Greenwood Village-based First Data Corp. said Tuesday it plans to restate its financial statements from 2001 through the first half of this year after “extensive interaction” with the U.S. Securities and Exchange Commission over an accounting method.
First Data, the credit-card and payment-processing giant, said it overstated profits by $300 million prior to Dec. 31, 2002. From 2003 through the first two quarters of this year, First Data then underreported profits by a total of $330 million, the filing shows.
First Data said the net effect of the restatement going back 5 1/2 years would be a noncash earnings increase of about $30 million. Shares of First Data slid 23 cents to $41.18 Tuesday. News of the restatement came after the stock market had closed.
“I don’t think one way or the other this will upset the apple cart,” said Bo Brownstein, an analyst with Denver- based Cambiar Investors, which owns about 5 million shares of First Data. “The investment community will view this as a nonevent.”
First Data, with a market capitalization of $31.5 billion, employs 33,000 people worldwide, including 5,000 in Colorado.
The restatement relates to the company’s use of derivatives – financial instruments whose worth depends on the value of an underlying asset such as a currency.
The company used certain derivatives to hedge against changes in interest rates and currencies related to its check business and foreign-exchange contracts for Western Union, First Data’s money-transfer business. First Data intends to spin off Western Union into a separate company later this year.
First Data said the restatement was prompted by discussions with the SEC, which notified First Data about accounting practices relating to the Statement of Financial Accounting Standards No. 133, or SFAS 133.
The company said its accounting practices were initially reviewed and approved by its independent auditor, Ernst & Young, which was involved in the restatement decision.
“We determined that it was in the best interest of our stockholders to restate our financial statements, and First Data will utilize the current (SEC accounting) interpretations going forward so that it can qualify for hedge accounting in order to minimize earnings volatility,” Ric Duques, First Data chairman and chief executive, said in a statement.
The restatement is not expected to have an effect on the company’s cash flow, total stockholder equity or timing of Western Union’s spinoff, said spokesman Colin Wheeler.
Staff writer Will Shanley can be reached at 303-820-1260 or wshanley@denverpost.com.
