FIS-10-Q 03-31-2014
Table of Contents

 
 
 
 
 
 
 
 
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
Form 10-Q
_______________________________________________
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended March 31, 2014
Or
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from                      to
Commission File No. 001-16427
_______________________________________________
Fidelity National Information Services, Inc.
(Exact name of registrant as specified in its charter)
Georgia
 
37-1490331
(State or other jurisdiction
 
(I.R.S. Employer Identification No.)
of incorporation or organization)
 
 
 
 
 
601 Riverside Avenue
 
 
Jacksonville, Florida
 
32204
(Address of principal executive offices)
 
(Zip Code)
(904) 438-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES o NO x
As of April 30, 2014, 287,797,282 shares of the Registrant’s Common Stock were outstanding.
 
 
 
 
 
 
 
 
 
 



FORM 10-Q
QUARTERLY REPORT
Quarter Ended March 31, 2014
INDEX
 
Page
 
 
 
 EX-31.1
 
 EX-31.2
 
 EX-32.1
 
 EX-32.2
 
 EX-101 INSTANCE DOCUMENT
 
 EX-101 SCHEMA DOCUMENT
 
 EX-101 CALCULATION LINKBASE DOCUMENT
 
 EX-101 DEFINITION LINKBASE DOCUMENT
 
 EX-101 LABELS LINKBASE DOCUMENT
 
 EX-101 PRESENTATION LINKBASE DOCUMENT
 


1

Table of Contents



FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions, except per share amounts)
(Unaudited)
 
March 31, 2014
 
December 31, 2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
737.7

 
$
547.5

Settlement deposits
444.7

 
327.4

Trade receivables, net of allowance for doubtful accounts of $21.0 and $16.2 as of
March 31, 2014 and December 31, 2013, respectively
987.9

 
987.9

Settlement receivables
257.2

 
178.2

Other receivables
19.4

 
62.1

Due from related parties
34.9

 
35.8

Prepaid expenses and other current assets
153.7

 
154.1

Deferred income taxes
52.8

 
58.9

Total current assets
2,688.3

 
2,351.9

Property and equipment, net
449.2

 
439.0

Goodwill
8,500.0

 
8,500.0

Intangible assets, net
1,288.0

 
1,339.3

Computer software, net
861.1

 
856.5

Deferred contract costs, net
206.9

 
206.8

Other noncurrent assets
277.4

 
266.6

Total assets
$
14,270.9

 
$
13,960.1

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
653.2

 
$
768.0

Settlement payables
717.0

 
518.6

Deferred revenues
270.1

 
243.6

Current portion of long-term debt
49.7

 
128.8

Due to Brazilian venture partner
14.4

 
13.7

Total current liabilities
1,704.4

 
1,672.7

Long-term debt, excluding current portion
4,728.9

 
4,339.8

Deferred income taxes
810.7

 
823.6

Due to Brazilian venture partner
36.2

 
34.5

Deferred revenues
26.7

 
27.2

Other long-term liabilities
261.6

 
325.0

Total liabilities
7,568.5

 
7,222.8

Equity:
 
 
 
FIS stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value, 200 shares authorized, none issued and outstanding as of March 31, 2014 and December 31, 2013

 

Common stock, $0.01 par value, 600 shares authorized, 387.1 and 387.0 shares issued as of March 31, 2014 and December 31, 2013, respectively
3.9

 
3.9

Additional paid in capital
7,271.5

 
7,247.6

Retained earnings
2,427.6

 
2,341.9

Accumulated other comprehensive earnings (loss)
3.2

 
(9.9
)
Treasury stock, $0.01 par value, 99.3 and 96.4 shares as of March 31, 2014 and December 31, 2013, respectively, at cost
(3,172.1
)
 
(3,003.0
)
Total FIS stockholders’ equity
6,534.1

 
6,580.5

Noncontrolling interest
168.3

 
156.8

Total equity
6,702.4

 
6,737.3

Total liabilities and equity
$
14,270.9

 
$
13,960.1

See accompanying notes to unaudited condensed consolidated financial statements.

2

Table of Contents

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In millions, except per share data)
(Unaudited)

 
Three months ended
March 31,
 
2014
 
2013
Processing and services revenues (for related party activity, see note 2)
$
1,520.3

 
$
1,478.0

Cost of revenues
1,050.0

 
1,008.0

Gross profit
470.3

 
470.0

Selling, general, and administrative expenses
186.6

 
194.9

Operating income
283.7

 
275.1

Other income (expense):
 
 
 
Interest expense, net
(41.1
)
 
(51.7
)
Other income (expense), net
(0.5
)
 
5.1

Total other income (expense), net
(41.6
)
 
(46.6
)
Earnings from continuing operations before income taxes
242.1

 
228.5

Provision for income taxes
80.6

 
75.2

Earnings from continuing operations, net of tax
161.5

 
153.3

Earnings (loss) from discontinued operations, net of tax
(0.4
)
 
(3.9
)
Net earnings
161.1

 
149.4

Net (earnings) loss attributable to noncontrolling interest
(6.6
)
 
(5.3
)
Net earnings attributable to FIS common stockholders
$
154.5

 
$
144.1

Net earnings per share — basic from continuing operations attributable to FIS common stockholders
$
0.54

 
$
0.51

Net earnings (loss) per share — basic from discontinued operations attributable to FIS common stockholders

 
(0.01
)
Net earnings per share — basic attributable to FIS common stockholders *
$
0.54

 
$
0.50

Weighted average shares outstanding — basic
288.0

 
291.0

Net earnings per share — diluted from continuing operations attributable to FIS common stockholders
$
0.53

 
$
0.50

Net earnings (loss) per share — diluted from discontinued operations attributable to FIS common stockholders

 
(0.01
)
Net earnings per share — diluted attributable to FIS common stockholders *
$
0.53

 
$
0.49

Weighted average shares outstanding — diluted
291.9

 
295.5

Cash dividends paid per share
$
0.24

 
$
0.22

Amounts attributable to FIS common stockholders:
 
 
 
Earnings from continuing operations, net of tax
$
154.9

 
$
148.0

Earnings (loss) from discontinued operations, net of tax
(0.4
)
 
(3.9
)
Net earnings attributable to FIS common stockholders
$
154.5

 
$
144.1

* Amounts may not sum due to rounding.
See accompanying notes to unaudited condensed consolidated financial statements.

