ATLANTA, Nov. 9, 2017 /PRNewswire/ -- Equifax Inc. (NYSE:
EFX) today announced financial results for the quarter ended
September 30, 2017.
"As we report our third quarter results, we recognize that we
have an important journey in front of us to regain the trust and
confidence of consumers and our business customers," said
Paulino Barros, Interim Chief
Executive Officer at Equifax. "Our teams have taken immediate
actions to improve our data security and provide improved support
for consumers who were impacted by our cybersecurity
incident. As we look to the future, I have committed Equifax
to four things: protecting consumers, enhancing our security,
empowering consumers to control access to personal credit data, and
leading our industry to confront the massive economic and national
security threats represented by cyber criminals. I have high
confidence in our global teams, and as we focus on these critical
imperatives we will emerge from this an even stronger company."
Financial Results Summary
The company reported revenue of $834.8
million in the third quarter of 2017, a 4 percent increase
compared to the third quarter of 2016 on a reported basis and 3
percent on a local currency basis.
Third quarter diluted EPS attributable to Equifax was
$0.79, down 28 percent compared to
the third quarter of 2016.
Net income attributable to Equifax of $96.3 million was down 27 percent compared to the
third quarter of 2016.
USIS third quarter results
- Total revenue was $307.7 million
in the third quarter of 2017 compared to $317.4 million in the third quarter of 2016, a
decrease of 3 percent. Operating margin for USIS was 42.1 percent
in the third quarter of 2017 compared to 44.0 percent in the third
quarter of 2016. Adjusted EBITDA margin for USIS was 49.2 percent
in the third quarter of 2017 compared to 50.6 percent in the third
quarter of 2016.
- Online Information Solutions revenue was $221.0 million, down 4 percent compared to the
third quarter of 2016.
- Mortgage Solutions revenue was $38.8
million, down 2 percent compared to the third quarter of
2016.
- Financial Marketing Services revenue was $47.9 million, down 1 percent compared to the
third quarter of 2016.
International third quarter results
- Total revenue was $239.8 million
in the third quarter of 2017, up 12 percent compared to the third
quarter of 2016 and a 10 percent increase on a local currency
basis. Operating margin for International was 22.0 percent in the
third quarter of 2017, compared to 12.3 percent in the third
quarter of 2016. Adjusted EBITDA margin for International was 33.2
percent in the third quarter of 2017, compared to 28.4 percent in
the third quarter of 2016.
- Asia Pacific revenue was
$81.2 million, up 10 percent compared
to the third quarter of 2016 and up 6 percent on a local currency
basis.
- Europe revenue was
$69.0 million, up 11 percent compared
to the third quarter of 2016 and up 10 percent on a local currency
basis.
- Latin America revenue was
$54.5 million, up 16 percent compared
to the third quarter of 2016 and up 20 percent on a local currency
basis.
- Canada revenue was
$35.1 million, up 11 percent compared
to the third quarter of 2016 and up 7 percent on a local currency
basis.
Workforce Solutions third quarter results
- Total revenue was $186.4 million
in the third quarter of 2017, a 9 percent increase compared to the
third quarter of 2016. Operating margin for Workforce Solutions was
43.1 percent in the third quarter of 2017 compared to 40.8 percent
in the third quarter of 2016. Adjusted EBITDA margin for Workforce
Solutions was 48.6 percent in the third quarter of 2017 compared to
47.0 percent in the third quarter of 2016.
- Verification Services revenue was $129.9
million, up 13 percent compared to the third quarter of
2016.
- Employer Services revenue was $56.5
million, flat compared to the third quarter of 2016.
Global Consumer Solutions third quarter results
- Revenue was $100.9 million, flat
compared to the third quarter of 2016 and flat on a local currency
basis. Operating margin was 24.5 percent compared to 27.6 percent
in the third quarter of 2016. Adjusted EBITDA margin was 27.9
percent compared to 30.0 percent in the third quarter of 2016.
Adjusted EPS and Adjusted EBITDA Margin
- Adjusted EPS attributable to Equifax was $1.53, up 6 percent compared to the third quarter
of 2016. This financial measure for 2017 excludes the income tax
effects of stock awards recognized upon vesting or settlement and
cybersecurity incident related costs. And additionally for 2016
excludes Veda acquisition related amounts. The financial measure
for both 2017 and 2016 excludes acquisition-related amortization
expense, net of associated tax impacts. These items are described
more fully in the attached Q&A.
- Adjusted EBITDA margin was 37.4 percent, compared to 35.9
percent in the third quarter of 2016. These financial measures for
2017 and 2016 have been adjusted for certain items, including costs
related to the cybersecurity incident, which affect the
comparability of the underlying operational performance and are
described more fully in the attached Q&A.
About Equifax
Equifax is a global information solutions company that uses
unique data, innovative analytics, technology and industry
expertise to power organizations and individuals around the world
by transforming knowledge into insights that help make more
informed business and personal decisions.
