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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 2-89213
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
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.33 1/3 Par Value
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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 has required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
Disclosure of delinquent filings pursuant to Item 405 of Regulation S-K
will be contained in the registrant's proxy statement for its 1996
annual meeting of shareholders, which statement is incorporated by
reference in Part III of this Form 10-K. Yes No X
--- ---
The aggregate market value of the voting stock held by non-affiliates
of the registrant on March 10, 1997 was $1,399,004,693.
The number of shares of the registrant's Common Stock outstanding as of
March 10, 1997, was 60,826,291.
DOCUMENTS INCORPORATED BY REFERENCE
PART II
Portions of this Registrant's 1996 Annual Report to Shareholders are
incorporated by reference into Items 5, 6, 7 and 8.
PART III
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held May 15, 1997 are incorporated by reference into
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
Subsidiaries 2
Description of Business 2
Data Processing and Field Service Support 6
Marketing and Customers 6
Competition 7
Supervision and Regulation 7
Employees 9
2. Properties 9
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
PART II
5. Market for Registrant's Common Stock
and Related Stockholder Matters 9
6. Selected Financial Data 9
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
8. Financial Statements and Supplementary Data 10
9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosures 11
PART III
10. Directors and Executive Officers of the Registrant 11
11. Executive Compensation 11
12. Security Ownership of Certain Beneficial Owners
and Management 11
13. Certain Relationships and Related Transactions 11
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 11
Index to Exhibits 11
Signatures 13
PART I
Item 1. BUSINESS
Overview
- - --------
Concord EFS, Inc. and its subsidiaries (the Company or Concord)
provide electronic transaction authorization, processing, settlement
and funds transfer services in selected markets. The Company's primary
activity is Card Services, which involves the provision of integrated
electronic transaction services for credit card, debit card and
electronic benefits transfer ("EBT") card transactions to supermarket
chains, grocery stores, convenience store merchants and other
retailers. The Company believes it is one of the few fully integrated
transaction processors, supplying electronic payment and verification
terminals, cash dispensing machines ("ATMs"), processing services,
payment settlement, depository services and transaction data
compilation. In addition, the Company is one of the few companies
offering full credit and debit card processing on a nationwide basis.
The Company also provides electronic payment and banking facilities to
a large customer base in the trucking industry for use at major truck
stop chains throughout the United States. In addition to maintaining a
network of over 350 ATMs at truck stops nationwide, the Company
provides fuel purchase cards, ATM bank cards and general banking
services to truck drivers. The Company offers trucking companies
payroll deposit and cash forwarding services, as well as real-time data
compilation with respect to fuel volume usage, fuel expenditures,
vehicle and driver tracking and truck routine maintenance schedules.
In addition, the Company provides check verification services to
grocery and other retail merchants.
Concord offers merchants a cost-effective, reliable, turnkey debit and
credit card processing system. The Company is able to provide its
system on a profitable basis because of its low-cost operational
structure, which includes efficient marketing, volume purchasing
arrangements with equipment and communications vendors, and direct
membership by its subsidiary, EFS National Bank, in bank card
associations (such as VISA, and MasterCard) and national and regional
debit card networks (such as Interlink, MAC, Explore and NYCE). In
1992, Concord entered into an agreement with the National Grocers
Association, Inc. ("NGA") whereby Concord became the preferred vendor
of the NGA for electronic payment services for a range of applications,
including both turnkey packaged solutions and customized payment
service agreements covering credit and debit card transaction
processing. The agreement has enabled Concord to increase
substantially its grocery store customer base. Currently, 6% to 7% of
grocery transactions use credit or debit card payment, and the Company
believes that this percentage is growing rapidly.
The Company seeks to grow its funds transfer and payment transaction
processing business by providing a fully integrated range of transfer
and processing services at competitive prices. The principal elements
of the Company's strategy include the following:
The Company focuses on specific markets that historically have been
underserved by the transaction processing industry, seeking a diverse
group of customers with low credit risk profiles.
