Concord EFS Reports Diluted Earnings Per Share of $0.72 for 2003; Results Include $22.9 Million in Merger and Other Charges.Business Editors MEMPHIS Memphis, city, ancient Egypt Memphis (mĕm`fĭs), ancient city of Egypt, capital of the Old Kingdom (c.3100–c.2258 B.C.), at the apex of the Nile delta and 12 mi (18 km) from Cairo. , Tenn.--(BUSINESS WIRE)--Feb. 23, 2004 Concord Concord, cities, United States Concord (kŏng`kərd, kŏn`kôrd'). 1 city (1990 pop. 111,348), Contra Costa co., W central Calif.; settled c.1852, inc. 1906. EFS EFS Encrypted File System (Microsoft Windows 2000) EFS Event Free Survival (survival rates in clinical trials) EFS Evangeliska Fosterlandsstiftelsen (Sweden) , Inc. (NYSE NYSE See: New York Stock Exchange : CE), a national electronic commerce provider, today announced fourth quarter revenue growth of 9% to $592.1 million. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of was $0.20, up 12% over fourth quarter 2002. Diluted earnings per share includes merger and acquisition charges of $5.5 million in fourth quarter 2003, incurred primarily in connection with the proposed merger with First Data Corporation. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma diluted earnings per share, which excludes merger and acquisition charges, rose 19% to $0.21 for the fourth quarter 2003.
Q4 Financial Highlights
4th Quarter - GAAP 4th Quarter - Pro Forma (1)
------------------------- ---------------------------
Quarter Ended December 31, Quarter Ended December 31,
2003 2002 % 2003 2002 %
------------------------- ---------------------------
Revenues
(in thousands) $592,080 $542,377 9% $592,080 $542,377 9%
Net Income
(in thousands) $93,096 $89,082 5% $98,599 $89,069 11%
Diluted Earnings
Per Share $0.20 $0.18 12% $0.21 $0.18 19%
(1) Excludes merger, acquisition, restructuring, write-off, and
litigation settlement charges.
For full year 2003, revenue was $2,270.5 million, up 15% on transaction growth of 16%. Diluted earnings per share was $0.72, up 25% over 2002. Results include merger, acquisition, restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , and write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. charges of $22.9 million in 2003, and acquisition, restructuring and write-off charges of $77.5 million and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. settlement charges of $8.8 million in 2002. Pro forma diluted earnings per share, which excludes these charges, rose 12% to $0.76 in 2003, consistent with management's previously announced expectations.
2003 Financial Highlights
2003 - GAAP 2003 - Pro Forma (1)
-------------------------- --------------------------
Year Ended December 31, Year Ended December 31,
2003 2002 % 2003 2002 %
-------------------------- --------------------------
Revenues
(in thousands) $2,270,471 $1,966,628 15% $2,270,471 $1,966,628 15%
Net Income
(in thousands) $349,513 $300,838 16% $371,056 $356,661 4%
Diluted Earnings
Per Share $0.72 $0.57 25% $0.76 $0.68 12%
(1) Excludes merger, acquisition, restructuring, write-off, and
litigation settlement charges.
A Note on Financial Measures Pro forma net income and pro forma diluted earnings per share are non-GAAP measures and should be viewed in addition to, and not in lieu of Instead of; in place of; in substitution of. It does not mean in addition to. , the company's reported results. Reconciliations to comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures are provided below under the heading "Reconciliation." Additional Operating Highlights -- Gross margin in fourth quarter 2003 was 29.17%, up 26 basis points over fourth quarter 2002 due to a full quarter effect of lower signature debit A monetary amount that is subtracted from an account balance. A debit from one account is a credit to another. See credit. interchange An interchange is a location where two things meet, usually perform some kind of exchange, and possibly go on their ways again. It is most commonly used in four contexts:
continued profit improvement initiatives. Gross margin in fourth quarter 2003 was up 87 basis points as compared to third quarter 2003 due to the full quarter effect of lower signature debit interchange rates, continued profit improvement initiatives, and the positive effect of seasonal revenue. For full year 2003, gross margin was 27.76%, down 275 basis points due to the full year effect of certain lower margin clients, continued price compression Price compression The limitation of the price appreciation potential for a callable bond in a declining interest rate environment, based on the expectation that the bond will be redeemed at the call price. due to competitive pressures, and higher credit interchange rates on a year over year basis. -- Selling, general and administrative expenses as a percentage of revenue declined to 5.94% in fourth quarter 2003 from 6.54% in fourth quarter 2002. For full year 2003, selling, general and administrative expenses as a percentage of revenue declined to 5.97% from 6.30% in 