##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For The Fiscal Year Ended June 30, 2006
 Commission File Number: 0-26802
 CheckFree Corporation
  Delaware
    
    58-2360335(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 4411 East Jones Bridge Road
Norcross, Georgia 30092
 (678) 375-3000
  Title of Each Class
    
    Name of Exchange on Which RegisteredCommon Stock, $.01 par value
    
    Nasdaq Global Select MarketPreferred Stock Purchase Rights
    
    Nasdaq Global Select Market
  þ o
 o þ
 þ o
 o
  þ o o
 o þ
   Documents
Incorporated By Reference




---



##### 



Table of Contents
 PagePart IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    13Item 1B.
    
    Unresolved Staff Comments
    
    
    22Item 2.
    
    Properties
    
    
    22Item 3.
    
    Legal Proceedings
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23Part IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    24Item 6.
    
    Selected Financial Data
    
    
    26Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    61Item 8.
    
    Financial Statements and Supplementary Data
    
    
    62Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    103Item 9A.
    
    Controls and Procedures
    
    
    103Item 9B.
    
    Other Information
    
    
    103Part IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    104Item 11.
    
    Executive Compensation
    
    
    104Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    104Item 13.
    
    Certain Relationships and Related Transactions
    
    
    104Item 14.
    
    Principal Accountant Fees and Services
    
    
    104Part IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    105Signatures
    
    
    112EX-21 SUBSIDIARIES OF THE COMPANYEX-23 CONSENT OF DELOITTE & TOUCHE LLPEX-24 POWER OF ATTORNEYEX-31.(A) SECTION 302 CERTIFICATION OF CEOEX-31.(B) SECTION 302 CERTIFICATION OF CFOEX-32.(A) SECTION 906 CERTIFICATION OF CEOEX-32.(B) SECTION 906 CERTIFICATION OF CFO
  -2-




---



##### Table of Contents



Part I
 
 Item 1. Business.
 All references to we, us, our, CheckFree or the Company in this Annual Report on
Form 10-K mean CheckFree Corporation and all entities owned or controlled by CheckFree Corporation,
except where it is made clear that the term means only the parent company.
 We own many trademarks and service marks. This Annual Report on Form 10-K contains trade
dress, trade names and trademarks of other companies. Use or display of other parties trademarks,
trade dress or trade names is not intended to, and does not, imply a relationship with the
trademark or trade dress owner.
 Overview
   SM
  -3-




---



##### Table of Contents



Electronic Commerce Division
 Introduction .
 
    
    receive and pay bills over the Internet; and
    
    pay billers directly through biller-direct sites, by telephone or through our
walk-in retail agent network.
 www.mycheckfree.com
 Industry Background .
  Products and Services. SM ® SM
 
    
    Electronic Billing or e-Bill Services.As of June 30, 2006, consumers could view
312 different e-bills through CSP websites or directly at our website. The following
billers are some of our largest electronic billing customers, as determined by the
number of consumers viewing and paying their
e-bills: JC Penney Card Services, AT&T, Sams Club Credit, Macys, Home Depot Consumer
Accounts, Lowes Consumer Credit Card, Sprint PCS, Verizon Corporation, Chevron and
Exxon/Mobil. Actual e-bills delivered in the fourth quarter ended June 30, 2006,
reached 50 million, which is an increase of 7% over the approximately 46.7 million
e-bills distributed in the third quarter ended March 31, 2006, and an increase of 22%
over the approximately 41 million e-bills delivered in the fourth quarter ended June 30,
2005. For the year, we delivered nearly 185 million e-bills.
 
    
    CheckFree Web.Consumers can pay anyone by accessing our service through various
CSPs. We have relationships with thousands of CSPs. Some of our largest CSPs, as
determined by type of CSP and number of consumers using our products, are Bank of
America, PNC Bank, SunTrust Banks,
 -4-




---



##### Table of Contents



Wachovia Bank and U.S. Bank. Once a consumer has accessed the system, he or she can
either elect to pay an electronic bill delivered by us or can instruct the system to pay
any individual or company within the United States. We complete this payment request
either electronically, using the Federal Reserves Automated Clearing House (ACH), or
in some instances other electronic methods such as MasterCards RPPS service or Visa
ePay, or by issuing a paper check or draft.
 -
    
    Automated Clearing House.The Federal Reserves ACH is the primary
batch-oriented electronic funds transfer system financial services
organizations use to move funds electronically through the banking system. We
access the ACH through an agreement with SunTrust Banks. Additional
information on the ACH can be found at the Federal Reserve Commissions website
at www.federalreserve.gov.-
    
    Paper Checks or Drafts.When we are unable to move the funds
electronically, we issue a paper check, drawn on our trust account, or a paper
draft, drawn on the consumers bank account.-
    
    Payment Method Selection.Our Genesis system incorporates our
patented technology that determines the preferred method of payment to balance
processing costs, operational efficiencies and risk of loss. We have been able
to manage our risk of loss by using this technology to adjust the mix of
electronic and paper transactions in individual cases such that, overall, we
have not incurred losses in excess of 0.41% of our revenues in any of the past
five years.
 
    
    Walk-in Payment Services.Through our CheckFreePay subsidiary (formerly
American Payment Systems, Inc. (APS)), we are able to offer walk-in payment services
at more than 11,000 retail agent locations throughout the United States. CheckFreePay
combines the agent footprint with our current electronic billing and payment
infrastructure to offer billing organizations a wider number of payment processing
services from a single company.
    
    Phone Payment Services.Through PhoneCharge, we are able to offer payment
services to billers over an interactive voice response (IVR) system. This service,
called CheckFree Pay-by-Phone, allows billers to provide an additional, convenient
method for their customers to pay bills, while reducing costs associated with those
customers contacting their call center or using other more expensive payment
methods.
    
    Other Products and Services.In addition to the above, the Electronic Commerce
Division offers a credit card account balance transfer product, a credit card balance
refund product, an automated recurring payments and software service, which is
primarily installed at health clubs throughout the United States, and other forms of
wholesale and retail payment solutions.
 Usage Metrics.
 The CheckFree Advantage.
 
    
    Scalable Genesis Platform.The Genesis platform is an open infrastructure created
to process e-bills and payments. The vast majority of the payment transactions are
processed using our Genesis platform, enabling us to improve our economies of scale. We
also operate processing platforms for
 -5-




---



##### Table of Contents



other aspects of our business including Health & Fitness (recurring debits for health
club fees), CheckFreePay (for walk-in payments) and PhoneCharge (for IVR payments).
    
    Sigma Quality.We follow an internal Sigma quality program, which links key drivers
of customer satisfaction to an internal set of metrics of system availability and
payment accuracy and timeliness. The program is designed to take our quality
performance to 99.9%, or 4.6 Sigma. The performance and compensation of many
employees within the Electronic Commerce Division are tied to the achievement of
process and system improvements that enhance customer satisfaction.
    
    Electronic Payment Rate.Electronic payments are more efficient than paper
payments, less expensive to process, and result in fewer errors and customer inquiries.
As of June 30, 2006, we completed 84% of our payments electronically. In addition to
sending a large majority of our payments electronically, we also have established links
to major billers that enable a more efficient flow of information and funds to them.
    
    Experienced Customer Care.We have approximately 900 customer care staff primarily
located in facilities in Phoenix, Arizona; Dublin, Ohio; and Aurora, Illinois. The
level and types of customer care services we provide vary depending upon the customers
or CSPs requirements. We provide both first- and second-tier support. When we
provide second-tier customer support, we provide payment research and support, and the
CSP handles its own inbound customer calls. To maintain our customer care standards,
we employ extensive internal monitoring systems, conduct ongoing customer surveys and
provide comprehensive training programs.
    
    Real-Time Payment Processing.We offer billers the option of a real-time payment
solution, meaning that billers can receive customer payment information as soon as
payments are made at one of our retail agent locations, through an IVR application, or
over the Internet, assuring that unnecessary service shut-offs of customers who pay
their bills at the last minute are avoided. Real-time payments also have the advantage
of minimizing calls to a billers call center by providing the billers customer with
the confidence that the biller has received the payment as soon as it is completed.
 Our Business Strategy.
 
    
    Drive increased adoption of electronic commerce services by consumers.We believe
that consumers will continue to move their financial transactions from traditional
paper-based to electronic methods if they have an easy-to-access, easy-to-use, secure,
and cost-effective method for receiving and paying their bills electronically. To
drive this transition, we make our electronic bill presentment and payment services
available directly, through CSPs and through biller sites so that e-bills are available
wherever consumers feel most comfortable viewing and paying them. We also price our
services to our customers in such a way as to facilitate their offering electronic
billing and payment to a broad array of consumers. CSPs and billers pay us mainly for
the number of transactions we process, plus typically a fee based on the number of
their consumers enabled to use our system. The price charged to the CSP or biller for
each consumer or each transaction may vary depending on:
 -
    
    the services provided to the consumers;-
    
    the nature of the transactions processed; and-
    
    the volume of consumers or transactions, or both.
 -6-




---



##### Table of Contents



We believe this flexibility equips our customers to provide consumers with services that
will meet their needs, and that this flexibility makes it more attractive for CSPs and
billers to promote our electronic billing and payment service.
    
    Continue to improve operational efficiency and effectiveness.We believe that as
our business grows and the number of transactions we process increases, we will be able
to take advantage of operating efficiencies associated with increased volumes, thereby
reducing our unit costs. Our Sigma quality program, high electronic payment rate,
consolidation of platforms, the scalability of our systems and high-quality customer
care centers all help us achieve greater efficiencies.
    
    Drive new forms of electronic commerce services.We intend to leverage our
infrastructure and distribution channels to address the requirements of consumers and
businesses in new electronic commerce applications. For example, through CheckFreePay
(our walk-in bill payment business) and PhoneCharge, we now offer a more complete suite
of payment services to meet the needs of consumers and billers. In addition, our core
payment and processing network manages person-to-person and small business payments.
 Technology, Research and Development.
   Sales, Marketing and Distribution.
  -7-




---



##### Table of Contents



Competition.
   Acquisitions.
 Investment Services Division
 Introduction.
  SM ® ®
 Industry Background.
 -8-




---



##### Table of Contents



Products and Services.
   Technology.
 SM
  Sales, Marketing and Distribution.
 Competition.
 Acquisitions.
 -9-




---



##### Table of Contents



Software Division
  
    
    Bank Payment.The Software Division provides ACH and account reconciliation
software and services to banks and bank holding companies. ACH is the primary
batch-oriented electronic funds transfer system financial services organizations use to
move funds electronically through the banking system. More than two-thirds of the
nations 14 billion ACH payments are processed each year through institutions using
our software systems.Our ACH software is marketed under the product name PEP+ ® (Paperless Entry Processing
System). PEP+ is an online, real-time system that enables the originating and receiving
of payments through the ACH system. These electronic transactions are substitutes for
paper checks and are typically used for recurring payments such as direct deposit
payroll payments; corporate payments to contractors and vendors; debit transfers that
consumers make to pay insurance premiums, mortgages, loans and other bills; and
business-to-business payments. Our PEP+ reACHä product, which can be used with
our PEP+ software, allows returned checks, checks at the point-of-sale, and checks sent
to a lockbox to be converted to electronic payments.Our account reconciliation software is marketed under the product name CheckFree
ARP/SMSä (Account Reconciliation Package/Service Management System). ARP/SMS is
an online, real-time positive pay and reconcilement system. We also provide add-on
positive pay modules that enable banks/financial institutions to reduce exposure to
check fraud and manage electronic check conversion.
    
    Operational Risk Management (ORM). The Software Division provides software that
enables organizations to reduce operational risk, improve operational efficiency and
contribute to increasing profitability. Banks, bank holding companies, securities and
insurance firms, corporations, and government agencies use our ORM products and
services. Our ORM solutions are marketed under four distinct brands. CheckFree
RECON-Plusä for Windows® and CheckFree RECON Securitiesä reconcile high
volumes of complex transactions that are spread across multiple internal and external
systems and include securities transaction processing, automated deposit verification,
consolidated bank account reconciliation and cash mobilization, and improved cash
control. CheckFree Frontier® is a multi-tier reconciliation system that operates
via a Web-based architecture. In April 2005, we acquired Accurate Software, Ltd., whose
Accurate NXGTM software provides a comprehensive, enterprise-wide
operational control framework and system for reconciliation, exception management,
workflow and business intelligence.
    
    Transaction Process Management.The Software Division provides software that
enables the management, monitoring and measurement of the flow of securities and cash
transactions across a local or global enterprise. Securities firms, insurance
companies, custodian banks, brokerage firms and asset managers use our financial
messaging and corporate actions products and services. These products are marketed
under the names CheckFree TradeFlowä, CheckFree Message Brokerä, CheckFree
Message Workstationä and CheckFree eVentä. CheckFree TradeFlow provides
complete straight-through processing (STP) of post-trade processes. Trade order
management systems, portfolio management packages and links to brokers and custodians
are integrated with CheckFree TradeFlow, a 2005 SWIFTReady Gold accredited platform
which serves as a comprehensive STP solution. CheckFree Message Broker is a middleware
system, and CheckFree Message Workstation enables the preparation, validation, repair
and review of messages in a system to monitor and manage transaction flows, including
all messages related to any one particular transaction. CheckFree eVent automates the
end-to-end corporate actions processes. The system automates the electronic receipt of
notifications and provides online management facilities to manage the process from
end-to-end. TradeFlow TPM 2.0ä, enables securities firms to manage transaction
processing across an enterprise via a single, integrated platform.
 -10-




---



##### Table of Contents




    
    Compliance.The Software Division provides solutions that enable banks, bank
holding companies, securities and insurance firms, corporations, and government
agencies to maintain compliance with federal and state regulations. These products
support unclaimed property management and government tax-related compliance reporting.
Our compliance software solutions are marketed under the names CheckFree APECSä,
CheckFree IRSä, CheckFree LCRä and CheckFree RRSä.
    
    Electronic Billing.CheckFree i-Series software enables billers to create online
bills and statements and distribute them to their customers for viewing and payment.
Our software and outsourced application hosting services provide e-bill and e-statement
creation and delivery, e-bill payment transaction management, security, tracking and
history, online marketing from the biller to its customers, and customer care.
 Licenses.
 Maintenance, Support and Professional Services.
 Sales, Marketing and Distribution.
 Competition .
  Seasonality.
 Acquisitions.
  Government Regulation
  -11-




---



##### Table of Contents



Intellectual Property Rights
  -12-




---



##### Table of Contents



Employees
  Available Information
 www.checkfreecorp.com
 www.checkfreecorp.com
 
 Item 1A. Risk Factors.
  Risks Related to Our Business
 The market for our electronic commerce services is evolving and may not continue to develop or grow
rapidly enough for us to sustain profitability.
  Our future profitability depends upon our ability to implement our strategy successfully to
increase adoption of electronic billing and payment methods.
  
    
    drive consumer awareness of electronic billing and payment;
    
    encourage consumers to sign up for and use the electronic billing and payment
services offered by our distribution partners;
    
    address consumer concerns regarding privacy and security of their data in using
electronic billing and payment services;
 -13-




---



##### Table of Contents




    
    continue to refine our infrastructure to handle seamless processing of transactions;
    
    continue to develop state-of-the-art, easy-to-use technology; and
    
    increase the number of bills we can present and pay electronically.
    Competitive pressures we face may have a material adverse effect on us.
      -14-




---



##### Table of Contents



Security and privacy breaches in our electronic transactions may damage customer relations and
inhibit our growth.
  
    
    cause our customers to lose confidence in our services;
    
    deter consumers from using our services;
    
    harm our reputation;
    
    expose us to liability;
    
    increase our expenses from potential remediation costs; and
    
    decrease market acceptance of electronic commerce transactions.
   We rely on third parties to distribute our electronic commerce and investment services products,
which may not result in widespread adoption.
  Consolidation in the financial services industry may adversely affect our ability to sell our
electronic commerce services, investment services and software.
  
    
    current and potential customers;
    
    business opportunities, if combined financial services organizations were to
determine that it is more efficient to develop in-house services similar to ours or
offer our competitors products or services; and
    
    revenue, if combined financial services organizations were able to negotiate a
greater volume discount for, or discontinue the use of, our products and services.
 -15-




---



##### Table of Contents



One customer accounts for a significant percentage of our consolidated revenues.
  If we do not successfully renew or renegotiate our agreements with our customers, our business may
suffer.
   Our future profitability depends on a decrease in the cost of processing payment transactions.
  The transactions we process expose us to fraud and credit risks.
  
    
    insufficient funds;
    
    unauthorized use;
    
    stop payment orders;
    
    payment disputes;
    
    closed accounts;
    
    theft;
    
    frozen accounts; and
    
    fraud.
  -16-




---



##### Table of Contents



We may experience significant losses due to our reliance on agents for walk-in payment services.
  We may experience breakdowns in our processing systems that could damage customer relations and
expose us to liability.
  
    
    fire;
    
    natural disaster;
    
    unauthorized entry;
    
    power loss;
    
    telecommunications failure;
    
    computer viruses;
    
    terrorist acts; and
    
    war.
  We may experience software defects, computer viruses and development delays, which could damage
customer relations, decrease our potential profitability and expose us to liability.
  
    
    additional development costs;
    
    diversion of technical and other resources from our other development efforts;
 -17-




---



##### Table of Contents




    
    loss of credibility with current or potential customers;
    
    harm to our reputation; or
    
    exposure to liability claims.
  We experience seasonal and other fluctuations in our revenues causing our operating results to
fluctuate.
    If we do not respond to rapid technological change or changes in industry standards, our services
could become obsolete and we could lose our customers.
  We may be unable to protect our intellectual property and technology, permitting competitors to
duplicate our products and services.
   -18-




---



##### Table of Contents



Our business could become subject to increased government regulation, which could make our business
more expensive to operate.
   Our walk-in payment business is subject to government regulation and any violation of such
regulations could result in civil or criminal penalties or a prohibition against providing money
transmitter services in particular jurisdictions.
  A weak economy could have a materially adverse impact on our business.
  -19-




---



##### Table of Contents



Our quarterly operating results fluctuate and may not accurately predict our future performance.
 .
 
    
    changes in our pricing policies or those of our competitors;
    
    loss of customers due to competitors or in-house solutions;
    
    relative rates of acquisition of new customers;
    
    seasonal patterns;
    
    delays in the introduction of new or enhanced services, software and related
products by us or our competitors or market acceptance of these products and services;
and
    
    other changes in operating expenses, personnel and general economic conditions.
 .
 We have a limited history of operating profitably in the past and may experience net losses in the
future.
  Risks Related to Our Common Stock
 Our common stock has been volatile since December 31, 2000.
  
    
    actual or anticipated fluctuations in our operating results;
    
    actual or anticipated fluctuations in our transaction and consumer growth;
    
    announcements by us, our competitors or our customers;
    
    announcements of the introduction of new or enhanced products and services by us or
our competitors;
    
    announcements of joint development efforts or corporate partnerships in the
electronic commerce market;
    
    market conditions in the banking, telecommunications, technology and other emerging
growth sectors;
    
    rumors relating to our competitors or us; and
    
    general market or economic conditions.
 -20-




---



##### Table of Contents



Availability of significant amounts of our common stock for sale in the future could adversely
affect our stock price.
  
    
    up to 8,922,354 shares available for issuance under our stock option and stock
incentive plans, under which there are (1) outstanding options to purchase 4,208,631
shares of our common stock, of which options for 3,604,750 shares were fully vested and
exercisable at an average weighted exercise price of approximately $28.96 per share,
and (2) 603,881 outstanding shares of restricted stock;
    
    issued warrants to purchase 7,500,000 shares of our common stock, of which warrants
for 2,500,000 shares were fully vested and exercisable at a weighted exercise price of
approximately $28.86 per share;
    
    up to 670,389 shares available for issuance under our Associate Stock Purchase Plan; and
    
    up to 883,227 shares available for issuance under our 401(k) Plan.
  
