First Data 2008 Annual Report Download - page 55

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
A portion of the restructuring charges in the predecessor period resulted from efforts to improve the overall efficiency and effectiveness of the sales and
sales support teams principally within the Merchant Services segment. This action resulted in the termination of approximately 230 sales related employees
comprising approximately 10% of the Merchant Services segment's regional sales, cross-sale and sales support organizations. The other restructuring in the
predecessor period resulted from the termination of approximately 140 employees within the International segment. The terminations were associated with the
data center consolidation and global sourcing initiatives. Partially offsetting the charges are reversals of prior period restructuring accruals of $2.3 million for
the 2007 predecessor period and an additional $0.2 million for the 2007 successor period.
In November 2007, the Company terminated approximately 6% of its worldwide work force as part of a strategic plan following the merger addressing
simplification, efficiencies and cost savings initiatives. A majority of the successor severance costs were recorded in purchase accounting while the remaining
amount was recorded through current operations.
During the 2007 predecessor period, the Company recorded a charge of $16.3 million related to the impairment of goodwill and intangible assets
associated with the wind-down of the Company's official check and money order business and an additional $4.3 million related to the impairment of fixed
assets and software associated with its government business included in the Financial Services segment. The Company also recorded a $5.0 million litigation
accrual associated with a judgment against the Company pertaining to a vendor contract issue within the Prepaid Services segment, and a benefit of $2.5
million related to the Visa settlement originally recorded in 2006 in All Other and Corporate. The Company also released a portion of the domestic
escheatment accrual made in the fourth quarter 2005 which is reflected in Other. The release was prompted by reaching resolution with a large majority of
states as to the Company's escheatment liability. The Company believes any remaining uncertainty is adequately accrued.
2006 Activities
Pretax Benefit (Charge)
Predecessor
Year ended December 31, 2006
Merchant
Services
Financial
Services International
Prepaid
Services
Integrated
Payment
Systems
All Other
and
Corporate
Divested
Operations Totals
(in millions)
Restructuring charges $ (4.4) $ (3.7) $ (14.5) — $ (0.2) $ (3.8) $ (0.7) $ (27.3)
Restructuring accrual reversals — 1.5 1.0 $ 0.1 — 0.7 — 3.3
Impairments — (17.5) 0.9 — — 0.5 — (16.1)
Litigation and regulatory settlements 7.4 (15.0) — — — 42.4 — 34.8
Other — 0.3 — — — — — 0.3
Total pretax benefit (charge), net of reversals $ 3.0 $ (34.4) $ (12.6) $ 0.1 $ (0.2) $ 39.8 $ (0.7) $ (5.0)
Associated with the realigning of the Company's operating structure related to shared service functions and global technology functions, including data
centers, a Company initiative to reduce operating costs to the appropriate level after the spin-off and certain business driven restructurings, the Company
recorded restructuring charges comprised of severance totaling $24.6 million and facility closures totaling $2.7 million for the year ended December 31, 2006.
Severance charges resulted from the termination of approximately 600 employees across the
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