First Data 2013 Annual Report Download - page 40

Product sales and other revenue. Product sales and other revenue decreased in 2013 compared to 2012 due to a decrease in software license sales and
lower bulk terminal sales in Canada due to exiting this line of business. In 2013, foreign currency exchange rate movements negatively impacted the growth
rate for product sales and other revenue in 2013 compared to 2012 by 5 percentage points.
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 were 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.
Segment EBITDA. Segment EBITDA decreased in 2013 compared to 2012 due to the impact of foreign currency exchange rate movements which
adversely impacted the segment EBITDA growth rate by 3 percentage points. Segment EBITDA in 2013 benefited from the revenue items noted above as well
as decreased operating expenses driven by cost savings initiatives. Segment EBITDA growth in 2013 compared to 2012 was adversely impacted by increased
costs related to the expansion of the Company’s merchant acquiring business as well as the decrease in software license sales described above.
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.
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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, 2013, 2012 and 2011.
During 2013, 2012 and 2011, FDC completed various amendments and modifications to certain of its debt agreements and several debt offerings in an
effort to extend its debt maturities. 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.
. 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, 2013 and 2012,
the Company held $425.3 million and $608.3 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, 2013 and 2012, the cash and cash equivalents held by IPS and the BAMS alliance totaled
$115.8 million and $85.8 million, respectively. All other domestic cash balances, to the extent available, are used to fund the Company’s short-term liquidity
needs.
Cash and cash equivalents also includes amounts held outside of the U.S. at December 31, 2013 and 2012 totaling $237.6 million and $268.4 million,
respectively. As of December 31, 2013, there was approximately $72 million of cash and cash equivalents held outside of the U.S. that could be used for
general corporate purposes. FDC plans to fund any cash needs in 2014 within the International segment with cash held by the segment, but if necessary, could
fund such needs using cash from the U.S., subject to satisfying debt covenant restrictions.
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