<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JUNE 30, 1996
-----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission file number 1-11073
-----------
FIRST DATA CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 47-0731996
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 HACKENSACK AVENUE, HACKENSACK, NEW JERSEY 07601
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 525-4700
----------------
NOT APPLICABLE
-------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- ------
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Number of Shares Outstanding
Title of each class as of July 1, 1996
- -------------------------------- ----------------------------
Common Stock, $.01 par value 223,909,790
<PAGE>
FIRST DATA CORPORATION
INDEX
-----
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
------
<S> <C> <C>
Item 1 Consolidated Financial Statements:
Consolidated Statements of Income for the
three and six months ended
June 30, 1996 and 1995.................................... 3
Consolidated Balance Sheets at June 30, 1996
and December 31, 1995..................................... 4
Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1995................... 5
Notes to Consolidated
Financial Statements...................................... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and
Results of Operations.................................... 9
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Securities Holders... 14
Item 6 Exhibits and Reports on Form 8-K........................ 15
</TABLE>
2
<PAGE>
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Operating revenues $1,200.4 $1,014.6 $2,330.1 $1,915.0
Other income --- 77.9 --- 80.9
----------- ----------- ----------- ----------
1,200.4 1,092.5 2,330.1 1,995.9
----------- ----------- ----------- ----------
EXPENSES
Operating 761.7 653.9 1,483.7 1,227.9
Selling, general & administrative 185.6 178.9 378.8 344.1
Merger, integration and impairment --- --- 16.3 ---
Interest expense 25.4 27.6 51.4 54.5
----------- ----------- ----------- ----------
972.7 860.4 1,930.2 1,626.5
----------- ----------- ---------- ----------
Income before income taxes 227.7 232.1 399.9 369.4
Income taxes 87.9 132.4 154.3 185.8
----------- ----------- ------------ --------
Net income $ 139.8 $ 99.7 $ 245.6 $ 183.6
=========== =========== ============ ==========
Earnings per common share $ 0.60 $ 0.45 $ 1.06 $ 0.84
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
FIRST DATA CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
June 30, December 31,
ASSETS 1996 1995
-------------- --------------
<S> <C> <C>
Cash and cash equivalents $ 190.0 $ 231.0
Settlement assets 6,676.6 6,210.6
Accounts receivable, net of allowance for doubtful accounts
of $15.3 (1996) and $20.9 (1995) 934.3 835.9
Property and equipment, net 667.3 571.4
Goodwill, less accumulated amortization
of $350.1 (1996) and $298.1 (1995) 3,385.5 3,246.1
Other intangibles, less accumulated amortization
of $290.6 (1996) and $237.0 (1995) 831.3 720.0
Other assets 482.2 402.8
-------------- --------------
$13,167.2 $12,217.8
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Settlement obligations $ 6,631.9 $ 6,119.4
Accounts payable and other liabilities 1,444.3 1,378.5
Borrowings 1,321.7 1,127.7
Senior convertible debentures 447.1 447.1
-------------- -------------
Total Liabilities 9,845.0 9,072.7
-------------- --------------
Commitments and contingencies
Stockholders' Equity:
Common Stock, $.01 par value; authorized 600.0 shares,
issued 224.0 shares 2.2 2.2
Additional paid-in capital 2,052.4 2,021.0
-------------- --------------
Paid-in capital 2,054.6 2,023.2
Retained earnings 1,298.8 1,148.8
Other (16.4) 18.7
Less treasury stock at cost, 0.2 shares (1996) and
0.7 shares (1995) (14.8) (45.6)
-------------- -------------
Total Stockholders' Equity 3,322.2 3,145.1
-------------- --------------
$13,167.2 $12,217.8
============== ==============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended
June 30,
--------------------
1996 1995
-------- ---------
<S> <C> <C>
Cash and cash equivalents at beginning of period $231.0 $350.5
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 245.6 183.6
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 195.6 165.4
Non-cash portion of merger, integration and
impairment charge 13.4 ---
Gains on sales of businesses, net of taxes --- (8.4)
Other non-cash items 11.0 14.6
Increase (decrease) in cash, excluding the effects of acquisitions,
resulting from changes in:
Accounts receivable (92.8) 19.3
Other assets (10.1) (44.9)
Accounts payable and other liabilities 5.0 2.9
Income tax accounts 54.1 107.3
--------- ---------
Net cash provided by operating activities 421.8 439.8
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Current year acquisitions, net of cash acquired (257.4) (408.4)
