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EX-10.1 - TAX RECEIVABLE AGREEMENT ADDENDUM - Worldpay, Inc.vntvex-101traaddendum.htm
EX-31.1 - CERTIFICATION OF CEO - Worldpay, Inc.vntvex-311x2015630.htm
EX-31.2 - CERTIFICATION OF CFO - Worldpay, Inc.vntvex-312x2015630.htm
EX-32 - CERTIFICATION OF CEO & CFO - Worldpay, Inc.vntvex-32x2015630.htm

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 10-Q
 
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
Commission File Number: 001-35462 
 
 
 
Vantiv, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
26-4532998
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
8500 Governor’s Hill Drive
Symmes Township, OH 45249
(Address of principal executive offices)
(513) 900-5250
(Registrant's telephone number, including area code)
 
 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer x
 
Accelerated filer o
Non-accelerated filer o
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o  No x
As of June 30, 2015, there were 146,178,993 shares of the registrant’s Class A common stock outstanding and 43,042,826 shares of the registrant’s Class B common stock outstanding.

 
 
 
 
 
 
 
 
 
 



VANTIV, INC.
FORM 10-Q
 
For the Quarterly Period Ended June 30, 2015
 
TABLE OF CONTENTS
 
 
Page
 
 

2
 
 
 


NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q, including the sections entitled "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors," contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  All statements other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, our objectives for future operations, and any statements of a general economic or industry specific nature, are forward-looking statements.  You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "will," "continue," "could," "should," "can have," "likely," or the negative or plural of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe, based on information currently available to our management, may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs.  These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the "Risk Factors" section of our most recent Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
 
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations and assumptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We undertake no obligation to publicly update any forward-looking statement after the date of this report, whether as a result of new information, future developments or otherwise, or to conform these statements to actual results or revised expectations, except as may be required by law.


3
 
 
 


PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Vantiv, Inc.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except share data)
 


Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
Revenue:
 
 
 
 
 

 
 

External customers
$
765,564

 
$
588,109

 
$
1,451,940

 
$
1,106,421

Related party revenues
20,431

 
20,622

 
39,666

 
39,888

Total revenue
785,995

 
608,731

 
1,491,606

 
1,146,309

Network fees and other costs
362,349

 
277,392

 
693,495

 
526,438

Sales and marketing
122,925

 
90,507

 
238,980

 
168,951

Other operating costs
76,551

 
56,754

 
145,290

 
117,123

General and administrative
47,060

 
48,552

 
94,903

 
81,158

Depreciation and amortization
67,659

 
89,041

 
135,461

 
138,887

Income from operations
109,451

 
46,485

 
183,477

 
113,752

Interest expense—net
(25,714
)
 
(13,496
)
 
(51,725
)
 
(24,050
)
Non-operating expenses
(6,725
)
 
(27,656
)
 
(15,491
)
 
(27,656
)
Income before applicable income taxes
77,012

 
5,333

 
116,261

 
62,046

Income tax expense
24,319

 
2,020

 
36,572

 
17,642

Net income
52,693

 
3,313

 
79,689

 
44,404

Less: Net income attributable to non-controlling interests
(16,157
)
 
(4,722
)
 
(24,164
)
 
(17,677
)
Net income (loss) attributable to Vantiv, Inc.
$
36,536

 
$
(1,409
)
 
$
55,525

 
$
26,727

Net income (loss) per share attributable to Vantiv, Inc. Class A common stock:
 

 
 

 
 
 
 
Basic
$
0.25

 
$
(0.01
)
 
$
0.38

 
$
0.19

Diluted
$
0.24

 
$
(0.01
)
 
$
0.37

 
$
0.18

Shares used in computing net income (loss) per share of Class A common stock:
 

 
 

 
 

 
 

Basic
145,566,899

 
140,451,466

 
145,051,664

 
139,346,292

Diluted
201,831,467

 
140,451,466

 
201,276,166

 
150,831,855

 
See Notes to Unaudited Consolidated Financial Statements.


4
 
 
 


Vantiv, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited
(In thousands)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
52,693

 
$
3,313

 
$
79,689

 
$
44,404

Other comprehensive income (loss), net of tax:
 
 
 
 
 

 
 

Loss on cash flow hedges and other
(330
)
 
(4,166
)
 
(7,700
)
 
(5,819
)
Comprehensive income (loss)
52,363

 
(853
)
 
71,989

 
38,585

Less: Comprehensive income attributable to non-controlling interests
(16,051
)
 
(3,201
)
 
(21,683
)
 
(15,580
)
Comprehensive income (loss) attributable to Vantiv, Inc.
$
36,312

 
$
(4,054
)
 
$
50,306

 
$
23,005

 
See Notes to Unaudited Consolidated Financial Statements.



5
 
 
 


Vantiv, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited
(In thousands, except share data) 
 
June 30,
2015
 
December 31,
2014
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
400,782

 
$
411,568

Accounts receivable—net
576,568

 
607,674

Related party receivable
6,922

 
6,164

Settlement assets
115,626

 
135,422

Prepaid expenses
25,353

 
26,906

Other
31,805

 
27,002

Total current assets
1,157,056

 
1,214,736

  Customer incentives
49,074

 
39,210

  Property, equipment and software—net
305,853

 
281,715

  Intangible assets—net
959,937

 
1,034,692

  Goodwill
3,366,528

 
3,291,366

  Deferred taxes
422,094

 
429,623

  Other assets
39,588

 
44,741

Total assets
$
6,300,130

 
$
6,336,083

Liabilities and equity
 

 
 

Current liabilities:
 

 
 

Accounts payable and accrued expenses
$
305,536

 
$
299,771

Related party payable
2,630

 
2,035

Settlement obligations
522,626

 
501,042

Current portion of note payable to related party
10,353

 
10,353

Current portion of note payable
106,148

 
106,148

Current portion of tax receivable agreement obligations to related parties
33,650

 
22,789

Current portion of tax receivable agreement obligations
19,170

 

Deferred income
8,835

 
5,480

Current maturities of capital lease obligations
17,262

 
8,158

Other
9,991

 
7,557

Total current liabilities
1,036,201

 
963,333

Long-term liabilities:
 

 
 

Note payable to related party
186,345

 
191,521

Note payable
2,834,135

 
3,085,716

Tax receivable agreement obligations to related parties
563,607

 
597,273

Tax receivable agreement obligations
201,630

 
152,420

Capital lease obligations
36,297

 
14,779

Deferred taxes
9,969

 
24,380

Other
38,269

 
6,075

Total long-term liabilities
3,870,252

 
4,072,164

Total liabilities
4,906,453

 
5,035,497

Commitments and contingencies (See Note 7 - Commitments, Contingencies and Guarantees)


 


Equity:
 

 
 

Class A common stock, $0.00001 par value; 890,000,000 shares authorized; 146,178,993 shares outstanding at June 30, 2015; 145,455,008 shares outstanding at December 31, 2014
1

 
1

Class B common stock, no par value; 100,000,000 shares authorized; 43,042,826 shares issued and outstanding at June 30, 2015 and December 31, 2014

 

Preferred stock, $0.00001 par value; 10,000,000 shares authorized; no shares issued and outstanding

 

Paid-in capital
668,378

 
629,353

Retained earnings
383,883

 
328,358

Accumulated other comprehensive loss
(8,987
)
 
(3,768
)
Treasury stock, at cost; 2,579,154 shares at June 30, 2015 and 2,173,793 shares at December 31, 2014
(66,798
)
 
(50,931
)
Total Vantiv, Inc. equity
976,477

 
903,013

Non-controlling interests
417,200

 
397,573

Total equity
1,393,677

 
1,300,586

Total liabilities and equity
$
6,300,130

 
$
6,336,083

 See Notes to Unaudited Consolidated Financial Statements.

