Table	of	Contents

# UNITED	STATES	SECURITIES	AND	EXCHANGE	COMMISSION

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE

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

# EXCHANGE	ACT	OF	1934

# Fidelity	National	Information	Services,	Inc.

(Exact	name	of	registrant	as	specified	in	its	charter)

Georgia

(State	or	other	jurisdiction of	incorporation	or	organization)

601	Riverside	Avenue Jacksonville,	Florida

(Address	of	principal	executive	offices)

(Registrant's	telephone	number,	including	area	code)

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

# Title	of	each	class:

Common	Stock,	par	value	$0.01	per	share

(I.R.S.	Employer Identification	No.)

(Zip	Code)

# Name	of	each	exchange	on	which	registered:

New	York	Stock	Exchange

# Securities	registered	pursuant	to	Section	12(g)	of	the	Act:	None

(Title	of	Class)

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.		Yes	þ					No	o Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.		Yes	o					No	þ

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	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to the	best	of	registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to this	Form	10-K.		o

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	or	a	non-accelerated	filer.	See	definition	of	"accelerated filer	and	large	accelerated	filer"	in	Rule	12b-2	of	the	Exchange	Act.

Large	accelerated	filer	þ					Accelerated	filer	o					Non-accelerated	filer	o

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	June	30,	2006,	the	last	business	day	of	the	registrant's	most	recently	completed	second	fiscal	quarter,	the	aggregate	market	value	of	the	registrant's common	stock	held	by	nonaffiliates	was	$2,175,304,441	based	on	the	closing	sale	price	of	$35.40	on	that	date	as	reported	by	the	New	York	Stock	Exchange. For	the	purposes	of	the	foregoing	sentence	only,	all	directors	and	executive	officers	of	the	registrant	were	assumed	to	be	affiliates.	The	number	of	shares outstanding	of	the	registrant's	common	stock,	$0.01	par	value	per	share,	was	191,509,231	as	of	February	1,	2007.

# PART	I

     Item	1B. Unresolved	Staff	Comments 19

# PART	II

# PART	III

# PART	IV

Unless	stated	otherwise	or	the	context	otherwise	requires,	all	references	in	this	Form	10-K	to	the	registrant,	"us,"	"we,"	"our",	the "Company"	or	"FIS"	are	to	Fidelity	National	Information	Services,	Inc.,	a	Georgia	corporation	formerly	known	as	Certegy	Inc.,	and	its subsidiaries;	all	references	to	"Certegy"	are	to	Certegy	Inc.,	and	its	subsidiaries,	prior	to	the	Certegy	merger	described	below;	all	references	to "Former	FIS"	are	to	Fidelity	National	Information	Services,	Inc.,	a	Delaware	corporation,	and	its	subsidiaries,	prior	to	the	merger;	and	all references	to	"Old	FNF"	are	to	Fidelity	National	Financial,	Inc.,	a	Delaware	corporation	that	owned	a	majority	of	our	shares	through November	9,	2006:	and	all	references	to	FNF	are	to	Fidelity	National	Financial,	Inc.	(formerly	known	as	Fidelity	National	Title	Group,	Inc.), formerly	a	subsidiary	of	Old	FNF	but	now	an	independent	company	that	remains	a	related	entity	from	an	accounting	perspective.

# Item	1. Business.

# General	Development	of	the	Business

FIS	constitutes	one	of	the	largest	global	providers	of	processing	services	to	financial	institutions,	with	market-leading	positions	in	core processing,	card	issuing	services,	check	risk	management,	mortgage	processing,	and	lender	processing	services	in	the	U.S.	We	serve	customers	in over	60	countries	throughout	the	world.	We	offer	a	diversified	product	mix,	and	we	believe	that	we	will	continue	to	benefit	from	the	opportunity	to cross-sell	products	and	services	across	our	broad	customer	base,	and	from	our	expanded	international	presence	and	scale.

Our	business	operations	and	organizational	structure	result	from	the	February	1,	2006,	business	combination	of	Certegy	and	Former	FIS	(the Certegy	Merger),	pursuant	to	which	Former	FIS	was	merged	into	a	wholly-owned	subsidiary	of	Certegy.	Immediately	after	the	Certegy	Merger, the	stockholders	of	Former	FIS,	including	its	then-majority	stockholder	Old	FNF	owned	approximately	67.4%	of	our	outstanding	common	stock. Accordingly,	for	accounting	and	financial	reporting	purposes,	the	Certegy	Merger	was	treated	as	a	reverse	acquisition	of	Certegy	by	Former	FIS under	the	purchase	method	of	accounting	pursuant	to	U.S.	generally	accepted	accounting	principles	and	a	tax	free	merger	under	IRC§368(a).	Also, as	a	result	of	the	Certegy	Merger,	our	name	changed	from	"Certegy	Inc."	to	"Fidelity	National	Information	Services,	Inc."	and	our	New	York Stock	Exchange	trading	symbol	from	"CEY"	to	"FIS".	Our	board	of	directors	was	reconstituted	so	that	a	majority	of	the	board	now	consists	of directors	designated	by	the	stockholders	of	Former	FIS.	On	November	9,	2006,	Old	FNF	(after	other	transactions	in	which	it	distributed	all	of	its assets	other	than	its	ownership	in	FIS)	merged	with	and	into	FIS	(the	FNF	Merger).	Upon	completion	of	the	FNF	Merger,	FIS	became	an independent	publicly	traded	company,	and	Old	FNF	ceased	to	exist	as	an	independent	publicly	traded	company.	The	assets	distributed	by	Old	FNF prior	to	the	FNF	Merger	included	its	ownership	in	Fidelity	National	Title	Group,	Inc.,	which	following	the	FNF	Merger	renamed	itself	Fidelity National	Financial,	Inc.

Certegy	was	incorporated	on	March	2,	2001,	under	the	laws	of	the	State	of	Georgia	as	a	wholly-owned	subsidiary	of	Equifax	Inc.	(Equifax). Equifax	contributed	its	payment	services	division	to	Certegy	and	"spun	off"	Certegy	on	July	7,	2001,	through	a	tax-free	dividend	of	all	of Certegy's	outstanding	shares	of	common	stock	to	Equifax's	shareholders.	As	a	result	of	the	spin-off,	Certegy	became	an	independent	publicly traded	company.	Certegy	established	itself	as	a	leading	provider	of	card	issuer	services	to	community	financial	institutions	and	as	a	leading provider	of	check	risk	management	services	to	large	national	retailers.	During	the	past	decade,	the	company	expanded	its	card	and	check operations	internationally	to	serve	customers	in	over	25	countries.	Also	during	that	time,	the	company	broadened	its	domestic	product	lines	to include	eBanking	services	to	financial	institutions	and	cash	access	services	to	the	gaming	industry.

Former	FIS	was	incorporated	under	the	laws	of	the	State	of	Delaware	on	May	20,	2004,	as	a	wholly-owned	subsidiary	of	Old	FNF,	our former	parent	company.	From	November	2004	through	March	2005,	Old	FNF	contributed	a	number	of	business	entities	to	Former	FIS,	including certain	real	estate-related	information	services	and	loan	default	management	businesses	developed	by	Old	FNF	in	the	1990s,	and	a	series	of	over 25	acquisitions	completed	by	Old	FNF	between	2001	and	2005.	Although	many	of	these	acquisitions	added	important	applications

and	services	to	the	offerings	of	Former	FIS,	the	recent	growth	of	Former	FIS	has	been	driven	primarily	by	the	acquisitions	of	companies	that provide	core	processing	services	to	financial	institutions	including:

•	The	financial	services	division	of	ALLTEL	Information	Services,	Inc.,	a	provider	of	core	banking	and	mortgage	processing	services;

•	Aurum	Technology,	a	provider	of	software	and	outsourcing	solutions	to	community	banks	and	credit	unions;

•	Kordoba,	a	provider	of	information	technology	solutions	for	the	financial	services	industry	with	a	focus	on	services	and	solutions	for	the German	banking	market;

•	Sanchez	Computer	Associates,	Inc.,	or	Sanchez,	a	provider	of	software	and	outsourcing	solutions	to	banks	and	other	financial institutions;	and

•	InterCept,	Inc.,	or	InterCept,	a	provider	of	outsourced	and	in-house	core	banking	solutions,	as	well	as	item	processing	and	check	imaging services.

# Financial	Information	About	Operating	Segments	and	Geographic	Areas

Shortly	after	the	February	1,	2006	merger	of	Certegy	and	FIS,	we	implemented	a	new	organizational	structure	and	we	began	reporting	under a	new	operating	segment	structure	effective	with	first	quarter	2006	results.	The	new	reportable	segments	are	Transaction	Processing	Services,	or TPS,	and	Lender	Processing	Services,	or	LPS.	This	reporting	structure	is	consistent	with	the	management	and	the	operating	structure	adopted following	the	Certegy	Merger.	The	primary	components	of	the	TPS	segment	are	Integrated	Financial	Solutions,	Enterprise	Banking	Solutions,	and International.	The	TPS	segment	includes	Certegy's	former	Card	and	Check	Services	segments	and	the	financial	institution	processing	component of	the	Financial	Institution	Software	and	Services	segment	of	Former	FIS.	The	primary	components	of	the	Lender	Processing,	or	LPS	segment,	are Mortgage	Processing	Services,	which	includes	the	Mortgage	Processing	component	of	the	Financial	Institution	Software	and	Services	segment	of Former	FIS,	and	Information	Services,	which	includes	the	Lender	Services,	Default	Management,	and	Information	Services	segments	of	Former FIS.

Revenues	in	our	Transaction	Processing,	or	TPS,	segment	are	generated	predominantly	from	the	development,	implementation, management,	support	and	maintenance	of	core	processing	software	and	systems	used	by	financial	institutions	to	maintain	the	primary	records	of their	customer	accounts.	We	also	provide	a	comprehensive	range	of	credit	card	processing	and	cardholder	support	services	to	our	financial institution	customers.	Additionally,	revenues	in	this	segment	are	generated	by	providing	check	risk	management	services	to	large	national	and regional	retail	chains.	Our	Integrated	Financial	Solutions	customers	are	comprised	primarily	of	community	banks,	credit	unions	and	savings	banks based	in	the	U.S.,	while	our	Enterprise	Banking	Solutions	customers	are	comprised	of	large	and	mid-tier	financial	institutions	and	retailers	in	the U.S.	Our	International	customer	base	consists	primarily	of	large	and	mid-tier	financial	institutions	and	retailers	outside	of	North	America.

Revenues	in	our	Lender	Processing,	or	LPS,	segment	are	generated	from	products	and	services	that	span	the	entire	mortgage	loan	life	cycle, from	origination	through	closing,	refinancing,	default,	foreclosure	and	resale.	Included	among	these	services	are	property	appraisal	and	valuation services,	property	records	information,	real	estate	tax	services,	borrower	credit	and	flood	zone	information	and	certification,	and	mortgage processing	and	default	management	services.	Also	included	are	loan	facilitation	services,	consisting	of	centralized,	customized	title	agency,	and closing	services,	that	allow	financial	institutions	to	outsource	their	title	and	loan	closing	requirements	in	accordance	with	pre-selected	criteria, regardless	of	the	geographic	location	of	the	borrower	or	property.	We	provide	these	services	to	U.S.	based	mortgage	lenders,	mortgage	servicers, investors	and	real	estate	professionals	to	assist	them	in	the	completion	of	real	estate	transactions.

# Narrative	Description	of	the	Business

# Overview

FIS	provides	a	comprehensive	range	of	core	processing	services,	check	services,	card	issuer	and	transaction	processing	services,	risk management	services,	mortgage	loan	processing,	mortgage-related	information	products,	and	outsourcing	services	to	a	wide	variety	of	financial institutions,	retailers,	mortgage	lenders	and	mortgage	loan

servicers,	and	real	estate	professionals.	We	serve	customers	in	more	than	60	countries	worldwide,	and	have	processing	and	technology relationships	with	35	of	the	top	50	global	banks,	including	nine	of	the	top	ten.	Approximately	50	percent	of	all	U.S.	residential	mortgages	are processed	using	our	mortgage	processing	platform.

The	customers	cited	in	the	following	discussion	provide	a	representative	cross-section	of	our	customers	based	on	size,	geographic	location, type	of	institution	and	the	services	that	they	use.

# Our	Transaction	Processing	Services	Operating	Segment

# Integrated	Financial	Solutions

The	primary	focus	of	our	Integrated	Financial	Solutions	business	is	to	serve	the	processing	needs	of	independent	community	banks,	credit unions,	and	savings	banks	in	the	United	States.	Processing	solutions	include	core	processing,	branch	automation,	back	office	support	systems, compliance,	credit	and	debit	card	issuing,	image	item	processing,	print	and	mail,	ATM/EFT,	retail	internet	banking	and	bill	payment	services, commercial	cash	management	and	voice	response	services.	Over	8,000	commercial	banks,	savings	institutions	and	credit	unions	utilize	one	or more	of	these	solutions.

Of	these	8,000	institutions,	over	1,200	institutions	utilize	one	of	our	core	processing	solutions.	Customers	of	this	segment	typically	seek	a fully	integrated	and	broad	suite	of	applications.	As	a	result,	our	core	processing	services	sold	in	this	market	have	various	add-on	modules	or applications	that	integrate	into	our	core	processing	applications,	providing	a	broad	processing	solution.	Examples	of	our	customers	in	this	sector include	Hudson	City	Savings	Bank,	Sterling	Bank,	and	VyStar	Credit	Union.

Over	6,000	institutions	utilize	our	card	issuer	services	which	enable	banks,	credit	unions,	and	others	to	issue	VISA	and	MasterCard	credit and	debit	cards,	and	other	electronic	payment	cards	for	use	by	both	consumer	and	business	accounts.	The	majority	of	our	card	issuer	programs	are full	service,	including	most	of	the	operations	and	support	necessary	for	an	issuer	to	operate	a	credit	and	debit	card	program.	We	do	not	make	credit decisions	for	our	card	issuing	customers,	nor	do	we	fund	their	card	receivables.	We	provide	our	card	issuer	services	primarily	through	our longstanding	contractual	alliances	with	two	associations	representing	independent	community	banks	and	credit	unions	in	the	U.S.,	the	Independent Community	Bankers	of	America,	or	ICBA,	and	Card	Services	for	Credit	Unions,	or	CSCU.	These	organizations	offer	our	products	and	services	to their	respective	members	with	our	company	as	the	provider.	Our	alliances	with	the	ICBA	and	CSCU	provide	us	with	an	efficient	and	effective means	of	marketing	our	products	and	services	to	individual	credit	unions	and	community	banks.

Our	item	processing	and	imaging	services	are	utilized	by	more	than	1,100	institutions.	The	services	provide	our	customers	with	a	wide	range of	outsourcing	services	relating	to	the	imaging	and	processing	of	checks,	statements,	remittances,	and	other	transaction	records,	which	are performed	at	one	of	our	52	processing	centers	located	throughout	the	U.S.	or	on-site	at	a	customer	location.

We	provide	a	full	range	of	eBanking	capabilities,	including	electronic	funds	transfer,	or	EFT,	processing	solutions,	ranging	from	automated teller	machine,	or	ATM,	and	debit	card	services	to	card	production	and	distribution	to	stored-value	gift	cards	and	payroll	cards.	Our	eBanking services	are	utilized	by	more	than	850	financial	institutions	and	enable	them	to	offer	Internet	banking	and	bill	payment	services	to	consumers	and businesses.

# Enterprise	Banking	Solutions

Our	Enterprise	Banking	Solutions	division	focuses	on	serving	the	processing	needs	of	large	U.S.	financial	institutions,	automotive	financing companies,	and	commercial	lenders.	We	also	provide	check	risk	management	and	related	processing	products	and	services	to	businesses	accepting or	cashing	checks	at	the	point-of-sale,	and	provide	comprehensive	cash	access	services	in	the	gaming	industry.	Primary	service	offerings	include:

•	Core	Processing	Applications	for	Financial	Institutions.		Our	core	processing	software	applications	are	designed	to	run	critical	banking processes	for	our	financial	institution	customers.	These	critical	banking	processes	include	deposit	and	lending	systems,	customer	systems, and	most	other	core	banking	systems	that	a	bank	must	utilize	to	manage	the	products	it	provides	to	its	customers.

•	Retail	Delivery	Applications	for	Financial	Institutions.		Our	retail	delivery	applications	facilitate	direct	interactions	between	a	bank	and its	customers	through	applications	that	allow	for	the	delivery	of	services	to	these	customers.	Our	retail	delivery	applications	include TouchPoint,	an	application	suite	that	supports	call	centers,	branch	and	teller	environments,	and	retail	and	commercial	Internet	channels.

•	Integration	Applications	for	Financial	Institutions.		Our	integration	applications	access	data	across	both	our	internal	and	third-party	core processing	systems	and	transport	information	to	our	customers'	retail	delivery	channels.	Our	integration	applications	provide	transaction routing	and	settlement.	These	applications	facilitate	tightly	integrated	systems	and	efficient	software	delivery	that	reduces	technology costs	for	our	customers.

•	Syndicated	Loan	Applications.		Our	syndicated	loan	applications	are	designed	to	support	wholesale	and	commercial	banking	requirements necessary	for	all	aspects	of	syndicated	commercial	loan	origination	and	management.

•	Automotive	Finance	Applications.		Our	primary	applications	include	an	application	suite	that	assists	automotive	finance	institutions	in evaluating	loan	applications	and	credit	risk,	and	allow	automotive	finance	institutions	to	manage	their	loan	and	lease	portfolios.

•	Check	Risk	Management	Services	for	Retailers.		Our	check	risk	management	services	utilize	our	proprietary	risk	management	services and	data	sources	to	manage	check	acceptance	risk	for	retailers	at	the	point-of-sale.	Our	services,	which	can	be	tailored	to	meet	the	specific needs	of	our	customers,	include	check	guarantee,	check	verification	and	check	collection	services.

•	Cash	Access	Services	to	Casinos.		Our	comprehensive	product	suite,	which	includes	credit	card	cash	advance	services,	ATM	cash disbursements,	and	check	cashing	services,	can	be	fully	integrated	into	our	customers'	cage	operations	or	operated	by	us	on	an	outsourced basis.

The	processing	needs	of	our	customers	vary	significantly	across	the	sizes	and	types	of	entities	we	serve.	These	entities	include:

•	Large	Financial	Institutions.		We	define	the	large	financial	institution	market	as	banks	and	other	financial	institutions	in	North	America with	assets	in	excess	of	$5	billion.	Of	the	100	largest	U.S.	banks	as	of	December	31,	2006,	our	customers	included	15	banks	that	use	our real-time,	integrated	loan	and	deposit	applications,	41	banks	that	use	our	deposit-related	core	processing	applications,	36	banks	that	use our	lending-related	core	processing	applications	and	32	banks	that	use	our	various	retail	delivery	applications.	Our	customers	in	this market	include	JP	Morgan	Chase,	Bank	of	America,	ING/Direct,	Charles	Schwab	Bank,	and	Citizens	Bank	of	Rhode	Island.

•	Automotive	Finance	Institutions.		Our	automotive	finance	processing	services	include	integrated	loan	and	lease	servicing	solutions	for	the global	automotive	finance	industry.	As	of	December	2006,	over	18	million	automotive	loans	and	leases	in	North	America	and	Europe were	processed	on	our	automotive	finance	applications.	We	also	offer	origination,	e-contract	hosting,	dealer	wholesale	finance,	and	other ancillary	services,	providing	an	end-to-end	automotive	finance	solution.	Three	of	the	top	five	captive	automotive	finance	companies	in	the U.S.,	as	ranked	at	the	end	of	2005,	utilize	our	applications	and	services.

•	Commercial	Lenders.		We	also	provide	business	solutions	that	allow	clients	to	automate	and	manage	their	entire	commercial	lending	and loan	trading	businesses.	Our	customers	include	more	than	91	financial	institutions,	including	9	of	the	top	10	and	27	of	the	top	50	as	ranked by	capital	as	of	December	31,	2006.	Our	customers	include	Bank	of	America,	JP	Morgan	Chase,	Barclays	Capital,	Bank	of	Scotland,	and Rabobank.

•	Retailers.		A	significant	portion	of	our	revenues	from	check	risk	management	services	is	generated	from	large	national	retail	chains including	Sears,	Best	Buy,	Marmaxx	and	Albertson's.	Other	customers	of	our	check	risk	management	products	and	services	include regional	merchants	such	as	hotels,	automotive	dealers,	telecommunication	companies,	supermarkets,	gaming	establishments,	mail	order houses	and	other	businesses.

We	have	developed	several	models	of	providing	our	customers	with	applications	and	services.	We	typically	deliver	the	highest	value	to	our customers	when	we	combine	our	software	applications	and	deliver	them	in	one	of	several	types	of	outsourcing	arrangements,	such	as	an application	service	provider,	facilities	management	processing	or	application	management	arrangement.	We	are	also	able	to	deliver	individual applications	through	a	software	licensing	arrangement.	Finally,	using	our	expertise	gained	in	the	foregoing	types	of	arrangements,	we	also	have clients	for	whom	we	manage	their	IT	operations,	without	providing	any	of	our	proprietary	software.

# International

We	offer	core	banking	applications,	item	processing,	card	services,	and	check	risk	management	solutions	to	financial	institutions,	card issuers,	and	retailers	in	approximately	60	countries	outside	the	United	States.	Our	international	operation	leverages	existing	domestic	applications and	provides	services	for	the	specific	business	needs	of	our	customers	in	targeted	international	markets.	Our	service	offering	includes	a comprehensive	range	of	full-service	outsourced	solutions,	including	core	banking	applications	and	transaction	processing	and	call	center	services. We	also	provide	application	management,	facilities	management,	consulting	services,	and	software	licensing	and	maintenance.	Our	international customers	include	CitiBank,	Bradesco,	ABN	AMRO/Banco	Real,	ING	Group,	Krung	Thai	Bank,	China	Construction	Bank,	National	Australia Bank,	and	a	number	of	other	mid-tier	and	regional	financial	institutions,	card	issuers,	and	retailers.

# Our	Lender	Processing	Services	Operating	Segment

# Mortgage	Processing	Services

We	offer	the	most	widely	used	mortgage	loan	servicing	system	(known	as	MSP)	in	the	U.S.	As	of	December	31,	2006,	our	mortgage	loan servicing	platforms,	including	MSP,	were	used	to	process	over	50%	of	all	residential	mortgages	by	dollar	volume	in	the	U.S.	representing	balances exceeding	$4.0	trillion.	Our	mortgage	loan	processing	customers	include	Bank	of	America,	Wells	Fargo,	National	City	Mortgage,	and	U.S.	Bank Home	Mortgage.	Our	customer	relationships	are	typically	long-term	relationships	that	generally	provide	relatively	consistent	annual	revenues based	on	the	number	of	mortgages	processed	on	our	platform.

While	our	mortgage	servicing	applications	can	be	purchased	on	a	stand-alone,	licensed	basis,	the	substantial	majority	of	our	MSP	customers by	both	number	of	customers	and	loan	volume	choose	to	use	us	as	their	processing	partner	and	engage	us	to	perform	all	data	processing	functions in	our	technology	center	located	in	Jacksonville,	Florida.	Customers	determine	whether	to	process	their	loan	portfolio	data	under	an	application service	provider	arrangement	in	which	multiple	clients	share	the	same	computing	and	personnel	resources	or	to	have	their	own	dedicated	resources within	our	facility.

# The	primary	applications	and	services	of	this	business	include:

•	MSP.		Our	Mortgage	Servicing	Platform,	or	MSP,	automates	all	areas	of	loan	servicing,	including	loan	setup	and	ongoing	processing, customer	service,	accounting	and	reporting	to	the	secondary	mortgage	market,	and	federal	regulatory	reporting.	MSP	processes	a	wide range	of	loan	products,	including	fixed-rate	mortgages,	adjustable-rate	mortgages,	construction	loans,	equity	lines	of	credit,	and	daily simple	interest	loans.

•	Empower!		Empower!	is	a	mortgage	loan	origination	software	system	used	by	banks,	savings	&	loans,	mortgage	bankers,	and	sub-prime lenders.	This	application	fully	automates	every	phase	of	making	loans,	providing	seamless	credit	bureau	access	and	interfacing	with automated	underwriting	systems	used	by	Freddie	Mac	and	Fannie	Mae,	as	well	as	with	vendors	providing	servicing,	flood	certifications, appraisals,	and	title	insurance.

# Mortgage	Information	Services

We	offer	a	comprehensive	suite	of	services	spanning	the	entire	mortgage	loan	life	cycle,	from	loan	origination	through	closing,	refinancing, foreclosure	and	resale.	A	significant	number	of	our	customers	use	a	combination	of	our	mortgage	information,	mortgage	origination	and	default management	services.	Our	client	base	includes	mortgage	lenders	such	as	ABN	Amro,	U.S.	Bancorp,	Bank	of	America,	Freddie	Mac,	New	Century Mortgage	and

Washington	Mutual,	as	well	as	investors	and	real	estate	professionals.	Our	primary	product	lines	are	described	below:

•	Valuation	and	Appraisal	Services.		We	provide	a	broad	suite	of	valuation	applications,	which	include	automated	valuation	models, traditional	appraisals,	broker	price	opinions,	collateral	scores,	and	appraisal	reviews.	We	have	developed	innovative	new	hybrid	valuation offerings	such	as	collateral	valuation	insurance,	which	combine	a	traditional	valuation	with	an	insurance	policy	issued	by	an	unaffiliated third	party	that	guarantees	the	accuracy	of	a	valuation	within	certain	parameters.

•	Real	Estate	Tax	Services.		We	offer	lenders	a	monitoring	service	that	will	notify	them	of	any	change	in	tax	status	during	the	life	of	a	loan. We	also	provide	complete	outsourcing	of	tax	escrow	services,	including	the	establishment	of	a	tax	escrow	account	that	is	integrated	with the	lender's	mortgage	servicing	system	and	the	processing	of	tax	payments	to	taxing	authorities.

•	Flood	Zone	Certifications.		We	offer	flood	zone	certifications	through	a	proprietary	automated	system	that	accesses	and	interprets	Federal Emergency	Management	Agency,	or	FEMA,	flood	maps	and	certifies	whether	a	property	is	in	a	federally	designated	flood	zone. Additionally,	we	offer	lenders	a	life-of-loan	flood	zone	determination	service	that	monitors	previously	issued	certificates	for	any	changes, such	as	FEMA	flood	map	revisions,	for	as	long	as	that	loan	is	outstanding.

•	1031	Exchange	Intermediary	Services.		We	act	as	a	qualified	exchange	intermediary	for	those	customers	who	seek	to	engage	in	qualified exchanges	under	Section	1031	of	the	Internal	Revenue	Code,	which	allows	capital	gains	tax	deferral	on	the	sale	of	certain	real	estate investment	assets.

•	Mortgage	Origination	Services.		We	provide	centralized	title	and	closing	services	to	financial	institutions	in	the	first	mortgage,	refinance, home	equity	and	sub-prime	lending	markets.	Our	client	base	includes	Wells	Fargo,	Washington	Mutual,	and	Bank	of	America.	Our centralized	financial	institution	title	agency	services	include	arranging	for	the	issuance	of	a	title	insurance	policy	by	a	title	insurer.	We offer	these	services	on	a	national	basis,	both	in	the	traditional	manner	and	through	our	centralized	production	facilities	that	incorporate automated	processes,	which	can	help	expedite	the	delivery	of	services.	Our	closing	management	services	cover	a	variety	of	types	of closings,	including	purchases	and	refinancings,	and	provide	a	variety	of	types	of	services.	We	maintain	a	network	of	independent	closing agents	who	are	trained	to	close	loans	in	accordance	with	the	lender's	instructions.

•	Credit	Reporting.		We	provide	credit	information	reports	and	related	services	to	meet	the	needs	of	the	mortgage	industry	and	help commercial	banks,	mortgage	companies,	and	consumer	lenders	make	loan	decisions.	Our	services	include	providing	a	merged	credit report	that	contains	credit	history	data	on	individual	or	joint	credit	applicants	acquired	from	the	combined	databases	of	three	credit bureaus	(Experian,	Trans	Union	and	Equifax)	for	national	coverage.	We	consolidate	and	organize	information	from	these	credit	bureaus and	deliver	a	concise	report	to	our	customers.

•	Default	Management	Services.		We	primarily	provide	our	default	management	services	to	national	mortgage	lenders	and	loan	servicers, many	of	which	previously	performed	this	function	in-house.	We	currently	provide	default	management	services	to	22	of	the	top	25 residential	mortgage	servicers,	13	of	the	top	25	sub-prime	servicers,	and	24	of	the	top	25	subservicers.	Washington	Mutual	and	Bank	of America	are	two	of	our	largest	customers.	Our	Default	Management	Services	enable	mortgage	lenders	and	loan	servicers	to	outsource	the business	processes	necessary	to	take	a	loan	and	the	underlying	real	estate	securing	the	loan	through	the	default	and	foreclosure	process. We	work	with	customers	to	identify	specific	parameters	regarding	the	type	and	quality	of	services	they	require	and	provide	a	single	point of	contact	for	these	services.	As	a	result,	our	customers	are	able	to	use	our	outsourcing	services	in	a	manner	that	we	believe	provides	a greater	level	of	consistency	in	services,	pricing,	and	quality	than	if	these	customers	were	to	obtain	these	services	from	separate	providers. For	example,	we	can	offer	default	management	services	to	our	MSP	mortgage	processing	customers.	We	use	our	own	resources	and networks	that	we	have	established	with	independent	contractors	to	provide	these	default	management	outsourcing	solutions.

# Sales	and	Marketing

# Sales	Force

Our	sales	and	marketing	efforts	are	primarily	organized	around	our	lines	of	business,	and	by	customer	market	segment	and	distribution channel.	In	our	Transaction	Processing	Services	segment,	we	have	a	sales	force	that	markets	our	core	processing	services	to	our	large	national bank	customers.	A	separate	sales	group	focuses	on	community	based	institutions.	Specialized	sales	teams	have	been	established	to	promote	our products	to	national	and	regional	retailers	and	the	automotive	and	gaming	industries.	In	addition,	we	have	a	sales	force	responsible	for	marketing our	services	outside	the	United	States.	We	also	market	certain	products	and	services	of	our	Transaction	Processing	Services	segment	through indirect	sales	channels,	such	as	ICBA	and	CSCU,	independent	sales	organizations,	marketing	alliances,	and	financial	institutions.

In	our	Lender	Processing	Segment,	sales	teams	are	assigned	to	national	banks,	credit	unions,	thrifts,	and	mortgage	companies	based	on institution	size.	Other	teams	focus	on	more	highly	specialized	lending	and	servicing	companies.	We	endeavor	to	increase	market	share	by attracting	new	customers	as	well	as	further	penetrating	our	customer	base	by	selling	additional	mortgage	related	product	services	including origination,	default	management,	tax	and	appraisal	services,	to	existing	mortgage	processing	clients	and	vice	versa.

A	significant	portion	of	our	potential	customers	in	each	of	our	business	lines	is	targeted	via	direct	and/or	indirect	field	sales,	as	well	as inbound	and	outbound	telemarketing	efforts.	Marketing	activities	include	direct	marketing,	print	advertising,	media	relations,	public	relations, tradeshow	and	convention	activities,	seminars,	and	other	targeted	activities.	As	many	of	our	customers	use	a	single	product	or	service,	or	a combination	of	products	or	services,	our	direct	sales	force	also	targets	existing	customers	to	promote	cross-selling	opportunities.	Our	strategy	is	to use	the	most	efficient	delivery	system	available	to	successfully	acquire	customers	and	build	awareness	of	our	products	and	services.

In	addition	to	our	traditional	sales	force,	we	have	established	a	core	team	of	senior	managers	to	lead	strategic	account	management	for	the full	range	of	our	services	to	existing	and	potential	top-tier	financial	institution	customers.	The	individuals	who	participate	in	this	effort,	which	we coordinate	through	our	Office	of	the	Enterprise,	spend	a	significant	amount	of	their	time	on	sales	and	marketing	efforts	as	well	as	working	with	our business	units	to	develop	solutions	based	upon	strategic	issues	impacting	customers'	businesses.

# Patents,	Trademarks	and	Other	Intellectual	Property

We	rely	on	a	combination	of	contractual	restrictions,	internal	security	practices,	and	copyright	and	trade	secret	law	to	establish	and	protect our	software,	technology,	and	expertise.	Further,	we	have	developed	a	number	of	brands	that	have	accumulated	substantial	goodwill	in	the marketplace,	and	we	rely	on	trademark	law	to	protect	our	rights	in	that	area.	We	intend	to	continue	our	policy	of	taking	all	measures	we	deem necessary	to	protect	our	copyright,	trade	secret,	and	trademark	rights.	These	legal	protections	and	arrangements	afford	only	limited	protection	of our	proprietary	rights,	and	there	is	no	assurance	that	our	competitors	will	not	independently	develop	or	license	products,	services,	or	capabilities that	are	substantially	equivalent	or	superior	to	ours.	In	general,	we	believe	that	we	own	most	proprietary	rights	necessary	for	the	conduct	of	our business,	although	we	do	license	certain	items,	none	of	which	is	material,	under	arms-length	agreements	for	varying	terms.

# Competition

In	the	large	bank	sector,	the	markets	for	our	core	banking	products	and	services	are	highly	competitive.	The	markets	are	very	mature	and have	a	number	of	existing	providers	with	a	high	level	of	experience	and	significant	market	share.	Additionally,	given	the	attractive	market characteristics	in	financial	services,	there	are	from	time	to	time	new	market	entrants	which	seek	to	leverage	shifts	in	technology	or	product innovation	to	attract	customers.

Our	primary	competitors	include	internal	technology	departments	within	banks,	data	processing	or	software	development	departments	of large	companies	or	large	computer	manufacturers,	third-party	payment	processors,	independent	computer	services	firms,	companies	that	develop and	deploy	software	applications,	companies	that	provide	customized	development,	implementation	and	support	services,	and	companies	that market	software	for	the	electronic	payment	industry.	Some	of	these	competitors	possess	substantially	greater	financial,	sales	and	marketing

resources	than	we	do.	Competitive	factors	for	applications	and	services	include	the	quality	of	the	technology-based	application	or	service, application	features	and	functions,	ease	of	delivery	and	integration,	ability	of	the	provider	to	maintain,	enhance,	and	support	the	applications	or services,	and	price.	We	believe	that	we	compete	favorably	in	each	of	these	categories.	In	addition,	we	believe	that	our	financial	institution	industry expertise,	combined	with	our	ability	to	offer	multiple	applications	and	services	to	individual	customers,	enhances	our	competitiveness	against competitors	with	more	limited	application	offerings.

We	compete	with	vendors	that	offer	similar	core	processing	applications	and	services	to	financial	institutions,	including	Fiserv,	Inc.,	Jack Henry	and	Associates,	Inc.,	Metavante	Corporation,	Open	Solutions,	IBM	and	Accenture.	In	certain	non-U.S.	markets,	we	compete	with	regional providers	including	Alnova,	I-Flex,	and	Temenos.

Our	competitors	in	the	card	issuer	services	market	include	third-party	credit	and	debit	card	processors	such	as	First	Data	Corporation,	Total System	Services,	Electronic	Data	Systems	Corporation,	and	Payment	Systems	for	Credit	Unions,	and	third-party	software	providers,	which	license their	card	processing	systems	to	financial	institutions	and	third-party	processors.	Competitors	in	the	check	risk	management	services	market include	First	Data's	TeleCheck	Services	division,	CrossCheck,	eFunds,	and	Global	Payments.

The	markets	for	our	mortgage	information	services	are	also	highly	competitive.	Key	competitive	factors	include	quality	of	the	service, convenience,	speed	of	delivery,	customer	service,	and	price.	We	do	not	believe	that	there	is	a	competitor	currently	offering	the	scope	of	services and	market	coverage	that	we	provide	in	our	mortgage	information	services	business.	However,	there	are	a	number	of	competitors	in	specific	lines, some	of	which	have	substantial	resources.	First	American	and	Land	America	are	significant	competitors	in	a	majority	of	our	Mortgage	Information Services,	including	tax,	flood,	appraisal	and	default.

# Research	and	Development

Our	research	and	development	activities	have	related	primarily	to	the	design	and	development	of	our	processing	systems	and	related	software applications	and	risk	management	platforms.	We	expect	to	continue	our	practice	of	investing	an	appropriate	level	of	resources	to	maintain, enhance	and	extend	the	functionality	of	our	proprietary	systems	and	existing	software	applications,	to	develop	new	and	innovative	software applications	and	systems	in	response	to	the	needs	of	our	customers,	and	to	enhance	the	capabilities	surrounding	our	outsourcing	infrastructure.	In addition,	we	intend	to	offer	products	and	services	that	are	compatible	with	new	and	emerging	delivery	channels.

As	part	of	our	research	and	development	process,	we	evaluate	current	and	emerging	technology	for	applicability	to	our	existing	and	future software	platforms.	To	this	end,	we	engage	with	various	hardware	and	software	vendors	in	evaluation	of	various	infrastructure	components.	Where appropriate,	we	use	third-party	technology	components	in	the	development	of	our	software	applications	and	service	offerings.	Third-party	software may	be	used	for	highly	specialized	business	functions,	which	we	may	not	be	able	to	develop	internally	within	time	and	budget	constraints. Additionally,	third-party	software	may	be	used	for	commodity	type	functions	within	a	technology	platform	environment.	In	the	case	of	nearly	all of	our	third-party	software,	enterprise	license	agreements	exist	for	the	third-party	component	and	either	alternative	suppliers	exist	or	transfer	rights exist	to	ensure	the	continuity	of	supply.	As	a	result,	we	are	not	materially	dependent	upon	any	third-party	technology	components.	We	work	with our	customers	to	determine	the	appropriate	timing	and	approach	to	introducing	technology	or	infrastructure	changes	to	our	applications	and services.	In	the	years	ended	December	31,	2006,	2005	and	2004	we	recorded	expense	of	approximately	$105.6	million,	$113.5	million	and $74.2	million,	respectively	on	research	and	development	efforts.

With	respect	to	our	outsourcing	of	software	development,	we	are	transferring	costs	from	our	U.S.	and	Western	European-based	development centers	to	Covansys	Corporation	(Covansys),	in	which	FIS	holds	an	equity	investment,	and	other	lower	cost	off-shore	facilities.	We	are	using	our relationship	with	Covansys	and	with	other	facilities	to	lower	our	internal	development	costs	over	time	by	outsourcing	certain	programming, development	and	maintenance	functions.

# Government	Regulation

Various	aspects	of	our	businesses	are	subject	to	federal,	state,	and	foreign	regulation.	Our	failure	to	comply	with	any	applicable	laws	and regulations	could	result	in	restrictions	on	our	ability	to	provide	our	products	and	services,	as	well	as	the	imposition	of	civil	fines	and	criminal penalties.

As	a	provider	of	electronic	data	processing	and	back-office	services	to	financial	institutions	such	as	banks,	thrifts	and	credit	unions	we	are subject	to	regulatory	oversight	and	examination	by	the	Federal	Financial	Institutions	Examination	Council,	an	interagency	body	of	the	Federal Deposit	Insurance	Corporation,	the	Office	of	Thrift	Supervision,	the	Office	of	the	Comptroller	of	the	Currency,	the	Board	of	Governors	of	the Federal	Reserve	System,	the	National	Credit	Union	Administration	and	various	state	regulatory	authorities.	In	addition,	independent	auditors annually	review	several	of	our	operations	to	provide	reports	on	internal	controls	for	our	customers'	auditors	and	regulators.	We	also	may	be subject	to	possible	review	by	state	agencies	that	regulate	banks	in	each	state	in	which	we	conduct	our	electronic	processing	activities.

Beginning	July	1,	2001,	financial	institutions	were	required	to	comply	with	privacy	regulations	imposed	under	the	Gramm-Leach-Bliley	Act. These	regulations	place	restrictions	on	financial	institutions'	use	of	non-public	personal	information.	All	financial	institutions	must	disclose detailed	privacy	policies	to	their	customers	and	offer	them	the	opportunity	to	direct	the	financial	institution	not	to	share	information	with	third parties.	The	new	regulations,	however,	permit	financial	institutions	to	share	information	with	non-affiliated	parties	who	perform	services	for	the financial	institutions.	As	a	provider	of	services	to	financial	institutions,	we	are	required	to	comply	with	the	privacy	regulations	and	are	bound	by the	same	limitations	on	disclosure	of	the	information	received	from	our	customers	as	apply	to	the	financial	institutions	themselves.

Given	that	one	of	the	databases	that	we	maintain	in	the	U.S.	contains	certain	data	pertaining	to	the	check-writing	histories	of	consumers,	and that	data	is	used	to	provide	certain	check	risk	management	services,	our	check	risk	management	business	is	subject	to	the	Federal	Fair	Credit Reporting	Act	and	various	similar	state	laws.	Among	other	things,	the	Fair	Credit	Reporting	Act	imposes	requirements	on	us	concerning	data accuracy,	and	provides	that	consumers	have	the	right	to	know	the	contents	of	their	check-writing	histories,	to	dispute	their	accuracy,	and	to	require verification	or	removal	of	disputed	information.	In	furtherance	of	our	objectives	of	data	accuracy,	fair	treatment	of	consumers,	protection	of consumers'	personal	information,	and	compliance	with	these	laws,	we	maintain	a	high	level	of	security	for	our	computer	systems	in	which consumer	data	resides,	and	we	maintain	consumer	relations	call	centers	to	facilitate	efficient	handling	of	consumer	requests	for	information	and handling	of	disputes.

Our	check	collection	services	are	subject	to	the	Federal	Fair	Debt	Collection	Practices	Act	and	various	state	collection	laws	and	licensing requirements.	The	Federal	Trade	Commission,	as	well	as	state	attorneys	general	and	other	agencies,	have	enforcement	responsibility	over	the collection	laws,	as	well	as	the	various	credit	reporting	laws.

Elements	of	our	cash	access	business	are	registered	as	a	Money	Services	Business	and	are	subject	to	the	USA	Patriot	Act	and	reporting requirements	of	the	Bank	Secrecy	Act	and	U.S.	Treasury	Regulations.	This	business	is	also	subject	to	various	state,	local	and	tribal	licensing requirements.	The	Financial	Crimes	Enforcement	Network,	state	attorneys	general,	and	other	agencies	have	enforcement	responsibility	over	laws relating	to	money	laundering,	currency	transmission,	and	licensing.

