Delaware | 001-11073 | 47-0731996 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
225 LIBERTY STREET 29th FLOOR NEW YORK, NEW YORK | 10281 |
(Address of Principal Executive Offices) | (Zip Code) |
Item | 9.01 Financial Statements and Exhibits. |
(d) | The following is a list of the Exhibits filed or furnished with this report. |
Exhibit Number | Description of Exhibit |
99.1 | Press Release issued by FDC on April 25, 2016 |
• | Q1 GAAP consolidated revenue of $2.8 billion, up 3%; up 5% excluding currency impacts |
• | Q1 segment revenue of $1.7 billion, up 2%; up 5% excluding currency impacts |
• | Q1 adjusted EBITDA of $636 million, up 13%; adjusted EBITDA margin expands 360 basis points to 37.6% |
• | Q1 GAAP net loss of $56 million, includes $46 million of debt extinguishment charges and $52 million of IPO-triggered stock-based compensation costs |
• | Continued strengthening of the balance sheet through debt refinancings that extended maturities of $4.6 billion of term loans |
Peter Poillon Investor Relations First Data 212-266-3565 Peter.Poillon@firstdata.com | Liidia Liuksila Public Relations First Data 212-515-0174 Liidia.Liuksila@firstdata.com |
Three Months Ended March 31, | |||||||||||||
2016 | 2015 | % Change | Constant Currency % Change | ||||||||||
Revenues: | |||||||||||||
Transaction and processing service fees (a) | $ | 1,591 | $ | 1,566 | 2 | % | 3 | % | |||||
Product sales and other | 279 | 256 | 9 | % | 14 | % | |||||||
Total revenues (excluding reimbursable items) | 1,870 | 1,822 | 3 | % | 5 | % | |||||||
Reimbursable PIN debit fees, postage and other | 907 | 873 | 4 | % | 4 | % | |||||||
Total revenues | 2,777 | 2,695 | 3 | % | 5 | % | |||||||
Expenses: | |||||||||||||
Cost of services | 731 | 714 | 2 | % | |||||||||
Cost of products sold | 78 | 76 | 3 | % | |||||||||
Selling, general and administrative | 564 | 520 | 8 | % | |||||||||
Depreciation and amortization | 238 | 251 | -5 | % | |||||||||
Other operating expense | 21 | 1 | NM | ||||||||||
Total expenses (excluding reimbursable items) | 1,632 | 1,562 | 4 | % | |||||||||
Reimbursable PIN debit fees, postage and other | 907 | 873 | 4 | % | |||||||||
Total expenses | 2,539 | 2,435 | 4 | % | |||||||||
Operating profit | 238 | 260 | -8 | % | |||||||||
Interest expense, net | (263 | ) | (406 | ) | -35 | % | |||||||
Loss on debt extinguishment | (46 | ) | — | NM | |||||||||
Other income (b) | 6 | 35 | -83 | % | |||||||||
Loss before income taxes and equity earnings in affiliates | (65 | ) | (111 | ) | -41 | % | |||||||
Income tax expense | 5 | 3 | 67 | % | |||||||||
Equity earnings in affiliates (a) | 64 | 51 | 25 | % | |||||||||
Net loss | (6 | ) | (63 | ) | -90 | % | |||||||
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest | 50 | 49 | 2 | % | |||||||||
Net loss attributable to First Data Corporation | $ | (56 | ) | $ | (112 | ) | -50 | % | |||||
(See accompanying notes) |
Three Months Ended March 31, | ||||||||||
2016 | 2015 | % Change | ||||||||
Segment Revenues (c): | ||||||||||
Global Business Solutions | $ | 955 | $ | 962 | -1 | % | ||||
Global Financial Solutions | 386 | 357 | 8 | % | ||||||
Network & Security Solutions | 352 | 336 | 5 | % | ||||||
Total segment revenues | 1,693 | 1,655 | 2 | % | ||||||
Adjustments to reconcile to consolidated revenues: | ||||||||||
Adjustments for non wholly owned entities (d) | 14 | 20 | -30 | % | ||||||
Independent Sales Organization (ISO) commission expense (e) | 163 | 147 | 11 | % | ||||||
Reimbursable PIN debit fees, postage, and other | 907 | 873 | 4 | % | ||||||
Consolidated revenues | $ | 2,777 | $ | 2,695 | 3 | % | ||||
Adjusted EBITDA (f): | ||||||||||
Global Business Solutions | $ | 376 | $ | 360 | 4 | % | ||||
Global Financial Solutions | 155 | 119 | 30 | % | ||||||
Network & Security Solutions | 151 | 130 | 16 | % | ||||||
Corporate | (46 | ) | (46 | ) | — | % | ||||
Adjusted EBITDA | 636 | 563 | 13 | % | ||||||
Adjustments to reconcile to Net loss attributable to First Data Corporation: | ||||||||||
Adjustments for non wholly owned entities (d) | 10 | 7 | 43 | % | ||||||
Depreciation and amortization | (238 | ) | (251 | ) | -5 | % | ||||
Interest expense, net | (263 | ) | (406 | ) | -35 | % | ||||
Loss on debt extinguishment | (46 | ) | — | NM | ||||||
Other items (g) | (35 | ) | (15 | ) | 133 | % | ||||
Income tax expense | (5 | ) | (3 | ) | 67 | % | ||||
Stock-based compensation | (115 | ) | (7 | ) | NM | |||||
Net loss attributable to First Data Corporation | $ | (56 | ) | $ | (112 | ) | -50 | % | ||
