Equifax Ends 2006 with Strong Broad-Based Revenue and EPS Growth for the Quarter and Full Year
Atlanta 31st January 2007 — Equifax Inc. (NYSE: EFX) today announced financial results for the quarter and year ended December 31, 2006. For the fourth quarter of 2006, revenue increased to $390.0 million, up 8 percent compared to the fourth quarter of 2005. Net income rose to $63.1 million, a slight increase from a year ago. Diluted earnings per share (“EPS”) grew to $0.50, up 4 percent from the fourth quarter of 2005.
On a non-GAAP basis, excluding the impact of a charge in the fourth quarter of 2006 related to the company’s organizational realignment and the negative incremental impact of adopting Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS 123R”) on January 1, 2006, net income grew to $67.8 million, up 8 percent, and EPS rose to $0.53, a 12 percent increase from the fourth quarter of 2005. See the reconciliations of non-GAAP financial measures to the comparable GAAP financial measures attached to this earnings release for additional information.
For the full year 2006, revenue increased to $1.55 billion, up 7 percent compared to the full year 2005.
Net income rose to $274.5 million, an 11 percent increase from a year ago. EPS grew to $2.12, up 14 percent from the full year 2005. On a non-GAAP basis, excluding the impact of certain items in 2006, net income grew to $260.5 million, up 6 percent, and EPS rose to $2.01, an 8 percent increase from 2005. When also excluding the incremental impact of adopting SFAS 123R from the non-GAAP measures above, net income increased to $265.7 million, up 8 percent, and EPS rose to $2.05, a 10 percent increase from 2005.
“The performance in the fourth quarter of 2006 reflects the strength and capability of the company, enabling us to deliver strong financial results for the year,” said Richard F. Smith, Equifax Chairman and Chief Executive Officer. “For the year, we met or exceeded the guidance provided in all areas, further underscoring our long-standing commitment to shareholders.”
Fourth Quarter 2006 Highlights
- Double-digit revenue growth in four of five business units contributed to an 8 percent increase in revenue in the fourth quarter of 2006, when compared to the same period in 2005.
- The company completed an organizational realignment, effective January 1, 2007, to better support our strategic objectives. We recorded a $6.4 million severance charge in the quarter related to the elimination of certain positions as part of the realignment.
- Operating margin decreased to 28.2 percent in the fourth quarter of 2006 from 29.3 percent in the fourth quarter of 2005. On a non-GAAP basis, excluding the unfavorable impact of the $6.4 million charge related to our organizational realignment and the negative incremental impact of adopting SFAS 123R, operating margin increased to 30.0 percent in the fourth quarter of 2006.
- Cash provided by operating activities for the fourth quarter of 2006 was $118.9 million, a 12 percent increase when compared to the same period in 2005.
- The company repurchased 1.4 million shares of its common stock on the open market for $50.7 million during the fourth quarter of 2006. At December 31, 2006, $132.6 million remained authorized for future share repurchases.
- The company acquired Austin-Tetra, Inc. on October 6, 2006 for $34.4 million. Austin-Tetra is a leading provider of business-to-business data management and enhancement services to the commercial market. This acquisition is an integral part of our long-term growth strategy, complementing our commercial information business.
North America
Total revenue was $308.9 million in the fourth quarter of 2006, a 6 percent increase from the fourth quarter of 2005. Operating margin for North America was 38.8 percent in the fourth quarter of 2006 compared to 37.8 percent in the fourth quarter of 2005.
- North America Information Services revenue was $203.6 million, up 3 percent compared to the fourth quarter of 2005.
- Marketing Services revenue was $73.6 million, up 11 percent compared to the fourth quarter of 2005.
- Personal Solutions revenue was $31.7 million, up 18 percent compared to the fourth quarter of 2005.
Europe
Total revenue was $41.3 million, up 17 percent compared to the fourth quarter of 2005. In local currency, revenue was up 7 percent when compared to the same period in the prior year. Operating margin was 20.6 percent, down from 25.8 percent in the fourth quarter of 2005.
Latin America
Total revenue was $39.8 million, up 10 percent compared to the fourth quarter of 2005. In local currency, revenue was up 8 percent when compared to the same period in the prior year. Operating margin was 32.8 percent, up from 24.7 percent in the fourth quarter of 2005.
Full Year 2006 Highlights
- Broad-based revenue growth across business units contributed to 7 percent increase in revenue in 2006, when compared to the same period in 2005.
- Operating margin decreased to 28.2 percent for the full year 2006 from 29.2 percent for the full year 2005. On a non-GAAP basis, excluding the impact of certain litigation matters, the $6.4 million severance charge in 2006 related to our organizational realignment, and the negative incremental impact of adopting SFAS 123R, operating margin increased to 29.7 percent for the full year 2006.
- Cash provided by operating activities for the full year 2006 was $374.3 million, an 11 percent increase when compared to the same period in 2005.
