##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark
One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from ___ to ___
 Commission File Number 1-31951
 eFunds Corporation
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    39-1506286
(IRS Employer Identification Number)
 4900 N. Scottsdale Road, Suite 1000Scottsdale, Arizona
    
    85251(Address of principal executive offices)
    
    (Zip Code)
  þ o
  þ o o
 o þ




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 1A. RISK FACTORSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 5. OTHER INFORMATION CAUTIONARY STATEMENTSITEM 6. EXHIBITSSIGNATURESIndex to ExhibitsExhibit 31.1Exhibit 31.2Exhibit 32.1    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 EFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,2007
    
    
    December 31,(dollars in thousands)
    
    (Unaudited)
    
    
    2006Current assets:Cash and cash equivalents
    
    $
    142,658
    
    
    $
    126,740Short term investments
    
    
    18,950
    
    
    
    7,000Restricted cash
    
    
    1,395
    
    
    
    3,730Settlement assets
    
    
    20,459
    
    
    
    58,328Accounts receivable  net
    
    
    107,384
    
    
    
    107,188Deferred income taxes
    
    
    16,273
    
    
    
    12,781Prepaid expenses and other current assets
    
    
    25,527
    
    
    
    26,115Total current assets
    
    
    332,646
    
    
    
    341,882Property and equipment  net
    
    
    67,514
    
    
    
    60,145Long-term deferred income taxes
    
    
    
    
    
    
    877Intangible assets  net
    
    
    394,959
    
    
    
    395,785Other non-current assets
    
    
    29,109
    
    
    
    25,849Total non-current assets
    
    
    491,582
    
    
    
    482,656Total assets
    
    $
    824,228
    
    
    $
    824,538Current liabilities:Accounts payable
    
    $
    18,776
    
    
    $
    24,021Settlement liabilities
    
    
    19,918
    
    
    
    54,792Accrued liabilities
    
    
    46,013
    
    
    
    53,520Deferred revenue and gains
    
    
    24,923
    
    
    
    22,052Long-term debt due within one year
    
    
    3,518
    
    
    
    4,438Total current liabilities
    
    
    113,148
    
    
    
    158,823Long-term deferred gains
    
    
    13,300
    
    
    
    18,078Long-term debt
    
    
    101,929
    
    
    
    102,656Deferred income taxes
    
    
    9,305
    
    
    
    Other long-term liabilities
    
    
    10,012
    
    
    
    7,345Total liabilities
    
    
    247,694
    
    
    
    286,902Commitments and contingencies (Notes 6, 10 & 11)Stockholders equity:Preferred stock $.01 par value; 100,000,000 shares authorized; no shares
issued and outstanding
    
    
    
    
    
    
    Common stock $.01 par value (250,000,000 shares authorized; 52,135,572
shares issued and 47,544,329 shares outstanding June 30, 2007 and
51,684,486 shares issued and 47,093,243 shares outstanding at December
31, 2006)
    
    
    522
    
    
    
    517Additional paid-in capital
    
    
    539,637
    
    
    
    528,090Treasury stock at cost (4,591,243 shares)
    
    
    (100,000
    )
    
    
    (100,000
    )Retained earnings
    
    
    127,264
    
    
    
    105,690Accumulated other comprehensive income
    
    
    9,111
    
    
    
    3,339Stockholders equity
    
    
    576,534
    
    
    
    537,636Total liabilities and stockholders equity
    
    $
    824,228
    
    
    $
    824,538
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EFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(in thousands, except per share amounts)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net revenue
    
    $
    138,790
    
    
    $
    132,397
    
    
    $
    272,832
    
    
    $
    272,135Operating expenses:Processing, communication and service costs
    
    
    35,364
    
    
    
    33,046
    
    
    
    69,942
    
    
    
    68,339Employee costs
    
    
    58,214
    
    
    
    55,699
    
    
    
    115,822
    
    
    
    114,777Depreciation and amortization
    
    
    12,071
    
    
    
    11,854
    
    
    
    24,096
    
    
    
    23,632Other operating costs
    
    
    15,892
    
    
    
    16,615
    
    
    
    29,092
    
    
    
    35,035Total operating expenses
    
    
    121,541
    
    
    
    117,214
    
    
    
    238,952
    
    
    
    241,783Income from operations
    
    
    17,249
    
    
    
    15,183
    
    
    
    33,880
    
    
    
    30,352Interest expense
    
    
    (1,413
    )
    
    
    (1,424
    )
    
    
    (2,844
    )
    
    
    (3,000
    )Other income  net
    
    
    1,187
    
    
    
    1,179
    
    
    
    2,154
    
    
    
    1,986Income before income taxes
    
    
    17,023
    
    
    
    14,938
    
    
    
    33,190
    
    
    
    29,338Provision for income taxes
    
    
    (5,958
    )
    
    
    (5,228
    )
    
    
    (11,616
    )
    
    
    (8,968
    )Net income
    
    $
    11,065
    
    
    $
    9,710
    
    
    $
    21,574
    
    
    $
    20,370Weighted average shares outstanding
    
    
    47,412
    
    
    
    46,517
    
    
    
    47,311
    
    
    
    46,332Weighted average shares and potential dilutive shares outstanding
    
    
    48,553
    
    
    
    47,260
    
    
    
    48,334
    
    
    
    47,130Net income per share  basic
    
    $
    0.23
    
    
    $
    0.21
    
    
    $
    0.46
    
    
    $
    0.44Net income per share  diluted
    
    $
    0.23
    
    
    $
    0.21
    
    
    $
    0.45
    
    
    $
    0.43
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EFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months EndedJune 30,(in thousands)
    
    2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    21,574
    
    
    $
    20,370Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    8,321
    
    
    
    8,728Amortization
    
    
    15,775
    
    
    
    14,904Stock-based compensation
    
    
    5,848
    
    
    
    4,662Excess tax benefits from share-based compensation
    
    
    (686
    )
    
    
    (1,130
    )Deferred income taxes
    
    
    6,690
    
    
    
    12,599Other - net
    
    
    85
    
    
    
    79Changes in assets and liabilities, net of effects from acquisitions and dispositions:Restricted cash
    
    
    142
    
    
    
    2,260Accounts receivable
    
    
    519
    
    
    
    (178
    )Accounts payable
    
    
    (5,558
    )
    
    
    (6,232
    )Acquisition and other adjustments
    
    
    (2,022
    )
    
    
    Deferred revenue and gains
    
    
    (2,581
    )
    
