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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 000-13848
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 filers 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.
The aggregate market value of the voting stock held by non-affiliates of
the registrant on February 15, 2002 was $14,500,446,855.
The number of shares of the registrant's Common Stock outstanding as of
February 15, 2002 was 508,172,778.
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 either was previously filed or will be 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:
. Information contained in our Annual Report to Stockholders for the
fiscal year ended December 31, 2001 is incorporated by reference in
response to Items 1, 5, 6, 7, 7a, and 8.
. Information contained in our Proxy Statement to be filed for the
Annual Meeting of Stockholders to be held on May 23, 2002 is
incorporated herein by reference in response to Items 10, 11, 12, and
13.
FORWARD-LOOKING STATEMENTS
This report may contain or incorporate by reference forward-looking
statements made pursuant to the safe harbor provisions of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Forward-looking statements are not guarantees of future
performance and involve risks, uncertainties, and other factors, including those
set forth in this paragraph. Important factors that could cause our actual
results, performance, or achievements to be materially different from any future
results, performance, or achievements expressed or implied by those statements
include, but are not limited to: (i) the failure to successfully execute our
corporate consolidation plan, (ii) the loss of key personnel or inability to
attract additional qualified personnel, (iii) the loss of key customers, (iv)
increasing competition, (v) changes in card association rules and practices,
(vi) the inability to remain current with rapid technological change, (vii)
risks related to acquisitions, (viii) the imposition of additional state taxes,
(ix) continued consolidation in the banking and retail industries, (x) business
cycles and the credit risk of our merchant customers, (xi) the outcome of
litigation involving VISA and MasterCard, (xii) utility and system interruptions
or processing errors, (xiii) susceptibility to fraud at the merchant level,
(xiv) changes in card association fees, products, or practices, (xv)
restrictions on surcharging, (xvi) rules and regulations governing financial
institutions and changes in such rules and regulations, and (xvii) volatility of
the price of our common stock. We undertake no obligation to publicly update or
revise any forward-looking statements to reflect changed assumptions, the
occurrence of anticipated or unanticipated events, or changes to future results
over time. See the cautionary statements included as Exhibit 99.2 to this Form
10-K for a more detailed discussion of the foregoing and other factors.
INDUSTRY SOURCES
Unless otherwise noted, the industry information provided in this Form
10-K, including the industry rankings, is based upon information contained in
the following industry publications:
. Thomson Financial's EFT Data Book 2002 Edition, for share of point of
sale personal identification number (PIN)-secured debit transactions
processed and share of PIN-secured debit payment transactions as of
March 2001,
. Thomson Financial's EFT Data Book 2002 Edition, for share of PIN-secured
debit payment transactions, based on 2000 transactions,
. Thomson Financial's 2002 Card Industry Directory, for share of automated
teller machines driven as of March 2001,
. The Nilson Report, Issue No. 751, for share of annual PIN-secured and
signature debit payment transactions among the debit networks, based on
2000 transactions, and
. The Nilson Report, Issue 739, for share of dollar volume of credit and
signature debit card payments, based on 2000 transactions.
We believe these publications contain the most current industry information
published on the matters referenced, as of the date of this Form 10-K.
CONCORD EFS, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Item 1. BUSINESS ............................................................. 1
Item 2. PROPERTIES ........................................................... 12
Item 3. LEGAL PROCEEDINGS .................................................... 13
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .................. 14
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS .................................................. 14
Item 6. SELECTED FINANCIAL DATA .............................................. 15
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ................................................ 15
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ........... 15
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .......................... 15
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES ................................................ 16
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ................... 16
Item 11. EXECUTIVE COMPENSATION ............................................... 16
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ....... 16
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ....................... 16
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K .... 17
PART I
Item 1. BUSINESS
Overview
Concord EFS, Inc. is a leading, vertically integrated electronic
transaction processor. We acquire, route, authorize, capture, and settle
virtually all types of electronic payment and deposit access transactions for
financial institutions and merchants nationwide. Our primary activities consist
of Network Services, which provides automated teller machine (ATM) processing,
debit card processing, deposit risk management, and coast-to-coast debit network
access principally for financial institutions, and Payment Services, which
provides payment processing for supermarkets, major retailers, petroleum
dealers, convenience stores, restaurants, trucking companies, and independent
retailers. In 2001 we processed approximately 9.1 billion transactions.
Services
Network Services. Network Services includes terminal driving and monitoring
for ATMs, transaction routing and authorization via the combined STAR(sm),
MAC(R), and Cash Station(R) debit network as well as other debit networks,
deposit risk management, and real-time card management and authorization for
personal identification number (PIN)-secured debit and signature debit cards. In
addition, we operate the network switch that connects a coast-to-coast network
of ATMs and point of sale (POS) locations that accept debit cards issued by our
member financial institutions. Our network access services include transaction
switching and settlement. In 2001 we processed approximately 2.3 billion
PIN-secured debit transactions and approximately 3.2 billion ATM transactions.
Our debit network has been built primarily through the acquisition of a
number of regional debit networks, giving us a non-bankcard association,
coast-to-coast debit network. In 1999, through our acquisition of Electronic
Payment Services, Inc., we acquired the MAC network, which is concentrated in
the Northeastern United States. In 2000, through our acquisition of Cash
Station, Inc., we acquired the Cash Station network, which is concentrated in
the Midwest. Most recently, in February 2001, we acquired Star Systems, Inc.
