##### Table of Contents



Financial Highlights(a) Years Ended December 31
    
    2004
    
    
    
    2003
    
    
    
    2002
    
    
    
    2001
    
    
    
    2000(In thousands, except per share and
employee data)Service revenue
    
    $
    884,433
    
    
    
    $
    750,351
    
    
    
    $
    690,803
    
    
    
    $
    602,648
    
    
    
    $
    547,618Reimbursable expenses
    
    
    34,280
    
    
    
    
    45,395
    
    
    
    
    38,520
    
    
    
    
    38,028
    
    
    
    
    37,392Total revenue
    
    
    918,713
    
    
    
    
    795,746
    
    
    
    
    729,323
    
    
    
    
    640,676
    
    
    
    
    585,010Operating income(b)(c)
    
    
    241,778
    
    
    
    
    178,560
    
    
    
    
    182,522
    
    
    
    
    111,314
    
    
    
    
    83,481Other operating charges and
loss on sale of business included
in operating income
above(b)
    
    
    
    
    
    
    
    (30,942
    )
    
    
    
    (7,342
    )
    
    
    
    (28,718
    )
    
    
    
    (28,419
    )Income from continuing
operations(c)
    
    
    147,955
    
    
    
    
    108,108
    
    
    
    
    107,672
    
    
    
    
    45,702
    
    
    
    
    40,166EPS from continuing
operations, diluted(c)
    
    
    1.62
    
    
    
    
    1.21
    
    
    
    
    1.21
    
    
    
    
    0.52
    
    
    
    
    0.48Total assets
    
    
    1,287,476
    
    
    
    
    1,021,284
    
    
    
    
    979,010
    
    
    
    
    832,392
    
    
    
    
    704,439Debt
    
    
    50,100
    
    
    
    
    52,029
    
    
    
    
    182,446
    
    
    
    
    158,816
    
    
    
    
    142,276Total shareholders equity
    
    
    983,659
    
    
    
    
    790,495
    
    
    
    
    622,607
    
    
    
    
    484,821
    
    
    
    
    401,069Employees (full-time equivalents)
    
    
    4,600
    
    
    
    
    3,700
    
    
    
    
    4,400
    
    
    
    
    4,200
    
    
    
    
    4,200
   (a)
    
    All financial information has been restated to reflect the merger of ChoicePoint and DBT
Online, Inc. in 2000, which has been accounted for as a pooling of interests, the stock splits
paid in the form of stock dividends effective March 7, 2001 and June 6, 2002, and the discontinued operations
related to the sale of CP Commercial Specialists as of February 28, 2003.(b)
    
    Included in operating income are loss on sale of business and other operating charges which
include merger-related costs, unusual items and realignment charges that management excludes
in its assessments of operating results and in determining operational incentive awards.(c)
    
    The 2000 and 2001 results are presented on a historical basis which includes goodwill
amortization and do not reflect the provisions of SFAS No. 142 Goodwill and Other Intangible
Assets which required companies to cease amortizing goodwill that existed on December 31, 2001. During the first quarter of 2004, ChoicePoint reorganized its business, which was previously
operated in three business segments, into the following four business segments: Insurance Services,
Business Services, Government Services and Marketing Services. Historical information presented in this annual report has been reclassified to conform
to the current presentation. Revenue
(in millions)
    

(BAR CHART)
    
    
    Free Cash Flow
(Cash flow from continuing
operations less capital expenditures)
(in millions)
    

(BAR CHART)




---



ChoicePoint 2004 Annual Report Managements Discussion and Analysis
    
    
    14Managements Report on Internal Control Over Financial Reporting
    
    
    26Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
    
    
    27Report of Independent Registered Public Accounting Firm
    
    
    28Consolidated Statements of Income
    
    
    29Consolidated Balance Sheets
    
    
    30Consolidated Statements of Shareholders Equity
    
    
    31Consolidated Statements of Cash Flows
    
    
    32Notes to Consolidated Financial Statements
    
    
    33Shareholder Information
    
    
    53
 ChoicePoint is committed to full disclosure of its accounting policies. For instance, as of
December 31, 2004, the only off-balance sheet assets or liabilities are two synthetic leases on the
properties of the Companys corporate headquarters. Similarly, ChoicePoint employees may direct
their contributed retirement funds to a variety of investment vehicles, only one of which is
ChoicePoint stock. Shareholders who have any questions or concerns about corporate policies,
governance and/or disclosure are encouraged to contact the Companys Investor Relations office.
ChoicePoint has established a toll-free telephone number to receive complaints about accounting,
internal accounting controls, auditing or other legitimate concerns anonymously. The whistleblower
hotline number is 800-762-0056.  13




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##### Table of Contents



Managements Discussion and Analysis ChoicePoint 2004 Annual Report
 (BAR CHART)
    
    (BAR CHART)
 Overview Over the past seven years, ChoicePoint Inc. (ChoicePoint or the Company) has transformed
from a predominantly manually driven and insurance customer-focused asset base into the
diversified, technology driven, data intensive business it is today. This transformation, coupled
with strong execution, has enabled the Company to deliver strong growth in revenue, earnings and
cash flows. Given our 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. For more information, visit the Companys Web
site at www.choicepoint.com. Across our markets, we compete on data, analytics and distribution. A majority of our revenue
streams are transaction based, earning revenue each time our databases are accessed and further
promoting the scalability of our products and services. The fundamentals that drive revenues are
numerous and varied across and within our business segments. Generally, the Companys primary
growth drivers are new customer acquisitions, increased penetration of new products, expansion into
new markets, acquisitions and emerging risk-oriented growth opportunities such as homeland
security. On a macro level, low unemployment, a changing regulatory environment and new initiatives
contribute to enhanced opportunities for ChoicePoint. (In thousands)
    
    2004
    
    
    
    2003
    
    
    
    Change
    
    
    
    2002
    
    
    
    ChangeService revenue
    
    $
    884,433
    
    
    
    $
    750,351
    
    
    
    
    18
    %
    
    
    $
    690,803
    
    
    
    
    9
    %Reimbursable expenses
per EITF 01-14
    
    
    34,280

    
    
    
    
    45,395
    
    
    
    
    
    
    
    
    
    38,520Total revenue
    
    $
    918,713
    
    
    
    $
    795,746
    
    
    

    
    15
    %
    
    
    $
    729,323
    
    
    
    
    9
    %
 14




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##### Table of Contents



Managements Discussion and AnalysiscontinuedChoicePoint 2004 Annual Report Comparison of 2004 with 2003
    
    Comparison of 2003 with 2002Consolidated Results
    
    Consolidated ResultsRevenue
    
    Total Revenue
grew 15%, or $123.0
million, to $918.7
million in 2004.
Service Revenue,
which excludes
revenue from
reimbursable
expenses per EITF
01-14 (see Note 3
to the Consolidated
Financial
Statements), grew
18% or $134.1
million to $884.4
million in 2004.
Revenue growth in
2004 was driven by
consistent growth
in our Insurance
Services products,
strong performances
in our background
screening, tenant
screening and vital
records businesses
in our Business
Services segment
and revenues from
the ten
acquisitions we
completed during
2004. This revenue
growth was offset
slightly by
softness in our
print and e-mail
direct marketing
product lines
during the first
half of 2004
compared to the
prior period.
Internal revenue
(which excludes
$74.1 million of
revenue from
acquisitions)
increased 8% from
2003 to 2004.
    
    Total Revenue
grew 9%, or $66.4
million, to $795.7
million in 2003.
Service Revenue
grew 9% or $59.5
million to $750.4
million in 2003.
Revenue growth in
2003 resulted
primarily from unit
growth in our
Insurance Services
segment, base
Business Services
business and
revenues from the
eleven acquisitions
we completed during
2003 and the fourth
quarter of 2002.
This revenue growth
was offset by
difficult homeland
security
comparables to 2002
in our Business
Services segment
and softness in our
print and e-mail
direct marketing
product lines.
Internal revenue
(which excludes
$50.7 million of
revenue from
acquisitions)
increased 2% from
2002 to 2003.Operating Income
    
    Operating
Income increased
35%, or $63.2
million, from
$178.6 million in
2003 to $241.8
million in 2004.
Excluding $30.9
million of 2003
other operating
charges (see
discussion below),
operating income
increased 15%.
Operating income in
Insurance Services,
Business Services
and Government
Services improved
primarily due to
increased revenues
and product mix.
Operating income in
Marketing Services
declined from the
prior year due to
the aforementioned
revenue decreases
and fixed cost
commitments early
in 2004. Also
during 2004, the
Company sold its
minority investment
in a small document
management
technology company
that it invested in
several years ago

and recorded a
pre-tax gain of
approximately $4.0
million related to
the sale (see Note
3 to the
Consolidated
Financial
Statements).
    
    Operating
Income decreased
slightly from $182.5 million in
2002 to $178.6
million in 2003 due
to $30.9 million of
2003 other
operating charges.
These charges
relate to the
consolidation of
some of our
operations to
better streamline
customer service
and operating
performance, the
re-engineering of
our direct
marketing business
to focus on future
growth areas and
the realignment of
our technology
infrastructure and
operations
following the
divestiture of our
CP Commercial
Specialists
(CPCS) business
and transition to
our new data center
(see discussion
below). Operating
income in Insurance
Services and
Business Services
improved primarily
due to increased
revenues and cost
control initiatives
employed in our
more economically
sensitive Business
Services businesses
that experienced no
revenue growth.
Without the revenue
and related
operating income
decline in our
Marketing Services
segment (discussed
in Financial
Reporting by
Segment below), we
would have realized
a 190 basis point
improvement in
operating margins
from our ongoing
operations as the
highly scalable
nature of our
operations enable
us to improve
margins as revenues
expand.Interest Expense
    
    Interest
expense decreased
$0.1 million to
$3.0 million in
2004 from $3.1
million in 2003 due
to lower average
debt outstanding,
offset slightly by
higher average
interest rates in
2004.
    
    Interest
expense decreased
$4.7 million to
$3.1 million in
2003 due to lower
interest rates and
our ability to
capitalize on our
increased earnings
and our strong cash
position to
significantly
reduce
borrowings.Income Taxes
    
    ChoicePoints
2004 effective tax
rate for continuing
operations was
38.1%, a decrease
from 38.4% in 2003
primarily due to
research and
development and job
creation credits
obtained relating
to state and
federal taxes.
    
    Income taxes
for continuing
operations for 2003
and 2002 were
provided at the
effective rate of
38. 4%.
 15




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##### Table of Contents



Managements Discussion and AnalysiscontinuedChoicePoint 2004 Annual Report Other Operating Charges The 2003 other operating charge included asset impairments of $15.4 million primarily
related to the write-down of equipment and other long-lived assets at closed facilities or
abandoned technology in the realignment and re-engineering of our technology in connection with the
transition to our new data center and following the divestiture of our CPCS business, the write
down of acquisition intangibles related to abandoned products and customer relationships of $6.0
million, $4.4 million in severance and termination benefits, and $5.2 million of abandoned lease
commitments (net of estimated sublease income where applicable) and other contractual commitments
that are expected to be satisfied at various dates through August 2008. During the second quarter
of 2002, the Company recorded an other operating charge of $7.3 million. This charge included a
write-down of minority investments in start-up companies of $2.4 million, asset impairments of
technology initiatives of $3.0 million, $0.6 million in severance and termination benefits, and
$1.4 million of expenses primarily related to the closure of two facilities and remaining
obligations. No other operating charges were incurred in 2004. The Companys management excludes
these other operating charges in its assessments of operating results and in determining
operational incentive awards. Cumulative Effect of Change in Accounting Principle Effective January 1, 2002, ChoicePoint adopted new accounting rules for goodwill and certain
intangible assets. Among the requirements of the new rules is that goodwill and certain intangible
assets be assessed for impairment using fair value measurement techniques. During the second
quarter of 2002, the Company completed its impairment review and recorded a $39.1 million non-cash
pretax charge ($24.4 million net of taxes) for the impairment of goodwill resulting primarily from
the EquiSearch Services, Inc. acquisition in 1998 and the Internet business the Company acquired as
part of the DBT merger in May 2000. The charge is non-operational in nature and is reflected as a
cumulative effect of change in accounting principle in the accompanying consolidated financial
statements (see Note 3 to the Consolidated Financial Statements). Financial Results by Segment December 31, 2004
    
    
    
    December 31, 2003
    
    
    
    December 31, 2002Operating
    
    
    
    
    
    
    
    Operating
    
    
    
    
    
    
    
    OperatingRevenue
    
    
    Income
    
    
    
    Revenue
    
    
    Income
    
    
    
    Revenue
    
    
    IncomeInsurance Services
    
    $
    352,725
    
    
    $
    195,715
    
    
    
    $
    309,124
    
    
    $
    172,518
    
    
    
    $
    270,282
    
    
    $
    144,639Business Services(1)
    
    
    349,881
    
    
    
    73,438
    
    
    
    
    276,148
    
    
    
    56,540
    
    
    
    
    239,363
    
    
    
    50,562Government Services
    
    
    83,934
    
    
    
    21,464
    
    
    
    
    63,335
    
    
    
    14,540
    
    
    
    
    69,398
    
    
    
    18,862Marketing ServicesMarketing Services service revenue
    
    
    93,389
    
    
    
    18,651
    
    
    
    
    96,642
    
    
    
    21,849
    
    
    
    
    105,833
    
    
    
    32,866Reimbursable expenses
    
    
    34,280
    
    
    
    
    
    
    
    
    45,395
    
    
    
    
    
    
    
    
    38,520
    
    
    
    Marketing Services total revenue
    
    
    127,669
    
    
    
    18,651
    
    
    
    
    142,037
    
    
    
    21,849
    
    
    
    
    144,353
    
    
    
    32,866Royalty
    
    
    4,504
    
    
    
    2,062
    
    
    
    
    5,102
    
    
    
    2,068
    
    
    
    
    5,855
    
    
    
    3,326Divested and discontinued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    (206
    )Corporate and shared
    
    
    
    
    
    
    (69,552
    )
    
    
    
    
    
    
    
    (58,013
    )
    
    
    
    
    
    
    
    (60,185
    )Total before other operating charges
    
    
    918,713
    
    
    
    241,778
    
    
    
    
    795,746
    
    
    
    209,502
    
    
    
    
    729,323
    
    
    
    189,864Other operating charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,942
    )
    
    
    
    
    
    
    
    (7,342
    )Totals from operations
    
    $
    918,713
    
    
    $
    241,778
    
    
    
    $
    795,746
    
    
    $
    178,560
    
    
    
    $
    729,323
    
    
    $
    182,522
   (1)
    
    As announced on March 4, 2005 and
discussed in Note 14 to the Consolidated Financial Statements, the
Company will discontinue the sale of certain information services offered by its Business Services segment. (PIE CHART) 16




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##### Table of Contents



Managements
Discussion and Analysis continuedChoicePoint 2004 Annual Report (BAR CHART)
    
    (BAR CHART)
 Insurance Services once again posted strong annual results, achieving 14% total
revenue growth over 2003 as we helped property and casualty (P&C) auto and property insurers
assess underwriting risk in more than 100 million renewal or new policy transactions through
industry-leading data and analytical solutions. In 2004, internal revenue growth, excluding $5.9
million of incremental acquisition revenue was 12%, as we continued to grow our already strong base
personal lines and underwriting business with recent product
offerings such as Current Carrier®,
PolicyWatchSM and additional motor vehicle record (MVR) activity files, further
addressing the needs of our customers by providing increased analytics and low cost alternatives
for insurance companies to price risk. Effective December 1, 2004, ChoicePoint enhanced its
C.L.U.E.® report process to provide consumers with access to C.L.U.E. reports in compliance with
the FACT Act. Our Insurity operations also had an exceptional year, as we continued to expand our
service offerings and to help our customers solve complex business challenges and better focus on
managing their businesses around their core competencies with industry-leading software solutions,
business process outsourcing services and additional scoring and analytic offerings. 2004 operating
income increased $23.2 million, or 13% from 2003 due to increased revenue offset slightly by
increased data processing and other system costs related to our data center opened in mid 2004.
Operating margins remained consistent, at 55.5% for 2004, compared to 55.8% for 2003. During 2004, the Business Services team continued to expand the number of customers and industries
serviced, to grow our record collections capabilities and to integrate acquisitions into its core
businesses, while capitalizing on market share growth achieved during 2003 and improved hiring
trends. These efforts enabled the Business Services segment to deliver 27% total revenue growth and
10% internal revenue growth, which excludes $45.2 million of incremental revenue from 2003 and 2004
acquisitions. The Workplace Solutions business facilitated more than
eight million background
screenings for our customers, including over half of Americas 100 largest employers, identifying
approximately 400,000 individuals with criminal records. These background screenings include
approximately one million ChoicePoint-subsidized transactions for many of our nations leading
non-profit organizations under our VolunteerSelectSM screening product. During 2004, we
continued to expand service offerings of our other products to customers of our tenant screening
business, growing market share and generating unit growth. The public
filings group also continues
to expand its offerings to customers, including the financial services industry with such products
as LienGuard®, DEBTOR DiscoverySM and several customer enrollment/USA PATRIOT Act and mortgage
fraud credentialing solutions. Our VitalChek® vital records unit continued its rollout of
identification authentication and teleservices to increase the operational efficiency of our large
agency providers. 2004 Business Services operating income increased $16.9 million, or 30% from
2003 due to increased revenue and continuing trends toward the use of more automated products.
Operating margins improved slightly to 21.0% for 2004, compared to 20.5% for 2003. 17




