UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

x        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

OR

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

EQUIFAX INC.

(Exact name of registrant as specified in its charter)

 

Registrant’s 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 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.
                x YES                 o NO

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 registrant’s 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. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
                x YES                 o NO

The aggregate market value of the voting and non-voting common equity held by non-affiliates, based upon the closing price for the Common Stock as reported on the New York Stock Exchange composite tape on June 30, 2004, was $3,371,599,440. All executive offers, directors, and holders of 5% or more of the outstanding Common Stock of registrant have been deemed, solely for purposes of the foregoing calculation, to be “affiliates” of the registrant.

As of February 28, 2005, 134,804,062 shares of registrant’s Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxy statement for the Annual Meeting of Shareholders to be held on May 17, 2005, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the registrant’s fiscal year.

 

EXPLANATORY NOTE

The purpose of this Amendment No. 1 on Form 10-K/A is to amend our Annual Report on Form 10-K for the fiscal year ended December 31, 2004, which was filed on March 16, 2005. This Amendment is being filed solely to correct an inadvertent error in the Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements (the “Audit Opinion”), included in Part II, Item 8, Financial Statements and Supplementary Data, on page 48 of the original filing of this Form 10-K Report. Ernst & Young LLP has revised its Audit Opinion to delete an erroneous reference in the last paragraph to Note 2 of the Notes to our Consolidated Financial Statements, for information concerning the adoption by us in 2003 of Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Our adoption of Statement of Financial Accounting Standards No. 146, effective January 1, 2003, was previously disclosed in our Form 10-K for the fiscal year ended December 31, 2002, in Note 1 to the Notes to our Consolidated Financial Statements.

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, this Amendment contains the complete text of Item 8 and Item 15, and our principal executive officer and principal financial officer are providing re-executed Rule 13a-14 certifications dated as of the date of this Amendment and are also furnishing written statements pursuant to Title 18 United States Code, as added by Section 906 of the Sarbanes-Oxley Act of 2002. The certifications are attached as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Amendment. The Exhibit section also has been revised to include as Exhibit 23.1 the updated consent of the Independent Registered Public Accounting Firm. Unaffected Items or Exhibits are not included in this Amendment.

Except as described above, no other changes have been made to the original Form 10-K  and this Form 10-K/A does not amend, update or change the financial statements or any other items or disclosures in the original Form 10-K.

2

 

ITEM 8.                FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Management’s Report on Internal Control over Financial Reporting	4
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	5
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements	6
Consolidated Statements of Income for each of the three years in the period ended December 31, 2004	7
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2004	8
Consolidated Balance Sheets at December 31, 2004 and 2003	9
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for each of the three years in the period ended December 31, 2004	10
Notes to Consolidated Financial Statements	12

 

3

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Equifax is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Equifax’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes those written policies and procedures that:

·  pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Equifax;

·  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States;

·  provide reasonable assurance that receipts and expenditures of Equifax are being made only in accordance with authorization of management and the Board of Directors of Equifax; and

·  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.

Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of Equifax’s internal control over financial reporting as of December 31, 2004. Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of Equifax’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors.

Based on this assessment, management determined that, as of December 31, 2004, Equifax maintained effective internal control over financial reporting.

Ernst & Young LLP, an independent registered public accounting firm, who audited and reported on the consolidated financial statements of Equifax included in this report, has issued an attestation report on management’s assessment of internal control over financial reporting which is included on page 5 of this report.

4

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Report of Independent Registered Public Accounting Firm
on Internal Control OVER FINANCIAL REPORTING

The Board of Directors and
Stockholders of Equifax Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Equifax Inc. maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Equifax Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection  of unauthorized acquisition, use, or disposition of the company’s assets that could have a material  effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Equifax Inc. maintained effective internal control over financial reporting as of December 31, 2004 is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Equifax Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004 based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2004 of Equifax Inc. and our report dated March 15, 2005 expressed an unqualified opinion therein.

/s/ Ernst & Young LLP

Atlanta, Georgia
March 15, 2005

5

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors and
Stockholders of Equifax Inc.:

We have audited the accompanying consolidated balance sheets of Equifax Inc., as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement position. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Equifax Inc. at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Equifax Inc.’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2005 expressed an unqualified opinion therein.

