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Vantiv Reports Third Quarter 2012 Results

Cash net income is derived from GAAP net income, adjusting for the following items: (a) amortization of intangible assets acquired in business combinations and customer portfolio and related asset acquisitions; (b) non-operating expenses primarily associated with the refinancing of our debt and the termination of our interest rate swaps in March 2012 and May 2011; (c) adjustments to income tax expense assuming conversion of non-controlling interests into shares of Class A common stock; (d) share-based compensation; and (e) costs associated with our separation from Fifth Third Bank and acquisition and integration costs incurred in connection with our acquisitions. For purposes of providing better comparability, we also make adjustments in 2011 to reflect depreciation and amortization assuming that our property and equipment at December 31, 2011 was in place on January 1, 2011 and for interest expense assuming the Company’s level of debt and applicable terms as of December 31, 2011 was outstanding on January 1, 2011.

(1) See schedule 8 for a reconciliation of GAAP income from operations to adjusted EBITDA.

(2) Represents adjustments to income tax expense assuming conversion of non-controlling interests into shares of Class A common stock.

(3) Cash net income assumes the conversion of non-controlling interests into shares of Class A common stock.

(4) Adjusted cash net income per share is calculated as cash net income divided by adjusted shares outstanding.

(5) Shares for the nine months ended September 30, 2012 are pro forma and weighted assuming the equity structure in place March 31, 2012, was in place January 1, 2012. The quarter to date and year to date adjusted shares outstanding include 83,919,136 Class B units that are excluded from the GAAP dilutive income per share calculation.

 
Schedule 3
Vantiv, Inc.
Segment Information

(Unaudited)

(in thousands)

 
Three Months Ended September 30, 2012
  Financial Institution   General  
Merchant Services Services Corporate/Other Total
Total revenue $ 354,120 $ 112,616 $ $ 466,736
Network fees and other costs 177,084   31,155     208,239
Net revenue 177,036 81,461 258,497
Sales and marketing 63,046   6,267     69,313
Segment profit $ 113,990   $ 75,194   $   $ 189,184
 
Non-financial data:
Transactions (in millions) 3,047 881 3,928
Net revenue per transaction $ 0.0581 $ 0.0925 $ 0.0658
 
Three Months Ended September 30, 2011
  Financial Institution   General  
Merchant Services Services Corporate/Other Total
Total revenue $ 299,318 $ 110,046 $ $ 409,364
Network fees and other costs 158,315   34,151     192,466
Net revenue 141,003 75,895 216,898
Sales and marketing 50,748   5,400   347   56,495
Segment profit $ 90,255   $ 70,495   $ (347 ) $ 160,403
 
Non-financial data:
Transactions (in millions) 2,396 825 3,221
Net revenue per transaction $ 0.0588 $ 0.0920 $ 0.0673
 
Nine Months Ended September 30, 2012
  Financial Institution   General  
Merchant Services Services Corporate/Other Total
Total revenue $ 1,028,926 $ 340,221 $ $ 1,369,147
Network fees and other costs 517,499   100,192     617,691
Net revenue 511,427 240,029 751,456
Sales and marketing 193,394   19,208     212,602
Segment profit $ 318,033   $ 220,821   $   $ 538,854
 
Non-financial data:
Transactions (in millions) 8,613 2,578 11,191
Net revenue per transaction $ 0.0594 $ 0.0931 $ 0.0671
 
Nine Months Ended September 30, 2011
  Financial Institution   General  
Merchant Services Services Corporate/Other Total
Total revenue $ 853,739 $ 329,635 $ $ 1,183,374
Network fees and other costs 456,799   103,577     560,376
Net revenue 396,940 226,058 622,998
Sales and marketing 152,263   18,711   1,310   172,284
Segment profit $ 244,677   $ 207,347   $ (1,310 ) $ 450,714
 
Non-financial data:
Transactions (in millions) 6,918 2,527 9,445
Net revenue per transaction $ 0.0574 $ 0.0895 $ 0.0660
   
Schedule 4
Vantiv, Inc.
Condensed Consolidated Statements of Financial Position

(Unaudited)

(in thousands)

 

September 30, 2012

December 31, 2011
Assets
Current assets:
Cash and cash equivalents $ 380,757 $ 370,549
Accounts receivable—net 367,047 368,658
Related party receivable 4,394 4,361
Settlement assets 110,946 46,840
Prepaid expenses 11,512 8,642
Other 17,765   20,947
Total current assets 892,421 819,997
 
Customer incentives 19,709 17,493
Property and equipment—net 161,219 152,310
Intangible assets—net 837,001 916,198
Goodwill 1,532,374 1,532,374
Deferred taxes 12,292 4,292
Other assets 24,281   47,046
Total assets $ 3,479,297   $ 3,489,710
 
Liabilities and equity
Current liabilities:
Accounts payable and accrued expenses $ 213,017 $ 193,706
Related party payable 752 3,814
Settlement obligations 248,752 208,669
Current portion of note payable 52,500 16,211
Deferred income 9,830 7,313
Current maturities of capital lease obligations 5,068 4,607
Other 2,477   6,400
Total current liabilities 532,396 440,720
Long-term liabilities:
Note payable 1,176,480 1,738,498
Tax receivable agreement obligations 333,000
Capital lease obligations 9,552 12,322
Deferred taxes 9,263 9,263
Other 1,423   33,187
Total long-term liabilities 1,529,718 1,793,270
Total liabilities 2,062,114 2,233,990
 
Commitments and contingencies
Equity:
Total equity (1) 1,417,183   1,255,720
Total liabilities and equity $ 3,479,297   $ 3,489,710

 

(1) Includes equity attributable to non-controlling interests.

