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 ~~June 30, 2001~~March 31, 2002






		OR









~~[_]~~		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ~~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 ~~(State or Other Jurisdiction of~~		04-2462252 ~~(IRS Employer~~









(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer 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[ ]~~Yes x No o

The number of shares of the registrant’s Common Stock, $0.33 1/3 par value, outstanding as of ~~July 31, 2001~~April 30, 2002 was ~~251,549,679.~~510,523,433.

TABLE OF CONTENTS


CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
AMENDMENT TO 1993 INCENTIVE STOCK OPTION PLAN

CONCORD EFS, INC. AND SUBSIDIARIES

~~INDEX~~


PART I — Financial Information		~~Page No.~~




~~PART I —Financial Information~~




Item 1. Financial Statements (Unaudited)









	Condensed Consolidated Balance Sheets as of ~~June 30, 2001~~March 31, 2002 and December 31, ~~2000~~2001		1









	Condensed Consolidated Statements of Income for Three Months Ended March 31, 2002 and ~~Six Months ended June 30,~~March 31, 2001 ~~and June 30, 2000~~		2









	Condensed Consolidated Statements of Cash Flows for ~~Six~~Three Months ~~ended June 30,~~Ended March 31, 2002 and March 31, 2001 ~~and June 30, 2000~~		3









	Notes to Condensed Consolidated Financial Statements		4









Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			1213









Item 3. Quantitative and Qualitative Disclosures About Market Risk			1920









PART II ~~—Other~~— Other Information









Item 1. Legal Proceedings			2021




~~Item 2. Changes in Securities and Use of Proceeds~~			20




~~Item 4. Submission of Matters to a Vote of Security Holders~~			21




Item 6. Exhibits and Reports on Form 8-K			2122









Signatures			2223

CONCORD EFS, INC. AND SUBSIDIARIES

~~Condensed Consolidated Balance Sheets~~
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

June 30, December 31,
2001 2000

(in thousands)
Assets
Current assets
Cash and cash equivalents $ 617,704 $ 231,762
Securities available for sale 861,926 649,425
Accounts receivable, net 262,588 307,756
Inventories 21,133 15,087
Prepaid expenses and other current assets 24,708 22,125
Deferred income taxes 5,870 6,732

Total current assets 1,793,929 1,232,887
Loans, net 94,024 78,654
Property and equipment, net 217,715 214,662
Goodwill, net 164,396 150,049
Other intangible assets, net 81,896 75,644
Other assets 11,950 9,769

Total assets $ 2,363,910 $ 1,761,665

Liabilities and stockholders’ equity
Current liabilities
Accounts payable and other liabilities $ 312,280 $ 296,980
Deposits 139,478 125,834
Accrued liabilities 41,425 48,307
Accrued restructuring charges 70,377 3,410
Income taxes payable 24,447 —
Current maturities of long-term debt — 3,357

Total current liabilities 588,007 477,888
Long-term debt 119,549 109,911
Deferred income taxes 14,075 31,871
Other liabilities 4,943 6,412

Total liabilities 726,574 626,082

Commitments and contingent liabilities — —
Minority interest in subsidiary 3,057 3,052

Stockholders’ equity
Common stock 83,850 80,485
Other stockholders’ equity 1,550,429 1,052,046

Total stockholders’ equity 1,634,279 1,132,531

Total liabilities and stockholders’ equity $ 2,363,910 $ 1,761,665


	March 31,		December 31,
	2002		2001

	(in thousands)
ASSETS




CURRENT ASSETS




Cash and cash equivalents	$	496,273	$	682,906




Securities available for sale		1,200,563		1,228,805




Accounts receivable, net		391,541		134,496




Inventories		21,643		20,971




Prepaid expenses and other current assets		43,583		34,346




Deferred income taxes		14,821		13,054

TOTAL CURRENT ASSETS		2,168,424		2,114,578









Loans, net		86,473		89,038




Property and equipment, net		282,205		267,451




Goodwill, net		213,736		158,632




Other intangible assets, net		61,608		85,712




Other assets		20,179		14,034

TOTAL ASSETS	$	2,832,625	$	2,729,445






LIABILITIES AND STOCKHOLDERS’ EQUITY




CURRENT LIABILITIES




Accounts payable and other liabilities	$	435,935	$	488,789




Deposits		177,223		162,972




Accrued liabilities		42,403		29,837




Accrued restructuring charges		15,441		5,315




Income taxes payable		9,213		1,438




Current maturities of long-term debt		10,000		—

TOTAL CURRENT LIABILITIES		690,215		688,351









Long-term debt		109,297		119,458




Deferred income taxes		59,335		55,437




Other liabilities		7,188		4,202

TOTAL LIABILITIES		866,035		867,448






Commitments and contingent liabilities		—		—




Minority interest in subsidiary		4,429		3,410

STOCKHOLDERS’ EQUITY




Common stock		170,174		169,352




Other stockholders’ equity		1,791,987		1,689,235

TOTAL STOCKHOLDERS’ EQUITY		1,962,161		1,858,587

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,832,625	$	2,729,445

See Notes to Condensed Consolidated Financial Statements.

-1-

CONCORD EFS, INC. AND SUBSIDIARIES

~~Condensed Consolidated Statements of Income~~
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three months ended Six months ended
June 30, June 30,

2001 2000 2001 2000

(in thousands, except per share data)
Revenue $ 420,686 $ 338,848 $ 796,324 $ 641,765
Cost of operations 299,619 240,771 569,887 463,286
Selling, general and administrative expenses 22,714 24,045 46,526 45,882
Acquisition and restructuring charges — — 125,362 776

Operating Income 98,353 74,032 54,549 131,821
Other income (expense)
Interest income 15,240 11,107 30,722 21,000
Interest expense (3,257 ) (2,597 ) (6,380 ) (5,013 )

Income Before Taxes and Minority Interest 110,336 82,542 78,891 147,808
Income taxes 39,154 30,102 33,528 53,710

Income Before Minority Interest 71,182 52,440 45,363 94,098
Minority interest in net income of subsidiary — 158 173 304

Net Income $ 71,182 $ 52,282 $ 45,190 $ 93,794

Pro forma provision for income taxes — — — 260

Pro forma Net Income $ 71,182 $ 52,282 $ 45,190 $ 93,534

Per Share Data:
Basic and pro forma basic earnings per share $ 0.29 $ 0.22 $ 0.19 $ 0.39

Diluted and pro forma diluted earnings per share $ 0.28 $ 0.21 $ 0.18 $ 0.38

Average Shares Outstanding:
Basic shares 243,393 238,782 242,528 238,709

Diluted shares 254,157 246,320 253,111 245,534


		Three months ended
		March 31,

		2002			2001

		(in thousands, except per share data)





Revenue		$	462,143		$	375,638




Cost of operations			321,855			270,268




Selling, general and administrative expenses			24,782			23,812




Acquisition, restructuring and write-off charges			47,500			125,362

OPERATING INCOME (LOSS)			68,006			(43,804	)









Other income (expense):




	Interest income		19,572			15,482




	Interest expense		(3,106	)		(3,123	)

INCOME (LOSS) BEFORE TAXES AND MINORITY INTEREST			84,472			(31,445	)




Income taxes (benefit)			29,988			(5,626	)

INCOME (LOSS) BEFORE MINORITY INTEREST			54,484			(25,819	)




Minority interest in net income of subsidiary			275			173

NET INCOME (LOSS)		$	54,209		$	(25,992	)

PER SHARE DATA:




	Basic earnings (loss) per share	$	0.11		$	(0.05	)

	Diluted earnings (loss) per share	$	0.10		$	(0.05	)

AVERAGE SHARES OUTSTANDING:




	Basic shares		508,699			483,329

	Diluted shares		530,272			483,329

See Notes to Condensed Consolidated Financial Statements.