    
    (2,774
    )Income taxes receivable/payable
    
    
    (2,130
    )
    
    
    (13,159
    )Other assets and liabilities
    
    
    1,509
    
    
    
    (16,021
    )Net cash provided by operating activities
    
    
    47,486
    
    
    
    24,108Cash flows from investing activities:Capital expenditures
    
    
    (20,708
    )
    
    
    (20,983
    )Acquisitions, net of cash acquired
    
    
    (1,427
    )
    
    
    Proceeds from dispositions
    
    
    
    
    
    
    2,356Purchase of short-term investments
    
    
    (44,165
    )
    
    
    Proceeds from sale of short-term investments
    
    
    32,215
    
    
    
    Other - net
    
    
    (2,874
    )
    
    
    (4,533
    )Net cash used in investing activities
    
    
    (36,959
    )
    
    
    (23,160
    )Cash flows from financing activities:Issuance of common stock
    
    
    6,361
    
    
    
    8,442Excess tax benefits from share-based compensation
    
    
    686
    
    
    
    1,130Payments on long-term debt
    
    
    (1,656
    )
    
    
    (1,987
    )Other
    
    
    
    
    
    
    54Net cash provided by financing activities
    
    
    5,391
    
    
    
    7,639Net increase in cash and cash equivalents
    
    
    15,918
    
    
    
    8,587Cash and cash equivalents at beginning of period
    
    
    126,740
    
    
    
    85,987Cash and cash equivalents at end of period
    
    $
    142,658
    
    
    $
    94,574Supplemental disclosures:Cash paid for income taxes
    
    $
    5,524
    
    
    $
    10,654Cash paid for interest
    
    $
    3,245
    
    
    $
    3,012Noncash investing and financing activities:Purchase of assets under capital lease obligations
    
    $
    
    
    
    $
    20
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EFUNDS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
     
    
    the Company and its subsidiaries will in all material respects carry on its business
in the regular and ordinary course consistent with past practice; and
    
    the Company and its subsidiaries will use commercially reasonable efforts to preserve
intact its current business organization, keep available the services of its current
officers and employees, preserve its relationships with customers, suppliers and others
having business dealings with the Company, and maintain appropriate relations and
goodwill with governmental entities.
  
    
    declare or pay dividends on, or make any other distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their capacity as
such;
    
    split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any securities in respect of or in substitution for shares of its capital
stock;
    
    purchase, redeem or otherwise acquire, directly or indirectly, any shares of its
capital stock or any other securities or any rights to acquire any such shares or other
securities (except for the withholding of shares of common stock in connection with taxes
payable in respect of the exercise of options or the conversion of restricted stock
units);
    
    issue, dispose of or encumber any shares of its capital stock or equity equivalent or
any securities or other rights to acquire, any such shares or other equity equivalent
(other than upon the exercise of options or the conversion of restricted stock units or
in connection with the Companys Employee Stock Purchase Plan (subject to certain
limitations) and except for pledges of the stock of subsidiaries required under the
existing terms of the Companys credit agreement), waive or modify the terms of any such
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rights or accelerate the vesting of any options or restricted stock units (other than
acceleration which occurs pursuant to the terms thereof as in effect on June 26, 2007 in
connection with the Merger);
    
    amend its certificate of incorporation or by-laws or other organizational documents,
or alter through merger, consolidation, liquidation, reorganization, restructuring or in
any other fashion, the corporate structure or ownership of any material subsidiary of the
Company;
    
    acquire or agree to acquire, except for purchases of inventory in the ordinary course
of business consistent with past practice, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise acquire or
agree to acquire any assets (tangible or intangible) that have a value in excess of $5
million individually or $15 million in the aggregate;
    
    sell, lease or otherwise dispose of or encumber, any of its property or assets
(tangible or intangible and including intellectual property) that have a value in excess
of $5 million individually and $15 million in the aggregate or that are otherwise
material to the Company or any of its subsidiaries, or create any lien (other than by
operation of law in the ordinary course of business) of any kind with respect to such
property or assets, except sales of obsolete assets or inventory in the ordinary course
of business consistent with past practice;
    
    except in the ordinary course of business or as required by a change after June 26,
2007 in applicable law, enter into, materially amend or otherwise modify, or unilaterally
or prior to the expiration thereof agree to terminate, any material contract, or certain
other significant agreements described in the Merger Agreement, or enter into any
agreement relating to the management of any material asset or property or any of the
Companys or any of its subsidiaries businesses (extensions of existing agreements will
not constitute material modifications or amendments of such agreements for purposes of
the foregoing);
    
    except for short-term borrowings incurred in the ordinary course of business
consistent with past practice or as required by existing contractual arrangements in
certain credit agreements, incur any indebtedness or engage in any other financing
arrangements, make any loans, advances or capital contributions to, or investments in, or
receive any capital contributions from, any person other than to or in the Company or any
wholly-owned subsidiary and except signing, milestone, progress or other similar bonus
payments to customers in connection with the sale of the products of the Company and its
subsidiaries, consistent with past practice, or the creation of accounts payable in the
ordinary course of business consistent with past practice, or assume, guarantee, endorse
or otherwise become liable or responsible for any obligations of another person (other
than the Company or any of its subsidiaries), enter into any keep well or other
agreement to maintain the financial condition of another person (other than the Company
or any of its subsidiaries) or cancel or forgive any debts owed to it (except if
determined in good faith not to be collectible or consistent with past practice) or waive
any rights or claims of material value;
    
    except as may be required as a result of a change in law or in U.S. GAAP, change any
of the accounting principles or practices used by the Company;
    
    except in the ordinary course of business, settle or compromise any material pending
or threatened litigation or claim, other than settlements or compromises requiring
payments by the Company or any of its subsidiaries of no more than $2 million
individually and $10 million in the aggregate and the pending settlement of certain
litigation in Florida;
    
    pay, discharge, settle or satisfy any material claims, liabilities or obligations
other than the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the March 31, 2007 balance sheet included in
its financial statements (or described in the notes thereto) or incurred since March 31,
2007 in the ordinary course of business consistent with past practice and except for
payments, discharges or satisfactions of no more than $2 million individually and $10
million in the aggregate;
    
