FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
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
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(Exact name of registrant as specified in its charter)
DELAWARE 47-0731996
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6200 SOUTH QUEBEC STREET, GREENWOOD VILLAGE, COLORADO 80111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 488-8000
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5660 NEW NORTHSIDE DRIVE, SUITE 1400, ATLANTA, GA 30328-5800
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(Former address)
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
Title of each class Outstanding at April 30, 2001
------------------------------- -----------------------------
(Common stock, $.01 par value) 391,766,311
1
FIRST DATA CORPORATION
INDEX
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PAGE
PART I FINANCIAL INFORMATION NUMBER
------
Item 1. Financial Statements:
Consolidated Statements of Income for the three
months ended March 31, 2001 and 2000 ................................3
Consolidated Balance Sheets at March 31, 2001 and
December 31, 2000....................................................4
Consolidated Statements of Cash Flows for the three
months ended March 31, 2001 and 2000.................................5
Notes to Consolidated Financial Statements...........................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................15
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........20
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................22
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
Three months ended March 31,
------------------------------
2001 2000
----------- -----------
REVENUES
Service revenues $ 1,427.3 $ 1,316.1
Product sales and other 43.9 27.1
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1,471.2 1,343.2
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EXPENSES
Operating 914.1 873.9
Selling, general & administrative 259.5 209.8
Restructuring, business divestitures,
litigation and impairment, net -- 9.5
Interest expense 31.5 20.4
----------- -----------
1,205.1 1,113.6
----------- -----------
Income before cumulative effect of a change
in accounting principle and income taxes 266.1 229.6
Income taxes 75.9 64.6
----------- -----------
Income before cumulative effect of a change
in accounting principle 190.2 165.0
Cumulative effect of a change in accounting
principle, net of $1.6 income tax benefit (2.7) --
----------- -----------
Net income $ 187.5 $ 165.0
=========== ===========
Earnings per share - basic $ 0.48 $ 0.40
Earnings per share - diluted $ 0.47 $ 0.39
=========== ===========
Weighted average shares outstanding:
Basic 394.4 416.6
Diluted 402.2 423.4
See notes to consolidated financial statements.
3
FIRST DATA CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
March 31, December 31,
2001 2000
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ASSETS
Cash and cash equivalents $ 799.5 $ 853.3
Settlement assets 10,864.1 9,816.6
Accounts receivable, net of allowance for doubtful accounts
of $38.3 (2001) and $34.4 (2000) 912.4 970.7
Property and equipment, net 622.6 624.3
Goodwill, less accumulated amortization of $675.0 (2001) and
$656.6 (2000) 2,693.5 2,563.3
Other intangibles, less accumulated amortization of $768.2
(2001) and $727.7 (2000) 1,047.7 1,005.6
Investment in affiliates 918.9 806.4
Other assets 631.0 654.9
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$ 18,489.7 $ 17,295.1
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Settlement obligations $ 10,735.4 $ 9,773.2
Accounts payable and other liabilities 1,924.5 1,964.2
Borrowings 2,169.2 1,830.0
----------- ------------
Total Liabilities 14,829.1 13,567.4
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Stockholders' Equity:
Common Stock, $.01 par value; authorized 600.0 shares, issued 448.9 shares
(2001 and 2000) 4.5 4.5
Additional paid-in capital 2,356.0 2,292.7
----------- ------------
Paid-in capital 2,360.5 2,297.2
Retained earnings 3,829.4 3,717.1
Accumulated other comprehensive income (loss) (119.2) (18.9)
Less treasury stock at cost, 56.8 shares (2001) and 55.6
shares (2000) (2,410.1) (2,267.7)
----------- ------------
Total Stockholders' Equity 3,660.6 3,727.7
----------- ------------
$ 18,489.7 $ 17,295.1
=========== ===========
See notes to consolidated financial statements.
4
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended March 31,
------------------------------------
2001 2000
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Cash and cash equivalents at beginning of period $ 853.3 $ 1,044.0
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income 187.5 165.0
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 148.9 149.5
Non-operating and non-cash portion of restructuring and business
divestitures, net - 9.5
Other noncash items, net 15.2 (27.9)
Increase (decrease) in cash, excluding the effects of acquisitions
and dispositions, resulting from changes in:
Accounts receivable 64.2 189.4
Other assets (47.9) 32.3
Accounts payable and other liabilities (160.5) (128.1)
Income tax accounts 62.5 (273.2)
----------- -----------
Net cash provided by operating activities 269.9 116.5
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CASH FLOWS FROM INVESTING ACTIVITIES
Current year acquisitions, net of cash acquired (281.6) (10.2)
Payments related to other businesses previously acquired (16.8) (29.6)
Proceeds from dispositions, net of expenses paid 1.8 30.5
Additions to property and equipment, net (42.5) (44.5)
Payments to secure customer service contracts, including outlays for
conversion, and capitalized systems development costs (57.5) (31.2)
Other investing activities (18.8) 21.7
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Net cash used in investing activities (415.4) (63.3)
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CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net (198.5) (408.2)
Proceeds from issuance of long-term debt 534.0 --
Proceeds from issuance of common stock 109.9 75.2
Purchase of treasury shares (345.9) (352.8)
Cash dividends (7.8) (8.4)
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Net cash provided by (used in) financing activities 91.7 (694.2)
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Change in cash and cash equivalents (53.8) (641.0)
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Cash and cash equivalents at end of period $ 799.5 $ 403.0
=========== ===========
See notes to consolidated financial statements.
