##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 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 No. 001-34005
 
 Lender Processing Services, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    26-1547801(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)601 Riverside AvenueJacksonville, Florida
    
    32204(Address of principal executive offices)
    
    (Zip Code)
 (904) 854-5100  (Registrants telephone number, including area code)
  þ o
  Large accelerated filer o

   

   Accelerated filer
 o


   Non-accelerated filer þ
(Do not check if a smaller reporting company)


  Smaller reporting company o
  o þ




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##### 



PagePart I: FINANCIAL INFORMATIONItem 1. Consolidated and Combined Financial Statements (Unaudited)Consolidated and Combined Balance Sheets as of September 30, 2008 and December 31,
2007
    
    
    3Consolidated and Combined Statements of Earnings for the three and nine months ended
September 30, 2008 and 2007
    
    
    4Consolidated and Combined Statements of Comprehensive Earnings for the three and
nine months ended September 30, 2008 and 2007
    
    
    5Consolidated and Combined Statement of Stockholders Equity for the nine months
ended September 30, 2008
    
    
    6Consolidated and Combined Statements of Cash Flows for the nine months ended
September 30, 2008 and 2007
    
    
    7Notes to Consolidated and Combined Financial Statements (Unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosure About Market Risks
    
    
    33Item 4T. Controls and Procedures
    
    
    33Part II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    34Item 6. Exhibits
    
    
    37EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Part I: FINANCIAL INFORMATION
 
 Item 1. Consolidated and Combined Financial Statements (Unaudited)
 LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
 
 Consolidated and Combined Balance Sheets
 September 30,
    
    
    December2008 (Unaudited)
    
    
    31, 2007 (1)(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    49,417
    
    
    $
    39,566Trade receivables, net of allowance for doubtful accounts of $36.0
million and $20.3 million at September 30, 2008 and December 31,
2007
    
    
    371,098
    
    
    
    286,236Other receivables
    
    
    15,582
    
    
    
    7,971Due from affiliates
    
    
    1,082
    
    
    
    Prepaid expenses and other current assets
    
    
    22,387
    
    
    
    33,323Deferred income taxes, net
    
    
    34,640
    
    
    
    40,440Total current assets
    
    
    494,206
    
    
    
    407,536Property and equipment, net of accumulated depreciation and
amortization of $138.0 million and $126.1 million at September 30,
2008 and December 31, 2007
    
    
    92,473
    
    
    
    95,620Goodwill
    
    
    1,086,606
    
    
    
    1,078,154Other intangible assets, net of accumulated amortization of $263.0
million and $239.0 million at September 30, 2008 and December 31, 2007
    
    
    93,481
    
    
    
    118,129Computer software, net of accumulated amortization of $79.9 million
and $73.9 million at September 30, 2008 and December 31, 2007
    
    
    150,170
    
    
    
    150,372Other non-current assets
    
    
    133,049
    
    
    
    112,232Total assets
    
    $
    2,049,985
    
    
    $
    1,962,043LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    32,367
    
    
    $
    19,499Accrued salaries and benefits
    
    
    33,629
    
    
    
    22,908Recording and transfer tax liabilities
    
    
    16,708
    
    
    
    10,657Due to affiliates
    
    
    1,030
    
    
    
    Income taxes payable
    
    
    32,311
    
    
    
    Other accrued liabilities
    
    
    70,426
    
    
    
    57,053Current portion of long-term debt
    
    
    110,105
    
    
    
    Deferred revenues
    
    
    53,946
    
    
    
    58,076Total current liabilities
    
    
    350,522
    
    
    
    168,193Deferred revenues
    
    
    32,866
    
    
    
    23,146Deferred income taxes, net
    
    
    45,249
    
    
    
    55,196Long-term debt, excluding current portion
    
    
    1,438,625
    
    
    
    Other long-term liabilities
    
    
    21,439
    
    
    
    34,419Total liabilities
    
    
    1,888,701
    
    
    
    280,954Minority interest
    
    
    11,103
    
    
    
    10,050Stockholders Equity:Preferred stock $0.0001 par value; 50 million shares authorized,
none issued at September 30, 2008 or December 31, 2007
    
    
    
    
    
    
    Common stock $0.0001 par value; 500 million shares authorized, 95.3
million shares issued at September 30, 2008
    
    
    9
    
    
    
    FISs equity
    
    
    
    
    
    
    1,671,039Additional paid-in capital
    
    
    101,640
    
    
    
    Retained earnings
    
    
    48,738
    
    
    
    Accumulated other comprehensive earnings
    
    
    35
    
    
    
    Treasury stock $0.0001 par value; 7,000 shares at September 30, 2008
    
    
    (241
    )
    
    
    Total stockholders equity
    
    
    150,181
    
    
    
    1,671,039Total liabilities and stockholders equity
    
    $
    2,049,985
    
    
    $
    1,962,043
 
 (1)
    
    Derived from audited financial statements.  3




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LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
 
 Consolidated and Combined Statements of Earnings
 (Unaudited)
 Three months ended September 30,
    
    
    Nine months ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except per share data)
    
    
    (In thousands, except per share data)Processing and services revenues,
including $73.0 million and $55.5
million of revenues from related parties
for the three month periods and $175.0
million and $162.5 million of revenues
from related parties for the nine month
periods ended September 30, 2008 and
2007, respectively
    
    $
    472,678
    
    
    $
    425,464
    
    
    $
    1,385,784
    
    
    $
    1,251,902Cost of revenues, including related
party expenses of $1.9 million and $1.6
million for the three month periods and
$6.6 million and $4.2 million for the
nine month periods ended September 30,
2008 and 2007, respectively
    
    
    302,081
    
    
    
    261,655
    
    
    
    887,218
    
    
    
    788,478Gross profit
    
    
    170,597
    
    
    
    163,809
    
    
    
    498,566
    
    
    
    463,424Selling, general, and administrative
expenses, including related party
expenses, net of expense reimbursements,
of $2.8 million and $6.8 million for the
three month periods and $25.1 million
and $17.1 million for the nine month
periods ended September 30, 2008 and
2007, respectively
    
    
    59,746
    
    
    
    51,528
    
    
    
    178,745
    
    
    
    160,600Operating income
    
    
    110,851
    
    
    
    112,281
    
    
    
    319,821
    
    
    
    302,824Other income (expense):Interest income
    
    
    476
    
    
    
    427
    
    
    
    1,039
    
    
    
    1,172Interest expense
    
    
    (24,565
    )
    
    
    (34
    )
    
    
    (24,623
    )
    
    
    (111
    )Other income, net
    
    
    (5
    )
    
    
    
    
    
    
    277
    
    
    
    Total other income (expense)
    
    
    (24,094
    )
    
    
    393
    
    
    
    (23,307
    )
    
    
    1,061Earnings before income taxes,
equity in losses of
unconsolidated entity and
minority interest
    