Headquartered in Atlanta, Ga.,
Equifax operates or has investments in 24 countries in North America, Central and South America, Europe and the Asia
Pacific region. It is a member of Standard & Poor's
(S&P) 500® Index, and its common stock is traded on the New
York Stock Exchange (NYSE) under the symbol EFX. Equifax employs
approximately 10,100 employees worldwide.
Earnings Conference Call and Audio Webcast
In conjunction with this release, Equifax will host a conference
call tomorrow, November 10, 2017 at
8:30 a.m. (ET) via a live audio
webcast. To access the webcast, go to the Investor Relations
section of our website at www.equifax.com. The discussion will be
available via replay at the same site shortly after the conclusion
of the webcast. This press release is also available at that
website.
Non-GAAP Financial Measures
This earnings release presents adjusted EPS attributable to
Equifax which is diluted EPS attributable to Equifax adjusted (to
the extent noted above for different periods) for
acquisition-related amortization expense, net of tax,
acquisition-specific transaction and due diligence expense, as well
as integration expense through Q1 2017 following the closure of the
acquisition of Veda, the adjustment of redeemable noncontrolling
interest that reflects a redemption value in excess of fair value,
the income tax effects of stock awards that are recognized upon
vesting or settlement and costs related to the cybersecurity
incident announced September 7, 2017.
This earnings release also presents adjusted EBITDA and adjusted
EBITDA margin which is defined as consolidated net income
attributable to Equifax plus net interest expense, income taxes,
depreciation and amortization, and also excludes certain one-time
items. These are important financial measures for Equifax but are
not financial measures as defined by GAAP.
These non-GAAP financial measures should be reviewed in
conjunction with the relevant GAAP financial measures and are not
presented as an alternative measure of net income or EPS as
determined in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures and related notes are
presented in the Q&A. This information can also be found under
"Investor Relations/Financial Information/Non-GAAP Financial
Measures" on our website at www.equifax.com.
Forward-Looking Statements
This release contains forward-looking statements and
forward-looking information. These statements can be identified by
expressions of belief, expectation or intention, as well as
statements that are not historical fact. These statements are based
on certain factors and assumptions including with respect to
foreign exchange rates, expected growth, results of operations,
performance, business prospects and opportunities and effective tax
rates. While the company believes these factors and assumptions to
be reasonable based on information currently available, they may
prove to be incorrect.
Several factors could cause actual results to differ materially
from those expressed or implied in the forward-looking statements,
including, but not limited to actions taken by us, including
restructuring or strategic initiatives (including capital
investments or asset acquisitions or dispositions), as well as from
developments beyond our control, including, but not limited to,
changes in worldwide and U.S. economic conditions that materially
impact consumer spending, consumer debt and employment and the
demand for Equifax's products and services. Other risk factors
include the impact of the cybersecurity incident and the resulting
government investigations, litigation and other impacts on our
business and results of operations; adverse or uncertain
economic conditions and changes in credit and financial markets;
economic, political and other risks associated with international
sales and operations; risks relating to illegal first party efforts
to access data or other cybersecurity or physical security
breaches; changes in, and the effects of, laws and regulations and
government policies governing our business, including, without
limitation, our examination and supervision by the Consumer
Financial Protection Bureau ("CFPB"), a federal agency that holds
primary responsibility for the regulation of consumer protection
with respect to financial products and services in the U.S.,
oversight by the U.K. Financial Conduct Authority ("FCA") and
Information Commissioner's Office of our debt collections services
and core credit reporting businesses in the U.K. and oversight by
the Office of Australian Information Commission, the Australian
Competition and Consumer Commission and other regulatory entities
of our credit reporting business in Australia; federal or state responses to
identity theft concerns; potential adverse developments in new and
pending legal proceedings or government investigations, including
investigations or examinations undertaken by the CFPB, State
Attorneys General, the FCA or other governmental agencies; our
ability to successfully develop and market new products and
services, respond to pricing and other competitive pressures,
complete and integrate acquisitions and other investments and
achieve targeted cost efficiencies; timing and amount of capital
expenditures; changes in capital markets and corresponding effects
on the company's investments and benefit plan obligations; foreign
currency exchange rates and earnings repatriation limitations; and
the decisions of taxing authorities, all of which could affect our
effective tax rates. A summary of additional risks and
uncertainties can be found in our Annual Report on Form 10-K for
the year ended December 31, 2016,
including without limitation under the captions "Item 1. Business
-- Governmental Regulation" and "-- Forward-Looking Statements" and
"Item 1A. Risk Factors," in our Quarterly Report on Form 10-Q
for the quarter ended September 30,
2017, including without limitation under the caption "Item
1A. Risk Factors," and in our other filings with the U.S.
