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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] 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 - 1-13069
CHOICEPOINT INC.
(Exact Name of Registrant as Specified in Its Charter)
GEORGIA 58-2309650
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1000 ALDERMAN DRIVE 30005
ALPHARETTA, GEORGIA (Zip Code)
(Address of Principal Executive
Offices)
(770) 752-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
-------------------------------------- -------------------------------
Common Stock, par value $.10 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
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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 [_]
Aggregate market value of the voting stock held by non-affiliates of
the Registrant: $2,098,231,189 as of March 15, 2001.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. 62,022,791 shares of
Common Stock, par value $.10 per share, outstanding as of March 15, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to the 2001 Annual Meeting of
Shareholders are incorporated herein by reference in Part III, Items 10 (as
related to Directors), 11, 12 and 13.
Portions of the Annual Report to Shareholders for the year ended
December 31, 2000 are incorporated herein by reference in Parts II and IV.
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TABLE OF CONTENTS
PAGE
----
PART I....................................................... 1
Item 1. Business......................................... 1
Item 2. Properties....................................... 5
Item 3. Legal Proceedings................................ 5
Item 4. Submission of Matters to a Vote of Security
Holders......................................... 5
Part II...................................................... 7
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters .................... 7
Item 6. Selected Financial Data........................... 7
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 7
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk................................ 7
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 7
Part III..................................................... 8
Item 10. Directors and Executive Officers of the
Registrant..................................... 8
Item 11. Executive Compensation........................... 8
Item 12. Security Ownership of Certain Beneficial Owners
and Management.................................. 8
Item 13. Certain Relationships and Related
Transactions................................... 8
Part IV...................................................... 8
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................. 8
THIS FORM 10-K AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
CHOICEPOINT INC. OR ITS MANAGEMENT CONTAIN STATEMENTS WHICH MAY CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, 15 U.S.C.A. SECTIONS 77Z-2 AND 78U-5
(SUPP. 1996). THOSE STATEMENTS AND INFORMATION ARE BASED ON MANAGEMENT'S
BELIEFS, PLANS, EXPECTATIONS AND ASSUMPTIONS AND ON INFORMATION CURRENTLY
AVAILABLE TO CHOICEPOINT. THE WORDS "MAY," "SHOULD," "EXPECT," "ANTICIPATE,"
"INTEND," "PLAN," "CONTINUE," "BELIEVE," "SEEK," "ESTIMATE," AND SIMILAR
EXPRESSIONS USED IN THIS REPORT THAT DO NOT RELATE TO HISTORICAL FACTS ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
THE FORWARD-LOOKING STATEMENTS IN THIS REPORT ARE NOT GUARANTEES OF
FUTURE PERFORMANCE AND INVOLVE CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS.
SUCH RISKS, UNCERTAINTIES AND ASSUMPTIONS INCLUDE, BUT ARE NOT LIMITED TO, THE
FOLLOWING: (I) THE LEVELS OF DEMAND FOR CHOICEPOINT'S EXISTING SERVICES; (II)
CHOICEPOINT'S ABILITY TO DEVELOP NEW SERVICES AND TO ADAPT EXISTING SERVICES TO
NEW USES; (III) CHOICEPOINT'S ABILITY TO MAINTAIN ACCEPTABLE MARGINS AND ITS
ABILITY TO CONTROL ITS COSTS; (IV) THE IMPACT OF FEDERAL, STATE AND LOCAL
REGULATORY REQUIREMENTS ON CHOICEPOINT'S BUSINESS, SPECIFICALLY THE PUBLIC
RECORDS MARKET AND PRIVACY MATTERS AFFECTING CHOICEPOINT; (V) THE IMPACT OF
CONSOLIDATION OR OTHER BUSINESS DEVELOPMENTS IN THE INSURANCE INDUSTRY, WHICH
ACCOUNTS FOR APPROXIMATELY 50% OF CHOICEPOINT'S REVENUE; AND (VI) THE
UNCERTAINTY OF ECONOMIC CONDITIONS IN GENERAL. MANY OF SUCH FACTORS ARE BEYOND
CHOICEPOINT'S ABILITY TO CONTROL OR PREDICT. AS A RESULT, CHOICEPOINT'S FUTURE
ACTIONS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND THE MARKET PRICE OF
CHOICEPOINT'S COMMON STOCK COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY
FORWARD-LOOKING STATEMENTS MADE BY CHOICEPOINT. DO NOT PUT UNDUE RELIANCE ON
FORWARD-LOOKING STATEMENTS. CHOICEPOINT DOES NOT INTEND TO PUBLICLY UPDATE ANY
FORWARD-LOOKING STATEMENTS THAT MAY BE MADE FROM TIME TO TIME BY, OR ON BEHALF
OF, CHOICEPOINT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR
OTHERWISE.
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PART I
ITEM 1. BUSINESS
GENERAL
ChoicePoint Inc., a Georgia corporation ("ChoicePoint" or the
"Company"), is a leading provider of identification and credential verification
services for making smarter decisions in today's fast-paced world. ChoicePoint
became an independent public company in August 1997 through the combination of
the businesses that had comprised the Insurance Services Group of Equifax Inc.
("Equifax") within a separate company and the subsequent spinoff (the "Spinoff")
of the Company's outstanding stock by Equifax as a stock dividend to the
shareholders of Equifax. References to ChoicePoint or the Company mean
ChoicePoint Inc., its subsidiaries and divisions after the Spinoff and the
Insurance Services Group of Equifax prior to the Spinoff.