    
    Microsoft, which held 8,567,250 shares;
    
    The former members of Integrion Financial Network, L.L.C. (Integrion) and their
assignees collectively held warrants to purchase up to 1,500,000 shares, which warrants
were fully vested and exercisable;
    
    Bank One, which held warrants to purchase 1,000,000 shares,
which warrants were
fully vested and exercisable; and
    
    Bank of America, which held 450,000 of the vested Integrion warrants and additional
warrants to purchase up to 5,000,000 shares, which warrants were not currently vested,
and expire on September 30, 2010.
    -21-




---



##### Table of Contents



Anti-takeover provisions in our organizational documents and Delaware corporation law make any
change in control more difficult.
  
    
    division of our board of directors into three classes serving staggered three-year terms;
    
    removal of our directors by the stockholders only for cause upon 80% stockholder approval;
    
    prohibiting our stockholders from calling a special meeting of stockholders;
    
    ability to issue additional shares of our common stock or preferred stock without
stockholder approval;
    
    prohibiting our stockholders from unilaterally amending our certificate of
incorporation or by-laws except with 80% stockholder approval; and
    
    advance notice requirements for raising business or making nominations at
stockholders meetings.
   
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
   
    
    101,000 square feet in Phoenix, Arizona;
    
    78,000 square feet in Aurora, Illinois;
    
    43,000 square feet in Wallingford, Connecticut;
    
    43,000 square feet in Norcross, Georgia;
    
    16,000 square feet in Houston, Texas;
    
    7,000 square feet in Ansonia, Connecticut; and
    
    2,000 square feet in Shelton, Connecticut.
 -22-




---



##### Table of Contents




    
    56,000 square feet in Jersey City, New Jersey;
    
    21,000 square feet in Newark, New Jersey;
    
    18,000 square feet in Los Angeles, California;
    
    15,000 square feet in Chicago, Illinois;
    
    5,000 square feet in San Diego, California; and
    
    2,300 square feet in Boston, Massachusetts.
  
    
    22,000 square feet in Norcross, Georgia;
    
    26,000 square feet in Owings Mills, Maryland;
    
    13,000 square feet in Wokingham, Berkshire, United Kingdom;
    
    6,000 square feet in London, United Kingdom;
    
    1,000 square feet in North Sydney, New South Wales, Australia;
    
    935 square feet in Windhof, Luxembourg; and
    
    600 square feet in Slough, Berkshire, United Kingdom.
  
    
    227,000 square feet in Norcross, Georgia; and
    
    230 square feet in Henderson, Nevada.
   
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  -23-




---



##### Table of Contents



Part II
 
 Item 5.
    
    Market for the Registrants Common Equity and Related Stockholder Matters and Issuer
Purchases of Equity Securities.
  Common Stock PriceFiscal Period
    
    High
    
    
    LowFiscal 2005First Quarter
    
    $
    31.95
    
    
    $
    24.56Second Quarter
    
    $
    39.23
    
    
    $
    27.42Third Quarter
    
    $
    42.12
    
    
    $
    34.68Fourth Quarter
    
    $
    41.25
    
    
    $
    32.59Fiscal 2006First Quarter
    
    $
    41.60
    
    
    $
    32.33Second Quarter
    
    $
    50.55
    
    
    $
    34.89Third Quarter
    
    $
    55.42
    
    
    $
    42.56Fourth Quarter
    
    $
    57.08
    
    
    $
    44.28Fiscal 2007First
Quarter (through September 6, 2006)
    
    $
    50.28
    
    
    $
    33.28
   -24-




---



##### Table of Contents



(c)
    
    
    (d)(a)
    
    
    (b)
    
    
    Total Number of Shares
    
    
    Approximate Dollar ValueTotal Number
    
    
    Average
    
    
    Purchased as Part of
    
    
    of Shares that May Yetof Shares
    
    
    Price Paid
    
    
    Publicly Announced
    
    
    Be Purchased Under thePeriod
    
    Purchased
    
    
    per Share
    
    
    Plans or Programs
    
    
    Plans or Programs4/1/2006 
4/30/2006
    
    
    0
    
    
$
    
    
    
    
    0
    
    
    $
    52.8 million5/1/2006 
5/31/2006
    
    
    64,000
    
    
    $
    49.98
    
    
    
    64,000
    
    
    $
    49.6 million6/1/2006 
6/30/2006 (1)
    
    
    492,195
    
    
    $
    47.20
    
    
    
    492,195
    
    
        $
    26.4 millionTotal
    
    
    556,195
    
    
    $
    47.48
    
    
    
    556,195
    
    
        $
    26.4 million
 
 (1)
    
    Last repurchase date was June 16, 2006.  -25-




---



##### Table of Contents



Item 6. Selected Financial Data.
  Year Ended June 30,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(In thousands, except per share data)Consolidated Statements of Operations:Revenues:Processing and servicingThird parties
    
    $
    735,840
    
    
    $
    627,541
    
    
    $
    481,589
    
    
    $
    390,944
    
    
    $
    332,548Related parties (a)
    
    
    18,236
    
    
    
    33,000
    
    
    
    41,500
    
    
    
    78,981
    
    
    
    82,813Total processing and servicing
    
    
    754,076
    
    
    
    660,541
    
    
    
    523,089
    
    
    
    469,925
    
    
    
    415,361License fees
    
    
    35,196
    
    
    
    28,458
    
    
    
    23,912
    
    
    
    24,163
    
    
    
    25,020Maintenance fees
    
    
    42,218
    
    
    
    31,231
    
    
    
    28,271
    
    
    
    25,733
    
    
    
    24,298Professional fees
    
    
    47,912
    
    
    
    29,617
    
    
    
    23,955
    
    
    
    24,949
    
    
    
    18,784Total revenues
    
    
    879,402
    
    
    
    749,847
    
    
    
    599,227
    
    
    
    544,770
    
    
    
    483,463Expenses:Cost of processing, servicing and support
    
    
    342,535
    
    
    
    296,912
    
    
    
    244,429
    
    
    
    237,598
    
    
    
    261,761Research and development
    
    
    101,854
    
    
    
    80,039
    
    
    
    64,035
    
    
    
    50,658
    
    
    
    53,788Sales and marketing
    
    
    87,418
    
    
    
    69,106
    
    
    
    50,783
    
    
    
    56,146
    
    
    
    57,173General and administrative
    
    
    61,948
    
    
    
    57,486
    
    
    
    43,724
    
    
    
    38,091
    
    
    
    42,784Depreciation and amortization
    
    
    99,530
    
    
    
    175,719
    
    
    
    176,430
    
    
    
    224,297
    
    
    
    433,508In-process research and development (b)
    
    
    
    
    
    
    
    
    
    
    324
    
    
    
    
    
    
    
    Impairment of intangible assets (c)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,228
    
    
    
    155,072Reorganization charge (d)
    
    
    
    
    
    
    5,585
    
    
    
    
    
    
    
    1,405
    
    
    
    16,365Total expenses
    
    
    693,285
    
    
    
    684,847
    
    
    
    579,725
    
    
    
    618,423
    
    
    
    1,020,451Income (loss) from continuing operations
before other income and expenses
    
    
    186,117
    
    
    
    65,000
    
    
    
    19,502
    
    
    
    (73,653
    )
    
    
    (536,988
    )Other:Equity in net loss of joint venture (e)
    
    
    (3,100
    )
    
    
    (2,984
    )
    
    
    (593
    )
    
    
    
    
    
    
    Interest income
    
    
    13,441
    
    
    
    8,809
    
    
    
    5,693
    
    
    
    7,327
    
    
    
    8,486Interest expense
    
    
    (986
    )
    
    
    (1,094
    )
    
    
    (13,164
    )
    
    
    (12,975
    )
    
    
    (12,788
    )Gain (loss) on investments (f)
    
    
    
    
    
    
    592
    
    
    
    
    
    
    
    (3,228
    )
    
    
    Income (loss) from continuing operations
before income taxes and cumulative
effect of accounting change
    
    
    195,472
    
    
    
    70,323
    
    
    
    11,438
    
    
    
    (82,529
    )
    
    
    (541,290
    )Income tax expense (benefit)
    
    
    74,455
    
    
    
    24,560
    
    
    
    1,088
    
    
    
    (33,156
    )
    
    
    (99,217
    )Income (loss) before cumulative effect of
accounting change
    
    
    121,017
    
    
    
    45,763
    
    
    
    10,350
    
    
    
    (49,373
    )
    
    
    (442,073
    )Cumulative effect of accounting change (g)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,894
    )
    
    
    Income from continuing operations
    
    
    121,017
    
    
    
    45,763
    
    
    
    10,350
    
    
    
    (52,267
    )
    
    
    (442,073
    )Earnings from discontinued operations
before income taxes (including gain on
disposal of $12,821 in FY 2006)
    
    
    14,310
    
    
    
    1,518
    
    
    
    292
    
    
    
    133
    
    
    
    1,469Income tax expense on discontinued
operations
    
    
    (8,064
    )
    
    
    (480
    )
    
    
    (107
    )
    
    
    (50
    )
    
    
    (346
    )Income from discontinued operations
    
    
    6,246
    
    
    
    1,038
    
    
    
    185
    
    
    
    83
    
    
    
    1,123Net income (loss)
    
    $
    127,263
    
    
    $
    46,801
    
    
    $
    10,535
    
    
    $
    (52,184
    )
    
    $
    (440,950
    )Diluted net income (loss) per common share
    
    $
    1.36
    
    
    $
    0.50
    
    
    $
    0.11
    
    
    $
    (0.59
    )
    
    $
    (5.04
    )Weighted average shares outstanding (h)
    
    
    93,708
    
    
    
    92,915
    
    
    
    91,864
    
    
    
    88,807
    
    
    
    87,452Consolidated Balance Sheet Data:Working capital
    
    $
    382,334
    
    
    $
    339,271
    
    
    $
    263,813
    
    
    $
    304,286
    
    
    $
    201,741Total assets
    
    
    1,758,029
    
    
    
    1,569,916
    
    
    
    1,548,932
    
    
    
    1,587,270
    
    
    
    1,637,477Long-term obligations, less current portion
    
    
    28,432
    
    
    
    25,389
    
    
    
    25,504
    
    
    
    176,692
    
    
    
    176,377Total stockholders equity
    
    
    1,483,635
    
    
    
    1,336,415
    
    
    
    1,299,182
    
    
    
    1,268,149
    
    
    
    1,305,661
 -26-




---



##### Table of Contents



(a) During fiscal year 2002 through January 2003, all revenues generated from Bank of America are
classified as related party. During fiscal years 2002 through 2004, all revenues generated from
Microsoft and FDC are classified as related party. During fiscal year 2005 and 2006, only the
revenues generated from Microsoft are classified as related party.(b) During fiscal year ended June 30, 2004, we recorded charges related to in-process research and
development that were capitalized by entities before we acquired them.(c) During the fiscal year ended June 30, 2002, we recorded an impairment charge related to the
goodwill associated with CheckFree
i-Solutions and technology assets associated with TransPoint.
During fiscal year ended June 30, 2003, we recorded an impairment charge related to other
intangible assets and goodwill of CheckFree i-Solutions.(d) During the fiscal year ended June 30, 2002, we recorded a reorganization charge in order to
streamline operations in our Electronic Commerce Division, refine our strategy for CheckFree
i-Solutions within our Software Division, and discontinue certain product lines associated with our
Investment Services Division. For the fiscal year ended June 30, 2003, we adjusted our estimate of
the total reorganization charge that was recorded in the previous fiscal year. During fiscal year
ended June 30, 2005, we recorded a reorganization charge relating to the re-scoping of many
positions with the intent to re-hire as quickly as possible, the elimination of some other
positions and the relocation of our Electronic Billing and Payment operations from our Waterloo,
Ontario, Canada to our headquarters in Norcross, Georgia.(e) During the fiscal year ended June 30, 2004, we entered into an agreement with Voca, Ltd. to
form the joint venture OneVu located in the United Kingdom, which has incurred losses since
inception.(f) During the fiscal year ended June 30, 2005, we recorded a gain on the sale of stock. We
received shares of stock from an insurance vendor that demutualized. We sold the shares shortly
after we received them, and recorded the proceeds as a gain on investments. During the fiscal year
ended June 30, 2003, we recorded losses on certain investments resulting from an
other-than-temporary decline in their fair value.(g) On July 1, 2002, we adopted SFAS 142,Goodwill and Other Intangible Assets. Upon adoption,
we performed a transitional impairment test and recorded an impairment charge related to the
goodwill associated with CheckFree i-Solutions.(h) In June 2005, we purchased a total of 891,200 shares of our own common stock at an average
purchase price of $37.52 per share, or $33.5 million in the aggregate. In the year ended June 30,
2006, we purchased a total of 707,732 shares of our own common stock at an average purchase price
of $47.47 per share, or $33.6 million in the aggregate. In both cases, the shares were immediately
retired and cancelled.The preparation of our financial statements in conformity with Generally Accepted Accounting
Principles in the United States of America requires us 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 financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. -27-




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
   
    
    Electronic Commerce;
    
    Investment Services; and
    
    Software.
  SM
  Executive Summary
  
    
    The expiration of our agreements with First Data Corporation (FDC) in August 2005
and Microsoft Corporation (Microsoft) in December 2005 and the related cessation of
amortization of intangible assets resulting from our September 2000 acquisition of
MSFDC, L.L.C. (TransPoint) in September 2005;
    
    Slower than expected transaction growth in the quarter ended June 30, 2006;
    
    The negative impact on interest-based revenue of our largest bank customer
migrating from a processing model that guarantees funds to our standard risk-based
processing model during the quarter ended March 31, 2006;
    
    Our acquisition of PhoneCharge, Inc. (PhoneCharge), for $100 million in cash in
January 2006;
    
    Our purchase of substantially all the assets of Integrated Data Systems, Inc.
(IDS) for $18.0 million in cash in September 2005;
    
    Our purchase of substantially all of the assets of Aphelion, Inc. (Aphelion) for
$18.1 million in cash in October 2005;
    
    Our prior year acquisition of Accurate in April 2005, having a full year impact on
our results compared to less than three months in the prior year;
 -28-




---



##### Table of Contents




    
    The divestiture of our M-Solutions business unit for $18.6 million in February 2006;
and
    
    Our becoming a full tax payer during the year, having utilized substantially all of
the tax credits we earned in prior years.
   Fiscal Year Ended June 30,
    
    Microsoft
    
    
    FDC
    
    
    Total2001
    
    $
    6,000
    
    
    $
    5,000
    
    
    $
    11,0002002
    
    
    15,000
    
    
    
    8,500
    
    
    
    23,5002003
    
    
    21,000
    
    
    
    11,500
    
    
    
    32,5002004
    
    
    27,000
    
    
    
    14,500
    
    
    
    41,5002005
    
    
    33,000
    
    
    
    17,500
    
    
    
    50,5002006
    
    
    18,000
    
    
    
    3,000
    
    
    
    21,000Total
    
    $
    120,000
    
    
    $
    60,000
    
    
    $
    180,000
   -29-




---



##### Table of Contents



-30-




---



##### Table of Contents



Year ended June 30,2006
    
    
    2005
    
    
    2004Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Expenses:Cost of processing, servicing and support
    
    
    39.0
    
    
    
    39.6
    
    
    
    40.8Research and development
    
    
    11.6
    
    
    
    10.7
    
    
    
    10.7Sales and marketing
    
    
    9.9
    
    
    
    9.2
    
    
    
    8.5General and administrative
    
    
    7.0
    
    
    
    7.7
    
    
    
    7.3Depreciation and amortization
    
    
    11.3
    
    
    
    23.4
    
    
    
    29.4In-process research and development
    
    
    
    
    
    
    
    
    
    
    0.1Impairment of intangible assets
    
    
    
    
    
    
    
    
    
    
    Reorganization charge
    
    
    
    
    
    
    0.7
    
    
    
    Total expenses
    
    
    78.8
    
    
    
    91.3
    
    
    
    96.8Income from continuing operations before other income
and expenses
    
    
    21.2
    
    
    
    8.7
    
    
    
    3.2Equity in net loss of joint venture
    
    
    (0.4
    )
    
    
    (0.4
    )
    
    
    (0.1
    )Interest income
    
    
    1.5
    
    
    
    1.2
    
    
    
    1.0Interest expense
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (2.2
    )Gain (loss) on investments
    
    
    
    
    
    
    
    
    
    
    Income from continuing operations before income taxes
    
    
    22.2
    
    
    
    9.4
    
    
    
    1.9Income tax expense
    
    
    8.5
    
    
    
    3.3
    
    
    
    0.2Income from continuing operations
    
    
    13.7
    
    
    
    6.1
    
    
    
    1.7Earnings from discontinued operations before income
taxes (including gain on disposal of $12,821,000 in
FY 2006)
    
    
    1.6
    
    
    
    0.2
    
    
    
    Income tax expense on discontinued operations
    
    
    0.9
    
    
    
    0.1
    
    
    
    Income from discontinued operations
    
    
    0.7
    
    
    
    0.1
    
    
    
    Net income (loss)
    
    
    14.4
    %
    
    
    6.2
    %
    
    
    1.7
    %
 Results of Operations
 Years Ended June 30, 2006 and 2005
  Total Revenues (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    879,402
    
    
    $
    749,847
    
    
    $
    129,555
    
    
    
    17.3
    %
   -31-




---



##### Table of Contents



Processing and Servicing Revenue (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    754,076
    
    
    $
    660,541
    
    
    $
    93,535
    
    
    
    14.2
    %
  -32-




---



##### Table of Contents



License Fee Revenue (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    35,196
    
    
    $
    28,458
    
    
    $
    6,738
    
    
    
    23.7
    %
  Maintenance Fee Revenue (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    42,218
    
    
    $
    31,231
    
    
    $
    10,987
    
    
    
    35.2
    %
  Professional Fee Revenue (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    47,912
    
    
    $
    29,617
    
    
    $
    18,295
    
    
    
    61.8
    %
  -33-




---



##### Table of Contents



Cost of Processing, Servicing and Support (000s)
 June 30,2006
    
    
    2005%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    342,535
    
    
    
    39.0
    %
    
    $
    296,912
    
    
    
    39.6
    %
  Research and Development (000s)
 June 30,2006
    
    
    2005%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    101,854
    
    
    
    11.6
    %
    
    $
    80,039
    
    
    
    10.7
    %
  Sales and Marketing (000s)
 June 30,2006
    
    
    2005%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    87,418
    
    
    
    9.9
    %
    
    $
    69,106
    
    
    
    9.2
    %
 -34-




---



##### Table of Contents



General and Administrative (000s)
 June 30,2006
    
    
    2005%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    61,948
    
    
    
    7.0
    %
    
    $
    57,486
    
    
    
    7.7
    %
  Depreciation and Amortization (000s)
 June 30,2006
    
    
    2005%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    99,530
    
    
    
    11.3
    %
    
    $
    175,719
    
    
    
    23.4
    %
   Reorganization Charge (000s)
 June 30,2006
    
    
    2005%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    
    
    
    
    
    
    
    
    $
    5,585
    
    
    
    0.7
    %
  -35-




---



##### Table of Contents



Equity in Loss of Joint Venture (000s)
 June 30,2006
    
    
    2005%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    (3,100
    )
    
    
    (0.4
    )%
    
    $
    (2,984
    )
    
    
    (0.4
    )%
  Net Interest (000s)
 June 30,2006
    
    
    2005$
    
    

%
Revenue
    
    
    $
    
    

%
RevenueYear ended:Interest income
    
    $
    13,441
    
    
    
    
    
    
    $
    8,809Interest expense
    
    
    (986
    )
    
    
    
    
    
    
    (1,094
    )Net interest
    
    $
    12,455
    
    
    
    1.4
    %
    
    $
    7,715
    
    
    
    1.1
    %
   Gain on Investments (000s)
 June 30,2006
    
    
    2005%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    
    
    
    
    
    
    
    
    $
    592
    
    
    
    
  -36-




---



##### Table of Contents



Income Tax Expense (000s)
 June 30,2006
    
    
    2005$
    
    

Effective Rate
    
    
    $
    
    
    Effective RateYear ended
    
    $
    74,455
    
    
    
    38.1
    %
    
    $
    24,560
    
    
    
    34.9
    %
  Earnings from Discontinued Operations (000s)
 June 30,2006
    
    
    2005$
    
    
    % Revenue
    
    
    $
    
    
    % RevenueYear ended
    
    $
    14,310
    
    
    
    1.6
    %
    
    $
    1,518
    
    
    
    0.2
    %
 
 Income Tax Expense on Discontinued Operations (000s)
 June 30,2006
    
    
    2005$
    
    
    EffectiveRate
    
    
    $
    
    
    Effective RateYear ended
    
    $
    8,064
    
    
    
    56.4
    %
    
    $
    480
    
    
    
    31.6
    %
  Years Ended June 30, 2005 and 2004
  Total Revenues (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    749,847
    
    
    $
    599,227
    
    
    $
    150,620
    
    
    
