易速傳真 (EFX) 2008 Q3 法說會逐字稿

Good day and welcome to the Equifax third quarter earnings release conference call.

Today's call is being recorded.

At this time, I would like to turn the conference over to your host, Mr.

Jeff Dodge.

Please go ahead, sir.

Good morning and welcome to today's conference call.

I'm Jeff Dodge, Investor Relations.

With me today are Rick Smith, our Chairman and Chief Executive Officer and Lee Adrean, Chief Financial Officer.

Today's call is being recorded.

An archive of the recording will be available later today in the Investor Center on our our Website at www.Equifax.com.

During this call, we will be making certain forward-looking statements including updates to our out look, to help you understand Equifax and its business environment.

These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations.

Certain risk factors inherent in our business are set forth in filings with is SEC, including our 2007 Form 10-K and subsequent filings.

During this call, we will refer to several non-GAAP financial measures.

For Equifax, consolidated in the third quarter of 2008, these measures include adjusted net income, adjusted operating income, and adjusted operating margin.

These measures determine net income, operating income and operating margin by adjusting for special items indicated in Items A and B, of the non-GAAP financial measures reconciliation attached to our press release.

We also provide adjusted diluted EPS, which adjust for acquisition related amortization and the special items.

Finally, we will refer to EBITDA, defined as operating income before depreciation and amortization and the special items.

Please see the section of our earnings release entitled reconciliation of non-GAAP financial measures to the comparable GAAP financial measures for further details in the non-GAAP reconciliation posted in the Investor Center on our web site.

Now I would like to turn it over to Rick.

Thanks, Jeff and Good morning everyone.

I'm convinced there will be some point in time where we will open up an earnings call, with a comment that goes something like this, we are thankful we have got a vibrant economy that is putting winds in our sails.

But I think as you all know that's not the environment we are operating in right now.

We have being experiencing a market around the world with unprecedented volatility.

Despite this challenge, we have been on the offense under taking difficulty but important measures to reduce our expenses, while protecting our margins, earnings, and cash flow.

At the same time, we continue to invest in new products, global expansion and hedging our counter cyclical products and our people, to strengthen the Company for the future and ensure we drive the best value for our share holders.

For the quarter, total revenue is $484.1 million down 2%.

Cash from operating activities was $138 million, up 16%, from $118.7 million in the third quarter of 2007.

EBITDA, was $163 million down 3%.

Operating margin 22.2%.

On a non-GAAP basis excluding the impact of restructuring and asset write-down charges, operating margin was 25.6%, up from 25.4% in the second quarter of 2008 and diluted EPS was $0.56 a share up 15%, while adjusted EPS was $0.63, up 9%.

As always.

Lee will present the detailed financials in a moment.

But, I want to first talk about how we are facing into reality and managing through this environment and delivering performance for our shareholders, customers, and employees.

Last year we recognized that our cost base needed to be restructured in order to remain competitive and deliver value to our shareholders, in a more competitive, faster paced global market.

We have done many things.

We have leveraged highly-skilled out sourcing partners in India.

For to date, we have moved approximately 650 positions to their facilities.

Our Global Sourcing Office renegotiated global contract we our largest suppliers to further reduce cost.

We reduced-- we conducted intense reviews of all operating expenses in each of our business units and COEs to identify incremental cost reduction opportunities.

We restructured our global operations, started with a new leader, highly experienced in tools critical to improve our global operating efficiency.

While we were clearly benefiting prom the past decisions in the current environment, we needed to do more.

This quarter we took a restructuring charge for steps we took that will enable us to further rationalize our expense base, realign our resources and position us for the future.

When we decided to make this move, we challenged every business unit and COE to identify costs that can be eliminated, while being very careful not no interfere with the momentum and progress on key growth initiatives.

We believe we have accomplished that with this restructuring end, while these decisions are always tough, it is a necessary step for us to take for shareholders, our employees, and our customers.

One of the more difficult challenges in these types of environments, is to maintain a balance perspective on both short-term needs and long-term opportunities.

I believe the team is doing that very well.

[Lean] and Workout, our rapidly becoming a part of our DNA.

To date, we have completed a number of lean and value screen mapping activities, bringing the totaled number of trained individuals to over 160 people.

We have increased the volume of consumer disputes handled on the web instead of by mail and phone.