6
 
 
 


Vantiv, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
 
Six Months Ended
June 30,
 
2015
 
2014
Operating Activities:
 
 
 
   Net income
$
79,689

 
$
44,404

   Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
       Depreciation and amortization expense
135,461

 
104,620

       Write-off of intangible asset

 
34,267

       Amortization of customer incentives
8,183

 
4,883

       Amortization and write-off of debt issuance costs
5,196

 
28,878

       Share-based compensation expense
16,720

 
20,044

       Excess tax benefit from share-based compensation
(13,753
)
 
(9,299
)
       Tax receivable agreements non-cash items
13,733

 
1,500

       Change in operating assets and liabilities:
 

 
 

           Accounts receivable and related party receivable
30,348

 
(11,865
)
           Net settlement assets and obligations
41,380

 
28,423

           Customer incentives
(13,342
)
 
(9,850
)
           Prepaid and other assets
(2,163
)
 
(9,724
)
           Accounts payable and accrued expenses
46,748

 
30,179

           Payable to related party
595

 
(310
)
           Other liabilities
3,582

 
310

              Net cash provided by operating activities
352,377

 
256,460

Investing Activities:
 
 
 
   Purchases of property and equipment
(42,013
)
 
(48,850
)
   Acquisition of customer portfolios and related assets
(37,154
)
 
(27,068
)
   Purchase of investments

 
(7,487
)
   Cash used in acquisitions, net of cash acquired

 
(1,658,694
)
              Net cash used in investing activities
(79,167
)
 
(1,742,099
)
Financing Activities:
 
 
 
   Proceeds from issuance of long-term debt

 
3,443,000

   Repayment of debt and capital lease obligations
(262,946
)
 
(1,806,241
)
   Payment of debt issuance cost

 
(38,059
)
   Proceeds from exercise of Class A common stock options
9,628

 
321

   Repurchase of Class A common stock

 
(34,366
)
   Repurchase of Class A common stock (to satisfy tax withholding obligations)
(15,867
)
 
(14,978
)
   Payments under tax receivable agreements
(22,805
)
 
(8,639
)
   Excess tax benefit from share-based compensation
13,753

 
9,299

   Distributions to non-controlling interests
(3,132
)
 
(5,470
)
   Decrease in cash overdraft
(2,627
)
 

              Net cash (used in) provided by financing activities
(283,996
)
 
1,544,867

Net (decrease) increase in cash and cash equivalents
(10,786
)
 
59,228

Cash and cash equivalents—Beginning of period
411,568

 
171,427

Cash and cash equivalents—End of period
$
400,782

 
$
230,655

Cash Payments:
 
 
 
   Interest
$
48,502

 
$
17,445

   Income taxes
5,054

 
17,888

Non-cash Items:
 
 
 
   Issuance of tax receivable agreements to related parties
$

 
$
109,400

   Contingent consideration for issuance of tax receivable agreement

 
137,120


 See Notes to Unaudited Consolidated Financial Statements.

7
 
 
 


Vantiv, Inc.
CONSOLIDATED STATEMENT OF EQUITY
Unaudited
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
Other
 
Non-
 
Total
 
Class A
 
Class B
 
Treasury Stock
 
Paid-in
 
Retained
 
Comprehensive
 
Controlling
 
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
Earnings
 
Loss
 
Interests
Beginning Balance, January 1, 2015
$
1,300,586

 
145,455

 
$
1

 
43,043

 
$

 
2,174

 
$
(50,931
)
 
$
629,353

 
$
328,358

 
$
(3,768
)
 
$
397,573

Net income
79,689

 

 

 

 

 

 

 

 
55,525

 

 
24,164

Issuance of Class A common stock under employee stock plans, net of forfeitures
9,628

 
1,129

 

 

 

 

 

 
9,628

 

 

 

Tax benefit from employee share-based compensation
13,753

 

 

 

 

 

 

 
13,753

 

 

 

Repurchase of Class A common stock (to satisfy tax withholding obligation)
(15,867
)
 
(405
)
 

 

 

 
405

 
(15,867
)
 

 

 

 

Unrealized loss on hedging activities and other, net of tax
(7,700
)
 

 

 

 

 

 

 

 

 
(5,219
)
 
(2,481
)
Distributions to non-controlling interests
(3,132
)
 

 

 

 

 

 

 

 

 

 
(3,132
)
Share-based compensation
16,720

 

 

 

 

 

 

 
12,912

 

 

 
3,808

Reallocation of non-controlling interests of Vantiv Holding due to change in ownership

 

 

 

 

 

 

 
2,732

 

 

 
(2,732
)
Ending Balance, June 30, 2015
$
1,393,677

 
146,179

 
$
1

 
43,043

 
$

 
2,579

 
$
(66,798
)
 
$
668,378

 
$
383,883

 
$
(8,987
)
 
$
417,200

 
See Notes to Unaudited Consolidated Financial Statements.



8
 
 
 


Vantiv, Inc.
CONSOLIDATED STATEMENT OF EQUITY
Unaudited
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
Other
 
Non-
 
Total
 
Class A
 
Class B
 
Treasury Stock
 
Paid-in
 
Retained
 
Comprehensive
 
Controlling
 
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
Earnings
 
Income (Loss)
 
Interests
Beginning Balance, January 1, 2014
$
1,176,322

 
141,759

 
$
1

 
48,823

 
$

 
1,607

 
$
(33,130
)
 
$
597,730

 
$
203,066

 
$
264

 
$
408,391

Net income
44,404

 

 

 

 

 

 

 

 
26,727

 

 
17,677

Issuance of Class A common stock under employee stock plans, net of forfeitures
321

 
44

 

 

 

 

 

 
321

 

 

 

Tax benefit from employee share-based compensation
9,299

 

 

 

 

 

 

 
9,299

 

 

 

Repurchase of Class A common stock (to satisfy tax withholding obligation)
(14,978
)
 
(472
)
 

 

 

 
472

 
(14,978
)
 

 

 

 

Issuance of Class A common stock and cancellation of Class B common stock in connection with secondary offering

 
5,780

 

 
(5,780
)
 

 

 

 

 

 

 

Repurchase of Class A common stock
(34,366
)
 
(1,109
)
 

 

 

 

 

 
(34,366
)
 

 

 

Issuance of tax receivable agreements
(17,400
)
 

 

 

 

 

 

 
(17,400
)
 

 

 

Unrealized loss on hedging activities and other, net of tax
(5,819
)
 

 

 

 

 

 

 

 

 
(3,722
)
 
(2,097
)
Formation of joint venture
18,839

 

 

 

 

 

 

 

 

 

 
18,839

Distribution to non-controlling interests
(5,470
)
 

 

 

 

 

 

 

 

 

 
(5,470
)
Share-based compensation
20,044

 

 

 

 

 

 

 
15,017

 

 

 
5,027

Reallocation of non-controlling interests of Vantiv Holding due to change in ownership

 

 

 

 

 

 

 
52,834

 

 

 
(52,834
)
Ending Balance, June 30, 2014
$
1,191,196

 
146,002

 
$
1

 
43,043

 
$

 
2,079

 
$
(48,108
)
 
$
623,435

 
$
229,793

 
$
(3,458
)
 
$
389,533

 
See Notes to Unaudited Consolidated Financial Statements.



9
 
 
 


Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Description of Business
 
Vantiv, Inc., a Delaware corporation, is a holding company that conducts its operations through its majority-owned subsidiary, Vantiv Holding, LLC ("Vantiv Holding"). Vantiv, Inc. and Vantiv Holding are referred to collectively as the "Company," "Vantiv," "we," "us" or "our," unless the context requires otherwise.
 
The Company provides electronic payment processing services to merchants and financial institutions throughout the United States of America. The Company markets its services through diverse distribution channels, including national, regional and mid-market sales teams, third-party reseller clients and a telesales operation. The Company also has relationships with a broad range of referral partners that include merchant banks, independent software vendors ("ISVs"), value-added resellers ("VARs"), payment facilitators, independent sales organizations ("ISOs") and trade associations as well as arrangements with core processors.
 