/s/ Ernst & Young LLP

Atlanta, Georgia
March 15, 2005

6

EQUIFAX INC.
CONSOLIDATED STATEMENTS OF INCOME

		Twelve Months Ended December 31,
		2004			2003			2002
		(In millions, except per share amounts)
Operating revenue		$	1,272.8		$	1,210.7		$	1,095.3
Costs and expenses:
Costs of services		531.5			499.7			416.4
Selling, general and administrative expenses		282.0			272.1			246.7
Depreciation		14.4			15.1			12.4
Amortization		66.7			79.0			67.3
Restructuring and impairment charges		2.4			30.6			—
Total costs and expenses		897.0			896.5			742.8
Operating income		375.8			314.2			352.5
Other income, net		47.5			14.0			6.8
Minority interests in earnings, net of tax		(3.2		)	(3.3		)	(2.0		)
Interest expense		(34.9		)	(39.6		)	(41.2		)
Income from continuing operations before income taxes		385.2			285.3			316.1
Provision for income taxes		(147.9		)	(104.6		)	(124.4		)
Income from continuing operations		237.3			180.7			191.7
Discontinued operations (Note 3):
Loss from discontinued operations, net of income tax benefit (expense) of $1.5, $0.0 and $(2.2) in 2004, 2003 and 2002		(2.6		)	(15.8		)	(13.7		)
Net income		$	234.7		$	164.9		$	178.0
Per common share (basic):
Income from continuing operations		$	1.81		$	1.35		$	1.41
Discontinued operations		(0.02		)	(0.12		)	(0.10		)
Net income		$	1.79		$	1.23		$	1.31
Shares used in computing basic earnings per share		131.3			134.5			136.2
Per common share (diluted):
Income from continuing operations		$	1.78		$	1.32		$	1.38
Discontinued operations		(0.02		)	(0.12		)	(0.10		)
Net income		$	1.76		$	1.20		$	1.28
Shares used in computing diluted earnings per share		133.5			136.7			138.5
Dividends per common share		$	0.11		$	0.08		$	0.08

 

See Notes to Consolidated Financial Statements.

7

EQUIFAX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

		Twelve Months Ended December 31,
		2004			2003			2002
		(In millions)
Cash flows from operating activities:
Net income		$	234.7		$	164.9		$	178.0
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Gain on sale of investment in Intersections Inc.		(36.8		)	—			—
Loss from discontinued operations		2.6			15.8			13.7
Depreciation and amortization		81.1			94.1			79.7
Restructuring and impairment charges		2.4			30.6			—
Income tax benefit from stock plans		5.9			4.3			6.6
Deferred income taxes		25.3			15.8			17.9
Changes in assets and liabilities, excluding effects of acquisitions:
Accounts receivable, net		(17.2		)	17.8			27.5
Current liabilities, excluding debt		7.6			(15.4		)	(31.7		)
Other current assets		7.9			(3.9		)	12.0
Other long-term liabilities, excluding debt		2.7			(3.4		)	(10.8		)
Other assets		(7.0		)	(27.7		)	(43.3		)
Other		(0.2		)	0.8			—
Cash provided by operating activities		309.0			293.7			249.6
Investing activities:
Additions to property and equipment		(16.5		)	(14.2		)	(12.5		)
Additions to other assets, net		(31.0		)	(38.5		)	(42.9		)
Acquisitions, net of cash acquired		(17.4		)	(40.7		)	(321.2		)
Investments in unconsolidated companies		—			—			(0.1		)
Proceeds from sale of investments and businesses		59.4			—			41.0
Deferred payments on prior year acquisitions		(1.4		)	(5.4		)	(4.9		)
Other		0.4			—			—
Cash used by investing activities		(6.5		)	(98.8		)	(340.6		)
Financing activities:
Net short-term payments		(145.5		)	(16.0		)	(25.8		)
Additions to long-term debt		0.6			113.4			249.5
Payments on long-term debt		(15.6		)	(202.6		)	(75.0		)
Treasury stock purchases		(138.0		)	(94.9		)	(79.8		)
Dividends paid		(15.0		)	(11.3		)	(11.4		)
Proceeds from exercise of stock options		28.1			19.5			34.2
Other		(3.6		)	(3.4		)	0.9
Cash (used) provided by financing activities		(289.0		)	(195.3		)	92.6
Effect of foreign currency exchange rates on cash		(1.2		)	8.3			(2.8		)
Cash provided (used) by discontinued operations		1.7			0.8			(2.4		)
Increase (decrease) in cash and cash equivalents		14.0			8.7			(3.6		)
Cash and cash equivalents, beginning of year		38.1			29.4			33.0
Cash and cash equivalents, end of year		$	52.1		$	38.1		$	29.4

 

See Notes to Consolidated Financial Statements.