5
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation
The accompanying 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, 2000.
Significant accounting policies disclosed therein have not changed except as
discussed below with respect to the Company's accounting for its derivatives and
hedging activities.
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 at March 31, 2001 and the consolidated results of its operations and
cash flows for the three months ended March 31, 2001 and 2000. Results of
operations reported for interim periods are not necessarily indicative of
results for the entire year.
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 and assessments charged by credit
card associations of $407.4 million and $358.4 million for the three months
ended March 31, 2001 and 2000, respectively).
The Company adopted the provisions of the Securities and Exchange Commission
("SEC") Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101") in the third quarter of 2000. SAB 101 provides guidance
on the recognition, presentation, and disclosure of revenue in financial
statements filed with the SEC. Upon adoption, the Company restated prior periods
to reflect the netting of certain revenues and expenses that were previously
presented gross. The restatement had the effect of reducing revenues and
operating expenses for the three months ended March 31, 2000 by $11.7 million.
The adoption of SAB 101 had no impact on income from continuing operations, net
income, or related per share amounts.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), as amended. SFAS 133 requires companies to
record derivatives on the balance sheet as assets or liabilities at fair value.
The adoption of SFAS 133 on January 1, 2001 resulted in a net of tax transition
adjustment loss of $24.8 million recognized in the Accumulated Other
Comprehensive Income component of stockholders' equity and a net of tax loss of
$2.7 million recognized in the Statement of Income for the three months ended
March 31, 2001.
Note 2: Divestitures
In January 2000, the Company completed the sale of its Hogan Information
Services business unit to Dolan Media Company for cash proceeds of $30.5
million. As a result of this transaction, a pre-tax gain of $3.2 million was
recognized in the first quarter of 2000.
6
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 3: Acquisitions
In January 2001, the Company entered into a joint venture and formed Nihon Card
Processing Co. Ltd., providing third party credit card processing services, by
contributing cash of approximately $15 million. The Company is accounting for
this investment under the equity method of accounting.
In February 2001, the Company acquired Bidpay.com for approximately $24 million
in cash. Bidpay.com is a provider of web-based payment services to online
auction markets. The purchase price has been initially allocated to goodwill and
is being amortized over seven years.
In March 2001, the Company acquired a majority interest in TASQ Technology, Inc.
for approximately $176 million in cash. TASQ Technology, Inc. is an industry
leader in point-of-sale (POS) deployment operations. The preliminary purchase
price allocation resulted in identifiable intangible assets of $34.8 million
which are being amortized over periods of 5 to 10 years and goodwill of $137.8
million which is being amortized over 20 years. Also, the Company acquired a 25%
equity interest in FEXCO, one of Ireland's largest financial services companies,
for approximately $68 million in cash. The Company is accounting for this
investment under the equity method of accounting.
Each of these acquisitions have been accounted for as purchases and their
respective results are included with the Company's results from the effective
date of each acquisition. No pro forma financial information with respect to the
above acquisitions is presented as the aggregate impact is not material.
In addition, the Company issued 1 million shares of its common stock, valued at
approximately $53 million, to a merchant alliance partner pursuant to the terms
of an earnout agreement entered into in connection with the Company's acquiring
its 50% ownership interest in 1997.
Note 4: Restructuring and Impairment
There were no restructuring charges incurred during the first three months of
2001.
During the three months ended March 31, 2000, the Company recorded restructuring
charges of $12.7 million; $1.1 million related to payment services, $9.0 million
related to card issuing services, $0.3 million related to merchant services and
$2.3 million related to all other and corporate. All charges represent severance
accruals for approximately 700 employees resulting from the downsizing of
certain operations.
The following table summarizes the Company's utilization of restructuring
accruals for the three months ended March 31, 2001 (in millions):
Employee Facility
Severance Closure
----------- -----------
Remaining Accrual at December 31, 2000 $51.7 $14.0
Current Period Expense Provision --- ---
Cash Payments and Other (a) (8.5) (0.3)
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Remaining Accrual at March 31, 2001 $43.2 $13.7
=========== ===========
(a) Other includes net sub-lease income on facilities which will fund a lease
buyout.
Note 5: Investments In Affiliates
Operating results include the Company's proportionate share of income from
affiliates, which consist of unconsolidated investments and joint ventures
accounted for under the equity method of accounting. The most significant of
these affiliates are related to the Company's merchant bank alliance program.
A merchant bank alliance is a joint venture between FDC and a financial
institution that combines the expertise of the Company with the visibility and
distribution of the bank. The joint ventures sell processing services to
merchants. At March 31, 2001, there were seven such joint ventures accounted for
under the equity method of accounting.
7
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In September 2000, the Company gained a controlling interest in one of its
merchant alliances. Revenues and expenses for the merchant services segment
have been restated to the beginning of 2000 to reflect this alliance as a
consolidated subsidiary.
A summary of financial information for the merchant alliances and other
affiliates accounted for under the equity method of accounting is as follows (in
millions):
March 31, 2001 December 31, 2000
---------------- -------------------
Total Assets $ 3,221.3 $ 3,446.0
Total Liabilities 2,393.7 2,594.5
Three months ended March 31,
----------------------------------------
2001 2000
---------------- -------------------
Net Operating Revenues $ 369.1 $ 308.2
Operating Expenses 244.6 225.2
Operating Income 124.5 82.7
Net Income 108.0 79.6
FDC Share of Net Income 51.9 43.5
Amounts presented herein do not include amortization of $13.4 million and $12.9
million for the three months ended March 31, 2001 and 2000, respectively,
related to the excess of FDC's investment over its proportionate interest in the
net assets of the joint venture. This difference, which amounted to $706.1 and
$655.3 million at March 31, 2001 and December 31, 2000, respectively, is
amortized over the estimated useful lives of the underlying intangible assets.
