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DELAWARE
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47-0731996
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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225 LIBERTY STREET, 29th FLOOR
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NEW YORK, NEW YORK
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10281
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code
(800) 735-3362
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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o
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(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Emerging growth company
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o
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Class
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Outstanding at May 1, 2017
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Class A Common Stock, $0.01 par value per share
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374,872,715 shares
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Class B Common Stock, $0.01 par value per share
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544,173,197 shares
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PAGE
NUMBER
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Three months ended
March 31, |
||||||
(in millions, except per share amounts)
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2017
|
|
2016
|
||||
Revenues:
|
|
|
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|
|
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Transaction and processing service fees (a)
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$
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1,563
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|
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$
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1,591
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Product sales and other (a)
|
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319
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|
|
279
|
|
||
Total revenues (excluding reimbursable items)
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1,882
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1,870
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Reimbursable debit network fees, postage, and other
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919
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907
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Total revenues
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2,801
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2,777
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Expenses:
|
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Cost of services (exclusive of items shown below)
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700
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731
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Cost of products sold
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80
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78
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Selling, general, and administrative
|
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525
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564
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Depreciation and amortization
|
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228
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238
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Other operating expenses
|
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22
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|
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21
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||
Total expenses (excluding reimbursable items)
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1,555
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1,632
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Reimbursable debit network fees, postage, and other
|
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919
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907
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Total expenses
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2,474
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2,539
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||
Operating profit
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327
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238
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|
||
Interest expense, net
|
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(234
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)
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(263
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)
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||
Loss on debt extinguishment
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(56
|
)
|
|
(46
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)
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||
Other (expense) income
|
|
(1
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)
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6
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Income (loss) before income taxes and equity earnings in affiliates
|
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36
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(65
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)
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Income tax expense
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12
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|
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5
|
|
||
Equity earnings in affiliates
|
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55
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|
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64
|
|
||
Net income (loss)
|
|
79
|
|
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(6
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)
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Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest
|
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43
|
|
|
50
|
|
||
Net income (loss) attributable to First Data Corporation
|
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$
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36
|
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$
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(56
|
)
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Net income (loss) attributable to First Data Corporation per share:
|
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|
||||
Basic
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$
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0.04
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$
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(0.06
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)
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Diluted
|
|
$
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0.04
|
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$
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(0.06
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)
|
|
|
|
|
|
||||
Weighted-average common shares outstanding:
|
|
|
|
|
||||
Basic
|
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910
|
|
|
896
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Diluted
|
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931
|
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896
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(a)
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Includes processing fees, administrative service fees, and other fees charged to merchant alliances accounted for under the equity method of
$52 million
and
$53 million
for the
three
months ended
March 31, 2017
and
2016
, respectively.
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Three months ended
March 31, |
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(in millions)
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2017
|
|
2016
|
||||
Net income (loss)
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$
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79
|
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$
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(6
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
||
Foreign currency translation adjustment
|
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90
|
|
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(64
|
)
|
||
Gain on derivative instruments
|
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1
|
|
|
—
|
|
||
Total other comprehensive income (loss), net of tax
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91
|
|
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(64
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)
|
||
Comprehensive income (loss)
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170
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|
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(70
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)
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Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest
|
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46
|
|
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52
|
|
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Comprehensive income (loss) attributable to First Data Corporation
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$
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124
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$
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(122
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)
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(in millions)
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As of March 31,
2017 |
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As of December 31,
2016 |
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ASSETS
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Current assets:
|
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Cash and cash equivalents
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$
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503
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$
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385
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Accounts receivable, net of allowance for doubtful accounts of $42 and $74
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1,753
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1,877
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Settlement assets
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9,381
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14,795
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|
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Prepaid expenses and other current assets
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418
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360
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Total current assets
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12,055
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17,417
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Property and equipment, net of accumulated depreciation of $1,500 and $1,416
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924
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883
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Goodwill
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16,770
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16,696
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Customer relationships, net of accumulated amortization of $5,765 and $5,660
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1,658
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1,739
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Other intangibles, net of accumulated amortization of $2,445 and $2,365
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1,887
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1,800
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Investment in affiliates
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982
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988