8

EQUIFAX INC.
CONSOLIDATED BALANCE SHEETS

		December 31,
		2004			2003
		(In millions, except par values)
ASSETS
Current Assets:
Cash and cash equivalents		$	52.1		$	38.1
Trade accounts receivable, net of allowance for doubtful accounts of $9.3 in 2004 and $11.9 in 2003		195.1			172.5
Other receivables		8.9			13.0
Deferred income tax assets		13.2			14.4
Other current assets		29.8			42.1
Current assets from discontinued operations		0.5			5.8
Total current assets		299.6			285.9
Property and Equipment:
Land, buildings and improvements		30.2			29.5
Data processing equipment and furniture		309.6			300.4
		339.8			329.9
Less accumulated depreciation		198.0			183.3
		141.8			146.6
Goodwill, net		747.5			724.3
Purchased Intangible Assets, net		281.3			296.2
Other Assets, net		87.0			91.4
Assets of Discontinued Operations		—			8.9
		$	1,557.2		$	1,553.3
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt and current maturities		$	255.7		$	160.5
Accounts payable		9.7			12.5
Accrued salaries and bonuses		28.8			32.8
Other current liabilities		162.4			144.9
Current liabilities from discontinued operations		0.3			4.1
Total current liabilities		456.9			354.8
Long-Term Debt		398.5			663.0
Deferred Revenue		9.8			12.0
Deferred Income Tax Liabilities		38.6			19.3
Other Long-Term Liabilities		129.8			124.1
Liabilities of Discontinued Operations		—			8.6
Total liabilities		1,033.6			1,181.8
Commitments and Contingencies
Shareholders’ Equity:
Preferred stock, $0.01 par value: Authorized—10.0; Issued—none		—			—
Common stock, $1.25 par value: Authorized shares—300.0; Issued shares—182.0 in 2004 and 180.4 in 2003; Outstanding shares—129.4 in 2004 and 132.7 in 2003		227.5			225.5
Paid-in capital		466.9			432.5
Retained earnings		1,298.8			1,079.0
Accumulated other comprehensive loss		(267.0		)	(296.1		)
Treasury stock, at cost, 47.7 shares in 2004 and 42.3 shares in 2003		(1,133.4		)	(995.5		)
Stock held by employee benefits trusts, at cost, 4.9 shares in 2004 and 5.4 shares in 2003		(69.2		)	(73.9		)
Total shareholders’ equity		523.6			371.5
		$	1,557.2		$	1,553.3

 

See Notes to Consolidated Financial Statements.

9

EQUIFAX INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME (LOSS)

																													Stock
																					Accumulated								Held By
		Common Stock:																			Other								Employee					Total
		Shares									Paid-In					Retained					Comprehensive					Treasury			Benefits					Shareholders’
		Outstanding				Amount					Capital					Earnings					Loss					Stock			Trusts					Equity
		(In millions)
Balance, December 31, 2001			136.2				$	223.0				$	376.7				$	758.8				$	(197.2	)		$	(828.0	)		$	(89.8	)			$	243.5
Net income			—				—					—					178.0					—				—				—					178.0
Other comprehensive income			—				—					—					—					(162.2		)		—				—					(162.2		)
Shares issued under stock plans			2.4				2.1					28.2					—					—				0.8				7.4					38.5
Treasury stock purchased			(2.9	)			—					—					—					—				(72.5		)		—					(72.5		)
Cash dividends			—				—					—					(11.4		)			—				—				—					(11.4		)
Income tax benefit from stock plans			—				—					6.6					—					—				—				—					6.6
Dividends from employee benefits trusts			—				—					0.5					—					—				—				—					0.5
Balance, December 31, 2002			135.7				$	225.1				$	412.0				$	925.4				$	(359.4	)		$	(899.7	)		$	(82.4	)			$	221.0
Net income			—				—					—					164.9					—				—				—					164.9
Other comprehensive income			—				—					—					—					63.3				—				—					63.3
Shares issued under stock plans			1.1				0.4					15.7					—					—				(0.8		)		8.5					23.8
Treasury stock purchased			(4.1	)			—					—					—					—				(95.0		)		—					(95.0		)
Cash dividends			—				—					—					(11.3		)			—				—				—					(11.3		)
Income tax benefit from stock plans			—				—					4.3					—					—				—				—					4.3
Dividends from employee benefits trusts			—				—					0.5					—					—				—				—					0.5
Balance, December 31, 2003			132.7				$	225.5				$	432.5				$	1,079.0				$	(296.1	)		$	(995.5	)		$	(73.9	)			$	371.5
Net income			—				—					—					234.7					—				—				—					234.7
Other comprehensive income			—				—					—					—					29.1				—				—					29.1
Shares issued under stock plans			2.1				2.0					34.0					—					—				—				4.7					40.7
Treasury stock purchased			(5.4	)			—					—					—					—				(138.0		)		—					(138.0		)
Cash dividends			—				—					—					(15.0		)			—				—				—					(15.0		)
Dividends from employee benefits trusts			—				—					0.4					—					—				—				—					0.4
Balance, December 31, 2004			129.4				$	227.5				$	466.9				$	1,298.8	*			$	(267.0	)		$	(1,133.4	)*		$	(69.2	)			$	523.6	*

*                      Does not total due to rounding

See Notes to Consolidated Financial Statements.

10

Accumulated Other Comprehensive Loss consists of the following components:

		December 31,
		2004			2003			2002
		(In millions)
Foreign currency translation		$	(148.2	)	$	(173.7	)	$	(239.6	)
Minimum pension liability, net of accumulated tax of $70.2, $70.7 and $70.2 in 2004, 2003 and 2002, respectively		(117.0		)	(120.1		)	(117.0		)
Cash flow hedging transactions, net of tax of $1.1, $1.4 and $1.9 in 2004, 2003 and 2002, respectively		(1.8		)	(2.3		)	(2.8		)
		$	(267.0	)	$	(296.1	)	$	(359.4	)

 

Comprehensive Income is as follows:

		Twelve Months Ended December 31,
		2004			2003			2002
Net income		$	234.7		$	164.9		$	178.0
Other comprehensive income (loss):
Foreign currency translation adjustment		29.5			65.9			(47.8		)
Reclassification adjustment for the gain on sale of discontinued operations		(4.0		)	0			0
Change in cumulative loss from cash flow hedging transactions		0.5			0.5			(2.0		)
Minimum pension liability adjustment		3.1			(3.1		)	(112.4		)
		$	263.8		$	228.2		$	15.8

 

See Notes to Consolidated Financial Statements.

