Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 September 30, 2013

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                      to                     

Commission File Number 0-14948

 

 

FISERV, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

WISCONSIN   39-1506125

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I. R. S. Employer

Identification No.)

 

255 FISERV DRIVE, BROOKFIELD, WI   53045
(Address of Principal Executive Offices)   (Zip Code)

(262) 879-5000

(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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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   ¨
Non-accelerated filer   ¨    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of October 24, 2013, there were 128,969,152 shares of common stock, $.01 par value, of the registrant outstanding.

 

 

 


Table of Contents

INDEX

 

          Page  

PART I—FINANCIAL INFORMATION

  

Item 1.

   Financial Statements (Unaudited)   
  

Consolidated Statements of Income

     1   
  

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

    

 

2

3

  

  

  

Consolidated Statements of Cash Flows

     4   
   Notes to Consolidated Financial Statements      5   

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      19   

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      26   

Item 4.

   Controls and Procedures      26   

PART II—OTHER INFORMATION

  

Item 1.

   Legal Proceedings      27   

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      27   

Item 6.

   Exhibits      27   
   Signatures   
   Exhibit Index   


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Fiserv, Inc.

Consolidated Statements of Income

(In millions, except per share data)

(Unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2013     2012     2013     2012  

Revenue:

        

Processing and services

   $ 1,016      $ 922      $ 2,997      $ 2,724   

Product

     185        185        554        567   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     1,201        1,107        3,551        3,291   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Cost of processing and services

     520        486        1,565        1,451   

Cost of product

     164        150        511        464   

Selling, general and administrative

     237        206        711        615   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     921        842        2,787        2,530   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     280        265        764        761   

Interest expense

     (41     (48     (123     (135

Interest and investment income

     —          —          —          6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes and income from investment in unconsolidated affiliate

     239        217        641        632   

Income tax provision

     (79     (80     (218     (207

Income from investment in unconsolidated affiliate

     1        3        7        9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     161        140        430        434   

Loss from discontinued operations, net of income taxes

     (2     (1     (3     (2
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 159      $ 139      $ 427      $ 432   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share—basic:

        

Continuing operations

   $ 1.24      $ 1.04      $ 3.26      $ 3.18   

Discontinued operations

     (0.02     (0.01     (0.02     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 1.22      $ 1.03      $ 3.24      $ 3.16   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share—diluted:

        

Continuing operations

   $ 1.22      $ 1.03      $ 3.22      $ 3.14   

Discontinued operations

     (0.02     (0.01     (0.02     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 1.21      $ 1.02      $ 3.19      $ 3.12   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Basic

     129.9        134.9        132.0        136.6   

Diluted

     131.9        136.6        133.8        138.3   

See accompanying notes to consolidated financial statements.

 

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Fiserv, Inc.

Consolidated Statements of Comprehensive Income

(In millions)

(Unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2013      2012     2013     2012  

Net income

   $ 159       $ 139      $ 427      $ 432   

Other comprehensive income (loss):

         

Fair market value adjustment on cash flow hedges, net of income taxes of $1 million, $1 million and $8 million

     —           (2     (2     (12

Reclassification adjustment for net realized losses on cash flow hedges included in interest expense, net of income taxes of $1 million, $7 million, $4 million and $16 million

     2         10        7        24   

Foreign currency translation

     2         4        (8     5   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     4         12        (3     17   
  

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 163       $ 151      $ 424      $ 449   
  

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Fiserv, Inc.

Consolidated Balance Sheets

(In millions)

(Unaudited)

 

     September 30,
2013
    December 31,
2012
 
Assets     

Cash and cash equivalents

   $ 321      $ 358   

Trade accounts receivable, net

     710        661   

Deferred income taxes

     54        42   

Prepaid expenses and other current assets

     442        349   

Assets of discontinued operations

     —          33   
  

 

 

   

 

 

 

Total current assets

     1,527        1,443   

Property and equipment, net

     259        248   

Intangible assets, net

     2,180        1,744   

Goodwill

     5,217        4,705   

Other long-term assets

     273        357   
  

 

 

   

 

 

 

Total assets

   $ 9,456      $ 8,497   
  

 

 

   

 

 

 
Liabilities and Shareholders’ Equity     

Accounts payable and accrued expenses

   $ 826      $ 721   

Current maturities of long-term debt

     2        2   

Deferred revenue

     400        379   

Liabilities of discontinued operations

     —          3   
  

 

 

   

 

 

 

Total current liabilities

     1,228        1,105   

Long-term debt

     3,929        3,228   

Deferred income taxes

     683        638   

Other long-term liabilities

     156        109   
  

 

 

   

 

 

 

Total liabilities

     5,996        5,080   
  

 

 

   

 

 

 

Commitments and contingencies

    

Shareholders’ equity:

    

Preferred stock, no par value: 25.0 million shares authorized; none issued

     —          —     

Common stock, $0.01 par value: 450.0 million shares authorized; 197.9 million shares issued

     2        2   

Additional paid-in capital

     832        804   

Accumulated other comprehensive loss

     (63     (60

Retained earnings

     6,377        5,950   

Treasury stock, at cost, 68.6 million and 64.5 million shares

     (3,688     (3,279
  

 

 

   

 

 

 

Total shareholders’ equity

     3,460        3,417   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 9,456      $ 8,497   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Fiserv, Inc.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

 

     Nine Months Ended  
     September 30,  
     2013     2012  

Cash flows from operating activities:

    

Net income

   $ 427      $ 432   

Adjustment for discontinued operations

     3        2   

Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:

    

Depreciation and other amortization

     145        142   

Amortization of acquisition-related intangible assets

     156        120   

Share-based compensation

     37        35   

Deferred income taxes

     (11     (11

Non-cash impairment charge

     30        —     

Dividend from unconsolidated affiliate

     6        —     

Settlement of interest rate hedge contracts

     —          (88

Other non-cash items

     (16     (20

Changes in assets and liabilities, net of effects from acquisitions:

    

Trade accounts receivable

     (7     24   

Prepaid expenses and other assets

     (51     (47

Accounts payable and other liabilities

     (12     (16

Deferred revenue

     (26     (31
  

 

 

   

 

 

 

Net cash provided by operating activities from continuing operations

     681        542   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Capital expenditures, including capitalization of software costs