    
    86,757
    
    
    
    112,674
    
    
    
    296,514
    
    
    
    303,885Provision for income taxes
    
    
    33,662
    
    
    
    43,610
    
    
    
    115,048
    
    
    
    117,620Earnings before equity in losses
of unconsolidated entity and
minority interest
    
    
    53,095
    
    
    
    69,064
    
    
    
    181,466
    
    
    
    186,265Equity in losses of unconsolidated entity
    
    
    (1,484
    )
    
    
    (794
    )
    
    
    (3,854
    )
    
    
    (2,514
    )Minority interest
    
    
    (330
    )
    
    
    (279
    )
    
    
    (1,053
    )
    
    
    (715
    )Net earnings
    
    $
    51,281
    
    
    $
    67,991
    
    
    $
    176,559
    
    
    $
    183,036Net earnings per share  basic (1)
    
    $
    0.54
    
    
    
    
    
    
    $
    1.85Weighted average shares outstanding 
basic (1)
    
    
    94,667
    
    
    
    
    
    
    
    95,551Net earnings per share  diluted (1)
    
    $
    0.54
    
    
    
    
    
    
    $
    1.84Weighted average shares outstanding 
diluted (1)
    
    
    95,223
    
    
    
    
    
    
    
    95,963
 
 (1)
    
    Earnings per share data for the three and nine months ended September 30, 2008 is reflected
on a pro forma basis (Note 3).  4




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##### Table of Contents



LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
 
 Consolidated and Combined Statements of Comprehensive Earnings
 (Unaudited)
 Three months ended September 30,
    
    
    Nine months ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)
    
    
    (In thousands)Net earnings
    
    $
    51,281
    
    
    $
    67,991
    
    
    $
    176,559
    
    
    $
    183,036Other comprehensive earnings:Unrealized (loss) gain on
other investments, net of
tax
    
    
    (111
    )
    
    
    
    
    
    
    139
    
    
    
    Unrealized loss on
interest rate swaps, net
of tax
    
    
    (104
    )
    
    
    
    
    
    
    (104
    )
    
    
    Other comprehensive earnings
    
    
    (215
    )
    
    
    
    
    
    
    35
    
    
    
    Comprehensive earnings
    
    $
    51,066
    
    
    $
    67,991
    
    
    $
    176,594
    
    
    $
    183,036
  5




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##### Table of Contents



LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
 
 Consolidated and Combined Statement of Stockholders Equity
 (In thousands)
 (Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    TotalCommon
    
    
    Common
    
    
    Paid-In
    
    
    Retained
    
    
    FISs
    
    
    Comprehensive
    
    
    Treasury
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Equity
    
    
    Earnings
    
    
    Shares
    
    
    Stock
    
    
    EquityBalances, December 31, 2007
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,671,039
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    1,671,039Net earnings (January 1,
2008 to June 20, 2008)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118,295
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118,295Net distribution to FIS
    
    
    
    
    
    
    
    
    
    
    11,405
    
    
    
    
    
    
    
    (121,677
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110,272
    )Capitalization of Lender
Processing Services, Inc.
    
    
    1
    
    
    
    
    
    
    
    1,667,268
    
    
    
    
    
    
    
    (1,667,657
    )
    
    
    389
    
    
    
    
    
    
    
    
    
    
    
    Issuance of
note payable to FIS
    
    
    
    
    
    
    
    
    
    
    (1,585,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,585,000
    )Net earnings (June 21, 2008
to September 30, 2008)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,264Distribution of common
stock (July 2, 2008)
    
    
    94,610
    
    
    
    9
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted stock
    
    
    515
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,526
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,526
    )Exercise of stock options
    
    
    138
    
    
    
    
    
    
    
    1,674
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (241
    )
    
    
    1,433Tax benefit associated with
exercise of stock options
    
    
    
    
    
    
    
    
    
    
    512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    512Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    5,790
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,790Unrealized loss on
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (250
    )
    
    
    
    
    
    
    
    
    
    
    (250
    )Unrealized loss on interest
rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (104
    )
    
    
    
    
    
    
    
    
    
    
    (104
    )Balances, September 30, 2008
    
    
    95,264
    
    
    $
    9
    
    
    $
    101,640
    
    
    $
    48,738
    
    
    $
    
    
    
    $
    35
    
    
    
    (7
    )
    
    $
    (241
    )
    
    $
    150,181
  6




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##### Table of Contents



LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
 
 Consolidated and Combined Statements of Cash Flows
 (Unaudited)
 Nine months ended September 30,2008
    
    
    2007(In thousands)Cash flows from operating activities:Net earnings
    
    $
    176,559
    
    
    $
    183,036Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization
    
    
    68,395
    
    
    
    77,852Amortization of debt issuance costs
    
    
    1,509
    
    
    
    Deferred income taxes, net
    
    
    3,968
    
    
    
    13,688Stock-based compensation cost
    
    
    14,910
    
    
    
    10,822Income tax benefit from exercise of stock options
    
    
    (512
    )
    
    
    Equity in losses of unconsolidated entity
    
    
    3,854
    
    
    
    2,514Minority interest
    
    
    1,053
    
    
    
    715Changes in assets and liabilities, net of effects of acquisitions:Net increase in trade receivables
    
    
    (84,167
    )
    
    
    (70,052
    )Net (increase) decrease in other receivables
    
    
    (7,612
    )
    
    
    23,603Net decrease (increase) in prepaid expenses and other assets
    
    
    8,631
    
    
    
    (6,953
    )Net increase in deferred contract costs
    
    
    (3,955
    )
    
    
    (18,776
    )Net decrease (increase) in deferred revenues
    
    
    5,342
    
    
    
    (24,272
    )Net increase in accounts payable, accrued liabilities and other liabilities
    
    
    59,317
    
    
    
    2,971Net cash provided by operating activities
    
    
    247,292
    
    
    
    195,148Cash flows from investing activities:Additions to property and equipment
    
    
    (14,657
    )
    
    
    (5,072
    )Additions to capitalized software
    
    
    (23,685
    )
    
    
    (29,412
    )Acquisitions, net of cash acquired
    
    
    (15,488
    )
    
    
    (37,305
    )Net cash used in investing activities
    
    
    (53,830
    )
    
    
    (71,789
    )Cash flows from financing activities:Borrowings
    
    
    25,700
    
    
    
    Debt service payments
    
    
    (61,993
    )
    
    
    Capitalized debt issuance costs
    
    
    (24,882
    )
    
    
    Stock options exercised
    
    
    1,433
    
    
    
    Income tax benefit from exercise of stock options
    
    
    512
    
    
    
    Dividends paid
    
    
    (9,526
    )
    
    
    Net distributions to FIS
    
    
    (114,855
    )
    
    
    (143,843
    )Net cash used in financing activities
    
    
    (183,611
    )
    
