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


		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.








		For the quarterly period ended ~~March 31,~~June 30, 2002








OR









		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.








		For the transition period from to

Commission file number 000-13848

CONCORD EFS, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		04-2462252









(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

2525 Horizon Lake Drive, Suite 120, Memphis, 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. Yesx (XBox) Noo (Box)

The number of shares of the registrant’s Common Stock, $0.33 1/3 par value, outstanding as of ~~April 30,~~July 31, 2002 was ~~510,523,433.~~513,035,052.

TABLE OF CONTENTS


~~CONDENSED CONSOLIDATED BALANCE SHEETS~~PART 1 Financial Information
~~CONDENSED CONSOLIDATED STATEMENTS OF INCOME~~Item 1. Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets
	Condensed Consolidated Statements of Income
	Condensed Consolidated Statements of Cash Flows
	Notes to Condensed Consolidated Financial Statements
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II ~~OTHER INFORMATION~~Other Information
	Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
~~SIGNATURES~~Signatures
~~AMENDMENT TO 1993 INCENTIVE STOCK OPTION PLAN~~CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATION OF CHIEF FINANCIAL OFFICER

CONCORD EFS, INC. AND SUBSIDIARIES


PART I — Financial Information









Item 1. Financial Statements (Unaudited)









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









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









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









	Notes to Condensed Consolidated Financial Statements	4









Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1316









Item 3. Quantitative and Qualitative Disclosures About Market Risk		2025









PART II — Other Information









Item 1. Legal Proceedings		2126









Item 2. Changes in Securities and Use of Proceeds		27









Item 4. Submission of Matters to a Vote of Security Holders		28









Item 6. Exhibits and Reports on Form 8-K		2229









Signatures		2330

CONCORD EFS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)


	March 31,		December 31,			June 30,		December 31,
	2002		2001			2002		2001

	(in thousands)					(in thousands)
ASSETS					ASSETS




CURRENT 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




					Cash and cash equivalents	$	755,751	$	682,906




					Securities available for sale		1,097,361		1,228,805




					Accounts receivable, net		412,823		134,496




					Inventories		22,048		20,971




					Prepaid expenses and other current assets		41,633		34,346




					Deferred income taxes		4,196		13,054

TOTAL CURRENT ASSETS		2,168,424		2,114,578	TOTAL CURRENT ASSETS		2,333,812		2,114,578









Loans, net		86,473		89,038	Loans, net		82,522		89,038




Property and equipment, net		282,205		267,451	Property and equipment, net		301,819		267,451




Goodwill, net		213,736		158,632	Goodwill, net		282,644		158,632




Other intangible assets, net		61,608		85,712	Other intangible assets, net		59,280		85,712




Other assets		20,179		14,034	Other assets		25,796		14,034

TOTAL ASSETS	$	2,832,625	$	2,729,445	TOTAL ASSETS	$	3,085,873	$	2,729,445






LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY




CURRENT LIABILITIES					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		—




					Accounts payable and other liabilities	$	442,605	$	488,789




					Deposits		159,126		162,972




					Accrued liabilities		46,024		29,837




					Accrued restructuring charges		35,289		5,315




					Accrued litigation settlement		18,753		—




					Income taxes payable		16,588		1,438




					Current maturities of long-term debt		43,021		—

TOTAL CURRENT LIABILITIES		690,215		688,351	TOTAL CURRENT LIABILITIES		761,406		688,351









Long-term debt		109,297		119,458	Long-term debt		126,244		119,458




Deferred income taxes		59,335		55,437	Deferred income taxes		64,686		55,437




Other liabilities		7,188		4,202	Other liabilities		8,348		4,202

TOTAL LIABILITIES		866,035		867,448	TOTAL LIABILITIES		960,684		867,448






Commitments and contingent liabilities		—		—	Commitments and contingent liabilities		—		—




Minority interest in subsidiary		4,429		3,410	Minority interest in subsidiary		4,514		3,410

STOCKHOLDERS’ EQUITY					STOCKHOLDERS’ EQUITY




Common stock		170,174		169,352




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




					Common stock		171,011		169,352




					Other stockholders’ equity		1,949,664		1,689,235

TOTAL STOCKHOLDERS’ EQUITY		1,962,161		1,858,587	TOTAL STOCKHOLDERS’ EQUITY		2,120,675		1,858,587

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,832,625	$	2,729,445	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,085,873	$	2,729,445

See Notes to Condensed Consolidated Financial Statements.

-1-

CONCORD EFS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


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





Revenue	Revenue	$	462,143		$	375,638		Revenue	$	538,177	$	419,841	$	1,000,320	$	794,708




Cost of operations	Cost of operations		321,855			270,268		Cost of operations		381,894		299,619		704,275		569,887




Selling, general and administrative expenses	Selling, general and administrative expenses		24,782			23,812		Selling, general and administrative expenses		32,357		22,714		57,139		47,102




Acquisition, restructuring and write-off charges	Acquisition, restructuring and write-off charges		47,500			125,362		Acquisition, restructuring and write-off charges		29,006		—		76,506		125,362




Litigation settlement charges								Litigation settlement charges		20,761		—		20,761		—

OPERATING INCOME (LOSS)			68,006			(43,804	)
OPERATING INCOME								OPERATING INCOME		74,159		97,508		141,639		52,357









Other income (expense):




Other income and expense:								Other income and expense:




	Interest income		19,572			15,482		Other income		6,388		845		6,914		2,192




	Interest expense		(3,106	)		(3,123	)	Interest income		19,498		15,240		39,070		30,722
								Interest expense		2,656		3,257		5,762		6,380
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	)
INCOME BEFORE TAXES AND MINORITY INTEREST								INCOME BEFORE TAXES AND MINORITY INTEREST		97,389		110,336		181,861		78,891









Income taxes								Income taxes		34,086		39,154		64,074		33,528

INCOME BEFORE MINORITY INTEREST								INCOME BEFORE MINORITY INTEREST		63,303		71,182		117,787		45,363









Minority interest in net income of subsidiary	Minority interest in net income of subsidiary		275			173		Minority interest in net income of subsidiary		85		—		360		173

