1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
--- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission File Number 1-10442
FIRST FINANCIAL MANAGEMENT
CORPORATION
(Exact name of Registrant as specified in its charter)
GEORGIA 58-1107864
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 CORPORATE SQUARE, SUITE 700, ATLANTA, GEORGIA 30329
(Address of principal executive offices)
(404) 321-0120
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
COMMON STOCK, $.10 PAR VALUE NEW YORK STOCK EXCHANGE
5% SENIOR CONVERTIBLE DEBENTURES DUE 1999 NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ].
The aggregate market value of the Common Stock of the Registrant held by
nonaffiliates as of January 31, 1995: $3,749,087,586
Number of shares of Common Stock outstanding as of January 31, 1995:
61,709,709 shares
DOCUMENTS INCORPORATED BY REFERENCE PART
- ----------------------------------- ----
Proxy Statement for the Annual Meeting of Shareholders
to be held on April 26, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III
2
PART I
ITEM 1. BUSINESS.
First Financial Management Corporation ("FFMC" or the "Company") provides
a variety of information services to a diverse customer base. FFMC was
incorporated as a Georgia corporation in 1971, and became a public company in
1983.
The Company periodically conducts a strategic reevaluation of its
businesses, reviewing overall trends and developments in relation to its
business investments and industry concentrations. These strategic reviews have
resulted in numerous business acquisitions that have complemented internal
growth in expanding the Company's customer base, range of services,
technological capabilities and management depth. Such reviews also resulted in
FFMC's dispositions in 1992 of business units no longer involved in the
Company's strategic direction (see "Dispositions").
INFORMATION SERVICES
FFMC operates in a single business segment, providing a vertically
integrated set of data processing, storage and management services for the
capture, manipulation and distribution of information. These services are
provided to over 327,000 commercial establishments and government agencies,
primarily in the United States. In addition, the Company, through its November
1994 acquisition of Western Union Financial Services, Inc. and related assets
("Western Union"), provides information services to a worldwide network of
agents resulting in money transfers involving an estimated 55 million consumers
in 1994. Currently, a substantial majority of these money transfers originate
within the United States.
The Company markets its array of service offerings to attract new
customers and cross sells its various services throughout its existing customer
base. FFMC's business units utilize the Company's internally developed
telecommunications infrastructure to transfer data and route service calls in
providing information services to their customers. The credit and debit card
processing and check acceptance business areas are increasingly using data
capture terminals developed by MicroBilt (FFMC's in-house research and
development unit) to connect customer point-of-sale systems to FFMC's data
transfer network. The Company continues to pursue further integration of its
services to gain competitive advantage. FFMC's information services fall into
three main categories: merchant services, health care services and imaging
services.
Merchant Services
Merchant services involves information processing and transfer related to
financial transactions. These services include the authorization, processing
and settlement of credit and debit card transactions, verification or guarantee
of check transactions, debt collection and accounts receivable management, and
worldwide nonbank money transfers and bill payments. Also included is a
business unit that designs, installs and manages in-store financial services
outlets in supermarkets. Services are provided to over 310,000 customers in
all 50 states, the Caribbean, Canada, Mexico, Australia, and New Zealand. In
addition, Western Union provides information services throughout its worldwide
network of over 24,000 agents that results in money transfers for consumers.
Merchant services' operations consists of over 80 processing centers employing
approximately 5,700 employees. The percentages of FFMC's revenues
-2-
3
contributed by merchant services were 71%, 66% and 60%, respectively, during
the years ended December 31, 1994, 1993 and 1992.
National Bancard Corporation ("NaBANCO") was acquired by FFMC in 1987,
and has since become the largest provider of merchant credit and debit card
authorization, processing and settlement services in the United States. These
services are provided for merchants with respect to transactions in which
payment is made through bank cards (primarily VISA and MasterCard) and certain
other credit cards. Fees for credit card authorization and settlement services
are generally based on the dollar volume of transactions processed.
Approximately $74 billion in merchant credit and debit card transactions were
handled in 1994, compared with $54 billion in 1993 and $43 billion in 1992.
NaBANCO's processing centers in Sunrise, Florida and Melville, New York
support merchant electronic cash registers and dial up point-of-sale
authorization and draft capture terminals. Approximately 97% of the credit
card authorizations by NaBANCO are performed electronically, with responses to
customers usually within two to five seconds. Also, voice authorization
services are provided via the Florida center to merchants without electronic
authorization capabilities and in the event that electronic authorization
capabilities are interrupted. Essentially all of the electronic authorization
volume can be handled through either of the two processing centers, enabling
transactions to be load-shared between centers and ensuring availability of
processing facilities.
Starting in June 1993, NaBANCO began providing most of its services under
an agreement as agent for and in conjunction with First Financial Bank ("FFB"),
FFMC's credit card bank formed for the primary purpose of supporting the
Company's credit card processing and settlement operations. FFB replaced
Georgia Federal Bank, FSB (see "Dispositions") as NaBANCO's primary sponsoring
member bank in the VISA and MasterCard systems as required by their rules.
NaBANCO also provides services as agent for and in conjunction with other
sponsoring member banks and maintains ongoing relationships with these and
other banks to assist in marketing and delivering NaBANCO's services to these
banks' merchant customers.
The TeleCheck system was founded in 1964 to provide services to merchants
who desire to pass the risk of bad checks to a third party, and is now one of
the largest check acceptance services in the world. These services are
provided utilizing large consumer data bases and proprietary risk management
systems operated under the "TeleCheck" trademark. Checks totalling over $30
billion were authorized in 1993, compared with $24 billion in 1993 and $15
billion in 1992.
TeleCheck provides check guarantee services (buying the approved check at
face value from the merchant if it is subsequently dishonored) up to a
pre-established warranty maximum. TeleCheck's check verification service helps
merchants reduce bad check write-offs and control the costs of check acceptance
by providing access to payment data bases and activity monitoring systems.
These services allow merchants to maintain a liberal check acceptance program
to increase sales and profits. Fees charged to customers for check
verification and guarantee services are generally based on the dollar volume of
transactions processed.
TeleCheck became a part of merchant services through FFMC's acquisition
in July 1992 of TeleCheck Services, Inc. ("TSI") and its principal franchisee,
Payment Services Company - U.S. ("PSC"). TSI was the owner and franchisor of
the TeleCheck system, and provided these services along with eleven independent
franchisees (including PSC) operating in geographically-defined territories.
PSC started in 1976 as the owner of the Houston TeleCheck franchise, and grew
its volume and service
-3-
4
offerings through internal growth and the acquisition of additional franchises
and other related businesses.
In 1993, TSI and PSC completed the combination of their operations,
consolidating TSI's data processing operations and administrative offices into
PSC's headquarters and principal operating facility in Houston, Texas. The
Company also acquired five entities during 1993 that operated TeleCheck
franchises, four in the United States and the franchise in the Commonwealth of
Puerto Rico. In 1994, the Company acquired the entity operating the TeleCheck
franchise covering Australia and New Zealand. TeleCheck now operates virtually
the entire TeleCheck system, with independent franchisees remaining in only
three states and Canada.
Nationwide Credit, Inc. ("Nationwide"), acquired by FFMC in 1990, is a
leading provider of debt collection and accounts receivable management services
nationally to a wide variety of customers including retailers, health care
providers, financial institutions and the federal government and its agencies
through eleven collection offices located throughout the United States. Fees
charged to customers are generally based on the dollar amount of the funds
collected. Nationwide's services are performed with enhanced technological
advancements, including on-line skiptracing capabilities and paperless
collection systems, as customers' transactions are managed through a
collector's computer terminal linked to a central mainframe computer.
In March 1994, Nationwide acquired The Master Collectors, Inc. ("Master
Collectors"), an Atlanta-based collection agency. During 1994, the Master
Collectors' administrative and principal operating office was consolidated into
Nationwide's headquarters facility in Marietta, Georgia.
International Banking Technologies, Inc. ("IBT"), acquired via merger
with FFMC in 1993 and headquartered in Norcross, Georgia, is a leader in
developing in-store branch banking programs in supermarkets. IBT provides a
comprehensive array of services for its financial institution customers, with
the objective of developing a profitable retail financial services outlet while
achieving a value added arrangement to the food retailer. IBT derives its
revenues from fees earned during the design and installation phases, and also
from the on-going management of the in-store program between the financial
institution and the supermarket.
FFMC's acquisition of Western Union gives the Company a worldwide
leadership position in nonbank money transfer and bill payment services. The
primary market for Western Union's services is comprised of people who
periodically need to send or receive cash quickly to meet emergency situations,
to send funds to family in other locations or to use nonbank financial services
to pay bills and meet other obligations.
Western Union's automated money transfer system is connected to its
network of over 18,000 agents in the United States and over 6,000 agents in
over 100 foreign countries. In addition, money transfer services are available
on a next day basis to 15 African countries and third party service is
available in over 20 additional countries. Proprietary software links Western
Union's network directly to personal computers at agent locations for over half
of Western Union's domestic agent locations and over 1,000 of its foreign agent
locations. Western Union's administrative offices are located in Paramus, New
Jersey, and its principal operating facilities are customer service centers in
Bridgeton, Missouri and Dallas, Texas, the latter being a multilingual center.
-4-
5
Data is entered into the money transfer system from a person initiating a
transfer (the sender with funds) and the information is available throughout
Western Union's agent network (for a money transfer to a recipient specified by
the initiator) or to a specified commercial establishment (for a bill payment).
The information processing and transfer is completed by Western Union's system
such that money is available to the intended recipient, generally within
minutes. Western Union's revenues are derived from the transfer fee, which is
paid by the sender based on a graduated schedule and varies with the principal
amount of the money transfer.
Money transfers are typically handled by Western Union agents, of which
over 6,000 are located in supermarkets and convenience stores in the United
States. Customers can also call toll-free to a Western Union service center
and charge the transfer and related fee to their credit card account.
Commercial customers can also contact Western Union directly to complete money
transfers to traveling employees or clients.
Western Union offers bill payment services to utility companies,
collection agencies, finance companies and other financial institutions. The
debtor pays a transaction fee to settle their account via a money transfer
initiated at a participating Western Union agent location, with Western Union's
commercial customer benefiting from a convenient collection tool that results
in immediately available funds.
Also in recent years, Western Union has introduced ancillary products to
expand its services throughout its customer base. These products include money
orders and a prepaid disposable phone card, both of which are sold primarily
through Western Union's money transfer agents.
Merchant service revenues and earnings are favorably affected by
increased credit card and check volume during the holiday shopping period in
the fourth quarter and, to a lesser extent, during the back-to-school buying
period in the third quarter. In future years, the Company believes that its
revenues and earnings will also be affected by higher Western Union money
transfer volume during the summer months.
Health Care Services
Health care services includes data processing and information management
services related to health care and workers' compensation claims and the
resulting payments. Services are provided to approximately 2,000 customers by
over 5,300 employees operating in 180 locations throughout the United States.
The percentages of FFMC's revenues provided by health care services were 18%,
21% and 20%, respectively, for the years ended December 31, 1994, 1993 and
1992.
During 1994, FFMC began the process of consolidating previously separate
business units under one operating entity, FIRST HEALTH. The Company believes
a streamlined organizational structure will promote the marketing of its
various health care services to new customers, and the cross-selling of such
services to existing customers.
FIRST HEALTH Strategies, based in Salt Lake City, Utah, is one of the
nation's largest processors of private sector health care claims. Its services
include claims administration, utilization management, provider networks,
insurance brokerage and data analysis and reporting. These services are
designed to help control employer health care costs and to monitor the quality
of health care provided. FIRST
-5-
6
HEALTH Strategies markets its services principally to employers with
self-funded group health benefit plans and to employers with insured plans
which are seeking health care management alternatives. In 1994, FIRST HEALTH
Strategies began providing claims administration services to health maintenance
organizations.