(STAR), whose network spans the Western, Southwestern, and Southeastern United
States. As a result of these acquisitions, as of December 31, 2001, our
estimated 6,200 financial institution customers deployed almost 200,000 ATMs
nationwide that carried at least one of our brands (STAR, MAC, or Cash Station).
We market our debit network services under three different brand names:
STAR, MAC, and Cash Station. We intend to consolidate all of our brands under
the STAR brand name by 2004. We believe this will add to the name recognition of
STAR as a coast-to-coast electronic funds transfer (EFT) brand.
Through the approximately 865,000 branded POS locations connected to our
combined network, we believe that in 2001 we switched approximately 50% of the
total United States PIN-secured debit transactions at the point of sale. We
believe that we enjoy a significant competitive advantage by owning a
coast-to-coast debit network with the strength of the STAR
brand that allows us to effectively cross-sell our services to both Network
Services and Payment Services customers.
For PIN-secured debit transactions using our combined STAR, MAC, and Cash
Station debit network and for which we are both the acquiring processor and the
debit card processor, we receive (1) a fee from the merchant for acquiring the
transaction, (2) a network acquirer fee from the merchant plus a fee from the
card issuing financial institution for running the transaction through our
network switch, and (3) a fee from the card issuer for obtaining the
authorization. For PIN-secured debit transactions that use our network, but
where we do not have an acquiring relationship with the merchant and a
processing relationship with the issuer, we still earn a network acquirer fee
plus a fee for switching the transaction through our network.
We hold an 85% ownership interest in Primary Payment Systems, Inc., which
we believe is an industry leader in deposit account fraud detection systems.
Through Primary Payment Systems, we have extended our services to provide
deposit risk management services to our customers. Our deposit risk management
products provide the financial services and retail industries with tools to
reduce deposit account and securities account fraud and its related expense.
Primary Payment Systems' products are marketed to financial institutions
directly by Primary Payment Systems as well as through our STAR network. Primary
Payment Systems also provides us with access to a number of financial
institution customers who are customers of Primary Payment Systems but not our
debit network.
In 2001 Primary Payment Systems increased the breadth of its deposit risk
management services with the acquisition of Wally Industries, Inc. d/b/a WJM
Technologies. WJM provides front-end tools to help identify fraudulent deposit
accounts before they are opened and activated. Through its Early Warning(R)
software product, WJM screens new banking customer relationships.
In December 2001 we announced that we had reached an agreement to acquire
The Logix Companies, LLC, an electronic transaction processor based in Longmont,
Colorado. A private limited liability company, Logix provides financial
institutions, retailers, and independent sales organizations with ATM
processing, electronic check conversion, identification and authentication
services, database development and reporting, and merchant processing services.
We expect to close the Logix transaction during the first quarter of 2002,
subject to various conditions, including regulatory approval.
Payment Services. Payment Services provides the systems and processing that
allow retail clients to accept virtually any type of electronic payment,
including all card types--credit, debit, electronic benefits transfer (EBT),
prepaid, and proprietary cards--as well as 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. In 2001 we processed approximately 3.6 billion of these payment
transactions. 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 turn-key, providing merchants with POS terminal
equipment, transaction routing and authorization, settlement, funds movement,
and sponsorship into all credit card associations (such as VISA and MasterCard)
and debit networks (such as STAR, Pulse, and NYCE).
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Early in 2000 we completed two acquisitions in the Payment Services area.
In February 2000 we completed our acquisition of Virtual Cyber Systems, Inc., an
Internet software development company, and in January 2000 we completed our
acquisition of National Payment Systems Inc. d/b/a 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 merchants.
We have benefited from the shift in payments from cash and checks to
debit cards and EBT. We have also realized growth in transactions as a result of
our merchants expanding into additional locations and the growth in our
independent sales organization partners. We believe our end-to-end product has
provided us with a competitive advantage. For PIN-secured debit transactions for
which we are both the acquiring processor and the debit card processor, we are
able to capture all of the applicable fees associated with each transaction,
thereby maximizing our per transaction revenue opportunity. We believe we were
the leading provider of payment services to the grocery and petroleum industries
as of December 31, 2001.
As a fully integrated transaction processor, we are able to provide our
Payment Services customers with the following services:
. Equipment--We sell or lease POS terminal equipment through volume
purchasing arrangements with equipment vendors.
. Front-End / Software--We provide the systems and software for POS
applications that support a variety of non-cash payment types,
including credit, debit, EBT, check authorization, electronic check
conversion, and gift cards.
. Communications Network--We manage and monitor the telecommunications
networks that connect the terminals with our host and with the credit,
debit, and EBT gateways connected to us. We support all major
telecommunications options, including frame relay, dial-up, satellite,
wireless, and digital subscriber line (DSL).
. Transaction Authorization--We connect to all major credit card
associations, debit networks, and magnetic-stripe EBT programs,
allowing us to route transactions to the appropriate network for
authorization and then relay this information back to the terminal to
complete the transaction.
. Merchant Accounting--We perform the merchant accounting function that
aggregates transaction information by merchant for submission to the
appropriate networks and for merchant-level settlement and reporting.
. Settlement / Reporting--The credit card associations settle with our
subsidiary EFS National Bank, which acts as the merchant's sponsoring
bank.