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##### Table of Contents



Managements Discussion and AnalysiscontinuedChoicePoint 2004 Annual Report (BAR CHART) In 2004, Government Services total revenue grew 33% from 2003, primarily due to our
acquisitions of The Templar Corporation and iMapData.com, Inc. (iMap) in early 2004 and
additional contract work at our Bode laboratories. These acquisitions complemented our strategy to
grow this business to better serve our base law enforcement customers and to fuel future growth in
new markets including public health and public safety. In addition, in January 2005, the Company
acquired i2 Limited (i2), a Cambridge, U.K.-based provider of visual investigative and link
analysis software for intelligence, law enforcement, military and large commercial applications.
The combination of our robust public filings data, iMaps mapping software and i2s analytic
platform enables us to offer end-to-end solutions to meet our customers needs. Excluding the 2004
incremental impact from acquisitions which contributed $23.0 million of revenue in 2004, our
internal revenue for Government Services declined 4% from 2003 primarily due to a reduction in
batch and project-oriented revenues. Operating income increased $6.9 million, or 48% from 2003 to
2004 due to increased revenue primarily from acquisitions with slightly higher than average
government segment operating margins. Operating margins increased to 25.6% for 2004, compared to
23.0% for 2003 based on a change in business sales mix. (BAR CHART) Marketing Services service revenue and internal growth turned positive in the third quarter of
2004, stabilizing from the softness in demand for our print and e-mail product offerings begun in
2003 and reflecting growth in our list extract data services and teleservices. In response to the
softness in demand for print services and the impact of proposed anti-SPAM legislation, we
reengineered certain of our direct marketing businesses, managing costs, downsizing our e-mail
business and focusing on our competitive strengths. For 2004, Marketing Services service revenue
declined 3% from 2003, as the positive results in the second half of the year partially offset the
weakness in the first half. Total revenue (service revenue plus reimbursable expenses) declined 10%
from the prior year primarily due to the softness in demand for print services, including postage
related to those services. Due to the high fixed costs in the marketing business which could not be
quickly reduced in response to decreased revenues, full year operating income decreased $3.2
million, or 15% from 2003 to 2004. Operating margins (as a percentage of service revenue) also
declined to 20.0% for 2004 compared to 22.6% for 2003 (14.6% and 15.4% of total revenue,
respectively) related to the aforementioned revenue decrease. However, as a result of cost control
initiatives and an improved business sales mix, operating margins began to improve in the second
half of 2004. Royalty Royalty revenue from laser technology patents held by the Company decreased to $4.5 million
in 2004 from $5.1 million in 2003 primarily due to the expiration in November 2004 of the largest
of two patents. The remaining patent underlying this revenue expires in May 2005 (see Note 11 to
the Consolidated Financial Statements). Discontinued Operations and Divested and Discontinued Product Lines In February 2003, the Company sold its CPCS business for $87.0 million in cash, culminating
efforts to exit the highly manual, labor intensive businesses that characterized the Company in its
early existence. Due to changes in accounting rules in 2002, CPCS is reported as discontinued
operations and its revenues and operating results are excluded from continuing operations (see Note
4 to the Consolidated Financial Statements for CPCS results). The gain on sale of CPCS was
approximately $32.9 million net of taxes. Divested and discontinued product lines listed in the
Financial Results by Segment table above include the residual operating results from the laboratory
services business sold in August 2001. 18




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##### Table of Contents



Managements Discussion and AnalysiscontinuedChoicePoint 2004 Annual Report (BAR CHART)
    
    (BAR CHART)
    
    (BAR CHART)
 Cash Flow and Liquidity Review Capital Resources The Companys sources of capital include, but are not limited to, cash from continuing
operations, amounts available under credit facilities and other bank borrowings, the issuance of
equity securities and other external sources of funds. ChoicePoints short-term and long-term
liquidity depends primarily upon its level of net income, working capital management (accounts
receivable, accounts payable and accrued expenses) and bank borrowings. We believe that available
short-term and long-term capital resources are sufficient to fund capital expenditures and working
capital requirements, scheduled debt payments, interest and tax obligations for the next twelve
months. We currently estimate 2005 capital expenditures will be
approximately $65  $70 million.
However, any material variance of our operating results from our projections or investments in or
acquisitions of businesses, products, or technologies could require us to obtain additional equity
or debt financing. The Company uses cash generated to invest in growing the business and to fund acquisitions and
operations. Therefore, no cash dividends have been paid, and we do not anticipate paying any cash
dividends on our common stock in the near future. The Company may desire to obtain additional
long-term financing for other strategic reasons. We anticipate no difficulty in obtaining long-term
financing based on favorable experiences in the debt market in the recent past. ChoicePoint may
also utilize an existing line of credit for overnight borrowings; however, no such borrowings were
outstanding at either December 31, 2004 or 2003. Effective December 29, 2004, the Company entered into a $400 million unsecured multicurrency
revolving credit facility which may be expandable to $500 million and which expires in December
2009 (the Credit Facility). The Credit Facility replaced the Companys $325 million unsecured
revolving credit facility which was scheduled to expire in May 2005 (the Former Credit Facility).
At December 31, 2004, there were no borrowings under the Credit Facility. In July 2001, to obtain
an additional source of financing, 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 up to $100 million. Net proceeds from the Receivables Facility were $50.0 million at
December 31, 2004 and December 31, 2003. At December 31, 2004, we had $450 million of available
capacity under these facilities. Subsequent to December 31, 2004, the Company borrowed $100.0
million under the Credit Facility to fund our acquisition of i2 (see Note 4 to the Consolidated
Financial Statements). The Credit Facility contains covenants customary for facilities of this type and are
consistent with the covenants included in our Former Credit Facility. Such covenants include
limitations, in certain circumstances, on the ability of the Company and its subsidiaries to (i)
effect a change of control of the Company, (ii) incur certain types of liens, and (iii) transfer or
sell assets. The Credit Facility also requires compliance with financial covenants, including (i)
maximum funded debt to EBITDA and (ii) minimum interest coverage. We have maintained compliance
with these financial covenants. Contractual Obligations and the Related Future Payments Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    
    
    
    More than(In thousands)
    
    Total
    
    
    
    1 year
    
    
    
    1-3 years
    
    
    
    3-5 years
    
    
    
    5 yearsDebt*
    
    $
    50,000
    
    
    
    $
    50,000
    
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    Capital lease obligations
    
    
    100
    
    
    
    
    83
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    Operating leases and other commitments
    
    
    58,450
    
    
    
    
    16,780
    
    
    
    
    21,865
    
    
    
    
    8,874
    
    
    
    
    10,931Total contractual cash obligations
    
    $
    108,550
    
    
    
    $
    66,863
    
    
    
    $
    21,882
    
    
    
    $
    8,874
    
    
    
    $
    10,931
   *
    
    Excludes a $2.3 million liability related
to the fair market evaluation of our interest rate swaps discussed below. 19




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Managements Discussion and AnalysiscontinuedChoicePoint 2004 Annual Report Interest and tax pay payments totaling $39.7 million ($35.3 million net of
refunds) were made in 2004. Similar payments are expected in future years. We have not included obligations under our deferred compensation and postretirement benefit
plans in the contractual obligations table. Our deferred compensation and postretirement benefit
plans are not required to be funded in advance, but rather are funded as benefits become payable to
participants. We made postretirement benefit payments of $3.5 million and deferred compensation
payments of $1.1 million in 2004. Off-Balance Sheet Items In 1997, the Company entered into a $25 million synthetic lease agreement for our
headquarters building. In 2001, the Company entered into another synthetic lease agreement for up
to $48 million, as amended, to finance the construction of our data center facility that was
completed in the second quarter of 2003. Both leases expire in 2007, at which time we have the
following options for each lease: renew the lease for an additional five years, purchase the
building for the original cost or remarket the property. If we elect to remarket the property,
ChoicePoint must guarantee the lessor 80% to 85% of the original
cost. The Company has accounted
for the synthetic leases as operating leases and has recorded rent expense. During 2003, we
modified our $48 million synthetic lease to, among other things, continue to qualify for
off-balance sheet treatment in accordance with the provisions of Financial Accounting Standards
Board (FASB) Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. If
the Company had elected to purchase the properties instead of entering into the synthetic leases,
total assets and debt would have increased by $68.6 million at December 31, 2004 and $67.3 million
at December 31, 2003 and we would have recorded additional depreciation expense related to the
synthetic leases of approximately $2.2 million ($1.4 million after tax) for 2004, $1.7 million
($1.0 million after tax) for 2003 and $800,000 ($500,000 after tax) for 2002. Derivatives Derivative financial instruments at December 31, 2004 consist of four interest rate swap
agreements entered into to reduce the impact of changes in a benchmark interest rate (LIBOR) on the
Companys LIBOR- based payments on the Companys synthetic leases. At December 31, 2004, the total
notional amount under these swap agreements was $67 million and they involve the receipt of a
variable rate and payment by ChoicePoint of fixed rates between 4.6% and 6.5%. ChoicePoint has
designated all of these swaps as cash flow hedges of the variability in expected future interest
payments on $67 million of the Companys LIBOR-based payments. Amounts currently due to or from
interest rate swap counterparties are recorded as expense in the period in which they accrue. The
Company does not enter into derivative financial instruments for trading or
speculative purposes. As of December 31, 2004, the fair value of the outstanding interest rate swap
agreements was a liability of $2.3 million, which has been recorded net of taxes in accumulated
other comprehensive loss in accordance with Statement of Financial Accounting Standards (SFAS)
No. 133, Accounting for Derivative Instruments and Hedging Activities (see Notes 3 and 5 to the
Consolidated Financial Statements). Interest Rate Risk Management As of December 31, 2004, $68.6 million is outstanding under the synthetic lease agreements,
of which $67.0 million of LIBOR-based payments are hedged with the swap agreements. In addition,
$50.0 million is outstanding under the Receivables Facility. Based on the Companys overall
interest rate exposure at December 31, 2004, a 1% change in interest rates would result in a
change in annual pretax interest expense of approximately $500,000 based on our current level of
borrowing. Summary of Cash Activities Net cash provided by operating activities of continuing operations for the year ended
December 31, was $248.1 million for 2004, $194.3 million for 2003 and $158.7 million for 2002. 2004 vs. 2003 The impact of the net change in operating assets and liabilities increased $23.7 million in
2004 as compared to the impact in the prior year, primarily as a result of increases in our current
liabilities offset slightly by increased accounts receivable in the current year as compared to the
prior year. Our increase in current liabilities is due primarily to increased operational costs
related to increased revenues and deferred revenues related to government contracts at iMapData
Inc., which was acquired in 2004, and changes in income taxes payable due to timing of estimated
tax payments. Our accounts receivable increased by $33.0 million from December 2003 to December
2004 while revenue increased $123.0 million from 2003 to 2004 for the year ended December 31.
There was only a slight increase in DSO (Days Sales Outstanding), net of pass-through, to 40.9
days as of December 31, 2004 compared to 39.3 days as of December 31, 2003. The increase in DSO was
due to increased 2004 sales in our Government Services segment, which has typically slower paying
customers, and project-related work. 2003 vs. 2002 Primarily as a result of increases in our current liabilities due to increased incentives and
other operational costs related to increased revenues in 2003 as compared to 2002, the impact of
the net change in operating assets and liabilities increased $19.6 million from 2002 to 2003. Our
accounts receivable from continuing operations increased by only $16.8 million from December 2002
to December 2003, while revenue increased $66.4 million from 2002 to 2003 for the year ended
December 31. 20




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Managements Discussion and AnalysiscontinuedChoicePoint 2004 Annual Report Net cash provided by discontinued operations for the year ended December 31, 2004
includes the return of an escrow payment related to the sale of CPCS. 2003 net cash provided by
discontinued operations includes the gain on sale of CPCS as well as cash provided by CPCS
operations for the two months prior to divestiture and 2002 cash flows represent cash provided by
CPCS operations for the year ended December 31, 2002. Net cash used in investing activities for the year ended December 31, includes the acquisition
of stock or assets of ten entities totaling $229.3 million in 2004, eight entities totaling $93.6
million in 2003 and six entities totaling $187.0 million in 2002 to further capitalize on
investment opportunities to build our business model, to expand our offerings to new markets and to
develop new products. In 2003, the cash used for investing in acquisitions was offset by proceeds
of $87.0 million from the sale of CPCS. Net cash provided by financing activities for the year ended December 31 of $21.4 million in
2004 and $47.9 million in 2002 was used to fund the aforementioned acquisitions. During 2003, the
Company used $118.1 million to pay down debt incurred to fund 2003 and late 2002 acquisitions. New Accounting Pronouncements In January 2003, the FASB issued FIN 46, which addresses consolidation of business
enterprises of variable interest entities (VIE) and requires companies with a controlling
financial interest in a VIE to include the assets, liabilities and results of activities of the VIE
in the consolidated financial statements of the company. FIN 46 was effective immediately for VIEs
created after January 31, 2003 and was effective for the quarter ending June 30, 2003 for all VIEs
that existed prior to January 31, 2003. The Company has accounted for the synthetic leases as
operating leases and has recorded rent expense. During the second quarter of 2003, the Company
modified its $48 million synthetic lease to, among other things, continue to qualify for
off-balance sheet treatment in accordance with the provisions of FIN 46 (Note 5 to the Consolidated
Financial Statements). In December 2003, the FASB redeliberated certain proposed modifications and
revised FIN 46 (FIN 46-R). The revised provisions were applicable no later than the first
reporting period ending after March 15, 2004. The adoption of FIN 46-R did not have an effect on
the Companys operating results or financial position. In December 2003, the FASB issued a revision to SFAS No. 132, Employers Disclosures About
Pensions and Other Post Retirement Benefits, which revises employers disclosures about pension
and other postretirement benefit plans to provide additional information so that users can develop
a clearer picture regarding the status and health of a companys plan. Certain of the provisions of
SFAS No. 132 were effective for fiscal years ending on or after December 15, 2003, and have been
adopted by the Company (see Note 8 to the Consolidated Financial Statements). In May 2004, the FASB issued Staff Position FAS 106-2, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003, which
requires additional disclosures for employers that sponsor postretirement health care plans that
provide prescription drug benefits that are impacted by this act. The disclosure requirements of
this Staff Position do not apply to the Company. In December 2004, the FASB issued two Staff Position FAS that provide accounting guidance on
how companies should account for the effects of the American Jobs Creation Act of 2004 (the Jobs
Creation Act) that was signed into law on October 22, 2004. The Jobs Creation Act could affect how
companies report their deferred income tax balances. In Staff Position FAS 109-1, the FASB
concludes that the tax relief (special tax deduction for domestic manufacturing) from the Jobs
Creation Act should be accounted for as a special deduction instead of a tax rate reduction.
Staff Position FAS 109-2 gives a company additional time to evaluate the effects of the Jobs
Creation Act on any plan for reinvestment or repatriation of foreign earnings for purposes of
applying SFAS No. 109, Accounting for Income Taxes. However, a company must provide certain
disclosures if it chooses to utilize the additional time granted by the FASB. These Staff Positions
do not apply to the Company. In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets. This
Statement amends the guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions. APB
29 provided an exception to the basic measurement principle (fair value) for exchanges of similar
assets, requiring that some nonmonetary exchanges be recorded on a carryover basis. SFAS No. 153
eliminates the exception to fair value for exchanges of similar productive assets and replaces it
with a general exception for exchange transactions that do not have commercial substance, that is,
transactions that are not expected to result in significant changes in the cash flows of the
reporting entity. The provisions of SFAS No. 153 are effective for exchanges of nonmonetary assets
occurring in fiscal periods beginning after June 15, 2005. As of December 31, 2004, management
believes that SFAS No. 153 will have no significant effect on the financial position, results of
operations, and cash flows of the Company. In
December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment which requires
companies to apply a fair value method of measurement for all share-based payment transactions with
employees, including stock options, and to recognize these transactions in the financial statements
effective July 1, 2005. The Company has the option to only apply
the SFAS No. 123(R) to all grants
after the effective date and to any unvested portion of grants issued prior to the effective date
(Modified Prospective Application) or to apply the statement retroactively to either 1) periods
in 2005 prior to the effective date or 2) all prior years (Modified Retrospective 21




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Managements Discussion and AnalysiscontinuedChoicePoint 2004 Annual Report Application). The Company is currently evaluating its application options and
anticipates that the impact of the adoption of SFAS No. 123(R) will be a reduction of net income
after tax of approximately $11 million or a reduction of $0.11 per share on an annual basis for
2005. Critical Accounting Policies The consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America, which require the Company to make estimates and
assumptions which may be revised over time as new information and regulations become available. The
Company believes that of its significant accounting policies (see Note 3 to the Consolidated
Financial Statements), the following may involve a higher degree of judgment and complexity: Purchase price allocation Over its history, the Companys growth has been partly driven by
acquisitions. The application of the purchase method of accounting requires companies to assign
values to acquired assets and liabilities, including intangible assets acquired based on their fair
value. The determination of fair value for acquired assets, particularly intangible assets,
requires a high degree of judgment, and estimates often involve significant subjectivity due to the
lack of transparent market data or listed market prices. The Company generally uses internal cash
flow models and other evaluations in determining the fair value of assets acquired; however, the
use of different valuation models or assumptions could result in different amounts of goodwill and
other acquisition intangible assets and different lives for amortizable intangible assets. As of
December 31, 2004, certain of our 2004 purchase price allocations were based on preliminary
estimates which may be revised in future periods as estimates and assumptions are finalized (see
Note 4 to the Consolidated Financial Statements). The Company does not anticipate that these
revisions would be significant to the financial statements taken as a whole. Impairment charges SFAS No. 142 requires the testing of intangible assets with indefinite lives
and goodwill for impairment at least annually. We completed our initial impairment test in 2002 and
our annual impairment tests as of October 31, 2002, 2003 and 2004 as required by SFAS No. 142 (see
Notes 3 and 4 to the Consolidated Financial Statements). In assessing the recoverability of these
intangible assets, the Company must make assumptions regarding the estimated discounted future cash
flows to determine fair value of the respective assets. These assumptions may change in the future
due to economic conditions or in connection with the sale or integration of the Companys business
units at which time ChoicePoint may be required to record impairment charges for these assets. Upon
completion of our analysis for goodwill impairment in the second quarter of 2002, we recorded a
non-cash charge of $39.1 million ($24.4 million net of taxes) to reduce the carrying value of our
goodwill retroactive to
January 1, 2002. In calculating the goodwill impairment charge, the fair value of the impaired
reporting units was estimated using a discounted cash flow methodology. This impairment charge was
due to increased competition and pricing pressures and related primarily to goodwill recorded in
the 1998 acquisition of EquiSearch Services, Inc. and goodwill related to the Internet business
acquired as part of the DBT merger in May 2000. No additional impairment charge was recorded as a
result of the annual reviews based on estimated discounted future cash flows as compared to the
current book value of long-lived assets and no circumstances occurred between October 31, 2004 and
December 31, 2004 that would have made the Company complete an additional review. If the Company
had assumed a 10% reduction in its estimated annual cash flows in the 2004 annual impairment tests,
it would have recorded additional impairment of approximately $18 million. For the other acquisition intangible assets such as purchased software, customer relationships
and non-compete agreements and tangible long-lived assets, the Company is required to assess them
for impairment whenever indicators of impairment exist in accordance with SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. Management uses measurable operating
performance criteria as well as qualitative measures to determine whether an indicator of
impairment exists. If an indicator of impairment exists, the Company reviews and reevaluates the
assumptions used, which are primarily identified from the Companys budget and longer-term
strategic plan, for assessing the recoverability of its long-lived tangible and intangible assets
and adjusts them as necessary. Also, in connection with selling and integrating certain business
operations, the Company has historically recorded asset impairment charges for property, equipment,
data and software assets that will no longer be used. Inherent in the assumptions used in
impairment analyses are certain significant management judgments and estimates such as future
undiscounted cash flows. During 2003, $15.4 million of equipment, technology and other long-lived
assets and $6.0 million of acquisition-related intangible assets and during 2002, $3.0 million of
technology initiatives were written down and recorded as other operating expense as indicators of
impairment related to these assets were identified (see Note 10 to the Consolidated Financial
Statements). The Company periodically reviews and reevaluates these assumptions and adjusts them as
necessary. As discussed in Note 10 to the Consolidated Financial Statements, in connection with selling
and integrating certain business operations, the Company has recorded asset impairment charges for
data and software assets that will no longer be used. Inherent in the assumptions used in
impairment analyses are certain significant management judgments and estimates. We periodically
review and reevaluate these assumptions and adjust them as necessary. 22




