##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION
 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934



|x                                                  | QUARTERLY
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|-------------------------------------------------- | -----------------------------------------------------------------------------------------
|For the quarterly period
 ended September 30, 2002

OR


|o                                                          | TRANSITION
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------
|For the transition period
 from __________ to ____________

Commission file number 000-13848



---

CONCORD EFS, INC.

(Exact Name of Registrant
 as Specified in its Charter)



|Delaware                         | 04-2462252             
|-------------------------------- | -----------------------
|                                 |                        
|(State
 or Other Jurisdiction of | (I.R.S. 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 o

The number of shares of the registrants
 Common Stock, $0.33 1/3 par value, outstanding as of October 31, 2002 was 508,733,706.



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TABLE OF CONTENTS



|                                                  |                                                                                     |                                                      |  |  |  |  |  | 
|------------------------------------------------- | ----------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I - FINANCIAL INFORMATION                   
|                                                  | FINANCIAL STATEMENTS (UNAUDITED)                                                   
|                                                  |                                                                                     | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                                                  |                                                                                     | CONDENSED CONSOLIDATED STATEMENTS OF INCOME         
|                                                  |                                                                                     | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                  |                                                                                     | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                  | MANAGEMENTS DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                         
|                                                  | CONTROLS AND PROCEDURES                                                            
|PART II OTHER INFORMATION                        
|                                                  | Item 1. Legal Proceedings                                                          
|                                                  | Item 6. Exhibits and Reports on Form 8-K                                           
|SIGNATURES                                       
|CERTIFICATIONS                                   
|FORM 10-Q LISTING OF EXHIBITS                    
|MASTER AGREEMENT, DATED AS OF JULY 12, 2002      
|MASTER LEASE AGREEMENT, DATED AS OF JULY 12, 2002
|CONSTRUCTION AGENCY AGREEMENT, DATED JULY 12,2002
|LOAN AGREEMENT, DATED AS OF JULY 12, 2002        
|GUARANTY AGREEMENT, DATED AS OF JULY 12, 2002    
|LETTER AGREEMENT, DATED SEPTEMBER 11, 2002       
|LETTER AGREEMENT, DATED AUGUST 30, 2002          
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER         
|CERTIFICATION OF PRESIDENT                       
|CERTIFICATION OF CHIEF FINANCIAL OFFICER         
|CAUTIONARY STATEMENTS                            



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##### Table of Contents







CONCORD EFS, INC. AND SUBSIDIARIES



|PART I - Financial
 Information                                                                
|-----------------------------------------------------------------------------------------------
|Item 1.  Financial Statements (Unaudited)                                                      
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Item 2.  Managements
 Discussion and Analysis of Financial Condition and Results of Operations
|Item 3.  Quantitative
 and Qualitative Disclosures About Market Risk                           
|Item 4.  Controls
 and Procedures                                                              
|PART II -
 Other Information                                                                   
|Item 1.  Legal
 Proceedings                                                                    
|Item 6.  Exhibits
 and Reports on Form 8-K                                                     
|Signatures                                                                                     
|Certifications                                                                                 



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##### Table of Contents












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



|                                            | September 30,  |            | December 31,
|------------------------------------------- | -------------- | ---------- | ------------
|                                            | 2002           |            | 2001        
|                                            |                |            |             
|ASSETS                                      | (in thousands)
|CURRENT ASSETS                              |                |            |             
|Cash
 and cash equivalents                  | $              | 807,425    |             
|Securities available for sale               |                | 1,231,823  |             
|Alternative investments                     |                | 197,378    |             
|Accounts receivable, net                    |                | 165,318    |             
|Inventories                                 |                | 20,688     |             
|Prepaid
 expenses and other current assets  |                | 36,083     |             
|Deferred
 income taxes                      |                | 960        |             
|                                            |                |            |             
|TOTAL
 CURRENT ASSETS                       |                | 2,459,675  |             
|                                           
|Loans,
 net                                 |                | 12,953     |             
|Property
 and equipment, net                |                | 311,404    |             
|Goodwill,
 net                              |                | 282,644    |             
|Other
 intangible assets, net               |                | 54,609     |             
|Other
 assets                               |                | 31,988     |             
|                                            |                |            |             
|TOTAL
 ASSETS                               | $              | 3
,153,273 |             
|                                            |                |            |             
|LIABILITIES AND STOCKHOLDERS' EQUITY        |                |            |             
|CURRENT
 LIABILITIES                        |                |            |             
|Accounts
 payable and other liabilities     | $              | 468,318    |             
|Deposits                                    |                | 133,674    |             
|Accrued liabilities                         |                | 43,565     |             
|Accrued restructuring charges               |                | 31,590     |             
|Accrued
 litigation settlement              |                | 2,487      |             
|Income
 taxes payable                       |                | 21,954     |             
|Current
 maturities of long-term debt       |                | 75,489     |             
|                                            |                |            |             
|TOTAL
 CURRENT LIABILITIES                  |                | 777,077    |             
|                                           
|Long-term
 debt                             |                | 141,751    |             
|Deferred
 income taxes                      |                | 67,385     |             
|Other
 liabilities                          |                | 8,039      |             
|                                            |                |            |             
|TOTAL
 LIABILITIES                          |                | 994,252    |             
|                                            |                |            |             
|Commitments
 and contingent liabilities     |                |           |             
|Minority
 interest in subsidiary            |                | 4,825      |             
|                                            |                |            |             
|STOCKHOLDERS' EQUITY                        |                |            |             
|Common
 stock                               |                | 169,578    |             
|Other
 stockholders' equity                 |                | 1,984,618  |             
|                                            |                |            |             
|TOTAL
 STOCKHOLDERS' EQUITY                 |                | 2,154,196  |             
|                                            |                |            |             
|TOTAL
 LIABILITIES AND STOCKHOLDERS' EQUITY | $              | 3,153,273  |             
|                                            |                |            |             

See Notes to Condensed Consolidated Financial
 Statements.

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##### Table of Contents








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



|                                                 | Three months endedSeptember 30,       |         | Nine months endedSeptember 30,
|------------------------------------------------ | ------------------------------------- | ------- | ------------------------------
|                                                 |                                       |         |                               
|                                                 | 2002                                  |         |                               
|                                                 |                                       |         |                               
|                                                 | (in thousands, except per share data)
|                                                
|Revenue                                          | $                                     | 568,296 |                               
|Cost of
 operations                              |                                       | 421,086 |                               
|Selling,
 general and administrative expenses    |                                       | 31,233  |                               
|Acquisition, restructuring and
write-off charges |                                       |        |                               
|Litigation settlement charges (credits)          |                                       | (11,000 | )                             
|                                                 |                                       |         |                               
|OPERATING INCOME                                 |                                       | 126,977 |                               
|                                                
|Other
 income and expense:                       |                                       |         |                               
|Other
 income                                    |                                       | 1,023   |                               
|Investment income                                |                                       | 20,653  |                               
|Interest expense                                 |                                       | 3,054   |                               
|                                                 |                                       |         |                               
|INCOME
 BEFORE TAXES AND MINORITY INTEREST       |                                       | 145,599 |                               
|                                                
|Income
 taxes                                    |                                       | 50,959  |                               
|                                                 |                                       |         |                               
|INCOME
 BEFORE MINORITY INTEREST                 |                                       | 94,640  |                               
|                                                
|Minority
 interest in net income of subsidiary   |                                       | 311     |                               
|                                                 |                                       |         |                               
|NET
 INCOME                                      | $                                     | 94,329  |                               
|                                                 |                                       |         |                               
|PER
 SHARE DATA:                                 |                                       |         |                               
|Basic
 earnings per share                        | $                                     | 0.18    |                               
|                                                 |                                       |         |                               
|Diluted
 earnings per share                      | $                                     | 0.18    |                               
|                                                 |                                       |         |                               
|AVERAGE
 SHARES OUTSTANDING:                     |                                       |         |                               
|Basic
 shares                                    |                                       | 512,546 |                               
|                                                 |                                       |         |                               
|Diluted
 shares                                  |                                       | 527,856 |                               
|                                                 |                                       |         |                               

See Notes to Condensed Consolidated Financial
 Statements.

