First Data Reports 21% Increase in Third Quarter EPS of $0.58
EPS Driven by Overall Reported Revenue Growth of 12% And Strong Margins in All Core Segments
FDC Raises 2000 EPS Estimate to $2.09 to $2.14
ATLANTA, Oct. 12 /PRNewswire/ -- First Data Corporation (NYSE: FDC - news), a global leader in electronic commerce and payment services, announced its sixth consecutive quarter of strong earnings per share growth, Chairman and Chief Executive Officer Ric Duques reported today. Reported earnings per share, before nonrecurring items, grew 21% to $0.58, while earnings per share, adjusted for the impact of the sale of the Investor Services business in the fourth quarter of 1999, grew 23%. Revenues from continuing operations rose 12% to $1.44 billion and pro forma revenues from continuing operations, which include consolidated revenues from Merchant Services, were up 13%.
``Our sixth consecutive quarter of EPS growth of at least 14% reflects continued execution of our core strategies,'' Duques said. ``Our business continues to excel on the top and bottom line. Based on our continued confidence in our operating performance, we are raising our expectations of earnings per share in 2000 from a range of $2.02 to $2.07 to a range of $2.09 to $2.14.''
Third Quarter Financial Highlights (excluding nonrecurring items)
* Earnings per share increased 21% to $0.58, up from $0.48 in the third
quarter of 1999. This is the third consecutive quarter of 20%-plus
EPS growth.
* Net income increased 14 % to $236 million. Net income, adjusted for
the impact of the sale of the Investor Services Business, grew 16%.
* Each of the three primary business segments maintained operating
margins in excess of 20%, with the Payments and Merchant segments
achieving margins of 30%. For the third consecutive quarter, net
margins increased over the same quarter in 1999, rising from 15.0% to
16.4%.
* The Company expects to meet its previously stated objective of
$1.0 billion in free cash flow for the year due to the continued strong
operating results from the three primary business segments.
* The Company reported one-time after-tax gains totaling $125 million,
almost exclusively related to the successful sale of Transpoint to
Checkfree. This was partially offset by one-time after-tax
restructuring and other charges totaling $53 million, approximately
$40 million of this charge related to the after-tax impact of the Card
Segment restructuring announced in late September.
* In May, the Company announced a $1 billion stock repurchase program.
During the third quarter the company repurchased 12.5 million shares of
its stock for $562 million. The total amount repurchased to date under
this program is 14.4M shares for $660 million.
Business Segment Highlights
Business segment highlights reflect the Company's creation of a new Emerging Payments segment in connection with the announcement of eONE Global on October 9, 2000 and the modification of previously reported segments to accommodate the change. Also in the quarter, the company's revenues were marginally impacted by the adoption of SEC Staff Accounting Bulletin 101.
Payment Instruments, comprised largely of Western Union and representing 40% of First Data revenue, achieved outstanding results with revenue up 18% to $596 million and profits up 19% to $190 million. After adjusting for the $8 million impact to revenue due to the weaker Euro, revenue growth would have been 20%. Results were fueled by strong third quarter growth of 23% in total worldwide money transfer transactions, raising the year-to-date growth rate to 20%. Western Union International revenue grew 41% (46% after adjusting for the weaker Euro) with money transfer transaction growth of 49%. The Payments business continues to achieve increased market penetration, with a 21% increase in its agent network over the third quarter of 1999 to approximately 94,000 locations -- including a 31% increase to 52,000 international agent locations.
Merchant Processing Services, comprised of the company's merchant acquiring and Telecheck business, accounts for 30% of First Data's revenue. The Merchant businesses delivered another strong quarter, with earnings up 26% to $137 million on reported revenues of $455 million. Merchant segment revenues grew 17% and were positively impacted by gaining a controlling interest in one of the company's merchant alliances. Merchant sales dollar volume processed was up 24% for the quarter, or up 14% on a pro forma basis when computed to include the prior year results of Paymentech and the Norwest portfolio.
