EX-99.8 10 a25143exv99w8.htm EXHIBIT 99.8 exv99w8
 

Exhibit 99.8
 
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
 
On June 25, 2006, Fidelity National Title Group, Inc., referred to herein as FNT or New FNF, entered into a securities exchange and distribution agreement with Fidelity National Financial, Inc., referred to as FNF, as amended and restated as of September 18, 2006, under which FNF agreed to transfer substantially all of its assets (other than its ownership interest in Fidelity National Information Services, Inc., referred to FIS, and FNF Capital Leasing, Inc., referred to as FNF Leasing) in exchange for the assumption by FNT of certain liabilities of FNF and shares of FNT’s Class A Common Stock, par value $0.0001 per share. At the same time that FNF and FNT entered into the securities exchange and distribution agreement, FNF and FIS entered into an agreement and plan of merger, which provided that following the distribution under the securities exchange and distribution agreement, FNF would merge with and into FIS. As a result of the completion of the merger, on November 9, 2006, FNF’s separate corporate existence ceased and FIS was the surviving corporation.
 
Acquisitions among entities under common control are not considered business combinations and are to be accounted for at historical cost in accordance with EITF 90-5, Exchanges of Ownership Interests between Enterprises under Common Control. Furthermore, the substance of the proposed transactions and the merger is effectively a reverse spin-off of FIS by FNF in accordance with EITF 02-11, Accounting for Reverse Spinoffs. Accordingly, the historical financial statements of FNF will become those of FNT; however, the criteria to account for FIS as discontinued operations as prescribed by SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets will not be met. This is primarily due to the continuing involvement of FNT with FIS and significant influence that FNT will have over FIS through common board members, common senior management and continuing business relationships. It is expected that FIS will continue to be included in FNF’s consolidated financial statements through October 24, 2006.
 
The following unaudited combined pro forma financial statements present FNF’s historical financial statements and adjusts them as if FNF were no longer reporting FIS in its consolidated balance sheet and results of operations. The unaudited pro forma combined statements of continuing operations for the years ended December 31, 2005, 2004 and 2003, and the nine month periods ended September 30, 2006 and 2005, are presented as if the reverse spin-off of FIS by FNF had been completed on January 1, 2005 and do not include expenses of approximately $18 million expected to be incurred in order to effect the proposed transactions, including fees paid to investment bankers, external legal counsel and external accountants. The unaudited pro forma combined balance sheet as of September 30, 2006, is presented as if the reverse spin-off of FIS by FNF had been completed as of September 30, 2006. These pro forma financial statements do not reflect adjustments related to the merger of FNF Leasing with and into a subsidiary of FIS, which occurred on October 26, 2006. The financial condition and results of operations of FNF Leasing are not material with respect to the unaudited combined pro forma financial statements. Total assets of FNF Leasing were $100.6 million, or 1.4% of pro forma total assets, at September 30, 2006, and $69.8 million at December 31, 2005. Pretax income was $0.8 million, or less than 1% of pro forma pretax income, for the nine months ended September 30, 2006, and $1.3 million or less than 1% of pro forma pretax income, for the year ended December 31, 2005.
 
These unaudited pro forma combined financial statements should be read in conjunction with FNF’s consolidated financial statements and accompanying notes incorporated by reference. The unaudited pro forma combined financial statements are not necessarily indicative of the results of operations or financial condition of FNT after the proposed transactions that would have been reported had the proposed transactions been completed as of the dates presented, and are not necessarily representative of the future consolidated results of operations or financial condition of FNT.
 
[Tables appear on the following pages]


1


 

 
New FNF
Unaudited Pro Forma Combined Balance Sheet
as of September 30, 2006
(In thousands)
 
                                       
          FIS
    Other
       
    Historical
    Pro Forma
    Pro Forma
       
    FNF     Adjustments(1)     Adjustments     Notes   Pro Forma  
    (In thousands)              
 
ASSETS:
                               