NET INCOME (LOSS)		$	54,209		$	(25,992	)
NET INCOME								NET INCOME	$	63,218	$	71,182	$	117,427	$	45,190


PER SHARE DATA:	PER SHARE DATA:							PER SHARE DATA:




	Basic earnings (loss) per share	$	0.11		$	(0.05	)	Basic earnings per share	$	0.12	$	0.15	$	0.23	$	0.09

	Diluted earnings (loss) per share	$	0.10		$	(0.05	)	Diluted earnings per share	$	0.12	$	0.14	$	0.22	$	0.09

AVERAGE SHARES OUTSTANDING:	AVERAGE SHARES OUTSTANDING:							AVERAGE SHARES OUTSTANDING:




	Basic shares		508,699			483,329		Basic shares		511,673		486,785		510,186		485,057

	Diluted shares		530,272			483,329		Diluted shares		532,638		508,569		531,455		506,472

See Notes to Condensed Consolidated Financial Statements.

-2-

CONCORD EFS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


		Three months ended								Six months ended
		March 31,								June 30,

		2002			2001					2002			2001

		(in thousands)								(in thousands)
OPERATING ACTIVITIES	OPERATING ACTIVITIES							OPERATING ACTIVITIES




								Net income		$	117,427		$	45,190




								Adjustments to reconcile net income to net cash provided by (used in) operating activities:




									Minority interest in subsidiary		360			173




									Provision for losses on accounts receivable and loans		116			3,962




									Depreciation and amortization		39,612			45,517




									Deferred income taxes		11,979			(21,051	)




									Net realized gain on sales of securities available for sale		(1,013	)		(1,616	)




									Restructuring charges		38,338			13,081




									Changes in operating assets and liabilities:




									Settlement receivables and payables, net		(303,577	)		1,214




									Accounts receivable		(27,031	)		(11,652	)




									Inventories		(843	)		(6,046	)




									Prepaid expenses and other current assets		(6,818	)		(2,565	)




									Accounts payable and other liabilities		79,714			97,036




									Other, net		2,338			2,048





NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(181,189	)	$	69,213		NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			(49,398	)		165,291









INVESTING ACTIVITIES	INVESTING ACTIVITIES							INVESTING ACTIVITIES




	Acquisition of securities available for sale		(232,020	)		(172,411	)	Acquisition of securities available for sale			(423,762	)		(521,316	)




	Proceeds from sales of securities available for sale		205,155			110,784		Proceeds from sales of securities available for sale			487,336			242,123




	Proceeds from maturity of securities available for sale		47,499			15,532		Proceeds from maturity of securities available for sale			85,528			79,755




	Purchases of loans		(15,828	)		(9,417	)	Purchases of loans			(17,716	)		(23,490	)




	Net change in loans		18,952			3,522		Net change in loans			25,281			7,625




	Acquisition of property and equipment		(36,981	)		(23,843	)	Acquisition of property and equipment			(70,904	)		(48,332	)




	Purchased merchant contracts		—			(7,490	)	Purchased merchant contracts			—			(16,423	)




	Business acquisitions, net		(15,509	)		—		Business acquisitions, net			(17,240	)		(19,700	)




	Other investing activity		(6,681	)		(1,893	)	Other investing activity			(13,443	)		(2,938	)

NET CASH USED IN INVESTING ACTIVITIES			(35,413	)		(85,216	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES								NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			55,080			(302,696	)









FINANCING ACTIVITIES	FINANCING ACTIVITIES							FINANCING ACTIVITIES




								Net increase (decrease) in deposits			(3,846	)		13,644




	Net increase (decrease) in deposits		14,251			(1,109	)	Proceeds from borrowings			50,000			21,000




	Proceeds from borrowings		—			13,000		Payments on borrowings			(193	)		(14,268	)




	Payments on borrowings		(161	)		(14,268	)	Proceeds from offering of common stock			—			420,630




	Proceeds from exercise of stock options		15,938			11,085		Proceeds from exercise of stock options			21,445			16,591




	Payments on leases payable		(59	)		(438	)	Payments on leases payable			(243	)		(871	)

NET CASH PROVIDED BY FINANCING ACTIVITIES	NET CASH PROVIDED BY FINANCING ACTIVITIES		29,969			8,270		NET CASH PROVIDED BY FINANCING ACTIVITIES			67,163			456,726

NET DECREASE IN CASH AND CASH EQUIVALENTS			(186,633	)		(7,733	)
NET INCREASE IN CASH AND CASH EQUIVALENTS								NET INCREASE IN CASH AND CASH EQUIVALENTS			72,845			319,321




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

CASH AND CASH EQUIVALENTS AT END OF PERIOD	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	496,273		$	290,650		CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	755,751		$	617,704

See Notes to Condensed Consolidated Financial Statements.

-3-

CONCORD EFS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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 ~~three~~six months ended ~~March 31,~~June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Concord EFS, Inc. and Subsidiaries (Concord) annual report on Form 10-K filed on February 26, 2002 for the year ended December 31, 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 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, 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 2001 amounts have been reclassified to conform to the 2002 presentation.

Recent Pronouncement: In July 2002 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue 94-3. The principal difference between SFAS 146 and Issue 94-3 relates to SFAS 146’s requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity’s commitment to an exit plan. The FASB concluded in SFAS 146 that an entity’s commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. Therefore, SFAS 146 eliminates the definition and requirements for recognition of exit costs in Issue 94-3. SFAS 146 also establishes that fair value is the objective for initial measurement of the liability. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002.

Note B —– Business Combinations

In June 2001 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards 141, “Business Combinations.” SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business combinations completed after June 30, 2001.

-4-

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

Note B —– Business Combinations, continued

On May 17, 2002 Concord acquired Core Data Resources, Inc., an electronic transaction processor. The acquisition, for which Concord issued approximately 2.0 million shares of its common stock, 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 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 paid approximately $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_SMsm), a debit network. The acquisition was accounted for as a pooling of interests transaction in which Concord issued approximately 48.0 million shares of its common stock.