FIRST HEALTH Services, based in Glen Allen, Virginia, is one of the
largest providers of transaction processing and management services to
governmental agencies and private and public third party payors. These
services include processing for Medicaid and other state programs,
pharmaceutical claims processing, drug utilization review services, and
management services for mental health, substance abuse, and preventative care
programs.
In addition, FIRST HEALTH is a leading supplier of Medicare claims
processing systems to health care insurers and a provider of hospital
information processing systems focused on revenue generation and cost
containment.
In July 1994, FFMC expanded FIRST HEALTH's service offerings by the
acquisition of GENEX Services, Inc. ("GENEX"). GENEX, headquartered in Wayne,
Pennsylvania, provides workers' compensation cost containment services to the
insurance industry and to self-insured corporations throughout the United
States, Canada and the Commonwealth of Puerto Rico. Services provided include
medical case management, medical bill review, vocational rehabilitation,
utilization management, independent medical exams, disability case management,
access to PPO networks, and telephonic injury management. GENEX has over 1,000
employees and over 120 offices throughout its markets to extend its service
coverage given the differences in disability laws and regulations among the
states.
During 1994, health care reform measures introduced in 1993 by the
executive and legislative branches of the federal government have been
supplanted by private sector initiatives to streamline the delivery of health
care services in the United States. FFMC believes this trend will continue.
Accordingly, the Company in 1994 intentionally slowed its rate of capital
investments in its health care services businesses as the nature of the reform
process materialized. FFMC continues to believe that its health care services,
given their focus on the efficiency of information processing, are favorably
positioned to benefit from an emphasis on reducing the level of administrative
costs related to the delivery of health care products and services.
In 1994, FIRST HEALTH Strategies continued its development of an
electronic claims processing system (ACT3). The Company lengthened its
implementation schedule to allow continued system design to incorporate the
effects of industry reforms on the processing of health care transactions. The
ACT3 system is being tested, and FFMC believes customer implementation will
commence in late 1995.
Data Imaging Services
Data imaging services is comprised of a full array of information
management services, including data capture, data imaging, micrographics,
electronic database management, and output printing and distribution. Services
are provided through First Image Management Company ("First Image") through
approximately 80 locations across the United States. First Image,
headquartered in Atlanta, Georgia, is the largest full service provider of
imaging services in the United States, employing nearly 3,400 people to provide
services to over 13,000 customers. The percentages of FFMC's revenues from
data imaging services were 11% in 1994, 13% in 1993 and 15% in 1992.
-6-
7
First Image markets its array of services under a "total solutions"
approach with the objective of improving the utility of a user's data base
through ease of access and efficient information output. In addition, First
Image's services reduce the need for its clients to devote substantial capital
investments to create, maintain and access large databases. Fees for First
Image's services are based on the volume and complexity of the information
management services as well as other factors such as required turnaround time,
volume and duration of contract. The majority of First Image's revenues are
derived from contracts two to three years in length.
First Image strengthened its market leadership position during 1994 by
acquiring the assets of AT&T's Global Information Solutions Information
Imaging Systems ("AT&T IIS"). At the date of acquisition, AT&T IIS provided a
full line of information management services to approximately 850 customers
through 13 locations across the United States. First Image continues to
provide services to AT&T's Data Services Division under a long-term contract.
In 1994, First Image began implementation of a business strategy to
deemphasize its sales and related maintenance of imaging equipment, focusing
its organization instead on the growth of its recurring business services.
Third party equipment suppliers are now utilized, as needed, to furnish First
Image customers with imaging equipment and associated maintenance services.
Also during 1994, First Image reorganized its businesses around three product
sets - Data Acquisition, Data Output and Corporate Publishing.
First Image's Data Acquisition division creates and manages large scale
electronic data bases through the collection and conversion of paper source
documents via key entry or high speed scanning techniques. Customers can be
linked to these data bases off-line, by dedicated transmission lines or
satellite link, or on-line by a direct link to First Image's key entry
terminals. In 1994, the Data Acquisition division signed several large
contracts with insurance companies for processing related to health care
claims.
The Data Output division includes First Image's production of computer
output microfilm ("COM") and the customization, printing and mailing of reports
and statements from large databases. COM services result in cost savings for
customers by the elimination of paper and reduced information distribution
costs with compact storage and efficient information retrieval. In 1994, First
Image introduced a CD-ROM data storage and retrieval product in selected
markets. As a natural extension of its database management services, First
Image prints and distributes large volumes of computer generated documents such
as promotional mailings, invoices and account statements for its clients each
month.
The Corporate Publishing division maintains databases for training
manuals, software manuals, product catalogs, directories and other lengthy,
detailed documents. Updates for these documents are transmitted electronically
to First Image from its customers. First Image then updates the database,
prints the required pages, and ships the hard copy output to predetermined
client locations.
MARKETING
FFMC markets its services through a variety of channels including direct
solicitation and general advertising. The Company's employees are utilized in
the direct solicitation of new customers and the cross-selling of additional
FFMC services to existing customers. Direct sales organizations at the
Company's merchant credit card and check acceptance businesses have been
effective in signing new merchant accounts in the past several years.
-7-
8
General advertising of FFMC's services is accomplished through industry
and trade publications, direct mail, telemarketing, and contact at trade
conventions and Company-sponsored seminars as well as direct sales. Western
Union, acquired by FFMC in November 1994, maintains a broad based advertising
and marketing program supporting the Western Union brand and the public's
awareness of Western Union's services.
In addition, the Company believes that its ongoing business acquisition
program is an important complement to direct marketing efforts to enhance
existing products by expanding markets and services offered.
COMPETITION
The most significant competitive factors in the sale of the Company's
services are price, quality, technological advancement and reliability of
service. Competition is encountered from several different sources, which vary
depending on the particular service involved and the size of the customer
served. These sources include national and local service providers, and
in-house solutions sold by computer equipment and software vendors.
The Company's merchant credit card services compete against several other
national service providers and against banks that continue to provide these
services to their merchant customers. FFMC's check acceptance business is in
competition principally with two other national companies.
Western Union originated nonbank money transfer services in 1871, and is
the dominant provider of these services in the United States. Western Union
competes with bank wire transfer services (available primarily to commercial
users) and money orders as alternative methods of funds transfer. First Data
Corporation is currently the major competitor in the nonbank money transfer
business, and Western Union faces several established competitors in providing
commercial money transfer and electronic bill payment services. Western
Union's major competitive strengths include its long service history, its
worldwide brand awareness, and the market presence of its large and established
worldwide agent network.
FFMC's acquisition strategy includes the objective of entering large,
fragmented markets in which the Company can become the dominant service
provider. The markets related to health care information services and debt
collection services continue to be fragmented, with no one company or group of
companies considered dominant. First Image is the largest provider in the data
imaging market, a market composed primarily of local area providers.
DISPOSITIONS
In 1992, FFMC sold or entered into agreements to sell Georgia Federal
Bank, FSB and its subsidiaries ("Georgia Federal"), including its consumer
finance subsidiary, First Family Financial Services ("First Family"). Georgia
Federal was acquired by FFMC on May 31, 1989 specifically to ensure that the
Company's merchant credit card processing business had access to the payment
system through Georgia Federal's sponsorship in the VISA and MasterCard
networks. In 1992, the Company implemented alternative measures to provide
continued access to the payment system (including a plan to form a credit card
bank), which provided FFMC the flexibility to sell Georgia Federal. The sale
of First Family was consummated on November 10, 1992, and a definitive
agreement to sell Georgia Federal was entered into on December 21, 1992. FFMC
operated Georgia Federal until the sale was
-8-
9
consummated on June 12, 1993 although the agreement provided that all 1993
results accrued to the purchaser.
During the period of FFMC's ownership of Georgia Federal and First
Family, these combined businesses comprised the Company's financial services
segment for purposes of FFMC's financial reporting. Georgia Federal was the
largest thrift institution in the State of Georgia with assets of over $4
billion, and First Family was a regional consumer finance company with $600
million in assets and offices in eight southeastern states. These businesses
have been presented as discontinued operations in FFMC's consolidated financial
statements.
On December 31, 1992, FFMC entered into a definitive agreement to sell
Basis Information Technologies, Inc. ("Basis"), the Company's original core
business unit that provided data processing services to financial institutions.
FFMC operated this business until the sale was consummated on February 10,
1993, although the agreement provided that all 1993 results accrued to the
purchaser. During the fourth quarter of 1992, the Company discontinued
software development for a major Basis product line in connection with the
settlement of litigation with a vendor. As a part of its overall strategic
reevaluation, FFMC's management determined that additional investments in its
financial institutions processing business did not fit the Company's overall
strategic direction and decided to pursue the sale of Basis. Basis was
included in FFMC's Information Services segment for financial reporting
purposes.
REGULATION AND EXAMINATION
The 1992 business dispositions removed certain service offerings that
previously subjected FFMC to considerable regulation and examination. However,
remaining services that the Company provides directly to governmental agencies
and to banks and other regulated financial institutions may be reviewed by
various federal and state regulatory agencies.
First Financial Bank ("FFB") was formed effective May 7, 1993 under
Georgia law as a special purpose bank that will conduct only those activities
permitted for "credit card banks" under the Federal Bank Holding Company Act,
as amended (the "BHC Act"). Under the BHC Act, FFMC may own a credit card bank
without itself becoming subject to federal regulation as a bank holding company
(or subject to related restrictions on the types of activities FFMC and its
other subsidiaries may engage in) as long as the credit card bank: (a) engages
only in credit card operations, (b) accepts no deposits other than time
deposits of $100,000 or more, (c) maintains only one office that accepts
deposits, and (d) does not engage in the business of making commercial loans.
FFB operates under these limitations.
First Financial Bank is subject to examination and regulation by the
Georgia Department of Banking and Finance and applicable federal regulatory
agencies, including the Federal Deposit Insurance Corporation ("FDIC"), which
in 1993 approved FFB's application for FDIC deposit insurance. Certain
activities of NaBANCO are subject to examination and regulation. In addition,
certain minimum capital ratios must be maintained by FFB, and arrangements
between FFB and its affiliates must be on terms at least as favorable as those
available from independent third parties. In addition, FFB and NaBANCO
continue to be subject to the VISA and MasterCard rules, including a
requirement that FFB maintain adequate capital (currently $70 million) based on
the merchant credit card processing volume settled through FFB.
FFMC's service operations related to debt collection, health care claims
administration, and money transfer are regulated at the state level by banking
or insurance commissions or similar authorities, which
-9-
10
require the Company to obtain and maintain licenses to conduct such operations.
Such licenses generally require the Company or the licensed subsidiary to
demonstrate and maintain minimum levels of net worth and/or liquidity.
INDUSTRY TRENDS
The technological capabilities required for the rapid and efficient
creation, processing, handling, storage and retrieval of information are
becoming increasingly complex. These capabilities require large capital
expenditures and have resulted in an industry consolidation that is beneficial
to FFMC. The Company's customers are handling an expanding variety of
transactions with rapidly growing volumes. This processing increasingly
requires the use of sophisticated software, hardware and communication
technologies.
Third-party credit card processing and check verification services are
being performed increasingly through electronic means, which provide faster and
more reliable confirmations and quicker and more convenient transaction
processing and settlement. Sophisticated technological and communication
capabilities are also essential to permit the imaging, creation and effective
management of large data bases. Likewise, within the health care and
pharmaceutical claims industry, there is an increasing need for data to be
available more rapidly in order to manage and pay for health care services.
Significant capital commitments are becoming increasingly important in
order to develop, maintain and update the systems (including software, hardware
and communication equipment and methods) necessary to provide these
technologically advanced services at a competitive price. Economies of scale
are needed to justify these capital investments. In addition, as more on-line
and other electronic delivery systems are used, it is becoming easier to serve
a wider geographic area from centralized data processing centers. As a result
of these developments, many institutions are contracting with outside
specialists for these services, and many small information processing and
handling organizations are consolidating with large providers of these
services.