Note 6: Borrowings
The Company's commercial paper borrowings at March 31, 2001 were $645 million.
The Company's commercial paper program is supported by a $1.1 billion revolving
credit facility. In the first quarter of 2001, the Company filed a $1.5 billion
shelf registration providing for the issuance of debt and equity securities. The
Company has $1.5 billion available under this registration, $250 million
available under its uncommitted bank lines, and $300 million available under its
extendable commercial notes ("ECN") program.
In the first quarter 2001, the Company issued $542 million of 2% Senior
Convertible Contingent Debt Securities due 2008 ("CODES"), and received net
proceeds of $534 million. The securities are contingently convertible into
approximately 6.62 million shares once certain conditions are satisfied based
upon the trading price of the Company's common stock and/or the CODES. The CODES
are redeemable at the option of the Company commencing March 1, 2004 and at the
option of holders of the CODES on March 1, 2004 and 2006.
Note 7: Earnings Per Share
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 (in millions):
8
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Three months ended March 31,
----------------------------
2001 2000
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Weighted average shares outstanding:
Basic weighted average shares 394.4 416.6
Common stock equivalents 6.9 6.8
4 7/8% convertible note due 2005 0.9 --
---------- -----------
402.2 423.4
========== ===========
Earnings add back related to
convertible note $ 0.3 --
Diluted earnings per common share was calculated based on weighted-average
shares outstanding including the dilutive impact of shares issuable upon
conversion of convertible debt and common stock equivalents which consist of
outstanding stock options, warrants and restricted stock. The after tax interest
expense and issue cost amortization on convertible debt is added back to net
income when common stock equivalents are included in computing diluted earnings
per common share. The "if converted" method is utilized in calculating diluted
earnings per common share only when conversion is not conditional upon the
occurrence of certain events.
Note 8: Comprehensive Income
The components of comprehensive income are as follows (in millions):
Three months ended March 31,
----------------------------
2001 2000
------------ -----------
Net income $ 187.5 $ 165.0
Foreign exchange effect (33.9) (9.6)
Unrealized loss on hedging activities (a) (69.7) --
Unrealized gain (loss) on securities 3.3 (2.5)
------------ -----------
Total comprehensive income $ 87.2 $ 152.9
============ ===========
(a) includes the ($24.8) million cumulative effect of adopting SFAS 133 on
January 1, 2001.
Note 9: Derivative Financial Instruments
Adoption of SFAS 133
The Company adopted SFAS 133, on January 1, 2001. SFAS 133 requires
companies to record derivatives on the balance sheet as assets or liabilities
at fair value. SFAS 133 requires that upon adoption the transition adjustment
be reported in net income or other comprehensive income, as appropriate, as the
cumulative effect of a change in accounting principle. In accordance with the
transition provisions of SFAS 133, the Company recorded a net-of-tax transition
adjustment loss of $24.8 million in other comprehensive income and a net-of-tax
transition adjustment loss of $2.7 million in earnings. Management does not
believe that ongoing application of SFAS 133 will significantly alter the
Company's hedging strategies or impact its net income. However, its application
may increase the volatility of other comprehensive income.
9
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The transition adjustment recorded in other comprehensive income represented the
recognition of all derivatives that are designated cash flow hedging instruments
at fair value. The transition adjustment recorded in earnings represented
purchased option costs that were derecognized from the balance sheet upon
adoption.
Accounting for Derivatives and Hedging Activities
The Company utilizes certain derivative financial instruments to enhance its
ability to manage risks which exist as part of ongoing business operations.
Derivative instruments are entered into for periods consistent with related
underlying exposures and do not constitute positions independent of those
exposures. The Company does not enter into contracts for speculative purposes.
The Company recognizes all derivatives on the balance sheet at their fair
value. The estimated fair value of the derivatives is based primarily on dealer
quotations. The Company presently uses derivatives only to mitigate cash flow
risks with respect to forecasted transactions. On the date the derivative
contract is entered into, the Company designates the derivative as a hedge of a
forecasted transaction (cash flow hedge). Changes in the fair value of a
derivative that is designated and qualifies as a cash-flow hedge are recorded in
other comprehensive income and reclassified into earnings in the same period or
periods during which the hedged transaction affects earnings. Changes in the
fair value of a derivative that is not designated as a hedge would be recorded
immediately in earnings.
The Company formally documents all relationships between hedging instruments and
hedged items, as well as its risk-management objective and strategy for
undertaking various hedge transactions. This process includes linking all
derivatives that are designated as cash flow hedges to forecasted transactions.
The Company also formally assesses, both at the hedge's inception and on an
ongoing basis, whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in cash flows of the hedged items. If it
is determined that a derivative is not highly effective as a hedge or if a
derivative ceases to be a highly effective hedge, the Company will discontinue
hedge accounting prospectively.
