First Data Reports Second Quarter EPS of $0.56; Revenue Growth Was a Very Solid 10%.DENVER Denver, city (1990 pop. 467,610), alt. 5,280 ft (1,609 m), state capital, coextensive with Denver co., N central Colo., on a plateau at the foot of the Front Range of the Rocky Mts., along the South Platte River where Cherry Creek meets it; inc. 1861. -- First Data Corp. (NYSE NYSE See: New York Stock Exchange : FDC FDC - Floppy Disk Controller ) today reported its financial results for the second quarter of 2006. The company's consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenue was $2.9 billion, up 10%. Net income was $436 million, or $0.56 per share. Earnings per share included a $0.01 net benefit from other items (see note H). "Our second quarter results were driven by the strong performance of both our Commercial and International segments. As we approach the spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. , we are very encouraged by the momentum that the new First Data is building toward achieving the high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. of its long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. targeted 8-10% top and bottom line growth," said Ric Duques, chairman and chief executive officer. "Furthermore, the strength of Western Union's brands and global reach firmly positions the company for continued long-term growth and we remain extremely confident in its future as a stand-alone company stand-alone company An independent operating firm. For example, a large diversified firm may consider spinning off a subsidiary because, as a stand-alone company, the subsidiary would command a higher price-earnings ratio than the parent. ." Segment Results For the quarter, Western Union generated revenue of $1.1 billion, a 15% increase, and operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. was $352 million, up 9%. Profit margin remained strong at 31.2%. While Western Union's performance this quarter was impacted by consumer reaction to immigration reform Immigration reform is the common term used in political discussions regarding changes to immigration policy. In a certain sense, reform can be general enough to include promoted, expanded, or open immigration, but in reality discussions of reform often deal with the aspect of activities in the U.S., the strength of the brand worldwide and the geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. diversity of Western Union continue to drive the strong performance of its global consumer-to-consumer Consumer-to-consumer (or C2C) electronic commerce involves the electronically-facilitated transactions between consumers through some third party. A common example is the online auction, in which a consumer posts an item for sale and other consumers bid to purchase business. Consumer-to-consumer transaction growth was 27%. Consumer-to-consumer revenue increased 17%. The consumer-to-business Consumer-to-business (C2B ) is an electronic commerce business model in which consumers (individuals) offer products and services to companies and the companies pay them. service delivered transaction growth of 11% and revenue growth of 4%. For the quarter, Commercial Services generated revenue of $1.0 billion, a very strong 11% growth or 9% excluding reimbursable re·im·burse tr.v. re·im·bursed, re·im·burs·ing, re·im·burs·es 1. To repay (money spent); refund. 2. To pay back or compensate (another party) for money spent or losses incurred. debit A monetary amount that is subtracted from an account balance. A debit from one account is a credit to another. See credit. network fees. Operating profit was $277 million, up a strong 27% or 12% excluding integration expense from 2005. Margin for the quarter improved to 26.9% from 23.4%, or to 33.3% from 32.3% excluding reimbursable debit network fees and 2005 integration costs. Second quarter results were driven by a continued focus on sales, operating cost efficiencies and strong transaction growth of 13%. For the quarter, Financial Institution Services generated revenue of $452 million, down 6%. Operating profit was $95 million, down 11%. Margin for the quarter declined to 20.9% from 22.0%, or to 31.2% from 32.0% excluding reimbursables. Results were in line with the company's expectations, which anticipated the impact of three significant client deconversions in 2005. For the quarter, First Data International generated revenue of $299 million, up 41% and revenue growth on a constant currency basis excluding acquisitions was 15%. Operating profit was $34 million, up 43%. Margin improved to 11.2% from 11.0%. "We continue to be very pleased with the underlying performance of our International segment and the growth it continues to generate," Duques added. Outlook for 2006 "We remain within our previously stated full-year EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. guidance from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $2.35-$2.42, which now includes the positive impact of the litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. settlement with VISA See