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 |
Press Release issued by FDC on October 29, 2018 | |
• | Total segment revenue of $2,158 million, up 4% reported(a), up 3% on a comparable accounting basis(b), up 5% on an organic constant currency basis(c) |
• | Consolidated revenue of $2,369 million, impacted by the adoption of ASC 606 |
• | Net income attributable to First Data diluted EPS of $0.42 |
• | Adjusted diluted EPS of $0.35, includes $0.02 of adverse foreign exchange |
• | Total segment EBITDA of $815 million, up 4% reported(a), up 5% on a comparable accounting basis(b), up 7% on an organic constant currency basis(c) |
• | Cash flow from operations of $671 million; free cash flow of $444 million |
• | Total borrowings declined $862 million; net debt declined $855 million in quarter |
• | $6 billion refinancing reduces annualized interest expense by approximately $90 million |
• | Full year 2018 organic constant currency segment revenue and EBITDA growth guidance unchanged |
• | Revising full year 2018 EPS guidance primarily to reflect recent adverse foreign currency movements |
(a) | GAAP growth rate -- Consolidated revenue, segment revenue and segment EBITDA reflect New Reporting Standards, including the modified retrospective application of ASC 606 (the New Revenue Standard). See Form 8-K filed on April 16, 2018, for full description of the New Reporting Standards and their impact on 2017 results. |
(b) | Non-GAAP growth rate -- Growth rate adjusted to retrospectively apply ASC 606 to the prior year period, providing a consistent basis of accounting to both periods. |
(c) | Non-GAAP growth rate -- Organic constant currency growth (“Organic CC growth”) is defined as reported growth adjusted for the following: (1) excludes the impacts of year-over-year currency rate changes in the current period; (2) excludes the results of significant divestitures in the prior year period; (3) includes the results of significant acquisitions in the prior year period; and (4) is adjusted to retrospectively apply ASC 606 to the prior year period. |
• | Revenue: Organic constant currency segment revenue growth guidance remains unchanged at 5% to 6%. Reported constant currency segment revenue growth was revised to 6.3% to 7.3%, strictly to reflect the impact of divestitures completed in the third quarter of 2018 - this compares to previously disclosed reported constant currency segment revenue growth guidance of 7% to 8%. |
• | EBITDA: Organic constant currency segment EBITDA growth guidance remains unchanged at 6.5% to 8.5%. Reported constant currency segment EBITDA growth guidance was revised to 7.6% to 9.6%, strictly to reflect the impact of divestitures completed in the third quarter of 2018 - this compares to previously disclosed reported constant currency segment EBITDA growth guidance of 8% to 10%. |
• | Adjusted diluted EPS: $1.38 to $1.40. This compares to previously disclosed guidance of $1.42 to $1.47. The revision to the EPS guidance primarily reflects the negative impacts associated with certain significant and recent foreign currency movements, and a modest dilutive impact from recently closed divestitures. This current guidance includes an estimated year-over-year adverse impact from foreign currency movements on reported segment EBITDA of approximately $60 million in the second half of 2018 (which was approximately flat in the first half of 2018). |