-5-

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


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

		2002		2001		2002		2001

Revenue:




	Concord	$	538,177	$	419,841	$	1,000,320	$	779,836




	STAR (1)		—		—		—		15,396




	Intercompany eliminations (2)		—		—		—		(524	)

	Combined revenue	$	538,177	$	419,841	$	1,000,320	$	794,708

Net income:




	Concord	$	63,218	$	71,182	$	117,427	$	42,262




	STAR (1)		—		—		—		2,928

	Combined net income	$	63,218	$	71,182	$	117,427	$	45,190

Basic earnings per share combined		$	0.12	$	0.15	$	0.23	$	0.09

Diluted earnings per share combined		$	0.12	$	0.14	$	0.22	$	0.09

(1)		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.




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

-6-

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

Note B —– Business Combinations, continued

Acquisition, restructuring and write-off charges were $29.0 million ($18.9 million, net of taxes) for the three months ended June 30, 2002. During the second quarter, management approved a plan in conjunction with the Core Data acquisition and continued consolidation initiatives to improve overall operating efficiencies. The charge consisted of $16.8 million for contract terminations, $4.1 million for exiting a non-strategic business, $1.0 million for closing and consolidating certain facilities and $0.7 million for compensation and severance. In addition, the charge included stock compensation charges of $4.8 million related to the modification of stock options of terminated employees and asset impairment charges of $1.6 million recorded as an adjustment to the write-off of non-performing purchased merchant contracts. In connection with the plan, Concord expects to eliminate 24 positions, none of which were eliminated as of June 30, 2002. As of June 30, 2002, $22.3 million of the charges were accrued but unpaid. Concord expects to complete the plan by June 30, 2003.

The following table presents a summary of activity in the second quarter 2002 restructuring charge accrual (in thousands):


Acquisition, restructuring and write-off charges	$	29,006




Cash outlays		211




Non-cash writedowns and charges – asset impairment		6,536

Balance, June 30, 2002	$	22,259

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


Contract terminations	$	16,800




Non-strategic business closures		3,846




Facility closings and consolidations		930




Compensation and severance		683

Balance, June 30, 2002	$	22,259

-7-

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

Note B – Business Combinations, continued

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 corporate consolidation plan initiated to continue improvements in 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 addition, asset impairment charges of $22.5 million ($0.03 basic and diluted earnings per share) 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. In connection with the ~~consolidation~~ plan, Concord expects to eliminate approximately 165 positions, 76109 of which were eliminated as of ~~March 31,~~June 30, 2002. Compensation and severance costs paid and charged against the restructuring charge accrual were ~~$0.7~~$1.8 million through ~~March 31,~~June 30, 2002. As of ~~March 31,~~June 30, 2002, ~~$15.4~~$13.0 million of the charges were accrued but unpaid. Concord expects to complete the consolidation plan by March 31, 2003.

The following table presents a summary of activity in the first quarter 2002 restructuring charge accrual (in thousands):


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




Cash outlays		1,623		2,696




Non-cash writedowns and charges – asset impairment		30,436		31,774

Balance, March 31, 2002	$	15,441
Balance, June 30, 2002			$	13,030

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


Facility closings and consolidations	$	6,260	$	5,963




Compensation and severance		5,255		4,131




Non-strategic business closures		3,926		2,936

Balance, March 31, 2002	$	15,441
Balance, June 30, 2002			$	13,030

~~-7-~~-8-

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

Note B —– Business Combinations, continued

Acquisition, restructuring and write-off charges were $125.4 million ($86.4 million, net of taxes) for the three months ended March 31, 2001. The charges were a result of a company-wide consolidation plan to address areas of operating redundancies created by 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. The charges 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,~~advisory, legal, and ~~advisory~~accounting fees, $19.1 million for the termination of certain data center services contracts, $9.8 million for compensation and severance costs, and $1.0 million for other expenses. In connection with the consolidation plan, Concord expected to eliminate approximately 250 positions, all of which 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~~were 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	$	5,315




Cash outlays		5,286		5,286




Non-cash writedowns and charges — asset impairment		29




Non-cash writedowns and charges – asset impairment				29

Balance, March 31, 2002	$	—	$	—

Note C —– Goodwill and Other Intangible Assets

In June 2001 the Financial Accounting Standards Board issued ~~Statements~~Statement 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 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 has determined that the carrying amount of goodwill is not impaired.

~~-8-~~-9-

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

Note C —– Goodwill and Other Intangible Assets, continued

The following table 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 )


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

	2002		2001		2002		2001

Reported net income	$	63,218	$	71,182	$	117,427	$	45,190




Goodwill amortization, net of tax		—		2,415		—		4,691

Adjusted net income	$	63,218	$	73,597	$	117,427	$	49,881

Adjusted basic earnings per share	$	0.12	$	0.15	$	0.23	$	0.10

Adjusted diluted earnings per share	$	0.12	$	0.14	$	0.22	$	0.10

The following table presents the 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 relating to other intangible assets as of December 31, 2001 for the periods ~~listed for other intangible assets,~~indicated, net of the write-off of non-performing purchased merchant contracts of $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

-10-

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

Note D —– Comprehensive Income

Total comprehensive income ~~(loss)~~ was ~~$49.4~~$79.5 million and ~~$(18.9)~~$70.4 million for the three months ended ~~March 31,~~June 30, 2002 and 2001, respectively. Total comprehensive income was $128.9 million and $51.5 million for the six months ended June 30, 2002 and 2001, 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-~~Note E – Offering of Common Stock

In June 2001 Concord issued and sold approximately 17.8 million 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 approximately 34.1 million shares of Concord common stock. Most of the selling stockholders were the previous owners of STAR who received unregistered common stock of Concord in connection with the February 1, 2001 acquisition. Net of the underwriting discount and other expenses of the offering, Concord received $420.6 million for the common stock it issued and sold. Concord did not receive any proceeds from the sale of shares by the selling stockholders.