     (171     (145

Payments for acquisitions of businesses, net of cash acquired

     (30     —     

Dividend from unconsolidated affiliate

     116        —     

Net proceeds from sale of investments

     2        27   

Other investing activities

     (1     (3
  

 

 

   

 

 

 

Net cash used in investing activities from continuing operations

     (84     (121
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from long-term debt

     1,319        994   

Repayments of long-term debt

     (1,574     (946

Issuance of treasury stock

     37        80   

Purchases of treasury stock

     (455     (580

Other financing activities

     12        1   
  

 

 

   

 

 

 

Net cash used in financing activities from continuing operations

     (661     (451
  

 

 

   

 

 

 

Net change in cash and cash equivalents from continuing operations

     (64     (30

Net cash flows from discontinued operations

     27        —     

Beginning balance

     358        337   
  

 

 

   

 

 

 

Ending balance

   $ 321      $ 307   
  

 

 

   

 

 

 

Discontinued operations cash flow information:

    

Net cash (used in) provided by operating activities

   $ (8   $ 2   

Net cash provided by (used in) investing activities

     35        (2
  

 

 

   

 

 

 

Net change in cash and cash equivalents from discontinued operations

     27        —     

Net cash flows to continuing operations

     (27     —     

Beginning balance—discontinued operations

     —          —     
  

 

 

   

 

 

 

Ending balance—discontinued operations

   $ —        $ —     
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Fiserv, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. Principles of Consolidation

The consolidated financial statements for the three-month and nine-month periods ended September 30, 2013 and 2012 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. Such adjustments consisted of normal recurring items. Interim results are not necessarily indicative of results for a full year. The consolidated financial statements and accompanying notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual consolidated financial statements and accompanying notes of Fiserv, Inc. (the “Company”). These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

The consolidated financial statements include the accounts of Fiserv, Inc. and all 100% owned subsidiaries. Investments in less than 50% owned affiliates in which the Company has significant influence but not control are accounted for using the equity method of accounting. All intercompany transactions and balances have been eliminated in consolidation.

2. Fair Value Measurements

The Company applies fair value accounting for all assets and liabilities that are recognized or disclosed at fair value in its consolidated financial statements on a recurring basis. Fair value represents the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability.

The fair values of cash equivalents, trade accounts receivable, settlement assets and obligations, and accounts payable approximate their respective carrying values due to the short period of time to maturity. The estimated fair value of total debt was $4.0 billion at September 30, 2013 and $3.5 billion at December 31, 2012 and was estimated using discounted cash flows based on the Company’s current incremental borrowing rates or quoted prices in active markets (level 2 of the fair value hierarchy).

3. Acquisition

On January 14, 2013, the Company acquired Open Solutions Inc. (“Open Solutions”), a provider of account processing technology for financial institutions, for a cash purchase price of $55 million. The Company also assumed approximately $960 million of debt in connection with the acquisition. This acquisition advances the Company’s go-to-market strategies by adding a number of products and services and by expanding the number of account processing clients to which the Company can provide its broad array of add-on products and services.

 

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The preliminary allocation of purchase price recorded for Open Solutions is as follows:

 

(In millions)

      

Cash and cash equivalents

   $ 39   

Trade accounts receivable

     41   

Prepaid expenses and other current assets

     41   

Intangible assets

     571   

Goodwill

     510   

Other long-term assets

     18   

Accounts payable and other current liabilities

     (140

Long-term debt, less current maturities

     (952

Other long-term liabilities

     (73
  

 

 

 

Total cash purchase price

   $ 55   
  

 

 

 

The cash purchase price and repayment of assumed debt were funded utilizing a combination of available cash and existing availability under the Company’s revolving credit facility. The amounts attributed to goodwill and identified tax assets are based on preliminary valuations and are subject to final adjustment. The preliminary purchase price allocation resulted in goodwill, included within the Financial Institution Services (“Financial”) segment, of approximately $510 million, of which $161 million is expected to be deductible for tax purposes. Such goodwill is primarily attributable to synergies with the products and services that Open Solutions provides and the anticipated value created by selling the Company’s products and services to Open Solutions’ existing client base. The values allocated to intangible assets are as follows:

 

(In millions)

   Gross
Carrying
Amount
     Weighted-
Average
Useful Life
 

Customer related intangible assets

   $ 460         20 years   

Acquired software and technology

     105         7 years   

Trade name

     6         10 years   
  

 

 

    
   $ 571      
  

 

 

    

The results of operations for Open Solutions, including $69 million and $204 million of revenue, respectively, during the three and nine months ended September 30, 2013, have been included within the Financial segment from the date of acquisition. As a result of the acquisition, the Company has incurred merger and integration costs, including a $30 million non-cash impairment charge related to the Company’s decision to replace its Acumen® account processing platform with DNATM, an Open Solutions account processing platform. The Acumen platform costs were recorded as capitalized software and included in the Financial segment assets. The related impairment charge was recorded in cost of product within the Corporate and Other segment in the first quarter of 2013 as this charge is excluded from the Company’s measure of the Financial segment’s operating performance.

The following unaudited supplemental pro forma information presents the Company’s results of operations as though the acquisition of Open Solutions had occurred on January 1, 2012. This information is presented for informational purposes and is not necessarily indicative of the Company’s operating results which would have occurred had the acquisition been consummated as of that date. The pro forma information presented below does not include anticipated synergies, the impact of purchase accounting adjustments or certain other expected benefits of the acquisition and should not be used as a predictive measure of our future results of operations.

 

     (Pro Forma Unaudited)  

(In millions, except per share data)

   Three Months Ended
September 30, 2012
     Nine Months Ended
September 30, 2012
 

Total revenue

   $ 1,187       $ 3,542   

Net income

   $ 141       $ 443   

Net income per share—basic

   $ 1.04       $ 3.24   

Net income per share—diluted

   $ 1.03       $ 3.20   

 

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4. Discontinued Operations

On March 14, 2013, the Company sold its club solutions business (“Club Solutions”) for approximately $37 million in cash at closing. The assets, liabilities, results of operations and cash flows of Club Solutions, which were previously included within the Payments and Industry Products (“Payments”) segment, have been reported as discontinued operations in the accompanying consolidated financial statements for all periods presented. During 2013, Club Solutions revenue was $10 million, and the Company recognized a $4 million loss, net of income taxes, on the sale of the business. Club Solutions revenue was $12 million and $35 million during the three and nine months ended September 30, 2012, respectively. The assets of discontinued operations at December 31, 2012 primarily consist of intangible assets, including software, customer related intangibles and goodwill.

