Supplemental Guarantor Condensed Consolidating Financial Statements

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Supplemental Guarantor Condensed Consolidating Financial Statements

Supplemental Guarantor Condensed Consolidating Financial Statements

As described in note 2 "Borrowings" in "Item 8. Financial Statements and Supplementary Data" in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, FDC's 7.0% senior notes are guaranteed by most of the existing and future, direct and indirect, wholly owned, domestic subsidiaries of FDC (Guarantors). The Guarantors guarantee the senior secured revolving credit facility, senior secured term loan facility, the 5.0% senior secured notes, the 5.375% senior secured notes, and the 6.75% senior secured notes, which rank senior in right of payment to all existing and future unsecured and second lien indebtedness of FDC’s guarantor subsidiaries to the extent of the value of the collateral. The Guarantors guarantee the 5.75% senior second lien notes which rank senior in right of payment to all existing and future unsecured indebtedness of FDC’s guarantor subsidiaries to the extent of the value of the collateral. The 7.0% senior note guarantee is unsecured and ranks equally in right of payment with all existing and future senior indebtedness of the guarantor subsidiaries but senior in right of payment to all existing and future subordinated indebtedness of FDC’s guarantor subsidiaries.

All of the above guarantees are full, unconditional, and joint and several and each of the Guarantors is 100% owned, directly or indirectly, by the Company. None of the other subsidiaries of the Company, either direct or indirect, guarantee the notes (Non-Guarantors). The Guarantors are subject to release under certain circumstances as described below.

The credit agreement governing the guarantees of the senior secured revolving credit facility and senior secured term loan facility provide for a Guarantor to be automatically and unconditionally released and discharged from its guarantee obligations in certain circumstances, including under the following circumstances:

• the Guarantor ceases to be a “restricted subsidiary” for purpose of the agreement because the Company no longer directly or indirectly owns 50% of the equity or, if a corporation, stock having voting power to elect a majority of the board of directors of the Guarantor; or

• the Guarantor is designated as an “unrestricted subsidiary” for purposes of the agreement covenants; or

• the Guarantor is no longer wholly owned by the Company subject to the value of all Guarantors released under this provision does not exceed (x) 10% of the Company’s Covenant EBITDA plus (y) the amount of investments permitted under the agreement in respect of non-guarantors.

The indentures governing all of the other guarantees described above provide for a Guarantor to be automatically and unconditionally released and discharged from its guarantee obligations in certain circumstances, including upon the earliest to occur of:

• the sale, exchange or transfer of the subsidiary’s capital stock or all or substantially all of its assets;

• designation of the Guarantor as an “unrestricted subsidiary” for purposes of the indenture covenants;

• release or discharge of the Guarantor’s guarantee of certain other indebtedness; or

• legal defeasance or covenant defeasance of the indenture obligations when provision has been made for them to be fully satisfied.

The following tables present the results of operations, comprehensive income, financial position and cash flows of the Company (FDC Parent Company), the Guarantor subsidiaries, the Non-Guarantor subsidiaries and consolidation adjustments for the periods presented to arrive at the information for the Company on a consolidated basis:

