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

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|[x] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.            
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|    |  | For the quarterly period ended June 30, 2001                                                        
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|[_] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
SECURITIES EXCHANGE ACT OF 1934.
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|    |  | For the transition period fromto                                                                    
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Commission file number 000-13848



CONCORD EFS, INC.

(Exact Name of Registrant as Specified in its Charter)

|                                         |  |                         
|---------------------------------------- |  | ------------------------
|Delaware
(State or Other Jurisdiction of |  | 04-2462252
(IRS Employer
|                                        
|                                        
|                                        
|                                        
|Incorporation or Organization)           |  | Identification Number)  

2525 Horizon Lake Drive, Suite 120, Memphis, Tennessee 38133
(Address of Principal Executive Offices)

(901) 371-8000
(Registrants Telephone Number, Including Area Code)



Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes[x] No[ ]

The number of shares of the registrants Common Stock, $0.33 1/3 par value,
outstanding as of July 31, 2001 was 251,549,679.





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CONCORD EFS, INC. AND SUBSIDIARIES

INDEX

|                                                                                              |                                                                                                                   |          |    |   | 
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | -------- | -- | - | 
|                                                                                              |                                                                                                                   | Page No.
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|PART I  Financial Information                                                                |                                                                                                                   |          |    |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 1. Financial Statements (Unaudited)                                                      |                                                                                                                   |          |    |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Condensed Consolidated Balance Sheets as of June 30, 2001
and December 31, 2000                                   |          |    | 1 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Condensed Consolidated Statements of Income for Three
Months and Six Months ended June 30, 2001 and June 30, 2000 |          |    | 2 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Condensed Consolidated Statements of Cash Flows for
Six Months ended June 30, 2001 and June 30, 2000              |          |    | 3 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Notes to Condensed Consolidated Financial Statements                                                              |          |    | 4 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations |                                                                                                                   |          | 12 |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 3. Quantitative and Qualitative Disclosures About
Market Risk                            |                                                                                                                   |          | 19 |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|PART II Other Information                                                                    |                                                                                                                   |          |    |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 1. Legal Proceedings                                                                     |                                                                                                                   |          | 20 |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 2. Changes in Securities and Use of Proceeds                                             |                                                                                                                   |          | 20 |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                                                                                   |          | 21 |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                   |          | 21 |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Signatures                                                                                    |                                                                                                                   |          | 22 |  





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CONCORD EFS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

|                                           |                                           |   |           |           |           |                |           |              |           |  |  | 
|------------------------------------------ | ----------------------------------------- | - | --------- | --------- | --------- | -------------- | --------- | ------------ | --------- |  |  | 
|                                           |                                           |   |           |           |           | June 30,       |           | December 31,
|                                           |                                           |   |           |           |           | 2001           |           | 2000        
|                                           |                                           |   |           |           |           |                |           |             
|                                           |                                           |   |           |           |           | (in thousands)
|Assets                                     |                                           |   |           |           |           |                |           |             
|                                          
|                                          
|                                          
|                                          
|Current assets                             |                                           |   |           |           |           |                |           |             
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                 |   | $         | 617,704   |           |                | $         | 231,762      |          
|                                          
|                                          
|                                          
|                                          
|                                           | Securities available for sale             |   |           | 861,926   |           |                |           | 649,425      |          
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts receivable, net                  |   |           | 262,588   |           |                |           | 307,756      |          
|                                          
|                                          
|                                          
|                                          
|                                           | Inventories                               |   |           | 21,133    |           |                |           | 15,087       |          
|                                          
|                                          
|                                          
|                                          
|                                           | Prepaid expenses and other current assets |   |           | 24,708    |           |                |           | 22,125       |          
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred income taxes                     |   |           | 5,870     |           |                |           | 6,732        |          
|                                           |                                           |   |           |           |           |                |           |              |          
|Total current assets                       |                                           |   | 1,793,929 |           |           |                | 1,232,887 |             
|                                          
|                                          
|                                          
|                                          
|Loans, net                                 |                                           |   | 94,024    |           |           |                | 78,654    |             
|                                          
|                                          
|                                          
|                                          
|Property and equipment, net                |                                           |   | 217,715   |           |           |                | 214,662   |             
|                                          
|                                          
|                                          
|                                          
|Goodwill, net                              |                                           |   | 164,396   |           |           |                | 150,049   |             
|                                          
|                                          
|                                          
|                                          
|Other intangible assets, net               |                                           |   | 81,896    |           |           |                | 75,644    |             
|                                          
|                                          
|                                          
|                                          
|Other assets                               |                                           |   | 11,950    |           |           |                | 9,769     |             
|                                           |                                           |   |           |           |           |                |           |              |          
|Total assets                               |                                           | $ | 2,363,910 |           |           | $              | 1,761,665 |             
|                                           |                                           |   |           |           |           |                |           |              |          
|Liabilities and stockholders equity       |                                           |   |           |           |           |                |           |             
|                                          
|                                          
|                                          
|                                          
|Current liabilities                        |                                           |   |           |           |           |                |           |             
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable and other liabilities    |   | $         | 312,280   |           |                | $         | 296,980      |          
|                                          
|                                          
|                                          
|                                          
|                                           | Deposits                                  |   |           | 139,478   |           |                |           | 125,834      |          
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued liabilities                       |   |           | 41,425    |           |                |           | 48,307       |          
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued restructuring charges             |   |           | 70,377    |           |                |           | 3,410        |          
|                                          
|                                          
|                                          
|                                          
|                                           | Income taxes payable                      |   |           | 24,447    |           |                |           |             |          
|                                          
|                                          
|                                          
|                                          
|                                           | Current maturities of long-term debt      |   |           |          |           |                |           | 3,357        |          
|                                           |                                           |   |           |           |           |                |           |              |          
|Total current liabilities                  |                                           |   | 588,007   |           |           |                | 477,888   |             
|                                          
|                                          
|                                          
|                                          
|Long-term debt                             |                                           |   |           | 119,549   |           |                |           | 109,911      |          
|                                          
|                                          
|                                          
|                                          
|Deferred income taxes                      |                                           |   |           | 14,075    |           |                |           | 31,871       |          
|                                          
|                                          
|                                          
|                                          
|Other liabilities                          |                                           |   |           | 4,943     |           |                |           | 6,412        |          
|                                           |                                           |   |           |           |           |                |           |              |          
|Total liabilities                          |                                           |   | 726,574   |           |           |                | 626,082   |             
|                                           |                                           |   |           |           |           |                |           |              |          
|Commitments and contingent liabilities     |                                           |   |           |          |           |                |           |             |          
|                                          
|                                          
|                                          
|                                          
|Minority interest in subsidiary            |                                           |   |           | 3,057     |           |                |           | 3,052        |          
|                                           |                                           |   |           |           |           |                |           |              |          
|Stockholders equity                       |                                           |   |           |           |           |                |           |              |          
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock                              |   |           |           | 83,850    |                |           |              | 80,485    | 
|                                          
|                                          
|                                          
|                                          
|                                           | Other stockholders equity                |   |           |           | 1,550,429 |                |           |              | 1,052,046 | 
|                                           |                                           |   |           |           |           |                |           |              |          
|Total stockholders equity                 |                                           |   |           | 1,634,279 |           |                |           | 1,132,531    |          
|                                           |                                           |   |           |           |           |                |           |              |          
|Total liabilities and stockholders equity |                                           |   | $         | 2,363,910 |           |                | $         | 1,761,665    |          
|                                           |                                           |   |           |           |           |                |           |              |          

See Notes to Condensed Consolidated Financial Statements.