    
    (143,843
    )Net increase (decrease) in cash and cash equivalents
    
    
    9,851
    
    
    
    (20,484
    )Cash and cash equivalents, beginning of period
    
    
    39,566
    
    
    
    47,783Cash and cash equivalents, end of period
    
    $
    49,417
    
    
    $
    27,299Cash paid for interest
    
    $
    15,543
    
    
    $
    Cash paid for taxes
    
    $
    720
    
    
    $
    Non-cash contribution of stock compensation from FIS
    
    $
    9,120
    
    
    $
    10,822Non-cash contribution for Espiel acquisition
    
    $
    
    
    
    $
    6,000Non-cash redistribution of assets to FIS
    
    $
    (4,537
    )
    
    $
    Non-cash
exchange of FIS note
    
    $
    (1,585,000
    )
    
    $
    
  7




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##### Table of Contents



LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
 
 NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)
 Except as otherwise indicated or unless the context otherwise requires, all references to
LPS, we, the Company, or the registrant are to Lender Processing Services, Inc., a Delaware
corporation that was incorporated in December 2007 as a wholly-owned subsidiary of FIS, and its
subsidiaries; all references to FIS, the former parent, or the holding company are to
Fidelity National Information Services, Inc., a Georgia corporation formerly known as Certegy Inc.,
and its subsidiaries, that owned all of LPSs shares until July 2, 2008; all references to former
FIS are to Fidelity National Information Services, Inc., a Delaware corporation, and its
subsidiaries, prior to the Certegy merger described below; all references to old FNF are to
Fidelity National Financial, Inc., a Delaware corporation that owned a majority of FISs shares
through November 9, 2006; and all references to FNF are to Fidelity National Financial, Inc.
(formerly known as Fidelity National Title Group, Inc.), formerly a subsidiary of old FNF but now a
stand-alone company that remains a related entity from an accounting perspective.
 (1) Basis of Presentation
  Capitalization and Closing of Lender Processing Services, Inc. Spin-off Transaction and Issuance of
Common Stock Shares
    8




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##### Table of Contents



LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
   Separation from FIS and Principles of Consolidation and Combination
    Reporting Segments
   
    
    our mortgage processing services, which we conduct using our market-leading mortgage
servicing platform and our team of experienced support personnel based primarily at our
Jacksonville, Florida data center;
    
    our Desktop application, a workflow system that assists our customers in managing
business processes, which today is primarily used in connection with mortgage loan default
management, but which has broader applications;
    
    our other software and related service offerings, including our mortgage origination
software, our real estate closing and title insurance production software and our
middleware application which provides collaborative network connectivity among mortgage
industry participants; and
    
    our data and analytics businesses, the most significant of which are our alternative
property valuations business, which provides a range of valuations other than traditional
appraisals, our property records business, and our advanced analytic services, which assist
our customers in their loan marketing or loss mitigation efforts.
 9




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##### Table of Contents



LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
   
    
    settlement services, which consist of title agency services, in which we act as an
agent for title insurers, closing services, in which we assist in the closing of real
estate transactions, and lien recording and release services;
    
    appraisal services, which consist of traditional appraisal and appraisal management
services; and
    
    other origination services, which consist of real estate tax services, which provide
lenders with information about the tax status of a property, flood zone information, which
assists lenders in determining whether a property is in a federally designated flood zone,
and qualified exchange intermediary services for customers who seek to engage in qualified
exchanges under Section 1031 of the Internal Revenue Code.
  
    
    foreclosure management services, including access to a nationwide network of
independent attorneys, document preparation and recording and other services;
    
    property inspection and preservation services, designed to preserve the value of
properties securing defaulted loans; and
    
    asset management services, providing disposition services for our customers real
estate owned properties through a network of independent real estate brokers, attorneys and
other vendors to facilitate the transaction.
  (2) Related Party Transactions
  
    
    Agreements to provide title agency services.These agreements allow us to provide services to
existing customers through loan facilitation transactions, primarily with large national
lenders. The arrangement involves providing title agency services which result in the issuance
of title policies on behalf of title insurance underwriters owned by FNF and its subsidiaries.
Subject to certain early termination provisions for cause, each of these agreements may be
terminated upon five years prior written notice, which notice may not be given until after
the fifth anniversary of the effective date of each agreement, which ranges from July 2004
through September 2006 (thus effectively resulting in a minimum ten year term and a rolling
one-year term thereafter). Under these agreements, we earn commissions which, in aggregate,
are equal to approximately 88% of the total title premium from title policies that we place
with subsidiaries of FNF. We also perform similar functions in connection with trustee sale
guarantees, a form of title insurance that subsidiaries of FNF issue as part of the
foreclosure process on a defaulted loan.
 
    
    Agreements to provide software development and services.These agreements govern the fee
structure under which we are paid for providing software development and services to FNF which
consist of developing software for use in the title operations of FNF.
 10




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LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
 
    
    Arrangements to provide other data services.Under these arrangements, we are paid for
providing other data services to FNF, which consist primarily of data services required by the
title insurance operations.
  Three months ended
    
    
    Nine months endedSeptember 30
    
    
    September 302008
    
    
    2007
    
    
    2008
    
    
    2007Title agency commissions
    
    $
    56.8
    
    
    $
    34.7
    
    
    $
    123.6
    
    
    $
    103.0Software development revenue
    
    
    13.7
    
    
    
    15.9
    
    
    
    41.8
    
    
    
    44.6Other data related services
    
    
    2.5
    
    
    
    4.9
    
    
    
    9.6
    
    
    
    14.9Total revenues
    
    $
    73.0
    
    
    $
    55.5
    
    
    $
    175.0
    
    
    $
    162.5
 
    
    Title plant access and title production services.Under these agreements, we obtain access to
FNFs title plants for real property located in various states, including access to their
online databases, physical access to title records, use of space, image system use, and use of
special software, as well as other title production services. For the title plant access, we
pay monthly fees (subject to certain minimum charges) based on the number of title reports or
products ordered and other services received. For the title production services, we pay for
services based on the number of properties searched, subject to certain minimum use. The title
plant access agreement has a term of 3 years beginning in November 2006 and is automatically
renewable for successive 3 year terms unless either party gives 30 days prior written notice.
The title production services agreement can be terminated by either party upon 30 days prior
written notice.
 
    
    Agreements to provide administrative corporate support services to and from FIS and from FNF.
Historically, FNF has provided to FIS certain administrative corporate support services
relating to general management, statutory accounting, claims administration, and other
administrative support services. Prior to the spin-off, as a part of FIS, we also received
these administrative corporate support services from FNF. In connection with the spin-off, we
entered into a separate agreement with FNF for the provision of certain of these
administrative corporate support services by FNF. In addition, prior to the spin-off, FIS
provided general management, accounting, treasury, payroll, human resources, internal audit,
and other corporate administrative support services to us. In connection with the spin-off,
we entered into corporate services agreements with FIS under which we receive from FIS, and we
provide to FIS, certain transitional corporate support services. The pricing for all of these
services, both from FNF and FIS, and to FIS, is on an at-cost basis. The term of the
corporate services agreements is two years, subject to early termination because the services
are no longer required by the party receiving the services or upon mutual agreement of the
parties and subject to extension in certain circumstances. Management believes the methods
used to allocate the amounts included in these financial statements for corporate services are
reasonable.
 