Card Issuer Services, the world's largest third party card processor, accounts for 25% of First Data's revenue, recorded a 1% revenue increase to $363 million and a 14% increase in earnings to $74 million. Year to date revenues of $1.1 billion represent an 8% increase over 1999 and year to date earnings are up 16% to $224 million. Operating margins were up from 17.9% in 1999 to 20.2% in 2000 due primarily to cost management initiatives implemented during the year and restructuring charges recorded in the first quarter.
Earlier this month the company converted approximately 45 million JC Penney credit cards on behalf of its client GE Capital Corp. The conversion raised the number of accounts First Data maintains on file to more than 300 million. In addition, First Data has a pipeline of more than 41 million retail and bankcards to be converted in late 2001 and the first half of 2002. Card Issuer also has recently signed a significant card production management contract covering plastics management, card creation, and card distribution.
Emerging Payments -- On October 9, 2000, First Data announced the launch of eONE Global, a business focused on identifying, developing, commercializing and operating emerging payment systems and related technologies supporting e-commerce and Internet payment products. In order to facilitate the tracking of its emerging payments businesses, the Company has established a new Emerging Payments segment and has moved CashTax, SurePay, and e-commerce investments into that segment for reporting purposes.
First Data currently has an industry leading position, processing for 100,000 Internet merchants through its bank alliances. As compared to the third quarter of 1999, the dollar volume generated by identifiable Internet merchants tripled to an estimated $5.5 billion. First Data continues to service 60 of the top 100 e-commerce-enabled Internet merchants.
FDC Accentuates Internet Presence During the Quarter
In addition to strong financial performance, the company also undertook
initiatives to accentuate its Internet presence:
* Launched Western Union PayCash service that allows Internet purchases
with cash.
* Leveraging its brand name in the electronic payments market, the
Company launched Western Union Money Zap, its person-to-person
Internet payment service.
Outlook for 2000
Ric Duques said the Company expects to achieve the following for the year
2000:
* Reported revenue growth from continuing operations in the low double
digits.
* Pro forma consolidated revenue growth in the range of 13-17%.
* Net income growth in the range of 13-17%.
* An increase in EPS growth to a range of 18-21% for the year.
Atlanta-based First Data Corp. helps move the world's money. As the leader in electronic commerce and payment services, First Data serves more than two million merchant locations, 1,400 card issuers and millions of consumers, making it easier, faster and more secure for people and businesses to buy goods and services. With approximately 29,000 employees worldwide, the company provides credit, debit and stored-value card issuing and merchant transaction processing services; Internet commerce solutions; money transfers and money orders; and check processing and verification services throughout the United States, United Kingdom, Australia, Mexico, Spain and Germany. In addition, its Western Union® network includes approximately 94,000 agent locations with operations in 185 countries and territories. For more information, please visit the company's web site at www.firstdatacorp.com .
Notice to Investors, Prospective Investors and the Investment Community
Cautionary Information Regarding Forward-Looking Statements
Statements in this press release regarding First Data Corporation's business which are not historical facts 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) continued growth at rates approximating recent levels for card-based payment transactions, consumer money transfer transactions and other product markets; (b) successful conversions under service contracts with major clients; (c) renewal of material contracts in the Company's business units consistent with past experience; (d) timely, successful and cost effective implementation of processing systems to provide new products, improved functionality and increased efficiencies, particularly in the Card Issuer Services segment; (e) continuing development and maintenance of appropriate business continuity and data security plans for the Company's processing systems based on the needs and risks relative to each such system; (f) absence of consolidation among client financial institutions or other client groups which has a significant impact on FDC client relationships and no material loss of business resulting from significant customers of the Company involved in announced mergers; (g) 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; (h) anticipation of and response to technological changes, particularly with respect to e-commerce; (i) attracting and retaining qualified key employees; (j) no imposition of a Value Added Tax on third-party credit card processing services by the European Community (``EC''), which could put credit card processing outsourcers at a competitive disadvantage to in-house solutions in the EC; (k) 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 products obsolete; (l) continuation of the existing interest rate environment, avoiding increases in agent fees related to the Company's consumer money transfer products and the Company's short-term borrowing costs; (m) absence of significant changes in foreign exchange spreads on retail money transfer transactions, particularly between the United States and Mexico, without a corresponding increase in volume or consumer fees; (n) no unanticipated developments relating to previously disclosed lawsuits against Western Union, inter alia, violation of consumer protection laws in connection with advertising the cost of money transfer to Mexico; (o) successfully managing the potential both for patent protection and patent liability in the context of rapidly developing legal framework for expansive software patent protection; and (p) continued political stability in countries in which Western Union has material operations.
