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Table of Contents



United States
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported):
April 26, 2006

Fidelity National Information Services, Inc.

(Exact name of Registrant as Specified in its Charter)

1-16427
(Commission File Number)

     
Georgia   58-2606325
(State or Other Jurisdiction of Incorporation or Organization)   (IRS Employer Identification Number)

601 Riverside Avenue
Jacksonville, Florida 32204

(Addresses of Principal Executive Offices)

(904) 854-8100
(Registrant’s Telephone Number, Including Area Code)


(Former Name or Former Address, if Changed Since Last Report)

     
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
   
o
  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
   
o
  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
   
o
  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
   
o
  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



 


TABLE OF CONTENTS

Item 2.02. Results of Operations and Financial Condition
Item 5.02. Election of Directors
Item 9.01. Financial Statements and Exhibits
SIGNATURE
EXHIBIT INDEX
EXHIBIT 99.1


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Item 2.02. Results of Operations and Financial Condition

On April 26, 2006, Fidelity National Information Services, Inc. issued an earnings release announcing its financial results for the First Quarter of 2006. The information in this Current Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

A copy of the earnings release is attached as Exhibit 99.1.

Item 5.02. Election of Directors

On April 26, 2006, James K. Hunt was elected to the Board of Directors of Fidelity National Information Services, Inc. (“FIS” or the “Company”) to fill the vacancy created by the resignation of Terry Christensen. Mr. Hunt is the founding Managing Partner of Bison Capital Asset Management, LLC, which is a multi-fund limited private equity partnership, which makes non-control equity investments in middle market growth companies, and has been for more than five years. Prior to founding Bison Capital, Mr. Hunt was the President of SunAmerica Corporate Finance and Executive Vice President of SunAmerica Investments (subsequently, AIG SunAmerica).
Mr. Hunt has not been appointed to any committees of the Board of FIS at this time.

Item 9.01. Financial Statements and Exhibits

(c) Exhibits

     
Exhibit
  Description
99.1
  Press release announcing Fidelity National Information Services, Inc. Reports First Quarter 2006 Earnings.

 


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SIGNATURE

Pursuant to the requirements 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.

         
  Fidelity National Information Services, Inc.
 
 
Date: May 2, 2006 By:   /s/ Jeffrey S. Carbiener  
    Name: Jeffrey S. Carbiener
Title: Executive Vice President and
Chief Financial Officer
 
       
 

 


Table of Contents

EXHIBIT INDEX

     
Exhibit
  Description
99.1
  Press release announcing Fidelity National Information Services, Inc. Reports First Quarter 2006 Earnings.

 

exv99w1
 

EXHIBIT 99.1
(Fidelity National Information Services Press Release)
Fidelity National Information Services, Inc. Reports First Quarter Earnings
Jacksonville, Fla. — April 26, 2006 — Fidelity National Information Services, Inc. (NYSE:FIS), today reported its operating results for the first quarter of 2006. The merger between Fidelity National Information Services and Certegy Inc. was completed February 1, 2006. In accordance with Generally Accepted Accounting Principles (“GAAP”), Certegy’s operating results for January 2006 and the first quarter of 2005 are excluded from FIS’ reported GAAP earnings.
     FIS’ operating results for the first quarter of 2006 and the comparable 2005 period are presented on a GAAP and on a pro forma basis, which management believes provides more meaningful comparisons between the two periods. Reconciliations between the aforementioned GAAP and pro forma results are provided in the attachments to this press release, which is posted on the company’s website at http://www.fidelityinfoservices.com.
         
GAAP   1st Quarter 2006   1st Quarter 2005
Total revenue
  $900.9 million   $651.6 million
Net Earnings
  $39.4 million   $44.6 million
Net Earnings Per Diluted Share
  $0.23   $0.35
     FIS’ results have been adjusted on a pro forma basis to reflect a January 1, 2005, effective date for the merger and the March 2005 recapitalization and sale of minority interests by FIS. Additionally, the pro forma results exclude merger related costs and the expense associated with the vesting of certain FIS performance based options issued in conjunction with the March 2005 recapitalization.
                 
Pro Forma (see Appendix)   1st Quarter 2006   1st Quarter 2005   % Chg  
Total Revenue
  $993.9 million   $914.0 million     8.7 %
EBITDA
  $244.6 million   $214.2 million     14.2 %
Pro Forma Net Earnings
  $58.6 million   $41.1 million     42.6 %
Pro Forma Net Earnings Per Diluted Share
  $0.30   $0.22     36.4 %
Cash Earnings
  $86.9 million   $74.3 million     16.9 %
Cash Earnings Per Diluted Share
  $0.45   $0.39     15.4 %
     “FIS generated excellent results in the first quarter, with revenue growth of 8.7% and EBITDA growth of 14.2%. This strong performance positions us solidly to achieve our full year objectives,” stated Chairman William P. Foley, II. “The merger integration effort is well under way, and we are beginning to realize tangible benefits from the combination.”