    
    Corporate aircraft use agreements. Historically the Company has had access to certain
corporate aircraft owned by FNF and by FIS. In connection with the spin-off, the Company was
added as a co-obligor of the aircraft lease obligations for the aircraft leased by FIS, and
pursuant to an aircraft interchange agreement, LPS was included as an additional permitted
user of corporate aircraft leased by FNF. FNF will also continue to be a permitted user of
any aircraft leased by FIS or LPS. LPS was also added as a party to the aircraft cost sharing
agreement that was previously between FNF and FIS. Under this agreement, the Company and FIS
share the costs of one of FNFs aircraft that is used by all of the entities. The cost for
use of each aircraft under the aircraft interchange agreement is calculated on the same basis
and reflects the costs attributable to the time the aircraft is in use by the user. The
aircraft interchange agreement is terminable by any party on 30 days prior notice. The costs
under the aircraft cost sharing agreement are shared equally among FNF, FIS and the Company,
and the agreement remains in effect so long as FNF has possession or use of the aircraft (or
any replacement) but may be terminated at any time with the consent of FNF, FIS and the
Company.
 
    
    Real estate management, real estate lease and equipment lease agreements.In connection with
the spin-off and the transfer of the real property located at the Companys corporate
headquarters campus from FIS to LPS, the Company entered into new leases with FNF and FIS, as
tenants, as well as a new sublease with FNF, as landlord, for office space on the Companys
headquarters corporate campus. The Company also entered into a new
 11




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LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
 property management agreement with FNF for an office building located on the corporate campus
with the Companys headquarters. Included in the Companys expenses are amounts paid to FNF for
the lease of certain equipment and the sublease of certain office space, furniture and
furnishings at the Companys headquarters location. In addition, the Companys revenues include
amounts paid by FNF and FIS for the lease of office space located at the Companys corporate
headquarters and business operations as well as revenues for property management services for
FNF for the office building located on the corporate campus with the Companys headquarters.
    
    Licensing, cost sharing, business processing and other agreements.These agreements provide
for the reimbursement of certain amounts from FNF and FIS related to various licensing and
cost sharing agreements, as well as the payment of certain amounts by the Company to FNF or
its subsidiaries in connection with our use of certain intellectual property or other assets
of or services by FNF.
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Title plant information expense
    
    $
    1.9
    
    
    $
    1.6
    
    
    $
    6.6
    
    
    $
    4.2Corporate services
    
    
    3.5
    
    
    
    9.3
    
    
    
    31.1
    
    
    
    29.1Licensing, leasing and cost sharing agreements
    
    
    (0.7
    )
    
    
    (2.5
    )
    
    
    (6.0
    )
    
    
    (12.0
    )Total expenses
    
    $
    4.7
    
    
    $
    8.4
    
    
    $
    31.7
    
    
    $
    21.3
  Other related party transactions:
 Investment by FNF in Fidelity National Real Estate Solutions, Inc.
  (3) Unaudited Pro Forma Net Earnings per Share
 Earnings per Share
  12




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LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
   Three months ended
    
    
    Nine months endedSeptember 30, 2008
    
    
    September 30, 2008Pro forma weighted average shares outstanding  basic
    
    
    94,667
    
    
    
    95,551Plus: Pro forma common stock equivalent shares
    
    
    556
    
    
    
    412Pro forma weighted average shares outstanding  diluted
    
    
    95,223
    
    
    
    95,963Pro forma basic net earnings per share
    
    $
    0.54
    
    
    $
    1.85Pro forma diluted net earnings per share
    
    $
    0.54
    
    
    $
    1.84
  (4) Acquisitions
   (5) Long-Term Debt
  September 30,2008Term A Loan, secured, interest payable at LIBOR plus 2.50%
(6.43% at September 30, 2008), quarterly principal amortization,
maturing July 2013
    
    $
    665,000Term B Loan, secured, interest payable at LIBOR plus 2.50%
(6.43% at September 30, 2008), quarterly principal amortization,
maturing July 2014
    
    
    508,725Revolving Loan, secured, interest payable at LIBOR plus 2.50%
(Eurocurrency Borrowings), Fed-funds plus 2.50% (Swingline
Borrowings) or Prime plus 1.50% (Base Rate Borrowings) (6.43%,
4.53% or 6.50%, respectively, at September 30, 2008), maturing
July 2013. Total of $139.3 million unused (net of outstanding
letters of credit) as of September 30, 2008
    
    
    Senior unsecured notes, issued at par, interest payable
semiannually at 8.125%, due July 2016
    
    
    375,000Other promissory notes with various interest rates and maturities
    
    
    51,548,730Less current portion
    
    
    (110,105
    )Long-term debt, excluding current portion
    
    $
    1,438,625
 13




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LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
         14




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LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
      Interest Rate Swaps
  Notional Amount
    
    Bank Pays
    
    LPS paysAmortization Period
    
    (in millions)
    
    Variable Rate of(1)
    
    Fixed Rate of(2)July 31, 2008 to December 31, 2008
    
    $
    420.0
    
    
    1 Month LIBOR
    
    
    3.275
    %December 31, 2008 to March 31, 2009
    
    $
    400.0
    
    
    1 Month LIBOR
    
    
    3.275
    %March 31, 2009 to June 30, 2009
    
    $
    385.0
    
    
    1 Month LIBOR
    
    
    3.275
    %June 30, 2009 to September 30, 2009
    
    $
    365.0
    
    
    1 Month LIBOR
    
    
    3.275
    %September 30, 2009 to December 31, 2009
    
    $
    345.0
    
    
    1 Month LIBOR
    
    
    3.275
    %December 31, 2009 to March 31, 2010
    
    $
    330.0
    
    
    1 Month LIBOR
    
    
    3.275
    %March 31, 2010 to June 30, 2010
    
    $
    310.0
    
    
    1 Month LIBOR
    
    
    3.275
    %June 30, 2010 to July 31, 2010
    
    $
    290.0
    
    
    1 Month LIBOR
    
    
    3.275
    %
 
 (1)
    
    3.93% as of September 30, 2008.(2)
    
    In addition to the fixed rate paid under the swaps, we pay an applicable margin to our bank
lenders on the Term A Loan, Term B Loan and Revolving Loan equal to 2.50% as of September 30,
2008. 15




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LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
  Accounting for Derivative Instruments and Hedging Activities Fair Value Measurements
   2008
    
    $
    1,2802009
    
    
    145,1002010
    
    
    145,1002011
    
    
    145,1002012
    
    
    145,100Thereafter
    
    
    967,050Total
    
    $
    1,548,730
 (6) Income Taxes
 Accounting for Uncertainty in Income Taxes
 (7) Commitments and Contingencies
 Litigation
  
    
    These matters raise difficult and complicated factual and legal issues and are subject
to many uncertainties and complexities.
    