5. Share-Based Compensation

The Company recognized $11 million and $37 million of share-based compensation expense during the three and nine months ended September 30, 2013, respectively, and $10 million and $35 million of share-based compensation expense during the three and nine months ended September 30, 2012, respectively. The Company’s annual grant of share-based awards generally occurs in the first quarter. During the nine months ended September 30, 2013, the Company granted 1.0 million stock options and 0.5 million restricted stock units at weighted-average estimated fair values of $25.33 and $81.97, respectively. During the nine months ended September 30, 2012, the Company granted 1.0 million stock options and 0.4 million restricted stock units at weighted-average estimated fair values of $21.59 and $65.42, respectively. During the nine months ended September 30, 2013 and 2012, stock options to purchase 0.5 million shares and 1.7 million shares, respectively, were exercised.

6. Shares Used in Computing Net Income Per Share

The computation of shares used in calculating diluted net income per common share is as follows:

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  

(In millions)

   2013      2012      2013      2012  

Weighted-average shares outstanding used for the calculation of net income per share—basic

     129.9         134.9         132.0         136.6   

Common stock equivalents

     2.0         1.7         1.8         1.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total shares used for the calculation of net income per share—diluted

     131.9         136.6         133.8         138.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

For each of the three-month periods ended September 30, 2013 and 2012, stock options for 0.9 million shares were excluded from the calculation of diluted weighted-average outstanding shares because their impact was anti-dilutive. For the nine months ended September 30, 2013 and 2012, stock options for 0.8 million and 1.5 million shares, respectively, were excluded from the calculation of diluted weighted-average outstanding shares because their impact was anti-dilutive.

 

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7. Intangible Assets

Intangible assets consisted of the following:

 

     Gross                

(In millions)

   Carrying      Accumulated      Net Book  
September 30, 2013    Amount      Amortization      Value  

Customer related intangible assets

   $ 2,155       $ 634       $ 1,521   

Acquired software and technology

     493         271         222   

Trade names

     120         36         84   

Capitalized software development costs

     642         370         272   

Purchased software

     294         213         81   
  

 

 

    

 

 

    

 

 

 

Total

   $ 3,704       $ 1,524       $ 2,180   
  

 

 

    

 

 

    

 

 

 
     Gross                

(In millions)

   Carrying      Accumulated      Net Book  
December 31, 2012    Amount      Amortization      Value  

Customer related intangible assets

   $ 1,695       $ 534       $ 1,161   

Acquired software and technology

     378         222         156   

Trade names

     114         29         85   

Capitalized software development costs

     667         398         269   

Purchased software

     325         252         73   
  

 

 

    

 

 

    

 

 

 

Total

   $ 3,179       $ 1,435       $ 1,744   
  

 

 

    

 

 

    

 

 

 

The Company estimates that annual amortization expense with respect to acquired intangible assets, which include customer related intangible assets, acquired software and technology, and trade names, will be approximately $210 million in 2013, approximately $200 million in 2014, approximately $190 million in 2015, approximately $150 million in 2016 and approximately $140 million in 2017. Annual amortization expense in 2013 with respect to capitalized and purchased software is estimated to approximate $110 million.

8. Investment in Unconsolidated Affiliate

The Company owns a 49% interest in StoneRiver Group, L.P. (“StoneRiver”), which is accounted for as an equity method investment, and reports its share of StoneRiver’s net income as income from investment in unconsolidated affiliate. The Company’s investment in StoneRiver was $78 million at December 31, 2012 and was reported within other long-term assets in the consolidated balance sheet. In the second quarter of 2013, the Company received a $122 million cash dividend from StoneRiver, distributed from excess proceeds from a recapitalization transaction. The dividend exceeded the Company’s investment carrying amount, resulting in the reduction of its investment balance to zero, with the excess cash dividend recorded within other long-term liabilities in the consolidated balance sheet. At September 30, 2013, the Company’s carrying amount was $35 million and was reported within other long-term liabilities in the consolidated balance sheet. Although the Company does not maintain a legal obligation to fund any of the liabilities or potential operating deficits of StoneRiver, it intends to provide future financial support, based upon its continuing assessment of various factors, should the need arise. A portion of the dividend, $6 million, represents a return on the Company’s investment and was reported as cash flows from operating activities.

 

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9. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following:

 

     September 30,      December 31,  

(In millions)

   2013      2012  

Trade accounts payable

   $ 61       $ 97   

Settlement obligations

     239         216   

Client deposits

     177         147   

Accrued compensation and benefits

     132         144   

Other accrued expenses

     217         117   
  

 

 

    

 

 

 

Total

   $ 826       $ 721   
  

 

 

    

 

 

 

10. Long-Term Debt

The Company maintains a $2.0 billion revolving credit facility with a syndicate of banks. Borrowings under this facility bear interest at a variable rate, 1.3% at September 30, 2013, based on LIBOR plus a specified margin or the bank’s base rate. There are no significant commitment fees and no compensating balance requirements. The facility expires on August 1, 2017 and contains various restrictions and covenants that require the Company, among other things, to (i) limit its consolidated indebtedness as of the end of each fiscal quarter to no more than three and one-half times consolidated net earnings before interest, taxes, depreciation and amortization and certain other adjustments during the period of four fiscal quarters then ended, and (ii) maintain consolidated net earnings before interest, taxes, depreciation and amortization and certain other adjustments of at least three times consolidated interest expense as of the end of each fiscal quarter for the period of four fiscal quarters then ended. During the first nine months of 2013, the Company was in compliance with all financial debt covenants. As of September 30, 2013, borrowings outstanding under the facility approximated $1.0 billion, primarily related to the funding of assumed debt from the acquisition of Open Solutions. The revolving credit facility was amended on October 25, 2013. See Note 14.

11. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, net of income taxes, consisted of the following:

 

(In millions)

   Cash Flow
Hedges
    Foreign
Currency
Translation
    Other     Total  

Balance at December 31, 2012

   $ (57   $ (1   $ (2   $ (60
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive loss before reclassifications

     (2     (8     —          (10

Amounts reclassified from accumulated other comprehensive loss

     7        —          —          7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive (loss) income

     5        (8     —          (3
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2013

   $ (52   $ (9   $ (2   $ (63
  

 

 

   

 

 

   

 

 

   

 

 

 

Based on the amounts recorded in accumulated other comprehensive loss at September 30, 2013, the Company estimates that it will recognize approximately $14 million in interest expense during the next twelve months related to settled interest rate hedge contracts.

