Heartland Payment Systems (HPY) 8-K/A Index to Financial Statements

EXHIBIT 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On July 29, 2014, Heartland Payment Systems, Inc. (the "Company” or the "Purchaser”) and TouchNet Information Systems, Inc. (“TouchNet” or the "Seller”), entered into an Agreement and Plan of Merger (the “Agreement”), under which the Purchaser would acquire all of the shares of common stock of TouchNet (the "Acquisition”) for a cash payment of $375.0 million minus the net working capital of TouchNet on the closing date. The Acquisition closed as of September 4, 2014.

TouchNet was incorporated under the laws of the state of Kansas on May 19, 1989. The Company develops, markets, and supports advanced e-commerce solutions to automate the delivery of business critical transactions primarily for colleges and universities.

The following unaudited pro forma condensed combined balance sheet combines the historical condensed consolidated balance sheet of the Company and the historical balance sheet of TouchNet as of June 30, 2014, giving effect to the Acquisition as if it had been consummated on June 30, 2014. The following unaudited pro forma condensed combined statements of income and comprehensive income for the six-month period ended June 30, 2014 and the twelve-month period ended December 31, 2013 combine the condensed consolidated statement of income and comprehensive income of the Company and the statement of income and comprehensive income of TouchNet for the six-month period ended June 30, 2014 and the twelve-month period ended December 31, 2013, giving effect to the Acquisition as if it had occurred at January 1, 2013. The unaudited pro forma condensed combined financial statements do not include the realization of potential cost savings from operating efficiencies, synergies or other restructurings that may result from the acquisition.

The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the Company’s historical financial statements, related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as filed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and quarterly report filed on Form 10-Q for the six months ended June 30, 2014, and the TouchNet audited and unaudited financial statements and related notes, and other financial information included elsewhere in this Current Report on Form 8-K/A. The unaudited pro forma condensed combined financial statements should be read in conjunction with the notes thereto.

The historical financial information has been adjusted to give pro forma effect to events that are directly attributable to the Acquisition, are factually supportable with respect to the income statement and are expected to have a continuing impact on the combined income statement. The pro forma adjustments are based upon information and assumptions available at the time of the filing of this document. The Company and TouchNet did not maintain direct historical relationships prior to the acquisition. Accordingly, no pro forma adjustments were required to eliminate activities among the Company and the TouchNet.

The acquisition will be accounted for under the purchase method of accounting. Under this method, the fair values of TouchNet’s assets acquired and the liabilities assumed are estimated at the Acquisition consummation date. The historical amounts of TouchNet’s assets and liabilities are then adjusted to such fair values and these fair values are added to the Company’s balance sheet. The pro forma fair value adjustments are preliminary, based on estimates, and may be adjusted as the Company analyzes what was known and knowable at the acquisition, including the finalization of valuations. Accordingly, the final fair value adjustments may be materially different from those presented in this document.

The unaudited pro forma condensed combined financial information is for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Acquisition had been consummated as of the dates indicated, nor is it necessarily indicative of future operating results or financial position.

F-1

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

June 30, 2014

(in thousands)

Assets	Heartland			TouchNet			Pro Forma Adjustments (See Note 2)				Pro Forma Combined
Current assets:
Cash and cash equivalents	$	53,839		$	27,867		$	(372,251	)	(a)	$	84,455
							375,000			(e)
Funds held for customers	131,448										131,448
Receivables, net	212,559			19,786							232,345
Investments	4,112										4,112
Inventory	10,351			82							10,433
Prepaid expenses	17,898			540							18,438
Current tax assets	17,789										17,789
Current deferred tax assets, net	7,715										7,715
Total current assets	455,711			48,275			2,749				506,735
Capitalized customer acquisition costs, net	66,433										66,433
Property and equipment, net	155,770			2,997			396			(b)	159,163
Goodwill	204,737						207,665			(b)	412,402
Intangible assets, net	50,103			5,614			(5,614		)	(c)	194,503
							144,400			(b)
Deposits and other assets, net	1,206										1,206
Total assets	$	933,960		$	56,886		$	349,596			$	1,340,442
Liabilities and Equity
Current liabilities:
Due to sponsor banks	$	58,774		$			$				$	58,774
Accounts payable	70,767			2,686							73,453
Customer fund deposits	131,448										131,448
Processing liabilities	107,108										107,108
Current portion of accrued buyout liability	12,901										12,901
Current portion of borrowings							18,750			(d)	18,750
Accrued expenses and other liabilities	23,758			1,310							25,068
Current portion of unearned revenue	5,183			34,364			(8,232		)	(b)	31,315
Total current liabilities	409,939			38,360			10,518				458,817
Deferred tax liabilities, net	43,910										43,910
Reserve for unrecognized tax benefits	6,739										6,739
Long-term borrowings	200,000						356,250			(d)	556,250
Long-term portion of unearned revenue				2,234			(880		)	(b)	1,354
Long-term portion of accrued buyout liability	28,367										28,367
Total liabilities	688,955			40,594			365,888				1,095,437
Commitments and contingencies	—
Equity
Common stock	36			63			(63		)	(f)	36
Additional paid-in capital	240,209			7,817			(7,817		)	(f)	240,209
Accumulated other comprehensive loss	(143		)								(143		)
Retained earnings	424			10,465			(10,465		)	(f)	424
Treasury stock	—			(2,053		)	2,053			(f)	—
Total stockholders’ equity	240,526			16,292			(16,292		)		240,526
Noncontrolling interests	4,479										4,479
Total equity	245,005			16,292			(16,292		)		245,005
Total liabilities and equity	$	933,960		$	56,886		$	349,596			$	1,340,442