3

Table of Contents


FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Earnings
(In millions)
(Unaudited)

 
Three months ended March 31,
 
2014
 
2013
Net earnings
 
 
$
161.1

 
 
 
$
149.4

Other comprehensive earnings, before tax:
 
 
 
 
 
 
 
Unrealized gain (loss) on investments and derivatives
$
(0.9
)
 
 
 
$
(1.2
)
 
 
Reclassification adjustment for (gains) losses included in net earnings
1.6

 
 
 
1.7

 
 
Unrealized gain (loss) on investments and derivatives, net
0.7

 
 
 
0.5

 
 
Foreign currency translation adjustments
18.2

 
 
 
(7.2
)
 
 
Other comprehensive earnings (loss), before tax:
18.9

 
 
 
(6.7
)
 
 
Provision for income tax expense (benefit) related to items of other comprehensive earnings
0.2

 
 
 
0.8

 
 
Other comprehensive earnings (loss), net of tax
$
18.7

 
18.7

 
$
(7.5
)
 
(7.5
)
Comprehensive earnings:
 
 
179.8

 
 
 
141.9

Net (earnings) loss attributable to noncontrolling interest
 
 
(6.6
)
 
 
 
(5.3
)
Other comprehensive (earnings) losses attributable to noncontrolling interest
 
 
(5.6
)
 
 
 
(1.5
)
Comprehensive earnings attributable to FIS common stockholders
 
 
$
167.6

 
 
 
$
135.1


See accompanying notes to unaudited condensed consolidated financial statements.





4

Table of Contents

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Statement of Equity
Three months ended March 31, 2014
(In millions, except per share amounts)
(Unaudited)

 
 
 
 
 
Amount
 
 
 
 
 
FIS Stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
Number of shares
 
 
 
Additional
 
 
 
other
 
 
 
 
 
 
 
Common
 
Treasury
 
Common
 
paid in
 
Retained
 
comprehensive
 
Treasury
 
Noncontrolling
 
Total
 
shares
 
shares
 
stock
 
capital
 
earnings
 
earnings
 
stock
 
interest
 
equity
Balances, December 31, 2013
387.0

 
(96.4
)
 
$
3.9

 
$
7,247.6

 
$
2,341.9

 
$
(9.9
)
 
$
(3,003.0
)
 
$
156.8

 
$
6,737.3

Issuance of restricted stock
0.1

 

 

 

 

 

 

 

 

Exercise of stock options

 
0.5

 

 
(3.0
)
 

 

 
15.3

 

 
12.3

Treasury shares held for taxes due upon exercise of stock options

 
(0.2
)
 

 

 

 

 
(9.4
)
 

 
(9.4
)
Excess income tax benefit from exercise of stock options

 

 

 
8.5

 

 

 

 

 
8.5

Stock-based compensation

 

 

 
13.3

 

 

 

 

 
13.3

Cash dividends paid ($0.24 per share per quarter) and other distributions

 

 

 

 
(68.8
)
 

 

 
(0.7
)
 
(69.5
)
Purchases of treasury stock

 
(3.2
)
 

 

 

 

 
(175.0
)
 

 
(175.0
)
Other

 

 

 
5.1

 

 

 

 

 
5.1

Net earnings

 

 

 

 
154.5

 

 

 
6.6

 
161.1

Other comprehensive earnings, net of tax

 

 

 

 

 
13.1

 

 
5.6

 
18.7

Balances, March 31, 2014
387.1

 
(99.3
)
 
$
3.9

 
$
7,271.5

 
$
2,427.6

 
$
3.2

 
$
(3,172.1
)
 
$
168.3

 
$
6,702.4

See accompanying notes to unaudited condensed consolidated financial statements.


5

Table of Contents

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
Three months ended
March 31,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net earnings
$
161.1

 
$
149.4

Adjustment to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
152.6

 
153.2

Amortization of debt issue costs
2.6

 
2.8

Gain on mFoundry acquisition

 
(9.2
)
Stock-based compensation
13.3

 
13.2

Deferred income taxes
(6.7
)
 
(15.4
)
Excess income tax benefit from exercise of stock options
(8.5
)
 
(4.0
)
Other operating activities
(0.6
)
 

Net changes in assets and liabilities, net of effects from acquisitions and foreign currency:
 
 
 
Trade receivables
15.3

 
(12.0
)
Settlement activity
2.5

 
(13.9
)
Prepaid expenses and other assets
(13.0
)
 
(35.1
)
Deferred contract costs
(16.6
)
 
(19.7
)
Deferred revenue
25.9

 
(8.3
)
Accounts payable, accrued liabilities, and other liabilities
(105.3
)
 
6.5

Net cash provided by operating activities
222.6

 
207.5

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions to property and equipment
(37.9
)
 
(31.0
)
Additions to computer software
(52.0
)
 
(42.7
)
Acquisitions, net of cash acquired, and equity investments

 
(115.0
)
Other investing activities, net
8.5

 
(7.0
)
Net cash used in investing activities
(81.4
)
 
(195.7
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings
1,839.0

 
2,206.3

Repayment of borrowings
(1,529.6
)
 
(1,990.1
)
Excess income tax benefit from exercise of stock options
8.5

 
4.0

Proceeds from exercise of stock options
12.8

 
18.8

Treasury stock activity
(203.1
)
 
(105.3
)
Dividends paid
(69.5
)
 
(64.8
)
Other financing activities, net
(15.7
)
 
(0.7
)
Net cash provided by financing activities
42.4

 
68.2

Effect of foreign currency exchange rate changes on cash
6.6

 
(7.0
)
Net increase in cash and cash equivalents
190.2

 
73.0

Cash and cash equivalents, beginning of period
547.5

 
517.6

Cash and cash equivalents, end of period
$
737.7

 
$
590.6

 
 
 
 
Supplemental cash flow information:
 
 
 
Cash paid for interest
$
48.7

 
$
80.8

Cash paid for income taxes
$
25.3

 
$
28.5

See accompanying notes to unaudited condensed consolidated financial statements.

6

Table of Contents

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Unless stated otherwise or the context otherwise requires, all references to “FIS,” “we,” the “Company” or the “registrant” are to Fidelity National Information Services, Inc., a Georgia corporation, and its subsidiaries.