-2-

CONCORD EFS, INC. AND SUBSIDIARIES

~~Condensed Consolidated Statements of Cash Flows~~
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six months ended
June 30,

2001 2000

(in thousands)
Operating activities
Net cash provided by operating activities $ 232,228 $ 138,721
Investing activities
Acquisition of securities available for sale (521,316 ) (97,328 )
Proceeds from sales of securities available for sale 240,507 30,280
Proceeds from maturity of securities available for sale 79,755 14,644
Purchases of loans (23,490 ) (42,134 )
Acquisition of property and equipment (48,332 ) (37,267 )
Purchased merchant contracts (16,423 ) (12,569 )
Business acquisition (19,700 ) —
Other investing activity 4,687 3,354

Net cash used in investing activities (304,312 ) (141,020 )
Financing activities
Net increase in deposits 13,644 14,562
Proceeds from notes payable 21,000 19,000
Payments on notes payable (14,268 ) (20,648 )
Proceeds from offering of common stock 421,930 —
Proceeds from exercise of stock options 16,591 3,244
Payments on leases payable (871 ) (1,802 )
Activity by pooled subsidiaries — (2,905 )

Net cash provided by financing activities 458,026 11,451

Net increase in cash and cash equivalents 385,942 9,152
Cash and cash equivalents at beginning of year 231,762 173,099

Cash and cash equivalents at end of period $ 617,704 $ 182,251


		Three months ended
		March 31,

		2002			2001

		(in thousands)
OPERATING ACTIVITIES




NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		$	(181,189	)	$	69,213




INVESTING ACTIVITIES




	Acquisition of securities available for sale		(232,020	)		(172,411	)




	Proceeds from sales of securities available for sale		205,155			110,784




	Proceeds from maturity of securities available for sale		47,499			15,532




	Purchases of loans		(15,828	)		(9,417	)




	Net change in loans		18,952			3,522




	Acquisition of property and equipment		(36,981	)		(23,843	)




	Purchased merchant contracts		—			(7,490	)




	Business acquisitions, net		(15,509	)		—




	Other investing activity		(6,681	)		(1,893	)

NET CASH USED IN INVESTING ACTIVITIES			(35,413	)		(85,216	)




FINANCING ACTIVITIES




	Net increase (decrease) in deposits		14,251			(1,109	)




	Proceeds from borrowings		—			13,000




	Payments on borrowings		(161	)		(14,268	)




	Proceeds from exercise of stock options		15,938			11,085




	Payments on leases payable		(59	)		(438	)

NET CASH PROVIDED BY FINANCING ACTIVITIES			29,969			8,270

NET DECREASE IN CASH AND CASH EQUIVALENTS			(186,633	)		(7,733	)




CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR			682,906			298,383

CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	496,273		$	290,650

See Notes to Condensed Consolidated Financial Statements.

-3-

CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~June 30, 2001~~(Unaudited)

Note A –— 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 Regulation 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~~three months ended ~~June 30, 2001~~March 31, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, ~~2001.~~2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Concord EFS, Inc. and Subsidiaries (Concord) ~~current~~annual report on Form ~~8-K/A~~10-K filed ~~April 16, 2001~~February 26, 2002 for the year ended December 31, ~~2000.~~2001.

Nature of Operations: Concord is a vertically integrated electronic transaction processor. 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 consist of ~~Payment Services, which provides payment processing for supermarkets, major retailers, petroleum dealers, convenience stores, trucking companies and independent retailers, and~~ 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.~~institutions, and Payment Services, which provides payment processing for supermarkets, major retailers, petroleum dealers, convenience stores, restaurants, trucking companies and independent retailers.

Principles of Consolidation: The condensed consolidated financial statements include the accounts of Concord and its subsidiaries after elimination of all material intercompany balances and transactions.

Business Combinations: The condensed consolidated financial statements have been restated for all transactions accounted for as poolings of interests to combine the financial position, results of operations and cash flows of the respective companies for all periods presented. Transactions accounted for under the purchase method of accounting reflect the net assets of the acquired company at fair value on the date of acquisition, and the excess of the purchase price over fair value of the net assets is recorded as goodwill. The results of operations of the purchased company are included in Concord’s results of operations since the date of acquisition.

Reclassification: Certain ~~2000~~2001 amounts have been reclassified to conform to the ~~2001~~2002 presentation.

~~Recent Pronouncements:~~ Note B — Business Combinations

In June 2001 the Financial Accounting Standards Board issued ~~Statements~~Statement of Financial Accounting Standards ~~No.~~ 141, ~~Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective~~“Business Combinations.” SFAS 141 requires that the purchase method of accounting be used for fiscal years beginning after December 15, 2001. Under the new rules, goodwill will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. Furthermore, pooling-of-interests accounting will be prohibited forall business combinations initiated ~~subsequent to~~after June 30, 2001.

~~Concord will apply~~ SFAS 141 also includes guidance on the ~~new rules on accounting for~~initial recognition and measurement of goodwill and other intangible assets beginning in the first quarter of 2002. The impact of the application of the nonamortization provisions of the Statement will be reviewed during the remainder of the year. During 2002, Concord will perform the first of the required impairment tests of goodwill as of January 1, 2002 and has not yetarising from business combinations completed after June 30, 2001.

-4-

CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~June 30, 2001~~

~~Note A – Basis of Presentation, continued~~

~~determined what the effect of these tests will be on the earnings and financial position of Concord.~~(Unaudited)

Note B ~~—Business~~— Business Combinations, continued

On March 1, 2002 Concord acquired The Logix Companies, LLC, an electronic transaction processor. The acquisition, for which Concord issued approximately 0.9 million shares of its common stock and $6.3 million in cash, was accounted for as a purchase transaction and is immaterial to Concord’s financial statements. The allocation of the purchase price is preliminary because a valuation study has not yet been completed.

On January 1, 2002 Concord acquired H & F Services, Inc., an independent sales organization, for $8.9 million in cash. Prior to the acquisition, Concord had purchased merchant contracts through H & F Services. The acquisition was accounted for as a purchase transaction and is immaterial to Concord’s financial statements.

Concord owns a majority interest in Primary Payment Systems, Inc., a deposit risk management company. In April 2001 Concord increased its ownership position in Primary Payment Systems to 85.5% through the purchase of newly issued shares, which largely funded Primary Payment Systems’ acquisition of Wally Industries, Inc. d/b/a WJM Technologies. The acquisition of WJM, for which Primary Payment Systems paid approximately $20.0 million, was accounted for as a purchase transaction and is immaterial to Concord’s financial statements.

On February 1, 2001 Concord acquired Star Systems, Inc. (STAR_SM), a debit network. The acquisition was accounted for as a pooling of interests transaction in which Concord issued approximately ~~24.0~~48.0 million shares of its common stock.

On August 21, 2000 Concord acquired Cash Station, Inc. (Cash Station), a debit network. The acquisition was accounted for as a pooling-of-interests transaction in which Concord issued approximately 2.5 million shares of its common stock.

On January 31, 2000 Concord acquired National Payment Systems Inc. d/b/a Card Payment Systems, a reseller of payment processing services. The acquisition was accounted for as a pooling-of-interests transaction in which Concord issued 6.2 million shares of its common stock.

~~The following table presents selected financial information split among Concord, Card Payment Systems, Cash Station and STAR:~~

-5-

CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~June 30, 2001~~(Unaudited)

Note B –— Business Combinations, continued

The following table presents selected financial information split between Concord and STAR (in thousands, except per share data):

Three months ended Six months ended
June 30, June 30,

2001 2000 2001 2000

(in thousands, except per share data)
Revenue:
Concord $ 420,686 $ 290,122 $ 781,452 $ 543,843
Card Payment Systems(1) — — — 4,047
Cash Station(2) — 4,819 — 9,495
STAR(3) — 45,646 15,396 87,790
Intercompany eliminations(4) — (1,739 ) (524 ) (3,410 )

Combined revenue $ 420,686 $ 338,848 $ 796,324 $ 641,765

Pro forma net income:
Concord $ 71,182 $ 45,987 $ 42,262 $ 82,926
Card Payment Systems(1) — — — 650
Cash Station(2) — 487 — 816
STAR(3) — 5,808 2,928 9,402
Pro forma provision for Card Payment Systems
income taxes(5) — — — (260 )

Combined net income $ 71,182 $ 52,282 $ 45,190 $ 93,534

Pro forma basic earnings per share combined $ 0.29 $ 0.22 $ 0.19 $ 0.39

Pro forma diluted earnings per share combined $ 0.28 $ 0.21 $ 0.18 $ 0.38


		Three months ended
		March 31,

		2002		2001

Revenue:




	Concord	$	462,143	$	360,766




	STAR (1)		—		15,396




	Intercompany eliminations (2)		—		(524	)

Combined revenue		$	462,143	$	375,638

Net income (loss):




	Concord	$	54,209	$	(28,920	)




	STAR (1)		—		2,928

Combined net income (loss)		$	54,209	$	(25,992	)

Basic earnings (loss) per share combined		$	0.11	$	(0.05	)

Diluted earnings (loss) per share combined		$	0.10	$	(0.05	)

(1)		The 2000 amounts reflect the results of Card Payment Systems operations from January 1, 2000 through January 31, 2000 (unaudited). Results of operations from February 1, 2000 are included in Concord amounts.