Note F – Earnings Per Share

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


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

		2002		2001		2002		2001

Numerator:




	Net income	$	63,218	$	71,182	$	117,427	$	45,190

Denominator:




	Denominator for basic earnings per share, weighted-average shares		511,673		486,785		510,186		485,057




	Effect of dilutive stock options		20,965		21,784		21,269		21,415





	Denominator for diluted earnings per share, adjusted weighted-average shares, and assumed conversions		532,638		508,569		531,455		506,472

Basic earnings per share		$	0.12	$	0.15	$	0.23	$	0.09

Diluted earnings per share		$	0.12	$	0.14	$	0.22	$	0.09

Excluding acquisition, restructuring, write-off, and litigation settlement charges and related taxes, diluted earnings per share for the six months ended June 30, 2002 and 2001 were $0.34 and $0.26, respectively. Earnings per share and related per share data have been restated to reflect all stock splits.

-11-

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

Note ~~E — Earnings Per Share~~

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

Three months ended
March 31,

2002 2001

Numerator:
Net income (loss) $ 54,209 $ (25,992 )

Denominator:
Denominator for basic earnings per share, weighted-average shares 508,699 483,329
Effect of dilutive stock options 21,573 —

Denominator for diluted earnings per share, adjusted weighted-average shares and assumed conversions 530,272 483,329

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

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

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

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

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

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.

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 typically constitutes a bundled rate for the transaction authorization, processing, settlement, and funds transfer services Concord provides, plus the interchange fees charged by the credit card associations and collected by Concord. The balance of Payment Services revenue is 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-~~Business segment information for the three months and six months ended June 30, 2002 and 2001 is presented below (in thousands):


	Three months ended June 30, 2002

	Network		Payment
	Services		Services		Other			Total

Revenue	$	205,149	$	333,028	$	—		$	538,177




Cost of operations		108,950		272,944		—			381,894




Selling, general and administrative expenses		—		—		32,357			32,357




Acquisition, restructuring and write-off charges		—		—		29,006			29,006




Litigation settlement charges		—		—		20,761			20,761




Other income		—		—		6,388			6,388




Interest income		—		—		19,498			19,498




Interest expense		—		—		2,656			2,656




Income taxes		—		—		34,086			34,086




Minority interest in subsidiary		—		—		85			85

Net income (loss)	$	96,199	$	60,084	$	(93,065	)	$	63,218

-12-

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

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


	Three months ended June 30, 2001

	Network		Payment
	Services		Services		Other			Total

Revenue	$	156,829	$	263,012	$	—		$	419,841




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




Selling, general and administrative expenses		—		—		22,714			22,714




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




Litigation settlement charges		—		—		—			—




Other income		—		—		845			845




Interest income		—		—		15,240			15,240




Interest expense		—		—		3,257			3,257




Income taxes		—		—		39,154			39,154




Minority interest in subsidiary		—		—		—			—

Net income (loss)	$	71,209	$	49,013	$	(49,040	)	$	71,182


	Six months ended June 30, 2002

	Network		Payment
	Services		Services		Other			Total

Revenue	$	390,806	$	609,514	$	—		$	1,000,320




Cost of operations		203,889		500,386		—			704,275




Selling, general and administrative expenses		—		—		57,139			57,139




Acquisition, restructuring and write-off charges		—		—		76,506			76,506




Litigation settlement charges		—		—		20,761			20,761




Other income		—		—		6,914			6,914




Interest income		—		—		39,070			39,070




Interest expense		—		—		5,762			5,762




Income taxes		—		—		64,074			64,074




Minority interest in subsidiary		—		—		360			360

Net income (loss)	$	186,917	$	109,128	$	(178,618	)	$	117,427

-13-

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

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

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

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 —– Operations by Business Segment, continued


	Six months ended June 30, 2001

	Network		Payment
	Services		Services		Other			Total

Revenue	$	303,986	$	490,722	$	—		$	794,708




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




Selling, general and administrative expenses		—		—		47,102			47,102




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




Litigation settlement charges		—		—		—			—




Other income		—		—		2,192			2,192




Interest income		—		—		30,722			30,722




Interest expense		—		—		6,380			6,380




Income taxes		—		—		33,528			33,528




Minority interest in subsidiary		—		—		173			173

Net income (loss)	$	133,937	$	90,884	$	(179,631	)	$	45,190

Note H – 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~~On May 14, 2002 the plaintiffs filed ana second amended complaint alleging that the class consists of ~~at least 60,000~~over 100,000 merchants who were subjected to the allegedly improper rate and fee changes over a several-year period. The second amended complaint ~~seeks~~sought damages in excess of ~~$15.0~~$70.0 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 byOn May 16, 2002 the parties entered into a settlement agreement relating to this litigation and received preliminary approval byfrom the ~~Court.~~trial court therefor. On August 6, 2002 the trial court rejected the only objection filed against the settlement agreement and gave the settlement agreement its final approval. The objector has not yet indicated whether he will appeal, but he has 30 days from the date of final approval to do so. The maximum amount of the credits and payments by EFS National Bank under the ~~proposed~~ settlement ~~would be~~is $37.6 million, payable over a five-year period. A portion of such amount ~~would~~will be used to pay plaintiffs’ counsel and certain claims administration expenses. In connection with the settlement, Concord ~~believes~~has recorded a one-time charge of $20.8 million ($13.5 million, net of taxes) for the ~~actual amount of credits and payments if the proposed settlement becomes final will be~~three months ended June 30, 2002. The charge is less than ~~the~~ $37.6 million, because the 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~~in the Tennessee case discussed above will also resolve the issues in the Missouri case.

~~Although these matters are in~~-14-

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

Note I – Other Income

Other income for the ~~preliminary stages, EFS National Bank believes it has various defenses~~three months ended June 30, 2002 includes $5.9 million representing the sale of certain terminal hardware and related future rental payments. The remaining other income represents net realized gain on sales of securities available for sale.

Note J – Subsequent Event

On August 5, 2002 Concord announced that its Board of Directors approved the repurchase of up to $250.0 million of Concord’s common stock. Under the ~~claims against it, and if these matters cannot be resolved by settlement, EFS National Bank intends~~repurchase plan, Concord may buy back shares of its outstanding stock from time to ~~vigorously defend against all claims. Due to~~time either on 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.open market or through privately negotiated transactions.

