Western Union 2006 Annual Report Download - page 57

Management’s Discussion and Analysis of Financial Condition and Results of Operations 55
Advances from/(to) Affiliates of First Data
Prior to the spin-off, excess cash generated from our
domestic operations that was not required to meet certain
regulatory requirements was paid periodically to First Data
and was reflected as a receivable from First Data. In
addition, First Data and its subsidiaries provided a number
of services on behalf of our businesses, including shared
services, which were reimbursed periodically. The net
payable to and receivable from First Data was a function
of the timing of cash sweeps to First Data net of any
services First Data and its affiliates had provided. These
balances were settled at the time of the spin-off as part
of the dividend to First Data.
Capital Contributed by First Data
in Connection with Acquisitions
In 2005, Western Union received a contribution of capital
from First Data in connection with the acquisition of Vigo.
In 2004, First Data contributed capital in connection with
contingent consideration payments made by First Data in
connection with the acquisitions of Paymap and ECG, both
of which were contributed to Western Union as part of
the spin-off.
Notes Payable to and Receivable from First Data
In connection with the spin-off on September 29, 2006,
funds previously advanced to First Data to finance certain
international acquisitions made by First Data were repaid
to us in cash. These notes were funded primarily through
cash generated from our international operations and
notes payable issued to First Data. As part of the spin-off,
substantially all notes payable and notes receivable to or
from affiliates of First Data were settled in cash.
In 2005 and 2004, we made advances to First Data in
the form of notes of $504.7 million and $270.7 million,
respectively, to finance certain international acquisitions
made by First Data. These notes were funded primarily
through cash generated from our international operations
and notes payable issued to First Data with balances of
$153.6 million at December 31, 2005.
Dividends to First Data
In connection with the spin-off, FFMC paid a $2.4 billion
dividend to First Data in the form of a promissory note that
was repaid immediately following the spin-off, and we paid
an additional $100.0 million to First Data financed through
borrowings under our revolving credit facility as discussed
below. The remaining $453.9 million reflected as a cash
dividend was comprised of cash, consideration for an
ownership interest held by a First Data subsidiary in one
of our agents which had already been reflected as part
of our company, and settlement of net intercompany
receivables (exclusive of certain intercompany notes
discussed above).
In 2005 and 2004, we paid dividends to First Data
from profit generated through operations. The amount
of dividends distributed in each year was impacted by
the cash balances available as a result of loans made
to affiliates.
Proceeds from the Issuance of Borrowings, Net of Debt
Issue Costs / Principal Repayments on Borrowings
During September 2006, FFMC entered into the
Bridge Loan for $2.4 billion, which was refinanced
on November 17, 2006 through the issuance of the
Floating Rate Notes for $500.0 million, the 2011 Notes for
$1.0 billion and the 2036 Notes for $500.0 million, along
with approximately $400 million worth of commercial paper
borrowings, all of which are described in more detail above
under “ — Financing.”
In addition to the above borrowings, as discussed
further in “—Significant Non-Cash Transactions” below,
we also issued $1.0 billion aggregate principal amount of
the 2016 Notes in connection with the spin-off for which
we received no cash proceeds.
Net Proceeds from the Issuance of Commercial Paper
During November 2006, we established a commercial
paper program pursuant to which we may issue unsecured
commercial paper notes in an amount not to exceed
$1.5 billion outstanding at any time. An initial borrowing
under the commercial paper program of approximately
$400 million was made in connection with the refinancing
of the Bridge Loan described above, of which we
subsequently repaid $75.4 million by the end of 2006.
Cash Flows from Financing Activities
Years Ended December 31,
Source (use) (in millions) 2006 2005 2004
Advances from/(to) affiliates of First Data $ 160.2 $(153.2) $ 250.0
Capital contributed by First Data in connection with acquisitions — 369.2 28.7
Notes payable issued to First Data — 400.1 255.0
Repayments of notes payable to First Data (154.5) (246.5) (255.0)
Additions to notes receivable from First Data (7.5) (504.7) (270.7)
Proceeds from repayments of notes receivable from First Data 776.2 18.4 —
Dividends to First Data (2,953.9) (417.2) (659.8)
Proceeds from the issuance of borrowings, net of debt issue costs 4,386.0 — —
Principal payments on borrowings (2,400.0) — —
Net proceeds from the issuance of commercial paper 324.6 — —
Proceeds from net borrowings under credit facilities 3.0 — —
Proceeds from exercise of options 80.8 — —
Cash dividends to public stockholders (7.7) — —
Purchase of treasury shares (19.9) — —
Net cash provided by/(used in) financing activities $ 187.3 $(533.9) $(651.8)