UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:
December 31, 2017
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
(State or Other Jurisdiction
of Incorporation or Organization)
39-1506125
(I.R.S. Employer
Identification No.)
255 Fiserv Dr., Brookfield, WI 53045
(Address of Principal Executive Offices, Including Zip Code)
Registrant’s telephone number, including area code: (262) 879-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.01 per share
Name of Each Exchange on Which Registered
The NASDAQ Stock Market LLC
No
No
No
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
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
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The aggregate market value of the common stock of the registrant held by non-affiliates as of June 30, 2017 (the last trading day
of the second fiscal quarter) was $25,747,259,465 based on the closing price of the registrant’s common stock on the NASDAQ
Global Select Market on that date. The number of shares of the registrant’s common stock, $0.01 par value per share, outstanding
at February 16, 2018 was 206,607,864.
Smaller Reporting Company
Non-Accelerated Filer
Accelerated Filer
No
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this report incorporates information by reference to the registrant’s proxy statement for its 2018 annual meeting of
shareholders, which proxy statement will be filed with the Securities and Exchange Commission no later than 120 days after the
close of the fiscal year ended December 31, 2017.
TABLE OF CONTENTS
Page
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Properties
Legal Proceedings
Mine Safety Disclosures
Executive Officers of the Registrant
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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, could cause actual results to differ materially from our current expectations. The factors that may
affect our results include, among others: pricing and other actions by competitors; the capacity of our technology to keep pace
with a rapidly evolving marketplace; the impact of a security breach or operational failure on our business; the effect of
legislative and regulatory actions in the United States and internationally; our ability to comply with government regulations;
our ability to successfully identify, complete and integrate acquisitions, and to realize the anticipated benefits associated with
the same; our ability to successfully complete the sale of a 55% interest of our lending solutions business on the anticipated
terms and timeline or at all; the impact of our strategic initiatives; the impact of market and economic conditions on the
financial services industry; and other factors discussed in this report under the heading “Risk Factors.” 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. We are not including the information provided on the
websites referenced herein as part of, or incorporating such information by reference into, this Annual Report on Form 10-K.
In this report, all references to “we,” “us” and “our” refer to Fiserv, Inc. (“Fiserv”), a Wisconsin corporation, and, unless the
context otherwise requires, its consolidated subsidiaries.
PART I
Item 1. Business
Overview
Fiserv, Inc. is a leading global provider of financial services technology. We are publicly traded on the NASDAQ Global Select
Market and part of the S&P 500 Index. We serve over 12,000 clients worldwide, including banks, savings banks, credit unions,
investment management firms, leasing and finance companies, billers, retailers, merchants, and building societies. We provide
account processing systems; electronic payments processing products and services, such as electronic bill payment and
presentment services, card-based transaction processing and network services, ACH transaction processing, account-to-account
transfers, and person-to-person payments; internet and mobile banking systems; and related services including document and
payment card production and distribution, check processing and imaging, source capture systems, and lending and risk
management products and services. Most of the services we provide are necessary for our clients to operate their businesses
and are, therefore, non-discretionary in nature. Our operations are principally located in the United States where we operate
data and transaction processing centers, provide technology support, develop software and payment solutions, and offer
consulting services.
In 2017, we had $5.7 billion in total revenue, $1.5 billion in operating income and $1.5 billion of net cash provided by
operating activities from continuing operations. Processing and services revenue, which in 2017 represented 85% of our total
revenue, is primarily generated from account- and transaction-based fees under contracts that generally have terms of three to
five years and high renewal rates. Revenue from clients outside the United States comprised approximately 5% of total revenue
in each of 2017 and 2016 and 6% in 2015.
We have grown our business by developing highly specialized product and service enhancements, extending our capabilities
through innovation, welcoming new clients, selling additional products and services to existing clients, and acquiring
businesses that complement ours, all of which have enabled us to deliver a wide range of integrated products and services and
have created new opportunities for growth.
We originally incorporated in Delaware in 1984 and reincorporated as a Wisconsin corporation in 1992. Our headquarters are
located at 255 Fiserv Drive, Brookfield, Wisconsin 53045, and our telephone number is (262) 879-5000.
Our operations are reported in the Payments and Industry Products (“Payments”) and Financial Institution Services
(“Financial”) business segments. Financial information regarding our business segments is included in Note 9 to the
consolidated financial statements.
1
Payments
The businesses in our Payments segment provide financial institutions and other companies with the products and services
required to process electronic payment transactions and to offer their customers access to financial services and transaction
capability through digital channels. Financial institutions and other companies have increasingly relied on third-party providers
for those products and services, either on a licensed software or outsourced basis, as an increasing number of payment
transactions are completed electronically as our clients’ customers seek the convenience of 24-hour digital access to their
financial accounts. Within the Payments segment, we primarily provide electronic bill payment and presentment services,
internet and mobile banking software and services, account-to-account transfers, person-to-person payment services, debit and
credit card processing and services, payments infrastructure services, and other electronic payments software and services. Our
businesses in this segment also provide card and print personalization services, investment account processing services for
separately managed accounts, and fraud and risk management products and services. Our solutions in the Payments segment
include:
Electronic Payments
Our electronic payments business is comprised of electronic bill payment and presentment services and other electronic
payment services for businesses and consumers, such as person-to-person payments, account-to-account transfers, account
opening and funding, and small business invoicing and payments. Our principal electronic bill payment and presentment
product, CheckFree® RXP®, allows our clients’ customers: to manage household bills via an easy-to-use, online tool; to view
billing and payment information; to pay and manage all of their bills in one place; and to complete same-day or next-day bill
payments to a wide range of billers and others.
Our person-to-person payments solution, Popmoney®, allows consumers a convenient way to send and receive money while
offering financial institutions the opportunity to generate new transaction-based revenue, attract new accounts and increase
loyalty among existing customers. More than 2,500 financial institutions have agreed to offer our person-to-person payments
services to their customers as of December 31, 2017. In addition to Popmoney, we partner with Early Warning Services, LLC to
offer a turnkey implementation of its Zelle® real-time person-to-person payments service. Our turnkey solution simplifies the
implementation of Zelle by providing interface, risk management, alerting, settlement and other services to clients.
Digital Channels
Our principal digital consumer and business banking products are Architect™, Corillian Online®, Corillian® Business Online,
FINkit™, Mobiliti™, and Mobiliti Business™. Our Corillian product suite supports multiple lines of banking businesses and has
been designed to be highly scalable to meet the evolving needs of our clients. This structure enables our clients to deploy new
services by adding and integrating applications, such as electronic bill payment, person-to-person payments and personal
financial management tools, to any internet connected point-of-presence. Our Mobiliti product suite provides a variety of
mobile banking and payments services to our clients and their customers via mobile browser, downloadable application for
smart phones and tablets, text message, and Amazon® Echo Alexa voice banking. We also provide the advanced capabilities of
Corillian Online and Mobiliti as an outsourced service, known as Corillian Online ASP and Mobiliti ASP. Our Architect
product suite supports online, mobile and tablet banking for retail and small business customers on a single platform. Each of
these suites enables customers to complete balance inquiries, view their transaction history, make bill payments, and transfer
funds between accounts and other people. As of December 31, 2017, we had approximately 2,300 Mobiliti ASP clients.
In the third quarter of 2017, we completed the acquisition of Monitise plc, a provider of digital solutions, including FINkit, that
enables innovative digital banking experiences for leading financial institutions worldwide.
Card Services
Our card services business is a leader in electronic funds transfer and provides a total payments solution through a variety of
products and services. We provide thousands of financial institution clients with a full range of credit and debit processing
services, including: ATM monitoring, tokenization, loyalty and reward programs, real-time person-to-person payments,
customized authorization processing, direct access and settlement for networks, and risk management solutions. We own and
operate the Accel® network, which serves more than 3,000 financial institutions with funds access at over 500,000 ATMs and
incorporates CardFree CashSM access as well as EMV™ chip and traditional magnetic stripe cards. Our Accel network point of
sale support delivers comprehensive coverage of PIN and signature authentication support at physical and electronic commerce
merchants across the country. Our digital enablement capability provides our clients’ consumers with mobile-based,
customizable card management and alert tools that drive engagement and revenue for our issuers, and our risk management
tools and portfolio management services are integrated with real-time fraud decisioning.
2
Biller Solutions
Our biller business provides electronic billing and payment services to companies that deliver bills to their customer base, such
as utilities, telephone and cable companies, consumer lending institutions, and insurance providers, enabling our biller clients
to reduce costs, collect payments faster through multiple channels, increase customer satisfaction, and provide customers
flexible, easy-to-use ways to view and pay their bills. Our clients’ customers access our electronic billing and payment systems
by viewing or paying a bill through a financial institution’s bill payment application, using a biller’s website, mobile
application or automated phone system, leveraging www.mycheckfree.com, or by paying in person at one of more than 24,000
nationwide walk-in payment locations. These diverse options allow our clients’ customers to view and pay bills wherever,
whenever and however they feel most comfortable. Furthermore, because our biller clients are able to receive all of these
services from us, we can eliminate the operational complexity and expense of supporting multiple vendor systems or in-house
developed systems.
Output Solutions
Our output solutions business provides business communication solutions to clients across a wide variety of industries,
including financial services, healthcare, retail, utilities, and travel and entertainment. Our products and services include:
electronic document management through our electronic document delivery products and services; card manufacturing,
personalization and mailing; statement production and mailing; design and fulfillment of direct mail solutions; forms
distribution; laser printing and mailing; branded merchandise; and office supplies.
Investment Services
Our investment services business provides technology solutions that enable financial planning, portfolio management and
trading, model management, performance measurement, and reporting products and services to financial service organizations,
including broker dealers, registered investment advisors, banks, asset managers and insurance companies that deliver financial
advice and managed account products to U.S. retail investors. Our investment services business also supports global
institutional asset managers and asset servicers with portfolio accounting, performance analytics, fee billing and revenue
management, and post-trade processing technology. Our primary product, the Unified Wealth Platform, is a real-time portfolio
management, trading and reporting system used by some of the largest brokerage firms and asset managers in the U.S. offering
managed accounts.
Risk Management and Other Solutions
Our risk management solutions business provides financial and risk management products and services that deliver operating
efficiencies and management insight that enable our clients to protect and grow their businesses. Our Enterprise Performance
Management and Financial Control Solutions offerings include budgeting and planning, financial accounting, and automated
reconciliation and account certification tools to facilitate a robust assessment environment and efficient close process for our
clients. These solutions are further complemented by fraud detection and mitigation through our predictive analytics solution,
Fraud Risk and Anti-Money Laundering Compliance Management.
In the third quarter of 2017, we acquired Dovetail Group Limited (“Dovetail”), a leading provider of bank payments and
liquidity management solutions. The Dovetail payments platform helps financial institutions enable real-time payments and
integrate into a broad range of payment solutions.
Financial
The businesses in our Financial segment provide financial institutions with the products and services they need to run their
operations. By licensing software from third parties or outsourcing their processing requirements by contracting with third-
party processors, financial institutions are typically able to reduce costs and enhance their products, services, capacity and
capabilities. For example, the licensing of software reduces the need for costly technical expertise within a financial institution,
and outsourcing processing operations reduces the infrastructure and other costs required to operate systems internally. Within
the Financial segment, we provide depository institutions and leasing and finance companies 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. Many of the products and services that
we sell are integrated with solutions from our Payments segment such as electronic bill payment and presentment, internet and
mobile banking, debit processing and network services, and person-to-person payments. Our solutions in the Financial segment
include:
3
Account Processing
We provide account servicing and management technology solutions to our depository institution clients, as well as a range of
integrated, value-added banking products and services. Account processing solutions are the principal systems that enable a
financial institution to operate systems that process customer deposit and loan accounts, an institution’s general ledger, central
information files and other financial information. These solutions also include extensive security, report generation and other
features that financial institutions need to process transactions for their customers, as well as to comply with applicable
regulations. Although many of our clients contract to obtain a majority of their processing requirements from us, our software
design allows clients to start with one application and, as needed, add applications and features developed by us or by third
parties. We support a broad range of client-owned peripheral devices manufactured by a variety of vendors, which reduces a
new client’s initial conversion expenses, enhances existing clients’ ability to change technology and broadens our market
opportunity.
The principal account processing solutions used by our bank clients are Cleartouch®, DNA®, Precision®, Premier®, Signature®
and TotalPlus®. The principal account processing solutions primarily used by our credit union clients are CharlotteSM,
CubicsPlus®, CUnify™, CUSA®, DataSafe®, DNA, Galaxy®, OnCU®, Portico®, Spectrum® and XP2®. The Signature and DNA
systems are available both domestically and internationally. In addition, we offer Agiliti™ as a software-as-a-service solution to
the U.K. financial institutions. Account processing solutions are generally offered as an outsourced service or as licensed
software for installation on client-owned or -hosted computer systems.
Item Processing
Our item processing business offers products and services to financial institutions. Through the Fiserv Clearing Network, we
provide check clearing and image exchange services. Other solutions include image archive with online retrieval, in-clearings,
exceptions and returns, statements and fraud detection. We also provide consulting services, business operations services and
related software products that promote change in deposit behavior to transition check capture from branch and teller channels
to digital self-service deposit channels including mobile, merchant and ATM.
Lending and Other Solutions
Our lending business offers life-of-loan digital products and services to financial institutions, including loan originations,
servicing and default systems primarily for auto, consumer and real estate. In addition, our lending solutions include a full
complement of professional services such as customization, business process outsourcing, training, consulting and
implementation services. On February 7, 2018, we announced a definitive agreement to sell a 55% interest of our lending
solutions business. We will retain a 45% interest in the joint venture, which will include all of our automotive loan origination
and servicing products, as well as our LoanServ platform. The transaction, which is subject to customary closing conditions, is
targeted to close in the first quarter of 2018.
Other businesses in this segment provide solutions for ACH and treasury management, case management and resolution, and
source capture optimization to the financial services industry. Our offerings include Immediate FundsSM, PEP+®, and our
remote deposit capture solutions branded as Source Capture Solutions®.
In the first quarter of 2017, we completed our acquisition of Online Banking Solutions, Inc. (“OBS”), a provider of cash
management and digital business banking solutions that complement and enrich our existing solutions. OBS products are
integrated across a number of our account processing solutions and with other account processing platforms, and will enable
our bank and credit union clients to better serve their commercial customers. In the third quarter of 2017, we acquired the assets
of PCLender, LLC (“PCLender”), a leader in internet-based mortgage software and mortgage lending technology solutions,
enhancing our suite of mortgage origination services to financial institutions of all sizes.
Our Strategy
Our vision is to be a global leader in transaction-based technology solutions. Our mission is to provide integrated technology
and services solutions that enable best-in-class results for our clients. We are focused on operating businesses where we have:
deep industry expertise that enables us to serve the market with high effectiveness; a strong competitive position, currently or
via a clear path in the foreseeable future; long-term, trusted client relationships that are based on recurring services and
transactions; differentiated solutions that deliver value to our clients through integration and innovation; and strong
management to execute strategies in a disciplined manner. Consistent with this focus, we continue to operate our business in
accordance with the following strategic framework:
4
• Portfolio Management. We expect to acquire businesses when we identify: a compelling strategic need, such as a
product, service or technology that helps meet client demand; an opportunity to change industry dynamics; a way to
achieve business scale; or similar considerations. We expect to divest businesses that are not in line with our market,
product or financial strategies.
• Client Relationship Value. We plan to increase the number and breadth of our client relationships by, among other
actions: continuing to integrate our products and services; introducing new products and services that are aligned with
market needs; combining products and services to deliver enhanced, integrated value propositions; and improving the
quality of our client service and support.
• Operational Effectiveness. We believe we can improve the quality of our client delivery while reducing our costs by
using the opportunities created by our size and scale. For example, we are using our consolidated buying power and
optimizing our facilities to create cost savings.
• Capital Discipline. We intend to make capital allocation decisions that offer the best prospects for our long-term
growth and profitability, which may include, among other matters, internal investment, repayment of debt, repurchases
of our own shares or acquisitions.
•
Innovation. We seek to be an innovation leader, utilizing our assets and capabilities to be at the forefront of our
industry and enable our clients to deliver best-in-class results.
Servicing the Market
The markets for our account and transaction processing services have specific needs and requirements, with strong emphasis
placed by clients on quality, security, integration with other product lines, service reliability, timely introduction of new
products and features, flexibility and value. We believe that our financial strength and primary focus on the financial services
industry enhances our ability to meet these needs and service our clients. In addition, we believe that our dedication to
providing excellent client service and support no matter the size of the client and our commitment of substantial resources to
training and technical support helps us to identify and fulfill the needs of our clients.
Product Development
To meet the changing technology needs of our clients, we continually develop, maintain and enhance our products and systems.
Product development expenditures represented approximately 8% of our total revenue in each of 2017 and 2016 and 9% in
2015. Our development and technology centers apply the expertise of multiple teams to design, develop and maintain
specialized processing systems. Our account processing systems are designed to meet the preferences and diverse requirements
of the international, national, regional or local market-specific financial service environments of our clients. In developing our
products, we use current software development principles, such as service-oriented architecture, to create efficiencies, and we
stress interaction with and responsiveness to the needs of our clients.
Intellectual Property
We regard our software, transaction processing services and related products as proprietary, and we utilize a combination of
patent, copyright, trademark and trade secret laws, internal security practices, and employee and third party non-disclosure
agreements to protect our intellectual property assets. Our patents cover innovations relating to numerous financial software
products and services, and we continue, where appropriate, to seek and secure patents with respect to our ongoing innovations.
We believe that we possess all proprietary rights necessary to conduct our business.
Competition
The market for technology products and services in the financial industry is highly competitive. Our principal competitors
include other vendors of financial services technology, data processing affiliates of large companies, and processing centers
owned and operated as user cooperatives. Outside the U.S., our primary competitors include global and local IT product and
services companies, as well as payment service providers and processors. We expect competition to continue to increase as new
companies enter our markets and existing competitors expand their product lines and services. Some of these competitors
possess substantially greater financial, sales and marketing resources than we do and have substantial flexibility in competing
with us, including through the use of integrated product offerings and through pricing. Competitive factors for our business
include product quality, security, integration with other product lines, service reliability, timely introduction of new products
and features, flexibility and value. We believe that we compete favorably in each of these categories. Additional information
about competition in our segments is provided below.
5
Payments
The businesses in our Payments segment compete with a number of competitors, including ACI Worldwide, Inc., Fidelity
National Information Services, Inc. (“FIS”), First Data Corporation, Jack Henry and Associates Inc. (“Jack Henry”), KUBRA
Data Transfer, Ltd., MasterCard Incorporated, NCR Corporation, Paymentech, LLC, Paymentus Corporation, PayPal Holdings,
Inc., Q2 Holdings, Inc., R.R. Donnelley & Sons Company, Total System Services, Inc., U.S. Bancorp, Visa Inc., The Western
Union Company and Worldpay, Inc. In addition to traditional payments competitors, large technology, media and other
providers are increasingly seeking to provide or facilitate a wide range of point of sale and non-point of sale payments. These
newer competitors include, but are not limited to, Alphabet Inc., Amazon.com, Inc., Apple Inc., Facebook, Inc., Intuit Inc.,
Samsung Group, Starbucks Corporation and Wal-Mart Stores, Inc. Existing and potential financial institution and biller clients,
could also develop and use their own in-house systems instead of our products and services. In addition, many companies that
provide solutions to the financial services industry are consolidating, creating larger competitors with greater resources and
broader product lines.
