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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2004

OR

For the transition period from                      to                     

Commission File No. 001-16427

Certegy Inc.

(Exact name of registrant as specified in its charter)

(678) 867-8000

(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 x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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CERTEGY INC.

INDEX

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PART I. FINANCIAL INFORMATION

CERTEGY INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(In thousands, except per share amounts)

The accompanying notes are an integral part of these Consolidated Financial Statements.

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CERTEGY INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(In thousands, except per share amounts)

The accompanying notes are an integral part of these Consolidated Financial Statements.

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CERTEGY INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par values)

The accompanying notes are an integral part of these Consolidated Financial Statements.

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CERTEGY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

The accompanying notes are an integral part of these Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands, except per share amounts or unless otherwise noted)

1. Basis of Presentation

The Company provides credit and debit card processing and check risk management services to financial institutions and merchants in the U.S. and internationally through two segments, Card Services and Check Services (see Note 16 for segment information). Card Services provides card issuer services in the U.S., the U.K., Brazil, Chile, Australia, New Zealand, Ireland, Thailand, and the Caribbean. Additionally, Card Services provides merchant processing and e-banking services in the U.S. and card issuer software, support, and consulting services in numerous countries. Check Services provides check risk management services and related processing services in the U.S., the U.K., Canada, France, Ireland, Australia, and New Zealand.

The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and should be read in conjunction with the Company’s consolidated financial statements and the notes to those statements for the year ended December 31, 2003 included in the Company’s annual report on Form 10-K. Significant accounting policies disclosed in the annual report have not changed. All significant intercompany transactions and balances have been eliminated.

The Company has prepared these consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. This information reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, results of operations, and cash flows for the interim periods presented. All adjustments made have been of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading. Certain prior period amounts have been reclassified to conform to the current period presentation. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

2. Significant Accounting Policies

Reserve for Card Losses. The Company recognizes a reserve for estimated losses related to its merchant processing and card issuing businesses based on historical experience and other relevant factors. This reserve amount is subject to risk that actual losses may be greater than the Company’s estimates. At September 30, 2004 and December 31, 2003, the Company had aggregate card loss reserves of $1.0 million and $1.1 million, respectively, which are included in other current liabilities in the consolidated balance sheets.

Reserve for Check Guarantee Losses. In the Company’s check guarantee business, if a guaranteed check presented to a merchant customer is dishonored by the check writer’s bank, the Company reimburses its merchant customer for the check’s face value and pursues collection of the amount from the delinquent check writer. The Company’s merchant customers have approximately 60 days from the check date to present claims for dishonored checks to the Company. The Company has a maximum potential liability equal to the value of all checks presented to its merchant customers; however, through historical experience and analysis, the Company is able to reasonably estimate its liability for check returns. The Company recognizes a liability to its merchant customers for its estimated check returns (claims payable) and a receivable for amounts the Company estimates it will recover from the check writers (claims recoverable), based on historical experience and other relevant factors. The estimated check returns and recovery amounts are subject to the risk that actual amounts returned and recovered may be different than the Company’s estimates. The Company had accrued claims payable and accrued claims recoverable of $21.1 million and $28.7 million, respectively, at September 30, 2004, and $38.3 million and $46.5 million, respectively, at December 31, 2003.

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The Company settles its claim obligations with merchants, on average, within 14 days from the date of receipt. Recoverability of claims from the check writers extends beyond this timeframe, but generally occurs within one year.

Stock-Based Compensation. Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS 148”), establishes accounting and reporting standards for stock-based employee compensation plans. SFAS 148, which was issued in December 2002, requires disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and its effect on the reported results. As permitted by the standard, the Company has elected to apply APB Opinion No. 25 “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock option plans. Accordingly, the Company does not recognize compensation cost in connection with its stock option plans. If the Company had elected to recognize compensation cost for these plans based on the fair value at the replacement date (for stock options that existed at the date of the Company’s spin-off from Equifax Inc.) and grant dates as prescribed by SFAS 123, net income and earnings per share would have been reduced to the following pro forma amounts for the three and nine months ended September 30, 2004 and 2003:

3. Acquisitions

On March 1, 2004, the Company completed the purchases of Game Financial Corporation (“Game Financial”), a provider of debit and credit card cash advances, ATM access and check cashing services in gaming institutions, and Crittson Financial Services LLC (“Crittson”), a full service provider of card and merchant processing services. The acquisition of Crittson further strengthens the Company’s U.S. market share as the leading third party credit card processor for community banks and credit unions. The acquisition of Game Financial positions the Company as a leading provider of comprehensive cash access services in the gaming industry, and broadens its check risk management product line and customer base. These acquisitions had an initial cash purchase price of $39.2 million, net of $24.6 million of cash acquired (approximately $5.8 million of the Crittson acquisition price was reclassified to cash provided by (used in) discontinued operations for the merchant acquiring portion of the acquisition (Note 4)). The initial purchase price allocation resulted in identifiable intangible assets of $16.4 million, which are being amortized over five to seven years, and goodwill of $36.7 million. The Company expects that 100 percent of the goodwill resulting from these acquisitions will be tax deductible.