Securities and Exchange Commission. Forward-looking statements are
given only as at the date of this release and the company disclaims
any obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
FOR MORE INFORMATION
1550 Peachtree Street, NE
Atlanta, Georgia 30309
Marisa Salcines
Media Relations
mediainquiries@equifax.com
Jeff Dodge
Investor Relations
404-885-8804
jeff.dodge@equifax.com
EQUIFAX
|
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
|
Three Months
Ended
September 30,
|
|
|
2017
|
|
2016
|
(In millions, except per share amounts)
|
|
(Unaudited)
|
Operating
revenue
|
|
$
|
834.8
|
|
|
$
|
804.1
|
|
Operating
expenses:
|
|
|
|
|
Cost of services
(exclusive of depreciation and amortization below)
|
|
297.3
|
|
|
288.0
|
|
Selling, general and
administrative expenses
|
|
312.2
|
|
|
233.4
|
|
Depreciation and
amortization
|
|
72.4
|
|
|
70.6
|
|
Total operating
expenses
|
|
681.9
|
|
|
592.0
|
|
Operating
income
|
|
152.9
|
|
|
212.1
|
|
Interest
expense
|
|
(21.4)
|
|
|
(24.3)
|
|
Other income,
net
|
|
4.5
|
|
|
2.4
|
|
Consolidated income
before income taxes
|
|
136.0
|
|
|
190.2
|
|
Provision for income
taxes
|
|
(35.5)
|
|
|
(55.3)
|
|
Consolidated net
income
|
|
100.5
|
|
|
134.9
|
|
Less: Net income
attributable to noncontrolling interests including redeemable
noncontrolling interests
|
|
(4.2)
|
|
|
(2.1)
|
|
Net income
attributable to Equifax
|
|
$
|
96.3
|
|
|
$
|
132.8
|
|
Basic earnings per
common share:
|
|
|
|
|
Net income
attributable to Equifax
|
|
$
|
0.80
|
|
|
$
|
1.11
|
|
Weighted-average
shares used in computing basic earnings per share
|
|
120.1
|
|
|
119.5
|
|
Diluted earnings per
common share:
|
|
|
|
|
Net income
attributable to Equifax
|
|
$
|
0.79
|
|
|
$
|
1.09
|
|
Weighted-average
shares used in computing diluted earnings per share
|
|
121.4
|
|
|
121.3
|
|
Dividends per common
share
|
|
$
|
0.39
|
|
|
$
|
0.33
|
|
EQUIFAX
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
September 30,
2017
|
|
December 31,
2016
|
(In millions,
except par values)
|
|
(Unaudited)
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
315.4
|
|
|
$
|
129.3
|
|
Trade accounts
receivable, net of allowance for doubtful accounts of $10.2 and
$7.8 at September 30, 2017 and December 31, 2016,
respectively
|
|
458.3
|
|
|
433.3
|
|
Prepaid
expenses
|
|
76.9
|
|
|
60.2
|
|
Other current
assets
|
|
48.7
|
|
|
50.1
|
|
Total current
assets
|
|
899.3
|
|
|
672.9
|
|
Property and
equipment:
|
|
|
|
|
Capitalized
internal-use software and system costs
|
|
388.0
|
|
|
307.0
|
|
Data processing
equipment and furniture
|
|
294.3
|
|
|
273.2
|
|
Land, buildings and
improvements
|
|
214.5
|
|
|
203.8
|
|
Total property and
equipment
|
|
896.8
|
|
|
784.0
|
|
Less accumulated
depreciation and amortization
|
|
(368.1)
|
|
|
(317.1)
|
|
Total property and
equipment, net
|
|
528.7
|
|
|
466.9
|
|
Goodwill
|
|
4,178.4
|
|
|
3,974.3
|
|
Indefinite-lived
intangible assets
|
|
95.0
|
|
|
94.8
|
|
Purchased intangible
assets, net
|
|
1,276.8
|
|
|
1,323.8
|
|
Other assets,
net
|
|
137.5
|
|
|
131.3
|
|
Total
assets
|
|
$
|
7,115.7
|
|
|
$
|
6,664.0
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Short-term debt and
current maturities of long-term debt
|
|
$
|
667.8
|
|
|
$
|
585.4
|
|
Accounts
payable
|
|
82.5
|
|
|
81.0
|
|
Accrued
expenses
|
|
135.7
|
|
|
149.3
|
|
Accrued salaries and
bonuses
|
|
92.9
|
|
|
158.8
|
|
Deferred
revenue
|
|
117.4
|
|
|
110.7
|
|
Other current
liabilities
|
|
240.0
|
|
|
174.4
|
|
Total current
liabilities
|
|
1,336.3
|
|
|
1,259.6
|
|
Long-term
debt
|
|
2,038.7
|
|
|
2,086.8
|
|