Investments
  $ 4,327,988     $ 224,555     $     $ 4,103,433  
Cash and cash equivalents
    806,303       122,406             683,897  
Trade receivables, net
    766,393       553,720             212,673  
Goodwill
    4,861,734       3,787,382       (73,555 )   (2)   1,147,907  
Prepaid expenses and other assets
    1,014,170       641,461             372,709  
Capitalized software
    704,567       626,499             78,068  
Title plants
    325,340       6,060             319,280  
Property and equipment, net
    529,433       299,448             229,985  
Other intangible assets
    1,179,126       1,082,802             96,324  
                                 
    $ 14,515,054     $ 7,344,333     $ (73,555 )   $ 7,244,276  
                                 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Liabilities:
                               
Accounts payable and accrued liabilities
  $ 1,591,636     $ 664,472     $     $ 927,164  
Deferred revenue
    516,612       388,380             128,232  
Notes payable
    3,524,126       2,868,832             655,294  
Reserve for claim losses
    1,203,792       7,099             1,196,693  
Secured trust deposits
    875,317                   875,317  
Deferred tax liability
    337,490       302,397             35,093  
Payable to Related party
          (4,943 )           4,943  
Income taxes payable
    68,226       47,845           20,381  
                                 
      8,117,199       4,274,082             3,843,117  
Minority interests
    1,907,183       12,706       1,869,441     (3)   25,036  
Stockholders’ equity
    4,490,672       3,057,545       (1,942,996 )     3,376,123  
                                 
    $ 14,515,054     $ 7,344,333     $ (73,555 )   $ 7,244,276  
                                 
 
See accompanying notes to Unaudited Pro Forma Combined Financial Statements

2


 

 
New FNF
Unaudited Pro Forma Combined Statement of Continuing Operations
For the Nine Months Ended September 30, 2006
(In thousands, except per share data)
 
                                         
          FIS
    Other
             
    Historical
    Pro Forma
    Pro Forma
             
    FNF     Adjustments(1)     Adjustments     Notes     Pro Forma  
 
Total revenue
  $ 7,634,090     $ (3,010,364 )   $ 170,653       (2 )   $ 4,794,379  
                                         
Personnel costs
    2,632,935       (1,245,945 )     17,795       (3 )        
                      3,860       (4 )     1,408,645  
Other operating expenses
    1,706,137       (1,011,725 )     94,417       (4 )     788,829  
Agent commissions
    1,537,489             58,441       (5 )     1,595,930  
Depreciation and amortization
    404,770       (318,304 )                   86,466  
Provision for claim losses
    357,210       (425 )                   356,785  
Interest expense
    183,536       (141,930 )                   41,606  
                                         
Total expenses
    6,822,077       (2,718,329 )     174,513               4,278,261  
                                         
Earnings before income taxes and minority interests
    812,013       (292,035 )     (3,860 )             516,118  
Income tax expense
    302,069       (108,109 )     (1,436 )             192,524  
                                         
Earnings before minority interests
    509,944       (183,926 )     (2,424 )             323,594  
Minority interest expense
    143,381       41       (141,184 )     (6 )     2,238  
                                         
Net income
  $ 366,563     $ (183,967 )   $ 138,760             $ 321,356  
                                         
Net income per share — basic
  $ 2.09                             $ 1.47  
Pro forma weighted average shares — basic
    175,119                               218,741(7 )
Net income per share — diluted
  $ 2.02                             $ 1.45  
                                         
Pro forma weighted average shares — diluted
    180,123                               222,130(7 )
                                         
 
See accompanying notes to Unaudited Pro Forma Combined Financial Statements

3


 

Unaudited Pro Forma Combined Statement of Continuing Operations
for the Year Ended December 31, 2005
 
                                 
          FIS
    Other
       
    Historical
    Pro Forma
    Pro Forma
       
    FNF     Adjustments(1)     Adjustments     Pro Forma  
    (In thousands, except per share data)  
 
Total revenue
  $ 9,668,938     $ 2,776,245     $ 195,713 (2)   $ 7,088,406  
                                 
Personnel costs
    3,224,678       1,276,557       5,147 (3)     1,953,268  
Other operating expenses
    1,716,711       751,282       114,878 (4)     1,080,307  
Agent commissions
    2,060,467             80,835 (5)     2,141,302  
Depreciation and amortization
    406,259       299,637             106,622  
Provision for claim losses
    480,556       1,928             478,628  
Interest expense
    172,327       126,778             45,549  
                                 