11

1.   SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

Accounting Principles.   Our financial statements and the accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

Basis of Consolidation.   Our consolidated financial statements include Equifax and all subsidiaries. The Company consolidates all majority-owned and controlled subsidiaries, uses the equity method of accounting for investments in which the Company is able to exercise significant influence and uses the cost method for all other investments. All significant intercompany transactions and balances are eliminated. Certain prior year amounts have been reclassified to conform to current year presentation.

Nature of Operations.   We collect, organize and manage various types of financial, demographic and marketing information. Our products and services enable businesses to make credit and service decisions, manage their portfolio risk and develop marketing strategies concerning consumers and commercial enterprises. We serve customers across a wide range of industries, including the financial services, mortgage, retail, telecommunications, utilities, automotive, brokerage, healthcare and insurance industries, as well as state and federal governments. We also enable consumers to manage and protect their financial health through a portfolio of products offered directly to individuals. We have approximately 4,400 employees worldwide, and manage our business globally through the following three reporting segments: Equifax North America, Equifax Europe and Equifax Latin America. Our operations are predominantly located within the U.S., with foreign operations principally located in Canada, the U.K. and Brazil.

Our products and services are categorized as follows: Information Services, Marketing Services and Personal Solutions. Our Information Services products and services allow customers to make credit decisions about consumers and commercial enterprises. Our Marketing Services information products and databases enable customers to identify a target audience for marketing purposes, and our Personal Solutions products and services provide information to consumers which enable them to reduce their exposure to identity fraud and to monitor their credit health.

We develop, maintain and enhance secured proprietary information databases through compilation of accounts receivable information about consumers and businesses that we obtain from a variety of sources, such as credit granting institutions, public record information, including bankruptcies, liens and judgments, and marketing information from surveys and warranty cards. We process this information utilizing our proprietary information management systems and make it available to our customers in virtually any medium or format they choose.

Use of Estimates.   GAAP requires us to make estimates and assumptions. Accordingly, we make these estimates and assumptions after exercising judgment and we believe that the estimates and assumptions inherent in our financial statements are reasonable, based upon information available to us at the time they are made. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are used for, but not limited to, the accounting for long-lived asset impairments, contingencies and the allowance for doubtful accounts, the use, recoverability and/or realizability of certain assets, including deferred tax and other assets, restructuring costs, the valuation of pension plan obligations and assets and the preliminary allocation of the purchase price of acquisitions. Actual results could differ from these estimates.

Revenue Recognition and Deferred Revenue.   We recognize revenue when persuasive evidence of an arrangement exists, for which the corresponding products have been delivered or services have been rendered, the pricing of which is either fixed or determinable and collectibility of the fee arrangement is reasonably assured. We consider the earnings process to be completed when we have fulfilled our specific obligations under the contract as demonstrated by evidence of product delivery or rendering of services.

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Most of our revenues are based upon transactional activity generated by customers’ access to, or queries of, our proprietary databases. Revenues are typically usage-based and incorporate predetermined volume-tiered unit pricing. Some of our revenue is related to subscription-based contracts under which the customer pays a flat fee for a preset or unlimited volume of transactions or services. Revenue recognition in these cases is based upon pro-rating the related fee over the term of the contract. In conjunction with certain products and services, we charge non-refundable set-up and membership fees which are recognized on a straight-line basis over the term of the contract. Revenue from the sale of decision or statistical models is recognized upon customer installation and acceptance. For certain products and services sold on a subscription basis, we recognize revenue pro rata over the term of the contract.

Some of our sales contracts contain multiple elements pertaining to the delivery of distinct products and services such as decisioning models, prescreening services, and database management services.  These deliverables are divided into separate units of accounting to which we allocate the contract revenues based on specific evidence of their relative fair values. The individual deliverables are generally independent of each other and can be sold on a stand-alone basis without affecting their usefulness to the customer. If relative fair values cannot be established, revenue recognition is deferred until all elements within the contract have been delivered. Failure to satisfy a specific element in the arrangement does not result in the cancellation of the entire contract but rather would result in a pro rata refund to the customer.

Deferred revenue represents the liability for amounts billed in advance of service delivery, and is classified as either current or long-term deferred revenue, with the current portion representing services expected to be provided within the next twelve months. Current deferred revenue is included with other current liabilities in the accompanying Consolidated Balance Sheets, and totaled $33.8 million and $22.9 million respectively at December 31, 2004 and 2003. In conjunction with the divestiture of our risk management collections businesses in the U.S. and Canada in October 2000, certain of the proceeds received related to contracts to provide credit information products and services to the buyers over the next five to six years and were recorded in current and long-term deferred revenue. At December 31, 2004 and 2003, $10.1 million and $11.6 million, respectively, remained unrecognized, with $7.7 million and $9.2 million, respectively, included in long-term deferred revenue in the accompanying Consolidated Balance Sheets. This deferred revenue will be recognized as the contracted products and services are provided.