Based on market share, ChoicePoint is a leading provider of risk
management and fraud prevention information and related technology solutions to
the insurance industry. The Company also offers risk management and fraud
prevention solutions to organizations in other industries. The Company operates
its business through two primary service groups: Insurance Services and Business
& Government Services.
The Insurance Services group provides most major domestic insurance
companies with underwriting and claims information services to assist those
companies in assessing the insurability and associated policy pricing of
individuals and property. The Company furnishes access to motor vehicle reports,
maintains a database of claims histories, provides automated claims verification
information services to both the property and casualty and the life and health
insurance markets, and provides database marketing services, including
pre-screened and direct marketing lists. The Business & Government Services
group offers pre-employment background investigations, pre-employment and
regulatory compliance drug testing services, shareholder locator searches,
credential verification services, and due diligence and public record
information searches to other corporate and government organizations, as well as
to the aforementioned insurance markets. The Company also provides modeling
services, customized policy rating and issuance software, property inspections
and audits to the commercial insurance market, and laboratory testing services
and related technology solutions to the life insurance market.
ChoicePoint's strategic goal is to be a leading provider of enhanced
information services to a broad range of industries. The Company is continuing
to expand its data distribution, data gathering and technological capabilities,
and believes that it is positioned to offer a variety of new products to a
diverse set of industries. The Company intends to accomplish its goals by
expanding its presence in business and government markets, pursuing acquisitions
and strategic alliances, developing and enhancing key technological capabilities
and maintaining solid financial performance.
STRATEGIC ACQUISITIONS AND ALLIANCES
Commencing in 1993, the Company initiated a strategy of acquiring
organizations that add new data, markets and technology to ChoicePoint's
operations. In April 1994, ChoicePoint acquired the assets of Programming
Resources Company ("PRC"), headquartered in Hartford, Connecticut, which
develops custom policy rating and issuance software for commercial property and
casualty insurance companies. The PRC acquisition enhanced ChoicePoint's
technological capability by adding a systems development competency and expanded
the Company's presence in the commercial insurance market. In November 1994,
ChoicePoint acquired Osborn Group Inc., formerly known as Osborn Laboratories,
Inc. ("Osborn Group"), a blood, urine and saliva testing business that provides
insurance companies with applicant-specific information. Osborn Group, which is
the second largest laboratory of its kind in the United States, uses
state-of-the-art technologies that incorporate voice, image and other data into
its production and communication processes. Osborn Group also has a highly
skilled research and development team, which researches alternative sampling and
testing techniques for delivery of more effective and lower cost testing
solutions to customers.
In 1996, ChoicePoint acquired Professional Test Administrators, Inc.
("PTA"), headquartered in Chicago, Illinois, to accelerate the Company's entry
into the drug testing market. The PTA acquisition gave ChoicePoint the ability
to administer all components of substance abuse programs, including results
analysis. By offering drug testing services, ChoicePoint is able to enhance the
value of its employment services by creating a total hiring solution for
customers.
In August 1996, ChoicePoint acquired 70% of the outstanding capital
stock of CDB Infotek, currently marketed under the name ChoicePoint PRO
("ChoicePoint PRO"), an automated public records company with more than 1,600
online public record databases,
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including criminal, bankruptcy, judgment and lien databases. Through the
exercise of an option, the Company acquired the remaining outstanding shares of
ChoicePoint PRO, which is now a wholly owned subsidiary of ChoicePoint.
Headquartered in Santa Ana, California, ChoicePoint PRO serves corporations and
the legal, insurance and investigative markets.
In addition, in furtherance of the Company's focus on building its
strategic records capabilities to serve the government, healthcare and insurance
markets, in October 1997 ChoicePoint acquired the assets of Medical Information
Network, LLC ("MediNet"). MediNet is an online physician verification service
that provides background information on physicians, including disciplinary data,
education, board certifications, and criminal and civil convictions from sources
such as the American Medical Association, U.S. Drug Enforcement Agency, U.S.
Food and Drug Administration and state medical boards, to assist in fraud
mitigation.
To add to its drug testing medical review officer offerings, in 1997
ChoicePoint acquired the assets of Drug Free, Inc., a drug testing information
services company. In April 1998, ChoicePoint acquired the assets of Attest
National Drug Testing, Inc., a drug testing information services company, and in
June 1998 Application Profiles, Inc., a full service background investigation
company. In October 1998, the Company acquired Informus Corporation ("Informus")
in order to leverage their Internet technology and expand its automated
offerings in the pre-employment screening market. The Informus acquisition
allows the Company to provide a complete range of web-based solutions by
integrating its pre-employment background and drug testing services over the
Internet to its corporate customers, and the acquisition provides further growth
opportunities for the Company in the small to mid-sized company market. Also in
November 1998, the Company acquired Tyler-McLennon, Inc., a provider of
employment background screening services and record searches.
In September 1998, ChoicePoint entered into a strategic alliance with
Intertech Information Management, Inc. ("Intertech"), a leading provider of
document management and imaging services. The minority equity investment in
Intertech allows the Company to license document management software that
enables ChoicePoint to transform data from paper to electronic format, thereby
enhancing efficiencies.
In October 1998, the Company acquired ChoicePoint Direct Inc., formerly
known as Customer Development Corporation ("CP Direct"). CP Direct is a
full-service, fully integrated database marketing company providing customized
marketing programs primarily for clients in the insurance, consumer finance,
publishing and banking industries.
