First Data 2010 Annual Report Download - page 37

Table of Contents
FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
• 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, expenses related to the conversion of certain BAMS merchant
clients onto First Data platforms, 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);
• debt issuance costs are excluded and represent costs associated with issuing debt and modifying the Company's debt structure as
well as costs associated with the issuance of debt related to the merger with an affiliate of KKR in 2007;
• KKR related items are excluded and represent items related to the merger with an affiliate of KKR primarily resulting from 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.
Retail and Alliance Services segment results.
(in millions)
Year ended December 31, Percent Change
2010 2009 2008 2010 vs. 2009 2009 vs. 2008
Revenues:
Transaction and processing service fees $ 2,923.9 $ 2,720.1 $ 2,894.2 7% (6)%
Product sales and other 390.9 342.7 383.0 14% (11)%
Segment revenue $ 3,314.8 $ 3,062.8 $ 3,277.2 8% (7)%
Segment EBITDA $ 1,322.3 $ 1,193.5 $ 1,407.8 11% (15)%
Segment Margin 40% 39% 43% 1pt (4)pts
Key indicators:
Domestic merchant transactions (a) 34,604.9 28,257.8 26,856.9 22% 5%
(a) Domestic merchant transactions include acquired VISA and MasterCard credit and signature debit, PIN-debit, electronic benefits transactions, and
processed-only or gateway customer transactions at the POS. Domestic merchant transactions for 2008 include
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