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Managements Discussion and AnalysiscontinuedChoicePoint 2004 Annual Report Software and databases
developed for internal use As discussed in Note 3 to the
Consolidated Financial Statements, the Company capitalizes certain direct costs incurred in the
development of internal use software and databases. Amortization of such costs as cost of service
revenue is done on a straight-line basis generally over three to five years. The Company evaluates
the recoverability of capitalized costs periodically or as changes in circumstances suggest a
possible impairment may exist in accordance with SFAS No. 144. Primarily in connection with the
recent realignment of our technology infrastructure and the
integration of our public filings
businesses subsequent to the DBT merger in 2000, capitalized costs were written down by $5.1
million in 2003 and $3.0 million in 2002 and are included in the impairment charges of $ 15.4
million in 2003 and $3.0 million in 2002 discussed above. Amortization of capitalized software and
database costs amounted to $15.9 million in 2004, $13.7 million in 2003 and $ 10.1 million in 2002. Postretirement benefit obligations In connection with developing the Companys projected
liabilities for postretirement benefits, management is required to make estimates and assumptions
which affect the reported amounts of the liability as of the date of the financial statements and
the amount of expense recognized during the period. The liability is developed based on currently
available information, estimates of future trends and actuarial assumptions provided by our
independent actuaries including a discount rate of 5.75% and an initial health care cost trend rate
of approximately 11.33%. A 0.25% decrease or increase in the discount rate (to 5.50% or 6.0%) would
result in a change in the liability of approximately $500,000. Actual results could differ from
these estimates. See Note 8 to the Consolidated Financial Statements for a discussion of the impact
of changes in health care cost trend rates. Revenue recognition Certain of the Companys revenues are accounted for under the percentage of
completion method and some of its software revenues are allocated to each element of a transaction
based upon its fair value as determined by vendor specific objective evidence. The Company
estimates the percentage of completion on contracts and determines the software revenue allocation
method based on assumptions and estimates that require judgment. Changes in estimates to complete
and revisions to the fair value used in the allocation of software revenue elements could result in
a change in the timing of revenue recognition. Management believes its method and related
assumptions, which have been consistently applied, to be reasonable (see Note 3 to the Consolidated
Financial Statements). Illegal Data Access On September 27, 2004, we found evidence of suspicious activity by a few of our small
business customers in the Los Angeles area. We 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. We understand 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. We further understand that
law enforcements investigation of the matter is ongoing. Our customer procedures include credentialing customers prior to granting them access to
information services. In addition, in our public filings group, we perform random audits of
previously credentialed customers to assess the propriety of their
use of our information services.
In the past, we have suspended or terminated access to our
information services when account
activity seems inconsistent with contract expectations and/or when customer audit efforts fail to
resolve our concerns regarding account usage or permissible purpose. As we did in the recent Los Angeles incident, we have worked with law enforcement on other
occasions of suspicious activity related to customer use of our
information services. There have
been other instances in which we have received subpoenas and other inquiries from law enforcement
regarding activities of our customers, which sometimes related to potentially improper use of our
information services. In some cases, we were not provided either the purpose or conclusions of
these investigations. We are aware of a limited number of past instances that resulted in criminal
convictions of certain former customers for activities involving improper use of our information
services. Based on information currently available, we estimate 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
our 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 our databases that matched searches conducted by customers whom we believe may have had
improper access to our information services on or after July 1, 2003, the effective date of the
California notification law. Because our databases are constantly updated, our search results will
never be identical to the search results of these customers. The California notification law requires us to notify consumers of unauthorized acquisition
of personal information, including first name or first initial and last name combined 23




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Managements Discussion and AnalysiscontinuedChoicePoint 2004 Annual Report with social security number, drivers license number or similar unique personal
identifiers. We have 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. We 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. We will use this alternative method of notice, including posting a notice on
our website at www.choicepoint.com. Our review of the recent Los Angeles and other similar incidents is ongoing, and the number of
potentially affected consumers may increase. However, we currently do not anticipate a significant
increase to our estimate of the number of potentially affected consumers. We intend to provide
notice to any additional affected consumers who are identified through our continuing review. Absent specific notification from law enforcement personnel, affected consumers or others, we
cannot determine whether a particular consumer is a victim of identity theft. Accordingly, we do
not know how many of these consumers may be actual victims of identity theft. Law enforcement
officials have informed us that they have identified approximately 750 consumers nationwide where
some attempt was made to compromise their identity. We are taking a variety of steps to assist the potentially affected consumers that we have
identified to date. In addition to the above-mentioned notices, we have purchased three-bureau
credit reports and a one-year credit monitoring service for each of these individuals. We have
established a toll-free number for consumers receiving a notice from us. We also have urged
potentially affected consumers to check their credit reports for suspicious activity. Regulatory and Legislative Matters,
Legal Proceedings and Assessment We have 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. We have 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 we have violated certain applicable state laws regarding consumer protection and
related matters. We intend to cooperate with the state Attorneys General in connection with these
inquiries. We have 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 our Chief Executive Officer and Chief Operating
Officer and related matters. We intend 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 our 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. We intend 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. We are 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. We intend to defend the lawsuit vigorously. We are 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 us from disclosing consumer information
improperly and to require us to allow the plaintiffs to be excluded from our databases. The suit
also seeks damages of up to $ 1,000 for each violation of the FCRA and unspecified punitive
damages. We intend to defend this lawsuit vigorously. 24




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Managements Discussion and AnalysiscontinuedChoicePoint 2004 Annual Report We
are 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. We intend 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. We are 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. We intend 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. On March 4, 2005, we announced
that we 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 or (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. We cannot currently
accurately estimate the total impact
on our operating results and financial condition of the customer fraud, related events and our
decision to discontinue certain services. We estimate we will encounter a decline in our revenue from
these customers in our 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. We will review our various technology investments in this small business segment as well
as other related costs incurred in serving this segment. We 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. We cannot
currently estimate our expenses for additional legal, consulting and other operating items. Forward-Looking Statements Certain written and oral statements made by or on behalf of the Company, including
information in this Annual Report, may constitute forward-looking statements as defined under the
Private Securities Litigation Reform Act of 1995. Words or phrases such as should result, are
expected to, we anticipate, we estimate, we project, or similar expressions are intended to
identify forward-looking statements. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those expressed in any
forward-looking statements. These risks and uncertainties include, but are not limited to, the
following important factors: the results of our ongoing review of the Los Angeles incident and
other incidents, the impact of our decision to discontinue certain
services as discussed above,
the results of our re-credentialing of customer accounts, the results of any litigation or
government proceedings, demand for the Companys services, product development, maintaining
acceptable margins, maintaining our data supply, maintaining secure systems, ability to minimize
system interruptions, ability to control costs, the impact of federal, state, and local regulatory
requirements on the Companys business, specifically the direct
marketing and public filings markets and privacy matters affecting the Company and any federal or state legislative responses to
identify theft concerns, the impact of competition and customer consolidations, ability to continue
our long-term business strategy including growth through acquisition, ability to attract and retain
qualified personnel, the ability to mitigate material litigation and the uncertainty of economic
conditions in general. Additional information concerning these risks and uncertainties is contained
in the Companys filings with the SEC, including the Companys Annual Report on Form 10-K. Readers
are cautioned not to place undue reliance on forward-looking statements, since the statements speak
only as of the date that they are made, and the Company undertakes no obligation to publicly update
these statements based on events that may occur after the date of this report. 25




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Managements Report on Internal Control Over Financial Reporting
ChoicePoint 2004 Annual Report The management of ChoicePoint Inc. is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over financial reporting is a
process designed under the supervision of the Companys principal executive and principal financial
officers to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the Companys financial statements for external reporting purposes in accordance
with generally accepted accounting principles.
Our internal control over financial reporting is supported by written
polices and guidelines, a program of internal audits, a written Code
of Conduct applicable to all Company directors and all officers and
employees of the Company, and quarterly written representations
obtained from business unit leaders and key financial associates. Because of the inherent limitations of internal control over financial reporting, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also,
projections of any evaluation of the effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate. The Companys management assessed the effectiveness of the Companys internal control over
financial reporting as of December 31, 2004. In making this assessment, the Companys management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control Integrated Framework.Based on this assessment, management believes
that, as of December 31, 2004, the Companys internal control over financial reporting is
effective. The Companys independent registered public accounting firm has audited managements
assessment of the effectiveness of the Companys internal control over financial reporting as of
December 31, 2004, as stated in their report appearing below, which expresses unqualified opinions
on managements assessment and on the effectiveness of the Companys internal control over
financial reporting as of December 31, 2004. -s- Derek V. Smith
    
    -s- Doug C. CurlingDerek V. Smith
    
    Doug C. CurlingChief Executive Officer
    
    Chief Operating Officer
 -s- Steven W. Surbaugh
    
    -s- David E. TrineSteven W. Surbaugh
    
    David E. TrineChief Financial Officer
    
    Treasurer and Corporate Controller
 26




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##### Table of Contents



Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
ChoicePoint 2004 Annual Report To the Board of Directors and Shareholders of ChoicePoint Inc.: We have audited managements assessment, included in the accompanying Managements Report on
Internal Control over Financial Reporting, that ChoicePoint Inc. and subsidiaries (the Company)
maintained effective internal control over financial reporting as of December 31, 2004, based on
criteria established in Internal Control Integrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Companys management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the effectiveness of the Companys internal
control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinions. A companys internal control over financial reporting is a process designed by, or under the
supervision of, the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A companys internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including
the possibility of collusion or improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that the Company maintained effective internal control
over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based
on the criteria established in Internal Control  Integrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of December 31,
2004, based on the criteria established in Internal Control Integrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements and financial statement
schedule as of and for the year ended December 31, 2004 of the Company and our reports dated March
11, 2005 expressed unqualified opinions on those financial statements and financial statement
schedule. -s- Atlanta, Georgia
Atlanta, Georgia
March 11, 2005 27




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
ChoicePoint 2004 Annual Report To the Board of Directors and Shareholders of ChoicePoint Inc.: We have audited the accompanying consolidated balance sheets of ChoicePoint Inc. and subsidiaries
(the Company) as of December 31, 2004 and 2003 and the related consolidated statements of income,
shareholders equity, and cash flows for each of the three years in the period ended December 31,
2004. These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of ChoicePoint Inc. and subsidiaries as of December 31, 2004 and
2003 and the results of their operations and their cash flows for each of the three years in the
period ended December 31, 2004, in conformity with accounting principles generally accepted in the
United States of America. As described in Note 3, these consolidated financial statements have been revised to include
the disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, which was adopted by the Company as of January 1, 2002. We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of the Companys internal control over financial
reporting as of December 31, 2004, based on the criteria
established in Internal Control 
Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 11, 2005 expressed an unqualified opinion on managements assessment of
the effectiveness of the Companys internal control over financial reporting and an unqualified
opinion on the effectiveness of the Companys internal control over financial reporting. -s- Atlanta, Georgia
Atlanta, Georgia
March 11, 2005 28




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##### Table of Contents



Consolidated Statements of Income
ChoicePoint 2004 Annual Report (In thousands, except per share data)Year Ended December 31,
    
    2004
    
    
    
    2003
    
    
    
    2002Service revenue
    
    $
    884,433
    
    
    
    $
    750,351
    
    
    
    $
    690,803Reimbursable expenses (Note 3)
    
    
    34,280
    
    
    
    
    45,395
    
    
    
    
    38,520Total revenue
    
    
    918,713
    
    
    
    
    795,746
    
    
    
    
    729,323Costs and expenses:Cost of service revenue
    
    
    457,842
    
    
    
    
    402,148
    
    
    
    
    360,131Reimbursable expenses
    
    
    34,280
    
    
    
    
    45,395
    
    
    
    
    38,520Selling, general, and administrative
    
    
    184,813
    
    
    
    
    138,701
    
    
    
    
    140,808Other operating charges (Note 10)
    
    
    
    
    
    
    
    30,942
    
    
    
    
    7,342Total costs and expenses
    
    
    676,935
    
    
    
    
    617,186
    
    
    
    
    546,801Operating income
    
    
    241,778
    
    
    
    
    178,560
    
    
    
    
    182,522Interest expense, net
    
    
    2,948
    
    
    
    
    3,061
    
    
    
    
    7,772Income from continuing operations before income taxes
    
    
    238,830
    
    
    
    
    175,499
    
    
    
    
    174,750Provision for income taxes
    
    
    90,875
    
    
    
    
    67,391
    
    
    
    
    67,078Income from continuing operations
    
    
    147,955
    
    
    
    
    108,108
    
    
    
    
    107,672Income from discontinued operations, net of tax (Note 4)
    
    
    
    
    
    
    
    991
    
    
    
    
    6,571Gain on sale of discontinued operations, net of tax (Note 4)
    
    
    
    
    
    
    
    32,893
    
    
    
    
    Income before cumulative effect of change in accounting principle
    
    
    147,955
    
    
    
    
    141,992
    
    
    
    
    114,243Cumulative effect of change in accounting principle, net of tax (Note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    (24,416
    )Net income
    
    $
    147,955
    
    
    
    $
    141,992
    
    
    
    $
    89,827Earnings per share (Notes 3 and 7)Basic:Income from continuing operations
    
    $
    1.69
    
    
    
    $
    1.26
    
    
    
    $
    1.28Income from discontinued operations, net
    
    
    
    
    
    
    
    0.01
    
    
    
    
    0.08Gain on sale of discontinued operations, net
    
    
    
    
    
    
    
    0.38
    
    
    
    
    Income before cumulative effect of change in accounting principle
    
    
    1.69
    
    
    
    
    1.65
    
    
    
    
    1.36Cumulative effect of change in accounting principle, net
    
    
    
    
    
    
    
    
    
    
    
    
    (0.29
    )Net income
    
    $
    1.69
    
    
    
    $
    1.65
    
    
    
    $
    1.07Diluted:Income from continuing operations
    
    $
    1.62
    
    
    
    $
    1.21
    
    
    
    $
    1.21Income from discontinued operations, net
    
    
    
    
    
    
    
    0.01
    
    
    
    
    0.07Gain on sale of discontinued operations, net
    
    
    
    
    
    
    
    0.37
    
    
    
    
    Income before cumulative effect of change in accounting principle
    
    
    1.62
    
    
    
    
    1.58
    
    
    
    
    1.28Cumulative effect of change in accounting principle, net
    
    
    
    
    
    
    
    
    
    
    
    
    (0.27
    )Net income
    
    $
    1.62
    
    
    
    $
    1.58
    
    
    
    $
    1.01Weighted average shares  basic
    
    
    87,502
    
    
    
    
    85,957
    
    
    
    
    84,313Dilutive effect of stock options
    
    
    3,803
    
    
    
    
    3,729
    
    
    
    
    4,881Weighted average shares  diluted
    
    
    91,305
    
    
    
    
    89,686
    
    
    
    
    89,194
 The accompanying notes are an integral part of these consolidated financial statements. 29




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##### Table of Contents



Consolidated Balance SheetsChoicePoint 2004 Annual Report (In thousands, except par values)December 31 ,
    
    2004
    
    
    
    2003AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,577
    
    
    
    $
    23,410Accounts receivable, net of allowance for doubtful accounts
of $5,128 in 2004 and $5,450 in 2003
    
    
    186,629
    
    
    
    
    153,661Deferred income tax assets
    
    
    
    
    
    
    
    9,160Other current assets
    
    
    30,171
    
    
    
    
    17,721Total current assets
    
    
    218,377
    
    
    
    
    203,952Property and equipment, net
    
    
    68,224
    
    
    
    
    56,968Goodwill
    
    
    824,904
    
    
    
    
    645,172Other acquisition intangible assets
    
    
    95,511
    
    
    
    
    47,081Deferred income tax assets
    
    
    
    
    
    
    
    871Other
    
    
    80,460
    
    
    
    
    67,240Total assets
    
    $
    1,287,476
    
    
    
    $
    1,021,284Liabilities and Shareholders EquityCurrent liabilities:Short-term debt and current maturities of long-term debt
    
    $
    50,083
    
    
    
    $
    50,194Accounts payable
    
    
    39,421
    
    
    
    
    31,823Accrued salaries and bonuses
    
    
    33,332
    
    
    
    
    34,480Deferred income taxes
    
    
    946
    
    
    
    
    Other current liabilities
    
    
    99,886
    
    
    
    
    61,984Total current liabilities
    
    
    223,668
    
    
    
    
    178,481Long-term debt, less current maturities
    
    
    17
    
    
    
    
    1,835Postretirement benefit obligations
    
    
    28,850
    
    
    
    
    30,815Deferred income taxes
    
    
    26,115
    
    
    
    
    Other long-term liabilities
    
    
    25,167
    
    
    
    
    19,658Total liabilities
    
    
    303,817
    
    
    
    
    230,789Commitments and contingencies (Note 9)Shareholders equity:Preferred stock, $0.01 par value; 10,000 shares authorized, no shares issued or
outstanding
    
    
    
    
    
    
    
    Common
stock, $0.10 par value; shares authorized - 400,000; issued - 89,426 in 2004 and
87,748 in 2003
    
    
    8,943
    
    
    
    
    8,775Paid-in capital
    
    
    418,773
    
    
    
    
    374,929Retained earnings
    
    
    577,734
    
    
    
    
    429,779Accumulated other comprehensive loss, net
    
    
    (1,317
    )
    
    
    
