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Lender Processing Services, Inc. Reports Strong Fourth Quarter Earnings

Posted on: Wednesday, 11 February 2009, 15:01 CST

JACKSONVILLE, Fla., Feb. 11 /PRNewswire-FirstCall/ -- Lender Processing Services, Inc. (NYSE: LPS), a leading provider of integrated technology and services to the mortgage industry, today reported consolidated revenues of $476.1 million for the fourth quarter of 2008, an increase of 8.5% compared to the fourth quarter of 2007, and net earnings of $54.3 million or 57 cents per share.

Pro forma adjusted net earnings for the fourth quarter of 2008 were $60.9 million, or 64 cents per share, compared to $63.6 million, or 65 cents per share, in the fourth quarter of 2007. Pro forma adjusted net earnings in the current quarter were impacted by $3.4 million in after-tax incremental public company costs incurred as a result of LPS being spun-off on July 2, 2008. Also, these results include an adjustment for purchase amortization of 7 cents per share for the fourth quarter of 2008 while adjustments for the prior year quarter included pro forma interest expense of 15 cents per share and purchase amortization of 7 cents per share.

"LPS had a solid fourth quarter despite continued difficult market conditions and a tenuous macro-economic environment impacting some of its businesses. LPS, with its unique capabilities and market leading presence, remains well positioned to achieve its growth objectives in 2009 and beyond," said William P. Foley II, Chairman of LPS. "Fourth quarter earnings were in line with expectations. Our Default Services business continued to deliver strong results which more than offset a decline in our Loan Facilitation Services. Also, our Servicing and other technology businesses had another solid quarter," added Jeff Carbiener, President and CEO of LPS.

Operating income was $120.4 million in the quarter compared to $121.2 million in the fourth quarter of 2007.

Full year 2008 revenues of $1.9 billion were up 10.1% compared to 2007 and net earnings for full year 2008 were $230.9 million. Pro forma adjusted net earnings for full year 2008 were $230.7 million compared to $221.2 million in 2007.

Pro forma adjusted free cash flow (net cash provided by operating activities including the pro forma interest expense noted earlier, minus additions to property and equipment and capitalized software) for the year ended December 31, 2008 of $276.5 million was well above the $150.2 million for the same period in 2007, primarily due to lower working capital requirements.

Technology, Data and Analytics

Revenues for the segment were $149.1 million compared to $145.9 million in the fourth quarter of 2007 while operating income of $53.5 million was $1.7 million below the prior year quarter. Mortgage Processing revenues of $88.4 million were $4.5 million lower compared to the fourth quarter of 2007, primarily due to lower non-account based fees. Other TD&A revenues increased by 14.6% to $60.8 million compared to the prior year quarter, mainly due to strong growth in our Desktop application and Data and Analytics services. Overall operating income for the segment was lower primarily due to lower non- account based fees, partially offset by higher contributions from Desktop and Mortgage Processing.

Loan Transaction Services

Revenues for the segment increased by 11.6% to $329.9 million compared to the fourth quarter of 2007 while operating income increased by 14.8% to $82.9 million compared to the prior year period. Loan Facilitation Services revenues of $86.1 million declined 42.9% compared to the same period last year, mainly due to ongoing weakness in the refinance and origination markets, which translated into decreased appraisal and settlement service volumes and lower tax and other loan origination related revenues. Default Services, on the other hand, more than offset this decline with revenues of $243.7 million which increased 68.3% over the fourth quarter of 2007, primarily due to continued strength in the default market and our ability to gain market share. Overall operating income for the segment grew due to higher income in Default Services, partially offset by lower contributions from some of our loan origination related services like appraisal, settlement, tax and our property exchange business.

Other Items

Net corporate expenses totaled $16.1 million compared to $10.4 million in the fourth quarter of 2007 primarily due to the incremental public company costs of $5.6 million in the current quarter.

Outlook

"We had a strong finish in 2008 and while some of our markets and the broader economy in general pose challenges, LPS has a solid presence in each of its businesses and remains well-positioned to grow earnings in 2009," said Jeff Carbiener. "Building on the strong fourth quarter, we expect first quarter and full year 2009 adjusted earnings to be in the range of $0.60-$0.62 and $2.64-$2.74 per diluted share, respectively."

