First Data Reports First Quarter 2013 Financial Results

  • First quarter consolidated revenue of $2.6 billion, up 1%; adjusted revenue of $1.6 billion, flat to prior year
  • First quarter net loss $337 million; adjusted EBITDA of $520 million, down 6%
  • Extended maturities on $1.8 billion in debt and lowered the interest rate on $3.7 billion of term loans by 100 basis points
  • Since August 2010, the company has extended maturity dates on $20 billion in debt to 2017 and beyond.
  • Generated $69 million in operating cash flow and ended the first quarter with $1.6 billion in unrestricted liquidity

ATLANTA--(BUSINESS WIRE)-- First Data Corporationtoday reported its financial results for the first quarter ended March 31, 2013. Consolidated revenue for the first quarter was $2.6 billion, up $27 million, or 1%, compared to a year ago, primarily driven by a $38 million increase in reimbursable debit network fees, postage and other. Adjusted revenue, which excludes certain items including debit network fees was $1.6 billion, flat year-over-year.

For the first quarter, the net loss attributable to First Data was $337 million, compared to a loss of $153 million a year ago. The net loss increased on the year-over-year change in the income tax provision due primarily to the establishment of valuation allowances against operating loss carry forwards. Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) was $520 million, down 6% compared to $551 million in the first quarter of 2012.


For the quarter, First Data generated $69 million in operating cash flow, after $473 million in cash interest payments, and finished the quarter with $1.6 billion in unrestricted liquidity—$143 million in cash available for corporate use plus $1.5 billion under the revolving credit facility.

"As anticipated, we faced a tough comparison on top-line growth this quarter. That said, our profitability fell short of the mark," said First Data CFO Ray Winborne. "We are streamlining our organization to drive decision making closer to the customer, and the related savings will enable us to better align our cost structure with near-term revenue growth."

Segment Results

Retail and Alliance Services segment revenue for the first quarter was $861 million, up $14 million, or 2%, compared to $847 million in 2012. Merchant Services revenue was up 1%, on higher volumes offset by lower yield. Transaction growth was 4%, and credit mix was 70%. Regional average ticket was $77, up 4% compared to a year ago. Product revenue was up 4% as growth in prepaid was offset by a decline in check-processing. Segment EBITDA was $354 million, up $2 million, or 1%, compared to 2012. Margin for the first quarter was 41%. During the quarter, Retail and Alliance Services added 16 bank referral agreements, eight new independent sales organizations and two regional sales alliances.

Financial Services segment revenue for the first quarter was $331 million, down $15 million or 4%, compared to $346 million in the same quarter of 2012. New business and volume growth were 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 13%, impacted by a previously disclosed customer deconversion. Absent this impact, debit issuer transactions were down 1% on lost business partially offset by new STAR Network business and continued organic growth in debit. Segment EBITDA was $133 million, down $24 million or 15%, compared to $157 million in 2012, primarily due to higher technology and operations costs. Margin for the first quarter was 40%. During the quarter, Financial Services renewed more than 250 contracts with financial institutions.

International segment revenue for the first quarter was $409 million, up $4 million, or 1%, compared to $405 million in the prior year. On a constant currency basis, segment revenue was up 2%. Merchant acquiring revenue, on a constant currency basis, grew 11% on higher transaction volumes. Issuing revenue, on a constant currency basis, decreased 5% as higher transaction volumes were offset by lost business. Segment EBITDA was $100 million, up $5 million or 5%, compared to $95 million in 2012. On a constant currency basis, segment EBITDA grew 7%. Margin improved to 25%.

Capital Structure Improvements

Debt Issued, Amended and Extended

On Feb. 13, 2013, the company issued $785 million in senior unsecured notes with a coupon of 11.25% due in 2021; the proceeds of those notes were used to pay the company's $748.4 million 10.55% PIK senior unsecured notes due 2015, and pay related fees and expenses, including premiums. In addition, the company entered into a Feb. 2013 Joinder Agreement and incurred an aggregate principal amount of $258 million in new term loans maturing on Sept. 24, 2018, with rates consistent with the existing 2018 loans. Proceeds of the New 2018B Term Loans were used to repay all of the company's outstanding term loan borrowings maturing in 2014 and to pay related fees and expenses.

On April 10, 2013, the company issued $815 million in senior unsecured notes with a coupon of 10.625% due in 2021; the proceeds of those notes were used to pay First Data's 9.875% senior unsecured notes due in 2015 and related fees and expenses. In addition, in April the company amended the senior secured term loan facility in a manner that effectively lowered the interest rate by 1% on $2.436 billion and €178 million in loans due in 2017 as well as $1.0 billion in loans due in 2018 to LIBOR plus 400 bps or ABR plus 300 bps. Since August 2010, the company has extended maturity dates on $20 billion in debt to 2017 and beyond.

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, April 30, 2013, at 10 a.m. EDT to review the first 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 34424748, at least 10 minutes prior to the start of the call.

