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
June 30, 1996
___________________________
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 June 30, 1996 was 56,647,653.
<PAGE>
CONCORD EFS, INC. AND SUBSIDIARIES
INDEX
Page No.
---------
PART 1- Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1995 1
Condensed Consolidated Statements of Income for
the Three and Six Months ended June 30, 1996
and June 30, 1995 2
Condensed Consolidated Statements of Cash Flows
for the Six Months ended June 30, 1996 and
June 30, 1995 3
Notes to Condensed Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K 6
Signatures 7
Exhibit 11 - Computation of Earnings Per Share
<PAGE>
CONCORD EFS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30 December 31
1996 1995
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 31,971,065 $ 36,572,976
Securities available-for-sale 28,617,387 23,439,135
Accounts receivable, net 73,019,558 63,690,114
Inventories 3,604,086 4,765,304
Prepaid expenses and other assets 5,336,369 3,634,801
------------ ------------
TOTAL CURRENT ASSETS 142,548,465 132,102,330
SECURITIES HELD-TO-MATURITY 6,150,055 4,865,865
PROPERTY AND EQUIPMENT 66,463,851 57,749,905
Less accumulated depreciation
and amortization 41,895,461 37,831,369
------------ ------------
24,568,390 19,918,536
------------ ------------
TOTAL ASSETS $173,266,910 $156,886,731
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other liabilities $ 61,975,301 $ 60,966,543
Accrued liabilities 2,304,938 2,530,310
Current maturities of long-term debt 404,746 392,177
------------ ------------
TOTAL CURRENT LIABILITIES $ 64,684,985 $ 63,889,030
LONG TERM DEBT, LESS CURRENT MATURITIES 772,762 978,327
DEFERRED INCOME TAXES 1,572,000 1,743,000
MINORITY INTEREST IN SUBSIDIARY 96,462 731,579
STOCKHOLDERS' EQUITY:
Common Stock-par value $.33 1/3
per share par value; 80,000,000
shares authorized; 56,647,653 issued
and outstanding (56,117,111 at
December 31, 1995) 18,882,551 8,313,646
Other stockholders' equity 87,258,150 81,231,149
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 106,140,701 89,544,795
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $173,266,910 $156,886,731
============ ============
See Notes to Condensed Consolidated Financial Statements -Unaudited.
-1-
<PAGE>
CONCORD EFS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30
----------------------- ------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Revenues $40,857,650 $29,897,035 $74,752,412 $55,824,999
Cost of operations 28,503,308 21,334,718 53,037,473 40,014,482
Selling, general and
administrative expenses 3,224,282 2,743,166 5,958,239 5,071,605
----------- ----------- ----------- -----------
OPERATING INCOME 9,130,060 5,819,151 15,756,700 10,738,912
Other income (expense):
Interest income 657,152 509,474 1,315,022 1,001,321
Interest expense (25,066) (25,949) (52,286) (53,296)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 9,762,146 6,302,676 17,019,436 11,686,937
Income taxes 3,449,000 2,250,000 6,089,000 4,191,000
----------- ----------- ----------- -----------
INCOME BEFORE
MINORITY INTEREST 6,313,146 4,052,676 10,930,436 7,495,937
Minority interest (41,964) 28,258 374 44,014
----------- ----------- ----------- -----------
NET INCOME $ 6,271,182 $ 4,080,934 $10,930,810 $ 7,539,951
=========== =========== =========== ===========
Per share data:
Weighted average common
and common equivalent
shares outstanding 59,170,953 57,482,471 58,987,732 57,163,041
========== ========== ========== ==========
Earnings per share $0.11 $0.07 $0.19 $0.13
========== ========== ========== ==========
See Notes to Condensed Consolidated Financial Statements - Unaudited
-2-
<PAGE>
CONCORD EFS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30
--------------------------
1996 1995
----------- ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $10,421,231 $ 8,043,436
INVESTING ACTIVITIES:
Acquisition of property and equipment (8,713,946) (3,883,678)
Purchases of securities available-for-sale (6,463,125) (4,366,734)
Purchase of securities held-to-maturity (1,475,000)
Sale of securities available-for-sale 247,500
Maturities of securities held-to-maturity 198,353 404,490
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (16,453,718) (7,598,422)
FINANCING ACTIVITIES:
Proceeds from sale of common stock 1,623,572 1,765,005
Payments on notes payable (192,996) (181,195)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,430,576 1,583,810
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,601,911) 2,028,824
Cash and cash equivalents at beginning of period 36,572,976 23,030,329
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $31,971,065 $25,059,153
=========== ===========
For purposes of these statements, the Company considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents.
See Notes to Condensed Consolidated Financial Statements -Unaudited.
-3-
<PAGE>
CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) JUNE 30, 1996
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 six month
period ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996. 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,
1995.