    (x) increase in any manner the compensation and employee benefits (including severance
benefits) of any of the Companys current or former directors, executive officers and
other employees or pay any pension or retirement allowance not required by law or any
existing plan or agreement to any such employees, (y) become a party to, amend or commit
to any employee benefit plan or agreement with or for the benefit of
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any employee, other than, in the case of clause (x), (A) annual merit adjustments to the
compensation of employees who are not executive officers consistent with past practice,
(B) increases not exceeding 25% of base salary individually or $250,000 in the aggregate
for all individuals in the compensation of employees who are not executive officers or
directors made in connection with transfers and promotions in the ordinary course of
business consistent with past practice and (C) the establishment of terms of employment
(including compensation) of newly hired employees other than executive officers in the
ordinary course of business consistent with past practice, and in the case of clause (y),
amendments to existing employee benefit plans or employee agreements or employment,
severance or change in control agreements required to cause such plans or agreements to
not be subject to Section 409A of the Code or, if subject to Section 409A of the Code, to
not result in the application of the additional tax thereunder (provided, that any such
amendment does not materially expand the benefits to be received thereunder) or (z) except
to the extent required by law, voluntarily accelerate the vesting of any compensation or
benefit; provided, however, that the Company and any of its subsidiaries may pay cash
bonuses and other cash incentive compensation (including sales commissions) in respect of
calendar year 2007 to employees, including executive officers, at the times contemplated
by their bonus and incentive compensation arrangements as in effect on June 26, 2007 and
consistent with past practice;
    
    (x) change its material (A) tax accounting policies or practices or (B) tax elections,
(y) settle any material audits, examinations or litigation with respect to taxes or (z)
waive any restrictions on assessments or collections of material taxes, including any
extension of the limitations period other than in a manner consistent with past practice,
except, in each case, as may be required by law or U.S. GAAP;
    
    change fiscal years;
    
    authorize, recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation, dissolution, restructuring or other reorganization of the Company or
any material subsidiary or complete any of the actions that would be contemplated by any
such plan, or organize any new subsidiary;
    
    enter into any material collective bargaining agreement;
    
    make or agree to make any new capital expenditures in excess of 100% of the amounts of
such expenditures as reflected in the capital expenditure budgets provided to FIS prior
to June 26, 2007, provided, that any such expenditures could be incurred by the Company
without further approval or authorization by its Board of Directors or any committee
thereof;
    
    dispose of, permit to lapse, waive, release or assign any material rights, or settle
any claims, with respect to any material intellectual property where such settlement
would reasonably be expected to result in the receipt or expenditure of more than
$500,000 by the Company or any of its subsidiaries;
    
    enter into any lease of any real property, except any renewals or replacements of
existing leases in the ordinary course consistent with past practice;
    
    knowingly waive the benefits of, agree to modify in any material manner, terminate,
release any person from or fail to use reasonable best efforts to enforce, if requested
by FIS (provided that the Company will, as promptly as reasonably practicable, notify FIS
of any breach of), any confidentiality, standstill or similar contract to which the
Company or any of its subsidiaries is a party, which covers or relates to its business,
assets or properties or to which the Company or any of its subsidiaries is a beneficiary;
    
    enter into any contract that purports to limit, curtail or restrict the Companys
ability or that of any of its existing or future subsidiaries or affiliates to compete
in any geographic area or line of business or limit the persons to whom the Company or
any of its existing or future subsidiaries or affiliates may sell products or services;
or
    
    authorize, or agree in writing or otherwise to take, any of the foregoing actions.
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-
    
    US Payments-
    
    US Risk Management-
    
    International
    Recent accounting pronouncements
 Definition of Settlement in FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxesan interpretation of
FASB Statement No. 109
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Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
 Fair Value Measurements
 Stock incentive plans
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Deluxe Option Conversion Plan
  Employee Stock Purchase Plan
  Adoption of SFAS No. 123R
 Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees.
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Expected volatility
    
    
    33.0
    %
    
    
    35.1
    %
    
    
    32.5
    %
    
    
    35.0
    %Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk-free interest rate
    
    
    4.6
    %
    
    
    4.9
    %
    
    
    4.6
    %
    
    
    4.5
    %Expected life
    
    5 years
    
    
    5 years
    

    
    5 years
    

    
    5 yearsWeighted average fair value at grant date
    
    $
    11.68
    
    
    $
    10.04
    
    
    $
    9.25
    
    
    $
    9.21
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Wtd. Avg.ExerciseShares
    
    PriceOptions outstanding at January 1, 2007
    
    
    3,308,808
    
    
    $
    18.17Options granted
    
    
    2,342,500
    
    
    
    24.81Options exercised
    
    
    (340,858
    )
    
    
    17.10Options forfeited and cancelled
    
    
    (170,509
    )
    
    
    21.19Options outstanding at June 30, 2007
    
    
    5,139,941
    
    
    $
    21.19Options exercisable
    
    
    1,861,704
    
    
    $
    15.75
  Ranges of
    
    Options
    
    Wtd. Avg.
    
    Wtd. Avg.
    
    Options
    
    Wtd. Avg.Exercise Prices
    
    Outstanding
    
    Remaining Life
    
    Exercise Price
    
    Exercisable
    
    Exercse Price$6.19-$12.87
    
    
    553,964
    
    
    
    5.3
    
    
    $
    8.88
    
    
    
    553,964
    
    
    $
    8.88$12.88-$15.99
    
    
    275,930
    
    
    
    3.6
    
    
    
    13.59
    
    
    
    275,575
    
    
    
    13.59$16.00-$17.75
    
    
    409,842
    
    
    
    6.6
    
    
    
    16.35
    
    
    
    401,836
    
    
    
    16.34$17.76-$22.95
    
    
    822,482
    
    
    
    7.8
    
    
    
    20.95
    
    
    
    410,384
    
    
    
    21.22$22.96-$27.00
    
    
    3,077,723
    
    
    
    9.4
    
    
    
    24.79
    
    
    
    219,945
    
    
    
    24.445,139,941
    
    
    
    
    
    
    
    21.19
    
    
    
    1,861,704
    
    
    
    15.75
 Revenue recognition
  Software Revenue
Recognition Revenue Arrangements with Multiple Deliverables
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US
    
    
    US Risk(in thousands)
    
    Payments
    
    
    Management
    
    
    International
    
    
    Other
    
    
    TotalBalance as of December 31,
2006
    
    $
    178,541
    
    
    $
    46,553
    
    
    $
    36,001
    
    
    $
    10,640
    
    
    $
    271,735Goodwill acquired
    
    
    477
    
    
    
    
    
    
    
    2,881
    
    
    
    
    
    
    
    3,358Balance as of June 30, 2007
    
    $
    179,018
    
    
    $
    46,553
    
    
    $
    38,882
    
    
    $
    10,640
    
    
    $
    275,093
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Wtd. Avg.
    
