First Data 2010 Annual Report Download - page 46

Table of Contents
FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Cash flows from operating activities increased in 2009 compared to 2008 due most significantly to the $246 million out of period collection and the
timing of prefunding both described above.
The most significant sources of cash in 2008 were associated with the collection of receivables, distributions of earnings associated with certain
affiliates and the timing of certain settlement arrangements. Offsetting these sources were uses of cash associated with the $246 million out of period
collection described above and payments for various liabilities the most significant of which included interest payments on long-term debt, incentive
compensation payments, pension plan contributions to the United Kingdom pension plan and income taxes.
The Company anticipates funding operations throughout 2011 primarily with cash flows from operating activities and by closely managing
discretionary capital and other spending; however, any shortfalls would be supplemented as necessary by borrowings against its revolving credit facility.
Cash flows from investing activities.
Year ended December 31,
Source/(use) (in millions) 2010 2009 2008
Current period acquisitions, net of cash acquired $ (3.2) $ (86.5) $ (188.7)
Payments related to other businesses previously acquired (1.4) (14.7) (35.6)
Proceeds from dispositions, net of expenses paid and cash disposed 21.2 88.1 215.1
Proceeds from sale of property and equipment 5.5 29.4 —
Additions to property and equipment, net (210.1) (199.1) (283.9)
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems
development costs (159.6) (180.0) (163.9)
Proceeds from the sale of marketable securities 0.3 3.9 74.9
Other investing activities 18.1 (48.7) (1.3)
Net cash used in investing activities $ (329.2) $ (407.6) $ (383.4)
Acquisitions and dispositions. The Company finances acquisitions through a combination of internally generated funds, short-term borrowings and
equity of its parent company. The Company may consider using long-term borrowings subject to restrictions on its debt agreements. Although the Company
considers potential acquisitions from time to time, the Company's plan for 2011 does not include funding of material acquisitions. All acquisitions during the
periods presented were funded from cash flows from operating activities or from the reinvestment of cash proceeds from the sale of other assets other than the
acquisition of the Company's proportionate share of the BAMS alliance and CPS discussed in "significant non-cash transactions" below. Purchases of
noncontrolling interests are classified as financing activities as noted below.
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. For a more detailed discussion on acquisitions and dispositions in 2010, 2009 and 2008 refer to Note 3 to the Consolidated Financial Statements
included in Item 8 of this Form 10-K.
For 2009 and 2008, payments related to other businesses previously acquired related mostly to contingent consideration associated with a merchant
alliance for which there will be no additional payments. Additionally, no significant payments associated with other businesses are anticipated.
During 2010, proceeds from dispositions related most significantly to the receipt of a contingent payment associated with the Company's sale of a
merchant acquiring business in Canada in the fourth quarter of 2009. The source of cash in proceeds from dispositions in 2009 resulted from the Company
selling the merchant acquiring business mentioned above 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 "Overview"
above.
Capital expenditures. Capital expenditures are estimated to be approximately $400 million in 2011 and are 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 or utilize its
revolving credit facility. During 2009, the Company entered into sale leaseback transactions for certain equipment which resulted in proceeds from the sale of
approximately $22 million.
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