EX-99.2 3 dex992.htm SUPPLEMENTAL INFORMATION Supplemental Information

Exhibit 99.2

ChoicePoint Inc.

Operating Results by Quarter

(dollars in thousands)

 

    Q1 2005     Q2 2005     Q3 2005     Q4 2005     Total
2005
    Q1 2006     Q2 2006     Q3 2006     Q4 2006     Total
2006
    Q1 2007     Q2 2007     Q3 2007     Q4 2007     Total
2007
    Q1 2008  

Insurance Services Revenue

  $ 98,560     $ 100,963     $ 104,775     $ 98,555     $ 402,853     $ 112,326     $ 112,298     $ 116,118     $ 113,716     $ 454,458     $ 125,282     $ 125,185     $ 129,211     $ 125,909     $ 505,587     $ 142,686  

Screening and Authentication Services Revenue

    55,552       61,346       63,687       61,469       242,054       61,845       64,955       66,832       63,456       257,088       61,438       65,881       64,556       60,974       252,849       62,319  

Business Services Revenue

    45,062       42,738       43,998       37,832       169,630       37,298       36,862       35,513       35,742       145,415       35,697       36,159       36,456       33,857       142,169       35,887  

Marketing Services Revenue

    23,099       23,018       23,138       22,274       91,529       21,875       19,140       19,089       19,610       79,714       17,200       15,313       14,320       13,140       59,973       12,015  

Royalty Revenue

    797       526       954       121       2,398       —         —         —         —         —         —         —         —         —         —         —    
                                                                                                                               

Service Revenue (a)

  $ 223,070     $ 228,591     $ 236,552     $ 220,251     $ 908,464     $ 233,344     $ 233,255     $ 237,552     $ 232,524     $ 936,675     $ 239,617     $ 242,538     $ 244,543     $ 233,880     $ 960,578     $ 252,907  
                                                                                                                               

Reimbursable Expenses per EITF 01-14 (e)

    6,543       6,623       7,479       7,411       28,056       6,726       5,084       4,934       6,134       22,878       4,859       5,412       5,640       5,466       21,377       3,539  
                                                                                                                               

Total Revenue

  $ 229,613     $ 235,214     $ 244,031     $ 227,662     $ 936,520     $ 240,070     $ 238,339     $ 242,486     $ 238,658     $ 959,553     $ 244,476     $ 247,950     $ 250,183     $ 239,346     $ 981,955     $ 256,446  
                                                                                                                               

Insurance Services Operating Income

  $ 54,204     $ 55,282     $ 57,906     $ 54,278     $ 221,670     $ 60,815     $ 60,039     $ 60,594     $ 58,395     $ 239,843     $ 65,179     $ 62,727     $ 65,032     $ 65,239     $ 258,177     $ 72,024  

Screening and Authentication Services Operating Income

    11,192       14,476       16,415       16,897       58,980       14,238       14,729       15,740       12,389       57,096       10,067       12,714       13,237       10,583       46,601       10,401  

Business Services Operating Income

    10,724       6,846       8,301       3,171       29,042       1,860       2,440       1,241       655       6,196       940       2,918       2,205       825       6,888       1,392  

Marketing Services Operating Income

    4,257       3,661       3,840       4,141       15,899       4,002       2,135       2,834       3,475       12,446       1,197       752       495       (33 )     2,411       (1,091 )

Royalty Operating Income

    770       325       506       121       1,722       —         —         —         —         —         —         —         —         —         —         —    

Corporate & Shared Expenses

    (18,499 )     (16,736 )     (19,236 )     (16,162 )     (70,633 )     (14,941 )     (14,463 )     (15,358 )     (19,240 )     (64,002 )     (16,585 )     (15,277 )     (17,894 )     (19,598 )     (69,354 )     (21,740 )

Stock-based compensation

    (1,223 )     (1,447 )     (1,449 )     (1,471 )     (5,590 )     (4,975 )     (4,927 )     (5,990 )     (6,062 )     (21,954 )     (5,535 )     (5,528 )     (5,447 )     (4,721 )     (21,231 )     (5,253 )
                                                                                                                               

