First Data 2007 Annual Report Download - page 146

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
holder prior to the sale. FDC's interest in Early Warning Services is reflected in the "Investment in affiliates" line item of the Consolidated Balance Sheets.
The Company recognized a gain on the sale of $0.7 million, net of tax, which is included in the results of discontinued operations in 2006. PPS and IDLogix
were previously reported as part of All Other and Corporate.
As discussed in Note 1 and on September 29, 2006, the Company separated its Western Union money transfer business into an independent, publicly
traded company. The spin-off included all entities previously reported as the Western Union segment as well as two small entities previously reported in All
Other and Corporate. In connection with the spin-off, Western Union transferred $1 billion of notes and $2.5 billion in cash to FDC. To facilitate Western
Union's separation from FDC, FDC provided certain services to Western Union during a one-year transition period. Additionally, the Company and Western
Union entered into various commercial service agreements which are long-term arrangements to provide ongoing services.
In November 2006, the Company sold its subsidiary Taxware to ADP(R) Employer Services, a division of Automatic Data Processing, Inc. for
approximately $125 million in cash. The Company recognized a gain on the sale of $42.6 million, net of tax and minority interest, which is also included in
the results of discontinued operations in 2006. Taxware was previously reported as part of All Other and Corporate.
Discontinued operations for the year ended December 31, 2006 also includes non-recurring separation costs of $48.4 million which consist principally
of investment banker fees, external legal and accounting fees to affect the spin-off, costs to separate information systems and consulting costs incurred to
assist in managing the spin-off.
Included in the results from discontinued operations is interest expense allocated based upon a percentage of net assets in accordance with EITF
No. 87-24 "Allocation of Interest to Discontinued Operations" of $32.7 million and $35.6 million for the years ended December 31, 2006 and 2005,
respectively. In addition, certain corporate expenses were allocated to discontinued operations in accordance with EITF 87-24 and were limited to specifically
identified costs and other costs, such as corporate shared services, which support segment operations. These costs represent those that have historically been
allocated to and recorded by the Company's operating segments as an expense with the exception of the addition of certain share-based compensation
expenses and pension benefit not previously allocated.
Losses from discontinued operations for the predecessor period from January 1, 2007 through September 24, 2007 relate to certain tax account true-ups
and discrete tax items related to Western Union.
The following table presents the summarized results of discontinued operations for the years ended December 31, 2006 and 2005 (in millions):
Year Ended December 31,
2006 2005
Revenue $ 3,351.1 $ 4,072.0
Expenses 2,385.5 2,779.7
Operating profit 965.6 1,292.3
Other income (expense) 75.0 17.4
Income before income taxes 1,040.6 1,309.7
Income tax expense (a) 360.0 402.1
Minority interest, net of tax (24.3) (1.7)
Equity earnings in affiliates 9.4 4.0
Income from discontinued operations $ 665.7 $ 909.9
(a) The amount of the gain on the sale of NYCE in excess of the income taxes was deferred (reserved) to 2005. During 2005, the reserve of $9.8 million
was reversed against the sales price adjustment.
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