First Data 2011 Annual Report Download - page 20

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.
As of December 31, 2011, the Company had $11.22 billion aggregate principal amount of variable rate long-term indebtedness,
of which interest rate swaps fix the interest rate on $5 billion in notional amount prior to the impact of $750 million of fixed to
floating interest rate swaps. As a result, as of December 31, 2011, the impact of a 100 basis point increase in interest rates would
increase the Company's annual interest expense by approximately $70 million. See the discussion of the Company's interest rate swap
transactions in Note 6 to the Company's Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.
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 for material, known tax exposures relating to deductions,
transactions and other matters involving some uncertainty as to the proper tax treatment of the item. These reserves reflect what the
Company believes to be reasonable assumptions as to the likely final resolution of each issue if raised by a taxing authority. While the
Company believes that the reserves are adequate to cover reasonably expected tax risks, there is no assurance that, in all instances, an
issue raised by a tax authority will be finally resolved at a financial cost not in excess of any related reserve. An unfavorable
resolution, therefore, could negatively impact the Company's effective tax rate, financial position, results of operations and cash flows
in the current and/or future periods.
Failure to protect the Company's intellectual property rights and defend itself from potential patent infringement claims may
diminish the Company's competitive advantages or restrict it from delivering the Company's services.
The Company's trademarks, patents and other intellectual property are important to its future success. The FIRST DATA
trademark and trade name and the STAR trademark and trade name are intellectual property rights which are individually material to
the Company. These trademarks and trade names are widely recognized and associated with quality and reliable service. Loss of the
proprietary use of the FIRST DATA or STAR trademarks and trade names or a diminution in the perceived quality associated with
them could harm the growth of the Company's businesses. The Company also relies on proprietary technology. It is possible that
others will independently develop the same or similar technology. Assurance of protecting its trade secrets, know-how or other
proprietary information cannot be guaranteed. The Company's patents could be challenged, invalidated or circumvented by others and
may not be of sufficient scope or strength to provide the Company with any meaningful protection or advantage. If the Company was
unable to maintain the proprietary nature of its technologies, the Company could lose competitive advantages and be materially
adversely affected. The laws of certain foreign countries in which the Company does business or contemplates doing business in the
future do not recognize intellectual property rights or protect them to the same extent as do the laws of the United States. Adverse
determinations in judicial or administrative proceedings could prevent the Company from selling the Company's services or prevent
the Company from preventing others from selling competing services, and thereby may have a material adverse affect on the business
and results of operations. Additionally, claims have been made, are currently pending, and other claims may be made in the future,
with regards to the Company's technology infringing on a patent or other intellectual property rights. Unfavorable resolution of these
claims could either result in the Company being restricted from delivering the related service or result in a settlement that could be
material to the Company.
The Company is the subject of various legal proceedings which could have a material adverse effect on the Company's revenue
and profitability.
The Company is involved in various litigation matters. The Company is also involved in or is the subject of governmental or
regulatory agency inquiries or investigations from time to time. If the Company is unsuccessful in its defense in the litigation matters,
or any other legal proceeding, it may be forced to pay damages or fines and/or change its business practices, any of which could have
a material adverse effect on the Company's revenue and profitability. For more information about the Company's legal proceedings,
see "Item 3: Legal Proceedings" herein.
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