First Data 2009 Annual Report Download - page 53

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
which is included as a long-term account receivable in the “Other long-term assets” line of the Company’s
Consolidated Balance Sheets, reflecting the indemnification obligation. The uncertain income tax liabilities and
corresponding receivable are based on information provided by Western Union regarding its tax contingency
reserves for periods prior to the spin-off date. There is no assurance that a Western Union-related issue raised by
the IRS or other tax authority will be finally resolved at a cost not in excess of the amount reserved and reflected
in the Company’s uncertain income tax liabilities and corresponding receivable from Western Union.
Equity earnings in affiliates
Equity earnings in affiliates decreased in 2009 compared to 2008 due to the net impact of the CPS and
WFMS alliance transactions described above. Equity earnings in affiliates for 2008 and in the 2007 successor
period was lower than the 2007 predecessor period due to increased amortization associated with the value
assigned to the identifiable intangible assets of merchant alliances from the excess of the Company’s investment
over the proportionate share of the affiliates net assets from the merger as well as amortization of customer
relationships on an accelerated basis in the successor periods. Equity earnings in affiliates for 2008 also were
negatively impacted due to the CPS alliance termination which occurred on November 1, 2008 resulting in two
fewer months of equity earnings when compared to the pro forma 2007 period.
Net income attributable to noncontrolling interests
Most of the net income attributable to noncontrolling interests relates to the Company’s consolidated
merchant alliances. Net income attributable to noncontrolling interests decreased in 2009 compared to 2008 due
to the deconsolidation of the alliance with Wells Fargo at December 31, 2008 upon sale of part of the Company’s
interest in the alliance discussed in “Overview” above. Partially offsetting this decrease was an increase due to
the formation of the BAMS alliance beginning in June 2009. Net income attributable to noncontrolling interests
increased in 2008 compared to 2007 due to the new alliance with Allied Irish Banks p.l.c. (“AIB”) in January
2008 and higher earnings from the alliance with Wells Fargo.
Segment Results
FDC classifies its businesses into four segments: Retail and Alliance Services, Financial Services,
International and Integrated Payment Systems. Integrated Payment Systems and All Other and Corporate are not
discussed separately as their results that had a significant impact on operating results are discussed in the
“Consolidated Results” discussion above. As discussed above in “Overview,” results of operations reflect the
segment realignment for all periods presented.
The Company sold a merchant acquiring business in Canada as well as a debit and credit card issuing and
acquiring processing business in Austria and Active Business Services, Ltd, all reported within the International
segment, in November 2009, August 2009 and July 2008, respectively, and Peace Software, reported within the
Financial Services segment, in October 2008. The results of divested businesses are excluded from segment
results. The International and Financial Services performance measures have been adjusted for 2009, 2008 and
2007 to exclude the results of divested businesses. Retail and Alliance Services segment performance measures
have been adjusted for 2008 and 2007 to reflect the sale of 12.5% of the Company’s ownership interest in the
Wells Fargo Merchant Services alliance that occurred on December 31, 2008.
Beginning in the third quarter of 2009, the Company changed the financial reports provided to its Chief
Executive Officer, the Company’s chief operating decision maker (“CODM”), to better enable him to make
operating decisions and assess the performance of the Company’s business segments. The segments have not
53