First Data 2014 Annual Report Download - page 35

Transaction and processing service fees revenue increased in 2014 compared to 2013 due to volume growth in the card issuing and merchant acquiring
businesses. The majority of increases in the merchant acquiring businesses resulted from volume growth in the merchant acquiring alliances, partially offset
by lost processing business in Canada. Revenue in the card issuing business increased primarily from transaction and volumes growth from existing
customers in Argentina, new business from existing clients in the United Kingdom and Greece, as well as inflation in Argentina. In 2014, foreign currency
exchange rate movements negatively impacted the transaction and processing service fees revenue growth rate by approximately 3 percentage points
compared to the same period in 2013.
Transaction and processing service fees revenue increased in 2013 compared to 2012 primarily due to volume growth and pricing in the merchant acquiring
businesses and card issuing businesses partially offset by lost business in the card issuing businesses. The majority of increases in the merchant acquiring
businesses resulted from volume growth in merchant acquiring alliances and direct sales channels primarily in Ireland, United Kingdom, and Poland.
Revenue in the card issuing businesses declined primarily due to lost business in Australia and Germany partially offset by volume growth from existing
customers in Argentina and the United Kingdom. In 2013, foreign currency exchange rate movements negatively impacted the transaction and processing
service fees revenue growth rate by 2 percentage points compared to 2012.
Transaction and processing service fee revenue is driven by accounts on file and transactions. The spread between growth in these two indicators and revenue
growth was driven mostly by the mix of transaction types and the impact of foreign currency exchange rate movements. International card accounts on file
increased in 2014 compared to 2013 primarily due to new portfolios of existing clients in the United Kingdom, partially offset by the removal of inactive
accounts in Canada.
Product sales and other revenue increased in 2014 compared to 2013 primarily due to the $12 million sale of a merchant portfolio in Poland in the fourth
quarter. In 2014, foreign currency exchange rate movements negatively impacted the growth rate for product sales and other revenue in 2014 compared to
2013 by 8 percentage points.
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 3 percentage points.
International Segment EBITDA increased in 2014 compared to 2013 due to the revenue items noted above and a combined $9 million from a tax recovery in
Australia and lower bonus expense, partially offset by an unfavorable tax outcome in Argentina. The segment EBITDA growth rate for 2014 compared to
2013 was negatively impacted by 6 percentage points from the impact of foreign currency exchange rate movements.
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 our merchant acquiring business as well as the decrease in software license sales described above.
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Our source of liquidity is principally cash generated from operating activities supplemented as necessary on a short-term basis by borrowings against our
revolving credit facility. We believe our 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 our debt structure as well as our cash flow activities and the sources and
uses of funds during the years ended December 31, 2014, 2013, and 2012.
Over the past few years, we completed various amendments and modifications to certain of our debt agreements in an effort to extend our debt maturities and
lower interest rates. Details regarding our debt structure are provided in Note 6 "Borrowings" to our Consolidated Financial Statements in Part II, Item 8 of
this Form 10-K.
On July 11, 2014, FDH, our direct parent, completed the issuance of $3.5 billion of its Class B common equity in a private placement. Approximately $2.5
billion of the net proceeds from the private placement were contributed to us as a capital contribution and the funds were used to repay approximately $2.2
billion of debt and $214 million in call premiums.
Additionally, on July 18, 2014, we repriced approximately $5.7 billion of 2018 term loans, reducing the interest rate by 50 basis points and saving over $25
million in annual interest expense. The debt pay down from the equity contribution proceeds, combined with the repricing and other actions by us, will lower
annual cash interest payments by approximately $228 million.
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