 


 

FIS presents its financial results in accordance with Generally Accepted Accounting Principles (“GAAP”). However, in order to provide the investment community with a more thorough means of evaluating the operating performance of its operations, FIS also reports several non-GAAP measures, including earnings before interest, taxes, depreciation and amortization (“EBITDA”), net earnings plus depreciation and amortization less capital expenditures (“Free Cash Flow”) and net earnings plus other intangible amortization, net of income tax (“Cash Earnings”). Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings.
Pro Forma Segment Information
     FIS’ Transaction Processing Services generated revenue of $592.5 million, or 5.8% over the prior-year period, driven by strong sales generated within the Integrated Financial Solutions product line. EBITDA increased 9.6% to $133.0 million.
     Lender Processing Services revenue increased 12.8% to $400.5 million, driven by market share gains, deeper penetration within its existing customer base and a 5.9% increase in the number of mortgage loans processed. EBITDA increased 9.8% to $134.2 million.
     Corporate expense for the first quarter of 2006 totaled $22.7 million. The $6.8 million, or 23.1%, decline from the prior-year quarter was primarily attributable to the consolidation of duplicate functions during the quarter. Interest expense for the quarter increased $6.6 million to $44.3 million, largely due to higher interest rates.
Outlook
     Management reiterated its pro forma earnings outlook for full year 2006, which excludes pre-tax merger and acquisition costs, pre-tax expense associated with performance based options, and approximately $0.06 per diluted share after-tax expense associated with the establishment of a previously announced joint venture in Brazil. This guidance is consistent with the guidance previously provided by the Company in a February 15, 2006, press release and Form 8-K filed with the Securities and Exchange Commission.
    Revenue growth of 4% to 6% over $3.9 billion combined revenue in 2005.
 
    EBITDA growth of 9% to 11% over $1.0 billion pro forma combined EBITDA in 2005.
 
    Pro forma full year 2006 earnings per diluted share of $1.50 to $1.55, compared to $1.28 pro forma earnings per diluted share in 2005.
 
    Pro forma cash earnings per diluted share of $2.11 to $2.17 compared to $1.92 pro forma cash earnings per diluted share in 2005.
 
    Free cash flow of approximately $475 million to $525 million.
     FIS will host a call with investors and analysts to discuss first quarter results on Thursday, April 27, 2006, beginning at 8:30 a.m. Eastern daylight time. Those wishing to participate via the webcast should access the call through FIS’ Investor Relations website at http://www.fidelityinfoservices.com. Those wishing to participate via the telephone may do so by calling 866-233-3843 (USA) or 612-332-0637 (International). The conference call replay will be available via webcast though FIS’ Investor Relations website. The telephone replay will be

 


 

available through May 4, 2006, by dialing 800-475-6701 (USA) or 320-365-3844 (International). The access code will be 825714.
About Fidelity National Information Services, Inc.
     Fidelity National Information Services, Inc. (NYSE:FIS) is a leading provider of core processing for financial institutions; card issuer and transaction processing services; mortgage loan processing and mortgage-related information products; and outsourcing services to financial institutions, retailers, mortgage lenders and real estate professionals. FIS has processing and technology relationships with 35 of the top 50 global banks, including nine of the top ten. Nearly 50 percent of all U.S. residential mortgages are processed using FIS software. Headquartered in Jacksonville, Florida, FIS maintains a strong global presence, serving over 7,800 financial institutions in more than 60 countries worldwide. For more information on Fidelity National Information Services, please visit www.fidelityinfoservices.com.
     FIS is a majority-owned subsidiary of Fidelity National Financial Inc. (NYSE:FNF), number 248 on the Fortune 500 and a provider of outsourced products and services to a variety of industries. More information about FNF can be found at www.fnf.com.
Forward-Looking Statements
     This press release contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future economic performance and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties which forward-looking statements are subject to include, but are not limited to: changes in general economic, business and political conditions, including changes in the financial markets; the risk that our recent merger with a subsidiary of Fidelity National Financial, Inc. may fail to achieve beneficial synergies or that it may take longer than expected to do so; the effects of our substantial leverage, which may limit the funds available to make acquisitions and invest in our business; the risks of reduction in revenue from the elimination of existing and potential customers due to consolidation in the banking, retail and financial services industries; failures to adapt our services to changes in technology or in the marketplace; adverse changes in the level of real estate activity, which would adversely affect certain of our businesses; our potential inability to find suitable acquisition candidates or difficulties in integrating acquisitions; significant competition that our operating subsidiaries face; and other risks detailed in the “Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of the Company’s Form 10-K and other filings with the Securities and Exchange Commission.
SOURCE: Fidelity National Information Services, Inc.
CONTACT: Mary Waggoner, Senior Vice President, Investor Relations, 904-854-3282,
mary.waggoner@fnf.com
###

 


 

