First Data 2008 Annual Report Download - page 43

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
portfolio associated with the official checks and money orders, are not intended to be available to creditors of First Data nor its other subsidiaries. The
portfolio had been invested largely in long-term municipal bonds until repositioned to short-term tax exempt securities in 2007 in conjunction with the wind-
down. In the first quarter of 2008, the Company further repositioned the investment portfolio associated with this business from short-term tax exempt
securities to principally taxable investments. The majority of the clients of this business deconverted during 2008. The remaining clients are expected to
deconvert mainly during 2009 though some will be after 2009, in accordance with their respective contract terms. In July 2008, IPS agreed with The Western
Union Company ("Western Union") that on October 1, 2009 IPS will assign and transfer to Western Union, among other things, certain assets and equipment
used by IPS to issue retail money orders and an amount sufficient to satisfy all outstanding retail money orders. On the closing date, Western Union will
assume IPS's role as issuer of the retail money orders. Integrated Payment Systems Inc. will continue to use its licenses to offer payment services that fall
under state and federal regulations and the business will continue to operate in a much reduced capacity after all of the client deconversions as outstanding
official check and money order clearance activity related to financial institution clients winds down.
2006 Overview
Spin-off of Western Union
On September 29, 2006, the Company separated its Western Union money transfer business into an independent, publicly traded company through a
spin-off of 100% of Western Union to FDC shareholders in a transaction intended to qualify for tax-free treatment ("the spin-off"). FDC and Western Union
are independent and have separate ownership, boards of directors and management.
Discontinued Operations
The historic results of operations of Western Union, Primary Payment Systems ("PPS"), IDLogix and Taxware, LP ("Taxware") are presented as
discontinued operations due to the spin-off or sale of these entities in 2006. All prior period amounts presented in the financial statements and MD&A were
adjusted to reflect this discontinued operations presentation. In 2004, the Company divested its 64% ownership of NYCE, an electronic funds transfer
network. The sale agreement of NYCE contemplated potential adjustments to the sales price which resulted in activity in discontinued operations in 2006.
Segment Discussion
Merchant Services Segment
The Merchant Services segment is comprised of businesses that provide merchant acquiring and processing and related services. Merchant acquiring
operations are the largest component of the segment's revenue, facilitating the merchants' ability to accept credit and debit cards by authorizing, capturing, and
settling merchants' credit, debit, stored-value and loyalty card transactions. Many of the segment's services are offered through joint ventures and other
alliance arrangements.
Merchant Services continues to grow in credit, signature debit and PIN-debit processing through the strength of its merchant alliances, independent
sales organizations ("ISO") and referral partners, focused sales force efforts and the development of new POS technologies and payment methods. Financial
results of the merchant alliance strategy appear both in the "Transaction and processing service fees revenue" and "Equity earnings in affiliates" line items of
the Consolidated Statements of Operations.
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