• | Free cash flow: $1.4+ billion guidance remains unchanged. |
Peter Poillon Investor Relations First Data 212-266-3565 Peter.Poillon@firstdata.com | Andrea Duffy Public Relations First Data 212-515-0174 Andrea.Duffy@firstdata.com |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | ||||||||||||||||
Revenues excluding reimbursable items | $ | 2,158 | $ | 2,081 | $ | 6,486 | $ | 5,998 | ||||||||
Reimbursable items | 211 | 995 | 613 | 2,904 | ||||||||||||
Total revenues | 2,369 | 3,076 | 7,099 | 8,902 | ||||||||||||
Expenses: | ||||||||||||||||
Cost of revenues (exclusive of items shown below) | 741 | 794 | 2,271 | 2,356 | ||||||||||||
Selling, general, and administrative | 665 | 565 | 1,995 | 1,611 | ||||||||||||
Depreciation and amortization | 248 | 248 | 753 | 713 | ||||||||||||
Other operating expenses | 29 | 57 | 106 | 108 | ||||||||||||
Total expenses (excluding reimbursable items) | 1,683 | 1,664 | 5,125 | 4,788 | ||||||||||||
Reimbursable items | 211 | 995 | 613 | 2,904 | ||||||||||||
Total expenses | 1,894 | 2,659 | 5,738 | 7,692 | ||||||||||||
Operating profit | 475 | 417 | 1,361 | 1,210 | ||||||||||||
Interest expense, net | (231 | ) | (233 | ) | (698 | ) | (702 | ) | ||||||||
Loss on debt extinguishment | (2 | ) | (1 | ) | (3 | ) | (72 | ) | ||||||||
Other income (expense) | 202 | (4 | ) | 201 | (7 | ) | ||||||||||
Income before income taxes and equity earnings in affiliates | 444 | 179 | 861 | 429 | ||||||||||||
Income tax (benefit) expense | 54 | (106 | ) | 44 | (66 | ) | ||||||||||
Equity earnings in affiliates | 58 | 55 | 167 | 167 | ||||||||||||
Net income | 448 | 340 | 984 | 662 | ||||||||||||
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest | 47 | 44 | 141 | 145 | ||||||||||||
Net income attributable to First Data Corporation | $ | 401 | $ | 296 | $ | 843 | $ | 517 | ||||||||
Net income attributable to First Data Corporation per share: | ||||||||||||||||
Basic | $ | 0.43 | $ | 0.32 | $ | 0.91 | $ | 0.57 | ||||||||
Diluted | $ | 0.42 | $ | 0.31 | $ | 0.88 | $ | 0.55 | ||||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 932 | 918 | 928 | 915 | ||||||||||||
Diluted | 965 | 944 | 956 | 938 | ||||||||||||
SELECTED CONSOLIDATED BALANCE SHEET DATA | ||||||||
As of | As of | |||||||
9/30/2018 | 12/31/2017 | |||||||
Cash and cash equivalents | $ | 601 | $ | 498 | ||||
Settlement assets | 20,735 | 20,363 | ||||||
Total assets | 47,603 | 48,269 | ||||||
Short-term and current portion of long-term borrowings | 806 | 1,271 | ||||||
Settlement obligations | 20,735 | 20,363 | ||||||
Long-term borrowings | 16,949 | 17,927 | ||||||
Total liabilities | 40,659 | 42,183 | ||||||
Redeemable noncontrolling interest | 78 | 72 | ||||||
Total First Data Corporation stockholders' equity | 4,058 | 3,152 | ||||||
Noncontrolling interests | 2,808 | 2,862 | ||||||
Total equity | 6,866 | 6,014 | ||||||
SELECTED CONSOLIDATED CASH FLOW DATA | |||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Source/(Use) of cash | |||||||||||||||
Net cash provided by operating activities | $ | 671 | $ | 581 | $ | 1,809 | $ | 1,582 | |||||||
Net cash provided by (used in) investing activities | 348 | (819 | ) | 58 | (1,060 | ) | |||||||||
Net cash (used in) provided by financing activities | (955 | ) | 252 | (1,739 | ) | (410 | ) | ||||||||
Supplemental cash flow data | |||||||||||||||