Segments
 
The Company’s segments consist of the Merchant Services segment and the Financial Institution Services segment. The Company’s Chief Executive Officer ("CEO"), who is the chief operating decision maker ("CODM"), evaluates the performance and allocates resources based on the operating results of each segment. Below is a summary of each segment:
 
Merchant Services—Provides merchant acquiring and payment processing services to large national merchants, regional and small-to-mid sized businesses. Merchant services are sold to small to large businesses through diverse distribution channels. Merchant Services includes all aspects of card processing including authorization and settlement, customer service, chargeback and retrieval processing and interchange management.
 
Financial Institution Services—Provides card issuer processing, payment network processing, fraud protection, card production, prepaid program management, automated teller machine ("ATM") driving and network gateway and switching services that utilize the Company’s proprietary Jeanie debit payment network to a diverse set of financial institutions, including regional banks, community banks, credit unions and regional personal identification number ("PIN") networks. Financial Institution Services also provides statement production, collections and inbound/outbound call centers for credit transactions, and other services such as credit card portfolio analytics, program strategy and support, fraud and security management and chargeback and dispute services.

Basis of Presentation and Consolidation
 
The accompanying consolidated financial statements include those of Vantiv, Inc. and all subsidiaries thereof, including its majority-owned subsidiary, Vantiv Holding, LLC. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and should be read in connection with the Company's 2014 audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K. The accompanying consolidated financial statements are unaudited; however, in the opinion of management they include all normal and recurring adjustments necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. All intercompany balances and transactions have been eliminated.
 
As of June 30, 2015, Vantiv, Inc. and Fifth Third Bank ("Fifth Third") owned interests in Vantiv Holding of 77.25% and 22.75%, respectively (see Note 6 - Controlling and Non-controlling Interests for changes in non-controlling interests).
 
The Company accounts for non-controlling interests in accordance with Accounting Standards Codification ("ASC") 810, Consolidation. Non-controlling interests primarily represent Fifth Third's minority share of net income or loss of and equity in Vantiv Holding. Net income attributable to non-controlling interests does not include expenses incurred directly by Vantiv, Inc., including income tax expense attributable to Vantiv, Inc. All of the Company’s non-controlling interests are presented after Vantiv Holding income tax expense in the accompanying consolidated statements of income as "Net income

10
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


attributable to non-controlling interests." Non-controlling interests are presented as a component of equity in the accompanying consolidated statements of financial position.

Share Repurchase Program

In February 2014, our board of directors authorized a program to repurchase up to $300 million of our Class A common stock. We have approximately $275 million of share repurchase authority remaining as of June 30, 2015 under this authorization. Purchases under the repurchase program are allowed from time to time in the open market, in privately negotiated transactions, or otherwise. The manner, timing, and amount of any purchases are determined by management based on an evaluation of market conditions, stock price, and other factors. The share repurchase program has no expiration date and the Company may discontinue purchases at any time that management determines additional purchases are not warranted.

Sponsorship
 
In order to provide electronic payment processing services, Visa, MasterCard and other payment networks require sponsorship of non-financial institutions by a member clearing bank. In June 2009, the Company entered into a ten-year agreement with Fifth Third (the "Sponsoring Member") to provide sponsorship services to the Company. The Company also has agreements with certain other banks that provide sponsorship into the card networks.
 
Use of Estimates
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount 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 periods. Actual results could differ from those estimates.

Revenue Recognition
 
The Company has contractual agreements with its clients that set forth the general terms and conditions of the relationship including line item pricing, payment terms and contract duration. Revenues are recognized as earned (i.e., for transaction based fees, when the underlying transaction is processed) in conjunction with ASC 605, Revenue Recognition. ASC 605, Revenue Recognition, establishes guidance as to when revenue is realized or realizable and earned by using the following criteria: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price is fixed or determinable; and (4) collectibility is reasonably assured.
 
The Company follows guidance provided in ASC 605-45, Principal Agent Considerations. ASC 605-45, Principal Agent Considerations, which states that whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement and that certain factors should be considered in the evaluation. The Company recognizes processing revenues net of interchange fees, which are assessed to the Company’s merchant customers on all processed transactions. Interchange rates are not controlled by the Company, which effectively acts as a clearing house collecting and remitting interchange fee settlement on behalf of issuing banks, debit networks, credit card associations and its processing customers. All other revenue is reported on a gross basis, as the Company contracts directly with the end customer, assumes the risk of loss and has pricing flexibility.
 
The Company generates revenue primarily by processing electronic payment transactions. Set forth below is a description of the Company’s revenue by segment. 

Merchant Services
 
The Company’s Merchant Services segment revenue is primarily derived from processing credit and debit card transactions. Merchant Services revenue is primarily comprised of fees charged to businesses, net of interchange fees, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions. The fees charged consist of either a percentage of the dollar volume of the transaction or a fixed fee, or both, and are recognized at the time of the transaction. Merchant Services revenue also includes a number of revenue items that are incurred by the Company and are reimbursable as the costs are passed through to and paid by the Company’s clients. These items primarily consist of Visa, MasterCard and other payment network fees. In addition, for sales through ISOs and certain other referral sources in which the Company is the primary party to the contract with the merchant, the Company records the

11
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


full amount of the fees collected from the merchant as revenue. Merchant Services segment revenue also includes revenue from ancillary services such as fraud management, equipment sales and terminal rent. Merchant Services revenue is recognized as services are performed. 

Financial Institution Services

The Company’s Financial Institution Services segment revenues are primarily derived from debit, credit and ATM card transaction processing, ATM driving and support, and PIN debit processing services. Financial Institution Services revenue associated with processing transactions includes per transaction and account related fees, card production fees and fees generated from the Company’s Jeanie network. Financial Institution Services revenue related to card transaction processing is recognized when consumers use their client-issued cards to make purchases. Financial Institution Services also generates revenue through other services, including statement production, collections and inbound/outbound call centers for credit transactions and other services such as credit card portfolio analytics, program strategy and support, fraud and security management and chargeback and dispute services. Financial Institution Services revenue is recognized as services are performed.
 
Financial Institution Services provides certain services to Fifth Third. Revenues related to these services are included in the accompanying statements of income as related party revenues.
 
Expenses
 
Set forth below is a brief description of the components of the Company’s expenses:
 
Network fees and other costs primarily consist of certain expenses incurred by the Company in connection with providing processing services to its clients which are passed through to its clients, including Visa and MasterCard network association fees, payment network fees, third party processing fees, telecommunication charges, postage and card production costs.
 
Sales and marketing expense primarily consists of salaries and benefits paid to sales personnel, sales management and other sales and marketing personnel, residual payments made to ISOs and referral partners, and advertising and promotional costs.
 
Other operating costs primarily consist of salaries and benefits paid to operational and IT personnel, costs associated with operating the Company’s technology platform and data centers, information technology costs for processing transactions, product development costs, software consulting fees and maintenance costs.

General and administrative expenses primarily consist of salaries and benefits paid to executive management and administrative employees, including finance, human resources, product development, legal and risk management, share-based compensation costs, equipment and occupancy costs and consulting costs.

Non-operating expenses during the three months and six months ended June 30, 2015 primarily relate to the change in fair value of a tax receivable agreement ("TRA") entered into in June 2014 (see Note 8 - Fair Value Measurements). The amounts for the three months and six months ended June 30, 2014 relate to the refinancing of the Company's senior secured credit facilities in June 2014 and the change in fair value of a TRA entered into in June 2014.

Share-Based Compensation
 
The Company expenses employee share-based payments under ASC 718, Compensation—Stock Compensation, which requires compensation cost for the grant-date fair value of share-based payments to be recognized over the requisite service period. The Company estimates the grant date fair value of the share-based awards issued in the form of options using the Black-Scholes option pricing model. The fair value of restricted stock awards and performance awards is measured based on the market price of the Company’s stock on the grant date. For the six months ended June 30, 2015 and 2014 total share-based compensation expense was $16.7 million and $20.0 million, respectively.


