Edgar Filing: Lender Processing Services, Inc.

LPS 9.30.2012

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, 2012

	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 of incorporation or organization)	(I.R.S. Employer Identification No.)

601 Riverside Avenue	32204
Jacksonville, Florida	(Zip Code)
(Address of principal executive offices)

(904) 854-5100

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

As of October 31, 2012, 84,851,945 shares of the registrant's common stock were outstanding.

FORM 10-Q

QUARTERLY REPORT

Quarter Ended September 30, 2012

INDEX



	Page
Part I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited).
Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011	3
Condensed Consolidated Statements of Earnings for the three and nine months ended September 30, 2012 and 2011	4
Condensed Consolidated Statements of Comprehensive Earnings for the three and nine months ended September 30, 2012 and 2011	5
Condensed Consolidated Statement of Equity for the nine months ended September 30, 2012	6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011	7
Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3. Quantitative and Qualitative Disclosures About Market Risk	46
Item 4. Controls and Procedures	47
Part II: OTHER INFORMATION	47
Item 1. Legal Proceedings	47
Item 1a. Risk Factors	47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 6. Exhibits	49

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Part I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited).

LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)



	September 30, 2012			December 31, 2011
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	160,716		$	77,355
Trade receivables, net of allowance for doubtful accounts of $46.6 million and $36.0 million, respectively	308,359			345,048
Other receivables	3,652			1,423
Prepaid expenses and other current assets	33,726			33,004
Deferred income taxes, net	111,853			74,006
Total current assets	618,306			530,836
Property and equipment, net of accumulated depreciation of $201.2 million and $182.9 million, respectively	112,463			121,245
Computer software, net of accumulated amortization of $196.3 million and $181.2 million, respectively	241,103			228,882
Other intangible assets, net of accumulated amortization of $322.0 million and $342.6 million, respectively	26,299			39,140
Goodwill	1,126,090			1,132,828
Other non-current assets (inclusive of investments carried at fair value) - see note 6	245,267			192,484
Total assets	$	2,369,528		$	2,245,415

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	2,500		$	39,310
Trade accounts payable	37,655			43,105
Accrued salaries and benefits	79,042			64,383
Legal and regulatory accrual	196,446			78,483
Other accrued liabilities	158,659			168,627
Deferred revenues	53,210			64,078
Total current liabilities	527,512			457,986

Deferred revenues	25,724			34,737
Deferred income taxes, net	160,360			122,755
Long-term debt, net of current portion	1,074,500			1,109,850
Other non-current liabilities	36,375			32,099
Total liabilities	1,824,471			1,757,427

Commitments and contingencies (note 12)

Stockholders' equity:
Preferred stock $0.0001 par value; 50 million shares authorized, none issued at September 30, 2012 and December 31, 2011	—			—
Common stock $0.0001 par value; 500 million shares authorized, 97.4 million shares issued at September 30, 2012 and December 31, 2011	10			10
Additional paid-in capital	253,285			250,533
Retained earnings	699,895			658,146
Accumulated other comprehensive loss	(3,427		)	(1,783		)
Treasury stock at cost; 12.7 million and 13.0 million shares at September 30, 2012 and December 31, 2011, respectively	(404,706		)	(418,918		)
Total stockholders' equity	545,057			487,988
Total liabilities and stockholders' equity	$	2,369,528		$	2,245,415

See accompanying notes to condensed consolidated financial statements (unaudited).

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LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(In thousands, except per share data)
Revenues	$	512,676		$	519,437		$	1,551,904		$	1,556,280
Expenses:
Operating expenses	375,716			404,423			1,150,905			1,175,381
Depreciation and amortization	24,516			20,822			72,538			66,445
Legal and regulatory charges	—			—			144,476			—
Exit costs, impairments and other charges	—			—			—			29,198
Total expenses	400,232			425,245			1,367,919			1,271,024
Operating income	112,444			94,192			183,985			285,256
Other income (expense):
Interest income	463			353			1,365			1,064
Interest expense	(16,112		)	(22,986		)	(48,969		)	(50,961		)
Other income, net	14			(128		)	173			(174		)
Total other income (expense)	(15,635		)	(22,761		)	(47,431		)	(50,071		)
Earnings from continuing operations before income taxes	96,809			71,431			136,554			235,185
Provision for income taxes	36,110			26,787			60,973			88,195
Net earnings from continuing operations	60,699			44,644			75,581			146,990
Loss from discontinued operations, net of tax	(2,395		)	(4,194		)	(8,036		)	(29,246		)
Net earnings	$	58,304		$	40,450		$	67,545		$	117,744

Net earnings per share - basic from continuing operations	$	0.72		$	0.53		$	0.89		$	1.71
Net loss per share - basic from discontinued operations	(0.03		)	(0.05		)	(0.10		)	(0.34		)
Net earnings per share - basic	$	0.69		$	0.48		$	0.79		$	1.37
Weighted average shares outstanding - basic	84,699			84,370			84,574			85,946

Net earnings per share - diluted from continuing operations	$	0.71		$	0.53		$	0.88		$	1.71
Net loss per share - diluted from discontinued operations	(0.02		)	(0.05		)	(0.08		)	(0.34		)
Net earnings per share - diluted	$	0.69		$	0.48		$	0.80		$	1.37
Weighted average shares outstanding - diluted	84,948			84,415			84,774			86,108

See accompanying notes to condensed consolidated financial statements (unaudited).

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LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(In thousands)
Net earnings	$	58,304		$	40,450		$	67,545		$	117,744
Other comprehensive loss:
Unrealized (loss)/gain on investments, net of tax	(3		)	744			918			1,004
Unrealized loss on interest rate swaps, net of tax (1)	(737		)	(1,377		)	(2,568		)	(2,087		)
Currency translation adjustment	6			—			6			—
Other comprehensive loss	(734		)	(633		)	(1,644		)	(1,083		)
Comprehensive earnings	$	57,570		$	39,817		$	65,901		$	116,661

____________

(1) Net of income tax benefit of $0.5 million and $0.9 million for the three months ended September 30, 2012 and 2011, respectively, and $1.6 million and $1.3 million for the nine months ended September 30, 2012 and 2011, respectively.

See accompanying notes to condensed consolidated financial statements (unaudited).

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LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Equity

Nine Months Ended September 30, 2012

(Unaudited)



	Common Shares	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Shares		Treasury Stock			Total Equity
	(In thousands)
Balances, December 31, 2011	97,427	$	10	$	250,533		$	658,146		$	(1,783	)	(13,021	)	$	(418,918	)	$	487,988
Net earnings	—	—		—			67,545			—			—		—			67,545
Cash dividends declared(1)(2)	—	—		—			(25,796		)	—			—		—			(25,796		)
Exercise of stock options and restricted stock vesting	—	—		(16,004		)	—			—			363		14,212			(1,792		)
Income tax effect of equity compensation	—	—		(764		)	—			—			—		—			(764		)
Stock-based compensation cost	—	—		19,520			—			—			—		—			19,520
Unrealized gain on investments, net	—	—		—			—			918			—		—			918
Unrealized loss on interest rate swaps, net	—	—		—			—			(2,568		)	—		—			(2,568		)
Currency translation adjustment	—	—		—			—			6			—		—			6
Balances, September 30, 2012	97,427	$	10	$	253,285		$	699,895		$	(3,427	)	(12,658	)	$	(404,706	)	$	545,057

____________


(1)	Dividends of $0.10 per common share were paid on March 15, 2012, June 21, 2012 and September 20, 2012.

(2) Dividends declared includes dividends accrued on restricted stock that are not paid until a vesting occurs.

See accompanying notes to condensed consolidated financial statements (unaudited).

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LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Nine Months Ended September 30,
	2012			2011
	(In thousands)
Cash flows from operating activities:
Net earnings	$	67,545		$	117,744
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	73,407			73,753
Amortization of debt issuance costs	3,317			8,901
Asset impairment charges	3,812			31,855
(Gain)/loss on sale of discontinued operations	(6,688		)	1,486
Deferred income taxes, net	776			11,985
Stock-based compensation cost	19,520			28,179
Income tax effect of equity compensation	(494		)	588
Changes in assets and liabilities, net of effects of acquisitions:
Trade receivables	27,543			64,291
Other receivables	(1,748		)	2,708
Prepaid expenses and other assets	(18,512		)	(6,258		)
Deferred revenues	10,605			(3,382		)
Accounts payable, accrued liabilities and other liabilities	124,487			(2,249		)
Net cash provided by operating activities	303,570			329,601

Cash flows from investing activities:
Additions to property and equipment	(16,109		)	(25,970		)
Additions to capitalized software	(56,088		)	(55,501		)
Purchases of investments, net of proceeds from sales	(17,604		)	(14,918		)
Acquisition of title plants and property records data	(33,600		)	(15,686		)
Acquisitions, net of cash acquired	(12,250		)	(9,802		)
Proceeds from sale of discontinued operations, net of cash distributed	16,206			—
Net cash used in investing activities	(119,445		)	(121,877		)

Cash flows from financing activities:
Borrowings	—			960,000
Debt service payments	(72,082		)	(942,915		)
Exercise of stock options and restricted stock vesting	(1,792		)	(2,680		)
Income tax effect of equity compensation	494			(588		)
Dividends paid	(25,384		)	(26,006		)
Debt issuance costs paid	—			(22,059		)
Treasury stock repurchases	—			(136,878		)
Bond repurchases	—			(4,925		)
Payment of contingent consideration related to acquisitions	(2,000		)	—
Net cash used in financing activities	(100,764		)	(176,051		)

Net increase in cash and cash equivalents	83,361			31,673
Cash and cash equivalents, beginning of period	77,355			52,287
Cash and cash equivalents, end of period	$	160,716		$	83,960

Supplemental disclosures of cash flow information:
Cash paid for interest	$	54,774		$	48,672
Cash paid for taxes	$	46,853		$	49,181

See accompanying notes to condensed consolidated financial statements (unaudited).

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LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED 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 Fidelity National Information Services, Inc. ("FIS"), a Georgia corporation, and its subsidiaries. FIS owned all of LPS's shares until they were distributed to the shareholders of FIS in a tax-free spin-off on July 2, 2008.

(1) Basis of Presentation

The unaudited financial information included in this report includes the accounts of Lender Processing Services, Inc. and its subsidiaries prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the instructions to Form 10-Q and Article 10 of Regulation S-X. All adjustments considered necessary for a fair presentation have been included. The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. This report should be read in conjunction with the Company's Annual Report on Form 10-K that was filed on February 29, 2012 and our other filings with the Securities and Exchange Commission.

Reporting Segments

We are a provider of integrated technology and outsourced services to the mortgage lending industry, with market leading positions in mortgage processing and default management services in the U.S. We conduct our operations through two reporting segments, Technology, Data and Analytics ("TD&A") and Transaction Services.

Reclassifications and Segment Reorganization

In connection with organizational realignments implemented during the first quarter ended March 31, 2012, the Company has made the following changes to its financial reporting structure and presentation:

•

Allocation of Corporate Expenses. To improve visibility and analysis regarding the performance of each reporting segment, as of January 1, 2012, the Company began allocating corporate expenses for functions that directly support the operating segments. Costs being allocated include, among others, stock compensation, internal audit, legal, human resources, marketing and accounting shared services. These costs are allocated to each reporting segment based on a variety of factors including headcount, actual consumption, activity, or other relevant factors. After completing the allocation process, the net remaining costs included in the Corporate segment represent unallocated general and administrative expenses, which are discussed further in note 13 to our condensed consolidated financial statements.

•

Operating Segment Components. In order to provide improved comparability, LPS has reclassified operating results from 2011 to conform to certain 2012 organizational realignments. The specific components that were realigned include Broker Price Opinions, which was formerly included as part of the Data and Analytics reporting unit within the TD&A segment, and has been reclassified to our Default Services reporting unit within the Transaction Services segment; and Property Tax Direct/ National Tax Network, which represents the remaining portion of the Tax Services business unit that was sold on January 31, 2012, which was previously included as part of the Origination Services reporting unit within the Transaction Services segment, and is now included as part of the Data and Analytics reporting unit within the TD&A Segment. We also have discontinued the historical allocation of a portion of the revenue and expenses of our Desktop business unit, included as part of our Technology reporting unit within our TD&A segment, to the Foreclosure business unit, included as part of our Default Services reporting unit within the Transaction Services segment.

•

Financial Statement Captions. In the accompanying condensed consolidated statement of operations, we have eliminated the use of financial statement captions "Gross Margin", "Cost of revenues" and "Selling, general and administrative expenses". We now use the captions “Operating expenses,” “Depreciation and amortization,” "Legal and regulatory charges" and "Exit costs, impairments and other charges." "Operating expenses" includes all costs, excluding depreciation and amortization, incurred by the Company to produce revenues. "Legal and regulatory charges" represents our loss contingency and related expenses for legal and regulatory matters that are probable and estimable. "Exit costs, impairments and other charges" represents certain lease exit charges, employee severance, stock compensation acceleration charges, impairments of long-lived assets, and other non-operating charges.

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All prior period information has been reclassified to conform with the current year's presentation. The changes noted above did not have any impact on previously reported consolidated revenues, operating income, net earnings, earnings per share or stockholders' equity.

(2) Fair Value

Fair Value of Financial Assets and Liabilities

The fair values of financial assets and liabilities are determined using the following fair value hierarchy:


•	Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.


•	Level 2 Inputs to the valuation methodology include:


•	quoted prices for similar assets or liabilities in active markets;


•	quoted prices for identical or similar assets or liabilities in inactive markets;


•	inputs other than quoted prices that are observable for the asset or liability; and


•	inputs that are derived principally from or corroborated by observable market data by correlation or other means.


•	Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following tables set forth, by level within the fair value hierarchy, our assets and liabilities measured at fair value on a recurring basis. The fair values of other financial instruments, which primarily include short-term financial assets and liabilities and long term debt, are estimated as of period-end and disclosed elsewhere in these notes.



As of September 30, 2012 (in millions):				Fair Value
	Classification	Carrying Value		Level 1		Level 2		Level 3		Total
Investments (note 6)	Asset	$	74.2	$	5.9	$	68.3	$	—	$	74.2
Interest rate swaps (note 10)	Liability	$	9.6	$	—	$	9.6	$	—	$	9.6



As of December 31, 2011 (in millions):				Fair Value
	Classification	Carrying Value		Level 1		Level 2		Level 3		Total
Investments (note 6)	Asset	$	55.6	$	6.9	$	48.7	$	—	$	55.6
Interest rate swaps (note 10)	Liability	$	5.4	$	—	$	5.4	$	—	$	5.4

Our Level 1 financial instruments include U.S. government and agency bonds, for which there are quoted prices in active markets. Our Level 2 financial instruments consist of corporate bonds, municipal bonds and derivatives, for which there are parallel markets or alternative means to estimate fair value using observable information inputs. The estimates used are subjective in nature and involve uncertainties and significant judgment in the interpretation of current market data. Therefore, the values presented are not necessarily indicative of amounts we could realize or settle currently.

Fair Value of Assets Acquired and Liabilities Assumed

The fair values of assets acquired and liabilities assumed in business combinations are estimated using various assumptions.

