First Data 2012 Annual Report Download - page 74

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCI into the Consolidated Statements of Operations. Unrealized gains and losses on investments carried at fair value are included as a
separate component of OCI, net of any related tax effects.
The following table presents additional information regarding available-for-sale securities:
(a) Includes activity resulting from sales, redemptions, liquidations and related matters.
(b) In the fourth quarter of 2010, due to new and existing state laws and regulations as well as the Company’ s changing views of its
use of capital, the Company determined it could no longer assert that it will not more likely than not be required to sell the
SLARS prior to the recovery of their fair value to amortized cost.
In January 2013, the company sold approximately $21 million of its holdings in SLARS resulting in a realized gain of $1.0
million.
The following table presents maturity information for the Company’ s investments in debt securities as of December 31, 2012:
The Company also maintained investments in non-marketable securities, held for strategic purposes (collectively referred to as
“cost method investments”) which are carried at cost and included in “Other long-term assets” in the Company’ s Consolidated
Balance Sheets. These investments are evaluated for impairment upon an indicator of impairment such as an event or change in
circumstances that may have a significant adverse effect on the fair value of the investment. During the third quarter of 2012, the
Company recognized an impairment of $8.7 million related to a cost method investment due to uncertainty regarding the investee’ s
viability as a going concern. Where there are no indicators of impairment present, the Company estimates the fair value for the cost
method investments only if it is practicable to do so. As of December 31, 2012, it was deemed impracticable to estimate the fair value
on $8.0 million of cost method assets due to the lack of sufficient data upon which to develop a valuation model and the costs of
obtaining an independent valuation in relation to the size of the investments.
Note 6: Derivative Financial Instruments
Risk Management Objectives and Strategies
The Company is exposed to various financial and market risks, including those related to changes in interest rates and foreign
currency exchange rates, that exist as part of its ongoing business operations. The Company utilizes certain derivative financial
instruments to enhance its ability to manage these risks.
The Company uses derivative instruments (i) to mitigate cash flow risks with respect to changes in interest rates (forecasted
interest payments on variable rate debt), (ii) to maintain a desired ratio of fixed rate and floating rate debt, and (iii) to protect the net
investment in certain foreign subsidiaries and/or affiliates and intercompany loans with respect to changes in foreign currency
exchange rates.
Derivative instruments are entered into for periods consistent with related underlying exposures and do not constitute positions
independent of those exposures. The Company applies strict policies to manage each of these risks, including prohibition against
derivatives trading, derivatives market-making or any other speculative activities. Although most of the Company’ s derivatives do not
qualify for hedge accounting, they are maintained for economic hedge purposes and are not considered speculative.
74
Year ended December 31,
(in millions) 2012 2011 2010
Proceeds from sales (a) $156.6 $283.2 $138.1
Gross realized gains included in earnings as a result of sales (a) 4.4 3.6 6.2
Gross realized (losses) included in earnings as a result of sales (a)
—
(2.9) (3.3)
Gross losses included in earnings as a result of impairment (b)
—
(5.2) (28.2)
N
et unrealized gains or (losses) included in OCI, net of tax 2.9 (2.0) 7.7
N
et gains or (losses) reclassified out of OCI into earnings, net of tax 2.7 (2.8) (19.8)
(in millions) Fair Value
Due within one yea
r
$125.6
Due after one year through five years 15.3
Due after five years through 10 years
—
Due after 10 years 38.9
Total debt securities
$179.8