FIRST DATA CORPORATION
SUMMARY FINANCIAL HIGHLIGHTS
(Unaudited)
(In millions, except per share amounts)
Three Months Ended September 30,
2000 1999 Change
Revenues:
Continuing operations $1,440.3 $1,290.0 12%
Divested or to be divested --- 93.0
Total revenues $1,440.3 $1,383.0 4%
Income before income taxes
Before nonrecurring items
and Investor Services Group $330.6 $283.4 17%
Investor Services Group --- 8.1
Before nonrecurring items 330.6 291.5 13%
Restructuring, business
divestitures, litigation and
impairments, net 112.9 (6.1)
$443.5 $285.4 55%
Net Income
Before nonrecurring items
and Investor Services Group $236.4 $203.3 16%
Investor Services Group --- 4.8
Before nonrecurring items 236.4 208.1 14%
Restructuring, business
divestitures, litigation and
impairments, net 71.9 (1.0)
$308.3 $207.1 49%
Earnings per common share
Before nonrecurring items
and Investor Services Group $0.58 $0.47 23%
Investor Services Group --- 0.01
Before nonrecurring items 0.58 0.48 21%
Restructuring, business
divestitures, litigation and
impairments, net 0.17 ---
$0.75 $0.48 56%
Weighted average shares
outstanding - diluted 409.8 433.8 -6%
Net Income margins
Before nonrecurring items 16.4% 15.0% 1.4 pts
Restructuring, business
divestitures, litigation and
impairments, net 5.0% ---
21.4% 15.0% 6.4 pts
FIRST DATA CORPORATION
SUMMARY FINANCIAL HIGHLIGHTS
(Unaudited)
(In millions, except per share amounts)
Nine Months Ended September 30,
2000 1999 Change
Revenues:
Continuing operations $4,197.4 $3,692.6 14%
Divested or to be divested --- 331.3
Total revenues $4,197.4 $4,023.9 4%
Income before income taxes
Before nonrecurring items
and Investor Services Group $874.8 $733.4 19%
Investor Services Group --- 26.3
Before nonrecurring items 874.8 759.7 15%
Restructuring, business
divestitures, litigation and
impairments, net 100.6 (41.0)
$975.4 $718.7 36%
Net Income
Before nonrecurring items
and Investor Services Group $625.5 $518.7 21%
Investor Services Group --- 15.6
Before nonrecurring items 625.5 534.3 17%
Restructuring, business
divestitures, litigation and
impairments, net 64.2 7.1
$689.7 $541.4 27%
Earnings per common share
Before nonrecurring items
and Investor Services Group $1.50 $1.18 27%
Investor Services Group --- 0.04
Before nonrecurring items 1.50 1.22 23%
Restructuring, business
divestitures, litigation and
impairments, net 0.15 0.02
$1.65 $1.24 33%
Weighted average shares
outstanding - diluted 417.4 438.2 -5%
Net Income margins
Before nonrecurring items 14.9% 13.3% 1.6 pts
Restructuring, business
divestitures, litigation and
impairments, net 1.5% 0.2%
16.4% 13.5% 2.9 pts
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except per share amounts)
Three Months Ended September 30,
2000 1999 Change
Revenues:
Service revenues (e) $1,405.7 $1,356.3
Product sales and other 34.6 26.7
1,440.3 1,383.0 4%
Expenses:
Operating 875.6 866.5 1%
Selling, general & administrative 208.0 197.6 5%
Restructuring, business divestitures,
litigation and impairments,
net(a), (b) (112.9) 6.1 N/M
Interest expense 26.1 27.4 -5%
