Equifax 10-K 2007
Documents found in this filing:
Washington, D.C. 20549
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
o 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
(Exact name of registrant as specified in its charter)
Registrants telephone number, including area code: 404-885-8000
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Exchange Act (Act).
Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
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.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
x Large accelerated filer o Accelerated filer o Non-accelerated filer
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2
of the Act).
As of the last day of the second fiscal quarter, the aggregate market value of the registrants common stock held by non-affiliates of the registrant was $4,516,672,927 based on the closing sale price as reported on the New York Stock Exchange. At January 31, 2007, there were 124,858,610 shares of voting common stock with a par value of $1.25 outstanding.
Registrants definitive proxy statement relating to its annual meeting of shareholders to be held on May 4, 2007 is incorporated by reference in Part III to the extent described therein.
As used herein, the terms Equifax, 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.
This Form 10-K and other written reports and oral statements made from time to time by Equifax may contain forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include all statements that are not historical or current facts; relate to our expectations about future events or results based on the information that is currently available to us; involve assumptions, risks and uncertainties; and speak only as of the date on which such statements are made. Words such as may, could, should, would, believe, expect, anticipate, estimate, intend, seeks, plan, project, continue, predict, and other words or expressions of similar meaning are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Examples of forward-looking statements include, among others, information concerning our growth strategies, financing plans, competitive position, potential growth opportunities, future financial performance, potential operating performance improvements, objectives for products and services, trends, and in particular, our cost reduction programs and activities, litigation and other legal matters, and our outlook for 2007. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our actual results may differ materially from those expressed or implied in those statements.
Some factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those described in Item IA, Risk Factors, and the following:
· Changes in the United States (U.S.) and global economic conditions and significant movements in interest rates that impact consumer spending and use of consumer debt;
· Heightened competition, particularly price competition, which could reduce profit margins and constrain growth in our businesses, primarily in the credit reporting and credit scoring business;
· Our ability to successfully develop and market new products and services, incorporate new technology and adapt to technological change and customer demand;
· Disruptions in our business-critical systems and operations which could interfere with our ability to deliver products and services to our customers;
· Security risks related to illegal third-party efforts to access our data and interfere with our operating systems;
· The impact of our pending acquisition of TALX Corporation, including our ability to obtain TALX shareholder and regulatory approvals of the acquisition, described in Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, on the proposed terms and schedule; the risk that the business will not be integrated successfully; the risk that cost savings and any other synergies from the acquisition may take longer to realize than expected or may not be fully realized; and the disruption from the acquisition making it more difficult to maintain relationships with customers, employees or suppliers;
· Risks associated with the integration of other acquired technologies, businesses and investments;
· Management of Equifaxs outsourcing projects or key vendors, including technology infrastructure and related services;
· Risks associated with investments and operations in foreign countries, including laws related to the protection of intellectual property, taxation or repatriation of foreign earnings;
· Changes in laws and regulations, and the application and enforcement of existing laws and regulations, such as those related to consumer protection, privacy, identity theft and marketing of consumer or business information, which could impact the amount we can charge for our products and services, limit the availability of or demand for such products and services, increase our compliance costs or result in increased exposure to potential litigation, or tax, welfare or pension laws and regulations;
· Changes in accounting pronouncements promulgated by standard-setting or regulatory bodies, including the Public Company Accounting Oversight Board, Financial Accounting Standards Board and the Securities and Exchange Commission (SEC);
· Pending and potential state and federal class action lawsuits, other litigation and regulatory actions, claims of infringement of patents or other intellectual property, and the outcome of federal tax audits;
· Significant deterioration in economic conditions, including changes in inflation, interest rates and foreign currency exchange rates, which could have an adverse effect on our operations, impede our access to, or increase the cost of, external financing or increase future pension expense; and
· Potential public health epidemics, international conflicts and terrorist acts which could cause operational disruption.
You should not place undue reliance on these forward-looking statements and should carefully review the disclosures and the risk factors described in this and other documents we file from time to time with the SEC, including our future reports on Forms 10-K, 10-Q and 8-K.
You may obtain our SEC filings at our website, www.equifax.com/corp/investorcenter/financials/main.shtml, or at the SECs web site, www.sec.gov.
We were founded in Atlanta, Georgia, in 1899, incorporated in Georgia in 1913, and have been known as Equifax Inc. since 1975. We have been publicly owned since 1965, listed on the New York Stock Exchange since 1971 and are a member of the S&P 500 and certain other indices.
We collect, organize and manage numerous types of credit, financial, public record, demographic and marketing information regarding individuals and businesses. This information originates from a variety of sources including financial or credit granting institutions, governmental entities and consumers. The original data is compiled and processed utilizing our proprietary software and systems and distributed to customers in a variety of user-friendly and value-add formats. Our products and services include consumer credit information, information database management, marketing information, business credit information, decisioning and analytical tools, and identity verification services which enable businesses to make informed decisions about extending credit or service, mitigate fraud, manage portfolio risk, and develop marketing strategies for consumers and businesses. We also enable consumers to manage and protect their financial affairs through a portfolio of products that we sell directly via the Internet and in various hard-copy formats.
We currently operate in 14 countries: North America (the U.S., Canada and Costa Rica), Europe (the United Kingdom (U.K.), The Republic of Ireland, Spain and Portugal) and Latin America (Brazil, Argentina, Chile, El Salvador, Honduras, Peru and Uruguay). We serve customers across a wide range of industries, including the financial services, retail, telecommunications, utilities, automotive, brokerage, healthcare and insurance industries, as well as state and federal governments. We also serve consumers directly. Our revenue stream is highly diversified with our largest customer providing slightly more than 2% of total revenues.
We managed our business and report our financial results through the following three reportable segments:
· North America
· Latin America
The North America reportable segment consists of three operating segments:
· Information Services
· Marketing Services
· Personal Solutions
Detailed financial results and segment information are provided in Note 14 of the Notes to Consolidated Financial Statements in this Form 10-K. We implemented an organizational realignment in late 2006, effective January 1, 2007; see further discussion of this matter in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, and Note 15 of the Notes to Consolidated Financial Statements in this Form 10-K.
Our strategic objective is to provide value-add products and services that leverage our information and enabling technology assets to allow customers to determine the type of business relationship to have with a particular consumer or business. These products and services include:
· Enabling businesses to make informed decisions utilizing credit information;
· Assisting customers in reducing the impact of fraudulent activities;
· Assisting companies in the management of their credit portfolios;
· Enabling customers to manage their debt recovery activities;
· Enabling customers to market specific products and services to consumers and businesses;
· Enabling customers to develop marketing strategies for cross-selling other products and services to their entire customer base;
· Enabling consumers to manage information on their personal credit and financial histories; and
· Enabling customers to comply with federal and state legislation in their customer management and identification verification processes.
To meet these strategic objectives, we have developed numerous analytical tools for customers to use in their consumer and commercial decisioning activities. These activities cover the complete customer life cycle from consumer acquisition, to relationship management (e.g., up-selling, cross-selling), to risk management.
Our Predictive Sciences solutions include (1) the statistical analysis of data, (2) creation of models, (3) integration of models into decisioning platforms (e.g., enabling technologies) and (4) consulting with our customers in the formulation and execution of strategies to maximize revenue opportunities throughout our Information and Marketing Services businesses. We also sell our services to institutions that may not be customers for our information services, but will utilize our enabling technology solutions to make better business decisions.
Our enabling technologies include products such as ePort, APPLY, Decision Power, Accel CM, Accel DM, LoanCenter and InterConnect®. These platforms are developed in an Application Service Provider (ASP) format to allow for ease of integration with customers internal systems and to leverage Equifaxs extensive technological systems and communication networks.
North America is our largest reportable segment. During the twelve months ended December 31, 2006, North America generated 80% of our revenue and 85% of our operating profit before general corporate expense. This segment includes results of our Information Services, Marketing Services and Personal Solutions operating segments in the U.S., Canada and Costa Rica.
In North America, our Information Services operating segment consists of the following components: U.S. Consumer and Commercial Services, Mortgage Services and our Canadian Operations.
Our Consumer Services products and services are derived from the credit information that we maintain about individual consumers and are the dominant products and services in our North America segment. We offer a full range of Consumer Services products in our North America markets, including credit reporting, credit scoring, mortgage reporting, risk management, fraud detection and modeling
services, together with certain of our decisioning products that facilitate pre-approved offers of credit and automate a variety of credit decisions. Our customers utilize the information we provide to make decisions for a wide range of credit and business purposes, such as whether, and on what terms, to approve mortgage or auto loans and credit card applications, and for identity verification and similar business uses. Risk management, as well as fraud detection and prevention services, enable banks and financial institutions to monitor default rates and proactively manage their existing credit card or other consumer loan accounts.
Customers of our Consumer Services products and services access them through a full range of electronic distribution mechanisms, including direct real-time access, which facilitates instant decisions for the immediate granting of credit. Customers of our Consumer Services products include banks, mortgage lenders, financial institutions, telecommunications and utility companies, retailers, automotive manufacturers and dealers, brokerage firms, insurance companies, healthcare providers and governments.
Our Commercial Services products and services are derived from our databases of credit and financial information about businesses. The sale of credit information, scores and decisioning tools are the primary sources of revenue and are purchased by a wide variety of customers. We contributed to the creation of Small Business Exchange, a unique single source of small business credit information in the U.S. Our Small Business Credit Database includes loan, credit card, public records data and leasing history as well as trade accounts receivable performance. Customers utilize our reports to make financial and marketing decisions.
Our Mortgage Services products, available only in the U.S., consist of specialized credit reports that combine the reports of the three major consumer credit reporting agencies into one. Mortgage lenders use these reports in making their mortgage underwriting decisions.
Our operations in Canada include our Consumer and Commercial Services product lines, and these revenues are consolidated on a geographic basis as Canadian Operations.
Our Marketing Services operating segment includes our Credit Marketing and Direct Marketing products and services. We offer a full range of credit and direct marketing products in the U.S., which provide customers with the tools they need to maximize and manage their customer marketing efforts, effectively utilize a variety of marketing methods, efficiently identify and acquire new customers and realize additional revenue from existing customers. Our Marketing Services products enable customers to:
· Identify, target and reach the best prospects and customers;
· Utilize our accurate and powerful consumer databases to manage their customer portfolios;
· Segment customers according to particular criteria;
· Select from specialty, self-reported or permission-based direct mailing lists;
· Easily access online customer mailing lists;
· Use what-if scenarios to create customized mailing lists online;
· Improve their direct mail response rate; and
· Reduce costs associated with unwanted or unnecessary mailings.
Our Credit Marketing Services products and services utilize our consumer credit information databases through batch processing to help our customers acquire new customers for credit relationships and monitor current relationships, using a variety of products and services including prescreen and account review services.
We provide Direct Marketing Services products, such as compiled, self-reported and permission-based consumer marketing databases and services, and integrated precision marketing tools that enable marketers to identify, target and build consumer relationships through postal and email marketing. Our targeted high-quality demographic and lifestyle information lists and list performance services, which include data enhancement, data quality, modeling and analytical consulting, facilitate improved direct mail response and increased customer loyalty. Our products enable customers to target specifically defined market segments and individuals, and to design more effective and economically-efficient marketing campaigns. Customers include financial institutions, insurers, catalogers, publishers, technology companies, manufacturers and telecommunications companies.
Our products give consumers information to make financial decisions, as well as providing the ability to monitor their credit information. We offer three monitoring products for consumers who are concerned about identity theft and data breaches: Credit Watch Gold 3-in-1 Monitoring that provides protection by monitoring and communicating changes on credit reports at any of the three consumer credit reporting agencies and Credit Watch Gold and Credit Watch Silver that allow consumers to monitor their Equifax credit report. We also provide consumers with credit reports and score products, including the Equifax Credit Report which provides consumers with access to their credit profile and the Equifax 3-in-1 Credit Report that combines reports from the three nationwide credit reporting agencies into one convenient easy-to-use product. In addition, we offer two products that provide the FICO® score, the score used by most lenders when making loan decisions: Score Power® a single purchase score product and Score Watch, a subscription product that monitors a consumers FICO score and shows correlating interest rates likely to be offered within credit score ranges. We offer all of our products in both online and offline (print) versions, depending upon the preference of the consumer. Our products are also available through relationships with business partners, by providing them the ability to distribute our products to their customers. Most of our products are available in the U.S. and Canada.