. Funds Movement--Through EFS National Bank, we move the funds from the
networks to the merchant's bank via automated clearing house (ACH)
transfers.
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We believe that our ownership of EFS National Bank provides us with a
number of competitive advantages in Payment Services:
. We are a member of the credit and debit card associations and
therefore do not have to pay another financial institution to sponsor
us.
. We settle our transactions directly through the Federal Reserve and
thus do not have to pay a third-party vendor.
. We perform services such as ACH and wire transfer internally and
therefore do not have to pay another financial institution for such
services.
Operations by Business Segment
"Note Q--Operations by Business Segment" on pages 46 to 48 of our Annual
Report to Stockholders for the fiscal year ended December 31, 2001 (Annual
Report to Stockholders) contains information about the relative contribution of
our Network Services and Payment Services segments to our earnings and is
incorporated herein by reference.
Strategy
Our strategy is to grow our Network Services and Payment Services
businesses by providing a fully integrated range of processing services at
competitive prices targeted to select markets with high growth characteristics.
We have developed and continue to pursue the following initiatives to improve
our competitive position and increase our share of the market for transaction
processing services:
. Focus on markets that are switching rapidly to electronic payment
cards. We target markets in which the use of cash and checks has
historically been high, such as supermarkets and gas stations.
. Utilize a multi-faceted sales approach to target selected vertical
markets. We seek to penetrate our selected markets through a segmented
sales approach. As of January 31, 2002, approximately 325 corporate
salespeople sold directly to small, medium, and large companies, and
approximately 1,000 third party independent sales organizations and
agent banks sold to smaller merchants. Our direct sales force is
organized along key customer industry lines with specialization in the
petroleum, supermarket, major retail, and restaurant industries. We
believe that this vertical sales approach provides us with broad
access to potential new customers.
. Provide a fully integrated range of services. We believe that our
vertically integrated structure allows us to be a highly efficient
provider of electronic payment processing services. By providing a
wide range of relevant services, we are able to customize services, to
offer competitive prices, and to capitalize on the complete revenue
opportunity with each of our clients. Further, for PIN-secured debit
transactions for which we are both the acquiring processor and the
debit
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card processor, we are able to capture all of the applicable fees
associated with each transaction, thereby maximizing our per
transaction revenue opportunity.
. Cross-sell our services to existing clients. With the acquisitions of
STAR and Cash Station, we provided network access to approximately
6,200 financial institution customers as of December 31, 2001. These
acquisitions created an opportunity to increase revenue and profits by
cross-selling our ATM processing and debit card processing products to
these existing financial institution customers, especially STAR and
Cash Station members, which as of December 31, 2001 were
under-penetrated with our processing services as compared to MAC
network members.
. Leverage our PIN-secured debit infrastructure. As a coast-to-coast
debit network, we believe that we have significant opportunities to
add additional services on our network. For example, we believe that
most Internet-based transactions are currently fulfilled using
established credit card payment methodologies. As the use of
PIN-secured debit cards for retail purchases continues to rise, we
believe that debit card usage on the Internet will also increase. We
are also developing services to take advantage of our existing ATM
network and card base, such as person-to-person payments.
. Develop new products and services to meet market needs. We strive to
offer our customers new payment alternatives and other products that
will help them reduce their costs or improve revenues. Examples
include electronic check conversion, which is designed to reduce the
number of checks written for payment; gift cards and loyalty programs,
which are value-added services to increase sales; an identification
verification service, which is designed to reduce new account fraud
losses and is expected to help financial institutions comply with the
USA Patriot Act; and an Internet-based payment gateway, which allows
new clients to connect to our processing platforms in hours rather
than weeks, with minimal programming and without certification.
. Maintain a highly efficient operating structure. We strive to maintain
a highly efficient operating structure, including an emphasis on low
overhead and cost control efforts. Additionally, through our banking
subsidiary, EFS National Bank, we are able to participate directly in
bank card associations and regional and national ATM and debit card
networks to cost-effectively settle electronic transactions and to
substantially reduce our ACH and wire transfer fees. We have been
successful in leveraging the efficiency of our operating structure and
efficiency improvements in telecommunications and other technologies.
Between 1998 and 2001, we improved our operating income per
transaction at a compound annual rate of 13%, excluding acquisition
expenses and restructuring charges.
. Seek selective acquisitions. We continue to look for opportunities to
grow our business through selective acquisitions that will allow us to
increase our customer base, increase profitable transaction volume,
and reduce costs. For example, the acquisitions of STAR and Cash
Station enabled us to increase our volume of PIN-
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secured debit transactions at the point of sale. We have also
increased our volume of credit transactions processed through the
acquisition of Card Payment Systems. In addition, we recently
announced that we had reached an agreement to acquire Logix, an
electronic transaction processor that provides financial institutions,
retailers, and independent sales organizations with ATM processing,
electronic check conversion, identification and authentication
services, database development and reporting, and merchant processing
services. We expect to close the Logix transaction during the first
quarter of 2002, subject to various conditions, including regulatory
approval.