The	Real	Estate	Settlement	Procedures	Act,	or	RESPA,	and	related	regulations	generally	prohibit	the	payment	or	receipt	of	fees	or	any	other item	of	value	for	the	referral	of	a	real	estate-secured	loan	to	a	loan	broker	or	lender	and	prohibit	fee	shares	or	splits	or	unearned	fees	in	connection with	the	provision	of	residential	real	estate	settlement	services,	such	as	mortgage	brokerage	and	real	estate	brokerage.	Notwithstanding	these prohibitions,	RESPA	permits	payments	for	goods	furnished	or	for	services	actually	performed,	so	long	as	those	payments	bear	a	reasonable relationship	to	the	market	value	of	the	goods	or	services	provided.	RESPA	and	related	regulations	may	to	some	extent	restrict	our	real	estate- related	businesses	from	entering	into	certain	preferred	alliance	arrangements.	The	U.S.	Department	of	Housing	and	Urban	Development	is responsible	for	enforcing	RESPA.

Real	estate	appraisers	are	subject	to	regulation	in	most	states,	and	some	state	appraisal	boards	have	sought	to	prohibit	our	automated valuation	applications.	Courts	have	limited	such	prohibitions,	in	part	on	the	ground	of

preemption	by	the	federal	Financial	Institutions	Reform,	Recovery,	and	Enforcement	Act	of	1989,	but	we	cannot	assure	you	that	our	valuation	and appraisal	services	business	will	not	be	subject	to	regulation.

The	title	agency	and	related	services	we	provide	are	conducted	through	an	underwritten	title	company,	title	agencies,	and	individual	escrow officers.	The	regulation	of	an	underwritten	title	company	in	California	is	generally	limited	to	requirements	to	maintain	specified	levels	of	net worth	and	working	capital,	and	to	obtain	and	maintain	a	license	in	each	of	the	counties	in	California	in	which	it	operates.	The	title	agencies	and individual	escrow	officers	are	also	subject	to	regulation	by	the	insurance	or	banking	regulators	in	many	jurisdictions.	These	regulators	generally require,	among	other	items,	that	agents	and	individuals	obtain	and	maintain	a	license	and	be	appointed	by	a	title	insurer.	We	also	own	a	small	title insurer	which	issues	policies	generated	by	our	agency	operations	in	relatively	limited	circumstances.	This	insurer	is	domiciled	in	New	York	and	is therefore	subject	to	regulation	by	the	insurance	regulatory	authorities	of	that	state.	Among	other	things,	no	person	may	acquire	10%	or	more	of	our common	stock	without	the	approval	of	the	New	York	insurance	regulators.

The	California	Department	of	Insurance	has	recently	proposed	implementing	rate	reductions	in	the	title	insurance	industry	in	California.	New York,	Colorado,	Florida,	Nevada,	Texas	and	other	insurance	regulators	have	also	announced	reviews	of	title	insurance	rates	and	other	states	could follow.	At	this	stage,	we	are	unable	to	predict	what	the	outcome	will	be	of	these	or	any	similar	processes.

Given	that	we	conduct	business	in	international	markets	as	well	as	in	the	U.S.,	we	are	subject	to	laws	and	regulations	in	jurisdictions	outside the	U.S.	that	regulate	many	of	the	same	activities	that	are	described	above,	including	electronic	data	processing	and	back-office	services	for financial	institutions	and	use	of	consumer	information.

The	IRS	has	proposed	regulations	under	Section	468B	regarding	the	taxation	of	the	income	earned	on	escrow	accounts,	trusts	and	other funds	used	during	deferred	exchanges	of	like-kind	property	and	under	Section	7872	regarding	below-market	loans	to	facilitators	of	these exchanges.	The	proposed	regulations	affect	taxpayers	that	engage	in	like-kind	exchanges	and	escrow	holders,	trustees,	qualified	intermediaries, and	others	that	hold	funds	during	like-kind	exchanges.	We	currently	do	not	know	what	effect	these	changes	will	have	on	our	1031	exchange businesses.

Although	we	do	not	believe	that	compliance	with	future	laws	and	regulations	related	to	our	businesses,	including	future	consumer	protection laws	and	regulations,	will	have	a	material	adverse	effect	on	our	company,	enactment	of	new	laws	and	regulations	may	increasingly	affect	the operations	of	our	business,	directly	or	indirectly,	which	could	result	in	substantial	regulatory	compliance	costs,	litigation	expense,	adverse publicity,	and/or	loss	of	revenue.

# Employees

As	of	December	31,	2006,	we	had	approximately	24,871	employees,	including	approximately	7,706	employees	principally	employed	outside of	the	U.S.	None	of	our	U.S.	workforce	currently	is	unionized.	We	have	not	experienced	any	work	stoppages,	and	we	consider	our	relations	with employees	to	be	good.

# Available	Information

Our	Internet	website	address	is	www.fidelityinfoservices.com.	We	make	available,	free	of	charge,	through	our	website	our	Annual	Reports on	Form	10-K,	Quarterly	Reports	on	Form	10-Q,	and	Current	Reports	on	Form	8-K,	and	amendments	to	those	reports,	as	soon	as	reasonably practicable	after	we	file	them	with,	or	furnish	them	to,	the	Securities	and	Exchange	Commission.	Our	Corporate	Governance	Policy	and	Code	of Business	Conduct	and	Ethics	are	also	available	on	our	website	and	are	available	in	print,	free	of	charge,	to	any	shareholder	who	mails	a	request	to the	Corporate	Secretary,	Fidelity	National	Information	Services,	Inc.,	601	Riverside	Avenue,	Jacksonville,	FL	32204	USA.	Other	corporate governance-related	documents	can	be	found	at	our	website	as	well.	However,	the	information	found	on	our	website	is	not	part	of	this	or	any	other report.

# Item	1A. Risk	Factors.

In	addition	to	the	normal	risks	of	business,	we	are	subject	to	significant	risks	and	uncertainties,	including	those	listed	below	and	others described	elsewhere	in	this	Annual	Report	on	Form	10-K.	Any	of	the	risks	described	herein	could	result	in	a	significant	adverse	effect	on	our results	of	operation	and	financial	condition.

# If	we	fail	to	adapt	our	services	to	changes	in	technology	or	in	the	marketplace,	or	if	our	ongoing	efforts	to	upgrade	our	technology	are	not successful,	we	could	lose	customers	and	have	difficulty	attracting	new	customers	for	our	products	and	services.

The	markets	for	our	services	are	characterized	by	constant	technological	changes,	frequent	introductions	of	new	services	and	evolving industry	standards.	Our	future	success	will	be	significantly	affected	by	our	ability	to	enhance	our	current	products	and	services,	and	develop	and introduce	new	products	and	services	that	address	the	increasingly	sophisticated	needs	of	our	customers	and	their	clients.	These	initiatives	carry	the risks	associated	with	any	new	product	or	service	development	effort,	including	cost	overruns,	delays	in	delivery,	and	performance	issues.	There can	be	no	assurance	that	we	will	be	successful	in	developing,	marketing	and	selling	new	products	and	services	that	meet	these	changing	demands, that	we	will	not	experience	difficulties	that	could	delay	or	prevent	the	successful	development,	introduction,	and	marketing	of	these	products	and services,	or	that	our	new	products	and	services	and	their	enhancements	will	adequately	meet	the	demands	of	the	marketplace	and	achieve	market acceptance.

# We	operate	in	a	competitive	business	environment,	and	if	we	are	unable	to	compete	effectively	our	results	of	operations	and	financial condition	may	be	adversely	affected.

The	market	for	our	services	is	intensely	competitive.	Our	competitors	vary	in	size	and	in	the	scope	and	breadth	of	the	services	they	offer. Some	of	our	competitors	have	substantial	resources.	We	face	direct	competition	from	third	parties,	and	since	many	of	our	larger	potential customers	have	historically	developed	their	key	applications	in-house	and	therefore	view	their	system	requirements	from	a	make-versus-buy perspective,	we	often	compete	against	our	potential	customers'	in-house	capacities.	In	addition,	we	expect	that	the	markets	in	which	we	compete will	continue	to	attract	new	competitors	and	new	technologies.	There	can	be	no	assurance	that	we	will	be	able	to	compete	successfully	against current	or	future	competitors	or	that	competitive	pressures	we	face	in	the	markets	in	which	we	operate	will	not	materially	adversely	affect	our business,	financial	condition,	and	results	of	operations.

# Our	substantial	leverage	and	debt	service	requirements	may	adversely	affect	our	financial	and	operational	flexibility.

As	of	December	31,	2006,	we	had	total	debt	of	approximately	$3.0	billion.	This	high	level	of	debt	could	have	important	consequences	to	us, including	the	following:

•	the	debt	level	makes	us	more	vulnerable	to	economic	downturns	and	adverse	developments	in	our	business,	may	cause	us	to	have difficulty	borrowing	money	in	the	future	for	working	capital,	capital	expenditures,	acquisitions	or	other	purposes	and	will	limit	our	ability to	pursue	other	business	opportunities	and	implement	certain	business	strategies;

•	we	need	to	use	a	large	portion	of	the	money	we	earn	to	pay	principal	and	interest	on	our	senior	credit	facilities,	which	reduces	the	amount of	money	available	to	finance	operations,	acquisitions	and	other	business	activities,	repay	other	indebtedness	and	pay	shareholder dividends;

•	some	of	the	debt	has	a	variable	rate	of	interest,	which	exposes	us	to	the	risk	of	increased	interest	rates;	and

•	we	have	a	higher	level	of	debt	than	certain	of	our	competitors,	which	may	cause	a	competitive	disadvantage	and	may	reduce	flexibility	in responding	to	changing	business	and	economic	conditions,	including	increased	competition.

In	addition,	the	terms	of	our	senior	credit	facilities	may	restrict	us	from	taking	actions,	such	as	making	significant	acquisitions	or	dispositions or	entering	into	certain	agreements	that	we	might	believe	to	be	advantageous	to	us.

# If	we	are	unable	to	successfully	consummate	and	integrate	acquisitions,	our	results	of	operations	may	be	adversely	affected.

As	part	of	our	growth	strategy,	we	have	made	numerous	acquisitions	in	recent	years.	We	anticipate	that	we	will	continue	to	seek	to	acquire complementary	businesses,	products	and	services.	This	strategy	will	depend	on	the	ability	to	find	suitable	acquisitions	and	finance	them	on acceptable	terms.	We	may	require	additional	debt	or	equity	financing	for	future	acquisitions,	and	doing	so	will	be	made	more	difficult	by	our substantial	debt.	If	we	are	unable	to	acquire	suitable	acquisition	candidates,	we	may	experience	slower	growth.

Further,	even	if	we	successfully	complete	acquisitions,	we	will	face	challenges	in	integrating	any	acquired	business.	These	challenges include	eliminating	redundant	operations,	facilities	and	systems,	coordinating	management	and	personnel,	retaining	key	employees,	managing different	corporate	cultures,	and	achieving	cost	reductions	and	cross-selling	opportunities.	There	can	be	no	assurance	that	we	will	be	able	to	fully integrate	all	aspects	of	acquired	businesses	successfully	or	fully	realize	the	potential	benefits	of	bringing	them	together,	and	the	process	of integrating	these	acquisitions	may	disrupt	our	business	and	divert	our	resources.

# Consolidation	in	the	banking	and	financial	services	industry	could	adversely	affect	our	revenues	by

# eliminating	some	of	our	existing	and	potential	customers	and	could	make	us	more	dependent	on	a	more	limited	number	of	customers.

There	has	been	and	continues	to	be	substantial	merger,	acquisition	and	consolidation	activity	in	the	banking	and	financial	services	industry. Mergers	or	consolidations	of	banks	and	financial	institutions	in	the	future	could	reduce	the	number	of	our	customers	and	potential	customers, which	could	adversely	affect	our	revenues	even	if	these	events	do	not	reduce	the	aggregate	number	of	customers	or	the	banking	and	other	activities of	the	consolidated	entities.	If	our	customers	merge	with	or	are	acquired	by	other	entities	that	are	not	our	customers,	or	that	use	fewer	of	our services,	they	may	discontinue	or	reduce	their	use	of	our	services.	In	addition,	it	is	possible	that	the	larger	banks	or	financial	institutions	resulting from	mergers	or	consolidations	could	decide	to	perform	in-house	some	or	all	of	the	services	which	we	currently	provide	or	could	provide.	Any	of these	developments	could	have	a	material	adverse	effect	on	our	business	and	results	of	operations.

# Demand	for	many	of	our	products	and	services	is	sensitive	to	the	level	of	consumer	transactions

# generated	by	our	customers,	and	accordingly,	our	revenues	could	be	impacted	negatively	by	a	general	economic	slowdown	or	any	other event	causing	a	material	slowing	of	consumer	spending.

A	significant	portion	of	our	revenue	is	derived	from	transaction	processing	fees.	Any	changes	in	economic	factors	that	adversely	affect consumer	spending	and	related	consumer	debt,	or	a	reduction	in	check	writing	or	credit	and	debit	card	usage,	could	reduce	the	volume	of transactions	that	we	process,	and	have	an	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.

# Potential	customers	of	our	financial	information	software	and	services	business	may	be	reluctant	to	switch	to	a	new	vendor,	which	may adversely	affect	our	growth,	both	in	the	U.S.	and	internationally.

For	banks	and	other	potential	customers	of	our	financial	information	software	and	services	segment,	switching	from	one	vendor	of	bank	core processing	or	related	software	and	services	(or	from	an	internally-developed	system)	to	a	new	vendor	is	a	significant	undertaking.	Many	potential customers	worry	about	potential	disadvantages	such	as	loss	of	accustomed	functionality,	increased	costs	and	business	disruption.	As	a	result,

potential	customers,	both	in	the	U.S.	and	internationally,	often	resist	change.	We	seek	to	overcome	this	resistance	through	strategies	such	as	making investments	to	enhance	the	functionality	of	our	software.	However,	there	can	be	no	assurance	that	our	strategies	for	overcoming	potential customers'	reluctance	to	change	vendors	will	be	successful,	and	this	resistance	may	adversely	affect	our	growth,	both	in	the	U.S.	and internationally.

# Decreased	lending	and	real	estate	activity	may	reduce	demand	for	certain	of	our	services	and	adversely	affect	our	results	of	operations.

Revenues	from	our	information	services	and	lender	services	operations	are	closely	related	to	the	general	level	of	real	estate	transactions, such	as	real	estate	sales	and	mortgage	refinancings.	Real	estate	sales	are	affected	by	a

number	of	factors,	including	mortgage	interest	rates,	the	availability	of	funds	to	finance	purchases	and	general	economic	conditions.	The	volume	of refinancing	transactions	in	particular	and	mortgage	originations	in	general	declined	in	2004,	2005	and	2006	from	2003	levels,	resulting	in	reduction of	revenues	in	some	of	our	businesses.	In	addition,	rising	mortgage	delinquency	and	default	rates	have	negatively	impacted	some	of	our	mortgage lending	customers,	particularly	within	the	subprime	lending	market.	These	trends	appear	likely	to	continue.	Our	revenues	in	future	periods	will continue	to	be	subject	to	these	and	other	factors	which	are	beyond	our	control	and,	as	a	result,	are	likely	to	fluctuate.

# We	could	have	conflicts	with	FNF,	and	the	executive	chairman	of	our	board	of	directors	and	other officers	and	directors	could	have	conflicts	of	interest	due	to	their	relationships	with	FNF.

Conflicts	may	arise	between	FNF	and	us	as	a	result	of	our	ongoing	agreements	and	the	nature	of	our	respective	businesses.	Among	other things,	we	and	certain	of	our	subsidiaries	are	parties	to	a	variety	of	intercompany	agreements	with	FNF.	Certain	of	our	executive	officers	and directors	will	be	subject	to	conflicts	of	interest	with	respect	to	such	intercompany	agreements	and	other	matters	due	to	their	relationships	with	FNF.

Some	of	the	FNF	executive	officers	and	directors	who	became	executive	officers	and	directors	of	our	company	in	connection	with	the	FNF Merger,	including	William	P.	Foley,	II,	Alan	L.	Stinson	and	Brent	B.	Bickett,	own	substantial	amounts	of	FNF	stock	and	stock	options	because	of their	relationships	with	FNF	and	Old	FNF	prior	to	the	FNF	Merger.	Such	ownership	could	create	or	appear	to	create	potential	conflicts	of	interest when	our	directors	and	officers	are	faced	with	decisions	that	involve	FNF	or	any	of	its	respective	subsidiaries.

Mr.	Foley,	who	became	our	Executive	Chairman	in	connection	with	the	FNF	Merger,	is	currently	the	Chief	Executive	Officer	and	Chairman of	the	board	of	directors	of	FNF.	Mr.	Stinson	and	Mr.	Bickett	also	became	officers	of	our	company	and	FNF.	As	a	result,	each	of	these	individuals has	obligations	to	us	as	well	as	to	FNF	and	will	have	conflicts	of	interest	with	respect	to	matters	potentially	or	actually	involving	or	affecting	us and	FNF.

Matters	that	could	give	rise	to	conflicts	between	us	and	FNF	include,	among	other	things.

•	our	past	and	ongoing	relationships	with	FNF,	including	intercompany	agreements	and	other	arrangements	with	respect	to	the administration	of	tax	matters,	employee	benefits,	indemnification,	and	other	matters;

•	the	quality	and	pricing	of	services	that	we	have	agreed	to	provide	to	FNF	or	that	it	has	agreed	to	provide	to	us;	and

•	business	opportunities	arising	for	either	us	or	FNF,	that	could	be	pursued	by	either	us	or	by	FNF.

We	will	seek	to	manage	these	potential	conflicts	through	dispute	resolution	and	other	provisions	of	our	agreements	with	FNF	and	through oversight	by	independent	members	of	our	board	of	directors.	However,	there	can	be	no	assurance	that	such	measures	will	be	effective	or	that	we will	be	able	to	resolve	all	potential	conflicts	with	FNF,	or	that	the	resolution	of	any	such	conflicts	will	be	no	less	favorable	to	us	than	if	we	were dealing	with	an	unaffiliated	third	party.

# We	may	lack	adequate	oversight	since	the	chairman	of	the	board	of	directors	and	chief	executive	officer	of	FNF	is	also	our	executive chairman.

Mr.	Foley	is	executive	chairman	of	our	board	of	directors.	Mr.	Foley	is	also	the	chairman	of	the	board	of	directors	and	chief	executive officer	of	FNF.	As	a	result	of	his	roles,	he	has	obligations	to	us	as	well	as	FNF	and	may	have	conflicts	of	time	with	respect	to	matters	potentially	or actually	involving	or	affecting	us.	As	executive	chairman,	it	is	expected	that	Mr.	Foley	will	devote	no	more	than	one-half	of	his	time	to	matters relating	to	us.	If	Mr.	Foley's	duties	as	executive	chairman	of	our	board	of	directors	require	more	time	than	he	is	able	to	allot,	then	his	oversight	of the	activities	of	our	company	could	be	diminished	and	the	effective	management	of	our	company	could	be	adversely	affected.

# Our	revenues	from	the	sale	of	services	to	VISA	and	MasterCard	organizations	are	dependent	upon	our	continued	VISA	and	MasterCard

# certification	and	financial	institution	sponsorship,	and	the	loss	or

# suspension	of	this	certification	or	sponsorship	could	adversely	affect	our	business.

In	order	to	provide	our	card	services,	we	must	be	designated	a	certified	processor	by,	and	be	a	member	service	provider	of,	MasterCard	and be	designated	as	an	independent	sales	organization	of	VISA.	These	designations	are	dependent	upon	our	continuing	adherence	to	the	standards	of the	VISA	and	MasterCard	associations.	The	member	financial	institutions	of	VISA	and	MasterCard,	some	of	which	are	our	competitors,	set	the standards	with	which	we	must	comply.	If	we	fail	to	comply	with	these	standards,	our	designation	as	a	certified	processor,	as	a	member	service provider,	or	as	an	independent	sales	organization	could	be	suspended	or	terminated.	The	termination	of	our	member	service	provider	status	or	our status	as	a	certified	processor,	or	any	changes	in	the	VISA	and	MasterCard	rules	that	prevent	our	registration	or	otherwise	limit	our	ability	to provide	transaction	processing	and	marketing	services	for	the	VISA	or	MasterCard	organizations	would	result	in	the	loss	of	business	from	VISA	or MasterCard	issuing	customers,	and	lead	to	a	reduction	in	our	revenues,	which	would	have	a	material	adverse	effect	on	our	business.

# We	have	a	long	sales	cycle	for	many	of	our	applications	and	if	we	fail	to	close	sales	after	expending

# significant	time	and	resources	to	do	so,	our	business,	financial	condition,	and	results	of	operations	may	be	adversely	affected.

The	implementation	of	many	of	our	applications	often	involves	significant	capital	commitments	by	our	customers,	particularly	those	with smaller	operational	scale.	Potential	customers	generally	commit	significant	resources	to	an	evaluation	of	available	software	and	require	us	to expend	substantial	time,	effort,	and	money	educating	them	as	to	the	value	of	our	software	and	services.	We	incur	substantial	costs	in	order	to obtain	each	new	customer.	We	may	expend	significant	funds	and	management	resources	during	the	sales	cycle	and	ultimately	fail	to	close	the	sale. Our	sales	cycle	may	be	extended	due	to	our	customers'	budgetary	constraints	or	for	other	reasons.	If	we	are	unsuccessful	in	closing	sales	after expending	significant	funds	and	management	resources	or	we	experience	delays,	it	could	have	a	material	adverse	effect	on	our	business,	financial condition,	and	results	of	operations.

If	Old	FNF's	2006	spin-off	of	FNF	does	not	constitute	a	tax	free	distribution	under	Section	355(e)	of	the	Internal	Revenue	Code	or	if	our merger	with	Old	FNF	does	not	constitute	a	tax	free	reorganization	under	Section	368(a),	then	we	may	suffer	losses	resulting	from	payment of	taxes	and	tax-related	losses.

Under	a	tax	disaffiliation	agreement,	which	we	were	required	to	enter	into	with	Old	FNF	and	FNF	as	a	condition	to	the	closing	under	our merger	agreement	with	Old	FNF,	FNF	is	required	to	indemnify	us	for	taxes	and	tax-related	losses	(including	stockholder	suits)	if	Old	FNF's	2006 spin-off	of	FNF	(the	"2006	Distribution")	were	determined	to	be	taxable	either	to	Old	FNF	(and	us	as	its	successor)	or	the	FNF	stockholders	or both,	unless	such	adverse	determination	were	the	result	of	a	breach	by	us	of	our	agreement	not	to	take	any	action	within	our	control	that	would cause	the	2006	Distribution	to	be	taxable	or	the	result	of	an	acquisition	of	FIS	stock	within	the	control	of	us	or	a	subsidiary.	In	such	an	event,	Old FNF	estimated	that	the	amount	of	tax	on	the	transfer	of	FNF's	stock	in	the	distribution	could	be	in	the	range	of	$150	million	and	possibly	greater depending	on,	among	other	things,	the	value	of	FNF's	stock	at	the	time	of	the	2006	Distribution.	In	addition,	FNF	is	required	under	the	tax disaffiliation	agreement	to	indemnify	Old	FNF	(and	us	as	its	successor)	for	taxes	and	tax-related	losses	(including	stockholder	suits)	in	the	event the	Old	FNF-FIS	merger	were	determined	to	be	taxable.	Old	FNF	estimated	that	the	amount	of	tax	on	Old	FNF's	transfer	and	retirement	of	its	FIS stock	in	the	merger	could	be	in	the	range	of	$1	billion	and	possibly	greater	depending	on,	among	other	things,	the	value	of	our	stock	at	the	time	of the	merger.

Even	if	the	2006	Distribution	otherwise	qualifies	as	a	spin-off	under	Section	355	of	the	Code,	the	distribution	of	FNF	common	stock	to	the Old	FNF	stockholders	in	connection	with	the	2006	Distribution	would	not	qualify	as	tax-free	to	Old	FNF	(or	us	as	its	successor)	under Section	355(e)	of	the	Code	if	50%	or	more	of	the	stock	of	Old	FNF	(including	us	as	successor	to	Old	FNF)	or	FNF	is	acquired	as	part	of	a	plan	or series	of	related	transactions	that	includes	the	2006	Distribution.	As	a	result	of	our	merger	with	Old	FNF,	approximately	49%	of	our	stock	would be	treated	as	having	been	acquired	pursuant	to	a	plan	that	includes	the	2006	Distribution	for	purposes	of	Section	355(e)	of	the	Code.

There	is	no	guaranty	that	FNF	will	have	financial	resources	to	satisfy	any	such	indemnification	obligation	described	above.	If	the	tax-free status	is	lost	because	of	any	action	taken	by	us	or	any	of	our	subsidiaries	after	the	time	of	the	2006	Distribution	(except	for	certain	actions specifically	identified	in	the	tax	disaffiliation	agreement),	we	would	be	required	to	pay	the	taxes	described	above	ourself	and	would	be	required	to indemnify	FNF	for	all	tax-related	losses.

# We	may	be	affected	by	significant	restrictions	following	the	FNF	Merger	with	respect	to	certain	actions	that	could	jeopardize	the	tax-free status	of	the	spin-off	by	Old	FNF	of	Fidelity	National	Title	Group	or	the	FNF	Merger.

In	order	to	preserve	the	tax-free	treatment	of	the	spin-off	by	Old	FNF	of	Fidelity	National	Title	Group,	a	tax	disaffiliation	agreement	entered into	by	FNF	and	us	prior	to	the	closing	under	the	FNF	Merger	agreement	restricts	us,	for	two	years	after	the	spin-off,	from	taking	certain	actions within	our	control	that	could	cause	the	spin-off	to	be	taxable	without	first	obtaining	a	consent	of	certain	officers	of	FNF	or	obtaining	an	opinion from	a	nationally	recognized	law	firm	or	accounting	firm	that	such	action	will	not	cause	the	spin-off	to	be	taxable	to	FNF	under	Section	355(e)	of the	Code.	In	general,	such	actions	would	include	engaging	in	certain	transactions	involving	(i)	the	acquisition	of	our	stock	or	(ii)	the	issuance	of shares	of	our	stock.

Because	of	these	restrictions,	we	may	be	limited	in	the	amount	of	stock	that	we	can	issue	to	make	acquisitions	or	raise	additional	capital	in the	two	years	subsequent	to	the	spin-off	and	the	FNF	Merger	and	in	our	ability	to	repurchase	shares	of	our	common	stock.

# We	may	experience	software	defects,	development	delays,	and	installation	difficulties,	which	would	harm	our	business	and	reputation	and expose	us	to	potential	liability.

Many	of	our	services	are	based	on	sophisticated	software	and	computing	systems,	and	we	may	encounter	delays	when	developing	new applications	and	services.	Further,	the	software	underlying	our	services	has	occasionally	contained	and	may	in	the	future	contain	undetected	errors or	defects	when	first	introduced	or	when	new	versions	are	released.	In	addition,	we	may	experience	difficulties	in	installing	or	integrating	our technologies	on	platforms	used	by	our	customers.	Defects	in	our	software,	errors,	or	delays	in	the	processing	of	electronic	transactions,	or	other difficulties	could	result	in:

•	interruption	of	business	operations;

•	delay	in	market	acceptance;

•	additional	development	and	remediation	costs;

•	diversion	of	technical	and	other	resources;

•	loss	of	customers;

•	negative	publicity;	or

•	exposure	to	liability	claims.

Although	we	attempt	to	limit	our	potential	liability	through	disclaimers	and	limitation-of-liability	provisions	in	our	license	and	customer agreements,	we	cannot	be	certain	that	these	measures	will	be	successful	in	limiting	our	liability.

# Security	breaches	or	computer	viruses	could	harm	our	business	by	disrupting	our	delivery	of	services	and	damaging	our	reputation.

As	part	of	our	business,	we	electronically	receive,	process,	store,	and	transmit	sensitive	business	information	of	our	customers.	In	addition, we	collect	personal	consumer	data,	such	as	names	and	addresses,	social	security	numbers,	driver's	license	numbers,	checking	and	savings	account numbers,	and	payment	history	records.	Unauthorized	access	to	our	computer	systems	or	databases	could	result	in	the	theft	or	publication	of confidential	information	or	the	deletion	or	modification	of	records	or	could	otherwise	cause	interruptions	in	our	operations.	These	concerns	about security	are	increased	when	we	transmit	information	over	the	Internet.	Computer	viruses	have

also	been	distributed	and	have	rapidly	spread	over	the	Internet.	Computer	viruses	could	infiltrate	our	systems,	disrupting	our	delivery	of	services and	making	our	applications	unavailable.	Any	inability	to	prevent	security	breaches	or	computer	viruses	could	also	cause	existing	customers	to	lose confidence	in	our	systems	and	terminate	their	agreements	with	us,	and	could	inhibit	our	ability	to	attract	new	customers.

# Many	of	our	customers	are	subject	to	a	regulatory	environment	and	to	industry	standards	that	may	change	in	a	manner	that	reduces	the number	of	transactions	in	which	our	customers	engage	and

# therefore	reduces	our	revenues.

Our	customers	are	subject	to	a	number	of	government	regulations	and	industry	standards	with	which	our	products	and	services	must	comply. For	example,	our	products	are	affected	by	VISA	and	MasterCard	electronic	payment	standards	that	are	generally	updated	twice	annually.	In addition,	action	by	regulatory	authorities	relating	to	credit	availability,	data	usage,	privacy,	or	other	related	regulatory	developments	could	have	an adverse	effect	on	our	customers	and	therefore	could	have	a	material	adverse	effect	on	our	business,	financial	condition,	and	results	of	operations.

# If	we	fail	to	comply	with	privacy	regulations	imposed	on	providers	of	services	to	financial	institutions,	our	business	could	be	harmed.

As	a	provider	of	services	to	financial	institutions,	we	are	bound	by	the	same	limitations	on	disclosure	of	the	information	we	receive	from	our customers	as	apply	to	the	financial	institutions	themselves.	If	we	fail	to	comply	with	these	regulations,	we	could	be	exposed	to	suits	for	breach	of contract	or	to	governmental	proceedings,	our	customer	relationships	and	reputation	could	be	harmed,	and	we	could	be	inhibited	in	our	ability	to obtain	new	customers.	In	addition,	if	more	restrictive	privacy	laws	or	rules	are	adopted	in	the	future	on	the	federal	or	state	level,	or,	with	respect	to our	international	operations,	by	authorities	in	foreign	jurisdictions	on	the	national,	provincial,	state,	or	other	level,	that	could	have	an	adverse impact	on	us.

# If	we	experience	system	failures,	the	products	and	services	we	provide	to	our	customers	could	be	delayed	or	interrupted,	which	could	harm our	business	and	reputation	and	result	in	the	loss	of	customers.

Our	ability	to	provide	reliable	service	in	a	number	of	our	businesses	depends	on	the	efficient	and	uninterrupted	operations	of	our	computer network	systems	and	data	centers.	Our	systems	and	operations	could	be	exposed	to	damage	or	interruption	from	fire,	natural	disaster,	power	loss, telecommunications	failure,	unauthorized	entry,	and	computer	viruses.	Although	we	have	taken	steps	to	prevent	system	failures,	we	cannot	be certain	that	our	measures	will	be	successful.	Further,	our	property	and	business	interruption	insurance	may	not	be	adequate	to	compensate	us	for all	losses	or	failures	that	may	occur.	Any	significant	interruptions	could:

•	increase	our	operating	expenses	to	correct	problems	caused	by	the	interruption;

•	harm	our	business	and	reputation;

•	result	in	a	loss	of	customers;	or

•	expose	us	to	liability.

Any	one	or	more	of	the	foregoing	occurrences	could	have	a	material	adverse	effect	on	our	business,	financial	condition,	and	results	of	operations

# We	face	liability	to	our	merchant	customers	if	checks	that	we	have	guaranteed	are	dishonored	by	the	check	writer's	bank.

If	a	check	that	we	have	guaranteed	is	dishonored	by	the	check	writer's	bank,	we	must	reimburse	our	merchant	customer	for	the	check's	face value	and	pursue	collection	of	the	amount	from	the	delinquent	check	writer.	In	some	cases,	we	recognize	a	liability	to	our	merchant	customers	for estimated	check	returns	and	a	receivable	for	amounts	we	estimate	we	will	recover	from	the	check	writers,	based	on	historical	experience	and	other relevant	factors.	The	estimated	check	returns	and	recovery	amounts	are	subject	to	the	risk	that	actual	amounts	returned	may	exceed	our	estimates and	actual	amounts	recovered	may	be	less	than	our	estimates.

# Our	outsourcing	of	key	development	functions	overseas	may	lead	to	quality	control	issues	that	affect	our	business	operations.

By	outsourcing	development	functions	overseas,	we	may	experience	quality	control	issues	in	our	applications	offered	to	our	markets. Overseas	outsourcing	operations	are	subject	to	risk	of	quality	control	deficiencies	due	to	the	physical	distance	from	our	headquarters,	the	increased potential	for	instructions	and	guidance	to	be	misunderstood,	a	lack	of	direct	institutional	control	and	the	time	and	expense	it	will	take	to	provide	on site	training.	Any	one	of	these	factors	make	it	more	difficult	for	us	to	maintain	quality	control,	and	the	potential	for	quality	control	issues	may impact	our	ability	to	maintain	and	or	increase	our	customer	base.

# Misappropriation	of	our	intellectual	property	and	proprietary	rights	could	impair	our	competitive	position.

Our	ability	to	compete	depends	upon	proprietary	systems	and	technology.	Despite	our	efforts	to	protect	our	proprietary	rights,	unauthorized parties	may	attempt	to	copy	aspects	of	our	services	or	to	obtain	and	use	information	that	we	regard	as	proprietary.	Policing	unauthorized	use	of our	proprietary	rights	is	difficult.	We	cannot	make	any	assurances	that	the	steps	we	have	taken	will	prevent	misappropriation	of	technology	or	that the	agreements	entered	into	for	that	purpose	will	be	enforceable.	Effective	trademark,	service	mark,	copyright,	and	trade	secret	protection	may	not be	available	in	every	country	in	which	our	applications	and	services	are	made	available	online.	Misappropriation	of	our	intellectual	property	or potential	litigation	concerning	such	matters	could	have	a	material	adverse	effect	on	our	results	of	operations	or	financial	condition.

# If	our	applications	or	services	are	found	to	infringe	the	proprietary	rights	of	others,	we	may	be	required	to	change	our	business	practices and	may	also	become	subject	to	significant	costs	and	monetary	penalties.

As	our	information	technology	applications	and	services	develop,	we	may	become	increasingly	subject	to	infringement	claims.	Any	claims, whether	with	or	without	merit,	could:

•	be	expensive	and	time-consuming	to	defend;

•	cause	us	to	cease	making,	licensing	or	using	applications	that	incorporate	the	challenged	intellectual	property;

•	require	us	to	redesign	our	applications,	if	feasible;

•	divert	management's	attention	and	resources;	and

•	require	us	to	enter	into	royalty	or	licensing	agreements	in	order	to	obtain	the	right	to	use	necessary	technologies.

# We	may	not	succeed	with	our	current	and	future	expansion	of	our	international	operations	and	such failure	may	adversely	affect	our	growth	and	results	of	operations.

In	2006,	sales	outside	of	the	U.S.	represented	approximately	10.9%	of	our	revenues.	We	believe	there	are	additional	opportunities	to	expand our	international	operations,	and	we	expect	to	commit	significant	resources	to	expand	our	international	sales	and	marketing	activities.	However, overall	we	are	less	well-known	internationally	than	in	the	United	States	and	have	less	experience	with	local	business	conditions.	In	addition,	we will	face	challenges	in	successfully	managing	small	operations	located	far	from	our	headquarters,	because	of	the	greater	difficulty	in	overseeing and	guiding	operations	from	a	distance,	and	we	will	be	increasingly	subject	to	a	number	of	other	risks	and	potential	costs,	including:

•	political	and	economic	instability;

•	unexpected	changes	in	regulatory	requirements	and	policy,	the	adoption	of	laws	detrimental	to	our	operations	such	as	legislation	relating to	the	collection	of	personal	data	over	the	Internet	or	the	adoption	of	laws,	regulations,	or	treaties	governing	the	export	of	encryption related	software;

•	the	burdens	of	complying	with	a	wide	variety	of	other	laws	and	regulations;

•	failure	to	adequately	manage	currency	exchange	rate	fluctuations;

•	potentially	adverse	tax	consequences,	including	restrictions	on	the	repatriation	of	earnings;

•	potential	difficulty	of	enforcing	agreements	and	collecting	receivables	in	some	foreign	legal	systems;	and

•	general	economic	conditions	in	international	markets.

There	can	be	no	assurance	that	we	will	be	able	to	compete	successfully	against	current	or	future	international	competitors.

# Sales	of	our	shares	by	large	shareholders	could	adversely	affect	the	trading	price	of	our	shares.

In	connection	with	the	2005	minority	interest	sale	in	Former	FIS,	we	entered	into	a	registration	rights	agreement	with	certain	of	our stockholders	requiring	us	to	register	the	shares	of	our	common	stock	that	are	beneficially	owned	by	them.	Consequently,	we	have	to	date registered	for	resale	from	time	to	time	shares	which	collectively	account	for	approximately	12.8%	of	our	shares	outstanding.	Sales	of	these	shares, or	the	possibility	that	sales	of	these	shares	may	occur	in	unlimited	amounts	and	without	prior	notice,	could	adversely	affect	the	trading	price	of	our shares.

# Statement	Regarding	Forward-Looking	Information

The	statements	contained	in	this	Form	10-K	or	in	our	other	documents	or	in	oral	presentations	or	other	statements	made	by	our	management that	are	not	purely	historical	are	forward-looking	statements	within	the	meaning	of	Section	27A	of	the	Securities	Act	of	1933	and	Section	21E	of the	Securities	Exchange	Act	of	1934,	including	statements	regarding	our	expectations,	hopes,	intentions,	or	strategies	regarding	the	future.	These statements	relate	to,	among	other	things,	our	future	financial	and	operating	results.	In	many	cases,	you	can	identify	forward-looking	statements	by terminology	such	as	"may,"	"will,"	"should,"	"expect,"	"plan,"	"anticipate,"	"believe,"	"estimate,"	"predict,"	"potential,"	or	"continue,"	or	the negative	of	these	terms	and	other	comparable	terminology.	Actual	results	could	differ	materially	from	those	anticipated	in	these	statements	as	a result	of	a	number	of	factors,	including,	but	not	limited	to:

•	general	political,	economic,	and	business	conditions,	including	the	possibility	of	intensified	international	hostilities,	acts	of	terrorism,	and general	volatility	in	the	capital	markets;

•	failures	to	adapt	our	services	to	changes	in	technology	or	in	the	marketplace;

•	consolidation	in	the	mortgage	lending	or	banking	industry;

•	security	breaches	of	our	systems	and	computer	viruses	affecting	our	software;

•	a	decrease	in	the	volume	of	real	estate	transactions	such	as	real	estate	sales	and	mortgage	refinancings,	which	can	be	caused	by	high	or increasing	interest	rates,	a	shortage	of	mortgage	funding,	or	a	weak	United	States	economy;

•	the	impact	of	competitive	products	and	pricing;

•	the	ability	to	identify	suitable	acquisition	candidates	and	the	ability	to	finance	such	acquisitions,	which	depends	upon	the	availability	of adequate	cash	reserves	from	operations	or	of	acceptable	financing	terms	and	the	variability	of	our	stock	price;

•	our	ability	to	integrate	any	acquired	business'	operations,	products,	clients,	and	personnel;

•	the	effect	of	our	substantial	leverage,	which	may	limit	the	funds	available	to	make	acquisitions	and	invest	in	our	business;

•	changes	in,	or	the	failure	to	comply	with,	government	regulations,	including	privacy	regulations;	and

•	other	risks	detailed	elsewhere	in	this	Risk	Factors	section	and	in	our	other	filings	with	the	Securities	and	Exchange	Commission.

We	are	not	under	any	obligation	(and	expressly	disclaim	any	such	obligation)	to	update	or	alter	our	forward-looking	statements,	whether	as	a result	of	new	information,	future	events	or	otherwise.	You	should	carefully	consider	the	possibility	that	actual	results	may	differ	materially	from our	forward-looking	statements.

# None.

# Item	2.		Properties.

Our	corporate	headquarters	are	located	in	Jacksonville,	Florida,	in	an	owned	facility.	FNF	occupies	and	pays	us	rent	for	approximately 121,000	square	feet	in	this	facility.	We	lease	office	space	as	follows:

# (1) Represents	the	number	of	locations	in	each	state	listed.

We	also	lease	approximately	81	locations	outside	the	United	States.	We	believe	our	properties	are	adequate	for	our	business	as	presently conducted.

# Item	3. Legal	Proceedings.

In	the	ordinary	course	of	business,	we	are	involved	in	various	pending	and	threatened	litigation	matters	related	to	our	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	follows	the	provisions	of	Statement	of	Financial	Accounting	Standards	("SFAS") No.	5,	"Accounting	for	Contingencies,"	when	making	accrual	and	disclosure	decisions.	When	assessing	reasonably	possible	and	probable outcomes,	we	base	our	decision	on	our	assessment	of	the	ultimate	outcome	following	all	appeals.

The	Company	and	certain	of	its	employees	were	named	on	March	6,	2006	as	defendants	in	a	civil	lawsuit	brought	by	Grace	&	Digital Information	Technology	Co.,	Ltd.	("Grace"),	a	Chinese	company	that	formerly	acted	as	a	sales	agent	for	Alltel	Information	Services	("AIS").

Grace	originally	filed	suit	in	December	2004	in	state	court	in	Monterey	County,	California,	alleging	that	the	Company	breached	a	sales agency	agreement	by	failing	to	pay	commissions	associated	with	sales	contracts	signed	in	2001	and	2003.	The	2001	contracts	were	never completed.	The	2003	contracts,	as	to	which	Grace	provided	no	assistance,	were	for	a	different	project	and	were	executed	one	and	one-half	years after	Grace's	sales	agency	agreement	was	terminated.	In	addition	to	its	breach	of	contract	claim,	Grace	also	alleged	that	the	Company	violated	the Foreign	Corrupt	Practices	Act	(FCPA)	in	its	dealings	with	a	bank	customer	in	China.	The	Company	denied	Grace's	allegations	in	this	California lawsuit.

In	December	2005,	the	Monterey	County	court	dismissed	the	lawsuit	on	the	grounds	of	inconvenient	forum,	which	decision	Grace	appealed on	February	10,	2006.	That	appeal	was	subsequently	dismissed	voluntarily	by	Grace.	On	March	6,	2006,	Grace	filed	a	new	lawsuit	in	the	United States	District	Court	for	the	Middle	District	of	Florida	seeking	the	recovery	of	over	$50	million	in	damages	arising	from	the	same	transaction,	and added	an	additional	allegation	to	its	complaint	that	the	Company	violated	the	Racketeer	Influenced	and	Corrupt	Organizations	Act	(RICO)	in	its dealings	with	the	same	bank	customer.	We	intend	to	defend	this	case	vigorously.	On	March	7,	2006,	the	Company	filed	its	motion	to	dismiss	this lawsuit,	and	on	March	27,	2006,	we	filed	an	answer	denying	Grace's	underlying	allegations	and	counterclaiming	against	Grace	for	tortious interference	and	abuse	of	process.	These	motions	have	all	been	fully	briefed	and	are	pending	before	the	Court.	A	pretrial	management	order	was entered	providing	for	discovery,	pretrial	motion	deadlines,	and,	if	necessary,	a	trial	in	the	later	part	of	2007.

