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.