~~-12-~~-15-

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

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 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) 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 99.2 to our annual report on Form 10-K filed on 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 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

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

~~-13-~~-16-

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

~~In March~~On May 17, 2002 we ~~announced that we had reached an agreement to acquire~~acquired Core Data Resources, Inc., 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 expect to close the Core Data~~This acquisition was accounted for as a purchase transaction in ~~the second quarter~~which we exchanged approximately 2.0 million shares of ~~2002, subject to various conditions, including regulatory approval.~~our common stock for all of Core Data’s outstanding common stock.

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. On February 1, 2001 we completed our acquisition of Star Systems, Inc. (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 which we exchanged approximately 48.0 million shares of our common stock for all of STAR’s outstanding common stock.

As a result of our acquisition of STAR and subsequent purchase of shares, we acquired a majority interest in Primary Payment Systems, Inc., a company providing deposit risk management services to merchants and financial institutions. We own an 85.5% interest in 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 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 well as provide additional cross-selling opportunities and augment customer retention.

Payment Services

Payment Services provides the systems and processing that allow retail clients to accept virtually any type of electronic payment, including all card ~~types—~~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 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).

~~-14-~~-17-

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

We own two insured depository institutions, EFS National Bank and EFS Federal Savings Bank. While EFS National Bank engages exclusively in activities related to our payment processing business, EFS Federal Savings Bank has engaged in limited local deposit taking and lending operations. We have determined that the continuation of those local retail banking operations are not strategic to the company, and we are, therefore, pursuing options to dispose of those operations and related assets and liabilities. As an interim step in this regard, on May 15, 2002 we applied to the Office of the Comptroller of the Currency to merge EFS Federal Savings Bank into EFS National Bank.

On January 1, 2002 we acquired H & F Services, Inc., an independent sales organization. Prior to the acquisition, 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 acquiring merchant contracts, reduce the cost of operations, and increase selling, general and administrative expenses.

Consolidation Plans

In the second quarter of 2002 we initiated a plan in conjunction with the Core Data acquisition and continued consolidation initiatives to improve overall operating efficiencies. The plan includes contract terminations, exiting a non-strategic business, closing and consolidating certain facilities, eliminating 24 positions, and writing off impaired assets. We incurred a charge of $18.9 million, net of taxes, related to the plan. During the next twelve months, we will implement the plan to improve our overall operating efficiencies.

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.

-18-

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

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 in accordance with the 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. The majority of our revenue is tied to contracts with original terms of between three and five years.

A principal component of our revenue is derived from Network Services ~~(40.2%~~(38.1% and ~~39.3%~~37.4% for the three months ended ~~March 31,~~June 30, 2002 and 2001 and 39.1% and 38.3% for the six months ended June 30, 2002 and 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 ~~(59.8%~~(61.9% and ~~60.7%~~62.6% for the three months ended ~~March 31,~~June 30, 2002 and 2001 and 60.9% and 61.7% for the six months ended June 30, 2002 and 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, 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~~having revenue dependent 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 lists revenue by segment for the periods indicated (in millions):


	Three months ended				Three months				Six months
	March 31,				ended June 30,				ended June 30,

	2002		2001		2002		2001		2002		2001

Network Services	$	185.6	$	147.8	$	205.2	$	156.8	$	390.8	$	304.0




Payment Services		276.5		227.8		333.0		263.0		609.5		490.7

Total	$	462.1	$	375.6	$	538.2	$	419.8	$	1,000.3	$	794.7

-19-

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

Components of Revenue and Expenses, continued

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 network fees, which represent amounts charged by the credit and debit networks. Interchange and 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.

~~-16-~~

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

~~Components of Revenue and Expenses, continued~~

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


	Three months ended				Three months				Six months
	March 31,				ended June 30,				ended June 30,

	2002		2001		2002		2001		2002		2001

Network Services	$	94.6	$	84.4	$	109.0	$	85.6	$	203.9	$	170.1




Payment Services		227.2		185.9		272.9		214.0		500.4		399.8

Total	$	321.8	$	270.3	$	381.9	$	299.6	$	704.3	$	569.9

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.

-20-

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

Results of Operations

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


	Three months ended						Three months ended						Six months ended
	March 31,						June 30,						June 30,

	2002			2001			2002			2001			2002			2001

Revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%




Cost of operations		69.6			71.9			71.0			71.4			70.4			71.7




Selling, general and administrative expenses		5.4			6.3			6.0			5.4			5.7			5.9




Acquisition, restructuring and write-off charges		10.3			33.5			5.4			—			7.7			15.8




Litigation settlement charges								3.8			—			2.1			—

Operating income (loss)		14.7			(11.7	)
Operating income								13.8			23.2			14.1			6.6




Other income								1.2			0.2			0.7			0.3




Interest income, net		3.5			3.3			3.1			2.9			3.3			3.0

Income (loss) before taxes		18.2			(8.4	)




Income taxes (benefit)		6.5			(1.5	)
Income before taxes								18.1			26.3			18.1			9.9




Income taxes								6.3			9.3			6.4			4.2

Net income (loss)		11.7	%		(6.9	)%
Net income								11.8	%		17.0	%		11.7	%		5.7	%

~~-17-~~

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

~~First~~Second Quarter 2002 Compared to 2001

Revenue in the ~~first~~second quarter 2002 increased ~~23.0%~~28.2% to ~~$462.1~~$538.2 million from ~~$375.6~~$419.8 million in 2001. In the ~~first~~second quarter 2002 Network Services accounted for ~~40.2%~~38.1% of revenue, and Payment Services accounted for ~~59.8%~~61.9%. Network Services revenue in the ~~first~~second quarter 2002 increased ~~25.6%~~30.8% compared to 2001 as a result of network price increases, 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 ~~first~~second quarter 2002 increased ~~21.3%~~26.6% compared to 2001, due primarily to increased transaction volumes. The increased volumes resulted from the addition of new merchants and the increased use of debit, EBT, and ~~EBT~~credit card transactions at new and existing merchants.