We	and	our	counsel	have	investigated	these	allegations	and,	based	on	the	results	of	the	investigations,	we	do	not	believe	that	there	have	been any	violations	of	the	FCPA	or	RICO,	or	that	the	ultimate	disposition	of	these	allegations	or	the	lawsuit	will	have	a	material	adverse	impact	on	our financial	position,	results	of	operations	or	cash	flows.	We	are	fully	cooperating	with	the	Securities	and	Exchange	Commission	and	the U.S.	Department	of	Justice	in	connection	with	their	inquiry	into	these	allegations.

# Item	4. Submission	of	Matters	to	a	Vote	of	Security	Holders.

Our	Annual	Meeting	of	Stockholders	was	held	on	October	23,	2006.	The	results	of	matters	submitted	to	a	vote	were	as	follows:

The	proposal	to	approve	the	issuance	of	FIS	common	stock	to	the	stockholders	of	Old	FNF	in	connection	with	the	agreement	and	plan	of merger,	dated	as	of	June	25,	2006,	as	amended	and	restated	as	of	September	18,	2006,	between	FIS	and	Old	FNF,	which	agreement	provides	for the	merger	of	Old	FNF	with	and	into	FIS	with	FIS	being	the	surviving	corporation	received	the	following	votes:

The	proposal	to	approve	the	adoption	of	an	amendment	to	the	Certegy	Inc.	Stock	Incentive	Plan,	which	among	other	things,	increased	the total	number	of	shares	of	common	stock	available	for	issuance	under	the	plan	by	an	additional	4,000,000	shares	and	increased	the	limits	on	the number	of	individual	awards	that	may	be	granted	under	the	plan,	received	the	following	votes:

      The	proposal	to	approve	the	FIS	Employee	Stock	Purchase	Plan	received	the	following	votes:

| The	proposal	to	approve	the	FIS	Employee	Stock	Purchase	Plan	received	the	following	votes: |  |  |
| :--- | :--- | :--- |
|  | Votes | Percentage |
| Shares\tVoted\t"For" | 97,646,500 | 100.0% |
| Shares\tVoted\t"Against" | — | — |
| Shares\tVoted\t"Abstain" | — | — |

      The	proposal	to	approve	the	adoption	of	the	FIS	Annual	Incentive	Plan	received	the	following	votes:

| The	proposal	to	approve	the	adoption	of	the	FIS	Annual	Incentive	Plan	received	the	following	votes: |  |  |
| :--- | :--- | :--- |
|  | Votes | Percentage |
| Shares\tVoted\t"For" | 97,646,500 | 100.0% |
| Shares\tVoted\t"Against" | — | — |
| Shares\tVoted\t"Abstain" | — | — |

Nominees	for	Class	1	directors	to	serve	until	the	2009	FIS	Annual	Meeting	of	Shareholders	were	elected	by	the	following	vote:

|  | Shares	Voted<br>"For" | Authority	to	Vote<br>"Withheld" |
| :--- | :--- | :--- |
| William\tP.\tFoley | 97,646,500 | 0 |
| Thomas\tM.\tHagerty | 97,646,500 | 0 |
| Robert\tM.\tClements | 97,646,500 | 0 |
| Daniel\tD.\tLane | 97,646,500 | 0 |

Directors	whose	term	of	office	as	a	director	continued	after	the	meeting	are	as	follows:	Lee	A.	Kennedy,	David	K.	Hunt,	Cary	H.	Thompson, Keith	W.	Hughes,	Marshall	Haines	and	James	K.	Hunt.	Additionally,	upon	the	closing	of	the	securities	exchange	and	distribution	agreement between	FNF	and	FNT,	Richard	N.	Massey	became	a	director	of	the	Company.

The	proposal	to	approve	the	ratification	of	the	appointment	of	KPMG	LLP	as	the	independent	registered	public	accounting	firm	for	FIS	for 2006	received	the	following	votes:

# Item	5. Market	for	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities.

Our	common	stock	trades	on	the	New	York	Stock	Exchange	under	the	ticker	symbol	"FIS."	The	table	set	forth	below	provides	the	high	and low	sales	prices	of	the	common	stock	and	the	cash	dividends	declared	per	share	of	common	stock	for	each	quarter	of	2006	and	2005.

|  | High | Low | Dividend |
| :--- | :--- | :--- | :--- |
| 2006 |  |  |  |
| First\tQuarter(a) | $ 40.60 | $36.57 | $0.05 |
| Second\tQuarter | $ 40.16 | $35.15 | $0.05 |
| Third\tQuarter | $ 37.58 | $33.74 | $0.05 |
| Fourth\tQuarter | $ 42.46 | $36.66 | $0.05 |
| 2005 |  |  |  |
| First\tQuarter | $ 37.00 | $33.73 | $0.05 |
| Second\tQuarter | $ 39.02 | $32.35 | $0.05 |
| Third\tQuarter | $ 41.01 | $33.05 | $0.05 |
| Fourth\tQuarter | $ 41.29 | $36.42 | $0.05 |

(a) As	part	of	the	merger	transaction,	Certegy	declared	a	$3.75	per	share	special	cash	dividend	that	was	paid	to	its	pre-merger	shareholders	at the	consummation	of	the	Certegy	Merger.	As	of	February	1,	2007,	there	were	approximately	7,000	shareholders	of	record	of	our	common stock.

Certegy,	as	the	predecessor	registrant,	began	declaring	cash	dividends	to	common	shareholders	in	the	third	quarter	of	2003.	The	declaration and	payment	of	future	dividends	is	at	the	discretion	of	the	Board	of	Directors,	and	depends	on,	among	other	things,	our	investment	policy	and opportunities,	results	of	operations,	financial	condition,	cash	requirements,	future	prospects,	and	other	factors	that	may	be	considered	relevant	by our	Board	of	Directors,	including	legal	and	contractual	restrictions.	Additionally,	the	payment	of	cash	dividends	may	be	limited	by

covenants	in	certain	debt	agreements.	A	regular	quarterly	dividend	of	$.05	per	common	share	is	payable	March	28,	2007	to	shareholders	on	record as	of	the	close	of	business	on	March	14,	2007.

Item	12	of	Part	III	contains	information	concerning	securities	authorized	for	issuance	under	our	equity	compensation	plans.

The	Company	intends	to	limit	dilution	caused	by	option	exercises	(including	anticipated	exercises)	by	repurchasing	shares	in	the	open	market or	in	privately	negotiated	transactions.

The	following	table	summarizes	purchases	of	equity	securities	by	the	issuer	during	the	quarter	ended	December	31,	2006:

| Period | (a)	Total<br>Number<br>of	Shares<br>(or	Units)<br>Purchased | (b)	Average<br>Price	Paid<br>per	Share<br>(or	Unit) | (c)	Total<br>Number	of<br>Shares<br>(or	Units)<br>Purchased	as<br>Part	of	Publicly<br>Announced<br>Plans	or<br>Programs(1) | (d)	Approximate<br>Dollar	Value<br>of	Shares	That<br>May	Yet	Be<br>Purchased	Under<br>the	Plans	or<br>Programs<br>(in	millions)(2) |
| :--- | :--- | :--- | :--- | :--- |
| 10/1/06\t–\t10/31/06 | \t 1,432,000(3) | $39.40 | — | $207.1 |
| 11/1/06\t–\t11/30/06 | — | — | — | 206.8 |
| 12/1/06\t–\t12/31/06 | — | — | — | 206.8 |
| Total | \t 1,432,000 | $39.40 | — | $206.8 |

(1) In	April	2006,	our	Board	of	Directors	approved	a	3,000,000	share	repurchase	authorization.	There	is	no	termination	date	in	connection with	this	authorization.	In	October	2006,	our	Board	of	Directors	authorized	additional	purchases	up	to	$200	million	worth	of	Company stock.

(2) As	of	the	last	day	of	the	applicable	month.

(3) Repurchased	as	part	of	the	closing	conditions	of	the	FNF	Merger.

# Item	6. Selected	Financial	Data.

The	selected	financial	data	set	forth	below	constitutes	historical	financial	data	of	Fidelity	National	Information	Services,	Inc.	and	should	be read	in	conjunction	with	Item	7,	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations,	and	Item	8,	Financial Statements	and	Supplementary	Data,	included	elsewhere	in	this	report.

On	February	1,	2006,	Former	FIS	was	merged	into	a	wholly	owned	subsidiary	of	Certegy	in	a	tax-free	merger.	For	accounting	and	financial reporting	purposes,	the	merger	was	treated	as	a	reverse	acquisition	of	Certegy	by	Former	FIS	under	the	purchase	method	of	accounting	pursuant	to accounting	principles	generally	accepted	in	the	U.S.	Accordingly,	our	historical	financial	information	for	periods	prior	to	the	Certegy	Merger	are the	historical	financial	information	of	Former	FIS.

|  | 2006(1)(2) | 2005(2) | 2004(2) | 2003(2) | 2002 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Statement\tof\tEarnings\tData: |  |  |  |  |  |
| Processing\tand\tservices\trevenues | $ 4,132,602 | $ 2,766,085 | $ 2,331,527 | $1,830,924 | $ 619,723 |
| Cost\tof\trevenues | 2,929,567 | 1,793,285 | 1,525,174 | 1,101,569 | 379,508 |
| Gross\tprofit | 1,203,035 | 972,800 | 806,353 | 729,355 | 240,215 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 505,528 | 422,623 | 432,310 | 331,751 | 144,761 |
| Research\tand\tdevelopment\tcosts | 105,580 | 113,498 | 74,214 | 38,345 | — |
| Operating\tincome | 591,927 | 436,679 | 299,829 | 359,259 | 95,454 |
| Other\tincome\t(expense) | (188,297) | (124,623) | 14,911 | (3,654) | 10,149 |
| Earnings\tbefore\tincome\ttaxes,\tequity\tin\tearnings\t(loss)\tof |  |  |  |  |  |
| unconsolidated\tentities\tand\tminority\tinterest | 403,630 | 312,056 | 314,740 | 355,605 | 105,603 |
| Income\ttax\texpense | 150,150 | 116,085 | 118,343 | 137,975 | 39,390 |
| Equity\tin\tearnings\t(loss)\tof\tunconsolidated\tentities | 5,792 | 5,029 | (3,308) | (55) | — |
| Minority\tinterest | (185) | (4,450) | (3,673) | (14,518) | (8,359) |
| Net\tearnings | $259,087 | $196,550 | $189,416 | $203,057 | $57,854 |
| Net\tearnings\tper\tshare\t—\tbasic(3) | $1.39 | $1.54 | $1.48 | $1.59 | $.45 |
| Weighted\taverage\tshares\t—\tbasic | 185,926 | 127,920 | 127,920 | 127,920 | 127,920 |
| Net\tearnings\tper\tshare\t—\tdiluted(3) | $1.37 | $1.53 | $1.48 | $1.59 | $.45 |
| Weighted\taverage\tshares\t—\tdiluted | 189,196 | 128,354 | 127,920 | 127,920 | 127,920 |

(1) Certegy's	results	of	operations	are	included	in	earnings	from	February	1,	2006,	the	Certegy	Merger	date.

(2) Effective	January	1,	2006,	FIS	adopted	the	fair	value	recognition	provisions	of	SFAS	No.	123R,	"Share	Based	Payment"	using	the prospective	method	of	adoption.	Effective	January	1,	2003,	FIS	adopted	the	fair	value	recognition	provisions	of	SFAS	No.	123,

"Accounting	for	Stock-Based	Compensation,"	using	the	prospective	method	of	adoption	in	accordance	with	SFAS	No.	148,	"Accounting for	Stock-Based	Compensation	—	Transition	and	Disclosure,"	and	as	a	result	recorded	stock	compensation	expense	of	$50.1	million, $20.4	million,	$15.4	million	and	$3.8	million	for	the	years	ended	December	31,	2006,	2005,	2004	and	2003,	respectively.

(3) Net	earnings	per	share	are	calculated,	for	all	periods	prior	to	2006,	using	the	shares	outstanding	following	FIS's	formation	as	a	holding company,	adjusted	as	converted	by	the	exchange	ratio	(.6396)	in	the	Certegy	Merger.

|  | 2006 | 2005 | 2004 | 2003 | 2002 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tSheet\tData\t(at\tend\tof\tperiod): |  |  |  |  |  |
| Cash\tand\tcash\tequivalents | $211,753 | $133,152 | $190,888 | $92,049 | $55,674 |
| Total\tassets | 7,630,560 | 4,189,021 | 4,002,856 | 2,327,085 | 530,647 |
| Total\tlong-term\tdebt | 3,009,501 | 2,564,128 | 431,205 | 13,789 | 17,129 |
| Minority\tinterest | 12,970 | 13,060 | 13,615 | 12,130 | 63,272 |
| Total\tstockholders'\tequity | 3,142,744 | 694,570 | 2,754,844 | 1,890,797 | 286,487 |

# Selected	Quarterly	Financial	Data

|  | March	31, | June	30, | September	30, | December	31, |
| :--- | :--- | :--- | :--- | :--- |
| 2006 |  |  |  |  |
| Processing\tand\tservices\trevenues | $900,936 | $ 1,021,946 | $1,080,651 | $1,129,069 |
| Earnings\tbefore\tincome\ttaxes,\tequity\tin\tearnings\t(loss)\tof\tunconsolidated |  |  |  |  |
| entities\tand\tminority\tinterest | 61,323 | 106,082 | 119,659 | 116,566 |
| Net\tearnings | 39,358 | 66,029 | 78,580 | 75,120 |
| Basic\tearnings\tper\tshare | $.23 | $.34 | $.41 | $.39 |
| Diluted\tearnings\tper\tshare | $.23 | $.34 | $.41 | $.39 |
| 2005 |  |  |  |  |
| Processing\tand\tservices\trevenues | $651,580 | $708,713 | $698,109 | $707,683 |
| Earnings\tbefore\tincome\ttaxes,\tequity\tin\tearnings\t(loss)\tof\tunconsolidated |  |  |  |  |
| entities\tand\tminority\tinterest | 73,057 | 81,559 | 88,786 | 68,654 |
| Net\tearnings | 44,596 | 48,576 | 57,892 | 45,486 |
| Basic\tearnings\tper\tshare | $.35 | $.38 | $.45 | $.36 |
| Diluted\tearnings\tper\tshare | $.35 | $.38 | $.45 | $.35 |

# Item	7. Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations

We	are	one	of	the	largest	global	providers	of	processing	services	to	financial	institutions,	with	market-leading	positions	in	core	processing, card	issuing	services,	check	risk	management,	mortgage	processing,	and	certain	other	lender	processing	services	in	the	U.S.,	serving	customers	in over	60	countries	throughout	the	world.	We	offer	a	diversified	product	mix,	and	we	believe	that	we	will	continue	to	benefit	from	the	opportunity	to cross-sell	products	and	services	across	our	broad	customer	base,	and	from	our	expanded	international	presence	and	scale.	We	have	two	reporting segments,	Transaction	Processing	Services	and	Lender	Processing	Services,	which	produced	approximately	59%	and	41%,	respectively,	of	our revenues	for	the	year	ended	December	31,	2006.

•	Transaction	Processing	Services.		This	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	our 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	check	guarantee	and	verification services	to	retailers.

•	Lender	Processing	Services.		This	segment	offers	core	mortgage	processing	software,	which	banks	use	to	process	and	service	mortgage loans,	as	well	as	customized	outsourced	business	processes	and	information	solutions	primarily	to	national	lenders	and	loan	servicers. These	loan	facilitation	services	consist	primarily	of	centralized,	customized	title	agency	and	closing	services	offered	to	first	mortgage, refinance,	home	equity	and	sub-prime	lenders.	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.	This	segment	also	offers	property	data	and	real	estate-related	services.	Included	in	these services	are	appraisal	and	valuation	services,	property	records	information,	real	estate	tax	services,	and	borrower	credit	and	flood	zone information.

We	also	have	a	corporate	segment	that	consists	primarily	of	costs	relating	to	corporate	overhead.

# Business	Trends	and	Conditions

# Transaction	Processing	Services

In	the	transaction	processing	services	business,	increases	in	deposit	and	card	transactions	can	positively	affect	our	business	and	thus	the condition	of	the	overall	economy	can	have	an	effect	on	growth.

In	this	segment,	we	compete	for	both	licensing	and	outsourcing	business,	and	thus	are	affected	by	the	decisions	of	financial	institutions	to utilize	our	services	under	an	outsourced	arrangement	or	to	process	in-house	under	a	software	license	and	maintenance	agreement.	As	a	provider	of outsourcing	solutions,	we	benefit	from	multi-year	recurring	revenue	streams.	Generally,	financial	institutions	of	all	sizes	will	consider	outsourcing information	technology	and	business	process	services	to	varying	degrees,	although	smaller	financial	institutions	are	more	likely	to	outsource	all information	technology	functions	to	companies	such	as	us	since	they	generally	do	not	have	the	staff,	budget	or	expertise	to	implement	and	operate highly	complex	technical	environments.	Larger	financial	institutions	have	historically	chosen	to	limit	outsourcing	to	specific	application	functions or	services	in	connection	with	a	particular	product	or	operation.	Generally,	demand	for	outsourcing	solutions	has	increased	over	time	as	providers such	as	us	realize	economies	of	scale	and	improve	their	ability	to	provide	services	that	improve	customer	efficiencies	and	reduce	costs.

Card	transactions	continue	to	increase	as	a	percentage	of	total	point-of-sale	payments,	which	fuels	continuing	demand	for	card-related products.	We	continue	to	launch	new	products	aimed	at	serving	this	demand.	In	recent	years,	we	have	introduced	a	variety	of	stored-value	card types,	Internet	banking,	and	electronic	bill	presentment/payment	products,	as	well	as	a	number	of	card	enhancement	and	loyalty/reward	programs. The	common	theme	among	these	offerings	continues	to	be	convenience	and	security	for	the	consumer	coupled	with	value	to	the	financial institution.

We	may	be	affected	by	the	consolidation	trend	in	the	banking	industry.	This	trend	may	be	beneficial	or	detrimental	to	the	Transaction Processing	Services	businesses.	When	consolidations	occur,	merger	partners	often	operate	disparate	systems	licensed	from	competing	service providers.	The	newly	formed	entity	generally	makes	a	determination	to	migrate	its	core	systems	to	a	single	platform.	When	a	financial	institution processing	client	is	involved	in	a	consolidation,	we	may	benefit	by	expanding	the	use	of	our	services	if	such	services	are	chosen	to	survive	the consolidation	and	support	the	newly	combined	entity.	Conversely,	we	may	lose	market	share	if	a	customer	of	ours	is	involved	in	a	consolidation and	our	services	are	not	chosen	to	survive	the	consolidation	and	support	the	newly	combined	entity.

# Lender	Processing	Services

Our	mortgage	processing	services	business,	driven	by	MSP,	is	largely	subject	to	the	same	types	of	factors	as	affect	our	financial	institutions core	processing	business,	described	above.	The	level	of	residential	real	estate	activity,	which	depends	in	part	on	the	level	of	interest	rates,	affects the	level	of	revenues	from	many	of	the	other	businesses	in	the	Lender	Processing	Services	segment.

The	increase	in	interest	rates	in	2006	has	resulted	in	a	reduction	in	new	loan	origination	and	refinancing	activity.	The	current	MBA	forecast	is for	$2.4	trillion	of	mortgage	originations	in	2007	as	compared	to	$2.5	trillion	in	2006.	Relatively	higher	interest	rates	are	also	likely	to	result	in seasonal	effects	having	more	influence	on	real	estate	activity.	Traditionally,	the	greatest	volume	of	real	estate	activity,	particularly	residential resale	transactions,	has	occurred	in	the	spring	and	summer	months.

In	contrast,	we	believe	that	a	rising	interest	rate	environment	may	increase	the	volume	of	consumer	mortgage	defaults	and	thus	favorably affect	our	default	management	services,	which	provide	services	relating	to	residential	mortgage	loans	in	default.	The	overall	strength	of	the economy	also	affects	default	revenues.

# Critical	Accounting	Policies

The	accounting	policies	described	below	are	those	we	consider	critical	in	preparing	our	Consolidated	and	Combined	Financial	Statements. Certain	of	these	policies	require	management	to	make	estimates	and	assumptions	that	affect	the	reported	amounts	of	assets	and	liabilities	and disclosures	with	respect	to	contingent	liabilities	and	assets	at	the	date	of	the	Consolidated	and	Combined	Financial	Statements	and	the	reported amounts	of	revenues	and	expenses	during	the	reporting	periods.	Actual	amounts	could	differ	from	those	estimates.	See	Note	3	of	Notes	to	the Consolidated	and	Combined	Financial	Statements	for	a	more	detailed	description	of	the	significant	accounting	policies	that	have	been	followed	in preparing	our	Consolidated	and	Combined	Financial	Statements.

# Revenue	Recognition

The	following	describes	our	primary	types	of	revenues	and	our	revenue	recognition	policies	as	they	pertain	to	the	types	of	transactions	we enter	into	with	our	customers.	We	enter	into	arrangements	with	customers	to	provide	services,	software	and	software	related	services	such	as	post- contract	customer	support	and	implementation	and	training	either	individually	or	as	part	of	an	integrated	offering	of	multiple	products	and services.	These	products	and	services	occasionally	include	offerings	from	more	than	one	segment	to	the	same	customer.	The	revenues	for	services provided	under	these	multiple	element	arrangements	are	recognized	in	accordance	with	the	applicable	revenue	recognition	accounting	principles	as further	described	below.

In	our	TPS	business,	we	recognize	revenues	relating	to	bank	processing	and	credit	and	debit	card	processing	services	along	with	software licensing	and	software	related	services.	Several	of	our	contracts	include	a	software	license	and	one	or	more	of	the	following	services:	data processing,	development,	implementation,	conversion,	training,	programming,	post-contract	customer	support	and	application	management.	In some	cases,	these	services	are	offered	in	combination	with	one	another	and	in	other	cases	we	offer	them	individually.	Revenues	from	processing services	are	typically	volume-based	depending	on	factors	such	as	the	number	of	accounts	processed,	transactions	processed	and	computer resources	utilized.

The	substantial	majority	of	the	revenues	in	the	transaction	processing	services	business	are	from	outsourced	data	processing,	credit	and	debit card	processing,	and	application	management	arrangements.	Revenues	from	these	arrangements	are	recognized	as	services	are	performed	in accordance	with	Securities	and	Exchange	Commission	("SEC")	Staff	Accounting	Bulletin	No.	104	("SAB	No.	104"),	"Revenue	Recognition"	and related	interpretations.	SAB	No.	104	sets	forth	guidance	as	to	when	revenue	is	realized	or	realizable	and	earned	when	all	of	the	following	criteria are	met:	(1)	persuasive	evidence	of	an	arrangement	exists;	(2)	delivery	has	occurred	or	services	have	been	rendered;	(3)	the	seller's	price	to	the buyer	is	fixed	and	determinable;	and	(4)	collectability	is	reasonably	assured.	Revenues	and	costs	related	to	implementation,	conversion	and programming	services	associated	with	our	data	processing	and	application	management	agreements	during	the	implementation	phase	are	deferred and	subsequently	recognized	using	the	straight-line	method	over	the	term	of	the	related	services	agreement.	We	evaluate	these	deferred	contract costs	for	impairment	in	the	event	any	indications	of	impairment	exist.	A	portion	of	credit	card	processing	revenue	is	generated	from	our	merchant institution	processing	business,	where	our	relationship	is	with	the	financial	institution	that	contracts	directly	with	the	merchant.	In	this	business, we	are	responsible	for	collecting	and	settling	interchange	fees	with	the	credit	card	associations,	thus	interchange	fees	are	included	as	a	component of	revenue	and	costs	of	revenue.

In	the	event	that	arrangements	with	our	customers	include	more	than	one	product	or	service,	we	determine	whether	the	individual	revenue elements	can	be	recognized	separately	in	accordance	with	Financial	Accounting

Standards	Board	("FASB")	Emerging	Issues	Task	Force	No.	00-21	("EITF	00-21"),	"Revenue	Arrangements	with	Multiple	Deliverables".	EITF 00-21	addresses	the	determination	of	whether	an	arrangement	involving	more	than	one	deliverable	contains	more	than	one	unit	of	accounting	and how	the	arrangement	consideration	should	be	measured	and	allocated	to	the	separate	units	of	accounting.

If	the	products	and	services	are	software	related	products	and	services	as	determined	under	AICPA's	SOP	97-2	"Software	Revenue Recognition"	("SOP	97-2"),	and	SOP	98-9	"Modification	of	SOP	No.	97-2,	Software	Revenue	Recognition,	with	Respect	to	Certain	Transactions" ("SOP	98-9")	we	apply	these	pronouncements	and	related	interpretations	to	determine	the	appropriate	units	of	accounting	and	how	the arrangement	consideration	should	be	measured	and	allocated	to	the	separate	units.

We	recognize	software	license	and	post-contract	customer	support	fees	as	well	as	associated	development,	implementation,	training, conversion	and	programming	fees	in	accordance	with	SOP	No.	97-2	and	SOP	No.	98-9.	Initial	license	fees	are	recognized	when	a	contract	exists, the	fee	is	fixed	or	determinable,	software	delivery	has	occurred	and	collection	of	the	receivable	is	deemed	probable,	provided	that	vendor-specific objective	evidence	("VSOE")	has	been	established	for	each	element	or	for	any	undelivered	elements.	We	determine	the	fair	value	of	each	element or	the	undelivered	elements	in	multi-element	software	arrangements	based	on	VSOE.	If	the	arrangement	is	subject	to	accounting	under SOP	No.	97-2,	VSOE	for	each	element	is	based	on	the	price	charged	when	the	same	element	is	sold	separately,	or	in	the	case	of	post-contract customer	support,	when	a	stated	renewal	rate	is	provided	to	the	customer.	If	evidence	of	fair	value	of	all	undelivered	elements	exists	but	evidence does	not	exist	for	one	or	more	delivered	elements,	then	revenue	is	recognized	using	the	residual	method.	Under	the	residual	method,	the	fair	value of	the	undelivered	elements	is	deferred	and	the	remaining	portion	of	the	arrangement	fee	is	recognized	as	revenue.	If	evidence	of	fair	value	does not	exist	for	one	or	more	undelivered	elements	of	a	contract,	then	all	revenue	is	deferred	until	all	elements	are	delivered	or	fair	value	is	determined for	all	remaining	undelivered	elements.	Revenue	from	post-contract	customer	support	is	recognized	ratably	over	the	term	of	the	agreement.	We record	deferred	revenue	for	all	billings	invoiced	prior	to	revenue	recognition.

With	respect	to	a	small	percentage	of	revenues,	we	use	contract	accounting,	as	required	by	SOP	No.	97-2,	when	the	arrangement	with	the customer	includes	significant	customization,	modification,	or	production	of	software.	For	elements	accounted	for	under	contract	accounting, revenue	is	recognized	in	accordance	with	SOP	81-1,	"Accounting	for	Performance	of	Construction	Type	and	Certain	Production-Type	Contracts", using	the	percentage-of-completion	method	since	reasonably	dependable	estimates	of	revenues	and	contract	hours	applicable	to	various	elements of	a	contract	can	be	made.	Revenues	in	excess	of	billings	on	these	agreements	are	recorded	as	unbilled	receivables	and	are	included	in	trade receivables.	Billings	in	excess	of	revenue	recognized	on	these	agreements	are	recorded	as	deferred	revenue	until	revenue	recognition	criteria	are met.	Changes	in	estimates	for	revenues,	costs	and	profits	are	recognized	in	the	period	in	which	they	are	determinable.	When	our	estimates	indicate that	the	entire	contract	will	be	performed	at	a	loss,	a	provision	for	the	entire	loss	is	recorded	in	that	accounting	period.

In	our	LPS	business,	we	recognize	revenues	relating	to	mortgage	processing	services,	loan	facilitation	services,	default	management	services, and	property	data-related	services.	Mortgage	processing	arrangements	are	typically	volume-based	depending	on	factors	such	as	the	number	of accounts	processed,	transactions	processed	and	computer	resources	utilized.	Revenue	derived	from	software	and	service	arrangements	included	in the	lender	processing	services	segment	is	recognized	in	accordance	with	SOP	No.	97-2	as	discussed	above.	Loan	facilitation	services	primarily consist	of	centralized	title	agency	and	closing	services	for	various	types	of	lenders.	Revenues	relating	to	loan	facilitation	services	are	typically recognized	at	the	time	of	closing	of	the	related	real	estate	transaction.	Ancillary	service	fees	are	recognized	when	the	service	is	provided.	Default management	services	assist	customers	through	the	default	and	foreclosure	process,	including	property	preservation	and	maintenance	services	(such as	lock	changes,	window	replacement,	debris	removal	and	lawn	service),	posting	and	publication	of	foreclosure	and	auction	notices,	title	searches, document	preparation	and	recording	services,	and	referrals	for	legal	and	property	brokerage	services.	Property	data	or	data-related	services principally	include	appraisal	and	valuation	services,	property	records	information,	real	estate	tax	services,	borrower	credit	and	flood	zone information	and	multiple	listing	software	and	services.	Revenues	derived	from	these	services	are	recognized	as	the	services	are	performed	in accordance	with	SAB	No.	104	as	described	above.

In	addition,	our	flood	and	tax	units	provide	various	services	including	life-of-loan-monitoring	services.	Revenue	for	life-of-loan	services	is deferred	and	recognized	ratably	over	the	estimated	average	life	of	the	loan	service	period,	which	is	determined	based	on	our	historical	experience and	industry	data.	We	evaluate	our	historical	experience	on	a	periodic	basis,	and	adjust	the	estimated	life	of	the	loan	service	period	prospectively.

# Reserves	for	Card	Processing	and	Check	Guarantee	Losses

We	recognize	a	reserve	for	estimated	losses	related	to	our	card	issuing	business	based	on	historical	experience	and	other	relevant	factors.	In our	card	issuing	business,	we	record	estimates	to	accrue	for	losses	resulting	from	transaction	processing	errors.	We	utilize	a	number	of	systems	and procedures	within	our	card	issuing	business	in	order	to	minimize	such	transaction	processing	errors.	Card	processing	loss	reserves	are	primarily determined	by	performing	a	historical	analysis	of	our	loss	experience	and	considering	other	factors	that	could	affect	that	experience	in	the	future. Such	factors	include	the	general	economy	and	the	credit	quality	of	customers.	Once	these	factors	are	considered,	we	assess	the	reserve	adequacy by	comparing	the	recorded	reserve	to	the	estimated	amount	based	on	an	analysis	of	the	current	trend	changes	or	specific	anticipated	future	events. Any	adjustments	are	charged	to	costs	of	services.	These	card	processing	loss	reserve	amounts	are	subject	to	risk	that	actual	losses	may	be	different than	our	estimates.

In	the	check	guarantee	business,	if	a	guaranteed	check	presented	to	a	merchant	customer	is	dishonored	by	the	check	writer's	bank,	we reimburse	our	merchant	customer	for	the	check's	face	value	and	pursue	collection	of	the	amount	from	the	delinquent	check	writer.	Loss	reserves and	anticipated	recoveries	are	primarily	determined	by	performing	a	historical	analysis	of	the	check	loss	and	recovery	experience	and	considering other	factors	that	could	affect	that	experience	in	the	future.	Such	factors	include	the	general	economy,	the	overall	industry	mix	of	our	customer volumes,	statistical	analysis	of	check	fraud	trends	within	our	customer	volumes,	and	the	quality	of	returned	checks.	Once	these	factors	are considered,	a	rate	is	established	for	check	losses	that	is	calculated	by	dividing	the	expected	check	losses	by	dollar	volume	processed	and	a	rate	for anticipated	recoveries	that	is	calculated	by	dividing	the	anticipated	recoveries	by	the	total	amount	of	related	check	losses.	These	rates	are	then applied	against	the	dollar	volume	processed	and	check	losses,	respectively,	each	month	and	charged	to	cost	of	revenue.	The	estimated	check returns	and	recovery	amounts	are	subject	to	risk	that	actual	amounts	returned	and	recovered	may	be	different	from	our	estimates.

# Computer	Software

Computer	software	includes	the	fair	value	of	software	acquired	in	business	combinations,	purchased	software	and	capitalized	software development	costs.	Purchased	software	is	recorded	at	cost	and	amortized	using	the	straight	line	method	over	its	estimated	useful	life	and	software acquired	in	business	combinations	is	recorded	at	its	fair	value	and	amortized	using	straight	line	and	accelerated	methods	over	their	estimated	useful lives,	ranging	from	3	to	10	years.

Capitalized	software	development	costs	are	accounted	for	in	accordance	with	either	SFAS	No.	86,	"Accounting	for	the	Costs	of	Computer Software	to	Be	Sold,	Leased,	or	Otherwise	Marketed"	(SFAS	No.	86),	or	with	SOP	No.	98-1,	"Accounting	for	the	Costs	of	Computer	Software Developed	or	Obtained	for	Internal	Use".	After	the	technological	feasibility	of	the	software	has	been	established	(for	SFAS	No.	86	software),	or	at the	beginning	of	application	development	(for	SOP	No.	98-1	software),	software	development	costs,	which	include	salaries	and	related	payroll costs	and	costs	of	independent	contractors	incurred	during	development,	are	capitalized.	Research	and	development	costs	incurred	prior	to	the establishment	of	technological	feasibility	(for	SFAS	No.	86	software),	or	prior	to	application	development	(for	SOP	No.	98-1	software),	are expensed	as	incurred.	Software	development	costs	are	amortized	on	a	product	by	product	basis	commencing	on	the	date	of	general	release	of	the products	(for	SFAS	No.	86	software)	and	the	date	placed	in	service	for	purchased	software	(for	SOP	No.	98-1	software).	Software	development costs	(for	SFAS	No.	86	software)	are	amortized	using	the	greater	of	(1)	the	straight	line	method	over	its	estimated	useful	life,	which	ranges	from five	to	ten	years	or	(2)	the	ratio	of	current	revenues	to	total	anticipated	revenue	over	its	useful	life.

# Goodwill	and	Other	Intangible	Assets

We	have	significant	intangible	assets	that	were	acquired	through	business	acquisitions.	These	assets	consist	of	purchased	customer relationships,	contracts,	and	the	excess	of	purchase	price	over	the	fair	value	of	identifiable	net	assets	acquired	(goodwill).	The	determination	of estimated	useful	lives	and	the	allocation	of	the	purchase	price	to	the	fair	values	of	the	intangible	assets	require	significant	judgment	and	may	affect the	amount	of	future	amortization	on	the	intangible	assets	other	than	goodwill.

As	of	December	31,	2006	and	December	31,	2005,	goodwill	was	$3.7	billion	and	$1.8	billion,	respectively.	The	process	of	determining whether	or	not	an	asset,	such	as	goodwill,	is	impaired	or	recoverable	relies	on	projections	of	future	cash	flows,	operating	results	and	market conditions.	Such	projections	are	inherently	uncertain	and,	accordingly,	actual	future	cash	flows	may	differ	materially	from	projected	cash	flows.	In evaluating	the	recoverability	of	goodwill,	we	perform	an	annual	goodwill	impairment	test	on	our	reporting	units	based	on	an	analysis	of	the discounted	future	net	cash	flows	generated	by	the	reporting	units'	underlying	assets.	We	completed	our	annual	goodwill	impairment	test	on	our reporting	units	as	of	December	31,	2006	and	determined	that	each	of	our	reporting	units	has	a	fair	value	in	excess	of	its	carrying	value. Accordingly,	no	goodwill	impairment	has	been	recorded.	Such	analyses	are	particularly	sensitive	to	changes	in	estimates	of	future	net	cash	flows and	discount	rates.	Changes	to	these	estimates	might	result	in	material	changes	in	the	fair	value	of	the	reporting	units	and	determination	of	the recoverability	of	goodwill	which	may	result	in	charges	against	earnings	and	a	reduction	in	the	carrying	value	of	our	goodwill.

As	of	December	31,	2006	and	December	31,	2005,	intangible	assets	were	$1.0	billion	and	$0.5	billion	respectively,	which	consist	primarily of	purchased	customer	relationships	and	trademarks.	The	valuation	of	these	assets	involves	significant	estimates	and	assumptions	concerning matters	such	as	customer	retention,	future	cash	flows	and	discount	rates.	If	any	of	these	assumptions	change,	it	could	affect	the	carrying	value	of these	assets.	Purchased	customer	relationships	are	amortized	over	their	estimated	useful	lives	using	an	accelerated	method	which	takes	into consideration	expected	customer	attrition	rates	over	a	ten-year	period.	All	trademarks	have	been	determined	to	have	indefinite	lives	and	are	not amortized,	but	are	reviewed	for	impairment	at	least	annually	in	accordance	with	SFAS	No.	142.	During	2005,	we	recorded	an	impairment	of $9.3	million	to	write	off	the	carrying	value	of	customer	relationships	at	one	subsidiary	in	the	Lender	Processing	Services	segment	which	were terminated.

# Long-Lived	Assets

We	review	long-lived	assets,	primarily	computer	software,	property	and	equipment	and	other	intangibles,	such	as	customer	relationships	and contracts,	for	impairment	whenever	events	or	changes	in	circumstances	indicate	that	the	carrying	amount	of	an	asset	may	not	be	recoverable.	If indicators	of	impairment	are	present,	we	estimate	the	future	net	cash	flows	expected	to	be	generated	from	the	use	of	those	assets	and	their	eventual disposal.	We	would	recognize	an	impairment	loss	if	the	aggregate	future	net	cash	flows	were	less	than	the	carrying	amount.	As	a	result,	the carrying	values	of	these	assets	could	be	significantly	affected	by	the	accuracy	of	the	estimates	of	future	net	cash	flows,	which	are	not	capable	of being	made	with	certainty.

# Accounting	for	Income	Taxes

Through	March	9,	2005,	our	operating	results	have	been	included	in	Old	FNF's	consolidated	U.S.	Federal	and	certain	consolidated	and/or combined	State	income	tax	returns.	The	provision	for	income	taxes	in	the	Consolidated	and	Combined	statements	of	earnings	is	made	at	rates consistent	with	what	we	would	have	provided	for	as	a	stand-alone	taxable	entity.	Subsequent	to	the	recapitalization	transaction	and	sale	of	minority interest,	we	became	a	stand-alone	taxpayer.	As	part	of	the	process	of	preparing	the	Consolidated	and	Combined	financial	statements,	we	were required	to	determine	income	taxes	in	each	of	the	jurisdictions	in	which	we	operate.	This	process	involves	estimating	actual	current	tax	expense together	with	assessing	temporary	differences	resulting	from	differing	recognition	of	items	for	income	tax	and	accounting	purposes.	These differences	result	in	deferred	income	tax	assets	and	liabilities,	which	are	included	within	the	Consolidated	Balance	Sheets.	We	must	then	assess the	likelihood	that	deferred	income	tax	assets	will	be	recovered	from	future	taxable	income	and,	to	the	extent	we	believe	that	recovery	is	not likely,	establish	a	valuation	allowance.	To	the	extent	we	established	a	valuation	allowance	or	increased	this

allowance	in	a	period,	we	must	reflect	this	increase	as	an	expense	within	income	tax	expense	in	the	statement	of	earnings.	Determination	of	the income	tax	expense	requires	estimates	and	can	involve	complex	issues	that	may	require	an	extended	period	to	resolve.	Further,	changes	in	the geographic	mix	of	revenues	or	in	the	estimated	level	of	annual	pre-tax	income	can	cause	the	overall	effective	income	tax	rate	to	vary	from	period to	period.

# Derivatives	and	Hedging

We	utilize	interest	rate	swaps	to	hedge	our	exposure	on	our	variable	rate	debt	obligations.	We	have	designated	these	interest	rate	swaps	as cash	flow	hedges	in	accordance	with	SFAS	No.	133,	"Accounting	for	Derivative	Instruments	and	Hedging	Activities"	as	amended.	All relationships	between	the	hedging	instruments	and	hedged	items	are	documented	at	the	inception	of	the	hedge	transaction,	as	well	as	the	risk- management	objective	and	strategy	for	undertaking	each	hedge	transaction.	We	carry	the	fair	value	of	the	interest	rate	swaps	as	an	asset	or	a liability	on	the	balance	sheet	at	each	reporting	date,	with	a	corresponding	amount	recorded	in	other	comprehensive	earnings	within	stockholders' equity.	Amounts	are	reclassified	from	other	comprehensive	earnings	to	the	income	statement	in	the	periods	that	the	hedged	transaction	affects earnings.	A	formal	assessment	is	performed	at	the	hedge's	inception	and	on	a	regular	basis	thereafter	to	determine	whether	the	hedge	has	been highly	effective	in	offsetting	changes	in	the	cash	flows	of	the	hedged	transaction	and	whether	it	is	expected	to	be	highly	effective	in	the	future.

Our	existing	cash	flow	hedges	have	been	highly	effective	and	there	has	been	no	impact	on	earnings	due	to	hedge	ineffectiveness.	As	of December	31,	2006	and	2005,	the	estimated	fair	value	of	cash	flow	hedges	results	in	an	asset	of	$4.9	million	and	$5.2	million,	which	is	included	in the	accompanying	Consolidated	Balance	Sheets	in	other	assets	with	a	corresponding	amount	recorded	as	a	component	of	accumulated	other comprehensive	earnings,	net	of	deferred	taxes.

# Related	Party	Transactions

# Transactions	with	FNF

We	have	historically	conducted	business	with	Old	FNF	and	its	subsidiaries.	In	March	2005,	in	connection	with	the	recapitalization	and	sale of	equity	interest,	we	entered	into	various	agreements	with	Old	FNF	under	which	we	continued	to	provide	title	agency	services,	title	plant management,	and	IT	services.	Further,	we	also	entered	into	service	agreements	with	Old	FNF	under	which	Old	FNF	continued	to	provide	us	with corporate	services.	In	September	2005,	when	Fidelity	National	Title	Group,	Inc.	("FNT")	was	formed	and	the	title	insurance	business	was consolidated	under	FNT,	many	of	these	agreements	were	amended	and	restated	to	take	into	account	the	services	that	would	be	performed	for	and by	FNT	rather	than	Old	FNF.	On	February	1,	2006,	in	connection	with	the	closing	of	the	Certegy	Merger,	many	of	these	agreements	were	further amended	and	restated	to	reflect	certain	changes	in	the	parties'	relationships.	Certain	of	these	agreements	were	amended	or	terminated	in	connection with	the	FNF	merger	and	related	transactions,	as	described	in	our	current	report	on	Form	8-K	filed	with	the	SEC	on	October	27,	2006.	A	summary of	these	agreements	as	in	effect	through	December	31,	2006	is	as	follows:

•	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.	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.

