EVERTEC Reports Third Quarter 2012 Results

  EVERTEC Reports Third Quarter 2012 Results

Third Quarter 2012 Highlights

  *Total revenues were $83.8 million, an increase of 3%, as compared to the
    third quarter of 2011.
  *Adjusted EBITDA was $38.4 million, an increase of 2%, as compared to the
    third quarter of 2011.
  *Net debt (unpaid principal balance, net of cash) decreased to $696.0
    million as of September 30, 2012 compared to $719.8 million as of June 30,
    2012.
  *Recently 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 80% of FY 2011 total revenues) as well as a 90%
    and 60% exemption on property and municipal taxes, respectively.

Business Wire

SAN JUAN, Puerto Rico -- November 13, 2012

EVERTEC Group, LLC (“EVERTEC” or the “Company”) today reported consolidated
results for the third quarter ended September 30, 2012.

“We are pleased to report another quarter of growth and the continued
penetration of our products and services in Latin America and the Caribbean,”
said Peter Harrington, EVERTEC’s President and Chief Executive Officer. “In
addition, we recently received a 15-year tax grant from the Government of
Puerto Rico under the Tax Incentive Act 73 of 2008 that covers EVERTEC’s data
processing activities in Puerto Rico. This grant structurally enhances our
advantaged tax position and free cash flow profile, enabling continued
investment in our leading technology platform and growth of our transaction
processing business both locally and in international markets.”

Third Quarter 2012 Financial Results

For the quarter ended September 30, 2012, total revenues increased by $2.8
million, or 3%, to $83.8 million compared to $81.0 million inthe
corresponding 2011 period. Merchant Acquiring segment revenues increased by
$2.2 million, or 15%. The increase was primarily driven by higher realized net
margin. Payment Processing (formerly referred to as “Transaction Processing”)
segment revenues increased by $1.1 million, or 5% primarily driven by an
increase in volume and accounts on file. Business Solutions segment revenues
decreased by $0.5 million, or 1% primarily driven by lower demand for certain
IT consulting services.

Total operating costs and expenses, excluding depreciation and amortization,
decreased by $0.4 million, or 1%, to $47.8 million for the quarter ended
September 30, 2012, compared to $48.2 million for the same period in 2011. The
decrease was primarily due to a reduction in personnel and equipment expenses,
partially offset by higher cost of sales associated with the increase in total
revenues. Total operating costs and expenses, excluding depreciation and
amortization, as a percentage of total revenues decreased by approximately 248
basis points to 57.0% from 59.5% in the prior period.

Non-operating expenses for the quarter ended September 30, 2012, were $14.4
million, a decrease of $8.7 million from $23.1 million for the same period in
2011. The decrease was primarily the result of a $13.2 million reduction in
other expenses, partially offset by a $3.4 million increase in interest
expense. The variance of other expenses was primarily driven by a $14.2
million non-recurring expense related to the voluntary retirement program
(“VRP”) in 2011. The higher interest expense was the result of the issuance of
additional debt in May 2012.

Income tax expense for the quarter ended September 30, 2012, amounted to $0.5
million, compared to an income tax benefit of $5.1 million for the
corresponding 2011 period. The income tax expense for the quarter ended
September 30, 2012, related to income before taxes generated by our
international operations. The income tax benefit for the 2011 period was the
result of a loss before income taxes primarily associated with the
aforementioned VRP expense.

Adjusted EBITDA for the quarter ended September 30, 2012, was $38.4 million,
an increase of $0.7 million, or 2%, compared to $37.7 million for the same
period in 2011. This increase was primarily due to higher revenues and a
slight decrease in cash expenses.

Nine Months Ended September 30, 2012 Financial Results

Total revenues for the nine months ended September 30, 2012, increased by
$15.1 million, or 6%, to $250.7 million compared to $235.6 for the same period
in 2011. Merchant Acquiring segment revenues increased by $7.5 million, or
17%; Payment Processing segment revenues increased by $6.8 million, or 11%;
and Business Solutions segment revenues increased by $0.9 million, or 1%.
Revenue increases in our Merchant Acquiring and Payment Processing segments
for the nine months ended September 30, 2012 were primarily driven by the same
factors previously described for the quarter ended September 30, 2012. The
increase Business Solutions segment revenues was primarily driven by higher
demand for certain network services partially offset by lower demand for
certain IT consulting services.

