Quarterly Report (10-q)

Date : 07/25/2019 @ 9:35PM
Source : Edgar (US Regulatory)
Stock : Equifax Inc (EFX)
Quote : 140.94  -0.36 (-0.25%) @ 4:19PM

Quarterly Report (10-q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2019
 
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: 001-06605
 
 
  
EQUIFAX INC .
(Exact name of registrant as specified in its charter) 
Georgia
58-0401110
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
 
1550 Peachtree Street
N.W.
Atlanta
Georgia
30309
(Address of principal executive offices)
(Zip Code)
 
404 - 885-8000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common stock, $1.25 par value per share
 
EFX
 
New York Stock Exchange
 
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        No    
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes        No   
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  

On July 12, 2019 , there were 120,884,329 shares of the registrant’s common stock outstanding.



EQUIFAX INC.
 
QUARTERLY REPORT ON FORM 10-Q
 
QUARTER ENDED June 30, 2019
 
INDEX
 
 
 
Page
 
 
 
 
 
 
 

 
 
 





2


FORWARD-LOOKING STATEMENTS
 
This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” “may” and similar expressions identify forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events, plans or developments that we expect or anticipate will occur in the future, including statements relating to future operating results and statements related to the 2017 cybersecurity incident, possible outcomes of legal proceedings and investigations related to the 2017 cybersecurity incident, the ultimate amount and timing of payments the Company may be required to make in connection with the Consumer Settlement (as defined below in Part II, "Item 1. Legal Proceedings"), and improvements in our information technology and data security infrastructure, including as part of our technology transformation, and similar statements about our business plans, are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company’s historical experience and our present expectations or projections, including without limitation our expectation regarding the Company’s outlook, long-term organic and inorganic growth, and expected increases in costs related to the 2017 cybersecurity incident referenced below in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Overview—Business Environment and Company Outlook.” These risks and uncertainties include, but are not limited to, those described in Part I, “Item 1A. Risk Factors,” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2018 , in Part II, “Item 1A. Risk Factors” and elsewhere in this report, and those described from time to time in our future reports filed with the Securities and Exchange Commission. As a result of such risks and uncertainties, we urge you not to place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 



3


PART I.  FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)
 
EQUIFAX INC.
 
CONSOLIDATED STATEMENTS OF INCOME  
 
(Unaudited)

 
 
Three Months Ended 
June 30,
 
 
2019
 
2018
(In millions, except per share amounts)
 
 
Operating revenue
 
$
880.0

 
$
876.9

Operating expenses:
 
 

 
 

Cost of services (exclusive of depreciation and amortization below)
 
376.9

 
348.6

Selling, general and administrative expenses
 
306.8

 
257.5

Depreciation and amortization
 
82.5

 
77.2

Total operating expenses
 
766.2

 
683.3

Operating income
 
113.8

 
193.6

Interest expense
 
(27.6
)
 
(26.4
)
Other income, net
 
2.8

 
2.2

Consolidated income before income taxes
 
89.0

 
169.4

Provision for income taxes
 
(20.7
)
 
(23.3
)
Consolidated net income
 
68.3

 
146.1

Less: Net income attributable to noncontrolling interests including redeemable noncontrolling interests
 
(1.5
)
 
(1.3
)
Net income attributable to Equifax
 
$
66.8

 
$
144.8

Basic earnings per common share:
 
 

 
 

Net income attributable to Equifax
 
$
0.55

 
$
1.20

Weighted-average shares used in computing basic earnings per share
 
120.8

 
120.3

Diluted earnings per common share:
 
 

 
 

Net income attributable to Equifax
 
$
0.55

 
$
1.19

Weighted-average shares used in computing diluted earnings per share
 
122.0

 
121.4

Dividends per common share
 
$
0.39

 
$
0.39




See Notes to Consolidated Financial Statements.


4





EQUIFAX INC.
 
CONSOLIDATED STATEMENTS OF (LOSS) INCOME  
 
(Unaudited)

 
 
Six Months Ended 
June 30,
 
 
2019
 
2018
(In millions, except per share amounts)
 
 
Operating revenue
 
$
1,726.1

 
$
1,742.6

Operating expenses:
 
 
 
 
Cost of services (exclusive of depreciation and amortization below)
 
764.4

 
691.5

Selling, general and administrative expenses
 
1,305.6

 
558.0

Depreciation and amortization
 
160.1

 
155.3

Total operating expenses
 
2,230.1

 
1,404.8

Operating (loss) income
 
(504.0
)
 
337.8

Interest expense
 
(54.3
)
 
(50.3
)
Other income, net
 
4.9

 
5.1

Consolidated (loss) income before income taxes
 
(553.4
)
 
292.6

Benefit (provision) for income taxes
 
67.3

 
(52.6
)
Consolidated net (loss) income
 
(486.1
)
 
