Increased to 100.0% from 84.4%
2 Increased from 49.0% acquired in 1994
3 Increased from 35.0% acquired with DICOM S.A. in 1994
4 Increased to 66.7% from the 33.3% ownership position acquired in 1994
5 Increased to 100.0% from the 50.0% ownership position acquired in 1995 and
1994
In 1998, in addition to the businesses above, the Company acquired the credit
files of fourteen credit affiliates located in the United States and the
collection businesses of Computer Sciences Corporation (CSC), which was
subsequently sold (Note 9). Also, during the first quarter of 1998, the Company
obtained the control necessary and began to consolidate the operations of its
66.7% owned investment in Organizacion VERAZ S.A. in Argentina. The investment
in Proceda S.A., along with increases in certain other equity investments,
totaled $22.8 million and was accounted for under the equity method. They were
purchased with cash and recorded as other assets. The remaining 1998 business
and credit file acquisitions were accounted for as purchases and had an
aggregate purchase price of $491,076,000. They were purchased with a combination
of cash totaling $485,076,000 and the reissuance of treasury stock with a fair
market value of $6,000,000. These acquisitions and the consolidation of VERAZ
resulted in $389,013,000 of goodwill, $86,259,000 of purchased data files, and
$22,170,000 of other assets (primarily software and deferred systems costs).
These allocations include $26.0 million reallocated from other assets related to
investments in companies previously accounted for under the equity method. Their
results of operations have been included in the consolidated statements of
income from the dates of acquisition. The following unaudited pro forma
information has been prepared as if these acquisitions had occurred on January
1, 1997. The information is based on the
<PAGE>
historical results of the separate companies, and may not necessarily be
indicative of the results that could have been achieved, or of results that may
occur in the future.
(In thousands, except per share amounts) 1998 1997
- --------------------------------------------------------------------------------
Revenue $1,751,184 $1,592,264
Net income 181,598 170,588
Net income per common share (diluted) 1.26 1.15
================================================================================
In 1997, in addition to the businesses above, the Company acquired the credit
files of sixteen credit affiliates located in the United States. The investments
in companies in India and Argentina totaled $18.8 million and were accounted for
under the equity method. They were purchased with cash and recorded as other
assets. The investment in Group Incresa in Spain was made by the Company's
49%-owned equity investment, ASNEF. The remaining 1997 business and credit file
acquisitions were accounted for as purchases and had an aggregate purchase price
of $117,303,000, with $88,661,000 allocated to goodwill, $32,695,000 to
purchased data files, and $10,096,000 to other assets (primarily purchased
software). These allocations include $25.2 million reallocated from other assets
related to the Company's first 50% ownership in DICOM S.A. Their results of
operations have been included in the consolidated statements of income from the
dates of acquisition and were not material. They were purchased using a
combination of cash totaling $102,903,000, notes payable to sellers of
$5,800,000, and the reissuance of treasury stock with a fair market value of
$8,600,000.
4. DIVESTITURES
In April 1999, the Company sold its 34% equity interest in Proceda S.A. in
Brazil, and in June 1999, also sold three risk management offices located in the
U.S. Proceeds from these sales totaled $25,957,000 and resulted in a gain of
$7,095,000 recorded in other income ($2,888,000 after tax, or $.02 per share).
In October 1998, the Company sold the collection businesses it had purchased
from CSC earlier in the year (Note 9).
During the second quarter of 1997, the Company sold its National Decision
Systems business unit from its North America Information Services segment. Cash
proceeds, net of related divestiture expenses, totaled $80,998,000 and resulted
in a gain of $42,798,000 recorded in other income ($17,881,000 after tax, or
$.12 per share).
5. LONG-TERM DEBT AND SHORT-TERM BORROWINGS
Long-term debt at December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Senior Notes, 6.5%, due 2003, net of unamortized
discount of $357 in 1999 and $459 in 1998 $199,643 $199,541
Senior Notes, 6.3%, due 2005, net of unamortized
discount of $921 in 1999 and $1,089 in 1998 249,079 248,911
Senior Debentures, 6.9%, due 2028, net of unamortized
discount of $1,425 in 1999 and $1,475 in 1998 148,575 148,525
Borrowings under $750 million revolving credit facility,
Weighted average rate of 6.62% at December 31, 1999 318,000 249,000
Other 22,581 30,584
- --------------------------------------------------------------------------------------
937,878 876,561
Less current maturities 4,170 7,075
- --------------------------------------------------------------------------------------
$933,708 $869,486
======================================================================================
</TABLE>
In June 1998, the Company issued new 6.3% seven-year notes with a face value of
$250,000,000 in a public offering. The notes were sold at a discount of
$1,172,500. In July 1998, the Company issued new 6.9% thirty-year debentures
with a face value of $150,000,000 in a public offering. The debentures were sold
at a discount of $1,500,000. The discounts and related issuance costs will be
amortized on a straight-line basis over the respective term of the notes and
debentures.