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Other long-term assets
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741
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769
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Total assets
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$
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35,017
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$
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40,292
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LIABILITIES AND EQUITY
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Current liabilities:
|
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|
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Accounts payable and accrued liabilities
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$
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1,457
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$
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1,564
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Short-term and current portion of long-term borrowings
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501
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358
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|
||
Settlement obligations
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9,381
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14,795
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|
||
Total current liabilities
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11,339
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16,717
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Long-term borrowings
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18,123
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18,131
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Deferred tax liabilities
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413
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409
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|
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Other long-term liabilities
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793
|
|
|
831
|
|
||
Total liabilities
|
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30,668
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36,088
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|
||
Commitments and contingencies (See note 11)
|
|
|
|
|
|
|
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Redeemable noncontrolling interest
|
|
72
|
|
|
73
|
|
||
First Data Corporation stockholders' equity:
|
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Class A Common stock, $0.01 par value; 1,600 shares authorized as of March 31, 2017 and December 31, 2016, respectively; 374 shares and 368 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively
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4
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4
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Class B Common stock, $0.01 par value; 625 shares authorized as of March 31, 2017 and December 31, 2016, respectively; 544 shares issued and outstanding as of March 31, 2017 and December 31, 2016
|
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5
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|
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5
|
|
||
Additional paid-in capital
|
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13,168
|
|
|
13,149
|
|
||
Accumulated loss
|
|
(10,576
|
)
|
|
(10,612
|
)
|
||
Accumulated other comprehensive loss
|
|
(1,238
|
)
|
|
(1,326
|
)
|
||
Total First Data Corporation stockholders' equity
|
|
1,363
|
|
|
1,220
|
|
||
Noncontrolling interests
|
|
2,914
|
|
|
2,911
|
|
||
Total equity
|
|
4,277
|
|
|
4,131
|
|
||
Total liabilities and equity
|
|
$
|
35,017
|
|
|
$
|
40,292
|
|
|
|
Three months ended March 31,
|
||||||
(in millions)
|
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2017
|
|
2016
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
||
Net income (loss)
|
|
$
|
79
|
|
|
$
|
(6
|
)
|
Adjustments to reconcile to net cash provided by operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)
|
|
258
|
|
|
262
|
|
||
Charges related to other operating expenses and other income (expense)
|
|
23
|
|
|
15
|
|
||
Loss on debt extinguishment
|
|
56
|
|
|
46
|
|
||
Stock-based compensation expense
|
|
65
|
|
|
115
|
|
||
Other non-cash and non-operating items, net
|
|
9
|
|
|
—
|
|
||
Increase (decrease) in cash, excluding the effects of acquisitions and dispositions, resulting from changes in:
|
|
|
|
|
|
|
||
Accounts receivable, current and long-term
|
|
136
|
|
|
61
|
|
||
Other assets, current and long-term
|
|
(26
|
)
|
|
16
|
|
||
Accounts payable and other liabilities, current and long-term
|
|
(170
|
)
|
|
(102
|
)
|
||
Income tax accounts
|
|
(9
|
)
|
|
(21
|
)
|
||
Net cash provided by operating activities
|
|
421
|
|
|
386
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
||
Additions to property and equipment
|
|
(58
|
)
|
|
(53
|
)
|
||
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs
|
|
(59
|
)
|
|
(64
|
)
|
||
Other investing activities, net
|
|
1
|
|
|
(6
|
)
|
||
Net cash used in investing activities
|
|
(116
|
)
|
|
(123
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
||
Short-term borrowings, net
|
|
119
|
|
|
498
|
|
||
Proceeds from issuance of long-term debt
|
|
1,300
|
|
|
896
|
|
||
Payment of call premiums and debt issuance cost
|
|
(57
|
)
|
|
(43
|
)
|
||
Principal payments on long-term debt
|
|
(1,456
|
)
|
|
(1,651
|
)
|
||
Payment of taxes related to net settlement of equity awards
|
|
(60
|
)
|
|
(39
|
)
|
||
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interest
|
|
(43
|
)
|
|
(58
|
)
|
||
Other financing activities, net
|
|
10
|
|
|
24
|
|
||
Net cash used in financing activities
|
|
(187
|
)
|
|
(373
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
(8
|
)
|
||
Change in cash and cash equivalents
|
|
118
|
|
|
(118
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
385
|
|
|
429
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
503
|
|
|
$
|
311
|
|
NON-CASH TRANSACTIONS
|
|
|
|
|
||||
Capital leases, net of trade-ins
|
|
$
|
54
|
|
|
$
|
44
|
|
Other financing arrangements
|
|
$
|
100
|
|
|
$
|
22
|
|
|
|
First Data Corporation Stockholders
|
|
|
|
|
||||||||||||||||||||||||||||
|
|
Common Stock
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
|
||||||||||||||||||||||
(in millions)
|
|
Class A
|
|
Class B
|
|
Additional Paid-In Capital
|
|
Accumulated Loss
|
|
|
Noncontrolling Interest
|
|
|
|||||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Total
|
|||||||||||||||||||||
Balance, December 31, 2016
|
|
368
|
|
|
$
|
4
|
|
|
544
|
|
|
$
|
5
|
|
|
$
|
13,149
|
|
|
$
|
(10,612
|
)
|
|
$
|
(1,326
|
)
|
|
$
|
2,911
|
|
|
$
|
4,131
|
|
Dividends and distributions paid to noncontrolling interests (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
(35
|
)
|
|||||||
Net income (b)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
35
|
|
|
71
|
|
|||||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88
|
|
|
3
|
|
|
91
|
|
|||||||
Adjustment to redemption value of redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||||
Stock compensation expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65
|
|
|||||||
Stock activity under stock compensation plans and other
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
|||||||
Balance, March 31, 2017
|
|
374
|
|
|
$
|
4
|
|
|
544
|
|
|
$
|
5
|
|
|
$
|
13,168
|
|
|
$
|
(10,576
|
)
|
|
$
|
(1,238
|
)
|
|
$
|
2,914
|
|
|
$
|
4,277
|
|
|
|
First Data Corporation Stockholders
|
|
|
|
|
||||||||||||||||||||||||||||
|
|
Common Stock
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
|
||||||||||||||||||||||
(in millions)
|
|
Class A
|
|
Class B
|
|
Additional Paid-In Capital
|
|
Accumulated Loss
|
|
|
Noncontrolling Interest
|
|
|
|||||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Total
|
|||||||||||||||||||||
Balance, December 31, 2015
|
|
180
|
|
|
$
|
2
|
|
|
719
|
|
|
$
|
7
|
|
|
$
|
12,910
|
|
|
$
|
(11,032
|
)
|
|
$
|
(1,219
|
)
|
|
$
|
2,992
|
|
|
$
|
3,660
|
|
Dividends and distributions paid to noncontrolling interests (a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
|
(50
|
)
|
|||||||
Net (loss) income (b)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56
|
)
|
|
—
|
|
|
42
|
|
|
(14
|
)
|
|||||||
Other comprehensive (loss) income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(66
|
)
|
|
2
|
|
|
(64
|
)
|
|||||||
Adjustment to redemption value of redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|||||||
Stock compensation expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
115
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
115
|
|
|||||||
Stock activity under stock compensation plans and other
|
|
3
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
(40
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|||||||
Balance, March 31, 2016
|
|
183
|
|
|
$
|
2
|
|
|
724
|
|
|
$
|
7
|
|
|
$
|
12,989
|
|
|
$
|
(11,088
|
)
|
|
$
|
(1,285
|
)
|
|
$
|
2,986
|
|
|
$
|
3,611
|
|
(a)
|
The total distribution presented in the unaudited consolidated statements of equity for the
three
months ended
March 31, 2017
and
2016
excludes
$8 million
in distributions paid to redeemable non-controlling interest not included in equity.
|
(b)
|
The total net income (loss) presented in the unaudited consolidated statements of equity for the
three
months ended
March 31, 2017
and
2016
is
$8 million
lower and
$8 million
higher, respectively, than the amounts presented in the unaudited consolidated statements of operations due to the net income attributable to the redeemable noncontrolling interest not included in equity.
|
|
|
Three months ended
March 31, |
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Amortization of initial payments for new contracts
|
|
$
|
19
|
|
|
$
|
15
|
|
Amortization related to equity method investments
|
|
11
|
|
|
9
|
|
|
|
Three months ended
March 31, |
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Interchange fees and assessments
|
|
$
|
6,039
|
|
|
$
|
5,287
|
|
Debit network fees
|
|
745
|
|
|
726
|
|
•
|
Phase I entailed activities such as completion of an accounting guidance gap analysis, reviewing significant revenue streams (and related costs) and representative contracts to determine the potential changes to its existing accounting policies. The Company has completed Phase I.
|
•
|
Phase II will further determine the impact of the adoption of the New Revenue Standard and will include activities such as validating and concluding on potential accounting guidance gaps from Phase I, quantifying the effects the New Revenue Standard will have on its consolidated financial statements, identifying and documenting changes to its accounting policies, expanding disclosures as required by the New Revenue Standard, and identifying and addressing the impact the New Revenue Standard will have on business processes, systems and internal controls to support the recognition and disclosure requirements. The Company has begun Phase II.
|
•
|
Phase III will complete the Company’s adoption and implementation of the New Revenue Standard and will include activities such as running parallel reporting for impacted areas under the New and Current Revenue Standard, recording the accounting adjustments that were identified in Phase II, evaluating and testing modified and newly implemented internal controls over the New Revenue Standard, and revising the Company’s financial statement disclosures.
|
•
|
The capitalization of certain costs that are part of setting up a customer on the Company’s platforms and certain customer acquisition costs that meet the definition of incremental costs of obtaining a contract, both of which are currently recognized as an expense when incurred; and
|
•
|
Certain software license arrangements that are currently recognized over the term of the software arrangement may be
|
•
|
Certain customer contractual arrangements with volume-based discounts which could result in a potential deferral of revenue;
|
•
|
Certain services revenue associated with programming activities that currently have standalone value and are recognized as work is performed may need to be deferred and recognized over the contract period; and
|
•
|
Principal versus agent conclusions (reporting revenue gross vs. net), including interchange fees and assessments charged by credit card associations, network fees related to PIN-debit and PINless debit transactions and revenue-based commission payments to Independent Sales Organizations (ISOs) and sales channels.