Insert Rate Derivatives
A portion of the Company's payment services business involves the payment of
commissions to selling agents that are computed based on short-term variable
rates. The Company has interest rate swap agreements, which serve to effectively
convert the variable rate commissions to agents to fixed rate amounts. These
agreements have an aggregate notional amount of $3.9 billion at March 31, 2001,
expire between 2001 and 2012 and require the Company to pay based upon fixed
rates between 4.38% and 6.94% (weighted average of 5.99%) while the Company
receives payments principally based on three month variable rates. The
counterparties to these agreements are financial institutions with a major
rating agency credit rating of "A" or better. The credit risk inherent in these
swap agreements represents the possibility that a loss may occur from the
nonperformance of a counterparty to the agreements. The Company monitors the
credit risk of these counterparties and the concentration of its contracts with
any individual counterparty. FDC anticipates that the counterparties will be
able to fully satisfy their obligations under the agreements.
Foreign Currency Derivatives
The Company's cash flows are exposed to foreign currency risk from transactions
denominated in foreign currencies, primarily the euro and british pound. It is
the policy of the company to minimize its cash flow exposure to adverse changes
in currency exchange rates. This is accomplished by identifying and evaluating
the risk that the Company's cash flows will decline in value due to
10
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
changes in exchange rates and by determining the appropriate strategies
necessary to manage such exposures. The Company's objective is to maintain
economically balanced currency risk management strategies that provide adequate
downside protection.
The Company utilizes purchased foreign currency options and forward exchange
contracts, which qualify as cash flow hedges to mitigate some of this risk.
These are intended to offset the effect of exchange rate fluctuations on
forecasted sales and intercompany royalties expected to occur over the next 12
months. Gains and losses on the derivatives are intended to offset losses and
gains on the hedged transactions in an effort to reduce the earnings volatility
resulting from fluctuating foreign currency exchange rates. The primary
currencies hedged by the Company are the European euro and British pound. At
March 31, 2001 the Company had purchased put options totaling 138 million euros
and 20 million pounds and forward sale contracts for 16 million euros. These
agreements expire between April and January 2002.
Other Cash Flow Hedges
The Company holds investments in equity securities of certain publicly traded
Companies and has hedged the anticipted future cash flows related to certain of
these investments, having an aggregate cost of $91.1 million, through the use of
costless collars (the sale of a call option on the investment shares, combined
with the purchase of a put option on the same amount of shares). Based upon the
Company's intent to sell the underlying shares upon the maturities of the
collars, the collars qualify, and have been designated, as cash flow hedges.
These agreements have aggregate notional amounts of $70.5 million with respect
to the put and $97.4 million with respect to the call. The collars expire at
various times from 2004 through 2006.
Accumulated Derivative Gains or Losses
The following table summarizes activity in other comprehensive income related to
derivatives classified as cash flow hedges held by the Company during the period
of January 1, 2001 (the date of adoption of SFAS 133) through March 31, 2001:
Cumulative effect of adopting FAS 133 as of January 1, ($ 24.8)
2001
Less: Reclassifications into earnings from other comprehensive
income 3.7
----------
(21.1)
Changes in fair value of derivatives - loss (48.6)
----------
Accumulated loss included in other comprehensive income ($ 69.7)
==========
The $3.7 million reclassification into earnings from other comprehensive income
was primarily recorded to revenues in the consolidated statement of income.
Approximately $18 million of the $24.8 million loss recognized in other
comprehensive income relating to the adoption of SFAS 133 will be reclassified
into earnings during 2001.
Note 10: Segment Information
First Data Corporation classifies its businesses into four segments: payment
services, merchant services, card issuing services and emerging payments. See
the Company's 2000 Annual Report on Form 10-K for a detailed description of each
segment and the accounting policies of the operating segments.
As stated in the Company's 2000 Annual Report on Form 10-K, the Company
established the emerging payments segment
11
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
in the third quarter of 2000. The segments have been restated to reflect the
movement of the operations of CashTax from payment services and non-core
e-commerce related activity and investments from the all other and corporate
segment, to emerging payments. In addition, a small information business from
all other and corporate was moved to card issuing services which reflects
current management reporting relationships.
The following table presents the Company's operating segment results for the
three months ended March 31, 2001 and 2000 (in millions):
Three months ended March 31,
----------------------------------
2001 2000
-------------- -------------
Revenues:
--------
Payment Services $ 625.6 $ 530.5
Merchant Services 476.2 408.3
Card Issuing Services 361.8 364.0
Emerging Payments 21.4 20.4
All Other and Corporate 38.6 57.4
-------------- -------------
Subtotal 1,523.6 1,380.6
Eliminations (a) (52.4) (37.4)
-------------- -------------
Consolidated $ 1,471.2 $ 1,343.2
============== =============
Operating Profit:
----------------
Payment Services $ 161.3 $ 134.4
Merchant Services 103.4 85.7
Card Issuing Services 72.7 68.9
Emerging Payments 0.2 3.2
All Other and Corporate (1.2) 4.7
-------------- -------------
Subtotal 336.4 296.9
Corporate Interest Expense (31.5) (20.4)
Restructuring, Business
Divestitures, Litigation and
Impairments, net -- (9.5)
Eliminations (a) (38.8) (37.4)
-------------- -------------
Consolidated $ 266.1 $ 229.6
============== =============
Depreciation & Amortization:
---------------------------
Payment Services $ 30.2 $ 30.3
Merchant Services 64.6 58.6
Card Issuing Services 50.1 56.0
Emerging Payments 0.7 0.7
All Other and Corporate 3.3 3.9
-------------- -------------
Consolidated $ 148.9 $ 149.5
============== =============
(a) Represents elimination of adjustment to record payment services revenues on
a pre-tax equivalent basis and elimination of inter-segment revenue.
