First Data 2012 Annual Report Download - page 95

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
California’ s dismissal of all the claims against the defendants. On July 26, 2012, the plaintiffs petitioned the Ninth Circuit for
rehearing en banc. The Company continues to believe the complaints are without merit and intends to vigorously defend them.
There are asserted claims against the Company where an unfavorable outcome is considered to be reasonably possible. These
claims can generally be categorized in the following areas: (1) patent infringement which results from claims that the Company is
using technology that has been patented by another party; (2) Merchant customer matters often associated with alleged processing
errors or disclosure issues and claims that one of the subsidiaries of the Company has violated a federal or state requirement regarding
credit reporting or collection in connection with its check verification guarantee, and collection activities; and (3) other matters which
may include issues such as employment. The Company’ s estimates of the possible ranges of losses in excess of any amounts accrued
are $0 to $6 million for patent infringement, $0 to $75 million for merchant customer matters and $0 to $4 million for other matters,
resulting in a total estimated range of possible losses of $0 to $85 million for all of the matters described above.
The estimated range of reasonably possible losses is based on currently available information and involves elements of
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udgment and significant uncertainties. As additional information becomes available and the resolution of the uncertainties becomes
more apparent, it is possible that actual losses may exceed even the high end of the estimated range.
Other
In the normal course of business, the Company is subject to claims and litigation, including indemnification obligations to
purchasers of former subsidiaries. Management of the Company believes that such matters will not have a material adverse effect on
the Company’ s results of operations, liquidity or financial condition.
As discussed in Note 3 of these Consolidated Financial Statements, during the year ended December 31, 2012, contingent
consideration was recorded related to the acquisition of Clover Network, Inc. The transaction called for cash consideration as well as a
series of contingent payments based on the achievement of specified sales targets. These contingent payments are classified as
purchase consideration if made to outside investors and compensation if made to current and future employees. As part of the
purchase price, the Company recorded a $20 million liability for the contingent consideration due to outside investors based upon the
net present value of the Company’ s estimate of the future payments.
Also during the year ended December 31, 2012, contingent consideration was recorded related to a small divestiture. The
transaction called for a series of contingent payments based on revenue over three years. As part of the sale price, the Company
recorded a $14 million asset for the contingent consideration due based upon the net present value of the Company’ s estimate of future
receipts from the buyer.
Note 12: First Data Corporation Stockholder’s Equity and Redeemable Noncontrolling Interests
Dividends
The Company’ s senior secured revolving credit facility, senior secured term loan facility, senior secured notes, senior second
lien notes, PIK toggle senior second lien notes, senior notes and senior subordinated notes contain restrictions on the Company’ s
ability to pay dividends. The restrictions are subject to numerous qualifications and exceptions, including an exception that allows the
Company to pay a dividend to repurchase, under certain circumstances, the equity of Parent held by employees, officers and directors
that were obtained in connection with the stock compensation plan. The Company paid cash dividends to its parent totaling $6.7
million during 2012, $0.2 million during 2011, and $14.9 million during 2010.
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