Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
Commission file number 0-13848
CONCORD EFS, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2462252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2525 Horizon Lake Drive, Suite 120, Memphis, Tennessee 38133
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, Including Area Code: (901) 371-8000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.33 1/3 Par Value
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 if disclosure of delinquent files pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 16, 2001 was $10,511,553,446.
The number of shares of the registrant's Common Stock outstanding as of March
16, 2001 was 242,078,626.
DOCUMENTS INCORPORATED BY REFERENCE
Filings made by companies with the Securities and Exchange Commission (SEC)
sometimes "incorporate information by reference." This means that the company is
referring you to information that was previously filed with the SEC, and this
information is considered to be part of the filing you are reading. The
following materials are incorporated by reference into this Form 10-K:
o Information contained in our Annual Report to Stockholders for the year
ended December 31, 2000, is incorporated by reference in response to Items
1, 5, 6, 7, 7A, and 8.
o Information contained in our Proxy Statement for the Annual Meeting of
Stockholders to be held May 24, 2001 is incorporated by reference in
response to Items 10, 11, 12, and 13.
CONCORD EFS, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Item No. Page
PART I
1. Business
Overview 1
Operations by Business Segment 2
Marketing and Customers 2
Competition 3
Supervision and Regulation 4
Executive Officers of Concord 6
Employees 7
2. Properties 6
3. Legal Proceedings 8
4. Submission of Matters to a Vote of Security Holders 8
PART II
5. Market for Registrant's Common Stock
and Related Stockholder Matters 8
6. Selected Financial Data 9
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
7a. Quantitative and Qualitative Disclosures About Market Risk 9
8. Financial Statements and Supplementary Data 9
9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure 9
PART III
10. Directors and Executive Officers 10
11. Executive Compensation 10
12. Security Ownership of Certain Beneficial Owners
and Management 10
13. Certain Relationships and Related Transactions 10
PART IV
14. Exhibits, Financial Statement Schedules and Reports 10
on Form 8-K
Signatures 13
PART I
Item 1. BUSINESS
Overview
Concord EFS, Inc. (Concord) is a vertically-integrated electronic transaction
processor. Concord acquires, routes, authorizes, captures, and settles all types
of non-cash payment transactions for retailers and financial institutions
nationwide. Concord's primary activities consist of (1) Payment Services
(previously called merchant card services), which provides payment processing
for supermarkets, major retailers, petroleum dealers, convenience stores,
trucking companies, and independent retailers; and (2) Network Services
(previously called ATM services), which provides automated teller machine (ATM)
processing, debit card processing, and debit network access for financial
institutions.
Payment Services. Payment Services provides the systems and processing that
allow retail clients to accept virtually any type of cashless payment, including
all card types - credit, debit, electronic benefits transfer (EBT), fleet,
prepaid, and automated clearing house (ACH) - and a variety of check-based
options. We focus on providing payment processing services to selected segments,
with specialized systems designed for supermarkets, gas stations, convenience
stores, and restaurants. Payment Services also includes providing payment cards
that enable drivers of trucking companies to purchase fuel and obtain cash
advances at truck stops. Our services are completely turn-key, providing
retailers with point of sale (POS) terminal equipment, transaction routing and
authorization, settlement, funds movement, and sponsorship into all credit card
associations (such as VISA and MasterCard) and major debit networks (such as
STARsm, Pulse, and NYCE).
Early in 2000 we completed two acquisitions in the Payment Services area. On
January 31, 2000, we completed our acquisition of National Payment Systems Inc.
d/b/a Card Payment Systems (referred to in this Form 10-K as Card Payment
Systems), a New York-based reseller of payment processing services. Card Payment
Systems provides card-based payment processing services to independent sales
organizations, which in turn sell those services to retailers. The acquisition
was accounted for as a pooling of interests transaction in which we exchanged
6.2 million shares of our stock for all the outstanding shares of Card Payment
Systems' common stock. We incurred acquisition costs of $0.8 million related to
this transaction during the first quarter of 2000. On February 7, 2000 we
completed our acquisition of Virtual Cyber Systems, Inc., an internet software
development company. This acquisition, for which we paid approximately $2
million, was accounted for as a purchase transaction and was immaterial to our
financial statements.
Network Services. Network Services include terminal driving and monitoring for
ATMs, transaction routing and authorization via credit and debit network
gateways, and real-time card management and authorization for on-line debit and
signature debit cards. We also operate the switch that connects a coast-to-coast
network of ATMs and POS locations that accept debit cards issued by our member
financial institutions. Our network access services include transaction
switching and settlement.