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



|                                                                    | Nine months ended September 30,
|------------------------------------------------------------------- | -------------------------------
|                                                                    |                                
|                                                                    | 2002                           
|                                                                    |                                
|                                                                    | (in thousands)                 
|OPERATING ACTIVITIES                                                |                                
|Net
 income                                                         | $                              
|Adjustments to reconcile net income to net cash                     |                                
|provided by operating activities:                                   |                                
|Minority interest in subsidiary                                     |                                
|Provision for (recovery of) losses on accounts receivable and loans |                                
|Depreciation and amortization                                       |                                
|Deferred income taxes                                               |                                
|Net
 realized gain on sales of securities available for sale        |                                
|Restructuring charges                                               |                                
|Changes
 in operating assets and liabilities:                       |                                
|Settlement receivables and payables, net                            |                                
|Accounts receivable                                                 |                                
|Inventories                                                         |                                
|Prepaid expenses and other current assets                           |                                
|Accounts payable and other liabilities                              |                                
|Other, net                                                          |                                
|                                                                    |                                
|NET
 CASH PROVIDED BY OPERATING ACTIVITIES                          |                                
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|INVESTING ACTIVITIES                                                |                                
|Acquisition of securities available for sale                        |                                
|Proceeds from sales of securities available for sale                |                                
|Proceeds from maturity of securities available for sale             |                                
|Acquisition of alternative investments                              |                                
|Purchases of loans                                                  |                                
|Proceeds from sales of loans                                        |                                
|Other net change in loans                                           |                                
|Acquisition of property and equipment                               |                                
|Purchased merchant contracts                                        |                                
|Business acquisitions, net                                          |                                
|Other
 investing activity                                           |                                
|                                                                    |                                
|NET
 CASH USED IN INVESTING ACTIVITIES                              |                                
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|FINANCING ACTIVITIES                                                |                                
|Net
 increase (decrease) in deposits                                |                                
|Proceeds from borrowings                                            |                                
|Payments on borrowings                                              |                                
|Purchase and retirement of common stock                             |                                
|Proceeds from offering of common stock                              |                                
|Proceeds from exercise of stock options                             |                                
|Payments on leases payable                                          |                                
|                                                                    |                                
|NET
 CASH PROVIDED BY FINANCING ACTIVITIES                          |                                
|                                                                    |                                
|NET
 INCREASE IN CASH AND CASH EQUIVALENTS                          |                                
|CASH
 AND CASH EQUIVALENTS AT BEGINNING OF YEAR                     |                                
|                                                                    |                                
|CASH
 AND CASH EQUIVALENTS AT END OF PERIOD                         | $                              
|                                                                    |                                

See Notes to Condensed Consolidated Financial
 Statements.

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

Note A - Basis of Presentation

The accompanying unaudited condensed
 consolidated financial statements have been prepared in accordance with generally accepted
 accounting principles for interim financial information and with the instructions to
 Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the
 information and footnotes required by generally accepted accounting principles for complete
 financial statements. In the opinion of management, all adjustments, consisting of normal
 recurring accruals, considered necessary for a fair presentation have been included.
 Operating results for the three and nine months ended September 30, 2002 are not necessarily
 indicative of the results that may be expected for the year ended December 31, 2002.
 For further information, refer to the consolidated financial statements and footnotes
 thereto included in the Concord EFS, Inc. and Subsidiaries (Concord) annual report on
 Form 10-K filed on February 26, 2002 for the year ended December 31, 2001.

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

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

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

Alternative Investments:  Concords
 alternative investments, including hedge fund-of-funds, are accounted for under the equity
 method of accounting with realized and unrealized gains and losses reflected in investment
 income for each reporting period.

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

Recent Pronouncement: In July 2002 the
 Financial Accounting Standards Board issued Statement of Financial Accounting Standards
 146, Accounting for Costs Associated with Exit or Disposal Activities.  SFAS 146 addresses
 financial accounting and reporting for costs associated with exit or disposal activities and
 nullifies EITF Issue 94-3.  The principal difference between SFAS 146 and Issue 94-3 relates
 to SFAS 146s requirements for recognition of a liability for a cost associated with an exit
 or disposal activity.  SFAS 146 requires that a

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

Note A - Basis of Presentation,
 continued

liability for a cost associated with
 an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3,
 a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of
 an entitys commitment to an exit plan.  The FASB concluded in SFAS 146 that an entitys
 commitment to a plan, by itself, does not create an obligation that meets the definition of a
 liability.  Therefore, SFAS 146 eliminates the definition and requirements for recognition
 of exit costs in Issue 94-3.  SFAS 146 also establishes that fair value is the objective for
 initial measurement of the liability. The provisions of this Statement are effective for
 exit or disposal activities that are initiated after December 31, 2002.

In October 2002 the Financial
 Accounting Standards Board issued Statement of Financial Accounting Standards 147,
 Acquisitions of Certain Financial Institutions.  SFAS 147 addresses the financial
 accounting and reporting for the acquisition of all or part of a financial institution and
 is effective for any such activities initiated after October 1, 2002. The adoption of this
 statement is not anticipated to have a material effect on Concords financial position or
 results of operations.

Note B - Business Combinations and
 Acquisition, Restructuring and Write-Off Charges

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

On May 17, 2002 Concord acquired
 Core Data Resources, Inc., an electronic transaction processor.  The acquisition, for which
 Concord issued approximately 2.0 million shares of its common stock, was accounted for as a
 purchase transaction and is immaterial to Concords financial statements.  The allocation of
 the purchase price is preliminary because a valuation study has not yet been completed.
 Concord expects to complete this study in the fourth quarter.

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

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

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##### Table of Contents



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

Note B - Business Combinations and
 Acquisition, Restructuring and Write-Off Charges, continued

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

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

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



|                                    | Three
 months endedSeptember 30, |         | Nine
 months endedSeptember 30,
|----------------------------------- | -------------------------------- | ------- | -------------------------------
|                                    |                                  |         |                                
|                                    |                                  | 2002    |                                
|                                    |                                  |         |                                
|Revenue:                            |                                  |         |                                
|Concord                             | $                                | 568,296 |                                
|STAR (1)                            |                                  |        |                                
|Intercompany eliminations (2)       |                                  |        |                                
|                                    |                                  |         |                                
|Combined revenue                    | $                                | 568,296 |                                
|                                    |                                  |         |                                
|Net income:                         |                                  |         |                                
|Concord                             | $                                | 94,329  |                                
|STAR (1)                            |                                  |        |                                
|                                    |                                  |         |                                
|Combined net income                 | $                                | 94,329  |                                
|                                    |                                  |         |                                
|Basic earnings per share combined   | $                                | 0.18    |                                
|                                    |                                  |         |                                
|Diluted earnings per share combined | $                                | 0.18    |                                
|                                    |                                  |         |                                



|(1) | The 2001 amounts reflect the results of STAR
 operations from January 1, 2001 through January 31, 2001. Results of operations from
 February 1, 2001 are included in Concord amounts.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | All material activity between Concord and STAR
 has been eliminated.                                                                                                                 

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##### Table of Contents



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

Note B - Business Combinations and Acquisition,
 Restructuring and Write-Off Charges, continued

Acquisition, restructuring and write-off charges were $29.0 million
 ($18.9 million, net of taxes) for the three months ended June 30, 2002.
 During the second quarter, management approved a plan in conjunction with the
 Core Data acquisition and continued consolidation initiatives to improve
 overall operating efficiencies. The charge consisted of $16.8 million for
 contract terminations, $4.1 million for exiting a non-strategic business, $1.0
 million for closing and consolidating certain facilities and $0.7 million for
 compensation and severance. In addition, the charge included stock
 compensation charges of $4.8 million related to the modification of stock
 options of terminated employees and asset impairment charges of $1.6 million
 recorded as an adjustment to the write-off of non-performing purchased
 merchant contracts. In connection with the plan, Concord expects to eliminate
 24 positions, none of which were eliminated as of September 30, 2002. As of
 September 30, 2002, $21.3 million of the charges were accrued but unpaid.
 Concord expects to complete the plan by June 30, 2003.

The following table presents a summary of activity through
 September 30, 2002 related to the second quarter 2002 restructuring charge accrual (in thousands):



|Acquisition, restructuring and write-off charges   | $ | 29,006
|-------------------------------------------------- | - | ------
|Cash outlays                                       |   | 1,182 
|Non-cash writedowns and charges - asset impairment |   | 1,691 
|Non-cash writedowns and charges - other            |   | 4,845 
|                                                   |   |       
|Balance, September 30, 2002                        | $ | 21,288
|                                                   |   |       

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



|Contract terminations                | $ | 16,649
|------------------------------------ | - | ------
|Non-strategic business closures      |   | 3,093 
|Facility closings and consolidations |   | 863   
|Compensation and severance           |   | 683   
|                                     |   |       
|Balance, September 30, 2002          | $ | 21,288
|                                     |   |       

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##### Table of Contents



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

Note B - Business Combinations and
 Acquisition, Restructuring and Write-Off Charges, continued

Acquisition, restructuring and write-off
 charges were $47.5 million ($30.6 million, net of taxes) for the three months ended
 March 31, 2002. During the first quarter, management approved a corporate consolidation
 plan initiated to continue improvements in overall operating efficiency and integrate
 recent acquisitions. The charge consisted of $6.7 million for closing and consolidating
 certain facilities, $5.9 million for compensation and severance, and $4.5 million
 for exiting non-strategic businesses. In addition, asset impairment charges of
 $22.5 million ($0.03 basic and diluted earnings per share) were incurred for the
 write-off of non-performing purchased merchant contracts identified in the first
 quarter and $7.9 million was incurred for the write-off of capitalized software
 and computer and communications equipment no longer in use. In connection with
 the plan, Concord expects to eliminate approximately 165 positions, 142 of which
 were eliminated as of September 30, 2002. Compensation and severance costs paid
 and charged against the restructuring charge accrual were $2.9 million through September
 30, 2002. As of September 30, 2002, $10.3 million of the charges were accrued but
 unpaid. Concord expects to complete the consolidation plan by March 31, 2003.