Deferred income tax
liabilities, net
|
|
303.5
|
|
|
325.4
|
|
Long-term pension and
other postretirement benefit liabilities
|
|
175.6
|
|
|
184.4
|
|
Other long-term
liabilities
|
|
95.9
|
|
|
86.5
|
|
Total
liabilities
|
|
3,950.0
|
|
|
3,942.7
|
|
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 September 30, 2017 and December 31,
2016;
Outstanding shares - 120.0 and 119.9 at September 30, 2017 and
December 31, 2016, respectively
|
|
236.6
|
|
|
236.6
|
|
Paid-in
capital
|
|
1,335.0
|
|
|
1,313.3
|
|
Retained
earnings
|
|
4,424.7
|
|
|
4,153.2
|
|
Accumulated other
comprehensive loss
|
|
(311.8)
|
|
|
(528.9)
|
|
Treasury stock, at
cost, 68.7 shares and 68.8 shares at September 30, 2017 and
December 31, 2016, respectively
|
|
(2,578.2)
|
|
|
(2,505.6)
|
|
Stock held by
employee benefit trusts, at cost, 0.6 shares at September 30, 2017
and December 31, 2016
|
|
(5.9)
|
|
|
(5.9)
|
|
Total Equifax
shareholders' equity
|
|
3,100.4
|
|
|
2,662.7
|
|
Noncontrolling
interests including redeemable noncontrolling interests
|
|
65.3
|
|
|
58.6
|
|
Total
equity
|
|
3,165.7
|
|
|
2,721.3
|
|
Total liabilities and
equity
|
|
$
|
7,115.7
|
|
|
$
|
6,664.0
|
|
EQUIFAX
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
Nine Months
Ended
September 30,
|
|
|
2017
|
|
2016
|
(In
millions)
|
|
(Unaudited)
|
Operating
activities:
|
|
|
|
|
Consolidated net
income
|
|
$
|
423.5
|
|
|
$
|
370.3
|
|
Adjustments to
reconcile consolidated net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
216.7
|
|
|
195.4
|
|
Stock-based
compensation expense
|
|
34.6
|
|
|
30.2
|
|
Excess tax benefits
from stock-based compensation plans
|
|
—
|
|
|
(29.6)
|
|
Deferred income
taxes
|
|
(40.6)
|
|
|
(10.4)
|
|
Changes in assets and
liabilities, excluding effects of acquisitions:
|
|
|
|
|
Accounts receivable,
net
|
|
(14.9)
|
|
|
(54.5)
|
|
Other assets, current
and long-term
|
|
(24.4)
|
|
|
(0.9)
|
|
Current and long term
liabilities, excluding debt
|
|
13.8
|
|
|
43.7
|
|
Cash provided by
operating activities
|
|
608.7
|
|
|
544.2
|
|
Investing
activities:
|
|
|
|
|
Capital
expenditures
|
|
(157.5)
|
|
|
(131.0)
|
|
Acquisitions, net of
cash acquired
|
|
(77.3)
|
|
|
(1,792.4)
|
|
Cash received from
sale of asset
|
|
8.6
|
|
|
—
|
|
Economic
hedges
|
|
—
|
|
|
(10.8)
|
|
Cash used in
investing activities
|
|
(226.2)
|
|
|
(1,934.2)
|
|
Financing
activities:
|
|
|
|
|
Net short-term
borrowings
|
|
354.9
|
|
|
194.2
|
|
Payments on long-term
debt
|
|
(322.5)
|
|
|
(300.0)
|
|
Borrowings on
long-term debt
|
|
—
|
|
|
1,574.7
|
|
Treasury stock
purchases
|
|
(77.1)
|
|
|
—
|
|
Dividends paid to
Equifax shareholders
|
|
(140.7)
|
|
|
(118.1)
|
|
Dividends paid to
noncontrolling interests
|
|
(8.2)
|
|
|
(5.8)
|
|
Proceeds from exercise
of stock options
|
|
18.8
|
|
|
26.8
|
|
Payment of taxes
related to settlement of equity awards
|
|
(28.0)
|
|
|
(19.7)
|
|
Excess tax benefits
from stock-based compensation plans
|
|
—
|
|
|
29.6
|
|
Purchase of redeemable
noncontrolling interests
|
|
—
|
|
|
(3.6)
|
|
Other
|
|
—
|
|
|
(5.4)
|
|
Cash (used in)
provided by financing activities
|
|
(202.8)
|
|
|
1,372.7
|
|
Effect of foreign
currency exchange rates on cash and cash equivalents
|
|
6.4
|
|
|
35.5
|
|
Increase in cash and
cash equivalents
|
|
186.1
|
|
|
18.2
|
|
Cash and cash
equivalents, beginning of period
|
|
129.3
|
|
|
93.3
|
|
Cash and cash
equivalents, end of period
|
|
$
|
315.4
|
|
|
$
|
111.5
|
|
Common Questions & Answers (Unaudited)
(Dollars in millions)
1. Can you provide a further
analysis of operating revenue by operating segment?
