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First Financial Management Corp – ‘10-Q’ for 6/30/95

As of: Monday, 8/14/95 · For: 6/30/95 · Accession #: 950144-95-2328 · File #: 1-10442

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/14/95  First Financial Management Corp   10-Q        6/30/95    4:335K                                   Bowne of Atlanta Inc/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        First Financial Management Corporation 10-Q           16     63K 
 2: EX-10.1     Amd. #1 to Amded. & Restated Credit Agreement          6     15K 
 3: EX-10.2     Revolving Credit Agmt. Dated as of 5/2/95            159    499K 
 4: EX-27.1     Financial Data Schedule                                1      6K

10-Q — First Financial Management Corporation 10-Q
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Consolidated Financial Statements: Exhibits and Reports on Form 8-K Management's Discussion and Analysis of Financial Condition and Results of Operations
1	1st Page - Filing Submission
2	Item 1. Consolidated Financial Statements:
10	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
15	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 16 TOC ↑Top Previous Next ↓Bottom Just 1st
 

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
                                                            ------------------
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   1-10442  
                       -------------

FIRST FINANCIAL MANAGEMENT CORPORATION  
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)  

   GEORGIA                                                  58-1107864
-----------------------                                      ------------------ 
(State or other jurisdiction of                               (I.R.S. Employer  
incorporation or organization)                               Identification No.)

3 CORPORATE SQUARE, SUITE 700,  ATLANTA, GEORGIA                30329   
--------------------------------------------------------------------------------
    (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code  (404) 321-0120  
                                                   -----------------
NOT APPLICABLE  
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last  
report.)  

 Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange  
Act of 1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to such 
filing requirements for the past 90 days. Yes  X   No                           
                       ---     ---

       Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.                     

                                                    Number of Shares Outstanding
Title of each class                                 as of August 1, 1995
----------------------------                        ----------------------------
Common Stock, $.10 par value                                  63,868,916        

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FIRST FINANCIAL MANAGEMENT CORPORATION  

INDEX   
-----   

                                                                          PAGE
PART I.    FINANCIAL INFORMATION                                          NUMBER
                                                                          ------

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 

2 

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PART I.   FINANCIAL INFORMATION 

FIRST FINANCIAL MANAGEMENT CORPORATION  

CONSOLIDATED BALANCE SHEETS 
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                      June 30, 1995  December 31, 1994
                                                      -------------  -----------------
                                                          (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      
                                                         --------       --------      
     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      
                                                         --------       --------      
                                                         $3,111.6       $3,135.7      
                                                         ========       ========      

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      
                                                         --------       --------      
     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      
                                                         --------       --------      
       Total Liabilities                                  1,557.6        1,705.9      
                                                         --------       --------      
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      
                                                         --------       --------      
       Total Shareholders' Equity                         1,554.0        1,429.8      
                                                         --------       --------      
                                                         $3,111.6       $3,135.7      
                                                         ========       ========      

See notes to consolidated financial statements.                                 

3 

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FIRST FINANCIAL MANAGEMENT CORPORATION  

CONSOLIDATED STATEMENTS OF INCOME 
(UNAUDITED) 

                                                                [Download Table]

                                    THREE MONTHS ENDED JUNE 30,      
                                    ---------------------------      
                                         1995          1994          
                                       ------        ------          
                              (In millions, except per share amounts)
                                                                     
REVENUES                                                             
Service revenues                       $768.1        $498.3          
Product sales                            12.2          18.0          
Other                                     1.7           1.2          
                                       ------        ------          
                                        782.0         517.5          
                                       ------        ------          
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          
                                       ------        ------          
                                        696.6         460.1          
                                       ------        ------          

Operating income                         85.4          57.4          

Interest, net                             6.5          (1.5)         
Pension cost                              3.4           ---          
                                       ------        ------          
Income before income taxes               75.5          58.9          

Income taxes                             31.0          24.7          
                                       ------        ------          
Net income                             $ 44.5        $ 34.2          
                                       ======        ======          

Earnings per common share              $ 0.69        $ 0.55          
                                       ======        ======          

See notes to consolidated financial statements.                                 

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FIRST FINANCIAL MANAGEMENT CORPORATION  

CONSOLIDATED STATEMENTS OF INCOME 
(UNAUDITED) 

                                                                [Download Table]

                                        SIX MONTHS ENDED JUNE 30,      
                                        -------------------------      
                                           1995          1994          
                                         --------       -------        
                                (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         
                                         --------       ------         
                                          1,466.3        978.8         
                                         --------       ------         
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         
                                         --------       ------         
                                          1,307.4        873.0         
                                         --------       ------         

Operating income                            158.9        105.8         

Interest, net                                14.7         (2.7)        
Pension cost                                  8.7          ---         
                                         --------       ------         
Income before income taxes                  135.5        108.5         

Income taxes                                 55.6         44.8         
                                         --------       ------         
Net income                               $   79.9       $ 63.7         
                                         ========       ======         

Earnings per common share                $   1.25       $ 1.02         
                                         ========       ======         

See notes to consolidated financial statements.                                 

5 

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FIRST FINANCIAL MANAGEMENT CORPORATION  

CONSOLIDATED STATEMENTS OF CASH FLOWS 
(UNAUDITED) 

                                                                [Download Table]

                                                           SIX MONTHS ENDED JUNE 30,
                                                           -------------------------
                                                               1995         1994    
                                                             ------       ------    
                                                                (In millions)       
                                                                                    
Cash and cash equivalents at January 1                      $ 326.1      $ 190.0    
                                                            -------      -------    

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    
                                                            -------      -------    
     Net cash provided by operating activities                360.0        134.5    
                                                            -------      -------    

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)   
                                                            -------      -------    
     Net cash provided by financing activities                 41.4          3.0    
                                                            -------      -------    

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)   
                                                            -------      -------    
     Net cash used in investing activities                   (429.2)      (123.1)   
                                                            -------      -------    

Change in cash and cash equivalents                           (27.8)        14.4    
                                                            -------      -------    

Cash and cash equivalents at June 30                        $ 298.3      $ 204.4    
                                                            =======      =======    

See notes to consolidated financial statements.                                 

6 

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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.                            

7 

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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):                                                 

                                                                [Download Table]
                                                                       
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)
                                                                ------ 
Pension Obligations Assumed                                     $149.6 
                                                                ====== 

        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.

8 

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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:                                                   

                                                                [Download Table]

                                            (In millions)  
                                        1995           1994
                                        ----           ----
                                                           
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.

9 

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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                                  

10  

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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.   

11  

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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                
      -------------------                 --------------------------------------
                      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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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	12/31/95	13
Filed on:	8/14/95	16
	8/1/95	1
	7/25/95	15		8-K
	7/3/95	13
For Period End:	6/30/95	1	13
	6/22/95	15		8-K
	6/12/95	9	15	8-K
	6/9/95	15		8-K
	6/1/95	13
	5/12/95	9	10	10-Q
	5/2/95	8	15
	1/3/95	13
	1/1/95	8
	12/31/94	2	7	10-K405, 11-K
	12/1/94	13
	11/8/94	15
	6/30/94	2	13	10-Q
	6/25/92	15
				List all Filings

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Filing Submission 0000950144-95-002328 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

First Financial Management Corp – ‘10-Q’ for 6/30/95

As of: Monday, 8/14/95 · For: 6/30/95 · Accession #: 950144-95-2328 · File #: 1-10442

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Quarterly Report — Form 10-QFiling Table of Contents

10-Q — First Financial Management Corporation 10-QDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Quarterly Report — Form 10-Q
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10-Q — First Financial Management Corporation 10-Q
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