The following table presents a summary of
 activity through September 30, 2002 related to the first quarter 2002 restructuring
 charge accrual (in thousands):



|Acquisition, restructuring and write-off charges   | $ | 47,500
|-------------------------------------------------- | - | ------
|Cash outlays                                       |   | 5,424 
|Non-cash writedowns and charges - asset impairment |   | 31,774
|                                                   |   |       
|Balance, September 30, 2002                        | $ | 10,302
|                                                   |   |       

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



|Facility closings and consolidations | $ | 5,333 
|------------------------------------ | - | ------
|Compensation and severance           |   | 2,981 
|Non-strategic business closures      |   | 1,988 
|                                     |   |       
|Balance, September 30, 2002          | $ | 10,302
|                                     |   |       

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##### Table of Contents



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

Note B - Business Combinations and Acquisition,
 Restructuring and Write-Off Charges, continued

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

The following table presents a summary of current year activity through
March 31, 2002 related to the 2001 restructuring charge accrual (in thousands):



|Balance, December 31, 2001                         | $ | 5,315
|-------------------------------------------------- | - | -----
|Cash outlays                                       |   | 5,286
|Non-cash writedowns and charges - asset impairment |   | 29   
|                                                   |   |      
|Balance, March 31, 2002                            | $ |     
|                                                   |   |      

Note C - Goodwill and Other Intangible Assets

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

Concord adopted SFAS 142 effective January
 1, 2002. Concord has tested goodwill for impairment using the two-step process prescribed
 in SFAS 142. The first step is a screen for potential impairment, while the second
 step measures the amount of the impairment, if any. Concord has performed the first
 of the required impairment tests for goodwill as of January 1, 2002 and has determined
 that the carrying amount of goodwill is not impaired.

-9-



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##### Table of Contents



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

Note C - Goodwill and Other Intangible
 Assets, continued

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



|                                    | Three months endedSeptember 30, |        | Nine months endedSeptember 30,
|----------------------------------- | ------------------------------- | ------ | ------------------------------
|                                    |                                 |        |                               
|                                    | 2002                            |        | 2001                          
|                                    |                                 |        |                               
|Reported net income                 | $                               | 94,329 |                               
|Goodwill amortization, net of tax   |                                 |       |                               
|                                    |                                 |        |                               
|Adjusted net income                 | $                               | 94,329 |                               
|                                    |                                 |        |                               
|Adjusted basic earnings per share   | $                               | 0.18   |                               
|                                    |                                 |        |                               
|Adjusted diluted earnings per share | $                               | 0.18   |                               
|                                    |                                 |        |                               

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



|Network Services           | $ | 124,982
|-------------------------- | - | -------
|Payment Services           |   | 33,650 
|                           |   |        
|Balance, December 31, 2001 | $ | 158,632
|                           |   |        

The following table presents Concords
 amortization expense relating to other intangible assets as of December 31, 2001
 for the periods indicated, net of the write-off of non-performing purchased merchant
 contracts of $22,496 in the three months ended March 31, 2002 and $1,611 in the
 three months ended June 30, 2002 included in acquisition, restructuring and write-off
 charges as described in Note B (in thousands):



|2002       | $ | 12,486
|---------- | - | ------
|2003       |   | 7,925 
|2004       |   | 7,873 
|2005       |   | 7,873 
|2006       |   | 7,698 
|Thereafter |   | 17,750
|           |   |       
|Total      | $ | 61,605
|           |   |       

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##### Table of Contents



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

Note D - Comprehensive Income
Total comprehensive income was $100.4 million and $84.4 million for the three months ended September
 30, 2002 and 2001, respectively. Total comprehensive income was $229.2 million and $135.9 million
 for the nine months ended September 30, 2002 and 2001, respectively. Comprehensive income includes
 net income and the change in the unrealized gain or loss on securities available for sale arising
 during the period.
Note E - Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):



|                                                                                                      |  | Three months endedSeptember 30, |         | Nine months endedSeptember 30,
|----------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | ------------------------------
|                                                                                                      |  |                                 |         |                               
|                                                                                                      |  | 2002                            |         | 2001                          
|                                                                                                      |  |                                 |         |                               
|Numerator:                                                                                            |  |                                 |         |                               
|Net
 income                                                                                           |  | $                               | 94,329  |                               
|                                                                                                      |  |                                 |         |                               
|Denominator:                                                                                          |  |                                 |         |                               
|Denominator for basic earnings per share, weighted-average shares                                     |  |                                 | 512,546 |                               
|Effect
 of dilutive stock options                                                                     |  |                                 | 15,310  |                               
|                                                                                                      |  |                                 |         |                               
|Denominator for diluted earnings per share, adjusted
weighted-average
shares, and assumed conversions |  |                                 | 527,856 |                               
|                                                                                                      |  |                                 |         |                               
|Basic
 earnings per share                                                                             |  | $                               | 0.18    |                               
|                                                                                                      |  |                                 |         |                               
|Diluted
 earnings per share                                                                           |  | $                               | 0.18    |                               
|                                                                                                      |  |                                 |         |                               

Excluding acquisition, restructuring, write-off, and litigation
 settlement charges and related taxes, diluted earnings per share for the three months ended September 30, 2002 and 2001
 were $0.17 and $0.16, respectively, and for the nine months ended September 30, 2002 and 2001 were $0.50 and $0.42,
 respectively. Earnings per share and related per share data have been restated to reflect all stock splits.

Note F - Common Stock Repurchase Plan
On August 5, 2002 Concord announced that its Board of Directors approved the repurchase of up to $250.0 million of
 Concords common stock. Under the repurchase plan, Concord may buy back shares of its outstanding stock from time
 to time either on the open market or through privately negotiated transactions. A total of 4.5 million shares at
 an aggregate cost of $68.4 million have been purchased and retired
for the three months ended September 30, 2002. On November 7,
2002 Concord announced that its Board of Directors approved the
repurchase of an additional $150.0 million of Concords
common stock. The Boards approval brings the total potential
repurchase to $400.0 million.

Concord immediately retires its common stock when purchased. Upon retirement, Concord reduces retained earnings for the
 excess of purchase price over par value.

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##### Table of Contents



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

Note G - Stock Split
The Board of Directors approved a two-for-one stock split on August 30, 2001. Shareholders of record as of September 14, 2001
 were distributed additional shares on September 28, 2001. All share data, earnings per share, and per share data have been
 restated to reflect the stock split.
Note H - Offering of Common Stock
In June 2001 Concord issued and sold approximately 17.8 million shares of its common stock pursuant to a registration statement
 filed with the Securities and Exchange Commission. Pursuant to the same registration statement, the selling stockholders named
 in the registration statement sold approximately 34.1 million shares of Concord common stock. Most of the selling stockholders
 were the previous owners of STAR who received unregistered common stock of Concord in connection with the February 1, 2001
 acquisition. Net of the underwriting discount and other expenses of the offering, Concord received $420.6 million for the
 common stock it issued and sold. Concord did not receive any proceeds from the sale of shares by the selling stockholders.

Note I - Operations by Business Segment
Concord has two reportable segments: Network Services and Payment Services.
Network Services revenue consists of processing fees for driving and monitoring ATMs, processing fees for managing debit card
 records, and access and switching fees for network access, plus the network fees charged by the debit networks and collected by
 Concord.
Revenue from Payment Services primarily includes discount fees charged to merchants, which are a percentage of the dollar amount
 of each credit card transaction Concord processes, as well as a flat fee per transaction. The discount fee, primarily charged
 to smaller merchants, is negotiated with each merchant and typically constitutes a bundled rate for the transaction
 authorization, processing, settlement, and funds transfer services Concord provides, plus the interchange fees charged by the
 credit card associations and collected by Concord. The balance of Payment Services revenue is derived from transaction fees for
 processing debit card and electronic benefits transfer card transactions, check verification and authorization services, and
 sales of POS terminals from inventory.

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##### Table of Contents



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

Note I - Operations by Business Segment, continued
Business segment information for the three months and nine months ended September 30, 2002 and 2001 is presented below (in
 thousands):



|                                                 |  | Three months ended September 30, 2002 
|------------------------------------------------ |  | --------------------------------------
|                                                
|                                                 |  | NetworkServices                       
|                                                 |  |                                       
|Revenue                                          |  | $                                     
|Cost
 of operations                              |  |                                       
|Selling,
 general and administrative expenses    |  |                                       
|Acquisition, restructuring and write-off charges |  |                                       
|Litigation settlement charges (credits)          |  |                                       
|Other
 income                                    |  |                                       
|Investment income                                |  |                                       
|Interest
 expense                                |  |                                       
|Income
 taxes                                    |  |                                       
|Minority
 interest in subsidiary                 |  |                                       
|                                                 |  |                                       
|Net
 income (loss)                               |  | $                                     
|                                                 |  |                                       
|                                                 |  |                                       
|                                                 |  | Three months ended September
 30, 2001
|                                                 |  |                                       
|                                                 |  | NetworkServices                       
|                                                 |  |                                       
|Revenue                                          |  | $                                     
|Cost
 of operations                              |  |                                       
|Selling,
 general and administrative expenses    |  |                                       
|Acquisition, restructuring and write-off charges |  |                                       
|Litigation settlement charges (credits)          |  |                                       
|Other
 income                                    |  |                                       
|Investment income                                |  |                                       
|Interest expense                                 |  |                                       
|Income
 taxes                                    |  |                                       
|Minority interest in subsidiary                  |  |                                       
|                                                 |  |                                       
|Net
 income (loss)                               |  | $                                     
|                                                 |  |                                       

