Factual Data (FDCC) 10-Q 2002 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-24205

Factual Data Corp.

(Exact name of Registrant as specified in its charter)

Colorado
(State or other jurisdiction of
incorporation or organization) 84-1449911
(I.R.S. Employer
Identification No.)

5200 Hahns Peak Drive, Loveland, Colorado 80538
(Address of principal executive offices) (Zip code)

(970) 663-5700
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

     As of November 11, 2002, the registrant had 6,188,589 shares of common stock outstanding.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
		UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosure about Market Risk
	Item 4. Controls and Procedures
PART II — OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds
	Item 3. Defaults upon Senior Securities
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
EX-3.1 Amendment to Articles of Incorporation
EX-99.1 Chief Executive Officer Certification
EX-99.2 Chief Financial Officer Certification

TABLE OF CONTENTS

FACTUAL DATA CORP.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2002

TABLE OF CONTENTS

PART I.	Financial Information
Item 1.	Financial Statements
	Consolidated Balance Sheets — September 30, 2002 (Unaudited) and December 31, 2001	3
	Unaudited Consolidated Statements of Income — For the
	Three Months Ended September 30, 2002 and September 30, 2001 and the Nine Months Ended September 30, 2002 and September 30, 2001	4
	Unaudited Consolidated Statements of Cash Flows — For the
	Nine Months Ended September 30, 2002 and September 30, 2001	5
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4	Controls and Procedures	21
PART II.	Other Information
Item 1.	Legal Proceedings	22
Item 2.	Changes in Securities and Use of Proceeds	22
Item 3.	Defaults upon Senior Securities	22
Item 4.	Submission of Matters to a Vote of Security Holders	22
Item 5.	Other Information	22
Item 6.	Exhibits and Reports on Form 8-K	23
SIGNATURES		24

2

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

FACTUAL DATA CORP.
CONSOLIDATED BALANCE SHEETS

							September 30,
				December 31,			2002
				2001			(Unaudited)
			Assets
Current assets
		Cash and cash equivalents		$	6,163,743		$	5,390,149
		Trade accounts receivable, net of allowance of $243,946 and $290,354			5,919,521			9,088,711
		Prepaid expenses and other			244,356			334,808
		Deferred income taxes			466,344			450,854
Total current assets					12,793,964			15,264,522
Property and equipment, net of accumulated depreciation of $6,124,635 and $7,698,259					5,722,515			5,824,866
Other assets
		Intangibles, net (including book value of goodwill of $168,971 and $565,971)			28,684,010			29,215,501
		Deferred income taxes			3,463,237			3,187,883
		Other assets			219,805			162,854
Total other assets					32,367,052			32,566,238
Total assets				$	50,883,531		$	53,655,626
	Liabilities and Shareholders’ Equity
Current liabilities
		Line of credit		$	2,200,000		$	—
		Current portion of long-term debt			2,650,862			3,225,161
		Current portion of capitalized lease obligation — license agreements			1,927,139			2,584,502
		Accounts payable			4,806,209			6,045,224
		Accrued branch efficiency costs			510,199			112,397
		Accrued compensation			1,335,466			1,565,145
		Income taxes payable			332,138			875,139
		Accrued expenses			426,986			486,915
		Deferred revenue			78,624			77,748
Total current liabilities					14,267,623			14,972,231
Capitalized lease obligation — license agreements, less current portion					7,386,831			5,261,703
Long-term debt, less current portion					4,754,222			4,598,070
Total liabilities					26,408,676			24,832,004
Shareholders’ equity
		Preferred stock, 1,000,000 shares authorized; none issued and outstanding			—			—
		Common stock, no par value, 50,000,000 shares authorized; 6,120,380 shares issued and outstanding at December 31, 2001 and 6,188,589 shares issued and outstanding at September 30, 2002			27,615,506			27,676,783
		Accumulated (deficit) earnings			(3,140,651	)		1,146,839
Total shareholders’ equity					24,474,855			28,823,622
Total liabilities and shareholders’ equity				$	50,883,531		$	53,655,626

See accompanying notes to unaudited consolidated financial statements.

3

FACTUAL DATA CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

			For the Three Months Ended						For the Nine Months Ended
			September 30,						September 30,
			2001			2002			2001			2002
Revenue:
	Mortgage services		$	9,636,720		$	15,156,839		$	31,118,765		$	37,846,507
	Consumer services			1,619,882			1,846,427			4,856,480			5,169,502
	Other services			616,086			998,643			1,676,772			2,568,569
		Total revenue		11,872,688			18,001,909			37,652,017			45,584,578
Operating expenses:
	Cost of services			6,929,981			9,560,095			21,874,328			24,820,134
	Selling, general, and administrative			2,132,980			3,472,891			6,641,398			9,746,652
	Depreciation and amortization			909,174			1,081,258			2,667,271			3,122,887
	Acquisition consolidation costs			60,533			—			156,905			115,479
		Total operating expenses		10,032,668			14,114,244			31,339,902			37,805,152
Income from operations				1,840,020			3,887,665			6,312,115			7,779,426
Other income (expense):
	Other income			139,639			152,927			342,636			411,642
	Interest expense			(516,111	)		(382,001	)		(1,796,354	)		(1,152,697	)
		Total other expense		(376,472	)		(229,074	)		(1,453,718	)		(741,055	)
Income before income taxes				1,463,548			3,658,591			4,858,397			7,038,371
Income tax expense				554,990			1,448,930			1,879,571			2,750,882
Net income			$	908,558		$	2,209,661		$	2,978,826		$	4,287,489
Earnings per share:
		Basic	$	.15		$	.36		$	.53		$	.70
		Diluted	$	.15		$	.35		$	.53		$	.69
Weighted average shares outstanding:
		Basic		6,119,114			6,181,156			5,634,437			6,142,634
		Diluted		6,262,130			6,267,812			5,663,248			6,209,659

See accompanying notes to unaudited consolidated financial statements.