12
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


Earnings Per Share
 
Basic earnings per share is computed by dividing net income attributable to Vantiv, Inc. by the weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to Vantiv, Inc., adjusted as necessary for the impact of potentially dilutive securities, by the weighted-average shares outstanding during the period and the impact of securities that would have a dilutive effect on earnings per share. See Note 9 - Net Income Per Share for further discussion.

Dividend Restrictions

The Company does not intend to pay cash dividends on its Class A common stock in the foreseeable future. Vantiv, Inc. is a holding company that does not conduct any business operations of its own. As a result, Vantiv, Inc.’s ability to pay cash dividends on its common stock, if any, is dependent upon cash dividends and distributions and other transfers from Vantiv Holding, which are subject to certain Fifth Third consent rights in the Amended and Restated Vantiv Holding Limited Liability Company Agreement. These consent rights require the approval of Fifth Third for certain significant matters, including the payment of all distributions by Vantiv Holding other than certain permitted distributions, which relate primarily to the payment of tax distributions and tax-related obligations. The amounts available to Vantiv, Inc. to pay cash dividends are also subject to the covenants and distribution restrictions in its subsidiaries’ loan agreements. As a result of the restrictions on distributions from Vantiv Holding and its subsidiaries, essentially all of the Company's consolidated net assets are held at the subsidiary level and are restricted as of June 30, 2015.

Income Taxes
 
Vantiv, Inc. is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level.
 
Income taxes are computed in accordance with ASC 740, Income Taxes, and reflect the net tax effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the corresponding income tax amounts. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, such deferred tax assets will be adjusted through the Company’s provision for income taxes in the period in which this determination is made. As of June 30, 2015 and December 31, 2014, the Company had recorded no valuation allowances against deferred tax assets.

The Company's consolidated interim effective tax rate is based upon expected annual income from operations, statutory tax rates and tax laws in the various jurisdictions in which the Company operates. Significant or unusual items, including adjustments to accruals for tax uncertainties, are recognized in the quarter in which the related event occurs.

The Company's effective tax rates were 31.5% and 28.4%, respectively, for the six months ended June 30, 2015 and 2014. The effective tax rate for each period reflects the impact of the Company's non-controlling interests.
 
Cash and Cash Equivalents
 
Cash on hand and investments with original maturities of three months or less (that are readily convertible to cash) are considered to be cash equivalents. Cash equivalents consist primarily of overnight EuroDollar sweep accounts which are maintained at reputable financial institutions with high credit quality and therefore are considered to bear minimal credit risk.
 
Accounts Receivable—net
 
Accounts receivable primarily represent processing revenues earned but not collected. For a majority of its customers, the Company has the authority to debit the client’s bank accounts through the Federal Reserve’s Automated Clearing House; as such, collectibility is reasonably assured. The Company records a reserve for doubtful accounts when it is probable that the accounts receivable will not be collected. The Company reviews historical loss experience and the financial position of its customers when estimating the allowance. As of June 30, 2015 and December 31, 2014, the allowance for doubtful accounts was not material to the Company’s statements of financial position.
 

13
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


Customer Incentives
 
Customer incentives represent signing bonuses paid to customers. Customer incentives are paid in connection with the acquisition or renewal of customer contracts, and are therefore deferred and amortized using the straight-line method based on the contractual agreement. Related amortization is recorded as contra-revenue.
 
Property, Equipment and Software—net
 
Property, equipment and software consists of the Company’s facilities, furniture and equipment, software, land and leasehold improvements. These assets are depreciated on a straight-line basis over their respective useful lives, which are 15 to 40 years for the Company’s facilities and related improvements, 2 to 10 years for furniture and equipment, 3 to 5 years for software and 3 to 10 years for leasehold improvements or the lesser of the estimated useful life of the improvement or the term of lease. Also included in property, equipment and software is work in progress consisting of costs associated with software developed for internal use which has not yet been placed in service. Accumulated depreciation as of June 30, 2015 and December 31, 2014 was $224.5 million and $202.8 million, respectively.
 
The Company capitalizes certain costs related to computer software developed for internal use and amortizes such costs on a straight-line basis over an estimated useful life of 3 to 5 years. Research and development costs incurred prior to establishing technological feasibility are charged to operations as such costs are incurred. Once technological feasibility has been established, costs are capitalized until the software is placed in service.
 
Goodwill and Intangible Assets
 
In accordance with ASC 350, Intangibles—Goodwill and Other, the Company tests goodwill for impairment for each reporting unit on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit is below its carrying value. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that fair value of the goodwill within the reporting unit is less than its carrying value. The Company performed its most recent annual goodwill impairment test for all reporting units as of July 31, 2014 using market data and discounted cash flow analyses. Based on this analysis, it was determined that the fair value of all reporting units were substantially in excess of the carrying value. There have been no other events or changes in circumstances subsequent to the testing date that would indicate impairment of these reporting units as of June 30, 2015.

Intangible assets consist of acquired customer relationships, trade names and customer portfolios and related assets that are amortized over their estimated useful lives. The Company reviews finite lived intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. As of June 30, 2015, there have been no such events or circumstances that would indicate potential impairment of finite lived intangible assets. Subsequent to the Mercury acquisition in June 2014, the Company decided to phase out an existing trade name used in the ISO channel within the Merchant Services segment. As a result of this decision, the remaining useful life was changed from indefinite to definite which resulted in the Company recording a charge to amortization expense of $34.3 million during the quarter ended June 30, 2014.
 
Settlement Assets and Obligations
 
Settlement assets and obligations result from Financial Institution Services when funds are transferred from or received by the Company prior to receiving or paying funds to a different entity. This timing difference results in a settlement asset or obligation. The amounts are generally collected or paid the following business day.
 
The settlement assets and obligations recorded by Merchant Services represent intermediary balances due to differences between the amount the Sponsoring Member receives from the card associations and the amount funded to the merchants. Such differences arise from timing differences, interchange expenses, merchant reserves and exception items. In addition, certain card associations limit the Company from accessing or controlling merchant settlement funds and, instead, require that these funds be controlled by the Sponsoring Member. The Company follows a net settlement process whereby, if the settlement received from the card associations precedes the funding obligation to the merchant, the Company temporarily records a corresponding liability. Conversely, if the funding obligation to the merchant precedes the settlement from the card associations, the amount of the net receivable position is recorded by the Company, or in some cases, the Sponsoring Member may cover the position with its own funds in which case a receivable position is not recorded by the Company.
 

14
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


Derivatives
 
The Company accounts for derivatives in accordance with ASC 815, Derivatives and Hedging. This guidance establishes accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the statement of financial position at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item will be recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portion of the change in the fair value of the derivative will be recorded in accumulated other comprehensive income ("AOCI") and will be recognized in the statement of income when the hedged item affects earnings. The Company does not enter into derivative financial instruments for speculative purposes.

Tax Receivable Agreements

As of June 30, 2015, the Company is party to tax receivable agreements ("TRAs") with Fifth Third, which were executed in connection with its initial public offering ("IPO"). One provides for the payment by the Company to Fifth Third of 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income tax that the Company actually realizes as a result of the increases in tax basis that may result from the purchase of Vantiv Holding units from Fifth Third or from the future exchange of units by Fifth Third for cash or shares of the Company's Class A common stock, as well as the tax benefits attributable to payments made under such tax receivable agreement. Any actual increase in tax basis, as well as the amount and timing of any payments under the agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of shares of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable, and the amount and timing of the Company's income. The other tax receivable agreement provides for the payment by the Company to Fifth Third of 85% of the amount of cash savings according to Fifth Third's respective ownership interests in Vantiv Holding immediately prior to our initial public offering, if any, in U.S. federal, state, local and foreign income tax that National Processing Company ("NPC") actually realizes as a result of its use of its net operating losses ("NOLs") and other tax attributes.