 

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12. Cash Flow Information

Supplemental cash flow information was as follows:

 

     Nine Months Ended
September 30,
 

(In millions)

   2013      2012  

Interest paid, including on assumed debt

   $ 97       $ 105   

Income taxes paid from continuing operations

     238         246   

Liabilities assumed in acquisitions of businesses

     1,169         —     

Treasury stock purchases settled after the balance sheet date

     8         6   

13. Business Segment Information

The Company’s operations are comprised of the Payments segment and the Financial segment. The Payments segment primarily provides electronic bill payment and presentment services, debit and other card-based payment products and services, internet and mobile banking software and services, and other electronic payments software and services, including account-to-account transfers and person-to-person payments. The businesses in this segment also provide investment account processing services for separately managed accounts, card and print personalization services, and fraud and risk management products and services. The Financial segment provides banks, thrifts and credit unions with account processing services, item processing and source capture services, loan origination and servicing products, cash management and consulting services, and other products and services that support numerous types of financial transactions. The Corporate and Other segment primarily consists of unallocated corporate expenses, amortization of acquisition-related intangible assets, intercompany eliminations and other costs that are not considered when management evaluates segment performance.

 

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(In millions)

   Payments      Financial      Corporate
and Other
    Total  

Three Months Ended September 30, 2013

          

Processing and services revenue

   $ 480       $ 538       $ (2   $ 1,016   

Product revenue

     151         42         (8     185   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total revenue

   $ 631       $ 580       $ (10   $ 1,201   
  

 

 

    

 

 

    

 

 

   

 

 

 

Operating income

   $ 173       $ 194       $ (87   $ 280   
  

 

 

    

 

 

    

 

 

   

 

 

 

Three Months Ended September 30, 2012

          

Processing and services revenue

   $ 453       $ 473       $ (4   $ 922   

Product revenue

     153         40         (8     185   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total revenue

   $ 606       $ 513       $ (12   $ 1,107   
  

 

 

    

 

 

    

 

 

   

 

 

 

Operating income

   $ 166       $ 165       $ (66   $ 265   
  

 

 

    

 

 

    

 

 

   

 

 

 

Nine Months Ended September 30, 2013

          

Processing and services revenue

   $ 1,410       $ 1,595       $ (8   $ 2,997   

Product revenue

     464         118         (28     554   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total revenue

   $ 1,874       $ 1,713       $ (36   $ 3,551   
  

 

 

    

 

 

    

 

 

   

 

 

 

Operating income

   $ 518       $ 541       $ (295   $ 764   
  

 

 

    

 

 

    

 

 

   

 

 

 

Nine Months Ended September 30, 2012

          

Processing and services revenue

   $ 1,326       $ 1,407       $ (9   $ 2,724   

Product revenue

     484         109         (26     567   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total revenue

   $ 1,810       $ 1,516       $ (35   $ 3,291   
  

 

 

    

 

 

    

 

 

   

 

 

 

Operating income

   $ 481       $ 479       $ (199   $ 761   
  

 

 

    

 

 

    

 

 

   

 

 

 

Goodwill in the Payments segment was $3.4 billion as of September 30, 2013 and December 31, 2012. Goodwill in the Financial segment was $1.8 billion and $1.3 billion as of September 30, 2013 and December 31, 2012, respectively.

14. Subsequent Event

On October 25, 2013, the Company obtained a $900 million term loan under a new loan agreement with a syndicate of banks. This term loan bears interest at a variable rate, including based on LIBOR or the administrative agent’s prime rate, in either case, plus a specified margin based on the Company’s long-term debt rating in effect from time to time, and matures in October 2018. Scheduled principal payments of $90 million are due on the last business day of December of each year, commencing on December 31, 2014. In connection with the term loan financing, the Company entered into an amendment to its existing $2.0 billion revolving credit agreement that conformed certain of its provisions to those in the new term loan agreement and extended its maturity to October 2018. The revolving credit facility was previously scheduled to expire on August 1, 2017. The new term loan facility and amended revolving credit facility contain various restrictions and covenants substantially similar to those contained in the revolving credit facility described in Note 10. The Company used the net proceeds from the term loan to repay outstanding borrowings under the revolving credit facility. After such repayment, $75 million remains outstanding under the revolving credit agreement.

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

 

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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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

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   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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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   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This quarterly report contains “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those that express a plan, belief, expectation, estimation, anticipation, intent, contingency, future development or similar expression, and can generally be identified as forward-looking because they include words such as “believes,” “anticipates,” “expects,” “could,” “should” or words of similar meaning. Statements that describe our future plans, objectives or goals are also forward-looking statements. The forward-looking statements in this report involve significant risks and uncertainties, and a number of factors, both foreseen and unforeseen, that could cause actual results to differ materially from our current expectations. The factors that may affect our results include, among others: the impact on our business of the current state of the economy, including the risk of reduction in revenue resulting from decreased spending on the products and services we offer; legislative and regulatory actions in the United States and internationally, including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulations; our ability to successfully integrate acquisitions, including Open Solutions Inc., into our operations; changes in client demand for our products or services; pricing or other actions by competitors; the impact of our strategic initiatives; our ability to comply with government regulations, including privacy regulations; and other factors identified in our Annual Report on Form 10-K for the year ended December 31, 2012 and in other documents that we file with the Securities and Exchange Commission. You should consider these factors carefully in evaluating forward-looking statements and are cautioned not to place undue reliance on such statements, which speak only as of the date of this report. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report.

Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to our unaudited consolidated financial statements and accompanying notes to help provide an understanding of our financial condition, the changes in our financial condition and our results of operations. Our discussion is organized as follows:

 

    Overview. This section contains background information on our company and the services and products that we provide, our enterprise priorities and the trends and business developments affecting our industry in order to provide context for management’s discussion and analysis of our financial condition and results of operations.

 

    Results of operations. This section contains an analysis of our results of operations presented in the accompanying unaudited consolidated statements of income by comparing the results for the three and nine months ended September 30, 2013 to the comparable periods in 2012.