-1-



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CONCORD EFS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |         |  |  |  | 
|------------------------------------------------ | -------------- | - | ------- | ------- |  | ------------------------------------- | ------- | ---------------- |  | ---- | ------- | ------- |  | - | ------- | ------- |  |  |  | 
|                                                 |                |   |         |         |  | Three months ended                    |         | Six months ended
|                                                 |                |   |         |         |  | June 30,                              |         | June 30,        
|                                                 |                |   |         |         |  |                                       |         |                 
|                                                 |                |   |         |         |  | 2001                                  |         | 2000             |  | 2001 |         | 2000   
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |        
|                                                 |                |   |         |         |  | (in thousands, except per share data)
|Revenue                                          |                | $ | 420,686 |         |  | $                                     | 338,848 |                  |  | $    | 796,324 |         |  | $ | 641,765 |        
|                                                
|                                                
|                                                
|                                                
|Cost of operations                               |                |   | 299,619 |         |  |                                       | 240,771 |                  |  |      | 569,887 |         |  |   | 463,286 |        
|                                                
|                                                
|                                                
|                                                
|Selling, general and
administrative expenses     |                |   | 22,714  |         |  |                                       | 24,045  |                  |  |      | 46,526  |         |  |   | 45,882  |        
|                                                
|                                                
|                                                
|                                                
|Acquisition and
restructuring charges            |                |   |        |         |  |                                       |        |                  |  |      | 125,362 |         |  |   | 776     |        
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|Operating Income                                 |                |   | 98,353  |         |  |                                       | 74,032  |                  |  |      | 54,549  |         |  |   | 131,821 |        
|                                                
|                                                
|                                                
|                                                
|Other
income (expense)                           |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|Interest income                                  |                |   | 15,240  |         |  |                                       | 11,107  |                  |  |      | 30,722  |         |  |   | 21,000  |        
|                                                
|                                                
|                                                
|                                                
|Interest expense                                 |                |   | (3,257  | )       |  |                                       | (2,597  | )                |  |      | (6,380  | )       |  |   | (5,013  | )      
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|Income Before Taxes
and Minority Interest        |                |   | 110,336 |         |  |                                       | 82,542  |                  |  |      | 78,891  |         |  |   | 147,808 |        
|                                                
|                                                
|                                                
|                                                
|Income taxes                                     |                |   | 39,154  |         |  |                                       | 30,102  |                  |  |      | 33,528  |         |  |   | 53,710  |        
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|Income Before
Minority Interest                  |                |   | 71,182  |         |  |                                       | 52,440  |                  |  |      | 45,363  |         |  |   | 94,098  |        
|                                                
|                                                
|                                                
|                                                
|Minority interest in
net income of subsidiary    |                |   |        |         |  |                                       | 158     |                  |  |      | 173     |         |  |   | 304     |        
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|Net Income                                       |                | $ | 71,182  |         |  | $                                     | 52,282  |                  |  | $    | 45,190  |         |  | $ | 93,794  |        
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|Pro forma provision
for income taxes             |                |   |        |         |  |                                       |        |                  |  |      |        |         |  |   | 260     |        
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|Pro forma Net Income                             |                | $ | 71,182  |         |  | $                                     | 52,282  |                  |  | $    | 45,190  |         |  | $ | 93,534  |        
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|Per Share Data:                                  |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|                                                
|                                                
|                                                
|                                                
|Basic and pro forma basic
earnings per share     |                | $ | 0.29    |         |  | $                                     | 0.22    |                  |  | $    | 0.19    |         |  | $ | 0.39    |        
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|Diluted and pro forma diluted
earnings per share |                | $ | 0.28    |         |  | $                                     | 0.21    |                  |  | $    | 0.18    |         |  | $ | 0.38    |        
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|Average Shares Outstanding:                      |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Basic shares   |   |         | 243,393 |  |                                       |         | 238,782          |  |      |         | 242,528 |  |   |         | 238,709 | 
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        
|                                                 | Diluted shares |   |         | 254,157 |  |                                       |         | 246,320          |  |      |         | 253,111 |  |   |         | 245,534 | 
|                                                 |                |   |         |         |  |                                       |         |                  |  |      |         |         |  |   |         |        

See Notes to Condensed Consolidated Financial Statements.

-2-



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CONCORD EFS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

|                                               |                                                         |   |                  |          |      |   |          |         |  
|---------------------------------------------- | ------------------------------------------------------- | - | ---------------- | -------- | ---- | - | -------- | ------- | -
|                                               |                                                         |   | Six months ended
|                                               |                                                         |   | June 30,        
|                                               |                                                         |   |                 
|                                               |                                                         |   | 2001             |          | 2000
|                                               |                                                         |   |                  |          |     
|                                               |                                                         |   | (in thousands)   |          |      |   |         
|Operating activities                           |                                                         |   |                  |          |      |   |          |        
|                                              
|                                              
|                                              
|                                              
|Net cash provided by operating activities      |                                                         | $ | 232,228          |          |      | $ | 138,721  |        
|                                              
|                                              
|                                              
|                                              
|Investing activities                           |                                                         |   |                  |          |      |   |          |        
|                                              
|                                              
|                                              
|                                              
|                                               | Acquisition of securities
available for sale            |   |                  | (521,316 | )    |   |          | (97,328 | )
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from sales of securities
available for sale    |   |                  | 240,507  |      |   |          | 30,280  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from maturity of securities
available for sale |   |                  | 79,755   |      |   |          | 14,644  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Purchases of loans                                      |   |                  | (23,490  | )    |   |          | (42,134 | )
|                                              
|                                              
|                                              
|                                              
|                                               | Acquisition of property and equipment                   |   |                  | (48,332  | )    |   |          | (37,267 | )
|                                              
|                                              
|                                              
|                                              
|                                               | Purchased merchant contracts                            |   |                  | (16,423  | )    |   |          | (12,569 | )
|                                              
|                                              
|                                              
|                                              
|                                               | Business acquisition                                    |   |                  | (19,700  | )    |   |          |        |  
|                                              
|                                              
|                                              
|                                              
|                                               | Other investing activity                                |   |                  | 4,687    |      |   |          | 3,354   |  
|                                               |                                                         |   |                  |          |      |   |          |        
|Net cash used in investing activities          |                                                         |   | (304,312         | )        |      |   | (141,020 | )      
|                                              
|                                              
|                                              
|                                              
|Financing activities                           |                                                         |   |                  |          |      |   |          |        
|                                              
|                                              
|                                              
|                                              
|                                               | Net increase in deposits                                |   |                  | 13,644   |      |   |          | 14,562  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from notes payable                             |   |                  | 21,000   |      |   |          | 19,000  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Payments on notes payable                               |   |                  | (14,268  | )    |   |          | (20,648 | )
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from offering of common stock                  |   |                  | 421,930  |      |   |          |        |  
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from exercise of stock options                 |   |                  | 16,591   |      |   |          | 3,244   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Payments on leases payable                              |   |                  | (871     | )    |   |          | (1,802  | )
|                                              
|                                              
|                                              
|                                              
|                                               | Activity by pooled subsidiaries                         |   |                  |         |      |   |          | (2,905  | )
|                                               |                                                         |   |                  |          |      |   |          |        
|Net cash provided by financing activities      |                                                         |   | 458,026          |          |      |   | 11,451   |        
|                                               |                                                         |   |                  |          |      |   |          |        
|Net increase in cash and cash equivalents      |                                                         |   | 385,942          |          |      |   | 9,152    |        
|                                              
|                                              
|                                              
|                                              
|Cash and cash equivalents at beginning
of year |                                                         |   | 231,762          |          |      |   | 173,099  |        
|                                               |                                                         |   |                  |          |      |   |          |        
|Cash and cash equivalents at end of period     |                                                         | $ | 617,704          |          |      | $ | 182,251  |        
|                                               |                                                         |   |                  |          |      |   |          |        