Payments related to the Western Union acquisition:
Payment of deferred cash purchase consideration --- (300.0)
Funding of assumed pension obligations for a suspended plan --- (154.1)
Payments related to other businesses previously acquired (39.1) (34.2)
Proceeds from dispositions, net of expenses and taxes paid 7.1 10.5
Additions to property and equipment, net (180.0) (112.1)
Payments to secure customer service contracts, including outlays for
conversion and capitalized systems development costs (96.1) (87.2)
Other investing activities (0.9) (1.0)
--------- ---------
Net cash used in investing activities (566.4) (1,086.5)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net 82.0 505.4
Issuance of long-term debt 99.7 ---
Principal payments on long-term debt (11.4) (8.5)
Proceeds from issuance of common stock 75.6 54.4
Purchase of treasury shares (129.6) (32.8)
Cash dividends and other distributions (12.7) (9.8)
--------- ---------
Net cash provided by financing activities 103.6 508.7
--------- ---------
Change in cash and cash equivalents (41.0) (138.0)
--------- ---------
Cash and cash equivalents at end of period $190.0 $212.5
======== ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The consolidated financial statements of First Data Corporation ("FDC" or
"the Company") should be read in conjunction with the Company's consolidated
financial statements for the year ended December 31, 1995. Significant
accounting policies disclosed therein have not changed. The Company
completed its merger with First Financial Management Corporation ("FFMC") in
October 1995, which was accounted for as a pooling of interests.
Accordingly, the consolidated financial statements included herein give
retroactive effect to this transaction and include the combined operations
of FDC and FFMC for all periods presented. Certain prior year amounts have
been reclassified to conform to the current year presentation.
The 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 at
June 30, 1996 and the consolidated results of its operations for the three
and six months ended June 30, 1996 and 1995 and cash flows for the six
months ended June 30, 1996 and 1995. Results of operations reported for
interim periods are not necessarily indicative of results for the entire
year.
FDC operates in a single business segment, providing a variety of
information services primarily to financial institutions and commercial
establishments. The largest category of services involves information
processing and funds transfer related to payment transactions, including
credit and debit cards, checks and other types of payment instruments (such
as money transfers, money orders, and official checks). These services
include the authorization, processing and settlement of credit and debit
card transactions, verification or guarantee of check transactions, and
worldwide nonbank money transfers. Other service areas include information
processing for investment companies, health care claims processing, and data
imaging and related information management services.
FDC recognizes revenues from its information processing services as such
services are performed, recording revenues net of certain costs not
controlled by the Company (primarily interchange fees charged by credit card
associations of $522.7 million and $441.6 million for three months ended
June 30, 1996 and 1995, respectively, and $952.7 million and $708.9 million
for the six months ended June 30, 1996 and 1995, respectively).
2. In the fourth quarter of 1995, the Company recorded a $645.7 million merger,
integration and impairment charge and disclosed that plans for the
integration of operations would continue to be implemented during 1996. The
1996 first quarter results include a $16.3 million merger, integration and
impairment charge, which reduced net income by $10.0 million ($.04 per
share), related primarily to integration processes in certain of the
Company's businesses. The charge included $12.0 million of restructuring and
integration costs consisting principally of accruals for personnel severance
(involving approximately 800 employees) with additional charges for lease
termination costs and incurred employee relocations. The remaining $4.3
million of the first quarter charge is impairment costs, principally related
to exiting certain locations and business activities. For the fourth quarter
of 1995 and the first quarter of 1996, restructuring and integration
accruals totaled $133.2 million, against which $60.7 million of cash
expenditures have been charged through June 30, 1996.
6
<PAGE>
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
3. FDC has guaranteed the $447.1 million of 5% senior convertible debentures
issued by FFMC in December 1994.