Operating Income before other charges

  $ 61,425     $ 62,407     $ 66,283     $ 60,975     $ 251,090     $ 60,999     $ 59,953     $ 59,061     $ 49,612     $ 229,625     $ 55,263     $ 58,306     $ 57,628     $ 52,295     $ 223,492     $ 55,733  
                                                                                                                               

Other charges (b):

                               

Accelerated depreciation

    —         —         —         —         —         (5,463 )     —         —         —         (5,463 )     —         —         —         —         —         —    

Other operating charges (c)

    (5,412 )     (6,040 )     (4,006 )     (13,315 )     (28,773 )     (5,987 )     (2,740 )     (116,054 )     7,209       (117,572 )     (1,157 )     (278 )     (2,499 )     (87,764 )     (91,698 )     (4,069 )
                                                                                                                               

Operating Income (Loss) - Continuing Operations

  $ 56,013     $ 56,367     $ 62,277     $ 47,660     $ 222,317     $ 49,549     $ 57,213     $ (56,993 )   $ 56,821     $ 106,590     $ 54,106     $ 58,028     $ 55,129     $ (35,469 )   $ 131,794     $ 51,664  
                                                                                                                               

Operating Income (Loss) - Discontinued Operations

  $ 5,075     $ 2,484     $ 2,700     $ 4,571     $ 14,830     $ 3,503     $ 3,270     $ 4,860     $ 7,835     $ 19,468     $ 2,615     $ 2,276     $ 3,013     $ 712     $ 8,616     $ (4,632 )
                                                                                                                               

Impairment Loss on Assets Held for Sale - Discontinued Operations

  $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ (58,000 )   $ (9,504 )   $ (67,504 )   $ (146 )   $ (688 )   $ (49,183 )   $ (8,901 )   $ (58,918 )   $ (1,231 )
                                                                                                                               

Gain (Loss) on sale of Discontinued Operations

  $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ (4,941 )   $ (85 )   $ (5,026 )   $ (382 )   $ 138     $ (250 )   $ 1,287     $ 793     $ 60  
                                                                                                                               

Operating Margins - Continuing Operations

                               

Insurance Services

    55.0 %     54.8 %     55.3 %     55.1 %     55.0 %     54.1 %     53.5 %     52.2 %     51.4 %     52.8 %     52.0 %     50.1 %     50.3 %     51.8 %     51.1 %     50.5 %

Screening and Authentication Services

    20.1 %     23.6 %     25.8 %     27.5 %     24.4 %     23.0 %     22.7 %     23.6 %     19.5 %     22.2 %     16.4 %     19.3 %     20.5 %     17.4 %     18.4 %     16.7 %

Business Services

    23.8 %     16.0 %     18.9 %     8.4 %     17.1 %     5.0 %     6.6 %     3.5 %     1.8 %     4.3 %     2.6 %     8.1 %     6.0 %     2.4 %     4.8 %     3.9 %

Marketing Services

    18.4 %     15.9 %     16.6 %     18.6 %     17.4 %     18.3 %     11.2 %     14.8 %     17.7 %     15.6 %     7.0 %     4.9 %     3.5 %     -0.3 %     4.0 %     -9.1 %

ChoicePoint excluding other charges as a percentage of service revenue (b) (c)

    27.5 %     27.3 %     28.0 %     27.7 %     27.6 %     26.1 %     25.7 %     24.9 %     21.3 %     24.5 %     23.1 %     24.0 %     23.6 %     22.4 %     23.3 %     22.0 %

Operating income excluding other charges as a percentage of total revenue - continuing operations (b)

    26.8 %     26.5 %     27.2 %     26.8 %     26.8 %     25.4 %     25.2 %     24.4 %     20.8 %     23.9 %     22.6 %     23.5 %     23.0 %     21.8 %     22.8 %     21.7 %
                                                                                                                               

Internal Growth Rates (d)

                               

