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8-K - 8-K - EVERTEC Group, LLCd500237d8k.htm

Exhibit 99.1

EVERTEC GROUP, LLC REPORTS FOURTH QUARTER AND YEAR 2012 RESULTS

Fourth Quarter 2012 Highlights

 

   

Total revenues were $91.0 million, an increase of 6%, as compared to the fourth quarter of 2011.

 

   

Adjusted EBITDA was $51.8 million, an increase of 29%, as compared to the fourth quarter of 2011.

 

   

Received a 15-year tax grant from the Government of Puerto Rico providing for a reduced income tax rate of 4.0% on data processing activities (approximately 73% of FY 2012 taxable income) as well as a 90% and 60% exemption on property and municipal taxes, respectively.

 

   

Returned capital of approximately $50.3 million to stockholders through a special dividend.

Year ended December 31, 2012 Highlights

 

   

Total revenues were $341.7 million, an increase of 6%, as compared to the corresponding 2011 period.

 

   

Adjusted EBITDA was $169.6 million, an increase of 14%, as compared to the corresponding 2011 period.

 

   

Enhanced management team with addition of Chief Executive Officer Peter Harrington and Chief Operating Officer Philip Steurer.

 

   

Converted from a Puerto Rico corporation to a Puerto Rico limited liability company for the purpose of improving the consolidated tax efficiency of EVERTEC and its subsidiaries.

 

   

Returned total capital of approximately $317.5 million to stockholders through two special dividends.

SAN JUAN, PUERTO RICO – MARCH 14, 2013 — EVERTEC Group, LLC (“EVERTEC” or the “Company”) today reported consolidated results for the fourth quarter and year ended December 31, 2012.

“We are pleased to report another strong quarter and year of double-digit Adjusted EBITDA growth and revenue increases across our business lines,” said Peter Harrington, EVERTEC’s President and Chief Executive Officer. “Our continued strong financial performance is a testament to the value of our diversified business model, which has enabled us to provide our customers with differentiated, value-add capabilities and successfully penetrate new markets and geographies. In addition to our commercial accomplishments during 2012, we also took a number of important steps in our corporate development including obtaining a 15-year tax grant from the Government of Puerto Rico. This grant has structurally enhanced our advantaged free cash flow profile and further positions us to compound our momentum in the Latin American payments market.”

Fourth Quarter 2012 Financial Results

Total revenues for the quarter ended December 31, 2012 were $91.0 million, representing an increase of $5.4 million, or 6% as compared to the corresponding 2011 period. The aforementioned consolidated growth reflects an increase in Merchant Acquiring revenues of $0.1 million, Payment Processing revenues of $2.4 million or 11%, and Business Solutions revenues of $2.9 million or 6%. The increase in Payment Processing and Business Solutions segment revenues was primarily due to an increase in volume and higher demand for our services.

Total operating costs and expenses, excluding depreciation and amortization, for the quarter ended December 31, 2012 were $47.3 million, representing a decrease of $0.6 million or 1% as compared to the corresponding 2011 period. The decrease was primarily due to a reduction in personnel related costs.

Total non-operating expenses for the quarter ended December 31, 2012 remained flat when compared to the 2011 period.

Income tax benefit for the quarter ended December 31, 2012 amounted to $0.8 million as compared to an income tax expense of $1.6 million for the corresponding 2011 period. The income tax benefit for the 2012 period was primarily related to the impact of the tax grant received by EVERTEC during the fourth quarter of 2012.

Adjusted EBITDA for the quarter ended December 31, 2012 was $51.8 million, an increase of $11.5 million or 29% as compared to $40.2 million for the same period in 2011. The increase in Adjusted EBITDA was primarily driven by the


aforementioned growth in revenues and significant operating leverage in our leading technology platform. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) improved to 56.9% from 47.0% in the corresponding 2011 period.