    25.1
    %
  -37-




---



##### Table of Contents



Processing and Servicing Revenue (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    660,541
    
    
    $
    523,089
    
    
    $
    137,452
    
    
    
    26.3
    %
  License Fee Revenue (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    28,458
    
    
    $
    23,912
    
    
    $
    4,546
    
    
    
    19.0
    %
  -38-




---



##### Table of Contents



Maintenance Fee Revenue (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    31,231
    
    
    $
    28,271
    
    
    $
    2,960
    
    
    
    10.5
    %
  Professional Fee Revenue (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    29,617
    
    
    $
    23,955
    
    
    $
    5,662
    
    
    
    23.6
    %
   Cost of Processing, Servicing and Support (000s)
 June 30,2005
    
    
    2004%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    296,912
    
    
    
    39.6
    %
    
    $
    244,429
    
    
    
    40.8
    %
  
    
    The gross margin of our walk-in payment business was less than our core electronic
billing and payment business;
    
    Our acquisitions of HelioGraph and Accurate resulted in increased customer support
and implementation services resources that carry a lower gross margin than our core
Electronic Commerce and Investment Services businesses; and
 -39-




---



##### Table of Contents




    
    During fiscal 2005, we incurred a charge of approximately $1.6 million for a loss in
a services agreement with a large customer in our Software business.
 Research and Development (000s)
 June 30,2005
    
    
    2004%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    80,039
    
    
    
    10.7
    %
    
    $
    64,035
    
    
    
    10.7
    %
  Sales and Marketing (000s)
 June 30,2005
    
    
    2004%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    69,106
    
    
    
    9.2
    %
    
    $
    50,783
    
    
    
    8.5
    %
  General and Administrative (000s)
 June 30,2005
    
    
    2004%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    57,486
    
    
    
    7.7
    %
    
    $
    43,724
    
    
    
    7.3
    %
  -40-




---



##### Table of Contents



Depreciation and Amortization (000s)
 June 30,2005
    
    
    2004%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    175,719
    
    
    
    23.4
    %
    
    $
    176,430
    
    
    
    29.4
    %
  Reorganization Charge (000s)
 June 30,2005
    
    
    2004%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    5,585
    
    
    
    0.7
    %
    
    $
    
    
    
    
    
  In-Process Research & Development (000s)
 June 30,2005
    
    
    2004%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    
    
    
    
    
    
    
    $
    324
    
    
    
    0.1
    %
  Equity in Loss of Joint Venture (000s)
 June 30,2005
    
    
    2004%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    (2,984
    )
    
    
    (0.4
    )%
    
    $
    (593
    )
    
    
    (0.1
    )%
  -41-




---



##### Table of Contents



Net Interest (000s)
 June 30,2005
    
    
    2004$
    
    
    % Revenue
    
    
    $
    
    
    % RevenueYear ended:Interest income
    
    $
    8,809
    
    
    
    
    
    
    $
    5,693Interest expense
    
    
    (1,094
    )
    
    
    
    
    
    
    (5,944
    )Call premium expense
    
    
    
    
    
    
    
    
    
    
    (4,813
    )Unamortized note issuance costs
    
    
    
    
    
    
    
    
    
    
    (2,407
    )Net interest
    
    $
    7,715
    
    
    
    1.1
    %
    
    $
    (7,471
    )
    
    
    (1.2
    )%
   Gain on Investments (000s)
 June 30,2005
    
    
    2004%
    
    
    
    
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    RevenueYear ended
    
    $
    592
    
    
    
    0.1
    %
    
    $
    
    
    
    
    
  Income Tax Expense (000s)
 June 30,2005
    
    
    2004$
    
    
    Effective Rate
    
    
    $
    
    
    Effective RateYear ended
    
    $
    24,560
    
    
    
    34.9
    %
    
    $
    1,088
    
    
    
    9.3
    %
  -42-




---



##### Table of Contents



Earnings from Discontinued Operations (000s)
 June 30,2005
    
    
    2004$
    
    
    % Revenue
    
    
    $
    
    
    % RevenueYear ended
    
    $
    1,518
    
    
    
    0.2
    %
    
    $
    292
    
    
    
    0.1
    %
  Income Tax Expense on Discontinued Operations (000s)
 June 30,2005
    
    
    2004$
    
    

Effective Rate
    
    
    $
    
    
    Effective RateYear ended
    
    $
    480
    
    
    
    31.6
    %
    
    $
    107
    
    
    
    36.6
    %
  -43-




---



##### Table of Contents



Segment Information
   Year Ended June 30,2006
    
    
    2005
    
    
    2004(In thousands)Revenues:Electronic Commerce
    
    $
    662,728
    
    
    $
    580,696
    
    
    $
    452,732Investment Services
    
    
    112,245
    
    
    
    96,064
    
    
    
    86,270Software
    
    
    109,386
    
    
    
    81,072
    
    
    
    67,462Impact of discontinued operations  Investment
Services
    
    
    (4,957
    )
    
    
    (7,985
    )
    
    
    (7,237
    )Total
    
    $
    879,402
    
    
    $
    749,847
    
    
    $
    599,227Segment operating income (loss):Electronic Commerce
    
    $
    247,918
    
    
    $
    207,796
    
    
    $
    155,724Investment Services
    
    
    17,846
    
    
    
    18,638
    
    
    
    19,911Software
    
    
    20,858
    
    
    
    17,748
    
    
    
    14,293Corporate
    
    
    (37,845
    )
    
    
    (37,595
    )
    
    
    (33,256
    )Impact of discontinued operations  Investment
Services
    
    
    (1,490
    )
    
    
    (1,517
    )
    
    
    (288
    )Purchase accounting amortization:Electronic Commerce
    
    
    (49,072
    )
    
    
    (130,175
    )
    
    
    (132,699
    )Investment Services
    
    
    (1,992
    )
    
    
    (604
    )
    
    
    (819
    )Software
    
    
    (5,973
    )
    
    
    (2,667
    )
    
    
    (3,040
    )SFAS 123(R)  Options issued before July 1, 2004Electronic Commerce
    
    
    (2,999
    )
    
    
    
    
    
    
    Investment Services
    
    
    (425
    )
    
    
    
    
    
    
    Software
    
    
    (184
    )
    
    
    
    
    
    
    Corporate
    
    
    (525
    )
    
    
    
    
    
    
    Reorganization charge:Electronic Commerce
    
    
    
    
    
    
    (3,208
    )
    
    
    Investment Services
    
    
    
    
    
    
    (313
    )
    
    
    Software
    
    
    
    
    
    
    (1,876
    )
    
    
    Corporate
    
    
    
    
    
    
    (188
    )
    
    
    Write off of capitalized software  Software
    
    
    
    
    
    
    (1,039
    )
    
    
    In-process research and development  Software
    
    
    
    
    
    
    
    
    
    
    (324
    )Income from continuing operations before
other income, expenses, income taxes and
discontinued operations
    
    $
    186,117
    
    
    $
    65,000
    
    
    $
    19,502
 -44-




---



##### Table of Contents



Years Ended June 30, 2006 and 2005
 Electronic Commerce Segment Information:
 Electronic Commerce Revenue (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    662,728
    
    
    $
    580,696
    
    
    $
    82,032
    
    
    
    14.1
    %
     Fiscal 2006:
 Quarter Ended6/30/06
    
    
    3/31/06
    
    
    12/31/05
    
    
    9/30/05(In millions)Full ServiceRevenue
    
    $
    107.6
    
    
    $
    109.4
    
    
    $
    116.0
    
    
    $
    118.5Active subscribers
    
    
    10.3
    
    
    
    9.7
    
    
    
    9.0
    
    
    
    8.8Transactions processed
    
    
    217.2
    
    
    
    206.7
    
    
    
    189.7
    
    
    
    180.1Payment ServicesRevenue
    
    $
    46.6
    
    
    $
    47.8
    
    
    $
    36.1
    
    
    $
    35.4Transactions processed
    
    
    85.1
    
    
    
    86.6
    
    
    
    81.0
    
    
    
    85.9Other Electronic CommerceRevenue
    
    $
    12.5
    
    
    $
    12.2
    
    
    $
    11.2
    
    
    $
    9.6TotalsElectronic Commerce revenue
    
    $
    166.7
    
    
    $
    169.4
    
    
    $
    163.3
    
    
    $
    163.5Transactions processed
    
    
    302.3
    
    
    
    293.3
    
    
    
    270.7
    
    
    
    266.0
 -45-




---



##### Table of Contents



Fiscal 2005:
 Quarter Ended6/30/05
    
    
    3/31/05
    
    
    12/31/04
    
    
    9/30/04(In millions)Full ServiceRevenue
    
    $
    110.1
    
    
    $
    106.4
    
    
    $
    102.4
    
    
    $
    99.1Active subscribers
    
    
    7.8
    
    
    
    7.4
    
    
    
    6.9
    
    
    
    6.4Transactions processed
    
    
    161.9
    
    
    
    153.6
    
    
    
    142.9
    
    
    
    133.5Payment ServicesRevenue
    
    $
    33.8
    
    
    $
    32.4
    
    
    $
    31.3
    
    
    $
    30.5Transactions processed
    
    
    83.0
    
    
    
    80.8
    
    
    
    76.5
    
    
    
    72.3Other Electronic CommerceRevenue
    
    $
    8.9
    
    
    $
    8.8
    
    
    $
    8.4
    
    
    $
    8.6TotalsElectronic Commerce revenue
    
    $
    152.8
    
    
    $
    147.6
    
    
    $
    142.1
    
    
    $
    138.2Transactions processed
    
    
    244.9
    
    
    
    234.4
    
    
    
    219.4
    
    
    
    205.8
    -46-




---



##### Table of Contents



Electronic Commerce Operating Income (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    247,918
    
    
    $
    207,796
    
    
    $
    40,122
    
    
    
    19.3
    %
  Investment Services Segment Information:
 Investment Services Revenue (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    112,245
    
    
    $
    96,064
    
    
    $
    16,181
    
    
    
    16.8
    %
  Investment Services Operating Income (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    17,846
    
    
    $
    18,638
    
    
    $
    (792
    )
    
    
    (4.2
    %)
 SM
 -47-




---



##### Table of Contents



Software Segment Information:
 Software Revenue (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    109,386
    
    
    $
    81,072
    
    
    $
    28,314
    
    
    
    34.9
    %
  Software Operating Income (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    20,858
    
    
    $
    17,748
    
    
    $
    3,110
    
    
    
    17.5
    %
  Impact of Discontinued Operations:
 M-Solutions Revenue (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    4,957
    
    
    $
    7,985
    
    
    $
    (3,028
    )
    
    
    (37.9
    )%
 M-Solutions Operating Income (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    1,490
    
    
    $
    1,517
    
    
    $
    (27
    )
    
    
    (1.8
    )%
  -48-




---



##### Table of Contents



Corporate Segment Information:
 Corporate Operating Loss (000s)
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    (37,845
    )
    
    $
    (37,595
    )
    
    $
    (250
    )
    
    
    0.7
    %
  Purchase Accounting Amortization (000s) :
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    57,037
    
    
    $
    133,446
    
    
    $
    (76,409
    )
    
    
    (57.3
    )%
  SFAS 123(R)  Options Issued Before July 1, 2004 (000s) :
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    4,133
    
    
    $
    
    
    
    $
    4,133
    
    
    
    
  Impact of Discontinued Operations (000s) :
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    1,490
    
    
    $
    1,517
    
    
    $
    (27
    )
    
    
    (1.8
    )%
  -49-




---



##### Table of Contents



Reorganization Charge (000s) :
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    
    
    
    $
    5,585
    
    
    $
    (5,585
    )
    
    
    
  Write off of Capitalized Software (000s) :
 June 30,
    
    
    Change2006
    
    
    2005
    
    
    $
    
    
    %Year ended
    
    $
    
    
    
    $
    1,039
    
    
    $
    (1,039
    )
    
    
    
  Years Ended June 30, 2005 and 2004
 Electronic Commerce Segment Information:
 Electronic Commerce Revenue (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    580,696
    
    
    $
    452,732
    
    
    $
    127,964
    
    
    
    28.3
    %
     -50-




---



##### Table of Contents



Fiscal 2005:
 Quarter Ended6/30/05
    
    
    3/31/05
    
    
    12/31/04
    
    
    9/30/04(In millions)Full ServiceRevenue
    
    $
    110.1
    
    
    $
    106.4
    
    
    $
    102.4
    
    
    $
    99.1Active subscribers
    
    
    7.8
    
    
    
    7.4
    
    
    
    6.9
    
    
    
    6.4Transactions processed
    
    
    161.9
    
    
    
    153.6
    
    
    
    142.9
    
    
    
    133.5Payment ServicesRevenue
    
    $
    33.8
    
    
    $
    32.4
    
    
    $
    31.3
    
    
    $
    30.5Transactions processed
    
    
    83.0
    
    
    
    80.8
    
    
    
    76.5
    
    
    
    72.3Other Electronic CommerceRevenue
    
    $
    8.9
    
    
    $
    8.8
    
    
    $
    8.4
    
    
    $
    8.6TotalsElectronic Commerce revenue
    
    $
    152.8
    
    
    $
    147.6
    
    
    $
    142.1
    
    
    $
    138.2Transactions processed
    
    
    244.9
    
    
    
    234.4
    
    
    
    219.4
    
    
    
    205.8
 Fiscal 2004:
 Quarter Ended6/30/04
    
    
    3/31/04
    
    
    12/31/03
    
    
    9/30/03(In millions)Full ServiceRevenue
    
    $
    96.2
    
    
    $
    94.0
    
    
    $
    91.8
    
    
    $
    85.5Active subscribers
    
    
    5.9
    
    
    
    5.5
    
    
    
    5.0
    
    
    
    4.6Transactions processed
    
    
    123.9
    
    
    
    115.5
    
    
    
    106.1
    
    
    
    94.3Payment ServicesRevenue
    
    $
    14.0
    
    
    $
    12.8
    
    
    $
    12.0
    
    
    $
    11.9Transactions processed
    
    
    41.3
    
    
    
    36.7
    
    
    
    33.1
    
    
    
    32.4Other Electronic CommerceRevenue
    
    $
    8.2
    
    
    $
    8.4
    
    
    $
    8.7
    
    
    $
    9.2TotalsElectronic Commerce revenue
    
    $
    118.4
    
    
    $
    115.2
    
    
    $
    112.5
    
    
    $
    106.6Transactions processed
    
    
    165.2
    
    
    
    152.2
    
    
    
    139.2
    
    
    
    126.7
   -51-




---



##### Table of Contents



Electronic Commerce Operating Income (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    207,796
    
    
    $
    155,724
    
    
    $
    52,072
    
    
    
    33.4
    %
  Investment Services Segment Information:
 Investment Services Revenue (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    96,064
    
    
    $
    86,270
    
    
    $
    9,794
    
    
    
    11.4
    %
  Investment Services Operating Income (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    18,638
    
    
    $
    19,911
    
    
    $
    (1,273
    )
    
    
    (6.4
    )%
  Software Segment Information:
 Software Revenue (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    81,072
    
    
    $
    67,462
    
    
    $
    13,610
    
    
    
    20.2
    %
  -52-




---



##### Table of Contents



Software Operating Income (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    17,748
    
    
    $
    14,293
    
    
    $
    3,455
    
    
    
    24.2
    %
  Corporate Segment Information:
 Corporate Operating Loss (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    (37,595
    )
    
    $
    (33,256
    )
    
    $
    (4,339
    )
    
    
    (13.0
    )%
  Impact
of Discontinued Operations:
 M-Solutions
Revenue (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    7,985
    
    
    $
    7,237
    
    
    $
    748
    
    
    
    10.3
    %
 M-Solutions
Operating Income (000s)
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    1,517
    
    
    $
    288
    
    
    $
    1,229
    
    
    
    426.7
    %
  Purchase Accounting Amortization (000s) :
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    133,446
    
    
    $
    136,558
    
    
    $
    (3,112
    )
    
    
    (2.3
    )%
  -53-




---



##### Table of Contents



Reorganization Charge (000s) :
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    5,585
    
    
    $
    
    
    
    $
    5,585
    
    
    
    
  Write off of Capitalized Software (000s) :
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    1,039
    
    
    $
    
    
    
    $
    1,039
    
    
    
    
  In-Process Research & Development (000s) :
 June 30,
    
    
    Change2005
    
    
    2004
    
    
    $
    
    
    %Year ended
    
    $
    
    
    
    $
    324
    
    
    $
    (324
    )
    
    
    
  Liquidity and Capital Resources
  Year Ended June 30,2006
    
    
    2005
    
    
    2004(In thousands)Net cash provided by operating activities
    
    $
    213,602
    
    
    $
    206,095
    
    
    $
    171,059Net cash used in investing activities
    
    
    (138,076
    )
    
    
    (215,855
    )
    
    
    (103,415
    )Net cash used in financing activities
    
    
    (3,971
    )
    
    
    (24,113
    )
    
    
    (142,466
    )Effect of exchange rate changes
    
    
    256
    
    
    
    313
    
    
    
    296Net increase (decrease) in cash and cash
equivalents
    
    $
    71,811
    
    
    $
    (33,560
    )
    
    $
    (74,526
    )
  -54-




---



##### Table of Contents



-55-




---



##### Table of Contents



:
 Payments Due Year Ended June 30,2008 to
    
    
    2010 toContractual Obligations
    
    Total
    
    
    2007
    
    
    2009
    
    
    2011
    
    
    Thereafter(In thousands)Operating leases
    
    $
    102,406
    
    
    $
    17,892
    
    
    $
    32,097
    
    
    $
    21,739
    
    
    $
    30,678Capital lease obligations
    
    
    425
    
    
    
    358
    
    
    
    67
    
    
    
    
    
    
    
    Other long-term obligations
    
    
    38,984
    
    
    
    5,728
    
    
    
    28,912
    
    
    
    1,231
    
    
    
    3,113Total contractual obligations
    
    $
    141,815
    
    
    $
    23,978
    
    
    $
    61,076
    
    
    $
    22,970
    
    
    $
    33,791
   Use of Non-GAAP Financial Information
  -56-




---



##### Table of Contents



Year Ended June 30,2006
    
    
    2005Cash provided by operating activities
    
    $
    213,602
    
    
    $
    206,095Excluding: Net change in settlement accounts
    
    
    3,430
    
    
    
    (153
    )Less:          Capital expenditures
    
    
    (48,096
    )
    
    
    (33,893
    )Plus:           Data Center Reimbursements
    
    
    2,046
    
    
    
    Free cash flow
    
    $
    170,982
    
    
    $
    172,049
   Recent Accounting Pronouncements
  -57-




---



##### Table of Contents



-58-




---



##### Table of Contents



Recent Development
  Application of Critical Accounting Policies and Estimates
  Discussion with the Audit Committee of the Board of Directors.
 Accounting for Goodwill.
 