The balance sheet at December 31, 1995 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:
June 30 December 31
1996 1995
---------- -----------
Decrease in securities
available-for-sale $1,580,646 $303,316
Increase in deferred tax assets 535,000 103,000
Decrease in equity 1,045,646 200,316
Stockholders' Matters and Earnings Per Share
The Board of Directors approved three for two stock splits on December 15, 1995
and June 18, 1996. Prior periods earnings per share and related per share data
have been restated to reflect the stock splits.
-4-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue and net income for the second quarter ended June 30, 1996 increased 37%
and 54%, respectively, compared to the same period of the prior year. Revenue
and net income for the six months ended June 30, 1996 increased 34% and 45%,
respectively, compared to the same period of the prior year. The increase in
revenue for both the quarter and six months ended June 30, 1996 was
attributable to the addition of new customers and additional volume from
existing customers in Bank Card Services and Trucking Services. The Company
owns and operates approximately 400 cash dispensing machines (ATM's) at major
truckstops across the country. ATM surcharge revenue, which began in the
second quarter of 1996, accounted for roughly 50% of the increase in Trucking
Services revenue for the second quarter of 1996 and 30% of the increase in
Trucking Services revenue for the six month period of 1996.
Net income as a percentage of revenue increased from 13.7% to 15.3% for the
second quarter of 1996, when compared to the prior year. Approximately two
thirds of this increase was primarily due to Bank Card Services revenue growth
coupled with slower increases in operational costs and selling, general and
administrative expenses. The remaining one third of the increase was
attributable to net margin on ATM surcharge revenue.
Net income as a percentage of revenue increased from 13.5% to 14.6% for the six
months ended June 30, 1996, when compared to the prior year. Approximately
three quarters of this increase was primarily due to Bank Card Services revenue
growth coupled with slower increases in operational costs and selling, general
and administrative expenses. The remaining one quarter of the increase was
attributable to net margin on ATM surcharge revenue.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1996, the Company generated $10.4 million
from operating activities and received approximately $1.6 million from stock
issued from exercises of options under the Company's Incentive Stock Option
Plan. The Company invested $7.9 million in securities and $8.7 million in
capital additions during the six months ended June 30, 1996. The capital
additions were primarily for new computer equipment. The disqualifying
disposition of the incentive stock options also reduced corporate income taxes
paid by approximately $3.1 million for the six months ended June 30, 1996.
With little debt, adequate available 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 ratios.
-5-
<PAGE>
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 first quarter.
-6-
<PAGE>
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: August 12, 1996 By: /s/ Dan M. Palmer
-----------------------------------
Dan M. Palmer
Chief Executive Officer
Date: August 12, 1996 By: /s/ Thomas J. Dowling
-----------------------------------
Thomas J. Dowling
Vice President & Controller
-7-
<PAGE>
EXHIBIT 11
CONCORD EFS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Three Months Six Months
Ended Ended
June 30 June 30
----------------------- -----------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
For primary earnings per share:
Net income $ 6,271,182 $ 4,080,934 $10,930,810 $ 7,539,951
=========== =========== =========== ===========
Weighted average common
shares outstanding net of
treasury shares 56,600,084 55,357,799 56,484,230 54,871,706
Weighted average common
stock equivalent shares
for stock options by
treasury stock method
using average market price 2,570,869 2,124,672 2,503,502 2,291,335
----------- ----------- ----------- -----------
Weighted average common and
common equivalent shares 59,170,953 57,482,471 58,987,732 57,163,041
=========== =========== =========== ===========
Per share amount $0.11 $0.07 $0.19 $0.13
=========== =========== =========== ===========
For fully diluted earnings per
share:
Net income $ 6,271,182 $ 4,080,934 $10,930,810 $ 7,539,951
=========== =========== =========== ===========
Weighted average common and
common equivalent shares for
primary earnings per share 59,170,953 57,482,471 58,987,732 57,163,041
Add shares representing
additional shares for stock
options based on period-end
market price 120,317 589,390 80,861 420,003
----------- ----------- ----------- -----------
Weighted average common and
common equivalent shares-
fully diluted basis 59,291,270 58,071,861 59,068,593 57,583,044
=========== =========== =========== ===========
Per share amount $0.11 $0.07 $0.19 $0.13
=========== =========== =========== ===========
<PAGE>
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<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
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<SECURITIES> 34767 34767
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<ALLOWANCES> 794 794
<INVENTORY> 3604 3604
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<CURRENT-LIABILITIES> 64685 64685
<BONDS> 0 0
0 0
0 0
<COMMON> 18883 18883
<OTHER-SE> 87258 87258
<TOTAL-LIABILITY-AND-EQUITY> 173267 173267
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<CGS> 28503 53037
<TOTAL-COSTS> 31728 58996
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<INTEREST-EXPENSE> 25 52
<INCOME-PRETAX> 9762 17019
<INCOME-TAX> 3449 6089
<INCOME-CONTINUING> 6271 10931
<DISCONTINUED> 0 0
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