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended June 30, 2016
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	—		$	975		$	767		$	(73	)	$	1,669
Product sales and other	—			207			137			(37		)	307
Total revenues (excluding reimbursable items)	—			1,182			904			(110		)	1,976
Reimbursable PIN debit fees, postage, and other	—			644			308			—			952
Total revenues	—			1,826			1,212			(110		)	2,928
Expenses:
Cost of services (exclusive of items shown below)	—			394			351			(47		)	698
Cost of products sold	—			81			45			(40		)	86
Selling, general, and administrative	39			289			195			(23		)	500
Depreciation and amortization	2			141			95			—			238
Other operating expenses	—			22			2			—			24
Total expenses (excluding reimbursable items)	41			927			688			(110		)	1,546
Reimbursable PIN debit fees, postage, and other	—			644			308			—			952
Total expenses	41			1,571			996			(110		)	2,498
Operating (loss) profit	(41		)	255			216			—			430
Interest expense, net	(278		)	(4		)	(2		)	—			(284		)
Loss on debt extinguishment	(9		)	—			—			—			(9		)
Interest income (expense) from intercompany notes	70			(57		)	(13		)	—			—
Other income (expense)	2			—			36			—			38
Equity earnings from consolidated subsidiaries	223			120			—			(343		)	—
(Loss) income before income taxes and equity earnings in affiliates	(33		)	314			237			(343		)	175
Income tax (benefit) expense	(185		)	145			68			—			28
Equity earnings in affiliates	—			61			7			—			68
Net income (loss)	152			230			176			(343		)	215
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest	—			—			15			48			63
Net income (loss) attributable to First Data Corporation	$	152		$	230		$	161		$	(391	)	$	152
Comprehensive income (loss)	$	112		$	244		$	93		$	(275	)	$	174
Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest	—			—			14			48			62
Comprehensive income (loss) attributable to First Data Corporation	$	112		$	244		$	79		$	(323	)	$	112

	Six months ended June 30, 2016
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	—		$	1,923		$	1,485		$	(148	)	$	3,260
Product sales and other	—			401			254			(69		)	586
Total revenues (excluding reimbursable items)	—			2,324			1,739			(217		)	3,846
Reimbursable PIN debit fees, postage, and other	—			1,266			593			—			1,859
Total revenues	—			3,590			2,332			(217		)	5,705
Expenses:
Cost of services (exclusive of items shown below)	—			800			703			(74		)	1,429
Cost of products sold	—			151			85			(72		)	164
Selling, general, and administrative	205			543			387			(71		)	1,064
Depreciation and amortization	3			290			183			—			476
Other operating expenses:	12			29			4			—			45
Total expenses (excluding reimbursable items)	220			1,813			1,362			(217		)	3,178
Reimbursable PIN debit fees, postage, and other	—			1,266			593			—			1,859
Total expenses	220			3,079			1,955			(217		)	5,037
Operating (loss) profit	(220		)	511			377			—			668
Interest expense, net	(534		)	(9		)	(4		)	—			(547		)
Loss on debt extinguishment	(55		)	—			—			—			(55		)
Interest income (expense) from intercompany notes	133			(119		)	(14		)	—			—
Other income	—			—			44			—			44
Equity earnings from consolidated subsidiaries	449			176			—			(625		)	—
(Loss) income before income taxes and equity earnings in affiliates	(227		)	559			403			(625		)	110
Income tax (benefit) expense	(323		)	260			96			—			33
Equity earnings in affiliates	—			116			16			—			132
Net income (loss)	96			415			323			(625		)	209
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest	—			—			34			79			113
Net income (loss) attributable to First Data Corporation	$	96		$	415		$	289		$	(704	)	$	96
Comprehensive (loss) income	$	(10	)	$	442		$	243		$	(571	)	$	104
Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest	—			—			35			79			114
Comprehensive (loss) income attributable to First Data Corporation	$	(10	)	$	442		$	208		$	(650	)	$	(10	)

	Three months ended June 30, 2015
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	—		$	980		$	764	$	(77	)	$	1,667
Product sales and other	—			176			118		(15		)	279
Total revenues (excluding reimbursable items)	—			1,156			882		(92		)	1,946
Reimbursable PIN debit fees, postage, and other	—			627			299		—			926
Total revenues	—			1,783			1,181		(92		)	2,872
Expenses:
Cost of services (exclusive of items shown below)	—			372			360		(77		)	655
Cost of products sold	—			60			40		(15		)	85
Selling, general, and administrative	27			290			209		—			526
Depreciation and amortization	5			151			96		—			252
Other operating expenses	7			2			10		—			19
Total expenses (excluding reimbursable items)	39			875			715		(92		)	1,537
Reimbursable PIN debit fees, postage, and other	—			627			299		—			926
Total expenses	39			1,502			1,014		(92		)	2,463
Operating (loss) profit	(39		)	281			167		—			409
Interest expense, net	(403		)	(3		)	1		—			(405		)
Interest income (expense) from intercompany notes	77			(79		)	2		—			—
Other (expense) income	(30		)	3			3		—			(24		)
Equity earnings from consolidated subsidiaries	135			85			—		(220		)	—
(Loss) income before income taxes and equity earnings in affiliates	(260		)	287			173		(220		)	(20		)
Income tax (benefit) expense	(234		)	197			47		—			10
Equity earnings in affiliates	—			55			8		—			63
Net (loss) income	(26		)	145			134		(220		)	33
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest	—			—			18		41			59
Net (loss) income attributable to First Data Corporation	$	(26	)	$	145		$	116	$	(261	)	$	(26	)
Comprehensive (loss) income	$	8		$	144		$	194	$	(275	)	$	71
Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest	—			—			21		41			62
Comprehensive income (loss) attributable to First Data Corporation	$	8		$	144		$	173	$	(316	)	$	9