4

FACTUAL DATA CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

					Nine Months Ended
					September 30,
					2001			2002
Cash flows from operating activities:
	Net income				$	2,978,826		$	4,287,489
	Reconciliation of net income to net cash provided by operating activities:
				Depreciation and amortization		2,667,271			3,122,887
				Unrealized loss on swap agreement		87,968			—
				Bad debt expense		470,197			434,391
				Net cash settlements under swap agreement		63,858			59,733
				Deferred income taxes		302,083			290,844
		Changes in assets and liabilities, net of business acquisitions:
				Accounts receivable		(2,370,257	)		(3,476,894	)
				Prepaid expenses and other		(25,329	)		(90,452	)
				Income tax refund receivable		987,558			—
				Other assets		(55,011	)		66,951
				Accrued branch efficiency costs		(816,035	)		(397,802	)
				Accounts payable		338,659			1,239,015
				Income taxes payable		346,866			543,001
				Accrued expenses and compensation		814,710			289,608
				Deferred revenue		64,538			(876	)
		Net cash provided by operating activities				5,855,902			6,367,895
Cash flows from investing activities:
			Cash used for software development			(563,152	)		(604,643	)
			Purchase of property, equipment and intangibles			(464,100	)		(1,287,398	)
			Net cash settlements under swap agreement			(63,858	)		(59,733	)
			Acquisition of businesses, net of cash acquired			(1,131,563	)		(1,020,000	)
		Net cash used in investing activities				(2,222,673	)		(2,971,774	)
Cash flows from financing activities:
			Principal payments of long-term debt and capital lease obligations			(2,747,071	)		(3,564,325	)
			Borrowings on line of credit			1,900,000			—
			Payments on line of credit			(1,806,395	)		(2,200,000	)
			Proceeds from issuance of long-term debt			—			1,533,333
			Net proceeds from warrants exercised			5,020,767			—
			Net proceeds from employee stock purchases and exercises of stock options			71,727			61,277
			Purchase of treasury stock			(11,134	)		—
		Net cash provided by (used in) financing activities				2,427,894			(4,169,715	)
		Net increase (decrease) in cash and cash equivalents				6,061,123			(773,594	)
Cash and cash equivalents, beginning of period						347,926			6,163,743
Cash and cash equivalents, end of period					$	6,409,049		$	5,390,149

See accompanying notes to unaudited consolidated financial statements.

5

FACTUAL DATA CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)

Supplemental disclosure of non-cash investing and financing activities (unaudited):

     During the nine months ended September 30, 2001, we recorded a warrant subscription receivable of $5.2 million in connection with the issuance of warrants.

     During the nine months ended September 30, 2001, we entered into a capital lease obligation of $570,000 for a license agreement.

     During the nine months ended September 30, 2001 and September 30, 2002, we issued notes payable of $1.6 million and $1.1 million, respectively, in connection with acquisitions.

     During the nine months ended September 30, 2002, we reduced the carrying value of certain license agreements and related capital lease obligations by $290,000 in connection with the revision of certain provisions of the agreements and recorded a receivable of $127,000 for amounts due from the licensor.

     During the nine months ended September 30, 2001, we issued 964 shares of stock, originally acquired as treasury stock valued at $9,525 (cost), to employees in connection with its employee stock purchase plan.

	Nine Months Ended
	September 30,
	2001		2002
Cash paid for interest	$	1,696,116	$	1,152,697
Cash paid for income taxes		203,017		1,907,668

See accompanying notes to unaudited consolidated financial statements.

6

FACTUAL DATA CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

     The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). However, certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States have been omitted or condensed pursuant to the rules and regulations of the SEC.

     The consolidated financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of our financial position and operating results for the interim periods. The unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 16, 2002, which includes audited financial statements for the years ended December 31, 2001 and 2000. The results of operations for the three and nine month periods ended September 30, 2002, may not be indicative of the results of operations for the year ended December 31, 2002.

     Certain amounts in the unaudited consolidated statements of operations for the three and nine months ended September 30, 2001 and the unaudited consolidated statements of cash flows for the nine months ended September 30, 2001, have been reclassified to conform to the current period’s presentation.

2. Business Acquisitions

     During the nine months ended September 30, 2002, we completed three asset acquisitions; two during the three months ended March 31, 2002 and one during the three months ended June 30, 2002. The purpose of these acquisitions was to acquire franchise rights, enabling us to increase market share. The acquisitions have been accounted for using the purchase method and the results of operations are reflected in our consolidated financial statements from the date of the acquisition. The purchase price allocation of the acquisitions and consideration paid were as follows:

				Acquisitions Completed During the
				Three Months Ended		Three Months Ended
		Lives		March 31, 2002		June 30, 2002		Total
				(Unaudited)		(Unaudited)		(Unaudited)
Fair value of assets:
	Property and equipment	3-7 years		$	5,500	$	—	$	5,500
	Customer rights and customer lists	15 years			1,527,500		180,000		1,707,500
	Non-compete agreements	3 years			210,000		10,000		220,000
	Goodwill		N/A		397,000		—		397,000
	Other assets		N/A		—		10,000		10,000
				$	2,140,000	$	200,000	$	2,340,000
Consideration paid:
	Notes payable issued			$	1,070,000	$	75,000	$	1,145,000
	Accounts payable assumed				175,000		—		175,000
	Cash payments				895,000		125,000		1,020,000
				$	2,140,000	$	200,000	$	2,340,000

7

     The following unaudited pro forma information presents our consolidated results of operations as if the 2002 acquisitions occurred on January 1, 2001 and January 1, 2002. The unaudited pro forma financial data does not purport to be indicative of the actual results which would have been obtained, or the results which may be obtained in the future.

