Exhibit 99.2
UNAUDITED PRO FORMA COMBINED
FINANCIAL DATA OF FIS AND EFUNDS REFLECTING THE SPIN-OFF OF LPS
FINANCIAL DATA OF FIS AND EFUNDS REFLECTING THE SPIN-OFF OF LPS
The following unaudited pro forma combined financial statements present the historical financial statements of Fidelity National Information Services, Inc., a Georgia corporation, (“FIS”), with adjustments relating to our spin-off of 100% of the common stock of Lender Processing Services, Inc., a Delaware Corporation (“LPS”), (the “Spin-off”), which was completed July 2, 2008. These statements also reflect our retirement of $1,585.0 million in debt in connection with the spin-off and related adjustments to interest expense related to the debt retirement, and the related reduction in equity. The unaudited pro forma combined balance sheet as of March 31, 2008 is presented as if the Spin-off had been completed on March 31, 2008. The unaudited pro forma combined statements of continuing operations for the three month period ended March 31, 2008 and the year ended December 31, 2007 are presented as though the Spin-off had been completed on January 1, 2007. Further, the 2007 pro forma statement of operations includes adjustments for our acquisition of eFunds Corporation (“eFunds”), which was completed on September 12, 2007 (the “eFunds Acquisition”) as if it had been completed on January 1, 2007.
These unaudited pro forma combined financial statements should be read in conjunction with our historical consolidated financial statements and accompanying notes previously filed in our Form 10-K for the year ended December 31, 2007 and Form 10-Q for the three months ended March 31, 2008. The historical statement of continuing operations for FIS for the year ended December 31, 2007 has been adjusted to reflect the reclassification of certain discontinued operations which occurred in the three month period ended March 31, 2008. The unaudited pro forma combined financial statements are not necessarily indicative of the results of operations or financial position of FIS that would have been reported had the Spin-off and eFunds Acquisition been completed as of the dates presented, and are not necessarily representative of the future consolidated results of operations or financial position of our company.
The Spin-off of LPS by FIS and Debt Exchange
On July 2, 2008, all of the shares of the common stock of LPS were distributed to FIS’s shareholders through a stock dividend. At the time of the distribution, LPS consisted of all the assets, liabilities, businesses and employees related to FIS’s lender processing services segment as of the spin-off date. Prior to the spin-off, FIS contributed to LPS all of its interest in such assets, liabilities, businesses and employees in exchange for shares of the common stock of LPS and $1,585.0 million aggregate principal amount of LPS’s debt obligations (the “Debt Obligations”). Upon the distribution, FIS’s shareholders received one-half share of LPS common stock for every share of FIS common stock held as of the close of business on June 24, 2008. LPS is now a stand-alone public company trading under the symbol “LPS” on the New York Stock Exchange.
Contemporaneously with the Spin-off, we transferred the LPS Debt Obligations to certain lenders under our existing credit facility in exchange for their assignment to us of the entire remaining $1,585.0 million principal amount of our Term Loan B, which we then retired. This loan was incurred in connection with the eFunds acquisition.
The Acquisition of eFunds by FIS
On September 12, 2007 we completed the eFunds Acquisition for $1,790.8 million, of which $1,744.9 million was cash paid for eFunds’ common stock.
Under the purchase method of accounting, the aggregate consideration paid for eFunds is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their fair values on the transaction date. FIS established that the fair value of the net assets acquired was lower than the purchase price, and as a result, goodwill was recorded for the amount that the purchase price exceeded the fair value of the net assets acquired. In connection with the eFunds Acquisition, the Company adopted eFunds’ stock option plans and registered approximately 2.2 million shares underlying stock options and
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0.2 million shares underlying restricted stock units in replacement of similar outstanding awards held by eFunds employees.