    (2,589
    )Treasury stock, at cost, 1,194 shares in 2004 and 1,193 shares in 2003
    
    
    (20,474
    )
    
    
    
    (20,399
    )Total shareholders equity
    
    
    983,659
    
    
    
    
    790,495Total liabilities and shareholders equity
    
    $
    1,287,476
    
    
    
    $
    1,021,284
 The accompanying notes are an integral part of these consolidated financial statements. 30




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##### Table of Contents



Consolidated Statements of Shareholders Equity
ChoicePoint 2004 Annual Report AccumulatedOtherComprehensive
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury(In thousands)
    
    Income
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Loss, Net
    
    
    Stock
    
    
    TotalBalance, December 31, 2001
    
    
    
    
    
    $
    8,450
    
    
    $
    297,612
    
    
    $
    197,960
    
    
    $
    (3,635
    )
    
    $
    (15,566
    )
    
    $
    484,821Net income
    
    $
    89,827
    
    
    
    
    
    
    
    
    
    
    
    89,827
    
    
    
    
    
    
    
    
    
    
    
    89,827Change in fair value of derivatives, net of deferred taxes of $503
    
    
    754
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    754
    
    
    
    
    
    
    
    754Comprehensive income
    
    $
    90,581Restricted stock plans, net
    
    
    
    
    
    
    (9
    )
    
    
    2,791
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,782Stock options exercised
    
    
    
    
    
    
    214
    
    
    
    25,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,264Common stock redeemed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (814
    )
    
    
    (814
    )Tax benefit of stock options exercised
    
    
    
    
    
    
    
    
    
    
    19,973
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,973Balance, December 31, 2002
    
    
    
    
    
    
    8,655
    
    
    
    345,426
    
    
    
    287,787
    
    
    
    (2,881

    )
    
    
    (16,380
    )
    
    
    622,607Net income
    
    $
    141,992
    
    
    
    
    
    
    
    
    
    
    
    141,992
    
    
    
    
    
    
    
    
    
    
    
    141,992Change in fair value of derivatives, net of deferred taxes of $166
    
    
    249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249
    
    
    
    
    
    
    
    249Other
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    43Comprehensive income
    
    $
    142,284Restricted stock plans, net
    
    
    
    
    
    
    6
    
    
    
    3,659
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,665Stock options exercised
    
    
    
    
    
    
    114
    
    
    
    16,180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,294Common stock redeemed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    (99
    )Stock purchased by employee benefit trusts, net
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    (3,920
    )
    
    
    (3,898
    )Tax benefit of stock options exercised
    
    
    
    
    
    
    
    
    
    
    9,642
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,642Balance, December 31, 2003
    
    
    
    
    
    
    8,775
    
    
    
    374,929
    
    
    
    429,779
    
    
    
    (2,589
    )
    
    
    (20,399
    )
    
    
    790,495Net income
    
    $
    147,955
    
    
    
    
    
    
    
    
    
    
    
    147,955
    
    
    
    
    
    
    
    
    
    
    
    147,955Change in fair value of derivatives, net of deferred taxes of $823
    
    
    1,235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,235
    
    
    
    
    
    
    
    1,235Other
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    37Comprehensive income
    
    $
    149,227Restricted and other stock plans, net
    
    
    
    
    
    
    6
    
    
    
    4,891
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,897Stock options exercised
    
    
    
    
    
    
    162
    
    
    
    23,271
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,433Common stock redeemed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151
    )
    
    
    (151
    )Stock distributed by employee benefit trusts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76
    
    
    
    76Tax benefit of stock options exercised
    
    
    
    
    
    
    
    
    
    
    15,682
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,682Balance, December 31, 2004
    
    
    
    
    
    $
    8,943
    
    
    $
    418,773
    
    
    $
    577,734
    
    
    $
    (1,317
    )
    
    $
    (20,474
    )
    
    $
    983,659
 The accompanying notes are an integral part of these consolidated financial statements. 31




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##### Table of Contents



Consolidated Statements of Cash FlowsChoicePoint 2004 Annual Report (In thousands)Year Ended December 31,
    
    2004
    
    
    
    2003
    
    
    
    2002Cash flows from operating activities:Net income
    
    $
    147,955
    
    
    
    $
    141,992
    
    
    
    $
    89,827Cumulative effect of change in accounting principle, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    24,416Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    (991
    )
    
    
    
    (6,571
    )Gain on sale of discontinued operations, net of tax
    
    
    
    
    
    
    
    (32,893
    )
    
    
    
    Income from continuing operations
    
    
    147,955
    
    
    
    
    108,108
    
    
    
    
    107,672Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:Depreciation and amortization
    
    
    61,346
    
    
    
    
    53,120
    
    
    
    
    44,850Non-cash components of other operating charges
    
    
    
    
    
    
    
    21,164
    
    
    
    
    5,405Compensation recognized under employee stock plans, net
    
    
    4,897
    
    
    
    
    3,665
    
    
    
    
    2,782Tax benefit of stock options exercised
    
    
    15,682
    
    
    
    
    9,642
    
    
    
    
    19,040Gain on sale of minority investment
    
    
    (4,049
    )
    
    
    
    
    
    
    
    
    Changes in assets and liabilities, excluding effects
of acquisitions and divestitures:Accounts receivable, net
    
    
    (22,841
    )
    
    
    
    (14,179
    )
    
    
    
    (10,497
    )Other current assets, excluding income taxes
    
    
    (9,453
    )
    
    
    
    4,703
    
    
    
    
    3,571Deferred income taxes
    
    
    30,730
    
    
    
    
    8,859
    
    
    
    
    10,039Estimated income taxes
    
    
    10,728
    
    
    
    
    (3,102
    )
    
    
    
    (9,567
    )Current liabilities, excluding debt and income taxes
    
    
    7,582
    
    
    
    
    9,109
    
    
    
    
    (6,769
    )Other long-term liabilities, excluding debt
    
    
    5,543
    
    
    
    
    (6,802
    )
    
    
    
    (7,812
    )Net cash provided by continuing operations
    
    
    248,120
    
    
    
    
    194,287
    
    
    
    
    158,714Net cash provided (used) by discontinued operations
    
    
    500
    
    
    
    
    (38,609
    )
    
    
    
    10,036Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (229,314
    )
    
    
    
    (93,567
    )
    
    
    
    (186,990
    )Cash proceeds from sale of businesses and minority investments
    
    
    3,549
    
    
    
    
    87,000
    
    
    
    
    650Additions to property and equipment, net
    
    
    (28,255
    )
    
    
    
    (20,645
    )
    
    
    
    (19,796
    )Additions to other assets, net
    
    
    (37,783
    )
    
    
    
    (21,286
    )
    
    
    
    (29,207
    )Net cash used by investing activities
    
    
    (291,803
    )
    
    
    
    (48,498
    )
    
    
    
    (235,343
    )Cash flows from financing activities:Payments on Former Credit Facilities
    
    
    (70,000
    )
    
    
    
    (153,000
    )
    
    
    
    (195,000
    )Borrowings under Former Credit Facilities
    
    
    70,000
    
    
    
    
    58,000
    
    
    
    
    135,000Payments on Receivables Facility
    
    
    (70,000
    )
    
    
    
    (35,000
    )
    
    
    
    Borrowings under Receivables Facility
    
    
    70,000
    
    
    
    
    
    
    
    
    
    85,000Payments on other debt, net
    
    
    (2,008
    )
    
    
    
    (426
    )
    
    
    
    (1,531
    )Changes in stock held by employee benefit trusts, net
    
    
    76
    
    
    
    
    (3,898
    )
    
    
    
    Redemption of common stock
    
    
    (151
    )
    
    
    
    (99
    )
    
    
    
    (814
    )Proceeds from exercise of stock options
    
    
    23,433
    
    
    
    
    16,294
    
    
    
    
    25,264Net cash provided (used) by financing activities
    
    
    21,350
    
    
    
    
    (118,129
    )
    
    
    
    47,919Net decrease in cash and cash equivalents
    
    
    (21,833
    )
    
    
    
    (10,949
    )
    
    
    
    (18,674
    )Cash and cash equivalents, beginning of year
    
    
    23,410
    
    
    
    
    34,359
    
    
    
    
    53,033Cash and cash equivalents, end of year
    
    $
    1,577
    
    
    
    $
    23,410
    
    
    
    $
    34,359
 The accompanying notes are an integral part of these consolidated financial statements. 32




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Notes to Consolidated Financial Statements
ChoicePoint 2004 Annual Report 1 Nature of Operations ChoicePoint Inc. (NYSE: CPS), a Georgia corporation
(ChoicePoint or the Company), 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. ChoicePoints businesses are focused on four primary
markets  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. 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. Additionally, ChoicePoint provides
customized policy rating and issuance software and business
outsourcing services to the commercial insurance market.
Prior to the divestiture of our CP Commercial Specialists
(CPCS) business in February 2003 (Note 4), ChoicePoint
also provided property inspections and audits to the commercial insurance market. 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
employment background screenings and drug testing administration
services, public filing searches, vital record services,
credential verification, due diligence information, Uniform
Commercial Code searches and filings, authentication services,
tenant screening services, mortgage fraud credentialing services
and people and shareholder locator information searches.
Subsequent to December 31, 2004 and in response to the
illegal data access issues and related matters (Note 14),
ChoicePoint announced that it will discontinue the sale of
certain services offered by its Business Services group. Industry
leading data, analytical 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 (Note 4), ChoicePoint expanded its offering 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. 2 Basis of Presentation ChoicePoint Inc. was established through the combination
of the businesses that comprised the Insurance Services Group
of Equifax Inc. (Equifax) within a separate company and
the subsequent spinoff on August 8, 1997 (the Spinoff) of
the Companys outstanding stock by Equifax as a stock dividend to the shareholders of Equifax. The consolidated financial statements include the accounts
of ChoicePoint and its subsidiaries. All material transactions
and balances between entities included in the consolidated
financial statements have been eliminated. 3 Significant Accounting Policies Use of Estimates The preparation of financial statements in
conformity with accounting principles generally accepted in
the United States of America requires management to make
estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements as well as reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from these estimates. Earnings Per Share
(EPS)  In accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings
Per Share, the Company has computed basic EPS and diluted
EPS (using the treasury stock method). Options outstanding
to purchase approximately 716,000, 2.5 million, and 900,000
shares of common stock at December 31, 2004, 2003 and
2002, respectively, were not included in the computation of
diluted EPS because the exercise prices of the options were
greater than the average market prices of the Companys
common shares during the applicable year (Note 7). Reclassifications Certain prior year amounts have been
reclassified to conform with the current year presentation. Revenue  ChoicePoint recognizes revenue when it is realized
or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence
that an agreement exists, prices are fixed or determinable,
services and products are provided to the customer, and collectibility is reasonably assured. The Company reduces revenue
for estimated volume discounts and other allowances. The
Company also records deferred revenue primarily related to 33




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Notes to Consolidated Financial Statements continuedChoicePoint 2004 Annual Report payments received in advance or revenue being earned under software licensing, maintenance and
support and other contractual agreements. Deferred revenue included in other current liabilities
totaled $32.0 million as of December 31, 2004 and $15.1 million as of December 31, 2003. In
addition to the general policy discussed above, the following are the specific revenue recognition
policies for our major business lines and for multiple-element arrangements: Information Services
Revenue for the P&C personal lines, public filing
searches, employment background
screening and drug testing, vital records and other services in the Business Services segment is
generally earned on a transactional basis and recognized as the services are delivered. Revenue
from non-transaction-based arrangements such as subscription licenses and fixed fee arrangements is
recognized over the period in which the customer is using the service. Provisions for bad debts and
volume discounts are recognized during the period in which they are estimable and applicable,
respectively. Marketing Services Revenues in our teleservices, print and data fulfillment services are
recognized when projects are completed and delivered (typically within one month) in accordance
with contractual terms. Certain database management services in our Marketing Services segment
represent hosting arrangements. The contracts for these services are in essence a periodic service
agreement to provide database services to a specific customer. The revenues and certain up-front
costs related to these hosting arrangements are recognized ratably over the term of the agreement
in accordance with SAB 104, Revenue Recognition in Financial Statements, and Emerging Issues Task
Force (EITF) Issue No. 00-3, Application of AICPA Statement of Position 97-2 to Arrangements
That Include the Right to Use Software Stored on Another Entitys Hardware. Software Services Software revenues for the Companys Insurance Services segment are generated
primarily by transactions that include multiple-element arrangements encompassing licensing
software systems (consisting of software and maintenance support) and providing professional
services. ChoicePoint allocates revenue to each element of a transaction based upon its fair value
as determined by vendor specific objective evidence (VSOE). VSOE of fair value for all elements
of an arrangement is based upon the normal pricing and discounting practices for those products and
services when sold separately and, for maintenance and support services, is additionally measured
by the renewal rare offered to the customer. The Company defers revenue for any undelivered
elements, and recognizes revenue when the product is delivered or over the period in which the
service is performed, in accordance with its revenue recognition policy for such element. If the
fair value of any undelivered element included in bundled software and service arrangements cannot
be objectively determined, revenue is deferred until all elements are delivered and services have been
performed, or until fair value can objectively be determined for any remaining undelivered elements. When
the fair value of a delivered element has not been established, the residual method is used to record revenue if the
fair value of all undelivered elements is determinable. Under the residual method, the fair value
of the undelivered elements is deferred and the remaining portion of the arrangement fee is
allocated to the delivered elements and is recognized as revenue. In some instances, perpetual software license arrangements require significant customization.
These arrangements are accounted for under the percentage of completion method based on estimates
of the extent of progress toward completion. The Company estimates the percentage of completion on
contracts on a monthly basis utilizing estimated remaining hours to complete as a percentage of
total estimated hours to complete the project. Changes in estimates to complete and revisions in
overall profit estimates are recognized in the period in which they are determined. Government Contracts Certain of the Companys government contracts may have cancellation or
pricing provisions or renewal clauses that are required by law, such as those dependent upon fiscal
funding outside of a governmental units control, that it can be cancelled if deemed in the
taxpayers best interest and that it may be subject to limitations under statutes. ChoicePoint
considers multiple factors, including the history with the customer in similar transactions, the
essential use of the service and the planning, budgeting and approval processes undertaken by the
governmental entity. If the Company determines that the likelihood of non-acceptance in these
arrangements is remote, revenue is recognized once all of the criteria described above have been
met. If such a determination cannot be made, revenue is recognized upon the earlier of cash receipt
or approval of the applicable funding provision by the governmental entity. Pass-through Expense  The Company records certain revenue on a net basis since it has in essence
earned a commission or fee for arranging the delivery of a service ordered by a customer from a
specified vendor and is not the primary obligor under the provisions of EITF 99-19, Reporting
Revenue Gross as a Principal versus Net as an Agent. Motor vehicle records registry revenue (the
fee charged by states for motor vehicle records) and other fixed costs that are passed on by
ChoicePoint to its customers (pass-through expense) are excluded from revenue and recorded as a
reduction to cost of service revenue in the Consolidated Financial Statements. The incidental fee
charged by ChoicePoint to provide this delivery service is reported as revenue. For the twelve
months ended December 31, pass-through expense was $644.7 million in 2004, $597.6 million in 2003
and $491.7 million in 2002. 34




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Notes to Consolidated Financial Statements continuedChoicePoint 2004 Annual Report Reimbursable Expenses- During 2002, the Company began
applying the consensus reached in EITF 01-14, Income Statement Characterization of Reimbursements
Received for Out-of-Pocket Expenses Incurred, which requires the presentation of reimbursed
out-of-pocket expenses on a gross basis as revenues and expenses. As required, the Company
reclassified prior periods presented to comply with the guidance in EITF 01-14. The application of
EITF 01-14 had no impact on operating income, net income or earnings per share. Reimbursed
materials, shipping and postage charges in the Companys Marketing Services segment for the twelve
months ended December 31, totaled $34.3 million in 2004, $45.4 million in 2003 and $38.5 million in
2002 and have been presented as revenues and expenses in the corresponding Consolidated Statements
of Income. Other- During 2004, the Company sold its minority investment in a small document management
technology company that it invested in several years ago and recorded a pre-tax gain of
approximately $4.0 million related to the sale. This gain was substantially offset by an increase
in litigation expense accruals on an outstanding legal action that is related to the litigation
addressed in Note 9 and costs related to the closure of certain operating facilities during the
quarter. Stock Options- As of December 31, 2004, the Company has stock-based employee compensation plans
(Note 7). The Company accounts for these stock option plans in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related
Interpretations (APB No. 25). Accordingly, the Company does not recognize compensation cost in
connection with these plans, as all options granted under these plans had an exercise price equal
to the fair market value of ChoicePoint common stock on the date of grant. In December 2002, the
Financial Accounting Standards Board (FASB) issued SFAS No. 148, Accounting for Stock-Based
CompensationTransition and Disclosure, which amends SFAS No. 123, Accounting for Stock-Based
Compensations, and provides alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based compensation. Furthermore, SFAS No. 148 requires
more prominent and frequent disclosures in the financial statements about the effects of
stock-based compensation. The Company adopted SFAS No. 148 as of January 1, 2003 with respect to
the disclosure requirements. The Company has elected to account for stock-based compensation using
the intrinsic value method prescribed in APB No. 25 and related interpretations. Accordingly, the
Company does not recognize compensation cost in connection with these
plans, as all options granted
under these plans had an exercise price equal to the market value of ChoicePoint common stock on
the date of grant. If the Company had elected to apply the fair value recognition provisions of
SFAS No. 123, Accounting for Stock-Based Compensation to stock-based
employee compensation, net income and net income per share would have been reduced to the pro
forma amounts indicated in the following table (in thousands, except per share information).
The fair value of each option granted is estimated on the date of grant using the Black-Scholes
Option Pricing Model. During the second quarter of 2004, the Company adjusted the pro forma
stock-based compensation expense to reflect the impact of actual forfeitures as compared to
original estimates. Year Ended December 31,
    
    2004
    
    
    2003
    
    
    2002Net income, as reported
    
    $
    147,955
    
    
    $
    141,992
    
    
    $
    89,827Deduct:Total stock-based employee
compensation expense
determined under fair
value based method for
stock option awards,
net of related tax effects
    
    
    8,456
    
    
    
    13,154
    
    
    
    15,360Pro forma net income
    
    $
    139,499
    
    
    $
    128,838
    
    
    $
    74,467Earnings per share:Basic  as reported
    
    $
    1,69
    
    
    $
    1.65
    
    
    $
    1.07Basic  pro forma
    
    
    1.59
    
    
    
    1.50
    
    
    
