First Data 2009 Annual Report Download - page 46

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
to an increase in expenses associated with payments to ISO’s most significantly as a result of the portion the CPS
alliance received by the Company upon termination, the impacts of acquisitions as well as sponsor management
fees. Selling, general and administrative expenses decreased in 2008 compared to the 2007 pro forma period due
to the items noted above excluding the impact of the 2007 accelerated vesting charges and the professional fees
related to the merger which are excluded from the pro forma 2007 period. Selling, general and administrative
expenses, as a percentage of transaction and processing service fee revenue decreased for 2008 compared to pro
forma 2007 as a result of the items noted above.
Depreciation and Amortization—Expenses increased in 2009 compared to 2008 due most significantly to
the net impact of amortization associated with the CPS and WFMS alliance transactions and the BAMS alliance
noted above as well as an increase due to newly capitalized assets. In addition, amortization expense increased as
a result of accelerated amortization recorded in second quarter 2009 related to intangible assets associated with
the contract termination in the Financial Services segment. These increases were partially offset by less
amortization on certain intangible assets that are being amortized on an accelerated basis resulting in higher
amortization in prior periods.
Amortization was higher in the 2008 and 2007 successor periods than in the 2007 predecessor period due to
identifiable intangible assets recorded in purchase accounting related to the merger including amortization of
customer relationships on an accelerated basis rather than a straight-line basis. Partially offsetting these increases
was a decrease related to the depreciation of fixed assets recorded in purchase accounting related to the merger.
Although the total value of the fixed assets increased from pre-merger book values, certain of the depreciable
assets were determined to have longer lives which resulted in lower annual depreciation. Depreciation and
amortization in 2008 increased compared to the same 2007 pro forma period due to newly capitalized assets, the
impact of acquisitions, and the amortization associated with the Company’s proportionate share of assets from
the termination of the CPS alliance which was previously netted within the “Equity earnings in affiliates” line
within the Consolidated Statements of Operations.
Other operating expenses, net
Other operating expenses related to restructuring, impairments, litigation and regulatory settlements and
other totaled $289.7 million for the successor year ended December 31, 2009, $3,255.6 million for the successor
year ended December 31, 2008, and $23.3 million and a benefit of $0.2 million for the 2007 predecessor and
successor periods, respectively. These items are presented on the Consolidated Statements of Operations under
those respective descriptions.
2009 Activities
Pretax Benefit (Charge)
Successor
Year ended December 31, 2009
Retail and
Alliance
Services
Financial
Services International
All Other
and
Corporate
Divested
Operations Totals
(in millions)
Restructuring charges .................. $(15.9) $(14.5) $ (49.2) $(22.0) $(0.5) $(102.1)
Restructuring accrual reversals .......... 4.2 1.7 2.9 0.5 — 9.3
Impairments ......................... — — (131.9) (53.2) — (185.1)
Litigation and regulatory settlements ...... — (14.5) — 2.7 — (11.8)
Total pretax charge, net of reversals ...... $(11.7) $(27.3) $(178.2) $(72.0) $(0.5) $(289.7)
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