Insurance Services

    11.8 %     12.7 %     12.4 %     13.1 %     12.6 %     12.8 %     10.1 %     8.2 %     11.6 %     10.6 %     8.0 %     9.3 %     11.0 %     10.7 %     9.7 %     12.2 %

Screening and Authentication Services

    12.2 %     11.5 %     12.5 %     9.1 %     11.3 %     11.1 %     5.0 %     3.8 %     2.3 %     5.4 %     -1.4 %     1.2 %     -3.4 %     -3.9 %     -1.9 %     1.4 %

Business Services

    3.1 %     -3.2 %     3.5 %     -10.6 %     -2.0 %     -17.2 %     -13.8 %     -19.3 %     -5.5 %     -14.3 %     -4.3 %     -1.9 %     -4.1 %     -11.0 %     -5.3 %     -5.8 %

Marketing Services

    1.3 %     -0.9 %     -1.9 %     -6.3 %     -2.0 %     -5.3 %     -16.8 %     -17.5 %     -12.0 %     -12.9 %     -21.4 %     -20.0 %     -25.0 %     -33.0 %     -24.8 %     -30.1 %

Total ChoicePoint

    8.8 %     7.3 %     8.9 %     4.8 %     7.5 %     4.0 %     1.3 %     -1.0 %     3.6 %     1.9 %     0.8 %     2.9 %     1.8 %     -0.3 %     1.3 %     3.7 %
                                                                                                                               

 

(a) Service revenue represents revenue from continuing business lines and is used by management to assess and manage its on-going businesses and to determine operational incentive awards.

 

(b) Management excludes these charges in its assessments of operating results.

 

(c) Other operating charges include specific expenses related to the fraudulent data access, asset impairment, lease abandonment, merger-related costs, unusual items, realignment charges, gain (loss) on sale of business, and other charges.

 

(d) Internal revenue growth is the revenue growth from comparable business units for the same period in the prior year and excludes revenue from reimbursable expenses, acquisitions, divested and discontinued product lines and discontinued operations. This measure is used by management to analyze the performance of the business segments and as a criteria component for incentive compensation awards.

 

(e) Reimbursable expenses represent certain reimbursed out-of-pocket expenses that are presented on a gross basis in accordance with EITF 01-14. As these expenses are fully reimbursed, without mark-up, by our clients and in a majority of cases prepaid by the customers, there is no impact on operating income, net income, earnings per share, cash flows or the balance sheet; therefore, we have excluded the impact of these expenses in the calculation of operating margins, service revenue and internal growth.


ChoicePoint Inc.

Operating Results by Quarter

(dollars in thousands except per share amounts)

 

    Q1 2006     Q2 2006     Q3 2006     Q4 2006     Fiscal Year
2006
    Q1 2007     Q2 2007     Q3 2007     Q4 2007     Fiscal Year
2007
    Q1 2008  

Net income

  $ 30,610     $ 34,861     $ (72,216 )   $ 23,667     $ 16,922     $ 30,922     $ 32,570     $ 1,251     $ (32,321 )   $ 32,424     $ 22,985  

EPS - Diluted

  $ 0.34     $ 0.40     $ (0.89 )   $ 0.30     $ 0.20     $ 0.40     $ 0.43     $ 0.02     $ (0.47 )   $ 0.44     $ 0.34  

Less:

                     

Income (loss) from discontinued operations, net of tax

    2,046       2,561       3,868       (2,015 )     6,460       1,809       1,729       2,691       (931 )     5,298       (2,730 )

Impairment loss on assets held for sale, net of tax

        (34,918 )     (6,895 )     (41,813 )     (90 )     (424 )     (30,348 )     (5,492 )     (36,354 )     (726 )

Gain (loss) on sale of discontinued operations, net of tax

    —         —         (3,088 )     (53 )     (3,141 )     (365 )     129       (155 )     882       491       37  
                                                                                       

Income from continuing operations

  $ 28,564     $ 32,300     $ (38,078 )   $ 32,630     $ 55,416     $ 29,568     $ 31,136     $ 29,063     $ (26,780 )   $ 62,989     $ 26,404  

