First Data 2009 Annual Report Download - page 2

PART I
ITEM 1. BUSINESS
General
First Data Corporation (“FDC” or “the Company”) is a provider of electronic commerce and payment
solutions for merchants, financial institutions and card issuers globally and has operations in 36 countries,
serving approximately 6.0 million merchant locations. FDC was incorporated in Delaware in 1989 and was the
subject of an initial public offering in connection with a spin-off from American Express in 1992. On
September 24, 2007, the Company was acquired through a merger transaction (the “merger”) with an entity
controlled by affiliates of Kohlberg Kravis Roberts & Co. (“KKR”). The merger resulted in the equity of FDC
becoming privately held.
The Company has acquired multiple domestic and international businesses over the last five years with the
most significant acquisition being the formation of the Banc of America Merchant Services, LLC (“BAMS”)
alliance in 2009. The acquisition resulted in a total purchase price of approximately $3.4 billion. On June 26,
2009, Bank of America N.A. (“BofA”) and the Company, together with Rockmount Investments, LLC
(“Rockmount”), an investment vehicle controlled by a third-party investor, formed a new company, BAMS.
BAMS provides clients with a comprehensive suite of acquiring and processing payment products for credit and
debit cards as well as merchant loyalty, prepaid, check and e-commerce solutions. The Company owns a 48.45%
direct voting interest in BAMS and BofA owns a 46.55% direct voting interest. The remaining stake in BAMS is
a 5% non-voting interest held by Rockmount. The Company owns a 40% noncontrolling interest in Rockmount.
Refer to Note 4 of the Company’s Financial Statements in Item 8 of this Form 10-K for additional information
regarding the BAMS alliance.
Spin-off of The Western Union Company (“Western Union”)
On September 29, 2006, the Company separated its Western Union money transfer business into an
independent, publicly traded company through a spin-off of 100% of Western Union to FDC shareholders in a
transaction intended to qualify for tax-free treatment (“the spin-off”) giving the shareholders separate ownership
interests in FDC and Western Union.
Segments
Effective January 1, 2009, the Company’s Chief Executive Officer began making strategic and operating
decisions with regards to assessing performance and allocating resources based on a new segment structure. The
most significant changes were check verification, settlement and guarantee services moving from the Financial
Services segment into the Retail and Alliance Services segment as well as the Prepaid Services segment moving
into the Retail and Alliance Services segment. The Company is organized in three primary segments: Retail and
Alliance Services, Financial Services and International. In addition, the Company currently operates its official
check business through its Integrated Payment Systems (“IPS”) segment but is in the process of winding-down
the official check business.
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 including the Retail
and Alliance Services segment being reported on a proportionate consolidation basis and the profit measure
being changed to a form of EBITDA (earnings before net interest expense, income taxes, depreciation and
amortization). Proportionate consolidation reflects the Company’s proportionate share of the results of
non-wholly owned alliances based on equity ownership, net of a proportionate share of eliminations for amounts
charged between the Company and the alliances. Results in prior periods have been adjusted to conform to this
presentation. Refer to Note 16 of the Company’s Financial Statements in Item 8 of this Form 10-K for additional
information regarding segment results.
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