    In these matters, plaintiffs seek a variety of remedies including equitable relief in
the form of injunctive and other remedies and monetary relief in the form of compensatory
damages. In some cases, the monetary damages sought include punitive or treble damages.
None of the cases described below includes a specific statement as to the dollar amount of
damages demanded. Instead, each of the cases includes a demand in an amount to be proved at
trial.
    
    For the reasons specified above, it is not possible to make meaningful estimates of the
amount or range of loss that could result from these matters at this time. We review these
matters on an ongoing basis and follow the provisions of SFAS No. 5, Accounting for
Contingencies, when making accrual and disclosure decisions.
 
 16




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LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
 When assessing reasonably possible and probable outcomes, we base our decision on our
assessment of the ultimate outcome following all appeals.
    
    We intend to vigorously defend each of these matters, and we do not believe that the
ultimate disposition of these lawsuits will have a material adverse impact on our financial
position.
 National Title Insurance of New York, Inc. Litigation
  Harris, Ernest and Mattie v. FIS Foreclosure Solutions, Inc.
  Off-Balance Sheet Arrangements
  Escrow Arrangements
   17




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##### Table of Contents



LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
  (8) Stock Option Plans
      18




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LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
 Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Weighted
    
    Intrinsic Value at
    
    
    
    
    
    Average
    
    WeightedRemaining
    
    Average
    
    September 30,
    
    
    
    
    
    Remaining
    
    Average
    
    Intrinsic Value atRange of Exercise
    
    Number of
    
    Contractual
    
    Exercise
    
    2008
    
    Number of
    
    Contractual
    
    Exercise
    
    September 30, 2008Prices
    
    Options
    
    Life
    
    Price
    
    (in thousands)
    
    Options
    
    Life
    
    Price
    
    (in thousands)$
    0.00
    
    
    
    
    $
    13.67
    
    
    
    1,004,873
    
    
    
    5.88
    
    
    $
    12.64
    
    
    $
    17,968
    
    
    
    719,214
    
    
    
    5.65
    
    
    $
    12.23
    
    
    $
    13,15513.68
    
    
    
    
    
    20.00
    
    
    
    229,953
    
    
    
    3.74
    
    
    
    18.60
    
    
    
    2,742
    
    
    
    229,953
    
    
    
    3.74
    
    
    
    18.60
    
    
    
    2,74220.01
    
    
    
    
    
    25.00
    
    
    
    18,728
    
    
    
    2.36
    
    
    
    23.13
    
    
    
    138
    
    
    
    18,728
    
    
    
    2.36
    
    
    
    23.13
    
    
    
    13825.01
    
    
    
    
    
    28.00
    
    
    
    383,981
    
    
    
    4.71
    
    
    
    26.33
    
    
    
    1,610
    
    
    
    383,981
    
    
    
    4.71
    
    
    
    26.33
    
    
    
    1,61028.01
    
    
    
    
    
    30.00
    
    
    
    30,696
    
    
    
    3.29
    
    
    
    28.15
    
    
    
    73
    
    
    
    30,696
    
    
    
    3.29
    
    
    
    28.15
    
    
    
    7330.01
    
    
    
    
    
    33.00
    
    
    
    38,730
    
    
    
    6.90
    
    
    
    32.37
    
    
    
    
    
    
    
    22,961
    
    
    
    7.02
    
    
    
    32.23
    
    
    
    33.01
    
    
    
    
    
    35.00
    
    
    
    2,185,860
    
    
    
    6.33
    
    
    
    34.57
    
    
    
    
    
    
    
    228,800
    
    
    
    6.33
    
    
    
    34.51
    
    
    
    35.01
    
    
    
    
    
    36.00
    
    
    
    543,399
    
    
    
    6.23
    
    
    
    35.17
    
    
    
    
    
    
    
    150,150
    
    
    
    6.23
    
    
    
    35.17
    
    
    
    36.01
    
    
    
    
    
    37.00
    
    
    
    487,726
    
    
    
    5.18
    
    
    
    36.19
    
    
    
    
    
    
    
    153,043
    
    
    
    5.18
    
    
    
    36.15
    
    
    
    37.01
    
    
    
    
    
    38.00
    
    
    
    1,857,662
    
    
    
    6.22
    
    
    
    37.20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.00
    
    
    
    
    $
    38.00
    
    
    
    6,781,608
    
    
    
    5.94
    
    
    $
    31.12
    
    
    $
    22,531
    
    
    
    1,937,526
    
    
    
    5.27
    
    
    $
    22.67
    
    
    $
    17,718
  (9) Segment Information
   Technology,
    
    
    LoanData and
    
    
    Transaction
    
    
    CorporateAnalytics
    
    
    Services
    
    
    and Other
    
    
    TotalProcessing and services revenues
    
    $
    138,964
    
    
    $
    335,389
    
    
    $
    (1,675
    )
    
    $
    472,678Cost of revenues
    
    
    73,980
    
    
    
    229,804
    
    
    
    (1,703
    )
    
    
    302,081Gross profit
    
    
    64,984
    
    
    
    105,585
    
    
    
    28
    
    
    
    170,597Selling, general and administrative expenses
    
    
    15,790
    
    
    
    28,324
    
    
    
    15,632
    
    
    
    59,746Operating income
    
    $
    49,194
    
    
    $
    77,261
    
    
    $
    (15,604
    )
    
    $
    110,851Depreciation and amortization
    
    $
    15,230
    
    
    $
    6,669
    
    
    $
    1,920
    
    
    $
    23,819Total assets
    
    $
    1,061,519
    
    
    $
    810,559
    
    
    $
    177,907
    
    
    $
    2,049,985Goodwill
    
    $
    662,172
    
    
    $
    424,434
    
    
    $
    
    
    
    $
    1,086,606
  Technology,
    
    
    LoanData and
    
    
    Transaction
    
    
    CorporateAnalytics
    
    
    Services
    
    
    and Other
    
    
    TotalProcessing and services revenues
    
    $
    139,849
    
    
    $
    289,256
    
    
    $
    (3,641
    )
    
    $
    425,464Cost of revenues
    
    
    78,391
    
    
    
    184,595
    
    
    
    (1,331
    )
    
    
    261,655Gross profit
    
    
    61,458
    
    
    
    104,661
    
    
    
    (2,310
    )
    
    
    163,809Selling, general and administrative expenses
    
    
    16,319
    
    
    