Financial
Our products and services in the Financial segment compete in several different market segments and geographies, including
with large, diversified software and service companies and independent suppliers of software products. Existing and potential
financial institution clients could also develop and use their own in-house systems. In addition, we compete with vendors that
offer similar transaction processing products and services to financial institutions, including Black Knight Financial
Technology Solutions LLC, Computer Services, Inc., Finastra Limited, FIS, Infosys Ltd., International Business Machines
Corporation, Jack Henry, Oracle Corporation, SAP SE and Temenos Group AG.
Government Regulation
The regulations that apply to the delivery of financial services are complex and evolve continuously. Except with respect to
certain products and services, Fiserv and its subsidiaries are generally not directly subject to federal or state regulations
applicable to financial institutions such as banks and credit unions. However, as a provider of services to these financial
institutions, our operations are examined on a regular basis by various state and federal regulatory authorities and
representatives of the Federal Financial Institutions Examination Council, which is a formal interagency body empowered to
prescribe uniform principles, standards and report forms for the federal examination of financial institutions and to make
recommendations to promote uniformity in the supervision of financial institutions. Also, state and federal regulations may
require our financial institution clients to include certain provisions in their contracts with service providers like us, such as
those related to security and privacy, and to conduct ongoing monitoring and risk management for third party relationships. In
addition, independent auditors annually review many of our operations to provide internal control evaluations for our clients
and their auditors.
In conducting our direct-to-consumer businesses, including our walk-in bill payment, online bill payment and Popmoney
person-to-person payment services, we are directly subject to various federal and state laws, rules and regulations including
those relating to the movement of money. In order to comply with our obligations under applicable laws, we are required,
among other matters, to comply with licensing and reporting requirements, to implement operating policies and procedures
necessary to comply with anti-money laundering laws, to comply with capital requirements, to protect the privacy and security
of our clients’ information, and to undergo periodic audits and examinations.
Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), there have been
substantial reforms to the supervision and operation of the financial services industry, including numerous new regulations that
have imposed compliance costs and, in some cases, limited revenue sources for us and our clients. Among other things, the
Dodd-Frank Act established the Consumer Financial Protection Bureau (“CFPB”), which is empowered to conduct rule-making
and supervision related to, and enforcement of, federal consumer financial protection laws. The CFPB has issued guidance that
applies to, and conducts direct examinations of, “supervised banks and nonbanks” as well as “supervised service providers”
like us. In addition, federal and state agencies have begun to propose and enact cybersecurity regulations, such as the
Cybersecurity Requirements for Financial Services Companies issued by the New York State Department of Financial Services
in 2017 and the Advance Notice of Proposed Rulemaking on Enhanced Cyber Risk Management Standards proposed by The
Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency and the Federal Deposit
Insurance Corporation in 2016. New regulations could, among other things, require us to make significant additional
investments to comply with them, modify our products or services or the manner in which they are provided, or limit or change
the amount or types of revenue we are able to generate.
6
Employees
We have nearly 24,000 employees globally, many of whom are specialists in our information management centers and related
product and service businesses. This service support network includes employees with backgrounds in computer science and
the financial industry, as well as employees with direct experience in payments, financial institutions and other financial
services environments. Our employees provide expertise in: programming, software development, modification and
maintenance; computer operations, network control and technical support; client services and training; business process
outsourcing; item and mortgage processing; system conversions; sales and marketing; and account management.
The service nature of our business makes our employees an important corporate asset. Although the market for qualified
personnel is competitive, we have not experienced significant difficulty with hiring or retaining our staff of top industry
professionals. In assessing a potential acquisition candidate, we emphasize the quality and stability of the acquisition
candidate’s employees.
Available Information
Our website address is www.fiserv.com. We are not including the information provided on our website as a part of, or
incorporating it by reference into, this Annual Report on Form 10-K. We make available free of charge (other than an investor’s
own internet access charges) through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such
material with, or furnish such material to, the Securities and Exchange Commission.
Item 1A. Risk Factors
You should carefully consider each of the risks described below, together with all of the other information contained in this
Annual Report on Form 10-K, before making an investment decision with respect to our securities. If any of the following risks
develop into actual events, our business, financial condition or results of operations could be materially and adversely affected
and you may lose all or part of your investment.
We operate in a competitive business environment and may not be able to compete effectively.
The markets for our services are highly competitive from new and existing competitors. Our principal competitors include
other vendors of financial services technology, data processing affiliates of large companies, and processing centers owned and
operated as user cooperatives. Our competitors vary in size and in the scope and breadth of the services they offer. Many of our
larger existing and potential clients have historically developed their key applications in-house. As a result, we often compete
against our existing or potential clients’ in-house capabilities. We expect that the markets in which we compete will continue to
attract new well-funded competitors and new technologies, including large technology, media and other companies not
historically in the financial services industry, start-ups and international providers of similar products and services to ours. We
cannot provide any assurance that we will be able to compete successfully against current or future competitors or that
competitive pressures faced by us in the markets in which we operate will not materially and adversely affect our business,
results of operations and financial condition.
If we fail to adapt our products and services to changes in technology or in the marketplace, or if our ongoing efforts to
upgrade our technology are not successful, we could lose clients or have trouble attracting new clients, and our ability to
grow may be limited.
The markets for our products and services are characterized by constant technological changes, frequent introductions of new
products and services, and increasing client expectations. Our ability to enhance our current products and services and to
develop and introduce innovative products and services that address the increasingly sophisticated needs of our clients and their
customers will significantly affect our future success. We may not be successful in developing, marketing or selling new
products and services that meet these demands or achieve market acceptance. In addition, the success of certain of our products
and services rely, in part, on financial institutions, billers and other third parties to promote the use of our products and services
by their customers. If we are unsuccessful in offering products or services that gain market acceptance, or if third parties
insufficiently promote our products and services, it would likely have a material adverse effect on our ability to retain existing
clients, to attract new ones and to grow profitably.
If we are unable to renew client contracts at favorable terms, we could lose clients and our results of operations and
financial condition may be adversely affected.
Failure to achieve favorable renewals of client contracts could negatively impact our business. Our contracts with clients
generally run for a period of three to five years. At the end of the contract term, clients have the opportunity to renegotiate their
contracts with us or to consider whether to engage one or more of our competitors to provide products and services. If we are
7
not successful in achieving high renewal rates and favorable contract terms, our results of operations and financial condition
may be materially and adversely affected.
Consolidations in the banking and financial services industry could adversely affect our revenue by eliminating existing
or potential clients and making us more dependent on fewer clients.
Mergers, consolidations and failures of financial institutions reduce the number of our clients and potential clients, which could
adversely affect our revenue. If our clients merge with or are acquired by other entities that are not our clients, or that use fewer
of our services, they may discontinue or reduce their use of our services. It is also possible that the larger financial institutions
that result from mergers or consolidations could have greater leverage in negotiating terms with us or could decide to perform
in-house some or all of the services which we currently provide or could provide. Any of these developments could have a
material adverse effect on our business, results of operations and financial condition.
Security breaches, computer malware or other “cyber attacks” could harm our business by disrupting our delivery of
services and damaging our reputation.
Our operations depend on receiving, storing, processing and transmitting sensitive information pertaining to our business, our
associates, our clients and their customers. Any unauthorized intrusion, malicious software infiltration, network disruption,
denial of service or similar act could disrupt the integrity, continuity, security and trust of our systems or data, or the systems or
data of our clients or vendors. These events could create costly litigation, significant financial liability, increased regulatory
scrutiny, financial sanctions and a loss of confidence in our ability to serve clients and cause current or potential clients to
choose another service provider, all of which could have a material adverse impact on our business. In addition, as these threats
continue to evolve, we may be required to invest significant additional resources to modify and enhance our information
security and controls or to investigate and remediate any security vulnerabilities. Although we believe that we maintain a robust
program of information security and controls and none of the threats that we have encountered to date have materially impacted
us, we may not be able to prevent a material event in the future, and the impact of a material event could have a material
adverse effect on our business, results of operations and financial condition.
Operational failures could harm our business and reputation.
An operational failure could harm our business or cause us to lose clients. An operational failure could be caused by our actions
or the actions of third parties, and could involve networks and systems upon which we rely to deliver our services and over
which we have limited or no control. Interruptions of service could damage our relationship with clients and could cause us to
incur substantial expenses, including those related to the payment of service credits or other liabilities. A prolonged interruption
of our services or network could cause us to experience data loss or a reduction in revenue. In addition, a significant
interruption of service could have a negative impact on our reputation and could cause our current and potential clients to
choose another service provider. Any of these developments could have a material adverse impact on our business, results of
operations and financial condition.
We may experience software defects, development delays or installation difficulties, which would harm our business and
reputation and expose us to potential liability.
Our services are based on sophisticated software and computer systems, and we may encounter delays when developing new
applications and services. Further, the software underlying our services may contain undetected errors or defects when first
introduced or when new versions are released. In addition, we may experience difficulties in installing or integrating our
technology on systems used by our clients. Defects in our software, errors or delays in the processing of electronic transactions
or other difficulties could result in interruption of business operations, delay in market acceptance, additional development and
remediation costs, diversion of technical and other resources, loss of clients, negative publicity or exposure to liability claims.
Although we attempt to limit our potential liability through disclaimers and limitation of liability provisions in our license and
client agreements, we cannot be certain that these measures will successfully limit our liability.
A heightened regulatory environment in the financial services industry may have an adverse impact on our clients and
our business.
Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), a number of
substantial regulations affecting the supervision and operation of the financial services industry within the United States have
been adopted, including those that establish the Consumer Financial Protection Bureau (“CFPB”). The CFPB has issued
guidance that applies to, and conducts direct examinations of, “supervised banks and nonbanks” as well as “supervised service
providers” like us. In addition, federal and state governments have adopted or are pursuing numerous additional regulations
impacting the financial services industry, including regulations related to cybersecurity and data privacy. To the extent this
oversight or regulation negatively impacts the business, operations or financial condition of our clients, our business and results
8
of operations could be materially and adversely affected because, among other matters, our clients could have less capacity to
purchase products and services from us, could decide to avoid or abandon certain lines of business, or could seek to pass on
increased costs to us by negotiating price reductions. Additional regulation, examination and oversight of us could require us to
modify the manner in which we contract with or provide products and services to our clients; directly or indirectly limit how
much we can charge for our services; require us to invest additional time and resources to comply with such oversight and
regulations; or limit our ability to update our existing products and services, or require us to develop new ones. Any of these
events, if realized, could have a material adverse effect on our business, results of operations and financial condition.
If we fail to comply with applicable regulations, our businesses could be harmed.
If we fail to comply with regulations applicable to our business, including data privacy regulations, we could be exposed to
litigation or regulatory proceedings, our client relationships and reputation could be harmed, and we could be inhibited in our
ability to obtain new clients, which could have a material adverse impact on our business, results of operations and financial
condition. In addition, the future enactment of more restrictive laws or rules on the federal or state level, or, with respect to our
international operations, in foreign jurisdictions on the national, provincial, state or other level, could have a material adverse
impact on our business, results of operations and financial condition.
Our failure to comply with a series of complex regulations in our payments businesses could subject us to liability.
Certain of our subsidiaries are licensed as money transmitters in those states where such licensure is required. In connection
with such licensure, we are required to demonstrate and maintain certain levels of net worth and liquidity and to file periodic
reports. In addition, our direct-to-consumer payments businesses, including our walk-in bill payment, online bill payment and
Popmoney person-to-person payment services, are subject to federal regulation in the United States, including anti-money
laundering regulations and certain restrictions on transactions to or from certain individuals or entities. The complexity of these
regulations will continue to increase our cost of doing business. In addition, any violations of law may result in civil or criminal
penalties against us and our officers, or the prohibition against us providing money transmitter services in particular
jurisdictions.
If we fail to comply with the applicable requirements of the payment card networks, they could seek to fine us, suspend
us or terminate our registrations which could adversely affect our business.
We are subject to card association and network rules governing Visa, MasterCard, American Express, Discover or other similar
organizations, including the Payment Card Industry Data Security Standard enforced by the major card brands. The rules of the
card networks are set by their boards which may be influenced by card issuers, some of which offer competing transaction
processing services. If we fail to comply with these rules, we could be fined, our certifications could be suspended, or our
certifications could be terminated. The suspension or termination of our certifications, or any changes to the card association
and network rules, that we do not successfully address could limit our ability to provide transaction processing services to
clients and result in a reduction of revenue or increased costs of operation, which, in either case, could have a material adverse
effect on our business and results of operations.
We may be sued for infringing the intellectual property rights of others.
Third parties may claim that we are infringing their intellectual property rights. We may expose ourselves to additional liability
if we agree to indemnify our clients against third party infringement claims. If the owner of intellectual property establishes
that we are, or a client which we are obligated to indemnify is, infringing its intellectual property rights, we may be forced to
change our products or services, and such changes may be expensive or impractical, or we may need to seek royalty or license
agreements from the owner of such rights. If we are unable to agree on acceptable terms, we may be required to discontinue the
sale of key products or halt other aspects of our operations. We may also be liable for financial damages for a violation of
intellectual property rights, and we may incur expenses in connection with indemnifying our clients against losses suffered by
them. Any adverse result related to violation of third party intellectual property rights could materially and adversely harm our
business, results of operations and financial condition. Even if intellectual property claims brought against us are without merit,
they may result in costly and time-consuming litigation and may require significant attention from our management and key
personnel.
Misappropriation of our intellectual property and proprietary rights could impair our competitive position.
Our ability to compete depends upon proprietary systems and technology. We actively seek to protect our proprietary rights.
Nevertheless, unauthorized parties may attempt to copy aspects of our services or to obtain and use information that we regard
as proprietary. The steps we have taken may not prevent misappropriation of technology. Agreements entered into for that
purpose may not be enforceable or provide us with an adequate remedy. Effective patent, trademark, service mark, copyright
and trade secret protection may not be available in every country in which our applications and services are made available.
9
Misappropriation of our intellectual property or potential litigation concerning such matters could have a material adverse
effect on our business, results of operations and financial condition.
Acquisitions subject us to risks, including increased debt, assumption of unforeseen liabilities and difficulties in
integrating operations.
A major contributor to our growth in revenue and earnings since our inception has been our ability to identify, acquire and
integrate complementary businesses. We anticipate that we will continue to seek to acquire complementary businesses, products
and services. We may not be able to identify suitable acquisition candidates or complete acquisitions in the future, which could
adversely affect our future growth; or businesses that we acquire may not perform as well as expected or may be more difficult
to integrate and manage than expected, which could adversely affect our business and results of operations. We may not be able
to integrate all aspects of acquired businesses successfully or realize the potential benefits of bringing them together. In
addition, the process of integrating these acquisitions may disrupt our business and divert our resources.
These risks may arise for a number of reasons: we may not be able to find suitable businesses to acquire at affordable
valuations or on other acceptable terms; we may face competition for acquisitions from other potential acquirers; we may need
to borrow money or sell equity or debt securities to the public to finance future acquisitions and the terms of these financings
may be adverse to us; changes in accounting, tax, securities or other regulations could increase the difficulty or cost for us to
complete acquisitions; we may incur unforeseen obligations or liabilities in connection with acquisitions; we may need to
devote unanticipated financial and management resources to an acquired business; we may not realize expected operating
efficiencies or product integration benefits from an acquisition; we could enter markets where we have minimal prior
experience; and we may experience decreases in earnings as a result of non-cash impairment charges.
We may be obligated to indemnify the purchasers of businesses pursuant to the terms of the relevant purchase and sale
agreements.
We have in the past and may in the future sell businesses. In connection with sales of businesses, we may make representations
and warranties about the businesses and their financial affairs and agree to retain certain liabilities associated with our operation
of the businesses prior to their sale. Our obligation to indemnify the purchasers and agreement to retain liabilities could have a
material adverse effect on our business, results of operations and financial condition.
The failure to attract and retain key personnel could have a material adverse effect on our business.
We depend on the experience, skill and contributions of our senior management and other key employees. If we fail to attract,
motivate and retain highly qualified management, technical, compliance and sales personnel, our future success could be
harmed. Our senior management provides strategic direction for our company, and if we lose members of our leadership team,
our management resources may have to be diverted from other priorities to address this loss. Our products and services require
sophisticated knowledge of the financial services industry, applicable regulatory and industry requirements, computer systems,
and software applications, and if we cannot hire or retain the necessary skilled personnel, we could suffer delays in new product
development, experience difficulty complying with applicable requirements or otherwise fail to satisfy our clients’ demands.
Our business may be adversely impacted by U.S. and global market and economic conditions.
For the foreseeable future, we expect to continue to derive most of our revenue from products and services we provide to the
financial services industry. Given this concentration, we are exposed to the global economic conditions in the financial services
industry. A prolonged poor economic environment could result in significant decreases in demand by current and potential
clients for our products and services and in the number and dollar amount of transactions we process, which could have a
material adverse effect on our business, results of operations and financial condition.
The market for our electronic transaction services continues to evolve and may not continue to develop or grow rapidly
enough to sustain profitability.
If the number of electronic transactions does not continue to grow, or if consumers or businesses do not continue to adopt our
services, it could have a material adverse effect on our business, results of operations and financial condition. We believe future
growth in the electronic transactions market will be driven by a combination of factors including speed, cost, ease-of-use,
security and quality of products and services offered to consumers and businesses.
10
New guidance or further analysis of the newly enacted U.S. tax reform legislation could cause us to modify current
estimates about the impact that it will have on us, which could negatively impact our anticipated earnings and have an
adverse effect on our results of operations and cash flow.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and
Jobs Act (the “Tax Act”). The Tax Act significantly revises the U.S. corporate income tax code by, among other things,
lowering corporate income tax rates, implementing a territorial-style tax system and imposing a repatriation tax on deemed
repatriated earnings of foreign subsidiaries. With the enactment of the Tax Act, our financial results for 2017 included a
reduction of income tax expense of approximately $275 million resulting primarily from the re-evaluation of our deferred tax
assets and liabilities to reflect the recently enacted 21 percent U.S. federal corporate tax rate and the deemed repatriation tax on
untaxed accumulated foreign earnings. These estimates are based on our initial analysis of the Tax Act. Further analysis of this
complex legislation or future guidance from the Internal Revenue Service, the Securities and Exchange Commission or the
Financial Accounting Standards Board could cause us to adjust current estimates in future periods, which could impact our
earnings and have an adverse effect on our results of operations and cash flow.
Our balance sheet includes significant amounts of goodwill and intangible assets. The impairment of a significant
portion of these assets would negatively affect our results of operations.
Our balance sheet includes goodwill and intangible assets that represent 73% of our total assets at December 31, 2017. These
assets consist primarily of goodwill and identified intangible assets associated with our acquisitions. On at least an annual
basis, we assess whether there have been impairments in the carrying value of goodwill. In addition, we review intangible
assets for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be
recoverable. If the carrying value of the asset is determined to be impaired, then it is written down to fair value by a charge to
operating earnings. An impairment of a significant portion of goodwill or intangible assets could have a material negative effect
on our results of operations.
Increased leverage may harm our financial condition and results of operations.