Cash interest payments(a) | $ | 237 | $ | 215 | $ | 689 | $ | 668 |
(a) | For purposes of this schedule, cash interest payments excludes interest on capital leases and interest on foreign lines of credit. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2018 | 2017 | % Change | Organic CC % Change(c) | 2018 | 2017 | % Change | Organic CC % Change(c) | ||||||||||||||||
Consolidated Revenues | $ | 2,369 | $ | 3,076 | (23)% | $ | 7,099 | $ | 8,902 | (20)% | |||||||||||||
Adjustments: | |||||||||||||||||||||||
Non wholly owned entities(a) | — | (14 | ) | (103)% | (14 | ) | (49 | ) | (71)% | ||||||||||||||
Reimbursable items | (211 | ) | (995 | ) | (79)% | (613 | ) | (2,904 | ) | (79)% | |||||||||||||
Total Segment Revenues | $ | 2,158 | $ | 2,067 | 4% | 5% | $ | 6,472 | $ | 5,949 | 9% | 6% | |||||||||||
Segment Revenues: | |||||||||||||||||||||||
Global Business Solutions | $ | 1,384 | $ | 1,256 | 10% | 6% | $ | 4,151 | $ | 3,601 | 15% | 7% | |||||||||||
Global Financial Solutions | 407 | 416 | (2)% | 6% | 1,221 | 1,211 | 1% | 3% | |||||||||||||||
Network & Security Solutions | 367 | 395 | (7)% | (2)% | 1,100 | 1,137 | (3)% | 2% | |||||||||||||||
Total Segment Revenues | $ | 2,158 | $ | 2,067 | 4% | 5% | $ | 6,472 | $ | 5,949 | 9% | 6% | |||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2018 | 2017 | % Change | Organic CC % Change(c) | 2018 | 2017 | % Change | Organic CC % Change(c) | ||||||||||||||||
Net income attributable to First Data Corporation | $ | 401 | $ | 296 | 35% | $ | 843 | $ | 517 | 63% | |||||||||||||
Adjustments: | |||||||||||||||||||||||
Non wholly owned entities(a) | (7 | ) | (9 | ) | (22)% | (29 | ) | (21 | ) | 38% | |||||||||||||
Depreciation and amortization | 248 | 248 | —% | 753 | 713 | 6% | |||||||||||||||||
Interest expense, net | 231 | 233 | (1)% | 698 | 702 | (1)% | |||||||||||||||||
Loss on debt extinguishment | 2 | 1 | 100% | 3 | 72 | (96)% | |||||||||||||||||
Other items(b) | (173 | ) | 61 | NM | (95 | ) | 120 | NM | |||||||||||||||
Income tax (benefit) expense | 54 | (106 | ) | NM | 44 | (66 | ) | NM | |||||||||||||||
Stock-based compensation | 59 | 62 | (5)% | 192 | 183 | 5% | |||||||||||||||||
Total Segment EBITDA | $ | 815 | $ | 786 | 4% | 7% | $ | 2,409 | $ | 2,220 | 9% | 8% | |||||||||||
Segment EBITDA: | |||||||||||||||||||||||
Global Business Solutions | $ | 503 | $ | 465 | 8% | 10% | $ | 1,481 | $ | 1,330 | 11% | 10% | |||||||||||
Global Financial Solutions | 161 | 179 | (10)% | (2)% | 503 | 498 | 1% | 4% | |||||||||||||||
Network & Security Solutions | 195 | 184 | 6% | 6% | 563 | 520 | 8% | 8% | |||||||||||||||
Corporate | (44 | ) | (42 | ) | (5)% | (5)% | (138 | ) | (128 | ) | (8)% | (8)% | |||||||||||
Total Segment EBITDA | $ | 815 | $ | 786 | 4% | 7% | $ | 2,409 | $ | 2,220 | 9% | 8% | |||||||||||
(a) | 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. Segment revenue for our significant affiliates 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. |
(b) | Includes restructuring, non-normal course litigation and regulatory settlements, debt issuance expenses, deal and deal integration costs, Other expense as presented in the unaudited consolidated statements of operations, which includes divestitures, derivative gains (losses), non-operating foreign currency gains (losses), and other as applicable to the periods presented. |