Simultaneously and in connection with the completion of the acquisition of Mercury Payment Systems, LLC ("Mercury"), the Company entered into a TRA (the "Mercury TRA") with pre-acquisition owners of Mercury (the "Mercury TRA Holders"). The Mercury TRA generally provides for the payment by the Company to the Mercury TRA Holders of 85% of the value of the amount of cash savings, if any, in U.S. federal, state, local and foreign income tax that the Company actually realizes as a result of the increase in tax basis of the assets of Mercury and the use of the NOLs and other tax attributes of Mercury. The Mercury TRA is considered contingent consideration under ASC 805, Business Combinations ("ASC 805") as it is part of the consideration payable to the former owners of Mercury. In accordance with ASC 805, the contingent consideration is initially measured at fair value at the acquisition date and recorded as a liability. The Mercury TRA liability is therefore recorded at fair value based on estimates of discounted future cash flows associated with estimated payments to the Mercury TRA Holders. The liability recorded by the Company for the Mercury TRA obligations will be re-measured at fair value at each reporting date with the change in fair value recognized in earnings as a non-operating expense.

All TRA obligations are recorded based on the full and undiscounted amount of the expected future payments, except for the Mercury TRA which represents contingent consideration relating to an acquired business, and is recorded at fair value for financial reporting purposes (See Note 8 - Fair Value Measurements). 

Payments under each of the TRAs discussed above are required to the extent the Company realizes cash savings as a result of the underlying tax attributes. The cash savings realized by the Company are computed by comparing the Company's actual income tax liability to the amount of such taxes the Company would have been required to pay had there been no deductions related to the tax attributes discussed above. The Company retains the benefit of the remaining 15% of these tax savings.

The timing and/or amount of aggregate payments due under the TRAs may vary based on a number of factors, including the amount and timing of the taxable income the Company generates in the future and the tax rate then applicable, the use of loss carryovers and amortizable basis. Payments under the TRAs, if necessary, are required to be made no later than January 5th of the second year immediately following the current taxable year. A payment under the TRA obligations of approximately $22.8 million was paid during January 2015. The term of the TRAs will continue until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the TRAs for an amount based on the agreed payments remaining to be made under the agreements. See Note 12 - Subsequent Event for discussion of the Repurchase Addendum to the Mercury TRA executed as of July 24, 2015.


15
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


New Accounting Pronouncements
 
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The update requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. Amortization of the costs will continue to be reported as interest expense. The update requires retrospective application and represents a change in accounting principle. The update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted for financial statements that have not been previously issued. The Company does not expect the new guidance to have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, "Revenue From Contracts With Customers." The ASU supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The amendment provides a five-step analysis of transactions to determine when and how revenue is recognized, based upon the core principal that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment also requires additional disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early adoption prohibited. The amendment allows companies to use either a full retrospective or a modified retrospective approach to adopt this ASU. In July 2015, the FASB confirmed its decision to defer the effective date of this standard by one year, which makes the standard effective beginning after December 15, 2017. The Company is currently evaluating which transition approach to use and assessing the impact of the adoption of this principle on the Company's consolidated financial statements.    

2. BUSINESS COMBINATIONS

Acquisition of Mercury Payment Systems, LLC

On June 13, 2014, the Company completed the acquisition of Mercury, acquiring all of the outstanding voting interest. Mercury was a payment technology and service leader whose solutions are integrated into point-of-sale software applications and brought to market through dealer and developer partners. This acquisition helps to accelerate the Company's growth in the integrated payments channel.

During the second quarter of 2015, the Company recorded measurement period adjustments to the trade name and to the Mercury TRA. The adjustment to the trade name, which is included in intangible assets below, is based on a change in the underlying assumptions used to value the trade name due to the refinement of estimates. The trade name was initially assigned a value of $59.1 million and a weighted average estimated useful life of 9.5 years utilizing the relief from royalty method. As a result of a change in the underlying assumptions due to the refinement of estimates, the Company is assigning the trade name a value of $15 million based on a weighted average estimated useful life of 2.5 years. The adjustment to the Mercury TRA is due to a change in the inputs used in determining the fair value of the TRA as a result of refining estimates. Both measurement period adjustments are reflected in the table below and have no effect on the accompanying statement of income.

The following is the final fair value of the purchase price for Mercury (in thousands):
Cash purchase price paid at closing
$
1,681,179

Fair value of contingent consideration related to a TRA
192,507

Total purchase price
$
1,873,686



16
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


The acquisition was accounted for as a business combination under ASC 805. The purchase price was allocated to the assets acquired and the liabilities assumed based on the estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, a significant portion of which is deductible for tax purposes. Goodwill, assigned to Merchant Services, consists primarily of the acquired workforce and growth opportunities, none of which qualify as an intangible asset. The final purchase price allocation is as follows (in thousands):
Cash acquired
$
22,485

Current assets
47,421

Property, equipment and software
32,257

Intangible assets
347,000

Goodwill
1,422,916

Deferred tax assets
43,054

Other non-current assets
767

Current and non-current liabilities
(42,214
)
Total purchase price
$
1,873,686


The following pro forma information shows the Company’s results of operations for the three months and six months ended June 30, 2014 as if the Mercury acquisition had occurred January 1, 2013. The pro forma information is presented for informational purposes only and is not necessarily indicative of what would have occurred if the acquisition had been made as of that date, nor is it intended to be indicative of future operating results.
 
Three Months Ended
June 30, 2014
 
Six Months Ended
June 30, 2014
 
(Pro forma)
 
(Pro forma)
 
(in thousands, except share data)
Total revenue
$
689,861

 
$
1,306,129

Income from operations
55,565

 
121,807

Net income including non-controlling interests
18,811

 
50,211

Net income attributable to Vantiv, Inc.
10,125

 
31,065

Net income per share attributable to Vantiv, Inc. Class A common stock:
 
 
 
Basic
$
0.07

 
$
0.22

Diluted
$
0.07

 
$
0.21

Shares used in computing net income per share of Class A common stock:
 
 
 
Basic
140,451,466

 
139,346,292

Diluted
151,524,278

 
150,831,855

 
The pro forma results include certain pro forma adjustments that were directly attributable to the business combination as follows:
additional amortization expense that would have been recognized relating to the acquired intangible assets,
an adjustment of interest expense to reflect the additional borrowings of the Company in conjunction with the acquisition and removal of Mercury historical debt, and
a reduction in non-operating expenses in the three and six months ended June 30, 2014 for acquisition-related transaction costs and debt refinancing costs incurred by the Company.

17
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)



3. GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill, by business segment, are as follows (in thousands):
 
 
Merchant Services
 
Financial Institution Services
 
Total
Balance as of December 31, 2014
 
$
2,716,516

 
$
574,850

 
$
3,291,366

Goodwill attributable to acquisition of Mercury (1)
 
75,162

 

 
75,162

Balance as of June 30, 2015
 
$
2,791,678

 
$
574,850

 
$
3,366,528

 
(1) Amount represents adjustments to goodwill associated with the acquisition of Mercury as a result of the finalization of purchase accounting.

Intangible assets consist of acquired customer relationships, trade names and customer portfolios and related assets. The useful lives of customer relationships are determined based on forecasted cash flows, which include estimates for customer attrition associated with the underlying portfolio of customers acquired. The customer relationships acquired in conjunction with acquisitions are amortized based on the pattern of cash flows expected to be realized taking into consideration expected revenues and customer attrition, which are based on historical data and the Company's estimates of future performance. These estimates result in accelerated amortization on certain acquired intangible assets.

Indefinite lived trade names are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Subsequent to the Mercury acquisition in June 2014, the Company decided to phase out an existing trade name used in the ISO channel. The trade name was originally expected to remain in use for the foreseeable future and therefore was deemed an indefinite lived intangible asset not subject to amortization. As a result of this decision, the remaining useful life was changed from indefinite to definite which resulted in the Company recording a charge to amortization expense of $34.3 million during the quarter ended June 30, 2014. The trade name was revalued utilizing an income approach using the relief-from-royalty method. The revised fair value of $6.7 million is being amortized on a straight-line basis over the remaining estimated useful life of two years.