Cost of operations decreased in the ~~first~~second quarter 2002 to ~~69.6%~~71.0% of revenue compared to ~~71.9%~~71.4% in 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 ~~first~~second quarter 2002 selling, general and administrative expenses ~~decreased~~increased as a percentage of revenue to ~~5.4%~~6.0% from ~~6.3%~~5.4% in 2001. Overall, selling, general and administrative expenses increased to ~~$24.8~~$32.4 million in the ~~first~~second quarter 2002 from ~~$23.8~~$22.7 million in 2001. This increase is primarily attributable to the expenses related to the acquisition of the H & F Services ~~Inc.~~ sales ~~force.~~force, increased headcount, and expenses related to the Logix and Core Data acquisitions.

-21-

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

Second Quarter 2002 Compared to 2001, continued

Acquisition, restructuring and write-off charges were $29.0 million in the second quarter 2002. There were no such charges in the second quarter 2001. In the second quarter of 2002 we initiated a plan in conjunction with the Core Data acquisition and continued consolidation initiatives to improve overall operating efficiencies. The plan includes contract terminations, exiting a non-strategic business, closing and consolidating certain facilities, eliminating 24 positions, and writing off impaired assets. The charge of $29.0 million ($18.9 million, net of taxes) consisted of $16.8 million for contract terminations, $4.1 million for exiting a non-strategic business, $1.0 million for closing and consolidating certain facilities, and $0.7 million for compensation and severance. In addition, the charge included stock compensation charges of $4.8 million related to the modification of stock options of terminated employees and asset impairment charges of $1.6 million recorded as an adjustment to the write-off of non-performing purchased merchant contracts.

Litigation settlement charges were $20.8 million in the second quarter 2002. There were no such charges in the second quarter 2001. The charges represent credits and payments to merchants and former merchants, legal expenses, and claims administration expenses in connection with a settlement agreement relating to a purported class action lawsuit alleging that certain rate and fee charges were improper under Tennessee law due to allegedly deficient notice.

Excluding acquisition, restructuring, write-off, and litigation settlement charges, operating income as a percentage of revenue was 23.0% in the second quarter 2002 compared to 23.2% in 2001.

Other income improved as a percentage of revenue to 1.2% in the second quarter 2002 compared to 0.2% in 2001. This improvement resulted from the sale of certain terminal hardware and related future rental payments.

Net interest income improved as a percentage of revenue to 3.1% in the second quarter 2002 compared to 2.9% in 2001. This improvement resulted primarily from our increased investment in various securities of available cash flow from operations plus approximately $420.6 million in proceeds from our June 2001 stock offering, which increased net interest income by 40.6% compared to 2001.

Our overall tax rate was 35.0% in the second quarter 2002 compared to 35.5% in 2001.

Net income as a percentage of revenue decreased to 11.8% in the second quarter 2002 from 17.0% in 2001. Excluding acquisition, restructuring, write-off, and litigation settlement charges, net income as a percentage of revenue was 17.8% in 2002 compared to 17.0% in 2001. This increase is the result of increased other income and interest income.

-22-

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

Six Months Ended June 30, 2002 Compared to 2001

Revenue in the six months ended June 30, 2002 increased 25.9% to $1,000.3 million from $794.7 million in 2001. In the six months ended June 30, 2002 Network Services accounted for 39.1% of revenue, and Payment Services accounted for 60.9%. Network Services revenue in the six months ended June 30, 2002 increased 28.6% compared to 2001 as a result of network price increases, 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, 2002 increased 24.2% compared to 2001, due primarily to increased transaction volumes. The increased volumes resulted from the addition of new merchants and the increased use of debit, EBT, and credit card transactions at new and existing merchants.

Cost of operations decreased in the six months ended June 30, 2002 to 70.4% of revenue compared to 71.7% in 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 six months ended June 30, 2002 selling, general and administrative expenses decreased as a percentage of revenue to 5.7% from 5.9% in 2001. Overall, selling, general and administrative expenses increased to $57.1 million in the six months ended June 30, 2002 from $47.1 million in 2001. This increase is primarily attributable to the expenses related to the acquisition of the H & F Services sales force, increased headcount, and expenses related to the Logix and Core Data acquisitions.

Acquisition, restructuring and write-off charges decreased to ~~$47.5~~$76.5 million in 2002 from $125.4 million in 2001. In the second quarter of 2002 we initiated a plan and incurred a charge of $29.0 million as described in the second quarter 2002 to 2001 comparison.

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)~~taxes) 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.

Litigation settlement charges were $20.8 million in the six months ended June 30, 2002. There were no such charges in the six months ended June 30, 2001. The charges are described in the second quarter 2002 to 2001 comparison.

Excluding acquisition, restructuring, write-off, and ~~write-off~~litigation settlement charges, operating income as a percentage of revenue increased to ~~25.0%~~23.9% in the ~~first quarter~~six months ended June 30, 2002 from ~~21.7%~~22.4% in 2001. This increase in operating income resulted from improved operating efficiencies and economies of scale.

-23-

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

Six Months Ended June 30, 2002 Compared to 2001, continued

Other income improved as a percentage of revenue to 0.7% in the six months ended June 30, 2002 from 0.3% in 2001. This improvement resulted from the sale of certain terminal hardware and related future rental payments.

Net interest income improved as a percentage of revenue to ~~3.5%~~3.3% in the ~~first quarter~~six months ended June 30, 2002 compared to ~~3.3%~~3.0% in 2001. This improvement resulted primarily from our increased investment in various securities of available cash flow from operations plus approximately $420.6 million in proceeds from our June 2001 stock offering, which increased net interest income by ~~26.4%~~36.8% compared to 2001.

Our overall tax rate ~~increased~~decreased to ~~35.5%~~35.2% in the ~~first quarter~~six months ended June 30, 2002 compared to ~~(17.9%)~~42.5% in 2001. Excluding acquisition, restructuring, write-off, and ~~write-off~~litigation settlement charges, the tax rate was ~~35.5%~~35.2% in 2002 and 35.5% in 2001.