Use of Non-GAAP Financial Information

LPS reports several non-GAAP measures, including pro forma adjusted net earnings and pro forma adjusted free cash flow. The adjusted results exclude acquisition related amortization costs and include pro forma debt related interest expenses. Non-GAAP measures should be considered in conjunction with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings. A reconciliation of these non-GAAP measures to related GAAP measures is included in the attachments to this release.

Conference Call and Webcast

LPS will host a conference call to discuss these results on Wednesday, February 11, 2009, at 5:00 p.m. Eastern time. Interested parties are invited to listen to the live webcast by logging on to the Investor Relations section at www.lpsvcs.com. Supplemental materials will be available on the website. Those wishing to participate via the conference call may do so by calling 866- 823-5035. A replay of the webcast will be available on the website shortly after the call where it will be archived for one month. A replay of the conference call will be available through February 18, 2009 by dialing 888- 203-1112 (access code: 4530769).

To access a printer friendly version of this release and accompanying exhibits, go to http://www.lpsvcs.com/investor.

About Lender Processing Services

Lender Processing Services, Inc. (LPS) is a leading provider of integrated technology and services to the mortgage industry. LPS offers solutions that span the mortgage continuum, including lead generation, origination, servicing, workflow automation (Desktop), portfolio retention and default, augmented by the company's award-winning customer support and professional services. Approximately 50 percent of all U.S. mortgages are serviced using LPS's Mortgage Servicing Package (MSP). In fact, many of the nation's top servicers rely on MSP, including seven of the top 10 and 16 of the top 20. LPS also offers proprietary mortgage and real estate data and analytics for the mortgage and capital markets industries. For more information about LPS, please visit www.lpsvcs.com.

Forward Looking Statements

This press release contains forward-looking statements that involve a number of risks and uncertainties. Those forward-looking statements include all statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements are based on management's beliefs, as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to future economic performance and are not statements of historical fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties to which forward- looking statements are subject include, but are not limited to: changes in general economic, business and political conditions, including changes in the financial markets; the effects of our substantial leverage on our ability to make acquisitions and invest in our business; the elimination of existing and potential customers as a result of failures and consolidations in the banking and financial services industries; changes to the laws, rules and regulations that regulate our businesses as a result of the current economic and financial environment; the impact of adverse changes in the level of real estate activity on demand for certain of our services; our ability to adapt our services to changes in technology or the marketplace; risks associated with protecting information security and privacy; the impact of any potential defects, development delays, installation difficulties or system failures on our business and reputation; risks associated with our spin-off from Fidelity National Information Services, Inc. ("FIS"), including those relating to our new stand-alone public company status and limitations on our strategic and operating flexibility as a result of the tax-free nature of the spin-off; and other risks and uncertainties detailed in the "Statement Regarding Forward- Looking Information," "Risk Factors" and other sections of the Company's Form 10 and other filings with the Securities and Exchange Commission.