The Company reviews finite lived intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable.

As of June 30, 2015 and December 31, 2014, the Company's intangible assets consisted of the following (in thousands):
 
 
June 30,
2015
 
December 31,
2014
Customer relationship intangible assets
 
$
1,596,581

 
$
1,596,581

Trade names - finite lived
 
21,733

 
65,833

Customer portfolios and related assets
 
125,507

 
57,383

 
 
1,743,821

 
1,719,797

 
 
 
 
 
Less accumulated amortization on:
 
 
 
 
  Customer relationship intangible assets
 
739,860

 
655,017

Trade names - finite lived
 
9,667

 
5,105

  Customer portfolios and related assets
 
34,357

 
24,983

 
 
783,884

 
685,105

 
 
$
959,937

 
$
1,034,692

  
Customer portfolios and related assets acquired during the six months ended June 30, 2015 have a weighted-average amortization period of 4.9 years. Amortization expense on intangible assets for the three months ended June 30, 2015 and 2014 was $49.6 million and $71.6 million, respectively. Amortization expense on intangible assets for the six months ended June 30,

18
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


2015 and 2014 was $98.8 million and $105.0 million, respectively. For the three and six months ended June 30, 2014, intangible amortization expense included a $34.3 million charge related to the phasing out of a trade name.

The estimated amortization expense of intangible assets for the next five years is as follows (in thousands):
Six months ending December 31, 2015
 
$
100,755

2016
 
190,415

2017
 
170,202

2018
 
161,472

2019
 
153,530

2020
 
81,470


4. LONG-TERM DEBT

As of June 30, 2015 and December 31, 2014, the Company’s debt consisted of the following: 
 
June 30,
2015
 
December 31,
2014
 
(in thousands)
$2,050.0 million term A loan, maturing on June 13, 2019, and bearing interest at a variable base rate (LIBOR) plus a spread rate (200 basis points) (total rate of 2.19% at June 30, 2015) and amortizing on a basis of 1.25% per quarter during each of the first twelve quarters, 1.875% per quarter during the next four quarters and 2.50% during the next three quarters with a balloon payment due at maturity
$
1,947,500

 
$
1,998,750

$1,400.0 million term B loan, maturing on June 13, 2021, and bearing interest at a variable base rate (LIBOR) with a floor of 75 basis points plus a spread rate (300 basis points) (total rate of 3.75% at June 30, 2015) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity
1,186,000

 
1,393,000

$10.1 million leasehold mortgage, expiring on August 10, 2021 and bearing interest payable monthly at a fixed rate (rate of 6.22% at June 30, 2015)
10,131

 
10,131

Less: Current portion of note payable and current portion of note payable to related party
(116,501
)
 
(116,501
)
Less: Original issue discount
(6,650
)
 
(8,143
)
Note payable and note payable to related party
$
3,020,480

 
$
3,277,237


2014 Debt Refinancing
    
On June 13, 2014, Vantiv, LLC completed a debt refinancing by entering into an amended and restated loan agreement ("Amended Loan Agreement"). The Amended Loan Agreement provides for senior secured credit facilities comprised of a $2.05 billion term A loan, a $1.4 billion term B loan and a $425 million revolving credit facility. Proceeds from the refinancing were primarily used to fund the Mercury acquisition and repay the prior term A loan with an outstanding balance of approximately $1.8 billion as of the date of refinancing. The prior revolving credit facility was also terminated. The maturity date and debt service requirements relating to the new term A and term B loans are listed in the table above. The new revolving credit facility matures in June 2019 and includes a $100 million swing line facility and a $40 million letter of credit facility. The commitment fee rate for the unused portion of the revolving credit facility is 0.375% per year. There were no outstanding borrowings on the revolving credit facility at June 30, 2015.
    
As of June 30, 2015 and December 31, 2014, Fifth Third held $196.7 million and $201.9 million, respectively, of the term A loans.

On January 6, 2015, the Company made an early principal payment of $200 million on the term B loan. The Company expensed approximately $1.8 million in non-operating expenses related to the write-off of deferred financing fees and OID in connection with the early principal payment.

19
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


Guarantees and Security
 
The Company's debt obligations at June 30, 2015 are unconditional and are guaranteed by Vantiv Holding and certain of Vantiv Holding’s existing and subsequently acquired or organized domestic subsidiaries. The refinanced debt and related guarantees are secured on a first-priority basis (subject to liens permitted under the Amended Loan Agreement) by substantially all the capital stock (subject to a 65% limitation on pledges of capital stock of foreign subsidiaries and domestic holding companies of foreign subsidiaries) and personal property of Vantiv Holding and any obligors as well as any real property in excess of $10 million in the aggregate held by Vantiv Holding or any obligors (other than Vantiv Holding), subject to certain exceptions. 

Covenants
 
There are certain financial and non-financial covenants contained in the Amended Loan Agreement for the refinanced debt, which are tested on a quarterly basis. The financial covenants require maintenance of certain leverage and interest coverage ratios. At June 30, 2015, the Company was in compliance with these financial covenants.

5. DERIVATIVES AND HEDGING ACTIVITIES
 
Risk Management Objective of Using Derivatives
 
The Company enters into derivative financial instruments to manage differences in the amount, timing and duration of its known or expected cash payments related to its variable-rate debt. As of June 30, 2015 and December 31, 2014, the Company’s derivative instruments consisted of interest rate swaps, which hedged the variable rate debt by converting floating-rate payments to fixed-rate payments. These swaps are designated as cash flow hedges for accounting purposes.
 
Accounting for Derivative Instruments
 
The Company recognizes derivatives in other current and non-current assets or liabilities in the accompanying consolidated statements of financial position at their fair values. Refer to Note 8 - Fair Value Measurements for a detailed discussion of the fair value of its derivatives. The Company designates its interest rate swaps as cash flow hedges of forecasted interest rate payments related to its variable-rate debt.
 
The Company formally documents all relationships between hedging instruments and underlying hedged transactions, as well as its risk management objective and strategy for undertaking hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to forecasted transactions. A formal assessment of hedge effectiveness is performed both at inception of the hedge and on an ongoing basis to determine whether the hedge is highly effective in offsetting changes in cash flows of the underlying hedged item. Hedge effectiveness is assessed using a regression analysis. If it is determined that a derivative ceases to be highly effective during the term of the hedge, the Company will discontinue hedge accounting for such derivative.
 
The Company’s interest rate swaps qualify for hedge accounting under ASC 815, Derivatives and Hedging. Therefore, the effective portion of changes in fair value were recorded in AOCI and will be reclassified into earnings in the same period during which the hedged transactions affected earnings.

Cash Flow Hedges of Interest Rate Risk
 
The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company uses interest rate swaps as part of its interest rate risk management strategy. As of June 30, 2015, the Company had a total of 14 outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk. Of the 14 outstanding interest rate swaps, 8 of them cover an exposure period from June 2015 through June 2017 and have a combined notional balance of $1.2 billion (amortizing to $1.1 billion). The remaining 6 interest rate swaps cover an exposure period from January 2016 through January 2019 and have a combined notional balance of $500 million. Fifth Third is the counterparty to 5 of the 14 outstanding interest rate swaps with notional balances ranging from $293.8 million to $250.0 million.
 

20
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


The Company does not offset derivative positions in the accompanying consolidated financial statements. The table below presents the fair value of the Company’s derivative financial instruments designated as cash flow hedges included within the accompanying consolidated statements of financial position (in thousands):
 
Consolidated Statement of
Financial Position Location
 
June 30, 2015
 
December 31, 2014
Interest rate swaps
Other long-term assets
 
$

 
$
104

Interest rate swaps
Other current liabilities
 
8,062

 
5,205

Interest rate swaps
Other long-term liabilities
 
10,180

 
2,283

 
Any ineffectiveness associated with such derivative instruments will be recorded immediately as interest expense in the accompanying consolidated statements of income. As of June 30, 2015, the Company estimates that $8.6 million will be reclassified from accumulated other comprehensive income as an increase to interest expense during the next 12 months.

