First Data 2008 Annual Report Download - page 102
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Foreign Currency Risk
The Company is exposed to changes in currency rates as a result of its investments in foreign operations, revenues generated in currencies other than
the U.S. dollar and foreign currency denominated loans. Revenue and profit generated by international operations will increase or decrease compared to prior
periods as a result of changes in foreign currency exchange rates. In connection with the merger, the intent of management towards its intercompany
investments and certain net investment hedges were changed. Such decisions have resulted in a different foreign currency risk exposure than what existed
prior to the merger.
After consideration of changes in intent associated with the merger, a hypothetical uniform 10% weakening in the value of the U.S. dollar relative to all
the currencies in which the Company's revenues and profits are denominated would result in a decrease to pretax income of approximately $23 million. The
decrease results from a $98 million decrease related to a euro denominated term loan held by the Company as well as an $11 million decrease related to a euro
denominated cross currency swap held by the Company. This decrease is partially offset by a $66 million increase related to foreign exchange on
intercompany loans and a $20 million increase related to foreign exchange on foreign currency earnings, assuming consistent operating results as the
preceding twelve months from December 31, 2008. There are inherent limitations in the sensitivity analysis presented, primarily due to the assumption that
foreign exchange rate movements are linear and instantaneous. As a result, the analysis is unable to reflect the potential effects of more complex market
changes that could arise, which may positively or negatively affect income.
Regulatory
Through its merchant alliances, the Merchant Services segment holds an ownership interest in several competing merchant acquiring businesses while
serving as the electronic processor for those businesses. In order to satisfy state and federal antitrust requirements, the Company actively maintains an
antitrust compliance program.
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