First Data 2009 Annual Report Download - page 70

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Payments Related to Other Businesses Previously Acquired
For all periods, payments related to other businesses previously acquired related mostly to contingent
consideration associated with a merchant alliance. The payments in 2009 and 2008 were recognized as a part of
purchase accounting associated with the merger with affiliates of KKR and did not result in an increase in assets.
The merger is described in Note 2 to the Consolidated Financial Statements included in Item 8 of this Form
10-K. There will be no additional payments of contingent consideration associated with this merchant alliance.
Additionally, no significant payments associated with other businesses is anticipated.
Proceeds from Dispositions, net of expenses paid and cash disposed
The source of cash in proceeds from dispositions in 2009 resulted from the Company selling a merchant
acquiring business in Canada in the fourth quarter of 2009 and selling its debit and credit card issuing and
acquiring processing business in Austria in the third quarter of 2009. The source of cash in proceeds from
dispositions in 2008 resulted from the Company selling its interest in Early Warning Services, which had been
accounted for under the equity method, and selling its subsidiary Active Business Services Ltd. both in the third
quarter of 2008 as well as from selling its subsidiary Peace in October 2008 and from reducing its ownership
interest in the alliance with Wells Fargo in December 2008 as described in “2008 Overview” above.
Capital Expenditures
The Company incurred capital expenditures consisting of property and equipment purchases, payments to
secure customer service contracts and capitalized systems development costs, including expenditures related to
data center consolidation, of approximately $379.1 million in 2009. During 2009, the Company entered into sale
leaseback transactions for certain equipment which resulted in proceeds from the sale of approximately $22
million. Capital expenditures are estimated to be approximately $370 million in 2010. Capital expenditures in
2009 were funded through cash flows from operating activities. Capital expenditures in 2010 are also expected to
be funded by cash flows from operations. If, however, cash flows from operating activities are insufficient, the
Company will decrease its discretionary capital expenditures, enter into capital leases or utilize its revolving
credit facility.
Capital expenditures in 2009 decreased from 2008 as a result of the Company implementing cost savings
initiatives. Capital expenditures in 2007 were high due 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.
Proceeds from the Sale of Marketable Securities
Proceeds from the sale of marketable securities in 2008 as well as the 2007 successor period resulted from
the sale of MasterCard shares and, in 2008, the sale of one additional investment. Proceeds in the predecessor
period in 2007 resulted from the partial liquidation of miscellaneous marketable securities.
Other Investing Activities
The use of cash from other investing activities in 2009 related primarily to a $28.0 million contribution to
the PNC alliance as discussed in the “Overview” section above and a $21.0 million increase in regulatory and
restricted cash balances. Due to volatility in the global credit and capital markets, certain of the Company’s
portfolio holdings within settlement assets may have a less favorable market value or are otherwise impaired.
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