    28,351
    
    
    
    6,858
    
    
    
    51,528Operating income
    
    $
    45,139
    
    
    $
    76,310
    
    
    $
    (9,168
    )
    
    $
    112,281Depreciation and amortization
    
    $
    16,958
    
    
    $
    7,279
    
    
    $
    1,242
    
    
    $
    25,479Total assets
    
    $
    1,047,239
    
    
    $
    716,479
    
    
    $
    151,970
    
    
    $
    1,915,688Goodwill
    
    $
    651,600
    
    
    $
    426,554
    
    
    $
    
    
    
    $
    1,078,154
 19




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LENDER PROCESSING SERVICES, INC.
AND SUBSIDIARIES AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Unaudited)  Continued
  Technology,
    
    
    LoanData and
    
    
    Transaction
    
    
    CorporateAnalytics
    
    
    Services
    
    
    and Other
    
    
    TotalProcessing and services revenues
    
    $
    416,532
    
    
    $
    977,966
    
    
    $
    (8,714
    )
    
    $
    1,385,784Cost of revenues
    
    
    229,487
    
    
    
    666,597
    
    
    
    (8,866
    )
    
    
    887,218Gross profit
    
    
    187,045
    
    
    
    311,369
    
    
    
    152
    
    
    
    498,566Selling, general and administrative expenses
    
    
    49,519
    
    
    
    86,153
    
    
    
    43,073
    
    
    
    178,745Operating income
    
    $
    137,526
    
    
    $
    225,216
    
    
    $
    (42,921
    )
    
    $
    319,821Depreciation and amortization
    
    $
    45,216
    
    
    $
    18,165
    
    
    $
    5,014
    
    
    $
    68,395
  Technology,
    
    
    LoanData and
    
    
    Transaction
    
    
    CorporateAnalytics
    
    
    Services
    
    
    and Other
    
    
    TotalProcessing and services revenues
    
    $
    424,234
    
    
    $
    830,185
    
    
    $
    (2,517
    )
    
    $
    1,251,902Cost of revenues
    
    
    238,699
    
    
    
    553,762
    
    
    
    (3,983
    )
    
    
    788,478Gross profit
    
    
    185,535
    
    
    
    276,423
    
    
    
    1,466
    
    
    
    463,424Selling, general and administrative expenses
    
    
    49,095
    
    
    
    83,104
    
    
    
    28,401
    
    
    
    160,600Operating income
    
    $
    136,440
    
    
    $
    193,319
    
    
    $
    (26,935
    )
    
    $
    302,824Depreciation and amortization
    
    $
    52,577
    
    
    $
    21,498
    
    
    $
    3,777
    
    
    $
    77,852
 20




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##### Table of Contents



Except as otherwise indicated or unless the context otherwise requires, all references to
LPS, we, the Company, or the registrant are to Lender Processing Services, Inc., a Delaware
corporation that was incorporated in December 2007 as a wholly-owned subsidiary of FIS, and its
subsidiaries; all references to FIS, the former parent, or the holding company are to
Fidelity National Information Services, Inc., a Georgia corporation formerly known as Certegy Inc.,
and its subsidiaries, that owned all of LPSs shares until July 2, 2008; all references to former
FIS are to Fidelity National Information Services, Inc., a Delaware corporation, and its
subsidiaries, prior to the Certegy merger described below; all references to old FNF are to
Fidelity National Financial, Inc., a Delaware corporation that owned a majority of FISs shares
through November 9, 2006; and all references to FNF are to Fidelity National Financial, Inc.
(formerly known as Fidelity National Title Group, Inc.), formerly a subsidiary of old FNF but now a
stand-alone company that remains a related entity from an accounting perspective.
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
  21




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##### Table of Contents




    
    our mortgage processing services, which we conduct using our market-leading mortgage
servicing platform and our team of experienced support personnel based primarily at our
Jacksonville, Florida data center;
    
    our Desktop application, a workflow system that assists our customers in managing
business processes, which today is primarily used in connection with mortgage loan default
management, but which has broader applications;
    
    our other software and related service offerings, including our mortgage origination
software, our real estate closing and title insurance production software and our
middleware application which provides collaborative network connectivity among mortgage
industry participants; and
    
    our data and analytics businesses, the most significant of which are our alternative
property valuations business, which provides a range of valuations other than traditional
appraisals, our property records business, and our advanced analytic services, which assist
our customers in their loan marketing or loss mitigation efforts.
   
    
    settlement services, which consist of title agency services, in which we act as an
agent for title insurers, closing services, in which we assist in the closing of real
estate transactions, and lien recording and release services;
    
    appraisal services, which consist of traditional appraisal and appraisal management
services; and
    
    other origination services, which consist of real estate tax services, which provide
lenders with information about the tax status of a property, flood zone information, which
assists lenders in determining whether a property is in a federally designated flood zone,
and qualified exchange intermediary services for customers who seek to engage in qualified
exchanges under Section 1031 of the Internal Revenue Code.
  
    
    foreclosure management services, including access to a nationwide network of
independent attorneys, document preparation and recording and other services;
    
    property inspection and preservation services, designed to preserve the value of
properties securing defaulted loans; and
    
    asset management services, providing disposition services for our customers real
estate owned properties through a network of independent real estate brokers, attorneys and
other vendors to facilitate the transaction.
   22




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##### Table of Contents



Recent Trends and Developments
  Critical Accounting Policies
  Transactions with Related Parties
  Factors Affecting Comparability
  
    
    On July 2, 2008, we borrowed $1,235.7 million under bank credit facilities, including
$25.7 million on a revolving credit facility. We also issued senior notes in an aggregate
principal amount of $375.0 million. Prior to July 2, 2008 we had no debt on the balance
sheet and an insignificant amount of interest expense on the income statement.
  23




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##### Table of Contents



Comparisons of three and nine months ended September 30, 2008 and 2007
 Consolidated Results of Operations  Unaudited
  % of Revenue
    
    
    VarianceThree months ended September 30,
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %(in millions)Processing and services revenues
    
    $
    472.7
    
    
    $
    425.5
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    47.2
    
    
    
    11.1
    %Cost of revenues
    
    
    302.1
    
    
    
    261.7
    
    
    
    63.9
    %
    
    
    61.5
    %
    
    
    (40.4
    )
    
    
    -15.4
    %Gross profit
    
    
    170.6
    
    
    
    163.8
    
    
    
    36.1
    %
    
    
    38.5
    %
    
    
    6.8
    
    
    
    4.2
    %Gross margin
    
    
    36.1
    %
    
    
    38.5
    %Selling, general and
administrative expenses
    
    
    59.7
    
    
    
    51.5
    
    
    
    12.6
    %
    
    
    12.1
    %
    
    
    (8.2
    )
    
