NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation and Summary of Significant Accounting Policies
Business Description
First Data Corporation (FDC or the Company) is a global leader in commerce-enabling technology and solutions for merchants, financial institutions, and card issuers. The services the Company provides include merchant transaction processing and acquiring; credit, retail, and debit card issuing and processing; prepaid services; and check verification, settlement and guarantee services; as well as solutions to help clients grow their businesses including the Company's Clover line of payment solutions and related applications.
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended
December 31, 2015
. Significant accounting policies disclosed therein have not changed.
The accompanying consolidated financial statements are unaudited; however, in the opinion of management, they include all normal recurring adjustments necessary for a fair presentation of the consolidated financial position of the Company as of
June 30, 2016
and December 31,
2015
and the consolidated results of the Company's operations, comprehensive income (loss), consolidated cash flows and changes in equity for the
three and six
months ended
June 30, 2016
and
2015
. Results of operations reported for interim periods are not necessarily indicative of results for the entire year due in part to the seasonality of certain business units.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Presentation
Depreciation and amortization presented as a separate line item on the Company’s unaudited consolidated statements of operations does not include amortization of initial payments for new contracts which is recorded as contra-revenue within “Transaction and processing service fees.” Also not included is amortization related to equity method investments which is netted within “Equity earnings in affiliates.” The following table presents the amounts associated with such amortization for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
(in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Amortization of initial payments for new contracts
|
|
$
|
16
|
|
|
$
|
13
|
|
|
$
|
31
|
|
|
$
|
24
|
|
Amortization related to equity method investments
|
|
12
|
|
|
15
|
|
|
21
|
|
|
30
|
|
Revenue Recognition
The majority of the Company’s revenues are comprised of: 1) transaction-based fees, which typically constitute a percentage of dollar volume processed; 2) fees per transaction processed; 3) fees per account on file during the period; or 4) some combination thereof.
The Company’s arrangements with clients often consist of multiple services and products (multiple-element arrangements). In accounting for these multiple-element arrangements, the Company assesses the elements of the contract and whether each element has standalone value and allocates revenue to the various elements based on their estimated selling price as a component of total consideration for the arrangement. The selling price is based on current selling prices offered by the Company or another party for current products or management's best estimate of a selling price.
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In the case of contracts that the Company owns and manages, revenue is comprised of fees charged to the client, net of interchange fees and assessments charged by the credit card associations, and is recognized at the time the client accepts a point of sale transaction. The fees charged to the client are a percentage of the credit card and signature-based debit card transaction’s dollar value, a fixed amount, or a combination of the two. Personal identification number based debit (PIN-debit) network fees are recognized in “Reimbursable PIN debit fees, postage, and other” revenues and expenses in the unaudited consolidated statements of operations.
STAR Network
access fees charged to clients are assessed on a per transaction basis. Interchange fees and assessments charged by credit card associations to the Company’s consolidated subsidiaries and network fees related to PIN-debit transactions charged by debit networks were as follows for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
(in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Interchange fees and assessments
|
|
$
|
5,935
|
|
|
$
|
5,526
|
|
|
$
|
11,222
|
|
|
$
|
10,491
|
|
PIN-Debit fees
|
|
776
|
|
|
760
|
|
|
1,502
|
|
|
1,470
|
|
The Company records deferred revenue when it receives payments in advance of the delivery of products or the performance of services. The deferred revenue is recognized into earnings when underlying performance obligations are achieved. As of
June 30, 2016
and
December 31, 2015
, current deferred revenue included within "Accounts payable and accrued liabilities" in the Company's unaudited consolidated balance sheets was
$139 million
and
$140 million
, respectively. As of
June 30, 2016
and
December 31, 2015
, noncurrent deferred revenue included within "Other long-term liabilities" in the Company's unaudited consolidated balance sheets was
$163 million
and
$146 million
, respectively.
A major component of the Company's deferred revenue represents certain Clover terminal devices which do not have standalone value as of June 30, 2016. The Company will continue to assess in the future whether an adequate secondary market is capable of developing or has developed for these devices to establish standalone value. If a secondary market is deemed capable of developing or develops whereby clients are able to substantially recover their original purchase price, the Company will recognize revenue for Clover terminal devices upon delivery.
Common Stock
During the six months ended June 30, 2016,
150.7 million
shares of Class B common stock were converted to
150.7 million
shares of Class A common stock. The majority of the shares converted shortly after the expiration of our initial public offering lockup period which ended on April 11, 2016.
New Accounting Guidance
In May 2014, the Financial Accounting Standards Board (FASB) issued guidance that requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in an exchange for those goods or services. It also requires enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively, and improves guidance for multiple-element arrangements. The guidance applies to any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. As amended in August 2015, the guidance is effective for public companies for annual periods beginning after December 15, 2017 as well as interim periods within those annual periods using either the full retrospective approach or modified retrospective approach. The FASB also permitted early adoption of the standard, but not before December 15, 2016. The Company is currently evaluating the impacts of the new guidance on its consolidated financial statements.
In February 2016, the FASB issued guidance which requires lessees to put most leases on their balance sheets. The guidance also modifies the classification criteria and the accounting for sales-type and direct financing leases for lessors and provides new presentation and disclosure requirements for both lessees and lessors. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period subsequent to adoption of the proceeding revenue recognition guidance. The Company is currently evaluating the impact of adoption of the new guidance on its consolidated financial statements.
In March 2016, the FASB issued guidance that will change some aspects of the accounting for stock-based payments to employees. Under the new guidance, companies will be required to record all excess tax benefits and tax deficiencies as income tax expense
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
or benefit in the income statement and to present excess tax benefits as an operating activity on the statement of cash flows. The guidance may also change how companies account for forfeitures and an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation. The new guidance will be effective for public companies for fiscal years beginning after December 15, 2016 as well as interim periods within those annual periods. Early adoption is permitted in any interim or annual period. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In June 2016, the FASB issued guidance that will change the accounting for credit impairment. Under the new guidance, companies are required to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This new guidance will be effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2: Borrowings
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
As of June 30,
2016
|
|
As of December 31,
2015
|
Short-term borrowings:
|
|
|
|
|
|
|
Foreign lines of credit and other arrangements
|
|
$
|
33
|
|
|
$
|
43
|
|
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%
|
|
207
|
|
|
—
|
|
Unamortized deferred financing costs (a)
|
|
(2
|
)
|
|
—
|
|
Total Short-term borrowings
|
|
238
|
|
|
43
|
|
Current portion of long-term borrowings:
|
|
|
|
|
|
|
8.75% Senior secured second lien notes due 2022
|
|
—
|
|
|
750
|
|
Unamortized discount and unamortized deferred financing costs
|
|
—
|
|
|
(10
|
)
|
Other arrangements
|
|
3
|
|
|
—
|
|
Capital lease obligations
|
|
67
|
|
|
73
|
|
Total Current portion of long-term borrowings
|
|
70
|
|
|
813
|
|
Total Short-term and current portion of long-term borrowings
|
|
308
|
|
|
856
|
|
Long-term borrowings:
|
|
|
|
|
|
|
Senior secured term loan facility due March 2018 at LIBOR and euro LIBOR plus 3.5% or, solely with respect to U.S. dollar-denominated term loans, a base rate plus 2.5%
|
|
—
|
|
|
4,938
|
|
Senior secured term loan facility due September 2018 at LIBOR plus 3.5% or a base rate plus 2.5%
|
|
—
|
|
|
1,008
|
|
Senior secured term loan facility due March 2021 at LIBOR and euro LIBOR plus 4.0% or, solely with respect to U.S. dollar-denominated term loans, a base rate plus 3.0%
|
|
4,889
|
|
|
1,171
|
|
Senior secured term loan facility due July 2022 at LIBOR and euro LIBOR plus 3.75% or, solely with respect to U.S. dollar-denominated term loans, a base rate plus 2.75%
|
|
3,828
|
|
|
2,464
|
|
6.75% Senior secured first lien notes due 2020
|
|
1,398
|
|
|
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
|
|
|
1,000
|
|
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)
|
|
(182
|
)
|
|
(174
|
)
|
Other arrangements
|
|
19
|
|
|
—
|
|
Capital lease obligations
|
|
166
|
|
|
122
|
|
Total Long-term borrowings
|
|
18,828
|
|
|
18,737
|
|
Total Borrowings (b) (c)
|
|
$
|
19,136
|
|
|
$
|
19,593
|
|
|
|
(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
June 30, 2016
and
December 31, 2015
, the fair value of the Company's long-term borrowings was
$19.0 billion
and
$19.6 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.
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Foreign Lines of Credit and Other Arrangements
As of
June 30, 2016
and
December 31, 2015
, the Company had
$324 million
and
$245 million
, respectively, available under short-term lines of credit and other arrangements with foreign banks and alliance partners primarily to fund settlement activity. As of
June 30, 2016
and
December 31, 2015
, this includes a
$165 million
and
$75 million
, respectively, committed line of credit for one of the Company's U.S. alliances. The remainder of these arrangements are primarily associated with international operations and are in various functional currencies, the most significant of which are the Australian dollar, the Polish zloty, and the euro. Of the amounts outstanding as of
June 30, 2016
and
December 31, 2015
,
$7 million
and
$17 million
, respectively, were uncommitted.
Senior Secured Revolving Credit Facility
The Company has a
$1.25 billion
senior secured revolving credit facility maturing on June 2, 2020 subject to certain earlier springing maturity provisions in certain circumstances. Up to
$250 million
of the senior secured revolving credit facility is available for letters of credit, of which
$43 million
and
$42 million
of letters of credit were issued under these facilities as of
June 30, 2016
and
December 31, 2015
, respectively. As of
June 30, 2016
,
$1.2 billion
remained available.