SEGMENT REVENUE RECONCILIATION | |||||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||
2018 | 2017 | % B/(W)(b) | 2018 | 2017 | % B/(W)(b) | ||||||||||||||
Reported FDC segment revenue | $ | 2,158 | $ | 2,067 | 4% | $ | 6,472 | $ | 5,949 | 9% | |||||||||
New revenue standard adjustments (ASC 606) | — | 26 | — | 72 | |||||||||||||||
FDC segment revenue (comparable accounting) | 2,158 | 2,093 | 3% | 6,472 | 6,021 | 8% | |||||||||||||
Currency impact | 45 | — | 19 | — | |||||||||||||||
FDC CC adjusted segment revenue | 2,203 | 2,093 | 5% | 6,491 | 6,021 | 8% | |||||||||||||
Acquisitions/Divestitures(c) | — | 10 | — | 129 | |||||||||||||||
Organic CC FDC segment revenue growth(a) | $ | 2,203 | $ | 2,103 | 5% | $ | 6,491 | $ | 6,150 | 6% | |||||||||
Reported GBS segment revenue | $ | 1,384 | $ | 1,256 | 10% | $ | 4,151 | $ | 3,601 | 15% | |||||||||
New revenue standard adjustments (ASC 606) | — | 45 | — | 119 | |||||||||||||||
GBS segment revenue (comparable accounting) | 1,384 | 1,301 | 7% | 4,151 | 3,720 | 12% | |||||||||||||
Currency impact | 36 | — | 25 | — | |||||||||||||||
Acquisitions/Divestitures(c) | — | 35 | — | 180 | |||||||||||||||
Organic CC GBS segment revenue growth(a) | $ | 1,420 | $ | 1,336 | 6% | $ | 4,176 | $ | 3,900 | 7% | |||||||||
Reported GBS NA segment revenue | $ | 1,079 | $ | 973 | 11% | $ | 3,227 | $ | 2,818 | 15% | |||||||||
New revenue standard adjustments (ASC 606) | — | 35 | — | 95 | |||||||||||||||
GBS NA segment revenue (comparable accounting) | 1,079 | 1,008 | 7% | 3,227 | 2,913 | 11% | |||||||||||||
Currency impact | 2 | — | — | — | |||||||||||||||
Acquisitions/Divestitures(c) | — | 35 | — | 180 | |||||||||||||||
Organic CC GBS NA segment revenue growth(a) | $ | 1,081 | $ | 1,043 | 4% | $ | 3,227 | $ | 3,093 | 4% | |||||||||
Reported GBS EMEA segment revenue | $ | 180 | $ | 167 | 8% | $ | 528 | $ | 463 | 14% | |||||||||
New revenue standard adjustments (ASC 606) | — | 2 | — | 5 | |||||||||||||||
GBS EMEA segment revenue (comparable accounting) | 180 | 169 | 7% | 528 | 468 | 13% | |||||||||||||
Currency impact | 1 | — | (33 | ) | — | ||||||||||||||
Acquisitions/Divestitures(c) | — | — | — | — | |||||||||||||||
Organic CC GBS EMEA segment revenue growth(a) | $ | 181 | $ | 169 | 8% | $ | 495 | $ | 468 | 6% | |||||||||
Reported GBS APAC segment revenue | $ | 49 | $ | 44 | 12% | $ | 147 | $ | 125 | 18% | |||||||||
New revenue standard adjustments (ASC 606) | — | 1 | — | 1 | |||||||||||||||
GBS APAC segment revenue (comparable accounting) | 49 | 45 | 10% | 147 | 126 | 17% | |||||||||||||
Currency impact | 1 | — | (2 | ) | — | ||||||||||||||
Acquisitions/Divestitures(c) | — | — | — | — | |||||||||||||||
Organic CC GBS APAC segment revenue growth(a) | $ | 50 | $ | 45 | 13% | $ | 145 | $ | 126 | 16% | |||||||||
Reported GBS LATAM segment revenue | $ | 76 | $ | 72 | 7% | $ | 249 | $ | 195 | 28% | |||||||||
New revenue standard adjustments (ASC 606) | — | 7 | — | 18 | |||||||||||||||
GBS LATAM segment revenue (comparable accounting) | 76 | 79 | (2)% | 249 | 213 | 17% | |||||||||||||
Currency impact | 32 | — | 60 | — | |||||||||||||||
Acquisitions/Divestitures(c) | — | — | — | — | |||||||||||||||
Organic CC GBS LATAM segment revenue growth(a) | $ | 108 | $ | 79 | 37% | $ | 309 | $ | 213 | 45% | |||||||||
Reported GFS segment revenue | $ | 407 | $ | 416 | (2)% | $ | 1,221 | $ | 1,211 | 1% | |||||||||