•	Agreements	to	provide	title	plant	information,	maintenance	and	management.		These	agreements	govern	the	fee	structure	under	which	we are	paid	for	maintaining,	managing	and	updating	title	plants	owned	by	FNF's	title	underwriters	in	certain	parts	of	the	country.	The	title plant	maintenance	agreement	requires,	among	other	things,	that	we	gather	updated	property	information,	organize	it,	input	it	into	one	of several	systems,	maintain	or	obtain	the	use	of	necessary	software	and	hardware	to	store,	access	and	deliver	the	data,	sell	and	deliver	the data	to	customers	and	provide	various	forms	of	customer	support.	We	sell	property	information	to	title	underwriters	which	are subsidiaries	of	FNF	as	well	as	to	various	unaffiliated	customers.	We	pay	FNF	a	royalty	fee	of	2.5%	to	3.75%	of	the	revenues	received.	In the	case	of	the	maintenance	agreement,	we	are	responsible	for	the	costs	of	keeping	the	title	plant	assets	current	and	functioning	and	in

return	receive	the	revenue	generated	by	those	assets.	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	the	agreement	in	May	2005	(thus	effectively	resulting	in	a	minimum	ten	year	term	and	a	rolling	one-year	term	thereafter).

•	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.

•	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	services	required	by	the	title	insurance	operations.

•	Agreements	by	FNF	to	provide	corporate	services	to	us.		These	agreements	provide	for	FNF	to	provide	general	management,	accounting, treasury,	tax,	finance,	legal,	payroll,	human	resources,	employee	benefits,	internal	audit,	mergers	and	acquisitions,	and	other	corporate and	administrative	support	FIS.	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 FIS	believe	to	be	reasonable.

•	Licensing,	leasing	and	cost	sharing	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	their	subsidiaries)	in	connection	with	our	use	of	certain	intellectual	property	or	other	assets	of	or	services	by	FNF.

•	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	by	FIS	on	behalf	of	title	insurance	underwriters	owned	by	FNF	and	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	the	agreement	ranging	from	July	2004	through	September	2006	for various	agreements	(thus	effectively	resulting	in	a	minimum	ten	year	term	and	a	rolling	one-year	term	thereafter).	The	LPS	segment includes	revenues	from	unaffiliated	third	parties	of	$83.9	million,	$80.9	million	and	$92.2	million	for	the	years	ended	December	31,	2006, 2005	and	2004,	respectively,	representing	commissions	on	title	insurance	policies	written	by	us	on	behalf	of	title	insurance	subsidiaries	of FNF.	These	commissions	are	equal	to	88%	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.

A	detail	of	related	party	items	included	in	revenues	is	as	follows	(in	millions):

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Data\tprocessing\tservices\trevenue | $82.2 | $56.9 | $56.6 |
| Title\tplant\tinformation\trevenue | 41.4 | 31.1 | 28.9 |
| Software\trevenue | 25.9 | 18.9 | 5.8 |
| Other\treal-estate\trelated\tservices | 12.7 | 10.9 | 9.9 |
| Total\trevenues | $ 162.2 | $ 117.8 | $101.2 |

A	detail	of	related	party	items	included	in	operating	expenses	is	as	follows	(in	millions):

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Title\tplant\troyalty\texpense | $2.4 | $3.0 | $2.8 |
| Rent\texpense | — | 5.0 | 8.4 |
| Corporate\tservices | 9.5 | 29.0 | 75.1 |
| Licensing,\tleasing\tand\tcost\tsharing\tagreement | (12.9) | (15.7) | (15.6) |
| Total\texpenses | $(1.0) | $21.3 | $70.7 |

We	believe	the	amounts	earned	from	or	charged	by	FNF	to	us	under	each	of	the	foregoing	service	arrangements	are	fair	and	reasonable. Although	the	88%	commission	rate	on	title	insurance	policies	was	set	without	negotiation,	we	believe	it	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.	In	connection	with	title	plant	management,	we	charge	FNF	title	insurers	for	title	information	at	approximately	the same	rates	we	and	other	similar	vendors	charge	unaffiliated	title	insurers.	Our	IT	infrastructure	support	and	data	center	management	services	to FNF	are	priced	within	the	range	of	prices	we	offer	to	third	parties.

We	also	provide	data	processing	services	to	Sedgwick	CMS,	a	company	in	which	FNF	has	held	an	approximately	40%	equity	interest	since February	1,	2006.	We	recorded	$17.3	million	in	revenue	relating	to	this	arrangement	with	Sedgwick	in	2006.

# Other	transactions	with	FNF:

# Contribution	of	National	New	York

During	the	second	quarter	of	2006,	Old	FNF	contributed	the	stock	of	National	Title	Insurance	of	New	York,	Inc.	("National	New	York"),	a title	insurance	company,	to	us,	in	connection	with	the	recapitalization	transaction	in	March	2005.	This	transaction	was	reflected	as	a	contribution	of capital	from	Old	FNF	in	the	amount	of	Old	FNF's	historical	basis	in	National	New	York	of	approximately	$10.7	million.

# 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.

The	contribution	of	National	New	York	and	the	merger	with	FNF	Capital	were	completed	between	entities	under	common	control	and	their results	of	operations	and	account	balances	have	been	included	in	our	results	of	operations	and	statement	of	financial	position	since	the	date	of	the relevant	transactions.	Had	we	included	the	results	of	operations	and	balance	sheets	for	all	periods	presented	in	our	Combined	and	Consolidated Financial	Statements,	net	earnings	would	have	been	adjusted	by	$0.5	million,	($0.2)	million	and	($0.7)	million	for	2006,	2005	and	2004, respectively,	and	total	assets	would	have	increased	$82.2	million	as	of	December	31,	2005.

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"),	our	subsidiary,	for approximately	61%	of	the	outstanding	shares	of	FNRES.	As	a	result,	as	of	December	31,	2006,	we	no	longer	consolidate	FNRES,	but	record	our remaining	39%	interest	as	an	equity	investment	in	the	amount	of	$33.5	million.	The	results	of	FNRES	are	included	in	the	Consolidated	and Combined	Statements	of	Earnings	for	all	periods	presented.

# Transactions	with	Covansys

In	2004,	we	entered	into	a	master	service	provider	agreement	with	Covansys,	an	entity	in	which	we	hold	a	29%	equity	interest,	which requires	that	we	purchase	a	minimum	of	$150	million	in	services	over	a	five	year	period	expiring	June	30,	2009	or	be	subject	to	certain	penalties	if defined	spending	thresholds	are	not	met.	We	do	not	believe	any	future	penalties	will	be	incurred	under	the	agreement.	During	2006,	2005,	and 2004,	we	spent	$35.7	million,	$17.6	million	and	$5.0	million	purchasing	professional	services	from	Covansys	and	its	subsidiaries.

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

In	2006,	we	recorded	revenues	of	$22.8	million	from	ABN	AMRO	Real	and	$20.4	million	from	Banco	Bradesco	S.A.,	which	are	venture partners	in	our	Brazilian	Card	business.

# Recent	Developments

# Combination	with	Old	FNF

On	June	25,	2006,	we	entered	into	an	agreement	and	plan	of	merger	(the	"FNF	Merger	Agreement")	with	Old	FNF	(amended	September	18, 2006)	(the	"FNF	Merger").	This	FNF	Merger	was	one	step	in	a	plan	that	eliminated	Old	FNF's	holding	company	structure	and	majority	ownership in	FIS.	In	connection	with	this	plan,	Old	FNF	also	entered	into	a	securities	exchange	and	distribution	agreement	(the	"SEDA")	with	its	subsidiary FNT.	Under	the	SEDA,	Old	FNF	agreed	that,	prior	to	the	merger,	Old	FNF	would	transfer	substantially	all	its	assets	and	liabilities	to	FNT,	in exchange	for	shares	of	FNT	common	stock.	Old	FNF	then	would	spin-off	all	shares	of	FNT	stock	it	held	to	the	stockholders	of	Old	FNF	in	a	tax- free	distribution.	Pursuant	to	the	FNF	Merger	Agreement,	on	November	9,	2006	Old	FNF	merged	with	and	into	FIS,	with	FIS	continuing	as	the surviving	corporation.	In	consideration	for	the	FNF	Merger,	Old	FNF	stockholders	received	an	aggregate	of	96,521,877	shares	of	our	stock	for their	Old	FNF	shares.	In	addition,	in	connection	with	the	FNF	Merger	we	issued	options	to	purchase	our	common	stock	and	shares	of	our restricted	stock	in	exchange	for	Old	FNF	options	and	restricted	stock	outstanding	at	the	time	of	the	FNF	Merger.	After	the	completion	of	all	of	the transactions,	FNT	was	renamed	Fidelity	National	Financial,	Inc.	("FNF")	and	trades	under	the	symbol	FNF.	Former	Old	FNF	Chairman	and	CEO William	P.	Foley,	II,	assumed	the	same	position	in	FNF	and	now	serves	as	Executive	Chairman	of	FIS,	and	other	key	members	of	Old	FNF	senior management	continue	their	involvement	in	both	FNF	and	FIS	in	executive	capacities.

U.S.	generally	accepted	accounting	principles	require	that	one	of	the	two	parties	to	the	FNF	Merger	be	designated	as	the	acquirer	for accounting	purposes.	However,	Financial	Accounting	Standards	Board	Technical	Bulletin	85-5,	"Issues	Relating	to	Accounting	for	Business Combinations"	provides	that	if	a	transaction	lacks	substance,	it	is	not	a	purchase	event	and	should	be	accounted	for	based	on	existing	carrying amounts.	In	the	FNF	Merger,	the	minority	interest	in	FIS	has	not	changed	and,	in	substance,	the	only	assets	and	liabilities	of	the	combined	entity after	the	exchange	are	those	of	FIS	prior	to	the	exchange.	Because	a	change	in	ownership	of	the	minority	interest	has	not	taken	place,	the	exchange has	been	accounted	for	based	on	the	carrying	amounts	of	our	assets	and	liabilities.

# Factors	Affecting	Comparability

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

•	On	February	1,	2006,	Former	FIS	merged	into	a	wholly-owned	subsidiary	of	Certegy.	The	transaction	resulted	in	a	reverse	acquisition with	a	total	purchase	price	of	approximately	$2.2	billion.	Certegy	provided	credit	card,	debit	card,	and	other	transaction	processing	and check	risk	management	services	to	financial	institutions	and	merchants	in	the	U.S.	and	internationally	through	two	segments,	Card Services	and	Check	Services.

•	On	March	9,	2005,	our	recapitalization	was	completed	through	$2.8	billion	in	borrowings	under	senior	credit	facilities	consisting	of	an $800	million	Term	Loan	A	facility,	a	$2.0	billion	Term	Loan	B	facility	(collectively,	the	"Term	Loan	Facilities")	and	a	$400	million revolving	credit	facility	(the	"Revolver").	We	fully	drew	upon	the	entire	$2.8	billion	in	Term	Loan	Facilities	to	complete	the recapitalization	while	the	Revolver	remained	undrawn	at	the	closing.	At	the	same	time,	we	also	sold	a	25	percent	equity	interest	to	an investment	group	led	by	Thomas	H.	Lee	Partners	("THL")	and	Texas	Pacific	Group	("TPG").

•	During	2004,	we	acquired	Aurum	Technology	(Aurum),	Sanchez	Computer	Associates,	Inc.	(Sanchez),	Kordoba	and	InterCept	Inc. (InterCept)	which	added	significant	revenues	to	our	TPS	segment.

The	Consolidated	and	Combined	Financial	Statements	present	the	results	of	operations	of	Certegy,	the	effects	of	the	recapitalization	and results	of	operations	of	the	2004	acquisitions,	in	each	case,	effective	as	of	the	date	of	the

acquisition	or	recapitalization.	As	a	result	of	these	transactions,	the	results	of	operations	in	the	periods	covered	by	the	Consolidated	and	Combined Financial	Statements	may	not	be	directly	comparable.

# Consolidated	and	Combined	Results	of	Operations

# (in	thousands,	except	per	share	amounts)

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Processing\tand\tservices\trevenues | $4,132,602 | $2,766,085 | $2,331,527 |
| Cost\tof\trevenues | 2,929,567 | 1,793,285 | 1,525,174 |
| Gross\tprofit | 1,203,035 | 972,800 | 806,353 |
| Selling,\tgeneral,\tand\tadministrative\texpenses | 505,528 | 422,623 | 432,310 |
| Research\tand\tdevelopment\tcosts | 105,580 | 113,498 | 74,214 |
| Operating\tincome | 591,927 | 436,679 | 299,829 |
| Other\tincome\t(expense): |  |  |  |
| Interest\tincome | 4,746 | 6,392 | 1,232 |
| Interest\texpense | (192,819) | (126,778) | (4,496) |
| Other\tincome\t(expense) | (224) | (4,237) | 18,175 |
| Total\tother\tincome\t(expense) | (188,297) | (124,623) | 14,911 |
| Earnings\tbefore\tincome\ttaxes,\tequity\tin\tearnings\t(loss)\tof\tunconsolidated\tentities\tand |  |  |  |
| minority\tinterest | 403,630 | 312,056 | 314,740 |
| Provision\tfor\tincome\ttaxes | 150,150 | 116,085 | 118,343 |
| Earnings\tbefore\tequity\tin\tearnings\t(loss)\tof\tunconsolidated\tentities\tand\tminority |  |  |  |
| interest | 253,480 | 195,971 | 196,397 |
| Equity\tin\tearnings\t(loss)\tof\tunconsolidated\tentities | 5,792 | 5,029 | (3,308) |
| Minority\tinterest | (185) | (4,450) | (3,673) |
| Net\tearnings | $259,087 | $196,550 | $189,416 |
| Pro\tforma\tnet\tearnings\tper\tshare\t—\tbasic | $1.39 | $1.54 | $1.48 |
| Pro\tforma\tweighted\taverage\tshares\toutstanding\t—\tbasic | 185,926 | 127,920 | 127,920 |
| Pro\tforma\tnet\tearnings\tper\tshare\t—\tdiluted | $1.37 | $1.53 | $1.48 |
| Pro\tforma\tweighted\taverage\tshares\toutstanding\t—\tdiluted | 189,196 | 128,354 | 127,920 |

# Processing	and	Services	Revenues

Processing	and	services	revenues	totaled	$4,132.6	million,	$2,766.1	million	and	$2,331.5	million	in	2006,	2005	and	2004,	respectively.	The increase	in	revenue	in	2006	of	$1,366.5	million	as	compared	to	2005	is	primarily	due	to	incremental	revenues	from	the	February	1,	2006	Certegy Merger,	which	contributed	$1,067.2	million	to	the	overall	increase.	The	remaining	2006	increase	is	attributable	to	growth	across	both	segments, including	15.2%	growth	in	Transaction	Processing	Services,	excluding	the	impact	of	Certegy,	and	7.5%	growth	in	Lender	Processing	Services. The	growth	in	Transaction	Processing	Services	was	driven	by	strong	new	sales	within	Integrated	Financial	Solutions	and	International,	while	the growth	in	Lender	Processing	Services	was	driven	by	market	share	gains	in	default	and	appraisal	services.	The	increase	in	revenue	in	2005	of $434.6	million	as	compared	to	2004	is	primarily	attributable	to	an	increase	of	$316.4	million,	or	35.5%,	from	our	Transaction	Processing	Services segment	which	is	the	result	of	including	a	full	year	of	results	for	the	2004	acquisitions	of	Aurum,	Sanchez,	Kordoba,	and	InterCept	which contributed	$301.1	million	of	the	increase.	The	remaining	2005	increase	is	primarily	due	to	organic	growth	across	the	company.

# Cost	of	Revenues

Cost	of	revenues	totaled	$2,929.6	million,	$1,793.3	million	and	$1,525.2	million	in	2006,	2005	and	2004	respectively.	The	increase	in	cost	of revenues	in	2006	as	compared	to	2005	of	$1,136.3	million	was	primarily	due	to	incremental	cost	of	revenues	from	the	February	1,	2006	Certegy Merger	which	contributed	$848.2	million	to	the	overall	increase.	An	increase	in	depreciation	and	amortization	expense	to	$383.0	million	in	2006 from	$252.5	million	in	2005	resulting	from	additional	intangible	amortization	related	to	the	Certegy	Merger	also	contributed	to	the	year-over-year increase.	The	increase	in	cost	of	revenues	of	$268.1	million	in	2005	as	compared	to	2004	is	primarily	attributable	to	including	a	full	year	of	results for	the	2004	acquisitions	of	Aurum,	Sanchez,	Kordoba,	and	InterCept	including	the	amortization	of	intangibles	related	to	each	acquisition.

# Gross	Profit

Gross	profit	as	a	percentage	of	revenues	("gross	margin")	was	29.1%,	35.2%	and	34.6%	in	2006,	2005	and	2004,	respectively.	The	decrease in	gross	margin	is	primarily	due	to	the	February	1,	2006	Certegy	Merger,	which	businesses	typically	have	lower	margins	than	those	of	the historically	owned	FIS	businesses.	Incremental	intangible	amortization	expense	relating	to	the	Certegy	Merger	also	contributed	to	the	decrease	in gross	margin	in	2006.	The	increase	in	gross	margin	in	2005	as	compared	to	2004	resulted	from	the	full	year	of	results	for	the	2004	acquisitions.

# Selling,	General	and	Administrative	Expenses

Selling,	general	and	administrative	expenses	totaled	$505.5	million,	$422.6	million	and	$432.3	million	for	2006,	2005	and	2004, respectively.	The	increase	of	$82.9	million	in	selling,	general	and	administrative	expenses	for	2006	as	compared	to	2005	primarily	relates	to incremental	selling,	general	and	administrative	expenses	from	the	February	1,	2006	Certegy	Merger	which	contributed	$73.7	million	to	the	overall increase.	Additionally,	the	increase	was	also	due	to	an	increase	in	stock	based	compensation	expense	which	increased	from	$20.4	million	during 2005	to	$50.1	million	for	2006.	This	increase	in	stock-based	compensation	is	primarily	attributable	to	the	$24.5	million	in	expense	recorded	for	the vesting	of	the	FIS	performance-based	options	granted	in	March	2005	for	which	the	performance	criteria	was	met	during	the	first	quarter	of	2006 and	an	acceleration	charge	of	$6.1	million	recorded	in	the	fourth	quarter	relating	to	the	FNF	Merger.	The	decrease	of	$9.7	million	in	2005	as compared	to	2004	primarily	results	from	cost	control	measures	implemented	in	2005	related	to	the	2004	acquisitions.	Also	included	in	selling, general	and	administrative	expenses	are	$50.5	million,	$47.1	million,	and	$40.5	million	in	depreciation	and	amortization	costs	in	2006,	2005	and 2004,	respectively.

# Research	and	Development	Costs

Research	and	development	costs	totaled	$105.6	million,	$113.5	million	and	$74.2	for	2006,	2005	and	2004,	respectively.	The	increase	of $39.3	million	in	2005	as	compared	to	2004	reflects	an	increase	in	research	and	development	activity	surrounding	the	acquired	technology	assets associated	with	the	2004	acquisitions	of	Aurum,	Sanchez,	Bankware,	Kordoba,	and	InterCept.

# Operating	Income

Operating	income	totaled	$591.9	million,	$436.7	million	and	$299.8	million	for	2006,	2005	and	2004,	respectively.	Operating	income	as	a percentage	of	revenue	("operating	margin")	was	14.3%,	15.8%	and	12.9%	for	2006,	2005	and	2004,	respectively.	The	year-over-year	decrease	in operating	margin	for	2006	is	primarily	due	to	incremental	intangible	asset	amortization	relating	to	the	Certegy	Merger,	increased	stock	based compensation	costs,	other	merger	related	costs,	as	well	as	relatively	lower	gross	profit	percentage	associated	with	the	Certegy	product	lines,	as noted	above.	The	increase	in	operating	margin	for	2005	as	compared	to	2004	is	primarily	attributable	to	the	higher	revenues	associated	with	2004 acquisitions,	for	which	there	was	a	full	year	of	results	in	2005.	The	addition	of	these	acquisitions	resulted	in	a	higher	revenue	base	for	spreading more	stable	administrative	costs.

# Interest	Expense

Interest	expense	totaled	$192.8	million,	$126.8	million	and	$4.5	million	for	2006,	2005	and	2004,	respectively.	The	increase	in	interest expense	in	2006	as	compared	to	2005	primarily	relates	to	an	increase	in	interest	rates	and

higher	average	borrowings.	Additionally,	the	recapitalization	that	occurred	late	in	the	first	quarter	of	2005	resulted	in	a	full	year	of	interest	in	2006 as	compared	to	approximately	ten	months	in	2005.	The	increase	in	interest	expense	in	2005	as	compared	to	2004	also	resulted	from	the recapitalization	in	2005.

# Income	Tax	Expense

# Net	Earnings

# Segment	Results	of	Operations

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Processing\tand\tservices\trevenues | $2,458,777 | $1,208,430 | $ 892,033 |
| Cost\tof\trevenues | 1,914,148 | 904,124 | 667,078 |
| Gross\tprofit | 544,629 | 304,306 | 224,955 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 171,106 | 94,889 | 99,581 |
| Research\tand\tdevelopment\tcosts | 70,879 | 85,702 | 54,038 |
| Operating\tincome | $302,644 | $123,715 | $71,336 |

Revenues	for	the	Transaction	Processing	Services	segment	are	derived	from	three	main	revenue	channels;	Enterprise	Solutions,	Integrated Financial	Solutions	and	International.	Revenues	from	Transaction	Processing	Services	totaled	$2,458.8	million,	$1,208.4	and	$892.0	million	for 2006,	2005	and	2004,	respectively.	The	overall	segment	increase	of	$1,250.4	million	during	2006,	as	compared	to	2005	was	primarily	attributable to	the	Certegy	Merger	which	contributed	$1,067.2	million	to	the	overall	increase.	The	majority	of	the	remaining	2006	growth	is	attributable	to organic	growth	within	the	historically	owned	Integrated	Financial	Solutions	and	International	revenue	channels,	with	International	including $31.9	million	related	to	the	newly	formed	business	process	outsourcing	operation	in	Brazil.	The	overall	segment	increase	of	$316.4	in	2005	as compared	to	2004	results	from	the	inclusion	of	a	full	year	of	results	for	the	2004	acquisitions	of	Aurum,	Sanchez,	Kordoba,	and	InterCept,	which contributed	$301.1	million	of	the	increase.

Cost	of	revenues	for	the	Transaction	Processing	Services	segment	totaled	$1,914.1	million,	$904.1	million	and	$667.1	million	for	2006, 2005	and	2004,	respectively.	The	overall	segment	increase	of	$1,010.0	million	during	2006	as	compared	to	2005	was	primarily	attributable	to	the Certegy	Merger	which	contributed	$848.2	million	to	the	increase.	Gross	profit	as	a	percentage	of	revenues	("gross	margin")	was	22.2%,	25.2%	and 25.2%	for	2006,	2005	and	2004,	respectively.	The	decrease	in	gross	profit	in	2006	as	compared	to	2005	is	primarily	due	to	the	February	1,	2006 Certegy	Merger,	which	businesses	typically	have	lower	margins	than	those	of	the	historically	owned	FIS	businesses.	Incremental	intangible	asset amortization	relating	to	the	Certegy	Merger	also	contributed	to	the	decrease	in	gross	margin.	Included	in	cost	of	revenues	was	depreciation	and amortization	of	$272.4	million,	$139.8	million,	and	$94.6	million	for	2006,	2005	and	2004,	respectively.

Selling,	general	and	administrative	expenses	totaled	$171.1	million,	$94.9	million	and	$99.6	million	for	2006,	2005	and	2004,	respectively. The	increase	in	2006	compared	to	2005	is	primarily	attributable	to	the	Certegy	Merger	which	contributed	$73.7	million	to	the	overall	increase	of $76.2	million.	The	decrease	of	$4.7	million	in	2005	as	compared	to	2004	is	primarily	attributable	to	the	effect	of	acquisition	related	costs	in	2004. Included	in	selling,	general	and	administrative	expenses	was	depreciation	and	amortization	of	$11.0	million,	$9.1	million	and	$2.3	million	for 2006,	2005	and	2004,	respectively.

Research	and	development	costs	totaled	$70.9	million,	$85.7	million	and	$54.0	million	for	2006,	2005	and	2004,	respectively.	The	increase of	$31.7	million	in	2005	as	compared	to	2004	reflects	an	increase	in	research	and	development	activity	surrounding	the	acquired	technology	assets associated	with	the	2004	acquisitions	of	Aurum,	Sanchez,	Bankware,	Kordoba,	and	Intercept.

The	increase	in	operating	margin	for	2006	as	compared	to	2005	resulted	from	a	decrease,	as	a	percentage	of	revenue,	of	0.9%	in	selling, general	and	administrative	expenses	and	4.2%	in	research	and	development	costs,	partially	offset	by	a	decrease	in	gross	margin	as	discussed	above. The	increase	in	2005,	as	compared	to	2004,	primarily	results	from	the	relative	stability	of	selling,	general	and	administrative	expenses	against	a larger	revenue	base	due	to	the	inclusion	of	a	full	year	of	results	for	the	2004	acquisitions.

# (in	thousands)

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Processing\tand\tservices\trevenues | $1,678,606 | $1,562,161 | $1,445,008 |
| Cost\tof\trevenues | 1,015,419 | 889,161 | 858,186 |
| Gross\tprofit | 663,187 | 673,000 | 586,822 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 208,698 | 234,655 | 261,045 |
| Research\tand\tdevelopment\tcosts | 34,701 | 27,796 | 20,176 |
| Operating\tincome | $419,788 | $410,549 | $305,601 |

Revenues	for	the	Lender	Processing	Services	segment	totaled	$1,678.6	million,	$1,562.2	million	and	$1,445.0	million	for	2006,	2005	and 2004,	respectively.	The	overall	segment	increase	of	$116.4	million	during	2006	as	compared	to	2005	was	the	result	of	growth	across	most	of	the business	lines,	but	primarily	due	to	increased	demand	for	our	appraisal	services	along	with	growth	in	our	default	management	businesses.

Cost	of	revenues	for	the	Lender	Processing	Services	segment	totaled	$1,015.4	million,	$889.2	million	and	$858.2	million	for	2006,	2005	and 2004,	respectively.	Gross	margin	was	39.5%,	43.1%	and	40.6%	for	2006,	2005	and	2004,	respectively.	The	decrease	in	gross	margin	is	primarily due	to	growth	in	lower	margin	product	lines	including	default	and	appraisal	services	along	with	declining	margins	in	our	tax	services	due	to	the lengthening	of	the	service	period.	Included	in	cost	of	revenues	was	depreciation	and	amortization	of	$110.6	million,	$112.8	million	and $103.3	million	for	2006,	2005	and	2004,	respectively.

Selling,	general	and	administrative	expenses	for	the	Lender	Processing	Services	segment	totaled	$208.7	million,	$234.7	million	and $261.0	million	for	2006,	2005	and	2004,	respectively.	The	decreasing	trend	is	primarily	the	result	of	cost	control	measures	and	the	increased revenue	base	in	the	Transaction	Processing	Services	segment	for	allocating	certain	combined	selling	and	administrative	expenses.	Included	in selling,	general	and	administrative	expenses	was	depreciation	and	amortization	of	$29.2	million,	$31.8	million,	and	$35.1	million	for	2006,	2005 and	2004,	respectively.

Research	and	development	costs	for	the	Lender	Processing	Services	segment	totaled	$34.7	million,	$27.8	million,	and	$20.2	million	for 2006,	2005	and	2004,	respectively.	The	increasing	trend	relates	primarily	to	additional	activities	surrounding	our	mortgage	processing	and	loan origination	software	lines.

# Corporate	and	Other

Selling,	general	and	administrative	expenses	from	the	Corporate	and	Other	segment	consist	of	corporate	overhead	costs	that	have	been allocated	from	FNF	prior	to	the	merger	with	FNF	and	other	amounts	incurred	directly

by	FIS,	including	stock	based	compensation.	Selling,	general	and	administrative	expenses	were	$125.7	million,	$93.1	million	and	$71.7	million	in 2006,	2005	and	2004,	respectively.	The	increase	in	2006	as	compared	to	2005	of	$32.6	million	primarily	relates	to	an	increase	in	stock	based compensation	expense	which	increased	from	$20.4	million	in	2005	to	$50.1	million	in	2006,	as	well	as	an	increase	in	merger	and	merger	related integration	costs.	The	increase	in	stock	based	compensation	primarily	related	to	the	$24.5	million	in	expense	recorded	in	the	first	quarter	of	2006 for	the	vesting	of	the	FIS	performance	based	options	granted	in	March	of	2005	for	which	the	performance	criteria	were	met	during	2006	and	a $6.1	million	charge	related	to	the	acceleration	of	vesting	of	stock	options	recorded	in	the	fourth	quarter	relating	to	the	FNF	merger.

# Pro	forma	Segment	Information

Summarized	pro	forma	financial	information	for	2006	and	2005	concerning	the	Company's	reportable	segments	is	shown	in	the	following tables.	The	results	below	have	been	adjusted	on	a	pro	forma	basis	to	reflect	a	January	1,	2005,	effective	date	for	the	Certegy	Merger,	purchase	of minority	interests	of	Kordoba,	and	the	March	2005	recapitalization	and	sale	of	minority	interests	by	FIS.

For	the	year	ended	December	31,	2006	(in	thousands):

|  | Transaction<br>Processing<br>Services | Lender<br>Processing<br>Services | Corporate<br>and	Other | Total |
| :--- | :--- | :--- | :--- | :--- |
| Processing\tand\tservices\trevenues | $2,549,740 | $1,678,606 | $(2,829) | $4,225,517 |
| Cost\tof\trevenues | 1,994,222 | 1,015,419 | — | 3,009,641 |
| Gross\tprofit | 555,518 | 663,187 | (2,829) | 1,215,876 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 175,516 | 208,698 | 208,204 | 592,418 |
| Research\tand\tdevelopment\tcosts | 70,879 | 34,701 | — | 105,580 |
| Operating\tincome | $309,123 | $419,788 | $(211,033) | $517,878 |

|  | Transaction<br>Processing<br>Services | Lender<br>Processing<br>Services | Corporate<br>and	Other | Total |
| :--- | :--- | :--- | :--- | :--- |
| Processing\tand\tservices\trevenues | $2,325,571 | $1,562,161 | $(4,506) | $3,883,226 |
| Cost\tof\trevenues | 1,778,630 | 889,161 | — | 2,667,791 |
| Gross\tprofit | 546,941 | 673,000 | (4,506) | 1,215,435 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 186,098 | 234,655 | 126,074 | 546,827 |
| Research\tand\tdevelopment\tcosts | 85,702 | 27,796 | — | 113,498 |
| Operating\tincome | $275,141 | $410,549 | $(130,580) | $555,110 |

# Liquidity	and	Capital	Resources

# Cash	Requirements

Our	cash	requirements	include	cost	of	revenues,	selling,	general	and	administrative	expenses,	income	taxes,	debt	service	payments,	capital expenditures,	systems	development	expenditures	and	business	acquisitions.	Our	principal	sources	of	funds	are	cash	generated	by	operations	and borrowings.

At	December	31,	2006,	we	have	cash	on	hand	of	$211.8	million	and	long-term	debt	including	the	current	portion	of	approximately $3.0	billion.	We	expect	cash	flows	from	operations	over	the	next	twelve	months	will	be	sufficient	to	fund	our	operating	cash	requirements,	and	pay principal	and	interest	on	our	outstanding	debt	absent	any	unusual	circumstances	such	as	acquisitions	or	adverse	changes	in	the	business environment.

We	currently	pay	quarterly	dividends	to	our	shareholders	of	$0.05	per	share	and	expect	to	continue	to	do	so	in	the	future,	although	the payment	of	any	future	dividends	is	at	the	discretion	of	our	Board	of	Directors	and	subject	to	any	limits	in	our	debt	or	other	agreements.

We	intend	to	limit	dilution	caused	by	option	exercises,	including	anticipated	exercises,	by	repurchasing	shares	on	the	open	market	or	in privately	negotiated	transactions.	During	2006,	we	repurchased	4,261,200	shares	at	an	average	price	of	$37.60	under	this	program.	On	October	25, 2006,	our	Board	of	Directors	approved	a	plan	authorizing	repurchases	up	to	an	additional	$200	million	worth	of	our	common	stock.

# Capital	Expenditures

Our	principal	capital	expenditures	are	for	computer	software	and	additions	to	property	and	equipment.	In	2006,	we	spent	approximately $300.2	million	on	capital	expenditures	and	in	2007,	we	expect	to	spend	approximately	$300	million,	primarily	on	equipment,	purchased	software and	internally	developed	software.

# Financing

On	March	9,	2005,	FIS	completed	a	recapitalization.	FIS	entered	into	$3.2	billion	in	senior	credit	facilities	consisting	of	an	$800	million Term	Loan	A	facility,	a	$2.0	billion	Term	Loan	B	facility	(collectively,	the	"Term	Loan	Facilities")	and	a	$400	million	revolving	credit	facility (the	"Revolver")	with	a	consortium	of	lenders	led	by	Bank	of	America.	FIS	fully	drew	upon	the	entire	$2.8	billion	in	Term	Loan	Facilities	to consummate	the	recapitalization.	FIS	used	proceeds	from	the	loans	to	repay	the	outstanding	principal	and	interest	on	a	$2.7	billion	note	it previously	issued	as	a	dividend	to	FNF.	Revolving	credit	borrowings	and	Term	A	and	B	Loans	bore	interest	at	a	floating	rate	and	as	a	result	of scheduled	and	other	repayments,	the	aggregate	principal	balance	of	the	Term	Loan	Facilities	at	December	31,	2006	was	$2.5	billion.	These	credit facilities	were	paid	in	full	as	a	result	of	the	refinancing	transaction	completed	on	January	18,	2007	as	described	below.

FIS	used	proceeds	from	the	Term	Loans	to	repay	all	outstanding	principal	and	interest	on	a	$2.7	billion	principal	amount	promissory	note	that it	distributed	to	FNF	as	a	dividend	on	March	8,	2005.	On	March	9,	2005,	FIS	also	completed	its	minority	interest	sale,	in	which	it	issued	common shares	representing	a	25%	interest	in	FIS	to	an	investor	group	for	$500	million.	FIS	used	the	proceeds	of	that	issuance	and	the	remaining	Term Loan	proceeds	to	retire	its	former	revolving	credit	facility	and	pay	expenses	relating	to	the	recapitalization	and	the	minority	interest	sale.	These expenses	totaled	$79.2	million,	and	included	certain	fees	and	expenses	of	the	investor	group	totaling	approximately	$45.7	million.	The	remaining proceeds	from	the	Term	Loans	and	minority	interest	sale	were	retained	to	use	for	general	corporate	purposes.

On	January	18,	2007,	we	entered	into	a	credit	agreement	with	JPMorgan	Chase	Bank,	N.A.,	as	Administrative	Agent,	Swing	Line	Lender, and	L/C	Issuer,	Bank	of	America,	N.A.,	as	Swing	Line	Lender,	and	other	financial	institutions	party	thereto	(the	"Credit	Agreement").	The	Credit Agreement	replaces	the	Bank	of	America	Term	Loan	and	Revolver	as	well	as	the	$100	million	Wachovia	Settlement	Facility.	The	Credit Agreement,	which	is	unsecured,	provides	for	a	committed	$2.1	billion	five-year	term	facility	denominated	in	U.S.	Dollars	(the	"JPM	Term	Loan") and	a	committed	$900	million	revolving	credit	facility	(the	"JPM	Revolving	Loan")	with	a	sublimit	of	$250	million	for	letters	of	credit	and	a sublimit	of	$250	million	for	swing	line	loans,	maturing	on	the	fifth	anniversary	of	the	closing	date	(the	"Maturity	Date").	The	JPM	Revolving	Loan is	bifurcated	into	a	$735	million	multicurrency	revolving	credit	loan	(the	"Multicurrency	Tranche")	that	can	be	denominated	in	any	combination	of U.S.	Dollars,	Euro,	British	Pounds	Sterling	and	Australian	Dollars,	and	any	other	foreign	currency	in	which	the	relevant	lenders	agree	to	make advances	and	a	$165	million	U.S.	Dollar	revolving	credit	loan	that	can	be	denominated	only	in	U.S.	Dollars.	The	swingline	loans	and	letters	of credit	are	available	as	a	sublimit	under	the	Multicurrency	Tranche.	In	addition,	the	Credit	Agreement	provides	for	an	uncommitted	incremental loan	facility	in	the	uncommitted	maximum	principal	amount	of	$600	million,	which	will	be	made	available	only	upon	receipt	of	further commitments	from	lenders	under	the	Credit	Agreement	sufficient	to	fund	the	amount	requested	by	FIS.

The	JPM	Term	Loan	was	fully	drawn	on	the	closing	date	and	a	total	of	$557	million	was	borrowed	under	the	JPM	Revolving	Loan	on	the closing	date.	The	obligations	under	the	Credit	Agreement	have	been	jointly	and	severally,	unconditionally	guaranteed	by	substantially	all	of	the domestic	subsidiaries	of	the	Company.

FIS	may	borrow,	repay	and	re-borrow	amounts	under	the	JPM	Revolving	Loan	from	time	to	time	until	the	maturity	of	the	JPM	Revolving Loan.	FIS	must	make	quarterly	principal	payments	under	the	JPM	Term	Loan	in	scheduled	installments	of:	(a)	$13,125,000	per	quarter	from March	31,	2007	through	December	31,	2008;	(b)	$26,250,000	per	quarter	from	March	31,	2009	through	December	31,	2009;	and (c)	$52,500,000	per	quarter	from	March	31,	2010	through	September	30,	2011,	with	the	remaining	balance	of	approximately	$1,522,500,000 payable	on	the	Maturity	Date.

In	addition	to	the	scheduled	principal	payments,	the	JPM	Term	Loan	is	(with	certain	exceptions)	subject	to	mandatory	prepayment	upon issuances	of	debt,	casualty	and	condemnation	events,	and	sales	of	assets.	Voluntary	prepayments	of	the	Loans	are	generally	permitted	at	any	time without	fee	upon	proper	notice	and	subject	to	a	minimum	dollar	requirement.	Commitment	reductions	of	the	JPM	Revolving	Loan	are	also permitted	at	any	time	without	fee	upon	proper	notice.	The	JPM	Revolving	Loan	has	no	scheduled	principal	payments,	but	it	will	be	due	and payable	in	full	on	the	Maturity	Date.

The	outstanding	balance	of	the	Loans	bear	interest	at	a	floating	rate,	which	is	at	our	option,	either	(a)	the	eurocurrency	rate	plus	an applicable	margin	and	mandatory	cost	or	(b)	a	base	rate	plus	an	applicable	margin.	The	applicable	margin	is	subject	to	adjustment	based	on	a leverage	ratio	(total	indebtedness	to	EBITDA	of	the	Company	and	its	consolidated	subsidiaries,	as	further	defined	in	the	Credit	Agreement). Alternatively,	the	Company	has	the	ability	to	request	the	lenders	to	submit	competitive	bids	for	one	or	more	advances	under	the	JPM	Revolving Loan	("Bid	Rate	Advances").

The	Credit	Agreement	provides	procedures	for	lenders	to	submit	bids	for	Bid	Rate	Advances	and	for	the	Company	to	accept	or	reject	them. The	Credit	Agreement	contains	affirmative,	negative	and	financial	covenants	customary	for	financings	of	this	type,	including,	among	other	things, limits	on	the	creation	of	liens,	limits	on	the	incurrence	of	indebtedness,	restrictions	on	investments	and	dispositions,	limitations	on	dividends	and other	restricted	payments,	a	minimum	interest	coverage	ratio	and	a	maximum	leverage	ratio.	Upon	an	event	of	default,	the	Administrative	Agent can	accelerate	the	maturity	of	the	loan.	Events	of	default	include	conditions	customary	for	such	an	agreement,	including	failure	to	pay	principal	and interest	in	a	timely	manner	and	breach	of	certain	covenants.

The	foregoing	does	not	constitute	a	complete	summary	of	the	terms	of	the	Credit	Agreement	and	reference	is	made	to	the	complete	text	of the	agreement,	which	was	filed	as	Exhibit	10.1	to	Form	8-K	dated	January	19,	2007.

In	connection	with	the	new	Credit	Agreement,	the	Company	terminated	the	Bank	of	America	Term	Loan	and	Revolver	on	January	18,	2007 and	repaid	it	in	full	before	its	final	scheduled	expiration	date	of	March	9,	2013.	The	final	payment	was	approximately	$2.64	billion,	including principal,	interest	and	fees.	The	Company	incurred	no	early	termination	penalties	in	terminating	the	Bank	of	America	credit	agreement.

In	connection	with	the	Certegy	Merger,	the	Company	has	an	obligation	to	service	$200	million	(aggregate	principal	amount)	of	unsecured 4.75%	fixed-rate	notes	due	in	September	2008.	The	notes	were	recorded	in	purchase	accounting	at	a	discount	of	$5.7	million,	which	is	being amortized	on	a	straight-line	basis	over	the	term	of	the	notes.	The	notes	accrue	interest	at	a	rate	of	4.75%	per	year,	payable	semi-annually	in	arrears on	each	March	15	and	September	15.

The	Company	had	a	$100	million	unsecured	revolving	credit	facility	that	it	used	to	finance	its	customers'	shortfalls	in	the	daily	funding requirements	associated	with	the	Company's	credit	and	debit	card	settlement	operations	("Settlement	Facility").	Amounts	borrowed	were	typically repaid	within	one	to	two	business	days,	as	customers	funded	the	shortfalls.	This	facility	had	a	term	of	364	days	and	was	renewed	annually.	There were	no	amounts	outstanding	under	this	facility	at	December	31,	2006.	The	Settlement	Facility	was	terminated	on	January	18,	2007.