 
Schedule 5
Vantiv, Inc.
Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 
Nine Months Ended
September 30,   September 30,
2012 2011
Operating Activities:
Net income $ 53,289 $ 45,043
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 119,181 115,767
Loss on derivative assets 100
Amortization of customer incentives 4,567 2,574
Amortization and write-off of debt issuance costs 58,407 17,346
Share-based compensation expense 26,889 2,202
Deferred taxes (2,255 )
Other non-cash items 711
Change in operating assets and liabilities:
Decrease in accounts receivable and related party receivable 1,578 19,403
Decrease in net settlement assets and obligations (24,023 ) (31,380 )
Increase in customer incentives (6,783 ) (8,243 )
Decrease (increase) in prepaid and other assets 4,192 (708 )
Increase (decrease) in accounts payable and accrued expenses 11,333 (8,234 )
Decrease in payable to related party (3,062 ) (1,932 )
Increase (decrease) in other liabilities 1,332   (694 )
Net cash provided by operating activities 246,900   149,700  
 
Investing Activities:
Purchases of property and equipment (38,245 ) (46,232 )
Acquisition of customer portfolios and related assets (10,530 ) (1,226 )
Purchase of investments   (3,300 )
Net cash used in investing activities (48,775 ) (50,758 )
 
Financing Activities:
Proceeds from initial public offering, net of offering costs 460,913
Proceeds from follow-on offering, net of offering costs 33,512
Proceeds from issuance of long-term debt 1,248,750
Repayment of debt and capital lease obligations (1,793,074 ) (15,443 )
Payment of debt issuance costs (28,949 ) (6,276 )
Purchase of Class B units in Vantiv Holding from Fifth Third (33,512 )
Repurchase of Class A common stock (to satisfy tax withholding obligations) (16,126 )
Tax benefit from employee share-based compensation 13,436
Distribution to funds managed by Advent International Corporation (40,086 )
Distribution to non-controlling interests (32,781 ) (2,792 )
Net cash used in financing activities (187,917 ) (24,511 )
 
Net increase in cash and cash equivalents 10,208 74,431
Cash and cash equivalents—Beginning of period 370,549   236,512  
Cash and cash equivalents—End of period $ 380,757   $ 310,943  
 
Cash Payments:
Interest $ 50,720 $ 82,267
Taxes 12,247 5,950
Non-cash Items:
Issuance of tax receivable agreements $ 333,000 $
Assets acquired under capital lease obligations 1,202 18,702
Assets acquired under debt obligations 19,227
Accrual of secondary offering costs 3,000
 
Schedule 6
Vantiv, Inc.
Reconciliation of GAAP Net Income to Cash Net Income

(Unaudited)

(in thousands)

 
Three Months Ended September 30, 2012
GAAP   Transition, Acquisition and Integration(1)   Share-Based Compensation   Comparability Adjustments   Other Adjustments Cash Net Income
 
Revenue $ 466,736 $ $ $ $ $ 466,736
Network fees and other costs 208,239           208,239  
Net revenue 258,497 258,497
Sales and marketing 69,313 69,313
Other operating costs 40,376 (553 ) 39,823
General and administrative 28,600 (1,701 ) (9,396 ) 17,503
Depreciation and amortization 40,618         (29,579 ) (2) 11,039  
Income from operations 79,590 2,254 9,396 29,579 120,819
Interest expense—net (10,056 ) (10,056 )
Non-operating expenses            
Income before applicable income taxes 69,534 2,254 9,396 29,579 110,763
Income tax expense 20,895   868   3,617     17,264   (3) 42,644  
Net income(4) $ 48,639   $ 1,386   $ 5,779   $   $ 12,315   $ 68,119  
 
Three Months Ended September 30, 2011
GAAP   Transition, Acquisition and Integration(1)   Share-Based Compensation   Comparability Adjustments Other Adjustments Cash Net Income
 
Revenue $ 409,364 $ $ $ $ $ 409,364
Network fees and other costs 192,466           192,466  
Net revenue 216,898 216,898
Sales and marketing 56,495 (291 ) 56,204
Other operating costs 35,028 (2,732 ) 32,296
General and administrative 18,896 (1,072 ) (809 ) 17,015
Depreciation and amortization 40,066       (931 ) (5) (31,042 ) (2) 8,093  
Income from operations 66,413 4,095 809 931 31,042 103,290
Interest expense—net (26,198 ) (426 ) (6) (26,624 )
Non-operating expenses            
Income before applicable income taxes 40,215 4,095 809 505 31,042 76,666
Income tax expense 11,532   1,576   311   195   15,903   (3) 29,517  
Net income(4) $ 28,683   $ 2,519   $ 498   $ 310   $ 15,139   $ 47,149  
 

Non-GAAP Financial Measures

This schedule presents net revenue and cash net income. These are important financial performance measures for the company, but are not financial measures as defined by GAAP. Such financial measures should not be considered as alternatives to GAAP net income, and such measures may not be comparable to those reported by other companies.

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