First Data's 2nd-quarter losses grow; CFO praises streamlining -
Published Wednesday, July 31, 2013 at 1:00 am / Updated at 5:21 pm
First Data's 2nd-quarter losses grow; CFO praises streamlining

First Data Corp., the payments processing firm with 5,000 employees in Omaha, said Tuesday that its second-quarter losses grew 20 percent because of a change in income tax provisions taking away the company’s ability to recognize a tax benefit on operating losses.

The privately held Atlanta-based company reported a net loss of $189.1 million, compared with a loss of $157.4 million a year ago. Adjusted revenue was flat at $1.7 billion.

Chief Financial Officer Ray Winborne said the company’s business is buoyed by a slowly improving U.S. economy, though “lingering uncertainty” remains.

“U.S. housing and employment march onward, driving expanding consumer credit, which is good for our business,” Winborne said. He said First Data will benefit from a continued shift to electronic payments.

Winborne said growth in First Data’s business helping merchants process payments was offset by challenges in its card issuing business. First Data’s biggest segment, retail and alliance services, saw revenue grow 2 percent to $928 million. Most of this segment involves First Data authorizing, processing and settling customer payment transactions for merchants.

“We saw volume improvement across both small and large merchants this quarter,” Winborne said, with total transaction growth up 6 percent.

The financial services segment, including payment card issuing, processing and billing services, saw revenue fall 3 percent to $337 million because of lost business and pricing changes, and the divestiture of two small businesses that provided information and check clearing services.

Still, Winborne said, considering the segment’s 45 percent margin, “This quarter’s results reflect the positive steps taken to streamline and simplify the organization.”

First Data laid off about 100 employees in Omaha during the quarter, part of a “restructuring” of the financial services segment.

Revenue in the international business segment was flat at $425 million.

Chief Executive Officer Frank Bisignano did not participate in a conference call about the earnings with investors and analysts. Earlier this month he informed employees of significant and unusual changes to compensation, the Wall Street Journal reported. He suspended the firm’s 3.5 percent 401(k) contributions and replaced those and a portion of managers’ cash bonuses with stock, extending ownership in the company to nearly every employee. He told employees in a memo the change would allow the company to invest in innovation and new product development.

“We have more closely aligned our employees’ compensation with the financial performance of the company,” Winborne said Tuesday.

The changes take effect in January and are expected to save about $60 million annually at first, rising to $100 million in 2017, the Journal reported.

The company is working to pay off debt and become profitable in anticipation of an initial public offering.

Winborne said the company’s priorities have not changed with Bisignano, the former JPMorgan Chase co-chief operating officer, becoming CEO in April, then hiring former JPMorgan Chase chief information officer Guy Chiarello as First Data’s president.

But, he said, “The level of intensity has clicked up a couple of clicks north of what it was. There’s a real sense of urgency to grow this business.”

Contact the writer: Barbara Soderlin    |   402-444-1336

Barbara Soderlin covers food safety, ConAgra, technology and employment/unemployment issues.

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