Accounts Receivable Securitization Agreement
On December 31, 2015, the Company established a fully consolidated and wholly owned subsidiary, First Data Receivables, LLC (FDR). FDR and FDC entered into an agreement where certain wholly owned subsidiaries of FDC agreed to transfer and contribute receivables to FDR. FDR’s assets are not available to satisfy obligations of any other entities or affiliates of FDC. FDR's creditors will be entitled, upon its liquidation, to be satisfied out of FDR’s assets prior to any assets or value in FDR becoming available to FDR’s equity holders. As of June 30, 2016, the Company transferred
$312 million
in receivables to FDR as part of the securitization program and FDR utilized the receivables as collateral in borrowings of
$207 million
. As of June 30, 2016, the receivables held by FDR are recorded within “Accounts receivable, net” in the Company's unaudited consolidated balance sheets.
Recent Events
On January 1, 2016, the Company designated the euro-denominated portions of the Senior secured term loan facility due March 2018, Senior secured term loan facility due March 2021, and the Senior secured term loan facility due July 2022 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. Foreign currency gains and losses on the euro-denominated portions of these term loans were previously recorded within "Other income (expense)" on the Company's unaudited consolidated statements of operations.
On January 15, 2016, the Company redeemed its
8.75%
senior secured second lien notes. Associated with the redemption, the Company recorded
$43 million
in loss on debt extinguishment.
On March 29, 2016, the Company issued and sold
$900 million
aggregate principal amount of additional
5.0%
Senior Secured Notes due 2024, which mature on January 15, 2024, pursuant to the indenture governing the
5.0%
Senior Secured Notes due 2024 that were issued on November 25, 2015. The additional notes are treated as a single series with the existing
5.0%
Senior secured first lien notes due 2024 and have the same terms as the Existing
5.0%
Notes. The Company used the net proceeds from the issue and sale of the additional notes to repay a portion of its U.S. dollar-denominated senior secured term loan facility due March 2018 and to pay related fees and expenses. Associated with the partial redemption of the U.S. dollar-denominated senior secured term loan facility, the Company recorded
$3 million
in loss on debt extinguishment.
On April 13, 2016, the Company refinanced its U.S. dollar-denominated senior secured term loan due March 2018 through new and existing lenders to provide approximately
$3.7 billion
of U.S. dollar-denominated senior secured term loans due March 2021. The senior secured term loan due March 2021 bears interest at a rate of LIBOR plus
400 basis points
or a base rate plus
300 basis points
. In connection with this transaction, the Company recorded approximately
$5 million
in loss on debt extinguishment and expensed approximately
$11 million
in debt issuance costs, which is included within "Interest expense, net" on the consolidated statements of operations.
On June 2, 2016, the Company refinanced its senior secured term loan due September 2018 and euro-denominated senior secured term loan due March 2018 through new and existing lenders to provide approximately
$1.0 billion
and
€311 million
(
$342 million
equivalent), respectively, of senior secured term loans due July 2022. The senior secured term loans due July 2022 bear interest at a rate of LIBOR plus
375 basis points
or, solely with respect to the U.S. dollar denominated term loans, a base rate plus
275
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
basis points
. In connection with this transaction, the Company recorded approximately
$4 million
in loss on debt extinguishment and expensed
$4 million
in debt issuance costs, which is included within "Interest expense, net" on the consolidated statements of operations. The euro-denominated senior secured term loan facility remains designated as a non-derivative hedge of net investment in foreign operations.
Note 3: Stock Compensation Plans
The Company provides stock-based compensation awards to its employees under the 2015 Omnibus Incentive Plan (stock plan), which the Company adopted in conjunction with its initial public offering on October 15, 2015. The stock plan allows for the Company to award an equity interest in the Company.
Total stock-based compensation expense recognized in "Cost of services" and “Selling, general, and administrative” on the consolidated statements of operations resulting from stock options, non-vested restricted stock awards, and non-vested restricted stock units was as follows for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
(in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Cost of services
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
72
|
|
|
$
|
—
|
|
Selling, general, and administrative
|
|
33
|
|
|
16
|
|
|
99
|
|
|
23
|
|
Total
|
|
$
|
56
|
|
|
$
|
16
|
|
|
$
|
171
|
|
|
$
|
23
|
|
Substantially all of the Company's employees are granted restricted stock awards or units on an annual basis which generally vest
20%
after the first anniversary,
40%
after the second anniversary, and the remaining
40%
on the third anniversary. During the
six
months ended
June 30, 2016
,
18 million
restricted stock awards and units were granted at a weighted average price per share of
$12.51
.
As of
June 30, 2016
, there was
$104 million
and
$283 million
of total unrecognized compensation expense related to non-vested stock options and restricted stock, respectively. Previously unrecognized expense of
$52 million
was recognized during the first quarter of 2016 in connection with the Company's initial public offering.
During the
three and six
months ended
June 30, 2016
, the Company paid approximately
$20 million
and
$59 million
of taxes related to the net settlement of vested equity awards, respectively, which was recorded as a reduction to stockholders’ equity.
The Company has an employee stock purchase plan under which the sale of
6 million
shares of its common stock has been authorized. The total number of shares issued through the stock purchase plan have not been significant through June 30, 2016.
For additional information on the Company’s stock compensation plans, refer to note 4 “Stock Compensation Plans” in “Item 8. Financial Statements and Supplementary Data” in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2015
.
Note 4: Net Income (Loss) Per Share
Upon First Data Holdings, Inc. (FDH), the Company's direct parent company, merging with and into FDC on October 13, 2015, all outstanding shares of FDH's Class A Common Stock, Class B Common Stock, and Series A Voting Participating Convertible Preferred Stock (Series A Preferred Stock) automatically converted to identical shares of the Company's stock. Following the filing of the Company's prospectus with the Securities and Exchange Commission on October 15, 2015, holders of existing Class B Common Stock and Series A Preferred Stock received Class B Common Stock in the Company. Other than voting rights, this common stock has the same rights as the Class A Common Stock and therefore both are treated as the same class of stock for purposes of the net income (loss) per share calculation.
Basic net income (loss) per share is calculated by dividing net income (loss) attributable to FDC by the weighted-average shares outstanding during the period, without consideration for any potential dilutive shares. Diluted net income (loss) per share has been computed to give effect to the impact, if any, of shares issuable upon the assumed exercise of the Company’s common stock equivalents, which consist of outstanding stock options and unvested restricted stock.
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table sets forth the computation of the Company's basic and diluted net income (loss) per share for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
(in millions, except share and per share amounts)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Numerator:
|
|
|
|
|
|
|
|
Net income (loss) used in computing net income (loss) per share, basic and diluted
|
$
|
152
|
|
|
$
|
(26
|
)
|
|
$
|
96
|
|
|
$
|
(138
|
)
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
Shares used in computing net income (loss) per share, basic (a)
|
899,874,086
|
|
|
1,000
|
|
|
897,798,717
|
|
|
1,000
|
|
Effect of dilutive securities
|
14,554,596
|
|
|
—
|
|
|
18,525,909
|
|
|
—
|
|
Total dilutive securities
|
914,428,682
|
|
|
1,000
|
|
|
916,324,626
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share
|
$
|
0.17
|
|
|
$
|
(26,000
|
)
|
|
$
|
0.11
|
|
|
$
|
(138,000
|
)
|
Diluted net income (loss) per share
|
$
|
0.17
|
|
|
$
|
(26,000
|
)
|
|
$
|
0.10
|
|
|
$
|
(138,000
|
)
|
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from diluted net income (loss) per share
|
29,697,196
|
|
|
—
|
|
|
28,270,165
|
|
|
—
|
|
(a) 2015 net loss per share, basic and diluted is calculated using
1,000
shares outstanding prior to the merger with FDH and the filing of the Company's prospectus in October 2015.
Note 5: Segment Information
For a detailed discussion of the Company’s principles and its operating segments refer to note 7 “Segment Information” in the Company’s consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2015
.