We recently expanded our debit network in our Network Services area through two
acquisitions. On August 21, 2000, we completed our acquisition of Cash Station,
Inc., a leading Midwest debit network based in Chicago, Illinois. The
acquisition was accounted for as a pooling of interests transaction in which we
exchanged approximately 2.5 million shares of our stock for all of the
outstanding common stock of Cash Station. On February 1, 2001, we completed our
acquisition of Star Systems, Inc. (STARsm), the nation's largest PIN-secured
debit network, based in Maitland, Florida. The merger was accounted for as a
pooling of interests transaction in which we exchanged approximately 24.8
million shares of our stock for all of STAR's outstanding common stock.
As a result of these two acquisitions, we also acquired a majority interest of
74% in Primary Payment Systems, Inc., a company providing risk management
services to merchants and financial institutions. STAR and Cash Station own 67%
and 7% of Primary Payment Systems, respectively.
An example of the vertical integration of our services is our ownership of two
financial institutions, EFS National Bank and EFS Federal Savings Bank. These
banks allow us to provide our merchants with bank sponsorship into credit and
debit card associations and to own and deploy ATMs. Traditional banking
activities such as lending and deposit-taking are also provided.
We seek to grow our Payment Services and Network Services businesses by
providing a fully integrated range of transfer and processing services at
competitive prices. The principal elements of our strategy include:
1) We focus our marketing efforts on industry segments that are moving rapidly
to electronic commerce and therefore have above-market growth in the
transactions that we process. We seek a diverse group of customers with low
credit risk profiles.
2) We seek to be an efficient provider of electronic payment processing
services through a combination of above-market transaction growth and
downward management of operating cost per transaction.
3) We provide clients with complete outsourcing solutions, including designing
equipment solutions, selling and leasing equipment, authorizing
transactions, capturing information, directly participating in all major
credit and debit card associations and networks, and effecting settlement
of payment transactions and transfer of funds.
4) We use a balanced marketing approach through the use of internal marketing
specialists, independent sales representatives, and independent sales
organizations in an effort to efficiently provide broad access to new
financial institution and merchant customers nationwide.
Operations by Business Segment
"Note Q - Operations By Business Segment," on pages 40 to 41 of our Annual
Report to Stockholders for the year ended December 31, 2000 (Annual Report to
Stockholders) contains information about the relative contribution of our
Payment Services and Network Services segments to our earnings and is
incorporated herein by reference.
Marketing and Customers
Sales Approach. We market our services and products on a nationwide basis to
supermarkets, gas stations, convenience stores, restaurants, independent
retailers, debit networks, financial institutions, and trucking companies. We
market both directly through our internal sales force and indirectly through
independent sales organizations and their representatives. Our strategy is to
use our in-house marketing expertise to target the large to mid-sized companies
within these selected industries and to use the extensive market penetration of
independent sales organizations to extend our sales reach into the small,
independent firms nationwide.
Marketing Relationships. We have historically had success in marketing through
key trade association relationships, such as our endorsement by the National
Grocers Association as the recommended provider of electronic services to
grocers and our partnership with the Food Marketing Institute to develop and
promote new payment products to the supermarket industry. Management is
committed to the cultivation of such trade association relationships and the
development of arrangements with other service providers.
We are also an authorized issuer of payment cards and processor of card
transactions with the major truck stop chains, which provides a substantial
advantage in selling our card payment systems to trucking companies. Our
relationships with the truck stop owners also afforded us an opportunity to
place ATMs at truck stops, which in turn provided a further advantage in selling
our integrated processing and banking services to trucking companies and truck
drivers.
Our established presence in supermarket chains, grocery stores, convenience
stores, and other small and mid-size retailers gives us an advantage in
establishing relationships with EBT providers, whose benefits are primarily
accessed at such retail locations.
Cross-Selling Opportunities. As an integrated services provider, we have natural
cross-selling opportunities within our client base. We acquired Electronic
Payment Services in 1999, Cash Station in 2000, and STAR in 2001. These
acquisitions collectively added 200,000 retail locations and 6,500 financial
institution customers to our client base, affording us the opportunity to
cross-sell settlement processing services to Electronic Payment Services' retail
customers (who primarily received only authorization services from Electronic
Payment Services) and to cross-sell ATM and card processing services to Cash
Station and STAR financial institutions (who currently use third-party
processors).
Primary Offices. Our headquarters are located in Memphis, Tennessee, with other
primary offices in Maitland, Florida; Atlanta, Georgia; and Wilmington,
Delaware. Our executive officers actively participate in our marketing efforts.