240.0

Less: Net income attributable to noncontrolling interests including redeemable noncontrolling interests
 
(3.0
)
 
(4.2
)
Net (loss) income attributable to Equifax
 
$
(489.1
)
 
$
235.8

Basic earnings per common share:
 
 
 
 
Net (loss) income attributable to Equifax
 
$
(4.05
)
 
$
1.96

Weighted-average shares used in computing basic earnings per share
 
120.8

 
120.3

Diluted earnings per common share:
 
 
 
 
Net (loss) income attributable to Equifax
 
$
(4.02
)
 
$
1.94

Weighted-average shares used in computing diluted earnings per share
 
121.8

 
121.4

Dividends per common share
 
$
0.78

 
$
0.78




See Notes to Consolidated Financial Statements.


5

EQUIFAX INC.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
 
(Unaudited)
 
 
 
Three Months Ended June 30,
 
 
2019
 
2018
 
 
Equifax
Shareholders
 
Noncontrolling
Interests
 
Total
 
Equifax
Shareholders
 
Noncontrolling
Interests
 
Total
 
 
(In millions)
Net income
 
$
66.8

 
$
1.5

 
$
68.3

 
$
144.8

 
$
1.3

 
$
146.1

Other comprehensive (loss) income:
 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency translation adjustment
 
(57.1
)
 
(1.0
)
 
(58.1
)
 
(159.2
)
 
5.3

 
(153.9
)
Change in unrecognized prior service cost and actuarial losses related to our pension and other postretirement benefit plans, net
 
3.0

 

 
3.0

 
3.9

 

 
3.9

Comprehensive (loss) income
 
$
12.7

 
$
0.5

 
$
13.2

 
$
(10.5
)
 
$
6.6

 
$
(3.9
)


 
 
Six Months Ended June 30,
 
 
2019
 
2018
 
 
Equifax
Shareholders
 
Noncontrolling
Interests
 
Total
 
Equifax
Shareholders
 
Noncontrolling
Interests
 
Total
 
 
(In millions)
Net income
 
$
(489.1
)
 
$
3.0

 
$
(486.1
)
 
$
235.8

 
$
4.2

 
$
240.0

Other comprehensive (loss) income:
 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency translation adjustment
 
(19.8
)
 
(0.2
)
 
(20.0
)
 
(117.9
)
 
6.9

 
(111.0
)
Change in unrecognized prior service cost and actuarial losses related to our pension and other postretirement benefit plans, net
 
6.0

 

 
6.0

 
7.9

 

 
7.9

Change in cumulative loss from cash flow hedging transactions, net
 
0.1

 

 
0.1

 

 

 

Comprehensive (loss) income
 
$
(502.8
)
 
$
2.8

 
$
(500.0
)
 
$
125.8

 
$
11.1

 
$
136.9




See Notes to Consolidated Financial Statements.

6

EQUIFAX INC.


CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
June 30, 2019
 
December 31, 2018
(In millions, except par values)
 
 
 
 
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
135.8

 
$
223.6

Trade accounts receivable, net of allowance for doubtful accounts of $13.3 and $10.9 at June 30, 2019 and December 31, 2018, respectively
 
502.6

 
469.1

Prepaid expenses
 
97.9

 
100.0

Other current assets
 
77.5

 
109.6

Total current assets
 
813.8

 
902.3

Property and equipment:
 
 

 
 

Capitalized internal-use software and system costs
 
837.1

 
684.1

Data processing equipment and furniture
 
342.4

 
344.6

Land, buildings and improvements
 
231.2

 
216.1

Total property and equipment
 
1,410.7

 
1,244.8

Less accumulated depreciation and amortization
 
(538.2
)
 
(480.0
)
Total property and equipment, net
 
872.5

 
764.8

Goodwill
 
4,282.5

 
4,129.7

Indefinite-lived intangible assets
 
94.9

 
94.8

Purchased intangible assets, net
 
1,104.1

 
1,099.2

Other assets, net
 
305.7

 
162.4

Total assets
 
$
7,473.5

 
$
7,153.2

LIABILITIES AND EQUITY
 
 

 
 
Current liabilities:
 
 

 
 

Short-term debt and current maturities of long-term debt
 
$
32.3

 
$
4.9

Accounts payable
 
156.9

 
175.7

Accrued expenses
 
213.4

 
213.2

Accrued salaries and bonuses
 
98.6

 
131.0

Deferred revenue
 
97.1

 
98.0

Other current liabilities
 
899.6

 
204.0

Total current liabilities
 
1,497.9

 
826.8

Long-term debt
 
2,833.3

 
2,630.6

Deferred income tax liabilities, net
 
249.9

 
316.2

Long-term pension and other postretirement benefit liabilities
 
134.4

 
139.3

Other long-term liabilities
 
170.1

 
84.6

Total liabilities
 
4,885.6

 
3,997.5

Commitments and Contingencies (see Note 6)
 