# Contractual	Obligations

FIS's	long-term	contractual	obligations	generally	include	its	long-term	debt	and	operating	lease	payments	on	certain	of	its	property	and equipment.	The	following	table	summarizes	FIS's	significant	contractual	obligations	and

commitments	as	of	December	31,	2006,	after	giving	effect	to	the	debt	refinancing	completed	on	January	18,	2007	(in	thousands):

|  | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Long-term\tdebt\t(note\t13) | $96,161 | $282,041 | $145,129 | $215,586 | $ 165,455 | $2,105,129 | $3,009,501 |
| Operating\tleases\t(note\t15) | 50,687 | 42,785 | 33,609 | 21,479 | 10,616 | 16,543 | 175,719 |
| Investment\tcommitment | 22,300 | 44,800 | — | — | — | — | 67,100 |
| Purchase\tcommitments | 60,000 | 25,000 | — | — | — | — | 85,000 |
| Data\tprocessing\tagreement\tobligations |  |  |  |  |  |  |  |
| (note\t15) | 37,538 | 45,733 | 49,171 | 50,951 | 50,721 | 284,993 | 519,107 |
| Total | $266,686 | $440,359 | $227,909 | $288,016 | $ 226,792 | $2,406,665 | $3,856,427 |

# Off-Balance	Sheet	Arrangements

FIS	does	not	have	any	material	off-balance	sheet	arrangements,	other	than	the	Wisconsin	operating	leases	disclosed	below	and	in	Note	15	to the	Consolidated	and	Combined	Financial	Statements.

The	Company	has	a	synthetic	lease	arrangement	(the	"Wisconsin	Lease")	which	is	not	included	in	the	Company's	consolidated	balance sheets	with	respect	to	its	facilities	in	Madison,	Wisconsin	(the	"Wisconsin	Leased	Property").	In	connection	with	the	Certegy	Merger,	the	term	of the	Wisconsin	Lease	was	amended	so	that	it	was	scheduled	to	expire	on	December	31,	2006.	The	term	of	the	Wisconsin	Lease	has	since	been further	amended	so	that	it	now	expires	on	June	30,	2007.	The	original	cost	to	the	lessor	of	the	Wisconsin	Leased	Property	when	Certegy	entered into	the	Wisconsin	Lease	was	approximately	$10.1	million.	Subject	to	the	satisfaction	of	certain	conditions,	the	Company	has	the	option	to	acquire the	Wisconsin	Leased	Property	at	its	original	cost,	or	to	direct	the	sale	of	the	Wisconsin	Leased	Property	to	a	third	party.

# Recent	Accounting	Pronouncements

In	September	2006,	the	FASB	issued	SFAS	No.	158,	"Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Post	Retirement Plans"	("SFAS	158").	SFAS	158	requires	entities	to	recognize	on	their	balance	sheets	the	funded	status	of	pension	and	other	postretirement	benefit plans.	Entities	are	required	to	recognize	actuarial	gains	and	losses,	prior	service	cost,	and	any	remaining	transition	amounts	from	the	initial application	of	SFAS	No.	87,	"Employers'	Accounting	for	Pensions,"	and	SFAS	No.	106,	"Employers'	Accounting	for	Postretirement	Benefits Other	Than	Pensions,"	when	recognizing	a	plan's	funded	status,	with	the	offset	to	accumulated	other	comprehensive	income.	SFAS	158	will	not change	the	amounts	recognized	in	the	income	statement	as	net	periodic	benefit	cost.	All	of	the	requirements	of	SFAS	158	are	effective	as	of December	31,	2006	for	calendar-year	public	companies,	except	for	a	requirement	for	fiscal-year-end	measurements	of	plan	assets	and	benefit obligations	with	which	the	Company	is	already	in	compliance.	Adoption	of	this	standard	resulted	in	the	Company	recording	a	$6.9	million	pre-tax adjustment	to	other	long-term	liabilities	and	other	comprehensive	income.

In	September	2006,	the	Securities	and	Exchange	Commission	(SEC)	issued	Staff	Accounting	Bulletin	No.	108	(Topic	1N),	"Considering	the Effects	of	Prior	Year	Misstatements	when	Quantifying	Misstatements	in	Current	Year	Financial	Statements"	(SAB	108).	This	SAB	addresses	how the	effects	of	prior-year	uncorrected	misstatements	should	be	considered	when	quantifying	misstatements	in	current-year	financial	statements. SAB	108	requires	registrants	to	quantify	misstatements	using	both	the	balance	sheet	and	income	statement	approaches	and	to	evaluate	whether either	approach	results	in	quantifying	an	error	that	is	material	in	light	of	relevant	quantitative	and	qualitative	factors.	When	the	effect	of	initial adoption	is	determined	to	be	material,	the	SAB	allows	registrants	to	record	that	effect	as	a	cumulative	effect	adjustment	to	beginning-of-year retained	earnings.	SAB	108	is	effective	for	annual	financial	statements	covering	the	first	fiscal	year	ending	after	November	15,	2006.	Adoption	of this	standard	had	no	effect	on	the	Company's	statements	of	financial	position	and	operations.

In	June	2006,	The	Financial	Accounting	Standards	Board	issued	FASB	Interpretation	Number	48	(FIN	48),	"Accounting	for	Uncertainty	in Income	Taxes".	FIN	48	is	effective	for	fiscal	years	beginning	after	December	15,	2006.	The	interpretation	clarifies	the	accounting	for	uncertainty in	income	taxes	recognized	in	the	financial	statements	in	accordance	with	FASB	Statement	Number	109,	Accounting	for	Income	Taxes.	The interpretation

outlines	recognition	thresholds	and	measurement	attributes	to	determine	the	amount,	if	any,	of	a	tax	benefit	to	be	recognized	in	an	enterprise's financial	statements.	The	Interpretation	also	provides	guidance	on	subsequent	recognition,	de-recognition,	measurement,	recognition	of	interest	and penalties,	classification	and	disclosure.	The	Company	has	reviewed	FIN	48	and	has	determined	that	its	implementation	will	not	have	a	material impact	on	the	Company's	financial	statements.

In	December	2004,	the	FASB	issued	FASB	Statement	No.	123R	("SFAS	No.	123R"),	"Share-Based	Payment,"	which	requires	that compensation	cost	relating	to	share-based	payments	be	recognized	in	the	financial	statements.	During	2003,	FIS	adopted	the	fair	value	recognition provision	of	Statement	of	Financial	Accounting	Standards	No.	123,	"Accounting	for	Stock-Based	Compensation"	("SFAS	No.	123"),	for	stock- based	employee	compensation,	effective	as	of	the	beginning	of	2003.	FIS	had	elected	to	use	the	prospective	method	of	transition,	as	permitted	by Statement	of	Financial	Accounting	Standards	No.	148,	"Accounting	for	Stock-Based	Compensation	—	Transition	and	Disclosure" ("SFAS	No.	148").	Under	this	method,	stock-based	employee	compensation	cost	was	recognized	from	the	beginning	of	2003	as	if	the	fair	value method	of	accounting	had	been	used	to	account	for	all	employee	awards	granted,	modified,	or	settled	in	years	beginning	after	December	31,	2002. SFAS	No.	123R	does	not	allow	for	the	prospective	method,	but	requires	the	recording	of	expense	relating	to	the	vesting	of	all	unvested	options beginning	in	the	first	quarter	of	2006.	Since	SFAS	No.	123	was	adopted	in	2003,	the	impact	of	recording	additional	expense	in	2006	under SFAS	No.	123R	relating	to	options	granted	prior	to	January	1,	2003	is	not	significant	as	all	options	accounted	for	under	other	methods	were	fully vested	as	of	December	31,	2005.

# Item	7A.		Quantitative	and	Qualitative	Disclosure	About	Market	Risks

FIS	is	highly	leveraged.	As	of	December	31,	2006,	it	was	paying	interest	on	the	Term	Loan	Facilities	and	Revolver	at	a	rate	of	LIBOR	plus 1.25	to	1.75%,	or	(6.60-7.10%).	As	of	January	18,	2007,	FIS	was	paying	interest	on	the	new	Credit	Agreement	at	LIBOR	plus	1.00%.	A	one percent	increase	in	the	LIBOR	rate	would	increase	its	annual	debt	service	on	the	Credit	Agreement	by	$22.6	million	(based	on	amounts outstanding	at	December	31,	2006).	The	credit	rating	assigned	to	FIS	by	Standard	&	Poor's	is	currently	BB+	with	a	positive	outlook.

On	April	11,	2005,	FIS	entered	into	interest	rate	swap	agreements	which	have	effectively	fixed	the	interest	rate	at	approximately	5.4% through	April	2008	on	$350	million	of	the	term	loan	facilities	and	at	approximately	5.2%	through	April	2007	on	an	additional	$350	million	of	the term	loan	facilities.	The	estimated	fair	value	of	the	cash	flow	hedges	results	in	an	asset	of	FIS	of	$4.9	million	as	of	December	31,	2006,	which	is included	in	the	accompanying	consolidated	balance	sheets	in	other	noncurrent	assets	and	as	a	component	of	accumulated	other	comprehensive earnings,	net	of	deferred	taxes.

# Item	8. Financial	Statements	and	Supplementary	Data

# AND	SUBSIDIARIES	AND	AFFILIATES

# INDEX	TO	FINANCIAL	INFORMATION

|  | Page<br>Number |
| :--- | :--- |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm\ton\tInternal\tControl\tover\tFinancial\tReporting | 44 |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm\ton\tFinancial\tStatements | 45 |
| Consolidated\tBalance\tSheets\tas\tof\tDecember\t31,\t2006\tand\t2005 | 46 |
| Consolidated\tand\tCombined\tStatements\tof\tEarnings\tfor\tthe\tyears\tended\tDecember\t31,\t2006,\t2005\tand\t2004 | 47 |
| Consolidated\tand\tCombined\tStatements\tof\tComprehensive\tEarnings\tfor\tthe\tyears\tended\tDecember\t31,\t2006,\t2005\tand\t2004 | 48 |
| Consolidated\tand\tCombined\tStatements\tof\tStockholders'\tEquity\tfor\tthe\tyears\tended\tDecember\t31,\t2006,\t2005\tand\t2004 | 49 |
| Consolidated\tand\tCombined\tStatements\tof\tCash\tFlows\tfor\tthe\tyears\tended\tDecember\t31,\t2006,\t2005\tand\t2004 | 50 |
| Notes\tto\tConsolidated\tand\tCombined\tFinancial\tStatements | 51 |

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# ON	INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

# The	Board	of	Directors	and	Stockholders

We	have	audited	management's	assessment,	included	in	the	accompanying	Management's	Report	on	Internal	Control	Over	Financial Reporting,	that	Fidelity	National	Information	Services,	Inc.	and	subsidiaries	and	affiliates	(the	Company)	maintained	effective	internal	control over	financial	reporting	as	of	December	31,	2006,	based	on	criteria	established	in	Internal	Control	—	Integrated	Framework	issued	by	the Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO).	Fidelity	National	Information	Services,	Inc.'s	management	is responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control	over financial	reporting.	Our	responsibility	is	to	express	an	opinion	on	management's	assessment	and	an	opinion	on	the	effectiveness	of	the	Company's internal	control	over	financial	reporting	based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those standards	require	that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial reporting	was	maintained	in	all	material	respects.	Our	audit	included	obtaining	an	understanding	of	internal	control	over	financial	reporting, evaluating	management's	assessment,	testing	and	evaluating	the	design	and	operating	effectiveness	of	internal	control,	and	performing	such	other procedures	as	we	considered	necessary	in	the	circumstances.	We	believe	that	our	audit	provides	a	reasonable	basis	for	our	opinion.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A company's	internal	control	over	financial	reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting	principles, and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of	management	and	directors	of	the company;	and	(3)	provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any evaluation	of	effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that the	degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

In	our	opinion,	management's	assessment	that	Fidelity	National	Information	Services,	Inc.	maintained	effective	internal	control	over financial	reporting	as	of	December	31,	2006,	is	fairly	stated,	in	all	material	respects,	based	on	criteria	established	in	Internal	Control-Integrated Framework	issued	by	COSO.	Also,	in	our	opinion,	Fidelity	National	Information	Services,	Inc.	maintained,	in	all	material	respects,	effective internal	control	over	financial	reporting	as	of	December	31,	2006,	based	on	criteria	established	in	Internal	Control	—	Integrated	Framework	issued by	COSO.

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the consolidated	balance	sheets	of	Fidelity	National	Information	Services,	Inc.	and	subsidiaries	and	affiliates	as	of	December	31,	2006	and	2005,	and the	related	consolidated	and	combined	statements	of	earnings,	comprehensive	earnings,	stockholders'	equity,	and	cash	flows	for	each	of	the	years in	the	three-year	period	ended	December	31,	2006,	and	our	report	dated	March	1,	2007	expressed	an	unqualified	opinion	on	those	consolidated	and combined	financial	statements.

March	1,	2007 Jacksonville,	Florida Certified	Public	Accountants

# ON	FINANCIAL	STATEMENTS

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Fidelity	National	Information	Services,	Inc.	and	subsidiaries	and	affiliates (the	Company)	as	of	December	31,	2006	and	2005,	and	the	related	consolidated	and	combined	statements	of	earnings,	comprehensive	earnings, stockholders'	equity,	and	cash	flows	for	each	of	the	years	in	the	three-year	period	ended	December	31,	2006.	These	consolidated	and	combined financial	statements	are	the	responsibility	of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on	these	consolidated	and combined	financial	statements	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those standards	require	that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material misstatement.	An	audit	includes	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements.	An	audit also	includes	assessing	the	accounting	principles	used	and	significant	estimates	made	by	management,	as	well	as	evaluating	the	overall	financial statement	presentation.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinion.

In	our	opinion,	the	consolidated	and	combined	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	financial position	of	Fidelity	National	Information	Services,	Inc.	and	subsidiaries	and	affiliates	as	of	December	31,	2006	and	2005,	and	the	results	of	their operations	and	their	cash	flows	for	each	of	the	years	in	the	three-year	period	ended	December	31,	2006,	in	conformity	with	U.S.	generally	accepted accounting	principles.

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Accounting	Oversight	Board	(United	States),	the	effectiveness	of Fidelity	National	Information	Services,	Inc.	and	subsidiaries	and	affiliates'	internal	control	over	financial	reporting	as	of	December	31,	2006, based	on	criteria	established	in	Internal	Control	—	Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway Commission	(COSO),	and	our	report	dated	March	1,	2007	expressed	an	unqualified	opinion	on	management's	assessment	of,	and	the	effective operation	of,	internal	control	over	financial	reporting.

As	discussed	in	note	5	to	the	consolidated	and	combined	financial	statements,	the	Company	completed	a	merger	with	Certegy	Inc.	on February	1,	2006.

# Consolidated	Balance	Sheets

| Cash	and	cash	equivalents | $211,753 | $133,152 |
| :--- | :--- | :--- |
| Settlement\tdeposits | 25,488 | — |
| 2006\tand\t2005 | 623,065 | 427,480 |
| Settlement\treceivables | 18,442 | — |
| Other\treceivables | 159,584 | 57,365 |
| Receivable\tfrom\trelated\tparty | 5,208 | 9,146 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 148,601 | 58,228 |
| Deferred\tincome\ttaxes | 108,398 | 105,845 |
| Total\tcurrent\tassets | 1,300,539 | 791,216 |
| 2006\tand\t2005 | 345,799 | 220,425 |
| Goodwill | 3,737,540 | 1,787,713 |
| and\t2005 | 1,009,978 | 508,780 |
| and\t2005 | 640,815 | 451,993 |
| Deferred\tcontract\tcosts | 233,996 | 183,263 |
| Investment\tin\tunconsolidated\tentities | 195,739 | 136,024 |
| Long\tterm\tlease\treceivables | 52,702 | — |
| Other\tnoncurrent\tassets | 113,452 | 109,607 |
| Total\tassets | $7,630,560 | $4,189,021 |
| LIABILITIES\tAND\tSTOCKHOLDERS'\tEQUITY |  |  |
| Current\tliabilities: |  |  |
| Accounts\tpayable\tand\taccrued\tliabilities | $520,016 | $309,591 |
| Settlement\tpayables | 43,930 | — |
| Current\tportion\tof\tlong-term\tdebt | 61,661 | 33,673 |
| Deferred\trevenues | 254,908 | 254,534 |
| Total\tcurrent\tliabilities | 880,515 | 597,798 |
| Deferred\trevenues | 104,479 | 111,536 |
| Deferred\tincome\ttaxes | 396,263 | 153,193 |
| Long-term\tdebt,\texcluding\tcurrent\tportion | 2,947,840 | 2,530,455 |
| Other\tlong-term\tliabilities | 145,749 | 88,409 |
| Total\tliabilities | 4,474,846 | 3,481,391 |
| Minority\tinterest | 12,970 | 13,060 |
| Stockholders'\tequity: |  |  |
|  | — | — |
| outstanding\tat\tDecember\t31,\t2006\tand\t2005,\trespectively | 1,974 | 1,279 |
| Additional\tpaid\tin\tcapital | 2,879,271 | 545,639 |
| Retained\tearnings | 376,961 | 156,127 |
| Accumulated\tother\tcomprehensive\tearnings\t(loss) | 45,009 | (8,475) |
|  | (160,471) | — |
| Total\tstockholders'\tequity | 3,142,744 | 694,570 |
| Total\tliabilities\tand\tstockholders'\tequity | $7,630,560 | $4,189,021 |

The	accompanying	notes	are	an	integral	part	of	these	consolidated	and	combined	financial	statements.

# Consolidated	and	Combined	Statements	of	Earnings

| respectively | $ 4,132,602 | $ 2,766,085 | $2,331,527 |
| :--- | :--- | :--- | :--- |
| parties\tfor\tthe\tyears\tended\tDecember\t31,\t2006,\t2005\tand\t2004,\trespectively | 2,929,567 | 1,793,285 | 1,525,174 |
| Gross\tprofit | 1,203,035 | 972,800 | 806,353 |
| and\t2004,\trespectively | 505,528 | 422,623 | 432,310 |
| Research\tand\tdevelopment\tcosts | 105,580 | 113,498 | 74,214 |
| Operating\tincome | 591,927 | 436,679 | 299,829 |
| Other\tincome\t(expense): |  |  |  |
| Interest\tincome | 4,746 | 6,392 | 1,232 |
| Interest\texpense | (192,819) | (126,778) | (4,496) |
| Other\tincome\t(expense) | (224) | (4,237) | 18,175 |
| Total\tother\tincome\t(expense) | (188,297) | (124,623) | 14,911 |
| Earnings\tbefore\tincome\ttaxes,\tequity\tin\tearnings\t(loss)\tof\tunconsolidated\tentities\tand |  |  |  |
| minority\tinterest | 403,630 | 312,056 | 314,740 |
| Provision\tfor\tincome\ttaxes | 150,150 | 116,085 | 118,343 |
| Earnings\tbefore\tequity\tin\tearnings\t(loss)\tof\tunconsolidated\tentities\tand\tminority\tinterest | 253,480 | 195,971 | 196,397 |
| Equity\tin\tearnings\t(loss)\tof\tunconsolidated\tentities | 5,792 | 5,029 | (3,308) |
| Minority\tinterest | (185) | (4,450) | (3,673) |
| Net\tearnings | $259,087 | $196,550 | $189,416 |
| Net\tearnings\tper\tshare\t—\tbasic | $1.39 | $1.54 | $1.48 |
| Weighted\taverage\tshares\toutstanding\t—\tbasic | 185,926 | 127,920 | 127,920 |
| Net\tearnings\tper\tshare\t—\tdiluted | $1.37 | $1.53 | $1.48 |
| Weighted\taverage\tshares\toutstanding\t—\tdiluted | 189,196 | 128,354 | 127,920 |

# Consolidated	and	Combined	Statements	of	Comprehensive	Earnings

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands) |  |
| Net\tearnings | $259,087 | $196,550 | $ 189,416 |
| Other\tcomprehensive\t(loss)\tearnings: |  |  |  |
| Unrealized\tgain\t(loss)\ton\tCovansys\twarrants(1) | 12,551 | (3,704) | — |
| Unrealized\tgain\t(loss)\ton\tinterest\trate\tswaps(2) | (227) | 3,192 | — |
| Unrealized\tgain\t(loss)\ton\tother\tinvestments | 75 | (4) | 265 |
| Unrealized\tgain\t(loss)\ton\tforeign\tcurrency\ttranslation | 29,503 | (19,488) | 14,534 |
| Pension\tliability\tadjustment(3) | 11,582 | (4,804) | — |
| Other\tcomprehensive\t(loss)\tearnings | 53,484 | (24,808) | 14,799 |
| Comprehensive\tearnings | $312,571 | $171,742 | $ 204,215 |

# Consolidated	and	Combined	Statements	of	Stockholders'	Equity

|  | Common<br>Shares | Common<br>Stock | Net	Investment<br>by	FNF | Additional<br>Paid	In<br>Capital | Retained<br>Earnings | Comprehensive<br>Earnings<br>(Loss) | Treasury<br>Shares | Treasury<br>Stock | Total<br>Stockholders'<br>Equity |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  | (In\tthousands) |  |  |  |  |
| Balances,\tDecember\t31,\t2003 | —\t\t $—\t\t $1,889,263 | —\t\t $—\t\t $1,889,263 | —\t\t $—\t\t $1,889,263 | \t $—\t\t $— | \t $—\t\t $— | \t $1,534 | — | $— | $1,890,797 |
| Unrealized\tgain\ton\tother\tinvestments,\tnet | — | — | — | — | — | 265 | — | — | 265 |
| Unrealized\tgain\ton\tforeign\tcurrency |  |  |  |  |  |  |  |  |  |
| translation | — | — | — | — | — | 14,534 | — | — | 14,534 |
| Contribution\tof\tcapital,\tnet | — | — | 659,832 | — | — | — | — | — | 659,832 |
| Net\tearnings | — | — | 189,416 | — | — | — | — | — | 189,416 |
| Balances,\tDecember\t31,\t2004 | — | — | 2,738,511 | — | — | 16,333 | — | — | 2,754,844 |
| Net\tearnings\tfrom\tJanuary\t1,\t2005\tthrough |  |  |  |  |  |  |  |  |  |
| March\t8,\t2005 | — | — | 40,423 | — | — | — | — | — | 40,423 |
| Dividends\tpaid | — | — | (2,700,000) | — | — | — | — | — | (2,700,000) |
| Net\tdistribution\tto\tparent | — | — | (6,719) | — | — | — | — | — | (6,719) |
| Capitalization\tof\tholding\tcompany | 95,940 | 959 | (72,215) | 71,256 | — | — | — | — | — |
| Sale\tof\tminority\tinterest,\tnet\tof\toffering\tcosts | 31,980 | 320 | — | 454,016 | — | — | — | — | 454,336 |
| Stock-based\tcompensation | — | — | — | 20,367 | — | — | — | — | 20,367 |
| Net\tearnings\tfrom\tMarch\t9,\t2005\tto |  |  |  |  |  |  |  |  |  |
| December\t31,\t2005 | — | — | — | — | 156,127 | — | — | — | 156,127 |
| Unrealized\tloss\ton\tinvestments\tand |  |  |  |  |  |  |  |  |  |
| derivatives,\tnet | — | — | — | — | — | (516) | — | — | (516) |
| Unrealized\tloss\ton\tforeign\tcurrency |  |  |  |  |  |  |  |  |  |
| translation | — | — | — | — | — | (19,488) | — | — | (19,488) |
| Minimum\tpension\tliability\tadjustment | — | — | — | — | — | (4,804) | — | — | (4,804) |
| Balances,\tDecember\t31,\t2005 | \t 127,920 | \t $1,279 | \t $— | \t $545,639 | \t $156,127 | \t $(8,475) | — | $— | $694,570 |
| Net\tEarnings | — | — | — | — | 259,087 | — | — | — | 259,087 |
| Pension\tliability\tadjustment |  | — | — | — | — | 11,582 | — | — | 11,582 |
| Certegy\tacquisition | 69,507 | 695 | — | 2,173,311 | — | — | (5,964) | (60) | 2,173,946 |
| Exercise\tof\tstock\toptions | — | — | — | 70,364 | — | — | 3,511 | 39 | 70,403 |
| Tax\tbenefit\tassociated\twith\texercise\tof\tstock |  |  |  |  |  |  |  |  |  |
| options | — | — | — | 26,859 | — | — | — | — | 26,859 |
| Stock-based\tcompensation | — | — | — | 50,076 | — | — | — | — | 50,076 |
| Cash\tdividends\tdeclared | — | — | — | — | (38,253) | — | — | — | (38,253) |
| National\tNY\tcontribution\tfrom\tFNF | — | — | — | 10,744 | — | — | — | — | 10,744 |
| FNF\tCapital\tmerger | — | — | — | 2,278 | — | — | 279 | 3 | 2,281 |
| Purchases\tof\ttreasury\tstock | — | — | — | — | — | — | (4,262) | (160,453) | (160,453) |
| Unrealized\tloss\ton\tinvestments\tand |  |  |  |  |  |  |  |  |  |
| derivatives,\tnet | — | — | — | — | — | 12,399 | — | — | 12,399 |
| Unrealized\tloss\ton\tforeign\tcurrency |  |  |  |  |  |  |  |  |  |
| translation | — | — | — | — | — | 29,503 | — | — | 29,503 |
| Balances,\tDecember\t31,\t2006 | \t 197,427 | \t $1,974 | \t $— | \t $2,879,271 | \t $376,961 | \t $45,009 | (6,436) | $(160,471) | $3,142,744 |

# Consolidated	and	Combined	Statements	of	Cash	Flows

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands) |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |
| Net\tearnings | $259,087 | $196,550 | $189,416 |
| Adjustment\tto\treconcile\tnet\tearnings\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 433,550 | 299,637 | 238,400 |
| Loss\t(gain)\ton\tCovansys\twarrants | — | 4,400 | (15,800) |
| Stock-based\tcompensation | 50,076 | 20,367 | 15,436 |
| Deferred\tincome\ttaxes | 18,842 | 41,557 | (11,003) |
| Equity\tin\t(earnings)\tloss\tof\tunconsolidated\tentities | (5,792) | (5,029) | 3,308 |
| Minority\tinterest | 185 | 4,450 | 3,673 |
| Changes\tin\tassets\tand\tliabilities,\tnet\tof\teffects\tfrom\tacquisitions: |  |  |  |
| Net\tdecrease\t(increase)\tin\ttrade\treceivables | 32,045 | (39,011) | (27,795) |
| Net\t(increase)\tdecrease\tin\tprepaid\texpenses\tand\tother\tassets | (73,669) | (91,831) | 120,553 |
| Net\tincrease\tin\tdeferred\tcontract\tcosts | (88,902) | (100,293) | (48,311) |
| Net\tincrease\t(decrease)\tin\tdeferred\trevenue | (13,500) | 42,840 | 159,058 |
| Net\t(decrease)\tincrease\tin\taccounts\tpayable,\taccrued\tliabilities,\tand\tother\tliabilities | (117,209) | 52,339 | (123,189) |
| Net\tcash\tprovided\tby\toperating\tactivities | 494,713 | 425,976 | 503,746 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |
| Additions\tto\tproperty\tand\tequipment | (122,363) | (79,567) | (72,947) |
| Additions\tto\tcapitalized\tsoftware | (177,834) | (159,098) | (104,555) |
| Acquisitions,\tnet\tof\tcash\tacquired | 110,953 | (48,389) | (423,170) |
| Net\tcash\tused\tin\tinvesting\tactivities | (189,244) | (287,054) | (600,672) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |
| Borrowings | 245,130 | 2,800,000 | 410,000 |
| Debt\tservice\tpayments | (368,576) | (711,037) | (19,839) |
| Capitalized\tdebt\tissuance\tcosts | (5,059) | (33,540) | — |
| Sale\tof\tstock,\tnet\tof\ttransactions\tcosts | — | 454,336 | — |
| Income\ttax\tbenefits\tfrom\tsale\tof\tstock\toptions | 26,859 | — | — |
| Stock\toptions\texercised | 70,403 | — | — |
| Treasury\tstock\tpurchases | (160,453) | — | — |
| Dividends\tpaid | (38,253) | (2,700,000) | — |
| Net\tcontribution\tby\t(distribution\tto)\tFNF | 1,396 | (7,013) | (195,007) |
| Net\tcash\t(used\tin)\tprovided\tby\tfinancing\tactivities | (228,553) | (197,254) | 195,154 |
| Effect\tof\tforeign\tcurrency\texchange\trates\ton\tcash | 1,685 | 596 | 611 |
| Net\t(decrease)\tincrease\tin\tcash\tand\tcash\tequivalents | 78,601 | (57,736) | 98,839 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 133,152 | 190,888 | 92,049 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $211,753 | $133,152 | $190,888 |
| Noncash\tcontributions\tby\tFNF | $11,629 | $294 | $854,839 |
| Cash\tpaid\tfor\tinterest | $185,879 | $112,935 | $3,615 |
| Cash\tpaid\tfor\ttaxes | $79,968 | $83,829 | $13,782 |

# FIDELITY	NATIONAL	INFORMATION	SERVICES,	INC.	AND	SUBSIDIARIES	AND	AFFILIATES

# CONSOLIDATED	AND	COMBINED	FINANCIAL	STATEMENTS

# NOTES	TO	CONSOLIDATED	AND	COMBINED	FINANCIAL	STATEMENTS

# (1)		Basis	of	Presentation

Fidelity	National	Information	Services,	Inc.	("FIS"	or	the	"Company")	is	a	leading	provider	of	technology	solutions,	processing	services,	and information-based	services	to	the	financial	services	industry.	The	Company's	formation	began	in	early	2004	and	was	substantially	completed	on March	8,	2005,	when	all	the	entities,	assets	and	liabilities	that	are	included	in	these	Consolidated	and	Combined	Financial	Statements	as	of March	8,	2005	were	organized	under	one	legal	entity	(as	discussed	below).	The	formation	was	accomplished	through	the	contribution	of	entities and	operating	assets	and	liabilities	to	a	newly	formed	subsidiary	of	Fidelity	National	Financial,	Inc.	("FNF").	The	Consolidated	and	Combined Financial	Statements	included	herein	reflect	the	historical	financial	position,	results	of	operations	and	cash	flows	of	the	businesses	included	in	the formation.	On	February	1,	2006,	the	Company	completed	a	merger	with	Certegy	Inc.	("Certegy")	(the	"Certegy	Merger")	(note	5)	which	was accounted	for	as	a	reverse	acquisition	and	purchase	accounting	was	applied	to	the	acquired	assets	and	assumed	liabilities	of	Certegy.	In	form, Certegy	was	the	legal	acquirer	in	the	Certegy	Merger	and	the	continuing	registrant	for	SEC	reporting	purposes.	However,	due	to	the	majority ownership	in	the	combined	entity	held	by	FIS	shareholders,	FIS	was	designated	the	acquirer	for	accounting	purposes	and,	effective	on	the	Certegy Merger	date,	the	historical	financial	statements	of	FIS	became	the	historical	financial	statements	of	the	continuing	registrant	for	all	periods	prior	to the	Certegy	Merger.	The	results	of	operations	of	Certegy	are	only	included	in	these	historical	financial	statements	for	periods	subsequent	to	the Certegy	Merger.	Immediately	after	the	Certegy	Merger,	the	name	of	the	SEC	registrant	was	changed	to	Fidelity	National	Information	Services,	Inc.

As	a	result	of	the	Certegy	Merger,	each	outstanding	share	of	FIS	common	stock	was	exchanged	for	0.6396	shares	of	common	stock	of Certegy,	which	has	a	par	value	of	$0.01	per	share.	All	share	and	per	share	amounts	disclosed	in	these	financial	statements	and	footnotes	for periods	prior	to	February	1,	2006	are	presented	as	converted	by	the	exchange	ratio	used	in	the	Certegy	Merger.

Shortly	after	consummating	the	Certegy	Merger,	the	Company	implemented	a	new	organizational	structure,	which	resulted	in	the	formation of	new	operating	segments	beginning	with	the	reporting	of	results	for	the	first	quarter	of	2006	(note	18).	Effective	as	of	February	1,	2006,	the Company's	reportable	segments	are	Transaction	Processing	Services,	or	TPS,	and	Lender	Processing	Services,	or	LPS.	This	structure	reflects	how the	businesses	are	managed	consistent	with	the	new	operating	structure	adopted	following	the	Certegy	Merger.	The	primary	components	of	the TPS	segment	are	Certegy's	former	reportable	segments	of	Card	and	Check	Services	and	the	financial	institution	processing	businesses	of	FIS's former	Financial	Institution	Software	and	Services	segment	(Enterprise	Solutions,	Integrated	Financial	Solutions,	and	International	operations). The	primary	components	of	the	LPS	segment	are	Mortgage	Processing	and	Information	Services,	which	includes	the	mortgage	lender	processing component	of	FIS's	former	Financial	Institution	Software	and	Services	segment,	and	FIS's	former	Lender	Services,	Default	Management,	and Information	Services	segments.

# (2) Combination	with	FNF

On	June	25,	2006,	the	Company	entered	into	an	agreement	and	plan	of	merger	(the	"FNF	Merger	Agreement")	with	FNF	(amended September	18,	2006)	(the	FNF	Merger).	The	FNF	Merger	was	one	step	in	a	plan	that	eliminated	FNF's	holding	company	structure	and	majority ownership	of	FIS.	In	connection	with	this	plan,	FNF	also	entered	into	a	securities	exchange	and	distribution	agreement	(the	"SEDA")	with	its subsidiary	Fidelity	National	Title	Group,	Inc.	("FNT").	Under	the	SEDA,	FNF	agreed	that,	prior	to	the	merger,	FNF	would	transfer	substantially all	its	assets	and	liabilities	to	FNT,	in	exchange	for	shares	of	FNT	common	stock.	FNF	then	would	spin-off	all	shares	of	FNT	stock	it	held	to	the stockholders	of	FNF	in	a	tax-free	distribution.	Pursuant	to	the	FNF	Merger	Agreement,	on	November	9,	2006	FNF	merged	with	and	into	FIS,	with FIS	continuing	as	the	surviving	corporation.	In	consideration	for	the	FNF	Merger,	FNF	stockholders	received	an	aggregate	of	96,521,877	shares	of FIS	stock	for	their	FNF	shares.	In	addition,	in	connection	with	the	FNF	Merger	FIS	issued	options	to	purchase	FIS	common	stock	and	shares	of FIS	restricted	stock	in	exchange	for	FNF	options	and	restricted	stock	outstanding	at	the	time	of	the

# NOTES	TO	CONSOLIDATED	AND	COMBINED	FINANCIAL	STATEMENTS	—	(Continued)

FNF	Merger.	The	FNF	Merger	followed	the	completion	on	October	24,	2006,	of	FNT's	acquisition	under	the	SEDA	of	substantially	all	of	the assets	and	liabilities	of	FNF	(other	than	FNF's	interests	in	FIS	and	in	FNF	Capital	Leasing,	Inc.,	a	small	subsidiary	which	merged	into	FIS	in	a separate	transaction)	in	exchange	for	45,265,956	shares	of	FNT's	Class	A	common	stock	and	the	subsequent	spin-off	of	FNT	shares	(the	FNT Distribution").	Pursuant	to	the	SEDA	and	after	the	completion	of	all	of	the	transactions,	FNT	was	renamed	Fidelity	National	Financial,	Inc.	("New FNF")	and	now	trades	under	the	symbol	FNF.	Former	FNF	Chairman	and	CEO	William	P.	Foley,	II,	assumed	a	similar	position	in	New	FNF	and now	serves	as	Executive	Chairman	of	FIS,	and	other	key	members	of	FNF	senior	management	continued	their	involvement	in	both	New	FNF	and FIS	in	executive	capacities.

U.S.	generally	accepted	accounting	principles	require	that	one	of	the	two	parties	to	the	FNF	Merger	be	designated	as	the	acquirer	for accounting	purposes.	However,	Financial	Accounting	Standards	Board	Technical	Bulletin	85-5,	"Issues	Relating	to	Accounting	for	Business Combinations"	provides	that	if	a	transaction	lacks	substance,	it	is	not	a	purchase	event	and	should	be	accounted	for	based	on	existing	carrying amounts.	In	the	FNF	Merger,	the	minority	interest	of	FIS	has	not	changed	and	the	only	assets	and	liabilities	of	the	combined	entity	after	the exchange	are	those	of	FIS	prior	to	the	exchange.	Because	a	change	in	ownership	of	the	minority	interest	did	not	take	place,	the	exchange	has	been accounted	for	based	on	the	carrying	amounts	of	FIS's	assets	and	liabilities.

# (3) Summary	of	Significant	Accounting	Policies

The	following	describes	the	significant	accounting	policies	of	the	Company	which	have	been	followed	in	preparing	the	accompanying Consolidated	and	Combined	Financial	Statements.

# 		(a) Principles	of	Consolidation	and	Combination	and	Basis	of	Presentation

Prior	to	March	9,	2005,	the	historical	financial	statements	of	the	Company	were	presented	on	a	combined	basis.	Beginning	March	9,	2005, after	all	the	assets	and	liabilities	of	the	Company	were	formally	contributed	to	the	holding	company,	the	historical	financial	statements	of	the Company	have	been	presented	on	a	consolidated	basis	for	financial	reporting	purposes.	The	accompanying	Consolidated	and	Combined	Financial Statements	include	those	assets,	liabilities,	revenues,	and	expenses	directly	attributable	to	FIS's	operations	and,	prior	to	March	9,	2005,	allocations of	certain	FNF	corporate	assets,	liabilities,	and	expenses	to	FIS.

All	significant	intercompany	profits,	transactions	and	balances	have	been	eliminated	in	consolidation	or	combination.	The	financial information	included	herein	does	not	necessarily	reflect	what	the	financial	position	and	results	of	operations	of	the	Company	would	have	been	had it	operated	as	a	stand-alone	entity	during	the	periods	covered.

The	Company's	investments	in	less	than	50%	owned	partnerships	and	affiliates	are	accounted	for	using	the	equity	method	of	accounting.

All	dollar	amounts	presented	in	these	notes	and	in	the	accompanying	Consolidated	and	Combined	Financial	Statements	(except	per	share amounts)	are	in	thousands	unless	indicated	otherwise.

# 		(b) Transactions	with	Related	Parties

FIS	has	historically	conducted	business	with	FNF	and	its	subsidiaries.	In	March	2005,	in	connection	with	the	recapitalization	and	sale	of equity	interest	(note	4),	FIS	entered	into	various	agreements	with	FNF	under	which	it	has	continued	to	provide	title	agency	services,	title	plant management,	and	IT	services.	Further,	the	Company	also	entered	into	service	agreements	with	FNF	under	which	FNF	continued	to	provide corporate	services.	In	September	2005,	when	FNT	was	formed	and	the	title	insurance	business	was	consolidated	under	FNT,	many	of	these agreements	were	amended	and	restated	to	take	into	account	the	services	that	would	be	performed	for	and	by	FNT	rather	than	FNF.	On	February	1, 2006,	in	connection	with	the	closing	of	the	Certegy	Merger,	many	of	these	agreements	were	further	amended	and	restated	to	reflect	changes	in	the parties'	relationships.	Certain	of	these

agreements	were	further	amended	or	terminated	in	connection	with	the	FNF	Merger	and	related	transactions.	A	summary	of	these	agreements	as	in effect	through	December	31,	2006	is	as	follows:

•	Agreement	to	provide	data	processing	services.		This	agreement	governs	the	revenues	to	be	earned	by	the	Company	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.

•	Agreements	to	provide	title	plant	information,	maintenance	and	management.		These	agreements	govern	the	fee	structure	under	which	the Company	is	paid	for	maintaining,	managing	and	updating	title	plants	owned	by	FNF's	title	underwriters	in	certain	parts	of	the	country. The	title	plant	maintenance	agreement	requires,	among	other	things,	that	the	Company	gather	updated	property	information,	organize	it, input	it	into	one	of	several	systems,	maintain	or	obtain	the	use	of	necessary	software	and	hardware	to	store,	access	and	deliver	the	data, sell	and	deliver	the	data	to	customers	and	provide	various	forms	of	customer	support.	The	Company	sells	property	information	to	title underwriters	which	are	subsidiaries	of	FNF	as	well	as	to	various	unaffiliated	customers.	The	Company	pays	FNF	a	royalty	fee	of	2.5%	to 3.75%	of	the	revenues	received.	In	the	case	of	the	maintenance	agreement,	the	Company	is	responsible	for	the	costs	of	keeping	the	title plant	assets	current	and	functioning	and	in	return	receives	the	revenue	generated	by	those	assets.	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	the	agreement	in	May	2005	(thus	effectively	resulting	in	a	minimum	ten	year	term and	a	rolling	one-year	term	thereafter).

•	Agreements	to	provide	software	development	and	services.		These	agreements	govern	the	fee	structure	under	which	the	Company	is	paid for	providing	software	development	and	services	to	FNF	which	consist	of	developing	software	for	use	in	the	title	operations	of	FNF.

•	Arrangements	to	provide	other	real	estate	related	services.		Under	these	arrangements	the	Company	is	paid	for	providing	other	real	estate related	services	to	FNF,	which	consist	primarily	of	data	services	required	by	the	title	insurance	operations.

•	Agreements	by	FNF	to	provide	corporate	services	to	the	Company.		These	agreements	provide	for	FNF	to	provide	general	management, accounting,	treasury,	tax,	finance,	legal,	payroll,	human	resources,	employee	benefits,	internal	audit,	mergers	and	acquisitions,	and	other corporate	and	administrative	support	to	the	Company.	The	pricing	of	these	services	is	at	cost	for	services	which	are	either	directly attributable	to	the	Company,	or	in	certain	circumstances,	an	allocation	of	the	Company's	share	of	the	total	costs	incurred	by	FNF	in providing	such	services	based	on	estimates	that	FNF	and	the	Company	believe	to	be	reasonable.

•	Licensing,	leasing	and	cost	sharing	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 the	Company	to	FNF	or	its	subsidiaries	in	connection	with	the	Company's	use	of	certain	intellectual	property	or	other	assets	of	or	services by	FNF.

•	Agreements	to	provide	title	agency	services.		These	agreements	allow	the	Company	to	provide	services	to	existing	customers	through	loan facilitation	transactions,	primarily	with	large	national	lenders.	The	arrangement	involves	the	Company	providing	title	agency	services which	result	in	the	issuance	of	title	policies	by	the	Company	on	behalf	of	title	insurance	underwriters	owned	by	FNF	and	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	the	agreement	ranging	from	July	2004 through	September	2006	for	various	agreements	(thus	effectively	resulting	in	a	minimum	ten	year	term	and	a	rolling	one-year	term thereafter).	The	LPS	segment	includes

revenues	from	unaffiliated	third	parties	of	$83.9	million,	$80.9	million	and	$92.2	million	for	the	years	ended	December	31,	2006,	2005 and	2004,	respectively,	representing	commissions	on	title	insurance	policies	written	by	the	Company	on	behalf	of	title	insurance subsidiaries	of	FNF.	These	commissions	are	equal	to	88%	of	the	total	title	premium	from	title	policies	that	the	Company	places	with subsidiaries	of	FNF.	The	Company	also	performs	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.

