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UNITED STATES 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
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2004 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period
from to |
Commission file number 1-13069
ChoicePoint Inc.
(Exact Name of Registrant as Specified in Its Charter)
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Georgia |
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58-2309650 |
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(State or Other Jurisdiction of
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(I.R.S. Employer |
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Incorporation or Organization)
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Identification No.) |
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1000 Alderman Drive
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30005 |
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Alpharetta, Georgia
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(Zip Code) |
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(Address of Principal Executive Offices)
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(770) 752-6000
(Registrant’s Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the
Act:
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Name of Each Exchange on Which Registered |
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Common Stock, par value $.10 per share |
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New York Stock Exchange |
Securities Registered Pursuant to Section 12(g) of the
Act:
None
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 þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
Registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K o
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Exchange Act
Rule 12b-2). Yes þ No o
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of June 30, 2004:
$3,985,791,120 (based on the closing sale price of the
Registrant’s Common Stock on that date as reported on the
New York Stock Exchange).
Indicate the number of shares outstanding of each of the
registrant’s classes of common stock, as of the latest
practicable date: 89,967,399 shares of Common Stock, par
value $.10 per share, outstanding as of February 28,
2005.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of ChoicePoint Inc.’s Proxy Statement relating to
the 2005 Annual Meeting of Shareholders are incorporated herein
by reference in Part III, Items 10, 11, 12, 13
and 14.
Portions of ChoicePoint Inc.’s Annual Report to
Shareholders for the year ended December 31, 2004 are
incorporated herein by reference in Parts II and IV.
TABLE OF CONTENTS
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.
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,” “project,”
“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 those described in Item 7,
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Risk
Factors.” Many of such factors are beyond
ChoicePoint’s ability to control or predict. As a result,
ChoicePoint’s future actions, financial position, 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.
2
PART I
General
ChoicePoint Inc., a Georgia corporation (“ChoicePoint”
or the “Company”), was incorporated in 1997. Over the
past seven years, ChoicePoint has transformed from a
predominately manually-driven and insurance customer-focused
asset base into the diversified, technology driven, data
intensive business it is today. Given the unique data,
analytical and distribution capabilities, ChoicePoint is the
leading provider of identification and credential verification
services for making smarter decisions in a world challenged by
increased risks. Serving the needs of business, government,
non-profit organizations and consumers, ChoicePoint works to
create a safer and more secure society through the responsible
use of information.
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 four primary service groups: Insurance
Services, Business Services, Government Services and Marketing
Services.
The Insurance Services group provides information products and
services used in the underwriting and claims processes by
property and casualty (“P&C”) insurers. Insurance
Services’ major offerings to the personal lines P&C
market include claims history data, motor vehicle records
(“MVR”), accident report records, credit information
and modeling services. For the commercial insurance market,
ChoicePoint provides customized policy rating and issuance
software and business outsourcing services. The Company also
provided property inspections and audits to the commercial
insurance market until the sale of this business in February
2003.
The Business Services group provides information products and
services to Fortune 1000 corporations, consumer finance
companies, asset-based lenders, legal and professional service
providers, health care service providers, non-profit
organizations, small businesses, and consumers. Major offerings
include pre-employment background screenings and drug testing
administration services, public filing searches, vital record
services, tenant screening services, credential verification,
due diligence information, Uniform Commercial Code searches and
filings, authentication services, mortgage fraud credentialing
services and people and shareholder locator information
services. ChoicePoint announced on March 4, 2005 that the
Company will discontinue the sale of certain information
services that contain sensitive consumer data, including social
security and driver’s license numbers, except 1) where
there is a specific consumer driven transaction or benefit,
2) where authentication or fraud prevention tools are
provided to large accredited corporate customers with existing
consumer relationships or 3) where the services support
federal, state or local government and criminal justice
purposes. These changes will have an impact on the scope of
services offered to some customers through our Business Services
group and the availability of information services in certain
market segments, particularly small businesses. These changes
are being made in response to the matters discussed under the
caption “Illegal Data Access” in this Item 1 of
this report.
Industry leading data, analytic and platform tools enable the
Government Services group to provide information products and
services to federal, state and local governmental and law
enforcement agencies. Major offerings include DNA identification
services, background screenings and drug testing administration
services, public filing searches, credential verification,
authentication services, data visualization, analytics and data
integration services. Subsequent to December 31, 2004 and
as a result of the Company’s acquisition of i2 Limited, a
Cambridge, UK-based provider of visual investigative and link
analysis software, ChoicePoint expanded its offerings of
non-data related services into international markets.
The Marketing Services group provides direct marketing services
to Fortune 1000 corporations, insurance companies and financial
institutions. Marketing Services offers a full complement of
products including data, analytics, teleservices, database and
campaign management services, as well as print, Web and
fulfillment services.
3
ChoicePoint’s strategic goal is to be the 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, developing new
products and services and maintaining solid financial
performance.
Strategic Acquisitions, Divestitures and Alliances
The Company’s acquisition strategy is to purchase or
partner with organizations that add new data, markets and
technology to ChoicePoint’s operations.
In February 2004, ChoicePoint acquired The Templar Corporation,
a provider of advanced and secure information technology
solutions.
In March 2004, ChoicePoint acquired iMapData.com, Inc., an
information and analytics company with data visualization
capabilities.
In April, 2004 ChoicePoint acquired the assets of ADREM
Profiles, Inc., Government Business Services, L.L.C. and
Advanced Information Resources, providers of pre-employment
screening services, the assets of Service Abstract Corp., a
provider of public filings information on liens and judgments,
the assets of Superior Information Services, LLC, a provider of
public filings information for bankruptcies, civil judgments and
federal and state tax liens and the assets of Charles Jones,
LLC, a supplier of title and property lien searches.
In May 2004, the Company purchased the assets of Investigation
Technologies, LLC, doing business as Rapsheets, which provides
computerized criminal records.
In August, 2004, ChoicePoint acquired certain assets of AIG
Technologies, Inc., a software and software maintenance provider.
In October 2004, the Company acquired InsurQuote, Inc., a
leading provider of insurance rating solutions to the property
and casualty carrier markets.
In December 2004, the Company acquired Priority Data Systems,
Inc., which develops comparative rating software solutions to
the independent insurance agency market, and the assets of
USAHire, LLC, an applicant screening software provider.
In January 2005, ChoicePoint acquired i2 Limited, a provider of
visual investigative and link analysis software for
intelligence, law enforcement, military and large commercial
applications.
In February 2003, the Company sold its CP Commercial Specialists
(“CPCS”) division, a provider of property inspections
and audits to the commercial insurance market.
4
Products and Customers
As indicated above, the Company operates through four primary
service groups: Insurance Services, Business Services,
Government Services and Marketing Services. The Company’s
business is not materially seasonal. The following table
reflects the revenue generated by each of ChoicePoint’s
four primary service groups, and from the royalty and divested
and discontinued product lines, from 2002 through 2004 and the
percentage contribution by each group to ChoicePoint’s
revenue for each such year. The royalty revenue is generated
from laser technology patents held by the Company. Certain
patents underlying this revenue expired in November 2004 and the
remaining patent will expire in May 2005, at which time royalty
revenue from these patents will cease. Due to changes in
accounting rules in 2002, CPCS is reported as discontinued
operations and its revenues are excluded from the amounts below.
Historical Revenue by Service Group
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December 31, 2004 | |
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December 31, 2003 | |
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December 31, 2002 | |
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Amount | |
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Amount | |
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Amount | |
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Insurance Services
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$ |
352,725 |
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40 |
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$ |
309,124 |
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41 |
% |
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$ |
270,282 |
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39 |
% |
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Business Services(1)
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349,881 |
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40 |
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276,148 |
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37 |
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239,363 |
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35 |
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Government Services
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83,934 |
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9 |
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63,335 |
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69,398 |
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10 |
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Marketing Services
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93,389 |
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11 |
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96,642 |
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13 |
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105,833 |
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Royalty
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4,504 |
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— |
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5,102 |
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1 |
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5,855 |
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1 |
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Divested and discontinued
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— |
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— |
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— |
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— |
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72 |
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— |
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Service revenue
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884,433 |
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100 |
% |
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750,351 |
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690,803 |
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Reimbursable expenses
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34,280 |
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45,395 |
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38,520 |
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Total revenue
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$ |
918,713 |
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$ |
795,746 |
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$ |
729,323 |
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| (1) |
As announced on March 4, 2005, the Company will discontinue
the sale of certain services offered by its Business Services
group. |
Insurance Services. ChoicePoint provides underwriting
information to property and casualty insurance companies in the
United States. Personal lines property and casualty insurance
services include underwriting and claims information, such as
motor vehicle reports, accident report records, the
Company’s Comprehensive Loss Underwriting Exchange
(“C.L.U.E.®”) and Current Carrier® database
services, vehicle registration services, credit reports,
modeling services, ChoicePointLink® (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 underwrite in the auto and
home insurance markets. Current Carrier is a proprietary
database comprised of information regarding current and previous
insurance coverage and possible lapses in auto and property
coverage. ChoicePoint’s proprietary ChoicePoint
Rulestm
system automates customer-specific decision making criteria to
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 system-to-system and
Internet communications. ChoicePoint also provides modeling
services to the personal lines property and casualty market and
development of high-end customized application rating and
issuance software for commercial customers. The Company also
offers customized policy rating, issuance and administration
software and related business outsourcing services to the
commercial insurance market. Until the sale of the CPCS group in
February 2003, ChoicePoint provided other services to the
commercial property and casualty insurance market, which
included commercial inspections for underwriting purposes and
workers compensation audits of commercial properties.
