First Data 2009 Annual Report Download - page 54

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
changed from those described in the “Segment Realignment” section above but the presentation of the results has
changed from prior periods. Results for 2008 and 2007 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.
• 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
affiliates of KKR and the debt issued thereunder. Other adjustments also include the exclusion of
KKR annual sponsor fees for management, consulting, financial and other advisory services and
the effect of purchase accounting associated with the merger on EBITDA which is primarily the
result of revenue recognition adjustments.
• Retail and Alliance Services segment revenue and EBITDA are reflected based on the Company’s
proportionate share of the results of its investments in businesses accounted for under the equity
method and consolidated subsidiaries with noncontrolling ownership interests. In addition, Retail
and Alliance Services segment measures reflect commission payments to certain ISO’s, which are
treated as an expense in the Consolidated Statements of Operations, as contra revenue to be
consistent with revenue share arrangements with other ISO’s that are recorded as contra revenue.
Corporate operations include administrative and shared service functions such as the executive group, legal,
tax, treasury, internal audit, accounting, human resources, information technology and procurement. Costs
incurred by Corporate that are directly attributable to a segment are allocated to the respective segment.
Administrative and shared service costs are retained by Corporate.
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