UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to

Fidelity National Information Services, Inc.

Georgia		37-1490331
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

601 Riverside Avenue
Jacksonville, Florida		32204
(Address of principal executive offices)		(Zip Code)

(904) 854-8100
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ     NO o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) 

YES o     NO þ

     As of July 31, 2008, 189,719,809 shares of the Registrant’s Common Stock were outstanding.

 

 

FORM 10-Q
QUARTERLY REPORT
Quarter Ended June 30, 2008

INDEX

				Page
Part I:		FINANCIAL INFORMATION
Item 1.		Consolidated Financial Statements (unaudited)
A.		Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007			3
B.		Consolidated Statements of Earnings for the three and six month periods ended June 30, 2008 and 2007			4
C.		Consolidated Statements of Comprehensive Earnings for the three and six month periods ended June 30, 2008 and 2007			5
D.		Consolidated Statement of Stockholders’ Equity for the six month period ended June 30, 2008			6
E.		Consolidated Statements of Cash Flows for the six month periods ended June 30, 2008 and 2007			7
F.		Notes to Consolidated Financial Statements			8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3.		Quantitative and Qualitative Disclosure About Market Risk			35
Item 4.		Controls and Procedures			35
Part II:		OTHER INFORMATION
Item 1.		Legal Proceedings			35
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 4.		Submission of Matters to a Vote of Security Holders			36
Item 6.		Exhibits			36
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)

		June 30, 2008				December 31, 2007
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	207,035			$	355,278
Settlement deposits			33,665				21,162
Trade receivables, net of allowance for doubtful accounts of $65.3 million and $53.4 million at June 30, 2008 and December 31, 2007, respectively			914,204				825,915
Settlement receivables			109,056				116,935
Other receivables			189,248				206,746
Receivable from FNF			8,727				14,907
Prepaid expenses and other current assets			155,187				168,454
Deferred income taxes			120,479				120,098
Total current assets			1,737,601				1,829,495
Property and equipment, net of accumulated depreciation of $365.8 million and $331.5 million at June 30, 2008 and December 31, 2007, respectively			394,496				392,508
Goodwill			5,337,592				5,326,831
Intangible assets, net of accumulated amortization of $693.9 million and $611.4 million at June 30, 2008 and December 31, 2007, respectively			1,007,613				1,030,582
Computer software, net of accumulated amortization of $401.6 million and $334.5 million at June 30, 2008 and December 31, 2007, respectively			825,929				775,151
Deferred contract costs			274,758				256,852
Investment in unconsolidated entities			28,136				30,491
Long term note receivable from FNF			5,859				6,154
Other noncurrent assets			166,461				146,519
Total assets		$	9,778,445			$	9,794,583
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	540,845			$	606,179
Settlement payables			140,411				129,799
Current portion of long-term debt			297,129				272,014
Deferred revenues			243,717				246,222
Total current liabilities			1,222,102				1,254,214
Deferred revenues			130,349				111,884
Deferred income taxes			402,753				394,972
Long-term debt, excluding current portion			3,975,078				4,003,383
Other long-term liabilities			217,356				234,757
Total liabilities			5,947,638				5,999,210
Minority interest			75,290				14,194
Stockholders’ equity:
Preferred stock $0.01 par value; 200 million shares authorized, none issued and outstanding at June 30, 2008 and December 31, 2007			—				—
Common stock $0.01 par value; 600 million shares authorized, 199.4 million and 199.0 million shares issued at June 30, 2008 and December 31, 2007, respectively			1,994				1,990
Additional paid in capital			3,068,804				3,038,203
Retained earnings			1,022,664				899,512
Accumulated other comprehensive earnings			86,099				53,389
Treasury stock, $0.01 par value, 9.8 million and 4.3 million shares at June 30, 2008 and December 31, 2007, respectively			(424,044	)			(211,915	)
Total stockholders’ equity			3,755,517				3,781,179
Total liabilities and stockholders’ equity		$	9,778,445			$	9,794,583

See accompanying notes to consolidated financial statements (unaudited).

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)

		Three month periods								Six month periods
		ended June 30,								ended June 30,
		2008				2007				2008				2007
Processing and services revenues, including $72.7 million and $69.2 million of revenues from related parties for the three month periods and $137.4 million and $130.6 million of revenues from related parties for the six month periods ended June 30, 2008 and 2007, respectively		$	1,339,038			$	1,125,034			$	2,629,990			$	2,196,474
Cost of revenues, including expense incurred to related parties of $8.4 million and $0.0 million for the three month periods and $17.0 million and $0.0 million for the six month periods ended June 30, 2008 and 2007, respectively			962,964				802,461				1,891,519				1,574,842
Gross profit			376,074				322,573				738,471				621,632
Selling, general, and administrative expenses, including expense incurred to (reimbursed from) related parties of $2.0 million and $(2.2) million for the three month periods and $4.3 million and $(2.3) million for the six month periods ended June 30, 2008 and 2007, respectively			175,384				119,616				338,935				232,698
Research and development costs			26,567				23,588				53,635				50,697
Operating income			174,123				179,369				345,901				338,237
Other income (expense):
Interest income			1,904				490				4,922				1,049
Interest expense			(62,800	)			(42,969	)			(125,248	)			(115,084	)
Gain on sale of Covansys stock			—				92,044				—				92,044
Other income, net			2,183				811				1,732				1,476
Total other (expense) income			(58,713	)			50,376				(118,594	)			(20,515	)
Earnings before income taxes, equity in (losses) earnings of unconsolidated entities, minority interest, and discontinued operations			115,410				229,745				227,307				317,722
Provision for income taxes			40,867				84,580				81,822				117,309
Earnings before equity in (losses) earnings of unconsolidated entities, minority interest, and discontinued operations			74,543				145,165				145,485				200,413
Equity in (losses) earnings of unconsolidated entities			(317	)			736				(2,274	)			1,672
Minority interest			(716	)			(286	)			(838	)			(110	)
Net earnings from continuing operations			73,510				145,615				142,373				201,975
(Losses) earnings from discontinued operations, net of tax			(1,603	)			2,389				34				5,532
Net earnings		$	71,907			$	148,004			$	142,407			$	207,507
Net earnings per share — basic from continuing operations		$	0.38			$	0.76			$	0.74			$	1.05
Net earnings per share — basic from discontinued operations			(0.01	)			0.01				—				0.03
Net earnings per share — basic		$	0.37			$	0.77			$	0.74			$	1.08
Weighted average shares outstanding — basic			192,538				192,743				193,541				192,323
Net earnings per share — diluted from continuing operations		$	0.38			$	0.74			$	0.73			$	1.03
Net earnings per share — diluted from discontinued operations			(0.01	)			0.01				—				0.03
Net earnings per share — diluted		$	0.37			$	0.75			$	0.73			$	1.06
Weighted average shares outstanding — diluted			194,448				196,977				195,493				196,395
Cash dividends paid per share		$	0.05			$	0.05			$	0.10			$	0.10

See accompanying notes to consolidated financial statements (unaudited).

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Comprehensive Earnings
(In thousands)
(Unaudited)

		Three month periods								Six month periods
		ended June 30,								ended June 30,
		2008				2007				2008				2007
Net earnings		$	71,907			$	148,004			$	142,407			$	207,507
Other comprehensive earnings (losses):
Unrealized gain on Covansys warrants, net of tax (1)			—				7,369				—				7,647
Unrealized gain (loss) on interest rate swaps, net of tax (2)			41,964				5,211				(6,419	)			4,069
Unrealized loss on other investments, net of tax			(139	)			(69	)			(13	)			(46	)
Unrealized gain on foreign currency translation, net of tax (3)			15,798				15,913				39,142				19,770
Other comprehensive earnings			57,623				28,424				32,710				31,440
Comprehensive earnings		$	129,530			$	176,428			$	175,117			$	238,947

See accompanying notes to consolidated financial statements (unaudited).