Accounts Receivable.   In September 2004, we entered into a new trade receivables-backed revolving credit facility. At December 31, 2004, $111.1 million of net accounts receivable had been sold to our wholly-owned subsidiary and is included in accounts receivable in the accompanying Consolidated Balance Sheets. We do not recognize interest income on our trade receivables.

Allowance for Doubtful Trade Accounts Receivable.   The provision for estimated losses on trade accounts receivable is based on historical write-off experience, an analysis of the aging of outstanding receivables, customer payment patterns and the establishment of specific reserves for customers in adverse financial condition or for existing contractual disputes wherein we are not assured of a favorable outcome. The allowance for doubtful accounts was $9.3 million and $11.9 million, respectively, at December 31, 2004 and 2003. Increases to the provision are recorded as bad debt expense and are included in selling, general and administrative expenses on the accompanying Consolidated Statements of Income. Bad debt expense was $2.9 million or 0.23% of revenue for 2004, $8.8 million or 0.72% of revenue for 2003 and $10.1 million or 0.91% of revenue for 2002. We reassess the adequacy of the allowance for doubtful accounts receivable each reporting period. During 2004, we wrote off $4.5 million of accounts receivable and recovered $3.4 of previously written-off accounts receivable. During 2003, we wrote-off $17.0 million of accounts receivable, which included $11.0 million from our eMarketing business unit, and recovered $0.6 million of previously written-off accounts receivable.

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Costs of Services.   Costs of services consist primarily of data acquisition and royalties; customer service costs, which include: personnel costs to collect, maintain and update our proprietary databases, to develop and maintain software application platforms and to provide consumer and customer call center support; hardware and software expense associated with transaction processing systems; telecommunication and computer network expense; and occupancy costs associated with facilities where these functions are performed.

Selling, General and Administrative Expenses.   Selling, general and administrative expenses consist primarily of personnel related costs paid to sales and administrative employees and management, fees for professional and consulting services and advertising costs.

Advertising.   Advertising costs are expensed as incurred and totaled $15.7 million in 2004, $4.6 million in 2003 and $2.9 million in 2002.

Legal Contingencies.   We periodically review claims and legal proceedings and assess whether we have potential financial exposure. If the potential loss from any claim or legal proceeding is probable and can be estimated, we accrue a liability for estimated settlements and incurred but unpaid legal fees for services performed to date.

Income Taxes.   We base income tax expense on pre-tax financial accounting income, and recognize deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Significant judgment is required to determine our overall local, state, federal and foreign income tax expense due to transactions and calculations where the ultimate tax consequence is uncertain. We have recorded a valuation allowance to reduce our deferred tax assets to the amount of future tax benefit that we estimate is likely to be received. We believe that our estimates are reasonable, however, the final outcome of tax matters may be different than the estimates reflected on our financial statements.

Earnings Per Share.   Our basic earnings per share, or EPS, is calculated as income from continuing operations or net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated to reflect the potential dilution that would occur if stock options or other contracts to issue common stock were exercised and resulted in additional common shares outstanding. The income amount used in our EPS calculations is the same for both basic and diluted EPS. A reconciliation of the weighted average outstanding shares used in the two calculations is as follows:

		2004		2003		2002
		(In millions)
Weighted average shares outstanding (basic)		131.3		134.5		136.2
Effect of dilutive securities:
Stock options		1.6		2.0		2.3
Long-term incentive plans		0.6		0.2		—
Weighted average shares outstanding (diluted)		133.5		136.7		138.5

 

Cash and cash equivalents.   We consider cash and cash equivalents to be short-term cash investments with original maturities of three months or less.

Property and Equipment.   The cost of property and equipment is depreciated primarily on the straight-line basis over estimated asset lives of 30 to 50 years for buildings; useful lives, not to exceed lease terms, for leasehold improvements; three to ten years for data processing equipment (including capitalized software); and five to seven years for other fixed assets.

Certain internal use software and systems development costs are deferred and capitalized in accordance with AICPA Statement of Position 98-1, “Accounting for the Costs of Computer Software

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Developed or Obtained for Internal Use,” and Emerging Issues Task Force (“EITF”) 97-13 “Accounting for Costs Incurred with a Business Process Reengineering Project.” Accordingly the specifically identified costs incurred to develop or obtain software and accompanying hardware which is intended for internal use are not capitalized until the determination is made as to the availability of a technically feasible solution to solve the pre-defined user and operating performance requirements as established during the preliminary stage of an internal use software development project. Costs incurred during a software development project’s preliminary stage are expensed. Application development activities which are eligible for capitalization include software design and configuration, development of interfaces, coding, testing, installation and the development of training materials. Costs of business process reengineering are expensed as incurred. We monitor the activities undertaken in our various software and systems development projects and analyze the associated costs, making appropriate distinction between and accounting for costs to be capitalized and costs to be expensed. Internal use software and systems development project costs that are deferred and capitalized are subsequently amortized on a straight-line basis over a three to ten year period after project completion and when the related software or system is ready for its intended use.

