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FORM 10-Q
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, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-10442
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FIRST FINANCIAL MANAGEMENT CORPORATION
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(Exact name of registrant as specified in its charter)
GEORGIA 58-1107864
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 CORPORATE SQUARE, SUITE 700, ATLANTA, GEORGIA 30329
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 321-0120
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NOT APPLICABLE
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(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
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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 August 1, 1995
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Common Stock, $.10 par value 63,868,916
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FIRST FINANCIAL MANAGEMENT CORPORATION
INDEX
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PAGE
PART I. FINANCIAL INFORMATION NUMBER
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Item 1 Consolidated Financial Statements:
Consolidated Balance Sheets at June 30, 1995
and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the
three and six months ended June 30, 1995 and 1994 . . . . . . . 4
Consolidated Statements of Cash Flows for the
six months ended June 30, 1995 and 1994 . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 15
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PART I. FINANCIAL INFORMATION
FIRST FINANCIAL MANAGEMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 1995 December 31, 1994
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(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents $ 298.3 $ 326.1
Accounts receivable, net of allowance for doubtful
accounts of $7.5 (1995) and $7.7 (1994) 414.0 473.8
Prepaid expenses and other current assets 108.3 103.3
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Total Current Assets 820.6 903.2
Property and equipment, net 160.4 163.6
Goodwill, less accumulated amortization
of $95.8 (1995) and $73.4 (1994) 1,747.5 1,740.6
Customer portfolios, less accumulated amortization
of $52.4 (1995) and $44.5 (1994) 219.1 160.5
Other assets 164.0 167.8
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$3,111.6 $3,135.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $644.3 $678.9
Income taxes payable 18.3 5.6
Current portion of long-term debt 30.1 9.2
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Total Current Liabilities 692.7 693.7
Long-term debt, less current portion 202.5 53.1
Pension obligations assumed 149.6 266.0
Senior convertible debentures 447.1 447.1
Other liabilities 65.7 246.0
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Total Liabilities 1,557.6 1,705.9
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Commitments and contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized
150,000,000 shares, issued 63,883,017
shares (1995) and 61,575,046 shares (1994) 6.4 6.2
Additional paid-in capital 905.4 858.2
Retained earnings 642.2 565.4
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Total Shareholders' Equity 1,554.0 1,429.8
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$3,111.6 $3,135.7
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See notes to consolidated financial statements.
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FIRST FINANCIAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
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1995 1994
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(In millions, except per share amounts)
REVENUES
Service revenues $768.1 $498.3
Product sales 12.2 18.0
Other 1.7 1.2
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782.0 517.5
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EXPENSES
Operating 589.8 388.9
Selling, general and administrative 64.5 36.1
Cost of products sold 8.3 11.4
Depreciation and amortization 34.0 23.7
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696.6 460.1
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Operating income 85.4 57.4
Interest, net 6.5 (1.5)
Pension cost 3.4 ---
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Income before income taxes 75.5 58.9
Income taxes 31.0 24.7
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Net income $ 44.5 $ 34.2
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Earnings per common share $ 0.69 $ 0.55
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See notes to consolidated financial statements.
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FIRST FINANCIAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
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1995 1994
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(In millions, except per share amounts)
REVENUES
Service revenues $1,439.1 $940.4
Product sales 25.1 36.8
Other 2.1 1.6
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1,466.3 978.8
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EXPENSES
Operating 1,097.0 737.6
Selling, general and administrative 126.9 66.5
Cost of products sold 17.0 22.9
Depreciation and amortization 66.5 46.0
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1,307.4 873.0
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Operating income 158.9 105.8
Interest, net 14.7 (2.7)
Pension cost 8.7 ---
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Income before income taxes 135.5 108.5
Income taxes 55.6 44.8
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Net income $ 79.9 $ 63.7
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Earnings per common share $ 1.25 $ 1.02
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See notes to consolidated financial statements.
