<PAGE>   1
                                                                      EXHIBIT 13

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                     1999                1998                  1997               1996              1995
                                  -----------         -----------           -----------       -----------       -----------
                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  <S>                 <C>                   <C>               <C>               <C>
Revenues                          $ 1,466,639         $ 1,145,664           $   680,872       $   529,279       $   292,698
Net income (loss)                      82,468             (12,779)               37,899            19,148            11,265
Total assets                          734,011             622,533               426,432           341,323           150,153
Total long-term debt                  238,253              23,025                52,001            22,175            50,176
Per common share:
Earnings-Basic                           1.16               (0.18)                 0.60              0.32              0.25
         Diluted                         1.14               (0.18)                 0.58              0.32              0.25
Cash dividends declared
</TABLE>


     This summary unaudited combined condensed financial information reflects
the September 1998 PMT Merger which was accounted for as a pooling-of-interests;
accordingly, the separate historical financial results of NOVA and PMT have been
combined in this table and throughout the Annual Report.




<PAGE>   2

                                                                      EXHIBIT 13


          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

OVERVIEW

     Since the incorporation of NOVA's predecessor, NOVA Information Systems, in
February 1991, NOVA Corporation has grown in dollar volume processed to the
third largest integrated transaction processor in the United States, leading to
significant increases in revenues and improved operating efficiencies. This
growth has been fueled by NOVA's marketing programs, the merger with PMT
Services, Inc. (PMT) in September 1998, and through a series of strategic
merchant portfolio purchases and acquisitions, joint venture agreements, and
long-term banking alliances that provide a channel for merchant portfolio
purchases, as well as long-term exclusive marketing arrangements.

     NOVA's merger with PMT, portfolio purchases, joint venture investments, and
marketing alliances provide significant strategic and financial benefits
including: (1) enhanced distribution channels to facilitate growth in
transaction volume, (2) expansion of the number of merchant locations served,
(3) further geographic diversification of NOVA's portfolio, and (4) economies of
scale derived from substantial increases in transaction processing volume.

     The PMT merger in September 1998, enabled NOVA to integrate two unique
sales channels, PMT's ISO relationships and NOVA's traditional bank channel,
while leveraging NOVA's existing in-house technologies. Following the PMT
merger, NOVA has continued to focus on the processing sector comprised primarily
of small to medium-sized merchants, who historically have been overlooked and
could benefit from the advantages of value-added services usually offered only
to large merchants. From its origin, NOVA has invested significant capital to
develop, expand and enhance an integrated technology platform of hardware,
software applications and network telecommunications infrastructure to process
large volumes of transactions.

     During 1999 NOVA focused significant efforts on consolidating and
integrating PMT's numerous operational and administrative functions into NOVA's
centralized structure. This process, which was substantially completed during
1999, not only eliminated future duplication of costs, but also streamlined all
aspects of managing NOVA. An integral component of this consolidation process
was the conversion of PMT's merchant base onto the NOVA Network. While the
conversion of the PMT merchants enabled consolidation by facilitating a uniform
approach and methodology for all functional areas of the Company, the primary
benefit of conversion results from the economies of scale and operating
efficiencies achieved by further utilizing the NOVA Network.

     Another significant factor influencing 1999 operating results is the
realization of the benefits from 1998 conversion efforts. During 1998 and late
1997, NOVA completed four major merchant portfolio purchases: Key Merchant
Services, LLC (KMS) in January 1998, a joint venture with KeyBank, N.A.; Elan
Merchant Services, LLC (Elan) in October 1997, a joint venture with Firstar
Bank, U.S.A, N.A.; the CoreStates portfolio (CoreStates) in October 1998,
purchased from First Union National Bank of Delaware; and the MBNA portfolio
(MBNA) in December 1997, purchased from MBNA American Bank, N.A. KMS, Elan,
CoreStates and MBNA represented $5.1 billion, $3.0 billion, $3.1 billion and
$1.0 billion, respectively, in annualized credit and debit card processing
volume at the times of the transactions. During 1998 and early 1999, NOVA
completed the conversions to the NOVA Network of merchants represented by these
investments.

MERGER AND CONSOLIDATION CHARGES

     As a result of NOVA's merger with PMT and other mergers completed during
1998, the Company recorded a $90.7 million charge in 1998. This charge was
primarily related to direct merger transaction costs, charges associated with
the consolidation and closure of PMT's corporate headquarters and certain
operating

                                      2
<PAGE>   3

subsidiaries, contract termination costs related to unfavorable third party
processing contracts, and the decision to exit certain of PMT's sales
distribution channels. Beginning in 1998 and continuing throughout 1999,
management executed substantially all parts of the plan for PMT's integration
and consolidation, making refinements to the plan as additional facts and
circumstances became available. During 1999, revisions to the plan resulted in
the reversal of approximately $6.5 million in charges accrued in 1998 that were
not needed under the revised plan and additional costs of approximately $6.7
million to recognize the costs of executing revised elements of the plan. The
consolidation and integration charges recorded in 1999 exceeded the reversal of
1998 charges by approximately $180,000, with such excess charges reflected in
the operating results for 1999.

     The following is a summary of the activity recorded relating to merger and
consolidation charges:

<TABLE>
<CAPTION>
                                                       BALANCE    REVERSAL                        BALANCE
                                   1998     PAYMENTS      AT         OF       1999     PAYMENTS      AT
                                  CHARGES   APPLIED    12/31/98   ACCRUALS   CHARGES   APPLIED    12/31/99
                                  -------   --------   --------   --------   -------   --------   --------
                                                               (IN THOUSANDS)
<S>                    <C>        <C>       <C>        <C>        <C>        <C>       <C>        <C>
Direct transaction
  costs..............  Cash       $15,515   $(11,412)  $ 4,103    $    --    $  241    $ (4,344)   $   --
Severance packages...  Cash        14,050     (1,404)   12,646     (2,149)    1,591      (8,297)    3,791
Lease abandonment....  Cash         4,658         --     4,658       (280)    2,968      (2,324)    5,022
Contract termination
  charges............  Cash        35,506    (13,689)   21,817     (3,621)       --     (18,196)       --
Asset write-down.....  Non-cash     7,121     (7,121)       --         --     1,863      (1,863)       --
Costs to exit a
  distribution
  channel............  Non-cash    11,370    (11,370)       --         --        --          --        --
Costs to exit a
  distribution
  channel............  Cash         2,500         --     2,500       (434)       --      (2,066)       --
                                  -------   --------   -------    -------    ------    --------    ------
                                  $90,720   $(44,996)  $45,724    $(6,484)   $6,663    $(37,090)   $8,813
                                  =======   ========   =======    =======    ======    ========    ======
</TABLE>

     The primary costs associated with consolidation and closure of facilities
include employee and executive severance, estimated unrecoverable future lease
obligations on vacated facilities, and the write-down of capital assets to their
net realizable value. The consolidation and closure actions result from the
elimination of overlapping functions, primarily customer service, accounting,
and administrative areas.

     Direct Transaction Costs.  Direct merger transaction costs primarily
consisted of investment banking commissions, professional fees, and regulatory
filing expenses. During 1999, approximately $241,000 of merger related
professional fees were incurred in excess of amounts accrued in 1998.

     Severance Packages.  During 1998, management developed and began
implementing plans to close PMT's corporate headquarters, as well as downsize
certain of PMT's operating subsidiaries. As of December 31, 1998, the only
significant employee group notified of such plans was at the corporate
headquarters and certain executives. Accordingly, the costs associated with
these terminations were the only severance costs included in the 1998 charge.
The total number of employees terminated from this group was approximately 275,
with 210 having received severance packages as of December 31, 1998. Of these
employees, certain executives' severance is being paid over two years. The
remaining employees in this group were displaced during the first quarter of
1999, with all severance benefits paid at that time. During 1999, management was
able to settle termination related benefits associated with certain executives
at amounts less than originally agreed, accounting for substantially all of the
reversal in this merger charge category.

     During 1999, decisions were made to close or downsize additional facilities
to further streamline the operating and administrative functions. These actions
resulted in the termination of approximately 183 employees, of which 179
received severance packages totaling approximately $1.4 million as of December
31, 1999. The remaining four individuals, with total severance payments due of
approximately $160,000, were notified of their termination during 1999, but
received their severance payments in January 2000. The

                                      3
<PAGE>   4

remaining severance accrued in the December 31, 1999 merger reserve balance
relates to executives whose terminations were effective and accrued for during
1998 and whose severance will be fully paid by mid-2001.

     Lease Abandonment.  The Company began the process of moving PMT's
operations from Nashville, Tennessee to other locations in December 1998, and
completed this process in the first quarter of 1999, at which time the premises
in Nashville were completely vacated. The 1998 charge included the estimated
unrecoverable future lease obligations for primarily PMT's Nashville
headquarters. By December 1999 the facility was fully subleased, facilitating an
accurate assessment of future unrecoverable lease obligations. Based on the
updated assessment, approximately $280,000 of the original merger and
consolidation charge was reversed. During 1999, plans were made to close or
downsize additional facilities. These decisions resulted in additional accruals
of approximately $3.0 million covering ten locations, eight of which have been
closed or downsized during 1999. The remaining two facilities will be closed or
downsized during 2000. Obligations under leases included in the reserve balance
will not be fully paid out until August 2007.

     Contract Termination Charges.  Consistent with past practice, management
developed a plan in 1998 to convert the front-end and back-end transaction
processing of PMT's merchants to the NOVA Network. As a result of this plan, in
1998 the Company negotiated the termination of long-term processing contracts
with third parties. The majority of these terminations were finalized and paid
in 1998. During 1999, management was able to successfully terminate one of the
contracts without incurring the $2.0 million penalty recognized in 1998. Based
on new facts and circumstances arising in 1999, management also determined that
the economic benefits of terminating another contract did not outweigh the early
termination costs. Accordingly, approximately $3.9 million of contract
termination charges were reversed to appropriately reflect these events.

     Asset Write-Down.  Capital asset write-downs are substantially attributable
to the computer software and equipment including PMT's management information
and financial reporting systems. Additional assets written down include
telephone systems, and office furniture and equipment that will not be
redeployed for use at another NOVA facility. Charges recorded in 1998 were
associated primarily with PMT's corporate office in Nashville. Additional
charges of approximately $1.9 million were recognized during 1999 in connection
with the revised facility consolidation plan.

     Costs to Exit a Distribution Channel.  In 1998 management formulated plans
to exit unique distribution channels based upon the type of merchant business
generated through these channels. Specifically, servicing and maintaining the
type of merchant generated through these channels is not compatible with NOVA's
operating philosophy and not strategically aligned with NOVA's plan of business.
The charge related to exiting this distribution channel included a contract
termination fee and the write down of certain related intangible assets
resulting from an analysis of discounted future cash flows generated from the
subject merchants. The final negotiated termination fee was approximately
$434,000 less than accrued in 1998, resulting in a reversal of the excess charge
during 1999.

     During 1998, NOVA also recorded approximately $14.2 million in unusual
selling, general and administrative charges associated with the PMT Merger. Such
charges primarily result from changes in management estimates pertaining to
collectibility of accounts receivable ($6.2 million), merchant credit and fraud
loss reserves ($4.7 million), and state sales and use tax reserves ($2.0
million). The remainder of the results of operations discussion will exclude the
impacts of merger related charges, as the Company believes that this will
provide for more meaningful comparisons.

COMPONENTS OF REVENUES AND EXPENSES

  Revenues

     NOVA derives revenues principally from electronic processing of credit,
charge and debit card transactions that are authorized and captured through the
NOVA Network and through third-party networks prior to conversion. Typically
merchants are charged for these processing services at a bundled rate that is a
percentage of the dollar amount of each transaction and, in some instances,
additional fees per transaction.

