FDC First Data Corporation

FIRST DATA CORPORATION

(Exact name of registrant as specified in its charter)

www.firstdata.com

DELAWARE		47-0731996
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
225 LIBERTY STREET, 29th FLOOR
NEW YORK, NEW YORK		10281
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code (800) 735-3362

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    ý   No   o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ý     No   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

	Large accelerated filer	x			Accelerated filer	o
	Non-accelerated filer	o		(Do not check if a smaller reporting company)
					Smaller reporting company	o
					Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o   No  ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date

Class		Outstanding at September 30, 2017
Class A Common Stock, $0.01 par value per share		480,402,599 shares
Class B Common Stock, $0.01 par value per share		443,064,055 shares

1

---

INDEX

 

			PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited):
	Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016		4
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016		5
	Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016		6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016		7
	Consolidated Statements of Equity for the nine months ended September 30, 2017 and 2016		8
	Notes to Consolidated Financial Statements		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		42
Item 4.	Controls and Procedures		42
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		44
Item 1A.	Risk Factors		44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		44
Item 3.	Defaults Upon Senior Securities		44
Item 4.	Mine Safety Disclosures		44
Item 5.	Other Information		44
Item 6.	Exhibits		45

Unless otherwise indicated or the context otherwise requires, financial data in this Form 10-Q reflects the consolidated business and operations of First Data Corporation and its consolidated subsidiaries. Unless the context otherwise requires, all references herein to “First Data,” “FDC,” the “Company,” “we,” “our,” or “us” refer to First Data Corporation and its consolidated subsidiaries.

Amounts in this Form 10-Q and the unaudited consolidated financial statements included in this Form 10-Q are presented in U.S. Dollars rounded to the nearest million, unless otherwise noted.

2

---

Table of Contents

Forward-Looking Statements

 

Certain matters we discuss in this Form 10-Q and in other public statements may constitute forward-looking statements. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions which concern our strategy, plans, projections or intentions. Examples of forward-looking statements include, but are not limited to, all statements we make relating to revenue, earnings before net interest expense, income taxes, depreciation, and amortization (EBITDA), earnings, margins, growth rates, and other financial results for future periods. By their nature, forward-looking statements speak only as of the date they are made; are not statements of historical fact or guarantees of future performance; and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify. Actual results could differ materially and adversely from our forward-looking statements due to a variety of factors, including the following: (1) adverse impacts from global economic, political, and other conditions affecting trends in consumer, business, and government spending; (2) our ability to anticipate and respond to changing industry trends, including technological changes and increasing competition; (3) our ability to successfully renew existing client contracts on favorable terms and obtain new clients; (4) our ability to prevent a material breach of security of any of our systems; (5) our ability to implement and improve processing systems to provide new products, improve functionality, and increase efficiencies; (6) the successful management of our merchant alliance program which involves several alliances not under our sole control and each of which acts independently of the others; (7) our successful management of credit and fraud risks in our business units and merchant alliances, particularly in the context of eCommerce and mobile markets; (8) consolidation among financial institution clients or other client groups that impacts our client relationships; (9) our ability to use our net operating losses without restriction to offset income for US tax purposes; (10) our ability to improve our profitability and maintain flexibility in our capital resources through the implementation of cost savings initiatives; (11) the acquisition or disposition of a material business or assets; (12) our ability to successfully value and integrate acquired businesses; (13) our high degree of leverage; (14) adverse impacts from currency exchange rates or currency controls imposed by any government or otherwise; (15) changes in the interest rate environment that increase interest on our borrowings or the interest rate at which we can refinance our borrowings; (16) the impact of new or changes in current laws, regulations, credit card association rules, or other industry standards; and (17) new lawsuits, investigations, or proceedings, or changes to our potential exposure in connection with pending lawsuits, investigations or proceedings, and various other factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2016, including but not limited to, Item 1 - Business, Item 1A - Risk Factors, and Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations. Except as required by law, we do not intend to revise or update any forward-looking statement as a result of new information, future developments or otherwise.

 

3

---

Table of Contents

PART I. FINANCIAL INFORMATION  

ITEM 1.                          FINANCIAL STATEMENTS

FIRST DATA CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three months ended   September 30,								Nine months ended   September 30,
(in millions, except per share amounts)		2017				2016				2017				2016
Revenues:
Transaction and processing service fees (a)		$	1,733			$	1,693			$	4,982			$	4,953
Product sales and other (a)		348				307				1,016				893
Total revenues (excluding reimbursable items)		2,081				2,000				5,998				5,846
Reimbursable debit network fees, postage, and other		995				936				2,904				2,795
Total revenues		3,076				2,936				8,902				8,641
Expenses:
Cost of services (exclusive of items shown below)		698				711				2,089				2,140
Cost of products sold		96				87				267				251
Selling, general, and administrative		564				499				1,607				1,563
Depreciation and amortization		248				237				713				713
Other operating expenses		57				12				108				57
Total expenses (excluding reimbursable items)		1,663				1,546				4,784				4,724
Reimbursable debit network fees, postage, and other		995				936				2,904				2,795
Total expenses		2,658				2,482				7,688				7,519
Operating profit		418				454				1,214				1,122
Interest expense, net		(234		)		(263		)		(706		)		(810		)
Loss on debt extinguishment		(1		)		(3		)		(72		)		(58		)
Other (expense) income		(4		)		(30		)		(7		)		14
Income before income taxes and equity earnings in affiliates		179				158				429				268
Income tax (benefit) expense		(106		)		24				(66		)		57
Equity earnings in affiliates		55				66				167				198
Net income		340				200				662				409
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest		44				68				145				181
Net income attributable to First Data Corporation		$	296			$	132			$	517			$	228
Net income attributable to First Data Corporation per share:
Basic		$	0.32			$	0.15			$	0.57			$	0.25
Diluted		$	0.31			$	0.14			$	0.55			$	0.25
Weighted-average common shares outstanding:
Basic		918				905				915				900
Diluted		944				923				938				918

(a)	Includes processing fees, administrative service fees, and other fees charged to merchant alliances accounted for under the equity method of $56 million and $162 million for the three and nine months ended September 30, 2017 , respectively, and $52 million and $150 million for the comparable periods in 2016 .

 

See notes to unaudited consolidated financial statements.

4

---

FIRST DATA CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

		Three months ended   September 30,								Nine months ended   September 30,
(in millions)		2017				2016				2017				2016
Net income		$	340			$	200			$	662			$	409
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		105				61				213				(44		)
Pension liability adjustments		—				—				19				—
Derivative instruments		1				—				—				—
Total other comprehensive income (loss), net of tax		106				61				232				(44		)
Comprehensive income		446				261				894				365
Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest		50				69				158				183
Comprehensive income attributable to First Data Corporation		$	396			$	192			$	736			$	182

 

See notes to unaudited consolidated financial statements.

5

---

Table of Contents

FIRST DATA CORPORATION

CONSOLIDATED BALANCE SHEETS

 (Unaudited)

(in millions, except par value)		As of September 30, 2017				As of December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents		$	502			$	385
Accounts receivable, net of allowance for doubtful accounts of $45 and $74		1,910				1,877
Settlement assets		15,139				14,795
Prepaid expenses and other current assets		335				360
Total current assets		17,886				17,417
Property and equipment, net of accumulated depreciation of $1,595 and $1,416		911				883
Goodwill		17,371				16,696
Customer relationships, net of accumulated amortization of $5,954 and $5,660		1,876				1,739
Other intangibles, net of accumulated amortization of $2,611 and $2,365		1,913				1,800
Investment in affiliates		965				988
Other long-term assets		723				769
Total assets		$	41,645			$	40,292
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	1,552			$	1,564
Short-term and current portion of long-term borrowings		854				358
Settlement obligations		15,139				14,795
Total current liabilities		17,545				16,717
Long-term borrowings		17,795				18,131
Deferred tax liabilities		412				409
Other long-term liabilities		857				831
Total liabilities		36,609				36,088
Commitments and contingencies (See note 11)
Redeemable noncontrolling interest		72				73
First Data Corporation stockholders' equity:
Class A Common stock, $0.01 par value; 1,600 shares authorized as of September 30, 2017 and December 31, 2016, respectively; 490 shares and 372 shares issued as of September 30, 2017 and December 31, 2016, respectively; and 480 shares and 367 shares outstanding as of September 30, 2017 and December 31, 2016, respectively		5				4
Class B Common stock, $0.01 par value; 625 shares authorized as of September 30, 2017 and December 31, 2016, respectively; 443 shares and 544 shares issued and outstanding as of September 30, 2017 and December 31, 2016		4				5
Preferred stock, $0.01 par value; 100 shares authorized as of September 30, 2017 and December 31, 2016, respectively; no shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		—				—
Class A Treasury stock, at cost, 10 shares and 5 shares as of September 30, 2017 and December 31, 2016, respectively		(139		)		(61		)
Additional paid-in capital		13,430				13,210
Accumulated loss		(10,095		)		(10,612		)
Accumulated other comprehensive loss		(1,107		)		(1,326		)
Total First Data Corporation stockholders' equity		2,098				1,220
Noncontrolling interests		2,866				2,911
Total equity		4,964				4,131
Total liabilities and equity		$	41,645			$	40,292

 See notes to unaudited consolidated financial statements.

6

---

Table of Contents

FIRST DATA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Nine months ended September 30,
(in millions)		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	662			$	409
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)		806				793
Charges related to other operating expenses and other income		115				43
Loss on debt extinguishment		72				58
Stock-based compensation expense		183				214
Other non-cash and non-operating items, net		36				30
Increase (decrease) in cash, excluding the effects of acquisitions and dispositions, resulting from changes in:
Accounts receivable, current and long-term		60				115
Other assets, current and long-term		8				20
Accounts payable and other liabilities, current and long-term		(186		)		5
Income tax accounts		(174		)		(27		)
Net cash provided by operating activities		1,582				1,660
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(198		)		(168		)
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs		(192		)		(183		)
Acquisitions, net of cash acquired		(848		)		(6		)
Proceeds from dispositions		88				—
Proceeds from the maturity of net investment hedges		90				—
Other investing activities, net		3				19
Net cash used in investing activities		(1,057		)		(338		)
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net		415				234
Proceeds from issuance of long-term debt		3,548				2,377
Payment of call premiums and debt issuance cost		(63		)		(52		)
Principal payments on long-term debt		(4,063		)		(3,544		)
Payment of taxes related to settlement of equity awards		(87		)		(59		)
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interest		(203		)		(240		)
Other financing activities, net		43				26
Net cash used in financing activities		(410		)		(1,258		)
Effect of exchange rate changes on cash and cash equivalents		2				(18		)
Change in cash and cash equivalents		117				46
Cash and cash equivalents at beginning of period		385				429
Cash and cash equivalents at end of period		$	502			$	475
NON-CASH TRANSACTIONS
Capital leases, net of trade-ins		$	57			$	119
Other financing arrangements		$	102			$	42

 

See notes to unaudited consolidated financial statements.