	Three Months
	Ended September 30,
	2001		2002
	(Unaudited)
Total revenue	$	12,517,611	$	18,001,909
Net income		1,018,711		2,209,661
Basic earnings per share		0.17		0.36
Diluted earnings per share		0.16		0.35

	Nine Months Ended
	September 30,
	2001		2002
	(Unaudited)
Total revenue	$	39,721,911	$	46,137,408
Net income		3,332,364		4,395,401
Basic earnings per share		0.59		0.72
Diluted earnings per share		0.59		0.71

3. Line of Credit and Long-Term Debt

     On April 30, 2002, we renewed our $10.0 million credit facility agreement with our bank whereby we converted the existing $1.7 million balance on our line of credit into a new $4.0 million term loan and modified its terms. The term loan requires monthly principal payments of $83,333, through April 30, 2006 with interest at the floating rate or Eurodollar rate of 4.6% at September 30, 2002. Our $6.0 million line of credit bears interest at the floating rate or Eurodollar rate as defined in the agreement of 4.6% at September 30, 2002. Principal and unpaid interest is due April 30, 2003. The line of credit and the term loan require that we meet certain financial covenants and as of September 30, 2002 we were in compliance with such covenants. The line of credit and the term loan are collateralized by substantially all of our assets. The amount due under the line of credit was $2.2 million at December 31, 2001. There was no amount due on the line of credit at September 30, 2002.

     Future maturities of long-term debt as of September 30, 2002 are as follows:

Period Ending	Long-Term		Capital
December 31,	Debt		Leases		Total
(Unaudited)	(in thousands)
2002 (3 months)	$	689	$	134	$	823
2003		2,816		484		3,300
2004		1,978		233		2,211
2005		1,190		44		1,234
2006		334		—		334
Subtotal		7,007		895		7,902
Less amount representing interest		—		79		79
Subtotal		7,007		816		7,823
Less current maturities		2,785		440		3,225
Total	$	4,222	$	376	$	4,598

8

4. Earnings Per Share

     The following table sets forth a computation of our basic and diluted earnings per share during the three months ended September 30, 2002 and September 30, 2001:

			Three Months Ended
			September 30,
			2001		2002
Numerator:
	Net income available to common shareholders		$	908,558	$	2,209,661
Denominator:
	Basic earnings per share — weighted average shares			6,119,114		6,181,156
	Effect of dilutive securities:
		Stock options and warrants		143,016		86,656
Denominator for diluted earnings per share — weighted average shares				6,262,130		6,267,812
Earnings per share:
	Basic		$	0.15	$	0.36
	Diluted		$	0.15	$	0.35

     Stock options and warrants convertible or exercisable into approximately 513,756 shares of common stock were outstanding at September 30, 2002 and stock options and warrants convertible or exercisable into approximately 685,863 shares of common stock were outstanding as of September 30, 2001. Of these securities, 427,100 and 542,847 for the three months ended September 30, 2002 and 2001, respectively, were not included in the computation of diluted earnings per share because they were anti-dilutive; however, they could potentially dilute earnings per share in future periods.

     The following table sets forth a computation of our basic and diluted earnings per share during the nine months ended September 30, 2002 and September 30, 2001:

			Nine Months Ended
			September 30,
			2001		2002
Numerator:
	Net income available to common shareholders		$	2,978,826	$	4,287,489
Denominator:
	Basic earnings per share — weighted average shares			5,634,437		6,142,634
	Effect of dilutive securities:
		Stock options and warrants		28,811		67,025
Denominator for diluted earnings per share — weighted average shares				5,663,248		6,209,659
Earnings per share:
	Basic		$	0.53	$	0.70
	Diluted		$	0.53	$	0.69

     Stock options and warrants convertible or exercisable into approximately 513,756 shares of common stock were outstanding at September 30, 2002 and stock options and warrants convertible or exercisable into approximately 685,863 shares of common stock were outstanding as of September 30, 2001. Of these securities, 446,731 and 657,052 for the nine months ended September 30, 2002 and 2001, respectively, were not included in the computation of diluted earnings per share because they were anti-dilutive. However, they could potentially dilute earnings per share in future periods.

5. Business Segment Information

     We operate in three business segments: mortgage services, consumer services and other services, which consists of resident and employment screening services. Operating results and other financial data are presented for our principal business segments as follows:

9

		Mortgage		Consumer		Other
Three Months Ended		Services		Services		Services		Total
(Unaudited)
September 30, 2002:
	Revenue	$	15,156,839	$	1,846,428	$	998,642	$	18,001,909
	Cost of services		7,699,308		1,126,198		734,589		9,560,095
	Net income		2,008,678		146,628		54,355		2,209,661
	Total assets		41,002,182		11,381,455		1,271,989		53,655,626
	Goodwill		565,971		—		—		565,971
	Depreciation and amortization		927,460		114,492		39,306		1,081,258
	Capital expenditures		251,821		—		—		251,821
September 30, 2001:
	Revenue	$	9,636,720	$	1,619,882	$	616,086	$	11,872,688
	Cost of services		5,490,153		965,540		474,288		6,929,981
	Net income		852,100		43,528		12,930		908,558
	Total assets		38,749,894		11,679,847		1,028,567		51,458,308
	Goodwill		8,771		—		—		8,771
	Depreciation and amortization		787,548		88,171		33,455		909,174
	Capital expenditures		172,101		2,617		8,375		183,093

		Mortgage		Consumer		Other
Nine Months Ended		Services		Services		Services		Total
(Unaudited)
September 30, 2002:
	Revenue	$	37,846,507	$	5,169,502	$	2,568,569	$	45,584,578
	Cost of services		19,783,049		3,147,920		1,889,165		24,820,134
	Net income		3,824,550		351,892		111,047		4,287,489
	Total assets		41,002,182		11,381,455		1,271,989		53,655,626
	Goodwill		565,971		—		—		565,971
	Depreciation and amortization		2,684,271		326,092		112,524		3,122,887
	Capital expenditures		1,279,629		—		7,769		1,287,398
September 30, 2001:
	Revenue	$	31,118,765	$	4,856,480	$	1,676,772	$	37,652,017
	Cost of services		17,723,642		2,915,007		1,235,679		21,874,328
	Net income		2,831,163		115,137		32,526		2,978,826
	Total assets		38,749,894		11,679,847		1,028,567		51,458,308
	Goodwill		8,771		—		—		8,771
	Depreciation and amortization		2,341,090		232,632		93,549		2,667,271
	Capital expenditures		448,226		7,499		8,375		464,100

Business segment information for the three and nine months ended September 30, 2001 have been reclassified to conform to the current period’s presentation.