In November 1998, the Company acquired EquiSearch Services, Inc.
("EquiSearch"). The EquiSearch acquisition allowed the Company to expand its
value-added applications of Company data and to offer consumer-benefit services.
EquiSearch's primary function is to contract with companies or stock transfer
agents to locate lost stockholders of Fortune 1000 and other public
corporations.
In December 1998, in order to increase the Company's presence in the
personal automobile insurance market, ChoicePoint acquired DATEQ Information
Network, Inc. ("DATEQ"), a provider of underwriting services to that market. The
DATEQ acquisition allowed the Company to bring enhanced risk assessment products
and services to its core insurance customer base.
Also in December 1998, the Company sold its life and health insurance
field underwriting services and insurance claim investigation services to PMSI
Services, Inc. This transaction, when combined with the December 1997 sale of
the paramedical examination business to Pediatric Services of America, Inc.,
completes ChoicePoint's strategy of exiting the labor-intensive life and health
and investigative field businesses.
In May 1999, the Company purchased the assets of Washington Document
Service, Inc., a leading nationwide court document research and retrieval
company serving the legal market, which complements the Company's existing
public record service. In July 1999, the Company acquired Data Tracks
Technology, Inc., a public record information company based in Sarasota,
Florida. This acquisition strengthens the Company's online public record data in
the Florida market and brings a strong web-based solution that is leveragable
into certain markets and customers. In November 1999, the Company acquired the
stock of DataMart, Inc. which provides software database services for
ChoicePoint companies.
In January 2000, the Company completed the previously-announced sale of
its operations in the United Kingdom to Experian Limited, including the CUE UK
database, a proprietary database containing home and motor insurance claims
information.
Also in January 2000, the Company purchased Statewide Data Services,
Inc. ("SDS"), the insurance industry's largest provider of prospecting leads and
related services to property and casualty agents. Management believes that this
acquisition, combined with the
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Company's underwriting information and direct marketing services, will provide
the insurance industry with a complete and integrated suite of direct
marketing products and services.
Effective February 1, 2000, the Company acquired NSA Resources, Inc.
("NSA"), one of the largest independent drug testing administration companies in
the United States, to strengthen the Company's position as a leading
single-source provider of pre-employment solutions. NSA contracts with customers
as a third-party administrator of drug tests used for determining employment
eligibility.
In March 2000, the Company acquired Practical Computer Concepts, Inc.
d/b/a Fraud Defense Network, a web-based anti-fraud business servicing the
insurance claims industry.
On May 16, 2000, the Company completed a merger with DBT Online, Inc.,
a public record services provider ("DBT"), whereby DBT shareholders received
.525 shares (pre-split) of newly-issued shares of ChoicePoint common stock for
each share of DBT common stock owned.
In October 2000, the Company acquired RRS Police Records Management,
Inc., a provider of police reports and related services to the property and
casualty industry. In November 2000 the Company acquired the policy processing
and interface management services assets of VIS'N Service Corporation and the
data collection assets of Cat Data Group, LLC. In December 2000, the Company
acquired the assets of Drug Free Consortium, to provide drug testing services.
In January 2001, the Company acquired BTi Employee Screening Services,
Inc., an employee pre-screening services company based in Texas and ABI
Consulting Inc., a third-party administrator of workplace drug and alcohol
testing programs.
In February 2001, the Company acquired Insurity Solutions Inc., a
company with an Internet-based rating, underwriting and customer service
technology.
PRODUCTS AND CUSTOMERS
As indicated above, the Company operates through two primary service
groups: Insurance Services and Business & Government Services. ChoicePoint's
offices are primarily located throughout the United States. The Company's
business is not seasonal. The Company's balance sheets are generally managed on
a consolidated basis, and, therefore, it is impracticable to report assets by
segment. The following table reflects the revenue generated by each of
ChoicePoint's two primary service groups, and from the royalty and divested and
discontinued product lines, from 1998 through 2000 and the percentage
contribution by each group to ChoicePoint's revenue for each such year.
HISTORICAL REVENUE BY SERVICE GROUP
2000 1999 1998
---------------- ----------------- -----------------
AMOUNT % AMOUNT % AMOUNT %
--------- ----- -------- ------- --------- ------
(DOLLARS IN THOUSANDS)
Insurance Services................. $ 294,752 50% $255,814 51% $ 236,619 59%
Business & Government Services..... 292,417 49 236,454 48 156,509 39
Royalty 6,364 1 6,219 1 6,636 2
--------- ----- -------- ------- --------- ------
Subtotal........................... 593,533 100% 498,487 100% 399,764 100%
Divested & Discontinued Product
Lines.............................. -- 9,371 66,368
--------- -------- ---------
Total.................... $ 593,533 $507,858 $ 466,132
========= ======== =========
Insurance Services. ChoicePoint provides underwriting information to
property and casualty insurance companies in the United States. Personal lines
property and casualty insurance services include automated direct marketing,
underwriting and claims information, such as motor vehicle reports, the
Company's Comprehensive Loss Underwriting Exchange ("C.L.U.E.(R)") database
services, vehicle registration services, credit reports, modeling services,
ChoicePointLink(R) (insurance agent software), and driver's license information.
C.L.U.E. is a proprietary database comprised of claims information contributed
by major insurance underwriters (and accessed by those same underwriters), which
enables them to assess underwriting risks and pending claims in the auto and
home insurance markets. ChoicePoint's proprietary ChoicePoint Rules(TM) systems
automate customer-specific decision making criteria to
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provide property and casualty insurance underwriters with decision management
tools that streamline and reduce the cost of the underwriting process. This
service group offers information delivery services to its clients using
mainframe, personal computer and Internet web-based communications.