~~(2)~~		The three months ended June 30, 2000 amounts reflect the results of Cash Station operations from April 1, 2000 through June 30, 2000 (unaudited). The six months ended June 30, 2000 amounts reflect the results of Cash Station operations from January 1, 2000 through June 30, 2000 (unaudited). Results of operations from July 1, 2000 are included in Concord amounts.




~~(3)~~		The three months ended June 30, 2000 amounts reflect the results of STAR operations from April 1, 2000 through June 30, 2000 (unaudited). The six months ended June 30, 2000 amounts reflect the results of STAR operations from January 1, 2000 through June 30, 2000 (unaudited). The 2001 amounts reflect the results of STAR operations from January 1, 2001 through January 31, 2001. Results of operations from February 1, 2001 are included in Concord amounts.




~~(4)~~(2)		All material activity between Concord and STAR has been eliminated.

-6-

CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~June 30, 2001~~(Unaudited)

Note B –— Business Combinations, continued

~~(5)~~ The results of operations include pro forma income taxes that would have been required if Card Payment Systems had been a taxable corporation. The former owners of Card Payment Systems were responsible for income taxes for the periods prior to the merger.

~~Concord owns~~Acquisition, restructuring and write-off charges were $47.5 million ($30.6 million, net of taxes) for the three months ended March 31, 2002. During the first quarter, management approved a ~~majority interest~~corporate consolidation plan initiated to continue improvements in ~~Primary Payment Systems, Inc., a deposit risk management service.~~overall operating efficiency and integrate recent acquisitions. The charge consisted of $6.7 million for closing and consolidating certain facilities, $5.9 million for compensation and severance, and $4.5 million for exiting non-strategic businesses. In ~~April 2001 Concord increased its ownership position~~addition, asset impairment charges of $22.5 million were incurred for the write-off of non-performing purchased merchant contracts identified in ~~Primary Payment Systems to 85% through~~ the purchase of newly issued shares, which largely funded Primary Payment Systems’ acquisition of Wally Industries, Inc., d/b/a WJM Technologies. Primary Payment Systems is immaterial to Concord’s financial statements.

~~On February 7, 2000 Concord acquired Virtual Cyber Systems, Inc., an Internet software development company. The acquisition of Virtual Cyber Systems, for which Concord paid approximately $2.0~~first quarter and $7.9 million was ~~accounted~~incurred for the write-off of capitalized software and computer and communications equipment no longer in use. In connection with the consolidation plan, Concord expects to eliminate approximately 165 positions, 76 of which were eliminated as of March 31, 2002. Compensation and severance costs paid and charged against the restructuring charge accrual were $0.7 million through March 31, 2002. As of March 31, 2002, $15.4 million of the charges were accrued but unpaid. Concord expects to complete the consolidation plan by March 31, 2003.

The following table presents a ~~purchase transaction and was immaterial to Concord’s financial statements.~~summary of activity in the 2002 restructuring charge accrual (in thousands):


Acquisition, restructuring and write-off charges	$	47,500




Cash outlays		1,623




Non-cash writedowns and charges – asset impairment		30,436

Balance, March 31, 2002	$	15,441

The following table presents a summary of the remaining components of the 2002 restructuring charge accrual (in thousands):


Facility closings and consolidations	$	6,260




Compensation and severance		5,255




Non-strategic business closures		3,926

Balance, March 31, 2002	$	15,441

-7-

CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note B — Business Combinations, continued

Acquisition, restructuring and ~~restructuring~~write-off charges were $125.4 million ($86.4 million, net of taxes) for the three months ended March 31, 2001. The ~~expenses and~~ charges were a result of a company-wide consolidation plan to address areas of operating redundancies created by recent acquisitions. The plan ~~includes~~included consolidation of data centers and other facilities to eliminate redundancies, the reassignment or termination of certain employees timed to coincide with the integration of redundant processing platforms and the functional integration of the STAR organization into Concord. The charges ~~included~~consisted of $63.9 million for combining various processing platforms, $16.0 million for the consolidation of duplicate products and internal systems, $15.6 million for accounting, legal and advisory fees, $19.1 million for the termination of certain data center services contracts, ~~and $10.8~~$9.8 million for compensation and severance costs and $1.0 million for other expenses. In connection with the consolidation plan, Concord ~~expects~~expected to eliminate approximately 250 positions, ~~140~~all of which ~~have been~~were eliminated as of March 31, 2002. Compensation and severance costs paid and charged against the restructuring charge accrual were $9.8 million through March 31, 2002. As of March 31, 2002, the consolidation activities have been completed and there was no remaining balance related to the 2001 restructuring charge accrual.

The following table presents a summary of activity in the 2001 restructuring charge accrual (in thousands):


Balance, December 31, 2001	$	5,315




Cash outlays		5,286




Non-cash writedowns and charges — asset impairment		29

Balance, March 31, 2002	$	—

Note C — Goodwill and Other Intangible Assets

In June ~~30, 2001. The individual components~~2001 the Financial Accounting Standards Board issued Statements of Financial Accounting Standards 142, “Goodwill and Other Intangible Assets.” SFAS 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. SFAS 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives.

Concord adopted SFAS 142 effective January 1, 2002. Application of the ~~expenses~~nonamortization provisions of SFAS 142 is immaterial to Concord’s financial statements. Concord has tested goodwill for impairment using the two-step process prescribed in SFAS 142. The first step is a screen for potential impairment, while the second step measures the amount of the impairment, if any. Concord has performed the first of the required impairment tests for goodwill as of January 1, 2002 and ~~charges are listed below. As~~has determined that the carrying amount of ~~June 30, 2001, $69.1 million of these expenses were accrued but unpaid.~~goodwill is not impaired.

~~As of June 30, 2001, expenses of $1.3 million, primarily related to Cash Station network de-conversion costs, were accrued but unpaid.~~

~~-7-~~-8-

CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~June 30, 2001~~(Unaudited)

Note ~~B —Business Combinations,~~C — Goodwill and Other Intangible Assets, continued

The following table ~~details~~presents a reconciliation of net income adjusted to exclude amortization expense of goodwill with indefinite useful lives (in thousands, except per share data):


	Three months ended
	March 31,

	2002		2001

Reported net income (loss)	$	54,209	$	(25,992	)




Goodwill amortization, net of tax		—		2,275

Adjusted net income (loss)	$	54,209	$	(23,717	)

Adjusted basic earnings (loss) per share	$	0.11	$	(0.05	)

Adjusted diluted earnings (loss) per share	$	0.10	$	(0.05	)

The following table presents the ~~activity in~~allocation of unamortized goodwill to Concord’s reporting units (in thousands):


Network Services	$	124,982




Payment Services		33,650

Balance, December 31, 2001	$	158,632

The following table presents Concord’s amortization expense for the ~~restructuring charge accrual by category, in millions:~~

2001
Expenses
Cash or Balance & Charges Balance
Description Non-cash 12/31/00 Accrued Activity 6/30/01

2000:
Compensation and severance Cash $1.0 $— $1.0 $—
Network de-conversion costs Cash 2.4 — 1.1 1.3
2001:
Office closings and operational
     de-conversions Cash — 63.9 14.7 49.2
Duplicate or abandoned products
     & systems Cash — 4.4 1.5 2.9
Duplicate or abandoned products
     & systems Non-Cash — 11.6 11.6 —
Advisory, legal, & accounting Cash — 15.6 15.3 0.3
Contract terminations Cash — 19.1 9.3 9.8
Compensation and severance Cash — 9.8 3.2 6.6
Other Non-cash — 1.0 0.7 0.3

$3.4 $125.4 $58.4 $70.4

~~Note C – Offering of Common Stock~~

During the quarter, Concord issued and sold 8,879,000 shares of its common stock pursuant to a registration statement filed with the Securities and Exchange Commission. Pursuant to the same registration statement, the selling stockholders named in the registration statement sold 17,031,849 shares of Concord common stock. Mostperiods listed for other intangible assets, net of the ~~selling stockholders were the previous owners~~write-off of ~~STAR who received unregistered common stock~~non-performing purchased merchant contracts of Concord in connection with the February 1, 2001 acquisition. Net of the underwriting discount of the offering, Concord received $421.9 million for the common stock it issued and sold. Concord did not receive any proceeds from the sale of shares by the selling stockholders.

~~-8-~~

~~CONCORD EFS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~June 30, 2001~~$22,496 (in thousands):


2002	$	10,098




2003		8,790




2004		8,738




2005		8,738




2006		8,465




Thereafter		18,387

Total	$	63,216

Note D ~~—Comprehensive~~— Comprehensive Income ~~(Loss)~~

Total comprehensive income (loss) was ~~$70.4~~$49.4 million and ~~$53.8~~$(18.9) million for the ~~second quarter of 2001 and 2000, respectively. Total comprehensive income was $51.5 million and $95.4 million for the six~~three months ended ~~June 30,~~March 31, 2002 and 2001, ~~and 2000,~~ respectively. Comprehensive income includes net income and the change in the unrealized gain or loss on securities available for sale arising during the period.