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
UNAUDITED CONSOLIDATED AND COMBINED RESULTS FOR THE THREE MONTHS ENDING MARCH 31, 2006 AND 2005
(In thousands)
                 
    Three months ended March 31,  
    2006     2005  
Processing and services revenues
  $ 900,936     $ 651,580  
 
               
Cost of revenues
    622,337       430,075  
Selling, general, and administrative expenses
    145,729       110,556  
Research and development costs
    28,060       23,936  
 
           
 
               
Operating income
    104,810       87,013  
 
               
Other income (expense)
               
Interest income
    1,891       2,762  
Realized gains and losses
    (2,110 )     (3,297 )
Interest expense
    (43,268 )     (13,421 )
 
           
Total other income (expense)
    (43,487 )     (13,956 )
 
           
 
               
Earnings before income taxes, equity earnings and minority interest
    61,323       73,057  
Income tax expense
    23,487       28,054  
Equity in earnings of unconsolidated entities
    1,833       1,238  
Minority interest
    311       1,645  
 
           
 
               
Net earnings
  $ 39,358     $ 44,596  
 
           
 
               
Net earnings per share-basic
  $ 0.23     $ 0.35  
 
           
Weighted average shares outstanding-basic
    169,989       127,920  
 
           
Net earnings per share-diluted
  $ 0.23     $ 0.35  
 
           
Weighted average shares outstanding-diluted
    172,987       127,920  
 
           

 


 

Appendix A- Historical Detail and Reconciliation of Non-GAAP Measures for Continuing Operations
NOTE:   The Adjustments Column represents pro forma adjustments relating to the merger transaction between CEY and FIS, the recapitalization transaction at FIS in March 2005, and the purchase of the remaining minority interest in Kordoba in September 2005 to reflect such transactions as if they occurred January 1, 2005

EBITDA Detail
                                 
2006 Q1   FIS     CEY-Jan     ADJ     Pro Forma  
Net Earnings
  $ 39,358     $ (42,523 )     (3,708 )   $ (6,873 )
+ Interest Expense
    43,268       1,081             44,349  
+ Minority Interest
    311                   311  
+ Income Taxes
    23,487       (26,396 )     (2,626 )     (5,535 )
+ Depreciation/Amort
    96,795       4,274       6,856       107,925  
- Interest Income
    (1,891 )                 (1,891 )
- Equity in (Earnings) Loss of Unconsolidated Entities, net of tax
    (1,833 )                   (1,833 )
- Other (Income) Expense
    2,110       123               2,233  
     
EBITDA
  $ 201,605     $ (63,441 )   $ 522     $ 138,686  
     
EBITDA Margin
                                 
2006 Q1   FIS     CEY-Jan     ADJ     Pro Forma  
EBITDA
  $ 201,605     $ (63,441 )   $ 522     $ 138,686  
Revenue
  $ 900,936     $ 92,915     $     $ 993,851  
EBITDA Margin
    22.4 %     -68.3 %             14.0 %
EBIT Detail
                                 
2006 Q1   FIS     CEY-Jan     ADJ     Pro Forma  
Net Earnings
  $ 39,358     $ (42,523 )   $ (3,708 )   $ (6,873 )
+ Interest Expense
    43,268       1,081             44,349  
+ Minority Interest
    311                   311  
+ Income Taxes
    23,487       (26,396 )     (2,626 )     (5,535 )
- Interest Income
    (1,891 )                 (1,891 )
- Equity in (Earnings) Loss of Unconsolidated Entities, net of tax
    (1,833 )                 (1,833 )
- Other (Income) Expense
    2,110       123             2,233  
     
EBIT
  $ 104,810     $ (67,715 )   $ (6,334 )   $ 30,761  
     
EBIT Margin
                                 
2006 Q1   FIS     CEY-Jan     ADJ     Pro Forma  
EBIT
  $ 104,810     $ (67,715 )   $ (6,334 )   $ 30,761  
Revenue
  $ 900,936     $ 92,915     $     $ 993,851  
EBIT Margin
    11.6 %     -72.9 %             3.1 %
Adjusted Diluted EPS
                                 
2006 Q1   FIS     CEY-Jan     ADJ     Pro Forma  
Net Earnings
  $ 39,358     $ (42,523 )   $ (3,708 )   $ (6,873 )
Adjusted EPS
  $ 0.23                     $ (0.04 )
Diluted Shares Outstanding
    172,987                       195,111  
Cash Earnings
                                 
2006 Q1   FIS     CEY-Jan     ADJ     Pro Forma  
Net Earnings
  $ 39,358     $ (42,523 )   $ (3,708 )   $ (6,873 )
+ Tax Adjusted Purchase Price Amortization
    24,520       233       3,524       28,277  
     
Cash Earnings
  $ 63,878     $ (42,290 )   $ (184 )   $ 21,404  
     
Diluted Cash EPS
  $ 0.37                     $ 0.11  
Diluted Shares Outstanding
    172,987                       195,111  
Free Cash Flow
                                 