See Notes to Condensed Consolidated Financial Statements.

-3-



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CONCORD EFS, INC. AND
SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001

Note A  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management all
adjustments, consisting of normal recurring accruals, considered necessary for
a fair presentation have been included. Operating results for the six months
ended June 30, 2001 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2001. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Concord EFS, Inc. and Subsidiaries (Concord) current report on Form 8-K/A filed
April 16, 2001 for the year ended December 31, 2000.

Nature of Operations: Concord is a vertically integrated electronic
transaction processor. Concord acquires, routes, authorizes, captures and
settles virtually all types of electronic payment and deposit access
transactions for financial institutions and merchants nationwide. Concords
primary activities consist of Payment Services, which provides payment
processing for supermarkets, major retailers, petroleum dealers, convenience
stores, trucking companies and independent retailers, and Network Services,
which provides automated teller machine (ATM) processing, debit card
processing, deposit risk management and coast-to-coast debit network access
principally for financial institutions.

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 assets is recorded as goodwill. The
results of operations of the purchased company are included since the date of
acquisition.

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

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

Concord will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. The impact of the
application of the nonamortization provisions of the Statement will be reviewed
during the remainder of the year. During 2002, Concord will perform the first
of the required impairment tests of goodwill as of January 1, 2002 and has not
yet

-4-



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

Note A  Basis of Presentation, continued

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

Note B Business Combinations

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

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

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

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

-5-



---



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

Note B  Business Combinations, continued

|                                              |                                                              |  |   |                                       |         |                  |   |         |         |      |   |         |         |  |   |         |         | 
|--------------------------------------------- | ------------------------------------------------------------ |  | - | ------------------------------------- | ------- | ---------------- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                              |                                                              |  |   | Three months ended                    |         | Six months ended
|                                              |                                                              |  |   | June 30,                              |         | June 30,        
|                                              |                                                              |  |   |                                       |         |                 
|                                              |                                                              |  |   | 2001                                  |         | 2000             |   | 2001    |         | 2000
|                                              |                                                              |  |   |                                       |         |                  |   |         |         |     
|                                              |                                                              |  |   | (in thousands, except per share data)
|Revenue:                                      |                                                              |  |   |                                       |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                             
|                                             
|                                             
|                                             
|                                              | Concord                                                      |  | $ | 420,686                               |         |                  | $ | 290,122 |         |      | $ | 781,452 |         |  | $ | 543,843 |        
|                                             
|                                             
|                                             
|                                             
|                                              | Card Payment Systems(1)                                      |  |   |                                      |         |                  |   |        |         |      |   |        |         |  |   | 4,047   |        
|                                             
|                                             
|                                             
|                                             
|                                              | Cash Station(2)                                              |  |   |                                      |         |                  |   | 4,819   |         |      |   |        |         |  |   | 9,495   |        
|                                             
|                                             
|                                             
|                                             
|                                              | STAR(3)                                                      |  |   |                                      |         |                  |   | 45,646  |         |      |   | 15,396  |         |  |   | 87,790  |        
|                                             
|                                             
|                                             
|                                             
|                                              | Intercompany eliminations(4)                                 |  |   |                                      |         |                  |   | (1,739  | )       |      |   | (524    | )       |  |   | (3,410  | )      
|                                              |                                                              |  |   |                                       |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                              | Combined revenue                                             |  |   | $                                     | 420,686 |                  |   | $       | 338,848 |      |   | $       | 796,324 |  |   | $       | 641,765 | 
|                                              |                                                              |  |   |                                       |         |                  |   |         |         |      |   |         |         |  |   |         |        
|Pro forma net income:                         |                                                              |  |   |                                       |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                             
|                                             
|                                             
|                                             
|                                              | Concord                                                      |  | $ | 71,182                                |         |                  | $ | 45,987  |         |      | $ | 42,262  |         |  | $ | 82,926  |        
|                                             
|                                             
|                                             
|                                             
|                                              | Card Payment Systems(1)                                      |  |   |                                      |         |                  |   |        |         |      |   |        |         |  |   | 650     |        
|                                             
|                                             
|                                             
|                                             
|                                              | Cash Station(2)                                              |  |   |                                      |         |                  |   | 487     |         |      |   |        |         |  |   | 816     |        
|                                             
|                                             
|                                             
|                                             
|                                              | STAR(3)                                                      |  |   |                                      |         |                  |   | 5,808   |         |      |   | 2,928   |         |  |   | 9,402   |        
|                                             
|                                             
|                                             
|                                             
|                                              | Pro forma provision
for Card Payment Systems
income taxes(5) |  |   |                                      |         |                  |   |        |         |      |   |        |         |  |   | (260    | )      
|                                              |                                                              |  |   |                                       |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                              | Combined net income                                          |  |   | $                                     | 71,182  |                  |   | $       | 52,282  |      |   | $       | 45,190  |  |   | $       | 93,534  | 
|                                              |                                                              |  |   |                                       |         |                  |   |         |         |      |   |         |         |  |   |         |        
|Pro forma basic earnings
per share combined   |                                                              |  | $ | 0.29                                  |         |                  | $ | 0.22    |         |      | $ | 0.19    |         |  | $ | 0.39    |        
|                                              |                                                              |  |   |                                       |         |                  |   |         |         |      |   |         |         |  |   |         |        
|Pro forma diluted earnings
per share combined |                                                              |  | $ | 0.28                                  |         |                  | $ | 0.21    |         |      | $ | 0.18    |         |  | $ | 0.38    |        
|                                              |                                                              |  |   |                                       |         |                  |   |         |         |      |   |         |         |  |   |         |        



