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|  | AUGUST 19, 2004
By Michael Eidam A Long Goodbye at Equifax CEO Thomas Chapman will retire in late 2005, leaving a company that has had "dynamite" growth but soon faces serious challenges Give them credit, they're starting the CEO search with plenty of lead time. Early in the day on Aug. 18, Thomas F. Chapman, chairman and CEO of Equifax, stated his intention to retire sometime in late 2005, according to a company statement. While such an announcement wasn't expected quite so soon, Wall Street didn't seem surprised that in the face of a changing industry, Chapman might want to step down before the tailwind turns into a headwind. Equifax (EFX ) stock closed up more than 1%, at $24.71. The announcement enables the Atlanta-based credit-rating agency to look outside for Chapman's replacement. Company officials confirmed that the board has appointed a search committee. "The board's desire is to have an experienced leader fill the position, so the board will focus its search on external candidates," spokesman David Rubinger said in an interview with BusinessWeek Online. Once his successor is picked, Chapman will stay on as chairman during the transition. MORTGAGE DROP-OFF. Chapman is credited with generating growth for the company by selling credit reports directly to consumers through Equifax Personal Solutions and for the successful spin-off of Certegy (CEY ), a credit- and debit-card processing company. "That was an incredible value-enhancing event for shareholders," says Craig Peckham, research analyst with Jefferies & Co. in New York. "The growth there has been nothing short of dynamite." According to Rubinger, Chapman has been talking to the board for some time about his desire to retire, and "given the company's strong financial condition, this [was] an ideal time to make the announcement." While Equifax reported record earnings of $73 million for the second quarter on July 22, it will face some challenges that might make it tough to keep profits growing. One hurdle, says Peckham, will be "how the company manages the obvious downturn in demand for credit reports due to the slowdown in the mortgage industry." The Mortgage Application Index dropped 49% in the second quarter of 2004, causing the North American Services segment of Equifax to suffer a 20% drop in mortgage-related revenue. CANNIBALIZING? More important, the new CEO will have to deal with managing the costs of implementing the Fair & Accurate Credit Transaction (FACT) Act that was signed into law in December, 2003. One provision requires that credit bureaus provide one free credit report a year to consumers if requested. "The true cost of [the act] still remains unknown and won't be known into the fourth quarter of 2004 and continuing into 2005," says Peckham. "It's certainly going to be a cost burden and potentially cannibalize revenues." Andrew Jeffrey, a research analyst at Needham & Co., points out that the timing of Chapman's announcement is "made more remarkable" by the fact that Equifax will increase prices to offset the costs of the new act "at a time when its...customers have unprecedented pricing power." In fact, if Chapman's comments to the Federal Trade Commission concerning FACT are any indication, he may have been thinking it was time to step down while the going was still good. In an Apr. 16, 2004, letter to the FTC, Chapman highlighted several ways in which the new legislation could prove burdensome for Equifax. He cited the need to quickly build an infrastructure to handle surges in demand and the "threat that the volume of unregulated demand for free reports will overwhelm our capacity to serve consumers." Peckham, who holds a buy rating on the stock, isn't worried about Equifax' ability to fill Chapman's shoes. "The value of this company's assets and its brand transcend one individual," he says. Judging from the slight gain the stock showed, it looks like investors agree and think any future problems will be ones Equifax can ultimately overcome.  Eidam is a correspondent in BusinessWeek's Atlanta bureau Edited by Patricia O'Connell Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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