(1) Basis of Presentation
The unaudited financial information included in this report includes the accounts of FIS and its subsidiaries prepared in accordance with U.S. generally accepted accounting principles and the instructions to Form 10-Q and Article 10 of Regulation S-X. All adjustments considered necessary for a fair presentation have been included. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The preparation of these Condensed Consolidated Financial Statements (Unaudited) in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements (Unaudited) and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. Certain reclassifications have been made in the 2013 Condensed Consolidated Financial Statements (Unaudited) to conform to the classifications used in 2014.
We report the results of our operations in four reporting segments: 1) Financial Solutions Group (“FSG”), 2) Payment Solutions Group (“PSG”), 3) International Solutions Group (“ISG”) and 4) Corporate and Other (Note 12).

(2) Related Party Transactions

Brazilian Venture

The Company operates a joint venture ("Brazilian Venture") with Banco Bradesco S.A. ("Banco Bradesco") in which we own a 51% controlling interest, to provide comprehensive, fully outsourced transaction processing, call center, cardholder support and collection services to multiple card issuing clients in Brazil, including Banco Bradesco. The Company recorded Banco Bradesco Brazilian Venture revenues of $67.0 million and $75.1 million during the three months ended March 31, 2014 and 2013, respectively, relating to these services.

(3) Unaudited Net Earnings per Share
The basic weighted average shares and common stock equivalents for the three months ended March 31, 2014 and 2013 are computed using the treasury stock method.

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Table of Contents
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


The following table summarizes the earnings per share attributable to FIS common stockholders for the three months ended March 31, 2014 and 2013 (in millions, except per share amounts):
 
Three months ended
March 31,
 
2014
 
2013
Earnings from continuing operations attributable to FIS, net of tax
$
154.9

 
$
148.0

Earnings (loss) from discontinued operations attributable to FIS, net of tax
(0.4
)
 
(3.9
)
Net earnings attributable to FIS common stockholders
$
154.5

 
$
144.1

Weighted average shares outstanding — basic
288.0

 
291.0

Plus: Common stock equivalent shares
3.9

 
4.5

Weighted average shares outstanding — diluted
291.9

 
295.5

Net earnings per share — basic from continuing operations attributable to FIS common stockholders
$
0.54

 
$
0.51

Net earnings (loss) per share — basic from discontinued operations attributable to FIS common stockholders

 
(0.01
)
Net earnings per share — basic attributable to FIS common stockholders *
$
0.54

 
$
0.50

Net earnings per share — diluted from continuing operations attributable to FIS common stockholders
$
0.53

 
$
0.50

Net earnings (loss) per share — diluted from discontinued operations attributable to FIS common stockholders

 
(0.01
)
Net earnings per share — diluted attributable to FIS common stockholders *
$
0.53

 
$
0.49

 
 
 
 
* Amounts may not sum due to rounding.
 
 
 
Options to purchase approximately 4.1 million and 1.7 million shares of our common stock for the three months ended March 31, 2014 and 2013, respectively, were not included in the computation of diluted earnings per share because they were anti-dilutive.

(4) Discontinued Operations

Certain operations are reported as discontinued in the Condensed Consolidated Statements of Earnings (Unaudited) for the three months ended March 31, 2014 and 2013.

 Brazil Item Processing and Remittance Services Operations

During the third quarter of 2010, the Company decided to pursue strategic alternatives for Fidelity National Participacoes Ltda. (“Participacoes”). Participacoes' processing volume was transitioned to other vendors or back to its customers during the second quarter of 2011. There were no revenues for the 2014 and 2013 periods. Participacoes had expenses of $0.5 million and $6.0 million for the three months ended March 31, 2014 and 2013, respectively. As a result of the dismissal of employees related to the shut-down activities completed in 2011, the three months ended March 31, 2014 and 2013 included charges of $(0.1) million and $3.6 million, respectively, to settle claims or increase our provision for potential labor claims. The shut-down activities involved the transfer and termination of approximately 2,600 employees. As of March 31, 2014, there were approximately 940 active labor claims. Former employees generally had up to two years from the date of termination to file labor claims, which extended through April 2013. Consequently, we have continued exposure on these active claims, which were not transferred with other assets and liabilities in the disposal. Our accrued liability for active labor claims, net of $15.2 million in court ordered deposits, is $26.0 million as of March 31, 2014. Any changes in the estimated liability related to these labor claims will be recorded as discontinued operations.
 
(5) Changes in Accumulated Other Comprehensive Earnings (Losses)

The following table shows accumulated other comprehensive earnings ("AOCE") by component, net of tax, for the three months ended March 31, 2014 (in millions):

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Table of Contents
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


 
 
 
 
Foreign
 
 
 
 
 
 
Interest Rate
 
Currency
 
 
 
 
 
 
Swap
 
Translation
 
 
 
 
 
 
Contracts
 
Adjustments
 
Other
 
Total
Balances, December 31, 2013
 
$
(2.4
)
 
$
(3.0
)
 
$
(4.5
)
 
$
(9.9
)
Other comprehensive gain/(loss) before reclassifications
 
(0.6
)
 
12.7

 

 
12.1

Amounts reclassified from AOCE
 
1.0

 

 

 
1.0

Net current period AOCE attributable to FIS
 
0.4

 
12.7

 

 
13.1

Balances, March 31, 2014
 
$
(2.0
)
 
$
9.7

 
$
(4.5
)
 
$
3.2


The amount reclassified from AOCE for interest rate swap contracts includes $1.6 million recorded as interest expense, reduced by a related $0.6 million provision for income taxes.