The following tables present the Company’s operating segment results for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2016
|
(in millions)
|
|
Global Business Solutions
|
|
Global Financial Solutions
|
|
Network & Security Solutions
|
|
Corporate
|
|
Total
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction and processing service fees
|
|
$
|
819
|
|
|
$
|
341
|
|
|
$
|
321
|
|
|
$
|
—
|
|
|
$
|
1,481
|
|
Product sales and other
|
|
209
|
|
|
54
|
|
|
45
|
|
|
—
|
|
|
308
|
|
Equity earnings in affiliates
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
Total segment revenues
|
|
$
|
1,037
|
|
|
$
|
395
|
|
|
$
|
366
|
|
|
$
|
—
|
|
|
$
|
1,798
|
|
Depreciation and amortization
|
|
$
|
110
|
|
|
$
|
88
|
|
|
$
|
30
|
|
|
$
|
3
|
|
|
$
|
231
|
|
Segment EBITDA
|
|
448
|
|
|
160
|
|
|
166
|
|
|
(28
|
)
|
|
746
|
|
Other operating expenses and Other income (expense) excluding divestitures
|
|
39
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
13
|
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2015
|
(in millions)
|
|
Global Business Solutions
|
|
Global Financial Solutions
|
|
Network & Security Solutions
|
|
Corporate
|
|
Total
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction and processing service fees
|
|
$
|
843
|
|
|
$
|
314
|
|
|
$
|
321
|
|
|
$
|
—
|
|
|
$
|
1,478
|
|
Product sales and other
|
|
203
|
|
|
39
|
|
|
35
|
|
|
—
|
|
|
277
|
|
Equity earnings in affiliates
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
Total segment revenues
|
|
$
|
1,056
|
|
|
$
|
353
|
|
|
$
|
356
|
|
|
$
|
—
|
|
|
$
|
1,765
|
|
Depreciation and amortization
|
|
$
|
122
|
|
|
$
|
98
|
|
|
$
|
22
|
|
|
$
|
4
|
|
|
$
|
246
|
|
Segment EBITDA
|
|
454
|
|
|
124
|
|
|
156
|
|
|
(32
|
)
|
|
702
|
|
Other operating expenses and Other income (expense) excluding divestitures
|
|
12
|
|
|
(4
|
)
|
|
—
|
|
|
(53
|
)
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2016
|
(in millions)
|
|
Global Business Solutions
|
|
Global Financial Solutions
|
|
Network & Security Solutions
|
|
Corporate
|
|
Total
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction and processing service fees
|
|
$
|
1,574
|
|
|
$
|
678
|
|
|
$
|
634
|
|
|
$
|
—
|
|
|
$
|
2,886
|
|
Product sales and other
|
|
398
|
|
|
103
|
|
|
84
|
|
|
—
|
|
|
585
|
|
Equity earnings in affiliates
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
Total segment revenues
|
|
$
|
1,992
|
|
|
$
|
781
|
|
|
$
|
718
|
|
|
$
|
—
|
|
|
$
|
3,491
|
|
Depreciation and amortization
|
|
$
|
213
|
|
|
$
|
182
|
|
|
$
|
57
|
|
|
$
|
7
|
|
|
$
|
459
|
|
Segment EBITDA
|
|
824
|
|
|
315
|
|
|
317
|
|
|
(74
|
)
|
|
1,382
|
|
Other operating expenses and Other income (expense) excluding divestitures
|
|
22
|
|
|
4
|
|
|
(2
|
)
|
|
(26
|
)
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2015
|
(in millions)
|
|
Global Business Solutions
|
|
Global Financial Solutions
|
|
Network & Security Solutions
|
|
Corporate
|
|
Total
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction and processing service fees
|
|
$
|
1,612
|
|
|
$
|
633
|
|
|
$
|
626
|
|
|
$
|
—
|
|
|
$
|
2,871
|
|
Product sales and other
|
|
390
|
|
|
77
|
|
|
66
|
|
|
—
|
|
|
533
|
|
Equity earnings in affiliates
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
Total segment revenues
|
|
$
|
2,018
|
|
|
$
|
710
|
|
|
$
|
692
|
|
|
$
|
—
|
|
|
$
|
3,420
|
|
Depreciation and amortization
|
|
$
|
241
|
|
|
$
|
195
|
|
|
$
|
43
|
|
|
$
|
12
|
|
|
$
|
491
|
|
Segment EBITDA
|
|
814
|
|
|
243
|
|
|
286
|
|
|
(78
|
)
|
|
1,265
|
|
Other operating expenses and Other income (expense) excluding divestitures
|
|
21
|
|
|
(7
|
)
|
|
—
|
|
|
(26
|
)
|
|
(12
|
)
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents a reconciliation of the Company’s consolidated results to segment amounts for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
(in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Consolidated revenues
|
|
$
|
2,928
|
|
|
$
|
2,872
|
|
|
$
|
5,705
|
|
|
$
|
5,567
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Non wholly owned entities (a)
|
|
(20
|
)
|
|
(20
|
)
|
|
(34
|
)
|
|
(40
|
)
|
ISOs commission expense (b)
|
|
(158
|
)
|
|
(161
|
)
|
|
(321
|
)
|
|
(308
|
)
|
Reimbursable debit network fees, postage, and other
|
|
(952
|
)
|
|
(926
|
)
|
|
(1,859
|
)
|
|
(1,799
|
)
|
Total segment revenues
|
|
$
|
1,798
|
|
|
$
|
1,765
|
|
|
$
|
3,491
|
|
|
$
|
3,420
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to First Data Corporation
|
|
$
|
152
|
|
|
$
|
(26
|
)
|
|
$
|
96
|
|
|
$
|
(138
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
Non wholly owned entities (a)
|
|
(7
|
)
|
|
(6
|
)
|
|
(17
|
)
|
|
(13
|
)
|
Depreciation and amortization
|
|
238
|
|
|
252
|
|
|
476
|
|
|
503
|
|
Interest expense, net
|
|
284
|
|
|
405
|
|
|
547
|
|
|
811
|
|
Loss on debt extinguishment
|
|
9
|
|
|
—
|
|
|
55
|
|
|
—
|
|
Other items (c)
|
|
(14
|
)
|
|
51
|
|
|
21
|
|
|
66
|
|
Income tax expense
|
|
28
|
|
|
10
|
|
|
33
|
|
|
13
|
|
Stock-based compensation
|
|
56
|
|
|
16
|
|
|
171
|
|
|
23
|
|
Total segment EBITDA
|
|
$
|
746
|
|
|
$
|
702
|
|
|
$
|
1,382
|
|
|
$
|
1,265
|
|
|
|
(a)
|
Net adjustment to reflect our proportionate share of the results of our investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. Segment revenue for our significant affiliates is reflected based on our proportionate share of the results of our investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. For other affiliates, we include equity earnings in affiliates, excluding amortization expense, in segment revenue.
|
|
|
(b)
|
Reported within "Selling, general, and administrative expense" in the unaudited consolidated statements of operations.
|
|
|
(c)
|
Includes restructuring, certain retention bonuses, non-normal course litigation and regulatory settlements, impairments, debt issuance expenses, Kohlberg Kravis Roberts & Co. (KKR) related items and “Other income (expense)" as presented in the unaudited consolidated statements of operations, which includes divestitures, derivative gains and (losses), non-operating foreign currency gains (losses), and the gain on Visa Europe share sale. KKR related items represent KKR annual sponsorship fees for management, consulting, financial and other advisory services. Upon completing the IPO in October 2015, the company is no longer obligated to pay KKR annual sponsorship fees.
|
The following table presents a reconciliation of segment depreciation and amortization amounts to the Company’s consolidated depreciation and amortization in the unaudited consolidated statements of cash flows for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
(in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Segment depreciation and amortization
|
|
$
|
231
|
|
|
$
|
246
|
|
|
$
|
459
|
|
|
$
|
491
|
|
Adjustments for non wholly owned entities (a)
|
|
19
|
|
|
21
|
|
|
38
|
|
|
42
|
|
Amortization of initial payments for new contracts (b)
|
|
16
|
|
|
13
|
|
|
31
|
|
|
24
|
|
Total consolidated depreciation and amortization per unaudited consolidated statements of cash flows
|
|
266
|
|
|
280
|
|
|
528
|
|
|
557
|
|
Amortization of equity method investments (c)
|
|
(12
|
)
|
|
(15
|
)
|
|
(21
|
)
|
|
(30
|
)
|
Amortization of initial payments for new contracts (b)
|
|
(16
|
)
|
|
(13
|
)
|
|
(31
|
)
|
|
(24
|
)
|
Total consolidated depreciation and amortization per unaudited consolidated statements of operations
|
|
$
|
238
|
|
|
$
|
252
|
|
|
$
|
476
|
|
|
$
|
503
|
|
|
|
(a)
|
Adjustment to reflect depreciation and amortization attributable to noncontrolling interests.
|
|
|
(b)
|
Included in "Transaction and processing service fees" as contra-revenue in the Company's unaudited consolidated statements of operations.
|
|
|
(c)
|
Included in "Equity earnings in affiliates" in the Company's unaudited consolidated statements of operations.
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6: Income Taxes
The following table presents the Company's income tax expense and effective income tax rate for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
(in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Income tax expense
|
|
$
|
28
|
|
|
$
|
10
|
|
|
$
|
33
|
|
|
$
|
13
|
|
Effective income tax rate
|
|
12
|
%
|
|
23
|
%
|
|
14
|
%
|
|
(77
|
)%
|
The effective tax rates for the three months ended
June 30, 2016
and
2015
and the six months ended
June 30, 2016
were different from the statutory rate as a result of the Company recording tax expense on its foreign earnings, but not on its domestic earnings, as a result of the valuation allowance recorded in the U.S. The effective tax rate for the six months ended
June 30, 2015
was different from the statutory rate as a result of the Company’s inability to recognize tax benefits attributable to its domestic losses while at the same time recording tax expense on its foreign earnings. The Company’s tax expense in all periods was also impacted by the Company not recording tax expense on noncontrolling interests from pass through entities.
The Company's
liability for unrecognized tax benefits was approximately
$249 million
as of
June 30, 2016
. The Company
anticipates it is reasonably possible that the liability for unrecognized tax benefits may decrease by
up to
$123 million
over the next twelve months beginning June 30, 2016 as a result of the possible closure of federal tax audits, potential settlements with certain states and foreign countries and the lapse of the statute of limitations in various state and foreign jurisdictions.
Note 7: Redeemable Noncontrolling Interest
One of the Company's noncontrolling interests is redeemable at the option of the holder and is presented outside of equity and carried at its estimated redemption value.