-1-
The Company seeks to be a low-cost, highly reliable provider of
electronic payment processing services by providing a fully integrated
range of relevant services, including designing equipment solutions,
selling and leasing equipment, authorizing transactions, capturing
information on its own host computer, directly participating in all
major credit and debit card associations and networks, and effecting
settlement of payment transactions and transfer of funds.
The Company offers maximum technological versatility for the provisions
of electronic processing services for a wide variety of communication
protocols and processing equipment of different manufacturers, in order
to provide a tailored solution to the customer's specific needs.
The Company adheres to a balanced marketing approach through the use of
internal marketing specialists, independent sales representatives and a
number of independent sales organizations ("ISOs") in an effort to
provide, at the most efficient cost, broader access to new merchant
customers and portfolio acquisition opportunities nationwide.
Subsidiaries
- - ------------
EFS National Bank (EFSNB), the largest subsidiary of the Company, sells
credit, debit, and electronic benefits transfer (EBT) card authori-
zation, data capture and settlement services to retailers and grocery
stores. It also sells cash card and cash forwarding services to
trucking companies through agreements with a network of truck stops.
The services of EFSNB do not consist of material amounts of traditional
banking activities (i.e., consumer and commercial loans, demand and
time deposits, real estate, etc.). Therefore, the Company is not
required to use the reporting format and related disclosures normally
required for bank holding companies.
Concord Computing Corporation's (CCC) primary activity is check
authorization and POS terminal driving, servicing and maintenance for
grocery store chains. It also owns and operates cash dispensing
machines (ATMs) at truck stops and grocery stores nationwide.
Additionally, CCC provides certain processing services for its
affiliated companies.
CCC incorporated Concord Retail Services, Inc. (CRS), a wholly-owned
Delaware subsidiary. CRS provides POS terminal driving, servicing and
maintenance to the Company's customers in the northeast United States.
The Company incorporated Concord Equipment Sales, Inc. (CES), a wholly-
owned Tennessee subsidiary, on September 5, 1991. CES purchases from
manufacturers point-of-sale (POS) terminal products and communications
equipment for use by the Company's customers in connection with the
Company's transaction processing services.
Description of Business
The Company operates in the transaction processing and payment services
industry, providing targeted markets with a fully integrated range of
services and products for credit card, debit card and EBT card trans-
actions, trucking company services, check verification data compilation
and payment settlement.
-2-
The following table is a listing of revenues by service type for the
three years ended December 31:
1996 1995 1994
-------- -------- -------
(in thousands)
Card Services $129,658 $ 95,906 $69,169
Trucking Services 24,301 16,687 12,853
Check Verification Services 6,905 8,485 7,744
EFT and Terminal Services 5,836 6,684 6,447
-------- -------- -------
$166,700 $127,762 $96,213
======== ======== =======
As transaction service revenues are similar in nature, total operating
expenses are not directly attributable to any individual revenue type.
Card Services
- - -------------
Card services accounted for 78% of the Company's revenue for the year
ended December 31, 1996. The Company processes credit card
transactions using VISA, MasterCard, Discover, American Express, Diners
Club and JCB cards. The Company processes debit card transactions for
banks issuing such cards, which permit direct payment debit from the
POS terminal against the cardholder's deposit account. In addition, in
those states where EBT programs have been implemented, the Company
similarly processes payments effected with EBT cards against funds made
available by public assistance benefit programs through the primary EBT
third-party providers.
The bank card (e.g., Visa and MasterCard) transaction process begins
when the consumer presents the card and the merchant "swipes" the card
at the POS terminal and enters the transaction amount. The Company
processes the data from the POS terminal through the relevant
electronic communications network to the card issuer. The transaction
is approved or rejected by the issuer bank, and the response is
transmitted almost instantaneously back through the Company's
processing systems to the POS terminal. The purchase transaction is
then confirmed against the authorization data retained in the Company's
system, whereupon the Company (through its subsidiary, EFSNB) settles
the payment by crediting the merchant with the transaction amount, less
the agreed discount rate, and submits the transaction through the
relevant network for crediting by the issuing bank to EFSNB of the
transaction amount less the interchange and/or association fee. To
complete the transaction, the issuing bank bills the consumer for the
transaction amount.
