First Data 2007 Annual Report Download - page 63

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Cash Flows from Investing Activities from Continuing Operations
Successor Predecessor
Period from
September 25
through
December 31,
2007
Period from
January 1
through
September 24,
2007
Year ended December 31,
Source/(use) (in millions) 2006 2005
Merger, net of cash acquired $ (25,756.2) — — —
Current year acquisitions, net of cash acquired (136.6) $ (690.3) $ (287.5) $ (443.9)
Payments related to other businesses previously acquired (0.5) (50.0) (51.1) (55.8)
Proceeds from dispositions, net of expenses paid — — 198.7 56.2
Additions to property and equipment, net (55.2) (275.5) (170.4) (189.5)
Payments to secure customer service contracts, including outlays for conversion, and capitalized
systems development costs (57.5) (123.7) (129.7) (137.9)
Proceeds from the sale of marketable securities 14.1 11.8 45.0 224.5
Dividend received from discontinued operations — — 2,500.0 —
Cash retained by Western Union — — (1,327.8) —
Other investing activities 108.7 (9.5) 202.6 (88.5)
Net cash (used in) provided by investing activities from continuing operations $ (25,883.2) $ (1,137.2) $ 979.8 $ (634.9)
Merger
As discussed in Note 2 in the accompanying Consolidated Financial Statements, the Company merged with an entity controlled by an affiliate of KKR
on September 24, 2007. The $26 billion represents the use of cash to purchase the FDC shares from its shareholders as well as other related transaction costs.
Current Year Acquisitions
The Company finances acquisitions through a combination of internally generated funds, long-term borrowings and equity. The Company believes that
its cash flow from operations together with other available sources of funds will be adequate to meet its funding requirements as it relates to future
acquisitions. The Company continues to pursue opportunities that strategically fit into the business. Additionally, the Company continues to manage its
portfolio of businesses and evaluate the possible divestiture of businesses that do not match its long-term growth objectives.
During 2007, the Company acquired 100% of Size Technologies, Inc., Datawire, Instant Cash, Intelligent Results, FundsXpress, First Data Polska,
Check Forte, Deecal International, 56% of the Merchant Solutions joint venture and various merchant portfolios for cash consideration. Also in 2007, the
Company purchased the interests in its First Data Government Solutions subsidiary owned by minority interest holders.
During 2006, the Company created a joint venture with Banca Nazionale del Lavora ("BNL"), acquired substantially all of the assets of ClearCheck,
Inc. and acquired 100% of FDD, Peace Software, and First Data Cono Sur. The cash outflow associated with the purchase of FDD was nearly offset by the
cash inflow from the subsequent sale of its wholly owned subsidiary easycash as discussed in Note 4 of the accompanying Consolidated Financial Statements.
The proceeds from the easycash sale were netted against the cash outflow as the sale was an integral and required part of the FDD acquisition.
Acquisitions during 2005 included expenditures made upon the formation of the International Card Services Joint Venture ("ICS") merchant alliance,
the acquisition of EuroProcessing International ("EPI"), First Data Austria (formerly Austrian Payment Systems Services GmbH), First Data International
Korea (formerly Korea Mobile Payment Services), the CitiCorp merchant services alliance, and acquisitions of other merchant portfolios.
The Company funded approximately $200 million for acquisitions through February 2008.
Payments Related to Other Businesses Previously Acquired
During 2007, 2006 and 2005, payments related to other businesses previously acquired related mostly to contingent consideration largely associated
with a merchant alliance. The Company anticipates making contingent consideration payments of approximately $18 million in 2008 most significantly
associated with a merchant alliance. The payments were recognized as a part of purchase accounting and will not result in an increase in assets.
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