certain reclassifications to conform historical financial statement presentation of Fiserv and First Data;

application of the acquisition method of accounting under the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification, which we refer to as ASC 805, “Business Combinations,” to reflect estimated merger consideration of approximately $41.2 billion ($24.5 billion in share consideration based on the closing price of Fiserv common stock on May 31, 2019, and $16.7 billion (which includes accrued interest and prepayment penalties associated with the First Data debt) in repayment of First Data debt) in exchange for 100% of all outstanding First Data common stock;

the proceeds and uses of the new and amended financing arrangements expected to be entered into and incurred in connection with the merger; and

transaction costs in connection with the merger.

Assets

Cash and cash equivalents

Trade accounts receivable, net

Prepaid expenses and other current assets

Settlement assets

Total current assets

Property and equipment, net

Intangible assets, net

Goodwill

Customer relationships, net

Other intangibles, net

Contract costs, net

Investment in affiliates

Other long-term assets

Total assets

Liabilities and Shareholders’ Equity

Accounts payable and accrued expenses

Short-term and current maturities of long-term debt

Contract liabilities

Settlement obligations

Total current liabilities

Long-term debt

Deferred income taxes

Long-term contract liabilities

Other long-term liabilities

Total liabilities

Commitments and contingencies

Redeemable noncontrolling interest

Shareholders’ equity:

Total Fiserv equity

Total First Data equity

Total shareholders’ equity

Noncontrolling interests

Total equity

Total liabilities and equity

Revenue:

Revenues excluding reimbursable items

Processing and services

Product

Reimbursable items

Total revenue

Expenses:

Cost of revenues (exclusive of items shown below)

Cost of processing and services

Cost of product

Selling, general and administrative

Gain on sale of business

Depreciation and amortization

Other operating expenses, net

Reimbursable items

Total expenses

Operating income

Interest expense

Interest expense, net

Debt financing activities

Loss on early debt extinguishment

Non-operating income

Other income (expense)

Income before income taxes and income (loss) from investments in unconsolidated affiliates

Income tax provision

Income (loss) from investments in unconsolidated affiliates

Net income

Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest

Net income attributable to shareholders

Net income attributable to shareholders per share – basic

Net income attributable to shareholders per share – diluted

Shares used in computing net income per share:

Basic

Diluted

Revenue:

Revenues excluding reimbursable items

Processing and services

Product

Reimbursable items

Total revenue

Expenses:

Cost of revenues (exclusive of items shown below)

Cost of processing and services

Cost of product

Selling, general and administrative

Gain on sale of businesses

Depreciation and amortization

Other operating expenses, net

Reimbursable items

Total expenses

Operating income

Interest expense

Interest expense, net

Loss on early debt extinguishment

Non-operating income

Other income (expense)

Income before income taxes and income from investments in unconsolidated affiliates

Income tax provision

Income from investments in unconsolidated affiliates

Net income

Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest

Net income attributable to shareholders

Net income attributable to shareholders per share – basic

Net income attributable to shareholders per share – diluted

Shares used in computing net income per share:

Basic

Diluted

Balance Sheet

As of March 31, 2019 (in millions)

Intangible assets, net

Customer relationships, net

Other intangibles, net

Contract costs, net

Investment in affiliates

Other long-term assets

Accounts payable and accrued expenses

Contract liabilities

Long-term contract liabilities

Other long-term liabilities

Represents a reclassification of customer relationship intangible assets to conform with Fiserv’s presentation.

Represents a reclassification of other intangible assets to conform with Fiserv’s presentation.

Represents a reclassification of contract costs to conform with Fiserv’s presentation.

Represents a reclassification of contract assets to conform with Fiserv’s presentation.

Represents a reclassification of investment in affiliates to conform with Fiserv’s presentation.

Represents a reclassification of current and long-term contract liabilities to conform with Fiserv’s presentation.

Statement of Income
For the three months ended March  31, 2019 (in millions)

Revenues excluding reimbursable items

Processing and services

Product

Reimbursable items

Cost of revenues (exclusive of items shown below)

Cost of processing and services

Cost of product

Selling, general and administrative

Depreciation and amortization

Other operating expenses, net

Reimbursable items

Interest expense

Interest expense, net

Non-operating income

Other income (expense)

Represents a reclassification of First Data revenue to processing and services revenue and product revenue to conform with Fiserv’s presentation.

Represents a reclassification of First Data reimbursable items recorded in revenue to conform with Fiserv’s presentation.

Represents a reclassification of First Data cost of revenues to conform with Fiserv’s presentation.

Represents a reclassification of First Data reimbursable items recorded in expense to conform with Fiserv’s presentation.

Represents a reclassification of First Data depreciation and amortization to conform with Fiserv’s presentation.