In November 1997, the Company replaced its $550 million revolving credit
facility with a new, committed $750 million revolving credit facility with a
group of commercial banks that expires November 2002. The agreement provides
interest rate options tied to Base Rate, LIBOR, or Money Market indexes and
contains certain financial covenants related to interest coverage, funded debt
to cash flow, and limitations on subsidiary indebtedness.
In 1997, the Company also arranged for a $75 million revolving credit facility
with a commercial bank that expires December 2000. The agreement provides
interest rate options tied to LIBOR, Prime, and Federal Funds indexes and
contains certain financial covenants related to interest coverage, funded debt
to cash flow, and limitations on subsidiary indebtedness. No amounts were
outstanding under this facility at December 31, 1999 or 1998.
Scheduled maturities of long-term debt during the five years subsequent to
December 31, 1999, are as follows: $4,170,000 in 2000; $14,631,000 in 2001;
$321,781,000 in 2002; $199,643,000 in 2003; and none in 2004.
<PAGE>
In October 1999, a Canadian subsidiary of the Company entered into a
C$100,000,000 loan, renewable annually, with a group of banks. The loan
agreement provides interest rate options tied to Prime, Base Rate, LIBOR, and
Canadian Banker's Acceptances, and contains financial covenants related to
interest coverage, funded debt to cash flow, and limitations on subsidiary
indebtedness. The Company's short-term borrowings at December 31, 1999 (which
includes the Canadian loan mentioned above) and 1998 totaled $75,696,000 and
$40,312,000, respectively, and consisted primarily of notes payable to banks.
These notes had a weighted average interest rate of 5.20% at December 31, 1999
and 5.47% at December 31, 1998.
6. INCOME TAXES
The Company records deferred income taxes using enacted tax laws and rates for
the years in which the taxes are expected to be paid. Deferred income tax assets
and liabilities are recorded based on the differences between the financial
reporting and income tax bases of assets and liabilities.
The provision for income taxes from continuing operations consists of the
following:
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Current:
Federal $96,342 $74,769 $109,804
State 15,855 10,854 21,408
Foreign 16,355 17,020 9,093
- --------------------------------------------------------------------------------
128,552 102,643 140,305
- --------------------------------------------------------------------------------
Deferred:
Federal 11,467 26,309 (8,361)
State 2,596 4,952 (2,269)
Foreign 7,432 (92) 7,938
- --------------------------------------------------------------------------------
21,495 31,169 (2,692)
- --------------------------------------------------------------------------------
$150,047 $133,812 $137,613
================================================================================
The provision for income taxes from continuing operations is based on income
from continuing operations before income taxes as follows:
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
United States $322,782 $299,815 $284,116
Foreign 43,142 27,430 39,022
- --------------------------------------------------------------------------------
$365,924 $327,245 $323,138
================================================================================
The provision for income taxes from continuing operations is reconciled with the
federal statutory rate as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
- ---------------------------------------------------------------------------------------
Provision computed at federal statutory rate $128,073 $114,536 $113,098
State and local taxes, net of federal tax benefit 11,993 10,274 12,440
Nondeductible goodwill from divestitures -- -- 5,652
Other 9,981 9,002 6,423
- ---------------------------------------------------------------------------------------
$150,047 $133,812 $137,613
=======================================================================================
</TABLE>
Components of the Company's deferred income tax assets and liabilities at
December 31, 1999 and 1998 are as follows:
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Deferred income tax assets:
Reserves and accrued expenses $26,067 $24,710
Postretirement benefits 9,515 9,591
Employee compensation programs 15,890 18,205
Deferred revenue 11,517 14,985
Net operating loss carryforwards of subsidiaries 11,066 10,257
Foreign tax credit carryforwards 18,629 13,120
Other 8,318 4,265
- --------------------------------------------------------------------------------
101,002 95,133
- --------------------------------------------------------------------------------
Deferred income tax liabilities:
Data files and other assets (71,163) (61,643)
Depreciation (2,940) (3,952)
Pension expense (34,236) (22,989)
Undistributed earnings of foreign subsidiaries (28,891) (20,520)
Other (8,889) (9,938)
- --------------------------------------------------------------------------------
(146,119) (119,042)
- --------------------------------------------------------------------------------
Net deferred income tax liability $(45,117) $(23,909)
================================================================================
<PAGE>
The Company's deferred income tax assets and liabilities at December 31, 1999
and 1998 are included in the accompanying consolidated balance sheets as
follows:
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Deferred income tax assets $28,015 $26,223
Deferred income tax liabilities (73,132) (50,132)
- --------------------------------------------------------------------------------
Net deferred income tax liability $(45,117) $(23,909)
================================================================================
Accumulated undistributed retained earnings of Canadian subsidiaries amounted to
approximately $104,515,000 at December 31, 1999. No provision for Canadian
withholding taxes or United States federal income taxes is made on these
earnings because they are considered by management to be permanently invested in
those subsidiaries and, under the tax laws, are not subject to such taxes until
distributed as dividends. If the earnings were not considered permanently
invested, approximately $5,226,000 of deferred income taxes would have been
provided. Such taxes, if ultimately paid, may be recoverable as foreign tax
credits in the United States.