6. Intangible Assets

     Our intangible assets consisted of the following:

			December 31,		September 30,
	Lives		2001		2002
					(Unaudited)
Customer rights and customer lists	15 years		$	24,362,094	$	26,116,162
Goodwill		—		168,971		565,971
Non-compete agreements	3 years			1,505,151		1,725,151
License agreements	10 years			8,334,350		8,044,036
Intellectual property	13-15 years			462,902		462,902
Loan origination costs	5 years			97,020		97,020
				34,930,488		37,011,242
Less accumulated amortization				6,246,478		7,795,741
			$	28,684,010	$	29,215,501

10

     Effective January 1, 2002, we adopted SFAS No. 142. As of September 30, 2002, we had $565,971 in unamortized goodwill. Upon the adoption of SFAS No. 142, goodwill is no longer amortizable and will be subject to impairment testing. As a result, we have not amortized goodwill for the nine months ended September 30, 2002. We had no goodwill amortization expense for the nine months ended September 30, 2001. The effect of adopting SFAS No. 142 and not amortizing goodwill is not considered to be material to net income or earnings per share for the three or nine months ended September 30, 2001 or 2002.

     In accordance with SFAS No. 142, we have completed a transitional impairment test of goodwill and have determined goodwill and our other intangible assets are not impaired. Goodwill and other intangible assets will be tested annually and whenever events and circumstances occur indicating that the assets may be impaired.

     Upon the adoption of SFAS No. 142, we evaluated the useful lives of our existing intangible assets and determined that the existing useful lives are appropriate.

     Future amortization expense for our intangible assets is estimated as follows (unaudited):

Period Ending December 31,
2002 (3 months)	$	544,583
2003		2,335,000
2004		2,573,132
2005		2,827,301
2006		2,876,184
Thereafter		17,493,330
	$	28,649,530

     The following table summarizes the activity in our intangible assets for the periods indicated:

	Year Ended
	December 31,			Nine Months Ended September 30,
	2001			2001			2002
				(Unaudited)
Goodwill:
Beginning balance	$	8,771		$	8,771		$	168,971
Additions		160,200			—			397,000
Amortization		—			—			—
Ending balance	$	168,971		$	8,771		$	565,971
Customer rights and customer lists:
Beginning balance	$	18,830,777		$	18,830,777		$	19,843,170
Additions		2,617,061			2,440,413			1,754,068
Amortization		(1,604,668	)		(1,200,790	)		(1,276,982	)
Ending balance	$	19,843,170		$	20,070,400		$	20,320,256
Franchise and license agreements:
Beginning balance	$	7,551,190		$	7,551,190		$	7,959,000
Additions		570,506			570,506			(290,314	)
Amortization		(162,696	)		(111,725	)		(192,545	)
Ending balance	$	7,959,000		$	8,009,971		$	7,476,141
Other intangibles:
Beginning balance	$	782,939		$	782,939		$	712,870
Additions		56,028			30,000			220,000
Amortization		(126,098	)		(101,372	)		(79,737	)
Ending balance	$	712,869		$	711,567		$	853,133
Total intangible assets	$	28,684,010		$	28,800,709		$	29,215,501

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     The changes in the carrying amount of goodwill by segment are as follows:

	Mortgage		Consumer		Other
	Services		Services		Services		Total
Balance as of January 1, 2002	$	168,971	$	—	$	—	$	168,971
Goodwill acquired during the period		397,000		—		—		397,000
Balance as of September 30, 2002	$	565,971	$	—	$	—	$	565,971

7. Shareholders’ Equity

     On May 21, 2001, we granted 50,500 options to purchase our common stock at $8.00 per share to seven employees. On July 19, 2002, the Board of Directors modified the options to allow the holders to exercise the options on a cashless basis. During the quarter ended September 30, 2002, in accordance with Financial Interpretation No. 44, “Accounting For Certain Transactions Involving Stock Options,” no deferred compensation or amortization was recorded in stockholders’ equity because the stock price was less than the options exercise prices.

     On November 1, 2002, we increased our authorized share capital to include 50,000,000 shares of common stock.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

     You should read the following discussion and analysis in conjunction with our unaudited consolidated financial statements, including the notes thereto contained elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the special considerations set forth in our annual report on Form 10-K for the year ended December 31, 2001 and elsewhere in this report.

Overview

     We provide a wide range of customized information services to businesses across the United States that assist them in making critical decisions, such as determining whether to make a mortgage or other loan, offer employment, accept new tenants, or enter into a business relationship. We specialize in providing customized mortgage credit reports and other mortgage related services, consumer credit reports, employment screening, resident screening, and commercial credit reports. Our customers include mortgage lenders and independent mortgage brokers, consumer lenders, employers, property managers, and other business customers desiring information regarding creditworthiness and other matters. We believe we are an industry leader in delivering our service offerings over the Internet and in utilizing technology and focusing on customer service to provide our services with the speed, reliability, accuracy, and customization that industry participants increasingly demand.

     Founded in 1985, we have been publicly held since 1998. Our common stock trades on Nasdaq under the symbol “FDCC.” For more information visit www.factualdata.com. The website shall not be deemed to be part of this report.

     In third quarter 2002, our strategy focused on increasing our share of diversified markets and concentrating our sales efforts on large national accounts. For the first nine months of 2002 compared to last year, our revenue from national accounts increased 182 percent. We attribute this increase to our technological superiority, our ‘Four Hours or It’s Free’ guarantee program, and our excellent customer service.