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statement of Stockholders’ Equity
(In thousands)
(Unaudited)

																		Accumulated
																		Other
										Additional								Comprehensive												Total
		Common				Common				Paid In				Retained				Earnings				Treasury				Treasury				Stockholders’
		Shares				Stock				Capital				Earnings				(Loss)				Shares				Stock				Equity
Balances, December 31, 2007			199,006			$	1,990			$	3,038,203			$	899,512			$	53,389				(4,336	)		($	211,915	)		$	3,781,179
Net Earnings			—				—				—				142,407				—				—				—				142,407
Issuance of restricted stock			364				4				(4	)			—				—				—				—				—
Exercise of stock options			—				—				(12,494	)			—				—				624				24,039				11,545
Tax benefit associated with exercise of stock options			—				—				932				—				—				—				—				932
Stock-based compensation			—				—				42,167				—				—				—				—				42,167
Cash dividends paid ($0.10 per share)			—				—				—				(19,255	)			—				—				—				(19,255	)
Purchases of treasury stock			—				—				—				—				—				(6,045	)			(236,168	)			(236,168	)
Unrealized loss on investments and derivatives, net			—				—				—				—				(6,432	)			—				—				(6,432	)
Unrealized gain on foreign currency translation			—				—				—				—				39,142				—				—				39,142
Balances, June 30, 2008			199,370			$	1,994			$	3,068,804			$	1,022,664			$	86,099				(9,757	)		($	424,044	)		$	3,755,517

See accompanying notes to consolidated financial statements (unaudited).

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

		Six month periods
		ended June 30,
		2008				2007
Cash flows from operating activities:
Net earnings		$	142,407			$	207,507
Adjustment to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			244,517				224,504
Gain on sale of Covansys stock			—				(92,044	)
Amortization of debt issue costs			2,859				28,436
Gain on sale of company assets			(1,040	)			—
Stock-based compensation			42,167				17,240
Deferred income taxes			3,030				3,551
Income tax benefit from exercise of stock options			(932	)			(11,161	)
Equity in losses (earnings) of unconsolidated entities			2,274				(1,672	)
Minority interest			838				664
Changes in assets and liabilities, net of effects from acquisitions:
Net increase in trade receivables			(58,199	)			(119,223	)
Net increase in prepaid expenses and other assets			(6,714	)			(45,890	)
Net increase in deferred contract costs			(39,502	)			(25,741	)
Net increase in deferred revenue			15,696				4,389
Net (decrease) increase in accounts payable, accrued liabilities, and other liabilities			(104,569	)			52,527
Net cash provided by operating activities			242,832				243,087
Cash flows from investing activities:
Additions to property and equipment			(43,896	)			(60,202	)
Additions to capitalized software			(111,750	)			(93,808	)
Cash received from sale of Covansys stock			—				136,338
Other investing activities			(4,665	)			—
Net proceeds from sale of company assets			33,506				—
Acquisitions, net of cash acquired			(17,404	)			(65,750	)
Net cash used in investing activities			(144,209	)			(83,422	)
Cash flows from financing activities:
Borrowings			2,699,600				2,700,300
Debt service payments			(2,704,573	)			(2,874,198	)
Capitalized debt issuance costs			(13	)			(12,577	)
Income tax benefits from exercise of stock options			932				11,161
Stock options exercised			11,545				43,194
Treasury stock purchases			(236,168	)			—
Dividends paid			(19,255	)			(19,267	)
Net cash used in financing activities			(247,932	)			(151,387	)
Effect of foreign currency exchange rates on cash			1,066				859
Net (decrease) increase in cash and cash equivalents			(148,243	)			9,137
Cash and cash equivalents, beginning of period			355,278				211,753
Cash and cash equivalents, end of period		$	207,035			$	220,890
Cash paid for interest		$	124,178			$	92,208
Cash paid for taxes		$	46,532			$	55,455

See accompanying notes to consolidated financial statements (unaudited).

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

     Unless stated otherwise or the context otherwise requires, all references to “FIS,” “we,” the “Company” or the “registrant”: (a) with respect to periods after the Certegy Merger described below, are to Fidelity National Information Services, Inc., a Georgia corporation formerly known as Certegy Inc., which was the surviving legal entity in the Certegy Merger; and (b) with respect to periods up to and including the Certegy Merger, are to Fidelity National Information Services, Inc., a Delaware corporation that merged into Certegy in the Certegy Merger but was deemed the acquirer from an accounting perspective, as described below; all references to “Certegy” are to Certegy Inc., and its subsidiaries, with respect to periods prior to the Certegy Merger; all references to “eFunds” are to eFunds Corporation, and its subsidiaries, as acquired by FIS (Note 5); all references to “Old FNF” are to Fidelity National Financial, Inc., a Delaware corporation that owned a majority of the Company’s shares through November 9, 2006; and all references to “FNF” are to Fidelity National Financial, Inc. (formerly known as Fidelity National Title Group, Inc. (“FNT”)), formerly a subsidiary of Old FNF but now an independent company that remains a related entity from an accounting perspective.

(1) Basis of Presentation

     The unaudited financial information included in this report includes the accounts of Fidelity National Information Services, Inc. and its subsidiaries prepared in accordance with generally accepted accounting principles and the instructions to Form 10-Q and Article 10 of Regulation S-X. All adjustments considered necessary for a fair presentation have been included. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. The preparation of these Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

     We are a leading provider of technology solutions, processing services, and information-based services to the financial services industry. Our reportable segments are Transaction Processing Services and Lender Processing Services.

	•		Transaction Processing Services. This segment focuses on serving the processing needs of financial institutions. Our primary software applications function as the underlying infrastructure of a financial institution’s core processing environment. These applications include core bank processing software, which banks use to maintain the primary records of their customer accounts. We also provide a number of complementary applications and services, such as item processing and electronic funds transfer, that interact directly with the core processing applications, and applications that facilitate interactions between our financial institution customers and their clients such as online banking and bill payment services and fraud prevention and detection services. We offer these applications and services through a range of delivery and service models, including on-site outsourcing and remote processing arrangements, as well as on a licensed software basis for installation on customer-owned and operated systems. This segment also includes card issuer services, which enable banks, credit unions, and others to issue VISA and MasterCard credit and debit cards, private label cards, and other electronic payment cards for use by both consumer and business accounts. In addition, we provide point-of-sale check verification and guarantee services to retailers.
	•		Lender Processing Services. This segment provides core mortgage processing, outsourced business processes, and information solutions primarily to national lenders and loan servicers. These processes include centralized, title agency and closing services offered to first mortgage, refinance, home equity and sub-prime lenders. This segment’s information solutions include appraisal and valuation services, real estate tax services and flood zone information. In addition, this segment provides default management services to national lenders and loan servicers, allowing customers to outsource the business processes necessary to take a loan and the underlying real estate securing the loan through the default and foreclosure process. On July 2, 2008, we completed the spin-off of the majority of the Lender Processing Services segment into a separate publicly traded company, referred as Lender Processing Services, Inc. (“LPS, Inc.”) (Note 13).

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

     Corporate overhead costs and other operations that are not included in our operating segments are included in Corporate and Other.

     On September 12, 2007, we completed the acquisition of eFunds Corporation (“eFunds”) (Note 5). The eFunds businesses have been integrated into our operations within the Transaction Processing Services segment.

     Certain reclassifications have been made in the 2007 consolidated financial statements to conform to the classifications used in 2008.