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##### Table of Contents



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

Note I - Operations by Business Segment, continued



|                                                 |  | Nine months ended September
 30, 2002
|------------------------------------------------ |  | -------------------------------------
|                                                 |  |                                      
|                                                 |  | NetworkServices                      
|                                                 |  |                                      
|Revenue                                          |  | $                                    
|Cost
 of operations                              |  |                                      
|Selling,
 general and administrative expenses    |  |                                      
|Acquisition, restructuring and write-off charges |  |                                      
|Litigation settlement charges (credits)          |  |                                      
|Other
 income                                    |  |                                      
|Investment income                                |  |                                      
|Interest expense                                 |  |                                      
|Income
 taxes                                    |  |                                      
|Minority
 interest in subsidiary                 |  |                                      
|                                                 |  |                                      
|Net
 income (loss)                               |  | $                                    
|                                                 |  |                                      
|                                                 |  |                                      
|                                                 |  | Nine months ended September
 30, 2001
|                                                 |  |                                      
|                                                 |  | NetworkServices                      
|                                                 |  |                                      
|Revenue                                          |  | $                                    
|Cost
 of operations                              |  |                                      
|Selling,
 general and administrative expenses    |  |                                      
|Acquisition, restructuring and write-off charges |  |                                      
|Litigation settlement charges (credits)          |  |                                      
|Other income                                     |  |                                      
|Investment income                                |  |                                      
|Interest expense                                 |  |                                      
|Income
 taxes                                    |  |                                      
|Minority interest in subsidiary                  |  |                                      
|                                                 |  |                                      
|Net
 income (loss)                               |  | $                                    
|                                                 |  |                                      

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##### Table of Contents



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

Note J - Contingencies

In September 2000 EFS National Bank was
 named as a defendant in a purported class action lawsuit filed in the Circuit Court
 of Tennessee for the Thirtieth Judicial District at Memphis alleging that certain
 of EFS National Banks rate and fee changes were improper under Tennessee law
 due to allegedly deficient notice. On May 14, 2002 the plaintiffs filed a second
 amended complaint alleging that the class consists of over 100,000 merchants who
 were subjected to the allegedly improper rate and fee changes over a several-year
 period. The second amended complaint sought damages in excess of $70.0 million
 as well as injunctive relief and unspecified punitive damages, treble damages, attorney
 fees, and costs.

On May 16, 2002 the parties entered into
 a settlement agreement relating to this litigation and received preliminary approval
 from the trial court therefor. On August 6, 2002 the trial court rejected the only
 objection filed against the settlement agreement and gave the settlement agreement
 its final approval. The objector and his counsel subsequently
reached an agreement with EFS National Bank, plaintiffs and counsel
 for the plaintiffs, pursuant to which EFS National Bank contributed an immaterial
 amount. As a result, no appeal was taken, and thus the settlement is now final
 and unappealable. The maximum amount of the credits and payments by EFS National
 Bank under the settlement is $37.6 million, payable over a five-year period. In
 connection with the settlement, Concord initially recorded a charge of $20.8 million
 ($13.5 million, net of taxes) for the three months ended June 30, 2002. The charge
 was less than $37.6 million, because the credits and payments are contingent upon
 merchant retention and submission of claims.

On September 17, 2002 EFS National Bank
 paid plaintiffs counsel and the named plaintiffs a total of $5.0 million,
 as required by the settlement agreement. The deadline for the submission of claims
 by class members was September 16, 2002. Approximately 150,000 class members were
 eligible to make claims, but less than 3,000 valid claims were actually submitted.
 In the fourth quarter the court-appointed claims administrator is expected to submit
 a report on the total amount of the valid claims submitted. Based on
the low number of valid claims submitted, Concord has reduced the charge by $11.0 million
 ($7.2 million, net of taxes) for the three months ended September 30, 2002. EFS
 National Bank is also responsible for the costs of claims administration and for
 its own costs and expenses, including attorneys fees.

A purported class action complaint with
 similar allegations and requests for relief was filed in St. Charles County, Missouri.
 That action was dismissed with prejudice in connection with the settlement of the
 Tennessee case.

Concord and its directors and certain of
 its officers have been named as defendants in a number of securities fraud class
 action lawsuits and shareholder derivative actions.
 The lawsuits all raise allegations relating
 to Concords financial performance between October 2001 and September 2002,
 changes in the price of Concords common stock during that time, alleged failures
 to disclose material facts, and alleged insider trading by certain officers and
 directors. The lawsuits seek unspecified compensatory and punitive damages, attorneys
 fees, and injunctive and other relief. Certain of these lawsuits
have been consolidated. Although these matters are in the
 preliminary stages, Concord believes that the claims against it and its directors
 and officers are without merit and intends to vigorously defend against all claims.

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##### Table of Contents



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

Note K - Other Income

Other income for the nine months ended September
 30, 2002 includes $5.9 million representing the sale of certain terminal hardware
 and related future rental payments. The remaining other income represents net realized
 gain on sales of securities available for sale.

Note L - Investment Income

Investment income for the three and nine
 months ended September 30, 2002 includes $1.8 million representing unrealized gains
 and losses from alternative investments. The remaining investment income represents
 interest income on securities available for sale and other investments of available
 cash.

-16-



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##### Table of Contents






CONCORD EFS, INC. AND
 SUBSIDIARIESMANAGEMENTS DISCUSSION & ANALYSIS OFFINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

You should read the following discussion
 together with our condensed consolidated financial statements and the notes to those
 financial statements, which are included in this report. This report may contain
 forward-looking statements made pursuant to the safe harbor provisions of Section
 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
 Exchange Act of 1934, as amended. Forward-looking statements are not guarantees
 of future performance and involve risks, uncertainties, and other factors, including
 those set forth in this paragraph. Important factors that could cause our actual
 results, performance, or achievements to be materially different from any future
 results, performance, or achievements expressed or implied by those statements include,
 but are not limited to: (i) the failure to successfully execute our corporate consolidation
 plans, (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) market
 saturation or restrictions on surcharging, (xvi) rules and regulations governing
 financial institutions and changes in such rules and regulations, (xvii) the timing
 and extent of changes in interest rates, (xviii) volatility of the price of our
 common stock, and (xix) litigation risks. 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 99.4 to this quarterly
 report on Form 10-Q for a more detailed discussion of the foregoing and other factors.

Overview

Concord EFS, Inc. (Concord) is a leading
 vertically integrated electronic transaction processor. We acquire, route, authorize,
 capture, and settle virtually all types of electronic payment and deposit access
 transactions for financial institutions and merchants nationwide. Our primary activities
 consist of Network Services, which provides automated teller machine (ATM) processing,
 debit card processing, deposit risk management, and coast-to-coast debit network
 access principally for financial institutions, and Payment Services, which provides
 payment processing for supermarkets, major retailers, petroleum dealers, convenience
 stores, restaurants, trucking companies, and independent retailers.

Network Services

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

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##### Table of Contents



CONCORD EFS, INC. AND
 SUBSIDIARIESMANAGEMENTS DISCUSSION & ANALYSIS OFFINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

On May 17, 2002 we acquired Core Data Resources,
 Inc., a privately held electronic transaction processor based in Amarillo, Texas.
 Core Data provides ATM processing and related services to financial institutions,
 retailers, and independent sales organizations nationwide. This acquisition was
 accounted for as a purchase transaction in which we exchanged approximately 2.0
 million shares of our common stock for all of Core Datas outstanding common
 stock.

On March 1, 2002 we completed our acquisition
 of The Logix Companies, LLC, an electronic transaction processor based in Longmont,
 Colorado. A private limited liability company, Logix provides financial institutions,
 retailers, and independent sales organizations with ATM processing, electronic check
 conversion, identification and authentication services, database development and
 reporting, and merchant processing services. This acquisition was accounted for
 as a purchase transaction in which we exchanged approximately 0.9 million shares
 of our common stock and $6.3 million in cash for all of the outstanding membership
 units of Logix.

On February 1, 2001 we completed our acquisition
 of Star Systems, Inc. (STAR), the nations largest PIN-secured debit network,
 based in Maitland, Florida. The merger was accounted for as a pooling-of-interests
 transaction in which we exchanged approximately 48.0 million shares of our common
 stock for all of STARs outstanding common stock.

As a result of our acquisition of STAR and
 subsequent purchase of shares, we acquired a majority interest in Primary Payment
 Systems, Inc., a company providing deposit risk management services to merchants
 and financial institutions. We own an 85.5% interest in Primary Payment Systems,
 with the remainder owned by certain financial institutions and a credit union service
 provider. Primary Payment Systems deposit risk management services provide
 advance notification of potential losses associated with fraudulent checks or high
 risk accounts utilizing a national database.

In 2001 Primary Payment Systems expanded
 its operations in the deposit risk management area through its acquisition of Wally
 Industries, Inc. d/b/a WJM Technologies. WJMs front-end tools, which screen
 new deposit accounts before they are opened, increase the breadth of Primary Payment
 Systems deposit risk management services. Primary Payment Systems believes
 that the addition of WJM will enable it to develop more powerful fraud filters that
 can be extended to other markets, as well as provide additional cross-selling opportunities
 and augment customer retention.

