Discover 2009 Annual Report Download - page 125

Depreciation expense, including amortization of assets recorded under capital leases, was $72.7 million, $75.8 million
and $81.6 million for the years ended November 30, 2009, 2008 and 2007, respectively. This includes depreciation
expense associated with held-for-sale property of $0.8 million for each of these years. Amortization expense on
capitalized software was $24.9 million, $24.7 million and $27.1 million for the years ended November 30, 2009, 2008
and 2007, respectively.
On November 12, 2009, the Company announced plans to close one of its processing centers in 2010. As such, this
property was classified as held for sale, and the Company recorded a loss of $5.6 million, which is included in other
expense in the consolidated statement of income, to reduce the recorded value of the property to its fair value less cost to
sell as of that date.
8. Business Combinations
On June 30, 2008, the Company purchased Diners Club International for $168 million in cash from Citibank, N.A.
The Company acquired the Diners Club brand, trademarks, employees, and license agreements. Diners Club currently
has 79 network licensees, which are generally financial institutions, that issue Diners Club branded credit cards and/or
provide card acceptance services for a network consisting of merchant and cash access locations in over 185 countries
and territories. Diners Club does not issue cards or extend consumer credit in international markets. Diners Club is
included in the Company’s Payment Services segment, formerly referred to as the Third-Party Payments segment. Since
the acquisition date, the results of operations and cash flows of Diners Club have been included in the Company’s
consolidated results of operations and cash flows, although no pro forma data is provided as the impact of the Diners
Club acquisition was not significant to the Company’s consolidated results of operations or cash flows.
The Company allocated $20.4 million of the purchase price to tangible net assets acquired based on their fair values at
June 30, 2008 and $151.0 million to identified intangible assets. These intangible assets consist of the international
transaction processing rights and brand-related intangibles. International transaction processing rights relate to the
revenue stream Diners Club receives for cross border processing activities related to the acceptance of Diners Club cards.
Trade name intangibles relate to the licensing of the use of the Diners Club name and brand to various financial
institutions around the world which then allows participants to issue Diners Club branded charge card products. These
intangible assets are deemed to have indefinite useful lives and are therefore not subject to amortization.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the Diners
Club acquisition (dollars in thousands):
At
June 30,
2008
Trade name intangibles............................................................................................................................................................................ $127,980
International transaction processing rights................................................................................................................................................... 23,047
Total intangible assets .......................................................................................................................................................................... 151,027
Other assets........................................................................................................................................................................................... 91,674
Total assets acquired............................................................................................................................................................................ 242,701
Total liabilities assumed ........................................................................................................................................................................ 71,322
Net assets acquired .......................................................................................................................................................................... $171,379
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