Equifax Inc. 2009 Annual Report (10-K) Summary
Business Context and Reporting Period
This filing covers the fiscal year ended December 31, 2009. Equifax Inc. is a global provider of information solutions, including consumer and business credit data, marketing services, and human resources business process outsourcing (TALX). The company operates in five segments: U.S. Consumer Information Solutions (USCIS), International, TALX, North America Personal Solutions, and North America Commercial Solutions. In 2009, 75% of revenue was generated in the U.S.
Key Financial Metrics
| Metric | 2009 | 2008 |
|---|---|---|
| Operating Revenue | $1,824.5 million | $1,935.7 million |
| Operating Income | $407.6 million | $477.2 million |
| Operating Margin | 22.3% | 24.7% |
| Net Income (Attributable to Equifax) | $233.9 million | $272.8 million |
| Diluted EPS | $1.83 | $2.09 |
| Cash from Operating Activities | $418.4 million | $448.1 million |
| Total Debt (Net) | $1,174.1 million | $1,219.3 million |
| Shareholders' Equity | $1,615.0 million | $1,323.5 million |
Material Changes vs. Prior Period
- Revenue Decline: Consolidated revenue decreased 6% ($111.2 million) primarily due to global economic weakness reducing demand for credit-related services and unfavorable foreign exchange rates (which negatively impacted revenue by $48.9 million).
- Segment Performance:
- USCIS: Revenue down 8% due to lower online credit decision volumes.
- International: Revenue down 13% due to foreign currency translation and economic weakness in the U.K. and Latin America.
- TALX: Revenue up 14% ($41.3 million), driven by increased employment verification volumes and tax management services demand due to high unemployment.
- Restructuring: The company recorded $24.8 million in restructuring charges in 2009 (compared to $16.8 million in 2008), primarily for headcount reductions to align costs with lower revenue.
- Acquisitions: Acquired IXI Corporation ($124.0 million) and Rapid Reporting Verification Company ($72.5 million) in late 2009 to enhance data assets and verification services.
Guidance, Outlook, and Risks
- 2010 Outlook: Management anticipates modest GDP growth and slight employment improvement in the second half of 2010. Revenue growth is expected to gradually improve, with operating results stable in the first half and increasing in the second half.
- Tax Rate: The effective tax rate is expected to increase to a range of 37% to 38% in 2010 following the recognition of foreign tax credit benefits in 2009.
- Capital Expenditures: Expected to range between $75 million and $100 million in 2010.
- Key Risks:
- Economic Conditions: Continued weakness could further reduce demand for credit products and increase delinquencies.
- Foreign Currency: A stronger U.S. dollar negatively impacts international revenue and profit.
- Regulatory Compliance: Increasing complexity in data privacy and consumer protection laws (e.g., FCRA, FACT Act) increases compliance costs.
- CSC Option: Computer Sciences Corporation (CSC) holds an option to sell its credit reporting business to Equifax for an estimated $600 million to $675 million, exercisable through 2013.
Investor Verification Checklist
- Goodwill Impairment: Verify the sensitivity of the "The Work Number" reporting unit, which had the smallest fair value excess (approx. 15%) over carrying value during the 2009 impairment test.
- CSC Option Liability: Confirm the current valuation of the potential $600M-$675M acquisition obligation from Computer Sciences Corporation.
- Foreign Exchange Exposure: Assess the impact of a strengthening U.S. dollar on the 25% of revenue generated internationally.
- Pension Funding: Review the funded status of the U.S. Retirement Income Plan (USRIP), which had a projected benefit obligation exceeding assets by $124.2 million at year-end.
- Restructuring Completion: Monitor the execution of cost-cutting measures and the timeline for realizing savings from the $24.8 million in 2009 restructuring charges.