VESA. , of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $0.035. If U.S. immigration immigration, entrance of a person (an alien) into a new country for the purpose of establishing permanent residence. Motives for immigration, like those for migration generally, are often economic, although religious or political factors may be very important. issues continue to impact the Western Union business at the same rate in the second half of the year, we would expect to deliver full-year EPS at the low end of the range, not including the benefit of the $0.035 from the litigation settlement. The full-year guidance excludes future spin costs and any impact from the spin-off, as we are currently unable to reasonably estimate these items," said Ric Duques. "The company is on track to complete the spin-off sometime in the late third quarter or early fourth quarter of 2006 and as a result we will not update guidance until the planned investor road shows in September September: see month. , at which time guidance will be provided by the two companies." Non-GAAP Measures In certain circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or results have been presented that are non-GAAP (generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ) measures and should be viewed in addition to, and not in lieu of Instead of; in place of; in substitution of. It does not mean in addition to. , the company's reported results. Reconciliations to comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures are available in the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. schedules and in the "Invest" section of the company's Web site at www.firstdata.com. Investor and Analyst Conference First Data will hold an investor and analyst conference call tomorrow, July July: see month. 21 at 8:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . Ric Duques, chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , will host the call. To listen to the broadcast, please log on to http://www.firstdata.com, and click on the link under the Invest section at least 15 minutes prior to the start of the call. To participate in the call, dial 888-831-9087 (U.S.) or +1-773-799-3935 (outside the U.S.) ten minutes prior to the start of the call and enter passcode FDC. A replay of the webcast will be available on the company website shortly after the call ends until 5:00 p.m. EDT July 28, or call 800-945-1615 (U.S.) or +1-402-220-3455 (outside the U.S.). No passcode is required. 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 au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: , and disclaims responsibility for, any recording, replay or distribution of any transcription transcription /trans·crip·tion/ (-krip´shun) the synthesis of RNA using a DNA template catalyzed by RNA polymerase; the base sequences of the RNA and DNA are complementary. tran·scrip·tion n. of this call. About First Data First Data Corp. (NYSE: FDC) is a leading provider of electronic commerce and payment solutions for businesses and consumers worldwide. Serving 4.6 million merchant locations, 1,700 card issuers and millions of consumers, First Data powers the global economy by making it easy, fast and secure for people and businesses around the world to buy goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. using virtually any form of payment. The company's portfolio of services and solutions includes credit, debit, private-label, gift and other prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. card issuing and merchant
transaction processing Updating the appropriate database records as soon as a transaction (order, payment, etc.) is entered into the computer. It may also imply that confirmations are sent at the same time.Transaction processing systems are the backbone of an organization because they update constantly. services; money transfer services; money orders; fraud protection and authentication (1) Verifying the integrity of a transmitted message. See message integrity, e-mail authentication and MAC. (2) Verifying the identity of a user logging into a network. solutions; check guarantee and verification See verify. verification - The process of determining whether or not the products of a given phase in the life-cycle fulfil a set of established requirements. services through TeleCheck; as well as Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the commerce and mobile solutions. Western Union, together with its affiliates Orlandi Valuta and Vigo Vigo (vē`gō), city (1990 pop. 279,986), Pontevedra prov., NW Spain, in Galicia, on an inlet of the Atlantic Ocean. A naval base and one of the most active ports of Spain, it has the country's most important fishing fleet. , are leaders in global money transfer, providing people with fast, reliable and convenient ways to send money around the world, pay bills and purchase money orders through a network of over 270,000 agent locations in more than 200 countries and territories. The company's STAR Network offers PIN-secured debit acceptance at 1.9 million ATM and retail locations. For more information, visit www.firstdata.com. Notice to