 

    Liquidity and capital resources. This section provides an analysis of our cash flows and a discussion of our outstanding debt as of September 30, 2013.

Overview

Company Background

We are a leading global provider of financial services technology. We provide account processing systems, electronic payments processing products and services, internet and mobile banking systems, and related services. We serve approximately 16,000 clients worldwide, including banks, thrifts, credit unions, investment management firms, leasing and finance companies, retailers, merchants and government agencies. The majority of our revenue is generated from recurring account- and transaction-based fees under contracts that generally have terms of three to five years. We also have had high contract renewal rates with our clients. The majority of the services we provide are necessary for our clients to operate their businesses and are, therefore, non-discretionary in nature.

Our operations are primarily in the United States and are comprised of the Payments and Industry Products (“Payments”) segment and the Financial Institution Services (“Financial”) segment. The Payments segment primarily provides electronic bill payment and presentment services, debit and other card-based payment products and services, internet and mobile banking software and services, and other electronic payments software and services, including account-to-account transfers and person-to-person payments. Our businesses in this segment also provide investment account processing services for separately managed accounts, card and print personalization services, and fraud and risk management products and services. The Financial segment provides banks, thrifts and

 

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credit unions with account processing services, item processing and source capture services, loan origination and servicing products, cash management and consulting services, and other products and services that support numerous types of financial transactions. The Corporate and Other segment primarily consists of unallocated corporate expenses, amortization of acquisition-related intangible assets, intercompany eliminations and other costs that are not considered when management evaluates segment performance.

On January 14, 2013, we acquired Open Solutions Inc. (“Open Solutions”), a provider of account processing technology for financial institutions, for a cash purchase price of $55 million. We also assumed approximately $960 million of debt. With this acquisition, we added 3,300 clients, as well as DNA™, a real-time, open architecture account processing platform. The Open Solutions acquisition advances Fiserv’s go-to-market strategies by adding a number of products and services and by expanding the number of account processing clients to which we can provide a broad array of our add-on solutions.

Enterprise Priorities

We continue to implement a series of strategic initiatives to help accomplish our mission of providing integrated technology and services solutions that enable best-in-class results for our clients. These strategic initiatives include active portfolio management of our various businesses, enhancing the overall value of our existing client relationships, improving operational effectiveness, being disciplined in our allocation of capital, and differentiating our products and services through innovation. Our key enterprise priorities for 2013 are: (i) to continue to build high-quality revenue growth and meet our earnings goals; (ii) to extend market momentum into deeper client relationships and a larger share of our strategic solutions; and (iii) to deliver innovation and integration to enhance results for our clients, with an important focus on Open Solutions.

Industry Trends

Market and regulatory conditions have continued to create a difficult operating environment for financial institutions and other businesses in the United States and internationally. In particular, legislation such as the Dodd-Frank Wall Street Reform and Consumer Protection Act has generated, and will continue to generate, numerous new regulations that will impact the financial industry. Financial institutions have generally remained cautious in their information technology spending as a result. These conditions have, however, created interest in solutions that help financial institutions win and retain customers, generate incremental revenue and enhance operating efficiency. Examples of these solutions include our digital channels and electronic payments solutions, including mobile banking and person-to-person payments. Despite the difficult environment over the past several years, our revenue increased 3% in 2012 compared to 2011 and 8% in the first nine months of 2013 compared to the same period in 2012; our net income per share from continuing operations increased 27% to $4.30 for the full year of 2012; and our net cash provided by operating activities was $826 million for the full year of 2012 and $681 million for the first nine months of 2013. We believe these financial results demonstrate the resilience of our recurring, fee-based revenue model, the largely non-discretionary nature of our products and services, and mild improvement in the general condition of the financial industry. We anticipate that we will benefit over the long term from the trend of financial institutions moving from in-house technology solutions to outsourced solutions.

During the past 25 years, the number of financial institutions in the United States has declined at a relatively steady rate of approximately 3% per year, primarily as a result of voluntary mergers and acquisitions. An acquisition benefits us when a newly combined institution is processed on our platform, or elects to move to one of our platforms, and negatively impacts us when a competing platform is selected. Financial institution acquisitions also impact our financial results due to early contract termination fees in our multi-year client contracts. Contract termination fees are primarily generated when an existing client with a multi-year contract is acquired by another financial institution. These fees can vary from period to period based on the number and size of clients that are acquired and how early in the contract term the contract is terminated.

Business Developments

We continue to invest in the development of new and strategic products in categories such as payments, including Popmoney® for person-to-person payments; MobilitiTM for mobile banking and payments services; and others that we believe will increase value to our clients and enhance the capabilities of our existing solutions. In January 2013, we acquired Open Solutions, a provider of account processing technology for financial institutions, which added DNA, a real-time, open architecture account processing platform. We believe our wide range of market-leading solutions along with the investments we are making in new and differentiated products will favorably position us and our clients to capitalize on opportunities in the marketplace.

 

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Results of Operations

On March 14, 2013, the Company sold its club solutions business (“Club Solutions”). The results of operations and cash flows of Club Solutions, which were previously included within the Payments segment, have been reported as discontinued operations for all periods presented.

The following table presents certain amounts included in our consolidated statements of income, the relative percentage that those amounts represent to revenue and the change in those amounts from year to year. This information should be read together with the consolidated financial statements and accompanying notes.

 

     Three Months Ended September 30,  
                 Percentage of
Revenue (1)
    Increase (Decrease)  

(In millions)

   2013     2012     2013     2012     $     %  

Revenue:

            

Processing and services

   $ 1,016      $ 922        84.6     83.3   $ 94        10

Product

     185        185        15.4     16.7     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     1,201        1,107        100.0     100.0     94        8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

            

Cost of processing and services

     520        486        51.2     52.7     34        7

Cost of product

     164        150        88.6     81.1     14        9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-total

     684        636        57.0     57.5     48        8

Selling, general and administrative

     237        206        19.7     18.6     31        15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     921        842        76.7     76.1     79        9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     280        265        23.3     24.0     15        6

Interest expense

     (41     (48     (3.4 %)      (4.3 %)      (7     (15 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes and income from investment in unconsolidated affiliate

   $ 239      $ 217        19.9     19.6   $ 22        10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Nine Months Ended September 30,  
                 Percentage of
Revenue (1)
    Increase (Decrease)  

