First Data 2009 Annual Report Download - page 49

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
comprising approximately 10% of the merchant acquiring business’ 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 associated with data center consolidation and global sourcing
initiatives.
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 All Other and Corporate. 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 Retail and Alliance 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.
Interest income
Interest income in 2009 decreased compared to 2008 due to lower interest rates and a decrease in cash
balances. Interest income in 2008 decreased compared to the 2007 predecessor and successor periods due to the
same factors.
Interest expense
Interest expense decreased in 2009 compared to 2008 due to lower average interest rates on variable rate
debt in 2009. Also contributing to the decrease were interest rate swaps that no longer qualified for hedge
accounting beginning in 2009, the impact of which is $64.3 million and is recorded in the “other income
(expense)” line item of the Consolidated Statements of Operations. Partially offsetting these decreases was an
increase due to higher average balances (approximately $22,609.8 million as of December 31, 2009 which is
slightly higher than the debt balances as of December 31, 2008) as well as higher interest rates on the Company’s
senior unsecured debt in 2009 as the result of amendments to such debt in June 2008.
Interest expense for the year ended December 31, 2008 and the 2007 successor period were higher than the
2007 predecessor period most significantly due to debt (approximately $22,572.5 million 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 pro forma 2007 primarily due to decreasing interest rates
which favorably impacted all unhedged variable rate debt.
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