A replay of the call will be available through May 14, 2013, at 888-843-7419 (U.S.) or 630-652-3042 (outside the U.S.); pass code 34424748# 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 March 31,
2013 2012 Change  
Revenues:
Transaction and processing service fees (a):
Merchant related services $ 943.1 $ 920.5 2 %
Check services 72.4 78.0 -7 %
Card services 406.8 429.9 -5 %
Other services 121.4 124.9 -3 %
Product sales and other 202.4 203.4 0 %
Reimbursable debit network fees, postage and other   844.8     807.3   5 %
  2,590.9     2,564.0   1 %
 
Expenses:
Cost of services (exclusive of items shown below) 718.7 695.4 3 %
Cost of products sold 82.6 85.0 -3 %
Selling, general and administrative 463.3 446.5 4 %
Reimbursable debit network fees, postage and other 844.8 807.3 5 %
Depreciation and amortization 272.2 309.1 -12 %
Other operating expenses:
Restructuring, net   18.2     3.7   NM
  2,399.8     2,347.0   2 %
Operating profit   191.1     217.0   -12 %
 
Interest income 2.7 2.5 8 %
Interest expense (469.0 ) (461.1 ) 2 %
Other income (expense) (b)   0.3     (8.2 ) NM
  (466.0 )   (466.8 ) 0 %
 
Loss before income taxes and equity earnings in affiliates (274.9 ) (249.8 ) 10 %
 
Income tax expense (benefit) 61.6 (108.2 ) NM
Equity earnings in affiliates (a)   37.7     27.5   37 %
Net loss (298.8 ) (114.1 ) 162 %
Less: Net income attributable to noncontrolling
interests and redeemable noncontrolling interests   38.6     38.4   1 %
Net loss attributable to First Data Corporation $ (337.4 ) $ (152.5 ) 121 %
 
(See accompanying notes)
 
FIRST DATA CORPORATION
SUMMARY SEGMENT DATA
(Unaudited)
(in millions)
       
Three months ended March 31,
2013 2012 Change

Segment Revenues (c):

Retail and Alliance Services $ 861.4 $ 847.3 2 %
Financial Services 330.6 345.6 -4 %
International   408.6     404.9   1 %
Subtotal segment revenues 1,600.6 1,597.8 0 %
All Other and Corporate 29.7 35.9 -17 %
Adjustments to reconcile to Adjusted revenue:
Official check and money order revenues (d) (1.7 ) (4.0 ) NM
Eliminations of intersegment revenues   (15.5 )   (14.3 ) NM
Adjusted revenue   1,613.1     1,615.4   0 %
 
Adjustments to reconcile to Consolidated revenues (e):
Adjustments for non-wholly-owned entities (f) 15.5 21.1 NM
Official check and money order revenues (d) 1.7 4.0 NM
ISO commission expense (g) 115.8 116.2 NM
Reimbursable debit network fees, postage and other   844.8     807.3   5 %
Consolidated revenues $ 2,590.9   $ 2,564.0   1 %
 

Segment EBITDA (h):

Retail and Alliance Services $ 354.2 $ 352.0 1 %
Financial Services 133.1 157.4 -15 %
International   100.4     95.4   5 %
Subtotal segment EBITDA 587.7 604.8 -3 %
All Other and Corporate   (67.3 )   (54.1 ) 24 %
Adjusted EBITDA   520.4     550.7   -6 %
 
Adjustments to reconcile to Net loss attributable to
First Data Corporation (e):
Adjustments for non-wholly-owned entities (f) 3.1 (3.7 ) NM
Depreciation and amortization (272.2 ) (309.1 ) -12 %
Interest expense (469.0 ) (461.1 ) 2 %
Interest income 2.7 2.5 8 %
Other items (i) (22.0 ) (14.0 ) NM
Income tax (expense) benefit (61.6 ) 108.2 NM
Stock based compensation (9.2 ) (3.6 ) 156 %
Official check and money order EBITDA (d) 1.3 1.7 NM
Costs of alliance conversions (j) (22.6 ) (11.5 ) NM
KKR related items (k) (8.1 ) (8.4 ) NM
Debt issuance costs (l)   (0.2 )   (4.2 ) NM
Net loss attributable to First Data Corporation $ (337.4 ) $ (152.5 ) 121 %
 
 

Segment depreciation and amortization (a):

Retail and Alliance Services $ 106.0 $ 136.6 -22 %
Financial Services 80.3 89.9 -11 %
International   70.2     73.6   -5 %
Subtotal segment depreciation and amortization 256.5 300.1 -15 %
All Other and Corporate   11.0     12.9   -15 %
  267.5     313.0   -15 %
Adjustments to reconcile to consolidated depreciation and amortization:
Adjustments for non-wholly-owned entities (f) 24.4 26.6 NM
Amortization of initial payments for new contracts   10.2     9.8   4

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