---

|(1) |  | The 2000 amounts reflect the results of Card Payment Systems operations
from January 1, 2000 through January 31, 2000 (unaudited). Results of
operations from February 1, 2000 are included in Concord amounts.                                                                                                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | The three months ended June 30, 2000 amounts reflect the results of Cash
Station operations from April 1, 2000 through June 30, 2000 (unaudited).
The six months ended June 30, 2000 amounts reflect the results of Cash
Station operations from January 1, 2000 through June 30, 2000 (unaudited).
Results of operations from July 1, 2000 are included in Concord amounts.                                                                                           
|   
|   
|   
|   
|(3) |  | The three months ended June 30, 2000 amounts reflect the results of STAR
operations from April 1, 2000 through June 30, 2000 (unaudited). The six
months ended June 30, 2000 amounts reflect the results of STAR operations
from January 1, 2000 through June 30, 2000 (unaudited). The 2001 amounts
reflect the results of STAR operations from January 1, 2001 through
January 31, 2001. Results of operations from February 1, 2001 are included
in Concord amounts.
|   
|   
|   
|   
|(4) |  | All material activity between Concord and STAR has been eliminated.                                                                                                                                                                                                                                                                                                                                                                                                    

-6-



---



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

Note B  Business Combinations, continued



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

Concord owns a majority interest in Primary Payment Systems, Inc., a deposit
risk management service. In April 2001 Concord increased its ownership
position in Primary Payment Systems to 85% through the purchase of newly issued
shares, which largely funded Primary Payment Systems acquisition of Wally
Industries, Inc., d/b/a WJM Technologies. Primary Payment Systems is immaterial
to Concords financial statements.

On February 7, 2000 Concord acquired Virtual Cyber Systems, Inc., an
Internet software development company. The acquisition of Virtual Cyber
Systems, for which Concord paid approximately $2.0 million, was accounted for
as a purchase transaction and was immaterial to Concords financial statements.

Acquisition and restructuring charges were $125.4 million ($86.4 million, net
of taxes) for the three months ended March 31, 2001. The expenses and charges
were a result of a company-wide consolidation plan to address areas of
operating redundancies created by recent acquisitions. The plan includes
consolidation of data centers and other facilities to eliminate redundancies,
the reassignment or termination of certain employees timed to coincide with the
integration of redundant processing platforms and the functional integration of
the STAR organization into Concord. The charges included $63.9 million for
combining various processing platforms, $16.0 million for the consolidation of
duplicate products and internal systems, $15.6 million for accounting, legal
and advisory fees, $19.1 million for the termination of certain data center
services contracts and $10.8 million for compensation, severance costs and
other expenses. In connection with the consolidation plan, Concord expects to
eliminate approximately 250 positions, 140 of which have been eliminated as of
June 30, 2001. The individual components of the expenses and charges are listed
below. As of June 30, 2001, $69.1 million of these expenses were accrued but
unpaid.

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

-7-



---



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

Note B Business Combinations, continued

The following table details the activity in the restructuring charge accrual by
category, in millions:

|                                |  |          |  |          |  |           |  |          |  |        
|------------------------------- |  | -------- |  | -------- |  | --------- |  | -------- |  | -------
|                                |  |          |  |          |  | 2001      |  |          |  |        
|                                |  |          |  |          |  | Expenses  |  |          |  |        
|                                |  | Cash or  |  | Balance  |  | & Charges |  |          |  | Balance
|Description                     |  | Non-cash |  | 12/31/00 |  | Accrued   |  | Activity |  | 6/30/01
|                                |  |          |  |          |  |           |  |          |  |        
|2000:                           |  |          |  |          |  |           |  |          |  |        
|                               
|                               
|                               
|                               
|
|Compensation and severance      |  | Cash     |  | $1.0     |  | $        |  | $1.0     |  | $     
|                               
|                               
|                               
|                               
|Network de-conversion costs     |  | Cash     |  | 2.4      |  |          |  | 1.1      |  | 1.3    
|                               
|                               
|                               
|                               
|2001:                           |  |          |  |          |  |           |  |          |  |        
|                               
|                               
|                               
|                               
|
|Office closings and operational |  |          |  |          |  |           |  |          |  |        
|                               
|                               
|                               
|                               
|
|de-conversions                  |  | Cash     |  |         |  | 63.9      |  | 14.7     |  | 49.2   
|                               
|                               
|                               
|                               
|Duplicate or abandoned products |  |          |  |          |  |           |  |          |  |        
|                               
|                               
|                               
|                               
|& systems                       |  | Cash     |  |         |  | 4.4       |  | 1.5      |  | 2.9    
|                               
|                               
|                               
|                               
|
|Duplicate or abandoned products |  |          |  |          |  |           |  |          |  |        
|                               
|                               
|                               
|                               
|
|& systems                       |  | Non-Cash |  |         |  | 11.6      |  | 11.6     |  |       
|Advisory, legal, & accounting   |  | Cash     |  |         |  | 15.6      |  | 15.3     |  | 0.3    
|                               
|                               
|                               
|                               
|
|Contract terminations           |  | Cash     |  |         |  | 19.1      |  | 9.3      |  | 9.8    
|                               
|                               
|                               
|                               
|Compensation
and severance      |  | Cash     |  |         |  | 9.8       |  | 3.2      |  | 6.6    
|                               
|                               
|                               
|                               
|
|Other                           |  | Non-cash |  |         |  | 1.0       |  | 0.7      |  | 0.3    
|                                |  |          |  |          |  |           |  |          |  |        
|                                |  |          |  | $3.4     |  | $125.4    |  | $58.4    |  | $70.4  
|                                |  |          |  |          |  |           |  |          |  |        

Note C  Offering of Common Stock

During the quarter, Concord issued and sold 8,879,000 shares of its common
stock pursuant to a registration statement filed with the Securities and
Exchange Commission. Pursuant to the same registration statement, the selling
stockholders named in the registration statement sold 17,031,849 shares of
Concord common stock. 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 of the
offering, Concord received $421.9 million for the common stock it issued and
sold. Concord did not receive any proceeds from the sale of shares by the
selling stockholders.