Represents a reclassification of First Data other operating expenses, net to conform with Fiserv’s presentation.

Represents a net presentation of Fiserv’s and First Data’s interest income and expense amounts.

Represents a presentation of Fiserv non-operating income within other income (expense).

Statement of Income

For the year ended December 31, 2018 (in  millions)

Revenues excluding reimbursable items

Processing and services

Product

Reimbursable items

Cost of revenues (exclusive of items shown below)

Cost of processing and services

Cost of product

Selling, general and administrative

Gain on sale of businesses

Depreciation and amortization

Other operating expenses, net

Reimbursable items

Interest expense

Interest expense, net

Non-operating income

Other income (expense)

Represents a reclassification of First Data revenue to processing and services revenue and product revenue to conform with Fiserv’s presentation.

Represents a reclassification of First Data reimbursable items recorded in revenue to conform with Fiserv’s presentation.

Represents a reclassification of First Data cost of revenues to conform with Fiserv’s presentation.

Represents a reclassification of First Data reimbursable items recorded in expense to conform with Fiserv’s presentation.

Represents a reclassification of First Data depreciation and amortization to conform with Fiserv’s presentation.

Represents a reclassification of First Data other operating expenses, net to conform with Fiserv’s presentation.

Represents a reclassification of First Data gain on sale of businesses to conform with Fiserv’s presentation.

Represents a net presentation of Fiserv’s and First Data’s interest income and expense amounts.

Represents a presentation of Fiserv non-operating income within other income (expense).

Preliminary calculation of estimated merger consideration  (in millions)

Share consideration

Shares of First Data as of April 30, 2019

Exchange ratio

Fiserv common stock to be issued

Share price on May 31, 2019

Estimated value of Fiserv common shares to be issued to First Data stockholders pursuant to the merger agreement

Estimated repayment of First Data’s debt (including prepayment penalties and accrued interest)

Preliminary fair value of estimated total merger consideration

Under the terms of the merger agreement, First Data stockholders have the right to receive a fixed exchange ratio of 0.303 of a share of Fiserv common stock, par value $0.01 per share, for each share of First Data common stock. For purposes of the unaudited pro forma condensed combined balance sheet, the estimated merger consideration is based on the total First Data common stock issued and outstanding as of April 30, 2019 and the closing price per share of Fiserv common stock on May 31, 2019. A 10% change in the closing price per share of Fiserv common stock would increase or decrease the estimated fair value of share consideration transferred by approximately $2.5 billion.

It is currently expected that all of the outstanding historical debt of First Data (excluding debt reflected as receivable securitized loans, finance lease obligations and other arrangements and lines of credit) will be repaid in connection with the merger. Based on the amounts of First Data debt reflected as outstanding on the First Data balance sheet as of March 31, 2019, a total of $16,461 million is therefore expected to be repaid, comprising short-term debt of $366 million and long-term debt of $16,095 million. In addition, prepayment penalties and accrued interest of approximately $143 million and $75 million, respectively, associated with the First Data debt are expected to be paid in connection with such repayment. Amounts outstanding under the various First Data financing arrangements will change between the date of the First Data balance sheet as of March 31, 2019 used for purposes of these unaudited pro forma condensed combined financial statements and the closing date, and Fiserv may determine to repay additional amounts in respect of First Data’s financing arrangements, including debt reflected as receivable securitized loans, finance lease obligations and other arrangements or lines of credit, or to leave a portion of such amounts outstanding. Accordingly, the amount of First Data debt actually repaid on the closing date may differ from the amount expected to be repaid as of the date of these unaudited pro forma condensed combined financial statements.

In connection with the merger, Fiserv agreed to convert certain equity awards held by First Data employees into Fiserv equity awards. At this time, Fiserv has not completed its analysis and calculations related to eligible employees and vesting schedules in sufficient detail necessary to arrive at fair value; however, the impact is not expected to be material in the context of the transaction. Any corresponding adjustment may result in the recognition of an incremental component of purchase consideration transferred, which is not currently reflected in the preliminary estimate of merger consideration.

