UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2005

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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act (“Act”).
                 x YES                  o NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
                 o YES                  x NO

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 at least 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.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).
                 oYES                  x NO

As of the last day of the second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $4,202,477,677 based on the closing sale price as reported on the New York Stock Exchange. At January 31, 2006, there were 129,414,320 shares of voting common stock with a par value of $1.25 outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Registrant’s definitive proxy statement relating to its annual meeting of shareholders to be held on May 17, 2006 is incorporated by reference in Part III to the extent described therein.

FORWARD-LOOKING STATEMENTS

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.

This Form 10-K and certain information incorporated herein by reference contains 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. In addition, certain statements included in our future filings with the Securities and Exchange Commission (“SEC”), in press releases, and in oral and written statements made by us or with our approval, which are not statements of historical fact, are forward-looking statements. 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. These forward-looking statements are found at various places throughout this report and in the documents incorporated herein by reference. These statements are based on our current expectations about future events or results and 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. 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 these forward-looking statements. Factors that may cause such a difference, include, but are not limited to those discussed in Part I, Item IA, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors, below, as well as: changes in worldwide and U.S. economic conditions that materially impact consumer spending and consumer debt; interest rate increases or other factors that reduce mortgage refinancings or new mortgages; changes in the marketing techniques of credit card issuers; pricing and other competitive pressures and the company’s ability to gain or maintain share of sales as a result of actions by competitors and others; risks relating to illegal third party efforts to access data; risks associated with the integration of acquisitions and other investments; the outcome of our litigation; changes in estimates in critical accounting judgments; changes in or failure to comply with laws and regulations, including changes in the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, accounting standards, taxation requirements (including tax rate changes, new tax laws and revised tax interpretations) in domestic or foreign jurisdictions; costs associated with compliance with the Fair and Accurate Credit Transactions Act of 2003 and federal or state responses to identity theft concerns; exchange rate fluctuations and other risks associated with investments and operations in foreign countries; our ability to successfully develop and market new products and services, incorporate new technology and adapt to technological change; equity markets, including market disruptions and significant interest rate fluctuations, which may impede our access to, or increase the cost of, external financing; increased competitive pressures both domestically and internationally; and international conflict, including terrorist acts. Equifax undertakes no duty to update, whether as a result of new information, future events or otherwise, unless required by law.

Readers 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 future reports on Forms 10-Q and 8-K, and any amendments thereto.

You may obtain our SEC filings at our website, www.equifax.com/OurCompany/Investor Center/Financials/SEC Filings, or over the Internet at the SEC’s web site, www.sec.gov.

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PART I

ITEM 1.                BUSINESS

Overview

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. Our proprietary databases contain information on more than 400 million consumers and businesses worldwide. 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 13 countries: North America (the U.S., Canada and Costa Rica), Europe (the U.K., Ireland, Spain and Portugal) and Latin America (Brazil, Argentina, Chile, El Salvador, 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. Our revenue stream is highly diversified with our largest customer providing slightly more than 2% of total revenues.

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Segment Reporting

We manage our business and report our financial results through the following three reportable segments:

·       North America

·       Europe

·       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 below in Part II, Item 8, Financial Statements and Supplementary Data—Note 13 of the Notes to Consolidated Financial Statements, Segment Information.

Overview

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 small 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 small 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 ID 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.

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Our enabling technologies include products such as ePort, APPLY, Decision Power, ID Authentication, Accel CM, Accel DM 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 Equifax’s extensive technological systems and communication networks. To broaden and further strengthen our enabling technologies capabilities within North America Information Services, we acquired APPRO Systems, Inc. (“APPRO”) on March 15, 2005. APPRO’s LoanCenter software products and services serve the credit origination, underwriting and fulfillment needs for financial institutions, credit unions and automotive lending institutions. Also, on August 29, 2005, we acquired BeNow, Inc., a provider of leading edge solutions to multi-channel marketers, to enhance our Marketing Services business and add to our enabling technology capabilities.

North America

North America is our largest reportable segment and in 2005 generated 81% of our revenue and 87% 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. Approximately 2,750 employees were employed in the North America reporting segment as of December 31, 2005.

Information Services

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 maintain information on more than 290 million consumers in North America, where we are a market leader in Consumer Services. 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, credit card applications, identity verification and similar business uses. Risk management and fraud detection and prevention services enable banks and financial institutions to monitor default rates and proactively manage their existing credit card 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 have created Small Business Exchange, a unique single source of small business credit information in the U.S., and maintain information on more than 30 million small businesses. 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.

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Our operations in Canada include our Consumer and Commercial Services product lines, and these revenues are consolidated on a geographic basis as Canadian Operations.

Marketing Services

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 on-line customer mailing lists;

·       Use “what-if” scenarios to create customized mailing lists on-line;

·       Improve their direct mail response rate; and

·       Reduce costs associated with unwanted or unnecessary mailings.

Our Credit Marketing Services products and services, available in the U.S., Canada, Latin America and Europe, utilize our consumer credit information databases through batch processing to help our customers acquire new customers 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.

