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EQUIFAX INC. (EFX)

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EQUIFAX : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

10/23/2014 | 04:41pm US/Eastern
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 Management's Discussion and
Analysis, or MD&A, are to diluted earnings per share, or 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.



BUSINESS OVERVIEW



We are a leading global provider of information solutions, employment and income
verifications and human resources business process outsourcing services. We
leverage some of the largest sources of consumer and commercial data, along with
advanced analytics and proprietary technology, to create customized insights
which enable our business customers to grow faster, more efficiently and more
profitably, and to inform and empower consumers.



Businesses rely on us for consumer and business credit intelligence, credit
portfolio management, fraud detection, decisioning technology, marketing tools,
and human resources-related services. We also offer a portfolio of products that
enable individual consumers to manage their financial affairs and protect their
identity. Our revenue stream is diversified among businesses across a wide range
of industries, international geographies and individual consumers.



Segment and Geographic Information

Segments.   On July 1, 2014 the North America Commerical Solutions ("NACS")
operating segment was consolidated into the U.S. Consumer Information Solutions
and International operating segments. The change was driven by an enterprise
wide distribution marketing strategy to maximize the penetration of our products
and services in our targeted markets. In an effort to accelerate our penetration
and simplify how our commercial information customers interact with us, we have
reorganized our operating segments. The U.S. portion of the NACS operating
segment was consolidated into the U.S. Consumer Information Solutions operating
segment. The combined operating segment was renamed U.S. Information Solutions
("USIS"). The Canadian portion of the NACS operating segment was consolidated
into the Canada operations of the International operating segment.



The USIS segment, the largest of our four segments, consists of three product
and service lines: Online Information Solutions; Mortgage Solutions; and
Financial Marketing Services. Online information solutions and Mortgage
Solutions revenue is principally transaction-based and is derived from our sales
of products such as consumer and commercial credit reporting and scoring,
identity management, fraud detection and modeling services. USIS also markets
certain decisioning software services which facilitate and automate a variety of
consumer and commercial credit-oriented decisions. Financial Marketing Services
revenue is principally project- and subscription-based and is derived from our
sales of batch credit and consumer wealth information such as those that assist
clients in acquiring new customers, cross-selling to existing customers and
managing portfolio risk.



The International segment consists of Canada, Europe and Latin America. Canada's
products and services are similar to our USIS offerings, while Europe and Latin
America are made up of varying mixes of product lines that are in our USIS and
North America Personal Solutions reportable segments. In Europe and Latin
America, we also provide information and technology services to support lenders
and other creditors in the collections and recovery management process.



The Workforce Solutions segment consists of the Verification Services and
Employer Services business lines. Verification Services revenue is
transaction-based and is derived primarily from employment and income
verification. Employer Services revenues are derived from our provision of
certain human resources business process outsourcing services that include both
transaction- and subscription-based product offerings. These services include
unemployment claims management, employment-based tax credit services and other
complementary employment-based transaction services.



North America Personal Solutions revenue is both transaction- and
subscription-based and is derived from the sale of credit monitoring and
identity theft protection products, which we deliver electronically to consumers
primarily via the internet. We reach consumers directly and indirectly through
partners.



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Geographic Information.   We currently have significant operations in the
following countries: Argentina, Canada, Chile, Costa Rica, Ecuador, El Salvador,
Honduras, Mexico, Paraguay, Peru, Portugal, the Republic of Ireland, Spain, the
U.K., Uruguay and the U.S. Our operations in the Republic of Ireland focus on
data handling and customer support activities. We also offer consumer credit
services in India and Russia through joint ventures and have an investment in a
consumer and commercial credit information company in Brazil.



Key Performance Indicators.    Management focuses on a variety of key indicators
to monitor operating and financial performance. These performance indicators
include operating revenue, change in operating revenue, operating income,
operating margin, net income attributable to Equifax, diluted earnings per
share, cash provided by operating activities and capital expenditures. The key
performance indicators for the three and nine months ended September 30, 2014
and 2013 were as follows:



                                                                     Key Performance Indicators
                                                          Three Months Ended                          Nine Months Ended
                                                            September 30,                               September 30,
                                                   2014                           2013               2014           2013
                                             (Dollars in millions, except per share data)
Operating revenue                        $                  613.4           $           572.0     $  1,811.8     $  1,725.4
Operating revenue change                                        7 %        
               10 %            5 %           12 %
Operating income                         $                  153.7           $           150.0     $    473.0     $    457.1
Operating margin                                             25.1 %                      26.2 %         26.1 %         26.5 %
Net income from continuing operations
attributable to Equifax                  $                   92.7           $            84.1     $    269.4     $    256.7
Net income attributable to Equifax       $                   92.7           $            83.5     $    269.4     $    275.1
Diluted earnings per share from
continuing operations attributable to
Equifax                                  $                   0.75           $            0.67     $     2.17     $     2.08
Diluted earnings per share
attributable to Equifax                  $                   0.75           $            0.67     $     2.17     $     2.23
Cash provided by operating activities    $                  195.6          
$           174.3     $    413.4     $    377.1
Capital expenditures                     $                   26.2           $            25.3     $     63.9     $     61.5



Operational and Financial Highlights

• During the first quarter of 2014, we acquired 100% of the stock of TDX,

a data and technology company in the United Kingdom that specializes in

helping lenders and creditors optimize collection and recovery

performance through the use of analytics, data exchanges and technology

        platforms. The results of this acquisition have been included in our
        International operating segment subsequent to the acquisition. We also
        purchased Forseva, a provider of end-to-end, cloud-based credit
        management software solutions. The results of this acquisition have been

included in our USIS operating segment subsequent to the acquisition.




     •  We repurchased 2.5 million shares of our common stock on the open market

for $186.6 million during the first nine months of 2014. On September

        11, 2014, the Board of Directors authorized the repurchase of up to an
        additional $400 million of the Company's outstanding shares of common
        stock in connection with a previously authorized share repurchase
        program. At September 30, 2014, $428.5 million was available for future
        purchases of common stock under our share repurchase authorization.



Business Environment and Company Outlook




Demand for our services tends to be correlated to general levels of economic
activity, to consumer credit activity, to a lesser extent small commercial
credit and marketing activity and to our own initiatives to expand our products
and markets served. In the United States, for the first nine months of 2014, we
experienced modestly improved growth in overall economic activity and in general
consumer credit, a moderating year-over-year decline in consumer mortgage
activity, and continuing benefits from our new product and market initiatives.
As expected, total company mortgage related revenues declined in the third
quarter albeit at a lesser rate than in the second quarter of 2014. While we
continue to expect modest growth in overall economic activity and general
consumer credit for the remainder of 2014, mortgage market origination activity
is expected to grow slightly when compared to 2013. Internationally, the
environment continues to be challenging as developed countries continue to
experience low economic growth rates and certain developing countries face
country specific political or economic issues. In addition, recent weakening in
foreign exchange rates of certain of the countries in which we operate has
further reduced growth in revenue and profit when reported in U.S. dollars.


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Over the longer term, we continue to expect that our ongoing investments in new
product innovation, business execution, enterprise growth initiatives,
technology infrastructure and continuous process improvement will enable us, in
a modestly growing global economy, to deliver long-term average organic revenue
growth ranging between 6% and 8% with additional growth of 1% to 2% derived from
strategic acquisitions consistent with our long term business strategy. We also
expect to grow earnings per share at a somewhat faster rate than revenue over
time as a result of both operating and financial leverage.

© Acquiremedia 2014

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