Competition
The business of electronic payment processing and settlement, check
authorization programs, ATM processing, debit card processing, and fuel card and
cash forwarding services are all highly competitive. Our principal competitors
include national and major regional banks, local processing banks, non-bank
processors, and other independent service organizations, some of which have
substantially greater capital, management, marketing, and technological
resources than those of Concord. We also compete with other electronic payment
processing organizations and debit networks for growth opportunities. The recent
trend of consolidation in the banking industry in the United States has resulted
in fewer opportunities for merchant portfolio acquisitions, as many small banks
have been acquired by large banks, some of which compete with us in the
provision of processing services.
In our Payment Services segment, we compete against other companies who have a
dominant share of each business. Management estimates that:
o the three largest payment processors, which we are not among, account for
roughly 50% of the total credit and debit card sales volume;
o a single competitor accounts for well in excess of 50% of the total dollar
volume of payment processing for the trucking industry; and
o another single competitor accounts for in excess of 50% of the total dollar
volume of check verifications.
There can be no assurance that we will continue to be able to compete
successfully with such competitors.
In our Network Services segment, management estimates that:
o the three largest ATM processors, of which we are the largest, process for
approximately 24% of total ATMs in the U.S.; and
o Visa and MasterCard collectively account for approximately 60% of total
annual POS switch transaction volume among the debit networks.
While we compete with VISA and MasterCard in our Network Services business, we
are at the same time reliant on VISA and MasterCard for the authority to process
transactions in the VISA and MasterCard systems. Moreover, VISA and MasterCard
have existing products and rules which could make it difficult for us to compete
against them on a level playing field, which could further increase
VISA/MasterCard's dominance in the debit network access portion of the Network
Services business.
In addition, the competitive pricing pressures that would result from any
increase in competition could adversely affect our margins and may have a
material adverse effect on our financial condition and results of operations.
We compete in terms of price, quality, speed, and flexibility in customizing
systems to meet the particular needs of customers. We believe that we are one of
the few fully-integrated suppliers of a broad range of hardware, processing,
banking, and data compilation services for use in transactions at retail
locations. We also believe that we are one of the few processors that operates a
nationwide debit network, permitting us to offer end-to-end debit transaction
processing services.
Supervision and Regulation
Concord and its subsidiaries are subject to a number of federal and state laws.
Concord is a financial holding company and a bank holding company registered
with the Board of Governors of the Federal Reserve System (the "Board") under
the Bank Holding Company Act of 1956, as amended, which is administered by the
Board. As a financial holding company, Concord is subject to the Bank Holding
Company Act, which generally prohibits it from
o directly or indirectly engaging in any activities other than banking,
managing or controlling banks, and certain other activities that the Board
deems to be financial in nature, incidental to such a financial activity or
complementary to a financial activity; and
o acquiring, directly or indirectly, ownership or control of more than 5% of
the voting shares of any company that is engaged in activities other than
permissible financial activities, with certain exceptions.
For Concord to qualify as a financial holding company, its depository
institution subsidiaries needed to have at least a "satisfactory" Community
Reinvestment Act rating on their most recent examination, and Concord was
required to certify that its depository institution subsidiaries are well
capitalized and well managed. If any of its depository institution subsidiaries
ceases to be well capitalized or well managed, Concord will be required to enter
into an agreement with the Board to bring that depository institution into
compliance with applicable capital and management requirements. During the
period of noncompliance, the Board may impose limitations on the activities of
Concord and its affiliates, and Concord may not directly or indirectly engage
in, or acquire shares of a company engaged in, additional activities permissible
for financial holding companies but not bank holding companies, without the
Board's prior approval. In addition, the Board may require divestiture of
Concord's depository institution subsidiaries if the capital or management
deficiency persists. Also, if any of its depository institution subsidiaries
fails to maintain a "satisfactory" rating under the Community Reinvestment Act,
Concord may not directly or indirectly engage in, or acquire shares of a company
engaged in, additional activities permissible for financial holding companies
but not bank holding companies until the subsidiary depository institution
improves its rating to at least a "satisfactory" rating.
Concord is required to file with the Board an annual report and such additional
information which the Board may require. Concord also is required to obtain the
prior approval of the Board before acquiring more than 5% of any class of voting
stock of any bank that is not already controlled by Concord. The Board may
examine Concord's and each of its subsidiaries' records, including a review of
Concord's capital adequacy in relation to guidelines issued by the Board. The
Board requires minimum capital levels as measured by three ratios: total capital
to risk-weighted assets, tier one capital to risk-weighed assets, and tier one
capital to average total assets. If the level of capital is deemed to be
inadequate, the Board may restrict Concord's future expansion and operations and
take certain other enforcement actions. The Board possesses cease and desist
powers over Concord if, among other things, its actions or actions of its
subsidiaries represent unsafe or unsound practices or violations of law.