Personal Solutions

Our products and services allow consumers to make smarter financial decisions. We focus on solving three problems for consumers—managing personal credit, preparing for a major purchase and protecting personal identity. Equifax Credit Report™ provides consumers with access to their credit profile. Equifax Credit Watch™ is a subscription service that assists consumers in protecting against identity theft and the associated fraud that typically occurs as a result of identity theft. ScorePower® provides consumers with access to their FICO® score, the score used most frequently by lenders when making lending decisions. Score Watch™ is a subscription service that monitors a consumer’s FICO® score and shows correlating interest rates likely to be offered within credit score ranges. The Equifax 3-in-1 Credit Report™ combines reports from the three nationwide credit reporting agencies, in one convenient easy to use product. 3-in-1 Monitoring is a subscription service that monitors and reports changes on reports at any of the three consumer credit reporting agencies. We offer our products in both online and off-line versions, depending

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upon the preference of the consumer. We also offer our products 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., Canada and the U.K.

Europe

The Europe segment consists of our operations conducted in the U.K., Ireland, Spain and Portugal, and accounted for 10% of our 2005 revenue. The U.K. accounted for 88% of the segment’s revenue. Approximately 570 employees were employed in Europe as of December 31, 2005.

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 on-line service for consumers.

Europe customers include banks, mortgage lenders, financial institutions and governments, which utilize the information we provide to make decisions for a wide range of credit and business purposes, such as approval of loans for many purposes, 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.

Latin America

The Latin America segment consists of our operations conducted in Brazil, Argentina, Chile, El Salvador, Peru and Uruguay, and accounted for 9% of our 2005 revenue. Brazil accounted for 53% of the segment’s revenue. Approximately 950 employees were employed in Latin America as of December 31, 2005. Our Information Services product and services line is sold in each country of 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 to varying degrees and 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 on businesses operating in these countries.

We also offer our Credit Marketing products and services to varying degrees in each of the Latin America countries 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 banks, telecommunications companies, retailers, financial institutions 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 segment’s countries the majority of our customers access our products and services through a number of electronic distribution mechanisms, including direct real-time

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access, which facilitates instant decisions and cross-selling opportunities. We also sell directly our various reports and services via branches, websites and mail fulfillment.

Sales and Distribution

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. We also 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 worldwide 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™, our web-based product delivery channel, 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 and effective means of delivering products and services to our customers.

Product Development

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.

Data Sources

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 and from various government and public record services. Additionally, 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 data in certain geographic areas. Outside of the U.S., governmental data sources are generally more significant to our business.

Our Marketing Services operating segment, with the exception of the Credit Marketing Services products, is derived from proprietary databases consisting of consumer, lifestyle and demographic information. The majority of this information is gathered by consumers reporting information on warranty cards, voluntarily providing information via websites maintained by us, or otherwise requesting certain types of information. 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. All databases are regularly updated by information provided by banks, financial institutions, telecommunications companies, other trade credit

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providers and governments, and we are committed to enhancing, expanding and maintaining the integrity of our proprietary databases. Our Personal Solutions product line relies on the consumer credit information databases, which support our Consumer Services products.

Government Regulation

Since our business involves the collection of consumer data and the distribution of such information to businesses who make credit, service and marketing decisions, certain of our activities and products and services are subject to regulation under various local, state and federal laws in the U.S. governing consumer report data and consumer reporting agencies, including the Fair Credit Reporting Act (“FCRA”), which regulates the use of consumer credit information and, to a lesser extent, the Gramm-Leach-Bliley Act, which regulates the use of non-public personal financial information held by financial institutions. The Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”) amended the FCRA and became law in December 2003. During 2004, as required by the FACT Act, we established, along with the other nationwide credit reporting agencies, a centralized request facility, Central Source, LLC, which is owned jointly by Equifax, Experian Information Solutions, Inc. (“Experian”) and TransUnion LLC (“TransUnion”), to provide to consumers, upon their request, a free annual credit file disclosure on a phased-in between December 1, 2004 and September 1, 2005. Additional provisions of the FACT Act impose requirements designed to reduce consumer identity theft, limit provision of medical information and require reports to the Federal Trade Commission (“FTC”) regarding consumer complaints. For additional information on the FACT Act, see Part I, Item IA, “Risk Factors—Risks Relating to Regulation and Litigation” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We continue to monitor federal and state legislative and regulatory issues involving consumer data privacy and protection. Much of this activity resulted from highly publicized third party security breaches in early 2005 involving personal financial data. While numerous bills have been introduced and a few have become law at the state level, governing matters such as the right of consumers to “freeze” the credit files maintained by credit reporting agencies under certain circumstances and security breach notification provisions, these have not resulted in significant changes to our business practices. We expect to see an increase in the number of notices resulting from breached third party databases and the number of consumers that contact credit reporting companies following a breach. At the federal level, Congress has held hearings and drafted various bills dealing with data security and identity theft issues. We cannot predict the outcome of any of these bills in 2006 and the potential impact on our Consolidated Financial Statements. The FCRA, as amended in 2003, contains a number of significant identity theft protections for consumers and we continue to work with regulators to fully implement all of its provisions.

We are also subject to privacy and consumer credit laws and regulations in foreign countries where we do business, including the European Union’s Privacy Directive. The U.K.’s 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.

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.

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Intellectual Property

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, the more important of which cover various aspects of and relate to the use of data within a consumer credit file. 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 marks 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 there-from, 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.

Competition

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 Dun & Bradstreet, Inc. 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.

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Employees

We employed approximately 4,600 employees in 13 countries as of January 31, 2006. The North America segment employed approximately 2,750 of these employees, Europe employed approximately 580, Latin America employed approximately 960 and general corporate employed approximately 310. 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.

Available Information

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 SEC. Information contained on our website is not part of this Form 10-K or our other filings with the SEC.