7

---

Table of Contents

FIRST DATA CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)  

		First Data Corporation Stockholders
		Common Stock														Treasury Stock							Additional Paid-In Capital				Accumulated Loss				Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interest				Total
(in millions)		Class A							Class B							Class A
		Shares			Amount				Shares			Amount				Shares			Amount
Balance, December 31, 2016		367			$	4			544			$	5			5			$	(61	)		$	13,210			$	(10,612	)		$	(1,326	)		$	2,911			$	4,131
Dividends and distributions paid to noncontrolling interests (a)		—			—				—			—				—			—				—				—				—				(179		)		(179		)
Net income (b)		—			—				—			—				—			—				—				517				—				121				638
Other comprehensive income		—			—				—			—				—			—				—				—				219				13				232
Adjustment to redemption value of redeemable noncontrolling interest		—			—				—			—				—			—				1				—				—				—				1
Stock compensation expense		—			—				—			—				—			—				183				—				—				—				183
Stock activity under stock compensation plans		11			—				1			—				5			(78		)		36				—				—				—				(42		)
Conversion of common stock		102			1				(102	)		(1		)		—			—				—				—				—				—				—
Balance, September 30, 2017		480			$	5			443			$	4			10			$	(139	)		$	13,430			$	(10,095	)		$	(1,107	)		$	2,866			$	4,964

		First Data Corporation Stockholders
		Common Stock														Treasury Stock							Additional Paid-In Capital				Accumulated Loss				Accumulated Other Comprehensive Loss				Noncontrolling Interest				Total
(in millions)		Class A							Class B							Class A
		Shares			Amount				Shares			Amount				Shares			Amount
Balance, December 31, 2015		180			$	2			719			$	7			—			$	—			$	12,910			$	(11,032	)		$	(1,219	)		$	2,992			$	3,660
Dividends and distributions paid to noncontrolling interests (a)		—			—				—			—				—			—				—				—				—				(215		)		(215		)
Net income  (b)		—			—				—			—				—			—				—				228				—				156				384
Other comprehensive (loss) income		—			—				—			—				—			—				—				—				(46		)		2				(44		)
Adjustment to redemption value of redeemable noncontrolling interest		—			—				—			—				—			—				4				—				—				—				4
Stock compensation expense		—			—				—			—				—			—				214				—				—				—				214
Stock activity under stock compensation plans and other		173			2				(161	)		(2		)		5			(58		)		28				—				—				—				(30		)
Balance, September 30, 2016		353			$	4			558			$	5			5			$	(58	)		$	13,156			$	(10,804	)		$	(1,265	)		$	2,935			$	3,973

(a)	The total distribution presented in the unaudited consolidated statements of equity for the nine months ended September 30, 2017 and 2016 excludes $24 million and $ 25 million , respectively, in distributions paid to redeemable noncontrolling interest not included in equity.

(b)	The total net income presented in the unaudited consolidated statements of equity for the nine months ended September 30, 2017 and 2016 is $24 million and $25 million lower, respectively, than the amounts presented in the unaudited consolidated statements of operations due to the net income attributable to the redeemable noncontrolling interest not included in equity.

See notes to unaudited consolidated financial statements.

8

---

Table of Contents

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation and Summary of Significant Accounting Policies

 

Business Description

 

First Data Corporation ("FDC" or "the Company") is a global leader in commerce-enabling technology and solutions for merchants, financial institutions, and card issuers. The Company provides merchant transaction processing and acquiring; credit, retail, and debit card issuing and processing; prepaid and payroll services; check verification; settlement and guarantee services; statement printing and remittance services; as well as solutions to help clients grow their businesses including the Company's Clover line of payment solutions and related applications.

Basis of Presentation

 

The accompanying unaudited consolidated financial statements of the Company should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 . Significant accounting policies disclosed therein have not changed.

 

The accompanying consolidated financial statements are unaudited; however, in the opinion of management, they include all normal recurring adjustments necessary for a fair presentation of the consolidated financial position of the Company, the consolidated results of the Company's operations, comprehensive income (loss), consolidated cash flows and changes in equity as of and for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year due in part to the seasonality of certain business units.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

 

Presentation

 

Depreciation and amortization, presented as a separate line item on the Company’s unaudited consolidated statements of operations, does not include amortization of initial payments for new contracts which is recorded as contra-revenue within “Transaction and processing service fees.” Also not included is amortization related to equity method investments which is netted within “Equity earnings in affiliates.” The following table presents the amounts associated with such amortization for the three and nine months ended September 30, 2017 and 2016 :

		Three months ended   September 30,								Nine months ended   September 30,
(in millions)		2017				2016				2017				2016
Amortization of initial payments for new contracts		$	20			$	16			$	58			$	47
Amortization related to equity method investments		12				12				35				33

 

Revenue Recognition

 

Interchange fees and assessments charged by issuing bank and credit card associations to the Company’s consolidated subsidiaries and network fees related to PIN-debit and PINless-debit transactions charged by debit networks were as follows for the three and nine months ended September 30, 2017 and 2016 :

		Three months ended   September 30,								Nine months ended   September 30,
(in millions)		2017				2016				2017				2016
Interchange fees and assessments		$	6,598			$	6,184			$	19,229			$	17,406
Debit network fees		820				753				2,384				2,255

9

---

Table of Contents

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Deferred Revenue

The Company records deferred revenue when it receives payments or invoices in advance of the delivery of products or the performance of services. The deferred revenue is recognized when underlying performance obligations are achieved. As of September 30, 2017 and December 31, 2016 , current deferred revenue included within "Accounts payable and accrued liabilities" in the Company's unaudited consolidated balance sheets was $154 million and $149 million , respectively. As of September 30, 2017 and December 31, 2016 , noncurrent deferred revenue included within "Other long-term liabilities" in the Company's unaudited consolidated balance sheets was $177 million and $184 million , respectively.

In January 2017, the Company determined that standalone value had been achieved for its Clover terminal devices, principally because a secondary market had been established. The Company accounted for the change on a prospective basis. Beginning January 1, 2017, the Company recognized revenue on sales of Clover terminal devices upon delivery, while Clover terminal devices sold prior to January 1, 2017 continued to be deferred over the term of the respective processing agreement. As of September 30, 2017 , $51 million of the Company's deferred revenue represented sales of Clover terminal devices which did not have standalone value prior to the change in accounting.   

Treasury Stock

In connection with the vesting of restricted stock awards or exercise of stock options, shares of Class A and Class B common stock are delivered to the Company by employees to satisfy tax withholding obligations. The Company accounts for treasury stock activities under the cost method whereby the cost of the acquired stock is recorded as treasury stock. Because Class B common stock converts automatically to Class A common stock upon any transfer, whether or not for value, except for certain transactions described in the Company's amended and restated certificate of incorporation, all shares of treasury stock reside as Class A.

Reclassifications

Certain amounts for prior years have been reclassified to conform with the current year financial statement presentation.

New Accounting Guidance

 

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance that requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the Company expects to be entitled in an exchange for those goods or services. It also requires enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively, and improves guidance for multiple-element arrangements. The FASB has subsequently issued several amendments to the standard, including clarification on accounting for licenses, identifying performance obligations, and principal versus agent consideration (reporting revenue gross vs. net).

Since the issuance of ASC 606 and ASC 340-40 (collectively, the New Revenue Standard) in May 2014, the Company has been preparing for the adoption of the New Revenue Standard. The Company has been monitoring the activity of the FASB and the Transition Resource Group as it relates to specific industry interpretive guidance and further overall interpretations and clarifications.

Beginning in the second half of 2016, the Company began Phase I of its three-phase plan to complete its adoption of the New Revenue Standard:

•	Phase I entailed activities such as completion of an accounting guidance gap analysis, reviewing significant revenue streams (and related costs) and representative contracts to determine the potential changes to its existing accounting policies. The Company has completed Phase I.

•

Phase II further determines the impact of the adoption of the New Revenue Standard and includes activities such as validating and concluding on potential accounting guidance gaps from Phase I, quantifying the effects the New Revenue Standard will have on its consolidated financial statements, identifying and documenting changes to its accounting policies, assessing disclosures as required by the New Revenue Standard, and identifying and addressing the impact the New Revenue Standard will have on business processes, systems and internal controls to support the recognition and disclosure requirements. The Company has substantially completed its efforts as part of Phase II.

10

---

Table of Contents

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

•

Phase III will complete the Company’s adoption and implementation of the New Revenue Standard and will include activities such as running parallel reporting for impacted areas under the New and Current Revenue Standard (ASC 605), recording the accounting adjustments that were identified in Phase II, evaluating and testing modified and newly implemented internal controls over the New Revenue Standard, and revising the Company’s financial statement disclosures. The Company has commenced Phase III.

While the Company is finalizing its evaluation of the full impact of the New Revenue Standard and related amendments on its consolidated financial statements and related disclosures, the Company has assessed certain changes which are not expected to have a material impact on its consolidated financial statements upon adoption of the New Revenue Standard such as:

•	The capitalization of certain costs that are part of setting up a customer on the Company’s platforms and certain customer

acquisition costs that meet the definition of incremental costs of obtaining a contract, both of which are currently recognized

as an expense when incurred;

•	Certain software license arrangements that are currently recognized over the term of the software arrangement may be

recognized earlier; and

•	Certain services revenue associated with programming activities that currently have standalone value and are recognized as work is performed may need to be deferred and recognized over the contract period.

The Company is also continuing to validate and quantify potential changes, which may be significant to the consolidated financial statements, such as:

•	Certain customer contractual arrangements with volume-based discounts which could result in a potential deferral of

revenue; and

•	Principal versus agent considerations (reporting revenue gross vs. net), including interchange fees and assessments charged

by credit card associations, network fees related to PIN-debit and PINless debit transactions and revenue-based commission

payments to Independent Sales Organizations (ISOs) and sales channels.

The Company plans to adopt the New Revenue Standard, as well as other clarifications and technical guidance issued by the FASB related to this New Revenue Standard, on January 1, 2018, and the Company will apply the modified retrospective transition method. This will result in an adjustment to retained earnings for the cumulative effect, if any, of applying the New Revenue Standard to contracts in process as of the adoption date. Under this method, the Company would not restate the prior consolidated financial statements presented. However, the Company will include additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during 2018, as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any.

Leases

In February 2016, the FASB issued guidance which requires lessees to put most leases on their balance sheets. The guidance also modifies the classification criteria and the accounting for sales-type and direct financing leases for lessors and provides new presentation and disclosure requirements for both lessees and lessors. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period subsequent to adoption of the preceding revenue recognition guidance. The Company is currently evaluating the impact of adoption of the new guidance on its consolidated financial statements.

Stock-based Compensation

In March 2016, the FASB issued guidance that will change some aspects of the accounting for stock-based payments to employees. Under the new guidance, companies will be required to record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement and to present excess tax benefits as an operating activity on the statement of cash flows. The guidance may also change how companies account for forfeitures and an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation. The Company adopted the various amendments in its consolidated financial statements for the quarterly period ending March 31, 2017 with an effective date of January 1, 2017. The Company has elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. The adoption of these amendments did not have a material effect on its consolidated financial statements while the Company still has income tax valuation allowances within the U.S.  When these income tax valuation allowances in the U.S. are fully or partially released, the Company could experience volatility in its income tax expense.

11

---

Table of Contents

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In May 2017, the FASB issued guidance that will clarify when changes to terms or conditions of a stock-based payment award must be accounted for as a modification. Under the new guidance, companies will only apply modification accounting guidance if the value, vesting conditions or classification of an award changes. This new guidance will be effective for fiscal years beginning after December 15, 2017 for all entities, including interim periods within those fiscal years with early adoption permitted. The guidance should be adopted prospectively to awards modified on or after the adoption date. The Company is currently evaluating the impact of adoption of the new guidance on its consolidated financial statements.