The following table presents a summary of the redeemable noncontrolling interest activity during the periods presented:
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2016
|
|
2015
|
Balance as of January 1,
|
|
$
|
77
|
|
|
$
|
70
|
|
Distributions
|
|
(16
|
)
|
|
(18
|
)
|
Share of income
|
|
17
|
|
|
18
|
|
Adjustment to redemption value of redeemable noncontrolling interest
|
|
(4
|
)
|
|
8
|
|
Balance as of June 30,
|
|
$
|
74
|
|
|
$
|
78
|
|
Note 8: Derivative Financial Instruments
The Company enters into the following types of derivatives:
|
|
•
|
Floating to fixed interest rate swaps: The Company uses interest rate swaps to mitigate its exposure to interest rate fluctuations on interest payments related to variable rate debt. The Company uses these contracts in non-qualifying hedging relationships.
|
|
|
•
|
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.
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company held the following derivative instruments as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
(in millions)
|
|
Notional Currency
|
|
Notional Value
|
|
Assets
(a)
|
|
Liabilities
(a)
|
|
Notional Value
|
|
Assets
(a)
|
|
Liabilities
(a)
|
Derivatives designated as hedges of net investments in foreign operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
AUD
|
|
260
|
|
|
$
|
60
|
|
|
$
|
—
|
|
|
260
|
|
|
$
|
65
|
|
|
$
|
—
|
|
Foreign exchange contracts (b)
|
|
EUR
|
|
—
|
|
|
—
|
|
|
—
|
|
|
200
|
|
|
51
|
|
|
—
|
|
Foreign exchange contracts
|
|
GBP
|
|
250
|
|
|
75
|
|
|
—
|
|
|
250
|
|
|
39
|
|
|
—
|
|
Foreign exchange contracts
|
|
CAD
|
|
110
|
|
|
19
|
|
|
—
|
|
|
110
|
|
|
24
|
|
|
—
|
|
|
|
|
|
|
|
154
|
|
|
—
|
|
|
|
|
179
|
|
|
—
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
USD
|
|
5,000
|
|
|
—
|
|
|
(22
|
)
|
|
5,000
|
|
|
—
|
|
|
(56
|
)
|
|
|
|
|
|
|
$
|
154
|
|
|
$
|
(22
|
)
|
|
|
|
$
|
179
|
|
|
$
|
(56
|
)
|
|
|
(a)
|
Of the balances included in the table above, in aggregate,
$154 million
of assets and
$20 million
of liabilities, net
$134 million
, as of
June 30, 2016
and
$179 million
of assets and
$51 million
of liabilities, net
$128 million
, as of
December 31, 2015
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)
|
The forward exchange contracts matured in January 2016 at a net settlement value of
$49 million
.
|
The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions excluding those forecasted transactions related to the payment of variable interest on existing financial instruments is through January 2018.
Fair Value Measurement
The carrying amounts for the Company's derivative financial instruments are the estimated fair value of the financial instruments. The Company’s derivatives are not exchange listed and therefore the fair value is estimated under an income approach using Bloomberg analytics models that are based on readily observable market inputs. These models reflect the contractual terms of the derivatives, such as notional value and expiration date, as well as market-based observables including interest and foreign currency exchange rates, yield curves, and the credit quality of the counterparties. The models also incorporate the Company’s creditworthiness in order to appropriately reflect non-performance risk. Inputs to the derivative pricing models are generally observable and do not contain a high level of subjectivity and, accordingly, the Company’s derivatives are classified within Level 2 of the fair value hierarchy. While the Company believes its estimates result in a reasonable reflection of the fair value of these instruments, the estimated values may not be representative of actual values that could have been realized or that will be realized in the future.
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Effect of Derivative Instruments on the Unaudited Consolidated Financial Statements
Derivative gains and (losses) were as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(in millions, pretax)
|
|
Interest
Rate
Contracts
|
|
Foreign
Exchange
Contracts
|
|
Interest
Rate
Contracts
|
|
Foreign
Exchange
Contracts
|
|
Interest
Rate
Contracts
|
|
Foreign
Exchange
Contracts
|
|
Interest
Rate
Contracts
|
|
Foreign
Exchange
Contracts
|
|
Derivatives in net investment hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in Foreign currency translation adjustment in the consolidated statements of comprehensive income (loss) (effective portion)
|
|
$
|
—
|
|
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
(35
|
)
|
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
32
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in Other income (expense) in the consolidated statements of operations
|
|
(1
|
)
|
|
—
|
|
|
(13
|
)
|
|
(1
|
)
|
|
(5
|
)
|
|
—
|
|
|
(18
|
)
|
|
2
|
|
|
Accumulated Derivative Gains and Losses
The following table summarizes activity in other comprehensive income related to derivative instruments classified as cash flow hedges and a net investment hedge held by the Company for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, after tax)
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Accumulated gain included in other comprehensive income (loss) at beginning of the period
|
|
$
|
81
|
|
|
$
|
79
|
|
|
$
|
86
|
|
|
$
|
37
|
|
|
Increase (decrease) in fair value of derivatives that qualify for hedge accounting, net of tax (a)
|
|
19
|
|
|
(22
|
)
|
|
14
|
|
|
20
|
|
|
Accumulated gain included in other comprehensive income (loss) at end of the period
|
|
$
|
100
|
|
|
$
|
57
|
|
|
$
|
100
|
|
|
$
|
57
|
|
|
|
|
(a)
|
Gains and (losses) are included in “Foreign currency translation adjustment” in the unaudited consolidated statements of comprehensive income (loss).
|
Note 9: Restructuring
During the
three and six
months ended
June 30, 2016
and
2015
, the Company recorded restructuring charges in connection with management’s alignment of the business with strategic objectives, cost savings initiatives, the departure of certain executive officers, and refinements of estimates.
In connection with our announced cost management initiatives, we expect to incur approximately
$125 million
of restructuring charges, of which we have incurred
$99 million
through June 30, 2016. For the three and six months ended
June 30, 2016
, we incurred $
24 million
and
$45 million
respectively, which includes a current quarter loss of
$21 million
on the impairment of a held-for-sale asset related to the exit of a facility. For the
three and six
months ended
June 30, 2015
, we incurred approximately
$19 million
and
$20 million
in restructuring costs, respectively, primarily related to severance costs.
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A summary of net pretax charges incurred by segment and reported within "Other operating expenses" on the consolidated statement of operations was as follows for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
(in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Global Business Solutions
|
|
$
|
(2
|
)
|
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
Global Financial Solutions
|
|
(1
|
)
|
|
(4
|
)
|
|
(2
|
)
|
|
(4
|
)
|
Network & Security Solutions
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
Corporate
|
|
(21
|
)
|
|
(10
|
)
|
|
(36
|
)
|
|
(11
|
)
|
Restructuring, net
|
|
$
|
(24
|
)
|
|
$
|
(19
|
)
|
|
$
|
(45
|
)
|
|
$
|
(20
|
)
|
The following table summarizes the Company’s utilization of restructuring accruals for the period presented:
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Employee
Severance
|
|
Other
|
Remaining accrual as of January 1, 2016
|
|
$
|
29
|
|
|
$
|
1
|
|
Restructuring, net
|
|
24
|
|
|
21
|
|
Impairment of held-for-sale assets
|
|
—
|
|
|
(21
|
)
|
Cash payments and other
|
|
(36
|
)
|
|
—
|
|
Remaining accrual as of June 30, 2016
|
|
$
|
17
|
|
|
$
|
1
|
|
Note 10: Commitments and Contingencies
The Company is involved in various legal proceedings. Accruals have been made with respect to these matters, where appropriate, which are reflected in the Company’s unaudited consolidated financial statements. The Company may enter into discussions regarding settlement of these matters and may enter into settlement agreements if it believes settlement is in the best interest of the Company. The matters discussed below, if decided adversely to or settled by the Company, individually or in the aggregate, may result in liability material to the Company’s financial condition and/or results of operations.
Legal
There are asserted claims against the Company where an unfavorable outcome is considered to be reasonably possible. These claims can generally be categorized in the following areas: (1) patent infringement which results from claims that the Company is using technology that has been patented by another party, (2) merchant customer matters often associated with alleged processing errors or disclosure issues and claims that one of the subsidiaries of the Company has violated a federal or state requirement regarding credit reporting or collection in connection with its check verification guarantee and collection activities, and (3) other matters which may include issues such as employment. The Company’s estimates of the reasonably possible ranges of losses in excess of any amounts accrued are
$0
to
$10 million
for patent infringement,
$0
to
$40 million
for merchant customer matters, and
$0
to
$30 million
for other matters, resulting in a total estimated range of reasonably possible losses of
$0
to
$80 million
for all of the matters described above.
The estimated range of reasonably possible losses is based on information currently available and involves elements of judgment and significant uncertainties. As additional information becomes available and the resolution of the uncertainties becomes more apparent, it is possible that actual losses may exceed even the high end of the estimated range.
Other
In the normal course of business, the Company is subject to claims and litigation, including indemnification obligations to purchasers of former subsidiaries. Management of the Company believes that such matters will not have a material adverse effect on the Company’s results of operations, liquidity, or financial condition.
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 11: Investment in Affiliates
Segment results include the Company’s proportionate share of income from affiliates, which consist of unconsolidated investments accounted for under the equity method of accounting. The most significant of these affiliates are related to the Company’s merchant bank alliance programs.