(2) Discontinued Operations

During the first quarter of 2008 and the third quarter of 2007, we discontinued certain operations in the Transaction Processing Services and Lender Processing Services segments, which are reported as discontinued operations in the consolidated statements of earnings for the three and six month periods ended June 30, 2008 and 2007, in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). On July 2, 2008, we completed the spin-off of the Lender Processing Services segment into a separate publicly traded company, referred to as Lender Processing Services, Inc. (see Note 13- “Subsequent Events”). The results of operations for the Lender Processing Services segment continue to be included in net earnings from continuing operations in the consolidated statements of earnings for the three- and six-month periods ended June 30, 2008 and 2007, and in accordance with SFAS No. 144,will not be reflected as discontinued operations in the consolidated statements of earnings until we report results for the three- and nine-month periods ending September 30, 2008 and 2007.

     Certegy Gaming Services, Inc.

     On April 1, 2008, we sold Certegy Gaming Services, Inc. (“Certegy Game”) for $25.0 million, realizing a pretax loss of $0.8 million, because its operations were not in line with our strategic plans. Certegy Game had revenues of $24.9 million during the three month period ended June 30, 2007 and $27.2 million and $49.5 million during the six month periods ended June 30, 2008 and 2007, respectively. Certegy Game had earnings (losses) before taxes of ($1.0) million during the three month period ended June 30, 2007 and $1.2 million (excluding the pretax loss) and ($1.2) million during the six month periods ended June 30, 2008 and 2007, respectively.

     FIS Credit Services, Inc.

     On February 29, 2008, we sold FIS Credit Services, Inc. (“Credit”) for $6.0 million, realizing a pre-tax gain of $1.6 million, because its operations were not in line with our strategic plans. Credit had revenues of $3.4 million during the three month period ended June 30, 2007 and $1.4 million and $7.3 million during the six month periods ended June 30, 2008 and 2007, respectively. Credit had losses before taxes of $0.4 million during the three month period ended June 30, 2007 and $0.3 million (excluding the realized gain) and $0.9 million during the six month periods ended June 30, 2008 and 2007, respectively.

     Homebuilders Financial Network, LLC

     During the six month period ended June 30, 2008, we exited the Homebuilders Financial Network, LLC (“HFN”) business due to the loss of a major customer. HFN had revenues of $0.2 million and $3.1 million during the three month periods and $1.4 million and $6.2 million during the six month periods ended June 30, 2008 and 2007, respectively. HFN had earnings (losses) before taxes of $0.7 million and $0.8 million during the three month periods and ($2.7) million and $1.5 million during the six month periods ended June 30, 2008 and 2007, respectively.

     Property Insight, LLC

     On August 31, 2007, we sold Property Insight, LLC (“Property Insight”) to FNF because its operations were not in line with our strategic plans. Property Insight had revenues of $19.7 million and $40.8 million, and earnings before taxes of $5.2 million and $10.7 million during the three and six month periods ended June 30, 2007, respectively.

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

(3) Related Party Transactions

     We have historically conducted business with FNF and its subsidiaries. A number of these business activities were based upon agreements between FNF and entities which have been a part of our Lender Processing Services segment. As part of the spin-off of the Lender Processing Services business, a number of these agreements have been amended and renegotiated by FNF, FIS and LPS, Inc. and became effective between these parties in the third quarter of 2008 when the spin-off occurred on July 2, 2008. A summary of the revenue producing agreements that were in effect through June 30, 2008 is as follows:

•		Agreements to provide title agency services. These agreements allow us to provide services to existing customers through loan facilitation transactions, primarily with large national lenders. The arrangement involves FIS providing title agency services which result in the issuance of title policies on behalf of title insurance underwriters owned by FNF and its subsidiaries. Subject to certain early termination provisions for cause, each of these agreements may be terminated upon five years’ prior written notice, which notice may not be given until after the fifth anniversary of the effective date of each agreement, which range from July 2004 through September 2006 (thus effectively resulting in a minimum ten-year term and a rolling one-year term thereafter). Under these agreement, we earn commissions which, in aggregate, are equal to approximately 89% of the total title premium from title policies that we place with subsidiaries of FNF. We also perform similar functions in connection with trustee sale guarantees, a form of title insurance that subsidiaries of FNF issue as part of the foreclosure process on a defaulted loan. These agreements primarily related to the Lender Processing Services segment and will cease to be part of our reported results subsequent to the spin-off.
•		Agreement to provide data processing services. This agreement governs the revenues to be earned by us for providing IT support services and software, primarily infrastructure support and data center management, to FNF and its subsidiaries. Subject to certain early termination provisions (including the payment of minimum monthly service and termination fees), this agreement has an initial term of five years from February 2006 with an option to renew for one or two additional years. In connection with the spin-off this agreement will be amended so that certain of these services will be provided on revised terms and conditions.
•		Agreements to provide software development and services. These agreements govern the fee structure under which we are paid for providing software development and services to FNF which consist of developing software for use in the title operations of FNF. These agreements primarily related to the Lender Processing Services segment and will cease to be part of our reported results subsequent to the spin-off. In connection with the spin-off LPS, Inc., will enter into new agreements with FNF to provide these services.
•		Arrangements to provide other real estate related services. Under these arrangements we are paid for providing other real estate related services to FNF, which consist primarily of data, tax and title related services required by the title insurance operations. These agreements primarily related to the Lender Processing Services segment and will cease to be part of our reported results subsequent to the spin-off.

     A detail of FNF related party items included in revenues for the three and six month periods ending June 30, 2008 and 2007, is as follows (in millions):

		Three months ended								Six months ended
		June 30,								June 30,
		2008				2007				2008				2007
Title agency commissions		$	34.2			$	36.2			$	66.8			$	68.4
Data processing services revenue			11.4				12.6				22.6				24.6
Software and services revenue			14.3				15.4				28.0				28.6
Other real-estate related services			12.8				5.0				20.0				9.0
Total revenues		$	72.7			$	69.2			$	137.4			$	130.6

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

     Further, we also entered into service agreements with FNF to provide certain services to us. A summary of these agreements in effect through June 30, 2008 is as follows:

•

Agreements by FNF to provide corporate services to us. Since November 9, 2006, these charges relate to certain activities performed or recorded by FNF on behalf of us. The pricing of these services is at cost for services which are either directly attributable to us, or in certain circumstances, an allocation of our share of the total costs incurred by FNF in providing such services based on estimates that FNF and we believe to be reasonable. Subsequent to the spin-off of the Lender Processing Services segment, we will have certain agreements to provide certain corporate services to LPS, Inc. for a period of time.

•

Licensing, leasing, cost sharing and other agreements. These agreements provide for the reimbursement of certain amounts from FNF or its subsidiaries related to various miscellaneous licensing, leasing, and cost sharing agreements, as well as the payment of certain amounts by us to FNF or its subsidiaries in connection with our use of certain intellectual property or other assets of or services provided by FNF.

     On August 31, 2007, we completed the sale of Property Insight to FNF. The net earnings from Property Insight, including related party revenues and expenses, are classified as earnings from discontinued operations for the three and six month periods ended June 30, 2007. Property Insight’s related party revenues and expenses with FNF were $10.4 million and $0.8 million during the three month period and $23.1 million and $0.9 million during the six month period ended June 30, 2007, respectively. As a result of the transaction, during the three and six month periods ended June 30, 2008, we incurred related party expenses relating to our title agency operation’s access to Property Insight’s data subsequent to the sale, which are included in the table below.