The table below summarizes our provision for income tax expense (benefit) related to items of other comprehensive earnings (in millions):

 
 
Three months ended March 31,
 
 
2014
 
2013
 
 
 
 
 
Unrealized gain (loss) on investments and derivatives
 
$
0.3

 
$
0.2

Foreign currency translation adjustments
 
(0.1
)
 
0.2

Other components of other comprehensive earnings (loss)
 

 
0.4

Provision for income tax expense (benefit) related to items of other comprehensive earnings
 
$
0.2

 
$
0.8


(6) Condensed Consolidated Financial Statement Details
The following table shows the Company’s condensed consolidated financial statement details as of March 31, 2014 and December 31, 2013 (in millions):

 
March 31, 2014
 
December 31, 2013
 
Cost
 
Accumulated
depreciation and amortization
 
Net
 
Cost
 
Accumulated
depreciation and amortization
 
Net
Property and equipment
$
1,112.6

 
$
663.4

 
$
449.2

 
$
1,077.4

 
$
638.4

 
$
439.0

Intangible assets
$
2,743.9

 
$
1,455.9

 
$
1,288.0

 
$
2,807.6

 
$
1,468.3

 
$
1,339.3

Computer software
$
1,535.4

 
$
674.3

 
$
861.1

 
$
1,557.5

 
$
701.0

 
$
856.5

       
The Company entered into capital lease obligations of $0.4 million and $1.7 million during the three months ended March 31, 2014 and 2013, respectively. The assets are included in property and equipment and computer software and the remaining capital lease obligation is classified as long-term debt on our Condensed Consolidated Balance Sheet (Unaudited) as of March 31, 2014. Periodic payments are included in repayment of borrowings on the Condensed Consolidated Statements of Cash Flows (Unaudited).

Settlement Activity

Settlement deposits represent funds we hold that were drawn from our customers to facilitate our settlement activities and, as of March 31, 2014, included $75.0 million of short-term investments in certificates of deposit with original maturities of greater than 90 days. These certificates of deposit are Level 2 type securities in the fair-value hierarchy. Settlement payables consist of settlement deposits from customers, settlement payables to third parties and outstanding checks related to our

9

Table of Contents
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


settlement activities for which the right of offset does not exist or we do not intend to exercise our right of offset. Our accounting policy for such outstanding checks is to include them in settlement payables on the balance sheet and in operating cash flows on the statement of cash flows.
        
(7) Long-Term Debt
Long-term debt as of March 31, 2014 and December 31, 2013, consisted of the following (in millions):
 
March 31, 2014
 
December 31, 2013
Term Loans A-4, quarterly principal amortization (1)
1,862.5

 
1,962.5

Senior Notes due 2018, interest payable semi-annually at 2.000%
250.0

 
250.0

Senior Notes due 2020, interest payable semi-annually at 7.875%
500.0

 
500.0

Senior Notes due 2022, interest payable semi-annually at 5.000%
700.0

 
700.0

Senior Notes due 2023, interest payable semi-annually at 3.500%
1,000.0

 
1,000.0

Revolving Loan (2)
443.0

 
29.0

Other
23.1

 
27.1

 
4,778.6

 
4,468.6

Current portion
(49.7
)
 
(128.8
)
Long-term debt, excluding current portion
$
4,728.9

 
$
4,339.8

__________________________________________
(1)
Interest on the Term Loans A-4 is generally payable at LIBOR plus an applicable margin of up to 2.00% based upon the Company's corporate credit ratings and the ratings on the FIS Credit Agreement. As of March 31, 2014, the weighted average interest rate on the Term Loans A-4 was 1.40%.
(2)
Interest on the Revolving Loan is generally payable at LIBOR plus an applicable margin of up to 2.00% plus an unused commitment fee of up to 0.35%, each based upon the Company's corporate credit ratings and the ratings on the FIS Credit Agreement. As of March 31, 2014, the applicable margin on the Revolving Loan, excluding facility fees and unused commitment fees, was 1.25%.

FIS is a party to a syndicated credit agreement (the "FIS Credit Agreement"), which as of March 31, 2014, provided total committed capital of $3,862.5 million comprised of: (1) a revolving credit facility in an aggregate maximum principal amount of $2,000.0 million maturing on March 30, 2017 (the "Revolving Loan"); and (2) term loans of $1,862.5 million maturing on March 30, 2017 (the "Term Loans A-4"). As of March 31, 2014, the outstanding principal balance of the Revolving Loan was $443.0 million, with $1,556.2 million of borrowing capacity remaining thereunder (net of $0.8 million in outstanding letters of credit issued under the Revolving Loan).

The obligations of FIS under the FIS Credit Agreement and under all its outstanding senior notes rank equal in priority, are unsecured and are guaranteed by substantially all of the domestic subsidiaries of FIS. The FIS Credit Agreement and the senior notes remain subject to customary covenants, including, among others, limitations on the payment of dividends by FIS, and events of default.

The following table summarizes the mandatory principal payments pursuant to the FIS Credit Agreement and the senior notes' indentures as of March 31, 2014 (in millions). There are no mandatory principal payments on the Revolving Loan and any balance outstanding on the Revolving Loan will be due and payable at its scheduled maturity date:
 
Term Loan
 
2018
 
2020
 
2022
 
2023
 
 
 
A-4
 
Notes
 
Notes
 
Notes
 
Notes
 
Total
2014
$

 
$

 
$

 
$

 
$

 
$

2015
100.0

 

 

 

 

 
100.0

2016
100.0

 

 

 

 

 
100.0

2017
1,662.5

 

 

 

 

 
1,662.5

2018

 
250.0

 

 

 

 
250.0

Thereafter

 

 
500.0

 
700.0

 
1,000.0

 
2,200.0

Total
$
1,862.5

 
$
250.0

 
$
500.0

 
$
700.0

 
$
1,000.0

 
$
4,312.5



10

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FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Voluntary prepayment of the Term Loans is generally permitted at any time without fee upon proper notice and subject to a minimum dollar requirement. In addition to scheduled principal payments, the Term Loans are (with certain exceptions) subject to mandatory prepayment upon the occurrence of certain events.

FIS may redeem some or all of the 2020 Notes and the 2022 Notes on or before July 14, 2017 and May 14, 2020, respectively, at specified premiums to par, and thereafter at par, as outlined in the respective indenture agreements. FIS may also redeem the 2018 Notes and the 2023 Notes at its option in whole or in part, at any time and from time to time, at a redemption price equal to the greater of 100% of the principal amount to be redeemed and a make-whole amount calculated as described in the related indenture in each case plus accrued and unpaid interest to, but excluding, the date of redemption; provided no make-whole amount will be paid for redemptions on the 2023 Notes during the three months prior to their maturity.

