-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IoyrvTDf+gV3J3Ui8aqYyE/fdEeUtgvivyaFQNQ5MwuIqZELtQ3RVsaeadODPdqt rEv+bwtmNuTtcMSy7hg7Cg== 0000740112-97-000007.txt : 19971117 0000740112-97-000007.hdr.sgml : 19971117 ACCESSION NUMBER: 0000740112-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONCORD EFS INC CENTRAL INDEX KEY: 0000740112 STANDARD INDUSTRIAL CLASSIFICATION: FUNCTIONS RELATED TO DEPOSITORY BANKING, NEC [6099] IRS NUMBER: 042462252 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13848 FILM NUMBER: 97720973 BUSINESS ADDRESS: STREET 1: 2525 HORIZON LAKE DR STE 120 CITY: MEMPHIS STATE: TN ZIP: 38133 BUSINESS PHONE: 9013718000 MAIL ADDRESS: STREET 1: 2525 HORIZON LAKE DRIVE STREET 2: SUITE 120 CITY: MEMPHIS STATE: TN ZIP: 38133 FORMER COMPANY: FORMER CONFORMED NAME: CONCORD COMPUTING CORP DATE OF NAME CHANGE: 19920515 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended Commission file number 0-13848 September 30, 1997 ___________________________ 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 of Organization) Identification Number) 2525 Horizon Lake Drive, Suite 120, Memphis, Tennessee 38133 (Address of Principal Executive Offices) (901) 371-8000 (Registrant's telephone number, including area code) _________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] No[ ] The number of shares of the registrant's Common Stock, $.33 1/3 par value, as of September 30, 1997 was 61,708,784. CONCORD EFS, INC. AND SUBSIDIARIES INDEX Page No. --------- PART 1- Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996 1 Condensed Consolidated Statements of Income for the Three Months and Nine Months ended September 30, 1997 and September 30, 1996 2 Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 1997 and September 30, 1996 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II - Other Information Item 6. Exhibits and Reports on Form 8-K 8 Signatures 9 Exhibit 11 - Computation of Earnings Per Share CONCORD EFS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30 December 31 1997 1996 ------------ ----------- (In thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 73,179 $ 96,164 Securities available-for-sale 103,266 63,345 Accounts receivable, net 41,358 38,248 Inventories 4,894 4,353 Other assets 3,710 3,577 -------- -------- TOTAL CURRENT ASSETS 226,407 205,687 SECURITIES HELD-TO-MATURITY 55,138 56,714 OTHER ASSETS, NET 11,251 3,375 PROPERTY AND EQUIPMENT 83,485 73,819 Less accumulated depreciation and amortization 54,079 46,782 -------- -------- NET PROPERTY AND EQUIPMENT 29,406 27,037 -------- -------- TOTAL ASSETS $322,202 $292,813 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and other liabilities $ 37,234 $ 71,814 Accrued liabilities 7,943 2,849 Current maturities of long-term debt 438 418 Income taxes payable 297 -------- -------- TOTAL CURRENT LIABILITIES 45,912 75,081 LONG TERM DEBT, LESS CURRENT MATURITIES 18,230 561 DEFERRED INCOME TAXES 2,067 2,023 STOCKHOLDERS' EQUITY: Common Stock-$.33 1/3 per share par value; 100,000,000 shares authorized, 61,708,784 issued and outstanding at September 30, 1997 and 60,817,424 shares at December 31, 1996 20,570 20,272 Other stockholders' equity 235,423 194,876 -------- -------- TOTAL STOCKHOLDERS' EQUITY 255,993 215,148 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $322,202 $292,813 ======== ======== See Notes to Condensed Consolidated Financial Statements - Unaudited. -1- CONCORD EFS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Nine Months Ended Ended September 30 September 30 ------------------ ------------------- 1997 1996 1997 1996 ------- -------- -------- -------- (In thousands, except earnings per share) Revenue $64,716 $44,051 $168,520 $118,803 Cost of operations 47,811 31,748 124,299 84,786 Selling, general and administrative expenses 2,215 2,145 6,111 8,103 ------- ------- -------- -------- OPERATING INCOME 14,690 10,158 38,110 25,914 Other income (expense): Interest income 3,295 885 8,023 2,200 Interest expense (299) (20) (413) (72) ------- ------- ------- -------- INCOME BEFORE INCOME TAXES 17,686 11,023 45,720 28,042 Income taxes 6,264 3,874 16,234 9,963 ------- ------- ------- ------- NET INCOME $11,422 $ 7,149 $29,486 $18,079 ======= ======= ======= ======= Per share data: Weighted average common and common equivalent shares outstanding 63,615 59,491 63,110 59,156 ====== ====== ====== ====== Earnings per share $0.18 $0.12 $0.47 $0.31 ====== ====== ====== ====== See Notes to Condensed Consolidated Financial Statements - Unaudited -2- CONCORD EFS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30 -------------------- 1997 1996 ------- ------- (In thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES $10,284 $59,936 INVESTING ACTIVITIES: Acquisition of property and equipment (9,666) (12,247) Purchases of securities available-for-sale (98,444) (7,253) Purchases of securities held-to-maturity (13,138) (11,551) Sale of securities available-for-sale 40,722 Maturities of securities available-for-sale 18,512 Maturities of