-8-



---



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

Note D Comprehensive Income (Loss)

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

Note E Earnings Per Share

The following table sets forth the computation of basic and diluted earnings
per share:

|                           |                                                                                                      |   |                                       |         |                  |   |      |         |      |   |      |         |  |   |      |         | 
|-------------------------- | ---------------------------------------------------------------------------------------------------- | - | ------------------------------------- | ------- | ---------------- | - | ---- | ------- | ---- | - | ---- | ------- |  | - | ---- | ------- | 
|                           |                                                                                                      |   | Three months ended                    |         | Six months ended
|                           |                                                                                                      |   | June 30,                              |         | June 30,        
|                           |                                                                                                      |   | 2001                                  |         | 2000             |   | 2001 |         | 2000
|                           |                                                                                                      |   |                                       |         |                  |   |      |         |     
|                           |                                                                                                      |   | (in thousands, except per share data)
|Numerator:                 |                                                                                                      |   |                                       |         |                  |   |      |         |      |   |      |         |  |   |      |        
|                          
|                          
|                          
|                          
|                           | Net income                                                                                           |   | $                                     | 71,182  |                  |   | $    | 52,282  |      |   | $    | 45,190  |  |   | $    | 93,794  | 
|                           |                                                                                                      |   |                                       |         |                  |   |      |         |      |   |      |         |  |   |      |        
|Denominator:               |                                                                                                      |   |                                       |         |                  |   |      |         |      |   |      |         |  |   |      |        
|                          
|                          
|                          
|                          
|                           | Denominator for basic earnings
per share, weighted-average shares                                    |   |                                       | 243,393 |                  |   |      | 238,782 |      |   |      | 242,528 |  |   |      | 238,709 | 
|                          
|                          
|                          
|                          
|                           | Effect of dilutive employee
stock options                                                            |   |                                       | 10,764  |                  |   |      | 7,538   |      |   |      | 10,583  |  |   |      | 6,825   | 
|                          
|                          
|                          
|                          
|                           |                                                                                                      |   |                                       |         |                  |   |      |         |      |   |      |         |  |   |      |        
|                          
|                          
|                          
|                          
|                           | Denominator for diluted earnings per
share, adjusted weighted-average
shares and assumed conversions |   |                                       | 254,157 |                  |   |      | 246,320 |      |   |      | 253,111 |  |   |      | 245,534 | 
|                           |                                                                                                      |   |                                       |         |                  |   |      |         |      |   |      |         |  |   |      |        
|Basic earnings per share   |                                                                                                      | $ | 0.29                                  |         |                  | $ | 0.22 |         |      | $ | 0.19 |         |  | $ | 0.39 |        
|                           |                                                                                                      |   |                                       |         |                  |   |      |         |      |   |      |         |  |   |      |        
|Diluted earnings per share |                                                                                                      | $ | 0.28                                  |         |                  | $ | 0.21 |         |      | $ | 0.18 |         |  | $ | 0.38 |        
|                           |                                                                                                      |   |                                       |         |                  |   |      |         |      |   |      |         |  |   |      |        

Excluding acquisition costs and restructuring charges and related taxes,
diluted earnings per share for the six months ended June 30, 2001 and 2000 were
$0.52 and $0.38, respectively. Earnings per share and related per share data
have been restated to reflect all stock splits.

Note F Operations by Business Segment

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

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

-9-



---



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

Note F Operations by Business Segment, continued

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

Industry segment information for the three months and six months ended June 30,
2001 and 2000 is presented below, in thousands.

|                                           |  |                                  |          |          |  |       |         |       |  |   |         |   |  |   |          |  
|------------------------------------------ |  | -------------------------------- | -------- | -------- |  | ----- | ------- | ----- |  | - | ------- | - |  | - | -------- | -
|                                           |  | Three months ended June 30, 2001
|                                           |  | Payment                          |          | Network  |  |       |         |       |  |   |         |  
|                                           |  | Services                         |          | Services |  | Other |         | Total
|                                           |  |                                  |          |          |  |       |         |      
|Revenue                                    |  | $                                | 263,857  |          |  | $     | 156,829 |       |  | $ |        |   |  | $ | 420,686  |  
|                                          
|                                          
|                                          
|                                          
|Cost of operations                         |  |                                  | (213,999 | )        |  |       | (85,620 | )     |  |   |        |   |  |   | (299,619 | )
|                                          
|                                          
|                                          
|                                          
|Selling,
general &
administrative expenses |  |                                  |         |          |  |       |        |       |  |   | (22,714 | ) |  |   | (22,714  | )
|                                          
|                                          
|                                          
|                                          
|Acquisition
&
restructuring charges        |  |                                  |         |          |  |       |        |       |  |   |        |   |  |   |         |  
|                                          
|                                          
|                                          
|                                          
|Taxes & interest, net                      |  |                                  |         |          |  |       |        |       |  |   | (27,171 | ) |  |   | (27,171  | )
|                                          
|                                          
|                                          
|                                          
|Minority interest
in subsidiary            |  |                                  |         |          |  |       |        |       |  |   |        |   |  |   |         |  
|                                           |  |                                  |          |          |  |       |         |       |  |   |         |   |  |   |          |  
|Net income (loss)                          |  | $                                | 49,858   |          |  | $     | 71,209  |       |  | $ | (49,885 | ) |  | $ | 71,182   |  
|                                           |  |                                  |          |          |  |       |         |       |  |   |         |   |  |   |          |  

|                                           |  |   |                                  |   |          |   |         |   |       |   |         |   |  |   |          |   | 
|------------------------------------------ |  | - | -------------------------------- | - | -------- | - | ------- | - | ----- | - | ------- | - |  | - | -------- | - | 
|                                           |  |   | Three months ended June 30, 2000
|                                           |  |   | Payment                          |   | Network  |   |         |   |       |   |         |   | 
|                                           |  |   | Services                         |   | Services |   | Other   |   | Total
|                                           |  |   |                                  |   |          |   |         |   |      
|Revenue                                    |  | $ | 215,385                          |   |          | $ | 123,463 |   |       | $ |        |   |  | $ | 338,848  |  
|                                          
|                                          
|                                          
|                                          
|Cost of operations                         |  |   | (171,265                         | ) |          |   | (69,506 | ) |       |   |        |   |  |   | (240,771 | )
|                                          
|                                          
|                                          
|                                          
|Selling,
general &
administrative expenses |  |   |                                 |   |          |   |        |   |       |   | (24,045 | ) |  |   | (24,045  | )
|                                          
|                                          
|                                          
|                                          
|Acquisition
&
restructuring charges        |  |   |                                 |   |          |   |        |   |       |   |        |   |  |   |         |  
|                                          
|                                          
|                                          
|                                          
|Taxes & interest, net                      |  |   |                                 |   |          |   |        |   |       |   | (21,592 | ) |  |   | (21,592  | )
|                                          
|                                          
|                                          
|                                          
|Minority interest
in subsidiary            |  |   |                                 |   |          |   |        |   |       |   | (158    | ) |  |   | (158     | )
|                                           |  |   |                                  |   |          |   |         |   |       |   |         |   |  |   |          |  
|Net income (loss)                          |  | $ | 44,120                           |   |          | $ | 53,957  |   |       | $ | (45,795 | ) |  | $ | 52,282   |  
|                                           |  |   |                                  |   |          |   |         |   |       |   |         |   |  |   |          |  