 


Equifax shareholders' equity:
 
 
 
 

Preferred stock, $0.01 par value: Authorized shares - 10.0; Issued shares - none
 

 

Common stock, $1.25 par value: Authorized shares - 300.0;
Issued shares - 189.3 at June 30, 2019 and December 31, 2018;
Outstanding shares - 120.9 and 120.6 at June 30, 2019 and December 31, 2018, respectively
 
236.6

 
236.6

Paid-in capital
 
1,381.5

 
1,356.6

Retained earnings
 
4,135.5

 
4,717.8

Accumulated other comprehensive loss
 
(640.0
)
 
(626.3
)
Treasury stock, at cost, 67.8 shares and 68.1 shares at June 30, 2019 and December 31, 2018, respectively
 
(2,564.3
)
 
(2,571.0
)
Stock held by employee benefit trusts, at cost, 0.6 shares at June 30, 2019 and December 31, 2018
 
(5.9
)
 
(5.9
)
Total Equifax shareholders’ equity
 
2,543.4

 
3,107.8

Noncontrolling interests including redeemable noncontrolling interests
 
44.5

 
47.9

Total equity
 
$
2,587.9

 
$
3,155.7

Total liabilities and equity
 
7,473.5

 
7,153.2


 See Notes to Consolidated Financial Statements.

7

EQUIFAX INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Unaudited)

 
 
Six Months Ended June 30,
 
 
2019
 
2018
 
 
(In millions)
Operating activities:
 
 

 
 

Consolidated net (loss) income
 
$
(486.1
)
 
$
240.0

Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
163.1

 
157.5

Stock-based compensation expense
 
29.8

 
20.7

Deferred income taxes
 
(84.6
)
 
(10.0
)
Changes in assets and liabilities, excluding effects of acquisitions:
 
 
 
 

Accounts receivable, net
 
(30.2
)
 
(36.3
)
Other assets, current and long-term
 
34.8

 
64.5

Current and long term liabilities, excluding debt
 
621.2

 
(81.6
)
Cash provided by operating activities
 
248.0

 
354.8

Investing activities:
 
 
 
 

Capital expenditures
 
(208.5
)
 
(118.7
)
Acquisitions, net of cash acquired
 
(234.8
)
 
(30.7
)
Investment in unconsolidated affiliates, net
 
(25.0
)
 

Cash used in investing activities
 
(468.3
)
 
(149.4
)
Financing activities:
 
 
 
 

Net short-term borrowings (repayments)
 
27.2

 
(960.2
)
Payments on long-term debt
 
(50.0
)
 
(100.0
)
Borrowings on long-term debt
 
250.0

 
994.8

Dividends paid to Equifax shareholders
 
(94.2
)
 
(93.9
)
Dividends paid to noncontrolling interests
 
(4.7
)
 
(8.7
)
Proceeds from exercise of stock options
 
6.1

 
5.7

Payment of taxes related to settlement of equity awards
 
(4.6
)
 
(12.6
)
Purchase of redeemable noncontrolling interests
 

 
(21.3
)
Debt issuance costs
 

 
(7.3
)
Payment of contingent consideration
 

 
(1.5
)
Cash provided by (used in) financing activities
 
129.8

 
(205.0
)
Effect of foreign currency exchange rates on cash and cash equivalents
 
2.7

 
(9.4
)
Decrease in cash and cash equivalents
 
(87.8
)
 
(9.0
)
Cash and cash equivalents, beginning of period
 
223.6

 
336.4

Cash and cash equivalents, end of period
 
$
135.8

 
$
327.4

 
See Notes to Consolidated Financial Statements.

8

EQUIFAX INC.


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND OTHER COMPREHENSIVE (LOSS) INCOME
 
(Unaudited)

For the Three Months Ended June 30, 2019
 
 
 
Equifax Shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
Stock
Held By Employee Benefits Trusts
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
Outstanding
 
Amount
 
Paid-In
Capital
 
Retained
Earnings
 
 
Treasury
Stock
 
 
Noncontrolling
Interests
 
Total
Equity
 
 
(In millions, except per share amounts)
Balance, March 31, 2019
 
120.8

 
$
236.6

 
$
1,369.4

 
$
4,115.4

 
$
(585.9
)
 
$
(2,567.9
)
 
$
(5.9
)
 
$
49.2

 
$
2,610.9

Net income
 

 

 

 
66.8

 

 

 

 
1.5

 
68.3

Other comprehensive (loss)
 

 

 

 


 
(54.1
)
 

 

 
(1.0
)
 
(55.1
)
Shares issued under stock and benefit plans, net of minimum tax withholdings
 