Marketing and Customers
We market our services and products on a nationwide basis to supermarkets,
gas stations, convenience stores, restaurants, independent retailers, financial
institutions, and trucking companies. We market both directly through our
internal sales force and indirectly through independent sales organizations and
their representatives. As of December 31, 2001, our sales force included
approximately 75 corporate salespeople selling directly to medium and large
companies; approximately 315 independent salespeople at H & F Services, Inc., an
independent sales organization selling to small- and medium-sized companies; and
approximately 970 third party independent sales organizations and agent banks
selling to smaller merchants. On January 1, 2002, we acquired H & F Services,
and as a result, our corporate sales force grew to 325 salespeople as of January
31, 2002, increasing our ability to penetrate all tiers of the market more
efficiently. Our strategy is to use our in-house marketing expertise to target
companies within selected industries and to use the extensive market penetration
of independent sales organizations to further extend our sales reach into small,
independent firms nationwide. Our relationship with independent sales
organizations was augmented by our acquisition, early in 2000, of Card Payment
Systems, which provides card-based payment processing services to independent
sales organizations.
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. Our acquisition of Electronic
Payment Services granted us the opportunity to cross-sell settlement processing
services to the approximately 80,000 merchant customer locations that primarily
received only authorization services from Electronic Payment Services. Our
acquisitions of Cash Station and STAR increased our client base to an estimated
865,000 branded POS locations and approximately 6,200 financial institution
customers as of December 31, 2001 and afford us the opportunity to cross-sell
ATM and card processing services to those Cash Station and STAR POS locations
and financial institutions that primarily use third-party processors or process
internally.
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.
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
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systems to trucking companies. Our relationships with the truck stop owners also
affords us an opportunity to place ATMs at truck stops, which in turn provides 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-sized retailers gives us an advantage in
establishing relationships with EBT providers, whose benefits are primarily
accessed at such retail locations.
Our customers are among the leaders in their industries. As of December 31,
2001, our Network Services customers included some of the largest financial
institutions in the United States. As of December 31, 2001, our largest Network
Services customers were Banc One Corporation, Charter One Bank FSB, First Union
Corporation, PNC Bank Corporation, and Wells Fargo Bank, and our largest Payment
Services customers were Delhaize America, Inc., Diamond Shamrock Refining &
Marketing Company, PETsMART, Inc., Sunoco, Inc., and SUPERVALU, Inc.
Competition
The businesses of electronic payment processing and settlement, ATM
processing, debit card processing, and debit network access 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 and technological, management, and marketing resources than we have. We
also compete with other electronic payment processing organizations and debit
networks. 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 providing processing services.
. In our Network Services segment, management estimates that:
. as of March 2001, the three largest ATM processors, of which we
believe that we were the largest, drove approximately 27% of total
ATMs in the United States,
. as of March 2001, the three largest regional debit networks, of which
we believe that we were the largest, processed approximately 70% of
all PIN-secured debit payment transactions, and
. in 2000, VISA and MasterCard collectively accounted for over 65% of
total annual debit payment transactions (both PIN-secured and
signature debit transactions) among the debit networks.
. In our Payment Services segment, we compete with other companies who have a
significant share of each business. Management estimates that:
. in 2000, the three largest acquirers of PIN-secured debit payment
transactions, of which we believe that we were the largest, accounted
for approximately 40% of all PIN-secured debit payment transactions
and
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. in 2000, the three largest bank card acquirers, which we believe that
we were not among, processed approximately 65% of the total dollar
volume of credit and signature debit card payments.
There can be no assurance that we will continue to be able to compete
successfully with such competitors.
While we compete with VISA and MasterCard in our Network Services business,
at the same time our Payment Services business relies 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 that could make
it difficult for us to compete against them, which could further increase VISA's
and MasterCard's power 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 operating results and financial condition.
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 coast-to-coast debit network, permitting us to offer comprehensive
debit transaction processing services.
Supervision and Regulation
We and our subsidiaries are subject to a number of federal and state laws.
We are both a financial holding company and a bank holding company registered
with the Federal Reserve under the Bank Holding Company Act of 1956, as amended,
which is administered by the Federal Reserve. As a financial holding company, we
are subject to the Bank Holding Company Act, which generally prohibits us from:
. directly or indirectly engaging in any activities other than banking,
managing, or controlling banks and certain other activities that the
Federal Reserve has approved as financial in nature, incidental to
such a financial activity, or complementary to a financial activity
and
. acquiring, directly or indirectly, ownership or control of more than
5% of any class of voting shares of any company that is engaged in
activities other than activities that the Federal Reserve has approved
as financial in nature, incidental to such a financial activity, or
complementary to a financial activity, with certain exceptions.
For us to qualify as a financial holding company, our depository
institution subsidiaries needed to have at least a "satisfactory" Community
Reinvestment Act rating on their most recent examination, and we were required
to certify that our depository institution subsidiaries are well
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capitalized and well managed. If any of our depository institution subsidiaries
ceases to be well capitalized or well managed, we are required to enter into an
agreement with the Federal Reserve to bring that depository institution into
compliance with applicable capital and management requirements. We are in the
process of entering into such an agreement with the Federal Reserve as a result
of the failure of our subsidiary, EFS Federal Savings Bank, to maintain
compliance with these standards. In the interim, the Federal Reserve has
required that in order to engage in new non-banking activities, including
through acquisitions, we must comply with procedures applicable to bank holding
companies that have not registered as financial holding companies. We were
subject to those procedures prior to our registration as a financial holding
company on September 8, 2000. Accordingly, we do not expect these requirements
to have a material impact on our business.