Exhibit A LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES AND AFFILIATES Consolidated and Combined Statements of Earnings (In thousands) Three Months Ended Year Ended December 31, December 31, 2008 2007 2008 2007 (Unaudited) (Unaudited) Processing and services revenues $476,125 $438,666 $1,861,909 $1,690,568 Cost of revenues 295,640 270,169 1,182,858 1,058,647 Selling, general and administrative expenses 60,112 47,259 238,857 207,859 Operating income 120,373 121,238 440,194 424,062 Other income (expense): Interest income 566 518 1,605 1,690 Interest expense (25,306) (35) (49,929) (146) Other expense, net (8,704) - (8,427) - Total other income (expense) (33,444) 483 (56,751) 1,544 Earnings before income taxes, equity in losses of unconsolidated entity and minority interest 86,929 121,721 383,443 425,606 Provision for income taxes 31,619 47,114 146,667 164,734 Earnings before equity in losses of unconsolidated entity and minority interest 55,310 74,607 236,776 260,872 Equity in losses of unconsolidated entity (833) (534) (4,687) (3,048) Minority interest (148) (304) (1,201) (1,019) Net earnings $54,329 $73,769 $230,888 $256,805 Exhibit B LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES AND AFFILIATES Condensed Consolidated and Combined Balance Sheets (In thousands) December 31, 2008 2007 (Unaudited) Assets Current assets: Cash and cash equivalents $125,966 $39,566 Trade receivables, net of allowance for doubtful accounts 344,848 286,236 Other receivables 17,393 7,971 Due from affiliates 2,713 - Prepaid expenses and other current assets 22,030 33,323 Deferred income taxes 52,646 40,440 Total current assets 565,596 407,536 Property and equipment, net of accumulated depreciation and amortization 95,542 95,620 Goodwill 1,091,056 1,078,154 Intangible assets, net of accumulated amortization 83,489 118,129 Computer software, net of accumulated amortization 157,539 150,372 Other non-current assets 122,300 112,232 Total assets $2,115,522 $1,962,043 Liabilities and Stockholders' Equity Current liabilities: Trade accounts payable $31,720 $19,499 Accrued salaries and benefits 36,492 22,908 Recording and transfer tax liabilities 14,639 10,657 Due to affiliates 1,573 - Other accrued liabilities 101,612 57,053 Current portion of long-term debt 145,101 - Deferred revenues 51,628 58,076 Total current liabilities 382,765 168,193 Deferred revenues 40,343 23,146 Deferred income taxes 53,329 55,196 Long-term debt, less current portion 1,402,350 - Other long-term liabilities 39,217 34,419 Total liabilities 1,918,004 280,954 Minority interest 11,252 10,050 Stockholders' equity: Preferred stock $0.0001 par value; 50 million shares authorized, none issued at December 31, 2008 or 2007 - - Common stock $0.0001 par value; 500 million shares authorized, 95.3 million shares issued at December 31, 2008 9 - Treasury stock $0.0001 par value; 19,870 shares at December 31, 2008 (582) - Additional paid-in capital 106,966 - Retained earnings 93,540 1,671,039 Accumulated other comprehensive earnings (13,667) - Total stockholders' equity 186,266 1,671,039 Total liabilities and stockholders' equity $2,115,522 $1,962,043 Exhibit C LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES AND AFFILIATES Consolidated and Combined Statements of Cash Flows (In thousands) Year Ended December 31, 2008 2007 (Unaudited) Cash flows from operating activities: Net earnings $230,888 $256,805 Adjustment to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 93,416 102,607 Amortization of debt issuance costs 3,002 - Deferred income taxes (28) 12,840 Stock-based compensation cost 21,513 14,057 Income tax benefit from exercise of stock options (533) - Equity in losses of unconsolidated entity 4,687 3,048 Minority interest 1,201 1,019 Changes in assets and liabilities, net of effects from acquisitions Net increase in trade receivables (57,918) (99,234) Net (increase) decrease in other receivables (9,423) 28,325 Net decrease (increase) in prepaid expenses and other assets 11,666 (48,556) Net decrease (increase) in deferred revenue 10,501 (29,946) Net decrease in accounts payable, accrued liabilities and other liabilities 54,888 42,029 Net cash provided by operating activities 363,860 282,994 Cash flows from investing activities: Additions to property and equipment (23,012) (20,754) Additions to capitalized software (39,276) (49,798) Acquisitions, net of cash acquired (19,938) (37,305) Net cash used in investing activities (82,226) (107,857) Cash flows from financing activities: Borrowings 25,700 - Debt service payments (63,272) - Capitalized debt issuance costs (25,735) - Net distributions to FIS (114,855) (183,354) Stock options exercised 1,448 - Income tax benefit from exercise of stock options 533 - Dividends paid (19,053) - Net cash used in financing activities (195,234) (183,354) Net increase (decrease) in cash and cash equivalents 86,400 (8,217) Cash and cash equivalents, at beginning of period 39,566 47,783 Cash and cash equivalents, at end of period $125,966 $39,566 Cash paid for interest $32,330 $- Cash paid for income taxes $62,229 $- Non-cash contribution relating to stock compensation $9,120 $14,057 Non-cash contribution for Espiel acquisition $- $6,000 Non-cash redistribution of assets to FIS $(6,191) $- Non-cash exchange of FIS note $(1,585,000) $- Exhibit D LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES AND AFFILIATES SUPPLEMENTAL FINANCIAL INFORMATION - UNAUDITED (In thousands) Year Ended December 31, Quarter Ended 2008 2007 12/31/2008 9/30/2008 6/30/2008 1. Revenues Technology, Data and Analytics (TD&A): Mortgage Processing $334,184 $339,670 $88,364 $83,592 $82,062 Other TD&A 231,466 230,476 60,754 55,372 59,682 Total 565,650 570,146 149,118 138,964 141,744 Loan Transaction Services: Loan Facilitation Services 455,992 652,858 86,118 93,545 125,124 Default Services 851,828 473,021 243,736 241,844 197,223 Total 1,307,820 1,125,879 329,854 335,389 322,347 Corporate and Other (11,561) (5,457) (2,847) (1,675) (3,711) Total Revenue $1,861,909 $1,690,568 $476,125 $472,678 $460,380 Revenue Growth from Prior Year Period Technology, Data and Analytics: Mortgage Processing -1.6% 4.7% -4.9% 2.9% -1.4% Other TD&A 0.4% 3.6% 14.6% -5.5% 1.5% Total -0.8% 4.2% 2.2% -0.6% -0.2% Loan Transaction Services: Loan Facilitation Services -30.2% 4.8% -42.9% -43.8% -29.6% Default Services 80.1% 70.3% 68.3% 97.1% 89.7% Total 16.2% 25.0% 11.6% 15.9% 14.4% Corporate and Other 111.9% -114.7% -3.2% -54.0% -380.3% Total Revenue 10.1% 13.8% 8.5% 11.1% 8.3% 2. Depreciation and Amortization Depreciation and Amortization $51,154 $57,268 $13,714 $12,613 $11,306 Purchase Price Amortization 40,018 43,389 10,711 10,627 8,980 Other Amortization 2,244 1,950 596 579 594 Total Depreciation and Amortization $93,416 $102,607 $25,021 $23,819 $20,880 3. Stock Compensation Expense Stock Compensation Expense, Excluding Acceleration Charges $21,375 $14,057 $6,603 $5,790 $4,295 Stock Acceleration Expense 138 - - - 138 Total Stock Compensation Expense $21,513 $14,057 $6,603 $5,790 $4,433 Quarter Ended 3/31/2008 12/31/2007 9/30/2007 6/30/2007 3/31/2007 1. Revenues Technology, Data and Analytics (TD&A): Mortgage Processing $80,166 $92,883 $81,256 $83,233 $82,298 Other TD&A 55,658 53,029 58,593 58,776 60,078 Total 135,824 145,912 139,849 142,009 142,376 Loan Transaction Services: Loan Facilitation Services 151,205 150,889 166,546 177,710 157,713 Default Services 169,025 144,805 122,710 103,967 101,539 Total 320,230 295,694 289,256 281,677 259,252 Corporate and Other (3,328) (2,940) (3,641) 1,324 (200) Total Revenue $452,726 $438,666 $425,464 $425,010 $401,428 Revenue Growth from Prior Year Period Technology, Data and Analytics: Mortgage Processing -2.6% 13.9% -1.9% 5.8% 1.0% Other TD&A -7.4% -9.0% 5.6% 2.8% 16.8% Total -4.6% 4.4% 1.1% 4.5% 7.1% Loan Transaction