Operating revenue consists of the following components:
(In
millions)
|
|
Three months
ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local
Currency
|
Operating
revenue:
|
|
2017
|
|
2016
|
|
$
Change
|
|
%
Change
|
|
%
Change*
|
Online Information
Solutions
|
|
$
|
221.0
|
|
|
$
|
229.8
|
|
|
$
|
(8.8)
|
|
|
(4)
|
%
|
|
|
Mortgage
Solutions
|
|
38.8
|
|
|
39.4
|
|
|
(0.6)
|
|
|
(2)
|
%
|
|
|
Financial Marketing
Services
|
|
47.9
|
|
|
48.2
|
|
|
(0.3)
|
|
|
(1)
|
%
|
|
|
Total U.S.
Information Solutions
|
|
307.7
|
|
|
317.4
|
|
|
(9.7)
|
|
|
(3)
|
%
|
|
|
Asia
Pacific
|
|
81.2
|
|
|
73.6
|
|
|
7.6
|
|
|
10
|
%
|
|
6
|
%
|
Europe
|
|
69.0
|
|
|
62.1
|
|
|
6.9
|
|
|
11
|
%
|
|
10
|
%
|
Latin
America
|
|
54.5
|
|
|
47.0
|
|
|
7.5
|
|
|
16
|
%
|
|
20
|
%
|
Canada
|
|
35.1
|
|
|
31.6
|
|
|
3.5
|
|
|
11
|
%
|
|
7
|
%
|
Total
International
|
|
239.8
|
|
|
214.3
|
|
|
25.5
|
|
|
12
|
%
|
|
10
|
%
|
Verification
Services
|
|
129.9
|
|
|
114.6
|
|
|
15.3
|
|
|
13
|
%
|
|
|
Employer
Services
|
|
56.5
|
|
|
56.7
|
|
|
(0.2)
|
|
|
—
|
%
|
|
|
Total Workforce
Solutions
|
|
186.4
|
|
|
171.3
|
|
|
15.1
|
|
|
9
|
%
|
|
|
Global Consumer
Solutions
|
|
100.9
|
|
|
101.1
|
|
|
(0.2)
|
|
|
—
|
%
|
|
—
|
%
|
Total operating
revenue
|
|
$
|
834.8
|
|
|
$
|
804.1
|
|
|
$
|
30.7
|
|
|
4
|
%
|
|
3
|
%
|
|
*Reflects percentage
change in revenue conforming 2017 results using 2016 exchange
rates.
|
|
nm - not
meaningful.
|
2. What was the currency impact on the
foreign operations?
The U.S. dollar impact on operating revenue is as follows:
|
|
Three months
ended
September 30, 2017
|
|
|
Operating
Revenue
|
(In
millions)
|
|
Amount
|
|
%
|
Asia
Pacific
|
|
$
|
3.0
|
|
|
4
|
%
|
Europe
|
|
0.5
|
|
|
1
|
%
|
Latin
America
|
|
(1.8)
|
|
|
(4)
|
%
|
Canada
|
|
1.4
|
|
|
5
|
%
|
Global Consumer
Solutions
|
|
0.1
|
|
|
—
|
%
|
Total
|
|
$
|
3.2
|
|
|
—
|
%
|
3. What drove the fluctuation in the
effective tax rate?
Our effective income tax rate was 26.1% and 29.1% for the three
months ended September 30, 2017 and September 30, 2016,
respectively. The decrease in our effective income tax rate is
primarily attributable to the adoption of the new stock-based
compensation guidance we prospectively adopted in the first quarter
of 2017 that requires the recognition of the income tax effects of
awards in the income statement when the awards vest or are settled.
These amounts were previously recognized in additional
paid-in-capital. We recognized a $4.8
million tax benefit related to the accounting change in the
third quarter of 2017.
4. What is the breakdown of costs related
to the cybersecurity incident?
During the third quarter of 2017, we recorded $87.5 million ($59.3
million, net of tax) for expenses related to the
cybersecurity incident announced September
7, 2017. The components of the costs are as follows:
(In
millions)
|
|
Three Months
Ended
September 30, 2017
|
Product
cost
|
|
$
55.5
|
|
Professional
fees
|
|
17.1
|
|
Consumer
support
|
|
14.9
|
|
Total
|
|
$
87.5
|
|
Expenses Incurred. In the third quarter of fiscal
2017, the Company recorded $27.3 million of pretax
expenses related to the cybersecurity incident. These expenses are
included in Selling, General and Administrative expenses in the
accompanying Consolidated Statements of Income for the three and
nine months ended September 30, 2017. Expenses include costs
to investigate and remediate the cybersecurity incident and legal
and other professional services related thereto, all of which were
expensed as incurred.
Contingent Liability. Additionally, as a result of
the cybersecurity incident, we are offering free credit file
monitoring and identity theft protection to all U.S. consumers. We
have concluded that the costs associated with providing this
service are a contingent liability that is probable and estimable.