Business Services. In addition to serving the property
and casualty insurance markets, ChoicePoint provides information
products and services to Fortune 1000 corporations, consumer
finance companies, asset-based lenders, legal and professional
service providers, health care service providers, non-profit
organizations, small businesses and consumers. For instance, the
Company provides information and services to customers in
5
a variety of industries for use in the hiring and employee
regulatory compliance process, including:
(1) pre-employment background screenings, which include
credit and driving record checks, prior employment verification,
education and licensing verification and criminal record
searches; (2) comprehensive drug screening program
management and administration and due diligence and credential
verification services to legal and professional service
providers; (3) tenant screening services;
(4) volunteer screening services; (5) authentication
services and (6) mortgage credentialing services. The
Company provides online and on-demand searches and filings of
public records, including Uniform Commercial Code searches and
filings, bankruptcy, lien and judgment searches, regulatory
compliance services, searches of partnership and corporation
filing records, and criminal record searches to assist
organizations and lending institutions in managing potential
risk exposure. The Company also provides services that
facilitate ordering certified vital records such as birth,
death, marriage and divorce certificates. ChoicePoint announced
on March 4, 2005 that the Company will discontinue the sale
of information services that contain sensitive consumer data,
including social security and driver’s license numbers,
except 1) where there is a specific consumer driven
transaction or benefit, 2) where authentication or fraud
prevention tools are provided to large accredited corporate
customers with existing consumer relationships or 3) where
the services support federal, state or local government and
criminal justice purposes. These changes will have an impact on
the scope of services offered to some customers through our
Business Services group and the availability of information
services in certain market segments, particularly small
businesses. These changes are being made in response to the
matters discussed under the caption “Illegal Data
Access” in this Item 1 of this report.
Government Services. The Company also provides enhanced
information services to government agencies, such as uncovering
ownership of hidden assets, locating individuals and providing
leads for criminal and civil investigations, assisting with
homeland security initiatives and providing information to
certain Medicare and Medicaid providers and provider applicants
to assist in identifying and reducing health care fraud, DNA
identification services, background screenings and drug testing
administration services, public filing searches, credential
verification, authentication services and data visualization and
analytics services.
Marketing Services. ChoicePoint also provides direct
marketing and database marketing services to Fortune 1000
corporations, insurance companies and financial institutions.
Marketing Services offers a full complement of products
including data, analytics, teleservices, database and campaign
management services, as well as Web and fulfillment services.
For additional information regarding these service groups, see
Note 11 to the Consolidated Financial Statements
incorporated by reference into this report.
Customers. ChoicePoint’s customer base includes
substantially all domestic insurance companies, many Fortune
1000 corporations, non-profit organizations, small businesses,
financial institutions, consumers and certain local, state and
federal government agencies. The Company has more than 50,000
customers, none of which represented more than 10% of the
Company’s total revenue in 2004.
ChoicePoint’s customers include federal, state, and local
governments. Government business is subject to many unique
risks, such as delays in funding, reduction or modification of
contracts or subcontracts, failure to exercise options, changes
in government policies, and the imposition of budgetary
restraints.
Each of ChoicePoint’s current service groups has 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 property and casualty
competitors include Trans Union Corporation, Fair
Isaac & Company, Inc., American Insurance Services
Group, a unit of Insurance Services Office, Inc., Metropolitan
Reporting Bureau, Explorer Information Services and Insurance
Information Exchange, L.L.C., a unit of Insurance Services
Office, Inc., while the Company’s competitors in the
commercial insurance market are Computer Sciences Corporation,
CGI Group Inc. and Fiserv, Inc. In
6
the Government Services market, ChoicePoint’s competitors
in the automated public filings market currently include the
Lexis-Nexis service of Reed Elsevier PLC, First Data
Corporation, InsightAmerica, Inc., The First American
Corporation, Merlin Information Services, LocatePLUS Holdings
Corporation and infoUSA Inc. For link analysis services,
its competitors are Visual Analytics Inc., Knowledge Computing
Corporation and Xanalys Corporation and for DNA identification
services, the Company competes with Orchid BioSciences, Inc. and
Myriad Genetics Inc. In the Business Services market, the
Company’s competitors in the pre-employment screening and
drug testing services market include Kroll Inc., a wholly owned
subsidiary of Marsh McLennan Companies, Inc., various security
companies and clinical laboratories, including pre-screening
services of Automatic Data Processing, Inc., First Advantage
Corporation, Total Information Services, a subsidiary of US
Investigations Services, Inc., and Laboratory Corporation of
America Holdings and for tenant screening services, its
competitors are First Advantage Corporation and RentPort, Inc.
The Company’s competitors in the vital records market
include USAVital.com, a subsidiary of Backgrounds USA,
NationalBirthCertificate.com, Mantech International Corporation,
Genesis Systems, Inc. and QS Technologies, Inc. and in the
permit services market the primary competitors are Comdata
Transportation Services, a division of Ceridian Corporation and
Xero-Fax, Inc. Its competitors in database marketing services
offerings include Acxiom Corporation, Knowledge Base Inc. and
Harte-Hanks Communications, Inc. With respect to its offerings
of consumer benefit services such as those provided by its
subsidiary, EquiSearch Services Inc. (“EquiSearch”),
the Company competes with Keane Tracers, Inc. and Georgeson
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 filings, federal, state and other
governmental authorities, other information companies and online
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 certain data or
public filings were to occur, the Company’s business,
financial position and results of operations could be materially
adversely affected. In the event that such a termination occurs,
the Company believes that it could acquire the data from other
sources; however, such termination could have a material adverse
effect on the Company’s financial position 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 position and results
of operations would be materially adversely 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. In addition, events described under the caption
“Illegal Data Access” in this Item 1 of this
report may affect relationships with data suppliers, which could
have a material adverse effect on the Company’s financial
position or results of operations.
Employees
As of December 31, 2004, ChoicePoint employed approximately
5,000 persons, none of whom was unionized and all of whom were
employed in the United States. As of December 31, 2004,
ChoicePoint employed approximately 275 individuals in Hartford,
Connecticut in its Insurity facilities and approximately 40
employees in White Plains, New York at its EquiSearch offices
and approximately 95 employees at Bode Labs in Springfield,
Virginia. ChoicePoint has approximately 80 employees at its
Vital Chek office in Nashville, Tennessee, and approximately 45
employees at the Bridger Systems office in Bozeman, Montana.
The ChoicePoint Precision Marketing group employs approximately
65 individuals in Boston, Massachusetts, approximately 240
employees in Pensacola, Florida, approximately 215 individuals
in Peoria, Illinois, approximately 235 employees in
El Paso, Texas and approximately 275 in Las Cruces, New
Mexico.
7
The public filings group employs approximately 30 individuals in
Santa Ana, California and about 325 employees in Boca Raton,
Florida.
The WorkPlace Solutions group employs approximately 95
individuals in St. Petersburg, Florida, 110 employees in Dallas,
Texas, 60 employees in Los Angeles, California, approximately
135 employees in Charlotte, North Carolina, 45 people in Tampa,
Florida, approximately 80 National Safety Alliance employees in
Nashville, Tennessee, and about 40 employees at its Rapsheets
office in Memphis, Tennessee.
There are approximately 45 individuals at the iMapData office in
McLean, Virginia, 105 employees in Trenton, New Jersey at the
Superior Information Services and Charles Jones offices and 105
employees in Omaha, Nebraska at the Priority Data Systems office.
In January 2005, the Company acquired i2 Limited, which employs
approximately 200 employees at its headquarters in the United
Kingdom and 75 employees in its Springfield, Virginia office.
Approximately 1,350 individuals are employed in the Atlanta area
in the Company’s headquarters and two branch office
locations. The balance of ChoicePoint’s employees is
located in the Company’s remaining offices throughout the
United States. 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 typical duration for
federal trademark registrations is ten years, but each trademark
registration generally may be renewed an unlimited number of
times as long as the trademark continues to be used in commerce
by the owner of the trademark. Additional trademarks and trade
names used in the Company’s business are registered and
maintained in the U.S. ChoicePoint®, the ChoicePoint
logo, ScreenNow®, Current Carrier, VitalChek®,
AutoTrackXP® and C.L.U.E. are registered trademarks of
ChoicePoint Asset Company, a wholly owned subsidiary of the
Company.
ChoicePoint owns a 62.5% interest in revenue relating to certain
patents involving laser technology, one of which expired in
November 2004. The remaining patent will expire in May 2005.
Upon the expiration of this 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.
Illegal Data Access
On September 27, 2004, the Company found evidence of
suspicious activity by a few of its small business customers in
the Los Angeles area. ChoicePoint notified law enforcement
authorities in Los Angeles, and they commenced an investigation.
These customers opened ChoicePoint accounts by using stolen
identities and altered documents. These small business customers
were able to access information services containing primarily
the following: consumer names, current addresses and former
addresses, social security numbers, driver’s license
numbers, other public filings information, including, but not
limited to, bankruptcies, liens and judgments, professional
licenses, and real property data, and in certain cases, credit
reports.
The Company understands that a Nigerian citizen pled no contest
in California state court in connection with this Los Angeles
incident and was sentenced to 16 months in prison.
ChoicePoint further understands that law enforcement’s
investigation of the matter is ongoing.
The Company’s customer procedures include credentialing
customers prior to granting them access to information services.
In addition, in its public filings group, the Company performs
random audits of previously credentialed customers to assess the
propriety of their use of ChoicePoint information services. In
the past, the Company has suspended or terminated access to
ChoicePoint information services when account activity seems
inconsistent with contract expectations and/or when customer
audit efforts fail to resolve concerns regarding account usage
or permissible purpose.
8
As the Company did in the recent Los Angeles incident,
ChoicePoint has worked with law enforcement on other occasions
of suspicious activity related to customer use of its
information services. There have been other instances in which
the Company has received subpoenas and other inquiries from law
enforcement regarding activities of its customers, which
sometimes related to potentially improper use of ChoicePoint
information services. In some cases, the Company was not
provided either the purpose or conclusions of these
investigations. The Company is aware of a limited number of past
instances that resulted in criminal convictions of certain
former customers for activities involving improper use of
ChoicePoint information services.