As of
June 30, 2016
, the Company had
two
unconsolidated significant subsidiaries that were not required to be consolidated, but represent more than
20%
of the Company’s pretax income. One of the subsidiaries became significant during the second quarter of 2016. Summarized financial information for the affiliates is presented below for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
(in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net operating revenues
|
|
$
|
299
|
|
|
$
|
294
|
|
|
$
|
580
|
|
|
$
|
563
|
|
Operating expenses
|
|
127
|
|
|
128
|
|
|
256
|
|
|
249
|
|
Operating income
|
|
$
|
172
|
|
|
$
|
166
|
|
|
$
|
324
|
|
|
$
|
314
|
|
Net income
|
|
$
|
172
|
|
|
$
|
166
|
|
|
$
|
324
|
|
|
$
|
315
|
|
FDC equity earnings
|
|
58
|
|
|
53
|
|
|
112
|
|
|
99
|
|
Note 12: Supplemental Financial Information
Supplemental Unaudited Consolidated Statements of Operations Information
The following table details the components of “Other income (expense)” on the unaudited consolidated statements of operations for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
(in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Derivative financial instruments losses
|
|
$
|
(1
|
)
|
|
$
|
(14
|
)
|
|
$
|
(5
|
)
|
|
$
|
(16
|
)
|
Divestitures, net gains
|
|
1
|
|
|
2
|
|
|
1
|
|
|
3
|
|
Gain on Visa Europe share sale
|
|
29
|
|
|
—
|
|
|
29
|
|
|
—
|
|
Non-operating foreign currency gains and (losses)
|
|
9
|
|
|
(12
|
)
|
|
19
|
|
|
24
|
|
Other income (expense)
|
|
$
|
38
|
|
|
$
|
(24
|
)
|
|
$
|
44
|
|
|
$
|
11
|
|
Gain on Visa Europe share sale
On June 21, 2016, Visa Inc. (Visa) acquired Visa Europe (VE), of which the Company was a member and shareholder through certain subsidiaries. On June 21, 2016, the Company received cash of
€24.2 million
(
$27 million
equivalent at June 21, 2016) and Visa preferred stock which is convertible into Visa common shares. We will also receive a deferred payment
three years
after the closing date of the acquisition, valued at approximately
€2.3 million
(
$2.6 million
equivalent at June 21, 2016). As of June 21, 2016, the Class A common stock equivalent of the preferred stock was approximately
$19 million
. However, the preferred shares have been assigned a value of
zero
as of June 30, 2016, based on transfer restrictions and Visa's ability to adjust the conversion ratio dependent on the outcome of existing and potential litigations in the Visa Europe territory over the next
12 years
. The Company could receive additional proceeds as a number of First Data subsidiaries are working with certain members of Visa Europe who sponsor other of our merchant acquiring businesses in Europe in respect of sale proceeds received by those members.
Note 13: Supplemental Guarantor Condensed Consolidating Financial Statements
As described in note 2 "Borrowings" in "Item 8. Financial Statements and Supplementary Data" in the Company's Annual Report on Form 10-K for the year ended
December 31, 2015
, FDC's
7.0%
senior notes are guaranteed by most of the existing and future, direct and indirect, wholly owned, domestic subsidiaries of FDC (Guarantors). The Guarantors guarantee the senior secured revolving credit facility, senior secured term loan facility, the
5.0%
senior secured notes, the
5.375%
senior secured notes, and the
6.75%
senior secured notes, which rank senior in right of payment to all existing and future unsecured and second lien indebtedness
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
of FDC’s guarantor subsidiaries to the extent of the value of the collateral. The Guarantors guarantee the
5.75%
senior second lien notes which rank senior in right of payment to all existing and future unsecured indebtedness of FDC’s guarantor subsidiaries to the extent of the value of the collateral. The
7.0%
senior note guarantee is unsecured and ranks equally in right of payment with all existing and future senior indebtedness of the guarantor subsidiaries but senior in right of payment to all existing and future subordinated indebtedness of FDC’s guarantor subsidiaries.
All of the above guarantees are full, unconditional, and joint and several and each of the Guarantors is
100%
owned, directly or indirectly, by the Company. None of the other subsidiaries of the Company, either direct or indirect, guarantee the notes (Non-Guarantors). The Guarantors are subject to release under certain circumstances as described below.
The credit agreement governing the guarantees of the senior secured revolving credit facility and senior secured term loan facility provide for a Guarantor to be automatically and unconditionally released and discharged from its guarantee obligations in certain circumstances, including under the following circumstances:
|
|
•
|
the Guarantor ceases to be a “restricted subsidiary” for purpose of the agreement because the Company no longer directly or indirectly owns
50%
of the equity or, if a corporation, stock having voting power to elect a majority of the board of directors of the Guarantor; or
|
|
|
•
|
the Guarantor is designated as an “unrestricted subsidiary” for purposes of the agreement covenants; or
|
|
|
•
|
the Guarantor is no longer wholly owned by the Company subject to the value of all Guarantors released under this provision does not exceed (x)
10%
of the Company’s Covenant EBITDA plus (y) the amount of investments permitted under the agreement in respect of non-guarantors.
|
The indentures governing all of the other guarantees described above provide for a Guarantor to be automatically and unconditionally released and discharged from its guarantee obligations in certain circumstances, including upon the earliest to occur of:
|
|
•
|
the sale, exchange or transfer of the subsidiary’s capital stock or all or substantially all of its assets;
|
|
|
•
|
designation of the Guarantor as an “unrestricted subsidiary” for purposes of the indenture covenants;
|
|
|
•
|
release or discharge of the Guarantor’s guarantee of certain other indebtedness; or
|
|
|
•
|
legal defeasance or covenant defeasance of the indenture obligations when provision has been made for them to be fully satisfied.
|
The following tables present the results of operations, comprehensive income, financial position and cash flows of the Company (FDC Parent Company), the Guarantor subsidiaries, the Non-Guarantor subsidiaries and consolidation adjustments for the periods presented to arrive at the information for the Company on a consolidated basis:
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2016
|
(in millions)
|
|
FDC Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidation
Adjustments
|
|
Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction and processing service fees
|
|
$
|
—
|
|
|
$
|
975
|
|
|
$
|
767
|
|
|
$
|
(73
|
)
|
|
$
|
1,669
|
|
Product sales and other
|
|
—
|
|
|
207
|
|
|
137
|
|
|
(37
|
)
|
|
307
|
|
Total revenues (excluding reimbursable items)
|
|
—
|
|
|
1,182
|
|
|
904
|
|
|
(110
|
)
|
|
1,976
|
|
Reimbursable PIN debit fees, postage, and other
|
|
—
|
|
|
644
|
|
|
308
|