We are required to file with the Federal Reserve an annual report and such
additional information as the Federal Reserve may require. We also are required
to obtain the prior approval of the Federal Reserve before acquiring more than
5% of any class of voting stock of any bank that is not already controlled by
us. The Federal Reserve may examine our records and each of our subsidiaries'
records, including a review of our capital adequacy in relation to guidelines
issued by the Federal Reserve. The Federal Reserve requires minimum capital
levels as measured by three ratios: total capital to risk-weighted assets, tier
one capital to risk-weighted assets, and tier one capital to average total
assets. If the level of capital is deemed to be inadequate, the Federal Reserve
may restrict our future expansion and operations and take certain other
enforcement actions. The Federal Reserve possesses cease and desist powers over
us if, among other things, our actions or actions of our subsidiaries represent
unsafe or unsound practices or violations of law. Further, both of our
depository institution subsidiaries exceed the capital requirements applicable
to them to be considered well capitalized.
Federal law also regulates transactions among us and our affiliates,
including the amount of loans or investments that our 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. Our 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. As a federal savings bank, EFS Federal Savings Bank operates
under the regulatory and supervisory jurisdiction of the Office of Thrift
Supervision. EFS Federal Savings Bank is also a member of the Federal Reserve
System and is therefore subject to certain provisions of the Federal Reserve
Act. The Federal Deposit Insurance Corporation insures the domestic deposits of
both banks. Each bank
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also is subject to periodic examination by, and must make regularly scheduled
reports of financial condition to, its respective regulatory agencies.
Our EFT services sold to financial institutions are regulated by certain
state and federal banking laws. Material changes in federal or state regulation
could increase our cost of providing EFT services, change the competitive
environment, or otherwise adversely affect us. We are not aware of any such
change that is pending.
We also are affected by the financial privacy provisions of the
Gramm-Leach-Bliley Act (the GLB Act) and its implementing regulations, which
apply to banks and other financial institutions. The GLB Act and regulations
generally require financial institutions to disclose their practices for
gathering and disclosing nonpublic personal financial information regarding
consumers. Consumers also have the right to opt out of certain types of
information sharing. We do not deal directly with consumers through our Payment
Services or Network Services businesses. However, certain consumer financial
information that we receive may be subject to limitations on reuse and
redisclosure under the GLB Act. Additionally, pending legislation at the state
and federal levels may further restrict our information gathering and disclosure
practices. Although the GLB Act and other privacy laws have not had a material
impact on our business to date, existing and potential future privacy laws may
limit our ability to develop new products and services that make use of certain
data gathered through our Network Services and Payment Services businesses.
In addition to regulation by federal and state laws and governmental
agencies, we are 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 the Registrant
The following table sets forth certain information concerning our executive
officers as of February 15, 2002:
Name Age Position(s)
- -------------------------- --------- ---------------------------------------------------------------------
Dan M. Palmer 58 Chairman of the Board and Chief Executive Officer
Edward A. Labry III 39 Director and President
Vickie L. Brown 47 Senior Vice President
Ronald V. Congemi 54 Director, Senior Vice President, and President of Network Services
Richard M. Harter 65 Director and Secretary
Edward T. Haslam 49 Senior Vice President, Chief Financial Officer, and Treasurer
Marcia E. Heister 45 Senior Vice President, General Counsel, and Assistant Secretary
-10-
Name Age Position(s)
- ---------------------------- --------- ---------------------------------------------------------------------
E. Miles Kilburn 39 Senior Vice President of Business Strategy and Corporate Development
William E. Lucado 60 Senior Vice President, Chief Investment Officer, Chief Compliance
Officer, and Assistant Secretary
Steve A. Lynch 41 Senior Vice President and Chief Information Officer
Christopher S. Reckert 39 Senior Vice President and Chief Marketing Officer
Dan M. Palmer has been a director of Concord since May 1987, was appointed
Chairman of the Board in 1991, and was named Chief Executive Officer of Concord
in 1990. Mr. Palmer founded Union Planters National Bank's Electronic Fleet
Systems operation in 1982, which was acquired by Concord in 1985.
Edward A. Labry III has been a director of Concord since September 1993.
Mr. Labry joined Concord in 1985, assumed the role of Chief Marketing Officer in
1990, and was named President of Concord in 1994.
Vickie L. Brown joined Concord in 1979, was named Senior Vice President in
1991, and previously served in various financial and operations positions with
Concord.
Ronald V. Congemi has been a director of Concord since February 2001. Mr.
Congemi was named Senior Vice President and President of Network Services of
Concord in May 2001, and he has been President of STAR since its inception in
1984.
Richard M. Harter has been a director of Concord and Secretary of Concord
since its formation. From 1969 through 2001, Mr. Harter was a partner in Bingham
Dana LLP, Concord's corporate counsel. Mr. Harter now serves as of counsel to
that firm.
Edward T. Haslam joined Concord in February 1999, became Chief Financial
Officer in April 2000, and became Senior Vice President and Treasurer in May
2001. At various times, Mr. Haslam has served as Chief Operating Officer, Chief
Financial Officer, Chief Accounting Officer, and Executive Vice President of
Electronic Payment Services, which he joined in 1994.