Total operating costs and expenses, excluding depreciation and amortization,
were $142.8 million for the nine months ended September 30, 2012, compared to
$140.8 million for the same period in 2011. The $2.0 million increase was
primarily due to higher equipment expenses and cost of sales, partially offset
by a decrease in personnel expenses from cost control measures implemented in
late 2011. Total operating costs and expenses, excluding depreciation and
amortization, as a percentage of total revenues decreased by approximately 281
basis points to 57.0% from 59.8% in the prior year period.

Non-operating expenses for the nine months ended September 30, 2012, amounted
to $48.7 million, compared to $54.2 million for the corresponding 2011 period.
The decrease in non-operating expenses was primarily driven by lower other
expenses of $6.5 million. Other expenses for the nine months ended September
30, 2012, were primarily comprised of debt issuance costs of $8.8 million and
personnel related charges of $2.2 million. For the corresponding 2011 period,
other expenses were primarily comprised of the $14.2 million VRP expense, debt
issuance costs of $2.2 million and $1.2 million from the settlement of a
derivative related to our acquisition of an equity interest in CONTADO from
Popular.

The Company reported income tax benefit of $87.0 million for the nine months
ended September 30, 2012, compared to $34.7 million for the corresponding 2011
period. The income tax benefit for 2012 was primarily driven by the
elimination of EVERTEC’s deferred tax liability balance of $89.2 million
following its conversion to a limited liability company on April 17, 2012. The
income tax benefit for the corresponding 2011 period was mainly due to a
reduction in EVERTEC’s deferred tax liability of $27.6 million as a result of
a reduction in the marginal Puerto Rico corporate income-tax rate from 39% to
30% and taxable loss for the nine months ended September 30, 2011.

Adjusted EBITDA for the nine months ended September 30, 2012 increased by $8.9
million, or 8%, to $117.8 million when compared to the same period in 2011.
This increase was primarily driven by revenue growth across all three business
segments, partially offset by an increase in cash expenses. Adjusted EBITDA
margin (Adjusted EBITDA as a percentage of total revenues) improved by
approximately 76 basis points to 47.0% from 46.2% in the prior year period.

Cash and Liquidity

As of September 30, 2012, EVERTEC’s unrestricted cash balance was $49.5
million, and the Company had $49.3 million of net borrowing capacity available
under its revolving credit facility.

Debt

As of September 30, 2012, the Company’s unpaid principal balance was $745.5
million.

Conference Call Information

EVERTEC will host an investor conference call to review the operating results
for the third quarter of 2012 as follows:

   Date:              November 13, 2012
      Time:              10:30 a.m. (Eastern Standard Time)
      Telephone access:  (866) 770-7051 (U.S.) or (617) 213-8064 (outside
                          U.S.) Passcode 53088737
      Live webcast:      www.evertecinc.com, in the ‘Investor Relations’
                          section

The teleconference replay will be available two hours after completion through
November 27, 2012, at (888) 286-8010 (U.S.) or (617) 801-6888. The conference
ID for the replay is 14821679. The archived webcast will be on the EVERTEC
website, www.evertecinc.com, in the ‘News and Market Information’ area of the
‘Investor Relations’ section, under ‘Event Calendar’.

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
1.2 billion transactions annually, and manages the electronic payment network
for over 4,900 automated teller machines (“ATM”) and over 107,000
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 and financial services brands in Latin
America. In addition, EVERTEC provides a comprehensive suite of software and
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.

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 Puerto Rico and 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 Company’s Annual Report on Form 10-K for the year ended
December 31, 2011, filed with the Securities and Exchange Commission (“SEC”)
on March 27, 2012, and in the other 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.