- Equifax repurchased 6.0 million shares of its common stock on the open market for $212.7 million during the full year 2006.
- The effective tax rate for the full year 2006 was 34.0 percent, as compared to 36.9 percent for the same period in 2005. The decline was primarily driven by the reversal of certain income tax reserves related to uncertain tax positions due to the expiration of the applicable statute of limitations during the third quarter of 2006, and a non-taxable gain related to a litigation settlement during the second quarter of 2006. On a non-GAAP basis, excluding the favourable impact of the reversal of certain income tax reserves and the litigation settlement, our effective tax rate was 37.6 percent for the full year 2006.
- Total debt declined $52.2 million from December 31, 2005 to December 31, 2006.
Europe
Total revenue was $153.6 million, up 8 percent compared to the full year 2005. In local currency, revenue was up 7 percent when compared to the prior year. Operating margin was 23.1 percent, down from 23.5 percent in the full year 2005.
Latin America
Total revenue was $154.0 million, up 21 percent compared to 2005. In local currency, revenue was up 14 percent when compared to the prior year. Operating margin was 29.8 percent, up from 26.3 percent in the full year 2005.
2007 Annual Outlook
Based on current business trends and management's outlook, Equifax expects consolidated annual revenue growth to be between 6 percent and 10 percent. In 2007, we expect quarterly year-over-year growth to be in the lower portion of this range in the first quarter and to increase over the course of the year as new product and market initiatives yield increasing results. EPS for the full year is expected to be between $2.15 and $2.23, representing growth ranging from 7 percent to 11 percent over our 2006 EPS, excluding certain items, of $2.01. EBITDA, a non-GAAP financial measure defined by us as 4 operating income before depreciation and amortization expense, is expected to be in the range of $555 million to $575 million for the full year. Annual capital expenditures are targeted at $70 million to $100 million. A reconciliation of EBITDA to its most directly comparable GAAP measure and related notes are presented in the attached Q&A.
About Equifax
Equifax Inc. is a global leader in information technology that enables and secures global commerce with consumers and businesses. We are one of the largest sources of consumer and commercial data.
Utilizing our databases, advanced analytics and proprietary enabling technology, we provide real-time answers for our customers. This innovative ability to transform information into intelligence is valued by customers across a wide range of industries and markets. Headquartered in Atlanta, Georgia, Equifax employs approximately 4,900 people in 14 countries throughout North America, Latin America and Europe. Equifax was founded 107 years ago, and today is a member of Standard & Poor's (S&P) 500® Index. Our common stock is traded on the New York Stock Exchange under the symbol EFX. www.equifax.com
Earnings Conference Call and Webcast
Equifax's quarterly teleconference to discuss the fourth quarter and full year earnings release will be held tomorrow at 8:30 a.m. (EDT). The live audio Webcast of the speakers' presentations will be available at www.equifax.com and a replay will be available at the same site shortly after the conclusion of the Webcast. This press release, the financial tables, as well as other supplemental information, are also available at that Web site.
Supplemental Financial Information and Non-GAAP Financial Measures
The Common Questions and Answers (Unaudited) ("Q&A") that are a part of this press release include supplemental financial information which Equifax believes is useful to assess its operating performance. The following financial measures included herein or in the Q&A are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP"): consolidated pretax income, net income and diluted earnings per share, excluding certain items; operating income and operating margin, excluding certain items for our consolidated results and particular business units; effective tax rate, excluding certain items, and EBITDA. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures and related notes are presented in the Q&A. This information can also be found under "Our Company/Investor Center/Non-GAAP/GAAP Financial Measures" on our Web site at www.equifax.com. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
Caution Concerning Forward-Looking Statements
Statements in this press release that relate to Equifax's future plans, objectives, expectations, performance, events and the like may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Future events, risks and uncertainties, individually or in the aggregate, could cause our actual results to differ materially from those expressed or implied in these forward-looking statements. Those factors include, but are not limited to, changes in worldwide and U.S. economic conditions and movements in interest rates that 5 materially impact consumer spending and use of consumer debt, including mortgages; changes in demand for Equifax's products and services; our ability to successfully develop and market new products and services; pricing and other competitive pressures which could result in a loss of customers or a rate of increase or decrease in prices for our services different than past experience; risks relating to illegal third party efforts to access data and our operating systems; risks associated with the integration of acquired technologies, businesses and other investments; changes in laws and regulations governing our business and the application of existing laws, including federal or state responses to identity theft concerns and governing the use of consumer or business credit or marketing information, which could increase our operating costs or reduce the market for our services; disruptions in our business critical systems and operations which could interfere with our ability to deliver services to our customers; third party claims alleging infringement of intellectual property or other proprietary rights or alleging unfair competition or violation of privacy rights; the outcome of pending litigation; and certain other factors discussed under Item 1A, "Risk Factors" in Equifax's 2005 Annual Report on Form 10-K, and in our other filings with the Securities and Exchange Commission. Equifax assumes no obligation to update any forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made.