FFMC believes that it can benefit from these trends by leveraging the
collective capabilities developed through its various service offerings which
lend themselves to cross-selling and to synergistic combinations. The Company
also believes that its growing array of information services enhances its
ability to provide a total solutions approach to many of its customers' needs.
EMPLOYEES
At December 31, 1994, FFMC and its subsidiaries employed approximately
15,000 employees. Western Union has a three-year labor contract (expiring
August 6, 1997) with the Communications Workers of America, AFL-CIO,
representing approximately 900 full time and 200 part time employees. The
Company's employees are not otherwise represented by any labor organization.
PRODUCT DEVELOPMENT
FFMC develops systems software and data capture equipment to facilitate
the delivery of the Company's information services to its customers. These
products enable customers to more easily connect with FFMC's information
transfer network and to make the completion of transactions more convenient and
efficient.
-10-
11
During 1994, FFMC repositioned one of its business units, MicroBilt, by
deemphasizing sales to unaffiliated parties to focus on its primary role as the
Company's internal research and development arm. MicroBilt develops
technological solutions to enhance the Company's service offerings and to
facilitate the linkage of customer transaction terminals with FFMC's
information processing network. MicroBilt develops and supports data capture,
communications and information distribution systems to multi-location
customers, including financial institutions, retailers, restaurants, and health
care and pharmaceutical providers. In 1992, MicroBilt developed a
point-of-sale terminal (SurePay(TM)) which captures and stores electronically
the cardholder's signature, allowing NaBANCO to provide its merchant customers
with added protection against procedural chargebacks. In January 1995,
TeleCheck introduced MicroBilt-developed Accelera(TM), a combination check
reader and credit card processing devise that connects with a merchant's
point-of-sale terminal.
Outlays for FFMC's software development activities totalled $35 million
in 1994, $31 million in 1993 and $27 million in 1992. The 1992 amount excludes
development costs incurred by Basis which were subsequently written off in
1992 in connection with the settlement of litigation with a vendor. The costs
of software maintenance, research and conceptualization are expensed when
incurred.
ITEM 2. PROPERTIES
FFMC leases virtually all of its operating facilities of its business
units, covering approximately 400 locations across the United States and 10
locations outside the United States. Approximately 230 of these locations
represent the Company's principal data processing and service centers, many of
which also contain sales and administrative offices. These facilities are
under leases that have expiration dates ranging from 1995 to 2009.
During 1994, FFMC sold the FIRST HEALTH operations facility in Salt Lake
City, Utah and leased it back under a fifteen year agreement. The Company's
remaining owned property is a First Image operations facility in London,
Kentucky.
All of FFMC's properties are in good repair and in suitable condition for
the purposes for which they are used.
FFMC will move its corporate headquarters office during 1995 to another
leased office location in Atlanta, Georgia. The new facility has a ten year
lease through 2005, with renewal options.
ITEM 3. LEGAL PROCEEDINGS.
There were no material legal proceedings involving FFMC or its property
required to be disclosed herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of FFMC's shareholders during the
fourth quarter of 1994.
-11-
12
EXECUTIVE OFFICERS
Set forth below is information about FFMC's executive officers:
OFFICER OF
NAME AGE POSITIONS WITH FFMC FFMC SINCE
---- --- ------------------- ----------
Patrick H. Thomas 52 Chairman of the Board, President 1972
and Chief Executive Officer
Robert J. Amman 56 Vice Chairman and Chief Operations 1995
Officer
Richard D. Jackson 58 Vice Chairman and Chief Operations 1989
Officer
Stephen D. Kane 51 Vice Chairman, Chief Administrative 1988
Officer and Secretary
M. Tarlton Pittard 55 Vice Chairman, Chief Financial 1986
Officer and Treasurer
Randolph L. M. Hutto 46 Senior Executive Vice President, 1992
General Counsel
Richard Macchia 43 Executive Vice President, Finance and 1989
Principal Accounting Officer
Messrs. Thomas, Kane and Pittard have been principally employed as
executive officers of FFMC for more than five years. Messrs. Amman, Jackson,
Kane and Pittard each were named Vice Chairman in January 1995.
Prior to his appointment as Vice Chairman of FFMC, Mr. Amman was
President and Chief Executive Officer of Western Union Financial Services, Inc.
since 1988.
Prior to his appointment as Vice Chairman of FFMC, Mr. Jackson was Senior
Executive Vice President of the Company since January 1993. He was Vice
Chairman and Chief Executive Officer of Georgia Federal Bank, FSB ("Georgia
Federal"), since July 1986 and became Senior Executive Vice President of FFMC
in June 1989.
Mr. Hutto was named Senior Executive Vice President of FFMC in January
1995. Mr. Hutto joined FFMC in January 1992 as Executive Vice President,
Secretary and General Counsel. Previously he had been a partner with the law
firm of Sutherland, Asbill and Brennan, FFMC's principal outside counsel, since
1985.
Mr. Macchia assumed his present position with FFMC in September 1991.
From December 1989 until such time, he served as Senior Vice President and
Chief Financial Officer, Commercial Services, then a division of FFMC.
-12-
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
FFMC's $.10 par value common stock is traded on the New York Stock
Exchange under the symbol "FFM." The high and low prices for the Company's
common stock for each quarter during the last two years were as follows:
1994 1993
-------- --------
Quarter Ended High Low High Low
- ------------- ------ ----- ------ -----
March 31 $60 1/8 $51 1/8 $44 1/4 $38 1/4
June 30 59 1/8 52 3/8 42 3/8 36
September 30 62 52 55 1/8 42 3/8
December 31 63 1/2 53 3/4 58 1/2 50 1/2
The closing sale price for the Company's common stock on March 10, 1995
was $69 1/4 per share, with 1,918 holders of record as of that date.
In 1989 the Company established a policy of making semi-annual dividend
payments to shareholders and the Company's Board of Directors has since
declared semi-annual cash dividends of $.05 per share. The Company expects to
pay future cash dividends semi-annually depending upon the Company's pattern
of growth, profitability, financial condition, and other factors which the
Board of Directors may deem appropriate.
-13-
14
ITEM 6. SELECTED FINANCIAL DATA.
FIRST FINANCIAL MANAGEMENT CORPORATION
The following data should be read in conjunction with the consolidated
financial statements and related notes thereto included elsewhere in this
Annual Report and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The Company's merger with GENEX Services, Inc.
("GENEX") in July 1994 has been accounted for as a pooling of interests and,
accordingly, the following information (including share information) has been
restated to include both FFMC and GENEX. During each of the periods presented
below, FFMC has made various acquisitions, accounted for as purchases, which
affect the comparability of information presented. For additional information
concerning the Company's acquisitions, see Note B to the consolidated financial
statements. In addition, in 1992 the Company disposed of one of its two
business segments and recorded a loss in another business unit that was sold.
These dispositions are outlined in Note C to the consolidated financial
statements.
- -------------------------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)
Income statement data:
- ---------------------
Revenues $2,207.5 $1,759.6 $1,508.4 $1,057.5 $816.3
Expenses 1,939.2 1,539.4 1,440.5* 952.9 737.1
--------------------------------------------------------
Income from continuing
operations before income taxes 268.3 220.2 67.9 104.6 79.2
Income taxes 108.1 88.4 46.5 41.9 31.5
--------------------------------------------------------
Income from continuing operations $ 160.2 $ 131.8 $ 21.4 $ 62.7 $ 47.7
========================================================
Depreciation and amortization $ 97.7 $ 77.8 $ 84.5 $ 58.7 $ 45.2
Per share data:
- --------------
Income per share - continuing operations
Primary $ 2.56 $ 2.12 $ 0.35* $ 1.32 $ 1.17
Fully diluted 2.56 2.12 0.35* 1.23 1.10
Cash dividends per share 0.10 0.10 0.10 0.07 0.07
Weighted average common shares outstanding:
- ------------------------------------------
Primary 62.9 62.0 60.1 47.4 40.8
Fully diluted 62.9 62.1 60.3 53.0 48.1
Balance sheet data (at year end):
- --------------------------------
Total assets $3,135.7 $1,645.9 $1,571.7 $1,297.0 $1,105.2
Long-term debt, including current portion 62.3 17.3 158.7 152.1 207.8
Convertible debentures 447.1 -- -- -- 166.8
Total shareholders' equity 1,429.8 1,253.5 1,124.9 997.6 600.7
* Includes loss in business unit sold of $79.6 million ($1.07 after-tax loss
per share).
-14-
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
First Financial Management Corporation (the "Company" or "FFMC") is in
the business of providing information services to commercial establishments,
government agencies and consumers. The Company markets its array of service
offerings to attract new customers and cross-sells its various services
throughout its existing customer base. The largest category of services
involves information processing and transfer related to financial transactions.
These services include the authorization, processing and settlement of credit
and debit card transactions, verification or guarantee of check transactions,
debt collection and accounts receivable management, and worldwide nonbank money
transfers and bill payments. A second category includes data processing and
information management services related to health care and workers'
compensation claims and the resulting payments. The final service category is
comprised of a full array of information management services, including data
capture, data imaging, micrographics, electronic database management, and
output printing and distribution.
The Company's information services business is presented as FFMC's
continuing operations in the accompanying consolidated financial statements and
in the following discussions. Discontinued operations consist of FFMC's
previous financial services businesses (which the Company sold or signed
agreements to sell in 1992), the results of operations for which are not
included in the Company's results in 1994 or 1993.
In July 1994, FFMC completed its merger with GENEX Services, Inc.
("GENEX"). This business combination has been accounted for as a pooling of
interests and, accordingly, for all periods in the accompanying consolidated
financial statements and in the following discussions the results of GENEX are
included in the Company's results. In November 1994, FFMC completed its
acquisition of Western Union Financial Services, Inc. and related assets
("Western Union"). This business combination was accounted for as a purchase,
and the results of Western Union have been included in the Company's results
from the effective date of the acquisition.
RESULTS OF OPERATIONS
1994 Compared With 1993
FFMC's revenues increased 25% to $2.2 billion in 1994 from $1.8
billion in 1993, including a 31% increase in service revenues. Net income for
the year ended December 31, 1994 was $160.2 million, 22% greater than 1993's
net income of $131.8 million. Per share earnings increased to $2.56 compared
with per share earnings of $2.12 in 1993, an increase of 21%.
Record new business (contracted in the latter half of 1993 and during
1994) together with the assimilation of acquisitions contributed to the
Company's revenue growth. Internal growth of 16% for the year was the
principal component of the overall increase in revenues in 1994 as compared
with the prior year. Over 67,000 new customers (net of attrition) were added
in 1994, with the majority occurring in FFMC's financial transaction processing
area. In addition, this area benefited during 1994 from new business from
several national accounts signed in 1993's fourth quarter.
The Company continues to emphasize growth in its service revenues, as
reflected by the 31% increase in 1994 compared with the prior year. FFMC also
continues to place emphasis on expense controls, as 1994's 29% increase in
operating expenses over 1993 is below the increase in service
-15-
16
revenues. This favorable comparison occurred despite the fact that the
strongest growth in service revenues occurred in the Company's credit card
processing services, an area that has a lower margin than the Company's overall
margin.
Product sales declined in 1994 compared with the prior year, primarily
due to FFMC's decision to decrease the significance of one-time product sales
and focus its product development effort on data capture platforms that link
customers to the Company's information services. Changes in the composition of
product sales led to a gross profit percentage on product sales of 36.3% in
1994 compared with 39.6% in 1993.
Depreciation and amortization expense increased 26% in 1994 compared
with the prior year, but represented 4.4% of revenues in both 1994 and 1993.
General and administrative expenses decreased slightly as a percentage of
revenues in 1994 compared with 1993. After excluding 1994 pension costs of
approximately $2.3 million incurred in the fourth quarter related to the
assumption of Western Union pension obligations, general and administrative
expenses increased 10% in 1994 compared with 1993.
The combination of these revenue and expense changes resulted in a
pre-tax margin of 12.2% in 1994 compared with a pre-tax margin of 12.5% in
1993. FFMC's effective tax rate for 1994 was 40.3%, comparable to the 40.1% in
1993.