7. SHAREHOLDERS' EQUITY
RIGHTS PLAN In 1995, the Company's Board of Directors adopted a Shareholder
Rights Plan (Rights Plan). The Rights Plan contains provisions to protect the
Company's shareholders in the event of an unsolicited offer to acquire the
Company, including offers that do not treat all shareholders equally, the
acquisition in the open market of shares constituting control without offering
fair value to all shareholders, and other coercive, unfair or inadequate
takeover bids and practices that could impair the ability of the Board of
Directors to represent shareholders' interests fully. Pursuant to the Rights
Plan, the Board of Directors declared a dividend of one Share Purchase Right (a
Right) for each outstanding share of the Company's common stock, with
distribution to be made to shareholders of record as of November 24, 1995. The
Rights, which will expire in November 2005, initially will be represented by,
and traded together with, the Company's common stock. The Rights are not
currently exercisable and do not become exercisable unless certain triggering
events occur. Among the triggering events is the acquisition of 20% or more of
the Company's common stock by a person or group of affiliated or associated
persons. Unless previously redeemed, upon the occurrence of one of the specified
triggering events, each Right that is not held by the 20% or more shareholder
will entitle its holder to purchase one share of common stock or, under certain
circumstances, additional shares of common stock at a discounted price.
COMPREHENSIVE INCOME Effective with the first quarter 1998, the Company
adopted Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income." SFAS 130 requires the disclosures of the
components of comprehensive income (net income plus other changes in equity
accounts from non-owner transactions), and accumulated other comprehensive
income (the accumulated total of comprehensive income transactions other than
net income). The Company has elected to disclose these items in its Consolidated
Statements of Shareholders' Equity and has changed the format of those
statements to meet the requirements of SFAS 130.
TREASURY STOCK During 1999, 1998, and 1997, the Company repurchased 6,944,000,
4,555,000, and 4,143,000 of its own common shares through open market
transactions at an aggregate cost of $210,175,000, $161,797,000, and
$129,085,000, respectively. At its January 1999 meeting, the Company's Board of
Directors authorized an additional $250,000,000 in share repurchases, and at
December 31, 1999, approximately $100 million remained available for future
purchases. During 1998 and 1997, the Company reissued 164,000 and 270,000
treasury shares, respectively, in connection with acquisitions (Note 3). In
1998, the Company received 17,000 treasury shares in conjunction with the final
settlement of a prior year acquisition.
In 1993, the Company established the Equifax Inc. Employee Stock Benefits Trust
to fund various employee benefit plans and compensation programs and transferred
6,200,000 treasury shares to the Trust. In 1994, the Company transferred 600,000
treasury shares to another employee benefits trust. Shares held by the trusts
are not considered outstanding for earnings per share calculations until
released to the employee benefit plans or programs. During 1999, 364,354 shares
were used, with 304,183 shares contributed to the Company's U.S. Retirement Plan
and 60,171 shares used for various employee incentive programs. In 1998, 569,655
shares were used for a contribution to the Company's U.S. Retirement Plan, an
employee stock purchase plan, and an employee bonus plan. The shares contributed
to the U.S. Retirement Plan (390,000 shares) were repurchased by the Company at
the current market price and recorded as treasury stock. No shares were used in
1997.
STOCK OPTIONS The Company's shareholders have approved several stock option
plans which provide that qualified and nonqualified options may be granted to
officers and employees at exercise prices not less than market value on the date
of grant. Generally, options vest proportionately over a four-year period and
are exercisable for ten years from grant date. Certain of the plans also provide
for awards of restricted shares of the Company's common stock. At December 31,
1999, there were 1,563,000 shares available for future option grants and
restricted stock awards.