2006 Q1   FIS     CEY-Jan     ADJ   Pro Forma  
Net Earnings
  $ 39,358     $ (42,523 )   $ (3,708 )   $ (6,873 )
+ Depreciation/Amort
    96,795       4,274       6,856       107,925  
- Capital Expenditures
    (69,264 )     (5,200 )           (74,464 )
     
Free Cash Flow
  $ 66,889     $ (43,449 )   $ 3,148     $ 26,588  
Continued on the following page
 
                                 
2005 Q1   FIS     CEY     ADJ     Pro Forma  
Net Earnings
  $ 44,596     $ 21,155     $ (24,665 )   $ 41,086  
+ Interest Expense
    13,421       3,305       21,031       37,757  
+ Minority Interest
    1,645             (640 )     1,005  
+ Income Taxes
    28,054       12,757       (14,992 )     25,819  
+ Depreciation/Amort
    75,740       12,529       21,133       109,402  
- Interest Income
    (2,762 )                 (2,762 )
- Equity in (Earnings) Loss of Non-Consolidated Entities, net of tax
    (1,238 )                 (1,238 )
- Other (Income) Expense
    3,297       (165 )           3,132  
     
EBITDA
  $ 162,753     $ 49,581     $ 1,867     $ 214,201  
     
 
                                 
2005 Q1   FIS     CEY     ADJ     Pro Forma  
EBITDA
  $ 162,753     $ 49,581     $ 1,867     $ 214,201  
Revenue
  $ 651,580     $ 262,458     $     $ 914,038  
EBITDA Margin
    25.0 %     18.9 %             23.4 %
 
                                 
2005 Q1   FIS     CEY     ADJ     Pro Forma  
Net Earnings
  $ 44,596     $ 21,155     $ (24,665 )   $ 41,086  
+ Interest Expense
    13,421       3,305       21,031       37,757  
+ Minority Interest
    1,645             (640 )     1,005  
+ Income Taxes
    28,054       12,757       (14,992 )     25,819  
- Interest Income
    (2,762 )                 (2,762 )
- Equity in (Earnings) Loss of Non-Consolidated Entities, net of tax
    (1,238 )                 (1,238 )
- Other (Income) Expense
    3,297       (165 )           3,132  
     
EBIT
  $ 87,013     $ 37,052     $ (19,266 )   $ 104,799  
     
 
                                 
2005 Q1   FIS     CEY     ADJ     Pro Forma  
EBIT
  $ 87,013     $ 37,052     $ (19,266 )   $ 104,799  
Revenue
  $ 651,580     $ 262,458     $     $ 914,038  
EBIT Margin
    13.4 %     14.1 %             11.5 %
 
                                 
2005 Q1   FIS     CEY     ADJ     Pro Forma  
Net Earnings
  $ 44,596     $ 21,155     $ (24,665 )   $ 41,086  
Adjusted EPS
  $ 0.35                     $ 0.22  
Diluted Shares Outstanding
    127,920                       190,779  
 
                                 
2005 Q1   FIS     CEY     ADJ     Pro Forma  
Net Earnings
  $ 44,596     $ 21,155     $ (24,665 )   $ 41,086  
+ Tax Adjusted Purchase Price Amortization
    21,970       681       10,607       33,258  
     
Cash Earnings
  $ 66,566     $ 21,836     $ (14,058 )   $ 74,344  
     
Diluted Cash EPS
  $ 0.52                     $ 0.39  
Diluted Shares Outstanding
    127,920                   190,779  
 
                                 
2005 Q1   FIS     CEY     ADJ     Pro Forma  
Net Earnings
  $ 44,596     $ 21,155     $ (24,665 )   $ 41,086  
+ Depreciation/Amort
    75,740       12,529       21,133       109,402  
- Capital Expenditures
    (42,012 )     (12,037 )           (54,049 )
     
Free Cash Flow
  $ 78,324     $ 21,647     $ (3,532 )   $ 96,439  


 


 

Pro Forma Measures Excluding Selected Items
         
Pro Forma EBITDA
  $ 138,686  
Merger and Acquisition Costs
    81,751  
Performance Based Stock Option Costs
    24,130  
 
     
Pro Forma EBITDA, excluding selected items
  $ 244,567  
 
     
 
       
Pro Forma Net Earnings
    (6,873 )
Merger and Acquisition Costs, net of tax
    50,609  
Performance Based Stock Option Costs, net of tax
    14,888  
 
     
Pro Forma Net Earnings, excluding selected items
  $ 58,624  
 
     
 
       
Weighted Average Shares
    172,987  
Adjustment as if transaction took place 1/1/2005
    22,124  
 
     
Pro Forma Weighted Average Shares
    195,111  
 
     
 
       
Pro Forma Net Earnings per diluted share
  $ (0.04 )
Merger and Acquisition Costs per share
    0.26  
Performance Based Stock Option Costs per share
    0.08  
 
