First Data 2012 Annual Report Download - page 105

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 15: Segment Information
Operating segments are defined as components of an enterprise about which separate financial information is available that is
evaluated regularly by a company’s chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate
resources and in assessing performance. First Data’s CODM is its Chief Executive Officer. The Company is organized in three
segments: Retail and Alliance Services, Financial Services and International.
The business segment measurements provided to and evaluated by the CODM are computed in accordance with the principles
listed below.
• The accounting policies of the operating segments are the same as those described in the summary of significant
accounting policies.
• Segment results exclude divested businesses.
• Segment revenue includes equity earnings in affiliates (excluding amortization expense) and intersegment revenue. Retail
and Alliance Services segment revenue does not include equity earnings because it is reported using proportionate
consolidation as described below.
• 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 and related expense is excluded;
• official check and money order businesses’ EBITDA are excluded;
• expenses related to the reorganization of global application development resources (applicable to 2010 ),
expenses associated with domestic data center consolidation initiatives and planned workforce reduction
expenses (applicable to 2010 ), certain platform development and other costs directly associated with the
termination of the Chase Paymentech Solutions alliance, and expenses related to the conversion of certain
BAMS alliance merchant clients onto the Company’s platforms all of which are considered nonrecurring
p
rojects (excludes costs accrued in purchase accounting). Effective October 1, 2011, First Data and Bank of
America N.A. (“the Bank”) jointly decided to have First Data operate the Bank’s legacy settlement
platform. Transition costs associated with the revised strategy are also excluded from segment EBITDA.
• debt issuance costs are excluded and represent costs associated with issuing debt and modifying the
Company’s debt structure;
• KKR related items include annual sponsor and other fees for management, consulting, financial and other
advisory services.
• 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, shared service and certain
information technology costs are retained by Corporate.
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