Credit Losses

In June 2016, the FASB issued guidance that will change the accounting for credit impairment. Under the new guidance, companies are required to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This new guidance will be effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Statement of Cash Flows

In November 2016, the FASB issued guidance that will change the presentation of restricted cash and restricted cash equivalents on the statement of cash flows. Under the new guidance, companies will be required to include restricted cash and restricted cash equivalents with the cash and cash equivalents line item when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Given this change, transfers between cash, cash equivalents, and restricted cash and cash equivalents will not be reported as cash flow activities on the statement of cash flows. In addition, the guidance requires entities to disclose information about the nature of restrictions on its cash and cash equivalents, including restricted cash and cash equivalents. This new guidance will be effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted, including adoption in an interim period. The guidance should be applied using a retrospective transition method to each period presented. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Goodwill

In January 2017, the FASB issued guidance simplifying the test for goodwill impairment. This standard eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. This guidance must be applied on a prospective basis. The Company does not expect the adoption of this guidance to have a material impact on the Company's financial position, results of operations or cash flows.

Pension Costs

In March 2017, the FASB issued guidance that requires employers that sponsor defined benefit plans for pensions and/or other post-retirement benefits to present the service cost component of net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Employers will present the other components of the net periodic benefit cost separately from the line item that includes the service cost and outside of any subtotal of operating income, if one is presented. These components will not be eligible for capitalization in assets. This new guidance will be effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted, including adoption in an interim period. The Company plans to adopt the guidance on January 1, 2018. Upon adoption, the guidance requires changes to the presentation of the income statement to be applied retrospectively. The Company does not expect the adoption of this guidance to have a material impact on the Company’s financial position or results of operations.

Derivatives and Hedging

In August 2017, the FASB issued guidance to simplify the current application of hedge accounting. This standard is intended to better align a company’s risk management strategies and financial reporting for hedging relationships through changes to both designation and measurement for qualifying hedging relationships and more accurately presenting the economic effects in the

12

---

Table of Contents

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

financial statements. In addition, the new guidance establishes flexibility in the requirements to qualify and maintain hedge accounting. This guidance is effective for fiscal years beginning after December 15, 2018 and for interim periods therein, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on the Company’s financial position, results of operations or cash flows.

13

---

Table of Contents

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2: Borrowings  

(in millions)		As of September 30, 2017				As of December 31, 2016
Short-term borrowings:
Foreign lines of credit and other arrangements		$	79			$	84
Receivable securitized loan at LIBOR plus 150 basis points or a base rate equal to the highest of (i) the applicable lender's prime rate, or (ii) the federal funds rate plus 0.50%		589				160
Unamortized deferred financing costs (a)		(4		)		(2		)
Total short-term borrowings		664				242
Current portion of long-term borrowings:
Senior secured term loan facility due June 2020 at LIBOR plus 2.0% or a base rate plus 1.0% (f)		65				—
Other arrangements and capital lease obligations		125				116
Total current portion of long-term borrowings		190				116
Total short-term and current portion of long-term borrowings		854				358
Long-term borrowings:
Senior secured term loan facility due March 2021 at LIBOR and euro LIBOR plus 3.0% or, solely with respect to U.S. dollar-denominated term loans, a base rate plus 2.0%  (d), (e)		—				4,379
Senior secured term loan facility due July 2022 at LIBOR plus 3.0% or a base rate plus 2.0%, or solely with respect to euro-denominated term loans, euro LIBOR plus 3.25% (e)		—				3,583
Senior secured term loan facility due April 2024 at LIBOR plus 2.5% or a base rate plus 1.5%		4,017				—
Senior secured term loan facility due July 2022 at LIBOR plus 2.25% or a base rate plus 1.25%		3,758				—
Senior secured term loan facility due June 2020 at LIBOR plus 2.0% or a base rate plus 1.0% (f)		1,186				—
6.75% Senior secured first lien notes due 2020 (f)		—				1,398
5.375% Senior secured first lien notes due 2023		1,210				1,210
5.0% Senior secured first lien notes due 2024		1,900				1,900
5.75% Senior secured second lien notes due 2024		2,200				2,200
7.0% Senior unsecured notes due 2023		3,400				3,400
Unamortized discount and unamortized deferred financing costs (a)		(136		)		(154		)
Other arrangements and capital lease obligations		260				215
Total long-term borrowings (b)		17,795				18,131
Total borrowings (c)		$	18,649			$	18,489

(a)	Unamortized deferred financing costs and certain lenders' fees associated with debt transactions were capitalized as discounts are amortized on a straight-line basis, which approximates the effective interest method, over the remaining term of the respective debt.

(b)	As of September 30, 2017 and December 31, 2016 , the fair value of the Company's long-term borrowings was $18.4 billion and $18.8 billion , respectively. The estimated fair value of the Company's long-term borrowings was primarily based on market trading prices and is considered to be a Level 2 measurement.

(c)	The effective interest rate is not substantially different than the coupon rate on any of the Company's debt tranches.

(d)	The U.S. dollar denominated portion of the Senior secured term loan facility maturing March 2021was refinanced on April 26, 2017. In connection with this transaction, the Company expensed $6 million in loss on debt extinguishment and $5 million in debt issuance costs.

(e)

The U.S. dollar denominated portion of the Senior secured term loan facility maturing July 2022 was refinanced on June 14, 2017. Additionally, the March 2021 and July 2022 Euro term loans were both paid off on June 14, 2017 with the proceeds from the July 2022 term loan facility. In connection with this transaction, the Company expensed $9 million in loss on debt extinguishment and $4 million in debt issuance costs.

(f)	On January 23, 2017, the Company incurred an aggregate principal amount of $1.3 billion in new U.S. dollar denominated term loans maturing on June 2, 2020. The proceeds were utilized to pay down all existing 6.75% senior secured first lien notes. In connection with this transaction, the Company recorded $56 million in loss on debt extinguishment.

---

		Three months ended September 30,								Nine months ended September 30,
(in millions)		2017				2016				2017				2016
Cost of services		$	19			$	19			$	54			$	91
Selling, general, and administrative		43				24				129				123
Total stock-based compensation expense		$	62			$	43			$	183			$	214

---

		Three months ended September 30,								Nine months ended September 30,
(in millions, except per share amounts)		2017				2016				2017				2016
Numerator:
Net income attributable to First Data Corporation		$	296			$	132			$	517			$	228
Denominator:
Weighted average shares used in computing net income per share, basic		918				905				915				900
Effect of dilutive securities		26				18				23				18
Total dilutive securities		944				923				938				918
Net income attributable to First Data Corporation per share:
Basic		$	0.32			$	0.15			$	0.57			$	0.25
Diluted		$	0.31			$	0.14			$	0.55			$	0.25
Anti-dilutive shares excluded from diluted net income per share (a)		8				20				13				27

(a)	Potentially dilutive securities whose effect would have been anti-dilutive are excluded from the computation of diluted earnings per share for all periods presented.

---

---

		Three months ended   September 30,								Nine months ended   September 30,
(in millions)		2017				2016				2017				2016
Total segment revenues		$	1,905			$	1,820			$	5,479			$	5,311
Adjustments:
Non wholly-owned entities (a)		14				25				49				59
Independent sales organizations (ISOs) commission expense (b)		162				155				470				476
Reimbursable debit network fees, postage, and other		995				936				2,904				2,795
Consolidated revenues		$	3,076			$	2,936			$	8,902			$	8,641
Total segment EBITDA		$	787			$	739			$	2,224			$	2,121
Adjustments:
Non wholly-owned entities (a)		9				7				21				24
Depreciation and amortization		(248		)		(237		)		(713		)		(713		)
Interest expense, net		(234		)		(263		)		(706		)		(810		)
Loss on debt extinguishment		(1		)		(3		)		(72		)		(58		)
Other items (c)		(61		)		(44		)		(120		)		(65		)
Stock-based compensation		(62		)		(43		)		(183		)		(214		)
Income tax benefit (expense)		106				(24		)		66				(57		)
Net income attributable to First Data Corporation		$	296			$	132			$	517			$	228

(a)

Net adjustment to reflect the Company's proportionate share of the results of the Company's investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. Segment revenue for the Company's significant affiliates is reflected based on the Company's proportionate share of the results of the Company's investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. For other affiliates, the Company includes equity earnings in affiliates, excluding amortization expense, in segment revenue.

(b)	Reported within "Selling, general, and administrative expense" in the unaudited consolidated statements of operations.

(c)	Includes restructuring, non-normal course litigation and regulatory settlements, debt issuance expenses, deal integration costs, and “Other income (expense)" as presented in the unaudited consolidated statements of operations, which includes divestitures, derivative gains (losses), non-operating foreign currency gains (losses), and other, as applicable to the periods presented.

---

(a)	Included in "Transaction and processing service fees" as contra-revenue in the Company's unaudited consolidated statements of operations.

(b)	Included in "Equity earnings in affiliates" in the Company's unaudited consolidated statements of operations.

Note 6: Income Taxes

The following table presents the Company's income tax expense and effective income tax rate for the three and nine months ended September 30, 2017 and 2016 :

		Three months ended   September 30,								Nine months ended   September 30,
(in millions)		2017				2016				2017				2016
Income tax (benefit) expense		$	(106	)		$	24			$	(66	)		$	57
Effective income tax rate		(45		)%		11		%		(11		)%		12		%

(in millions)		2017				2016
Balance as of January 1,		$	73			$	77
Distributions		(24		)		(25		)
Share of income		24				25
Adjustment to redemption value of redeemable noncontrolling interest		(1		)		(4		)
Balance as of September 30,		$	72			$	73

---

		Three months ended   September 30,								Nine months ended   September 30,
(in millions)		2017				2016				2017				2016
Global Business Solutions		$	14			$	2			$	29			$	7
Global Financial Solutions		4				—				12				2
Network & Security Solutions		1				—				4				2
Corporate		5				4				18				40
Restructuring, net		$	24			$	6			$	63			$	51

(in millions)		Employee Severance
Remaining accrual as of January 1, 2017		$	9
Restructuring, net		63
Cash payments and other		(52		)
Remaining accrual as of September 30, 2017		$	20

 

---

(in millions)		Allocation of Purchase Price
Cash		$	10
Other current assets		58
Property and equipment		7
Intangible assets		463
Goodwill		432
Current liabilities		(58		)
Deferred tax liabilities		(139		)

---

•

Floating to fixed interest rate collar contracts: The Company uses interest rate collar contracts to mitigate its exposure to interest rate fluctuations on interest payments related to variable rate debt. No payments or receipts are exchanged on interest rate collar contracts unless interest rates rise or fall in excess of a predetermined ceiling or floor rate. The Company uses these contracts in a qualifying hedging relationship.

•	Foreign exchange contracts: The Company uses cross-currency swaps to protect the net investment in certain foreign subsidiaries and/or affiliates with respect to changes in foreign currency exchange rates. The Company uses these contracts in both qualifying and non-qualifying hedging relationships.

(a)	Our derivatives are subject to master netting agreements to the extent that the swaps are with the same counterparty. The terms of those agreements require that the Company net settle the outstanding positions at the option of the counterparty upon certain events of default.

(b)	The Company entered into new foreign exchange contracts with a notional value of EUR 915 million on June 14, 2017.