The authorization process is similar for other credit cards (e.g.,
Discover and American Express), debit card (e.g., Explore and NYCE) and
EBT transactions. In a credit card or EBT transaction, the credit card
issuer or EBT primary provider effects the payment settlement by
crediting the merchant's account with the issuer and credits the
Company's account with the related processing service fee. In a debit
card transaction, the transaction is initiated by the consumer's
insertion of the personal identification number, and the transaction is
settled by directly debiting the cardholder's account in the payment
amount plus the surcharge (if any), crediting the merchant in the
payment amount less the processing service charge, paying the network
fee and crediting the Company in the amount of the processing service
charge plus the surcharge (if applicable).
-3-
The Company's principal business is the provision of electronic payment
services to supermarket chains, grocery stores, convenience store
merchants and other retailers. The Company has been selective in the
merchants to which it has marketed its services and has historically
chosen retailers whose businesses are less economically volatile and
involve less risk of chargeback and merchant fraud. The Company will
not, for instance, deal with merchants who book transactions for
delivery at a later date, such as mail-order retailers and travel
agents. No single customer of the Company accounts for a material
portion of the Company's revenues.
Trucking Services
- - -----------------
The Company's trucking services accounted for 15% of its revenue for
the year ended December 31, 1996. The Company provides a variety of
flexible payment systems that enable truckers to use payment cards to
purchase fuel and services and to obtain cash advances at more than
4,000 truck stops. Through its national bank subsidiary, EFSNB, the
Company offers payroll and cash distribution programs to trucking
companies and truck drivers. In connection with the issuance of ATM
bank cards to truck drivers and payroll distribution programs, EFSNB
opens individual payroll deposit accounts and/or full service checking
accounts in the truck drivers' names. Payroll deposit accounts are
special purpose accounts for deposit by the trucking company of
payments for the drivers' accounts, with the drivers' benefits limited
to the right of withdrawal. Under this program, the trucking company
transmits payment instructions to EFSNB, and the specified funds are
made available to the designated drivers within minutes. A substantial
number of truck drivers with payroll deposit accounts choose to open
full-service checking accounts with EFSNB.
The Company also provides trucking companies with private label fuel
cards for use by their drivers. When such fuel cards are utilized, the
Company gathers fuel purchase and other trucking data at the same time
as it processes the payment transactions; the data gathered by the
Company include truck vehicle and trailer identification numbers and
odometer mileage, in addition to fuel volume and expenditure
information. The data gathered from aggregate transactions of a
trucking company provide current information with respect to fuel
volume usage, fuel expenditures, vehicle and driver tracking and truck
routine maintenance schedules. The trucking company customer has real-
time direct access to the Company's database for the trucking company's
drivers and operations.
The Company has established over 350 ATMs at selected locations of
major truck stop chains nationwide. As the Company and its
competitors place ATM cards in truck driver's hands, the Company's ATMs
will be increasingly utilized, and the Company will receive fees both
from the use of its own ATM cards and those of its competitors.
The Company is a member of all major ATM networks, including Cirrus and
Plus.
Check Verification Services
- - ---------------------------
The Company provides check verification programs, which may be
customized to a particular merchant's needs or to a particular market.
The Company's check payment verification services accounted for
approximately 4% of its revenue for the year ended December 31, 1996.
-4-
The traditional check verification program, which is customized to the
specific merchant or merchant chain, consists of a positive and
negative file based upon the check writing history for the checking
account party with the specific merchant or merchant chain. Under the
program's negative file, if a customer tenders a check at any one store
of a merchant chain that is returned for insufficient funds, any
additional checks tendered by such customer will be rejected at all
stores of the merchant chain. Under the positive file, if a customer
cashes a check at any one store in a chain, the amount of that check
reduces for the specified time period that customer's check-cashing
limit for further check presentation at any other store of the chain.