(In millions)

   2013     2012     2013     2012     $     %  

Revenue:

            

Processing and services

   $ 2,997      $ 2,724        84.4     82.8   $ 273        10

Product

     554        567        15.6     17.2     (13     (2 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     3,551        3,291        100.0     100.0     260        8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

            

Cost of processing and services

     1,565        1,451        52.2     53.3     114        8

Cost of product

     511        464        92.2     81.8     47        10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-total

     2,076        1,915        58.5     58.2     161        8

Selling, general and administrative

     711        615        20.0     18.7     96        16
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     2,787        2,530        78.5     76.9     257        10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     764        761        21.5     23.1     3        —     

Interest expense

     (123     (135     (3.5 %)      (4.1 %)      (12     (9 %) 

Interest and investment income

     —          6        —          0.2     (6     (100 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes and income from investment in unconsolidated affiliate

   $ 641      $ 632        18.1     19.2   $ 9        1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Percentage of revenue is calculated as the relevant revenue, expense or income amount divided by total revenue, except for cost of processing and services and cost of product amounts which are divided by the related component of revenue.

 

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     Three Months Ended September 30,  
                 Corporate        

(In millions)

   Payments     Financial     and Other     Total  

Total revenue:

        

2013

   $ 631      $ 580      $ (10   $ 1,201   

2012

     606        513        (12     1,107   

Revenue growth

   $ 25      $ 67      $ 2      $ 94   

Revenue growth percentage

     4     13       8

Operating income:

        

2013

   $ 173      $ 194      $ (87   $ 280   

2012

     166        165        (66     265   

Operating income growth

   $ 7      $ 29      $ (21   $ 15   

Operating income growth percentage

     4     18       6

Operating margin:

        

2013

     27.4     33.3       23.3

2012

     27.4     32.1       24.0

Operating margin growth (1)

     —          1.2       (0.7 %) 

 

     Nine Months Ended September 30,  
                 Corporate        

(In millions)

   Payments     Financial     and Other     Total  

Total revenue:

        

2013

   $ 1,874      $ 1,713      $ (36   $ 3,551   

2012

     1,810        1,516        (35     3,291   

Revenue growth

   $ 64      $ 197      $ (1   $ 260   

Revenue growth percentage

     4     13       8

Operating income:

        

2013

   $ 518      $ 541      $ (295   $ 764   

2012

     481        479        (199     761   

Operating income growth

   $ 37      $ 62      $ (96   $ 3   

Operating income growth percentage

     8     13       —     

Operating margin:

        

2013

     27.6     31.6       21.5

2012

     26.6     31.6       23.1

Operating margin growth (1)

     1.0     —            (1.6 %) 

 

(1)  Represents the percentage point growth or decline in operating margin.

 

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Total Revenue

Total revenue increased $94 million and $260 million, respectively, or 8%, in each of the third quarter and first nine months of 2013 compared to 2012. Revenue growth was driven by both our Payments and Financial segments in 2013. Revenue from our Open Solutions acquisition contributed $69 million of total revenue to the Financial segment in the third quarter of 2013 and $204 million in the first nine months of 2013.

Revenue in our Payments segment increased $25 million and $64 million, respectively, or 4%, in each of the third quarter and first nine months of 2013 compared to 2012. Payments segment revenue growth was primarily driven by our recurring revenue businesses as processing and services revenue increased $27 million and $84 million, respectively, or 6%, in both the third quarter and first nine months of 2013 over the prior year periods. This growth was primarily due to new clients and increased transaction volumes from existing clients in our card services business, biller solutions business, bill payment business and digital channels business, which includes our online and mobile banking solutions. Payments segment revenue growth was partially offset in both the third quarter and the first nine months of 2013 due to a discount on a renewal of a bill payment contract and lower software license revenue. In addition, the third quarter of 2013 was negatively impacted by lower professional services fees related to a large online banking implementation in our international business.

Revenue in our Financial segment increased $67 million and $197 million, respectively, or 13%, in each of the third quarter and first nine months of 2013 compared to 2012, driven by the acquisition of Open Solutions. Excluding the Open Solutions acquisition, revenue growth in 2013 was flat compared to the prior year, primarily due to the migration of an account processing client to its parent company’s account processing platform.

Total Expenses

Total expenses during the third quarter and first nine months of 2013 increased $79 million, or 9%, and $257 million, or 10%, respectively, compared to 2012. Total expenses as a percentage of total revenue increased 60 basis points from 76.1% in the third quarter of 2012 to 76.7% in the third quarter of 2013 and increased 160 basis points from 76.9% in the first nine months of 2012 to 78.5% in the first nine months of 2013. Merger and integration expenses resulting from the acquisition of Open Solutions negatively impacted our operating margin by approximately 90 basis points and 160 basis points in the third quarter and first nine months of 2013, respectively.

Cost of processing and services as a percentage of processing and services revenue decreased to 51.2% in the third quarter of 2013 as compared to 52.7% in the third quarter of 2012 and to 52.2% in the first nine months of 2013 as compared to 53.3% in the first nine months of 2012. Cost of processing and services as a percentage of revenue was favorably impacted by increased operating leverage in our recurring revenue businesses.

Cost of product as a percentage of product revenue was 88.6% in the third quarter of 2013 compared to 81.1% in the third quarter of 2012 and was 92.2% in the first nine months of 2013 compared to 81.8% in the first nine months of 2012. The increase in cost of product as a percentage of product revenue in 2013 was primarily due to a $30 million non-cash impairment charge in the first quarter related to the replacement of our Acumen account processing platform with DNA, an Open Solutions account processing platform, along with other merger and integration costs associated with the acquisition.

Selling, general and administrative expense as a percentage of total revenue was 19.7% in the third quarter of 2013 compared to 18.6% in the third quarter of 2012 and was 20.0% in the first nine months of 2013 compared to 18.7% in the first nine months of 2012. The increase in selling, general and administrative expense as a percentage of total revenue was primarily due to higher acquired intangible amortization and transaction expenses attributed to our acquisition of Open Solutions.