-10-



---



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

Note F Operations by Business Segment, continued

|                                           |  |                                |          |          |  |       |          |       |  |   |         |   |  |   |          |  
|------------------------------------------ |  | ------------------------------ | -------- | -------- |  | ----- | -------- | ----- |  | - | ------- | - |  | - | -------- | -
|                                           |  | Six months ended June 30, 2001
|                                           |  | Payment                        |          | Network  |  |       |          |       |  |   |         |  
|                                           |  | Services                       |          | Services |  | Other |          | Total
|                                           |  |                                |          |          |  |       |          |      
|Revenue                                    |  | $                              | 491,717  |          |  | $     | 304,607  |       |  | $ |        |   |  | $ | 796,324  |  
|                                          
|                                          
|                                          
|                                          
|Cost of operations                         |  |                                | (399,838 | )        |  |       | (170,049 | )     |  |   |        |   |  |   | (569,887 | )
|                                          
|                                          
|                                          
|                                          
|Selling,
general &
administrative expenses |  |                                |         |          |  |       |         |       |  |   | (46,526 | ) |  |   | (46,526  | )
|                                          
|                                          
|                                          
|                                          
|Acquisition &
restructuring charges        |  |                                | (21,787  | )        |  |       | (103,575 | )     |  |   |        |   |  |   | (125,362 | )
|                                          
|                                          
|                                          
|                                          
|Taxes & interest, net                      |  |                                |         |          |  |       |         |       |  |   | (9,186  | ) |  |   | (9,186   | )
|                                          
|                                          
|                                          
|                                          
|Minority interest
in subsidiary            |  |                                |         |          |  |       |         |       |  |   | (173    | ) |  |   | (173     | )
|                                           |  |                                |          |          |  |       |          |       |  |   |         |   |  |   |          |  
|Net income (loss)                          |  | $                              | 70,092   |          |  | $     | 30,983   |       |  | $ | (55,885 | ) |  | $ | 45,190   |  
|                                           |  |                                |          |          |  |       |          |       |  |   |         |   |  |   |          |  

|                                           |  |   |                                |   |          |   |          |   |       |   |         |   |  |   |          |   | 
|------------------------------------------ |  | - | ------------------------------ | - | -------- | - | -------- | - | ----- | - | ------- | - |  | - | -------- | - | 
|                                           |  |   | Six months ended June 30, 2000
|                                           |  |   | Payment                        |   | Network  |   |          |   |       |   |         |   | 
|                                           |  |   | Services                       |   | Services |   | Other    |   | Total
|                                           |  |   |                                |   |          |   |          |   |      
|Revenue                                    |  | $ | 405,782                        |   |          | $ | 235,983  |   |       | $ |        |   |  | $ | 641,765  |  
|                                          
|                                          
|                                          
|                                          
|Cost of operations                         |  |   | (322,086                       | ) |          |   | (141,200 | ) |       |   |        |   |  |   | (463,286 | )
|                                          
|                                          
|                                          
|                                          
|Selling, general &
administrative expenses |  |   |                               |   |          |   |         |   |       |   | (45,882 | ) |  |   | (45,882  | )
|                                          
|                                          
|                                          
|                                          
|Acquisition &
restructuring charges        |  |   | (776                           | ) |          |   |         |   |       |   |        |   |  |   | (776     | )
|                                          
|                                          
|                                          
|                                          
|Taxes & interest, net                      |  |   |                               |   |          |   |         |   |       |   | (37,723 | ) |  |   | (37,723  | )
|                                          
|                                          
|                                          
|                                          
|Minority interest
in subsidiary            |  |   |                               |   |          |   |         |   |       |   | (304    | ) |  |   | (304     | )
|                                           |  |   |                                |   |          |   |          |   |       |   |         |   |  |   |          |  
|Net income (loss)                          |  | $ | 82,920                         |   |          | $ | 94,783   |   |       | $ | (83,909 | ) |  | $ | 93,794   |  
|                                           |  |   |                                |   |          |   |          |   |       |   |         |   |  |   |          |  

-11-



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CONCORD EFS, INC. AND
SUBSIDIARIES

MANAGEMENTS DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 2001

You should read the following discussion together with our condensed
consolidated financial statements and the notes to those financial statements,
which are included in this report. This report contains 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 performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by those
statements include, but are not limited to: (i) the failure to successfully
execute our corporate consolidation plan, (ii) the loss of key personnel or
inability to attract additional qualified personnel, (iii) the loss of key
customers, (iv) increasing competition, (v) changes in card association rules
and practices, (vi) the inability to remain current with rapid technological
change, (vii) risks related to acquisitions, (viii) the imposition of
additional state taxes, (ix) continued consolidation in the banking and retail
industries, (x) business cycles and the credit risk of our merchant customers,
(xi) the outcome of litigation involving VISA and MasterCard, (xii) utility and
system interruptions or processing errors, (xiii) susceptibility to fraud at
the merchant level, (xiv) changes in card association fees, products or
practices, (xv) restrictions on surcharging, (xvi) changes in rules and
regulations governing financial institutions and (xvii) volatility of the price
of our common stock. We undertake no obligation to publicly update or revise
any forward-looking statements to reflect changed assumptions, the occurrence
of anticipated or unanticipated events or changes to future results over time.
See the cautionary statements included as Exhibit 99.1 to the current report on
Form 8-K filed on July 18, 2001 for a more detailed discussion of the foregoing
and other factors.

Overview

Concord EFS, Inc. (Concord) is a leading, vertically integrated electronic
transaction processor. We acquire, route, authorize, capture and settle
virtually all types of electronic payment and deposit access transactions for
financial institutions and merchants nationwide. Our primary activities
consist of Network Services, which provides automatic 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, trucking companies and independent
retailers.

Network Services includes terminal driving and monitoring for ATMs,
transaction
routing and authorization via the combined
STARSM, 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.

We recently expanded our debit network in our Network Services area through
two
acquisitions. 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

-12-



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

Overview, continued

which we exchanged approximately 24.0 million shares of our common stock for
all of STARs outstanding common stock. On August 21, 2000 we completed our
acquisition of Cash Station, Inc. (Cash Station), a leading Midwest PIN-secured
debit network based in Chicago, Illinois. This acquisition was accounted for
as a pooling of interests transaction in which we exchanged approximately 2.5
million shares of our stock for all of the outstanding common stock of Cash
Station.

Payment Services provides the systems and processing that allow retail
clients to accept virtually any type of electronic payment, including all
card types credit, debit, electronic benefits transfer (EBT), prepaid and
proprietary cards  as well as a variety of check-based options. We focus
on providing payment processing services to selected segments, with
specialized systems designed for supermarkets, gas stations, convenience
stores and restaurants. Payment Services also includes providing payment
cards that enable drivers of trucking companies to purchase fuel and obtain
cash advances at truck stops. Our services are completely turn-key, providing
merchants with POS terminal equipment, transaction routing and
authorization, settlement, funds movement and sponsorship into all credit
card associations (such as VISA and MasterCard) and debit networks (such as
STAR, Pulse and NYCE).