We have increased the automation of US Consumer Data loading resulting in faster loading of data at reduce costs.

We have executed new costs in our contracts with third-party providers and we have moved more projects to automated fulfillment and improved our order management process for marketing services, which leads to better demand planning and resource deployment.

As a result through the third quarter, we have accomplished 75% of our targeted cost savings from these efforts and on track to meet or exceed our full-year target and the benefit will continue into 2009 and beyond as we identify new opportunities.

We are just getting started in International with [Lean] and Workout, with a focus on improving interactions with customers, creating cost leverage opportunities across the various geographies and leveraging the COEs to drive faster time to revenue and more efficient production processes.

This is obviously a journey.

Every time we complete a [Lean] or Workout initiative, we learn something new and our people find new opportunities for us to improve our operating efficiencies and eliminate unnecessary expenses.

On the growth side we continue to invest in MPI.

Today we have launched 52 products across everyone of our business units.

In this environment, we estimate that we will deliver revenue in 2008, from MPI, which is over three times the actual MPI revenue in 2007.

We are carrying great momentum as we exit 2008, and go into 2009 from MPI.

Two of our biggest MPI opportunities, which we talked about with you in the past, our Settlement Services and Capital Markets continue to gain traction with customers and prospects.

First a bit of insight on Settlement Services, this business grown each quarter.

Enabling us to offset most of the decline in the core tri-tri-bureau reporting revenue.

We expect revenue for the year will be over five times the 2007 level.

Several new customers were added during the quarter including our largest customer to date.

As you know, when we load these customers on, it takes a number of months before you ramp up, so the true benefit of this largest customer we have added, we will start to feel the first quarter of 2009.

Also during the quarter, we significantly increased staffing in our sales and operations unit to drive further market penetration.

We expect to exit 2008, again, with a very strong annual run rate, in spite of this difficult environment.

In Capital Markets, we are leveraging our analytical tools and capabilities to provide more transparencies into the inherent risk of securitized portfolios.

Our sales team continues to gain transaction with a pipeline that contains a number of the largest institutional players in the Asset Securitization markets.

Revenue is being ramped up quickly and interest remains very high.

We have six tests under way, another six large institutions in the pipeline.

WE have also reached out to the US Treasure Department with a proposal to help in the pricing of the mortgage backed security assets.

For the bank consolidations that have occurred this year our analytical services enabling technologies are increasing critical differentiator for us in the market place.

During the third quarter, 31% of our online transactions were delivered through one of our technology platforms, during the quarter, up from 29% third quarter 2007.

Approximately 20% of our US online transaction volume for the third quarter 2008, includes scores, from models built by Equifax.

While in credit marketing over 45% of names listed include a score from Equifax model.

Next onto the work number, many of our core credit information customers are keenly interested in using the work number data assets to help them under write loans more affectively and prioritize their collection strategies.

We have had some great successes with the work number this year, that momentum continued in the third quarter.

Today, we have closed 55 cross sale deals including many of our large national accounts.

We have robust pipeline of over 100 opportunities and the fourth quarter, will be able to deliver the work number information to the inner connect platform and in early 2009, the work number information will be delivered through our core credit reporting system, which will enable us to launch products at a faster, faster rate.

In collections, we have a unique portfolio of products, which is unmatched in the industry and is being led by a team under Bill Canfield's leadership.

Combining products from the work number and the core USCIS business, our sales efforts are focused on both first-party, and third-party collection activities.

For major card issuers, with our collection strategies we assist them in prioritizing delinquent accounts with our highest chances of collectibility.

Collection agencies can prioritize accounts based on a potential amount that is collectible.

And the financial institutions, we can better determine which home equity loans can be modified by minimizing lost risk.

The revenue for this portfolio grew 32% during the quarter.

Again, I want to underscore, it is a unique product offering, we have a full-suite of USCIS core products and the fact that we have employment and income data to help third-party and first-party collectors, collect and restructure their loans is of high interest to every bank we have talked to, and it's my view that this environment will need this kind of product for at least few more years so the growth prospects for collections look strong through 2010, in my opinion.

Finally, you have all seen in our recent announcement as one of our-- that we are one of the founding members of the iCard Foundation, we believe that the technology advances, by this foundation will become the premier facilitator of commerce on the internet.

Ensuring that all parties know who they are dealing with and improving transactional efficiency..