Financial Information About Geographic Areas

Detailed financial information by geographic area, including revenues for the past three fiscal years from our customers in the U.S., from our customers outside the U.S., and from customers in certain foreign countries, is set forth in Part II, Item 8, Financial Statements and Supplementary Data—Note 13 of the Notes to Consolidated Financial Statements, Segment Information.

Executive Officers of the Registrant

Following are the persons serving as our executive officers as of March 2, 2006, 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 Reinsurance—Americas of GE Global Insurance Holdings Corp. from 2001 to 2003; and as President and Chief Executive Officer,

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GE Capital Fleet Services from 1995 to 2000; and in various other executive positions with General Electric Corporation.

Ms. Gaston, Mr. Mast and Mr. Springman have been employed with Equifax or its subsidiaries in executive positions for the previous five years.

Mr. Heroman joined Equifax as Corporate Vice President and Chief Financial Officer in November 2002. Prior to joining Equifax, he served as Executive Vice President and Chief Financial Officer of People’s Bank in Bridgeport, Connecticut. Before joining People’s Bank, he was at SunTrust Banks, Inc. from 1988 until 2001, where his last position held was Senior Vice President and Treasurer.

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, and in various executive positions with The Coca-Cola Company for more than 18 years.

ITEM 1A.        RISK FACTORS

The following risk factors and other information included in this Form 10-K should be carefully considered. The risks and uncertainties described below 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, financial condition or results of operations could be materially and adversely affected.

Risks Related to Our Business

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.

Consumer credit reports constitute our core product. In general, our customers use our credit information and related services to process applications for new credit cards, automobile loans, home mortgages and refinancing 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. 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 and various government and public record services. Our data sources could withdraw their data from us for a variety of reasons, including legislatively or judicially imposed restrictions on use. If a substantial number of data sources were to withdraw their data, or if we were to lose access to data due to government regulation, 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.

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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. In consumer credit reporting services, we compete primarily with two global consumer credit reporting companies, Experian and TransUnion. We also compete with these and other companies, including Acxiom Corporation, Harte-Hanks, Inc. and InfoUSA, Inc. with respect to our direct marketing services, Fair Issac Corporation, Experian and TransUnion with respect to our analytical tools and a variety of software companies with respect to our enabling technologies. 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 each 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. 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 may also 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 commercial relationships 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 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, our ability to increase revenues 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.

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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 CSC’s credit reporting agencies utilize our computerized credit database services. Under the 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 $700 million. This estimate is based solely on our internal analysis of the value of the businesses, 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 CSC’s 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.

Our international operations subject us to additional business risks that may reduce our profitability or revenues.

We conduct business outside the U.S. During the fiscal year ended December 31, 2005, we received approximately 26% 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. The risks and potential costs of 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 in addressing these potential risks.

Security is important to our business, and breaches of security, or the perception that e-commerce is not secure, could harm our business.

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.

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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, 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.

We may incur risks related to acquisitions or significant investment in businesses.

We have made in the past, and may make in the future, acquisitions of, or significant investments in, businesses that offer complementary products, services and technologies. Any acquisitions or investments 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 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.

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 the principal members of our management and technical computer information systems staff. We do not have employment agreements with any of our executive officers other than Richard F. Smith, Chairman and Chief Executive Officer, and Donald T. Heroman, Chief Financial Officer. The loss of our management and key technical employees might slow the achievement of important business goals. It is also critical to our success that we recruit and retain qualified technical personnel to perform development work. We may not be able to attract and retain skilled and experienced technical personnel on acceptable terms because of intense competition.

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Risks Related to Our Common Stock

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 133,534,624 shares were outstanding as of December 31, 2005, 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, also called a poison pill, which could make it uneconomical for a third party to acquire our company on a hostile basis.

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These provisions could also discourage or impede a tender offer, proxy contest or other similar transactions involving control of us, even if viewed favorably by shareholders.

Risks Relating to Regulation and Litigation

Compliance with recent amendments to the FCRA have increased our compliance costs.

The FACT Act, which amended the FCRA, became law in December 2003. Beginning on December 1, 2004, the FACT Act, among other things, required us on an annual basis to provide free credit reports to consumers upon request. These reports may be requested by Internet, telephone or mail through centralized request facilities which we and other nationwide credit reporting agencies must establish and support. In addition, subject to final regulations to be adopted by the FTC, consumers will be entitled to a free credit report upon request if a report results in the consumer obtaining credit terms less favorable than those provided to a majority of the credit provider’s customers (also known as risk-based pricing). The FACT Act also requires us to provide credit scores to requesting consumers for a reasonable fee, as determined by the FTC.

The FTC has issued regulations to implement many of these requirements, including establishment of the centralized request facilities and development of procedures to phase-in such requests. The phase-in was completed on September 1, 2005. Additional provisions of the FACT Act impose requirements designed to reduce consumer identity theft, limit provision of medical information and require reports to the FTC regarding consumer complaints. We have modified our procedures and systems to deal with these and other FACT Act provisions where applicable.

We have incurred significant compliance costs to implement the FACT Act requirements, and we expect to continue incurring expenses to comply with the FTC’s regulations that could have a material adverse effect on our financial condition and results of operations. The net impact of the free report disclosure and other requirements of the FACT Act on our business will depend on numerous factors, including among others the actual demand of consumers for free credit reports; our ability to increase fees to customers to recover these regulatory costs; our experience marketing fee-generating products to consumers requesting free credit file disclosures; the FTC’s final determination of the fee we can charge for providing credit score disclosures to requesting consumers; the actual cost of resolving additional credit file and credit score reinvestigation requests from consumers; and approval of final FTC and Federal Reserve Board rules on risk-based pricing transactions and other matters.