                                      4
<PAGE>   5

These charges, referred to as "merchant discount," are negotiated with each
merchant and, in the aggregate, represent in excess of 90% of NOVA's revenues.
Certain merchant customers are charged a flat fee per transaction, while others
may also be charged miscellaneous fees, including fees for handling chargebacks,
monthly minimums, equipment rentals, sales or leasing, and other miscellaneous
services. Revenues are reported net of amounts paid to ISO's, agent banks and
merchant associations under revenue sharing agreements pursuant to which such
parties receive payments based primarily on processing volume for particular
groups of merchants.

  Expenses

     Cost of service includes costs directly attributable to the furnishing of
transaction processing and other services to NOVA's merchant customers. The most
significant components of cost of service include interchange and assessment
fees, which are charged by the credit card associations for clearing services,
advertising and other expenses. Interchange and assessment fees are billed
primarily as a percent of dollar volume processed and, to a lesser extent, as a
per-transaction fee. Cost of service also includes charges paid to third parties
for POS network service (for merchant customers acquired but not yet converted
to the NOVA Network), merchant accounting and settlement fees, cost of equipment
leased, rented or sold, NOVA Network costs and other direct operating expenses.

     Conversion costs include expenses incurred to convert acquired portfolios
from existing processing platforms to the NOVA Network and operating systems.
Such costs are expensed as incurred and these costs include expenses related to
reprogramming POS terminals at merchant locations, duplicate costs to process
transactions prior to conversion, unfavorable contract payments for transaction
authorizations, and independent contractor fees.

     Selling, general and administrative expenses include salaries and wages,
commissions, employee benefits, travel and entertainment, telecommunications,
and other costs of the operations and marketing centers, subsidiary offices, and
corporate headquarters. Depreciation and amortization costs are related to
NOVA's capital expenditures, merchant portfolio purchases and business
acquisitions.

RESULTS OF OPERATIONS

     The following table for the years ended December 31, 1999, 1998, and 1997
sets forth the percentage of revenues represented by certain items on NOVA's
consolidated statements of operations:

                          PERCENTAGE OF TOTAL REVENUES

<TABLE>
<CAPTION>
                                                              1999     1998     1997
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>
Revenue.....................................................  100.0%   100.0%   100.0%
Cost of service.............................................   76.4     77.3     76.3
Conversion costs............................................    1.8      0.9      0.4
Selling, general and administrative.........................    7.5     10.5     11.2
Depreciation and amortization...............................    3.9      3.9      3.5
Merger and consolidation expenses...........................    0.0      7.9      0.3
Operating income (loss).....................................   10.4     (0.5)     8.4
Interest income.............................................    0.2      0.6      0.9
Interest expense............................................   (0.5)    (0.5)    (0.6)
Minority interest in income of subsidiaries.................   (1.1)    (0.9)    (0.1)
Other income................................................    0.0      0.0      0.0
Income (loss) before provision (benefit) for income taxes...    9.0     (1.3)     8.6
Provision (benefit) for income taxes........................    3.4     (0.2)     3.0
Net income (loss)...........................................    5.6     (1.1)     5.6
</TABLE>

                                      5
<PAGE>   6

YEAR ENDED DECEMBER 31, 1999, COMPARED WITH YEAR ENDED DECEMBER 31, 1998

  Revenues

     NOVA's revenue increased $321.0 million, or 28.0%, to $1.5 billion for the
year ended December 31, 1999, compared with $1.1 billion for the same period in
1998. This revenue growth is primarily attributable to a 20.4% increase in
merchant sales processing volume to $57.2 billion from $47.5 billion in 1998. Of
the total increase, approximately $1.2 billion in volume and $39.3 million in
revenues are attributable to individually insignificant purchases. The
pass-through of higher interchange rates from the credit card associations in
the form of higher discount rates accounts for approximately $66.5 million of
the increased revenues. The remaining increase is primarily due to internal
growth and bank marketing relationships.

  Cost of Service

     Cost of service increased $235.1 million, or 26.5%, to $1.1 billion for the
year ended December 31, 1999, from $885.6 million for the same period in 1998.
The increase resulted from additional interchange and assessment fees and other
operating costs associated with the higher merchant sales volume processed.
Incremental increases were also recognized for interchange expenses as a result
of credit card association rate increases. Cost of service as a percentage of
revenue decreased to 76.4% from 77.3% because a substantial portion of the
volume from recent portfolio purchases and merger and acquisitions transactions
has been converted to the NOVA Network and therefore reducing the number of
transactions being processed by higher cost third party vendors.

  Conversion Costs

     Conversion costs increased $16.3 million over 1998 levels to $26.3 million
in 1999. This increase relates to the increased conversion efforts in 1999 as
compared to 1998, including the conversions of portfolios relating to the
acquisition of PMT.

  Selling, General and Administrative Expenses

     Selling, general and administrative expenses were $109.7 million in 1999,
an increase of $3.7 million, or 3.5%, over 1998 expenditures of $106.0 million.
As a percentage of revenue, selling, general and administrative expenses
decreased in 1999 to 7.5% from 9.2% in 1998. The low growth in such expenses
relative to revenue growth illustrates the significant economies of scale
achieved through processing higher credit and debit card processing volume and
the consolidation of operating and administrative functions. For purposes of
comparison, 1998 costs exclude approximately $14.2 million in unusual charges
associated with the PMT merger.

  Depreciation and Amortization

     Depreciation and amortization expenses increased 27.9% to $57.3 million in
1999 compared to $44.8 million in 1998 due primarily to amortization expenses
associated with recent portfolio purchases, investments in joint ventures and
depreciation related to new operating infrastructure placed into service during
1999 and late 1998.

  Operating Income

     NOVA's consolidated operating income for 1999 was $152.3 million, as
compared to operating income of $99.3 million during 1998 (excluding
non-recurring merger and consolidation charges of $90.7 million and $14.2
million in unusual selling, general and administrative costs). The increase in
operating income of $53.0 million, or 53.4%, is due to the factors noted above.

                                      6
<PAGE>   7

  Interest Income and Expense

     Interest income decreased 56.1% to $2.9 million in 1999, compared to $6.6
million in 1998. Interest expense increased 18.3% to $7.1 million in 1999
compared to $6.0 million in 1998. NOVA had lower average cash balances during
1999 and higher average debt obligations outstanding primarily due to the stock
repurchase program and expenditures resulting from the PMT consolidation.

  Minority Interest in Income of Subsidiaries

     Minority interest in income of subsidiaries increased 63.4% to $16.5
million in 1999 from $10.1 million in 1998. This increase reflects the improved
profitability of Elan and KMS resulting from their conversion during 1998.

  Income Taxes

     NOVA's effective tax rate for 1999 was approximately 37.4%, compared with
an effective income tax rate of 15.6% for 1998. The increase in the effective
rate primarily reflects the inclusion in 1998 of Subchapter S corporation income
which is not subject to income tax. Partially offsetting this benefit in 1998
was the impact of the non-deductible portion of the merger costs incurred in
connection with the PMT Merger. Excluding the effect of the non-deductible
charges and the effect of Subchapter S corporation income, the effective tax
rate for 1998 would be 40.4%. The decrease from 40.4% to 37.4% relates to the
effect of decreasing income apportionment from high tax states through both
facility and personnel relocations and incorporating PMT's businesses into
NOVA's state tax planning structure.

  Net Income

     Net income of $82.5 million, or $1.14 per share, in 1999 compares to net
income in 1998 of $57.9 million, or $0.80 per share (excluding non-recurring
merger and consolidation charges of $90.7 million and $14.2 million in unusual
selling, general and administrative costs) due to the factors noted above.

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

  Revenues

     NOVA's revenue increased $464.8 million, or 68.3%, to $1.1 billion for the
year ended December 31, 1998, compared with $680.9 million for the same period
in 1997. This revenue growth is primarily attributable to a 61.7% increase in
merchant sales processing volume to $47.5 billion from $29.4 billion in 1997. Of
the total increase, approximately $8.1 billion in volume and $195.8 million in
revenues are attributable to the Elan joint venture and the KMS joint venture.
Other purchases, in the aggregate, contributed approximately $4.7 billion in
volume and $109.2 million in revenues over 1997 levels. The pass-through of
higher interchange rates from the credit card associations in the form of higher
discount rates accounts for approximately $40 million of the increased revenues.
The remaining increase is primarily due to internal growth and bank marketing
relationships.

  Cost of Service

     Cost of service increased $366.2 million, or 70.5%, to $885.6 million for
the year ended December 31, 1998, from $519.4 million for the same period in
1997. The increase resulted from additional interchange and assessment fees and
other operating costs associated with the higher merchant sales volume
processed.

     Incremental increases were also recognized for interchange expenses as a
result of credit card association rate increases. Cost of service as a
percentage of revenue increased to 77.3% from 76.3% because a substantial
portion of the volume from recent portfolio purchases, investments in joint
ventures, and merger and acquisitions transactions had not been converted to the
NOVA Network and therefore were being processed by third party vendors at a
higher cost.

                                      7
<PAGE>   8

  Conversion Costs

     Conversion costs increased $7.4 million over 1997 levels to $10.0 million
in 1998. This increase relates to the increased conversion efforts in 1998 as
compared to 1997, including the conversions of portfolios relating to the KMS
joint venture and the Elan joint venture, and the MBNA and CoreStates merchant
portfolios. Conversion activity for 1999 is expected to exceed 1998 levels due
to the significance of the conversion of PMT's portfolios.

  Selling, General and Administrative Expenses

     Selling, general and administrative expenses were $106.0 million in 1998
(prior to approximately $14.2 million in unusual charges associated with the PMT
merger), an increase of $30.0 million, or 39.3%, over 1997 expenditures of $76.0
million. Selling, general and administrative expenses as a percentage of revenue
decreased in 1998 to 9.2% from 11.2% in 1997.

     These increases are attributable to (i) the costs paid to sellers for
operating and managing merchant portfolios during transition and conversion of
the portfolios to the NOVA Network and (ii) an expanded sales force associated
with marketing arrangements entered into, in each case, in conjunction with
recent portfolio purchases and joint venture transactions. In addition, during
the third and fourth quarters of 1998, NOVA incurred additional personnel and
facilities costs in anticipation of beginning the transition of all operational
functions for the PMT merchant portfolios beginning in October 1998. Many of
these costs were duplicative of costs incurred in connection with the then
existing PMT operations.

  Depreciation and Amortization

     Depreciation and amortization expenses increased 90.0% to $44.8 million in
1998 compared to $23.6 million in 1997 due primarily to amortization expenses
associated with recent portfolio purchases and investments in joint ventures.

  Operating Income

     NOVA's consolidated operating income for 1998 was $99.3 million (excluding
non-recurring merger and consolidation charges of $90.7 million and $14.2
million in unusual SG&A costs), as compared to operating income of $59.2 million
during 1997, an increase of $40.1 million, or 67.7%, due to the factors noted
above. The 1997 operating income included a $1.9 million merger related charge
incurred by PMT.

  Interest Income and Expense

     Interest income increased 4.8% to $6.6 million in 1998, compared to $6.3
million in 1997. NOVA had higher average cash balances during 1998 due to a
public offering of common stock in April 1998 that yielded net proceeds of
$142.6 million.

     Interest expense increased 36.4% to $6.0 million in 1998 compared to $4.4
million in 1997 due to higher average debt obligations outstanding in 1998.
Average borrowings increased due to draws against NOVA's bank credit facility in
late 1997 and early 1998 to fund the Elan and KMS investments and the MBNA
portfolio purchase. In addition, NOVA recorded deferred purchase obligations in
January 1998 related to the KMS investment. Although all bank borrowings were
repaid during the second quarter using a portion of the offering proceeds, NOVA
continued to incur interest expense throughout the year related to the deferred
purchase obligation.

  Minority Interest in Income of Subsidiaries

     Minority interest in income of subsidiaries increased to $10.1 million in
1998 from $776,000 in 1997. This increase reflects the ten month incremental
inclusion of Elan and approximately eleven months incremental inclusion of KMS.