     Our commitment to integrating with all Loan Origination Software systems serving a significant client base has not only served our mission to reach larger clients, but has also widened our potential broker client base by increasing their access to Factual Data’s services. Therefore, our market share in the broker segment has also increased. We note that our annual revenue has increased every year since our IPO in 1998, as has our year-over-year quarterly revenue for every quarter, since 1998. We intend to continue to grow our businesses organically, focusing on customer service, as well as through prudent acquisitions.

     The favorable mortgage market has had a positive influence on our earnings this quarter. However, our increases are not solely attributable to the favorable mortgage market. We have experienced increases in our non-mortgage divisions as well. Our reputation in the information services industry has helped us gain new clients in all divisions. As a result of our web-based technology, we have the best EPS and EBITDA (earnings before interest, taxes, depreciation and amortization) margins in the history of our company.

Critical Accounting Policies

     We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results.

     In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Revenue Recognition

     We recognize revenue when the mortgage credit report or other information, collectively a “unit,” has been delivered to the customer, persuasive evidence of the terms of the arrangement exists, our fee is fixed and determinable, and collectibility is reasonably assured. Delivery usually takes place electronically and revenue is recognized when the customer has access to the data. Our “4 Hours

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or It’s Free” guarantee program applies to line-item verifications and updates on our reports. We do not recognize revenue on services subject to the guarantee until the guarantee conditions are met. The fees we charge our customers are based on the type of unit delivered. We do not receive upfront set up fees or other upfront fees from our customers. Our cost of services primarily includes data costs, which are expensed when the unit is delivered to the customer.

Valuation of Goodwill and Other Intangible Assets

     We assess the impairment of identifiable intangible assets and goodwill at least annually whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include the following:

• significant underperformance relative to expected historical or projected future operating results;

• significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

• significant negative industry or economic trends;

• significant decline in our stock price for a sustained period; and

• our market capitalization relative to net book value.

     In 2002, Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” became effective. As of December 31, 2001 and September 30, 2002, the net carrying amount of goodwill of $168,971 and $565,971, respectively, is no longer amortized and is subject to impairment testing under SFAS No. 142. In lieu of amortization, we are required to perform an initial impairment review of our goodwill in 2002 and an annual impairment review thereafter. We have completed a transitional impairment test of goodwill and have determined goodwill and our other intangible assets are not impaired. Goodwill and other intangible assets will be tested annually and whenever events and circumstances occur indicating that the assets may be impaired. We have also evaluated the useful lives of our existing intangible assets and determined that the existing useful lives are appropriate. Other intangible assets of $28.6 million at September 30, 2002 are subject to the amortization methods prescribed by SFAS No. 142.

Allowance for Doubtful Accounts

     We estimate the uncollectability of our accounts receivable. We specifically analyze accounts receivable, historical bad debts, customer concentrations, customer creditworthiness, current economic trends, and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. Material differences may result in the amount and timing of bad debt expense for any period if we made different judgments or utilized different estimates. Our accounts receivable was $9.4 million as of September 30, 2002, and our allowance for doubtful accounts was $290,000 as of September 30, 2002.

Accounting for Income Taxes

     As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes. This process involves estimating our current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded in our consolidated balance sheet.

     Significant judgment is required in determining our provision for income taxes and deferred tax assets and liabilities. We recorded a net deferred tax asset of approximately $3.6 million at September 30, 2002, of which approximately $3.6 million related to intangible assets. We believe that it is more likely than not that the deferred tax assets will be realized from the generation of future taxable income. Although the deferred tax asset is considered realizable, actual amounts could be reduced, and charged against our results from operations in future periods, if we do not generate sufficient future taxable income.

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Capitalized Software Development Costs

     We capitalize costs, which include primarily salaries in connection with developing software for internal use. We use judgment in determining whether development costs meet the criteria for immediate expense or capitalization. Direct costs incurred in the development of software are capitalized once the preliminary project stage is completed, management has committed to funding the project, and completion and use of the software for its intended purpose are probable. We cease capitalization of development costs once the software has been substantially completed and is ready for its intended use. We capitalized $563,000 and $605,000 of costs during the nine months ended September 30, 2001, and 2002, respectively. The software development costs capitalized are amortized over the estimated useful life of the software, which we estimate to be three years. Amortization expense was $482,000 and $559,000 for the nine months ended September 30, 2001 and 2002, respectively.

Business Segments

     We classify our business operations into three reporting segments: mortgage services, consumer services, and other services. Historically, we have derived most of our revenue from mortgage services, with our primary service in this segment being our mortgage credit reports. Through our consumer services business, we generate revenue primarily from the delivery of consumer credit reports. Our other services consist of resident and employment screening services.

Results of Operations

Comparison of three months ended September 30, 2002 and September 30, 2001

     Revenue, cost of services, and cost of services as a percent of revenue for our operating segments for the periods indicated are as follows ($ in thousands):

Three Months Ended	Mortgage			Consumer			Other
September 30, 2001	Services			Services			Services			Total
Revenue	$	9,637		$	1,620		$	616		$	11,873
Cost of services		5,490			966			474			6,930
Cost of services as a percent of revenue		57.0	%		59.6	%		76.9	%		58.4	%

Three Months Ended	Mortgage			Consumer			Other
September 30, 2002	Services			Services			Services			Total
Revenue	$	15,157		$	1,846		$	999		$	18,002
Cost of services		7,699			1,126			735			9,560
Cost of services as a percent of revenue		50.8	%		61.0	%		73.6	%		53.1	%

     Total revenue increased $6.1 million, or 51.3%, from $11.9 million in the three months ended September 30, 2001 to $18.0 million in the same period of 2002.

     Mortgage services revenue increased $5.6 million, or 58.4%, from $9.6 million in the three months ended September 30, 2001 to $15.2 million in the same period of 2002 as a result of our ability to obtain new business from national accounts, which fueled demand for our mortgage services.

     Consumer services revenue increased $200,000, or 12.5%, from $1.6 million in the three months ended September 30, 2001 to $1.8 million in the same period of 2002 as a result of an increase in market share.

     Other services revenue increased $383,000, or 62.2%, from $616,000 in the three months ended September 30, 2001 to $999,000 in the same period of 2002. This increase in resident and employment screening services was a result of the development of new customers.