    
    -15.9
    %Operating income
    
    $
    110.9
    
    
    $
    112.3
    
    
    
    23.5
    %
    
    
    26.4
    %
    
    $
    (1.4
    )
    
    
    -1.2
    %Operating margin
    
    
    23.5
    %
    
    
    26.4
    %
 % of Revenue
    
    
    VarianceNine months ended September 30,
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %(in millions)Processing and services revenues
    
    $
    1,385.8
    
    
    $
    1,251.9
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    133.9
    
    
    
    10.7
    %Cost of revenues
    
    
    887.3
    
    
    
    788.5
    
    
    
    64.0
    %
    
    
    63.0
    %
    
    
    (98.8
    )
    
    
    -12.5
    %Gross profit
    
    
    498.5
    
    
    
    463.4
    
    
    
    36.0
    %
    
    
    37.0
    %
    
    
    35.1
    
    
    
    7.6
    %Gross margin
    
    
    36.0
    %
    
    
    37.0
    %Selling, general and
administrative expenses
    
    
    178.7
    
    
    
    160.6
    
    
    
    12.9
    %
    
    
    12.8
    %
    
    
    (18.1
    )
    
    
    -11.3
    %Operating income
    
    $
    319.8
    
    
    $
    302.8
    
    
    
    23.1
    %
    
    
    24.2
    %
    
    $
    17.0
    
    
    
    5.6
    %Operating margin
    
    
    23.1
    %
    
    
    24.2
    %
 Processing and Services Revenues
  Cost of Revenues
  Gross Margin
  24




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##### Table of Contents



Selling General and Administrative Expenses
  Operating Income
  Segment Results of Operations  Technology, Data and Analytics  Unaudited
 % of Revenue
    
    
    VarianceThree months ended September 30,
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %(in millions)Processing and services revenues
    
    $
    139.0
    
    
    $
    139.8
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    (0.8
    )
    
    
    -0.6
    %Cost of revenues
    
    
    74.0
    
    
    
    78.4
    
    
    
    53.2
    %
    
    
    56.1
    %
    
    
    4.4
    
    
    
    5.6
    %Gross profit
    
    
    65.0
    
    
    
    61.4
    
    
    
    46.8
    %
    
    
    43.9
    %
    
    
    3.6
    
    
    
    5.9
    %Gross margin
    
    
    46.8
    %
    
    
    43.9
    %Selling, general and
administrative expenses
    
    
    15.8
    
    
    
    16.3
    
    
    
    11.4
    %
    
    
    11.7
    %
    
    
    0.5
    
    
    
    3.1
    %Operating income
    
    $
    49.2
    
    
    $
    45.1
    
    
    
    35.4
    %
    
    
    32.3
    %
    
    $
    4.1
    
    
    
    9.1
    %Operating margin
    
    
    35.4
    %
    
    
    32.3
    %
 % of Revenue
    
    
    VarianceNine months ended September 30,
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %(in millions)Processing and services revenues
    
    $
    416.5
    
    
    $
    424.2
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    (7.7
    )
    
    
    -1.8
    %Cost of revenues
    
    
    229.5
    
    
    
    238.7
    
    
    
    55.1
    %
    
    
    56.3
    %
    
    
    9.2
    
    
    
    3.9
    %Gross profit
    
    
    187.0
    
    
    
    185.5
    
    
    
    44.9
    %
    
    
    43.7
    %
    
    
    1.5
    
    
    
    0.8
    %Gross margin
    
    
    44.9
    %
    
    
    43.7
    %Selling, general and
administrative expenses
    
    
    49.5
    
    
    
    49.1
    
    
    
    11.9
    %
    
    
    11.6
    %
    
    
    (0.4
    )
    
    
    -0.8
    %Operating income
    
    $
    137.5
    
    
    $
    136.4
    
    
    
    33.0
    %
    
    
    32.2
    %
    
    $
    1.1
    
    
    
    0.8
    %Operating margin
    
    
    33.0
    %
    
    
    32.2
    %
 Processing and Services Revenues
  25




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Cost of Revenues
  Gross Margin
  Selling General and Administrative Expenses
  Operating Income
  26




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##### Table of Contents



Segment Results of Operations  Loan Transaction Services  Unaudited
 % of Revenue
    
    
    VarianceThree months ended September 30,
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %(in millions)Processing and services revenues
    
    $
    335.4
    
    
    $
    289.3
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    46.1
    
    
    
    15.9
    %Cost of revenues
    
    
    229.8
    
    
    
    184.6
    
    
    
    68.5
    %
    
    
    63.8
    %
    
    
    (45.2
    )
    
    
    -24.5
    %Gross profit
    
    
    105.6
    
    
    
    104.7
    
    
    
    31.5
    %
    
    
    36.2
    %
    
    
    0.9
    
    
    
    0.9
    %Gross margin
    
    
    31.5
    %
    
    
    36.2
    %Selling, general and
administrative expenses
    
    
    28.3
    
    
    
    28.4
    
    
    
    8.4
    %
    
    
    9.8
    %
    
    
    0.1
    
    
    
    0.4
    %Operating income
    
    $
    77.3
    
    
    $
    76.3
    
    
    
    23.0
    %
    
    
    26.4
    %
    
    $
    1.0
    
    
    
    1.3
    %Operating margin
    
    
    23.0
    %
    
    
    26.4
    %
 % of Revenue
    
    
    VarianceNine months ended September 30,
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %(in millions)Processing and services revenues
    
    $
    978.0
    
    
    $
    830.2
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    147.8
    
    
    
    17.8
    %Cost of revenues
    
    
    666.6
    
    
    
    553.8
    
    
    
    68.2
    %
    
    
    66.7
    %
    
    
    (112.8
    )
    
    
    -20.4
    %Gross profit
    
    
    311.4
    
    
    
    276.4
    
    
    
    31.8
    %
    
    
    33.3
    %
    
    
    35.0
    
    
    
    12.7
    %Gross margin
    
    
    31.8
    %
    
    
    33.3
    %Selling, general and
administrative expenses
    
    
    86.2
    
    
    
    83.1
    
    
    
    8.8
    %
    
    
    10.0
    %
    
    
    (3.1
    )
    
    
    -3.7
    %Operating income
    
    $
    225.2
    
    
    $
    193.3
    
    
    
    23.0
    %
    
    
    23.3
    %
    
    $
    31.9
    
    
    
    16.5
    %Operating margin
    
    
    23.0
    %
    
    
    23.3
    %
 Processing and Services Revenues
  Cost of Revenues
  Gross Margin
  27




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##### Table of Contents



Selling General and Administrative Expenses
  Operating Income
  Segment Results of Operations  Corporate and Other
  Liquidity and Capital Resources
 Cash Requirements
    Capital Expenditures
  Financing
  28




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29




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##### Table of Contents



Interest Rate Swaps
  Notional Amount
    
    Bank Pays
    
    LPS paysAmortization Period
    
    (in millions)
    