Payment Services

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

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##### Table of Contents



CONCORD EFS, INC. AND
 SUBSIDIARIESMANAGEMENTS DISCUSSION & ANALYSIS OFFINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

We own one insured depository institution,
 EFS National Bank, which supports our payment processing business. As part of our
 effort to consolidate our insured depository operations and terminate local deposit
 taking and lending activities, EFS Federal Savings Bank, another subsidiary, was
 merged into EFS National Bank on August 26, 2002.

On January 1, 2002 we acquired H &
 F Services, Inc., an independent sales organization. Prior to the acquisition,
 we had purchased merchant contracts through H & F Services. Through the acquisition,
 we have improved our control over this sales channel with product, pricing, compensation,
 and productivity initiatives. This acquisition will significantly increase selling,
 general and administrative expenses, reduce the average cost of acquiring merchant
 contracts, and reduce the cost of operations.

Consolidation Plans

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

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

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

Restatement of Historical Financial Information

The financial information for prior periods
 presented below and elsewhere in this report has been restated for the results of
 STAR 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.

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##### Table of Contents



CONCORD EFS, INC. AND
 SUBSIDIARIESMANAGEMENTS DISCUSSION & ANALYSIS OFFINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

Components of Revenue and Expenses

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

A principal component of our revenue is
 derived from Network Services (36.8% and 37.8% for the three months ended September
 30, 2002 and 2001 and 38.3% and 38.1% for the nine months ended September 30, 2002
 and 2001). 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 network fees charged by the debit networks and collected
 by us. We recognize this revenue at the time of the transaction.

The majority of our revenue (63.2% and 62.2%
 for the three months ended September 30, 2002 and 2001 and 61.7% and 61.9% for the
 nine months ended September 30, 2002 and 2001) is generated from fee income related
 to Payment Services. Revenue from Payment Services primarily includes discount
 fees charged to merchants, which are a percentage of the dollar amount of each credit
 card transaction we process, as well as a flat fee per transaction. The discount
 fee, primarily charged to smaller merchants, is negotiated with each merchant and
 typically constitutes a bundled rate for the transaction authorization, processing,
 settlement, and funds transfer services we provide, plus the interchange fees charged
 by the credit card associations and collected by us. The balance of Payment Services
 revenue is derived from transaction fees for processing credit card transactions
 for larger merchants, debit card and EBT card transactions, check verification and
 authorization services, and sales of POS terminals from inventory. We recognize
 this revenue at the time of the transaction. One result of having revenue dependent
 on the total dollar volume processed is that lower ticket size or other reduction
 in total purchases causes a reduction in our revenue. However, net income is not
 correspondingly affected because the majority of our transactions are priced on
 a fixed fee per transaction basis plus interchange fees.

The following table lists revenue by
 segment for the periods indicated (in millions):



|                 | Three monthsended September 30, |       | Nine monthsended September 30,
|---------------- | ------------------------------- | ----- | ------------------------------
|                 |                                 |       |                               
|                 | 2002                            |       | 2001                          
|                 |                                 |       |                               
|Network Services | $                               | 209.4 |                               
|Payment Services |                                 | 358.9 |                               
|                 |                                 |       |                               
|Total            | $                               | 568.3 |                               
|                 |                                 |       |                               

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##### Table of Contents



CONCORD EFS, INC. AND
 SUBSIDIARIESMANAGEMENTS DISCUSSION & ANALYSIS OFFINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

Components of Revenue and Expenses, continued

Cost of operations includes all costs directly
 attributable to our providing services to our customers. The most significant component
 of cost of operations is interchange and network fees, which represent amounts charged
 by the credit and debit networks. Interchange and network fees are billed primarily
 as a percentage of dollar volume processed and, to a lesser extent, as a transaction
 fee. This amount is a direct expense of the revenue component described above,
 so that when total dollar volume processed declines, due to lower ticket size or
 other reduction in total purchases, there is a corresponding decline in cost of
 operations. Cost of operations also includes telecommunications costs, personnel
 costs, occupancy costs, depreciation, the cost of equipment leased and sold, the
 cost of operating our debit network, and other miscellaneous merchant supplies and
 services expenses.

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



|                 | Three monthsended September 30, |       | Nine monthsended September 30,
|---------------- | ------------------------------- | ----- | ------------------------------
|                 |                                 |       |                               
|                 | 2002                            |       | 2001                          
|                 |                                 |       |                               
|Network Services | $                               | 115.1 |                               
|Payment Services |                                 | 306.0 |                               
|                 |                                 |       |                               
|Total            | $                               | 421.1 |                               
|                 |                                 |       |                               

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.

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##### Table of Contents



CONCORD EFS, INC. AND
 SUBSIDIARIESMANAGEMENTS DISCUSSION & ANALYSIS OFFINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

Results of Operations

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



|                                                 | Three months endedSeptember 30, |   | Nine months endedSeptember 30,
|------------------------------------------------ | ------------------------------- | - | ------------------------------
|                                                 |                                 |   |                               
|                                                 | 2002                            |   | 2001                          
|                                                 |                                 |   |                               
|Revenue                                          | 100.0                           | % |                               
|Cost of operations                               | 74.1                            |   |                               
|Selling, general and administrative expenses     | 5.5                             |   |                               
|Acquisition, restructuring and write-off charges |                                |   |                               
|Litigation settlement charges (credits)          | (1.9                            | ) |                               
|                                                 |                                 |   |                               
|Operating income                                 | 22.3                            |   |                               
|Other income                                     | 0.2                             |   |                               
|Net investment income                            | 3.1                             |   |                               
|                                                 |                                 |   |                               
|Income before taxes                              | 25.6                            |   |                               
|Income taxes                                     | 9.0                             |   |                               
|                                                 |                                 |   |                               
|Net income                                       | 16.6                            | % |                               
|                                                 |                                 |   |                               

Third Quarter 2002 Compared to 2001

Revenue in the third quarter 2002 increased
 30.3% to $568.3 million from $436.2 million in 2001. In the third quarter 2002 Network
 Services accounted for 36.8% of revenue, and Payment Services accounted for 63.2%.
 Network Services revenue in the third quarter 2002 increased 26.9% compared to 2001
 as a result of network price increases, the addition of new network and processing
 customers, and increases in transaction volumes from existing customers. The increased
 transaction volumes resulted primarily from increased use of STAR network debit cards
 for payment at the point of sale. Revenue from Payment Services in the third quarter
 2002 increased 32.3% compared to 2001, due primarily to increased transaction volumes.
 The increased volumes resulted from the addition of new merchants and the increased
 use of debit, EBT, and credit card transactions at new and existing merchants.

Cost of operations increased in the third
 quarter 2002 to 74.1% of revenue compared to 69.8% in 2001. This percentage increase
 was due primarily to increased interchange and network fees. These increases resulted
 from the addition of new lower margin merchants, the expansion of relationships
 with existing lower margin merchants, and price increases by the credit and debit
 networks.

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##### Table of Contents



CONCORD EFS, INC. AND
 SUBSIDIARIESMANAGEMENTS DISCUSSION & ANALYSIS OFFINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

Third Quarter 2002 Compared
 to 2001, continued

In the third quarter 2002
 selling, general and administrative expenses increased as a percentage of revenue
 to 5.5% from 5.1% in 2001. Overall, selling, general and administrative expenses
 increased to $31.2 million in the third quarter 2002 from $22.3 million in 2001.
 This increase is primarily attributable to the expenses related to the acquisition
 of the H & F Services sales force, increased headcount, and expenses related
 to the Logix and Core Data acquisitions.

We reduced our litigation
 settlement charges by $11.0 million in the third quarter 2002. There were no such
 charges in the third quarter 2001. The charges represent credits and payments to
 merchants and former merchants, legal expenses, and claims administration expenses
 in connection with a settlement agreement relating to a purported class action lawsuit
 alleging that certain rate and fee charges were improper under Tennessee law due
 to allegedly deficient notice. The reduction was due to the low
number of valid claims actually submitted.

Excluding the litigation
 settlement credit, operating income as a percentage of revenue decreased to 20.4%
 in the third quarter 2002 compared to 25.1% in 2001. This decrease was due to the
 addition of lower margin revenue from large merchants and increased selling, general
 and administrative expenses.

Other income as a percentage
 of revenue was 0.2% in the third quarter of both 2002 and 2001.

Net investment income decreased
 as a percentage of revenue to 3.1% in the third quarter 2002 compared to 3.7% in
 2001. Overall, net investment income increased 8.7% to $17.6 million in the third
 quarter 2002 compared to $16.2 million in 2001. This increase resulted primarily
 from increased investments in various securities of available cash flow from operations
 offset by lower than anticipated rates of return. Net investment income includes
 $1.8 million of unrealized gains and losses from alternative investments in the
 third quarter of 2002.