2002. -- Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: in fourth quarter 2003 was at 22.30%, relatively flat as compared to fourth quarter 2002. Net income margin in the fourth quarter was down 70 basis points from the prior year period to 15.72% as a result of the $5.5 million increase in merger, acquisition, restructuring, write-off, and litigation settlement charges and a decrease in net interest income of $5.8 million. For full year 2003, operating margin and net income margin were 20.78% and 15.39%, respectively. Compared to 2002, operating margin was up 95 basis points and net income margin was relatively flat, due to a decrease in merger, acquisition, restructuring, write-off, and litigation settlement charges offset by the addition of lower margin revenue from large merchants. -- Cash and securities at year end 2003 were $1.6 billion. -- Depreciation and amortization in 2003 was $108.4 million. -- Capital expenditures primarily for capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. and purchased software and computer facilities and equipment were $103.7 million in 2003. Business Segment Highlights Network Services. Network Services revenue increased 8% to $168.8 million in fourth quarter 2003 as compared to the prior year period. For full year 2003, Network Services revenue was up 7% to $657.1 million on transaction volume growth of 11%. Transaction growth was largely driven by STAR(sm) PIN-debit payment transactions, up 17% for the year to 3.5 billion transactions in 2003. PIN-debit payment transactions now represent over half (51%) of all Network Services' 6.8 billion transactions. The STAR network ended the year with 135 million cardholders and approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 1.26 million ATM and point of sale locations that display the STAR mark. Concord currently provides processing for 20.8 million debit cards debit card, card that allows the cost of goods or services that are purchased to be deducted directly from the purchaser's checking account. They can also be used at automated teller machines for withdrawing cash from the user's checking account. and approximately 93,200 ATMs. Payment Services. Payment Services revenue was up 10% to $423.3 million for the fourth quarter 2003, including interchange fees Interchange fee is a term used in the payment card industry to describe a fee that bank card networks such as Visa and MasterCard require merchants to pay card-issuing banks when merchants accept their credit and debit cards for purchases. of $267.0 million that were up 11% over fourth quarter 2002. The Payment Services quarterly revenue comparison now includes for both quarters the effect of certain large lower margin clients added in 2002. Payment Services revenue, net of interchange fees, increased 8% in fourth quarter 2003 over fourth quarter 2002. For full year 2003, Payment Services revenue was $1,613.4 million, up 19% over 2002. This revenue includes interchange fees of $1,033.4 million in 2003, which were up 26% as compared to 2002. Payment Services revenue, net of interchange fees, increased 9% in 2003. Payment Services revenue, net of interchange fees, is an alternative GAAP (generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ) revenue recognition method that Concord believes is useful to investors because it enables comparison with certain industry peers. The following table provides the impact of interchange fees on Payment Services Revenue for the fourth quarter 2003 and 2002 (in millions):
Quarter Ended:
-------------------------
Dec 31, 2003 Dec 31, 2002 % Change
------------------------- ---------
Reported revenue $423.3 $386.2 10%
Interchange fees included in
revenue 267.0 241.6 11%
Revenue, net of interchange fees $156.3 $144.6 8%
The following table provides the impact of interchange fees on Payment Services Revenue for the full years 2003 and 2002 (in millions):
Year Ended:
-------------------------
Dec 31, 2003 Dec 31, 2002 % Change
------------------------- ---------
Reported revenue $1,613.4 $1,354.6 19%
Interchange fees included in
revenue 1,033.4 822.1 26%
Revenue, net of interchange fees $580.0 $532.5 9%
Payment Services transaction volume was 5.6 billion for the year, up 24% over 2002, including 21% growth in acquired credit and signature debit to 3.5 billion transactions; 21% growth in acquired PIN-debit to 1.3 billion transactions; and 31% growth in electronic benefits transfer to 447 million transactions. Payment Services currently provides payment processing services for approximately 457,000 merchant locations, which represents a net increase of approximately 46,000 locations for the year. Merchant locations include approximately 22,600 quick service restaurant locations, which were up a net 7,800 locations in 2003. Selected Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Financial Data The following table presents selected consolidated financial data (in thousands, except earnings per share) for the fourth quarter 2003 and 2002.