Beginning in the fall of 1995, the Company began to offer a new check
verification program for electronic comparison of a tendered check
against a nationwide multi-merchant database which aggregates the bad
check experiences of all participating merchants. The Company has
entered into arrangements with two providers of such nationwide check
history databases. For check verification utilizing a nationwide
database, the merchant "swipes" the magnetic ink bank and account
identification ("MICR") line of the check using an electronic check
reader, and the check account number is immediately compared against
the nationwide database, which will not verify the tendered check while
a previous bad check on such account remains outstanding against any
other merchant using the database. The Company is able to customize a
particular merchant's use of the nationwide database to include
checking against various identification references in addition to the
check MICR, such as the driver's license number and social security
number of the purchaser. Currently, the Company's fees deriving from
check verification utilizing the nationwide databases represent an
insignificant portion of total check verification revenues; however,
the Company believes merchant use of the nationwide verification
databases will increase as their benefits become more widely known.
Check verification programs provide more limited payment assurance than
check guarantee programs but at a substantially lower cost. Typically
only approximately 1% of checks tendered to merchants are rejected for
insufficient funds or other reasons. Guarantee charges typically range
from 2.5% to 4% of the face value of a check, while check verification
charges amount to only pennies per check. In addition, electronic
check verification is virtually instantaneous, while obtaining the
payment benefit under a check guarantee for a rejected check involves
substantial delay and additional merchant effort. The Company believes
that its check verification services represent a valuable add-on
product which enhances the card processing and settlement services
offered by the Company to supermarket chains, grocery stores,
convenience store merchants and other retailers, and are of particular
value in comparison to check guarantee programs to high-volume, low-
margin retailers.
In addition, the Company provides Electronic Funds Transfer (EFT)
services and sells electronic terminal equipment to customers who are
users of the services.
All of these services are sold directly to the end-user on a nationwide
basis.
-5-
Data Processing and Field Service Support
- - -----------------------------------------
The Company maintains a data processing facility in Elk Grove,Illinois,
primarily for the Company's Check Services and EFT Services, and a data
processing facility in Memphis, Tennessee for Trucking Services and
Card Services. These facilities utilize fully redundant computers
which provide the high levels of availability and the transaction
speed necessary for processing large numbers of financial transactions.
Backup power is available to provide service in the event of power
failure at a computer center. The Company maintains dedicated
telephone networks, packet switching networks and In-Watts networks
connecting data processing centers to retail stores where transaction
and electronic funds transfer terminals are located.
The Company also provides field support and repair services for POS
terminal installations. The Company maintains field support and repair
facilities in Elk Grove, Illinois, Aurora, Colorado and West Chester,
Pennsylvania.
Marketing and Customers
- - -----------------------
The Company markets its services and products on a nationwide basis
directly and through ISOs and independent sales representatives to
supermarket chains, grocery stores, convenience store merchants, and
other retailers, electronic funds transfer networks, financial
institutions and trucking companies. Historically, the Company has
grown its merchant customer base primarily through its in-house
telemarketing and sales force working with independent contractor sales
representatives nationwide. During 1996, the Company has reorganized
its sales and marketing activities relating to its card services
business by adding marketing professionals focused upon multi-store
merchants in certain specialized markets, by reducing the Company's in-
house telemarketing staff, and by outsourcing a portion of its
telemarketing activities to independent sales organizations and by
expanding its relationships with ISOs nationwide. The Company's
strategy is to increase its in-house marketing expertise in certain
specialized market areas and broaden its access to growth opportunities
nationwide by utilizing the broader market penetration of ISOs. The
Company believes that the most promising growth opportunities currently
exist in certain small retail merchant chains in specialized markets,
and in the acquisition of merchant processing portfolios developed by
smaller processing services providers.
The Company has had success historically in marketing through key trade
association relationships, such as its relationship with the NGA, as
the recommended provider of electronic services to grocers, and through
agreements with other payment services providers. Management is
committed to the cultivation of such trade association relationships
and the development of arrangements with other service providers.