As of December 31, 2017, we had approximately $4.9 billion of debt. We and our subsidiaries may incur additional
indebtedness in the future. Our indebtedness could: decrease our ability to obtain additional financing for working capital,
capital expenditures, general corporate or other purposes; limit our flexibility to make acquisitions; increase our cash
requirements to support the payment of interest; limit our flexibility in planning for, or reacting to, changes in our business and
our industry; and increase our vulnerability to adverse changes in general economic and industry conditions. Our ability to
make payments of principal and interest on our indebtedness depends upon our future performance, which will be subject to
general economic conditions and financial, business and other factors affecting our consolidated operations, many of which are
beyond our control. In addition, if our outstanding senior notes are downgraded to below investment grade, we may incur
additional interest expense. If we are unable to generate sufficient cash flow from operations in the future to service our debt
and meet our other cash requirements, we may be required, among other things: to seek additional financing in the debt or
equity markets; to refinance or restructure all or a portion of our indebtedness; or to reduce or delay planned capital or
operating expenditures. Such measures might not be sufficient to enable us to service our debt and meet our other cash
requirements. In addition, any such financing, refinancing or sale of assets might not be available at all or on economically
favorable terms.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2017, we operated data, development, item processing and support centers in approximately 105 cities. We
owned five buildings, and the more than 120 remaining locations where we operated our businesses are subject to leases. We
believe that the facilities and equipment that we own and lease are well maintained, are in good operating condition, and are
adequate for our business needs. However, we may choose to combine existing operations to enhance business integration. We
maintain our own, and contract with multiple service providers to provide, processing back-up in the event of a disaster. We
also maintain copies of data and software used in our business in locations that are separate from our facilities.
Item 3. Legal Proceedings
In the normal course of business, we or 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 consolidated financial statements.
11
Item 4. Mine Safety Disclosures
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names of our executive officers as of February 22, 2018, together with their ages, positions and business experience are
described below:
Name
Jeffery W. Yabuki
Mark A. Ernst
Robert W. Hau
Lynn S. McCreary
Devin B. McGranahan
Kevin J. Schultz
Byron C. Vielehr
Age
57
59
52
58
48
60
54
Title
President, Chief Executive Officer and Director
Chief Operating Officer
Chief Financial Officer and Treasurer
Chief Legal Officer and Secretary
Group President, Billing and Payments Group
Group President, Digital Banking Group
Group President, Depository Institution Services Group
Mr. Yabuki has been a director and our President and Chief Executive Officer since 2005. Before joining Fiserv, Mr. Yabuki
served as executive vice president and chief operating officer of H&R Block, Inc., a financial services firm, from 2002 to 2005.
From 2001 to 2002, he served as executive vice president of H&R Block and from 1999 to 2001, he served as the president of
H&R Block International. From 1987 to 1999, Mr. Yabuki held various executive positions with the American Express
Company, a financial services firm, including president and chief executive officer of American Express Tax and Business
Services, Inc.
Mr. Ernst has served as Chief Operating Officer since 2011. Prior to joining Fiserv, he served as deputy commissioner for
operations support for the Internal Revenue Service from 2009 to 2010, where he was responsible for technology, operations,
shared services, human resources and the chief financial office. From 2008 to 2009, he was chief executive officer of Bellevue
Capital LLC, a private investment firm; from 2001 to 2007, he served as chairman, president and chief executive officer of
H&R Block, Inc., a financial services firm; and from 1998 to 2000, he served as its chief operating officer. His experience,
which includes executive positions with the American Express Company, a financial services firm, spans more than 30 years in
the financial services industry. On February 5, 2018, Mr. Ernst informed us that he intends to retire on April 1, 2018.
Mr. Hau has served as Chief Financial Officer since 2016. Before joining Fiserv, Mr. Hau served as executive vice president
and chief financial officer at TE Connectivity Ltd., a global technology company that designs and manufactures highly
engineered connectivity and sensor products, from 2012 to 2016. From 2009 to 2012, he served as executive vice president and
chief financial officer at Lennox International Inc., a provider of products and services in the heating, air conditioning, and
refrigeration markets; and from 2006 to 2009, he served as vice president and chief financial officer for the aerospace business
group of Honeywell International, Inc., a technology and manufacturing company. Mr. Hau joined Honeywell (initially
AlliedSignal) in 1987 and served in a variety of senior financial leadership positions, including vice president and chief
financial officer for the company’s aerospace electronic systems unit and for its specialty materials business group.
Ms. McCreary has served as Chief Legal Officer and Secretary since 2013. Ms. McCreary joined Fiserv in 2010 as senior vice
president and deputy general counsel. Prior to joining Fiserv, Ms. McCreary was an attorney with the law firm of Bryan Cave
LLP from 1996 to 2010, including serving as managing partner of its San Francisco, California office from its opening in 2008
to 2010. Ms. McCreary began her career in financial services with positions at Citicorp Person-to-Person and Metropolitan Life
Insurance Company’s mortgage subsidiary, Metmor Financial, Inc.
Mr. McGranahan has served as Group President, Billing and Payments Group, since 2016. Before joining Fiserv, Mr.
McGranahan served as a senior partner at McKinsey & Company, a global management consulting firm. While there, he held a
variety of senior management roles at the firm, including leader of the global insurance practice from 2013 to 2016 and co-
chair of the global senior partner election committee from 2013 to 2015. In addition, Mr. McGranahan served as co-leader of
the North America financial services practice from 2009 to 2016. He joined McKinsey in 1992 and served in a variety of other
leadership positions prior to 2009, including leader of the North American property and casualty practice and managing partner
of the Pittsburgh office.
Mr. Schultz has served as Group President, Digital Banking Group, since 2014. Prior to joining Fiserv, Mr. Schultz served as
president of global financial services at First Data Corporation, a global payment processing company, from 2009 to 2011, and
as global head of processing services at Visa Inc. from 2007 to 2009. He has more than 30 years of experience in the payments
12
and financial services industry, including a variety of other senior leadership roles at Visa Inc. and Global Payments Inc., an
electronic transaction processing service provider.
Mr. Vielehr has served as Group President, Depository Institution Services Group, since 2013. Prior to joining Fiserv,
Mr. Vielehr served in a succession of senior executive positions with The Dun & Bradstreet Corporation, a provider of
commercial information and business insight solutions, from 2005 to 2013, most recently as president of international and
global operations. He also previously served as president and chief operating officer of Northstar Systems International, Inc., a
developer of wealth management software (now part of SEI Investments Company), from 2004 to 2005. Mr. Vielehr has more
than 25 years of experience in the financial services and technology industries, including a variety of executive leadership roles
at Merrill Lynch and Strong Capital Management.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
PART II
Securities
Market Price Information
Our common stock is traded on the NASDAQ Global Select Market under the symbol “FISV.” Set forth below is the high and
low sales price of our common stock during the periods presented.
Quarter Ended
March 31
June 30
September 30
December 31
2017
2016
High
Low
High
Low
$
$
118.30
127.10
129.61
133.36
$
104.51
114.95
119.70
120.38
$
102.88
108.85
111.51
109.11
85.63
96.34
97.73
92.81
At December 31, 2017, our common stock was held by 1,883 shareholders of record and by a significantly greater number of
shareholders who hold shares in nominee or street name accounts with brokers. The closing price of our common stock on
February 16, 2018 was $142.72 per share. We have never paid dividends on our common stock, and we do not anticipate
paying dividends in the foreseeable future. For additional information regarding our expected use of capital, refer to the
discussion in this report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Liquidity and Capital Resources.”
Issuer Purchases of Equity Securities
The table below sets forth information with respect to purchases made by or on behalf of us or any “affiliated purchaser” (as
defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934) of shares of our common stock during the three
months ended December 31, 2017:
Period
October 1-31, 2017
November 1-30, 2017
December 1-31, 2017
Total
_____
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)
545,000
$
520,000
400,000
1,465,000
128.07
127.96
131.39
545,000
520,000
400,000
1,465,000
11,658,000
11,138,000
10,738,000
(1) On November 16, 2016, our board of directors authorized the purchase of up to 15.0 million shares of our common stock.
This authorization does not expire.
13
Stock Performance Graph
The stock performance graph and related information presented below is not deemed to be “soliciting material” or to be “filed”
with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934
or to the liabilities of Section 18 of the Securities Exchange Act of 1934 and will not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically
incorporate it by reference into such a filing.
The following graph compares the cumulative total shareholder return on our common stock for the five years ended
December 31, 2017 with the S&P 500 Index and the NASDAQ US Benchmark Financial Administration Index. The graph
assumes that $100 was invested on December 31, 2012 in our common stock and each index and that all dividends were
reinvested. No cash dividends have been declared on our common stock. The comparisons in the graph are required by the
Securities and Exchange Commission and are not intended to forecast or be indicative of possible future performance of our
common stock.
Fiserv, Inc.
S&P 500 Index
NASDAQ US Benchmark Financial
Administration Index
December 31,
2012
2013
2014
2015
2016
2017
$
$
100
100
100
$
149
132
155
$
180
151
178
$
231
153
198
$
269
171
222
332
208
300
14
Item 6. Selected Financial Data
The following data should be read in conjunction with the consolidated financial statements and accompanying notes included
elsewhere in this Annual Report on Form 10-K. The selected historical data presented below has been affected by acquisitions
and dispositions, transactional gains recorded by our unconsolidated affiliate, debt extinguishment and refinancing activities,
and by the Tax Cuts and Jobs Act enacted in December 2017. In addition, total assets and long-term debt have been adjusted on
a retrospective basis for the adoption of Accounting Standards Update (“ASU”) No. 2015-17, Balance Sheet Classification of
Deferred Taxes, and ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs effective December 31, 2015.
Accordingly, current deferred tax assets have been reclassified to noncurrent assets and liabilities, and certain debt issuance
costs previously included within other long-term assets have been reclassified as a reduction in long-term debt.
(In millions, except per share data)
Total revenue
Income from continuing operations
Income (loss) from discontinued operations
Net income
Net income (loss) per share - basic:
Continuing operations
Discontinued operations
Total
Net income (loss) per share - diluted:
Continuing operations
Discontinued operations
Total
Total assets
Long-term debt (including current maturities)
Shareholders’ equity
2017
2016
2015
2014
2013
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
5,696
1,232
14
1,246
5.84
0.07
5.90
5.71
0.07
5.78
10,289
4,900
2,731
$
$
$
$
$
$
$
$
5,505
930
—
930
4.22
—
4.22
4.15
—
4.15
9,743
4,562
2,541
$
$
$
$
$
$
$
$
5,254
712
—
712
3.04
—
3.04
2.99
—
2.99
9,340
4,293
2,660
$
$
$
$
$
$
$
$
5,066
754
—
754
3.04
—
3.03
2.99
—
2.98
9,308
3,790
3,295
4,814
650
(2)
648
2.48
(0.01)
2.47
2.44
(0.01)
2.44
9,466
3,831
3,585
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to our
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, acquisitions and dispositions, our enterprise priorities, and the trends affecting our industry in order to
provide context for management’s discussion and analysis of our financial condition and results of operations.
Critical accounting policies and estimates. This section contains a discussion of the accounting policies that we
believe are important to our financial condition and results of operations and that require judgment and estimates
on the part of management in their application. In addition, all of our significant accounting policies, including
critical accounting policies, are summarized in Note 1 to the accompanying consolidated financial statements.
Results of operations. This section contains an analysis of our results of operations presented in the accompanying
consolidated statements of income by comparing the results for the year ended December 31, 2017 to the results
for the year ended December 31, 2016 and by comparing the results for the year ended December 31, 2016 to the
results for the year ended December 31, 2015.
Liquidity and capital resources. This section provides an analysis of our cash flows and a discussion of our
outstanding debt and commitments at December 31, 2017.
15
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 over 12,000 clients
worldwide, including banks, savings banks, credit unions, investment management firms, leasing and finance companies,
billers, retailers, merchants, and building societies. 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 and high renewal rates. Most of the
services we provide are necessary for our clients to operate their businesses and are, therefore, non-discretionary in nature.
Our operations are principally located 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, internet and mobile banking software and services, account-to-account
transfers, person-to-person payment services, debit and credit card processing and services, payments infrastructure services,
and other electronic payments software and services. Our businesses in this segment also provide card and print personalization
services, investment account processing services for separately managed accounts, and fraud and risk management products
and services. The Financial segment provides banks, credit unions, and leasing and finance companies 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. Corporate and Other primarily
consists of unallocated corporate expenses including share-based compensation, amortization of acquisition-related intangible
assets, intercompany eliminations and other costs that are not considered when management evaluates segment performance.
Acquisitions and Dispositions
We frequently review our portfolio to ensure we have the right set of businesses to execute on our strategy. We expect to
acquire businesses when we identify: a compelling strategic need, such as a product, service or technology that helps meet
client demand; an opportunity to change industry dynamics; a way to achieve business scale; or similar considerations. We
expect to divest businesses that are not in line with our market, product or financial strategies.
During 2017, we completed four acquisitions for an aggregate purchase price of $384 million, net of $33 million of acquired
cash, along with earn-out provisions estimated at a fair value of $15 million. In January 2017, we completed our acquisition of
Online Banking Solutions, Inc. (“OBS”), a provider of cash management and digital business banking solutions that
complement and enrich our existing solutions. In July 2017, we acquired the assets of PCLender, LLC (“PCLender”), a leader
in internet-based mortgage software and mortgage lending technology solutions. The OBS and PCLender acquisitions are
included in the Financial segment as their products are integrated across a number of our account processing solutions and will
enable our bank and credit union clients to better serve their commercial and mortgage customers. In August 2017, we acquired
Dovetail Group Limited (“Dovetail”), a leading provider of bank payments and liquidity management solutions. In September
2017, we completed our acquisition of Monitise plc (“Monitise”), a provider of digital solutions that enables innovative digital
banking experiences for leading financial institutions worldwide. The Dovetail and Monitise acquisitions are included in the
Payments segment and will further enable us to help financial institutions around the world transform their payments
infrastructure and to expand our digital leadership, respectively.
In 2016, we acquired the Convenience Pay Services business of Hewlett Packard Enterprise Company and completed our
purchase of the Community Financial Services business of ACI Worldwide, Inc. for an aggregate purchase price of $265
million. These acquisitions expand our biller solution offerings and enhance our suite of digital banking and payments
solutions, and are included in the Payments segment.
In May 2017, we sold our Australian item processing business, which was reported within the Financial segment, for
approximately $17 million, and, in January 2018, we completed the sale of the retail voucher business acquired in our 2017
acquisition of Monitise for proceeds of £37 million ($50 million). In addition, in February 2018, we announced a definitive
agreement to sell a 55% interest of our lending solutions business, which is reported within the Financial segment, retaining a
45% interest in the joint venture.
During 2017 and 2015, StoneRiver Group, L.P. (“StoneRiver”), a joint venture in which we own a 49% interest and account for
under the equity method, recognized net gains on the sales of subsidiary businesses, and in 2016, recognized a net gain on the
sale of a business interest. Our pre-tax share of the net gains and related expenses on these transactions was $26 million in
2017, $146 million in 2016 and $29 million in 2015, with related tax expenses of $9 million, $54 million and $13 million,
respectively. In addition, we received cash dividends of $45 million, $151 million and $36 million in 2017, 2016 and 2015,
respectively, from StoneRiver, which were funded from the sale transactions.
16
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 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 2018 are: (i) to continue to build high-quality revenue while meeting our earnings goals; (ii) to
enhance client relationships with an emphasis on digital and payment solutions; and (iii) to deliver innovation and integration
which enables differentiated value for our clients.
Industry Trends
The market for products and services offered by financial institutions continues to evolve rapidly. The traditional financial
industry and other market entrants regularly introduce and implement new payment, deposit, lending, investment and risk
management products, and the distinctions among the products and services traditionally offered by different types of financial
institutions continue to narrow as they seek to serve the same customers. At the same time, regulatory conditions and
cybersecurity scrutiny have continued to create a challenging operating environment for financial institutions. For example,
legislation such as the Dodd-Frank Wall Street Reform and Consumer Protection Act has generated, and may continue to
generate, new regulations impacting the financial industry. These conditions, along with mild economic improvement, have
created heightened interest in solutions that help financial institutions win and retain customers, generate incremental revenue,
comply with regulations and enhance operating efficiency. Examples of these solutions include our electronic payments
solutions and channels such as internet, mobile and tablet banking, sometimes referred to as “digital channels.”
This increased focus on digital channels by both financial institutions and their customers, as well as the growing volume and
types of payment transactions in the marketplace, have increased the data and transaction processing needs of financial
institutions. We expect that financial institutions will continue to invest significant capital and human resources to process
transactions, manage information, maintain regulatory compliance and offer innovative new services to their customers in this
rapidly evolving and competitive environment. We anticipate that we will benefit over the long term from the trend of financial
institutions moving from in-house technology to outsourced solutions as they seek to remain current on technology changes in
an evolving marketplace. We believe that economies of scale in developing and maintaining the infrastructure, technology,
products, services and networks necessary to be competitive in such an environment are essential to justify these investments,
and we anticipate that demand for products that facilitate customer interaction with financial institutions, including electronic
transactions through digital channels, will continue to increase, which we expect to create revenue opportunities for us. Based
on these market conditions, we believe that our sizable and diverse client base, combined with our position as a leading
provider of non-discretionary, recurring revenue-based products and services, gives us a solid foundation for growth.
Furthermore, we believe that the integration of our products and services creates a compelling value proposition for our clients.
In addition to the trends described above, the financial institutions marketplace has experienced change in composition as well.
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. Rather than reducing the overall
market, these consolidations have transferred accounts among financial institutions. An acquisition benefits us when a newly
combined institution is processed on our system, or elects to move to one of our systems, and negatively impacts us when a
competing system is selected. Financial institution acquisitions also impact our financial results due to early contract
termination fees in our multi-year client contracts, which 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. Our revenue is diversified, and our focus
on long-term client relationships and recurring, transaction-oriented products and services has reduced the impact that
consolidation in the financial services industry has had on us. We have clients that span the entire range of financial institutions
in terms of asset size and business model, and our 50 largest financial institution clients represent less than 25% of our annual
revenue. In addition, we believe that our products and services can assist financial institutions with the regulatory and market
challenges that they currently face by providing, among other things, new sources of revenue and opportunities to reduce their
costs.
Critical Accounting Policies and Estimates
Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles
generally accepted in the United States, which require management to make estimates, judgments and assumptions that affect
the reported amount of assets, liabilities, revenue and expenses. We continually evaluate the accounting policies and estimates
that we use to prepare our consolidated financial statements and base our estimates on historical experience and assumptions
17
that we believe are reasonable in light of current circumstances. Actual amounts and results could differ materially from these
estimates.
Acquisitions
From time to time, we make strategic acquisitions that may have a material impact on our consolidated results of operations or
financial position. We allocate the purchase price of acquired businesses to the assets acquired and liabilities assumed in the
transaction at their estimated fair values. The estimates used to determine the fair value of long-lived assets, such as intangible
assets, can be complex and require significant judgments. We use information available to us to make fair value determinations
and engage independent valuation specialists, when necessary, to assist in the fair value determination of significant acquired
long-lived assets. While we use our best estimates and assumptions as a part of the purchase price allocation process, our
estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to
one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding
offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or
liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income.
We are also required to estimate the useful lives of intangible assets to determine the amount of acquisition-related intangible
asset amortization expense to record in future periods. We periodically review the estimated useful lives assigned to our
intangible assets to determine whether such estimated useful lives continue to be appropriate.
Goodwill and Acquired Intangible Assets
We review the carrying value of goodwill for impairment annually, or more frequently if events or circumstances indicate the
carrying value may not be recoverable. Goodwill is tested for impairment at a reporting unit level, determined to be at an
operating segment level or one level below. When reviewing goodwill for impairment, we consider the amount of excess fair
value over the carrying value of each reporting unit, the period of time since a reporting unit’s last quantitative test, the extent a
reorganization or disposition changes the composition of one or more of our reporting units, and other factors to determine
whether or not to first perform a qualitative test. When performing a qualitative test, we assess numerous factors to determine
whether it is more likely than not that the fair value of our reporting units are less than their respective carrying values.