The Europe segment consists of our operations conducted in the U.K., Republic of Ireland, Spain and Portugal. During the twelve months ended December 31, 2006, Europe accounted for 10% of our revenue and 7% of our operating profit before general corporate expense. The U.K. accounted for 88% of the segments revenue during the twelve months ended December 31, 2006.
Our Information Services product line is sold in the U.K., Portugal and Spain. These products are based on consumer credit records that we maintain. The Consumer Services products we provide include credit reporting, credit scoring, risk management, fraud detection and modeling services. Our Commercial Services products, such as business credit reporting and commercial risk management services, are only available in the U.K.
In the U.K., we also provide both Credit Marketing and Direct Marketing products and services, similar to the U.S. Our core offerings include prospect list generation for marketing to businesses and consumers, along with analytics supporting marketing campaigns. We have a limited offering of Marketing Services products in Spain as well. We also offer our Personal Solutions products in the U.K. under the branding of myEquifax, a unique online service for consumers.
Europe customers include financial institutions, mortgage lenders, governments, utilities and telecommunications companies, which utilize the information we provide to make decisions for a wide range of credit and business purposes, such as approval of loans, applications, verification of identities, account management and other related business uses. Products are developed to respond to market needs and opportunities and may include variations of products offered in the U.S. market.
The Latin America segment consists of our operations conducted in Brazil, Argentina, Chile, El Salvador, Honduras, Peru and Uruguay. During the twelve months ended December 31, 2006, Latin America accounted for 10% of our 2006 revenue and 8% of our operating profit before general corporate expense. Brazil accounted for 51% of the segments revenue.
Our Information Services product and services line is sold in each country we serve in Latin America, and our Consumer Services products and services are the dominant source of revenue in each of these countries, with the exception of Brazil. We offer a full range of Consumer Services products, based on the consumer credit records that we maintain, including credit reporting, credit scoring, risk management, identity verification and fraud detection services.
We offer our Commercial Services products and services line in each of the Latin America countries we serve to varying degrees. It is the dominant source of revenue in Brazil where we are a market leader. Services offered include credit reporting, decisioning tools and software, and commercial risk management services for businesses operating in these countries.
We also offer our Credit Marketing products and services to varying degrees in each of the Latin America countries we serve and provide a variety of consumer and commercial marketing services based on our extensive credit information databases including account profitability analysis, business profile analysis, business prospect lists and database management.
Latin America customers include financial institutions, telecommunications companies, retailers, and governments which utilize the information we provide to make decisions for a wide range of credit and business purposes such as credit card applications, service applications, identity verification and similar business uses. In each of this segments countries, the majority of our customers access our products and services through a number of electronic distribution mechanisms, including direct real-time access, which facilitates instant decisions and cross-selling opportunities. We also sell our various reports and services directly via branches, websites and mail fulfillment.
We have a sales organization in each of our geographical segments. We sell our products primarily through our direct sales force, although the sales channels used by us can and will vary by product and service depending on market and business needs. We also sell and market our products and services through indirect sales channels. In addition, we sell through direct mail and various websites, such as www.equifax.com- which is the primary distribution channel for our Personal Solutions products and services.
We primarily distribute our products and services to customers in all markets through electronic data interfaces. Our enabling technologies platforms are developed primarily in an ASP format to allow for ease of integration into customers inhouse technology systems and to leverage our extensive technological system and communication network. Equifax ePORT, one of our web-based product delivery channels, enables us to deliver services to customers via a secure Internet connection. The success of our Personal Solutions product line is directly linked to delivery of products to consumers through a secure Internet channel. We will continue to leverage technology to capitalize on the most efficient, secure and effective means of delivering products and services to our customers.
Our products and services are based on proprietary technology and databases enabling customers to operate their businesses efficiently and effectively. We constantly expand our product and service offerings through internal development, partnering with third parties and through acquisitions.
We rely extensively on data from external sources for our proprietary and non-proprietary databases. These sources include financial or credit granting institutions, which provide loan and accounts receivable information; governmental entities, which provide public records of bankruptcies, liens and judgments; and consumers, who participate in surveys and submit warranty cards from which we gather demographic and marketing information. Our Information Services product line relies predominately on data received from customers via contractual relationships with vendors and other commercial enterprises and from various government and public record services. In the U.S., we also rely on a contractual relationship with Computer Sciences Corporation, a division of which is a third-party affiliate, to provide us credit data for consumers residing in certain geographic areas. Outside of the U.S., governmental data sources are generally more significant to our business.
Our Direct Marketing Services products utilize information derived from proprietary databases consisting of consumer, lifestyle and demographic information. This information is acquired from third-party data compilers or is gathered from consumers voluntarily reporting information on product registration cards which they submit via paper, electronically to a third-party or via the Internet to websites maintained by us. This permission-based information is generally less regulated and restricted than the credit information that we maintain. See Government Regulation below. These databases provide us with the opportunity to develop new products to explore cross-selling synergies with all of our databases. Our Credit Marketing Services products utilize information derived from the credit-based consumer data that also underlies our Information Services segments.
The databases underlying our Information Services and Marketing Services segments include numerous generalized databases and specialized databases of varying sizes. Some of these databases are subject to regulatory or contractual restrictions regarding usage. Our databases are regularly updated by information provided by financial institutions, telecommunications companies, other trade credit providers and governments, and we are committed to enhancing, expanding and maintaining the integrity of the information contained in our proprietary databases. Our Personal Solutions product line relies on the consumer credit information databases, which support our Consumer Services products.
Data and Privacy Protection in the U.S. Our U.S. operations are subject to various federal and state laws and regulations governing the collection, protection and use of consumer credit and other information, and imposing sanctions for the misuse of such information or unauthorized access to data. Many of these provisions also affect our customers use of consumer credit or other data we furnish. The information underlying our U.S. Commercial Services and Direct Marketing Services business is less regulated than the other portions of our business. A significant portion of the information maintained by our Marketing Services business is voluntarily provided by individuals, rendering it subject to fewer restrictions on use. It is our policy, however, to treat all information with a high degree of security, reflecting our recognition of individuals privacy concerns.
These laws and regulations that may be applied to our business include, but are not limited to, the following:
· The Fair Credit Reporting Act (FCRA), which governs among other things the reporting of information to credit reporting agencies, including Equifax; making prescreened offers of credit; the sharing of consumer report information among affiliated and unaffiliated third parties; access to credit scores; and requirements for users of consumer report information. Violation of the FCRA, or of similar state laws, can result in an award of actual damages, as well as statutory and/or punitive damages in the event of a willful violation.
· The Fair and Accurate Credit Transactions Act of 2003 (FACT Act), which amended the FCRA and requires nationwide consumer credit reporting agencies, such as us, to furnish a free annual credit file disclosure to consumers, upon request, through a centralized request facility we have established with the other nationwide credit reporting agencies. The FACT Act includes new requirements for financial institutions to develop policies and procedures to identify potential identity theft and, upon the request of a consumer, to place a fraud alert in the consumers credit file stating that the consumer may be the victim of identity theft or other fraud; new consumer credit report notice requirements for lenders that use consumer report information in connection with risk-based credit pricing actions; new requirements for entities that furnish information to consumer reporting agencies to implement procedures and policies regarding the accuracy and integrity of the furnished information, and regarding the correction of previously furnished information that is later determined to be inaccurate; and a new requirement for mortgage lenders to disclose credit scores to consumers. The FACT Act also prohibits a business that receives consumer information from an affiliate from using that information for marketing purposes unless the consumer is first provided a notice and an opportunity to direct the business not to use the information for such marketing purposes (opt-out), subject to certain exceptions.
· The Financial Services Modernization Act of 1999, or Gramm-Leach-Bliley Act (GLB), which, among other things, regulates the use of non-public personal financial information of consumers that is held by financial institutions. Equifax is subject to various GLB provisions, including rules relating to the physical, administrative and technological protection of non-public personal financial information. Breach of the GLB can result in civil and/or criminal liability and sanctions by regulatory authorities, such as fines of up to $100,000 per violation and up to five years imprisonment for individuals.
· The Health Insurance Portability and Accountability Act of 1996 (HIPAA), which requires reasonable safeguards to prevent intentional or unintentional use or disclosure of protected health information.
· Federal and state laws governing the use of the Internet and regulating telemarketing, including the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM), which regulates commercial email, prohibits false or misleading header information, requires that a commercial email be identified as an advertisement, and requires that commercial emails give recipients an opt-out method.
· Fannie Mae and Freddie Mac regulations applicable to our credit reporting and mortgage services products, and the Real Estate Settlement Procedures Act and HUDs Regulation X, which requires the disclosure of certain basic information to borrowers concerning settlement costs and prohibits the charging of unearned fees and certain kickbacks or other fees for referrals in connection with a residential mortgage settlement service.
We continue to monitor federal and state legislative and regulatory issues involving consumer data privacy and protection. At the federal level, Congress has held hearings and drafted or is considering various bills dealing with data security, identity theft, information brokers, credit reports, credit score access and use limitations, use of social security numbers, public records access and class action reform.
A number of states in the U.S. have passed versions of security breach notification and credit file freeze legislation. A file freeze enables identity theft victims, or in certain states recipients of data breach notices or all consumers, to place and lift a freeze on access to their credit files. A freeze also imposes differing requirements on credit reporting for how and when to respond to such requests and significant differences in the fees the agencies may charge for freeze-related actions. State legislatures are considering various other bills dealing with data security, identity theft, information brokers, credit reports, credit score access and use limitations, use of social security numbers and public records access.
International Data and Privacy Protection. We are subject to data protection, privacy and consumer credit laws and regulations in the foreign countries where we do business.
· In Canada, the Personal Information Protection and Electronic Documents Act (2000) applies to organizations with respect to personal information that they collect, use or disclose in the course of commercial activities. It requires compliance with the National Standard of Canada Model Code for the Protection of Personal Information, covering accountability and identifying purposes, consent, collection, use, disclosure, retention, accuracy, safeguards, individual access and compliance. The Federal Privacy Commissioner is invested with powers of investigation and intervention, and provisions of Canadian law regarding civil liability apply in the event of unlawful processing which is prejudicial to the persons concerned.
· In Europe, we are subject to the European Union (EU) data protection laws, including the comprehensive EU Directive on Data Protection (1995), which imposes a number of obligations on Equifax with respect to use of personal data, and includes a prohibition on the transfer of personal information from the EU to other countries that do not provide consumers with an adequate level of privacy or security. The EU standard for adequacy is generally stricter and more comprehensive than that of the U.S. and most other countries. In the U.K., the Data Protection Act of 1998 regulates the manner in which we can use third-party data. Recent regulatory limitations affect our use of the Electoral Roll, one of our key data sources in the U.K. Generally, the data underlying the products offered by our U.K. Information Services and Personal Solutions product lines, excluding our Commercial Services products, are subject to these regulations.
· In Latin America, most countries generally are following the EU data protection model. This includes consumer data protection and privacy laws and regulations in Argentina and Chile. There are also constitutional provisions in Argentina, Brazil, Chile, Peru and certain other countries which declare the right to a judicial hearing on the use of personal data, and grant individuals the right to access and correct information in the possession of data controllers in many of those countries.
These laws and regulations have not resulted in material changes to our business practices to date, but have significantly increased our compliance costs. In the U.S., we have seen an increase in the number of notices resulting from breached third-party databases and in the number of consumers that contact us following a breach to obtain their credit files, credit scores and/or use our credit monitoring services.
We generally seek protection under federal, state and foreign laws for strategic or financially important intellectual property developed in connection with our business. Certain intellectual property, where appropriate, is protected by contracts, licenses, registrations, confidentiality or other agreements or protections. We own several patents registered in the U.S. and certain foreign countries. We also have certain registered trademarks in the U.S. and in many foreign countries. The most important of these is Equifax and many variations thereof. These trademarks are used in connection with most of our product lines and services. Although these patents and trademarks are important and valuable assets in the aggregate, no single patent, group of patents or trademark is critical to the success of our business. We do not hold any franchises or concessions that are material to our business or results of operations.
We license other companies to use certain data, technology and other intellectual property rights we own or control, primarily as core components of our products and services, on terms that are consistent with customary industry standards.