Quarter Ended:
----------------------------
December 31, December 31,
2003 2002
------------- --------------
Revenue $592,080 $542,377
Cost of Operations 419,366 385,549
Selling, General and Administrative
Expenses 35,159 35,495
Merger, Acquisition, Restructuring and
Write-Off Charges 5,503 980
Litigation Settlement Adjustment -- (1,000)
------------- --------------
Operating Income 132,052 121,353
Investment Income 11,225 17,664
Interest Expense 2,185 2,826
Other Income, net 395 1,226
Income Taxes 48,106 48,096
Minority Interest in Subsidiary 285 239
------------- --------------
Net Income $93,096 $89,082
------------- --------------
Basic Earnings Per Share $0.20 $0.18
Diluted Earnings Per Share $0.20 $0.18
Shares Used For:
Basic Earnings Per Share 465,124 496,195
Diluted Earnings Per Share 473,743 507,936
The following table presents selected consolidated financial data (in thousands, except earnings per share) for the full years 2003 and 2002.
Year Ended:
----------------------------
December 31, December 31,
2003 2002
------------- --------------
Revenue $2,270,471 $1,966,628
Cost of Operations 1,640,134 1,366,545
Selling, General and Administrative
Expenses 135,552 123,867
Merger, Acquisition, Restructuring and
Write-Off Charges 22,943 77,486
Litigation Settlement Charges -- 8,761
------------- --------------
Operating Income 471,842 389,969
Investment Income 52,943 77,387
Interest Expense 8,444 11,642
Other Income, net 18,709 9,163
Income Taxes 184,446 163,129
Minority Interest in Subsidiary 1,091 910
------------- --------------
Net Income $349,513 $300,838
------------- --------------
Basic Earnings Per Share $0.73 $0.59
Diluted Earnings Per Share $0.72 $0.57
Shares Used For:
Basic Earnings Per Share 478,403 507,278
Diluted Earnings Per Share 488,453 524,676
Reconciliation Pro forma net income and pro forma diluted earnings per share, which exclude merger, acquisition, restructuring, write-off and litigation settlement charges, are non-GAAP measures that management believes are useful to investors because they enhance understanding of the company's performance by providing comparative results that exclude certain items that management believes are not indicative indicative: see mood. of operating trends. The following table provides reconciliations between reported net income and reported diluted earnings per share and pro forma net income and pro forma diluted earnings per share for the fourth quarter 2003 and 2002 (in thousands):
Quarter Ended:
-------------------
Dec 31, Dec 31,
2003 2002 % Change
------------------- ---------
Reported net income $93,096 $89,082 5%
Merger, acquisition, restructuring,
and write-off charges 5,503 980
Litigation settlement charges
(credits) -- (1,000)
Income taxes related to charges -- 7
Pro forma net income $98,599 $89,069 11%
Reported net income $93,096 $89,082 5%
Shares used for diluted earnings per
share 473,743 507,936
Reported diluted earnings per share $0.20 $0.18 12%
Pro forma net income $98,599 $89,069 11%
Shares used for diluted earnings per
share 473,743 507,936
Pro forma diluted earnings per share $0.21 $0.18 19%
The following table provides reconciliations between reported net income and reported diluted earnings per share and pro forma net income and pro forma diluted earnings per share for the full years 2003 and 2002 (in thousands):
Year Ended:
-------------------
Dec 31, Dec 31,
2003 2002 % Change
------------------- ---------
Reported net income $349,513 $300,838 16%
Merger, acquisition, restructuring,
and write-off charges 22,943 77,486
Litigation settlement charges
(credits) -- 8,761
Income taxes related to charges 1,400 30,424
Pro forma net income $371,056 $356,661 4%
Reported net income $349,513 $300,838 16%
Shares used for diluted earnings per
share 488,453 524,676
Reported diluted earnings per share $0.72 $0.57 25%
Pro forma net income $371,056 $356,661 4%
Shares used for diluted earnings per
share 488,453 524,676
Pro forma diluted earnings per share $0.76 $0.68 12%
About Concord EFS, Inc. Concord EFS, Inc., a vertically integrated electronic transaction processor, provides the technology and network systems that make payments and other financial transactions faster, more efficient, and more secure than paper-based alternatives. Concord acquires, routes, authorizes, captures, and settles virtually all types of electronic payment and deposit access transactions for financial institutions and merchants nationwide. Concord's primary activities include Network Services, which provides automated teller machine automated teller machine (ATM), device used by bank customers to process account transactions. Typically, a user inserts into the ATM a special plastic card that is encoded with information on a magnetic strip. (ATM) processing, debit card processing, deposit risk management, and STAR(sm) network access principally for financial institutions; and Payment Services, which provides point of sale processing, settlement, and related services, with specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. systems focusing on supermarkets Supermarkets, past and present, include: Transnational Originating (HQ) country first. The rest in alphabetical order.