    
    June 30, 2007
    
    
    December 31, 2006Amort.
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    GrossPeriod
    
    
    Carrying
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    Accumulated(dollars in thousands)
    
    In Years
    
    
    Amounts
    
    
    Amortization
    
    
    Net
    
    
    Amounts
    
    
    Amortization
    
    
    NetSoftware-internal use
    
    
    4
    
    
    $
    146,070
    
    
    $
    (111,749
    )
    
    $
    34,321
    
    
    $
    140,336
    
    
    $
    (103,136
    )
    
    $
    37,200Software-licensing
and resale
    
    
    5
    
    
    
    77,684
    
    
    
    (52,830
    )
    
    
    24,854
    
    
    
    71,849
    
    
    
    (50,113
    )
    
    
    21,736Acquired contracts
and other
    
    
    8
    
    
    
    103,151
    
    
    
    (42,460
    )
    
    
    60,691
    
    
    
    102,674
    
    
    
    (37,560
    )
    
    
    65,114$
    326,905
    
    
    $
    (207,039
    )
    
    $
    119,866
    
    
    $
    314,859
    
    
    $
    (190,809
    )
    
    $
    124,050
   Restructuring charges
  Lease-RelatedSeverance
    
    
    Costs &(in thousands)
    
    Related
    
    
    Other
    
    
    TotalBalance at December 31, 2006
    
    $
    73
    
    
    $
    557
    
    
    $
    630Reversal of Provisions
    
    
    (50
    )
    
    
    
    
    
    
    (50
    )Cash payments
    
    
    (23
    )
    
    
    (65
    )
    
    
    (88
    )Balance at March 31, 2007
    
    
    
    
    
    
    492
    
    
    
    492Cash payments
    
    
    
    
    
    
    (35
    )
    
    
    (35
    )Balance at June 30, 2007
    
    $
    
    
    
    $
    457
    
    
    $
    457
  Acquisition exit activities
  Lease-RelatedSeverance
    
    
    Costs &(in thousands)
    
    Related
    
    
    Other
    
    
    TotalBalance at December 31, 2006
    
    $
    1,133
    
    
    $
    4,899
    
    
    $
    6,032Cash payments
    
    
    (390
    )
    
    
    (343
    )
    
    
    (733
    )Reversal of Provisions
    
    
    (370
    )
    
    
    (293
    )
    
    
    (663
    )Balance at March 31, 2007
    
    
    373
    
    
    
    4,263
    
    
    
    4,636Cash payments
    
    
    (177
    )
    
    
    (212
    )
    
    
    (389
    )Balance at June 30, 2007
    
    $
    196
    
    
    $
    4,051
    
    
    $
    4,247
  12




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##### Table of Contents



June 30,
    
    
    December 31,(in thousands)
    
    2007
    
    
    20065.39% Senior Notes due 2012
    
    $
    100,000
    
    
    $
    100,000Capital leases and other
    
    
    5,448
    
    
    
    7,094Less capital lease and other amounts due within one year
    
    
    (3,518
    )
    
    
    (4,438
    )Total
    
    $
    101,930
    
    
    $
    102,656
       13




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(in thousands, except per share amounts)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net income per share  basicNet income
    
    $
    11,065
    
    
    $
    9,710
    
    
    $
    21,574
    
    
    $
    20,370Weighted average shares outstanding
    
    
    47,412
    
    
    
    46,517
    
    
    
    47,311
    
    
    
    46,332Net income per share  basic
    
    $
    0.23
    
    
    $
    0.21
    
    
    $
    0.46
    
    
    $
    0.44Net income per share  dilutedNet income
    
    $
    11,065
    
    
    $
    9,710
    
    
    $
    21,574
    
    
    $
    20,370Weighted average shares outstanding
    
    
    47,412
    
    
    
    46,517
    
    
    
    47,311
    
    
    
    46,332Dilutive impact of options
    
    
    1,141
    
    
    
    743
    
    
    
    1,022
    
    
    
    798Weighted average shares and potential dilutive shares outstanding
    
    
    48,553
    
    
    
    47,260
    
    
    
    48,334
    
    
    
    47,130Net income per share  diluted
    
    $
    0.23
    
    
    $
    0.21
    
    
    $
    0.45
    
    
    $
    0.43
       -
    
    processing electronic payment transactions including electronic funds transfers (EFT),
automated clearinghouse (ACH) and other payment processing services;-
    
    processing and other activities associated with prepaid cards (such as payroll cards and
gift cards) following the acquisition of the Companys prepaid solutions business in July
2005;-
    
    providing electronic benefit transfer (EBT) services to government agencies; and-
    
    licensing, maintaining and supporting its EFT software and providing ATM management
services and other business process outsourcing (BPO) services related to payment
transactions.
    14




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net revenue:US Payments
    
    $
    68,757
    
    
    $
    68,149
    
    
    $
    136,417
    
    
    $
    142,788US Risk Management
    
    
    48,058
    
    
    
    46,359
    
    
    
    95,190
    
    
    
    96,245International
    
    
    21,975
    
    
    
    17,889
    
    
    
    41,225
    
    
    
    33,102Total net revenue
    
    
    138,790
    
    
    
    132,397
    
    
    
    272,832
    
    
    
    272,135Operating expenses before overhead:US Payments
    
    
    57,274
    
    
    
    59,345
    
    
    
    111,976
    
    
    
    124,596US Risk Management
    
    
    25,548
    
    
    
    27,735
    
    
    
    51,926
    
    
    
    57,255International
    
    
    21,995
    
    
    
    16,008
    
    
    
    43,129
    
    
    
    31,330Total operating expenses before overhead
    
    
    104,817
    
    
    
    103,088
    
    
    
    207,031
    
    
    
    213,181Allocated overhead:US Payments
    
    
    4,298
    
    
    
    3,628
    
    
    
    8,306
    
    
    
    7,555US Risk Management
    
    
    4,493
    
    
    
    3,327
    
    
    
    8,349
    
    
    
    6,643International
    
    
    2,428
    
    
    
    2,190
    
    
    
    4,590
    
    
    
    4,116Corporate
    
    
    5,505
    
    
    
    4,981
    
    
    
    10,676
    
    
    
    10,288Total allocated overhead
    
    
    16,724
    
    
    
    14,126
    
    
    
    31,921
    
    
    
    28,602Income (loss) from operations:US Payments
    
    
    7,185
    
    
    
    5,176
    
    
    
    16,135
    
    
    
