First Data 2008 Annual Report Download - page 75

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
(a) No pro forma adjustments have been made to segment revenue in 2007. Accordingly, values represent the sum of predecessor and successor periods.
(b) Adjustments to Merchant Services segment operating profit consist of adjustments related to increased other intangible asset amortization expense;
increased other intangible asset amortization expense associated with equity method investments; decreased fixed asset depreciation expense; the reversal
of costs associated with the accelerated vesting of equity awards; the reversal of rent expense related to synthetic leases bought out as a result of change
in control provisions; and an adjustment for increased depreciation expense on buildings purchased out of synthetic leases.
(c) Adjustments to Financial Services segment operating profit consist of adjustments related to increased other intangible asset amortization expense; the
reversal of costs associated with the accelerated vesting of equity awards; the reversal of rent expense related to synthetic leases bought out as a result of
change in control provisions; decreased fixed asset depreciation expense; and an adjustment for increased depreciation expense on buildings purchased
out of synthetic leases.
(d) Adjustments to International segment operating profit consist of adjustments related to decreased other intangible asset amortization expense; decreased
fixed asset depreciation expense; increased other intangible asset amortization expense associated with equity method investments; the reversal of costs
associated with the accelerated vesting of equity awards; and the reversal of amortization of prior year service costs and actuarial gains and losses related
to defined benefit plans.
(e) Adjustments to Prepaid Services segment operating profit consist of adjustments related to increased other intangible asset amortization expense; and the
reversal of costs associated with the accelerated vesting of equity awards.
(f) Adjustments to Integrated Payment Systems segment operating profit consist of adjustments related to decreased other intangible asset amortization
expense; and the reversal of costs associated with the accelerated vesting of equity awards.
(g) Adjustments to All Other and Corporate operating profit consist of adjustments related to decreased other intangible asset amortization expense;
decreased fixed asset depreciation expense; the reversal of costs associated with the accelerated vesting of equity awards; the reversal of amortization of
prior year service costs and actuarial gains and losses related to defined benefit plans; adjustments to recognize expense resulting from the sponsor's
management fee; and the reversal of merger transaction costs.
Capital Resources and Liquidity
The Company's source of liquidity is principally cash generated from operating activities supplemented as necessary on a very short-term basis by
borrowings against its revolving credit facility. The economic downturn (described in greater detail under "Economic Conditions" above) is expected to have
at least a near term impact on the capital resources provided by operating activities. If the impact is more than expected, certain capital expenditures may be
limited and, in an extreme situation, may require the use of the revolving credit facility to fund interest payments or capital expenditures; however, to prevent
such measures, the Company has implemented cost saving initiatives that it expects will allow it to continue to fund such items from operating activities.
Based on the above, the Company believes its current level of cash and short-term financing capabilities along with future cash flows from operations are
sufficient to meet the needs of the business. The following discussion highlights the Company's cash flow activities from continuing operations and the
sources and uses of funding during the successor year ended December 31, 2008, the successor period from September 25, 2007 through December 31, 2007,
the predecessor period from January 1, 2007 through September 24, 2007 and the year ended December 31, 2006.
Cash and Cash Equivalents
Investments (other than those included in settlement assets) with original maturities of three months or less (that are readily convertible to cash) are
considered to be cash equivalents and are stated at cost, which approximates market value. At December 31, 2008 and December 31, 2007, the Company held
$406.3 million and $606.5 million in cash and cash equivalents, respectively.
Cash and cash equivalents held by IPS are not available to fund any operations outside of the IPS business. At December 31, 2008 and 2007, the cash
and cash equivalents held by IPS totaled $180.3 million and $147.3 million, respectively. All other domestic cash balances, to the extent available, are used to
fund FDC's short-term liquidity needs.
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