Changes in the legislative, regulatory and judicial environments may adversely affect our ability to collect, manage, aggregate and use data.

Our business involves collection of consumer and business data and distribution of such information to businesses making credit and marketing decisions. Consequently, certain of our activities and services are subject to regulation by federal, state and local authorities in the U.S. and Canada, and in those countries within Europe and Latin America where we do business. For instance, much of the data and services that we provide are subject to regulation under the FCRA which regulates the use of consumer credit information and, to a lesser extent, the Gramm-Leach-Bliley Act which regulates the use of non-public personal information held by financial institutions.

We are also subject to the U.K.’s Data Protection Act of 1998, which regulates the manner in which we can use third-party data and recent regulatory limitations relating to use of the Electoral Roll, one of our key data sources in the U.K. In addition, public interest in individual privacy rights and the collection, 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, and have a negative impact on our ability to collect such information provided by consumers voluntarily. Future

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international, federal, state and local 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 is inherently uncertain and adverse developments or outcomes can result in significant monetary damages, penalities or injunctive relief against us.

ITEM 1B.       UNRESOLVED STAFF COMMENTS

There were no unresolved comments from the Staff of the SEC at December 31, 2005.

ITEM 2.                PROPERTIES

Our executive offices are located at 1550 Peachtree Street, N.W., Atlanta, Georgia, in a leased facility that is also utilized by our North America and Latin America segments. 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 own four office buildings. One is located in Wexford, Ireland and is utilized by Europe. One each, utilized by Latin America, is located in Sao Paulo, Brazil and in Santiago, Chile. A fourth located in Buenos Aires, Argentina was purchased in 2001 for use by Latin America but never occupied, and is now held for sale or lease. 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 Part II, Item 8, Financial Statements and Supplementary Data—Note 5 of the Notes to Consolidated Financial Statements, Commitments and Contingencies. We believe that suitable additional space will be available to accommodate our future needs.

ITEM 3.                LEGAL PROCEEDINGS

On December 30, 2003, Equifax and Naviant, Inc. served a demand for arbitration alleging, among other things, that the shareholder sellers of Naviant had breached various representations and warranties concerning information furnished to us in connection with our acquisition of Naviant in 2002. The arbitration demand seeks rescission of our Naviant purchase and the recovery of the purchase price or, in the alternative, recovery of monetary damages on various grounds. On March 22, 2004, we recommenced our demand for arbitration in order to utilize the procedures of the American Arbitration Association. Some of the respondents have answered and denied liability. Following the dismissal of the action described in the next paragraph, a schedule was established for the arbitration, which is now underway. Discovery is ongoing and a hearing on the merits is scheduled for October 2006. We cannot at this time predict the probable outcome of this matter.

On April 28, 2004, in a case captioned Softbank Capital Partners LP, et al. v. Equifax Inc. and Naviant, Inc., certain of the former shareholders of Naviant filed suit in the U.S. District Court for the Southern District of Florida seeking declaratory relief to prevent Equifax and Naviant from proceeding with the arbitration discussed in the preceding paragraph, except for claims asserted against Softbank Capital Partners LP, as Shareholders’ Representative. On March 31, 2005, the District Court denied plaintiffs’ motion for partial summary judgment, granted Equifax’s and Naviant’s motion to dismiss and dismissed the lawsuit. Plaintiffs have appealed the dismissal to the U.S. Court of Appeals for the Eleventh Circuit. The District Court has dismissed Equifax’s and Naviant’s counterclaims. Although Equifax believes it and Naviant have substantial factual and legal defenses to plaintiffs’ claims, we cannot at this time predict the outcome of this matter.

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On August 13, 2004, in a case captioned Equifax Inc and Naviant, Inc. v. Austin Ventures VII, L.P., et al., Equifax filed suit in the U.S. District Court for the Southern District of Florida to preserve its claims against the shareholder and option holder sellers of Naviant pending the arbitration proceeding described above. On June 20, 2005, the District Court granted the request of Equifax to stay the litigation pending the arbitration. The District Court denied the motion to dismiss of two defendants, and Equifax subsequently dismissed its claims against one of these defendants, Seisint, Inc., as part of a settlement.

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 Equifax’s Score Power® credit score product in violation of certain procedural requirements under the federal Credit Repair Organizations Act (“CROA”). Plaintiff contends that Equifax Consumer and Fair Isaac are “credit repair organizations” under CROA and that the transaction by which he purchased Score Power® was in violation of CROA and fraudulent. Plaintiff seeks certification of a class on behalf of all individuals who purchased such services from defendants within the five-year period prior to the filing of the complaint. Plaintiff seeks unspecified damages, attorneys’ fees and costs. On May 23, 2005, the District Court denied defendants’ partial motions to dismiss the case and the defendants have answered, denying all liability or wrongdoing. Discovery is concluded. Plaintiff has filed motions for class certification and partial summary judgment. Equifax denies any liability or wrongdoing, denies that a class action is appropriate and will vigorously defend against all claims.

