First Data 2007 Annual Report Download - page 73

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
The Company also has lines of credit associated with Cashcard Australia, Ltd. ("Cashcard") which are periodically used to fund ATM settlement
activity. As of December 31, 2007, the lines of credit totaled approximately 162 million Australian dollars, or approximately $142 million. The Company had
$54.6 million outstanding against these lines of credit as of December 31, 2007. There were no amounts outstanding against these lines of credit as of
December 31, 2006.
The Company has two credit facilities associated with First Data Polska which are periodically used to fund settlement activity. As of December 31,
2007, the facilities totaled approximately 210 million Polish zloty, or approximately $84 million. The Company had an immaterial amount outstanding against
these facilities as of December 31, 2007.
Significant non-cash Transactions
Significant non-cash transactions during the 2007 predecessor period included the grant of approximately 3.7 million shares of restricted stock to
certain employees. During the 2007 successor period, the Company increased the principal amount of its senior unsecured PIK term loan facility by $67.5
million resulting from interest expense. As discussed above, interest on this facility is paid entirely by increasing the principal amount of the outstanding loan.
Significant non-cash transactions during 2006 included the issuance of approximately 1.1 million shares of restricted stock to certain employees in
conjunction with the Company's incentive compensation plan.
In connection with the spin-off, Western Union transferred $1 billion of Western Union notes to FDC. On September 29, 2006, the Company
exchanged these Western Union notes for FDC debt (commercial paper) held by investment banks (the "debt-for-debt exchange").
On September 29, 2006, the holder of a warrant originally issued on November 16, 2000 exercised its right to a cashless exercise of the warrant. The
Company issued 359,824 shares of its common stock to the warrant holder in connection with the cashless exercise. The warrant had provided for the
purchase of 3.5 million shares of the Company's common stock at $40.025 before giving effect to the adjustment for the Company's spin-off of The Western
Union Company.
Significant non-cash transactions during 2005 included the Company awarding 550,000 shares of restricted stock to executive officers.
As an integral part of FDC's official check business, FDC receives funds from instruments sold in advance of settlement with payment recipients. These
funds (referred to as "settlement assets" on FDC's Consolidated Balance Sheets) are not utilized to support the Company's operations; however, the Company
does have the opportunity to earn income from investing these funds. The Company maintains a portion of its settlement assets in short term investments
(classified as cash equivalents within settlement assets) to fund settlement obligations.
Off-Balance Sheet Arrangements
Other than facility and equipment leasing arrangements, the Company did not engage in off-balance sheet financing activities. Prior to the merger, the
Company had several synthetic operating lease arrangements. On September 20, 2007, the Company purchased the buildings and equipment under its
synthetic operating lease arrangements as contractually required due to change in control provisions contained in the agreements. In 2006, the Company
purchased one of the buildings under its synthetic operating lease arrangements and contributed it to Western Union as part of the spin-off. The Company also
purchased the Memphis facility under the synthetic lease and sold it to a third party for less than the liability assumed in the Concord merger. Rent expense
related to synthetic operating leases was $4.7 million for the predecessor period from January 1 through September 24, 2007 and $9.0 million and $6.3 million
for the years ended December 31, 2006 and 2005, respectively.
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