-9-

CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note E ~~—Earnings~~— Earnings Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per ~~share:~~share (in thousands, except per share data):


		Three months ended				Six months ended					Three months ended
		June 30,				June 30,					March 31,
		2001		2000		2001		2000
											2002		2001
		(in thousands, except per share data)
Numerator:	Numerator:									Numerator:




	Net income	$	71,182	$	52,282	$	45,190	$	93,794	Net income (loss)	$	54,209	$	(25,992	)

Denominator:	Denominator:									Denominator:




	Denominator for basic earnings per share, weighted-average shares		243,393		238,782		242,528		238,709	Denominator for basic earnings per share, weighted-average shares		508,699		483,329




Effect of dilutive stock options										Effect of dilutive stock options		21,573		—




	Effect of dilutive employee stock options		10,764		7,538		10,583		6,825
Denominator for diluted earnings per share, adjusted weighted-average shares and assumed conversions										Denominator for diluted earnings per share, adjusted weighted-average shares and assumed conversions		530,272		483,329





Basic earnings (loss) per share										Basic earnings (loss) per share	$	0.11	$	(0.05	)




	Denominator for diluted earnings per share, adjusted weighted-average shares and assumed conversions		254,157		246,320		253,111		245,534
Diluted earnings (loss) per share										Diluted earnings (loss) per share	$	0.10	$	(0.05	)

Basic earnings per share		$	0.29	$	0.22	$	0.19	$	0.39

Diluted earnings per share		$	0.28	$	0.21	$	0.18	$	0.38

Excluding acquisition, ~~costs~~restructuring and ~~restructuring~~write-off charges and related taxes, diluted earnings per share for the ~~six~~three months ended ~~June 30,~~March 31, 2002 and 2001 were $0.16 and ~~2000 were $0.52 and $0.38,~~$0.12, respectively. Earnings (loss) per share and related per share data have been restated to reflect all stock splits.

Note F ~~—Operations~~— Operations by Business Segment

Concord has two reportable segments: ~~Payment~~Network Services and ~~Network~~Payment Services.

Concord’s revenue from Payment Services results from processing payment transactions made by credit cards (such as VISA, MasterCard, Discover, American Express and Diner’s Club) and debit cards (such as STAR, Pulse and NYCE). Payment Services also includes providing payment cards that enable drivers of trucking companies to purchase fuel and obtain cash advances at truck stops.

~~-9-~~

~~CONCORD EFS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~June 30, 2001~~

~~Note F —Operations by Business Segment, continued~~

Network Services revenue consists of processing fees for driving and monitoring ATMs, processing fees for managing debit card records, and access and switching fees for network ~~access~~access.

Revenue from Payment Services primarily includes discount fees charged to merchants, which are a percentage of the dollar amount of each credit card transaction Concord processes, as well as a flat fee per transaction. The discount fee, primarily charged to smaller merchants, is negotiated with each merchant and ~~fees and other surcharges charged for proprietary ATMs.~~

~~Industry segment information~~typically constitutes a bundled rate for the ~~three months~~transaction authorization, processing, settlement, and ~~six months ended June 30, 2001~~funds transfer services Concord provides, plus the interchange fees charged by the credit card associations and ~~2000~~collected by Concord. The balance of Payment Services revenue is ~~presented below, in thousands.~~

Three months ended June 30, 2001
Payment Network
Services Services Other Total

Revenue $ 263,857 $ 156,829 $ — $ 420,686
Cost of operations (213,999 ) (85,620 ) — (299,619 )
Selling, general & administrative expenses — — (22,714 ) (22,714 )
Acquisition & restructuring charges — — — —
Taxes & interest, net — — (27,171 ) (27,171 )
Minority interest in subsidiary — — — —

Net income (loss) $ 49,858 $ 71,209 $ (49,885 ) $ 71,182

Three months ended June 30, 2000
Payment Network
Services Services Other Total

Revenue $ 215,385 $ 123,463 $ — $ 338,848
Cost of operations (171,265 ) (69,506 ) — (240,771 )
Selling, general & administrative expenses — — (24,045 ) (24,045 )
Acquisition & restructuring charges — — — —
Taxes & interest, net — — (21,592 ) (21,592 )
Minority interest in subsidiary — — (158 ) (158 )

Net income (loss) $ 44,120 $ 53,957 $ (45,795 ) $ 52,282

derived from transaction fees for processing debit card and electronic benefits transfer card transactions, check verification and authorization services, and sales of POS terminals.

-10-

CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~June 30, 2001~~(Unaudited)

Note F ~~—Operations~~— Operations by Business Segment, continued

Business segment information for the three months ended March 31, 2002 and 2001 is presented below (in thousands):

Six months ended June 30, 2001
Payment Network
Services Services Other Total

Revenue $ 491,717 $ 304,607 $ — $ 796,324
Cost of operations (399,838 ) (170,049 ) — (569,887 )
Selling, general & administrative expenses — — (46,526 ) (46,526 )
Acquisition & restructuring charges (21,787 ) (103,575 ) — (125,362 )
Taxes & interest, net — — (9,186 ) (9,186 )
Minority interest in subsidiary — — (173 ) (173 )

Net income (loss) $ 70,092 $ 30,983 $ (55,885 ) $ 45,190


		Network		Payment
		Services		Services		Other			Total

2002




	Revenue	$	185,657	$	276,486	$	—		$	462,143




	Cost of operations		94,607		227,248		—			321,855




	Selling, general and administrative expenses		—		—		24,782			24,782




	Acquisition, restructuring and write-off charges		—		—		47,500			47,500




	Taxes and interest, net		—		—		13,522			13,522




	Minority interest in subsidiary		—		—		275			275

	Net income (loss)	$	91,050	$	49,238	$	(86,079	)	$	54,209

Six months ended June 30, 2000
Payment Network
Services Services Other Total

Revenue $ 405,782 $ 235,983 $ — $ 641,765
Cost of operations (322,086 ) (141,200 ) — (463,286 )
Selling, general & administrative expenses — — (45,882 ) (45,882 )
Acquisition & restructuring charges (776 ) — — (776 )
Taxes & interest, net — — (37,723 ) (37,723 )
Minority interest in subsidiary — — (304 ) (304 )

Net income (loss) $ 82,920 $ 94,783 $ (83,909 ) $ 93,794


		Network		Payment
		Services		Services		Other			Total

2001




	Revenue	$	147,778	$	227,860	$	—		$	375,638




	Cost of operations		84,429		185,839		—			270,268




	Selling, general and administrative expenses		—		—		23,812			23,812




	Acquisition, restructuring and write-off charges		—		—		125,362			125,362




	Taxes and interest, net (benefit)		—		—		(17,985	)		(17,985	)




	Minority interest in subsidiary		—		—		173			173

	Net income (loss)	$	63,349	$	42,021	$	(131,362	)	$	(25,992	)

Note G — Contingencies

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 who were subjected to the allegedly improper rate and fee changes over a several-year period. The amended complaint seeks damages in excess of $15.0 million as well as injunctive relief and unspecified punitive damages, treble damages, attorney fees, and costs.

-11-

CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note G — Contingencies, continued

The parties are currently engaged in settlement discussions and have advised the Tennessee Court that they have made significant progress towards and are close to resolving this matter. The parties have reached an agreement in principle to settle the case, subject to the completion of mutually satisfactory documentation by the parties and approval by the Court. The maximum amount of credits and payments by EFS National Bank under the proposed settlement would be $37.6 million, payable over a five-year period. A portion of such amount would be used to pay plaintiffs’ counsel and certain claims administration expenses. Concord believes the actual amount of credits and payments if the proposed settlement becomes final will be less than the $37.6 million because credits and payments are contingent upon merchant retention and submission of claims.

A number of procedural steps must now be undertaken before the proposed settlement becomes final. Those steps include, without limitation, finalizing and executing the proposed settlement agreement and related documentation, presenting the proposed settlement agreement and related documentation to the Court and seeking preliminary approval from the Court, sending notices to all potential class members, and allowing time for potential class members (a) to opt out of the class or to remain in the class and (b) to object to the proposed settlement and to attempt to persuade the court not to approve the proposed settlement.

There can be no assurance that the foregoing steps will be completed or that the proposed settlement will become final, on the terms described above or otherwise.