EPS from continuing operations

  $ 0.32     $ 0.37     $ (0.47 )   $ 0.41     $ 0.65     $ 0.38     $ 0.41     $ 0.39     $ (0.39 )   $ 0.85     $ 0.39  
                                                                                       

Add back other charges (a):

                     

Accelerated depreciation expense

    5,463       —         —         —         5,463       —         —         —         —         —         —    

Other operating charges (c)

    5,987       2,740       116,054       (7,209 )     117,572       1,157       278       2,499       87,764       91,698       4,069  

Tax provision (benefit) related to other charges

    (4,541 )     (1,109 )     (44,416 )     2,575       (47,491 )     (441 )     (108 )     (1,000 )     (33,297 )     (34,846 )     (1,394 )
                                                                                       

Income from continuing operations excluding other charges (a)(c)

  $ 35,473     $ 33,931     $ 33,560     $ 27,996     $ 130,960     $ 30,284     $ 31,306     $ 30,562     $ 27,687     $ 119,841     $ 29,079  

EPS from continuing operations excluding other charges (a)(c)

  $ 0.40     $ 0.39     $ 0.40 (b)   $ 0.35     $ 1.54     $ 0.39     $ 0.41     $ 0.41     $ 0.39 (b)   $ 1.61     $ 0.43  
                                                                                       

Weighted Avg Shares - diluted

    88,804       87,736       81,551       79,782       84,986       77,362       75,852       73,829       68,825       74,423       68,200  
                                 

 

(a) The Company has presented this information with and without these items because they represent costs that management excludes in its assessment of operating results of the business.

 

(b) EPS from continuing operations excluding other charges for the fourth quarter of 2007 and the third quarter of 2006 is calculated based upon weighted average diluted shares of 70,263 and 83,533 respectively.

The dilutive effect of stock options and other share-based awards is included in the calculation of EPS from continuing operations excluding other charges because such effect is dilutive.

 

(c) Other operating charges include specific expenses related to the fraudulent data access, lease abandonments, merger-related costs, unusual items, realignment charges, and other charges as follows:

 

    Q1 2006   Q2 2006     Q3 2006   Q4 2006     Fiscal Year
2006
  Q1 2007   Q2
2007
    Q3 2007     Q4
2007
  Fiscal Year
2007
    Q1 2008

Asset impairments - Marketing Services segment

  $ —     $ —       $ 110,000   $ (10,600 )   $ 99,400   $ —     $ —       $ —       $ 85,983   $ 85,983     $ —  

Asset impairments

    3,940     1,497       4,721     562       10,720     279     26       199       353     857       486

Transaction-related expenses

    —       —         —       —         —       —       —         —         —       —         2,044

Nonmerger severance

    1,115     658       410     —         2,183     174     1,614       1,512       1,103     4,403       1,382

Lease abandonments

    150     (386 )     —       1,996       1,760     137     139       957       144     1,377       —  

Expenses related to fraudulent data access

    782     971       923     833       3,509     567     (1,501 )     112       177     (645 )     99

Other, net

    —       —         —       —         —       —       —         (281 )     4     (277 )     58
                                                                           

Total other operating charges

  $ 5,987   $ 2,740     $ 116,054   $ (7,209 )   $ 117,572   $ 1,157   $ 278     $ 2,499     $ 87,764   $ 91,698     $ 4,069
                                                                           

 


ChoicePoint Inc.

