First Data 2008 Annual Report Download - page 56

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
organization, representing all levels of employees and approximately 2% of the Company's workforce. The restructuring plans associated with the Company
initiative to reduce operating costs and business driven items were completed in 2006. The Company reversed $3.3 million of prior period restructuring
accruals during the year ended December 31, 2006 related to changes in estimates regarding severance costs that occurred in 2006 and 2005.
Impairment charges related to the impairment of a prepaid asset, software, terminals and buildings offset partially by gains on the sale of assets
previously impaired.
The Company recorded a benefit of approximately $45 million due to the Visa settlement within All Other and Corporate. Also in 2006, excess
litigation accruals in the Merchant Services segment totaling $7.4 million were released. The Company recorded minority interest expense of $3.5 million
associated with this release. The settlement and accrual release were partially offset by a $15.0 million settlement associated with a patent infringement
lawsuit against TeleCheck, clearing all past and future claims related to this litigation, within the Financial Services segment and a charge of $2.7 million
related to the settlement of a claim within All Other and Corporate.
Interest income
Interest income in 2008 decreased compared to the 2007 predecessor and successor periods due to a decrease in cash balances and lower interest rates.
Interest income in the 2007 predecessor period was higher than the comparable period in 2006 while the successor period was lower than the comparable
period in 2006. This was most significantly a result of an increase in cash balances as a result of $2.5 billion in cash transferred to FDC from Western Union
immediately prior to the spin-off in 2006.
Interest expense
Interest expense for the year ended December 31, 2008 and the 2007 successor period was higher than the 2007 predecessor period most significantly
due to debt (approximately $22.6 billion as of December 31, 2008) incurred primarily as the result of the merger. Prior to the merger in 2007, the Company
had debt balances of less than $3 billion. Higher interest rates on the new merger related debt also contributed to the increase.
Interest expense for 2008 decreased compared to the pro forma 2007 year primarily due to decreasing interest rates which favorably impacted all
unhedged variable rate debt.
Interest expense was lower during the 2007 predecessor period compared to the year ended December 31, 2006 due to lower debt balances than the
Company had prior to the debt for debt exchange related to the Western Union spin-off and the repayments of debt in September, November and December
2006 and January 2007.
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