Early in 2000 we completed two acquisitions in the Payment Services area. On
February 7, 2000 we completed our acquisition of Virtual Cyber Systems, Inc.,
an Internet software development company. This acquisition, for which we paid
approximately $2.0 million, was accounted for as a purchase transaction and was
immaterial to our financial statements. On January 31, 2000 we completed our
acquisition of Card Payment Systems, a New York-based reseller of payment
processing services. Card Payment Systems provides card-based payment
processing services to independent sales organizations, which in turn sell
those services to merchants. The acquisition was accounted for as a pooling of
interests transaction in which we exchanged 6.2 million shares of our stock for
all the outstanding shares of Card Payment Systems common stock. We incurred
acquisition costs of $0.8 million related to this transaction during the first
quarter of 2000.

Restatement of Historical Financial Information

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

Components of Revenue and Expenses

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

-13-



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

Components of Revenue and Expenses, continued

A principal component of our revenue derives from Network Services (37.3% and
36.4% for three months ended June 30, 2001 and 2000 and 38.3% and 36.8% for the
six months ended June 30, 2001 and 2000). 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.

The majority of our revenue (62.7% and 63.6% for the three months ended June
30, 2001 and 2000 and 61.7% and 63.2% for the six months ended June 30, 2001
and 2000) 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 is negotiated
with each merchant and typically constitutes a bundled rate for the transaction
authorization, processing, settlement and funds transfer services we provide.
The balance of Payment Services revenue is derived from transaction fees for
processing 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.

The following table is a listing of revenue by segment for the
periods indicated:

|                 |  |                |       |                |  |      |       |      |  |   |       |  |  |   |       | 
|---------------- |  | -------------- | ----- | -------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                 |  | Three months   |       | Six months    
|                 |  | ended June 30, |       | ended June 30,
|                 |  | 2001           |       | 2000           |  | 2001 |       | 2000
|                 |  |                |       |                |  |      |       |     
|                 |  | (in millions)  |       | (in millions) 
|Network Services |  | $              | 156.8 |                |  | $    | 123.4 |      |  | $ | 304.6 |  |  | $ | 236.0 | 
|                
|                
|                
|                
|Payment Services |  |                | 263.9 |                |  |      | 215.4 |      |  |   | 491.7 |  |  |   | 405.8 | 
|                 |  |                |       |                |  |      |       |      |  |   |       |  |  |   |       | 
|Total            |  | $              | 420.7 |                |  | $    | 338.8 |      |  | $ | 796.3 |  |  | $ | 641.8 | 
|                 |  |                |       |                |  |      |       |      |  |   |       |  |  |   |       | 

Cost of operations includes all costs directly attributable to providing
services to our customers. The most significant component of cost of operations
is interchange and assessment fees, which are amounts charged by the credit and
debit networks. Interchange and assessment fees are billed primarily as a
percentage of dollar volume processed and, to a lesser extent, as a transaction
fee. Cost of operations also includes telecommunications costs, personnel
costs, occupancy costs, depreciation, the cost of equipment leased and sold,
the cost of operating our debit network and other miscellaneous merchant
supplies and services expenses. We strive to maintain a highly efficient
operational structure, which includes volume purchasing arrangements with
equipment and communications vendors and direct membership by our subsidiary,
EFS National Bank, in bank card associations and major debit networks.

-14-



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

Components of Revenue and Expenses, continued

The following table lists cost of operations by segment for the
periods
indicated:

|                 |  |                |       |                |  |      |       |      |  |   |       |  |  |   |       | 
|---------------- |  | -------------- | ----- | -------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                 |  | Three months   |       | Six months    
|                 |  | ended June 30, |       | ended June 30,
|                 |  | 2001           |       | 2000           |  | 2001 |       | 2000
|                 |  |                |       |                |  |      |       |     
|                 |  | (in millions)  |       | (in millions) 
|Network Services |  | $              | 85.6  |                |  | $    | 69.5  |      |  | $ | 170.1 |  |  | $ | 141.2 | 
|                
|                
|                
|                
|Payment Services |  |                | 214.0 |                |  |      | 171.3 |      |  |   | 399.8 |  |  |   | 322.1 | 
|                 |  |                |       |                |  |      |       |      |  |   |       |  |  |   |       | 
|Total            |  | $              | 299.6 |                |  | $    | 240.8 |      |  | $ | 569.9 |  |  | $ | 463.3 | 
|                 |  |                |       |                |  |      |       |      |  |   |       |  |  |   |       | 

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

Results of Operations

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

|                                             |  |                    |       |                  |  |      |       |      |  |  |       |   |  |  |       |  
|-------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  |  | ----- | - |  |  | ----- | -
|                                             |  | Three months ended |       | Six months ended
|                                             |  | June 30,           |       | June 30,        
|                                             |  | 2001               |       | 2000             |  | 2001 |       | 2000
|                                             |  |                    |       |                  |  |      |       |     
|Revenue                                      |  |                    | 100.0 | %                |  |      | 100.0 | %    |  |  | 100.0 | % |  |  | 100.0 | %
|                                            
|                                            
|                                            
|                                            
|Cost of operations                           |  |                    | 71.2  |                  |  |      | 71.1  |      |  |  | 71.6  |   |  |  | 72.2  |  
|                                            
|                                            
|                                            
|                                            
|Selling, general and
administrative expenses |  |                    | 5.4   |                  |  |      | 7.1   |      |  |  | 5.8   |   |  |  | 7.2   |  
|                                            
|                                            
|                                            
|                                            
|Acquisition and
restructuring charges        |  |                    |      |                  |  |      |      |      |  |  | 15.7  |   |  |  | 0.1   |  
|                                             |  |                    |       |                  |  |      |       |      |  |  |       |   |  |  |       |  
|Operating income                             |  |                    | 23.4  |                  |  |      | 21.8  |      |  |  | 6.9   |   |  |  | 20.5  |  
|                                            
|                                            
|                                            
|                                            
|Interest income, net                         |  |                    | 2.8   |                  |  |      | 2.5   |      |  |  | 3.0   |   |  |  | 2.5   |  
|                                             |  |                    |       |                  |  |      |       |      |  |  |       |   |  |  |       |  
|Income before taxes                          |  |                    | 26.2  |                  |  |      | 24.3  |      |  |  | 9.9   |   |  |  | 23.0  |  
|                                            
|                                            
|                                            
|                                            
|Income taxes                                 |  |                    | 9.3   |                  |  |      | 8.9   |      |  |  | 4.2   |   |  |  | 8.4   |  
|                                             |  |                    |       |                  |  |      |       |      |  |  |       |   |  |  |       |  
|Net income                                   |  |                    | 16.9  | %                |  |      | 15.4  | %    |  |  | 5.7   | % |  |  | 14.6  | %
|                                             |  |                    |       |                  |  |      |       |      |  |  |       |   |  |  |       |  

-15-



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

Second Quarter 2001 Compared to Second Quarter 2000

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

Cost of operations increased slightly in the second quarter 2001 to 71.2% of
revenue compared to 71.1% in the second quarter 2000.

In the second quarter 2001 selling, general and administrative expenses
decreased, as a percent of revenue, to 5.4% from 7.1% in the second quarter
2000. Overall, selling, general and administrative expenses decreased to $22.7
million in the second quarter 2001 from $24.0 million in the second quarter
2000. This decrease is primarily attributable to less direct marketing expense
and reduced headcount.