     A detail of FNF related party items included in operating expenses (net of expense reimbursements) for the three and six month periods ending June 30, 2008 and 2007, is as follows (in millions):

		Three months ended								Six months ended
		June 30,								June 30,
		2008				2007				2008				2007
Title plant expenses		$	2.1			$	—			$	4.7			$	—
Equipment leasing			6.3				—				12.3				—
Corporate services			0.4				0.6				0.8				1.5
Licensing, cost sharing, and other services			1.6				(2.8	)			3.5				(3.8	)
Total expenses		$	10.4			$	(2.2	)		$	21.3			$	(2.3	)

     We believe the amounts earned from or charged by FNF to us under each of the foregoing service arrangements are fair and reasonable. We believe that the approximate 89% aggregate commission rate on title insurance policies is consistent with the blended rate that would be available to a third party title agent given the amount and the geographic distribution of the business produced and the low risk of loss profile of the business placed. Our information technology infrastructure support and data center management services to FNF are priced within the range of prices we offer to third parties. However, the amounts we earned or that were charged under these arrangements were not negotiated at arm’s-length, and may not represent the terms that we might have obtained from an unrelated third party.

     We also provide data processing services to Sedgwick CMS, Inc. (“Sedgwick”), a company in which FNF holds an approximate 32% equity interest. We recorded revenue relating to the Sedgwick arrangement of $9.7 million and $10.3 million during the three month periods and $19.4 million and $18.6 million during the six month periods ended June 30, 2008 and 2007, respectively.

     Other related party transactions:

     Merger with FNF Capital

     On October 26, 2006, we completed a merger with FNF Capital, Inc. (“FNF Capital”), a leasing subsidiary of Old FNF. We issued 279,000 shares of our common stock to Old FNF in exchange for a majority ownership in FNF Capital. The transaction was recorded at Old FNF’s historical basis in FNF Capital of approximately $2.3 million and we purchased the minority ownership shortly thereafter for $3.8 million in cash. Through the merger, we assumed a note payable to Old FNF of $13.9 million, and we recorded interest expense related to this note of $0.2 million and $0.4 million during the three and six month periods ended June 30, 2007, respectively. On September 30, 2007, we sold certain leasing assets of FNF Capital back to FNF for $15.0 million and FNF assumed the

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aforementioned note payable and other liabilities. We also recorded a $7.3 million note receivable from FNF relating to the transaction, and we recorded $0.1 million and $0.1 million of interest income related to this note during the three and six month periods ended June 30, 2008.

Investment by FNF in Fidelity National Real Estate Solutions, Inc.

     On December 31, 2006, FNF contributed $52.5 million to Fidelity National Real Estate Solutions, Inc. (“FNRES”), an FIS subsidiary, for approximately 61% of the outstanding shares of FNRES. As a result, since December 31, 2006, we no longer consolidate FNRES, but have recorded our remaining 39% interest as an equity investment in the amount of $28.1 million and $30.5 million as of June 30, 2008 and December 31, 2007, respectively. We recorded $0.4 million and $0.6 million for the three month periods and $2.4 million and $1.1 million for the six month periods ended June 30, 2008 and 2007, respectively in equity losses (net of tax), from our investment in FNRES. The equity investment in FNRES was transferred to LPS, Inc. in the spin-off transaction.

Transactions with ABN AMRO Real and Banco Bradesco S.A.

     We recorded revenues for card and item processing services of $28.3 million and $15.5 million for the three month periods and $42.8 million and $28.6 million for the six month periods ended June 30, 2008 and 2007, respectively, from ABN AMRO Real (“ABN”). We recorded card and item processing revenues of $23.8 million and $12.0 million for the three month periods and $44.6 million and $20.5 million for the six month periods ended June 30, 2008 and 2007, respectively, from Banco Bradesco (“Bradesco”). Both ABN and Bradesco are venture partners in our Brazilian card business.

     In March, 2006 we entered into an agreement with Banco Bradesco and Banco ABN AMRO Real (“banks”) to form a venture to provide comprehensive, fully outsourced card processing services to Brazilian card issuers. In exchange for a 51% controlling interest in the venture, we contributed our existing business contracts and Brazilian card processing infrastructure and committed to make enhancements to our card processing system to meet the processing needs of the partner banks and their affiliates. The banks executed long-term, exclusive contracts to process their card portfolios with the venture in exchange for an aggregate 49% interest in the venture. The conversion of the banks existing card portfolios would follow completion of the system enhancements required for each respective bank. The venture agreement had certain provisions allowing for the unwind of the venture if conversions were unsuccessful. These unwind rights terminated at the first conversion date, which occurred in the second quarter 2008. Due to the lapsing of the unwind rights in the second quarter 2008, we recorded a $63 million minority interest liability, representing the 49% interest in the venture owned by the banks, and an offsetting customer contract intangible asset. This intangible asset will be amortized over the contract term, which is ten years from final bank conversion. The final value to be assigned to customer intangible assets will be based on the fair value of the venture upon completion of the system enhancements and final bank conversions and may require adjustments; however, we do not believe such adjustments, if any, will have a material impact on our results of operations or financial condition. Final bank conversions are expected to be completed in the first half of 2009.

     We contributed approximately $113 million of total development costs to the venture through June 30, 2008. Costs in excess of $50 million are to be contractually shared by the parties 75% by us and 25% by the banks. We will also transfer additional consideration to the banks totaling approximately $105 million based on current exchange rates upon final conversion of their card portfolios.

(4) Unaudited Net Earnings per Share

     The basic weighted average shares and common stock equivalents for the three and six month periods ended June 30, 2008 and 2007 are computed in accordance with FASB Statement 128, Earnings per Share, using the treasury stock method.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

     The following table summarizes the net earnings per share, for the three and six month periods ending June 30, 2008 and 2007 (in thousands, except per share amounts):

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
Net earnings from continuing operations		$	73,510			$	145,615			$	142,373			$	201,975
Net earnings (losses) from discontinued operations			(1,603	)			2,389				34				5,532
Net earnings		$	71,907			$	148,004			$	142,407			$	207,507
Weighted average shares outstanding — basic			192,538				192,743				193,541				192,323
Plus: Common stock equivalent shares assumed from conversion of options			1,910				4,234				1,952				4,072
Weighted average shares outstanding — diluted			194,448				196,977				195,493				196,395
Basic net earnings per share from continuing operations		$	0.38			$	0.76			$	0.74			$	1.05
Basic net earnings (losses) per share from discontinued operations			(0.01	)			0.01				—				0.03
Basic net earnings per share		$	0.37			$	0.77			$	0.74			$	1.08
Diluted net earnings per share from continuing operations		$	0.38			$	0.74			$	0.73			$	1.03
Diluted net earnings (losses) per share from discontinued operations			(0.01	)			0.01				—				0.03
Diluted net earnings per share		$	0.37			$	0.75			$	0.73			$	1.06

     Options to purchase approximately 9.4 million shares and 2.7 million shares of our common stock for the three month periods and 9.0 million shares and 3.8 million shares of our common stock for the six month periods ended June 30, 2008 and 2007, respectively, were not included in the computation of diluted earnings per share because they were antidilutive.

(5) Acquisitions

     The results of operations and financial position of the entities acquired during the six month period ended June 30, 2008 and the year ended December 31, 2007 are included in the Consolidated Financial Statements from and after the date of acquisition.

eFunds Corporation

     On September 12, 2007, we completed the acquisition of eFunds (the “eFunds Acquisition”). This acquisition expanded our presence in risk management services, EFT services, prepaid/gift card processing, and global outsourcing solutions to financial services companies in the U.S. and internationally. Pursuant to the Agreement and Plan of Merger (the “eFunds Merger Agreement”) dated as of June 26, 2007, eFunds became a wholly-owned subsidiary of FIS. The issued and outstanding shares of eFunds common stock, par value $0.01 per share, were converted into the right to receive $36.50 per share in cash from us.