     
Pro Forma Net Earnings per diluted share, excluding selected items
  $ 0.30  
 
     
 
       
Pro Forma Cash Earnings
    21,404  
Merger and Acquisition Costs, net of tax
    50,609  
Performance Based Stock Option Costs, net of tax
    14,888  
 
     
Pro Forma Cash Earnings, excluding selected items
  $ 86,901  
 
     
Pro Forma Weighted Average Shares
    195,111  
 
       
Pro Forma Cash Earnings per diluted share
  $ 0.11  
Merger and Acquisition Costs per share
    0.26  
Performance Based Stock Option Costs per share
    0.08  
 
     
Pro Forma Cash Earnings per diluted share, excluding selected items
  $ 0.45  
 
     
 
       
Pro Forma Free Cash Flow
  $ 26,588  
Merger and Acquisition Costs, net of tax
    50,609  
Performance Based Stock Option Costs, net of tax
    14,888  
 
     
Pro Forma Free Cash Flow, excluding selected items
  $ 92,085  
 
     


 


 

Appendix B
Unaudited Pro Forma Combined Statement of Continuing Operations
for the Quarter Ended March 31, 2006
(In thousands Except Per Share Data)
                                                                 
                    Pro Forma                     Purchase Price     Cash          
    Certegy-Jan     FIS     Adjustments     Note     Pro Forma     Amortization     Earnings          
Total revenue
  $ 92,915     $ 900,936                     $ 993,851                          
Total cost of revenue
    73,218       622,337       6,856       (1 )     702,411                          
 
                                                       
Gross profit (loss)
    19,697       278,599       (6,856 )             291,440                          
General and administrative
    7,645       143,745       (522 )     (2 )     150,868                          
Research and development costs
          28,060                       28,060                          
Merger and Acquisition costs
    79,767       1,984                       81,751                          
 
                                                       
Income (loss) from operations
    (67,715 )     104,810       (6,334 )             30,761                          
Interest income (expense) and other
    (1,204 )     (43,487 )                   (44,691 )                        
 
                                                       
Income from continuing operations before tax and min. int
    (68,919 )     61,323       (6,334 )             (13,930 )                        
Provision for income tax
    (26,396 )     23,487       (2,626 )     (4 )     (5,535 )                        
 
                                                       
Income from continuing operations
    (42,523 )     37,836       (3,708 )             (8,395 )                        
Equity in earnings (loss) of unconsolidated entities, net
          1,833                     1,833                          
Minority interests in earnings, net of tax
          (311 )                   (311 )                        
 
                                                   
Net income
  $ (42,523 )   $ 39,358     $ (3,708 )           $ (6,873 )   $ 28,277     $ 21,404          
 
                                                   
Net income per share-basic
  $ (0.68 )   $ 0.23                     $ (0.04 )           $ 0.11          
 
                                                       
Pro forma Weighted average shares-basic
    62,326       169,989                       191,809               191,809          
 
                                                       
Net income per share-diluted
  $ (0.67 )   $ 0.23                     $ (0.04 )           $ 0.11          
 
                                                       
Pro forma Weighted average shares-diluted
    63,796       172,987                       195,111               195,111          
 
                                                       
 
                                                               
Pro Forma Net Earnings
                                  $ (6,873 )                        
Merger and Acquisition Costs, net of tax
                                    50,609                          
Performance Based Stock Option Costs, net of tax
                                    14,888                          
 
                                                             
Pro Forma Net Earnings, excluding selected items
                                  $ 58,623                          

 


 

Appendix B
Unaudited Pro Forma Combined Statement of Continuing Operations
for the Quarter Ended March 31, 2005
(In thousands Except Per Share Data)
                                                                                         
                                                                            Tax Adjusted        
                    Pro Forma                     Recapitalization     2005 FIS             Pro Forma,     Purchase Price        
    Certegy     FIS     Adjustments     Note     Pro Forma     Adjustments     Acquisitions     Note     as adjusted     Amortization     Cash Earnings  
Total revenue
  $ 262,458     $ 651,580                     $ 914,038                             $ 914,038                  
Total cost of revenue
    190,292       430,075       20,569       (1 )     640,678               564       (6 )     641,242                  
 
                    (258 )     (2 )                                                        
 
                                                                         
Gross profit (loss)
    72,166       221,505       (20,311 )             273,360             (564 )             272,796                  
General and administrative
    34,814       110,556       (1,309 )     (2 )     144,061                               144,061                  
Research and development costs
          23,936                       23,936                             23,936                  
Merger and Acquisition costs
    300             (300 )     (3 )                                                  
 
                                                                         
Income (loss) from operations
    37,052       87,013       (18,702 )             105,363             (564 )             104,799                  
Interest income (expense) and other
    (3,140 )     (13,956 )                   (17,096 )     (21,031 ) (5)                     (38,127 )                
 