We have therefore recorded an estimate of the expenses necessary to
provide this service to those who have signed up or will sign up by
the January 31, 2018 deadline. We
have incurred $4.7 million through
September 30, 2017 and have estimated
a range of additional costs between $56
million and $110 million. In accordance with Accounting
Standards Codification section 450-20-30-1, we have recorded a
liability for the low end in the range as we do not believe that
any amount within the range is a better estimate than any other
amount.
Reconciliations of Non-GAAP Financial Measures to the
Comparable GAAP Financial Measures (Unaudited)
(Dollars in
millions, except per share amounts)
A. Reconciliation of net income
attributable to Equifax to diluted EPS attributable to Equifax,
adjusted for Veda acquisition related amounts other than
acquisition-related amortization, the income tax effect of stock
awards recognized upon vesting or settlement, cybersecurity
incident related costs, income tax adjustments, and
acquisition-related amortization expense:
|
|
Three Months
Ended
September 30,
|
|
|
|
|
(In millions, except per share amounts)
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
Net income
attributable to Equifax
|
|
$
|
96.3
|
|
|
$
|
132.8
|
|
|
$
|
(36.5)
|
|
|
(27)
|
%
|
Acquisition-related
amortization expense of certain acquired intangibles
(1)
|
|
43.0
|
|
|
47.5
|
|
|
(4.5)
|
|
|
(9)
|
%
|
Veda acquisition
related amounts other than acquisition-related amortization
(2)
|
|
—
|
|
|
6.3
|
|
|
(6.3)
|
|
|
nm
|
Income tax effects of
stock awards that are recognized upon vesting or settlement
(3)
|
|
(4.8)
|
|
|
—
|
|
|
(4.8)
|
|
|
nm
|
Cybersecurity
incident related costs (4)
|
|
87.5
|
|
|
—
|
|
|
87.5
|
|
|
nm
|
Tax impact of
adjustments (5)
|
|
(36.1)
|
|
|
(11.4)
|
|
|
(24.7)
|
|
|
nm
|
Net income
attributable to Equifax, adjusted for items listed above
|
|
185.9
|
|
|
175.2
|
|
|
10.7
|
|
|
6
|
%
|
Diluted EPS
attributable to Equifax, adjusted for items listed above
|
|
$
|
1.53
|
|
|
$
|
1.44
|
|
|
$
|
0.09
|
|
|
6
|
%
|
Weighted-average
shares used in computing diluted EPS
|
|
121.4
|
|
|
121.3
|
|
|
|
|
|
|
nm
- not meaningful
|
(1) During the third quarter of 2017, we recorded
acquisition-related amortization expense of certain acquired
intangibles of $43.0 million
($35.1 million, net of tax). We
calculate this financial measure by excluding the impact of
acquisition-related amortization expense and including a benefit to
reflect the significant cash income tax savings resulting from the
income tax deductibility of amortization for certain acquired
intangibles. The $7.9 million of tax
is comprised of $14.1 million of tax
expense net of $6.2 million of a cash
income tax benefit. During the third quarter of 2016, we recorded
acquisition-related amortization expense of certain acquired
intangibles of $47.5 million
($38.0 million, net of tax). The
$9.5 million of tax is comprised of
$15.7 million of tax expense net of
$6.2 million of a cash income tax
benefit.
(2) During the third quarter of 2016, we recorded
$6.3 million ($4.4 million, net of tax) for Veda acquisition
related amounts other than acquisition-related amortization related
to transaction and integration costs in operating income. See the
Notes to this reconciliation for additional detail.
(3) During the third quarter of 2017, we recorded a tax
benefit of $4.8 million related to
the tax effects of deductions for stock compensation in excess of
amounts recorded for compensation costs. See the Notes to this
reconciliation for additional detail.
(4) During the third quarter of 2017, we recorded
$87.5 million ($59.3 million, net of tax) for expenses related
to the cybersecurity incident. See the Notes to this reconciliation
for additional detail.
(5) During the third quarter of 2017, we recorded the tax
impact of adjustments of $36.1
million comprised of (i) acquisition-related amortization
expense of certain acquired intangibles of $7.9 million ($14.1
million of tax expense net of $6.2
million of cash income tax benefit) and (ii) a tax
adjustment of $28.2 million related
to expenses for the cybersecurity incident.
During the third quarter of 2016 we recorded the tax impact of
adjustments of $11.4 million
comprised of (i) acquisition-related amortization expense of
certain acquired intangibles of $9.5
million ($15.7 million of tax
expense net of $6.2 million of cash
income tax benefit), and (ii) a tax adjustment of $1.9 million for Veda acquisition related amounts
other than acquisition related amortization.