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FIRST FINANCIAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
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1995 1994
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(In millions)
Cash and cash equivalents at January 1 $ 326.1 $ 190.0
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income 79.9 63.7
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization 66.5 46.0
Other non-cash items 8.6 3.0
Increase (decrease) in cash, excluding the effects of
acquisitions, resulting from changes in:
Accounts receivable 56.6 (27.4)
Prepaid expenses and other assets (12.2) (6.5)
Accounts payable and accrued expenses 75.2 46.5
Income tax accounts 85.4 9.2
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Net cash provided by operating activities 360.0 134.5
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under revolving credit facility, net 168.4
Fundings of pension obligations assumed (154.1)
Principal payments on long-term debt (4.8) (2.0)
Proceeds from exercise of stock warrants 35.0 8.1
Cash dividends and other payments (3.1) (3.1)
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Net cash provided by financing activities 41.4 3.0
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CASH FLOWS FROM INVESTING ACTIVITIES
Current year acquisitions, net of cash received (57.4) (47.0)
Payments related to businesses previously acquired (327.4) (35.0)
Proceeds from sale of business, net of payments
related to businesses previously sold 6.8 (3.0)
Additions to property and equipment, net (23.1) (14.6)
Software development and customer conversions (28.1) (23.5)
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Net cash used in investing activities (429.2) (123.1)
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Change in cash and cash equivalents (27.8) 14.4
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Cash and cash equivalents at June 30 $ 298.3 $ 204.4
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See notes to consolidated financial statements.
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FIRST FINANCIAL MANAGEMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The consolidated financial statements include the accounts of First
Financial Management Corporation and its wholly-owned subsidiaries
(the "Company" or "FFMC"). All material intercompany profits,
transactions, and balances have been eliminated. Certain prior year
amounts have been reclassified to conform to the current year's
presentation.
The Company operates in a single business segment, providing
information services to commercial establishments, government agencies
and consumers. The largest category of services, merchant services,
involves information processing and transfer related to financial
transactions. These services include the authorization, processing and
settlement of credit and debit card transactions, verification or
guarantee of check transactions, debt collection and accounts
receivable management, and worldwide nonbank money transfers and bill
payments. A second category includes data processing and information
management services related to health care and workers' compensation
claims and the resulting payments. The final service category
comprises a full array of information management services, including
data capture, data imaging, micrographics, electronic database
management, and output printing and distribution.
The financial information presented should be read with the Company's
annual consolidated financial statements and notes included in its
Annual Report on Form 10-K for the year ended December 31, 1994. The
foregoing unaudited consolidated financial statements reflect all
adjustments (all of which are of a normal recurring nature) which are,
in the opinion of management, necessary for a fair presentation of the
results of the interim periods. The results for the interim periods
are not necessarily indicative of results to be expected for the year.
2. In 1995, the Company has completed several acquisitions, including a
company specializing in grocery store check approval and debit card
processing, two merchant credit card processing portfolios, and a
check verification and guarantee company. Through June 30, 1995 the
Company paid $57.4 million in cash (net of cash acquired) and issued
notes payable totaling $8.0 million in connection with such
acquisitions. All current year acquisitions have been accounted for as
purchases, and their 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 anticipated to be material.
3. In March 1995, the Company awarded Patrick H. Thomas, its Chairman,
President and Chief Executive Officer, 500,000 restricted shares as
incentive compensation for the years 1995 through 1999. The vesting of
the shares is contingent upon FFMC's attainment of a performance goal
for 1995 and continued employment through 1999, unless specified
conditions occur. The Company also awarded 94,500 restricted shares to
Mr. Thomas as incentive compensation, which are subject to forfeiture,
in part or in whole, based on a formula related to the pretax income
of the Company for 1995 and the market price of the Company's common
stock at the end of 1995. All of these restricted shares will vest
free of restrictions in the event of approval by the FFMC shareholders
of the merger described in Note 8.
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FIRST FINANCIAL MANAGEMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
The value of the award is adjusted using the closing price of the
Company's common stock on balance sheet dates through the date of
measurement for the FFMC performance goal. The Company has assumed the
maximum number of shares will be earned and is amortizing the value
from the date of grant (March 1994 for the 94,500 share award, as it
replaced a similar previously issued but subsequently canceled award)
over the restriction period.
