First Data Reports Third Quarter 2007 Revenue Growth of 16%

Business Wire, Nov 14, 2007

DENVER -- First Data Corp. today reported its financial results for the third quarter of 2007. Consolidated revenues were up 16% to $2.1 billion. Adjusted EBITDA for the quarter (excluding the impact of projected near-term cost savings) was up 11% to $660 million. Year to date consolidated revenues were up 15% to $5.9 billion. Year to date adjusted EBITDA (excluding the impact of projected near-term cost savings) was up 7% to $1.8 billion. A table describing adjusted EBITDA and reconciling income from continuing operations to adjusted EBITDA (including incorporating the impact of projected near-term cost savings) is included in the accompanying schedules.

For the quarter, income from continuing operations was $35 million, down 73% but included $208 million of after-tax merger related costs and other costs directly attributable to the transaction with an affiliate of Kohlberg Kravis Roberts & Co. (the "Transaction") such as accelerated stock based compensation and related payroll taxes, increased amortization as the result of purchase accounting, incremental net interest expense on the new debt structure and non-recurring charges related to debt repayment loss and non cash derivative losses of the corporation merged into the company ("Merger Impacts"). Income from continuing operations was $436 million year to date, down 28%, but included Merger Impacts of $221 million. Excluding Merger Impacts, year to date 2007 income from continuing operations grew 8%.

"First Data delivered a strong quarter reflecting solid growth in overall electronic transactions," said Michael Capellas, Chairman and Chief Executive Officer. "At our core, First Data is really a technology company. Going forward, you will see us accelerate the areas of new product development and innovation while simplifying our sales approach with one face to the customer."

Segment Results

Commercial Services

For the quarter, Commercial Services generated revenues of $1.2 billion, a growth rate of 11% or 7% excluding reimbursable debit network fees. Revenue growth was primarily driven by continued strong transaction growth. Operating profit was $305 million, up 4% or 7% excluding purchase accounting adjustments and accelerated stock based compensation expense related to the Transaction. Operating margin stayed relatively constant at 34.6% excluding reimbursable debit network fees, purchase accounting adjustments and accelerated stock based compensation expense related to the Transaction compared to 34.5% in the third quarter of 2006. Reported operating margin for the quarter was 26.1%.

Financial Institution Services

For the quarter, Financial Institution Services generated revenue of $502 million, up 10% or 7% excluding reimbursables. Operating profit was $88 million, down 9% or down 3% excluding purchase accounting adjustments and accelerated stock based compensation expense related to the Transaction. The decrease in operating profit was primarily the result of anticipated price compression related to contract renewals. Operating margin for the quarter was 28.5% excluding reimbursables, purchase accounting adjustments and accelerated stock based compensation expense related to the Transaction compared to 31.4% in the third quarter of 2006. Reported operating margin including reimbursables, purchase accounting adjustments and accelerated stock based compensation expense related to the Transaction was 17.4% for the quarter.

First Data International

For the quarter, First Data International generated revenue of $425 million, up 28%. Revenue growth on a constant currency basis, excluding acquisitions and divestitures, was 8%. This 8% growth was lower compared to previous quarters due primarily to lost business in the UK as well as price compression. Operating profit was $39 million, up 20% or up 25% excluding purchase accounting adjustments and accelerated stock based compensation expense related to the Transaction. Operating margin was 9.5% excluding purchase accounting adjustments and accelerated stock based compensation expense related to the Transaction compared to 9.7% in the third quarter of 2006. Operating profit included approximately $9 million of incremental investments in data center consolidation, platform initiatives and strategic business development costs which negatively impacted the 9.5% operating margin by approximately two percentage points during the quarter. Reported operating margin was 9.1%.

Significant Events

On September 24, 2007, First Data was acquired by an affiliate of Kohlberg Kravis Roberts & Co. Under the terms of the merger agreement, the company's stockholders received $34 per share in cash.

Also effective September 24, 2007, Michael D. Capellas became First Data's new Chairman and CEO, replacing Ric Duques. Duques served as Chairman and CEO since November 2005, and previously served as Chairman from 1992 to 2003 and CEO from 1987 to 2003. Capellas was previously CEO of MCI, President of Hewlett-Packard Company and Chairman and CEO of Compaq Computer Corporation.