First Data 2008 Annual Report Download - page 135

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The terms of certain of the Company's acquisition agreements provide for additional consideration to be paid if the acquired entity's results of
operations exceed certain targeted levels or if certain other conditions are met, as well as other payments or receipts of cash related to certain events that
transpired subsequent to the acquisition of certain companies. Targeted levels are generally set substantially above the historical experience of the acquired
entity at the time of acquisition. Such additional consideration is paid in cash and is recorded when payable as additional purchase price. Additional
consideration was paid totaling $35.6 million in 2008, $0.5 million in the successor period from September 25, 2007 through December 31, 2007, $50.0
million in the predecessor period from January 1, 2007 through September 24, 2007 and $51.1 million in 2006. The maximum amount of remaining estimable
contingent consideration consists of potential cash payments of $14.7 million, all of which was payable and accrued at December 31, 2008.
Note 5: Investments in Affiliates
Operating results include the Company's proportionate share of income from affiliates, which consist of unconsolidated investments and joint ventures
accounted for under the equity method of accounting. The most significant of these affiliates are related to the Company's merchant bank alliance program.
A merchant bank alliance, as it pertains to investments accounted for under the equity method, is a joint venture between FDC and a financial
institution that combines the processing capabilities and management expertise of the Company with the visibility and distribution channel of the bank. The
joint ventures acquire credit and debit card transactions from merchants. The Company provides processing and other services to the joint ventures and
charges fees to the joint venture primarily based on contractual pricing. These fees have been separately identified on the face of the Consolidated Statements
of Operations.
At December 31, 2008, there were ten affiliates accounted for under the equity method of accounting, comprised of five merchant alliances and five
strategic investments in companies in related markets.
On November 1, 2008, the Company and JPMorgan Chase terminated their merchant alliance joint venture, CPS, which was the Company's largest
merchant alliance. Upon termination of the alliance, the Company received a 49% ownership interest in Merchant Link which is being accounted for under the
equity method. Refer to Note 4 for more information regarding the termination of the CPS alliance joint venture. Operating results of the CPS alliance joint
venture for 2008 are included in the financial information presented below through October 31, 2008. Total assets and liabilities for 2008 are not included as a
result of the termination.
On December 31, 2008, the Company and Wells Fargo & Company ("WFB") extended their merchant alliance joint venture, Wells Fargo Merchant
Services, LLC ("WFMS") for five years beyond its previously contracted termination date through December 31, 2014. In connection with the agreement to
extend WFMS, FDC sold 12.5% of the membership interests to WFB. As a result of the transaction, FDC deconsolidated the WFMS balance sheet as of
December 31, 2008 and is reflecting its remaining 40% ownership interest as an equity method investment. Refer to Note 4 for more information regarding
this transaction. Operating results of WFMS are not included in the financial information presented below as the alliance was fully consolidated throughout
2008. Because FDC deconsolidated the WFMS balance sheet as of December 31, 2008, the total assets and liabilities of the alliance as of that date are
included below.
The Company sold its investment in Early Warning Services and purchased 50% of EUFISERV inter-bank processing business (subsequently renamed
Trionis) in the third quarter of 2008. In the fourth quarter of 2008, the Company sold its interest in an international entity which had been accounted for under
the equity method.
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