First Data 2012 Annual Report Download - page 115

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The primary components of assets and liabilities are settlement-related accounts similar to those described in Note 4 of these
Consolidated Financial Statements.
The formation of a merchant 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. The amount by which the total of the Company’ s
investments in affiliates exceeded its proportionate share of the investees’ net assets was approximately $1.3 billion and $1.4 billion at
December 31, 2012 and 2011, respectively.
The non-goodwill portion of this amount is considered an identifiable intangible asset that is amortized. The estimated future
amortization expense for these intangible assets as of December 31, 2012 is as follows:
These amounts assume that these alliances continue as they currently exist. Much of the difference between FDC’ s
proportionate share of the investees’ net income and FDC’ s equity earnings noted above relates to this amortization.
Note 19: Supplemental Guarantor Condensed Consolidating Financial Statements
As described in Note 8 of these Consolidated Financial Statements, FDC’ s 9.875% senior notes, 12.625% senior notes, 10.55%
senior notes and 11.25% senior subordinated notes are unconditionally guaranteed by substantially all existing and future, direct and
indirect, wholly-owned, domestic subsidiaries of FDC other than Integrated Payment Systems Inc. (“Guarantors”). None of the other
subsidiaries of FDC, either direct or indirect, guarantee the notes (“Non-Guarantors”). The Guarantors also unconditionally guarantee
the senior secured revolving credit facility, senior secured term loan facility, the 8.875% senior secured notes, the 7.375% senior
secured notes and the 6.75% senior secured notes, which rank senior in right of payment to all existing and future unsecured and
second lien indebtedness of FDC’ s guarantor subsidiaries to the extent of the value of the collateral. The Guarantors further
unconditionally guarantee the 8.25% senior second lien notes and 8.75%/10.00% PIK toggle senior second lien notes which rank
senior in right of payment to all existing and future unsecured indebtedness of FDC’ s guarantor subsidiaries to the extent of the value
of the collateral. The 9.875% senior note, 12.625% senior note, 10.55% senior note and 11.25% senior subordinated note guarantees
are unsecured and rank equally in right of payment with all existing and future senior indebtedness of the guarantor subsidiaries but
senior in right of payment to all existing and future subordinated indebtedness of FDC’ s guarantor subsidiaries. The 11.25% senior
subordinated note guarantees are unsecured and rank equally in right of payment with all existing and future senior subordinated
indebtedness of the guarantor subsidiaries.
During the second quarter of 2011, the Company began allocating certain general and administrative expenses of the parent
company to its subsidiaries. This allocation was inadvertently not reflected in the Company’ s previously reported supplemental
guarantor condensed consolidating financial statements. In the second quarter of 2010, the Company reorganized the ownership
structure of two entities for tax purposes. The reorganization did not have any impact to the Company’ s consolidated financial
statements, however, the impact of the reorganization was not appropriately reflected in the Company’ s previously reported
supplemental guarantor condensed consolidating financial statements. The Company does not believe these errors were material. In
addition to the items just described, the Company corrected certain other immaterial errors. The adjustments are limited to the
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Year ended December 31,
(in millions) 2012 2011 2010
N
et operating revenues $1,278.4 $1,114.4 $999.1
Operating expenses 630.2 577.4 520.6
Operating income $648.2 $537.0 $478.5
N
et income $ 639.4 $ 509.8 $ 455.6
FDC equity earnings $158.2 $153.4 $117.3
Year ended December 31,
(in millions) Amount
2013 $78.4
2014 62.2
2015 57.1
2016 52.3
2017 49.1
Thereafte
r
48.2