|
(in millions)
|
|
As of March 31,
2017 |
|
As of December 31,
2016 |
||||
Short-term borrowings:
|
|
|
|
|
|
|
||
Foreign lines of credit and other arrangements
|
|
$
|
126
|
|
|
$
|
84
|
|
Senior secured revolving credit facility at either (i) LIBOR for deposits in the applicable currency plus 350 basis points or (ii) prime rate plus 250 basis points
|
|
11
|
|
|
—
|
|
||
Accounts receivable securitized loan at LIBOR plus 200 basis points or a base rate equal to the highest of (i) the applicable lender's prime rate, or (ii) the federal funds rate plus 0.50%
|
|
228
|
|
|
160
|
|
||
Unamortized deferred financing costs (a)
|
|
(1
|
)
|
|
(2
|
)
|
||
Total short-term borrowings
|
|
364
|
|
|
242
|
|
||
Current portion of long-term borrowings:
|
|
|
|
|
|
|
||
Other arrangements and capital lease obligations
|
|
137
|
|
|
116
|
|
||
Total current portion of long-term borrowings
|
|
137
|
|
|
116
|
|
||
Total short-term and current portion of long-term borrowings
|
|
501
|
|
|
358
|
|
||
Long-term borrowings:
|
|
|
|
|
|
|
||
Senior secured term loan facility due March 2021 at LIBOR and euro LIBOR plus 3.0% or, solely with respect to U.S. dollar-denominated term loans, a base rate plus 2.0% (d), (e)
|
|
4,381
|
|
|
4,379
|
|
||
Senior secured term loan facility due July 2022 at LIBOR plus 3.0% or a base rate plus 2.0%, or solely with respect to euro-denominated term loans, euro LIBOR plus 3.25% (e)
|
|
3,594
|
|
|
3,583
|
|
||
Senior secured term loan facility due June 2020 at LIBOR plus 2.0% or a base rate plus 1.0%
|
|
1,284
|
|
|
—
|
|
||
6.75% Senior secured first lien notes due 2020
|
|
—
|
|
|
1,398
|
|
||
5.375% Senior secured first lien notes due 2023
|
|
1,210
|
|
|
1,210
|
|
||
5.0% Senior secured first lien notes due 2024
|
|
1,900
|
|
|
1,900
|
|
||
5.75% Senior secured second lien notes due 2024
|
|
2,200
|
|
|
2,200
|
|
||
7.0% Senior unsecured notes due 2023
|
|
3,400
|
|
|
3,400
|
|
||
Unamortized discount and unamortized deferred financing costs (a)
|
|
(150
|
)
|
|
(154
|
)
|
||
Other arrangements and capital lease obligations
|
|
304
|
|
|
215
|
|
||
Total long-term borrowings (b)
|
|
18,123
|
|
|
18,131
|
|
||
Total borrowings (c)
|
|
$
|
18,624
|
|
|
$
|
18,489
|
|
(a)
|
Unamortized deferred financing costs are amortized on a straight-line basis, which approximates the interest method, over the remaining term of the respective debt. In addition, certain lenders' fees associated with debt transactions were capitalized as discounts and are similarly being amortized on a straight-line basis, which approximates the effective interest method, over the remaining term of the respective debt.
|
(b)
|
As of
March 31, 2017
and
December 31, 2016
, the fair value of the Company's long-term borrowings was
$18.7 billion
and
$18.8 billion
, respectively. The estimated fair value of the Company's long-term borrowings was primarily based on market trading prices and is considered to be a Level 2 measurement.
|
(c)
|
The effective interest rate is not substantially different than the coupon rate on any of the Company's debt tranches.
|
(d)
|
The U.S. dollar denominated Senior secured term loan facility maturing March 2021was refinanced on April 26, 2017. See note 13 "Subsequent Events" for additional information.
|
(e)
|
The euro-denominated portions of the Senior secured term loan facilities are designated as non-derivative hedges of net investments in foreign operations. As such, foreign currency gains and losses on the euro-denominated portions of these terms loans is recorded within "Foreign currency translation adjustment" on the Company's unaudited consolidated statements of comprehensive income (loss) to the extent the hedges are effective.
|
|
|
Three months ended March 31,
|
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Cost of services
|
|
$
|
19
|
|
|
$
|
49
|
|
Selling, general, and administrative
|
|
46
|
|
|
66
|
|
||
Total
|
|
$
|
65
|
|
|
$
|
115
|
|
|
|
Three months ended March 31,
|
||||||
(in millions, except per share amounts)
|
|
2017
|
|
2016
|
||||
Numerator:
|
|
|
|
|
||||
Net income (loss) used in computing net income (loss) per share, basic and diluted
|
|
$
|
36
|
|
|
$
|
(56
|
)
|
|
|
|
|
|
||||
Denominator:
|
|
|
|
|
||||
Weighted average shares used in computing net income (loss) per share, basic
|
|
910
|
|
|
896
|
|
||
Effect of dilutive securities
|
|
21
|
|
|
—
|
|
||
Total dilutive securities
|
|
931
|
|
|
896
|
|
||
|
|
|
|
|
||||
Net income (loss) attributable to First Data Corporation per share:
|
|
|
|
|
||||
Basic
|
|
$
|
0.04
|
|
|
$
|
(0.06
|
)
|
Diluted
|
|
$
|
0.04
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
||||
Anti-dilutive shares excluded from diluted net income (loss) per share (a)
|
|
13
|
|
|
46
|
|
(a)
|
Potentially dilutive securities whose effect would have been anti-dilutive are excluded from the computation of diluted earnings per share for the three months ended March 31, 2017 and 2016.