On a pro forma basis (assuming that FFMC owned Western Union for all
of 1993 and 1994, and the related acquisition financing was completed on
January 1, 1993), the inclusion of the historical results of operations of
Western Union would have diluted the Company's consolidated results in 1993
and, to a much lesser degree, in 1994. However, Western Union is currently
experiencing profitability growth significantly above its historical rate,
which was an important factor in FFMC's determination to purchase Western
Union. The Company expects to further supplement this growth through the
cross-selling of its other information processing services throughout Western
Union's worldwide distribution network of over 24,000 agents in over 100
countries.
1993 Compared with 1992
FFMC consummated several significant business transactions during 1993
that resulted from the Company's strategic reevaluation of its businesses
completed in 1992. During the fourth quarter of 1992, the Company entered into
agreements to sell its financial services businesses, comprised of Georgia
Federal Bank, FSB ("Georgia Federal"), formerly the largest thrift institution
in Georgia, together with First Family Financial Services ("First Family"),
which previously was Georgia Federal's regional consumer finance subsidiary.
The sales of First Family and Georgia Federal were consummated in November 1992
and June 1993, respectively.
During the fourth quarter of 1992 the Company also agreed to sell
Basis Information Technologies, Inc. ("Basis"), the unit within FFMC's
information services business that provided data processing services to
financial institutions. The sale of Basis was consummated in February 1993.
Prior to entering into the agreement for the sale of Basis, the Company
discontinued software development and wrote off related costs for a major
product line in connection with the settlement of litigation with a vendor, the
combination of which resulted in income of $13.8 million included in other
revenues. Concurrently, the Company decided to explore the sale of Basis. In
reviewing the potential market value of Basis, FFMC's management determined
that a write-down of the carrying value of Basis' net assets was necessary.
Accordingly, the Company recognized a pre-tax loss of $79.6 million in 1992 (an
after tax loss of $1.07 per share). Revenues attributable to Basis were
-16-
17
$113.8 million in 1992 and its contribution to income before income taxes,
aside from the items mentioned above, was approximately $4.5 million.
The terms of both the Georgia Federal and Basis sale agreements
provided that the results of operations of these businesses after December 31,
1992 accrued to the respective purchasers, such that FFMC's 1993 financial
results do not include results for these businesses. The following discussion
pertains to FFMC's continuing operations.
FFMC's revenues increased 17% to $1.8 billion in 1993 from $1.5
billion in the prior year. Excluding Basis' 1992 revenues, the revenue growth
rate for the year was 26%. Income from continuing operations increased to
$131.8 million in 1993 from $21.4 million in 1992. Excluding the Basis asset
write-down from the prior year's results, income from continuing operations
increased 53% in 1993 compared with the prior year. Per share earnings from
continuing operations increased to $2.12 in 1993, compared with $.35 in 1992.
Excluding the Basis write-down, per share earnings increased 49% over 1992.
The 17% increase in revenues in 1993 is all attributable to internal
growth, as the effect of excluding Basis' revenues in 1993 is largely offset by
incremental 1993 revenues from acquisitions completed in 1992. The internal
revenue growth was due primarily to significant volume increases within FFMC's
existing businesses, particularly in the Company's credit card services and
check acceptance services areas. Despite pricing pressures in several of
FFMC's product areas, the Company demonstrated the leveragability of its
businesses by translating the revenue increases into higher percentage
increases in pre-tax income, thereby producing higher pre-tax margins. FFMC's
pre-tax margin of 12.5% in 1993 compared with a 9.8% pre-tax margin in 1992
(excluding the Basis write-down). The impact of the revenue increases and the
expansion of margins in 1993 was enhanced by net interest income of $.3 million
in 1993 compared with net interest expense of $9.4 million in 1992, as FFMC
reduced its debt obligations during 1993 from the cash received from the sale
of businesses.
The Company's effective tax rate decreased 1.4% to 40.1% in 1993. The
comparable 1992 rate of 41.5% excludes the impact of the Basis write-down. The
decrease occurred despite a 1% increase in the federal corporate tax rate from
the Omnibus Budget Reconciliation Act of 1993, which was signed into law during
the year and which contained several other provisions which affected FFMC's
1993 income tax expense. The Company's lower effective tax rate in 1993 was
attributable primarily to lower levels of nondeductible goodwill and to lower
effective state tax rates resulting from FFMC's tax strategies.
ECONOMIC FLUCTUATIONS
The Company's business is somewhat insulated from economic
fluctuations due to recurring service revenues from long-term customer
relationships, and the fact that FFMC's services often result in cost savings
for its customers. In addition, the Company believes that its credit and debit
card processing services are benefiting from higher overall card use and, in
particular, to growing card use for recurring transactions at outlets such as
supermarkets and grocery stores.
Strong economic growth during 1994 benefited FFMC's results, as the
Company experienced higher year-to-year processing volumes, particularly in its
credit card processing and check acceptance service areas. The Company
believes that recent increases in short-term interest rates will not
significantly impact processing volumes in these business areas.
-17-
18
Portions of FFMC's business are seasonal. The Company's revenues and
earnings are favorably affected by increased credit card and check volume
during the holiday shopping period in the fourth quarter and, to a lesser
extent, during the back-to-school buying period in the third quarter. In
future years, the Company believes that it's revenues and earnings will also be
affected by higher Western Union money transfer volume during the summer
months.
Although FFMC cannot precisely determine the impact of inflation on
its operations, the Company feels that it is not significantly affected by
inflation. To some extent the Company is able to contractually increase the
price of its services to offset increased costs of employee compensation and
other operating expenses. In addition, FFMC's revenues from its information
services for credit card, check and money transfer transactions are generally a
percentage of the dollar volume processed. The Company's operating margins on
these services are therefore relatively insulated from the effects of inflation
on merchant prices for goods and services and on the dollar value of money
transfers.
CAPITAL RESOURCES AND LIQUIDITY
FFMC's information services business generates strong cash flows from
operating activities, and the growth in these cash flows in recent years
mirrors the growth in the scale and breadth of the Company's service offerings.
Cash generated from operating activities in 1994 increased 38% to $298.3
million, up from $215.7 million in 1993 and compared with $153.0 million in
1992. The increased cash flows from operating activities are due primarily to
the Company's increased earnings in these periods (before non-cash expenses
for depreciation and amortization and other non-cash expenses).
The Company transferred the responsibility for merchant credit card
settlement to its credit card bank, First Financial Bank ("FFB"), in June 1993
(included in FFMC's continuing operations) from Georgia Federal (part of FFMC's
discontinued operations). FFB was activated during the second quarter of 1993
with a required initial capitalization of $70 million. The capitalization of
FFB is based upon the requirements of bank card associations given the size of
the Company's credit card processing operations. The primary purpose of FFB is
to support the Company's credit card services activities, and FFB does not
conduct any significant banking activities, accept deposits from unaffiliated
parties or engage in lending activities. FFB's capitalization and activities
comply with regulatory requirements and restrictions.
The significant cash flows generated from operating activities are
reinvested by the Company in existing businesses, are used to fund tactical
acquisitions, and are also used to reduce borrowings and to contribute to the
financing of larger, strategic acquisitions.
FFMC reinvests cash in its businesses principally for property and
equipment additions, software development and customer conversions. Cash
outlays in 1994 for these reinvestments totalled $91.0 million, which was
partially offset by the Company's receipt of $12.5 million in cash proceeds
from a property sale in December 1994. Comparative prior year outlays totalled
$81.0 million in 1993 and $79.7 million in 1992. The Company estimates that
business reinvestment amounts will increase moderately in 1995, primarily from
outlays anticipated for software development activities.
Cash from operating activities exceeded non-acquisition investing
activities by $219.8 million in 1994, $134.7 in 1993, and $73.3 million in
1992. This excess cash was utilized primarily to
-18-
19
finance the Company's business acquisitions. Cash consideration paid (net of
cash acquired), including amounts paid related to acquisitions completed in
prior years, totalled $560.7 million in 1994, $92.2 million in 1993 and $267.5
million in 1992.
FFMC utilizes the capital markets and its revolving credit facility
for proceeds to supplement excess cash generated from operations to fund its
acquisition program and for other general corporate purposes. The Company
filed a shelf registration statement with the Securities and Exchange
Commission in November 1994 to enable the Company to issue up to $1.0 billion
in debt and convertible debt securities. In addition, FFMC amended its
unsecured revolving credit facility in November 1994, increasing it from $450
million to $1.0 billion and providing for a new three year term.
FFMC agreed to pay a total of $893.2 million in cash for its November
1994 acquisition of Western Union. Under the terms of the acquisition
agreement, $593.2 million was paid in November 1994 and $300 million was paid
in January 1995. The Company utilized its amended revolving credit facility
and available cash on hand to finance the Western Union cash purchase price
portion paid in November 1994. Subsequently, net cash proceeds of $441.6
million from FFMC's December 1994 issuance of senior convertible debentures
(under its shelf registration) were used to repay all but $45 million of these
borrowings. In January 1995, FFMC utilized $220 million in facility borrowings
and $80 million of available cash on hand to finance the final cash payment.
The Company also has an option to acquire an additional business unit from
Western Union's prior owner (who also has an option to put the additional
business unit to FFMC) for $20 million in cash in 1996.
The Company also assumed underfunded pension plan obligations
(estimated at $266.0 million) as part of the purchase consideration for the
Western Union acquisition. FFMC is evaluating its funding options related to
these obligations. Future cash contributions needed to meet minimum funding
requirements should not materially affect the Company's cash flows. The
Company may decide to fund a substantial portion of such obligations in advance
of required contributions.
FFMC expects to receive approximately $35 million in cash during
1995's second quarter from the exercise of remaining publicly held stock
warrants. FFMC received $8.1 million in cash proceeds in 1994 from the
exercise of these stock warrants, which were issued in 1989 in connection with
an offering of the Company's common stock.
The Company continued its practice established in 1989 of paying
semi-annual $.05 per share cash dividends to shareholders (distributed in
January and July), the latest of which was paid on January 3, 1995 to
shareholders of record on December 1, 1994.
Cash equivalents of $97.1 million and $70.0 million, respectively, at
December 31, 1994 and 1993 relate to required investments of cash in connection
with the Company's merchant credit card and money transfer settlements. FFMC's
remaining cash and cash equivalents are available for acquisitions and general
corporate purposes. If suitable opportunities arise for additional
acquisitions, the Company may use cash, draw on its available credit facility,
or use common stock or other securities as payment of all or part of the
consideration for such acquisitions. Alternatively, FFMC may seek additional
funds in the equity or debt markets, under its existing shelf registration or
otherwise, to finance such acquisitions or to repay outstanding borrowings
under its credit facility. The Company believes that its current level of cash
and future cash flows from operations are sufficient to meet the needs of its
existing businesses.
-19-
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data filed as a part of
this Form 10-K are listed in the Index to Consolidated Financial Information.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning the nominees for Directors of FFMC is contained
under "Election of Directors" in FFMC's Proxy Statement for the April 26, 1995
Annual Meeting of Shareholders and is incorporated herein by reference in
response to the information required by this item.
Information concerning the Executive Officers of FFMC is contained in
a separate section captioned "Executive Officers" in Part I of this Report and
is incorporated herein by reference in response to the information required by
this item.
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under "Compensation Related Matters" in
FFMC's Proxy Statement for the April 26, 1995 Annual Meeting of Shareholders is
incorporated herein by reference in response to the information required by
this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under "Voting Securities" and "Election of
Directors" (regarding ownership of FFMC stock) in FFMC's Proxy Statement for
the April 26, 1995 Annual Meeting of Shareholders is incorporated herein by
reference in response to the information required by this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information set forth under "Certain Transactions" in FFMC's Proxy
Statement for the April 26, 1995 Annual Meeting of Shareholders is incorporated
herein by reference in response to the information required by this item.