We are licensed by others to use certain data, technology and other intellectual property rights they own or control, none of which is material to our business except for licenses from (1) Fair Isaac Corporation, relating to certain credit-scoring algorithms and the right to sell credit scores derived from
them, which licenses have varying durations and generally provide for usage-based fees; and (2) Seisint, Inc., relating to a software platform which facilitates sales by our Direct Marketing Services and Credit Marketing Services units, which licenses have ten-year terms beginning in 2002 and may be renewed on an annual basis thereafter.
We operate in a number of geographic, product and service markets, which are highly competitive. Our Information Services products primarily compete with the products of two global consumer credit reporting companies, Experian and TransUnion, which offer a range of consumer credit reporting products that are similar to products we offer. We believe that our products and services offer customers an advantage over those of our competitors because of the quality of our data files, which we believe to be superior in terms of depth and accuracy. Our competitive strategy is to rely on product features and quality while remaining competitive on price. Experian and The Dun & Bradstreet Corporation are the major competitors for our Commercial Services products, although we believe we have a unique database and product for the small business segment of that market. Our Marketing Services products also compete with these companies and others who offer demographic information products and services, including Acxiom Corporation, Harte-Hanks, Inc. and infoUSA, Inc. We believe the Marketing Services products and services are superior and, in some cases, unique compared to those offered by our competitors at comparable prices. Our Personal Solutions products and services compete with similar offerings sold directly by Experian and TransUnion and also with offerings from a number of resellers of consumer credit information sold by Experian, TransUnion and us. We tailor our pricing of Personal Solutions products to the needs of the market, which can change frequently due to the dynamic nature of the consumer market. We change our pricing periodically to accommodate new product introductions or other market conditions. We also compete with Fair Isaac Corporation, Experian and TransUnion with respect to our analytical tools.
We employed approximately 4,960 employees in 14 countries as of January 31, 2007. The North America segment employed approximately 2,680 of these employees, Europe employed approximately 590, Latin America employed approximately 1,140 and general corporate employed approximately 550. None of our U.S. employees are subject to a collective bargaining agreement and no work stoppages have been experienced. Pursuant to local laws, our employees in Brazil, Spain and Argentina are subject to collective bargaining agreements that govern general salary and compensation matters, basic benefits and hours of work. Equifax is not a party to these agreements. We consider our employee relations to be good. Information regarding our officers is included in Executive Officers of the Registrant below.
Our website is www.equifax.com. We make available on this website, free of charge, our annual reports on Form 10-K, quarterly filings on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and Exchange Commission (SEC). Other information contained on our website is not part of this Form 10-K or our other filings with the SEC.
Detailed financial information by geographic area, including revenues for the past three fiscal years from our customers in the U.S, and from customers in certain foreign countries, is set forth in Note 14 of the Notes to Consolidated Financial Statements in this Form 10-K.
The persons serving as our executive officers as of February 27, 2007, together with their ages, positions and brief summaries of their business experience, are as follows:
There are no family relationships among our executive officers, nor are there any arrangements or understandings between any of the officers and any other persons pursuant to which they were selected as officers.
Mr. Smith has been Chairman and Chief Executive Officer since December 15, 2005. He was named Chairman-Elect and Chief Executive Officer effective September 19, 2005 and was elected as a Director on September 22, 2005. Prior to that, Mr. Smith served as Chief Operating Officer, GE Insurance Solutions, since 2004; as President and Chief Executive Officer of GE Property and Casualty Reinsurance from 2003 to 2004; as President and Chief Executive Officer of GE Property and Casualty ReinsuranceAmericas of GE Global Insurance Holdings Corp. from 2001 to 2003; and as President and Chief Executive Officer, GE Capital Fleet Services from 1995 to 2000.
Mr. Adrean joined Equifax as Corporate Vice President and Chief Financial Officer in October 2006. Prior to joining Equifax, he served as Executive Vice President and Chief Financial Officer of NDCHealth Corporation since 2004. Prior thereto, he was Executive Vice President and Chief Financial Officer of EarthLink, Inc. from 2000 until 2004.
Mr. Mast has served as General Counsel since he joined Equifax in 2000. His responsibilities include legal services, global sourcing, security and compliance, government and legislative relations, corporate governance and privacy functions.
Ms. Rushing joined Equifax in May 2006 as Corporate Vice President and Chief Administrative Officer. Prior to joining Equifax, Ms. Rushing served as an executive coach and HR Consultant with Atlanta-based Cameron Wesley LLC. Prior thereto, she was Senior Vice President of Human Resources at The Coca-Cola Company, where she was employed from 1996 until 2004.
Mr. Springman has been Chief Marketing Officer since February 2004. He joined Equifax in 1990 and has held various executive positions, most recently serving as the head of the Predictive Sciences unit from
August 2002 until February 2004. Prior thereto, Mr. Springman served as Group Executive, North America Information Solutions from September 2001 until August 2002.
Mr. Webb joined Equifax in November 2004 as the Chief Technology Officer. Prior to joining Equifax, Mr. Webb was employed by General Electric Corporation from 1996 to 2004, where he held Chief Information Officer positions for GE Commercial Finance, GE Global Consumer Finance and GE Energy Services. Prior thereto, he worked as an information technology and management consultant with EDS and Andersen Consulting.
Mr. Adams assumed his current position in January 2007. He joined Equifax in 1999 and has served as Group Executive, North America Information Services from November 2003 until December 2006; Senior Vice President, Equifax North America Sales from October 2001 until October 2003; and Senior Vice President, Financial Services from February 1999 until 2001.
Mr. Ely joined Equifax in February 2004 and is President, North American Personal Solutions. He served as Group Executive, Personal Solutions from August 2005 until December 2006 when he assumed his current position. From February 2004 until August 2005, Mr. Ely was Senior Vice President of Product Management and Marketing. Prior to joining Equifax, he was Senior Vice President, Worldwide Marketing of S1 Corporation from June 2001 until September 2003, and held senior marketing and software development management positions with NetVendor, Per-Se Technologies, Dun & Bradstreet Software, Sybase and NCR Corporation prior to that.
Mr. Ploder joined Equifax in February 2004 and is President, International. Prior to that position, Mr. Ploder was Group Executive, Latin America. Before joining Equifax, he was employed by MCI where he had been Vice President, International since 1999. Before that, Mr. Ploder spent the previous 13 years in the telecommunications industry, primarily in international management positions.
Mr. Shannon assumed his current position in January 2007. Since joining Equifax in 1992, he has held various executive positions including, most recently, Group Executive, Europe from February 2002 until December 2006, and Managing Director, U.K. from July 2001 until February 2002.
Ms. King joined Equifax in March 2004 as Vice President and Corporate Controller. Prior to joining Equifax, Ms. King served as Corporate Controller for UPS Capital from March 2001 until March 2004 and before that held various executive positions with The Coca-Cola Company.
The following risk factors and other information included in this Form 10-K should be carefully considered. The risks and uncertainties described in the subsequent discussion are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be less significant may also impair our business operations. If any of the following risks actually were to occur, our business, reputation, financial condition or results of operations could be materially and adversely affected.
We have announced and are currently in the process of implementing a new long-term growth strategy, and we may not be successful.
We have developed a long-term growth strategy which includes (1) increasing our share of our customers spending on information-related services through the development and introduction of new products, pricing our services in accordance with the value they create for customers, increasing the range of current services utilized by customers, and improving the quality of sales and customer support interactions with consumers; (2) increasing our customers use of our proprietary analytical, predictive and enabling technology; (3) investing in and developing new, differentiated data sources that provide unique value to customers in their highest value decisioning needs; and (4) expanding into key emerging
opportunities via acquisitions, partnerships, and/or internal development, including related markets in the United States, such as initiatives in the commercial, collections, and healthcare markets, as well as new geographic markets outside the United States. If we are unable to successfully execute our growth strategy, we may not be able to grow our business, growth may occur more slowly than we anticipate, or our revenues, net income and earnings per share may decline.
We may incur risks related to acquisitions or significant investment in businesses.
Our long-term strategy includes growth through acquisitions and investments in businesses that offer complementary products, services and technologies. Any acquisitions or investments, including our pending acquisition of TALX Corporation as described in Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, will be accompanied by the risks commonly encountered in acquisitions of businesses. Such risks include:
· The financial and strategic goals for the acquired and combined business may not be achieved;
· The possibility that we will pay more than the acquired companies or assets are worth;
· Unexpected liabilities arising out of the acquired businesses;
· The difficulty of assimilating the systems, operations and personnel of the acquired businesses;
· The potential disruption of our ongoing business;
· The potential dilution of our existing shareholders and earnings per share;
· Unanticipated liabilities, legal risks and costs;
· The distraction of management from our ongoing business; and
· The impairment of relationships with employees and customers as a result of any integration of new management personnel.
These factors could harm our business, results of operations or financial position, particularly in the event of a significant acquisition. The acquisition of businesses having a significant presence outside the U.S. will increase our relative exposure to the risks of conducting operations in international markets.
Since our revenues depend to a large extent on our customers demand for consumer credit information, deterioration of current economic conditions may harm our results of operations.
Although we continue to take steps to diversify our lines of business, consumer credit reports remain a core product. In general, our customers use our credit information and related services to process applications for new credit cards, automobile loans, home mortgages, home equity loans and other consumer loans. They also use our credit information and services to monitor existing credit relationships. Consumer demand for credit (i.e., rates of spending and levels of indebtedness) tends to grow more slowly or decline during periods of economic contraction or slow economic growth. Rising rates of interest may reduce consumer demand for mortgage loans and also impact our mortgage services joint venture. A decline in consumer demand for credit may reduce our customers demand for our consumer credit information. Consequently, our revenues from consumer credit information products and services could be negatively affected and our results of operations harmed if consumer demand for credit decreases.
The loss of access to credit and other data from external sources could harm our ability to provide our products and services.
We rely extensively upon data from external sources to maintain our proprietary and non-proprietary databases, including data received from customers, strategic partners and various government and public
record sources. Our data sources could withdraw their data from us for a variety of reasons, including legislatively or judicially imposed restrictions on use. We also compete with several of our third-party data suppliers. If a substantial number of data sources or certain key data sources were to withdraw or be unable to provide their data, if we were to lose access to data due to government regulation, or if the collection of data becomes uneconomical, our ability to provide products and services to our clients could be materially adversely impacted, which could result in decreased revenues, net income and earnings per share.
Our markets are highly competitive and new product introductions and pricing strategies being offered by our competitors could decrease our sales and market share or require us to reduce our prices in a manner that reduces our gross margins.
We operate in a number of geographic, product and service markets that are highly competitive, as described above under Competition. We currently have a business relationship with Fair Isaac Corporation to resell their credit scoring product and are also involved in litigation with that firm arising from our development with TransUnion and Experian of the VantageScore (SM) credit scoring product which is competitive with Fair Isaacs products. Competitors may develop products and services that are superior to or that achieve greater market acceptance than our products and services.
The sizes of our competitors vary across market segments, as do the resources we have allocated to the segments we target. Therefore, some of our competitors may have significantly greater financial, technical, marketing or other resources than we do in one or more of our market segments, or overall. As a result, our competitors may be in a position to respond more quickly than we can to new or emerging technologies and changes in customer requirements, or may devote greater resources than we can to the development, promotion, sale and support of products and services. Moreover, new competitors or alliances among our competitors may emerge and potentially reduce our market share, revenue or margins. If we are unable to respond as quickly or effectively to changes in customer requirements as our competition, our ability to expand our business and sell our products and services will be negatively affected.
Some of our competitors also may choose to sell products competitive to ours at lower prices by accepting lower margins and profitability, or may be able to sell products competitive to ours at lower prices given proprietary ownership of data, technical superiority or economies of scale. Price reductions by our competitors could negatively impact our margins and results of operations, and could also harm our ability to obtain new customers on favorable terms.
Our ability to increase our revenues will depend to some extent upon introducing new products and services, and if the marketplace does not accept these new products and services, our revenues may remain flat or decline.
To increase our revenues, we must enhance and improve existing products and continue to introduce new products and new versions of existing products that keep pace with technological developments, satisfy increasingly sophisticated customer requirements and achieve market acceptance. We believe much of our future growth prospects will rest on our ability to continue to expand into newer products and services. Products that we plan to market in the future are in various stages of development. We cannot assure that the marketplace will accept these products. If our current or potential customers are not willing to switch to or adopt our new products and services, such as the new VantageScore credit scoring product, our ability to increase revenues or improve operating margins will be impaired.
If we fail to keep up with rapidly changing technologies, our products and services could become less competitive or obsolete.
