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
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
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 001-31527
CONCORD EFS, INC.
(Exact Name of Registrant as Specified in its Charter)
| Delaware |
04-2462252 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification Number) | |
| 2525 Horizon Lake Drive, Suite 120, Memphis, |
38133 | |
| (Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
(901) 371-8000
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 whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes x No ¨
The number of shares of the registrant’s common stock outstanding as of April 30, 2003 was 486,595,518.
CONCORD EFS, INC.
FORM 10-Q QUARTERLY REPORT
PART I—Financial Information
Item 1. Financial Statements (Unaudited)
CONCORD EFS, INC. AND SUBSIDIARIES
(Unaudited)
| March 31, 2003 |
December 31, 2002 | |||||
| (in thousands) | ||||||
| ASSETS |
||||||
| CURRENT ASSETS |
||||||
| Cash and cash equivalents |
$ |
861,128 |
$ |
471,825 | ||
| Securities available for sale |
|
983,295 |
|
985,400 | ||
| Accounts receivable, net |
|
129,666 |
|
129,983 | ||
| Settlement receivables, net |
|
41,538 |
|
24,958 | ||
| Inventories |
|
22,857 |
|
19,983 | ||
| Prepaid expenses and other current assets |
|
39,378 |
|
48,633 | ||
| Deferred income taxes |
|
7,000 |
|
5,569 | ||
| TOTAL CURRENT ASSETS |
|
2,084,862 |
|
1,686,351 | ||
| Securities available for sale |
|
136,327 |
|
139,092 | ||
| Property and equipment, net |
|
346,647 |
|
338,558 | ||
| Goodwill, net |
|
265,040 |
|
265,460 | ||
| Other intangible assets, net |
|
53,106 |
|
57,073 | ||
| Other assets, net |
|
41,997 |
|
41,906 | ||
| TOTAL ASSETS |
$ |
2,927,979 |
$ |
2,528,440 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
| CURRENT LIABILITIES |
||||||
| Accounts payable and other liabilities |
$ |
43,248 |
$ |
25,252 | ||
| Settlement payables |
|
466,233 |
|
165,349 | ||
| Deposits |
|
67,033 |
|
78,133 | ||
| Accrued liabilities |
|
61,628 |
|
53,617 | ||
| Income taxes payable |
|
40,847 |
|
16,527 | ||
| Current maturities of long-term debt |
|
44,110 |
|
58,940 | ||
| TOTAL CURRENT LIABILITIES |
|
723,099 |
|
397,818 | ||
| Long-term debt |
|
136,327 |
|
139,092 | ||
| Deferred income taxes |
|
65,594 |
|
62,343 | ||
| Other liabilities |
|
6,244 |
|
7,962 | ||
| TOTAL LIABILITIES |
|
931,264 |
|
607,215 | ||
| Commitments and contingent liabilities |
|
— |
|
— | ||
| Minority interest in subsidiary |
|
5,336 |
|
5,063 | ||
| STOCKHOLDERS’ EQUITY |
||||||
| Common stock, $0.33 1/3 par value; authorized 1,500,000 shares, issued and outstanding 486,483 at March 31, 2003 and 486,461 at December 31, 2002 |
|
162,161 |
|
162,154 | ||
| Additional paid-in capital |
|
986,567 |
|
986,416 | ||
| Retained earnings |
|
834,322 |
|
756,605 | ||
| Accumulated other comprehensive income |
|
8,329 |
|
10,987 | ||
| TOTAL STOCKHOLDERS’ EQUITY |
|
1,991,379 |
|
1,916,162 | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
2,927,979 |
$ |
2,528,440 | ||
See Notes to Consolidated Financial Statements.