Services: Loan Facilitation Services -4.1% -6.2% 1.2% 20.8% 4.8% Default Services 66.5% 72.1% 68.8% 69.2% 70.6% Total 23.5% 20.7% 21.9% 35.0% 23.4% Corporate and Other n/m -140.4% -140.3% -89.4% -102.4% Total Revenue 12.8% 11.9% 10.6% 19.0% 14.3% 2. Depreciation and Amortization Depreciation and Amortization $13,521 $12,831 $14,207 $15,484 $14,746 Purchase Price Amortization 9,700 11,428 10,670 10,316 10,975 Other Amortization 475 496 602 452 400 Total Depreciation and Amortization $23,696 $24,755 $25,479 $26,252 $26,121 3. Stock Compensation Expense Stock Compensation Expense, Excluding Acceleration Charges $4,687 $3,235 $3,607 $3,645 $3,570 Stock Acceleration Expense - - - - - Total Stock Compensation Expense $4,687 $3,235 $3,607 $3,645 $3,570 Exhibit E LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES AND AFFILIATES NON-GAAP FINANCIAL INFORMATION - UNAUDITED (In thousands, except per share data) Year Ended December 31, Quarter Ended 2008 2007 12/31/2008 9/30/2008 6/30/2008 1. EBIT - Consolidated Revenue $1,861,909 $1,690,568 $476,125 $472,678 $460,380 Cost of Sales 1,182,858 $1,058,647 295,640 302,081 294,963 Selling, General and Administrative Expenses 238,857 207,859 60,112 59,746 60,782 Operating Income 440,194 424,062 120,373 110,851 104,635 Less Non-recurring Charges: Restructuring Costs 2,353 (4,235) - - 2,353 LPS Spin Related Costs 2,963 - - - 1,960 Acceleration of Performance- Based Shares 138 - - - 138 EBIT, as adjusted $445,648 $419,827 $120,373 $110,851 $109,086 EBIT Margin, as adjusted 23.9% 24.8% 25.3% 23.5% 23.7% Depreciation and Amortization $93,416 $102,607 $25,021 $23,819 $20,880 2. EBIT - Technology, Data and Analytics Revenue $565,650 $570,146 $149,118 $138,964 $141,744 Cost of Sales 309,969 $313,747 80,482 73,980 81,397 Selling, General and Administrative Expenses 64,640 64,770 15,121 15,790 17,471 Operating Income 191,041 191,629 53,515 49,194 42,876 Less Non-recurring Charges: Restructuring Costs 2,178 - - - 2,178 LPS Spin Related Costs - - - - - Acceleration of Performance- Based Shares - - - - - EBIT, as adjusted $193,219 $191,629 $53,515 $49,194 $45,054 EBIT Margin, as adjusted 34.2% 33.6% 35.9% 35.4% 31.8% Depreciation and Amortization $61,206 $68,720 $15,990 $15,230 $13,971 3. EBIT - Loan Transaction Services Revenue $1,307,820 $1,125,879 $329,854 $335,389 $322,347 Cost of Sales 885,410 $750,174 218,813 229,804 217,337 Selling, General and Administrative Expenses 114,281 110,132 28,128 28,324 29,366 Operating Income 308,129 265,573 82,913 77,261 75,644 Less Non-recurring Charges: Restructuring Costs 163 - - - 163 LPS Spin Related Costs - - - - - Acceleration of Performance- Based Shares - - - - - EBIT, as adjusted $308,292 $265,573 $82,913 $77,261 $75,807 EBIT Margin, as adjusted 23.6% 23.6% 25.1% 23.0% 23.5% Depreciation and Amortization $25,210 $28,752 $7,045 $6,669 $5,310 4. EBIT - Corporate and Other Revenue $(11,561) $(5,457) $(2,847) $(1,675) $(3,711) Cost of Sales (12,521) $(5,274) (3,655) (1,703) (3,771) Selling, General and Administrative Expenses 59,936 32,957 16,863 15,632 13,945 Operating Income (58,976) (33,140) (16,055) (15,604) (13,885) Less Non-recurring Charges: Restructuring Costs 12 (4,235) - - 12 LPS Spin Related Costs 2,963 - - - 1,960 Acceleration of Performance- Based Shares 138 - - - 138 EBIT, as adjusted $(55,863) $(37,375) $(16,055) $(15,604) $(11,775) Depreciation and Amortization $7,000 $5,135 $1,986 $1,920 $1,599 5. Net Earnings - Reconciliation Net Earnings $230,888 $256,805 $54,329 $51,281 $63,546 Less Non-recurring Charges: Restructuring Costs, net of tax 1,452 (2,596) - - 1,440 LPS Spin Related Costs, net of tax 1,828 - - - 1,200 Acceleration of Performance- Based Shares, net of tax 85 - - - 84 Impact of change in tax rate on non-recurring items (223) - (223) - - Net Earnings, excluding non- recurring items 234,030 254,209 54,106 51,281 66,270 Pro Forma Interest Expense, net of tax (1) 