In our markets, technology changes rapidly and there are continuous improvements in computer hardware, network operating systems, programming tools, programming languages, operating systems,
database technology and the use of the Internet. Advances in technology may result in changing customer preferences for products and services and delivery formats. If we fail to enhance our current products and develop new products in response to changes in technology, industry standards or customer preferences, our products and services could rapidly become less competitive or obsolete. Our future success will depend, in part, upon our ability to internally develop new and competitive technologies; use leading third-party technologies effectively; continue to develop our technical expertise; anticipate and effectively respond to changing customer needs; and influence and respond to emerging industry standards and other technological changes.
We may suffer adverse financial consequences if Computer Sciences Corporation requires us to purchase its credit reporting business when the public equity or debt markets or other financing conditions are unfavorable to us.
In 1988, we entered into an agreement with Computer Sciences Corporation, or CSC, and certain of its affiliates under which CSCs credit reporting agencies utilize our computerized credit database services. Under this agreement, CSC has an option, exercisable at any time, to sell its credit reporting business to us. The option expires in August 2013. The option exercise price will be determined by an appraisal process and would be due in cash within 180 days after the exercise of the option. We estimate that if CSC were to exercise the option today, the option price would be approximately $650 million to $725 million. This estimate is based solely on our internal analysis of the value of the business, current market conditions and other factors, all of which are subject to constant change. Therefore, the actual option exercise price could be materially higher or lower than the estimated amount. If CSC were to exercise its option, we would have to obtain additional sources of funding. We believe that this funding would be available from sources such as additional bank lines of credit and the issuance of public debt and/or equity. However, the availability and terms of any such capital financing would be subject to a number of factors, including credit market conditions, the state of the equity markets, general economic conditions and our financial performance and condition. Because we do not control the timing of CSCs exercise of its option, we could be required to seek such financing and increase our debt levels at a time when market or other conditions are unfavorable.
We conduct business outside the U.S. During 2006, we generated approximately 28% of our revenues from business outside the U.S. As part of our growth strategy, we plan to continue to pursue opportunities outside the U.S. As a result, our future operating results could be negatively affected by a variety of factors, many of which are beyond our control. Risks that could give rise to incremental costs in our international operations include: political and economic instability; changes in regulatory requirements and policy and the adoption of laws detrimental to our operations, such as legislation relating to the collection and use of personal data; negative impact of currency exchange rate fluctuations; potentially adverse tax consequences; increased restrictions on the repatriation of earnings; and general economic conditions in international markets. We may not be able to avoid significant expenditures should one or more of these risk factors occur.
Security is critically important to our business, and breaches of security, or the perception that e-commerce is not secure, could harm our business and reputation.
Business-to-business and business-to-consumer electronic commerce, including that which is Internet-based, requires the secure transmission of confidential information over public networks. Several of our products are accessed through the Internet, including our consumer and commercial information services that are delivered via ePORT, our Internet delivery channel, and our Personal Solutions services accessible through the www.equifax.com website. Security breaches in connection with the delivery of our products and services via ePORT, our Personal Solutions website, or well-publicized security breaches not
involving the Internet that may affect us or our industry, such as database intrusion, could be detrimental to our business, operating results and financial condition. We cannot be certain that advances in criminal capabilities, new discoveries in the field of cryptography or other developments will not compromise or breach the technology protecting the networks that access our products, consumer services and proprietary database information.
If we experience system failures, the delivery of our products and services to our customers could be delayed or interrupted, which could harm our business and reputation and result in the loss of customers.
Our ability to provide reliable service largely depends on the efficient and uninterrupted operation of our computer network systems and data centers. Some of these systems have been outsourced to third-party providers. Any significant interruptions could severely harm our business and reputation and result in a loss of customers. Our systems and operations could be exposed to damage or interruption from fire, natural disaster, power loss, war, terrorist act, telecommunications failure, unauthorized entry and computer viruses. The steps we have taken to prevent a system failure, including backup disaster recovery systems, may not be successful, and our property and business interruption insurance may not be adequate to compensate us for all losses or failures that may occur.
The loss of key personnel, or the inability to attract and retain highly skilled personnel, could make it more difficult to run our business and reduce our likelihood of success.
We are dependent on our ability to attract and retain experienced sales, consulting, research and development, marketing, technical support and management personnel. The loss of our key employees and management might slow the achievement of important business goals. We may not be able to attract and retain skilled and experienced technical personnel on acceptable terms because of intense competition.
We could fail to adequately protect our intellectual property rights.
Our ability to compete effectively depends in part on the protection of our technology, products, services and brands through intellectual property right protections, including patents, copyrights, database rights, trade secrets and trademarks. The extent to which such rights can be protected and enforced varies in different jurisdictions.
We face and could continue to face claims for intellectual property infringement.
There is a risk of litigation relating to our use or future use of intellectual property rights of third parties. Third-party infringement claims and any related litigation against us could subject us to liability for damages, restrict us from using and providing our technologies, products or services or operating our business generally, or require changes to be made to our technologies, products and services. We are currently a defendant in litigation brought by Fair Isaac Corporation arising from our development with TransUnion and Experian of the VantageScore credit scoring product that is competitive with Fair Isaacs products, in which the plaintiff has alleged trademark infringement, among other claims.
Our agreements with key long-term customers may not be renewed.
We have long-standing relationships with a number of our large customers. There can be no assurance that these relationships will continue, due to market competition, customer requirements and customer consolidation through mergers or acquisitions. Although our largest single customer represents only slightly more than 2% of our revenue, the loss of a significant number of major customers could materially adversely affect our business, reputation, financial condition or operating results.
Our tax provisions may not be adequate.
Although we believe we have made appropriate provisions for taxes in the various jurisdictions in which we operate on the basis of current law, due to possible changes of law or challenges from tax authorities under existing laws it is possible that the provision may turn out to be insufficient and this could materially affect our financial condition.
Changes in the legislative, regulatory and judicial environments may adversely affect our ability to collect, manage, aggregate and use data.
The credit reporting and direct marketing industries are subject to substantial government regulation relating to individual privacy and the collection, distribution and use of information about individuals. The information and personal data we collect is subject to a variety of government regulations, including, but not limited to, those described above under Government Regulation. In addition, public interest in individual privacy rights and the collection, protection, distribution and use of information about individuals may result in the adoption of new federal, state, local and foreign laws and regulations that could include increased compliance requirements and restrictions on the purchase, sale and sharing of information about consumers for commercial purposes. This could have a negative impact on our ability to collect such information provided by consumers voluntarily. Future laws and regulations with respect to the collection, management and use of data about individuals, and adverse publicity, judicial interpretations or potential litigation concerning the commercial use of such information may result in substantial regulatory compliance costs, litigation expense or a loss of revenue.
The outcome of litigation or regulatory proceedings in which we are involved could be adverse.
Various legal proceedings arise during the normal course of our business. These include individual consumer cases, class action lawsuits, and actions brought by regulators. While we do not currently believe that the outcome of any such pending or threatened litigation will have a material adverse effect on our financial position, litigation is inherently uncertain and adverse developments or outcomes can result in significant monetary damages, penalties or injunctive relief against us. Our insurance arrangements may be insufficient to cover an adverse judgment in a large lawsuit. See Part I, Item 3, Legal Proceedings for information on our material pending litigation.
There may be further consolidation in our end-client markets.
To the extent that our existing clients merge with or are acquired by other entities who are not our clients or who use fewer of our services, such as in the financial services sector, we could be adversely impacted if the surviving entities use fewer of our services or discontinue use of our services altogether, or if the number of potential clients is thereby reduced.
We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common stock.
The issuance of additional equity securities or securities convertible into equity securities would result in dilution of the then-existing shareholders equity interests in us. Our Board of Directors has the authority to issue, without vote or action of shareholders, up to 10,000,000 shares of preferred stock in one or more series, and has the ability to fix the rights, preferences, privileges and restrictions of any such series. Any such series of preferred stock could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of
holders of our common stock. If we issue convertible preferred stock, a subsequent conversion may dilute the current common shareholders interest. Our Board of Directors has no present intention of issuing any such preferred stock, but reserves the right to do so in the future. In addition, we are authorized to issue, without shareholder approval, up to 300,000,000 shares of common stock, of which 128,615,662 shares were outstanding as of December 31, 2006, including shares held by employee benefits trusts.
Provisions in our articles of incorporation, bylaws, shareholder rights plan, other agreements and Georgia law may make it difficult for a third-party to acquire us, even in situations that may be viewed as desirable by our shareholders.
Our articles of incorporation, bylaws, shareholder rights plan, other agreements and the General Business Corporation Code of the State of Georgia, or Georgia Code, contain provisions that may delay or prevent an attempt by a third-party to acquire control of our company. For example, our articles of incorporation:
· Provide for classified terms for the members of our Board of Directors;
· Authorize our Board of Directors to fill vacant directorships or to increase the size of the Board;
· Do not authorize our shareholders to remove a director without cause;
· Do not authorize our shareholders to cumulate voting in the election of directors; and
· Authorize the issuance of preferred stock with such rights, powers and privileges as the Board of Directors deems appropriate.
In addition, our bylaws limit the ability of shareholders to bring business before a meeting of shareholders and do not allow our shareholders to act by written consent.
We are a Georgia corporation and have elected to be governed by the business combination and fair price provisions of the Georgia Code, that could be viewed as having the effect of discouraging an attempt to obtain control of us. The business combination provision generally would prohibit us from engaging in various business combination transactions with any interested shareholder for a period of five years after the date of the transaction in which the person became an interested shareholder unless certain designated conditions are met.
The fair price provision generally requires that, absent Board or shareholder approval of an acquisition or merger, an interested shareholder seeking to engage in a business combination transaction with us must pay the remaining shareholders the same price for their shares as was paid by the interested shareholder to acquire beneficial ownership of 10% or more of our outstanding voting shares.
We have also implemented a shareholder rights plan, sometimes referred to as a poison pill, which could make it uneconomical for a third-party to acquire our company on a hostile basis.
These provisions could also discourage or impede a tender offer, proxy contest or other similar transaction involving control of us, even if viewed favorably by shareholders.
There were no unresolved comments from the Staff of the SEC at December 31, 2006.
Our executive offices are located at 1550 Peachtree Street, N.W., Atlanta, Georgia, in a leased facility. Our other properties are geographically distributed to meet sales and operating requirements worldwide. We consider these properties to be both suitable and adequate to meet our current operating
requirements, and most of the space is being utilized. We ordinarily lease office space for conducting our business and are obligated under approximately 80 leases and other rental arrangements for our headquarters and field locations. We owned three office buildings at December 31, 2006, including buildings utilized by our Latin America operations and located in Sao Paulo, Brazil and Santiago, Chile. Our building located in Wexford, Republic of Ireland, which was utilized by our European operations, was sold in January 2007. We also own 23.5 acres in Windward Office Park located in Alpharetta, Georgia, adjacent to office space we currently lease. For additional information regarding our obligations under leases, see Note 6 of the Notes to Consolidated Financial Statements in this Form 10-K. We believe that suitable additional space will be available to accommodate our future needs.
Equifax, certain of its subsidiaries, and other persons have been named as parties in various legal actions and administrative proceedings arising in connection with the operation of Equifaxs businesses. In most cases, plaintiffs seek unspecified damages and other relief. These actions include the following:
Naviant Arbitration and Litigation. As previously reported, we have been involved in arbitration proceedings brought against the shareholder sellers of Naviant, Inc., which we acquired in 2002, claiming they breached various representations and warranties concerning information furnished to us in connection with the acquisition transaction. We also filed a lawsuit on August 13, 2004, in the U.S. District Court for the Southern District of Florida, in a case captioned Equifax Inc. and Naviant Inc. v. Austin Ventures VII, L.P, et al., to preserve our legal claims against these shareholder sellers. On June 20, 2005, the District Court granted our request to stay the litigation pending the outcome of the arbitration. Since our original demand for arbitration was filed on December 30, 2003, we have released our claims against one selling shareholder, Seisint, Inc., as part of a settlement; settled our claims against certain other former selling shareholders on June 14, 2006, in exchange for a cash payment to us of $15.2 million; and continued to pursue our arbitration claims against the remaining selling shareholders. On November 21, 2006, the District Court granted our request to lift the stay on our lawsuit so we can pursue our claims against the selling shareholders in that action. We have filed an amended complaint that focuses our claims on those pertaining to the remaining defendants. At our request, the arbitration panel has entered an order staying the arbitration proceedings.