-20-
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) FINANCIAL STATEMENTS
The financial statements filed as a part of this Form 10-K are
listed in the Index to Consolidated Financial Information.
(a)(2) FINANCIAL STATEMENT SCHEDULES
The schedules required under Article 5 of Regulation S-X are listed
in the attached Index to Consolidated Financial Information. All
other schedules are omitted because they are either not applicable
or the information is presented in the financial statements or notes
thereto.
(a)(3) EXHIBITS
3.1 Restated Articles of Incorporation of First Financial Management
Corporation (filed May 13, 1994 as an exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994
and incorporated herein by reference).
3.2 Bylaws, as amended through March 15, 1995.
4.1 See Articles V, VI and VIII of the Registrant's Restated Articles of
Incorporation (filed May 13, 1994 as an exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994
and incorporated herein by reference) and Articles 1, 2, 5 and 9 of
the Registrant's Bylaws, as amended through March 15, 1995, filed as
Exhibit 3.2 hereto.
4.2* FFMC Savings Plus Plan, as amended and restated, effective January
1, 1991 (filed on November 5, 1990 as an exhibit to the Registrant's
Registration Statement on Form S-8 (File No. 33-37532) and
incorporated herein by reference).
4.3* Amendments 1 and 2 to the FFMC Savings Plus Plan, dated November 2,
1992 and April 1, 1993, respectively (filed on August 12, 1994 as an
exhibit to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 and incorporated herein by reference).
4.4* Amendment 3 to the FFMC Savings Plus Plan, dated November 7, 1994.
4.5 Amended and Restated Credit Agreement dated as of June 25, 1992,
amended and restated as of November 8, 1994 between First Financial
Management Corporation, First Financial Bank, and The Chase
Manhattan Bank (National Association), as agent for the banks that
are signatories to the Agreement. The Exhibits and Schedules to the
Amended and Restated Credit Agreement are identified on a list of
Exhibit and Schedules contained in the Table of Contents to the
Amended and Restated Credit Agreement, which list is incorporated
herein by reference. Such Exhibits and Schedules have been omitted
for purposes of this filing, but will be furnished supplementally to
the Commission upon request (filed on November 15, 1994 as an
exhibit to the Registrant's Current Report on Form 8-K and
incorporated herein by reference).
4.6 Warrant Agreement, dated June 15, 1989, between the Registrant and
Wachovia Bank and
-21-
22
Trust Company, N.A. (filed on June 19, 1989 as an exhibit to
Registrant's Registration Statement on Form S-3 (File No. 33-29267)
and incorporated herein by reference).
4.7 Amendment dated September 5, 1989, to the Warrant Agreement, dated
June 15, 1989, by and between the Registrant and Wachovia Bank and
Trust Company, N.A. (filed on September 6, 1989 as an exhibit to
Amendment No. 1 to Registrant's Registration Statement on Form S-3
(File No. 33-29267) and incorporated herein by reference).
4.8 Indenture, dated as of December 5, 1994, between the Registrant and
NationsBank of Georgia, National Association, as Trustee (filed on
December 5, 1994 as an exhibit to the Registrant's Amendment No. 2
to its Registration Statement on Form S-3 (File No. 33-56327)
covering an unlimited amount of senior debt securities and
incorporated herein by reference).
4.9 First Supplemental Indenture, dated as of December 5, 1994, between
the Company and NationsBank of Georgia, National Association, as
Trustee (filed on December 6, 1994 as an exhibit to the Registrant's
Post Effective Amendment No. 1 to Form S-3 covering $440,000,000 of
Senior Convertible Debentures due 1999 and incorporated herein by
reference).
10.1 Agreement and Plan of Merger, dated July 6, 1992, by and among the
Registrant, PSC Acquisition Corporation and Payment Services Company
- U.S. The schedules to the Agreement and Plan of Merger were
omitted, but were identified in a list included therein and will be
furnished supplementally to the Commission upon request (filed on
November 16, 1992 as an exhibit to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1992 and
incorporated herein by reference).
10.2 Underwriting Agreement covering the Registrant's Senior Convertible
Debentures due 1999 (filed on December 6, 1994 as an exhibit to the
Registrant's Post Effective Amendment No. 1 to its Registration
Statement on Form S-3 (File No. 33-56327) and incorporated herein by
reference).
10.3 Lease between Mack Paramus Affiliates, as lessor, and Western Union
Financial Services, Inc., as lessee, dated June 30, 1993, together
with the First Amendment to Lease, dated March 3, 1995, covering the
Western Union Financial Services, Inc. headquarters office in
Paramus, New Jersey. The Exhibits to the Lease are listed in the
Table of Contents to the Lease, which list is incorporated herein by
reference. Such Exhibits (and Exhibits to the First Amendment to
Lease) have been omitted for purposes of filing, but will be
furnished to the Commission upon request.
10.4 Lease between the Northwestern Mutual Life Insurance Company, as
lessor, and Endata, Inc., as lessee, dated December 23, 1985 for
Endata, Inc.'s headquarters at 501 Great Circle Road, Nashville,
Tennessee (filed on March 31, 1986 as an exhibit to Endata, Inc.'s
Annual Report on Form 10-K for 1985 (File No. 0-11357) and
incorporated herein by reference).
-22-
23
10.5 Lease between Parkway, Ltd., as landlord, and National Bancard
Corporation, as tenant, dated December 28, 1987, together with
Addendum to Lease Agreement, dated February 22, 1988, for the
NaBANCO Building in Sunrise, Florida (filed on March 14, 1988 as an
exhibit to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1987 and incorporated herein by reference).
10.6 Lease, together with related Rider, dated February 6, 1989, between
Rowe Properties-Data Limited Partnership, as Lessor, and The
Computer Company as Lessee, covering First Health Services
Corporation's facilities at Innsbrook Corporate Center in Glen
Allen, Virginia, together with a Guaranty, dated February 2, 1989,
guaranteeing Lessor's obligations under the Lease (filed on March
27, 1990 as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1989 and incorporated herein by
reference).
10.7 Lease, dated February 28, 1990, as amended by the First Amendment
dated June 22, 1990, between Frank J. Hanna, Jr., as Lessor, and
Nationwide Credit, Inc. (Nationwide), as Lessee, covering
Nationwide's headquarters facility at 2258 Northwest Parkway,
Marietta, Georgia. (1)
10.8 Lease Agreement between VPM 1988-1 Ltd., as landlord, and Payment
Services Company, as tenant, dated March 27, 1990, together with
First Amendment to Lease Agreement (dated July 9, 1990), Second
Amendment to Lease Agreement (dated February 21, 1992), Third
Amendment to Lease Agreement (dated October 5, 1992), Fourth
Amendment to Lease Agreement (dated April 5, 1993) and Fifth
Amendment to Lease Agreement (dated December 15, 1993). The
Exhibits to the Lease Agreement and related Amendments are listed at
the end of such documents, and these lists are incorporated herein
by reference. Such Exhibits have been omitted for purposes of
filing, but will be furnished to the Commission upon request.
10.9 Lease Agreement between TriNet Essential Facilities X, Inc., as
landlord, and First Health Strategies, Inc. (a wholly owned
subsidiary of the Registrant), as tenant, dated November 1, 1994,
together with Exhibits B and C to the Lease Agreement, covering a
First Health Strategies, Inc. office facility in Salt Lake City,
Utah. All other Exhibits to the Lease Agreement are listed in the
Table of Contents to the Lease Agreement, which list is incorporated
herein by reference. Such Exhibits have been omitted for purposes of
filing, but will be furnished to the Commission upon request.
-23-
24
10.10 Office Building Lease between Weprec Powers Pointe Corporation, as
landlord, and First Financial Management Corporation, as tenant,
dated March 8, 1995, together with Exhibit F to the Office Building
Lease, covering the Registrant's new corporate headquarters office
in Atlanta, Georgia. All other Exhibits to the Office Building
Lease are listed in the Table of Contents to the Office Building
Lease, which list is incorporated herein by reference. Such
Exhibits have been omitted for purposes of filing, but will be
furnished supplementally to the Commission upon request.
10.11* The Registrant's 1982 Incentive Stock Plan, as amended through
January 31, 1990. (1)
10.12* The Registrant's 1988 Incentive Stock Plan, as amended through
January 30, 1991. (1)
10.13* Amendment to the Registrant's 1988 Incentive Stock Plan, dated March
22, 1994 (filed on August 12, 1994 as an exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
and incorporated herein by reference).
10.14* Amendment to the Registrant's 1988 Incentive Stock Plan, dated
February 24, 1995.
10.15* First Financial Management Corporation Performance Units Incentive
Plan, as amended through May 1, 1991 (filed on November 14, 1991 as
an exhibit to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991 and incorporated herein by
reference).
10.16* Directors' Restricted Stock Award Plan, together with Form of
Director's Restricted Stock Award Agreement (filed on March 31, 1987
as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1986 and incorporated herein by reference).
10.17* 1990 Directors' Stock Option Plan. (Filed on August 14, 1990 as an
exhibit to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1990 and incorporated herein by reference.)
10.18* Endata, Inc. Amended Stock Option Plan (filed on October 17, 1986 as
an exhibit to Post-Effective Amendment No. 1 to Endata, Inc.'s
Registration Statement on Form S-8 (File No. 2-97925) and
incorporated herein by reference), together with an Amendment to
Endata Inc.'s Amended Stock Option Plan, dated October 30, 1987, and
two forms of letters specifying the manner in which each Endata,
Inc. Stock Option was converted into an option to purchase the
Registrant's stock and forms of the Endata Incentive and
Non-Qualified Stock Option Agreements (filed on March 14, 1988 as an
exhibit to the Registrant's Annual Report on Form 10-K for the year
ended December 31,1987 and incorporated herein by reference).
10.19* FFMC 1990 Employee Stock Purchase Plan adopted December 15, 1989, as
amended on October 24, 1990 (1), and amendment thereto adopted on
July 24, 1991, effective October 1, 1991 (filed on August 14, 1991
as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1991 and incorporated herein by
reference).
-24-
25
10.20* Employment Agreement, dated January 31, 1989, between the Registrant
and Patrick H. Thomas (filed on March 31, 1989 as an exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1988 and incorporated herein by reference). This Employment
Agreement was superseded effective January 1, 1995 by the Employment
Agreement listed as Exhibit 10.32.
10.21* Employment Agreement, dated January 31, 1989, between the Registrant
and M. Tarlton Pittard (filed on March 31, 1989 as an exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1988 and incorporated herein by reference).
10.22* Employment Agreement, dated February 15, 1991, Termination of prior
Employment Agreement, Termination of Employee Death Benefit
Agreement, and First Amendment to Deferred Compensation Agreement,
all between the Registrant (or Georgia Federal Bank, FSB) and
Richard D. Jackson. (1)
10.23* Form of Restricted Stock Award Agreement between the Registrant and
each of the following officers covering awards under the 1988
Incentive Stock Plan, on January 31 1990, to M. Tarlton Pittard and
Richard D. Jackson. (1)
10.24* Non-Qualified Stock Option, dated February 5, 1988, granted by the
Registrant to Patrick H. Thomas (filed on March 14, 1988 as an
exhibit to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1987 and incorporated herein by reference).
10.25* Form of Non-Qualified Stock Option Agreement as issued to the
Registrant's Executive Officers under the 1988 Incentive Stock Plan
(filed on March 30, 1994 as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.26* Form of Restricted Stock Award Agreement between the Registrant and
each of the following officers covering awards under the 1988
Incentive Stock Plan on May 1, 1991, to Richard D. Jackson, M.
Tarlton Pittard and Stephen D. Kane (filed on August 14, 1991 as an
exhibit to the Registrant's Quarterly Report on Form 10-K for the
quarter ended June 30, 1991 and incorporated herein by reference).
10.27* Form of Restricted Stock Award Agreement between the Registrant and
each of the following officers covering awards on January 31, 1989
under the 1988 Incentive Stock Plan: Patrick H. Thomas, M. Tarlton
Pittard and Stephen D. Kane (filed on March 31, 1989 as an exhibit
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988 and incorporated herein by reference).