B. Reconciliation of net income attributable to Equifax
to adjusted EBITDA, excluding cybersecurity incident related costs,
Veda acquisition related amounts, income taxes, interest expense,
net and depreciation and amortization expense, and presentation of
adjusted EBITDA margin:
|
|
Three Months Ended
September 30,
|
|
|
|
|
(in
millions)
|
|
2017
|
|
2016
|
|
$
Change
|
|
%
Change
|
Revenue
|
|
$
|
834.8
|
|
|
$
|
804.1
|
|
|
$
|
30.7
|
|
4
|
%
|
Net income
attributable to Equifax
|
|
$
|
96.3
|
|
|
$
|
132.8
|
|
|
$
|
(36.5)
|
|
(27)
|
%
|
Income
taxes
|
|
35.5
|
|
|
55.3
|
|
|
(19.8)
|
|
(36)
|
%
|
Interest expense,
net*
|
|
20.8
|
|
|
24.0
|
|
|
(3.2)
|
|
(13)
|
%
|
Depreciation and
amortization
|
|
72.4
|
|
|
70.6
|
|
|
1.8
|
|
3
|
%
|
Veda acquisition
related amounts (1)
|
|
—
|
|
|
6.3
|
|
|
nm
|
|
nm
|
Cybersecurity
incident related costs (2)
|
|
87.5
|
|
|
—
|
|
|
nm
|
|
nm
|
Adjusted EBITDA,
excluding the items listed above
|
|
$
|
312.5
|
|
|
$
|
289.0
|
|
|
$
|
23.5
|
|
8
|
%
|
Adjusted EBITDA
margin
|
|
37.4
|
%
|
|
35.9
|
%
|
|
|
|
|
|
nm - not
meaningful
|
*Excludes interest
income of $0.6 million in 2017 and $0.3 million in 2016.
|
(1) During the third quarter of 2016, we recorded
$6.3 million ($4.4 million, net of tax) for Veda acquisition
related amounts other than acquisition-related amortization related
to transaction and integration costs in operating income. See the
Notes to this reconciliation for additional detail.
(2) During the third quarter of 2017, we recorded
$87.5 million ($59.3 million, net of tax) for expenses related
to the cybersecurity incident. See the Notes to this reconciliation
for additional detail.
C. Reconciliation of operating income to Adjusted
EBITDA, excluding cybersecurity incident related costs, Veda
acquisition related amounts, income taxes, depreciation and
amortization expense, other income, net, noncontrolling interest,
and presentation of adjusted EBITDA margin for each of the
segments:
(In
millions)
|
|
Three months ended
September 30, 2017
|
|
|
U.S.
Information
Solutions
|
|
International
|
|
Workforce
Solutions
|
|
Global
Consumer
Solutions
|
|
General
Corporate
Expense
|
|
Total
|
|
|
|
|
|
|
Revenue
|
|
$
|
307.7
|
|
|
$
|
239.8
|
|
|
$
|
186.4
|
|
|
$
|
100.9
|
|
|
nm
|
|
|
$
|
834.8
|
|
Operating
Income
|
|
129.5
|
|
|
52.9
|
|
|
80.3
|
|
|
24.7
|
|
|
(134.5)
|
|
|
152.9
|
|
Depreciation and
Amortization
|
|
21.3
|
|
|
27.7
|
|
|
10.3
|
|
|
3.4
|
|
|
9.7
|
|
|
72.4
|
|
Other
income/(expense), net*
|
|
0.7
|
|
|
3.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.9
|
|
Noncontrolling
interest
|
|
—
|
|
|
(4.2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4.2)
|
|
Adjustments
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
87.5
|
|
|
87.5
|
|
Adjusted
EBITDA
|
|
$
|
151.5
|
|
|
$
|
79.6
|
|
|
$
|
90.6
|
|
|
$
|
28.1
|
|
|
$
|
(37.3)
|
|
|
$
|
312.5
|
|
Operating
Margin
|
|
42.1
|
%
|
|
22.0
|
%
|
|
43.1
|
%
|
|
24.5
|
%
|
|
nm
|
|
|
18.3
|
%
|
Adjusted EBITDA
Margin
|
|
49.2
|
%
|
|
33.2
|
%
|
|
48.6
|
%
|
|
27.9
|
%
|
|
nm
|
|
|
37.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nm - not
meaningful
|
*Excludes interest
income of $0.6 million in International.