28,131 59,623 - - 13,951 Pro Forma Net Earnings 205,899 194,586 54,106 51,281 52,319 Purchase Price Amortization, net of tax 24,751 26,595 6,815 6,504 5,496 Pro Forma Adjusted Net Earnings $230,650 $221,181 $60,921 $57,785 $57,815 Pro Forma Net Earnings Per Share $2.15 $1.99 $0.57 $0.54 $0.55 Pro Forma Adjusted Net Earnings Per Share (2) $2.41 $2.26 $0.64 $0.61 $0.61 Pro Forma Diluted Weighted Average Shares (2) 95,754 97,697 95,126 95,223 95,070 6. Cashflow - Reconciliation Cash Flows from Operating Activities: Net Earnings $230,888 $256,805 $54,329 $51,281 $63,546 Less Non- recurring Charges: Restructuring Costs, net of tax 1,452 (2,596) - - 1,440 LPS Spin Related Costs, net of tax 1,828 - - - 1,200 Impact of change in tax rate on non- recurring items (223) - (223) - - Net Earnings, excluding non-recurring items 233,945 254,209 54,106 51,281 66,186 Pro Forma Interest Expense, net of tax 28,131 59,623 - - 13,951 Pro Forma Adjusted Net Earnings 205,814 194,586 54,106 51,281 52,235 Adjustments to reconcile net earnings to net cash provided by operating activities: Non-cash adjustments 123,258 133,571 30,081 32,420 18,262 Working capital adjustments 9,714 (107,382) 32,158 26,908 (91,474) Net cash provided by (used in) operating activities 338,786 220,775 116,345 110,609 (20,977) Capital expenditures included in investing activities (62,288) (70,552) (23,946) (13,205) (14,344) Pro Forma Adjusted Net Free Cashflow $276,498 $150,223 $92,399 $97,404 $(35,321) Quarter Ended 3/31/2008 12/31/2007 9/30/2007 6/30/2007 3/31/2007 1. EBIT - Consolidated Revenue $452,726 $438,666 $425,464 $425,010 $401,428 Cost of Sales 290,174 270,169 261,655 269,042 257,781 Selling, General and Administrative Expenses 58,217 47,259 51,528 55,603 53,469 Operating Income 104,335 121,238 112,281 100,365 90,178 Less Non-recurring Charges: Restructuring Costs - (4,235) - - - LPS Spin Related Costs 1,003 - - - - Acceleration of Performance-Based Shares - - - - - EBIT, as adjusted $105,338 $117,003 $112,281 $100,365 $90,178 EBIT Margin, as adjusted 23.3% 26.7% 26.4% 23.6% 22.5% Depreciation and Amortization $23,696 $24,755 $25,479 $26,252 $26,121 2. EBIT - Technology, Data and Analytics Revenue $135,824 $145,912 $139,849 $142,009 $142,376 Cost of Sales 74,110 75,048 78,391 78,187 82,121 Selling, General and Administrative Expenses 16,258 15,675 16,319 16,954 15,822 Operating Income 45,456 55,189 45,139 46,868 44,433 Less Non-recurring Charges: Restructuring Costs - - - - - LPS Spin Related Costs - - - - - Acceleration of Performance-Based Shares - - - - - EBIT, as adjusted $45,456 $55,189 $45,139 $46,868 $44,433 EBIT Margin, as adjusted 33.5% 37.8% 32.3% 33.0% 31.2% Depreciation and Amortization $16,015 $16,143 $16,958 $17,437 $18,182 3. EBIT - Loan Transaction Services Revenue $320,230 $295,694 $289,256 $281,677 $259,252 Cost of Sales 219,456 196,412 184,595 192,174 176,993 Selling, General and Administrative Expenses 28,463 27,028 28,351 27,711 27,042 Operating Income 72,311 72,254 76,310 61,792 55,217 Less Non-recurring Charges: Restructuring Costs - - - - - LPS Spin Related Costs - - - - - Acceleration of Performance-Based Shares - - - - - EBIT, as adjusted $72,311 $72,254 $76,310 $61,792 $55,217 EBIT Margin, as adjusted 22.6% 24.4% 26.4% 21.9% 21.3% Depreciation and Amortization $6,186 $7,254 $7,279 $7,449 $6,770 4. EBIT - Corporate and Other Revenue $(3,328) $(2,940) $(3,641) $1,324 $(200) Cost of Sales (3,392) (1,291) (1,331) (1,319) (1,333) Selling, General and Administrative Expenses 13,496 4,556 6,858 10,938 10,605 Operating Income (13,432) (6,205) (9,168) (8,295) (9,472) Less Non-recurring Charges: Restructuring Costs - (4,235) - - - LPS Spin Related Costs 1,003 - - - - Acceleration of Performance-Based Shares - - - - - EBIT, as adjusted $(12,429) $(10,440) $(9,168) $(8,295) $(9,472) Depreciation and Amortization $1,495 $1,358 $1,242 $1,366 $1,169 5. Net Earnings - Reconciliation