EVERTEC Group, LLC (Unaudited) Consolidated Balance Sheets
                                                          
(Dollar amounts in thousands)           September 30, 2012   December 31, 2011
                                                             
Assets
Current Assets:
Cash                                    $      49,491        $   53,523
Restricted cash                                4,706             5,288
Accounts receivable, net                       67,475            60,930
Prepaid expenses and other assets             14,264           21,526     
Total current assets                           135,936           141,267
Investments in equity investees                10,131            12,267
Property and equipment, net                    32,103            36,685
Goodwill                                       373,472           371,712
Other intangible assets, net                   413,506           448,914
Other long-term assets                        21,505           22,894     
Total assets                            $      986,653       $   1,033,739  
Liabilities and member's equity
Current Liabilities:
Accrued liabilities                     $      44,351        $   29,581
Accounts payable                               17,738            21,786
Unearned income                                935               900
Income tax payable                             2,182             3,383
Deferred tax liability, net                   870              9,321      
Total current liabilities                      66,076            64,971
Long-term debt                                 736,197           523,833
Long-term deferred tax liability, net          6,976             91,431
Other long-term liabilities                   337              449        
Total liabilities                             809,586          680,684    
Member's equity
Member's units (100 units issued and           -                 -
outstanding)
Contributed capital                            175,169           326,367
Accumulated earnings                           665               28,006
Accumulated other comprehensive
income (loss), net of tax of $0 and           1,233            (1,318     )
$13
Total member's equity                         177,067          353,055    
Total liabilities and member's equity   $      986,653       $   1,033,739  
                                                                            

EVERTEC Group, LLC (Unaudited) Consolidated Statements of Income and
Comprehensive Income
                                               
                   Quarters ended September 30,   Nine months ended September
                                                  30,
(Dollar amounts    2012            2011          2012            2011
in thousands)
Revenues ^ (1)
Merchant           $  16,810        $ 14,576      $  51,499        $ 44,043
acquiring, net
Payment               23,284          22,199         69,986          63,235
processing
Business             43,745        44,249       129,214       128,273 
solutions
Total revenues       83,839        81,024       250,699       235,551 
                                                                   
Operating costs
and expenses
Cost of
revenues,
exclusive of          40,897          39,673         118,469         114,832
depreciation and
amortization
shown below
Selling, general
and                   6,921           8,548          24,385          26,005
administrative
expenses
Depreciation and     17,765        17,513       53,517        51,977  
amortization
Total operating
costs and            65,583        65,734       196,371       192,814 
expenses
                                                                   
Income from          18,256        15,290       54,328        42,737  
operations
                                                                   
Non-operating
(expenses)
income
Interest income       38              178            230             637
Interest expense      (14,784  )      (11,396 )      (39,214  )      (39,272 )
(Losses)
earnings of           (472     )      429            103             685
equity method
investments
Other expenses       855           (12,309 )    (9,802   )     (16,288 )
(income)
Total
non-operating        (14,363  )     (23,098 )     (48,683  )     (54,238 )
(expenses)
income
Income (loss)
before income         3,893           (7,808  )      5,645           (11,501 )
taxes
Income tax
expense              512           (5,132  )     (86,960  )     (34,669 )
(benefit)
Net income            3,381           (2,676  )      92,605          23,168
(loss)
Other
comprehensive
income (loss),
net of income
tax expense of
$0, $8, $13 and
$8
Foreign currency
translation          215           (3,004  )     2,551         (1,590  )
adjustments
Total
comprehensive      $  3,596        $ (5,680  )   $  95,156       $ 21,578  
income (loss)
                                                                   
___________
^(1) Certain prior period balances have been reclassified to conform to the
current presentation format which did not have any impact on net income.


EVERTEC Group, LLC (Unaudited) Consolidated Cash Flows
                                             
                                               Nine months ended September 30,
                                               2012              2011
Cash flows from operating activities
Net income                                     $  92,605          $  23,168
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization                     53,517             51,977
Amortization of debt issue costs and premium      3,748              6,499
and accretion of discount
Provision for doubtful accounts and sundry        1,291              918
losses
Deferred tax benefit                              (93,140   )        (24,400 )
Share-based compensation                          889                684
Realized loss on derivative                       -                  1,399
Unrealized gain of indemnification assets         (334      )        (676    )
Amortization of a contract liability              (703      )        (5,151  )
Loss on disposition of property and               62                 56
equipment
Earnings from equity investee                     (103      )        (685    )
Dividend received from equity investee            728                738
Prepayment penalty related to debt                -                  (3,387  )
refinancing
Premium on issuance of long-term debt             2,000              -
(Increase) decrease in assets:
Accounts receivable, net                          (3,831    )        12,189
Prepaid expenses and other assets                 2,433              (13,507 )
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities          10,991             9,813
Income tax payable                                (1,201    )        553
Unearned income                                   35                 84
Other long-term liabilities                      -                (449    )
Total adjustments                                (23,618   )       36,655  
Net cash provided by operating activities        68,987           59,823  
                                                                  
