First Data 2008 Annual Report Download - page 136

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A summary of unaudited financial information for the merchant alliances and other affiliates accounted for under the equity method of accounting is as
follows (in millions):
Successor
December 31, 2008 2007
Total assets $ 1,647.6 $ 7,443.7
Total liabilities $ 1,595.1 $ 6,186.8
Successor Predecessor
Year ended
December 31,
2008
Period from
September 25, 2007
through
December 31, 2007
Period from
January 1, 2007
through
September 24, 2007
Year ended
December 31,
2006
Net operating revenues $ 1,495.9 $ 477.9 $ 1,193.8 $ 1,489.9
Operating expenses 826.2 252.6 667.5 877.6
Operating income 669.7 225.3 526.3 612.3
Net income $ 622.7 $ 216.9 $ 506.1 $ 580.0
FDC equity earnings $ 123.0 $ 46.8 $ 223.0 $ 283.1
The primary components of assets and liabilities are settlement-related accounts as described in Note 6.
The formation of a merchant joint venture alliance accounted for under the equity method of accounting generally involves the Company and/or a
financial institution contributing merchant contracts to the alliance and a cash payment from one owner to the other to achieve the desired ownership
percentages. The asset amounts reflected above are owned by the alliances and other equity method investees and do not include any of such payments made
by the Company. As discussed in Note 2, a portion of the purchase price related to the merger was allocated to the Company's investments in unconsolidated
joint ventures. The amount by which the total of the Company's investments in its joint ventures exceeded its proportionate share of the joint ventures' net
assets totaled $1,328.5 million and $3,190.8 million at December 31, 2008 and 2007, respectively. The decrease in this amount resulted from the termination
of the CPS alliance partially offset by the deconsolidation of the WFMS joint venture. The non-goodwill portion of this amount is considered an identifiable
intangible asset that is amortized accordingly. The estimated future amortization expense for these intangible assets as of December 31, 2008 is $71.3 million
in 2009, $66.2 million in 2010, $61.3 million in 2011, $55.8 million in 2012 and $49.8 million in 2013. These amounts assume that these alliances continue as
they currently exist. Much of the difference between FDC's proportionate share of the investee's net income and FDC's equity earnings noted above relates to
this amortization.
Note 6: Settlement Assets and Obligations
Settlement assets and obligations result from FDC's processing services and associated settlement activities, including settlement of payment
transactions. Settlement assets are generated principally from payment instrument sales (primarily official checks and financial institution money orders) and
merchant services transactions. Certain merchant settlement assets that relate to settlement obligations accrued by the Company are held by partner banks to
which the Company does not have legal ownership but has the right to use to satisfy the related settlement obligation. FDC records corresponding settlement
obligations for amounts payable to merchants and for payment instruments not yet presented for settlement. At December 31, 2008, the difference in the
aggregate amount of such assets and liabilities is primarily due to unrealized net investment gains and losses,
135