Investors, Prospective Investors and the Investment Community; Cautionary Information Regarding Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Statements in this press release regarding First Data Corporation's business which are not historical facts, including the revenue and earnings projections, are "forward-looking statements." All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties which could cause actual events or results to differ materially from those projected. Important factors upon which the Company's forward-looking statements are premised include: (a) no unanticipated developments that delay or negatively impact the planned tax-free tax-free adj. Not subject to taxation; tax-exempt. tax-free Adjective not needing to have tax paid on it: a tax-free lump sum Adj. 1. spin-off of 100% of the Western Union subsidiary to the Company's shareholders; (b) continued growth at rates approximating approximating, adj See approximal. recent levels for card-based payment transactions, consumer money transfer transactions and other product markets; (c) successful conversions under service contracts with major clients; (d) renewal of material contracts in the Company's business units consistent with past experience; (e) timely, successful and cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. implementation of processing systems to provide new products, improved functionality and increased efficiencies; (f) successful and timely integration of significant businesses and technologies acquired by the Company and realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. of anticipated synergies; (g) continuing development and maintenance of appropriate business continuity plans for the Company's processing systems based on the needs and risks relative to each such system; (h) absence of further consolidation among client financial institutions or other client groups which has a significant impact on FDC client relationships and no material loss of business from significant customers of the Company; (i) achieving planned revenue growth throughout the Company, including in the merchant alliance program which involves several joint ventures not under the sole control of the Company and each of which acts independently of the others, and successful management of pricing pressures through cost efficiencies and other cost-management initiatives; (j) successfully managing the credit and fraud risks in the Company's business units and the merchant alliances, particularly in the context of the developing e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. markets; (k) anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of and response to technological changes, particularly with respect to e-commerce; (l) attracting and retaining qualified key employees; (m) no unanticipated changes in laws, regulations, credit card association rules or other industry standards affecting FDC's businesses which require significant product redevelopment efforts, reduce the market for or value of its products or render (1) To make visible; to draw. The term comes from the graphics world where a rendering is an artist's drawing of what a new structure would look like. In computer-aided design (CAD), a rendering is a particular view of a 3D model that has been converted into a realistic image. products obsolete OBSOLETE. This term is applied to those laws which have lost their efficacy, without being repealed, 2. A positive statute, unrepealed, can never be repealed by non-user alone. 4 Yeates, Rep. 181; Id. 215; 1 Browne's Rep. Appx. 28; 13 Serg. & Rawle, 447. ; (n) continuation continuation - continuation passing style of the existing interest rate environment so as to avoid increases in agent fees related to IPS' products and increases in interest on the Company's borrowings; (o) absence of significant changes in foreign exchange spreads on retail money transfer transactions, particularly in high-volume corridors, without a corresponding increase in volume or consumer fees; (p) continued political stability in countries in which Western Union has material operations; (q) implementation of Western Union agent agreements with governmental entities according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. schedule and no interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. of relations with countries in which Western Union has or is implementing material agent agreements; (r) no unanticipated developments relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). lawsuits, investigations or similar matters; (s) no catastrophic events that could impact the Company's or its major customer's operating facilities, communication systems and technology or that has a material negative impact on current economic conditions or levels of consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. ; (t) no material breach of security of any of our systems; and (u) successfully managing the potential both for patent protection and patent liability in the context of rapidly developing legal framework for expansive software patent protection.