12
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, December 31,
2001 2000
----------- -----------
Segment Assets (in millions):
Payment Services $ 12,677.6 $ 11,437.1
Merchant Services 3,824.4 3,686.4
Card Issuing Services 1,462.7 1,525.6
Emerging Payments 260.0 235.9
All Other and Corporate 265.0 410.1
----------- -----------
Consolidated $ 18,489.7 $ 17,295.1
=========== ===========
Note 11: Commitments and Contingencies
In 1998, five putative class actions based on similar factual allegations were
filed in United States District Courts, a California state court and a Texas
state court against, among others, the Company or its subsidiaries, including
its Western Union Financial Services, Inc. subsidiary. The plaintiffs in these
actions claim that an undisclosed "commission" is charged by the Company or its
subsidiaries when consumers transmit money to Mexico, in that the exchange rate
used in these transactions is less favorable than the exchange rate that the
Company or its subsidiaries receive when they trade dollars in the international
money market. The plaintiffs assert that the Company and its subsidiaries
violated the law by failing to disclose this "commission" in advertising and in
the transactions. Some of the plaintiffs also assert that the Company or its
subsidiaries have discriminated against persons who use their services to
transmit money to Mexico, in that the difference between the market exchange
rate and the exchange rate used by Western Union in the Mexico transactions is
greater than the difference between the market and exchange rates used by the
Company or its subsidiaries when transmitting funds to other countries. The
plaintiffs seek, among other things, injunctive relief, imposition of a
constructive trust, restitution, compensatory and statutory damages, statutory
penalties and punitive damages.
The parties to some of these actions reached proposed settlements. Under the
proposed settlement, the Company will establish a charitable fund for the
advancement of Mexican and Mexican-American causes in the amount of $4 million.
Western Union also will issue coupons for discounts on future money transfer
transactions to Mexico to its customers who transferred money from the U.S. to
Mexico between January 1, 1987 and August 31, 1999. In addition, the Company
will issue coupons for discounts on future Western Union transactions to
customers who transferred money to Mexico from January 1, 1988 to December 10,
1996 using the MoneyGram service because MoneyGram was previously operated by a
subsidiary of the Company. The proposed settlement also includes reasonable
attorneys' fees and costs as well as the costs of settlement notice and
administration.
On December 21, 2000, the United States District Court for the Northern District
of Illinois granted final approval of the proposed settlement and entered a
final judgment. In approving the settlement, the Court permanently enjoined the
continued prosecution of the other actions. In January 2001, notices of appeal
from the final judgment were filed in two of the actions by some of the class
members who objected to the settlement in the respective action.
On January 11, 2000, a subsequent putative class action that makes allegations
similar to the allegations described above was filed in a California state court
against the Company and its subsidiaries, Western Union Financial Services, Inc.
and Orlandi Valuta. The putative class consists of those persons who have used
13
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Western Union's or Orlandi Valuta's services after August 31, 1999 to transmit
money from California to Mexico, or who have used the Western Union or Orlandi
Valuta money transfer services to transmit money from California to Mexico and
have opted out of one of the nationwide settlements discussed above. The
plaintiffs seek injunctive relief, imposition of a constructive trust, an
accounting, restitution, compensatory and statutory damages alleged to be in
excess of $500,000,000, statutory penalties in an amount of $1,000 for each
offense, punitive damages, attorneys' fees, prejudgment interest, and costs of
suit. The Company is vigorously defending this action.
On January 19, 2001, another putative class was filed in the United States
District Court for the Eastern District of New York against the Company and its
subsidiary, Western Union Financial Services, Inc. asserting claims on behalf of
a putative worldwide class (excluding members of the settlement class certified
in one of the above actions). The plaintiff claims that the Company and Western
Union impose an undisclosed "charge" when they transmit consumers' money by wire
to international locations, in that the exchange rate used in these transactions
is less favorable than the exchange rate that Western Union receives when it
trades currency in the international money market. Plaintiff further asserts
that Western Union's failure to disclose this "charge" in the transactions
violates 18 U.S.C. section 1961 et seq. and state deceptive trade practices
statutes, and also asserts claims for civil conspiracy. Plaintiff seeks
injunctive relief, compensatory damages in an amount to be proven at trial,
treble damages, punitive damages, attorneys' fees, and costs of suit. The
Company intends to vigorously defend this action.
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.
14
FIRST DATA CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
Significant Developments
During the first three months of 2001, First Data Corporation ("FDC" or the
"Company") continued to emphasize its three principal business segments: payment
services, merchant services and card issuing services. The Company's focus is on
revenue growth, cost management and execution of core strategies. FDC also
continues to seek Internet growth opportunities in these core segments as well
as in its fourth segment, emerging payments.
In the payment services segment, Western Union signed a number of agreements to
expand availability of Western Union Money Transfer services. In January 2001,
Western Union signed a five-year agreement with the India Department of Posts,
to expand the availability of Western Union Money Transfer services throughout
India, which the company anticipates will add 5,000 new Western Union agent
locations throughout India in the next three years. Western Union also signed an
agreement with the China Department of Posts, as a money transfer agent, which
is expected to add 1,000 new agent locations in the next year. Additionally,
Western Union signed an agreement with 7-Eleven to offer automated money
transfer services to potentially 5,000 new locations, and signed a five-year
agreement with Publix supermarkets to increase its presence throughout the
Southeast United States, with 650 new locations. Another agreement with Rite-Aid
drugstores is expected to add 1,600 money transfer locations during 2001. In
January 2001, Western Union acquired Bidpay.com, a provider of web-based payment
services to online auction markets. In March 2001, Western Union acquired a 25%
equity interest in FEXCO, one of Ireland's largest financial services companies,
expanding its opportunities in the European market.