                                      8
<PAGE>   9

  Income Taxes

     NOVA's effective tax rate for 1998 was approximately 15.6%, compared with
an effective income tax rate of 35.2% for 1997. The decrease in the effective
rate primarily reflects the impact of the inclusion in 1998 of Subchapter S
corporation income which is not subject to income tax. Partially offsetting the
benefit in 1998 was the impact of the non-deductible portion of the merger costs
incurred in connection with the PMT Merger. Excluding the effect of the
non-deductible charges and the effect of Subchapter S corporation income which
is not subject to income tax, the effective tax rate for 1998 would be 40.4%.
The increase from the 1997 comparable rate of 38.2% is due to an increase in
state tax rates.

  Net Loss

     A net loss of $12.8 million, or $0.18 per share, in 1998 compares to net
income in 1997 of $37.9 million, or $0.58 per share. Excluding both years'
merger related charges and the unusual selling, general and administrative
charges recognized during 1998, net income for 1998 of $57.9 million represented
an increase of approximately 45.5% over net income of $39.8 million in 1997 due
to the factors noted above.

  Other Matters

     As discussed in Note 1 to the consolidated financial statements, PMT
incurred a net loss of $345,000 during the two months ended December 31, 1998.
These results include approximately $4.1 million of costs associated with the
NOVA/PMT merger that were not accrued for during fiscal 1998, and conversion
related costs of approximately $850,000. Additional factors adversely affecting
this period include operating under unfavorable third party processing contracts
that were not renewed in anticipation of conversion to the NOVA Network and
general inefficiencies resulting from consolidation plans and efforts.

LIQUIDITY AND CAPITAL RESOURCES

     NOVA's primary uses of its capital resources include the purchase of
merchant portfolios, investments in joint ventures, capital expenditures and
working capital requirements.

     NOVA produces significant cash flow from operating activities, amounting to
$92.4 million in 1999, $42.8 million in 1998 and $42.2 million in 1997. Cash
flow is generated primarily from operating earnings, after considering the
effect of depreciation and amortization and, for 1998, the non-cash portion of
the merger and consolidation charge. These cash flows are significantly impacted
by increases in trade receivables directly attributable to the increases in
processing volume and revenues. During 1998, deferred tax assets resulting from
merger related timing differences also had a significant unfavorable affect on
cash flows from operating activities. Cash flows from operations in 1999 were
also unfavorably impacted from the payment of merger charges accrued in 1998.
Investing activities utilized a net $150.1 million in 1999, compared to $108.0
million cash in 1998 and $182.1 million in 1997. Significant 1999 investments
include $103.1 million for portfolio purchases, $28.2 million in enhancing and
improving the technology platforms and operating centers, and $33.2 million to
fund equipment leases. The nature of these uses is consistent with historical
uses.

     Net cash provided by financing activities was $39.2 million, $89.4 million,
and $15.9 million for the years ended December 31, 1999, 1998, and 1997,
respectively. During 1999, NOVA's primary financing source was bank borrowings
of $232.9 million, of which $159.1 million was used to purchase treasury shares.
NOVA's financing sources during 1998 relate primarily to a stock offering
completed in April 1998, which provided $142.6 million, net of expenses, and
bank borrowings totaling $21.8 million. Subsequent to the public offering, NOVA
used $53.1 million of the net proceeds to repay amounts outstanding under its
bank credit facilities. Net cash provided in 1997 consists primarily of proceeds
received from short-term and long-term debt obligations, offset for cash outlays
for the issuance of a note receivable of $8.8 million.

     NOVA has available credit facilities of $250.0 million. At December 31,
1999, $213.0 in borrowings were outstanding under this facility. See Note 8 to
the Consolidated Financial Statements.

                                       9
<PAGE>   10

     NOVA typically has relatively low working capital requirements because
merchant discount fees charged are collected in an average of thirty days, while
normal vendor payables are paid in thirty days or longer. In addition,
acquisition activity may cause variations in working capital due to conversion
period operating costs and the transition in the payment of expenses and the
collection of receivables from the former processor to NOVA. Because of the
seasonality of NOVA's business, capital requirements may be greater in certain
months.

     NOVA anticipates that it will incur approximately $18.3 million in capital
expenditures during 2000 for upgrading and expanding existing facilities and the
expansion and enhancement of its information systems. Since electronic
transaction processing is virtually all technology based, NOVA expects to
continue the trend in capital investments in its technology infrastructure and
solutions for the foreseeable future. However, there can be no assurances that
NOVA will not incur higher capital expenditures in 2000 and 2001 to support the
business.

     NOVA believes its existing cash and cash equivalents, cash generated from
operations, and available credit facilities are sufficient to fund future
merchant portfolio purchases, capital investment needs, and working capital
requirements for the foreseeable future.

YEAR 2000 IMPACT

     In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. Beginning in 1997 and throughout 1998 and 1999, the
Company completed its remediation and testing of systems. As a result of those
planning and implementation efforts, the Company experienced no significant
disruptions in its critical systems, applications, computing platforms and
merchant terminals and believes those systems successfully responded to the Year
2000 date change. The Company is not aware of any material problems resulting
from Year 2000 issues, either with its internal systems or the products and
services of third parties. The Company will continue to monitor its critical
computer applications and those of its suppliers and vendors throughout the year
2000 to ensure that any latent Year 2000 matters that may arise are addressed
promptly.

                                       10
<PAGE>   11

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                                 1999           1998
                                                              -----------    ----------
                                                                   (IN THOUSANDS,
                                                                   EXCEPT SHARES)
<S>                                                           <C>            <C>
                                        ASSETS
Current Assets:
  Cash and cash equivalents.................................   $  32,574      $ 51,131
  Trade receivables, less allowance for doubtful accounts of
     $11,191 and $8,466 at December 31, 1999 and December
     31, 1998, respectively.................................     137,016        85,245
  Current portion of net investment in finance leases.......      15,611        11,775
  Inventory.................................................      11,255         8,460
  Deferred income taxes.....................................      20,114        31,884
  Other current assets......................................       8,935        22,638
                                                               ---------      --------
          Total current assets..............................     225,505       211,133
                                                               ---------      --------
Merchant and customer contracts.............................     331,933       263,992
Long-term portion of investment in finance leases...........      42,145        33,910
Property, equipment and software, net.......................      76,963        65,732
Excess cost of businesses acquired..........................      14,033        14,707
Long-term note receivable...................................      13,618        13,781
Other non-current assets....................................      29,814        19,278
                                                               ---------      --------
                                                               $ 734,011      $622,533
                                                               =========      ========
                         LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..........................................   $  21,574      $ 30,365
  Accounts payable to affiliate.............................         465           827
  Settlement obligations....................................          --         9,263
  Accrued liabilities.......................................      19,635        18,989
  Credit and fraud loss reserve.............................      17,728        12,777
  Accrued merger and consolidation charges..................       8,813        45,724
  Long-term debt obligations due within one year............      16,066        31,534
                                                               ---------      --------
          Total current liabilities.........................      84,281       149,479
                                                               ---------      --------
Deferred income taxes.......................................      11,928         1,057
Long-term debt..............................................     238,253        23,025
Minority interest in subsidiaries...........................       8,680         7,754
Commitments and Contingencies
Shareholders' Equity:
  Common stock, $.01 par value, 200,000,000 shares
     authorized, 73,710,755 and 72,597,045 shares
     outstanding at December 31, 1999 and 1998,
     respectively...........................................         737           726
  Additional paid in capital................................     435,345       422,499
  Treasury stock, at cost, 5,432,163 shares.................    (145,329)           --
  Retained earnings.........................................     100,116        17,993
                                                               ---------      --------
          Total shareholders' equity........................     390,869       441,218
                                                               ---------      --------
                                                               $ 734,011      $622,533
                                                               =========      ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       11
<PAGE>   12


                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                      YEARS ENDED DECEMBER 31,
                                                              ----------------------------------------
                                                                  1999           1998          1997
                                                              ------------   ------------   ----------
                                                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                           <C>            <C>            <C>
REVENUES....................................................   $1,466,639     $1,145,664     $680,872
Operating Expenses:
  Cost of service...........................................    1,120,733        885,606      519,387
  Conversion costs..........................................       26,337          9,991        2,595
  Selling, general and administrative.......................      109,722        120,154       76,038
  Depreciation and amortization.............................       57,332         44,839       23,603
  Merger and consolidation expenses.........................          180         90,720        1,889
                                                               ----------     ----------     --------
          Total operating expenses..........................    1,314,304      1,151,310      623,512
                                                               ----------     ----------     --------
OPERATING INCOME (LOSS).....................................      152,335         (5,646)      57,360
Other income (expense):
  Interest income...........................................        2,946          6,560        6,265
  Interest expense..........................................       (7,083)        (5,999)      (4,388)
  Minority interest in income of subsidiaries...............      (16,487)       (10,056)        (776)
                                                               ----------     ----------     --------
                                                                  (20,624)        (9,495)       1,101
                                                               ----------     ----------     --------
Income (loss) before provision (benefit) for income taxes...      131,711        (15,141)      58,461
Provision (benefit) for income taxes........................       49,243         (2,362)      20,562
                                                               ----------     ----------     --------
NET INCOME (LOSS)...........................................   $   82,468     $  (12,779)    $ 37,899
                                                               ==========     ==========     ========
Per Share Amounts:
  Basic earnings (loss) per share...........................   $     1.16     $    (0.18)    $   0.60
  Diluted earnings (loss) per share.........................   $     1.14     $    (0.18)    $   0.58
Shares used in per share calculations:
  Weighted averages shares -- basic.........................       71,154         70,061       63,571
  Weighted averages shares -- diluted.......................       72,561         70,061       65,668
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       12
<PAGE>   13

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                           COMMON STOCK                                              TREASURY STOCK
                                          ---------------     ADDITIONAL           RETAINED        ------------------
                                          SHARES   AMOUNT   PAID IN CAPITAL   EARNINGS (DEFICIT)   SHARES    AMOUNT       TOTAL
                                          ------   ------   ---------------   ------------------   ------   ---------   ---------
                                                                              (IN THOUSANDS)
<S>                                       <C>      <C>      <C>               <C>                  <C>      <C>         <C>
BALANCE AT DECEMBER 31, 1996 (AS
  RESTATED).............................  62,923    $630       $266,352           $   3,251           557   $  (2,093)  $ 268,140
                                          ------    ----       --------           ---------        ------   ---------   ---------
  Issuance of common stock..............       1      --             14                  --            --          --          14
  Stock options exercised...............     574       5          1,440                  --            --          --       1,445
  Income tax benefit from stock options
    exercises...........................      --      --          1,986                  --            --          --       1,986
  Cancellation of treasury stock........    (557)     (6)           (74)             (2,013)         (557)      2,093          --
  Distribution of Subchapter S
    Corporations prior to poolings......      --      --             --              (6,756)           --          --      (6,756)
  Pooling of interests transactions.....   2,074      21          1,072                 239            --          --       1,332
  Minority shareholders' contribution...      --      --            524                  --            --          --         524
  Net and comprehensive income..........      --      --             --              37,899            --          --      37,899
                                          ------    ----       --------           ---------        ------   ---------   ---------
BALANCE AT DECEMBER 31, 1997............  65,015    $650       $271,314           $  32,620            --   $      --   $ 304,584
                                          ------    ----       --------           ---------        ------   ---------   ---------
  Issuance of common stock related to
    NOVA secondary offering, net of
    expenses............................   5,000      50        142,539                  --            --          --     142,589
  Stock options exercised...............     615       6          6,614                  --            --          --       6,620
  Income tax benefit from stock options
    exercises...........................      --      --          1,057                  --            --          --       1,057
  Subsidiary fiscal year conversion.....     307       3            163               5,506            --          --       5,672
  Pooling of interests transactions.....   1,660      17            812              (2,593)           --          --      (1,764)
  Distribution of Subchapter S
    Corporations prior to poolings......      --      --             --              (4,761)           --          --      (4,761)
  Net and comprehensive net loss........      --      --             --             (12,779)           --          --     (12,779)
                                          ------    ----       --------           ---------        ------   ---------   ---------
BALANCE AT DECEMBER 31, 1998............  72,597    $726       $422,499           $  17,993            --   $      --   $ 441,218
                                          ------    ----       --------           ---------        ------   ---------   ---------
  Stock options exercised...............   1,114      11          9,344                  --            --          --       9,355
  Income tax benefit from stock options
    exercises...........................      --      --             --                  --            --          --       9,540
  Subsidiary fiscal year conversion.....      --      --             --                (345)           --          --        (345)
  Treasury stock acquired...............      --      --             --                  --        (5,972)   (159,144)   (159,144)
  Treasury stock issued for stock
    options.............................      --      --         (6,038)                 --           540      13,815       7,777
  Net and comprehensive net income......      --      --             --              82,468            --          --      82,468
                                          ------    ----       --------           ---------        ------   ---------   ---------
BALANCE AT DECEMBER 31, 1999............  73,711    $737       $435,345           $ 100,116        (5,432)  $(145,329)  $ 390,869
                                          ======    ====       ========           =========        ======   =========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       13
<PAGE>   14