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Data\tprocessing\tservices\trevenue | $82.2 | $56.9 | $56.6 |
| Title\tplant\tinformation\trevenue | 41.4 | 31.1 | 28.9 |
| Software\trevenue | 25.9 | 18.9 | 5.8 |
| Other\treal-estate\trelated\tservices | 12.7 | 10.9 | 9.9 |
| Total\trevenues | $ 162.2 | $ 117.8 | $101.2 |

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Title\tplant\troyalty\texpense | $2.4 | $3.0 | $2.8 |
| Rent\texpense | — | 5.0 | 8.4 |
| Corporate\tservices | 9.5 | 29.0 | 75.1 |
| Licensing,\tleasing\tand\tcost\tsharing\tagreement | (12.9) | (15.7) | (15.6) |
| Total\texpenses | $(1.0) | $21.3 | $70.7 |

The	Company	believes	the	amounts	earned	from	or	charged	by	FNF	to	the	Company	under	each	of	the	foregoing	service	arrangements	are fair	and	reasonable.	Although	the	88%	commission	rate	on	title	insurance	policies	was	set	without	negotiation,	the	Company	believes	it	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.	In	connection	with	title	plant	management,	the	Company	charges	FNF	title	insurers for	title	information	at	approximately	the	same	rates	the	Company	and	other	similar	vendors	charge	unaffiliated	title	insurers.	The	Company's	IT infrastructure	support	and	data	center	management	services	to	FNF	are	priced	within	the	range	of	prices	the	Company	offers	to	third	parties.

The	Company	also	provides	data	processing	services	to	Sedgwick	CMS,	a	Company	in	which	FNF	has	held	an	approximately	40%	equity interest	since	February	1,	2006.	The	Company	recorded	$17.3	million	in	revenue	relating	to	this	arrangement	with	Sedgwick	in	2006.

During	the	second	quarter	of	2006,	FNF	contributed	the	stock	of	National	Title	Insurance	of	New	York,	Inc.	("National	New	York"),	a	title insurance	company,	to	the	Company,	in	connection	with	the	recapitalization	transaction	in	March	2005.	This	transaction	was	reflected	as	a contribution	of	capital	from	FNF	in	the	amount	of	FNF's	historical	basis	in	National	New	York	of	approximately	$10.7	million.

On	October	26,	2006,	the	Company	completed	a	merger	with	FNF	Capital,	Inc.	("FNF	Capital")	a	leasing	subsidiary	of	FNF.	The	Company issued	279,000	shares	of	the	Company's	common	stock	to	FNF	in	exchange	for	a

majority	ownership	in	FNF	Capital.	The	transaction	was	recorded	at	FNF's	historical	basis	in	FNF	Capital	of	approximately	$2.3	million	and	the Company	purchased	the	minority	ownership	shortly	thereafter	for	$3.8	million	in	cash.

The	contribution	of	National	New	York	and	the	merger	with	FNF	Capital	were	completed	between	entities	under	common	control	and	their results	of	operations	and	account	balances	have	been	included	in	the	Company's	results	of	operations	and	statement	of	financial	position	since	the date	of	the	relevant	transactions.	Had	the	Company	included	the	results	of	operations	and	balance	sheets	for	all	periods	presented	in	these Combined	and	Consolidated	Financial	Statements,	net	earnings	would	have	been	adjusted	$0.5	million,	$(0.2)	million	and	$(0.7)	million	for	2006, 2005	and	2004,	respectively	and	total	assets	would	have	increased	$82.2	million	as	of	December	31,	2005.

On	December	31,	2006,	FNF	contributed	$52.5	million	to	Fidelity	National	Real	Estate	Solutions,	Inc.("FNRES"),	a	subsidiary	of	the Company,	for	approximately	61%	of	the	outstanding	shares	of	FNRES.	As	a	result,	as	of	December	31,	2006,	the	Company	no	longer	consolidates FNRES,	but	records	its	remaining	39%	interest	as	an	equity	investment	in	the	amount	of	$33.5	million.	The	results	of	FNRES	are	included	in	the Consolidated	and	Combined	Statement	of	earnings	for	all	periods	presented.

The	Company	also	entered	into	a	master	service	provider	agreement	with	Covansys,	an	entity	in	which	the	Company	holds	a	29%	equity interest,	which	requires	the	Company	to	purchase	a	minimum	of	$150	million	in	services	over	a	five	year	period	expiring	June	30,	2009	or	be subject	to	certain	penalties	if	defined	spending	thresholds	are	not	met.	The	Company	does	not	believe	any	future	penalties	will	be	incurred	under the	agreement.	During	2006,	2005,	and	2004,	the	Company	spent	$35.7	million,	$17.6	million	and	$5.0	million	purchasing	professional	services from	Covansys	and	its	subsidiaries.

In	2006,	the	Company	recorded	revenues	of	$22.8	million	from	ABN	AMRO	Real	and	$20.4	million	from	Banco	Bradesco	which	are venture	partners	in	the	Company's	Brazilian	card	business.

# 		(c) Cash	and	Cash	Equivalents

For	purposes	of	reporting	cash	flows,	highly	liquid	instruments	purchased	with	original	maturities	of	three	months	or	less	are	considered	cash equivalents.	The	carrying	amounts	reported	in	the	Consolidated	Balance	Sheets	for	these	instruments	approximate	their	fair	value.

# 		(d) Fair	Value	of	Financial	Instruments

The	fair	values	of	financial	instruments,	which	include	trade	receivables	and	long-term	debt,	approximate	their	carrying	values.	These estimates	are	subjective	in	nature	and	involve	uncertainties	and	significant	judgment	in	the	interpretation	of	current	market	data.	Therefore,	the values	presented	are	not	necessarily	indicative	of	amounts	the	Company	could	realize	or	settle	currently.	The	Company	holds,	or	has	held,	certain derivative	instruments,	specifically	interest	rate	swaps,	warrants	and	several	put	and	call	options	relating	to	certain	majority-owned	subsidiaries (note	3(e)).

# 		(e) Derivative	Financial	Instruments

The	Company	accounts	for	derivative	financial	instruments	in	accordance	with	Statement	of	Financial	Accounting	Standards	("SFAS") No.	133,	"Accounting	for	Derivative	Instruments	and	Hedging	Activities",	("SFAS	No.	133")	as	amended.	During	2005	and	2006,	the	Company engaged	in	hedging	activities	relating	to	its	variable	rate	debt	through	the	use	of	interest	rate	swaps.	The	Company	designates	these	interest	rate swaps	as	cash	flow	hedges.	The	estimated	fair	values	of	the	cash	flow	hedges	are	recorded	as	an	asset	or	liability	of	the	Company	and	are	included in	the	accompanying	Consolidated	Balance	Sheets	in	other	non-current	assets	and	or	other	long	term	liabilities,	as	appropriate,	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	recorded	as	interest	expense	as	a	yield	adjustment	as	interest	payments	are	made	on	the	term	loan.	The	Company's	existing	cash	flow hedges	are	highly	effective	and	there	is	no	current	impact	on	earnings	due	to	hedge	ineffectiveness.	It	is	the	policy	of	the	Company	to	execute	such instruments	with	credit-worthy	banks	and	not	to	enter	into	derivative	financial	instruments	for	speculative	purposes.

The	Company	also	owns	warrants	to	purchase	additional	shares	of	common	stock	of	Covansys	Corporation.	From	September	2004	(the	date of	initial	purchase	of	Covansys	stock	and	warrants)	until	March	25,	2005,	the	Company	accounted	for	the	warrants	under	SFAS	No.	133.	Under the	provisions	of	SFAS	No.	133,	the	warrants	were	considered	derivative	instruments	and	were	recorded	at	a	fair	value	of	approximately $23.5	million	on	the	date	of	acquisition.	During	the	first	quarter	of	2005,	the	Company	recorded	a	loss	of	$4.4	million	on	the	decrease	in	fair	value of	the	warrants	through	March	25,	2005	which	is	reflected	in	the	Consolidated	and	Combined	Statement	of	Earnings	in	other	income	and	expense. On	March	25,	2005,	the	terms	of	the	warrants	were	amended	to	add	a	mandatory	holding	period	subsequent	to	exercise	of	the	warrants	and eliminate	a	cashless	exercise	option	available	to	the	Company	such	that	the	accounting	for	the	investment	in	the	warrants	is	now	governed	by	the provisions	of	SFAS	No.	115,	"Accounting	for	Certain	Investments	in	Debt	and	Equity	Securities",	and	changes	in	the	fair	value	of	the	warrants	are recorded	in	other	comprehensive	earnings.	The	fair	value	of	the	Company's	investment	in	Covansys	warrants	at	December	31,	2006	and	2005	is $46.3	million	and	$29.5	million,	respectively.

# 		(f) Trade	Receivables,	net

A	summary	of	trade	receivables,	net,	at	December	31,	2006	and	December	31,	2005	is	as	follows	(in	thousands):

Settlement	Deposits,	Receivables,	and	Payables.		The	Company	records	settlement	receivables	and	payables	that	result	from	timing differences	in	the	Company's	settlement	process	with	merchants,	financial	institutions,	and	credit	card	associations	related	to	merchant	and	card transaction	processing	and	third-party	check	collections.	Cash	held	by	FIS	associated	with	this	settlement	process	is	classified	as	settlement deposits	in	the	Consolidated	Balance	Sheets.

The	Company	had	a	$100	million	unsecured	revolving	credit	facility	that	it	used	to	finance	its	customers'	shortfalls	in	the	daily	funding requirements	associated	with	the	Company's	credit	and	debit	card	settlement	operations	(the	"Settlement	Facility").	Amounts	borrowed	were typically	repaid	within	one	to	two	business	days,	as	customers	funded	the	shortfalls.	This	facility	had	a	term	of	364	days	and	was	renewed annually.	There	were	no	amounts	outstanding	under	this	facility	at	December	31,	2006.	The	Settlement	Facility	was	terminated	on	January	18, 2007.

# 		(g) Other	receivables

Other	receivables	represent	amounts	due	from	consumers	related	to	deferred	debit	processing	services	offered	in	Australia	and	the	U.K., amounts	due	from	financial	institutions	for	the	settlement	of	transactions	in	the	Company's	cash	access	business,	fees	due	from	financial institutions	related	to	the	Company's	property	exchange

facilitation	business,	certain	lease	receivables	and	income	taxes	receivable.	The	carrying	value	for	these	receivables	approximates	their	fair	value.

Goodwill	represents	the	excess	of	cost	over	the	fair	value	of	identifiable	net	assets	acquired	and	liabilities	assumed	in	business	combinations. SFAS	No.	142,	"Goodwill	and	Intangible	Assets"	("SFAS	No.	142")	requires	that	intangible	assets	with	estimable	useful	lives	be	amortized	over their	respective	estimated	useful	lives	to	their	estimated	residual	values	and	reviewed	for	impairment	in	accordance	with	SFAS	No.	144, "Accounting	for	the	Impairment	or	Disposal	of	Long-Lived	Assets"	("SFAS	No.	144").	SFAS	No	142	and	SFAS	No.	144	also	provide	that goodwill	and	other	intangible	assets	with	indefinite	useful	lives	should	not	be	amortized,	but	shall	be	tested	for	impairment	annually	or	more frequently	if	circumstances	indicate	potential	impairment,	through	a	comparison	of	fair	value	to	its	carrying	amount.	The	Company	measures	for impairment	on	an	annual	basis	during	the	fourth	quarter	using	a	September	30th	measurement	date	unless	circumstances	require	a	more	frequent measurement.

# 		(i) Long-lived	Assets

SFAS	No.	144	requires	that	long-lived	assets	and	intangible	assets	with	definite	useful	lives	be	reviewed	for	impairment	whenever	events	or changes	in	circumstances	indicate	that	the	carrying	amount	of	an	asset	may	not	be	recoverable.	Recoverability	of	assets	to	be	held	and	used	is measured	by	comparison	of	the	carrying	amount	of	an	asset	to	estimated	undiscounted	future	cash	flows	expected	to	be	generated	by	the	asset.	If the	carrying	amount	of	an	asset	exceeds	its	estimated	future	cash	flows,	an	impairment	charge	is	recognized	in	the	amount	by	which	the	carrying amount	of	the	assets	exceed	the	fair	value	of	the	asset.

# 		(j) Intangible	Assets

The	Company	has	intangible	assets	which	consist	primarily	of	customer	relationships	that	are	recorded	in	connection	with	acquisitions	at their	fair	value	based	on	the	results	of	valuations	by	third	parties.	Customer	relationships	are	amortized	over	their	estimated	useful	lives	using	an accelerated	method	which	takes	into	consideration	expected	customer	attrition	rates	up	to	a	ten-year	period.	Intangible	assets	with	estimated	useful lives	are	reviewed	for	impairment	in	accordance	with	SFAS	No.	144	while	intangible	assets	that	are	determined	to	have	indefinite	lives	are reviewed	for	impairment	at	least	annually	in	accordance	with	SFAS	No.	142.

# 		(k) Computer	Software

Computer	software	includes	the	fair	value	of	software	acquired	in	business	combinations,	purchased	software	and	capitalized	software development	costs.	Purchased	software	is	recorded	at	cost	and	amortized	using	the	straight-line	method	over	its	estimated	useful	life	and	software acquired	in	business	combinations	is	recorded	at	its	fair	value	and	amortized	using	straight-line	or	accelerated	methods	over	its	estimated	useful life,	ranging	from	five	to	ten	years.

Capitalized	software	development	costs	are	accounted	for	in	accordance	with	either	SFAS	No.	86,	"Accounting	for	the	Costs	of	Computer Software	to	Be	Sold,	Leased,	or	Otherwise	Marketed"	("SFAS	No.	86"),	or	with	the	American	Institute	of	Certified	Public	Accountants	("AICPA") Statement	of	Position	("SOP")	No.	98-1,	"Accounting	for	the	Costs	of	Computer	Software	Developed	or	Obtained	for	Internal	Use"	("SOP	98-1"). After	the	technological	feasibility	of	the	software	has	been	established	(for	SFAS	No.	86	software),	or	at	the	beginning	of	application	development (for	SOP	No.	98-1	software),	software	development	costs,	which	include	salaries	and	related	payroll	costs	and	costs	of	independent	contractors incurred	during	development,	are	capitalized.	Research	and	development	costs	incurred	prior	to	the	establishment	of	technological	feasibility	(for SFAS	No.	86	software),	or	prior	to	application	development	(for	SOP	No.	98-1	software),	are	expensed	as	incurred.	Software	development	costs are	amortized	on	a	product-by-product	basis	commencing	on	the	date	of	general	release	of	the	products	(for

SFAS	No.	86	software)	and	the	date	placed	in	service	for	purchased	software	(for	SOP	No.	98-1	software).	Software	development	costs	(for SFAS	No.	86	software)	are	amortized	using	the	greater	of	(1)	the	straight-line	method	over	its	estimated	useful	life,	which	ranges	from	three	to	ten years	or	(2)	the	ratio	of	current	revenues	to	total	anticipated	revenue	over	its	useful	life.

# 		(l) Deferred	Contract	Costs

Cost	of	software	sales	and	outsourced	data	processing	and	application	management	arrangements,	including	costs	incurred	for	bid	and proposal	activities,	are	generally	expensed	as	incurred.	However,	certain	costs	incurred	upon	initiation	of	a	contract	are	deferred	and	expensed over	the	contract	life.	These	costs	represent	incremental	external	costs	or	certain	specific	internal	costs	that	are	directly	related	to	the	contract acquisition	or	transition	activities	and	are	primarily	associated	with	installation	of	systems/processes	and	data	conversion.

In	the	event	indications	exist	that	a	deferred	contract	cost	balance	related	to	a	particular	contract	may	be	impaired,	undiscounted	estimated cash	flows	of	the	contract	are	projected	over	its	remaining	term	and	compared	to	the	unamortized	deferred	contract	cost	balance.	If	the	projected cash	flows	are	not	adequate	to	recover	the	unamortized	cost	balance,	the	balance	would	be	adjusted	to	equal	the	contract's	net	realizable	value, including	any	termination	fees	provided	for	under	the	contract,	in	the	period	such	a	determination	is	made.

# 		(m) Property	and	Equipment

Property	and	equipment	is	recorded	at	cost,	less	accumulated	depreciation	and	amortization.	Depreciation	and	amortization	are	computed primarily	using	the	straight-line	method	based	on	the	estimated	useful	lives	of	the	related	assets:	thirty	years	for	buildings	and	three	to	seven	years for	furniture,	fixtures	and	computer	equipment.	Leasehold	improvements	are	amortized	using	the	straight-line	method	over	the	lesser	of	the	initial term	of	the	applicable	lease	or	the	estimated	useful	lives	of	such	assets.

# 		(n) Income	Taxes

Through	March	8,	2005,	the	Company's	operating	results	were	included	in	FNF's	Consolidated	U.S.	Federal	and	State	income	tax	returns. The	provision	for	income	taxes	in	the	Consolidated	and	Combined	Statements	of	Earnings	is	made	at	rates	consistent	with	what	the	Company would	have	paid	as	a	stand-alone	taxable	entity	in	those	periods.	Beginning	on	March	9,	2005,	the	Company	became	its	own	tax	paying	entity. The	Company	recognizes	deferred	income	tax	assets	and	liabilities	for	temporary	differences	between	the	financial	reporting	basis	and	the	tax basis	of	the	Company's	assets	and	liabilities	and	expected	benefits	of	utilizing	net	operating	loss	and	credit	carryforwards.	Deferred	income	tax assets	and	liabilities	are	measured	using	enacted	tax	rates	expected	to	apply	to	taxable	income	in	the	years	in	which	those	temporary	differences	are expected	to	be	recovered	or	settled.	The	impact	on	deferred	income	taxes	of	changes	in	tax	rates	and	laws,	if	any,	is	reflected	in	the	Consolidated and	Combined	Financial	Statements	in	the	period	enacted.

# 		(o) Revenue	Recognition

The	following	describes	the	Company's	primary	types	of	revenues	and	its	revenue	recognition	policies	as	they	pertain	to	the	types	of transactions	the	Company	enters	into	with	its	customers.	The	Company	enters	into	arrangements	with	customers	to	provide	services,	software	and software	related	services	such	as	post-contract	customer	support	and	implementation	and	training	either	individually	or	as	part	of	an	integrated offering	of	multiple	products	and	services.	These	products	and	services	occasionally	include	offerings	from	more	than	one	segment	to	the	same customer.	The	revenues	for	services	provided	under	these	multiple	element	arrangements	are	recognized	in	accordance	with	the	applicable	revenue recognition	accounting	principles	as	further	described	below.

In	its	TPS	business,	the	Company	recognizes	revenues	relating	to	bank	processing	and	credit	and	debit	card	processing	services	along	with software	licensing	and	software	related	services.	Several	of	the	Company's	contracts	include	a	software	license	and	one	or	more	of	the	following services:	data	processing,	development,	implementation,	conversion,	training,	programming,	post-contract	customer	support	and	application management.	In	some	cases,	these	services	are	offered	in	combination	with	one	another	and	in	other	cases	the	Company	offers	them	individually. Revenues	from	processing	services	are	typically	volume-based	depending	on	factors	such	as	the	number	of	accounts	processed,	transactions processed	and	computer	resources	utilized.

The	substantial	majority	of	the	revenues	in	the	TPS	business	are	from	outsourced	data	processing,	credit	and	debit	card	processing,	and application	management	arrangements.	Revenues	from	these	arrangements	are	recognized	as	services	are	performed	in	accordance	with	Securities and	Exchange	Commission	("SEC")	Staff	Accounting	Bulletin	No.	104	("SAB	No.	104"),	"Revenue	Recognition"	and	related	interpretations. SAB	No.	104	sets	forth	guidance	as	to	when	revenue	is	realized	or	realizable	and	earned	when	all	of	the	following	criteria	are	met:	(1)	persuasive evidence	of	an	arrangement	exists;	(2)	delivery	has	occurred	or	services	have	been	rendered;	(3)	the	seller's	price	to	the	buyer	is	fixed	and determinable;	and	(4)	collectability	is	reasonably	assured.	Revenues	and	costs	related	to	implementation,	conversion	and	programming	services associated	with	the	Company's	data	processing	and	application	management	agreements	during	the	implementation	phase	are	deferred	and subsequently	recognized	using	the	straight-line	method	over	the	term	of	the	related	services	agreement.	The	Company	evaluates	these	deferred contract	costs	for	impairment	in	the	event	any	indications	of	impairment	exist.	A	relatively	small	percentage	of	credit	card	processing	revenue	is generated	from	the	merchant	institution	processing	business,	where	the	relationship	is	with	the	financial	institution	that	contracts	directly	with	the merchant.	In	this	business,	the	Company	is	responsible	for	collecting	and	settling	interchange	fees	with	the	credit	card	associations,	thus interchange	fees	are	included	as	a	component	of	revenue	and	costs	of	revenue.

In	the	event	that	the	Company's	arrangements	with	its	customers	include	more	than	one	product	or	service,	the	Company	determines	whether the	individual	revenue	elements	can	be	recognized	separately	in	accordance	with	Financial	Accounting	Standards	Board	("FASB")	Emerging Issues	Task	Force	No.	00-21	("EITF	00-21"),	"Revenue	Arrangements	with	Multiple	Deliverables".	EITF	00-21	addresses	the	determination	of whether	an	arrangement	involving	more	than	one	deliverable	contains	more	than	one	unit	of	accounting	and	how	the	arrangement	consideration should	be	measured	and	allocated	to	the	separate	units	of	accounting.

If	the	products	and	services	are	software	related	products	and	services	as	determined	under	AICPA's	SOP	97-2	"Software	Revenue Recognition"	("SOP	97-2"),	and	SOP	98-9	"Modification	of	SOP	No.	97-2,	Software	Revenue	Recognition,	with	Respect	to	Certain	Transactions" ("SOP	98-9")	the	Company	applies	these	pronouncements	and	related	interpretations	to	determine	the	appropriate	units	of	accounting	and	how	the arrangement	consideration	should	be	measured	and	allocated	to	the	separate	units.

The	Company	recognizes	software	license	and	post-contract	customer	support	fees	as	well	as	associated	development,	implementation, training,	conversion	and	programming	fees	in	accordance	with	SOP	No.	97-2	and	SOP	No.	98-9.	Initial	license	fees	are	recognized	when	a	contract exists,	the	fee	is	fixed	or	determinable,	software	delivery	has	occurred	and	collection	of	the	receivable	is	deemed	probable,	provided	that	vendor- specific	objective	evidence	("VSOE")	has	been	established	for	each	element	or	for	any	undelivered	elements.	The	Company	determines	the	fair value	of	each	element	or	the	undelivered	elements	in	multi-element	software	arrangements	based	on	VSOE.	If	the	arrangement	is	subject	to accounting	under	SOP	No.	97-2,	VSOE	for	each	element	is	based	on	the	price	charged	when	the	same	element	is	sold	separately,	or	in	the	case	of post-contract	customer	support,	when	a	stated	renewal	rate	is	provided	to	the	customer.	If	evidence	of	fair	value	of	all	undelivered	elements	exists but	evidence	does	not	exist	for	one	or	more	delivered	elements,	then	revenue	is	recognized	using	the	residual	method.	Under	the	residual	method, the	fair	value	of	the	undelivered	elements	is	deferred	and	the	remaining	portion	of	the	arrangement	fee	is	recognized	as	revenue.	If	evidence	of	fair value	does	not	exist	for	one	or	more	undelivered	elements	of	a	contract,	then	all	revenue	is	deferred	until	all	elements	are	delivered	or	fair	value	is determined	for	all

remaining	undelivered	elements.	Revenue	from	post-contract	customer	support	is	recognized	ratably	over	the	term	of	the	agreement.	The Company	records	deferred	revenue	for	all	billings	invoiced	prior	to	revenue	recognition.

With	respect	to	a	small	percentage	of	revenues,	the	Company	uses	contract	accounting,	as	required	by	SOP	No.	97-2,	when	the	arrangement with	the	customer	includes	significant	customization,	modification,	or	production	of	software.	For	elements	accounted	for	under	contract accounting,	revenue	is	recognized	in	accordance	with	SOP	81-1,	"Accounting	for	Performance	of	Construction	Type	and	Certain	Production-Type Contracts",	using	the	percentage-of-completion	method	since	reasonably	dependable	estimates	of	revenues	and	contract	hours	applicable	to various	elements	of	a	contract	can	be	made.	Revenues	in	excess	of	billings	on	these	agreements	are	recorded	as	unbilled	receivables	and	are included	in	trade	receivables.	Billings	in	excess	of	revenue	recognized	on	these	agreements	are	recorded	as	deferred	revenue	until	revenue recognition	criteria	are	met.	Changes	in	estimates	for	revenues,	costs	and	profits	are	recognized	in	the	period	in	which	they	are	determinable.	When the	Company's	estimates	indicate	that	the	entire	contract	will	be	performed	at	a	loss,	a	provision	for	the	entire	loss	is	recorded	in	that	accounting period.

In	its	LPS	business,	the	Company	recognizes	revenues	relating	to	mortgage	processing	services,	loan	facilitation	services,	default management	services,	and	property	data-related	services.	Mortgage	processing	arrangements	are	typically	volume-based	depending	on	factors	such as	the	number	of	accounts	processed,	transactions	processed	and	computer	resources	utilized.	Revenue	derived	from	software	and	service arrangements	included	in	the	lender	processing	services	segment	is	recognized	in	accordance	with	SOP	No.	97-2	as	discussed	above.	Loan facilitation	services	primarily	consist	of	centralized	title	agency	and	closing	services	for	various	types	of	lenders.	Revenues	relating	to	loan facilitation	services	are	typically	recognized	at	the	time	of	closing	of	the	related	real	estate	transaction.	Ancillary	service	fees	are	recognized	when the	service	is	provided.	Default	management	services	assist	customers	through	the	default	and	foreclosure	process,	including	property	preservation and	maintenance	services	(such	as	lock	changes,	window	replacement,	debris	removal	and	lawn	service),	posting	and	publication	of	foreclosure and	auction	notices,	title	searches,	document	preparation	and	recording	services,	and	referrals	for	legal	and	property	brokerage	services.	Property data	or	data-related	services	principally	include	appraisal	and	valuation	services,	property	records	information,	real	estate	tax	services	and borrower	credit	and	flood	zone	information.	Revenues	derived	from	these	services	are	recognized	as	the	services	are	performed	in	accordance	with SAB	No.	104	as	described	above.

In	addition,	the	Company's	flood	and	tax	units	provide	various	services	including	life-of-loan-monitoring	services.	Revenue	for	life-of-loan services	is	deferred	and	recognized	ratably	over	the	estimated	average	life	of	the	loan	service	period,	which	is	determined	based	on	the	Company's historical	experience	and	industry	data.	The	Company	evaluates	its	historical	experience	on	a	periodic	basis,	and	adjusts	the	estimated	life	of	the loan	service	period	prospectively.

# 		(p) Stock-Based	Compensation	Plans

Certain	FIS	employees	are	participants	in	the	Fidelity	National	Information	Services,	Inc.	2005	Stock	Incentive	Plan,	which	provides	for	the granting	of	incentive	and	nonqualified	stock	options,	restricted	stock	and	other	stock-based	incentive	awards	to	officers	and	key	employees.	Also, certain	FIS	employees	are	participants	in	FNF's	stock-based	compensation	plans.	Through	the	acquisition	of	Certegy,	the	Company	adopted	the Certegy	stock	incentive	plans,	which	also	allow	for	the	granting	of	stock-based	awards.	All	of	the	outstanding	awards	as	of	January	31,	2006	under Certegy's	plans	were	vested	prior	to	the	Certegy	Merger.

On	November	9,	2006,	as	part	of	the	closing	of	the	FNF	Merger,	the	Company	assumed	certain	options	and	restricted	stock	grants	that	the Company's	employees	and	directors	held	under	various	FNF	stock-based	compensation	plans.	The	Company	assumed	approximately	2.7	million options	to	replace	4.9	million	outstanding	FNF	options	per	the	FNF	Merger	Agreement.	The	Company	also	assumed	0.1	million	shares	of restricted	stock.

The	Company	accounts	for	stock-based	compensation	using	the	fair	value	recognition	provisions	of	SFAS	No.	123R,	"Share-Based Payment"	("SFAS	123R")	effective	January	1,	2006.	Prior	to	January	1,	2006,	the	Company	accounted	for	stock-based	compensation	using	the	fair value	recognition	provisions	of	SFAS	No.	123,	"Accounting	for	Stock-Based	Compensation"	("SFAS	No.	123")	which	the	Company	adopted	on January	1,	2003	under	the	prospective	method	as	permitted	by	SFAS	No.	148,	"Accounting	for	Stock-Based	Compensation	—	Transition	and Disclosure"	("SFAS	No.	148").	Under	the	fair-value	method,	stock-based	employee	compensation	cost	was	recognized	from	the	beginning	of	2003 as	if	the	fair	value	method	of	accounting	had	been	used	to	account	for	all	employee	awards	granted,	modified,	or	settled	in	years	beginning	after December	31,	2002.	The	Company	has	provided	for	stock	compensation	expense	of	$50.1	million,	$20.4	million	and	$15.4	million	for	2006,	2005 and	2004,	respectively,	which	is	included	in	selling,	general,	and	administrative	expense	in	the	Consolidated	and	Combined	Statements	of Earnings.	The	year	ended	2006	included	stock	compensation	expense	of	$24.5	million	relating	to	the	FIS	performance	based	options	granted	on March	9,	2005	for	which	the	performance	and	market	based	criteria	for	vesting	were	met	during	the	period	and	a	$6.1	million	charge	relating	to	the acceleration	of	option	vesting	in	connection	with	the	FNF	Merger.	There	was	no	material	impact	of	adopting	SFAS	No.	123R	as	all	options	issued to	the	Company's	employees	under	FNF	grants	that	had	been	accounted	for	under	other	methods	were	fully	vested	as	of	December	31,	2005.	All grants	of	FIS	options	have	been	accounted	for	under	fair	value	accounting	under	SFAS	123	or	SFAS	123R.

The	following	table	illustrates	the	effect	on	net	earnings	for	the	year	ended	December	31,	2005,	and	2004	as	if	the	Company	had	applied	the fair	value	recognition	provisions	of	SFAS	No.	123	to	all	awards	held	by	FIS	employees,	including	those	that	were	issued	prior	to	the	adoption	of SFAS	123	(in	thousands):

|  | 2005 | 2004 |
| :--- | :--- | :--- |
| Net\tearnings,\tas\treported | $196,550 | $ 189,416 |
| Add:\tStock-based\tcompensation\texpense\tincluded\tin\treported\tnet\tearnings,\tnet\tof\trelated\tincome\ttax\teffects | 12,589 | 9,569 |
| Deduct:\tTotal\tstock-based\temployee\tcompensation\texpense\tdetermined\tunder\tfair\tvalue\tbased\tmethods\tfor\tall |  |  |
| awards,\tnet\tof\trelated\tincome\ttax\teffects | (12,995) | (10,206) |
| Pro\tforma\tnet\tearnings | $196,144 | $ 188,779 |
| Earnings\tper\tshare:\nBasic\t—\tas\treported\tand\tpro\tforma | $1.54 | $1.48 |
| Diluted\t—\tas\treported\tand\tpro\tforma | $1.53 | $1.48 |

# 		(q) Foreign	Currency	Translation

The	functional	currency	for	the	foreign	operations	of	the	Company	is	either	the	U.S.	Dollar	or	the	local	currency.	For	foreign	operations where	the	local	currency	is	the	functional	currency,	the	translation	of	foreign	currencies	into	U.S.	dollars	is	performed	for	balance	sheet	accounts using	exchange	rates	in	effect	at	the	balance	sheet	date	and	for	revenue	and	expense	accounts	using	a	weighted	average	exchange	rate	during	the period.	The	gains	and	losses	resulting	from	the	translation	are	included	in	accumulated	other	comprehensive	earnings	(loss)	in	the	Consolidated Statements	of	Stockholders'	Equity	and	are	excluded	from	net	earnings.	Realized	gains	or	losses	resulting	from	other	foreign	currency	transactions are	included	in	other	income	(expense)	and	are	insignificant	for	the	years	ended	December	31,	2006,	2005,	and	2004.

# 		(r) Management	Estimates

The	preparation	of	these	Consolidated	and	Combined	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	and	Combined	Financial	Statements	and	the	reported	amounts	of	revenues	and	expenses	during the	reporting	periods.	Actual	results	could	differ	from	those	estimates.

The	Company	recognizes	a	reserve	for	estimated	losses	related	to	its	card	issuing	business	based	on	historical	experience	and	other	relevant factors.	The	Company	records	estimates	to	accrue	for	losses	resulting	from	transaction	processing	errors	by	utilizing	a	number	of	systems	and procedures	in	order	to	minimize	such	transaction	processing	errors.	Card	processing	loss	reserves	are	primarily	determined	by	performing	a historical	analysis	of	loss	experience	and	considering	other	factors	that	could	affect	that	experience	in	the	future.	Such	factors	include	the	general economy	and	the	credit	quality	of	customers.	Once	these	factors	are	considered,	the	Company	assesses	the	reserve	adequacy	by	comparing	the recorded	reserve	to	the	estimated	amount	based	on	an	analysis	of	the	current	trend	changes	or	specific	anticipated	future	events.	Any	adjustments are	charged	to	costs	of	services.	These	card	processing	loss	reserve	amounts	are	subject	to	risk	that	actual	losses	may	be	greater	than	estimates.

In	the	Company's	check	guarantee	business,	if	a	guaranteed	check	presented	to	a	merchant	customer	is	dishonored	by	the	check	writer's bank,	the	Company	reimburses	the	merchant	customer	for	the	check's	face	value	and	pursues	collection	of	the	amount	from	the	delinquent	check writer.	Loss	reserves	and	anticipated	recoveries	are	primarily	determined	by	performing	a	historical	analysis	of	our	check	loss	and	recovery experience	and	considering	other	factors	that	could	affect	that	experience	in	the	future.	Such	factors	include	the	general	economy,	the	overall industry	mix	of	customer	volumes,	statistical	analysis	of	check	fraud	trends	within	customer	volumes,	and	the	quality	of	returned	checks.	Once these	factors	are	considered,	the	Company	establishes	a	rate	for	check	losses	that	is	calculated	by	dividing	the	expected	check	losses	by	dollar volume	processed	and	a	rate	for	anticipated	recoveries	that	is	calculated	by	dividing	the	anticipated	recoveries	by	the	total	amount	of	related	check losses.	These	rates	are	then	applied	against	the	dollar	volume	processed	and	check	losses,	respectively,	each	month	and	charged	to	cost	of	revenue. The	estimated	check	returns	and	recovery	amounts	are	subject	to	risk	that	actual	amounts	returned	and	recovered	may	be	different	than	the Company's	estimates.	The	Company	had	accrued	claims	payable	and	accrued	claims	recoverable	balances	of	$30.0	million	and	$39.4	million	at December	31,	2006	related	to	these	estimations.	In	addition,	the	Company	recorded	check	guarantee	losses,	net	of	anticipated	recoveries	excluding service	fees,	of	$102.9	million	for	the	year	ended	December	31,	2006.	The	amounts	paid	to	merchant	customers,	net	of	amounts	recovered	from check	writers	excluding	service	fees,	was	$107.9	million	for	the	year	ended	December	31,	2006.	As	the	check	guarantee	business	was	acquired	as part	of	the	Certegy	Merger	(see	Note	5),	there	are	no	amounts	related	to	this	activity	in	the	years	ended	December	31,	2005	and	2004.

# 		(s) Net	Earnings	per	Share

The	basic	weighted	average	shares	and	common	stock	equivalents	for	the	year	ended	December	31,	2006	only	include	the	shares	and	options that	were	previously	outstanding	at	Certegy	from	February	1,	2006	through	December	31,	2006.	If	these	shares	and	options	had	been	outstanding for	the	entire	twelve	months	of	2006,	basic	weighted	average	shares	outstanding	would	have	been	approximately	191.3	million,	common	stock equivalents	would	have	been	3.3	million	and	weighted	average	shares	on	a	diluted	basis	would	have	been	194.6	million.

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Net\tearnings | $259,087 | $196,550 | $ 189,416 |
| Weighted\taverage\tshares\toutstanding\t—\tbasic | 185,926 | 127,920 | 127,920 |
| Plus:\tCommon\tstock\tequivalent\tshares\tassumed\tfrom\tconversion\tof\toptions | 3,270 | 434 | — |
| Weighted\taverage\tshares\toutstanding\t—\tdiluted | 189,196 | 128,354 | 127,920 |
| Basic\tnet\tearnings\tper\tshare | $1.39 | $1.54 | $1.48 |
| Diluted\tnet\tearnings\tper\tshare | $1.37 | $1.53 | $1.48 |

# 		(t) Recent	Accounting	Pronouncements

In	June	2006,	the	Financial	Accounting	Standards	Board	issued	FASB	Interpretation	Number	48	(FIN	48),	"Accounting	for	Uncertainty	in Income	Taxes".	FIN	48	is	effective	for	fiscal	years	beginning	after	December	15,	2006.	The	interpretation	clarifies	the	accounting	for	uncertainty in	income	taxes	recognized	in	the	financial	statements	in	accordance	with	SFAS	No.	109,	Accounting	for	Income	Taxes.	The	interpretation	outlines recognition	thresholds	and	measurement	attributes	to	determine	the	amount,	if	any,	of	a	tax	benefit	to	be	recognized	in	an	enterprise's	financial statements.	The	Interpretation	also	provides	guidance	on	subsequent	recognition,	de-recognition,	measurement,	recognition	of	interest	and penalties,	classification	and	disclosure.	The	company	has	reviewed	FIN	48	and	has	determined	that	its	implementation	will	not	have	a	material impact	on	the	Company's	financial	statements.

In	December	2004,	the	FASB	issued	FASB	Statement	No.	123R	("SFAS	No.	123R"),	"Share-Based	Payment,"	which	requires	that compensation	cost	relating	to	share-based	payments	be	recognized	in	the	financial	statements.	During	2003,	FIS	adopted	the	fair	value	recognition provision	of	SFAS	No.	123,	"Accounting	for	Stock-Based

Compensation"	("SFAS	No.	123"),	for	stock-based	employee	compensation,	effective	as	of	the	beginning	of	2003.	FIS	had	elected	to	use	the prospective	method	of	transition,	as	permitted	by	SFAS	No.	148,	"Accounting	for	Stock-Based	Compensation	—	Transition	and	Disclosure" ("SFAS	No.	148").	Under	this	method,	stock-based	employee	compensation	cost	was	recognized	from	the	beginning	of	2003	as	if	the	fair	value method	of	accounting	had	been	used	to	account	for	all	employee	awards	granted,	modified,	or	settled	in	years	beginning	after	December	31,	2002. SFAS	No.	123R	does	not	allow	for	the	prospective	method,	but	requires	the	recording	of	expense	relating	to	the	vesting	of	all	unvested	options beginning	in	the	first	quarter	of	2006.	Since	SFAS	No.	123	was	adopted	in	2003,	the	impact	of	recording	additional	expense	in	2006	under SFAS	No.	123R	relating	to	options	granted	prior	to	January	1,	2003	is	not	significant	as	all	options	accounted	for	under	other	methods	were	fully vested	as	of	December	31,	2005.

# 		(u) Certain	Reclassifications

Certain	reclassifications	have	been	made	in	the	2005	and	2004	Consolidated	Financial	Statements	to	conform	to	the	classifications	used	in

# (4)		Recapitalization	of	FIS	and	Sale	of	Equity	Interest

On	March	9,	2005,	the	recapitalization	of	FIS	was	completed	through	$2.8	billion	in	borrowings	under	new	senior	credit	facilities	consisting of	an	$800	million	Term	Loan	A	facility,	a	$2.0	billion	Term	Loan	B	facility	(collectively,	the	"Term	Loan	Facilities")	and	a	$400	million revolving	credit	facility	(the	"Revolver").	The	Company	fully	drew	upon	the	entire	$2.8	billion	in	Term	Loan	Facilities	to	complete	the recapitalization	while	the	Revolver	remained	undrawn	at	the	closing.	Bank	of	America,	JP	Morgan	Chase,	Wachovia	Bank,	Deutsche	Bank	and Bear	Stearns	led	a	consortium	of	lenders	which	provided	the	new	senior	credit	facilities.

Concurrently,	FIS	sold	a	25	percent	equity	interest	to	an	investment	group	led	by	Thomas	H.	Lee	Partners	(THL)	and	Texas	Pacific	Group (TPG).	The	Company	issued	a	total	of	32	million	shares	of	common	stock	of	FIS	(as	converted	for	the	Certegy	Merger)	to	the	investment	group	for a	total	purchase	price	of	$500	million.	A	new	Board	of	Directors	was	created	at	FIS,	with	William	P.	Foley,	II,	then	current	Chairman	and	Chief Executive	Officer	of	FNF,	serving	as	Chairman	and	Chief	Executive	Officer	of	FIS.	FNF	appointed	four	additional	members	to	the	FIS	Board	of Directors,	while	each	of	THL	and	TPG	appointed	two	directors.	On	February	1,	2006	the	Company	completed	its	Certegy	Merger	and	further changes	were	made	to	the	Board	of	Directors	and	Lee	Kennedy	was	appointed	President	and	CEO	of	FIS	(note	5).	The	following	steps	were undertaken	to	consummate	the	recapitalization	plan	and	equity	interest	sale.	On	March	8,	2005,	the	Company	declared	and	paid	a	$2.7	billion dividend	to	FNF	in	the	form	of	a	note.	On	March	9,	2005,	the	Company	borrowed	$2.8	billion	under	its	new	senior	credit	facilities	and	then	paid FNF	$2.7	billion,	plus	interest	in	repayment	of	the	note.	The	equity	interest	sale	was	then	closed	through	the	payment	of	$500	million	from	the investment	group	led	by	THL	and	TPG	to	the	Company.	The	Company	then	repaid	approximately	$410	million	outstanding	under	its	November	8, 2004	credit	facility.	Finally,	the	Company	paid	all	expenses	related	to	the	transactions.	These	expenses	totaled	$79.2	million,	consisting	of $33.5	million	in	financing	fees	and	$45.7	million	in	fees	relating	to	the	equity	interest	sale,	including	placement	fees	payable	to	the	investors.

# (5)		Acquisitions

The	results	of	operations	and	financial	position	of	the	entities	acquired	during	the	years	ended	December	31,	2006,	2005,	and	2004	are included	in	the	Consolidated	and	Combined	Financial	Statements	from	and	after	the	date	of	acquisition.	The	acquisitions	prior	to	2006	were	made by	the	Company	or	FNF	and	then	contributed	to	FIS	by	FNF.	The	acquisitions	made	by	FNF	and	contributed	to	FIS	are	included	in	the	related Consolidated	and	Combined	Financial	Statements	as	capital	contributions.	The	purchase	price	of	each	acquisition	was	allocated	to	the	assets acquired	and	liabilities	assumed	based	on	third	party	valuations	with	any	excess	cost	over	fair	value	being	allocated	to	goodwill.