CROA Litigation. On November 19, 2004, an action was commenced captioned Robbie Hillis v. Equifax Consumer Services, Inc. and Fair Isaac, Inc., in the U.S. District Court for the Northern District of Georgia. Plaintiff asserts that defendants have jointly sold Equifaxs Score Power® credit score product in violation of certain procedural requirements under the federal Credit Repair Organizations Act (CROA) and in violation of the antifraud provisions of that statute. Plaintiff contends that Equifax Consumer Services, Inc., and Fair Isaac are credit repair organizations under the CROA and that the transaction by which he purchased Score Power® was in violation of the CROA and fraudulent. On February 5, 2007, the parties entered into an Agreement of Settlement and, on February 8, 2007, the District Court entered an order approving the parties motion to consolidate cases, for preliminary approval of class action settlement, for approval of notice plan, and a motion for certification of settlement class. Under the proposed settlement, a class consisting of all purchasers from defendants of ScorePower, CreditWatch and a variety of related services, will release all CROA claims and will receive, on request, ScoreWatch for a three-month period without cost. Defendants also agreed to certain injunctive relief and will pay an award of fees to plaintiffs counsel not to exceed $4 million. Notices to the class will be distributed on or before March 9, 2007, and the final fairness hearing will be held on June 4, 2007.
On April 19, 2006, in an action captioned Steven G. Millett and Melody J. Millett v. Equifax Information Services, LLC and Equifax Consumer Services, Inc., which was originally filed on June 16, 2004, and then transferred from the U.S. District Court for Kansas to the U.S. District Court for the Northern District of Georgia, plaintiffs filed a Fifth Amended Class Action Complaint. In this complaint, plaintiffs assert,
among other allegations, that Equifax Consumer Services, Inc. sold Equifaxs Credit Watch product in violation of the CROA, asserting claims similar to those made by plaintiff in the Hillis case described in the preceding paragraph. On January 8, 2007, we entered into a settlement agreement with the Milletts by which their individual claims will be dismissed with prejudice. The class described originally by the complaint in Millett is subsumed in the Hillis settlement class.
NCRA/Standfacts Litigation. On March 25, 2004, the National Credit Reporting Association, Inc. (NCRA), a trade association of mortgage credit information resellers, and, separately, 23 of NCRAs members, commenced suits against Equifax, Experian and TransUnion alleging various violations of antitrust and unfair practices laws. After a variety of rulings on procedural and substantive issues, including grants on two occasions of all or part of defendants motions to dismiss, the remaining claims of all plaintiffs have been consolidated under a Third Amended Complaint, filed June 29, 2005, in an action captioned Standfacts Credit Services, et al. v. Experian Information Solutions, Inc., Equifax Inc., and TransUnion, LLC, pending in the U.S District Court of the Central District of California. The amended complaint seeks injunctive relief and unspecified amounts of damages. In 2005, the District Court granted defendants motions to dismiss all claims except for one remaining Sherman Act, Section 1 conspiracy claim. In late 2006, 19 of the 23 original plaintiffs were dismissed from the case by agreement. On January 19, 2007, the District Court entered an order pursuant to stipulation of the parties dismissing all remaining claims of plaintiffs, with prejudice, and preserving only the right of certain plaintiffs to appeal the previous dismissal by the District Court of certain monopolization claims to the United States Court of Appeals for the Ninth Circuit.
VantageScore Litigation. On March 14, 2006, Equifax and two other national credit reporting companies announced the development of VantageScore, a credit scoring system. VantageScore is being independently marketed and sold separately by the three national credit reporting companies through licensing agreements with VantageScore Solutions LLC, which is jointly owned by them. On October 11, 2006, Fair Isaac Corporation filed a lawsuit in the U.S. District Court for the District of Minnesota, alleging that the national credit reporting companies and VantageScore Solutions LLC violated antitrust laws, engaged in unfair competitive practices and infringed plaintiffs trademark by using a credit score product with a score range that overlaps the FICO® score range. The defendants have filed answers denying the claims. Equifax believes the lawsuit is without merit and will vigorously defend itself and VantageScore Solutions LLC against these claims.
Other. Equifax has been named as a defendant in various other legal actions, including administrative claims, class actions and other litigation arising in connection with our business. Some of the legal actions include claims for substantial compensatory or punitive damages or claims for indeterminate amounts of damages. We believe we have strong defenses to, and where appropriate, will vigorously contest, many of these matters. Given the number of these matters, some are likely to result in adverse judgments, penalties, injunctions, fines or other relief. However, we do not believe that these litigation matters will be individually material to our Consolidated Financial Statements. We may explore potential settlements before a case is taken through trial because of the uncertainty and risks inherent in the litigation process.
For information regarding contingent tax claims raised by the Canada Revenue Agency, and our accounting for legal contingencies, see Note 6 of the Notes to Consolidated Financial Statements in this Form 10-K.
No matters were submitted to a vote of our security holders during the fourth quarter of 2006.
Our common stock is listed and traded on the New York Stock Exchange under the ticker symbol EFX. The following table shows the high and low sales prices for our stock, as reported on the New York Stock Exchange, for each quarter in the last two fiscal years:
At January 31, 2007, we had approximately 7,280 holders of record of our common stock; however, we believe the number of beneficial owners of common stock exceeds this number.
While we have historically paid dividends to common shareholders, the declaration and payment of future dividends will depend on many factors, including our earnings, financial condition, business development needs, and regulatory considerations, and is at the discretion of our Board of Directors. Set forth below is the amount of cash dividends declared per share of Equifax common stock for each quarter in the last two fiscal years:
Information required by this Item regarding the securities authorized for issuance under our equity compensation plans is included in the section captioned Securities Authorized for Issuance Under Equity Compensation Plans of our Proxy Statement for the Annual Meeting of Shareholders to be held May 4, 2007. This Proxy Statement will be filed with the SEC, and is incorporated herein by reference.
The following table contains information with respect to purchases of our common stock made by or on behalf of Equifax or any affiliated purchaser (as defined in Rule 10b-18(a) (3) under the Securities Exchange Act of 1934), during our fourth quarter ended December 31, 2006:
(1) The total number of shares purchased includes: (a) shares purchased pursuant to our publicly-announced share repurchase program; and (b) shares surrendered, or deemed surrendered, in satisfaction of the exercise price and/or to satisfy tax withholding obligations in connection with the exercise of employee stock options, totaling 2,439 shares for the month of October 2006, zero shares for the month of November 2006, and 14,760 shares for the month of December 2006.
(2) Average price paid per share for shares purchased as part of our publicly-announced plan (includes brokerage commissions).
(3) The Program was last amended by our Board of Directors in February 2007, to authorize the repurchase of $650.0 million of our common stock (in addition to the then-remaining previous authorization of $132.6 million) from time to time, directly or through brokers or agents, and has no stated expiration date; $400 million of such repurchase authorization is contingent on the closing of our pending acquisition of TALX Corporation, described in Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations.
Our $500.0 million senior unsecured revolving credit agreement, as amended, with SunTrust Bank and other lenders restricts our ability to pay cash dividends on our capital stock or repurchase capital stock if the total amount of such payments in any fiscal year would exceed 20% of our consolidated total assets measured as of the end of the preceding fiscal year.
The table below summarizes our selected historical financial information for each of the last five years. The summary of operations for the years ended December 31, 2006, 2005 and 2004, and the balance sheet data as of December 31, 2006 and 2005, has been derived from our audited Consolidated Financial Statements included in Part II, Item 8, Financial Statements and Supplementary Data. The summary of operations for the years ended December 31, 2003 and 2002, and the balance sheet data as of December 31, 2004, 2003 and 2002 has been derived from our audited Consolidated Financial Statements not included in this report. The historical selected financial information may not be indicative of our future performance, and should be read in conjunction with the information contained in Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements in this Form 10-K.
(1) For information about acquisition activity during 2006, 2005 and 2004 presented in the table above, see Note 3 of the Notes to Consolidated Financial Statements in this Form 10-K. In 2003, we acquired assets and related businesses of five affiliates and a small eMarketing business for $42.9 million, primarily in cash; $19.6 million was allocated to goodwill, $15.5 million to purchased data files, and $6.2 million to non-compete agreements. In 2002, we acquired assets and related businesses of eleven affiliates and Naviant, Inc. for $333.6 million, consisting of cash and notes payable; $175.7 million was allocated to goodwill, $88.8 million to purchased data files, and $69.1 million to net assets.
(2) Our results of operations related to Spain Commercial and Italy during 2004, 2003 and 2002, presented in the table above, have been reclassified to discontinued operations. For additional information about these discontinued operations, see Note 12 of the Notes to Consolidated Financial Statements in this Form 10-K.
(3) On January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123R, Share-Based Payment (SFAS 123R), which resulted in incremental stock-based compensation expense during 2006. For additional information about the impact of SFAS 123R, see Note 2 of the Notes to Consolidated Financial Statements in this Form 10-K.
(4) In 2006, there were several litigation matters that had a material impact on our Consolidated Financial Statements and/or were not part of our core operations. For additional information about these litigation matters, see Note 6 of the Notes to Consolidated Financial Statements in this Form 10-K.
(5) In 2006, we recorded a severance charge of $6.4 million ($4.0 million, net of tax) related to an organizational realignment. For additional information about this charge, see Note 11 of the Notes to Consolidated Financial Statements in this Form 10-K.
(6) In 2003, we recorded asset impairment and restructuring charges of $30.6 million ($19.3 million, net of tax). Restructuring charges primarily consisted of employee severance and facilities consolidation.
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.
All references to earnings per share data in Managements Discussion and Analysis (MD&A) are to diluted earnings per share (EPS) unless otherwise noted. 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.
Our business plan is focused on providing a comprehensive information database, analytical resources to transform information into value-add insight for our customers and technology platforms that deliver highly customized decisioning tools that enable our customers to make decisions about their customers in real time at the point of interaction. Our products and services include consumer credit information, information database management, marketing information, commercial credit information, decisioning and analytical tools, and identity verification services, which enable businesses to make informed decisions about extending credit or service, mitigate fraud, managing portfolio risk and developing strategies for marketing to consumers and businesses. We also enable consumers to manage and protect their financial affairs through a portfolio of products that we sell directly and indirectly via the Internet and other marketing distribution channels.
Information. We collect, organize and manage numerous types of credit, financial, public record, demographic and marketing information regarding individuals and businesses. This information originates from a variety of sources including financial or credit granting institutions, which provide loan and accounts receivable information; governmental entities, which provide public records of bankruptcies, liens and judgments; and consumers who participate in surveys and submit warranty registration cards from which we gather demographic and marketing information. The original data is compiled and processed utilizing our proprietary software and systems and distributed to customers in a variety of user-friendly and value-add formats.
Analytics and Insights. We have developed analytical tools for customers to use in their consumer- and commercial-oriented decisioning activities. These decisioning activities include numerous types of consumer interactions including customer acquisition, relationship management (e.g., up-selling and cross-selling) and risk management.
Enabling Technologies. Our enabling technologies include products such as ePort, Equifax APPLY, Decision Power, ID Authentication, Accel CM, Accel DM, LoanCenter and InterConnect. These platforms are generally distributed using the application service provider model to allow for ease of integration into customers in-house technology systems and to leverage our extensive technological systems and communication networks.
Segments. We are organized and report our business results in three reportable segments: North America, Europe and Latin America. The North America segment consists of three operating segments: Information Services, Marketing Services and Personal Solutions. The Europe and Latin America reportable segments are made up of varying mixes of three product lines: Information Services, Marketing Services and Personal Solutions. Information Services revenue is principally transaction-based and is derived from our sales of the following product lines, a significant majority of which are delivered electronically: credit reporting and scoring, mortgage reporting, identity verification, fraud detection and modeling services, and certain of our decisioning products that facilitate and automate a variety of credit-oriented decisions. Marketing Services revenue is principally transaction-based and derived from sales of products that help customers acquire new customers, cross-sell to existing customers and manage portfolio
risk. Personal Solutions revenue is both transaction- and subscription-based and is derived from sales of credit monitoring and identity theft protection products, which we deliver to consumers through the mail and electronically via the Internet. For additional information regarding our reportable and operating segments, including detailed financial results, see Note 14 of the Notes to Consolidated Financial Statements in this Form 10-K as well as further discussion within MD&A.