On October 18, 2005, 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 was recently transferred from the U.S. District Court for Kansas to the U.S. District Court for the Northern District of Georgia, plaintiffs filed a Fourth Amended Complaint. In this Complaint, plaintiffs for the first time assert, among other allegations, that Equifax Consumer Services, Inc. sold Equifax’s Credit Watch product in violation of certain procedural requirements under CROA, similar to the claims made by plaintiff in the Hillis case described in the preceding paragraph. Plaintiffs seek certification of a class on behalf of all individuals who purchased the CreditWatch product from Equifax from September 9, 2001 to the present, and unspecified damages, attorney’s fees and costs. Equifax has filed a partial motion to dismiss. Discovery is ongoing. Equifax denies any liability or wrongdoing, denies that a class action is appropriate and will vigorously defend against all claims.

On March 25, 2004, the National Credit Reporting Association, Inc. (“NCRA”), a trade association of mortgage credit information resellers, and, separately, 23 of NCRA’s 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 Informations Solutions, Inc., Equifax Inc., and TransUnion, LLC, pending in the U.S District Court of the Central District of California. Plaintiffs seek to represent a class of all resellers that have purchased information from defendants since March 2000, and allege that the defendants have conspired to monopolize, have discriminated among resellers in pricing and have treated resellers unfairly. The amended complaint seeks injunctive relief and unspecified amounts of damages. On August 12, 2005, the defendants moved to dismiss the antitrust claims and for summary judgment on the unfair practices claims. The District Court granted defendants’ motions to dismiss all claims except for one remaining Sherman Act, Section 1 conspiracy claim and a state law claim based on the same theory. Equifax denies any liability or wrongdoing, denies that a class action is appropriate and will vigorously defend against all claims.

On October 13, 2004, an action captioned Nunnally et al. v. Equifax Information Services LLC was commenced in the U.S. District Court of the Northern District of Alabama. The complaint alleges that the Company violated the Fair Credit Reporting Act by failing to provide a full disclosure along with its reinvestigation results sent to consumers that disputed the accuracy of their consumer reports. Plaintiffs

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seek to represent a class of all consumers to which the Company failed to send a complete disclosure after completion of reinvestigation. Plaintiffs are seeking unspecified damages, attorneys’ fees and costs. On February 4, 2005, the District Court denied our motion to dismiss the complaint, but certified the issue for immediate appeal and stayed the case. The Eleventh Circuit granted our motion to appeal and the appeal is now pending. Equifax believes it has meritorious defenses to the claims asserted and intends to vigorously defend this case.

We are involved in other matters, claims and proceedings as is normal in the ordinary course of our business. Any possible adverse outcome arising from these matters is not expected to have a material impact on our results of operations or financial position, either individually or in the aggregate. However, our evaluation of the likely impact of these pending lawsuits could change in the future.

For information about contingent tax matters related to Canada Revenue Agency, see Part II, Item 8, Financial Statements and Supplementary Data—Note 5 of the Notes to Consolidated Financial Statements, Commitments and Contingencies, in this Form 10-K.

ITEM 4.                SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the fourth quarter of 2005.

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PART II

ITEM 5.                MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

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:

 

Holders

At January 31, 2006, we had approximately 7,730 holders of record of our common stock; however, we believe the number of beneficial owners of common stock exceeds this number.

Dividends

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:

 

Securities Authorized for Issuance Under Equity Compensation Plans

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 17, 2006 to be filed with the Securities and Exchange Commission (“SEC”), and is incorporated herein by reference.

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Issuer Purchases of Equity Securities

The following table contains information with respect to purchases 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), of our common stock during our fourth quarter ended December 31, 2005:

																Maximum Number
																(or Approximate
												Total Number				Dollar Value)
								Average				of Shares Purchased				of Shares that May
				Total Number				Price				as Part of				Yet Be Purchased
				of Shares				Paid				Publicly-Announced				Under the Plans or
Period				Purchased(1)				Per Share(2)				Plans or Programs				Programs(3)
September 30, 2005																	$ 144,341,256
October 1 - October 31, 2005					210,798				$ 35.56				210,000				$ 136,873,418
November 1 - November 30, 2005					791,145				$ 36.18				791,000				$ 108,258,545
December 1 - December 31, 2005					411,433				$ 37.97				340,200				$ 95,342,269
Total					1,413,376				$ 36.53				1,341,200				$ 95,342,269

(1)                The total number of shares purchased includes: (1) shares purchased pursuant to our publicly announced share repurchase program; and (2) 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 798 shares for the month of October 2005, 145 shares for the month of November 2005 and 71,233 shares for the month of December 2005.

(2)                Average price paid per share for shares purchased as part of our publicly announced plan (includes brokerage commissions).

(3)                Our publicly announced share repurchase program was amended by our Board of Directors on August 6, 2004, to authorize the repurchase of $250.0 million of our common stock (in addition to the then remaining authorization of $33.0 million from the Board’s prior authorization) from time to time, directly or through brokers or agents, and has no stated expiration date. On February 24, 2006, the Board of Directors authorized approximately $250 million for additional share repurchases under this program.

Dividend and Share Repurchase Restrictions

Our $500.0 million senior unsecured revolving credit agreement entered into in August 2004 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.

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ITEM 6.                SELECTED FINANCIAL DATA

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, 2005, 2004 and 2003, and the balance sheet data as of December 31, 2005 and 2004, 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, 2002 and 2001, and the balance sheet data as of December 31, 2003, 2002 and 2001 has been derived from Consolidated Financial Statements not included in this report. Other information was derived from unaudited financial data. 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, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements and the accompanying Notes to the Financial Statements. See Part II, Item 8, Financial Statements and Supplementary Data, and see Note 11 of the Notes to Consolidated Financial Statements, Discontinued Operations.