4. All outstanding FFMC common stock warrants were exercised during the
final exercise period in the second quarter of 1995. As a result of
these exercises, the Company issued 1.3 million new shares of FFMC
common stock in return for $35.0 million in cash.
5. On May 2, 1995 the Company amended its $1.0 billion unsecured
Revolving Credit Facility, which has a term through November 1997, by
reducing the amount available to $500 million. Simultaneously the
Company entered into an additional $500 million revolving credit
facility with a one year term. The amended facility and the new
revolving credit facility contain the same covenants and restrictions
as the original $1.0 billion revolving credit facility.
During 1995, FFMC also added a short term uncommitted borrowing
arrangement (for unsecured borrowings of up to $100 million) to
supplement its existing committed revolving credit facilities in
providing for the Company's financing needs. Borrowings under this
short term uncommitted borrowing arrangement bear interest at
prevailing money market rates (6.45% at June 30, 1995) and are subject
to terms that are no more restrictive than the terms of the revolving
credit agreements. The Company's current portion of long-term debt on
the accompanying balance sheet at June 30, 1995 includes amounts
outstanding under this arrangement totaling $18.4 million.
6. During the second quarter of 1995, the Company completed its actuarial
review of the suspended pension plan assumed in November 1994 in
connection with the acquisition of Western Union. The assumptions used
in the actuarial review included a 8.25% discount rate and a 9.50%
expected long term rate of return on assets. This review resulted in
an increase to the net underfunded pension obligation of $37.7 million
with a corresponding adjustment to goodwill. During the second
quarter, the Company made advance fundings of its pension obligations
totaling $154.1 million in cash.
The following table sets forth the funded status and amounts
recognized in the Consolidated Balance Sheet at June 30, 1995 (amounts
in millions):
Actuarial present value of projected benefit
obligation as of January 1, 1995 $550.0
Less: Plan assets at January 1, 1995 (246.3)
Year to date 1995 Plan fundings (154.1)
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Pension Obligations Assumed $149.6
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Based on the current status of the pension plan there is no difference
between accumulated and vested pension obligations. Additionally,
pension costs of $8.7 million for the first six months of 1995 have
been recorded in accrued expenses. In July 1995, FFMC made an
additional $44 million cash funding of its pension obligations.
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FIRST FINANCIAL MANAGEMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
7. Earnings per common share amounts are computed by dividing income
amounts by the weighted average number of common and common equivalent
shares (when dilutive) outstanding during the period. Common stock
equivalents consist of shares issuable under the Company's stock
option plans, shares issuable in connection with outstanding warrants
and an assumed conversion into common stock of FFMC's senior
convertible debentures issued in December 1994. The after tax interest
expense and amortization on these debentures ($3.6 million and $7.1
million for the three and six months ended June 30, 1995,
respectively) are added back to net income in computing earnings per
common share. Weighted average shares for all periods reflect the
shares issued in July 1994 to effect FFMC's merger with GENEX
Services, Inc., which was accounted for as a pooling of interests.
Weighted average shares used to compute earnings per common share were
as follows:
(In millions)
1995 1994
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Three months ended June 30, 69.8 62.6
Six months ended June 30, 69.6 62.5
8. On May 12, 1995 the Company entered into an Agreement and Plan of
Merger with Employee Benefits Plan, Inc. ("EBP"). Pursuant to the
merger agreement, EBP will ultimately become a wholly owned subsidiary
of FFMC. The merger requires various regulatory approvals and approval
of a majority of the shareholders of EBP. Upon consummation of the
merger, each EBP shareholder will receive .1975 shares of FFMC common
stock for each common share of EBP, resulting in the issuance by FFMC
of approximately 1.8 million common shares.