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Unaudited Pro Forma Combined Balance Sheet
as of March 31, 2008
as of March 31, 2008
Pro forma | ||||||||||||||||||||
FIS | LPS | adjustments relating | FIS | |||||||||||||||||
historical | historical | to LPS spin-off | Note | pro forma | ||||||||||||||||
(In thousands except for per share data) | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 327,965 | $ | 102,978 | $ | — | $ | 224,987 | ||||||||||||
Settlement deposits | 42,742 | — | — | 42,742 | ||||||||||||||||
Accounts receivable, net | 857,881 | 316,751 | — | 541,130 | ||||||||||||||||
Settlement receivables | 119,954 | — | — | 119,954 | ||||||||||||||||
Other receivables | 184,971 | 13,972 | — | 170,999 | ||||||||||||||||
Receivable from related party | 11,687 | — | — | 11,687 | ||||||||||||||||
Prepaid and other current assets | 174,914 | 28,797 | — | 146,117 | ||||||||||||||||
Deferred income taxes | 119,983 | 27,147 | — | 92,836 | ||||||||||||||||
Total current assets | 1,840,097 | 489,645 | — | 1,350,452 | ||||||||||||||||
Property and equipment, net | 402,848 | 95,454 | — | 307,394 | ||||||||||||||||
Goodwill, net | 5,338,727 | 1,078,154 | — | 4,260,573 | ||||||||||||||||
Other intangible assets, net | 986,084 | 107,918 | — | 878,166 | ||||||||||||||||
Computer software, net | 809,497 | 147,808 | — | 661,689 | ||||||||||||||||
Other non-current assets | 454,977 | 111,079 | (13,376 | ) | (1) | 330,522 | ||||||||||||||
Total assets | $ | 9,832,230 | $ | 2,030,058 | $ | (13,376 | ) | $ | 7,788,796 | |||||||||||
Current Liabilities: | ||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 606,250 | $ | 185,496 | $ | — | $ | 420,754 | ||||||||||||
Settlement payables | 161,631 | — | — | 161,631 | ||||||||||||||||
Current portion of long-term debt | 270,615 | — | (16,000 | ) | (2) | 254,615 | ||||||||||||||
Deferred revenues | 241,308 | 56,441 | — | 184,867 | ||||||||||||||||
Total current liabilities | 1,279,804 | 241,937 | (16,000 | ) | 1,021,867 | |||||||||||||||
Deferred revenues | 121,468 | 24,434 | — | 97,034 | ||||||||||||||||
Deferred income taxes | 382,245 | 53,746 | — | 328,499 | ||||||||||||||||
Long-term debt | 3,908,702 | — | (1,569,000 | ) | (2) | 2,339,702 | ||||||||||||||
Other long-term liabilities | 288,930 | 34,265 | — | 254,665 | ||||||||||||||||
Total liabilities | 5,981,149 | 354,382 | (1,585,000 | ) | 4,041,767 | |||||||||||||||
Minority interest | 11,249 | 10,363 | — | 886 | ||||||||||||||||
Preferred stock $0.01 par value, 200 million shares authorized, none issued and outstanding | — | — | — | — | ||||||||||||||||
Common stock $0.01 par value, 600 million shares authorized, 199.4 million shares issued and outstanding as of March 31, 2008 | 1,994 | — | — | 1,994 | ||||||||||||||||
Additional paid in capital | 3,058,581 | — | (93,689 | ) | (3) | 2,964,892 | ||||||||||||||
Retained earnings | 960,296 | — | — | 960,296 | ||||||||||||||||
Accumulated other comprehensive earnings | 28,476 | — | — | 28,476 | ||||||||||||||||
Treasury stock | (209,515 | ) | — | — | (209,515 | ) | ||||||||||||||
Parent’s equity | — | 1,665,313 | 1,665,313 | (2) (3) | — | |||||||||||||||
Total equity | 3,839,832 | 1,665,313 | 1,571,624 | 3,746,143 | ||||||||||||||||
Total liabilities and equity | $ | 9,832,230 | $ | 2,030,058 | $ | (13,376 | ) | $ | 7,788,796 | |||||||||||
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Unaudited Pro Forma Combined Statement of Continuing Operations
for the Three Month Period Ended March 31, 2008
for the Three Month Period Ended March 31, 2008
Pro forma | ||||||||||||||||||||
FIS | LPS | adjustments relating | FIS | |||||||||||||||||
historical | historical | to LPS spin-off | Note | pro forma | ||||||||||||||||
(In thousands except for per share data) | ||||||||||||||||||||
Processing and services revenues | $ | 1,290,952 | $ | 452,726 | $ | — | $ | 838,226 | ||||||||||||
Cost of revenue | 928,555 | 282,586 | — | 645,969 | ||||||||||||||||
Gross profit | 362,397 | 170,140 | — | 192,257 | ||||||||||||||||
Selling, general and administrative expenses | 163,551 | 58,217 | — | 105,334 | ||||||||||||||||
Research and development costs | 27,068 | 7,588 | — | 19,480 | ||||||||||||||||
Operating income | 171,778 | 104,335 | — | 67,443 | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 3,018 | 260 | — | 2,758 | ||||||||||||||||
Interest expense | (62,448 | ) | (18 | ) | 22,615 | (4) | (39,815 | ) | ||||||||||||
Other income (expense), net | (451 | ) | — | — | (451 | ) | ||||||||||||||
Total other income (expense) | (59,881 | ) | 242 | 22,615 | (37,508 | ) | ||||||||||||||
Earnings before income taxes, equity in earnings of unconsolidated entities, and minority interest | 111,897 | 104,577 | 22,615 | 29,935 | ||||||||||||||||
Provision for income taxes | 40,955 | 40,576 | 8,961 | (5) | 9,340 | |||||||||||||||
Earnings before equity in earnings of unconsolidated entities and minority interest | 70,942 | 64,001 | 13,654 | 20,595 | ||||||||||||||||
Equity in loss of unconsolidated entities | (1,957 | ) | (1,957 | ) | — | — | ||||||||||||||