Impairment of Long-Lived Assets.   We monitor the status of our long-lived assets annually or more frequently if necessary, in order to determine if conditions exist or events and circumstances indicate that an asset may be impaired in that its carrying amount may not be recoverable. Significant factors that are considered that could be indicative of an impairment include: changes in business strategy, market conditions or the manner in which an asset is used; underperformance relative to historical or expected future operating results; and negative industry or economic trends. If potential indicators of impairment exist, we estimate recoverability based on the assets ability to generate cash flows greater than the carrying value of the asset. We estimate the undiscounted future cash flows arising from the use and eventual disposition of the related long-lived asset group. If the carrying value of the long-lived asset group exceeds the estimated future undiscounted cash flows, an impairment loss is recorded based on the amount by which the asset’s carrying amount exceeds its fair value. We utilize the discounted present value of the associated future estimated cash flows to determine the asset’s fair value. During 2004, 2003 and 2002, we recognized a $2.4 million, $30.6 million and $0.0 million impairment charge, respectively. See Note 6 for further details.

Other Assets.   Other assets at December 31, 2004 and 2003 consist of the following:

		2004			2003
		(In millions)
Purchased software		$	20.4		$	14.8
Prepaid pension cost		18.2			17.0
Investments in unconsolidated companies		0.4			28.5
Data purchases		5.6			2.7
Other		42.4			28.4
		$	87.0		$	91.4

 

As discussed above under “Impairment of Long-Lived Assets,” we regularly review these assets to determine if conditions or circumstances exist or events have occurred that would indicate that an asset could be impaired, and, if appropriate, we recognize impairments by recording a charge against income. We believe that the long-lived assets, as reflected in the above table and the accompanying Consolidated Balance Sheets, were appropriately valued at December 31, 2004 and 2003. Amortization expense for other assets was $8.0 million in 2004, $17.6 million in 2003 and $6.6 million in 2002. As of December 31, 2004 and 2003, related accumulated amortization balances were $23.2 million and $28.3 million, respectively.

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Foreign Currency Translation.   The functional currency of our foreign subsidiaries is those subsidiaries’ local currencies. We translate the assets and liabilities of foreign subsidiaries at the year-end rate of exchange, and revenue and expenses at the average rates prevailing during the year. We record the resulting translation adjustment as a component of shareholders’ equity. We also record gains and losses resulting from the translation of inter-company balances of a long-term investment nature as a component of shareholders’ equity. We record foreign currency transaction gains and losses, which are not material, in the Consolidated Statements of Income.

Financial Instruments.   Our financial instruments consist primarily of cash and cash equivalents, accounts and notes receivable, accounts payable and short-term and long-term debt. The carrying amounts of these items, other than long-term debt, approximate their fair market values due to their short maturity. As of December 31, 2004, the fair value of our long-term debt (determined primarily by broker quotes) was $426.3 million compared to its carrying value of $398.5 million.

Accounting for Stock-Based Compensation.   In accordance with the accounting and disclosure provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148 “Accounting for Stock-Based Compensation-Transition and Disclosure,” we have elected to apply APB Opinion No. 25 and related interpretations in accounting for our stock option and performance share plans. Accordingly, by our use of the intrinsic value method to account for stock-based employee compensation, we do not recognize compensation cost in connection with our stock option plans.

We have computed the proforma disclosures required under SFAS No. 123 and SFAS No. 148 using the Black-Scholes option pricing model. The fair value of options granted in 2004, 2003 and 2002 is estimated on the date of grant using the Black-Scholes option pricing model based on the following weighted average assumptions:

		2004		2003		2002
Dividend yield		0.5	%	0.4	%	0.3	%
Expected volatility		36.3	%	40.7	%	40.8	%
Risk-free interest rate		3.6	%	1.1	%	3.5	%
Expected life in years		4.5		2.8		2.9

 

The weighted-average grant date fair value per share of options granted in 2004, 2003 and 2002 is as follows:

		2004			2003			2002
Grants (all at market price)		$	8.75		$	5.59		$	7.51

 

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If we had elected to recognize compensation cost for these plans based on the fair value at grant date as prescribed by SFAS No. 123, net income and net income per share would have been reduced to the pro forma amounts indicated in the table below (in millions, except per share amounts):

		Twelve Months Ended December 31,
		2004					2003					2002
		(In millions, except per share data)
Net income, as reported			$	234.7				$	164.9				$	178.0
Add: Total stock-based employee compensation expense, net of related tax effect, included in reported net income			1.5					2.3					2.0
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects			(6.4		)			(14.4		)			(16.1		)
Pro forma net income			$	229.8				$	152.8				$	163.9
Earnings per share:
Basic—as reported			$	1.79				$	1.23				$	1.31
Basic—pro forma			$	1.75				$	1.14				$	1.20
Diluted—as reported			$	1.76				$	1.21				$	1.29
Diluted—pro forma			$	1.72				$	1.12				$	1.18

 

Derivative Instruments and Hedging Activities.   We recognize derivatives as assets or liabilities on our balance sheet at fair value, and the gain or loss related to the effective portion of derivatives designated as cash flow hedges as a component of other comprehensive income.