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
                                                                       (IN THOUSANDS)
<S>                                                           <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)...........................................  $  82,468   $ (12,779)  $  37,899
Subsidiary fiscal year conversion...........................      2,547       4,820          --
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
  Non-cash portion of merger and consolidation charges......         --      18,491          --
  Depreciation and amortization.............................     57,332      44,839      23,603
  Deferred income taxes.....................................      3,210     (30,429)      1,376
  Loss on disposal of equipment.............................         --         265          12
  Minority interest.........................................     16,605      10,193         776
  Interest on debt obligations..............................      1,161       2,062          --
  Changes in assets and liabilities, net of the effects of
    business acquisitions:
    Trade receivables.......................................    (41,993)    (32,179)    (22,351)
    Inventory...............................................     (2,795)     (4,503)       (613)
    Other assets............................................     (8,160)    (21,674)     (9,944)
    Accounts payable........................................     (7,235)     11,131       9,177
    Accrued liabilities.....................................    (10,781)     52,608       2,309
                                                              ---------   ---------   ---------
         Net cash provided by operating activities..........     92,359      42,845      42,244
                                                              ---------   ---------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of merchant portfolios and customer contracts.....   (102,218)    (91,125)   (108,804)
Purchase of property and equipment..........................    (28,199)    (46,385)    (20,576)
Purchase of equipment for leasing...........................    (33,220)    (27,906)    (19,297)
Amounts placed in escrow related to business purchase
  transactions..............................................     (8,700)         --          --
Purchase of investments.....................................         --          --     (49,168)
Proceeds from sale of investments...........................         --      39,123          --
Amounts received on leases..................................     22,192      18,329      14,650
Other.......................................................         --          --       1,076
                                                              ---------   ---------   ---------
         Net cash used in investing activities..............   (150,145)   (107,964)   (182,119)
                                                              ---------   ---------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings and notes payable,
  net.......................................................         --       1,496      32,800
Proceeds from the issuance of long-term debt................    232,928      20,353      34,189
Payments on long-term debt and capital leases...............    (36,008)    (70,074)    (38,657)
Proceeds from public offerings, net of offering expenses....         --     142,589          14
Proceeds from stock options exercised.......................     17,132       6,620       1,445
Purchase of treasury stock..................................   (159,144)         --          --
Issuance of note receivable.................................         --      (1,785)     (8,773)
Distribution of minority interest...........................    (15,679)     (5,011)
Distributions of Subchapter S Corporations..................         --      (4,761)     (5,083)
                                                              ---------   ---------   ---------
         Net cash provided by financing activities..........     39,229      89,427      15,935
                                                              ---------   ---------   ---------
Net increase (decrease) in cash and cash equivalents........    (18,557)     24,308    (123,940)
                                                              ---------   ---------   ---------
Cash and cash equivalents, beginning of the year............     51,131      26,823     150,763
                                                              ---------   ---------   ---------
Cash and cash equivalents, end of the year..................  $  32,574   $  51,131   $  26,823
                                                              =========   =========   =========
Supplementary information
  Income taxes paid.........................................  $  31,896   $  28,181   $  19,763
  Interest paid.............................................  $   6,753   $   6,944   $   3,866
  Notes payable issued in connection with business
    acquisition.............................................  $      --   $  33,758   $     433
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       14
<PAGE>   15
                                                                      EXHIBIT 13

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND ORGANIZATION

     NOVA Corporation (the "Company" or "NOVA") is an integrated service
provider of transaction processing services, related software applications and
value-added services primarily to small to medium-sized business enterprises.
The Company provides merchants with transaction processing support for all major
credit and charge cards, including VISA, MasterCard, American Express, Discover,
Diners Club and JCB, and also provides access to debit card processing and check
verification services. NOVA provides merchants a broad range of transaction
processing services, including authorizing card transactions at the
point-of-sale ("POS"), capturing and transmitting transaction data, payment
settlement and assisting in resolving billing disputes with customers.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of NOVA
Corporation and its majority-owned subsidiaries. All significant intercompany
transactions have been eliminated.

COMBINED FINANCIAL RESULTS

     On September 24, 1998, NOVA completed a merger transaction with PMT
Services, Inc. ("PMT"), pursuant to which PMT became a wholly-owned subsidiary
of NOVA. In addition to the PMT merger, PMT completed various mergers prior to
the merger with NOVA. These mergers were intended to qualify as tax-free
reorganizations and were accounted for as poolings of interests. Accordingly,
the consolidated historical financial statements for all periods presented
combine the financial results of NOVA and PMT. Although prior to the merger PMT
reported on the fiscal year ended July 31 basis, PMT changed their year end to
October 31 in 1998. Conforming PMT to a calendar year fiscal year was not
practicable for 1998 due to the timing and cost associated with establishing and
auditing the beginning of year balances as of January 1, 1998. Beginning in
1999, PMT's fiscal year was changed to conform to a calendar year.

     The NOVA balance sheet as of December 31, 1998, has been combined with the
PMT balance sheet as of October 31, 1998. The NOVA statement of operations and
cash flows for the year ended December 31, 1998, has been combined with the PMT
statement of operations and cash flows for the twelve months ended October 31,
1998. The NOVA statements of operations and cash flows for the year ended
December 31, 1997, have been combined with the PMT statements of operations and
cash flows for the fiscal year ended July 31, 1997. The results of operations of
PMT for the period November 1, 1998 through December 31, 1998 was a net loss of
$345,000 and is recorded as a decrease in shareholders' equity for the year
ended December 31, 1999. Revenues for this interim period were $90.8 million and
expenses, including income tax benefits, were $91.1 million. The results of
operations of PMT for the period August 1, 1997, through October 31, 1997 of
$7.6 million have been recorded as an increase to shareholders' equity for the
year ended December 31, 1998. Revenues for this interim period were $101.1
million and expenses, including income taxes, were $93.5 million.

     There were no transactions between NOVA and PMT prior to the combination,
and immaterial adjustments were recorded to conform PMT's accounting policies.
Certain reclassifications were made to the PMT financial statements to conform
to NOVA's presentations.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

     In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

                                       15

<PAGE>   16
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE AND COST OF SERVICE RECOGNITION

     Revenues derived principally from the electronic processing of transactions
(principally merchant discount) are recognized, net of revenue sharing amounts,
at the time the merchant's transactions are processed. Directly related cost of
service is also recognized at the time of processing and include interchange
fees paid to the credit card issuing bank, VISA and MasterCard assessments,
telecommunications expenses, and merchant accounting processing fees.

     When the Company purchases merchant portfolios, it typically enters into
revenue sharing agreements with the sellers. The revenue sharing amounts are
determined primarily on sales volume processed for a particular group of
merchants. The revenue sharing agreements generally have an initial term of at
least three years with renewal provisions. Revenue is shown in the accompanying
statements of operations net of revenue sharing amounts of $47.8 million, $35.3
million, and $16.3 million for the years ended December 31, 1999, 1998, and
1997, respectively.

     Additional revenue sources include the sale, lease and rental of POS
processing equipment. Revenues related to direct financing leases are recognized
over the term of the lease using the effective interest method. Equipment sales
revenues are recorded when the equipment is shipped. Rental income is recognized
as earned.

CONVERSION COSTS

     The cost of converting purchased merchant portfolios from the seller's
processing platform and telecommunications network to the NOVA Network is
expensed as incurred.

CASH AND CASH EQUIVALENTS

     For purposes of the consolidated statements of cash flows, NOVA considers
all highly liquid debt instruments with original maturities of three months or
less to be cash equivalents.

RESTRICTED CASH

     Restricted cash represents funds held-on-deposit with certain processing
banks pursuant to agreements to cover potential merchant losses, and funds held
by lending institutions pursuant to loan agreements to provide additional
collateral. These amounts are classified as "Other Non-current Assets" for
financial statement purposes, and total $11.5 million and $8.2 million at
December 31, 1999, and 1998, respectively.

ACCOUNTS RECEIVABLE

     Accounts receivable are primarily comprised of amounts due from the
Company's clearing and settlement banks and represent the discount earned, after
related interchange fees on transactions processed during the month ending on
the balance sheet date. Such balances are typically received from the clearing
and settlement banks within thirty days following the end of each month.

     The Company's merchant customers have liability for charges disputed by
cardholders. However, in the case of merchant insolvency, bankruptcy or other
nonpayment, the Company may be liable for any such charges disputed by
cardholders. NOVA believes that the diversification of its merchant portfolio
among industries and geographic regions reduces its risk of loss. Based on
historical loss experience, the Company has established reserves for estimated
credit losses on transactions processed.

FINANCING LEASES

     The Company provides direct financing leases and sales-type leases to its
customers. The significant difference between the two types of leases is dealer
profit recognized in a sales-type lease. At inception of a POS equipment lease,
the Company records an investment in direct financing leases which is equal to
the total

                                       16

<PAGE>   17
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of future lease rentals and the estimated residual value of the leased equipment
less unearned income. The unearned income is the difference between the cost of
the equipment and the total of future lease payments plus the estimated residual
value of the leased equipment. Residual value is based upon the estimated
proceeds from the sale or lease of the asset at the end of the lease term.
Amortization of unearned income is recorded using the effective interest method.
The investment in financing leases is reduced by an allowance for rental
payments that are expected to be uncollectable.

INVENTORY

     Inventory, which consists of electronic POS equipment held for sale or
rental to merchants, is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.

PROPERTY, EQUIPMENT, AND SOFTWARE

     Property, equipment and software is stated at cost less accumulated
depreciation. Depreciation is calculated using the straight-line method for
financial reporting purposes and primarily accelerated methods for tax purposes.
For financial reporting purposes, equipment is depreciated over three to seven
years and buildings are depreciated over thirty years. Leasehold improvements
and property acquired under capital leases are amortized over the useful life of
the asset or the lease term, whichever is shorter. Direct costs associated with
the development of software for internal use are capitalized and depreciated
over the useful life of the software, up to ten years. Maintenance and repairs
are charged to expense as incurred. Expenditures for renewals and improvements
that extend the useful life are added to the property and equipment accounts.
The Company rents POS equipment to merchants under operating leases. The rented
equipment is capitalized and depreciated over three years.

FINANCIAL INSTRUMENTS

     Management believes the carrying amounts of financial instruments at
December 31, 1999 and 1998, including cash, accounts and notes receivable,
accounts payable, accrued expenses and loans payable to financial and lending
institutions approximates fair value. The Company's financial instruments at
December 31, 1999, and 1998 consist primarily of cash and cash equivalents and
loans payable to financial and lending institutions. Due to the short maturities
of the cash and cash equivalents, carrying amounts approximate the respective
fair values. The loans payable are primarily variable rate instruments at terms
the Company believes would be available if similar financing were obtained from
another third party. As such, their carrying amounts also approximate their fair
value.

     Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable
and cash investments. Concentrations of credit risk with respect to trade
accounts receivable are limited, due to the large number of entities comprising
the customer base and the ongoing credit evaluations conducted to monitor the
status of a customer's financial condition. Cash investments are held by
numerous financial institutions and present minimal risk to the Company.

INTANGIBLES

     The excess cost of businesses acquired is amortized on the straight-line
basis over thirty years. Accumulated amortization at December 31, 1999, and 1998
was $3.3 million and $2.6 million, respectively. Amortization expense was
approximately $661,000, $573,000 and $500,000 for the years ended December 31,
1999, 1998 and 1997, respectively.

     Amortization of merchant portfolios is provided on a straight-line basis
over a ten-year life, based on the Company's estimates of future merchant sales
volumes. Accumulated amortization of portfolios was $100.1 million and $63.1
million at December 31, 1999, and 1998, respectively. Amortization expense was
approximately $37.2 million, $30.0 million, and $14.0 million for the years
ended December 31, 1999, 1998, and 1997, respectively.
                                       17

<PAGE>   18
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Management periodically evaluates intangibles for indications of impairment
based on the operating results of the related business or merchant portfolio
purchased. If this evaluation indicates that the intangible asset will not be
recoverable, as determined based on the undiscounted cash flows over the
remaining life of the asset, the carrying value and remaining amortization
period of the related intangible asset will be adjusted to reflect fair value.

INCOME TAXES

     The Company accounts for income taxes pursuant to the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). Under this method, deferred tax assets and liabilities are
recorded to reflect the future tax consequences attributable to the effects of
differences between the carrying amounts of existing assets and liabilities for
financial reporting and their respective amounts used for income tax purposes.

SETTLEMENT OBLIGATIONS

     Settlement obligations result from timing differences in the Company's
settlement processes with merchants. During 1999 the company changed its
settlement process to eliminate such timing differences.

STOCK COMPENSATION

     NOVA has elected under the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") to
continue to use the intrinsic-value method of accounting for employee
stock-based compensation in accordance with Accounting Principles Board Opinion
Number 25, "Accounting for Stock Issued to Employees" ("APB 25"). Refer to Note
12 regarding pro forma net income (loss) and earnings per share information.

EARNINGS PER SHARE

     Basic earnings per common share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
common share is computed using the weighted average number of common shares
outstanding during the period and reflects any dilutive effects of options,
warrants and convertible securities outstanding during the period.

RECENT PRONOUNCEMENT

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 2000. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.

PRESENTATION

     Certain 1997 and 1998 amounts have been reclassified to conform to the 1999
presentation.

NOTE 2.  BUSINESS COMBINATIONS

     In September 1998, NOVA completed the acquisition of PMT Services, Inc., in
a merger transaction by exchanging 37,651,000 shares of its common stock for all
of the outstanding common stock of PMT. Each share of PMT was exchanged for
0.715 of one share of NOVA common stock. In addition, outstanding PMT options
and warrants were converted at the same exchange factor of NOVA common stock.
See Note 12.

                                       18

<PAGE>   19
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The combined results below reflect reclassifications to conform financial
statement presentation:

<TABLE>
<CAPTION>
                                                                         1997
                                                                ----------------------
                                                                (IN THOUSANDS, EXCEPT
                                                                   PER SHARE DATA)
<S>                                                             <C>
Revenues:
  NOVA......................................................           $335,625
  PMT.......................................................            355,010
  Reclassification to conform financial presentation........             (9,763)
  Combined..................................................           $680,872
                                                                       ========
Net income:
  NOVA......................................................           $ 17,385
  PMT.......................................................             20,514
                                                                       --------
  Combined..................................................           $ 37,899
                                                                       ========
Net income per share (on a diluted basis):
  NOVA......................................................           $   0.58
  PMT(1)....................................................           $   0.58
  Combined..................................................           $   0.58
</TABLE>

---------------

(1) Adjusted for effect of exchange ratio of 0.715 shares of NOVA common stock
    for each share of PMT common stock.

     As previously stated, PMT completed various business combinations in the
year ended October 31, 1998, and the year ended July 31, 1997, by issuing common
stock in exchange for all of the outstanding common stock of the companies
acquired. These transactions were accounted for as poolings of interests. The
consolidated accompanying financial statements have been prepared to reflect the
restatement of all periods presented. Eight of these transactions were
considered material for restatement of prior period consolidated financial
statements and are summarized below:

<TABLE>
<CAPTION>
COMPANY ACQUIRED                                           DATE          SHARES ISSUED(1)
----------------                                     -----------------   ----------------
                                                                          (IN THOUSANDS)
<S>                                                  <C>                 <C>
Fairway Marketing Group (Fairway)..................  December 23, 1996          304
Bancard Systems, Inc. (BSI)........................   January 27, 1997        2,239
Retail Payment Services, Inc. (RPS)................   January 30, 1997          406
Eric Krueger, Inc. (Krueger).......................       June 3, 1997          414
LADCO Financial Group (LFG)........................      July 14, 1997        1,046
Bancard, Inc. (BCI)................................    October 2, 1997        2,768
MBN National, Inc. (MBN)...........................       May 14, 1998          706
Superior Bankcard Service, Inc. (Superior).........      July 30, 1998        2,660
</TABLE>

---------------

(1) Adjusted for effect of exchange ratio of 0.715 shares of NOVA common stock
    for each share of PMT common stock.

     Separate revenues and net income (loss) of the acquired operating
businesses for the periods prior to each of the mergers are presented in the
following table. In addition, the table includes unaudited pro forma net income,
which reflects pro forma adjustments to present income taxes on the basis on
which they will be reported in future periods.

                                       19
<PAGE>   20
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              JULY 31, 1997
                                                            -----------------
                                                             (IN THOUSANDS)
<S>                                                         <C>
Revenues:
  PMT.....................................................      $240,756
  Fairway.................................................         7,125
  BSI.....................................................        12,218
  LFG.....................................................        12,882
  BCI.....................................................        40,827
  MBN.....................................................        12,651
  Superior................................................        17,319
  Other...................................................        11,232
                                                                --------
Revenues, as reported.....................................      $355,010
                                                                ========
Net income (loss):
  PMT.....................................................      $ 13,806
  Fairway.................................................           183
  BSI.....................................................           746
  LFG.....................................................         1,319
  BCI.....................................................         2,656
  MBN.....................................................        (1,041)
  Superior................................................         2,500
  Other...................................................           345
                                                                --------
          Net income, as reported.........................        20,514
Pro forma tax effect of Subchapter S Corporations.........        (1,798)
                                                                --------
          Pro forma net income............................      $ 18,716
                                                                ========
</TABLE>

     Fairway, RPS, Krueger, Bancard, MBN and Superior were Subchapter S
Corporations for income tax purposes; therefore, these entities did not pay U.S.
federal income taxes. These entities are included in the Company's U.S. federal
income tax return effective from the date of each merger.

     In addition to these transactions, PMT completed five separate operating
business acquisitions during the year ended October 31, 1998 and the year ended
July 31, 1997, with five unrelated entities. PMT issued an aggregate of
3,577,914 shares of common stock, on a converted basis, in exchange for all the
outstanding stock of the five entities. On an individual basis these
transactions, which were accounted for as poolings of interests, were not
considered material for retroactive restatement of the consolidated financial
statements. Retroactive restatement would have increased total assets by 1% as
of December 31, 1997. Retroactive restatement would have increased revenue by
2.98% and net income by 0.80% during 1997.

NOTE 3.  MERCHANT PORTFOLIO PURCHASES AND JOINT VENTURES

MERCHANT PORTFOLIOS

     NOVA purchases various merchant portfolios, whereby servicing rights for
electronic authorization and payment processing to specific merchants under
contract to processing banks are acquired. The Company's operating results
reflect each of these purchases from the effective dates of the transactions.
Significant portfolio purchases are summarized below.

     On February 15, 1999, NOVA acquired the assets of American National Bancard
Company ("ANC"), an independent sales organization ("ISO"), through NOVA's
wholly-owned subsidiary PMT. The acquisition was accounted for as a purchase
transaction, and the net assets and results of operations are included in the
consolidated financial statements from the date of acquisition. Cash disbursed
to the seller at the time of the transaction totaled approximately $11.1 million
and was allocated to "Merchant and customer contracts"

                                       20


<PAGE>   21
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

based on the estimated fair market value of the assets acquired. Additional
consideration of $8.7 million has been placed in escrow with a third party until
January 31, 2000. This amount was due subject to ANC's achieving certain
performance thresholds as set forth in the purchase agreement. During 2000, ANC
met the required performance thresholds, resulting in the release of these funds
to ANC. At December 31, 1999 the escrow funds are recorded in "Other non-current
assets" for financial statement purposes. An additional payment of up to $2.1
million may be required in fiscal 2000 based upon future performance of the
portfolio.

     Effective November 4, 1998, the Company completed a transaction with First
Union Bank of Delaware, successor by merger to CoreStates Bank of Delaware, N.A.
("CoreStates"), whereby NOVA acquired all rights, title, and interest in, and
assumed certain liabilities of the CoreStates merchant processing portfolio. An
initial non-refundable payment of $25.0 million was made at the time of the
purchase. In December 1999, an additional $23.0 million was paid based on
achieving certain minimum performance levels. An additional payment of up to
$23.0 million may be required in fiscal 2000 based upon future performance of
the portfolio.

     Significant 1997 merchant portfolio purchases include the Crestar Bank
merchant portfolio effective May 29, 1997, and the MBNA America Bank, N.A.
merchant portfolio effective December 31, 1997. Purchase price consideration
paid approximated $21.7 million and $20.3 million, respectively.

JOINT VENTURES

     In addition to merchant portfolio purchases, the Company has also entered
into joint venture agreements with certain financial institutions for the
purpose of expanding and strengthening its merchant processing base. On January
21, 1998, NOVA consummated a transaction with KeyBank National Association
("KeyBank") whereby the Company purchased a 51% membership interest in Key
Merchant Services, LLC ("KMS"). NOVA provides transaction processing and other
services to the merchant contracts KeyBank initially contributed to the venture.
The purchase price of the membership interest was payable over a three-year
period. The original purchase price recorded was $51.0 million, for which the
last installment of $18.5 million, including interest, was paid as of December
31, 1999. During 1999, the Company paid an additional $12.4 million to KeyBank
based on achieving certain performance thresholds. Additional consideration of
up to $6.2 million may be required during fiscal 2000 based upon future
performance of the portfolio.

     Effective December 29, 1999, KMS acquired the merchant processing portfolio
of First American National Bank. The total purchase price was $14.5 million.

     Effective October 31, 1997, the Company entered into a joint venture with
Firstar Bank, U.S.A., N.A. ("Firstar") whereby NOVA purchased a 51% interest in
Elan Merchant Services, LLC ("EMS") for $24.0 million. Effective May 1, 1999,
Firstar contributed the merchant processing portfolio of Star Banc to EMS. NOVA
paid Firstar $6.2 million in cash, representing 51% of the value of the merchant
processing portfolio contributed by Firstar. The Company performs the
transaction processing services for the joint venture's merchant contracts.