10.28* Resolution of the Compensation Committee of the Registrant's Board
of Directors, dated June 24, 1993, accelerating to December 31, 1993
the date on which restrictions lapsed on stock awards previously
issued to Patrick H. Thomas, M. Tarlton Pittard and Stephen D. Kane
(filed on March 30, 1994 as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.29* Employment Agreement, dated January 29, 1992, between the Registrant
and Stephen D. Kane (filed on March 23, 1992 as an exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1991 and incorporated herein by reference).
-25-
26
10.30 Agreement, dated May 7, 1993, by and among National Bancard
Corporation, CMSC Corporation and First Financial Bank (filed on May
14, 1993 as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993 and incorporated herein by
reference).
10.31 Agreement, Plan of Reorganization and Plan of Merger, dated as of
July 28, 1993 by and among First Financial Management Corporation,
Tomahawk Acquisition Corporation, Pennant Acquisition Corporation,
International Banking Technologies, Inc., Prime Consulting Group,
Inc. and The Shareholders of International Banking Technologies,
Inc. and Prime Consulting Group, Inc. The Schedules to this
Agreement, Plan of Reorganization and Plan of Merger are identified
on a list of schedules contained at the end of the Table of Contents
to such Agreement, which list is incorporated herein by reference.
All schedules were omitted for purposes of filing but will be
furnished supplementally to the Commission upon request (filed on
August 13, 1993 as an exhibit to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993 and incorporated
herein by reference).
10.32* Employment Agreement, dated March 22, 1994, between the Registrant
and Patrick H. Thomas (filed on March 30, 1994 as an exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference).
10.33* First Amendment, dated December 21, 1994, to Employment Agreement,
dated March 22, 1994, between the Registrant and Patrick H. Thomas.
10.34* Second Amendment, dated March 13, 1995, to Employment Agreement,
dated March 22, 1994, between the Registrant and Patrick H. Thomas,
together with two Restricted Stock Award Agreements (both dated
March 13, 1995) constituting Exhibits A and B, respectively, to the
Second Amendment.
10.35* Non-Qualified Stock Option, dated March 22, 1994, granted by the
Registrant to Patrick H. Thomas (filed on March 30, 1994 as an
exhibit to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993 and incorporated herein by reference).
10.36 Agreement, Plan of Reorganization and Plan of Merger, dated June 30,
1994, by and among First Financial Management Corporation, Bluebird
Acquisition Corporation, Gencan Acquisition Corporation, GENEX
Services, Inc., GENEX Services of Canada, Ltd. The Schedules to
this Agreement, Plan of Reorganization and Plan of Merger are
identified on a list of schedules contained at the end of the Table
of Contents to such agreement, which list is incorporated herein by
reference. All schedules were omitted for purposes of filing but
will be furnished supplementally to the Commission upon request
(filed on August 12, 1994 as an exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
and incorporated herein by reference).
10.37 Stock Purchase Agreement, dated October 20, 1994 by and between New
Valley Corporation and First Financial Management Corporation. The
Exhibits and Schedules to the Stock Purchase Agreement are
identified on a list of Exhibits and Schedules contained in the
Table of Contents to the Stock Purchase Agreement, which list is
incorporated herein by reference. Such Exhibits and Schedules have
been omitted for purposes of filing, but will be furnished
supplementally to the Commission upon request (filed on November 4,
1994 as an exhibit to the Registrant's Current Report on Form 8-K
and incorporated herein by reference).
-26-
27
10.38 Amendment No. 1, dated November 14, 1994, to Stock Purchase
Agreement, dated October 20, 1994, by and between New Valley
Corporation and First Financial Management Corporation (filed on
November 15, 1994 as an exhibit to the Registrant's Current Report
on Form 8-K and incorporated herein by reference).
10.39* Employment Agreement, dated April 20, 1990, between Western Union
Corporation and Robert J. Amman (an Executive Officer of the
Registrant), together with Amendment to Employment Agreement, dated
January 30, 1991.
21.1 List of Subsidiaries.
23.1 Consent of Independent Auditors.
27.1 Financial Data Schedule (for SEC use only).
* Indicates management contract or compensatory plan or arrangement.
(1) Filed on April 1, 1991 as an exhibit to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1990 and incorporated
herein by reference.
(b) REPORTS ON FORM 8-K
The Company filed current reports on Form 8-K on November 4, 1994 to report the
pending acquisition of Western Union assets and on November 15, 1994 as a
supplemental report to confirm consummation of the acquisition of the Western
Union assets on November 14, 1994 and to reflect various adjustments made by
Amendment No. 1 to the Stock Purchase Agreement.
-27-
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 17, 1995.
FIRST FINANCIAL MANAGEMENT CORPORATION
By: /s/ Patrick H. Thomas
--------------------------------
Patrick H. Thomas
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- -------------------------------- ----------------------------- --------------------
/s/ Patrick H. Thomas Chairman of the Board, March 17, 1995
- ---------------------------- President and Chief Executive Officer --------------
Patrick H. Thomas
/s/ M. Tarlton Pittard Vice Chairman, Chief Financial March 17, 1995
- ----------------------------- Officer, Treasurer and Director --------------
M. Tarlton Pittard
/s/ Richard Macchia Executive Vice President March 17, 1995
- ---------------------------- and Principal Accounting Officer --------------
Richard Macchia
/s/ George L. Cohen Director March 17, 1995
- --------------------------- --------------
George L. Cohen
/s/ Robert E. Coleman Director March 17, 1995
- -------------------------- --------------
Robert E. Coleman
/s/ Jack R. Kelly, Jr. Director March 17, 1995
- ------------------------------- --------------
Jack R. Kelly, Jr.
/s/ Henry A. Leslie Director March 17, 1995
- ----------------------------- --------------
Henry A. Leslie
/s/ Charles B. Presley Director March 17, 1995
- ----------------------------- --------------
Charles B. Presley
/s/ Virgil R. Williams Director March 17, 1995
- ----------------------------- --------------
Virgil R. Williams
-28-
29
FIRST FINANCIAL MANAGEMENT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL INFORMATION
FINANCIAL STATEMENTS:
Page in this
10-K Report
-----------
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . 30
Consolidated Balance Sheets at December 31, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Consolidated Statements of Income for the Years
Ended December 31, 1994, 1993, and 1992 . . . . . . . . . . . . . . 32
Consolidated Statements of Shareholders'
Equity for the Years Ended
December 31, 1994, 1993, and 1992 . . . . . . . . . . . . . . . . . 33
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . 34
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 35
SCHEDULES:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . 48
Schedule VIII - Valuation and Qualifying Accounts . . . . . . . . . . . . . . 49
All other schedules (as required under Article 5 of Regulation S-X) are omitted
because they are either not applicable or the information is presented in the
financial statements or notes thereto.
-29-
30
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
First Financial Management Corporation
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of First
Financial Management Corporation and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1994. 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 conducted our audits in accordance with generally accepted auditing
standards. 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 provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of First Financial Management
Corporation and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
January 27, 1995
-30-
31
FIRST FINANCIAL MANAGEMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------------
1994 1993
--------- ----------
(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents $ 326.1 $ 190.0
Accounts receivable, net of allowance for doubtful
accounts of $7.7 (1994) and $5.0 (1993) 473.8 351.9
Prepaid expenses and other current assets 103.3 70.2
-------- --------
Total Current Assets 903.2 612.1
Property and equipment, net 163.6 144.3
Goodwill, less accumulated amortization
of $73.4 (1994) and $52.0 (1993) 1,740.6 647.7
Customer portfolios, less accumulated amortization
of $44.5 (1994) and $31.8 (1993) 160.5 140.1
Other assets 167.8 101.7
-------- --------
$3,135.7 $1,645.9
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 678.9 $ 288.9
Income taxes payable 5.6 10.6
Current portion of long-term debt 9.2 6.6
-------- --------
Total Current Liabilities 693.7 306.1
Long-term debt, less current portion 53.1 10.7
Pension obligations assumed 266.0
Senior convertible debentures 447.1
Other liabilities 246.0 75.6
-------- --------
Total Liabilities 1,705.9 392.4
-------- --------
Commitments and contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized
150,000,000 shares, issued 61,575,046
shares (1994) and 60,976,996 shares (1993) 6.2 6.1
Additional paid-in capital 858.2 835.2
Retained earnings 565.4 412.2
-------- --------
Total Shareholders' Equity 1,429.8 1,253.5
-------- --------
$3,135.7 $1,645.9
======== ========
See notes to consolidated financial statements.
-31-
32
FIRST FINANCIAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
---------------------------------------
1994 1993 1992
---------------------------------------
(In millions, except per share amounts)
REVENUES
Service revenues $2,131.0 $1,632.9 $1,399.8
Product sales 73.1 116.8 92.0
Other 3.4 9.9 16.6
-------- -------- --------
2,207.5 1,759.6 1,508.4
-------- -------- --------
EXPENSES
Operating 1,767.5 1,367.5 1,185.5
General and administrative 28.5 23.9 23.5
Cost of products sold 46.6 70.5 58.0
Depreciation and amortization 97.7 77.8 84.5
Loss in business unit sold 79.6
Interest, net (1.1) (0.3) 9.4
-------- -------- --------
1,939.2 1,539.4 1,440.5
-------- -------- --------
Income from continuing operations
before income taxes 268.3 220.2 67.9
Income taxes 108.1 88.4 46.5
-------- -------- --------
Income from continuing operations 160.2 131.8 21.4
Income from discontinued operations,
net of taxes 36.9
Loss on sale of discontinued operations,
net of taxes (6.8)
-------- -------- --------
Net income $ 160.2 $ 131.8 $ 51.5
======== ======== ========
EARNINGS PER COMMON SHARE
Continuing operations $ 2.56 $ 2.12 $ 0.35
Discontinued operations 0.50
-------- -------- --------
Net income $ 2.56 $ 2.12 $ 0.85
======== ======== ========
See notes to consolidated financial statements.
-32-
33
FIRST FINANCIAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Total
Common Paid-in Retained Shareholders'
Shares Capital Earnings Equity
- ------------------------------------------------------------------------------------------------------------
(Dollars in millions; shares in thousands)
Balance, January 1, 1992
As previously reported by FFMC 56,753 $740.9 $256.7 $ 997.6
Pooling of interests with GENEX
Services, Inc. 1,095 7.3 (3.5) 3.8
---------------------------------------------------
Balance, January 1, 1992, as restated 57,848 748.2 253.2 1,001.4
Stock issued in acquisitions 2,058 66.5 66.5
Stock warrants exercised 389 10.4 10.4
Shares issued under stock compensation
plans, net of forfeitures 256 7.1 7.1
Shares issued for employee stock
purchase plan 47 1.3 1.3
Cash dividends ($.10 per share) (5.8) (5.8)
Investment in FFMC common stock
by merged entity (0.7) (0.7)
Shareholder distributions by merged entities (6.8) (6.8)
Net income 51.5 51.5
---------------------------------------------------
Balance, December 31, 1992 60,598 832.8 292.1 1,124.9
Stock issued in acquisitions 50 2.4 2.4
Stock warrants exercised 50 1.3 1.3
Shares issued under stock compensation
plans, net of forfeitures 227 2.9 2.9
Shares issued for employee stock
purchase plan 52 1.9 1.9
Cash dividends ($.10 per share) (5.9) (5.9)
Shareholder distributions by merged entities (5.8) (5.8)
Net income 131.8 131.8
---------------------------------------------------
Balance, December 31, 1993 60,977 841.3 412.2 1,253.5
Stock warrants exercised 303 8.1 8.1
Shares issued under stock compensation
plans, net of forfeitures 248 12.5 12.5
Shares issued for employee stock
purchase plan 47 2.5 2.5
Cash dividends ($.10 per share) (6.2) (6.2)
Shareholder distributions by merged entity (0.8) (0.8)
Net income 160.2 160.2
---------------------------------------------------
Balance, December 31, 1994 61,575 $864.4 $565.4 $1,429.8
===================================================
See notes to consolidated financial statements.