     The total purchase price was as follows (in millions):

Cash paid for eFunds’ common stock		$	1,744.9
Value of eFunds’ stock awards			37.6
Transaction costs			8.3
		$	1,790.8

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     The purchase price has been initially allocated to eFunds’ tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of September 12, 2007. Goodwill has been recorded based on the amount that the purchase price exceeds the fair value of the net assets acquired. The initial purchase price allocation is as follows (in millions):

Cash		$	99.3
Trade and other receivables			129.3
Land, buildings, and equipment			77.9
Other assets			17.1
Computer software			59.6
Intangible assets			175.2
Goodwill			1,542.4
Total liabilities assumed			(310.0	)
Total purchase price		$	1,790.8

     The allocation of the purchase price to intangible assets, including computer software and customer relationships, is based on valuations performed to determine the values of such assets as of the merger date.

     The following table summarizes the liabilities assumed in the eFunds Acquisition (in millions):

Notes payable and capital lease obligations		$	103.2
Deferred income taxes			6.9
Estimated severance payments			41.6
Estimated employee relocation and facility closure costs			22.0
Other merger related costs			20.2
Other operating liabilities			116.1
Total liabilities assumed		$	310.0

     We are currently evaluating the various employment agreements, lease agreements, vendor arrangements, and customer contracts of eFunds. This evaluation has resulted in the recognition of certain liabilities associated with exiting activities of the acquired company. We believe the evaluations have been substantially completed as of June 30, 2008. If we determine that adjustments to the amounts recorded as of June 30, 2008 are necessary, we will record these adjustments during the 2008 third quarter, prior to the one year anniversary of the merger.

     In connection with the eFunds Acquisition, we also adopted eFunds’ stock option plans and registered approximately 2.2 million options and 0.2 million restricted stock units in replacement of similar outstanding awards held by eFunds employees. The amounts attributable to vested options are included as an adjustment to the purchase price, and the amounts attributable to unvested options and restricted stock units will be expensed over the remaining vesting period based on a valuation as of the date of closing. On March 31, 2008, as approved by the Compensation Committee of the Board of Directors, we accelerated the vesting of all stock awards held by eFunds employees. As a result we recorded $14.1 million in additional stock compensation expense for the six months ended June 30, 2008.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

     Pro Forma Results

     Selected unaudited pro forma results of operations for the three and six month periods ended June 30, 2008 and 2007, assuming the eFunds Acquisition had occurred as of January 1, 2007, and using actual general and administrative expenses prior to the acquisition and merger, are presented for comparative purposes below (in thousands):

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
Total revenues		$	1,339,038			$	1,263,824			$	2,629,990			$	2,469,306
Net earnings from continuing operations		$	73,510			$	130,086			$	142,373			$	170,400
Pro forma earnings per share — basic from continuing operations		$	0.38			$	0.67			$	0.74			$	0.89
Pro forma earnings per share — diluted from continuing operations		$	0.38			$	0.66			$	0.73			$	0.87

Other acquisitions:

     The following transactions with acquisition prices between $10 million and $100 million were completed by us during the period from January 1, 2007 through June 30, 2008. Purchase prices reflected in the table are net of cash acquired:

Name of Company Acquired		Date Acquired		Purchase Price
Second Foundation, Inc.		February 15, 2007		$18.9 million
Espiel, Inc. and Financial Systems Integrators, Inc.		June 8, 2007		$43.3 million
McDash Analytics		May 15, 2008		$19.1 million

(6) Long-Term Debt

     Through the eFunds Acquisition on September 12, 2007, we assumed $100.0 million in long-term notes payable previously issued by eFunds (the “eFunds Notes”). On February 26, 2008, we redeemed the eFunds Notes for a total of $109.3 million, which included a make-whole premium of $9.3 million.

     As of June 30, 2008, we had entered into the following interest rate swap transactions converting a portion of our interest rate exposure on on our term loans from variable to fixed:

				Notional Amount				Bank Pays		FIS pays
Effective Date		Termination Date		(in millions)				Variable Rate of(1)		Fixed Rate of(2)
April 11, 2007		April 11, 2010		$	850.0			1 Month Libor			4.92	%
October 11, 2007		October 11, 2009			1,000.0			1 Month Libor			4.73	%
December 11, 2007		December 11, 2009			250.0			1 Month Libor			3.80	%
				$	2,100.0

     We have designated these interest rate swaps as cash flow hedges in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The estimated fair value of these cash flow hedges results in a liability of $51.0 million and $41.2 million, as of June 30, 2008 and December 31, 2007, respectively, which is included in the accompanying consolidated balance sheets in other long-term liabilities and as a component of accumulated other comprehensive earnings, net of deferred taxes. A portion of the amount included in accumulated other comprehensive earnings is reclassified into interest expense as a yield adjustment as interest payments are made on the Term Loans. In accordance with the provisions of SFAS No. 157, Fair Value Measurements, the inputs used to determine the estimated fair value of our interest rate swaps are Level 2-type measurements. During the three months ended June 30, 2008, we terminated the $750 million interest rate swap tied to the Term Loan B that

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was retired subsequent to June 30, 2008, without any significant impact to our financial position or results of operations during the period as its fair value was approximately zero on the date of termination.

     Our existing cash flow hedges are highly effective and there is no current impact on earnings due to hedge ineffectiveness. It is our policy to execute such instruments with credit-worthy banks and not to enter into derivative financial instruments for speculative purposes.

(7) Income Taxes

     During 2007 we adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). As a result of the adoption, we had no change to reserves for uncertain tax positions. Interest and penalties on accrued but unpaid taxes are classified in the consolidated financial statements as income tax expense. Our unrecognized tax benefit decreased by $1.4 million and $7.1 million during the three and six month periods ended June 30, 2008, due to final and preliminary settlements with taxing authorities. As a result of the settlements, the total amount of accrued interest recognized in the consolidated balance sheets decreased $3.0 million during the six month period ended June 30, 2008.

(8) Commitments and Contingencies

Litigation

     In the ordinary course of business, we are involved in various pending and threatened litigation matters related to operations, some of which include claims for punitive or exemplary damages. We believe that no actions, other than the matters listed below, depart from customary litigation incidental to our business. As background to the disclosure below, please note the following:

	•		These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities.
	•		We review these matters on an on-going basis and follow the provisions of Statement of Financial Accounting Standards No. 5, Accounting for Contingencies (“SFAS 5”), when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, we base decisions on our assessment of the ultimate outcome following all appeals.

     Grace & Digital Information Technology Co., Ltd.

     We and certain of our employees were named as defendants in a civil lawsuit brought by Grace & Digital Information Technology Co., Ltd. (“Grace”). Grace was a sales agent engaged by Alltel Information Services, Inc. (“AIS”) in June of 2001. In March of 2002 (before AIS was acquired by us) Grace’s contract was terminated because it was no longer providing sales agent services. In May of 2004, Grace asserted a claim against us for unpaid sales commissions, and filed suit later that same year. The case was subsequently dismissed and re-filed in March of 2006. In the second filing, Grace alleged damages caused by breach of contract, violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and violation of the Foreign Corrupt Practices Act (“FCPA”). Grace’s FCPA and RICO allegations prompted inquiries by both the SEC and the U.S. Department of Justice. We vigorously defended Grace’s civil lawsuit, and in March of 2007 the court dismissed the RICO claims with prejudice and struck Grace’s FCPA allegations. The parties subsequently settled the remaining breach of contract claim at court-ordered mediation in April of 2007. The U.S. Department of Justice and SEC have now closed their investigations as to us with no action being taken against us.