Total expenses
    8,060,998       2,456,182       200,860       5,805,676  
                                 
Earnings before income taxes and minority interests
    1,607,940       320,063       (5,147 )     1,282,730  
Income tax expense
    573,391       119,063       (1,835 )     452,493  
                                 
Earnings before minority interests
    1,034,549       201,000       (3,312 )     830,237  
Minority interest expense
    70,443       4,450       (63,465 )(6)     2,528  
                                 
Net income
  $ 964,106     $ 196,550     $ 60,153     $ 827,709  
                                 
Net income per share — basic
  $ 5.56                     $ 3.78  
                                 
Pro forma weighted average shares — basic
    173,475 (7)                     218,729 (7)
                                 
Net income per share — diluted
  $ 5.55                     $ 3.73  
                                 
Pro forma weighted average shares — diluted
    173,647 (7)                     220,029 (7)
                                 
 
See accompanying notes to Unaudited Pro Forma Combined Financial Statements


4


 

Unaudited Pro Forma Combined Statement of Continuing Operations
for the Year Ended December 31, 2004
 
                                 
          FIS
    Other
       
    Historical
    Pro Forma
    Pro Forma
       
    FNF     Adjustments(1)     Adjustments     Pro Forma  
    (In thousands, except per share data)  
 
Total revenue
  $ 8,296,002     $ 2,345,633     $ 212,855 (2)   $ 6,163,224  
                                 
Personnel costs
    2,786,297       1,073,395             1,712,902  
Other operating expenses
    1,599,124       719,770       118,559 (4)     997,913  
Agent commissions
    2,028,926             94,296 (5)     2,123,222  
Depreciation and amortization
    338,434       238,400             100,034  
Provision for claim losses
    311,916       133             311,783  
Interest expense
    47,214       4,496             42,718  
                                 
      7,111,911       2,036,194       212,855       5,288,572  
                                 
Earnings from continuing operations before income taxes and minority interests
    1,184,091       309,439             874,652  
Income tax expense
    438,114       116,350             321,764  
                                 
Earnings from continuing operations before minority interest
    745,977       193,089             552,888  
Minority interest expense
    5,015       3,673             1,342  
                                 
Net income
  $ 740,962     $ 189,416     $     $ 551,546  
                                 
Earnings per share from continuing operations — basic
  $ 4.28                     $ 3.19  
                                 
Weighted average shares — basic
    172,951 (8)                     172,951 (8)
Earnings per share from continuing operations — diluted
  $ 4.28                     $ 3.19  
                                 
Weighted average shares — diluted
    172,951 (8)                     172,951 (8)
 
See accompanying notes to Unaudited Pro Forma Combined Financial Statements


5


 

Unaudited Pro Forma Combined Statement of Continuing Operations
for the Year Ended December 31, 2003
 
                                 
          FIS
    Other
       
    Historical
    Pro Forma
    Pro Forma
       
    FNF     Adjustments(1)     Adjustments     Pro Forma  
    (In thousands, except per share data)  
 
Total revenue
  $ 7,715,215     $ 1,828,750     $ 269,163 (2)   $ 6,155,628  
                                 
Personnel costs
    2,465,026       723,781             1,741,245  
Other operating expenses
    1,448,133       603,927       44,463 (4)     888,669  
Agent commissions
    1,823,241             224,700 (5)     2,047,941  
Depreciation and amortization
    227,937       143,958             83,979  
Provision for claim losses
    287,136                   287,136  
Interest expense
    43,103       1,569             41,534  
                                 
      6,294,576       1,473,235       269,163       5,090,504  
                                 
Earnings from continuing operations before income taxes and minority interests
    1,420,639       355,515             1,065,124  
Income tax expense
    539,843       137,940             401,903  
                                 
Earnings from continuing operations before minority interests
    880,796       217,575             663,221  
Minority interest
    18,976       14,518             4,458  
                                 
Net income
  $ 861,820     $ 203,057     $     $ 658,763  
                                 
 
See accompanying notes to Unaudited Pro Forma Combined Financial Statements


6


 

Notes to Unaudited Pro Forma Combined Financial Statements
 
Notes to Unaudited Pro Forma Combined Balance Sheet as of September 30, 2006
 
This combined balance sheet includes the historical balance sheet of FNF and removes the historical balance sheet of FIS and FNF’s minority interest liability related to FIS and FNT as though the merger had occurred on September 30, 2006.
 
