First Data Corporation announced its sixth consecutive quarter of strong earnings per share growth, Chairman and Chief Executive Officer Ric Duques reported Thursday. Reported earnings per share, before nonrecurring items, grew 21% to $0.58, while earnings per share, adjusted for the impact of the sale of the Investor Services business in the fourth quarter of 1999, grew 23%. Revenues from continuing operations rose 12% to $1.44 billion and pro forma revenues from continuing operations, which include consolidated revenues from Merchant Services, were up 13%.
“Our sixth consecutive quarter of EPS growth of at least 14% reflects continued execution of our core strategies,” Duques said. “Our business continues to excel on the top and bottom line. Based on our continued confidence in our operating performance, we are raising our expectations of earnings per share in 2000 from a range of $2.02 to $2.07 to a range of $2.09 to $2.14.”
Third Quarter Financial Highlights (excluding nonrecurring items)
* Earnings per share increased 21% to $0.58, up from $0.48 in the third quarter of 1999. This is the third consecutive quarter of 20%-plus EPS growth.
* Net income increased 14 % to $236 million. Net income, adjusted for the impact of the sale of the Investor Services Business, grew 16%.
* Each of the three primary business segments maintained operating margins in excess of 20%, with the Payments and Merchant segments achieving margins of 30%. For the third consecutive quarter, net margins increased over the same quarter in 1999, rising from 15.0% to 16.4%.
* The Company expects to meet its previously stated objective of $1.0 billion in free cash flow for the year due to the continued strong operating results from the three primary business segments.
* The Company reported one-time after-tax gains totaling $125 million, almost exclusively related to the successful sale of Transpoint to Checkfree. This was partially offset by one-time after-tax restructuring and other charges totaling $53 million, approximately $40 million of this charge related to the after-tax impact of the Card Segment restructuring announced in late September.
* In May, the Company announced a $1 billion stock repurchase program. During the third quarter the company repurchased 12.5 million shares of its stock for $562 million. The total amount repurchased to date under this program is 14.4M shares for $660 million.
Business Segment Highlights
Business segment highlights reflect the Company’s creation of a new Emerging Payments segment in connection with the announcement of eONE Global on October 9, 2000 and the modification of previously reported segments to accommodate the change. Also in the quarter, the company’s revenues were marginally impacted by the adoption of SEC Staff Accounting Bulletin 101.
Payment Instruments, comprised largely of Western Union and representing 40% of First Data revenue, achieved outstanding results with revenue up 18% to $596 million and profits up 19% to $190 million. After adjusting for the $8 million impact to revenue due to the weaker Euro, revenue growth would have been 20%. Results were fueled by strong third quarter growth of 23% in total worldwide money transfer transactions, raising the year-to-date growth rate to 20%. Western Union International revenue grew 41% (46% after adjusting for the weaker Euro) with money transfer transaction growth of 49%. The Payments business continues to achieve increased market penetration, with a 21% increase in its agent network over the third quarter of 1999 to approximately 94,000 locations — including a 31% increase to 52,000 international agent locations.
Merchant Processing Services, comprised of the company’s merchant acquiring and Telecheck business, accounts for 30% of First Data’s revenue. The Merchant businesses delivered another strong quarter, with earnings up 26% to $137 million on reported revenues of $455 million. Merchant segment revenues grew 17% and were positively impacted by gaining a controlling interest in one of the company’s merchant alliances. Merchant sales dollar volume processed was up 24% for the quarter, or up 14% on a pro forma basis when computed to include the prior year results of Paymentech and the Norwest portfolio.
Card Issuer Services, the world’s largest third party card processor, accounts for 25% of First Data’s revenue, recorded a 1% revenue increase to $363 million and a 14% increase in earnings to $74 million. Year to date revenues of $1.1 billion represent an 8% increase over 1999 and year to date earnings are up 16% to $224 million. Operating margins were up from 17.9% in 1999 to 20.2% in 2000 due primarily to cost management initiatives implemented during the year and restructuring charges recorded in the first quarter.
Earlier this month the company converted approximately 45 million JC Penney credit cards on behalf of its client GE Capital Corp. The conversion raised the number of accounts First Data maintains on file to more than 300 million. In addition, First Data has a pipeline of more than 41 million retail and bankcards to be converted in late 2001 and the first half of 2002. Card Issuer also has recently signed a significant card production management contract covering plastics management, card creation, and card distribution.
Emerging Payments — On October 9, 2000, First Data announced the launch of eONE Global, a business focused on identifying, developing, commercializing and operating emerging payment systems and related technologies supporting e-commerce and Internet payment products. In order to facilitate the tracking of its emerging payments businesses, the Company has established a new Emerging Payments segment and has moved CashTax, SurePay, and e-commerce investments into that segment for reporting purposes.
First Data currently has an industry leading position, processing for 100,000 Internet merchants through its bank alliances. As compared to the third quarter of 1999, the dollar volume generated by identifiable Internet merchants tripled to an estimated $5.5 billion. First Data continues to service 60 of the top 100 e-commerce-enabled Internet merchants.
FDC Accentuates Internet Presence During the Quarter
In addition to strong financial performance, the company also undertook initiatives to accentuate its Internet presence:
* Launched Western Union PayCash service that allows Internet purchases with cash.
* Leveraging its brand name in the electronic payments market, the Company launched Western Union Money Zap, its person-to-person Internet payment service.
Outlook for 2000
Ric Duques said the Company expects to achieve the following for the year 2000:
* Reported revenue growth from continuing operations in the low double digits.
* Pro forma consolidated revenue growth in the range of 13-17%.
* Net income growth in the range of 13-17%.
* An increase in EPS growth to a range of 18-21% for the year.
Atlanta-based First Data Corp. helps move the world’s money. As the leader in electronic commerce and payment services, First Data serves more than two million merchant locations, 1,400 card issuers and millions of consumers, making it easier, faster and more secure for people and businesses to buy goods and services. With approximately 29,000 employees worldwide, the company provides credit, debit and stored-value card issuing and merchant transaction processing services; Internet commerce solutions; money transfers and money orders; and check processing and verification services throughout the United States, United Kingdom, Australia, Mexico, Spain and Germany. In addition, its Western Union(R) network includes approximately 94,000 agent locations with operations in 185 countries and territories.
For more details on FDC’s 3Q/00 results visit CardData ([www.carddata.com])