    0.88Diluted  as reported
    
    $
    1,62
    
    
    $
    1.58
    
    
    $
    1.01Diluted  pro forma
    
    
    1.53
    
    
    
    1.45
    
    
    
    0.85
 The fair value of each option granted is estimated on the date of grant using the
Black-Scholes Option Pricing Model with the following assumptions: Year Ended December 31,
    
    2004
    
    
    2003
    
    
    2002Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    32
    %
    
    
    33
    %
    
    
    33
    %Risk-free interest rate
    
    
    2.8
    %
    
    
    2.8
    %
    
    
    4.4
    %Expected life in years
    
    
    3.82
    
    
    
    4.23
    
    
    
    4.77Weighted average fair value
of options granted
    
    $
    11.50
    
    
    $
    10.00
    
    
    $
    14.31
 In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment which
requires companies to apply a fair value method of measurement for all share-based payment
transactions with employees, including stock options, and to recognize these transactions in
the financial statements effective July 1, 2005. The Company has the option to only apply the
SFAS No. 123(R) to all grants after the effective date and to any unvested portion of grants
issued prior to the effective date (Modified Prospective Application) or to apply the
statement retroactively to either 1) periods in 2005 prior to the effective date or 2) all
prior years (Modified Retrospective Application). The Company is currently evaluating its
application options and anticipates that the impact of the adoption of SFAS No. 123(R) will be
a reduction of net income after tax of approximately $ 11 million or a reduction of $0.11 per
share on an annual basis. 35




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Notes to Consolidated Financial Statements continuedChoicePoint 2004 Annual Report Property and Equipment  Property and equipment at December 31, 2004 and 2003 consisted of
the following (in thousands): December 31,
    
    2004
    
    
    2003Land, buildings, and
improvements
    
    $
    25,218
    
    
    $
    23,541Data processing equipment
and furniture
    
    
    162,407
    
    
    
    143,726Less accumulated depreciation
    
    
    (119,401
    )
    
    
    (110,299
    )$
    68,224
    
    
    $
    56,968
 The cost of property and equipment is depreciated primarily on the straight-line basis
over estimated asset lives of 30 to 40 years for buildings; useful lives, not to exceed lease
terms, for leasehold improvements; three to eight years for data processing equipment and eight
to ten years for furniture. Goodwill  The Company accounts for acquisitions using the purchase method of accounting. As a
result, goodwill and other acquisition intangibles are recorded at the time of purchase based on
internal evaluations which are subject to change based on the final resolutions of acquired asset
valuations. In June 2001, the FASB issued SFAS No. 141, Business Combinations, effective July 1, 2001
and SFAS No. 142, Goodwill and Other Intangible Assets, effective for the Company on January 1,
2002. SFAS No. 142 requires companies to cease amortizing goodwill that existed on December 31,
2001. SFAS No. 142 also broadens the criteria for recording intangible assets separate from
goodwill and establishes a new method of testing goodwill impairment whereby goodwill impairment is deemed to
exist if the net book value of a reporting unit exceeds its estimated fair value. As a result of
the adoption of these accounting standards, certain intangibles were subsumed into goodwill and
amortization of these assets and goodwill was discontinued effective January 1, 2002. Upon
completion of our analysis for goodwill impairment in the second quarter of 2002 in accordance with
the adoption of SFAS No. 142, ChoicePoint recorded a non-cash charge of $39.1 million ($24.4
million net of taxes of $14.7 million) to reduce the carrying value of its goodwill retroactive to
January 1,2002. Such charge is reflected as a cumulative effect of change in accounting principle
in the accompanying Consolidated Statements of Income. In calculating the goodwill impairment
charge, the fair value of the impaired reporting units was estimated using a discounted cash flow
methodology. This impairment charge is due to increased competition and pricing pressures and
relates primarily to the 1998 acquisition of EquiSearch Services, Inc. and the Internet business
acquired as part of the DBT Online, Inc. merger in May 2000, both of which are included in Business
Services segment. The Company also completed its annual goodwill impairment reviews as of October
31, 2004 and October 31, 2003. No additional impairment charge was recorded as a result of these
reviews. A summary of the change in goodwill during the years ended December 31, 2004 and 2003, by
business segment, is as follows: Net Goodwill at
    
    
    Acquisitions
    
    
    
    
    
    
    Net Goodwill at(In thousands)
    
    December 31, 2003
    
    
    & Adjustments
    
    
    Divestiture
    
    
    December 31, 2004Insurance Services
    
    $
    48,036
    
    
    $
    26,786
    
    
    $
    
    
    
    $
    74,822Business Services
    
    
    397,298
    
    
    
    81,274
    
    
    
    
    
    
    
    478,572Government Services
    
    
    9,084
    
    
    
    71,521
    
    
    
    
    
    
    
    80,605Marketing Services
    
    
    190,754
    
    
    
    151
    
    
    
    
    
    
    
    190,905Total
    
    $
    645,172
    
    
    $
    179,732
    
    
    $
    
    
    
    $
    824,904
 Net Goodwill at
    
    
    Acquisitions
    
    
    
    
    
    
    Net Goodwill at(In thousands)
    
    December 31, 2002
    
    
    & Adjustments
    
    
    Divestiture
    
    
    December 31, 2003Insurance Services
    
    $
    45,659
    
    
    $
    13,206
    
    
    $
    (10,829
    )
    
    $
    48,036Business Services
    
    
    345,680
    
    
    
    51,618
    
    
    
    
    
    
    
    397,298Government Services
    
    
    9,084
    
    
    
    
    
    
    
    
    
    
    
    9,084Marketing Services
    
    
    178,185
    
    
    
    12,569
    
    
    
    
    
    
    
    190,754Total
    
    $
    578,608
    
    
    $
    77,393
    
    
    $
    (10,829
    )
    
    $
    645,172
 Other Acquisition
Intangible Assets  Other acquisition intangibles, excluding
trademarks/tradenames, are being amortized on a straight-line basis over two to ten years for
customer relationships, three to twenty years for purchased data files, one to five years for
software, one to seven years for non-compete agreements and three to eleven years for other
intangible assets. Amortization expense was $ 14.8 million
for 2004, $9.5 million for 2003 and $6.1 million for 2002. Estimated amortization expense for the
next five years is $19.6 million for 2005, $17.2 million for 2006, $12.9 million for 2007, $9.9
million for 2008 and $6.7 million for 2009. Other Acquisition Intangible Assets at December 31,
2004 and 2003 consisted of the following: 36




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Notes to Consolidated Financial Statements continuedChoicePoint 2004 Annual Report 2004
    
    
    
    
    
    
    2003Accumulated
    
    
    
    
    
    
    
    
    
    
    Accumulated(In thousands)
    
    Gross
    
    
    Amortization
    
    
    Net
    
    
    Gross
    
    
    Amortization
    
    
    NetCustomer relationships
    
    $
    45,362
    
    
    $
    (14,906
    )
    
    $
    30,456
    
    
    $
    36,918
    
    
    $
    (7,288
    )
    
    $
    29,630Purchased data files
    
    
    35,499
    
    
    
    (2,973
    )
    
    
    32,526
    
    
    
    2,107
    
    
    
    (945
    )
    
    
    1,162Software
    
    
    14,800
    
    
    
    (10,755
    )
    
    
    4,045
    
    
    
    15,050
    
    
    
    (11,210
    )
    
    
    3,840Non-compete agreements
    
    
    15,007
    
    
    
    (4,441
    )
    
    
    10,566
    
    
    
    10,141
    
    
    
    (2,471
    )
    
    
    7,670Trademarks/tradenames
    
    
    10,600
    
    
    
    
    
    
    
    10,600
    
    
    
    3,500
    
    
    
    
    
    
    
    3,500Other intangible assets
    
    
    15,338
    
    
    
    (8,020
    )
    
    
    7,318
    
    
    
    8,687
    
    
    
    (7,408
    )
    
    
    1,279Total
    
    $
    136,606
    
    
    $
    (41,095
    )
    
    $
    95,511
    
    
    $
    76,403
    
    
    $
    (29,322
    )
    
    $
    47,081
 Other Assets  Other assets at December 31, 2004 and 2003 consisted of the
following: (In thousands) December 31,
    
    2004
    
    
    2003Software and databases
developed for internal use, net
    
    $
    56,705
    
    
    $
    46,322Purchased software, net
    
    
    17,739
    
    
    
    13,304Other
    
    
    6,016
    
    
    
    7,614$
    80,460
    
    
    $
    67,240
 For the years ended December 31, costs of software and databases developed for internal
use of approximately $25.6 million in 2004, $13.2 million in 2003 and $19.3 million in 2002 were
capitalized and are included in software and databases developed for internal use, net. The
amounts capitalized include certain direct costs, including independent contractor and payroll
costs in accordance with Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. Other assets are being amortized on a
straight-line basis primarily over three to five years. Accumulated amortization was $79.6
million as of December 31, 2004 and $59.3 million as of December 31, 2003. The Company regularly evaluates whether events and circumstances have occurred that indicate
the carrying amount of other long-lived assets may warrant revision or may not be recoverable.
When factors indicate that other assets should be evaluated for possible impairment, the Company
uses an estimate of the future undiscounted net cash flows of the related business over the
remaining life of the other assets in measuring whether those assets are recoverable. If the
carrying amount exceeds undiscounted cash flows, an impairment loss would be recognized for the
difference between the carrying amount and its estimated fair value on a discounted cash flow
methodology. For the years ended December 31, 2003 and 2002, approximately $7.2 million and $5.4
million of other long-lived assets were written down to fair value and recognized as other
operating charges, respectively (Note 10). Depreciation and
Amortization Expense Depreciation and amortization expense from continuing
operations for 2004, 2003 and 2002 consisted of the following: (In thousands)Year Ended December 31,
    
    2004
    
    
    2003
    
    
    2002Property and equipment
    
    $
    21,174
    
    
    $
    21,205
    
    
    $
    19,366Other acquisition
intangibles
    
    
    14,824
    
    
    
    9,539
    
    
    
    6,133Software and databases
developed for internal use
    
    
    15,908
    
    
    
    13,680
    
    
    
    10,093Purchased software
    
    
    7,355
    
    
    
    6,349
    
    
    
    6,293Other assets
    
    
    2,085
    
    
    
    2,347
    
    
    
    2,965Total
    
    $
    61,346
    
    
    $
    53,120
    
    
    $
    44,850
 Consolidated Statements
of Cash Flows  The Company considers short-term cash investments
with original maturities of three months or less to be cash equivalents. The tax payments made by ChoicePoint were approximately $36.7 million in 2004 ($32.4
million net of refunds), $81.8 million in 2003 and $43.7 million in 2002. Interest paid on
debt totaled $2.9 million in 2004, $3.1 million in 2003 and $8.5 million in 2002. In 2004, 2003 and 2002, the Company acquired various businesses that were accounted
for as purchases (Note 4). In conjunction with these transactions, liabilities were assumed
as follows: (In thousands)Year Ended December 31 ,
    
    2004
    
    
    2003
    
    
    2002Fair value of assets acquired
    
    $
    274,034
    
    
    $
    102,779
    
    
    $
    201,058Cash paid for acquisitions
    
    
    242,219
    
    
    
    94,644
    
    
    
    192,582Liabilities assumed
    
    $
    31,815
    
    
    $
    8,135
    
    
    $
    8,476
 Financial Instruments and
Derivatives  The Companys financial instruments recorded on
the balance sheet consist primarily of cash and cash equivalents, accounts receivable,
accounts payable and debt. The carrying amounts approximate their fair values because of the
short maturity of these instruments or, in the case of debt, because it bears interest at
current market rates. 37




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Notes to Consolidated Financial Statements continuedChoicePoint 2004 Annual Report The Companys derivative financial instruments are accounted for under the provisions of SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No.
138. Such derivatives at December 31, 2004 and 2003 consist of interest rate swap agreements (Note
5) entered into to limit the effect of changes in LIBOR (a benchmark interest rate) on the
Companys LIBOR-based payments, including the synthetic leases. Amounts currently due to or from
interest rate swap counterparties are recorded in expense in the period in which they accrue. The
Company measures all derivatives at fair value and recognizes them in the Consolidated Balance
Sheet as an asset or liability, depending on ChoicePoints rights or obligations under the
applicable derivative contract. ChoicePoints only derivative instruments are swap agreements which
have been designated as cash flow hedges to hedge the variability in expected future interest
payments on a portion of the Companys LIBOR-based payments and, as such, the effective portions of
changes in fair value are reported in cumulative other comprehensive loss and are subsequently
reclassified into earnings when the hedged item affects earnings. The Company formally documents
all relationships between hedging instruments and hedged items, as well as its risk management
objectives and strategies for undertaking various hedge transactions. The Company assesses, on an
ongoing basis, whether the derivatives that are used in hedging transactions are highly effective
in offsetting changes in fair value or cash flows of hedged items. Should it be determined that a
derivative is not highly effective as a hedge, the Company will discontinue hedge accounting
treatment. The Company does not enter into derivative financial instruments for trading or
speculative purposes. The fair value of the interest rate swap agreements was a liability of $2.3
million as of December 31, 2004 and $4.4 million at December 31, 2003 which has been recorded net
of taxes in accumulated other comprehensive loss in the Consolidated Financial Statements. There
was no impact on earnings related to swap agreements in 2002, 2003 or 2004. Other New Accounting
Pronouncements  In January 2003, the FASB issued FIN 46, which addresses
consolidation of business enterprises of variable interest entities (VIE) and requires companies
with a controlling financial interest in a VIE to include the assets, liabilities and results of
activities of the VIE in the consolidated financial statements of the company. FIN 46 was effective
immediately for VIEs created after January 31, 2003 and was effective for the quarter ending June
30, 2003 for all VIEs that existed prior to January 31, 2003. The Company has accounted for the
synthetic leases as operating leases and has recorded rent expense. During the second quarter of
2003, the Company modified its $48 million synthetic lease to, among other things, continue to
qualify for off-balance sheet treatment in accordance with the provisions of FIN 46 (Note 5). In
December 2003, the FASB redeliberated certain proposed modifications and revised FIN 46 (FIN 46-R). The revised
provisions were applicable no later than the first reporting period ending after March 15, 2004.
The adoption of FIN 46-R did not have an effect on the Companys operating results or financial
position. In December 2003, the FASB issued a revision to SFAS No. 132, Employers Disclosures About
Pensions and Other Post Retirement Benefits, which revises employers disclosures about pension
and other postretirement benefit plans to provide additional information so that users can develop
a clearer picture regarding the status and health of a companys plan. Certain of the provisions of
SFAS No. 132 are effective for fiscal years ending on or after December 15, 2003, and have been
adopted by the Company (see Note 8). In May 2004, the FASB issued Staff Position FAS 106-2, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003, which
requires additional disclosures for employers that sponsor postretirement health care plans that
provide prescription drug benefits that are impacted by this act. The disclosure requirements of
this Staff Position do not apply to the Company. In December 2004, the FASB issued two Staff Position FAS that provide accounting guidance on
how companies should account for the effects of the American Jobs Creation Act of 2004 (the Jobs
Creation Act) that was signed into law on October 22, 2004. The Jobs Creation Act could affect how
companies report their deferred income tax balances. In Staff Position FAS 109-1, the FASB
concludes that the tax relief (special tax deduction for domestic manufacturing) from the Jobs
Creation Act should be accounted for as a special deduction instead of a tax rate reduction.
Staff Position FAS 109-2 gives a company additional time to evaluate the effects of the Jobs
Creation Act on any plan for reinvestment or repatriation of foreign earnings for purposes of
applying SFAS No. 109, Accounting for Income Taxes. However, a company must provide certain
disclosures if it chooses to utilize the additional time granted by the FASB. These Staff Positions
do not apply to the Company. In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets. This
Statement amends the guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions. APB
29 provided an exception to the basic measurement principle (fair value) for exchanges of similar
assets, requiring that some nonmonetary exchanges be recorded on a carryover basis. SFAS No. 153
eliminates the exception to fair value for exchanges of similar productive assets and replaces it
with a general exception for exchange transactions that do not have commercial substance, that is,
transactions that are not expected to result in significant changes in the cash flows of the
reporting entity. The provisions of SFAS 153 are effective for exchanges of nonmonetary assets
occurring in fiscal periods beginning after June 15, 2005. 38




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Notes to Consolidated Financial Statements continuedChoicePoint 2004 Annual Report Management believes that SFAS No. 153 will have no significant effect on the financial position,
results of operations, and cash flows of the Company. 4 Acquisitions and Divestitures Acquisitions  During 2004, 2003 and 2002, the Company acquired either stock or assets
of the following businesses: Business
    
    Date Acquired
    
    SegmentUSAHire, LLC
    
    December 2004
    
    Business ServicesPriority Data
Systems, Inc.
    
    December 2004
    
    Insurance ServicesInsurQuote, Inc.
    
    October 2004
    
    Insurance ServicesAIG Technologies, Inc.
    
    August 2004
    
    Insurance ServicesInvestigation Technologies, LLC d/b/a Rapsheets
    
    May 2004
    
    Business ServicesService Abstract Corp.
    
    April 2004
    
    Business ServicesADREM
Profiles, Inc.,
Government Business
Services, LLC and
Advance Information
Resources Corporation
    
    April 2004
    
    Business ServicesCharles Jones, LLC and
Superior Information
Services, LLC
    
    April 2004
    
    Business ServicesiMapData.com, Inc.
    
    February 2004
    
    Government ServicesTemplar Corporation
    
    February 2004
    
    Government ServicesCITI
NETWORK, Inc.
d/b/a Applicant
Screening and
Processing
    
    October 2003
    
    Business ServicesBridger Systems, Inc.
    
    September 2003
    
    Business ServicesinsuranceDecisions, Inc.
    
    September 2003
    
    Insurance ServicesTML
Information
Services, Inc.
    
    August 2003
    
    Insurance ServicesIdentico Systems, LLC
    
    July 2003
    
    Business ServicesMortgage Asset Research
Institute, Inc.
    
    June 2003
    
    Business ServicesThe List Source, Inc.
d/b/a Kramer Lead
Marketing Group
    
    January 2003
    
    Marketing ServicesNational Data
Retrieval, Inc.
    
    January 2003
    
    Business ServicesAccident Report
Services, Inc.
    
    December 2002
    
    Insurance ServicesVital Chek
Network, Inc.
    
    December 2002
    
    Business ServicesResident Data, Inc.
    
    October 2002
    
    Business ServicesL&S Report Service, Inc.
    