    10,637US Risk Management
    
    
    18,017
    
    
    
    15,297
    
    
    
    34,915
    
    
    
    32,347International
    
    
    (2,448
    )
    
    
    (309
    )
    
    
    (6,494
    )
    
    
    (2,344
    )Corporate
    
    
    (5,505
    )
    
    
    (4,981
    )
    
    
    (10,676
    )
    
    
    (10,288
    )Income from operations
    
    $
    17,249
    
    
    $
    15,183
    
    
    $
    33,880
    
    
    $
    30,352
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Depreciation and amortization:US Payments
    
    $
    6,434
    
    
    $
    6,691
    
    
    $
    12,877
    
    
    $
    13,339US Risk Management
    
    
    2,833
    
    
    
    2,653
    
    
    
    5,676
    
    
    
    5,390International
    
    
    2,484
    
    
    
    2,147
    
    
    
    4,911
    
    
    
    4,212Corporate
    
    
    320
    
    
    
    363
    
    
    
    632
    
    
    
    691Total depreciation and amortization
    
    $
    12,071
    
    
    $
    11,854
    
    
    $
    24,096
    
    
    $
    23,632
 15




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006United States
    
    $
    116,949
    
    
    $
    114,508
    
    
    $
    231,907
    
    
    $
    239,033EMEA
    
    
    13,445
    
    
    
    12,088
    
    
    
    24,693
    
    
    
    21,228India
    
    
    4,646
    
    
    
    2,379
    
    
    
    9,463
    
    
    
    5,004Canada
    
    
    2,067
    
    
    
    1,803
    
    
    
    3,448
    
    
    
    4,405Latin America
    
    
    1,317
    
    
    
    1,542
    
    
    
    2,404
    
    
    
    2,258Asia
    
    
    366
    
    
    
    77
    
    
    
    917
    
    
    
    207Total consolidated
    
    $
    138,790
    
    
    $
    132,397
    
    
    $
    272,832
    
    
    $
    272,135
  June 30,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006United States
    
    $
    51,439
    
    
    $
    44,278India
    
    
    15,062
    
    
    
    14,869Canada
    
    
    554
    
    
    
    458United Kingdom and other
    
    
    459
    
    
    
    540Total consolidated
    
    $
    67,514
    
    
    $
    60,145
     16




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##### Table of Contents



Contractual cash obligations
  Payments Due by December 31,(in thousands)
    
    Total
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterLong-term debt
    
    $
    100,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    100,000Capital lease obligations
    
    
    5,447
    
    
    
    2,738
    
    
    
    2,539
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations1
    
    
    65,244
    
    
    
    9,847
    
    
    
    14,027
    
    
    
    7,866
    
    
    
    6,135
    
    
    
    5,621
    
    
    
    21,748Vendor obligations
    
    
    47,538
    
    
    
    19,261
    
    
    
    18,145
    
    
    
    4,730
    
    
    
    2,751
    
    
    
    2,651
    
    
    
    Other
    
    
    7,200
    
    
    
    7,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    225,429
    
    
    $
    39,046
    
    
    $
    34,711
    
    
    $
    12,766
    
    
    $
    8,886
    
    
    $
    8,272
    
    
    $
    121,748
 
 1
    
    Future minimum lease payments for non-cancelable operating
leases are presented net of minimum sublease rentals of $4.2 million
due in the future under non-cancelable subleases.  Future commercial commitments
  Commitment Expiration by Period1(in thousands)
    
    Total
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    ThereafterLetters of credit and other
    
    $
    1,052
    
    
    $
    1,028
    
    
    $
    24
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Performance bonds
    
    
    11,747
    
    
    
    1,075
    
    
    
    10,542
    
    
    
    95
    
    
    
    35
    
    
    
    
    
    
    
    Total commitments
    
    $
    12,799
    
    
    $
    2,103
    
    
    $
    10,566
    
    
    $
    95
    
    
    $
    35
    
    
    $
    
    
    
    $
    
 
 1
    
    Represents commercial commitment expirations during the last six months
of 2007 and the respective years ending December 31, 2008 through 2011, and
thereafter. India Tax Dispute.
 Acquisition holdbacks and earn-outs
  17




---



##### Table of Contents



Other commitments
    India Tax Dispute
     18




---



##### Table of Contents



Other contingencies
  
 ITEM 1A. RISK FACTORS
     
    
    the current market price of our common stock may reflect a market assumption that the
merger will occur, and a failure to complete the merger could result in a decline in the
market price of our common stock,
    
    the occurrence of any event, change or other circumstance that could give rise to the
termination of the merger agreement,
    
    the outcome of any legal proceedings that may be instituted against us and others
relating to the merger agreement,
 19




---



##### Table of Contents




    
    the inability to complete the merger due to the failure to obtain stockholder approval
or the failure to satisfy other conditions to consummate the merger,
    
    the failure of the merger to be completed for any other reason,
    
    certain costs relating to the merger, such as legal, accounting and certain financial
advisory fees, are payable by us whether or not the merger is completed,
    
    under certain circumstances specified in the merger agreement, if the merger is not
completed we may be required to pay Fidelity National Information Services, Inc. a
termination fee of $55 million and reimburse Fidelity National Information Services, Inc.
for up to $5 million of out-of-pocket expenses,
    
    there may be substantial disruption of our business and a distraction of our
management and employees from day-to-day operations, because matters related to the
merger may require substantial commitments of their time and resources,
    
    the impact of events beyond our control, and
    
    uncertainty about the effect of the merger may adversely affect our relationships with
our employees, customers, suppliers and other persons with whom we have business
relationships.
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    Our Business
   20




---



##### Table of Contents




    
    US Payments
    
    US Risk Management
    
    International
   US Payments
   US Risk Management
  21




---



##### Table of Contents



®
 International
  Key Events During the Three Months Ended June 30, 2007
 
    
    We entered into a definitive agreement with Fidelity National Information Services, Inc.
(FIS) that provides for FIS to acquire us for $36.50 per common share. The transaction is
valued at approximately $1.8 billion.
    