(c)	Three cross-currency swaps matured in April 2017 (notional values of AUD 111 million , GBP 150 million and CAD 35 million ). The Company received $90 million related to these swaps.

---

Effect of Derivative Instruments on the Unaudited Consolidated Financial Statements

Derivative gains and (losses) were as follows for the three and nine months ended September 30, 2017 and 2016 :

		Three months ended September 30,																Nine months ended September 30,
		2017								2016								2017								2016
(in millions, pretax)		Interest Rate Contracts				Foreign Exchange Contracts				Interest Rate Contracts				Foreign Exchange Contracts				Interest Rate Contracts				Foreign Exchange Contracts				Interest Rate Contracts				Foreign Exchange Contracts
Derivatives designated as hedging instruments:
Gain (loss) recognized in "Foreign currency translation adjustment" in the unaudited consolidated statements of comprehensive income (effective portion)		$	—			$	(42	)		$	—			$	5			$	—			$	(85	)		$	—			$	27
Gain recognized in "Derivative instruments" in the unaudited consolidated statements of comprehensive income (effective portion)		1				—				—				—				—				—				—				—
Derivatives not designated as hedging instruments:
Loss recognized in "Other (expense) income" in the unaudited consolidated statements of operations		—				—				—				—				—				—				(5		)		—

Accumulated Derivative Gains and Losses

The following table summarizes activity in other comprehensive income related to derivative instruments classified as cash flow hedges and net investment hedges held by the Company for the three and nine months ended September 30, 2017 and 2016 :

		Three months ended September 30,								Nine months ended September 30,
(in millions, after tax)		2017				2016				2017				2016
Accumulated gain included in other comprehensive income at beginning of period		$	133			$	138			$	177			$	116
(Decrease) increase in fair value of derivatives that qualify for hedge accounting, net of tax (a)		(41		)		5				(85		)		27
Accumulated gain included in other comprehensive income at end of period		$	92			$	143			$	92			$	143

(a)	(Losses) gains are included in "Derivative instruments" and “Foreign currency translation adjustment” in the unaudited consolidated statements of comprehensive income.

---

		Three months ended   September 30,								Nine months ended   September 30,
(in millions)		2017				2016				2017				2016
Net operating revenues		$	209			$	232			$	631			$	683
Operating expenses		103				96				304				286
Operating income		$	106			$	136			$	327			$	397
Net income		$	106			$	136			$	327			$	397
FDC equity earnings		36				46				112				136

Note 13: Subsequent Events

 

On October 2, 2017, the Company closed the digital banking joint venture, named Apiture, which combines FDC and Live Oak Bancshares, Inc. digital banking platforms, products, and services, delivering innovative technology solutions tailored for financial institutions. The joint venture will be accounted for as an equity method investment, as Apiture is owned and managed equally between the Company and Live Oak Bancshares, Inc. As a result, the contributed digital banking business will no longer be consolidated into the Company’s results. During the twelve months ended December 31, 2016, the Company’s digital banking business had revenue and operating income of $57 million and $11 million , respectively.

On October 20, 2017, the Company announced that it has entered into a definitive stock purchase agreement to acquire BluePay Holdings, Inc. (BluePay), for $760 million in cash, subject to adjustments and excluding transaction related costs. BluePay is a provider of technology-enabled payment processing for merchants in the U.S. and Canada and is one of the Company's largest distribution partners with a strong focus on eCommerce and integrated payment solutions. The Company expects the transaction to close by year-end and is expected to be accretive to diluted EPS, excluding amortization of acquisition intangibles and deal integration costs.

24

---

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  

For an understanding of the significant factors that influenced our results, the following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this report. This management's discussion and analysis should also be read in conjunction with the management's discussion and analysis and consolidated financial statements for the year ended December 31, 2016 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2017.

Year over year percent changes are calculated on whole-dollar values as management views this as a more accurate representation of the Company's performance. As such, the values here-in may not recalculate due to rounding.

Executive Overview

First Data Corporation sits at the center of global electronic commerce. We believe we offer our clients the most complete array of integrated solutions in the industry, covering their needs across next generation commerce technologies, merchant acquiring, issuing, and network solutions. We believe we have the industry’s largest distribution network, driven by our partnerships with many of the world’s leading financial institutions, our direct sales force, and a network of distribution partners. We are the largest merchant acquirer, issuer processor, and third largest network services provider in the United States, enabling businesses to accept electronic payments, helping financial institutions issue credit, debit and prepaid cards, and routing secure transactions between them.

 

Our business is characterized by transaction related fees, multi-year contracts, and a diverse client base, which allows us to grow alongside our clients. Our multi-year contracts allow us to achieve a high level of recurring revenues with the same clients. While the contracts typically do not specify fixed revenues to be realized thereunder, they do provide a framework for revenues to be generated based on volume of services provided during such contracts' terms. Our business also generally requires minimal incremental capital expenditures and working capital to support additional revenue within our existing business lines.

Components of Revenue

We generate revenue by providing commerce-enabling solutions. Our major components of revenue have not changed from those discussed within “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2016 .

Factors Affecting the Comparability of Our Results of Operations

As a result of a number of factors, our historical results of operations are not comparable from period to period and may not be comparable to our financial results of operations in future periods. Key factors affecting the comparability of our results of operations are summarized below.

Currency Impact

Although the majority of our revenue is earned in U.S. dollars, a portion of our revenues and expenses are in foreign currencies. As a result, changes in foreign currencies against the U.S. dollar can impact our results of operations. Additionally, we have intercompany debts in foreign currencies, which impacts our results of operations. In recent periods, the U.S. dollar has fluctuated versus most foreign currencies, which has impacted our revenues generated in foreign currencies as presented in U.S. dollars in our unaudited consolidated financial statements. We believe the presentation of constant currency provides relevant information and we use this non-GAAP financial measure to, among other things, evaluate our ongoing operations in relation to foreign currency fluctuations. The presentation of non-GAAP financial measures should not be considered in isolation or as a substitute for our related financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP") . For additional information on our constant currency calculation, see “Segment Results” within this Form 10-Q.

Interest Expense

As a result of our capital market activities over the past twelve months, we have lowered the weighted average interest rate of our outstanding borrowings from 5.3% as of September 30, 2016 to 4.7% as of September 30, 2017 .

25

---

Table of Contents

Stock-Based Compensation Expense

Stock-based compensation expense decreased for the nine months ended September 30, 2017 compared to the same periods in 2016 , as we recognized $52 million in expense in the first quarter of 2016 that was directly associated with our initial public offering as we began recognizing stock-based compensation expense over the respective service period which commenced upon the completion of our initial public offering on October 15, 2015. See note 3 “Stock Compensation Plans” to our unaudited consolidated financial statements in Part I of this Form 10-Q for additional information about our stock compensation plans.

Acquisitions and Divestitures

Acquisitions and divestitures over the past year have affected the comparability of our results. The largest acquisition was CardConnect in the third quarter 2017, which contributed revenue of $41 million, net of intercompany processing charges, and segment EBITDA of $7 million to our Global Business Solutions segment.

Results of Operations

Consolidated results should be read in conjunction with note 5 "Segment Information" to our unaudited consolidated financial statements in Part I of this Form 10-Q, which provides more detailed discussions concerning certain components of our unaudited consolidated statements of operations. All significant intercompany accounts and transactions have been eliminated within the consolidated results.

Overview

Revenue increased 5% to $3.1 billion for the three months ended September 30, 2017 , and 3% to $8.9 billion for the nine months ended September 30, 2017 . Operating profits decreased 8% to $418 million for the three months ended September 30, 2017 and increased 8% to $1.2 billion for the nine months ended September 30, 2017 . On a constant currency basis, revenue increased 5% and 3% for the three and nine months ended September 30, 2017 , respectively.

Net income attributable to First Data Corporation improved $164 million and $289 million to $296 million and $517 million for the three and nine months ended September 30, 2017 , respectively, from the comparable periods in 2016 . The chart below reconciles Net income attributable to First Data Corporation for the three and nine months ended September 30, 2016 to September 30, 2017 :

(in millions)		Three months ended   September 30,				Nine months ended   September 30,
Net income attributable to First Data Corporation ending September 30, 2016		$	132			$	228
Better (worse):
Total revenues (excluding CardConnect and reimbursable items)		40				111
Stock-based compensation expense		(19		)		31
Other operating expenses		(45		)		(51		)
Interest expense, net		29				104
Other (expense) income		26				(21		)
Income tax		130				123
Other miscellaneous, net		3				(8		)
Net income attributable to First Data Corporation ending September 30, 2017		$	296			$	517

Segment Results

We operate three reportable segments: Global Business Solutions (GBS), Global Financial Solutions (GFS), and Network & Security Solutions (NSS). Our segments are designed to establish global lines of businesses that work seamlessly with our teams in our regions of North America (United States and Canada), EMEA (Europe, Middle East, and Africa), LATAM (Latin America and Caribbean region), and APAC (Asia Pacific).

The business segment measurements provided to and evaluated by the chief operating decision maker are computed in accordance with the principles listed below:

•	The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.

26

---

Table of Contents

•	Intersegment revenues are eliminated in the segment that sells directly to the end market.

•	Segment revenue excludes reimbursable debit network fees, postage, and other revenue.

•	Segment EBITDA includes equity earnings in affiliates and excludes depreciation and amortization expense, net income attributable to noncontrolling interests, other operating expenses, other income (expense) and stock-based compensation.

•

For significant affiliates, segment revenue and segment EBITDA are reflected based on our proportionate share of the results of our investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. For other affiliates, we include equity earnings in affiliates, excluding amortization expense, in segment revenue and segment EBITDA. In addition, GBS measures reflect revenue-based commission payments to Independent Sales Organizations (ISOs) and non-FDC owned sales channels, which are treated as an expense in the unaudited consolidated statements of operations, as contra revenue.

•	Corporate operations include corporate-wide governance functions such as our executive management team, tax, treasury, internal audit, corporate strategy, and certain accounting, human resources and legal costs related to supporting the corporate function. Costs incurred by Corporate that are attributable to a segment are allocated to the respective segment.

•

Certain measures exclude the estimated impact of foreign currency changes (constant currency). To present this information, monthly results during the periods presented for entities with functional currencies other than U.S. dollars are translated into U.S. dollars at the average exchange rates in effect during the corresponding month of the prior fiscal year, rather than the actual average exchange rates in effect during the current fiscal year. Once translated, each month during the periods presented is added together to calculate the constant currency results for the periods presented.