~~-18-~~

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

~~First Quarter 2002 Compared to 2001, continued~~

Net income as a percentage of revenue increased to 11.7% in the ~~first quarter~~six months ended June 30, 2002 from ~~(6.9%)~~5.7% in 2001. Excluding acquisition, restructuring, write-off, and ~~write-off~~litigation settlement charges, net income as a percentage of revenue was ~~18.4%~~18.0% in 2002 compared to ~~16.1%~~16.6% in 2001. This increase is the result of improved margins, reduced selling, general and administrative expenses as a percentage of revenue, and increased other income and interest income.

Liquidity and Capital Resources

In the ~~first quarter~~six months ended June 30, 2002 we ~~used $181.2~~generated $254.2 million infrom operating activities ~~due primarily to~~excluding the timing of settlement operations. Including the timing of settlement operations, we used $49.4 million in operating activities. We received ~~$15.9~~$50.0 million in proceeds from Federal Home Loan Bank advances and $21.4 million from stock issued for exercises of options under our stock option ~~plan and deposits increased $14.3 million.~~plan. We liquidated ~~$20.6~~$149.1 million in securities, net of purchases and maturities. We spent ~~$37.0~~$70.9 million on capital additions and ~~$15.5~~$17.2 million for business acquisitions. Our capital additions were primarily for capitalized and purchased software and computer facilities and equipment.

~~Our~~As of June 30, 2002 our assets ~~are~~were primarily monetary, consisting of cash, assets convertible into cash, securities, and receivables. Because of their liquidity, these assets are not significantly affected by inflation. We believe that anticipated replacement costs of software, facilities, and 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.

On July 1, 2002 we invested a total of $150.0 million in two hedge fund-of-funds entities that allow us through a single investment in each entity, to access a variety of hedge fund managers and strategies. These holdings are intended to allow us to more efficiently diversify our investments by allocating a portion of our investable cash with a number of professional money managers. From a liquidity standpoint, substantially all of the funds allow withdrawals on a quarterly basis. These investments will be accounted for using the equity method, with unrealized gains or losses reflected in current profit and loss each quarter.

On August 5, 2002 we announced that our Board of Directors approved the repurchase of up to $250.0 million of our common stock. Under the repurchase plan, we may buy back shares of our outstanding stock from time to time either on the open market or through privately negotiated transactions.

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.

~~-19-~~-24-

CONCORD EFS, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosures About Market Risk

~~Since December 31, 2001,~~As of June 30, 2002, there ~~have been~~were no changes with regard to market risk since December 31, 2001 that would require further quantitative or qualitative disclosure. For our quantitative and qualitative disclosures about market risk for the fiscal year ending December 31, 2001, refer to Exhibit 13 to our annual report on Form 10-K, filed on February 26, 2002.

~~-20-~~-25-

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~~proceedings and developments that ~~are currently~~may be considered material ~~to Concord~~ were reported in ~~Concord’s Annual Report~~our annual report on Form 10-K for the year ended December 31, ~~2001. There~~2001 (filed on February 26, 2002), our quarterly report on Form 10-Q for the quarter ended March 31, 2002 (filed on May 9, 2002), and our most recent current report on Form 8-K (filed on May 16, 2002). During the quarter ended June 30, 2002, there were no material developments in ~~the~~any litigation matter previously disclosed except for the developments discussed below.

As previously disclosed, 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~~On May 14, 2002 the plaintiffs filed ana second amended complaint alleging that the class consists of ~~at least 60,000~~over 100,000 merchants who were subjected to the allegedly improper rate and fee changes over a several-year period. The second amended complaint ~~seeks~~sought damages in excess of ~~$15.0~~$70.0 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 relating to this litigation and ~~related documentation, presenting the proposed settlement agreement and related documentation to the Court and seeking~~received preliminary approval from the ~~Court, sending notices~~trial court therefor. On August 6, 2002 the trial court rejected the only objection filed against the settlement agreement and gave the settlement agreement its final approval. The objector has not yet indicated whether he will appeal, but he has 30 days from the date of final approval to ~~all potential class members, and allowing time for potential class members (a) to opt out~~do so. The principal terms 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.~~agreement are:

~~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.~~
(1) Every member of the purported class seeking a monetary recovery is required to submit a written claim, verified under penalty of perjury.
(2) EFS National Bank admits no liability.
(3) The settlement covers all claims relating to specific rate increases or changes and the imposition of certain fees.
(4) The settlement covers claims by former and current merchants. Former merchants who return to EFS National Bank in connection with the settlement will receive a premium over what non-returning former merchants receive.
(5) Credits and payments will be made annually in 2002, 2003, 2004, 2005, and 2006. Claimants will have to remain with EFS National Bank through 2006 to receive the maximum available financial benefit from the settlement.
(6) The maximum amount of the credits and payments by EFS National Bank under the settlement is $37.6 million. A portion of such amount will be used to pay plaintiffs’ counsel and certain claims administration expenses.

-26-

CONCORD EFS, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION

Item 1. Legal Proceedings, continued

(7) If more than 4% of the potential class members opt out of the monetary aspects of the settlement, EFS National Bank will have the right to withdraw from the settlement. EFS National Bank will receive releases from all potential class members who do not opt out of the monetary aspects of the settlement.
(8) EFS National Bank agrees to certain injunctive relief regarding notice of new fees and rate increases and the content of monthly statements sent to merchants.

~~Although these matters~~Item 2. Changes in Securities and Use of Proceeds

Pursuant to the stockholder vote at our annual meeting, we filed a Certificate of Amendment on June 7, 2002 with the Delaware Secretary of State, amending our Certificate of Incorporation to increase the number of authorized shares of our common stock, $0.33 1/3 par value, to 1,500,000,000 shares. 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 our 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 ~~preliminary stages, EFS National Bank believes it~~number of authorized shares of common stock could enable our Board of Directors to render more difficult an attempt by another person or entity to obtain control of Concord, although our Board of Directors has ~~various defenses to the claims against it,~~no present intention of issuing additional shares for such purpose and ~~if these matters cannot be resolved~~has no present knowledge of any takeover efforts by ~~settlement, EFS National Bank intends to vigorously defend against all claims.~~any person or entity.