The table below presents the effect of the Company’s interest rate swaps on the accompanying consolidated statements of income for the three months and six months ended June 30, 2015 and 2014 (in thousands): 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Derivatives in cash flow hedging relationships:
 
 
 
 
 
 

 
 

Amount of gain (loss) recognized in OCI (effective portion) (1)
 
$
(1,717
)
 
$
(6,234
)
 
$
(13,152
)
 
$
(8,833
)
Amount of gain (loss) reclassified from accumulated OCI into earnings (effective portion)
 
(1,252
)
 
(483
)
 
(2,293
)
 
(818
)
Amount of gain (loss) recognized in earnings (2)
 
1

 
156

 

 
(2
)
 
(1)
"OCI" represents other comprehensive income.
(2)
Amount represents hedge ineffectiveness and is recorded as a component of interest expense-net in the accompanying consolidated statement of income.

Credit Risk Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

As of June 30, 2015, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $19.6 million. As of June 30, 2015, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions at June 30, 2015, it could have been required to settle its obligations under the agreements at their termination value of $19.6 million.

6. CONTROLLING AND NON-CONTROLLING INTERESTS
 
The Company has various non-controlling interests that are accounted for in accordance with ASC 810, Consolidation ("ASC 810"). As discussed in Note 1 - Basis of Presentation and Summary of Significant Accounting Policies, Vantiv, Inc. owns a controlling interest in Vantiv Holding, and therefore consolidates the financial results of Vantiv Holding and its subsidiaries and records non-controlling interest for the economic interests in Vantiv Holding held by Fifth Third. In addition, the Company and People's United Bank (“PUB”) formed People’s United Merchant Services (“PUMS”) during May 2014, which represents a joint venture that provides customers a comprehensive suite of payment solutions. Vantiv Holding owns 51% of PUMS and PUB owns 49%. PUMS is consolidated by the Company in accordance with ASC 810 and records non-controlling interest for the economic interests in PUMS held by PUB.


21
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


As of June 30, 2015, Vantiv, Inc.’s interest in Vantiv Holding was 77.25%. Changes in units and related ownership interest in Vantiv Holding are summarized as follows:
 
Vantiv, Inc.
 
Fifth Third
 
Total
As of December 31, 2014
145,455,008

 
43,042,826

 
188,497,834

% of ownership
77.17
%
 
22.83
%
 
 

Equity plan activity (a)
723,985

 

 
723,985

As of June 30, 2015
146,178,993

 
43,042,826

 
189,221,819

% of ownership
77.25
%
 
22.75
%
 
 

 
(a)
Includes stock issued under the equity plans less Class A common stock withheld to satisfy employee tax withholding obligations upon vesting or exercise of employee equity awards and forfeitures of restricted Class A common stock awards.

As a result of changes in ownership interests in Vantiv Holding, adjustments of $2.7 million and $52.8 million were recognized during the six months ended June 30, 2015 and June 30, 2014, respectively, in order to reflect the portion of net assets of Vantiv Holding attributable to non-controlling unit holders based on changes in the proportionate ownership interests in Vantiv Holding during those periods.
 
The table below provides a reconciliation of net income attributable to non-controlling interests based on relative ownership interests as discussed above (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
52,693

 
$
3,313

 
$
79,689

 
$
44,404

Items not allocable to non-controlling interests:
 

 
 

 
 

 
 
Vantiv, Inc. expenses (a)
12,587

 
10,621

 
20,397

 
19,814

Vantiv Holding net income
$
65,280

 
$
13,934

 
$
100,086

 
$
64,218

Net income attributable to non-controlling interests of Fifth Third (b)
$
14,468

 
$
4,421

 
$
22,371

 
$
17,376

Net income attributable to PUMS non-controlling interest (c)
1,689

 
301

 
1,793

 
301

Total net income attributable to non-controlling interests
$
16,157

 
$
4,722

 
$
24,164

 
$
17,677

 
 
 (a)                    Primarily represents income tax expense related to Vantiv, Inc.
(b)                     Net income attributable to non-controlling interests of Fifth Third reflects the allocation of Vantiv Holding’s net income based on the proportionate ownership interests in Vantiv Holding held by the non-controlling unit holders. The net income attributable to non-controlling unit holders reflects the changes in ownership interests summarized in the table above.
(c)
Reflects net income attributable to the non-controlling interest of PUMS.

In connection with the separation from Fifth Third, Fifth Third received a warrant that allows for the purchase of up to 20.4 million Class C Non-Voting Units of Vantiv Holding. The warrant is exercisable, in whole or in part, and from time to time, but not during a restricted period. A restricted period means a period during which Vantiv Holding (or any successor thereto) is treated as a partnership for U.S. federal income tax purposes; provided that the restricted period shall terminate upon the earlier of (i) a change of control, and (ii) in the event Vantiv, Inc. is no longer a public company owning Vantiv Holding, both as defined in the warrant agreement. The warrant expires upon the earliest to occur of the 20th anniversary of the issue date or a change of control where the price paid per unit in such change of control minus the exercise price of the warrant is less than zero. Fifth Third is entitled to purchase the underlying Units of the warrant at a price of $15.98 per unit. The warrant was valued at approximately $65.4 million at June 30, 2009, the issuance date, using a Black-Scholes option valuation model using probability weighted scenarios. The warrant is recorded as a component of the non-controlling interest on the accompanying statements of financial position as of June 30, 2015 and December 31, 2014.


22
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


7. COMMITMENTS, CONTINGENCIES AND GUARANTEES

Legal Reserve
 
From time to time, the Company is involved in various litigation matters arising in the ordinary course of its business. While it is impossible to ascertain the ultimate resolution or range of financial liability with respect to these contingent matters, management believes none of these matters, either individually or in the aggregate, would have a material effect upon the Company’s consolidated financial statements.

8. FAIR VALUE MEASUREMENTS
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the hierarchy prescribed in ASC 820, Fair Value Measurement, based upon the available inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows:
 
Level 1 Inputs—Quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.
 
Level 2 Inputs—Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including but not limited to quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities and observable inputs other than quoted prices such as interest rates or yield curves.
 
Level 3 Inputs—Unobservable inputs reflecting the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk.
 
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 (in thousands):
 
June 30, 2015
 
December 31, 2014
 
Fair Value Measurements Using
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
$

 
$

 
$

 
$

 
$
104

 
$

Liabilities:
 

 
 

 
 

 
 

 
 

 
 

Interest rate swaps
$

 
$
18,242

 
$

 
$

 
$
7,488

 
$

  Mercury TRA

 

 
220,800

 

 

 
152,420


The following table summarizes carrying amounts and estimated fair values for financial assets and liabilities, excluding assets and liabilities measured at fair value on a recurring basis, as of June 30, 2015 and December 31, 2014 (in thousands):
 
June 30, 2015
 
December 31, 2014
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Liabilities:
 

 
 

 
 

 
 

Note payable
$
3,136,981

 
$
3,130,440

 
$
3,393,738

 
$
3,310,181

 
We consider that the carrying value of cash and cash equivalents, receivables, accounts payable and accrued expenses approximates fair value (Level 1) given the short-term nature of these items. The fair value of the Company’s note payable was estimated based on rates currently available to the Company for bank loans with similar terms and maturities and is classified in Level 2 of the fair value hierarchy.
 
Interest Rate Swaps
 
The Company uses interest rate swaps to manage interest rate risk. The fair value of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted

23
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. In addition, to comply with the provisions of ASC 820, Fair Value Measurements, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its interest rate swaps for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees.
 