Operating revenues overview

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Consolidated revenues		$	3,076			$	2,936			5	%		5	%		$	8,902			$	8,641			3	%		3	%
Adjustments:
Non-wholly owned entities		(14		)		(25		)		(44	)%		NM			(49		)		(59		)		(17	)%		NM
Independent sales organizations (ISOs) commissions		(162		)		(155		)		5	%		NM			(470		)		(476		)		(1	)%		NM
Reimbursable debit network fees, postage, and other		(995		)		(936		)		6	%		6	%		(2,904		)		(2,795		)		4	%		4	%
Total segment revenues		$	1,905			$	1,820			5	%		4	%		$	5,479			$	5,311			3	%		4	%
Segment revenues:
Global Business Solutions		$	1,094			$	1,045			5	%		4	%		$	3,131			$	3,037			3	%		3	%
Global Financial Solutions		416				397				5	%		5	%		1,211				1,178				3	%		5	%
Network & Security Solutions		395				378				5	%		5	%		1,137				1,096				4	%		4	%

NM represents not meaningful

 

27

---

Table of Contents

Global Business Solutions segment results

The following table displays total segment revenue for the three and nine months ended September 30, 2017 and 2016 by region and illustrates, on a percentage basis, the impact of foreign currency fluctuations on revenue growth:

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Revenues:
North America		$	833			$	819			2	%		2	%		$	2,410			$	2,371			2	%		2	%
EMEA		150				137				9	%		6	%		417				417				—	%		3	%
APAC		39				43				(8	)%		(9	)%		109				125				(12	)%		(14	)%
LATAM		72				46				53	%		61	%		195				124				56	%		58	%
Total segment revenue		$	1,094			$	1,045			5	%		4	%		$	3,131			$	3,037			3	%		3	%
Key indicators:
North America merchant transactions (a)		12,517				11,881				5	%					36,494				34,368				6	%
International merchant transactions (b)		2,453				2,087				18	%					7,173				5,801				24	%

(a)	North American merchant transactions include acquired Visa and MasterCard credit and signature debit, American Express and Discover, PIN-debit, electronic benefits transactions, processed-only, and gateway customer transactions at the Point of Sale (POS). North American merchant transactions reflect 100% of alliance transactions.

(b)	International transactions include Visa, MasterCard, and other payment network merchant acquiring transactions for clients outside the U.S. and Canada. Transactions include credit, signature debit, PIN-debit POS, POS gateway, and Automated Teller Machine (ATM) transactions. International transactions reflect 100% of alliance transactions.

Global Business Solutions segment revenue for the three and nine months ended September 30, 2017 increased 5% and 3% , respectively, on a reported basis and 4% and 3% , respectively, on a constant currency basis, as compared to the same periods in 2016 . North America revenue benefited by $41 million due to the acquisition of CardConnect at the beginning of the third quarter of 2017. Additionally, the North America revenue increase was driven by mid-single digit transaction growth, offset by high-single digit lower blended yield for the three and nine months ended September 30, 2017 . Furthermore, North America results were impacted by a change in accounting for Clover hardware sales (effective the first quarter of 2017), which resulted in recognizing new Clover sales when shipped. For the three and nine months ended September 30, 2017 , the impact of this change was an approximate 200 basis point increase to the North America growth rate as we continue to benefit from amortizing previously deferred Clover revenue. Revenue for the three and nine months ended September 30, 2016 included an increase of $13 million from certain fee increases which only benefited the third quarter of 2016 and $12 million and $15 million, respectively, from other non-recurring items.

Constant currency revenue growth in our LATAM region for the three and nine months ended September 30, 2017 was driven by increases in our active customer base and sales volumes in Brazil of $17 million and $43 million, respectively, and growth in Argentina of $10 million and $25 million, respectively. Constant currency revenue in the APAC region was negatively impacted by $10 million and $31 million for the three and nine months ended September 30, 2017 , respectively, due to the Australian ATM business disposition at the end of the third quarter of 2016, and partially offset by growth in India during 2017. EMEA constant currency revenue increased by 6% for the three months ended September 30, 2017 as a result of an equal impact from a higher blended yield and increased volumes and transactions in the United Kingdom and Germany. For the nine months ended September 30, 2017 , the EMEA constant currency revenue growth of 3% was primarily impacted by a non-recurring $10 million benefit in the prior year as result of changes in interchange pricing in the United Kingdom during the first quarter of 2016.

North America transactions increased for the three and nine months ended September 30, 2017 , compared to the same periods in 2016 , driven by growth in existing clients. The acquisition of CardConnect did not have a significant impact on volume due to CardConnect processing over 90% of their transactions on First Data platforms prior to the acquisition. International transaction growth for the three and nine months ended September 30, 2017 compared to the same periods in 2016 outpaced revenue growth due to significant transaction growth in our Brazil Acquiring business and new portfolios of existing clients throughout all of our international regions.

28

---

Table of Contents

Global Financial Solutions segment results

The following table displays total segment revenue for the three and nine months ended September 30, 2017 and 2016 by region and illustrates, on a percentage basis, the impact of foreign currency fluctuations on revenue growth:

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Revenues:
North America		$	238			$	236			1	%		1	%		$	707			$	706			—	%		—	%
EMEA		121				113				7	%		7	%		332				324				2	%		9	%
APAC		24				21				14	%		13	%		72				59				22	%		20	%
LATAM		33				27				22	%		24	%		100				89				12	%		15	%
Total segment revenue		$	416			$	397			5	%		5	%		$	1,211			$	1,178			3	%		5	%
Key indicators:
North America card accounts on file (a)																894				844				6	%
International card accounts on file (b)																166				147				13	%

(a)	North America card accounts on file reflect the total number of bankcard credit and retail credit accounts as of the end of the periods presented.

(b)	International card accounts on file reflect total bankcard and retail accounts outside the United States and Canada as of the end of the periods presented.

Global Financial Solutions segment revenue for the three and nine months ended September 30, 2017 increased 5% and 3% , respectively, on a reported basis and 5% and 5% , respectively, on a constant currency basis compared to the same period in 2016 . North America revenue growth was driven by growth in our credit and retail card processing businesses of $9 million and $25 million for the three and nine months ended September 30, 2017 , respectively due to growth in new and existing business, which includes $4 million of revenue from contract amendments and other items during the third quarter of 2017. Growth in our credit and retail card processing businesses was partially offset by lower volumes in our plastics business which negatively impacted revenue by $6 million and $20 million for the three and nine months ended September 30, 2017 , respectively, primarily attributed to lower Europay, MasterCard and Visa ("EMV") volumes.

Constant currency revenue growth of $8 million and $28 million in our EMEA region for the three and nine months ended September 30, 2017 was primarily driven by growth in new and existing business in the United Kingdom and Central, Eastern, and Southeastern Europe region of $9 million and $26 million, respectively. Additionally, our EMEA region's constant currency revenue for the three months ended September 30, 2017 was positively impacted by a VisionPlus license fee resolution in the Middle East, and Africa region. LATAM constant currency revenue growth for the three months ended September 30, 2017 of $7 million was primarily driven by growth in Argentina from new and existing business and inflation of $4 million.  For the nine months ended September 30, 2017, LATAM constant currency revenue growth of $13 million was also driven by new and existing business of $13 million, which includes approximately $5 million from Colombia, and inflation of $5 million, partially offset by lower VisionPlus license resolution revenue of $6 million. Constant currency revenue growth in our APAC region for the three and nine months ended September 30, 2017 was driven by growth in new and existing business in Australia of $3 million and $13 million, respectively.

North America card accounts on file increased for the three and nine months ended September 30, 2017 compared to the same period in 2016 from growth in existing clients. Approximately 70% of the International card accounts on file increase for the three and nine months ended September 30, 2017 compared to the same period in 2016 is due to growth in existing clients.

29

---

Table of Contents

Network & Security Solutions segment results

The following table displays total segment revenue by product for the three and nine months ended September 30, 2017 and 2016 . Our Network & Security Solutions segment is comprised of more than 95% domestic businesses with no material foreign exchange impact on reported results:

		Three months ended September 30,											Nine months ended September 30,
(in millions)		2017				2016				Percent Change			2017				2016				Percent Change
Revenues:
EFT Network		$	122			$	126			(3	)%		$	359			$	363			(1	)%
Stored Value Network		106				92				16	%		290				261				11	%
Security and Fraud		115				110				5	%		333				322				4	%
Other (a)		52				50				1	%		155				150				3	%
Segment revenue		$	395			$	378			5	%		$	1,137			$	1,096			4	%
Key indicators:
Network transactions (EFT Network and Stored Value) (b)		5,539				5,040				10	%		16,005				14,715				9	%

(a)	Other is primarily comprised of revenue generated from our Government and Digital Banking businesses.

(b)	Network transactions include the debit issuer processing transactions, STAR Network issuer transactions, Payroll and Gift Solutions and POS transactions.

Network & Security Solutions segment revenue for the three and nine months ended September 30, 2017 increased 5% and 4% , respectively, compared to the same periods in 2016 driven by growth within our Stored Value Network and Security and Fraud. EFT Network revenue was down as transaction growth was offset by increases in client incentives. During the three and nine months ended September 30, 2017 , Stored Value Network revenue increased $14 million and $29 million, respectively, due to increased rates and $4 million and $15 million, respectively, due to higher volumes. Our rates increased primarily due to a contract renewal in the fourth quarter of 2016 for a major Gift Solutions customer. Security and Fraud revenue increased due to strong growth from our suite of security products, partially offset by revenue declines within our TeleCheck business of $3 million and $10 million for the three and nine months ended September 30, 2017 , respectively. Other revenue increased from growth in our Government contracts.

Reimbursable debit network fees, postage, and other

Reimbursable debit network fees, postage, and other revenue and expenses increased $59 million and $109 million for the three and nine months ended September 30, 2017 compared to the same period in 2016 due to transaction and volume growth related to debit network fees of $ 72 million and $ 139 million partially offset by lower plastics and print volumes.

Operating expenses overview

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Cost of services (exclusive of items shown below)		$	698			$	711			(2	)%		(2	)%		$	2,089			$	2,140			(2	)%		(2	)%
Cost of products sold		96				87				10	%		9	%		267				251				6	%		7	%
Selling, general, and administrative		564				499				13	%		13	%		1,607				1,563				3	%		3	%
Depreciation and amortization		248				237				5	%		4	%		713				713				—	%		—	%
Other operating expenses		57				12				375	%		375	%		108				57				89	%		91	%
Total expenses (excluding reimbursable items)		1,663				1,546				8	%		7	%		4,784				4,724				1	%		2	%
Reimbursable debit network fees, postage, and other		995				936				6	%		6	%		2,904				2,795				4	%		4	%
Total expenses		$	2,658			$	2,482			7	%		7	%		$	7,688			$	7,519			2	%		2	%

30

---

Table of Contents

Cost of services

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Salaries, wages, and bonus (a)		$	349			$	365			(4	)%					$	1,090			$	1,105			(1	)%
Stock-based compensation (b)		19				19				—	%					54				91				(41	)%
Outside professional services		68				68				—	%					194				196				(1	)%
Software, telecommunication infrastructure, and repairs		99				103				(4	)%					293				299				(2	)%
Other		163				156				4	%					458				449				2	%
Cost of services expense		$	698			$	711			(2	)%		(2	)%		$	2,089			$	2,140			(2	)%		(2	)%

(a) Salaries, wages, and bonus declined in the third quarter due to benefits from our ongoing expense savings initiatives.

(b) $22 million decrease for the nine months ended September 30, 2017 impacted partially by IPO related expense recognized in the first quarter of 2016.

Cost of products sold

Cost of products sold expense increased for the three and nine months ended September 30, 2017 compared to the same periods in 2016 due to hardware expense which was impacted by certain changes in accounting for Clover terminals effective January 1, 2017 due to achieving standalone value. See note 1 "Basis of Presentation and Summary of Significant Accounting Policies" to our unaudited consolidated financial statements in Part I of this Form 10-Q for additional information on deferred revenue for Clover terminals. This increase was partially offset by declines in number of non- Clover hardware units sold.