    
    Electronic Commerce of $659.8 million;
    
    Software of $62.7 million; and
    
    Investment Services of $12.1 million.
   Intangible Assets Exclusive of Goodwill.
 -59-




---



##### Table of Contents



Equity Instruments Issued to Customers.
 Income Taxes and Deferred Income Taxes.
 -60-




---



##### Table of Contents



Investments.
 Inflation
  Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
  -61-




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data.
  -62-




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL
CONTROL OVER FINANCIAL REPORTING
 
 Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework Internal ControlIntegrated Framework
  -63-




---



##### Table of Contents



-64-




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Internal ControlIntegrated Framework
 
 
 -65-




---



##### Table of Contents



CHECKFREE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 June 30,2006
    
    
    2005(In thousands, exceptshare and per share data)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    173,083
    
    
    $
    101,272Settlement assets
    
    
    107,128
    
    
    
    73,675Investments
    
    
    144,530
    
    
    
    196,805Accounts receivable, net
    
    
    146,605
    
    
    
    122,158Accounts receivable, related parties
    
    
    
    
    
    
    5,775Prepaid expenses and other assets
    
    
    39,810
    
    
    
    26,258Deferred income taxes
    
    
    7,311
    
    
    
    10,407Total current assets
    
    
    618,467
    
    
    
    536,350PROPERTY AND EQUIPMENT, Net
    
    
    100,217
    
    
    
    89,273OTHER ASSETS:Capitalized software, net
    
    
    3,755
    
    
    
    6,175Goodwill
    
    
    734,591
    
    
    
    656,174Strategic agreements, net
    
    
    106,005
    
    
    
    147,448Other intangible assets, net
    
    
    62,416
    
    
    
    30,935Investments
    
    
    78,559
    
    
    
    62,996Other noncurrent assets
    
    
    8,372
    
    
    
    4,600Deferred income taxes
    
    
    45,240
    
    
    
    35,648Investment in joint venture
    
    
    407
    
    
    
    317Total other assets
    
    
    1,039,345
    
    
    
    944,293Total assets
    
    $
    1,758,029
    
    
    $
    1,569,916LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    16,967
    
    
    $
    11,444Settlement obligations
    
    
    103,732
    
    
    
    73,919Accrued liabilities
    
    
    74,366
    
    
    
    72,189Current portion of long-term obligations
    
    
    767
    
    
    
    476Deferred revenue
    
    
    40,301
    
    
    
    39,051Total current liabilities
    
    
    236,133
    
    
    
    197,079ACCRUED RENT AND OTHER
    
    
    3,844
    
    
    
    4,324DEFERRED INCOME TAXES
    
    
    2,964
    
    
    
    4,967DEFERRED REVENUE
    
    
    3,021
    
    
    
    1,742CAPITAL LEASE AND LONG-TERM OBLIGATIONS  Less current portion
    
    
    28,432
    
    
    
    25,389COMMITMENTS AND CONTINGENCIES (Note 11)STOCKHOLDERS EQUITY:Preferred stock- 50,000,000 authorized shares, $0.01 par value;
no amounts issued or outstanding
    
    
    
    
    
    
    Common stock- 500,000,000 authorized shares, $0.01 par value;
issued and outstanding 90,867,834 and 90,257,704 shares, respectively
    
    
    909
    
    
    
    903Additional paid-in-capital
    
    
    2,482,309
    
    
    
    2,469,184Unearned compensation
    
    
    
    
    
    
    (6,168
    )Accumulated other comprehensive loss
    
    
    (1,593
    )
    
    
    (2,251
    )Accumulated deficit
    
    
    (997,990
    )
    
    
    (1,125,253
    )Total stockholders equity
    
    
    1,483,635
    
    
    
    1,336,415Total liabilities and stockholders equity
    
    $
    1,758,029
    
    
    $
    1,569,916
  -66-




---



##### Table of Contents



CHECKFREE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended June 30,2006
    
    
    2005
    
    
    2004(In thousands, exceptshare and per share data)REVENUES:Processing and servicing:Third parties
    
    $
    735,840
    
    
    $
    627,541
    
    
    $
    481,589Related parties
    
    
    18,236
    
    
    
    33,000
    
    
    
    41,500Total processing and servicing
    
    
    754,076
    
    
    
    660,541
    
    
    
    523,089License fees
    
    
    35,196
    
    
    
    28,458
    
    
    
    23,912Maintenance fees
    
    
    42,218
    
    
    
    31,231
    
    
    
    28,271Professional fees
    
    
    47,912
    
    
    
    29,617
    
    
    
    23,955Total revenues
    
    
    879,402
    
    
    
    749,847
    
    
    
    599,227EXPENSES:Cost of processing, servicing and support
    
    
    342,535
    
    
    
    296,912
    
    
    
    244,429Research and development
    
    
    101,854
    
    
    
    80,039
    
    
    
    64,035Sales and marketing
    
    
    87,418
    
    
    
    69,106
    
    
    
    50,783General and administrative
    
    
    61,948
    
    
    
    57,486
    
    
    
    43,724Depreciation and amortization
    
    
    99,530
    
    
    
    175,719
    
    
    
    176,430In-process research and development
    
    
    
    
    
    
    
    
    
    
    324Reorganization charge
    
    
    
    
    
    
    5,585
    
    
    
    Total expenses
    
    
    693,285
    
    
    
    684,847
    
    
    
    579,725INCOME FROM CONTINUING OPERATIONS BEFORE OTHER
INCOME AND EXPENSE
    
    
    186,117
    
    
    
    65,000
    
    
    
    19,502OTHER:Equity in net loss of joint venture
    
    
    (3,100
    )
    
    
    (2,984
    )
    
    
    (593
    )Interest income
    
    
    13,441
    
    
    
    8,809
    
    
    
    5,693Interest expense
    
    
    (986
    )
    
    
    (1,094
    )
    
    
    (13,164
    )Gain on investments
    
    
    
    
    
    
    592
    
    
    
    INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES
    
    
    195,472
    
    
    
    70,323
    
    
    
    11,438INCOME TAX EXPENSE
    
    
    74,455
    
    
    
    24,560
    
    
    
    1,088INCOME FROM CONTINUING OPERATIONS
    
    
    121,017
    
    
    
    45,763
    
    
    
    10,350Earnings from discontinued operations before
income taxes (including a gain on disposal of
$12,821 in 2006)
    
    
    14,310
    
    
    
    1,518
    
    
    
    292Income tax expense on discontinued operations
    
    
    8,064
    
    
    
    480
    
    
    
    107INCOME FROM DISCONTINUED OPERATIONS
    
    
    6,246
    
    
    
    1,038
    
    
    
    185NET INCOME
    
    $
    127,263
    
    
    $
    46,801
    
    
    $
    10,535BASIC INCOME PER SHARE:Income per share from continuing operations
    
    $
    1.33
    
    
    $
    0.51
    
    
    $
    0.12Income per share from discontinued operations
    
    
    0.07
    
    
    
    0.01
    
    
    
    0.00Total basic income per share
    
    $
    1.40
    
    
    $
    0.52
    
    
    $
    0.12Weighted average number of shares
    
    
    90,984,495
    
    
    
    90,767,054
    
    
    
    89,869,760DILUTED INCOME PER SHARE:Income per share from continuing operations
    
    $
    1.29
    
    
    $
    0.49
    
    
    $
    0.11Income per share from discontinued operations
    
    
    0.07
    
    
    
    0.01
    
    
    
    0.00Total diluted income per share
    
    $
    1.36
    
    
    $
    0.50
    
    
    $
    0.11Weighted average number of shares
    
    
    93,708,295
    
    
    
    92,914,597
    
    
    
    91,864,490
  -67-




---



##### Table of Contents



CHECKFREE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Number of
    
    
    Number ofShares of
    
    
    Shares of
    
    
    Common
    
    
    AdditionalCommon
    
    
    Treasury
    
    
    Stock at
    
    
    Paid-InStock
    
    
    Stock
    
    
    Par
    
    
    Capital(In thousands, except share data)BALANCE JUNE 30, 2003
    
    
    89,266,370
    
    
    
    
    
    
    $
    893
    
    
    $
    2,449,374Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized loss on available-for-sale securities,
net of      tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gain on foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized
loss on cash flow hedges, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options exercised
    
    
    571,844
    
    
    
    
    
    
    
    6
    
    
    
    7,150Tax benefit associated with exercise
of stock options and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,621Employee stock purchases
    
    
    176,868
    
    
    
    
    
    
    
    2
    
    
    
    3,299401(k) match
    
    
    149,844
    
    
    
    
    
    
    
    1
    
    
    
    6,213Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,405BALANCE JUNE 30, 2004
    
    
    90,164,926
    
    
    
    
    
    
    
    902
    
    
    
    2,471,062Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized loss on available-for-sale
securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized loss on foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized
loss on cash flow hedges, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options exercised
    
    
    710,396
    
    
    
    
    
    
    
    7
    
    
    
    10,200Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,028Employee stock purchases
    
    
    165,098
    
    
    
    
    
    
    
    2
    
    
    
    3,995Treasury shares acquired
    
    
    
    
    
    
    (891,200
    )
    
    
    
    
    
    
    Treasury shares retired
    
    
    (891,200
    )
    
    
    891,200
    
    
    
    (9
    )
    
    
    (33,451
    )401(k) match
    
    
    108,484
    
    
    
    
    
    
    
    1
    
    
    
    3,069Unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,721Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,560BALANCE JUNE 30, 2005
    
    
    90,257,704
    
    
    
    
    
    
    
    903
    
    
    
    2,469,184Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gain on available-for-sale
securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gain on foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized loss on cash flow hedges, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options exercised
    
    
    1,113,286
    
    
    
    
    
    
    
    11
    
    
    
    23,747Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,907Employee stock purchases
    
    
    122,334
    
    
    
    
    
    
    
    1
    
    
    
    4,066Treasury shares acquired
    
    
    
    
    
    
    (707,732
    )
    
    
    
    
    
    
    Treasury shares retired
    
    
    (707,732
    )
    
    
    707,732
    
    
    
    (7
    )
    
    
    (33,593
    )401(k) match
    
    
    82,242
    
    
    
    
    
    
    
    1
    
    
    
    4,053Reclassification of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,168
    )Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,113BALANCE JUNE 30, 2006
    
    
    90,867,834
    
    
    
    
    
    
    $
    909
    
    
    $
    2,482,309
  -68-




---



##### Table of Contents



CHECKFREE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AccumulatedOther
    
    
    Treasury
    
    
    
    
    
    
    
    
    
    
    TotalComprehensive
    
    
    Stock
    
    
    Unearned
    
    
    Accumulated
    
    
    StockholdersIncome (Loss)
    
    
    At Cost
    
    
    Compensation
    
    
    Deficit
    
    
    Equity(In thousands, except share data)BALANCE JUNE 30, 2003
    
    $
    471
    
    
    $
    
    
    
    $
    
    
    
    $
    (1,182,589
    )
    
    $
    1,268,149Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,535
    
    
    
    10,535Unrealized loss on available-for-sale
securities, net of tax
    
    
    (709
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (709
    )Unrealized gain on foreign currency
translation
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Unrealized loss on cash flow hedges,
net of tax
    
    
    (544
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (544
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,336Stock options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,156Tax benefit associated with exercise
of stock options and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,621Employee stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,301401(k) match
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,214Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,405BALANCE JUNE 30, 2004
    
    
    (728
    )
    
    
    
    
    
    
    
    
    
    
    (1,172,054
    )
    
    
    1,299,182Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,801
    
    
    
    46,801Unrealized loss on available-for-sale
securities, net of tax
    
    
    (174
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (174
    )Unrealized loss on foreign currency
translation
    
    
    (800
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (800
    )Unrealized loss on cash flow hedges,
net of tax
    
    
    (549
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (549
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,278Stock options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,207Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,028Employee stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,997Treasury shares acquired
    
    
    
    
    
    
    (33,460
    )
    
    
    
    
    
    
    
    
    
    
    (33,460
    )Treasury shares retired
    
    
    
    
    
    
    33,460
    
    
    
    
    
    
    
    
    
    
    
    401(k) match
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,070Unearned compensation
    
    
    
    
    
    
    
    
    
    
    (8,721
    )
    
    
    
    
    
    
    Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    2,553
    
    
    
    
    
    
    
    2,553Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,560BALANCE JUNE 30, 2005
    
    
    (2,251
    )
    
    
    
    
    
    
    (6,168
    )
    
    
    (1,125,253
    )
    
    
    1,336,415Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,263
    
    
    
    127,263Unrealized gain on available-for-sale
securities, net of tax
    
    
    (1,015
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,015
    )Unrealized gain on foreign currency
translation
    
    
    687
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    687Unrealized loss on cash flow hedges,
net of tax
    
    
    986
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    986Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,921Stock options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,758Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,907Employee stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,067Treasury shares acquired
    
    
    
    
    
    
    (33,600
    )
    
    
    
    
    
    
    
    
    
    
    (33,600
    )Treasury shares retired
    
    
    
    
    
    
    33,600
    
    
    
    
    
    
    
    
    
    
    
    401(k) match
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,054Reclassification of unearned
compensation
    
    
    
    
    
    
    
    
    
    
    6,168
    
    
    
    
    
    
    
    Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,113BALANCE JUNE 30, 2006
    
    $
    (1,593
    )
    
    $
    
    
    
    $
    
    
    
    $
    (997,990
    )
    
    $
    1,483,635
  -69-




---



##### Table of Contents



CHECKFREE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended June 30,2006
    
    
    2005
    
    
    2004(In thousands)OPERATING ACTIVITIES:Net income
    
    $
    127,263
    
    
    $
    46,801
    
    
    $
    10,535Adjustments to reconcile net income to net cash
provided by operating activities:Equity in net loss of joint venture
    
    
    3,100
    
    
    
    2,984
    
    
    
    593Depreciation and amortization
    
    
    100,020
    
    
    
    176,598
    
    
    
    177,582Deferred income tax benefit
    
    
    (8,021
    )
    
    
    (13,701
    )
    
    
    (12,930
    )Gain on investments
    
    
    
    
    
    
    (592
    )
    
    
    Equity-based compensation
    
    
    17,177
    
    
    
    8,193
    
    
    
    5,569Gain on sale of business
    
    
    (12,821
    )
    
    
    
    
    
    
    Net loss on disposition of property and equipment
    
    
    418
    
    
    
    277
    
    
    
    487Write off of in-process research and development
    
    
    
    
    
    
    
    
    
    
    324Write off of convertible notes issuance costs
    
    
    
    
    
    
    
    
    
    
    2,407Change in certain assets and liabilities (net of acquisitions):Settlement assets and obligations
    
    
    (3,430
    )
    
    
    153
    
    
    
    (193
    )Accounts receivable
    
    
    (17,367
    )
    
    
    (11,994
    )
    
    
    (12,874
    )Prepaid expenses and other
    
    
    (9,772
    )
    
    
    (6,211
    )
    
    
    3,495Accounts payable
    
    
    3,547
    
    
    
    (1,750
    )
    
    
    11Accrued liabilities and other
    
    
    7,640
    
    
    
    4,238
    
    
    
    (2,308
    )Deferred revenue
    
    
    5,848
    
    
    
    1,099
    
    
    
    (1,639
    )Net cash provided by operating activities
    
    
    213,602
    
    
    
    206,095
    
    
    
    171,059INVESTING ACTIVITIES:Purchase of property and software
    
    
    (48,096
    )
    
    
    (33,893
    )
    
    
    (23,482
    )Proceeds from sale of business
    
    
    18,593
    
    
    
    
    
    
    
    Capitalization of software development costs
    
    
    (875
    )
    
    
    (1,706
    )
    
    
    (2,817
    )Purchases of investments  Held-to-maturity
    
    
    
    
    
    
    
    
    
    
    (511
    )Proceeds from maturities of investments  Held-to-maturity
    
    
    
    
    
    
    
    
    
    
    34,253Purchases of investments  Available-for-sale
    
    
    (429,949
    )
    
    
    (380,672
    )
    
    
    (240,919
    )Proceeds from maturities of investments  Available-for-sale
    
    
    466,011
    
    
    
    262,704
    
    
    
    255,972Purchase of other investments
    
    
    (573
    )
    
    
    (223
    )
    
    
    (74
    )Proceeds from other investments
    
    
    162
    
    
    
    26
    
    
    
    11Decrease in restricted investments
    
    
    
    
    
    
    
    
    
    
    3,000Purchase of businesses, net of cash acquired
    
    
    (136,143
    )
    
    
    (54,934
    )
    
    
    (122,322
    )Investment in joint venture
    
    
    (3,190
    )
    
    
    (2,818
    )
    
    
    (1,212
    )Changes in other assets
    
    
    (4,016
    )
    
    
    (4,339
    )
    
    
    (5,314
    )Net cash used in investing activities
    
    
    (138,076
    )
    
    
    (215,855
    )
    
    
    (103,415
    )FINANCING ACTIVITIES:Principal payments under capital lease and other
long-term obligations
    
    
    (2,469
    )
    
    
    (5,108
    )
    
    
    (5,575
    )Proceeds from stock options exercised
    
    
    23,758
    
    
    
    10,207
    
    
    
    7,156Proceeds from employee stock purchase plan
    
    
    4,377
    
    
    
    4,248
    
    
    
    3,453Payment of deferred financing fees
    
    
    (1,095
    )
    
    
    
    
    
    
    Proceeds from data center facility
    
    
    2,046
    
    
    
    
    
    
    
    Treasury shares acquired
    
    
    (33,600
    )
    
    
    (33,460
    )
    
    
    Excess tax benefit from equity based compensation
    
    
    3,012
    
    
    
    
    
    
    
    Redemption of convertible notes
    
    
    
    
    
    
    
    
    
    
    (172,500
    )Increase in long-term deposits
    
    
    
    
    
    
    
    
    
    
    25,000Net cash used in financing activities
    
    
    (3,971
    )
    
    
    (24,113
    )
    
    
    (142,466
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    256
    
    
    
    313
    
    
    
    296NET INCREASE (DECREASE) IN CASH ANDCASH EQUIVALENTS
    
    
    71,811
    
    
    
    (33,560
    )
    
    
    (74,526
    )CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    101,272
    
    
    
    134,832
    
    
    
    209,358End of period
    
    $
    173,083
    
    
    $
    101,272
    
    
    $
    134,832
  -70-




---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Organization
 Principles of Consolidation
 Use of Estimates
 Cash and Cash Equivalents
 Investments
    -71-




---



##### Table of Contents



Settlement Assets and Obligations
 Concentrations of Credit Risk
 Derivative Financial Instruments
 Property and Equipment
 Capitalized Software 
 
    
    SFAS 86 Software development costs incurred prior to the
establishment of technological feasibility are expensed as
incurred. Software development costs incurred after the
technological feasibility of the subject software product has been
established are capitalized in accordance with SFAS 86.
Capitalized software costs are amortized on a product-by-product
basis using either the estimated economic life of the product on a
straight-line basis over three to five years, or the current year
gross product revenue to the current and anticipated future gross
product revenue, whichever produces the greater annual
amortization.
    
    SOP 98-1  Software costs incurred in the preliminary project
stage are expensed as incurred. Software costs incurred after the
preliminary project stage is complete, we have committed to the
project, and it is probable the software will be used to perform
the function intended are capitalized in accordance with SOP 98-1.
Capitalized software costs are amortized on a product-by-product
basis using the estimated economic life of the product on a
straight-line basis, generally three to five years. Capitalized
software costs not expected to be completed and placed in service
are written down to estimated fair value.
 -72-




---



##### Table of Contents



Goodwill and Other Intangible Assets
   Impairment of Long-Lived Assets 
 Transaction Processing
 Comprehensive Income (Loss)
 Stock-Based Compensation
   -73-




---



##### Table of Contents



Year Ended June 30,2005
    
    
    2004Net income, as reported
    
    $
    46,801
    
    
    $
    10,535Stock-based compensation
included in net income
    
    
    3,677
    
    
    
    1,828Stock-based compensation under SFAS 123(R)
    
    
    (9,281
    )
    
    
    (16,589
    )Pro forma net income (loss)
    
    $
    41,197
    
    
    $
    (4,226
    )Pro forma earnings (loss) per share:Basic and diluted
    
    $
    0.45
    
    
    $
    (0.05
    )
  Year EndedJune 30, 2006Income from continuing operations before other income and expenses, as reported
    
    $
    186,117Effect of adopting SFAS 123(R)
    
    
    5,993Income from continuing operations before other income and expenses
    
    $
    192,110Income from continuing operations before income taxes, as reported
    
    $
    195,472Effect of adopting SFAS 123(R)
    
    
    5,993Income from continuing operations before income taxes
    
    $
    201,465Net income, as reported
    
    $
    127,263Effect of adopting SFAS 123(R)
    
    
    3,717Net income
    
    $
    130,980Net cash provided by operating activities, as reported
    
    $
    213,602Effect of adopting SFAS 123(R)
    
    
    3,012Net cash provided by operating activities
    
    $
    216,614Net cash provided by financing activities, as reported
    
    $
    (3,971
    )Effect of adopting SFAS 123(R)
    
    
    (3,012
    )Net cash provided by financing activities
    
    $
    (6,983
    )Net income per share, as reported:Basic
    
    $
    1.40Diluted
    
    $
    1.36Effect of adopting SFAS 123(R) on net income per share:Basic and diluted
    
    $
    0.04Net income per share:Basic
    
    $
    1.44Diluted
    
    $
    1.40
 -74-




---



##### Table of Contents



Stock-Related Transactions With Third Parties
 Basic and Diluted Earnings Per Share
 Foreign Currency Translation
 Revenue Recognition
 
    
    Processing and servicing Processing and servicing includes revenues from transaction
processing, electronic funds transfer and monthly service fees on consumer funds transfer
services. We recognize revenues when the services have been performed. Certain customer
agreements include minimum monthly revenue commitments to us and; of those agreements, some
have provisions that allow these minimum commitments to be credited against future services,
as defined. We defer any portion of the minimum revenue commitments that we expect to be
credited against future services until the future services are performed or the credits expire
unused. Our estimate of minimums to be credited against future services is primarily based on
customer specific historical experience and volume and growth experience with other customers.
Transaction fees related to our walk-in payment operations are recorded gross of agent
commissions if we are required to invoice our customers for such fees and remit the commission
to our agents.As part of processing certain types of transactions, we earn interest from the time money is
collected from our customers until the time payment is made to the applicable merchants. These
revenues, which are generated from trust account balances not included on our consolidated
balance sheets, are included in our processing and servicing revenues and totaled $41,643,000,
$26,648,000 and $14,813,000 for the years ended June 30, 2006, 2005 and 2004, respectively.
    
