First Data 2007 Annual Report Download - page 14

Integrated Payment Systems
The Integrated Payment Systems segment is comprised of:
(1) Official check and money order issuance; and
(2) Check processing and payment management services.
Integrated Payment Systems revenues from external customers excluding an adjustment to reflect segment revenue on a pretax equivalent basis,
operating profit, and assets represent the following percentages of FDC's consolidated revenues, total reported segment operating profit and consolidated
assets:
Successor
Period from
September 25, 2007
through
December 31,
2007
Predecessor
Period from
January 1, 2007
through
September 24,
2007
Year ended
December 31,
2006
Year ended
December 31,
2005
Revenue from external customers 0% (1)% (2)% 0%
Operating profit 1, 2 9% 3% 1% 8%
Assets2 25% 42% 42%
1 – Operating profit, as a percentage of total segment and all other and corporate operating profit, for the predecessor period from January 1, 2007 through
September 24, 2007 includes accelerated vesting of stock options and restricted stock awards and units and transaction costs related to the merger of $265.2
million that were recognized in All Other and Corporate. The exclusion of these costs from the calculation would decrease Integrated Payment System's
operating profit percentage shown above by approximately 1 percentage point for the predecessor period from January 1, 2007 through September 24, 2007.
2 – Operating profit and assets were impacted by purchase accounting in the successor period from September 25, 2007 through December 31, 2007.
Upon completion of a strategic review of the Company's official check and money order operations in the first quarter of 2007, the Company decided to
gradually exit this line of business. The Company expects the wind-down of the majority of the business to take place in 2008. During 2007, the Company
repositioned its investment portfolio associated with this business from long-term municipal bonds to short-term investments, the majority of which were
short-term, tax-exempt variable rate demand notes at December 31, 2007. In January 2008, the portfolio was further repositioned from these short-term, tax-
exempt variable rate demand notes to mostly short-term taxable investments, the majority of which were in commercial paper and bank certificates of
deposits.
Official checks and money orders
The Company issues official checks, which are sold primarily through financial institutions, and money orders, which are sold at financial institutions
or retail store fronts. Official checks serve as an alternative to a bank's own disbursement items such as cashiers or bank checks and money orders primarily
serve as a disbursement option for un-banked customers.
The Company's official check and money order services generate revenue primarily through the ability to invest funds pending settlement. The
Company invests these funds in investments to minimize its exposure to credit risks. These investments primarily were in tax-exempt variable rate demand
notes in 2007 but were replaced with mostly short-term taxable investments in January of 2008 as noted above as well as some long-term auction-rate
securities.
An official check transaction is initiated when a consumer procures an official check from one of the Company's agents, typically a financial institution.
The agent generally is required to remit the funds collected from the consumer to the Company the same day or the following day. The Company pays its
agents commissions based on short-term variable interest rates and the balance of outstanding official checks attributable to the individual agent. The
Company nets the commissions paid to agents against the revenues it earns from its investments.
Check processing and payment management services
Check processing represents capture and processing of inbound and outbound checks, including image based services, and payment management
services represents remote deposit, clearing services and processing which occur in various forms such as checks, ACH, wire transfer and stored value cards.
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