First Data 2009 Annual Report Download - page 230

Chase Paymentech
NOTES TO COMBINED FINANCIAL STATEMENTS
For the years ended December 31, 2007 and 2006 and
the year ended December 31, 2005 (unaudited) (Continued)
With respect to FDC’s ownership interest in Chase Paymentech, the Company met the significant subsidiary
test provided in SEC Regulation S-X Rule 1-02(w), in that FDC’s equity earnings in the Company exceeded 20%
of FDC’s consolidated income from continuing operations before income taxes for the period from January 1,
2007 through September 24, 2007 (the predecessor period), and for the year ended December 31, 2006. In
accordance with SEC Regulation S-X Rule 3-09, these combined financial statements are filed with FDC’s
Form 10-K as part of Item 15(c). The Company did not meet the significant subsidiary test for the year ended
December 31, 2005, as FDC’s equity earnings in the Company did not exceed the 20% threshold in SEC
Regulation S-X Rule 1- 02(w). While the combined financial statements present financial information for the
year ended December 31, 2005, this information is unaudited because the Company was not audited in its
combined form for that period.
Holding Companies
FDC Offer Corp. and its subsidiaries, Paymentech, Inc. and Paymentech Management Resources, Inc.
(PMRI), are primarily holding companies whose main source of income results from their ownership interests in
the Company’s U.S. operations. Paymentech Employee Resources LLC is the employer of substantially all
employees associated with the U.S. operations. The accompanying combined financial statements include the
financial position, results of operations, changes in owners’ equity and cash flows for these entities for all periods
presented.
Chase Merchant Services, LLC (CMS) is a joint venture formed by FDC and JPMorgan Chase in 1997. As
discussed below, effective October 1, 2005, all of the assets and liabilities of CMS were transferred to the
Company’s U.S. operations in exchange for an ownership interest in Chase Paymentech Solutions, LLC.
Subsequent to the October 1, 2005 transaction, CMS’ primary source of income results from its ownership
interests in the Company’s U.S. operations. The accompanying combined financial statements include the
financial position, results of operations, changes in owners’ equity and cash flows for CMS for all periods
subsequent to October 1, 2005.
U.S. Operations
Chase Paymentech Solutions, LLC (Chase Paymentech—U.S. or the Company’s U.S. operations), formerly
Banc One Payment Services, L.L.C. (BOPS), and its subsidiaries comprise the Company’s U.S.-based
operations. Chase Paymentech—U.S. is a joint venture beneficially owned by FDC and JPMorgan Chase,
through direct investments as well as through investments in FDC Offer Corp. and CMS. Each of these members
in the joint venture hold membership interests which are of a single class and have substantially the same rights
and privileges.
BOPS was originally formed as a joint venture between FDC and Bank One in 1996. As a result of
JPMorgan Chase’s merger with Bank One in July 2004, FDC and JPMorgan Chase beneficially owned both
BOPS and CMS, which while commonly owned, were controlled by different management committees and were
competitors in the marketplace. To benefit from the complementary technological and management knowledge,
as well as the market presence of each of these joint ventures, on October 1, 2005, through a series of
transactions, all of the assets and liabilities of CMS were transferred to BOPS, and the joint venture was
subsequently renamed Chase Paymentech Solutions, LLC.
The results of the Company’s U.S. operations and cash flows included in the accompanying combined
financial statements for the nine month period ended on September 30, 2005 represent the historical results of
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