In addition to the existing board, which includes ourselves, Microsoft, Google, eBay, Oracle and Novell, two new members, Intel and Deutsche Telecom have now joined.

We intend to launch a consumer oriented proto-type in the next few months, with a goal of having two to three pilots launched by 2010.

I will now turn it over to Lee for some detailed financials.

Thanks, Rick and good morning everyone.

This morning all financial information I will be discussing will be presented on a GAAP bases, except as otherwise noted.

You should also refer to Q&A and non-GAAP reconciliations attached to our earnings press release for additional financial information.

For the quarter, consolidated revenue of $484.1 million was down 1.7%, from a year ago.

Changes in foreign exchange rates favorably affected revenue by $3 million.

Constant dollar revenue declined 2.3%.

The beneficial impact of foreign exchange has declined during 2008.

During the first half of 2008, the favorable impact of foreign exchange rates versus the prior year was in excess of $10 million per quarter.

The favorable impact was just $3 million in the quarter just ended, as I noted, and given current exchange rates we anticipate that revenue in the fourth quarter will be negatively impacted by the changing foreign exchange rates.

So we are definitely seeing some head wind from foreign exchange.

EBITDA, a non-GAAP measure, was $163 million, down 3% in the quarter.

Operating income was $107.2 million, down 17% from the same quarter a year ago.

Adjusted operating income, in non-GAAP measure, which adds back restructuring and asset write-down charges decreased by 4%.

Operating margin was 22.2% in the quarter.

On a non-GAAP basis, again, adjusted for restructure asset write-down charges, operating margin was 25.6% in the third quarter compared to 26.2% in the third quarter a year ago, but up from 25.4% in the second quarter.

We experienced a favorable tax rate of 19.9% in the third quarter.

This resulted from the recognition of a $14.6 million income tax benefit related to our Brazilian operations, excluding this item our third quarter tax rate was 36.1%, consistent with our expectation for the full year of approximately 36.5%.

Net income for the quarter was $72.3 million up 6% from a year ago.

Year to date, cash provided by operating activities was up 20% to $325 million, a strong indicator of the quality of our earnings, particularly given the current economic climate.

Diluted earnings per share for the quarter was $0.56, up from $0.48 in 2007, reflecting a decrease in average shares outstanding as a result of the shares repurchase activity over the last year.

Excluding the impact of acquisition related intangible amortization from diluted earnings per share, as we have done in prior quarters, as well as excluding the impact of the special items, the restructuring and asset write-down charges and the income tax benefit, adjusted diluted earnings per share, a non-GAAP measure was $0.63, up 9% from $0.58 in the third quarter of 2007.

We repurchased 1.8 million shares during the quarter for $62.8 million, bringing year to date repurchases to 144 million and 4 million shares.

Since acquiring TALX, we have now repurchased over 21.9 million shares for approximately $863 million.

Outstanding debt was $1.3 billion, down approximately $80 million when compared to year-end 2007.

Finally, our balance sheet is strong.

Our bank line, which currently runs through 2011, is $850 million, with $465 million drawn against the facility as of September 30 and significant available capacity.

With our existing facility and the cash generated from operations, we have sufficient capacity to fund our operating needs for the foreseeable future.

Moving to the business units, in our US Consumer Information Solutions unit, online Consumer Information Solutions revenue was $151.1 million, down 6% when compared to the same quarter last year.

For our core product, online transaction volume was flat compared to last year.

Mortgage Reporting Solutions revenue of $16.7 million was down 1% when compared to Q3 of 2007.

Strong growth in our Settlement Services business and a small acquisition of a mortgage reseller earlier this year, largely offset a decline in traditional tri-merge mortgage credit reporting revenue, resulting from a 27% market decline in mortgage origination and a decline in the number of mortgage reports per closed loan.

Credit Marketing services revenue of $30 million was down 24% for the quarter.

Our prescreening revenue, which is primarily directed towards new account acquisition, was down 44% as financial institutions have cut back significantly on new marketing and extension of credit, while revenue from our portfolio review product line, which is used to manage and sustain existing customer accounts was up 1%.

Direct Marketing Services revenue was $22.8 million down 15% compared to the third quarter of 2007, reflecting the slow down in retail sales in the marketing campaigns of many retailers.