New revenue standard adjustments (ASC 606) | — | (6 | ) | — | (6 | ) | |||||||||||||
GFS segment revenue (comparable accounting) | 407 | 410 | (1)% | 1,221 | 1,205 | 1% | |||||||||||||
Currency impact | 9 | — | (6 | ) | — | ||||||||||||||
Acquisitions/Divestitures(c) | — | (18 | ) | — | (30 | ) | |||||||||||||
Organic CC GFS segment revenue growth(a) | $ | 416 | $ | 392 | 6% | $ | 1,215 | $ | 1,175 | 3% | |||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||
2018 | 2017 | % B/(W)(b) | 2018 | 2017 | % B/(W)(b) | ||||||||||||||
Reported GFS NA segment revenue | $ | 233 | $ | 238 | (2)% | $ | 694 | $ | 707 | (2)% | |||||||||
New revenue standard adjustments (ASC 606) | — | (2 | ) | — | (2 | ) | |||||||||||||
GFS NA segment revenue (comparable accounting) | 233 | 236 | (1)% | 694 | 705 | (1)% | |||||||||||||
Currency impact | — | — | — | — | |||||||||||||||
Acquisitions/Divestitures(c) | — | (11 | ) | — | (11 | ) | |||||||||||||
Organic CC GFS NA segment revenue growth(a) | $ | 233 | $ | 225 | 4% | $ | 694 | $ | 694 | —% | |||||||||
Reported GFS EMEA segment revenue | $ | 114 | $ | 121 | (6)% | $ | 343 | $ | 332 | 3% | |||||||||
New revenue standard adjustments (ASC 606) | — | (1 | ) | — | (1 | ) | |||||||||||||
GFS EMEA segment revenue (comparable accounting) | 114 | 120 | (5)% | 343 | 331 | 4% | |||||||||||||
Currency impact | 1 | — | (19 | ) | — | ||||||||||||||
Acquisitions/Divestitures(c) | — | (7 | ) | — | (19 | ) | |||||||||||||
Organic CC GFS EMEA segment revenue growth(a) | $ | 115 | $ | 113 | 1% | $ | 324 | $ | 312 | 4% | |||||||||
Reported GFS APAC segment revenue | $ | 27 | $ | 24 | 9% | $ | 84 | $ | 72 | 16% | |||||||||
New revenue standard adjustments (ASC 606) | — | (3 | ) | — | (9 | ) | |||||||||||||
GFS APAC segment revenue (comparable accounting) | 27 | 21 | 23% | 84 | 63 | 32% | |||||||||||||
Currency impact | 2 | — | — | — | |||||||||||||||
Acquisitions/Divestitures(c) | — | — | — | — | |||||||||||||||
Organic CC GFS APAC segment revenue growth(a) | $ | 29 | $ | 21 | 30% | $ | 84 | $ | 63 | 31% | |||||||||
Reported GFS LATAM segment revenue | $ | 33 | $ | 33 | 2% | $ | 100 | $ | 100 | 1% | |||||||||
New revenue standard adjustments (ASC 606) | — | — | — | 6 | |||||||||||||||
GFS LATAM segment revenue (comparable accounting) | 33 | 33 | 2% | 100 | 106 | (5)% | |||||||||||||
Currency impact | 6 | — | 13 | — | |||||||||||||||
Acquisitions/Divestitures(c) | — | — | — | — | |||||||||||||||
Organic CC GFS LATAM segment revenue growth(a) | $ | 39 | $ | 33 | 23% | $ | 113 | $ | 106 | 7% | |||||||||
Reported NSS segment revenue | $ | 367 | $ | 395 | (7)% | $ | 1,100 | $ | 1,137 | (3)% | |||||||||
New revenue standard adjustments (ASC 606) | — | (13 | ) | — | (41 | ) | |||||||||||||
NSS segment revenue (comparable accounting) | 367 | 382 | (4)% | 1,100 | 1,096 | —% | |||||||||||||
Currency impact | — | — | — | — | |||||||||||||||
Acquisitions/Divestitures(c) | — | (7 | ) | — | (21 | ) | |||||||||||||
Organic CC NSS segment revenue growth(a) | $ | 367 | $ | 375 | (2)% | $ | 1,100 | $ | 1,075 | 2% | |||||||||
SEGMENT EBITDA RECONCILIATION | |||||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||
2018 | 2017 | % B/(W)(b) | 2018 | 2017 | % B/(W)(b) | ||||||||||||||
Reported FDC segment EBITDA | $ | 815 | $ | 786 | 4% | $ | 2,409 | $ | 2,220 | 9% | |||||||||