                                       21

<PAGE>   22
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following summarizes the allocation of the aggregate purchase price to
the major categories of assets acquired and liabilities assumed resulting from
all portfolio purchases and joint venture investments made by the Company in
each year:

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
Merchant contracts..........................................  $103,073   $122,814   $109,247
Property and equipment......................................       398      2,069         --
Non-compete agreement.......................................        --        932        250
                                                              --------   --------   --------
                                                               103,471    125,815    109,497
Liabilities assumed.........................................    (1,253)        --         --
Notes payable to seller.....................................        --    (33,758)      (443)
                                                              --------   --------   --------
         Net cash paid......................................  $102,218   $ 92,057   $109,054
                                                              ========   ========   ========
</TABLE>

NOTE 4.  MERGER AND CONSOLIDATION CHARGES

     As a result of NOVA's merger with PMT and other mergers completed during
1998, the Company recorded a $90.7 million charge in 1998. This charge was
primarily related to direct merger transaction costs, charges associated with
the consolidation and closure of PMT's corporate headquarters and certain
operating subsidiaries, contract termination costs related to unfavorable third
party processing contracts, and the decision to exit certain of PMT's sales
distribution channels. Beginning in 1998 and continuing throughout 1999,
management executed substantially all parts of the plan for PMT's integration
and consolidation, making refinements to the plan as additional facts and
circumstances became available. During 1999, revisions to the plan resulted in
the reversal of approximately $6.5 million in charges accrued in 1998 that were
not needed under the revised plan and additional costs of approximately $6.7
million to recognize the costs of executing revised elements of the plan. The
consolidation and integration charges recorded in 1999 exceeded the reversal of
1998 charges by approximately $180,000, with such excess charges reflected in
the operating results for 1999.

     The following is a summary of the activity recorded relating to merger and
consolidation charges:

<TABLE>
<CAPTION>
                                                              BALANCE    REVERSAL                        BALANCE
                                          1998     PAYMENTS      AT         OF       1999     PAYMENTS      AT
                                         CHARGES   APPLIED    12/31/98   ACCRUALS   CHARGES   APPLIED    12/31/99
                                         -------   --------   --------   --------   -------   --------   --------
                                                                      (IN THOUSANDS)
<S>                            <C>       <C>       <C>        <C>        <C>        <C>       <C>        <C>
Direct transaction costs.....  Cash      $15,515   $(11,412)  $ 4,103    $    --    $  241    $ (4,344)   $   --
Severance packages...........  Cash       14,050     (1,404)   12,646     (2,149)    1,591      (8,297)    3,791
Lease abandonment............  Cash        4,658         --     4,658       (280)    2,968      (2,324)    5,022
Contract termination
  charges....................  Cash       35,506    (13,689)   21,817     (3,621)       --     (18,196)       --
Asset write-down.............  Non-cash    7,121     (7,121)       --         --     1,863      (1,863)       --
Costs to exit a distribution
  channel....................  Non-cash   11,370    (11,370)       --         --        --          --        --
Costs to exit a distribution
  channel....................  Cash        2,500         --     2,500       (434)       --      (2,066)       --
                                         -------   --------   -------    -------    ------    --------    ------
                                         $90,720   $(44,996)  $45,724    $(6,484)   $6,663    $(37,090)   $8,813
                                         =======   ========   =======    =======    ======    ========    ======
</TABLE>

     The primary costs associated with consolidation and closure of facilities
include employee and executive severance, estimated unrecoverable future lease
obligations on vacated facilities, and the write-down of capital assets to their
net realizable value. The consolidation and closure actions result from the
elimination of overlapping functions, primarily customer service, accounting,
and administrative areas.

     Direct Transaction Costs.  Direct merger transaction costs primarily
consisted of investment banking commissions, professional fees, and regulatory
filing expenses. During 1999, approximately $241,000 of merger related
professional fees were incurred in excess of amounts accrued in 1998.

                                       22

<PAGE>   23
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Severance Packages.  During 1998, management developed and began
implementing plans to close PMT's corporate headquarters, as well as downsize
certain of PMT's operating subsidiaries. As of December 31, 1998, the only
significant employee group notified of such plans was at the corporate
headquarters and certain executives. Accordingly, the costs associated with
these terminations were the only severance costs included in the 1998 charge.
The total number of employees terminated from this group was approximately 275,
with 210 having received severance packages as of December 31, 1998. Of these
employees, certain executives' severance is being paid over two years. The
remaining employees in this group were displaced during the first quarter of
1999, with all severance benefits paid at that time. During 1999, management was
able to settle termination related benefits associated with certain executives
at amounts less than originally agreed, accounting for substantially all of the
reversal in this merger charge category.

     During 1999, decisions were made to close or downsize additional facilities
to further streamline the operating and administrative functions. These actions
resulted in the termination of approximately 183 employees, of which 179
received severance packages totaling approximately $1.4 million as of December
31, 1999. The remaining four individuals, with total severance payments due of
approximately $160,000, were notified of their termination during 1999, but
received their severance payments in January 2000. The remaining severance
accrued in the December 31, 1999 merger reserve balance relates to executives
whose terminations were effective and accrued for during 1998 and whose
severance will be fully paid by mid-2001.

     Lease Abandonment.  The Company began the process of moving PMT's
operations from Nashville, Tennessee to other locations in December 1998, and
completed this process in the first quarter of 1999, at which time the premises
in Nashville were completely vacated. The 1998 charge included the estimated
unrecoverable future lease obligations for primarily PMT's Nashville
headquarters. By December 1999 the facility was fully subleased, facilitating an
accurate assessment of future unrecoverable lease obligations. Based on the
updated assessment, approximately $280,000 of the original merger and
consolidation charge was reversed. During 1999, plans were made to close or
downsize additional facilities. These decisions resulted in additional accruals
of approximately $3.0 million covering ten locations, eight of which have been
closed or downsized during 1999. The remaining two facilities will be closed or
downsized during 2000. Obligations under leases included in the reserve balance
will not be fully paid out until October 2007.

     Contract Termination Charges.  Consistent with past practice, management
developed a plan in 1998 to convert the front-end and back-end transaction
processing of PMT's merchants to the NOVA Network. As a result of this plan, in
1998 the Company negotiated the termination of long-term processing contracts
with third parties. The majority of these terminations were finalized and paid
in 1998. During 1999, management was able to successfully terminate one of the
contracts without incurring the $2.0 million penalty recognized in 1998. Based
on new facts and circumstances, arising in 1999, management also determined that
the economic benefits of terminating another contract did not outweigh the early
termination costs. Accordingly, approximately $3.9 million of contract
termination charges were reversed to appropriately reflect these events.

     Asset Write-Down.  Capital asset write-downs are substantially attributable
to the computer software and equipment including PMT's management information
and financial reporting systems. Additional assets written down include
telephone systems, and office furniture and equipment that will not be
redeployed for use at another NOVA facility. Charges recorded in 1998 were
associated primarily with PMT's corporate office in Nashville. Additional
charges of approximately $1.9 million were recognized during 1999 in connection
with the revised facility consolidation plan.

     Costs to Exit a Distribution Channel.  In 1998 management formulated plans
to exit unique distribution channels based upon the type of merchant business
generated through these channels. Specifically, servicing and maintaining the
type of merchant generated through these channels is not compatible with NOVA's
operating philosophy and not strategically aligned with NOVA's plan of business.
The charge related to exiting this distribution channel included a contract
termination fee and the write down of certain related intangible assets
resulting from an analysis of discounted future cash flows generated from the
subject merchants. The

                                       23

<PAGE>   24
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

final negotiated termination fee was approximately $434,000 less than accrued in
1998, resulting in a reversal of the excess charge during 1999.

NOTE 5.  PROPERTY, EQUIPMENT, AND SOFTWARE

     Property, equipment and software at December 31, 1999 and 1998 consist of:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Land and building...........................................  $ 12,316   $ 10,680
Equipment...................................................    44,836     35,525
Credit card terminals held for rent.........................    24,007     22,610
Software, internally developed..............................    23,776      5,686
Furniture and fixtures......................................     6,264      6,019
Leasehold improvements......................................     2,730      2,414
Work-in-progress, including software development............     6,510     11,446
                                                              --------   --------
                                                               120,439     94,380
Less accumulated depreciation and amortization..............   (43,476)   (28,648)
                                                              --------   --------
                                                              $ 76,963   $ 65,732
                                                              ========   ========
</TABLE>

     Depreciation expense for the years ended December 31, 1999, 1998, and 1997
was approximately $17.0 million, $12.6 million, and $6.6 million, respectively.

NOTE 6.  NET INVESTMENT IN DIRECT FINANCE LEASES

     The components of the investment in direct financing leases for POS
equipment are as follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Minimum lease payments......................................  $ 72,884   $ 60,383
Residual values -- unguaranteed.............................    12,799      9,700
Allowance for doubtful accounts.............................    (3,594)    (3,217)
                                                              --------   --------
Net minimum lease payments receivable.......................    82,089     66,866
Unearned income.............................................   (24,333)   (21,181)
                                                              --------   --------
          Net investment in direct financing leases.........  $ 57,756   $ 45,685
                                                              ========   ========
</TABLE>

     Changes in the allowance for doubtful accounts at December 31, 1999, 1998,
and 1997 were as follows:

<TABLE>
<CAPTION>
                                                             1999      1998      1997
                                                            -------   -------   -------
                                                                  (IN THOUSANDS)
<S>                                                         <C>       <C>       <C>
Balance at beginning of year..............................  $ 3,217   $ 2,482   $ 1,659
Subsidiary fiscal year conversion.........................      (39)       78        --
Provision for bad debt expense............................    3,278     2,987     2,390
Charged off lease contracts...............................   (3,262)   (2,776)   (2,043)
Bad debt recoveries.......................................      400       446       476
                                                            -------   -------   -------
          Balance at end of year..........................  $ 3,594   $ 3,217   $ 2,482
                                                            =======   =======   =======
</TABLE>

                                       24

<PAGE>   25
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At December 31, 1999, minimum lease payments receivable, including
estimated residual values receivable, are due as follows:

<TABLE>
<CAPTION>
                                                           MINIMUM LEASE    UNGUARANTEED
                                                             PAYMENTS      RESIDUAL VALUES
YEAR ENDED DECEMBER 31:                                     RECEIVABLE       RECEIVABLE
-----------------------                                    -------------   ---------------
                                                                   (IN THOUSANDS)
<S>                                                        <C>             <C>
2000.....................................................     $28,879          $ 2,342
2001.....................................................      22,849            2,462
2002.....................................................      15,131            3,642
2003.....................................................       5,634            3,988
Thereafter...............................................         391              365
                                                              -------          -------
                                                              $72,884          $12,799
                                                              =======          =======
</TABLE>

     The Company's experience indicates a portion of the leases will terminate
at dates other than the end of the contractual period. Accordingly, the
foregoing table should not be regarded as a forecast of future collections.

NOTE 7.  NOTE RECEIVABLE

     In March 1997, PMT entered into a ten year lease agreement for a portion of
office space available in a building that served as its corporate headquarters.
PMT granted a mortgage loan to an independent developer and advanced funds for
the purchase and renovation of the building. The outstanding loan amount of
$13.6 million bears interest at 5%, with principal and interest of $80,673 due
monthly in arrears. The loan principal was issued in various draws based upon
completion of certain stages of renovation. The outstanding balance is payable
in full in October 2007. The mortgage loan is secured by a first lien on the
property. An independent appraisal of the property determined its fair value for
the purpose of classifying the related leasing transaction in accordance with
Statement of Financial Accounting Standards No. 13, "Accounting for Leases." The
lease is classified as an operating lease, and the minimum lease commitment is
included in Note 11.