We monitor the financial stability of our counterparties on an ongoing basis. The lender commitments under the undrawn portions of the Revolving Loan are comprised of a diversified set of financial institutions, both domestic and international. The combined commitments of our top 10 revolving lenders comprise about 58% of our Revolving Loan. The failure of any single lender to perform its obligations under the Revolving Loan would not adversely impact our ability to fund operations. If the single largest lender were to default under the terms of the FIS Credit Agreement (impacting the capacity of the Revolving Loan), the maximum loss of available capacity on the undrawn portion of the Revolving Loan, as of March 31, 2014, would be approximately $107.0 million.

Debt issuance costs of $42.9 million, net of accumulated amortization, remain capitalized as of March 31, 2014, related to all of the above outstanding debt.

The fair value of the Company’s long-term debt is estimated to be approximately $25.6 million higher than the carrying value as of March 31, 2014. This estimate is based on quoted prices of our senior notes and trades of our other debt in close proximity to March 31, 2014, which are considered Level 2-type measurements. This estimate is subjective in nature and involves uncertainties and significant judgment in the interpretation of current market data. Therefore, the values presented are not necessarily indicative of amounts the Company could realize or settle currently.

As of March 31, 2014, we have entered into the following interest rate swap transactions converting a portion of the interest rate exposure on our Term and Revolving Loans from variable to fixed (in millions):

Effective date
 
Termination date
 
Notional amount
 
Bank pays
variable rate of
 
FIS pays
 fixed rate of
 
September 1, 2011
 
September 1, 2014
 
$
150.0

 
1 Month LIBOR (1)
 
0.74
%
(2)
September 1, 2011
 
September 1, 2014
 
150.0

 
1 Month LIBOR (1)
 
0.74
%
(2)
September 1, 2011
 
September 1, 2014
 
300.0

 
1 Month LIBOR (1)
 
0.72
%
(2)
July 1, 2012
 
July 1, 2015
 
300.0

 
1 Month LIBOR (1)
 
0.58
%
(2)
February 3, 2014
 
February 1, 2017
 
400.0

 
1 Month LIBOR (1)
 
0.89
%
(2)
 
 
 
 
$
1,300.0

 
 
 
 

 
___________________________________
(1)
0.15% in effect as of March 31, 2014.
(2)
Does not include the applicable margin and facility fees paid to lenders on the Term Loans and Revolving Loan as described above.
We have designated these interest rate swaps as cash flow hedges and, as such, they are carried on the Condensed Consolidated Balance Sheets (Unaudited) at fair value with changes in fair value included in other comprehensive earnings, net of tax.

A summary of the fair value of the Company’s derivative instruments as of March 31, 2014 and December 31, 2013, is as follows (in millions):

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FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


 
March 31, 2014
 
December 31, 2013
 
Balance sheet location
 
Fair
value
 
Balance sheet location
 
Fair
value
Interest rate swap contracts
Accounts payable and accrued liabilities
 
$
1.7

 
Accounts payable and accrued liabilities
 
$
2.5

Interest rate swap contracts
Other long-term liabilities
 
$
2.2

 
Other long-term liabilities
 
$
1.9


In accordance with the authoritative guidance for fair value measurements, the inputs used to determine the estimated fair value of our interest rate swaps are Level 2-type measurements. We considered our own credit risk and the credit risk of the counterparties when determining the fair value of our interest rate swaps. Adjustments are made to these amounts and to accumulated other comprehensive earnings ("AOCE") within the Condensed Consolidated Statements of Comprehensive Earnings (Unaudited) and Condensed Consolidated Statements of Equity as the factors that impact fair value change, including current and projected interest rates, time to maturity and required cash transfers/settlements with our counterparties. Periodic actual and estimated settlements with counterparties are recorded to interest expense as a yield adjustment to effectively fix the otherwise variable rate interest expense associated with the Term and Revolving Loans for hedged notional amounts.

A summary of the effect of derivative instruments on the Company’s Condensed Consolidated Statements of Comprehensive Earnings (Unaudited) and recognized in AOCE for the three months ended March 31, 2014 and 2013 is as follows (in millions):
 
 
Amount of gain (loss)
recognized in AOCE on
derivatives
 
 
 
Amount of loss reclassified
from AOCE into
income
Derivatives in cash
 
Three months ended
 
Location of loss
 
Three months ended
flow hedging
 
March 31,
 
reclassified from
 
March 31,
relationships
 
2014
 
2013
 
AOCE into income
 
2014
 
2013
Interest rate swap contracts
 
$
(1.1
)
 
$

 
Interest expense
 
$
(1.6
)
 
$
(1.7
)

Approximately $1.9 million of the balance in AOCE as of March 31, 2014, is expected to be reclassified into income over the next twelve months.
Our existing cash flow hedges are highly effective and there was no impact on earnings due to hedge ineffectiveness. It is our practice to execute such instruments with credit-worthy banks at the time of execution and not to enter into derivative financial instruments for speculative purposes. As of March 31, 2014, we believe that our interest rate swap counterparties will be able to fulfill their obligations under our agreements and we believe we will have debt outstanding through the various expiration dates of the swaps such that the forecasted transactions remain probable of occurring.

(8) Supplemental Guarantor Financial Information

The following supplemental financial information sets forth for FIS and its guarantor and non-guarantor subsidiaries: (a) the Condensed Consolidating Balance Sheets as of March 31, 2014 and December 31, 2013; (b) the Condensed Consolidating Statements of Earnings and Comprehensive Earnings for the three months ended March 31, 2014 and 2013; and (c) the Condensed Consolidating Statements of Cash Flows for the three months ended March 31, 2014 and 2013. Each guarantor subsidiary is 100% owned by FIS and all guarantees are full and unconditional as well as joint and several.