New revenue standard adjustments (ASC 606) | — | (6 | ) | — | (13 | ) | |||||||||||||
FDC segment EBITDA (comparable accounting) | 815 | 780 | 5% | 2,409 | 2,207 | 9% | |||||||||||||
Currency impact | 23 | — | 25 | — | |||||||||||||||
FDC CC adjusted segment EBITDA | 838 | 780 | 8% | 2,434 | 2,207 | 10% | |||||||||||||
Acquisitions/Divestitures(c) | — | 8 | — | 43 | |||||||||||||||
Organic CC FDC segment EBITDA growth(a) | $ | 838 | $ | 788 | 7% | $ | 2,434 | $ | 2,250 | 8% | |||||||||
Reported GBS segment EBITDA | $ | 503 | $ | 465 | 8% | $ | 1,481 | $ | 1,330 | 11% | |||||||||
New revenue standard adjustments (ASC 606) | — | (2 | ) | — | (13 | ) | |||||||||||||
GBS segment EBITDA (comparable accounting) | 503 | 463 | 8% | 1,481 | 1,317 | 12% | |||||||||||||
Currency impact | 18 | — | 22 | — | |||||||||||||||
Acquisitions/Divestitures(c) | — | 12 | — | 51 | |||||||||||||||
Organic CC GBS segment EBITDA growth(a) | $ | 521 | $ | 475 | 10% | $ | 1,503 | $ | 1,368 | 10% | |||||||||
Reported GFS segment EBITDA | $ | 161 | $ | 179 | (10)% | $ | 503 | $ | 498 | 1% | |||||||||
New revenue standard adjustments (ASC 606) | — | (4 | ) | — | — | ||||||||||||||
GFS segment EBITDA (comparable accounting) | 161 | 175 | (8)% | 503 | 498 | 1% | |||||||||||||
Currency impact | 5 | — | 3 | — | |||||||||||||||
Acquisitions/Divestitures(c) | — | (4 | ) | — | (8 | ) | |||||||||||||
Organic CC GFS segment EBITDA growth(a) | $ | 166 | $ | 171 | (2)% | $ | 506 | $ | 490 | 4% | |||||||||
Reported NSS segment EBITDA | $ | 195 | $ | 184 | 6% | $ | 563 | $ | 520 | 8% | |||||||||
New revenue standard adjustments (ASC 606) | — | — | — | — | |||||||||||||||
NSS segment EBITDA (comparable accounting) | 195 | 184 | 6% | 563 | 520 | 8% | |||||||||||||
Currency impact | — | — | — | — | |||||||||||||||
Acquisitions/Divestitures(c) | — | — | — | — | |||||||||||||||
Organic CC NSS segment EBITDA growth(a) | $ | 195 | $ | 184 | 6% | $ | 563 | $ | 520 | 8% | |||||||||
(a) | Organic constant currency growth (“Organic CC growth”) is defined as reported growth adjusted for the following: (1) excludes the impacts of year-over-year currency rate changes in the current period; (2) excludes the results of significant divestitures in the prior year period; (3) includes the results of significant acquisitions in the prior year period; and (4) is adjusted to retrospectively apply New Reporting Standards to the prior year period. |
(b) | “B” means results in 2018 are better than results in 2017 “(W)” means results are worse. |
(c) | “Acquisitions/Divestitures" includes the following 2017 activity: the acquisitions of CardConnect and BluePay in GBS North America; the formation of the digital banking JV in NSS (treated as a 50% digital banking revenue divestiture), and the divestiture of the GFS Baltics business. |
ADJUSTED NET INCOME RECONCILIATION | |||||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||||
Net income attributable to First Data Corporation | $ | 401 | $ | 296 | 36% | $ | 843 | $ | 517 | 63% | |||||||||
Adjustments: | |||||||||||||||||||
Stock-based compensation | 59 | 62 | (5)% | 192 | 183 | 5% | |||||||||||||
Loss on debt extinguishment | 2 | 1 | NM | 3 | 72 | NM | |||||||||||||
Amortization of acquisition intangibles and deferred financing costs(a) | 102 | 106 | (4)% | 312 | 295 | 6% | |||||||||||||
Other(b) | (173 | ) | 61 | NM | (95 | ) | 115 | (182)% | |||||||||||