A purported class action complaint with similar allegations and requests for relief has been filed in St. Charles County, Missouri, but there has not been a substantial amount of activity in the Missouri case. The proposed settlement would also resolve the issues 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. Due to the current status of the claims, EFS National Bank cannot predict the outcome of the proposed settlement, and accordingly, no amounts have been accrued in the financial statements relating to these contingencies.

-12-

CONCORD EFS, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
~~June 30, 2001~~

You should read the following discussion together with our condensed consolidated financial statements and the notes to those financial statements, which are included in this report. This report ~~contains~~may contain 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) ~~changes in~~ 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 ~~99.1~~99.2 to ~~the current~~our annual report on Form ~~8-K~~10-K filed on ~~July 18, 2001~~February 26, 2002 for a more detailed discussion of the foregoing and other factors.

Overview

Concord EFS, Inc. (Concord) 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 ~~automatic~~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.

Network Services includes terminal driving and monitoring for ATMs, transaction routing and authorization via the combined STAR_SMsm, ~~MAC®~~MAC_®, and Cash ~~Station®~~Station^® 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~~point of sale (POS) locations that accept debit cards issued by our member financial institutions. Our network access services include transaction switching and settlement.

-13-

CONCORD EFS, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In March 2002 we announced that we had reached an agreement to acquire Core Data Resources, a privately held electronic transaction processor based in Amarillo, Texas. Core Data provides ATM processing and related services to financial institutions, retailers, and independent sales organizations nationwide. We ~~recently~~expect to close the Core Data transaction in the second quarter of 2002, subject to various conditions, including regulatory approval.

On March 1, 2002 we completed our acquisition of 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. This acquisition was accounted for as a purchase transaction in which we exchanged approximately 0.9 million shares of our common stock and $6.3 million in cash for all of the outstanding membership units of Logix.

In 2001 we expanded our debit network in our Network Services ~~area through two acquisitions.~~area. On February 1, 2001 we completed our acquisition of Star Systems, Inc. (STAR), ~~(STAR)~~ the nation’s largest PIN-secured debit network, based in Maitland, Florida. The merger was accounted for as a pooling-of-interests transaction in

~~-12-~~

~~CONCORD EFS, INC. AND SUBSIDIARIES~~
~~MANAGEMENT’S DISCUSSION & ANALYSIS OF~~
~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
~~June 30, 2001~~

~~Overview, continued~~

which we exchanged approximately ~~24.0~~48.0 million shares of our common stock for all of STAR’s outstanding common stock. ~~On August 21, 2000 we completed~~

As a result of our acquisition of ~~Cash Station,~~STAR and subsequent purchase of shares, we acquired a majority interest in Primary Payment Systems, Inc. ~~(Cash Station)~~, a ~~leading Midwest PIN-secured debit network based~~company providing deposit risk management services to merchants and financial institutions. We own an 85.5% interest in ~~Chicago, Illinois. This~~Primary Payment Systems, with the remainder owned by certain financial institutions and a credit union service provider. Primary Payment Systems’ deposit risk management services provide advance notification of potential losses associated with fraudulent checks or high risk accounts utilizing a national database.

In 2001 Primary Payment Systems expanded its operations in the deposit risk management area through its acquisition ~~was accounted for~~of Wally Industries, Inc. d/b/a WJM Technologies. WJM’s front-end tools, which screen new deposit accounts before they are opened, increase the breadth of Primary Payment Systems’ deposit risk management services. Primary Payment Systems believes that the addition of WJM will enable it to develop more powerful fraud filters that can be extended to other markets, as ~~a pooling of interests transaction in which we exchanged approximately 2.5 million shares of our stock for all of the outstanding common stock of Cash Station.~~well as provide additional cross-selling opportunities and augment customer retention.

Payment Services provides the systems and processing that allow retail clients to accept virtually any type of electronic payment, including all card ~~types —credit,~~types—credit, debit, electronic benefits transfer (EBT), prepaid, and proprietary ~~cards –~~ 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. 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 ~~completely~~ 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).

~~Early in 2000~~-14-

CONCORD EFS, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On January 1, 2002 we ~~completed two acquisitions in the Payment~~acquired H & F Services, ~~area. On February 7, 2000 we completed our acquisition of Virtual Cyber Systems,~~ Inc., an Internet software development company. This acquisition, for which we paid approximately $2.0 million, was accounted for as a purchase transaction and was immaterial to our financial statements. On January 31, 2000 we completed our acquisition of 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~~organization. Prior to ~~merchants. The~~the acquisition, ~~was accounted for as a pooling~~we had purchased merchant contracts through H & F Services. We believe that this acquisition will increase our control over the sales channel, including pricing and compensation. We expect the acquisition to reduce the average cost of ~~interests transaction in which we exchanged 6.2 million shares~~acquiring merchant contracts, reduce the cost of ~~our stock for all the outstanding shares of Card Payment Systems’ common stock. We incurred acquisition costs of $0.8 million related to this transaction during~~operations, and increase selling, general and administrative expenses.

In the first quarter of ~~2000.~~2002 we initiated a consolidation plan to continue improvements in overall operating efficiency and integrate recent acquisitions. The plan includes closing and consolidating certain facilities, exiting several non-strategic businesses, eliminating approximately 165 positions, and writing off impaired assets. We incurred a charge of $30.6 million, net of taxes, related to the consolidation plan. During the next 12 months, we will implement the plan and focus on consolidation activities for operational improvements in our Payment Services segment.

In the first quarter of 2001 we initiated a company-wide consolidation plan to address areas of operating redundancies created by our recent acquisitions. The plan included consolidation of data centers and other facilities to eliminate redundancies, the reassignment or termination of certain employees timed to coincide with the integration of redundant processing platforms, and the functional integration of the STAR organization into Concord. We incurred a charge of $86.4 million, net of taxes, related to our consolidation plan, including costs incurred in combining operating platforms and facilities, communications conversion costs, asset write-offs, and severance and compensation costs, as well as investment banking fees and advisory, legal, and accounting fees incurred in connection with the acquisition of STAR. Our consolidation activities to capture synergies within our network operations and align our resources across the enterprise for greater efficiency and improved service delivery were completed as of March 31, 2002.

Restatement of Historical Financial Information

The financial information for prior periods presented below and elsewhere in this report has been restated for the results of STAR ~~Cash Station and Card Payment Systems~~ in accordance with the ~~pooling of interests~~pooling-of-interests method of accounting for business combinations. The financial information includes the financial position, operating results, and cash flows for all periods presented.

Components of Revenue and Expenses

Network Services and Payment Services are our two reportable business segments. These business units are managed separately because they offer distinct products for different end users. All of our revenue is generated in the United States, and no single customer of Concord accounts for a material portion of our revenue. ~~Over 75% percent~~The majority of our ~~total~~ revenue is tied to contracts with terms of between three and five years.

~~-13-~~

~~CONCORD EFS, INC. AND SUBSIDIARIES~~
~~MANAGEMENT’S DISCUSSION & ANALYSIS OF~~
~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
~~June 30, 2001~~

~~Components of Revenue and Expenses, continued~~

A principal component of our revenue ~~derives~~is derived from Network Services ~~(37.3%~~(40.2% and ~~36.4%~~39.3% for the three months ended ~~June 30, 2001~~March 31, 2002 and ~~2000 and 38.3% and 36.8% for the six months ended June 30, 2001 and 2000)~~2001). Network Services revenue consists of processing fees for driving and monitoring ATMs, processing fees for managing debit card records and access and switching fees for network access. We recognize this revenue at the time of the transaction.

-15-

CONCORD EFS, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Components of Revenue and Expenses, continued

The majority of our revenue ~~(62.7%~~(59.8% and ~~63.6%~~60.7% for the three months ended ~~June 30, 2001~~March 31, 2002 and ~~2000 and 61.7% and 63.2% for the six months ended June 30, 2001 and 2000)~~2001) is generated from fee income related to Payment Services. Revenue from Payment Services primarily includes discount fees charged to merchants, which are a percentage of the dollar amount of each credit card transaction we process, as well as a flat fee per transaction. The discount fee, primarily charged to smaller merchants, is negotiated with each merchant and typically constitutes a bundled rate for the transaction authorization, processing, settlement, and funds transfer services we ~~provide.~~provide, plus the interchange fees charged by the credit card associations and collected by us. The balance of Payment Services revenue is derived from transaction fees for processing credit card transactions for larger merchants, debit card and EBT card transactions, check verification and authorization services, and sales of POS terminals. We recognize this revenue at the time of the transaction. One result of basing revenue on the total dollar volume processed is that lower ticket size or other reduction in total purchases causes a reduction in our revenue. However, net income is not correspondingly affected because the majority of our transactions are priced on a fixed fee per transaction basis.