Description (in millions)

Preliminary fair value of estimated total merger consideration

Assets

Cash and cash equivalents

Trade accounts receivable

Prepaid expenses and other current assets

Settlement assets

Property and equipment

Intangible assets

Contract costs

Other long-term assets

Total assets

Liabilities

Accounts payable and accrued expenses

Short-term other arrangements and finance lease obligations

Contract liabilities

Settlement obligations

Long-term other arrangements and finance lease obligations

Deferred income taxes

Long-term contract liabilities

Other long-term liabilities

Total liabilities

Redeemable noncontrolling interest

Noncontrolling interests

Less: Net assets

Goodwill

Reflects the sources and uses of funds relating to the merger as follows:

Description (in millions)

Sources:

Proceeds from term loans

Proceeds from senior notes

Less: Capitalized debt issuance costs and original issue discount

Uses:

Transaction costs

Estimated repayment of First Data’s debt (including prepayment penalties and accrued interest)

Pro forma net adjustment to cash and cash equivalents

To fund amounts payable in connection with the merger, Fiserv expects to incur borrowings under its new term loan credit agreement, which we refer to as the term loans, that was entered into on February 15, 2019 with a syndicate of financial institutions and pursuant to which such financial institutions have committed to provide Fiserv with a senior unsecured term loan facility in an aggregate principal amount of $5,000 million. In addition, Fiserv expects to issue new senior debt securities, which we refer to as the senior notes, in an aggregate principal amount of $12,000 million.

Reflects debt issuance costs and original issue discount of approximately $129 million expected to be incurred in connection with the $12,000 million issuance of senior notes, the $5,000 million incurrence of term loans, and the $1,500 million increase in commitments to Fiserv’s existing revolving credit facility. Does not include estimated cash paid for transaction costs to be incurred, including bridge facility financing fees. Also does not include prepayment penalties associated with the First Data debt.

Reflects estimated cash paid for transaction costs to be incurred by Fiserv and First Data, including bridge facility financing fees. Does not include prepayment penalties associated with the First Data debt.

It is currently expected that all of the outstanding historical debt of First Data (excluding debt reflected as receivable securitized loans, finance lease obligations and other arrangements and lines of credit) will be repaid in connection with the merger. Based on the amounts of First Data debt reflected as outstanding on the First Data balance sheet as of March 31, 2019, a total of $16,461 million is therefore expected to be repaid, comprising short-term debt of $366 million and long-term debt of $16,095 million. In addition, prepayment penalties and accrued interest of approximately $143 million and $75 million, respectively, associated with the First Data debt are expected to be paid in connection with such repayment. Amounts outstanding under the various First Data financing arrangements will change between the date of the First Data balance sheet as of March 31, 2019 used for purposes of these unaudited pro forma condensed combined financial statements and the closing date, and Fiserv may determine to repay additional amounts in respect of First Data’s financing arrangements, including debt reflected as receivable securitized loans, finance lease obligations and other arrangements or lines of credit, or to leave a portion of such amounts outstanding. Accordingly, the amount of First Data debt actually repaid on the closing date may differ from the amount expected to be repaid as of the date of these unaudited pro forma condensed combined financial statements.

Reflects an adjustment to intangible assets, net based on a preliminary fair value assessment:

Description (in millions)

Fair value of intangible assets acquired

Removal of First Data’s historical intangible assets

Pro forma net adjustment to intangible assets, net

Fiserv determined a preliminary estimate of intangible assets. The intangible assets, including customer relationships, technology and tradenames, have been amortized based on estimated useful lives of seven to fifteen years.

Reflects an adjustment to goodwill based on the preliminary purchase price allocation:

Description (in millions)

Fair value of consideration transferred in excess of the preliminary fair value of assets acquired and liabilities assumed

Removal of First Data’s historical goodwill

Pro forma net adjustment to goodwill

Goodwill represents the excess of the estimated merger consideration over the preliminary fair value of the underlying assets acquired and liabilities assumed. Refer to the preliminary estimated merger consideration allocation in Note 3 above for more details.

In connection with the merger, Fiserv entered into a bridge facility commitment letter, pursuant to which it obtained commitments for a 364-day senior unsecured bridge term loan facility in an aggregate principal amount of $17,000 million. Subsequently, on February 15, 2019, Fiserv entered into a new term loan credit agreement with a syndicate of financial institutions pursuant to which such financial institutions have committed to provide Fiserv with a senior unsecured term loan facility in an aggregate principal amount of $5,000 million. The aggregate principal amount of the commitments under the term loan credit agreement have replaced a corresponding amount of the commitments in respect of the bridge facility in accordance with the terms of the bridge facility commitment letter. As a result, there are now $12,000 million in bridge facility commitments remaining. Fiserv does not intend to draw down on the bridge facility and currently expects to replace the remaining bridge facility commitments prior to the closing of the merger with permanent financing that it currently expects will consist of $12,000 million in aggregate principal amount from the issuance of senior notes. In addition, Fiserv entered into amendments to its existing revolving credit facility to modify certain provisions in order to facilitate the merger and borrowings under the existing revolving credit facility in connection with the merger, increase the commitments available thereunder by $1,500 million and make certain additional amendments to facilitate the operation of the combined business following the merger. Refer to the table below for a summary of the impact the financing arrangements are expected to have on the short-term and long-term debt balances, and refer to Note 5 for details on the impact these financing arrangements are expected to have on the unaudited pro forma condensed combined statements of income.