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

Net income as a percentage
 of revenue decreased to 16.6% in the third quarter 2002 from 18.7% in 2001. Excluding
 the litigation settlement credit, net income as a percentage of revenue decreased
 to 15.3% in the third quarter 2002 compared to 18.7% in 2001. This decrease is
 the result of lower operating margins, increased selling, general and administrative
 expenses, and decreased net investment income as a percentage of revenue.

A slower than anticipated
 economy and a significant increase in our implementation backlog, which measures
 new contract revenue not yet implemented, have had an impact on our results of operations
 in the third quarter of 2002. The delay in implementations is attributable to our
 continuing migration of existing customers between our various processing platforms.
 In addition, we have experienced larger than anticipated merchant losses and lower
 than forecasted September transactions.

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CONCORD EFS, INC. AND
 SUBSIDIARIESMANAGEMENTS DISCUSSION & ANALYSIS OFFINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

Nine Months Ended September
 30, 2002 Compared to 2001

Revenue in the nine months
 ended September 30, 2002 increased 27.4% to $1,568.6 million from $1,230.9 million
 in 2001. In the nine months ended September 30, 2002 Network Services accounted
 for 38.3% of revenue, and Payment Services accounted for 61.7%. Network Services
 revenue in the nine months ended September 30, 2002 increased 28.0% compared to
 2001 as a result of network price increases, the addition of new network and processing
 customers, and increases in transaction volumes from existing customers. The increased
 transaction volumes resulted primarily from increased use of STAR network debit cards
 for payment at the point of sale. Revenue from Payment Services in the nine months
 ended September 30, 2002 increased 27.1% compared to 2001, due primarily to increased
 transaction volumes. The increased volumes resulted from the addition of new merchants
 and the increased use of debit, EBT, and credit card transactions at new and existing
 merchants.

Cost of operations increased
 in the nine months ended September 30, 2002 to 71.8% of revenue compared to 71.0%
 in 2001. This percentage increase was due to increased interchange and network
 fees partially offset by improvements in operating efficiencies and economies of
 scale. The increased interchange and network fees resulted from the addition of
 new lower margin merchants, the expansion of relationships with existing lower margin
 merchants, and price increases by the credit and debit networks.

Selling, general and administrative
 expenses as a percentage of revenue was 5.6% in the nine months ended September
 30, 2002 and 2001. Overall, selling, general and administrative expenses increased
 to $88.4 million in the nine months ended September 30, 2002 from $69.5 million
 in 2001. This increase is primarily attributable to the expenses related to the
 acquisition of the H & F Services sales force, increased headcount, and expenses
 related to the Logix and Core Data acquisitions.

Acquisition, restructuring
 and write-off charges decreased to $76.5 million in 2002 from $125.4 million in
 2001. In the second quarter of 2002 we initiated a plan in conjunction with the
 Core Data acquisition and continued consolidation initiatives to improve overall
 operating efficiencies. The plan includes contract terminations, exiting a non-strategic
 business, closing and consolidating certain facilities, eliminating 24 positions,
 and writing off impaired assets. The charge of $29.0 million ($18.9 million, net
 of taxes) consisted of $16.8 million for contract terminations, $4.1 million for
 exiting a non-strategic business, $1.0 million for closing and consolidating certain
 facilities, and $0.7 million for compensation and severance. In addition, the charge
 included stock compensation charges of $4.8 million related to the modification
 of stock options of terminated employees and asset impairment charges of $1.6 million
 recorded as an adjustment to the write-off of non-performing purchased merchant
 contracts.

In the first quarter of
 2002 we initiated a consolidation plan to continue improvements in overall operating
 efficiency and integrate recent acquisitions. The plan includes closing and consolidating
 certain facilities, exiting several non-strategic businesses, eliminating approximately
 165 positions, and writing off impaired assets. The charge of $47.5 million ($30.6
 million, net of taxes) consisted of $6.7 million for closing and consolidating certain
 facilities, $5.9 million for compensation and severance, and $4.5 million for exiting
 non-strategic businesses. In addition, asset impairment charges of $22.5 million
 were incurred for the write-off of non-performing purchased

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##### Table of Contents



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

Nine Months Ended September
 30, 2002 Compared to 2001, continued

merchant
contracts identified in the first
 quarter and $7.9 million was incurred for the write-off of capitalized software
 and computer and communications equipment no longer in use.

Litigation settlement charges
 were $9.8 million in the nine months ended September 30, 2002. There were no such
 charges in the nine months ended September 30, 2001. The charges represent credits
 and payments to merchants and former merchants, legal expenses, and claims administration
 expenses in connection with a settlement agreement relating to a purported class
 action lawsuit alleging that certain rate and fee charges were improper under Tennessee
 law due to allegedly deficient notice.

Excluding acquisition, restructuring,
 write-off, and litigation settlement charges, operating income as a percentage of
 revenue decreased to 22.6% in the nine months ended September 30, 2002 from 23.3%
 in 2001. This decrease in operating income resulted from the addition of lower
 margin revenue from large merchants partially offset by improved efficiencies and
 economies of scale.

Other income increased as
 a percentage of revenue to 0.5% in the nine months ended September 30, 2002 from
 0.2% in 2001. This increase resulted from the sale of certain terminal hardware
 and related future rental payments in the second quarter of 2002.

Net investment income as
 a percentage of revenue was 3.3% in the nine months ended September 30, 2002 and
 2001. Overall, net investment income increased 25.6% to $50.9 million in the nine
 months ended September 30, 2002 compared to $40.5 million in 2001. This increase
 resulted primarily from increased investments in various securities of available
 cash flow from operations plus approximately $420.6 million in proceeds from our
 June 2001 stock offering offset by lower than anticipated rates of return. Net investment
 income includes $1.8 million of unrealized gains and losses from alternative investments
 in the nine months ended September 30, 2002.

Our overall tax rate decreased
 to 35.1% in the nine months ended September 30, 2002 compared to 38.2% in 2001.
 Excluding acquisition, restructuring, write-off, and litigation settlement charges,
 the tax rate was 35.2% in 2002 and 35.5% in 2001.

Net income as a percentage
 of revenue increased to 13.5% in the nine months ended September 30, 2002 from 10.3%
 in 2001. Excluding acquisition, restructuring, write-off, and litigation settlement
 charges, net income as a percentage of revenue was 17.1% in 2002 compared to 17.3%
 in 2001.

A slower than anticipated
 economy, lower than anticipated ticket size, and a significant increase in our implementation
 backlog, which measures new contract revenue not yet implemented, have had an impact
 on our results of operations in the third quarter of 2002. The delay in implementations
 is attributable to our continuing migration of existing customers between our various
 processing platforms. In addition, we have experienced larger than anticipated
 merchant losses and lower than forecasted September transactions.

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CONCORD EFS, INC. AND
 SUBSIDIARIESMANAGEMENTS DISCUSSION & ANALYSIS OFFINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

Liquidity and Capital Resources



In the nine months ended
 September 30, 2002 we generated $366.5 million from operating activities excluding
 the timing of settlement operations. Including the timing of settlement operations,
 we generated $334.1 million in operating activities. We received $97.8 million
 in proceeds from Federal Home Loan Bank advances, net of payments, $53.5 million
 from sales of loans, and $22.8 million from stock issued for exercises of options
 under our stock option plan. We liquidated $24.3 million in securities, net of
 purchases and maturities, and invested $195.5 million in alternative investments.
 We spent $100.4 million on capital additions, $68.4 million repurchasing our common
 stock, and $17.2 million for business acquisitions. Our capital additions were
 primarily for capitalized and purchased software and computer facilities and equipment.

As of September 30, 2002
 our assets were primarily monetary, consisting of cash, assets convertible into
 cash, securities, alternative investments, and receivables. Because of their liquidity,
 these assets are not significantly affected by inflation; however, earnings and
 asset values are impacted by the interest rate environment. We believe that anticipated
 replacement costs of software, facilities, and equipment will not materially affect
 operations. However, the rate of inflation affects our expenses, such as those
 for employee compensation and telecommunications, which may not be readily recoverable
 in the price of services offered by us.

As of September 30, 2002
 our investment in alternative investments totaled $197.4 million in two hedge fund-of-funds
 entities. A total of 85 individual hedge funds are included in our fund-of-funds
 investments. In response to negative perceptions among shareholders of potential
 risks, on August 9, 2002, we announced we would be liquidating these alternative
 investments in an orderly process which began immediately after the announcement
 and will take place over the next two quarters. Under the terms of the investment
 agreements, all of the funds require advance notice to redeem and withdraw our investment.
 These notices to redeem are required to be given from 30 to 60 days prior to the
 end of a quarter. There were no redemption fees required to be paid by us as a
 result of our negotiations to exit the funds. As of October 31, 2002 cash redemptions
 of $120.1 million have been received from the liquidation process, with an additional
 amount of $57.3 million expected to be received in the last two months of 2002 and
 the remainder expected to be received in the first quarter of 2003.

On August 5, 2002 we announced
 that our Board of Directors approved the repurchase of up to $250.0 million of our
 common stock. Under the repurchase plan, we may buy back shares of our outstanding
 stock from time to time either on the open market or through privately negotiated
 transactions. As of September 30, 2002 a total of 4.5 million shares at an aggregate
 cost of $68.4 million had been purchased and retired pursuant to the repurchase
 plan. On November 7, 2002 we announced that our Board of
Directors approved the repurchase of an additional
$150.0 million of our common stock. The Boards approval brings
the total potential repurchase to $400.0 million.