The following table ~~is a listing of~~lists revenue by segment for the periods ~~indicated:~~indicated (in millions):


	Three months				Six months				Three months ended
	ended June 30,				ended June 30,				March 31,
	2001		2000		2001		2000
									2002		2001
	(in millions)				(in millions)
Network Services	$	156.8	$	123.4	$	304.6	$	236.0	$	185.6	$	147.8




Payment Services		263.9		215.4		491.7		405.8		276.5		227.8

Total	$	420.7	$	338.8	$	796.3	$	641.8	$	462.1	$	375.6

Cost of operations includes all costs directly attributable to our providing services to our customers. The most significant component of cost of operations is interchange and ~~assessment~~network fees, which ~~are~~represent amounts charged by the credit and debit networks. Interchange and ~~assessment~~network fees are billed primarily as a percentage of dollar volume processed and, to a lesser extent, as a transaction fee. This amount is a direct expense of the revenue component described above, so that when total dollar volume processed declines, due to lower ticket size or other reduction in total purchases, there is a corresponding decline in cost of operations. Cost of operations also includes telecommunications costs, personnel costs, occupancy costs, depreciation, the cost of equipment leased and sold, the cost of operating our debit network and other miscellaneous merchant supplies and services expenses. We strive to maintain a highly efficient operational structure, which includes volume purchasing arrangements with equipment and communications vendors and direct membership by our subsidiary, EFS National Bank, in bank card associations and major debit networks.

~~-14-~~-16-

CONCORD EFS, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
~~June 30, 2001~~

Components of Revenue and Expenses, continued

The following table lists cost of operations by segment for the periods ~~indicated:~~indicated (in millions):


	Three months				Six months				Three months ended
	ended June 30,				ended June 30,				March 31,
	2001		2000		2001		2000
									2002		2001
	(in millions)				(in millions)
Network Services	$	85.6	$	69.5	$	170.1	$	141.2	$	94.6	$	84.4




Payment Services		214.0		171.3		399.8		322.1		227.2		185.9

Total	$	299.6	$	240.8	$	569.9	$	463.3	$	321.8	$	270.3

Our selling, general and administrative expenses include certain salaries and wages and other general administrative expenses. These costs are not allocated to the reportable segments.

Results of Operations

The following table shows, for the periods indicated, the ~~percent~~percentage of revenue represented by certain items on our consolidated statements of income:

Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000

Revenue 100.0 % 100.0 % 100.0 % 100.0 %
Cost of operations 71.2 71.1 71.6 72.2
Selling, general and administrative expenses 5.4 7.1 5.8 7.2
Acquisition and restructuring charges — — 15.7 0.1

Operating income 23.4 21.8 6.9 20.5
Interest income, net 2.8 2.5 3.0 2.5

Income before taxes 26.2 24.3 9.9 23.0
Income taxes 9.3 8.9 4.2 8.4

Net income 16.9 % 15.4 % 5.7 % 14.6 %


	Three months ended
	March 31,

	2002			2001

Revenue		100.0	%		100.0	%




Cost of operations		69.6			71.9




Selling, general and administrative expenses		5.4			6.3




Acquisition, restructuring and write-off charges		10.3			33.5

Operating income (loss)		14.7			(11.7	)




Interest income, net		3.5			3.3

Income (loss) before taxes		18.2			(8.4	)




Income taxes (benefit)		6.5			(1.5	)

Net income (loss)		11.7	%		(6.9	)%

~~-15-~~-17-

CONCORD EFS, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
~~June 30, 2001~~

~~Second~~First Quarter ~~2001~~2002 Compared to ~~Second Quarter 2000~~2001

Revenue in the ~~second~~first quarter ~~2001~~2002 increased ~~24.2%~~23.0% to ~~$420.7~~$462.1 million from ~~$338.8~~$375.6 million in ~~the second quarter 2000.~~2001. In the ~~second~~first quarter ~~2001~~2002 Network Services accounted for ~~37.3%~~40.2% of revenue, and Payment Services accounted for ~~62.7%~~59.8%. Network Services revenue in the ~~second~~first quarter ~~2001~~2002 increased ~~27.0%~~25.6% compared to ~~the same period in 2000~~2001 as a result of ~~an increase in the number of ATMs driven,~~ the addition of new network and processing customers and increases in transaction volumes. The increased transaction volumes resulted primarily from increased use of our network debit cards for payment at the point of sale. Revenue from Payment Services in the ~~second~~first quarter ~~2001~~2002 increased ~~22.5%~~21.3% compared to ~~the same period in 2000,~~2001, due primarily to increased transaction volumes. The increased volumes resulted from the addition of new merchants and the ~~widening acceptance~~increased use of debit and EBT card transactions at new and existing merchants.

Cost of operations ~~increased slightly~~decreased in the ~~second~~first quarter ~~2001~~2002 to ~~71.2%~~69.6% of revenue compared to ~~71.1%~~71.9% in ~~the second quarter 2000.~~2001. This percentage decrease was due primarily to a decrease in depreciation and amortization expenses, improvements in operating efficiencies and economies of scale.

In the ~~second~~first quarter ~~2001~~2002 selling, general and administrative expenses decreased as a ~~percent~~percentage of revenue to 5.4% from ~~7.1%~~6.3% in ~~the second quarter 2000.~~2001. Overall, selling, general and administrative expenses ~~decreased~~increased to ~~$22.7~~$24.8 million in the ~~second~~first quarter ~~2001~~2002 from ~~$24.0~~$23.8 million in ~~the second quarter 2000.~~2001. This ~~decrease~~increase is primarily attributable to ~~less direct marketing expense~~the expenses related to the acquisition of H & F Services, Inc. sales force.

Acquisition, restructuring and ~~reduced headcount.~~write-off charges decreased to $47.5 million in 2002 from $125.4 million in 2001. In the first quarter of 2002 we initiated a consolidation plan to continue improvements in overall operating efficiency and integrate recent acquisitions. The plan includes closing and consolidating certain facilities, exiting several non-strategic businesses, eliminating approximately 165 positions, and writing off impaired assets. The charge of $47.5 million ($30.6 million, net of tax) consisted of $6.7 million for closing and consolidating certain facilities, $5.9 million for compensation and severance, and $4.5 million for exiting non-strategic businesses. In addition, asset impairment charges of $22.5 million were incurred for the write-off of non-performing purchased merchant contracts identified in the first quarter and $7.9 million was incurred for the write-off of capitalized software and computer and communications equipment no longer in use.

Excluding acquisition, restructuring and write-off charges, operating income as a percentage of revenue increased to 25.0% in the first quarter 2002 from 21.7% in 2001. This increase in operating income resulted from improved operating efficiencies and economies of scale.

Net interest income improved as a ~~percent~~percentage of revenue to ~~2.8%~~3.5% in the ~~second~~first quarter ~~2001~~2002 compared to ~~2.5%~~3.3% in ~~the second quarter 2000. The~~2001. This improvement ~~was the result~~resulted primarily from our increased investment in various securities of ~~returns we received from investing~~ available cash flow from operations plus approximately $420.6 million in proceeds from our June 2001 stock offering, which increased ~~the second quarter~~ interest income by ~~37.2% over the second quarter 2000.~~26.4% compared to 2001.

Our overall tax rate ~~decreased~~increased to 35.5% in the ~~second~~first quarter ~~2001~~2002 compared to ~~36.5%~~(17.9%) in 2001. Excluding acquisition, restructuring and write-off charges, the ~~second quarter 2000.~~tax rate was 35.5% in 2002 and 2001.

~~Net income, as a percent of revenue, increased to 16.9% in the second quarter 2001 from 15.4% in the second quarter 2000.~~

~~Six Months Ended June 30, 2001 Compared to 2000~~

Revenue in the six months ended June 30, 2001 increased 24.1% to $796.3 million from $641.8 million in the same period 2000. In the six months ended June 30, 2001 Network Services accounted for 38.3% of revenue, and Payment Services accounted for 61.7%. Network Services revenue in the six months ended June 30, 2001 increased 29.1% compared to the same period in 2000, as a result of an increase in the number of ATMs driven, the addition of new network and processing customers and increases in transaction volumes. The increased transaction volumes resulted primarily from increased use of our network debit cards for payment at the point of sale. Revenue from Payment Services in the six months ended June 30, 2001 increased 21.2% compared to the same period in 2000, due primarily to increased transaction volumes. The increased volumes resulted from the addition of new merchants and the widening acceptance of debit and EBT card transactions at new and existing merchants.