Although the Company determined that the majority of the inputs used to value its interest rate swaps fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its interest rate swaps utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2015 and December 31, 2014, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its interest rate swaps and determined that the credit valuation adjustment was not significant to the overall valuation of its interest rate swaps. As a result, the Company classified its interest rate swap valuations in Level 2 of the fair value hierarchy. See Note 5 - Derivatives and Hedging Activities for further discussion of the Company’s interest rate swaps.

Mercury TRA

The Mercury TRA is considered contingent consideration as it is part of the consideration payable to the former owners of Mercury. Such contingent consideration is measured at fair value and is based on significant inputs not observable in the market, which is classified in Level 3 of the fair value hierarchy. The Mercury TRA is recorded at fair value based on estimates of discounted future cash flows associated with the estimated payments to the Mercury TRA Holders. The significant unobservable inputs used in the fair value measurement of the Mercury TRA are the discount rate, projections of Mercury taxable income and effective tax rates for Mercury. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. The liability recorded is re-measured at fair value at each reporting period with the change in fair value recognized in earnings as a non-operating expense. The Company recorded non-operating expenses of $6.7 million and $1.2 million related to the change in fair value during the three months ended June 30, 2015 and 2014, respectively. The Company recorded non-operating expenses of $13.7 million and $1.2 million related to the change in fair value during the six months ended June 30, 2015 and 2014, respectively. See Note 12 - Subsequent Event for discussion of the Repurchase Addendum to the Mercury TRA executed as of July 24, 2015 and Note 1 - Basis of Presentation and Summary of Significant Accounting Policies for further discussion of the Mercury TRA.

9.  NET INCOME PER SHARE
 
Basic net income per share is calculated by dividing net income attributable to Vantiv, Inc. by the weighted-average shares of Class A common stock outstanding during the period.

Diluted net income per share is calculated assuming that Vantiv Holding is a wholly-owned subsidiary of Vantiv, Inc., therefore eliminating the impact of Fifth Third's non-controlling interest. Pursuant to the Exchange Agreement, the Class B units of Vantiv Holding ("Class B units"), which are held by Fifth Third and represent the non-controlling interest in Vantiv Holding, are convertible into shares of Class A common stock on a one-for-one basis. Based on this conversion feature, diluted net income per share is calculated assuming the conversion of the Class B units on an "if-converted" basis. Due to the Company's structure as a C corporation and Vantiv Holding's structure as a pass-through entity for tax purposes, the numerator in the calculation of diluted net income per share is adjusted accordingly to reflect the Company's income tax expense assuming the conversion of the Fifth Third non-controlling interest into Class A common stock. The adjusted effective tax rate used in the calculation was 36.0% for 2015 and 36.5% for 2014. As of June 30, 2015 and 2014, there were approximately 43.0 million Class B units outstanding. During the three and six months ended June 30, 2014, approximately 47.0 million and 47.9 million Class B units, respectively, of Vantiv Holding were excluded in computing diluted net income per share because including them would have an antidilutive effect. As the Class B units of Vantiv Holding were not included, the numerator used in the calculation of diluted net income per share was equal to the numerator used in the calculation of basic net income per share. Additionally, due to the net loss for the three months ended June 30, 2014, any remaining potentially dilutive securities were also excluded from the denominator in computing diluted net income per share.
 
In addition to the Class B units discussed above, potentially dilutive securities during the three and six months ended June 30, 2015 and 2014 included restricted stock awards, the warrant held by Fifth Third which allows for the purchase of Class C units of Vantiv Holding, stock options and performance share awards.
 

24
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


The shares of Class B common stock do not share in the earnings or losses of the Company and are therefore not participating securities. Accordingly, basic and diluted net income per share of Class B common stock has not been presented.

The following table sets forth the computation of basic and diluted net income per share (in thousands, except share data): 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
Basic:
 
 
 

 


 
 

Net income (loss) attributable to Vantiv, Inc.
$
36,536

 
$
(1,409
)
 
$
55,525

 
$
26,727

Shares used in computing basic net income (loss) per share:
 
 
 
 
 
 
 
Weighted-average Class A common shares
145,566,899

 
140,451,466

 
145,051,664

 
139,346,292

Basic net income (loss) per share
$
0.25

 
$
(0.01
)
 
$
0.38

 
$
0.19

Diluted:
 
 
 
 
 
 
 
Consolidated income before applicable income taxes
$
77,012

 
$

 
$
116,261

 
$

Income tax expense excluding impact of non-controlling interest
27,724

 

 
41,854

 

Net income (loss) attributable to Vantiv, Inc.
$
49,288

 
$
(1,409
)
 
$
74,407

 
$
26,727

Shares used in computing diluted net income (loss) per share:
0

 
 
 
 
 
 
Weighted-average Class A common shares
145,566,899

 
140,451,466

 
145,051,664

 
139,346,292

Weighted-average Class B units of Vantiv Holding
43,042,826

 

 
43,042,826

 

Warrant
12,171,352

 

 
11,774,401

 
9,912,517

Restricted stock awards
506,059

 

 
856,272

 
1,459,091

Stock options
544,331

 

 
551,003

 
113,955

Diluted weighted-average shares outstanding
201,831,467

 
140,451,466

 
201,276,166

 
150,831,855

Diluted net income (loss) per share
$
0.24

 
$
(0.01
)
 
$
0.37

 
$
0.18



25
 
 
 

Vantiv, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)


10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
 
The activity of the components of accumulated other comprehensive income (loss) related to cash flow hedging and other activities for the three months and six months ended June 30, 2015 and 2014 is presented below (in thousands):
 
 
 
 
Total Other Comprehensive Income (Loss)
 
 
 
 
 AOCI Beginning Balance
 
Pretax Activity
 
Tax Effect
 
 Net Activity
 
Attributable to non-controlling interests
 
Attributable to Vantiv, Inc.
 
AOCI Ending Balance
Three months ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Net change in fair value recorded in accumulated OCI
 
$
(10,782
)
 
$
(1,717
)
 
$
502

 
$
(1,215
)
 
$
391

 
$
(824
)
 
$
(11,606
)
 Net realized loss reclassified into earnings (a)
 
2,231

 
1,252

 
(367
)
 
885

 
(285
)
 
600

 
2,831

 Other
 
(212
)
 

 

 

 

 

 
(212
)
 Net change
 
$
(8,763
)
 
$
(465
)
 
$
135

 
$
(330
)
 
$
106

 
$
(224
)
 
$
(8,987
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Net change in fair value recorded in accumulated OCI
 
$
(1,237
)
 
$
(6,234
)
 
$
1,720

 
$
(4,514
)
 
$
1,631

 
$
(2,883
)
 
$
(4,120
)
 Net realized loss reclassified into earnings (a)
 
424

 
483

 
(139
)
 
344

 
(110
)
 
234

 
658

Other
 

 
4

 

 
4

 

 
4

 
4

 Net change
 
$
(813
)
 
$
(5,747
)
 
$
1,581

 
$
(4,166
)
 
$
1,521

 
$
(2,645
)
 
$
(3,458
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Net change in fair value recorded in accumulated OCI
 
$
(5,288
)
 
$
(13,152
)
 
$
3,831

 
$
(9,321
)
 
$
3,003

 
$
(6,318
)
 
$
(11,606
)
 Net realized loss reclassified into earnings (a)
 
1,732

 
2,293

 
(672
)
 
1,621

 
(522
)
 
1,099

 
2,831

Other
 
(212
)
 

 

 

 

 

 
(212
)
 Net change
 
$
(3,768
)
 
$
(10,859
)
 
$
3,159

 
$
(7,700
)
 
$
2,481

 
$
(5,219
)
 
$
(8,987
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Net change in fair value recorded in accumulated OCI
 
$
(5
)
 
$
(8,833
)
 
$
2,425

 
$
(6,408
)
 
$
2,293

 
$
(4,115
)
 
$
(4,120
)
 Net realized loss reclassified into earnings (a)
 
269

 
818