First Data Reports Second Quarter 2013 Financial Results

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First Data Reports Second Quarter 2013 Financial Results

  • Second quarter consolidated revenue of $2.7 billion, up 1%; adjusted revenue of $1.7 billion, flat to prior year
  • Second quarter net loss $189 million; adjusted EBITDA of $633 million, up 2%
  • Extended maturities on additional $750 million in debt, bringing year-to-date total to $2.5 billion
  • Generated $240 million in operating cash flow and ended the second quarter with $1.6 billion in unrestricted liquidity

ATLANTA--(BUSINESS WIRE)-- First Data Corporationtoday reported its financial results for the second quarter ended June 30, 2013. Consolidated revenue for the second quarter was $2.7 billion, up $24 million, or 1%, compared to a year ago, primarily driven by a $29 million increase in reimbursable debit network fees, postage and other. Adjusted revenue, which excludes certain items including debit network fees, was $1.7 billion, flat year-over-year.


For the second quarter, the net loss attributable to First Data was $189 million, compared to a loss of $157 million a year ago. The net loss increase is primarily attributable to an $86 million dollar change in the provision for income taxes. Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) was $633 million, up 2% compared to $621 million in the second quarter of 2012.

For the quarter, First Data generated $240 million in operating cash flow, after $441 million in cash interest payments, and finished the quarter with $1.6 billion in unrestricted liquidity—$110 million in cash available for corporate use plus $1.5 billion under the revolving credit facility.

"Since joining First Data at the end of April, I have had the opportunity to meet with many of our customers and our very capable employees, which has confirmed my belief that this is a great company," said First Data CEO Frank Bisignano. "We have added several talented leaders to the executive team, and we made the decision to expand equity ownership to employees across the company, more closely aligning our success with strong results for our customers and investors."

Segment Results

Retail and Alliance Services segment revenue for the second quarter was $928 million, up $14 million, or 2%, compared to $914 million in 2012. Merchant Services revenue was up 3% on higher volumes offset by lower yield. Transaction growth was 6%, and credit mix was 72%. Regional average ticket was $76.62, up 5% compared to a year ago. Product revenue decreased 1% as growth in prepaid was offset by a decline in check-processing. Segment EBITDA was $429 million, up $14 million, or 3%, compared to 2012. Margin expanded in the second quarter to 46%. During the quarter, Retail and Alliance Services added 22 bank referral agreements, 11 new independent sales organizations and 5 regional sales alliances.

Financial Services segment revenue for the second quarter was $337 million, down $12 million or 3%, compared to $349 million in the same quarter of 2012. New business and volume growth were more than offset by lost business and pricing. In addition, revenues were impacted by the divestiture of two small businesses providing information and check clearing services. Active card accounts on file were up 6% compared to the prior year. Debit issuer transactions were down 9%, impacted by a previously disclosed customer deconversion and a decline in gateway transactions. Absent the impact of these items, debit issuer transactions were up 3% on continued organic growth partially offset by net lost business. Segment EBITDA was $151 million, flat year-over-year, as revenue declines were offset by lower expenses from targeted cost reductions. Margin for the second quarter was 45%. During the quarter, Financial Services renewed more than 280 contracts with financial institutions.

International segment revenue for the second quarter was $425 million, flat year-over-year. On a constant currency basis, segment revenue was up 2%. Merchant acquiring revenue, on a constant currency basis, grew 8% on higher transaction volumes. Issuing revenue, on a constant currency basis, decreased 3% as higher transaction volumes were offset by lost business. Segment EBITDA was $115 million, down $2 million or 2%, compared to $118 million in 2012 due to expense growth driven by higher acquiring volumes and inflationary pressures in Argentina. On a constant currency basis, segment EBITDA was up 1%. Margin for the second quarter was 27%.

Capital Structure Improvements

Debt Issued, Redeemed and Extended

On May 15, 2013, the company issued $750 million in Senior Subordinated Notes with a coupon of 11.75%, due in 2021. The Company used the net proceeds from the offering of the notes, together with cash on hand, to redeem $520 million aggregate principal amount of its 11.25% Senior Subordinated Notes due 2016, repurchase $230 million aggregate principal amount of its outstanding 11.25% Subordinated Notes in a privately negotiated transaction with an existing holder of such notes, and pay related fees and expenses.

Non-GAAP Measures

In certain circumstances, results have been presented that are non-GAAP (generally accepted accounting principles) measures and should be viewed in addition to, and not in lieu of, the company's reported results. Reconciliations to comparable GAAP measures are available in the accompanying schedules and in the "Investor Relations" section of the company's website at investor.firstdata.com.

Investor Conference Call

The company will host a conference call and webcast on Tuesday, July 30, 2013, at 9:30 a.m. EDT to review the second quarter 2013 financial results. Chief Financial Officer Ray Winborne will lead the call.

The call will be webcast on the "Investor Relations" section of the First Data website at http://investor.firstdata.com and a slide presentation to accompany the call will also be available on the website.

To listen to the call, dial 888-771-4371 (U.S.) or 847-585-4405 (outside the U.S.); pass code 35116802, at least 10 minutes prior to the start of the call.

