First Data 2009 Annual Report Download - page 168

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
value and loyalty card transactions as well as for transaction authorization and posting, network
switching and account management.
• The IPS segment is principally comprised of operations which deal in the issuance of official checks
which are sold by agents that are financial institutions. Official checks serve as an alternative to a
bank’s own items such as cashiers or bank checks. Revenue is principally earned on invested funds
which are pending settlement. The official check business is conducted by a subsidiary of the
Company, Integrated Payment Systems Inc., which is licensed to offer payment instrument and money
transmitter services that fall under state and federal regulations. This segment is in the process of
winding down its official check business. IPS also offers payment processing services, and such other
services will continue after the wind down of the official check business.
Beginning in the third quarter of 2009, the Company changed the financial reports provided to its Chief
Executive Officer to better enable him to make operating decisions and assess the performance of the Company’s
business segments. The segments have not changed but the presentation of the results has changed. Results in
prior periods have been adjusted to conform to this presentation.
The business segment measurements provided to and evaluated by the 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 results exclude divested businesses.
• Retail and Alliance Services segment revenue does not include equity earnings because it is reported
using proportionate consolidation as described below. Other segment revenue includes equity earnings
in affiliates (excluding amortization expense) and intersegment revenue.
• 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 expense is excluded;
• official check and money order businesses’ EBITDA are excluded;
• cost of data center technology and savings initiatives are excluded and represent implementation
costs associated with initiatives to reduce operating expenses including items such as platform and
data center consolidation initiatives in the International segment, expenses related to the
reorganization of global application development resources, expenses associated with domestic
data center consolidation initiatives and planned workforce reduction expenses, as well as certain
platform development and other costs directly associated with the termination of the CPS alliance
all of which are considered nonrecurring projects (excludes costs accrued in purchase accounting);
• KKR merger related items are excluded and represent third party expenses including legal,
accounting and other advisory fees incurred in connection with the merger of the Company with
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