Information Regarding Proposed Merger With First Data This communication is not a solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of a proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. from any security holder of Concord EFS, Inc. First Data Corporation has filed a definitive amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. proxy statement/prospectus with the Securities and Exchange Commission (SEC) concerning the planned merger of Concord with a subsidiary of First Data. WE URGE INVESTORS TO READ THE DEFINITIVE VERSION OF THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC, BECAUSE THEY CONTAIN (OR WILL CONTAIN WHEN FILED) IMPORTANT INFORMATION. Investors can obtain the definitive amended proxy statement/prospectus and other relevant documents free of charge at the SEC's website, www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . In addition, documents filed with the SEC by First Data will be available free of charge from First Data Investor Relations Investor relations The process by which the corporation communicates with its investors. , 6200 S. Quebec Quebec, city, Canada Quebec, Fr. Québec, city (1991 pop. 167,517), provincial capital, S Que., Canada, at the confluence of the St. Lawrence and St. Charles rivers. St., Suite 340, Greenwood Greenwood. 1 City (1990 pop. 26,265), Johnson co., central Ind.; settled 1822, inc. as a city 1960. A residential suburb of Indianapolis, Greenwood is in a retail shopping area. Manufactures include motor vehicle parts and metal products. Village, CO 80111. Documents filed with the SEC by Concord will be available free of charge from Concord Investor Relations, 2525 Horizon Lake Drive, Suite 120, Memphis, TN 38133. Concord, and its respective directors and executive officers and other members of their management and employees, may be deemed to be participants in the solicitation of proxies in connection with the planned merger. Information about the directors and executive officers of Concord and their ownership of Concord stock is set forth in the proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. for Concord's 2003 annual meeting of stockholders. Investors may obtain additional information regarding the interests of the participants by reading the definitive amended proxy statement/prospectus. Notice to Investors, Prospective Investors and the Investment Community: Cautionary Information Regarding Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This release may contain or incorporate by reference forward-looking statements made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements reflect management's expectations, estimates, and assumptions, based on information available at the time of the statement or, with respect to any document incorporated by reference, available at the time that such document was prepared. Forward-looking statements include, but are not limited to, statements regarding future events, plans, goals, objectives, and expectations. The words "anticipate," "believe," "estimate," "expect," "plan," "intend," "likely," "will," "should," and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and other factors, including those set forth below, which may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by those statements. 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 plans, (ii) the loss of key personnel or inability to attract additional qualified personnel, (iii) the loss of key customers or renewal of customer contracts on less favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. terms, (iv) increasing competition and its effect on our margins, (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 The printing of pages on a single sheet of paper in a particular order so that they come out in the correct sequence when cut and folded. 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 See VESA. and MasterCard MasterCard Worldwide (NYSE: MA) is a mutinational corporation based in Purchase, NY in the United States. Throughout the world, its principal business is to process payments between the banks of merchants and the banks of purchasers that use its "Mastercard" branded debit- and , (xii) utility and system interruptions or processing errors, (xiii) information theft, (xiv) susceptibility susceptibility the state of being susceptible. Refers usually to infectious disease but may be to physical factors such as wetting or to psychological factors such as harassment. to merchant fraud and credit and fraud risk of entities we sponsor into networks, (xv) changes in card association fees or products, (xvi) automated teller machine market saturation In economics, "market saturation" is a term used to describe a situation in which a product has become diffused (distributed) within a market; the actual level of saturation can depend on consumer purchasing power; as well as competition, prices, and technology. or restrictions on surcharging, (xvii) rules and regulations governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. financial institutions and other networks and changes in such rules and regulations, (xviii) the timing and extent of changes in interest rates, (xix) volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the of the price of our common stock, (xx) litigation risks, and (xxi) the receipt of regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. and shareholder approvals required for the planned merger with First Data Corporation, as well as the timing of the anticipated completion and possible conditions of the planned merger and their consequences. Concord undertakes no obligation to 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 99.1 to our Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended September September: see month. 30, 2003 as filed on November November: see month. 7, 2003 for a more detailed discussion of certain of the factors that could cause our actual results to differ materially from those included in the forward-looking statements. |
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