As an integrated services provider, the Company has natural cross-
selling marketing opportunities. When the Company established itself
with the major truck stop chains as an authorized issuer of payment
cards and processor of card transactions, the Company gained a
substantial advantage in selling its card payment systems to trucking
companies. The Company's established relationships with the truck stop
owners also afforded an opportunity to sell the placement of ATMs at
truck stops, which in turn provided a further advantage in selling the
-6-
Company's integrated processing and banking services to trucking
companies and truck drivers. The Company's established presence in
grocery stores, grocery chains, convenience stores and other small and
mid-size retailers gives it an advantage in establishing relationships
with EBT providers, whose benefits are utilized largely at such retail
locations.
The Company's sales offices are located in suburbs of Memphis,
Tennessee and Chicago, Illinois. The Company's executive officers
actively participate in the Company's marketing efforts.
Competition
- - -----------
The markets for electronic payment processing, credit and debit card
payment settlement, check authorization programs, fuel card and cash
forwarding services, and ATM services are all highly competitive. The
Company's principal competitors include major national and regional
banks, local processing banks, non-bank processors and other
independent service organizations, many of which have substantially
greater capital, management, marketing and technological resources than
those of the Company. The three largest credit and debit card
processors accounted for 49.5% of the total credit and debit card sales
volume in 1995 (The Nilson Report, April 1996). A single competitor
accounted for 58.6% of the total dollar volume of payment transaction
processing for the trucking industry in 1995 (The Nilson Report,
February 1996). A single competitor accounted for 66.6% of the total
dollar volume of check verifications in the United States in 1995 (The
Nilson Report, April 1996). There can be no assurance that the Company
will continue to be able to compete successfully with such competitors.
In addition, the competitive pricing pressures that would result from
any increase in competition could adversely affect the Company's
margins and may have a material adverse effect on the Company's
financial condition and results of operations.
The Company competes in its markets in terms of price, quality, speed
and flexibility in customizing systems to meet the particular needs of
customers. The Company believes that it is one of the few fully
integrated suppliers of a broad range of hardware and processing,
banking and data compilation services for use in transactions at retail
locations.
The Company also competes with other electronic payment processing
organizations for growth opportunities. The recent consolidation in
banking in the Untied States has resulted in fewer opportunities for
merchant portfolio acquisitions, as many small banks have been acquired
by large banks, some of which are competitors with the Company in the
provision of processing services.
Supervision and Regulation
- - --------------------------
Concord EFS, Inc. and its subsidiaries are subject to a number of
federal and state laws. As a bank holding company, the Company is
subject to regulation under the Bank Holding Company Act of 1956, as
amended (the "Act") which is administered by the Federal Reserve Board
(the "Board"). Under the Act, the Company is generally prohibited from
directly engaging in any activities other than banking, managing or
controlling banks, and bank-related activities. Also, the Act
prohibits a bank holding company, with certain exceptions, from
acquiring, directly or indirectly, ownership or control of 5% or more
-7-
of the voting shares of any company which is not a bank or bank holding
company. The primary exception to this prohibition involves activities
which the Board determines are closely related to banking. A bank is
also generally prohibited from engaging in certain tie-in arrangements
with its bank holding company or affiliates with respect to the lease
or sale of property, furnishing of services, or the extension of
credit. The Act contains certain restrictions concerning future
mergers with other bank holding companies and banks. The Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA)
contains certain merger restrictions with Savings and Loan
Associations.
Under the Act, a bank holding company is required to file with the
Board an annual report and such additional information which the Board
may require. The Board may examine the Company's and each of its sub-
sidiaries' records, including a review of capital adequacy in relation
to guidelines issued by the Board. If the level of capital is deemed
to be inadequate, the board may restrict the future expansion and oper-
ations of the Company. The Board possesses cease and desist powers over
a bank holding company if its actions or actions of any of its subsidi-
aries represent unsafe or unsound practices or violations of law.
Federal law also regulates transactions among the Company and its
affiliates, including the amount of a banking affiliate's loan to, or
investments in, non-bank affiliates and the amount of advances to third
parties collateralized by securities of an affiliate. In addition,
various requirements and restrictions under federal and state laws
regulate the operations of the Company's banking affiliates, requiring
the maintenance of reserves against deposits, limiting the nature of
loans and the interest that may be charged thereon, restricting
investments and other activities. The Company'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.
