First Data 2013 Annual Report Download - page 27

fees charged to alliances accounted for under the equity method. For segment reporting purposes, the proportionate consolidation presentation results in
revenue including the alliance partners’ share of processing fees charged to both consolidated and unconsolidated alliances. Merchant discount revenue from
credit card and signature debit card transactions acquired from merchants is recorded net of interchange and assessments charged by the credit card
associations. “Check services” revenues include check verification, settlement and guarantee fees which are charged on a per transaction basis or as a
percentage of the face value of the check. “Card services” revenue related to credit and retail card processing is comprised primarily of fees charged to the client
based on cardholder accounts on file, both active and inactive. “Card services” revenue for output services consists of fees for printing statements and letters
and embossing plastics. Debit processing and network service fees included in “Card services” revenues are typically based on transaction volumes
processed. “Other services” revenue includes all other types of transactional revenue not specifically related to the classifications noted above.
 Sales and leasing of POS devices in the Retail and Alliance Services and International segments are the primary drivers of
this revenue component, providing a recurring revenue stream. This component also includes contract termination fees, royalty income and gain/loss from the
sale of merchant portfolios, all of which occur less frequently but are considered a part of ongoing operations. Also included within this line item is revenue
recognized from custom programming and system consulting services, software licensing and maintenance revenue generated primarily from the Vision PLUS
software in the International segment and investment income generated by invested settlement assets, realized net gains and losses and, if applicable,
impairment losses from such assets within the Retail and Alliance Services, Financial Services and International segments and All Other and Corporate.
Debit network fees from personal identification number (“PIN”)-debit card transactions
acquired from merchants are recorded gross with the associated network fee recorded in the corresponding expense caption, principally within the Retail and
Alliance Services segment. In addition, the reimbursable component and the offsetting expense caption include postage, telecommunications and similar costs
that are passed through to customers principally within the Financial Services segment. Reimbursable debit network fees, postage and other revenue and the
corresponding expense are not included in segment results.
This caption includes the costs directly associated with providing services to customers and includes the following:
telecommunications costs, personnel and infrastructure costs to develop and maintain applications, operate computer networks and provide associated
customer support, losses on check guarantee services and merchant chargebacks, and other operating expenses.
These costs include those directly associated with product and software sales such as cost of POS devices, merchant terminal
leasing costs and software licensing and maintenance costs.
 This caption primarily consists of salaries, wages and related expenses paid to sales personnel, administrative
employees and management as well as advertising and promotional costs and other selling expenses.
This caption consists of the Company’s depreciation and amortization expense. Excluded from this caption is the
amortization of initial payments for contracts which is recorded as a contra-revenue within the “Transaction and processing services fees” line as well as
amortization related to equity method investments which is netted within the “Equity earnings in affiliates” line.
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The following discussion for both consolidated results and segment results are for the year ended December 31, 2013 compared to the year ended
December 31, 2012 as well as for the year ended December 31, 2012 compared to the year ended December 31, 2011. Consolidated results should be read in
conjunction with segment results, which provide more detailed discussions concerning certain components of the Consolidated Statements of Operations. All
significant intercompany accounts and transactions have been eliminated.
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