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The most significant assumptions, and those requiring the most judgment, involve the estimated fair values of contingent considerations, intangible assets and software, with the remaining value, if any, attributable to goodwill. The Company utilizes third-party experts to assist with determining the fair values of intangible assets and software purchased in business combinations.

(3) Related Party Transactions

The Company did not have any related party transactions as of and during the three and nine months ended September 30, 2012. Lee A. Kennedy has served as a director since our spin-off from FIS and as our Executive Chairman since September 15, 2009. He also served as our interim President and Chief Executive Officer from July 6, 2011 to October 6, 2011. Historically, Mr. Kennedy also served as Chairman of Ceridian Corporation (“Ceridian”) from January 25, 2010 until July 28, 2011, and as Chief Executive Officer of Ceridian from January 25, 2010 until August 19, 2010. Therefore, Ceridian was a related party of the Company for periods from January 25, 2010 until July 28, 2011. During those periods we were (and we continue to be) party to certain agreements with Ceridian under which we incurred expenses. A summary of the Ceridian related party agreements in effect as of September 30, 2011 is as follows:

•

Administrative Services. Ceridian provides certain administrative services to our human resources group, including Family and Medical Leave Act (“FMLA”) administrative services, military leave administrative services, flexible spending account services and tax processing services. Each of the administrative services agreements has an initial term of one year and is automatically renewable for successive one year terms unless either party gives 90 days prior written notice. Each agreement may be terminated upon 30 days written notice in the event of a breach.

•

COBRA Health Benefit Services. Ceridian also provides us with Consolidated Omnibus Budget Reconciliation Act (“COBRA”) health benefit services. The COBRA agreement had an initial term of one year and is automatically renewable for successive one year terms unless either party gives 90 days prior written notice. This agreement may be terminated upon 30 days written notice in the event of a breach.

We incurred less than $0.1 million in expenses during the three months ended September 30, 2011, and $0.2 million in expenses during the nine months ended September 30, 2011 related to the Ceridian related party agreements listed above, which are included in operating expenses within the accompanying condensed consolidated statements of operations. We believe the amounts charged by Ceridian under the above-described service arrangements are fair and reasonable.

(4) Net Earnings Per Share

The basic weighted average shares and common stock equivalents are computed using the treasury stock method. The following table summarizes the earnings per share for the three and nine months ending September 30, 2012 and 2011 (in thousands, except per share amounts):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Earnings from continuing operations, net of tax	$	60,699		$	44,644		$	75,581		$	146,990
Loss from discontinued operations, net of tax	(2,395		)	(4,194		)	(8,036		)	(29,246		)
Net earnings	$	58,304		$	40,450		$	67,545		$	117,744

Net earnings per share - basic from continuing operations	$	0.72		$	0.53		$	0.89		$	1.71
Net loss per share - basic from discontinued operations	(0.03		)	(0.05		)	(0.10		)	(0.34		)
Net earnings per share - basic	$	0.69		$	0.48		$	0.79		$	1.37
Weighted average shares outstanding - basic	84,699			84,370			84,574			85,946

Net earnings per share - diluted from continuing operations	$	0.71		$	0.53		$	0.88		$	1.71
Net loss per share - diluted from discontinued operations	(0.02		)	(0.05		)	(0.08		)	(0.34		)
Net earnings per share - diluted	$	0.69		$	0.48		$	0.80		$	1.37
Weighted average shares outstanding - diluted	84,948			84,415			84,774			86,108

Options to purchase approximately 7.3 million and 8.3 million shares of our common stock for the three months ended September

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30, 2012 and 2011, respectively, and 7.4 million and 7.8 million shares of our common stock for the nine months ended September 30, 2012 and 2011, respectively, were not included in the computation of diluted earnings per share because they were antidilutive. In addition, as of September 30, 2012, 1.6 million shares of restricted stock are not included in our weighted average shares outstanding due to vesting restrictions that contain forfeitable rights to dividends. We may, in the future, limit dilution caused by option exercises, including anticipated exercises, by repurchasing shares in the open market or in privately negotiated transactions.

Our ability to repurchase shares of common stock or senior notes is subject to restrictions contained in our senior secured credit agreement and in the indenture governing our 2016 Notes described below. On June 16, 2011, our Board of Directors approved an authorization for us to repurchase up to $100.0 million of our common stock and/or our 2016 Notes, effective through December 31, 2012. As of September 30, 2012, we had $95.1 million remaining available under our $100.0 million repurchase authorization.

(5) Acquisitions

The results of operations of entities acquired during the nine months ended September 30, 2012 and 2011 are included in the condensed consolidated financial statements from and after the date of acquisition. The purchase price of each acquisition was allocated to the assets acquired and liabilities assumed based on their fair value with any excess cost over fair value being allocated to goodwill. The impact of the acquisitions made from January 1, 2011 through September 30, 2012 was not significant, individually or in the aggregate, to our historical consolidated financial results.

PCLender

On March 14, 2011, we acquired PCLender.com, Inc. ("PCLender") for $9.8 million (net of cash acquired). As a result of the transaction, we recognized a liability for contingent consideration totaling $3.0 million. The acquisition resulted in the recognition of $8.2 million of goodwill and $6.1 million of other intangible assets and software. The allocation of the purchase price to goodwill and intangible assets was based on the valuation performed to determine the value of such assets as of the acquisition date. The valuation was determined utilizing the income approach using a combination of Level 2 and Level 3-type inputs. PCLender is now a part of the TD&A segment and further expands our loan origination offerings and market by complementing our Empower origination technology.

LendingSpace

On July 25, 2012, we completed the purchase of the assets of LendingSpace, a business that provides mortgage loan origination software solutions, for approximately $12.3 million. The acquisition resulted in the recognition of $6.7 million of goodwill, based on the amount that the purchase price exceeded the fair value of the net assets acquired. All of the acquired goodwill is deductible for tax purposes. As part of the acquisition, we also recognized $4.8 million of other intangible assets and software, which have a weighted average amortization period of approximately 6 years. The allocation of the purchase price to goodwill and intangible assets was based on the valuation performed to determine the value of such assets as of the acquisition date. The valuation was determined utilizing the income approach using a combination of Level 2 and Level 3-type inputs. LendingSpace is now a part of the TD&A segment and will further strengthen LPS' origination technology solutions.

(6) Investments

Our title insurance underwriter subsidiary, National Title Insurance of New York, Inc. ("NTNY"), is statutorily required to maintain investment assets backing its reserves for settling losses on the policies it issues. These investments, which consist of treasury bonds, municipal bonds, government agency bonds and corporate bonds, are classified as available for sale securities, and are included in the accompanying condensed consolidated balance sheets at fair value within other non-current assets. Any gains or losses on these investments are recognized in other comprehensive earnings (loss) until the investment maturity or sale date. Since the Company does not intend to sell and will more-likely-than-not maintain each debt security until its anticipated recovery, and no significant credit risk is deemed to exist, these investments are not considered other than temporarily impaired.

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The amortized cost and fair value of our available for sale securities at September 30, 2012 and December 31, 2011 are as follows (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of September 30, 2012	$	70,168	$	4,066	$	(48	)	$	74,186
As of December 31, 2011	$	53,066	$	2,781	$	(269	)	$	55,578

There have been no significant changes to the stated maturities on our investment portfolio since December 31, 2011, as reflected in our 2011 Annual Report on Form 10-K.

(7) Discontinued Operations

During the year ended December 31, 2011, management made decisions to sell or dispose of certain non-core or underperforming business units including Verification Bureau, SoftPro, Rising Tide Auction, True Automation, Aptitude Solutions and certain operations previously included in our Real Estate Group, all of which were previously included as part of the TD&A segment. Management also made the decision to sell the Tax Services business (other than our tax data services that provide lenders with information about the tax status of a property, which is now included in our TD&A segment), previously included within the Transaction Services segment. All of these businesses were classified as discontinued operations for the year ended December 31, 2011.

On January 9, 2012, we completed the sale of our SoftPro business unit for $15.5 million. The sale of SoftPro, which was previously included within the TD&A segment, resulted in a pre-tax gain on disposal of $8.3 million.

On January 31, 2012, we completed the sale of our Tax Services group, previously included within the Transaction Services segment, in which we are required to pay a total of $14.4 million (all of which was paid as of September 30, 2012) to the buyer in exchange for their assumption of life-of-loan servicing obligations. As the net assets of the business were written down during 2011 in anticipation of the contemplated sale, no gain or loss was recognized during 2012 upon completion of the sale.

On May 2, 2012, we completed the sale of our True Automation and Aptitude Solutions business units, which were previously included within the TD&A segment, for approximately $16.1 million, and recorded a $1.6 million pre-tax loss on disposal.

Each of these asset groups qualifies as discontinued operations under ASC Topic 205-20 Presentation of Financial Statements- Discontinued Operations. Under that guidance, the results of operation of a component of an entity that either has been disposed of or is classified as held for sale shall be reported as discontinued operations if the entity will not have significant continuing involvement in the operations of the component after the disposal transaction and the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal. The results of discontinued operations are presented net of tax, as a separate component in the condensed consolidated statements of operations. As of September 30, 2012, all significant remaining assets and liabilities associated with these held for sale businesses have been disposed of.

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The table below illustrates the components of the loss from discontinued operations, net of tax, for the three and nine months ended September 30, 2012 and 2011 (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012 (1)			2011
Revenues	$	578		$	18,379		$	9,057		$	56,829
Pretax loss from discontinued operations before impairment charges	$	(2,187	)	$	(4,545	)	$	(11,561	)	$	(16,488	)
Impairment charges:
Intangible assets	—			—			(226		)	(3,471		)
Computer software	—			—			—			(11,939		)
Property and equipment	—			—			—			(2,783		)
Goodwill	—			—			(2,281		)	(17,684		)
Other	—			—			(335		)	5,967
Total impairment charges	—			—			(2,842		)	(29,910		)
Pretax loss from operations	(2,187		)	(4,545		)	(14,403		)	(46,398		)
Other income (expense)	(1,633		)	(2,165		)	6,693			(2,004		)
Income tax benefit (expense) on discontinued operations	1,425			2,516			(326		)	19,156
Loss from discontinued operations, net of tax	$	(2,395	)	$	(4,194	)	$	(8,036	)	$	(29,246	)

___________________

(1) The Company recorded a $2.3 million impairment to goodwill, a $0.2 million impairment to intangible assets, and a $0.3 million impairment to other assets related to a revision in the fair value of the remaining net assets of the True Automation business unit, which was sold on May 2, 2012.

(8) Goodwill

Changes to goodwill during the nine months ended September 30, 2012 are summarized as follows (in thousands):



	Technology, Data and Analytics			Transaction Services		Total
Balance, December 31, 2011	$	755,757		$	377,071	$	1,132,828
Goodwill disposal related to SoftPro sale	(4,943		)	—		(4,943		)
Goodwill impairment related to True Automation (1)	(2,281		)	—		(2,281		)
Goodwill disposal related to True Automation/Aptitude Solutions sale	(6,166		)	—		(6,166		)
Goodwill reapportionment (2)	(7,400		)	7,400		—
Goodwill related to LendingSpace acquisition	6,652			—		6,652
Balance, September 30, 2012	$	741,619		$	384,471	$	1,126,090

____________

(1) The Company recorded a $2.3 million impairment of goodwill related to a revision of the fair value of the remaining net assets of the True Automation business unit which was sold on May 2, 2012, and is described in note 7.

(2) As a result of the Company's segment reorganization described in footnote 1, we reclassified $7.4 million of goodwill from the TD&A segment to the Transaction Services segment.

(9) Restructuring

During 2011, management committed to three separate restructuring plans (the "First Quarter 2011 Restructuring Plan", the "Second Quarter 2011 Restructuring Plan", and the "Fourth Quarter 2011 Restructuring Plan") in order to remove duplicate headcount, reduce future operating expenses, and improve operational performance and profitability. For the nine month period ended September 30, 2011, the total restructuring costs related to these efforts amounted to $21.4 million of employee termination

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costs. Of the $21.4 million of employee termination costs recorded for the nine months ended September 30, 2011, $6.9 million, $4.1 million and $10.4 million applies to the Technology, Data and Analytics, Transaction Services and Corporate segments, respectively. All payouts related to the First Quarter 2011 and Second Quarter 2011 Restructuring Plans were made by June 30, 2011 and June 30, 2012, respectively. All payouts related to our Fourth Quarter 2011 Restructuring Plan are expected to be made by December 31, 2012.

The following table sets forth the Company's Fourth Quarter 2011 Restructuring Plan, exclusive of stock-based compensation charges, as of and for the nine months ended September 30, 2012 (in millions):



4th Quarter 2011 Restructuring Plan	Other Accrued Liabilities December 31, 2011		Cash Paid			Other Accrued Liabilities September 30, 2012
Ongoing termination arrangement	$	1.9	$	(1.4	)	$	0.5
Contract termination costs - severance	3.5		(3.2		)	0.3
Total	$	5.4	$	(4.6	)	$	0.8

(10) Long-Term Debt

Long-term debt as of September 30, 2012 and December 31, 2011 consists of the following (in thousands):



	September 30, 2012			December 31, 2011
Term A Loan, secured, interest payable at LIBOR plus 2.50% (2.71% at September 30, 2012) quarterly principal amortization, maturing August 2016	$	468,125		$	528,313
Term B Loan, secured, interest payable at LIBOR plus 4.50%, subject to 1% LIBOR Floor, (5.50% at September 30, 2012) quarterly principal amortization, maturing August 2018	246,875			248,750
Revolving Loan, secured, interest payable at LIBOR plus 2.50% (Eurocurrency Borrowings) (2.71% at September 30, 2012), Fed-funds plus 2.50% (Swingline borrowings) (2.59% at September 30, 2012), or the highest of (a) Fed-funds plus 0.50%, (b) Prime or (c) LIBOR plus 1%, plus the Applicable Margin for Base Rate borrowings of 1.50% (Base Rate Borrowings) (2.09%, 4.75% or 2.71%, respectively, at September 30, 2012), maturing August 2016. Total of $398.1 million unused (net of outstanding letters of credit and revolver) as of September 30, 2012.	—			10,000
Senior unsecured notes, issued at par, interest payable semiannually at 8.125%, due July 2016	362,000			362,000
Other promissory notes with various interest rates and maturities	—			97
Total debt	1,077,000			1,149,160
Less current portion	(2,500		)	(39,310		)
Long-term debt, excluding current portion	$	1,074,500		$	1,109,850

Financing

On August 18, 2011, the Company entered into an Amendment, Restatement and Joinder Agreement (the "Amendment Agreement") in respect of the Credit Agreement dated as of July 2, 2008 (the "2008 Credit Agreement") with JPMorgan Chase Bank, N.A., as Administrative Agent, Swing Line Lender and Letters of Credit Issuer, and various other lenders who were parties to the 2008 Credit Agreement. In connection with entering into the Amendment Agreement, on August 18, 2011, the Company also entered into an Amended and Restated Credit Agreement (the "2011 Credit Agreement") with JPMorgan Chase Bank, N.A., as Administrative Agent, Swing Line Lender and Letters of Credit Issuer, and various other lenders who are parties to the 2011 Credit Agreement which amends and restates the 2008 Credit Agreement. Subsequently, on October 19, 2012, we entered into Amendment No. 1 (the “Amendment”) to the 2011 Credit Agreement , which (i) gives us additional flexibility under the 2011 Credit Agreement with respect to charges incurred for accruals for litigation and regulatory matters, and (ii) extends the period with respect to which mandatory prepayments using excess cash flow must be made from the fiscal year ending December 31, 2012 to the fiscal year ending December 31, 2013.