Federal law also regulates transactions among Concord and its affiliates,
including the amount of loans or investments that the Concord banking
affiliates, EFS National Bank and EFS Federal Savings Bank, may make to non-bank
affiliates and the amount of advances that each may make to third parties
collateralized by an affiliate's securities. In addition, various federal and
state laws and regulations regulate the operations of EFS National Bank and EFS
Federal Savings Bank, including laws and regulations requiring reserves against
deposits, limiting the nature and pricing of loans, and restricting investments
and other activities. Concord's bank affiliates are also limited in the amount
of dividends that they may declare. Prior regulatory approval must be obtained
before declaring any dividends if the amount of capital, surplus, and retained
earnings is below certain statutory limits.
EFS National Bank and EFS Federal Savings Bank also are generally prohibited
from engaging in certain tie-in arrangements with their affiliates that
condition the availability or price of their products and services on the
customer also obtaining products or services from the affiliate or providing
credit, property, or services to an affiliate.
As a national bank, EFS National Bank operates under the rules and regulations
of the Office of the Comptroller of the Currency, which is its primary
regulator. EFS Federal Savings Bank is also a member of the Federal Reserve
System, subject to provisions of the Federal Reserve Act. As a federal savings
bank, EFS Federal Savings Bank operates under the regulatory and supervisory
jurisdiction of the Office of Thrift Supervision. The Federal Deposit Insurance
Corporation insures the domestic deposits of both banks. Each bank also is
subject to periodic examination by, and must make regularly scheduled reports of
financial condition to, its respective regulatory agencies.
Concord's electronic funds transfer (EFT) services sold to financial
institutions are regulated by certain state and federal banking laws. Material
changes in federal or state regulation could increase Concord's cost of
providing EFT services, change the competitive environment, or otherwise
adversely affect Concord. Concord is not aware of any such change which is
pending.
In addition to regulation by federal and state laws and governmental agencies,
Concord is subject to the rules and regulations of the various credit card
associations and debit networks, including requirements for equity capital
commensurate with transaction processing dollar volume.
Executive Officers of Concord
The following table sets forth certain information concerning our executive
officers as of March 16, 2001:
Name Age Position(s)
- --------------------------------------------------------------------------------
Dan M. Palmer ..................... 58 Chairman of the Board and Chief
Executive Officer
Edward A. Labry III ............... 38 Director and President
Edward T. Haslam .................. 48 Chief Financial Officer
Vickie Brown ...................... 47 Senior Vice President, Chief Operating
Officer, EFS National Bank
Thomas J. Dowling ................. 35 Senior Vice President and Chief
Financial Officer, EFS National Bank
William E. Lucado ................. 60 Senior Vice President, Chief Investment
and Compliance Officer
Mr. Palmer has been a director of Concord since May 1987, and was appointed
Chairman of the Board in 1991. He was named Chief Executive Officer of Concord
in 1990, and Chief Executive Officer of EFS National Bank upon its formation in
1992. He joined Union Planters National Bank in 1982 and founded the bank's
Electronic Fleet Systems (EFS) operation, which was later acquired by Concord.
He continued as President and Chief Executive Officer of EFS following the
acquisition in 1985.
Mr. Labry was named President of Concord EFS, Inc. and EFS National Bank in
1994. Mr. Labry joined Concord in 1984 as a salesman in Concord's trucking
services division, assuming responsibility for all sales and marketing in that
unit in 1987. In 1990, Mr. Labry was named chief marketing officer for all
Concord companies, and was appointed senior vice president in 1991. He is a
member of the international Advisory Councils for Visa and MasterCard, and
serves as director on the board of MS Carriers.
Edward T. Haslam joined Concord in 1999. Previously, he was chief operating
officer of Electronic Payment Services, Inc. (EPS). Prior positions during his
5-year tenure at EPS included chief financial officer and chief accounting
officer. Mr. Haslam also held financial management positions at SEI Corporation
and Manufacturers Hanover Financial Services, Inc.
Vickie Brown joined Concord in 1979 as an accountant. She served as Treasurer
from 1982 through 1991, was elected Vice President in April 1985 and was elected
Senior Vice President in 1991. Ms. Brown served as Chief Operating Officer of
Concord Computing Corporation from 1990 through 1992. Ms. Brown has been Chief
Operating Officer of EFS National Bank since 1997.