NOTE 8.  LONG-TERM DEBT OBLIGATIONS

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                         WEIGHTED                   -------------------
                                                       INTEREST RATE   MATURITIES     1999       1998
                                                       -------------   ----------   --------   --------
                                                                                       (IN THOUSANDS)
<S>                                                    <C>             <C>          <C>        <C>
Revolving credit facility............................      7.25%          2004      $213,000   $     --
Variable Rate Secured Notes:
Equipment lease-backed notes.........................      6.35           2003        37,612     24,879
Equipment lease-backed notes.........................      7.22           2002         1,886      9,401
Equipment lease-backed notes.........................      8.50           2001           216        640
Equipment lease-backed notes.........................                     1999            --         31
Deferred merchant portfolio purchase price
  installment........................................      7.88           1999            --     17,362
Other................................................        --             --         1,605      2,246
                                                                                    --------   --------
Total long-term debt obligations.....................                                254,319     54,559
Less amounts due within one year.....................                                (16,066)   (31,534)
                                                                                    --------   --------
Long-term obligations................................                               $238,253   $ 23,025
                                                                                    ========   ========
</TABLE>

                                       25

<PAGE>   26
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The maturities of long-term obligations at December 31, 1999, are as
follows:

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)
                                                              --------------
<S>                                                           <C>
2000........................................................     $ 16,066
2001........................................................       13,370
2002........................................................        8,551
2003........................................................        3,062
2004........................................................      213,270
                                                                 --------
                                                                 $254,319
                                                                 ========
</TABLE>

     In November 1999, NOVA amended its revolving credit agreement. The amended
agreement, secured by substantially all of the company's assets, expires on
November 16, 2004, and provides for borrowings up to $250.0 million. This
agreement amended an earlier, five-year, $80.0 million agreement entered into on
October 27, 1997. At the Company's option under the terms of the agreement,
borrowings bear interest at a spread of up to 1.5% over either the bank's base
rate, or the prevailing Eurodollar rate, as determined from certain financial
ratios. On August 25, 1999, the Company entered into a bridge loan for $70.0
million at the prevailing Eurodollar rate plus 1%. The bridge loan was repaid
from proceeds drawn from the amended credit facility upon completion of the
amendment. The Company also maintains a standby letter of credit facility for up
to $25.0 million. A commitment fee is assessed on the average daily unused
portion of the revolving loans and the standby letter of credit. The fee ranges
from .20% to .40%, depending on certain leverage ratios, adjusted quarterly.
NOVA's policy is to classify revolving credit facility borrowings under
long-term debt since it has the ability under the credit agreement, and the
intent, to maintain these obligations for longer than one year.

     The revolving credit facility contains certain financial covenants. NOVA
was in compliance with all covenants under the amended agreement at December 31,
1999.

     The Variable Rate Secured Notes ("Notes") are secured by the remaining
payment stream of pledged equipment leases. The Notes bear a variable rate of
interest based on indices determined by each lender, either the one month
commercial paper rate then in effect, prime rate, or two year treasury
securities, as the case may be.

NOTE 9.  INCOME TAXES

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                               1999      1998
                                                              -------   -------
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
DEFERRED TAX LIABILITIES:
  Property and equipment....................................  $ 9,520   $ 7,757
  Gross lease receivable....................................   32,674    23,489
  Residual values, including portfolios.....................    5,934     4,495
  Mark-to-market accounting for accounts receivable.........      284     1,052
  Other.....................................................       --     1,467
                                                              -------   -------
          Total deferred tax liabilities....................  $48,412   $38,260
                                                              =======   =======
</TABLE>

                                       26

<PAGE>   27
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                               1999      1998
                                                              -------   -------
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
DEFERRED TAX ASSETS:
  Leased equipment..........................................  $20,710   $14,870
  Merger related costs......................................    3,591    18,663
  Unearned income...........................................   10,908     8,659
  Allowance for doubtful accounts and merchant loss
     reserve................................................   15,504    10,463
  Accrued liabilities.......................................    1,303     3,588
  Book over tax amortization................................    1,879    12,619
  Net operating loss carryforwards..........................    1,778       332
  Other.....................................................      925       225
                                                              -------   -------
          Total deferred tax assets.........................   56,598    69,419
Valuation allowance.........................................       --      (332)
                                                              -------   -------
Net deferred tax assets ....................................  $ 8,186   $30,827
                                                              =======   =======
</TABLE>

     In assessing the likelihood of utilizing existing net deferred tax assets,
management considered its current operating environment, future ability to
generate sufficient taxable income and the excess of its appreciated asset
values over the related tax basis. At this time, management believes it is more
likely than not that the deferred tax assets will be realized based on its
assessment of current financial condition.

     The components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
                                                             YEARS ENDED DECEMBER 31,
                                                           ----------------------------
                                                            1999       1998      1997
                                                           -------   --------   -------
                                                                  (IN THOUSANDS)
<S>                                                        <C>       <C>        <C>
Current:
  Federal................................................  $42,034   $ 25,735   $16,878
  State..................................................    4,331      2,332     2,308
Deferred:
  Federal................................................    2,676    (26,681)    1,214
  State..................................................      534     (3,748)      162
Change in valuation allowance............................     (332)        --        --
                                                           -------   --------   -------
                                                           $49,243   $ (2,362)  $20,562
                                                           =======   ========   =======
</TABLE>

     The provision (benefit) for income taxes differs from the amount computed
by applying the federal statutory rate to income before provision for income
taxes for the following reasons:

<TABLE>
<CAPTION>
                                                             YEARS ENDED DECEMBER 31,
                                                             ------------------------
                                                             1999      1998     1997
                                                             -----    ------    -----
                                                                  (IN THOUSANDS)
<S>                                                          <C>      <C>       <C>
Federal statutory rate.....................................     35%    (35.0)%   35.0%
State income taxes, net of federal tax benefit.............    2.3      (6.1)     2.8
Non-deductible merger-related charges......................     --      32.2       --
Amortization of excess cost of businesses acquired.........     --       0.5      0.1
Subchapter S Corporations income tax not subject to tax....     --      (7.4)    (2.9)
Other......................................................    0.1       0.2      0.2
                                                             -----    ------    -----
Effective tax rate.........................................   37.4%    (15.6)%   35.2%
                                                             =====    ======    =====
</TABLE>

     The Company has approximately $4.7 million of federal and state net
operating loss carryforwards available to offset future taxable income of
certain subsidiaries. These cumulative net operating loss carryforwards expire
in varying amounts through fiscal 2014.

                                       27

<PAGE>   28
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10.  CAPITALIZATION

PREFERRED STOCK

     The Company is authorized to issue 5,000,000 shares of Preferred Stock in
one or more series with such designations, powers, preferences, rights,
qualifications, limitations and restrictions as may be fixed by the Board of
Directors.

COMMON STOCK

     On April 21, 1998, NOVA completed a public offering in which the Company
sold 5,000,000 shares of common stock for a purchase price to the public of
$30.00 per share. The net proceeds received from the sales of the shares of
common stock were approximately $142.6 million after deducting underwriting
discounts and commissions and estimated expenses. The Company used its net
proceeds to repay all amounts outstanding under its bank credit facility and to
purchase various merchant portfolios.

     In June 1999, the Board of Directors authorized a share repurchase program
approving share purchases of up to $250.0 million from time to time on the open
market, or pursuant to privately negotiated transactions price levels the
Company deems attractive. The shares may be used to meet funding requirements
for benefit plans and other business purposes. As of December 31, 1999, NOVA had
acquired 5,972,172 shares at an aggregate cost of $159.1 million. The purchase
of the shares was funded primarily through the draw down of funds from the
existing credit facility.

RIGHTS AGREEMENT

     On June 8, 1999, the Board of Directors approved the adoption of a share
Rights Agreement which provides for a dividend distribution to shareholders of
record on June 8, 1999, of one Right for each outstanding share of common stock.
The Rights are attached to the common stock, do not have voting or dividend
rights, and, until they become exercisable, they can have no dilutive effect on
earnings. Each Right, when exercisable, entitles the holder to purchase ten
shares of common stock (subject to adjustment based upon a predetermined
formula) at a purchase price per share of 20% of market value, measured as of
the date that an announcement is made that a person has acquired sufficient
shares to become an Acquiring Person (any person who acquires, after July 9,
1999, 10% of the outstanding shares of the Company) multiplied by the number of
shares of common stock to be received upon exercise. The distribution date will
occur upon the earlier of (i) ten days following a public announcement that a
person or group of affiliated or associated persons has acquired beneficial
ownership of 10% or more of the outstanding shares, or (ii) ten days following
the commencement of a tender offer or an exchange offer that would result in a
person or group beneficially owning 10% or more of such outstanding shares of
common stock. The Rights are not exercisable until the distribution date and
will expire at the close of business on July 9, 2009, unless earlier redeemed by
the Company.

     In the event that, after the Rights become exercisable, (i) the Company is
acquired in a merger or other business combination in which the Company is not
the surviving corporation, (ii) all of its shares are acquired in a share
exchange or the Company engages in a merger or consolidation in which all or
part of its outstanding shares are changed or exchanged for stock, other
securities or assets of any other person or (iii) 50% or more of the Company's
assets or earning power is sold or transferred, each Right holder shall have the
right to receive, upon exercise, a number of shares of common stock of the
acquiring company equal to the calculated conversion exchange ratio.

     Unless the terms of an offer for all shares are first approved by the Board
and the Rights Agreement amended to permit the transaction, or the Rights are
redeemed by the Company, the Rights will cause substantial dilution, if they
become exercisable. In general, the Company may redeem the Rights in whole, but
not in part, at a price of $.01 per Right, at any time before a person becomes a
beneficial owner of 10% or more of the outstanding common stock of NOVA.
Immediately upon the action of the Board of Directors ordering

                                       28

<PAGE>   29
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

redemption of the Rights, the Rights will terminate and the only right of the
holders will be to receive the $.01 redemption price.

NOTE 11.  COMMITMENTS, CONTINGENCIES, AND LEASE OBLIGATIONS

CONTINGENCIES

     NOVA is involved in ordinary and routine litigation incidental to its
business. The Company is not party to any pending legal proceedings that, in the
opinion of management, would have a material adverse effect on the results of
operations or financial position.

OPERATING LEASE OBLIGATIONS

     The Company has leases for various real property and equipment that expire
at various dates. The future minimum rental commitments, net of future sublease
income, for all non-cancelable leases at December 31, 1999, are payable as
follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,                                     (IN THOUSANDS)
-------------------------                                     --------------
<S>                                                           <C>
2000........................................................     $  6,114
2001........................................................        5,475
2002........................................................        4,217
2003........................................................        3,744
2004........................................................        3,482
Thereafter..................................................       11,478
                                                                 --------
          Total future minimum lease payments...............     $ 34,510
Less future sublease income.................................     $(10,479)
                                                                 --------
                                                                 $ 24,031
                                                                 ========
</TABLE>

     Rental expense, net of sublease income, for the years ended December 31,
1999, 1998 and 1997 was approximately $4.8 million, $4.9 million and $3.3
million respectively.

NOTE 12.  STOCK OPTION PLANS

     The Company applies APB 25 and related interpretations in accounting for
its employee stock options. Under APB 25, if the exercise price of NOVA's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized. As discussed below, the
alternative fair value accounting provided for under SFAS 123 requires the use
of option valuation models that were not developed for use in valuing employee
stock options.

     Pro forma disclosures of net income (loss) and earnings per share pursuant
to SFAS 123 require that the information be determined as if the Company has
accounted for its employee stock options granted subsequent to December 31,
1994, under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                                         YEARS ENDED DECEMBER 31,
                                                     --------------------------------
                                                       1999        1998        1997
                                                     --------    --------    --------
<S>                                                  <C>         <C>         <C>
Risk free interest rate............................  4.7%-6.3%   4.5%-5.7%   5.7%-6.9%
Dividend yield.....................................         0%          0%          0%
Expected volatility of stock price.................     0.577       0.577       0.544
Expected life in years.............................         7           7           7
</TABLE>

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models

                                       29

<PAGE>   30
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

require the input of highly subjective assumptions, including the expected stock
price volatility. In management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options because the stock options have characteristics significantly
different from those of traded options, and changes in the subjective
assumptions can materially affect the fair value estimate.