Segment depreciation and amortization (a): | ||||||||||
Total segment depreciation and amortization | $ | 228 | $ | 245 | -7 | % | ||||
Adjustments for non wholly owned entities (d) | 19 | 21 | -10 | % | ||||||
Amortization of initial payments for new contracts | 15 | 11 | 36 | % | ||||||
Total consolidated depreciation and amortization per unaudited consolidated statements of cash flows | 262 | 277 | -5 | % | ||||||
Amortization of equity method investments | (9 | ) | (15 | ) | -40 | % | ||||
Amortization of initial payments for new contracts | (15 | ) | (11 | ) | 36 | % | ||||
Total consolidated depreciation and amortization per unaudited consolidated statements of operations | $ | 238 | $ | 251 | -5 | % | ||||
(See accompanying notes) |
(a) | Includes amortization of initial payments for new contracts (presented in "Summary Segment Data"), which is recorded as a contra-revenue within "Transaction and processing service fees" and amortization related to equity method investments, which is netted within the "Equity earnings in affiliates" line of $9 million and $15 million for the three months ended March 31, 2016 and 2015, respectively. |
(b) | Other income includes divestitures, impairments, derivative gains and (losses), and non-operating foreign currency gains and (losses), as applicable to the periods presented. |
(c) | Segment revenues exclude reimbursable PIN debit fees, postage and other revenue. For significant affiliates, segment revenue is reflected based on our proportionate share of the results of our investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. For other affiliates, we include equity earnings in affiliates, excluding amortization expense, in segment revenue. In addition, our segment measures reflect revenue-based commission payments to Independent Sales Organizations (ISOs). |
(d) | Net adjustment to reflect our proportionate share of the results of our investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. For other affiliates, we include equity earnings in affiliates, excluding amortization expense, in segment revenue and adjusted EBITDA by segment. |
(e) | Independent Sales Organization commissions are presented as contra-revenues in the unaudited consolidated statements of operations. |
(f) | Adjusted EBITDA includes equity earnings in affiliates and excludes depreciation and amortization expense, net income attributable to noncontrolling interests, other operating expenses, and other income (expense). |
(g) | Restructuring, non-normal course litigation and regulatory settlements, debt issuance costs, and "Other income" as presented in the unaudited consolidated statements of operations, which includes divestitures, impairments, derivative gains and (losses), non-operating foreign currency gains and (losses), and Kohlberg Kravis Roberts & Co. (KKR) related items. KKR related items represent KKR annual sponsorship fees for management, consulting, financial and other advisory services. In the first quarter 2016, the company did not incur any KKR related items. |
Adjustments | ||||||||||||||||||||||||
GAAP | Segment Adjustments (a) | Stock-based compensation (b) | Loss on debt extinguishment (c) | MTM adjustment for derivatives (d) | Amortization of acquisition intangibles and deferred financing costs (e) | Restructuring, impairment, litigation and other (f) | Adjusted | |||||||||||||||||
Total revenues | $ | 2,777 | $ | (1,084 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,693 | |||||||
Total expenses | 2,539 | (1,098 | ) | (115 | ) | — | — | (105 | ) | (27 | ) | 1,194 | ||||||||||||
Operating profit | 238 | 14 | 115 | — | — | 105 | 27 | 499 | ||||||||||||||||
Interest expense, net | (263 | ) | — | — | — | — | 3 | — | (260 | ) | ||||||||||||||
Loss on debt extinguishment | (46 | ) | — | — | 46 | — | — | — | — | |||||||||||||||
Other income (expense) | 6 | — | — | — | 4 | — | (10 | ) | — | |||||||||||||||
(Loss) income before income taxes and equity earnings in affiliates | (65 | ) | 14 | 115 | 46 | 4 | 108 | 17 | 239 | |||||||||||||||
Income tax expense | 5 | — | 7 | — | — | 6 | 1 | 19 | ||||||||||||||||
Equity earnings in affiliates | 64 | (64 | ) | — | — | — | — | — | — | |||||||||||||||
Net (loss) income | (6 | ) | (50 | ) | 108 | 46 | 4 | 102 | 16 | 220 | ||||||||||||||
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest | 50 | (50 | ) | — | — | — | — | — | — | |||||||||||||||
Net (loss) income attributable to First Data Corporation | $ | (56 | ) | $ | — | $ | 108 | $ | 46 | $ | 4 | $ | 102 | $ | 16 | $ | 220 | |||||||