Examples of qualitative factors that we assess include our share price, our financial performance, market and competitive
factors in our industry, and other events specific to our reporting units. If we conclude that it is more likely than not that the fair
value of a reporting unit is less than its carrying value, we perform a quantitative impairment test.
The quantitative impairment test compares the fair value of the reporting unit to its carrying value, and recognizes an
impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total
amount of goodwill allocated to that reporting unit. We determine the fair value of a reporting unit based primarily on the
present value of estimated future cash flows. Determining the fair value of a reporting unit involves judgment and the use of
significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating margins
used to calculate estimated future cash flows, risk-adjusted discount rates, and future economic and market conditions.
Our most recent impairment assessment in the fourth quarter of 2017 determined that our goodwill was not impaired. The
estimated fair values of the respective reporting units substantially exceeded the carrying values, except for recently acquired
reporting units that approximated or exceeded the carrying values to a lesser magnitude given the short passage of time
between the recent acquisition dates and when we performed our most recent annual impairment assessment.
We review acquired intangible assets for impairment whenever events or changes in circumstances indicate the carrying
amount of the asset may not be recoverable. Recoverability is assessed by comparing the carrying amount of the asset to the
undiscounted future cash flows expected to be generated by the asset. Measurement of any impairment loss is based on
estimated fair value. Given the significance of our goodwill and intangible asset balances, an adverse change in fair value could
result in an impairment charge, which could be material to our consolidated financial statements.
Revenue Recognition
The majority of our revenue is generated from monthly account- and transaction-based fees. Revenue is recognized as services
are provided and is primarily recognized under service agreements that are long-term in nature, generally three to five years,
and that do not require management to make significant judgments or assumptions. At times, however, judgment is exercised in
evaluating revenue recognition, such as when a contract arrangement includes multiple product and service deliverables. Due to
the quantity, size and nature of our multiple element arrangements, the judgments we make in this regard are not likely to have
a material impact on revenue recognition for any individual element. Additionally, given the nature of our business and the
rules governing revenue recognition, our revenue recognition practices generally do not involve significant estimates that
materially affect our results of operations. Additional information about our revenue recognition policies is included in Note 1
to the consolidated financial statements.
18
Results of Operations
Components of Revenue and Expenses
The following summary describes the components of revenue and expenses as presented in our consolidated statements of
income.
Processing and Services
Processing and services revenue, which in 2017 represented 85% of our total revenue, is primarily generated from account- and
transaction-based fees under contracts that generally have terms of three to five years. Revenue is recognized when the related
transactions are processed and services have been performed. Processing and services revenue is most reflective of our business
performance as a significant amount of our total operating profit is generated by these services. Cost of processing and services
includes costs directly associated with providing services to clients and includes the following: personnel; equipment and data
communication; infrastructure costs, including costs to maintain software applications; client support; depreciation and
amortization; and other operating expenses.
Product
Product revenue, which in 2017 represented 15% of our total revenue, is primarily derived from integrated print and card
production sales, as well as software license sales which represented less than 4% of our total revenue. Cost of product includes
costs directly associated with the products sold and includes the following: costs of materials and software development;
personnel; infrastructure costs; depreciation and amortization; and other costs directly associated with product revenue.
Selling, General and Administrative Expenses
Selling, general and administrative expenses primarily consist of: salaries, wages, commissions and related expenses paid to
sales personnel, administrative employees and management; advertising and promotional costs; depreciation and amortization;
and other selling and administrative expenses.
19
Financial Results
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.
(In millions)
Year ended December 31,
Revenue:
Processing and services
Product
Total revenue
Expenses:
Cost of processing and
services
Cost of product
Sub-total
Selling, general and
administrative
Gain on sale of business
Total expenses
Operating income
Interest expense
Interest and investment
income (loss), net
Loss on early debt
extinguishment
Income from continuing
operations before income
taxes and income from
investment in
unconsolidated affiliate
2017
2016
2015
Percentage of Revenue (1)
2015
2016
2017
Increase (Decrease)
2017 vs. 2016
2016 vs. 2015
$ 4,833
863
5,696
$ 4,625
880
5,505
$ 4,411
843
5,254
84.8 % 84.0 % 84.0 % $ 208
(17)
15.2 % 16.0 % 16.0 %
100.0 % 100.0 % 100.0 % 191
4 % $ 214
37
(2)%
3 % 251
47.4 % 47.8 % 49.4 %
84.9 % 84.9 % 86.7 %
53.1 % 53.8 % 55.4 %
79
(14)
65
4 %
(2)%
2 %
34
16
50
— (0.2)%
20.2 % 20.0 % 19.7 %
—
49
10
73.1 % 73.8 % 75.1 % 104
87
26.9 % 26.2 % 24.9 %
13
(3.1)% (3.0)% (3.2)%
—
67
4 %
—
—
3 % 117
6 % 134
(7)
8 %
2,291
733
3,024
1,150
(10)
4,164
1,532
(176)
2
—
2,212
747
2,959
1,101
—
4,060
1,445
(163)
(7)
—
2,178
731
2,909
1,034
3,943
1,311
(170)
1
(85)
—
—
(0.1)%
—
9
129 %
(8)
(800)%
—
(1.6)%
—
—
(85)
(100)%
5 %
4 %
5 %
2 %
2 %
2 %
6 %
—
3 %
10 %
(4)%
$ 1,358
$ 1,275
$ 1,057
23.8 % 23.2 % 20.1 % $ 83
7 % $ 218
21 %
(1) Percentage of revenue is calculated as the relevant revenue, expense, income or loss 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.
20
(In millions)
Year ended December 31,
Total revenue:
2017
2016
2015
Revenue growth:
2017
2017 percentage
2016
2016 percentage
Operating income:
2017
2016
2015
Operating income growth:
2017
2017 percentage
2016
2016 percentage
Operating margin:
2017
2016
2015
Operating margin growth: (1)
2017
2016
Payments
Financial
Corporate
and Other
$
$
$
$
$
$
(68)
(62)
(51)
(6)
(11)
(351)
(321)
(355)
(30)
34
$
$
$
$
$
$
$
$
$
$
$
$
3,234
3,090
2,862
144
5%
228
8%
1,034
943
840
91
10%
103
12%
32.0%
30.5%
29.3%
$
$
$
$
$
$
2,530
2,477
2,443
53
2 %
34
1 %
849
823
826
26
3 %
(3)
— %
33.5 %
33.2 %
33.8 %
Total
5,696
5,505
5,254
191
3%
251
5%
1,532
1,445
1,311
87
6%
134
10%
26.9%
26.2%
24.9%
150
120
bps
bps
30
(60)
bps
bps
70
130
bps
bps
(1) Represents the basis point growth or decline in operating margin.
Total Revenue
Total revenue increased $191 million, or 3%, in 2017 and increased $251 million, or 5%, in 2016 compared to the prior years.
The increase in total revenue during 2017 and 2016 was attributable to revenue growth in our Payments segment of 5% and
8%, respectively, and revenue growth in our Financial segment of 2% and 1%, respectively, compared to the prior years.
Revenue in our Payments segment increased $144 million, or 5%, in 2017 and increased $228 million, or 8%, in 2016
compared to the prior years. Revenue growth at our card services business contributed approximately 2.5% in each of 2017 and
2016 to the Payments segment revenue growth largely due to increased transaction volumes. Increased volumes also drove
revenue growth contributions of 1% in 2017 from our electronic payments business and 2% in 2016 from our output solutions
business, which included a higher level of EMV chip card manufacturing and personalization, compared to the prior years.
Revenue from in-year business acquisitions further contributed $22 million, or 1%, and $86 million, or 3%, in 2017 and 2016,
respectively, to Payments segment revenue growth.
Revenue in our Financial segment increased $53 million, or 2%, in 2017 and increased $34 million, or 1%, in 2016 compared
to the prior years. Our lending solutions business contributed approximately 2% and 1% to the Financial segment revenue
growth in 2017 and 2016, respectively, driven by increased volumes. In addition, our account processing business contributed
approximately 1% to the Financial segment revenue growth in 2016. Financial segment revenue growth was partially offset by
the Australian item processing business disposition in 2017 and lower revenue in our international business in 2016, which each
negatively impacted Financial segment revenue growth by approximately 1% compared to the prior years.
21
Total Expenses
Total expenses increased $104 million in 2017 and $117 million in 2016, or 3% in each year, compared to the prior years. Total
expenses as a percentage of total revenue was 73.1%, 73.8% and 75.1% in 2017, 2016 and 2015, respectively. Total expenses
were favorably impacted by 20 basis points in 2017 compared to 2016 due to the gain on the sale of our Australian item
processing business.
Cost of processing and services as a percentage of processing and services revenue was 47.4%, 47.8% and 49.4% in 2017,
2016 and 2015, respectively. Cost of processing and services as a percentage of processing and services revenue was favorably
impacted in both 2017 and 2016 by increased operating leverage in our recurring revenue businesses. Cost of processing and
services as a percentage of processing and services revenue in 2016 was also favorably impacted by approximately 80 basis
points from lower amortization related to certain fully amortized acquisition-related intangible assets compared to the prior
year.
Cost of product as a percentage of product revenue was consistent in 2017 and 2016 at 84.9%, and decreased from 86.7% in
2015. Cost of product as a percentage of product revenue was negatively impacted in 2015 by increased expenses in our output
solutions business associated with additional investments to expand our card manufacturing and personalization capacity.
Selling, general and administrative expenses as a percentage of total revenue was 20.2%, 20.0% and 19.7% in 2017, 2016 and
2015, respectively. The increase in selling, general and administrative expenses as a percentage of total revenue in 2017 and
2016 was primarily due to increased costs associated with acquisitions.
Operating Income and Operating Margin
Total operating income increased $87 million, or 6%, in 2017 and increased $134 million, or 10%, in 2016 compared to the
prior years. Total operating margin increased to 26.9% in 2017 from 26.2% in 2016 and 24.9% in 2015.
Operating income in our Payments segment increased $91 million, or 10%, in 2017 and increased $103 million, or 12%, in
2016 compared to the prior years. Operating margin was 32.0%, 30.5% and 29.3% in 2017, 2016 and 2015, respectively,
increasing 150 basis points in 2017 and 120 basis points in 2016. Our card services business contributed approximately 110
basis points in each of 2017 and 2016 to the Payments segment operating margin growth largely attributable to scalable
revenue growth. In addition, Payments segment operating margin was positively impacted by approximately 90 basis points
from our electronic payments business in 2017 and by approximately 70 basis points from our output solutions business in
2016, attributable to improved operating leverage and product mix, respectively. Payments segment operating margin
improvement was partially offset by approximately 50 basis points in each of 2017 and 2016 as a result of in-year acquisitions.
Operating income in our Financial segment increased $26 million, or 3%, in 2017 and was generally consistent in 2016
compared to the prior years. Operating margin was 33.5%, 33.2% and 33.8% in 2017, 2016 and 2015, respectively, increasing
30 basis points in 2017 and decreasing 60 basis points in 2016. Financial segment operating margin in 2017 was positively
impacted by approximately 70 basis points from scalable revenue growth. Increased expenses associated with incremental
investments in innovation-based solutions negatively impacted Financial operating margin by 30 basis points and 60 basis
points in 2017 and 2016, respectively.
The operating loss in Corporate and Other increased $30 million in 2017 and decreased $34 million in 2016 compared to the
prior years. The operating loss increase in 2017 was primarily attributable to increased acquisition and related integration costs
of $12 million and increased employee benefit expenses, including severance, of $20 million. These increased costs were
partially offset by a $10 million gain on the sale of our Australian item processing business. The operating loss improvement in
2016 was primarily due to lower amortization related to certain fully amortized acquisition-related intangible assets compared
to 2015.
Interest Expense
Interest expense increased $13 million, or 8%, in 2017 and decreased $7 million, or 4%, in 2016 compared to the prior years.
Higher average variable interest rates and higher average outstanding debt contributed approximately $7 million and $6
million, respectively, to increased interest expense in 2017 compared to 2016. The lower interest expense in 2016 was primarily
due to the reclassification of $7 million to interest expense for unamortized losses on settled cash flow hedges related to the
early extinguishment of debt in 2015.
Interest and Investment Income (Loss), net
The net interest and investment loss in 2016 was attributable to a non-cash write-off of a $7 million cost-method investment.
22
Loss on Early Debt Extinguishment
In May 2015, we redeemed our $600 million aggregate principal amount of 3.125% senior notes due in 2016 and $500 million
aggregate principal amount of 6.8% senior notes due in 2017, which resulted in a pre-tax loss on early debt extinguishment of
$85 million related to make-whole payments and other costs associated with redemption.
Income Tax Provision
Income tax provision as a percentage of income from continuing operations before income from investment in unconsolidated
affiliate was 11.6%, 38.6% and 35.7% in 2017, 2016 and 2015, respectively. The rate in 2017 decreased by 20.3% attributable
to the enactment of the Tax Cuts and Jobs Act, as further described below, and by 3.6% attributable to excess tax benefits from
share-based compensation awards recognized as a reduction in the income tax provision as a result of the 2017 adoption of
Accounting Standards Update 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-
Based Payment Accounting. The higher rate in 2016 compared to 2015 was primarily due to the level of income tax expense
associated with our share of the net gains on sales transactions by our unconsolidated affiliate, StoneRiver.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and
Jobs Act. The Tax Act makes broad changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal
corporate tax rate from 35 percent to 21 percent beginning in 2018; (2) requiring companies to pay a one-time transition tax on
certain un-repatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from
foreign subsidiaries; (4) requiring U.S. federal taxable income to include certain earnings of controlled foreign corporations;
and (5) creating a new limitation on deductible interest expense. The provisions of the Tax Act decreased our 2017 effective tax
rate by 20.3%, primarily due to the re-evaluation of the net deferred tax liability to reflect the lower federal tax rate of 21
percent. The ultimate impact of the Tax Act may differ from the reported amounts due to changes in interpretations and
assumptions, as well as guidance that may be issued in the future.
Income from Investment in Unconsolidated Affiliate
During 2017 and 2015, StoneRiver recognized net gains on the sales of subsidiary businesses, and in 2016, recognized a net
gain on the sale of a business interest, resulting in our share of StoneRiver income of $32 million, $147 million and $32 million
in 2017, 2016 and 2015, respectively.
Income from Discontinued Operations
Income from discontinued operations in 2017 included a litigation settlement related to a prior disposition of $19 million, net of
income tax of $7 million, and earnings related to an acquired business held for sale.
Net Income Per Share - Diluted from Continuing Operations
Net income per share-diluted from continuing operations was $5.71, $4.15 and $2.99 in 2017, 2016 and 2015, respectively. Net
income per share-diluted from continuing operations was favorably impacted by discrete income tax benefits associated with
the Tax Act of $1.28 per share in 2017 and from our share of net investment gains, primarily from StoneRiver capital
transactions, of $0.09, $0.39 and $0.07 per share in 2017, 2016 and 2015, respectively. Net income per share-diluted from
continuing operations was negatively impacted in 2017 and 2016 by merger and integration costs of $0.23 and $0.17 per share,
respectively, and in 2015 by debt extinguishment and refinancing costs of $0.25 per share. The amortization of acquisition-
related intangible assets also reduced net income per share-diluted from continuing operations by $0.49, $0.46 and $0.53 per
share in 2017, 2016 and 2015, respectively.
23
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, along with our cash and cash equivalents of $325 million and
available borrowings under our revolving credit facility of $0.9 billion at December 31, 2017. The following table summarizes
our operating cash flow and capital expenditure amounts for the years ended December 31, 2017 and 2016, respectively.
(In millions)
Income from continuing operations
Depreciation and amortization
Share-based compensation
Excess tax benefits from share-based awards
Deferred income taxes
Income from investment in unconsolidated affiliate
Dividends from unconsolidated affiliate
Non-cash impairment charges
Gain on sale of business
Net changes in working capital and other
Operating cash flow
Capital expenditures
Year Ended
December 31,
Increase (Decrease)
2017
2016
$
%
$
1,232
$
433
63
—
(247)
(32)
45
18
(10)
(19)
1,483
287
$
$
$
930
411
68
(51)
21
(147)
151
17
—
31
$
$
1,431
290
$
$
302
22
(5)
51
(268)
115
(106)
1
(10)
(50)
52
(3)
4 %
(1)%
Our net cash provided by operating activities, or operating cash flow, was $1.48 billion in 2017, an increase of 4% compared to
$1.43 billion in 2016. This increase was primarily due to improved operating results, partially offset by $106 million of lower
cash dividends received from our StoneRiver joint venture and unfavorable timing of payables. In 2017 and 2016, we received
cash dividends of $45 million and $151 million, respectively, from our StoneRiver joint venture. These dividends, in their
entirety, represented returns on our investment and are reported in cash flows from operating activities.
Our current policy is to use our operating cash flow primarily to fund capital expenditures, share repurchases and acquisitions,
and to repay debt rather than to pay dividends. Our capital expenditures were approximately 5% of our total revenue in both
2017 and 2016.
Share Repurchases
We purchased $1.17 billion and $1.20 billion of our common stock in 2017 and 2016, respectively. On November 16, 2016, our
board of directors authorized the purchase of up to 15.0 million shares of our common stock. As of December 31, 2017, we had
approximately 10.7 million shares remaining under this authorization. Shares repurchased are generally held for issuance in
connection with our equity plans.
Acquisitions and Dispositions
We completed four acquisitions in 2017 for an aggregate purchase price of $384 million, net of $33 million of acquired cash,
and two acquisitions in 2016 for an aggregate purchase price of $265 million. We funded these acquisitions by utilizing a
combination of available cash and existing availability under our revolving credit facility.
In January 2018, we completed the sale of the retail voucher business acquired in our 2017 acquisition of Monitise for proceeds
of £37 million ($50 million). In addition, in February 2018, we announced a definitive agreement to sell a 55% interest of our
lending solutions business, retaining a 45% interest in the joint venture.
24
Indebtedness
(In millions)
Revolving credit facility
Term loan
2.7% senior notes due 2020
4.625% senior notes due 2020
4.75% senior notes due 2021
3.5% senior notes due 2022
3.85% senior notes due 2025
Other borrowings
Total debt (including current maturities)
December 31,
2017
2016
$
$
1,068
540
846
449
398
696
894
9
4,900
$
$
647
629
845
448
398
695
893
7
4,562
At December 31, 2017, our debt consisted primarily of $3.3 billion of senior notes, $1.1 billion of revolving credit facility
borrowings and $540 million of term loan borrowings. Interest on our senior notes is paid semi-annually. We were in
compliance with all financial debt covenants during 2017. Additional information about our debt structure and associated
instruments is included in Note 5 to the consolidated financial statements.
Variable Rate Debt
We maintain a $2.0 billion revolving credit agreement and a term loan with a syndicate of banks. Both the outstanding
borrowings under the revolving credit facility and the term loan bear interest at a variable rate based on LIBOR or on a base
rate, plus a specified margin based on our long-term debt rating in effect from time to time. The variable interest rate was
2.59% on the revolving credit facility borrowings and 2.82% on the term loan borrowings at December 31, 2017. There are no
significant commitment fees and no compensating balance requirements on the revolving credit facility, which matures in April
2020. The outstanding principal balance on the term loan of $540 million is due at maturity in October 2018. At December 31,
2017, the term loan was classified in the consolidated balance sheet as long-term as we have the intent to refinance this debt on
a long-term basis and the ability to do so under our revolving credit facility. The revolving credit facility and the term loan
contain various, substantially similar 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.