Marcia E. Heister joined Concord in February 1999, became General Counsel
in June 2000, and became Senior Vice President and Assistant Secretary in May
2001. At various times, Ms. Heister has served as General Counsel, Corporate
Secretary, and Executive Vice President of Electronic Payment Services, which
she joined in 1994.
E. Miles Kilburn joined Concord in February 2001 and was named Senior Vice
President of Business Strategy and Corporate Development in May 2001. Prior to
joining Concord, Mr. Kilburn served as Group Executive Vice President and Chief
Financial Officer of STAR, having joined STAR in 1995 as Senior Vice President
and Counsel.
William E. Lucado was named Senior Vice President and Chief Investment and
Compliance Officer of Concord in 1998 and became Assistant Secretary of Concord
in May 2001. Mr. Lucado joined Concord in 1991.
-11-
Steve A. Lynch joined Concord in February 1999, became Chief Information
Officer in April 2000, and became Senior Vice President in May 2001. Previously,
Mr. Lynch served as Senior Vice President, Technology of Electronic Payment
Services, which he joined in 1997. Prior to that, Mr. Lynch held various systems
development management positions in the industry since 1983.
Christopher S. Reckert was named Senior Vice President and Chief Marketing
Officer of Concord in May 2001. Previously, Mr. Reckert served as Senior Vice
President, Sales and has held various sales and marketing positions in the
industry since 1987.
Employees
As of January 31, 2002, we employed 2,628 full and part-time personnel,
including 696 data processing and technical employees, 1,297 in operations, and
635 in sales and administration. None of our employees are represented by a
labor union. We consider our employee relations to be satisfactory.
Item 2. PROPERTIES
The following table sets forth certain information concerning our principal
facilities as of December 31, 2001:
Area in Description / Lease Expiration
Location Square Feet Business Segment (if applicable)
- -------------------------- ----------------- ------------------------------------------ ---------------------------
Bartlett, TN 19,160 Distribution Center and Warehouse, October 15, 2004
Payment Services
Bartlett, TN 6,480 Operations and Warehouse, Payment August 15, 2004
Services
Chicago, IL 21,719 Offices, Network Services December 31, 2007
Chicago, IL 20,231 Subleased July 31, 2002
Columbia, SC 6,314 Offices, Network Services August 31, 2004
Cordova, TN 48,119 Customer Service Center, Payment Services December 31, 2006
Cordova, TN 1,407 Federal Savings Bank Branch, Payment June 30, 2003
Services
Elk Grove, IL 18,300 Data Processing Center and Operations, May 31, 2005
Payment Services
Ft. Wright, KY 3,902 Sales Office, Network Services September 30, 2003
Maitland, FL 119,589 Offices and Data Processing Center, August 31, 2011
Network Services
Maitland, FL 63,259 Offices and Operations, Network Services May 31, 2003
Maitland, FL 30,792 Offices and Operations, Network Services June 30, 2003
Marietta, GA 100,000 Offices and Data Processing Center, September 30, 2006
Payment Services
Memphis, TN 43,375 Corporate Headquarters, Offices, Data September 30, 2003
Processing Center, and Operations,
Payment Services
-12-
Area in Description / Lease Expiration
Location Square Feet Business Segment (if applicable)
- -------------------------- ----------------- ------------------------------------------ ---------------------------
Memphis, TN 11,535 Offices and Operations, Payment Services September 30, 2003
New York, NY 10,000 Offices, Payment Services January 31, 2009
North Olmsted, OH 36,627 Offices and Sales Office, Network December 31, 2003
Services
Oakland, TN 800 Federal Savings Bank Branch, Payment Month-to-Month
Services
Petaluma, CA 8,132 Offices and Operations, Network Services May 31, 2003
Pittsburgh, PA 2,316 Sales Office, Network Services August 31, 2003
Pleasanton, CA 10,083 Offices, Payment Services October 31, 2003
Reston, VA 5,369 Offices, Network Services May 31, 2006
Reston, VA 7,813 Offices, Network Services May 31, 2002
San Diego, CA 19,544 Offices and Operations, Network Services February 28, 2003
Scottsdale, AZ 17,978 Offices and Operations, Network Services December 31, 2005
Shelby Oaks, TN 14,525 Offices, Payment Services December 31, 2003
Tempe, AZ 5,848 Offices, Payment Services October 31, 2003
Wilmington, DE 107,500 Corporate Offices, Offices, and May 21, 2005
Operations, Network Services
Wilmington, DE 70,000 Offices, Data Processing Center, and Not Applicable
Operations, Network Services
We believe all facilities were suitable and adequate for our businesses as
of December 31, 2001. However, we periodically review our space requirements and
may acquire new space to meet the needs of our businesses or consolidate and
dispose of or sublet facilities that are no longer required.
Item 3. LEGAL PROCEEDINGS
In September 2000, EFS National Bank was named as a defendant in a
purported class action lawsuit filed 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 filed an amended complaint alleging that the
class consists of at least 60,000 merchants that were subjected to the allegedly
improper rate and fee changes over a several-year period. The amended complaint
seeks damages in excess of $15,000,000 as well as injunctive relief and
unspecified punitive damages, treble damages, attorney fees, and costs.
