First Data 2007 Annual Report Download - page 59

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Pro Forma Financial Information
The following unaudited pro forma Condensed Consolidated Statement of Income reflect the consolidated results of operations of the Company as if the
merger had occurred on January 1, 2007. The pro forma statement is derived from the application of pro forma adjustments to the historical Statement of
Income of the predecessor period January 1, 2007 to September 24, 2007 and the successor period from September 25, 2007 to December 31, 2007. The pro
forma Statement of Income should be read in conjunction with the Consolidated Financial Statements, related notes and other financial information included
elsewhere in this Form 10-K.
The pro forma adjustments are described in the notes to the pro forma Statement of Income and are based on available information and assumptions that
management believes are reasonable. Certain of the pro forma adjustments and results of operations in the successor period are based on preliminary
allocation of the purchase price and preliminary valuation of intangible assets. The pro forma Statement of Income is not necessarily indicative of the future
results of operations of the successor Company or results of operations of the successor Company that would have actually occurred had the merger been
consummated as of January 1, 2007.
Unaudited Pro Forma Condensed Consolidated Statement of Income
Historical
Pro Forma
Adjustments Pro Forma
Successor Predecessor
Period from
September 25
through
December 31,
Period from
January 1
through
September 24,
Year ended
December 31,
(in millions) 2007 2007 2007
Revenues:
Transaction and processing service fees $ 1,553.3 $ 3,965.9 $ — $ 5,519.2
Investment income, net (8.2) (66.9) — (75.1)
Product sales and other 223.0 616.4 — 839.4
Reimbursable debit network fees, postage and other 510.4 1,257.5 — 1,767.9
2,278.5 5,772.9 — 8,051.4
Expenses:
Cost of services 1,142.4 2,632.0 359.7(a) 4,134.1
Cost of products sold 92.0 230.4 — 322.4
Selling, general and administrative 378.9 1,089.3 (150.1) (b) 1,318.1
Reimbursable debit network fees, postage and other 510.4 1,257.5 — 1,767.9
Other operating expenses(c) (0.2) 23.3 — 23.1
2,123.5 5,232.5 209.6 7,565.6
Operating profit 155.0 540.4 (209.6) 485.8
Interest income 17.9 30.8 — 48.7
Interest expense (584.7) (103.6) (1,364.4)(d) (2,052.7)
Other income (expense) (74.0) 4.9 15.8(e) (53.3)
Income (loss) before income taxes, minority interest, equity earnings in affiliates and
discontinued operations (485.8) 472.5 (1,558.2) (1,571.5)
Income tax (benefit) expense (176.1) 125.8 (636.3)(f) (686.6)
Minority interest (39.0) (105.3) — (144.3)
Equity earnings in affiliates 46.8 223.0 (147.8)(g) 122.0
Income (loss) from continuing operations $ (301.9) $ 464.4 $ (1,069.7) $ (907.2)
(a) Adjustments to Cost of services consist of adjustments related to increased other intangible asset amortization expense of $470.3 million; the reversal of
amortization of prior year service costs and actuarial gains and losses related to defined benefit plans of $3.9 million; the reversal of costs associated
with the accelerated vesting of equity awards of $105.6 million; the reversal of rent expense of $4.7 million related to synthetic leases bought out as a
result of change in control provisions; and an adjustment for increased depreciation expense on buildings bought out of synthetic leases of $3.6 million.
Note that amortization of the customer relationships intangible assets are recognized on an accelerated basis and the other intangible assets are
recognized on a straight-line basis. Based on the preliminary valuation of the intangible assets, amortization was approximately $1,125 million for pro
forma 2007 and is projected to be approximately as follows for 2008 through 2012: respectively, $1,024 million, $946 million, $885 million, $765
million and $661 million.
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