We enter into hedging transactions in order to reduce financial volatility and manage the fixed-floating mix of our debt portfolio. As of December 31, 2004, the only hedging transactions to which we were a counterparty consisted of interest rate swap agreements.

At December 31, 2004, we have a $29.0 million notional amount floating-to-fixed interest rate swap agreement in place with a bank counterparty that fixes the interest rate on the $29.0 million synthetic lease related to our corporate headquarters through its maturity in 2010. This hedge has been designated as a cash flow hedge under SFAS 133, is fully effective, and at December 31, 2004, was marked to market and valued as a liability totaling $3.1 million. We determine the fair value of our interest rate swap derivative through the inquiry of the counterparty banks. This liability is included with other current liabilities in the accompanying Consolidated Balance Sheets, and the related loss of $1.8 million was recorded, net of income tax, as a component of accumulated other comprehensive loss. The termination of the lease, whenever that occurs, of our headquarters building will result in the reclassification of accumulated other comprehensive loss into earnings for the cash flow hedge.

At December 31, 2004, we also have interest rate swap agreements in place with a bank counterparty to float the interest rate on $250.0 million of our fixed rate senior unsecured notes through their maturity date in 2005. These derivatives have been designated as fair value hedges and are fully effective. The value of these swaps was $5.6 million at December 31, 2004, and is included with other current assets in the accompanying Consolidated Balance Sheets with a corresponding increase in the amount of currently maturing short-term debt. Changes in the fair value of these swaps and that of the related debt are recorded in interest expense in the accompanying Consolidated Statements of Income, the net of which is zero in 2004, 2003 and 2002.

Our maximum economic exposure to loss due to credit risk on these interest rate swap agreements approximates $2.5 million if all bank counterparties were to default. We manage this exposure by

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monitoring the concentration of risk that we have with any one bank, and through the use of minimum credit quality standards for all counterparties.

2.   RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the EITF reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 provides guidance pertaining to the revenue recognition methodology to apply to revenue arrangements that involve the delivery or performance of multiple products, services, and/or rights to use assets. The provisions of EITF Issue No. 00-21 apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. We adopted EITF Issue No. 00-21 on July 1, 2003 and it did not have a material impact on our financial position or results of operations.

In December 2003, the Financial Accounting Standards Board (“FASB”) issued a revision to SFAS No. 132 “Employers Disclosures about Pensions and Other Postretirement Benefits.” The purpose of the revision is to require additional disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. These additional disclosures include information describing the types of plan assets, investment strategy, measurements date(s), plan obligations, cash flows and components of net periodic benefit cost recognized. As revised, SFAS 132 enhances disclosures by providing more relevant information about the plan assets available to finance benefit payments, the obligation to pay benefits and an entity’s obligation to fund the plan. This revised version of SFAS 132 is effective for fiscal years ending after December 15, 2003. We adopted the revisions to SFAS 132 and have included the additional disclosures in the Notes to our Consolidated Financial Statements.

In December 2003, the FASB issued its revision to FASB Interpretation No. 46, “Consolidation of Variable Interest Entities, (an Interpretation of ARB No. 51).” FIN 46 addresses the consolidation by a reporting entity of variable interest entities that either do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or in which the equity investors lack the characteristics of a controlling financial interest. Application of FIN 46 is required in financial statements of public entities that have interests in variable interest entities or potential variable interest entities (also referred to as special-purpose entities) for periods ending after December 15, 2003. The FASB subsequently issued FASB Staff Positions (“FSP’s”), which deferred the effective date for applying the provisions of FIN 46 for interests in certain variable interest entities or potential variable interest entities created before February 1, 2003 until the end of the first interim period ending after March 15, 2004. These FSP’s also required certain disclosures about variable interest entities and potential variable interest entities. We adopted the provisions of FIN 46 in March 2004 and it has not had a material impact on our financial position or results of operations.

In December 2003, the Staff of the Securities and Exchange Commission, or SEC, issued Staff Accounting Bulletin No. 104, or SAB 104, “Revenue Recognition,” which supersedes SAB 101, “Revenue Recognition in Financial Statements.” SAB 104’s primary purpose is to rescind the accounting guidance contained in SAB 101 related to multiple-element revenue arrangements that was superseded as a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” Additionally, SAB 104 rescinds the SEC’s related “Revenue Recognition in Financial Statements Frequently Asked Questions and Answers” issued with SAB 101 that had been codified in SEC Topic 13, “Revenue Recognition.” While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104, which was effective upon issuance. We implemented SAB 104 in December 2003 and it did not have a material effect on our financial position or results of operations.

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In May 2004, the FASB issued FSP No. 106-2 “Accounting and Disclosure Requirements Related to the Medicare Modernization Act of 2003.” This staff position supersedes FSP No. 106-1 “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” by clarifying the guidance on the recognition of the effects of the Act on employers accumulated post-retirement benefit obligation. Employers that sponsor a postretirement health care plan that provides prescription benefits that are deemed actuarially equivalent to the Medicare Part D benefit are eligible for a federal subsidy. This subsidy is to be treated as an actuarial experience gain in the calculation of the accumulated post-retirement benefit obligation. FSP 106-2 is effective for the first interim period or annual period beginning after June 15, 2004. We adopted the accounting and disclosure provisions of FSP 106-2 in July 2004 and it did not have a material effect on our financial position or results of operations.