In addition to personal lines underwriting information, ChoicePoint
provides services to the commercial property and casualty insurance market.
Those services include commercial inspections for underwriting purposes, workers
compensation audits of commercial properties, marketing and modeling services to
the personal lines property and casualty market and development of high-end
customized application rating and issuance software for commercial customers.
ChoicePoint also provides laboratory information services and related technology
offerings to major life and health insurance companies in the United States.
Business & Government Services. In addition to serving the property and
casualty and life and health insurance markets, ChoicePoint provides risk
management and fraud prevention services and related technology solutions,
shareholder locator services and database marketing services to Fortune 1000
corporations, asset-based lenders, legal and professional service providers,
health care service providers and local, state and federal government agencies.
For instance, the Company provides information and services to customers in a
variety of industries for use in the hiring and employee regulatory compliance
process, including: (i) pre-employment background screenings, which include
credit and driving record checks, prior employment verification, education and
licensing verification and criminal record searches; and (ii) comprehensive drug
screening program management and administration and due diligence and credential
verification services to legal and professional service providers.
The Company also provides enhanced information services to government
agencies, such as (i) uncovering ownership of hidden assets, locating
individuals and providing leads for criminal and civil investigations, (ii)
providing parent locator services, which locate for the public sector
individuals who are in violation of court mandates and (iii) screening of
certain Medicare and Medicaid providers and provider applicants to assist in
identifying and reducing health care fraud. In connection with its business and
government services, the Company provides automated and on-demand searches and
filings of public business records, including Uniform Commercial Code searches
and filings, bankruptcy, lien and judgment searches, searches of partnership and
corporation filing records, and criminal record searches to assist organizations
and lending institutions in managing potential risk exposure.
Customers. ChoicePoint's customer base includes substantially all
domestic insurance companies, many Fortune 1000 companies and certain local,
state and federal government agencies. The Company has more than 25,000
customers, none of which represented more than 10% of the Company's total
revenue in 2000.
Both of ChoicePoint's current service groups have the capability to
receive orders for and deliver products and services through electronic
communications. The Company supplies software to customers that wish to access
the Company using private networks.
COMPETITION
The Company operates in a number of geographic and product and service
markets, which are highly competitive. In the insurance services market,
ChoicePoint's competitors include Trans Union Corporation, American Insurance
Services Group, a unit of Insurance Services Office, Inc., Insurance Information
Exchange, L.L.C., a subsidiary of AMS Services, Inc. and LabOne, Inc. with
respect to insurance laboratory services. In the business and government
services market, ChoicePoint's competitors in the automated public records
market currently include the Lexis-Nexis service of Reed Elsevier PLC, West
Publishing Company, Dallas Computer Services, Inc. and InfoUSA Inc., while its
competitors in the pre-employment screening and drug testing services market
include various security companies and clinical laboratories, including
Pinkertons Inc., Avert, Inc. and Laboratory Corporation of America Holdings. Its
competitors in database marketing services offerings include Acxiom Corporation
and Harte-Hanks Communications, Inc. With respect to its offerings of consumer
benefit services such as those provided by EquiSearch, the Company competes with
Keane Tracers, Inc. and Shareholder Communications Corporation. In each of its
markets, the Company competes on the basis of responsiveness to customer needs,
price and the quality and range of products and services offered.
SOURCES OF SUPPLY
ChoicePoint's operations depend upon information derived from a wide
variety of automated and manual sources. External sources of data include public
records information companies, governmental authorities, and on-line search
systems. ChoicePoint has no reason to anticipate the termination of any
significant relationships with data suppliers. However, if material changes in
state or federal laws regulating or prohibiting the distribution of public
records were to occur, the Company's financial condition and results of
operations could be materially affected. In the event that such a termination
occurred, the Company believes that it could acquire the
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data from other sources; however, such termination could have a material adverse
effect on the Company's financial condition or results of operations.
ChoicePoint currently maintains databases that contain information
provided and used by insurance underwriters. The information comprising these
databases is not owned by ChoicePoint, and the participating organizations could
discontinue contributing information to the databases. If this were to occur,
the Company's financial condition and results of operations would be materially
affected. ChoicePoint believes, however, that such an event is unlikely because
contributors to the databases depend upon the aggregated information in such
databases to conduct their business operations.
EMPLOYEES
As of December 31, 2000, ChoicePoint employed approximately 4,200
persons, none of whom were unionized. Substantially all of the Company's
workforce is employed in the United States. As of December 31, 2000, ChoicePoint
employed approximately 310 individuals in Olathe, Kansas in its Osborn Group
facilities, approximately 260 individuals in Hartford, Connecticut in its PRC
facilities, approximately 150 individuals in Santa Ana, California at its
ChoicePoint PRO location, approximately 380 individuals in Peoria, Illinois in
its CP Direct location, about 80 employees at its CP Commercial Specialists
office in Overland Park, Kansas, approximately 250 individuals in St.
Petersburg, Florida at its Application Profiles office, approximately 30
employees in White Plains, New York at its EquiSearch offices, and approximately
20 individuals at the Sarasota, Florida location. The Company has approximately
120 employees in Pensacola, Florida at the SDS office, approximately 100 NSA
employees in Nashville, Tennessee and 290 DBT employees in Boca Raton, Florida.