|
|
|
Three months ended March 31, 2017
|
||||||||||||||||||
(in millions)
|
|
Global Business Solutions
|
|
Global Financial Solutions
|
|
Network & Security Solutions
|
|
Corporate
|
|
Total
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Transaction and processing service fees
|
|
$
|
743
|
|
|
$
|
347
|
|
|
$
|
316
|
|
|
$
|
—
|
|
|
$
|
1,406
|
|
Product sales and other
|
|
219
|
|
|
46
|
|
|
45
|
|
|
—
|
|
|
310
|
|
|||||
Equity earnings in affiliates
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|||||
Total segment revenues
|
|
$
|
971
|
|
|
$
|
393
|
|
|
$
|
361
|
|
|
$
|
—
|
|
|
$
|
1,725
|
|
Depreciation and amortization
|
|
$
|
106
|
|
|
$
|
85
|
|
|
$
|
30
|
|
|
$
|
1
|
|
|
$
|
222
|
|
Segment EBITDA
|
|
382
|
|
|
155
|
|
|
156
|
|
|
(42
|
)
|
|
651
|
|
|||||
Other operating expenses and other income (expense) excluding divestitures
|
|
(10
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(10
|
)
|
|
(23
|
)
|
|
|
Three months ended March 31, 2016
|
||||||||||||||||||
(in millions)
|
|
Global Business Solutions
|
|
Global Financial Solutions
|
|
Network & Security Solutions
|
|
Corporate
|
|
Total
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Transaction and processing service fees
|
|
$
|
755
|
|
|
$
|
337
|
|
|
$
|
313
|
|
|
$
|
—
|
|
|
$
|
1,405
|
|
Product sales and other
|
|
189
|
|
|
49
|
|
|
39
|
|
|
—
|
|
|
277
|
|
|||||
Equity earnings in affiliates
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|||||
Total segment revenues
|
|
$
|
955
|
|
|
$
|
386
|
|
|
$
|
352
|
|
|
$
|
—
|
|
|
$
|
1,693
|
|
Depreciation and amortization
|
|
$
|
103
|
|
|
$
|
94
|
|
|
$
|
27
|
|
|
$
|
4
|
|
|
$
|
228
|
|
Segment EBITDA
|
|
376
|
|
|
155
|
|
|
151
|
|
|
(46
|
)
|
|
636
|
|
|||||
Other operating expenses and other income (expense) excluding divestitures
|
|
(17
|
)
|
|
4
|
|
|
(2
|
)
|
|
—
|
|
|
(15
|
)
|
|
|
Three months ended
March 31, |
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Total segment revenues
|
|
$
|
1,725
|
|
|
$
|
1,693
|
|
Adjustments:
|
|
|
|
|
||||
Non wholly owned entities (a)
|
|
10
|
|
|
14
|
|
||
Independent sales organizations (ISOs) commission expense (b)
|
|
147
|
|
|
163
|
|
||
Reimbursable debit network fees, postage, and other
|
|
919
|
|
|
907
|
|
||
Consolidated revenues
|
|
$
|
2,801
|
|
|
$
|
2,777
|
|
|
|
|
|
|
||||
Total segment EBITDA
|
|
$
|
651
|
|
|
$
|
636
|
|
Adjustments:
|
|
|
|
|
||||
Non wholly owned entities (a)
|
|
6
|
|
|
10
|
|
||
Depreciation and amortization
|
|
(228
|
)
|
|
(238
|
)
|
||
Interest expense, net
|
|
(234
|
)
|
|
(263
|
)
|
||
Loss on debt extinguishment
|
|
(56
|
)
|
|
(46
|
)
|
||
Other items (c)
|
|
(26
|
)
|
|
(35
|
)
|
||
Income tax expense
|
|
(12
|
)
|
|
(5
|
)
|
||
Stock-based compensation
|
|
(65
|
)
|
|
(115
|
)
|
||
Net income (loss) attributable to First Data Corporation
|
|
$
|
36
|
|
|
$
|
(56
|
)
|
(a)
|
Net adjustment to reflect the Company's proportionate share of the results of the Company's investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. Segment revenue for the Company's significant affiliates is reflected based on the Company's proportionate share of the results of the Company's investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. For other affiliates, the Company includes equity earnings in affiliates, excluding amortization expense, in segment revenue.
|
(b)
|
Reported within "Selling, general, and administrative expense" in the unaudited consolidated statements of operations.
|
(c)
|
Includes restructuring, non-normal course litigation and regulatory settlements, debt issuance expenses and “Other income (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.
|
|
|
Three months ended
March 31, |
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Segment depreciation and amortization
|
|
$
|
222
|
|
|
$
|
228
|
|
Adjustments for non wholly owned entities
|
|
17
|
|
|
19
|
|
||
Amortization of initial payments for new contracts (a)
|
|
19
|
|
|
15
|
|
||
Total consolidated depreciation and amortization per unaudited consolidated statements of cash flows
|
|
258
|
|
|
262
|
|
||
Amortization of equity method investments (b)
|
|
(11
|
)
|
|
(9
|
)
|
||
Amortization of initial payments for new contracts (a)
|
|
(19
|
)
|
|
(15
|
)
|
||
Total consolidated depreciation and amortization per unaudited consolidated statements of operations
|
|
$
|
228
|
|
|
$
|
238
|
|
(a)
|
Included in "Transaction and processing service fees" as contra-revenue in the Company's unaudited consolidated statements of operations.
|
(b)
|
Included in "Equity earnings in affiliates" in the Company's unaudited consolidated statements of operations.
|
|
|
Three months ended
March 31, |
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Income tax expense
|
|
$
|
12
|
|
|
$
|
5
|
|
Effective income tax rate
|
|
13
|
%
|
|
(500
|
)%
|
(in millions)
|
|
2017
|
|
2016
|
||||
Balance as of January 1,
|
|
$
|
73
|
|
|
$
|
77
|
|
Distributions
|
|
(8
|
)
|
|
(8
|
)
|
||
Share of income
|
|
8
|
|
|
8
|
|
||
Adjustment to redemption value of redeemable noncontrolling interest
|
|
(1
|
)
|
|
(4
|
)
|
||
Balance as of March 31,
|
|
$
|
72
|
|
|
$
|
73
|
|
|
|
Three months ended
March 31, |
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Restructuring, net
|
|
$
|
23
|
|
|
$
|
21
|
|
Other
|
|
(1
|
)
|
|
—
|
|
||
Other operating expenses
|
|
$
|
22
|
|
|
$
|
21
|
|
|
|
Three months ended
March 31, |
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Global Business Solutions
|
|
$
|
9
|
|
|
$
|
3
|
|
Global Financial Solutions
|
|
4
|
|
|
1
|
|
||
Network & Security Solutions
|
|
2
|
|
|
2
|
|
||
Corporate
|
|
8
|
|
|
15
|
|
||
Restructuring, net
|
|
$
|
23
|
|
|
$
|
21
|
|
(in millions)
|
|
Employee
Severance
|
||
Remaining accrual as of January 1, 2017
|
|
$
|
9
|
|
Restructuring, net
|
|
23
|
|
|
Cash payments and other
|
|
(20
|
)
|
|
Remaining accrual as of March 31, 2017
|
|
$
|
12
|
|
•
|
Floating to fixed interest rate collar contracts: The Company uses interest rate collar contracts to mitigate its exposure to interest rate fluctuations on interest payments related to variable rate debt. No payments or receipts are exchanged on interest rate collar contracts unless interest rates rise or fall to exceed a predetermined ceiling or floor rate. The Company uses these contracts in a qualifying hedging relationship.
|
•
|
Foreign exchange contracts: The Company uses cross-currency swaps to protect the net investment in certain foreign subsidiaries and/or affiliates with respect to changes in foreign currency exchange rates. The Company uses these contracts in both qualifying and non-qualifying hedging relationships.