securities held-to-maturity 14,713 345 Purchased merchant contracts (9,033) (1,432) Buyout of minority shareholders (665) ------- ------- NET CASH USED IN INVESTING ACTIVITIES (56,334) (32,803) FINANCING ACTIVITIES: Proceeds from exercise of stock options 5,376 4,249 Proceeds from long-term debt 18,000 Payments on current maturities of long-term debt (311) (292) ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 23,065 3,957 ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (22,985) 31,090 Cash and cash equivalents at beginning of period 96,164 36,573 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $73,179 $67,663 ======= ======= For purposes of these statements, the Company considers all highly liquid investments with an initial maturity of three months or less when purchased to be cash equivalents. See Notes to Condensed Consolidated Financial Statements - Unaudited. -3- CONCORD EFS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 1997 Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant's annual report on Form 10-K for the year ended December 31, 1996. The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Securities Net unrealized loss on securities available-for-sale: September 30 December 31 1997 1996 ----------- ----------- Decrease in securities available-for-sale $46,261 $757,606 Increase in deferred tax assets 11,272 261,000 Decrease in equity 34,989 496,606 Recent Accounting Pronouncements Earnings Per Share In February 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 128, Earnings Per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of statement 128 on the calculation of primary earnings per share and fully diluted earnings per share for the third quarter and nine months ended September 30, 1997, and September 30, 1996 is not expected to be material. -4- CONCORD EFS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued Comprehensive Income In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 established standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Because this Statement addresses how supplemental financial information is disclosed in annual and interim reports, the adoption will have no material impact on the financial statements. Segment Reporting In June 1997, the FASB issued SFAS no. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 establishes standards for the reporting of financial information from operating segments in annual and interim financial statements. This Statement requires that financial information be reported on the basis that it is reported internally for evaluating segment performance and deciding how to allocate resources to segments. Because this Statement addresses how supplemental financial information is disclosed in annual and interim reports, the adoption will have no material impact on the financial statements. SFAS No. 131 will become effective in 1998. -5- CONCORD EFS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Form 10-Q 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 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 significant fluctuations in interest rates, inflation, economic recession, 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 results over time. RESULTS OF OPERATIONS Quarter Ended September 30, 1997 Compared to Quarter Ended September 30, 1996: Revenue increased 47% in the third quarter of 1997 when compared to the same quarter of the prior year. Transaction processing revenue from Card Services (77% of total revenue) increased 46% as new merchants were added and usage at existing merchants increased. Trucking Services (17% of total revenue) increased 63%, driven by surcharge revenue at cash dispensing machines (ATM), ATM transaction fees, ATM processing fees and additional trucking companies using the Company's fuel and cash advance services. Check and Terminal Services (6% of total revenue) increased 20% as terminal sales increased due to merchant additions and increasing EBT participation. Net income as a percentage of revenue increased in the third quarter of 1997 to 17.7% from 16.2% in the same quarter of the prior year. Three main factors to the percentage change were: increased operating costs primarily from Card Service volume related expenses, offset by selling, general and administrative expenses growth at a lower rate than revenue, and increased interest income. Selling, general and administrative expenses increased only 3% when compared to the third quarter of the prior year. The Company reorganized its marketing activities in the third quarter of the prior year and selling, general and administrative expenses have been maintained at a lower growth rate causing a corresponding increase to net income as a percentage of revenue. Interest income increased as proceeds from the Company's secondary offering in October 1996 and funds generated by operations were invested in agency, mortgage-backed, treasury and municipal securities. Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30, 1996: Revenue increased 42% for the nine months ended September 30, 1997 when compared to the same period of the prior year. Transaction processing revenue from Card Services (77% of total revenue) increased 41% as new merchants were added and usage at existing merchants increased. Trucking Services (18% of total revenue) increased 76%, driven by surcharge revenue at cash dispensing machines (ATM), ATM transaction fees, ATM processing fees and additional trucking companies using the Company's fuel and cash advance services. Check and Terminal Services (5% of total revenue) offset these increases, declining 8%. The decrease was primarily attributable to competitive repricing in Check Services. -6- CONCORD EFS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued RESULTS OF OPERATIONS (continued) Net income as a percentage of revenue increased for the nine months ended September 30, 1997 to 17.5% from 15.2%. Three main factors to the percentage change were: increased operating costs primarily from Card Service volume related expenses, offset by reduced selling, general and administrative expenses and increased interest income. The decrease in selling, general and administrative costs resulted primarily from the Company's reorganization of its marketing activities in the third quarter of 1996. Interest income increased as proceeds from the Company's secondary offering in October 1996 and funds generated from operations were invested in agency, mortgage-backed, treasury and municipal securities. LIQUIDITY AND CAPITAL RESOURCES The Company generated $10.3 million from operating activities for the nine months ended September 30, 1997. Investment securities purchases were $37.6 million, net of sales and maturities. Notes payable of $18.0 million were utilized to fund a portion of the security purchases. $9.7 million was spent on capital additions, primarily new computer equipment. The Company spent $9.0 million to purchase individual merchant contracts from independent sales organizations. Significant changes in cash, accounts receivable and accounts payable result from the day of the week the period end falls combined with increases in settlement volume from one period to the next. The Company has unused unsecured lines of credit of $10 million with financial institutions. The Company also holds securities with an approximate market value of $121 million that are available for operating needs or as collateral to obtain short term financing if needed. With little debt, adequate credit and strong cash generation, the Company is in sound financial condition and expects to fund continued growth from currently available resources. EFS National Bank, a wholly-owned subsidiary of the Company, exceeds required regulatory capital requirements. -7- PART II OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K. (a) Exhibits 11 - Computation of Earnings Per Share. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the third quarter. -8- Signatures Pursuant to the requirements 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. Date: November 14, 1997 By: /s/ Dan M. Palmer Dan M. Palmer Chief Executive Officer Date: November 14, 1997 By: /s/ Thomas J. Dowling Thomas J. Dowling Vice President & Controller -9- EXHIBIT 11 CONCORD EFS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE Three Months Nine Months Ended Ended September 30 September 30 ---------------- ---------------- 1997 1996 1997 1996 ------- ------- ------- ------- (In thousands, except earnings per share) For primary earnings per share: Net income $11,422 $ 7,149 $29,486 $18,079 ======= ======= ======= ======= Weighted average of common shares outstanding 61,491 57,016 61,141 56,662 Weighted average common stock equivalent shares for stock options by treasury stock method 2,124 2,475 1,969 2,494 ------- ------- ------- ------- Weighted average common and common equivalent shares 63,615 59,491 63,110 59,156 ======= ======= ======= ======= Per share amount $0.18 $0.12 $0.47 $0.31 ======= ====== ======= ====== For fully diluted earnings per share: Net income $11,422 $ 7,149 $29,486 $18,079 ======= ======= ======= ======= Weighted average common and common equivalent shares for primary earnings per share 63,615 59,491 63,110 59,156 Add shares representing additional shares for stock options based on period-end market price 81 52 ------- ------- ------- ------- Weighted average common and common equivalent shares-fully diluted basis 63,615 59,491 63,191 59,208 ======= ======= ======= ======= Per share amount $0.18 $0.12 $0.47 $0.31 ======= ======= ======= ======= EX-27 2
5 1000 3-MOS 9-MOS DEC-31-1997 DEC-31-1997 SEP-30-1997 SEP-30-1997 73179 73179 158404 158404 42564 42564 1206 1206 4894 4894 226407 226407 83485 83485 54079 54079 322202 322202 45912 45912 0 0 0 0 0 0 20570 20570 235423 235423 322202 322202 64716 168520 64716 168520 47811 124299 50026 130410 0 0 310 925 299 413 17686 45720 6264 16234 11422 29486 0 0 0 0 0 0 11422 29486 0.18 0.47 0.18 0.47
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