Other
Access to capital markets impacts our cost of capital, our ability to refinance maturing debt and our ability to fund future
acquisitions. Our ability to access capital on favorable terms depends on a number of factors, including general market
conditions, interest rates, credit ratings on our debt securities, perception of our potential future earnings and the market price
of our common stock. As of December 31, 2017, we had a corporate credit rating of Baa2 with a stable outlook from Moody’s
Investors Service, Inc. (“Moody’s”) and BBB with a stable outlook from Standard & Poor’s Ratings Services (“S&P”) on our
senior unsecured debt securities.
The interest rates payable on our senior notes, revolving credit facility and term loan are subject to adjustment from time to
time if Moody’s or S&P changes the debt rating applicable to the notes. If the ratings from Moody’s or S&P decrease below
investment grade, the per annum interest rates are subject to increase by up to two percent. In no event will the total increase in
the per annum interest rates exceed two percent above the original interest rates, nor will the per annum interest rate be reduced
below the original interest rate applicable to the senior notes.
25
Off-Balance Sheet Arrangements and Contractual Obligations
We do not participate in, nor have we created, any off-balance sheet variable interest entities or other off-balance sheet
financing. The following table details our contractual obligations at December 31, 2017:
(In millions)
Long-term debt including interest (1) (2)
Minimum operating lease payments (1)
Purchase obligations (1)
Income tax obligations
Total
$
$
Total
5,550
$
410
276
42
Less than
1 year
168
109
167
10
1-3 years
3-5 years
$
3,187
$
1,217
$
133
107
17
67
2
11
More than
5 years
978
101
—
4
6,278
$
454
$
3,444
$
1,297
$
1,083
(1) Interest, operating lease and purchase obligations are reported on a pre-tax basis.
(2) The calculations assume that only mandatory debt repayments are made, the term loan is refinanced on a long-term basis
under the revolving credit facility, no additional refinancing or lending occurs, and the variable rates on the revolving
credit facility and term loan are priced at the rate in effect as of December 31, 2017.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk refers to the risk that a change in the level of one or more market prices, interest rates, currency exchange rates,
indices, correlations or other market factors, such as liquidity, will result in losses for a certain financial instrument or group of
financial instruments. We are exposed primarily to interest rate risk and market price risk on outstanding debt, investments of
subscriber funds and foreign currency. Our senior management actively monitors these risks.
We manage our debt structure and interest rate risk through the use of fixed- and floating-rate debt. Based on our outstanding
debt with variable interest rates at December 31, 2017, a 1% increase in our borrowing rate would increase annual interest
expense in 2018 by approximately $16 million.
In connection with processing electronic payments transactions, the funds we receive from subscribers are invested into short-
term, highly liquid investments from the time we collect the funds until payments are made to the applicable recipients.
Subscriber funds are not included in our consolidated balance sheets and can fluctuate significantly based on consumer bill
payment and debit card activity. During 2017, the subscriber funds daily average balance approximated $1.2 billion. A 1%
increase or decrease in applicable interest rates would not have a material impact on our annual income from continuing
operations.
We conduct business in the United States and in foreign countries and are exposed to foreign currency risk from changes in the
value of underlying assets and liabilities of our non-U.S. dollar denominated foreign investments and foreign currency
transactions. We have entered into foreign currency forward exchange contracts with total notional values of approximately
$150 million as of December 31, 2017 to hedge foreign currency exposure to the Indian Rupee. In 2017, approximately 5% of
our total revenue was from clients in foreign countries. Risk can be estimated by measuring the impact of a near-term adverse
movement of 10% in foreign currency rates against the U.S. dollar. If these rates were 10% higher or lower at December 31,
2017, there would not have been a material impact on our annual income from continuing operations or financial position.
26
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Page
28
29
30
31
32
33
52
27
Fiserv, Inc.
Consolidated Statements of Income
In millions, except per share data
Year ended December 31,
Revenue:
Processing and services
Product
Total revenue
Expenses:
Cost of processing and services
Cost of product
Selling, general and administrative
Gain on sale of business
Total expenses
Operating income
Interest expense
Interest and investment income (loss), net
Loss on early debt extinguishment
Income from continuing operations before income taxes and income from
investment in unconsolidated affiliate
Income tax provision
Income from investment in unconsolidated affiliate
Income from continuing operations
Income from discontinued operations, net of income taxes
Net income
Net income per share - basic:
Continuing operations
Discontinued operations
Total
Net income per share - diluted:
Continuing operations
Discontinued operations
Total
2017
2016
2015
$
4,833
$
4,625
$
863
5,696
2,291
733
1,150
(10)
4,164
1,532
(176)
2
—
1,358
(158)
32
1,232
14
880
5,505
2,212
747
1,101
—
4,060
1,445
(163)
(7)
—
1,275
(492)
147
930
—
$
$
$
$
$
1,246
$
930
$
5.84
0.07
5.90
5.71
0.07
5.78
$
$
$
$
4.22
—
4.22
4.15
—
4.15
$
$
$
$
4,411
843
5,254
2,178
731
1,034
—
3,943
1,311
(170)
1
(85)
1,057
(377)
32
712
—
712
3.04
—
3.04
2.99
—
2.99
Shares used in computing net income per share:
Basic
Diluted
211.1
215.6
220.3
223.9
233.9
238.0
See accompanying notes to consolidated financial statements.
28
Fiserv, Inc.
Consolidated Statements of Comprehensive Income
In millions
Year ended December 31,
Net income
Other comprehensive income (loss):
Fair market value adjustment on cash flow hedges, net of income tax
provision of $2 million
Reclassification adjustment for net realized losses on cash flow hedges
included in interest expense, net of income tax provision of $4 million, $5
million and $6 million
Foreign currency translation
Total other comprehensive income (loss)
Comprehensive income
2017
2016
2015
$
1,246
$
930
$
712
4
6
12
22
$
1,268
$
—
—
7
(9)
(2)
928
$
10
(21)
(11)
701
See accompanying notes to consolidated financial statements.
29
Fiserv, Inc.
Consolidated Balance Sheets
In millions
December 31,
Assets
Cash and cash equivalents
Trade accounts receivable, less allowance for doubtful accounts
Prepaid expenses and other current assets
Assets held for sale
Total current assets
Property and equipment, net
Intangible assets, net
Goodwill
Other long-term assets
Total assets
Liabilities and Shareholders’ Equity
Accounts payable and accrued expenses
Current maturities of long-term debt
Deferred revenue
Total current liabilities
Long-term debt
Deferred income taxes
Other long-term liabilities
Total liabilities
Commitments and Contingencies
Shareholders’ Equity
Preferred stock, no par value: 25.0 million shares authorized; none issued
Common stock, $0.01 par value: 900.0 million shares authorized; 395.7 million shares issued
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Treasury stock, at cost, 188.1 million and 180.2 million shares
Total shareholders’ equity
Total liabilities and shareholders’ equity
2017
2016
$
$
$
$
325
997
603
50
1,975
390
1,882
5,590
452
10,289
1,383
3
552
1,938
4,897
552
171
7,558
—
4
1,035
(54)
10,240
(8,494)
2,731
10,289
$
$
$
$
300
902
526
—
1,728
405
1,833
5,373
404
9,743
1,242
95
483
1,820
4,467
762
153
7,202
—
4
1,020
(76)
8,994
(7,401)
2,541
9,743
See accompanying notes to consolidated financial statements.
30
Fiserv, Inc.
Consolidated Statements of Shareholders’ Equity
In millions
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Treasury Stock
Shares Amount
Balance at January 1, 2015
396
$
4
$
897
$
(63) $
7,352
155
$ (4,895)
Net income
Other comprehensive loss
Share-based compensation
Shares issued under stock plans
including income tax benefits
Purchases of treasury stock
65
(10)
Balance at December 31, 2015
396
4
952
Net income
Other comprehensive loss
Share-based compensation
Shares issued under stock plans
including income tax benefits
Purchases of treasury stock
68
—
Balance at December 31, 2016
396
4
1,020
Net income
Other comprehensive income
Share-based compensation
Shares issued under stock plans
Purchases of treasury stock
Balance at December 31, 2017
712
8,064
930
8,994
1,246
(11)
(74)
(2)
(76)
22
(2)
17
170
80
(1,471)
(6,286)
(2)
12
180
83
(1,198)
(7,401)
63
(48)
(2)
10
396
$
4
$
1,035
$
(54) $
10,240
188
78
(1,171)
$ (8,494)
See accompanying notes to consolidated financial statements.
31
Fiserv, Inc.
Consolidated Statements of Cash Flows
In millions
Year ended December 31,
2017
2016
2015
Cash flows from operating activities:
Net income
Adjustment for discontinued operations
Adjustments to reconcile net income to net cash provided by operating activities
from continuing operations:
$
$
1,246
(14)
$
930
—
Depreciation and other amortization
Amortization of acquisition-related intangible assets
Share-based compensation
Excess tax benefits from share-based awards
Deferred income taxes
Income from investment in unconsolidated affiliate
Dividends from unconsolidated affiliate
Non-cash impairment charges
Gain on sale of business
Loss on early debt extinguishment
Other operating activities
Changes in assets and liabilities, net of effects from acquisitions:
Trade accounts receivable
Prepaid expenses and other assets
Accounts payable and other liabilities
Deferred revenue
Net cash provided by operating activities from continuing operations
Cash flows from investing activities:
Capital expenditures, including capitalization of software costs
Payments for acquisitions of businesses, net of cash acquired
Proceeds from sale of business
Purchases of investments
Other investing activities
Net cash used in investing activities from continuing operations
Cash flows from financing activities:
Debt proceeds
Debt repayments, including redemption and other costs
Proceeds from issuance of treasury stock
Purchases of treasury stock, including employee shares withheld for tax
obligations
Excess tax benefits from share-based awards
Other financing activities
Net cash used in financing activities from continuing operations
Net change in cash and cash equivalents from continuing operations
Net cash flows from discontinued operations provided by operating activities
Cash and cash equivalents, beginning balance
Cash and cash equivalents, ending balance
$
274
159
63
—
(247)
(32)
45
18
(10)
—
(4)
(75)
(55)
54
61
1,483
(287)
(384)
17
(10)
7
(657)
2,310
(1,985)
78
(1,223)
—
—
(820)
6
19
300
325
$
253
158
68
(51)
21
(147)
151
17
—
—
(2)
(88)
(68)
178
11
1,431
(290)
(265)
—
(1)
2
(554)
2,126
(1,863)
79
(1,245)
51
—
(852)
25
—
275
300
$
712
—
223
194
65
(38)
20
(32)
36
6
—
85
(1)
(2)
(66)
148
(4)
1,346
(359)
—
—
(4)
3
(360)
3,121
(2,707)
71
(1,522)
38
(6)
(1,005)
(19)
—
294
275
See accompanying notes to consolidated financial statements.
32
Fiserv, Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Description of the Business
Fiserv, Inc. and its subsidiaries (collectively, the “Company”) provide financial services technology to clients worldwide,
including banks, savings banks, credit unions, investment management firms, leasing and finance companies, billers, retailers,
merchants, and building societies. The Company provides account processing systems, electronic payments processing
products and services, internet and mobile banking systems, and related services. The Company is principally located in the
United States where it operates data and transaction processing centers, provides technology support, develops software and
payment solutions, and offers consulting services.
The Company’s operations are comprised of the Payments and Industry Products (“Payments”) segment and the Financial
Institution Services (“Financial”) segment. Additional information regarding the Company’s business segments is included in
Note 9.
Principles of Consolidation
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.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
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 financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ materially from those estimates.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09,
Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”), which provides
guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be
required to apply modification accounting. Under ASU 2017-09, an entity would not apply modification accounting if the fair
value, vesting conditions, and classification of the award are the same immediately before and after the award is modified. ASU
2017-09 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017,
with early adoption permitted in any interim period. Entities must apply the standard prospectively. The Company early
adopted ASU 2017-09 effective September 30, 2017 and will apply the guidance prospectively to awards modified on or after
the adoption date. The adoption of this ASU did not have any impact on the Company’s consolidated financial statements and is
not expected to have a material impact on its consolidated financial statements going forward.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment (“ASU 2017-04”), which eliminates Step 2 of the goodwill impairment test that had required a
hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and
recognize an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without
exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a
qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 will be
effective prospectively for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, or
those beginning after January 1, 2017 if early adopted. The Company early adopted ASU 2017-04 in the first quarter of 2017.
The adoption of this ASU did not have any impact on the Company’s consolidated financial statements and is not expected to
have a material impact on its consolidated financial statements going forward.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a
Business (“ASU 2017-01”), which clarifies the definition of a business with the objective of adding guidance and providing a
more robust framework to assist reporting organizations with evaluating whether transactions should be accounted for as
acquisitions (or disposals) of assets or businesses. For public entities, ASU 2017-01 is effective prospectively for fiscal years,
33
including interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted for
transactions occurring before the issuance or effective date of the standard for which financial statements have not yet been
issued. The Company early adopted ASU 2017-01 in the first quarter of 2017, and the adoption did not have a material impact
on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments (“ASU 2016-15”), which adds or clarifies guidance on the presentation and classification of eight
specific types of cash receipts and cash payments in the statement of cash flows, with the intent of reducing diversity in
practice. For public entities, ASU 2016-15 is effective for fiscal years, including interim periods within those fiscal years,
beginning after December 15, 2017, with early adoption permitted. Entities must apply the guidance retrospectively to all
periods presented unless retrospective application is impracticable. The Company early adopted ASU 2016-15 in the first
quarter of 2017, and the adoption did not have a material impact on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies several aspects of the accounting for share-
based payment awards, including the accounting for income taxes and forfeitures, as well as classification in the statement of
cash flows. The standard requires that all tax effects related to share-based payments be recorded as income tax expense or
benefit in the income statement at settlement or expiration and, accordingly, excess tax benefits and tax deficiencies be
presented as operating activities in the statement of cash flows. For public entities, ASU 2016-09 was effective for annual
periods beginning after December 15, 2016, including interim periods within those annual periods. The recognition of all
excess tax benefits and tax deficiencies in the income statement, as well as related changes to the computation of diluted
earnings per share, is to be applied prospectively. The impact of this standard on the Company’s consolidated financial
statements depends on the intrinsic value of share-based compensation awards at the time of exercise or vesting, resulting in
more variability in effective tax rates and net earnings, and also impacting the dilution of common stock equivalents. The
Company adopted ASU 2016-09 effective January 1, 2017. As a result of this adoption, the Company recorded excess tax
benefits related to share-based compensation awards of $48 million in 2017 in the income tax provision, whereas such benefits
were previously recognized in equity. These benefits were partially offset by an increase in the dilution of common stock
equivalents for calculating diluted earnings per share. The Company elected to apply the change in presentation in the
statement of cash flows prospectively, and as a result, excess tax benefits are classified as operating activities when realized
through reductions to subsequent tax payments. The treatment of forfeitures did not change as the Company elected to continue
its current practice of estimating expected forfeitures.
Recently Issued Accounting Pronouncements
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to
Accounting for Hedging Activities (“ASU 2017-12”), which provides guidance designed to improve the financial reporting of
hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements
as well as to simplify the application of the hedge accounting guidance in current U.S. generally accepted accounting
principles. For public entities, ASU 2017-12 is effective for fiscal years, including interim periods within those fiscal years,
beginning after December 15, 2018, with early adoption permitted in any interim period or fiscal year. For cash flow and net
investment hedges existing at the date of adoption, the standard requires a cumulative-effect adjustment related to eliminating
the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to
the opening balance of retained earnings as of the beginning of the fiscal year of adoption. The amended presentation and
disclosure guidance is required only prospectively. The Company does not expect the adoption of ASU 2017-12 to have a
material impact on its consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than
Inventory (“ASU 2016-16”), which eliminates the current prohibition on immediate recognition of the current and deferred
income tax effects of intra-entity transfers of assets other than inventory, with the intent of reducing complexity and diversity in
practice. Under ASU 2016-16, entities must recognize the income tax consequences when the transfer occurs rather than
deferring recognition. For public entities, ASU 2016-16 is effective for fiscal years, including interim periods within those
fiscal years, beginning after December 15, 2017, with early adoption permitted as of the beginning of a fiscal year. Entities
must apply the guidance on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the
beginning of the period of adoption. The Company does not expect the adoption of ASU 2016-16 to have a material impact on
its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), which
prescribes an impairment model for most financial assets based on expected losses rather than incurred losses. Under this
model, an estimate of expected credit losses over the contractual life of the instrument is to be recorded as of the end of a
reporting period as an allowance to offset the amortized cost basis, resulting in a net presentation of the amount expected to be
34
collected on the financial asset. For public entities, ASU 2016-13 is effective for fiscal years, including interim periods within
those fiscal years, beginning after December 15, 2019. Early adoption is permitted for fiscal years beginning after December
15, 2018, including interim periods within those fiscal years. For most instruments, entities must apply the standard using a
cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year of adoption. The Company is
currently assessing the impact that the adoption of ASU 2016-13 will have on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to
recognize a lease liability and a right-of-use asset for each lease with a term longer than twelve months. The recognized
liability is measured at the present value of lease payments not yet paid, and the corresponding asset represents the lessee’s
right to use the underlying asset over the lease term and is based on the liability, subject to certain adjustments. For income
statement purposes, the standard retains the dual model with leases classified as either operating or finance. Operating leases
will result in straight-line expense while finance leases will result in a front-loaded expense pattern. For public entities, ASU
2016-02 is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The
standard requires a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the
earliest comparative period presented in the financial statements. The Company is currently assessing the impact that the
adoption of ASU 2016-02 will have on its consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial
Liabilities (“ASU 2016-01”), which primarily affects the accounting for equity investments, financial liabilities under the fair
value option, and the presentation and disclosure requirements of financial instruments. For public entities, ASU 2016-01 is
effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption
permitted for certain provisions of the standard. Entities must apply the standard, with certain exceptions, using a cumulative-
effect adjustment to beginning retained earnings as of the beginning of the fiscal year of adoption. The Company does not
expect the adoption of ASU 2016-01 to have a material impact on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), to clarify the
principles of recognizing revenue and to create common revenue recognition guidance between U.S. generally accepted
accounting principles and International Financial Reporting Standards. ASU 2014-09 outlines a single comprehensive model
for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue
recognition guidance, including industry-specific requirements. It also includes guidance on accounting for the incremental
costs of obtaining and costs incurred to fulfill a contract with a customer. The core principle of the revenue model is that an
entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. This model involves a five-step
process for achieving that core principle, along with comprehensive disclosures about the nature, amount, timing and
uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, to defer the effective date of the new
revenue standard for one year and permit early adoption as of the original effective date in ASU 2014-09. For public entities,
the new revenue standard is effective for annual and interim periods beginning after December 15, 2017. Entities have the
option of adopting this new guidance using either a full retrospective or a modified approach with the cumulative effect of
applying the guidance recognized at the date of initial application.
The Company adopted the new standard effective January 1, 2018 using the modified retrospective transition approach applied
to all contracts, which results in a cumulative effect adjustment to retained earnings as of the date of adoption. Under this
method, the Company will not restate the prior consolidated financial statements presented. However, the Company will be
required to provide additional disclosures in 2018 related to the amount by which each relevant 2018 financial statement line
item is affected by adoption of the new standard, and an explanation of the reasons for significant changes.
The Company has assessed the impacts of adopting this new revenue standard on its consolidated financial statements, related
disclosures, accounting policies, and necessary control, process and systems changes, and expects the new revenue standard
will not have an overall material impact on the amount and timing of revenue recognition. The Company expects the
accounting for stand-ready account- and transaction-based processing fees, the Company’s most significant revenue stream, to
remain substantially unchanged. Smaller impacted areas include the timing of revenue recognition of certain termination fees
over the modified contract term, which will generally result in an acceleration of revenue as compared to the Company’s
current accounting practice of recognition upon client deconversion, and the deferral of professional services revenue from
certain transaction processing platform enhancements that are currently recognized as performed.