Based on information currently available, the Company estimates
that approximately 145,000 consumers from 50 states and
other territories may have had their personal information
improperly accessed as a result of the recent Los Angeles
incident and certain other instances of improper access to
ChoicePoint information services. Approximately 35,000 of these
consumers are California residents, and approximately 110,000
are residents of other states. These numbers were determined by
conducting searches of ChoicePoint databases that matched
searches conducted by customers who the Company believes may
have had improper access to ChoicePoint information services on
or after July 1, 2003, the effective date of the California
notification law. Because ChoicePoint databases are constantly
updated, the Company’s search results will never be
identical to the search results of these customers.
The California notification law requires the Company to notify
consumers of unauthorized acquisition of personal information,
including first name or first initial and last name combined
with social security number, driver’s license number or
similar unique personal identifiers. The Company has completed
mailing notices to approximately 145,000 consumers in all
50 states. Substantially all of these notices were sent to
consumers who may have been affected as a result of the recent
Los Angeles incident. The Company used the criteria set forth in
the California notification law to determine who to notify in
each of the states. The California notification law permits
alternative methods for notifying consumers when the notice
provider does not have sufficient contact information. The
Company will use this alternative method of notice, including
posting a notice on its website at www.choicepoint.com.
ChoicePoint’s review of the recent Los Angeles and other
similar incidents is ongoing, and the number of potentially
affected consumers may increase. However, the Company currently
does not anticipate a significant increase to its estimate of
the number of potentially affected consumers. The Company
intends to provide notice to any additional affected consumers
who are identified through its continuing review.
Absent specific notification from law enforcement personnel,
affected consumers or others, the Company cannot determine
whether a particular consumer is a victim of identity theft.
Accordingly, ChoicePoint does not know how many of these
consumers may be actual victims of identity theft. Law
enforcement officials have informed the Company that they have
identified approximately 750 consumers nationwide where some
attempt was made to compromise their identity.
ChoicePoint is taking a variety of steps to assist the
potentially affected consumers that the Company has identified
to date. In addition to the above-mentioned notices, the Company
has purchased three-bureau credit reports and a one-year credit
monitoring service for each of these individuals. The Company
has established a toll-free number for consumers receiving a
notice from ChoicePoint. The Company also has urged potentially
affected consumers to check their credit reports for suspicious
activity.
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|
|
Regulatory and Legislative Matters, Legal Proceedings and
Assessment |
The Company has received a variety of inquiries and requests
from state Attorneys General as a result of the recent Los
Angeles incident. Generally, these state Attorneys General are
requiring that all affected individuals in each of their
respective states receive appropriate notice. The Company has
mailed notices to the approximately 145,000 affected consumers
identified to date. In addition, certain state Attorneys General
have requested, including by use of subpoena, information and
documents to determine whether ChoicePoint has violated certain
applicable state laws regarding consumer protection and related
matters. The Company intends to cooperate with the state
Attorneys General in connection with these inquiries.
9
ChoicePoint has received notice from the Securities and Exchange
Commission (“SEC”) that the SEC is conducting an
informal inquiry into the circumstances surrounding any possible
recent identity theft, recent trading in ChoicePoint stock by
its Chief Executive Officer and Chief Operating Officer and
related matters. The Company intends to cooperate and to provide
the requested information and documents to the SEC.
In addition, the Federal Trade Commission (“FTC”) is
conducting an inquiry into the Company’s compliance with
federal laws governing consumer information security and related
issues. In particular, the FTC has required the Company to
produce information and documents regarding the Company’s
customer credentialing process and the recent incident in Los
Angeles, as well as reported similar previous incidents. The
Company intends to cooperate with the FTC in connection with its
inquiry.
A number of congressional leaders are calling for hearings and
proposing legislative responses in light of increasing concerns
over identity theft. For example, the U.S. Senate Banking,
Housing and Urban Affairs Committee and the House Energy and
Commerce Subcommittee on Commerce, Trade and Consumer Protection
have held hearings to consider recent identity theft concerns.
The Company is a defendant in a complaint filed on
February 18, 2005 in the Superior Court of the State of
California, County of Los Angeles. The lawsuit alleges, among
other things, violations of California law in connection with
the recent fraud incident in Los Angeles. The plaintiff purports
to bring the lawsuit on behalf of a class of others similarly
situated and seeks injunctive relief and damages in an
unspecified amount. The Company intends to defend the lawsuit
vigorously.
ChoicePoint is also a defendant in a complaint filed on
February 22, 2005 in the U.S. District Court for the
Central District of California. The lawsuit alleges that the
recent incident in Los Angeles violates the federal Fair Credit
Reporting Act (“FCRA”), various California statutes
and the privacy rights of the plaintiffs. The plaintiff purports
to bring the lawsuit on behalf of a class of affected persons
and seeks an injunction to prevent the Company from disclosing
consumer information improperly and to require ChoicePoint to
allow the plaintiffs to be excluded from the Company’s
databases. The suit also seeks damages of up to $1,000 for each
violation of the FCRA and unspecified punitive damages. The
Company intends to defend this lawsuit vigorously.
ChoicePoint is also a defendant in a complaint filed on
March 8, 2005 in the U.S. District Court for the
Central District of California. The lawsuit alleges that the
recent incident in Los Angeles violates the FCRA and the
California Consumer Credit Reporting Agencies Act. The plaintiff
purports to bring the lawsuit on behalf of a class of affected
persons and seeks an injunction to prevent the Company from
disclosing consumer information improperly. The suit also seeks
actual damages of up to $1,000 for each violation of the FCRA
and punitive damages. The Company intends to defend this lawsuit
vigorously.
On March 4, 2005, a purchaser of the Company’s
securities filed a lawsuit against the Company and certain of
its officers in the United States District Court for the Central
District of California. The complaint alleges that the
defendants violated federal securities laws by issuing false or
misleading information in connection with certain events
described under the heading “Illegal Data Access” in
this report. Since then, additional complaints alleging
substantially similar claims have been filed by other purchasers
of the Company’s securities in the Central District of
California on March 10, 2005 and in the Northern District
of Georgia on March 11, 2005. Each of these lawsuits
purports to be filed on behalf of a class of the Company’s
shareholders who purchased the Company’s common stock
between certain specified dates and seeks certification as a
class action and unspecified compensatory damages,
attorneys’ fees, costs and other relief. The Company is
also aware that several law firms who specialize in representing
investors have issued notices to the public informing investors
that a lawsuit has been filed against the Company and soliciting
individuals who are interested in becoming lead plaintiffs of
the putative class. These other firms, or other plaintiffs, may
have already filed or may file in the future substantially
similar claims seeking substantially similar relief. The Company
intends to defend vigorously the existing lawsuits and any such
additional lawsuits.
While the ultimate resolution of the aforementioned cases cannot
presently be determined, an unfavorable outcome in these cases
could have a material adverse effect on the Company’s
financial condition or results of operations.
10
On March 4, 2005, ChoicePoint announced that the Company
will discontinue the sale of certain information services that
contain sensitive consumer data, including social security
numbers, except 1) where there is either a specific
consumer driven transaction or benefit, 2) where
authentication or fraud prevention tools are provided to large
accredited corporate customers with existing consumer
relationships, or 3) where the services support federal,
state or local government and law enforcement purposes. The
Company cannot currently accurately estimate the total impact on
its operating results and financial condition of the customer
fraud, related events and the decision to discontinue certain
services. ChoicePoint estimates it will encounter a decline in
revenue from these customers in its public filings business,
which could reduce total revenue for the year ended
December 31, 2005 by $15 to $20 million and may be
dilutive to earnings per share by $0.10 to $0.12. The Company
will review various technology investments in this small
business segment as well as other related costs incurred in
serving this segment. The Company also will incur incremental
expenses as a result of the customer fraud and related events,
including approximately $2 million for the three-bureau
reports and monitoring service for affected consumers identified
to date. ChoicePoint cannot currently estimate the expenses for
additional legal, consulting and other operating items.
Where You Can Find More Information
ChoicePoint files annual, quarterly, and current reports, proxy
statements, and other information with the Securities and
Exchange Commission (“SEC”). You may read and copy any
materials ChoicePoint files with the SEC, at the SEC’s
Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. For information on the operation of
the Public Reference Room, call the SEC at 1-800-SEC-0330. The
SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers
such as ChoicePoint that file electronically with the SEC at
http://www.sec.gov. The Company makes its annual report on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to such reports
filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, available (free of charge) on
or through its Internet Web site, located at
www.choicepoint.com, as soon as reasonably practicable after
they are filed with or furnished to the SEC.
ChoicePoint’s principal executive offices consist of
206,000 square feet of office space and an adjacent data
center consisting of 200,000 square feet, in Alpharetta,
Georgia, a suburb of Atlanta. As of December 31, 2004,
ChoicePoint maintained approximately 55 other offices in the
United States. These offices, all of which are leased, contain a
total of approximately 830,000 square feet of space.
Through ChoicePoint Precision Marketing Inc. (“CPM”),
ChoicePoint owned four buildings in Peoria, Illinois
representing approximately 180,000 square feet of space.
Through Vital Chek, ChoicePoint owns two buildings in Nashville,
Tennessee representing approximately 10,000 square feet.
The Company ordinarily leases office space of the general
commercial type for conducting its business.
In January 2005, ChoicePoint completed the sale of two buildings
in Peoria, Illinois owned by CPM that represented approximately
35,000 square feet.
In connection with the i2 Limited acquisition in January 2005,
ChoicePoint acquired two additional offices in the United
States, three offices in the United Kingdom and one office in
Canada, representing a total of 51,000 square feet of space.
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| Item 3. |
Legal Proceedings |
A class action lawsuit against the Company was filed in the
United States District Court for the Middle District of Florida
on August 11, 2003 (styled Fresco, et al. v.