Year Ended December 31, 2012 Financial Results

Total revenues for the year ended December 31, 2012 were $341.7 million, representing an increase of $20.6 million or 6% as compared to the corresponding 2011 period. Merchant Acquiring revenues for the year ended December 31, 2012 were $69.6 million, representing an increase of $7.6 million or 12% as compared to the corresponding 2011 period. The increase in Merchant Acquiring revenues during 2012 was primarily attributable to volume growth in our core business of $5.0 million. Payment Processing revenues for the year ended December 31, 2012 were $94.8 million, representing an increase of $9.1 million or 11% as compared to the corresponding 2011 period. The increase in Payment Processing revenues during 2012 was primarily attributable to an increase in volume. Business Solutions revenues for the year ended December 31, 2012 were $177.3 million, representing an increase of $3.9 million or 2% as compared to the corresponding 2011 period. The increase in Business Solutions revenues during 2012 was primarily due to higher demand for our services.

Total operating costs and expenses excluding depreciation and amortization, for the year ended December 31, 2012 were $190.2 million, representing an increase of $1.5 million or 1% as compared to the corresponding 2011 period. The increase was primarily attributable to the increase in revenues as described above, partially offset by a reduction in personnel costs.

Total non-operating expenses for the year ended December 31, 2012 were $61.9 million, representing a decrease of $5.6 million or 8% as compared to the 2011 period. The decrease in non-operating expenses in 2012 was primarily driven by lower other expenses of $9.7 million, partially offset by an increase in interest expense of $3.4 million from the issuance of additional debt in May 2012.

Income tax benefit for the year ended December 31, 2012 was $87.7 million as compared to $33.1 million for the corresponding 2011 period. The income tax benefit in 2012 was primarily attributable to a $90.9 million income tax benefit from the elimination of EVERTEC’s deferred tax liability following the Conversion and the effect of the tax grant received during the fourth quarter of 2012. The income tax benefit in 2011 was primarily attributable to a $27.6 reduction in the Company’s deferred tax liability following the enactment of certain tax reforms in Puerto Rico on January 31, 2011 which reduced in the marginal corporate income tax rate from 39% to 30%.

Adjusted EBITDA for the year ended December 31, 2012 was $169.6 million, an increase of $20.5 million or 14% as compared to the same period in 2011. This increase was primarily driven by revenue growth across all three business segments and lower incremental costs. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) improved to 49.6% from 46.4% in the corresponding 2011 period.

Cash and Liquidity

As of December 31, 2012, EVERTEC’s unrestricted cash balance was $25.0 million. Also, as of December 31, 2012 EVERTEC had $35.3 million of net borrowing capacity available under its revolving credit facility after giving effect to $14.0 million of short-term borrowings and a $0.7 million letter of credit on behalf of EVERTEC Costa Rica, S.A.

Debt

As of December 31, 2012, the Company’s unpaid principal balance was $759.5 million.

About EVERTEC

EVERTEC is the leading full-service transaction processing business in Latin America and the Caribbean. Based in Puerto Rico, EVERTEC provides a broad range of merchant acquiring, payment processing and business process management services across 19 countries in the region. EVERTEC processes over 1.8 billion transactions annually, and manages the electronic payment network for over 4,100 automated teller machines (“ATM”) and over 104,000 point-of-sale payment terminals. EVERTEC is the largest merchant acquirer in the Caribbean and Central America and the sixth largest in Latin America. EVERTEC owns and operates the ATH network, one of the leading ATM and personal identification number debit networks in Latin America. In addition, EVERTEC provides a comprehensive suite of

 

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services for core bank processing, cash processing and technology outsourcing. EVERTEC serves a broad and diversified customer base of leading financial institutions, merchants, corporations and government agencies with ‘mission critical’ technology solutions and believes its business is well positioned to continue to expand across the fast growing Latin American region.

EVERTEC is 51% owned by an affiliate of Apollo Global Management, LLC, a leading private equity investor, and 49% owned by Popular, Inc., the largest financial institution in the Caribbean. For more information about EVERTEC, please visit www.evertecinc.com.

Forward-Looking Statements

Certain statements in this press release constitute “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of EVERTEC to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by, or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” and “plans” and similar expressions of future or conditional verbs such as “will,” “should,” “would,” “may,” and “could” are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.

Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: our high level of indebtedness and restrictions contained in our debt agreements; our ability to generate sufficient cash to service our indebtedness and to generate future profits; our reliance on our relationship with Popular for a significant portion of our revenues; our ability to renew our client contracts on terms favorable to us; our dependence on our processing systems, technology infrastructure, security systems and fraudulent-payment-detection systems; our ability to develop, install and adopt new technology; a decreased client base due to consolidations in the banking and financial-services industry; the credit risk of our merchant clients, for which we may also be liable; the continuing market position of the ATH® network; our dependence on credit card associations; changes in the regulatory environment and changes in international, legal, political, administrative or economic conditions; the geographical concentration of our business in Puerto Rico; operating an international business in multiple regions with potential political and economic instability; our ability to execute our expansion and acquisition strategies; our ability to protect our intellectual property rights; our ability to recruit and retain qualified personnel; our ability to comply with federal, state, and local regulatory requirements; and evolving industry standards.

Consideration should be given to the areas of risk described above, as well as those risks set forth under the headings “Forward-Looking Statements” and “Risk Factors” in the reports the Company files with the SEC from time to time, in connection with considering any forward-looking statements that may be made by us and our businesses generally. We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.

 

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Investor Contacts

 

Juan J. Román, CPA    Luis M. Cabrera
Executive Vice President    Senior Vice President
Chief Financial Officer    Treasurer, Head of Investor Relations & Corporate Development
(787) 759-9999, ext 4895    (787) 759-9999, ext 3897
jjroman@evertecinc.com    luiscabrera@evertecinc.com

Media Contact

Wanda Betancourt, APR

Senior Vice President

Communications and Marketing

(787) 759-9999, ext 4805

wabetancourt@evertectinc.com

 

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EVERTEC Group, LLC Consolidated Balance Sheets

 

     December 31,  
(Dollar amounts in thousands)    2012     2011  

Assets

    

Current Assets:

    

Cash

   $ 24,993      $ 53,523   

Restricted cash

     4,939        5,288   

Accounts receivable, net

     78,672        60,930   

Prepaid expenses and other assets

     13,005        21,526   
  

 

 

   

 

 

 

Total current assets

     121,609        141,267   

Investment in equity investee

     11,080        12,267   

Property and equipment, net

     36,737        36,685   

Goodwill

     372,307        371,712   

Other intangible assets, net

     403,170        448,914   

Other long-term assets

     24,478        22,894   
  

 

 

   

 

 

 

Total assets

   $ 969,381      $ 1,033,739   
  

 

 

   

 

 

 

Liabilities and member’s equity

    

Current Liabilities:

    

Accrued liabilities

   $ 33,245      $ 29,581   

Accounts payable

     24,482        21,786   

Unearned income

     1,166        900   

Income tax payable

     2,959        3,383   

Current portion of long-term debt

     6,052        —     

Short-term borrowings

     26,995        —     

Deferred tax liability, net

     632        9,321   
  

 

 

   

 

 

 

Total current liabilities

     95,531        64,971   

Long-term debt

     730,709        523,833   

Long-term deferred tax liability, net

     6,827        91,431   

Other long-term liabilities

     3,072        449   
  

 

 

   

 

 

 

Total liabilities

     836,139        680,684   
  

 

 

   

 

 

 

Member’s equity

    

Member’s units (100 units issued and outstanding)

     —          —     

Contributed capital

     120,202        326,367   

Accumulated earnings

     13,882        28,006   

Accumulated other comprehensive loss, net of tax of $0 and $13

     (842     (1,318
  

 

 

   

 

 

 

Total member’s equity

     133,242        353,055   
  

 

 

   

 

 

 

Total liabilities and member’s equity

   $ 969,381      $ 1,033,739   
  

 

 

   

 

 

 

 

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EVERTEC Group, LLC Consolidated Statements of Income and Comprehensive Income

 

     Quarters ended December 31,     Years ended December 31,  
(Dollar amounts in thousands)    2012     2011     2012     2011  

Revenues

        

Merchant acquiring, net

   $ 18,092      $ 17,954      $ 69,591      $ 61,997   

Payment processing

     24,815        22,456        94,801        85,691   

Business solutions

     48,078        45,161        177,292        173,434   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     90,985        85,571        341,684        321,122   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses

        

Cost of revenues, exclusive of depreciation and amortization shown below

     40,391        40,545        158,860        155,377   

Selling, general and administrative expenses

     6,927        7,334        31,312        33,339   

Depreciation and amortization

     17,975        17,914        71,492        69,891   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     65,293        65,793        261,664        258,607   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     25,692        19,778        80,020        62,515   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-operating (expenses) income