Description (in millions)

Proceeds:

Proceeds from term loans

Proceeds from senior notes

Less: Capitalized debt issuance costs and original issue discount

Repayments:

Estimated repayment of First Data debt

Pro forma net adjustment to debt

Pro forma net adjustment to short-term and current maturities of long-term debt

Pro forma net adjustment to long-term debt

As mentioned in Note 4(a)(i), Fiserv expects to incur $5,000 million in aggregate principal amount of term loans under its new term loan credit agreement that was entered into on February 15, 2019 with a syndicate of financial institutions and pursuant to which such financial institutions committed to provide Fiserv with a senior unsecured term loan facility in an aggregate principal amount of $5,000 million. In addition, Fiserv expects to issue senior notes in an aggregate principal amount of $12,000 million.

As mentioned in Note 4(a)(ii), reflects debt issuance costs and original issue discount of approximately $129 million expected to be incurred in connection with the $12,000 million issuance of the senior notes, the $5,000 million incurrence of the term loans, and the $1,500 million increase in commitments to Fiserv’s existing revolving credit facility. Does not include estimated cash paid for transaction costs to be incurred, including bridge facility financing fees. Also does not include prepayment penalties associated with the First Data debt.

It is currently expected that all of the outstanding historical debt of First Data (excluding debt reflected as a receivable securitized loan, finance lease obligations and other arrangements and lines of credit) will be repaid in connection with the merger. Based on the amounts of First Data debt reflected as outstanding on the First Data balance sheet as of March 31, 2019, $16,461 million is therefore expected to be repaid, comprising short-term debt of $366 million and long-term debt of $16,095 million. Amounts outstanding under the various First Data financing arrangements will change between the date of the First Data balance sheet as of March 31, 2019 used for purposes of these unaudited pro forma condensed combined financial statements and the closing date, and Fiserv may determine to repay additional amounts in respect of First Data’s financing arrangements, including debt reflected as receivable securitized loans, finance lease obligations and other arrangements or lines of credit, or to leave a portion of such amounts outstanding. Accordingly, the amount of First Data debt actually repaid on the closing date may differ from the amount expected to be repaid as of the date of these unaudited pro forma condensed combined financial statements.

Reflects a deferred income tax liability resulting from preliminary fair value adjustments to intangible assets. The estimate of the deferred tax liability was determined based on the book and tax basis difference using a blended federal and state statutory income tax rate of Fiserv of 23%. This estimate of the deferred income tax liability is preliminary and is subject to change based upon Fiserv’s final determination of the fair values of identifiable intangible assets acquired by jurisdiction.

Reflects an adjustment to Fiserv and First Data equity based on the following:

Description (in millions)

Fair value of common stock issued to the sellers

Transaction costs

Removal of First Data’s historical shareholders’ equity

Pro forma net adjustment to total equity

As disclosed in Note 3(i), the estimated value of Fiserv common shares to be issued pursuant to the merger agreement is $24,556 million.

As disclosed in Note 4(a)(iii), represents the remaining estimated transaction costs to be incurred by Fiserv and First Data, including bridge facility financing fees. Does not include prepayment penalties associated with the First Data debt.    

The newly acquired intangible assets have been amortized based on estimated useful lives of seven to fifteen years. Pro forma amortization expense includes amortization expense for the newly identified intangible assets less the amortization expense on First Data’s historical intangible assets. The pro forma adjustments also reflect the amortization expense, net of tax, attributed to the noncontrolling interests of $59 million and $182 million for the three months ended March 31, 2019 and the year ended December 31, 2018, respectively, based on the ratio of First Data’s historical net income attributable to noncontrolling interests to net income for the three months ended March 31, 2019 and the year ended December 31, 2018, and as such, actual amortization expense attributable to noncontrolling interests may differ materially. Fiserv is still in the process of evaluating the fair value of the intangible assets. Any resulting change in the fair value would have a direct impact to amortization expense.

Description (in millions)

Amortization expense for intangible assets

Less: Historical First Data amortization

Pro forma net adjustment to cost of processing and services

Reflects the adjustments to reverse non-recurring transaction costs, which were recorded in Fiserv’s selling, general and administrative expenses and debt financing activities, and in First Data’s other operating expenses, net (reclassified to selling, general, and administrative expenses for pro forma purposes) for the three months ended March 31, 2019.

Historical interest expense has been adjusted as follows:

Description (in millions)

Increases to interest expense:

Senior notes

Term loans

Amortization of capitalized debt issuance costs and discounts

Decreases to interest expense:

Historical interest expense of First Data for debt being repaid

Pro forma net adjustment to interest expense, net