    July 2002
    
    Insurance ServicesTotal eData Corporation
    
    April 2002
    
    Marketing ServicesExperian Information
Solutions, Inc.
(marketing
and list extraction and
reporting businesses)
    
    January 2002
    
    Marketing Services
 The acquisitions above were accounted for as purchases, and the results of operations
from these acquisitions are included in ChoicePoints consolidated results from the date
acquired. In 2004, the Company acquired either the stock or assets of the following companies: the
Templar Corporation, a provider of advanced and secure information technology solutions based in
Alexandria, Virginia; iMapData.com, Inc., an information and analytics company with powerful data
visualization capabilities, based in Tysons Corner, Virginia; Superior Information Services, LLC,
located in Trenton, New Jersey and Service Abstract Corp., located in
Nanuet, New York, both of
which are providers of public filings information including liens and judgments in the Northeast
U.S.; Charles Jones, LLC, a leading supplier of New Jersey title and property lien searches,
located in Trenton, New Jersey; ADREM Profiles, Inc., Government Business Services, LLC and Advance
Information Resources Corporation, pre-employment screening services
companies located in Tampa, Florida;
Investigation Technologies, LLC, d/b/a/ Rapsheets, an electronic criminal records provider, located
in Memphis, Tennessee; AIG Technologies, Inc., a software and software maintenance provider located
in Livingston, New Jersey; InsurQuote, Inc., a leading provider of insurance rating solutions to
the property and casualty carrier markets located in Orem, Utah; Priority Data Systems, Inc, a
provider of comparative rating software solutions to the independent insurance agency market
located in Omaha, Nebraska; and USAHire, LLC, an applicant screening software provider located in
Charlotte, North Carolina. These acquisitions extend ChoicePoints current product and service
offerings in Insurance Services, Business Services and Government Services. One of these
acquisitions is subject to a potential additional earnout for the period ending December 2004 if
certain financial targets are met. The calculations related to this potential earnout are required
to be completed by April 30, 2005 and are not expected to be material to the consolidated financial
statements of ChoicePoint. As of December 31, 2004, no additional earnout had been paid. 2004 acquisitions had an aggregate purchase price of $242.2 million that was paid in cash,
$179.7 million was allocated to goodwill, of which approximately $82.4 million is fully deductible
for tax purposes, and $63.3 million to other acquisition intangible assets as follows based on
preliminary allocations: Weighted Average(In thousands)
    
    Amount
    
    
    Amortization PeriodPurchased data files
    
    $
    33,390
    
    
    thirteen yearsCustomer relationships
    
    
    8,448
    
    
    five yearsSoftware
    
    
    2,750
    
    
    three yearsTechnology
    
    
    6,650
    
    
    four yearsTrademark/tradename
    
    
    7,100
    
    
    indefinite life assetNoncompete agreements
    
    
    4,916
    
    
    six yearsTotal
    
    $
    63,254
 39




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Notes to Consolidated Financial Statements continuedChoicePoint 2004 Annual Report In 2003, the Company acquired National Data Retrieval, Inc., one of the nations leading
providers of public filings information for bankruptcies, civil judgments, and federal and state
tax liens based in Alpharetta, Georgia; The List Source, Inc. d/b/a Kramer Lead Marketing Group,
a marketing company servicing the life and health insurance and financial services markets based
in Dallas, Texas; Mortgage Asset Research Institute, Inc., which operates databases that help
monitor and identify fraud, misrepresentation and misconduct in the mortgage industry based in
Reston, Virginia; Identico Systems, LLC, a real-time provider of customer identity verification
via face-to-face transactions at the point of sale based in Nashua, New Hampshire; CITI NETWORK,
Inc. d/b/a Applicant Screening and Processing, a tenant screening company based in Orlando,
Florida and certain assets of TML Information Services, Inc., a provider of MVRs in the insurance
industry based in Forest Hills, New York; Bridger Systems, Inc., which assists customers with
their compliance with OFAC, the USA PATRIOT Act and other requirements based in Bozeman, Montana
and insurance Decisions, Inc., a provider of full service claims administration applications to
the insurance industry based in Ridgefield, Connecticut. These acquisitions extend ChoicePoints
current product and service offerings in Insurance Services, Marketing Services and Business
Services. 2003 acquisitions had an aggregate purchase price of $94.6 million which was paid in cash,
$77.4 million was allocated to goodwill, substantially all of which is expected to be fully
deductible for tax purposes, and $20.0 million to other acquisition intangible assets as
follows: Weighted Average(In thousands)
    
    Amount
    
    
    Amortization PeriodCustomer relationships
    
    $
    16,380
    
    
    five yearsPurchased data files
    
    
    1,529
    
    
    eight yearsSoftware
    
    
    1,018
    
    
    five yearsOther intangible assets
    
    
    688
    
    
    eleven yearsTrademark/tradename
    
    
    200
    
    
    indefinite life assetNoncompete agreements
    
    
    190
    
    
    five yearsTotal
    
    $
    20,005
 On December 2, 2002, ChoicePoint acquired 100 percent of the outstanding common stock
of Vital Chek Network, Inc. and Vital Chek Network of Canada, Inc. (collectively, VitalChek).
The results of VitalCheks operations have been included in the consolidated financial
statements since that date. VitalChek has been assigned to the Business Services segment.
VitalChek is a provider of proprietary technology and data management services that facilitate
the remote ordering of certified birth, death, marriage, and divorce certificates, and is based
in Nashville, Tennessee. As a result of the acquisition, ChoicePoint extended its current
product and services offerings that help verify a persons identity to include the birth
certificates that often begin the process. The purchase price was $120.0 million in an initial cash payment with an additional
earnout ending June 30, 2006 if VitalChek exceeds certain financial targets. As of December 31,
2004, no additional earnouts had been paid. The following table summarizes the fair values of
assets acquired and liabilities assumed (in thousands): Current assets
    
    $
    4,231Property, plant and equipment, net
    
    
    1,176Goodwill
    
    
    105,184Other acquisition intangible assets
    
    
    12,300Other assets
    
    
    765Total assets acquired
    
    
    123,656Current liabilities
    
    
    3,045Other long-term liabilities
    
    
    611Total liabilities assumed
    
    
    3,656Net assets acquired
    
    $
    120,000
 The goodwill listed above is fully deductible for tax purposes. Of the $12.3 million
of acquired intangible assets, $8.7 million was assigned to non-compete agreements that will
have a useful life of seven years, $1.6 million was assigned to software that will have a
useful life of three years and $2.0 million was assigned to trademarks/tradenames that will
have an indefinite life. The Companys unaudited 2002 pro forma combined historical results as of December 31, as
if VitalChek had been acquired at the beginning of 2002, are estimated to be: (In thousands, except per share information)
    
    2002Revenue
    
    $
    751,196Income from continuing operations
    
    
    107,049Income before cumulative effect
of change in accounting principle
    
    
    113,620Net income
    
    
    89,204EPS, basic
    
    $
    1.06EPS, diluted
    
    $
    1.00
 Also in 2002, the Company acquired the insurance market on-line consumer credit
reporting, marketing and pre-screen list extract services of Experian Information Solutions,
Inc., based in Chicago, Illinois; Total eData Corporation, an e-mail database company based in
Little Rock, Arkansas; Resident Data, Inc., a residential screening services provider to
apartment management companies based in Richardson, Texas; and two
accident report providers to
the P&C insurance industry, L&S Report Service, Inc., based in Phoenix, Arizona, and Accident
Report Services, Inc., based in Oklahoma City, Oklahoma. Excluding VitalChek, 2002 acquisitions had an aggregate purchase price of $72.6 million
which was paid in cash, $59.8 million was allocated to goodwill, of which $30.9 million 40




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Notes to Consolidated Financial Statements continuedChoicePoint 2004 Annual Report is expected to be fully deductible for tax purposes, and $9.9 million to other
acquisition intangible assets as follows: Weighted Average(In thousands)
    
    Amount
    
    
    Amortization PeriodSoftware
    
    $
    1,500
    
    
    three yearsTrademark/tradename
    
    
    1,300
    
    
    indefinite life assetCustomer relationships
    
    
    7,081
    
    
    five years$
    9,881
 The allocation of purchase price to the assets and liabilities of certain
acquisitions is preliminary and subject to change based on the
resolutions of pre-acquisition
contingencies. The remaining
accrual of $2.2 million as of December 31, 2004 for transaction costs related to the
above acquisitions, relates primarily to future payments under lease terminations and related
office closure expenses. Certain of these acquisitions are subject to contingent payment
agreements based on revenue and operating profit goals over the next two to three years. The
Company will record goodwill related to these contingent payment agreements as goals are met
and payments are reasonably estimable and probable. The pro forma effect of 2004, 2003 and 2002 purchased acquisitions, other than
VitalChek, is not material individually or in the aggregate to the consolidated financial
statements. Subsequent Event  On January 4, 2005, ChoicePoint acquired the stock of i2 Limited (i2), a
Cambridge, UK-based provider of visual investigative and link analysis software for
intelligence, law enforcement, military and large commercial applications, which will be
reported in our Government Services segment. The acquisition enhanced
ChoicePoints analytics
and distributions offerings and government market presence and marks the Companys strategic
expansion into international markets for non-data related services. The net purchase price was approximately $90.3 million ($105.3 million paid in cash, net
of $15.0 million of cash included in i2s opening balance sheet), which the Company financed
with $100 million of borrowings under its unsecured revolving credit facility (see Note 5).
The purchase of i2 also includes additional earnout provisions if i2 exceeds certain
financial targets in 2005 or 2006. The following table summarizes a
preliminary estimate of the fair values of assets
acquired and liabilities assumed (in thousands): Current assets
    
    $
    25,513Property and equipment, net
    
    
    2,566Goodwill
    
    
    66,838Other acquisition intangible assets
    
    
    35,300Other assets
    
    
    15Total assets acquired
    
    
    130,232Current liabilities
    
    
    31,001Long-term deferred tax liability
    
    
    9,500Total liabilities assumed
    
    
    40,501Net assets acquired
    
    $
    89,731
 Of
the $35.3 million of acquired intangible assets, $9.5 million was assigned to customer
relationships which will have a useful life of 20 years, $18.1 million was assigned to software
which will have a useful life of approximately five years and $7.7 million was assigned to
trademarks/tradenames that will have an indefinite life. Divestitures  In February 2003, the Company sold its CPCS business to New Mountain Capital, L.L.C.
for $87.0 million in cash. The sale of CPCS was the culmination
of ChoicePoints efforts to exit
the highly manual, labor-intensive businesses that characterized the Company in its early days and
focus on data and technology intensive solutions. CPCS is reported as a discontinued operation for
all periods presented in the accompanying consolidated financial statements, and the operating
results of CPCS through February 28, 2003, the date of sale, are reflected separately from the
results of continuing operations. The gain on sale of CPCS is approximately $32.9 million net of
taxes and includes transaction expenses of $9.4 million, which includes investment banker fees and
severance and retention benefits. Summarized operating results and gain on sale for the two months
ended February 28, 2003 and the year ended December 31, 2002 are as follows: Two Months Ended
    
    
    Year Ended(In thousands)
    
    February 28, 2003
    
    
    December 31, 2002Total revenue
    
    $
    11,234
    
    
    $
    62,239Income from operations
before income taxes
    
    $
    1,609
    
    
    $
    10,710Provision for income taxes
    
    
    618
    
    
    
    4,139Income from discontinued
operations, net of tax
    
    $
    991
    
    
    $
    6,571Gain on sale of discontinued
operations
    
    $
    61,201
    
    
    $
    Provision for income taxes
    
    
    28,308
    
    
    
    Gain on sale of discontinued
operations, net of tax
    
    $
    32,893
    
    
    $
    
 5 Debt and Other Financing Long-term debt at December 31, 2004 and 2003 was as follows: (In thousands)December 31,
    
    2004
    
    
    2003Receivables Facility
    
    $
    50,000
    
    
    $
    50,000Other long-term debt
    
    
    
    
    
    
    1,970Capital leases
    
    
    100
    
    
    
    5950,100
    
    
    
    52,029Less current maturities
    
    
    (50,083
    )
    
    
    (50,194
    )$
    17
    
    
    $
    1,835
 41




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Notes to Consolidated Financial Statements continuedChoicePoint 2004 Annual Report On December 29, 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 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 which expires
December 29, 2009. From May 10, 2002 through December 29, 2004, the Company had a $325 million
unsecured revolving credit facility and prior to May 10, 2002, the Company had a $250 million
unsecured revolving credit facility (the Former Credit Facilities) with a group of banks. There
were no borrowings under the Credit Facility or line of credit as of December 31, 2004 or the
Former Credit Facilities as of December 31, 2003. The Credit Facility contains covenants customary for facilities of this type. Such covenants
include limitations, in certain circumstances, on the ability of the Company and its subsidiaries
to (i) effect a change of control of the Company, (ii) incur certain types of liens, and (iii)
transfer or sell assets. The Credit Facility also requires compliance with financial covenants,
including (i) maximum funded debt to EBITDA and (ii) minimum interest coverage. 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 Company
will maintain the balance in the designated pool of accounts receivable sold by selling undivided
interests in new receivables as existing receivables are collected. 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. Due to certain contractual
removal-of-accounts provisions, the Receivables Facility has been recorded as an on-balance sheet
financing transaction in accordance with SFAS No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. The Company believes the Receivables Facility
provides a low cost of financing and is an additional source of debt capital with diversification
from other alternatives. Net proceeds from the Receivables Facility were $50.0 million at December
31, 2004 and December 31, 2003. The average interest rate based on the terms of the Receivables
Facility was approximately 2.8% at December 31, 2004 and approximately 1.5% at December 31, 2003. In 1997, the Company entered into a $25 million synthetic lease agreement for the Companys
headquarters building. Under the synthetic lease agreement, a third-party lessor purchased the
property, paid for the construction and leased the building to the Company. In 2001, the Company
entered into another synthetic lease agreement for up to $48 million to finance the construction of
its new data center facility. Both leases expire in 2007, at which time the Company has the
following options for each lease: renew the lease for an additional five years, purchase the
building for the original cost or remarket the property. If the Company elects to remarket the
properties, ChoicePoint must guarantee the lessor 80% to 85% of the original cost. The Company has accounted for the synthetic leases as operating leases and has recorded rent
expense. If the Company had elected to purchase the properties instead of entering into the
synthetic leases, total assets and debt would have increased by $68.6 million at December 31, 2004
and $67.3 million at December 31, 2003 and the Company would have recorded additional depreciation
expense for the year ended December 31 of approximately $2.2 million in 2004 ($1.4 million after
tax), $1.7 million in 2003 ($1.0 million after tax) and $800,000 in 2002 ($500,000 after tax). At December 31, 2003, ChoicePoint had four interest rate swap agreements (the Swap
Agreements) outstanding that reduce the impact of changes in the benchmark interest rate (LIBOR)
on its LIBOR-based payments on the synthetic leases. 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. These Swap Agreements involve the receipt of a variable rate and payment by
ChoicePoint of fixed rates between 4.6% and 6.5%. ChoicePoint has designated all of these swaps as
cash flow hedges of the variability in expected future interest payments on $67 million of the
Companys LIBOR-based payments. The Company is exposed to credit loss in the event of
nonperformance by the other parties to the Swap Agreements. However, the Company does not
anticipate nonperformance by the counterparties. Scheduled maturities of long-term debt subsequent to December 31, 2004 are as follows: $50.1
million in 2005 and $17,000 in 2006. 42




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Notes to Consolidated Financial StatementscontinuedChoicePoint 2004 Annual Report 6 Income Taxes ChoicePoint accounts for any income tax contingencies in accordance
with SFAS No. 5,
Accounting for Contingencies. The Company records deferred income taxes using enacted tax laws
and rates for the years in which the taxes are expected to be paid. Deferred income tax assets and
liabilities are recorded based on the differences between the financial reporting and income tax
bases of assets and liabilities. The provision for income taxes consists of the following: (In thousands)Year Ended December 31,
    
    2004
    
    
    2003
    
    
    2002Current:Federal
    
    $
    53,085
    
    
    $
    78,029
    
    
    $
    55,306State
    
    
    5,970
    
    
    
    9,792
    
    
    
    5,791Total current
    
    
    59,055
    
    
    
    87,821
    
    
    
    61,097Deferred:Federal
    
    
    27,485
    
    
    
    8,008
    
    
    
    (4,744
    )State
    
    
    4,335
    
    
    
    488
    
    
    
    164Total deferred
    
    
    31,820
    
    
    
    8,496
    
    
    
    (4,580
    )Total
    
    $
    90,875
    
    
    $
    96,317
    
    
    $
    56,517
 The provision for income taxes is based solely upon income before income taxes in the
United States. The provision for income taxes is reconciled with the federal statutory rate, as
follows: Year Ended December 31,
    
    2004
    
    
    2003
    
    
    2002Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State and local taxes,
net of federal tax benefit
    
    
    2.8
    
    
    
    2.3
    
    
    
    2.4Other
    
    
    0.3
    
    
    
    1.1
    
    
    
    1.0Effective rate for continuing
operations
    
    
    38.1
    
    
    
    38.4
    
    
    
    38.4Effective rate impact from
discontinued operations
    
    
    
    
    
    
    2.0
    
    
    
    Effective rate impact for
cumulative change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    0.2Overall effective rate
    
    
    38.1
    %
    
    
    40.4
    %
    
    
    38.6
    %
 Components of the Companys deferred income tax assets and liabilities at December 31,
2004 and 2003 are as follows: (In thousands)December 31,
    
    2004
    
    
    2003Deferred income tax assets:Postretirement benefits
    
    $
    12,520
    
    
    $
    13,109Reserves and accrued expenses
    
    
    2,733
    
    
    
    9,281Employee compensation programs
    
    
    11,405
    
    
    
    10,149Goodwill
    
    
    
    
    
    
    2,896Other
    
    
    6,754
    
    
    
    24,015Total deferred income tax assets
    
    
    33,412
    
    
    
    59,450Deferred income tax liabilities:Purchased software, data files,
technology, and other assets
    
    
    (25,519
    )
    
    
    (27,400
    )Goodwill
    
    
    (11,271
    )
    
    
    Depreciation
    
    
    (19,597
    )
    
    
    (5,130
    )Deferred expenses
    
    
    (3,679
    )
    
    
    (11,659
    )Other
    
    
    (407
    )
    
    
    (5,230
    )Total deferred income tax liabilities
    
    
    (60,473
    )
    
    
    (49,419
    )Net deferred income tax (liabilities)
assets
    
    $
    (27,061
    )
    
    $
    10,031
 Included in other current assets in the accompanying Consolidated Balance Sheets were
income tax prepayments of $1.3 million at December 31, 2004 and prepayments of $13.1 million as of
December 31, 2003, which were included in other current liabilities in the accompanying
Consolidated Balance Sheets. 7 Shareholders Equity Stock Split- On June 6,2002, ChoicePoint effected a four-for-three stock split in the form
of a stock dividend for shareholders of record as of May 16, 2002. Share and per share data for all
periods presented have been adjusted to reflect the split. Effective October 3, 2002, shareholders of the Company approved an amendment to the Articles
of Incorporation to increase the authorized common stock of the Company from 100 million to 400
million shares. Stock Options- On April 29, 2003, the shareholders of the Company approved the ChoicePoint Inc.
2003 Omnibus Incentive Plan (the Omnibus Plan). The Omnibus Plan provides for 3,500,000 shares of
common stock that may be issued or transferred pursuant to awards, or in payment of dividend
equivalents paid with respect to awards made under the plan. A variety of discretionary awards for
employees and non-employee directors is authorized under the Omnibus Plan, including incentive or
non-qualified stock options, restricted stock and deferred stock. The vesting of such awards may be
conditioned upon either a specified period of time or the attainment of certain performance goals
as determined by the Management Compensation & Benefits Committee of the Companys Board of
Directors. Option prices are generally set at the closing fair market prices as of the night before
the date of 43




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##### Table of Contents



Notes to Consolidated
Financial StatementscontinuedChoicePoint 2004 Annual Report grant and option terms do not exceed ten years. In 2004, options for 1.4 million shares
were granted at fair market value of the underlying stock under the Omnibus Plan with a weighted
average option price of $38.84. A summary of changes in all outstanding options and the related
weighted average exercise price per share is as follows (shares in thousands): December 31,
    
    2004
    
    
    
    2003
    
    
    
    2002Avg.
    
