Subsidiary Guarantors of Long-Term Debt

9 Months Ended

Sep. 30, 2013

Subsidiary Guarantors of Long-Term Debt

15. Subsidiary Guarantors of Long-Term Debt

Certain of the Company’s 100% owned domestic subsidiaries (“Guarantor Subsidiaries”) jointly and severally, and fully and unconditionally, guarantee the Company’s indebtedness under its revolving credit facility, senior notes and term loan. Under the indentures governing the senior notes, a guarantee of a Guarantor Subsidiary will terminate upon the following customary circumstances: the sale of such Guarantor Subsidiary if such sale complies with the indenture; if such Guarantor Subsidiary no longer guarantees certain other indebtedness of the Company, including as a result of the release of the Guarantor Subsidiaries if Standard & Poor’s and Moody’s Investors Service, Inc. increase the Company’s credit rating to A- and A3, respectively; or the defeasance or discharge of the indenture. The following condensed consolidating financial information is presented on the equity method and reflects summarized financial information for: (a) the Company; (b) the Guarantor Subsidiaries on a combined basis; and (c) the Company’s non-guarantor subsidiaries on a combined basis. The following condensed consolidating financial information reflects the reporting of Club Solutions as a discontinued operation for all periods presented.

Condensed Consolidating Statement of Income and Comprehensive Income

Three Months Ended September 30, 2013

(In millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Processing and services	$	—		$	731		$	326		$	(41	)	$	1,016
Product		—			174			25			(14	)		185
Total revenue		—			905			351			(55	)		1,201
Expenses:
Cost of processing and services		—			373			188			(41	)		520
Cost of product		—			155			23			(14	)		164
Selling, general and administrative		25			152			60			—			237
Total expenses		25			680			271			(55	)		921
Operating income (loss)		(25	)		225			80			—			280
Interest expense, net		(33	)		(8	)		—			—			(41	)
Income (loss) from continuing operations before income taxes and income from investment in unconsolidated affiliate		(58	)		217			80			—			239
Income tax (provision) benefit		28			(78	)		(29	)		—			(79	)
Income from investment in unconsolidated affiliate		—			1			—			—			1
Equity in earnings of consolidated affiliates		191			—			—			(191	)		—
Income from continuing operations		161			140			51			(191	)		161
Loss from discontinued operations, net of income taxes		(2	)		—			—			—			(2	)
Net income	$	159		$	140		$	51		$	(191	)	$	159
Comprehensive income	$	163		$	140		$	53		$	(193	)	$	163

Condensed Consolidating Statement of Income and Comprehensive Income

Three Months Ended September 30, 2012

(In millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Processing and services	$	—		$	644		$	319		$	(41	)	$	922
Product		—			165			33			(13	)		185
Total revenue		—			809			352			(54	)		1,107
Expenses:
Cost of processing and services		—			348			179			(41	)		486
Cost of product		—			145			18			(13	)		150
Selling, general and administrative		27			126			53			—			206
Total expenses		27			619			250			(54	)		842
Operating income (loss)		(27	)		190			102			—			265
Interest expense, net		(32	)		(14	)		(2	)		—			(48	)
Income (loss) from continuing operations before income taxes and income from investment in unconsolidated affiliate		(59	)		176			100			—			217
Income tax (provision) benefit		23			(66	)		(37	)		—			(80	)
Income from investment in unconsolidated affiliate		—			3			—			—			3
Equity in earnings of consolidated affiliates		176			—			—			(176	)		—
Income from continuing operations		140			113			63			(176	)		140
(Loss) income from discontinued operations, net of income taxes		(1	)		2			—			(2	)		(1	)
Net income	$	139		$	115		$	63		$	(178	)	$	139
Comprehensive income	$	151		$	115		$	67		$	(182	)	$	151