Net interest income improved as a percent of revenue to 2.8% in the second
quarter 2001 compared to 2.5% in the second quarter 2000. The improvement was
the result of returns we received from investing available cash, which
increased the second quarter interest income by 37.2% over the second quarter
2000.

Our overall tax rate decreased to 35.5% in the second quarter 2001 compared to
36.5% in the second quarter 2000.

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

Six Months Ended June 30, 2001 Compared to 2000

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

-16-



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

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

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

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

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

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

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

Excluding acquisition and restructuring charges, operating income as a percent
of revenue increased in the six months ended June 30, 2001 to 22.6% from 20.7%
in the same period 2000. This increase in operating income resulted from
improved economies of scale and declining selling, general and administrative
expenses as a percent of revenue.

-17-



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

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

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

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

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

Liquidity and Capital Resources

In the six months ended June 30, 2001, we generated $232.2 million from
operating activities. We also received $21.0 million in proceeds from Federal
Home Loan Bank advances, $421.9 million from our offering of stock and $16.6
million from stock issued for exercises of options under our stock option plan.
From cash provided by operating and financing activities, we invested $201.1
million in securities, net of sales and maturities. We also spent $48.3 million
on capital additions, $19.7 million for a business acquisition and $16.4
million to purchase merchant contracts. Additionally, we reduced debt by $14.3
million. Our capital additions were primarily for communications equipment, POS
terminals, new computer equipment and capitalized software.

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

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

-18-



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

Quantitative and Qualitative Disclosures About Market Risk

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

-19-



---



CONCORD EFS, INC. AND SUBSIDIARIES

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

EFS National Bank has been named as a defendant in a purported class action
lawsuit filed in September 2000 in the Circuit Court of Tennessee for the
Thirtieth Judicial District at Memphis alleging that certain of EFS National
Banks rate and fee changes were improper under Tennessee law due to allegedly
deficient notice. The plaintiffs filed an amended complaint alleging that the
class consists of at least 60,000 merchants who were subjected to the allegedly
improper rate and fee changes. The amended complaint seeks damages in excess of
$15 million as well as injunctive relief and unspecified punitive damages,
treble damages, attorney fees and costs. A class certification hearing in this
matter is presently scheduled to be held this fall. In July 1999, a class
action complaint with similar allegations was filed in St. Charles County,
Missouri seeking unspecified damages. Although these matters are in the
preliminary stages, EFS National Bank believes that the claims against it are
without merit and intends to vigorously defend against all claims.

Card Payment Systems, a Concord subsidiary, has been named as a defendant in a
class action suit filed in April 2001 in the District Court, Harrison County,
Texas. Plaintiffs allege that the subsidiary has violated Section 227(b)(1)(C)
of the Telephone Consumer Protection Act, 47 U.S.C. Section 227 et seq., and
Section 35.47(g) of the Texas Business and Commerce Code by sending unsolicited
advertisements by facsimile. Plaintiffs seek injunctive relief and statutory
damages in the amount of $500 per facsimile and treble damages in the amount of
$1,500 per facsimile for willful or knowing violations of the statutes. The
full amount of damages sought by plaintiffs is not known at this time. Card
Payment Systems filed an answer on or about May 17,2001, denying all liability
to Plaintiffs and intends to vigorously defend itself against all claims.

We are also a party to various routine lawsuits arising out of the conduct of
our business, none of which is expected to have a material adverse effect upon
our financial condition or results of operations.

Item 2. Changes in Securities and Use of Proceeds

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

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

-20-



---



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

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

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



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

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

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

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

|        |  |                                                                                                                                                                                                                                                                                  
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                  
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                  
|2.1     |  | Agreement and Plan of Merger among Concord EFS, Inc., Orion Acquisition
Corp. and Star Systems, Inc., dated as of October 6, 2000, is incorporated
herein by reference to Exhibit 10 to Concords quarterly report on Form 10-Q
(File No. 000-13848), filed on November 14, 2000.
|       
|       
|       
|       
|3.1     |  | Restated Certificate of Incorporation of Concord EFS, Inc. is incorporated
herein by reference to Exhibit 4.4 to Amendment No. 1 to Concords registration
statement on Form S-3 (File No. 333-61084), filed on June 4, 2001.                                                    
|       
|       
|       
|       
|3.2     |  | Amended and Restated Bylaws of Concord EFS, Inc. are incorporated herein by
reference to Exhibit 4.2 to Concords registration statement on Form S-8 (File
No. 333-74215), filed on March 10, 1999.                                                                              

(b)  Reports on Form 8-K

On July 18, 2001, we filed a current report on Form 8-K to report, under Item 5
of that form, factors that could cause our actual performance or achievements
to be materially different from any future results, performance or achievements
expressed or implied by forward-looking statements made from time to time
pursuant to the safe harbor provisions of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act, as amended.

-21-



---



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                     |  |     |  |                                      
|-------------------- |  | --- |  | -------------------------------------
|                     |  |     |  | CONCORD EFS, INC.                    
|                    
|                    
|                    
|                    
|                     |  |     |  |                                      
|                    
|                    
|                    
|                    
|Date: August 7, 2001 |  | By: |  | /s/ Dan M. Palmer                    
|                     |  |     |  |                                      
|                     |  |     |  | Dan M. Palmer                        
|                    
|                    
|                    
|                    
|                     |  |     |  | Chairman of the Board and            
|                    
|                    
|                    
|                    
|                     |  |     |  | Chief Executive Officer              
|                    
|                    
|                    
|                    
|                     |  |     |  |                                      
|                    
|                    
|                    
|                    
|Date: August 7, 2001 |  | By: |  | /s/ Edward T. Haslam                 
|                     |  |     |  |                                      
|                     |  |     |  | Edward T. Haslam                     
|                    
|                    
|                    
|                    
|                     |  |     |  | Senior Vice President,               
|                    
|                    
|                    
|                    
|                     |  |     |  | Chief Financial Officer and Treasurer

-22-



---



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

|        |  |                                                                                                                                                                                                                                                                                  
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                  
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                  
|2.1     |  | Agreement and Plan of Merger among Concord EFS, Inc., Orion Acquisition
Corp. and Star Systems, Inc., dated as of October 6, 2000, is incorporated
herein by reference to Exhibit 10 to Concords quarterly report on Form 10-Q
(File No. 000-13848), filed on November 14, 2000.
|       
|       
|       
|       
|3.1     |  | Restated Certificate of Incorporation of Concord EFS, Inc. is incorporated
herein by reference to Exhibit 4.4 to Amendment No. 1 to Concords registration
statement on Form S-3 (File No. 333-61084), filed on June 4, 2001.                                                    
|       
|       
|       
|       
|3.2     |  | Amended and Restated Bylaws of Concord EFS, Inc. are incorporated herein by
reference to Exhibit 4.2 to Concords registration statement on Form S-8 (File
No. 333-74215), filed on March 10, 1999.