     Cost of services are direct operational costs and consist of data costs, salaries, and telecommunications costs. Total cost of services increased $2.7 million, or 39.1%, from $6.9 million in the three months ended September 30, 2001 to $9.6 million in the same period of 2002. These costs are primarily variable costs, which tend to fluctuate with changes in revenue. Although these costs tend to remain

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fairly consistent as a percentage of revenue, during the three months ended September 30, 2002, our cost of services decreased as a percentage of revenue as a result of the lower data and salary costs discussed below. As a percentage of revenue, cost of services decreased from 58.4% in the three months ended September 30, 2001 to 53.1% in the same period of 2002.

     Mortgage cost of services increased $2.2 million, or 40.0%, from $5.5 million in the three months ended September 30, 2001 to $7.7 million in the same period of 2002. As a percentage of revenue, mortgage cost of services decreased from 57.0% in the three months ended September 30, 2001 to 50.8% in the same period of 2002 as a result of lower data costs and our ability to use our technology to reduce salary costs.

     Consumer cost of services increased $134,000 or 13.9%, from $966,000 in the three months ended September 30, 2001 to $1.1 million in the same period of 2002. As a percentage of revenue, these costs increased from 59.6% in the three months ended September 30, 2001 to 61.0% in the same period of 2002 as a result of increased data and salary costs.

     Other cost of services increased $261,000, or 55.1%, from $474,000 in the three months ended September 30, 2001 to $735,000 in the same period of 2002 and decreased as a percentage of revenue from 76.9% in the three months ended September 30, 2001 to 73.6% in the same period of 2002. This decrease was due to a reduction in salary costs.

     Selling, general and administrative expenses increased $1.4 million, or 66.7%, from $2.1 million in the three months ended September 30, 2001 to $3.5 million in the same period of 2002. As a percentage of revenue, these costs increased from 17.7% to 19.5%, a 1.8% increase. Although we expected these expenses to decrease as a percentage of revenue, $441,000 of this period’s increase was due to one-time costs related to a terminated merger agreement and costs associated with our FDinsight project. Excluding this $441,000, selling, general and administrative expense as a percentage of revenue decreased to 16.8%. The remainder of this period’s increase was primarily due to increased salary expense for corporate administration, national sales and programming staff, corresponding employee benefit expense and other selling, general and administrative expenses.

     Depreciation and amortization increased $191,000 or 21.1%, from $909,000 in the three months ended September 30, 2001 to $1.1 million in the same period of 2002. This increase was due to hardware and software upgrades to our technology center and the expansion of our corporate facility during 2002.

     We had no acquisition consolidation costs in the three months ended September 30, 2002 due to the absence of further acquisition consolidations during that period.

     Interest expense decreased $134,000, or 26.0%, from $516,000 in the three months ended September 30, 2001 to $382,000 in the same period of 2002. This decrease primarily was due to the reduction of the outstanding balance on our bank revolving line of credit from $3.5 million at September 30, 2001 to no outstanding balance at September 30, 2002 and the decrease in interest rates on the line of credit from 10.1% to 4.6%.

     Income tax expense was $555,000 in the three months ended September 30, 2001 compared to $1.4 million in the same period of 2002. Our effective tax rate was 38% and 40% for the three months ended September 30, 2001 and 2002.

     As a result of the foregoing factors, net income in the three months ended September 30, 2002 was $2.2 million, or $0.35 per diluted share, compared to $909,000, or $0.15 per diluted share, in the same period of 2001.

     Our EBITDA (earnings before interest, taxes, depreciation, and amortization) was $5.1 million in the three months ended September 30, 2002 compared to $2.9 million in the same period of 2001, a $2.2 million, or a 75.9% increase. EBITDA should not be considered as an alternative to net income, an indicator of operating performance, an alternative to cash flow, a measure of liquidity, or an ability to service debt obligations. EBITDA is not in accordance with, or superior to, accounting principles generally accepted in the United States, but it provides additional information for evaluating our operating performance. We believe EBITDA is a useful financial metric for evaluating our business.

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Comparison of nine months ended September 30, 2002 and September 30, 2001

     Revenue, cost of services, and cost of services as a percent of revenue for our operating segments for the periods indicated are as follows ($ in thousands):

Nine Months Ended	Mortgage			Consumer			Other
September 30, 2001	Services			Services			Services			Total
Revenue	$	31,119		$	4,856		$	1,677		$	37,652
Cost of services		17,724			2,915			1,235			21,874
Cost of services as a percent of revenue		57.0	%		60.0	%		73.6	%		58.1	%

Nine Months Ended	Mortgage			Consumer			Other
September 30, 2002	Services			Services			Services			Total
Revenue	$	37,847		$	5,169		$	2,569		$	45,585
Cost of services		19,783			3,148			1,889			24,820
Cost of services as a percent of revenue		52.3	%		60.9	%		73.5	%		54.4	%

     Total revenue increased $7.9 million, or 21.0%, from $37.7 million in the nine months ended September 30, 2001 to $45.6 million in the same period of 2002.

     Mortgage services revenue increased $6.7 million, or 21.5%, from $31.1 million in the nine months ended September 30, 2001 to $37.8 million in the same period of 2002 as a result of our ability to obtain new business from national accounts, which fueled demand for our mortgage services.

     Consumer services revenue increased $300,000, or 6.1%, from $4.9 million in the nine months ended September 30, 2001 to $5.2 million in the same period of 2002 as a result of new customers in certain territories.

     Other services revenue increased $900,000, or 53.0%, from $1.7 million in the nine months ended September 30, 2001 to $2.6 million in the same period of 2002. This increase in resident and employment screening services was a result of the development of new customers.