The operating margin for our US Consumer Information Solutions business was 38.2%, up slightly from 38% in the second quarter this year and down from 39.8% in the third quarter a year ago.

Our aggressive focus on controlling the expense base continues as the environment becomes more challenging.

TALX revenue was $73.4 million for the quarter up 4% from the third quarter a year ago.

The work numbers revenue was $32.6 million, up 12% from a year ago.

Continued softness in year-over-year comparisons of mortgage related revenue was more than offset by growth in consumer collections and Government Benefit program sectors.

The work numbers data base, currently has 48.2 million active records and 184 million total records, up 16% from the third quarter of 2007 and we currently have 6.8 million total records in backlog awaiting conversion.

The Tax and Talent Management Services unit delivered $40.8 million of revenue during the quarter, down 1% compared to last year.

As steady growth in Tax Management Services, fueled in part by increased Unemployment Compensation Claims activity was offset by reduced Government hiring activity at the TSA and other Government agencies for clients of our Talent Management Assessment business.

The TALX operating margin was 16.1% compared to 14.2% in 2007.

In North America Personal Solutions, revenue grew 6% to $40.9 million, a year-over-year decline in breech and transaction revenues, partly offset 21% growth in Direct Consumer Subscription revenue.

Subscription customers 1.3 million, in Q3 of 2008.

Subscription based revenue grew 14% in the quarter and now represents 79% of core revenue up from 73% in the third quarter of 2007.

Operating margin was 29.8% for the quarter compared to 26.9% for the same period in 2007.

North America Commercial Solutions revenue was $16.7 million, flat with the third quarter of 2007.

US Commercial Transaction volume was down 2% from a year ago, transaction based revenue in the US Commercial business now represents 55% of total Commercial revenue in the US.

Operating margin was14.8% compared to 19.5% a year ago, as we continue to invest in new product innovation and additional sources of data.

In comparison, the year to date margin is 15.4%, up from 12.1% for the same period 2007.

Our International business grew revenue by 8% in the quarter to $132.5 million.

In local currency, revenue grew 5%.

Marketing Services revenue decreased almost 4% in the local currency, primarily due to declines in Europe and Canada as banks and other financial institutions pulled back on their marketing activities.

Enabling Technology Services revenue grew 5% in local currency with particular strength in Canada and Europe.

Finally, Analytic Services local currency revenue grew 6% with strong double-digit growth in Latin America.

Latin America grew revenue 26% in US dollars to 59.3 million, in local currency revenue growth was16%, as all Latin American geographies delivered double-digit growth in local currency.

Europe delivered revenue of $44.9 million down 6% in US dollars and down 2% in local currency.

In the UK,, market conditions have slowed dramatically as transaction volumes grew only 2%.

Canada Consumer revenue $28.3 million, flat in US dollars and flat in local currency as well.

Online transaction volume was down 2%, but we continue to benefit from strategic pricing initiatives.

International Operating margin was 30% down from 31.2% in 2007 and 30.5% in the second quarter of 2008.

Throughout the Company, our initiatives to reduce costs and preserve strong operating margins and invest for future growth is vitally important when operating in uncertain markets and business environments.

Now let me turn it back to Rick.

Thanks, Lee.

Let me just quickly close, I thought I would give you some insight to the fourth quarter and then we will move to Q&A.

Obviously, restate where I started, it's a tough environment for our customers, it's a tough environment for many people around the world.

There is much uncertainty for our customers, which limits our visibility into the plans and activities.

Trying to forecast an out look is very difficult.

But, based upon the current levels of economic activity, customer demand, and we have our radiational downward seasonal trend in the fourth quarter and current foreign exchange rates, so it's important that we are assuming in this guidance that the current exchange rates remain constant throughout the balance of this quarter.

Obviously, fluctuations would improve or negatively impact those results, which I will give you in a second here.

So with those assumptions, we expect fourth quarter revenue to be in the range of $453 to $463 million.

As as a result of exchange rates declining, which we talked about, a trend that has accelerated since mid-September, we are expecting fourth quarter revenues to be negatively impacted by approximately $16 million when compared to the third quarter.

So using current exchange rates, negative $16 million impact in the fourth quarter from FX, when compared to the third quarter.

And we have factored this into our fourth quarter revenue guidance, which I just mentioned the 453 to 463.

We also expect adjusted earnings per share to be in the range of $0.59 to $0.63.