Non wholly-owned entities | — | (3 | ) | NM | (9 | ) | 3 | NM | |||||||||||
Discrete tax adjustment(c) | — | 3 | NM | — | (1 | ) | NM | ||||||||||||
Income tax on above items and discrete tax items(d)(e) | (51 | ) | (150 | ) | 66% | (256 | ) | (176 | ) | (45)% | |||||||||
Adjusted net income attributable to First Data Corporation | $ | 340 | $ | 376 | (9)% | $ | 990 | $ | 1,008 | (2)% | |||||||||
Adjusted net income per share: | |||||||||||||||||||
Basic | $ | 0.36 | $ | 0.41 | (12)% | $ | 1.07 | $ | 1.10 | (3)% | |||||||||
Diluted | $ | 0.35 | $ | 0.40 | (13)% | $ | 1.04 | $ | 1.07 | (4)% | |||||||||
Weighted-average common shares used to compute adjusted net income per share: | |||||||||||||||||||
Basic | 932 | 918 | 2% | 928 | 915 | 1% | |||||||||||||
Diluted | 965 | 944 | 2% | 956 | 938 | 2% |
(a) | 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 line also includes amortization related to deferred financing costs of $4 million and $5 million for the three months ended September 30, 2018 and 2017, respectively, and $13 million and $13 million for the nine months ended September 30, 2018 and 2017, respectively. |
(b) | See "Other operating expense, net" and "Other income (expense)" in our unaudited consolidated statements of income in Part I of this form 10-Q. |
(c) | Prior to January 1, 2018, we excluded the impact of all discrete tax items from Adjusted Net Income and Diluted Adjusted Net Income per Share. We will no longer exclude certain discrete items which were deemed to be recurring in nature. We retrospectively adjusted the prior period results presented in these unaudited consolidated financial statements. |
(d) | We exclude from Adjusted net income certain discrete tax item, such as tax law changes, tax impact of mergers and acquisitions, valuation allowance releases, and tax reserves related to issues that arose before KKR acquired us within a quarter. |
(e) | The tax effect of the adjustments between our GAAP and adjusted results takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). Generally, this results in a tax impact at the U.S. effective tax rate for certain adjustments, including the majority of amortization of intangible assets, deferred financing costs, stock compensation, and loss on debt extinguishment; whereas the tax impact of other adjustments, including restructuring expense, depends on whether the amounts are deductible in the respective tax jurisdictions and the applicable effective tax rate(s) in those jurisdictions. |
FREE CASH FLOW RECONCILIATION | |||||||||||
Nine months ended September 30, | |||||||||||
2018 | 2017 | Change | |||||||||
Net cash provided by operating activities | $ | 1,809 | $ | 1,582 | $ | 227 | |||||
Capital expenditures | (452 | ) | (390 | ) | (62 | ) | |||||
Distribution and dividends paid to noncontrolling interests and redeemable noncontrolling interest and other | (167 | ) | (113 | ) | (54 | ) | |||||
Free cash flow | $ | 1,190 | $ | 1,079 | $ | 111 | |||||
NET DEBT RECONCILIATION | ||||||||
As of | As of | |||||||
9/30/2018 | 12/31/2017 | |||||||
Total long-term borrowings | $ | 16,949 | $ | 17,927 | ||||
Total short-term and current portion of long-term borrowings | 806 | 1,271 | ||||||
Total borrowings | 17,755 | 19,198 | ||||||
Unamortized discount and unamortized deferred financing costs | 105 | 126 | ||||||
Total borrowings at par | 17,860 | 19,324 | ||||||