See notes to unaudited pro forma condensed combined financial statements

F-2

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

Six Months Ended June 30, 2014

(in thousands, except per share data)

	Heartland			TouchNet			Pro Forma Adjustments (See Note 3)				Pro Forma Combined
Total revenues	$	1,106,142		$	34,721		$	(208	)	(g)	$	1,140,655
Costs of services:
Interchange	685,869										685,869
Dues, assessments and fees	105,354										105,354
Processing and servicing	135,657			8,089							143,746
Customer acquisition costs	22,618										22,618
Depreciation and amortization	12,491			1,257			4,363			(a)	17,170
							24			(b)
							(965		)	(c)
Total costs of services	961,989			9,346			3,422				974,757
General and administrative	87,860			11,945							99,805
Total expenses	1,049,849			21,291			3,422				1,074,562
Income from operations	56,293			13,430			(3,630		)		66,093
Other income (expense):
Interest income	62			19							81
Interest expense	(2,308		)				(4,393		)	(d)	(6,701		)
Other, net	288			(31		)					257
Total other expense	(1,958		)	(12		)	(4,393		)		(6,363		)
Income from continuing operations before income taxes	54,335			13,418			(8,023		)		59,730
Provision for income taxes	22,852						(3,374		)	(e)	25,122
							5,644			(f)
Net income	31,483			13,418			(10,293		)		34,608
Less: Net loss attributable to noncontrolling interests
Continuing operations	(1,709		)								(1,709		)
Net income attributable to Heartland	$	33,192		$	13,418		$	(10,293	)		$	36,317
Earnings per share:
Basic earnings per share	$	0.91									$	1.00
Diluted earnings per share	$	0.89									$	0.97
Weighted average number of common shares outstanding:
Basic	36,350										36,350
Diluted	37,250										37,250

See notes to unaudited pro forma condensed combined financial statements

F-3

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF COMPREHENSIVE INCOME

Six Months Ended June 30, 2014

(in thousands)

	Heartland			TouchNet		Pro Forma Adjustments			Pro Forma Combined
Net income	$	31,483		$	13,418	$	(10,293	)	$	34,608
Other comprehensive income (loss):
Reclassification of gains on investments, net of income tax	(164		)						(164		)
Unrealized gains on investments, net of tax of income tax	14								14
Unrealized gains on derivative financial instruments, net of income tax	95								95
Comprehensive income	31,428			13,418		(10,293		)	34,553
Less: Comprehensive loss attributable to noncontrolling interests	(1,709		)						(1,709		)
Comprehensive income attributable to Heartland	$	33,137		$	13,418	$	(10,293	)	$	36,262

See notes to unaudited pro forma condensed combined financial statements

F-4

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

Year Ended December 31, 2013

(in thousands, except per share data)