# Certegy

On	September	14,	2005,	the	Company	entered	into	a	definitive	merger	agreement	with	Certegy	under	which	the	Company	and	Certegy combined	operations	to	form	a	single	publicly	traded	company	called	Fidelity	National	Information	Services,	Inc.	(NYSE:FIS).	Certegy	was	a payment	processing	company	headquartered	in	St.	Petersburg,	Florida.	On	January	26,	2006,	Certegy's	shareholders	approved	the	Certegy	Merger which	was	subsequently	consummated	on	February	1,	2006.

Under	the	terms	of	the	Certegy	Merger	agreement,	the	Company	was	merged	into	a	wholly	owned	subsidiary	of	Certegy	in	a	tax-free	merger, and	all	of	the	Company's	outstanding	stock	was	converted	into	Certegy	common	stock.	As	a	result	of	the	Certegy	Merger:

•	The	Company's	pre-merger	shareholders	owned	approximately	67.4%	of	the	Company's	outstanding	common	stock	immediately	after the	Certegy	Merger,	while	Certegy's	pre-merger	shareholders	owned	approximately	32.6%;

•	Immediately	after	the	Certegy	Merger,	FNF	and	its	subsidiaries	owned	approximately	51.0%	of	the	Company's	outstanding	common stock;	and

•	The	Company's	board	of	directors	was	reconstituted	so	that	a	majority	of	the	board	consisted	of	directors	designated	by	the	Company's shareholders.

In	connection	with	the	Certegy	Merger,	Certegy	amended	its	articles	of	incorporation	to	increase	the	number	of	authorized	shares	of	capital stock	from	400	million	shares	to	800	million	shares,	with	600	million	shares	being	designated	as	common	stock	and	200	million	shares	being designated	as	preferred	stock.	Additionally,	Certegy	amended	its	stock	incentive	plan	to	increase	the	total	number	of	shares	of	common	stock available	for	issuance	under	the	current	stock	incentive	plan	by	an	additional	6	million	shares,	and	to	increase	the	limits	on	the	number	of	options, restricted	shares,	and	other	awards	that	may	be	granted	to	any	individual	in	any	calendar	year.	These	changes	were	approved	by	Certegy's shareholders	on	January	26,	2006.

As	part	of	the	Certegy	Merger	transaction,	Certegy	declared	a	$3.75	per	share	special	cash	dividend	that	was	paid	to	Certegy's	pre-merger shareholders.	This	dividend,	totaling	$236.6	million,	was	paid	by	Certegy	at	the	consummation	of	the	Certegy	Merger.

Generally	accepted	accounting	principles	in	the	U.S.	require	that	one	of	the	two	companies	in	the	transaction	be	designated	as	the	acquirer for	accounting	purposes.	The	Company	has	been	designated	as	the	accounting	acquirer	because	immediately	after	the	Certegy	Merger	its shareholders	held	more	than	50%	of	the	common	stock	of	the	Company.	As	a	result,	the	Certegy	Merger	has	been	accounted	for	as	a	reverse acquisition	under	the	purchase	method	of	accounting.	Under	this	accounting	treatment,	the	Company	is	considered	the	acquiring	entity	and	Certegy is	considered	the	acquired	entity	for	financial	reporting	purposes.	The	financial	statements	of	the	combined	company	after	the	Certegy	Merger reflect	the	Company's	financial	results	on	a	historical	basis	and	include	the	results	of	operations	of	Certegy	from	February	1,	2006.

The	purchase	price	was	based	on	the	number	of	outstanding	shares	of	common	stock	of	Certegy	on	February	1,	2006,	the	date	of consummation	of	the	Certegy	Merger,	valued	at	$33.38	per	share	(which	was	the	average	of	the	trading	price	of	Certegy	common	stock	two	days before	and	two	days	after	the	announcement	of	the	Certegy	Merger	on	September	15,	2005	of	$37.13,	less	the	$3.75	per	share	special	dividend declared	prior	to	closing).	The	purchase	price	also	included	the	estimated	fair	value	of	Certegy's	stock	options	and	restricted	stock	units outstanding	at	the	transaction	date.

The	purchase	price	has	been	allocated	to	Certegy's	tangible	and	identifiable	intangible	assets	acquired	and	liabilities	assumed	based	on	their fair	values	as	of	February	1,	2006.	Goodwill	has	been	recorded	based	on	the	amount	that	the	purchase	price	exceeds	the	fair	value	of	the	net	assets acquired.	The	purchase	price	allocation	is	as	follows	(in	millions):

| acquired.	The	purchase	price	allocation	is	as	follows	(in	millions): |  |
| :--- | :--- |
| Cash | $376.3 |
| Trade\tand\tother\treceivables | 241.2 |
| Land,\tbuildings,\tand\tequipment | 72.4 |
| Other\tassets | 136.9 |
| Computer\tsoftware | 131.6 |
| Intangible\tassets | 653.5 |
| Goodwill | 1,951.7 |
| Liabilities\tassumed | (1,382.5) |
| Total\tpurchase\tprice | $2,181.1 |

The	allocation	of	the	purchase	price	to	intangible	assets,	including	computer	software,	is	based	on	studies	and	valuations	that	were	finalized	as	of September	30,	2006.	As	a	result,	during	the	quarter	ended	September	30,	2006,	the	Company	has	adjusted	its	initial	purchase	accounting	to	reflect revalued	customer	contracts,	computer	software,	deferred	income	taxes	and	assumed	liabilities	which	resulted	in	a	net	adjustment	to	goodwill	of $56.9	million.

      The	following	table	summarizes	the	liabilities	assumed	in	the	Certegy	Merger	(in	millions):

In	connection	with	the	Certegy	Merger,	the	Company	announced	that	it	will	terminate	and	settle	the	Certegy	U.S.	Retirement	Income	Plan (pension	plan).	The	estimated	impact	of	this	settlement	was	reflected	in	the	purchase	price	allocation	as	an	increase	in	the	pension	liability,	less	the fair	value	of	the	pension	plan	assets,	based	on	estimates	of	the	total	cost	to	settle	the	liability	through	the	purchase	of	annuity	contracts	or	lump sum	settlements	to	the	beneficiaries.	The	final	settlement	will	not	occur	until	after	an	IRS	determination	has	been	obtained,	which	is	expected	to	be received	in	2007.	In	addition	to	the	pension	plan	obligation,	the	Company	assumed	liabilities	for	Certegy's	Supplemental	Executive	Retirement Plan	("SERP")	and	Postretirement	Benefit	Plan.	The	total	liability

recorded	as	part	of	the	purchase	price	allocation	related	to	all	three	plans,	net	of	the	fair	value	of	plan	related	assets,	was	$32.6	million.

The	Company	has	evaluated	the	various	lease	agreements,	vendor	arrangements,	and	customer	contracts	of	Certegy.	This	evaluation	has resulted	in	the	recognition	of	certain	liabilities	associated	with	exiting	activities	of	the	acquired	company.

Also,	the	Certegy	Merger	triggered	the	performance	criteria	relating	to	FIS's	performance	stock	option	grant	made	in	March	2005	and	these awards	vested	when	the	trading	value	of	the	Company's	stock	remained	above	$31.27	for	45	consecutive	trading	days	following	the	Certegy Merger.	As	a	result,	the	Company	recorded	a	charge	of	$24.1	million	in	the	first	quarter	of	2006	and	recorded	an	additional	$0.4	million	in	the second	quarter	of	2006	relating	to	these	options	that	became	fully	vested	on	April	7,	2006.

# Significant	2005	acquisitions:

# Kordoba

On	September	30,	2005,	the	Company	completed	a	step	acquisition	and	acquired	the	remaining	25.1%	of	KORDOBA	Gesellschaft	fur Bankensoftware	mbH	&	Co.	KG,	Munich,	or	Kordoba,	a	provider	of	core	processing	software	and	outsourcing	solutions	to	the	German	banking market,	from	Siemens	Business	Services	GmbH	&	Co.	OHG	(Siemens).	The	original	purchase	of	74.9%	was	completed	September	30,	2004.	The total	acquisition	price	was	$163.2	million	in	cash	(which	includes	$39.7	million	for	the	subsequent	purchase	of	the	25.1%	minority	interest).	The Company	recorded	the	Kordoba	acquisition	based	on	its	proportional	share	of	the	fair	value	of	the	assets	acquired	and	liabilities	assumed	on	the respective	purchase	dates.

The	assets	acquired	and	liabilities	assumed	in	the	Kordoba	acquisition	(including	the	25.1%	minority	interest	acquisition)	were	as	follows	(in thousands):

Selected	unaudited	pro	forma	combined	results	of	operations	for	the	year	ended	December	31,	2006	and	2005,	assuming	the	Certegy	Merger and	the	Kordoba	minority	interest	acquisition	had	occurred	as	of	January	1,	2005,	and	using	actual	general	and	administrative	expenses	prior	to	the acquisition	are	set	forth	below	(in	thousands):

|  | 2006 | 2005 |
| :--- | :--- | :--- |
| Total\trevenue | $4,225,517 | $3,883,226 |
| Net\tearnings | $212,856 | $249,448 |
| Pro\tforma\tearnings\tper\tshare\t—\tbasic | $1.11 | $1.31 |
| Pro\tforma\tearnings\tper\tshare\t—\tdiluted | $1.09 | $1.30 |

The	December	31,	2006	pro	forma	results	include	pretax	merger	related	costs	recorded	in	January	2006	by	Certegy	of	$79.7	million	and	a pretax	charge	of	$24.5	million	related	to	FIS	performance-based	stock	compensation.

# Aurum	Technology,	Inc.

On	March	11,	2004,	FNF	acquired	Aurum	Technology,	Inc.	(Aurum)	for	$306.4	million,	comprised	of	$185.0	million	in	cash	and	FNF common	stock	valued	at	$121.4	million.	Aurum	is	a	provider	of	outsourced	and	in-house	information	technology	solutions	for	the	community	bank and	credit	union	markets.	The	assets	acquired	and	liabilities	assumed	in	the	Aurum	acquisition	were	as	follows	(in	thousands):

# Sanchez	Computer	Associates,	Inc.

On	April	14,	2004,	FNF	acquired	Sanchez	Computer	Associates,	Inc.	(Sanchez)	for	$183.7	million,	comprised	of	$88.1	million	in	cash	and FNF	common	stock	valued	at	$88.1	million	with	the	remaining	purchase	price	of	$7.5	million	relating	to	the	issuance	of	FNF	stock	options	for vested	Sanchez	stock	options.	Sanchez	develops	and	markets	scalable	and	integrated	software	and	services	that	provide	banking,	customer integration,	outsourcing	and	wealth	management	solutions	to	financial	institutions	in	several	countries.	Sanchez'	primary	application	offering	is Sanchez	Profiletm,	a	real-time,	multi-currency,	strategic	core	banking	deposit	and	loan	processing	system	that	can	be	utilized	on	both	an outsourced	and	in-house	basis.

      The	assets	acquired	and	liabilities	assumed	in	the	Sanchez	acquisition	were	as	follows	(in	thousands):

# InterCept,	Inc.

On	November	8,	2004,	the	Company	acquired	all	of	the	outstanding	stock	of	InterCept,	Inc.	(InterCept)	for	$18.90	per	share.	The	total purchase	price	was	approximately	$419.4	million	which	included	$407.3	million	of	cash	with	the	remaining	purchase	price	relating	to	the	issuance of	FNF	options	for	vested	InterCept	options.	InterCept	provides	both	outsourced	and	in-house,	fully	integrated	core-banking	solutions	for community	banks,	including	loan	and	deposit	processing	and	general	ledger	and	financial	accounting	operations.	InterCept	also	operates significant	item	processing	and	check	imaging	operations,	providing	imaging	for	customer	statements,	clearing	and	settlement,	reconciliation	and automated	exception	processing	in	both	outsourced	and	in-house	relationships	for	customers.

      The	assets	acquired	and	liabilities	assumed	in	the	InterCept	acquisition	were	as	follows	(in	thousands):

# Other	acquisitions:

The	following	transactions	with	acquisition	prices	between	$10	million	and	$100	million	were	acquired	by	the	Company,	or	by	FNF	and subsequently	contributed	to	the	Company,	during	the	period	from	January	1,	2004	through	December	31,	2006:

| Name	of	Company	Acquired | Date	Acquired | Purchase	Price |
| :--- | :--- | :--- |
| Fast\tFunds | February\t1,\t2006 | $14.0\tmillion |
| Proservvi\tEmpreendimentos\te\tServicos\tLtda. | July\t17,\t2006 | $16.2\tmillion |
| Watterson\tPrime,\tLLC | November\t2,\t2006 | $10.4\tmillion |
| Hansen\tQuality\tLoan\tServices,\tLLC(i) | February\t27,\t2004 | $34.0\tmillion |
| Bankware | April\t7,\t2004 | $55.7\tmillion |
| Geotrac,\tInc. | July\t2,\t2004 | $40.0\tmillion |
| ClearPar\tLLC | December\t13,\t2004 | $33.1\tmillion |

(i) Represents	purchase	by	FNF	of	the	remaining	45%	interest	not	already	owned	by	the	Company.

# Consolidated	joint	venture:

# Banco	Bradesco	S.A.	and	Banco	ABN	AMRO	Real

On	March	28,	2006,	the	Company	signed	a	definitive	agreement	to	form	a	venture	with	Banco	Bradesco	S.A.	and	Banco	ABN	AMRO	Real to	provide	comprehensive,	fully	outsourced	credit	and	prepaid	card	processing	services	to	Brazilian	card	issuers.	This	venture	will	position	the Company	as	the	leading	third-party	card	processor	in	Brazil.	The	Company	will	make	investments	of	approximately	$109	million	through	2008, including	$42	million	in	2006,	and	will	transfer	ownership	of	its	existing	Brazilian	card	operation	to	the	new	venture.	This	venture	is	consolidated into	the	Company's	financial	statements	based	on	the	Company's	controlling	interest	in	the	venture.

# (6)		Investment	in	Covansys	Corporation

On	September	15,	2004,	FNF	acquired	11	million	shares	of	common	stock	and	warrants	to	purchase	4	million	additional	shares	of	Covansys Corporation	(Covansys),	a	publicly	traded	U.S.	based	provider	of	application	management	and	offshore	outsourcing	services	with	India	based operations	for	$121.0	million	in	cash.	FNF	subsequently	contributed	the	common	stock	and	warrants	to	the	Company	which	resulted	in	the Company	owning	approximately	29%	of	the	common	stock	of	Covansys.	The	Company	accounts	for	the	investment	in	common	stock	using	the equity	method	of	accounting	and,	until	March	24,	2005,	accounted	for	the	warrants	under	SFAS	No.	133.	Under	SFAS	No.	133,	the	warrants	were considered	derivative	instruments	and	were	recorded	at	a	fair	value	of	approximately	$23.5	million	on	the	date	of	acquisition.	On	March	25,	2005, the	terms	of	the	warrants	were	amended	to	add	a	mandatory	holding	period	subsequent	to	exercise	of	the	warrants	and	eliminate	a	cashless	exercise option	available	to	the	Company.	Following	these	amendments,	the	accounting	for	the	warrants	is	now	governed	by	the

provisions	of	SFAS	No.	115,	Accounting	for	Certain	Investments	in	Debt	and	Equity	Securities,	and	changes	in	the	fair	value	of	the	warrants	are recorded	through	equity	in	other	comprehensive	earnings.	For	the	years	ended	December	31,	2006,	2005	and	2004,	the	Company	recorded $5.8	million,	$5.0	million	and	$2.0	million,	respectively	in	equity	earnings	(net	of	tax)	from	its	investment	in	Covansys.

# (7)		Property	and	Equipment

Property	and	equipment	as	of	December	31,	2006	and	December	31,	2005	consists	of	the	following	(in	thousands):

|  | December	31,<br>2006 | December	31,<br>2005 |
| :--- | :--- | :--- |
| Land | $20,735 | $9,235 |
| Buildings | 110,999 | 90,031 |
| Leasehold\timprovements | 52,932 | 33,779 |
| Computer\tequipment | 320,365 | 212,790 |
| Furniture,\tfixtures,\tand\tother\tequipment | 102,458 | 61,435 |
|  | 607,489 | 407,270 |
| Accumulated\tdepreciation\tand\tamortization | (261,690) | (186,845) |
|  | $345,799 | $220,425 |

Depreciation	and	amortization	expense	on	property	and	equipment	amounted	to	$97.7	million,	$68.4	million	and	$58.2	million	for	the	years ended	December	31,	2006,	2005	and	2004,	respectively.

The	Company,	through	the	Certegy	Merger	(note	5),	is	the	tenant	of	certain	real	property	located	in	St.	Petersburg,	Florida	(the	"Florida Leased	Property")	pursuant	to	the	terms	of	a	synthetic	lease	agreement	entered	into	by	Certegy	on	December	30,	1999	(the	"Florida	Lease")	with	a variable	interest	entity	(the	"VIE"),	as	landlord.	The	term	of	the	Florida	Lease	expires	on	September	17,	2009,	but	can	be	renewed	through September	17,	2014.	In	accordance	with	certain	provisions	of	FASB	Interpretation	No.	46	(revised	2003),	"Consolidation	of	Variable	Interest Entities,	an	Interpretation	of	Accounting	Research	Bulletin	No.	51"	("FIN	46"),	the	value	of	the	property,	equipment	and	debt	related	to	the	VIE	is included	in	the	Company's	Consolidated	Balance	Sheet	at	the	fair	value	on	the	date	of	acquisition.	At	December	31,	2006,	the	book	value	of	the land,	building	and	leasehold	improvements	related	to	the	VIE	which	is	included	in	the	Consolidated	Balance	Sheet	was	$28.2	million,	net	of accumulated	depreciation.

Changes	in	goodwill,	net	of	purchase	accounting	adjustments,	during	the	years	ended	December	31,	2006	and	2005	are	summarized	as follows	(in	thousands):

|  | Transaction<br>Processing<br>Services | Lender<br>Processing<br>Services | Total |
| :--- | :--- | :--- | :--- |
| Balance,\tDecember\t31,\t2004 | $680,212 | $1,077,545 | $1,757,757 |
| Goodwill\tacquired\tduring\t2005 | 26,220 | 3,736 | 29,956 |
| Balance,\tDecember\t31,\t2005 | 706,432 | 1,081,281 | 1,787,713 |
| Goodwill\tremoved\tdue\tto\tdeconsolidation\tof\tFNRES | — | (20,339) | (20,339) |
| Goodwill\tacquired\tduring\t2006 | 1,969,956 | 210 | 1,970,166 |
| Balance,\tDecember\t31,\t2006 | $2,676,388 | $1,061,152 | $3,737,540 |

# (9)		Intangible	Assets

Intangible	assets,	as	of	December	31,	2006,	consist	of	the	following	(in	thousands):

|  | Cost | Amortization | Net |
| :--- | :--- | :--- | :--- |
| Customer\trelationships | $1,217,603 | $449,540 | $768,063 |
| Trademarks | 241,915 | — | 241,915 |
|  | $1,459,518 | $449,540 | $1,009,978 |

|  | Cost | Amortization | Net |
| :--- | :--- | :--- | :--- |
| Customer\trelationships | $756,403 | $292,731 | $ 463,672 |
| Trademarks | 45,108 | — | 45,108 |
|  | $801,511 | $292,731 | $ 508,780 |

Amortization	expense	for	intangible	assets	with	definite	lives	was	$175.6	million,	$125.4	million	and	$104.9	million	for	the	years	ended December	31,	2006,	2005	and	2004	respectively.	Intangible	assets,	other	than	those	with	indefinite	lives,	are	amortized	over	their	estimated	useful lives	ranging	from	5	to	10	years	using	accelerated	methods.	Estimated	amortization	expense	for	the	next	five	years	is	$151.1	million	for	2007, $133.6	million	for	2008,	$114.2	million	for	2009,	$96.2	million	for	2010,	and	$74.2	million	for	2011.

# (10)		Computer	Software

Computer	software	as	of	December	31,	2006	and	December	31,	2005	consists	of	the	following	(in	thousands):

|  | December	31,<br>2006 | December	31,<br>2005 |
| :--- | :--- | :--- |
| Software\tfrom\tbusiness\tacquisitions | $461,535 | $327,346 |
| Capitalized\tsoftware\tdevelopment\tcosts | 421,231 | 264,537 |
| Purchased\tsoftware | 82,264 | 69,040 |
| Computer\tsoftware | 965,030 | 660,923 |
| Accumulated\tamortization | (324,215) | (208,930) |
| Computer\tsoftware,\tnet\tof\taccumulated\tamortization | $640,815 | $451,993 |

# (11)		Deferred	Contract	Costs

A	summary	of	deferred	contract	costs	as	of	December	31,	2006	and	December	31,	2005	is	as	follows	(in	thousands):

|  | December	31,<br>2006 | December	31,<br>2005 |
| :--- | :--- | :--- |
| Installations\tand\tconversions\tin\tprogress | $74,280 | $48,574 |
| Installations\tand\tconversions\tcompleted,\tnet | 120,901 | 116,381 |
| Other,\tnet | 38,815 | 18,308 |
| Total\tdeferred\tcontract\tcosts | $233,996 | $183,263 |

# (12)		Accounts	Payable	and	Accrued	Liabilities

Accounts	payable	and	accrued	liabilities	as	of	December	31,	2006	and	December	31,	2005	consist	of	the	following	(in	thousands):

|  | December	31,<br>2006 | December	31,<br>2005 |
| :--- | :--- | :--- |
| Salaries\tand\tincentives | $95,681 | $96,492 |
| Accrued\tbenefits | 25,264 | 24,346 |
| Trade\taccounts\tpayable | 96,554 | 43,648 |
| Other\taccrued\tliabilities | 302,517 | 145,105 |
|  | $520,016 | $309,591 |

Long-term	debt	as	of	December	31,	2006	and	December	31,	2005	consists	of	the	following	(in	thousands):

|  | December	31,<br>2006 | December	31,<br>2005 |
| :--- | :--- | :--- |
| 0.25%\tquarterly\tprincipal\tamortization,\trepaid\tJanuary\t18,\t2007 | $1,730,000 | $1,760,000 |
| 0.25%\tquarterly\tprincipal\tamortization,\trepaid\tJanuary\t18,\t2007 | 786,000 | 794,000 |
| Unsecured\tnotes,\tnet\tof\tdiscount,\tinterest\tpayable\tsemiannually\tat\t4.75%,\tdue\tSeptember\t2008 | 195,893 | — |
| portion\tof\t$240,080\tat\tDecember\t31,\t2006,\trepaid\tJanuary\t18,\t2007 | 159,920 | — |
| Other\tpromissory\tnotes\twith\tvarious\tinterest\trates\tand\tmaturities\t(at\tDecember\t31,\t2006\tincludes |  |  |
| $89.9\tmillion\tof\tnon-recourse\tdebt\tof\tFNF\tCapital) | 137,688 | 10,128 |
|  | 3,009,501 | 2,564,128 |
| Less\tcurrent\tportion | (61,661) | (33,673) |
| Long-term\tdebt,\texcluding\tcurrent\tportion | $2,947,840 | $2,530,455 |

On	March	9,	2005,	the	Company	entered	into	a	Credit	Agreement	with	Bank	of	America,	as	Administrative	Agent	and	other	financial institutions	(the	"BOA	Credit	Agreement").	The	BOA	Credit	Agreement	provided	for	an	$800	million	six-year	term	facility	("Term	A	Loans"),	a $2.0	billion	eight-year	term	facility	("Term	B	Loans")	(collectively	the	"Term	Loan	Facilities")	and	a	$400	million	revolving	credit	facility	(the "Revolver")	maturing	on	the	sixth	anniversary	of	the	closing	date.	The	Term	Loan	Facilities	were	fully	drawn	on	the	closing	date	while	the Revolver	was	undrawn	on	the	closing	date.	The	Company	had	provided	an	unconditional	guarantee	of	the	full	and	punctual	payment	of	the obligations	under	the	BOA	Credit	Agreement	and	related	loan	documents.

The	BOA	Credit	Agreement	contained	affirmative,	negative,	and	financial	covenants	customary	for	financings	of	this	type,	including,	among other	things,	limits	on	the	creation	of	liens,	limits	on	the	incurrence	of	indebtedness,	restrictions	on	investments	and	dispositions,	limitations	on dividends	and	other	restricted	payments	and	capital	expenditures,	a	minimum	interest	coverage	ratio,	and	a	maximum	secured	leverage	ratio.	The Company's	management	believes	that	the	Company	was	in	compliance	with	all	covenants	related	to	the	BOA	Credit	Agreements	at	December	31, 2006.

In	connection	with	the	new	Credit	Agreement	disclosed	below,	the	Company	terminated	the	Bank	of	America	Term	Loan	and	Revolver	on January	18,	2007	and	repaid	it	in	full	before	its	final	scheduled	expiration	date	of	March	9,	2013.	The	final	payment	was	approximately $2.64	billion,	including	principal,	interest	and	fees.	The	Company	incurred	no	early	termination	penalties	in	terminating	the	BOA	Credit Agreement.

On	January	18,	2007,	the	Company	entered	into	a	credit	agreement	with	JPMorgan	Chase	Bank,	N.A.,	as	Administrative	Agent,	Swing	Line Lender,	and	L/C	Issuer,	Bank	of	America,	N.A.,	as	Swing	Line	Lender,	and	other	financial	institutions	party	thereto	(the	"Credit	Agreement").	The Credit	Agreement	replaces	the	Bank	of	America	Term	Loan	and	Revolver	as	well	as	the	$100	million	Settlement	Facility.	The	Credit	Agreement, which	is

unsecured,	provides	for	a	committed	$2.1	billion	five-year	term	facility	denominated	in	U.S.	Dollars	(the	"JPM	Term	Loan")	and	a	committed $900	million	revolving	credit	facility	(the	"JPM	Revolving	Loan")	with	a	sublimit	of	$250	million	for	letters	of	credit	and	a	sublimit	of $250	million	for	swing	line	loans,	maturing	on	the	fifth	anniversary	of	the	closing	date	(the	"Maturity	Date").	The	JPM	Revolving	Loan	is bifurcated	into	a	$735	million	multicurrency	revolving	credit	loan	(the	"Multicurrency	Tranche")	that	can	be	denominated	in	any	combination	of U.S.	Dollars,	Euro,	British	Pounds	Sterling	and	Australian	Dollars,	and	any	other	foreign	currency	in	which	the	relevant	lenders	agree	to	make advances	and	a	$165	million	U.S.	Dollar	revolving	credit	loan	that	can	be	denominated	only	in	U.S.	Dollars.	The	swingline	loans	and	letters	of credit	are	available	as	a	sublimit	under	the	Multicurrency	Tranche.	In	addition,	the	Credit	Agreement	provides	for	an	uncommitted	incremental loan	facility	in	the	uncommitted	maximum	principal	amount	of	$600	million,	which	will	be	made	available	only	upon	receipt	of	further commitments	from	lenders	under	the	Credit	Agreement	sufficient	to	fund	the	amount	requested	by	the	Company.

The	Company	may	borrow,	repay	and	re-borrow	amounts	under	the	JPM	Revolving	Loan	from	time	to	time	until	the	maturity	of	the	JPM Revolving	Loan.	The	Company	must	make	quarterly	principal	payments	under	the	JPM	Term	Loan	in	scheduled	installments	of: (a)	$13,125,000	per	quarter	from	March	31,	2007	through	December	31,	2008;	(b)	$26,250,000	per	quarter	from	March	31,	2009	through December	31,	2009;	and	(c)	$52,500,000	per	quarter	from	March	31,	2010	through	September	30,	2011,	with	the	remaining	balance	of approximately	$1,522,500,000	payable	on	the	Maturity	Date.

The	outstanding	balance	of	the	Loans	bear	interest	at	a	floating	rate,	which	is	at	Company's	option,	either	(a)	the	eurocurrency	rate	plus	an applicable	margin	and	mandatory	cost	or	(b)	a	base	rate	plus	an	applicable	margin.	The	applicable	margin	is	subject	to	adjustment	based	on	a leverage	ratio	(total	indebtedness	to	EBITDA	of	the	Company	and	its	consolidated	subsidiaries,	as	further	defined	in	the	Credit	Agreement). Alternatively,	the	Company	has	the	ability	to	request	the	lenders	to	submit	competitive	bids	for	one	or	more	advances	under	the	JPM	Revolving Loan	("Bid	Rate	Advances").

The	Credit	Agreement	provides	procedures	for	lenders	to	submit	bids	for	Bid	Rate	Advances	and	for	the	Company	to	accept	or	reject	them. The	Credit	Agreement	contains	affirmative,	negative	and	financial	covenants	customary	for	financings	of	this	type,	including,	among	other	things, limits	on	the	creation	of	liens,	limits	on	the	incurrence	of	indebtedness,	restrictions	on	investments	and	dispositions,	limitations	on	dividends	and other	restricted	payments,	a	minimum	interest	coverage	ratio	and	a	maximum	leverage	ratio.	Upon	an	event	of	default,	the	Administrative	Agent can	accelerate	the	maturity	of	the	loan.	Events	of	default	include	conditions	customary	for	such	an	agreement,	including	failure	to	pay	principal	and interest	in	a	timely	manner	and	breach	of	certain	covenants.	The	Company's	management	believes	that	the	Company	was	in	compliance	with	all covenants	related	to	the	Credit	Agreement	at	December	31,	2006.

Through	the	Certegy	Merger,	the	Company	has	an	obligation	to	service	$200	million	(aggregate	principal	amount)	of	unsecured	4.75% fixed-rate	notes	due	in	2008.	The	notes	were	recorded	in	purchase	accounting	at	a	discount	of	$5.7	million,	which	is	being	amortized	over	the	term of	the	notes.	The	notes	accrue	interest	at	a	rate	of	4.75%	per	year,	payable	semi-annually	in	arrears	on	each	March	15	and	September	15.

On	April	11,	2005,	FIS	entered	into	interest	rate	swap	agreements	which	have	effectively	fixed	the	interest	rate	at	approximately	5.4% through	April	2008	on	$350	million	of	the	Term	Loan	Facilities	(or	its	replacement	debt)	and	at	approximately	5.2%	through	April	2007	on	an additional	$350	million	of	the	term	loan.	The	Company	has	designated	these	interest	rate	swaps	as	cash	flow	hedges	in	accordance	with SFAS	No.	133.	The	estimated	fair	value	of	the	cash	flow	hedges	results	in	an	asset	to	the	Company	of	$4.9	million	and	$5.2	million,	as	of December	31,	2006	and	December	31,	2005,	respectively,	which	is	included	in	the	accompanying	Consolidated	Balance	Sheets	in	other	noncurrent assets	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	Loan	Facilities. The	Company's	existing	cash	flow	hedges	are	highly	effective	and	there	is	no	current	impact	on	earnings	due	to	hedge	ineffectiveness.	It	is	the policy	of	the	Company	to	execute	such	instruments	with	credit-worthy	banks	and	not	to	enter	into	derivative	financial	instruments	for	speculative purposes.

Principal	maturities	at	December	31,	2006	(and	at	December	31,	2006	after	giving	effect	to	the	debt	refinancing	completed	on	January	18, 2007)	for	the	next	five	years	and	thereafter	are	as	follows	(in	thousands):

|  | December	31,<br>2006 | January	18,	2007<br>Refinancing |
| :--- | :--- | :--- |
| 2007 | $61,661 | $96,161 |
| 2008 | 257,541 | 282,041 |
| 2009 | 68,129 | 145,129 |
| 2010 | 33,586 | 215,586 |
| 2011 | 941,875 | 165,455 |
| Thereafter | 1,646,709 | 2,105,129 |
| Total | $3,009,501 | $3,009,501 |

Income	tax	expense	(benefit)	for	the	years	ended	December	31,	2006,	2005	and	2004	consists	of	the	following	(in	thousands):

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Current\tprovision\t(benefit): |  |  |  |
| Federal | $112,237 | $70,669 | $ 105,682 |
| State | 21,389 | 12,973 | 17,656 |
| Foreign | 4,922 | (9,114) | 6,008 |
| Total\tcurrent\tprovision | $138,548 | $74,528 | $ 129,346 |
| Deferred\tprovision\t(benefit): |  |  |  |
| Federal | $8,421 | $22,827 | $(11,242) |
| State | 765 | 3,172 | 239 |
| Foreign | 2,416 | 15,558 | — |
| Total\tdeferred\tprovision | 11,602 | 41,557 | (11,003) |
| Total\tprovision\tfor\tincome\ttaxes | $150,150 | $116,085 | $ 118,343 |

The	provision	for	income	taxes	is	based	on	pre-tax	income	from	continuing	operations,	which	is	as	follows	(in	thousands):

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| United\tStates | $379,307 | $305,199 | $ 309,030 |
| Foreign | 24,323 | 6,857 | 5,710 |
| Total | $403,630 | $312,056 | $ 314,740 |

Total	income	tax	expense	for	the	years	ended	December	31	was	allocated	as	follows	(in	thousands):

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Tax\texpense\tper\tstatements\tof\tearnings | $150,150 | $116,085 | $ 118,343 |
| Unrealized\tgain\t(loss)\ton\tCovansys\tWarrants | 6,457 | (2,200) | — |
| Unrealized\tgain\t(loss)\ton\tinterest\trate\tswaps | (111) | 2,000 | — |
| Unrealized\t(loss)\tgain\ton\tother\tinvestments | — | — | 100 |
| Unrealized\t(loss)\tgain\ton\tforeign\tcurrency\ttranslation | (21) | — | — |
| Minimum\tpension\tliability\tadjustment | (2,757) | (920) | — |
| Total\tincome\ttax\texpense\t(benefit)\tallocated\tto\tother\tcomprehensive\tincome | 3,568 | (1,120) | 100 |
| Tax\tbenefit\tfrom\texercise\tof\tstock\toptions | (31,212) | — | — |
| Total\tincome\ttax\texpense | $122,506 | $114,965 | $ 118,443 |

A	reconciliation	of	the	federal	statutory	income	tax	rate	to	the	Company's	effective	income	tax	rate	for	the	years	ended	December	31,	2006, 2005	and	2004	is	as	follows	(in	thousands):

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Federal\tstatutory\tincome\ttax\trate | \t 35.0% | \t 35.0% | \t 35.0% |
| State\tincome\ttaxes | 5.7 | 5.6 | 5.9 |
| Federal\tbenefit\tof\tstate\ttaxes | (2.1) | (2.1) | (2.1) |
| Change\tin\tvaluation\tallowance | 0.0 | 0.0 | (0.9) |
| Other | (1.4) | (1.3) | (0.3) |
| Effective\tincome\ttax\trate | \t 37.2% | \t 37.2% | \t 37.6% |

The	significant	components	of	deferred	income	tax	assets	and	liabilities	at	December	31,	2006	and	2005	consist	of	the	following	(in thousands):

|  | 2006 | 2005 |
| :--- | :--- | :--- |
| Deferred\tincome\ttax\tassets: |  |  |
| Deferred\trevenue | $78,322 | $88,272 |
| Net\toperating\tloss\tcarryforwards | 42,085 | 44,083 |
| Allowance\tfor\tdoubtful\taccounts | 10,562 | 5,637 |
| Employee\tbenefit\taccruals | 63,333 | 26,996 |
| Accruals\tand\tReserves | 29,448 | 6,269 |
| Foreign\ttax\tcredit\tcarryforwards | 12,746 | 11,052 |
| Other | 6,661 | 7,359 |
| Total\tgross\tdeferred\tincome\ttax\tassets | 243,157 | 189,668 |
| Less\tvaluation\tallowance | (8,296) | (9,203) |
| Total\tdeferred\tincome\ttax\tassets | 234,861 | 180,465 |
| Deferred\tincome\ttax\tliabilities: |  |  |
| Deferred\tcontract\tcosts | 65,544 | 55,538 |
| Amortization\tof\tgoodwill\tand\tintangible\tassets | 381,052 | 126,879 |
| Depreciation | 50,518 | 36,044 |
| Investment | 23,230 | 3,748 |
| Other | 2,382 | 5,604 |
| Total\tdeferred\tincome\ttax\tliabilities | 522,726 | 227,813 |
| Net\tdeferred\tincome\ttax\tliability | $287,865 | $47,348 |

Deferred	income	taxes	have	been	classified	in	the	Consolidated	Balance	Sheets	as	of	December	31,	2006	and	2005	as	follows	(in	thousands):

|  | 2006 | 2005 |
| :--- | :--- | :--- |
| Current\tassets | $108,398 | $ 105,845 |
| Noncurrent\tliabilities | 396,263 | 153,193 |
| Net\tdeferred\tincome\ttax\tliability | $287,865 | $47,348 |

Management	believes	that	based	on	its	historical	pattern	of	taxable	income,	the	Company	will	produce	sufficient	income	in	the	future	to realize	its	deferred	income	tax	assets.	A	valuation	allowance	is	established	for	any	portion	of	a	deferred	income	tax	asset	that	management believes	it	is	more	likely	than	not	that	the	Company	will	not	be	able	to	realize	the	benefits	of	such	deferred	income	tax	assets.	Adjustments	to	the valuation	allowance	will	be	made	if	there	is	a	change	in	management's	assessment	of	the	amount	of	deferred	income	tax	asset	that	is	realizable.

At	December	31,	2006	and	December	31,	2005,	the	Company	has	federal	net	operating	loss	carryforwards	of	$45.6	million	and $91.8	million,	respectively	which	expire	between	2019	and	2024.	The	Company	also	has	foreign	net	operating	losses	in	Canada,	Brazil,	Germany and	the	United	Kingdom.	The	Company	considers	the	need	for	a	valuation	allowance	on	a	country-by-country	basis	taking	into	account	the	effects of	local	tax	law.	Management	believes	that	there	is	sufficient	evidence	to	support	its	conclusion	not	to	record	a	valuation	allowance	for	the	net operating	loss	carryovers	except	for	$15.5	million	of	Canadian	net	operating	loss	carryover	which	are	not	deemed	realizable.	The	total	Canadian net	operating	loss	carryforwards	as	of	December	31,	2006	are	$20.5	million	which	will	begin	to	expire	in	2006	unless	the	Company	is	able	to implement	a	tax	planning	strategy	to	utilize	the	net	operating	losses.	As	of	December	31,	2006,	the	Company	has	a	valuation	allowance	against $15.5	million	of	the	Canadian	net	operating	losses	that	Company's	management	believes	it	is	more	likely	than	not	that	it	will	not	realize	any benefits.	At	December	31,	2006	and	December	31,	2005,	the	company	had	foreign	tax	credit	carryovers	of	$12.3	million	and	$11	million, respectively,	which	expire	between	2010	and	2025.	As	of	December	31,	2006,	the	Company	has	a	valuation	allowance	against	$2.3	million	of foreign	tax	credits	that	the	Company's	management	believes	it	is	more	likely	than	not	that	it	will	not	realize	the	benefit.

As	of	January	1,	2005,	the	Internal	Revenue	Service	selected	the	Company	to	participate	in	the	Compliance	Assurance	Program	(CAP) which	is	a	real-time	audit	for	2005	and	future	years.	The	Internal	Revenue	Service	has	completed	its	review	for	years	2002-2005	which	resulted	in an	immaterial	adjustment	for	tax	year	2004	related	to	a	temporary	difference	and	no	changes	to	any	other	tax	year.	Tax	year	2006	is	currently under	audit	by	the	IRS.	Currently	Management	believes	the	ultimate	resolution	of	the	2006	examination	will	not	result	in	a	material	adverse	effect to	the	Company's	financial	position	or	results	of	operations.

The	Company	provides	for	United	States	income	taxes	on	earnings	of	foreign	subsidiaries	unless	they	are	considered	permanently	reinvested outside	the	United	States.	At	December	31,	2006,	the	cumulative	earnings	on	which	United	States	taxes	have	not	been	provided	for	were $90	million.	If	these	earnings	were	repatriated	to	the	United	States,	they	would	generate	foreign	tax	credits	that	could	reduce	the	federal	tax liability	associated	with	the	foreign	dividend.

# (15)		Commitments	and	Contingencies

# Litigation

In	the	ordinary	course	of	business,	the	Company	is	involved	in	various	pending	and	threatened	litigation	matters	related	to	its	operations, some	of	which	include	claims	for	punitive	or	exemplary	damages.	The	Company

believes	that	no	actions,	other	than	the	matters	listed	below,	depart	from	customary	litigation	incidental	to	its	business.	As	background	to	the disclosure	below,	please	note	the	following:

•	The	Company	reviews	these	matters	on	an	on-going	basis	and	follows	the	provisions	of	SFAS	No.	5,	"Accounting	for	Contingencies" when	making	accrual	and	disclosure	decisions.	When	assessing	reasonably	possible	and	probable	outcomes,	the	Company	bases	its decision	on	its	assessment	of	the	ultimate	outcome	following	all	appeals.

Grace	originally	filed	a	lawsuit	in	December	2004	in	state	court	in	Monterey	County,	California,	alleging	that	the	Company	breached	the sales	agency	agreement	by	failing	to	pay	Grace	commissions	associated	with	sales	contracts	signed	in	2001	and	2003.	The	2001	contracts	were never	completed.	The	2003	contracts,	as	to	which	Grace	provided	no	assistance,	were	for	a	different	project	and	were	executed	one	and	one-half years	after	Grace's	sales	agency	agreement	was	terminated.	In	addition	to	its	breach	of	contract	claim,	Grace	also	alleged	that	the	Company violated	the	Foreign	Corrupt	Practices	Act	(FCPA)	in	its	dealings	with	a	bank	customer	in	China.	The	Company	denied	Grace's	allegations	in	this California	lawsuit.

In	December	2005,	the	Monterey	County	court	dismissed	the	lawsuit	on	the	grounds	of	inconvenient	forum,	which	decision	Grace	appealed on	February	10,	2006.	That	appeal	was	subsequently	dismissed	voluntarily	by	Grace.	On	March	6,	2006,	Grace	filed	a	new	lawsuit	in	the	United States	District	Court	for	the	Middle	District	of	Florida	seeking	the	recovery	of	over	$50	million	in	damages	arising	from	the	same	transaction,	and added	an	additional	allegation	to	its	complaint	that	the	Company	violated	the	Racketeer	Influenced	and	Corrupt	Organizations	Act	(RICO)	in	its dealings	with	the	same	bank	customer.	The	Company	intends	to	defend	this	case	vigorously.	On	March	7,	2006,	the	Company	filed	its	motion	to dismiss	this	lawsuit,	and	on	March	27,	2006,	the	Company	filed	an	answer	denying	Grace's	underlying	allegations	and	counterclaiming	against Grace	for	tortious	interference	with	contract	and	abuse	of	process.	These	motions	have	all	been	fully	briefed	and	are	pending	before	the	Court.	A pretrial	management	order	has	been	entered	providing	for	discovery,	pretrial	motion	deadlines,	and,	if	necessary,	a	trial	in	the	later	part	of	2007.