    We settled our tax disputes with India and terminated the letters of credit and bank
guarantees required to pursue our appeals of these assessments.
 Trends
  
    
    prepaid solution products are experiencing the highest growth rate of any payment card
product and this trend is expected to continue over the next several years, although we
expect to see some moderation in growth levels seen in this industry in future periods;
    
    increased fraud and regulatory requirements are driving sustained growth in the need for
risk management products in the US and abroad;
    
    there continues to be a migration from the use of traditional paper checks and cash to
electronic payments;
    
    larger financial institutions are developing increasing expectations regarding the
ability of their payment technology providers to deliver complex, comprehensive solutions
addressing all forms of electronic payment types across multiple geographies; and
    
    there has been an increase in regulatory and legislative activity regarding notice
requirements associated with incidents involving the misappropriation of consumer data,
causing participants in the financial service and other industries to devote additional
efforts to maintaining the security of their data files.
 Risks and Challenges
  
    
    There is no assurance that the Merger Agreement with FIS and the Merger will be adopted
and approved by our stockholders, and there is no assurance that the other conditions to
the completion of the Merger will be satisfied.
 22




---



##### Table of Contents




    
    Changes in India tax laws or in the interpretation or enforcement of those laws could
adversely affect our results of operations.
    
    If the security of our databases is compromised, our reputation could suffer and
customers may not be willing to use our products and services.
    
    Estimates of future financial results are inherently unreliable.
    
    Our ability to expand through acquisitions involves risks and may not be successful.
    
    Consolidation in the industries we serve may adversely affect our ability to sell our products and services.
    
    We are unable to predict the results of the purported class action lawsuits filed in Florida and Texas.
    
    We may be unable to protect our intellectual property rights or others may claim that we
are infringing on their intellectual property.
    
    We face intense competition in all areas of our business, and if we do not compete
effectively, our business will be harmed.
    
    If we experience system failures, the products and services we provide to our customers
could be delayed or interrupted, which could harm our business and reputation and result in
the loss of customers.
    
    Legislation or regulation could impair our ability to collect and use data, increase our
operating costs or otherwise harm our business.
    
    We may experience software defects, development delays and installation difficulties,
which could harm our business and reputation and expose us to potential liability.
    
    There are a number of risks associated with our international sales and operations that
could harm our business.
    
    We face termination and compliance risks with respect to our government contracts.
    
    Provisions in our charter documents and Delaware law may delay or prevent a change in
control of our Company that you may consider favorable.
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,(dollars in millions)
    
    2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % ChangeNet revenue
    
    $
    138.8
    
    
    $
    132.4
    
    
    
    5
    %
    
    $
    272.8
    
    
    $
    272.1
    
    
    
    0
    %Operating expenses:Processing, communication and
service costs
    
    
    35.4
    
    
    
    33.0
    
    
    
    7
    
    
    
    69.9
    
    
    
    68.3
    
    
    
    2Employee costs
    
    
    58.2
    
    
    
    55.7
    
    
    
    4
    
    
    
    115.8
    
    
    
    114.8
    
    
    
    1Depreciation and amortization
    
    
    12.1
    
    
    
    11.9
    
    
    
    2
    
    
    
    24.1
    
    
    
    23.6
    
    
    
    2Other operating costs
    
    
    15.9
    
    
    
    16.6
    
    
    
    (4
    )
    
    
    29.1
    
    
    
    35.0
    
    
    
    (17
    )Total operating expenses1
    
    
    121.5
    
    
    
    117.2
    
    
    
    4
    
    
    
    239.0
    
    
    
    241.8
    
    
    
    (1
    )Income from operations1
    
    
    17.2
    
    
    
    15.2
    
    
    
    13
    
    
    
    33.9
    
    
    
    30.4
    
    
    
    12Interest expense
    
    
    (1.4
    )
    
    
    (1.4
    )
    
    
    
    
    
    
    (2.8
    )
    
    
    (3.0
    )
    
    
    (7
    )Other income  net
    
    
    1.2
    
    
    
    1.2
    
    
    
    
    
    
    
    2.2
    
    
    
    2.0
    
    
    
    10Income before income taxes1
    
    
    17.0
    
    
    
    14.9
    
    
    
    14
    
    
    
    33.2
    
    
    
    29.3
    
    
    
    13Provision for income taxes
    
    
    (6.0
    )
    
    
    (5.2
    )
    
    
    15
    
    
    
    (11.6
    )
    
    
    (9.0
    )
    
    
    29Net income1
    
    $
    11.1
    
    
    $
    9.7
    
    
    
    14
    
    
    $
    21.6
    
    
    $
    20.4
    
    
    
    6
 
 1
    
    Amounts may not sum due to rounding. 23




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##### Table of Contents



Net Revenue
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,(dollars in millions)
    
    2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % ChangeUS PaymentsEFT processing
    
    $
    38.2
    
    
    $
    36.2
    
    
    
    6
    %
    
    $
    75.1
    
    
    $
    71.1
    
    
    
    6
    %Prepaid Solutions1
    
    
    17.7
    
    
    
    17.8
    
    
    
    (1
    )
    
    
    35.8
    
    
    
    39.6
    
    
    
    (10
    )Government services (EBT)
    
    
    9.8
    
    
    
    10.2
    
    
    
    (4
    )
    
    
    19.4
    
    
    
    20.3
    
    
    
    (4
    )Software sales and other services
    
    
    2.6
    
    
    
    3.2
    
    
    
    (19
    )
    
    
    5.1
    
    
    
    10.2
    
    
    
    (50
    )ATM Managed Services
    
    
    0.5
    
    
    
    0.7
    
    
    
    (29
    )
    
    
    1.0
    
    
    
    1.5
    
    
    
    (33
    )68.8
    
    
    
    68.1
    
    
    
    1
    
    
    
    136.4
    
    
    
    142.7
    
    
    
    (4
    )US Risk ManagementFinancial institution products
    
    
    39.0
    
    
    
    36.7
    
    
    
    6
    
    
    
    76.8
    
    
    
    74.7
    
    
    
    3Retail products
    
    
    4.7
    
    
    
    4.9
    
    
    
    (4
    )
    
    
    8.8
    
    
    
    9.5
    
    
    
    (7
    )BPO
    
    
    4.4
    
    
    
    4.8
    
    
    
    (8
    )
    
    
    9.6
    
    
    
    12.1
    
    
    
    (21
    )48.1
    
    
    
    46.4
    
    
    
    4
    
    
    
    95.2
    
    
    
    96.3
    
    
    
    (1
    )InternationalSoftware sales
    
    
    9.9
    
    
    
    9.1
    
    
    
    9
    
    
    
    17.8
    
    
    
    15.1
    
    
    
    18BPO
    
    
    8.0
    
    
    
    7.1
    
    
    
    13
    
    
    
    15.1
    
    
    
    15.0
    
    
    
    1Prepaid Solutions1
    
    
    2.0
    
    
    
    
    
    
    
    *
    
    
    
    4.4
    
    
    
