First Data 2007 Annual Report Download - page 71

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
(10) Reflects the EBITDA of companies acquired after January 1, 2006 through December 31, 2007, as if these companies had been acquired on January 1,
2006. The amount for the 2007 predecessor period and 2006 was adjusted to include fourth quarter 2007 acquisitions.
(11) Reflects cost savings projected to be achieved within twelve months (the majority of which, at this time, are associated with certain corporate overhead
and operational business unit cost reduction efforts).
(12) Reflects minority interest not already accounted for in Other items above.
(13) Represents the Company's proportional share of income taxes, depreciation, and amortization on equity method investments.
(14) Includes non-capitalized merger and acquisition costs, losses on equity method investments, and amortization of unrecognized actuarial gains and
losses on pensions.
(15) EBITDA is defined as income (loss) from continuing operations plus net interest expense, income taxes, depreciation and amortization. EBITDA is not
a recognized term under GAAP and does not purport to be an alternative to income from continuing operations as a measure of operating performance
or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow available
for management's discretionary use as it does not consider certain cash requirements such as interest payments, tax payments and debt service
requirements. The presentation of EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis
of the Company's results as reported under GAAP. Management believes EBITDA is helpful in highlighting trends because EBITDA excludes the
results of decisions that are outside the control of operating management and can differ significantly from company to company depending on long-
term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. In addition, EBITDA
provides more comparability between the Company's predecessor results and the Company's successor results that reflect purchase accounting and the
Company's new capital structure. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement
GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.
Adjusted EBITDA excluding projected near term cost savings is defined as EBITDA further adjusted to exclude certain items and other adjustments
and is used by management as a measure of liquidity. The Company believes that the inclusion of supplementary adjustments to EBITDA applied in
presenting Adjusted EBITDA excluding near term cost savings are appropriate to provide additional information to investors about certain material
non-cash items, non-recurring items that we do not expect to continue at the same level in the future and certain items management believes will
materially impact future operating results.
Adjusted EBITDA is defined as Adjusted EBITDA excluding near term cost savings further adjusted to reflect cost savings projected to be achieved
within twelve months. Management believes the supplementary adjustments are appropriate to provide investors additional information about near term
cost cutting initiatives.
Consolidated EBITDA (or debt covenant EBITDA) is defined as Adjusted EBITDA further adjusted to exclude other adjustments that will be used in
calculating covenant compliance under the agreements governing new senior unsecured debt and/or new senior secured credit facilities. The Company
believes that the inclusion of supplementary adjustments to Adjusted EBITDA applied in presenting Consolidated EBITDA are appropriate to provide
additional information to investors about items that will impact the calculation of EBITDA that is used to determine covenant compliance under the
agreements governing new senior unsecured debt and/or new senior secured credit facilities. Since not all companies use identical calculations, this
presentation of Consolidated EBITDA may not be comparable to other similarly titled measures of other companies.
On May 26, 2005, the Company issued $550 million of 4.50% senior notes due June 15, 2010 and $450 million of 4.95% senior notes due June 15,
2015. The Company received net proceeds of $547.9 million and $447.7 million from these issuances, respectively, which were used to repay outstanding
commercial paper.
Proceeds from Issuance of Common Stock
Proceeds from the issuance of common stock result from stock option exercises and purchases under the Company's ESPP during the 2007 predecessor
period. Proceeds in the 2007 successor period represent equity funding from Holdings related to the merger.
On September 24, 2007, Holdings sold $1.0 billion aggregate principal amount of 11.5% senior PIK notes due 2016 to GS Mezzanine Partners VI
Fund, L.P. and the Goldman Sachs Group, Inc. This $1.0 billion, net of fees, was the source of funds for a portion of Holdings' investment in FDC. No cash
interest will accrue on these notes. Interest on the notes will be paid by increasing the principal amount of the notes. Holdings' senior PIK notes are unsecured
and neither FDC nor its subsidiaries provide credit support for Holdings' obligations under the notes. As a result, the senior PIK notes of Holdings are not
indebtedness of FDC or its subsidiaries. However, the senior PIK notes contain a number of covenants that, among other things, restrict, subject to certain
exceptions, FDC's ability to:
• incur additional indebtedness;
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