                                                                         
Income from continuing operations before tax and min. int
    33,912       73,057       (18,702 )             88,267       (21,031 )     (564 )             66,672                  
Provision for income tax
    12,757       28,054       (6,958 )     (4 )     33,853       (7,824 )     (210 )             25,819                  
 
                                                                         
Income from continuing operations
    21,155       45,003       (11,744 )             54,414       (13,207 )     (354 )             40,853                  
Equity in earnings (loss) of unconsolidated entities, net
          1,238                     1,238                           1,238                  
Minority interests in earnings, net of tax
          (1,645 )                   (1,645 )             640               (1,005 )                
 
                                                                         
Net income
  $ 21,155     $ 44,596     $ (11,744 )           $ 54,007     $ (13,207 )   $ 286             $ 41,086     $ 33,258     $ 74,344  
 
                                                                     
Net income per share-basic
  $ 0.34     $ 0.35                     $ 0.28                             $ 0.22             $ 0.39  
 
                                                                             
Pro forma Weighted average shares-basic
    61,794       127,920                       189,714                               189,714               189,714  
 
                                                                             
Net income per share-diluted
  $ 0.34     $ 0.35                     $ 0.28                             $ 0.22             $ 0.39  
 
                                                                             
Pro forma Weighted average shares-diluted
    62,859       127,920                       190,779                               190,779               190,779  
 
                                                                             
for the Quarter Ended June 30, 2005
(In thousands Except Per Share Data)
                                                                                         
                                                                            Tax Adjusted        
                    Pro Forma                     Recapitalization     2005 FIS             Pro Forma,     Purchase Price        
    Certegy     FIS     Adjustments     Note     Pro Forma     Adjustments     Acquisitions     Note     as adjusted     Amortization     Cash Earnings  
Total revenue
  $ 276,023     $ 708,713     $             $ 984,736     $                     $ 984,736                  
Total cost of revenue
    196,466       453,504       20,570       (1 )     670,278             563       (6 )     670,841                  
 
                (262 )     (2 )                                                        
 
                                                                         
Gross profit (loss)
    79,557       255,209       (20,308 )             314,458             (563 )             313,895                  
General and administrative
    35,188       109,318       (1,310 )     (2 )     143,196                             143,196                  
Research and development costs
          28,303                       28,303                             28,303                  
Merger and Acquisition Costs
    992             (992 )     (3 )                                                
 
                                                                         
Income (loss) from operations
    43,377       117,588       (18,006 )             142,959             (563 )             142,396                  
Interest income (expense) and other
    (2,674 )     (38,038 )                   (40,712 )                           (40,712 )                
 
                                                                         
Income from continuing operations before tax and min. int
    40,703       79,550       (18,006 )             102,247             (563 )             101,684                  
Provision for income tax
    15,312       30,609       (6,698 )     (4 )     39,223             (209 )             39,014                  
 
                                                                         
Income from continuing operations
    25,391       48,941       (11,308 )             63,024             (354 )             62,670                  
Equity in earnings (loss) of unconsolidated entities, net
          2,244                     2,244                           2,244                  
Minority interests in earnings, net of tax
          (2,609 )                   (2,609 )           988               (1,621 )                
 
                                                                         
Net income
  $ 25,391     $ 48,576     $ (11,308 )           $ 62,659     $     $ 634             $ 63,293     $ 32,232     $ 95,525  
 
                                                                     
Net income per share-basic
  $ 0.41     $ 0.38                     $ 0.33                             $ 0.33             $ 0.50  
 
                                                                             
Pro forma Weighted average shares-basic
    61,899       127,920                       189,819                               189,819               189,819  
 
                                                                             
Net income per share-diluted
  $ 0.40     $ 0.38                     $ 0.33                             $ 0.33             $ 0.50  
 
                                                                             
Pro forma Weighted average shares-diluted
    63,029       127,920                       190,949                               190,949               190,949  
 
                                                                             

 


 

Appendix B
Unaudited Pro Forma Combined Statement of Continuing Operations
for the Quarter Ended September 30, 2005
(In thousands Except Per Share Data)
                                                                                         
                                                                            Tax Adjusted        
                    Pro Forma                     Recapitalization     2005 FIS             Pro Forma,     Purchase Price        
    Certegy     FIS     Adjustments     Note     Pro Forma     Adjustments     Acquisitions     Note     as adjusted     Amortization     Cash Earnings  
Total revenue
  $ 282,774     $ 698,109     $             $ 980,883     $                     $ 980,883                  
Total cost of revenue
    201,997       447,794       20,570       (1 )     670,099             563       (6 )     670,662                  
 
                (262 )     (2 )                                                        
 
                                                                         
Gross profit (loss)
    80,777       250,315       (20,308 )             310,784             (563 )             310,221                  
General and administrative
    30,749       93,047       (1,310 )     (2 )     122,486                             122,486                  
Research and development costs
          33,545                       33,545                             33,545                  
Merger and Acquisition Costs
    7,010             (7,010 )     (3 )                                                
 