    
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    
    Avg.Shares
    
    
    Price
    
    
    
    Shares
    
    
    Price
    
    
    
    Shares
    
    
    PriceBalance, beginning of year
    
    
    12,121
    
    
    $
    23.17
    
    
    
    
    12,260
    
    
    $
    21.44
    
    
    
    
    11,840
    
    
    $
    15.31Granted
    
    
    1,358
    
    
    
    38.84
    
    
    
    
    1,571
    
    
    
    33.56
    
    
    
    
    2,946
    
    
    
    40.04Canceled/forfeited
    
    
    (233
    )
    
    
    35.50
    
    
    
    
    (547
    )
    
    
    32.24
    
    
    
    
    (327
    )
    
    
    32.49Exercised
    
    
    (1,637
    )
    
    
    15.28
    
    
    
    
    (1,163
    )
    
    
    14.71
    
    
    
    
    (2,199
    )
    
    
    11.67Balance, end of year
    
    
    11,609
    
    
    $
    25.83
    
    
    
    
    12,121
    
    
    $
    23.17
    
    
    
    
    12,260
    
    
    $
    21.44Exercisable at end of year
    
    
    6,728
    
    
    $
    17.29
    
    
    
    
    7,128
    
    
    $
    14.97
    
    
    
    
    7,285
    
    
    $
    13.82
 The following table summarizes information about stock options outstanding at December
31, 2004 (shares in thousands): Options Outstanding
    
    
    
    Options ExercisableWeighted Average
    
    
    Weighted
    
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    
    AverageContractual Life
    
    
    Exercise
    
    
    
    
    
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    
    in Years
    
    
    Price
    
    
    
    Shares
    
    
    Price$0.000 -$9.210
    
    
    694
    
    
    
    1.0
    
    
    $
    4.44
    
    
    
    
    694
    
    
    $
    4.44$9.211 -$13.815
    
    
    1,753
    
    
    
    2.9
    
    
    
    10.36
    
    
    
    
    1,753
    
    
    
    10.36$13.816-$18.420
    
    
    1,226
    
    
    
    3.9
    
    
    
    13.99
    
    
    
    
    1,226
    
    
    
    13.99$18.421 -$23.025
    
    
    1,015
    
    
    
    4.8
    
    
    
    19.14
    
    
    
    
    991
    
    
    
    19.14$23.026 -$27.630
    
    
    1,528
    
    
    
    5.9
    
    
    
    25.98
    
    
    
    
    1,434
    
    
    
    25.98$27.631 -$36.840
    
    
    1,692
    
    
    
    7.5
    
    
    
    32.78
    
    
    
    
    360
    
    
    
    30.50$36.841 -$41.770
    
    
    2,946
    
    
    
    7.9
    
    
    
    38.86
    
    
    
    
    208
    
    
    
    38.79$41.771 -$46.050
    
    
    755
    
    
    
    7.4
    
    
    
    42.92
    
    
    
    
    62
    
    
    
    42.80
 On a periodic basis, certain key officers, employees and directors of ChoicePoint
are granted restricted stock under the Omnibus Plan. During 2004, 136,000 shares were awarded with
a weighted average market value at the date of grant of $38.52 per share. During 2003 and
2002, 209,500 and 63,834 shares were awarded under the Omnibus Plan and a predecessor plan with
weighted average market values per share of $35.71 and $41.50, respectively. The market value of
the restricted stock at the date of grant was recorded as paid-in capital, a component of
shareholders equity and is being charged to expense over the vesting periods through April 2010.
The compensation cost charged against income for restricted stock was $6.2 million in 2004, $5.4
million in 2003 and $5.9 million in 2002. The Company applies APB No. 25 and related interpretations in accounting for its stock option
plans. Accordingly, the Company does not recognize compensation cost in connection with its stock
option plans. See Note 3 for the pro forma effect if the Company had elected to recognize
compensation cost for these plans based on the fair value at grant date as prescribed by SFAS No.
123. Shareholder Rights Plan- On October 29, 1997, the Companys board of directors adopted a
Shareholder Rights Plan (the Rights Plan). The Rights Plan contains provisions to protect
the Companys shareholders in the event of an unsolicited offer to acquire the Company, including
offers that do not treat all shareholders equally, the acquisition in the open market of shares
constituting control without offering fair value to all shareholders, and other coercive, unfair,
or inadequate takeover bids and practices that could impair the ability of the ChoicePoint board of
directors to fully represent shareholders interests. Pursuant to the Rights Plan, the ChoicePoint
board of directors declared a dividend of one Share Purchase Right (a Right) for each outstanding
share of the Companys common stock as of November 14, 1997. The Rights will be represented by, and
trade together with, the Companys common stock. The Rights will separate upon passage of time in
certain events including the acquisition of 15% or more of the Companys common stock by a person
or group of affiliated or associated persons (Associated Persons). The Rights will not become
exercisable unless certain triggering events occur prior to expiration on November 14, 2007. Among
the triggering events will be the acquisition of 20% or more of the Companys common stock by
Associated Persons. Unless previously redeemed by the ChoicePoint board of directors, upon the
occurrence of one of the specified triggering events, each Right that is not held by the 20% or
more shareholder will entitle its holder to purchase one share of common stock or, under certain
circumstances, additional shares of common stock at 44




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##### Table of Contents



Notes to Consolidated Financial StatementscontinuedChoicePoint 2004 Annual Report a discounted price. The Rights will cause substantial dilution to a person or group
that attempts to acquire ChoicePoint on terms not approved by the ChoicePoint board of directors.
Thus, the Rights are intended to encourage persons who may seek to acquire control of ChoicePoint
to initiate such an acquisition through negotiation with the board of directors. Grantor Trusts- ChoicePoint has established two grantor trusts which are used to purchase
ChoicePoint common stock in the open market as previously approved by the board of directors for
distribution under its various compensation and benefit plans. Funds from the grantor trusts
totaling $ 17.2 million representing 1.1 million shares of ChoicePoint common stock are reflected
as treasury stock, at cost, in the December 31, 2004 consolidated balance sheet. Cash remaining in
the grantor trusts of approximately $1.1 million at December 31, 2004 and December 31, 2003 are
included in cash and cash equivalents in the accompanying consolidated balance sheets. Treasury Stock- In addition to the common stock held in the grantor trusts, in accordance with the
terms of the awards, ChoicePoint redeemed 3,900 shares of common stock in 2004 and 2,800 shares in
2003 at market price in consideration of the minimum tax obligations for restricted stock vestings
at a total cost of $151,000 in 2004 and $99,000 in 2003. 8 Employee Benefits 401(k) Profit Sharing Plan- ChoicePoint adopted a 401(k) profit sharing plan, under which
eligible Company employees may contribute up to 75% of their compensation. ChoicePoint intends to
make matching contributions in the form of ChoicePoint common stock equal to a minimum of 25% of
employee contributions up to the first 6% of an employees contributions. The match made on
eligible employee contributions was 58% for 2004, 61% for 2003 and 64% for 2002. Employee
contributions will be invested in one of the available investment funds, as selected by the
employee. Matching contributions will be invested in the ChoicePoint stock fund. ChoicePoint may
make additional contributions based on achievement of targeted performance levels. The expense for
the 401(k) profit sharing plan was $4.0 million in 2004, $3.3 million in 2003 and $4.8 million in
2002. As a result of the Spinoff, ChoicePoint agreed to contribute to a defined contribution plan
for certain ChoicePoint employees. The additional benefits are intended to offset the adverse
impact of transitioning out of a defined benefit pension plan and represent the present value of
the estimated future contributions. The expense recognized and amounts contributed to the 401(k)
profit sharing plan to offset the adverse impact of transitioning out of the defined benefit plan
was $1.4 million in 2004, $1.5 million in 2003 and $1.7 million in 2002. Deferred Compensation Plan- ChoicePoint offers deferred compensation plans to directors and
certain officers of the Company. Under these plans, amounts earned by an officer or director may be
deferred and credited with gains and losses based upon four different investment alternatives,
including ChoicePoint common stock. The corresponding deferred compensation liability is recorded
at the current fair value of the individuals investment elections and any changes are recorded as
expense in the period incurred. As of December 31, 2004 and 2003, related to these plans, the
Company has recorded an other long-term liability of $20.5 million and $ 17.7 million,
respectively. Postretirement Benefits - As a result of the Spinoff, the Company agreed to provide certain retiree
health care and life insurance benefits for a defined group of eligible employees. No additional
members have been added to this group since the Spinoff. Health care and life insurance benefits
are provided through a trust. The Company accrues the cost of
providing postretirement benefits
for medical and life insurance coverage over the active service period of each employee, net of the
estimated amount of participant contributions. These postretirement benefit plans are unfunded. The
accounting for the health care plans anticipates future cost-sharing changes to the written plans
that are consistent with the Companys expressed intent to increase retiree contributions equal to
a percentage of health care cost increases. ChoicePoint uses December 31 as the measurement date
for these plans. The following table presents a reconciliation of the changes in the plans benefit obligations
and fair value of assets at December 31, 2004 and 2003: (In thousands)December 31,
    
    2004
    
    
    2003Change in benefit obligation:Obligation at beginning of year
    
    $
    40,347
    
    
    $
    33,176Service cost
    
    
    100
    
    
    
    51Interest cost
    
    
    1,801
    
    
    
    2,108Actuarial (gain) loss
    
    
    (7,543
    )
    
    
    10,685Benefit payments, net of
participant contributions
    
    
    (3,490
    )
    
    
    (5,673
    )Obligation at end of year
    
    
    31,215
    
    
    
    40,347Change in plan assets:Fair value of plan assets at
beginning of year
    
    
    
    
    
    
    Employer contributions
    
    
    3,490
    
    
    
    5,673Benefit payments
    
    
    (3,490
    )
    
    
    (5,673
    )Fair value of plan assets at end of year
    
    
    
    
    
    
    Funded status:Funded status at end of year
and net amount recognized
    
    
    (31,215
    )
    
    
    (40,347
    )Unrecognized prior service cost
    
    
    (741
    )
    
    
    (1,117
    )Unrecognized (gain) loss
    
    
    (1,894
    )
    
    
    5,649Net amount recognized
    
    
    (33,850
    )
    
    
    (35,815
    )Less current portion
    
    
    (5,000
    )
    
    
    (5,000
    )Accrued benefit cost
    
    $
    (28,850
    )
    
    $
    (30,815
    )
 45




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##### Table of Contents



Notes to Consolidated Financial StatementscontinuedChoicePoint 2004 Annual Report The current portion is included in other current liabilities in the accompanying
consolidated balance sheets. Net periodic postretirement benefit expense (income) includes the
following components: (In thousands)Year Ended December 31,
    
    2004
    
    
    2003
    
    
    2002Service cost
    
    $
    100
    
    
    $
    51
    
    
    $
    158Interest
cost on accumulated
benefit obligation
    
    
    1,801
    

    
    
    2,108
    
    
    
    2,338Amortization of prior
service cost
    
    
    (375
    )
    
    
    (583
    )
    
    
    (1,066
    )Amortization of losses
    
    
    
    
    
    
    (71
    )
    
    
    (1,047
    )Curtailment gain
    
    
    
    
    
    
    (1,020
    )
    
    
    Net periodic postretirement
benefit expense
    
    $
    1,526
    
    
    $
    485
    
    
    $
    383
 In 2003, the Company recognized a curtailment gain due to the sale of CPCS (Note 4). The following are weighted average assumptions used in the computation of postretirement
benefit expense and the related obligation: Year Ended December 31,
    
    2004
    
    
    2003
    
    
    2002Discount rate used to
determine accumulated
postretirement benefit obligation
at December 31
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    6.75
    %Discount rate used to
determine net periodic
postretirement benefit expense
    
    
    5.75
    %
    
    
    6.75
    %
    
    
    7.50
    %Initial health care cost
trend rate
    
    
    11.33
    %
    
    
    12.33
    %
    
    
    13.38
    %Ultimate health care cost
trend rate
    
    
    5.25
    %
    
    
    5.50
    %
    
    
    5.50
    %Year ultimate health care cost
trend rate reached
    
    
    2013
    
    
    
    2012
    
    
    
    2012
 Assumed health care trend rates have a significant effect on the amounts reported for
health care plans. If the health care cost trend rate were changed by 1% for all future years, the
accumulated postretirement benefit obligation (APBO) as of December 31, 2004 would have been
impacted as follows: 1-Percentage
    
    
    1-Percentage(In thousands)
    
    Point Increase
    
    
    Point DecreaseEffect total APBO
    
    $
    335
    
    
    $
    (314
    )Effect total service cost plus interest cost
    
    
    25
    
    
    
    (23
    )
 The Company continues to evaluate ways in which it can better manage these benefits and
control its costs. Any changes in the plan, revisions to assumptions or changes in the Medicare
program that affect the amount of expected future benefits may have a significant effect on the
amount of the reported obligation and future annual expense. In connection with the VitalChek acquisition, as of December 31, 2002, the Company had a
defined benefit pension plan which covered substantially all of the permanent employees of
VitalChek and was terminated by the Company effective January 31, 2003. 9 Commitments and Contingencies Leases-The Companys operating leases involve principally office space and office equipment.
Rental expense relating to these leases was $16.8 million in 2004, $17.3 million in 2003 and $19.2 million in 2002. Included in the operating leases are two synthetic lease agreements (Note 5).
The Company has accounted for these synthetic leases as operating leases and has recorded rent
expense. If the Company had elected to purchase the property instead of entering into the synthetic
leases, assets and debt would have increased by $68.6 million at December 31, 2004 and the Company
would have recorded additional depreciation expense of $2.2 million in 2004, $1.7 million in 2003
and $800,000 in 2002. Future minimum payment obligations for noncancelable operating leases exceeding one year, net
of subleases and assuming the utilization of the full notional amount under the synthetic leases,
are as follows as of December 31, 2004: (In thousands)Year
    
    Amount2005
    
    $
    16,7802006
    
    
    13,1382007
    
    
    8,7272008
    
    
    5,0122009
    
    
    3,862Thereafter
    
    
    10,931$
    58,450
 46




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Notes to Consolidated Financial StatementscontinuedChoicePoint 2004 Annual Report Change in Control Provisions in Employment Agreements  The Company has entered into employment agreements with certain officers to provide severance
pay and benefits in the event of a change in control of ChoicePoint. At December 31, 2004, the
maximum contingent liability under the agreements or plans was approximately $62.0 million. In
addition, the Companys restricted stock and stock option plans provide that all outstanding grants
under the Omnibus Plan shall become fully vested in the event of a change in control. Litigation-A class action lawsuit against the Company was filed in the United States District
Court for the Southern 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 (Florida 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 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. This complaint seeks
certification as a class action, compensatory damages, attorneys fees and costs, and injunctive
and other relief. The Company is defending against this action 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. See Regulatory and Legislative Matters, Legal Proceedings and Assessment in Note 14 where
legal issues related to illegal data access are discussed. While the ultimate resolution of these 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. ChoicePoint also is involved in other 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 estimable. 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. 10 Other Operating Charges During the year ended December 31, 2003, the Company recorded other operating charges of
$30.9 million ($19.1 million net of taxes) as a result of the realignment of our technology
infrastructure and operations following the divestiture of our CPCS business, the transition to our
new data center, the consolidation of certain Business Services operations and
the re-engineering of certain of our direct marketing businesses. This charge included asset
impairments of $15.4 million primarily related to the write-down of equipment and other long-lived
assets at closed facilities or abandoned technology in the realignment and re-engineering, the
write-down of acquisition intangibles related to abandoned products and customer relationships of
$6.0 million, $4.4 million in severance and termination benefits and $5.2 million of abandoned
lease commitments (net of estimated sublease income where applicable) and other contractual
commitments that are expected to be satisfied at various dates through August 2008. During the
second quarter of 2002, the Company recorded an unusual item charge of $7.3 million. This charge
included a write-down of minority investments in start-up companies of $2.4 million, asset
impairments of technology initiatives of $3.0 million, $0.6 million in severance and termination
benefits and $ 1.4 million of expenses primarily related to the closure of two facilities and
remaining obligations. No other operating charges were incurred in 2004. As of December 31, 2004,
$2.3 million was accrued for the remaining obligations related to these charges. The long-lived assets were deemed to be impaired in accordance with SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets as events or changes in circumstances
indicated that the carrying amounts of the assets were not recoverable. Where applicable, the
write-downs were based on an analysis of estimated future cash flows related to the assets. A
breakdown of these impairments by segment for years ended December 31, 2003 and 2002 is as follows: 47




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##### Table of Contents



Notes to Consolidated Financial Statementscontinued ChoicePoint 2004 Annual Report Insurance
    