    License fees We recognize revenues on software transactions in accordance with SOP 97-2,
Software Revenue Recognition (SOP 97-2), as amended by SOP 98-9, Modification of SOP
97-2, Software Revenue Recognition, With Respect to Certain Transactions and SOP 81-1,
Accounting for Performance of Construction-Type and Certain Production-Type Contracts, based
on the terms and conditions in the contract. In accordance with the provisions of SOP 97-2,
revenues from software license agreements are recognized when there is persuasive evidence
that an arrangement exists, the fee is fixed or determinable, collectibility is probable and
the software has been delivered, provided that no significant obligation remains under the
contract. We have multiple-element software arrangements which in addition to software
typically also include
 -75-




---



##### Table of Contents



professional services and maintenance services. For these arrangements, we recognize revenue
using the residual method. Under the residual method, the fair value of the undelivered
elements, based on vendor specific objective evidence of fair value, is deferred. The difference
between the total arrangement fee and the amount deferred for the undelivered elements is
recognized as revenue related to the delivered elements. We determine the fair value of the
undelivered elements based the amounts charged when those elements are sold separately.
Contracts accounted for under the percentage-of-completion method are generally measured based
on the ratio of labor costs incurred to total estimated labor costs to be incurred. Changes in
estimates to complete and revisions in overall profit estimates on these contracts are charged
to earnings in the period in which they are determined. We accrue for contract losses if and
when the current estimate of total contract costs exceeds total contract revenue.
 
    
    Maintenance fees We recognize maintenance fee revenues ratably
over the term of the related contractual support period, generally
12 months.
    
    Professional fees Other revenues consists primarily of
consulting and training services. We recognize consulting
revenues as services are performed and training revenues are
recognized upon delivery of the related services.
  Advertising Costs
 Income Taxes
 Business Segments
 Related Parties
 Recent Accounting Pronouncements
 -76-




---



##### Table of Contents



Reclassifications
 NOTE 2. ACQUISITIONS AND DIVESTITURES
 PhoneCharge, Inc.
  -77-




---



##### Table of Contents



Intangible
    
    
    UsefulAsset
    
    
    LifeCustomer base
    
    $
    25,000
    
    
    5 yrsCurrent technology
    
    
    4,400
    
    
    5 yrsTradenames
    
    
    1,700
    
    
    3 yrs
  Aphelion, Inc.
  Intangible
    
    
    UsefulAsset
    
    
    LifeCustomer base
    
    $
    5,000
    
    
    5 yrsCurrent technology
    
    
    1,300
    
    
    5 yrsTradenames
    
    
    600
    
    
    3 yrsCovenants not to compete
    
    
    320
    
    
    2 yrs
  Integrated Decision Systems, Inc.
  Intangible
    
    
    UsefulAsset
    
    
    LifeCustomer base
    
    $
    7,000
    
    
    6 yrsTradenames
    
    
    1,831
    
    
    3 yrsCurrent technology
    
    
    500
    
    
    3 yrs
  Accurate Software Limited
  -78-




---



##### Table of Contents



Intangible
    
    
    UsefulAsset
    
    
    LifeCustomer relationships
    
    $
    11,000
    
    
    6 yrsCurrent technology
    
    
    1,860
    
    
    
    2 to 5 yrsCovenants not to compete
    
    
    2,490
    
    
    1 yrTradenames
    
    
    2,026
    
    
    
    1.5 to 3 yrs
  Disposition of M-Solutions
  Total current assets
    
    $
    1,174Property and equipment, net
    
    
    369Goodwill
    
    
    7,250Other intangible assets, net
    
    
    1,305Total other assets
    
    
    8,555Total assets
    
    $
    10,098Total liabilities
    
    $
    4,326
 NOTE 3. INVESTMENTS
  June 30,2006
    
    
    2005Available-for-sale
    
    $
    378,678
    
    
    $
    347,895Other investments
    
    
    1,782
    
    
    
    918Less: amounts classified as cash equivalents
    
    
    157,371
    
    
    
    89,012Total investments
    
    $
    223,089
    
    
    $
    259,801
 -79-




---



##### Table of Contents



Available-for-Sale
 Cost orAmortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueJune 30, 2006:Corporate bonds
    
    $
    19,734
    
    
    $
    2
    
    
    $
    (193
    )
    
    $
    19,543Asset-backed securities
    
    
    31,267
    
    
    
    3
    
    
    
    (132
    )
    
    
    31,138Collateralized mortgage obligations
    
    
    14,928
    
    
    
    81
    
    
    
    (370
    )
    
    
    14,639Commercial paper
    
    
    44,659
    
    
    
    
    
    
    
    
    
    
    
    44,659Certificates of Deposit
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    10,000U.S. Government and federal agency
obligations
    
    
    62,459
    
    
    
    
    
    
    
    (764
    )
    
    
    61,695Municipal bonds
    
    
    67,197
    
    
    
    
    
    
    
    (11
    )
    
    
    67,186Money market and mutual funds and
other
    
    
    103,254
    
    
    
    
    
    
    
    
    
    
    
    103,254Mortgage pass-through securities
    
    
    27,430
    
    
    
    
    
    
    
    (866
    )
    
    
    26,564Available-for-sale investments
    
    
    380,928
    
    
    
    86
    
    
    
    (2,336
    )
    
    
    378,678Less: amounts classified as cash
equivalents
    
    
    157,371
    
    
    
    
    
    
    
    
    
    
    
    157,371Net available-for-sale investments
    
    $
    223,557
    
    
    $
    86
    
    
    $
    (2,336
    )
    
    $
    221,307
 Cost orAmortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueJune 30, 2005:Corporate bonds
    
    $
    59,211
    
    
    $
    9
    
    
    $
    (167
    )
    
    $
    59,053Asset-backed securities
    
    
    21,470
    
    
    
    25
    
    
    
    (95
    )
    
    
    21,400Collateralized mortgage obligations
    
    
    11,404
    
    
    
    26
    
    
    
    (224
    )
    
    
    11,206Commercial paper
    
    
    2,760
    
    
    
    
    
    
    
    
    
    
    
    2,760U.S. Government and federal agency
obligations
    
    
    46,382
    
    
    
    2
    
    
    
    (241
    )
    
    
    46,143Municipal bonds
    
    
    74,208
    
    
    
    12
    
    
    
    (17
    )
    
    
    74,203Money market and mutual funds
    
    
    103,152
    
    
    
    
    
    
    
    
    
    
    
    103,152Mortgage pass-through securities
    
    
    30,178
    
    
    
    14
    
    
    
    (214
    )
    
    
    29,978Available-for-sale investments
    
    
    348,765
    
    
    
    88
    
    
    
    (958
    )
    
    
    347,895Less: amounts classified as cash
equivalents
    
    
    89,012
    
    
    
    
    
    
    
    
    
    
    
    89,012Net available-for-sale investments
    
    $
    259,753
    
    
    $
    88
    
    
    $
    (958
    )
    
    $
    258,883
  -80-




---



##### Table of Contents



Cost or
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    FairCost
    
    
    Losses
    
    
    ValuesJune 30, 2006:Corporate bonds
    
    $
    16,830
    
    
    $
    (193
    )
    
    $
    16,637Asset-backed securities
    
    
    13,946
    
    
    
    (132
    )
    
    
    13,814Collateralized mortgage obligations
    
    
    13,990
    
    
    
    (370
    )
    
    
    13,620U.S. Government and federal agency obligations
    
    
    48,420
    
    
    
    (764
    )
    
    
    47,656Municipal bonds
    
    
    1,073
    
    
    
    (11
    )
    
    
    1,062Mortgage pass-through securities
    
    
    27,430
    
    
    
    (866
    )
    
    
    26,564Impaired available-for-sale investments
    
    $
    121,689
    
    
    $
    (2,336
    )
    
    $
    119,353June 30, 2005:Corporate bonds
    
    $
    21,270
    
    
    $
    (167
    )
    
    $
    21,103Asset-backed securities
    
    
    14,663
    
    
    
    (95
    )
    
    
    14,568Collateralized mortgage obligations
    
    
    9,849
    
    
    
    (224
    )
    
    
    9,625U.S. Government and federal agency obligations
    
    
    45,321
    
    
    
    (241
    )
    
    
    45,080Municipal bonds
    
    
    11,595
    
    
    
    (17
    )
    
    
    11,578Mortgage pass-through securities
    
    
    21,979
    
    
    
    (214
    )
    
    
    21,765Impaired available-for-sale investments
    
    $
    124,677
    
    
    $
    (958
    )
    
    $
    123,719
  Less than
    
    
    Equal or Greater than12 Months Impaired
    
    
    12 Months ImpairedTotal
    
    
    TotalEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    UnrealizedFair Values
    
    
    Losses
    
    
    Fair Values
    
    
    Losses
    
    
    Fair Values
    
    
    LossesJune 30, 2006:Corporate bonds
    
    $
    7,433
    
    
    $
    (49
    )
    
    $
    9,204
    
    
    $
    (144
    )
    
    $
    16,637
    
    
    $
    (193
    )Asset-backed securities
    
    
    7,381
    
    
    
    (53
    )
    
    
    6,433
    
    
    
    (79
    )
    
    
    13,814
    
    
    
    (132
    )Collateralized mortgage
obligations
    
    
    7,520
    
    
    
    (95
    )
    
    
    6,100
    
    
    
    (275
    )
    
    
    13,620
    
    
    
    (370
    )U.S. Government and federal
agency obligations
    
    
    12,087
    
    
    
    (108
    )
    
    
    35,569
    
    
    
    (656
    )
    
    
    47,656
    
    
    
    (764
    )Municipal bonds
    
    
    1,062
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    1,062
    
    
    
    (11
    )Mortgage pass-through
securities
    
    
    14,343
    
    
    
    (338
    )
    
    
    12,221
    
    
    
    (528
    )
    
    
    26,564
    
    
    
    (866
    )Impaired available-for-sale
Investments
    
    $
    49,826
    
    
    $
    (654
    )
    
    $
    69,527
    
    
    $
    (1,682
    )
    
    $
    119,353
    
    
    $
    (2,336
    )June 30, 2005:Corporate bonds
    
    $
    11,227
    
    
    $
    (66
    )
    
    $
    9,876
    
    
    $
    (101
    )
    
    $
    21,103
    
    
    $
    (167
    )Asset-backed securities
    
    
    12,385
    
    
    
    (69
    )
    
    
    2,183
    
    
    
    (26
    )
    
    
    14,568
    
    
    
    (95
    )Collateralized mortgage
obligations
    
    
    6,193
    
    
    
    (47
    )
    
    
    3,432
    
    
    
    (177
    )
    
    
    9,625
    
    
    
    (224
    )U.S. Government and federal
agency obligations
    
    
    13,328
    
    
    
    (85
    )
    
    
    31,752
    
    
    
    (156
    )
    
    
    45,080
    
    
    
    (241
    )Municipal bonds
    
    
    11,578
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    11,578
    
    
    
    (17
    )Mortgage pass-through
securities
    
    
    21,563
    
    
    
    (212
    )
    
    
    202
    
    
    
    (2
    )
    
    
    21,765
    
    
    
    (214
    )Impaired available-for-sale
Investments
    
    $
    76,274
    
    
    $
    (496
    )
    
    $
    47,445
    
    
    $
    (462
    )
    
    $
    123,719
    
    
    $
    (958
    )
 -81-




---



##### Table of Contents



Contractual MaturitiesAfter FiveAfter One Year
    
    
    YearsWithin one
    
    
    through Five
    
    
    through Ten
    
    
    After TenYear
    
    
    Years
    
    
    Years
    
    
    YearsCorporate bonds
    
    $
    9,540
    
    
    $
    9,002
    
    
    $
    
    
    
    $
    Asset-backed securities
    
    
    
    
    
    
    9,742
    
    
    
    3,267
    
    
    
    18,130Collateralized mortgage obligations
    
    
    500
    
    
    
    
    
    
    
    2,172
    
    
    
    11,967Commercial paper
    
    
    5,581
    
    
    
    
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    U.S. Government and federal agency obligations
    
    
    7,686
    
    
    
    39,163
    
    
    
    334
    
    
    
    473Municipal bonds
    
    
    3,500
    
    
    
    7,811
    
    
    
    
    
    
    
    55,875Mortgage pass-through securities
    
    
    
    
    
    
    
    
    
    
    454
    
    
    
    26,110Total debt securities classified as
available-for-sale investments
    
    $
    36,807
    
    
    $
    65,718
    
    
    $
    6,227
    
    
    $
    112,555
  Cost orAmortized
    
    
    EstimatedCost
    
    
    Fair ValuesContractual MaturitiesDue in one year or less
    
    $
    36,898
    
    
    $
    36,807Due after one year through five years
    
    
    66,609
    
    
    
    65,718Due after five years through ten years
    
    
    6,363
    
    
    
    6,227Due after ten years
    
    
    113,687
    
    
    
    112,555Total
    
    $
    223,557
    
    
    $
    221,307
    -82-




---



##### Table of Contents



Other investments
  Pledged investments
 NOTE 4. ACCOUNTS RECEIVABLE
  June 30,2006
    
    
    2005Trade accounts receivable
    
    $
    128,462
    
    
    $
    114,238Unbilled trade accounts receivable
    
    
    4,685
    
    
    
    3,729Other receivables
    
    
    14,967
    
    
    
    12,537Total
    
    
    148,114
    
    
    
    130,504Less: allowance for doubtful accounts
    
    
    1,509
    
    
    
    2,571Accounts receivable, net
    
    $
    146,605
    
    
    $
    127,933
  -83-




---



##### Table of Contents



NOTE 5. PROPERTY AND EQUIPMENT
  June 30,2006
    
    
    2005Land and land improvements
    
    $
    4,944
    
    
    $
    4,944Building and building improvements
    
    
    55,684
    
    
    
    51,928Computer equipment and software licenses
    
    
    279,490
    
    
    
    235,863Furniture and equipment
    
    
    21,772
    
    
    
    21,589Construction in progress
    
    
    2,046
    
    
    
    Total
    
    
    363,936
    
    
    
    314,324Less: accumulated depreciation
    
    
    263,719
    
    
    
    225,051Property and equipment, net
    
    $
    100,217
    
    
    $
    89,273
  NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS
      Electronic
    
    
    
    
    
    
    InvestmentCommerce
    
    
    Software
    
    
    Services
    
    
    TotalBalance as of June 30, 2004
    
    $
    578,695
    
    
    $
    22,889
    
    
    $
    11,387
    
    
    $
    612,971Goodwill acquired
    
    
    2,544
    
    
    
    40,659
    
    
    
    
    
    
    
    43,203Balance as of June 30, 2005
    
    
    581,239
    
    
    
    63,548
    
    
    
    11,387
    
    
    
    656,174Goodwill acquired
    
    
    78,466
    
    
    
    
    
    
    
    8,019
    
    
    
    86,485Disposition of business
    
    
    
    
    
    
    
    
    
    
    (7,250
    )
    
    
    (7,250
    )Purchase price adjustment
    
    
    
    
    
    
    (818
    )
    
    
    
    
    
    
    (818
    )Balance as of June 30, 2006
    
    $
    659,705
    
    
    $
    62,730
    
    
    $
    12,156
    
    
    $
    734,591
 -84-




---



##### Table of Contents



June 30,2006
    
    
    2005Capitalized software:Product technology from acquisitions and strategic agreement
    
    $
    167,108
    
    
    $
    167,458Internal development costs
    
    
    32,970
    
    
    
    33,226Total
    
    
    200,078
    
    
    
    200,684Less: accumulated amortization
    
    
    196,323
    
    
    
    194,509Capitalized software, net
    
    $
    3,755
    
    
    $
    6,175Strategic agreements:Strategic agreements(1)
    
    $
    744,423
    
    
    $
    744,423Less: accumulated amortization
    
    
    638,418
    
    
    
    596,975Strategic agreements, net
    
    $
    106,005
    
    
    $
    147,448Other intangible assets:Tradenames
    
    $
    53,176
    
    
    $
    52,754Customer base
    
    
    89,639
    
    
    
    57,068Current technology
    
    
    10,290
    
    
    
    4,090Money transfer licenses
    
    
    1,700
    
    
    
    1,700Covenants not to compete
    
    
    5,670
    
    
    
    5,350Total
    
    
    160,475
    
    
    
    120,962Less: accumulated amortization
    
    
    98,059
    
    
    
    90,027Other intangible assets, net
    
    $
    62,416
    
    
    $
    30,935
 
 (1)
    
    Strategic agreements primarily include certain entity-level covenants not to compete.   Fiscal Year Ending June 30,2007
    
    $
    42,0212008
    
    
    40,5462009
    
    
    38,1102010
    
    
    37,1282011
    
    
    12,385
 NOTE 7. ACCRUED LIABILITIES
  June 30,2006
    
    
    2005Compensation and benefits
    
    $
    36,433
    
    
    $
    33,156Other
    
    
    37,933
    
    
    
    33,677Reorganization reserves
    
    
    
    
    
    
    5,356Total
    
    $
    74,366
    
    
    $
    72,189
 -85-




---



##### Table of Contents



NOTE 8. FINANCING AGREEMENTS
   Line of Credit
   Data Center Facility
   -86-




---



##### Table of Contents



NOTE 9. CONVERTIBLE SUBORDINATED NOTES
  NOTE 10. CAPITAL LEASE AND OTHER LONG-TERM OBLIGATIONS
   June 30,2006
    
    
    2005Equipment and software licenses
    
    $
    15,830
    
    
    $
    13,583Less: accumulated depreciation and amortization
    
    
    12,080
    
    
    
    8,310Property under capital leases, net
    
    $
    3,750
    
    
    $
    5,273
  Fiscal Year Ending June 30,2007
    
    $
    3582008
    
    
    67Total future minimum lease payments
    
    
    425Less: amount representing interest
    
    
    17Net future minimum payments
    
    $
    408
 -87-




---



##### Table of Contents



Fiscal Year Ending June 30,2007
    
    $
    4942008
    
    
    24Total future minimum lease payments
    
    
    518Less: amount representing interest
    
    
    58Net future minimum payments
    
    $
    460
  NOTE 11. COMMITMENTS AND CONTINGENCIES
 Operating
Leases
  Fiscal Year Ending June 30,2007
    
    $
    17,8922008
    
    
    16,9962009
    
    
    15,1012010
    
    
    12,8742011
    
    
    8,865Thereafter
    
    
    30,678Future minimum lease payments
    
    $
    102,406
  Guarantees 
  (1)
    
    We warrant that our software products will perform in all material respects
in accordance with our standard published specifications in effect at the time of
delivery of the licensed products to the customer for 90 days. Additionally, we
warrant that our services will be performed consistent with generally
 -88-




---



##### Table of Contents



accepted industry standards or specific service levels through completion of the agreed
upon services. If necessary, we would provide for the estimated cost of product and
service warranties based on specific warranty claims and claim history, however, we have
not incurred significant recurring expense under our product or service warranties. As a
result, we believe the estimated liabilities related to these agreements are not
material.(2)
    
    CheckFree Services guarantees the obligations of one of its wholly owned subsidiaries. See
Note 8.
  Litigation 
 NOTE 12. CAPITAL STOCK
   NOTE 13. TRANSACTIONS INVOLVING EQUITY INSTRUMENTS
 Employee Plans
   -89-




---



##### Table of Contents



Stock Options
  Year ended June 30, 2006Weighted AverageNumber of
    
    
    Remaining
    
    
    Weighted Average
    
    
    Aggregate IntrinsicOptions
    
    
    Contractual Term
    
    
    Exercise Price
    
    
    ValueOutstanding  Beginning of year
    
    
    4,685,572
    
    
    
    
    
    
    $
    27.44Granted
    
    
    144,988
    
    
    
    
    
    
    
    41.39Exercised
    
    
    (1,056,336
    )
    
    
    
    
    
    
    22.37
    
    
    $
    25,700,000Cancelled
    
    
    (169,474
    )
    
