First Data 2014 Annual Report Download - page 64

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


In October 2013, the Company acquired Perka Inc., a provider of a mobile marketing and consumer loyalty solution. The acquisition is reported as part of the
Merchant Solutions segment. Refer to Note 9 "Commitments and Contingencies" of these Consolidated Financial Statements for additional information
regarding the liability for contingent consideration.

In April 2012, the Company acquired the remaining 30% noncontrolling interest in Omnipay, which was paid for in approximately two equal installments
during April 2012 and April 2013.
In December 2012, the Company acquired 100% of Clover Network, Inc., a provider of payment network services for total consideration of $54 million, net
of cash acquired. The transaction consisted of net cash consideration of $34 million as well as a series of contingent payments based on the achievement of
specified sales targets. These contingent payments are classified as purchase consideration if made to outside investors and compensation if made to current
and future employees. As part of the purchase price, the Company recorded a $20 million liability for the contingent consideration due to outside investors
based upon the net present value of the Company’s estimate of the future payments. The acquisition is reported as part of the Merchant Solutions segment.
Refer to Note 9 "Commitments and Contingencies" of these Consolidated Financial Statements for additional information regarding the liability for
contingent consideration.

Settlement assets and obligations result from the Company’s processing services and associated settlement activities, including settlement of payment
transactions. Settlement assets are generated principally from merchant services transactions. Certain merchant settlement assets that relate to settlement
obligations accrued by us 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. The Company records corresponding settlement obligations for amounts payable to merchants and for payment instruments not yet
presented for settlement. The difference in the aggregate amount of such assets and liabilities is primarily due to unrealized net investment gains and losses,
which are reported as OCI in equity.
The principal components of the Company’s settlement assets and obligations are as follows:






Cash and cash equivalents
$ 1,419.3
$ 1,576.7
Investment securities
16.5
71.2
Due from card associations and bank partners
5,220.1
5,102.5
Due from merchants
899.0
791.4
7,554.9
7,541.8

Investment securities
3.5
15.2
$ 7,558.4
$ 7,557.0


Payment instruments outstanding
$ 82.4
$ 164.1
Card settlements due to merchants
7,474.9
7,389.3
$ 7,557.3
$ 7,553.4
The changes in settlement assets and obligations are presented on a net basis within operating activities in the Consolidated Statements of Cash Flows.
However, because the changes in the settlement assets balance exactly offset changes in settlement obligations, the activity nets to zero.
64