        

Interest income

     83        123        313        760   

Interest expense

     (15,117     (11,685     (54,331     (50,957

Earnings of equity method investment

     461        148        564        833   

Other expenses (income):

        

Voluntary Retirement Program (“VRP”) expense

     —          (332     —          (14,529

Other income (expenses)

     1,312        (1,581     (8,490     (3,672
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expenses)

     1,312        (1,913     (8,490     (18,201
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-operating (expenses) income

     (13,261     (13,327     (61,944     (67,565
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     12,431        6,451        18,076        (5,050

Income tax (benefit) expense

     (786     1,615        (87,746     (33,054
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     13,217        4,836        105,822        28,004   

Other comprehensive (loss) income, net of income tax expense of $0, $5, $13 and $13

        

Foreign currency translation adjustments

     (2,075     414        476        (1,176
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

   $ 11,142      $ 5,250      $ 106,298      $ 26,828   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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EVERTEC Group, LLC Consolidated Statements of Cash Flows

 

     Year ended December 31,  
     2012     2011  

Cash flows from operating activities

    

Net income

   $ 105,822      $ 28,004   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     71,492        69,891   

Amortization of debt issue costs and premium and accretion of discount

     5,091        7,995   

Provision for doubtful accounts and sundry losses

     1,645        1,005   

Deferred tax benefit

     (93,402     (25,910

Share-based compensation

     1,204        884   

Realized loss on derivative

     —          1,399   

Unrealized (gain) loss of indemnification assets

     (966     292   

Amortization of a contract liability

     (703     (7,440

Loss on disposition of property and equipment and other intangibles

     1,671        122   

Earnings of equity method investment

     (564     (833

Dividend received from equity investment

     1,630        1,467   

Prepayment penalty related to debt refinancing

     —          (3,387

Premium on issuance of long-term debt

     2,000        —     

(Increase) decrease in assets:

    

Accounts receivable, net

     (16,301     3,704   

Prepaid expenses and other assets

     1,916        (7,409

Other long-term assets

     (3,567     —     

Increase (decrease) in liabilities:

    

Accounts payable and accrued liabilities

     5,846        (1,977

Income tax payable

     (424     944   

Unearned income

     266        584   
  

 

 

   

 

 

 

Total adjustments

     (23,166     41,331   
  

 

 

   

 

 

 

Net cash provided by operating activities

     82,656        69,335   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Net decrease in restricted cash

     349        812   

Intangible assets acquired

     (10,896     (14,466

Property and equipment acquired

     (16,613     (8,963

Proceeds from sales of property and equipment

     118        114   

Acquisition of an equity method investment

     —          (9,244
  

 

 

   

 

 

 

Net cash used in investing activities

     (27,042     (31,747
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from issuance of long-term debt

     208,725        —     

Debt issuance costs

     (2,174     —     

Short-term borrowings

     26,995        —     

Repayment and repurchase of long-term debt

     —          (38,590

Repayment of other financing agreement

     (225     (674

Net distributions to parent company

     (317,465     —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (84,144     (39,264
  

 

 

   

 

 

 

Net decrease in cash

     (28,530     (1,676

Cash at beginning of the period

     53,523        55,199   
  

 

 

   

 

 

 

Cash at end of the period

   $ 24,993      $ 53,523   
  

 

 

   

 

 

 

 

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Net Income Reconciliation to EBITDA and Adjusted EBITDA

We define “EBITDA” as earnings before interest, taxes, depreciation and amortization. We define “Adjusted EBITDA” as EBITDA as further adjusted to exclude unusual items and other adjustments described below. We present EBITDA and Adjusted EBITDA because we consider them important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. In addition, our presentation of Adjusted EBITDA is consistent with the equivalent measurements that are contained in our senior secured credit facilities and the indenture governing the notes in testing our compliance with covenants therein such as the senior secured leverage ratio and the fixed charge coverage ratio. In addition, in evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we may incur expenses such as those excluded in calculating them. Further, our presentation of these measures should not be construed as an inference that our future operating results will not be affected by unusual or nonrecurring items.