Thomas J. Dowling joined Concord in 1992 as Assistant Controller. He became Vice
President and Controller of Concord in 1995 and Chief Financial Officer of
Concord from 1998 to 2000, when Edward T. Haslam was appointed Chief Financial
Officer of Concord. Mr. Dowling continues to serve as Chief Financial Officer of
EFS National Bank. Prior to May 1992, he was a senior audit accountant and CPA
at Ernst & Young LLP.
William E. Lucado joined Concord in 1991 as a Vice President. He was named
Senior Vice President, Compliance Officer for EFS National Bank in 1992, and in
1994 he was elected Senior Vice President of Concord. In 1995, he was elected
Senior Vice President, Investment Officer and Compliance Officer, Corporate
Secretary and Director of EFS National Bank and other subsidiary companies. In
1996, he was elected Assistant Secretary of Concord, and in 1997 he was elected
President of EFS Federal Savings Bank. He was named Chief Investment and
Compliance Officer of Concord in 1998.
Employees
As of December 31, 2000, we employed 2,119 full and part-time personnel,
including 520 data processing and technical employees, 995 in operations, and
604 in sales and administration. Many of our employees are highly skilled, and
we believe our future success will depend in large part on our ability to
attract and retain such employees. We have incentive agreements with our Chief
Executive Officer and our President; however, we do not have any material
employment contracts with any other employees. None of our employees are
represented by a labor union, and we have experienced no work stoppages. We
consider our employee relations to be excellent.
Item 2. PROPERTIES
The following table sets forth certain information concerning our principal
facilities:
Area in Description/ Lease Expiration
Location Square Feet Business Segment (if applicable)
- --------------- ------------ ---------------------------- -------------------
Atlanta, GA 79,057 Offices and Operations, Month-to-month
Payment Services
Bartlett, TN 14,580 Distribution Center and October 15, 2004
Warehouse, Payment Services
Bartlett, TN 6,480 Operations and Warehouse, August 15,2004
Payment Services
Chicago, IL 17,798 Corporate Offices and December 31, 2007
Operations, Network Services
Columbia, SC 6,314 Offices, Network Services August 31, 2004
Cordova, TN 48,119 Customer Service Center, May 1, 2006
Payment Services
Cordova, TN 2,600 Federal Savings Bank Branch, June 30, 2003
Payment Services
Eatonville, FL 6,750 Operations, Network Services June 30, 2003
Elk Grove, IL 18,300 Operations, Payment Services May 31, 2005
Ft. Wright, KY 3,902 Sales Office, Network Services September 30, 2003
Maitland, FL 119,589 Offices and Operations, August 31, 2011
under construction,
Network Services
Maitland, FL 69,989 Offices and Operations, May 31, 2003
Network Services
Maitland, FL 30,792 Corporate Offices June 30, 2003
and Operations,
Network Services
Memphis, TN 50,910 Overall Corporate September 30, 2003
Headquarters, Offices
and Operations,
Payment Services
Memphis, TN 14,691 Offices, Payment Services December 31, 2003
Nashville, TN 3,730 Corporate Offices and February 28, 2003
Operations, Payment Services
N. Olmsted, OH 36,627 Data Processing Center, December 31, 2003
Network Services
Oakland, TN 800 Federal Savings Bank Branch, April 30, 2001
Payment Services
Pittsburgh, PA 2,316 Sales Office, August 31, 2003
Network Services
Pleasanton, CA 10,083 Offices, Payment Services October 31, 2003
Reston, VA 5,369 Offices, under construction,
Network Services May 31, 2005
Reston, VA 8,760 Offices, Network Services May 31, 2002
San Diego, CA 19,544 Offices and Operations, February 28, 2003
Network Services
St. Louis, MO 2,239 Offices, Network Services December 31, 2003
Wilmington, DE 107,500 Corporate Offices and May 21, 2005
Operations, Network Services
Wilmington, DE 70,000 Data Processing Center and not applicable
Operations, Network Services
We believe all facilities are adequate.
Item 3. LEGAL PROCEEDINGS
EFS National Bank has been named as a defendant in a purported class action
lawsuit filed in September 2000 in the Circuit Court of Tennessee for the
Thirtieth Judicial District at Memphis alleging that certain of EFS National
Bank's rate and fee changes were improper under Tennessee law due to allegedly
deficient notice. The plaintiffs recently filed an amended complaint alleging
that the class consists of at least 60,000 merchants who were subjected to the
allegedly improper rate and fee changes. The amended complaint seeks damages in
excess of $15 million as well as injunctive relief and unspecified punitive
damages, treble damages, attorney fees and costs. A class action complaint with
similar allegations has been filed in St. Charles County, Missouri. Although
these matters are in the preliminary stages, EFS National Bank believes that the
claims against it are without merit and intends to vigorously defend against all
claims.
