First Data 2011 Annual Report Download - page 100

Significant non-cash transactions. During 2011, 2010 and 2009, the principal amount of FDC's senior notes due 2015
increased by $73.1 million, $362.5 million and $333.0 million, respectively, resulting from the "payment" of accrued interest
expense. Beginning October 1, 2011, the interest on FDC's senior notes due 2015 is required to be paid in cash and the first such
payment will be made in April 2012.
During 2011, 2010 and 2009, the Company entered into capital leases, net of trade-ins, totaling approximately $106 million, $65
million and $105 million, respectively.
The following summary details the Company's exchange offerings during 2009, 2010 and 2011.
• March 2009 — Exchanged the remaining balance of the Company's 9.875% senior unsecured cash-pay term loan
bridge loans due 2015 that was not previously exchanged for senior notes having substantially identical terms and
guarantees with the exception of interest payments being due semi-annually on March 31 and September 30 of each
year instead of quarterly.
• September 2009 - Exchanged aggregate principal amounts of $3.2 billion of its 10.55% senior PIK notes, $2.5 billion
of its 11.25% senior subordinated notes and $1.6 billion of its 9.875% senior notes (which constituted all such notes
outstanding at that date) for publicly tradable notes having substantially identical terms and guarantees, except that the
exchange notes are freely tradable. Substantially all of the notes were exchanged effective September 9, 2009.
• December 2010 - Exchanged $3.0 billion of its 9.875% senior notes due 2015 and $3.0 billion of its 10.550% senior
PIK notes due 2015 for $2.0 billion of 8.25% senior second lien notes due 2021, $1.0 billion of 8.75%/10.00% PIK
toggle senior second lien notes due 2022 and $3.0 billion of 12.625% senior notes due 2021.
• December 2011 — Exchanged substantially all of its aggregate principal amounts of $3 billion of its 12.625% senior
notes due 2021 for publicly tradable notes having substantially identical terms and guarantees, except that the exchange
notes will be freely tradable.
There were no expenditures, other than professional fees, or receipts of cash associated with the exchange offers described
above.
In November 2011, the Company contributed the assets of its transportation business to an alliance in exchange for a 30%
interest in the alliance. Refer to Note 18 of these Consolidated Financial Statements for additional information.
On June 26, 2009, the Company entered into the BAMS alliance. The Company's and BofA's direct contributions to the alliance
consisted of non-cash assets and liabilities.
Refer to Note 13 of these Consolidated Financial Statements for information concerning the Company's stock-based
compensation plans.
Note 10: Related Party Transactions
Merchant Alliances
A substantial portion of the Company's business within the Retail and Alliance Services and International segments is conducted
through merchant alliances. Merchant alliances are alliances between the Company and financial institutions. If the Company has
majority ownership and management control over an alliance, then the alliance's financial statements are consolidated with those of
the Company and the related processing fees are treated as an intercompany transaction and eliminated upon consolidation. If the
Company does not have a controlling ownership interest in an alliance, it uses the equity method of accounting to account for its
investment in the alliance. As a result, the Company's consolidated revenues include processing fees charged to alliances accounted
for under the equity method. No directors or officers of the Company have ownership interests in any of the alliances. The formation
of each of these alliances generally involves the Company and the bank contributing contractual merchant relationships to the alliance
and a cash payment from one owner to the other to achieve the desired ownership percentage for each. The Company and the bank
contract a long-term processing service agreement as part of the negotiation process. This agreement governs the Company's provision
of transaction processing services to the alliance.
The Company negotiated all agreements with the alliance banks. Therefore, all transactions between the Company and its
alliances were conducted at arm's length; nevertheless, accounting guidance defines a transaction between the Company and an equity
method investee as a related party transaction requiring separate disclosure in the financial statements of the Company. Accordingly,
the revenue associated with these related party transactions are presented on the face of the Consolidated Statements of Operations.
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