Cash Flow and Balance Sheet Highlights

(dollars in thousands)

Reconciliation of net cash provided by operating activities to net free cash flow

 

    Q1 2006     Q2 2006     Q3 2006     Q4 2006     Fiscal Year
2006
    Q1 2007     Q2 2007     Q3 2007     Q4 2007     Fiscal Year
2007
    Q1 2008  

Net cash provided by operating activities - continuing operations

  $ 36,442     $ 26,624     $ 92,783     $ 44,779     $ 200,628     $ 37,770     $ 71,899     $ 62,612     $ 46,434     $ 218,715     $ 43,879  

Additions to property and equipment

    5,319       5,923       3,354       8,586       23,182       4,226       3,268       5,520       3,672       16,686       4,865  

Additions to other assets, net

    8,544       10,595       7,718       1,927       28,784       6,308       8,229       6,750       8,773       30,060       10,023  
                                                                                       

Total capital expenditures

    13,863       16,518       11,072       10,513       51,966       10,534       11,497       12,270       12,445       46,746       14,888  

Net free cash flow - continuing operations

  $ 22,579     $ 10,106     $ 81,711     $ 34,266     $ 148,662     $ 27,236     $ 60,402     $ 50,342     $ 33,989     $ 171,969     $ 28,991  
                                 

Depreciation and Amortization

  Q1 2006     Q2 2006     Q3 2006     Q4 2006     Fiscal Year
2006
    Q1 2007     Q2 2007     Q3 2007     Q4 2007     Fiscal Year
2007
    Q1 2008  

Insurance Services

  $ 2,998     $ 3,072     $ 4,023     $ 4,203     $ 14,296     $ 4,154     $ 4,657     $ 4,502     $ 4,545     $ 17,858     $ 4,652  

Screening and Authentication Services

    3,106       3,231       3,373       3,592       13,302       3,730       3,979       3,938       3,819       15,466       3,947  

Business Services

    5,168       4,580       4,592       4,903       19,243       4,533       4,328       4,223       3,596       16,680       3,150  

Marketing Services

    1,608       1,695       1,658       1,629       6,590       1,340       1,257       1,254       1,276       5,127       1,077  

Unallocated & Other

    2,508       2,454       2,401       2,293       9,656       2,343       2,126       2,218       1,926       8,613       1,998  

Accelerated Depreciation

    5,463       —         —         —         5,463       —         —         —         —         —         —    
                                                                                       

Total Continuing Operations

  $ 20,851     $ 15,032     $ 16,047     $ 16,620     $ 68,550     $ 16,100     $ 16,347     $ 16,135     $ 15,162     $ 63,744     $ 14,824  
                                                                                       
Calculation of Net Debt and Net Debt to Total Book Capital Ratio              
    March 31,
2006
    June 30,
2006
    September 30,
2006
    December 31,
2006
          March 31,
2007
    June 30,
2007
    September 30,
2007
    December 31,
2007
          March 31,
2008
 

Short-term debt and current maturities of long-term debt

  $ 100,010     $ 101,810     $ 75,011     $ 100,011       $ 110,011     $ 90,011     $ —       $ 80,000       $ 11,342  

Long-term debt, less current maturities

    105,032       95,031       315,030       315,028         350,025       335,019       515,000       530,000         562,500  
                                                                           

Total Debt

    205,042       196,841       390,041       415,039         460,036       425,030       515,000       610,000         573,842  

Cash and cash equivalents

    (8,499 )     (5,337 )     (37,229 )     (26,612 )       (39,242 )     (27,544 )     (37,487 )     (20,189 )       (31,956 )
                                                                           

Net Debt

    196,543       191,504       352,812       388,427         420,794       397,486       477,513       589,811         541,886  

Net Debt

    196,543       191,504       352,812       388,427         420,794       397,486       477,513       589,811         541,886  

Book Value of Shareholders’ Equity

    968,875       1,015,991       721,944       663,647         614,409       618,884       490,320       309,922         351,235  
                                                                           

Total Capitalization

    1,165,418       1,207,495       1,074,756       1,052,074         1,035,203       1,016,370       967,833       899,733         893,121  

Net debt to total book capital ratio

    16.9 %     15.9 %     32.8 %     36.9 %       40.6 %     39.1 %     49.3 %     65.6 %       60.7 %
Calculation of EBITDA and Ratio of Net Debt to EBITDA Ratio (d)            
    Q1 2006     Q2 2006     Q3 2006     Q4 2006     Fiscal Year
2006
    Q1 2007     Q2 2007     Q3 2007     Q4 2007     Fiscal Year
2007
    Q1 2008  