12

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FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


 
Condensed Consolidating Balance Sheets
 
March 31, 2014
 
 
 
Guarantor
 
Non-guarantor
 
 
 
 
 
FIS
 
subsidiaries
 
subsidiaries
 
Eliminations
 
Consolidated
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
23.1

 
$
269.3

 
$
445.3

 
$

 
$
737.7

Settlement deposits

 
444.7

 

 

 
444.7

Trade receivables, net

 
717.7

 
270.2

 

 
987.9

Investment in subsidiaries, intercompany and receivables from related parties
9,532.1

 
11,037.9

 
945.3

 
(21,480.4
)
 
34.9

Other current assets
11.0

 
253.8

 
218.3

 

 
483.1

Total current assets
9,566.2

 
12,723.4

 
1,879.1

 
(21,480.4
)
 
2,688.3

Property and equipment, net
6.0

 
326.4

 
116.8

 

 
449.2

Goodwill

 
7,212.7

 
1,287.3

 

 
8,500.0

Intangible assets, net

 
943.7

 
344.3

 

 
1,288.0

Computer software, net
39.3

 
656.2

 
165.6

 

 
861.1

Other noncurrent assets
61.0

 
306.2

 
117.1

 

 
484.3

Total assets
$
9,672.5

 
$
22,168.6

 
$
3,910.2

 
$
(21,480.4
)
 
$
14,270.9

Liabilities and Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
$
103.8

 
$
216.4

 
$
333.0

 
$

 
$
653.2

Settlement payables

 
550.6

 
166.4

 

 
717.0

Current portion of long-term debt
39.1

 
10.0

 
0.6

 

 
49.7

Deferred revenues

 
192.1

 
78.0

 

 
270.1

Other current liabilities

 

 
14.4

 

 
14.4

Total current liabilities
142.9

 
969.1

 
592.4

 

 
1,704.4

Deferred income taxes

 
767.6

 
43.1

 

 
810.7

Long-term debt, excluding current portion
4,722.4

 
6.2

 
0.3

 

 
4,728.9

Other long-term liabilities
4.8

 
98.0

 
221.7

 

 
324.5

Total liabilities
4,870.1

 
1,840.9

 
857.5

 

 
7,568.5

Total equity
4,802.4

 
20,327.7

 
3,052.7

 
(21,480.4
)
 
6,702.4

Total liabilities and equity
$
9,672.5

 
$
22,168.6

 
$
3,910.2

 
$
(21,480.4
)
 
$
14,270.9

 
Condensed Consolidating Balance Sheets
 
December 31, 2013
 
 
 
Guarantor
 
Non-guarantor
 
 
 
 
 
FIS
 
subsidiaries
 
subsidiaries
 
Eliminations
 
Consolidated
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
21.5

 
$
172.4

 
$
353.6

 
$

 
$
547.5

Settlement deposits

 
327.4

 

 

 
327.4

Trade receivables, net

 
709.4

 
278.5

 

 
987.9

Investment in subsidiaries, intercompany and receivables from related parties
9,305.8

 
10,846.7

 
1,083.5

 
(21,200.2
)
 
35.8

Other current assets
38.1

 
289.4

 
125.8

 

 
453.3

Total current assets
9,365.4

 
12,345.3

 
1,841.4

 
(21,200.2
)
 
2,351.9

Property and equipment, net
6.5

 
329.3

 
103.2

 

 
439.0

Goodwill

 
7,212.7

 
1,287.3

 

 
8,500.0

Intangible assets, net

 
993.2

 
346.1

 

 
1,339.3

Computer software, net
36.4

 
656.5

 
163.6

 

 
856.5

Other noncurrent assets
63.6

 
294.5

 
115.3

 

 
473.4

Total assets
$
9,471.9

 
$
21,831.5

 
$
3,856.9

 
$
(21,200.2
)
 
$
13,960.1

Liabilities and Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
$
184.7

 
$
229.2

 
$
354.1

 
$

 
$
768.0

Settlement payables

 
453.0

 
65.6

 

 
518.6

Current portion of long-term debt
114.1

 
13.3

 
1.4

 

 
128.8

Deferred revenues

 
172.4

 
71.2

 

 
243.6

Other current liabilites

 

 
13.7

 

 
13.7

Total current liabilities
298.8

 
867.9

 
506.0

 

 
1,672.7

Deferred income taxes

 
778.8

 
44.8

 

 
823.6

Long-term debt, excluding current portion
4,333.2

 
6.3

 
0.3

 

 
4,339.8

Other long-term liabilities
2.8

 
98.8

 
285.1

 

 
386.7

Total liabilities
4,634.8

 
1,751.8

 
836.2

 

 
7,222.8

Total equity
4,837.1

 
20,079.7

 
3,020.7

 
(21,200.2
)
 
6,737.3

Total liabilities and equity
$
9,471.9

 
$
21,831.5

 
$
3,856.9

 
$
(21,200.2
)
 
$
13,960.1


13

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FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



 
Condensed Consolidating Statements of Earnings and Comprehensive Earnings
 
Three months ended March 31, 2014
 
 
 
Guarantor
 
Non-guarantor
 
 
 
 
 
FIS
 
subsidiaries
 
subsidiaries
 
Eliminations
 
Consolidated
 
(in millions)
Processing and services revenues
$

 
$
1,174.5

 
$
345.8

 
$

 
$
1,520.3

Operating expenses
47.3

 
895.3

 
294.0

 

 
1,236.6

Operating income
(47.3
)
 
279.2

 
51.8

 

 
283.7

Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense, net
(42.8
)
 
(0.6
)
 
2.3

 

 
(41.1
)
Other income (expense)
(0.3
)
 
(0.4
)
 
0.2

 

 
(0.5
)
Net earnings (loss) of equity affiliates
220.6

 

 

 
(220.6
)
 

Total other income (expense)
177.5

 
(1.0
)
 
2.5

 
(220.6
)
 
(41.6
)
Earnings (loss) from continuing operations before income taxes
130.2

 
278.2

 
54.3

 
(220.6
)
 
242.1

Provision (benefit) for income taxes
(31.3
)
 
96.5

 
15.4

 

 
80.6

Net earnings (loss) from continuing operations
161.5

 
181.7

 
38.9

 
(220.6
)
 
161.5

Earnings (loss) from discontinued operations, net of tax
(0.4
)
 

 
(0.4
)
 
0.4

 
(0.4
)
Net earnings (loss)
161.1

 
181.7

 
38.5

 
(220.2
)
 
161.1

Net (earnings) loss attributable to noncontrolling interest
(6.6
)
 
0.1

 
(6.7
)
 
6.6

 
(6.6
)
Net earnings (loss) attributable to FIS common stockholders
$
154.5

 
$
181.8

 
$
31.8

 
$
(213.6
)
 
$
154.5

Comprehensive earnings (loss) attributable to FIS
$
167.6

 
$
181.6

 
$
43.7

 
$
(225.3
)
 