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aggregate principal amount of $535 million; and (iii) a Term B Loan with a maturity date of August 14, 2018 in an aggregate principal amount of $250 million. On October 12, 2012, we used a portion of the proceeds from the 2023 Notes described below to prepay the Term B Loan in full.

The loans under the 2011 Credit Agreement bear interest at a floating rate, which is an applicable margin plus, at the Company's option, either (a) the Eurodollar (LIBOR) rate or (b) the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) the one Month LIBOR rate plus 1.00% (the highest of clauses (i), (ii) and (iii), the "Base rate"). The annual margin on the Term A Loan and the revolving credit facility until the first business day following delivery of the compliance certificate with respect to the first fiscal quarter ending following the closing and funding of the amended and restated facility was 2.25% in the case of LIBOR loans and 1.25% in the case of the Base rate loans, and after that time is a percentage determined in accordance with a leverage ratio-based pricing grid. As of September 30, 2012, we were paying an annual margin of 2.5% above LIBOR. The annual margin on the Term B Loan was 4.50% in the case of LIBOR loans (with LIBOR subject to a floor of 1.0%) and 3.50% in the case of the Base rate loans.

The 2011 Credit Agreement provides that, beginning on December 31, 2011, the Company shall repay the outstanding principal amount of Term A Loans in quarterly installments of $6.7 million. These quarterly installment payments increase to $13.4 million beginning on December 31, 2013 and then to $20.1 million beginning on December 31, 2014 through March 31, 2016. The Term B Loans were subject to quarterly installment payments of $0.6 million beginning on September 30, 2011 until March 31, 2018. All remaining outstanding principal amounts of the Term A Loan shall be repaid at the applicable maturity dates. On October 12, 2012, we used a portion of the proceeds from the 2023 Notes described below to prepay the Term B Loan in full.

In addition to scheduled principal payments, the Term Loans are (with certain exceptions) subject to mandatory prepayment upon issuances of debt, casualty and condemnation events, and sales of assets, as well as from up to 50% of excess cash flow (as defined in the Credit Agreement) in excess of an agreed threshold commencing with the cash flow for the year ended December 31, 2013. Voluntary prepayments of the loans are generally permitted at any time without fee upon proper notice and subject to a minimum dollar requirement, except that, under certain conditions, voluntary prepayments of the Term B Loan made on or prior to August 18, 2012 would have been subject to a 1% prepayment premium. Commitment reductions of the revolving credit facility are also permitted at any time without fee upon proper notice. The revolving credit facility has no scheduled principal payments, but it will be due and payable in full on August 18, 2016. During the nine month period ending September 30, 2012, we have prepaid approximately $40.1 million on the Term Loan A. Subsequently, on October 12, 2012, we used a portion of the proceeds from the 2023 Notes described below to prepay approximately $246.9 million on the Term Loan B, which represented all amounts then outstanding under the Term Loan B.

The Company is allowed to raise additional term loans and/or increase commitments under the Revolving Credit Facility in an aggregate principal amount of up to $250.0 million (the “Incremental Facilities”). The Incremental Facilities are subject to restrictions on pricing and tenor of any new term loan, pro-forma compliance with financial covenants, pro-forma leverage ratio not to exceed 2.00:1.00, and other usual and customary conditions.

The obligations under the 2011 Credit Agreement are fully and unconditionally guaranteed, jointly and severally, by certain of our domestic subsidiaries. Additionally, the Company and such subsidiary guarantors pledged substantially all of our respective assets as collateral security for the obligations under the Credit Agreement and our respective guarantees.

The 2011 Credit Agreement contains customary affirmative, negative and financial covenants including, among other things, limits on the creation of liens, limits on the incurrence of indebtedness, restrictions on investments, dispositions and sale and leaseback transactions, limits on the payment of dividends and other restricted payments, a minimum interest coverage ratio and a maximum leverage ratio. Upon an event of default, the administrative agent can accelerate the maturity of the loan. Events of default include events customary for such an agreement, including failure to pay principal and interest in a timely manner, breach of covenants and a change of control of the Company. These events of default include a cross-default provision that permits the lenders to declare the 2011 Credit Agreement in default if (i) the Company fails to make any payment after the applicable grace period under any indebtedness with a principal amount in excess of $70 million or (ii) the Company fails to perform any other term under any such indebtedness, as a result of which the holders thereof may cause it to become due and payable prior to its maturity.

Senior Notes

On July 2, 2008, we issued senior notes (the “2016 Notes”) in an initial aggregate principal amount of $375.0 million under which $362.0 million was outstanding at September 30, 2012. The Notes were issued pursuant to an Indenture dated July 2, 2008 (the “Indenture”) among the Company, the guarantor parties thereto and U.S. Bank Corporate Trust Services, as Trustee. Subsequently, in October 2012, we used a portion of the proceeds from the 2023 Notes described below to accept for payment

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and settle approximately $286.4 million aggregate principal amount of the 2016 Notes that were tendered in the tender offer described below.

The 2016 Notes bear interest at a rate of 8.125% per annum. Interest payments are due semi-annually each January 1 and July 1. The maturity date of the 2016 Notes is July 1, 2016. On October 12, 2012, we announced that we had called for redemption any 2016 Notes that remained outstanding following completion of the tender offer, as discussed below.

The fair value of the Company's long-term debt at September 30, 2012 was estimated to be approximately 101% of the carrying value. We have estimated the fair value of our debt using Level 2 Inputs, based on values of recent quoted market prices on our term loans and values of recent trades on our 2016 Notes.

Refinancing Transactions

On September 27, 2012, the Company announced its plans to offer $600 million in aggregate principal amount of Senior Notes and commenced a tender offer and consent solicitation for all of the 2016 Notes. On October 12, 2012, we closed the offering of $600 million aggregate principal amount of 5.75% Senior Notes due 2023 (the “2023 Notes”). The 2023 Notes have been registered under the Securities Act of 1933, as amended, carry an interest rate of 5.75% and will mature on April 15, 2023. Interest will be paid semi-annually on the 15th day of April and October beginning April 15, 2013. The 2023 Notes are our unsecured, unsubordinated obligations and are guaranteed on an unsecured basis by the same subsidiaries that guarantee our obligations under the 2011 Credit Agreement. A portion of the net proceeds of the Offering, along with cash on hand, was used to purchase approximately $286.4 million aggregate principal amount of the 2016 Notes accepted for payment and settlement in the tender offer, to prepay in full the outstanding Term B Loan under the 2011 Credit Agreement and to pay fees and expenses in connection with these transactions. The remaining proceeds will be used to redeem any remaining 2016 Notes that were not tendered in the tender offer.

As part of the tender offer, the Company solicited consents from the holders of the 2016 Notes for certain proposed amendments that would eliminate or modify certain covenants and events of default as well as other provisions contained in the Indenture. Adoption of the proposed amendments required consents from holders of at least a majority in aggregate principal amount outstanding of the 2016 Notes. On October 12, 2012, the Company announced that it had received the requisite consents to execute a supplemental indenture to implement the proposed amendments to the Indenture, and delivered notice that it had called for redemption all 2016 Notes that remain outstanding following completion of the tender offer at a price equal to 104.06% of their face amount, plus accrued and unpaid interest to, but not including, the date of redemption. Payment for the redemption of the remaining 2016 Notes is expected to be made on November 13, 2012 (with interest accruing on the 2016 Notes to November 11, 2012).

The 2023 Notes were issued pursuant to an Indenture dated as of October 12, 2012, among the Company, the subsidiary guarantors and U.S. Bank National Association, as trustee (the "Indenture"). At any time and from time to time, prior to October 15, 2015, we may redeem up to a maximum of 35% of the original aggregate principal amount of the 2023 Notes with the proceeds of one or more equity offerings, at a redemption price equal to 105.750% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date). Prior to October 15, 2017, the Company may redeem some or all of the 2023 Notes by paying a “make-whole” premium based on U.S. Treasury rates. On or after October 15, 2017, we may redeem some or all of the 2023 Notes at the redemption prices described in the Indenture, plus accrued and unpaid interest. In addition, if a change of control occurs, we are required to offer to purchase all outstanding 2023 Notes at a price equal to 101% of the principal amount plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

The Indenture contains covenants that, among other things, limit LPS' ability and the ability of certain of LPS' subsidiaries (a) to incur or guarantee additional indebtedness or issue preferred stock, (b) to make certain restricted payments, including dividends or distributions on equity interests held by persons other than LPS or certain subsidiaries, in excess of an amount generally equal to 50% of consolidated net income generated since July 1, 2008, (c) to create or incur certain liens, (d) to engage in sale and leaseback transactions, (e) to create restrictions that would prevent or limit the ability of certain subsidiaries to (i) pay dividends or other distributions to LPS or certain other subsidiaries, (ii) repay any debt or make any loans or advances to LPS or certain other subsidiaries or (iii) transfer any property or assets to LPS or certain other subsidiaries, (f) to sell or dispose of assets of LPS or any restricted subsidiary or enter into merger or consolidation transactions and (g) to engage in certain transactions with affiliates. These covenants are subject to a number of exceptions, limitations and qualifications in the Indenture.

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subsidiaries other than National Title Insurance of New York, Inc. ("NTNY"), our title insurance underwriter subsidiary, by dividend or loan. NTNY is statutorily required to maintain investment assets backing its reserves for settling losses on the policies it issues, and its ability to pay dividends or make loans is limited by regulatory requirements.

The Indenture contains customary events of default, including failure of the Company (i) to pay principal and interest when due and payable and breach of certain other covenants and (ii) to make an offer to purchase and pay for 2023 Notes tendered as required by the Indenture. Events of default also include cross defaults, with respect to any other debt of the Company or debt of certain subsidiaries having an outstanding principal amount of $80.0 million or more in the aggregate for all such debt, arising from (i) failure to make a principal payment when due and such defaulted payment is not made, waived or extended within the applicable grace period or (ii) the occurrence of an event which results in such debt being due and payable prior to its scheduled maturity. Upon the occurrence of an event of default (other than a bankruptcy default with respect to the Company or certain subsidiaries), the trustee or holders of at least 25% of the 2023 Notes then outstanding may accelerate the 2023 Notes by giving us appropriate notice. If, however, a bankruptcy default occurs with respect to the Company or certain subsidiaries, then the principal of and accrued interest on the 2023 Notes then outstanding will accelerate immediately without any declaration or other act on the part of the trustee or any holder.

Subsequently, on October 19, 2012, the Company entered into Amendment No. 1 (the “Amendment”) to the 2011 Credit Agreement. The Amendment (1) gives the Company additional flexibility under the Credit Agreement with respect to charges incurred for accruals for litigation and regulatory matters and (2) extends the period with respect to which mandatory prepayments using excess cash flow must be made from the fiscal year ending December 31, 2012 to the fiscal year ending December 31, 2013.

In connection with these refinancing transactions, we will pay estimated fees of $26.0 million, including a call premium on our 2016 Notes of approximately $15.8 million. Of the $26.0 million of total fees paid, we expect to capitalize approximately $9.6 million and expense $16.4 million. We will also record a writeoff of the remaining debt issuance costs on our 2016 Notes of $1.5 million and on our Term B Loan of $6.4 million. All of these charges will be reflected in our results for the fourth quarter of 2012.

Fair Value of Long-Term Debt

The fair value of the Company's long-term debt at September 30, 2012 is estimated to be approximately 101% of its carrying value. We have estimated the fair value of our debt using Level 2 Inputs, based on values of recent quoted market prices on our term loans and values of recent trades on our 2016 Notes.

Interest Rate Swaps

On August 26, 2011, we entered into an interest rate swap to hedge forecasted monthly interest rate payments on $250 million of our floating rate debt, in which the counterparty pays a variable rate equal to 1 Month LIBOR (equal to 0.21% as of September 30, 2012) and the Company pays a fixed rate of 1.265%. The effective date of the swap is August 31, 2011 and the maturity date is July 31, 2016.

On August 4, 2010, we entered into the following interest rate swap transactions, which have been designated as cash flow hedges:



Period	Notional Amount		Counterparty Pays Variable Rate of (1)	LPS Pays Fixed Rate of (2)
	(in millions)
December 31, 2011 to December 31, 2012	$	150.0	1 Month LIBOR	1.295	%
December 31, 2012 to December 31, 2013	$	75.0	1 Month LIBOR	2.080	%

_________

(1) 0.21% as of September 30, 2012.

(2) In addition to the fixed rate paid under the swaps, we pay an applicable margin to our bank lenders on our Term A Loan and Revolving Loan equal to 2.50% as of September 30, 2012.

We have entered into interest rate swap transactions in order to convert a portion of our interest rate exposure on our floating rate debt from variable to fixed. We have designated these interest rate swaps as cash flow hedges. A portion of the amount included

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in accumulated other comprehensive earnings (loss) will be reclassified into interest expense as a yield adjustment as interest payments are made on the Term Loans. The inputs used to determine the estimated fair value of our interest rate swaps are Level 2-type measurements. We have considered our own credit risk when determining the fair value of our interest rate swaps.

Estimated fair values of interest rate swaps in the condensed consolidated balance sheets were as follows (in millions):



Balance Sheet Account	September 30, 2012		December 31, 2011
Other accrued liabilities	$	0.4	$	1.3
Other long-term liabilities	$	9.2	$	4.1

A cumulative loss of $5.9 million and $3.3 million is reflected in accumulated other comprehensive loss as of September 30, 2012 and December 31, 2011, respectively. A summary of the effect of derivative instruments on amounts recognized in other comprehensive earnings (loss) (“OCE”) and on the accompanying condensed consolidated statement of operations for the three and nine months ended September 30, 2012 and 2011 is as follows (in millions):



	Amount of Loss Recognized in OCE on Derivatives				Amount of Loss Reclassified from Accumulated OCE into Income (included within interest expense)
Interest Rate Swap contract	2012		2011		2012		2011
Three months ended September 30,	$	2.2	$	2.7	$	1.0	$	0.5
Nine months ended September 30,	$	7.3	$	4.3	$	3.1	$	0.9

Approximately $2.5 million (net of tax) of the balance in accumulated other comprehensive loss as of September 30, 2012 is expected to be reclassified into interest expense over the next twelve months.

It is our policy to execute such instruments with credit-worthy banks and not to enter into derivative financial instruments for speculative purposes. As of September 30, 2012, we believe our interest rate swap counterparties will be able to fulfill their obligations under our agreements, and we believe we will have debt outstanding through the various expiration dates of the swaps such that the occurrence of future cash flow hedges remains probable.

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(11) Income Taxes

Liabilities for uncertain tax positions are computed by determining a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The Company has performed an evaluation of its tax positions and has concluded that as of September 30, 2012 and December 31, 2011, there were no significant uncertain tax positions requiring recognition in its condensed consolidated financial statements. The Company's policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense.