Approximately 1,000 individuals are employed in the Atlanta area in the
Company's headquarters and two branch office locations. The balance of
ChoicePoint's employees are located in the Company's remaining offices.
ChoicePoint believes that its relations with its employees are good.
PROPRIETARY MATTERS
ChoicePoint owns a number of trademarks and trade names that
ChoicePoint believes are important to its business. Except for the ChoicePoint
trademark and logo, however, the Company is not dependent upon any single
trademark or trade name or group of trademarks or trade names. The current
duration for federal registrations range from seven to fifteen years, but each
trademark registration generally may be renewed an unlimited number of times as
long as the trademark is in use. Other trademarks and trade names used in the
Company's business are registered and maintained in the U.S. ChoicePoint and
C.L.U.E. are registered trademarks of ChoicePoint Asset Company.
ChoicePoint owns a 62.5% interest in revenue relating to certain
patents involving laser technology which expires between November 2004 and May
2005. Upon the expiration of the applicable patent, ChoicePoint loses its right
to exclude others from exploiting the inventions claimed therein, and
accordingly, the obligations of third parties to make royalty payments will
cease.
ITEM 2. PROPERTIES
ChoicePoint's principal executive offices are located in 206,000 square
feet of office space in Alpharetta, Georgia, a suburb of Atlanta. ChoicePoint
maintains approximately 74 other offices in the United States. These offices,
all of which are leased, contain a total of approximately 664,330 square feet of
space. Through Osborn Group, ChoicePoint owns two laboratory facilities in
Olathe, Kansas with approximately 76,000 square feet of space. Through CP
Direct, ChoicePoint owns four buildings in Peoria, Illinois representing
approximately 182,000 square feet of space. Through ChoicePoint Services Inc.,
ChoicePoint owns a building in Norcross, Georgia representing approximately
8,400 square feet. The Company ordinarily leases office space of the general
commercial type for conducting its business.
ITEM 3. LEGAL PROCEEDINGS
ChoicePoint is involved in litigation from time to time in the ordinary
course of its business. The Company does not believe that the outcome of any
pending or threatened litigation will have a material adverse effect on the
financial condition or results of operations of ChoicePoint. However, as is
inherent in legal proceedings where issues may be decided by finders of fact,
there is a risk that unpredictable decisions materially adverse to the Company
could be reached.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders by the Company
during the quarter ended December 31, 2000.
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EXECUTIVE OFFICERS OF REGISTRANT
Set forth below is certain biographical information with respect to
each executive officer of the Company, as of March 10, 2001:
NAME AND POSITION AGE EXECUTIVE OFFICER SINCE
----------------- ---- -----------------------
Derek V. Smith, Chairman, President and Chief
Executive Officer 46 1997
Douglas C. Curling, Chief Operating Officer........ 46 1997
Dan H. Rocco, Executive Vice President............. 61 1997
David T. Lee, Executive Vice President............. 41 1997
J. Michael de Janes, General Counsel and Secretary 43 1997
Michael S. Wood, Chief Financial Officer........... 46 2000
David E. Trine, Treasurer and Corporate Controller 40 2000
Derek V. Smith, 46, has served as President, Chief Executive Officer
and a Director of the Company since May 1997 and as Chairman of the Board since
May 1999. Mr. Smith served as Executive Vice President of Equifax and Group
Executive of the Insurance Services Group of Equifax from 1993 until the
Spinoff. From 1991 to 1993, he served as Senior Vice President and Chief
Financial Officer of Equifax. He also serves as a director of Metris Companies
Inc.
Douglas C. Curling, 46, has served as Chief Operating Officer and a
Director of the Company since May 2000 and served as Chief Operating Officer and
Treasurer from May 1999 to May 2000. He served as Executive Vice President,
Chief Financial Officer and Treasurer of ChoicePoint from the Spinoff until May
1999. He served as Senior Vice President -- Finance and Administration of the
Insurance Services Group of Equifax from 1993 until the Spinoff. He also serves
as a director of Intertech Information Management, Inc., a document imaging
company.
Dan H. Rocco, 61, has served as Executive Vice President of ChoicePoint
since the Spinoff. He served as Senior Vice President -- Operations of the
Insurance Services Group of Equifax from 1993 until the Spinoff. Mr. Rocco
served as President and General Manager of the Automated Services Division of
the Insurance Services Group of Equifax from 1991 to 1993.
David T. Lee, 41, has served as Executive Vice President since May 1999
and prior to that served as Senior Vice President of ChoicePoint from the
Spinoff until May 1999. He served as Vice President -- Property & Casualty
Marketing and Sales of the Insurance Services Group of Equifax from 1991 until
the Spinoff.
J. Michael de Janes, 43, has served as General Counsel of ChoicePoint
since the Spinoff, and has been Secretary of the Company since April 1998. He
served as Vice President and Counsel of the Insurance Services Group of Equifax
from 1993 until the Spinoff.
Michael S. Wood, 46, has served as Chief Financial Officer of the
Company since February 2000. From 1997 until January 2000 he served as Chief
Financial Officer of Lane Bryant, Inc., a division of The Limited, Inc. and from
1995 to 1997 he served as Vice President -- Finance of Lane Bryant, Inc.
David E. Trine, 40, has served as Treasurer and Vice President -
Corporate Controller since May 2000. He served as Vice President - Corporate
Controller from May 1999 to May 2000 and Vice President - Finance and Accounting
of the Company from the Spinoff until May 1999. Mr. Trine served as Senior Vice
President - Group Controller of Equifax Healthcare Information Services Group
from 1995 to 1996 and Vice President - Internal Audit for Equifax from 1990 to
1995.