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in millions, except per share amounts)
Three Months Ended
June 30,
-------------------------
2006 2005 Change
--------- -------- ------
Revenues:
Transaction and processing service fees:
Money transfer services $1,098.0 $957.9 15%
Merchant services 668.7 589.5 13%
Check services 93.9 94.5 -1%
Card services 407.5 398.3 2%
Other services 81.3 85.7 -5%
Investment income, net (16.2) (14.8) -9%
Product sales and other 172.1 160.6 7%
Reimbursable debit network fees, postage and
other 360.0 323.5 11%
--------- --------
2,865.3 2,595.2 10%
--------- --------
Expenses:
Cost of services 1,352.8 1,227.8 10%
Cost of products sold 77.4 63.4 22%
Selling, general and administrative 464.2 407.9 14%
Reimbursable debit network fees, postage and
other 360.0 323.5 11%
Other operating expenses:
Restructuring, net 0.3 10.2 NM
Impairments (2.0) 0.2 NM
Litigation and regulatory settlements (10.5) - NM
Other 8.3 11.4 NM
--------- --------
2,250.5 2,044.4 10%
--------- --------
Operating profit 614.8 550.8 12%
--------- --------
Other income (expense):
Interest income 14.0 4.6 204%
Interest expense (72.8) (55.0) 32%
Investment gains and (losses) 13.5 (0.6) NM
Divestitures, net 0.2 0.2 NM
--------- --------
(45.1) (50.8) NM
--------- --------
Income before income taxes, minority interest
and equity earnings in affiliates 569.7 500.0 14%
Income taxes (a) 168.6 130.6 29%
Minority interest (41.0) (32.9) 25%
Equity earnings in affiliates 76.3 55.4 38%
--------- --------
Net income $436.4 $391.9 11%
========= ========
Earnings per share:
Basic $0.57 $0.51 12%
Diluted $0.56 $0.50 12%
Weighted-average shares outstanding:
Basic 764.4 774.1 -1%
Diluted 777.4 782.8 -1%
Shares outstanding at end of period 765.2 771.6 -1%
(See accompanying notes)
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in millions, except per share amounts)
Six Months Ended June 30,
--------------------------
2006 2005 Change
--------- --------- ------
Revenues:
Transaction and processing service fees:
Money transfer services $2,132.0 $1,855.6 15%
Merchant services 1,262.1 1,133.1 11%
Check services 188.2 190.4 -1%
Card services 798.4 806.2 -1%
Other services 162.0 171.6 -6%
Investment income, net (29.2) (27.6) -6%
Product sales and other 353.3 306.6 15%
Reimbursable debit network fees, postage and
other 700.3 625.6 12%
--------- ---------
5,567.1 5,061.5 10%
--------- ---------
Expenses:
Cost of services 2,683.2 2,431.4 10%
Cost of products sold 144.0 123.0 17%
Selling, general and administrative 871.7 798.3 9%
Reimbursable debit network fees, postage and
other 700.3 625.6 12%
Other operating expenses:
Restructuring, net (0.5) 10.2 NM
Impairments (2.0) (0.8) NM
Litigation and regulatory settlements 4.5 0.1 NM
Other 10.5 11.4 NM
--------- ---------
4,411.7 3,999.2 10%
--------- ---------
Operating profit 1,155.4 1,062.3 9%
--------- ---------
Other income (expense):
Interest income 22.4 9.5 136%
Interest expense (142.0) (103.1) 38%
Investment gains and (losses) 13.5 22.2 NM
Divestitures, net 7.8 6.5 NM
--------- ---------
(98.3) (64.9) NM
--------- ---------
Income before income taxes, minority
interest, equity earnings in affiliates and
discontinued operations 1,057.1 997.4 6%
Income taxes (a) 312.5 274.0 14%
Minority interest (70.6) (60.5) 17%
Equity earnings in affiliates 137.1 103.5 32%
--------- ---------
Income from continuing operations 811.1 766.4 6%
Loss from discontinued operations, net of
taxes of $(0.6) and $0, respectively (b) (1.0) - NM
--------- ---------
Net income $810.1 $766.4 6%
========= =========
Earnings per share from continuing
operations:
Basic $1.06 $0.98 8%
Diluted $1.04 $0.97 7%
Earnings per share:
Basic $1.06 $0.98 8%
Diluted $1.04 $0.97 7%
Weighted-average shares outstanding:
Basic 765.0 783.9 -2%
Diluted 778.9 793.3 -2%
Shares outstanding at end of period 765.2 771.6 -1%
(See accompanying notes)
FIRST DATA CORPORATION
SUMMARY SEGMENT DATA
(Unaudited)
(in millions)
Three Months Ended June 30,
---------------------------
2006 2005 Change
--------- --------- -------
Revenues:
---------
Western Union $1,128.9 $979.6 15%
First Data Commercial Services 1,030.3 929.7 11%
First Data Financial Institution Services 451.6 482.1 -6%
First Data International 299.0 212.8 41%
Integrated Payment Systems 29.9 34.9 -14%
--------- ---------
Subtotal segment revenues 2,939.7 2,639.1 11%
All Other and Corporate 129.0 123.7 4%
--------- ---------
3,068.7 2,762.8 11%
--------- ---------