A summary of changes in outstanding options and the related weighted average
exercise price per share is shown in the following table. The number of options
outstanding and their exercise prices were adjusted pursuant to a formula as a
result of the spinoff of ChoicePoint in August 1997. The 1997 grant,
cancellation, and exercise information reflects the impact of this adjustment
back to January 1, 1997, with the adjustment increasing the number of options
outstanding at the beginning of fiscal 1997 by approximately 1,096,000 shares.
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------
(Shares in thousands) Shares Average Shares Average Shares Average
Price Price Price
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of year 7,820 $22.40 6,582 $14.89 7,526 $14.62
Adjustment to beginning balance
due to spinoff -- -- -- -- 1,096 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Granted:
At market price 3,924 $27.62 2,581 $34.90 968 $26.06
In excess of market price -- -- 271 $45.97 119 $35.44
Canceled (591) $34.42 (388) $28.61 (1,434) $15.81
Exercised (590) $13.39 (1,226) $11.20 (1,693) $11.45
- ---------------------------------------------------------------------------------------------------------
Balance, end of year 10,563 $24.14 7,820 $22.40 6,582 $14.89
- ---------------------------------------------------------------------------------------------------------
Exercisable at end of year 5,165 $17.95 4,230 $15.35 4,420 $12.53
=========================================================================================================
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1999 (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------- ------------------------------
Weighted Average Weighted Weighted
Range of Remaining Average Average
Exercise Contractual Exercise Exercise
Prices Shares Life in Years Price Shares Price
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$7.09-$16.26 3,052 3.2 $11.42 2,947 $11.24
17.57-24.44 3,437 8.8 $23.13 1,389 $22.78
24.44-36.87 3,432 6.9 $33.29 580 $28.95
37.00-55.12 642 7.9 $41.12 249 $44.79
- ------------------------------------------------------------------------------------------------------------
10,563 6.5 $24.14 5,165 $17.95
============================================================================================================
</TABLE>
The weighted-average grant-date fair value per share of options granted in 1999,
1998, and 1997 is as follows:
1999 1998 1997
- --------------------------------------------------------------------------------
Grants at market price $9.95 $13.27 $10.05
Grants in excess of market price -- $6.63 $6.17
The fair value of options granted in 1999, 1998, and 1997 is estimated on the
date of grant using the Black-Scholes option-pricing model based on the
following weighted average assumptions:
1999 1998 1997
- --------------------------------------------------------------------------------
Dividend yield 1.4% 1.1% 1.1%
Expected volatility 42.4% 41.9% 41.3%
Risk-free interest rate 5.6% 5.6% 6.3%
Expected life in years 4.0 4.3 4.3
PERFORMANCE SHARE PLAN The Company has a performance share plan for certain
key officers that provides for distribution of the Company's common stock at the
end of three-year measurement periods based on the growth in earnings per share
and certain other criteria. Recipients may elect to receive up to 50% of their
distribution in cash based on the Company's common stock price at the end of the
measurement period. Units outstanding at July 31, 1997 were increased by 14.6%
to reflect the impact of the ChoicePoint spinoff. The total expense under the
plan was a credit to expense of $900,000 in 1999, and a charge to expense of
$4,213,000 in 1998 and $11,022,000 in 1997. At December 31, 1999, 913,482 shares
of common stock were available for future awards under the plan. Units awarded
during the year were 177,000 in 1999, 187,000 in 1998, and 190,000 in 1997.
Award-date fair value per unit was $36.88 in 1999, $32.69 in 1998, and $29.50 in
1997. Units outstanding at December 31 were 443,412 in 1999, 489,753 in 1998,
and 809,600 in 1997.
PRO FORMA INFORMATION In accordance with the provisions of Statement of
Financial Accounting Standards, "Accounting for Stock-Based Compensation" (SFAS
No. 123), the Company has elected to apply APB Opinion No. 25 and related
interpretations in accounting for its stock option and performance share plans.