During the second and third quarters of 2004, we recorded certain purchase price allocation adjustments. These adjustments resulted in a net increase in goodwill of $649 thousand to record adjustments to net assets acquired, net cash paid for working capital purchase price adjustments, and adjustments to identifiable intangible assets.

On August 6, 2004, the Company completed the acquisition of the assets of Caribbean CariCard Services, Inc. (“CariCard”), a third-party transaction processor in the Caribbean, for $7.0 million in cash. CariCard provides a wide range of products and services to financial institutions, retailers, and the petroleum industry that service markets in 16 countries throughout the Caribbean. The preliminary purchase price allocation resulted in identifiable intangible assets of $4.3 million, which are being amortized over seven years, and goodwill of $2.2 million.

Additional consideration may be payable to the Company or to the sellers with respect to these acquisitions, which includes base revenue measurements, customer-based adjustments, and working capital adjustments. These vary in timing from ninety days to

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one year from the acquisition date. When and if paid, these adjustments will result in additional changes to the purchase price allocation.

These acquisitions were accounted for as purchases and their results of operations have been included in the consolidated statements of income from the dates of acquisition.

4. Discontinued Operations

The Company’s merchant processing operations consist of two businesses, merchant acquiring, where the Company owns the merchant contract and the associated risk for cardholder chargebacks, and institution processing, where the Company provides authorization, settlement, and customer service to community banks that contract directly with merchant customers. The Company views merchant acquiring as a non-strategic business and over the past few years, has operated this business conservatively to reduce exposure to merchant risk, which in the short-term improved overall profitability but limited growth. In September 2004, the Board of Directors approved a plan to sell the Company’s merchant acquiring business, at which time, the plan of sale criteria in FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” was met. The Company expects that the merchant acquiring business will be sold within a year.

The Company’s financial statements reflect the merchant acquiring business as a discontinued operation with the related assets and liabilities classified under the captions “Assets held for sale” and “Liabilities related to assets held for sale” in the consolidated balance sheets. The results of operations are treated as income from discontinued operations, net of tax, and separately stated in the consolidated statements of income, below income from continuing operations. The merchant acquiring operations were historically included in the Card Services segment.

The Company will continue to operate the institution processing business, which remains complementary to its card issuing business.

Summarized financial information for the discontinued operation for the three months and the nine months ended September 30, 2004 and 2003 is as follows:

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The assets held for sale and liabilities related to assets held for sale as of September 30, 2004 and December 31, 2003 are as follows:

Summarized cash flow information associated with the discontinued operation for the nine months ended September 30, 2004 and 2003 is as follows:

5. Other Charges

It is the Company’s policy to present other charges, such as severance, impairment, or restructuring charges, if significant for a given reporting period, on a separate line item within operating expenses in the consolidated statements of income. In the normal course of business, it is not unusual for the Company to have ongoing severance charges that are not significant and therefore, not presented separately in the consolidated statements of income.

During the first nine months of 2003, the Company recorded other charges of $12.2 million ($7.7 million after-tax, or $0.12 per diluted share). These charges include $9.6 million of early termination costs associated with a U.S. data processing contract, $2.7 million of charges related to the downsizing of the Company’s Brazilian card operation, and $(0.1) million of other items. These charges were recorded in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” and

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SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” See Note 16 for details of these charges by segment.

The following table summarizes the severance charges and contract termination costs incurred to date as described above, the changes in the accruals through September 30, 2004, and the ending balances in the accruals:

6. Earnings Per Share

Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur if stock options or other contracts to issue common stock were exercised and resulted in additional common shares outstanding during the period. A reconciliation of the average outstanding shares used in the basic and diluted EPS calculations is as follows (in thousands):

7. Other Current Assets

The Company’s other current assets at September 30, 2004 and December 31, 2003 consist of the following:

8. Property and Equipment

The cost of property and equipment is depreciated on a straight-line basis over estimated useful lives as follows: building—40 years; leasehold improvements—not to exceed lease terms; data processing equipment—3 to 5 years; and furniture and fixtures—3 to 8 years. Maintenance and repairs are charged to expense as incurred.