The new standard requires the Company to change its accounting for costs to obtain a contract, such as the capitalization of
commissions for sales personnel which are currently expensed as incurred, and also requires expanded qualitative and
quantitative disclosures. The estimated cumulative impact of adopting the new revenue standard on January 1, 2018 is an
35
increase in the opening balance of retained earnings of approximately $210 million, primarily related to the deferral of
incremental sales commissions incurred in obtaining contracts in prior periods.
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, accounts payable, and client
deposits approximate their respective carrying values due to the short period of time to maturity. The estimated fair value of
total debt is described in Note 5 and was based on quoted prices in active markets for the Company’s senior notes (level 1 of
the fair value hierarchy) and discounted cash flows based on the Company’s current incremental borrowing rate for its term
loan (level 3 of the fair value hierarchy). The fair value of the Company’s revolving credit facility borrowings approximates
carrying value as the underlying interest rate is variable based on LIBOR. The estimated fair value of the contingent
consideration liability of $15 million at December 31, 2017 (see Note 2) was based on the present value of a probability-
weighted assessment approach derived from the likelihood of achieving the various earn-out criteria (level 3 of the fair value
hierarchy) and is reported in other long-term liabilities in the consolidated balance sheet. This estimated fair value has not
changed since the acquisition date.
Derivatives
Derivatives are recorded in the consolidated balance sheets as either an asset or liability measured at fair value. If the derivative
is designated as a cash flow hedge, the effective portions of the changes in the fair value of the derivative are recorded as a
component of accumulated other comprehensive loss and recognized in the consolidated statements of income when the hedged
item affects earnings. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative are
recognized in earnings. To the extent the fair value hedge is effective, there is an offsetting adjustment to the basis of the item
being hedged. Ineffective portions of changes in the fair value of hedges are recognized in earnings. The Company’s policy is
to enter into derivatives with creditworthy institutions and not to enter into such derivatives for speculative purposes.
Foreign Currency
Foreign currency denominated assets and liabilities, where the functional currency is the local currency, are translated into U.S.
dollars at the exchange rates in effect at the balance sheet date. Revenue and expenses are translated at the average exchange
rates during the period. Gains and losses from foreign currency translation are recorded as a separate component of
accumulated other comprehensive loss.
Revenue Recognition
The Company generates revenue from the delivery of processing, service and product solutions. Revenue is recognized when
written contracts are signed, delivery has occurred, the fees are fixed or determinable, and collectability is reasonably assured.
Processing and services revenue is recognized as services are provided and is primarily derived from contracts that generate
account- and transaction-based fees for data processing, transaction processing, electronic billing and payment services,
electronic funds transfer, and debit processing services. In addition, processing and services revenue is derived from the
fulfillment of professional services, including consulting activities. Certain of the Company’s revenue is generated from
multiple element arrangements involving various combinations of product and service deliverables. The deliverables within
these arrangements are evaluated at contract inception to determine whether they represent separate units of accounting, and if
so, contract consideration is allocated to each deliverable based on relative selling price. The relative selling price is determined
using vendor specific objective evidence of fair value, third-party evidence or best estimate of selling price. Revenue is then
recognized in accordance with the appropriate revenue recognition guidance applicable to the respective elements. Also
included in processing and services revenue is software maintenance fee revenue for ongoing client support, which is
recognized ratably over the term of the applicable support period, generally 12 months. Deferred revenue consists primarily of
advance cash receipts for services and is recognized as revenue when the services are provided.
Product revenue is primarily derived from integrated print and card production sales, as well as software license sales which
represented less than 4% of total revenue. For software license agreements that do not require significant customization or
modification, the Company recognizes software license revenue upon delivery, assuming persuasive evidence of an
36
arrangement exists, the license fee is fixed or determinable, and collection is reasonably assured. Arrangements with customers
that include significant customization, modification or production of software are accounted for under contract accounting, with
revenue recognized using the percentage-of-completion method based upon efforts-expended, such as labor hours, to measure
progress towards completion. Changes in estimates for revenues, costs and profits are recognized in the period in which they
are determinable and were not material for any period presented.
The Company includes reimbursements from clients, such as postage and telecommunication costs, in processing and services
revenue and product revenue, while the related costs are included in cost of processing and services and cost of product.
Selling, General and Administrative Expenses
Selling, general and administrative expenses primarily consist of: salaries, wages, commissions and related expenses paid to
sales personnel, administrative employees and management; advertising and promotional costs; depreciation and amortization;
and other selling and administrative expenses.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and investments with original maturities of 90 days or less.
Allowance for Doubtful Accounts
The Company analyzes the collectability of trade accounts receivable by considering historical bad debts, client
creditworthiness, current economic trends, changes in client payment terms and collection trends when evaluating the adequacy
of the allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may
result in an additional allowance for doubtful accounts being recognized in the period in which the change occurs. The
allowance for doubtful accounts was $15 million at both December 31, 2017 and 2016.
Prepaid Expenses
Prepaid expenses represent advance payments for goods and services to be consumed in the future, such as maintenance,
postage and insurance, and totaled $136 million and $141 million at December 31, 2017 and 2016, respectively.
Settlement Assets and Obligations
Settlement assets of $385 million and $312 million were included in prepaid expenses and other current assets at December 31,
2017 and 2016, respectively, and settlement obligations of $379 million and $305 million were included in accounts payable
and accrued expenses at December 31, 2017 and 2016, respectively. Settlement assets and obligations result from timing
differences between collection and fulfillment of payment transactions primarily associated with the Company’s walk-in and
expedited bill payment service businesses. Settlement assets represent cash received or amounts receivable from agents,
payment networks or directly from consumers. Settlement obligations represent amounts payable to clients and payees.
Property and Equipment
Property and equipment are reported at cost. Depreciation of property and equipment is computed primarily using the straight-
line method over the shorter of the estimated useful life of the asset or the leasehold period, if applicable. Property and
equipment consisted of the following at December 31:
(In millions)
Land
Data processing equipment
Buildings and leasehold improvements
Furniture and equipment
Less: accumulated depreciation
Total
Estimated
Useful Lives
—
3 to 5 years
5 to 40 years
5 to 8 years
2017
2016
$
$
13
726
255
182
1,176
(786)
390
$
$
19
697
256
179
1,151
(746)
405
Depreciation expense for all property and equipment totaled $92 million, $90 million and $80 million in 2017, 2016 and 2015,
respectively.
37
Intangible Assets
Intangible assets consisted of the following at December 31:
(In millions)
2017
Customer related intangible assets
Acquired software and technology
Trade names
Capitalized software development costs
Purchased software
Total
(In millions)
2016
Customer related intangible assets
Acquired software and technology
Trade names
Capitalized software development costs
Purchased software
Total
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
2,293
$
1,168
$
579
117
737
241
460
64
282
111
3,967
$
2,085
$
1,125
119
53
455
130
1,882
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
2,200
$
1,043
$
507
117
641
230
432
57
233
97
3,695
$
1,862
$
1,157
75
60
408
133
1,833
$
$
$
$
Customer related intangible assets represent customer contracts and relationships obtained as part of acquired businesses and
are amortized over their estimated useful lives, generally 10 to 20 years. Acquired software and technology represents software
and technology intangible assets obtained as part of acquired businesses and are amortized over their estimated useful lives,
generally four to eight years. Trade names are amortized over their estimated useful lives, generally 10 to 20 years.
Amortization expense for acquired intangible assets, which include customer related intangible assets, acquired software and
technology, and trade names, totaled $159 million, $158 million and $194 million in 2017, 2016 and 2015, respectively.
The Company continually develops, maintains and enhances its products and systems. Product development expenditures
represented approximately 8% of the Company’s total revenue in each of 2017 and 2016 and 9% in 2015. Research and
development costs incurred prior to the establishment of technological feasibility are expensed as incurred. Routine
maintenance of software products, design costs and other development costs incurred prior to the establishment of a product’s
technological feasibility are also expensed as incurred. Costs are capitalized commencing when the technological feasibility of
the software has been established.
Capitalized software development costs represent the capitalization of certain costs incurred to develop new software or to
enhance existing software which is marketed externally or utilized by the Company to process client transactions. Capitalized
software development costs are amortized over their estimated useful lives, generally five years. Gross software development
costs capitalized for new products and enhancements to existing products totaled $159 million, $143 million and $137 million
in 2017, 2016 and 2015, respectively. Amortization of previously capitalized software development costs that have been placed
into service was $123 million, $106 million and $92 million in 2017, 2016 and 2015, respectively.
Purchased software represents software licenses purchased from third parties and is amortized over their estimated useful lives,
generally three to five years. Amortization of purchased software totaled $44 million, $40 million and $33 million in 2017,
2016 and 2015, respectively.
The Company estimates that annual amortization expense with respect to acquired intangible assets recorded at December 31,
2017 will be approximately $160 million in each of 2018 and 2019, $130 million in each of 2020 and 2021, and $120 million in
2022. Amortization expense with respect to capitalized and purchased software recorded at December 31, 2017 is estimated to
approximate $170 million in 2018.
38
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired and liabilities
assumed in a business combination. The Company evaluates goodwill for impairment on an annual basis, or more frequently if
circumstances indicate possible impairment. Goodwill is tested for impairment at a reporting unit level, determined to be at an
operating segment level or one level below. When reviewing goodwill for impairment, the Company considers the amount of
excess fair value over the carrying value of each reporting unit, the period of time since a reporting unit’s last quantitative test,
the extent a reorganization or disposition changes the composition of one or more of the reporting units, and other factors to
determine whether or not to first perform a qualitative test. When performing a qualitative test, the Company assesses
numerous factors to determine whether it is more likely than not that the fair value of its reporting units are less than their
respective carrying values. Examples of qualitative factors that the Company assesses include its share price, its financial
performance, market and competitive factors in its industry, and other events specific to its reporting units. If the Company
concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company
performs a quantitative impairment test by comparing reporting unit carrying values to estimated fair values. No impairment
was identified in the Company’s annual impairment assessment in the fourth quarter of 2017 as the estimated fair values of the
respective reporting units exceeded the carrying values. In addition, there is no accumulated impairment loss through
December 31, 2017. The changes in goodwill during 2017 and 2016 were as follows:
(In millions)
Goodwill - December 31, 2015
Acquired goodwill
Goodwill - December 31, 2016
Acquired goodwill
Disposed goodwill
Foreign currency adjustments
Goodwill - December 31, 2017
Asset Impairment
Payments
Financial
Total
3,437
173
3,610
146
—
1
3,757
$
$
1,763
—
1,763
71
(3)
2
1,833
$
$
5,200
173
5,373
217
(3)
3
5,590
$
$
The Company reviews property and equipment, intangible assets and its investment in unconsolidated affiliate for impairment
whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The
Company reviews capitalized software development costs for impairment at each balance sheet date. Recoverability of property
and equipment, capitalized software development costs, and other intangible assets is assessed by comparing the carrying
amount of the asset to either the undiscounted future cash flows expected to be generated by the asset or the net realizable value
of the asset, depending on the type of asset. The Company’s investment in unconsolidated affiliate is assessed by comparing the
carrying amount of the investment to its estimated fair value and is impaired if any decline in fair value is determined to be
other than temporary. Measurement of any impairment loss is based on estimated fair value.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following at December 31:
(In millions)
Trade accounts payable
Client deposits
Settlement obligations
Accrued compensation and benefits
Other accrued expenses
Total
Income Taxes
2017
2016
$
$
80
481
379
198
245
1,383
$
$
110
409
305
184
234
1,242
Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between
financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss and
tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is
39
recorded against deferred tax assets if it is more-likely-than-not that some portion or all of the deferred tax assets will not be
realized.
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss by component, net of income taxes, consisted of the following:
(In millions)
Balance at December 31, 2016
Other comprehensive income before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Net current-period other comprehensive income
Balance at December 31, 2017
(In millions)
Balance at December 31, 2015
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Net current-period other comprehensive (loss)
income
Balance at December 31, 2016
Cash Flow
Hedges
Foreign
Currency
Translation
Other
Total
(24) $
(50) $
(2) $
4
6
10
(14) $
12
—
12
(38) $
—
—
—
(2) $
Cash Flow
Hedges
Foreign
Currency
Translation
Other
Total
(31) $
—
7
7
(24) $
(41) $
(9)
—
(9)
(50) $
(2) $
—
—
—
(2) $
$
$
$
$
(76)
16
6
22
(54)
(74)
(9)
7
(2)
(76)
Based on the amounts recorded in accumulated other comprehensive loss at December 31, 2017, the Company estimates that it
will recognize approximately $6 million in interest expense during the next twelve months related to settled interest rate hedge
contracts.
The Company has entered into foreign currency forward exchange contracts, which have been designated as cash flow hedges,
to hedge foreign currency exposure to the Indian Rupee. As of December 31, 2017 and 2016, the notional amount of these
derivatives was approximately $150 million and $86 million, respectively, and the fair value totaling approximately $8 million
and $1 million, respectively, is reported in prepaid expenses and other current assets in the consolidated balance sheet.
Net Income Per Share
Net income per share in each period is calculated using actual, unrounded amounts. Basic net income per share is computed
using the weighted-average number of common shares outstanding during the year. Diluted net income per share is computed
using the weighted-average number of common shares and common stock equivalents outstanding during the year. Common
stock equivalents consist of stock options and restricted stock units and are computed using the treasury stock method. In 2017,
2016 and 2015, the Company excluded 0.7 million, 0.8 million and 0.9 million weighted-average shares, respectively, from the
calculations of common stock equivalents for anti-dilutive stock options.
The computation of shares used in calculating basic and diluted net income per share is as follows:
(In millions)
Weighted-average common shares outstanding used for the
calculation of net income per share - basic
Common stock equivalents
Weighted-average common shares outstanding used for the
calculation of net income per share - diluted
2017
2016
2015
211.1
4.5
215.6
220.3
3.6
223.9
233.9
4.1
238.0
40
Supplemental Cash Flow Information
(In millions)
Interest paid
Income taxes paid
Treasury stock purchases settled after the balance sheet date
2017
2016
2015
$
$
160
409
5
$
147
408
10
150
306
15
2. Acquisitions and Dispositions
Acquisitions
The Company completed four acquisitions in 2017 and two acquisitions in 2016. The results of operations for all acquired
businesses have been included in the accompanying consolidated statements of income from the dates of acquisition. This
includes revenue of $123 million and $86 million in 2017 and 2016, respectively, and impacts to operating income in each year
of approximately $5 million excluding acquired intangible asset amortization. Pro forma information for the Company’s
acquisitions is not provided because they did not have a material effect on the Company’s consolidated results of operations.
On January 17, 2017, the Company completed its acquisition of Online Banking Solutions, Inc. (“OBS”), a provider of cash
management and digital business banking solutions that complement and enrich the Company’s existing solutions. On July 31,
2017, the Company acquired the assets of PCLender, LLC (“PCLender”), a leader in internet-based mortgage software and
mortgage lending technology solutions. The OBS and PCLender acquisitions are included in the Financial segment as their
products are integrated across a number of the Company’s account processing solutions and will enable the Company’s bank
and credit union clients to better serve their commercial and mortgage customers. On August 18, 2017, the Company acquired
Dovetail Group Limited (“Dovetail”), a leading provider of bank payments and liquidity management solutions. On September
1, 2017, the Company completed its acquisition of Monitise plc (“Monitise”), a provider of digital solutions that enables
innovative digital banking experiences for leading financial institutions worldwide. The Dovetail and Monitise acquisitions are
included in the Payments segment and will further enable the Company to help financial institutions around the world
transform their payments infrastructure and to expand its digital leadership, respectively.
The Company acquired these four businesses for an aggregate purchase price of $384 million, net of $33 million of acquired
cash, along with earn-out provisions estimated at a fair value of $15 million. The purchase price allocations for these
acquisitions resulted in acquired software and technology and customer related intangible assets totaling $163 million and
goodwill of $217 million. The other net assets of $19 million include $50 million of assets held for sale and approximately $20
million of deferred tax liabilities. The purchase price allocations for the OBS and PCLender acquisitions were finalized in 2017
and did not materially change from the preliminary allocations. The purchase price allocations for the Dovetail and Monitise
acquisitions were based on preliminary valuations and are subject to final adjustment. The goodwill from the 2017 acquisitions
is primarily attributed to synergies and the anticipated value created by selling the products and services that these businesses
provide into the Company’s existing client base. Approximately $70 million of the goodwill is expected to be deductible for tax
purposes. The values allocated to intangible assets are as follows:
(In millions)
Customer related intangible assets
Acquired software and technology
Gross Carrying
Amount
Weighted-Average
Useful Life
15 years
7 years
12 years
92
71
163
$
$
In the first quarter of 2016, the Company acquired the Convenience Pay Services business of Hewlett Packard Enterprise
Company and completed its purchase of the Community Financial Services business of ACI Worldwide, Inc. These acquisitions
expand the Company’s biller solution offerings and enhance its suite of digital banking and payments solutions, and are
included in the Payments segment.
The Company acquired these two businesses for an aggregate purchase price of $265 million. The final purchase price
allocations for these acquisitions resulted in technology and customer intangible assets totaling approximately $80 million,
goodwill of $173 million, and other identifiable net assets of approximately $12 million consisting primarily of accounts
receivable. The goodwill from these transactions is deductible for tax purposes and is primarily attributed to synergies and
anticipated revenue and earnings growth associated with the products and services that these businesses provide.
41
Disposition
On May 11, 2017, the Company sold its Australian item processing business, which was reported within the Financial segment,
for approximately $17 million, consisting of $19 million in cash received at closing less a closing adjustment of $2 million
finalized in the fourth quarter of 2017. During 2017, the Company recognized a gain on the sale of $10 million, with the related
tax expense of $5 million recorded through the income tax provision, in the consolidated statements of income.
3. Discontinued Operations
Income from discontinued operations in 2017 included a litigation settlement related to a prior disposition of $19 million, net of
income tax of $7 million, and earnings related to an acquired business held for sale as described below.
On December 18, 2017, a definitive agreement was executed to sell the retail voucher business, MyVoucherCodes, acquired as
part of the Company’s acquisition of Monitise in September 2017. The Company completed the sale on January 10, 2018 for
proceeds of £37 million ($50 million). The corresponding assets of $50 million, consisting primarily of goodwill, were
presented as held for sale in the Company’s consolidated balance sheet at December 31, 2017 and the corresponding earnings
during the period were presented within discontinued operations since the business was never considered part of the Company’s
ongoing operations.
4. 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. The Company reports its share of StoneRiver’s net income as income from investment in unconsolidated affiliate,
with the related tax expense reported within the income tax provision, in the consolidated statements of income. In 2017, 2016
and 2015, the Company received cash dividends, funded from capital transactions, from StoneRiver of $45 million,
$151 million and $36 million, respectively. The dividends, in their entirety, represented returns on the Company’s investment
and are reported in cash flows from operating activities. The Company’s investment in StoneRiver was $14 million at
December 31, 2016 and is reported within other long-term assets in the consolidated balance sheet.
During the first quarter of 2017, StoneRiver recognized a gain on the sale of a business. The Company’s pre-tax share of the
gain was $26 million, with related tax expense of $9 million. During 2017, the Company received cash dividends of
$45 million from StoneRiver, which were funded from recent sale transactions and recorded as reductions in the Company’s
investment in StoneRiver. These dividends exceeded the Company’s investment carrying amount, resulting in the reduction of
its investment balance to zero, with the excess cash dividend of $6 million recorded as income, and related tax expense of $2
million, in 2017.
