First Data 2011 Annual Report Download - page 30

benefited the cost of products sold growth rate by 4 percentage points while foreign currency exchange rate movements had an
approximate 1 percentage point offsetting impact.
Expenses increased in 2010 compared to 2009 due to an increase in terminal sales partly due to new regulations, new sales and
increased sales to existing customers as well as a write-off of international leasing receivables incorrectly recognized in prior years
and the write-off of international terminal inventory.
Selling, general and administrative. Expenses increased in 2011 compared to 2010 due to growth in payments made to
independent sales organizations ("ISO's") as a result of the Company increasing its number of ISO partners as well as an increase in
ISO transaction volumes, higher incentive compensation expense and net increases in various expense items that were not individually
significant. The payments to ISO's impacted the selling, general and administrative growth rate by approximately 5%. Foreign
currency exchange rate movements also contributed to the increase in expenses by approximately 1 percentage point.
The increase in selling, general and administrative expenses in 2010 compared to 2009 was due to higher incentive
compensation expense and an increase in payments made to ISO's resulting from the same items described above. The increase in
payments made to ISO's impacted the selling, general and administrative expenses growth rate by 6 percentage points. Higher
incentive compensation expenses impacted the selling, general and administrative expenses growth rate by 2 percentage points when
comparing 2010 to 2009. Higher employee related expenses (part of which resulted from employees assumed as part of the BAMS
alliance transaction) also impacted the growth rate by 2 percentage points.
Depreciation and Amortization. Expenses decreased in 2011 compared to 2010 due most significantly to the 2011 correction of
cumulative depreciation and amortization errors related to purchase accounting associated with the Company's 2007 merger with an
affiliate of KKR and certain assets becoming fully amortized. The errors and the cumulative correction, which totaled a $57.7 million
benefit in "Depreciation and amortization" (the correction of total depreciation and amortization errors was a $58.5 million benefit in
aggregate) and occurred over a four year period, were deemed immaterial to prior years and the current year, respectively. In addition,
depreciation and amortization declined due to a decrease in the amortization of certain intangible assets that are being amortized on an
accelerated basis resulting in higher amortization in the prior period. These decreases were partially offset by increases due to newly
capitalized assets and foreign currency exchange rate movements. The error corrections benefited the depreciation and amortization
growth rate by 4 percentage points in 2011 compared to 2010.
Expense decreased in 2010 compared to 2009 due to amortization of certain intangible assets that are being amortized on an
accelerated basis resulting in higher amortization in prior periods. Also contributing to the decrease was accelerated amortization
recorded in 2009 related to intangible assets associated with the termination of services noted above. These decreases were partially
offset by increases due to newly capitalized assets and assets associated with the BAMS alliance.
Other operating expenses, net.
2011 Activities
Pretax Benefit (Charge)
(in millions)
Retail and
Alliance
Services
Financial
Services International
All Other
and
Corporate Totals
Year ended December 31, 2011
Restructuring charges $ (2.8) $ (10.5) $ (34.2) $ (3.8) $ (51.3)
Restructuring accrual reversals 1.1 — 2.5 1.3 4.9
Litigation and regulatory
settlements — — — 2.5 2.5
Total pretax charge, net of
reversals $ (1.7)$ (10.5)$ (31.7)$ — $ (43.9)
The 2011 restructurings resulted from the elimination of management and other positions, approximately 750 employees, as part
of the Company aligning the business with strategic objectives. Similar initiatives are expected to occur in future periods resulting in
additional restructuring charges. Partially offsetting the charges were reversals of excess 2009 and 2010 restructuring accruals as well
as reversals resulting from the refinement of 2011 estimates. The Company estimates cost savings resulting from the 2011
restructuring activities to be approximately $49 million on an annual basis.
28