First Data reports fourth quarter and year end results

"We are very excited about our strong 2004 results and are well-positioned for continued growth in 2005," said Chairman and Chief Executive Officer Charlie Fote. "Now that we are well into the Concord integration activities, our employees and business partners are looking towards the future with even greater enthusiasm."

The high quality of First Data's earnings generated cash flow from operating activities of $2.3 billion, which is at the high end of the 2004 target. During the year, 88.2 million shares were repurchased for $3.7 billion at an average price of $42.41. The company's current buyback authorization is $906 million.

The Western Union money transfer business, which represents 34% of First Data revenue, achieved full-year revenue growth of 14%. The agent network has exceeded 220,000 locations. The expansion of the network, together with the continued investment in promoting the brand, ensured another successful year demonstrated by consumer-to-consumer transaction growth of 20% for the quarter and 19% for the year. Seven times a second, every second of the year, customers trust Western Union to handle their money transfer needs. Ongoing investments in new products, marketing and loyalty programs also drove results.

WesternUnion.com posted a 50% increase in transaction activity this year. Merchant Services, which represents 36% of First Data revenue, continued to deliver outstanding performance with year-over-year transaction growth of 13% including Concord's volume, when compared on a pro forma basis. This success was the result of adding nine new bank relationships, expanding the sales force by 18%, and increasing sales productivity 13%. New sales generated 458,000 new merchants in 2004. "We continue to be very pleased with our Concord acquisition," said Fote. "This year we had great success in signing financial institutions to our STAR network." As a result of solid execution on the integration plans, the company achieved its 2004 cost-savings target of more than $30 million and is on schedule to achieve total synergies of at least $205 million. In 2004, many significant integration projects were completed including the integration of the sales forces and product lines, as well as the merger of several operating centers.

Outlook
"For 2005, our First Data team is focused on driving strong internal growth, continuing to execute on our Concord integration and making acquisitions that leverage our core strengths while at the same time using our strong cash flow to enhance shareholder value. The global opportunities in the payments industry are tremendous," Fote said. Fote added that 2005 will show solid EPS performance, double-digit revenue growth and superior cash flow. Full-year EPS is expected to be in the range of $2.34-$2.43, prior to the planned $0.11 in estimated integration expenses, and $2.23-$2.32 after considering integration expenses. This range assumes an effective tax rate of 27%. This range does not include any impact from expensing stock options as a result of adopting Financial Accounting Standards Board's Statement No. 123R. The expense upon adoption will be affected primarily by the company's adoption date, historical options, new option grants, forfeitures and the valuation methodology selected going forward.

Business Segment Highlights
Western Union Money Transfer Exceeds $1 Billion in Profits for 2004
Western Union money transfer revenue increased 15% in the fourth quarter to $908 million. Full-year revenue grew 14% to $3.4 billion. Operating profits of $286 million for the quarter and $1.1 billion for the full year grew 10% and 13%, respectively. Annual profit margin was 33%. Western Union continues to grow around the world. International money transfer transaction growth was strong at 24% in the fourth quarter, driving revenue growth of 22%. Full-year international transaction and revenue growth were also 24% and 22%, respectively. Western Union branded transaction growth to Mexico remained extremely strong in the quarter and for the year at 24%, with revenue growth of 13% for the year and 14% for the quarter.

Even with Western Union's strong 2004 performance in Mexico, during the year Italy surpassed it, becoming Western Union's second largest market. During 2004, Western Union strengthened its position in Italy by making equity investments in Angelo Costa S.p.A., and Finint Srl, its two largest Italian-based super agents. Western Union will continue to invest in super agent partners around the globe when and where it makes sense. Growth in Western Union will continue through network expansion and meeting
customer demand for new products and services. Western Union was recently granted a banking license by the Finanzmarktaufsicht Behoerde (FMA), the Austrian Financial Market Authority, allowing Western Union to expand the range of products and services offered to European consumers. Several other key new agent signings in the fourth quarter included the Polish Credit Union and Halcon Viajes, one of the largest travel agencies in Spain. Each of these signings will add more than 1,000 locations. Growth in China and India continues to be strong with more than 40,000 locations in these two countries. Finally, Payment Services' fourth quarter revenue was in line with expectations at $1.1 billion. Operating profit was $303 million, 94% of which was attributed to Western Union.

Merchant Services Results Powered by Excellent Transaction Growth
Merchant Services' revenues grew 50% for the fourth quarter to $1.1 billion, with operating profit up 55% to $350 million. Full-year revenue increased 44% to $3.8 billion and operating profit grew 37% to $990 million. Full-year margins remained strong at 26%. Merchant Services delivered another quarter of solid results driven by 64% transaction growth. During the quarter, First Data sold a merchant portfolio to iPayment, Inc. for $130 million in cash. This transaction, together with last year's sale of another merchant portfolio to iPayment, reflects First Data's strategy of maximizing returns on the merchant portfolio by selling non-sales supported merchants to partners that can match sales forces to these merchants. First Data and iPayment extended their long-term processing agreement. Additionally, the iPayment's sales force will begin selling other First Data product lines including debit, storedvalue, and TeleCheck to its merchants on a preferred provider basis. As in the past, First Data will continue to review its merchant portfolios and execute on initiatives which will maximize shareholder return. Year-over-year the company recorded incremental after-tax gains of $19 million from merchant portfolio sales.

Card Issuing Services Successfully Converts 58 Million Accounts

Card Issuing Services posted revenue of $609 million for the quarter, up 14% year-overyear and operating profit of $122 million, up 41% due primarily to the acquisition of Concord. Full-year revenue of $2.4 billion and operating profit of $508 million were up 14% and 64%, respectively. Annual margin was 21%. During 2004, Card Issuing Services completed account conversions for 11 clients totalling 58 million accounts. As of December 31, accounts on file were 406 million. The pipeline of accounts to be converted has been reduced to 34 million since year-end as a result of conversion activity of 16 million so far this year. During the quarter, First Data signed an agreement with Capital One Financial Corporation to provide production services functions. These services include statement services and plastics personalization, which will be provided by the Card Issuing Services segment and remittance processing services, which will be provided by First Data's REMITCO business unit. In addition, Card Issuing Services renewed a card processing agreement with World's Foremost Bank.

There were 135 million cards carrying the STAR logo at year-end and STAR Systems also announced that it has extended agreements with Chevy Chase Bank and CO-OP Network Credit Union Group.