During the third quarter
 we entered into agreements for the financing, construction and leasing of a new
 corporate headquarters in Memphis, Tennessee with an estimated total cost of $55.0
 million. The agreements qualify for operating lease accounting treatment under Statement
 of Financial Accounting Standards 13, Accounting For Leases, and, as
 such, the related assets and obligations are not recorded on our balance sheet.
 The term of the lease is seven years. Upon the completion of
construction, which is expected
 in the fourth quarter of 2003, rent payments will begin and will be expensed in
 our statement of income. The anticipated minimum lease payments

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CONCORD EFS, INC. AND
 SUBSIDIARIESMANAGEMENTS DISCUSSION & ANALYSIS OFFINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

Liquidity and Capital Resources,
 continued

under these agreements
 are not material to us. At the end
 of the lease term, we have options which include the renewal of the lease and a
 fixed-price purchase option on the land and facility. We have guaranteed the residual
 value of the land and facility at the end of the lease term to the owner / lessor.
 Under this guarantee, we would be responsible for a decline in fair value during
 the lease term up to an estimated maximum amount of approximately $45.9 million.
 Based on current market conditions, we do not expect to be required to make payments
 under this residual value guarantee. We also hold separate agreements
 with similar provisions on properties we currently occupy in Wilmington, Delaware
 and Atlanta, Georgia. The combined total cost financed under these agreements at
 their inception was approximately $35.0 million.

We believe that our cash
 and cash equivalents, securities, available credit (unused lines of credit with
 the Federal Home Loan Bank and unsecured lines of credit with financial institutions),
 and cash generated from operations are adequate to meet our capital and operating
 needs. EFS National Bank, our wholly owned financial institution subsidiary, exceeded
 the required regulatory capital ratios.

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CONCORD EFS, INC. AND
 SUBSIDIARIESQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative
 Disclosures About Market Risk

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

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CONCORD EFS, INC. AND
 SUBSIDIARIESCONTROLS AND PROCEDURES

Controls and Procedures

Based on their evaluation
 as of a date within 90 days prior to the filing of this quarterly report on Form
 10-Q, our Chief Executive Officer, President, and Chief Financial Officer have concluded
 that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)
 under the Securities Exchange Act of 1934, as amended) are effective. As of the
 date of this quarterly report on Form 10-Q, there have been no significant changes
 in our internal controls or in other factors that could significantly affect internal
 controls subsequent to the date of such evaluation, including any corrective actions
 with regard to significant deficiencies and material weaknesses.

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##### Table of Contents






CONCORD EFS, INC. AND
 SUBSIDIARIESPART IIOTHER INFORMATION




Item 1.    Legal Proceedings

From time to time Concord
 is involved in various litigation matters arising out of the conduct of its business.
 Pending proceedings and developments that may be considered material were reported
 in our annual report on Form 10-K for the year ended December 31, 2001 (filed on
 February 26, 2002), our quarterly report on Form 10-Q for the quarter ended March
 31, 2002 (filed on May 9, 2002), our current report on Form 8-K (filed on May 16,
 2002), and our quarterly report on Form 10-Q for the quarter ended June 30, 2002
 (filed on August 8, 2002). During the quarter ended September 30, 2002, there were
 no material developments in any litigation matter previously disclosed except for
 the developments discussed below.

As previously disclosed,
 in September 2000 EFS National Bank was named as a defendant in a purported class
 action lawsuit filed in the Circuit Court of Tennessee for the Thirtieth Judicial
 District at Memphis alleging that certain of EFS National Banks rate and fee
 changes were improper under Tennessee law due to allegedly deficient notice. On
 May 14, 2002 the plaintiffs filed a second amended complaint alleging that the class
 consists of over 100,000 merchants who were subjected to the allegedly improper
 rate and fee changes over a several-year period. The second amended complaint sought
 damages in excess of $70.0 million as well as injunctive relief and unspecified
 punitive damages, treble damages, attorney fees, and costs.

As previously disclosed,
 on May 16, 2002 the parties entered into a settlement agreement relating to this
 litigation and received preliminary approval from the trial court therefor. On
 August 6, 2002 the trial court rejected the only objection filed against the settlement
 agreement and gave the settlement agreement its final approval. The
objector and his counsel subsequently
 reached an agreement with EFS National Bank, plaintiffs and counsel for the plaintiffs, pursuant to which EFS National
 Bank contributed $50,000. As a result, no appeal was taken, and thus the settlement
 is now final and unappealable. The maximum amount of the credits and payments by
 EFS National Bank under the settlement is $37.6 million, payable over a five-year
 period.

It appears that the total
 cost to EFS National Bank of the settlement will be significantly less than $37.6
 million. On September 17, 2002 EFS National Bank paid plaintiffs counsel
 and the named plaintiffs a total of $5.0 million, as required by the settlement
 agreement. The deadline for the submission of claims by class members was September
 16, 2002. Approximately 150,000 class members were eligible to make claims, but
 less than 3,000 valid claims were actually submitted. In the fourth quarter the
 court-appointed claims administrator is expected to submit a report on the total
 amount of the valid claims submitted. EFS National Bank is also responsible for
 the costs of claims administration and for its own costs and expenses, including
 attorneys fees.

A purported class action
 complaint with similar allegations and requests for relief was filed in St. Charles
 County, Missouri. That action was dismissed with prejudice in connection with the
 settlement of the Tennessee case.

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##### Table of Contents



CONCORD EFS, INC. AND
 SUBSIDIARIESPART IIOTHER INFORMATION

Item 1.    Legal Proceedings,
 continued

The following table lists
 certain information with respect to the securities fraud purported class action
 lawsuits and shareholder derivative actions filed as of
November 8, 2002 against Concord and various of
 its officers and directors:



|Name
 of Plaintiff                                            | Filing
 Date           | Type
 of Case    
|------------------------------------------------------------- | ---------------------- | -----------------
|                                                              |                        |                  
|Matt L. Brody                                                 | September
 6, 2002*    | Securities
 Fraud
|James Weir
 and Chemical Valley Pension Fund of West Virginia | September
 9, 2002**   | Derivative       
|Colbert Birnet,
 L.P.                                         | September
 12, 2002*   | Securities
 Fraud
|Carolyn France                                                | September
 12, 2002**  | Derivative       
|Terry Prince                                                  | September
 13, 2002*   | Derivative       
|Stanley Tseng                                                 | September
 16, 2002*   | Derivative       
|Marc Abrams                                                   | September
 20, 2002*   | Securities
 Fraud
|John Morgan                                                   | September
 20, 2002**  | Derivative       
|Michele Rafkin                                                | September
 25, 2002*** | Derivative       
|Jason Counts                                                  | October 1,
 2002*      | Securities
 Fraud
|Gerald Goldberg                                               | October 22,
 2002***   | Derivative       
|Dan Miller                                                    | October 24,
 2002****  | Derivative       
|Kathy Schmersahl                                              | October 24,
 2002*     | Securities Fraud 
|John
Norwood                                                  | November 4,
2002*      | Securities Fraud 
|GF
Partnership                                                | November 6,
 2002*     | Securities Fraud 

---

*    Filed in the United States
 District Court for the Western District of Tennessee**    Filed in Tennessee state
 court in Memphis (Circuit Court)***    Filed in Tennessee state court in Memphis
 (Chancery Court)****    Filed in Delaware state court in New Castle County (Chancery
 Court)

The lawsuits all raise allegations
 relating to Concords financial performance between October 2001 and September
 2002, changes in the price of Concords common stock during that time, alleged
 failures to disclose material facts, and alleged insider trading by certain officers
 and directors. The lawsuits seek unspecified compensatory and punitive damages,
 attorneys fees, and injunctive and other relief. Certain of
these lawsuits have been consolidated. Although these matters are
 in the preliminary stages, Concord believes that the claims against it and its directors
 and officers are without merit and intends to vigorously defend against all claims.