Condensed Consolidating Statement of Income and Comprehensive Income

Nine Months Ended September 30, 2013

(In millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Processing and services	$	—		$	2,168		$	951		$	(122	)	$	2,997
Product		—			526			76			(48	)		554
Total revenue		—			2,694			1,027			(170	)		3,551
Expenses:
Cost of processing and services		—			1,113			574			(122	)		1,565
Cost of product		—			494			65			(48	)		511
Selling, general and administrative		84			456			171			—			711
Total expenses		84			2,063			810			(170	)		2,787
Operating income (loss)		(84	)		631			217			—			764
Interest expense, net		(97	)		(19	)		(7	)		—			(123	)
Income (loss) from continuing operations before income taxes and income from investment in unconsolidated affiliate		(181	)		612			210			—			641
Income tax (provision) benefit		80			(222	)		(76	)		—			(218	)
Income from investment in unconsolidated affiliate		—			7			—			—			7
Equity in earnings of consolidated affiliates		531			—			—			(531	)		—
Income from continuing operations		430			397			134			(531	)		430
Loss from discontinued operations, net of income taxes		(3	)		—			—			—			(3	)
Net income	$	427		$	397		$	134		$	(531	)	$	427
Comprehensive income	$	424		$	397		$	126		$	(523	)	$	424

Condensed Consolidating Statement of Income and Comprehensive Income

Nine Months Ended September 30, 2012

(In millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Processing and services	$	—		$	1,930		$	912		$	(118	)	$	2,724
Product		—			528			83			(44	)		567
Total revenue		—			2,458			995			(162	)		3,291
Expenses:
Cost of processing and services		—			1,033			536			(118	)		1,451
Cost of product		—			457			51			(44	)		464
Selling, general and administrative		76			372			167			—			615
Total expenses		76			1,862			754			(162	)		2,530
Operating income (loss)		(76	)		596			241			—			761
Interest expense, net		(84	)		(43	)		(2	)		—			(129	)
Income (loss) from continuing operations before income taxes and income from investment in unconsolidated affiliate		(160	)		553			239			—			632
Income tax (provision) benefit		86			(204	)		(89	)		—			(207	)
Income from investment in unconsolidated affiliate		—			9			—			—			9
Equity in earnings of consolidated affiliates		508			—			—			(508	)		—
Income from continuing operations		434			358			150			(508	)		434
(Loss) income from discontinued operations, net of income taxes		(2	)		4			—			(4	)		(2	)
Net income	$	432		$	362		$	150		$	(512	)	$	432
Comprehensive income	$	449		$	362		$	155		$	(517	)	$	449

Condensed Consolidating Balance Sheet

September 30, 2013

(In millions)	Parent Company		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	18	$	75		$	228		$	—		$	321
Trade accounts receivable, net		—		451			259			—			710
Prepaid expenses and other current assets		96		236			164			—			496
Total current assets		114		762			651			—			1,527
Investments in consolidated affiliates		10,044		—			—			(10,044	)		—
Intangible assets, net		22		1,927			231			—			2,180
Goodwill		—		4,149			1,068			—			5,217
Other long-term assets		31		393			108			—			532
Total assets	$	10,211	$	7,231		$	2,058		$	(10,044	)	$	9,456
Liabilities and Shareholders’ Equity
Accounts payable and accrued expenses	$	109	$	478		$	239		$	—		$	826
Current maturities of long-term debt		—		2			—			—			2
Deferred revenue		—		253			147			—			400
Total current liabilities		109		733			386			—			1,228
Long-term debt		3,927		2			—			—			3,929
Due to (from) consolidated affiliates		1,972		(1,607	)		(365	)		—			—
Other long-term liabilities		743		57			39			—			839
Total liabilities		6,751		(815	)		60			—			5,996
Total shareholders’ equity		3,460		8,046			1,998			(10,044	)		3,460
Total liabilities and shareholders’ equity	$	10,211	$	7,231		$	2,058		$	(10,044	)	$	9,456