Automotive Directions Inc., et al.) alleging that the
Company has obtained, disclosed and used information obtained
from the Florida Department of Highway Safety and Motor Vehicles
(“DHSMV”) in violation of the federal Driver’s
Privacy Protection Act (“DPPA”). The plaintiffs seek
to represent classes of individuals whose personal information
from Florida DHSMV records has been obtained, disclosed and used
for marketing purposes or other allegedly impermissible uses by
ChoicePoint without the express written consent of the
individual. A number of the Company’s
11
competitors have also been sued in the same or similar
litigation in Florida. ChoicePoint has filed a Motion for
Summary Judgment and has joined in a motion for judgment on the
pleadings. The complaint seeks certification as a class action,
compensatory damages, attorney’s fees and costs, and
injunctive and other relief. The Company intends to defend
against these actions vigorously.
A class action lawsuit against the Company was filed in the
Circuit Court of the First Judicial Circuit, Williamson County,
Illinois on June 13, 2002. As amended, the complaint
alleges that the Company violated the Illinois Consumer Fraud
and Deceptive Practices Act by selling information that it
received from insurance agent customers through underwriting
inquiries as leads (names of individuals seeking insurance) for
automobile and homeowner’s insurance to those same
insurance agent customers as well as their competitors. The
complaint seeks certification as a class action, compensatory
damages, attorney’s fees and costs and injunctive and other
relief. The Company’s December 31, 2004 balance sheet
includes a liability for the estimated fees and expenses in
connection with the resolution of this matter.
In addition, the Company is involved in the following
proceedings or inquiries that relate to the recent fraud
incident involving the Company in Los Angeles, California and
related matters discussed under “Illegal Data Access”
in Item 1 in this report.
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• |
The Company has received a variety of inquiries and requests
from state Attorneys General as a result of the recent Los
Angeles incident. Generally, these state Attorneys General are
requiring that all affected individuals in each of their
respective states receive appropriate notice. The Company has
mailed notices to the approximately 145,000 affected consumers
identified to date. In addition, certain state Attorneys General
have required, including by use of subpoena, information and
documents to determine whether ChoicePoint has violated certain
applicable state laws regarding consumer protection and related
matters. The Company intends to cooperate with the state
Attorneys General in connection with these inquiries. |
| |
| |
• |
ChoicePoint has received notice from the Securities and Exchange
Commission (“SEC”) that the SEC is conducting an
informal inquiry into the circumstances surrounding any possible
recent identity theft, recent trading in ChoicePoint stock by
its Chief Executive Officer and Chief Operating Officer and
related matters. The Company intends to cooperate and to provide
the requested information and documents to the SEC. |
| |
| |
• |
In addition, the Federal Trade Commission (“FTC”) is
conducting an inquiry into the Company’s compliance with
federal laws governing consumer information security and related
issues. In particular, the FTC has required the Company to
produce information and documents regarding the Company’s
customer credentialing process and the recent incident in Los
Angeles as well as reported similar previous incidents. The
Company intends to cooperate with the FTC in connection with its
inquiry. |
| |
| |
• |
The Company is a defendant in a complaint filed on
February 18, 2005 in the Superior Court of the State of
California, County of Los Angeles. The lawsuit alleges, among
other things, violations of California law in connection with
the recent fraud incident in Los Angeles. The plaintiff purports
to bring the lawsuit on behalf of a class of others similarly
situated and seeks injunctive relief and damages in an
unspecified amount. The Company intends to defend the lawsuit
vigorously. |
| |
| |
• |
The Company is also a defendant in a complaint filed on
February 22, 2005 in the U.S. District Court for the
Central District of California. The lawsuit alleges that the
recent incident in Los Angeles violates the federal Fair Credit
Reporting Act (“FCRA”), various California statutes
and the privacy rights of the plaintiffs. The plaintiff purports
to bring the lawsuit on behalf of a class of affected persons
and seeks an injunction to prevent the Company from disclosing
consumer information improperly and to require the Company to
allow the plaintiffs to be excluded from the Company’s
databases. The suit also seeks damages of up to $1,000 for each
violation of the FCRA and unspecific punitive damages. The
Company intends to defend this lawsuit vigorously. |
| |
| |
• |
ChoicePoint is also a defendant in a complaint filed on
March 8, 2005 in the U.S. District Court for the
Central District of California. The lawsuit alleges that the
recent incident in Los Angeles violates the FCRA and the
California Consumer Credit Reporting Agencies Act. The plaintiff
purports to bring the |
12
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| |
|
lawsuit on behalf of a class of affected persons and seeks an
injunction to prevent the Company from disclosing consumer
information improperly. The suit also seeks actual damages of up
to $1,000 for each violation of the FCRA and punitive damages.
The Company intends to defend this lawsuit vigorously. |
| |
| |
• |
On March 4, 2005, a purchaser of the Company’s
securities filed a lawsuit against the Company and certain of
its officers in the United States District Court for the Central
District of California. The complaint alleges that the
defendants violated federal securities laws by issuing false or
misleading information in connection with certain events
described under the heading “Illegal Data Access” in
this report. Since then, additional complaints alleging
substantially similar claims have been filed by other purchasers
of the Company’s securities in the Central District of
California on March 10, 2005 and in the Northern District
of Georgia on March 11, 2005. Each of these lawsuits
purports to be filed on behalf of a class of the Company’s
shareholders who purchased the Company’s common stock
between certain specified dates and seeks certification as a
class action and unspecified compensatory damages,
attorneys’ fees, costs and other relief. The Company is
also aware that several law firms who specialize in representing
investors have issued notices to the public informing investors
that a lawsuit has been filed against the Company and soliciting
individuals who are interested in becoming lead plaintiffs of
the putative class. These other firms, or other plaintiffs, may
have already filed or may file in the future substantially
similar claims seeking substantially similar relief. The Company
intends to defend vigorously the existing lawsuits and any such
additional lawsuits. |
While the ultimate resolution of the aforementioned cases cannot
presently be determined, an unfavorable outcome in any of these
cases could have a material adverse effect on the Company’s
financial position or results of operations.
ChoicePoint also is involved in litigation from time to time in
the ordinary course of its business. The Company provides for
estimated legal fees and settlements relating to pending
lawsuits when they are probable and reasonably estimated. The
Company does not believe that the outcome of any such pending or
threatened litigation in the ordinary course of business will
have a material adverse effect on the financial position 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 adverse to
the Company could be reached.
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| 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, 2004.
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| Item X. |
Executive Officers of the Registrant |
Set forth below is certain biographical information with respect
to each executive officer of the Company, as of March 1,
2005:
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Executive | |
| Name and Position |
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Age | |
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Officer Since | |
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Derek V. Smith, Chairman and Chief Executive Officer
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50 |
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1997 |
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Douglas C. Curling, President and Chief Operating Officer
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50 |
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1997 |
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David T. Lee, Executive Vice President
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45 |
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1997 |
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Steven W. Surbaugh, Chief Financial Officer
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55 |
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2002 |
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J. Michael de Janes, General Counsel
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47 |
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1997 |
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David W. Davis, Corporate Secretary and Vice President,
Government Affairs
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52 |
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2003 |
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David E. Trine, Treasurer and Corporate Controller
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44 |
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2000 |
|
Derek V. Smith, 50, has served as Chairman of the Board
since May 1999 and as Chief Executive Officer and a Director of
the Company since May 1997. He served as President of the
Company from May 1997 until April 2002.
13
Douglas C. Curling, 50, has served as President of the
Company since April 2002 and as Chief Operating Officer of the
Company since May 1999. He served as Chief Operating Officer and
Treasurer from May 1999 to May 2000 and served as Executive Vice
President, Chief Financial Officer and Treasurer of the Company
from 1997 until May 1999.
David T. Lee, 45, has served as Executive Vice President
of the Company since May 1999 and served as Senior Vice
President from 1997 until May 1999.
Steven W. Surbaugh, 55, has served as Chief Financial
Officer since April 2002. Prior to April 2002, he was a partner
with Arthur Andersen LLP for more than five years, where he most
recently served as the partner-in-charge of the real estate,
financial services and not-for-profit audit practices in the
Atlanta, Georgia office.
J. Michael de Janes, 47, has served as General
Counsel since 1997 and also served as Secretary from April 1998
until December 2003.
David W. Davis, 52, has served as Corporate Secretary and
Vice President, Government Affairs since December 2003. He
served as Staff Director and Policy Director of the Office of
the Vice Chair of the Senate Republican Conference from January
2003 to December 2003 and from 2001 to January 2003 he served as
Chief of Staff and Legislative Director for the Office of
Senator Kay Bailey Hutchison. From 1994 to 2001 Mr. Davis
served as Military Legislative Assistant and Deputy Chief of
Staff for Senator Hutchison.
David E. Trine, 44, has served as Treasurer since May
2000 and as Vice President — Corporate Controller
since May 1999. He served as Vice President — Finance
and Accounting of the Company from 1997 until May 1999.
There are no family relationships among the executive officers
of the Company, nor are there any arrangements or understandings
between any of the executive officers and any other persons
pursuant to which they were selected as executive officers. The
Board of Directors may elect an executive officer or officers at
any meeting of the Board of Directors. Each executive officer is
elected to serve until his successor has been elected and has
duly qualified. Elections of executive officers generally occur
each year at the Board of Directors meeting held in conjunction
with the Company’s Annual Meeting of Shareholders. In
addition, the Chief Executive Officer is authorized to appoint
certain officers of the Company.
PART II
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| Item 5. |
Market for the Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities |
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
Stock Performance” in the 2004 Annual Report to
Shareholders (the “Annual Report”), a copy of such
sections 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.
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| Item 6. |
Selected Financial Data |
The information included under the caption “Financial
Highlights” in the Annual Report, a copy of such section is
included in Exhibit 13 to this Form 10-K, is
incorporated herein by reference.
14
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| Item 7. |
Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
General
The information included under the caption
“Management’s Discussion and Analysis” in the
Annual Report, a copy of such section is included in
Exhibit 13 to this Form 10-K, is incorporated herein
by reference.
Risk Factors
You should carefully consider each of the following risk factors
and all of the other information in this Annual Report on
Form 10-K. These risks are not the only ones facing the
Company. ChoicePoint’s business operations could also be
impaired by additional risks and uncertainties.
If any of the following risks and uncertainties develops into
actual events, our business, financial condition and results of
operations could be materially and adversely affected. If that
happens, the trading prices of our common stock and any other
securities we may issue in the future could decline
significantly.