 

(1)    For information about acquisition activity during certain periods presented in the table above, see Part II, Item 8, Financial Statements and Supplementary Data—Note 2 of the Notes to Consolidated Financial Statements, Acquisitions.

(2)    Our results of operations related to Spain and Italy for certain periods presented in the table above have been reclassified to discontinued operations. For additional information about these discontinued operations, see Part II, Item 8, Financial Statements and Supplementary Data—Note 11 of the Notes to Consolidated Financial Statements, Discontinued Operations.

(3)    In 2003, we recorded asset impairment and restructuring charges of $30.6 million ($19.3 million after tax, or $0.14 per diluted share). Restructuring charges primarily consist of employee severance and facilities consolidation. For additional information

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about these charges, see Part II, Item 8, Financial Statements and Supplementary Data—Note 10 of the Notes to Consolidated Financial Statements, Restructuring and Impairment Charges.

(4)    In 2002, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 modifies the accounting for goodwill and other intangible assets. As of January 1, 2002, we ceased amortizing goodwill and other intangible assets with indefinite useful lives.

(5)    In 2001, we recorded restructuring and other charges of $60.4 million ($35.3 million after tax, or $0.25 per diluted share) for employee severance, facilities consolidation and the write-down of certain technology assets. Additionally, as a result of the spin-off of Certegy Inc. on July 7, 2001, our financial statements for the twelve months ended December 31, 2001, have been reclassified to isolate and show Certegy’s net assets, results of operations and cash flows as discontinued operations.

 

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ITEM 7.                MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes in Part II, Item 8—Financial Statements and Supplementary Data. This discussion contains forward-looking statements. Throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), we refer to several measures used by management to evaluate performance including free cash flow, other financial results adjusted for the impact of the Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”), and one-time items, which are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Under Securities and Exchange Commission (“SEC”) regulations, we are required to provide supplemental explanations and reconciliations for these “non-GAAP financial measures,” which we have included in Exhibit 99.1 to this Form 10-K.

All references to earnings per share data in this MD&A are to diluted earnings per share unless otherwise noted.

OVERVIEW

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, 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 channels of distribution.

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. Our proprietary databases contain information on more than 400 million consumers and businesses worldwide. 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. During 2005, in order to continue to grow our credit data business, we acquired the credit files, contractual rights to territories (generally states or integration areas) and customer relationships of two independent credit reporting agencies in the U.S. and one in Canada that house consumer information on our system.

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.

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Enabling Technologies.   Our enabling technologies include products such as ePort, APPLY, Decision Power, ID Authentication, Accel CM, Accel DM 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. We anticipate that our acquisitions in (1) March 2005 of APPRO Systems, Inc. (“APPRO”), a leading provider of enabling technologies for consumer and commercial lending operations, and (2) August 2005 of BeNow, Inc. (“BeNow”), a provider of leading edge solutions to multi-channel marketers, will help drive future growth in this market.

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 related and is derived from our sales of the following products, of which a significant majority 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 derived from sales of products that help customers acquire new customers, cross-sell to existing customers and manage portfolio risk. Personal Solutions revenue is transaction and subscription based, and is derived from sales of credit monitoring and identity theft protection products, which we deliver to consumers through mail delivery and electronically via the Internet. For additional information regarding our geographic business units and operating segments, including detailed financial results, see Note 13 of the Notes to Consolidated Financial Statements in this Form 10-K as well as further discussion below within MD&A.

We operate in 13 countries: North America (the U.S., Canada and Costa Rica), Europe (the United Kingdom, Ireland, Spain and Portugal) and Latin America (Brazil, Argentina, Chile, El Salvador, 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. Our revenue stream is highly diversified with our largest customer only providing slightly more than 2% of total revenues. 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.

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, income from continuing operations, diluted earnings per share from continuing operations, capital expenditures and cash provided by operating activities. We monitor these indicators, and our corporate governance practices, to ensure that business vitality is maintained and effective control is exercised.

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The key performance indicators for the twelve months ended December 31, 2005, 2004 and 2003 were as follows:

 

For additional key performance indicators related to non-GAAP financial measures and our operating segments, see Exhibit 99.1 to this Form 10-K and further discussion below, respectively.

Business Environment

Our financial condition and operating performance are driven primarily 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 our credit information, as well as other products and services. These effects are dynamic and complex. For example, in 2005, interest rate increases in the U.S. began to negatively impact our Mortgage business. However, despite this trend, we achieved 13% growth in our Mortgage revenue in 2005 as compared to 2004 due to the diversity of our customers and product offerings. Additionally, we generally experience growth in our Marketing Services business during periods of rising interest rates. Lenders typically spend more on their marketing efforts in order to retain or expand market share in consumer credit markets, which may mitigate the impact on us of rising interest rates and an economic downturn.

The credit information business is characterized by intense 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 applications development 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.

Consolidated Outlook for 2006

Looking forward, we believe that the performance of our business units in 2005, discussed in detail below, positions our company well for 2006. In 2006, we expect continued U.S. economic expansion, although at a slightly lower growth rate than in 2005 and 2004.

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During 2006, we expect:

·       U.S. Consumer and Commercial Services to continue its solid performance. We serve a diverse group of industries and applications within those industries which should allow this business to continue to grow and deliver a solid financial performance. The value added services, including Predictive Sciences and enabling technologies, will continue to drive revenue growth.

·       Marketing Services’ performance will primarily be driven by financial institutions’ activities in acquiring, managing and collecting their account portfolios. As the economy continues to expand, this business should continue to grow in 2006.