On June 12, 1995, the Company entered into an Agreement and Plan of
Merger with First Data Corporation ("First Data"). Pursuant to the
merger agreement, the Company will ultimately become a wholly owned
subsidiary of First Data. The merger requires various regulatory
approvals and approval of the shareholders of both companies. Upon
consummation of the merger, each FFMC shareholder will receive 1.5859
shares of First Data common stock for each common share of FFMC.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Data Merger
First Financial Management Corporation ("FFMC" or "the Company") entered into
an Agreement and Plan of Merger (the "FDC Merger Agreement"), dated as of June
12, 1995, among the Company, First Data Corporation ("First Data") and FDC
Merger Corp., a wholly owned subsidiary of First Data. The FDC Merger Agreement
provides for the merger of FDC Merger Corp. with and into FFMC, with FFMC
remaining as the surviving corporation in the merger and thus becoming a wholly
owned subsidiary of First Data. Pursuant to the FDC Merger Agreement, and
subject to the terms and conditions thereof, each share of FFMC common stock
will be converted into 1.5859 shares of First Data common stock. First Data
will account for the merger as a pooling of interests under generally accepted
accounting principles. The Company's merger with First Data requires various
regulatory approvals and the approvals of a majority of the shareholders of
both companies. While there can be no assurance as to when or if these
approvals will be obtained, the Company currently estimates that the merger
will be consummated in late 1995 or early 1996.
First Data provides high-quality, high-volume information processing and
related services to specific client groups: the transaction card, payment
instruments, teleservices, mutual fund, receivables and information management
industries. First Data's information processing facilities are comprised of
integrated networks of computer hardware, proprietary software and other
telecommunications and operations systems. First Data has data centers which
are capable of servicing a wide range of client groups, enabling it to process
transactions of hundreds of clients in a rapid and cost effective manner and
take advantage of economies-of-scale when adding new clients.
Strategic Transactions
FFMC entered into an Agreement and Plan of Merger (the "EBP Merger Agreement"),
dated May 12, 1995, among the Company, Employee Benefit Plans, Inc. ("EBP"),
and Gemini Acquisition Corp., a wholly owned subsidiary of FFMC. The EBP Merger
Agreement provides for the merger of Gemini Acquisition Corp. with and into
EBP, with EBP remaining as the surviving corporation in the merger and thus
becoming a wholly owned subsidiary of FFMC. The acquisition requires various
regulatory approvals and the approval of a majority of EBP shareholders. While
there can be no assurance as to when or if these approvals will be obtained,
the Company expects the merger with EBP to be consummated late in the third
quarter or early in the fourth quarter of 1995. Pursuant to the EBP Merger
Agreement, and subject to the terms and conditions thereof, each share of EBP
common stock will be converted into 0.1975 shares of FFMC common stock, which
translates into the Company's issuance, at the consummation of the merger, of
approximately 1.8 million new shares of FFMC common stock. FFMC will account
for the acquisition of EBP as a purchase transaction under generally accepted
accounting principles.
EBP provides benefit plan design and consulting, administrative services,
underwriting of group health and accident insurance, and managed care programs
to companies throughout the United States. The
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Company believes that the addition of EBP's claims processing business and
customers to its existing third party claims administration business will give
FFMC's health care services business greater strength and operating
efficiencies. The insurance aspect of EBP's business, though ancillary to the
claims processing business, affords FFMC the flexibility to offer a broader
range of products to its health care clients, thereby providing opportunities
for growth in the health care industry.
In November 1994, FFMC completed its acquisition of Western Union Financial
Services, Inc. and related assets ("Western Union"). This business combination
was accounted for as a purchase, and the results of Western Union have been
included in the Company's results from the effective date of the acquisition.
FFMC completed its merger with GENEX Services, Inc. ("GENEX") in July 1994.
This business combination was accounted for as a pooling of interests and,
accordingly, the results of GENEX are included in the Company's results for all
periods in 1994.
Results of Operations
FFMC reported net income of $44.5 million in the second quarter of 1995, up 30%
over 1994's second quarter. Earnings per common share for the quarter increased
25% to $.69 per share from $.55 per share in the prior year. Revenues were
$782.0 million for the quarter, or 51% over the $517.5 million in revenues for
the prior year's second quarter, including a 54% increase in service revenues.