Accordingly, the Company does not recognize compensation cost in connection with
its stock option plans and records compensation expense related to its
performance share plan based on the current market price of the Company's common
stock and the extent to which performance criteria are being met. If the Company
had elected to recognize compensation cost for these plans based on the fair
value at grant date as prescribed by SFAS No. 123, net income and net income per
share would have been reduced to the pro forma amounts indicated in the table
below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ----------------------- -----------------------
Reported Pro forma Reported Pro forma Reported Pro forma
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $215,857 $201,006 $193,433 $184,690 $183,737 $182,239
=========================================================================================================
Net income per share (basic) $1.57 $1.46 $1.37 $1.31 $1.27 $1.26
=========================================================================================================
Net income per share (diluted) $1.55 $1.44 $1.34 $1.28 $1.24 $1.23
=========================================================================================================
</TABLE>
Because the SFAS No. 123 fair value disclosure requirements apply only to
options and performance share units granted after December 31, 1994, the
resulting pro forma compensation cost may not be representative of that to be
expected in future years.
<PAGE>
8. EMPLOYEE BENEFITS
In 1998, the Company adopted Statement of Financial Accounting Standards No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits."
This statement revises employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or recognition
of these plans.
U.S. RETIREMENT PLAN The Company has a non-contributory qualified retirement
plan covering most U.S. salaried employees. Benefits are primarily a function of
salary and years of service. A reconciliation of the benefit obligation, plan
assets, and funded status of the plan is as follows (in thousands):
<TABLE>
<CAPTION>
Change in benefit obligation 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Benefit obligation at beginning of year $411,689 $388,859
Service cost 5,089 4,351
Interest cost 27,587 27,562
Actuarial (gain) loss (24,085) 21,638
Curtailments (3,912) --
Benefits paid (29,269) (30,721)
- ----------------------------------------------------------------------------------------------------
Benefit obligation at end of year $387,099 $411,689
====================================================================================================
<CAPTION>
Change in plan assets 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Fair value of plan assets at beginning of year $455,727 $435,005
Actual return on plan assets 64,137 33,443
Employer contribution 10,000 18,000
Benefits paid (29,270) (30,721)
- ----------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $500,594 $455,727
====================================================================================================
Funded status $113,495 $44,038
Unrecognized actuarial (gain) loss (39,300) 9,262
Unrecognized prior service cost 512 1,027
- ----------------------------------------------------------------------------------------------------
Prepaid pension cost $74,707 $54,327
====================================================================================================
<CAPTION>
Assumptions used in accounting for the plan are as follows: 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.75% 6.75%
Expected return on plan assets 9.50% 9.50%
Rate of compensation increase 4.25% 4.25%
</TABLE>
Net pension income for the plan includes the following (income) expense
components:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 5,089 $ 4,351 $ 5,266
Interest cost 27,587 27,562 26,735
Expected return on plan assets (40,066) (34,588) (32,835)
Amortization of prior service cost 429 846 1,293
Recognized actuarial loss 407 1,517 --
Curtailment gain (3,827) -- (17,118)
Amortization of transition obligation -- -- (62)
- --------------------------------------------------------------------------------------
Net pension income $(10,381) $ (312) $(16,721)
======================================================================================
</TABLE>
The 1999 curtailment gain of $3,827,000 was recognized in the fourth quarter and
resulted from workforce reductions related to outsourcing certain administrative
and data processing functions and the sale of three risk management offices. Net
pension income in 1997 includes income allocated to discontinued operations
totaling $16,707,000, of which $17,118,000 related to a curtailment gain
resulting from the spinoff of ChoicePoint (see Note 2).
At December 31, 1999, the plan's assets included 1,284,538 shares of the
Company's common stock with a market value of approximately $30,267,000.
FOREIGN RETIREMENT PLANS The Company maintains a defined benefits plan for
most salaried employees in Canada. The aggregate fair market value of the
Canadian plan assets approximates that plan's projected benefit obligation,
which totaled $25,701,000 and $26,021,000 at December 31, 1999 and 1998,
respectively. Prepaid pension cost for this plan was $12,027,000 and $4,191,000
at December 31, 1999 and 1998, respectively. The Company also maintains defined
contribution plans for certain employees in the United Kingdom.
SUPPLEMENTAL RETIREMENT PLAN The Company maintains a supplemental executive
retirement program for certain key employees. The plan, which is unfunded,
provides supplemental retirement payments based on salary and years of service.
The expense for this plan was $3,087,000 in 1999, $4,182,000 in 1998, and
$3,691,000 in 1997. The accrued liability for this plan at December 31, 1999 and
1998 was $26,371,000 and $28,474,000, respectively, and is included in other
long-term liabilities in the accompanying consolidated balance sheets.
<PAGE>
EMPLOYEE RETIREMENT SAVINGS PLAN The Company's retirement savings plans
provide for annual contributions, within specified ranges, determined at the
discretion of the Board of Directors for the benefit of eligible employees in
the form of cash or shares of the Company's common stock. Expense for these
plans was $5,170,000 in 1999, $3,346,000 in 1998, and $3,294,000 in 1997.