	Heartland			TouchNet		Pro Forma Adjustments (See Note 3)				Pro Forma Combined
Total revenues	$	2,135,372		$	64,480	$	(7,553	)	(g)	$	2,192,299
Costs of services:
Interchange	1,335,487									1,335,487
Dues, assessments and fees	200,903									200,903
Processing and servicing	237,232			15,260						252,492
Customer acquisition costs	42,109									42,109
Depreciation and amortization	19,975			2,437		8,725			(a)	29,384
						48			(b)
						(1,801		)	(c)
Total costs of services	1,835,706			17,697		6,972				1,860,375
General and administrative	173,568			21,872						195,440
Total expenses	2,009,274			39,569		6,972				2,055,815
Income from operations	126,098			24,911		(14,525		)		136,484
Other income (expense):
Interest income	124			52						176
Interest expense	(5,429		)			(9,207		)	(d)	(14,636		)
Other, net	(241		)	863						622
Total other income (expense)	(5,546		)	915		(9,207		)		(13,838		)
Income from continuing operations before income taxes	120,552			25,826		(23,732		)		122,646
Provision for income taxes	46,450					(9,153		)		47,258
						9,961
Net income from continuing operations	74,102			25,826		(24,540		)		75,388
Income from discontinued operations, net of income tax	3,970			—		—				3,970
Net income	78,072			25,826		(24,540		)		79,358
Less: Net (loss) income attributable to noncontrolling interests
Continuing operations	(610		)							(610		)
Discontinued operations	56									56
Net income attributable to Heartland	$	78,626		$	25,826	$	(24,540	)		$	79,912
Amounts attributable to Heartland:
Net income from continuing operations, net of noncontrolling interests	$	74,712		$	25,826	$	(24,540	)		$	75,998
Income from discontinued operations, net of income tax and noncontrolling interests	3,914			—		—				3,914
Net income attributable to Heartland	$	78,626		$	25,826	$	(24,540	)		$	79,912
Basic earnings per share:
Income from continuing operations	$	2.03								$	2.07
Income from discontinued operations	0.11									0.11
Basic earnings per share	$	2.14								$	2.18
Diluted earnings per share:
Income from continuing operations	$	1.96								$	2.00
Income from discontinued operations	0.10									0.10
Diluted earnings per share	$	2.06								$	2.10
Weighted average number of common shares outstanding:
Basic	36,791									36,791
Diluted	38,053									38,053

See notes to unaudited pro forma condensed combined financial statements

F-5

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF COMPREHENSIVE INCOME

Year Ended December 31, 2013

(in thousands)

	Heartland			TouchNet			Pro Forma Adjustments			Pro Forma Combined
Net income	$	78,072		$	25,826		$	(24,540	)	$	79,358
Other comprehensive income (loss):
Reclassification of gains on investments, net of income tax	—			(857		)				(857		)
Unrealized gains on investments, net of tax of income tax	12			396						408
Unrealized gains on derivative financial instruments, net of income tax	254									254
Foreign currency translation adjustment	(54		)							(54		)
Comprehensive income	78,284			25,365			(24,540		)	79,109
Less: Comprehensive loss attributable to noncontrolling interests	(570		)							(570		)
Comprehensive income attributable to Heartland	$	78,854		$	25,365		$	(24,540	)	$	79,679

See notes to unaudited pro forma condensed combined financial statements

F-6

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. GENERAL

The Company has accounted for the acquisition of TouchNet as a purchase business combination under the provisions of FASB Accounting Standards Codification Topic 850, Business Combinations. The accompanying unaudited pro forma condensed combined balance sheet reflects the acquisition price of TouchNet as outlined in Note 2(a) below. The purchase price allocation as outlined in Note 2(b) has not been finalized and is subject to change upon completion of appraisals of tangible and intangible assets. The purchase price allocation will be finalized when all necessary information is obtained which is expected to occur within one year of the consummation of the transaction.

2. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

The accompanying unaudited pro forma condensed combined balance sheet has been prepared as if the Acquisition was consummated on June 30, 2014 with respect to the unaudited pro forma condensed combined balance sheet. The following pro forma adjustments were made:

(a) To record cash consideration paid in the Acquisition (in thousands):

Cash - payment for base purchase price	$	375,000
Cash - received for estimated net working capital deficit	2,749
TouchNet acquisition consideration	$	372,251

(b) To reflect the allocation of the total acquisition consideration to the acquired assets and liabilities of TouchNet Information Systems, Inc. as of June 30, 2014 (in thousands):