Less: Settlement lines of credit and other arrangements | 76 | 205 | ||||||
Gross debt excluding settlement lines of credit and other arrangements | 17,784 | 19,119 | ||||||
Less: Cash and cash equivalents | 601 | 498 | ||||||
Net debt | $ | 17,183 | $ | 18,621 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||
GBS: | |||||||||||||||
North America merchant transactions(a) | 13,606 | 12,517 | 9% | 39,209 | 36,494 | 7% | |||||||||
International merchant transactions(b) | 2,830 | 2,453 | 15% | 8,075 | 7,173 | 13% | |||||||||
GFS: | |||||||||||||||
North America card accounts on file(c) | 944 | 894 | 6% | ||||||||||||
International card accounts on file(d) | 201 | 166 | 21% | ||||||||||||
NSS: | |||||||||||||||
Network transactions (EFT Network and Stored Value)(e) | 6,205 | 5,539 | 12% | 18,450 | 16,005 | 15% | |||||||||
(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. International merchant transactions reflect 100% of alliance 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. Additionally, North America card accounts on file exclude the impact of new education loan processing accounts. |
(d) | International card accounts on file reflect the total number of 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, Payroll and Gift Solutions and POS transactions. |
Consolidated Revenue to Total Segment Revenue | ||
FY 2018 vs. FY 2017 | ||
Consolidated revenue (at reported rates) 2018 at ASC 606 vs. 2017 at ASC 605 | ~(20%) | |
Adjustments: | ||
+Non wholly owned entities | ||
+Reimbursable postage and other | ||
+ASC 606 Adjustments | ||
+Currency Impact | ||
Memo: Total segment revenue (at constant currency) | ~6.3-7.3% |
Net Income to Total Segment EBITDA | ||
FY 2018 vs. FY 2017 | ||
Net income attributable to FDC(1) 2018 at ASC 606 vs. 2017 at ASC 605 | ~(30%) - (40%) | |
Adjustments | ||
+Depreciation and amortization | ||
+Interest Expense, net | ||
+Income tax (benefit) expense | ||
+Stock Based Compensation | ||
+ASC 606 Adjustments | ||
+Other(2) | ||
+Currency Impact | ||
Memo: total segment EBITDA (at constant currency) | ~7.6-9.6% |
Net Income to Adj. Net Income | ||
FY 2018 | ||
Net income attributable to FDC(1) | $0.98-$1.00 | |
Adjustments (note: adjustments represent positive balances) | ||
+Stock-based compensation | ||
+Amortization of acquisition intangibles and deferred financing cost | ||
+ASC 606 Adjustments | ||
+Other(3) | ||
Adjusted Net Income | $1.38-$1.40 |
Cash Flow From Operations to Free Cash Flow | ||
FY 2018 | ||
Cash / provided by operating activities | $2.1B+ | |
+Adjustments(4) | ||
Free cash flow source | $1.4B+ |
(1) | Reflects a significant increase in tax expense in 2018 primarily driven by the Q4 2017 release of a valuation allowance against deferred tax assets associated with the U.S. federal NOL. The reversal of the valuation allowance resulted in a significant non-cash tax benefit in Q4 2017 and the recording of a normalized book tax rate in 2018. |
(2) | Includes non wholly owned entities adjustment, loss on debt extinguishment, as well as other items. |
(3) | Includes loss on debt extinguishment, gain/loss on divestitures, restructuring, impairment, litigation and other, as well as the impact of tax expense/(benefit) of the adjusted items. |
(4) | Includes capital expenditures and distributions to minority interest and other. |