|
|
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||
(in millions)
|
|
Notional Currency
|
|
Notional Value
|
|
Assets
(a)
|
|
Liabilities
|
|
Notional Value
|
|
Assets
(a)
|
|
Liabilities
|
||||||||||
Derivatives designated as hedges of net investments in foreign operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Foreign exchange contracts (b)
|
|
AUD
|
|
211
|
|
|
$
|
48
|
|
|
$
|
—
|
|
|
211
|
|
|
$
|
57
|
|
|
$
|
—
|
|
Foreign exchange contracts (c)
|
|
GBP
|
|
300
|
|
|
72
|
|
|
—
|
|
|
300
|
|
|
78
|
|
|
—
|
|
||||
Foreign exchange contracts (d)
|
|
CAD
|
|
130
|
|
|
9
|
|
|
—
|
|
|
130
|
|
|
9
|
|
|
—
|
|
||||
|
|
|
|
|
|
129
|
|
|
—
|
|
|
|
|
144
|
|
|
—
|
|
||||||
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate collar contracts (e)
|
|
USD
|
|
4,300
|
|
|
4
|
|
|
—
|
|
|
3,000
|
|
|
3
|
|
|
—
|
|
||||
|
|
|
|
|
|
$
|
133
|
|
|
$
|
—
|
|
|
|
|
$
|
147
|
|
|
$
|
—
|
|
(a)
|
Of the balances included in the table above, in aggregate,
$133 million
of assets as of
March 31, 2017
and
$147 million
of assets as of
December 31, 2016
are subject to master netting agreements to the extent that the swaps are with the same counterparty. The terms of those agreements require that the Company net settle the outstanding positions at the option of the counterparty upon certain events of default.
|
(b)
|
Notional value
111 million
AUD, matured in April 2017. See note 13 "Subsequent Events" for additional information.
|
(c)
|
Notional value
150 million
GBP, matured in April 2017. See note 13 "Subsequent Events" for additional information.
|
(d)
|
Notional value
35 million
CAD, matured in April 2017. See note 13 "Subsequent Events" for additional information.
|
(e)
|
On January 31, 2017, the Company entered into
$1.3 billion
of
zero
-cost interest rate collars with an interest rate cap of
1.5%
of interest rate floors ranging between
1.160%
-
1.168%
. The collars will hedge variability in the interest rates on the senior secured term loan facilities.
|
|
|
Three months ended March 31,
|
|
||||||||||||||
|
|
2017
|
|
2016
|
|
||||||||||||
(in millions, pretax)
|
|
Interest
Rate Contracts |
|
Foreign
Exchange Contracts |
|
Interest
Rate Contracts |
|
Foreign
Exchange Contracts |
|
||||||||
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Loss recognized in "Foreign currency translation adjustment" in the unaudited consolidated statements of comprehensive income (loss) (effective portion)
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
|
$
|
—
|
|
|
$
|
(8
|
)
|
|
Gain recognized in "Derivative instruments" in the unaudited consolidated statements of comprehensive income (loss) (effective portion)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Loss recognized in "Other (expense) income" in the unaudited consolidated statements of operations
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
|
|
Three months ended March 31,
|
|
||||||
(in millions, after tax)
|
|
2017
|
|
2016
|
|
||||
Accumulated gain included in other comprehensive income (loss) as of January 1,
|
|
$
|
124
|
|
|
$
|
86
|
|
|
Decrease in fair value of derivatives that qualify for hedge accounting, net of tax (a) (b)
|
|
(9
|
)
|
|
(5
|
)
|
|
||
Accumulated gain included in other comprehensive income (loss) as of March 31,
|
|
$
|
115
|
|
|
$
|
81
|
|
|
(a)
|
Losses are included in "Derivative instruments" and “Foreign currency translation adjustment” in the unaudited consolidated statements of comprehensive income (loss).
|
(b)
|
Net of
$4 million
and
$3 million
of tax for the three months ended March 31, 2017 and 2016, respectively.
|
|
|
Three months ended
March 31, |
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Net operating revenues
|
|
$
|
268
|
|
|
$
|
280
|
|
Operating expenses
|
|
129
|
|
|
129
|
|
||
Operating income
|
|
$
|
139
|
|
|
$
|
151
|
|
Net income
|
|
$
|
139
|
|
|
$
|
151
|
|
FDC equity earnings
|
|
48
|
|
|
55
|
|
Business Trends
|
|
2016
|
|
2015
|
|
2014
|
Transactions processed (a)
|
|
88 billion
|
|
79 billion
|
|
74 billion
|
Payment volumes
|
|
$1.9 trillion
|
|
$1.7 trillion
|
|
$1.7 trillion
|
|
|
Three months ended March 31,
|
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Cost of services
|
|
$
|
19
|
|
|
$
|
49
|
|
Selling, general, and administrative
|
|
46
|
|
|
66
|
|
||
Total
|
|
$
|
65
|
|
|
$
|
115
|
|
(in millions)
|
|
Three months ended
March 31, |
||
Net (loss) attributable to First Data Corporation as of March 31, 2016
|
|
$
|
(56
|
)
|
Better (worse):
|
|
|
||
Stock-based compensation expense
|
|
50
|
|
|
Interest expense, net
|
|
29
|
|
|
Total revenues (excluding reimbursable items)
|
|
12
|
|
|
Depreciation and amortization
|
|
10
|
|
|
Loss on debt extinguishment
|
|
(10
|
)
|
|
Other miscellaneous, net
|
|
1
|
|
|
Net income attributable to First Data Corporation as of March 31, 2017
|
|
$
|
36
|
|
•
|
The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.
|
•
|
Intersegment revenues are eliminated in the segment that sells directly to the end market.
|
•
|
Segment revenue excludes reimbursable debit network fees, postage, and other revenue.
|
•
|
Segment EBITDA includes equity earnings in affiliates and excludes depreciation and amortization expense, net income attributable to noncontrolling interests, other operating expenses, other income (expense) and stock-based compensation.
|
•
|
For significant affiliates, segment revenue and segment EBITDA are 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 and segment EBITDA. In addition, GBS measures reflect revenue-based commission payments to Independent Sales Organizations (ISOs) and sales channels, which are treated as an expense in the unaudited consolidated statements of operations, as contra revenue.
|
•
|
Corporate operations include corporate-wide governance functions such as our executive management team, tax, treasury, internal audit, corporate strategy, and certain accounting, human resources and legal costs related to supporting the corporate function. Costs incurred by Corporate that are attributable to a segment are allocated to the respective segment.
|
•
|
Certain measures exclude the estimated impact of foreign currency changes (constant currency). To present this information, monthly results during the periods presented for entities with functional currencies other than U.S. dollars are translated into U.S. dollars at the average exchange rates in effect during the corresponding month of the prior fiscal year, rather than the actual average exchange rates in effect during the current fiscal year. Once translated, each month during the periods presented is added together to calculate the constant currency results for the periods presented.