	Allocation of Purchase Price			Carrying Value			Adjustments
Net fair value of assets acquired and liabilities assumed:
Cash	$	27,867		$	27,867		$
Receivables, net	19,786			19,786
Inventory	82			82
Prepaid expenses	540			540
Property and equipment, net	3,393			2,997			396
Intangible assets, net - pre-acquisition	—			5,614			(5,614	)
Accounts payable	(2,686		)	(2,686		)
Accrued expenses and other liabilities	(1,310		)	(1,310		)
Current unearned revenue	(26,132		)	(34,364		)	8,232
Long-term unearned revenue	(1,354		)	(2,234		)	880
Total net tangible assets acquired	20,186
Intangible assets acquired:
Customer relationships	101,300
Trademarks	5,000
Software	37,200
Non-competition agreement	900
Total intangible assets	144,400
Goodwill	207,665
Total acquisition consideration	$	372,251

The preliminary allocation of the purchase price was based upon a preliminary valuation and the Company’s estimates and assumptions which are subject to change upon the finalization of the valuation.

F-7

Of the total estimated purchase price, a preliminary estimate of approximately $20.2 million was allocated to net tangible assets acquired. Net assets were generally valued at their respective carrying amounts, which management believes approximate fair value, except for adjustments to receivables, property and equipment, accrued expenses, unearned revenue, and pre-acquisition intangible assets.

Approximately $144.4 million was allocated to acquired identifiable intangible assets. The value of identifiable intangible assets was derived from the present value of estimated future benefits from the various intangible assets acquired.

Of the total estimated purchase price, approximately $207.7 million was allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired, including intangible assets. Goodwill amounts are not amortized, but rather are tested for impairment at least annually. In the future, if the Company determines that the value of the goodwill has become impaired, an accounting charge for the amount of the impairment would be recorded in the quarter in which such determination is made.

(c) To eliminate TouchNet pre-acquisition intangible assets.

(d) To reflect borrowings incurred by the Company to finance the purchase price (in thousands):

Current portion of borrowings	$	18,750
Long-term portion of borrowings	356,250
	$	375,000

(e) To reflect cash inflow from proceeds of borrowings incurred by the Company to finance the purchase price.

(f) To eliminate TouchNet pre-acquisition net book value.

3. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

The accompanying unaudited pro forma condensed combined statements of income and comprehensive income have been prepared as if the Acquisition was consummated as January 1, 2013 with respect to the unaudited pro forma condensed combined statements of income and comprehensive income. Pro forma adjustments were made to reflect:

(a) Amortization of acquired intangible assets based on the straight-line method of amortization and using the amortization periods as follows (in thousands):

				Pro Forma Amortization Adjustment
	Intangible Asset Amount		Amortization Period (in months)	Six Months Ended June 30, 2014		Year Ended December 31, 2013
Customer relationships	$	101,300	240	$	2,533	$	5,065
Trademarks	5,000		60	500		1,000
Software	37,200		180	1,240		2,480
Non-competition agreement	900		60	90		180
Total intangible assets	$	144,400		$	4,363	$	8,725

In accordance with the provisions of ASC Topic 850, goodwill resulting from the Acquisition is not amortized.

(b) Adjustment to depreciation resulting from a net increase in the basis of property and equipment acquired based on estimated useful lives of 24 to 60 months.

(c) To eliminate TouchNet's historical amortization recorded on its pre-acquisition capitalized software development costs and patent and trademark intangible assets. These assets have been revalued and included in acquired intangible assets.

F-8

(d) This adjustment reflects an increase in interest expense resulting from financing the total estimated cash consideration of $375.0 million paid in the Acquisition, prior to reduction for a net working capital deficit. The $375.0 million was financed under an amortizing term credit facility. The interest expense adjustment assumes 50% of the term credit borrowing is borrowed at the average one-month LIBOR interest rate plus 200 basis points credit margin, and the remaining 50% of the term credit borrowing is borrowed at a five-year interest rate swap rate plus 200 basis points credit margin.

(e) To adjust income tax expense for pro forma income statement adjustments at the Company’s effective tax rate for the period.

(f) Adjustment to tax effect TouchNet's historical pretax income at the Company's effective tax rate for the period. Post acquisition, TouchNet becomes a C Corporation and member of the Company's consolidated tax group. TouchNet's historical tax provision reflects its pre-acquisition status as a Sub Chapter S Corporation.

(g) Adjustment to TouchNet's historical revenue to reflect the impact of the preliminary estimated fair value adjustment of $9.1 million to the carrying value of TouchNet's unearned revenue.

F-9