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Effects of customer fraud, actions the Company has taken
in response to those events, and related litigation and
governmental proceedings |
As described under “Illegal Data Access” in
Item 1 of this report, on September 27, 2004, the
Company found evidence of suspicious activity by a few of its
small business customers in the Los Angeles area. The
Company’s review of the recent Los Angeles and other
similar incidents is ongoing. ChoicePoint is taking a variety of
steps to assist the potentially affected consumers that have
been identified to date. In addition, the Company announced on
March 4, 2005 that it will discontinue certain information
services. ChoicePoint cannot currently accurately estimate the
total impact on its operating results and financial condition of
the customer fraud, related events and the decision to
discontinue those services. The Company estimates it will
encounter a decline in its revenue from these customers in the
public filings business, which could reduce total revenue for
the year ended December 31, 2005 by $15 to $20 million
and may be dilutive to earnings per share by $0.10 to $0.12. The
Company will review the various technology investments in this
small business segment as well as other related costs incurred
in serving this segment. ChoicePoint will also incur incremental
expenses as a result of the customer fraud and related events,
including approximately $2 million for the three-bureau
reports and monitoring service for affected consumers identified
to date. The Company cannot currently estimate the expense for
additional legal, consulting and other operating items relating
to these matters. In addition, the publicity associated with
these events or changes in regulation as discussed under this
“Risk Factors” may materially harm the business and
ChoicePoint’s relationship with customers or data suppliers.
The Company is involved in several legal proceedings or
inquiries that relate to these matters, as described in
Item 3 “Legal Proceedings” of this
Form 10-K. ChoicePoint is unable at this time to predict
the outcome of these actions. The ultimate resolution of these
matters could have a material adverse impact on the financial
results, financial condition, and liquidity and on the trading
price of the Company’s common stock. Regardless of the
merits and ultimate outcome of these lawsuits and other
proceedings, litigation and proceedings of this type are
expensive and will require that substantial Company resources
and executive time is devoted to defend these proceedings.
Customers
The Company has few long-term agreements with its customers.
Although management believes that the quality of
ChoicePoint’s products and services should permit the
Company to maintain relationships with its customers, there can
be no assurance that ChoicePoint will do so. Any loss of a
significant number of major customers would have a material
adverse effect on the business, financial position, and results
of operations.
ChoicePoint’s customers include federal, state, and local
governments. Government business is subject to many unique
risks, such as delays in funding, reduction or modification of
contracts or subcontracts, failure to exercise options, changes
in government policies, and the imposition of budgetary
restraints. A loss of
15
government contract revenues also could have a material adverse
effect on the business, financial position, and results of
operations.
The acquisition or consolidation of the Company’s customers
by another company could decrease the demand for products and
services. After consolidation, these companies may reorganize
management responsibilities or strategic and purchasing
decisions that could adversely affect demand for
ChoicePoint’s products and services. The Company may lose
business relationships with key contacts within a
customer’s organization due to budget cuts, layoffs, or
other changes resulting from an acquisition or consolidation.
The consolidation of companies also may alter the technological
infrastructure of the combined entity, and ChoicePoint’s
products and services may not be compatible with the new
technological system.
Acquisitions
The Company’s long-term business strategy includes growth
through acquisitions. While ChoicePoint believes it has been
successful in implementing this strategy during prior years,
there is no certainly that future acquisitions will be completed
on acceptable terms or that acquired assets, data or businesses
will be successfully integrated into the Company’s
operations. Any acquisitions or investments will be accompanied
by the risks commonly encountered in acquisitions of businesses.
Such risks include, among other things:
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• |
paying more than fair market value for an acquired company or
assets; |
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• |
failing to integrate the operations and personnel of the
acquired businesses in an efficient, timely manner; |
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| |
• |
assuming potential liabilities arising from the products of an
acquired company; |
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| |
• |
managing the potential disruption to our ongoing business; |
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| |
• |
distracting management focus from our core business; |
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| |
• |
impairing relationships with employees, customers, and strategic
partners; |
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| |
• |
incurring expenses associated with the amortization of other
intangibles; |
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| |
• |
incurring expenses associated with a write-off of a portion of
goodwill and other intangible assets due to changes in market
conditions, weak economies in certain competitive markets, or
the failure of certain acquisitions to realize expected
benefits; or |
| |
| |
• |
diluting the share value and voting power of existing
shareholders. |
Suppliers
ChoicePoint depends upon third-party information suppliers for
information used in its databases. The loss of some data supply
sources could have a material adverse effect on the
Company’s business, financial position, and results of
operations. The Company relies extensively upon data from
external sources to maintain our proprietary and non-proprietary
databases, and its operations depend upon information derived
from a wide variety of automated and manual sources. Data is
obtained from public filings, information companies,
governmental authorities, competitors, and customers. Agreements
with data suppliers are generally short-term agreements. Some
suppliers are also competitors, which may make the Company
vulnerable to unpredictable price increases and may cause some
suppliers not to renew certain agreements. ChoicePoint has no
reason to anticipate the termination of any significant
relationships with these data suppliers and believe that in most
cases substitute suppliers could be arranged if any termination
occurred. However, such a termination could have a material
adverse effect on the business, financial position, and results
of operations if the Company was unable to arrange for
substitute sources.
ChoicePoint currently maintains databases that contain
information provided and used by insurance underwriters. The
Company does not own the information in these databases, and the
participating organizations could discontinue contributing
information to the databases. If this information was withheld,
the business, financial position, and results of operations
would be materially adversely affected.
16
ChoicePoint uses social security numbers to generate certain
reports. Social security numbers could become unavailable in the
future because of changes in the law or because data suppliers
decide not to supply them. If this information cannot be
obtained in the future, the Company would be unable to generate
reports as efficiently. Although names, addresses, and dates of
birth are used to generate reports, without the use of social
security numbers, the Company believes that those reports would
not be as complete or as accurate as the reports generated with
social security numbers. ChoicePoint also would incur
significant expense to revise the software used to generate
reports. Less complete or less accurate reports could adversely
affect the business, financial position and results of
operations.
ChoicePoint obtains the credit header data in its databases from
consumer credit reporting agencies. The data consists of names,
addresses, social security numbers, and dates of birth. Any of
these suppliers could stop supplying this data or could
substantially increase their prices. Withholding this data could
materially adversely affect the business, financial position and
results of operations.
Competition
The information industry in which the Company operates is highly
competitive, and is expected to remain highly competitive. In
each of the markets served, ChoicePoint competes on the basis of
price, quality, customer service, product and service selection.
The Company’s competitive position in various market
segments depends upon the relative strength of competitors in
the segment and the resources devoted to competing in that
segment. Due to their size, certain competitors may be able to
allocate greater resources to a particular market segment than
ChoicePoint can. As a result, these competitors may be in a
better position to anticipate and respond to changing customer
preferences, emerging technologies and market trends. In
addition, new competitors and alliances may emerge to take
market share away. The Company cannot be sure that it will be
able to maintain or strengthen its competitive position in its
market segments, especially against larger competitors. If
ChoicePoint fails to successfully compete, the business,
financial position and results of operations may be adversely
affected.
Government Regulation and Adverse Publicity
Because personal, public and non-public information is used to
search the Company’s databases and access the databases of
others, ChoicePoint is vulnerable to government regulation and
adverse publicity concerning these uses. ChoicePoint provides
many types of data and services which already are subject to
regulation under the Fair Credit Reporting Act,
Gramm-Leach-Bliley Act, Drivers’ Privacy Protection Act,
and to a lesser extent, various other federal, state, and local
laws and regulations. These laws and regulations are designed to
protect the privacy of the public and to prevent the misuse of
personal information in the marketplace. However, many consumer
advocates, privacy advocates, and government regulators believe
the existing laws and regulations do not adequately protect
privacy. They have become increasingly concerned with the use of
personal information, particularly social security numbers,
department of motor vehicle data and dates of birth. As a
result, they are lobbying for further restrictions on the
dissemination or commercial use of personal information to the
public and private sectors. In particular, following publicity
surrounding the matters disclosed under “Illegal Data
Access” in Item 1 of this report, a number of
congressional leaders are calling for hearings and proposing
legislative responses in light of increasing concerns over
identity theft. The following legal and regulatory developments
could have a material adverse affect on the business, financial
position and results of operations:
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• |
amendment, enactment, or interpretation of laws and regulations
which restrict the access and use of personal information and
reduce the supply of data available to customers; |
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• |
changes in cultural and consumer attitudes to favor further
restrictions on information collection and sharing; |
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• |
failure of our products and services to comply with current laws
and regulations; and |
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• |
failure of our products and services to adapt to changes in the
regulatory environment in an efficient, cost-effective manner. |
17
Attracting and Retaining Qualified Personnel
The Company cannot be certain that it can continue to attract
and retain sufficient qualified management, technical, sales, or
other personnel necessary to conduct our business successfully.
The resignation, retirement, death or disability of the Chief
Executive Officer or Chief Operating Officer and the inability
to sufficiently replace either position could adversely affect
the business. During recent years, the Company has significantly
increased its senior management talent levels. Accordingly, the
dependency on the Chief Executive Officer and/or the Chief
Operating Officer is expected to continue to diminish in future
years.
System Interruptions
System interruptions could delay and disrupt the Company’s
products and services, cause harm to ChoicePoint’s business
and reputation and result in a loss of customers. The Company
depends heavily upon computer systems, most of which are located
in Alpharetta, Georgia and Boca Raton, Florida, to provide
reliable, uninterrupted service. Certain events beyond the
Company’s control, such as fires, floods, earthquakes,
hurricanes, power losses and telecommunications failures, could
damage computer networks and temporarily or permanently
interrupt services to customers. The systems in Boca Raton,
Florida are particularly susceptible to hurricanes. These
interruptions also may interfere with suppliers’ ability to
provide data and employees’ ability to attend work and
perform their responsibilities. ChoicePoint has attempted to
shield its systems from interruptions and failures through
disaster recovery planning, and property and business
interruption insurance is carried in case these events occur.