In the merchant services segment, the Company acquired a majority interest in
TASQ Technology, Inc., an industry leader in point-of-sale (POS) technologies
that will complement First Data Merchant Services' POS deployment operations.
The acquisition was effective March 1, 2001.
In April 2001, card issuing services acquired PaySys International Inc., which
provides card processing in more than 35 countries for bank, retail, and private
label cards. Also, card issuing services entered into a joint venture and formed
Nihon Card Processing Co. Ltd., the first company in Japan to provide
third-party credit card processing services.
With respect to the Company's U.K. card processing business ("FDR Europe"), card
issuing services will deconvert the Royal Bank of Scotland ("RBS") in July 2001.
The RBS business currently represents approximately 3% of card issuing services'
annualized revenue. In response, the Company is restructuring certain activities
to adjust its cost structure.
In March 2001, eONE Global launched govONE Solutions, combining CashTax with the
recently acquired transaction processing business of govWorks to augment payment
solutions for local, state and federal governmental entities. Also, eONE Global
announced a partnership with Verisign to co-market each other's products and to
develop solutions to increase secure payment options in B2B and B2C
marketplaces.
FDC is a market leader in its three major segments: payment services, merchant
services and card issuing services. The Company continues to focus on enhancing
these core business areas and to assess how best to serve its customer base as
well as pursue opportunities to expand its emerging payment businesses. Among
the actions the Company believes are necessary to continue its leadership
position is a focused effort to expand
15
FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
internationally, develop new products and services and to enhance its processing
platforms in response to Company growth, client requirements, changing
technology and expanding e-commerce initiatives. In this regard, the Company
continues to upgrade its business continuity plans to reflect new systems and
platforms developed to support these actions. Also, the Company continues to
take action to further streamline operations and reduce costs.
Results of Operations
The Company derives revenues in each of its reportable segments based
principally on the number of transactions processed, a percentage of dollar
volume processed or on a combination thereof. For the three months ended March
31, 2001, total revenues increased 10% to $1.47 billion from $1.34 billion in
the prior year quarter.
Product sales and other revenues increased 62% from $27.1 million in the first
three months of 2000 to $43.9 million in the same period of 2001. This increase
is due primarily to an increase in incentive payments received from a partner in
a previously formed merchant alliance and royalty payments.
For the three months ended March 31, 2001, operating expenses increased 5% to
$914.1 million from $873.9 million in the same period of 2000. This increase
resulted from growth in business, primarily offset by cost management
initiatives implemented in 2000. As a result, operating expenses as a percent of
revenue decreased in the first quarter of 2001 as compared to the same period in
2000.
Selling, general and administrative expenses increased 24% to $259.5 million in
2001's first quarter compared to $209.8 million for the same period in 2000. As
a percentage of revenue, selling, general and administrative expenses increased
2% attributable to increased advertising and promotional spending in the payment
services segment to drive revenue growth, and increased spending on system
advisory services for a specific project.
Interest expense increased 54% to $31.5 million for the first quarter of 2001
from $20.4 million for the first quarter of 2000. The increase is attributed to
an increase in average total debt balances as the Company continued the
repurchase of its stock under its buyback programs.
FDC's effective tax rate for the first quarter of 2001 was 28.5%, compared with
2000's first quarter rate of 28.1%. Excluding the impact of restructuring and
business divestitures, the effective tax rate remained flat at 28.5% for both
periods.
Net income of $187.5 million for the three months ended March 31, 2001 was up
from $165.0 million in the comparable period of 2000. Excluding restructuring,
business divestitures and a change in accounting principle, net income for the
three months ended March 31, 2001 of $190.2 million increased approximately 11%
over 2000's first quarter net income of $171.0 million. These increases were
primarily the result of margin improvements in the combined core businesses,
driven primarily by strong volume trends and the impact of cost reduction
initiatives. Diluted earnings per share ("EPS") increased 21% to $0.47 for the
first three months of 2001. Excluding the impact of restructuring, business
divestitures and a change in accounting principle, diluted EPS increased 18% to
$0.47 in the first three months of 2001.
Payment Services
Total revenues in the payment services segment increased by 18% (on a
tax-equivalent basis) to $625.6 million
16
FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
in the first quarter of 2001, as compared to $530.5 million in the same period
of 2000. This increase reflects continuing strong underlying volume increases in
total worldwide money transfer transactions, which increased by 23% to 25.6
million. Revenue for international money transfers (a transfer either sent to or
received from an international location other than Mexico) grew 36% (40% after
adjusting for the weaker euro) with transaction growth of 46%. Domestic money
transfer and Quick Collect money transfer transactions grew near 10% in the
first quarter 2001 compared to 2000. At March 31, 2001, the agent base had grown
21% as compared to a year ago, with nearly 104,000 agents in 186 countries and
territories.
Operating profits for the first quarter of 2001 grew 20% over last year's first
quarter, from $134.4 million to $161.3 million. Established businesses continued
to gain operating leverage on fixed expenses through cost efficiencies, which
were offset by price reductions in certain markets and increased promotional and
advertising spending.
Merchant Services
Revenues in the merchant services segment grew 17% to $476.2 million for the
first quarter of 2001 compared to $408.3 million for first quarter 2000. North
America merchant dollar volume and transactions grew 10% over the first quarter
of 2000 with merchant dollar volume increasing to $110.1 billion in 2001.