A replay of the call will be available through August 14, 2013, at 888-843-7419 (U.S.) or 630-652-3042 (outside the U.S.); pass code 35116802# and at http://investor.firstdata.com.

Please note: All statements made by First Data officers on this call are the property of First Data and subject to copyright protection. Other than the replay, First Data has not authorized, and disclaims responsibility for, any recording, replay or distribution of any transcription of this call.

Around the world, every second of every day, First Data makes payment transactions secure, fast and easy for merchants, financial institutions and their customers. First Data leverages its vast product portfolio and expertise to drive customer revenue and profitability. Whether the choice of payment is by debit or credit card, gift card, check or mobile phone, online or at the checkout counter, First Data takes every opportunity to go beyond the transaction. More information about the company is available on FirstData.com as well as on Twitter, LinkedIn, Facebook and YouTube.

FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions)
  
Three months ended June 30,
20132012Change
Revenues:
Transaction and processing service fees (a):
Merchant related services$1,023.7$987.44%
Check services71.378.4-9%
Card services419.7437.9-4%
Other services113.9118.5-4%
Product sales and other204.9217.0-6%
Reimbursable debit network fees, postage and other 875.3  846.3 3%
 2,708.8  2,685.5 1%
 
Expenses:
Cost of services (exclusive of items shown below)691.9713.4-3%
Cost of products sold83.486.2-3%
Selling, general and administrative493.2458.97%
Reimbursable debit network fees, postage and other875.3846.33%
Depreciation and amortization274.7294.5-7%
Other operating expenses:
Restructuring, net20.013.2NM
Impairments -  5.1 NM
 2,438.5  2,417.6 1%
Operating profit 270.3  267.9 1%
 
Interest income2.61.753%
Interest expense(472.2)(480.7)-2%
Other income (expense) (b) 15.0  (22.6)NM
 (454.6) (501.6)-9%
 
Loss before income taxes and equity earnings in affiliates(184.3)(233.7)-21%
 
Income tax expense (benefit)11.5(74.7)NM
Equity earnings in affiliates (a) 51.0  44.0 16%
Net loss(144.8)(115.0)26%
Less: Net income attributable to noncontrolling interests and

redeemable noncontrolling interest

 44.3  42.4 4%
Net loss attributable to First Data Corporation$(189.1)$(157.4)20%
 
(See accompanying notes)
 
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions)
  
Six months ended June 30,
20132012Change
Revenues:
Transaction and processing service fees (a):
Merchant related services$1,966.8$1,907.93%
Check services143.7156.4-8%
Card services826.5867.8-5%
Other services235.3243.4-3%
Product sales and other407.3420.4-3%
Reimbursable debit network fees, postage and other 1,720.1  1,653.6 4%
 5,299.7  5,249.5 1%
 
Expenses:
Cost of services (exclusive of items shown below)1,410.61,408.80%
Cost of products sold166.0171.2-3%
Selling, general and administrative956.5905.46%
Reimbursable debit network fees, postage and other1,720.11,653.64%
Depreciation and amortization546.9603.6-9%
Other operating expenses:
Restructuring, net38.216.9NM
Impairments -  5.1 NM
 4,838.3  4,764.6 2%
Operating profit 461.4  484.9 -5%
 
Interest income5.34.226%
Interest expense(941.2)(941.8)0%
Other income (expense) (b) 15.3  (30.8)NM
 (920.6) (968.4)-5%
 
Loss before income taxes and equity earnings in affiliates(459.2)(483.5)-5%
 
Income tax expense (benefit)73.1(182.9)NM
Equity earnings in affiliates (a) 88.7  71.5 24%
Net loss(443.6)(229.1)94%
Less: Net income attributable to noncontrolling interests and

redeemable noncontrolling interest

 82.9  80.8 3%
Net loss attributable to First Data Corporation$(526.5)$(309.9)70%
 
(See accompanying notes)
 
FIRST DATA CORPORATION
SUMMARY SEGMENT DATA
(Unaudited)
(in millions)
  
Three months ended June 30,
20132012Change
Segment Revenues (c):
Retail and Alliance Services$928.2$913.92%
Financial Services337.2348.7-3%
International 424.9  424.6 0%
Subtotal segment revenues1,690.31,687.20%
All Other and Corporate28.832.8-12%
Adjustments to reconcile to Adjusted revenue:
Official check and money order revenues (d)(0.7)(5.6)NM
Eliminations of intersegment revenues (16.7) (15.3)NM
Adjusted revenue 1,701.7  1,699.1 0%
 
Adjustments to reconcile to Consolidated revenues (e):
Adjustments for non-wholly-owned entities (f)7.815.6NM
Official check and money order revenues (d)0.75.6NM
ISO commission expense (g)123.3118.94%
Reimbursable debit network fees, postage and other 875.3  846.3 3%
Consolidated revenues$2,708.8 $2,685.5 1%
 
Segment EBITDA (h):
Retail and Alliance Services$429.3$415.23%
Financial Services150.7150.30%
International 115.2  117.5 -2%
Subtotal segment EBITDA Read Full Story

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