    
    
    
    
    *EFT processing
    
    
    2.0
    
    
    
    1.7
    
    
    
    18
    
    
    
    3.9
    
    
    
    3.0
    
    
    
    3021.9
    
    
    
    17.9
    
    
    
    22
    
    
    
    41.2
    
    
    
    33.1
    
    
    
    24Total net revenue2
    
    $
    138.8
    
    
    $
    132.4
    
    
    
    5
    
    
    $
    272.8
    
    
    $
    272.1
    
    
    
    
 
 *
    
    Represents an increase or decrease in excess of 100%.1
    
    2007 results include a reclassification of Prepaid Solutions revenues from US
Payments to International.2
    
    Amounts may not sum due to rounding. US Payments
   US Risk Management
  24




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##### Table of Contents



International
  Business Segment Operating Income
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,(dollars in millions)
    
    2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % ChangeOperating income (loss)US Payments
    
    $
    7.2
    
    
    $
    5.2
    
    
    
    39
    %
    
    $
    16.1
    
    
    $
    10.6
    
    
    
    52
    %US Risk Management
    
    
    18.0
    
    
    
    15.3
    
    
    
    18
    
    
    
    34.9
    
    
    
    32.3
    
    
    
    8International
    
    
    (2.5
    )
    
    
    (0.3
    )
    
    
    *
    
    
    
    (6.5
    )
    
    
    (2.3
    )
    
    
    *Corporate
    
    
    (5.5
    )
    
    
    (5.0
    )
    
    
    (10
    )
    
    
    (10.7
    )
    
    
    (10.3
    )
    
    
    (4
    )Total operating income1
    
    $
    17.2
    
    
    $
    15.2
    
    
    
    13
    
    
    $
    33.9
    
    
    $
    30.4
    
    
    
    12
 
 *
    
    Represents an increase or decrease in excess of 100%.1
    
    Amounts may not sum due to rounding. US Payments
  US Risk Management
  International
  Corporate
  25




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##### Table of Contents



Operating
Expenses
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,(dollars in millions)
    
    2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % ChangeOperating expenses:Processing, communication and
service costs
    
    $
    35.4
    
    
    $
    33.0
    
    
    
    7
    %
    
    $
    69.9
    
    
    $
    68.3
    
    
    
    2
    %Employee costs
    
    
    58.2
    
    
    
    55.7
    
    
    
    4
    
    
    
    115.8
    
    
    
    114.8
    
    
    
    1Depreciation and amortization
    
    
    12.1
    
    
    
    11.9
    
    
    
    2
    
    
    
    24.1
    
    
    
    23.6
    
    
    
    2Other operating costs
    
    
    15.9
    
    
    
    16.6
    
    
    
    (4
    )
    
    
    29.1
    
    
    
    35.0
    
    
    
    (17
    )Total operating expenses1
    
    $
    121.5
    
    
    $
    117.2
    
    
    
    4
    
    
    $
    239.0
    
    
    $
    241.8
    
    
    
    (1
    )
 
 1
    
    Amounts may not sum due to rounding. Processing, communication and service costs
  Employee costs
   Depreciation and amortization
  Other operating costs
  Interest Expense
  Other
Income - net
  26




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##### Table of Contents



Provision for Income Taxes
   LIQUIDITY AND CAPITAL RESOURCES
 Overview
  June 30,
    
    December 31,(dollars in millions)
    
    2007
    
    2006
    
    % ChangeCash and cash equivalents
    
    $
    142.7
    
    
    $
    126.7
    
    
    
    13
    %Short-term investments
    
    
    19.0
    
    
    
    7.0
    
    
    
    *Long-term debt due within one year
    
    
    3.5
    
    
    
    4.4
    
    
    
    (20
    )Long-term debt
    
    
    101.9
    
    
    
    102.7
    
    
    
    (1
    )Stockholders equity
    
    
    576.5
    
    
    
    537.6
    
    
    
    7Net working capital
    
    
    219.5
    
    
    
    183.1
    
    
    
    20
 
 *
    
    Represents an increase or decrease in excess of 100% Financial Condition
   27




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##### Table of Contents



Sources and Uses of Cash
  Summary of Cash FlowsFor the Six MonthsEnded June 30,(in millions)
    
    2007
    
    
    2006Cash provided by operating activities
    
    $
    47.5
    
    
    $
    24.1Cash (used in) provided by investing activities
    
    
    (37.0
    )
    
    
    (23.1
    )Cash provided by financing activities
    
    
    5.4
    
    
    
    7.6Net increase in cash and cash equivalents
    
    $
    15.9
    
    
    $
    8.6
  
    
    investment in projects, including our Oracle STS initiative, intended to increase our
product delivery and operational effectiveness, enhance our product suite and the security
and redundancy of our systems; and
    
    funding our liquidity needs and the implementation of significant customer contracts.
  Operating Activities
   Investing Activities
  Financing Activities
  Long-term Debt
  28




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##### Table of Contents



Contractual Obligations and Commitments
  Payments Due by December 31,(in thousands)
    
    Total
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterLong-term debt
    
    $
    100,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    100,000Capital lease obligations
    
    
    5,447
    
    
    
    2,738
    
    
    
    2,539
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations1
    
    
    65,244
    
    
    
    9,847
    
    
    
    14,027
    
    
    
    7,866
    
    
    
    6,135
    
    
    
    5,621
    
    
    
    21,748Vendor obligations
    
    
    47,538
    
    
    
    19,261
    
    
    
    18,145
    
    
    
    4,730
    
    
    
    2,751
    
    
    
    2,651
    
    
    
    Other
    
    
    7,200
    
    
    
    7,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    225,429
    
    
    $
    39,046
    
    
    $
    34,711
    
    
    $
    12,766
    
    
    $
    8,886
    
    
    $
    8,272
    
    
    $
    121,748
 
 1
    
    Future minimum lease payments for non-cancelable operating
leases are presented net of minimum sublease rentals of $4.2 million
due in the future under non-cancelable subleases.    Commitment Expiration by Period1(in thousands)
    
    Total
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterLetters of credit and other
    
    $
    1,052
    
    
    $
    1,028
    
    
    $
    24
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Performance bonds
    
    
    11,747
    
    
    
    1,075
    
    
    
    10,542
    
    
    
    95
    
    
    
    35
    
    
    
    
    
    
    
    Total commitments
    
    $
    12,799
    
    
    $
    2,103
    
    
    $
    10,566
    
    
    $
    95
    
    
    $
    35
    
    
    $
    
    
    
    $
    
 
 1
    
    Represents commercial commitment expirations during the last six months
of 2007 and the respective years ending December 31, 2008 through 2011, and
thereafter. 29




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##### Table of Contents



FORWARD-LOOKING STATEMENTS 
   Assumptions
 
    
    Compounded annual growth rate of consolidated revenue and EPS is consistent with the
long-term growth objectives publicly stated by management of 10+% per annum.
    