|
|
—
|
|
|
952
|
|
Total revenues
|
|
—
|
|
|
1,826
|
|
|
1,212
|
|
|
(110
|
)
|
|
2,928
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost of services (exclusive of items shown below)
|
|
—
|
|
|
394
|
|
|
351
|
|
|
(47
|
)
|
|
698
|
|
Cost of products sold
|
|
—
|
|
|
81
|
|
|
45
|
|
|
(40
|
)
|
|
86
|
|
Selling, general, and administrative
|
|
39
|
|
|
289
|
|
|
195
|
|
|
(23
|
)
|
|
500
|
|
Depreciation and amortization
|
|
2
|
|
|
141
|
|
|
95
|
|
|
—
|
|
|
238
|
|
Other operating expenses
|
|
—
|
|
|
22
|
|
|
2
|
|
|
—
|
|
|
24
|
|
Total expenses (excluding reimbursable items)
|
|
41
|
|
|
927
|
|
|
688
|
|
|
(110
|
)
|
|
1,546
|
|
Reimbursable PIN debit fees, postage, and other
|
|
—
|
|
|
644
|
|
|
308
|
|
|
—
|
|
|
952
|
|
Total expenses
|
|
41
|
|
|
1,571
|
|
|
996
|
|
|
(110
|
)
|
|
2,498
|
|
Operating (loss) profit
|
|
(41
|
)
|
|
255
|
|
|
216
|
|
|
—
|
|
|
430
|
|
Interest expense, net
|
|
(278
|
)
|
|
(4
|
)
|
|
(2
|
)
|
|
—
|
|
|
(284
|
)
|
Loss on debt extinguishment
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
Interest income (expense) from intercompany notes
|
|
70
|
|
|
(57
|
)
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
Other income (expense)
|
|
2
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
38
|
|
Equity earnings from consolidated subsidiaries
|
|
223
|
|
|
120
|
|
|
—
|
|
|
(343
|
)
|
|
—
|
|
(Loss) income before income taxes and equity earnings in affiliates
|
|
(33
|
)
|
|
314
|
|
|
237
|
|
|
(343
|
)
|
|
175
|
|
Income tax (benefit) expense
|
|
(185
|
)
|
|
145
|
|
|
68
|
|
|
—
|
|
|
28
|
|
Equity earnings in affiliates
|
|
—
|
|
|
61
|
|
|
7
|
|
|
—
|
|
|
68
|
|
Net income (loss)
|
|
152
|
|
|
230
|
|
|
176
|
|
|
(343
|
)
|
|
215
|
|
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
15
|
|
|
48
|
|
|
63
|
|
Net income (loss) attributable to First Data Corporation
|
|
$
|
152
|
|
|
$
|
230
|
|
|
$
|
161
|
|
|
$
|
(391
|
)
|
|
$
|
152
|
|
Comprehensive income (loss)
|
|
$
|
112
|
|
|
$
|
244
|
|
|
$
|
93
|
|
|
$
|
(275
|
)
|
|
$
|
174
|
|
Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
14
|
|
|
48
|
|
|
62
|
|
Comprehensive income (loss) attributable to First Data Corporation
|
|
$
|
112
|
|
|
$
|
244
|
|
|
$
|
79
|
|
|
$
|
(323
|
)
|
|
$
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2016
|
(in millions)
|
|
FDC Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidation
Adjustments
|
|
Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction and processing service fees
|
|
$
|
—
|
|
|
$
|
1,923
|
|
|
$
|
1,485
|
|
|
$
|
(148
|
)
|
|
$
|
3,260
|
|
Product sales and other
|
|
—
|
|
|
401
|
|
|
254
|
|
|
(69
|
)
|
|
586
|
|
Total revenues (excluding reimbursable items)
|
|
—
|
|
|
2,324
|
|
|
1,739
|
|
|
(217
|
)
|
|
3,846
|
|
Reimbursable PIN debit fees, postage, and other
|
|
—
|
|
|
1,266
|
|
|
593
|
|
|
—
|
|
|
1,859
|
|
Total revenues
|
|
—
|
|
|
3,590
|
|
|
2,332
|
|
|
(217
|
)
|
|
5,705
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost of services (exclusive of items shown below)
|
|
—
|
|
|
800
|
|
|
703
|
|
|
(74
|
)
|
|
1,429
|
|
Cost of products sold
|
|
—
|
|
|
151
|
|
|
85
|
|
|
(72
|
)
|
|
164
|
|
Selling, general, and administrative
|
|
205
|
|
|
543
|
|
|
387
|
|
|
(71
|
)
|
|
1,064
|
|
Depreciation and amortization
|
|
3
|
|
|
290
|
|
|
183
|
|
|
—
|
|
|
476
|
|
Other operating expenses:
|
|
12
|
|
|
29
|
|
|
4
|
|
|
—
|
|
|
45
|
|
Total expenses (excluding reimbursable items)
|
|
220
|
|
|
1,813
|
|
|
1,362
|
|
|
(217
|
)
|
|
3,178
|
|
Reimbursable PIN debit fees, postage, and other
|
|
—
|
|
|
1,266
|
|
|
593
|
|
|
—
|
|
|
1,859
|
|
Total expenses
|
|
220
|
|
|
3,079
|
|
|
1,955
|
|
|
(217
|
)
|
|
5,037
|
|
Operating (loss) profit
|
|
(220
|
)
|
|
511
|
|
|
377
|
|
|
—
|
|
|
668
|
|
Interest expense, net
|
|
(534
|
)
|
|
(9
|
)
|
|
(4
|
)
|
|
—
|
|
|
(547
|
)
|
Loss on debt extinguishment
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
Interest income (expense) from intercompany notes
|
|
133
|
|
|
(119
|
)
|
|
(14
|
)
|
|
—
|
|
|
—
|
|
Other income
|
|
—
|
|
|
—
|
|
|
44
|
|
|
—
|
|
|
44
|
|
Equity earnings from consolidated subsidiaries
|
|
449
|
|
|
176
|
|
|
—
|
|
|
(625
|
)
|
|
—
|
|
(Loss) income before income taxes and equity earnings in affiliates
|
|
(227
|
)
|
|
559
|
|
|
403
|
|
|
(625
|
)
|
|
110
|
|
Income tax (benefit) expense
|
|
(323
|
)
|
|
260
|
|
|
96
|
|
|
—
|
|
|
33
|
|
Equity earnings in affiliates
|
|
—
|
|
|
116
|
|
|
16
|
|
|
—
|
|
|
132
|
|
Net income (loss)
|
|
96
|
|
|
415
|
|
|
323
|
|
|
(625
|
)
|
|
209
|
|
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
34
|
|
|
79
|
|
|
113
|
|
Net income (loss) attributable to First Data Corporation
|
|
$
|
96
|
|
|
$
|
415
|
|
|
$
|
289
|
|
|
$
|
(704
|
)
|
|
$
|
96
|
|
Comprehensive (loss) income
|
|
$
|
(10
|
)
|
|
$
|
442
|
|
|
$
|
243
|
|
|
$
|
(571
|
)
|
|
$
|
104
|
|
Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
35
|
|
|
79
|
|
|
114
|
|
Comprehensive (loss) income attributable to First Data Corporation
|
|
$
|
(10
|
)
|
|
$
|
442
|
|
|
$
|
208
|
|
|
$
|
(650
|
)
|
|
$
|
(10
|
)
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2015
|
(in millions)
|
|
FDC Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidation
Adjustments
|
|
Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Transaction and processing service fees
|
|
$
|
—
|
|
|
$
|
980
|
|
|
$
|
764
|
|
|
$
|
(77
|
)
|
|
$
|
1,667
|
|
Product sales and other
|
|
—
|
|
|
176
|
|
|
118
|
|
|
(15
|
)
|
|
279
|
|
Total revenues (excluding reimbursable items)
|
|
—
|
|
|
1,156
|
|
|
882
|
|
|
(92
|
)
|
|
1,946
|
|
Reimbursable PIN debit fees, postage, and other
|
|
—
|
|
|
627
|
|
|
299
|
|
|
—
|
|
|
926
|
|
Total revenues
|
|
—
|
|
|
1,783
|
|
|
1,181
|
|
|
(92
|
)
|
|
2,872
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost of services (exclusive of items shown below)
|
|
—
|
|
|
372
|
|
|
360
|
|
|
(77
|
)
|
|
655
|
|
Cost of products sold
|
|
—
|
|
|
60
|
|
|
40
|
|
|
(15
|
)
|
|
85
|
|
Selling, general, and administrative
|
|
27
|
|
|
290
|
|
|
209
|
|
|
—
|
|
|
526
|
|
Depreciation and amortization
|
|
5
|
|
|
151
|
|
|
96
|
|
|
—
|
|
|
252
|
|
Other operating expenses
|
|
7
|
|
|
2
|
|
|
10
|
|
|
—
|
|
|
19
|
|
Total expenses (excluding reimbursable items)
|
|
39
|
|
|
875
|
|
|
715
|
|
|
(92
|
)
|
|
1,537
|
|
Reimbursable PIN debit fees, postage, and other
|
|
—
|
|
|
627
|
|
|
299
|
|
|
—
|
|
|
926
|
|
Total expenses
|
|
39
|
|
|
1,502
|
|
|
1,014
|
|
|
(92
|
)
|
|
2,463
|
|
Operating (loss) profit
|
|
(39
|
)
|
|
281
|
|
|
167
|
|
|
—
|
|
|
409
|
|
Interest expense, net
|
|
(403
|
)
|
|
(3
|
)
|
|
1
|
|
|
—
|
|
|
(405
|
)
|
Interest income (expense) from intercompany notes
|
|
77
|
|
|
(79
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
Other (expense) income
|
|
(30
|
)
|
|
3
|
|
|
3
|
|
|
—
|
|
|
(24
|
)
|
Equity earnings from consolidated subsidiaries
|
|
135
|
|
|
85
|
|
|
—
|
|
|
(220
|
)
|
|
—
|
|
(Loss) income before income taxes and equity earnings in affiliates
|
|
(260
|
)
|
|
287
|
|
|
173
|
|
|
(220
|
)
|
|
(20
|
)
|
Income tax (benefit) expense