Some of the limitations of EBITDA and Adjusted EBITDA are as follows:

 

   

they do not reflect cash outlays for capital expenditures or future contractual commitments;

 

   

they do not reflect changes in, or cash requirements for, working capital;

 

   

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements;

 

   

they do not reflect interest expense, or the cash requirements necessary to service interest, or principal payments, on indebtedness;

 

   

they do not reflect income tax expense or the cash necessary to pay income taxes; and

 

   

other companies, including other companies in our industry, may not use EBITDA and Adjusted EBITDA or may calculate EBITDA and Adjusted EBITDA differently than as presented in this press release, limiting their usefulness as a comparative measure.

EBITDA and Adjusted EBITDA are not measurements of liquidity or financial performance under accounting principles generally accepted in the United States of America (“GAAP”). You should not consider EBITDA and Adjusted EBITDA as alternatives to cash flows from operating activities or any other performance measures determined in accordance with GAAP, as an indicator of cash flows, as a measure of liquidity or as an alternative to operating or net income determined in accordance with GAAP.

 

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A reconciliation of net income to EBITDA and Adjusted EBITDA is provided below:

 

     Quarters ended December 31,      Years ended December 31,  
(Dollar amounts in thousands)    2012     2011      2012     2011  

Net income

   $ 13,217      $ 4,836       $ 105,822      $ 28,004   

Income tax (benefit) expense

     (786     1,615         (87,746     (33,054

Interest expense, net

     15,034        11,562         54,018        50,197   

Depreciation and amortization

     17,975        17,914         71,492        69,891   
  

 

 

   

 

 

    

 

 

   

 

 

 

EBITDA

     45,440        35,927         143,586        115,038   

Software maintenance reimbursement and other costs (1)

     507        720         2,429        2,570   

Equity income (2)

     432        582         1,057        635   

Compensation and benefits (3)

     315        608         3,795        15,970   

Pro forma cost reduction adjustments (4)

     2,150        —           2,150        —     

Pro forma VRP benefits(5)

     —          —           —          4,751   

Transaction, refinancing and other non-recurring fees (6)

     2,800        715         14,871        8,015   

Management fees (7)

     745        636         2,982        2,532   

Purchase accounting (8)

     (632     1,020         (1,284     (393
  

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 51,757      $ 40,208       $ 169,586      $ 149,118   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(1) 

Primarily represents reimbursements received for certain software maintenance expenses as part of the Merger.

(2) 

Represents CONTADO’s non-cash equity income, net of cash dividends received.

(3) 

For the year ended December 31, 2012, mainly represents a one-time payment of $2.2 million as a result of the former CEO’s employment modification agreement. For the year ended December 31, 2011, includes one-time costs related to the voluntary retirement program (“VRP”). All periods include other adjustments related to non-cash equity based compensation.

(4) 

Represents the pro forma effect of the expected net savings primarily in compensation and benefits from the reduction of certain temporary employees and professional services.

(5) 

Represents the pro forma net savings in compensation and benefits from the VRP.

(6) 

Represents primarily: (i) costs associated with the issuance and refinancing of EVERTEC’s debt of approximately $4,000 and $0.2 million in the quarters ended December 31, 2012 and 2011, respectively, and $8.8 million and $2.4 million in the years ended December 31, 2012 and 2011, respectively; (ii) costs associated with certain non-recurring corporate transactions, including, for example, costs related to EVERTEC’s conversion to an LLC and the distributions made to EVERTEC’s direct parent during 2012, of $1.0 million and $0.3 million in the quarters ended December 31, 2012 and 2011, respectively, and $3.5 million and $4.0 million in the years ended December 31, 2012 and 2011, respectively; and (iii) a nonrecurring, non-cash asset write-off of $1.6 million in the quarter and year ended December 31, 2012 and other non-recurring expenses of $1.6 million in the year ended December 31, 2011.

(7) 

Represents the management fee payable to our equity sponsors.

(8) 

Represents the elimination of purchase accounting impacts associated with (i) certain customer service and software related arrangements where EVERTEC receives reimbursements from Popular and (ii) EVERTEC’s rights and obligations to buy equity interests in CONTADO and Serfinsa in 2011.

 

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