996.8 1,097.6 -9%
Income before income taxes 443.5 285.4 55%
Income taxes (c), (d) 135.2 78.3 73%
Net income $308.3 $207.1 49%
Diluted earnings per common share $0.75 $0.48 56%
Weighted average shares
outstanding - diluted 409.8 433.8 -6%
Shares outstanding at end
of period 396.1 420.4 -6%
Depreciation expense $56.5 $63.0 -10%
Goodwill amortization
Deductible $12.2 $11.4 7%
Non-deductible 12.2 12.6 -3%
Other intangibles amortization 61.6 67.3 -8%
Total amortization $86.0 $91.3 -6%
(a) Results for third quarter 2000 include $81.8 million of restructuring and other charges and $194.7 million of gain on sale of businesses and disposition accrual reversals. Net of taxes, the effect of these items was a gain of $71.9 million.
(b) Results for third quarter 1999 include a $13.5 million charge related to the termination of a specialty services joint venture partially offset by the reversal of a $7.4 million merger accrual due to the favorable resolution of a contingency in the third quarter. Net of taxes the effect of these two items was a loss of $1 million.
(c) Income taxes on income before nonrecurring charges were $94.2 million for third quarter 2000. A net tax charge of $41.0 million resulted from restructuring, business divestitures, litigation, and impairment for the same period.
(d) Income taxes on income before nonrecurring charges were $83.4 million for third quarter 1999. A net tax benefit of $5.1 million resulted from restructuring, business divestitures, litigation, and impairment for the same period.
(e) First Data Corporation adopted Staff Accounting Bulletin No. 101 - Revenue Recognition in Financial Statements in the third quarter 2000 which resulted in the netting of certain revenue and expenses that were previously presented gross in the income statement.
N/M = Not meaningful.
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except per share amounts)
Nine Months Ended September 30,
Percent
2000 1999 Change
Revenues:
Service revenues (e), (f) $4,101.8 $3,948.1
Product sales and other 95.6 75.8
4,197.4 4,023.9 4%
Expenses:(e), (f)
Operating 2,618.4 2,586.1 1%
Selling, general &
administrative 638.8 603.7 6%
Restructuring, business divestitures,
litigation and impairments,
net(a), (b) (100.6) 41.0 N/M
Interest expense 65.4 74.4 -12%
3,222.0 3,305.2 -3%
Income before income taxes 975.4 718.7 36%
Income taxes (c), (d) 285.7 177.3 61%
Net income $689.7 $541.4 27%
Diluted earnings per common share $1.65 $1.24 33%
Weighted average shares
outstanding - diluted 417.4 438.2 -5%
Shares outstanding at end
of period 396.1 420.4 -6%
Depreciation expense $174.9 $185.5 -6%
Goodwill amortization
Deductible $36.3 $33.6 -8%
Non-deductible 36.8 41.6 -12%
Other intangibles amortization 189.4 201.8 -6%
Total amortization $262.5 $277.0 -5%
(a) Results for 2000 include $101.0 million of restructuring and other charges and $201.6 million of gain on sale of businesses and disposition accrual reversals. Net of taxes, the effect of these items was a gain of $64.2 million.