As a national bank, EFSNB operates under the rules and regulations of
the Comptroller of the Currency and is also a member of the Federal
Reserve System, subject to provisions of the Federal Reserve Act. The
Federal Deposit Insurance Corporation insures the domestic deposits of
all the Banks. Periodic audits and regularly scheduled reports of
financial information are required by all regulatory agencies.
Federal laws also regulate certain transactions among EFSNB and its
affiliates, including Concord EFS,Inc.
The Company's EFT Services sold to financial institutions are regulated
by certain State and Federal banking laws. Material changes in
federal or state regulation could increase the cost to the Company of
providing EFT Services, change the competitive environment or otherwise
adversely affect the Company. The Company is not aware of any such
change which is pending.
In addition to regulation by federal and state laws and governmental
agencies, the Company is subject to the rules and regulations of the
various credit card and debit card associations and networks, including
requirements for equity capital commensurate with processing
transaction dollar volume.
-8-
Employees
- - ---------
As of December 31, 1996, the Company employed 447 full and part-time
personnel, including 53 data processing and technical employees, 320 in
operations, and 74 in sales and administration. Many of the Company's
employees are highly skilled, and the Company believes its future
success will depend in a large part on its ability to attract and
retain such employees. The Company does not have employment contracts
with any of its personnel. None of the Company's employees are
represented by a labor union and the Company has experienced no work
stoppages. The Company considers its employee relations to be
excellent.
Item 2. PROPERTIES
The following table sets forth certain information concerning the
principal facilities of the Company, all of which are leased:
Approximate
Area In
Location Square Feet Primary Uses Expiration
- - ----------- ----------- ----------------- -------------
Memphis, TN 43,375 Corporate Offices July 31, 2000
& EFSNB Operations
Elk Grove, IL 20,330 Data Processing, July 31, 1997
Field Service,
Concord Operations
Aurora, Co 3,072 Field Service month to month
West Chester,
Pennsylvania 1,300 Field Service May 31, 1997
The Company believes all facilities are adequate.
Item 3. LEGAL PROCEEDINGS
The Company is a party to various routine lawsuits arising out of the
conduct of its business, none of which are expected to have a material
adverse effect upon the Company's financial condition or results of
operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of stockholders in the fourth
quarter of fiscal 1996.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
This information is included under the caption "Market Value For the
Registrant's Common Stock and Related Stockholders Matters" on page 6
of the Company's Annual Report(the "Annual Report"),and is incorporated
herein by reference.
Item 6. SELECTED FINANCIAL DATA
This information is included under the caption "Selected Consolidated
Financial Data" on page 1 of the Annual Report and is incorporated
herein by reference.
-9-
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This information is included under the captions "Management's Discus-
sion and Analysis of Financial Condition and Results of Operations" on
pages 3 and 4 of the Annual Report and is incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors and consolidated financial state-
ments set forth below are included on pages 7 - 20 of the Annual
Report, and are incorporated herein by reference.
Report of Independent Auditors.
Consolidated Balance Sheets as of December 31, 1996 and 1995.
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994.
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1995, and 1994.
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994.
Notes to Consolidated Financial Statements as of December 31, 1996.
Quarterly results of operations for the years ended December 31, 1996
and 1995 on page 5 of the Annual Report are incorporated herein by
reference.
Schedule II, Valuation and Qualifying Accounts, is listed below. All
schedules for which provision is made in the applicable accounting
regulations of the Securities & Exchange Commission are not required
under the related instructions and, therefore, have been omitted.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNT
CONCORD EFS, INC.
Balance Charged to Balance
Beginning Costs and * End
of Period Expenses Deductions of Period
--------- ---------- ---------- ---------
Year ended
December 31, 1996
Allowance for
uncollectible accounts $759,435 $816,786 $691,470 $884,751
======== ======== ======== ========
Year ended
December 31, 1995
Allowance for
uncollectible accounts $750,206 $500,000 $490,771 $759,435
======== ======== ======== ========
Year ended
December 31, 1994
Allowance for
uncollectible accounts $605,247 $480,000 $355,041 $750,206
======== ======== ======== ========
* Uncollectible accounts written off, net of recoveries.
