First Data 2007 Annual Report Download - page 49

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Minority interest
Most of the minority interest expense relates to the Company's consolidated merchant alliances. Minority interest was relatively consistent in 2007 and
2006.
The increase in expense for 2006 compared to 2005 is due to an increase in the alliances' income in 2006 as well as a minority interest expense
recognized in the second quarter 2006 related to the reversal of a 2004 litigation accrual in the Commercial Services segment.
Equity earnings in affiliates
Equity earnings for the 2007 successor period decreased from the predecessor periods due to increased amortization associated with the assigned value
to the identifiable intangible assets of merchant alliances in the preliminary intangible asset valuation. Equity earnings in affiliates decreased for pro forma
2007 compared to historical 2006 earnings levels resulting most significantly from the above noted amortization partially offset by increased merchant
transaction volume in the merchant alliances. Increased amortization negatively impacted the pro forma 2007 period by 71 percentage points. The increase in
equity earnings in affiliates for 2006 compared to 2005 resulted from increased merchant transaction volume in the merchant alliances.
Segment Results
Operating segments are defined by Statement of Financial Accounting Standard ("SFAS") No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"), as components of an enterprise about which separate financial information is available that is evaluated regularly by the
CODM, or decision-making group, in deciding how to allocate resources and in assessing performance. FDC's CODM is its Chief Executive Officer. FDC
classifies its businesses into four segments: First Data Commercial Services, First Data Financial Institution Services, First Data International and Integrated
Payment Systems. Integrated Payment Systems and All Other and Corporate are not discussed separately as their results that had a significant impact on
operating results are discussed in the "Consolidated Results" discussion above.
The Company's financial statements reflect Western Union, PPS, IDLogix, Taxware and NYCE as discontinued operations. The results of operations
were treated as income from discontinued operations, net of tax, and separately stated on the Consolidated Statements of Income below income from
continuing operations.
The business segment measurements provided to, and evaluated by, the Company's CODM are computed in accordance with the following principles:
• The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.
• Segment revenue includes interest income, equity earnings in affiliates (excluding amortization expense) and intersegment revenue.
• The portion of Corporate overhead allocated to the segments (shared service costs) is based primarily on a relative percentage of total segment
revenue.
• Segment operating profit includes interest income, minority interest (excluding minority interest related to interest expense and income taxes) and
equity earnings in affiliates net of related amortization expense.
• Segment operating profit excludes restructuring charges, impairment charges, significant litigation and regulatory settlement charges, other
charges, interest expense, other income or expense and income taxes since they are not allocated to the segments for internal evaluation purposes.
While these items are generally identifiable to the business segments, they are not included in the measurement of segment operating profit
provided to the CODM for purposes of assessing segment performance and decision making with respect to resource allocation.
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