(b) Results for 1999 include a third quarter $13.5 million charge related to the termination of a specialty services joint venture partially offset by the reversal of a $7.4 million merger accrual due to the favorable resolution of a contingency in the quarter. Net of taxes the effect of these two items was a loss of $1 million. Results also include recognizing a benefit of $24.5 million for Innovis that relates primarily to the receipt of the net proceeds from its sale to CBC Companies, Inc., gain on the sale of EBP Life of $4.5 million, loss on the sale of Donnelley of $29.8 million, and settlement of Western Union litigation of $34.1 million. Net of taxes, the effect of these items was a gain of $8.1 million.
(c) Income taxes on income before nonrecurring charges were $225.4 million for 1999. A net tax benefit of $48.1 million resulted from restructuring, business divestitures, and litigation for the same period.
(d) Income taxes on income before nonrecurring charges were $249.3 million for 2000. A net tax charge of $36.4 million resulted from restructuring, business divestitures, and litigation for the same period.
(e) First Data Corporation adopted Staff Accounting Bulletin No. 101 -- Revenue Recognition in Financial Statements in the third quarter 2000 which resulted in the netting of certain revenue and expenses that were previously presented gross in the income statement.
(f) In the third quarter of 2000, the Company gained a controlling interest in a merchant alliance. Revenues and expenses have been restated to the beginning of 2000 to reflect this venture as a consolidated subsidiary.
N/M = Not meaningful
FIRST DATA CORPORATION
Financial Transaction Processing
Key Indicators
(Unaudited)
September 30, 2000 1999 Percent
Card accounts on file (millions)
Domestic Cards 232.1 232.9 0%
International Cards 29.7 27.1 10%
Total 261.8 260.0 1%
For the Three Months Ended
September 30:
Merchant dollar volume
(billions, domestic only)
(a), (b) $107.5 $86.6 24%
Merchant transactions
(millions)
Domestic Merchant transactions
(a), (b) 1,915.0 1,593.6 20%
International Merchant
transactions 136.8 138.7 -1%
Total 2,051.8 1,732.3 18%
Merchant Processing Services
revenue - proforma basis
(millions) (c) $623.0 $551.5 13%
Merchant Processing Services
Alliance revenue - proforma
basis (millions) (d) $660.5 $551.5 20%
Payment Instrument transactions
(millions)
Money Transfer 23.0 18.7 23%
For the Nine Months Ended September 30:
Merchant dollar volume
(billions, domestic only)
(a), (b) $307.5 $223.9 37%
Merchant transactions (millions)
Domestic Merchant transactions
(a), (b) 5,458.0 3,925.6 39%
International Merchant
transactions 397.7 388.8 2%
Total 5,855.7 4,314.4 36%
Merchant Processing Services
revenue - proforma basis
(millions) (c) $1,801.5 $1,606.5 12%
Merchant Processing Services
Alliance revenue -
proforma basis
(millions)(d) $1,913.9 $1,606.5 19%
Payment Instrument transactions
(millions)
Money Transfer 65.0 54.1 20%
(a) Domestic Merchant dollar volume includes Visa and Mastercard only
from Alliances and Managed accounts. Domestic Merchant transactions
processed include only Visa and Mastercard bankcard
volume associated with Alliances, Managed accounts and processed
only customers.
(b) Including results for Paymentech and Norwest Portfolios comparably
for the first nine months in both years, dollar volume growth would
have been 14% for the quarter and 15% for the first nine months of
the year. Transaction growth would have been 9% for the quarter and
8% for the first nine months of the year.
(c) This line represents Merchant Processing Services segment revenue as
if all bank alliances were accounted for on a consolidated basis.
1999 has been adjusted to reflect Paymentech and Norwest Portfolios
as being owned the entire year of 1999. 2000 has been adjusted to
eliminate the effect of consolidating a merchant alliance in 2000
due to gaining a controlling interest in the third quarter. Certain
alliances are currently accounted for under the equity method as
required by generally accepted accounting principles (GAAP).
(d) This line is the same as (c) except for the inclusion of the
consolidation of the merchant alliance. |