POSTRETIREMENT BENEFITS The Company maintains certain unfunded healthcare and
life insurance benefit plans for eligible retired employees. Substantially all
of the Company's U.S. employees may become eligible for these benefits if they
reach normal retirement age while working for the Company and satisfy certain
years of service requirements. The Company accrues the cost of providing these
benefits over the active service period of the employee. Expense for these plans
was $1,480,000 in 1999, $1,969,000 in 1998, and $1,690,000 in 1997. The accrued
liability for these plans at December 31, 1999 and 1998 was $24,386,000 and
$24,680,000, respectively, and is included in other long-term liabilities in the
accompanying consolidated balance sheets.
9. COMMITMENTS AND CONTINGENCIES
Leases The Company's operating leases involve principally office space and
office equipment. Rental expense relating to these leases was $47,376,000 in
1999, $46,087,000 in 1998, and $38,779,000 in 1997.
Future minimum payment obligations for noncancelable operating leases exceeding
one year are as follows as of December 31, 1999:
(In thousands) Amount
- ------------------------------------------------------------------------------
2000 $35,240
2001 27,729
2002 19,476
2003 14,296
2004 12,854
Thereafter 117,915
- ------------------------------------------------------------------------------
$227,510
- ------------------------------------------------------------------------------
AGREEMENT WITH COMPUTER SCIENCES CORPORATION The Company has an agreement with
Computer Sciences Corporation (CSC) under which CSC-owned credit bureaus and
certain CSC affiliate bureaus utilize the Company's credit database service. CSC
and these affiliates retain ownership of their respective credit files and the
revenues generated by their credit reporting activity. The Company receives a
processing fee for maintaining the database and for each report supplied. The
initial term of the agreement expired in July 1998 and was renewable at the
option of CSC for successive ten-year periods. CSC has renewed the agreement for
the ten-year period beginning August 1, 1998. The agreement provides CSC with an
option to sell its credit reporting businesses to the Company and provides the
Company with an option to purchase CSC's credit reporting businesses if CSC does
not elect to renew the agreement or if there is a change in control of CSC while
the agreement is in effect. Both options expire in 2013. As of August 1, 1998,
the option price is determined by appraisal.
On November 25, 1997, CSC exercised an option, also contained in the agreement,
to sell its collection businesses to the Company at a purchase price of
approximately $38 million. Subsequent to November 25, 1997, the Company
determined that the fair value of the business being sold (based on its
estimated discounted cash flows) was less than the contractual purchase price
because a major contract expiring in 1998 would not be renewed. Accordingly, in
the fourth quarter of 1997, the Company recorded a $25,000,000 charge
($14,950,000 after tax, or $.10 per share) to reflect a valuation loss on this
acquisition, with a corresponding $25,000,000 liability included in other
current liabilities. This transaction was finalized in the second quarter of
1998, and the $25,000,000 liability was reclassified to reduce the amount of
goodwill recorded with the acquisition. In October 1998, this business was sold
for approximately the carrying amount of its net assets.
DATA PROCESSING SERVICES AGREEMENTS The Company has separate ten-year
agreements with IBM and EDS which outsource portions of its computer data
processing operations and related functions, and expire in 2008 and 2009,
respectively. The estimated aggregate contractual obligation remaining under
these agreements is approximately $900 million as of December 31, 1999. However,
this amount could be more or less depending on various factors such as the
inflation rate, the introduction of significant new technologies, or changes in
the Company's data processing needs as a result of acquisitions or divestitures.
Under certain circumstances (e.g., a change in control of the Company, or for
the Company's convenience), the Company may terminate either agreement. However,
the agreements provide that the Company must pay a significant termination
charge in the event of such a termination.
CHANGE IN CONTROL AGREEMENTS The Company has agreements with nineteen of its
officers which provide certain severance pay and benefits in the event of a
termination of the officer's employment under certain circumstances following a
"change in control" of the Company. "Change in control" is defined as the
accumulation by any person, entity, or group of 20% or more of the combined
voting power of the Company's voting stock or the occurrence of certain other
specified events. In the event of a "change in control," the Company's
performance share plan provides that all shares designated for future
distribution will become fully vested and payable, subject to the achievement of
certain levels of growth in earnings per share and certain other criteria. At
December 31, 1999, the maximum contingent liability under the agreements and
plans was approximately $22,126,000.