     Cost of services are direct operational costs and consist of data costs, salaries, and telecommunications costs. Total cost of services increased $2.9 million, or 13.2%, from $21.9 million in the nine months ended September 30, 2001 to $24.8 million in the same period of 2002. These costs are primarily variable costs, which tend to fluctuate with changes in revenue. Although these costs tend to remain fairly consistent as a percentage of revenue, during the nine months ended September 30, 2002, our cost of services decreased as a percentage of revenue as a result of the lower data and salary costs discussed below. As a percentage of revenue, cost of services decreased from 58.1% in the nine months ended September 30, 2001 to 54.4% in the same period of 2002.

     Mortgage cost of services increased $2.1 million, or 11.9%, from $17.7 million in the nine months ended September 30, 2001 to $19.8 million in the same period of 2002. As a percentage of revenue, mortgage cost of services decreased from 57.0% in the nine months ended September 30, 2001 to 52.3% in the same period of 2002 as a result of lower data costs and our ability to use our technology to reduce salary costs.

     Consumer cost of services increased $200,000 or 6.9%, from $2.9 million in the nine months ended September 30, 2001 to $3.1 million in the same period of 2002. As a percentage of revenue, these costs increased from 60.0% in the nine months ended September 30, 2001 to 60.9% in the same period of 2002 as a result of increased data costs.

     Other cost of services increased $700,000, or 58.3%, from $1.2 million in the nine months ended September 30, 2001 to $1.9 million in the same period of 2002 and decreased as a percentage of revenue from 73.6% in the nine months ended September 30, 2001 to 73.5% in the same period of 2002.

     Selling, general, and administrative expenses increased $3.1 million, or 47.0%, from $6.6 million in the nine months ended September 30, 2001 to $9.7 million in the same period of 2002. As a percentage of revenue, these costs increased from 17.6% to 21.3%, a 3.7% increase. Although we expected these expenses to decrease as a percentage of revenue, $937,000 of this period’s

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increase was due to one-time costs related to an abandoned securities offering, the negotiation and costs associated with a terminated merger agreement and costs associated with our FDinsight project. The remainder of this period’s increase was primarily due to increased salary expense for corporate administration, national sales and programming staff, corresponding employee benefit expense, business development, travel and other selling, general and administrative expenses.

     Depreciation and amortization increased $400,000 or 14.9%, from $2.7 million in the nine months ended September 30, 2001 to $3.1 million in the same period of 2002. This increase was due to hardware and software upgrades to our technology center and the expansion of our corporate facility.

     Acquisition consolidation costs decreased $42,000 from $157,000 in the nine months ended September 30, 2001 to $115,000 in the same period of 2002. This decrease was due primarily to the small number of acquisitions completed in this period compared to the same period 2001.

     Interest expense decreased $600,000, or 33.3%, from $1.8 million in the nine months ended September 30, 2001 to $1.2 million in the same period of 2002. This decrease primarily was due to the reduction of the outstanding balance on our bank revolving line of credit from $4.9 million at September 30, 2001 to no outstanding balance at September 30, 2002 and principal reduction on acquisition seller notes and the decrease in interest rates on the line of credit from 10.1% to 4.6%.

     Income tax expense was $1.9 million in the nine months ended September 30, 2001 compared to $2.8 million in the same period of 2002. Our effective tax rate was 39% for the nine months ended September 30, 2001 and 2002.

     As a result of the foregoing factors, net income in the first nine months ended September 30, 2002 was $4.3 million, or $0.69 per diluted share, compared to $3.0 million, or $0.53 per diluted share, in the same period of 2001. This earnings per share calculation takes into account an increase in weighted average diluted shares outstanding from 5,663,248 in the nine months ended September 30, 2001 to 6,209,659 for the same period of 2002.

     Our EBITDA (earnings before interest, taxes, depreciation, and amortization) was $11.3 million in the nine months ended September 30, 2002 compared to $9.3 million in the same period of 2001, a $2.0 million, or a 21.5%, increase compared to 2001. EBITDA should not be considered as an alternative to net income, an indicator of operating performance, an alternative to cash flow, a measure of liquidity, or an ability to service debt obligations. EBITDA is not in accordance with, or superior to, accounting principles generally accepted in the United States, but it provides additional information for evaluating our operating performance. We believe EBITDA is a useful financial metric for evaluating our business.

Liquidity and Capital Resources

     We had a cash balance of $5.4 million at September 30, 2002. As of September 30, 2002, we had working capital totaling $292,000. We anticipate our working capital to continue to increase as we pay down our current portion of long-term debt and capital lease obligations.

     On April 30, 2002, we renewed our $10.0 million credit facility agreement with our bank whereby we converted the existing $1.7 million balance on our line of credit into a new $4.0 million term loan and modified its terms. The term loan requires monthly principal payments of $83,333, through April 30, 2006 with interest at the floating rate or Eurodollar rate of 4.6% at September 30, 2002. Our $6.0 million line of credit bears interest at the floating rate or Eurodollar rate as defined in the agreement of 4.6% at September 30, 2002. Principal and unpaid interest is due April 30, 2003. The line of credit and the term loan are collateralized by substantially all of our assets. The credit line requires us to meet certain financial restrictive covenants, all of which were met as of September 30, 2002, including the following:

• minimum quarterly EBITDA levels;

• interest coverage ratio;

• book-to-net worth ratio;

• debt service ratio;

• annual capital expenditures;

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• total funded debt to last twelve months pro forma EBITDA; and

• total senior funded debt to last twelve months pro forma EBITDA.

     We believe that our anticipated cash requirements for operations will be met from internally generated funds and our bank credit line. We may be required to obtain additional public, private, or debt financing or a combination of the foregoing to continue our acquisition program and development of new information services.

