STRATEGIC PARTNERS
September 4, 2002
MEMPHIS, Tenn. -- Transaction processor Concord EFS says that in full-year 2002 it expects to realize revenue growth of 26 percent to 28 percent and diluted earnings per share growth of 16 percent to 20 percent, or between 68 cents to 70 cents per share, excluding acquisition, restructuring and write-off charges, litigation settlement charges and related taxes.
The 2002 guidance is below analysts' estimates of 75 cents a share, according to a Dow Jones Newswires report. The forecast for 2003 was short as well, with Concord anticipating 24 percent to 26 percent earnings growth, or about 84 cents to 88 cents a share, below the First Call forecast of 95 cents a share.
Concord president Edward A. Labry III attributed Concord's lower expectations for 2002 to acquisition-related increases in administrative costs, a slower-than-expected pace of implementing new business, the current low interest rate environment and weak economy.
In the past year, Concord has been trying to integrate recent acquisitions -- including Core Data Resources, Logix Cos., and Star Systems. Company executives assured investors and analysts during a Sept. 5 conference call that Concord wouldn't need to take any more charges in order to realize " efficiencies" from the mergers.
Company officials said during the call that merger costs came from merchant write-offs which came on faster than expected. Also, the company had not anticipated that it would have to integrate three acquisitions at the same time. Concord has taken on four charges in the past three years, all of which have been associated with acquisitions.
"It is important to note that our expected results for 2002 and 2003 represent above-average growth for our industry," Labry said in a news release. "In 2003, as we complete our integration plan for recent acquisitions we expect to see improvements in SG&A and cost of operations, with continued expansion in operating income per transaction. We also expect that revenue will be enhanced as we fully implement our current large backlog of new business."
Concord stock was trading at $12.90 a share when the market opened on Sept. 5., and had risen to $14.29 by midday. That's near the 52-week low of $12.86 a share, and far off the 52-week high of $35.06.
In August, Concord authorized the repurchase of up to $250 million of its shares, according to a report in the Memphis Business Journal. The company also denied a report that appeared on the online business site Briefing.com that the SEC was investigating Concord.
The company responded with a press release announcing that on Aug. 8 it filed the sworn statements of Concord chairman and chief executive officer Dan Palmer and chief financial officer Edward Haslam with the SEC, verifying the accuracy of the company's SEC filings. The release also stated that Concord, to the best of the company's knowledge, was not under investigation.
"Although it is our policy not to comment on rumors, we believe that it is appropriate in this instance to address the rumor that Concord is under investigation by the SEC," according to the statement. "We have not been notified by the SEC that Concord is under investigation, nor have they indicated to us an interest in gathering information about Concord."
Concord also announced that Labry will succeed Palmer as CEO in May 2003. Palmer will continue as a member of the executive management group, chairman of Concord's board of directors and chairman of EFS National Bank, a wholly-owned bank subsidiary.
Richard M. Harter, long-time Concord director, said in a news release that the two men have been a strong team for the past eight years. "I believe their collaborative leadership approach has been key to Concord's impressive growth and track record."
Labry joined Concord EFS in 1985 in the sales division, and advanced to director of sales when the marketing function was reorganized in 1987. In 1990 he was promoted to chief marketing officer for the entire company, and was named president in 1994.
Palmer said in the release that Labry was instrumental in identifying supermarkets, gas stations and ATMs as growth opportunities for Concord, and was a key negotiator in the acquisitions of Electronic Payment Services, Inc. (owner of the MAC network), Cash Station, and the Star Systems network, which strengthened Concord's position in the high-growth sectors of the electronic payments industry.
"Dan has been a great mentor for me, and we have made decisions over the years that have proved to be right but that were perceived as unconventional at the time," said Labry in the release. "I look forward to working with Dan and the rest of the management team to continue Concord's strong growth into the future."