Selling, general, and administrative

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Salaries, wages, bonus, and other		$	167			$	166			1	%					$	506			$	508			—	%
Stock-based compensation (a)		43				24				79	%					129				123				5	%
Independent sales organizations (ISOs) commissions (b)		162				155				5	%					470				476				(1	)%
Outside professional services (c)		78				46				70	%					176				136				29	%
Commissions		34				33				3	%					104				104				—	%
Other		80				75				7	%					222				216				3	%
Selling, general, and administrative expense		$	564			$	499			13	%		13	%		$	1,607			$	1,563			3	%		3	%

(a) The nine months ended September 30, 2017 was impacted by $30 million decrease for IPO related expense recognized in the first quarter of 2016. The three months ended September 30, 2017 increased due to expense associated with recent share-based awards to retain executives and new executives from CardConnect.

(b) Expense for the three and nine months ended September 30, 2017 impacted by the divestiture of the Australian ATM business at the end of the third quarter of 2016.

(c) Increase driven by higher legal fees and $21 million in expenses associated with CardConnect.

31

---

Table of Contents

Depreciation and amortization

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Depreciation expense		$	81			$	79			3	%					$	236			$	227			4	%
Amortization expense (a)		167				158				6	%					477				486				(2	)%
Depreciation and amortization		$	248			$	237			5	%		4	%		$	713			$	713			—	%		—	%

(a) The nine months ended September 30, 2017 includes a reduction in amortization expense on intangibles arising from the KKR acquisition of First Data, partially offset by increases driven by our CardConnect acquisition during the three months ended September 30, 2017.

Other operating expenses, net

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Restructuring, net (a)		$	24			$	6			300	%					$	63			$	51			24	%
Deal integration costs (a)		21				—				NM						26				—				NM
Asset impairment		8				—				NM						14				—				NM
Other		4				6				(33	)%					5				6				(17	)%
Other operating expenses		$	57			$	12			375	%		375	%		$	108			$	57			89	%		91	%

(a)	Refer to note 8 "Other operating expenses" to our unaudited consolidated financial statements in Part I of this Form 10-Q for details regarding other operating expenses.

Interest expense, net

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Interest expense, net		$	234			$	263			(11	)%		(11	)%		$	706			$	810			(13	)%		(13	)%

Interest expense, net decreased for the three and nine months ended September 30, 2017 , compared to the same period in 2016 , due to reduced average outstanding debt balances impacted by debt paydowns and lower interest rates resulting from debt exchanges and refinancing. Refer to note 2 "Borrowings" to our unaudited consolidated financial statements in Part I of this Form 10-Q for additional information.

Loss on debt extinguishment

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Loss on debt extinguishment		$	(1	)		$	(3	)		(67	)%		(67	)%		$	(72	)		$	(58	)		24	%		24	%

Refer to note 2 “Borrowings” to our unaudited consolidated financial statements in Part I of this Form 10-Q for additional information.

32

---

Table of Contents

Other (expense) income

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Gain on Visa Europe share sale		$	—			$	—									$	—			$	29
Divestitures, net loss		—				(31		)								—				(31		)
Derivatives loss		—				—										—				(5		)
Non-operating foreign currency (loss) gain		(3		)		2										(6		)		21
Other miscellaneous expense		(1		)		(1		)								(1		)		—
Other (expense) income		$	(4	)		$	(30	)		(87	)%		(87	)%		$	(7	)		$	14			(150	)%		(150	)%

Gain on Visa Europe share sale for the nine months ended September 30, 2016 represents the sale of our share in Visa Europe (VE). On June 21, 2016, Visa Inc. (Visa) acquired VE, of which we were a member and shareholder through certain subsidiaries. On June 21, 2016, we received cash of €24.2 million ($27 million equivalent at June 21, 2016) and Visa preferred stock, which is convertible into Visa common shares. We expect to receive a deferred payment three years after the closing date of the acquisition, valued at approximately €2.3 million ($2.6 million equivalent at June 21, 2016).  As of June 21, 2016, the Class A common stock equivalent of the preferred stock was approximately $19 million. However, the preferred shares have been assigned a value of zero based on transfer restrictions and Visa's ability to adjust the conversion ratio dependent on the outcome of existing and potential litigations in the VE territory over the next 12 years.

Divestitures, net loss for the three and nine months ended September 30, 2016 represents the sale of our Australian ATM business, which was reported as part of the Global Business Solutions segment. Associated with the transaction, we recognized a $31 million loss on the sale. The loss is comprised of investments of $69 million reduced by cash proceeds of $38 million.

Derivative loss for the nine months ended September 30, 2016 were driven by fair value adjustments on our non-designated interest rate contracts. Our variable to fixed interest rate swaps matured in September 2016 which were replaced with interest rate collar contracts which are designated as hedges with the fair market value adjustment, to the extent the hedges are effective, recognized through accumulated other comprehensive income. See note 10 "Derivative Financial Instruments" to our unaudited financial statements in Part I of this Form 10-Q for additional information on our derivative contracts.

Non-operating foreign currency (loss) gain for the three and nine months ended September 30, 2017 and 2016 were driven by revaluations on intercompany loans as the fluctuations are in line with lower interest rate volatility during 2017.

Income taxes

		Three months ended September 30,								Nine months ended September 30,
(in millions)		2017				2016				2017				2016
Income tax (benefit) expense		$	(106	)		$	24			$	(66	)		$	57
Effective income tax rate		(45		)%		11		%		(11		)%		12		%

The effective tax rate for the three and nine months ended September 30, 2017 and 2016 were different from the statutory rate as a result of recording tax expense on our foreign earnings, but not on our domestic earnings, as a result of the valuation allowance recorded in the U.S. Our tax expense in all periods was also impacted by us not recording tax expense on noncontrolling interests from pass through entities. In addition, the three and nine months ended September 30, 2017 included a $132 million benefit from a valuation allowance release related to deferred tax liability established upon the purchase of CardConnect and a $10 million benefit associated with a valuation allowance release in certain foreign jurisdictions due to improved financial performance. The nine months ended September 30, 2017 also included a $10 million benefit from a valuation allowance release resulting from purchase accounting related deferred tax liabilities established upon the purchase of Acculynk.

Our liability for unrecognized tax benefits was approximately $233 million as of September 30, 2017 . We anticipate it is reasonably possible that the liability for unrecognized tax benefits may decrease by up to $122 million over the next twelve months beginning

33

---

Table of Contents

September 30, 2017 as the result of the possible closure of federal tax audits, potential settlements with certain states and foreign countries and the lapse of the statute of limitations in various state and foreign jurisdictions.

We establish a valuation allowance against our deferred tax assets when, based upon the weight of all available evidence, we believe it is more likely than not that some portion or all of the deferred tax assets will not be realized. In making this determination, we have considered the relative impact of all of the available positive and negative evidence regarding future sources of taxable income and tax planning strategies. In the U.S. jurisdiction, we are in a three-year cumulative loss position, which is significant negative evidence, outweighing the positive evidence in the form of reversing temporary differences and projections of future income. We will continue to evaluate future financial performance both to determine whether we remain in a three-year cumulative loss position and to determine whether such performance is both sustained and significant enough to provide sufficient evidence to support reversal of the valuation allowance. If projections of future sustained profitability continue, we anticipate that it is reasonably possible that we may reverse substantially all of the valuation allowance in the U.S. jurisdiction as early as the end of 2017. As of December 31, 2016, the U.S. jurisdiction valuation allowance balance was $1.2 billion.

Following the original establishment of the U.S. jurisdiction deferred tax valuation allowance in 2012, we have regularly experienced substantial volatility in our effective tax rate in interim periods and across years. The interim and full year volatility is likely to continue in the future periods until the deferred tax valuation allowances can be released.

Equity earnings in affiliates

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Equity earnings in affiliates		$	55			$	66			(17	)%		(17	)%		$	167			$	198			(16	)%		(15	)%

Equity earnings in affiliates relate to the earnings of our unconsolidated merchant alliance partnerships and decreased for the three and nine months ended September 30, 2017 compared to the same periods in 2016 due to a decline in our North American joint venture partners mainly due to declines in new business.

Net income attributable to noncontrolling interests and redeemable noncontrolling interest

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Net income attributable to noncontrolling interests and redeemable noncontrolling interest		$	44			$	68			(35	)%		(35	)%		$	145			$	181			(20	)%		(20	)%

Net income attributable to noncontrolling interests and redeemable noncontrolling interest relate to the interest of our merchant partners in our consolidated merchant alliances and decreased for the three and nine months ended September 30, 2017 compared to the same periods in 2016 driven by significant revenue deterioration within our consolidated alliances, $3 million in restructuring expense in the third quarter of 2017, and the impact of $11 million of non-recurring items in the prior year.

34

---

Table of Contents

Segment EBITDA Overview

The following table displays Segment EBITDA by segment for the three and nine months ended September 30, 2017 and 2016 :

		Three months ended September 30,														Nine months ended September 30,
(in millions)		2017				2016				Percent Change			Constant Currency Percent Change			2017				2016				Percent Change			Constant Currency Percent Change
Segment EBITDA:
Global Business Solutions		$	465			$	455			2	%		2	%		$	1,330			$	1,279			4	%		5	%
Global Financial Solutions		180				158				14	%		14	%		502				473				6	%		8	%
Network & Security Solutions		184				166				11	%		11	%		520				483				8	%		8	%
Corporate		(42		)		(40		)		5	%		5	%		(128		)		(114		)		12	%		12	%
Total Segment EBITDA (Non-GAAP)		$	787			$	739			6	%		7	%		$	2,224			$	2,121			5	%		6	%

The following table displays Segment EBITDA margin by segment for the three and nine months ended September 30, 2017 and 2016 :    

		Three months ended September 30,									Nine months ended September 30,
		2017			2016			Change			2017			2016			Change
Segment EBITDA Margin:
Global Business Solutions		42.5	%		43.5	%		(100	) bps		42.5	%		42.1	%		40	bps
Global Financial Solutions		43.3	%		39.8	%		350	bps		41.5	%		40.2	%		130	bps
Network & Security Solutions		46.6	%		43.9	%		270	bps		45.7	%		44.1	%		160	bps
Total Segment EBITDA Margin (Non-GAAP)		41.3	%		40.6	%		70	bps		40.6	%		39.9	%		70	bps

Global Business Solutions

Global Business Solutions Segment EBITDA for the three months ended September 30, 2017 increased due to impact of the revenue items noted within " Global Business Solutions segment results" above and $7 million impact of CardConnect.

Global Business Solutions Segment EBITDA for the nine months ended September 30, 2017 increased due to the impact of the revenue items noted within " Global Business Solutions segment results" above, the acquisition of CardConnect, and currency translation. Currency translation negatively impacted segment adjusted EBITDA by approximately $ 9 million compared to the prior period.

Global Financial Solutions

Global Financial Solutions Segment EBITDA for the three months ended September 30, 2017 increased due to the impact of the revenue items noted within " Global Financial Solutions segment results" above, lower expenses associated with declines in plastics business, and improved expenses from operations efficiencies in North America.

Global Financial Solutions Segment EBITDA for the nine months ended September 30, 2017 increased due to the impact of the revenue items noted within " Global Financial Solutions segment results" above, lower expenses associated with declines in plastics business, and improved expenses from operations efficiencies in North America. Currency translation negatively impacted segment adjusted EBITDA by approximately $9 million compared to the prior period.

Network & Security Solutions

Network & Security Solutions Segment EBITDA increased due to the revenue items noted within " Network & Security Solutions segment results" above and efficiency initiatives.

35

---

Table of Contents

Corporate

Corporate Segment EBITDA expense increased due to higher legal, consulting and other fees related to recent acquisitions.