The	Company	and	its	counsel	have	investigated	these	allegations	and,	based	on	the	results	of	the	investigations,	do	not	believe	that	there have	been	any	violations	of	the	FCPA	or	RICO,	or	that	the	ultimate	disposition	of	these	allegations	or	the	lawsuit	will	have	a	material	adverse impact	on	the	Company's	financial	position,	results	of	operations	or	cash	flows.	The	Company	is	fully	cooperating	with	the	Securities	and Exchange	Commission	and	the	U.S.	Department	of	Justice	in	connection	with	their	inquiry	into	these	allegations.

# Indemnifications	and	Warranties

The	Company	often	indemnifies	its	customers	against	damages	and	costs	resulting	from	claims	of	patent,	copyright,	or	trademark infringement	associated	with	use	of	its	software	through	software	licensing	agreements.	Historically,	the	Company	has	not	made	any	payments under	such	indemnifications,	but	continues	to	monitor	the	conditions	that	are	subject	to	the	indemnifications	to	identify	whether	it	is	probable	that a	loss	has	occurred,	and	would	recognize	any	such	losses	when	they	are	estimable.	In	addition,	the	Company	warrants	to	customers	that	its software	operates	substantially	in	accordance	with	the	software	specifications.	Historically,	no	costs	have	been	incurred	related	to	software warranties	and	none	are	expected	in	the	future,	and	as	such	no	accruals	for	warranty	costs	have	been	made.

As	a	condition	to	the	FNT	Distribution,	FNF	received	a	ruling	from	the	Internal	Revenue	Service	and	an	opinion	from	a	nationally recognized	accounting	firm,	together	to	the	effect	that	the	FNT	Distribution	would	be	tax	free	for	both	FNF	and	the	stockholders	of	FNF	under Section	355	and	related	provisions	of	the	Internal	Revenue	Code.	The	FNT	Distribution	would	become	taxable	to	FNF	(and	to	the	Company,	its successor	after	the	FNF	merger)	pursuant	to	Section	355(e)	of	the	Internal	Revenue	Code	if	50%	or	more	of	the	shares	of	either	FNF	common stock	(taking	into	account	the	Company's	common	stock,	as	successor	to	FNF	after	the	merger)	or	50%	or	more	of	the	FNT	common	stock	were acquired,	directly	or	indirectly,	as	part	of	a	plan	or	series	of	related	transactions	that	included	the	FNT	Distribution.	Because	the	FNF	stockholders owned	more	than	50%	of	the	Company's	common	stock	following	the	FNF	Merger,	the	merger,	standing	alone,	would	not	cause	the	distribution	to be	taxable	to	FNF	under	Section	355(e).	However,	if	the	Internal	Revenue	Service	successfully	asserted	that	acquisitions	of	FNF	common	stock	or the	Company's	common	stock,	either	before	or	after	the	distribution,	were	part	of	a	plan	or	series	of	related	transactions	that	included	the	FNT Distribution,	such	determination	likely	would	result	in	the	recognition	of	gain	by	FNF	under	Section	355(e)	taking	into	account	that	the	merger resulted	in	an	acquisition	of	approximately	49%	of	the	stock	of	the	Company	pursuant	to	a	plan	that	includes	the	FNT	Distribution.	Under	tax disaffiliation	agreements	executed	by	the	parties,	FNT	would	generally	be	required	to	indemnify	the	Company	(as	successor	to	FNF	after	the merger)	against	tax-related	losses	to	the	Company	that	arise	if	the	distribution	were	to	become	taxable	under	Section	355(e).	However,	the Company	would	be	required	to	indemnify	FNT	if	the	Company	had	taken	certain	actions	within	its	control	that	caused	the	FNT	Distribution	to	be taxable.	If	Section	355(e)	were	to	cause	the	FNT	Distribution	to	be	taxable	to	FNF	and	indemnifiable	by	FNT	or	the	Company,	the	FNT Distribution	would	remain	tax	free	to	FNF's	stockholders,	assuming	the	other	requirements	of	Section	355	were	otherwise	satisfied.

# Escrow	Arrangements

In	conducting	its	operations,	the	Company	routinely	holds	customers'	assets	in	escrow,	pending	completion	of	real	estate	transactions. Certain	of	these	amounts	are	maintained	in	segregated	bank	accounts	and	have	not	been	included	in	the	accompanying	Consolidated	Balance Sheets.	The	Company	has	a	contingent	liability	relating	to	proper	disposition	of	these	balances,	which	amounted	to	$2.2	billion	at	December	31, 2006.	As	a	result	of	holding	these	customers'	assets	in	escrow,	the	Company	has	ongoing	programs	for	realizing	economic	benefits	during	the	year through	favorable	borrowing	and	vendor	arrangements	with	various	banks.	There	were	no	investments	or	loans	outstanding	as	of	December	31, 2006	related	to	these	arrangements.

# Leases

The	Company	leases	certain	of	its	property	under	leases	which	expire	at	various	dates.	Several	of	these	agreements	include	escalation	clauses and	provide	for	purchases	and	renewal	options	for	periods	ranging	from	one	to	five	years.

Future	minimum	operating	lease	payments	for	leases	with	remaining	terms	greater	than	one	year	for	each	of	the	years	in	the	five	years	ending December	31,	2011,	and	thereafter	in	the	aggregate,	are	as	follows	(in	thousands):

In	addition,	the	Company	has	operating	lease	commitments	relating	to	office	equipment	and	computer	hardware	with	annual	lease	payments of	approximately	$16	million	per	year	which	renew	on	a	short-term	basis.

Rent	expense	incurred	under	all	operating	leases	during	the	years	ended	December	31,	2006,	2005	and	2004	was	$81.5	million,	$61.1	million and	$52.6	million,	respectively.

Data	Processing	Services	Agreements.		The	Company,	through	the	Certegy	Merger	(note	5),	has	agreements	with	IBM	and	Proceda,	which expire	between	2007	and	2017,	for	portions	of	its	computer	data	processing	operations	and	related	functions.	The	Company's	estimated	aggregate contractual	obligation	remaining	under	these	agreements	is	approximately	$519.1	million	as	of	December	31,	2006.	However,	this	amount	could be	more	or	less	depending	on	various	factors	such	as	the	inflation	rate,	the	introduction	of	significant	new	technologies,	or	changes	in	the Company's	data	processing	needs.	The	Company	is	still	in	the	process	of	evaluating	certain	of	these	agreements	and,	as	part	of	the	integration plans	resulting	from	the	Certegy	Merger,	has	decided	to	terminate	one	of	these	plans	and	may	ultimately	terminate	additional	agreements.	The Company	must	pay	a	termination	charge	for	the	agreement	that	has	been	cancelled	and	will	have	to	pay	additional	charges	in	the	event	of	further terminations.

Synthetic	Leases.		As	discussed	in	Note	7,	the	Company	is	the	tenant	of	the	Florida	Leased	Property.	The	original	cost	to	the	lessor	of	the Florida	Leased	Property	when	Certegy	entered	into	the	Florida	Lease	was	approximately	$23.2	million.	Subject	to	the	satisfaction	of	certain conditions,	upon	the	expiration	(or	any	earlier	termination)	of	the	Florida	Lease,	the	Company	will	be	obligated	to	acquire	the	Florida	Leased Property	at	its	original	cost.

Additionally,	a	February	1,	2006	amendment	to	the	Florida	Lease	included	a	provision	that	would	require	the	Company	to	purchase	the Florida	Leased	Property	at	its	original	cost	if,	by	May	1,	2006,	the	lender	financing	the	Florida	Lease	had	concluded	either	that:	(i)	the	current value	of	the	Florida	Leased	Property	(as	reflected	on	an	appraisal	being	performed	at	the	direction	of	the	lender)	was	not	sufficient	for	the	original cost	of	the	Florida	Leased	Property	to	constitute	no	more	than	70%	of	the	current	value	(but,	instead	of	being	required	to	purchase	the	Florida Leased	Property,	the	Company	would	have	the	right	to	repay	a	sufficient	portion	of	the	lessor's	original	cost	to	maintain	such	70%	limit);	or (ii)	environmental	conditions	existed	in	connection	with	the	Florida	Leased	Property	(other	than	to	the	extent	previously	disclosed	by	the	Company to	the	lender)	that	could	adversely	affect	the	Florida	Leased	Property.

The	Florida	Lease	was	subsequently	amended	on	April	28,	2006	to	(i)	provide	the	lender	with	the	right	to	obtain	appraisals	on	the	Florida Leased	property	in	the	future;	and	(ii)	if	the	current	value	of	the	Florida	Leased	Property	(as	reflected	in	the	most	recently	obtained	appraisal)	is	not sufficient	for	the	original	cost	of	the	Florida	Leased	Property	to	constitute	no	more	than	70%	of	the	current	value,	provide	the	Lender	with	the	right to	demand	that	the	Company	(at	the	Company's	election)	either	prepay	the	lease	balance	or	provide	cash	collateral	so	that	after	giving	effect	to such	prepayment	or	cash	collateral	the	current	value	of	the	Florida	Lease	Property	(as	reflected	in	such	appraisal)	is	sufficient	for	the	original	cost of	the	Florida	Leased	Property	to	constitute	no	more	than	70%	of	the	current	value.

The	Company	also	has	a	synthetic	lease	arrangement	(the	"Wisconsin	Lease")	which	is	not	included	in	the	Company's	Consolidated	Balance Sheet	with	respect	to	its	facilities	in	Madison,	Wisconsin	(the	"Wisconsin	Leased	Property").	In	connection	with	the	Certegy	Merger,	the	term	of the	Wisconsin	Lease	was	amended	so	that	it	was	scheduled	to	expire	on	December	31,	2006.	The	term	of	the	Wisconsin	Lease	has	since	been further	amended	to	extend	the	expiration	date	to	June	30,	2007.	The	original	cost	to	the	lessor	of	the	Wisconsin	Leased	Property	when	Certegy entered	into	the	Wisconsin	Lease	was	approximately	$10.1	million.	Subject	to	the	satisfaction	of	certain	conditions,	the	Company	has	the	option	to acquire	the	Wisconsin	Leased	Property	at	its	original	cost,	or	to	direct	the	sale	of	the	Wisconsin	Leased	Property	to	a	third	party.

At	the	expiration	of	the	term	of	the	Wisconsin	Lease,	if	the	Wisconsin	Leased	Property	has	not	been	purchased	by	the	Company	or	sold	to	a third	party	at	the	direction	of	the	Company,	the	lessor	may	elect	to	sell	the	Wisconsin

Leased	Property.	If	the	proceeds	of	such	a	sale	do	not	cover	a	specified	percentage	of	the	original	cost	of	the	Wisconsin	Leased	Property,	then pursuant	to	the	provisions	of	a	residual	value	guarantee	made	by	the	Company	to	the	lessor	and	its	lender,	the	Company	is	obligated	to	pay	any resulting	shortfall	(but	not	more	than	approximately	$8.1	million).	Based	on	the	current	fair	market	value	of	the	Wisconsin	Leased	Property,	the Company	does	not	expect	to	be	required	to	make	payments	under	this	residual	value	guarantee.

# (16)		Employee	Benefit	Plans

# Stock	Purchase	Plan

Prior	to	the	Certegy	Merger	(note	5),	FIS	employees	participated	in	the	Fidelity	National	Financial,	Inc.	Employee	Stock	Purchase	Plan (ESPP).	Subsequent	to	the	Certegy	Merger,	the	Company	instituted	its	own	plan	with	the	same	terms	as	the	Fidelity	National	Financial,	Inc.	plan. Under	the	terms	of	both	plans	and	subsequent	amendments,	eligible	employees	may	voluntarily	purchase,	at	current	market	prices,	shares	of	FNF's (prior	to	the	FNF	merger)	or	FIS's	(post	FNF	merger)	common	stock	through	payroll	deductions.	Pursuant	to	the	ESPP,	employees	may	contribute an	amount	between	3%	and	15%	of	their	base	salary	and	certain	commissions.	Shares	purchased	are	allocated	to	employees,	based	upon	their contributions.	The	Company	contributes	varying	matching	amounts	as	specified	in	the	ESPP.	The	Company	recorded	an	expense	of	$13.1	million, $11.1	million,	and	$8.1	million,	respectively,	for	the	years	ended	December	31,	2006,	2005	and	2004	relating	to	the	participation	of	FIS	employees in	the	ESPP.

# 401(k)	Profit	Sharing	Plan

The	Company's	employees	are	covered	by	a	qualified	401(k)	plan.	Prior	to	the	Certegy	Merger,	this	plan	was	sponsored	by	FNF.	Eligible employees	may	contribute	up	to	40%	of	their	pretax	annual	compensation,	up	to	the	amount	allowed	pursuant	to	the	Internal	Revenue	Code.	The Company	generally	matches	50%	of	each	dollar	of	employee	contribution	up	to	6%	of	the	employee's	total	eligible	compensation.	The	Company recorded	$19.0	million,	$15.7	million	and	$12.7	million,	respectively,	for	the	years	ended	December	31,	2006,	2005	and	2004	relating	to	the participation	of	FIS	employees	in	the	401(k)	plan.

# Stock	Option	Plans

In	2005,	the	Company	adopted	the	FIS	2005	Stock	Incentive	Plan	(the	"Plan").	As	of	December	31,	2006	and	2005,	there	were	6,726,667 and	8,985,421	options	outstanding	under	this	plan,	respectively,	at	a	strike	price	of	$15.63	per	share	(as	adjusted	for	the	.6396	exchange	ratio	in	the Certegy	transaction).	These	stock	options	were	granted	at	the	fair	value	of	the	Company's	stock	on	the	grant	date	based	on	the	price	for	which	the Company	sold	32	million	shares	(a	25%	interest)	to	the	financial	sponsors	in	the	recapitalization	transaction	on	March	9,	2005.	The	Plan	provides for	the	grant	of	stock	options	and	restricted	stock,	representing	up	to	10,371,892	shares.	The	options	granted	thus	far	under	this	plan	have	a	term	of 10	years	and	vest	over	either	a	4	or	5	year	period	(the	"time-based	options")	on	a	quarterly	basis	or	based	on	specific	performance	criteria	(the "performance-based	options").	The	time-based	options	vest	with	respect	to	1/16	or	1/20	of	the	total	number	of	shares	subject	to	such	time-based options	on	the	last	day	of	each	fiscal	quarter.	The	performance-based	options	vest	for	certain	key	employees	in	the	event	of	a	change	in	control	or after	an	initial	public	offering	solely	if	one	of	the	following	targets	shall	be	met:	(a)	50%	of	the	total	number	of	shares	subject	to	such	performance based	options	vest	if	the	public	trading	value	of	a	share	of	common	stock	equals	at	least	$27.36	and	(b)	100%	of	the	total	number	of	shares	subject to	such	performance	based	options	will	vest	if	the	public	trading	value	of	a	share	of	common	stock	equals	at	least	$31.27,	provided	the	optionee's service	has	not	terminated	prior	to	the	applicable	vesting	date.	For	the	remaining	employees,	vesting	of	the	performance-based	options	occurs	in the	event	of	a	change	in	control	or	an	initial	public	offering	and	if	the	public	trading	value	of	common	stock	equals	at	least	$31.27	provided	the optionee's	service	with	FIS	has	not	terminated	prior	to	the	applicable	vesting	date.

Through	the	Certegy	Merger,	the	Company	assumed	the	Certegy	Inc.	Stock	Incentive	Plan	that	provides	for	the	issuance	of	qualified	and non-qualified	stock	options	to	officers	and	other	key	employees	at	exercise	prices	not	less	than	market	on	the	date	of	grant.	All	options	and	awards outstanding	prior	to	the	Certegy	Merger	under	the	Certegy	Plan	were	fully	vested	as	of	the	Certegy	Merger	date.	As	part	of	the	Certegy	Merger,	the Certegy	shareholders	approved	amendments	to	the	plan	and	approved	an	additional	6	million	shares	to	be	made	available	under	the	plan.	During the	period	from	February	1,	2006	through	December	31,	2006,	the	Company	has	granted	4,693,000	options	under	this	plan.	There	were	7,773,588 options	outstanding	under	this	plan	at	December	31,	2006.

On	November	9,	2006,	as	part	of	the	closing	of	the	FNF	Merger,	the	Company	assumed	certain	options	and	restricted	stock	grants	that	the Company's	employees	and	directors	held	in	FNF	in	certain	FNF	stock	option	plans.	The	Company	assumed	2,731,770	options	to	replace approximately	4.9	million	outstanding	FNF	options	per	the	FNF	Merger	Agreement.	The	Company	also	assumed	0.1	million	shares	of	restricted stock.

Certain	FIS	employees	are	participants	in	FNF's	stock-based	compensation	plans,	which	provide	for	the	granting	of	incentive	and nonqualified	stock	options,	restricted	stock	and	other	stock-based	incentive	awards	for	officers	and	key	employees.	Grants	of	incentive	and nonqualified	stock	options	under	these	plans	have	generally	provided	that	options	shall	vest	equally	over	three	years	and	generally	expire	ten years	after	their	original	date	of	grant.	All	options	granted	under	these	plans	have	an	exercise	price	equal	to	the	market	value	of	the	underlying common	stock	on	the	date	of	grant.	There	were	no	FNF	options	granted	to	FIS	employees	in	the	year	ended	December	31,	2006	and	2005.	The Company	recorded	expense	relating	to	FNF	options	of	$3.8	million	$15.4	million	and	$3.8	million	in	the	years	ended	December	31,	2006,	2005 and	2004,	respectively.	All	FNF	options	and	restricted	stock	for	which	the	Company	now	records	expense	were	converted	into	FIS	options	and restricted	stock	in	the	FNF	Merger	noted	above.

The	following	schedule	summarizes	the	stock	option	activity	for	the	years	ended	December	31,	2006	and	2005:

|  | Shares | Average<br>Exercise	Price |
| :--- | :--- | :--- |
| Balance,\tDecember\t31,\t2004 | —\t $— | —\t $— |
| Granted | 8,998,213 | 15.63 |
| Exercised | — | — |
| Cancelled | (12,792) | 15.63 |
| Balance,\tDecember\t31,\t2005 | 8,985,421 | $15.63 |
| Assumed\tin\tCertegy\tMerger | 4,419,788 | 27.23 |
| Assumed\tin\tthe\tFNF\tMerger | 2,731,770 | 25.72 |
| Granted | 4,693,000 | 39.75 |
| Exercised | (3,511,075) | 20.05 |
| Cancelled | (241,283) | 15.89 |
| Balance,\tDecember\t31,\t2006 | 17,077,621 | $26.02 |

The	intrinsic	value	of	options	exercised	during	the	year	ended	December	31,	2006	was	$68.1	million.	There	were	no	options	exercised	during the	year	ended	December	31,	2005.

The	following	table	summarizes	information	related	to	stock	options	outstanding	and	exercisable	as	of	December	31,	2006:

| Outstanding	Options | Outstanding	Options | Outstanding	Options | Outstanding	Options | Outstanding	Options | Exercisable	Options | Exercisable	Options | Exercisable	Options | Exercisable	Options |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Range\tof\tExercise\tPrice | Number\nof\nOptions | Weighted\nAverage\nRemaining\nContractual\nLife | Weighted\nAverage\nExercise\nPrice | Intrinsic\nValue\tat\nDecember\t31,\n2006 | Number\nof\nOptions | Weighted\nAverage\nRemaining\nContractual\nLife | Weighted\nAverage\nExercise\nPrice | Intrinsic\nValue\tat\nDecember\t31,\n2006 |
|  |  |  |  | (In\tthousands) |  |  |  | (In\tthousands) |
| $\t3.11\t-\t$18.22 | 7,655,832 | 7.53 | $15.45 | $188,671 | \t 5,209,303 | 7.27 | $15.36 | $128,841 |
| $18.23\t-\t$24.37 | 1,227,650 | 5.01 | 22.36 | 21,769 | 882,881 | 4.68 | 22.34 | 15,668 |
| $24.38\t-\t$29.74 | 1,431,716 | 4.70 | 28.34 | 16,820 | \t 1,223,440 | 4.51 | 28.20 | 14,548 |
| $29.75\t-\t$30.56 | 21,443 | 3.62 | 30.45 | 207 | 21,443 | 3.62 | 30.45 | 207 |
| $30.57\t-\t$31.94 | 1,002,381 | 6.21 | 31.62 | 8,490 | 718,050 | 5.24 | 31.87 | 5,903 |
| $31.95\t-\t$32.44 | 665,385 | 4.87 | 32.24 | 5,223 | 665,385 | 4.87 | 32.24 | 5,223 |
| $32.45\t-\t$35.25 | 9,294 | 5.71 | 34.02 | 57 | 9,294 | 5.71 | 34.02 | 57 |
| $35.26\t-\t$35.26 | 11,889 | 5.47 | 35.26 | 58 | 11,889 | 5.47 | 35.26 | 58 |
| $35.27\t-\t$39.48 | 2,186,606 | 6.49 | 39.08 | 2,217 | 92,538 | 5.18 | 38.71 | 128 |
| $39.49\t-\t$151.91 | 2,865,425 | 7.99 | 41.21 | — | 209,925 | 3.79 | 46.07 | — |
| $\t3.11\t-\t$151.91 | \t 17,077,621 | 6.87 | $26.02 | $243,512 | \t 9,044,148 | 6.19 | $21.36 | $170,633 |

The	Company	accounts	for	stock-based	compensation	using	the	fair	value	recognition	provisions	of	SFAS	No.	123R,	Share-Based	Payment ("SFAS	123R")	effective	as	of	January	1,	2006.	Prior	to	January	1,	2006,	the	Company	accounted	for	stock-based	compensation	using	the	fair value	recognition	provisions	of	SFAS	No.	123,	Accounting	for	Stock-Based	Compensation	("SFAS	No.	123")	which	the	Company	adopted	on January	1,	2003	under	the	prospective	method	as	permitted	by	SFAS	No.	148,	Accounting	for	Stock-Based	Compensation	—	Transition	and Disclosure	("SFAS	No.	148").	Under	this	method,	stock-based	employee	compensation	cost	was	recognized	from	the	beginning	of	2003	as	if	the fair	value	method	of	accounting	had	been	used	to	account	for	all	employee	awards	granted,	modified,	or	settled	in	years	beginning	after December	31,	2002.	The	Company	has	provided	for	stock	compensation	expense	of	$50.1	million,	$20.4	million	and	$15.4	million	for	2006,	2005 and	2004,	respectively,	which	is	included	in	selling,	general,	and	administrative	expense	in	the	Consolidated	and	Combined	Statements	of Earnings.	The	year	ended	2006	included	stock	compensation	expense	of	$24.5	million	relating	to	the	FIS	performance	based	options	granted	on March	9,	2005	for	which	the	performance	and	market	based	criteria	for	vesting	were	met	during	the	period	and	a	$6.1	million	charge	relating	to	the acceleration	of	option	vesting	per	the	FNF	Merger	Agreement.	There	was	no	material	impact	of	adopting	SFAS	No.	123R	as	all	options	related	to the	Company's	employees	from	FNF	grants	that	had	been	accounted	for	under	other	methods	were	fully	vested	as	of	December	31,	2005.	All grants	of	FIS	options	have	been	accounted	for	under	fair	value	accounting	under	SFAS	123	or	SFAS	123R.

The	fair	value	relating	to	the	time-based	options	granted	by	the	Company	in	2005	was	estimated	using	a	Black-Scholes	option-pricing	model, while	the	fair	value	relating	to	the	performance-based	options	was	estimated	using	a	Monte-Carlo	option	pricing	model	due	to	the	vesting characteristics	of	those	options,	as	discussed	above.	The	following	assumptions	were	used	for	the	4,798,747	time-based	options	granted	in	2005; the	risk	free	interest	rate	was	4.2%,	the	volatility	factor	for	the	expected	market	price	of	the	common	stock	was	44%,	the	expected	dividend	yield was	zero	and	weighted	average	expected	life	was	5	years.	The	fair	value	of	each	time-based	option	was	$6.79.	Since	the	Company	was	not	publicly traded	when	these	FIS	options	were	issued,	the	Company	relied	on	industry	peer	data	to	determine	the	volatility	assumption	and	for	the	expected life	assumption,	the	Company	used	an	average	of	several	methods,	including	FNF's	historical	exercise	history,	peer	firm	data,	publicly	available industry	data	and	the	Safe	Harbor	approach	as	stated	in	the	SEC	Staff	Accounting	Bulletin	107.	The	following	assumptions	were	used

for	the	valuation	of	the	4,199,466	performance-based	options	granted	in	2005:	the	risk	free	interest	rate	was	4.2%,	the	volatility	factor	for	the expected	market	price	of	the	common	stock	was	44%,	the	expected	dividend	yield	was	zero	and	the	objective	time	to	exercise	was	4.7	years	with an	objective	in	the	money	assumption	of	2.95	years.	It	was	also	expected	that	the	initial	public	offering	assumption	would	occur	within	a	9	month period	from	grant	date.	The	fair	value	of	the	performance-based	options	was	calculated	to	be	$5.85.

The	fair	value	for	FIS	options	granted	in	2006	was	estimated	at	the	date	of	grant	using	a	Black-Scholes	option-pricing	model	with	the following	weighted	average	assumptions.	The	risk	free	interest	rates	used	in	the	calculation	are	the	rate	that	corresponds	to	the	weighted	average expected	life	of	an	option.	The	risk	free	interest	rate	used	for	options	granted	during	2006	was	4.9%.	A	volatility	factor	for	the	expected	market price	of	the	common	stock	of	30%	was	used	for	options	granted	in	2006.	The	expected	dividend	yield	used	for	2006	was	0.5%.	A	weighted average	expected	life	of	6.4	years	was	used	for	2006.	The	weighted	average	fair	value	of	each	option	granted	during	2006	was	$15.52.

At	December	31,	2006,	the	total	unrecognized	compensation	cost	related	to	non-vested	stock	option	grants	is	$86.1	million,	which	is expected	to	be	recognized	in	pre-tax	income	over	a	weighted	average	period	of	1.9	years.

The	Company	intends	to	limit	dilution	caused	by	option	exercises,	including	anticipated	exercises,	by	repurchasing	shares	on	the	open	market or	in	privately	negotiated	transactions.	During	2006,	the	Company	repurchased	4,261,200	shares	at	an	average	price	of	$37.60.	On	October	25, 2006,	the	Company's	Board	of	Directors	approved	a	plan	authorizing	the	repurchase	of	up	to	an	additional	$200	million	worth	of	the	Company's common	stock.

# Defined	Benefit	Plans

# Certegy	Pension	Plan

In	connection	with	the	Certegy	Merger,	the	Company	announced	that	it	will	terminate	and	settle	the	Certegy	U.S.	Retirement	Income	Plan (USRIP).	The	estimated	impact	of	this	settlement	was	reflected	in	the	purchase	price	allocation	as	an	increase	in	the	pension	liability,	less	the	fair value	of	the	pension	plan	assets,	based	on	estimates	of	the	total	cost	to	settle	the	liability	through	the	purchase	of	annuity	contracts	or	lump	sum settlements	to	the	beneficiaries.	The	final	settlement	will	not	occur	until	after	an	IRS	determination	has	been	obtained,	which	is	expected	to	be received	in	2007.	In	addition	to	the	net	pension	plan	obligation	of	$21.6	million,	the	Company	assumed	liabilities	of	$8.0	million	for	Certegy's Supplemental	Executive	Retirement	Plan	("SERP")	and	$3.0	million	for	a	Postretirement	Benefit	Plan.

A	reconciliation	of	the	changes	in	the	fair	value	of	plan	assets	of	the	USRIP	for	the	period	from	February	1,	2006	through	December	31, 2006	is	as	follows	(in	thousands):

Benefits	paid	in	the	above	table	include	only	those	amounts	paid	directly	from	plan	assets.

As	of	December	31,	2006	and	for	2007	through	the	pay	out	of	the	pension	liability,	the	assets	are	being	invested	in	U.S.	Treasury	bonds	due to	the	short	duration	until	final	payment.

A	reconciliation	of	the	changes	in	the	benefit	obligations	under	the	USRIP	and	SERP	for	the	year	ended	December	31,	2006	is	as	follows	(in thousands):

The	funded	status	of	the	plans	at	December	31,	2006	was	a	liability	of	$20.7	million.	The	Company	recorded	a	pre-tax	adjustment	to	other long-term	liabilities	and	other	comprehensive	income	of	$6.9	million	relating	to	the	adoption	of	SFAS	158	relating	to	the	USRIP	and	SERP.

The	weighted-average	assumptions	used	to	determine	benefit	obligations	at	December	31,	2006	are	as	follows:

|  | USRIP<br>2006 | SERP<br>2006 |
| :--- | :--- | :--- |
| Discount\trate | 4.69% | 5.45% |
| Rate\tof\tcompensation\tincrease | N/A | 5.00% |

Net	periodic	benefit	cost	for	the	plans	includes	the	following	components	for	the	year	ended	December	31,	2006	(in	thousands):

|  | Retirement	Plans<br>2006 |
| :--- | :--- |
| Service\tcost | $131 |
| Interest\tcost | 3,423 |
| Expected\treturn\ton\tplan\tassets | (4,440) |
| Net\tperiodic\tbenefit\tcost | $886 |

The	weighted-average	assumptions	used	to	determine	periodic	benefit	cost	for	the	year	ended	December	31,	2006	are	as	follows:

|  | USRIP<br>2006 | SERP<br>2006 |
| :--- | :--- | :--- |
| Discount\trate | 4.75% | 5.40% |
| Expected\tlong-term\treturn\ton\tplan\tassets | 8.5% | N/A |
| Rate\tof\tcompensation\tincrease | N/A | 5.00% |

Information	about	the	expected	future	employer	contributions	and	benefit	payments	for	the	USRIP	and	the	SERP	is	as	follows	(in	thousands):

The	Company	expects	to	contribute	approximately	$14.0	million	to	the	USRIP	during	2007	in	order	to	fully	settle	and	liquidate	all	plan liabilities.	The	payout	of	the	SERP	plan	is	expected	to	be	when	its	only	participant	retires	which	is	assumed	to	be	2013.

In	connection	with	the	Kordoba	acquisition,	the	Company	assumed	Kordoba's	unfunded,	defined	benefit	plan	obligations.	These	obligations relate	to	retirement	benefits	to	be	paid	to	Kordoba's	employees	upon	retirement.	On	December	31,	2006,	2005	and	2004,	the	benefit	obligation	is as	follows	(in	thousands):

| Benefit	obligation	as	of	September	30,	2004 | $15,171 |
| :--- | :--- |
| Service\tcosts | 243 |
| Interest\tcosts | 199 |
| Actuarial\tadjustment\tand\tforeign\tcurrency\tloss,\tnet | 2,343 |
| Benefit\tobligation\tas\tof\tDecember\t31,\t2004 | 17,956 |
| Service\tcosts | 1,196 |
| Interest\tcosts | 853 |
| Benefit\tpayments | (148) |
| Actuarial\tadjustment\tand\tforeign\tcurrency\tloss,\tnet | 3,805 |
| Benefit\tobligation\tas\tof\tDecember\t31,\t2005 | 23,662 |
| Service\tcosts | 2,188 |
| Interest\tcosts | 1,070 |
| Benefit\tpayments | (136) |
| Actuarial\tadjustment\tand\tforeign\tcurrency\tloss,\tnet | 1,035 |
| Benefit\tobligation\tas\tof\tDecember\t31,\t2006 | $27,819 |

The	total	benefit	costs	for	the	years	ended	December	31,	2006,	2005	and	2004	for	these	plans	were	as	follows	(in	thousands):

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Service\tcost | $2,188 | $1,196 | $243 |
| Interest\tcost | 1,070 | 853 | \t 199 |
| Total\tbenefit\tcosts | $3,258 | $2,049 | $442 |

The	assumptions	used	to	determine	benefit	obligations	at	December	31,	2006,	2005	and	2004	and	the	periodic	benefit	cost	for	the	years ended	December	31,	2006,	2005	and	2004	were	as	follows	(in	thousands):

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Discount\trate | \t 4.50% | \t 4.25% | \t 5.25% |
| Salary\tprojection\trate | \t 2.50% | \t 2.25% | \t 2.25% |

Projected	payments	relating	to	these	liabilities	for	the	next	five	years	ending	December	31,	2011	and	the	period	from	2012	to	2016	are	as follows	(in	thousands):

| 2007 | $487 |
| :--- | :--- |
| 2008 | 775 |
| 2009 | 746 |
| 2010 | 785 |
| 2011 | 945 |
| 2012\t-\t2016 | 7,145 |

# (17)		Concentration	of	Risk

The	Company	generates	a	significant	amount	of	revenue	from	large	customers,	however,	no	customers	accounted	for	more	than	10%	of	total revenue	or	total	segment	revenue	in	the	years	ended	December	31,	2006,	2005	and	2004.

Financial	instruments	that	potentially	subject	the	Company	to	concentrations	of	credit	risk	consist	primarily	of	cash	equivalents	and	trade receivables.

The	Company	places	its	cash	equivalents	with	high	credit	quality	financial	institutions	and,	by	policy,	limits	the	amount	of	credit	exposure with	any	one	financial	institution.

Concentrations	of	credit	risk	with	respect	to	trade	receivables	are	limited	because	a	large	number	of	geographically	diverse	customers	make up	the	Company's	customer	base,	thus	spreading	the	trade	receivables	credit	risk.	The	Company	controls	credit	risk	through	monitoring procedures.

# (18)		Segment	Information

Upon	completion	of	the	Certegy	Merger,	the	Company	implemented	a	new	organizational	structure,	which	resulted	in	a	new	operating segment	structure	beginning	with	the	reporting	of	first	quarter	2006	results.	Effective	as	of	February	1,	2006,	the	Company's	operating	segments are	Transaction	Processing	Services,	or	TPS,	and	Lender	Processing	Services,	or	LPS.	This	structure	reflects	how	the	businesses	are	operated	and managed.	The	primary	components	of	the	TPS	segment,	which	includes	Certegy's	Card	and	Check	Services	and	the	financial	institution processing	component	of	the	former	Financial	Institution	Software	and	Services	segment	of	FIS,	are	Enterprise	Solutions,	Integrated	Financial Solutions	and	International	businesses.	The	primary	components	of	the	LPS	segment	are	Mortgage	Information	Services	businesses,	which includes	the	mortgage	lender	processing	component	of	the	former	Financial	Institution	Software	and	Services	segment	of	FIS,	and	the	former Lender	Services,	Default	Management,	and	Information	Services	segments	of	FIS.

Summarized	financial	information	concerning	the	Company's	segments	is	shown	in	the	following	tables.

As	of	and	for	the	year	ended	December	31,	2006	(in	thousands):

|  | Transaction<br>Processing<br>Services | Lender<br>Processing<br>Services | Corporate<br>and	Other | Total |
| :--- | :--- | :--- | :--- | :--- |
| Processing\tand\tservices\trevenues | $2,458,777 | $1,678,606 | $(4,781) | $4,132,602 |
| Cost\tof\trevenues | 1,914,148 | 1,015,419 | — | 2,929,567 |
| Gross\tprofit | 544,629 | 663,187 | (4,781) | 1,203,035 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 171,106 | 208,698 | 125,724 | 505,528 |
| Research\tand\tdevelopment\tcosts | 70,879 | 34,701 | — | 105,580 |
| Operating\tincome | 302,644 | 419,788 | (130,505) | 591,927 |
| Depreciation\tand\tamortization | $283,354 | $139,815 | $10,381 | $433,550 |
| Total\tassets | $5,071,453 | $1,858,348 | $700,759 | $7,630,560 |
| Goodwill | $2,676,388 | $1,061,152 | $— | $3,737,540 |

As	of	and	for	year	ended	December	31,	2005	(in	thousands):

|  | Transaction<br>Processing<br>Services | Lender<br>Processing<br>Services | Corporate<br>and	Other | Total |
| :--- | :--- | :--- | :--- | :--- |
| Processing\tand\tservices\trevenues | $1,208,430 | $1,562,161 | $(4,506) | $2,766,085 |
| Cost\tof\trevenues | 904,124 | 889,161 | — | 1,793,285 |
| Gross\tprofit | 304,306 | 673,000 | (4,506) | 972,800 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 94,889 | 234,655 | 93,079 | 422,623 |
| Research\tand\tdevelopment\tcosts | 85,702 | 27,796 | — | 113,498 |
| Operating\tincome | 123,715 | 410,549 | (97,585) | 436,679 |
| Depreciation\tand\tamortization | $148,850 | $144,593 | $6,194 | $299,637 |
| Total\tassets | $1,899,522 | $1,881,932 | $ 407,567 | $4,189,021 |
| Goodwill | $706,432 | $1,081,281 | $— | $1,787,713 |

|  | Transaction<br>Processing<br>Services | Lender<br>Processing<br>Services | Corporate<br>and	Other | Total |
| :--- | :--- | :--- | :--- | :--- |
| Processing\tand\tservices\trevenues | $892,033 | $1,445,008 | $(5,514) | $2,331,527 |
| Cost\tof\trevenues | 667,078 | 858,186 | (90) | 1,525,174 |
| Gross\tprofit | 224,955 | 586,822 | (5,424) | 806,353 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 99,581 | 261,045 | 71,684 | 432,310 |
| Research\tand\tdevelopment\tcosts | 54,038 | 20,176 | — | 74,214 |
| Operating\tincome | 71,336 | 305,601 | (77,108) | 299,829 |
| Depreciation\tand\tamortization | $96,879 | $138,392 | $3,129 | $238,400 |
| Total\tassets | $1,722,118 | $1,929,180 | $ 351,558 | $4,002,856 |
| Goodwill | $680,212 | $1,077,545 | $— | $1,757,757 |

The	Transaction	Processing	Services	segment	focuses	on	filling	the	processing	needs	of	large	financial	institutions,	commercial	lenders, independent	community	banks,	credit	unions	and	retailers.	The	primary	applications	are	software	applications	that	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.	This	segment	also	provides	a	number	of	complementary	applications	and	services	that interact	directly	with	the	core	processing	applications,	including	applications	that	facilitate	interactions	between	the	segment's	financial	institution customers	and	their	clients.	In	addition,	this	segment	includes	credit	card,	debit	card,	and	other	transaction	processing	and	check	risk	management services.	Included	in	this	segment	were	$450.0	million,	$184.3	million	and	$132.8	million	in	sales	to	non-U.S.	based	customers	in	the	years	ended December	31,	2006,	2005	and	2004,	respectively.	Also	included	in	this	segment	are	net	assets,	excluding	Goodwill	and	Other	Intangible	assets, located	outside	of	the	United	States	totaling	$296.5	million	at	December	31,	2006.	As	of	December	31,	2005	and	2004,	the	amount	of	net	assets located	outside	of	the	United	States	was	immaterial.	These	assets	are	predominately	located	in	Germany	and	South	America.

The	Lender	Processing	Services	segment	provides	a	comprehensive	range	of	products	and	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	products	and services	including	origination,	title	agency,	data	gathering,	risk	management,	servicing,	default	management	and	property	disposition	services	to lenders	and	other	real	estate	professionals.

The	Corporate	and	Other	segment	consists	of	the	corporate	overhead	costs	that	are	not	allocated	to	any	operating	segments.

# Item	9. Changes	in	and	Disagreements	with	Accountants	on	Accounting	and	Financial	Disclosure.

# Item	9A. Controls	and	Procedures.

As	of	the	end	of	the	year	covered	by	this	report,	the	Company	carried	out	an	evaluation,	under	the	supervision	and	with	the	participation	of its	principal	executive	officer	and	principal	financial	officer,	of	the	effectiveness	of	the	design	and	operation	of	its	disclosure	controls	and procedures,	as	such	term	is	defined	in	Rule	13a-15	(e)	under	the	Exchange	Act.	Based	on	this	evaluation,	the	Company's	principal	executive officer	and	principal	financial	officer	concluded	that	its	disclosure	controls	and	procedures	are	effective	to	provide	reasonable	assurance	that	its disclosure	controls	and	procedures	will	timely	alert	them	to	material	information	required	to	be	included	in	the	Company's	periodic	SEC	reports.

There	were	no	changes	in	our	internal	control	over	financial	reporting	that	occurred	during	the	most	recent	fiscal	quarter	that	have	materially affected,	or	are	reasonably	likely	to	materially	affect,	our	internal	control	over	financial	reporting.

# MANAGEMENT'S	REPORT	ON	INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

Management	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting,	as	such	term	is	defined	in Exchange	Act	Rules	13a-15(f).	Under	the	supervision	and	with	the	participation	of	our	management,	including	our	principal	executive	officer	and principal	financial	officer,	we	conducted	an	evaluation	of	the	effectiveness	of	our	internal	control	over	financial	reporting.	Management	has adopted	the	framework	in	Internal	Control	—	Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway Commission	(COSO).	Based	on	our	evaluation	under	this	framework,	our	management	concluded	that	our	internal	control	over	financial	reporting was	effective	as	of	December	31,	2006.	Our	management's	assessment	of	the	effectiveness	of	our	internal	control	over	financial	reporting,	and	the effectiveness	of	our	internal	control	over	financial	reporting,	as	of	December	31,	2006	have	been	audited	by	KPMG	LLP,	an	independent registered	public	accounting	firm,	as	stated	in	their	report	which	is	included	herein.

# Item	9B. Other	Information.

Within	120	days	after	the	close	of	its	fiscal	year,	the	Company	intends	to	file	with	the	Securities	and	Exchange	Commission	a	definitive proxy	statement	pursuant	to	Regulation	14A	of	the	Securities	Exchange	Act	of	1934	as	amended,	which	will	include	the	matters	required	by	these items.

# Item	15. Exhibits	and	Financial	Statement	Schedules

# (1)	Financial	Statement	Schedules:

All	schedules	have	been	omitted	because	they	are	not	applicable	or	the	required	information	is	included	in	the	consolidated	financial statements	or	notes	to	the	statements.

The	following	is	a	complete	list	of	exhibits	included	as	part	of	this	report,	including	those	incorporated	by	reference.	A	list	of	those documents	filed	with	this	report	is	set	forth	on	the	Exhibit	Index	appearing	elsewhere	in	this	report	and	is	incorporated	by	reference.

(1) Management	Contract	or	Compensatory	Plan.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be signed	on	its	behalf	by	the	undersigned,	thereunto	duly	authorized.

Lee	A.	Kennedy

President	and	Chief	Executive	Officer

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of the	registrant	and	in	the	capacities	and	on	the	dates	indicated.

# INDEX	TO	EXHIBITS

The	following	documents	are	being	filed	with	this	Report:


what portion of the total leased locations are in texas?
leased_locations_texas = 19
total_leased_locations = 63 + 81
percent_texas = leased_locations_texas / total_leased_locations
answer = percent_texas * 100