    
    
    
    
    
    44.85Outstanding  End of year
    
    
    3,604,750
    
    
    4.8 years
    
    $
    28.84
    
    
    $
    74,700,000Options exercisable at end of year
    
    
    3,045,659
    
    
    4.8 years
    
    $
    28.96
    
    
    $
    49,000,000Weighted average per-share fair value of
options granted during the period
    
    $
    23.37
 Year ended June 30, 2005Weighted AverageNumber of
    
    
    Remaining
    
    
    Weighted Average
    
    
    Aggregate IntrinsicOptions
    
    
    Contractual Term
    
    
    Exercise Price
    
    
    ValueOutstanding  Beginning of year
    
    
    5,414,603
    
    
    
    
    
    
    $
    26.18Granted
    
    
    200,223
    
    
    
    
    
    
    
    25.80Exercised
    
    
    (649,864
    )
    
    
    
    
    
    
    16.08
    
    
    $
    13,000,000Cancelled
    
    
    (279,390
    )
    
    
    
    
    
    
    28.05Outstanding  End of year
    
    
    4,685,572
    
    
    5.3 years
    
    $
    27.44
    
    
    $
    30,800,000Options exercisable at end of year
    
    
    3,763,822
    
    
    5.3 years
    
    $
    28.64
    
    
    $
    17,800,000Weighted average per-share fair value of
options granted during the period
    
    $
    14.39
 -90-




---



##### Table of Contents



Year ended June 30, 2004Weighted AverageNumber of
    
    
    Remaining
    
    
    Weighted Average
    
    
    Aggregate IntrinsicOptions
    
    
    Contractual Term
    
    
    Exercise Price
    
    
    ValueOutstanding  Beginning of year
    
    
    7,236,216
    
    
    
    
    
    
    $
    31.73Granted
    
    
    407,678
    
    
    
    
    
    
    
    27.55Exercised
    
    
    (571,844
    )
    
    
    
    
    
    
    12.51
    
    
    $
    9,900,000Cancelled
    
    
    (1,657,447
    )
    
    
    
    
    
    
    55.91Outstanding  End of year
    
    
    5,414,603
    
    
    5.7 years
    
    $
    26.18
    
    
    $
    20,800,000Options exercisable at end of year
    
    
    3,515,377
    
    
    5.7 years
    
    $
    28.80
    
    
    $
    10,900,000Weighted average per-share fair value of
options granted during the period
    
    $
    17.52
     -91-




---



##### Table of Contents



Restricted Stock
  Year ended June 30, 2006Number of
    
    
    WeightedRestricted
    
    
    Average Grant
    
    
    Aggregate IntrinsicStock
    
    
    Date Fair Value
    
    
    ValueOutstanding  Beginning of year
    
    
    456,676
    
    
    $
    26.16Granted
    
    
    261,361
    
    
    
    39.04Vested
    
    
    (82,471
    )
    
    
    26.60
    
    
    $
    2,900,000Cancelled
    
    
    (31,685
    )
    
    
    26.97Outstanding  End of year
    
    
    603,881
    
    
    $
    31.49
 Year ended June 30, 2005Number of
    
    
    WeightedRestricted
    
    
    Average Grant
    
    
    Aggregate IntrinsicStock
    
    
    Date Fair Value
    
    
    ValueOutstanding  Beginning of year
    
    
    242,678
    
    
    $
    26.54Granted
    
    
    371,446
    
    
    
    25.95Vested
    
    
    (89,977
    )
    
    
    26.53
    
    
    $
    2,800,000Cancelled
    
    
    (67,471
    )
    
    
    25.94Outstanding  End of year
    
    
    456,676
    
    
    $
    26.16
 Year ended June 30, 2004Number of
    
    
    WeightedRestricted
    
    
    Average Grant
    
    
    Aggregate IntrinsicStock
    
    
    Date Fair Value
    
    
    ValueOutstanding
 Beginning of year
    
    
    
    
    
    $
    Granted
    
    
    253,851
    
    
    
    26.53Vested
    
    
    
    
    
    
    
    
    
    $
    Cancelled
    
    
    (11,173
    )
    
    
    26.50Outstanding  End of year
    
    
    242,678
    
    
    $
    26.54
  Associate Stock Purchase Plan
  -92-




---



##### Table of Contents



June 30,
    
    
    December 31,
    
    
    June 30,
    
    
    December 31,2005
    
    
    2004
    
    
    2004
    
    
    2003Fair value of stock
purchase rights
    
    $
    9.27
    
    
    $
    7.61
    
    
    $
    7.56
    
    
    $
    8.46Assumptions:Risk-free interest rate
    
    
    2.6
    %
    
    
    1.7
    %
    
    
    1.0
    %
    
    
    1.0
    %Expected life
    
    3 months
    
    
    3 months
    
    
    3 months
    
    
    3 monthsVolatility
    
    
    33.9
    %
    
    
    33.5
    %
    
    
    43.7
    %
    
    
    53.8
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
  Stock Related Transactions With Third Parties
  NOTE 14. EARNINGS PER SHARE
  Year Ended June 30, 2006
    
    
    Year Ended June 30, 2005
    
    
    Year Ended June 30, 2004Net Income
    
    
    Shares
    
    
    Earnings
    
    
    Net Income
    
    
    Shares
    
    
    Earnings
    
    
    Net Income
    
    
    Shares
    
    
    Earnings(Numerator)
    
    
    (Denominator)
    
    
    Per Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Per Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Per ShareBasic EPS
    
    $
    127,263
    
    
    
    90,984
    
    
    $
    1.40
    
    
    $
    46,801
    
    
    
    90,767
    
    
    $
    0.52
    
    
    $
    10,535
    
    
    
    89,870
    
    
    $
    0.12Effect of dilutive securities:Options and warrants
    
    
    
    
    
    
    2,724
    
    
    
    
    
    
    
    
    
    
    
    2,148
    
    
    
    
    
    
    
    
    
    
    
    1,994Diluted EPS
    
    $
    127,263
    
    
    
    93,708
    
    
    $
    1.36
    
    
    $
    46,801
    
    
    
    92,915
    
    
    $
    0.50
    
    
    $
    10,535
    
    
    
    91,864
    
    
    $
    0.11
  -93-




---



##### Table of Contents



NOTE 15. EMPLOYEE BENEFIT PLANS
 Retirement Plan
 Pension Plan
 Deferred Compensation Plan
 Group Medical Plans
  NOTE 16. REORGANIZATION CHARGES
 Reorganization of fiscal year 2005
  Year EndedJune 30, 2005Reorganization charge:Electronic Commerce
    
    $
    3,208Investment Services
    
    
    313Software
    
    
    1,876Corporate
    
    
    188Total
    
    $
    5,585
 -94-




---



##### Table of Contents



OfficeSeverance
    
    
    Closureand Other
    
    
    andEmployee
    
    
    BusinessCosts
    
    
    Exit Costs
    
    
    TotalBalance as of June 30, 2004
    
    $
    
    
    
    $
    732
    
    
    $
    732Reorganization charge
    
    
    5,585
    
    
    
    
    
    
    
    5,585Cash payments, year ended June 30, 2005
    
    
    (385
    )
    
    
    (576
    )
    
    
    (961
    )Balance as of June 30, 2005
    
    
    5,200
    
    
    
    156
    
    
    
    5,356Cash payments, year ended June 30, 2006
    
    
    (5,200
    )
    
    
    (156
    )
    
    
    (5,356
    )Balance as of June 30, 2006
    
    $
    
    
    
    $
    
    
    
    $
    
 NOTE 17. DERIVATIVE FINANCIAL INSTRUMENTS
     Year Ended June 30,2006
    
    
    2005
    
    
    2004Beginning balance
    
    $
    (1,093
    )
    
    $
    (544
    )
    
    
    Net gains (losses) from cash flow hedges
    
    
    986
    
    
    
    (549
    )
    
    
    (544
    )Net amounts reclassified to earnings
    
    
    
    
    
    
    
    
    
    
    Ending balance
    
    $
    (107
    )
    
    $
    (1,093
    )
    
    $
    (544
    )
  -95-




---



##### Table of Contents



NOTE 18. INCOME TAXES
  Year Ended June 30,2006
    
    
    2005
    
    
    2004Domestic
    
    $
    197,382
    
    
    $
    74,208
    
    
    $
    11,106Foreign
    
    
    (1,910
    )
    
    
    (3,885
    )
    
    
    332Total income before income taxes
    
    $
    195,472
    
    
    $
    70,323
    
    
    $
    11,438
  Year Ended June 30,2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    75,913
    
    
    $
    35,998
    
    
    $
    11,685State and local
    
    
    5,418
    
    
    
    2,450
    
    
    
    2,179Foreign
    
    
    683
    
    
    
    (187
    )
    
    
    154Total current
    
    
    82,014
    
    
    
    38,261
    
    
    
    14,018Deferred:Federal
    
    
    (9,684
    )
    
    
    (13,620
    )
    
    
    (11,209
    )State and local
    
    
    2,595
    
    
    
    505
    
    
    
    (603
    )Foreign
    
    
    (470
    )
    
    
    (586
    )
    
    
    (1,118
    )Total deferred
    
    
    (7,559
    )
    
    
    (13,701
    )
    
    
    (12,930
    )Total income tax expense
    
    $
    74,455
    
    
    $
    24,560
    
    
    $
    1,088Effective income tax rate
    
    
    38.1
    %
    
    
    34.9
    %
    
    
    9.5
    %
  -96-




---



##### Table of Contents



Year Ended June 30,2006
    
    
    2005
    
    
    2004Computed expected tax expense
    
    $
    68,415
    
    
    $
    24,613
    
    
    $
    4,003State and
local tax expense (benefit), net of federal
income tax benefits
    
    
    6,306
    
    
    
    1,766
    
    
    
    (568
    )Deemed dividend from foreign affiliate
    
    
    151
    
    
    
    136
    
    
    
    1,330Tax Exempt Interest
    
    
    (1,597
    )
    
    
    (1,070
    )
    
    
    Tax Credits
    
    
    (571
    )
    
    
    (2,102
    )
    
    
    (5,972
    )Valuation allowance
    
    
    376
    
    
    
    503
    
    
    
    Other, net
    
    
    1,375
    
    
    
    714
    
    
    
    2,295Total income tax expense
    
    $
    74,455
    
    
    $
    24,560
    
    
    $
    1,088
  June 30,2006
    
    
    2005Deferred tax assets:Federal, state and foreign net operating loss carryforwards
    
    $
    2,613
    
    
    $
    3,728Federal, state and foreign tax credit carryforwards
    
    
    2,839
    
    
    
    3,962Allowance for bad debts and returns
    
    
    279
    
    
    
    702Accrued compensation and related items
    
    
    2,520
    
    
    
    2,680Stock warrants
    
    
    10,282
    
    
    
    12,445Property and equipment
    
    
    3,657
    
    
    
    849Other investments and other
    
    
    8,737
    
    
    
    7,183Deferred revenue
    
    
    985
    
    
    
    1,232Reserve accruals
    
    
    5,136
    
    
    
    5,574Capitalized software
    
    
    872
    
    
    
    443Other intangible assets
    
    
    22,649
    
    
    
    11,691Deferred tax assets
    
    
    60,569
    
    
    
    50,489Deferred tax liabilities:Intangible assets
    
    
    (6,261
    )
    
    
    (4,967
    )Prepaid expenses
    
    
    (1,373
    )
    
    
    (1,696
    )Deferred tax liabilities
    
    
    (7,634
    )
    
    
    (6,663
    )Valuation allowance
    
    
    (3,348
    )
    
    
    (2,738
    )Net deferred tax assets
    
    $
    49,587
    
    
    $
    41,088
   -97-




---



##### Table of Contents



NOTE 19. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 Year Ended June 30,2006
    
    
    2005
    
    
    2004(In thousands)Interest paid
    
    $
    93
    
    
    $
    970
    
    
    $
    6,233Call premium for redemption of convertible notes
    
    $
    
    
    
    $
    
    
    
    $
    4,813Income taxes paid, net
    
    $
    87,127
    
    
    $
    41,109
    
    
    $
    8,152Supplemental disclosure of non-cash investing and financing activities:Capital lease additions and acquisitions of other
long-term assets
    
    $
    1,821
    
    
    $
    710
    
    
    $
    1,247Additions under data center facility
    
    $
    1,285
    
    
    $
    
    
    
    $
    Stock funding of 401(k) match
    
    $
    4,055
    
    
    $
    3,100
    
    
    $
    3,144Stock funding of Associate Stock Purchase Plan
    
    $
    4,068
    
    
    $
    3,997
    
    
    $
    3,208
 NOTE 20. BUSINESS SEGMENTS
  
    
    Electronic Commerce Electronic Commerce provides services that
allow consumers to receive electronic bills through the Internet,
pay bills electronically (including payments received by agents at
walk-in locations and payments made telephonically) or in paper form to anyone and
perform ordinary banking transactions including balance inquiries,
transfers between accounts and on-line statement reconciliation.
These services are primarily directed to financial institutions,
internet financial sites, personal financial management software
providers and the customers of these businesses.
    
    Software Software includes software products and related
services for electronic billing, ACH processing and account
reconciliation. These products and services are primarily
directed to large corporations and financial institutions.
    
    Investment Services Investment Services includes investment
portfolio management services and investment trading and reporting
services. These products and services are primarily directed to
fee-based money managers and financial planners who manage
investments of institutions and high net worth individuals.
    
    Corporate Corporate services include human resources, legal,
finance and accounting and various other of our unallocated
overhead charges.
  -98-




---



##### Table of Contents



Year Ended June 30,2006
    
    
    2005
    
    
    2004(In thousands)Revenues:Electronic Commerce
    
    $
    662,728
    
    
    $
    580,696
    
    
    $
    452,732Investment Services
    
    
    112,245
    
    
    
    96,064
    
    
    
    86,270Software
    
    
    109,386
    
    
    
    81,072
    
    
    
    67,462Impact of discontinued operations
    
    
    (4,957
    )
    
    
    (7,985
    )
    
    
    (7,237
    )Total
    
    $
    879,402
    
    
    $
    749,847
    
    
    $
    599,227Segment operating income (loss):Electronic Commerce
    
    $
    247,918
    
    
    $
    207,796
    
    
    $
    155,724Investment Services
    
    
    17,846
    
    
    
    18,638
    
    
    
    19,911Software
    
    
    20,858
    
    
    
    17,748
    
    
    
    14,293Corporate
    
    
    (37,845
    )
    
    
    (37,595
    )
    
    
    (33,256
    )Impact of discontinued operations
    
    
    (1,490
    )
    
    
    (1,517
    )
    
    
    (288
    )Total
    
    
    247,287
    
    
    
    205,070
    
    
    
    156,384Purchase accounting amortization
    
    
    (57,037
    )
    
    
    (133,446
    )
    
    
    (136,558
    )Equity in net loss of joint venture
    
    
    (3,100
    )
    
    
    (2,984
    )
    
    
    (593
    )Reorganization charge
    
    
    0
    
    
    
    (5,585
    )
    
    
    Write off of capitalized software
    
    
    0
    
    
    
    (1,039
    )
    
    
    Gain (loss) on investments
    
    
    0
    
    
    
    592
    
    
    
    Impact of SFAS 123(R)
    
    
    (4,133
    )
    
    
    
    
    
    
    In-process research and development
    
    
    0
    
    
    
    
    
    
    
    (324
    )Interest, net
    
    
    12,455
    
    
    
    7,715
    
    
    
    (7,471
    )Total income (loss) from
continuing operations
before income taxes
    
    $
    195,472
    
    
    $
    70,323
    
    
    $
    11,438Identifiable assets:Electronic Commerce
    
    $
    1,170,209
    
    
    $
    1,028,511
    
    
    $
    1,105,751Investment Services
    
    
    59,902
    
    
    
    43,161
    
    
    
    62,838Software
    
    
    110,278
    
    
    
    118,252
    
    
    
    40,171Corporate
    
    
    417,640
    
    
    
    379,992
    
    
    
    340,172Total
    
    $
    1,758,029
    
    
    $
    1,569,916
    
    
    $
    1,548,932Capital expenditures:Electronic Commerce
    
    $
    38,785
    
    
    $
    26,783
    
    
    $
    18,113Investment Services
    
    
    8,206
    
    
    
    6,246
    
    
    
    5,446Software
    
    
    2,023
    
    
    
    651
    
    
    
    708Corporate
    
    
    903
    
    
    
    923
    
    
    
    462Total
    
    $
    49,917
    
    
    $
    34,603
    
    
    $
    24,729Depreciation and amortization:Electronic Commerce
    
    $
    78,907
    
    
    $
    157,756
    
    
    $
    158,873Investment Services
    
    
    10,146
    
    
    
    7,919
    
    
    
    6,725Software
    
    
    8,270
    
    
    
    7,076
    
    
    
    7,115Corporate
    
    
    2,697
    
    
    
    3,847
    
    
    
    4,869Total
    
    $
    100,020
    
    
    $
    176,598
    
    
    $
    177,582
 -99-




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004Electronic CommercePayment transactions
    
    $
    587,809
    
    
    $
    523,031
    
    
    $
    404,336e-Bill delivery
    
    
    29,438
    
    
    
    22,776
    
    
    
    13,987Other
    
    
    45,481
    
    
    
    34,889
    
    
    
    34,409Total Electronic Commerce
    
    
    662,728
    
    
    
    580,696
    
    
    
    452,732Investment ServicesPortfolio management services
    
    
    107,288
    
    
    
    88,079
    
    
    
    79,033SoftwareLicense
    
    
    35,122
    
    
    
    28,457
    
    
    
    23,931Maintenance
    
    
    38,093
    
    
    
    30,701
    
    
    
    27,762Professional fees
    
    
    36,171
    
    
    
    21,914
    
    
    
    15,769Total Software
    
    
    109,386
    
    
    
    81,072
    
    
    
    67,462Total consolidated revenue
    
    $
    879,402
    
    
    $
    749,847
    
    
    $
    599,227
  Year Ended June 30,2006
    
    
    2005United States
    
    $
    939,442
    
    
    $
    856,032Other
    
    
    67,425
    
    
    
    73,973Total
    
    $
    1,006,867
    
    
    $
    930,005
 -100-




---



##### Table of Contents



NOTE 21. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
  Quarter EndedSeptember 30
    
    
    December 31
    
    
    March 31
    
    
    June 30FISCAL 2006Total revenues, continuing operations
    
    $
    213,693
    
    
    $
    213,844
    
    
    $
    226,927
    
    
    $
    224,938Income from continuing operations
    
    
    40,307
    
    
    
    51,606
    
    
    
    48,863
    
    
    
    45,341Net income
    
    
    26,357
    
    
    
    33,765
    
    
    
    37,656
    
    
    
    29,485Basic earnings per share:Net income per common share
    
    $
    0.29
    
    
    $
    0.37
    
    
    $
    0.41
    
    
    $
    0.32Weighted average number of shares
    
    
    90,578
    
    
    
    90,820
    
    
    
    91,257
    
    
    
    91,287Diluted earnings per share:Net income per common share
    
    $
    0.28
    
    
    $
    0.36
    
    
    $
    0.40
    
    
    $
    0.31Weighted average number of shares
    
    
    92,818
    
    
    
    93,589
    
    
    
    94,199
    
    
    
    94,232
 Quarter EndedSeptember 30
    
    
    December 31
    
    
    March 31
    
    
    June 30FISCAL 2005Total revenues, continuing operations
    
    $
    175,943
    
    
    $
    183,685
    
    
    $
    189,200
    
    
    $
    201,019Income from continuing operations
    
    
    8,695
    
    
    
    19,951
    
    
    
    21,418
    
    
    
    14,936Net income
    
    
    6,207
    
    
    
    13,043
    
    
    
    15,606
    
    
    
    11,945Basic earnings per share:Net income per common share
    
    $
    0.07
    
    
    $
    0.14
    
    
    $
    0.17
    
    
    $
    0.13Weighted average number of shares
    
    
    90,315
    
    
    
    90,545
    
    
    
    90,864
    
    
    
    90,962Diluted earnings per share:Net income per common share
    
    $
    0.07
    
    
    $
    0.14
    
    
    $
    0.17
    
    
    $
    0.13Weighted average number of shares
    
    
    92,212
    
    
    
    93,019
    
    
    
    93,052
    
    
    
    93,054
  -101-




---



##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 2006, 2005 AND 2004
 BALANCE ASOF
    
    
    CHARGES TO
    
    
    
    
    
    
    BALANCE ASBEGINNING
    
    
    COSTS AND
    
    
    
    
    
    
    OF END OFOF PERIOD
    
    
    EXPENSES
    
    
    DEDUCTIONS
    
    
    PERIOD(In thousands)Allowance for Doubtful Accounts2006
    
    $
    2,571
    
    
    $
    (585
    )
    
    $
    477
    
    
    $
    1,5092005
    
    $
    834
    
    
    $
    2,197
    
    
    $
    460
    
    
    $
    2,5712004
    
    $
    1,670
    
    
    $
    (757
    )
    
    $
    79
    
    
    $
    834Allowance for Returns2006
    
    $
    1,020
    
    
    $
    815
    
    
    $
    1,490
    
    
    $
    3452005
    
    $
    1,171
    
    
    $
    1,247
    
    
    $
    1,398
    
    
    $
    1,0202004
    
    $
    1,262
    
    
    $
    2,483
    
    
    $
    2,574
    
    
    $
    1,171
 -102-




---



##### Table of Contents



Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A.
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
    Management Report on Internal Control over Financial Reporting
 Internal Control 
Integrated Framework
  Changes in Internal Control over Financial Reporting
  
 Item 9B.
    
