Friday, November 14, 2008

First Data Reports Third Quarter Results

First Data - First Data Reports Third Quarter 2008 Revenue Growth of 4%
First Data Reports Third Quarter 2008 Revenue Growth of 4%

DENVER, November 14, 2008 – First Data Corp. today reported its financial results for the third quarter of 2008. Consolidated revenues were up 4% to $2.2 billion. The adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were up 7% to $694 million.

Loss from continuing operations was $164 million, but included $270 million of incremental interest expense, net of tax, and $124 million of incremental depreciation and amortization, net of tax, compared to the third quarter of 2007. Both the incremental interest expense and depreciation and amortization are primarily attributable to the transaction with affiliates of Kohlberg Kravis Roberts & Co. (the "Transaction"). A table describing adjusted EBITDA and reconciling income (loss) from continuing operations to adjusted EBITDA is included in the accompanying schedules.

"Despite a difficult economic climate, we were able to grow revenue and adjusted EBITDA," said Michael Capellas, Chairman and Chief Executive Officer. "Our investments in product innovation are gaining momentum and you will see us announce some significant wins especially in the mobile commerce space."

Segment Results

Merchant Services

For the quarter, Merchant Services generated revenues of $1 billion, a growth rate of 6% or down 3% excluding reimbursable debit network fees. Revenue was positively impacted by 9% transaction growth. This impact was offset by the slowing U.S. economy which reduced transaction growth for smaller merchants and shifted transactions to some nationwide discounters and wholesalers. Operating profit was $106 million, down 60% or down 9% to $248 million excluding purchase accounting adjustments comprised principally of increased amortization expense related to the Transaction. Operating profit margin was 36.0% excluding reimbursable debit network fees and purchase accounting adjustments, compared to 38.6% in the third quarter of 2007. Operating profit was impacted by approximately $19 million of certain costs related to cost reduction initiatives, which accounted for seven percentage points of the 9% decline noted above and also impacted the 36.0% operating profit margin by three percentage points during the quarter. Reported operating profit margin for the quarter was 10.4 %.

Financial Services

For the quarter, Financial Services generated revenue of $700 million, down 5% or down 8% excluding reimbursables and purchase accounting adjustments. Adjusted revenue reflects modest growth in the card issuing business. This growth was offset by lost business and check volume declines in the TeleCheck business. In addition, the third quarter of 2007 included approximately $16 million more in revenues resulting from contract termination fees compared to this quarter. Operating profit was $111 million, down 23% or down 3% to $144 million excluding purchase accounting adjustments comprised principally of increased amortization expense related to the Transaction. Operating profit margin for the quarter was 28.1% excluding reimbursables and purchase accounting adjustments, compared to 26.5% in the third quarter of 2007. Operating profit was impacted by approximately $18 million of costs related to cost reduction initiatives, which negatively impacted the 3% decline noted above by thirteen percentage points and negatively impacted the 28.1% operating profit margin by four percentage points during the quarter. Reported operating margin was 15.9% for the quarter.

International

For the quarter, International generated revenue of $487 million, up 19%. Revenue benefited from 21% transaction growth which was in part driven by acquisitions in prior quarters. Operating profit was $49 million, up 59% or up 79% to $54 million excluding purchase accounting adjustments related to the Transaction. Operating margin was 11.2% excluding purchase accounting adjustments related to the Transaction compared to 7.4% in the third quarter of 2007. Adjusted operating profit included the partial reversal of a loss reserve for the failed airline in one of International's merchant acquiring alliances and lower employee related expenses. These items were offset by approximately $16 million in incremental investments in data center consolidation, platform initiatives and other expenses related to cost reduction initiatives. Reported operating margin was 10.0%.

A slide presentation will be made
available under the "Investor Relations" section of the Web site at A slide presentation to accompany the call will be included in the webcast and will be made
available under the "Investor Relations" section of the Web site at http://ir.firstdatacorp.com/events.cfm.


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