First Data 2013 Annual Report Download - page 105

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Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by a
company’s chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. First
Data’s CODM is its Chief Executive Officer. The Company is organized in three segments: Retail and Alliance Services, Financial Services and International.
The business segment measurements provided to and evaluated by the CODM are computed in accordance with the principles listed below.
· The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.
· Segment results exclude divested businesses.
· Segment revenue includes equity earnings in affiliates (excluding amortization expense) and intersegment revenue. Retail and Alliance Services
segment revenue does not include equity earnings because it is reported using proportionate consolidation as described below.
· Segment revenue excludes reimbursable debit network fees, postage and other revenue.
· Segment earnings before net interest expense, income taxes, depreciation and amortization (“EBITDA”) includes equity earnings in affiliates and
excludes depreciation and amortization expense, net income attributable to noncontrolling interests, other operating expenses and other income
(expense). Retail and Alliance Services segment EBITDA does not include equity earnings because it is reported using proportionate consolidation
as described below. Additionally, segment EBITDA is adjusted for items similar to certain of those used in calculating the Company’s compliance
with debt covenants. The additional items that are adjusted to determine segment EBITDA are:
· stock based compensation and related expense is excluded;
· official check and money order businesses’ EBITDA are excluded as these are winding down;
· certain costs directly associated with the termination of the Chase Paymentech Solutions alliance, and expenses related to the
conversion of certain BAMS alliance merchant clients onto the Company’s platforms (excludes costs accrued in purchase
accounting). Effective October 1, 2011, First Data and Bank of America N.A. (“the Bank”) jointly decided to have First Data
operate the Bank’s legacy settlement platform. Transition costs associated with the revised strategy are also excluded from segment
EBITDA;
· debt issuance costs are excluded and represent costs associated with issuing debt and modifying the Company’s debt structure;
and
· KKR related items include annual sponsor and other fees for management, consulting, financial and other advisory services are
excluded.
· Retail and Alliance Services segment revenue and EBITDA are reflected based on the Company’s proportionate share of the results of its
investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. In
addition, Retail and Alliance Services segment measures reflect commission payments to certain independent sales organizations (“ISO’s”), which
are treated as an expense in the Consolidated Statements of Operations, as contra revenue to be consistent with revenue share arrangements with
other ISO’s that are recorded as contra revenue.
· Corporate operations include administrative and shared service functions such as the executive group, legal, tax, treasury, internal audit,
accounting, human resources, information technology and procurement. Costs incurred by Corporate that are directly attributable to a segment are
allocated to the respective segment. Administrative, shared service and certain information technology costs are retained by Corporate.
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