Provision for income taxes on continuing operations were $61.0 million and $88.2 million during the nine months ended September 30, 2012 and 2011, respectively, which resulted in an effective tax rate of 44.7% and 37.5%, respectively. The change in the effective rate during the nine month period ended September 30, 2012 is due to assumptions regarding the deductibility of the legal and regulatory charge recorded during the current year.

(12) Commitments and Contingencies

We are involved in various pending and threatened litigation and regulatory matters related to our operations, some of which include claims for punitive or exemplary damages. We intend to vigorously defend all litigation and regulatory matters that are brought against us. In accordance with applicable accounting guidance, we establish accruals for litigation and regulatory matters when those matters present loss contingencies that are both probable and reasonably estimable. Our accrual for such matters, which totaled $78.5 million as of December 31, 2011, has increased to $196.4 million as of September 30, 2012 reflecting the continued progress made on each of the underlying matters which has enabled management to further refine its estimates. The accrual assumes no third party recoveries and includes estimated future costs of settlement, damages and associated legal and consulting fees. For the reasons described below, we are unable to estimate a range of material loss in excess of the amount accrued or for any potential losses related to any other reasonably possible claims. We continually evaluate the accrual for legal and regulatory matters as those matters progress.

Set forth below are descriptions of our material legal and regulatory proceedings. As background to the disclosure below, please note the following:


•	These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities.

•

In the litigation 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. Regulatory authorities also may seek a variety of remedies and in general do not make specific demands during the course of an investigation or inquiry.

Litigation Matters

Securities Class Action Litigation

On December 1, 2010, the Company was served with a complaint entitled St. Clair Shores General Employees' Retirement System v. Lender Processing Services, Inc., et al., which was filed in the United States District Court for the Middle District of Florida. The putative class action seeks damages for alleged violations of federal securities laws in connection with our disclosures relating to our default operations. An amended complaint was filed on May 18, 2011. LPS filed a motion to dismiss the complaint on July 18, 2011 and the plaintiff filed a response to the Company's motion on September 12, 2011. The complaint was dismissed on March 30, 2012. The plaintiffs subsequently filed a second and third amended complaint on May 8, 2012 and October 5, 2012, respectively. The Company intends to file a motion to dismiss the third amended complaint by November 16, 2012.

Shareholder Derivative Litigation

On January 21, 2011, a complaint entitled Michael Wheatley, derivatively on behalf of Lender Processing Services, Inc. v. Jeffrey S. Carbiener, et al., was filed in the Circuit Court of the 4th Judicial Circuit, in and for Duval County, Florida seeking damages for alleged violations of federal securities laws in connection with our disclosures relating to our default operations. The parties agreed to a voluntary stay in this matter.

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Washington Mutual Receivership Proceedings

The Federal Deposit Insurance Corporation (“FDIC”), in its capacity as Receiver for Washington Mutual Bank (“WAMU”), filed a complaint against the Company and certain of its subsidiaries on May 9, 2011 in the U.S. District Court for the Central District of California to recover alleged losses of approximately $154.5 million. The FDIC contends these losses were a direct and proximate result of the defendants' alleged breach of contract with WAMU and alleged gross negligence with respect to the provision of certain services by the Company's subsidiary LSI Appraisal LLC, an appraisal management company. In particular, the FDIC claims that the services provided failed to conform to federal and state law, regulatory guidelines and other industry standards, including specifically the provisions of the Uniform Standards of Professional Appraisal Practice (“USPAP”). The Company believes that the services it provided satisfied the terms and conditions of its contract with WAMU and were not performed with gross negligence. LPS filed a motion to dismiss the complaint on July 22, 2011 and the FDIC filed a response opposing the motion on August 4, 2011. On November 2, 2011, the court issued an order granting the Company's motion to dismiss the FDIC's claims of gross negligence, alter ego, single business enterprise and joint venture. On November 28, 2011 the FDIC amended its complaint, and the Company filed another motion to dismiss on December 23, 2011, which the FDIC opposed on January 23, 2012. On February 6, 2012, the court denied in part and granted in part the Company's motion to dismiss, but granted the FDIC leave to amend its complaint. On February 17, 2012, the FDIC filed a second amended complaint. The only remaining claim in this matter is the FDIC's claim for breach of contract, which the Company intends to vigorously defend.

American Home Mortgage Servicing, Inc.

American Home Mortgage Servicing, Inc. (“AHMSI”) filed a complaint against the Company and DocX, LLC ("DocX") on August 23, 2011 in District Court for Dallas County, Texas. The parties agreed to a voluntary stay of the proceeding pending the outcome of binding arbitration of the dispute. In the arbitration proceeding, AHMSI is seeking indemnification of approximately $21 million for damages, costs and expenses allegedly incurred as a result of negligence and breach of contract by DocX in connection with document execution and recording services provided to AHMSI by DocX.

Regulatory Matters

Due to the heavily regulated nature of the mortgage industry, from time to time we receive inquiries and requests for information from various state and federal regulatory agencies, including state attorneys general, the U.S. Department of Justice and other agencies, about various matters relating to our business. These inquiries take various forms, including informal or formal requests, reviews, investigations and subpoenas. We attempt to cooperate with all such inquiries.

There continues to be increased scrutiny of all parties involved in the mortgage industry by governmental authorities, judges and the news media, among others. We have responded to or are currently responding to inquiries from multiple governmental agencies. These inquiries range from informal requests for information to grand jury subpoenas. In 2010, we learned that the U.S. Attorney's office for the Middle District of Florida and the Florida Attorney General had begun conducting separate inquiries concerning certain business processes in our default operations. Since then, other federal and state authorities, including various regulatory agencies, and other state attorneys general, have initiated inquiries about these matters, and additional agencies may do so in the future. The business processes that these authorities are considering include the former document preparation, verification, signing and notarization practices of certain of our default operations and our relationships with foreclosure attorneys. We have discovered, during our own internal reviews, potential issues related to some of these practices which may cause the validity of certain documents used in foreclosure proceedings to be challenged. However, we are not aware of any person who was wrongfully foreclosed upon as a result of a potential error in the processes used by our employees. We have been cooperating and we have expressed our willingness to continue to fully cooperate with all such inquiries. Through the date of this filing, we have settled inquiries made by the attorneys general in the states of Missouri, Delaware and Colorado.

Nevada Attorney General

On December 15, 2011, the Nevada Attorney General filed a civil complaint in the District Court for Clark County alleging various violations of the Nevada Unfair and Deceptive Trade Practices Act. On January 30, 2012, the Company filed a motion to dismiss the complaint. On February 17, 2012, the parties filed a stipulation to stay the proceeding while the parties engage in settlement negotiations relative to this complaint. The stay expired on April 21, 2012. At a hearing on the motion to dismiss held on July 19, 2012, the court granted in part and denied in part the Company's motion to dismiss. On August 3, 2012, the Nevada Attorney General filed an amended complaint, which the Company has answered. The Company intends to vigorously defend this matter.

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Consent Order

Following a review by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Office of Thrift Supervision (collectively, the “banking agencies”), we have entered into a consent order (the “Order”) dated April 13, 2011 with the banking agencies. The banking agencies' review of our services included the services provided by our default operations to mortgage servicers regulated by the banking agencies, including document execution services. The Order does not make any findings of fact or conclusions of wrongdoing, nor does LPS admit any fault or liability. Under the Order, we agreed to further study the issues identified in the review and to enhance our compliance, internal audit, risk management and board oversight plans with respect to those businesses. We also agreed to engage an independent third party to conduct a risk assessment and review of our default management businesses and the document execution services we provided to servicers from January 1, 2008 through December 31, 2010. To the extent such review requires additional remediation of mortgage documents or identifies any financial injury from the document execution services we provided, we have agreed to implement an appropriate plan to address the issues. The Order contains various deadlines by which we have agreed to accomplish the undertakings set forth therein, and we have agreed to make periodic reports to the banking agencies on our progress. The Order does not include any fine or other monetary penalty, although the banking agencies have not yet concluded their assessment of whether any civil monetary penalties may be imposed.

Based on our current knowledge, we believe that the outcome of all pending or threatened legal and regulatory matters, including those described above, will not have a material adverse impact on our business operations, consolidated financial condition or liquidity. However, it is difficult to predict the final outcome of these matters due, among other things, to the early stage of many of these matters and the fact that these matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities. As a result, there can be no assurance that we will not incur costs and expenses in the future in excess of our current accrual that would be material, including but not limited to settlements, damages, fines or penalties and legal costs, or be subject to other remedies, as a result of the matters described above or other legal or regulatory matters. Therefore, it is reasonably possible that the current accrual for legal and regulatory matters will change and that the change could become material to the consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements other than operating leases and the escrow arrangements described below and in our Annual Report on Form 10-K filed on February 29, 2012.

Escrow Arrangements

In conducting our title agency and closing services, we routinely hold customers' assets in escrow accounts, pending completion of real estate related transactions. Certain of these amounts are maintained in segregated accounts, and these amounts have not been included in the accompanying condensed consolidated balance sheets. As an incentive for holding deposits at certain banks, we periodically have programs for realizing economic benefits through favorable arrangements with these banks. As of September 30, 2012, the aggregate value of all amounts held in escrow in our title agency and closing services operations totaled $447.1 million.

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(13) Segment Information

As discussed in note 1, in connection with organizational realignments implemented during the first quarter ended March 31, 2012, the composition of our reporting segments has changed. Prior year information was reclassified to conform to the current year's presentation. Summarized unaudited financial information concerning our segments is shown in the following tables.

As of and for the three months ended September 30, 2012 (in thousands):



	Technology, Data and Analytics		Transaction Services		Corporate and Other			Total
Revenues	$	191,956	$	320,714	$	6		$	512,676
Operating expenses (1)	112,814		251,770		11,132			375,716
Depreciation and amortization	18,765		4,767		984			24,516
Operating income (loss)	60,377		64,177		(12,110		)	112,444
Total other income (expense)	486		684		(16,805		)	(15,635		)
Earnings (loss) from continuing operations before income taxes	$	60,863	$	64,861	$	(28,915	)	$	96,809
Balance sheet data:
Total assets (2)	$	1,250,565	$	757,754	$	361,209		$	2,369,528
Goodwill (2)	$	741,619	$	384,471	$	—		$	1,126,090

As of and for the three months ended September 30, 2011 (in thousands):



	Technology, Data and Analytics		Transaction Services		Corporate and Other			Total
Revenues	$	173,138	$	348,095	$	(1,796	)	$	519,437
Operating expenses (1)	99,303		287,545		17,575			404,423
Depreciation and amortization	15,120		4,726		976			20,822
Operating income (loss)	58,715		55,824		(20,347		)	94,192
Total other income (expense)	271		455		(23,487		)	(22,761		)
Earnings (loss) from continuing operations before income taxes	$	58,986	$	56,279	$	(43,834	)	$	71,431
Balance sheet data:
Total assets (2)	$	1,247,114	$	764,728	$	237,457		$	2,249,299
Goodwill (2)	$	765,153	$	385,478	$	—		$	1,150,631

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For the nine months ended September 30, 2012 (in thousands):



	Technology, Data and Analytics		Transaction Services		Corporate and Other			Total
Revenues	$	556,204	$	997,692	$	(1,992	)	$	1,551,904
Operating expenses (1)	328,575		791,898		30,432			1,150,905
Depreciation and amortization	55,385		14,153		3,000			72,538
Legal and regulatory charges	—		—		144,476			144,476
Operating income (loss)	172,244		191,641		(179,900		)	183,985
Total other income (expense)	1,254		1,938		(50,623		)	(47,431		)
Earnings (loss) from continuing operations before income taxes	$	173,498	$	193,579	$	(230,523	)	$	136,554

For the nine months ended September 30, 2011 (in thousands):



	Technology, Data and Analytics		Transaction Services		Corporate and Other			Total
Revenues	$	512,259	$	1,048,800	$	(4,779	)	$	1,556,280
Operating expenses (1)	291,575		841,197		42,609			1,175,381
Depreciation and amortization	49,234		13,984		3,227			66,445
Exit, impairment and other charges	8,887		4,052		16,259			29,198
Operating income (loss)	162,563		189,567		(66,874		)	285,256
Total other income (expense)	1,033		1,234		(52,338		)	(50,071		)
Earnings (loss) from continuing operations before income taxes	$	163,596	$	190,801	$	(119,212	)	$	235,185

_________

(1) Operating expenses within the "Corporate and Other" segment are attributable to unallocated general and administrative expenses, which the Company believes are immaterial.

(2) Includes the impact of discontinued operations.

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(14) Condensed Consolidating Financial Information

As explained in note 10, on August 18, 2011, LPS (the “Parent Company”) entered into an Amendment, Restatement and Joinder Agreement (the "Amendment Agreement") in respect of the Credit Agreement dated as of July 2, 2008 (the "2008 Credit Agreement"). The 2011 Credit Agreement and the Notes are fully and unconditionally guaranteed, jointly and severally, by the majority of the subsidiaries of the Parent Company (the “Subsidiary Guarantors”). Certain other subsidiaries (the “Other Subsidiaries”) are not guarantors of the 2011 Credit Agreement and the Notes. The guarantees of the Notes by the Subsidiary Guarantors are general unsecured obligations of the Subsidiary Guarantors, and accordingly are senior to any of their existing and future subordinated debt obligations, equal in right of payment with any of their existing and future senior unsecured indebtedness and effectively subordinated to any of their existing and future secured indebtedness to the extent of the assets securing such debt (including the Subsidiary Guarantors' obligations under the 2011 Credit Agreement).

The Parent Company conducts virtually all of its business operations through its Subsidiary Guarantors and Other Subsidiaries. Accordingly, the Parent Company's main sources of internally generated cash are dividends and distributions with respect to its ownership interests in the subsidiaries, which are derived from the cash flow generated by the subsidiaries.

As of September 30, 2012, the Parent Company has no independent assets or operations, and our subsidiaries' guarantees are full and unconditional and joint and several. There are no significant restrictions on the ability of LPS or any of the Subsidiary Guarantors to obtain funds from any of our subsidiaries other than National Title Insurance of New York, Inc., our title insurance underwriter subsidiary, by dividend or loan. As discussed in note 6, NTNY is statutorily required to maintain investment assets backing its reserves for settling losses on the policies it issues, and its ability to pay dividends or make loans is limited by regulatory requirements. NTNY, which is not a subsidiary guarantor, was more than a minor subsidiary as of and during the three and nine month periods ended September 30, 2012 and 2011.

The following tables set forth, on a condensed consolidating basis, the balance sheets, the statements of operations and comprehensive earnings (loss) and the statements of cash flows for the Parent Company, the Subsidiary Guarantors and Other Subsidiaries as of and for the three and nine months ended September 30, 2012 and September 30, 2011, respectively.