(1) This column represents the historical balance sheet of FIS as included in FNF’s consolidated balance sheet as of September 30, 2006.
 
(2) This amount represents an excess of FIS’ historical goodwill balance related to Certegy over that recorded at FNF. In connection with the merger of FIS and Certegy, FNF’s basis is $73.6 million lower than it would have been if FNF had applied purchase accounting to all stockholders’ interests. This basis difference was recorded as a reduction of goodwill and minority interests in FNF’s consolidation.
 
(3) This represents the elimination of FNF’s minority interest liability balance relating to FIS and FNT of $1,418.2 million and $451.2 million, respectively, which was carried on FNF’s balance sheet as of September 30, 2006.
 
Notes to Unaudited Pro Forma Combined Statements of Continuing Operations for the Nine Months Ended September 30, 2006 and Years Ended December 31, 2005, 2004 and 2003
 
These combined statements of continuing operations include the historical statements of continuing operations of FNF and remove the results of operations of FIS and FNF minority interest expense relating to FIS and FNT as though the transaction had occurred on January 1, 2005.
 
(1) This column represents the historical results of operations of FIS as included in FNF’s consolidated results of operations for the periods presented.
 
(2) This represents the intercompany revenues relating to various agreements recorded on FIS’s income statement that had already been eliminated from the consolidated results of operations of FNF. These revenues amounted to $170.7 million for the nine months ended September 30, 2006 and $195.7 million, $212.9 million, and $269.2 million for the years ended December 31, 2005, 2004, and 2003, respectively.
 
(3) This represents the compensation expense relating to the restricted stock granted immediately following the proposed transactions. At the closing, FNT granted 785,000 shares of restricted stock to certain executive officers and directors which will vest over 3 years. Total expense based on FNT’s closing market value of $19.67 per share is $15.4 million and is recorded as a pro forma adjustment of $5.1 million for the year ended December 31, 2005 and $3.9 million for the nine months ended September 30, 2006.
 
(4) This represents the intercompany expenses related to various agreements that were eliminated in the consolidated results of operations of FNF, but will be third-party expenses subsequent to the transaction. These expenses amounted to $98.3 million for the nine months ended September 30, 2006 and $114.9 million, $118.6 million, and $44.5 million for the years ended December 31, 2005, 2004 and 2003, respectively.
 
(5) This represents the additional agent commissions paid by FNF to FIS that were previously eliminated in the consolidated results of FNF, but will be a third-party expense subsequent to the transaction. These commissions amounted to $58.4 million in the nine months ended September 30, 2006 and $80.8 million, $94.3 million, and $224.7 million in the years ended December 31, 2005, 2004, and 2003, respectively.
 
(6) This represents the elimination of the minority interest expense recorded by FNF relating to its earnings in FIS and FNT of $44.8 million and $18.7 million for the year ended December 31, 2005 and $88.0 million and $53.2 million for the nine months ended September 30, 2006.


7


 

 
(7) Amounts in the Historical FNF column represent FNT historical weighted average shares for the nine months ended September 30, 2006 and the year ended December 31, 2005. Amounts in the Pro Forma column have been calculated as follows:
 
                 
    Nine Months Ended
    Year Ended
 
    September 30, 2006     December 31, 2005  
 
Historical weighted average shares — basic
    173,475       173,463  
Additional shares issued
    45,266       45,266  
                 
Pro forma weighted average shares — basic
    218,741       218,729  
                 
Historical weighted average shares — diluted
    173,648       173,575  
Additional shares issued
    45,266       45,266  
Additional dilution from options assumed
    2,591       2,792  
Additional dilution from restricted stock
    625       396  
                 
      222,130       222,029  
                 
 
(8) Pro forma weighted average shares for the year ended December 31, 2004 have been calculated using the number of outstanding shares of FNF common stock as of a date prior to FNF’s distribution of FNT stock on October 18, 2005.


8