    Operating margins as a percentage of revenue are consistent with the long-term
objectives publicly stated by management.
 30




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##### Table of Contents




    
    Database consolidation and platform consolidation initiatives (Oracle STS) were
assumed to be executed over the course of the projection period commencing in 2008. The
capital expenditures and operating expenses required to implement these initiatives are
included in the capital expenditures and operating expenses included in the business
segment plans. The aggregate cost savings realized from these initiatives were assumed to
be included in the business segment projections as part of the ongoing effort to reduce
operating costs to remain cost-competitive in eFunds markets. Savings resulting from
these initiatives that would otherwise cause our operating margins to exceed the long-term
margin objectives publicly stated by management (20%) were assumed to be invested in
additional product research and development activities.
    
    Capital expenditures are approximately $44 million in 2007, declining to approximately
$36 million in 2011. These capital expenditures are required to sustain and grow our
operations. Capital expenditure requirements decline over time due to the benefits
resulting from the execution of the Oracle STS initiative.
    
    Cash required to fund increases in working capital needs grows approximately $7 million
per year.
    
    Total debt remains at approximately our debt level as of December 31, 2006. Interest
rates are assumed to remain at 2007 levels during the projection years.
    
    Excess free cash flow is retained in the business to cover interest rate, restricted
cash, and working capital risks.
    
    Effective income tax rates were assumed to remain consistent with managements
published 2007 guidance of 35% during the projection period.
  eFunds-Prepared Projected Financial Information
 2007E
    
    2008E
    
    2009E
    
    2010E
    
    2011ERevenue
    
    $
    591.1
    
    
    $
    665.3
    
    
    $
    715.2
    
    
    $
    791.8
    
    
    $
    877.6Operating Profit
    
    $
    99.4
    
    
    $
    134.1
    
    
    $
    146.3
    
    
    $
    162.2
    
    
    $
    179.8Net Income
    
    $
    63.6
    
    
    $
    87.8
    
    
    $
    97.8
    
    
    $
    110.4
    
    
    $
    124.4Earnings Per Share
    
    $
    1.3
    
    
    $
    1.7
    
    
    $
    1.9
    
    
    $
    2.2
    
    
    $
    2.4EBITDA1
    
    $
    148.4
    
    
    $
    183.0
    
    
    $
    194.0
    
    
    $
    208.5
    
    
    $
    224.4
 
 1
    
    Represents net income from continuing operations before
interest, income taxes, depreciation and amortization.  2007E (in millions, exceptper share numbers)Revenue
    
    $
    591.9Operating Profit
    
    $
    99.6Net Income
    
    $
    64.3Earnings Per Share
    
    $
    1.3EBITDA
    
    $
    147.9
 Cautionary Statement Regarding Projected Financial Information
  31




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##### Table of Contents




    
    necessarily make numerous assumptions (as discussed above), many of which are beyond
the control of the Company and may not prove to have been, or may no longer be, accurate;
    
    do not reflect revised prospects for the Companys business, changes in general
business or economic conditions, or any other transaction or event that has occurred or
that may occur and that was not anticipated at the time the applicable projections were
prepared;
    
    are not necessarily indicative of current values or future performance, which may be
significantly more favorable or less favorable than as set forth above; and
    
    should not be regarded as a representation that they will be achieved.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
  32




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Nominee
    
    For
    
    WithheldRichard J. Almeida
    
    
    44,352,731
    
    
    
    165,563Richard J. Lehmann
    
    
    44,364,324
    
    
    
    153,970
   For
    
    Against
    
    Abstain44,251,270
    
    248,114
    
    18,910
 
 ITEM 5. OTHER INFORMATION CAUTIONARY STATEMENTS
  33




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##### Table of Contents



ITEM 6. EXHIBITS
  ExhibitNo.
    
    Description
    
    Method of filing2.1
    
    
    Agreement and Plan of Merger, dated as of June 26, 2007, by
and among eFunds Corporation, Fidelity National Information
Services, Inc. and Agamemnon Merger Corp. (incorporated by
reference to Exhibit 2.1 to the Companys Current Report on
Form 8-K filed with the Commission on June 28, 2007)
    
    *3.1
    
    
    Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 (the S-1) filed by the
Company with the Commission on April 4, 2000, Registration
No. 333-33992)
    
    *3.2
    
    
    Bylaws (incorporated by reference to Exhibit 3.2 to the S-1)
    
    *4.1
    
    
    Form of common stock certificate (incorporated by reference
to Exhibit 4.1 to Amendment No. 1 to the S-1 filed by the
Company with the Commission on May 15, 2000 (Amendment No.
1), Registration No. 333-33992)
    
    *4.2
    
    
    Form of Rights Agreement by and between the Company and
Rights Agent, (incorporated by reference to Exhibit 4.2 to
Amendment No. 1)
    
    *4.3
    
    
    Certificate of Designation of Series A Participating
Preferred Stock (incorporated by reference to Exhibit 4.3
to the Companys Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000)
    
    *31.1
    
    
    Section 302 Certification by Mr. Paul F. Walsh
    
    Filed herewith31.2
    
    
    Section 302 Certification by Mr. George W. Gresham
    
    Filed herewith32.1
    
    
    Section 906 Certification by Mr. Paul F. Walsh and Mr.
George W. Gresham
    
    Filed herewith
 
 *
    
    Incorporated by reference 34




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##### Table of Contents



SIGNATURES
  eFunds Corporation
(Registrant)Date: August 9, 2007
    /s/ Paul F. WalshPaul F. WalshChief Executive Officer and Chairman
(Principal Executive Officer)Date: August 9, 2007
    /s/ George W. GreshamGeorge W. GreshamChief Financial Officer
(Principal Financial and Accounting Officer) 35




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##### Table of Contents



Index to Exhibits
 Exhibit No.
    
    Description
    
    Page Number31.1
    
    
    Section 302 Certification by Mr. Paul F. Walsh31.2
    
    
    Section 302 Certification by Mr. George W. Gresham32.1
    
    
    Section 906 Certification by Mr. Paul F. Walsh and Mr. George W. Gresham
 36