	Six months ended June 30, 2015
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	—		$	1,894		$	1,489		$	(150	)	$	3,233
Product sales and other	—			341			223			(29		)	535
Total revenues (excluding reimbursable items)	—			2,235			1,712			(179		)	3,768
Reimbursable PIN debit fees, postage, and other	—			1,228			571			—			1,799
Total revenues	—			3,463			2,283			(179		)	5,567
Expenses:
Cost of services (exclusive of items shown below)	—			777			742			(150		)	1,369
Cost of products sold	—			113			77			(29		)	161
Selling, general, and administrative	59			577			410			—			1,046
Depreciation and amortization	9			301			193			—			503
Other operating expenses	6			4			10			—			20
Total expenses (excluding reimbursable items)	74			1,772			1,432			(179		)	3,099
Reimbursable PIN debit fees, postage, and other	—			1,228			571			—			1,799
Total expenses	74			3,000			2,003			(179		)	4,898
Operating (loss) profit	(74		)	463			280			—			669
Interest expense, net	(805		)	(6		)	—			—			(811		)
Interest income (expense) from intercompany notes	158			(156		)	(2		)	—			—
Other income (expense)	39			3			(31		)	—			11
Equity earnings from consolidated subsidiaries	307			123			—			(430		)	—
(Loss) income before income taxes and equity earnings in affiliates	(375		)	427			247			(430		)	(131		)
Income tax (benefit) expense	(237		)	200			50			—			13
Equity earnings in affiliates	—			103			11			—			114
Net (loss) income	(138		)	330			208			(430		)	(30		)
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest	—			—			34			74			108
Net (loss) income attributable to First Data Corporation	$	(138	)	$	330		$	174		$	(504	)	$	(138	)
Comprehensive (loss) income	$	(259	)	$	302		$	38		$	(240	)	$	(159	)
Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest	—			—			26			74			100
Comprehensive (loss) income attributable to First Data Corporation	$	(259	)	$	302		$	12		$	(314	)	$	(259	)

