First Data 2014 Annual Report Download - page 147

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
(A Joint Venture)
Financial Statements
December 31, 2014 and 2013
(Dollars in thousands, unless otherwise noted)
 
Wells Fargo Merchant Services, LLC (the “Company”) is a joint venture between First Data Merchant Services Corporation (“FDMS”) and Wells
Fargo Bank, N.A. (“Wells Fargo”). FDMS is a wholly-owned subsidiary of First Data Corporation (“FDC”), which is owned by an entity controlled by
an affiliate of Kohlberg Kravis Roberts & Co. (“KKR”). The Company was established pursuant to the terms of an alliance agreement (the
“Membership Agreement”) dated November 1, 1993, as amended and a Limited Liability Company Agreement dated September 1, 1997, as amended.
The Membership Agreement will terminate on December 31, 2019. FDMS and Wells Fargo are here-in-after referred to, individually, as a “Member”
or, collectively, as “Members”.
The Company is engaged in processing and funds transfer related to the authorization, processing, and settlement of credit and debit card transactions
for merchants. A majority of its revenue is based on the dollar amount of transactions processed. The Company provides services to merchant
customers within all 50 states, with a significant concentration in California. The Company is operationally dependent on both FDMS and Wells
Fargo. The Company’s primary operations are conducted through FDMS. The Company’s funding and settlement are primarily conducted through
Wells Fargo. The majority of the bank accounts used for daily operations are with Wells Fargo.
 
 
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from the estimates. Significant items subject to such estimates and assumptions include the reserve for merchant credit losses.
 
The Company has a fiduciary responsibility to its merchant customers as it relates to the transfer of funds from a cardholder’s issuing bank, via
the VISA, MasterCard, or Discover card associations (the “Card Associations”) and the Accel, AFFN, Alaska Option, Credit Union 24, Interlink,
Jeanie, Maestro, NYCE, Pulse, TYME, Shazam, Star, Cash Station, Honor and MAC Debit Networks (the “Debit Networks”). The Company
records such amounts due from the issuing banks, Card Associations and Debit Networks within the balance sheet caption settlement assets
while the related liability, settlement liabilities, represents amounts due to merchants. Pursuant to the Card Associations’ and Debit Networks’
rules, such fiduciary funds are not available to support the operations of the Company.
147