Operating Income and Operating Margin

Total operating income increased $15 million, or 6%, in the third quarter of 2013 compared to 2012; operating income of $764 million for the first nine months of 2013 was slightly above the operating income of $761 million for the first nine months of 2012. Our total operating margin decreased 70 basis points to 23.3% in the third quarter of 2013 compared to the third quarter of 2012 and decreased 160 basis points to 21.5% in the first nine months of 2013 compared to the same period in 2012. The decreases in operating margin were primarily due to our Corporate and Other segment, in which our operating loss increased $21 million in the third quarter of 2013 and $96 million in the first nine months of 2013 compared to the same periods in 2012, negatively impacting our operating margin by

 

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approximately 180 basis points and 270 basis points, respectively. The increases in the Corporate and Other segment’s operating losses were primarily attributable to merger and integration expenses resulting from the acquisition of Open Solutions, including a $30 million non-cash impairment charge in the first quarter related to the replacement of our Acumen account processing platform with DNA. In addition, amortization expense, related to Open Solutions acquired intangible assets, increased $13 million and $36 million in the third quarter and first nine months of 2013, respectively.

Operating income in our Payments segment increased $7 million, or 4%, in the third quarter of 2013 as compared to 2012, and operating margin was consistent at 27.4% in the third quarter of 2013 and 2012. In the first nine months of 2013 compared to 2012, operating income in the Payments segment increased $37 million, or 8%, and operating margin increased 100 basis points to 27.6%. The increases in operating income and margin in 2013 were primarily due to revenue growth and scale efficiencies in our card services and digital channels businesses, partially offset by the negative impact of a discount on a renewal of a bill payment contract.

Operating income in our Financial segment increased $29 million, or 18%, and $62 million, or 13%, in the third quarter and first nine months of 2013, respectively, compared to 2012. Operating margin increased 120 basis points to 33.3% in the third quarter of 2013 compared to 2012 and was consistent at 31.6% in the first nine months of 2013 compared to 2012. The increase in operating margin in 2013 was primarily due to scale efficiencies and operational effectiveness benefits, partially offset by the migration of an account processing client to its parent company’s account processing platform.

Interest Expense

Interest expense decreased $7 million, or 15%, to $41 million in the third quarter of 2013 compared to 2012 and decreased $12 million, or 9%, to $123 million in the first nine months of 2013 compared to 2012. The decrease was primarily due to lower average interest rates in 2013 compared to 2012, partially offset by additional debt assumed in connection with the acquisition of Open Solutions. In addition, $4 million of expense associated with hedge ineffectiveness was recognized upon the settlement of our forward-starting interest rate swap agreements in the third quarter of 2012.

Interest and Investment Income

Interest and investment income decreased $6 million in the first nine months of 2013 as compared to 2012 due to a gain recognized on a sale of an investment in the prior year period.

Income Tax Provision

Our effective income tax rates for continuing operations were 33.1% and 34.1% in the third quarter and first nine months of 2013, respectively, and were 36.8% and 32.7% in the third quarter and first nine months of 2012, respectively. The lower effective tax rate in the third quarter of 2013 is primarily due to recognition of discrete tax benefits including the resolution of tax audits. The lower effective tax rate for the first nine months of 2012 was primarily due to increased deductions resulting from federal tax planning initiatives including the associated discrete tax benefits. We anticipate that our full year effective tax rate will be approximately 35% in 2013.

Net Income Per Share – Diluted from Continuing Operations

Net income per share-diluted from continuing operations was $1.22 and $1.03 in the third quarter of 2013 and 2012, respectively, and was $3.22 and $3.14 in the first nine months of 2013 and 2012, respectively. Amortization of acquisition-related intangible assets reduced net income per share-diluted from continuing operations by $0.26 per share and $0.19 per share in the third quarters of 2013 and 2012, respectively, and $0.76 per share and $0.56 per share for the first nine months of 2013 and 2012, respectively. In addition, net income per share was negatively impacted by merger and integration costs in the third quarter and first nine months of 2013 by $0.07 per share and $0.34 per share, respectively.

Liquidity and Capital Resources

General

Our primary liquidity needs are: (i) to fund normal operating expenses; (ii) to meet the interest and principal requirements of our outstanding indebtedness; and (iii) to fund capital expenditures and operating lease payments. We believe these needs will be satisfied using cash flow generated by our operations, our cash and cash equivalents of $321 million at September 30, 2013 and available borrowings under our revolving credit facility.

 

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     Nine Months Ended              
     September 30,     Increase (Decrease)  

(In millions)

   2013     2012     $     %  

Income from continuing operations

   $ 430      $ 434      $ (4  

Depreciation and amortization

     301        262        39     

Share-based compensation

     37        35        2     

Deferred income taxes

     (11     (11     —       

Non-cash impairment charge

     30        —          30     

Dividend from unconsolidated affiliate

     6        —          6     

Settlement of interest rate hedge contracts

     —          (88     88     

Net changes in working capital and other

     (112     (90     (22  
  

 

 

   

 

 

   

 

 

   

Operating cash flow

   $ 681      $ 542      $ 139        26
  

 

 

   

 

 

   

 

 

   

 

 

 

Capital expenditures

   $ 171      $ 145      $ 26        18
  

 

 

   

 

 

   

 

 

   

 

 

 

Our net cash provided by operating activities, or operating cash flow, was $681 million in the first nine months of 2013, an increase of 26% compared with $542 million in 2012. This increase was primarily due to a payment of $88 million in the third quarter of 2012 for the settlement of forward-starting interest rate swap agreements and lower tax and interest payments in 2013. Our current policy is to use our operating cash flow primarily to repay debt and fund capital expenditures, acquisitions and share repurchases, rather than to pay dividends. Our capital expenditures in the first nine months of 2013 increased by $26 million, compared to the same period in 2012, and were less than 5% of our total revenue in each period.

On January 14, 2013, we acquired Open Solutions for a cash purchase price of $16 million, net of cash acquired. In the second quarter of 2013, we received a $122 million cash dividend from StoneRiver Group, L.P., a joint venture in which we own a 49% interest. A portion of the dividend, $6 million, represents a return on our investment and was reported as cash flows from operating activities. During the first nine months of 2013, we purchased $455 million of our common stock. We announced a new ten million share repurchase authorization in the third quarter of 2013, and had approximately 10.4 million shares authorized for repurchase as of September 30, 2013. Shares repurchased are generally held for issuance in connection with our equity plans.