There are no family relationships among the officers of the Company,
nor are there any arrangements or understandings between any of the officers and
any other persons pursuant to which they were selected as officers. The Board of
Directors may elect an officer or officers at any meeting of the Board of
Directors. Each officer is elected to serve until his successor has been elected
and has duly qualified. Elections of officers generally occur each year at the
Board of Directors meeting held in conjunction with the Company's Annual Meeting
of Shareholders.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed and traded on the New York Stock
Exchange under the symbol "CPS." Information regarding the high and low sales
prices and the number of holders of the common stock is set forth under the
captions "Market Information" and "Quarterly Activity" on page 39 of the 2000
Annual Report to Shareholders (the "Annual Report"), a copy of which page is
included in Exhibit 13 to this Form 10-K and is incorporated herein by
reference.
The Company does not pay cash dividends and does not anticipate paying
any cash dividends in the foreseeable future. The Company currently intends to
retain future earnings to finance its operations and the expansion of its
business. Any future determination to pay cash dividends will be at the
discretion of the Company's Board of Directors and will be dependent upon the
Company's financial condition, operating results, capital requirements and such
other factors as the Board of Directors deems relevant.
ITEM 6. SELECTED FINANCIAL DATA
The information included under the caption "Financial Highlights" on
the inside front cover page of the Annual Report, a copy of which page is
included in Exhibit 13 to this Form 10-K, is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information included under the caption "Management's Discussion and
Analysis" on pages 18 through 21 of the Annual Report, a copy of which pages are
included in Exhibit 13 to this Form 10-K, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates.
The information below summarizes the Company's market risk associated with its
debt obligations as of December 31, 2000. The information below should be read
in conjunction with Note 5 of the "Notes to Consolidated Financial Statements"
on pages 30 and 31 of the Annual Report, copies of which pages are included in
Exhibit 13 to this Form 10-K and are incorporated herein by reference.
In August 1997, ChoicePoint entered into a $250.0 million unsecured
revolving credit facility (the "Credit Facility") with a group of banks. As of
December 31, 2000, $139 million was outstanding under the Credit Facility. The
Company has entered into an interest rate swap agreement (the "Swap Agreement")
to reduce the impact of changes in interest rates on its floating rate
obligations. The Swap Agreement has a notional amount of $125 million at
December 31, 2000 and matures in August 2002. This Swap Agreement involves the
exchange of variable rate for fixed rate payments and effectively changes the
Company's interest rate exposure to a weighted average fixed rate of 6.45%.
Based on the Company's overall interest rate exposure at December 31,
2000, a near-term change in interest rates would not materially affect the
consolidated financial position, results or operations or cash flows of the
Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information included under the captions "Consolidated Statements of
Income," "Consolidated Balance Sheets," "Consolidated Statements of
Shareholders' Equity," "Consolidated Statements of Cash Flows" and "Notes to
Consolidated Financial Statements" on pages 23 through 37 of the Annual Report,
copies of which pages are included in Exhibit 13 to this Form 10-K, is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has neither changed its independent accountants nor had any
disagreements on accounting and financial disclosures with such accountants.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to Directors of
the Company is included in the sections entitled "Election of ChoicePoint
Directors," and "Other Matters -- Section 16(a) Beneficial Ownership Reporting
Compliance" of the Proxy Statement for the 2001 Annual Meeting of Shareholders
and is incorporated herein by reference. Information regarding the Company's
executive officers is set forth in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included in the sections
entitled "ChoicePoint Executive Compensation," "Management Compensation and
Benefits Committee Report on Executive Compensation," "Election of ChoicePoint
Directors," "ChoicePoint Executive Compensation -- Employment Agreements and
Change-in-Control Arrangements," "ChoicePoint Executive Compensation
Compensation Committee Interlocks and Insider Participation," and "ChoicePoint
Stock Performance Graph" of the Proxy Statement for the 2001 Annual Meeting of
Shareholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Index to exhibits, financial statements and schedules.
(1)Financial Statements
Consolidated Balance Sheets for the Years Ended December 31, 2000 and
1999 are incorporated by reference from the Annual Report, and are included in
Exhibit 13 hereto.
Consolidated Statements of Income for the Years Ended December 31, 2000,
1999 and 1998 are incorporated by reference from the Annual Report, and are
included in Exhibit 13 hereto.
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 2000, 1999 and 1998 are incorporated by reference from the
Annual Report, and are included in Exhibit 13 hereto.
Consolidated Statements of Cash Flows for the Years Ended December 31,
2000, 1999 and 1998 are incorporated by reference from the Annual Report,
and are included in Exhibit 13 hereto.
Notes to Consolidated Financial Statements are incorporated by reference
from the Annual Report, and are included in Exhibit 13 hereto.
Report of Arthur Andersen LLP on the foregoing financial statements is
incorporated by reference from the Annual Report, and is included in Exhibit 13
hereto.
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(2)Financial Statement Schedules
Schedule II - Consolidated Valuation and Qualifying Accounts is
included as a schedule herein.
Schedules not listed have been omitted because they are not applicable
or the required information is included in the consolidated financial statements
or notes thereto.
(3)Exhibits required by Item 601 of Regulation S-K:
The following exhibits are included in this Form 10-K:
EXHIBIT
NO. DESCRIPTION
--- -----------
2.1 -- Purchase Agreement, by and among ChoicePoint Inc.,
ChoicePoint Acquisition Corporation and DBT Online, Inc.