We are also a party to various routine lawsuits arising out of the conduct of
our business, none of which are expected to have a material adverse effect upon
our financial condition or results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders in the fourth quarter of
fiscal 2000.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market Price of and Dividends on Concord's Common Stock and Related Stockholder
Matters
Information included under the caption "Market Value" on page 3 of our
Annual Report to Stockholders is incorporated herein by reference.
Recent Issuances of Unregistered Securities
In February 1999, in connection with its acquisition of Electronic Payment
Services, Concord issued 45.1 million shares of its Common Stock, $0.33 1/3
par value per share, to the former stockholders of Electronic Payment
Services in a transaction not registered under the Securities Act of 1933.
The transaction was exempt from registration under Section 4(2) of the
Securities Act. The unregistered shares were subsequently registered and
resold in a transaction in June of 1999.
In February 2001, in connection with its acquisition of STAR, Concord
issued approximately 24.8 million shares of its Common Stock, $0.33 1/3 par
value per share, to the former stockholders of STAR in a transaction not
registered under the Securities Act of 1933. The transaction was exempt
from registration under Section 4(2) of the Securities Act. Concord
currently expects that it will engage in a disciplined process in 2001 to
eliminate this stock overhang.
Item 6. SELECTED FINANCIAL DATA
Information included under the caption "Financial Highlights" on page 2 of
our Annual Report to Stockholders is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information included under the caption "Management's Discussion & Analysis
of Financial Condition and Results of Operations" on pages 8 to 18 of our
Annual Report to Stockholders is incorporated herein by reference.
Item 7 a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information included under the caption "Management's Discussion & Analysis
of Financial Condition and Results of Operations -- Quantitative and
Qualitative Disclosures About Market Risk" on page 18 of our Annual Report
to Stockholders is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors and consolidated financial statements
set forth below are included on pages 19 to 46 of our Annual Report to
Stockholders and are incorporated herein by reference:
o Report of Independent Auditors
o Consolidated Balance Sheets as of December 31, 2000 and 1999
o Consolidated Statements of Income for the years ended December 31, 2000,
1999 and 1998
o Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2000, 1999 and 1998
o Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
o Notes to Consolidated Financial Statements as of December 31, 2000
Quarterly results of operations for the years ended December 31, 2000 and 1999
under the caption "Note U - Quarterly Financial Results (Unaudited)" on page 45
of the Annual Report to Stockholders are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information included under the captions "Election of Directors" and "Committees;
Attendance" in our Proxy Statement for the Annual Meeting of Stockholders to be
held on May 24, 2001 is incorporated herein by reference. See also the section
captioned "Executive Officers of Concord" in Part I of this Form 10-K.
Item 11. EXECUTIVE COMPENSATION
Information included under the captions "Compensation of Directors," "Executive
Compensation," "Compensation Committee Interlocks and Insider Participation,"
"Compensation Committee Report on Executive Compensation" and "Five Year
Cumulative Stockholder Return" in our Proxy Statement for the Annual Meeting of
Stockholders to be held on May 24, 2001 is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information included under the caption "Beneficial Ownership of Common Stock" in
our Proxy Statement for the Annual Meeting of Stockholders to be held on May 24,
2001 is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information included under the caption "Certain Transactions" in our Proxy
Statement for the Annual Meeting of Stockholders to be held on May 24, 2001 is
incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The following financial statements are incorporated by reference from pages 19
to 46 of our Annual Report to Stockholders for the fiscal year ended December
31, 2000, as provided in Item 8 hereof:
o Report of Independent Auditors
o Consolidated Balance Sheets as of December 31, 2000 and 1999
o Consolidated Statements of Income for the years ended December 31, 2000,
1999 and 1998
o Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2000, 1999 and 1998
o Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
o Notes to Consolidated Financial Statements as of December 31, 2000
Quarterly results of operations for the years ended December 31, 2000 and 1999
under the caption "Note U - Quarterly Financial Results (Unaudited)" on page 45
of the Annual Report to Stockholders are incorporated herein by reference.
2. FINANCIAL STATEMENT SCHEDULES
All schedules are omitted as the required information is inapplicable or the
information is presented in the consolidated financial statements or related
notes.
3. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K AND PARAGRAPH (C) BELOW
See response to Item 14(c) below.
(b) Reports on Form 8-K
A report on Form 8-K was filed on October 10, 2000 reporting that Concord
entered into an Agreement and Plan of Merger dated as of October 6, 2000 with
Star Systems, Inc. and Orion Acquisition Corp.
(c) Exhibits
Exhibit Nos.
2.1 Agreement and Plan of Merger among Concord EFS, Inc., CEFT, Inc. and
Electronic Payment Services, Inc., dated as of November 20, 1998, is
incorporated herein by reference to Exhibit 2.1 to the current report
on Form 8-K (File No. 000-13848), filed on March 10, 1999.
2.2 Agreement and Plan of Merger among Concord EFS, Inc., Orion
Acquisition Corp. and Star Systems, Inc., dated as of October 6, 2000,
is incorporated herein by reference to Exhibit 10 to Concord's
quarterly report on Form 10-Q (File No. 000-13848), filed on November
14, 2000.
3.1 Restated Certificate of Incorporation of Concord EFS, Inc. is
incorporated herein by reference to Exhibit 4.1 to Concord's
registration statement on Form S-8 (File No. 333-74215), filed on
March 10, 1999.
3.2 Certificate of Amendment to the Restated Certificate of Incorporation
of Concord EFS, Inc. is incorporated herein by reference to Exhibit
3.3 to amendment No. 2 to Concord's registration statement on Form S-3
(File No. 333-77829), filed on June 14, 1999.
3.3 Amended and Restated Bylaws of Concord EFS, Inc. are incorporated
herein by reference to Exhibit 4.2 to Concord's registration statement
on Form S-8 (File No. 333-74215), filed on March 10, 1999.
10.1 Concord EFS, Inc. 1993 Incentive Stock Option Plan, as amended and
restated, is incorporated herein by reference to Exhibit 99.1 to
Concord's registration statement on Form S-8 (File No. 333-74215),
filed on March 10, 1999.
10.2 Electronic Payment Services, Inc. 1995 Stock Option Plan, as amended,
is incorporated herein by reference to Exhibit 99.1 to Concord's
registration statement on Form S-8 (File No. 333-74213), filed on
March 10, 1999.
10.3 Star Systems, Inc. 2000 Equity Incentive Plan is incorporated herein
by reference to Exhibit 99.1 to Concord's registration statement on
Form S-8 (File No. 333-56066), filed on February 23, 2001.
10.4*Incentive Agreement between Concord EFS, Inc. and Dan M. Palmer,
dated as of February 26, 1998, is incorporated herein by reference to
Exhibit 10.3 to Concord's annual report on Form 10-K (File No.
000-13848), filed on April 1, 1999.
10.5*Incentive Agreement between Concord EFS, Inc. and Edward A. Labry
III, dated as of February 26, 1998, is incorporated herein by
reference to Exhibit 10.2 to Concord's annual report on Form 10-K
(File No. 000-13848), filed on April 1, 1999.
10.6*Employment Agreement between H&S Holding Company (renamed Star
Systems, Inc.) and Ronald V. Congemi, dated as of March 1, 1999, and
amendment thereto between Star Systems, Inc., Concord EFS, Inc. and
Ronald V. Congemi, dated October 6, 2000.
10.7*Agreement Terminating Salary Continuation Agreement between Star
Systems, Inc., Concord EFS, Inc. and Ronald V. Congemi, dated October
6, 2000.
10.8*Star Nonqualified Deferred Compensation Plan, effective as of January
1, 2000.
11 Statement Regarding Computation of Per Share Earnings is incorporated
herein by reference to Concord's Annual Report to Stockholders for the
year ended December 31, 2000, filed herewith as Exhibit 13, Notes to
Consolidated Financial Statements, Note N.
13 Annual Report to Stockholders for the year ended December 31, 2000.
20 Notice of Annual Meeting of Stockholders.
21 List of Subsidiaries.
23 Consent of Independent Auditors.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this
report.
(d) Financial Statement Schedules
All financial statement schedules are omitted as the required information is
inapplicable or the information is presented in the consolidated financial
statements or related notes.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Concord EFS, Inc.
