First Data 2009 Annual Report Download - page 78

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
(7) Represents the exclusion of third party expenses including legal, accounting and other advisory fees
incurred in connection with the merger of the Company with an affiliate of KKR and the debt issued
thereunder, 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.
(8) Reflects the EBITDA of companies acquired or divested after December 31, 2008 through December 31,
2009, as if these companies had been acquired or divested on January 1, 2009.
(9) Reflects cost savings and revenue enhancements projected to be achieved within twelve months on an
annualized basis, principally in connection with cost savings initiatives described in Note 6 and the BAMS
alliance.
(10) Net income attributable to noncontrolling interests excluding amounts attributable to consolidated entities in
which the Company does not have a 50% or more direct ownership interest as provided for under the terms
of the agreements governing the Company’s senior unsecured debt and/or senior secured credit facilities.
The Company has only a 48.45% direct ownership interest in BAMS and a 2% indirect interest in BAMS
via its 40% noncontrolling interest in Rockmount, a holder of a 5% non-voting interest in BAMS.
(11) Represents the Company’s proportional share of income taxes, depreciation, and amortization on equity
method investments.
(12) Includes non-capitalized merger and acquisitions costs and losses on equity method investments.
(13) EBITDA is defined as net income (loss) attributable to First Data Corporation before net interest expense,
income taxes, depreciation and amortization. EBITDA is not a recognized term under U.S. generally
accepted accounting principles (“GAAP”) and does not purport to be an alternative to net income (loss)
attributable to First Data Corporation as a measure of operating performance or to cash flows from operating
activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow
available for management’s discretionary use as it does not consider certain cash requirements such as
interest payments, tax payments and debt service requirements. The presentation of EBITDA has limitations
as an analytical tool and should not be considered in isolation or as a substitute for analysis of the
Company’s results as reported under GAAP. Management believes EBITDA is helpful in highlighting
trends because EBITDA excludes the results of decisions that are outside the control of operating
management and can differ significantly from company to company depending on long-term strategic
decisions regarding capital structure, the tax jurisdictions in which companies operate and capital
investments. Management compensates for the limitations of using non-GAAP financial measures by using
them to supplement GAAP results to provide a more complete understanding of the factors and trends
affecting the business than GAAP results alone.
Consolidated EBITDA (or debt covenant EBITDA) is defined as EBITDA adjusted to exclude certain
material non-cash items, non-recurring items that the Company does not expect to continue at the same level
in the future and certain items management believes will materially impact future operating results and
adjusted to include near-term cost savings projected to be achieved within twelve months on an annualized
basis principally in connection with cost savings initiatives described in Note 6 above. Consolidated
EBITDA is further adjusted to add net income attributable to noncontrolling interests of non-wholly-owned
subsidiaries and exclude other miscellaneous adjustments that are used in calculating covenant compliance
under the agreements governing the Company’s senior unsecured debt and/or senior secured credit facilities.
The Company believes that the inclusion of supplementary adjustments to EBITDA are appropriate to
provide additional information to investors about items that will impact the calculation of EBITDA that is
used to determine covenant compliance under the agreements governing the Company’s senior unsecured
debt and/or senior secured credit facilities. Since not all companies use identical calculations, this
presentation of Consolidated EBITDA may not be comparable to other similarly titled measures of other
companies.
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