0.1

 

 
0.1

 

 

 
3.6

 

 

 
3.7

Cash dividends ($0.39 per share)
 

 

 

 
(47.3
)
 

 

 

 

 
(47.3
)
Dividends paid to employee benefits trusts
 

 

 
0.2

 

 

 

 

 

 
0.2

Stock-based compensation expense
 

 

 
11.8

 

 

 

 

 

 
11.8

Redeemable noncontrolling interest adjustment
 

 

 

 
0.6

 

 

 

 
(0.6
)
 

Dividends paid to noncontrolling interests
 

 

 

 

 

 

 

 
(4.6
)
 
(4.6
)
Balance, June 30, 2019
 
120.9

 
$
236.6

 
$
1,381.5

 
$
4,135.5

 
$
(640.0
)
 
$
(2,564.3
)
 
$
(5.9
)
 
$
44.5

 
$
2,587.9


At June 30, 2019 , $590.1 million was available for future purchases of common stock under our share repurchase authorization.

For the Three Months Ended June 30, 2018

 
 
Equifax Shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
Stock
Held By Employee Benefits Trusts
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
Outstanding
 
Amount
 
Paid-In
Capital
 
Retained
Earnings
 
 
Treasury
Stock
 
 
Noncontrolling
Interests
 
Total
Equity
 
 
(In millions, except per share amounts)
Balance, March 31, 2018
 
120.3

 
$
236.6

 
$
1,336.6

 
$
4,653.1

 
$
(366.8
)
 
$
(2,578.9
)
 
$
(5.9
)
 
$
62.2

 
$
3,336.9

Net income
 

 

 

 
144.8

 

 

 

 
1.3

 
146.1

Other comprehensive (loss) income
 

 

 

 

 
(147.2
)
 

 

 
5.2

 
(142.0
)
Shares issued under stock and benefit plans, net of minimum tax withholdings
 
0.1

 

 
(1.4
)
 

 

 
4.7

 

 

 
3.3

Cash dividends ($0.39 per share)
 

 

 

 
(47.1
)
 

 

 

 

 
(47.1
)
Dividends paid to employee benefits trusts
 

 

 
0.2

 

 

 

 

 

 
0.2

Stock-based compensation expense
 

 

 
7.9

 

 

 

 

 

 
7.9

Purchases of redeemable noncontrolling interests
 

 

 
(3.4
)
 

 
(8.0
)
 

 

 
(7.8
)
 
(19.2
)
Redeemable noncontrolling interest adjustment
 

 

 

 
(2.5
)
 

 

 

 
2.5

 

Dividends paid to noncontrolling interests
 

 

 

 

 

 

 

 
(6.3
)
 
(6.3
)
Other
 

 

 
(0.1
)
 

 

 

 

 

 
(0.1
)
Balance, June 30, 2018
 
120.4

 
$
236.6

 
$
1,339.8

 
$
4,748.3

 
$
(522.0
)
 
$
(2,574.2
)
 
$
(5.9
)
 
$
57.1

 
$
3,279.7




9

EQUIFAX INC.



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND OTHER COMPREHENSIVE (LOSS) INCOME
 
(Unaudited)

For the Six Months Ended June 30, 2019

 
 
Equifax Shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
Stock
Held By Employee Benefits Trusts
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
Outstanding
 
Amount
 
Paid-In
Capital
 
Retained
Earnings
 
 
Treasury
Stock
 
 
Noncontrolling
Interests
 
Total
Equity
 
 
(In millions, except per share amounts)
Balance, December 31, 2018
 
120.6

 
$
236.6

 
$
1,356.6

 
$
4,717.8

 
$
(626.3
)
 
$
(2,571.0
)
 
$
(5.9
)
 
$
47.9

 
$
3,155.7

Net (loss) income
 

 

 

 
(489.1
)
 

 

 

 
3.0

 
(486.1
)
Other comprehensive (loss)
 

 

 

 
 
 
(13.7
)
 

 

 
(0.2
)
 
(13.9
)
Shares issued under stock and benefit plans, net of minimum tax withholdings
 
0.3

 

 
(5.4
)
 

 

 
6.7

 

 

 
1.3

Cash dividends ($0.78 per share)
 

 

 

 
(94.7
)
 

 

 

 

 
(94.7
)
Dividends paid to employee benefits trusts
 

 

 
0.5

 

 

 

 

 

 
0.5

Stock-based compensation expense
 

 

 
29.8

 

 

 

 

 

 
29.8

Redeemable noncontrolling interest adjustment
 

 

 

 
1.5

 

 

 

 
(1.5
)
 

Dividends paid to noncontrolling interests
 

 

 

 

 

 

 

 
(4.7
)
 
(4.7
)
Balance, June 30, 2019
 
120.9

 
$
236.6

 
$
1,381.5

 
$
4,135.5

 
$
(640.0
)
 
$
(2,564.3
)
 
$
(5.9
)
 
$
44.5

 
$
2,587.9


At June 30, 2019 , $590.1 million was available for future purchases of common stock under our share repurchase authorization.