Adjustments for items included in segment
and All Other and Corporate revenues: (c)
Equity earnings in affiliates (d) (84.9) (64.6) 31%
Interest income (14.0) (4.6) 204%
Eliminations (e) (104.5) (98.4) NM
--------- ---------
Consolidated revenue $2,865.3 $2,595.2 10%
========= =========
Operating profit: (f)
---------------------
Western Union $351.9 $324.3 9%
First Data Commercial Services 276.7 217.3 27%
First Data Financial Institution Services 94.5 106.1 -11%
First Data International 33.6 23.5 43%
Integrated Payment Systems 2.9 10.5 -72%
--------- ---------
Subtotal segment operating profit 759.6 681.7 11%
All Other and Corporate (34.4) (19.7) 75%
--------- ---------
725.2 662.0 10%
--------- ---------
Adjustments for items included in segment
and All Other and Corporate operating
profit: (c)
Equity earnings in affiliates (76.3) (55.4) 38%
Minority interest from segment
operations (g) 38.2 32.9 16%
Eliminations (e) (62.2) (62.3) NM
Interest expense (72.8) (55.0) 32%
Items excluded from segment operations (h) 17.6 (22.2) NM
--------- ---------
Income before income taxes, minority
interest and equity earnings in
affiliates $569.7 $500.0 14%
========= =========
Depreciation & Amortization:
----------------------------
Western Union $26.4 $19.6 35%
First Data Commercial Services 76.5 80.0 -4%
First Data Financial Institution Services 37.6 42.9 -12%
First Data International 42.9 36.4 18%
Integrated Payment Systems 2.5 2.9 -14%
All Other and Corporate 13.3 13.1 2%
--------- ---------
Consolidated depreciation & amortization $199.2 $194.9 2%
========= =========
(See accompanying notes)
FIRST DATA CORPORATION
SUMMARY SEGMENT DATA
(Unaudited)
(in millions)
Six Months Ended June 30,
---------------------------
2006 2005 Change
--------- --------- -------
Revenues:
---------
Western Union $2,189.8 $1,897.8 15%
First Data Commercial Services 1,964.7 1,784.7 10%
First Data Financial Institution Services 896.8 952.7 -6%
First Data International 562.9 426.2 32%
Integrated Payment Systems 60.2 68.0 -11%
--------- ---------
Subtotal segment revenues 5,674.4 5,129.4 11%
All Other and Corporate 276.3 254.7 8%
--------- ---------
5,950.7 5,384.1 11%
--------- ---------
Adjustments for items included in segment
and All Other and Corporate revenues: (c)
Equity earnings in affiliates (d) (153.8) (121.9) 26%
Interest income (22.4) (9.5) 136%
Eliminations (e) (207.4) (191.2) NM
--------- ---------
Consolidated revenue $5,567.1 $5,061.5 10%
========= =========
Operating profit: (f)
---------------------
Western Union $688.7 $622.5 11%
First Data Commercial Services 491.1 390.7 26%
First Data Financial Institution Services 178.8 193.7 -8%
First Data International 62.7 45.1 39%
Integrated Payment Systems 7.3 21.3 -66%
--------- ---------
Subtotal segment operating profit 1,428.6 1,273.3 12%
All Other and Corporate (46.4) (18.7) 148%
--------- ---------
1,382.2 1,254.6 10%
--------- ---------
Adjustments for items included in segment
and All Other and Corporate operating
profit: (c)
Equity earnings in affiliates (137.1) (103.5) 32%
Minority interest from segment
operations (g) 68.1 60.5 13%
Eliminations (e) (122.9) (118.9) NM
Interest expense (142.0) (103.1) 38%
Items excluded from segment operations (h) 8.8 7.8 NM
--------- ---------
Income before income taxes, minority
interest, equity earnings in affiliates
and discontinued operations $1,057.1 $997.4 6%
========= =========
Depreciation & Amortization:
----------------------------
Western Union $52.3 $40.0 31%
First Data Commercial Services 154.6 161.5 -4%
First Data Financial Institution Services 76.2 84.9 -10%
First Data International 85.0 72.0 18%
Integrated Payment Systems 5.4 5.9 -8%
All Other and Corporate 27.2 26.0 5%
--------- ---------
Consolidated depreciation & amortization $400.7 $390.3 3%
========= =========
(See accompanying notes)
FIRST DATA CORPORATION
NOTES TO FINANCIAL SCHEDULES
(Unaudited)
Effective January 1, 2006, the Company began assessing performance and
allocating resources based on a new segment structure. Segment results
for 2005 have been adjusted to reflect the new structure. In addition,
consolidated revenues for 2005 have been adjusted to present
"Transaction and processing service fees" by revenue type and to
reflect the reclassification of debit network fees from "Transaction
and processing service fees" to "Reimbursable debit network fees,
postage and other." In addition, certain amounts in the prior year
have been reclassified to conform to current year presentation.