However, the system safeguards and insurance still may not
adequately protect the Company from losses arising from system
interruptions.
Security Breaches and Customers Misuse of Information
Services
Security breaches in the Company’s facilities, computer
networks, and databases may cause harm to ChoicePoint’s
business and reputation and result in a loss of customers. Many
security measures have been instituted to protect the systems
and to assure the marketplace that these systems are secure.
However, despite such security measures, the Company’s
systems may be vulnerable to physical break-ins, computer
viruses, attacks by hackers or similar disruptive problems.
Third-party contractors also may experience security breaches
involving the storage and transmission of proprietary
information. If users gain improper access to ChoicePoint’s
databases, they may be able to steal, publish, delete or modify
confidential third-party information that is stored or
transmitted on the networks. In addition, misuse by customers of
ChoicePoint’s information services could cause harm to the
business and reputation and result in loss of customers. On
September 27, 2004, the Company found evidence of
suspicious activity by a few small business customers in the Los
Angeles area. This recent fraud incident and related matters are
discussed under “Illegal Data Access” in Item 1
of this report. There have been other instances in which
subpoenas and other inquiries have been received from law
enforcement regarding activities of ChoicePoint customers which
sometimes related to potentially improper use of the
Company’s information services. The Company is aware of a
limited number of past instances that resulted in criminal
convictions of certain former customers for activities involving
improper use of certain information services. A security or
privacy breach may affect ChoicePoint in the following ways:
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• |
deterring customers from using ChoicePoint’s products and
services; |
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• |
deterring data suppliers from supplying data to the Company; |
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• |
harming the Company’s reputation; |
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• |
exposing ChoicePoint to liability; |
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• |
increasing operating expenses to correct problems caused by the
breach; |
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• |
affecting the Company’s ability to meet customers’
expectations; or |
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| |
• |
causing inquiry from governmental authorities. |
18
Economy
The current general economic downturn could continue to result
in a reduced demand for ChoicePoint’s products and
services. Revenues are dependent to a certain extent upon
general economic conditions and upon conditions in the
industries served by ChoicePoint. Certain revenues are derived
from pre-employment screening services. The revenue growth and
profitability of the business depends on the overall demand for
existing and new products. A softening of demand for information
services caused by a weakening of the economy generally may
result in decreased revenues or lower growth rates. The Company
cannot be certain that future revenues, results of operations,
cash flows and profitability will not fluctuate on a quarterly
or annual basis or that it will be able to refinance our
existing Credit Facility or Receivables Facility.
Direct Marketing
Direct marketing products and services could be vulnerable to
the following risks:
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| |
• |
development of other methods of sales and advertising that are
more effective than direct marketing; |
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• |
changes in laws and regulations relating to data privacy, in
particular, telephone solicitation and email privacy; |
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| |
• |
increases in postal rates or disruption in the availability of
postal services that could increase the cost of direct mail
production and processing and reduce demand for information
among our direct mail customers; and |
| |
| |
• |
loss of use or data by third parties. |
New Products, Services, and Technologies
The Company’s growth partially depends on the ability to
develop and market new products, services and technologies.
ChoicePoint has focused on developing growth opportunities in a
number of potential markets. No assurance can be given that
ChoicePoint will be successful in developing new products,
services and technologies or that these products, services and
technologies will gain market acceptance or generate significant
revenue. The Company’s initiatives are in various stages of
development and may be subject to delays in implementation,
customer dissatisfaction with product or service performance or
other significant undetected problems. If the Company fails to
successfully introduce new initiatives, the business, financial
position and results of operations may be adversely affected.
Litigation
In addition to the legal proceedings specifically described
under Item 3 of this report, ChoicePoint and its
subsidiaries are also involved in various legal proceedings that
periodically arise during the course of business. While the
Company does not have reason to believe that the outcome of any
such pending or threatened litigation will have a material
adverse effect on our financial position, litigation is
essentially unpredictable and excessive verdicts could occur.
Although we believe we have valid defenses in these matters, in
the future we could incur judgments or enter into settlements of
claims that could have a material adverse effect on our
financial position or results of operations.
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| 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, 2004. The information below should be read in
conjunction with Note 5 of the “Notes to Consolidated
Financial Statements” of the Annual Report, which notes are
included in Exhibit 13 to this Form 10-K and are
incorporated herein by reference.
Effective December 31, 2004, ChoicePoint entered into a
$400 million unsecured multicurrency revolving credit
facility (the “Credit Facility”) with a group of banks
that extends through a termination date of December 29,
2009, is expandable to $500 million and bears interest at
either a base rate as defined in the
19
Credit Facility or LIBOR plus an applicable margin. The
applicable margins range from 0.375% to 1.0% per annum
based on ChoicePoint’s funded debt to EBITDA ratio. The
Company also has a $25 million line of credit with a group
of banks at prime rate that expires December 29, 2009. The
Credit Facility replaced the Company’s $325 million
unsecured revolving credit facility which was scheduled to
expire in May 2005. As of December 31, 2004, there were no
borrowings under the Credit Facility or line of credit.
In July 2001, the Company and certain of its subsidiaries
entered into an agreement (the “Receivables Facility”)
with a financial institution whereby it may sell on a continuous
basis an undivided interest in all eligible trade accounts
receivable subject to limitations. The Receivables Facility
permits the advance of up to $100 million on the sale of
accounts receivable, may be extended in one-year terms and has
been extended through June 2005. Borrowings under the
Receivables Facility were $50.0 million at
December 31, 2004. The average interest rate based on the
terms of the Receivables Facility at December 31, 2004 was
approximately 2.8%.
The Company has entered into four interest rate swap agreements
(the “Swap Agreements”) to reduce the impact of
changes in the benchmark interest rate (LIBOR) on its
LIBOR-based payments on its synthetic leases, which are
described under the caption “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” in the Annual Report, incorporated by reference
in this report. One interest rate swap agreement has a notional
amount of $25 million and matures in August 2007. The other
three interest rate swap agreements have a total notional amount
of $42 million, became effective May 2003 and mature in
August 2007. The Swap Agreements involve the exchange of
variable rate for fixed rate payments with a fixed rate between
4.6% and 6.5%. As of December 31, 2004, $68.6 million
was outstanding under the Company’s synthetic base
agreements, of which $67.0 million of LIBOR-based payments
were hedged with the Swap Agreements.
Based on the Company’s overall interest rate exposure at
December 31, 2003, a 1% change in interest rates would
result in a change in annual pretax interest expense of
approximately $500,000 based on the Company’s level of
borrowing at that date.
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| 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” in the Annual Report, a copy of which sections
are included in Exhibit 13 to this Form 10-K, is
incorporated herein by reference.
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| Item 9. |
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure |
Not applicable.
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| Item 9A. |
Controls and Procedures |
As required by SEC rules, the Company has evaluated the
effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by
this annual report. This evaluation was carried out under the
supervision and with the participation of our management,
including our principal executive officer and principal
financial officer. Based on this evaluation, these officers have
concluded that the design and operation of our disclosure
controls and procedures are effective to ensure that information
required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
SEC’s rules and forms.
Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file under
the Exchange Act is accumulated and communicated to our
management, including our principal executive officer and
principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
20
The report called for by Item 308(a) of Regulation S-K
is incorporated herein by reference to “Management’s
Report on Internal Control Over Financial Reporting” of the
Company’s Annual Report, included in Exhibit 13 to
this Form 10-K.
The attestation report called for by Item 308(b) of
Regulation S-K is incorporated herein by reference to
“Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting” of the
Company’s Annual Report, included in Exhibit 13 to
this Form 10-K.
There were no significant changes in the Company’s internal
control over financial reporting during the quarter ended
December 31, 2004 that materially affected, or are
reasonably likely to materially affect, the Company’s
internal control over financial reporting.
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| Item 9B. |
Other Information |
Not applicable.
PART III
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| 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
“Proposal No. 1 — Election of
ChoicePoint Directors,” “Other Matters —
ChoicePoint Section 16(a) Beneficial Ownership Reporting
Compliance” and “Board Meetings and
Committees — Audit Committee” of the Proxy
Statement for the 2005 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. ChoicePoint has adopted a Code of Ethics for Senior
Financial Officers and Business Unit Leaders that applies to the
Company’s chief executive officer, chief financial officer,
principal accounting officer, controller and other senior
officers. A copy of the ChoicePoint Inc. Code of Conduct, Code
of Ethics for Senior Financial Officers and Business Unit
Leaders, the Corporate Governance Guidelines and charters for
the audit committee, management compensation and benefits
committee and corporate governance and nominating committee may
be found on the Company’s Web site at www.choicepoint.com.
Copies will be furnished without charge upon written request to
the Company at the following address: Attn: Corporate Secretary,
ChoicePoint Inc., 1000 Alderman Drive, Alpharetta, GA 30005. If
the Company makes any amendments to the Code of Ethics for
Senior Financial Officers and Business Unit Leaders other than
technical, administrative, or other non-substantive amendments,
or grants any waivers, including implicit waivers, from a
provision of this code to the Company’s chief executive
officer, chief financial officer, principal accounting officer,
controller and other senior officers, the Company will disclose
the nature of the amendment or waiver, its effective date and to
whom it applies on its Web site or in a report on Form 8-K
filed with the SEC.
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| 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 Committee Interlocks and Insider
Participation” and “ChoicePoint Stock Performance
Graph” of the Proxy Statement for the 2005 Annual Meeting
of Shareholders and is incorporated herein by reference.
|
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| Item 12. |
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters |
The information required by this Item is included in the
sections entitled “ChoicePoint Security Ownership of
Certain Beneficial Owners and Management” and “Equity
Compensation Plan Information” of the Proxy Statement for
the 2005 Annual Meeting of Shareholders and is incorporated
herein by reference.
