First Data 2007 Annual Report Download - page 210

Chase Paymentech
NOTES TO COMBINED FINANCIAL STATEMENTS – CONTINUED
For the years ended December 31, 2007 and 2006 and
the year ended December 31, 2005 (unaudited)
NOTE 16 – SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow disclosures and non-cash financing activities for the years ended December 31, 2007, 2006, and 2005 are as follows (in thousands):
2007 2006 2005
Supplemental cash flow information:
Cash paid for income taxes $ 72,315 $ 58,195 $ 51,780
Cash paid for interest 15,693 17,687 4,340
Supplemental non-cash financing activities:
Capital contribution for services paid on the Company's behalf $ — $ — $ 30,434
NOTE 17 – RELATED PARTIES
The Company has multiple relationships with JPMorgan Chase and FDC as described below.
JPMorgan Chase
JPMorgan Chase serves as the Company's primary bank and provides depository accounts, as well as investment, treasury management, and hedging services.
Amounts related to these services are included in interest and other income, interest expense and operating expenses on the combined statements of income
and comprehensive income.
Pursuant to a referral agreement, JPMorgan Chase is obligated to refer customers for credit and debit card processing services to the Company. Fees related to
these referrals offset revenue on the combined statements of income and comprehensive income. The payable related to these services is included in current
liabilities on the combined balance sheets.
JPMorgan Chase has agreed to indemnify the Company against certain losses, if any, which would result from the provision of bankcard processing services
to certain merchants. Pursuant to these indemnification agreements, the Company pays JPMorgan Chase an indemnification fee which is included in operating
expenses on the combined statements of income and comprehensive income.
In addition to referral and indemnification agreements, the Company has entered into various contracts with JPMorgan Chase relating to transaction services.
Under these contracts both the Company and JPMorgan Chase perform services for each other, such as merchant and private label transaction services,
statement preparation, development and support services, as well as gateway services, sponsorship for VISA, MasterCard and other card brands and debit
networks, and other services. The related revenue and fees for these services are included in revenue and operating expenses, respectively, on the combined
statements of income and comprehensive income. The related receivable and amounts accrued for these services are included in accounts receivable and
current liabilities, respectively, on the combined balance sheets.
JPMorgan Chase leases office space to the Company. Rent associated with these leases is included in operating expenses on the combined statements of
income and comprehensive income.
FDC
The Company has entered into agreements with various subsidiaries and affiliates of FDC, for the transaction servicing of some of the Company's U.S. and
international merchant transactions, as well as the provision of related services, such as chargeback management, fraud monitoring, collections, merchant
settlement, payer authentication, multi-currency, customer service, and MasterCard sponsorship necessary to process Canadian MasterCard transactions. The
negotiation and execution of revised U.S. and Canadian agreements covering certain of the above described services are pending. Fees related to these
services are included in operating expenses, and assessments offset revenue, on the combined statements of income and comprehensive income. The related
payables are included in payables to related parties, other accrued expenses and accrued assessments on the combined balance sheets.
The Company utilizes the services of TASQ Technology, Inc. (TASQ), a wholly-owned subsidiary of FDC, for the deployment of card processing point-of-
sale equipment and related software at customer locations in the U.S. The Company also purchases supplies from TASQ for distribution to its U.S. and
Canadian merchants. Amounts accrued for these services are included in current liabilities on the combined balance sheets. Expenses related to these services
and supplies offset revenue on the sale of point-of-sale equipment and are included in revenue on the combined statements of income and comprehensive
income.
Pursuant to an agreement with a debit network owned by FDC, the Company processes debit card transactions via that debit network and is required to pay
certain debit network fees. Fees paid related to this agreement are included in operating expenses on the combined statements of income and comprehensive
income. Fees accrued related to these services are included in other accrued expenses on the combined balance sheets.
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