|
|
|
Three months ended March 31,
|
||||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|
Constant Currency Percent Change
|
||||||
Consolidated revenues
|
|
$
|
2,801
|
|
|
$
|
2,777
|
|
|
1
|
%
|
|
1
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|||||
Non wholly owned entities
|
|
(10
|
)
|
|
(14
|
)
|
|
(29
|
)%
|
|
NM
|
|
||
Independent sales organizations (ISOs) commissions
|
|
(147
|
)
|
|
(163
|
)
|
|
(10
|
)%
|
|
NM
|
|
||
Reimbursable debit network fees, postage, and other
|
|
(919
|
)
|
|
(907
|
)
|
|
1
|
%
|
|
1
|
%
|
||
Total segment revenues
|
|
$
|
1,725
|
|
|
$
|
1,693
|
|
|
2
|
%
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||
Segment revenues:
|
|
|
|
|
|
|
|
|
||||||
Global Business Solutions
|
|
$
|
971
|
|
|
$
|
955
|
|
|
2
|
%
|
|
2
|
%
|
Global Financial Solutions
|
|
393
|
|
|
386
|
|
|
2
|
%
|
|
5
|
%
|
||
Network & Security Solutions
|
|
361
|
|
|
352
|
|
|
3
|
%
|
|
3
|
%
|
|
|
Three months ended March 31,
|
||||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|
Constant Currency Percent Change
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||
North America
|
|
$
|
751
|
|
|
$
|
737
|
|
|
2
|
%
|
|
2
|
%
|
EMEA
|
|
127
|
|
|
140
|
|
|
(9
|
)%
|
|
(3
|
)%
|
||
APAC
|
|
34
|
|
|
41
|
|
|
(17
|
)%
|
|
(17
|
)%
|
||
LATAM
|
|
59
|
|
|
37
|
|
|
59
|
%
|
|
52
|
%
|
||
Total segment revenue
|
|
$
|
971
|
|
|
$
|
955
|
|
|
2
|
%
|
|
2
|
%
|
Key indicators:
|
|
|
|
|
|
|
|
|
|
|||||
North America merchant transactions (a)
|
|
11,483
|
|
|
10,744
|
|
|
7
|
%
|
|
|
|||
International merchant transactions (b)
|
|
2,227
|
|
|
1,770
|
|
|
26
|
%
|
|
|
(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 Point of Sale (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 Automated Teller Machine (ATM) transactions. International transactions reflect 100% of alliance transactions.
|
|
|
Three months ended March 31,
|
||||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|
Constant Currency Percent Change
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||
North America
|
|
$
|
236
|
|
|
$
|
234
|
|
|
1
|
%
|
|
1
|
%
|
EMEA
|
|
101
|
|
|
103
|
|
|
(2
|
)%
|
|
9
|
%
|
||
APAC
|
|
23
|
|
|
18
|
|
|
28
|
%
|
|
25
|
%
|
||
LATAM
|
|
33
|
|
|
31
|
|
|
6
|
%
|
|
8
|
%
|
||
Total segment revenue
|
|
$
|
393
|
|
|
$
|
386
|
|
|
2
|
%
|
|
5
|
%
|
Key indicators:
|
|
|
|
|
|
|
|
|
|
|||||
North America card accounts on file (a)
|
867
|
|
|
814
|
|
|
7
|
%
|
|
|
||||
International card accounts on file (b)
|
156
|
|
|
139
|
|
|
12
|
%
|
|
|
(a)
|
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.
|
(b)
|
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.
|
|
|
Three months ended March 31,
|
|||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||
EFT Network
|
|
$
|
115
|
|
|
$
|
115
|
|
|
—
|
%
|
Stored Value Network
|
|
89
|
|
|
85
|
|
|
5
|
%
|
||
Security and Fraud
|
|
106
|
|
|
103
|
|
|
3
|
%
|
||
Other (a)
|
|
51
|
|
|
49
|
|
|
4
|
%
|
||
Segment revenue
|
|
$
|
361
|
|
|
$
|
352
|
|
|
3
|
%
|
Key indicators:
|
|
|
|
|
|
|
|
||||
Network transactions (EFT Network and Stored Value) (b)
|
|
5,114
|
|
|
4,764
|
|
|
7
|
%
|
(a)
|
Other is primarily comprised of revenue generated from our Government and Digital Banking businesses.
|
(b)
|
Network transactions include the debit issuer processing transactions,
STAR Network
issuer transactions, Payroll and Gift Solutions and POS transactions.
|
|
|
Three months ended March 31,
|
||||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|
Constant Currency Percent Change
|
||||||
Cost of services (exclusive of items shown below)
|
|
$
|
700
|
|
|
$
|
731
|
|
|
(4
|
)%
|
|
(3
|
)%
|
Cost of products sold
|
|
80
|
|
|
78
|
|
|
3
|
%
|
|
3
|
%
|
||
Selling, general, and administrative
|
|
525
|
|
|
564
|
|
|
(7
|
)%
|
|
(6
|
)%
|
||
Depreciation and amortization
|
|
228
|
|
|
238
|
|
|
(4
|
)%
|
|
(4
|
)%
|
||
Other operating expenses
|
|
22
|
|
|
21
|
|
|
5
|
%
|
|
4
|
%
|
||
Total expenses (excluding reimbursable items)
|
|
1,555
|
|
|
1,632
|
|
|
(5
|
)%
|
|
(4
|
)%
|
||
Reimbursable debit network fees, postage, and other
|
|
919
|
|
|
907
|
|
|
1
|
%
|
|
1
|
%
|
||
Total expenses
|
|
$
|
2,474
|
|
|
$
|
2,539
|
|
|
(3
|
)%
|
|
(2
|
)%
|
|
|
Three months ended March 31,
|
||||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|
Constant Currency Percent Change
|
||||||
Salaries, wages, and bonus
|
|
$
|
380
|
|
|
$
|
375
|
|
|
1
|
%
|
|
|
|
Stock-based compensation (a)
|
|
19
|
|
|
49
|
|
|
(61
|
)%
|
|
|
|||
Outside professional services
|
|
63
|
|
|
62
|
|
|
2
|
%
|
|
|
|||
Software, telecommunication infrastructure, and repairs
|
|
95
|
|
|
100
|
|
|
(5
|
)%
|
|
|
|||
Other
|
|
143
|
|
|
145
|
|
|
(1
|
)%
|
|
|
|||
Cost of services expense
|
|
$
|
700
|
|
|
$
|
731
|
|
|
(4
|
)%
|
|
(3
|
)%
|
(a)
|
$30 million decrease impacted by IPO related expense recognized in the prior year.
|
|
|
Three months ended March 31,
|
||||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|
Constant Currency Percent Change
|
||||||
Salaries, wages, bonus, and other
|
|
$
|
176
|
|
|
$
|
178
|
|
|
(1
|
)%
|
|
|
|
Stock-based compensation (a)
|
|
46
|
|
|
66
|
|
|
(30
|
)%
|
|
|
|||
Independent sales organizations (ISOs) commissions (b)
|
|
147
|
|
|
163
|
|
|
(10
|
)%
|
|
|
|||
Outside professional services
|
|
45
|
|
|
50
|
|
|
(10
|
)%
|
|
|
|||
Commissions
|
|
34
|
|
|
33
|
|
|
3
|
%
|
|
|
|||
Other
|
|
77
|
|
|
74
|
|
|
4
|
%
|
|
|
|||
Selling, general, and administrative expense
|
|
$
|
525
|
|
|
$
|
564
|
|
|
(7
|
)%
|
|
(6
|
)%
|
(a)
|
$22 million decrease impacted by IPO related expense recognized in the prior year.
|
(b)
|
$16 million decrease driven by consolidation of retail ISOs to wholesale ISOs via acquisition in the prior year.