Contractual Commitments and Commercial Commitments

     The following table sets forth a summary of our contractual obligations and commercial commitments as of September 30, 2002:

							Experian
Period Ending	Line of		Long-Term		Capital		Capital Lease		Operating
December 31,	Credit		Debt		Leases		Agreements		Leases		Total
					(in thousands)
2002 (3 months)	$	—	$	689	$	134	$	733	$	387	$	1,943
2003		—		2,816		484		3,297		1,582		8,179
2004		—		1,978		233		3,369		1,573		7,153
2005		—		1,190		44		1,579		1,282		4,095
2006		—		334		—		33		1,082		1,449
Thereafter		—		—		—		—		11,861		11,861
Total		—		7,007		895		9,011		17,767		34,680
Less capitalized interest		—		—		79		1,165		—		1,244
Net	$	—	$	7,007	$	816	$	7,846	$	17,767	$	33,436

Recent Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for the Company for fiscal years beginning after June 15, 2002. We believe the adoption of this statement will have no material impact on our consolidated financial statements.

     In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires that those long-lived assets be measured at the lower of carrying amount or fair value, less cost to sell, whether reported in continuing operations or in discontinued operations. Therefore, discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet occurred. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, is to be applied prospectively. We believe the adoption of this statement will have no material impact on our consolidated financial statements.

     In April 2002, FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” This statement eliminates the current requirement that gains and losses on debt extinguishment must be classified as extraordinary items in the income statement. Instead, such gains and losses will be classified as extraordinary items only if they are deemed to be unusual and infrequent, in accordance with the current GAAP criteria for extraordinary classification. In addition, SFAS 145 eliminates an inconsistency in lease accounting by requiring that modifications of capital leases that result in reclassification as operating leases be accounted for consistent with sale-leaseback accounting rules. The statement also contains other nonsubstantive corrections to authoritative accounting literature. The changes related to the debt extinguishment will be effective for fiscal years beginning after May 15, 2002. Adoption of this standard will not have any effect on our consolidated financial statements.

     In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”, which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force (“EITF”) Issue No. 94-3. The Company will adopt the provisions of SFAS No. 146 for restructuring activities initiated after December 31, 2002. SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the

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liability is incurred. Under EITF No. 94-3, a liability for an exit cost was recognized at the date of a company’s commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing future restructuring costs as well as the amount recognized. Adoption of this standard will not have any effect on our consolidated financial statements.

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Item 3.Quantitative and Qualitative Disclosure about Market Risk

     We had one interest rate swap agreement for a principal amount of $4.0 million, which expired in May 2002. We used the interest rate swap agreement to manage interest rate risk with regard to our variable rate notes payable. Our interest rate swap did not qualify for using the hedge method of accounting.

     As of September 30, 2002, our notes payable to corporations and individuals totaling $3.7 million bore interest at fixed rates ranging from 8.0% to 12.0%. Our Experian capital lease agreements totaling $9.0 million are discounted at a fixed rate of interest of 10.0%, and our other capital lease obligations totaling $895,000 are discounted at fixed rates of interest ranging from 8.1% and 10.7%.

     Our senior bank debt totaling $3.6 million carries a variable rate of interest of 4.6%.

     We are also exposed to some market risk through interest rates related to our cash and cash equivalents balances of $5.4 million. These funds are generally invested in money market funds with short maturities.

     We believe that fluctuations in interest rates on our debt obligations and our cash and cash equivalents in the near term will not materiality affect our operating results, financial position, or cash flows.

Item 4.Controls and Procedures

     Within the 90-day period prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in this quarterly report on Form 10-Q.

     Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These limitations include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors or mistakes or because of intentional circumvention of the established process.

     There have been no significant changes in our internal controls or in other factors, which could significantly affect internal controls subsequent to the date that we carried out our evaluation.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     Not applicable.

Item 2. Changes in Securities and Use of Proceeds

     Not applicable.

Item 3. Defaults upon Senior Securities

     Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

     We held our 2001 Annual Meeting of Shareholders on November 1, 2002. The following matters were acted upon at the meeting:

• We elected two members to our Board of Directors to serve three year terms and until their successors are elected and qualified;

• We considered and approved a proposal to amend our Articles of Incorporation to increase the number of authorized shares of our common stock from 10,000,000 to 50,000,000 shares;

• We considered and approved a proposal to increase the number of shares reserved for issuance under our 1999 Employee Formula Award Stock Option Plan from 400,000 to 600,000 shares; and

• We ratified the appointment of BDO Seidman, LLP as our independent public accountants for the fiscal year ending December 31, 2002.

     The results of voting on these matters at the meeting were as follows:

	For		Withhold		Against		Abstain
Election of Abdul H. Rajput		4,653,513		246,598		—		—
Election of Robert J. Terry		4,653,513		246,598		—		—
Amendment to Articles		4,537,244		—		354,872		7,995
Employees Plan		4,532,419		—		364,877		2,815
Independent Accountants		4,853,458		—		18,638		28,015

Item 5. Other Information

     Not applicable.

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Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibits — The following exhibits are filed herewith:
	Exhibit Number 3.1 Amendment to Articles of Incorporation.
	Exhibit Number 99.1 Chief Executive Officer certification under Section 906 of the Sarbanes-Oxley Act of 2002.
	Exhibit Number 99.2 Chief Financial Officer certification under Section 906 of the Sarbanes-Oxley Act of 2002.
(b)	Reports on Form 8-K:
	On July 25, 2002, under Items 5 and 7, we announced that we had signed a definitive agreement to be acquired by Fidelity National Information Services, Inc.
	On August 26, 2002, under Item 5, we signed an amendment to our Agreement and Plan of Merger dated July 23, 2002, with Fidelity National Information Services, Inc. The amendment extended both parties’ due diligence review period to August 29, 2002, and extended the period of time to complete the merger to October 31, 2002.
	On August 30, 2002, under Item 5, we announced that the merger agreement with Fidelity National Information Services, Inc. had been terminated by mutual agreement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: November 11, 2002	FACTUAL DATA CORP. (Registrant)
	/s/ J.H. Donnan J.H. Donnan Chief Executive Officer (Principal Executive Officer)
	/s/ Todd A. Neiberger Todd A. Neiberger Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

EXHIBIT
NUMBER	DESCRIPTION
3.1	Amendment to Articles of Incorporation.
99.1	Chief Executive Officer certification under Section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Chief Financial Officer certification under Section 906 of the Sarbanes-Oxley Act of 2002.

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