Subsidiary Guarantors of Long-Term Debt

9 Months Ended

Sep. 30, 2014

Subsidiary Guarantors of Long-Term Debt

14. 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 Ratings Services 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. Certain intercompany amounts reported in the prior periods within the condensed consolidating balance sheet and condensed consolidating statement of cash flows have been reclassified to conform to the current period presentation and are not considered to be material by the Company.

Condensed Consolidating Statement of Income and Comprehensive Income

Three Months Ended September 30, 2014

(In millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Processing and services	$	—		$	774		$	333		$	(44	)	$	1,063
Product		—			189			27			(16	)		200
Total revenue		—			963			360			(60	)		1,263
Expenses:
Cost of processing and services		—			393			188			(44	)		537
Cost of product		—			159			25			(16	)		168
Selling, general and administrative		22			160			61			—			243
Total expenses		22			712			274			(60	)		948
Operating income (loss)		(22	)		251			86			—			315
Interest expense, net		(32	)		(7	)		(2	)		—			(41	)
Income (loss) from continuing operations before income taxes and income from investment in unconsolidated affiliate		(54	)		244			84			—			274
Income tax (provision) benefit		29			(119	)		(30	)		—			(120	)
Income from investment in unconsolidated affiliate		—			85			—			—			85
Equity in earnings of consolidated affiliates		264			—			—			(264	)		—
Income from continuing operations		239			210			54			(264	)		239
Income (loss) from discontinued operations, net of income taxes		—			—			—			—			—
Net income	$	239		$	210		$	54		$	(264	)	$	239
Comprehensive income	$	231		$	210		$	45		$	(255	)	$	231

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

Nine Months Ended September 30, 2014

(In millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Processing and services	$	—		$	2,297		$	974		$	(130	)	$	3,141
Product		—			585			76			(52	)		609
Total revenue		—			2,882			1,050			(182	)		3,750
Expenses:
Cost of processing and services		—			1,176			564			(130	)		1,610
Cost of product		—			496			75			(52	)		519
Selling, general and administrative		71			487			170			—			728
Total expenses		71			2,159			809			(182	)		2,857
Operating income (loss)		(71	)		723			241			—			893
Interest expense, net		(96	)		(20	)		(6	)		—			(122	)
Income (loss) from continuing operations before income taxes and income from investment in unconsolidated affiliate		(167	)		703			235			—			771
Income tax (provision) benefit		89			(291	)		(85	)		—			(287	)
Income from investment in unconsolidated affiliate		—			89			—			—			89
Equity in earnings of consolidated affiliates		651			—			—			(651	)		—
Income from continuing operations		573			501			150			(651	)		573
Income (loss) from discontinued operations, net of income taxes		—			—			—			—			—
Net income	$	573		$	501		$	150		$	(651	)	$	573
Comprehensive income	$	576		$	501		$	146		$	(647	)	$	576

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 Balance Sheet

September 30, 2014

(In millions)	Parent Company		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	128	$	76	$	205	$	—		$	409
Trade accounts receivable, net		—		485		263		—			748
Prepaid expenses and other current assets		52		213		157		—			422
Total current assets		180		774		625		—			1,579
Due from consolidated affiliates		—		2,194		583		(2,777	)		—
Investments in consolidated affiliates		10,763		—		—		(10,763	)		—
Intangible assets, net		22		1,772		248		—			2,042
Goodwill		—		4,154		1,058		—			5,212
Other long-term assets		37		464		104		—			605
Total assets	$	11,002	$	9,358	$	2,618	$	(13,540	)	$	9,438
Liabilities and Shareholders’ Equity
Accounts payable and accrued expenses	$	169	$	511	$	206	$	—		$	886
Current maturities of long-term debt		90		2		—		—			92
Deferred revenue		—		263		156		—			419
Total current liabilities		259		776		362		—			1,397
Long-term debt		3,755		1		—		—			3,756
Due to consolidated affiliates		2,777		—		—		(2,777	)		—
Other long-term liabilities		749		30		44		—			823
Total liabilities		7,540		807		406		(2,777	)		5,976
Total shareholders’ equity		3,462		8,551		2,212		(10,763	)		3,462
Total liabilities and shareholders’ equity	$	11,002	$	9,358	$	2,618	$	(13,540	)	$	9,438

Condensed Consolidating Balance Sheet

December 31, 2013

(In millions)	Parent Company		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	139	$	76	$	185	$	—		$	400
Trade accounts receivable, net		—		465		286		—			751
Prepaid expenses and other current assets		81		195		145		—			421
Total current assets		220		736		616		—			1,572
Due from consolidated affiliates		—		1,683		425		(2,108	)		—
Investments in consolidated affiliates		10,122		—		—		(10,122	)		—
Intangible assets, net		22		1,866		254		—			2,142
Goodwill		—		4,150		1,066		—			5,216
Other long-term assets		33		448		102		—			583
Total assets	$	10,397	$	8,883	$	2,463	$	(12,230	)	$	9,513
Liabilities and Shareholders’ Equity
Accounts payable and accrued expenses	$	87	$	463	$	206	$	—		$	756
Current maturities of long-term debt		90		2		—		—			92
Deferred revenue		—		292		192		—			484
Total current liabilities		177		757		398		—			1,332
Long-term debt		3,754		2		—		—			3,756
Due to consolidated affiliates		2,108		—		—		(2,108	)		—
Other long-term liabilities		773		25		42		—			840
Total liabilities		6,812		784		440		(2,108	)		5,928
Total shareholders’ equity		3,585		8,099		2,023		(10,122	)		3,585
Total liabilities and shareholders’ equity	$	10,397	$	8,883	$	2,463	$	(12,230	)	$	9,513

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2014

(In millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net cash provided by operating activities from continuing operations	$	33		$	736		$	191		$	—		$	960
Cash flows from investing activities:
Capital expenditures, including capitalization of software costs		(3	)		(163	)		(59	)		—			(225	)
Net proceeds from investments		—			—			7			—			7
Other investing activities		—			(573	)		(119	)		691			(1	)
Net cash used in investing activities from continuing operations		(3	)		(736	)		(171	)		691			(219	)
Cash flows from financing activities:
Debt proceeds		544			—			—			—			544
Debt repayments		(544	)		—			—			—			(544	)
Issuance of treasury stock		39			—			—			—			39
Purchases of treasury stock		(785	)		—			—			—			(785	)
Other financing activities		706			—			—			(691	)		15
Net cash used in financing activities from continuing operations		(40	)		—			—			(691	)		(731	)
Net change in cash and cash equivalents from continuing operations		(10	)		—			20			—			10
Net cash flows to discontinued operations		(1	)		—			—			—			(1	)
Beginning balance		139			76			185			—			400
Ending balance	$	128		$	76		$	205		$	—		$	409

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 investments		—			—			2			—			2
Other investing activities		(1	)		(612	)		(120	)		732			(1	)
Net cash used in investing activities from continuing operations		(58	)		(593	)		(165	)		732			(84	)
Cash flows from financing activities:
Debt proceeds		1,319			—			—			—			1,319
Debt repayments		(1,573	)		(1	)		—			—			(1,574	)
Issuance of treasury stock		37			—			—			—			37
Purchases of treasury stock		(455	)		—			—			—			(455	)
Other financing activities		741			—			3			(732	)		12
Net cash (used in) provided by financing activities from continuing operations		69			(1	)		3			(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