Condensed Consolidating Balance Sheet

December 31, 2012

(In millions)	Parent Company		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	85	$	66		$	207		$	—		$	358
Trade accounts receivable, net		—		403			258			—			661
Prepaid expenses and other current assets		45		186			160			—			391
Assets of discontinued operations		—		33			—			—			33
Total current assets		130		688			625			—			1,443
Investments in consolidated affiliates		8,498		—			—			(8,498	)		—
Intangible assets, net		22		1,479			243			—			1,744
Goodwill		—		3,695			1,010			—			4,705
Other long-term assets		55		445			105			—			605
Total assets	$	8,705	$	6,307		$	1,983		$	(8,498	)	$	8,497
Liabilities and Shareholders’ Equity
Accounts payable and accrued expenses	$	73	$	417		$	231		$	—		$	721
Current maturities of long-term debt		—		2			—			—			2
Deferred revenue		—		213			166			—			379
Liabilities of discontinued operations		—		3			—			—			3
Total current liabilities		73		635			397			—			1,105
Long-term debt		3,223		4			1			—			3,228
Due to (from) consolidated affiliates		1,295		(988	)		(307	)		—			—
Other long-term liabilities		697		22			28			—			747
Total liabilities		5,288		(327	)		119			—			5,080
Total shareholders’ equity		3,417		6,634			1,864			(8,498	)		3,417
Total liabilities and shareholders’ equity	$	8,705	$	6,307		$	1,983		$	(8,498	)	$	8,497

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2013

(In millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net cash provided by (used in) operating activities from continuing operations	$	(70	)	$	568		$	183		$	—		$	681
Cash flows from investing activities:
Capital expenditures, including capitalization of software costs		(2	)		(122	)		(47	)		—			(171	)
Payments for acquisitions of businesses, net of cash acquired		(55	)		25			—			—			(30	)
Dividend from unconsolidated affiliate		—			116			—			—			116
Net proceeds from sale of investments		—			—			2			—			2
Other investing activities		731			4			(4	)		(732	)		(1	)
Net cash (used in) provided by investing activities from continuing operations		674			23			(49	)		(732	)		(84	)
Cash flows from financing activities:
Proceeds from long-term debt		1,319			—			—			—			1,319
Repayments of long-term debt		(1,573	)		(1	)		—			—			(1,574	)
Issuance of treasury stock		37			—			—			—			37
Purchases of treasury stock		(455	)		—			—			—			(455	)
Other financing activities		9			(616	)		(113	)		732			12
Net cash used in financing activities from continuing operations		(663	)		(617	)		(113	)		732			(661	)
Net change in cash and cash equivalents from continuing operations		(59	)		(26	)		21			—			(64	)
Net cash flows from (to) discontinued operations		(8	)		35			—			—			27
Beginning balance		85			66			207			—			358
Ending balance	$	18		$	75		$	228		$	—		$	321

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2012

(In millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net cash provided by (used in) operating activities from continuing operations	$	(158	)	$	517		$	183		$	—		$	542
Cash flows from investing activities:
Capital expenditures, including capitalization of software costs		(3	)		(106	)		(36	)		—			(145	)
Net proceeds from sale of investments		—			3			24			—			27
Other investing activities		538			(1	)		—			(540	)		(3	)
Net cash (used in) provided by investing activities from continuing operations		535			(104	)		(12	)		(540	)		(121	)
Cash flows from financing activities:
Proceeds from long-term debt		994			—			—			—			994
Repayments of long-term debt		(897	)		(4	)		(45	)		—			(946	)
Issuance of treasury stock		80			—			—			—			80
Purchases of treasury stock		(580	)		—			—			—			(580	)
Other financing activities		(1	)		(431	)		(107	)		540			1
Net cash used in financing activities from continuing operations		(404	)		(435	)		(152	)		540			(451	)
Net change in cash and cash equivalents from continuing operations		(27	)		(22	)		19			—			(30	)
Net cash flows from (to) discontinued operations		(5	)		5			—			—			—
Beginning balance		73			71			193			—			337
Ending balance	$	41		$	54		$	212		$	—		$	307