For the Six Months Ended June 30, 2018

 
 
Equifax Shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
Stock
Held By Employee Benefits Trusts
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
Outstanding
 
Amount
 
Paid-In
Capital
 
Retained
Earnings
 
 
Treasury
Stock
 
 
Noncontrolling
Interests
 
Total
Equity
 
 
(In millions, except per share amounts)
Balance, December 31, 2017
 
120.1

 
$
236.6

 
$
1,332.7

 
$
4,600.6

 
$
(412.0
)
 
$
(2,577.6
)
 
$
(5.9
)
 
$
64.6

 
$
3,239.0

Net income
 

 

 

 
235.8

 

 

 

 
4.2


240.0

Other comprehensive (loss) income
 

 

 

 

 
(102.0
)
 

 

 
6.9

 
(95.1
)
Shares issued under stock and benefit plans, net of minimum tax withholdings
 
0.3

 

 
(10.3
)
 

 

 
3.4

 

 

 
(6.9
)
Cash dividends ($0.78 per share)
 

 

 

 
(94.3
)
 

 

 

 

 
(94.3
)
Dividends paid to employee benefits trusts
 

 

 
0.4

 

 

 

 

 

 
0.4

Stock-based compensation expense
 

 

 
20.7

 

 

 

 

 

 
20.7

Purchases of redeemable noncontrolling interests
 

 

 
(3.7
)
 

 
(8.0
)
 

 

 
(7.9
)
 
(19.6
)
Redeemable noncontrolling interest adjustment
 

 

 

 
2.0

 

 

 

 
(2.0
)
 

Dividends paid to noncontrolling interests
 

 

 

 

 

 

 

 
(8.7
)
 
(8.7
)
Cumulative adjustment from change in accounting principle
 

 

 

 
4.2

 

 

 

 

 
4.2

Balance, June 30, 2018
 
120.4

 
$
236.6

 
$
1,339.8

 
$
4,748.3

 
$
(522.0
)
 
$
(2,574.2
)
 
$
(5.9
)
 
$
57.1

 
$
3,279.7



10






Accumulated Other Comprehensive Loss consists of the following components:
 
 
 
June 30, 2019
 
December 31, 2018
 
 
(In millions)
Foreign currency translation              
 
$
(347.8
)
 
$
(328.0
)
Unrecognized actuarial losses and prior service cost related to our pension and other postretirement benefit plans, net of accumulated tax of $91.7 and $93.1 at June 30, 2019 and December 31, 2018, respectively
 
(291.1
)
 
(297.1
)
Cash flow hedging transactions, net of accumulated tax of $0.7 at June 30, 2019 and December 31, 2018, respectively
 
(1.1
)
 
(1.2
)
Accumulated other comprehensive loss
 
$
(640.0
)
 
$
(626.3
)
 

See Notes to Consolidated Financial Statements.

11


EQUIFAX INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
June 30, 2019
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
As used herein, the terms Equifax, the Company, we, our and us refer to Equifax Inc., a Georgia corporation, and its consolidated subsidiaries as a combined entity, except where it is clear that the terms mean only Equifax Inc.

Nature of Operations.  We collect, organize and manage various types of financial, demographic, employment and marketing information. Our products and services enable businesses to make credit and service decisions, manage their portfolio risk, automate or outsource certain payroll-related, tax and human resources business processes, and develop marketing strategies concerning consumers and commercial enterprises. We serve customers across a wide range of industries, including the financial services, mortgage, retail, telecommunications, utilities, automotive, brokerage, healthcare and insurance industries, as well as government agencies. We also enable consumers to manage and protect their financial health through a portfolio of products offered directly to consumers. As of June 30, 2019 , we operated in the following countries: Argentina, Australia, Canada, Chile, Costa Rica, Ecuador, El Salvador, Honduras, India, Ireland, Mexico, New Zealand, Paraguay, Peru, Portugal, Spain, the United Kingdom, or U.K., Uruguay and the United States of America, or U.S. We also offer Equifax branded credit services in India and Russia through joint ventures, have investments in consumer and/or commercial credit information companies through joint ventures in Cambodia, Malaysia, Singapore and the United Arab Emirates, have an investment in a consumer and commercial credit information company in Brazil, and have an investment in an identity authentication company in Canada.
 