(incorporated by reference to Exhibit 2.1 of the Company's
Current Report on Form 8-K, filed February 15, 2000).
3.1 -- Articles of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 of the Company's
Registration Statement on Form S-1, as amended, File No.
333-30297).
3.2 -- Bylaws of the Company, as amended (incorporated by reference
to Exhibit 3.2 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000).
4.1 -- Rights Agreement, dated as of October 29, 1997, by and
between ChoicePoint Inc. and SunTrust Bank, Atlanta
(incorporated by reference to Exhibit 4.2 of the Company's
Form 8-A, filed November 5, 1997).
4.2 -- Amendment No. 1 to the Rights Agreement, dated as of June
21, 1999, between ChoicePoint Inc. and SunTrust
Bank, Atlanta (incorporated by reference to
Exhibit 4.2 of the Company's Current Report on
Form 8-A, filed August 17, 1999).
4.3 -- Amendment No. 2 to the Rights Agreement between ChoicePoint
Inc. and SunTrust Bank, Atlanta dated February 14, 2000
(incorporated by reference to Exhibit 4.1 of the Company's
Current Report on Form 8-K, filed February 15, 2000).
4.4 -- Form of Common Stock certificate (incorporated by reference
to Exhibit 4.1 of the Company's Registration Statement on
Form S-1, as amended, File No. 333-30297).
10.1 -- Form of Employment Agreement between the Company and each of
Derek V. Smith, Douglas C. Curling, David T. Lee and J.
Michael de Janes (incorporated by reference to Exhibit 10 of
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.2 -- Employment Agreement, dated April 1, 1997, by and between
DBT Online, Inc. and Frank Borman (incorporated by reference
to Exhibit 10.2 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000).
10.3 -- Agreement, dated July 24, 1996, by and between Equifax Inc.
and Dan Rocco, to be effective January 1, 1996 (relating to
the compensation of Mr. Rocco) (incorporated by reference to
Exhibit 10.9 of the Company's Registration Statement on Form
S-1, as amended, File No. 333-30297).
10.4 -- ChoicePoint Inc. 1997 Omnibus Stock Incentive Plan
(incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q, for the quarter ended June
30, 1997).
10.5 -- DBT Online, Inc. Amended and Restated Stock Option Plan.
10.6 -- Amendment 2000-1 to the DBT Online, Inc. Amended and
Restated Stock Option Plan (incorporated by reference to
Exhibit 4.2 of the Company's Registration Statement on Form
S-8, File No. 333-37498).
10.7 -- ChoicePoint Inc. Deferred Compensation Plan.
10.8 -- ChoicePoint Inc. 401(k) Profit Sharing Plan (incorporated by
reference to Exhibit 10.2 of the Company's Registration
Statement on Form S-1, as amended, File No. 333-30297).
10.9 -- Employee Benefits Agreement, dated as of July 31, 1997,
between Equifax Inc. and ChoicePoint Inc. (incorporated by
reference to Exhibit 10.4 of the Company's Quarterly Report
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on Form 10-Q, for the quarter ended June 30, 1997).
10.10 -- Tax Sharing and Indemnification Agreement, dated as of July
31, 1997, by and between Equifax Inc. and ChoicePoint Inc.
(incorporated by reference to Exhibit 10.7 of the Company's
Quarterly Report on Form 10-Q, for the quarter ended
June 30, 1997).
10.11 -- Revolving Credit Agreement, dated as of August 5, 1997,
among ChoicePoint Inc., the Lenders Listed Therein and
Wachovia Bank, N.A. as Administrative Agent, and SunTrust
Bank, Atlanta, as Documentation Agent (incorporated by
reference to Exhibit 10.10 of the Company's Quarterly Report
on Form 10-Q, for the quarter ended June 30, 1997).
10.12 -- Revolving Credit Agreement dated as of December 29, 1999
among ChoicePoint Inc., the Lenders listed therein, Wachovia
Bank, N.A. as Administrative Agent, SunTrust Bank, Atlanta,
as Documentation Agent, and First Union National Bank, as
Managing Agent (incorporated by reference to Exhibit 10.14
of the Company's Annual Report on Form 10-K, for the year
ended December 31, 1999).
10.13 -- Master Agreement, dated as of July 31, 1997, among
ChoicePoint Inc., SunTrust Banks, Inc. and SunTrust Bank,
Atlanta, as Agent (incorporated by reference to Exhibit
10.11(a) of the Company's Quarterly Report on Form 10-Q, for
the quarter ended June 30, 1997).
10.14 -- First Amendment to the Master Agreement, dated as of
September 30, 1998, among ChoicePoint, Inc., as Lessee,
SunTrust Banks, Inc., as Lessor, and SunTrust Bank, Atlanta,
as Agent (incorporated by reference to Exhibit 10.15 of the
Company's Annual Report on Form 10-K, for the year ended
December 31, 1999).
10.15 Second Amendment to the Master Agreement, dated as of
December 30, 1999, among ChoicePoint Inc., as Lessee,
SunTrust Banks, Inc., as Lessor, and SunTrust Bank, Atlanta,
as Agent (incorporated by reference to Exhibit 10.16 of the
Company's Annual Report on Form 10-K, for the year ended
December 31, 1999).