Net Earnings $61,732 $73,769 $67,991 $60,506 $54,539 Less Non-recurring Charges: Restructuring Costs, net of tax - (2,596) - - - LPS Spin Related Costs, net of tax 614 - - - - Acceleration of Performance-Based Shares, net of tax - - - - - Impact of change in tax rate on non- recurring items - - - - - Net Earnings, excluding non- recurring items 62,346 71,173 67,991 60,506 54,539 Pro Forma Interest Expense, net of tax (1) 14,180 14,588 14,805 15,326 14,904 Pro Forma Net Earnings 48,166 56,585 53,186 45,180 39,635 Purchase Price Amortization, net of tax 5,936 7,005 6,540 6,323 6,727 Pro Forma Adjusted Net Earnings $54,102 $63,590 $59,726 $51,503 $46,362 Pro Forma Net Earnings Per Share $0.49 $0.58 $0.54 $0.46 $0.41 Pro Forma Adjusted Net Earnings Per Share (2) $0.55 $0.65 $0.61 $0.53 $0.47 Pro Forma Diluted Weighted Average Shares (2) 97,597 97,697 97,697 97,697 97,697 6. Cashflow - Reconciliation Cash Flows from Operating Activities: Net Earnings $61,732 $73,769 $67,991 $60,506 $54,539 Less Non-recurring Charges: Restructuring Costs, net of tax - (2,596) - - - LPS Spin Related Costs, net of tax 614 - - - - Impact of change in tax rate on non-recurring items - - - - - Net Earnings, excluding non- recurring items 62,346 71,173 67,991 60,506 54,539 Pro Forma Interest Expense, net of tax 14,180 14,588 14,805 15,326 14,904 Pro Forma Adjusted Net Earnings 48,166 56,585 53,186 45,180 39,635 Adjustments to reconcile net earnings to net cash provided by operating activities: Non-cash adjustments 42,495 27,980 30,213 31,633 43,745 Working capital adjustments 42,122 (13,903) (36,445) (26,149) (30,885) Net cash provided by (used in) operating activities 132,783 70,662 46,954 50,664 52,495 Capital expenditures included in investing activities (10,793) (36,068) (9,448) (14,531) (10,505) Pro Forma Adjusted Net Free Cashflow $121,990 $34,594 $37,506 $36,133 $41,990 (1) Pro forma interest expense for each of the six quarters in the period ended June 30, 2008 represents the interest expense associated with the $1,610.7 million in debt incurred by us in connection with the spin-off assuming the spin-off occurred on January 1, 2007. Our new bank debt bears interest at a floating rate which we estimate would have been 4.96% on the revolving credit agreement, Term Loan A and Term Loan B based on the one month LIBOR rate on June 30, 2008 (2.46%) plus a spread of 2.5%. Our new senior notes bear interest at a fixed rate of 8.125%. Amortization of capitalized debt issuance costs in connection with the borrowings included in pro forma interest expense total approximately $5.7 million for the year ended December 31, 2007 and $2.7 million for the six months ended June 30, 2008. These projections also reflect principal paydowns of approximately $36.3 million ($35 million of Term Loan A, $1.3 million of Term Loan B) per quarter under the credit agreement (other than in the first quarter after closing, in which only $1.3 million is payable) and the paydown of the revolver of $25.7 million during the first quarter of 2007. (2) Pro forma earnings per share and pro forma diluted weighted average shares for the quarter ended June 30, 2008 are provided based on the 94,611 shares of Lender Processing Services, Inc. common stock issued to FIS shareholders on the July 2, 2008 spin-off date along with dilutive common stock equivalents calculated under the treasury stock method using the $33 per share closing price of LPS on July 2, 2008 as the average market price and the number of LPS options and awards issued to our employees per the terms of the spin-off. Pro forma earnings per share and pro forma diluted weighted average shares for all other periods presented above are based on the pro forma diluted shares as included in the Company's Form 10 filed on June 20, 2008.

SOURCE Lender Processing Services, Inc.

Source: PR Newswire

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