·       Personal Solutions to continue to grow in 2006, aided by consumers’ increased focus on identity theft and fiscal responsibility, which drives demand for our products and services.

·       Latin America to continue its solid performance, although at a more moderate rate than 2005. Latin America’s financial performance improved dramatically in 2005 due to increased volume and higher pricing. In addition, new value-add products and services contributed to revenue growth and improved competitive position in 2005.

·       Europe to continue to experience challenges due to the economic environment in the U.K.

We also expect to see opportunities for growth through our ability to identify and enhance our customers’ decisioning intelligence to more effectively interact with, and serve, their customers; broadening our Personal Solutions offerings to consumers; and ultimately moving our own businesses further up the value chain from data to analytics and decisioning technology—the main driver of growth and differentiation in our North America and Latin America business units.

RESULTS OF OPERATIONS—TWELVE MONTHS ENDED DECEMBER 31, 2005 AND 2004

Consolidated Financial Results

Income from continuing operations for the twelve months ended December 31, 2005 was $246.5 million, compared to $237.3 million for the twelve months ended December 31, 2004. Earnings per share from continuing operations increased to $1.86 for the twelve months ended December 31, 2005 as compared to $1.78 for the same period a year ago.

Operating Revenue

Consolidated operating revenue for the twelve months ended December 31, 2005 increased $170.6 million, or 13%, from $1,272.8 million in 2004 to $1,443.4 million in 2005. This increase is 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. See further discussion of segment financial results below.

Operating Expenses and Operating Margin

Consolidated total operating expenses increased $124.4 million, or 14%, for the twelve months ended December 31, 2005 as compared to the same period a year ago. Cost of services in 2005 increased $62.7 million, or 12%, when compared to 2004, primarily due to revenue growth as well as higher benefits and incentive costs mainly associated with our annual incentive program. 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 costs rose $60.6 million, or 21%, in 2005 as compared to the same prior year period, mainly due to higher salary, incentive and benefit costs related to our Chief Executive

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Officer (“CEO”) transition as well as increased year-over-year expenses related to our annual incentive program 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.

During the twelve months ended December 31, 2004, we recorded a $2.4 million asset impairment charge, primarily for purchased data files and other assets.

Consolidated operating margin for the twelve months ended December 31, 2005 was 29% as compared to 30% for the same period in 2004.

Other Income, Net

Consolidated other income, net decreased $38.3 million for the twelve months ended December 31, 2005, as compared to the same period a year ago. The decrease is 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 9 of the Notes to Consolidated Financial Statements in this Form 10-K), 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 5 of the Notes to Consolidated Financial Statements in this Form 10-K.

Effective Income Tax Rate

Our effective income tax rate from continuing operations 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 to the tax contingency reserve, partially offset by additional tax expense related to non-deductible executive compensation.

Discontinued Operations

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 and 2003 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 and 2003 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 11 of the Notes to Consolidated Financial Statements in this Form 10-K.

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Segment Financial Results

Our segment results for the twelve months ended December 31, 2005 and 2004 were as follows:

 

nm—not meaningful

Our North America revenue for the twelve months ended December 31, 2005 and 2004 was as follows:

 

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Our North America revenue excluding the impact of the FACT Act (non-GAAP) for the twelve months ended December 31, 2005 and 2004 was as follows:

 

North America

Information Services

For the twelve months ended December 31, 2005, total revenue for Information Services increased $99.2 million, or 14%, to $806.3 million in 2005 compared to $707.1 million in 2004, as discussed further below. Operating income was $345.5 million for Information Services, an increase of $46.0 million, or 15%, over the same period a year ago. The increase in operating income is primarily 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 costs have been greater than the related 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.

U.S. Consumer and Commercial Services revenue for the twelve months ended December 31, 2005 increased $77.8 million, or 15%, from $532.6 million in 2004 to $610.4 million in 2005. This increase is 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, acquisitions that occurred during 2005 (mainly APPRO) and increased revenue from products sold in our commercial services unit. In our U.S. Consumer Information business, on-line transaction volume was approximately 610 million, up 8% year-over-year.

Mortgage Services revenue for the twelve months ended December 31, 2005 increased 13%, from $75.5 million in 2004 to $85.1 million. This increase is primarily 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 operating revenue increased 12%, from $99.0 million in 2004 to $110.8 million in 2005, primarily due to favorable currency impact and increased sales volume. Local currency fluctuation against the U.S. dollar favorably impacted our Canadian revenue by $7.6 million, or 8%.

Marketing Services

Credit Marketing Services revenue for the twelve months ended December 31, 2005 increased $11.2 million, or 8%, compared to the same period in 2004. The rise in revenue is primarily due to increased volume from mainly financial institutions for certain of our products that target new customers as well as

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higher revenue from other existing and new customers. Direct Marketing Services revenue increased $6.4 million, or 7%, as compared to the same period in 2004. This increase is primarily due to higher volume from existing customers and revenue from new customers and products, as well as the acquisition of BeNow in 2005. Operating income for the twelve months ended December 31, 2005 was $85.2 million for Marketing Services, an increase of $13.2 million, or 18%, resulting primarily from increased revenue, reduced production related expenses for our traditional mail products and a $2.4 million asset impairment charge taken during 2004. For additional information about this charge, see Note 10 of the Notes to Consolidated Financial Statements in this Form 10-K.