In July 2004, the EITF of the FASB reached consensus Issue No. 02-14 “Whether the Equity Method of Accounting Applies When an Investor Does Not Have an Investment in Voting Stock of an Investee but Exercises Significant Influence through Other Means.” EITF Issue No. 02-14 provides guidance pertaining to an investors accounting when the investor has significant influence over an investee through means other than voting stock. The provisions of EITF No. 02-14 apply to reporting periods beginning after September 15, 2004. The Company’s accounting for such investments has been consistent with EITF 02-14 and its adoption during the fourth quarter of 2004 did not have a material impact on our financial position or results of operations.

In December 2004, the FASB issued SFAS No. 123R “Share-Based Payments.” SFAS 123R is a revision to SFAS 123 “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25 “Accounting for Stock Issued to Employees.” SFAS 123R establishes standards for the accounting for all transactions in which an entity exchanges its equity instruments for goods or services from either employees or non-employees. This financial accounting standard requires the cost resulting from share-based payment transactions be recognized in the entity’s financial statements as the goods are received or the services are rendered, and establishes fair value as the measurement objective for the accounting for such transactions. SFAS 123R is effective for public entities as of the beginning of the first interim or annual reporting period beginning after June 15, 2005 and applies to (a) all new awards granted after June 15, 2005; (b) modifications, repurchases or cancellations occurring after June 15, 2005, but pertaining to awards granted before June 15, 2005; and (c) the unvested service component of outstanding awards granted prior to June 15, 2005. SFAS 123R requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. We will adopt the provisions of SFAS 123R in our third quarter beginning July 1, 2005 and expect that its impact on our financial position or results of operations will be in the range of our SFAS 123 pro forma amounts disclosed in Note 1.

In December 2004, the FASB issued SFAS 153 “Exchanges of Non-monetary Assets—An Amendment of APB Opinion No. 29, Accounting for Non-monetary Transactions.” SFAS 153 amends APB 29 to eliminate the fair value measurement principal exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that lack commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to significantly change as result of the exchange. SFAS 153 is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. We will adopt the provisions of SFAS 153 in July 2005 and do not expect that it will have a material impact on our financial position or results of operations.

In December 2004, the FASB issued FSP No. 109-2 “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (the Act). FSP 109-2 specifically addresses the one-time deduction of 85% of certain foreign earnings that are

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repatriated. In accordance with this FSP an enterprise is allowed time beyond the financial reporting period covering the enactment of the Act, to evaluate the effect of the Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS 109. FSP 109-2 requires the following disclosures for an enterprise that has not completed its evaluation of the repatriation provisions: (a) a summary of the repatriation as it applies to the enterprise; (b) the expected completion date of the evaluation; (c) the expected effect on income tax expense or benefit; and (d) the amount of un-remitted earnings being considered for repatriation. FSP 109-2 is effective upon issuance. We are utilizing the time allowed by FSP 109-2 to evaluate the effect of the Act as it pertains to our foreign earnings and our application of SFAS 109, and have included the requisite disclosures in Note 8 to our Consolidated Financial Statements.

3.   DISCONTINUED OPERATIONS

In the third quarter of 2002, we made the decision to exit our commercial services business in Spain in our Equifax Europe segment. During 2003 and the first six months of 2004, this business component remained as held for sale. We completed the sale and final disposition of the business and recorded a $0.5 million gain in the third quarter of 2004, of which $1.7 million related to the recognition of a cumulative translation adjustment loss into income. In accordance with SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets to be Disposed Of,” the net assets, results of operations and cash flows of the Spain commercial business for 2004, 2003 and 2002 were classified as discontinued operations. For 2004, 2003 and 2002, revenues for this business component were $1.3 million, $8.6 million and $9.1 million, respectively. We had a $0.1 million gain on discontinued operations in 2004, a $13.6 million loss on discontinued operations in 2003 and $13.3 million loss on discontinued operations in 2002. Included in the 2003 losses was an estimated loss on disposal of $8.6 million recorded in the second and fourth quarters of 2003.

After incurring losses in each of the last four years, we decided to sell our Italian operations, which were formerly included in our Equifax Europe segment, in the fourth quarter of 2004. In accordance with SFAS 144, the net assets, results of operations and cash flows of the Italian business for 2004, 2003 and 2002 were classified as discontinued operations. For 2004, 2003 and 2002, revenues for this business component were $11.4 million, $14.7 million and $14.0, respectively. We recorded an impairment charge of $5.3 million related to the write-down of purchased data during the second quarter of 2004. We had a $2.7 million, $2.2 million and $0.4 million loss on discontinued operations in 2004, 2003 and 2002, respectively. We recorded a gain on the sale of $2.6 million during the fourth quarter of 2004, of which $5.7 million related to the recognition of a cumulative translation adjustment gain into income.

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