As used herein, the terms
Equifax, the Company, we, our and us refer to Equifax Inc., a Georgiacorporation, and its consolidated subsidiaries as a combined entity, except where it is clear that the terms mean only Equifax Inc.All references to earnings per share data in Management's Discussion and Analysis, or MD&A, are to diluted earnings per share, or EPS, unless otherwise noted. Diluted EPS is calculated to reflect the potential dilution that would occur if stock options or other contracts to issue common stock were exercised and resulted in additional common shares outstanding. BUSINESS OVERVIEW We are a leading global provider of information solutions, employment and income verifications and human resources business process outsourcing services. We leverage some of the largest sources of consumer and commercial data, along with advanced analytics and proprietary technology, to create customized insights which enable our business customers to grow faster, more efficiently and more profitably, and to inform and empower consumers. Businesses rely on us for consumer and business credit intelligence, credit portfolio management, fraud detection, decisioning technology, marketing tools, and human resources-related services. We also offer a portfolio of products that enable individual consumers to manage their financial affairs and protect their identity. Our revenue stream is diversified among businesses across a wide range of industries and international geographies and individual consumers.
Segment and Geographic Information
Segments. The U.S. Consumer Information Solutions, or USCIS, segment, the largest of our five segments, consists of three product and service lines: Online Consumer Information Solutions, or OCIS; Mortgage Solutions; and Consumer Financial Marketing Services. OCIS and Mortgage Solutions revenue is principally transaction-based and is derived from our sales of products such as consumer credit reporting and scoring, identity management, fraud detection and modeling services. USCIS also markets certain decisioning software services which facilitate and automate a variety of consumer credit-oriented decisions. Consumer Financial Marketing Services revenue is principally project- and subscription-based and is derived from our sales of batch credit and consumer wealth information such as those that assist clients in acquiring new customers, cross-selling to existing customers and managing portfolio risk. The International segment consists of Canada Consumer,
Europeand Latin America. Canada Consumer's products and services are similar to our USCIS offerings, while Europeand Latin Americaare made up of varying mixes of product lines that are in our USCIS, North America Commercial Solutions and North AmericaPersonal Solutions reportable segments. In Europeand Latin America, we also provide information and technology services to support lenders and other creditors in the collections and recovery management process. The Workforce Solutions segment consists of the Verification Services and Employer Services business lines. Verification Services revenue is transaction-based and is derived primarily from employment and income verification. Employer Services revenues are derived from our provision of certain human resources business process outsourcing services that include both transaction- and subscription-based product offerings. These services include unemployment claims management, employment-based tax credit services, and other complementary employment-based transaction services.
North America Personal Solutions revenue is both transaction- and subscription-based and is derived from the sale of credit monitoring and identity theft protection products, which we deliver electronically to consumers primarily via the internet and to a small degree through mail.
North America Commercial Solutions revenue is principally transaction-based, with the remainder project-based, and is derived from the sale of business information, credit scores and portfolio analytics that enable customers to utilize our reports to make financing, marketing and purchasing decisions related to businesses.
23 Geographic Information. We currently have significant operations in the following countries:
Argentina, Canada, Chile, Costa Rica, Ecuador, El Salvador, Honduras, Mexico, Paraguay, Peru, Portugal, the Republic of Ireland, Spain, the U.K., Uruguay, and the U.S. Our operations in the Republic of Irelandfocus on data handling and customer support activities. We also offer consumer credit services in Indiaand Russiathrough joint ventures and have an investment in a consumer and commercial credit information company in Brazil. Key Performance Indicators. Management focuses on a variety of key indicators to monitor operating and financial performance. These performance indicators include operating revenue, change in operating revenue, operating income, operating margin, net income attributable to Equifax, diluted earnings per share, cash provided by operating activities and capital expenditures. The key performance indicators for the three and six months ended June 30, 2014and
2013 were as follows: Key Performance Indicators Three Months Ended Six Months Ended June 30, June 30, 2014 2013 2014 2013 (Dollars in millions, except per share data) Operating revenue $ 613.9 $ 586.9
$ 1,198.4 $ 1,153.4Operating revenue change 5 % 14 % 4 % 13 % Operating income $ 167.4 $ 158.1 $ 319.3 $ 307.1Operating margin 27.3 % 26.9 % 26.6 % 26.6 % Net income from continuing operations attributable to Equifax $ 92.8 $ 90.5 $ 176.7 $ 172.6Net income attributable to Equifax $ 92.8 $ 90.5 $ 176.7 $ 191.6Diluted earnings per share from continuing operations attributable to Equifax $ 0.75 $ 0.73 $ 1.42 $ 1.40Diluted earnings per share attributable to Equifax $ 0.75 $ 0.73 $ 1.42 $ 1.55Cash provided by operating activities $ 152.8
$ 217.8 $ 202.8Capital expenditures $ 19.2 $ 17.5 $ 37.7 $ 36.2
Operational and Financial Highlights
• During the first quarter of 2014, we acquired 100% of the stock of TDX
Group, a data and technology company in the
United Kingdomthat specializes in helping lenders and creditors optimize collection and recovery performance through the use of analytics, data exchanges and technology platforms, for $322.8 million. The results of this
acquisition have been included in our International operating segment
subsequent to the acquisition. We also purchased Forseva, a provider of
end-to-end, cloud-based credit management software solutions. The
results of this acquisition have been included in our
Commercial Solutions operating segment subsequent to the acquisition.
• We repurchased 1.0 million shares of our common stock on the open market for
$73.4 millionduring the first six months of 2014. At June 30, 2014, $141.7 millionwas available for future purchases of common stock under our share repurchase authorization.
Business Environment and Company Outlook
Demand for our services tends to be correlated to general levels of economic activity, to consumer credit activity, to a lesser extent small commercial credit and marketing activity, and to our own initiatives to expand our products and markets served. In
the United States, for the first half of 2014, we experienced modestly improved growth in overall economic activity and in general consumer credit, a moderating year-over-year decline in consumer mortgage activity, and continuing benefits from our new product and market initiatives. As expected, total company mortgage related revenues declined significantly in the second quarter albeit at a lesser rate than in the first quarter of 2014. While we continue to expect modest growth in overall economic activity and general consumer credit for the remainder of 2014, mortgage market origination activity is expected to continue declining when compared to 2013 but at a much lesser rate than in the first half of 2014. Internationally, the environment continues to be challenging as developed countries continue to experience low economic growth rates and certain developing countries face country specific political or economic issues. In addition, recent weakening in foreign exchange rates of certain of the countries in which we operate has further reduced growth in revenue and profit when reported in U.S. dollars. Over the longer term, we continue to expect that our ongoing investments in new product innovation, business execution, enterprise growth initiatives, technology infrastructure, and continuous process improvement will enable us, in a modestly growing global economy, to deliver long-term average organic revenue growth ranging between 6% and 8% with additional growth of 1% to 2% derived from strategic acquisitions consistent with our long term business strategy. We also expect to grow earnings per share at a somewhat faster rate than revenue over time as a result of both operating and financial leverage.