Additionally, it's important, we will continue executing on our current game plan to reduce costs, drive strong margin, and earnings performance, keep the business strong and resilient and ensure we continue to be well positioned for the future.

In closing, I'm very, very proud of Equifax team and their results in this environment.

They have delivered solid adjusted EPS growth, operating margin and cash from operations, while positioning us well for top line growth when the business environment improves and it will improve and all the good things this team is doing to help customers solve problems, drive new product innovation, will be the benefactor of that when the environment does improve.

With that, operator if I could open up the lines for Q&A.

(OPERATOR INSTRUCTIONS).

We will go to Kyle Evans with Stevens North Inc.

We had a negative 3% common currency quarter for the third quarter and it sounds like guidance for a (inaudible) negative 3.5%, fourth quarter, what is factored into your thinking on that acceleration in the decline because the fourth quarter would seem to me to be an easier comp off of last year.

Can you give us any kind of out look on '09, even just tone?

I will jump in, Lee, you add to it.

First no, no out look on '09.

I can tell you this, Kyle, speaking of '09, I don't expect the economic landscape to improve materially in '09.

There has been so much Federal intervention around the world that on the surface you got to think it will help, you got to get the credit markets working, LIBOR got to come down, commercial paper market has to be working.

In theory that should help, at this juncture it's far too uncertain to give you insight on '09.

If I understand your first part of your question on third quarter versus fourth quarter, as I said before we have $3 million benefit in the third quarter, on FX it foes to negative 16, in the fourth quarter.

Also, in the fourth quarter, of last year, I'm sorry goes from positive 3 to negative 12, Lee is that right?

FX, in the fourth quarter?

Yes.

Last year, when you're looking at comparables FX helped by $6.5 million.

FX alone fourth quarter of '07 versus fourth quarter of '08 is about a 18, $19 million swing.

That's a significant swing.

The core business itself, on the fundamentals of the business I expect to operate in the fourth quarter very much like the third quarter.

Okay.

Latin America, area strength, can you give us an update there and how sustainable is that growth going forward.

I feel very good.

Spent a lot of time with Rudy and his team in LAtin America.

We got great leadership and products, continue to transfer products from around the world to Latin America, continue to write strategic pricing where it makes sense.

Brazil, is working well for us.

We got a great partnership with ACSP.

I remain bullish on Latin America for as far as I can see in the future.

Does that -- Argentina, can you give us a specific view there?

It's our highest margin business.

Continues to grow strong double-digit.

Everyone of our properties in Latin America grew double-digit in the third quarter.

There was political instability there, in Argentina.

But, I remain bullish on the margin front and the growth front for Argentina.

If I heard correctly, Lee said that the credit solicitation component of the Credit Marketing Services was down 44%.

That's pretty dramatic, do you see a change away from preapproved credit card solicitation?

Will we ever go back the other way?

Let's not forget this and it is important we put this context.

The credit markets froze, this is an unprecedented quarter.

When you have all the investment banks and banks that went under the markets froze.

There was not one bank interested in lending.

If you're not interested in lending, you're not interested in acquiring new risks.

So that what happened, in September, was unbelievable we saw auto loans not being extended.

Credit cards not being granted, home equity, nothing the markets froze.

At the end of th day, the second part of your question, yes, banks eventually will have to get back on the growth plans, when that happens I don't know.

I don't expect to happen any time soon.

As the credit market starts to thaw if you will, I'm convinced they will get back out and you will see marketing become a growth business for us again.

You think the banks will do that with preapproved offers?

Yes, I do.

Okay.

Thank you.

Thank you.

We will take our next question from Andrew Jeffrey with SunTrust.

Good morning.

Rick, obviously I understand and appreciate your reluctance to speak directly to 2009.

Just if you take a step back in the grand scheme of things, is there anything sort of structurally different about the business today in light of what's happened in the credit markets and with banks as you point out consolidating going under, etc...

than there was six months ago.

Or as we come through the cycle ultimately, which I believe we will, does your business look the same as you would have thought six months ago, better?

Worse?

Can you frame that up for us high level?

Let me respond, on the structural change to the banks themselves.

There are still some 8 to 9,000 small regional community banks, 7 to 8000 banks, there before this credit dislocation, they will be their post credit dislocation.

The fact that a few of the larger banks have merged, larger scheme of things doesn't change our structure, approach to the market, financials in any dramatic way.

In fact often times, some of those combinations provide opportunities for us as well.

As I think about us getting out of this environment that we are in, I agree with you, we will get through this.

I don't see large structural change.

Equifax will come through a stronger company.

I mean that sincerely, we have taken steps to make this a leaner, more agile company.

Outsourcing to low cost countries, like India restructuring our business, focusing better on our priorities.

Our MPI stuff we are doing here, Andrew is unbelievably strong, if we get any momentum from the market itself, what ESS is doing is one small example.

The fact that I told you the revenue is five times what it was last year and growing.

That's in a terrible mortgage market.

Some of the new things we are launching will accelerate in their growth.

Okay.

So we should think about Equifax as being well levered to an eventual recovery in the consumer credit economy.

I firmly believe that and see that the things we have done when you get lift in the economy watch out the top line growth will come.

Okay.

Despite the challenges you faced particularly in marketing the online reporting business, top and bottom seems to have hung in pretty well, do you think you can continue to drive improving operating margins sequentially in USCIS?

How should we think about progression of the operating income in that business?

Thank you for the complement.

The team has done a very good job.

We don't necessarily think about measure sequentially, quarter-to-quart but over longer period of time.

I've said to you and others that that's a great business, it's a great cash flow business, and we will protect those margins.

Think of that business being in that 38% range over a period of time.

You may see fluctuations quarter-to-quarter.

Okay.

Then so the last one on talks you got a little bit of a bifurcated performance there between the work number and Tax and Talent Management piece, anything strategic that needs to change there or you pretty happy with the position of that business?

One, let me start with the work number.

Unbelievable performance, in this environment to be growing 12% if you exclude mortgage, growing even faster.

It's a by-product of one good leadership, but two, leveraging the synergies in USCIS and the work numbers.

I'm bullish on the outlook for that.

Tax and Talent Management, (inaudible) -- you have got to tax business doing quite well.

You have the TSA, larger customers of the Talent Management business very slow because of the economy.

They are hiring less people, people are traveling less.

Also, the USPS, which is a brand new customer, we announced Q1 or Q2, is slower to ramp up.

I still have all the confidence in the world that the Talent Management business will become a growth business again.

If you look at it, two of the three businesses really solid growth in the third quarter, which is outstanding.

Okay.

Thank you.

q-and-a

We will go to Dan Levine with Robert W Baird.

Could you talk about the linearity you saw through the quarter, in terms of how-- especially in September and how things progressed and how business has trended today in October?

I wont talk about October.

Give you a sense for the quarter.

Let me speak specifically of the US market because that's where the most of the volatility occurred throughout the quarter.

If Dan Adams was sitting here he would tell you, he came out of August into September feeling good.

Performance across his business lines was-- and it's relative statement but solid.

And then in first, second week of September, through the end of September, that's when all the dislocation occurred and his business hit a wall at that point in time.

It was really a short period of time on actual a bankruptcies and uncertainties and the credit markets froze that caused his business to slow down dramatically.

(inaudible)

Then just when you look at the guidance and looking at more of on a segment level basis, given where we are at now with what you were thinking at the end of the second quarter, what businesses have you kind of lowered expectations for and any places you up the expectations (inaudible)

Missed the last piece.

Areas of the business where you feel better than you did a quarter ago.

Maybe TALX, or other areas where you are not feeling as comfortable as your were--

I'm sure, Lee jump in if you got a thought here.

I feel very good about Latin America, businesses operating on all cylinders.

I feel good about in the fourth quarter.

Over to Europe, I feel good about Spain and Portugal in the fourth quarter.

US, Commercial will have improved performance in the fourth quarter versus third quarter.

I feel good about the work number continuing performance in the fourth quarter.

(inaudible) it's a tough environment but -- businesses that will continue to have head winds are going to be USCIS, particular the marketing business.

DMS and CMS business.

UK, has the same kind of struggles in the third quarter as the fourth quarter.

Roughly Dan, (inaudible).

Great.

Just one last question, looking at the severance, the charges this quarter how should we think about that in terms of analyzed cost savings that you put in with those moves.

If I understand your question, how do I think about the analyzed cost savings from the restructuring in the third quarter, it that it?

Yes, that's it.