As of December 31, 2006, we operated in 14 countries covered by reportable segments: North America (the U.S., Canada and Costa Rica), Europe (the United Kingdom, Republic of Ireland, Spain and Portugal) and Latin America (Brazil, Argentina, Chile, El Salvador, Honduras, Peru and Uruguay). We serve customers across a wide range of industries, including the financial services, retail, telecommunications, utilities, automotive, brokerage, healthcare and insurance industries, as well as government agencies. We also serve consumers directly in the United States, Canada, and the United Kingdom. Our revenue stream is highly diversified with our largest customer only providing slightly more than 2% of total 2006 operating revenue. Our revenues are sensitive to a variety of factors, such as demand for, and price of, our services, technological competitiveness, our reputation for providing timely and reliable service, competition within our industry, federal, state and foreign regulatory requirements governing privacy and use of data, and general economic conditions.
Key Performance Indicators. Management focuses on a variety of key indicators to monitor operating and financial performance. These performance indicators include measurements of operating revenue, operating revenue growth, operating income, operating margin, net income, diluted earnings per share, cash provided by operating activities and capital expenditures. The key performance indicators for the twelve months ended December 31, 2006, 2005 and 2004, were as follows:
Our financial condition and operating performance are affected by the rate at which the U.S. economy grows, as measured by the gross domestic product, as well as levels of consumer spending and confidence regarding jobs and the health of the economy. Changes in overall economic conditions in the U.S. and other countries in which we operate, generally impact the demand for consumer credit and accordingly for our credit information, as well as other products and services. These effects are dynamic and complex.
The credit information business is characterized by price and service competition among a limited number of providers; investment in proprietary credit information databases; changes in customer requirements; continued consolidation in the lending, credit card and telecommunications industries; emerging new market segments; and technological innovation. Being competitive requires an emphasis on efficient processing to offset price compression; technological competence; protection of sensitive data; devotion of significant resources to marketing; and developing applications to differentiate our products and services from those of our competitors. Other significant factors include product cost, brand
recognition, customer responsiveness, ability to successfully integrate acquisitions and regulatory compliance.
Organizational Realignment. Effective January 1, 2007, we implemented certain organizational changes as a result of a strategic review of our business. The changes to our internal structure changed our operating segments to the following: U.S. Consumer Information Solutions, North America Personal Solutions, North America Commercial Solutions and International. U.S. Consumer Information Solutions consists of the former Marketing Services and North America Information Services, excluding U.S. Commercial Services and Canada. North America Commercial Solutions represents our former commercial business for the U.S. and Canada that was within North America Information Services as well as our October 2006 acquisition of Austin-Tetra. International consists of Canada (the consumer business), Europe and Latin America. North America Personal Solutions remains unchanged. We will present our financial results under this new organizational structure in our quarterly report for the period ending March 31, 2007. Our financial results for all periods presented in the Form 10-K are stated under the prior organization structure since that is how the Company was managed during all periods presented. The discussion of operating results by segment below is based on the organizational structure in place prior to January 1, 2007.
Long-Term Growth Strategy. During the twelve months ended December 31, 2006, we analyzed our business to develop our growth strategy through 2010. Based on this analysis of our business, our growth strategy includes the following:
· Increasing our share of our customers spending on information-related services through the development and introduction of new products, pricing our services in accordance with the value they create for customers, increasing the range of current services utilized by customers, and improving the quality of sales and customer support interactions with consumers;
· Increasing our customers use of our proprietary analytical, predictive and enabling technology;
· Investing in and developing new, differentiated data sources that provide unique value to customers in their highest value decisioning needs; and
· Expanding into key emerging opportunities via acquisitions, partnerships, and/or internal development, including related markets in the United States, such as initiatives in the commercial, collections, and healthcare markets, as well as new geographic markets outside the United States.
We are also committed to improving our operating efficiency through our organizational realignment by reducing layers of management, utilizing Global Centers of Excellence, and better aligning of our business units, which includes a sales structure that is more customer-focused.
Some of the specific initiatives required to execute this strategy may result in an increase in capital expenditures or cash investment in future periods. See the Liquidity and Financial Condition section within MD&A for information regarding sources and uses of cash.
Consolidated operating revenue for the twelve months ended December 31, 2006 increased $102.9 million, or 7%, from $1,443.4 million in 2005 to $1,546.3 million in 2006. This increase is due to broad-based growth across most lines of business and geographies, and a favorable foreign currency impact of $18.7 million, partially offset by a $13.4 million, or 16%, decline in Mortgage Solutions within the Information Services segment.
Operating Expenses and Operating Margin
Consolidated operating expenses increased $88.8 million, or 9%, to $1,110.2 million for the twelve months ended December 31, 2006, as compared to $1,021.4 million for the same period in 2005.
Cost of services in 2006 increased $32.2 million, or 5%, to $626.4 million when compared to the same period in 2005. The increase in cost of services was primarily due to operating revenue growth, and increased salary expenses due to higher headcount.
Selling, general and administrative expenses for the twelve months ended December 31, 2006 increased $56.0 million, or 16%, to $401.0 million when compared to the same period a year ago. This increase was mainly due to the $7.6 million incremental negative impact of adopting SFAS No. 123R, Share-Based Payment, (SFAS 123R) on January 1, 2006; $7.5 million in loss contingencies related to certain pending legal matters; a $6.4 million severance charge recognized during the fourth quarter of 2006 related to our organizational realignment; $3.2 million in additional benefit costs associated with our former Chief Financial Officers (CFO) and Chief Administrative Officers (CAO) decisions to retire during the twelve months ended December 31, 2006; higher salary expenses due to increased headcount; and increased professional fees. These increases were partially offset by higher salary and incentive costs in the twelve months ended December 31, 2005 related to our Chief Executive Officer (CEO) transition. For additional information about the impact of SFAS 123R, see Note 2 of the Notes to Consolidated Financial Statements in this Form 10-K.
Consolidated operating margin for the twelve months ended December 31, 2006 was 28.2% as compared to 29.2% for the same period in 2005. The decline in operating margin was primarily driven by the loss contingencies related to certain pending legal matters, the negative incremental impact of adopting SFAS 123R and the charge related to our organizational realignment. See Notes 6 and 15 of the Notes to Consolidated Financial Statements in this Form 10-K for additional information about the activity related to the loss contingencies and the organizational realignment, respectively.
Other Income, Net
Consolidated other income, net, increased to $16.2 million for the twelve months ended December 31, 2006, as compared to $9.2 million in the same period in 2005. This increase is primarily due to a favorable settlement of claims against certain former shareholders of Naviant, Inc. in September 2006. In 2004, we served a demand for arbitration, alleging, among other things, that the sellers had breached various representations and warranties concerning information furnished to us in connection with our acquisition of Naviant, Inc. in 2002. As a result of this settlement, we recognized a $14.1 million non-taxable gain in other income, net, on our Consolidated Statement of Income for the twelve months ended December 31, 2006 (as discussed in Note 6 of the Notes to Consolidated Financial Statements in this Form 10-K). This increase was partially offset by a $3.3 million gain in 2005 related to an agreement with Risk Management Alternatives (RMA) Holdings, LLC, which was amended to, among other things, reduce the scope of services we were obligated to provide.
Our effective income tax rate was 34.0% for the twelve months ended December 31, 2006, down from 36.9% for the same period in 2005. The reduction was due primarily to the reversal of $9.5 million in income tax reserves related to uncertain tax positions for which the applicable statute of limitations expired in the third quarter of 2006 and the $14.1 million non-taxable gain on the litigation settlement associated with Naviant, Inc. during the second quarter of 2006, offset by an increase in foreign tax expense during 2006. For additional information about our effective tax rate, see Note 7 of the Notes to Consolidated Financial Statements in this Form 10-K.
Net income for the twelve months ended December 31, 2006, was $274.5 million, compared to $246.5 million for the twelve months ended December 31, 2005. Earnings per share increased to $2.12 for the twelve months ended December 31, 2006, as compared to $1.86 for the same period a year ago.
Our consolidated segment results for the twelve months ended December 31, 2006 and 2005 were as follows:
Our North America operating revenue for the twelve months ended December 31, 2006 and 2005 was as follows:
For the twelve months ended December 31, 2006, Information Services revenue was $835.5 million, an increase of $29.2 million, or 4%, when compared to the same period in 2005. Fluctuations in the Canadian dollar against the U.S. dollar favorably impacted our 2006 Information Services revenue by $7.6 million.
U.S. Consumer and Commercial Services revenue for the twelve months ended December 31, 2006 totaled $645.6 million, an increase of $35.2 million, or 6%, when compared to the same period in 2005. This increase is primarily due to higher sales volume to our financial services customers and increased revenue from our commercial information services products, which offset some decline in telecommunication accounts and price compression. In our U.S. Consumer Information business, online volume was approximately 650 million transactions, up 6% year-over-year.
Mortgage Solutions revenue for the twelve months ended December 31, 2006 totaled $71.7 million, a decrease of $13.4 million, or 16%, as compared to the same period a year ago. This decrease is primarily due to volume declines from a large customer that changed its retail mortgage business model, as well as less favorable mortgage market conditions, including higher interest rates that resulted in lower refinancing and mortgage origination activity.
Canadian revenue for the twelve months ended December 31, 2006 totaled $118.2 million, an increase of $7.4 million, or 7%, when compared to the same period in 2005. Local currency fluctuation against the U.S. dollar favorably impacted our Canadian revenue by $7.6 million, or 7%. Accordingly, in local currency, revenue in Canada for the twelve months ended December 31, 2006 was flat when compared to the same period in 2005.
Information Services operating income was $343.3 million, a decrease of $2.2 million, or 1%, from the same period a year ago. Information Services operating margin was 41.1% for the twelve months ended December 31, 2006, versus 42.8% for the same period in 2005. The decline in Information Services operating income and operating margin was primarily driven by changes in business mix which resulted in price compression; increased tax and legal expenses; higher technology and fulfillment-related costs; and the $4.0 million, pretax, loss contingency related to certain pending legal matters.
For the twelve months ended December 31, 2006, Marketing Services revenue was $277.2 million, an increase of $23.5 million, or 9%, when compared to the same period in 2005. Credit Marketing Services revenue for the twelve months ended December 31, 2006 totaled $166.3 million, an increase of $15.6 million, or 10%, when compared to the same period in 2005. The increase in Credit Marketing Services revenue is primarily due to higher volume mainly from national and regional customers for certain of our products that target new customers and our account management product offerings, as well as continued demand for core prescreen products and data sales. Direct Marketing Services revenue for the twelve months ended December 31, 2006, totaled $110.9 million, an increase of $7.9 million, or 8%, as compared to the same period in 2005. This increase was primarily due to the acquisition of BeNow, Inc. (BeNow) in August 2005.
Total Marketing Services operating income for the twelve months ended December 31, 2006, was $99.1 million, an increase of $13.9 million, or 16%. Total Marketing Services operating margin was 35.7% for the twelve months ended December 31, 2006, versus 33.5% for the same period in 2005. The increase in total Marketing Services operating income was due to revenue growth, mainly related to higher volume, and lower production expenses as more projects migrate to our Accel platform, which was offset partly by increased royalty costs.
Personal Solutions revenue for the twelve months ended December 31, 2006 totaled $126.0 million, an increase of $11.3 million, or 10%, compared to the same period in 2005. This increase is primarily due to higher revenue related to subscription-based products, mainly driven by our 3-in-1 Monitoring product, as we continue to transition from a transaction-based product mix to subscription-based products. We also increased revenues through targeted advertising and improvement in the conversion of inquiries to sales. Revenue also increased due to solutions provided in third-party data breaches.
Personal Solutions operating income for the twelve months ended December 31, 2006 increased $0.1 million, to $13.6 million, compared to $13.5 million for the same period in 2005. Personal Solutions operating margin was 10.8% for the twelve months ended December 31, 2006, versus 11.8% for the same period in 2005. The slight increase in operating income was due to growth from increased subscription-based revenue, largely offset by volume-related costs and the recognition of $5.0 million in pretax loss contingencies related to certain legal matters. Of this $5.0 million loss, $4.0 million was recognized in selling, general and administrative expenses and $1.0 million was recorded in cost of services on our Consolidated Statement of Income during the twelve months ended December 31, 2006.