LITIGATION A number of lawsuits seeking damages are brought against the
Company each year, largely as a result of reports issued by the Company. The
Company provides for estimated legal fees and settlements relating to pending
lawsuits. In the opinion of management, the ultimate resolution of these matters
will not have a materially adverse effect on the Company's financial position,
liquidity, or results of operations.
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
<PAGE>
Quarterly operating revenue and operating income by reportable segment (Note 11)
and other summarized quarterly financial data for 1999 and 1998 are as follows
(in thousands, except per share amounts; 1998 amounts have been restated to
conform to the 1999 presentation):
<TABLE>
<CAPTION>
1999 First Second Third Fourth
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue:
North American Information Services $191,992 $196,835 $189,253 $190,366
Payment Services 151,129 163,602 175,084 190,837
Equifax Europe 46,053 47,220 45,038 50,111
Equifax Latin America 29,921 32,520 32,581 30,516
Other 2,409 2,409 2,409 2,409
- -------------------------------------------------------------------------------------------------
$421,504 $442,586 $444,365 $464,239
=================================================================================================
Operating income (loss):
North American Information Services $65,679 $71,696 $71,721 $72,428
Payment Services 28,637 30,607 34,756 41,529
Equifax Europe (1,688) (1,289) 242 4,419
Equifax Latin America 4,187 5,047 7,447 6,273
Other 2,217 2,217 2,217 2,217
- -------------------------------------------------------------------------------------------------
99,032 108,278 116,383 126,866
General Corporate Expense (10,222) (11,398) (4,214) (10,186)
- -------------------------------------------------------------------------------------------------
$88,810 $96,880 $112,169 $116,680
=================================================================================================
Net income $43,901 $52,106 $58,098 $61,772
=================================================================================================
Per common share (basic):
Net income (1) $0.32 $0.38 $0.42 $0.46
=================================================================================================
Per common share (diluted):
Net income $0.31 $0.37 $0.42 $0.45
=================================================================================================
<CAPTION>
1998 First Second Third Fourth
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue:
North American Information Services $180,307 $194,127 $200,355 $194,264
Payment Services 117,963 132,504 142,323 173,331
Equifax Europe 36,746 46,458 50,829 38,212
Equifax Latin America 15,669 17,966 29,498 40,790
Other 2,409 2,409 2,409 2,409
- -------------------------------------------------------------------------------------------------
$353,094 $393,464 $425,414 $449,006
=================================================================================================
Operating income (loss):
North American Information Services $61,864 $68,069 $69,107 $67,549
Payment Services 19,235 23,970 27,510 38,600
Equifax Europe 3,155 4,732 6,724 (17,352)
Equifax Latin America 4,186 4,346 6,046 6,830
Other 2,215 2,217 2,217 2,217
- -------------------------------------------------------------------------------------------------
90,655 103,334 111,604 97,844
General Corporate Expense (9,661) (11,151) (11,957) (5,016)
- -------------------------------------------------------------------------------------------------
$80,994 $92,183 $99,647 $92,828
=================================================================================================
Net income $44,735 $50,632 $53,529 $44,537
=================================================================================================
Per common share (basic):
Net income (1) $0.32 $0.36 $0.38 $0.32
=================================================================================================
Per common share (diluted):
Net income $0.31 $0.35 $0.37 $0.31
=================================================================================================
</TABLE>
1 Quarterly per share amounts do not add to the amounts shown in the
consolidated statements of income due to rounding.
11. SEGMENT INFORMATION
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 131 (SFAS 131), "Disclosures About Segments of an Enterprise and
Related Information." In the first quarter of 1999, the Company changed its
segment reporting structure to more closely match
<PAGE>
management's internal reporting of business operations. Significant changes
included moving the check solutions businesses in Canada and the U.K.
(previously in the North American and Europe segments, respectively) into
Payment Services, and moving the operations of Equifax Secure, which is
developing authentication and digital certificate services, from General
Corporate Expense to the North American segment. The 1998 and 1997 segment data
has been restated to conform with the current year presentation.
The Company's operations are primarily organized by its two major product
groups, information services and payment services. Information services are
organized in three reportable segments based on geographic region (North
America, Europe, and Latin America), while payment services are contained in one
reportable segment. The accounting policies of the segments are the same as
those described in the Company's summary of significant accounting and reporting
policies (Note 1). The Company evaluates the segment performance based on its
operating income before unusual items. Intersegment sales and transfers are not
material.