(a) FDC's effective tax rate on pretax income from continuing
operations was 27.8% and 27.7% for the three and six months ended
June 30, 2006, respectively, and 25.0% and 26.3% for the
corresponding periods in 2005.
(b) Discontinued operations relate to NYCE.
(c) Reconciles the total segment and All Other and Corporate revenue
to consolidated revenue or total segment and All Other and
Corporate operating profit to income before income taxes, minority
interest, equity earnings in affiliates and discontinued
operations as reported on the Consolidated Statements of Income.
(d) Excludes equity losses that were recorded in expense and the
amortization related to the excess of the investment balance over
the Company's proportionate share of the investee's net book
value.
(e) Represents elimination of adjustment to record Integrated Payment
Systems segment investment income and its related operating profit
on a pretax equivalent basis and elimination of intersegment
revenue.
(f) Segment and All Other and Corporate operating profit includes
interest income, minority interest from segment operations, equity
earnings in affiliates and the allocation of corporate overhead.
Segment and All Other and Corporate operating profit excludes
items discussed in note (h) below and interest expense.
(g) Minority interest from segment operations excludes minority
interest attributable to items excluded from segment operations
discussed in note (h) below as well as minority interest related
to interest expense and income taxes.
(h) Items, other than interest expense, excluded from segment
operations consist of the following:
Three months Six months
ended ended
(in millions) June 30, 2006 June 30, 2006
-------------- -------------- -------------
Restructuring, Reversals of excess
net $(0.3) $0.5 restructuring accruals of
$0.7 million and $1.9
million during the three
and six months,
respectively, were
partially offset by
charges of $1.0 million
and $1.4 million related
to facility closures,
respectively.
Impairments 2.0 2.0 Gains were recorded for
the subsequent sale of
assets previously
impaired.
Litigation and A charge was recorded
regulatory during the six months
settlements 10.5 (4.5) related to the settlement
of a patent infringement
lawsuit in the Commercial
Services segment. This
was partially offset by
releases of excess
litigation accruals in
the Commercial Services
and Western Union
segments in the second
quarter.
Investment Gains on the redemption
gains and of MasterCard stock and
(losses) 13.5 13.5 the sale of other
strategic investments
were recorded.
Divestitures, Gains on the sale of
net 0.2 7.8 corporate aircraft and a
small business and other
assets were recorded
during the six months,
partially offset by a
loss on the sale of a
small business.
Other (8.3) (10.5) Other relates to direct
external costs incurred
related to the spin-off
of Western Union
partially offset by the
first quarter reversal of
a portion of other
charges recorded in 2005.
-------------- -------------
17.6 8.8
Minority
interest (3.7) (3.7)
-------------- -------------
$13.9 $5.1
============== =============
Three months Six months
ended ended
(in millions) June 30, 2005 June 30, 2005
-------------- -------------- ---------------
Restructuring, Restructuring charges of
net $(10.2) $(10.2) $11.7 million were
recorded in the three
months ended June 30,
2005, partially offset
with reversals of excess
restructuring accruals of
$1.5 million for the
three months.