Long-Term Debt

 

     September 30,      December 31,  

(In millions)

   2013      2012  

Revolving credit facility

   $ 983       $ 280   

3.125% senior notes due 2015

     300         300   

3.125% senior notes due 2016

     600         600   

6.8% senior notes due 2017

     500         500   

4.625% senior notes due 2020

     449         449   

4.75% senior notes due 2021

     399         399   

3.5% senior notes due 2022

     697         697   

Other borrowings

     3         5   
  

 

 

    

 

 

 

Long-term debt (including current maturities)

   $ 3,931       $ 3,230   
  

 

 

    

 

 

 

At September 30, 2013, our long-term debt consisted primarily of $2.9 billion of senior notes and $1.0 billion in borrowings under the revolving credit facility. Interest on our senior notes is paid semi-annually. During the first nine months of 2013, we were in compliance with all financial debt covenants.

 

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Revolving Credit Facility

We maintain a $2.0 billion revolving credit facility with a syndicate of banks. Borrowings under this facility bear interest at a variable rate, 1.3% at September 30, 2013, based on LIBOR plus a specified margin or the bank’s base rate. There are no significant commitment fees and no compensating balance requirements. The facility expires on August 1, 2017 and contains various restrictions and covenants that require us, among other things, to (i) limit our consolidated indebtedness as of the end of each fiscal quarter to no more than three and one-half times consolidated net earnings before interest, taxes, depreciation and amortization and certain other adjustments during the period of four fiscal quarters then ended, and (ii) maintain consolidated net earnings before interest, taxes, depreciation and amortization and certain other adjustments of at least three times consolidated interest expense as of the end of each fiscal quarter for the period of four fiscal quarters then ended. As of September 30, 2013, borrowings outstanding under the facility approximated $1.0 billion, primarily related to the funding of assumed debt from the acquisition of Open Solutions.

On October 25, 2013, we obtained a $900 million term loan under a new loan agreement with a syndicate of banks. This term loan bears interest at a variable rate, including based on LIBOR or the administrative agent’s prime rate, in either case, plus a specified margin based on our long-term debt rating in effect from time to time, and matures in October 2018. Scheduled principal payments of $90 million are due on the last business day of December of each year, commencing on December 31, 2014. In connection with the term loan financing, we entered into an amendment to our existing $2.0 billion revolving credit agreement that conformed certain of its provisions to those in the new term loan agreement and extended its maturity to October 2018. Our revolving credit facility was previously scheduled to expire on August 1, 2017. The new term loan facility and amended revolving credit facility contain various restrictions and covenants substantially similar to those contained in our revolving credit facility. We used the net proceeds from the term loan to repay outstanding borrowings under our revolving credit facility. After such repayment, $75 million remains outstanding under our revolving credit agreement.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The quantitative and qualitative disclosures about market risk required by this item are incorporated by reference to Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2012 and have not materially changed since December 31, 2012.

 

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), our management, with the participation of our chief executive officer and chief financial officer, evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2013.

Changes in internal control over financial reporting

During the quarter ended September 30, 2013, we continued, as part of our ongoing integration activities related to our acquisition of Open Solutions, to incorporate our process-level and company-wide controls and procedures into this recently acquired business. We also continued to implement a billing module within our SAP enterprise resource planning (“ERP”) system, which we expect to further integrate our systems and improve the overall efficiency of our billing and collection processes. We expect the implementation of this module to continue in phases over the next year, which we believe will reduce implementation risk. The design and documentation of our internal control processes and procedures related to billing will be appropriately modified to supplement existing internal controls over financial reporting. As with any new technology, this module, and the internal controls over financial reporting included in the related processes, will be tested for effectiveness prior to and concurrent with the implementation. We believe the implementation of the billing module within our ERP system will further strengthen the related internal controls due to enhanced automation and integration of processes. There were no other changes in internal control over financial reporting that occurred during the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, we and our subsidiaries are named as defendants in lawsuits in which claims are asserted against us. In the opinion of management, the liabilities, if any, which may ultimately result from such lawsuits are not expected to have a material adverse effect on our financial statements.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below sets forth information with respect to purchases made by or on behalf of the company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of shares of our common stock during the quarter ended September 30, 2013:

 

Period

   Total Number
of Shares
Purchased
     Average Price
Paid per Share
     Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
     Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (1)
 

July 1-31, 2013

     1,153,000       $ 90.63         1,153,000         1,272,000   

August 1-31, 2013

     375,000         99.02         375,000         10,897,000   

September 1-30, 2013

     500,000         100.36         500,000         10,397,000   
  

 

 

       

 

 

    

Total

     2,028,000            2,028,000      
  

 

 

       

 

 

    

 

(1)  On each of February 22, 2012 and August 5, 2013, our board of directors authorized the purchase of up to ten million shares of our common stock. These authorizations do not expire.

 

ITEM 6. EXHIBITS

The exhibits listed in the accompanying exhibit index are filed as part of this Quarterly Report on Form 10-Q.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    FISERV, INC.
Date: October 30, 2013     By:  

/s/ Thomas J. Hirsch

     

Thomas J. Hirsch

Executive Vice President,

Chief Financial Officer,

Treasurer and Assistant Secretary


Table of Contents

Exhibit Index

 

Exhibit
Number

  

Exhibit Description

  10.1    Employment Agreement, dated February 23, 2010, between Fiserv, Inc. and Lynn S. McCreary
  10.2    Amendment No. 1 to Employment Agreement, dated July 1, 2013, between Fiserv, Inc. and Lynn S. McCreary
  10.3    Key Executive Employment and Severance Agreement, effective as of July 1, 2013, between Fiserv, Inc. and Lynn S. McCreary (1)
  31.1    Certification of the Chief Executive Officer, dated October 30, 2013
  31.2    Certification of the Chief Financial Officer, dated October 30, 2013
  32    Certification of the Chief Executive Officer and Chief Financial Officer, dated October 30, 2013
101.INS*    XBRL Instance Document
101.SCH*    XBRL Taxonomy Extension Schema Document
101.CAL*    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*    XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*    XBRL Taxonomy Extension Label Linkbase Document
101.PRE*    XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed with this quarterly report on Form 10-Q are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income for the three and nine months ended September 30, 2013 and 2012, (ii) the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012, (iii) the Consolidated Balance Sheets at September 30, 2013 and December 31, 2012, (iv) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012, and (v) Notes to Consolidated Financial Statements.
(1)  Form of agreement previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on December 23, 2008 (File No. 0-14948) and incorporated herein by reference.