FFMC is not required to file periodic reports with the Securities and
Exchange Commission with respect to the outstanding senior convertible
debentures so long as such reports for FDC contain summarized financial
information concerning FFMC. Subsequent to the merger, certain FDC
businesses were merged into certain FFMC subsidiaries, therefore, the
current year results are not comparable with the prior year. The summarized
financial information for FFMC and its subsidiaries is as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
For the periods ended June 30, 1996 1995 1996 1995
- ---------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C>
Revenues $702.5 $ 502.2 $1,315.9 $ 960.0
Income before income taxes 188.5 71.0 309.6 128.2
Net income 116.6 41.8 190.1 75.5
June 30, December 31,
1996 1995
- --------------------------------------------------------------------------
(In millions)
Goodwill $2,696.1 $1,794.8
Total assets 5,898.3 3,330.2
Borrowings 6.0 24.0
Senior convertible debentures 447.1 447.1
Total liabilities 2,906.0 1,816.6
</TABLE>
4. In January, 1996, FDC paid $162 million to purchase the remaining interest
in a joint venture relating to Western Union's money transfer services
between the U.S. and Mexico. The purchase price has been classified as
goodwill and, consistent with the Company's accounting for its 1994
acquisition of Western Union, is being amortized over forty years.
In 1996, the Company also acquired two businesses expanding FDC's markets
and service offerings in its payment instruments and its information
management services businesses and made additional payments relating to a
number of its alliance programs with bank clients involving merchant
business.
7
<PAGE>
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
5. In April 1996, the Company issued $100 million in Medium-Term Notes with two
and three year maturities and utilized the proceeds to reduce its commercial
paper borrowings. The Company's commercial paper borrowings at June 30, 1996
were $771.3 million under its $1 billion commercial paper program.
In August 1996, the Company issued an additional $200 million in Medium-Term
Notes with two and three year maturities and will utilize the proceeds to
reduce its commercial paper borrowings.
6. Earnings per common share amounts are computed by dividing net income
amounts by weighted average common and common equivalent shares (when
dilutive) outstanding during the period. Amounts utilized in per share
computations are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
For the periods ended June 30, 1996 1995 1996 1995
- ------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C>
Weighted average shares outstanding:
Simple weighted average shares 223.8 217.4 223.8 212.6
Common stock equivalents 14.2 12.7 14.0 13.5
------ ------ ------ ------
238.0 230.1 237.8 226.1
------ ------ ------ ------
Earnings add back related to senior
convertible debentures $ 3.5 $ 3.5 $ 7.0 $ 7.0
</TABLE>
Common stock equivalents consist of shares issuable under FDC's stock option
plans, shares issuable in connection with previously outstanding FFMC common
stock warrants, and an assumed conversion into common stock of FFMC's senior
convertible debentures. The after tax interest expense and issue cost
amortization on these debentures is added back to net income when common
stock equivalents are included in computing earnings per common share.
7. During the 1995 second quarter, the Company completed the sale of its health
systems business resulting in a pretax gain of $68.9 million which is
included in "Other income" on the Company's Consolidated Statements of
Income. This pretax gain was substantially offset by income taxes of $67.7
million relating thereto.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Data Corporation ("FDC" or "the Company") completed its merger with First
Financial Management Corporation ("FFMC") in October 1995. This business
combination was accounted for as a pooling of interests and, accordingly, the
results of FFMC are included in the Company's results for all periods presented
in the accompanying consolidated financial statements and in the following
discussions.
Results of Operations
Operating revenues for the quarter ended June 30, 1996 were up 18% to $1.20
billion, compared with $1.01 billion in 1995's second quarter. The Company's
internal growth rate in revenues over the prior year quarter (excluding the
effect of acquisitions and divested businesses) was approximately 17%. Operating
revenues for the six months ended June 30, 1996 were up 22% to $2.33 billion,
compared with $1.92 billion in the prior year period. The Company's internal
growth rate in revenue for the six month period over the prior year (excluding
the effect of acquisitions and divested businesses) was approximately 19%.
Growth in existing businesses, principally due to strong underlying volume
increases from existing clients and the addition of new clients, accounted for a
substantial majority of the revenue increase. The Company's performance
reflects, in particular, continuing strong growth in the domestic card issuance,
merchant processing, and payment instruments business areas. Though still
growing strongly, there has been some moderation in the growth rate of
international money transfer business due to the stabilization of the economy
and currency exchange rates in Mexico, which has lessened the urgency to use
rapid money transfer services. The internal growth rate includes the negative
impact of a slight revenue decrease in FDC's health care administrative services
area due principally to the Company's deemphasis of certain aspects of this
business primarily related to government programs.