      Driver’s Privacy Protection Act

     A putative class action lawsuit styled Richard Fresco, et al. v. Automotive Directions, Inc. et al., was filed against eFunds and seven other non-related parties in the U.S. District Court for the Southern District of Florida. The complaint alleged that eFunds purchased motor vehicle records that were used for marketing and other purposes that are not permitted under the Federal Driver’s Privacy Protection Act (“DPPA”). The plaintiffs sought statutory damages, plus costs, attorney’s fees and injunctive relief. eFunds and five of the other seven defendants settled the

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case with the plaintiffs. That settlement was preliminarily approved by the court over the objection of a group of Texas drivers and motor vehicle record holders and is awaiting final approval. The objectors filed two class action complaints styled Sharon Taylor, et al. v. Biometric Access Company et al. and Sharon Taylor, et al. v. Acxiom et al. in the U.S. District Court for the Eastern District of Texas alleging similar violations of the DPPA. The Acxiom action is filed against eFunds subsidiary ChexSystems, Inc., while the Biometric suit is filed against Certegy Check Services, Inc., a separate subsidiary of the Company. ChexSystems filed a motion to dismiss or stay the action based upon the earlier settlement which was granted pending final approval of the settlement. The objectors have appealed the order granting the stay and that appeal is set for argument during the third quarter of 2008. The judge recused himself in the action against Certegy Check Services, Inc. because he was a potential member of the class. The lawsuit was reassigned to a new judge and Certegy filed a motion to dismiss. Certegy believes both the DPPA and Texas law allow it to obtain motor vehicle records for the purposes outlined in its contract with the State of Texas, but the Court has not yet ruled on this issue.

     Employee Data Theft

     On July 3, 2007, we announced that a database administrator had misappropriated consumer information. To date, we have seen no evidence of the stolen information being used for anything other than marketing purposes. Nevertheless, multiple putative class action lawsuits were filed against us seeking monetary damages. Those class actions were settled in January of 2008. The Court preliminarily approved the settlement in March of 2008. Notice of the settlement was mailed to class members during the second quarter of 2008. A motion seeking final approval of the settlement from the court is scheduled for hearing during the third quarter of 2008.

(9) Defined Benefit Plans

     During 2007 we amended the Supplemental Executive Retirement Plan (“SERP”) to effectively freeze the benefits under the plan resulting in a curtailment and settlement of that plan at December 31, 2007. The unfunded status of the SERP at December 31, 2007 was a liability of $10.4 million and this liability was paid in full on February 1, 2008.

     In connection with our operations in Germany, we have unfunded, defined benefit plan obligations. These obligations relate to retirement benefits to be paid to employees upon retirement.

     The Company recorded total benefit costs relating to these plans of $0.8 million and $0.8 million for the three month periods and $1.6 million and $1.5 million for the six month periods ended June 30, 2008 and 2007, respectively.

(10) Stock Option Plans

     On March 31, 2008, as approved by the Compensation Committee of the Board of Directors, we accelerated the vesting of all stock awards held by eFunds employees and recorded $14.1 million in additional stock compensation expense. Also, during the second quarter of 2008, we recorded charges of $2.6 million relating to the acceleration of certain executive unvested stock awards upon termination. In total, we provided for stock compensation expense of $15.8 million and $8.8 million for the three month periods and $42.2 million and $17.2 million for the six month periods ended June 30, 2008 and 2007, respectively, which is included in selling, general, and administrative expenses in the consolidated statements of earnings.

(11) Share Repurchase Program

     On April 17, 2008, our Board of Directors approved a plan authorizing repurchases of up to $250.0 million of our common stock. Under the plan we had repurchased 5.8 million shares of our stock for $226.2 million, at an average price of $38.97, through June 30, 2008. During the period ended June 30, 2008, we also repurchased an additional 0.2 million shares of our stock for $10.0 million at an average price of $40.56 under the old share repurchase plan, for a total of 6.0 million shares for $236.2 million at an average price of $39.04.

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(12) Segment Information

     Our operating segments are Transaction Processing Services and Lender Processing Services. This structure reflects how the businesses are operated and managed. The primary components of the Transaction Processing Services segment, which includes Certegy’s Card and Check Services, financial institution processing and the operations acquired from eFunds, are Enterprise Solutions, Integrated Financial Solutions and International businesses. The primary components of the Lender Processing Services segment are Mortgage Processing, which includes mortgage lender processing, and Mortgage Information Services, which includes Lender Services, Default Management, and Information Services. On July 2, 2008, we completed the spin-off of the Lender Processing Services segment into a separate publicly traded company, referred to as Lender Processing Services, Inc. (see Note 13- “Subsequent Events”).

     Summarized financial information concerning our segments is shown in the following tables.

     As of and for the three month period ended June 30, 2008 (in thousands):

		Transaction				Lender
		Processing				Processing				Corporate
		Services				Services				and Other				Total
Processing and services revenues		$	867,231			$	471,757			$	50			$	1,339,038
Cost of revenues			665,660				297,304				—				962,964
Gross profit			201,571				174,453				50				376,074
Selling, general and administrative expenses			66,208				53,161				56,015				175,384
Research and development costs			19,357				7,210				—				26,567
Operating income		$	116,006			$	114,082			$	(55,965	)		$	174,123
Depreciation and amortization		$	87,587			$	28,937			$	3,759			$	120,283
Capital expenditures		$	39,696			$	22,071			$	4,331			$	66,098
Total assets		$	7,425,003			$	2,039,438			$	314,004			$	9,778,445
Goodwill		$	4,250,986			$	1,086,606			$	—			$	5,337,592

     As of and for the three month period ended June 30, 2007 (in thousands):

		Transaction				Lender
		Processing				Processing				Corporate
		Services				Services				and Other				Total
Processing and services revenues		$	684,811			$	436,202			$	4,021			$	1,125,034
Cost of revenues			527,005				275,456				—				802,461
Gross profit			157,806				160,746				4,021				322,573
Selling, general and administrative expenses			43,729				44,216				31,671				119,616
Research and development costs			14,905				8,683				—				23,588
Operating income		$	99,172			$	107,847			$	(27,650	)		$	179,369
Depreciation and amortization		$	72,402			$	33,079			$	6,698			$	112,179
Capital expenditures		$	50,279			$	22,039			$	7,196			$	79,514
Total assets		$	5,281,646			$	2,020,792			$	492,778			$	7,795,216
Goodwill		$	2,687,329			$	1,091,266			$	2,772			$	3,781,367

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

     As of and for the six month period ended June 30, 2008 (in thousands):

		Transaction				Lender
		Processing				Processing				Corporate
		Services				Services				and Other				Total
Processing and services revenues		$	1,694,030			$	935,870			$	90			$	2,629,990
Cost of revenues			1,299,924				591,595				—				1,891,519
Gross profit			394,106				344,275				90				738,471
Selling, general and administrative expenses			131,384				99,045				108,506				338,935
Research and development costs			38,837				14,798				—				53,635
Operating income		$	223,885			$	230,432			$	(108,416	)		$	345,901
Depreciation and amortization		$	175,183			$	60,313			$	7,525			$	243,021
Capital expenditures		$	112,202			$	38,645			$	3,809			$	154,656

     As of and for the six month period ended June 30, 2007 (in thousands):

		Transaction				Lender
		Processing				Processing				Corporate
		Services				Services				and Other				Total
Processing and services revenues		$	1,340,761			$	848,560			$	7,153			$	2,196,474
Cost of revenues			1,034,492				540,350				—				1,574,842
Gross profit			306,269				308,210				7,153				621,632
Selling, general and administrative expenses			84,615				86,924				61,159				232,698
Research and development costs			32,423				18,274				—				50,697
Operating income		$	189,231			$	203,012			$	(54,006	)		$	338,237
Depreciation and amortization		$	142,220			$	66,069			$	12,786			$	221,075
Capital expenditures		$	93,761			$	47,465			$	11,379			$	152,605

Transaction Processing Services

     The Transaction Processing Services segment focuses on serving the processing and risk management needs of financial institutions and retailers. Our primary software applications function as the underlying infrastructure of a financial institution’s processing environment. These applications include core bank processing software, which banks use to maintain the primary records of their customer accounts. We also provide a number of complementary applications and services that interact directly with the core processing applications, including applications that facilitate interactions between our financial institution customers and their clients. We offer applications and services through a range of delivery and service models, including on-site outsourcing and remote processing arrangements, as well as on a licensed software basis for installation on customer-owned and operated systems. This segment also includes card issuer services, which enable banks, credit unions, and others to issue VISA and MasterCard credit and debit cards, private label cards, and other electronic payment cards for use by both consumer and business accounts. In addition, we provide risk management services to retailers and financial institutions. Included in this segment were sales to non-U.S. based customers of $217.8 million and $153.0 million in the three month periods and $404.3 million and $292.4 million in the six month periods ended June 30, 2008 and 2007, respectively.

