First Data 2009 Annual Report Download - page 25

margin and adversely affect its business, operating results and financial condition. Furthermore, the rules and
regulations of the various card associations and networks prescribe certain capital requirements. Any increase in
the capital level required would further limit the Company’s use of capital for other purposes.
Changes in laws, regulations and enforcement activities may adversely affect the products, services and
markets in which the Company operates.
The Company and its customers are subject to regulations that affect the electronic payments industry in the
many countries in which the Company’s services are used. In particular, the Company’s customers are subject to
numerous regulations applicable to banks, financial institutions and card issuers in the United States and abroad,
and, consequently, the Company is at times affected by such federal, state and local regulations. Regulation of
the payments industry, including regulations applicable to the Company and its customers, has increased
significantly in recent years. Failure to comply with regulations may result in the suspension or revocation of
license or registration, the limitation, suspension or termination of service, and/or the imposition of civil and
criminal penalties, including fines which could have an adverse effect on the Company’s financial condition. The
Company is subject to U.S. and international financial services regulations, a myriad of consumer protection
laws, escheat regulations and privacy and information security regulations to name only a few. Changes to legal
rules and regulations, or interpretation or enforcement thereof, could have a negative financial effect on the
Company. In addition, even an inadvertent failure by the Company to comply with laws and regulations, as well
as rapidly evolving social expectations of corporate fairness, could damage the Company’s reputation or brands.
There is also increasing scrutiny of a number of credit card practices, from which some of the Company’s
customers derive significant revenue, by the U.S. Congress and governmental agencies. The Company has
structured its business in accordance with existing tax laws and interpretations of such laws which have been
confirmed through either tax rulings or opinions obtained in various jurisdictions including those related to value
added taxes in Europe. Changes in tax laws or their interpretations could decrease the value of revenues the
Company receives, the value of tax loss carryforwards and tax credits recorded on the Company’s balance sheet
and the amount of the Company’s cash flow and have a material adverse impact on the Company’s business.
The Company’s business may be adversely affected by risks associated with foreign operations.
The Company is subject to risks related to the changes in currency rates as a result of its investments in
foreign operations and from revenues generated in currencies other than the U.S. dollar. 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. From time to time, the Company utilizes foreign currency forward contracts or
other derivative instruments to mitigate the cash flow or market value risks associated with foreign currency
denominated transactions. However, these hedge contracts may not eliminate all of the risks related to foreign
currency translation. Furthermore, the Company may become subject to exchange control regulations that might
restrict or prohibit the conversion of its other revenue currencies into U.S. dollars. The occurrence of any of these
factors could decrease the value of revenues the Company receives from its international operations and have a
material adverse impact on the Company’s business.
Increase in interest rates may negatively impact the Company’s operating results and financial condition.
Certain of the Company’s borrowings, including borrowings under the Company’s senior secured credit
facilities to the extent the interest rate is not fixed by an interest rate swap, are at variable rates of interest. An
increase in interest rates would have a negative impact on the Company’s results of operations by causing an
increase in interest expense.
Unfavorable resolution of tax contingencies could adversely affect the Company’s tax expense.
The Company’s tax returns and positions are subject to review and audit by federal, state, local and
international taxing authorities. An unfavorable outcome to a tax audit could result in higher tax expense, thereby
negatively impacting the Company’s results of operations. The Company has established contingency reserves
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