Revenue growth was driven by growth in the dollar volume and transactions
processed, an increase of 62% in revenue from its gaming merchant alliance, as
well as an increase in incentive payments received from a partner in a
previously formed merchant alliance and royalty payments.
Operating profits increased 21% to $103.4 million for the first quarter of 2001
from $85.7 million for the 2000 first quarter. This improvement is reflective of
increased volume and transactions and increased margins due to the continuation
of cost reduction initiatives.
Key elements of FDC's strategy in the merchant services segment involve its
joint venture alliances with its bank partners and implementation of
International, debit and Internet commerce initiatives. Each joint venture
alliance requires successful management of the relationship between the Company
and the bank partner in that alliance. The alliance strategy could be affected
by further consolidation among financial institutions. Merchant services expects
that the shift from cash and check transactions to electronic and card
transactions will continue to benefit the alliances' internal growth. Internet
commerce and an increased number of debit transactions present growth
opportunities for the merchant services segment. While Internet commerce and
debit transactions currently account for a small portion of the segment's
transactions, they are growing rapidly.
The merchant services segment is the least insulated from economic slow downs as
its revenue is driven by both dollar volume and transactions processed and a
severe downturn of the economy could reduce both. However, the Company has
noted, and the December 2000 Nilson report shows, a secular trend in the shift
in payment methods from cash and check to electronic and card based payments.
The secular trend is accelerating on a year over year comparison. This
continuing shift is expected to help offset the effects of an economic slowdown.
Card Issuing Services
Total revenues in the card issuing services segment remained relatively flat at
$361.8 million for the first quarter of 2001 as compared to $364.0 million for
2000's first quarter. Growth in underlying volumes continued to be strong and
increases in accounts on file for 2001 was significant as compared to the first
quarter of 2000, offset in part by certain deconversions and pricing
concessions. Card accounts on file as of March 31,
17
FIRST DATA CORPORATION
MANAGMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
2001 were 311 million (a 21% increase from March 31, 2000) with domestic card
accounts growing to 282 million (22% growth) and international card accounts
growing to 29 million (12% growth). The increase is attributed to the addition
of the Wal-Mart portfolio and conversion of the JCPenney portfolio in the third
quarter of 2000, which have added approximately 45 million card accounts on
file. Accounts on file continue to grow faster than revenues due to an increased
proportion of accounts processed for large issuers with lower than average
prices and growth in debit and retail card accounts on file which generate lower
revenue per account.
Consolidation among financial institutions has led to an increasingly
concentrated client base, which results in a changing client mix towards larger,
highly sophisticated customers. The effects of pricing, client mix and product
mix of providing services to this increasingly concentrated industry will most
likely cause prospective revenues to grow more slowly than accounts on file.
Operating profit for the card issuing services segment increased 6% to $72.7
million in 2001's first quarter from $68.9 million in 2000. Improved performance
was driven by cost management initiatives, including workforce reductions in
2000 and productivity improvements that resulted in significant operating margin
improvements (from 18.9% in 2000 to 20.1% for 2001).
Emerging Payments
Revenues for the emerging payments segment increased 5% to $21.4 million in the
first quarter of 2001 from $20.4 million for 2000, representing revenues of the
govONE Solutions operating company, formerly CashTax.
Operating profit was $0.2 million for 2001 and $3.2 million for 2000. Results
primarily reflect operating profits of govONE Solutions offset by increased
spending on e-commerce initiatives in 2001 over 2000.
All Other and Corporate
Revenues from other operations decreased to $38.6 million for the first quarter
of 2001 from $57.4 million in first quarter 2000. Much of the decline was
attributed to a reduction in in-store bank branch installations at IBT, price
and volume declines at Call Interactive and the loss of a significant contract
at Teleservices. These items, along with an increase in spending on certain
corporate initiatives, lead to a decline in operating profits in the first
quarter of 2001, from $4.7 million profit in the first quarter of 2000 to a $1.2
million loss for 2001.
Capital Resources and Liquidity
FDC maintained a strong financial position in the first quarter of 2001. Cash
and cash equivalents were $799.5 million at March 31, 2001 compared to $853.3
million at December 31, 2000. FDC utilized cash flows from operating activities
to reinvest in its existing businesses, contribute to the financing of business
expansion and fund treasury stock purchases.
Operating activities generated cash of $269.9 million for the three months ended
March 31, 2001 compared to $116.5 million for 2000's first quarter. This
increase is primarily due to the first quarter 2000 tax payments associated with
the fourth quarter 1999 sale of Investor Services Group offset somewhat by the
net use of cash resulting from changes in working capital.
FDC reinvests cash in its existing businesses principally to expand its
processing capabilities through property and equipment additions, to establish
customer-processing relationships through contract payments and costs
18
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
for conversion and to acquire or develop software for use in its operations.
Capitalized amounts of these cash outlays increased to $100.0 million for the
first three months of 2001 as compared to $75.7 million for the first three
months of 2000.
Overall, FDC's operating cash flow for the three months ended March 31, 2001
exceeded its investing activities associated with additions to property and
equipment and capitalized contract and systems development costs by $169.9
million. These cash sources contributed to funds utilized for business
acquisitions and treasury stock purchases.
In the first three months of 2001, the Company had net cash outlays of $281.6
million for acquisitions (as compared to $10.2 million in 2000). The Company
also paid $16.8 million relating to businesses previously acquired, compared to
$29.6 million in the first quarter of 2000. In addition, the Company issued 1
million of its common shares, valued at $53 million, as part of an earnout
agreement relating to the acquisition of one of its equity method investments.