|
|
(234
|
)
|
|
197
|
|
|
47
|
|
|
—
|
|
|
10
|
|
Equity earnings in affiliates
|
|
—
|
|
|
55
|
|
|
8
|
|
|
—
|
|
|
63
|
|
Net (loss) income
|
|
(26
|
)
|
|
145
|
|
|
134
|
|
|
(220
|
)
|
|
33
|
|
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
18
|
|
|
41
|
|
|
59
|
|
Net (loss) income attributable to First Data Corporation
|
|
$
|
(26
|
)
|
|
$
|
145
|
|
|
$
|
116
|
|
|
$
|
(261
|
)
|
|
$
|
(26
|
)
|
Comprehensive (loss) income
|
|
$
|
8
|
|
|
$
|
144
|
|
|
$
|
194
|
|
|
$
|
(275
|
)
|
|
$
|
71
|
|
Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
21
|
|
|
41
|
|
|
62
|
|
Comprehensive income (loss) attributable to First Data Corporation
|
|
$
|
8
|
|
|
$
|
144
|
|
|
$
|
173
|
|
|
$
|
(316
|
)
|
|
$
|
9
|
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2015
|
(in millions)
|
|
FDC Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidation
Adjustments
|
|
Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Transaction and processing service fees
|
|
$
|
—
|
|
|
$
|
1,894
|
|
|
$
|
1,489
|
|
|
$
|
(150
|
)
|
|
$
|
3,233
|
|
Product sales and other
|
|
—
|
|
|
341
|
|
|
223
|
|
|
(29
|
)
|
|
535
|
|
Total revenues (excluding reimbursable items)
|
|
—
|
|
|
2,235
|
|
|
1,712
|
|
|
(179
|
)
|
|
3,768
|
|
Reimbursable PIN debit fees, postage, and other
|
|
—
|
|
|
1,228
|
|
|
571
|
|
|
—
|
|
|
1,799
|
|
Total revenues
|
|
—
|
|
|
3,463
|
|
|
2,283
|
|
|
(179
|
)
|
|
5,567
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost of services (exclusive of items shown below)
|
|
—
|
|
|
777
|
|
|
742
|
|
|
(150
|
)
|
|
1,369
|
|
Cost of products sold
|
|
—
|
|
|
113
|
|
|
77
|
|
|
(29
|
)
|
|
161
|
|
Selling, general, and administrative
|
|
59
|
|
|
577
|
|
|
410
|
|
|
—
|
|
|
1,046
|
|
Depreciation and amortization
|
|
9
|
|
|
301
|
|
|
193
|
|
|
—
|
|
|
503
|
|
Other operating expenses
|
|
6
|
|
|
4
|
|
|
10
|
|
|
—
|
|
|
20
|
|
Total expenses (excluding reimbursable items)
|
|
74
|
|
|
1,772
|
|
|
1,432
|
|
|
(179
|
)
|
|
3,099
|
|
Reimbursable PIN debit fees, postage, and other
|
|
—
|
|
|
1,228
|
|
|
571
|
|
|
—
|
|
|
1,799
|
|
Total expenses
|
|
74
|
|
|
3,000
|
|
|
2,003
|
|
|
(179
|
)
|
|
4,898
|
|
Operating (loss) profit
|
|
(74
|
)
|
|
463
|
|
|
280
|
|
|
—
|
|
|
669
|
|
Interest expense, net
|
|
(805
|
)
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(811
|
)
|
Interest income (expense) from intercompany notes
|
|
158
|
|
|
(156
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
Other income (expense)
|
|
39
|
|
|
3
|
|
|
(31
|
)
|
|
—
|
|
|
11
|
|
Equity earnings from consolidated subsidiaries
|
|
307
|
|
|
123
|
|
|
—
|
|
|
(430
|
)
|
|
—
|
|
(Loss) income before income taxes and equity earnings in affiliates
|
|
(375
|
)
|
|
427
|
|
|
247
|
|
|
(430
|
)
|
|
(131
|
)
|
Income tax (benefit) expense
|
|
(237
|
)
|
|
200
|
|
|
50
|
|
|
—
|
|
|
13
|
|
Equity earnings in affiliates
|
|
—
|
|
|
103
|
|
|
11
|
|
|
—
|
|
|
114
|
|
Net (loss) income
|
|
(138
|
)
|
|
330
|
|
|
208
|
|
|
(430
|
)
|
|
(30
|
)
|
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
34
|
|
|
74
|
|
|
108
|
|
Net (loss) income attributable to First Data Corporation
|
|
$
|
(138
|
)
|
|
$
|
330
|
|
|
$
|
174
|
|
|
$
|
(504
|
)
|
|
$
|
(138
|
)
|
Comprehensive (loss) income
|
|
$
|
(259
|
)
|
|
$
|
302
|
|
|
$
|
38
|
|
|
$
|
(240
|
)
|
|
$
|
(159
|
)
|
Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
26
|
|
|
74
|
|
|
100
|
|
Comprehensive (loss) income attributable to First Data Corporation
|
|
$
|
(259
|
)
|
|
$
|
302
|
|
|
$
|
12
|
|
|
$
|
(314
|
)
|
|
$
|
(259
|
)
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
(in millions)
|
|
FDC Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidation
Adjustments
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5
|
|
|
$
|
7
|
|
|
$
|
270
|
|
|
$
|
—
|
|
|
$
|
282
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
2
|
|
|
466
|
|
|
1,295
|
|
|
—
|
|
|
1,763
|
|
Settlement assets (a)
|
|
—
|
|
|
4,123
|
|
|
4,383
|
|
|
—
|
|
|
8,506
|
|
Intercompany notes receivable
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
Other current assets
|
|
167
|
|
|
213
|
|
|
105
|
|
|
—
|
|
|
485
|
|
Total current assets
|
|
175
|
|
|
4,809
|
|
|
6,053
|
|
|
(1
|
)
|
|
11,036
|
|
Property and equipment, net of accumulated depreciation
|
|
35
|
|
|
572
|
|
|
282
|
|
|
—
|
|
|
889
|
|
Goodwill
|
|
—
|
|
|
9,145
|
|
|
7,663
|
|
|
—
|
|
|
16,808
|
|
Customer relationships, net of accumulated amortization
|
|
—
|
|
|
1,130
|
|
|
814
|
|
|
—
|
|
|
1,944
|
|
Other intangibles, net of accumulated amortization
|
|
604
|
|
|
701
|
|
|
494
|
|
|
—
|
|
|
1,799
|
|
Investment in affiliates
|
|
4
|
|
|
886
|
|
|
144
|
|
|
—
|
|
|
1,034
|
|
Long-term intercompany receivables
|
|
9,594
|
|
|
16,541
|
|
|
7,133
|
|
|
(33,268
|
)
|
|
—
|
|
Long-term intercompany notes receivable
|
|
3,443
|
|
|
217
|
|
|
9
|
|
|
(3,669
|
)
|
|
—
|
|
Long-term deferred tax assets
|
|
431
|
|
|
—
|
|
|
—
|
|
|
(431
|
)
|
|
—
|
|
Other long-term assets
|
|
182
|
|
|
352
|
|
|
261
|
|
|
(56
|
)
|
|
739
|
|
Investment in consolidated subsidiaries
|
|
26,393
|
|
|
5,898
|
|
|
—
|
|
|
(32,291
|
)
|
|
—
|
|
Total assets
|
|
$
|
40,861
|
|
|
$
|
40,251
|
|
|
$
|
22,853
|
|
|
$
|
(69,716
|
)
|
|
$
|
34,249
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
281
|
|
|
$
|
723
|
|
|
$
|
508
|
|
|
$
|
—
|
|
|
$
|
1,512
|
|
Short-term and current portion of long-term borrowings
|
|
—
|
|
|
64
|
|
|
244
|
|
|
—
|
|
|
308
|
|
Settlement obligations (a)
|
|
—
|
|
|
4,123
|
|
|
4,383
|
|
|
—
|
|
|
8,506
|
|
Intercompany notes payable
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
Total current liabilities
|
|
281
|
|
|
4,910
|
|
|
5,136
|
|
|
(1
|
)
|
|
10,326
|
|
Long-term borrowings
|
|
18,644
|
|
|
168
|
|
|
16
|
|
|
—
|
|
|
18,828
|
|
Long-term deferred tax liabilities
|
|
—
|
|
|
798
|
|
|
70
|
|
|
(431
|
)
|
|
437
|
|
Long-term intercompany payables
|
|
20,446
|
|
|
7,716
|
|
|
5,106
|
|
|
(33,268
|
)
|
|
—
|
|
Long-term intercompany notes payable
|
|
226
|
|
|
3,415
|
|
|
28
|
|
|
(3,669
|
)
|
|
—
|
|
Other long-term liabilities
|
|
467
|
|
|
272
|
|
|
156
|
|
|
(56
|
)
|
|
839
|
|
Total liabilities
|
|
40,064
|
|
|
17,279
|
|
|
10,512
|
|
|
(37,425
|
)
|
|
30,430
|
|
Redeemable equity interest
|
|
—
|
|
|
—
|
|
|
74
|
|
|
(74
|
)
|
|
—
|
|
Redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
|
74
|
|
First Data Corporation stockholders' equity
|
|
797
|
|
|
22,972
|
|
|
6,352
|
|
|
(29,324
|
)
|
|
797
|
|
Noncontrolling interests
|
|
—
|
|
|
—
|
|
|
95
|
|
|
2,853
|
|
|
2,948
|
|
Equity of consolidated alliance
|
|
—
|
|
|
—
|
|
|
5,820
|
|
|
(5,820
|
)
|
|
—
|
|
Total equity
|
|
797
|
|
|
22,972
|
|
|
12,267
|
|
|
(32,291
|
)
|
|
3,745
|
|
Total liabilities and equity
|
|
$
|
40,861
|
|
|
$
|
40,251
|
|
|
$
|
22,853
|
|
|
$
|
(69,716
|
)
|
|
$
|
34,249
|
|
|
|
(a)
|
The majority of the Guarantor settlement assets relate to the Company’s merchant acquiring business. The Company believes the settlement assets are not available to satisfy any claims other than those related to the settlement liabilities.