    Variable Rate of(1)
    
    Fixed Rate of(2)July 31, 2008 to December 31, 2008
    
    $
    420.0
    
    
    1 Month LIBOR
    
    
    3.275
    %December 31, 2008 to March 31, 2009
    
    $
    400.0
    
    
    1 Month LIBOR
    
    
    3.275
    %March 31, 2009 to June 30, 2009
    
    $
    385.0
    
    
    1 Month LIBOR
    
    
    3.275
    %June 30, 2009 to September 30, 2009
    
    $
    365.0
    
    
    1 Month LIBOR
    
    
    3.275
    %September 30, 2009 to December 31, 2009
    
    $
    345.0
    
    
    1 Month LIBOR
    
    
    3.275
    %December 31, 2009 to March 31, 2010
    
    $
    330.0
    
    
    1 Month LIBOR
    
    
    3.275
    %March 31, 2010 to June 30, 2010
    
    $
    310.0
    
    
    1 Month LIBOR
    
    
    3.275
    %June 30, 2010 to July 31, 2010
    
    $
    290.0
    
    
    1 Month LIBOR
    
    
    3.275
    %
 
 (1)
    
    3.93% as of September 30, 2008.(2)
    
    In addition to the fixed rate paid under the swaps, we pay an applicable margin to our bank
lenders on the Term A Loan, Term B Loan and Revolving Loan equal to 2.50% as of September 30,
2008.  Accounting for Derivative Instruments and Hedging Activities
 30




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##### Table of Contents



Fair Value Measurements
  Contractual Obligations
  2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    TotalLong-term debt
    
    $
    1,280
    
    
    $
    145,100
    
    
    $
    145,100
    
    
    $
    145,100
    
    
    $
    145,100
    
    
    $
    967,050
    
    
    $
    1,548,730Interest on long-term debt
    
    
    18,108
    
    
    
    97,533
    
    
    
    89,436
    
    
    
    85,243
    
    
    
    75,922
    
    
    
    172,566
    
    
    
    538,808Operating lease
payments
    
    
    5,285
    
    
    
    19,277
    
    
    
    11,474
    
    
    
    7,465
    
    
    
    5,274
    
    
    
    401
    
    
    
    49,176Deferred compensation (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,228
    
    
    
    20,228Total
    
    $
    24,673
    
    
    $
    261,910
    
    
    $
    246,010
    
    
    $
    237,808
    
    
    $
    226,296
    
    
    $
    1,160,245
    
    
    $
    2,156,942
 
 (1)
    
    Deferred compensation is presented as payable after 2012 because of the uncertain timing of
the payables. Off-Balance Sheet Arrangements
  Escrow Arrangements
   Recent Accounting Pronouncements
 Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities,
 31




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##### Table of Contents



The Hierarchy of Generally Accepted Accounting
Principles
 Disclosures about Derivative Instruments and
Hedging Activities-an amendment of FASB Statement No. 133.
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Business Combinations
 Effective Date of FASB
Statement No. 157
 32




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosure About Market Risks
    
 Item 4T. Controls and Procedures
   
 Part II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
    
    These matters raise difficult and complicated factual and legal issues and are subject
to many uncertainties and complexities.
    
    In these matters, plaintiffs seek a variety of remedies including equitable relief in
the form of injunctive and other remedies and monetary relief in the form of compensatory
damages. In some cases, the monetary damages sought include punitive or treble damages.
None of the cases described below includes a specific
 
 33




---



##### Table of Contents



statement as to the dollar amount of damages demanded. Instead, each of the cases includes a
demand in an amount to be proved at trial.
    
    For the reasons specified above, it is not possible to make meaningful estimates of the
amount or range of loss that could result from these matters at this time. We review these
matters on an ongoing basis and follow the provisions of Statement of Financial Accounting
Standards No. 5, Accounting for Contingencies, when making accrual and disclosure
decisions. When assessing reasonably possible and probable outcomes, we base our decision
on our assessment of the ultimate outcome following all appeals.
    
    We intend to vigorously defend each of these matters, and we do not believe that the
ultimate disposition of these lawsuits will have a material adverse impact on our financial
position.
 National Title Insurance of New York, Inc. Litigation
 Barton v. National Title Insurance of New York, Inc. et al. Gentilcore v.
National Title Insurance of New York, Inc. et al. Martinez v. National Title Insurance of New
York, Inc. et al. Swick v. National Title Insurance of New York, Inc. et al. Davis v. National Title Insurance
of New York, Inc. et al. Pepe v. National Title Insurance of New York, Inc. et al. Kornbluth v.
National Title Insurance of New York, Inc. et al. Lamb v. National Title Insurance of New York, Inc. et
al. Blackwell
v. National Title Insurance of New York, Inc. et al. Magana v. National Title Insurance of New York,
Inc. et al. Moynahan v. National Title Insurance of New York, Inc. et al. Romero v. National Title
Insurance of New York, Inc. et al.
 Harris, Ernest and Mattie v. FIS Foreclosure Solutions, Inc.
  
 Item 1A. Risk Factors
  34




---



##### Table of Contents



Consolidations and failures in the banking and financial services industry could adversely
affect our revenues by eliminating some of our existing and potential customers and making us more
dependent on a more limited number of customers.
     35




---



##### Table of Contents



Efforts by the government, financial institutions and other parties to address the troubled
mortgage market and the current economic and financial environment could affect us.
       36




---



##### Table of Contents



Low levels of lending and real estate activity reduces demand for certain of our services and
may adversely affect our results of operations.
   If we were to lose any of our largest customers, our results of operations could be
significantly affected.
  
 Item 6. Exhibits
  31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification by Chief Executive Officer of Periodic Financial Reports pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.32.2
    
    Certification by Chief Financial Officer of Periodic Financial Reports pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
 37




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##### Table of Contents



SIGNATURES
  Date: November 14, 2008
    Lender Processing Services, Inc.By:
    /s/ FRANCIS K. CHANFrancis K. ChanExecutive Vice
President and Chief
Financial Officer 38




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##### Table of Contents



LENDER PROCESSING SERVICES, INC.
 FORM 10-Q
 INDEX TO EXHIBITS
  ExhibitNo.
    
    Description31.1
    
    Certification of Jeffrey S. Carbiener, Chief Executive Officer of
Lender Processing Services, Inc., pursuant to rule 13a-14(a) or
15d-14(a) of the Exchange Act, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Francis K. Chan, Chief Financial Officer of
Lender Processing Services, Inc., pursuant to rule 13a-14(a) or
15d-14(a) of the Exchange Act, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Jeffrey S. Carbiener, Chief Executive Officer of
Lender Processing Services, Inc., pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.32.2
    
    Certification of Francis K. Chan, Chief Financial Officer of
Lender Processing Services, Inc., pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
 39