Net (loss) income per share: | ||||||||||||||||||||||||
Basic | $ | (0.06 | ) | $ | 0.25 | |||||||||||||||||||
Diluted | $ | (0.06 | ) | $ | 0.24 | |||||||||||||||||||
Weighted-average common shares outstanding: | ||||||||||||||||||||||||
Basic | 896,339,379 | 896,339,379 | ||||||||||||||||||||||
Diluted | 896,339,379 | 918,886,109 |
(a) | Represents proportional consolidation, Independent Sales Organization commissions, and reimbursable PIN debit fees, postage, and other. |
(b) | Stock-based compensation expense includes $49 million of IPO-triggered expense, net of tax. |
(c) | Represents costs associated with debt refinancing. |
(d) | Represents mark-to-market activity related to our undesignated hedges, ineffectiveness of our designated hedges, and mark-to-market activity on our euro-denominated debt held in the United States. |
(e) | Represents amortization of intangibles established in connection with the 2007 Merger and acquisitions we have made since 2007, excluding the percentage of our consolidated amortization of acquisition intangibles related to non wholly owned consolidated alliances equal to the portion of such alliances owned by our alliance partners. This column also includes amortization related to deferred financing costs. |
(f) | Represents restructuring, impairments, litigation and regulatory settlements, investments gains and (losses), and divestitures, as applicable to the periods presented. |
Adjustments | ||||||||||||||||||||||||
GAAP | Segment Adjustments (a) | Stock-based compensation | Loss on debt extinguishment (b) | MTM adjustment for derivatives (c) | Amortization of acquisition intangibles and deferred financing costs (d) | Restructuring, impairment, litigation and other (e) | Adjusted | |||||||||||||||||
Total revenues | $ | 2,695 | $ | (1,040 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,655 | |||||||
Total expenses | 2,435 | (1,042 | ) | (7 | ) | — | — | (132 | ) | (25 | ) | 1,229 | ||||||||||||
Operating profit | 260 | 2 | 7 | — | — | 132 | 25 | 426 | ||||||||||||||||
Interest expense, net | (406 | ) | — | — | — | — | 16 | — | (390 | ) | ||||||||||||||
Loss on debt extinguishment | — | — | — | — | — | — | — | — | ||||||||||||||||
Other income (expense) | 35 | — | — | — | (66 | ) | — | 31 | — | |||||||||||||||
(Loss) income before income taxes and equity earnings in affiliates | (111 | ) | 2 | 7 | — | (66 | ) | 148 | 56 | 36 | ||||||||||||||
Income tax expense (benefit) | 3 | — | — | — | — | — | (2 | ) | 1 | |||||||||||||||
Equity earnings in affiliates | 51 | (51 | ) | — | — | — | — | — | — | |||||||||||||||
Net (loss) income | (63 | ) | (49 | ) | 7 | — | (66 | ) | 148 | 58 | 35 | |||||||||||||
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest | 49 | (49 | ) | — | — | — | — | — | — | |||||||||||||||
Net (loss) income attributable to First Data Corporation | $ | (112 | ) | $ | — | $ | 7 | $ | — | $ | (66 | ) | $ | 148 | $ | 58 | $ | 35 | ||||||
(a) | Represents proportional consolidation, Independent Sales Organization commissions, and reimbursable PIN debit fees, postage, and other. |
(b) | Represents costs associated with debt refinancing. |
(c) | Represents mark-to-market activity related to our undesignated hedges, ineffectiveness of our designated hedges, and mark-to-market activity on our euro-denominated debt held in the United States. |
(d) | Represents amortization of intangibles established in connection with the 2007 Merger and acquisitions we have made since 2007, excluding the percentage of our consolidated amortization of acquisition intangibles related to non-wholly owned consolidated alliances equal to the portion of such alliances owned by our alliance partners. This column also includes amortization related to deferred financing costs. |
(e) | Represents restructuring, impairments, litigation and regulatory settlements, investments gains and (losses), and divestitures, as applicable to the periods presented. |
Three months ended | |||||||||||||||||||
Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | Q1 2016 | |||||||||||||||
Net loss attributable to First Data Corporation | $ | (112 | ) | $ | (26 | ) | $ | (126 | ) | $ | (1,217 | ) | $ | (56 | ) | ||||
Adjustments to reconcile to Net loss attributable to First Data Corporation: | |||||||||||||||||||
Stock-based compensation (a) | 7 | 12 | 11 | 299 | 108 | ||||||||||||||
Loss on debt extinguishment (b) | — | — | 108 | 960 | 46 | ||||||||||||||
Mark-to-market adjustment for derivatives and euro-denominated debt (c) | (66 | ) | 33 | 13 | (33 | ) | 4 | ||||||||||||