~~-16-~~-18-

CONCORD EFS, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
~~June 30, 2001~~

~~Six Months Ended June 30, 2001~~First Quarter 2002 Compared to ~~2000,~~2001, continued

~~Cost of operations in the six months ended June 30, 2001 decreased to 71.6%~~Net income as a percentage of revenue compared to 72.2% in the same period 2000. This decrease was due primarily to a decrease, as a percent of revenue, in certain operating costs, such as telecommunications, payroll expenses and depreciation and amortization expenses.

Selling, general and administrative expenses decreased, as a percent of revenue, to 5.8% in the six months ended June 30, 2001 from 7.2% in the same period 2000. Overall, selling, general and administrative expenses increased to ~~$46.5 million~~11.7% in ~~the six months ended June 30, 2001 from $45.9 million in the same period 2000.~~

~~Acquisition expenses and restructuring charges in the six months ended June 30, 2001 were $125.4 million compared to $0.8 million in the same period 2000. In~~ the first quarter ~~of 2001, we initiated a company-wide consolidation plan~~2002 from (6.9%) in order to address areas of operating redundancies created by our recent acquisitions. The plan includes consolidation of data centers and other facilities to eliminate redundancies, the reassignment or termination of certain employees timed to coincide with the integration of redundant processing platforms and the functional integration of the STAR organization into Concord. During the next 9 months we intend to take steps to capture synergies within our network operations and align our resources across the enterprise for greater efficiency and improved service delivery. During the first quarter of 2001, we incurred a charge of $125.4 million ($86.4 million, net of taxes) related to our consolidation plan, including costs incurred in combining operating platforms and facilities, communications conversion costs, asset write-offs, severance and compensation costs, as well as investment banking fees and advisory, legal and accounting fees incurred in the acquisition of STAR.

We accrued charges of $63.9 million for combining various STAR processing platforms and facilities that will be closed and consolidated. We also accrued $16.0 million for duplicate products and systems such as abandoned products and internal systems that do not support our new network strategy. Various data center services contracts were terminated as part of the overall restructuring, for which we accrued $19.1 million. The consolidation of products, services, processing platforms and facilities created personnel duplications. As a result, we accrued compensation, severance costs and other expenses of $10.8 million to diminish redundancies and consolidate operational groups. In addition to these charges, we also incurred legal, accounting and advisory fees totaling $15.6 million in connection with the STAR merger.

In the six months ended June 30, 2001, $56.3 million of expenses were charged against the restructuring accrual. These expenses were primarily related to combining processing platforms and facilities, duplicate products and systems, legal, accounting and advisory fees and data center services contract terminations.

2001. Excluding acquisition, restructuring and ~~restructuring~~write-off charges, ~~operating~~net income as a ~~percent~~percentage of revenue ~~increased~~was 18.4% in ~~the six months ended June 30, 2001~~2002 compared to ~~22.6% from 20.7%~~16.1% in ~~the same period 2000.~~2001. This increase ~~in operating income resulted from~~is the result of improved ~~economies of scale and declining~~margins, reduced selling, general and administrative expenses as a ~~percent of revenue.~~

~~-17-~~

~~CONCORD EFS, INC. AND SUBSIDIARIES~~
~~MANAGEMENT’S DISCUSSION & ANALYSIS OF~~
~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
~~June 30, 2001~~

~~Six Months Ended June 30, 2001 Compared to 2000, continued~~

~~Net interest income in the six months ended June 30, 2001 improved as a percent~~percentage of revenue ~~to 3.0% compared to 2.5% in the same period 2000. The improvement was the result of returns we received from investing available cash , which~~and increased interest ~~income in the six months ended June 30, 2001 by 46.3% compared to the same period 2000.~~

Our overall tax rate increased to 42.5% in the six months ended June 30, 2001 compared to 36.3% in the same period 2000. Excluding acquisition and restructuring charges, the tax rate was 35.5% in the six months ended June 30, 2001 compared to 36.2% in the same period 2000.

Net income, as a percent of revenue, decreased to 5.7% in the six months ended June 30, 2001 from 14.6% in the same period 2000, due primarily to the acquisition and restructuring charges. Excluding these charges and related tax items, net income, as a percent of revenue, increased to 16.5% for the six months ended June 30, 2001 compared to 14.7% in the same period 2000.income.

Liquidity and Capital Resources

In the ~~six months ended June 30, 2001,~~first quarter 2002 we ~~generated $232.2 million from operating activities. We also received $21.0~~used $181.2 million in ~~proceeds from Federal Home Loan Bank advances, $421.9 million from our offering~~operating activities due primarily to the timing of ~~stock and $16.6~~settlement operations. We received $15.9 million from stock issued for exercises of options under our stock option ~~plan. From cash provided by operating~~plan and ~~financing activities, we invested $201.1~~deposits increased $14.3 million. We liquidated $20.6 million in securities, net of ~~sales~~purchases and maturities. We ~~also~~ spent ~~$48.3~~$37.0 million on capital additions ~~$19.7~~and $15.5 million for a business ~~acquisition and $16.4 million to purchase merchant contracts. Additionally, we reduced debt by $14.3 million.~~acquisitions. Our capital additions were primarily for ~~communications equipment, POS terminals, new~~capitalized and purchased software and computer ~~equipment~~facilities and ~~capitalized software.~~equipment.

Our assets are primarily monetary, consisting of cash, assets convertible into cash, securities ~~owned~~ and receivables. Because of their liquidity, these assets are not significantly affected by inflation. We believe that anticipated replacement costs of ~~equipment, furniture~~software, facilities and ~~leasehold improvements~~equipment will not materially affect operations. However, the rate of inflation affects our expenses, such as those for employee compensation and telecommunications, which may not be readily recoverable in the price of services offered by us.

We believe that our cash and cash equivalents, securities, available credit and cash generated from operations are adequate to meet our capital and operating needs. EFS National Bank and EFS Federal Savings Bank, our wholly owned financial institution subsidiaries, exceed required regulatory capital ratios.

~~-18-~~-19-

CONCORD EFS, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
~~June 30, 2001~~

Quantitative and Qualitative Disclosures About Market Risk

Since December 31, ~~2000,~~2001, there have been no changes with regard to market risk ~~requiring~~that would require further quantitative or qualitative disclosure. For our quantitative and qualitative disclosures about market risk for the fiscal year ending December 31, ~~2000,~~2001, refer to Exhibit ~~99.3 to Amendment No. 1~~13 to our ~~current~~annual report on Form ~~8-K,~~10-K, filed ~~April 16, 2001.~~on February 26, 2002.

~~-19-~~-20-

CONCORD EFS, INC. AND SUBSIDIARIES

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

From time to time Concord is involved in various litigation matters arising out of the conduct of its business. Pending matters that are currently material to Concord were reported in Concord’s Annual Report on Form 10-K for the year ended December 31, 2001. There were no material developments in the litigation matter previously disclosed except for the developments discussed below.

As previously disclosed, in September 2000, EFS National Bank ~~has been~~was named as a defendant in a purported class action lawsuit filed ~~in September 2000~~ 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 who were subjected to the allegedly improper rate and fee ~~changes.~~changes over a several-year period. The amended complaint seeks damages in excess of ~~$15~~$15.0 million as well as injunctive relief and unspecified punitive damages, treble damages, attorney fees, and costs.

A number of procedural steps must now be undertaken before the proposed settlement becomes final. Those steps include, without limitation, finalizing and executing the proposed settlement agreement and related documentation, presenting the proposed settlement agreement and related documentation to the Court and seeking preliminary approval from the Court, sending notices to all potential class ~~certification hearing~~members, and allowing time for potential class members (a) to opt out of the class or to remain in ~~this matter is presently scheduled~~the class and (b) to object to the proposed settlement and to attempt to persuade the court not to approve the proposed settlement.

There can be ~~held this fall. In July 1999, a~~no assurance that the foregoing steps will be completed or that the proposed settlement will become final, on the terms described above or otherwise.

A purported class action complaint with similar allegations ~~was~~and requests for relief has been filed in St. Charles County, Missouri, ~~seeking unspecified damages.~~ but there has not been a substantial amount of activity in the Missouri case. The proposed settlement would also resolve the issues in the Missouri case.

Although these matters are in the preliminary stages, EFS National Bank believes ~~that~~it has various defenses to the claims against it, ~~are without merit~~ and if these matters cannot be resolved by settlement, EFS National Bank intends to vigorously defend against all claims.