                                                                         
Income (loss) from operations
    43,018       123,723       (11,988 )             154,753             (563 )             154,190                  
Interest income (expense) and other
    (2,451 )     (34,937 )                   (37,388 )                           (37,388 )                
 
                                                                         
Income from continuing operations before tax and min. int
    40,567       88,786       (11,988 )             117,365             (563 )             116,802                  
Provision for income tax
    17,900       31,112       (4,460 )     (4 )     44,552             (209 )             44,343                  
 
                                                                         
Income from continuing operations
    22,667       57,674       (7,528 )             72,813             (354 )             72,459                  
Equity in earnings (loss) of unconsolidated entities, net
          2,135                     2,135                           2,135                  
Minority interests in earnings, net of tax
          (1,917 )                   (1,917 )           740               (1,177 )                
 
                                                                         
Net income
  $ 22,667     $ 57,892     $ (7,528 )           $ 73,031     $     $ 386             $ 73,417     $ 29,227     $ 102,644  
 
                                                                     
Net income per share-basic
  $ 0.37     $ 0.45                     $ 0.38                             $ 0.39             $ 0.54  
 
                                                                             
Pro forma Weighted average shares-basic
    62,017       127,920                       189,937                               189,937               189,937  
 
                                                                             
Net income per share-diluted
  $ 0.36     $ 0.45                     $ 0.38                             $ 0.38             $ 0.54  
 
                                                                             
Pro forma Weighted average shares-diluted
    63,313       127,920                       191,233                               191,233               191,233  
 
                                                                             
for the Quarter Ended December 31, 2005
(In thousands Except Per Share Data)
                                                                                         
                                                                            Tax Adjusted        
                    Pro Forma                     Recapitalization     2005 FIS             Pro Forma,     Purchase Price        
    Certegy     FIS     Adjustments     Note     Pro Forma     Adjustments     Acquisitions     Note     as adjusted     Amortization     Cash Earnings  
Total revenue
  $ 295,886     $ 707,683     $             $ 1,003,569     $                     $ 1,003,569                  
Total cost of revenue
    202,826       461,912       20,570       (1 )     685,046                             685,046                  
 
                (262 )     (2 )                                                        
 
                                                                         
Gross profit (loss)
    93,060       245,771       (20,308 )             318,523                           318,523                  
General and administrative
    28,692       109,702       (1,310 )     (2 )     137,084                             137,084                  
Research and development costs
          27,714                       27,714                             27,714                  
Merger and Acquisition Costs
    2,860             (2,860 )     (3 )                                                
 
                                                                         
Income (loss) from operations
    61,508       108,355       (16,138 )             153,725                           153,725                  
Interest income (expense) and other
    (2,132 )     (39,701 )                   (41,833 )                           (41,833 )                
 
                                                                         
Income from continuing operations before tax and min. int
    59,376       68,654       (16,138 )             111,892                           111,892                  
Provision for income tax
    22,958       25,539       (6,003 )     (4 )     42,494                           42,494                  
 
                                                                         
Income from continuing operations
    36,418       43,115       (10,135 )             69,398                           69,398                  
 
                                                                         
Equity in earnings (loss) of unconsolidated entities, net
    (117 )     650                     533                           533                  
Minority interests in earnings, net of tax
          1,721                     1,721                           1,721                  
 
                                                                         
Net income
  $ 36,301     $ 45,486     $ (10,135 )           $ 71,652     $     $             $ 71,652     $ 29,162     $ 100,814  
 
                                                                     
Net income per share-basic
  $ 0.58     $ 0.36                     $ 0.38                             $ 0.38             $ 0.53  
 
                                                                             
Pro forma Weighted average shares-basic
    62,326       127,920                       190,246                               190,246               190,246  
 
                                                                             
Net income per share-diluted
  $ 0.57     $ 0.35                     $ 0.37                             $ 0.37             $ 0.52  
 
                                                                             
Pro forma Weighted average shares-diluted
    63,796       129,657                       193,453                               193,453               193,453  
 
                                                                             

 


 

Appendix B
Notes to Unaudited Pro Forma Combined Statements of Continuing Operations for the four quarters of the year ended December 31, 2005 and the quarter ended March 31, 2006
     These combined statements of continuing operations include the historical statements of continuing operations of Certegy and FIS as though the merger had occurred on January 1, 2005, adjusted for items related to the transaction as described below:
(1)   Reflects the increase in amortization expense as a result of allocating an assumed portion of the merger consideration to intangible assets of Certegy, namely customer relationship intangibles and acquired software, and amortizing such intangibles over their estimated useful lives commencing as of the assumed acquisition date, offset by the amortization expense for such intangibles actually recorded by Certegy during the respective periods. Customer relationships are being amortized over 10 years on an accelerated method. Acquired computer software is being amortized over its estimated useful life of up to 10 years on an accelerated method. The acquired trademarks are considered to have indefinite useful lives and, therefore, are not reflected in these adjustments. The increase in amortization expense is $111.7 million offset by historical amortization of $29.4 million, or $82.3 million for the year ended December 31, 2005 and is allocated straight-line over the four quarters as presented and for January 2006 prior to the merger.
 