A substantial amount of discovery has taken place in this case. The parties
are currently engaged in settlement discussions and have advised the Tennessee
Court that they are attempting to resolve this matter. Ongoing discussions
continue, and substantive issues remain that preclude
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achieving a settlement at this time. The parties anticipate further discussions
in an attempt to address and resolve the remaining issues.
In July 1999, a purported class action complaint with similar allegations
and requests for relief was filed in St. Charles County, Missouri, but there has
not been a substantial amount of activity in the Missouri case.
Although these matters are in the preliminary stages, EFS National Bank
believes it has various defenses to the claims against it, and if these matters
cannot be resolved by settlement, EFS National Bank intends to vigorously defend
against all claims.
Card Payment Systems was named as a defendant in a class action suit filed
in April 2001 in the District Court, Harrison County, Texas. Plaintiffs alleged
that the subsidiary had violated Section 227(b)(1)(C) of the Telephone Consumer
Protection Act, 47 U.S.C. Section 227 et seq., and Section 35.47(9) of the Texas
Business and Commerce Code by sending unsolicited advertisements by facsimile.
Plaintiffs sought injunctive relief and statutory damages in the amount of $500
per facsimile and treble damages in the amount of $1,500 per facsimile for
willful or knowing violations of the statutes. Card Payment Systems has entered
into a settlement agreement pursuant to which the claims against Card Payment
Systems were dismissed on January 25, 2002.
We are also a party to various routine lawsuits arising out of the conduct
of our business, none of which is 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 2001.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market Price of and Dividends on Our 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.
-14-
Recent Issuances of Unregistered Securities
In February 1999, in connection with the acquisition of Electronic Payment
Services, we issued 90.1 million shares of our 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 Securities
Act). 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 January 2000, in connection with the acquisition of Card Payment
Systems, we issued approximately 12.5 million shares of our Common Stock, $0.33
1/3 par value per share, to the two former stockholders of Card Payment Services
in a transaction not registered under the Securities Act. The transaction was
exempt from registration under Section 4(2) of the Securities Act. The
unregistered shares have not been subsequently registered.
In February 2001, in connection with the acquisition of STAR, we issued
approximately 48.0 million shares of our 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. The transaction was exempt from registration under Section
4(2) of the Securities Act. A majority of the unregistered shares were
subsequently registered and resold in a transaction in June of 2001.
Item 6. SELECTED FINANCIAL DATA
Information included under the caption "Financial Highlights" on page 4 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 12 to 22 of our
Annual Report to Stockholders is incorporated herein by reference.
Item 7a. 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 pages 21 to 22 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 23 to 52 of our Annual Report to
Stockholders and are incorporated herein by reference:
. Report of Independent Auditors
-15-
. Consolidated Balance Sheets as of December 31, 2001 and 2000
. Consolidated Statements of Income for the years ended December 31,
2001, 2000, and 1999
. Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2001, 2000, and 1999
. Consolidated Statements of Cash Flows for the years ended December 31,
2001, 2000, and 1999
. Notes to Consolidated Financial Statements as of December 31, 2001
Quarterly results of operations for the years ended December 31, 2001 and
2000 under the caption "Note U--Quarterly Financial Results (Unaudited)" on page
51 of our 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 23, 2002 (Proxy Statement) is incorporated herein
by reference. See also the section captioned "Executive Officers of the
Registrant" 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 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 is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information included under the caption "Certain Transactions" in our Proxy
Statement is incorporated herein by reference.
-16-
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
23 to 52 of our Annual Report to Stockholders for the fiscal year ended December
31, 2001, as provided in Item 8 above:
. Report of Independent Auditors
. Consolidated Balance Sheets as of December 31, 2001 and 2000
. Consolidated Statements of Income for the years ended December 31,
2001, 2000, and 1999
. Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2001, 2000, and 1999
. Consolidated Statements of Cash Flows for the years ended December 31,
2001, 2000, and 1999
. Notes to Consolidated Financial Statements as of December 31, 2001
Quarterly results of operations for the years ended December 31, 2001 and
2000 under the caption "Note U--Quarterly Financial Results (Unaudited)" on page
51 of our Annual Report to Stockholders are incorporated herein by reference.
2. 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.
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
None.
-17-
(c) Exhibits
Exhibit No. Description
- --------------- ---------------------------------------------------------------------------------------------
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 4.4 to Amendment No. 1 to Concord's registration statement on Form S-3
(File No. 333-61084), filed on June 4, 2001.
3.2 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, are incorporated herein by
reference to Exhibit 10.6 to Concord's annual report on Form 10-K (File No. 000-13848),
filed on April 2, 2001.
10.7* Agreement Terminating Salary Continuation Agreement between Star Systems, Inc., Concord
EFS, Inc., and Ronald V. Congemi, dated October 6, 2000, is incorporated herein by
reference to Exhibit 10.7 to Concord's annual report on Form 10-K (File No. 000-13848),
filed on April 2, 2001.
10.8* Star Nonqualified Deferred Compensation Plan, effective as of January 1,
-18-
Exhibit No. Description
- --------------- ---------------------------------------------------------------------------------------------
2000, is incorporated herein by reference to Exhibit 10.8 to Concord's annual report on
Form 10-K (File No. 000-13848), filed on April 2, 2001.
10.9 Stock Purchase and Sale Agreement between Payroll Company, Inc. and Concord EFS, Inc.,
dated March 30, 2001, is incorporated herein by reference to Exhibit 10.9 to Amendment No.