The Company's financing activities included the issuance of $542 million of 2%
Senior Convertible Contingent Debt Securities due 2008, which generated net cash
proceeds of $534 million. Offsetting this cash inflow were repayments of short-
term debt, and share repurchases under the Company's $1 billion and $500 million
share repurchase programs discussed below and dividend payments partially offset
by proceeds from stock option exercises and other employee stock benefit
programs. Net cash generated from financing activities was $91.7 million during
the first three months of 2001, as compared to a use of cash of $694.2 million
in the same 2000 period.
The Company made cash outlays totaling $345.9 million in the three months ended
March 31, 2001 to buy back shares of its common stock. Proceeds from stock
option exercises totaling $109.9 million partially offset these outlays. In
addition, the Company continued its practice of paying quarterly cash dividends,
resulting in $7.8 million of cash payments to the Company's common stockholders
during the first three months of 2001.
The Company completed the $1 billion stock repurchase authorized by the Board of
Directors in May 2000 by purchasing 2.9 million of its common shares at a cost
of $164 million during the first quarter of 2001. A total of 21.0 million common
shares were repurchased under this program. Additionally, the Company
repurchased 0.4 million shares of its common stock for $21 million under the
$500 million stock repurchase program authorized in December 2000.
The Company filed a new $1.5 billion shelf registration in the first quarter
2001, all of which was available at quarter end, providing for the issuance of
up to $1.5 billion of debt and equity securities of the Company. The Company has
another shelf registration providing for the issuance of approximately 10
million shares of the Company's common stock in connection with certain types of
acquisitions, all of which was available at quarter end.
Included in cash and cash equivalents on the Consolidated Balance Sheet at March
31, 2001 is $70 million related to required investments of cash in connection
with the Company's merchant card settlement operation. FDC has remaining
available short-term borrowing capability of approximately $1.0 billion at March
31, 2001 under the Company's commercial paper program, uncommitted bank credit
lines and its $300 million extendable commercial notes 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.
19
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
There have been no material changes from the 2000 Annual Report on Form 10-K
related to the Company's exposure to market risk from interest rates.
20
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 March 31, 2001 and the related consolidated statements of
income and cash flows for the three-month periods ended March 31, 2001 and 2000.
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 auditing standards generally accepted in the United States,
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 accounting principles generally accepted in
the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of First Data
Corporation as of December 31, 2000, and the related consolidated statements of
income, stockholders' equity, and cash flows for the year then ended (not
presented herein) and in our report dated January 24, 2001, 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, 2000, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
Ernst & Young LLP
Denver, Colorado
April 11, 2001
21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time the Company is involved in various litigation matters arising
in the ordinary course of its business. None of these matters, either
individually or in the aggregate, currently is material to the Company except as
reported in the Company's Annual Report on Form 10-K for the year ended December
31, 2000 (the "Annual Report"). There were no material developments in the
litigation matters previously disclosed except that, in the action filed by
Julieta Amorsolo that was previously reported in the Annual Report, the
California Superior Court sustained defendants' demurrer to plaintiffs' claim
for violation of California Financial Code section 1810.5(a) and granted
defendants' motion to strike portions of the Corrected First Amended Complaint.
The plaintiffs filed a writ with the California Court of Appeals requesting that
it review the decision to sustain the defendant's demurrer. The California Court
of Appeals summarily denied the writ.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
In January 2001, the Company issued 1 million shares of its common stock to
fulfill certain obligations under a 1997 stock purchase agreement in which the
Company acquired 50% of the outstanding equity of another company. The shares
were issued to a shareholder of the company in which the interest was acquired.
The issuance of the common stock was not registered under the Act in reliance
upon the exemption from registration provided by Section 4(2) of the Act.
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
99.1 Private Securities Litigation Reform Act of 1995
Safe Harbor Compliance Statement for Forward-Looking Statements
(b) Reports on Form 8-K
- -----------------------
During the quarter, the Company filed the following Current Reports on Form
8-K.
(a) On January 25, 2001, the Company filed a Current Report on Form 8-K
reporting recent developments in litigation involving the Company.
(b) On February 21, 2001, the Company filed a Current Report on Form 8-K
reporting the Revolving Credit Agreement dated November 3, 2000
entered into by the Company and the January 25, 2001 press release
relating to the Company's earnings for fiscal year 2000.
(c) On February 22, 2001, the Company filed a Current Report on Form 8-K
reporting a February 21, 2001 press release regarding the Company's
offering of Convertible Senior Notes.
(d) On February 28, 2001, the Company filed a Current Report on Form 8-K
reporting an Underwriting Agreement Basic Provisions, 2001 First
Supplemental Indenture and Form of Global Note related to the
Company's offering of Convertible Senior Notes.
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.
22
FIRST DATA CORPORATION
---------------------------
(Registrant)
Date: May 14, 2001 By /s/ Kimberly S. Patmore
------------ ----------------------------------
Kimberly S. Patmore
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 14, 2001 By /s/ Tom Moore
------------ ----------------------------------
Tom Moore
Vice President and
Corporate Chief Financial Officer
(Principal Accounting Officer)
23
FIRST DATA CORPORATION
INDEX TO EXHIBITS
-----------------
Exhibit
Number Description
- -------
12 Computation of Ratio of Earnings to Fixed Charges
15 Letter from Ernst & Young LLP Regarding Unaudited Interim Financial
Information
99.1 Private Securities Litigation Reform Act of 1995
Safe Harbor Compliance Statement for Forward-Looking Statements
24