Adjusted Net Income

Adjusted net income is a non-GAAP financial measure used by management that provides additional insight on performance. Adjusted net income excludes amortization of acquisition-related intangibles, stock-based compensation, restructuring costs, discrete tax items and other items affecting comparability and, therefore, provides a more complete understanding of continuing operating performance. Management believes that the presentation of adjusted net income provides users of our financial statements greater transparency into ongoing results of operations allowing them to better compare our results from period to period. This non-GAAP measure is not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, adjusted net income is not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. These measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

The following table reconciles the reported Net income attributable to First Data Corporation presented in accordance with GAAP to the non-GAAP financial measure of adjusted net income for the three and nine months ended September 30, 2017 and 2016 :

		Three months ended September 30,											Nine months ended September 30,
(in millions)		2017				2016				% Change			2017				2016				% Change
Net income attributable to First Data Corporation		$	296			$	132			124	%		$	517			$	228			127	%
Adjustments:
Stock-based compensation		62				43				44	%		183				214				(14	)%
Loss on debt extinguishment		1				3				(67	)%		72				58				24	%
Amortization of acquisition intangibles and deferred financing costs (a)		106				104				2	%		295				318				(7	)%
Loss on disposal of businesses		—				31				NM			—				31				NM
Visa Europe settlement gain		—				—				NM			—				(29		)		NM
Restructuring		24				6				300	%		63				51				24	%
Intercompany foreign exchange gain (loss)		2				(2		)		(200	)%		6				(21		)		(129	)%
Fees paid on debt modification		1				—				NM			10				18				(44	)%
Impairment, litigation, and other (b)		10				6				67	%		13				13				—	%
Deal integration costs		21				—				NM			26				—				NM
Mark-to-market adjustment for derivatives		—				—				NM			—				5				(100	)%
Income tax on above items and discrete tax items (c)		(150		)		(11		)		NM			(176		)		(31		)		NM
Adjusted net income attributable to First Data Corporation		$	373			$	312			20	%		$	1,009			$	855			18	%

NM represents not meaningful

(a)

Represents amortization of intangibles established in connection with the 2007 Merger and acquisitions we have made since 2007, excluding the percentage of our consolidated amortization of acquisition intangibles related to non-wholly owned consolidated alliances equal to the portion of such alliances owned by our alliance partners. This line also includes amortization related to deferred financing costs of $5 million and $12 million for the three months ended September 30, 2017 and 2016, respectively, and $13 million and $20 million, respectively, for the nine months ended September 30, 2017 and 2016 .

(b)	Represents impairments, non-normal course litigation and regulatory settlements, investments gains (losses), divestitures, and other, as applicable to the periods presented.

(c)

The tax effect of the adjustments between our GAAP and adjusted results takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). Generally, this results in a tax impact at the U.S. effective tax rate for certain adjustments, including the majority of amortization of intangible assets, deferred financing costs, stock compensation, and loss on debt extinguishment; whereas the tax impact of other adjustments, including restructuring expense, depends on whether the amounts are deductible in the respective tax jurisdictions and the applicable effective tax rate(s) in those jurisdictions. Income tax (expense) benefit also includes the impact of significant discrete tax items impacting Net income (loss) attributable to First Data Corporation. The significant change in income taxes in the current period is primarily driven by a $132 million tax benefit associated with the release of valuation allowance as a result of the deferred tax liabilities recorded with the purchase of CardConnect.

Adjusted net income for the three and nine months ended September 30, 2017 improved due to better operating performance and lower interest expense. Growth in depreciation partially offset adjusted net income for the nine months ended September 30, 2017.

36

---

Table of Contents

Liquidity and Capital Resources

 

Our source of liquidity is principally cash generated from operating activities supplemented as necessary on a short-term basis by borrowings against our senior secured revolving credit facility and receivable securitization facility. We believe our current level of cash and short-term financing capabilities along with future cash flows from operations are sufficient to meet the ongoing needs of the business. To the extent future cash flows exceed the ongoing needs of the business, we expect to use a portion of the excess cash to reduce our debt balances and fund any potential acquisitions.

 

Over the past few years, we completed various amendments and modifications to certain of our debt agreements in an effort to extend our debt maturities and lower interest rates. Furthermore, we have used excess cash generated by the business to pay down certain tranches of debt. Our current level of debt may limit our ability to get additional funding at our current funding rate beyond our revolving credit facility and receivable securitization facility if needed. Details regarding our debt structure are provided in note 2 "Borrowings" to our unaudited financial statements in Part I of this Form 10-Q and in note 2 "Borrowings" in "Item 8. Financial Statements and Supplementary Data" in our Annual Report on Form 10-K for the year ended December 31, 2016 .

In July 2017, we acquired 100% of CardConnect for $763 million , net of cash acquired, paid through a combination of cash and funds available under existing credit facilities. For additional detail about the CardConnect acquisition, see note 9 "Acquisitions and Dispositions" to our unaudited financial statements in Part I of this Form 10-Q.

In October 2017, we entered into a definitive agreement to acquire BluePay for $760 million, which is expected to be funded by incremental debt and cash on hand.

Total borrowings and net debt

The chart below shows the net debt balances as of September 30, 2017 and December 31, 2016 . Net debt is a non-GAAP measure defined as total long-term borrowings plus short-term and current portion of long-term borrowings at par value excluding lines of credit used for settlement purposes less cash and cash equivalents. We believe that net debt provides additional insight on the level and management of leverage. Net debt is not, and should not be viewed as, a substitute for total outstanding borrowings under GAAP.

		As of				As of
(in millions)		September 30, 2017				December 31, 2016
Total long-term borrowings		$	17,795			$	18,131
Total short-term and current portion of long-term borrowings		854				358
Total borrowings		18,649				18,489
Unamortized discount and unamortized deferred financing costs		140				156
Total borrowings at par		18,789				18,645
Less: settlement lines of credit and other arrangements		(79		)		(84		)
Gross debt excluding settlement lines of credit and other arrangements		18,710				18,561
Less: cash and cash equivalents		(502		)		(385		)
Net debt		$	18,208			$	18,176

Credit ratings

  

As of October 30, 2017, our long-term corporate family rating from Moody’s was B1 (outlook stable). The long-term local issuer credit rating from Standard and Poor’s was B+ (stable). The long-term issuer default rating from Fitch was B+ (positive). A decrease in our credit ratings could affect our ability to access future financing at current funding rates, which could result in increased interest expense in the future.

Cash and cash equivalents

Investments (other than those included in settlement assets) with original maturities of three months or less (that are readily convertible to cash) are considered to be cash equivalents and are stated at cost, which approximates market value. As of September 30, 2017 and December 31, 2016 , we held $502 million and $385 million in cash and cash equivalents, respectively.

Included in cash and cash equivalents are amounts held by two of our domestic entities that are not available to fund operations outside of those entities. As of September 30, 2017 and December 31, 2016 , the cash and cash equivalents held by these entities totaled $144 million and $102 million, respectively. Cash and cash equivalents will only be available to the Company from these

37

---

Table of Contents

entities by declaration of a dividend by their respective Board of Directors. One of these entities is subject to regulatory capital requirements and must be satisfied before a dividend may be declared. All other domestic cash balances, to the extent available, are used to fund our short-term liquidity needs.

 

Cash and cash equivalents include amounts held outside of the U.S., totaling $323 million and $271 million as of September 30, 2017 and December 31, 2016 , respectively. As of September 30, 2017 and December 31, 2016 , there was approximately $233 million and $206 million, respectively, of cash and cash equivalents held by our international subsidiaries that was unavailable for U.S. general corporate purposes in the near term. A consolidated foreign joint venture held $151 million and $134 million in cash and cash equivalents as of September 30, 2017 and December 31, 2016 , respectively. In order for this cash and cash equivalents to be available for general corporate purposes, we would need the joint venture's Board of Directors to authorize a distribution. In addition as of September 30, 2017 and December 31, 2016 , $9 million and $10 million, respectively, of the remaining unavailable cash and cash equivalents in our international subsidiaries is held in countries that have currency controls and $73 million and $62 million, respectively, is retained within our international subsidiaries for their local operating requirements.

We plan to fund any international cash needs throughout the remainder of 2017 through cash flow from operations and cash held by our international entities, but if necessary, could fund such needs using cash from U.S. entities, subject to satisfying debt covenant restrictions .

Cash flows

		Nine months ended September 30,
Source/(use) (in millions)		2017				2016
Net cash provided by operating activities		$	1,582			$	1,660
Net cash used in investing activities		(1,057		)		(338		)
Net cash used in financing activities		(410		)		(1,258		)

Cash flows from operating activities

The chart below reconciles the change in operating cash flows for the nine months ended September 30, 2016 to September 30, 2017 :

Source/(use) (in millions)		Nine months ended September 30, 2017
Net cash provided by operating activities, previous period		$	1,660
Increases (decreases) in:
Net income, excluding other operating expenses and other income (expense) (a)		172
Depreciation and amortization		13
Working capital		(263		)
Net cash provided by operating activities, end of period		$	1,582

(a)	Excludes loss on debt extinguishment, stock-based compensation expense, deferred income tax benefit, and other non-cash items.

Cash flows provided by operating activities for the periods presented resulted from normal operating activities and reflect the timing of our working capital requirements.

Our operating cash flow is significantly impacted by our level of debt. Approximately $668 million and $759 million in cash interest was paid during the nine months ended September 30, 2017 and 2016 , respectively. The decrease in cash interest for the nine months ended September 30, 2017 compared to the same period in 2016 is due primarily to lower principal outstanding on long-term debt of $839 million and lower rates of approximately 57 basis points, partially offset by the timing of bond coupon payments in the previous year.

Refer to "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for a detailed discussion on how a 100 basis point increase in the applicable London Interbank Offered Rate (LIBOR) index on an annualized basis would impact our annual interest expense.

 

38

---

Table of Contents

The table below represents the working capital change for the the nine months ended September 30, 2017 compared to the same period in 2016 :

	Nine months ended September 30,
Source/(use) (in millions)	2017				2016				Change
Accounts receivable, current and long-term (a)	$	60			$	115			$	(55	)
Other assets, current and long-term	8				20				(12		)
Accounts payable and other liabilities, current and long-term  (b)	(186		)		5				(191		)
Income tax accounts	(32		)		(27		)		(5		)
Total working capital change	$	(150	)		$	113			$	(263	)

(a) Decrease in source from accounts receivables was due to timing of receipts in GFS and GBS. GBS was impacted by a day shift since September 30, 2017 ended on a weekend versus September 30, 2016 ended on a weekday, offset partially by lower hardware lease receivables. 

(b) Decrease is attributable to new MasterCard location fee, timing of payments related to Visa debit network fees, and an increase in ISO residual volumes.

Cash flows from investing activities

 

Net cash used in investing activities increased for the nine months ended September 30, 2017 compared to the same period in 2016 due to $848 million of cash paid for the acquisitions of Acculynk and CardConnect. These items were partially offset by $90 million of proceeds from the maturity of three net investment hedges and $88 million proceeds from dispositions of businesses.

Cash flows from financing activities

 

Net cash used in financing activities decreased for the nine months ended September 30, 2017 compared to the same period in 2016 due to business acquisitions.

Senior secured revolving credit facility and receivable securitization agreement

Refer to note 2 "Borrowings" in our unaudited financial statements in Part I of this Form 10-Q for detail on our senior secured revolving credit facility and receivable securitization agreement.