For the six months ended June 30, 1995, the Company reported net income of
$79.9 million compared with $63.7 million in 1994's first six months, an
increase of 25%. Revenues in 1995's first half rose 50% to $1.5 billion over
$978.8 million in the prior year period, including a 53% increase in service
revenues. Earnings per share increased to $1.25 per share for the six months
ended June 30, 1995 from the $1.02 per share reported in 1994's first six
months.
The revenue increases were due primarily to continued strong growth in the
Company's merchant services area, led by the acquisition of Western Union in
November 1994 and expanding internal growth. Merchant services revenues
increased 79% during 1995's second quarter compared with the year earlier
period (27% excluding the impact of Western Union in 1995). For the first six
months of 1995, merchant services revenues were up 78% compared with 1994's
first six months (26% excluding Western Union). The Company's overall internal
growth rate was 18% in 1995's second quarter, increasing the year-to-date rate
to 17% .
The Company continues to emphasize growth in its service revenues. The declines
in product sales reflect the Company efforts (that began in early 1994) to
decrease the significance of one-time product sales and focus its product
development effort on data capture platforms that link customers to FFMC's
information services. As a result, product sales declined in the second quarter
and first six months of 1995 compared with the comparable prior year periods.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
FFMC continues to place important emphasis on expense controls. Operating
expenses increased 52% and 49%, respectively, during the three and six month
periods ended June 30, 1995, compared with relatively higher increases in
service revenues during these periods.
The impact of Western Union's marketing costs in 1995 was the primary factor in
the increase in selling, general and administrative expenses during the second
quarter and first six months of 1995 compared with the year earlier periods.
Depreciation and amortization expense increased 43% during the second quarter
of 1995 and 45% in 1995's first six months over comparable 1994 periods,
primarily due to higher goodwill amortization in 1995 resulting from the
Western Union acquisition.
The combination of these revenue and expense changes resulted in operating
income margins of 10.8% for the first six months of both 1995 and 1994. The
relative increases in selling, general and administrative expenses during
1995's second quarter led to the slight decline in the Company's operating
margins to 10.9% compared with 11.1% in the second quarter of 1994.
Increases in interest expense and pension cost for the 1995 periods reflect
borrowings and obligations assumed related to the Western Union acquisition.
Higher levels of interest expense arose from FFMC's senior convertible
debentures and borrowings under its revolving credit facility. Pension cost in
1995's second quarter and first six months represents primarily interest
expense on the unfunded obligations of the Western Union suspended defined
benefit plan. Since benefits under this plan have been suspended for several
years and its assumption was principally a financing for the Western Union
acquisition, the Company has classified the related costs as nonoperating.
The higher level of interest and pension expenses in 1995, as contrasted with
FFMC's net interest income amounts (with no pension expense) during the prior
year periods, resulted in a pre-tax margin of 9.7% in the second quarter of
1995 compared with a pre-tax margin of 11.4% in 1994's second quarter. For
1995's first six months, the Company's pre-tax margin was 9.2% compared with
11.1% in the prior year period.
The Company's effective tax rate was down slightly to 41.1% in 1995's second
quarter compared with a 41.9% rate for the second quarter of 1994. For the
first six months of 1995, FFMC's effective tax rate was 41.0%, comparable to a
41.3% effective rate for 1994's first six months.
Portions of FFMC's business are seasonal. The Company's revenues and earnings
are favorably affected by increased credit card and check volume during the
holiday shopping period in the fourth quarter and, to a lesser extent, during
the back to school buying period in the third quarter. The Company's revenues
and earnings are also favorably affected by higher Western Union money transfer
volume during the summer months.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Capital Resources and Liquidity
Cash generated from operating activities during 1995's first six months was
$360.0 million, up from the $134.5 million generated during the six months
ended June 30, 1994. The increase is due to FFMC's higher levels of earnings
and non-cash amortization expenses, the refund of $68 million of estimated
income taxes for 1994, and the Company's efforts to reduce its working capital
requirements.