    
    Business
    
    
    Marketing(In millions)
    
    Services
    
    
    Services
    
    
    Services
    
    
    Other
    
    
    Total2003Asset impairments
    
    $
    1.1
    
    
    $
    9.8
    
    
    $
    0.8
    
    
    $
    3.7
    
    
    $
    15.4Write-down of acquisition intangibles
    
    
    0.3
    
    
    
    0.6
    
    
    
    5.1
    
    
    
    
    
    
    
    6.02002Asset impairments
    
    $
    
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    2.9
    
    
    $
    3.0Write-down of minority investments
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    2.4
    
    
    
    2.4
 11 Segment Disclosures During the first quarter of 2004, ChoicePoint reorganized its product lines into four
reportable segments: Insurance Services, Business Services, Government Services and
Marketing Services because of a change in managerial and operational reporting
responsibilities and due to recent acquisitions within the Government Services business
unit. Historical information in the following tables has been reclassified to conform to
the current presentation. See Note 1 for a description of each service group. The
accounting policies of the segments are the same as those described in Note 3. Management
evaluates the performance of its segments exclusive of other operating charges (Note 10).
Sales and transfers between segments are generally accounted for at cost plus a reasonable
profit; the effects of intersegment sales are immaterial to the computation of segment
profit. Substantially all of the Companys operations are located in the United States, and
no one customer represents more than 10% of total operating revenue. December 31, 2004
    
    
    
    December 31, 2003
    
    
    
    December 31, 2002Operating
    
    
    
    
    
    
    
    Operating
    
    
    
    
    
    
    
    Operating(In thousands)
    
    Revenue
    
    
    Income
    
    
    
    Revenue
    
    
    Income
    
    
    
    Revenue
    
    
    IncomeInsurance Services
    
    $
    352,725
    
    
    $
    195,715
    
    
    
    $
    309,124
    
    
    $
    172,518
    
    
    
    $
    270,282
    
    
    $
    144,639Business
Services (a)
    
    
    349,881
    
    
    
    73,438
    
    
    
    
    276,148
    
    
    
    56,540
    
    
    
    
    239,363
    
    
    
    50,562Government Services
    
    
    83,934
    
    
    
    21,464
    
    
    
    
    63,335
    
    
    
    14,540
    
    
    
    
    69,398
    
    
    

    18,862Marketing ServicesMarketing Services service
revenue
    
    
    93,389
    
    
    
    18,651
    
    
    
    
    96,642
    
    
    
    21,849
    
    
    
    
    105,833
    
    
    
    32,866Reimbursable expenses
    
    
    34,280
    
    
    
    
    
    
    
    
    45,395
    
    
    
    
    
    
    
    
    38,520
    
    
    
    Marketing Services
    
    
    127,669
    
    
    
    18,651
    
    
    
    
    142,037
    
    
    
    21,849
    
    
    
    
    144,353
    
    
    
    32,866Royalty
    
    
    4,504
    
    
    
    2,062
    
    
    
    
    5,102
    
    
    
    2,068
    
    
    
    
    5,855
    
    
    
    3,326Divested and discontinued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    (206
    )Corporate
and shared (b)
    
    
    
    
    
    
    (69,552
    )
    
    
    
    
    
    
    
    (58,013
    )
    
    
    
    
    
    
    
    (60,185
    )Other operating charges (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,942
    )
    
    
    
    
    
    
    
    (7,342
    )Total
    
    $
    918,713
    
    
    $
    241,778
    
    
    
    $
    795,746
    
    
    $
    178,560
    
    
    
    $
    729,323
    
    
    $
    182,522
 Assets
    
    
    
    Depreciation and AmortizationDecember 31,
    
    
    
    December 31,(In thousands)
    
    2004
    
    
    2003
    
    
    2002
    
    
    
    2004
    
    
    2003
    
    
    2002Insurance Services
    
    $
    214,033
    
    
    $
    174,909
    
    
    $
    158,773
    
    
    
    $
    8,305
    
    
    $
    9,583
    
    
    $
    8,675Business Services
    
    
    669,773
    
    
    
    530,861
    
    
    
    473,693
    
    
    
    
    25,729
    
    
    
    19,775
    
    
    
    14,649Government Services
    
    
    140,775
    
    
    
    43,578
    
    
    
    45,436
    
    
    
    
    10,157
    
    
    
    8,306
    
    
    
    6,985Marketing Services
    
    
    228,057
    
    
    
    216,371
    
    
    
    217,203
    
    
    
    
    6,762
    
    
    
    8,049
    
    
    
    8,682Royalty
    
    
    347
    
    
    
    4,317
    
    
    
    5,709
    
    
    
    
    1,356
    
    
    
    1,697
    
    
    
    1,697Unallocated and Other(c)
    
    
    34,491
    
    
    
    51,248
    
    
    
    56,494
    
    
    
    
    9,037
    
    
    
    5,710
    
    
    
    4,162Continuing Operations
    
    
    1,287,476
    
    
    
    1,021,284
    
    
    
    957,308
    
    
    
    
    61,346
    
    
    
    53,120
    
    
    
    44,850CPCS
    
    
    
    
    
    
    
    
    
    
    21,702
    
    
    
    
    
    
    
    
    159
    
    
    
    909Total
    
    $
    1,287,476
    
    
    $
    1,021,284
    
    
    $
    979,010
    
    
    
    $
    61,346
    
    
    $
    53,279
    
    
    $
    45,759
   (a)
    As announced on March 4, 2005, the Company will discontinue the sale of certain
information services offered by its Business Services Segment (Note 14).(b)
    Corporate and shared expenses represent costs of support functions, research and
development initiatives, incentives and profit sharing that benefit all segments.(c)
    Unallocated and Other includes certain corporate items and eliminations that
are not allocated to the segments. 48




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##### Table of Contents



Notes to Consolidated Financial StatementscontinuedChoicePoint 2004 Annual Report The Company owns a 62.5% interest in laser patent revenue relating to a certain
patent involving laser technology that will expire in May 2005. The Company owned an additional
62.5% interest in laser patent revenue relating to a certain patent that expired in November 2004.
Revenue from these patents is included in Royalty above. Upon the expiration of the applicable
patent, the Company loses its right to exclude others from exploiting the inventions claimed
therein, and accordingly, the obligation of third parties to make royalty payments will cease. 12 Related Party Transactions During 2004, one director of ChoicePoint served as a director of The Home Depot, Inc. During
2004, the Company performed services for The Home Depot, Inc. through the Business Services segment
totaling approximately $18.0 million ($13.6 million net of pass-through expenses). These services
were the result of arms length negotiations in the ordinary course of business. One director of the Company was a director of FleetBoston Financial Corporation until April 1,
2004 when it merged with Bank of America Corporation and he did not continue as a director of Bank
of America Corporation. In 2002, ChoicePoint entered into a credit facility with a total commitment
of $325 million, in which Fleet National Bank, a subsidiary of FleetBoston Financial Corporation, participated in the amount of $25 million. This
facility was replaced with a new credit facility as of December 29, 2004 (Note 5). Total interest
and fees paid to Fleet National Bank through March 31, 2004 related to this transaction during the
first quarter of 2004 was approximately $9,000. ChoicePoint also has a synthetic lease with a total
commitment of up to $48 million, in which Fleet National Bank participates in the amount of $13.8
million. As of March 31, 2004, $42.3 million was outstanding under the synthetic lease, of which
ChoicePoint is liable to Fleet National Bank for $12.2 million. Interest paid to Fleet National
Bank for the first quarter of 2004 related to this transaction was approximately $156,000. In
addition, during the first quarter of 2004, the Company provided
public filings information services
for FleetBoston Financial Corporation totaling approximately $8,000. The Credit Facility, synthetic
lease and services performed were the results of arms length negotiations conducted in the
ordinary course of business. During 2004, one director of ChoicePoint served as a director of General Electric Company.
During 2004, the Company performed business outsourcing, software solutions and background
screening services for General Electric Company and its subsidiaries through the Insurance Services
and Business Services segments totaling approximately $10.4 million. These services were the
result of arms length negotiations in the ordinary course of business. 49




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Notes to Consolidated Financial StatementscontinuedChoicePoint 2004 Annual Report 13 Quarterly Financial Summary (Unaudited) Following is a summary of the unaudited interim results of operations for each
quarter in the years ended December 31, 2004 and 2003: (In thousands, except per share data)
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthYear Ended December 31, 2004
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    TotalService revenue
    
    $
    204,385
    
    
    $
    223,700
    
    
    $
    231,466
    
    
    $
    224,882
    
    
    $
    884,433Reimbursable expenses
    
    
    12,860
    
    
    
    7,691
    
    
    
    6,149
    
    
    
    7,580
    
    
    
    34,280Total revenue
    
    
    217,245
    
    
    
    231,391
    
    
    
    237,615
    
    
    
    232,462
    
    
    
    918,713Cost of service revenue
    
    
    110,771
    
    
    
    116,528
    
    
    
    118,750
    
    
    
    111,793
    
    
    
    457,842Reimbursable expenses
    
    
    12,860
    
    
    
    7,691
    
    
    
    6,149
    
    
    
    7,580
    
    
    
    34,280Gross profit
    
    
    93,614
    
    
    
    107,172
    
    
    
    112,716
    
    
    
    113,089
    
    
    
    426,591Operating income
    
    
    54,271
    
    
    
    59,491
    
    
    
    64,036
    
    
    
    63,980
    
    
    
    241,778Net income
    
    
    33,262
    
    
    
    36,323
    
    
    
    39,153
    
    
    
    39,217
    
    
    
    147,955EPS, basic
    
    
    0.38
    
    
    
    0.42
    
    
    
    0.45
    
    
    
    0.45
    
    
    
    1.69EPS, diluted
    
    
    0.37
    
    
    
    0.40
    
    
    
    0.43
    
    
    
    0.43
    
    
    
    1.62
 (In thousands, except per share data)
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthYear Ended December 31, 2003
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    TotalService revenue
    
    $
    184,005
    
    
    $
    188,779
    
    
    $
    189,116
    
    
    $
    188,451
    
    
    $
    750,351Reimbursable expenses
    
    
    10,944
    
    
    
    10,470
    
    
    
    12,402
    
    
    
    11,579
    
    
    
    45,395Total revenue
    
    
    194,949
    
    
    
    199,249
    
    
    
    201,518
    
    
    
    200,030
    
    
    
    795,746Cost of service revenue
    
    
    99,786
    
    
    
    98,987
    
    
    
    100,963
    
    
    
    102,412
    
    
    
    402,148Reimbursable expenses
    
    
    10,944
    
    
    
    10,470
    
    
    
    12,402
    
    
    
    11,579
    
    
    
    45,395Gross profit
    
    
    84,219
    
    
    
    89,792
    
    
    
    88,153
    
    
    
    86,039
    
    
    
    348,203Operating income (a)
    
    
    51,803
    
    
    
    34,663
    
    
    
    47,774
    
    
    
    44,320
    
    
    
    178,560Income from continuing operations
    
    
    31,291
    

    
    
    20,853
    
    
    
    29,055
    
    
    
    26,909
    
    
    
    108,108EPS from continuing operations, basic
    
    
    0.37
    
    
    
    0.24
    
    
    
    0.34
    
    
    
    0.31
    
    
    
    1.26EPS from continuing operations, diluted
    
    
    0.35
    
    
    
    0.23
    
    
    
    0.32
    
    
    
    0.30
    
    
    
    1.21Net income
    
    
    65,175
    
    
    
    20,853
    
    
    
    29,055
    
    
    
    26,909
    
    
    
    141,992EPS, basic
    
    
    0.76
    
    
    
    0.24
    
    
    
    0.34
    
    
    
    0.31
    
    
    
    1.65EPS, diluted
    
    
    0.73
    
    
    
    0.23
    
    
    
    0.32
    
    
    
    0.30
    
    
    
    1.58
 The unaudited quarterly financial information reflects all adjustments that
are, in the opinion of management, necessary for a fair presentation of the results for
the interim periods presented.   (a) Operating income decreased in the second, third and
fourth quarters of 2003 due to $19.8 million, $4.0 million and $7.1 million of other
operating charges, respectively (Note 10). The net effect of these items on net
income was $12.2 million or $0.14 per share in the second quarter of 2003, $2.5
million or $0.03 per share in the third quarter of 2003 and $4.4 million or $0.05 per
share in the fourth quarter of 2003. 14 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. 50




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Notes to Consolidated Financial StatementscontinuedChoicePoint 2004 Annual Report 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. 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. 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. 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. 51




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Notes to Consolidated Financial StatementscontinuedChoicePoint 2004 Annual Report 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. 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. 52




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Shareholder Information
ChoicePoint 2004 Annual Report Annual Meeting The Annual Meeting of Shareholders will be held on April 28, 2005 in New York, NY. Shareholders
are encouraged to attend the meeting, which will begin at 10:00 a.m. local time. Market Information ChoicePoint common stock trades on the worlds largest financial market, the New York Stock
Exchange (NYSE), under the symbol CPS. Shareholders will find volume and pricing information in
leading financial publications as well as the Investor Relations section of ChoicePoints Web site
(www.choicepoint.com). As of February 28, 2005, there were 90.0 million common shares outstanding and ChoicePoint common
stock was held by 3,587 shareholders of record. Managements Certifications The certifications of the Companys Chief Executive Officer and Chief Financial Officer required by
the Sarbanes-Oxley Act have been included as Exhibits 31 and 32 in the Companys Form 10-K. In
addition, in 2004, the Companys Chief Executive Officer provided to the NYSE an unqualified
certification as to the Companys compliance with the NYSEs corporate governance listing standards
during 2003 as required by the NYSE listing standards. Quarterly Stock Performance ChoicePoint common stock
first traded on August 8, 1997 at a price  adjusted for a two-for-one
stock split effective November 24, 1999, a three-for-two split effective March 7, 2001 and a
four-for-three split effective June 6, 2002  of $8.94. Shown below, on that adjusted basis, are
high and low sale prices for each quarter of 2003 and 2004. High
    
    
    LowFirst Quarter 2003
    
    $
    42.04
    
    
    $
    28.30Second Quarter 2003
    
    
    38.51
    
    
    
    32.00Third Quarter 2003
    
    
    39.75
    
    
    
    31.90Fourth Quarter 2003
    
    
    38.97
    
    
    
    33.39First Quarter 2004
    
    $
    38.95
    
    
    $
    36.15Second Quarter 2004
    
    
    46.10
    
    
    
    37.87Third Quarter 2004
    
    
    45.65
    
    
    
    39.91Fourth Quarter 2004
    
    
    46.49
    
    
    
    40.72
 Analyst Coverage A number of leading Sell Side financial analysts and investment advisory services produce
investment research on ChoicePoint. For a current list, see the Investor Relations section of the
ChoicePoint Web site, www.choicepoint.com. Dividend Policy ChoicePoint has not paid any dividends since it became a public company, and it does not anticipate
paying any in the near future. Investor Information The Investor Relations section of ChoicePoints corporate Web site (www.choicepoint.com) contains a
wealth of valuable information, ranging from financial news releases and filings to archived
(audio) copies of investor conference calls. For additional information, or to obtain copies of the Form 10-K for the year ended December 31,
2004 (which will be provided free of charge with a copy of the financial statements and schedules),
Form 10-Q, or other materials, please contact: John Mongelli
Vice President, Investor Relations
1000 Alderman Drive
Alpharetta, GA 30005
Email: investors@choicepoint.com
Phone: 770-752-6171 Financial reports can also be obtained from ChoicePoints Web site. Conference Calls ChoicePoint conducts quarterly conference calls to discuss financial performance and other issues
of importance to investors. To learn about scheduled calls, hear archived copies of previous calls,
and to listen in to live Webcasts, visit the Web site at www.choicepoint.com. Transfer Agent and Registrar Shareholders with questions concerning the transfer of shares, lost certificates, changes of
address, or other issues should contact ChoicePoints transfer agent and registrar: SunTrust Banks, Inc.
P.O. Box 4625
Atlanta, GA 30302
800-568-3476 Independent Public Accountants Deloitte & Touche LLP
Atlanta, GA Trademarks ChoicePoint, the ChoicePoint logo, Current Carrier, VitalChek, C.L.U.E. and LienGuard are
registered trademarks; and PolicyWatch, VolunteerSelectand DEBTOR Discovery are service marks of
ChoicePoint Asset Company. © 2005 ChoicePoint Asset Company. All rights reserved.
Designed and produced by Corporate Reports Inc./Atlanta www.corporatereport.com 53




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Board of Directors and Elected Officers Board of Directors Derek V. Smith1*
Chairman and Chief Executive Officer
ChoicePoint Inc.
Director Since 1997 Doug C. Curling3
President and Chief Operating Officer
ChoicePoint Inc.
Director Since 2000 Thomas M. Coughlin1,2*,5
Retired Vice Chairman
Wal-Mart Stores Inc.
Director Since 2001 James M. Denny2
Retired Vice Chairman
Sears, Roebuck & Co.
Director Since 1997 Dr. John J. Hamre3*,4,5
President and Chief Executive Officer
Center for Strategic and International Studies
Director Since 2002 Kenneth G. Langone1,5*
Chairman, President,
and Chief Executive Officer
Invemed Associates LLC
Director Since 2000 John B. McCoy2,4
Retired Chairman
Bank One Corporation
Director Since 2003 Terrence Murray 1,4*,5
Retired Chairman
FleetBoston
Financial Corporation
Director Since 2002 Ray M. Robinson
Chairman
East Lake Community Foundation
President
East Lake Golf Club
Director Since 2004 Charles I. Story3
President and Chief Executive Officer
INROADS, Inc.
Director Since 1997 Board Committees 1. Executive Committee 2. Audit Committee 3. Privacy Committee 4. Management Compensation & Benefits Committee 5. Corporate Governance & Nominating Committee   *
    
    Denotes Committee Chairperson Elected Officers Derek V. Smith
Chairman and Chief Executive Officer
Joined Company 1997* Doug C. Curling
President and Chief Operating Officer
Joined Company 1997* David T. Lee
Executive Vice President
Joined Company 1997* Steven W. Surbaugh
Chief Financial Officer
Joined Company 2002 J. Michael de Janes
General Counsel
Joined Company 1997* David W. Davis
Corporate Secretary and
Vice President of Government Affairs
Joined Company 2003 David E. Trine
Treasurer and Corporate Controller
Joined Company 1997*   *
    
    Also member of the ChoicePoint senior management team prior to the Spinoff in 1997.