First Data 2012 Annual Report Download - page 39

Product sales and other revenue. Product sales and other revenue increased in 2012 compared to 2011 due to new software
license fees and new sales, price increases and higher terminal installations in Argentina. Partially offsetting these increases are
declines in terminal sales and lease originations in Germany, a decrease resulting from contract termination fees recognized in 2011 as
well as a decrease resulting from the strategic decision to exit a line of business in Greece. Foreign currency exchange rate movements
negatively impacted the growth rate for product sales and other revenue in 2012 compared to 2011 by 5 percentage points.
Product sales and other revenue increased in 2011 compared to 2010 due to growth in terminal sales and leasing revenue as a
result of new clients and growth from existing clients in Argentina and the United Kingdom as well as new terminal requirements and
lease renewals in the United Kingdom.
Segment EBITDA. Segment EBITDA increased in 2012 compared to 2011 due primarily to the revenue items noted above. In
addition, International segment EBITDA benefited in 2012 from the 2011 correction of cumulative errors in the amortization of initial
payments for new contracts related to purchase accounting associated with the KKR merger and the write-off of capitalized
commissions related to terminal leases which adversely impacted 2011 results by $14.3 million and benefited the growth rate for 2012
compared to 2011 by 3 percentage points. Segment EBITDA also benefited from decreased expenses, principally operations and
technology costs, driven by cost savings initiatives. The segment EBITDA growth rate for 2012 compared to 2011 benefited from
decreased operations and technology costs by 4 percentage points. The increases in segment EBITDA for 2012 compared to 2011
were partially offset by foreign currency exchange rate movements which adversely impacted the segment EBITDA growth rate by 4
percentage points.
Segment EBITDA increased in 2011 compared to 2010 due to the impact of the revenue items noted above, decreased operating
expenses driven by cost reduction initiatives, a benefit resulting from the write-off of leasing receivables and terminal inventory in
2010 and the impact of foreign currency exchange rate movements. The 2010 write-off of leasing receivables and terminal inventory
benefited the segment EBITDA growth rate in 2011 compared to 2010 by 6 percentage points. Segment EBITDA growth also
benefited 5 percentage points in 2011 compared to 2010 from the impact of foreign currency exchange rate movements. Partially
offsetting the increases described above was a decrease resulting from the correction of cumulative errors in the amortization of initial
payments for new contracts related to purchase accounting associated with the KKR merger and the write-off of capitalized
commissions related to terminal leases which, together, adversely impacted International segment EBITDA by $14.3 million and the
growth rate for 2011 compared to 2010 by 4 percentage points.
Capital Resources and Liquidity
FDC’s source of liquidity is principally cash generated from operating activities supplemented as necessary on a short-term
basis by borrowings against its revolving credit facility. 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 changes in the Company’s debt structure as well as the Company’s cash flow activities and the sources and uses of funding
during the years ended December 31, 2012, 2011 and 2010.
During 2012, 2011 and 2010, the Company completed various amendments and modifications to certain of its debt agreements,
several debt offerings and a debt exchange in an effort to extend its debt maturities. Additionally, in February 2013, FDC issued $785
million aggregate principal amount of 11.25% senior unsecured notes due January 15, 2021. The proceeds from the offering were
used to repurchase FDC’s outstanding 10.55% senior unsecured notes and to pay related fees and expenses. Also in February 2013,
FDC entered into a Joinder Agreement relating to its credit agreement, pursuant to which FDC incurred $258 million in new term
loans maturing on September 24, 2018. The net cash proceeds from the new term loans were used to repay all of its outstanding term
loan borrowings maturing in 2014 and to pay related fees and expenses.
Details regarding the Company’s debt structure are provided in Note 8 to the Company’s Consolidated Financial Statements in
Item 8 of this Form 10-K. The Company intends to extend additional debt maturity dates as opportunities allow.
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, 2012 and 2011, the Company held $608.3 million and $485.7 million in cash and cash equivalents,
respectively.
Included in cash and cash equivalents are amounts held by Integrated Payment Systems Inc. (“IPS”) and the BAMS alliance,
that are not available to fund operations outside of those businesses. At December 31, 2012 and 2011, the cash and cash equivalents
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