Minority interest expense | (122 | ) | (312 | ) | — | 190 | ||||||||||||||
Net earnings from continuing operations | 68,863 | 61,732 | 13,654 | 20,785 | ||||||||||||||||
Net income per share — basic from continuing Operations | $ | 0.35 | $ | 0.11 | ||||||||||||||||
Pro forma weighted average shares — basic | 194,542 | 194,542 | ||||||||||||||||||
Net income per share — diluted from continuing operations | $ | 0.35 | $ | 0.11 | ||||||||||||||||
Pro forma weighted average shares — diluted | 196,537 | 195,879 | ||||||||||||||||||
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Unaudited Pro Forma Combined Statement of Operations
for the Year Ended December 31, 2007
for the Year Ended December 31, 2007
Pro forma adjustments | Pro forma | |||||||||||||||||||||||||||||||
FIS | eFunds | relating to | LPS | adjustments relating | FIS | |||||||||||||||||||||||||||
historical | acquisition | eFunds acquisition | Note | historical | to LPS spin-off | Note | pro forma | |||||||||||||||||||||||||
(In thousands except for per share data) | ||||||||||||||||||||||||||||||||
Processing and services revenues | $ | 4,636,714 | $ | 385,699 | $ | — | $ | 1,690,568 | $ | — | $ | 3,331,845 | ||||||||||||||||||||
Cost of revenue | 3,294,889 | 254,182 | 21,690 | (6) | 1,022,711 | — | 2,548,050 | |||||||||||||||||||||||||
Gross profit | 1,341,825 | 131,517 | (21,690 | ) | 667,857 | — | 783,795 | |||||||||||||||||||||||||
Selling, general and administrative expenses | 489,893 | 167,290 | 5,817 | (7) | 207,859 | — | 455,141 | |||||||||||||||||||||||||
Research and development costs | 106,314 | 8,449 | — | 35,936 | — | 78,827 | ||||||||||||||||||||||||||
Operating income | 745,618 | (44,222 | ) | (27,507 | ) | 424,062 | — | 249,827 | ||||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest income | 4,318 | 132 | — | 1,690 | — | 2,760 | ||||||||||||||||||||||||||
Interest expense | (228,340 | ) | (2,844 | ) | (97,593 | ) | (4) | (146 | ) | 126,876 | (4) | (201,755 | ) | |||||||||||||||||||
Gain on sale of Covansys | 274,488 | — | — | — | — | 274,488 | ||||||||||||||||||||||||||
Other income (expense), net | 15,909 | 2,154 | — | — | — | 18,063 | ||||||||||||||||||||||||||
Total other income (expense) | 66,375 | (558 | ) | (97,593 | ) | 1,544 | 126,876 | 93,556 | ||||||||||||||||||||||||
Earnings before income taxes, equity in earnings of unconsolidated entities, and minority interest | 811,993 | (44,780 | ) | (125,100 | ) | 425,606 | 126,876 | 343,383 | ||||||||||||||||||||||||
Provision for income taxes | 300,197 | (12,501 | ) | (45,036 | ) | (5) | 164,734 | 48,213 | (5) | 126,139 | ||||||||||||||||||||||
Earnings before equity in earnings (loss) of unconsolidated entities and minority interest | 511,796 | (32,279 | ) | (80,064 | ) | 260,872 | 78,663 | 217,244 | ||||||||||||||||||||||||
Equity in earnings of unconsolidated entities | 936 | — | — | (3,048 | ) | — | 3,984 | |||||||||||||||||||||||||
Minority interest expense | (971 | ) | — | — | (1,019 | ) | — | 48 | ||||||||||||||||||||||||
Net earnings from continuing operations | $ | 511,761 | $ | (32,279 | ) | $ | (80,064 | ) | $ | 256,805 | $ | 78,663 | $ | 221,276 | ||||||||||||||||||
Net income per share – basic from continuing | ||||||||||||||||||||||||||||||||
Operations | $ | 2.65 | $ | 1.15 | ||||||||||||||||||||||||||||
Pro forma weighted average shares – basic | 193,080 | 193,080 | ||||||||||||||||||||||||||||||
Net income per share – diluted from continuing operations | $ | 2.60 | $ | 1.13 | ||||||||||||||||||||||||||||
Pro forma weighted average shares – diluted | 196,546 | 195,391 | ||||||||||||||||||||||||||||||
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Notes to Unaudited Pro Forma Combined Financial Statements
Notes to Unaudited Pro Forma Combined Balance Sheet as of March 31, 2008 and Statements of Continuing Operations for the Three Month Period Ended March 31, 2008 and the Year Ended December 31, 2007
The unaudited pro forma combined balance sheet as of March 31, 2008 is presented as if the Spin-off had been completed on March 31, 2008. The unaudited pro forma combined statements of continuing operations for the three month period ended March 31, 2008 and the year ended December 31, 2007 are presented as though the Spin-off had been completed on January 1, 2007. Further the 2007 pro forma statement of continuing operations includes adjustments for our acquisition of eFunds Corporation (“eFunds”), which was completed on September 12, 2007 (the “eFunds Acquisition”) as if it had been completed on January 1, 2007. The historical statement of continuing operations for FIS for the year ended December 31, 2007 has been adjusted to reflect the reclassification of certain discontinued operations which occurred in the three month period ended March 31, 2008. Discontinued operations had revenues of $121.3 million and earnings before taxes of $0.3 million for the year ended December 31, 2007. The historical statement of earnings for eFunds, from January 1, 2007 through September 12, 2007, includes merger related costs of approximately $91.4 million on a pre-tax basis.