(2)   Under the merger agreement, all Certegy stock options and restricted stock and restricted stock units will vest upon the closing of the merger. Accordingly, this adjustment reflects the elimination of historical stock compensation expense relating to the vesting of Certegy options in 2005, because such expense will be reflected at the time of closing of the merger. This adjustment amounts to a reduction in cost of revenues of $1.0 million and in selling, general and administrative costs of $11.2 million for the year ended December 31, 2005 and is allocated straight line over the four quarters presented and for the January 2006 period prior to the merger. Also, at closing, Certegy will grant approximately (1) 1.1 million options, which based on current assumptions, would have a fair value under SFAS No. 123R of approximately $11 per option, vesting over four years, and (2) 750,000 options, which based on current assumptions would have a fair value under SFAS No. 123R of approximately $12 per option, vesting over three years. The pro forma adjustment to increase stock compensation expense for these option grants is $5.9 million in 2005, all of which is reflected in selling, general and administrative costs and allocated straight line over the four quarters presented.
 
(3)   Reflects the removal of merger and acquisition costs that were recognized as expense by Certegy in 2005.
 
(4)   Reflects the tax benefit relating to the pro forma adjustments at the FIS tax rate of approximately 37.2% for the year ended December 31, 2005.
 
(5)   Reflects an increase in interest expense for the year ended December 31, 2005 of $21.0 million, as if the recapitalization completed on March 9, 2005 was completed on January 1, 2005.
 
(6)   This column represents the adjustments to purchase amortization and minority interest expense relating to the September 30, 2005 acquisition of the remaining 25.1% interest in Kordoba that FIS did not already own as if that acquisition occurred on January 1, 2005.

 


 

Appendix C
Unaudited Pro Forma and Historical Segment Information
for the Quarters Ended March 31, 2006 and 2005
(In thousands Except Per Share Data)
                                                                 
2006 - Quarter 1   Pro Forma     Historical  
    Transaction     Lender                     Transaction     Lender              
    Processing     Processing     Corporate and             Processing     Processing     Corporate and        
    Services     Services     Other     Total     Services     Services     Other     Total  
Processing and services revenue
    592,511       400,500       840       993,851       501,548       400,500       (1,112 )     900,936  
Cost of revenues
    467,890       234,521             702,411       387,816       234,521             622,337  
 
                                               
Gross profit
    124,621       165,979       840       291,440       113,732       165,979       (1,112 )     278,599  
Selling, general and admin costs
    43,926       59,063       129,630       232,619       39,516       59,063       47,150       145,729  
Research development costs
    19,077       8,983             28,060       19,077       8,983             28,060  
 
                                               
Operating income
    61,618       97,933       (128,790 )     30,761       55,139       97,933       (48,262 )     104,810  
Depreciation and amortization
    70,634       36,120       1,171       107,925       59,594       36,120       1,081       96,795  
 
                                               
EBITDA
    132,252       134,053       (127,619 )     138,686       114,733       134,053       (47,181 )     201,605  
 
                                               
 
                                                               
ProForma EBITDA
    132,252       134,053       (127,619 )     138,686                                  
Merger and Acquisition costs
    753       170       80,828       81,751                                  
Acceleration of performance-based shares
                24,130       24,130                                  
 
                                                       
ProForma EBITDA, excluding selected items
    133,005       134,223       (22,661 )     244,567                                  
                                                                 
2005 - Quarter 1   Pro Forma     Historical  
    Transaction     Lender                     Transaction     Lender              
    Processing     Processing     Corporate and             Processing     Processing     Corporate and        
    Services     Services     Other     Total     Services     Services     Other     Total  
Processing and services revenue
    560,284       354,867       (1,113 )     914,038       297,826       354,867       (1,113 )     651,580  
Cost of revenues
    437,462       203,780             641,242       226,295       203,780             430,075  
 
                                               
Gross profit
    122,822       151,087       (1,113 )     272,796       71,531       151,087       (1,113 )     221,505  
Selling, general and admin costs
    52,334       62,821       28,906       144,061       28,506       62,821       19,229       110,556  
Research development costs
    19,461       4,475             23,936       19,461       4,475             23,936  
 
                                               
Operating income
    51,027       83,791       (30,019 )     104,799       23,564       83,791       (20,342 )     87,013  
Depreciation and amortization
    70,375       38,502       525       109,402       37,039       38,502       199       75,740  
 
                                               
EBITDA
    121,402       122,293       (29,494 )     214,201       60,603       122,293       (20,143 )     162,753