Europe revenue for the twelve months ended December 31, 2006, was $153.6 million, an increase of $11.6 million, or 8%, as compared to the same period in 2005. Revenue increases were primarily due to higher consumer activity associated with new business and increased volumes from existing customers, as well as increased volumes related to our commercial services business. Local currency fluctuation against the U.S. dollar favorably impacted our European revenue by $2.2 million, or 1%, as revenue was up 7% in local currency. Operating income for the twelve months ended December 31, 2006, was $35.4 million, an increase of $2.0 million, or 6%, when compared to the same period a year ago. The increase in operating income was driven by higher sales volume and continued focus on controlling expenses, including certain vendor price reductions received during the six months ended June 30, 2006. This was offset by higher production costs from rising sales volumes related to our consumer and commercial businesses and increased investment in the business. Europes operating margin was 23.1% for the twelve months ended December 31, 2006, versus 23.5% for the same period in 2005.
Latin America revenue for the twelve months ended December 31, 2006, totaled $154.0 million, an increase of $27.3 million, or 21%, as compared to the same period in 2005. The change was primarily due to broad-based pricing increases in core information products, higher pricing for high-value products, new product introductions and favorable foreign currency impact. The program to price for value is approaching a more mature stage, which may impact the rate of revenue growth, although inherent market growth and the potential for share gain remains attractive.
During the twelve months ended December 31, 2006, all six countries in Latin America experienced double digit revenue growth in U.S. dollars and five of the six countries had double-digit growth in local currency. Local currency fluctuation against the U.S. dollar favorably impacted our Latin America revenue by $8.9 million, or 7%. Revenue grew 14% in local currency in 2006.
Operating income for the twelve months ended December 31, 2006, totaled $45.9 million, an increase of $12.6 million, or 38%, as compared to same period in 2005. This increase was primarily the result of revenue growth, as well as favorable currency impact. Latin America operating margin was 29.8% for the twelve months ended December 31, 2006, versus 26.3% for the same period in 2005. The increase in operating margin was primarily driven by higher pricing for selected high-value products.
Our general corporate expenses are costs that are incurred at the corporate level and are not directly associated with activities of a particular operating segment. These expenses include shared services, and administrative and legal expenses. General corporate expense was $101.2 million for the twelve months ended December 31, 2006, an increase of $12.3 million, or 14%, compared to $88.9 million for the same period in 2005. This increase was primarily driven by the $7.6 million incremental negative impact from our adoption of SFAS 123R; the $6.4 million severance charge related to the organizational realignment; the $3.2 million negative impact of our former CFOs and CAOs decisions during 2006 to retire; plus normal growth in ongoing corporate expenses due to inflation. These increases were partially offset by higher salary and incentive costs during the twelve months ended December 31, 2005 related to our CEO transition. For additional information about the impact of SFAS 123R, see Note 2 of the Notes to Consolidated Financial Statements in this Form 10-K.
Consolidated operating revenue increased $170.6 million, or 13%, to $1,443.4 million for the twelve months ended December 31, 2005, as compared to $1,272.8 million during the same period in 2004. This increase was due to growth in all of our reporting segments, except Europe which was flat. Our regulatory recovery fee revenue related to the FACT Act contributed $38.0 million for the twelve months ended December 31, 2005. Regulatory recovery fee revenue was not material during the twelve months ended December 31, 2004. Local currency fluctuation against the U.S. dollar favorably impacted our operating revenue by $21.7 million.
Operating Expenses and Operating Margin
Consolidated operating expenses increased $124.4 million, or 14%, to $1,021.4 million for the twelve months ended December 31, 2005, as compared to $897.0 million in the same period in 2004. Cost of services for the twelve months ended December 31, 2005 increased $62.7 million, or 12%, to $594.2 million when compared to the same period in 2004, primarily due to sales growth as well as higher benefits and incentive costs mainly associated with our annual incentive program. During the twelve months ended December 31, 2004, we recorded a $2.4 million asset impairment charge related to Marketing Services, mostly for purchased data files and other assets. During 2005 and 2004, we also incurred significant compliance costs, including operating expenses and capital investment, to implement the FACT Act requirements.
Selling, general and administrative expenses for the twelve months ended December 31, 2005 increased $60.6 million, or 21%, to $345.0 million when compared to the same period a year ago. This increase was mainly due to higher salary, incentive and benefit costs related to our CEO transition, as well as increased year-over-year expenses related to our annual incentive program which was based on our 2005 financial results. As part of the CEO transition, effective September 19, 2005, Richard F. Smith became our CEO, which, along with the retirement of our former CEO Thomas F. Chapman in 2005, contributed to the higher salary, incentive and benefit costs during the year. Additionally, higher year-over-year advertising costs also contributed to the increase in selling, general and administrative costs.
Consolidated operating margin for the twelve months ended December 31, 2005 was 29.2%, as compared to 29.5% for the same period in 2004.
Other Income, Net
Consolidated other income, net, decreased $38.3 million to $9.2 million for the twelve months ended December 31, 2005, as compared to $47.5 million in the same period in 2004. The decrease was primarily driven by a $36.8 million gain recorded in 2004 related to the sale of our investment in Intersections Inc. (for additional information regarding this sale, see Note 10 of the Notes to Consolidated Financial Statements in this Form 10-K). The decrease was partially offset by a $3.3 million gain recorded during the third quarter of 2005 related to an amendment to an agreement with RMA Holdings, LLC. For additional information about this gain, see Note 6 of the Notes to Consolidated Financial Statements in this Form 10-K.
Our effective income tax rate was 36.9% for the twelve months ended December 31, 2005, down from 38.4% for the same period in 2004. The favorable reduction was primarily due to lower state income taxes and a reduction in the tax contingency reserve, and partially offset by additional tax expense related to non-deductible executive compensation.
In 2002, we made the decision to exit our commercial services business in Spain, which was part of our European reportable segment. We disposed of this business in 2004. We have reclassified the 2004 results of our commercial business in Spain to loss from discontinued operations. Additionally, in 2004, we sold our Italian business and have reclassified the 2004 results of Italy to loss from discontinued operations. Accordingly, we recorded a $2.6 million, net of tax, loss from discontinued operations for the twelve months ended December 31, 2004. For additional information about our discontinued operations, see Note 12 of the Notes to Consolidated Financial Statements in this Form 10-K.
Net income for the twelve months ended December 31, 2005, was $246.5 million, compared to $234.7 million for the twelve months ended December 31, 2004, which includes the impact of discontinued operations. Earnings per share increased to $1.86 for the twelve months ended December 31, 2005, as compared to $1.76 for the twelve months ended December 31, 2004. Income from continuing operations for the twelve months ended December 31, 2004 was $237.3 million and earnings per share was $1.78. There were no discontinued operations in 2005.
Our segment results for the twelve months ended December 31, 2005 and 2004 were as follows:
Our North America revenue for the twelve months ended December 31, 2005 and 2004 was as follows:
For the twelve months ended December 31, 2005, Information Services revenue was $806.3 million, an increase of $99.2 million, or 14% when compared to the same period in 2004. A portion of this increase was due to $38.0 million in regulatory recovery fees related to the FACT Act for the year ended
December 31, 2005. Fluctuations in the Canadian dollar against the U.S. dollar favorably impacted our Information Services revenue by $7.6 million.
U.S. Consumer and Commercial Services revenue for the twelve months ended December 31, 2005 totaled $610.4 million, an increase of $77.8 million, or 15%, when compared to the same period in 2004. This increase was primarily due to higher sales to our specialty and financial services customers, regulatory recovery fee revenue of $35.1 million related to the FACT Act for the year ended December 31, 2005, the acquisition of APPRO Systems, Inc. (APPRO) and other affiliates that occurred during 2005, and increased revenue from products sold in our commercial services unit. In our U.S. Consumer Information business, online transaction volume was approximately 610 million, up 8% year-over-year.
Mortgage Solutions revenue for the twelve months ended December 31, 2005 totaled $85.1 million, an increase of $9.6 million, or 13%, as compared to the same period a year ago. This increase was mostly due to new customers, increased market share, an affiliate acquisition as well as regulatory recovery fee revenue of $2.9 million related to the FACT Act in 2005. These increases were partially offset by less favorable mortgage marketing conditions.
Canadian revenue for the twelve months ended December 31, 2005, totaled $110.8 million, an increase of $11.8 million, or 12%, when compared to the same period in 2004, primarily due to favorable currency impact and higher sales volume. Local currency fluctuation against the U.S. dollar favorably impacted our Canadian revenue by $7.6 million, or 8%.
Information Services operating income was $345.5 million, an increase of $46.0 million, or 15%, from the same period a year ago. Information Services operating margin was 42.8% for the twelve months ended December 31, 2005, versus 42.4% for the same period in 2004. The increase in operating income was mainly the result of higher sales volume in all businesses and positive margins related to the FACT Act in 2005. While our total FACT Act-related expenditures have been greater than the corresponding revenue since January 1, 2004, certain costs related to establishing systems to comply with the FACT Act were capitalized and are being depreciated over their respective useful lives.
Marketing Services revenue for the twelve months ended December 31, 2005 totaled $253.7 million, an increase of $17.6 million, or 7%, when compared to the same period in 2004. Credit Marketing Services revenue for the twelve months ended December 31, 2005 totaled $150.7 million, an increase of $11.2 million, or 8%, when compared to the same period in 2004. The increase in Credit Marketing Services revenue was primarily due to higher volume from mainly financial institutions for certain of our products that target new customers, as well as greater revenue from other existing and new customers. Direct Marketing Services revenue for the twelve months ended December 31, 2005 totaled $103.0, an increase of $6.4 million, or 7%, as compared to the same period in 2004. This increase was mainly due to higher volume from existing customers and revenue from new customers and products, as well as the acquisition of BeNow in August 2005.
Total Marketing Services operating income for the twelve months ended December 31, 2005 was $85.2 million, an increase of $13.2 million, or 18%, resulting primarily from higher revenue, reduced production-related expenses for our traditional mail products and a $2.4 million asset impairment charge taken during 2004. Marketing Services operating margin was 33.5% for the twelve months ended December 31, 2005, versus 31.5% for the same period in 2004.
Personal Solutions revenue for the twelve months ended December 31, 2005 totaled $114.7 million, an increase of $18.6 million, or 19%, compared to the same period in 2004. This change was primarily due to
increased volume and new products, including CreditWatch, ScoreWatch and 3-in-1 Credit Report Monitoring. Operating income for the twelve months ended December 31, 2005 decreased $4.1 million, to $13.5 million, compared to $17.6 million for the same period in 2004. This decrease was mainly due to an increase in advertising and other promotional campaigns. Personal Solutions operating margin was 11.8% for the twelve months ended December 31, 2005, versus 18.3% for the same period in 2004.
Europe revenue was flat at $142.0 million for the twelve months ended December 31, 2005 and 2004. This was primarily due to a decline in credit applications and marketing mailings in the U.K., and offset by a rise in our Personal Solutions business, new product sales and increases in our account management scores. Local currency fluctuation against the U.S. dollar unfavorably impacted our Europe revenue by $1.0 million, or 1%. Operating income for the twelve months ended December 31, 2005 was $33.4 million, an increase of $3.4 million, or 11%, when compared to the same period in 2004. The improvement in operating income was driven by expense reductions. However, softness in the U.K. economy during 2005 continued to impact the overall performance of our European operations. Europes operating margin was 23.5% for the year ended December 31, 2005, versus 21.1% for the same period in 2004.
Latin America revenue for the twelve months ended December 31, 2005 totaled $126.7 million, an increase of $35.2 million, or 38%, as compared to the same period in 2004. Local currency fluctuation against the U.S. dollar favorably impacted our Latin America revenue by $15.1 million and Latin America operating income by $3.4 million. Six countries in Latin America experienced double-digit revenue growth due to increased volume resulting from strengthening local economies and higher pricing associated with better contract execution.
Operating income for the twelve months ended December 31, 2005 totaled $33.3 million, an increase of $16.3 million, or 96%, as compared to the same period in 2004. This change was primarily the result of higher sales volumes and pricing, as well as favorable currency impact. Latin America operating margin was 26.3% for the twelve months ended December 31, 2005, versus 18.6% for the same period in 2004.
Our general corporate expenses are expenses that are incurred at the corporate level and are not directly associated with activities of a particular reportable segment. These expenses include shared services as well as administrative and legal expenses. General corporate expense was $88.9 million for the twelve months ended December 31, 2005, an increase of $28.6 million, or 47%, compared to $60.3 million for the same period in 2004. This increase was mainly driven by higher salary, incentive and benefit costs related to our CEO transition (see previous discussion), as well as increased year-over-year expenses regarding our annual incentive program which is based on our financial results.