1
CONCORD EFS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three months ended March 31, | |||||||
| 2003 |
2002 | ||||||
| (in thousands, except per share data) | |||||||
| Revenue |
$ |
519,859 |
|
$ |
421,681 | ||
| Cost of operations |
|
377,461 |
|
|
281,919 | ||
| Selling, general and administrative expenses |
|
31,826 |
|
|
24,782 | ||
| Merger, acquisition, restructuring and write-off charges |
|
2,387 |
|
|
47,500 | ||
| OPERATING INCOME |
|
108,185 |
|
|
67,480 | ||
| Other income and expense: |
|||||||
| Investment income |
|
14,710 |
|
|
19,572 | ||
| Interest expense |
|
2,369 |
|
|
3,106 | ||
| Other income (expense), net |
|
(541 |
) |
|
526 | ||
| INCOME BEFORE TAXES AND MINORITY INTEREST |
|
119,985 |
|
|
84,472 | ||
| Income taxes |
|
41,995 |
|
|
29,988 | ||
| INCOME BEFORE MINORITY INTEREST |
|
77,990 |
|
|
54,484 | ||
| Minority interest in net income of subsidiary |
|
273 |
|
|
275 | ||
| NET INCOME |
$ |
77,717 |
|
$ |
54,209 | ||
| PER SHARE DATA: |
|||||||
| Basic earnings per share |
$ |
0.16 |
|
$ |
0.11 | ||
| Diluted earnings per share |
$ |
0.16 |
|
$ |
0.10 | ||
| AVERAGE SHARES OUTSTANDING: |
|||||||
| Basic shares |
|
486,466 |
|
|
508,699 | ||
| Diluted shares |
|
495,158 |
|
|
530,272 | ||
See Notes to Consolidated Financial Statements.
2
CONCORD EFS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three months ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| (in thousands) |
||||||||
| OPERATING ACTIVITIES |
||||||||
| Net income |
$ |
77,717 |
|
$ |
54,209 |
| ||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
| Minority interest in subsidiary |
|
273 |
|
|
275 |
| ||
| Provision for (recovery of) losses on accounts receivable and loans |
|
352 |
|
|
(220 |
) | ||
| Depreciation and amortization |
|
25,877 |
|
|
18,534 |
| ||
| Deferred income taxes |
|
3,252 |
|
|
4,736 |
| ||
| Net realized gain on sales of securities available for sale |
|
(159 |
) |
|
(526 |
) | ||
| Restructuring charges |
|
— |
|
|
30,465 |
| ||
| Changes in operating assets and liabilities: |
||||||||
| Settlement receivables and payables, net |
|
284,304 |
|
|
(297,109 |
) | ||
| Accounts receivable |
|
(35 |
) |
|
(12,273 |
) | ||
| Inventories |
|
(2,874 |
) |
|
(445 |
) | ||
| Prepaid expenses and other assets |
|
6,718 |
|
|
(8,777 |
) | ||
| Accounts payable and other liabilities |
|
49,054 |
|
|
28,776 |
| ||
| Other, net |
|
1,641 |
|
|
1,166 |
| ||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
|
446,120 |
|
|
(181,189 |
) | ||
| INVESTING ACTIVITIES |
||||||||
| Acquisition of securities available for sale |
|
(189,417 |
) |
|
(232,020 |
) | ||
| Proceeds from sales of securities available for sale |
|
102,078 |
|
|
205,155 |
| ||
| Proceeds from maturity of securities available for sale |
|
86,637 |
|
|
47,499 |
| ||
| Purchases of loans |
|
— |
|
|
(15,828 |
) | ||
| Proceeds from sales of loans |
|
844 |
|
|
— |
| ||
| Other net change in loans |
|
1,612 |
|
|
18,952 |
| ||
| Acquisition of property and equipment |
|
(29,763 |
) |
|
(36,981 |
) | ||
| Purchase of merchant contracts |
|
(246 |
) |
|
(182 |
) | ||
| Business acquisitions, net |
|
— |
|
|
(15,509 |
) | ||
| Other investing activity |
|
— |
|
|
(6,499 |
) | ||
| NET CASH USED IN INVESTING ACTIVITIES |
|
(28,255 |
) |
|
(35,413 |
) | ||
| FINANCING ACTIVITIES |
||||||||