Amortization of acquisition intangibles and deferred financing costs (d) | 148 | 116 | 144 | 161 | 102 | ||||||||||||||
Restructuring, impairment, litigation, and other (e) | 58 | 9 | 21 | 101 | 16 | ||||||||||||||
Adjusted net income | $ | 35 | $ | 144 | $ | 171 | $ | 271 | $ | 220 |
(a) | Includes $49 million and $254 million of IPO-triggered expense, net of tax, for Q1 2016 and Q4 2015, respectively. |
(b) | Represents costs associated with debt refinancing. |
(c) | Represents mark-to-market activity related to our undesignated hedges, ineffectiveness of our designated hedges, and mark-to-market activity on our euro-denominated debt held in the United States. |
(d) | Represents amortization of intangibles established in connection with the 2007 Merger and acquisitions we have made since 2007, excluding the percentage of our consolidated amortization of acquisition intangibles related to non wholly owned consolidated alliances equal to the portion of such alliances owned by our alliance partners. This row also includes amortization related to deferred financing costs. |
(e) | Represents restructuring, impairments, litigation and regulatory settlements, investments gains and losses, and divestitures, as applicable to the periods presented. |
Three Months Ended March 31, | |||||||||
2016 | 2015 | % Change | |||||||
GBS: | |||||||||
North America merchant transactions (a) | 10,744 | 10,015 | 7 | % | |||||
International merchant transactions (b) | 1,766 | 1,549 | 14 | % | |||||
GFS: | |||||||||
North America card accounts on file (c) | 814 | 719 | 13 | % | |||||
International card accounts on file (d) | 151 | 135 | 12 | % | |||||
NSS: | |||||||||
Network transactions (EFT and Stored Value) (e) | 4,764 | 4,415 | 8 | % | |||||
(a) | North American merchant transactions include acquired Visa and MasterCard credit and signature debit, American Express and Discover, PIN-debit, electronic benefits transactions, processed-only and gateway customer transactions at the POS. North American merchant transactions reflect 100% of alliance transactions. |
(b) | International transactions include Visa, MasterCard, and other payment network merchant acquiring transactions for clients outside the U.S. and Canada. Transactions include credit, signature debit, PIN-debit POS, POS gateway, and ATM transactions. |
(c) | North America card accounts on file reflect the total number of bankcard credit and retail credit accounts as of the end of the periods presented. |
(d) | International card accounts on file reflect total bankcard and retail accounts outside the United States and Canada as of the end of the periods presented. |
(e) | Network transactions include the debit issuer processing transactions, STAR Network issuer transactions, and closed loop and open loop POS transactions. |
SELECTED CONSOLIDATED BALANCE SHEET DATA | ||||||||
As of | As of | |||||||
March 31, 2016 | December 31, 2015 | |||||||
Cash and cash equivalents | $ | 311 | $ | 429 | ||||
Current settlement assets | 7,777 | 8,150 | ||||||
Total assets | 33,725 | 34,362 | ||||||
Short-term and current portion of long-term borrowings | 604 | 856 | ||||||
Settlement obligations | 7,777 | 8,150 | ||||||
Long-term borrowings | 18,857 | 18,737 | ||||||
Total liabilities | 30,041 | 30,625 | ||||||
Redeemable noncontrolling interest | 73 | 77 | ||||||
Total First Data Corporation stockholders' equity | 625 | 668 | ||||||
Noncontrolling interests | 2,986 | 2,992 | ||||||
Total equity | 3,611 | 3,660 |
SELECTED CONSOLIDATED CASH FLOW DATA | |||||||
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Source/(Use) of cash | |||||||
Net cash provided by (used in) operating activities | $ | 386 | $ | (102 | ) | ||
Net cash used in investing activities | (123 | ) | (167 | ) | |||
Net cash (used in) provided by financing activities | (373 | ) | 253 | ||||
Supplemental cash flow data | |||||||
Cash interest payments on long-term debt (a) | $ | 186 | $ | 561 |
(a) | For purposes of this schedule, long-term debt excludes interest on capital leases. |
Non-GAAP Reconciliation: Operating to Free Cash Flow | ||||||||||
Three Months Ended March 31, | ||||||||||
2016 | 2015 | % Change | ||||||||
Net cash provided by (used in) operating activities | $ | 386 | $ | (102 | ) | NM | ||||
Capital expenditures | (117 | ) | (145 | ) | (19 | )% | ||||
Distribution to minority interest | (58 | ) | (63 | ) | (8 | )% | ||||
Free cash flow source/(use) | $ | 211 | $ | (310 | ) | NM |