Impairments (0.2) 0.8 A gain was recorded for
the six months ended June
30, 2005, due to the
subsequent sale of assets
previously impaired,
partially offset by an
impairment of software.
Litigation and Charges recorded during
regulatory the six months relate to
settlements - (0.1) a regulatory settlement
of $1.5 million in the
Western Union segment
offset by the reversal of
an unutilized reserve
established in 2000 for
the settlement of a
lawsuit also in the
Western Union segment.
Investment A gain of $21.4 million
gains and on the sale of CheckFree
(losses) (0.6) 22.2 Corporation common stock
was recorded for the six
months as well as the
sale and impairment of
other strategic
investments.
Divestitures, A gain on the sale of a
net 0.2 6.5 small business was
recorded and certain
excess divestiture
accruals were reversed
during the six months due
to the expiration of
certain contingencies.
Other (11.4) (11.4) Other charges relate to
inaccurate allocations
among clients of pass
through billings, the
majority of which related
to 2004.
-------------- -------------
(22.2) 7.8
Minority
interest - -
-------------- -------------
$(22.2) $7.8
============== =============
NM = Not meaningful.
FIRST DATA CORPORATION
FINANCIAL TRANSACTION PROCESSING
KEY INDICATORS
(in millions)
For the Three Months Ended June 30, 2006 2005 Change
----------------------------------- --------- --------- ------
Western Union
Consumer-to-consumer money transfer
transactions (a) 36.63 28.75 27%
Consumer-to-business transactions (b) 43.25 39.01 11%
Commercial Services
Domestic merchant transactions (c) 6,357.2 5,640.4 13%
Financial Institution Services
Domestic debit issuer transactions (d) 2,351.1 1,994.1 18%
First Data International
International transactions (e) 1,063.2 568.4 87%
For the Six Months Ended June 30,
---------------------------------
Western Union
Consumer-to-consumer money transfer
transactions (a) 69.89 54.09 29%
Consumer-to-business transactions (b) 87.55 78.60 11%
Commercial Services
Domestic merchant transactions (c) 12,153.0 10,732.4 13%
Financial Institution Services
Domestic debit issuer transactions (d) 4,425.6 3,833.6 15%
First Data International
International transactions (e) 2,018.4 1,086.5 86%
At June 30,
-----------
Financial Institution Services
Domestic active card accounts on
file: (f)
Bankcard 39.3 44.0 -11%
Retail 69.4 57.1 22%
--------- ---------
Total 108.7 101.1 8%
========= =========
First Data International
International card accounts on
file: (g)
Bankcard 30.8 19.8 56%
Retail 10.4 7.4 41%
--------- ---------
Total 41.2 27.2 51%
========= =========
(a) Consumer-to-consumer money transfer transactions include consumer-
to-consumer money transfer services worldwide. Amounts for 2006
include Vigo Remittance Corp. ("Vigo") which was acquired in
October 2005. Excluding Vigo, consumer-to-consumer money transfer
transactions grew 18% and 20% for the three and six months ended
June 30, 2006, respectively.
(b) Consumer-to-business transactions include Quick Collect, EasyPay,
PhonePay, Paymap's Just-in-Time and Equity Accelerator services,
and E Commerce Group's Speedpay transactions directly processed
by E Commerce Group.
(c) Domestic merchant transactions include acquired VISA and
MasterCard credit and signature debit, PIN-debit, electronic
benefits transactions ("EBT"), and processed-only or gateway
customer transactions at the point of sale ("POS"). Domestic
merchant transactions also include acquired ATM transactions,
gateway transactions at ATMs, and STAR PIN-debit POS transactions
received from other acquirers.
(d) Domestic debit issuer transactions include VISA and MasterCard
signature debit, STAR ATM, STAR PIN-debit POS, and ATM and PIN-
debit POS gateway transactions.
(e) International transactions include VISA, MasterCard and other card
association merchant acquiring and switching and debit issuer
transactions for clients outside the U.S. Merchant transactions
include credit, signature debit and PIN-debit POS, POS gateway and
ATM transactions. Debit issuer transactions include signature and
PIN-debit POS, POS gateway and ATM transactions.