Lender Processing Services

     The Lender Processing Services segment provides a comprehensive range of services related to the mortgage life cycle. The primary applications include core mortgage processing which banks use to process and service mortgage loans as well as other services including origination, title agency, data gathering, risk management, servicing, default management and property disposition services to lenders and other real estate professionals.

Corporate and Other

     Corporate overhead costs and other operations that are not included in our operating segments are included in Corporate and Other.

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

(13) Subsequent Events

     On July 2, 2008 (the “spin-off date”), all of the shares of the common stock, par value $0.0001 per share (the “Common Stock”), of LPS, Inc., were distributed to FIS shareholders through a stock dividend (the “spin-off”). At the time of the distribution, LPS Inc. consisted of substantially all the assets, liabilities, businesses and employees related to FIS’s Lender Processing Services segment as of the spin-off date. In the spin-off, FIS contributed to LPS, Inc. all of its interest in such assets, liabilities, businesses and employees in exchange for shares of the Common Stock and $1,585.0 million aggregate principal amount of LPS Inc. debt obligations (the “Debt Obligations”). Immediately following the LPS, Inc. spin-off, FIS retired the $1,585.0 Term Loan B. Upon the distribution, FIS shareholders received one-half share of the Common Stock of LPS Inc., for every share of FIS common stock held as of the close of business on June 24, 2008. Such shareholders of FIS collectively received 100% of the Common Stock of LPS Inc., which is now a stand-alone public company trading under the symbol “LPS” on the New York Stock Exchange. Further, concurrent with the spin-off, we exchanged the $1,585.0 million principal amount of LPS, Inc. debt obligations we received for all of the outstanding Term Loan B under our credit facilities, following which we retired the latter debt.

The following unaudited pro forma condensed financial statements present the historical financial statements of FIS, with adjustments relating to our spin-off of 100% of the common stock of LPS Inc. 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 condensed balance sheet as of June 30, 2008 is presented as if the spin-off had been completed on June 30, 2008. The unaudited pro forma combined statements of continuing operations for the six month period ended June 30, 2008 are presented as though the spin-off had been completed on January 1, 2008. The pro forma information is not necessarily indicative of the results that would have resulted had the spin-off occurred at the beginning of the periods presented, nor is it necessarily indicative of future results. The pro forma information is as follows:

		As of June 30, 2008
										Pro forma
		FIS				LPS				adjustments relating								FIS
		historical				historical				to LPS spin-off				Note				pro forma
						(In thousands)
Assets:
Total current assets		$	1,737,601			$	440,918			$	—							$	1,296,683
Goodwill, net			5,337,592				1,086,606				—								4,250,986
Other intangible assets, net			1,007,613				103,347				—								904,266
Other non-current assets			1,695,639				354,869				12,371				(1	)			1,328,399
Total assets		$	9,778,445			$	1,985,740			$	12,371							$	7,780,334
Liabilities:
Current portion of long-term debt		$	297,129			$	—			$	16,000				(2	)		$	281,129
Other current liabilities			924,973				192,533				—								732,440
Long-term debt			3,975,078				194				1,569,000				(2	)			2,405,884
Other long-term liabilities			750,458				107,739				—								642,719
Total liabilities			5,947,638				300,466				1,585,000								4,062,172
Minority interest			75,290				10,773				—								64,517
Stockholders’ equity			3,755,517				1,674,501				(1,572,629	)			(2) (3	)			3,653,645
Total liabilities and stockholders’ equity		$	9,778,445			$	1,985,740			$	12,371							$	7,780,334

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

		For the Six Month Period Ended June 30, 2008
						LPS
		FIS				Discontinued				FIS
		historical				Operations				pro forma
		(In thousands except for per share data)
Processing and services revenues		$	2,629,990			$	913,114			$	1,716,876
Cost of revenue			1,891,519				569,219				1,322,300
Gross profit			738,471				343,895				394,576
Selling, general and administrative expenses			338,935				100,520				238,415
Research and development costs			53,635				15,995				37,640
Operating income			345,901				227,380				118,521
Other income (expense):
Interest income			4,922				527				4,395
Interest expense			(125,248	)			(41,230	)			(84,018	)
Other income (expense), net			1,732				(51	)			1,783
Total other income (expense)			(118,594	)			(40,754	)			(77,840	)
Earnings before income taxes, equity in earnings of unconsolidated entities, and minority interest			227,307				186,626				40,681
Provision for income taxes			81,822				72,412				9,410
Earnings before equity in earnings of unconsolidated entities and minority interest			145,485				114,214				31,271
Equity in loss of unconsolidated entities			(2,274	)			(2,117	)			(157	)
Minority interest expense			(838	)			(722	)			(116	)
Net earnings from continuing operations		$	142,373			$	111,375			$	30,998
Net income per share basic from continuing operations		$	0.74							$	0.16
Pro forma weighted average shares basic			193,541								193,541
Net income per share diluted from continuing operations		$	0.73							$	0.16
Pro forma weighted average shares diluted			195,493								195,493

     Unless stated otherwise or the context otherwise requires, all references to “FIS,” “we,” the “Company” or the “registrant”: (a) with respect to periods after the Certegy Merger described below, are to Fidelity National Information Services, Inc., a Georgia corporation formerly known as Certegy Inc., which was the surviving legal entity in the Certegy Merger; and (b) with respect to periods up to and including the Certegy Merger, are to Fidelity National Information Services, Inc., a Delaware corporation that merged into Certegy in the Certegy Merger but was deemed the acquirer from an accounting perspective, as described below; all references to “Certegy” are to Certegy Inc., and its subsidiaries, with respect to periods prior to the Certegy Merger; all references to “eFunds” are to eFunds Corporation, and its subsidiaries, as acquired by FIS (Note 5); all references to “Old FNF” are to Fidelity National Financial, Inc., a Delaware corporation that owned a majority of the Company’s shares through November 9, 2006; and all references to “FNF” are to Fidelity National Financial, Inc. (formerly known as Fidelity National Title Group, Inc. (“FNT”)), formerly a subsidiary of Old FNF but now an independent company that remains a related entity from an accounting perspective.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with Item 1: Consolidated Financial Statements and the Notes thereto included elsewhere in this report. The discussion below contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future economic performance and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to: risks associated with the spin-off of the Lender Processing Services (LPS) segment by FIS, including whether the spin-off will not be beneficial, as a result of unexpected dis-synergies resulting from the separation or unfavorable reaction from customers, rating agencies or other constituencies; changes in general economic, business and political conditions, including changes in the financial markets; the effects of our substantial leverage, which may limit the funds available to make acquisitions and invest in our business; the risks of reduction in revenue from the elimination of existing and potential customers due to consolidation in the banking, retail and financial services industries; failures to adapt our services to changes in technology or in the marketplace; our potential inability to find suitable acquisition candidates or difficulties in integrating acquisitions; significant competition that our operating subsidiaries face; the possibility that our acquisition of eFunds may not be accretive to our earnings due to undisclosed liabilities, management or integration issues, loss of customers, the inability to achieve targeted cost savings, or other factors; and other risks detailed in the “Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of the Company’s Form 10-K and other filings with the Securities and Exchange Commission.