During the first quarter of 2016, StoneRiver recognized a gain on the sale of a business interest in which the Company’s pre-tax
share of this gain was $190 million. During the first quarter of 2016, the Company also received cash dividends of $140 million
from StoneRiver, which were funded from the sale transaction and recorded as reductions in the Company’s investment in
StoneRiver. In conjunction with this activity, the Company evaluated its equity method investment in StoneRiver for its ability
to recover the remaining carrying amount of such investment. Utilizing a discounted cash flow analysis (level 3 of the fair
value hierarchy) to arrive at a measure of the investment’s fair value, the Company recognized an impairment loss of
$44 million. The Company’s pre-tax share of the gain, net of the impairment loss, was $146 million, with related tax expense of
$54 million. During 2015, StoneRiver recognized a net gain on the sale of a subsidiary business. The Company’s pre-tax share
of the net gain and related expenses was $29 million, with related tax expense of $13 million.
42
5. Long-Term Debt
The Company’s long-term debt, net of discounts and debt issuance costs, consisted of the following at December 31:
(In millions)
Revolving credit facility
Term loan
2.7% senior notes due 2020
4.625% senior notes due 2020
4.75% senior notes due 2021
3.5% senior notes due 2022
3.85% senior notes due 2025
Other borrowings
Total debt
Less: current maturities
Long-term debt
2017
2016
$
$
1,068
540
846
449
398
696
894
9
4,900
(3)
4,897
$
$
647
629
845
448
398
695
893
7
4,562
(95)
4,467
The estimated fair value of total debt was $5.0 billion and $4.7 billion at December 31, 2017 and 2016, respectively. The
Company was in compliance with all financial debt covenants during 2017. Annual maturities of the Company’s total debt were
as follows at December 31, 2017:
(In millions)
Year ending December 31,
2018
2019
2020
2021
2022
Thereafter
Total
Revolving Credit Facility
$
$
3
2
2,905
400
696
894
4,900
The Company maintains a $2.0 billion revolving credit agreement with a syndicate of banks that matures in April 2020.
Borrowings under the revolving credit facility bear interest at a variable rate based on LIBOR or on a base rate, plus a specified
margin based on the Company’s long-term debt rating in effect from time to time. The variable interest rate on the revolving
credit facility borrowings was 2.59% at December 31, 2017. There are no significant commitment fees and no compensating
balance requirements. The revolving credit facility 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.
Term Loan
The Company maintains a term loan with a syndicate of banks that matures in October 2018 and bears interest at a variable rate
based on LIBOR or on a base rate, plus a specified margin based on the Company’s long-term debt rating in effect from time to
time. The variable interest rate on the term loan borrowings was 2.82% at December 31, 2017, and the outstanding principal
balance of $540 million is due at maturity. At December 31, 2017, the term loan was classified in the consolidated balance
sheet as long-term and within the debt maturity schedule above as maturing in April 2020, the date that the Company’s
revolving credit facility expires, as the Company has the intent to refinance this debt on a long-term basis and the ability to do
so under its revolving credit facility. The term loan facility contains various restrictions and covenants substantially similar to
those contained in the revolving credit facility described above.
43
Senior Notes
In May 2015, the Company completed an offering of $1.75 billion of senior notes comprised of $850 million aggregate
principal amount of 2.7% senior notes due in June 2020 and $900 million aggregate principal amount of 3.85% senior notes
due in June 2025. The notes pay interest at the stated rates semi-annually on June 1 and December 1, which commenced on
December 1, 2015. The Company’s 4.625% senior notes due in October 2020 and 3.5% senior notes due in October 2022 pay
interest at the stated rates on April 1 and October 1 of each year. The Company’s 4.75% senior notes due in June 2021 pay
interest at the stated rate on June 15 and December 15 of each year. The interest rates applicable to the senior notes are subject
to an increase of up to two percent in the event that the Company’s credit rating is downgraded below investment grade. The
indentures governing the senior notes contain covenants that, among other matters, limit (i) the Company’s ability to
consolidate or merge into, or convey, transfer or lease all or substantially all of its properties and assets to, another person;
(ii) the Company’s and certain of its subsidiaries’ ability to create or assume liens, and (iii) the Company’s and certain of its
subsidiaries’ ability to engage in sale and leaseback transactions.
In May 2015, the Company used the net proceeds from the offering described above to redeem its $600 million aggregate
principal amount of 3.125% senior notes due in June 2016 and $500 million aggregate principal amount of 6.8% senior notes
due in November 2017. The Company recorded a pre-tax loss on early debt extinguishment of $85 million related to make-
whole payments and other costs associated with this redemption. In addition, the Company paid scheduled December 2015 and
December 2016 principal payments on the term loan totaling $180 million and repaid, at that time, outstanding borrowings
under the revolving credit facility. The remaining net proceeds from the offering were used for general corporate purposes.
Debt Issuance Costs
Debt issuance costs are amortized as a component of interest expense over the term of the underlying debt using the effective
interest method. Debt issuance costs related to the Company’s term loan and senior notes totaled $14 million and $17 million at
December 31, 2017 and 2016, respectively, and are reported as a direct reduction of the related debt instrument in the
consolidated balance sheets. Debt issuance costs related to the Company’s revolving credit facility are reported in other long-
term assets in the consolidated balance sheets and totaled $3 million and $5 million at December 31, 2017 and 2016,
respectively.
6. Income Taxes
Substantially all of the Company’s pre-tax earnings are derived from domestic operations in all periods presented. A
reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate for continuing operations is as
follows:
Statutory federal income tax rate
State income taxes, net of federal effect
Unconsolidated affiliate tax
Tax benefit due to federal tax reform
Excess tax benefit from share-based awards
Domestic production activities deduction
Other, net
Effective income tax rate
2017
2016
2015
35.0 %
2.3 %
0.9 %
(20.3)%
(3.6)%
(2.0)%
(0.7)%
11.6 %
35.0 %
2.9 %
4.2 %
— %
— %
(3.0)%
(0.5)%
38.6 %
35.0 %
1.8 %
1.1 %
— %
— %
(2.1)%
(0.1)%
35.7 %
44
The income tax provision (benefit) for continuing operations was as follows:
(In millions)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Income tax provision
2017
2016
2015
$
$
342
44
19
405
(250)
3
—
(247)
158
$
$
402
53
16
471
21
5
(5)
21
492
$
$
Significant components of deferred tax assets and liabilities consisted of the following at December 31:
(In millions)
Accrued expenses
Interest rate hedge contracts
Share-based compensation
Net operating loss and credit carry-forwards
Deferred revenue
Other
Subtotal
Valuation allowance
Total deferred tax assets
Capitalized software development costs
Intangible assets
Property and equipment
Other
Total deferred tax liabilities
Total
2017
2016
$
$
$
39
9
40
131
17
7
243
(103)
140
(117)
(455)
(49)
(48)
(669)
(529) $
315
31
11
357
22
(2)
—
20
377
48
16
57
85
26
15
247
(35)
212
(156)
(681)
(67)
(44)
(948)
(736)
The valuation allowance increased by $68 million, from $35 million at December 31, 2016 to $103 million at December 31,
2017. Of the increase in 2017, $54 million related to net operating losses of newly acquired companies which had no impact on
the income tax provision, and $14 million was recorded to the income tax provision.
Deferred tax assets and liabilities are reported in the consolidated balance sheets as follows at December 31:
(In millions)
Noncurrent assets
Noncurrent liabilities
Total
2017
2016
$
23
(552)
(529) $
26
(762)
(736)
$
$
Noncurrent deferred tax assets are included in other long-term assets at December 31, 2017 and 2016.
45
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and
Jobs Act (the “Tax Act”). The Tax Act significantly revised the U.S. corporate income tax code by, among other things,
lowering the U.S. federal corporate tax rate from 35 percent to 21 percent beginning in 2018 and requiring companies to pay a
one-time transition tax on certain un-repatriated earnings of foreign subsidiaries. The Company has recorded a net tax benefit
of $275 million as a result of the Tax Act; however, the Company’s accounting for certain elements of the Tax Act continues to
be evaluated. The Company was able to make reasonable estimates of certain effects and has recorded provisional adjustments
as follows:
Reduction of U.S. Federal Corporate Tax Rate and Other Provisions – The Tax Act reduces the U.S. federal corporate
tax rate to 21 percent, effective January 1, 2018. The Company has recorded a provisional decrease of $270 million to
the net deferred tax liability, with a corresponding adjustment to deferred income tax benefit, for the year ended
December 31, 2017. While the Company was able to make a reasonable estimate of the impact of the corporate rate
reduction, it may be affected by other analyses related to the Tax Act, including, but not limited to, the Company’s
calculation of deemed repatriation of deferred foreign income and the state tax effect of adjustments made to federal
temporary differences. The Company has also recorded a provisional current income tax benefit of $5 million for the
year ended December 31, 2017 related to other provisions of the Tax Act.
Deemed Repatriation Transition Tax – The Deemed Repatriation Transition Tax (“Transition Tax”) is a tax on
previously untaxed accumulated and current earnings and profits of certain of our foreign subsidiaries. The Company
was able to make a reasonable estimate of the Transition Tax and has recorded zero as its provisional Transition Tax
obligation. The Company is continuing to gather additional information to more precisely compute the amount of
expense related to the Transition Tax enactment.
The Company was not able to make reasonable estimates, and has not recorded provisional adjustments, for the following
elements of the Tax Act. However, the potential impacts would not be material to the Company’s annual income from
continuing operations or financial position.
Global Intangible Low-Taxed Income (“GILTI”) – The Tax Act creates a new requirement that certain income, such as
GILTI, earned by a controlled foreign corporation must be included in the gross income of its U.S. shareholder.
Because of the complexity of the new GILTI tax rules, the Company is not yet able to reasonably estimate the effect of
this provision of the Tax Act and is continuing to evaluate this provision of the Tax Act and the application of
applicable accounting guidance. Therefore, the Company has not made any adjustments in its consolidated financial
statements and has not determined whether to record deferred taxes on GILTI.
Repatriation Intentions and Impacts – The Company is currently analyzing its global working capital and cash
requirements and the potential tax liabilities attributable to a repatriation, but has yet to determine whether it plans to
change its prior assertion. Accordingly, the Company has not recorded any deferred taxes attributable to investments in
foreign subsidiaries for which it is permanently reinvested. The Company will record the tax effects of any change in
its prior assertion in the period that it completes its analysis and is able to make a reasonable estimate.
Unrecognized tax benefits were as follows:
(In millions)
Unrecognized tax benefits - Beginning of year
Increases for tax positions taken during the current year
Increases for tax positions taken in prior years
Decreases for tax positions taken in prior years
Decreases for settlements
Lapse of the statute of limitations
Unrecognized tax benefits - End of year
$
$
2017
2016
2015
45
11
2
(15)
(1)
—
42
$
$
54
9
1
(15)
(2)
(2)
45
$
$
55
10
—
(10)
(1)
—
54
At December 31, 2017, unrecognized tax benefits of $37 million, net of federal and state benefits, would affect the effective
income tax rate from continuing operations if recognized. In 2018, reductions to unrecognized tax benefits for decreases in tax
positions taken in prior years, settlements and the lapse of statutes of limitations are estimated to total approximately
$10 million. The Company classifies interest expense and penalties related to income taxes as components of its income tax
provision. The income tax provision from continuing operations included interest expense and penalties on unrecognized tax
benefits of less than $1 million in each of 2017, 2016 and 2015. Accrued interest expense and penalties related to unrecognized
tax benefits totaled $3 million and $2 million at December 31, 2017 and 2016, respectively.
46
The Company’s federal tax returns for 2016 and 2017, and tax returns in certain states and foreign jurisdictions for 2008
through 2017 remain subject to examination by taxing authorities. At December 31, 2017, the Company had federal net
operating loss carry-forwards of $36 million, which expire in 2018 through 2037, state net operating loss carry-forwards of
$579 million, which expire in 2018 through 2037, and foreign net operating loss carry-forwards of $486 million, $47 million of
which expire in 2021 through 2037, and the remainder of which do not expire.
7. Employee Stock and Savings Plans
Stock Plans
The Company recognizes the fair value of share-based compensation awards granted to employees in cost of processing and
services, cost of product, and selling, general and administrative expense in its consolidated statements of income.
The Company’s share-based compensation primarily consists of the following:
Stock Options – The Company grants stock options to employees and non-employee directors at exercise prices equal
to the fair market value of the Company’s stock on the dates of grant, which are typically in the first quarter of the
year. Stock options generally vest over a three-year period beginning on the first anniversary of the grant. All stock
options expire ten years from the date of the award. The Company recognizes compensation expense for the fair value
of the stock options over the requisite service period of the stock option award.
Restricted Stock Units – The Company awards restricted stock units to employees and non-employee directors. The
Company recognizes compensation expense for restricted stock units based on the market price of the common stock
on the date of award over the period during which the awards vest. Restricted stock units generally vest over a three-
year period beginning on the second anniversary of the award.
Performance Share Units – The Company awards performance share units to employees. The number of shares issued
at the end of the performance period is determined by the level of achievement of pre-determined earnings and
revenue growth performance goals. The Company recognizes the expense, which is determined by utilizing a
probability assessment that the performance goals will be achieved, ratably over the requisite performance period of
the award.
Employee Stock Purchase Plan – The Company maintains an employee stock purchase plan that allows eligible
employees to purchase a limited number of shares of common stock each quarter through payroll deductions at 85% of
the closing price of the Company’s common stock on the last business day of each calendar quarter. The Company
recognizes compensation expense related to the 15% discount on the purchase date.
Share-based compensation expense was $63 million in 2017, $68 million in 2016 and $65 million in 2015. Share-based
compensation in 2017 and 2016 includes expense recognized on performance share units as management views the
performance goals as probable of attainment. The income tax benefits related to share-based compensation totaled $21 million,
$23 million and $22 million in 2017, 2016 and 2015, respectively. At December 31, 2017, the total remaining unrecognized
compensation cost for unvested stock options, restricted stock units and performance share units, net of estimated forfeitures, of
$64 million is expected to be recognized over a weighted-average period of 2.3 years.
The weighted-average estimated fair value of stock options granted during 2017, 2016 and 2015 was $37.53, $31.47 and
$25.51 per share, respectively. The fair values of stock options granted were estimated on the date of grant using a binomial
option-pricing model with the following assumptions:
Expected life (in years)
Average risk-free interest rate
Expected volatility
Expected dividend yield
2017
2016
2015
6.3
2.2%
28.9%
0%
6.4
1.9%
29.3%
0%
6.4
1.9%
29.2%
0%
The Company determined the expected life of stock options using historical data adjusted for known factors that could alter
historical exercise behavior. The risk-free interest rate is based on the U.S. treasury yield curve in effect as of the grant date.
Expected volatility is determined using weighted-average implied market volatility combined with historical volatility. The
Company believes that a blend of historical volatility and implied volatility better reflects future market conditions and better
indicates expected volatility than purely historical volatility.
47
A summary of stock option activity is as follows:
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
(In millions)
Shares
(In thousands)
Stock options outstanding - December 31, 2016
Granted
Forfeited
Exercised
Stock options outstanding - December 31, 2017
Stock options exercisable - December 31, 2017
7,743
$
717
(108)
(1,457)
6,895
5,249
$
$
48.03
114.76
95.02
38.07
56.34
42.38
5.3
4.3
$
$
516
466
A summary of restricted stock and performance share unit activity is as follows:
Restricted Stock Units
Performance Share Units
Units - December 31, 2016
Granted
Forfeited
Vested
Units - December 31, 2017
Shares
(In thousands)
1,264
333
(92)
(534)
971
$
$
Weighted-
Average
Grant Date
Fair Value
66.04
116.70
85.52
52.83
88.70
Shares
(In thousands)
149
55
(3)
—
201
The table below presents additional information related to stock option and restricted stock unit activity:
(In millions)
Total intrinsic value of stock options exercised
Fair value of restricted stock units vested
Income tax benefit from stock options exercised and restricted
stock units vested
Cash received from stock options exercised
$
2017
2016
$
116
61
66
36
113
58
62
39
$
$
$
Weighted-
Average
Grant Date
Fair Value
100.66
113.82
96.65
—
104.32
2015
123
41
61
35
As of December 31, 2017, 18.5 million share-based awards were available for grant under the Fiserv, Inc. 2007 Omnibus
Incentive Plan. Under its employee stock purchase plan, the Company issued 0.4 million shares in 2017 and 0.5 million shares
in each of 2016 and 2015. As of December 31, 2017, there were 11.0 million shares available for issuance under the employee
stock purchase plan. The number of shares remaining available for future issuance under the employee stock purchase plan is
subject to an annual increase on the first day of each fiscal year equal to the lesser of (i) 2.0 million shares, (ii) 1% of the shares
of the Company’s common stock outstanding on such date or (iii) a lesser amount determined by the Company’s board of
directors.
Employee Savings Plans
The Company and its subsidiaries have defined contribution savings plans covering substantially all employees. Under the
plans, eligible participants may elect to contribute a specified percentage of their salaries and the Company makes matching
contributions, each subject to certain limitations. Expenses for company contributions under these plans totaled $44 million,
$42 million and $40 million in 2017, 2016 and 2015, respectively.
48
8. Leases, Commitments and Contingencies
Leases
The Company leases certain facilities and equipment under operating leases. Most leases contain renewal options for varying
periods. Future minimum rental payments on operating leases with initial non-cancellable lease terms in excess of one year
were due as follows at December 31, 2017:
(In millions)
Year ending December 31,
2018
2019
2020
2021
2022
Thereafter
Total
$
$
109
81
52
37
30
101
410
Rent expense for all operating leases was $126 million, $117 million and $115 million during 2017, 2016 and 2015,
respectively.
Commitments and Contingencies
Litigation
In the normal course of business, the Company or its subsidiaries are named as defendants in lawsuits in which claims are
asserted against the Company. 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 the Company’s consolidated financial statements.
Electronic Payments Transactions
In connection with the Company’s processing of electronic payments transactions, funds received from subscribers are invested
from the time the Company collects the funds until payments are made to the applicable recipients. These subscriber funds are
invested in short-term, highly liquid investments. Subscriber funds, which are not included in the Company’s consolidated
balance sheets, can fluctuate significantly based on consumer bill payment and debit card activity and totaled approximately
$2.1 billion at December 31, 2017.
Indemnifications and Warranties
Subject to limitations and exclusions, the Company may indemnify its clients from certain costs resulting from claims of
patent, copyright or trademark infringement associated with its clients’ use of the Company’s products or services. The
Company may also warrant to clients that its products and services will operate substantially in accordance with identified
specifications. From time to time, in connection with sales of businesses, the Company agrees to indemnify the buyers for
liabilities associated with the businesses that are sold. Payments, net of recoveries, under such indemnification or warranty
provisions were not material to the Company’s consolidated results of operations or financial position.
49
9. 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, internet and mobile banking software and services,
account-to-account transfers, person-to-person payment services, debit and credit card processing and services, payments
infrastructure services, and other electronic payments software and services. The businesses in this segment also provide card
and print personalization services, investment account processing services for separately managed accounts, and fraud and risk
management products and services. The Financial segment provides depository institutions and leasing and finance companies
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.
Corporate and Other primarily consists of unallocated corporate expenses including share-based compensation, amortization of
acquisition-related intangible assets, intercompany eliminations and other costs that are not considered when management
evaluates segment performance.