As of December 31, 2006, we had $67.8 million in cash and cash equivalents compared to $37.5 million at December 31, 2005. Our principal sources of liquidity are cash provided by operating activities and our revolving credit facilities. Our ability to generate cash from operating activities is one of our fundamental financial strengths. We believe that anticipated cash provided by operating activities, together with current cash and cash equivalents and access to committed and uncommitted credit facilities and the capital markets, if required, will be sufficient to meet our projected cash requirements for the next twelve months, and the foreseeable future thereafter. However, any projections of future liquidity needs and cash flows are subject to substantial uncertainty. We have $250.0 million in principal relating to our
4.95% senior unsecured notes due November 1, 2007. Upon maturity, we intend to either (1) pay this obligation through a combination of borrowings under our credit facilities and cash and cash equivalents available at that time, or (2) refinance these notes, assuming such financing is available to us on acceptable terms.
In the normal course of business, we will consider the acquisition of, or investment in, complementary businesses or joint ventures, products, services and technologies, capital expenditures, payment of dividends, repurchase of outstanding shares of common stock and the retirement of debt. We may elect to use available cash and cash equivalents to fund such activities in the future. In the event additional liquidity needs arise, we may raise funds from a combination of sources, including the potential issuance of debt or equity securities. If adequate funds were not available to us, or were not available on acceptable terms, our ability to meet unanticipated working capital requirements or respond to business opportunities and competitive pressures could be limited.
Fund Transfer Limitations. The ability of certain of our subsidiaries and associated companies to transfer funds to us is limited, in some cases, by certain restrictions imposed by foreign governments, which do not, individually or in the aggregate, materially limit our ability to serve our indebtedness, meet our current obligations or pay dividends.
For the twelve months ended December 31, 2006, we generated $374.3 million of cash from operating activities compared to $337.8 million for the twelve months ended December 31, 2005, an increase of $36.5 million. The increase in cash provided by operating activities was primarily due to the $28.0 million increase in net income.
For the twelve months ended December 31, 2005, we generated $337.8 million of cash provided by operating activities compared to $309.0 million for the twelve months ended December 31, 2004, an increase of $28.8 million. The major sources of cash provided by operating activities for 2005 were net income of $246.5 million and the reduction within net income of non-cash charges for depreciation and amortization, included in determining net income, of $82.2 million.
Capital expenditures, which consist of additions to property and equipment as well as certain other long-term assets, totaled $52.0 million, $46.2 million and $47.5 million for the twelve months ended December 31, 2006, 2005 and 2004, respectively. Our capital expenditures are used for developing, enhancing and deploying new and existing internally-developed software and technology platforms, replacing or adding equipment, updating systems for regulatory compliance, the licensing of software applications, data security and investing in disaster recovery systems. In 2007, we expect total capital expenditures to be approximately $70 million to $100 million, primarily relating to new product development and technological infrastructure.
On October 6, 2006, we acquired Austin Consolidated Holdings, Inc., known as Austin-Tetra, for $34.4 million in cash. Austin-Tetra is a provider of business-to-business data management and enhancement services to the commercial market. They provide companies and government agencies with information to help them better understand existing customers, target new customers, and effectively manage their vendors. This acquisition is part of our long-term growth strategy, complementing our commercial information business. Austin-Tetra will be reported within our North America Information Services segment. We financed this acquisition through borrowings under our long-term revolving credit facility.
In March 2005, we acquired APPRO to broaden and further strengthen our enabling technologies capabilities in our North America Information Services business. Additionally, in August 2005, we acquired BeNow to enhance our Marketing Services business and add to our enabling technology capabilities. During the twelve months ended December 31, 2005, in order to continue to grow our credit data franchise, we also acquired the credit files, contractual rights to territories (generally states or integration areas) and customer relationships and related businesses of two independent credit reporting agencies in the U.S. and one in Canada that housed consumer information on our system. We acquired all of these businesses for $121.8 million in cash, net of cash acquired, and the issuance of 0.4 million shares of Equifax treasury stock, which had a value of $14.7 million on the date of issuance.
During the twelve months ended December 31, 2004, in order to continue to grow our credit data franchise, we also acquired the credit files, contractual rights to territories (generally states or integration areas) and customer relationships and related businesses of two independent credit reporting agencies in the U.S. and one in Canada that housed consumer information on our system. We acquired these businesses for a total of $17.4 million in cash, net of cash acquired.
For additional information about our acquisitions, see Note 3 of the Notes to Consolidated Financial Statements in this Form 10-K.
TALX Acquisition. On February 14, 2007, we agreed to acquire TALX Corporation (TALX), a leading provider of workplace verification information and employment services, in a transaction valued at approximately $1.4 billion, including the assumption of debt, based on the $41.91 per share closing price of Equifax stock on February 14, 2007. The acquisition of TALX equity is structured to consist of 75% Equifax common stock and 25% cash, together valued at approximately $1.2 billion. TALX shareholders may elect to receive for each share of TALX stock either a fixed exchange ratio of .861 shares of Equifax stock, $35.50 in cash or a combination of stock and cash equivalent value, subject to proration to achieve the 75% Equifax common stock and 25% cash consideration described above. In the aggregate, upon the closing of the acquisition, we will issue approximately 22 million shares of Equifax stock and pay approximately $300 million in cash for the stock of TALX. We also will assume TALXs outstanding debt, which was $191.5 million at December 31, 2006. We plan to finance the acquisition with cash provided by operating activities and borrowings under our senior revolving credit facility, of which no amounts were outstanding at February 14, 2007. The transaction has been approved by the Board of Directors of each company and also must be approved by the stockholders of TALX. The transaction is also subject to review by regulatory authorities and other customary closing conditions. We currently expect the transaction to close by the end of the third quarter of 2007. This transaction will be accounted for as a purchase in accordance with SFAS No. 141, Business Combinations.
In February 2007, our Board of Directors authorized us to repurchase an increased number of shares of our common stock. We announced our intention to repurchase approximately $700 million of the stock issued in the acquisition. We expect to finance these share repurchases using cash provided by operating activities, as well as the issuance of new debt.
Short-Term Borrowings. Net short-term (repayments) borrowings during the twelve months ended December 31, 2006, 2005 and 2004, totaled ($12.2) million, $92.3 million and ($22.5) million, respectively, activity under our trade receivables-backed, revolving credit facility. Under this facility, a wholly-owned subsidiary of Equifax may borrow up to $125.0 million, subject to borrowing base availability and other terms and conditions, for general corporate purposes. The amended credit facility is scheduled to expire on November 29, 2007, with the option to extend the term for an additional period of up to one year if specified conditions are satisfied. Outstanding debt under the facility is consolidated on our Balance Sheet for financial reporting purposes. Based on the calculation of the borrowing base applicable at
December 31, 2006, $19.4 million was available for borrowing and $80.0 million was outstanding under this facility, which is included in short-term debt and current maturities on our Consolidated Balance Sheet.
Long-Term Revolving Credit Facilities. Net (repayments) borrowings under long-term revolving credit facilities during the twelve months ended December 31, 2006, 2005 and 2004 were ($40.0) million, $65.0 million, and ($138.0) million, respectively. This activity relates to our $500.0 million senior unsecured revolving credit agreement (Existing Credit Agreement). On July 24, 2006, we amended and restated the Existing Credit Agreement. Under the Amended and Restated Credit Agreement (the Amended Credit Agreement), among other provisions, the term was extended from August 20, 2009 to July 24, 2011, the applicable margin for borrowings and the annual facility fee were lowered, the maximum leverage ratio (as defined in the Amended Credit Agreement) was increased from 3.0 to 1 to 3.5 to 1, and a minimum interest coverage ratio was deleted. The Amended Credit Agreement may be used for working capital and other general corporate purposes.
The Amended Credit Agreement also includes an accordion feature that will allow us to request an increase of up to $500.0 million in the maximum borrowing commitment, which cannot exceed $1.0 billion. Each member of the lending group may elect to participate or not participate in any request we make to increase the maximum borrowing commitment. In addition, any increase in the borrowing commitment pursuant to this accordion feature is subject to certain terms and conditions, including the absence of an event of default. The increased borrowing commitment may be used for general corporate purposes. We are permitted and intend to request an increase in the borrowing limit under the accordion feature of this credit facility effective upon the completion of our acquisition of TALX.
At December 31, 2006, interest was payable on borrowings under the Amended Credit Agreement at the base rate or London Interbank Offered Rate (LIBOR) plus a specified margin or competitive bid option as selected by us from time to time. The annual facility fee and interest rate are subject to adjustment based on our debt ratings. As of December 31, 2006, $475.0 million was available for borrowings and there were outstanding borrowings of $25.0 million under this facility, which is included in long-term debt on our Consolidated Balance Sheet.
Canadian Credit Facility. We are a party to a credit agreement with a Canadian financial institution that provides for a C$25.0 million (denominated in Canadian dollars), 364-day revolving credit agreement which was scheduled to expire on September 30, 2006. During the third quarter of 2006, however, we renewed this facility through September 30, 2007. At December 31, 2006, there were no outstanding borrowings under this facility.
Payments on Long-Term Debt. There were no material payments on long-term debt during the twelve months ended December 31, 2006 and 2004, respectively. During the twelve months ended December 31, 2005, we redeemed the $250.0 million principal amount relating to our 6.3% senior unsecured notes by utilizing borrowings under certain revolving credit facilities.
Other. At December 31, 2006, 79% of our debt was fixed-rate debt and 21% was variable-rate debt. Our variable-rate debt consists of the previously mentioned revolving credit facilities and generally bears interest based on a specified margin plus a base rate, LIBOR or commercial paper rate. The interest rates reset periodically, depending on the terms of the respective financing arrangements. At December 31, 2006, interest rates on substantially all of our variable-rate debt ranged from 5.6% to 5.7%. We were in compliance with all of our financial and non-financial debt covenants at December 31, 2006. We do not anticipate any covenant compliance issues if our acquisition of TALX is consummated as presently structured.
On February 15, 2007, Standard & Poors Corporation downgraded our senior unsecured long-term fixed debt rating from A- to BBB+ in reaction to our public announcement of the agreement to acquire TALX Corporation and an additional $400 million share repurchase program, due to its belief that the
acquisition reflects a somewhat more aggressive financial policy and more leveraged financial profile. S&Ps rating outlook remained stable. On February 16, 2007, Moodys Investors Service changed our rating outlook to stable from positive but maintained its Baa1 rating on our senior unsecured long-term fixed debt.
For additional information about our debt, including the terms of our financing arrangements, basis for variable interest rates and debt covenants, see Note 5 of the Notes to Consolidated Financial Statements in this Form 10-K.
Sources and uses of cash related to equity during the twelve months ended December 31, 2006, 2005 and 2004 were as follows:
Share Repurchase Program. Under the stock repurchase program authorized by our Board of Directors, we purchased 6.0 million, 4.2 million and 5.4 million common shares on the open market during the twelve months ended December 31, 2006, 2005 and 2004, respectively, for $212.7 million, $144.0 million and $138.0 million, respectively, at an average price per common share of $35.64, $34.45, and $25.57, respectively. At December 31, 2006, the amount available for future share repurchases under this program was $132.6 million. In February 2007, our Board of Directors amended the plan to authorize an additional repurchase of $650.0 million of our common stock; $400 million of such repurchase authorization is contingent on the closing of our previously described pending acquisition of TALX
As discussed above, following the completion of the TALX acquisition, we intend to repurchase approximately $700 million in Equifax stock in open market transactions or in privately-negotiated purchases. The timing and nature of any such repurchases will depend on market conditions, other investment opportunities, applicable securities laws and other factors.
Dividend Payments. During the twelve months ended December 31, 2006, 2005 and 2004, we paid cash dividends of $20.3 million, $20.2 million and $15.0 million, respectively, at $0.16 per share, $0.15 per share and $0.11 per share, respectively.
Exercise of Stock Options. During the twelve months ended December 31, 2006, 2005 and 2004, we received cash of $26.1 million, $62.8 million and $28.1 million, respectively, from the exercise of stock options.
The following table summarizes our significant contractual obligations and commitments as of December 31, 2006. The table excludes commitments that are contingent based on events or factors uncertain at this time. Some of the excluded commitments are discussed below the footnotes to the table.