Free Cash Flow

Free cash flow is a non-GAAP measure defined as cash flow provided by operating activities less capital expenditures and distributions to minority interests and other. We consider free cash flow to be a liquidity measure that provides useful information to management and users of our financial statements about the amount of cash generated by the business which can then be used to, among other things, reduce outstanding debt. Free cash flow is not, and should not be viewed as, a substitute for GAAP reported financial information.

The chart below reconciles cash flow from operations to free cash flow for the nine months ended September 30, 2017 and 2016 .

		Nine months ended September 30,
Source/(use) (in millions)		2017				2016				Change
Net cash provided by operating activities		$	1,582			$	1,660			$	(78	)
Capital expenditures		(390		)		(351		)		(39		)
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interest and other		(113		)		(363		)		250
Free cash flow		$	1,079			$	946			$	133

For the nine months ended September 30, 2017 , net cash provided by operating activities decreased due to the items noted previously. "Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interest and other" decreased due to$90 million received from the maturity of three net investment hedges in 2017, lower noncontrolling interest earnings, and the timing of distributions.

39

---

Table of Contents

Letters, lines of credit, and other

		Total Available (a)								Total Outstanding
(in millions)		As of September 30, 2017				As of December 31, 2016				As of September 30, 2017				As of December 31, 2016
Letters of credit (b)		$	250			$	250			$	44			$	41
Lines of credit and other (c)		347				489				73				84

(a)	Total available without giving effect to amounts outstanding.

(b)

Outstanding letters of credit are held in connection with lease arrangements, bankcard association agreements and other security agreements. The largest amount of letters of credit outstanding was approximately $44 million during the nine months ended September 30, 2017 . All letters of credit expire on or prior to June 30, 2018 with a one-year renewal option. We expect to renew most of the letters of credit prior to expiration.

(c)

As of September 30, 2017 , represents $338 million of committed lines of credit as well as certain uncommitted lines of credit and other agreements that are available in various currencies to fund settlement and other activity. We cannot use these lines of credit for general corporate purposes. Certain of these arrangements are uncommitted but, as of the dates presented, we had borrowings outstanding against them.

 

In the event one or more of the aforementioned lines of credit becomes unavailable, we will utilize our existing cash, cash flows from operating activities or our senior secured revolving credit facility to meet our liquidity needs.

Covenant Compliance

Under the senior secured revolving credit and term loan facilities, certain limitations, restrictions, and defaults could occur if we are not able to satisfy and remain in compliance with specified financial ratios. We have agreed that we will not permit the Consolidated Senior Secured Debt to Covenant EBITDA (both as defined in the agreement) Ratio for any 12 month period (last four fiscal quarters) to be greater than 6.00 to 1.00.

The breach of this covenant could result in a default under the senior secured revolving credit facility and the senior secured term loan credit facility and the lenders could elect to declare all amounts borrowed due and payable. Any such acceleration could also result in a default under the indentures for the senior secured notes, senior notes, and senior subordinated notes. As of September 30, 2017 , we were in compliance with all applicable covenants, including our sole financial covenant with Consolidated Senior Secured Debt of $12.0 billion , Covenant EBITDA of $3.5 billion and a Ratio of 3.45 to 1.00.

In determining Covenant EBITDA, EBITDA is calculated by reference to net income from continuing operations plus interest and other financing costs, net, provision for income taxes, and depreciation and amortization. Covenant EBITDA is calculated by adjusting EBITDA to exclude unusual items as permitted in calculating covenant compliance under the credit facilities. Covenant EBITDA is further adjusted to add net income attributable to noncontrolling interests and redeemable noncontrolling interest of certain non-wholly owned subsidiaries and exclude other miscellaneous adjustments that are used in calculating covenant compliance under the agreements governing our senior secured credit facilities. Because not all companies use identical calculations, this presentation of Covenant EBITDA may not be comparable to other similarly titled measures of other companies.

40

---

Table of Contents

The calculation of Covenant EBITDA under our senior secured facilities was as follows:

(in millions)		Last twelve months ended September 30, 2017
Net income attributable to First Data Corporation		$	709
Interest expense, net		964
Income tax benefit		(42		)
Depreciation and amortization		1,074
EBITDA		2,705
Loss on debt extinguishment		84
Stock-based compensation		232
Net income attributable to noncontrolling interests and redeemable noncontrolling interest		204
Projected near-term cost savings and revenue enhancements (a)		105
Restructuring, net		61
Non-operating foreign currency losses		8
Investment gains		(7		)
Equity entities taxes, depreciation and amortization (b)		14
Divestitures, net (c)		3
Other (d)		60
Covenant EBITDA		$	3,469

(a)	Reflects cost savings and revenue enhancements projected to be realized as a result of specific actions as if they were achieved on the first day of the period. Includes cost savings initiatives associated with the business optimization projects and other technology initiatives. We may not realize the anticipated cost savings pursuant to our anticipated timetable or at all.

(b)	Represents our proportional share of income taxes, depreciation, and amortization on equity method investments.

(c)	Reflects loss on divestiture of Australian ATM business reflected within "Other income" in the consolidated statements of operations in "Item 8. Financial Statements and Supplementary Data" in our Annual Report on Form 10-K for the year ended December 31, 2016 .

(d)	Includes items such as pension losses, litigation and regulatory settlements, impairments, deal costs, and other as applicable to the period presented.

Off-Balance Sheet Arrangements

 

During the nine months ended September 30, 2017 , there were no material changes in off-balance sheet arrangements from those reported as of December 31, 2016 in our Annual Report on Form 10-K for the year ended December 31, 2016 .

Contractual Obligations

 

During the nine months ended September 30, 2017 , there were no material changes outside the ordinary course of business in our contractual obligations and commercial commitments from those reported as of December 31, 2016 in our Annual Report on Form 10-K for the year ended December 31, 2016 .

Critical Accounting Policies

 

Our critical accounting policies have not changed from those reported as of December 31, 2016 in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2016 .

New Accounting Guidance

 

Refer to note 1 “Basis of Presentation and Summary of Significant Accounting Policies” in our unaudited consolidated financial statements in Part I of this Form 10-Q for new accounting guidance.

41

---

Table of Contents

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Interest Rate Risk

We are exposed to market risk from changes in interest rates. Our assets include cash equivalents as well as both fixed and floating rate interest-bearing securities. These investments arise primarily from settlement funds held by us pending settlement.

Our interest rate-sensitive liabilities are our debt instruments. Our senior secured term loan facilities are subject to variable interest rates. As of September 30, 2017 , we have $9.6 billion in variable rate debt, which includes $589 million on our accounts receivable securitization facility. Additionally, we have $4.3 billion in variable to fixed interest rate collar contracts, of which $1.5 billion expires in September 2018, $1.3 billion expires in January 2019, and the remaining $1.5 billion expires in September 2019. The interest rate collar contracts mitigate exposure to interest rate fluctuations, but are subject to contractual ceilings and floors. The interest rate collar contracts provide for interest rate protection if one month LIBOR rises above 150 basis points on the contracts expiring September 2018 and January 2019 and 175 basis points on the contracts expiring September 2019.

    

Based on the September 30, 2017 balances, a 100 basis point increase in short-term interest rates on an annualized basis compared to the interest rates as of September 30, 2017 , which for the one month LIBOR was 1.2322% , and a corresponding and parallel shift in the remainder of the yield curve, would result in a decrease to pretax income of $50 million. This decrease is due to a $64 million increase in interest expense related to our balance of variable interest rate debt, net of interest rate collar contracts partially offset by a $14 million increase in interest income primarily on settlement assets. A decrease in interest rates would result in an increase to pretax income. Actual interest rates could change significantly more than 100 basis points. There are inherent limitations in the sensitivity analysis presented, primarily due to the assumption that interest rate movements are linear and instantaneous. As a result, the analysis is unable to reflect the potential effects of more complex market changes that could arise, which may positively or negatively affect income.

 

Foreign Currency Risk

 

We are exposed to changes in currency rates as a result of our investments in foreign operations and revenues and expenses generated in currencies other than the U.S. dollar. Revenue and profit generated by international operations will increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates. Refer to note 10 "Derivative Financial Instruments" to our unaudited consolidated financial statements in Part I of this Form 10-Q for additional information regarding the changes in foreign currency exchange rates.

A hypothetical uniform 10% weakening in the value of the U.S. dollar relative to all the currencies in which our revenues and profits are denominated would result in an increase to pretax income of approximately $21 million. This increase results from a $23 million increase related to foreign exchange on foreign currency earnings, assuming consistent operating results as the twelve months preceding September 30, 2017 , and a $2 million decrease related to foreign exchange on intercompany loans. There are inherent limitations in the sensitivity analysis presented, primarily due to the assumption that foreign exchange movements are linear and instantaneous. As a result, the analysis is unable to reflect the potential effects of more complex market changes that could arise, which may positively or negatively affect income.

ITEM 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

 

We have evaluated, under the supervision of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of disclosure controls and procedures as of September 30, 2017 . This is done in order to ensure that information we are required to disclose in reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2017 .

Changes in Internal Control over Financial Reporting

In July 2017, we completed our acquisition of CardConnect, which is being integrated into our Global Business Solutions segment. As part of our ongoing integration activities, we are continuing to augment our company-wide controls to reflect the risks inherent in an acquisition. Also, in October 2017, we announced the closure of our Denver and Houston locations, which includes migration

42

---

Table of Contents

of a majority of our tax and treasury activities and Telecheck business as well as portions of other functions. These closures present transitional risks to maintaining adequate internal controls over financial reporting. Other than with respect to this acquisition and closures, there were no changes in our internal control over financial reporting during the quarter ended September 30, 2017 that materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

43

---

Table of Contents

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS

 

From time to time, we are involved in various litigation matters arising in the ordinary course of our business. None of these matters, either individually or in the aggregate, currently are material to us. 

ITEM 1A.	RISK FACTORS

 

There are no material changes to the risk factors as reported in our Annual Report on Form 10-K for the year ended December 31, 2016 .

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

 

None. 

ITEM 4.	MINE SAFETY DISCLOSURES

 

Not applicable. 

ITEM 5.	OTHER INFORMATION

 

None.

44

---

Table of Contents

ITEM 6.	EXHIBITS

 

The following exhibits are filed as part of this Quarterly Report or, where indicated, were filed and are incorporated by reference:

			Incorporated by Reference
Exhibit Number		Exhibit Description	Form		File Number		Exhibit Number		Filing Date
31.1 (1)		Certification of CEO pursuant to rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 (1)		Certification of CFO pursuant to rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 (1)		Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 (1)		Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS (1)		XBRL Instance Document
101.SCH (1)		XBRL Taxonomy Extension Schema Document
101.CAL (1)		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)		XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB (1)		XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)		XBRL Taxonomy Extension Presentation Linkbase Document

(1)	Filed herewith

*	Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 6 of this report.

45

---

Table of Contents

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

		FIRST DATA CORPORATION
		(Registrant)
Date:	October 30, 2017	By	/s/ Himanshu A. Patel
			Himanshu A. Patel
			Executive Vice President, Chief Financial Officer
			(principal financial officer)
Date:	October 30, 2017	By	/s/ Matthew Cagwin
			Matthew Cagwin
			Senior Vice President, Corporate Controller and Chief Accounting Officer
			(principal accounting officer)

46