Overview

     We are one of the largest global providers of processing services to financial institutions, serving customers in over 80 countries throughout the world. We are among the market leaders in core processing, card issuing services, check point-of-sale verification and guarantee, mortgage processing, and certain other lender processing services in the U.S. We offer a diversified service mix, and benefit from the opportunity to cross-sell multiple services across our broad customer base. We had two reporting segments at June 30, 2008, Transaction Processing Services and Lender Processing Services, which produced approximately 65% and 35% of our revenues for the three month periods and 64% and 36% of our revenues for the six month periods ended June 30, 2008.

•

Transaction Processing Services. This segment focuses on serving the processing needs of financial institutions. Our primary software applications function as the underlying infrastructure of a financial institution’s core processing environment. These applications include core bank processing software, which banks use to maintain the primary records of their customer accounts. We also provide a number of complementary applications and services, such as item processing and electronic funds transfer that interact directly with the core processing applications, and applications that facilitate interactions between our

financial institution customers and their clients such as online banking and bill payment services and fraud prevention and detection services. We offer these applications and services through a range of delivery and service models, including on-site outsourcing and remote processing arrangements, as well as on a licensed software basis for installation on customer-owned and operated systems. This segment also includes card issuer services, which enable banks, credit unions, and others to issue VISA and MasterCard credit and debit cards, private label cards, and other electronic payment cards for use by both consumer and business accounts. In addition, we provide point-of-sale check verification and guarantee services to retailers.

•

Lender Processing Services. This segment provides core mortgage processing, outsourced business processes, and information solutions primarily to national lenders and loan servicers. These processes include centralized, title agency and closing services offered to first mortgage, refinance, home equity and sub-prime lenders. This segment’s information solutions include appraisal and valuation services, real estate tax services and flood zone information. In addition, this segment provides default management services to national lenders and loan servicers, allowing customers to outsource the business processes necessary to take a loan and the underlying real estate securing the loan through the default and foreclosure process.

On July 2, 2008 (the “spin-off date”), all of the shares of the common stock, par value $0.0001 per share (the “Common Stock”), of, LPS, Inc., a Delaware corporation, previously a wholly-owned subsidiary of FIS, were distributed to FIS shareholders through a stock dividend (the “spin-off”). At the time of the distribution, LPS, Inc. consisted of substantially all the assets, liabilities, businesses and employees related to FIS’s Lender Processing Services segment as of the spin-off date. In the spin-off, FIS contributed to LPS, Inc., all of its interest in such assets, liabilities, businesses and employees in exchange for shares of the Common Stock and $1,585.0 million aggregate principal amount of LPS, Inc., debt obligations (the “Debt Obligations”). Immediately following the LPS, Inc. spin-off, FIS retired the $1,585.0 Term Loan B. Upon the distribution, FIS shareholders received one-half share of the Common Stock of LPS, Inc., for every share of the FIS common stock held as of the close of business on June 24, 2008. Such shareholders of FIS collectively received 100% of the Common Stock of LPS, Inc. which as of July 2, 2008 became a stand-alone public company trading under the symbol “LPS” on the New York Stock Exchange. Further, concurrent with the spin-off, we exchanged the $1,585.0 million principal amount of LPS, Inc. debt obligations we received for all of the outstanding Term Loan B under our credit facilities, following which we retired the latter debt.

     Corporate overhead costs and other operations that are not included in our operating segments are included in Corporate and Other.

Critical Accounting Policies

     There have been no significant changes to our critical accounting policies since our Form 10-K was filed on February 29, 2008.

Transactions with Related Parties

     We have historically conducted business with FNF and its subsidiaries, and other related parties. See Note 3 to the notes to the consolidated financial statements for a detailed description of all the related party transactions.

Discontinued Operations

     During the first six months of 2008 and the third quarter of 2007, we discontinued certain operations in the Transaction Processing Services and Lender Processing Services segments, which are reported as discontinued operations in the consolidated statements of earnings for the three and six month periods ended June 30, 2008 and 2007, in accordance with SFAS No. 144. See Note 2 to the Notes to Consolidated Financial Statements for a detailed description of discontinued operations.

Factors Affecting Comparability

     Our Consolidated Financial Statements included in this report that present our financial condition and operating results reflect the following significant transactions:

•

On September 12, 2007, we acquired eFunds (the “eFunds Acquisition”). eFunds provided risk management, EFT services, prepaid/gift card processing, and global outsourcing solutions to financial services companies in the U.S. and internationally. In connection with this acquisition, we borrowed an additional $1.6 billion under our bank credit facilities. The results of operations and financial position of eFunds are included in the Consolidated Financial Statements from and after the date of acquisition.

     As a result of this transaction, the results of operations in the periods covered by the Consolidated Financial Statements may not be directly comparable.

Comparisons of three and six month periods ended June 30, 2008 and 2007

Consolidated Results of Operations
(in thousands, except per share amounts)

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
		(Unaudited)								(Unaudited)
Processing and services revenues		$	1,339,038			$	1,125,034			$	2,629,990			$	2,196,474
Cost of revenues			962,964				802,461				1,891,519				1,574,842
Gross profit			376,074				322,573				738,471				621,632
Selling, general, and administrative expenses			175,384				119,616				338,935				232,698
Research and development costs			26,567				23,588				53,635				50,697
Operating income			174,123				179,369				345,901				338,237
Other income (expense):
Interest income			1,904				490				4,922				1,049
Interest expense			(62,800	)			(42,969	)			(125,248	)			(115,084	)
Gain on sale of Covansys stock			—				92,044				—				92,044
Other income, net			2,183				811				1,732				1,476
Total other income (expense)			(58,713	)			50,376				(118,594	)			(20,515	)
Earnings before income taxes, equity in (losses) earnings of unconsolidated entities, minority interest, and discontinued operations			115,410				229,745				227,307				317,722
Provision for income taxes			40,867				84,580				81,822				117,309
Earnings before equity in (losses) earnings of unconsolidated entities, minority interest, and discontinued operations			74,543				145,165				145,485				200,413
Equity in (losses) earnings of unconsolidated entities			(317	)			736				(2,274	)			1,672
Minority interest (expense) income			(716	)			(286	)			(838	)			(110	)
Net earnings from continuing operations			73,510				145,615				142,373				201,975
(Lossess) earnings from discontinued operations, net of tax			(1,603	)			2,389				34				5,532
Net earnings		$	71,907			$	148,004			$	142,407			$	207,507
Net earnings per share — basic from continuing operations		$	0.38			$	0.76			$	0.74			$	1.05
Net earnings per share — basic from discontinued operations			(0.01	)			0.01				—				0.03
Net earnings per share — basic		$	0.37			$	0.77			$	0.74			$	1.08
Weighted average shares outstanding — basic			192,538				192,743				193,541				192,323
Net earnings per share — diluted from continuing operations		$	0.38			$	0.74			$	0.73			$	1.03
Net earnings per share — diluted from discontinued operations			(0.01	)			0.01				—				0.03
Net earnings per share — diluted		$	0.37			$	0.75			$	0.73			$	1.06
Weighted average shares outstanding — diluted			194,448				196,977				195,493				196,395