The Company derives revenues in its primary service areas based principally on a
unit price per transaction, on a percentage of dollar volume, or on a
combination thereof. Lesser amounts of revenue are generated from foreign
currency exchange on money transfer transactions and sharing in interest earned
on fiduciary funds. The overall 1996 second quarter growth of FDC is
demonstrated by the following key indicators (along with the percentage growth
compared to second quarter 1995): 132 million card accounts on file at June 30,
1996 (+23%), 1.4 billion merchant transactions (+28%) and 115 million payment
instrument transactions, excluding MoneyGram money transfers (+14%). These
growth indicators are a continuation of the first quarter trend, producing the
following 1996 six month growth in key indicators (along with the percentage
growth compared to the 1995 period): 2.6 billion merchant transactions (+39%,
including the impact of the March 1995 acquisition of CES) and 226 million
payment instrument transactions, excluding MoneyGram money transfers (+14%).
Operating expenses for the 1996 second quarter increased 16% to $761.7 million
compared with $653.9 million in 1995 and increased 21% for the six months ended
June 30, 1996 to $1.5 billion compared with $1.2 billion in the same 1995
period. The percentage increases are less than the operating revenue increases
for the same periods and reverses a trend in 1995 when operating expenses were
rising at a rate of four percentage points higher than operating revenue growth.
The reversal occurred as a result of several factors. The Company experienced
growth in certain business units which have a lower ratio of operating expenses
to revenue than the overall Company average, and business units enjoyed the
benefits of integration activities. These positive impacts were somewhat offset
by the continued impact of signing certain new business and
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
renewing larger customers at lower rates and the impact of FFMC's health care
acquisition in 1995, which has relatively higher operating expenses compared
with its revenues.
Selling, general and administrative expenses for the quarter ended June 30, 1996
increased to $185.6 million, up 4% from $178.9 million in 1995. Selling costs
increased at rates slightly above revenue growth as the Company continues to
devote resources and expenditures to marketing and advertising programs aimed at
attracting new customers and increasing business levels. General and
administrative expenses decreased compared with 1995 primarily due to the
benefit of the synergy savings from the merger with FFMC.
Selling, general and administrative expenses for the six months ended June 30,
1996 increased to $378.8 million, up 10% from $344.1 million in 1995. This
year-to-date increase is higher than the quarter increase primarily due to the
inclusion of the March 1995 CES acquisition, which created growth in expenses
when comparing first quarter 1996 and 1995.
Although the Company's borrowings increased in 1996, interest expense is
slightly lower compared with the 1995 second quarter. This decrease was created
by $3.4 million ($8.7 million for the six months ended June 30, 1995) in reduced
costs related to assumed pension obligations in connection with the Western
Union acquisition (which has been classified as interest expense since it is a
suspended plan for which service credits are no longer being earned).
In the fourth quarter of 1995, the Company recorded a $645.7 million merger,
integration and impairment charge and disclosed that plans for the integration
of operations would continue to be implemented during 1996. The 1996 results
include a first quarter $16.3 million merger, integration and impairment charge,
which reduced net income by $10.0 million ($.04 per share), related primarily to
integration processes in certain of the Company's businesses. No additional
charge was recorded in the second quarter of 1996.
During the 1995 second quarter, the Company completed the sale of its health
systems business resulting in a pretax gain of $68.9 million which is included
in "Other income" on the Company's Consolidated Statements of Income. This
pretax gain was substantially offset by income taxes of $67.7 million relating
thereto.
FDC's effective income tax rate of 38.6% in 1996 was down from 39.6% and 39.3%
(excluding the impact of the divestiture discussed above) in the 1995 second
quarter and six months, respectively, declining as a result of increased
nontaxable earnings from investments of settlement assets.
Net income rose 40% to $139.8 million in the quarter ended June 30, 1996
compared with $99.7 million in the prior year quarter and net income margins
increased to 11.6% from 9.8%, respectively. This margin increase is due to
strong growth in the merchant services and payment instruments businesses (which
experienced higher margins than the overall FDC margin) and realization of
merger synergies from the consolidation of corporate functions and certain
business units, partially offset by the impact of pricing for larger customers
as previously discussed.