21
|
|
| Item 13. |
Certain Relationships and Related Transactions |
The information required by this Item is included in the section
entitled “Other Matters — Certain Relationships
and Related Transactions” of the Proxy Statement for the
2005 Annual Meeting of Shareholders and is incorporated herein
by reference.
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| Item 14. |
Principal Accountant Fees and Services |
The information required by this Item is included in the section
entitled “Audit Fees, Financial Information System Fees and
Other Fees” of the Proxy Statement for the 2005 Annual
Meeting of Shareholders and is incorporated herein by reference.
PART IV
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| Item 15. |
Exhibits, Financial Statement Schedules and Reports on
Form 8-K |
(a) Index to exhibits, financial statements and
schedules.
(1) The Consolidated Financial Statements, Notes to our
Consolidated Financial Statements and the Report of Independent
Registered Public Accounting Firm for ChoicePoint Inc. and
subsidiaries dated March 11, 2005 are included in
Exhibit 13 to this Form 10-K and are incorporated
herein by reference.
(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:
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| Exhibit |
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| Number |
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Description |
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2 |
.1 |
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— |
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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) |
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3 |
.1 |
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— |
|
Articles of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 of the
Company’s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002) |
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3 |
.2 |
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— |
|
Bylaws of the Company, as amended (incorporated by reference to
Exhibit 3.2 of the Company’s Annual Report on Form
10-K for the year ended December 31, 2001) |
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4 |
.1 |
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— |
|
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) |
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4 |
.2 |
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— |
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Amendment No. 1 to the Rights Agreement, dated as of
June 21, 1999, between ChoicePoint Inc. and SunTrust Bank,
Atlanta |
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4 |
.3 |
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— |
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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) |
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4 |
.4 |
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— |
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Amendment No. 3 to the Rights Agreement between ChoicePoint
Inc. and SunTrust Bank, Atlanta as dated July 30, 2002
(incorporated by reference to Exhibit 4.4 of the
Company’s Form 8-A/A, filed July 30, 2002) |
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4 |
.5 |
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— |
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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) |
22
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| Exhibit | |
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Description |
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10 |
.1 |
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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)* |
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10 |
.2 |
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Form of Employment and Compensation Agreement between the
Company and Derek V. Smith dated as of April 25, 2002
(incorporated by reference to Exhibit 10.2 of the
Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002)* |
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10 |
.3 |
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— |
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Amendment No. 1 to the Form of Employment and Compensation
Agreement between the Company and Derek V. Smith dated as of
February 4, 2003 (incorporated by reference to
Exhibit 10.7 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2002)* |
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10 |
.4 |
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— |
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Amendment No. 2 to the Form of Employment and Compensation
Agreement between the Company and Derek V. Smith dated as of
July 23, 2003 (incorporated by reference to
Exhibit 10.1 of the Company’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2003)* |
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10 |
.5 |
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— |
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Form of Employment and Compensation Agreement between the
Company Douglas C. Curling dated as of April 25, 2002
(incorporated by reference to Exhibit 10.3 of the
Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002)* |
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10 |
.6 |
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Amendment No. 1 to the Form of Employment and Compensation
Agreement between the Company and Douglas C. Curling dated as of
February 4, 2003 (incorporated by reference to
Exhibit 10.8 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2002)* |
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10 |
.7 |
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— |
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Amendment No. 2 to the Form of Employment and Compensation
Agreement between the Company and Douglas C. Curling dated as of
July 23, 2003 (incorporated by reference to
Exhibit 10.2 of the Company’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2003)* |
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10 |
.8 |
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— |
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Form of Employment and Compensation Agreement between the
Company and David T. Lee dated as of April 25, 2002
(incorporated by reference to Exhibit 10.5 of the
Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002)* |
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10 |
.9 |
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— |
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Form of Employment and Compensation Agreement between the
Company and J. Michael de Janes dated as of April 25, 2002
(incorporated by reference to Exhibit 10.6 of the
Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002)* |
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10 |
.10 |
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— |
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Form of Employment and Compensation Agreement between the
Company and Steven W. Surbaugh dated as of April 25, 2002
(incorporated by reference to Exhibit 10.4 of the
Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002)* |
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10 |
.11 |
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— |
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ChoicePoint Inc. 1997 Omnibus Stock Incentive Plan (incorporated
by By reference to Exhibit 10.11 of the Company’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2003)* |
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10 |
.12 |
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— |
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ChoicePoint Inc. 2003 Omnibus Incentive Plan (incorporated by
reference to the Company’s Proxy Statement to its Annual
Meeting of Shareholders on April 29, 2003)* |
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10 |
.13 |
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— |
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First Amendment to the ChoicePoint Inc. 2003 Omnibus Incentive
Plan (incorporated by reference to exhibit 10.13 of the
Company’s Annual Report on Form10-K for the fiscal year
ended December 31, 2003)* |
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10 |
.14 |
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— |
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Addendum to the ChoicePoint Inc. 2003 Omnibus Incentive Plan* |
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10 |
.15 |
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— |
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DBT Online, Inc. Amended and Restated Stock Option Plan
(incorporated by reference to Exhibit 10.5 of the
Company’s Annual Report on Form 10-K, for the year ended
December 31, 2000)* |
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10 |
.16 |
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— |
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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)* |
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10 |
.17 |
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— |
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ChoicePoint Inc. Amended and Restated Deferred Compensation Plan
(incorporated by Reference to Appendix A to the Company’s
Proxy Statement to its Annual Meeting of Shareholders on
April 29, 2004)* |
23
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| Exhibit | |
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| Number | |
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Description |
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10 |
.18 |
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ChoicePoint Inc. Deferred Compensation Plan No. 2
(incorporated by reference to Exhibit 10.16 to the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2002)* |
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10 |
.19 |
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Employee Benefits Agreement, dated as of July 31, 1997,
Between Equifax Inc. and ChoicePoint Inc. (incorporated by
reference to Exhibit 10.23 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2003)* |
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10 |
.20 |
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Revolving Credit Agreement dated as of December 29, 2004
among ChoicePoint Inc., the Lenders listed therein, Wachovia
Bank, National Association, as Administrative Agent, SunTrust
Bank, as Syndication Agent, BNP Paribas, as Documentation Agent,
Wachovia Capital Markets, LLC and SunTrust Capital Markets,
Inc., as Co-Lead Arrangers and Wachovia Capital Markets, LLC, as
Sole Book Runner |
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10 |
.21 |
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First Amendment to the Revolving Credit Agreement and other
Credit Documents, dated as of February 18, 2005, among
ChoicePoint Services Inc., ChoicePoint Inc., the financial
institutions from time to time party to the Initial Credit
Agreement, (the ‘Lenders”) and, Wachovia Bank,
National Association as Administrative Agent |
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10 |
.22 |
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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 10.26 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2003) |
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10 |
.23 |
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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 |
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10 |
.24 |
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— |
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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 |
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10 |
.25 |
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Third Amendment to the Master Agreement, dated as of
December 20, 2002, among ChoicePoint Inc., as Lessee,
SunTrust Banks, Inc., as Lessor, and SunTrust Bank, as Agent
(incorporated by reference to Exhibit 10.24 to the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2002) |
| |
| |
10 |
.26 |
|
— |
|
Fourth Amendment to the Master Agreement, dated as of
February 16, 2005, among ChoicePoint Inc., as Lessee and
Guarantor, SunTrust Banks, Inc. as Lessor and SunTrust Bank as
Agent |
| |
| |
10 |
.27 |
|
— |
|
Lease agreement, dated as of July 31, 1997, between
ChoicePoint Inc. and SunTrust Banks, Inc. (incorporated by
reference to Exhibit 10.30 to the Company’s Annual
Report on Form 10-K for the year ended December 31,
2003) |
| |
| |
10 |
.28 |
|
— |
|
Georgia Lease Supplement, dated as of July 31, 1997,
between ChoicePoint Inc. and SunTrust Banks, Inc., as Agent
(incorporated by reference to Exhibit 10.31 to the
Company’s Annual Report on Form 10-K for the year
ended December 31, 2003) |
| |
| |
10 |
.29 |
|
— |
|
First Amendment to the Georgia Lease Supplement, dated
September 30, 1998, between ChoicePoint Inc. and SunTrust
Banks, Inc. |
| |
| |
10 |
.30 |
|
— |
|
Second Amendment to the Georgia Lease Supplement, dated
December 30, 1999, between ChoicePoint Inc. and SunTrust
Banks, Inc. |
| |
| |
10 |
.31 |
|
— |
|
Operative Guaranty, dated as of July 31, 1997, by
ChoicePoint Inc. as Guarantor (incorporated by reference to
Exhibit 10.34 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2003) |
| |
| |
10 |
.32 |
|
— |
|
Construction Agency Agreement, dated as of July 31, 1997,
between SunTrust Banks, Inc. and ChoicePoint Inc. (incorporated
by reference to Exhibit 10.35 to the Company’s Annual
Report on Form 10-K for the year ended December 31,
2003) |
| |
| |
10 |
.33 |
|
— |
|
Amended and Restated Master Agreement, dated as of June 26,
2003, among ChoicePoint Inc. as Guarantor, ChoicePoint Inc. and
certain subsidiaries of ChoicePoint Inc. that may hereafter
become party hereto, as Lenders and SunTrust Bank, as Agent
(incorporated by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003). |
| |
| |
10 |
.34 |
|
— |
|
First Amendment to Amended and Restated Master Agreement, dated
as of February 16, 2005, among ChoicePoint Inc. as Lessee
and Guarantor, SunTrust Equity Funding, LLC, as Lessor, SunTrust
Bank, as Agent, and SunTrust Bank, Fleet National Bank and BNP
Paribas, as Lenders |
24
| |
|
|
|
|
|
|
| Exhibit | |
|
|
|
|
| Number | |
|
|
|
Description |
| | |
|
|
|
|
| |
| |
10 |
.35 |
|
— |
|
Amended and Restated Master Lease Agreement, dated as of
June 26, 2003, between SunTrust Equity Funding, LLC, as
Lessor, and ChoicePoint Inc. and certain subsidiaries of
ChoicePoint Inc., as Lessees (incorporated by reference to
Exhibit 10.4 to the Company’s Quarterly Report on Form
10-Q, for the quarter ended June 30, 2003) |
| |
| |
10 |
.36 |
|
— |
|
Amended and Restated Guaranty Agreement from ChoicePoint Inc.