By:/s/ Dan M. Palmer
-----------------
Dan M. Palmer Chairman of
the Board of Directors
and Chief Executive Officer
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
- ------------------------- ----------------------------- --------------
/s/ Dan M. Palmer Chairman of the Board March 30, 2001
Dan M. Palmer of Directors and Chief
Executive Officer
(Principal Executive Officer)
/s/ Edward T. Haslam Chief Financial Officer March 30, 2001
Edward T. Haslam (Principal Financial and
Accounting Officer)
/s/ Edward A. Labry President March 30, 2001
Edward A. Labry III and Director
/s/ Richard M. Harter Director and Secretary March 30, 2001
Richard M. Harter
/s/ Douglas C. Altenbern Director March 30, 2001
Douglas C. Altenbern
/s/ J. Richard Buchignani Director March 30, 2001
J. Richard Buchignani
/s/ Ronald V. Congemi Director March 30, 2001
Ronald V. Congemi
/s/ Richard P. Kiphart Director March 30, 2001
Richard P. Kiphart
/s/ Jerry D. Mooney Director March 30, 2001
Jerry D. Mooney
/s/ Paul L. Whittington Director March 30, 2001
Paul L. Whittington
CONCORD EFS, INC AND SUBSIDIARIES
FORM 10-K LISTING OF EXHIBITS
Exhibit Nos.
2.1 Agreement and Plan of Merger among Concord EFS, Inc., CEFT, Inc. and
Electronic Payment Services, Inc., dated as of November 20, 1998, is
incorporated herein by reference to Exhibit 2.1 to the current report on
Form 8-K (File No. 000-13848), filed on March 10, 1999.
2.2 Agreement and Plan of Merger among Concord EFS, Inc., Orion Acquisition
Corp. and Star Systems, Inc., dated as of October 6, 2000, is incorporated
herein by reference to Exhibit 10 to Concord's quarterly report on Form
10-Q (File No. 000-13848), filed on November 14, 2000.
3.1 Restated Certificate of Incorporation of Concord EFS, Inc. is incorporated
herein by reference to Exhibit 4.1 to Concord's registration statement on
Form S-8 (File No. 333-74215), filed on March 10, 1999.
3.2 Certificate of Amendment to the Restated Certificate of Incorporation of
Concord EFS, Inc. is incorporated herein by reference to Exhibit 3.3 to
amendment No. 2 to Concord's registration statement on Form S-3 (File No.
333-77829), filed on June 14, 1999.
3.3 Amended and Restated Bylaws of Concord EFS, Inc. are incorporated herein by
reference to Exhibit 4.2 to Concord's registration statement on Form S-8
(File No. 333-74215), filed on March 10, 1999.
10.1 Concord EFS, Inc. 1993 Incentive Stock Option Plan, as amended and
restated, is incorporated herein by reference to Exhibit 99.1 to Concord's
registration statement on Form S-8 (File No. 333-74215), filed on March 10,
1999.
10.2 Electronic Payment Services, Inc. 1995 Stock Option Plan, as amended, is
incorporated herein by reference to Exhibit 99.1 to Concord's registration
statement on Form S-8 (File No. 333-74213), filed on March 10, 1999.
10.3 Star Systems, Inc. 2000 Equity Incentive Plan is incorporated herein by
reference to Exhibit 99.1 to Concord's registration statement on Form S-8
(File No. 333-56066), filed on February 23, 2001.
10.4*Incentive Agreement between Concord EFS, Inc. and Dan M. Palmer, dated as
of February 26, 1998, is incorporated herein by reference to Exhibit 10.3
to Concord's annual report on Form 10-K (File No. 000-13848), filed on
April 1, 1999.
10.5*Incentive Agreement between Concord EFS, Inc. and Edward A. Labry III,
dated as of February 26, 1998, is incorporated herein by reference to
Exhibit 10.2 to Concord's annual report on Form 10-K (File No. 000-13848),
filed on April 1, 1999.
10.6*Employment Agreement between H&S Holding Company (renamed Star Systems,
Inc.) and Ronald V. Congemi, dated as of March 1, 1999, and amendment
thereto between Star Systems, Inc., Concord EFS, Inc. and Ronald V.
Congemi, dated October 6, 2000.
10.7*Agreement Terminating Salary Continuation Agreement between Star Systems,
Inc., Concord EFS, Inc. and Ronald V. Congemi, dated October 6, 2000.
10.8*Star Nonqualified Deferred Compensation Plan, effective as of January 1,
2000.
11 Statement Regarding Computation of Per Share Earnings is incorporated
herein by reference to Concord's Annual Report to Stockholders for the year
ended December 31, 2000, filed herewith as Exhibit 13, Notes to
Consolidated Financial Statements, Note N.
13 Annual Report to Stockholders for the year ended December 31, 2000.
20 Notice of Annual Meeting to Stockholders.
21 List of Subsidiaries.
23 Consent of Independent Auditors.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this
report.