The impact of these items is also evident in the results for the first six
months of 1996 where net income, excluding the 1996 merger, integration and
impairment charge rose 39% to $255.6 million compared
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
with $183.6 million in the prior year period and net income margins increased to
11.0% from 9.6%, respectively.
Earnings per common share were up 33% to $0.60 from $0.45 in 1995. Earnings per
common share for the six months ended June 30, 1996 were up 26% to $1.06 from
$0.84 in the first half of 1995. Excluding the 1996 merger, integration and
impairment charge, earnings per share in the first half of 1996 equaled $1.10,
up 31% from the same period in 1995.
Capital Resources and Liquidity
FDC's cash generated from operating activities during 1996's first six months of
$421.8 million exceeded net income principally due to depreciation and
amortization of $195.6 million offset by a net cash outflow attributable to net
working capital items (principally accounts receivable, accounts payable, and
income taxes) of $43.8 million in 1996. The amount generated from operating
activities is $18.0 million less than the amount generated in the first half of
1995 due principally to a net cash inflow attributable to net working capital
items of $84.6 million in 1995. This 1995 cash inflow was created largely by a
$68 million refund of 1994 taxes (received in 1995's first quarter) for an
anticipated advance funding in 1995 of the pension plan obligations assumed as a
part of the Western Union acquisition.
FDC reinvests cash in its existing businesses, principally to expand its
processing capabilities through property and equipment additions and systems
development, and to establish customer processing relationships through contract
payments and costs for conversion. These cash outlays totaled $276.1 million in
1996's first six months compared with $199.3 million in the same 1995 period.
Cash outlays for acquisitions in the first half of 1996 consists principally of
a $162 million payment to purchase the remaining interest in a joint venture
relating to Western Union's money transfer services between the U.S. and Mexico.
The remainder consists of additional payments relating to the Company's alliance
programs with bank clients involving merchant business, as well as an
acquisition which expands the Company's payment instruments markets and service
offerings.
FDC continues its pattern of paying quarterly cash dividends of $.03 per share
to the Company's common stockholders, resulting in cash outlays totaling $12.7
million in the first half of 1996.
During the six months ended June 30, 1996, the Company repurchased 1.7 million
shares of common stock in the open market for $129.6 million. These purchases
are pursuant to a formal plan approved by FDC's Board of Directors for use in
conjunction with certain employee benefit plans.
During the 1996 second quarter, the Company issued $100 million in Medium-Term
Notes and used the cash proceeds of $99.7 million to pay down the Company's
borrowings under its commercial paper program. As a result, the Company only
increased commercial paper borrowings by $82 million during the first six months
of 1996 to fund its investing activities. In addition, the Company filed a
shelf registration statement in June 1996, providing for the future issuance of
debt and equity securities up to $500 million in the aggregate.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Included in cash equivalents on the consolidated balance sheet at June 30, 1996
is $70.0 million related to required investments of cash in connection with the
Company's merchant card settlement operation. FDC's remaining cash and cash
equivalents of $120.0 million is available for acquisitions and general
corporate purposes. Also, FDC had available short-term borrowing capability of
approximately $229 million at June 30, 1996 under the Company's $1 billion
commercial paper program.
The Company believes that its current level of cash and financing capability
along with future cash flows from operations are sufficient to meet the needs of
its existing businesses. However, the Company may from time to time seek
longer-term financing to support additional cash needs or reduce its short-term
borrowings. In August 1996, the Company issued $200 million in Medium-Term
Notes and will use the proceeds to pay down the Company's borrowings under its
commercial paper program.
FDC is actively pursuing the divestiture of its MoneyGram operation in 1996 to
comply with the Company's agreement with the Federal Trade Commission as a part
of the merger with FFMC. The Company expects to utilize the proceeds from the
MoneyGram divestiture to reduce borrowings under its commercial paper program
and for other general corporate purposes.
12
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Stockholders and Board of Directors
First Data Corporation
We have reviewed the accompanying consolidated balance sheet of First Data
Corporation as of June 30, 1996, and the related consolidated statements of
income for the three-month and six-months periods ended June 30, 1996 and 1995,
and the consolidated statements of cash flows for the six-month periods ended
June 30, 1996 and 1995. These financial statements are the responsibility of
the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of First Data Corporation as of
December 31, 1995, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended (not presented
herein) and in our report dated February 5, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 1995, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
Ernst & Young LLP
New York, New York
August 9, 1996
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. Submission Of Matters To A Vote Of Securities Holders:
-----------------------------------------------------
The Company held its Annual Meeting of Stockholders on May 15, 1996. Five
matters were voted upon and approved at the meeting.
Proposal 1 Election of Directors
- ---------- ---------------------
The terms of office of three current directors, James D. Robinson III, Bernard
L. Schwartz and Garen K. Staglin, expired at the 1996 Annual Meeting. The re-
election of Messrs. Robinson, Schwartz and Staglin was voted on at the Annual
Meeting. The results of the voting were as follows:
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C>
James D. Robinson III 188,283,764 1,039,886
Bernard L. Schwartz 186,295,649 3,028,001
Garen K. Staglin 188,460,211 863,439
</TABLE>
Other directors whose terms continued after the meeting are Ben Burdetsky, Henry
C. Duques, Courtney F. Jones, Robert J. Levenson and Charles T. Russell.
Proposal 2 Approval of the First Data Corporation Employee Stock Purchase
- ---------- --------------------------------------------------------------
Plan
----
The results of the voting were as follows:
BROKER
FOR 184,674,677 AGAINST 2,170,812 ABSTAIN 2,478,161 NON-VOTE 0
Proposal 3 Approval of an amendment to the Company's 1992 Long-Term
--------------------------------------------------------
Incentive Plan, as amended, to provide for a 90-day period in
-------------------------------------------------------------
which employees may exercise options following certain
------------------------------------------------------
terminations of employment
--------------------------
The results of the voting were as follows:
BROKER
FOR 183,392,051 AGAINST 3,373,741 ABSTAIN 2,557,858 NON-VOTE 0
Proposal 4 Approval of the Company's Shareholder Value Plan long-term
-----------------------------------------------------------
incentive program
------------------
The results of the voting were as follows:
BROKER
FOR 185,206,814 AGAINST 1,496,737 ABSTAIN 2,620,099 NON-VOTE 0
Proposal 5 Ratification of the selection of Ernst & Young LLP as independent
-----------------------------------------------------------------
auditors of the Company for 1996
--------------------------------
The results of the voting were as follows:
BROKER
FOR 188,872,400 AGAINST 86,250 ABSTAIN 365,000 NON-VOTE 0
14
<PAGE>
PART II. OTHER INFORMATION (Continued)
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
12 Computation of Ratio of Earnings to Fixed Charges
15 Letter from Ernst & Young LLP Regarding Unaudited Interim
Financial Information
27.1 Financial Data Schedule (for SEC use only)
99 Private Securities Litigation Reform Act of 1995
Safe Harbor Compliance Statement for Forward-Looking Statements
(b) Reports on Form 8-K
-------------------
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST DATA CORPORATION
----------------------------------
(Registrant)
Date: August 13, 1996 By /S/ Lee Adrean
--------------------------- ---------------------------------------
Lee Adrean
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 13, 1996 By /S/ Richard Macchia
--------------------------- ---------------------------------------
Richard Macchia
Senior Vice President - Finance
(Principal Accounting Officer)
16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
FIRST DATA CORPORATION
COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Three Months Ended Six Months Ended
June 30, June 30,
--------- --------- --------- ---------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
--------- --------- --------- ---------
Earnings:
Income before income taxes $227.7 $232.1 $399.9 $369.4
Interest expense 25.4 27.6 51.4 54.5
Other adjustments 13.3 14.0 26.0 27.2
--------- --------- --------- ---------
Total earnings (a) $266.4 $273.7 $477.3 $451.1
======== ======== ======== ========
Fixed charges:
Interest expense $25.4 $27.6 $51.4 $54.5
Other adjustments 13.3 14.0 26.0 27.2
--------- --------- --------- ---------
Total fixed charges (b) $38.7 $41.6 $77.4 $81.7
======== ======== ======== ========
Ratio of earnings to
fixed charges (a / b) 6.88 6.58 6.17 5.52
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, fixed charges
consist of interest on debt, amortization of deferred financing costs and a
portion of rentals determined to be representative of interest. Earnings consist
of income before income taxes plus fixed charges.