dated as of June 26, 2003 (incorporated by reference to
Exhibit 10.6 to the Company’s Quarterly Report on Form
10-Q for the period ended June 30, 2003). |
| |
| |
10 |
.37 |
|
— |
|
Amended and Restated Loan Agreement, dated as of June 26,
2003, among SunTrust Equity Funding, LLC, as Lessor and
Borrower, the financial institutions party hereto, as Lenders
and SunTrust Bank, as Agent (incorporated by reference as
Exhibit 10.5 to the Company’s Quarterly Report on Form
10-Q for the period ended June 30, 2003). |
| |
| |
10 |
.38 |
|
— |
|
Construction Agency Agreement, dated as of August 29, 2001,
Among Atlantic Financial Group, Ltd. and ChoicePoint Inc., as
Construction Agent (incorporated by reference to
Exhibit 10.4 of the Company’s Quarterly Report on Form
10-Q, for the Quarter ended September 30, 2001) |
| |
| |
10 |
.39 |
|
— |
|
Georgia Lease Supplement and Short Form, dated as of
August 29, 2001, between Atlantic Financial Group, Ltd., a
Texas Limited Partnership doing business in Georgia as Atlantic
Financial Group, Ltd. (L.P.)(Texas), as Lessor, and ChoicePoint
Inc., a Georgia corporation, as Lessee (incorporated by
reference to Exhibit 10.36 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2002) |
| |
| |
10 |
.40 |
|
— |
|
Supplement to Georgia Lease Supplement and Short Form, dated as
of August 29, 2001, between Atlantic Financial Group, Ltd.,
a Texas limited partnership doing business in Georgia as
Atlantic Financial Group, Ltd. (L.P.) (Texas), as Lessor, and
ChoicePoint Inc., a Georgia corporation, as Lessee (incorporated
by reference to Exhibit 10.37 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2002) |
| |
| |
10 |
.41 |
|
— |
|
Partial Lease Termination Agreement, dated as of August 29,
2001, by and between SunTrust Banks, Inc., as Lessor, and
ChoicePoint Inc., as Lessee (incorporated by reference to
Exhibit 10.38 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2002) |
| |
| |
10 |
.42 |
|
— |
|
Loan Agreement, dated as of July 2, 2001, among ChoicePoint
Financial Inc., as Borrower, ChoicePoint Inc., as Initial
Servicer, Three Pillars Funding Corporation, as Lender, and
SunTrust Equitable Securities Corporation, as Administrator
(incorporated by reference to Exhibit 10.1 of the
Company’s Quarterly Report on Form 10-Q, for the quarter
ended June 30, 2001) |
| |
| |
10 |
.43 |
|
— |
|
Amendment #1 to Loan Agreement, dated July 1, 2002
among ChoicePoint Financial Inc., as Borrower, ChoicePoint Inc.,
as Servicer, Three Pillars Funding Corporation, as Lender, and
SunTrust Capital Markets, Inc., as Administrator (incorporated
by reference to Exhibit 10.40 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2002) |
| |
| |
10 |
.44 |
|
— |
|
Amendment #2 to Loan Agreement, dated December 31,
2002 Among ChoicePoint Financial Inc., as Borrower, ChoicePoint
Inc., as Servicer, Three Pillars Funding Corporation, as Lender,
and SunTrust Capital Markets, Inc., as Administrator
(incorporated by reference to Exhibit 10.41 to the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2002) |
| |
| |
10 |
.45 |
|
— |
|
Amendment #3 to Loan Agreement dated as of June 30,
2003 (incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q, for the quarter
ended June 30, 2003) |
| |
| |
10 |
.46 |
|
— |
|
Amendment #4 to Loan Agreement dated as of June 28,
2004 (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q, for the quarter
ended June 30, 2004) |
| |
| |
10 |
.47 |
|
— |
|
Receivables Sale and Contribution Agreement, dated as of
July 2, 2001, among ChoicePoint Services Inc., PRC
Corporation, ChoicePoint Business and Government Services Inc.,
ChoicePoint Direct Inc., Statewide Data Services, Inc.,
I.R.S.C., Inc., ChoicePoint Public Records Inc., Patlex
Corporation, National Safety Alliance, Incorporation, BTi
Employee Screening Services, Inc. and each other Subsidiary of
ChoicePoint Inc. that hereafter becomes a Party hereto, as
Originators, and ChoicePoint Capital Inc., as Buyer
(incorporated by reference to Exhibit 10.2 of the
Company’s Quarterly Report on Form 10-Q, for the quarter
Ended June 30, 2001) |
25
| |
|
|
|
|
|
|
| Exhibit | |
|
|
|
|
| Number | |
|
|
|
Description |
| | |
|
|
|
|
| |
| |
10 |
.48 |
|
— |
|
Receivables Sale Agreement, dated as of July 2, 2001, among
ChoicePoint Capital Inc., as Seller, and ChoicePoint Financial
Inc., as Purchaser (incorporated by reference to
Exhibit 10.3 of the Company’s Quarterly Report on Form
10-Q, for the quarter ended June 30, 2001) |
| |
| |
10 |
.49 |
|
— |
|
Amendment No. 1 to Receivables Sale and Contribution
Agreement, dated as of January 31, 2003 (incorporated by
reference to Exhibit 10.1 of the Company’s Quarterly
Report on Form 10-Q, for the quarter ended March 31, 2003) |
| |
| |
13 |
|
|
— |
|
The inside front cover, pages 12 – 53 and the inside
back cover of the Company’s 2004 Annual Report to
Shareholders. |
| |
| |
21 |
|
|
— |
|
Subsidiaries of the Company |
| |
| |
23 |
|
|
— |
|
Consent of Deloitte & Touche LLP, Independent Auditors |
| |
| |
31 |
.1 |
|
— |
|
Certification of Derek V. Smith, Chief Executive Officer,
pursuant to Rule 13(a)-14(a) or 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
| |
31 |
.2 |
|
— |
|
Certification of Steven W. Surbaugh, Chief Financial Officer,
pursuant to Rule 13(a)-14(a) or 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
| |
32 |
.1 |
|
— |
|
Certification of Derek V. Smith, Chief Executive Officer,
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| |
| |
32 |
.2 |
|
— |
|
Certification of Steven W. Surbaugh, Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| |
| |
99 |
.1 |
|
— |
|
Independent Auditors’ Report on Financial Statement
Schedule — Deloitte & Touche LLP |
|
|
| * |
Management contract, compensatory plan or arrangement required
to be filed as an exhibit. |
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 Office of Corporate
Secretary, specifying the exhibit or exhibits requested.
26
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 15, 2005.
|
|
| |
|
| |
Derek V. Smith |
| |
Chairman 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
Derek
V. Smith |
|
Chairman and Chief Executive Officer
and Director |
|
March 15, 2005 |
| |
/s/ Steven W. Surbaugh
Steven
W. Surbaugh |
|
Chief Financial Officer |
|
March 15, 2005 |
| |
/s/ Thomas M. Coughlin
Thomas
M. Coughlin |
|
Director |
|
March 15, 2005 |
| |
/s/ Douglas C. Curling
Douglas
C. Curling |
|
President, Chief Operating Officer
and Director |
|
March 15, 2005 |
| |
/s/ James M. Denny
James
M. Denny |
|
Director |
|
March 10, 2005 |
| |
/s/ Dr. John J. Hamre
Dr.
John J. Hamre |
|
Director |
|
March 13, 2005 |
| |
/s/ Kenneth G. Langone
Kenneth
G. Langone |
|
Director |
|
March 15, 2005 |
| |
/s/ John B. McCoy
John
B. McCoy |
|
Director |
|
March 9, 2005 |
| |
/s/ Terrence Murray
Terrence
Murray |
|
Director |
|
March 11, 2005 |
| |
/s/ Ray M. Robinson
Ray
M. Robinson |
|
Director |
|
March 15, 2005 |
| |
/s/ Charles I. Story
Charles
I. Story |
|
Director |
|
March 10, 2005 |
27
SCHEDULE II — VALUATION AND QUALIFYING
ACCOUNTS
For the Years Ended December 31, 2004, 2003 and 2002
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Balance at | |
|
Charged to | |
|
Charged | |
|
|
|
|
| |
|
Beginning of | |
|
Costs & | |
|
to Other | |
|
|
|
Balance at End | |
| Description |
|
Period | |
|
Expenses | |
|
Accounts | |
|
Deductions | |
|
of Period | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts
|
|
$ |
5,450 |
|
|
$ |
2,589 |
|
|
$ |
— |
|
|
$ |
(2,911 |
) |
|
$ |
5,128 |
|
|
Exit Cost Reserves
|
|
|
8,489 |
|
|
|
138 |
|
|
|
1,826 |
(1) |
|
|
(5,954 |
) |
|
|
4,499 |
|
|
Year ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts
|
|
$ |
4,978 |
|
|
$ |
1,656 |
|
|
$ |
— |
|
|
$ |
(1,184 |
) |
|
$ |
5,450 |
|
|
Exit Cost Reserves
|
|
|
4,817 |
|
|
|
9,592 |
|
|
|
2,325 |
(1) |
|
|
(8,245 |
) |
|
|
8,489 |
|
|
Year ended December 31, 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts
|
|
$ |
4,634 |
|
|
$ |
3,880 |
|
|
$ |
385 |
(1) |
|
$ |
(3,921 |
) |
|
$ |
4,978 |
|
|
Merger & Exit Cost Reserves
|
|
|
7,131 |
|
|
|
1,953 |
|
|
|
2,997 |
(1) |
|
|
(7,264 |
) |
|
|
4,817 |
|
|
|
| (1) |
Represents allowances established in connection with
acquisitions net of amounts charged to goodwill. |
28