Card Payment Systems, a Concord subsidiary, has been named as a defendant in a class action suit filed in April 2001 in the District Court, Harrison County, Texas. Plaintiffs allege that the subsidiary has violated Section 227(b)(1)(C) of the Telephone Consumer Protection Act, 47 U.S.C. Section 227 et seq., and Section 35.47(g) of the Texas Business and Commerce Code by sending unsolicited advertisements by facsimile. Plaintiffs seek 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. The full amount of damages sought by plaintiffs is not known at this time. Card Payment Systems filed an answer on or about May 17,2001, denying all liability to Plaintiffs and intends to vigorously defend itself against all claims.

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 2. Changes in Securities and Use of Proceeds~~

Pursuant to the stockholder vote at our annual meeting, on June 1, 2001, we filed a Certificate of Amendment with the Delaware Secretary of State, amending our Certificate of Incorporation to increase the number of authorized shares of our common stock to 750,000,000 shares, $0.33 1/3 par value. Holders of our common stock are not entitled to preemptive rights to purchase our common stock. The authorized shares of common stock can be issued without stockholder approval upon such terms and in consideration of such amounts as the Board of Directors determines is in our best interests. The authorization of additional shares of common stock has no dilutive effect upon the proportionate voting power of our present stockholders. However, issuance of additional shares could have a substantial dilutive effect on present stockholders.

Our issuance of additional shares of common stock may also make it more difficult to obtain stockholder approval of various actions, such as a merger or other corporate combination. The increase in the number of authorized shares of common stock could enable the Board of Directors to render more difficult an attempt by another person or entity to obtain control of Concord, although the Board of Directors has no present intention of issuing additional shares for

~~-20-~~-21-

~~such purpose and has no present knowledge of any takeover efforts by any person or entity.~~

~~Item 4. Submission of Matters to a Vote of Security Holders~~CONCORD EFS, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION

~~At the annual meeting of our stockholders held on May 24, 2001, our stockholders elected the following nominees to the Board of Directors, with votes cast as follows:~~

• ~~Douglas C. Altenbern—192,853,658 shares for and 3,204,668 abstentions;~~
• ~~J. Richard Buchignani—191,809,324 shares for and 4,249,002 abstentions;~~
• ~~Ronald V. Congemi—180,841,490 shares for and 15,216,836 abstentions;~~
• ~~Richard M. Harter—191,784,927 shares for and 4,273,399 abstentions;~~
• ~~Richard P. Kiphart—192,314,696 shares for and 3,743,630 abstentions;~~
• ~~Edward A. Labry III—180,965,020 shares for and 15,093,306 abstentions;~~
• ~~Jerry D. Mooney—192,847,168 shares for and 3,211,158 abstentions;~~
• ~~Dan M. Palmer—181,023,698 shares for and 15,034,628 abstentions; and~~
• ~~Paul L. Whittington—192,866,718 shares for and 3,201,608 abstentions.~~

~~There were no votes cast against any nominee, and there were 500 broker non-votes with respect to each nominee.~~

At the annual meeting, our stockholders also approved an amendment to our Certificate of Incorporation to increase the number of authorized shares of our common stock, with votes cast as follows: 191,043,288 shares for, 4,480,059 shares against or withheld, 533,979 abstentions and 1,500 broker non-votes.

Item 6. Exhibits and Reports on Form 8-K

~~(a) Exhibits~~
(a) Exhibits


Exhibit
Number		Description of Exhibit

~~2.1~~		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		Amendment, dated November 16, 2000, to Concord EFS, Inc. 1993 Incentive Stock Option Plan (Second 1999 Restatement)

~~(b)~~
(b) Reports on Form 8-K

On ~~July 18, 2001,~~January 22, 2002, we filed a current report on Form 8-K to report, under Item 5 of that form, ~~factors that could cause our actual performance or achievements~~developments with regard to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements made from time to time 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, as amended.pending legal proceedings.

~~-21-~~-22-

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 7, 2001~~May 9, 2002	By:	/s/ Dan M. Palmer

		Dan M. Palmer




		Chairman of the Board and




		Chief Executive Officer









Date: ~~August 7, 2001~~May 9, 2002	By:	/s/ Edward T. Haslam

		Edward T. Haslam




		Senior Vice President,




		Chief Financial Officer and Treasurer

~~-22-~~-23-

CONCORD EFS, INC. AND SUBSIDIARIES
FORM 10-Q LISTING OF EXHIBITS


Exhibit
Number		Description of Exhibit

~~2.1~~		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		Amendment, dated November 16, 2000, to Concord EFS, Inc. 1993 Incentive Stock Option Plan (Second 1999 Restatement)


			2001
			Expenses
	Cash or	Balance	& Charges		Balance
Description	Non-cash	12/31/00	Accrued	Activity	6/30/01

2000:




Compensation and severance	Cash	$1.0	$—	$1.0	$—




Network de-conversion costs	Cash	2.4	—	1.1	1.3




2001:




Office closings and operational




de-conversions	Cash	—	63.9	14.7	49.2




Duplicate or abandoned products




& systems	Cash	—	4.4	1.5	2.9




Duplicate or abandoned products




& systems	Non-Cash	—	11.6	11.6	—
Advisory, legal, & accounting	Cash	—	15.6	15.3	0.3




Contract terminations	Cash	—	19.1	9.3	9.8




Compensation and severance	Cash	—	9.8	3.2	6.6




Other	Non-cash	—	1.0	0.7	0.3

		$3.4	$125.4	$58.4	$70.4


	Three months ended June 30, 2001
	Payment			Network
	Services			Services			Other			Total

Revenue	$	263,857		$	156,829		$	—		$	420,686




Cost of operations		(213,999	)		(85,620	)		—			(299,619	)




Selling, general & administrative expenses		—			—			(22,714	)		(22,714	)




Acquisition & restructuring charges		—			—			—			—




Taxes & interest, net		—			—			(27,171	)		(27,171	)




Minority interest in subsidiary		—			—			—			—

Net income (loss)	$	49,858		$	71,209		$	(49,885	)	$	71,182


	Three months ended June 30, 2000
	Payment			Network
	Services			Services			Other			Total

Revenue	$	215,385		$	123,463		$	—		$	338,848




Cost of operations		(171,265	)		(69,506	)		—			(240,771	)




Selling, general & administrative expenses		—			—			(24,045	)		(24,045	)




Acquisition & restructuring charges		—			—			—			—




Taxes & interest, net		—			—			(21,592	)		(21,592	)




Minority interest in subsidiary		—			—			(158	)		(158	)

Net income (loss)	$	44,120		$	53,957		$	(45,795	)	$	52,282


	Six months ended June 30, 2001
	Payment			Network
	Services			Services			Other			Total

Revenue	$	491,717		$	304,607		$	—		$	796,324




Cost of operations		(399,838	)		(170,049	)		—			(569,887	)




Selling, general & administrative expenses		—			—			(46,526	)		(46,526	)




Acquisition & restructuring charges		(21,787	)		(103,575	)		—			(125,362	)




Taxes & interest, net		—			—			(9,186	)		(9,186	)




Minority interest in subsidiary		—			—			(173	)		(173	)

Net income (loss)	$	70,092		$	30,983		$	(55,885	)	$	45,190


	Six months ended June 30, 2000
	Payment			Network
	Services			Services			Other			Total

Revenue	$	405,782		$	235,983		$	—		$	641,765




Cost of operations		(322,086	)		(141,200	)		—			(463,286	)




Selling, general & administrative expenses		—			—			(45,882	)		(45,882	)




Acquisition & restructuring charges		(776	)		—			—			(776	)




Taxes & interest, net		—			—			(37,723	)		(37,723	)




Minority interest in subsidiary		—			—			(304	)		(304	)

Net income (loss)	$	82,920		$	94,783		$	(83,909	)	$	93,794

	•		~~Douglas C. Altenbern—192,853,658 shares for and 3,204,668 abstentions;~~

	•		~~J. Richard Buchignani—191,809,324 shares for and 4,249,002 abstentions;~~

	•		~~Ronald V. Congemi—180,841,490 shares for and 15,216,836 abstentions;~~

	•		~~Richard M. Harter—191,784,927 shares for and 4,273,399 abstentions;~~

	•		~~Richard P. Kiphart—192,314,696 shares for and 3,743,630 abstentions;~~

	•		~~Edward A. Labry III—180,965,020 shares for and 15,093,306 abstentions;~~

	•		~~Jerry D. Mooney—192,847,168 shares for and 3,211,158 abstentions;~~

	•		~~Dan M. Palmer—181,023,698 shares for and 15,034,628 abstentions; and~~

	•		~~Paul L. Whittington—192,866,718 shares for and 3,201,608 abstentions.~~