The following table represents our condensed consolidating balance sheet as of September 30, 2012 (in thousands):



	Parent Company (1)			Subsidiary Guarantors		Other Subsidiaries		Consolidating Adjustments			Total Consolidated Amounts
Assets:
Current assets	$	3,790		$	598,397	$	16,119	$	—		$	618,306
Investment in subsidiaries	1,557,561			—		—		(1,557,561		)	—
Non-current assets	19,442			1,651,147		80,633		—			1,751,222
Total assets	$	1,580,793		$	2,249,544	$	96,752	$	(1,557,561	)	$	2,369,528
Liabilities and equity:
Current liabilities	$	(13,276	)	$	500,310	$	40,478	$	—		$	527,512
Total liabilities	1,035,736			747,534		41,201		—			1,824,471
Total equity	545,057			1,502,010		55,551		(1,557,561		)	545,057
Total liabilities and equity	$	1,580,793		$	2,249,544	$	96,752	$	(1,557,561	)	$	2,369,528

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The following table represents our condensed consolidating statement of operations and comprehensive earnings (loss) for the three months ended September 30, 2012 (in thousands):



	Parent Company (2)			Subsidiary Guarantors			Other Subsidiaries		Consolidating Adjustments			Total Consolidated Amounts
Revenues	$	—		$	431,652		$	81,024	$	—		$	512,676
Total operating expenses	7,172			316,072			76,988		—			400,232
Operating income (loss)	(7,172		)	115,580			4,036		—			112,444
Total other income (expense)	(16,112		)	9			468		—			(15,635		)
Earnings (loss) from continuing operations before income taxes and equity in earnings of consolidated entities	(23,284		)	115,589			4,504		—			96,809
Provision (benefit) for income taxes	(8,685		)	42,991			1,804		—			36,110
Earnings (loss) from continuing operations before equity in earnings of consolidated entities	(14,599		)	72,598			2,700		—			60,699
Equity in earnings (loss) of consolidated entities, net of tax	72,903			—			—		(72,903		)	—
Earnings (loss) from continuing operations	58,304			72,598			2,700		(72,903		)	60,699
Loss from discontinued operations, net of tax	—			(2,395		)	—		—			(2,395		)
Net earnings (loss)	58,304			70,203			2,700		(72,903		)	58,304
Total other comprehensive earnings (loss)	(737		)	—			3		—			(734		)
Comprehensive earnings (loss)	$	57,567		$	70,203		$	2,703	$	(72,903	)	$	57,570

The following table represents our condensed consolidating statement of operations and comprehensive earnings (loss) for the nine months ended September 30, 2012 (in thousands):



	Parent Company (2)			Subsidiary Guarantors			Other Subsidiaries		Consolidating Adjustments			Total Consolidated Amounts
Revenues	$	—		$	1,312,535		$	239,369	$	—		$	1,551,904
Total operating expenses	19,520			1,119,070			229,329		—			1,367,919
Operating income (loss)	(19,520		)	193,465			10,040		—			183,985
Total other income (expense)	(48,969		)	116			1,422		—			(47,431		)
Earnings (loss) from continuing operations before income taxes and equity in earnings of consolidated entities	(68,489		)	193,581			11,462		—			136,554
Provision (benefit) for income taxes	(25,547		)	82,122			4,398		—			60,973
Earnings (loss) from continuing operations before equity in earnings of consolidated entities	(42,942		)	111,459			7,064		—			75,581
Equity in earnings of consolidated entities, net of tax	110,487			—			—		(110,487		)	—
Earnings (loss) from continuing operations	67,545			111,459			7,064		(110,487		)	75,581
Loss from discontinued operations, net of tax	—			(8,036		)	—		—			(8,036		)
Net earnings (loss)	67,545			103,423			7,064		(110,487		)	67,545
Total other comprehensive earnings (loss)	(2,568		)	—			924		—			(1,644		)
Comprehensive earnings	$	64,977		$	103,423		$	7,988	$	(110,487	)	$	65,901

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The following table represents our condensed consolidating statement of cash flows for the nine months ended September 30, 2012 (in thousands):



	Parent Company			Subsidiary Guarantors			Other Subsidiaries			Consolidating Adjustments			Total Consolidated Amounts
Net earnings	$	67,545		$	103,423		$	7,064		$	(110,487	)	$	67,545
Adjustment to reconcile net earnings to net cash provided by (used in) operating activities:
Non-cash expenses and other items	(90,458		)	73,385			236			110,487			93,650
Changes in assets and liabilities, net of effects from acquisitions	(27,500		)	159,719			10,156			—			142,375
Net cash provided by (used in) operating activities	(50,413		)	336,527			17,456			—			303,570
Net cash provided by (used in) investing activities	3,956			(105,365		)	(18,036		)	—			(119,445		)
Net cash used in financing activities	(98,764		)	(2,000		)	—			—			(100,764		)
Net increase (decrease) in cash and cash equivalents	$	(145,221	)	$	229,162		$	(580	)	$	—		83,361
Cash and cash equivalents, beginning of period													77,355
Cash and cash equivalents, end of period													$	160,716

The following table represents our condensed consolidating balance sheet as of December 31, 2011 (in thousands):



	Parent Company(1)		Subsidiary Guarantors		Other Subsidiaries		Consolidating Adjustments			Total Consolidated Amounts
Assets:
Current assets	$	2,065	$	515,189	$	13,582	$	—		$	530,836
Investment in subsidiaries	1,599,546		—		—		(1,599,546		)	—
Non-current assets	22,761		1,629,971		61,847		—			1,714,579
Total assets	$	1,624,372	$	2,145,160	$	75,429	$	(1,599,546	)	$	2,245,415
Liabilities and equity:
Current liabilities	$	55,856	$	368,780	$	33,350	$	—		$	457,986
Total liabilities	1,136,384		588,408		32,635		—			1,757,427
Total equity	487,988		1,556,752		42,794		(1,599,546		)	487,988
Total liabilities and equity	$	1,624,372	$	2,145,160	$	75,429	$	(1,599,546	)	$	2,245,415

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The following table represents our condensed consolidating statement of operations and comprehensive earnings (loss) for the three months ended September 30, 2011 (in thousands):



	Parent Company (2)			Subsidiary Guarantors			Other Subsidiaries		Consolidating Adjustments			Total Consolidated Amounts
Revenues	$	—		$	454,206		$	65,231	$	—		$	519,437
Total operating expenses	9,313			351,856			64,076		—			425,245
Operating income (loss)	(9,313		)	102,350			1,155		—			94,192
Total other income (expense)	(22,986		)	(112		)	337		—			(22,761		)
Earnings (loss) from continuing operations before income taxes and equity in earnings of consolidated entities	(32,299		)	102,238			1,492		—			71,431
Provision (benefit) for income taxes	(12,112		)	38,340			559		—			26,787
Earnings (loss) from continuing operations before equity in earnings of consolidated entities	(20,187		)	63,898			933		—			44,644
Equity in earnings of consolidated entities, net of tax	60,637			—			—		(60,637		)	—
Earnings from continuing operations	40,450			63,898			933		(60,637		)	44,644
Loss from discontinued operations, net of tax	—			(4,194		)	—		—			(4,194		)
Net earnings	40,450			59,704			933		(60,637		)	40,450
Total other comprehensive earnings (loss)	(1,377		)	—			744		—			(633		)
Comprehensive earnings	$	39,073		$	59,704		$	1,677	$	(60,637	)	$	39,817

The following table represents our condensed consolidating statement of operations and comprehensive earnings (loss) for the nine months ended September 30, 2011 (in thousands):



	Parent Company (2)			Subsidiary Guarantors			Other Subsidiaries		Consolidating Adjustments			Total Consolidated Amounts
Revenues	$	—		$	1,366,765		$	189,515	$	—		$	1,556,280
Total operating expenses	28,179			1,058,419			184,426		—			1,271,024
Operating income (loss)	(28,179		)	308,346			5,089		—			285,256
Total other income (expense)	(50,961		)	(112		)	1,002		—			(50,071		)
Earnings (loss) from continuing operations before income taxes and equity in earnings of consolidated entities	(79,140		)	308,234			6,091		—			235,185
Provision (benefit) for income taxes	(29,678		)	115,589			2,284		—			88,195
Earnings (loss) from continuing operations before equity in earnings of consolidated entities	(49,462		)	192,645			3,807		—			146,990
Equity in earnings of consolidated entities, net of tax	167,206			—			—		(167,206		)	—
Earnings from continuing operations	117,744			192,645			3,807		(167,206		)	146,990
Loss from discontinued operations, net of tax	—			(29,246		)	—		—			(29,246		)
Net earnings	117,744			163,399			3,807		(167,206		)	117,744
Total other comprehensive earnings (loss)	(2,087		)	—			1,004		—			(1,083		)
Comprehensive earnings	$	115,657		$	163,399		$	4,811	$	(167,206	)	$	116,661

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The following table represents our condensed consolidating statement of cash flows for the nine months ended September 30, 2011 (in thousands):



	Parent Company			Subsidiary Guarantors			Other Subsidiaries			Consolidating Adjustments			Total Consolidated Amounts
Cash flows from operating activities:
Net earnings	$	117,744		$	163,399		$	3,807		$	(167,206	)	$	117,744
Adjustment to reconcile net earnings to net cash provided by (used in) operating activities:
Non-cash expenses and other items	(136,941		)	126,272			210			167,206			156,747
Changes in assets and liabilities, net of effects from acquisitions	(48,221		)	101,809			1,522			—			55,110
Net cash provided by (used in) operating activities	(67,418		)	391,480			5,539			—			329,601
Net cash used in investing activities	—			(106,944		)	(14,933		)	—			(121,877		)
Net cash used in financing activities	(176,051		)	—			—			—			(176,051		)
Net increase (decrease) in cash and cash equivalents	$	(243,469	)	$	284,536		$	(9,394	)	$	—		31,673
Cash and cash equivalents, beginning of period													52,287
Cash and cash equivalents, end of period													$	83,960

______________

(1) The Parent Company does not allocate current or deferred income taxes to the Subsidiary Guarantors or Other Subsidiaries.

(2) The Parent Company does not allocate corporate overhead to the Subsidiary Guarantors or Other Subsidiaries.

(15) Subsequent Events

Subsequent events have been evaluated through the date on which the condensed consolidated financial statements were filed.

Dividend Declared

On October 25, 2012, we declared a regular dividend of $0.10 per common share. The dividend is payable on December 20, 2012 to shareholders of record as of the close of business on December 6, 2012.

Refinancing Transactions

On September 27, 2012, the Company announced its plans to offer $600 million aggregate principal amount of Senior Notes, and commenced a tender offer and consent solicitation for all of its outstanding 2016 Notes. On October 12, 2012, we closed the offering of $600 million aggregate principal amount of 5.75% Senior Notes due 2023. The proceeds from the offering of the 2023 Notes, together with cash on hand, were used to purchase approximately $286.4 million aggregate principal amount of the Company's 2016 Notes accepted for payment and settlement in the Company's tender offer for the 2016 Notes, to prepay in full the outstanding Term B Loan under the 2011 Credit Agreement and to pay fees and expenses in connection with these transactions. The remaining proceeds will be used to redeem any remaining 2016 Notes not tendered in the tender offer. See note 10, which includes a description of the Company's offering of the 2023 Notes, the tender offer for the 2016 Notes, and the repayment of the Term B Loan under the 2011 Credit Agreement.

Subsequently on October 19, 2012, the Company entered into Amendment No. 1 to the 2011 Credit Agreement. See Note 10, which also includes a description of the amendments made to the 2011 Credit Agreement.

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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 Fidelity National Information Services, Inc. ("FIS"), a Georgia corporation. FIS and its subsidiaries owned all of LPS's shares until they were distributed to the shareholders of FIS in a tax-free spin-off on July 2, 2008.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with Item 1: Condensed Consolidated Financial Statements (Unaudited) and the notes thereto included elsewhere in this report. The discussion below 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: our ability to adapt our services to changes in technology or the marketplace; the impact of adverse changes in the level of real estate activity (including, among others, loan originations and foreclosures) on demand for certain of our services; our ability to maintain and grow our relationships with our customers; the effects of our substantial leverage on our ability to make acquisitions and invest in our business; the level of scrutiny being placed on participants in the foreclosure process; risks associated with federal and state enforcement proceedings, inquiries and examinations currently underway or that may be commenced in the future with respect to our default management operations, and with civil litigation related to these matters; the impact of continued delays in the foreclosure process on the timing and collectability of our fees for certain of our services; changes to the laws, rules and regulations that regulate our businesses as a result of the current economic and financial environment; changes in general economic, business and political conditions, including changes in the financial markets; the impact of any potential defects, development delays, installation difficulties or system failures on our business and reputation; risks associated with protecting information security and privacy; and other risks and uncertainties detailed in the “Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of the Company's Form 10-K, this Form 10-Q and our other filings with the Securities and Exchange Commission.

Overview

We are a provider of integrated technology and transaction services to the mortgage lending industry, with market leading positions in mortgage processing and default management services in the U.S. We conduct our operations through two reporting segments, Technology, Data and Analytics and Transaction Services, which produced approximately 36% and 64%, respectively, of our revenues for the nine month periods ended September 30, 2012. A large number of financial institutions use our solutions. Our technology solutions include our mortgage processing system, which automates all areas of loan servicing, from loan setup and ongoing processing to customer service, accounting and reporting. Our technology solutions also include our Desktop system, which is a middleware enterprise workflow management application designed to streamline and automate business processes. Our transaction services include our default services, which are used by mortgage lenders, servicers and other real estate professionals to reduce the expense of managing defaulted loans, and our origination services, which support most aspects of the closing of mortgage loan transactions by lenders and loan servicers.

Our Technology, Data and Analytics segment principally includes:


•	Servicing Technology. Our mortgage servicing technology, which we conduct using our mortgage servicing platform and our team of experienced support personnel;


•	Default Technology. Our Desktop application, a workflow system that assists our customers in managing business processes, which is primarily used in connection with mortgage loan default management;


•	Origination Technology. Our mortgage origination technology and our collaborative electronic vendor network, which provides connectivity among mortgage industry participants; and


•	Data and Analytics. Our data and analytics businesses, in which we provide automated valuation products and aggregated property, loan and tax status data services.

Our Transaction Services segment offers a range of services used mainly in the production of a mortgage loan, which we refer to as origination services, and in the management of mortgage loans that go into default, which we refer to as default services.

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Our origination services include:


•	settlement and title agency services, in which we act as an agent for title insurers or as an underwriter, and closing services, in which we assist in the closing of real estate transactions;


•	appraisal services, which consist of traditional appraisals provided through our appraisal management company; and


•	other origination services, including flood zone information, which assists lenders in determining whether a property is in a federally designated flood zone.

Our default services include, among others:


•	foreclosure management services, including administrative services provided to independent attorneys and trustees, mandatory title searches, posting and publishing, and other services;


•	property inspection and preservation services designed to preserve the value of properties securing defaulted loans;


•	asset management services, providing disposition services for our customers' real estate owned properties through independent real estate brokers, attorneys and other vendors to facilitate the transaction; and


•	alternative property valuation services, which provide a range of default related valuation services supporting the foreclosure process.

General and administrative expenses that are not included in our operating segments are included in Corporate and Other.