$
167.6



 
Condensed Consolidating Statements of Earnings and Comprehensive Earnings
 
Three months ended March 31, 2013
 
 
 
Guarantor
 
Non-guarantor
 
 
 
 
 
FIS
 
subsidiaries
 
subsidiaries
 
Eliminations
 
Consolidated
 
(in millions)
Processing and services revenues
$

 
$
1,159.4

 
$
318.6

 
$

 
$
1,478.0

Operating expenses
61.5

 
866.4

 
275.0

 

 
1,202.9

Operating income
(61.5
)
 
293.0

 
43.6

 

 
275.1

Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense, net
(50.2
)
 
(0.4
)
 
(1.1
)
 

 
(51.7
)
Other income (expense)
9.6

 
0.1

 
(4.6
)
 

 
5.1

Net earnings (loss) of equity affiliates
222.3

 

 

 
(222.3
)
 

Total other income (expense)
181.7

 
(0.3
)
 
(5.7
)
 
(222.3
)
 
(46.6
)
Earnings (loss) from continuing operations before income taxes
120.2

 
292.7

 
37.9

 
(222.3
)
 
228.5

Provision (benefit) for income taxes
(33.1
)
 
94.9

 
13.4

 

 
75.2

Net earnings (loss) from continuing operations
153.3

 
197.8

 
24.5

 
(222.3
)
 
153.3

Earnings (loss) from discontinued operations, net of tax
(3.9
)
 
0.1

 
(4.0
)
 
3.9

 
(3.9
)
Net earnings (loss)
149.4

 
197.9

 
20.5

 
(218.4
)
 
149.4

Net (earnings) loss attributable to noncontrolling interest
(5.3
)
 
0.2

 
(5.5
)
 
5.3

 
(5.3
)
Net earnings (loss) attributable to FIS common stockholders
$
144.1

 
$
198.1

 
$
15.0

 
$
(213.1
)
 
$
144.1

Comprehensive earnings (loss) attributable to FIS
$
135.1

 
$
198.5

 
$
6.4

 
$
(204.9
)
 
$
135.1



14

Table of Contents
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


 
Condensed Consolidating Statements of Cash Flows
 
Three months ended March 31, 2014
 
 
 
Guarantor
 
Non-guarantor
 
 
 
 
 
FIS
 
subsidiaries
 
subsidiaries
 
Eliminations
 
Consolidated
 
(in millions)
Cash flows from operating activities
$
(52.6
)
 
$
284.2

 
$
(3.2
)
 
$
(5.8
)
 
$
222.6

Cash flows from investing activities
1.4

 
(58.6
)
 
(24.2
)
 

 
(81.4
)
Cash flows from financing activities
52.8

 
(128.7
)
 
112.5

 
5.8

 
42.4

Effect of foreign currency exchange rates on cash

 

 
6.6

 

 
6.6

Net increase (decrease) in cash
$
1.6

 
$
96.9

 
$
91.7

 
$

 
$
190.2


 
Condensed Consolidating Statements of Cash Flows
 
Three months ended March 31, 2013
 
 
 
Guarantor
 
Non-guarantor
 
 
 
 
 
FIS
 
subsidiaries
 
subsidiaries
 
Eliminations
 
Consolidated
 
(in millions)
Cash flows from operating activities
$
(48.8
)
 
$
227.8

 
$
16.4

 
$
12.1

 
$
207.5

Cash flows from investing activities
(0.1
)
 
(61.1
)
 
(134.5
)
 

 
(195.7
)
Cash flows from financing activities
38.8

 
(194.6
)
 
236.1

 
(12.1
)
 
68.2

Effect of foreign currency exchange rates on cash

 

 
(7.0
)
 

 
(7.0
)
Net increase (decrease) in cash
$
(10.1
)
 
$
(27.9
)
 
$
111.0

 
$

 
$
73.0


(9) Commitments and Contingencies
Litigation
     In the ordinary course of business, the Company is involved in various pending and threatened litigation matters related to operations, some of which include claims for punitive or exemplary damages. The Company believes that no actions, other than the matters listed below, depart from customary litigation incidental to its business. As background to the disclosure below, please note the following:

These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities.

The Company reviews all of its litigation on an on-going basis and follows the authoritative provisions for accounting for contingencies when making accrual and disclosure decisions. A liability must be accrued if (a) it is probable that a liability has been incurred and (b) the amount of loss can be reasonably estimated. If one of these criteria has not been met, disclosure is required when there is at least a reasonable possibility that a material loss may be incurred. When assessing reasonably possible and probable outcomes, the Company bases decisions on the assessment of the ultimate outcome following all appeals. Legal fees associated with defending litigation matters are expensed as incurred.

   CheckFree Corporation and CashEdge, Inc. v. Metavante Corporation and Fidelity National Information Services, Inc.

This is a patent infringement action that was filed by CheckFree Corporation and CashEdge, Inc., subsidiaries of Fiserv, Inc., against Fidelity National Information Services, Inc. and our subsidiary, Metavante Corporation (collectively the “Defendants”) in the U.S. District Court for the Middle District of Florida, Jacksonville Division on January 5, 2012. The complaint seeks damages, injunctive relief and attorneys' fees for the alleged infringement of three patents. Plaintiffs allege that the Defendants infringe the patents at issue by providing customers financial and payment solutions that process payment instructions, provide electronic biller notifications, and/or process account-to-account funds transfer transactions and have requested financial damages and injunctive relief. Defendants filed their Answer and Counterclaims to Plaintiffs' complaint for patent infringement denying the claims of patent infringement and asserting defenses, including non-infringement and

15

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FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


invalidity. Additionally, Defendants filed counterclaims asserting patent infringement of three patents and adding Fiserv, Inc. as a Counter Defendant. Defendants seek damages, injunctive relief and attorneys' fees. Plaintiffs and Counter Defendant Fiserv, Inc., filed their Answer to Defendants' counterclaims denying the claims of patent infringement and asserting defenses, including non-infringement and invalidity. In the fourth quarter of 2012, the Court granted Plaintiffs' Motion to Amend its First Amended Complaint to add a fourth patent and Defendants' Motion to Amend its First Amended Answer and Counterclaims. Defendants filed a Motion for Summary Judgment seeking an order invalidating all of the Plaintiffs' asserted patents. Plaintiffs filed a Motion for Summary Judgment seeking to invalidate select patent claims from one of Defendants' asserted patents.   On June 24, 2013, Defendants filed for covered business method (“CBM”) post-grant reviews of the validity of the Plaintiff's asserted patents at the US Patent and Trademark Office.  On June 25, 2013, Defendants filed a Motion to Stay the case pending the outcome of the CBM post-grant reviews.  The Court denied Plaintiffs' Motion for Summary Judgment. On December 23, 2013, the US Patent Office instituted Defendants’ CBM Petitions, thereby agreeing to review the validity of Plaintiff's patents. Additionally, on January 17, 2014, the Court granted Defendants’ Motion to Stay the litigation pending the outcome of the CBM review proceedings. An estimate of a possible loss or range of possible loss, if any, for this litigation cannot be made at this time.