(f) Domestic active card accounts on file include customer accounts
that had a balance or any monetary posting or authorization
activity during the last month of the quarter.
(g) International card accounts on file at June 30, 2005, have been
adjusted to reflect a reclassification of accounts from bankcard
to retail.
FIRST DATA CORPORATION
SUPPLEMENTAL METRICS
For the Three Months Ended June 30, 2006
----------------------------------------
Consolidated financial metrics (in millions):
Capital expenditures $82
Dividends $46
Western Union
Consumer-to-consumer: Including Excluding
Vigo Vigo
--------- ---------
U.S. same store sales transaction growth N/A 12%
International transaction growth 32% 24%
International revenue growth 20% 17%
Mexico transaction growth 43% 6%
Mexico revenue growth 39% 7%
Financial Institution Services
Revenue growth:
Card Processing -22%
Output Services 6%
Debit 0%
Postage -1%
Remitco -7%
For the Six Months Ended June 30, 2006
--------------------------------------
Consolidated financial metrics (in millions):
Capital expenditures $225
Dividends $92
Western Union
Consumer-to-consumer: Including Excluding
Vigo Vigo
--------- ---------
U.S. same store sales transaction growth N/A 14%
International transaction growth 33% 26%
International revenue growth 19% 16%
Mexico transaction growth 49% 11%
Mexico revenue growth 46% 13%
Financial Institution Services
Revenue growth:
Card Processing -22%
Output Services 3%
Debit 0%
Postage -1%
Remitco -1%
At June 30, 2006
----------------
Financial Institution Services
Domestic card accounts on file (in millions):
Bankcard 106.0
Retail 315.0
Debit 111.2
---------
Total 532.2
=========
First Data International
International card accounts on file (in
millions):
Bankcard 30.8
Retail 10.4
Debit 14.8
---------
Total 56.0
=========
N/A - Not applicable
FIRST DATA CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
(in millions)
Management believes the non-GAAP financial measures included in this
press release provide meaningful information to assist investors and
analysts in understanding our financial results and to better analyze
trends in our underlying business. The non-GAAP financial measures
should not be considered in isolation or as a substitute for the most
comparable GAAP financial measures. The non-GAAP financial measures
reflect an additional way of viewing aspects of our operations that,
when viewed with our GAAP results and the reconciliation to the
corresponding GAAP financial measures, provide a more complete
understanding of our business. Investors are strongly encouraged to
review our financial statements and publicly-filed reports in their
entirety and not to rely on any single financial measure. A
reconciliation of non-GAAP measures to the most directly comparable
GAAP financial measures is included below.
Three Months Ended June 30,
---------------------------
2006 2005 Change
--------- --------- -------
Commercial Services
-------------------
Revenue $1,030.3 $929.7 11%
Reimbursable debit network fees (199.9) (165.2)
--------- ---------
Revenue excluding reimbursable debit
network fees $830.4 $764.5 9%
========= =========
Operating profit $276.7 $217.3 27%
Integration expenses (1) - 29.8
--------- ---------
Operating profit excluding integration
expenses $276.7 $247.1 12%
========= =========
Profit margin 26.9% 23.4%
Profit margin excluding debit networks fees
and integration expenses 33.3% 32.3%
Financial Institution Services
------------------------------
Revenue $451.6 $482.1
Reimbursable postage and other (148.9) (150.8)
--------- ---------
Revenue excluding reimbursable postage and
other $302.7 $331.3
========= =========
Operating profit $94.5 $106.1
Profit margin 20.9% 22.0%
Profit margin excluding reimbursable
postage and other 31.2% 32.0%
(1) Integration expenses relate to the cost of personnel who were
assigned to work exclusively on the Concord integration or Company
reorganization plus the allocation of a portion of the cost of
certain Company personnel that were partially dedicated to such
activities. Additionally, these expenses include certain internal
and contract system development costs and infrastructure costs.
FDC - 1 |
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