Think you should think somewhere in the 15 to $18 million range annually.

Okay.

Great, thanks.

Next to Michael Meltz, JPMorgan.

Rick, one clarification and you said I hit a wall in September but I think USCIS was better than most people modeled for the quarter.

I think you're implying -- I think your guidance implies margins improving sequentially in the fourth quarter.

Am I reading that correctly.

What you're saying about margins?

And related to that you said a currency, a few different currency numbers, are you modeling currency year-over-year as a minus 12 in the fourth quarter?

Back to your first thought.

First, that's a good point.

USCIS was performing in even a better rate.

Yes, it met the analysts expectations.

Had that dislocation, (inaudible) could have exceeded the expectations in the quarter, good point.

Number two, margins, -- on currency, what I was saying there is that the business had a $3 million benefit from currency in the third quarter.

It will have a, at today's exchange rates a $12.3 million drag in the fourth quarter.

Michael, let me get the comparative frame right.

If you compare third quarter to fourth quarter, comparatively, little over 3 positive to a little more than 12 negative, $16 million drag compared to third quarter.

If you look compared to last year, it would be a negative $19 million drag.

Okay.

Last year we had we do all of this relative to a constant set of currencies we use for internal reporting.

Last year, fourth quarter was positive $6 million relative to those rates.

This year's, fourth quarter will be negative 12, compared to the same rates.

The swing versus fourth quarter last year is 18 to 19 million.

How should we be thinking about the EBIT impact of the FORE EX one?

For the most part it translates at the average margin of our international business.

Tends to be around 30%.

Then as-- I'm skipping over my margin question, as you look into next year what's your toughest comp on currency?

Is it first quarter?

Yes.

Okay.

Then my point on to get -- I guess the simple way to put it, your revenue target for the fourth quarter is well below where I was modeling, your EPS target is basically there.

What is the deltas?

Tight cost cutting or because it would imply margins improving in the fourth quarter.

Yes, I think we will get a little bit of margin improvement, some of that reflects the steps we taken in the third quarter and we are continuing to take steps to constrain expenses and some of it is just we are not spending money discretionarily, we are doing things structurely and fundamentally, like the restructuring charge so we will get help on the operating margin line.

Our tax rate probably stays in the 36% plus range instead of the 37% plus range that some people modeled.

That helped a little bit.

Let me jump in, the cost actions we have taken, we started these actions last year and taken actions every quarter this year.

Not just the third quarter set of actions but they start to build.

You will see those building in the fourth quarter, which is the primary reason we get the EPS lift that we are getting.

Two follow ups, you stepped up repurchase in the quarter, given events in recent weeks has that changed your thoughts on capital allocation going forward?

Yes.

It does somewhat.

The year to date we've applied about two-thirds of our available free cash to share repurchase and one-third to debt reduction.

But it's pretty clear that the credit markets including the corporate credit markets have changed in tenure pretty dramatically, in light of that I think we will probably more likely to emphasize debt reduction over share repurchase with a view that there continues to be uncertainty in the credit market and business market we are in, but, we will continue to do some mix of both.

Okay.

Last question, Rick, I understood your point about there being thousands and thousands of banks out there; however, within-- you mentioned earlier within a enabling technology some of the mergers give you opportunity.

Can you talk about at the top of the pyramid when you look at Wells Fargo, Wachovia, JPMorgan, Washington Mutual, is there opportunity for you to interconnect in some of these other platforms?

Obsoletely, we are better than a few of them but working right now with Wells Fargo to replace a encumber platform, I'm encouraged, I met with the CEO, talked about this as an opportunity.

So if we get Wells Fargo, onto-- to Interconnect, and B of As moving to Interconnect, we will have two of the four largest bank on Interconnect.

I remain optimistic.

Okay.

Thank you.

We will go next to Dhruv Chopra with Morgan Stanley.

Good morning gentlemen.

If I can ask a question on this bank consolidation point, again.

Historically, the core credit you've seen low single-digit annual price declines, is there any risk that that could potentially accelerate, if that's the case are there higher priced value added projects that you could cross-sell in there that would offset some of that pressure?

One, when you think about the banking consolidation of Wachovia as a example into Wells Fargo, that's that has the potential for some price consolidation, but in the scheme of things, look at the price comparison, it's relatively de minimus-- for the sales rep who handles that account that may not be the case.