DataTreasury Corporation v. Fidelity National Information Services, Inc. et. al.

This patent infringement lawsuit was filed on May 28, 2013 by DataTreasury Corporation (“DTC”) against Fidelity National Information Services, Inc. (the “Company”) and multiple customer banks in the US District Court for the Eastern District of Texas, Marshall Division.  Plaintiff alleges that the Company infringes the patents at issue by making, using, selling or offering to sell systems and methods for image-based check processing. The Complaint seeks damages, injunctive relief and attorneys' fees for the alleged infringement of two patents.  On October 25, 2013, the Company filed for covered business method (“CBM”) post-grant reviews of the validity of the Plaintiff's asserted patents at the US Patent and Trademark Office ("USPTO").  On December 18, 2013, the Company filed a Motion to Stay the case pending the outcome of the CBM post-grant reviews.   On April 4, 2014, the Company filed an Emergency Motion to Stay the case pending the Court's ruling on the underlying Motion to Stay in order to obtain relief from the aggressive schedule imposed by the Court. On April 29, 2014, the USPTO instituted the Company's two CBM petitions. The trial is currently scheduled for April 13, 2015. An estimate of a possible loss or range of possible loss, if any, for this action cannot be made at this time.

Indemnifications and Warranties

     The Company generally indemnifies its customers, subject to certain limitations and exceptions, against damages and costs resulting from claims of patent, copyright, or trademark infringement associated solely with its customers' use of the Company's software applications or services. Historically, the Company has not made any material payments under such indemnifications, but continues to monitor the conditions that are subject to the indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses when they are estimable. In addition, the Company warrants to customers that its software operates substantially in accordance with the software specifications. Historically, no material costs have been incurred related to software warranties and no accruals for warranty costs have been made.

(10) Stock Purchase Right

As of the date of acquisition of our subsidiary, Metavante Technologies, Inc. ("Metavante"), WPM, L.P., a Delaware limited partnership affiliated with Warburg Pincus Private Equity IX, L.P. (collectively “Warburg Pincus”) held a stock purchase right for FIS shares that originated from its initial investment in our subsidiary, Metavante. On March 6, 2013, Warburg Pincus sold 19.3 million shares of FIS common stock in a secondary public offering, constituting substantially all its remaining ownership position, other than shares it was still entitled to buy under the purchase right agreement. As of May 23, 2013, in exchange for a cash payment of $4.9 million by FIS to Warburg Pincus, the parties terminated the stock purchase right agreement and the Warburg shareholders agreement, thereby eliminating any further rights and obligations with respect thereto. The cash payment was calculated as the value, on a net settlement exercise basis, of the purchase rights remaining under the agreement on the termination date. This payment was recorded as a reduction to additional paid in capital.

(11) Share Repurchase Program

On January 29, 2014 our Board of Directors approved a plan authorizing repurchases of up to $2.0 billion of our outstanding common stock in the open market at prevailing market prices or in privately negotiated transactions through

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Table of Contents
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


December 31, 2017. This share repurchase authorization replaced any existing share repurchase authorization plan. Approximately $1,825.0 million of plan capacity remained available for repurchases as of March 31, 2014. The table below summarizes quarterly share repurchase activity for 2014 and 2013 under all plans (in millions, except per share amounts):
 
 
 
 
 
 
Total cost of shares
 
 
 
 
 
 
purchased as part of
 
 
Total number of
 
Average price
 
publicly announced
Three months ended
 
shares purchased
 
paid per share
 
plans or programs
March 31, 2014
 
3.2

 
$
54.31

 
$
175.0

December 31, 2013
 
2.5

 
$
50.73

 
$
125.7

September 30, 2013
 
2.7

 
$
46.69

 
$
124.9

June 30, 2013
 
2.8

 
$
44.25

 
$
125.0

March 31, 2013
 
2.7

 
$
37.17

 
$
100.4


(12) Segment Information
Summarized financial information for the Company’s segments is shown in the following tables.
As of and for the three months ended March 31, 2014 (in millions):

 
FSG
 
PSG
 
ISG
 
Corporate
and Other
 
Total
Processing and services revenues
$
586.8

 
$
619.5

 
$
314.4

 
$
(0.4
)
 
$
1,520.3

Operating expenses
399.8

 
384.0

 
275.0

 
177.8

 
1,236.6

Operating income
$
187.0

 
$
235.5

 
$
39.4

 
$
(178.2
)
 
283.7

Other income (expense) unallocated
 
 
 
 
 
 
 
 
(41.6
)
Income from continuing operations before income taxes
 
 
 
 
 
 
 
 
$
242.1

Depreciation and amortization
$
39.9

 
$
19.9

 
$
19.6

 
$
73.2

 
$
152.6

Capital expenditures (1)
$
41.2

 
$
19.3

 
$
24.0

 
$
5.8

 
$
90.3

Total assets (2)
$
5,471.1

 
$
5,232.6

 
$
2,174.4

 
$
1,390.1

 
$
14,268.2

Goodwill
$
4,064.7

 
$
3,833.1

 
$
602.2

 
$

 
$
8,500.0


As of and for the three months ended March 31, 2013 (in millions):

 
FSG
 
PSG
 
ISG
 
Corporate
and Other
 
Total
Processing and services revenues
$
575.3

 
$
611.8

 
$
291.6

 
$
(0.7
)
 
$
1,478.0

Operating expenses
386.9

 
373.3

 
251.3

 
191.4

 
1,202.9

Operating income
$
188.4

 
$
238.5

 
$
40.3