We develop, maintain and enhance secured proprietary information databases through the compilation of consumer specific data, including credit, income, employment, asset, liquidity, net worth and spending activity, and business data, including credit and business demographics, that we obtain from a variety of sources, such as credit granting institutions, and income and tax information primarily from large to mid-sized companies in the U.S. We process this information utilizing our proprietary information management systems. We also provide information, technology and services to support debt collections and recovery management.
 
Basis of Presentation.  The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, the instructions to Form 10-Q and applicable sections of SEC Regulation S-X. To understand our complete financial position and results, as defined by GAAP, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2018 (“ 2018 Form 10-K”).
 
Our unaudited Consolidated Financial Statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the periods presented and are of a normal recurring nature.
 
Earnings Per Share.  Our basic earnings per share, or EPS, is calculated as net income attributable to Equifax 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 net income (loss) amounts used in both our basic and diluted EPS calculations are the same. A reconciliation of the weighted-average outstanding shares used in the two calculations is as follows: 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(In millions)
Weighted-average shares outstanding (basic)
 
120.8

 
120.3

 
120.8

 
120.3

Effect of dilutive securities:
 
 
 
 

 
 
 
 
Stock options and restricted stock units
 
1.2

 
1.1

 
1.0

 
1.1

Weighted-average shares outstanding (diluted)
 
122.0

 
121.4

 
121.8

 
121.4

 

For the three months ended June 30, 2019 and 2018 , stock options that were anti-dilutive were 1.2 million and 0.7 million , respectively. For the six months ended June 30, 2019 and 2018 , stock options that were anti-dilutive were 1.3 million and 0.6 million , respectively. 
 

12




Financial Instruments.  Our financial instruments consist of cash and cash equivalents, accounts and notes receivable, accounts payable and short- and long-term debt. The carrying amounts of these items, other than long-term debt, approximate their fair market values due to the short-term nature of these instruments. The fair value of our fixed-rate debt is determined using Level 2 inputs such as quoted market prices for similar publicly traded instruments, and for non-publicly traded instruments through valuation techniques involving observable inputs based on the specific characteristics of the debt instrument. As of June 30, 2019 and December 31, 2018 , the fair value of our long-term debt, including the current portion, was $3.0 billion and $2.6 billion , respectively, compared to its carrying value of $2.8 billion and $2.6 billion , respectively.
 
Fair Value Measurements.  Fair value is determined based on the assumptions marketplace participants use in pricing the asset or liability. We use a three level fair value hierarchy to prioritize the inputs used in valuation techniques between observable inputs that reflect quoted prices in active markets, inputs other than quoted prices with observable market data and unobservable data (e.g., a company’s own data).
 
The following table presents items measured at fair value on a recurring basis:
 
 
 
 
Fair Value Measurements at Reporting Date Using:
Description
 
Fair Value of Assets
(Liabilities) at
June 30, 2019
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
(In millions)
Deferred Compensation Plan Assets (1)
 
$
36.1

 
$
36.1

 
$

 
$

Deferred Compensation Plan Liability (1)
 
(36.1
)
 

 
(36.1
)
 

Total
 
$

 
$
36.1

 
$
(36.1
)
 
$

 
(1)        We maintain deferred compensation plans that allow for certain management employees to defer the receipt of compensation (such as salary, incentive compensation and commissions) until a later date based on the terms of the plan. The liability representing benefits accrued for plan participants is valued at the quoted market prices of the participants’ investment elections. The asset consists of mutual funds reflective of the participants’ investment selections and is valued at daily quoted market prices.
    
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis. We completed various acquisitions during the six months ended June 30, 2019 and the year ended December 31, 2018 . The values of net assets acquired and the resulting goodwill were recorded at fair value using Level 3 inputs. The majority of the related current assets acquired and liabilities assumed were recorded at their carrying values as of the date of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and definite-lived intangible assets acquired in these acquisitions were internally or externally estimated primarily based on the income approach. The income approach estimates fair value based on the present value of the cash flows that the assets are expected to generate in the future. We developed internal estimates for the expected cash flows and discount rates used in the present value calculations.

Other Current Assets. Other current assets on our Consolidated Balance Sheets represent amounts receivable from tax authorities. Other current assets also include amounts in specifically designated accounts that hold the funds that are due to customers from our debt collection and recovery management services. As of June 30, 2019 , these assets were approximately $17.8 million , with a corresponding balance in other current liabilities. These amounts are restricted as to their current use, and will be released according to the specific customer agreements.
 
Other Assets.  Other assets on our Consolidated Balance Sheets primarily represent the long-term portion of the Company’s operating lease right-of-use assets, our investment in unconsolidated affiliates, employee benefit trust assets, assets related to life insurance policies covering certain officers of the Company, and the long-term portion of the Company’s right to consideration in exchange for goods or services that the entity has transferred to a customer (contract assets).
 