<PAGE>
EXHIBIT 15
August 12, 1996
The Stockholders and Board of Directors
First Data Corporation
We are aware of the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-47234, No. 33-48578, No. 33-82826, No. 33-87338, No. 33-90992,
No. 33-62921, No. 33-98724, No. 33-99882, No. 333-9017 and No. 333-9031 and
Forms S-3 No. 33-66656 and 333-4012) of First Data Corporation of our reports
dated May 10, 1996 and August 9, 1996 relating to the unaudited consolidated
interim financial statements of First Data Corporation which are included in its
Forms 10-Q for the quarters ended March 31, 1996 and June 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a part
of the registration statements prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 190 190
<SECURITIES> 0 0
<RECEIVABLES> 950 950
<ALLOWANCES> 15 15
<INVENTORY> 0 0
<CURRENT-ASSETS> 0<F1> 0<F1>
<PP&E> 667 667
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 13,167 13,167
<CURRENT-LIABILITIES> 0<F1> 0<F1>
<BONDS> 447 447
0 0
0 0
<COMMON> 2 2
<OTHER-SE> 3320 3320
<TOTAL-LIABILITY-AND-EQUITY> 13,167 13,167
<SALES> 0 0
<TOTAL-REVENUES> 1200 2330
<CGS> 0 0
<TOTAL-COSTS> 762 1484
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 25 51
<INCOME-PRETAX> 228 400
<INCOME-TAX> 88 154
<INCOME-CONTINUING> 140 246
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 140 246
<EPS-PRIMARY> 0.60 1.06
<EPS-DILUTED> 0.60 1.06
<FN>
<F1>Unclassified Balance Sheet
</FN>
</TABLE>
<PAGE>
EXHIBIT 99
Private Securities Litigation Reform Act of 1995
Safe Harbor Compliance Statement for Forward-Looking Statements
- ---------------------------------------------------------------
In passing the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"), Congress encouraged public companies to make "forward-looking
statements"* by creating a safe-harbor to protect companies from securities law
liability in connection with forward-looking statements. First Data Corporation
("FDC") intends to qualify both its written and oral forward-looking statements
for protection under the Reform Act.
To qualify oral forward-looking statements for protection under the Reform Act,
a readily available written document must identify important factors that could
cause actual results to differ materially from those in the forward-looking
statements. FDC provides the following information in connection with its
continuing effort to qualify forward-looking statements for the safe harbor
protection of the Reform Act.
Important factors currently known to management that could cause
actual results to differ materially from those in forward-looking statements
include the following: (i) achieving a smooth and timely integration of
overlapping businesses following the merger of FDC and FFMC; (ii) successful
implementation of the merchant bank alliance program and the U$A Value Exchange
program; (iii) timely completion and market acceptance of the ACT3 health care
claims administration processing system; (iv) accurate estimation of market
assumptions integral to the forward-looking statements including assumptions as
to growth rates for card-based payment transactions, consumer money transfer
transactions and other product markets as well as continued moderate growth in
the overall economy; (v) consolidation among financial institutions or other
client groups which has a significant impact on FDC client relationships; (vi)
changes in pricing which may be necessary to grow business with large
sophisticated customers and in competitive markets; (vii) maintaining a role for
FDC's credit card processing, merchant processing and money transfer businesses
in connection with new payment technologies being developed; (viii) successfully
managing the potential both for patent protection and patent liability in the
context of rapidly developing legal framework for expansive software patent
protection; (ix) the successful disposition of the MoneyGram business for fair
value in satisfaction of the August 28, 1995 consent decree with the Federal
Trade Commission, and (x) unanticipated changes in laws, regulations, credit
card association rules or other industry standards affecting FDC's businesses
which require significant product redevelopment efforts or render products
obsolete.
Forward-looking statements express expectations of future events. All forward-
looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to these
inherent uncertainties the investment community is urged not to place undue
reliance on forward-looking statements. In addition, FDC undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events, or changes to projections
over time.
* "Forward-looking statements" can be identified by use of words such as
--------------------------
"expect," "estimate," "project," "forecast," "anticipate," "plan" and similar
expressions.
