First Data 2007 Annual Report Download - page 42

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Consolidated Results
Pro Forma Historical
Successor Predecessor Percent Change
Historical
Percent Change
Year ended
December 31,
2007
Period from
September 25
through
December 31,
2007
Period from
January 1
through
September 24,
2007
Year ended December 31,
2006 2005
Pro Forma
2007
vs. Historical
2006
2006
vs.
2005
(in millions)
Revenues:
Transaction and processing service fees $ 5,519.2 $ 1,553.3 $ 3,965.9 $ 5,037.6 $ 4,658.9 10% 8%
Investment income, net (75.1) (8.2) (66.9) (128.6) (33.6) * *
Product sales and other 839.4 223.0 616.4 699.8 617.4 20% 13%
Reimbursable debit network fees, postage and
other 1,767.9 510.4 1,257.5 1,467.6 1,283.4 20% 14%
8,051.4 2,278.5 5,772.9 7,076.4 6,526.1 14% 8%
Expenses:
Cost of services 4,134.1 1,142.4 2,632.0 3,064.9 2,858.7 35% 7%
Cost of products sold 322.4 92.0 230.4 300.9 271.7 7% 11%
Selling, general and administrative 1,318.1 378.9 1,089.3 1,157.5 1,047.2 14% 11%
Reimbursable debit network fees, postage and
other 1,767.9 510.4 1,257.5 1,467.6 1,283.4 20% 14%
Other operating expenses, net 23.1 (0.2) 23.3 5.0 142.6 * *
7,565.6 2,123.5 5,232.5 5,995.9 5,603.6 26% 7%
Interest income 48.7 17.9 30.8 55.5 12.4 (12)% 348%
Interest expense (2,052.7) (584.7) (103.6) (248.0) (190.9) 728% 30%
Other income (expense) (a) (53.3) (74.0) 4.9 22.6 145.8 * *
Income tax (benefit) expense (686.6) (176.1) 125.8 203.7 188.3 * 8%
Minority interest (144.3) (39.0) (105.3) (142.3) (126.9) 1% 12%
Equity earnings in affiliates 122.0 46.8 223.0 283.1 232.9 (57)% 22%
Income from discontinued operations, net of
taxes — — (3.6) 665.7 909.9 * *
Net (loss) income $ (907.2) $ (301.9) $ 460.8 $ 1,513.4 $ 1,717.4 * (12)%
* Calculation not meaningful.
(a) Other income (expense) includes investment gains and (losses), derivative financial instruments gains and losses, divestitures, net, debt repayment gains
and losses and non-operating foreign exchange gain/(loss).
The following provides highlights of revenue and expense growth on a consolidated basis for the predecessor and successor periods and the pro forma
period in 2007 and the predecessor years ended December 31, 2006 and 2005 while a more detailed discussion is included in the "Segment Results" section
below:
Operating revenues overview
Transaction and processing service fees – First Data Commercial Services segment: the 2007 predecessor and successor periods were positively impacted by
growth of existing clients resulting from increased transaction volumes as well as an increase in Electronic Check Acceptance ("ECA") processing revenue.
Growth in 2006 compared to 2005 is due to internal growth of existing clients, increased transaction volumes, new alliances, new sales and pricing changes.
TeleCheck negatively impacted the growth rate in 2006 compared to 2005. First Data Financial Institution Services segment: the 2007 predecessor and
successor periods were positively impacted by acquisitions and growth of existing clients and negatively impacted by price compression and the net impact of
new and lost business. Revenue decreased in 2006 versus 2005 most significantly due to deconversions that occurred in 2005 and price compression partially
offset by growth of existing clients and new business. First Data International segment: the 2007 predecessor and successor periods were positively impacted
by acquisitions, growth of new and existing clients and benefit from foreign currency exchange rate movements and negatively impacted by lost business.
Revenue increased in 2006 compared to 2005 due to the same factors noted above.
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