Other Current Liabilities. Other current liabilities on our Consolidated Balance Sheets consist of the current portion of operating lease liabilities and various accrued liabilities such as costs related to the 2017 cybersecurity incident as described more fully in Note 6, interest expense, accrued payroll and other taxes, and accrued legal expenses. Other current liabilities also include corresponding amounts of other current assets related to amounts in specifically designated accounts that hold the funds that are due to customers from our debt collection and recovery management services. As of June 30, 2019 , these funds were approximately $17.8 million . These amounts are restricted as to their current use and will be released according to the specific customer agreements.


13




Change in Accounting Principle. In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” This standard requires lessees to record most leases on their balance sheets and expenses on their income statements in a manner similar to current lease accounting. The guidance also eliminates current real estate-specific provisions for all entities. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. All entities will classify leases to determine how to recognize lease-related revenue and expense. The guidance is effective for fiscal years and interim reporting periods beginning after December 15, 2018.

In July 2018, the FASB approved an additional optional transition method by allowing entities to initially apply the new lease standard at the adoption date. As of January 1, 2019, we adopted the standard using this optional transition method. The adoption of the standard did not have a material impact on our consolidated financial statements with the most significant impact being the recognition of right-of-use assets and lease liabilities for operating leases in other assets, net and other current and long-term liabilities, respectively, in our Consolidated Balance Sheets. We have applied the available package of practical expedients, as well as the election not to apply recognition and measurement requirements to short-term leases. We have implemented internal controls to enable preparation of financial information on adoption. See Note 3 for further details.
Recent Accounting Pronouncements.  Goodwill. In January 2017, the FASB issued ASU 2017-04 “Simplifying the Test for Goodwill Impairment (Topic 350).” This standard eliminates Step 2 from the current goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted. This guidance must be applied on a prospective basis. We do not expect the adoption of this guidance to have a material impact on our financial position, results of operations or cash flows.

Credit Losses . In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019. We do not expect the adoption of the standard to have a material impact on our consolidated financial statements.

Fair Value Measurements . In August 2018, the FASB issued ASU No. 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” which eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods therein, but entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The adoption of this standard will have an impact on our disclosures and will not materially impact our consolidated financial statements.

Retirement Benefits . In August 2018, the FASB issued ASU No. 2018-14 “Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans” which requires minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020 and early adoption is permitted. The adoption of this standard will have an impact on our disclosures and will not materially impact our consolidated financial statements.

Cloud Computing Arrangements . In August 2018, the FASB issued ASU No. 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU 2018-15 requires that issuers follow the internal-use software guidance in Accounting Standards Codification (ASC) 350-40 to determine which costs to capitalize as assets or expense as incurred. The ASC 350-40 guidance requires that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary project and post-implementation stages be expensed as they are incurred. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods therein. We are evaluating the impact of the adoption of the standard on our consolidated financial statements.


14





2. REVENUE

Revenue Recognition. Based on the information that management reviews internally for evaluating operating segment performance and nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors, we disaggregate revenue as follows:
 
 
Three Months Ended June 30,
 
Change
 
Six Months Ended June 30,
 
Change
Consolidated Operating Revenue
 
2019
 
2018
 
$
 
%
 
2019
 
2018
 
$
 
%
 
 
(In millions)
Online Information Solutions
 
$
246.1

 
$
224.1

 
$
22.0

 
10
 %
 
$
463.8

 
$
443.8

 
$
20.0

 
5
 %
Mortgage Solutions
 
35.6

 
45.5

 
$
(9.9
)
 
(22
)%
 
67.8

 
87.2

 
$
(19.4
)
 
(22
)%
Financial Marketing Services
 
51.0

 
55.0

 
$
(4.0
)
 
(7
)%
 
99.4

 
100.5

 
$
(1.1
)
 
(1
)%
Total U.S. Information Solutions
 
332.7

 
324.6

 
$
8.1

 
2
 %
 
631.0

 
631.5

 
$
(0.5
)
 
 %
Asia Pacific
 
75.9

 
86.1

 
$
(10.2
)
 
(12
)%
 
149.0

 
168.5

 
$
(19.5
)
 
(12
)%
Europe
 
66.0

 
72.3

 
$
(6.3
)
 
(9
)%
 
134.5

 
143.0

 
$
(8.5
)
 
(6
)%
Latin America
 
47.6

 
54.2

 
$
(6.6
)
 
(12
)%
 
94.8

 
110.1

 
$
(15.3
)
 
(14
)%
Canada
 
39.5

 
37.7

 
$
1.8

 
5
 %
 
75.8

 
73.2

 
$
2.6

 
4
 %
Total International
 
229.0

 
250.3

 
$
(21.3
)
 
(9
)%
 
454.1

 
494.8

 
$
(40.7
)
 