    Other Information.
  -103-




---



##### Table of Contents



Part III
 
 Item 10.
    
    Directors and Executive Officers of the Registrant.
 Election of Directors,
Executive Officers Section 16(a) Beneficial Ownership Reporting Compliance
 
 Item 11.
    
    Executive Compensation.
 Information Concerning
the Board of Directors, Executive Officers and Principal Stockholders Information Concerning
Compensation
 
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
 Ownership of Our Common
Stock by Directors and Executive Officers, Ownership of Our Common Stock by Principal
Stockholders Equity Compensation Plan Information
 
 Item 13.
    
    Certain Relationships and Related Transactions.
 Certain Relationships
and Related Transactions Compensation Committee Interlocks and Insider Participation
 
 Item 14.
    
    Principal Accountant Fees and Services.
 Fees of the Independent
Public Accountants for Fiscal 2006
 -104-




---



##### Table of Contents



Part IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules.
   Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting.Report of Independent Registered Public Accounting Firm.Consolidated Balance Sheets as of June 30, 2006 and 2005.Consolidated Statements of Operations for each of the three years in the period ended June 30,
2006.Consolidated Statements of Stockholders Equity for each of the three years in the period
ended June 30, 2006.Consolidated Statements of Cash Flows for each of the three years in the period ended June 30,
2006.Notes to the Consolidated Financial Statements.
     ExhibitNumber
    
    Exhibit Description2
    (a)
    
    Agreement and Plan of Merger and Contribution Agreement, dated as of February 15,
2000, among Microsoft Corporation, First Data Corporation, Citibank, N.A., MS II, L.L.C.,
First Data, L.L.C., H & B Finance, Inc., FDC International Partner, Inc., MSFDC
International, Inc., Citicorp Electronic Commerce, Inc., CheckFree Holdings Corporation,
Chopper Merger Corporation, and Chopper Corporation. (Reference is made to Exhibit 2(b)
to the Companys Registration Statement on Form S-4 (Registration No. 333-32644) filed
with the Securities and Exchange Commission on March 16, 2000, and incorporated herein by
reference.)
 -105-




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description2
    (b)
    
    Amended and Restated Agreement and Plan of Merger, dated as of July 7, 2000, among
CheckFree Holdings Corporation, Microsoft Corporation, First Data Corporation, Citibank,
N.A., H&B Finance, Inc., FDC International Partner, Inc., MSFDC International, Inc., Citi
TransPoint Holdings Inc., TransPoint Acquisition Corporation, Tank Acquisition
Corporation, Chopper Merger Corporation, CheckFree Corporation, Microsoft II, LLC and
First Data, L.L.C. (Reference is made to Appendix A to the Companys Registration
Statement on Form S-4 (Registration No. 333-41098) filed with the Securities and Exchange
Commission on July 10, 2000, and incorporated herein by reference.)2
    (c)
    
    Amended and Restated Strategic Alliance Master Agreement, dated as of April 26,
2000, among CheckFree Holdings Corporation, CheckFree Services Corporation and Bank of
America, N.A. (Reference is made to Appendix A to the Companys Proxy Statement for the
Special Meeting of Stockholders held on September 28, 2000, filed with the Securities and
Exchange Commission on August 25, 2000, and incorporated herein by reference.)3
    (a)
    
    Amended and Restated Certificate of Incorporation of the Company. (Reference is
made to Exhibit 4(e) to the Companys Registration Statement on Form S-8 (Registration
No. 333-50322), filed with the Securities and Exchange Commission on November 20, 2000,
and incorporated herein by reference.)3
    (b)
    
    Certificate of Ownership and Merger Merging CheckFree Corporation into CheckFree
Holdings Corporation. (Reference is made to Exhibit 3(b) to the Companys Annual Report
on Form 10-K for the year ended June 30, 2000, filed with the Securities and Exchange
Commission on September 26, 2000, and incorporated herein by reference.)3
    (c)
    
    By-Laws of the Company. (Reference is made to Exhibit 3(b) to the Companys
Current Report on Form 8-K, dated December 22, 1997, filed with the Securities and
Exchange Commission on December 30, 1997, and incorporated herein by reference.)3
    (d)
    
    Form of Specimen Stock Certificate. (Reference is made to Exhibit 3(d) to the
Companys Annual Report on Form 10-K for the year ended June 30, 2000, filed with the
Securities and Exchange Commission on September 26, 2000, and incorporated herein by
reference.)4
    (a)
    
    Articles FOURTH, FIFTH, SEVENTH, EIGHTH, TENTH AND ELEVENTH of the Companys
Amended and Restated Certificate of Incorporation (contained in the Companys Amended and
Restated Certificate of Incorporation filed as Exhibit 3(a) hereto) and Articles II, III,
IV, VI and VIII of the Companys By-Laws (contained in the Companys By-Laws filed as
Exhibit 3(c) hereto.)4
    (b)
    
    Rights Agreement, dated as of December 16, 1997, by and between the Company and The
Fifth Third Bank, as Rights Agent. (Reference is made to Exhibit 4.1 to the Companys
Registration Statement on Form 8-A (File No. 0-26802), filed with the Securities and
Exchange Commission on December 19, 1997, and incorporated herein by reference.)4
    (c)
    
    Amendment No. 1 to the Rights Agreement, dated as of February 5, 1999, between
CheckFree Holdings Corporation and The Fifth Third Bank, as Rights Agent. (Reference is
made to Exhibit 4.2 to Amendment No. 1 to the Companys Registration Statement on Form
8-A (File No. 0-26802), filed with the Securities and Exchange Commission on May 12,
1999, and incorporated herein by reference.)
 -106-




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description4(d)

    
    Amendment No. 2 to the Rights Agreement, dated as of September 30, 2000, between
CheckFree Corporation and The Fifth Third Bank, as Rights Agent. (Reference is
made to Exhibit 4.3 to Amendment No. 1 to the Companys Registration Statement on Form
8-A (File No. 0-26802), filed with the Securities and Exchange Commission on October 3,
2000, and incorporated herein by reference.)4(e)

    
    Substitution of Successor Rights Agent and Amendment No. 3 to the Rights Agreement,
dated as of January 25, 2002, between CheckFree Corporation and Wells Fargo Bank
Minnesota, National Association, as Rights Agent. (Reference is made to Exhibit 4.4 to
Amendment No. 3 to the Companys Registration Statement on Form 8-A (File No. 0-26802),
filed with the Securities and Exchange Commission on January 29, 2002, and incorporated
herein by reference.)10
    (a)
    
    CheckFree Services Corporation 401(k) Plan Adoption Agreement (restatement as of
January 1, 2006). (Reference is made to Exhibit 10(a) to the Companys Quarterly report
on Form 10-Q for the quarterly period ended March 31, 2006, filed with the Securities and
Exchange Commission on May 9, 2006, and incorporated herein by reference.)10
    (b)
    
    CheckFree Services Corporation Defined Contribution Plan and Trust, sponsored by
SunTrust BankBasic Plan Document #02, June 2002 (Prototype plan for CheckFree Services
Corporation 401(k) Plan) (Reference is made to Exhibit 10(b) to the Companys Quarterly
Report on Form 10-Q for the quarterly period ended December 31, 2004, filed with the
Securities and Exchange Commission on February 8, 2005, and incorporated herein by
reference.)10
    (c)
    
    CheckFree Corporation Third Amended and Restated Associate Stock Purchase Plan.
(Reference is made to Exhibit 4(a) to Post-Effective Amendment No. 1 to the Companys
Registration Statement on Form S-8 (Registration No. 333-101284), filed with the
Securities and Exchange Commission on June 13, 2005, and incorporated herein by
reference.)10
    (d)
    
    CheckFree Corporation 2002 Stock Incentive Plan. (Reference is made to Appendix B
to the Companys Definitive Proxy Statement for the 2002 Annual Meeting of Stockholders
held on November 6, 2002, filed with the Securities and Exchange Commission on October 3,
2002, and incorporated herein by reference.)+10
    (e)
    
    Form of Restricted Stock Award Agreement for Non-Employee Directors. (Reference is
made to Exhibit 10(d) to the Companys Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2004, filed with the Securities and Exchange Commission on
February 8, 2005, and incorporated herein by reference.)+10
    (f)
    
    Form of Performance Accelerated Restricted Stock Award Agreement. (Reference is
made to Exhibit 10(e) to the Companys Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2004, filed with the Securities and Exchange Commission on
February 8, 2005, and incorporated herein by reference.)+10
    (g)
    
    Form of Restricted Stock Award Agreement. (Reference is made to Exhibit 10(f) to
the Companys Quarterly Report on Form 10-Q for the quarterly period ended December 31,
2004, filed with the Securities and Exchange Commission on February 8, 2005, and
incorporated herein by reference.)+10
    (h)
    
    Form of Nonstatutory Stock Option Agreement Under the 2002 Stock Incentive Plan.
(Reference is made to Exhibit 10(g) to the Companys Quarterly Report on Form 10-Q for
the quarterly period ended December 31, 2004, filed with the Securities and Exchange
Commission on February 8, 2005, and incorporated herein by reference.)+
 -107-




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description10
    (i)
    
    Form of Incentive Stock Option Agreement Under the 2002 Stock Incentive Plan.
(Reference is made to Exhibit 10(h) to the Companys Quarterly Report on Form 10-Q for
the quarterly period ended December 31, 2004, filed with the Securities and Exchange
Commission on February 8, 2005, and incorporated herein by reference.) +10
    (j)
    
    CheckFree Corporation Third Amended and Restated 1995 Stock Option Plan.
(Reference is made to Exhibit 4(d) to the Companys Registration Statement on Form S-8,
as amended (Registration No. 333-50322), filed with the Securities and Exchange
Commission on November 20, 2000, and incorporated herein by reference.) +10
    (k)
    
    CheckFree Holdings Corporation Amended and Restated 1993 Stock Option Plan.
(Reference is made to Exhibit 4(a) to Post-Effective Amendment No. 1 to the Companys
Registration Statement on Form S-8 (Registration No. 33-98442), filed with the Securities
and Exchange Commission on January 9, 1998, and incorporated herein by reference.) +10
    (l)
    
    BlueGill Technologies, Inc. 1997 Stock Option Plan. (Reference is made to Exhibit
4(a) to the Companys Registration Statement on Form S-8 (Registration No. 333-35812),
filed with the Securities and Exchange Commission on April 28, 2000, and incorporated
herein by reference.) +10
    (m)
    
    BlueGill Technologies, Inc. Amended and Restated 1998 Incentive and Non-Qualified
Stock Option Plan. (Reference is made to Exhibit 4(a) to the Companys Registration
Statement on Form S-8 (Registration No. 333-35814), filed with the Securities and Exchange
Commission on April 28, 2000, and incorporated herein by reference.) +10
    (n)
    
    CheckFree Corporation Nonqualified Deferred Compensation Plan, dated December 31,
1998. (Reference is made to Exhibit 10(n) to the Companys Annual Report on Form 10-K
for the year ended June 30, 2005, filed with the Securities and Exchange Commission on
September 2, 2005, and incorporated herein by reference.) +10
    (o)
    
    Amendment No. 1 to CheckFree Corporation Nonqualified Deferred Compensation Plan,
dated May 5, 2000. (Reference is made to Exhibit 10(o) to the Companys Annual Report on
Form 10-K for the year ended June 30, 2005, filed with the Securities and Exchange
Commission on September 2, 2005, and incorporated herein by reference.) +10
    (p)
    
    Second Amendment to the CheckFree Services Corporation Nonqualified Deferred
Compensation Plan, dated January 1, 2002. (Reference is made to Exhibit 10(p) to the
Companys Annual Report on form 10-K for the year ended June 30, 2005, filed with the
Securities and Exchange commission on September 2, 2005, and incorporate herein by
reference.)  +10
    (q)
    
    Form of Indemnification Agreement. (Reference is made to Exhibit 10(a) to the
Companys Registration Statement on Form S-1, as amended (Registration No. 33-95738),
filed with the Securities and Exchange Commission on August 14, 1995, and incorporated
herein by reference.) +10
    (r)
    
    Schedule identifying material details of Indemnification Agreements substantially
identical to Exhibit 10(q). (Reference is made to Exhibit 10(i) to the Companys Annual
Report on Form 10-K for the year ended June 30, 2003, filed with the Securities and
Exchange Commission on September 15, 2003, and incorporated herein by reference.) +10
    (s)
    
    Confidentiality and Noncompetition Agreement, dated May 7, 1999, between Peter J.
Kight and the Company. (Reference is made to Exhibit 10(j) to the Companys Annual
Report on Form 10-K for the year ended June 30, 2003, filed with the Securities and
Exchange Commission on September 15, 2003, and incorporated herein by reference.)
 -108-




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description10
    (t)
    
    Noncompetition Agreement, dated February 11, 2003, between Mark A. Johnson and the
Company. (Reference is made to Exhibit 10(k) to the Companys Annual Report on Form 10-K
for the year ended June 30, 2003, filed with the Securities and Exchange Commission on
September 15, 2003, and incorporated herein by reference.)10
    (u)
    
    Confidentiality and Nonsolicitation Agreement, dated February 11, 2003, between
Mark A. Johnson and the Company. (Reference is made to Exhibit 10(l) to the Companys
Annual Report on Form 10-K for the year ended June 30, 2003, filed with the Securities
and Exchange Commission on September 15, 2003, and incorporated herein by reference.)10
    (v)
    
    Executive Employment Agreement between the Company and Peter J. Kight. (Reference
is made to Exhibit 10(z) to the Companys Annual Report on Form 10-K for the year ended
June 30, 1997, filed with the Securities and Exchange Commission on September 26, 1997,
and incorporated herein by reference.) +10
    (w)
    
    CheckFree Corporation 2003 Incentive Compensation Plan. (Reference is made to
Appendix A to the Companys Proxy Statement for the Annual Meeting of Stockholders held
on October 29, 2003, filed with the Securities Exchange Commission on September 29, 2003,
and incorporated herein by reference.) +10
    (x)
    
    Form of Stockholder Agreement entered into between the Company and each of
Microsoft Corporation and First Data Corporation. (Reference is made to Exhibit 10(ff)
to the Companys Registration Statement on Form S-4 (Registration No. 333-41098) filed
with the Securities and Exchange Commission on July 10, 2000, and incorporated herein by
reference.)**10
    (y)
    
    Form of Registration Rights Agreement entered into between the Company and each of
Microsoft Corporation and First Data Corporation. (Reference is made to Exhibit 10(gg)
to the Companys Registration Statement on Form S-4 (Registration No. 333-41098) filed
with the Securities and Exchange Commission on July 10, 2000, and incorporated herein by
reference.)**10
    (z)
    
    Form of Registration Rights Agreement entered into between the Company and
Citibank, N.A. (Reference is made to Exhibit 10(hh) to the Companys Registration
Statement on Form S-4 (Registration No. 333-41098) filed with the Securities and Exchange
Commission on July 10, 2000, and incorporated herein by reference.)**10(aa)
    
    Form of Commercial Alliance Agreement entered into between the Company and Microsoft
Corporation. (Reference is made to Exhibit 10(ff) to Amendment No. 1 to the Companys
Registration Statement on Form S-4 (Registration No. 333-32644) filed with the Securities
and Exchange Commission on April 18, 2000, and incorporated herein by reference.)**10(bb)
    
    Form of Marketing Agreement entered into between the Company and First Data
Corporation. (Reference is made to Exhibit 10(gg) to Amendment No. 1 to the Companys
Registration Statement on Form S-4 (Registration No. 333-32644) filed with the Securities
and Exchange Commission on April 18, 2000, and incorporated herein by reference.)**10(cc)
    
    Master Agreement, dated August 5, 2003, among Bastogne, Inc., CheckFree Services
Corporation and SunTrust Bank. (Reference is made to Exhibit 10(v) to the Companys
Annual Report on Form 10-K for the year ended June 30, 2003, filed with the Securities
and Exchange Commission on September 15, 2003, and incorporated herein by reference.)**
 -109-




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description10(dd)
    
    Revolving Credit Agreement, dated August 20, 2004, among CheckFree Corporation,
CheckFree Services Corporation and CheckFree Investment Corporation, as Borrowers, the
lenders from time to time party thereto, SunTrust Bank, as Administrative Agent, Bank of
America, N.A., as Syndication Agent and KeyBank National Association, US Bank and BNP
Paribas, as Documentation Agents, SunTrust Capital Markets, Inc. as Joint Lead Arranger
and Sole Book Runner and Banc of America Securities, LLC as Joint Lead Arranger.
(Reference is made to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 25, 2004, and incorporated herein by
reference.)10(ee)
    
    First Amendment to Revolving Credit Agreement, made and entered into as of December 7,
2004, by and among CheckFree Corporation, CheckFree Services Corporation, and CheckFree
Investment Corporation, the several banks and other financial institutions from time to
time party thereto (the Lenders), and Sun Trust Bank, in its capacity as Administrative
Agent for the Lenders, as Issuing Bank, and as Swingline Lender. (Reference is made to
Exhibit 10(c) to the Companys Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 2004, filed with the Securities and Exchange Commission on February 8,
2005, and incorporated herein by reference.)10(ff)
    
    Revolving Credit Agreement, dated April 13, 2006, among CheckFree Corporation,
CheckFree Services Corporation and CheckFree Investment Corporation, as Borrowers, the
lenders from time to time party thereto, SunTrust Bank, as Administrative Agent, Bank of
America, N.A., as Syndication Agent, and KeyBank National Association, US Bank, National
Association, and Mizuho Corporate Bank, Ltd., as Documentation Agents, SunTrust Capital
Markets, Inc. as Joint Lead Arranger and Sole Book Runner and Banc of America Securities,
LLC as Joint Lead Arranger. (Reference is made to Exhibit 10.1 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission on April 19, 2006,
and incorporated herein by reference.)10(gg)
    
    Master Agreement, dated April 13, 2006, among CheckFree Corporation, as Guarantor, and
CheckFree Services Corporation, as Lessee and Construction Agent, SunTrust Bank, as
Lessor, certain financial institutions parties thereto, as Lenders, SunTrust Equity
Funding, LLC, as Agent and Sole Arranger, US Bank, National Association, Mizuho Corporate
Bank (USA) and KeyBank National Association, each as Co-Documentation Agents, and Bank of
America, N.A., as Syndication Agent. (Reference is made to Exhibit 10.2 to the
Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on
April 19, 2006, and incorporated herein by reference.)10(hh)
    
    Master Lease Agreement, dated April 13, 2006, between CheckFree Services Corporation,
as Lessee, and SunTrust Bank, as Lessor. (Reference is made to Exhibit 10.3 to the
Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on
April 19, 2006, and incorporated herein by reference.)10(ii)
    
    Construction Agency Agreement, dated April 13, 2006, between SunTrust Bank and
CheckFree Services Corporation, as Construction Agent. (Reference is made to Exhibit
10.4 to the Companys Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 19, 2006, and incorporated herein by reference.)10(jj)
    
    First Amendment to Master Agreement, dated April 13, 2006, among Bastogne, Inc.,
CheckFree Services Corporation, CheckFree Corporation, and SunTrust Bank. (Reference is
made to Exhibit 10.5 to the Companys Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 19, 2006, and incorporated herein by
reference.)21
    
    Subsidiaries of the Company.*
 -110-




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description23
    
    
    Consent of Deloitte & Touche LLP.*24
    
    
    Power of Attorney.*31
    (a)
    
    Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley
Act of 2002.*31
    (b)
    
    Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley
Act of 2002.*32
    (a)
    
    Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley
Act of 2002.***32
    (b)
    
    Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley
Act of 2002.***
 
 *
    
    Filed with this report.**
    
    Portions of this Exhibit have been given confidential treatment by the Securities and
Exchange Commission.***
    
    Furnished with this report.+
    
    Management compensatory plan required to be filed pursuant to Item 14(c) of this Annual
Report on Form 10-K. (b)
    
    Exhibits.The exhibits to this report follow the Signature Page.(c)
    
    Financial Statement Schedules.The financial statement schedule is included in Item 8 to this Annual Report on Form
10-K.
 -111-




---



##### Table of Contents



SIGNATURES
  CHECKFREE CORPORATIONDate: September 8, 2006
    
    By: /s/ David E. MangumDavid E. Mangum, Executive Vice
     President and Chief Financial Officer
  /s/
Peter J. Kight
    
    Chairman of the Board and Chief Executive OfficerPeter J. Kight
    
    (Principal Executive Officer)/s/ David E. Mangum
    
    Executive Vice President and Chief Financial OfficerDavid E. Mangum
    
    (Principal Financial Officer)/s/ John J. Browne, Jr.
    