|
|
(In
millions)
|
|
Three months ended
September 30, 2016
|
|
|
U.S. Information
Solutions
|
|
International
|
|
Workforce
Solutions
|
|
Global Consumer
Solutions
|
|
General Corporate
Expense
|
|
Total
|
|
|
|
|
|
|
Revenue
|
|
$
|
317.4
|
|
|
$
|
214.3
|
|
|
$
|
171.3
|
|
|
$
|
101.1
|
|
|
nm
|
|
|
$
|
804.1
|
|
Operating
Income
|
|
139.5
|
|
|
26.3
|
|
|
69.9
|
|
|
28.0
|
|
|
(51.6)
|
|
|
212.1
|
|
Depreciation and
Amortization
|
|
20.6
|
|
|
28.8
|
|
|
10.7
|
|
|
2.3
|
|
|
8.2
|
|
|
70.6
|
|
Other
income/(expense), net*
|
|
0.6
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.1
|
|
Noncontrolling
interest
|
|
—
|
|
|
(2.1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.1)
|
|
Adjustments
(1)
|
|
—
|
|
|
6.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.3
|
|
Adjusted
EBITDA
|
|
$
|
160.7
|
|
|
$
|
60.8
|
|
|
$
|
80.6
|
|
|
$
|
30.3
|
|
|
$
|
(43.4)
|
|
|
$
|
289.0
|
|
Operating
Margin
|
|
44.0
|
%
|
|
12.3
|
%
|
|
40.8
|
%
|
|
27.6
|
%
|
|
nm
|
|
|
26.4
|
%
|
Adjusted EBITDA
Margin
|
|
50.6
|
%
|
|
28.4
|
%
|
|
47.0
|
%
|
|
30.0
|
%
|
|
nm
|
|
|
35.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nm - not
meaningful
|
*Excludes interest
income of $0.3 million in International.
|
(1) During the third quarter of 2017, we recorded
$87.5 million ($59.3 million, net of tax) for expenses related
to the cybersecurity incident. See the Notes to this reconciliation
for additional detail.
During the third quarter of 2016, we recorded $6.3 million ($4.4
million, net of tax) for Veda acquisition related amounts
other than acquisition-related amortization related to transaction
and integration costs in operating income. See the Notes to this
reconciliation for additional detail.
Notes to Reconciliations of Non-GAAP Financial Measures to
the Comparable GAAP Financial Measures
Diluted EPS attributable to Equifax is adjusted for the
following items:
Acquisition-related amortization expense - We calculate
this financial measure by excluding the impact of
acquisition-related amortization expense and including a benefit to
reflect the material cash income tax savings resulting from the
income tax deductibility of amortization for certain acquired
intangibles. These financial measures are not prepared in
conformity with GAAP. Management believes excluding the
impact of amortization expense is useful because excluding
acquisition-related amortization, and other items that are not
comparable, allows investors to evaluate our performance for
different periods on a more comparable basis. Certain acquired
intangibles result in material cash income tax savings which are
not reflected in earnings. Management believes that including a
benefit to reflect the cash income tax savings is useful as it
allows investors to better value Equifax. Management makes these
adjustments to earnings when measuring profitability, evaluating
performance trends, setting performance objectives and calculating
our return on invested capital.
Veda acquisition related amounts for transaction and due
diligence expenses incurred as a direct result of the acquisition,
as well as integration expense in the first year following the
closure of the acquisition - During the third quarter of 2017,
we did not exclude any amounts related to the Veda acquisition
transaction charges. Management believes excluding this charge is
useful as it allows investors to evaluate our performance for
different periods on a more comparable basis. Management makes
these adjustments to net income when measuring profitability,
evaluating performance trends, setting performance objectives and
calculating our return on invested capital. This is consistent with
how management reviews and assesses Equifax's historical
performance and is useful when planning, forecasting and analyzing
future periods.
Income tax effects of stock awards that are recognized upon
vesting or settlement - During the third quarter of 2017, we
recorded a tax benefit of $4.8
million related to the tax effects of deductions in excess
of compensation costs in accordance with newly adopted guidance.
Management believes excluding this tax effect from financial
results provides meaningful supplemental information regarding our
financial results for the three months ended September 30, 2017, as compared to the
corresponding period in 2016, because this amount is non-operating
and relates to income tax benefits or deficiencies for stock awards
recognized when tax amounts differ from recognized stock
compensation cost. This is consistent with how management reviews
and assesses Equifax's historical performance and is useful when
planning, forecasting and analyzing future periods.
Accrual for costs related to the cybersecurity incident -
During the third quarter of 2017, we reported that we were the
target of a cybersecurity incident impacting approximately 145.5
million U.S. consumers. We recorded $87.5
million ($59.3 million, net of
tax) during the third quarter of 2017 associated with the costs to
investigate the cybersecurity incident, legal fees to respond to
subsequent litigation and costs to deliver the free product
offering made to all U.S. consumers. Management believes excluding
this charge is useful as it allows investors to evaluate our
performance for different periods on a more comparable basis.
Management makes these adjustments to net income when measuring
profitability, evaluating performance trends, setting performance
objectives and calculating our return on invested capital. This is
consistent with how management reviews and assesses Equifax's
historical performance and is useful when planning, forecasting and
analyzing future periods.
Adjusted EBITDA and Adjusted EBITDA margin - Management
defines adjusted EBITDA as consolidated net income attributable to
Equifax plus net interest expense, income taxes, depreciation and
amortization, and also excludes certain one-time items. Management
believes the use of adjusted EBITDA and adjusted EBITDA margin
allows investors to evaluate our performance for different periods
on a more comparable basis.
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SOURCE Equifax Inc.