-10-
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
See Item 13 below.
Item 11. EXECUTIVE COMPENSATION
See Item 13 below.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See Item 13 below.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Items 10, 11, 12, and 13 is included in the
Company's Proxy Statement for the Annual Meeting of Shareholders to be
held on May 15, 1997 under the captions "Election of Directors",
"Executive Compensation", "Stock Options", Beneficial Ownership of
Common Stock", and "Certain Transactions" and is incorporated herein by
reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) and (2) -- The response to this portion of Item 14 is
submitted as a separate section of this report.
(3) Listing of Exhibits
Exhibit
Numbers
2 Agreement and Plan of Merger dated January 12, 1990 by and
between Concord Computing Corporation, a Massachusetts
corporation , and Concord Computing Corporation, a Delaware
corporation *
3(A) Certificate of Incorporation of Concord Computing Corporation,
a Delaware corporation *
3(B) Bylaws of Concord Computing Corporation, a Delaware
corporation *
3(C) Certificate of Merger of Concord Computing Corporation, a
Massachusetts corporation, with and into Concord Computing
Corporation, a Delaware corporation, filed with the Secretary
of State of Delaware March 22, 1990 *
3(D) Articles of Merger of Concord Computing Corporation, a
Massachusetts corporation, with and into Concord Computing
Corporation, a Delaware corporation, filed with the Secretary
of State of Massachusetts March 22, 1990 *
10 1993 Incentive Stock Option Plan (incorporated by reference
from exhibit to the Registrant's Proxy Statement for the
Annual Meeting of Shareholders held on May 12, 1993.)
11 Statement Re: Computation of Per-share Earnings.
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22 List of Subsidiaries
Jurisdiction of
Company Organization Ownership
------- --------------- ---------
Concord Computing Corp. Delaware 100%
EFS National Bank National Bank Charter 100%
Concord Equipment Sales Tennessee 100%
23 Consent of Independent Auditors
27 Financial Data Schedule
* Incorporated by reference from exhibits to the Registrant's
Amendment No. 1 to Form 10-Q for quarter ended March 31, 1990.
(b) Reports on Form 8-K -- No reports on Form 8-K were filed during the
quarter ended December 31, 1996.
(c) Exhibits -- The response to this portion of Item 14 is submitted as
a separate section of this report.
(d) Financial Statement Schedules -- The response to this portion of
Item 14 is submitted as a
seperate section of this report.
For the purposes of complying with the amendments to the rules
governing the Form S-8 (effective July 13, 1990) under the Securities
Act of 1933, the undersigned registrant hereby undertakes as follows,
which undertaking shall be incorporated by reference into registrant's
Registration Statement on Form S-8 No. 33-60871.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has fully 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
Chief Executive Officer
Date: March 31, 1997
/s/ Thomas J. Dowling
---------------------
Thomas J. Dowling
Vice President and Controller
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 and CEO March 31, 1997
- - ----------------- of the Company and EFS
Dan M. Palmer National Bank
/s/ Edward A. Labry President of the Company and March 31, 1997
- - ------------------- EFS National Bank
Edward A. Labry III
/s/ Richard M. Harter Director and Secretary of March 31, 1997
- - --------------------- the Company
Richard M. Harter
/s/ David C. Anderson Director of the Company March 31, 1997
- - ---------------------
David C. Anderson
/s/J. Richard Buchignani Director of the Company and March 31, 1997
- - ------------------------ EFS National Bank
J. Richard Buchignani
/s/ Joyce Kelso Director of the Company and March 31, 1997
- - ---------------- EFS National Bank
Joyce Kelso
/s/ Richard P. Kiphart Director of the Company March 31, 1997
- - -----------------------
Richard P. Kiphart
/s/ Jerry D. Mooney Director of the Company March 31, 1997
- - --------------------
Jerry D. Mooney
/s/Paul L. Whittington Director of the Company March 31, 1997
- - ----------------------
Paul L. Whittington
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