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CONCORD EFS, INC. AND
 SUBSIDIARIESPART IIOTHER INFORMATION




Item 6.    Exhibits and Reports
 on Form 8-K

(a)    Exhibits



|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description
 of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3.1     |  | Restated Certificate
 of Incorporation of Concord EFS, Inc. is incorporated herein by reference to Exhibit
 4.1 to Concords registration statement on Form S-8 (File No. 333-90678), filed
 on June 18, 2002.                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3.2     |  | Amended and
 Restated Bylaws of Concord EFS, Inc. are incorporated herein by reference to Exhibit
 4.2 to Concords registration statement on Form S-8 (File No. 333-74215), filed
 on March 10, 1999.                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.1    |  | Master Agreement,
 dated as of July 12, 2002, among Concord EFS, Inc., Electronic Payment Services,
 Inc., Star Systems, LLC, certain subsidiaries of Concord EFS, Inc. that may become
 a party to such agreement, Atlantic Financial Group, Ltd., certain financial institutions,
 and SunTrust Bank                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.2    |  | Master Lease
 Agreement, dated as of July 12, 2002, among Atlantic Financial Group, Ltd., Concord
 EFS, Inc., and certain subsidiaries of Concord EFS, Inc.                                                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.3    |  | Construction
 Agency Agreement, dated as of July 12, 2002, between Atlantic Financial Group, Ltd.
 and Concord EFS, Inc.                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.4    |  | Loan Agreement,
 dated as of July 12, 2002, between Atlantic Financial Group, Ltd. and SunTrust Bank                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.5    |  | Guaranty Agreement,
 dated as of July 12, 2002, from Concord EFS, Inc. to Atlantic Financial Group, Ltd.
 and certain financial institutions                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.6    |  | Letter agreement,
 dated September 11, 2002, between Concord EFS, Inc. and J. Richard Buchignani                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.7    |  | Letter
 agreement, dated August 30, 2002, between Concord EFS, Inc. and Bond Isaacson, including
 the accompanying Sign-On Bonus Re-Pay Agreement, dated
November 9, 2002, between
 Concord EFS, Inc. and Bond Isaacson (Confidential material appearing in this document
 was omitted and filed separately with the Securities and Exchange Commission in
 accordance with the Securities and Exchange Act of 1934, as amended, and 17 C.F.R.
 240.24b-2 and 200.80. Omitted information was replaced with asterisks.)
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.1    |  | Certification
 of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
 2002                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.2    |  | Certification
 of President Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.3    |  | Certification
 of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
 2002                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.4    |  | Cautionary
 Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

(b)    Reports on Form 8-K

On August 8, 2002 we filed
 a current report on Form 8-K to report, under Item 9 of that form, the submission
 to the Securities and Exchange Commission of sworn statements by each of our Principal
 Executive Officer, Dan M. Palmer, and Principal Financial Officer, Edward T. Haslam,
 in accordance with the Securities and Exchange Commission Order No. 4-460.

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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: November
 13, 2002 |  | By: /s/ Dan
 M. Palmer                 
|                         |  |                                        
|                         |  | Dan M. Palmer                          
|                         |  | Chairman of
 the Board and             
|                         |  | Chief Executive
 Officer               
|                         |  |                                        
|                         |  |                                        
|Date: November
 13, 2002 |  | By: /s/ Edward
 T. Haslam              
|                         |  |                                        
|                         |  | Edward T.
 Haslam                      
|                         |  | Senior Vice
 President,                
|                         |  | Chief Financial
 Officer, and Treasurer

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CERTIFICATION

I,
Dan M.
 Palmer, certify that:

1.     I have
 reviewed this quarterly report on Form 10-Q of Concord EFS, Inc. (the registrant);

2.     Based on
 my knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;

3.     Based on
 my knowledge, the financial statements, and other financial information included
 in this quarterly report, fairly present in all material respects the financial
 condition, results of operations and cash flows of the registrant as of, and for,
 the periods presented in this quarterly report;

4.     
The registrants
 other certifying officers and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the registrant and we have:

a)
     designed
 such disclosure controls and procedures to ensure that material information relating
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;

b)
     evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and

c)
     presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;

5.     The
 registrants other certifying officers and I have disclosed, based on our most recent
 evaluation, to the registrants auditors and the audit committee of registrants
 board of directors (or persons performing the equivalent function):

a)
     
all significant deficiencies in the design or operation of internal controls which could adversely
 affect the registrants ability to record, process, summarize and report financial
 data and have identified for the registrants auditors any material weaknesses
 in internal controls; and

b)
     any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the registrants internal controls; and

6.     
The registrants other certifying officers and I have indicated in this quarterly report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.



|Date | November
 13, 2002      
|---- | ------------------------
|     |                         
|By   | /s/ Dan
 M. Palmer      
|     |                         
|     | Dan M. Palmer           
|     | Chief Executive
 Officer

-34-



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##### Table of Contents



CERTIFICATION

I, Edward
 A. Labry III, certify that:

1.     I have
 reviewed this quarterly report on Form 10-Q of Concord EFS, Inc. (the registrant);

2.     Based on
 my knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;

3.     Based on
 my knowledge, the financial statements, and other financial information included
 in this quarterly report, fairly present in all material respects the financial
 condition, results of operations and cash flows of the registrant as of, and for,
 the periods presented in this quarterly report;

4.     The registrants
 other certifying officers and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the registrant and we have:

a)
     designed
 such disclosure controls and procedures to ensure that material information relating
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;

b)
     evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and

c)
     presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;

5.     
The registrants other certifying officers and I have disclosed, based on our most recent
 evaluation, to the registrants auditors and the audit committee of registrants
 board of directors (or persons performing the equivalent function):

a)
     all significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the registrants ability to record, process, summarize and report financial
 data and have identified for the registrants auditors any material weaknesses
 in internal controls; and

b)
     any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the registrants internal controls; and

6.
     The registrants other certifying officers and I have indicated in this quarterly
 report whether or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.



|Date | November
 13, 2002      
|---- | ------------------------
|     |                         
|By   | /s/ Edward
 A. Labry III
|     |                         
|     | Edward A.
 Labry III    
|     | President               

-35-



---



##### Table of Contents



CERTIFICATION

I, Edward
 T. Haslam, certify that:

1.     I have
 reviewed this quarterly report on Form 10-Q of Concord EFS, Inc. (the registrant);

2.     Based on
 my knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;

3.     Based on
 my knowledge, the financial statements, and other financial information included
 in this quarterly report, fairly present in all material respects the financial
 condition, results of operations and cash flows of the registrant as of, and for,
 the periods presented in this quarterly report;

4.     
The registrants other certifying officers and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the registrant and we have:

a)
     designed
 such disclosure controls and procedures to ensure that material information relating
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;

b)
     evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and

c)
     presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;

5.     
The registrants other certifying officers and I have disclosed, based on our most recent
 evaluation, to the registrants auditors and the audit committee of registrants
 board of directors (or persons performing the equivalent function):

a)
     all significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the registrants ability to record, process, summarize and report financial
 data and have identified for the registrants auditors any material weaknesses
 in internal controls; and

b)
     any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the registrants internal controls; and

6.     
The registrants other certifying officers and I have indicated in this quarterly report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.



|Date | November
 13, 2002      
|---- | ------------------------
|     |                         
|By   | /s/ Edward
 T. Haslam   
|     |                         
|     | Edward T.
 Haslam       
|     | Chief Financial
 Officer

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##### Table of Contents






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



|ExhibitNumber |  | Description
 of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3.1           |  | Restated Certificate
 of Incorporation of Concord EFS, Inc. is incorporated herein by reference to Exhibit
 4.1 to Concords registration statement on Form S-8 (File No. 333-90678), filed
 on June 18, 2002.                                                                                                                                                                                                                                                                                                         
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3.2           |  | Amended and
 Restated Bylaws of Concord EFS, Inc. are incorporated herein by reference to Exhibit
 4.2 to Concords registration statement on Form S-8 (File No. 333-74215), filed
 on March 10, 1999.                                                                                                                                                                                                                                                                                                                 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.1          |  | Master Agreement,
 dated as of July 12, 2002, among Concord EFS, Inc., Electronic Payment Services,
 Inc., Star Systems, LLC, certain subsidiaries of Concord EFS, Inc. that may become
 a party to such agreement, Atlantic Financial Group, Ltd., certain financial Institutions,
 and SunTrust Bank                                                                                                                                                                                                                 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.2          |  | Master Lease
 Agreement, dated as of July 12, 2002, among Atlantic Financial Group, Ltd., Concord
 EFS, Inc., and certain subsidiaries of Concord EFS, Inc.                                                                                                                                                                                                                                                                                                                                                            
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.3          |  | Construction
 Agency Agreement, dated as of July 12, 2002, between Atlantic Financial Group, Ltd.
 and Concord EFS, Inc.                                                                                                                                                                                                                                                                                                                                                                                               
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.4          |  | Loan Agreement,
 dated as of July 12, 2002, between Atlantic Financial Group, Ltd. and SunTrust Bank                                                                                                                                                                                                                                                                                                                                                                                                                   
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.5          |  | Guaranty Agreement,
 dated as of July 12, 2002, from Concord EFS, Inc. to Atlantic Financial Group, Ltd.
 and certain financial institutions                                                                                                                                                                                                                                                                                                                                                                           
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.6          |  | Letter agreement,
 dated September 11, 2002, between Concord EFS, Inc. and J. Richard Buchignani                                                                                                                                                                                                                                                                                                                                                                                                                       
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.7          |  | Letter
 agreement, dated August 30, 2002, between Concord EFS, Inc. and Bond Isaacson, including
 the accompanying Sign-On Bonus Re-Pay Agreement, dated November 9, 2002, between
 Concord EFS, Inc. and Bond Isaacson (Confidential material appearing in this document
 was omitted and filed separately with the Securities and Exchange Commission in
 accordance with the Securities and Exchange Act of 1934, as amended, and 17 C.F.R.
 240.24b-2 and 200.80. Omitted information was replaced with asterisks.)
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.1          |  | Certification
 of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
 2002                                                                                                                                                                                                                                                                                                                                                                                                                   
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.2          |  | Certification
 of President Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.3          |  | Certification
 of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
 2002                                                                                                                                                                                                                                                                                                                                                                                                                   
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.4          |  | Cautionary
 Statements