10-KPeriod: FY2006

Fidelity National Information Services, Inc. Annual Report, Year Ended Dec 31, 2006

Filed March 1, 2007For Securities:FIS

Summary

Fidelity National Information Services, Inc. (FIS) filed its 2006 10-K on March 1, 2007. The report details significant strategic and operational developments, including the merger with Certegy Inc. in early 2006 and a significant business combination with Fidelity National Financial, Inc. (FNF) in November 2006. These transactions have reshaped the company's scale and operational scope, positioning it as a major player in transaction processing and lender processing services. The company operates with substantial debt, approximately $3.0 billion as of year-end 2006, which presents risks related to interest rate fluctuations and financial flexibility. Revenue growth was robust, driven by acquisitions and organic growth in both key segments. However, the integration of Certegy led to a decrease in gross margins due to the lower margin profile of acquired businesses and increased amortization expenses. Investors should note the ongoing reliance on technology and the competitive landscape, as well as the potential conflicts of interest arising from shared executive leadership with FNF.

Key Highlights

  • 1Completed a significant merger with Certegy Inc. in February 2006, adding substantial revenue and expanding service offerings.
  • 2Executed a major business combination with FNF in November 2006, further consolidating its market position.
  • 3Reported robust revenue growth in 2006, reaching $4.13 billion, an increase driven by acquisitions and organic growth.
  • 4Maintained a strong operating income of $591.9 million in 2006, though operating margin slightly decreased due to integration costs and lower-margin acquisitions.
  • 5Carried approximately $3.0 billion in total debt as of December 31, 2006, highlighting a highly leveraged capital structure.
  • 6Introduced new credit facilities in January 2007, totaling $3.0 billion, to replace existing debt and provide financial flexibility.
  • 7Identified potential conflicts of interest due to shared executive leadership with FNF, which could impact strategic decisions.
  • 8Experienced a decrease in gross profit margin from 35.2% in 2005 to 29.1% in 2006, largely attributed to the Certegy acquisition.

Frequently Asked Questions

In 2006, FIS completed two major transactions: the merger with Certegy Inc. in February, significantly expanding its processing capabilities, and a business combination with Fidelity National Financial, Inc. (FNF) in November, which further integrated its operations and ownership structure.

FIS saw substantial revenue growth in 2006, reaching $4.13 billion, up from $2.77 billion in 2005, primarily due to the Certegy merger and organic growth. Operating income increased to $591.9 million from $436.7 million. However, the gross profit margin declined from 35.2% to 29.1%, impacted by the integration of Certegy's business and higher amortization expenses.

Key risks identified include failure to adapt to technological changes, intense competition, substantial leverage and debt service requirements, risks associated with integrating acquisitions, consolidation within the financial services industry, and potential conflicts of interest stemming from shared executive leadership with FNF.

As of December 31, 2006, FIS had approximately $3.0 billion in total debt. This high level of leverage makes the company more vulnerable to economic downturns, may limit its ability to borrow in the future, and requires a significant portion of earnings to service debt. The company refinanced its debt in January 2007 with a new credit agreement totaling $3.0 billion.