-33-
34
FIRST FINANCIAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-------------------------------------
1994 1993 1992
------- ------- -------
(In millions)
Cash and cash equivalents at January 1 $ 190.0 $ 18.2 $ 75.6
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations 160.2 131.8 21.4
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization 97.7 77.8 84.5
Loss in business unit sold 79.6
Other non-cash items (1.1) (3.6) (3.3)
Increase (decrease) in cash, excluding the effects of
acquisitions and dispositions, resulting from changes in:
Accounts receivable (110.4) (99.2) (48.7)
Prepaid expenses and other assets 14.9 (1.4) (7.4)
Accounts payable and accrued expenses 116.3 88.4 13.1
Income tax accounts 20.7 21.9 13.8
------- ------- -------
Net cash provided by continuing operating activities 298.3 215.7 153.0
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of senior convertible debentures, net 441.6
Borrowings under revolving credit facility, net 45.0 140.0
Principal payments on long-term debt (6.7) (155.5) (148.4)
Proceeds from issuance of common stock 8.1 1.3 10.4
Cash dividends and other payments (6.8) (12.0) (15.6)
------- ------- -------
Net cash provided by (used in) financing activities 481.2 (166.2) (13.6)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Current year acquisitions, net of cash received (509.9) (70.2) (232.6)
Payments related to businesses previously acquired (50.8) (22.0) (34.9)
Proceeds and dividends related to dispositions,
net of expenses and taxes paid (4.2) 295.5 150.4
Additions to property and equipment, net (27.3) (36.7) (34.0)
Software development and customer conversions (51.2) (44.3) (45.7)
------- ------- -------
Net cash provided by (used in) investing activities (643.4) 122.3 (196.8)
------- ------- -------
Change in cash and cash equivalents 136.1 171.8 (57.4)
------- ------- -------
Cash and cash equivalents at December 31 $ 326.1 $ 190.0 $ 18.2
======= ======= =======
CASH PAID DURING THE YEAR FOR
Income taxes $ 86.1 $ 62.8 $ 33.4
Interest 4.1 5.5 13.9
See notes to consolidated financial statements.
-34-
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of First
Financial Management Corporation and its wholly-owned subsidiaries (the
"Company" or "FFMC"). All material intercompany profits, transactions, and
balances have been eliminated. Certain prior year amounts have been
reclassified to conform to the current year's presentation.
The Company's continuing operations operate in a single business
segment, providing information services to commercial establishments,
government agencies and consumers. The largest category of services involves
information processing and transfer related to financial transactions. These
services include the authorization, processing and settlement of credit and
debit card transactions, verification or guarantee of check transactions, debt
collection and accounts receivable management, and worldwide nonbank money
transfers and bill payments. A second category includes data processing and
information management services related to health care and workers'
compensation claims and the resulting payments. The final service category is
comprised of a full array of information management services, including data
capture, data imaging, micrographics, electronic database management, and
output printing and distribution.
In 1993, FFMC formed First Financial Bank ("FFB"), its credit card
bank, whose only significant business purpose is to support the Company's
credit and debit card processing and settlement operations. FFB does not
conduct any other significant banking activities, accept deposits from
unaffiliated parties, or engage in lending activities.
CASH AND CASH EQUIVALENTS
Cash balances at December 31, 1994 include funds in transit from money
transfer agents. Cash equivalents consist of short-term investments in United
States government or government agency securities and are stated at cost which
approximates market value. These securities are short-term, highly liquid
investments with original maturities of three months or less which are readily
convertible to cash. Cash equivalents of $97.1 million and $70.0 million,
respectively, at December 31, 1994 and 1993 relate to required investments of
cash in connection with the Company's merchant credit card and money transfer
settlements.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated
depreciation or amortization which is provided on a straight-line basis over
the lesser of the useful life of the related assets (generally 5 to 10 years
for equipment, furniture and fixtures) or the lease term.
-35-
36
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the cost of acquired businesses over
the value assigned to tangible and identifiable intangible assets, and is
amortized on a straight-line basis, primarily over 40 years. The Company
periodically assesses the recoverability of goodwill when there are indications
of potential impairment by comparing its carrying value to expected future
operating results of the applicable acquired business. If estimates of future
operating results would be insufficient to recover future charges to goodwill
amortization, then the recorded value of goodwill balances would be reduced by
the estimated deficiencies in operating results.
Intangible assets consist primarily of customer portfolios (costs
assigned to purchased customer relationships) and software development and
related conversion costs (the principal component of other assets). These
costs are amortized on a straight-line basis over periods ranging from 4 to 15
years.
INCOME TAXES
FFMC adopted Statement of Financial Accounting Standards No. 109 ("FAS
109"), "Accounting for Income Taxes," effective January 1, 1993. Under FAS
109, deferred income taxes are determined based on the difference between
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the years in which such differences are expected to
reverse. No cumulative effect on the Company's results of operations from
adopting FAS 109 was recorded because it was insignificant. Prior to January
1, 1993 deferred income taxes were provided in accordance with Accounting
Principles Board Opinion No. 11.
REVENUE RECOGNITION
Service revenues are recognized as services are performed and product
sales (data processing equipment and related software enhancements) are
recognized upon delivery. Interchange fees incurred in the settlement of
merchant credit card transactions are included in operating expenses.
EARNINGS PER COMMON SHARE
Earnings per common share amounts are computed by dividing income
amounts by the weighted average number of common and common equivalent shares
(when dilutive) outstanding during the period. Common stock equivalents
consist of shares issuable under the Company's stock option plans, shares
issuable in connection with outstanding warrants and an assumed conversion into
common stock of FFMC's senior convertible debentures issued in December 1994.
The after-tax interest expense and amortization on these debentures ($0.7
million in 1994) is added back to net income in computing earnings per common
share. Weighted average shares for all periods reflect the shares issued in
1994 to effect FFMC's merger with GENEX Services, Inc., which was accounted for
as a pooling of interests. Weighted average shares used to compute earnings
per common share for the years ended December 31, 1994, 1993 and 1992,
respectively, were 62.9 million, 62.1 million and 60.3 million.
-36-
37
B. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS
FFMC completed the following business combinations and asset
acquisitions:
Initial Consideration
-----------------------------------------------
FFMC Common Stock
-----------------
Dollar
Businesses and Assets Acquired(a) Month Total(d) Cash Value Shares
- --------------------------------------------------------------------------------------------------------------
(Dollars in millions; shares in thousands)
1994:
- -----
Western Union Financial November $ 893.2(b) $593.2
Services, Inc. (Western Union)
GENEX Services, Inc. (GENEX) July 60.2(c) $60.2 1,095
The Master Collectors, Inc.
(Master Collectors) March 29.0 25.0
Other 30.2 26.9
-----------------------------------------------
$1,012.6 $645.1 $60.2 1,095
===============================================
1993:
- ----
International Banking Technologies (IBT) August $ 46.0 $46.0 1,000
Credit card processing portfolios 32.9 $ 32.9
TeleCheck franchise entities 20.1 15.4
Other 44.2 27.1
-----------------------------------------------
$ 143.2 $ 75.4 $46.0 1,000
===============================================
1992:
- ----
TeleCheck Services (TeleCheck) July $ 156.1 $142.8 $13.3 470
FIRST HEALTH Strategies, Inc. (Strategies) April 112.5 59.6 52.9 1,998
Credit card processing portfolios 10.4 10.4
Other 28.0 28.0
-----------------------------------------------
$ 307.0 $240.8 $66.2 2,468
===============================================
_______________________________________
(a)All of the outstanding common stock was acquired for each of the
businesses acquired.
(b)Deferred cash consideration of $300 million related to this
acquisition was paid in January 1995. The Company utilized $220 million in
bank borrowings and $80 million of available cash on hand to fund this payment,
and such amounts were included in Other Liabilities and Accounts Payable,
respectively, in the accompanying consolidated balance sheet at December 31,
1994. FFMC also assumed pension obligations estimated at $266 million as part
of the Western Union acquisition (see Note I). The Company also has an option
to acquire an additional business unit from Western Union's prior owner (who
also has an option to put the additional business unit to FFMC) for $20 million
in cash in 1996.
(c)Does not include the assumption of stock options.
(d)Other consideration, not separately listed in the table or described
above, consists of promissory notes and other amounts payable of $7.3 million
in 1994 and $21.8 million in 1993.
-37-
38
The mergers with GENEX and IBT were accounted for as poolings of
interests and, accordingly, the Company's financial statements and related
notes include their accounts and operations for all periods presented. Prior
to the combinations, GENEX and IBT were Subchapter S Corporations and included
no income taxes in their financial statements since their income was taxed at
the shareholder level. Results of GENEX included with FFMC's consolidated
results are as follows:
- ---------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------
(In Millions)
Revenues $90.8 $90.0 $83.1
Income form continuing operations 6.6 4.2 2.6
All other business combinations and asset acquisitions have been
accounted for as purchases, and their results have been included in the results
of the Company's continuing operations from the effective dates of acquisition.
The following table summarizes pro forma results of operations of the Company
as if the Company's acquisition of Western Union had occurred, all cash
purchase price consideration was paid, and related debt financing was concluded
on January 1, 1993. All other acquisitions have been excluded due to their
immaterial effect. This pro forma information is not necessarily indicative of
what the combined operations would have been if the Company had control of such
combined businesses for the periods presented.
-------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993
-------------------------------------------------------------------------------------------
(In millions, except per share amounts)
Revenues $2,644.5 $2,089.6
Income from continuing operations 160.0 95.6
Earnings per common share 2.49 1.57
Western Union is the leading provider of nonbank money transfer and
bill payment services in over 100 countries through its worldwide network of
over 24,000 agents. Western Union is one of the world's most recognized
trademarks, and has been in the money transfer business since 1871. Other
types of information services and products provided by acquired entities are as
follows: GENEX, workers' compensation cost containment and management services;
Master Collectors, debt collection and accounts receivable management services;
IBT, in-store marketing programs and systems for supermarkets; TeleCheck, check
acceptance services; Strategies, health care claims processing and management
services. Other acquisitions expanded the Company's markets and service
offerings in all of FFMC's business categories.
The following table outlines the assets acquired and liabilities
assumed (at the date of acquisition) for FFMC business combinations and asset
acquisitions accounted for as purchases.
-38-
39
- --------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
(In millions)
Fair value of assets acquired $1,462.0 $136.0 $407.3
Less liabilities recorded (509.6) (38.8) (100.3)
Less acquisition notes and accounts payable (307.3) (21.8)
Less value of common stock issued (66.2)
Less cash acquired (135.2) (5.2) (8.2)
----------------------------------------------
Net cash paid for acquisitions $ 509.9 $ 70.2 $232.6
==============================================
Amounts recorded for 1994 acquisitions are based on preliminary
estimates. The fair value of assets acquired includes initial goodwill amounts
aggregating $1.1 billion in 1994, $57.7 million in 1993, and $301.5 million in
1992. The terms of certain of the Company's acquisition agreements provide for
additional consideration to be paid if the acquired entity's results of
operations exceed certain targeted levels. Targeted levels are generally set
substantially above the historical experience of the acquired entity at the
time of acquisition. Such additional consideration is paid in cash and with
shares of the Company's common stock, and is recorded if and when earned as
additional purchase price. Acquisitions consummated in 1994 included no
contingent consideration. Additional consideration was paid totalling $7.6
million in 1994, $10.7 million in 1993, and $6.5 million in 1992 related to
businesses acquired prior to 1994, which have maximum remaining contingent
consideration totalling approximately $67 million, payable through 1999.