Recent Trends and Developments

Revenues in our origination businesses and certain of our data businesses are closely related to the level of residential real estate activity in the U.S., which includes sales, mortgage financing and mortgage refinancing. The level of real estate activity is primarily affected by real estate prices, the availability of funds for mortgage loans, mortgage interest rates and the overall state of the U.S. economy. The federal government has taken several steps over the last few years in an attempt to address the downturn in the housing market, including steps to reduce interest rates and programs such as the Home Affordability Refinance Program (the “HARP”) under which homeowners with loans owned by Fannie Mae or Freddie Mac who would otherwise be unable to get a refinancing loan because of a loss in home value have been able to refinance. On October 24, 2011, the Federal Housing Finance Agency announced a series of changes to HARP that have made it easier for certain borrowers who owe more than their home is worth and who are current on their mortgage payments to refinance their mortgages at the current lower interest rates and obtain other refinancing benefits ("HARP II").

The Mortgage Bankers Association (“MBA”) estimates that the level of U.S. mortgage originations, by dollar volume, was $1.4 trillion and $1.6 trillion in 2011 and 2010, respectively, with refinancing transactions comprising approximately 65% and 70%, respectively, of the total markets. Due to increased refinancing activity, the MBA's Mortgage Finance Forecast currently estimates that the mortgage origination market for 2012 will increase to $1.7 trillion, with more than 70% of that market representing refinancing transactions. However, the MBA forecasts a substantial drop in the mortgage origination market in 2013, including a decline of more than 20% in the overall market and a decline of more than 35% in the refinancing market specifically. Although we believe that the level of refinancing activity during 2012 has been positively impacted by continued low interest rates and government initiatives such as HARP II, it is difficult to predict whether and for how long the current level of refinancing activity may be sustained. The revenues for our origination businesses are linked to the volume of origination transactions, and refinancing transactions in particular, and a decrease in the level of origination activity could adversely affect the results of operations of those businesses.

Our various businesses are impacted differently by the level of mortgage originations and refinancing transactions. For instance, while our origination services and some of our data businesses are directly affected by the volume of real estate transactions and mortgage originations, our mortgage processing business is generally less affected because it earns revenues based on the total number of mortgage loans it processes, which tends to stay more constant. However, in the event that the difficult economy or other factors lead to a decline in levels of home ownership and a reduction in the number of mortgage loans outstanding and we are not able to counter the impact of those events with increased market share or higher fees, our mortgage processing revenues could be adversely affected.

In contrast, we believe that a weaker economy tends to increase the volume of consumer mortgage defaults, which can favorably affect our default management operations in which we service residential mortgage loans in default. These factors can

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also increase revenues from our Desktop solution, as the Desktop application, at present, is primarily used in connection with default management. However, in addition to providing refinancing opportunities for underwater borrowers through HARP, the federal government also implemented the Home Affordable Modification Program (“HAMP”), a loan modification program targeted at borrowers at risk of foreclosure because their incomes are not sufficient to make their mortgage payments. HAMP has been extended through December 31, 2013, and in 2012 the federal government has relaxed certain eligibility requirements for the program and has increased the financial incentives for banks to participate in it.

Through August 2012, the Treasury Department estimates that the banks had worked through most of the loans currently eligible for the HAMP program, and had offered approximately 2.2 million trial modifications. Of those, approximately 1.9 million trial modifications were actually implemented and approximately 1.1 million became permanent. While we believe that HAMP has had an adverse effect on the processing of delinquent loans (and may continue to have a negative effect in the future as additional mortgages become eligible under the program), the pace of modifications has slowed and we believe it will have a lessened impact going forward.

Notwithstanding the effects of existing government programs, the inventory of delinquent mortgage loans and loans in foreclosure remains significant. We believe this is due in part to a prolonged period of elevated delinquency rates coupled with a slowdown in the processing of foreclosures as lenders focused their resources on trying to make modifications under HAMP and on trying to confirm the compliance of their foreclosure procedures with applicable laws. In addition, following reviews conducted by federal banking regulatory agencies during late 2010 and early 2011 of their default and foreclosure processes, in April 2011, the 14 largest banks and certain of their third party service providers, including us, entered into consent orders with federal banking agencies. The consent orders further slowed the pace of foreclosures in 2011 as the banks and their third party providers tried to work through their requirements, and we believe this trend will continue for some time. Although five of the largest banks were able to reach a $25 billion settlement of federal and state investigations into their foreclosure practices that may result in more normalized foreclosure timelines in the future, we cannot predict whether any legislative or regulatory changes will be implemented as a result of the findings of the banking agencies following their default and foreclosure services reviews, or whether the government may take additional action to increase the success of HAMP or to otherwise address the current housing market and economic uncertainty. Any such actions could cause a continuation of or further slow the current level of foreclosure volumes and adversely affect our future results.

The slowdown in the processing of foreclosures has also adversely impacted a number of service providers in the default industry. For example, the foreclosure trustees that manage the foreclosure process for the servicers in many states are experiencing significant delays in the timing of receiving payments for their services. In many cases, the servicers direct these foreclosure trustees to use our default services, particularly our default title and our posting and publishing services. The fees for our services are passed through to the servicers, and we do not receive payment for these services until after the trustees are paid by the servicers, which often does not occur until the foreclosure process has been completed. As foreclosure timelines have continued to extend for longer periods, we have become uncertain of the trustees' ultimate ability to pay these fees and have increased our allowance for doubtful accounts. Continued delays in the foreclosure process and the timing of payments for these services could result in additional increases to our allowance for doubtful accounts or in the accounts becoming uncollectable.

The current economic downturn has also led to an increased legislative and regulatory focus on consumer protection practices. As a result, federal and state governments have enacted various new laws, rules and regulations. One example of such legislation is the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was signed into law in July 2010. The Dodd-Frank Act contains broad changes for many sectors of the financial services and lending industries. Among other things, the Dodd-Frank Act includes requirements for appraisals and appraisal management companies, including a requirement that appraisal fees be “customary and reasonable.” The Dodd-Frank Act also called for the establishment of the Consumer Finance Protection Bureau ("CFPB"), a new federal regulatory agency responsible for regulating consumer protection within the United States. It is difficult to predict the form that new rules or regulations implemented by the CFPB or other regulations or rule-makings implementing other requirements of the Dodd-Frank Act may take, what additional legislative or regulatory changes may be approved in the future, or whether those changes may require us to change our business practices, incur increased costs of compliance or adversely affect our results of operations.

Critical Accounting Policies

There have been no changes to our critical accounting policies since our Annual Report on Form 10-K was filed on February 29, 2012.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (the "FASB") issued Accounting Standard Update ("ASU") No. 2011-05, Presentation of Comprehensive Income, amended by ASU No. 2011-12, Deferral of the Effective Date for Amendments to the

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Presentation of Reclassifications of Items out of Accumulated Comprehensive Income. The ASUs eliminate the option to present the components of other comprehensive income (OCI) as part of the statement of changes in stockholders' equity and requires a company to present items of net income and other comprehensive income either in one continuous statement or in two separate, but consecutive statements. The statement also requires a company to present a statement of comprehensive income as part of the statements of condensed consolidating financial information. The new standard was effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We adopted the new guidance as of January 1, 2012. As we have historically presented two separate consecutive statements, the new guidance only requires the presentation of statements of condensed consolidating comprehensive earnings within note 14 to the condensed consolidated financial statements, included in Item 1 herein.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment, which contains changes to the testing of goodwill for impairment. These changes provide an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not (more than 50%) that the fair value of a reporting unit is less than its carrying amount. If an entity elects to perform a qualitative assessment and determines that an impairment is more likely than not, the entity is then required to perform the existing two-step quantitative impairment test, otherwise no further analysis is required. An entity may also elect not to perform the qualitative assessment and, instead, go directly to the two step quantitative impairment test. ASU No. 2011-08 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We adopted the new guidance in ASU No. 2011-08 as of January 1, 2012 and elected to perform the qualitative assessment for our annual impairment test using our September 30th measurement date to determine if further analysis is required for any of our reporting units.

In July 2012, the FASB issued an amended standard, ASU No. 2012-02, Intangibles — Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, to simplify how entities test indefinite-lived intangible assets for impairment, which improves consistency in impairment testing requirements among long-lived asset categories. The amended standard permits an assessment of qualitative factors to determine whether it is more likely than not (more than 50%) that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, the standard eliminates the requirement to perform quantitative impairment testing. The amended standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, and early adoption is permitted. We will adopt the amended standard on January 1, 2013, and we do not expect it to have an impact on the Company's consolidated financial position or results of operations.

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU No. 2011-04 develops common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with US GAAP and International Financial Reporting Standards (IFRSs) and improves the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with US GAAP and IFRSs. ASU No. 2011-04 is effective for fiscal years and interim periods beginning after December 15, 2011. We adopted the new guidance in ASU No. 2011-04 as of January 1, 2012, which only requires additional disclosure and does not have an impact on the Company's consolidated financial position or results of operations.

Related Party Transactions

The Company did not have any related party transactions as of and during the three and nine months ended September 30, 2012. We conduct business with Ceridian Corporation, which was a related party during the three and nine month periods ended September 30, 2011. Ceridian ceased being a related party as of July 28, 2011. See note 3 to our condensed consolidated financial statements included in Part I for a detailed description of all related party transactions.

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Results of Operations for the three months ended September 30, 2012 and 2011

As discussed in note 1 to our condensed consolidated financial statements (unaudited) included in Part I, in connection with organizational realignments implemented during the first quarter of 2012, the composition of our reporting segments has changed. Prior year information was reclassified to conform to the current year's presentation. The following tables reflect certain amounts included in operating income and net earnings in our condensed consolidated statements of operations, the relative percentage of those amounts to total revenues, and the change in those amounts from the comparable prior year period.

Condensed Consolidated Results of Operations - Unaudited



	Three Months ended September 30,
							As a % of Revenues (1)				Variance 2012 vs. 2011 (1)
(in millions, except per share amounts)	2012			2011			2012		2011		$			%
Revenues	$	512.7		$	519.4		100	%	100	%	$	(6.7	)	(1	)%
Expenses:
Operating expenses	375.7			404.4			73	%	78	%	28.7			7	%
Depreciation and amortization	24.5			20.8			5	%	4	%	(3.7		)	(18	)%
Total expenses	400.2			425.2			78	%	82	%	25.0			6	%
Operating income	112.5			94.2			22	%	18	%	18.3			19	%
Operating margin	22		%	18		%
Other income (expense)	(15.6		)	(22.8		)	(3	)%	(4	)%	7.2			32	%
Earnings from continuing operations before income taxes	96.9			71.4			19	%	14	%	25.5			(36	)%
Provision for income taxes	36.1			26.8			7	%	5	%	(9.3		)	(35	)%
Net earnings from continuing operations	60.8			44.6			12	%	9	%	16.2			36	%
Loss from discontinued operations, net of tax	(2.4		)	(4.2		)	—	%	(1	)%	1.8			43	%
Net earnings	$	58.3		$	40.4		11	%	8	%	$	17.9		44	%
Net earnings per share - diluted	$	0.69		$	0.48

____________

(1) Columns may not total due to rounding.

Revenues

Consolidated revenues decreased $6.7 million, or 1%, during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. The overall decrease was primarily due to a 22% decline in default services revenue within our Transaction Services segment resulting from continued delays in the foreclosure process causing reduced volumes. These ongoing delays were largely due to continued regulatory scrutiny and monitoring, including consent orders entered into by a number of large servicers, judicial actions and voluntary delays by servicers. The decreases were offset by a 16% increase in origination services in our Transaction Services segment, resulting from higher loan origination volumes due to the continued low interest rate environment, the impact of HARP II, which reduced loan-to-value requirements and thereby allowed certain “underwater” borrowers to qualify for refinancing, and from market share gains. We also experienced growth in our TD&A segment, lead by increases in servicing technology, primarily due to continued strong transactional and professional services revenue; growth in our origination technology, due to higher refinancing activity which drives incremental transactional fees; and growth in default technology from the annualization of new client implementations onto our Desktop platform in 2011 and the impact of a change in estimate in our Desktop division resulting in the deferral of revenue of $5.4 million during the quarter ended September 30, 2011.

Operating Expenses

Operating expenses decreased $28.7 million, or 7%, during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. Operating expenses as a percentage of revenues decreased to 73% during the three months ended September 30, 2012 as compared to 78% during the three months ended September 30, 2011. This decrease is primarily attributable to a favorable revenue mix and related operating leverage in our higher margin origination and technology

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operations resulting from increased loan origination volumes and growth in our servicing and default technology services. These increases were partially offset by reduced operating leverage in default services as a result of the slowdown in foreclosure volumes and an elongation of foreclosure timelines which extends our servicing obligations, and from near-term investments in our origination technology in order to extend our services from a software licensing model to a software as a service (“SaaS”) model.

Depreciation and Amortization

Depreciation and amortization increased $3.7 million, or 18%, during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. Depreciation and amortization as a percentage of revenues have increased to 5% during the three months ended September 30, 2012, compared to 4% during the three months ended September 30, 2011, primarily due to increased amortization resulting from increased investments in infrastructure and key technology platforms during 2012.

Operating Income

Operating income increased $18.3 million during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. Operating margin increased to 22% during the three months ended September 30, 2012 from 18% during the three months ended September 30, 2011 as a result of the factors described above.

Other Income (Expense)

Other expense decreased $7.2 million, or 32%, during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011, primarily due to an $8.0 million charge incurred related to the write off of debt issuance costs as part of the refinancing of our credit facilities during the three month period ended September 30, 2011.

Provision for Income Taxes

Provision for income taxes on continuing operations were $36.1 million and $26.8 million during the three months ended September 30, 2012 and 2011, respectively, which resulted in an effective tax rate of 37.3% and 37.5%, respectively.

Loss from Discontinued Operations, net

During 2011, management made decisions to sell or dispose of certain non-core or underperforming business units including Verification Bureau, SoftPro, Rising Tide Auction, True Automation, Aptitude Solutions and certain operations previously included in our Real Estate Group, all of which were previously included as part of the Technology, Data and Analytics segment. Management also made the decision to sell our Tax Services business (other than our tax data services that provide lenders with information about the tax status of a property, which are now included in our Technology, Data and Analytics segment), which was previously included within the Transaction Services segment. As of September 30, 2012, all of the above businesses have been sold or disposed of. Loss from discontinued operations, net of tax, was $2.4 million and $4.2 million for the three month periods ended September 30, 2012 and 2011, respectively. See note 7 to our condensed consolidated financial statements included in Part I for a detailed description of our discontinued operations.

Net Earnings and Net Earnings Per Share- Diluted

Net earnings increased $17.9 million during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. Net earnings per diluted share increased to $0.69 during the three months ended September 30, 2012 as compared to $0.48 during the three months ended September 30, 2011. The increases in net earnings and net earnings per diluted share were a result of the factors described above.

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Segment Results of Operations - Technology, Data and Analytics - Unaudited



	Three Months Ended September 30,
							As a % of Revenues (1)				Variance 2012 vs. 2011 (1)
(in millions)	2012 (1)			2011 (1)			2012		2011		$			%
Revenues
Technology:	$	174.1		$	156.5		91	%	90	%	$	17.6		11	%
Servicing Technology	111.6			107.3			58	%	62	%	4.3			4	%
Default Technology	36.2			28.2			19	%	16	%	8.0			28	%
Origination Technology	26.3			21.0			14	%	12	%	5.3			25	%
Data and Analytics	18.0			16.7			9	%	10	%	1.3			8	%
Total Revenues	192.0			173.2			100	%	100	%	18.8			11	%
Expenses:
Operating expenses	112.8			99.3			59	%	57	%	(13.5		)	(14	)%
Depreciation and amortization	18.8			15.1			10	%	9	%	(3.7		)	(25	)%
Total expenses	131.6			114.4			69	%	66	%	(17.2		)	(15	)%
Operating income	$	60.4		$	58.8		31	%	34	%	$	1.6		3	%
Operating margin	31		%	34		%

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(1)	Columns may not total due to rounding.