     The pro forma amounts are indicated below:

<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                                         ----------------------------
                                                          1999       1998      1997
                                                         -------   --------   -------
                                                            (IN THOUSANDS, EXCEPT
                                                              PER SHARE AMOUNTS)
<S>                                                      <C>       <C>        <C>
Net Income (Loss):
  As reported..........................................  $82,468   $(12,779)  $37,899
  Pro forma............................................   64,708    (20,789)   34,452
Basic Earnings Per Share:
  As reported..........................................  $  1.16   $  (0.18)  $  0.60
  Pro forma............................................     0.91      (0.30)     0.54
Diluted Earnings Per Share:
  As reported..........................................  $  1.14   $  (0.18)  $  0.58
  Pro forma............................................     0.89      (0.30)     0.52
</TABLE>

     The pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period, and additional options may be granted in future years. The
Company sponsors seven stock option plans whereby the Company has reserved for
issuance upon exercise of stock options a maximum of 11,540,610 shares of NOVA
common stock, and 550,000 shares related to stock appreciation rights.

     The 1991 Employees Stock Option and Stock Appreciation Rights Plan ("1991
Plan"), the 1996 Employees Stock Incentive Plan ("1996 Employees Plan"), and the
NOVA Corporation 1996 Directors Stock Option Plan ("1996 Directors Plan") are
available to grant options. These plans are administered by a committee of the
Board of Directors that determines the number of shares to be granted and the
option price per share. Under these plans, the options expire no later than ten
years from the grant date.

     The 1991 Plan option awards may be exercised in 20% increments annually,
beginning on March 1 following the date of grant. No options or rights shall be
granted under the Plan after November 2, 2001. No appreciation rights have been
granted.

     Under the 1996 Directors Plan options granted are exercisable in 25%
increments at the end of each of the four years subsequent to the date of grant,
and at a purchase price per share no less than the market value per share on the
grant date.

     The 1996 Employees Plan allows for the grants of incentive stock options,
non-qualified stock options, stock appreciation rights, and restricted stock
awards. On September 24, 1998, shareholders approved an amendment to increase
the number of shares issuable under the Plan from 2,000,000 shares to 6,000,000
shares to facilitate future grants to all employees of NOVA after the PMT
Merger. Under the 1996 Employees Plan, options may be exercised in 25%
increments at the end of each of the four years subsequent to the grant date.
The administrative committee under the plan may amend or alter the vesting
schedule of the outstanding options. Incentive stock options cannot be granted
at a per share price less than the fair market value of the common stock on the
grant date.

     In connection with the PMT merger, each outstanding option or warrant to
purchase PMT common stock became fully vested and was automatically converted
into an option or warrant to purchase the number of shares of NOVA common stock
in an amount and per share price equal to the exchange ratio of .715. Each
assumed option contains terms and provision similar to those terms, conditions,
and provisions contained in

                                       30

<PAGE>   31
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the original grant. The PMT plans are no longer available for option grants.
Approximately 2,300,000 shares of NOVA common stock have been reserved for
issuance upon the exercise of such options and warrants. Information contained
in the tables presents the option activity as if PMT shares had been converted
from December 31, 1996.

     A summary of option activity is as follows:

<TABLE>
<CAPTION>
                                                                   OPTIONS OUTSTANDING
                                                              ------------------------------
                                                                                WEIGHTED
                                                                NUMBER      AVERAGE EXERCISE
                                                              OUTSTANDING   PRICE PER SHARE
                                                              -----------   ----------------
                                                               (SHARE AMOUNTS IN THOUSANDS)
<S>                                                           <C>           <C>
Balance at December 31, 1996................................      3,191          $ 6.98
Granted and assumed.........................................        803           17.11
Exercised...................................................       (587)           3.02
Terminated..................................................       (195)          14.67
                                                                -------          ------
Balance at December 31, 1997................................      3,212            9.74
Granted and assumed.........................................      4,507           27.14
Exercised...................................................       (722)          12.61
Terminated..................................................       (198)          18.20
                                                                -------          ------
Balance at December 31, 1998................................      6,799           20.73
Granted.....................................................      1,430           25.56
Exercised...................................................     (1,654)          10.79
Terminated..................................................       (580)          28.28
                                                                -------          ------
Balance at December 31, 1999................................      5,995          $23.46
                                                                =======          ======
</TABLE>

     The following table summarizes information concerning outstanding and
exercisable options at December 31, 1999 (Share amounts in thousands):

<TABLE>
<CAPTION>
                                   OPTIONS OUTSTANDING        OPTIONS EXERCISABLE
                               ---------------------------   ----------------------
                                   WEIGHTED
                                   AVERAGE        WEIGHTED                 WEIGHTED
                                  REMAINING       AVERAGE                  AVERAGE
   RANGE OF        NUMBER      CONTRACTUAL LIFE   EXERCISE     NUMBER      EXERCISE
EXERCISE PRICES  OUTSTANDING      (IN YEARS)       PRICE     EXERCISABLE    PRICE
---------------  -----------   ----------------   --------   -----------   --------
<S>              <C>           <C>                <C>        <C>           <C>
$ 1.18                339            4.4           $ 1.18         339       $ 1.18
$ 3.73                182            4.6             3.73         182         3.73
$12.28 - $16.78       421            7.1            13.75         233        13.85
$18.53 - $22.03       742            7.4            19.52         563        19.49
$22.94 - $27.45     1,817            9.2            25.40         221        24.37
$27.50 - $31.12     2,416            8.7            29.24         583        29.30
$32.00 - $33.06        78            8.9            32.35          18        32.33
                    -----            ---           ------      ------       ------
Total               5,995            8.2           $23.46       2,139       $17.92
                    =====            ===           ======      ======       ======
</TABLE>

     The weighted-average grant date fair value of options granted is $16.25,
$17.08 and $9.62 for the years ended December 31, 1999, 1998 and 1997,
respectively. The Company realizes income tax benefits from the

                                       31

<PAGE>   32
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

exercise of certain stock options. This benefit results in a decrease in current
income taxes payable and an increase in additional paid in capital.

NOTE 13.  EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted
earnings per share in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings per Share":

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                              ----------------------------
                                                               1999       1998      1997
                                                              -------   --------   -------
                                                                 (IN THOUSANDS, EXCEPT
                                                                    PER SHARE DATA)
<S>                                                           <C>       <C>        <C>
Numerator for basic and diluted earnings per share..........  $82,468   $(12,779)  $37,899
Denominator:
  Denominator for basic earnings per share
     Weighted average shares................................   71,154     70,061    63,571
  Effect of dilutive employee stock options and
     warrants(1)............................................    1,407         --     2,097
                                                              -------   --------   -------
Denominator for diluted earnings per share..................   72,561     70,061    65,668
                                                              =======   ========   =======
Basic earnings per share....................................  $  1.16   $  (0.18)  $  0.60
                                                              =======   ========   =======
Diluted earnings per share..................................  $  1.14   $  (0.18)  $  0.58
                                                              =======   ========   =======
</TABLE>

---------------

(1) 1998 excludes approximately 2,127,000 stock options and warrants which were
    anti-dilutive for diluted earnings per share calculations.

NOTE 14.  RELATED PARTIES

     The Company has entered into a multi-year agreement with a shareholder that
provides telecommunications service and support, primarily for the Company's
transaction processing network. The amounts paid were approximately $6.6
million, $7.0 million and $3.8 million for the years ended December 31, 1999,
1998 and 1997, respectively.

     The Company paid another of its shareholders approximately $2.7 million,
$3.0 million and $3.3 million in the years ended December 31, 1999, 1998 and
1997, respectively, primarily for transaction processing fees. Additionally, the
Company received approximately $0.5 million, $1.5 million, and $0.9 million of
interest income in the years ended December 31, 1999, 1998 and 1997,
respectively.

     As discussed in Note 3, the Company purchased the CoreStates merchant
processing portfolio in November 1998. First Union, a shareholder of the
Company, acquired CoreStates prior to NOVA's acquisition of the portfolio.

                                       32

<PAGE>   33
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 15.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     Previously reported quarterly financial information for the year ended
December 31, 1998, has been restated below to reflect the acquisition of the PMT
in pooling of interests business combination.

<TABLE>
<CAPTION>
                                                       1999                                        1998
                                     -----------------------------------------   -----------------------------------------
                                      FIRST      SECOND     THIRD      FOURTH     FIRST      SECOND     THIRD      FOURTH
                                     QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER
                                     --------   --------   --------   --------   --------   --------   --------   --------
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                  <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Revenues...........................   311,765    379,344    387,471    388,059    240,542    275,186    307,209    322,727
                                     --------   --------   --------   --------   --------   --------   --------   --------
Cost of service....................   238,442    291,295    294,764    296,232    183,313    210,579    238,697    253,017
                                     --------   --------   --------   --------   --------   --------   --------   --------
Net income (loss) before income
  taxes............................    22,275     32,847     38,046     38,543     16,258(1)  20,600(2)  13,496(3) (65,495)(4,5)
                                     --------   --------   --------   --------   --------   --------   --------   --------
Provision (benefit) for income
  taxes............................     8,257     12,323     14,248     14,415      5,571      7,649      8,281    (23,863)
                                     --------   --------   --------   --------   --------   --------   --------   --------
Net income (loss)..................  $ 14,018   $ 20,524   $ 23,798   $ 24,128   $ 10,687   $ 12,951   $  5,215   $(41,632)
                                     --------   --------   --------   --------   --------   --------   --------   --------
Earnings per share -- basic........  $   0.19   $   0.28   $   0.34   $   0.35   $   0.16   $   0.18   $   0.07   $  (0.58)
                                     --------   --------   --------   --------   --------   --------   --------   --------
Earnings per share -- diluted......  $   0.19   $   0.28   $   0.33   $   0.35   $   0.16   $   0.18   $   0.07   $  (0.58)
                                     --------   --------   --------   --------   --------   --------   --------   --------
</TABLE>

---------------

(1) Net income and earnings per share include a pre-tax charge of $2.5 million
    associated with merger activities.
(2) Net income and earnings per share include a pre-tax charge of $1.6 million
    associated with merger activities.
(3) Net income and earnings per share include a pre-tax charge of $11.2 million
    associated with merger activities.
(4) Net income and earnings per share include a pre-tax charge of $75.4 million
    associated with merger activities.
(5) Includes $14.2 million of unusual charges for collectibility of accounts
    receivable, increase allowance for doubtful accounts, merchant credit and
    fraud losses reserves, and sales and use tax reserves.

     See notes 2 and 4 to the consolidated Financial Statements for additional
information on the above transactions.

     The Company has experienced, and expects to continue to experience,
significant seasonality in its business. The Company typically realizes higher
revenues in the fourth calendar quarter and lower revenues in the first calendar
quarter, reflecting increased transaction volumes during the summer months and a
significant decrease in transaction volume during the period immediately
following the holiday season. Quarterly results are also affected by the timing
of merchant portfolio purchases and the timing and magnitude of expenses for
merchant portfolio conversions. Therefore, the results reported in the table
above do not necessarily indicate the Company's normal seasonal trends.

                                       33

<PAGE>   34

                                                                     EXHIBIT 13

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


The Board of Directors and Shareholders


         We have audited the accompanying consolidated balance sheets of NOVA
Corporation (and subsidiaries) as of December 31, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We did not audit the 1997 financial statements or schedule of PMT
Services, Inc. ("PMT"), a wholly-owned subsidiary, and certain of its
subsidiaries which statements reflect total revenues of 45% of the consolidated
total for the year ended December 31, 1997. Those statements and schedule were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the 1997 data included for PMT, is based
solely on the report of the other auditors.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.

         In our opinion, based on our audits and the report of other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of NOVA Corporation and
subsidiaries at December 31, 1999 and 1998, and the consolidated results of
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, based on our audits and the report
of the other auditors, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.


                                        Ernst & Young LLP


Atlanta, Georgia
February 22, 2000


                                       34

<PAGE>   35
                        REPORT OF INDEPENDENT AUDITORS


TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF PMT SERVICES, INC.


In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows (not presented separately herein) present fairly, in all material
respects, the financial position of PMT Services, Inc. and its subsidiaries at
July 31, 1997 and the results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting principles in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.


                                       PricewaterhouseCoopers LLP


PricewaterhouseCoopers LLP

Nashville, Tennessee
September 25, 1998