(8
)%
Verification Services
 
172.3

 
149.3

 
$
23.0

 
15
 %
 
321.2

 
277.7

 
$
43.5

 
16
 %
Employer Services
 
57.8

 
58.3

 
$
(0.5
)
 
(1
)%
 
137.4

 
141.0

 
$
(3.6
)
 
(3
)%
Total Workforce Solutions
 
230.1

 
207.6

 
$
22.5

 
11
 %
 
458.6

 
418.7

 
$
39.9

 
10
 %
Global Consumer Solutions
 
88.2

 
94.4

 
$
(6.2
)
 
(7
)%
 
182.4

 
197.6

 
$
(15.2
)
 
(8
)%
Total operating revenue
 
$
880.0

 
$
876.9

 
$
3.1

 
 %
 
$
1,726.1

 
$
1,742.6

 
$
(16.5
)
 
(1
)%


Remaining Performance Obligation – We have elected to disclose only the remaining performance obligations for those contracts with an expected duration of greater than one year and do not disclose the value of remaining performance obligations for contracts in which we recognize revenue at the amount to which we have the right to invoice. We expect to recognize as revenue the following amounts related to our remaining performance obligations as of June 30, 2019 inclusive of foreign exchange impact:
Performance Obligation
 
Amount
 
 
(In millions)
Less than 1 year
 
$
35.5

1 to 3 years
 
50.1

3 to 5 years
 
23.5

Thereafter
 
52.1

Total remaining performance obligation
 
$
161.2


    
3. LEASES

On January 1, 2019, we adopted ASU 2016-02 using the optional transition method resulting in a cumulative-effect adjustment to our Consolidated Balance Sheets. Comparative financial statements of prior periods have not been adjusted to apply the new method retrospectively. The new method of accounting was applied only to leases that have ongoing minimum lease commitments after January 1, 2019, excluding short-term leases.


15





The effect of the adoption on key financial statement line items for the six months ended June 30, 2019 is as follows:
 
 
June 30, 2019
 
Change
Balance Sheet
 
Prior to ASU 2016-02 adoption
 
As reported under ASU 2016-02
 
$
 
%
 
 
(In millions)
 
 
Prepaid expenses
 
$
99.6

 
$
97.9

 
$
(1.7
)
 
(2
)%
Other assets, net
 
$
191.9

 
$
305.7

 
$
113.8

 
59
 %
Total assets
 
$
7,361.4

 
$
7,473.5

 
$
112.1

 
2
 %
Other current liabilities
 
$
878.7

 
$
899.6

 
$
20.9

 
2
 %
Other long-term liabilities
 
$
78.9

 
$
170.1

 
$
91.2

 
116
 %
Total liabilities
 
$
4,773.5

 
$
4,885.6

 
$
112.1

 
2
 %


Leases. We determine if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets and liabilities are included in other assets, net and other current and long-term liabilities, respectively, in our Consolidated Balance Sheets.

Operating lease ROU assets and lease liabilities are recognized based on the present value of the future fixed lease payments over the lease term at the commencement date. As most of our leases do not provide an implicit rate, we use our quarterly incremental borrowing rate based on the information available that corresponds to each lease commencement date and lease term when determining the present value of future payments.

Our operating leases principally involve office space. These operating leases may contain variable non-lease components consisting of common area maintenance, operating expenses, insurance, and similar costs of the office space that we occupy. We have adopted the practical expedient to not separate these non-lease components from the lease components and instead account for them as a single lease component for all of our leases. The operating lease ROU assets include future fixed lease payments made as well as any initial direct costs incurred and exclude lease incentives. Variable lease payments are not included within the operating lease ROU assets or lease liabilities and are expensed in the period in which they are incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Lease expense for operating leases was $10.6 million for the three months ended June 30, 2019 and 2018 , respectively. Lease expense for operating leases was $19.5 million and $20.2 million for the six months ended June 30, 2019 and 2018 , respectively. Our leases have remaining lease terms of one year to fifteen years , some of which may include options to extend the lease term up to five years , and some of which may include options to terminate leases within one year . We have elected to not record operating lease ROU assets and liabilities for short-term leases that have a term of twelve months or less. Our lease expense includes our short-term lease cost which is not material to our Consolidated Financial Statements.

Other information related to our operating leases was as follows:
Six Months Ended June 30, 2019
 
Amount
(in millions, except lease term and discount rate)
 
 
Supplemental Cash Flows Information
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash flows used by operating leases
 
$
14.7

Right-of-use assets obtained in exchange for lease obligations (non-cash):
 
 
Operating leases
 
$
2.6

 
 
 
Weighted Average Remaining Lease Term
 
6.3 years

Weighted Average Discount Rate
 
4.3
%



16





Estimated future minimum payment obligations for non-cancelable operating leases are as follows as of June 30, 2019 :
Years ending December 31,
 
Amount
 
 
(In millions)