Revenues

Revenues increased $18.8 million, or 11%, during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. The increase in servicing technology is primarily due to higher loan counts driving growth in recurring revenue, and continued strong transactional and professional services revenue. We also experienced growth in our origination technology due to higher refinancing activity which drives incremental transactional fees, growth in default technology from the annualization of new client implementations onto our Desktop platform in 2011, and the impact of a change in estimate resulting in the deferral of revenue of $5.4 million in our Desktop division during the quarter ended September 30, 2011.

Operating Expenses

Operating expenses increased $13.5 million, or 14%, during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. Operating expenses as a percentage of revenues increased to 59% during the three months ended September 30, 2012, compared to 57% during the three months ended September 30, 2011, primarily as a result of near-term investments in our origination technology in order to extend our services from a software licensing model to a software as a service (“SaaS”) model.

Depreciation and Amortization

Depreciation and amortization increased $3.7 million, or 25%, during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. Depreciation and amortization as a percentage of revenues have increased to approximately 10% during the three months ended September 30, 2012 as compared to 9% for the three months ended September 30, 2011 primarily due to increased amortization resulting from increased investments in infrastructure and key technology platforms during 2012.

Operating Income

Operating margin decreased to 31% during the three months ended September 30, 2012 as compared to 34% during the three months ended September 30, 2011 as a result of the factors described above.

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Segment Results of Operations - Transaction Services - Unaudited



	Three Months Ended September 30,
							As a % of Revenues (1)				Variance 2012 vs. 2011 (1)
(in millions)	2012 (1)			2011 (1)			2012		2011		$			%
Revenues
Origination Services	$	154.1		$	133.1		48	%	38	%	$	21.0		16	%
Default Services	166.7			215.0			52	%	62	%	(48.3		)	(22	)%
Total Revenues	320.7			348.1			100	%	100	%	(27.4		)	(8	)%
Expenses:
Operating expenses	251.8			287.5			79	%	83	%	35.7			12	%
Depreciation and amortization	4.8			4.7			1	%	1	%	(0.1		)	(2	)%
Total expenses	256.6			292.2			80	%	84	%	35.6			12	%
Operating income	$	64.1		$	55.9		20	%	16	%	$	8.2		15	%
Operating margin	20		%	16		%

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(1)	Columns may not total due to rounding.

Revenues

Revenues decreased $27.4 million, or 8%, during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. This decrease was primarily due to a 22% decrease in our default services revenue from continued delays in the foreclosure process causing reduced volumes as a result of continuing regulatory scrutiny and monitoring, judicial actions and voluntary delays by servicers. This decrease was partially offset by a 16% increase in our origination services revenue as a result of higher loan origination volumes due to the continued low interest rate environment, the impact of HARP II and market share gains, partially offset by lower appraisal volumes as we have exited certain lower margin contracts.

Operating Expenses

Operating expenses decreased $35.7 million, or 12%, during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. Operating expenses as a percentage of revenues decreased to 79% during the three months ended September 30, 2012 as compared to 83% during the three months ended September 30, 2011. This decrease is primarily attributable to favorable revenue mix and related operating leverage in our higher margin origination operations resulting from increased loan origination volumes.

Depreciation and Amortization

Depreciation and amortization increased 2% during the three months ended September 30, 2012 when compared to the three months ended September 30, 2011. Depreciation and amortization as a percentage of revenue remained constant at 1% during the three months periods ended September 30, 2012 and 2011.

Operating Income

Operating margin increased to 20% during the three months ended September 30, 2012 from 16% during the three months ended September 30, 2011 due to the factors described above.

Segment Results of Operations - Corporate and Other - Unaudited

The Corporate and Other segment consists of general and administrative expenses that are not included in the other segments, legal and regulatory charges, and the impact of certain smaller operations. Net operating expenses for this segment decreased to $12.1 million for the three months ended September 30, 2012 from $20.3 million for the three months ended September 30, 2011 primarily due to the increase to our legal and regulatory accrual during the second quarter of 2012, which was previously established in the fourth quarter of 2011, and the impact of charging our legal expenses against the accrual instead of to expense during the

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three months ended September 30, 2012.

Results of Operations for the nine months ended September 30, 2012 and 2011

Condensed Consolidated Results of Operations - Unaudited



	Nine Months Ended September 30,
							As a % of Revenues (1)				Variance 2012 vs. 2011 (1)(2)
(in millions, except per share amounts)	2012			2011			2012		2011		$			%
Revenues	$	1,551.9		$	1,556.3		100	%	100	%	$	(4.4	)	—	%
Expenses:
Operating expenses	1,150.9			1,175.4			74	%	76	%	24.5			2	%
Depreciation and amortization	72.5			66.4			5	%	5	%	(6.1		)	(9	)%
Legal and regulatory charges	144.5			—			9	%	—	%	(144.5		)	nm
Exit costs, impairments and other charges	—			29.2			—	%	2	%	29.2			nm
Total expenses	1,367.9			1,271.0			88	%	82	%	(96.9		)	(8	)%
Operating income	184.0			285.3			12	%	18	%	(101.3		)	(36	)%
Operating margin	12%			18%
Other income (expense)	(47.4		)	(50.1		)	(3	)%	(3	)%	2.7			5	%
Earnings from continuing operations before income taxes	136.6			235.2			9	%	15	%	(98.6		)	(42	)%
Provision for income taxes	61.0			88.2			4	%	6	%	27.2			31	%
Net earnings from continuing operations	75.6			147.0			5	%	9	%	(71.4		)	(49	)%
Loss from discontinued operations, net of tax	(8.0		)	(29.2		)	(1	)%	(2	)%	21.2			73	%
Net earnings	$	67.6		$	117.8		4	%	8	%	$	(50.2	)	(43	)%
Net earnings per share - diluted	$	0.80		$	1.37

____________

(1) Columns may not total due to rounding.

(2) Certain percentages are not meaningful, indicated by "nm."

Revenues

Consolidated revenues decreased $4.4 million, or less than 1%, during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. This decrease was primarily due to a 5% decrease in revenues in the Transaction Services segment, which was largely driven by a 20% decline in default services revenue resulting from continued delays in the foreclosure process causing reduced volumes, and from an increase in the sales allowance reserve of $5.2 million during 2012 based on management's ongoing assessment of the impact of these delays on the collectability of our accounts receivable. This decrease in default services was largely offset by a 23% increase in origination services as a result of higher loan origination volumes due to the continued low interest rate environment, the impact of HARP II, and from market share gains. We also benefited from a 9% increase in our Technology, Data and Analytics segment as a result of growth in our technology operations which provide servicing, origination and default related technologies.

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Operating Expenses

Operating expenses decreased $24.5 million, or 2%, during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. Operating expenses as a percentage of revenues decreased to 74% during the first nine months of 2012 as compared to 76% during the first nine months of 2011. The factors contributing to this decrease include favorable revenue mix and related operating leverage in our higher margin origination operations in our Transaction Services segment resulting from increased loan origination volumes, partially offset by near-term investments in our origination technology in order to extend our services from a software licensing model to a software as a service (“SaaS”) model.

Depreciation and Amortization

Depreciation and amortization increased $6.1 million, or 9%, during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. Depreciation and amortization as a percentage of revenues remained constant at approximately 5% during the nine months ended September 30, 2012 and September 30, 2011.

Legal and Regulatory Charges

We recorded a legal and regulatory charge of $144.5 million during the second quarter of 2012 for legal and regulatory matters for which we believe a loss contingency is probable and estimable. See note 12 to our condensed consolidated financial statements included in Part I for a detailed description of pending and threatened litigation and regulatory matters related to our operations.

Exit Costs, Impairments and Other Charges

We recorded a $29.2 million charge during the first nine months of 2011 primarily related to severance charges resulting from our various cost reduction initiatives described in note 9 of our condensed consolidated financial statements.

Operating Income

Operating income decreased $101.3 million during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. Operating margin decreased to 12% during the nine months ended September 30, 2012 from 18% during the nine months ended September 30, 2011 as a result of the factors described above.

Other Income (Expense)

Other expense decreased $2.7 million, or 5%, during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011, primarily due to a decrease in interest expense during the nine month period ending September 30, 2012 from lower average interest rates under our amended and restated credit facilities.

Provision for Income Taxes

Income taxes on continuing operations were $61.0 million and $88.2 million during the nine months ended September 30, 2012 and 2011, respectively, which resulted in an effective tax rate of 44.7% and 37.5%, respectively. The change in the effective rate during the nine month period ended September 30, 2012 is due to assumptions regarding the deductibility of the legal and regulatory charge recorded during the current year period.

Loss from Discontinued Operations, net

During 2011, management made decisions to sell or dispose of certain non-core or underperforming business units including Verification Bureau, SoftPro, Rising Tide Auction, True Automation, Aptitude Solutions and certain operations previously included in our Real Estate Group, all of which were previously included as part of the Technology, Data and Analytics segment. Management also made the decision to sell our Tax Services business (other than our tax data services that provide lenders with information about the tax status of a property, which are now included in our Technology, Data and Analytics segment), which was previously included within the Transaction Services segment. As of September 30, 2012, all of the above businesses have been sold or disposed of. Loss from discontinued operations, net of tax, was $8.0 million and $29.2 million for the nine month periods ended September 30, 2012 and 2011, respectively. The decrease in the loss from discontinued operations for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 was predominately the result of the sales or disposal of the above business units which caused decreased operating losses during the nine month period ended September 30, 2012. The decrease in the loss was also a result of a net gain of $6.7 million associated with the sale of discontinued operations during the first quarter of 2012. See note 7 to our condensed consolidated financial statements included in Part I for a detailed description

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of our discontinued operations.

Net Earnings and Net Earnings Per Share- Diluted

Net earnings decreased $50.2 million during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. Net earnings per diluted share totaled $0.80 and $1.37 during the first nine months of 2012 and 2011, respectively. The decrease was a result of the factors described above, partially offset by a decrease in our weighted average shares outstanding, on a diluted basis, as a result of the Company's share repurchases during 2011 made in connection with our authorized share repurchase programs.

Segment Results of Operations - Technology, Data and Analytics - Unaudited



	Nine Months Ended September 30,
							As a % of Revenues (1)				Variance 2012 vs. 2011 (1)(2)
(in millions)	2012 (1)			2011 (1)			2012		2011		$			%
Revenues
Technology:	$	503.8		$	460.3		91	%	90	%	$	43.5		9	%
Servicing Technology	331.2			314.2			60	%	61	%	17.0			5	%
Default Technology	101.8			86.4			18	%	17	%	15.4			18	%
Origination Technology	70.8			59.5			13	%	12	%	11.3			19	%
Data and Analytics	52.4			51.9			9	%	10	%	0.5			1	%
Total Revenues	556.2			512.2			100	%	100	%	44.0			9	%
Expenses:
Operating expenses	328.6			291.6			59	%	57	%	(37.0		)	(13	)%
Depreciation and amortization	55.4			49.2			10	%	10	%	(6.2		)	(13	)%
Exit costs, impairments and other charges	—			8.9			—	%	2	%	8.9			nm
Total expenses	384.0			349.7			69	%	68	%	(34.3		)	(10	)%
Operating income	$	172.2		$	162.5		31	%	32	%	$	9.7		6	%
Operating margin	31		%	32		%

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(1)	Columns may not total due to rounding.

(2) Certain percentages are not meaningful, indicated by "nm."

Revenues

Revenues increased $43.5 million, or 9%, during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. The increase is primarily due to growth in servicing technology due to new client implementations onto our mortgage servicing platform in 2011 and higher transactional fees, growth in origination technology due to higher refinancing activity which drives incremental transactional fees, and from growth in default technology from the annualization of new client implementations onto our Desktop platform in 2011.

Operating Expenses

Operating expenses increased $37.0 million, or 13%, during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. Operating expenses as a percentage of revenues increased to 59% during the first nine months of 2012 as compared to 57% during the first nine months of 2011 primarily as a result of near-term investments in our origination technology in order to extend our services from a software licensing model to a software as a service (“SaaS”) model.

Depreciation and Amortization

Depreciation and amortization increased $6.2 million, or 13%, during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. Depreciation and amortization as a percentage of revenues remained constant at approximately 10% during the nine months ended September 30, 2012 and September 30, 2011.

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Exit Costs, Impairments and Other Charges

We recorded an $8.9 million charge during the first nine months of 2011 primarily related to severance charges resulting from our various cost reduction initiatives described in note 9 of our condensed consolidated financial statements.

Operating Income

Operating margin decreased to 31% during the nine months ended September 30, 2012 as compared to 32% during the nine months ended September 30, 2011 due to the factors described above.

Segment Results of Operations - Transaction Services - Unaudited



	Nine Months Ended September 30
							As a % of Revenues (1)				Variance 2012 vs. 2011 (1)(2)
(in millions)	2012 (1)			2011 (1)			2012		2011		$			%
Revenues
Origination Services	$	451.5		$	367.9		45	%	35	%	$	83.6		23	%
Default Services	546.1			680.9			55	%	65	%	(134.8		)	(20	)%
Total Revenues	997.7			1,048.8			100	%	100	%	(51.1		)	(5	)%
Expenses:
Operating expenses	791.9			841.2			79	%	80	%	49.3			6	%
Depreciation and amortization	14.2			14.0			1	%	1	%	(0.2		)	(1	)%
Exit costs, impairments and other charges	—			4.1			—	%	—	%	4.1			nm
Total expenses	806.1			859.3			81	%	82	%	53.2			6	%
Operating income	$	191.6		$	189.5		19	%	18	%	$	2.1		1	%
Operating margin	19		%	18		%

____________


(1)	Columns may not total due to rounding.

(2) Certain percentages are not meaningful, indicated by "nm."

Revenues

Revenues decreased $51.1 million, or 5%, during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. The decrease was primarily driven by a 20% decline in our default services revenue resulting from continued delays in the foreclosure process causing reduced volumes. These ongoing delays were largely the result of continuing regulatory scrutiny and monitoring, including consent orders entered into by a number of large servicers, judicial actions and voluntary delays by servicers. The decrease was also due to a $5.2 million increase to our sales allowance reserve recorded during the nine months ended September 30, 2012 based on management's ongoing assessment of the impact of continued delays in the foreclosure process on the collectability of our accounts receivable. These decreases were partially offset by a 23% increase in our origination services revenue as a result of higher origination volumes due to the continued low interest rate environment, the impact of HARP II and from market share gains.

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Operating Expenses

Operating expenses decreased $49.3 million, or 6%, during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. Operating expenses as a percentage of revenues decreased to 79% during the first nine months of 2012 as compared to 80% during the first nine months of 2011. This decrease is primarily attributable to favorable revenue mix and related operating leverage in our higher margin origination operations resulting from increased loan origination volumes.