Net Income - as reported

  $ 30,610     $ 34,861     $ (72,216 )   $ 23,667     $ 16,922     $ 30,922     $ 32,570     $ 1,251     $ (32,321 )   $ 32,424     $ 22,985  

Loss from discontinued operations, net of taxes

    2,046       2,561       (34,138 )     (8,963 )     (38,494 )     1,354       1,434       (27,812 )     (5,541 )     (30,565 )     (3,419 )
                                                                                       

Income from Continuing Operations

    28,564       32,300       (38,078 )     32,630       55,416       29,568       31,136       29,063       (26,780 )     62,989       26,404  

Provision for income taxes

    18,783       21,951       (23,609 )     18,129       35,254       18,222       20,529       19,375       (16,354 )     41,772       17,591  

Interest expense

    2,205       2,960       4,693       6,062       15,920       6,316       6,361       6,690       7,665       27,032       7,669  
                                                                                       

Operating Income (Loss) - Continuing Operations

    49,552       57,211       (56,994 )     56,821       106,590       54,106       58,026       55,128       (35,469 )     131,793       51,664  

Add back: Other charges (a):

                     

Other operating charges (b)

    5,987       2,740       116,054       (7,209 )     117,572       1,157       278       2,499       87,764       91,698       4,069  
                                                                                       

Operating Income (Loss) - Continuing Operations - As Adjusted

    55,539       59,951       59,060       49,612       224,162       55,263       58,304       57,627       52,295       223,491       55,733  

Depreciation and amortization

    20,851       15,032       16,047       16,620       68,550       16,100       16,347       16,135       15,162       63,744       14,824  

Stock-based compensation

    4,975       4,927       5,990       6,062       21,954       5,535       5,528       5,447       4,721       21,231       5,253  
                                                                                       

Earnings before Interest, Taxes, Depreciation & Amortization (EBITDA)

  $ 81,365     $ 79,910     $ 81,097     $ 72,294     $ 314,666     $ 76,898     $ 80,179     $ 79,209     $ 72,178     $ 308,466     $ 75,810  
                                                                                       

EBITDA - Trailing 12 Months

        $ 314,666       $ 310,199     $ 310,469     $ 308,581     $ 308,466       $ 307,377  
                                                         

Net Debt to EBITDA Ratio (c)

          1.23         1.36       1.28       1.55       1.91         1.76  
                                                         

 

(a) Management excludes these charges in its assessments of operating results.

 

(b) Other operating charges include specific expenses related to the fraudulent data access, asset impairment, lease abandonment, merger-related costs, unusual items, realignment charges, gain (loss) on sale of business, and other charges.

 

(c) To supplement the Company’s balance sheet information presented on a GAAP basis, the Company also uses “net debt to EBITDA ratio”. Net debt to EBITDA ratio is a non-GAAP measure, which may be determined or calculated differently by other companies, and is obtained by dividing the Company’s net debt as of a specific date by its EBITDA for the specified period ending on such date. Net debt is calculated by subtracting cash and cash equivalents from total debt. The Company defines EBITDA as net income from continuing operations before taxes, interest, other operating charges, depreciation and amortization, including amortization associated with stock-based compensation.

The Company’s net debt to EBITDA ratio is required to be calculated by the Company’s loan covenants and Management uses it to evaluate the Company’s ability to repay or refinance its debt obligations. Management believes that net debt is a useful measure because it represents the amount of debt obligations that are not covered by available cash and temporary investments. Management believes that EBITDA is a useful measure in this context because it assists management in comparing the Company’s performance on a consistent basis without regard to depreciation and amortization, which are non-cash in nature and can vary significantly depending upon accounting methods or non-operating factors such as historical cost.

The Company’s net debt to EBITDA ratio should not be considered in isolation or as a substitute for a ratio of GAAP total debt to net income. The Company strongly encourages investors to review its financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Other companies may use different methodologies for calculating their non-GAAP financial measures and, accordingly, the Company’s non-GAAP financial measures may not be comparable to those measures.