|
|
|
Three months ended March 31,
|
|||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|||||
Depreciation expense
|
|
$
|
76
|
|
|
$
|
73
|
|
|
4
|
%
|
Amortization expense (a)
|
|
152
|
|
|
165
|
|
|
(8
|
)%
|
||
Depreciation and amortization
|
|
$
|
228
|
|
|
$
|
238
|
|
|
(4
|
)%
|
(a)
|
Decline driven by a reduction in amortization expense on intangibles arising from the KKR acquisition of First Data.
|
|
|
Three months ended March 31,
|
|||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|||||
Restructuring, net
(a)
|
|
$
|
23
|
|
|
$
|
21
|
|
|
10
|
%
|
Other
|
|
(1
|
)
|
|
—
|
|
|
NM
|
|
||
Other operating expenses
|
|
$
|
22
|
|
|
$
|
21
|
|
|
5
|
%
|
(a)
|
Refer to note 8 "Other Operating Expenses" to our unaudited consolidated financial statements in Part I, Item 1, of this Form 10-Q for details regarding other operating expenses.
|
|
|
Three months ended March 31,
|
|||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|||||
Interest expense, net
|
|
$
|
(234
|
)
|
|
$
|
(263
|
)
|
|
(11
|
)%
|
|
|
Three months ended March 31,
|
|||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|||||
Loss on debt extinguishment
|
|
$
|
(56
|
)
|
|
$
|
(46
|
)
|
|
22
|
%
|
|
|
Three months ended March 31,
|
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Derivatives losses
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
Non-operating foreign currency (losses) gains
|
|
(1
|
)
|
|
10
|
|
||
Other (expense) income
|
|
$
|
(1
|
)
|
|
$
|
6
|
|
|
|
Three months ended March 31,
|
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Income tax expense
|
|
$
|
12
|
|
|
$
|
5
|
|
Effective income tax rate
|
|
13
|
%
|
|
(500
|
)%
|
|
|
Three months ended March 31,
|
|||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|||||
Equity earnings in affiliates
|
|
$
|
55
|
|
|
$
|
64
|
|
|
(14
|
)%
|
|
|
Three months ended March 31,
|
|||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|||||
Net income attributable to noncontrolling interests and redeemable noncontrolling interest
|
|
$
|
43
|
|
|
$
|
50
|
|
|
(14
|
)%
|
|
|
Three months ended March 31,
|
||||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
Percent Change
|
|
Constant Currency Percent Change
|
||||||
Segment EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Global Business Solutions
|
|
$
|
382
|
|
|
$
|
376
|
|
|
2
|
%
|
|
3
|
%
|
Global Financial Solutions
|
|
155
|
|
|
155
|
|
|
—
|
%
|
|
3
|
%
|
||
Network & Security Solutions
|
|
156
|
|
|
151
|
|
|
3
|
%
|
|
3
|
%
|
||
Corporate
|
|
(42
|
)
|
|
(46
|
)
|
|
9
|
%
|
|
9
|
%
|
||
Total Segment EBITDA (Non-GAAP)
|
|
$
|
651
|
|
|
$
|
636
|
|
|
2
|
%
|
|
4
|
%
|
|
|
Three months ended March 31,
|
|||||||||
(in millions)
|
|
2017
|
|
2016
|
|
% Change
|
|||||
Net income (loss) attributable to First Data Corporation
|
|
$
|
36
|
|
|
$
|
(56
|
)
|
|
NM
|
|
Adjustments:
|
|
|
|
|
|
|
|||||
Stock-based compensation
|
|
65
|
|
|
115
|
|
|
(43
|
)%
|
||
Loss on debt extinguishment (a)
|
|
56
|
|
|
46
|
|
|
22
|
%
|
||
Mark-to-market adjustment for derivatives (b)
|
|
—
|
|
|
4
|
|
|
(100
|
)%
|
||
Amortization of acquisition intangibles and deferred financing costs (c)
|
|
95
|
|
|
108
|
|
|
(12
|
)%
|
||
Restructuring
|
|
23
|
|
|
21
|
|
|
10
|
%
|
||
Intercompany foreign exchange gain (loss)
|
|
1
|
|
|
(10
|
)
|
|
NM
|
|
||
Impairment, litigation, and other (d)
|
|
(1
|
)
|
|
6
|
|
|
NM
|
|
||
Income tax on above items and discrete tax items (e)
|
|
(17
|
)
|
|
(14
|
)
|
|
21
|
%
|
||
Adjusted net income attributable to First Data Corporation
|
|
$
|
258
|
|
|
$
|
220
|
|
|
17
|
%
|
(a)
|
Represents costs associated with debt refinancing on extinguished debt.
|
(b)
|
Represents mark-to-market activity related to our undesignated hedges.
|
(c)
|
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 $3 million for the three months ended March 31, 2017 and 2016, respectively.
|
(d)
|
Represents impairments, non-normal course litigation and regulatory settlements, investments gains (losses), fees paid on debt modifications, divestitures, and other, as applicable to the periods presented.
|
(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. Income tax (expense) benefit also includes the impact of significant discrete tax items impacting Net income (loss) attributable to First Data Corporation.
|
|
|
As of
|
|
As of
|
||||
(in millions)
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Total long-term borrowings
|
|
$
|
18,123
|
|
|
$
|
18,131
|
|
Total short-term and current portion of long-term borrowings
|
|
501
|
|
|
358
|
|
||
Total borrowings
|
|
18,624
|
|
|
18,489
|
|
||
Unamortized discount and unamortized deferred financing costs
|
|
151
|
|
|
156
|
|
||
Total borrowings at par
|
|
18,775
|
|
|
18,645
|
|
||
Less: settlement lines of credit and other arrangements
|
|
(126
|
)
|
|
(84
|
)
|
||
Gross debt excluding settlement lines of credit and other arrangements
|
|
18,649
|
|
|
18,561
|
|
||
Less: cash and cash equivalents
|
|
(503
|
)
|
|
(385
|
)
|
||
Net debt
|
|
$
|
18,146
|
|
|
$
|
18,176
|
|
|
|
Three months ended March 31,
|
||||||
Source/(use) (in millions)
|
|
2017
|
|
2016
|
||||
Net cash provided by operating activities
|
|
$
|
421
|
|
|
$
|
386
|
|
Net cash used in investing activities
|
|
(116
|
)
|
|
(123
|
)
|
||
Net cash used in financing activities
|
|
(187
|
)
|
|
(373
|
)
|
|
|
Three months ended March 31,
|
||
Source/(use) (in millions)
|
|
2017
|
||
Net cash provided by operating activities, previous period
|
|
$
|
386
|
|
Increases (decreases) in:
|
|
|
||
Net income, excluding other operating expenses and other income (expense) (a)
|
|
62
|
|
|
Depreciation and amortization
|
|
(4
|
)
|
|
Working capital
|
|
(23
|
)
|
|
Net cash provided by operating activities, end of period
|
|
$
|
421
|
|
(a)
|
Excludes loss on debt extinguishment, stock-based compensation expense, and other non-cash items.
