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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, 1997
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
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
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 1998 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 9, 1998 was $2,061,416,942.
The number of shares of the registrant's Common Stock outstanding as of March 9,
1998 was 61,997,502.
DOCUMENTS INCORPORATED BY REFERENCE
PART II
Portions of this Registrant's 1997 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 14, 1998 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 3
Data Processing and Field Service Support 6
Marketing and Customers 6
Competition 7
Supervision and Regulation 8
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 10
PART III
10. Directors and Executive Officers of the Registrant 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
on Form 8-K 12
Index to Exhibits 12
Signatures 14
PART I
This Annual Report on Form 10-K may contain or incorporate by reference
statements which may constitute "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Prospective investors are cautioned
that any such forward-looking statements are not guarantees for future
performance and involve risks and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Important factors currently known to management that could cause actual results
to differ materially from those in forward-looking statements include general
economic conditions, significant changes in the federal and state legal and
regulatory environment, and competition in the Company's markets. The Company
undertakes no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
to future operating results over time.
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. The Company believes a growing
-1-
percentage of grocery transactions use credit, debit or EBT cards for payment.
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:
1) The Company focuses on specific markets that historically have been under
served by the transaction processing industry, seeking a diverse group of
customers with low credit risk profiles.
2) 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.
3) The Company offers maximum technological versatility for the provisions of
equipment of different manufacturers, in order to provide a tailored solution to
the customer's specific needs.
4)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 authorization, 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.
-2-
During 1997, the Company made two acquisitions that were immaterial to the
financial statements. The Company purchased a federal savings bank charter in
July 1997 and began operations as EFS Federal Savings Bank (EFSFSB) in August
1997 to facilitate the strategic deployment of cash dispensing machines and bank
branches at selected truckstops. The Company also merged with Pay Systems of
America, Inc. (PSA) in a pooling of interests on December 15, 1997. PSA is a
Nashville, Tennessee based payroll processing company.
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 transactions, trucking
company services, check verification data compilation, payroll processing and
payment settlement.
The following table is a listing of revenues by service type for the three years
ended December 31:
1997 1996 1995
-------- -------- --------
(in thousands)
Card Services $185,918 $129,658 $ 95,906
Trucking Services 42,064 24,301 16,687
Check Verification Services 6,345 6,905 8,485
EFT and Terminal Services 5,677 5,836 6,684
-------- -------- --------
$240,004 $166,700 $127,762
======== ======== ========
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 77% of the Company's revenue for the year ended
December 31, 1997. 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.
-3-
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).
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 18% of its revenue for the year
ended December 31, 1997. 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 includes 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 provides 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.
-4-
The Company also processes ATM transactions for ATM owners at casinos,
truckstops, grocery stores and other retail merchants. Fee income is generated
from the authorization and settlement of ATM withdrawals at these locations.
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 3% of its revenue for
the year ended December 31, 1997.
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.
-5-
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.
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, 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 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, through its recent acquisition of PSA, will begin selling payroll
processing services to its retail, grocery store, trucking company and truckstop
merchants. Management believes the payroll processing business is a large and
growing market that will grow even faster as governmental requirements for
electronic filings of reports increase the accounting burden for small
businesses. As these businesses outsource the payroll process, growth
opportunities in this market will increase further.
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. In each of the Company's largest service
types, the Company competes against other companies who have a dominate share of
each market. Management estimates the three largest credit and debit card
processors account for roughly 50% of the total credit and debit card sales
volume in 1997. Management estimates a single competitor accounts for well in
excess of 50% of the total dollar volume of payment transaction processing for
the trucking industry. Another single competitor accounts for in excess of 50%
of the total dollar volume of check verifications. 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 trend of consolidation in the banking
industry 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.
-7-
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 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 subsidiaries' 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 operations of the Company. The Board possesses cease and
desist powers over a bank holding company if its actions or actions of any of
its subsidiaries 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 Office
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, 1997, the Company employed 592 full and part-time personnel,
including 55 data processing and technical employees, 448 in operations, and 89
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 Lease
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, 1998
Field Service, and
CCC Operations
Aurora, CO 3,072 Field Service month to month
West Chester, PA 1,300 Field Service May 31, 1998
Oakland, TN 800 EFSFSB Branch April 30, 1999
Nashville, TN 3,202 PSA Operations month to month
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 1997.
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 Stockholder Matters" on page 8 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 Discussion and
Analysis of Financial Condition and Results of Operations" on pages 3 to 7 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 statements set
forth below are included on pages 9 to 23 of the Annual Report, and are
incorporated herein by reference.
Report of Independent Auditors.
Consolidated Balance Sheets as of December 31, 1997 and 1996.
Consolidated Statements of Income for the years ended December 31, 1997,
1996 and 1995.
Consolidated Statements of Stockholders' Equity for the years ended December
31, 1997, 1996, and 1995.
Consolidated Statements of Cash Flows for the years ended December 31, 1997,
1996, and 1995.
Notes to Consolidated Financial Statements as of December 31, 1997.
Quarterly results of operations for the years ended December 31, 1997 and 1996
on page 8 of the Annual Report are incorporated herein by reference.
All other 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.
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 Stockholders to be held on
May 14, 1998 under the captions "Election of Directors", "Executive
Compensation", "Stock Options", Beneficial Ownership of Common Stock", and
"Certain Transactions" and is incorporated herein by reference.
-10-
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.)
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%
EFS Federal Savings Bank Federal Savings Bank Charter 100%
Pay Systems of America, Inc. 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, 1997.
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(c) Exhibits -- The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedules -- No financial statement schedules are
required to be filed as part of this report on Form 10-K.
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 By:/s/Thomas J. Dowling
----------------- --------------------
Dan M. Palmer Thomas J. Dowling
Chief Executive Officer Vice President and Controller
Date: March 31, 1998
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, 1998
Dan M. Palmer of the Company and EFS
National Bank
/s/ Edward A. Labry President of the Company and March 31, 1998
Edward A. Labry III EFS National Bank
/s/ Richard M. Harter Director and Secretary of March 31, 1998
Richard M. Harter the Company
/s/ Douglas C. Altenbern Director of the Company March 31, 1998
Douglas C. Altenbern
/s/ David C. Anderson Director of the Company March 31, 1998
David C. Anderson
/s/J. Richard Buchignani Director of the Company and March 31, 1998
J. Richard Buchignani EFS National Bank
/s/ Joyce Kelso Director of the Company and March 31, 1998
Joyce Kelso EFS National Bank
/s/ Richard P. Kiphart Director of the Company March 31, 1998
Richard P. Kiphart
/s/ Jerry D. Mooney Director of the Company March 31, 1998
Jerry D. Mooney
/s/Paul L. Whittington Director of the Company March 31, 1998
Paul L. Whittington
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