Personal Solutions

Personal Solutions revenue for the twelve months ended December 31, 2005 increased $18.6 million, or 19%, compared to the same period in 2004 primarily due to increased volume and new products, including CreditWatch, ScoreWatch and 3-in-1 Credit Report Monitoring. In 2005, operating income was $13.5 million for Personal Solutions, a decrease of $4.1 million, or 23%, primarily due to an increase in advertising and other promotional campaigns.

Europe

Europe revenue was flat at $142.0 million for the twelve months ended December 31, 2005 and 2004, primarily due to a decline in credit applications and marketing mailings in the U.K., offset by an increase 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 increased $3.4 million, or 11%, when compared to the same period a year ago. 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. Europe’s operating margin was 24% for the year ended December 31, 2005, versus 21% for the same period in 2004.

In June 2004, after incurring losses in each of the last four years, we determined that certain long-lived assets in the Italian business were impaired and recorded an impairment charge of $5.3 million. In 2004, we sold our Italian business and commercial services business in Spain. We have reclassified the 2004 and 2003 results from these businesses to loss from discontinued operations. For additional information about our discontinued operations, see Note 11 of the Notes to Consolidated Financial Statements in this Form 10-K.

Latin America

Our Latin America segment revenue increased 38% to $126.7 million for the twelve months ended December 31, 2005. 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 increased to $33.3 million for the twelve months ended December 31, 2005, compared to $17.0 million for the same period in 2004. This increase was primarily the result of higher sales volumes and increased pricing, as well as favorable currency impact. Latin America operating margin was 26% for the twelve months ended December 31, 2005, versus 19% for the same period in 2004.

General Corporate Expense

Our “general corporate expenses” are expenses that are incurred at the corporate level and have no clear relationship in their support of our business units, and ultimately the reportable segments. These

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expenses include shared services and administrative and legal expenses. General corporate expense was $88.9 million for the twelve months ended December 31, 2005, compared to $60.3 million for the same period in 2004. This increase was primarily driven by higher salary, incentive and benefit costs related to our CEO transition (see discussion above) as well as increased year-over-year expenses related to our annual incentive program based on our financial results.

RESULTS OF OPERATIONS—YEARS ENDED DECEMBER 31, 2004 AND 2003

Consolidated Financial Results

Income from continuing operations for the twelve months ended December 31, 2004 was $237.3 million, compared to $180.7 million for the twelve months ended December 31, 2003. Earnings per share from continuing operations increased to $1.78 for the twelve months ended December 31, 2004 as compared to $1.32 for the same period in 2003.

Operating Revenue

Consolidated operating revenue for the twelve months ended December 31, 2004 increased 5%, from $1,210.7 million in 2003 to $1,272.8 million in 2004. This increase was primarily due to growth in North America Information Services, Personal Solutions, Europe and Latin America, partially offset by a decrease in Marketing Services revenue. See further discussion of segment financial results below.

Operating Expenses and Operating Margin

Consolidated total operating expenses were relatively flat for the twelve months ended December 31, 2004 as compared to the same period in 2003. Cost of services in 2004 increased $31.8 million, or 6%, when compared to 2003, primarily due to revenue growth as well as higher benefits and incentive costs. During 2004, we also incurred significant compliance costs, including operating expenses and capital investment to implement the FACT Act requirements.

Selling, general and administrative costs rose $8.6 million, or 3%, in 2004 as compared to the same period in 2003 mainly due to higher benefit costs and increased professional fees. The increase in professional fees was associated with expenses we incurred to comply with our 2004 review of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002, which were in excess of $5.0 million, and expenses associated with services provided by our independent registered public accounting firm. These fees totaled $3.7 million in 2004, an increase of 162% compared to 2003. Depreciation and amortization expense declined $11.7 million, or 13%, in 2004 as compared to the same period in 2003, primarily due to the write-off of certain amortizable intangible assets related to our eMarketing business in 2003.

During the twelve months ended December 31, 2004, we recorded a $2.4 million asset impairment charge related to Marketing Services, primarily for purchased data. For the twelve months ended December 31, 2003, we recorded $30.6 million of restructuring and impairment charges primarily related to our eMarketing business. For additional information about these charges, see Note 10 of the Notes to Consolidated Financial Statements in this Form 10-K.

Consolidated operating margin for the twelve months ended December 31, 2004 was 30%, up from 26% for the same period in 2003. The increase in margin is primarily due to higher operating revenue and relatively flat total operating expenses, as discussed above.

Other Income, Net

Consolidated other income, net increased $33.5 million for the twelve months ended December 31, 2004, as compared to the same period a year ago. The increase is primarily driven by a $36.8 million gain

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recorded in 2004 related to the sale of our investment in Intersections Inc. For additional information regarding this sale, see Note 9 of the Notes to Consolidated Financial Statements in this Form 10-K.

Effective Income Tax Rate

Our effective income tax rate from continuing operations was 38.4% for the twelve months ended December 31, 2004, up from 36.7% for the same period in 2003. The increase was primarily due to limitations on our ability to utilize foreign tax credits and higher state income taxes due to a reduction in the availability of state tax net operating losses for use in 2004.

Discontinued Operations

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 and 2003 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 and 2003 results of Italy to loss from discontinued operations. Accordingly, we recorded a $2.6 million, net of tax, and a $15.8 million, net of tax, loss from discontinued operations for the twelve months ended December 31, 2004 and 2003, respectively. For additional information about our discontinued operations, see Note 11 of the Notes to Consolidated Financial Statements in this Form 10-K.

Segment Financial Results

Our segment results for the twelve months ended December 31, 2004 and 2003 were as follows:

 

nm—not meaningful

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