|
|
|
Three months ended March 31,
|
||||||||||
Source/(use) (in millions)
|
|
2017
|
|
2016
|
|
Change
|
||||||
Net cash provided by operating activities
|
|
$
|
421
|
|
|
$
|
386
|
|
|
$
|
35
|
|
Capital expenditures
|
|
(117
|
)
|
|
(117
|
)
|
|
—
|
|
|||
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interest
|
|
(43
|
)
|
|
(58
|
)
|
|
15
|
|
|||
Free cash flow
|
|
$
|
261
|
|
|
$
|
211
|
|
|
$
|
50
|
|
|
|
Total Available (a)
|
|
Total Outstanding
|
||||||||||||
(in millions)
|
|
As of March 31,
2017 |
|
As of December 31,
2016 |
|
As of March 31,
2017 |
|
As of December 31,
2016 |
||||||||
Letters of credit (b)
|
|
$
|
250
|
|
|
$
|
250
|
|
|
$
|
44
|
|
|
$
|
41
|
|
Lines of credit and other (c)
|
|
337
|
|
|
489
|
|
|
126
|
|
|
84
|
|
(a)
|
Total available without giving effect to amounts outstanding.
|
(b)
|
Outstanding letters of credit are held in connection with lease arrangements, bankcard association agreements and other security agreements. The largest amount of letters of credit outstanding was approximately $44 million during the three months ended
March 31, 2017
. All letters of credit expire on or prior to March 31, 2018 with a one-year renewal option. We expect to renew most of the letters of credit prior to expiration.
|
(c)
|
As of
March 31, 2017
, represents $297 million of committed lines of credit as well as certain uncommitted lines of credit and other agreements that are available in various currencies to fund settlement and other activity. We cannot use these lines of credit for general corporate purposes. Certain of these arrangements are uncommitted but, as of the dates presented, we had borrowings outstanding against them.
|
(in millions)
|
|
Last twelve
months ended March 31, 2017 |
||
Net income attributable to First Data Corporation
|
|
$
|
512
|
|
Interest expense, net
|
|
1,039
|
|
|
Income tax expense
|
|
88
|
|
|
Depreciation and amortization
|
|
1,057
|
|
|
EBITDA
|
|
2,696
|
|
|
|
|
|
|
|
Loss on debt extinguishment
|
|
80
|
|
|
Stock-based compensation
|
|
213
|
|
|
Net income attributable to noncontrolling interests and redeemable noncontrolling interest
|
|
233
|
|
|
Projected near-term cost savings and revenue enhancements (1)
|
|
97
|
|
|
Restructuring, net
|
|
51
|
|
|
Non-operating foreign currency (gains) and losses
|
|
(8
|
)
|
|
Investment (gains) and losses (2)
|
|
(35
|
)
|
|
Equity entities taxes, depreciation and amortization (3)
|
|
14
|
|
|
Divestitures, net (4)
|
|
34
|
|
|
Other (5)
|
|
32
|
|
|
Covenant EBITDA
|
|
$
|
3,407
|
|
(1)
|
Reflects cost savings and revenue enhancements projected to be realized as a result of specific actions as if they were achieved on the first day of the period. Includes cost savings initiatives associated with the business optimization projects and other technology initiatives. We may not realize the anticipated cost savings pursuant to our anticipated timetable or at all.
|
(2)
|
Reflects gains on Visa Europe share sale and international joint venture sale reflected within "Other income" in the consolidated statements of operations in
"Item 8. Financial Statements and Supplementary Data" in our Annual Report on Form 10-K for the year ended
December 31, 2016
.
|
(3)
|
Represents our proportional share of income taxes, depreciation, and amortization on equity method investments.
|
(4)
|
Reflects loss on divestiture of Australian ATM business reflected within "Other income" in the consolidated statements of operations in "Item 8. Financial Statements and Supplementary Data" in our Annual Report on Form 10-K for the year ended
December 31, 2016
.
|
(5)
|
Includes items such as pension losses, litigation and regulatory settlements, derivative financial instruments (gains) and losses, and other as applicable to the period presented.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased Under Announced Program
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under Announced Programs
|
|||||
January 1, 2017 through January 31, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
February 1, 2017 through February 28, 2017
|
|
217,295
|
|
|
16.27
|
|
|
—
|
|
|
—
|
|
|
March 1, 2017 through March 31, 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
217,295
|
|
|
$
|
16.27
|
|
|
—
|
|
|
—
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
|
Incorporated by Reference
|
||||||||
Exhibit Number
|
|
Exhibit Description
|
Form
|
|
File Number
|
|
Exhibit Number
|
|
Filing Date
|
4.1
|
|
2017 April Joinder Agreement, dated April 26, 2017, among the Company, certain of its subsidiaries, each lender party thereto, and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent Exhibit A - Marked Pages of the Conformed Credit Agreement
|
8-K
|
|
1-11073
|
|
4.1
|
|
04/27/2017
|
10.1 (1)*
|
|
Description of Compensation of Directors
|
|
|
|
|
|
|
|
10.2 (1) *
|
|
Form of Stock Award Agreement for Directors under the 2015 Omnibus Incentive Plan
|
|
|
|
|
|
|
|
31.1 (1)
|
|
Certification of CEO pursuant to rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
31.2 (1)
|
|
Certification of CFO pursuant to rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
32.1 (1)
|
|
Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
32.2 (1)
|
|
Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
101.INS (1)
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
101.SCH (1)
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
101.CAL (1)
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
101.DEF (1)
|
|
XBRL Taxonomy Extension Definitions Linkbase Document
|
|
|
|
|
|
|
|
101.LAB (1)
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
101.PRE (1)
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
(1)
|
Filed herewith
|
*
|
Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 6 of this report.
|
|
|
FIRST DATA CORPORATION
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
May 8, 2017
|
By
|
/s/ Himanshu A. Patel
|
|
|
|
Himanshu A. Patel
|
|
|
|
Executive Vice President, Chief Financial Officer
|
|
|
|
(principal financial officer)
|
|
|
|
|
|
|
|
|
Date:
|
May 8, 2017
|
By
|
/s/ Matthew Cagwin
|
|
|
|
Matthew Cagwin
|
|
|
|
Senior Vice President, Corporate Controller and
Chief Accounting Officer
|
|
|
|
(principal accounting officer)
|
•
|
An annual award , of common stock valued at $150,000 based on the closing price of FDC common stock on the date of grant. Grants are made in connection with each FDC Annual Shareholder Meeting.
|
•
|
An annual retainer of $85,000 to be paid in quarterly installments on the first business day of each quarter.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of First Data Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
Date:
|
May 8, 2017
|
/s/ Frank Bisignano
|
|
|
Frank Bisignano
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of First Data Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
Date:
|
May 8, 2017
|
/s/ Himanshu A. Patel
|
|
|
Himanshu A. Patel
Executive Vice President, Chief Financial Officer (principal financial officer) |
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of First Data Corporation.
|
Date:
|
May 8, 2017
|
/s/ Frank Bisignano
|
|
|
Frank Bisignano
Chief Executive Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of First Data Corporation.
|
Date:
|
May 8, 2017
|
/s/ Himanshu A. Patel
|
|
|
Himanshu A. Patel
Executive Vice President, Chief Financial Officer (principal financial officer) |