Depreciation and Amortization

Depreciation and amortization increased $0.2 million, or 1%, during the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. Depreciation and amortization expenses as a percentage of revenues have remained constant at 1% during the nine months ended September 30, 2012 and September 30, 2011.

Exit Costs, Impairments and Other Charges

We recorded a $4.1 million severance charge during the first nine months of 2011 related to our various cost reduction initiatives described in note 9 of our condensed consolidated financial statements.

Operating Income

Operating margin increased to 19% during the nine months ended September 30, 2012 as compared to 18% during the nine months ended September 30, 2011 due to the factors described above.

Segment Results of Operations - Corporate and Other - Unaudited

The Corporate and Other segment consists of general and administrative expenses that are not included in the other segments as well as the impact of certain smaller operations. Net operating expenses for this segment increased to $179.9 million for the nine months ended September 30, 2012 compared to $66.9 million for the nine months ended September 30, 2011 primarily due to the impact of recording a $144.5 million increase to our legal and regulatory accrual previously established in the fourth quarter of 2011, offset by severance and other charges of $16.3 million recorded during the first nine months of 2011.

Liquidity and Capital Resources

Cash Requirements

Our cash requirements include operating costs, income taxes, debt service payments, capital expenditures, systems development expenditures, legal and regulatory costs, stockholder dividends and business acquisitions. Our principal source of funds is cash generated by our operations.

At September 30, 2012, we had cash and cash equivalents of $160.7 million and debt of $1,077.0 million, including the current portion. We expect that cash flows from operations over the next twelve months will be sufficient to fund our operating cash requirements and pay principal and interest on our outstanding debt absent any unusual circumstances such as adverse changes in the business environment. As of September 30, 2012, we also have remaining availability under our revolving credit facility of approximately $398.1 million.

We currently pay a dividend of $0.10 per common share on a quarterly basis, and expect to continue to do so in the future. The declaration and payment of future dividends is at the discretion of the Board of Directors, and depends on, among other things, our investment policy and opportunities, results of operations, financial condition, cash requirements, future prospects, and other factors that may be considered relevant by our Board of Directors, including legal and contractual restrictions. Additionally, the payment of cash dividends may be limited by covenants in certain debt agreements. A regular quarterly dividend of $0.10 per common share is payable on December 20, 2012 to shareholders of record as of the close of business on December 6, 2012. We continually assess our capital allocation strategy, including decisions relating to the amount of our dividend, reduction of debt, repurchases of our stock and the acquisition of select businesses.

On June 16, 2011, our Board of Directors approved an authorization for us to repurchase up to $100.0 million of our common

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stock and/or our 2016 Notes, effective through December 31, 2012. This authorization replaced the previous authorization and subsumed all amounts remaining available thereunder. Our ability to repurchase shares of common stock or 2016 Notes is subject to restrictions contained in our senior secured credit agreement and in the indenture governing our Notes. During the three and nine months ended September 30, 2012, we did not repurchase any shares of our stock or 2016 Notes. As of September 30, 2012, we had $95.1 million remaining available under our $100.0 million repurchase authorization.

Operating Activities

Cash provided by operating activities reflects net income adjusted for certain non-cash items and changes in certain assets and liabilities. Cash provided by operating activities was approximately $303.6 million and $329.6 million during the nine months ended September 30, 2012 and 2011, respectively. The decline in cash provided by operating activities during the first nine months of 2012 when compared to the first nine months of 2011 was primarily related to a decrease in working capital contributions mainly from lower accounts receivable collections from Default Services, which carries a higher “days sales outstanding” ratio due to the lag between revenue recognition and collection.

Investing Activities

Investing cash flows consist primarily of capital expenditures and acquisitions and dispositions. Cash used in investing activities was approximately $119.4 million and $121.9 million during the nine months ended September 30, 2012 and 2011, respectively. The decrease in cash used in investing activities during the first nine months of 2012 when compared to the first nine months of 2011 was primarily due to the net impact of our disposition activities, as we have disposed of our Tax Services, SoftPro, True Automation and Aptitude Solutions businesses during the first nine months of 2012 for net cash proceeds of $16.2 million. This cash inflow was partially offset by a $11.3 million increase in cash paid for investments, acquisitions in title plants and property records data, property and equipment, and capitalized software in the first nine months of 2012.

Our principal capital expenditures are for computer software (purchased and internally developed) and additions to property and equipment. We spent approximately $72.2 million and $81.5 million on capital expenditures during the nine months ended September 30, 2012 and 2011, respectively.

Financing Activities

Cash used in financing activities was approximately $100.8 million and $176.1 million during the nine months ended September 30, 2012 and 2011, respectively. The decrease in cash used in financing activities during the first nine months of 2012 when compared to the first nine months of 2011 was primarily due to treasury stock repurchases of $136.9 million made in the the first nine months of 2011, offset by $72.1 million in borrowings under our revolving credit facility in the first nine months of 2012. As a result of refinancing our senior credit facilities during August 2011, we increased our net borrowings outstanding by approximately $17.0 million which was primarily used to pay debt issuance costs totaling $22.1 million related to the refinancing transaction.

Financing

The 2011 Credit Agreement consists of: (i) a 5-year revolving credit facility in an aggregate principal amount outstanding at any time not to exceed $400 million (with a $25 million sub-facility for Letters of Credit); (ii) a 5-year Term A Loan in an initial aggregate principal amount of $535 million; and (iii) a Term B Loan with a maturity date of August 14, 2018 in an aggregate principal amount of $250 million. On October 12, 2012, we used a portion of the proceeds from the 2023 Notes described below to prepay the Term B Loan in full.

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Senior Notes

On July 2, 2008, we issued senior notes (the “2016 Notes”) in an initial aggregate principal amount of $375.0 million under which $362.0 million was outstanding at September 30, 2012. The 2016 Notes were issued pursuant to an Indenture dated July 2, 2008 among the Company, the guarantor parties thereto and U.S. Bank Corporate Trust Services, as Trustee. As of October 25, 2012, we used a portion of the 2023 Notes described below to accept for payment and settle approximately $286.4 million aggregate principal amount of the 2016 Notes that were tendered in the tender offer described below.

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any 2016 Notes that remained outstanding following completion of the tender offer, as discussed below.

Refinancing Transactions

As part of the tender offer, the Company solicited consents from the holders of the 2016 Notes for certain proposed amendments that would eliminate or modify certain covenants and events of default as well as other provisions contained in the Indenture. Adoption of the proposed amendments required consents from holders of at least a majority in aggregate principal amount outstanding of the 2016 Notes. On October 12, 2012, the Company announced that it had received the requisite consents to execute a supplemental indenture to implement the proposed amendments to the Indenture, and delivered notice that it had called for redemption all 2016 Notes that remained outstanding following completion of the tender offer at a price equal to 104.06% of their face amount, plus accrued and unpaid interest to, but not including, the date of redemption. Payment for the redemption of the remaining 2016 Notes is expected to be made on November 13, 2012 (with interest accruing on the 2016 Notes to November 11, 2012).

LPS has no independent assets or operations and our subsidiaries' guarantees are full and unconditional and joint and several. There are no significant restrictions on the ability of LPS or any of the subsidiary guarantors to obtain funds from any of our subsidiaries other than National Title Insurance of New York, Inc. ("NTNY"), our title insurance underwriter subsidiary, by dividend or loan. NTNY is statutorily required to maintain investment assets backing its reserves for settling losses on the policies it issues, and its ability to pay dividends or make loans is limited by regulatory requirements.

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required by the Indenture. Events of default also include cross defaults, with respect to any other debt of the Company or debt of certain subsidiaries having an outstanding principal amount of $80.0 million or more in the aggregate for all such debt, arising from (i) failure to make a principal payment when due and such defaulted payment is not made, waived or extended within the applicable grace period or (ii) the occurrence of an event which results in such debt being due and payable prior to its scheduled maturity. Upon the occurrence of an event of default (other than a bankruptcy default with respect to the Company or certain subsidiaries), the trustee or holders of at least 25% of the 2023 Notes then outstanding may accelerate the 2023 Notes by giving us appropriate notice. If, however, a bankruptcy default occurs with respect to the Company or certain subsidiaries, then the principal of and accrued interest on the 2023 Notes then outstanding will accelerate immediately without any declaration or other act on the part of the trustee or any holder.

Interest Rate Swaps

See note 10 to the notes of the condensed consolidated financial statements for a detailed description of our interest rate swaps.

Contractual Obligations

As of September 30, 2012, there have been no significant changes to our contractual obligations, including our scheduled principal maturities on long-term debt, data processing and maintenance commitments, operating lease payments, and deferred compensation obligations, since our Annual Report on Form 10-K was filed on February 29, 2012. See note 10 to the notes of the condensed consolidated financial statements for a detailed description of the refinancing transactions that have occurred subsequent to period end.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements other than operating leases and the escrow arrangements described below.

Escrow Arrangements

In conducting our title agency, closing and tax services, we routinely hold customers' assets in escrow accounts, pending completion of real estate related transactions. Certain of these amounts are maintained in segregated accounts, and these amounts have not been included in the accompanying condensed consolidated balance sheets. As an incentive for holding deposits at certain banks, we periodically have programs for realizing economic benefits through favorable arrangements with these banks. As of September 30, 2012, the aggregate value of all amounts held in escrow in our title agency, closing and tax services operations totaled $447.1 million.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of business, we are routinely subject to a variety of risks, including those described in the “Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of our Annual Report on Form 10-K that was filed on February 29, 2012 and our other filings with the Securities and Exchange Commission. For example, we are exposed to the risk that decreased lending and real estate activity, which depend in part on the level of interest rates, may reduce demand for certain of our services and adversely affect our results of operations. The risks related to our business also include certain market risks that may affect our debt and other financial instruments. In particular, we face the market risks associated with our cash equivalents and interest rate movements on our outstanding debt. We regularly assess market risks and have established policies and business practices to protect against the adverse effects of these exposures.

Our cash equivalents are predominantly invested with high credit quality financial institutions, and consist of short-term investments such as money market demand accounts, money market funds and demand deposit accounts.

We are a highly leveraged company, with approximately $1,077.0 million in debt outstanding as of September 30, 2012. We have entered into interest rate swap transactions which convert a portion of the interest rate exposure on our floating rate debt from variable to fixed. We performed a sensitivity analysis based on the principal amount of our floating rate debt as of September 30, 2012, less the principal amount of such debt that was then subject to an interest rate swap. This sensitivity analysis takes into account scheduled principal installments that will take place in the next 12 months as well as the related notional amount of interest rate swaps then outstanding. Further, in this sensitivity analysis, the change in interest rates is assumed to be applicable for the entire year. Of the remaining variable rate debt not covered by the swap arrangements, we estimate that a 100 basis point increase in the LIBOR rate would increase our annual interest expense by approximately $1.8 million.

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Item 4. Controls and Procedures.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”). Based on this evaluation, the Company's principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is: (a) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms; and (b) accumulated and communicated to management, including the Company's principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II: OTHER INFORMATION

Item 1. Legal Proceedings

See Litigation and Regulatory Matters in Note 12 - Commitments and Contingencies to the Condensed Consolidated Financial Statements, which is incorporated by reference in this Item 1, for litigation and regulatory disclosures which update the disclosures in the legal proceedings section of the Company's 2011 Annual Report on Form 10-K, as previously updated by the disclosures in the legal proceedings section of the Company's Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2012 and June 30, 2012.

Item 1A. Risk Factors.

The strength of the economy and the housing market affect demand for certain of our services.

The Mortgage Bankers Association (“MBA”) estimates that the level of U.S. mortgage originations, by dollar volume, was $1.4 trillion and $1.6 trillion in 2011 and 2010, respectively, with refinancing transactions comprising approximately 65% and 70%, respectively, of the total markets. Due to increased refinancing activity, the MBA's Mortgage Finance Forecast currently estimates that the mortgage origination market for 2012 will increase to $1.7 trillion, with more than 70% of that market representing refinancing transactions. However, the MBA forecasts a substantial drop in the mortgage origination market in 2013, including a decline of more than 20% in the overall market and a decline of more than 35% in the refinancing market specifically. We believe the decrease in the MBA’s projections for 2013 is due to, among other things, current real estate prices, the potential for rising interest rates and tightened loan requirements, such as higher credit score and down payment requirements and additional fees. In the event of a decrease in the level of origination transactions, and the level of refinancing transactions in particular, the results of our origination services operations will be adversely affected. Further, in the event that the ongoing difficult economy or other factors lead to a decline in levels of home ownership and a reduction in the aggregate number of U.S. mortgage loans outstanding, our revenues from servicing technology could be adversely affected.

In contrast, the weaker economy and housing market have tended to increase the volume of consumer mortgage defaults, which can favorably affect our default services operations, in which we service residential mortgage loans in default. It can also increase revenues from our Desktop solution, which is currently primarily used in connection with default management. As a result, our default services have historically provided a natural hedge against the volatility of the real estate origination business and its resulting impact on our origination services. However, various pieces of government legislation aimed at mitigating the current downturn in the housing market and lenders’ efforts to comply with the requirements of that legislation and the requirements of consent orders entered into by a number of large lenders during 2011 have delayed foreclosure starts and slowed the pace at which foreclosures are processed, which has adversely affected the results of our default services operations. We continue to believe the size of the default services market should be significant in future years due to the substantial inventory of delinquent loans and loans in foreclosure, which should have a positive effect on our default revenues and the revenues from our Desktop solution. However, it is difficult to predict when or the speed at which these loans will make their way through the foreclosure process. If the foreclosure process continues to experience significant delays, our results of operations could be adversely affected.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Our ability to repurchase shares of common stock or senior notes is subject to restrictions contained in our senior secured credit agreement and in the indenture governing our senior unsecured notes. On June 16, 2011, our Board of Directors approved an authorization for us to repurchase up to $100.0 million of our common stock and/or our 2016 Notes, effective through December 31, 2012. This authorization replaced the previous authorization and subsumed all amounts remaining available thereunder. During the nine months ended September 30, 2012, we did not repurchase any shares of our stock or 2016 Notes. As of September 30, 2012, we had $95.1 million remaining available under our $100.0 million repurchase authorization.

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Item 6. Exhibits


(a)	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.

101	The following materials from Lender Processing Services, Inc.'s Annual Report on Form 10-Q for the quarter ended September 30, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Earnings, (iv) the Consolidated Statements of Stockholders' Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Date: October 31, 2012	Lender Processing Services, Inc.

	By:	/s/ THOMAS L. SCHILLING
		Thomas L. Schilling
		Executive Vice President and Chief Financial Officer

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LENDER PROCESSING SERVICES, INC.

FORM 10-Q

INDEX TO EXHIBITS

The following documents are being filed with this Report:



Exhibit No.		Description

31.1		Certification of Hugh R. Harris, President and 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 Thomas L. Schilling, 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 Hugh R. Harris, President and 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 Thomas L. Schilling, 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.

101		The following materials from Lender Processing Services, Inc.'s Annual Report on Form 10-Q for the quarter ended September 30, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Earnings, (iv) the Consolidated Statements of Stockholders' Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.