10.16 -- Lease agreement, dated as of July 31, 1997, between
ChoicePoint Inc. and SunTrust Banks, Inc. (incorporated by
reference to Exhibit 10.11(b) of the Company's Quarterly
Report on Form 10-Q, for the quarter ended June 30, 1997).
10.17 -- Georgia Lease Supplement, dated as of July 31, 1997, between
ChoicePoint Inc. and SunTrust Banks, Inc. (incorporated by
reference to Exhibit 10.11(c) of the Company's Quarterly
Report on Form 10-Q, for the quarter ended June 30, 1997) as
Agent.
10.18 -- First Amendment to the Georgia Lease Supplement, dated
September 30, 1998, between ChoicePoint Inc. and SunTrust
Banks, Inc. (incorporated by reference to Exhibit 10.17 of
the Company's Annual Report on Form 10-K, for the year ended
December 31, 1999).
10.19 -- Second Amendment to the Georgia Lease Supplement, dated
December 30, 1999, between ChoicePoint Inc. and SunTrust
Banks, Inc. (incorporated by reference to Exhibit 10.18 of
the Company's Annual Report on Form 10-K, for the year ended
December 31, 1999).
10.20 -- Operative Guaranty, dated as of July 31, 1997, by
ChoicePoint Inc. as Guarantor. (incorporated by reference to
Exhibit 10.11(d) of the Company's Quarterly Report on Form
10-Q, for the quarter ended June 30, 1997).
10.21 -- Construction Agency Agreement, dated as of July 31, 1997,
between SunTrust Banks, Inc. and ChoicePoint Inc.
(incorporated by reference to Exhibit 10.11(e) of the
Company's Quarterly Report on Form 10-Q, for the quarter
ended June 30, 1997).
10.22 -- Sublease Agreement, dated as of July 31, 1997, between
Equifax Inc. and Equifax Services Inc. (for certain property
and building located at 1525 Windward Concourse, Alpharetta,
Georgia [J.V. White Technology Center]) (incorporated
by reference to Exhibit 10.13 of the Company's Quarterly
Report on Form 10-Q, for the quarter ended June 30, 1997).
13 -- The inside front cover and pages 18-37 and
39 of the Company's 2000 Annual Report To
Shareholders.
21 -- Subsidiaries of the Company.
23.1 -- Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.2 -- Consent of Deloitte & Touche LLP, Independent Public
Accountants
23.3 -- Consent of Corbin & Wertz, Independent Public Accountants
99.1 -- Independent Auditors' Report - Deloitte & Touche LLP
99.2 -- Independent Auditors' Report - Corbin & Wertz
99.3 -- Report of Independent Public Accountants on Financial
Statement Schedule - Arthur Andersen LLP
10
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Copies of the Company's Form 10-K that are furnished pursuant to the
written request of the Company's shareholders do not include the exhibits listed
above. Any shareholder desiring copies of one or more of such exhibits should
write to the Company's Director, Investor Relations, specifying the exhibit or
exhibits requested.
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the
fiscal quarter ending December 31, 2000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Alpharetta, State of Georgia, on March 30, 2001.
CHOICEPOINT INC.
By: /s/ DEREK V. SMITH
------------------------------------------------
Derek V. Smith
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ DEREK V. SMITH Chairman, President, and Chief March 30, 2001
---------------------------------------
Derek V. Smith Executive Officer and Director
/s/ MICHAEL S. WOOD Chief Financial Officer March 30, 2001
---------------------------------------
Michael S. Wood
/s/ RON D. BARBARO Director March 30, 2001
---------------------------------------
Ron D. Barbaro
/s/ CHARLES G. BETTY Director March 30, 2001
---------------------------------------
Charles G. Betty
/s/ FRANK BORMAN Director March 30, 2001
---------------------------------------
Frank Borman
/s/ THOMAS M. COUGHLIN Director March 30, 2001
---------------------------------------
Thomas M. Coughlin
/s/ DOUGLAS C. CURLING Chief Operating Officer March 30, 2001
---------------------------------------
Douglas C. Curling and Director
/s/ JAMES M. DENNY Director March 30, 2001
---------------------------------------
James M. Denny
/s/ KENNETH G. LANGONE Director March 30, 2001
---------------------------------------
Kenneth G. Langone
/s/ BERNARD MARCUS Director March 30, 2001
---------------------------------------
Bernard Marcus
/s/ C. B. ROGERS, JR. Director March 30, 2001
---------------------------------------
C. B. Rogers, Jr.
/s/ CHARLES I. STORY Director March 30, 2001
---------------------------------------
Charles I. Story
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Schedule II - Valuation and Qualifying Accounts
For the Years Ended December 31, 2000, 1999 and 1998
Balance at Charged to Costs Balance at End
Beginning of & Charged to Other of
Description Period Expenses Accounts Deductions Period
------------ ---------------- ---------------- ---------- --------------
In thousands
Year ended December 31, 2000
Allowance for Doubtful Accounts 4,670 2,835 492(1) (2,210) 5,787
Merger & Exit Cost Reserves 4,556 11,263 1,224(1) (12,773) 4,270
Year ended December 31, 1999
Allowance for Doubtful Accounts 3,685 1,056 388(1) (459) 4,670
Merger & Exit Cost Reserves 6,997 3,748 -- (6,189) 4,556
Year ended December 31, 1998
Allowance for Doubtful Accounts 2,197 955 643(1) (110) 3,685
Merger & Exit Cost Reserves 2,123 5,983 223(1) (1,332) 6,997
(1) Represents allowances established in connection with acquisitions.
13