First Data 2007 Annual Report Download - page 64

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Proceeds from Dispositions, net of Expenses Paid
Proceeds from dispositions in 2006 relate to the sale of the Company's majority ownership interest in its subsidiaries PPS and IDLogix, and the sale of
its subsidiary Taxware. Proceeds from dispositions in 2005 relate to the sale of 20% of the PNC Merchant Services alliance as well as the sale of International
Banking Tech and the Company's investment in Link2Gov.
Capital Expenditures
The following table discloses capitalized expenditures related to customer contracts, conversion costs, systems development, other intangible assets,
and property and equipment (in millions).
Successor Predecessor
Period from
September 25
through
December 31,
2007
Period from
January 1
through
September 24,
2007
Year ended December 31,
2006 2005
Customer contracts $ (34.0) $ (39.2) $ (27.2) $ (42.1)
Conversion costs (4.4) (20.9) (35.4) (43.1)
Systems development (18.6) (55.9) (65.7) (52.6)
Other intangible assets (0.5) (7.7) (1.4) (0.1)
Subtotal (57.5) (123.7) (129.7) (137.9)
Property and equipment (55.2) (275.5) (170.4) (189.5)
Total amount capitalized $ (112.7) $ (399.2) $ (300.1) $ (327.4)
The significant increase in the 2007 successor and predecessor periods, compared to 2006 and 2005, in property and equipment related mostly to the
purchase of buildings and fixed assets out of synthetic leases triggered by the merger, expenditures related to the U.S. data center consolidation and an
increase in contract costs. Capital expenditures are funded through cash flows from operating activities. Capital expenditures are estimated to be
approximately $500 million in 2008 including expenditures related to the U.S. data center consolidation. The decrease in capital expenditures from 2005 to
2006 relates largely to decreases in initial payments for customer contracts and purchases of equipment. Amounts capitalized for property and equipment
relate to the purchase of electronic data processing equipment, building and improvements and other equipment, including terminals and production
equipment, with the largest component being electronic data processing equipment.
Proceeds from the Sale of Marketable Securities
Proceeds from the sale of marketable securities in the 2007 successor period related to $14.1 million from the sale of MasterCard shares. The
predecessor period in 2007 included $11.8 million from the partial liquidation of marketable securities. Proceeds from the sale of marketable securities in
2006 included $33.5 million from the partial liquidation of marketable securities acquired in the Concord merger and $10.5 million from the redemption of
MasterCard stock. Proceeds from the sale of marketable securities in 2005 included $97.9 million from the sale of CheckFree common stock, $84.1 million
from the liquidation of Concord marketable securities acquired in the merger and $42.5 million resulting from the sale and maturity of other investments held
by the Company.
Dividend Received from Discontinued Operations
Immediately prior to the spin-off, Western Union transferred $2.5 billion in cash to FDC. Within several months after the spin-off, the Company
utilized the majority of the proceeds to repurchase debt.
Cash Retained by Western Union
Cash retained by Western Union represents cash balances retained by Western Union at the date of the spin-off.
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