(In millions)
2017
Processing and services revenue
Product revenue
Total revenue
Operating income
Total assets 1
Capital expenditures
Depreciation and amortization expense
2016
Processing and services revenue
Product revenue
Total revenue
Operating income
Total assets
Capital expenditures
Depreciation and amortization expense
2015
Processing and services revenue
Product revenue
Total revenue
Operating income
Total assets
Capital expenditures
Depreciation and amortization expense
Payments
Financial
Corporate
and Other
Total
$
$
$
$
$
$
2,476
758
3,234
1,034
6,596
182
167
2,334
756
3,090
943
6,143
161
138
2,159
703
2,862
840
5,833
230
119
$
$
$
2,347
183
2,530
849
3,309
95
83
2,285
192
2,477
823
3,287
125
89
2,256
187
2,443
826
3,242
119
76
$
$
10
(78)
(68)
(351)
384
10
183
6
(68)
(62)
(321)
313
4
184
(4) $
(47)
(51)
(355)
265
10
222
4,833
863
5,696
1,532
10,289
287
433
4,625
880
5,505
1,445
9,743
290
411
4,411
843
5,254
1,311
9,340
359
417
1 Assets held for sale of $50 million at December 31, 2017 related to discontinued operations have been included within
Corporate and Other.
Revenue from clients outside the United States comprised approximately 5% of total revenue in each of 2017 and 2016 and 6%
in 2015.
50
10. Quarterly Financial Data (unaudited)
Quarterly financial data for 2017 and 2016 was as follows:
(In millions, except per share data)
2017
Total revenue
Cost of processing and services
Cost of product
Selling, general and administrative expenses
Gain on sale of business
Total expenses
Operating income
Income from continuing operations (1)
Net income (1)
Comprehensive income
Net income per share - continuing operations: (2)
Basic
Diluted
2016
Total revenue
Cost of processing and services
Cost of product
Selling, general and administrative expenses
Total expenses
Operating income
Income from continuing operations (3)
Net income (3)
Comprehensive income
Net income per share - continuing operations: (2)
Basic
Diluted
_____
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full
Year
$
1,394
$
1,386
$
1,400
$
1,516
$
570
182
277
—
1,029
365
247
247
256
573
175
276
(10)
1,014
372
221
221
229
572
174
284
—
576
202
313
—
1,030
1,091
370
232
232
236
425
532
546
547
5,696
2,291
733
1,150
(10)
4,164
1,532
1,232
1,246
1,268
$
$
$
1.15
1.13
$
$
1.05
1.02
$
$
1.10
1.08
$
$
2.56
2.50
$
$
5.84
5.71
1,331
$
1,363
$
1,380
$
1,431
$
553
181
258
992
339
289
289
294
547
180
274
551
186
274
561
200
295
1,001
1,011
1,056
362
212
212
207
369
214
214
219
375
215
215
208
5,505
2,212
747
1,101
4,060
1,445
930
930
928
$
$
1.30
1.27
$
$
0.95
0.94
$
$
0.98
0.96
$
$
0.99
0.98
$
$
4.22
4.15
(1) During the fourth quarter of 2017, the Company recognized discrete income tax benefits of $275 million associated with
the Tax Cuts and Jobs Act enacted in December 2017. Refer to Note 6 for more information regarding the Company’s
income taxes.
(2) Net income per share - continuing operations in each period is calculated using actual, unrounded amounts.
(3) During the first quarter of 2016, the Company recognized $146 million associated with its pre-tax share of a net gain on
the sale of a business interest by StoneRiver, with related tax expense of $54 million. Refer to Note 4 for more information
regarding the Company’s investment in StoneRiver.
51
11. Subsequent Events
On February 7, 2018, the Company announced a definitive agreement to sell a 55% interest of its lending solutions business,
which is reported within the Financial segment. The Company will retain a 45% interest in the joint venture, which will include
all of its automotive loan origination and servicing products, as well as the LoanServ platform. The transaction, which is
subject to customary closing conditions, is targeted to close in the first quarter of 2018.
On February 21, 2018, the Company’s board of directors declared a two-for-one stock split of the Company’s common stock
and a proportionate increase in the number of its authorized shares of common stock. The additional shares will be distributed
on March 19, 2018 to shareholders of record at the close of business on March 5, 2018. The Company's common stock will
begin trading at the split-adjusted price on March 20, 2018.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Fiserv, Inc:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Fiserv, Inc. and subsidiaries (the "Company") as of
December 31, 2017 and 2016, the related consolidated statements of income, comprehensive income, shareholders’ equity, and
cash flows, for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as
the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States
of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 22, 2018 expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
February 22, 2018
We have served as the Company’s auditor since 1985.
52
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
(a) Disclosure Controls and Procedures
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 Securities
Exchange Act of 1934). Based on this evaluation, our chief executive officer and chief financial officer concluded that our
disclosure controls and procedures were effective as of December 31, 2017.
(b) Management Report on Internal Control Over Financial Reporting
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting
is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate
because of changes in conditions.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control – Integrated Framework (2013). Based on management’s assessment, our
management believes that, as of December 31, 2017, our internal control over financial reporting was effective based on
those criteria.
Our independent registered public accounting firm has issued their attestation report on our internal control over financial
reporting. The report is included below under the heading “Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting.”
(c) Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended December 31,
2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
(d) Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
Our independent registered public accounting firm, Deloitte & Touche LLP, assessed the effectiveness of our internal
control over financial reporting and has issued their report as set forth below.
53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Fiserv, Inc.:
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Fiserv, Inc. and subsidiaries (the “Company”) as of December
31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal
Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our
report dated February 22, 2018, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
February 22, 2018
54
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Except for information concerning our executive officers included in Part I of this Form 10-K under the caption “Executive
Officers of the Registrant,” which is incorporated by reference herein, and the information regarding our Code of Conduct
below, the information required by Item 10 is incorporated by reference to the information set forth under the captions “Our
Board of Directors,” “Nominees for Election,” “Corporate Governance – Committees of the Board of Directors – Audit
Committee,” “Corporate Governance – Nominations of Directors,” and “Section 16(a) Beneficial Ownership Reporting
Compliance” in our definitive proxy statement for our 2018 annual meeting of shareholders, which will be filed with the
Securities and Exchange Commission no later than 120 days after the close of the fiscal year ended December 31, 2017.
Our board of directors has adopted a Code of Conduct and Business Ethics (“Code of Conduct”) that applies to all of our
directors and employees, including our chief executive officer, chief financial officer, chief accounting officer and other
persons performing similar functions. We have posted a copy of our Code of Conduct on the “About – For Investors –
Corporate Governance – Governance Documents” section of our website at www.fiserv.com. We intend to satisfy the disclosure
requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, the Code of Conduct by posting such
information on the “About – For Investors” section of our website at www.fiserv.com. We are not including the information
contained on our website as part of, or incorporating it by reference into, this report.
Item 11. Executive Compensation
The information required by Item 11 is incorporated by reference to the information set forth under the captions “Director
Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Compensation Committee
Interlocks and Insider Participation,” and “Executive Compensation” in our definitive proxy statement for our 2018 annual
meeting of shareholders, which will be filed with the Securities and Exchange Commission no later than 120 days after the
close of the fiscal year ended December 31, 2017.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in our
definitive proxy statement for our 2018 annual meeting of shareholders, which will be filed with the Securities and Exchange
Commission no later than 120 days after the close of the fiscal year ended December 31, 2017, is incorporated by reference
herein.
55
The table below sets forth information with respect to compensation plans under which equity securities are authorized for
issuance as of December 31, 2017.
Equity Compensation Plan Information
(a)
(b)
Number of shares
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
(c)
Number of shares
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
7,162,255 (2)
N/A
7,162,255
$56.34 (3)
N/A
$56.34 (3)
18,480,919 (4)
N/A
18,480,919
Plan Category
Equity compensation plans approved by our
shareholders (1)
Equity compensation plans not approved by our
shareholders
Total
(1) Columns (a) and (c) of the table above do not include 904,600 unvested restricted stock units outstanding under the Fiserv,
Inc. 2007 Omnibus Incentive Plan (the “Incentive Plan”) or 11,027,712 shares authorized for issuance under the Fiserv,
Inc. Amended and Restated Employee Stock Purchase Plan. The number of shares remaining available for future issuance
under the employee stock purchase plan is subject to an annual increase on the first day of each fiscal year equal to the
lesser of (i) 2,000,000 shares, (ii) 1% of the shares of our common stock outstanding on such date or (iii) a lesser amount
determined by our board of directors.
(2) Consists of options outstanding under the Incentive Plan as well as 200,839 shares subject to performance share units at the
target award level under the Incentive Plan and 66,160 shares subject to non-employee director deferred compensation
notional units under the Incentive Plan.
(3) Represents the weighted average exercise price of outstanding options and does not take into account outstanding
performance share units or non-employee director deferred compensation notional units.
(4) Reflects the number of shares available for future issuance under the Incentive Plan.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 is incorporated by reference to the information set forth under the captions “Corporate
Governance – Director Independence,” and “Corporate Governance – Review, Approval or Ratification of Transactions with
Related Persons,” in our definitive proxy statement for our 2018 annual meeting of shareholders, which will be filed with the
Securities and Exchange Commission no later than 120 days after the close of the fiscal year ended December 31, 2017.
Item 14. Principal Accounting Fees and Services
The information required by Item 14 is incorporated by reference to the information set forth under the captions “Independent
Registered Public Accounting Firm and Fees” and “Audit Committee Pre-Approval Policy” in our definitive proxy statement
for our 2018 annual meeting of shareholders, which will be filed with the Securities and Exchange Commission no later than
120 days after the close of the fiscal year ended December 31, 2017.
Item 15. Exhibits, Financial Statement Schedules
Financial Statement Schedules
PART IV
Financial statement schedules have been omitted because they are not applicable or the required information is shown in the
consolidated financial statements or accompanying notes.
Exhibits
The exhibits listed in the accompanying exhibit index are filed as part of this Annual Report on Form 10-K.
56
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
EXHIBIT INDEX
Exhibit Description
Restated Articles of Incorporation (1)
Amended and Restated By-laws (2)
Second Amended and Restated Credit Agreement, dated as of April 30, 2015, among Fiserv, Inc. and
the financial institutions party thereto (3)
Loan Agreement, dated as of October 25, 2013, among Fiserv, Inc. and the financial institutions party
thereto (4)
Amendment No. 1 to Loan Agreement, dated as of April 30, 2015, among Fiserv, Inc. and the financial
institutions party thereto (3)
Indenture, dated as of November 20, 2007, by and among Fiserv, Inc., the guarantors named therein
and U.S. Bank National Association (5)
Sixth Supplemental Indenture, dated as of September 21, 2010, among Fiserv, Inc., the guarantors
named therein and U.S. Bank National Association (6)
Eighth Supplemental Indenture, dated as of June 14, 2011, among Fiserv, Inc., the guarantors named
therein and U.S. Bank National Association (7)
Tenth Supplemental Indenture, dated as of September 25, 2012, among Fiserv, Inc., the guarantors
named therein and U.S. Bank National Association (8)
Twelfth Supplemental Indenture, dated as of May 22, 2015, between Fiserv, Inc. and U.S. Bank
National Association (9)
Thirteenth Supplemental Indenture, dated as of May 22, 2015, between Fiserv, Inc. and U.S. Bank
National Association (9)
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company agrees to furnish to the Securities and
Exchange Commission, upon request, any instrument defining the rights of holders of long-term debt
that is not filed as an exhibit to this Form 10-K.
Fiserv, Inc. Amended and Restated 2007 Omnibus Incentive Plan*
Fiserv, Inc. Amended and Restated 2007 Omnibus Incentive Plan Forms of Award Agreements
- Form of Restricted Stock Unit Agreement (Non Employee Director) (10)*
- Form of Restricted Stock Unit Agreement (Employee-PR) (11)*
- Form of Amendment to Restricted Stock Unit Agreement (Employee-PR) (12)*
- Form of Restricted Stock Unit Agreement (Employee-E) (11)*
- Form of Restricted Stock Unit Agreement (Employee-N) (11)*
- Form of Non-Qualified Stock Option Agreement (Non-Employee Director-LE) (10)*
- Form of First Amendment to Non-Qualified Stock Option Agreement (Non-Employee Director - LE)
(13)*
- Form of Non-Qualified Stock Option Agreement (Non-Employee Director - EE) (13)*
- Form of Second Amendment to Non-Qualified Stock Option Agreement (Non-Employee Director -
LE/EE) (14)*
- Form of Non-Qualified Stock Option Agreement (Non-Employee Director - N) (14)*
- Form of Stock Option Agreement (Employee-F) (11)*
- Form of Amendment to Stock Option Agreement (Employee-F) (12)*
- Form of Stock Option Agreement (Employee-E) (11)*
- Form of Stock Option Agreement (Employee-N) (11)*
- Form of Performance Share Unit Agreement (Employee-PR) (11)*
- Form of Performance Share Unit Agreement (Employee-E) (11)*
- Form of Performance Share Unit Agreement (Employee-N) (11)*
Amended and Restated Employment Agreement, dated December 22, 2008, between Fiserv, Inc. and
Jeffery W. Yabuki (15)*
Amendment No. 1 to Amended and Restated Employment Agreement, dated February 26, 2009,
between Fiserv, Inc. and Jeffery W. Yabuki (16)*
Amendment No. 2 to Amended and Restated Employment Agreement, dated December 30, 2009,
between Fiserv, Inc. and Jeffery W. Yabuki (17)*
57
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
21.1
23.1
31.1
31.2
Amendment No. 3 to Amended and Restated Employment Agreement, dated March 29, 2016, between
Fiserv, Inc. and Jeffery W. Yabuki (18)*
Amended and Restated Key Executive Employment and Severance Agreement, dated December 22,
2008, between Fiserv, Inc. and Jeffery W. Yabuki (15)*
Amendment No. 1 to Amended and Restated Key Executive Employment and Severance Agreement,
dated March 29, 2016, between Fiserv, Inc. and Jeffery W. Yabuki (18)*
Employment Agreement, dated January 3, 2011, between Fiserv, Inc. and Mark A. Ernst (19)*
Employment Agreement, dated February 23, 2010, between Fiserv, Inc. and Lynn S. McCreary (20)*
Amendment No. 1 to Employment Agreement, dated July 1, 2013, between Fiserv, Inc. and Lynn S.
McCreary (20)*
Employment Agreement, dated November 7, 2013, between Fiserv, Inc. and Byron C. Vielehr (21)*
Letter Agreement, dated October 22, 2014, between Fiserv, Inc. and Kevin J. Schultz (12)*
Form of Amended and Restated Key Executive Employment and Severance Agreement, between
Fiserv, Inc. and each of Mark Ernst, Lynn McCreary, Kevin Schultz and Byron Vielehr (15)*
Letter Agreement, effective February 10, 2016, between Fiserv, Inc. and Robert W. Hau (22)*
Form of Key Executive Employment and Severance Agreement between Fiserv, Inc. and Robert W.
Hau (23)*
Letter Agreement, effective October 31, 2016, between Fiserv, Inc. and Devin B. McGranahan (11)*
Key Executive Employment and Severance Agreement, dated October 31, 2016, between Fiserv, Inc.
and Devin B. McGranahan (11)*
Fiserv, Inc. Non-Qualified Deferred Compensation Plan (14)*
Form of Non-Employee Director Indemnity Agreement (24)
Fiserv, Inc. Non-Employee Director Deferred Compensation Plan (14)*
Non-Employee Director Compensation Schedule (25)*
Subsidiaries of Fiserv, Inc.
Consent of Independent Registered Public Accounting Firm
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
XBRL Instance Document
32.1
101.INS**
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
_____
*
This exhibit is a management contract or compensatory plan or arrangement.
**
(1)
(2)
Filed with this Annual Report on Form 10-K are the following documents formatted in XBRL (Extensible Business
Reporting Language): (i) the Consolidated Statements of Income for the years ended December 31, 2017, 2016, and
2015, (ii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016, and
2015, (iii) the Consolidated Balance Sheets at December 31, 2017 and 2016, (iv) the Consolidated Statements of
Shareholders’ Equity for the years ended December 31, 2017, 2016, and 2015, (v) the Consolidated Statements of Cash
Flows for the years ended December 31, 2017, 2016, and 2015, and (vi) Notes to Consolidated Financial Statements.
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on December 3, 2013,
and incorporated herein by reference.
Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed on February 19, 2016, and
incorporated herein by reference.
58
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on May 5, 2015, and incorporated
herein by reference.
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on October 29, 2013, and
incorporated herein by reference.
Previously filed as an exhibit to the Company’s Registration Statement on Form S-3 (File No. 333 147309) filed on
November 13, 2007, and incorporated herein by reference.
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 21, 2010, and
incorporated herein by reference.
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 14, 2011, and incorporated
herein by reference.
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 25, 2012,
and incorporated herein by reference.
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on May 22, 2015, and incorporated
herein by reference.
(10) Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed on February 24, 2012, and
incorporated herein by reference.
(11) Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed on February 23, 2017, and
incorporated herein by reference.
(12) Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed on February 20, 2015, and
incorporated herein by reference.
(13) Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on August 2, 2017, and
incorporated herein by reference.
(14) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on December 1, 2017, and
incorporated herein by reference.
(15) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on December 23, 2008, and
incorporated herein by reference.
(16) Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed on February 27, 2009,
and incorporated herein by reference.
(17) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on December 30, 2009, and
incorporated herein by reference.
(18) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on April 1, 2016, and incorporated
herein by reference.
(19) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on May 27, 2011, and incorporated
herein by reference.
(20) Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on October 30, 2013, and
incorporated herein by reference.
(21) Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed on February 20, 2014, and
incorporated herein by reference.
(22) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on February 16, 2016, and
incorporated herein by reference.
59
(23) Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on May 6, 2016, and incorporated
herein by reference.
(24) Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed on February 28, 2008, and
incorporated herein by reference.
(25) Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on July 30, 2015, and incorporated
herein by reference.
Item 16. Form 10-K Summary
None.
60
Pursuant to the requirements of Section 13 or 15(d) 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 on February 22, 2018.
SIGNATURES
FISERV, INC.
By:
/s/ Jeffery W. Yabuki
Jeffery W. Yabuki
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on February 22, 2018.
Name
/s/ Glenn M. Renwick
Glenn M. Renwick
/s/ Jeffery W. Yabuki
Jeffery W. Yabuki
/s/ Robert W. Hau
Robert W. Hau
/s/ Kenneth F. Best
Kenneth F. Best
/s/ Alison Davis
Alison Davis
Harry F. DiSimone
/s/ John Y. Kim
John Y. Kim
/s/ Dennis F. Lynch
Dennis F. Lynch
/s/ Denis J. O’Leary
Denis J. O’Leary
/s/ Kim M. Robak
Kim M. Robak
/s/ JD Sherman
JD Sherman
/s/ Doyle R. Simons
Doyle R. Simons
Capacity
Chairman of the Board
Director, President and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
61
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffery W. Yabuki, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Fiserv, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 22, 2018
By: /s/ Jeffery W. Yabuki
Jeffery W. Yabuki
President and Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Robert W. Hau, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Fiserv, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 22, 2018
By: /s/ Robert W. Hau
Robert W. Hau
Chief Financial Officer and Treasurer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report on Form 10-K of Fiserv, Inc. (the “Company”) for the year ended December 31, 2017 as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jeffery W. Yabuki, as President and
Chief Executive Officer of the Company, and Robert W. Hau, as Chief Financial Officer and Treasurer of the Company, each
hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best
of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
By:
By:
/s/ Jeffery W. Yabuki
Jeffery W. Yabuki
President and Chief Executive Officer
February 22, 2018
/s/ Robert W. Hau
Robert W. Hau
Chief Financial Officer and Treasurer
February 22, 2018