FFMC reinvested cash in its businesses (principally for property and equipment
additions, software development and customer conversions) totaling $51.2
million in the first six months of 1995, compared with $38.1 million in the
first half of 1994. The Company estimates that business reinvestment amounts
will increase moderately for the year ending December 31, 1995, primarily from
outlays anticipated for software development activities. Cash from operating
activities exceeded non-acquisition investing activities by $308.8 million in
1995's first six months, compared with $96.4 million in the comparable prior
year period.
In May 1995, FFMC issued 1.3 million shares of the Company's common stock and
received $35 million in cash from the exercise (during the final exercise
period) of all remaining publicly held common stock warrants. FFMC continued
its pattern of paying semi-annual cash dividends of $.05 per share. Payments
were made on January 3, 1995 (to shareholders of record at December 1, 1994)
and on July 3, 1995 (to shareholders of record at June 1, 1995).
During 1995, FFMC utilized the cash sources described above, together with
existing cash balances and $168.4 million in net additional borrowings,
primarily to fund obligations related to its acquisition of Western Union
Financial Services and related assets ("Western Union"). In January 1995, the
Company paid $300 million in cash as the final purchase consideration for the
Western Union acquisition. During the second quarter, FFMC paid $154.1 million
in cash to fund pension obligations assumed as a part of the Western Union
acquisition. In July 1995, the Company made the final anticipated advance
funding of pension obligations for 1995 of $44 million in cash. The Company
also paid $84.8 million in cash (net of cash received) during the first six
months of 1995 to fund other business acquisition activities.
Cash equivalents of $102.4 million relate to required investments of cash in
connection with the Company's merchant credit card and money transfer
settlements. FFMC's remaining cash and cash equivalents and available credit
facilities ($805 million at June 30, 1995) are available for acquisitions and
general corporate purposes. The Company believes that its current level of cash
and future cash flows from operations are sufficient to meet the needs of its
existing businesses.
In the event of consummation of the merger with First Data, FFMC will
incur investment banking, legal and miscellaneous other transaction costs of
approximately $32 million. Additionally, the Company will incur costs
associated with change of control and termination benefits of certain employees
of FFMC currently estimated at approximately $143.1 million on an after-tax
basis, including tax obligations payable by FFMC due to the vesting of
restricted shares upon approval of the merger by FFMC shareholders. Such tax
obligations are the result of tax reimbursements pursuant to change of control
agreements and the possibility that certain holders of restricted stock awards
may elect to surrender shares of common stock for the purposes of satisfying
withholding tax obligations. The estimate of costs associated with change of
control and termination benefits assumes a December 31, 1995 effective
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
date for the merger and a market value for FFMC Common Stock of $90 per share,
which approximates the market value on June 12, 1995, the date the Merger
Agreement was signed, of the 1.5859 shares of First Data Common Stock to be
issued for each share of FFMC Common Stock.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amendment No. 1 to the Amended and Restated Credit Agreement
Dated as of June 25, 1992, Amended and Restated as of November
8, 1994.
10.2 Revolving Credit Agreement Dated as of May 2, 1995.
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on June 9, 1995 to
report certain additional material contracts.
The Company filed a Current Report on Form 8-K on June 22, 1995 to
report that it had entered into an agreement (dated June 12, 1995) to
merge with First Data Corporation ("FDC"), whereby each share of the
Registrant's common stock will be converted into 1.5859 shares of FDC
common stock.
The Company filed a Current Report on Form 8-K on July 25, 1995 to
report Pro Forma Financial Statements giving effect to the proposed
merger with First Data Corporation along with supplemental historical
financial statements and supplemental pro forma financial information
previously filed by First Data Corporation.
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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 FINANCIAL MANAGEMENT CORPORATION
--------------------------------------
(Registrant)
Date: August 14, 1995 By /s/ M. Tarlton Pittard
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M. Tarlton Pittard
Vice Chairman, Chief Financial Officer
and Treasurer
Date: August 14, 1995 By /s/ Richard Macchia
------------------- --------------------------------------
Richard Macchia
Executive Vice President
and Principal Accounting Officer
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