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
(in millions)
|
|
FDC Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidation
Adjustments
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
105
|
|
|
$
|
16
|
|
|
$
|
308
|
|
|
$
|
—
|
|
|
$
|
429
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
—
|
|
|
826
|
|
|
1,000
|
|
|
—
|
|
|
1,826
|
|
Settlement assets (a)
|
|
—
|
|
|
4,273
|
|
|
3,877
|
|
|
—
|
|
|
8,150
|
|
Intercompany notes receivable
|
|
436
|
|
|
86
|
|
|
10
|
|
|
(532
|
)
|
|
—
|
|
Other current assets
|
|
98
|
|
|
188
|
|
|
95
|
|
|
—
|
|
|
381
|
|
Total current assets
|
|
639
|
|
|
5,389
|
|
|
5,290
|
|
|
(532
|
)
|
|
10,786
|
|
Property and equipment, net of accumulated depreciation
|
|
37
|
|
|
640
|
|
|
274
|
|
|
—
|
|
|
951
|
|
Goodwill
|
|
—
|
|
|
9,139
|
|
|
7,707
|
|
|
—
|
|
|
16,846
|
|
Customer relationships, net of accumulated amortization
|
|
—
|
|
|
1,235
|
|
|
901
|
|
|
—
|
|
|
2,136
|
|
Other intangibles, net of accumulated amortization
|
|
604
|
|
|
703
|
|
|
476
|
|
|
—
|
|
|
1,783
|
|
Investment in affiliates
|
|
5
|
|
|
900
|
|
|
143
|
|
|
—
|
|
|
1,048
|
|
Long-term intercompany receivables
|
|
8,523
|
|
|
15,192
|
|
|
6,321
|
|
|
(30,036
|
)
|
|
—
|
|
Long-term intercompany notes receivable
|
|
3,415
|
|
|
236
|
|
|
9
|
|
|
(3,660
|
)
|
|
—
|
|
Long-term deferred tax assets
|
|
524
|
|
|
—
|
|
|
—
|
|
|
(524
|
)
|
|
—
|
|
Other long-term assets
|
|
259
|
|
|
358
|
|
|
265
|
|
|
(70
|
)
|
|
812
|
|
Investment in consolidated subsidiaries
|
|
25,692
|
|
|
5,588
|
|
|
—
|
|
|
(31,280
|
)
|
|
—
|
|
Total assets
|
|
$
|
39,698
|
|
|
$
|
39,380
|
|
|
$
|
21,386
|
|
|
$
|
(66,102
|
)
|
|
$
|
34,362
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
283
|
|
|
$
|
792
|
|
|
$
|
564
|
|
|
$
|
—
|
|
|
$
|
1,639
|
|
Short-term and current portion of long-term borrowings
|
|
740
|
|
|
70
|
|
|
46
|
|
|
—
|
|
|
856
|
|
Settlement obligations (a)
|
|
—
|
|
|
4,273
|
|
|
3,877
|
|
|
—
|
|
|
8,150
|
|
Intercompany notes payable
|
|
96
|
|
|
408
|
|
|
28
|
|
|
(532
|
)
|
|
—
|
|
Total current liabilities
|
|
1,119
|
|
|
5,543
|
|
|
4,515
|
|
|
(532
|
)
|
|
10,645
|
|
Long-term borrowings
|
|
18,616
|
|
|
119
|
|
|
2
|
|
|
—
|
|
|
18,737
|
|
Long-term deferred tax liabilities
|
|
—
|
|
|
875
|
|
|
80
|
|
|
(524
|
)
|
|
431
|
|
Long-term intercompany payables
|
|
18,583
|
|
|
6,874
|
|
|
4,579
|
|
|
(30,036
|
)
|
|
—
|
|
Long-term intercompany notes payable
|
|
245
|
|
|
3,353
|
|
|
62
|
|
|
(3,660
|
)
|
|
—
|
|
Other long-term liabilities
|
|
467
|
|
|
288
|
|
|
127
|
|
|
(70
|
)
|
|
812
|
|
Total liabilities
|
|
39,030
|
|
|
17,052
|
|
|
9,365
|
|
|
(34,822
|
)
|
|
30,625
|
|
Redeemable equity interest
|
|
—
|
|
|
—
|
|
|
77
|
|
|
(77
|
)
|
|
—
|
|
Redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
77
|
|
|
77
|
|
First Data Corporation stockholders' equity
|
|
668
|
|
|
22,328
|
|
|
5,933
|
|
|
(28,261
|
)
|
|
668
|
|
Noncontrolling interests
|
|
—
|
|
|
—
|
|
|
88
|
|
|
2,904
|
|
|
2,992
|
|
Equity of consolidated alliance
|
|
—
|
|
|
—
|
|
|
5,923
|
|
|
(5,923
|
)
|
|
—
|
|
Total equity
|
|
668
|
|
|
22,328
|
|
|
11,944
|
|
|
(31,280
|
)
|
|
3,660
|
|
Total liabilities and equity
|
|
$
|
39,698
|
|
|
$
|
39,380
|
|
|
$
|
21,386
|
|
|
$
|
(66,102
|
)
|
|
$
|
34,362
|
|
|
|
(a)
|
The majority of the Guarantor settlement assets relate to the Company’s merchant acquiring business. The Company believes the settlement assets are not available to satisfy any claims other than those related to the settlement liabilities.
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2016
|
(in millions)
|
|
FDC Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidation
Adjustments
|
|
Consolidated
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
96
|
|
|
$
|
415
|
|
|
$
|
323
|
|
|
$
|
(625
|
)
|
|
$
|
209
|
|
Adjustments to reconcile to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)
|
|
3
|
|
|
325
|
|
|
200
|
|
|
—
|
|
|
528
|
|
Charges (gains) related to other operating expenses and other income (expense)
|
|
12
|
|
|
29
|
|
|
(40
|
)
|
|
—
|
|
|
1
|
|
Loss on debt extinguishment
|
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55
|
|
Stock-based compensation expense
|
|
171
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
171
|
|
Other non-cash and non-operating items, net
|
|
(428
|
)
|
|
(178
|
)
|
|
(24
|
)
|
|
625
|
|
|
(5
|
)
|
(Decrease) increase in cash, excluding the effects of acquisitions and dispositions, resulting from changes in operating assets and liabilities
|
|
(254
|
)
|
|
192
|
|
|
11
|
|
|
—
|
|
|
(51
|
)
|
Net cash (used in) provided by operating activities
|
|
(345
|
)
|
|
783
|
|
|
470
|
|
|
—
|
|
|
908
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
—
|
|
|
(27
|
)
|
|
(86
|
)
|
|
—
|
|
|
(113
|
)
|
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs
|
|
—
|
|
|
(93
|
)
|
|
(26
|
)
|
|
—
|
|
|
(119
|
)
|
Acquisitions, net of cash acquired
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
Proceeds from Visa Europe share sale
|
|
—
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
27
|
|
Other investing activities, net
|
|
68
|
|
|
136
|
|
|
—
|
|
|
(203
|
)
|
|
1
|
|
Net cash provided by (used in) investing activities
|
|
62
|
|
|
16
|
|
|
(85
|
)
|
|
(203
|
)
|
|
(210
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings, net
|
|
—
|
|
|
—
|
|
|
196
|
|
|
—
|
|
|
196
|
|
Proceeds from issuance of long-term debt
|
|
2,377
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,377
|
|
Payment of call premiums and debt issuance cost
|
|
(52
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52
|
)
|
Principal payments on long-term debt
|
|
(3,130
|
)
|
|
(31
|
)
|
|
(2
|
)
|
|
—
|
|
|
(3,163
|
)
|
Payment of taxes related to net settlement of equity awards
|
|
(59
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(59
|
)
|
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
(27
|
)
|
|
(130
|
)
|
|
(157
|
)
|
Distributions paid to equity holders
|
|
—
|
|
|
—
|
|
|
(266
|
)
|
|
266
|
|
|
—
|
|
Other financing activities, net
|
|
27
|
|
|
8
|
|
|
(67
|
)
|
|
67
|
|
|
35
|
|
Intercompany
|
|
1,020
|
|
|
(792
|
)
|
|
(228
|
)
|
|
—
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
|
183
|
|
|
(815
|
)
|
|
(394
|
)
|
|
203
|
|
|
(823
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
7
|
|
|
(29
|
)
|
|
—
|
|
|
(22
|
)
|
Change in cash and cash equivalents
|
|
(100
|
)
|
|
(9
|
)
|
|
(38
|
)
|
|
—
|
|
|
(147
|
)
|
Cash and cash equivalents at beginning of period
|
|
105
|
|
|
16
|
|
|
308
|
|
|
—
|
|
|
429
|
|
Cash and cash equivalents at end of period
|
|
$
|
5
|
|
|
$
|
7
|
|
|
$
|
270
|
|
|
$
|
—
|
|
|
$
|
282
|
|
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2015
|
(in millions)
|
|
FDC Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidation
Adjustments
|
|
Consolidated
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(138
|
)
|
|
$
|
330
|
|
|
$
|
208
|
|
|
$
|
(430
|
)
|
|
$
|
(30
|
)
|
Adjustments to reconcile to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)
|
|
9
|
|
|
340
|
|
|
208
|
|
|
—
|
|
|
557
|
|
(Gains) charges related to other operating expenses and other income (expense)
|
|
(33
|
)
|
|
1
|
|
|
41
|
|
|
—
|
|
|
9
|
|
Stock-based compensation expense
|
|
23
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
Other non-cash and non-operating items, net
|
|
(269
|
)
|
|
(130
|
)
|
|
(15
|
)
|
|
430
|
|
|
16
|
|
(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions
|
|
(318
|
)
|
|
118
|
|
|
78
|
|
|
—
|
|
|
(122
|
)
|
Net cash (used in) provided by operating activities
|
|
(726
|
)
|
|
659
|
|
|
520
|
|
|
—
|
|
|
453
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
(6
|
)
|
|
(64
|
)
|
|
(64
|
)
|
|
—
|
|
|
(134
|
)
|
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs
|
|
—
|
|
|
(122
|
)
|
|
(28
|
)
|
|
—
|
|
|
(150
|
)
|
Acquisitions, net of cash acquired
|
|
(70
|
)
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(89
|
)
|
Other investing activities, net
|
|
50
|
|
|
131
|
|
|
—
|
|
|
(195
|
)
|
|
(14
|
)
|
Net cash used in investing activities
|
|
(26
|
)
|
|
(74
|
)
|
|
(92
|
)
|
|
(195
|
)
|
|
(387
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings, net
|
|
194
|
|
|
—
|
|
|
(37
|
)
|
|
—
|
|
|
157
|
|
Principal payments on long-term debt
|
|
(10
|
)
|
|
(36
|
)
|
|
(6
|
)
|
|
—
|
|
|
(52
|
)
|
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
(41
|
)
|
|
(122
|
)
|
|
(163
|
)
|
Distributions paid to equity holders
|
|
—
|
|
|
—
|
|
|
(250
|
)
|
|
250
|
|
|
—
|
|
Other financing activities, net
|
|
(12
|
)
|
|
—
|
|
|
(67
|
)
|
|
67
|
|
|
(12
|
)
|
Intercompany
|
|
590
|
|
|
(539
|
)
|
|
(51
|
)
|
|
—
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
|
762
|
|
|
(575
|
)
|
|
(452
|
)
|
|
195
|
|
|
(70
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Change in cash and cash equivalents
|
|
10
|
|
|
10
|
|
|
(30
|
)
|
|
—
|
|
|
(10
|
)
|
Cash and cash equivalents at beginning of period
|
|
—
|
|
|
23
|
|
|
335
|
|
|
—
|
|
|
358
|
|
Cash and cash equivalents at end of period
|
|
$
|
10
|
|
|
$
|
33
|
|
|
$
|
305
|
|
|
$
|
—
|
|
|
$
|
348
|
|