1 to Concord's annual report on Form 10-K (File No. 000-13848), filed on June 18, 2001.
10.10* Split-Dollar Agreement among Concord EFS, Inc., Ross N. Cohen, and Ronald V. Congemi, dated
August 1, 2001
10.11* Amended and Restated Split-Dollar Agreement between Concord EFS, Inc. and Edward T. Haslam,
dated August 1, 2001
10.12* Amended and Restated Split-Dollar Agreement among Concord EFS, Inc., J. Richard Buchignani,
Benjamin C. Labry, and Edward A. Labry III, dated August 1, 2001
10.13* Amended and Restated Split-Dollar Agreement among Concord EFS, Inc., Thomas R. Renfro, Gary
G. Arnold, and Danny M. Palmer, dated August 1, 2001
10.14* Amended and Restated Split-Dollar Agreement between Concord EFS, Inc. and Christopher S.
Reckert, dated August 1, 2001
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, 2001, filed
herewith as Exhibit 13, Notes to Consolidated Financial Statements, Note N.
13 Annual Report to Stockholders for the year ended December 31, 2001
21 List of Subsidiaries
23.1 Consent of Ernst & Young LLP
23.2 Consent of Deloitte & Touche LLP
99.1 Opinion of Deloitte & Touche LLP (Star Systems, Inc. years ended 2000 and 1999)
99.2 Cautionary Statements
- ----------
* 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.
-19-
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: February 26, 2002
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 of Directors and February 26, 2002
------------------------- Chief Executive Officer
Dan M. Palmer (Principal Executive Officer)
/s/ Edward T. Haslam Senior Vice President, Chief Financial February 26, 2002
------------------------- Officer, and Treasurer (Principal
Edward T. Haslam Financial and Accounting Officer)
/s/ Edward A. Labry III Director and President February 26, 2002
-------------------------
Edward A. Labry III
/s/ Richard M. Harter Director and Secretary February 26, 2002
-------------------------
Richard M. Harter
/s/ Douglas C. Altenbern Director February 26, 2002
-------------------------
Douglas C. Altenbern
/s/ J. Richard Buchignani Director February 26, 2002
-------------------------
J. Richard Buchignani
/s/ Ronald V. Congemi Director February 26, 2002
-------------------------
Ronald V. Congemi
/s/ Richard P. Kiphart Director February 26, 2002
-------------------------
Richard P. Kiphart
/s/ Jerry D. Mooney Director February 26, 2002
-------------------------
Jerry D. Mooney
/s/ Paul L. Whittington Director February 26, 2002
-------------------------
Paul L. Whittington
CONCORD EFS, INC.
LISTING OF EXHIBITS
Exhibit No. Description
- ----------------- ----------------------------------------------------------
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 4.4 to
Amendment No. 1 to Concord's registration statement on Form
S-3 (File No. 333-61084), filed on June 4, 2001.
3.2 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, are incorporated herein by reference to Exhibit 10.6
to Concord's annual report on Form 10-K (File No.
000-13848), filed on April 2, 2001.
10.7* Agreement Terminating Salary Continuation Agreement between
Star Systems, Inc., Concord EFS, Inc., and Ronald V.
Congemi, dated October 6, 2000, is incorporated herein by
reference to Exhibit 10.7 to Concord's annual report on Form
10-K (File No. 000-13848), filed on April 2, 2001.
-21-
Exhibit No. Description
- ---------------- -----------------------------------------------------------
10.8* Star Nonqualified Deferred Compensation Plan, effective as
of January 1, 2000, is incorporated herein by reference to
Exhibit 10.8 to Concord's annual report on Form 10-K (File
No. 000-13848), filed on April 2, 2001.
10.9 Stock Purchase and Sale Agreement between Payroll Company,
Inc. and Concord EFS, Inc., dated March 30, 2001, is
incorporated herein by reference to Exhibit 10.9 to
Amendment No. 1 to Concord's annual report on Form 10-K
(File No. 000-13848), filed on June 18, 2001.
10.10* Split-Dollar Agreement among Concord EFS, Inc., Ross N.
Cohen, and Ronald V. Congemi, dated August 1, 2001
10.11* Amended and Restated Split-Dollar Agreement between Concord
EFS, Inc. and Edward T. Haslam, dated August 1, 2001
10.12* Amended and Restated Split-Dollar Agreement among Concord
EFS, Inc., J. Richard Buchignani, Benjamin C. Labry, and
Edward A. Labry III, dated August 1, 2001
10.13* Amended and Restated Split-Dollar Agreement among Concord
EFS, Inc., Thomas R. Renfro, Gary G. Arnold, and Danny M.
Palmer, dated August 1, 2001
10.14* Amended and Restated Split-Dollar Agreement between Concord
EFS, Inc. and Christopher S. Reckert, dated August 1, 2001
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, 2001, filed
herewith as Exhibit 13, Notes to Consolidated Financial
Statements, Note N.
13 Annual Report to Stockholders for the year ended December
31, 2001
21 List of Subsidiaries
23.1 Consent of Ernst & Young LLP
23.2 Consent of Deloitte & Touche LLP
99.1 Opinion of Deloitte & Touche LLP (Star Systems, Inc. years
ended 2000 and 1999)
99.2 Cautionary Statements
- -------------------
* 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.
-22-