A description of segment product and services is as follows:
NORTH AMERICAN INFORMATION SERVICES Consumer credit information; credit card
marketing services; risk management and collection services; locate services;
fraud detection and prevention services; mortgage loan origination information;
analytics and consulting; commercial credit reporting in Canada; internet
identity verification and digital certificate services; and through May 1997,
PC-based marketing systems, geo-demographic systems, and mapping tools.
PAYMENT SERVICES Credit and debit card authorization and processing; credit
card marketing enhancement; software products to manage credit card, merchant,
and collection processing; and check guarantee and verification services.
EQUIFAX EUROPE Consumer and commercial credit information and marketing
services, credit scoring and modeling services, and auto lien information.
EQUIFAX LATIN AMERICA Consumer and commercial credit information and other
commercial, financial, and consumer information.
OTHER Lottery services.
Segment information for 1999, 1998, and 1997 is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
Amount % Amount % Amount %
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue:
North American Information $768,446 43 % $769,053 47 % $703,368 51 %
Services
Payment Services 680,652 38 566,121 35 486,534 36
Equifax Europe 188,422 11 172,245 11 137,732 10
Equifax Latin America 125,538 7 103,923 6 28,818 2
Other 9,636 1 9,636 1 9,635 1
- --------------------------------------------------------------------------------------------------------------
$1,772,694 100 % $1,620,978 100 % $1,366,087 100 %
==============================================================================================================
Operating income:
North American Information $281,524 63 % $266,589 66 % $241,262 66 %
Services
Payment Services 135,529 30 109,315 27 85,217 23
Equifax Europe 1,684 - (2,741) - 23,458 6
Equifax Latin America 22,954 5 21,408 5 9,208 3
Other 8,868 2 8,866 2 8,868 2
- --------------------------------------------------------------------------------------------------------------
450,559 100 % 403,437 100 % 368,013 100 %
General Corporate Expense (36,020) (37,785) (44,105)
Valuation Loss (Note 9) -- -- (25,000)
- --------------------------------------------------------------------------------------------------------------
$414,539 $365,652 $298,908
==============================================================================================================
Total assets at December 31:
North American Information $ 612,002 33 % $ 553,809 30 % $ 451,487 38 %
Services
Payment Services 499,646 27 491,821 27 276,573 24
Equifax Europe 297,048 16 326,865 18 223,415 19
Equifax Latin America 277,015 15 341,834 19 115,617 10
Other 3,951 - 3,517 - 4,227 -
Corporate 150,119 9 110,949 6 105,785 9
- --------------------------------------------------------------------------------------------------------------
$1,839,781 100 % $1,828,795 100 % $1,177,104 100 %
==============================================================================================================
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation and amortization:
North American Information Services $45,818 $42,035 $38,563
Payment Services 35,628 28,279 19,552
Equifax Europe 21,405 15,362 9,042
Equifax Latin America 16,430 12,513 4,736
Other 768 768 768
Corporate 5,214 4,868 4,408
- ------------------------------------------------------------------------------------------------------------
$125,263 $103,825 $77,069
============================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Capital expenditures excluding property and equipment and other
assets acquired in acquisitions:
North American Information Services $38,345 $36,618 $30,719
Payment Services 51,052 43,835 26,358
Equifax Europe 15,590 25,028 13,160
Equifax Latin America 10,108 4,874 4,771
Other -- -- --
Corporate 5,776 8,977 11,031
- ------------------------------------------------------------------------------------------------------------
$120,871 $119,332 $86,039
============================================================================================================
</TABLE>
Financial information by geographic area is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
Amount % Amount % Amount %
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue based
on location of customer:
United States $1,233,983 70 % $1,174,733 72 % $1,057,032 78 %
Canada 97,251 5 96,628 6 100,943 7
United Kingdom 198,333 11 184,161 12 166,099 12
Brazil 115,985 7 62,253 4 -- -
Other 127,142 7 103,203 6 42,013 3
- -------------------------------------------------------------------------------------------------------
$1,772,694 100 % $1,620,978 100 % $1,366,087 100 %
- -------------------------------------------------------------------------------------------------------
Long-lived assets at December
31:
United States $557,960 45 % $511,482 39 % $421,559 54 %
Canada 107,687 9 96,840 7 60,521 8
United Kingdom 212,651 17 215,254 16 184,755 24
Brazil 220,298 18 347,355 27 -- --
Other 131,752 11 137,499 11 109,337 14
- -------------------------------------------------------------------------------------------------------
$1,230,348 100 % $1,308,430 100 % $776,172 100 %
- -------------------------------------------------------------------------------------------------------
</TABLE>