The adjustments are as follows:
(1) | This amount represents the write-off of debt issuance costs related to FIS’s Term Loan B which was retired by us in connection with the Spin-off. The amount represents the share of debt issuance costs attributable to $1,585.0 million of Term Loan B. |
(2) | These amounts represent the retirement of FIS’s Term Loan B which was retired by us in connection with the Spin-off as if the transaction occurred on March 31, 2008, at which time the balance of the Term Loan B was $1,585.0 million, reflected as $1,569.0 million of long-term debt and $16.0 million of current portion of long-term debt. |
(3) | These amounts represent the disposition of our net investments in LPS, following its issuance of $1,585.0 million of debt to us and the reclassification of our parent’s equity into additional paid in capital subsequent to our retirement of the Term Loan B and the consummation of the Spin-off as if it occurred on March 31, 2008. |
(4) | These amounts represent the adjustments to interest expense relating to the eFunds Acquisition and the Spin-off. The adjustment relating to the eFunds acquisition reflects an increase in interest expense of $97.6 million for the year ended December 31, 2007, as if the additional debt (the “Term Loan B” and the “Revolving Loan”) used to finance the eFunds Acquisition had been borrowed on January 1, 2007. The incurrence of the $1.6 billion Term Loan B on January 1, 2007, would increase interest expense $90.6 million for the year ended December 31, 2007. The increase in interest is calculated based on the Term Loan B’s outstanding balance and its effective interest rate at September 30, 2007 of 7.55%. After the use of the $1.6 billion for the acquisition, the remainder of the purchase price, $153.2 million, was assumed to be paid for with borrowings from the Company’s Revolving Loan. The issuance of the Revolving Loan on January 1, 2007, would increase interest expense $7.0 million for the year ended December 31, 2007. The increase in interest is calculated based on the Revolving Loan’s initial balance and its effective interest rate at September 30, 2007 of 6.05%. The adjustments relating to the Spin-off reflect a decrease in interest expense relating to the assumed retirement of the Term Loan B on January 1, 2007 and reflect a reduction of interest expense of $22.6 million for the three months ended March 31, 2008 and $126.9 million for the year ended December 31, 2007. The adjustment for the year ended December 31, 2007 includes the $90.6 million of additional expense assumed in the pro forma adjustment relating to the eFunds Acquisition together with the actual interest expense incurred on the Term Loan B from September 12, 2007 to December 31, 2007. |
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(5) | This amount represents the change in income tax expense relating to the transactions as noted. The adjustments for the spin-off are to adjust the pro forma income tax expense to an estimated FIS rate of 31.2% and 36.7% for the three month period ended March 31, 2008 and year ended December 31, 2007, respectively. |
(6) | Reflects the increase in amortization expense as a result of allocating an assumed portion of the eFunds Acquisition consideration to intangible assets of eFunds, namely customer relationship intangibles, acquired software and trademarks, and amortizing such intangibles over their estimated useful lives commencing as of the assumed acquisition date, offset by the amortization expense for similar intangibles actually recorded by eFunds in its historical financial statements. Acquired customer relationships and computer software are being amortized over their useful life of up to 10 years on an accelerated method. The acquired trademarks are considered to have a 1 year useful life. The increase in amortization expense is $21.7 million for the year ended December 31, 2007. |
(7) | Under the acquisition agreement, all eFunds unvested stock options and restricted stock units were assumed by FIS. Accordingly, this adjustment reflects the additional stock compensation expense included in selling, general and administrative costs, as if the acquisition had occurred on January 1, 2007. Assumed stock options resulted in $3.9 million in additional expense, while assumed restricted stock units resulted in $1.9 million of additional expense for the year ended December 31, 2007. |
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