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Property and equipment at September 30, 2004 and December 31, 2003 consists of the following:

Equipment under capital lease, which is included in data processing equipment and furniture above, totaled $4.2 million at September 30, 2004 and $0.6 million at December 31, 2003. Accumulated depreciation related to these assets totaled approximately $0.5 million at September 30, 2004 and $44 thousand at December 31, 2003.

9. Goodwill and Other Intangible Assets

Information related to the Company’s goodwill by segment is as follows:

Information related to the Company’s other intangible assets subject to amortization is as follows:

The Company’s other intangible assets primarily consist of acquired customer contracts, data files, and customer lists, which are generally amortized on a straight-line basis over their estimated useful lives, ranging from 5 to 15 years. Amortization expense associated with the Company’s acquired intangible assets totaled $1.1 million and $0.5 million for the three months ended September 30, 2004 and 2003, respectively, and $2.8 million and $1.5 million for the nine months ended September 30, 2004 and 2003, respectively. Estimated amortization expense for the Company’s acquired intangible assets for each of the five succeeding fiscal years is as follows: 2005—$4.6 million; 2006—$4.6 million; 2007—$4.6 million; 2008—$3.1 million; and 2009—$3.1 million.

The change in the carrying amount of goodwill and other intangible assets from December 31, 2003 to September 30, 2004 was the result of the acquisitions of Game Financial, Crittson, and CariCard (Note 3), and currency translation adjustments.

The Company has no intangible assets with indefinite useful lives.

10. Other Assets

Other assets principally consist of prepaid pension cost, life insurance policies, purchased software, and deferred income taxes. The costs of purchased software used to provide services to customers or for internal administrative services are capitalized and amortized on a straight-line basis over five to eight years, as determined by their estimated useful lives.

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Other assets, net consist of the following:

11. Other Current Liabilities

The Company’s other current liabilities at September 30, 2004 and December 31, 2003 consist of the following:

12. Long-Term Debt

Long-term debt at September 30, 2004 and December 31, 2003 consists of the following:

13. Shareholders’ Equity

Comprehensive Income. The components of comprehensive income for the three and nine months ended September 30, 2004 and 2003 are as follows:

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Accumulated other comprehensive loss at September 30, 2004 and December 31, 2003 consists of the following components:

Treasury Stock. During the first nine months of 2004, the Company repurchased approximately 2.4 million shares of its common stock at an aggregate cost of $87.8 million. Including approximately 6.1 million shares repurchased prior to 2004, the Company has repurchased a total of approximately 8.4 million shares through September 30, 2004. In May 2004, the Board of Directors of the Company approved a $100 million share repurchase program, which replaced the prior authority. As of September 30, 2004, the Company had $52.0 million remaining under this program for future share repurchases. During the first nine months of 2004, the Company reissued approximately 0.5 million treasury shares in connection with employee stock option exercises and restricted stock awards, net of cancellations.

Dividends. In February 2004, the Company’s Board of Directors approved a quarterly common stock dividend of $0.05 per share, or $3.2 million, which was paid on April 15, 2004 to shareholders of record as of the close of business on April 1, 2004. In May 2004, the Company’s Board of Directors approved a quarterly common stock dividend of $0.05 per share, or $3.2 million, which was paid on July 15, 2004 to shareholders of record as of the close of business on July 1, 2004. In August 2004, the Company’s Board of Directors approved a quarterly common stock dividend of $0.05 per share, or $3.1 million, which was paid on October 15, 2004 to shareholders of record as of the close of business on October 1, 2004.

In August 2003, the Company’s Board of Directors approved a quarterly common stock dividend of $0.05 per share, or $3.2 million, which was paid on October 15, 2003 to shareholders of record as of the close of business on October 1, 2003.

Deferred Compensation. During the first nine months of 2004, the Company granted approximately 0.1 million shares of restricted stock, net of cancellations to key employees under the Stock Incentive Plan. The shares become fully vested in three or four years if certain performance criteria are met; otherwise, they vest at the end of five years. Compensation expense associated with these awards can fluctuate each year based on the likelihood that the performance criteria will be met. Compensation expense associated with all restricted stock awards issued through September 30, 2004 was $1.2 million and $1.3 million for the three months ended September 30, 2004 and 2003, respectively, and $3.7 million and $3.2 million for the nine months ended September 30, 2004 and 2003, respectively.

14. Employee Benefits

Net periodic benefit cost for the Company’s retirement, supplemental retirement (“SERP”), and postretirement benefit plans includes the following components for the three months and nine months ended September 30, 2004 and 2003: