First Data 2014 Annual Report Download - page 76

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The Company has $43 million in outstanding letters of credit as of December 31, 2014, all of which were issued under the Company’s senior secured
revolving credit facility and expire prior to December 10, 2015 with a one-year renewal option. The letters of credit are held in connection with lease
arrangements, bankcard association agreements, and other security agreements. The Company expects to renew most of the letters of credit prior to
expiration.
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The Company is involved in various legal proceedings. Accruals have been made with respect to these matters, where appropriate, which are reflected in the
Company’s Consolidated Financial Statements. The Company may enter into discussions regarding settlement of these matters, and may enter into settlement
agreements, if it believes settlement is in the best interest of the Company. The matters discussed below, if decided adversely to or settled by the Company,
individually or in the aggregate, may result in liability material to the Company’s financial condition and/or results of operations.
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 we are 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 $30 million for patent infringement, $0 to $60 million for merchant customer matters and $0 to $5 million for other matters, resulting in a
total estimated range of possible losses of $0 to $95 million for all of the matters described above.
The estimated range of reasonably possible losses is based on information currently available and involves elements of judgment 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.
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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.
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Over the past three years, the Company completed three acquisitions in which contingent consideration was recorded. The transactions called for cash
consideration as well as contingent payments for achievement of certain milestones. As part of the purchase price, the Company recorded a $29 million
liability for the contingent consideration. This fair value measurement represents a Level 3 measurement as it is based on significant inputs not observable in
the market. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date. The primary assumption is
the estimated number of merchant locations that will be using the software or technology in the next three years. Refer to Note 3 "Acquisitions and
Dispositions" of these Consolidated Financial Statements for additional information regarding these acquisitions.
The following table provides the roll forward of contingent consideration measured at Level 3:
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