    Vice President, Controller, and Chief Accounting OfficerJohn J. Browne, Jr.
    
    (Principal Accounting Officer)*William P. Boardman
    
    DirectorWilliam P. Boardman*James D. Dixon
    
    DirectorJames D. Dixon*C. Kim Goodwin
    
    DirectorC. Kim Goodwin*Mark A. Johnson
    
    Director`Mark A. Johnson*Eugene F. Quinn
    
    DirectorEugene F. Quinn*Jeffrey M. Wilkins
    
    DirectorJeffrey M. Wilkins
 *By:
    
    /s/ Curtis A. LovelandCurtis A. Loveland,Attorney-in-Fact
 -112-




---



##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    Exhibit Description2
    (a)
    
    Agreement and Plan of Merger and Contribution Agreement, dated as of February 15,
2000, among Microsoft Corporation, First Data Corporation, Citibank, N.A., MS II, L.L.C.,
First Data, L.L.C., H & B Finance, Inc., FDC International Partner, Inc., MSFDC
International, Inc., Citicorp Electronic Commerce, Inc., CheckFree Holdings Corporation,
Chopper Merger Corporation, and Chopper Corporation. (Reference is made to Exhibit 2(b)
to the Companys Registration Statement on Form S-4 (Registration No. 333-32644) filed
with the Securities and Exchange Commission on March 16, 2000, and incorporated herein by
reference.)2
    (b)
    
    Amended and Restated Agreement and Plan of Merger, dated as of July 7, 2000, among
CheckFree Holdings Corporation, Microsoft Corporation, First Data Corporation, Citibank,
N.A., H&B Finance, Inc., FDC International Partner, Inc., MSFDC International, Inc., Citi
TransPoint Holdings Inc., TransPoint Acquisition Corporation, Tank Acquisition
Corporation, Chopper Merger Corporation, CheckFree Corporation, Microsoft II, LLC and
First Data, L.L.C. (Reference is made to Appendix A to the Companys Registration
Statement on Form S-4 (Registration No. 333-41098) filed with the Securities and Exchange
Commission on July 10, 2000, and incorporated herein by reference.)2
    (c)
    
    Amended and Restated Strategic Alliance Master Agreement, dated as of April 26,
2000, among CheckFree Holdings Corporation, CheckFree Services Corporation and Bank of
America, N.A. (Reference is made to Appendix A to the Companys Proxy Statement for the
Special Meeting of Stockholders held on September 28, 2000, filed with the Securities and
Exchange Commission on August 25, 2000, and incorporated herein by reference.)3
    (a)
    
    Amended and Restated Certificate of Incorporation of the Company. (Reference is
made to Exhibit 4(e) to the Companys Registration Statement on Form S-8 (Registration
No. 333-50322), filed with the Securities and Exchange Commission on November 20, 2000,
and incorporated herein by reference.)3
    (b)
    
    Certificate of Ownership and Merger Merging CheckFree Corporation into CheckFree
Holdings Corporation. (Reference is made to Exhibit 3(b) to the Companys Annual Report
on Form 10-K for the year ended June 30, 2000, filed with the Securities and Exchange
Commission on September 26, 2000, and incorporated herein by reference.)3
    (c)
    
    By-Laws of the Company. (Reference is made to Exhibit 3(b) to the Companys
Current Report on Form 8-K, dated December 22, 1997, filed with the Securities and
Exchange Commission on December 30, 1997, and incorporated herein by reference.)3
    (d)
    
    Form of Specimen Stock Certificate. (Reference is made to Exhibit 3(d) to the
Companys Annual Report on Form 10-K for the year ended June 30, 2000, filed with the
Securities and Exchange Commission on September 26, 2000, and incorporated herein by
reference.)4
    (a)
    
    Articles FOURTH, FIFTH, SEVENTH, EIGHTH, TENTH AND ELEVENTH of the Companys
Amended and Restated Certificate of Incorporation (contained in the Companys Amended and
Restated Certificate of Incorporation filed as Exhibit 3(a) hereto) and Articles II, III,
IV, VI and VIII of the Companys By-Laws (contained in the Companys By-Laws filed as
Exhibit 3(c) hereto.)4
    (b)
    
    Rights Agreement, dated as of December 16, 1997, by and between the Company and The
Fifth Third Bank, as Rights Agent. (Reference is made to Exhibit 4.1 to the Companys
Registration Statement on Form 8-A (File No. 0-26802), filed with the Securities and
Exchange Commission on December 19, 1997, and incorporated herein by reference.)4
    (c)
    
    Amendment No. 1 to the Rights Agreement, dated as of February 5, 1999, between
CheckFree Holdings Corporation and The Fifth Third Bank, as Rights Agent. (Reference is
made to Exhibit 4.2 to Amendment No. 1 to the Companys Registration Statement on Form
8-A (File No. 0-26802), filed with the Securities and Exchange Commission on May 12,
1999, and incorporated herein by reference.)




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description4(d)

    
    Amendment No. 2 to the Rights Agreement, dated as of September 30, 2000, between
CheckFree Corporation and The Fifth Third Bank, as Rights Agent. (Reference is
made to Exhibit 4.3 to Amendment No. 1 to the Companys Registration Statement on Form
8-A (File No. 0-26802), filed with the Securities and Exchange Commission on October 3,
2000, and incorporated herein by reference.)4(e)

    
    Substitution of Successor Rights Agent and Amendment No. 3 to the Rights Agreement,
dated as of January 25, 2002, between CheckFree Corporation and Wells Fargo Bank
Minnesota, National Association, as Rights Agent. (Reference is made to Exhibit 4.4 to
Amendment No. 3 to the Companys Registration Statement on Form 8-A (File No. 0-26802),
filed with the Securities and Exchange Commission on January 29, 2002, and incorporated
herein by reference.)10
    (a)
    
    CheckFree Services Corporation 401(k) Plan Adoption Agreement (restatement as of
January 1, 2006). (Reference is made to Exhibit 10(a) to the Companys Quarterly report
on Form 10-Q for the quarterly period ended March 31, 2006, filed with the Securities and
Exchange Commission on May 9, 2006, and incorporated herein by reference.)10
    (b)
    
    CheckFree Services Corporation Defined Contribution Plan and Trust, sponsored by
SunTrust BankBasic Plan Document #02, June 2002 (Prototype plan for CheckFree Services
Corporation 401(k) Plan) (Reference is made to Exhibit 10(b) to the Companys Quarterly
Report on Form 10-Q for the quarterly period ended December 31, 2004, filed with the
Securities and Exchange Commission on February 8, 2005, and incorporated herein by
reference.)10
    (c)
    
    CheckFree Corporation Third Amended and Restated Associate Stock Purchase Plan.
(Reference is made to Exhibit 4(a) to Post-Effective Amendment No. 1 to the Companys
Registration Statement on Form S-8 (Registration No. 333-101284), filed with the
Securities and Exchange Commission on June 13, 2005, and incorporated herein by
reference.)10
    (d)
    
    CheckFree Corporation 2002 Stock Incentive Plan. (Reference is made to Appendix B
to the Companys Definitive Proxy Statement for the 2002 Annual Meeting of Stockholders
held on November 6, 2002, filed with the Securities and Exchange Commission on October 3,
2002, and incorporated herein by reference.)+10
    (e)
    
    Form of Restricted Stock Award Agreement for Non-Employee Directors. (Reference is
made to Exhibit 10(d) to the Companys Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2004, filed with the Securities and Exchange Commission on
February 8, 2005, and incorporated herein by reference.)+10
    (f)
    
    Form of Performance Accelerated Restricted Stock Award Agreement. (Reference is
made to Exhibit 10(e) to the Companys Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2004, filed with the Securities and Exchange Commission on
February 8, 2005, and incorporated herein by reference.)+10
    (g)
    
    Form of Restricted Stock Award Agreement. (Reference is made to Exhibit 10(f) to
the Companys Quarterly Report on Form 10-Q for the quarterly period ended December 31,
2004, filed with the Securities and Exchange Commission on February 8, 2005, and
incorporated herein by reference.)+10
    (h)
    
    Form of Nonstatutory Stock Option Agreement Under the 2002 Stock Incentive Plan.
(Reference is made to Exhibit 10(g) to the Companys Quarterly Report on Form 10-Q for
the quarterly period ended December 31, 2004, filed with the Securities and Exchange
Commission on February 8, 2005, and incorporated herein by reference.)+




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description10
    (i)
    
    Form of Incentive Stock Option Agreement Under the 2002 Stock Incentive Plan.
(Reference is made to Exhibit 10(h) to the Companys Quarterly Report on Form 10-Q for
the quarterly period ended December 31, 2004, filed with the Securities and Exchange
Commission on February 8, 2005, and incorporated herein by reference.) +10
    (j)
    
    CheckFree Corporation Third Amended and Restated 1995 Stock Option Plan.
(Reference is made to Exhibit 4(d) to the Companys Registration Statement on Form S-8,
as amended (Registration No. 333-50322), filed with the Securities and Exchange
Commission on November 20, 2000, and incorporated herein by reference.) +10
    (k)
    
    CheckFree Holdings Corporation Amended and Restated 1993 Stock Option Plan.
(Reference is made to Exhibit 4(a) to Post-Effective Amendment No. 1 to the Companys
Registration Statement on Form S-8 (Registration No. 33-98442), filed with the Securities
and Exchange Commission on January 9, 1998, and incorporated herein by reference.) +10
    (l)
    
    BlueGill Technologies, Inc. 1997 Stock Option Plan. (Reference is made to Exhibit
4(a) to the Companys Registration Statement on Form S-8 (Registration No. 333-35812),
filed with the Securities and Exchange Commission on April 28, 2000, and incorporated
herein by reference.) +10
    (m)
    
    BlueGill Technologies, Inc. Amended and Restated 1998 Incentive and Non-Qualified
Stock Option Plan. (Reference is made to Exhibit 4(a) to the Companys Registration
Statement on Form S-8 (Registration No. 333-35814), filed with the Securities and Exchange
Commission on April 28, 2000, and incorporated herein by reference.) +10
    (n)
    
    CheckFree Corporation Nonqualified Deferred Compensation Plan, dated December 31,
1998. (Reference is made to Exhibit 10(n) to the Companys Annual Report on Form 10-K
for the year ended June 30, 2005, filed with the Securities and Exchange Commission on
September 2, 2005, and incorporated herein by reference.) +10
    (o)
    
    Amendment No. 1 to CheckFree Corporation Nonqualified Deferred Compensation Plan,
dated May 5, 2000. (Reference is made to Exhibit 10(o) to the Companys Annual Report on
Form 10-K for the year ended June 30, 2005, filed with the Securities and Exchange
Commission on September 2, 2005, and incorporated herein by reference.) +10
    (p)
    
    Second Amendment to the CheckFree Services Corporation Nonqualified Deferred
Compensation Plan, dated January 1, 2002. (Reference is made to Exhibit 10(p) to the
Companys Annual Report on form 10-K for the year ended June 30, 2005, filed with the
Securities and Exchange commission on September 2, 2005, and incorporate herein by
reference.)  +10
    (q)
    
    Form of Indemnification Agreement. (Reference is made to Exhibit 10(a) to the
Companys Registration Statement on Form S-1, as amended (Registration No. 33-95738),
filed with the Securities and Exchange Commission on August 14, 1995, and incorporated
herein by reference.) +10
    (r)
    
    Schedule identifying material details of Indemnification Agreements substantially
identical to Exhibit 10(q). (Reference is made to Exhibit 10(i) to the Companys Annual
Report on Form 10-K for the year ended June 30, 2003, filed with the Securities and
Exchange Commission on September 15, 2003, and incorporated herein by reference.) +10
    (s)
    
    Confidentiality and Noncompetition Agreement, dated May 7, 1999, between Peter J.
Kight and the Company. (Reference is made to Exhibit 10(j) to the Companys Annual
Report on Form 10-K for the year ended June 30, 2003, filed with the Securities and
Exchange Commission on September 15, 2003, and incorporated herein by reference.)




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description10
    (t)
    
    Noncompetition Agreement, dated February 11, 2003, between Mark A. Johnson and the
Company. (Reference is made to Exhibit 10(k) to the Companys Annual Report on Form 10-K
for the year ended June 30, 2003, filed with the Securities and Exchange Commission on
September 15, 2003, and incorporated herein by reference.)10
    (u)
    
    Confidentiality and Nonsolicitation Agreement, dated February 11, 2003, between
Mark A. Johnson and the Company. (Reference is made to Exhibit 10(l) to the Companys
Annual Report on Form 10-K for the year ended June 30, 2003, filed with the Securities
and Exchange Commission on September 15, 2003, and incorporated herein by reference.)10
    (v)
    
    Executive Employment Agreement between the Company and Peter J. Kight. (Reference
is made to Exhibit 10(z) to the Companys Annual Report on Form 10-K for the year ended
June 30, 1997, filed with the Securities and Exchange Commission on September 26, 1997,
and incorporated herein by reference.) +10
    (w)
    
    CheckFree Corporation 2003 Incentive Compensation Plan. (Reference is made to
Appendix A to the Companys Proxy Statement for the Annual Meeting of Stockholders held
on October 29, 2003, filed with the Securities Exchange Commission on September 29, 2003,
and incorporated herein by reference.) +10
    (x)
    
    Form of Stockholder Agreement entered into between the Company and each of
Microsoft Corporation and First Data Corporation. (Reference is made to Exhibit 10(ff)
to the Companys Registration Statement on Form S-4 (Registration No. 333-41098) filed
with the Securities and Exchange Commission on July 10, 2000, and incorporated herein by
reference.)**10
    (y)
    
    Form of Registration Rights Agreement entered into between the Company and each of
Microsoft Corporation and First Data Corporation. (Reference is made to Exhibit 10(gg)
to the Companys Registration Statement on Form S-4 (Registration No. 333-41098) filed
with the Securities and Exchange Commission on July 10, 2000, and incorporated herein by
reference.)**10
    (z)
    
    Form of Registration Rights Agreement entered into between the Company and
Citibank, N.A. (Reference is made to Exhibit 10(hh) to the Companys Registration
Statement on Form S-4 (Registration No. 333-41098) filed with the Securities and Exchange
Commission on July 10, 2000, and incorporated herein by reference.)**10(aa)
    
    Form of Commercial Alliance Agreement entered into between the Company and Microsoft
Corporation. (Reference is made to Exhibit 10(ff) to Amendment No. 1 to the Companys
Registration Statement on Form S-4 (Registration No. 333-32644) filed with the Securities
and Exchange Commission on April 18, 2000, and incorporated herein by reference.)**10(bb)
    
    Form of Marketing Agreement entered into between the Company and First Data
Corporation. (Reference is made to Exhibit 10(gg) to Amendment No. 1 to the Companys
Registration Statement on Form S-4 (Registration No. 333-32644) filed with the Securities
and Exchange Commission on April 18, 2000, and incorporated herein by reference.)**10(cc)
    
    Master Agreement, dated August 5, 2003, among Bastogne, Inc., CheckFree Services
Corporation and SunTrust Bank. (Reference is made to Exhibit 10(v) to the Companys
Annual Report on Form 10-K for the year ended June 30, 2003, filed with the Securities
and Exchange Commission on September 15, 2003, and incorporated herein by reference.)**




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description10(dd)
    
    Revolving Credit Agreement, dated August 20, 2004, among CheckFree Corporation,
CheckFree Services Corporation and CheckFree Investment Corporation, as Borrowers, the
lenders from time to time party thereto, SunTrust Bank, as Administrative Agent, Bank of
America, N.A., as Syndication Agent and KeyBank National Association, US Bank and BNP
Paribas, as Documentation Agents, SunTrust Capital Markets, Inc. as Joint Lead Arranger
and Sole Book Runner and Banc of America Securities, LLC as Joint Lead Arranger.
(Reference is made to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 25, 2004, and incorporated herein by
reference.)10(ee)
    
    First Amendment to Revolving Credit Agreement, made and entered into as of December 7,
2004, by and among CheckFree Corporation, CheckFree Services Corporation, and CheckFree
Investment Corporation, the several banks and other financial institutions from time to
time party thereto (the Lenders), and Sun Trust Bank, in its capacity as Administrative
Agent for the Lenders, as Issuing Bank, and as Swingline Lender. (Reference is made to
Exhibit 10(c) to the Companys Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 2004, filed with the Securities and Exchange Commission on February 8,
2005, and incorporated herein by reference.)10(ff)
    
    Revolving Credit Agreement, dated April 13, 2006, among CheckFree Corporation,
CheckFree Services Corporation and CheckFree Investment Corporation, as Borrowers, the
lenders from time to time party thereto, SunTrust Bank, as Administrative Agent, Bank of
America, N.A., as Syndication Agent, and KeyBank National Association, US Bank, National
Association, and Mizuho Corporate Bank, Ltd., as Documentation Agents, SunTrust Capital
Markets, Inc. as Joint Lead Arranger and Sole Book Runner and Banc of America Securities,
LLC as Joint Lead Arranger. (Reference is made to Exhibit 10.1 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission on April 19, 2006,
and incorporated herein by reference.)10(gg)
    
    Master Agreement, dated April 13, 2006, among CheckFree Corporation, as Guarantor, and
CheckFree Services Corporation, as Lessee and Construction Agent, SunTrust Bank, as
Lessor, certain financial institutions parties thereto, as Lenders, SunTrust Equity
Funding, LLC, as Agent and Sole Arranger, US Bank, National Association, Mizuho Corporate
Bank (USA) and KeyBank National Association, each as Co-Documentation Agents, and Bank of
America, N.A., as Syndication Agent. (Reference is made to Exhibit 10.2 to the
Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on
April 19, 2006, and incorporated herein by reference.)10(hh)
    
    Master Lease Agreement, dated April 13, 2006, between CheckFree Services Corporation,
as Lessee, and SunTrust Bank, as Lessor. (Reference is made to Exhibit 10.3 to the
Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on
April 19, 2006, and incorporated herein by reference.)10(ii)
    
    Construction Agency Agreement, dated April 13, 2006, between SunTrust Bank and
CheckFree Services Corporation, as Construction Agent. (Reference is made to Exhibit
10.4 to the Companys Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 19, 2006, and incorporated herein by reference.)10(jj)
    
    First Amendment to Master Agreement, dated April 13, 2006, among Bastogne, Inc.,
CheckFree Services Corporation, CheckFree Corporation, and SunTrust Bank. (Reference is
made to Exhibit 10.5 to the Companys Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 19, 2006, and incorporated herein by
reference.)21
    
    Subsidiaries of the Company.*




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description23
    
    
    Consent of Deloitte & Touche LLP.*24
    
    
    Power of Attorney.*31
    (a)
    
    Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley
Act of 2002.*31
    (b)
    
    Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley
Act of 2002.*32
    (a)
    
    Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley
Act of 2002.***32
    (b)
    
    Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley
Act of 2002.***
 
 *
    
    Filed with this report.**
    
    Portions of this Exhibit have been given confidential treatment by the Securities and
Exchange Commission.***
    
    Furnished with this report.+
    
    Management compensatory plan required to be filed pursuant to Item 14(c) of this Annual
Report on Form 10-K.