When you look at across the entire enterprise it's de minimus.

Two, before they get to that as a priority that's going to take a a lot of time.

(inaudible) Maybe in the third quarter priority for wells Fargo.

Secondarily, we look at the product mixes we offer both clients.

The share might be different with one client versus another.

One might use Interconnect and others may not.

In balance, I think that occurred in September it's a balance out look as far as risking the pricing side and opportunity on share and value added products.

Then you made reference to sending proposal for the Treasury, with the changes in the regulatory environment and the Bush, to freeze up the lending, there are some opportunities, can you give us additional specifics on where you see that opportunity for yourself and with the Treasury.

Absolutely.

One, this is not a theoretical opportunity.

It's a product, as I mentioned in the opening comments that we are selling to investment banks and to hedge funds.

We have a priority algorithm that no one else has built.

It allows us, very high degree of confidence level to link an individual mortgage in a tranch to an individual (inaudible) -- that is rich mix mortgage.

Add attributes that determine likelihood of prepayment or default.

(inaudible) Monetizing in today, I had a call with a very high level Treasury Department, yesterday to talk about this, they are going the pick as you know a handful of investment advisors if you will, firms who will manage the process, how it unfolds, who makes the decision on pricing of the assets is yet to be determined but we got their attention, we are cooperating, Drew I think you will see something crystallize as far as strategic direction the Treasury wants to take in the next two weeks and I'm hopeful that leads (inaudible) the way.

Excellent.

Then we haven't heard anything on updates in China, I'm sorry India and Russia, any developments.

Yes, Russia performing better than expected.

As far as data loads, more banks, give us data as far faster rate than we expected and financial, as far as revenue goes, performing at a better rate than our pro forma, as well.

It's still mall but I remain bullish, this ling-term will be a good little platform for us in Europe.

In India, The Reserve Bank of India, changed their ownership guidelines, I think it's been three or four months ago from no more 49% in foreign direct investments.(inaudible) That kind of forced us to go down a path b, we are down path b now.

Get the structure worked out and I'm hopeful in the next month or two we have that finalized.

We have time for one more question.

Okay.

We have a follow up from Kyle Evans.

Sounds like the big questions have been asked.

Maybe we can dive down to the lines that we are lighter than what we were modeling.

Personal Solutions in North America and commercial.

If you could give us detail on what is happening there on mix shift.

You gave subs on [PSAL] and the growth there, why did the transactional piece fall off the way it did?

Do you think that's indicative of that industry in general?

Does that market share shift?

Then in commercial, why flat year-over-year and down sequentially?

I will take a stab at that.

First, on [PSAL], one, the breech volume, which is transactional was down.

Not the number of breeches but the actual number of take ups, the number of consumers, using a breech of product was down.

Our subscription revenue continues to grow at double-digit rates, which long-term is a healthy sign.

In this time of uncertainty, consumers often times look at some products that are discretionary, when gas was at 4 something a gallon and commodities in general earlier in the quarter were high that put preassure on the ability to spend.

As gas continues plumet and commodities in general come down, I think that bodes well for the US consumers (inaudible).

The second part of your question was commercial --

(inaudible) The transaction sales of credit reports tend to be most closely corelated to new credit granting.

If people are buying one copy of their credit report it's in anticipation of getting a loan.

With loans less available and possibly to some extent consumers more reluctant to loan given conditions they may be under, I think just the flat out fundamental demand for that in this weaker economy is probably down.

On commercial, I think of it this way the core US commercial business was actually up strong double-digit.

And we had a mature market in Canada, that started to slow.

We have a marketing, commercial marketing business, in our -- the small business feels like a consumer so the marketing activity in the commercial business much like the consumer slowed dramatically in the third quarter.

When someone asked me earlier how do I think about the businesses in the fourth quarter, I think you will see improved performance coming out of commercial in the fourth quarter.

One last follow on, the [vantage] score -- any acceleration in testing or in revenue there as banks and card issuers rethink the way they originated the risks?

It's on track.

Continues to do well.

Fitch endorsed -- (inaudible) we continue to make great traction in inroads on selling as well as testing.

Thank you.

I would like to thank for joining us on the call.

We will make ourselves available if their are any additional questions during the day.

Thank you.

Ladies and gentlemen, thank you for your participation.

This does conclude today's conference call