CONSOLIDATED BALANCE SHEETS

	As of June 30, 2016
(in millions)	FDC Parent Company		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidation Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	5	$	7	$	270	$	—		$	282
Accounts receivable, net of allowance for doubtful accounts	2		466		1,295		—			1,763
Settlement assets (a)	—		4,123		4,383		—			8,506
Intercompany notes receivable	1		—		—		(1		)	—
Other current assets	167		213		105		—			485
Total current assets	175		4,809		6,053		(1		)	11,036
Property and equipment, net of accumulated depreciation	35		572		282		—			889
Goodwill	—		9,145		7,663		—			16,808
Customer relationships, net of accumulated amortization	—		1,130		814		—			1,944
Other intangibles, net of accumulated amortization	604		701		494		—			1,799
Investment in affiliates	4		886		144		—			1,034
Long-term intercompany receivables	9,594		16,541		7,133		(33,268		)	—
Long-term intercompany notes receivable	3,443		217		9		(3,669		)	—
Long-term deferred tax assets	431		—		—		(431		)	—
Other long-term assets	182		352		261		(56		)	739
Investment in consolidated subsidiaries	26,393		5,898		—		(32,291		)	—
Total assets	$	40,861	$	40,251	$	22,853	$	(69,716	)	$	34,249
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	281	$	723	$	508	$	—		$	1,512
Short-term and current portion of long-term borrowings	—		64		244		—			308
Settlement obligations (a)	—		4,123		4,383		—			8,506
Intercompany notes payable	—		—		1		(1		)	—
Total current liabilities	281		4,910		5,136		(1		)	10,326
Long-term borrowings	18,644		168		16		—			18,828
Long-term deferred tax liabilities	—		798		70		(431		)	437
Long-term intercompany payables	20,446		7,716		5,106		(33,268		)	—
Long-term intercompany notes payable	226		3,415		28		(3,669		)	—
Other long-term liabilities	467		272		156		(56		)	839
Total liabilities	40,064		17,279		10,512		(37,425		)	30,430
Redeemable equity interest	—		—		74		(74		)	—
Redeemable noncontrolling interest	—		—		—		74			74
First Data Corporation stockholders' equity	797		22,972		6,352		(29,324		)	797
Noncontrolling interests	—		—		95		2,853			2,948
Equity of consolidated alliance	—		—		5,820		(5,820		)	—
Total equity	797		22,972		12,267		(32,291		)	3,745
Total liabilities and equity	$	40,861	$	40,251	$	22,853	$	(69,716	)	$	34,249

(a) The majority of the Guarantor settlement assets relate to the Company’s merchant acquiring business. The Company believes the settlement assets are not available to satisfy any claims other than those related to the settlement liabilities.

	As of December 31, 2015
(in millions)	FDC Parent Company		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Consolidation Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	105	$	16	$	308	$	—		$	429
Accounts receivable, net of allowance for doubtful accounts	—		826		1,000		—			1,826
Settlement assets (a)	—		4,273		3,877		—			8,150
Intercompany notes receivable	436		86		10		(532		)	—
Other current assets	98		188		95		—			381
Total current assets	639		5,389		5,290		(532		)	10,786
Property and equipment, net of accumulated depreciation	37		640		274		—			951
Goodwill	—		9,139		7,707		—			16,846
Customer relationships, net of accumulated amortization	—		1,235		901		—			2,136
Other intangibles, net of accumulated amortization	604		703		476		—			1,783
Investment in affiliates	5		900		143		—			1,048
Long-term intercompany receivables	8,523		15,192		6,321		(30,036		)	—
Long-term intercompany notes receivable	3,415		236		9		(3,660		)	—
Long-term deferred tax assets	524		—		—		(524		)	—
Other long-term assets	259		358		265		(70		)	812
Investment in consolidated subsidiaries	25,692		5,588		—		(31,280		)	—
Total assets	$	39,698	$	39,380	$	21,386	$	(66,102	)	$	34,362
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	283	$	792	$	564	$	—		$	1,639
Short-term and current portion of long-term borrowings	740		70		46		—			856
Settlement obligations (a)	—		4,273		3,877		—			8,150
Intercompany notes payable	96		408		28		(532		)	—
Total current liabilities	1,119		5,543		4,515		(532		)	10,645
Long-term borrowings	18,616		119		2		—			18,737
Long-term deferred tax liabilities	—		875		80		(524		)	431
Long-term intercompany payables	18,583		6,874		4,579		(30,036		)	—
Long-term intercompany notes payable	245		3,353		62		(3,660		)	—
Other long-term liabilities	467		288		127		(70		)	812
Total liabilities	39,030		17,052		9,365		(34,822		)	30,625
Redeemable equity interest	—		—		77		(77		)	—
Redeemable noncontrolling interest	—		—		—		77			77
First Data Corporation stockholders' equity	668		22,328		5,933		(28,261		)	668
Noncontrolling interests	—		—		88		2,904			2,992
Equity of consolidated alliance	—		—		5,923		(5,923		)	—
Total equity	668		22,328		11,944		(31,280		)	3,660
Total liabilities and equity	$	39,698	$	39,380	$	21,386	$	(66,102	)	$	34,362

