First Data 2009 Annual Report Download - page 50

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Other income (expense)
(in millions)
Successor Predecessor
Year ended
December 31,
2009
Year ended
December 31,
2008
Period from
September 25, 2007
through
December 31,
2007
Period from
January 1
through
September 24,
2007
Investment gains and (losses) ................. $ 3.0 $21.1 $ 0.9 $(2.0)
Derivative financial instruments gains and
(losses) ................................. (67.4) (12.9) (33.3) (0.6)
Divestitures, net ............................ (12.9) (8.5) 0.2 6.1
Debt repayment gains and (losses) ............. — 7.0 (17.2) 1.4
Non-operating foreign currency gains and
(losses) ................................. 10.5 (21.1) (24.6) —
Other .................................... 5.5 — — —
Other income (expense) ...................... $(61.3) $(14.4) $(74.0) $ 4.9
Investment gains and (losses)—The 2008 investment gains and losses resulted from the recognition of a gain
related to the sale of MasterCard stock in the Retail and Alliance Services and International segments and a gain
on the sale of investment securities within the Financial Services segment partially offset by a loss resulting from
a money market investment impairment.
Derivative financial instruments gains and (losses)—The net gains and losses in 2009 were due most
significantly to the mark-to-market adjustments for cross currency swaps and interest rate swaps that are not
designated as accounting hedges as well as the impact of payments on interest rate swaps that do not qualify as
accounting hedges.
The derivative financial instruments loss in 2008 related most significantly to $16.0 million of charges for
ineffectiveness from interest rate swaps that were designated as accounting hedges but are not perfectly effective
partially offset by miscellaneous individually insignificant items.
The derivative loss in the 2007 successor period related most significantly to a $12.2 million
mark-to-market loss on collars entered into to economically hedge, although not designated as an accounting
hedge, MasterCard stock held by the Company. These collars were terminated in January 2008 in connection
with the sale of the hedged MasterCard stock. A loss of approximately $19 million was also recognized due to
decreases in the fair value of forward starting, deal contingent interest rate swaps of a subsidiary of KKR, Omaha
Acquisition Corporation, for the period prior to its merger with and into the Company from March 29, 2007 (its
formation) through September 24, 2007 and prior to their designation as a hedge.
Divestitures, net—The loss in 2009 resulted from the Company selling its debit and credit card issuing and
acquiring processing business in Austria in August 2009. The loss is partially offset by a gain related to the sale
of a merchant acquiring business in Canada in November 2009. During 2008, the Company recognized a loss
related to a divestiture of a business within the International segment. The Company also recognized a pretax loss
of $3.8 million resulting from the sale of 12.5% of its membership interest in Wells Fargo Merchant Services,
LLC discussed above in “Overview”. During the 2007 predecessor period, the Company recognized benefits
resulting from the release of excess divestiture accruals due to the expiration of certain contingencies.
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