~~-21-~~-27-

CONCORD EFS, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION

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

At the annual meeting of our stockholders held on May 23, 2002, our stockholders elected the following nominees to our Board of Directors, with votes cast as follows:

• Douglas C. Altenbern—419,048,899 shares for and 12,651,601 abstentions;
• J. Richard Buchignani—416,185,066 shares for and 15,515,434 abstentions;
• Ronald V. Congemi—357,247,280 shares for and 74,453,220 abstentions;
• Richard M. Harter—416,565,219 shares for and 15,135,281 abstentions;
• Richard P. Kiphart—421,935,665 shares for and 9,764,835 abstentions;
• Edward A. Labry III—357,405,657 shares for and 74,294,843 abstentions;
• Jerry D. Mooney—419,067,605 shares for and 12,632,895 abstentions;
• Dan M. Palmer—357,472,143 shares for and 74,228,357 abstentions; and
• Paul L. Whittington—419,041,609 shares for and 12,658,891 abstentions.

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

At the annual meeting, our stockholders approved an amendment to our Certificate of Incorporation to increase the number of authorized shares of our common stock, with votes cast as follows: 410,495,891 shares for, 19,380,393 shares against, 1,824,216 abstentions, and no broker non-votes.

At the annual meeting, our stockholders also approved the Concord EFS, Inc. 2002 Stock Option Plan that succeeds and replaces the Concord EFS, Inc. 1993 Incentive Stock Option Plan, with votes cast as follows: 314,877,291 shares for, 49,788,882 shares against, 2,197,080 abstentions, and 64,837,247 broker non-votes.

-28-

CONCORD EFS, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits


Exhibit
Number		Description of Exhibit

3.1		Restated Certificate of Incorporation of Concord EFS, Inc. is incorporated herein by reference to Exhibit 4.1 to Concord’s registration statement on Form S-8 (File No. 333-90678), filed on June 18, 2002.




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		Concord EFS, Inc. 1993 Incentive Stock Option Plan (Second 1999 Restatement) is incorporated herein by reference to Exhibit I to Concord’s proxy statement for the annual meeting of stockholders held on May 20, 1999, filed on April 9, 1999.




99.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




99.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

On May 16, 2002 we filed a current report on Form 8-K to report, under Item 5 of that form, developments with regard to pending legal proceedings.

-29-

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 8, 2002	By:	/s/ Dan M. Palmer Dan M. Palmer Chairman of the Board and Chief Executive Officer

Date: August 8, 2002	By:	/s/ Edward T. Haslam Edward T. Haslam Senior Vice President, Chief Financial Officer, and Treasurer

-30-

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


Exhibit
Number		Description of Exhibit

3.1		Restated Certificate of Incorporation of Concord EFS, Inc. is incorporated herein by reference to Exhibit ~~4.4 to Amendment No. 1~~4.1 to Concord’s registration statement on Form ~~S-3~~S-8 (File No. ~~333-61084)~~333-90678), filed on June ~~4, 2001.~~18, 2002.









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) is incorporated herein by reference to Exhibit I to Concord’s proxy statement for the annual meeting of stockholders held on May 20, 1999, filed on April 9, 1999.




99.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




99.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

~~On January 22, 2002, we filed a current report on Form 8-K to report, under Item 5 of that form, developments with regard to pending legal proceedings.~~

~~-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: May 9, 2002~~	~~By:~~	~~/s/ Dan M. Palmer~~ ~~Dan M. Palmer~~ ~~Chairman of the Board and~~ ~~Chief Executive Officer~~


~~Date: May 9, 2002~~	~~By:~~	~~/s/ Edward T. Haslam~~ ~~Edward T. Haslam~~ ~~Senior Vice President,~~ ~~Chief Financial Officer and Treasurer~~

~~-23-~~

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


~~Exhibit~~
~~Number~~		~~Description of Exhibit~~






~~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)~~

	(1)		Every member of the purported class seeking a monetary recovery is required to submit a written claim, verified under penalty of perjury.

	(2)		EFS National Bank admits no liability.

	(3)		The settlement covers all claims relating to specific rate increases or changes and the imposition of certain fees.

	(4)		The settlement covers claims by former and current merchants. Former merchants who return to EFS National Bank in connection with the settlement will receive a premium over what non-returning former merchants receive.

	(5)		Credits and payments will be made annually in 2002, 2003, 2004, 2005, and 2006. Claimants will have to remain with EFS National Bank through 2006 to receive the maximum available financial benefit from the settlement.

	(6)		The maximum amount of the credits and payments by EFS National Bank under the settlement is $37.6 million. A portion of such amount will be used to pay plaintiffs’ counsel and certain claims administration expenses.

	(7)		If more than 4% of the potential class members opt out of the monetary aspects of the settlement, EFS National Bank will have the right to withdraw from the settlement. EFS National Bank will receive releases from all potential class members who do not opt out of the monetary aspects of the settlement.

	(8)		EFS National Bank agrees to certain injunctive relief regarding notice of new fees and rate increases and the content of monthly statements sent to merchants.

	•		Douglas C. Altenbern—419,048,899 shares for and 12,651,601 abstentions;

	•		J. Richard Buchignani—416,185,066 shares for and 15,515,434 abstentions;

	•		Ronald V. Congemi—357,247,280 shares for and 74,453,220 abstentions;

	•		Richard M. Harter—416,565,219 shares for and 15,135,281 abstentions;

	•		Richard P. Kiphart—421,935,665 shares for and 9,764,835 abstentions;

	•		Edward A. Labry III—357,405,657 shares for and 74,294,843 abstentions;

	•		Jerry D. Mooney—419,067,605 shares for and 12,632,895 abstentions;

	•		Dan M. Palmer—357,472,143 shares for and 74,228,357 abstentions; and

	•		Paul L. Whittington—419,041,609 shares for and 12,658,891 abstentions.