(a) The majority of the Guarantor settlement assets relate to the Company’s merchant acquiring business. The Company believes the settlement assets are not available to satisfy any claims other than those related to the settlement liabilities.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended June 30, 2016
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	96		$	415		$	323		$	(625	)	$	209
Adjustments to reconcile to net cash (used in) provided by operating activities:
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)	3			325			200			—			528
Charges (gains) related to other operating expenses and other income (expense)	12			29			(40		)	—			1
Loss on debt extinguishment	55			—			—			—			55
Stock-based compensation expense	171			—			—			—			171
Other non-cash and non-operating items, net	(428		)	(178		)	(24		)	625			(5		)
(Decrease) increase in cash, excluding the effects of acquisitions and dispositions, resulting from changes in operating assets and liabilities	(254		)	192			11			—			(51		)
Net cash (used in) provided by operating activities	(345		)	783			470			—			908
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment	—			(27		)	(86		)	—			(113		)
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs	—			(93		)	(26		)	—			(119		)
Acquisitions, net of cash acquired	(6		)	—			—			—			(6		)
Proceeds from Visa Europe share sale	—			—			27			—			27
Other investing activities, net	68			136			—			(203		)	1
Net cash provided by (used in) investing activities	62			16			(85		)	(203		)	(210		)
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net	—			—			196			—			196
Proceeds from issuance of long-term debt	2,377			—			—			—			2,377
Payment of call premiums and debt issuance cost	(52		)	—			—			—			(52		)
Principal payments on long-term debt	(3,130		)	(31		)	(2		)	—			(3,163		)
Payment of taxes related to net settlement of equity awards	(59		)	—			—			—			(59		)
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interest	—			—			(27		)	(130		)	(157		)
Distributions paid to equity holders	—			—			(266		)	266			—
Other financing activities, net	27			8			(67		)	67			35
Intercompany	1,020			(792		)	(228		)	—			—
Net cash provided by (used in) financing activities	183			(815		)	(394		)	203			(823		)
Effect of exchange rate changes on cash and cash equivalents	—			7			(29		)	—			(22		)
Change in cash and cash equivalents	(100		)	(9		)	(38		)	—			(147		)
Cash and cash equivalents at beginning of period	105			16			308			—			429
Cash and cash equivalents at end of period	$	5		$	7		$	270		$	—		$	282

	Six months ended June 30, 2015
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(138	)	$	330		$	208		$	(430	)	$	(30	)
Adjustments to reconcile to net cash (used in) provided by operating activities:
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)	9			340			208			—			557
(Gains) charges related to other operating expenses and other income (expense)	(33		)	1			41			—			9
Stock-based compensation expense	23			—			—			—			23
Other non-cash and non-operating items, net	(269		)	(130		)	(15		)	430			16
(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions	(318		)	118			78			—			(122		)
Net cash (used in) provided by operating activities	(726		)	659			520			—			453
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment	(6		)	(64		)	(64		)	—			(134		)
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs	—			(122		)	(28		)	—			(150		)
Acquisitions, net of cash acquired	(70		)	(19		)	—			—			(89		)
Other investing activities, net	50			131			—			(195		)	(14		)
Net cash used in investing activities	(26		)	(74		)	(92		)	(195		)	(387		)
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net	194			—			(37		)	—			157
Principal payments on long-term debt	(10		)	(36		)	(6		)	—			(52		)
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interest	—			—			(41		)	(122		)	(163		)
Distributions paid to equity holders	—			—			(250		)	250			—
Other financing activities, net	(12		)	—			(67		)	67			(12		)
Intercompany	590			(539		)	(51		)	—			—
Net cash provided by (used in) financing activities	762			(575		)	(452		)	195			(70		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(6		)	—			(6		)
Change in cash and cash equivalents	10			10			(30		)	—			(10		)
Cash and cash equivalents at beginning of period	—			23			335			—			358
Cash and cash equivalents at end of period	$	10		$	33		$	305		$	—		$	348