Cash flows from investing activities
Net decrease (increase) in restricted cash        582                (1,572  )
Intangible assets acquired                        (5,430    )        (12,186 )
Property and equipment acquired                   (7,540    )        (6,412  )
Proceeds from sales of property and               80                 106
equipment
Acquisition of an equity method investment       -                (9,244  )
Net cash used in investing activities            (12,308   )       (29,308 )
                                                                  
Cash flows from financing activities
Proceeds from issuance of long-term debt          208,725            -
Debt issuance costs                               (2,174    )        -
Distribution to member                            (267,150  )        -
Repayment and repurchase of long-term debt       (112      )       (29,090 )
and other liabilities
Net cash used in financing activities            (60,711   )       (29,090 )
                                                                  
Net (decrease) increase in cash                   (4,032    )        1,425
Cash at beginning of the period                  53,523           55,199  
Cash at end of the period                      $  49,491         $  56,624  
                                                                             

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;
  *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;
  *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; 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.

Adjusted EBITDA is not a measurement of liquidity or financial performance
under generally accepted accounting principles (“GAAP”). You should not
consider Adjusted EBITDA as an alternative to cash flows from operating
activities 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.

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

                Quarters ended            Nine months ended          Twelve
               September 30,            September 30,              months
                                                                     ended
(Dollar                                                              September
amounts in      2012        2011         2012         2011         30, 2012
thousands)
                                                                     
Net income      $ 3,381      $ (2,676 )   $ 92,605      $ 23,168     $ 97,441
(loss)
Income tax
expense           512          (5,132 )     (86,960 )     (34,669 )    (85,345 )
(benefit)
Interest          14,746       11,218       38,984        38,635       50,546
expense, net
Depreciation
and              17,765     17,513     53,517      51,977     71,431  
amortization
EBITDA            36,404       20,923       98,146        79,111       134,073
                                                                     
Software
maintenance
reimbursement     615          1,192        1,922         1,850        2,642
and other
costs ^(1)
Equity income     472          (429   )     625           53           1,207
^(2)
Compensation
and benefits      380          14,548       3,480         15,362       4,088
^(3)
Pro forma VRP     -            1,584        -             4,751        -
benefits ^(4)
Transaction,
refinancing
and other         337          1,446        12,071        7,300        12,786
non-recurring
fees ^(5)
Management        746          636          2,237         1,896        2,873
fees ^(6)
Purchase
accounting       (550   )    (2,184 )    (652    )    (1,413  )   368     
^(7)
Adjusted        $ 38,404    $ 37,716    $ 117,829    $ 108,910   $ 158,037 
EBITDA
                                                                               

                                 ___________

(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 dividend received.

(3) For the six months ended June 30, 2012, mainly represents a one-time
payment of $2.2 million as a result of the former CEO’s employment
modification agreement. For the 2011 periods includes one-time costs related
to the VRP. All periods include other adjustments related to non-cash equity
based compensation.

(4) Adjustment represents the pro forma effect of expected net savings in
compensation and benefits related to employees that participated in the VRP
offered by the Company during the third quarter of 2011.

(5) For the quarter and nine months ended September 30, 2012, primarily
relates to non-recurring fees associated with the issuance of additional debt
and the dividend payment to our direct parent company. Also, includes
adjustments to support additional requirements of a stand-alone entity and to
certain other adjustments permitted under the senior secured credit facility
and indenture agreements.

(6) Represents the management fee payable to the equity sponsors.

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

Contact:

EVERTEC Group, LLC
Investors:
Juan J. Román, CPA, 787-759-9999, ext 4895
Executive Vice President and Chief Financial Officer
jjroman@evertecinc.com
or
Luis M. Cabrera, 787-759-9999, ext 3897
Senior Vice President
Treasurer, Head of Investor Relations & Corporate Development
luiscabrera@evertecinc.com
or
Media:
Wanda Betancourt, APR, 787-759-9999, ext 4805
Senior Vice President
Communications and Marketing
wabetancourt@evertectinc.com
 
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