C. DISPOSITIONS
During the fourth quarter of 1992, FFMC sold or signed agreements to sell the
following businesses:
- ---------------------------------------------------------------------------------------------------------------
BUSINESS SOLD MONTH SALE COMPLETED PROCEEDS TO FFMC (BEFORE SALE EXPENSES)
- ---------------------------- -------------------- ---------------------------------------------------
Georgia Federal Bank, FSB June 1993 $269 million in cash
("Georgia Federal")
First Family Financial November 1992 $248 million in cash to Georgia Federal, which
Services ("First Family," paid FFMC in 1992 a $100 million cash dividend and
formerly a subsidiary of $50.4 million in cash for the eventual 1993
Georgia Federal) settlement of income tax liabilities related to
the First Family sale
Basis Information February 1993 $96.5 million, 50% in cash and 50% in common stock
Technologies, Inc. ("Basis") of the buyer (subsequently sold in June 1993)
Georgia Federal and First Family formerly comprised FFMC's Financial
Services business segment. Georgia Federal was the largest thrift institution
in Georgia, and First Family was a regional
-39-
40
consumer finance company. For purposes of the consolidated statement of income
for the year ended December 31, 1992, net amounts for these businesses have
been presented as discontinued operations. Interest expense was allocated to
the Company's discontinued operations for each of the periods presented,
including the 1993 period prior to the completion of the Georgia Federal sale.
This allocation was based on the net assets of discontinued operations relative
to the sum of the consolidated net assets plus long term debt of continuing
operations, none of which was directly attributable to specific operations.
The agreement for the sale of Georgia Federal provided that the results of
operations of Georgia Federal after December 31, 1992 accrued to the buyer.
For the year ended December 31, 1992, revenues attributable to FFMC's
discontinued operations were $184.5 million and income from discontinued
operations was net of income taxes of $20.5 million.
Basis provided data processing services to financial institutions, and
prior to its sale was included in FFMC's continuing operations in the
accompanying consolidated financial statements for the year ended December 31,
1992. The agreement for the sale of Basis provided that Basis' results of
operations after December 31, 1992 accrued to the buyer. Prior to entering
into the stock purchase agreement for the sale of Basis, the Company
discontinued software development and wrote off related costs for a major
product line in connection with the settlement of litigation with a vendor, the
combination of which resulted in income of $13.8 million included in other
revenues in 1992. Concurrently, FFMC decided to explore the sale of Basis. In
reviewing the market value of Basis, the Company's management determined that a
write-down of the carrying value of Basis' net assets was appropriate and
recognized a fourth quarter 1992 pre-tax loss of $79.6 million.
D. PROPERTY AND EQUIPMENT
- -----------------------------------------------------------------------------------
December 31, 1994 1993
- -----------------------------------------------------------------------------------
(In millions)
Equipment $261.1 $200.9
Furniture and fixtures 30.4 26.0
Leasehold improvements 18.7 16.0
Land and buildings 3.4 15.2
---------------------------
313.6 258.1
Less accumulated depreciation and amortization (150.0) (113.8)
---------------------------
$163.6 $144.3
===========================
Amounts charged to expense for the depreciation and amortization of
property and equipment were $38.9 million, $36.7 million and $41.7 million,
respectively, for the years ended December 31, 1994, 1993 and 1992. In
December 1994, the Company sold an office property for net cash proceeds to the
Company of $12.5 million and leased it back under a fifteen year agreement.
-40-
41
E. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
- -------------------------------------------------------------------------------------------------------------
December 31, 1994 1993
- -------------------------------------------------------------------------------------------------------------
(In millions)
Accounts payable, including merchant credit
card and money transfer settlements $434.2 $162.5
Accrued costs of businesses acquired 75.5 36.6
Compensation and benefit liabilities 48.1 38.4
Other accrued expenses 121.1 51.4
-------------------------------
$678.9 $288.9
===============================
Accounts payable balances at December 31, 1994 and 1993 include
merchant credit card and money transfer settlements of $280.5 million and $97.3
million, respectively. Amounts due from credit card associations (related to
merchant settlements) totalling $148.6 and $101.5 million are included in
FFMC's accounts receivable balances at December 31, 1994 and 1993,
respectively.
F. LONG-TERM DEBT
----------------------------------------------------------------------------------
December 31, 1994 1993
----------------------------------------------------------------------------------
(In millions)
Revolving credit facility $45.0
Other obligations 17.3 $17.3
-------------------------
62.3 17.3
Less: current portion (9.2) (6.6)
-------------------------
$53.1 $10.7
=========================
FFMC amended its unsecured revolving credit facility on November 8,
1994, increasing it from $450 million to $1.0 billion. The amended facility
has a new three year term through November 1997 (with two possible one year
extensions) with borrowings due at the end of the term. Interest rates for
borrowings under the facility fluctuate based on market rates. Therefore, fair
market value approximates the amounts outstanding. The facility contains
covenants which require the Company to meet certain financial tests and
restrict certain activities in the future, none of which are expected to
significantly affect the Company's operations. At December 31, 1994, the
Company was in compliance with all these covenants. Borrowings under the
amended facility were at rates ranging from 5.6% to 6.4% in 1994, with
borrowings outstanding at December 31, 1994 at 6.4%. Other obligations consist
of equipment notes payable and capitalized lease obligations. These
obligations generally have interest rates ranging from 4% to the prime
commercial lending rate, and are due at various dates through May 2003.
-41-
42
Maturities of long-term debt at December 31, 1994 are as follows (in
millions): $9.2 in 1995, $5.1 in 1996, $46.5 in 1997, and $1.5 for all
periods thereafter.
G. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities and equipment under
operating lease agreements. Lease terms generally range from one to seven
years and substantially all agreements contain renewal options. Total rent
expense for operating leases was $58.2 million, $47.9 million and $61.3 million
for the years ended December 31, 1994, 1993 and 1992, respectively.
Commitments for rental payments under noncancelable operating leases at
December 31, 1994 are as follows (in millions): $48.8 in 1995, $38.0 in 1996,
$30.8 in 1997, $19.1 in 1998, $14.6 in 1999, and $30.0 for all periods
thereafter.
Additionally, one of the Company's businesses leases supermarket space
which it concurrently leases to its bank customers. The lease terms, renewal
options, and rent escalation provisions of the Company's lease to the bank
generally mirror the corresponding provisions of the Company's lease from the
supermarket. Lease rentals received exceed lease payments and the terms of the
leases are generally for noncancelable initial terms of five years. Total
lease payments to supermarkets were $7.2 million, $5.7 million, and $4.7
million for the years ended December 31, 1994, 1993 and 1992, respectively, and
remaining obligations under supermarket leases as of December 31, 1994
aggregate $28.5 million for the remaining lease terms.
In the normal course of business, the Company is subject to claims and
litigation, including indemnification obligations to purchasers of former
subsidiaries. Management of the Company believes that current or threatened
claims and litigation, including matters giving rise to indemnification
obligations, with a reasonably possible chance of loss would not, individually
or in the aggregate, result in a materially adverse effect on the Company's
results of operations, liquidity or financial condition.
H. INCOME TAXES
The provision for income taxes for continuing operations includes:
- --------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------
(In millions)
Current tax expense:
Federal $ 72.9 $59.5 $30.8
State 9.5 8.5 8.1
----------------------------------------------------
82.4 68.0 38.9
----------------------------------------------------
Deferred tax expense:
Federal 22.7 18.0 6.7
State 3.0 2.4 .9
----------------------------------------------------
25.7 20.4 7.6
----------------------------------------------------
$108.1 $88.4 $46.5
====================================================
The Company's effective tax rates for continuing operations differ from
statutory rates as follows:
-42-
43
- ------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
Federal statutory rate: 35.0% $35.0% 34.0%
State income taxes, net of federal income tax
benefit 4.8 4.6 4.9
Non-deductible amortization of intangible assets 2.4 2.4 3.4
Non-deductible loss in business unit sold 26.9
Subchapter S income (.3) (1.1) (1.3)
Other (1.6) (.8) .5
-------------------------------------
Effective tax rate 40.3% 40.1% 68.4%
=====================================
The following table outlines the principal components of deferred tax
items, representing the difference between book and tax bases of the Company's
assets and liabilities as aggregated under FAS 109. There is no valuation
allowance.
- -----------------------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993
- -----------------------------------------------------------------------------------------------------------
(In millions)
Deferred tax assets related to:
-------------------------------
Pension obligations assumed $96.7
Accrued expenses 48.9 $20.2
Other 7.7 2.4
Deferred tax liabilities related to:
------------------------------------
Software development costs (28.9) (20.9)
Property and equipment (16.1) (16.8)
Customer conversion costs (12.3) (8.0)
Deductible goodwill (9.0) (4.1)
Customer portfolios (8.9) (10.7)
Other (1.2) (3.1)
----------------------
$76.9 ($41.0)
======================
-43-
44
Deferred tax assets and liabilities are aggregated under FAS 109 into
net current and net non-current amounts, and are included in the accompanying
consolidated balance sheets as follows:
- -------------------------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993
- -------------------------------------------------------------------------------------------------------------
(In millions)
Prepaid expenses and other current assets $52.4 $22.3
Other assets 24.5
Other liabilities (63.3)
----------------------
$76.9 ($41.0)
======================
In years prior to the adoption of FAS 109 in 1993, deferred income
taxes arose from the recognition of certain income and expense items for tax
purposes in years different from those in which they are recognized in the
financial statements. The tax effects of these timing differences (primarily
depreciation and amortization) were deducted from the amount currently payable
in determining the provision for income taxes.
I. PENSION OBLIGATIONS ASSUMED
The purchase consideration for the Company's acquisition of Western
Union in November 1994 included FFMC's assumption of underfunded obligations
(estimated at $266 million) related to a suspended defined benefit pension
plan. Benefit accruals under this plan were suspended in 1988. Pension cost
for the partial 1994 period after acquisition is composed primarily of interest
and totalled approximately $2.3 million.
An actuarial review of the plan is in process which will provide
updated estimates of the accumulated benefit obligation (fully vested), the
projected benefit obligation less fair market value of plan assets and the net
underfunded pension obligation. The fair market value of plan assets at the
date of acquisition was $259 million. Adjustment to the net pension
obligations assumed, if required as a result of the actuarial review, will be
recorded in 1995 with a corresponding adjustment to goodwill.
The assets of the plan are held by a trustee and consist of marketable
securities and corporate and government debt securities and commingled funds.
FFMC is evaluating its funding options related to these obligations, and will
make future contributions to the plan as necessary to meet the minimum funding
requirements of the Employee Retirement Income Security Act of 1974. The
Company may decide to fund a substantial portion of such obligations in advance
of required contributions.
J. SHAREHOLDERS' EQUITY AND SENIOR CONVERTIBLE DEBENTURES
In December 1994, FFMC issued $447.1 million of 5% senior convertible
debentures due 1999. These debentures are convertible into shares of the
Company's common stock on or before December 15, 1999 at $69 per share, subject
to adjustment in certain events. The debentures are redeemable on at least 30
days' notice at the option of the Company (in whole or in part) at 102% during
the twelve month period beginning December 15, 1997, at 101% during the twelve
month period beginning December 15, 1998 and at 100% if redeemed at maturity.
The quoted market price for the debentures on the New York Stock Exchange was
105.75% of par at December 31, 1994.
-44-
45
On July 21, 1994, FFMC issued 1.1 million unregistered shares of its
common stock related to the Company's merger with GENEX Services, Inc. On
August 18, 1993, FFMC issued 1.0 million unregistered shares of its common
stock related to the Company's merger with International Banking Technologies,
Inc. As the Company accounted for these mergers as poolings of interests,
these shares have been reflected in share amounts for all periods presented in
the consolidated financial statements.
Publicly held stock warrants were exercised during the second quarter
of 1994, resulting in the issuance of 303,000 new shares of FFMC common stock
and cash proceeds to the Company of $8.1 million. After such exercises, 1.3
million shares remained subject to publicly held warrants at December 31, 1994,
with these remaining warrants exercisable at $26.67 per share during the second
quarter of 1995.
The Company's Articles of Incorporation authorizes 5.0 million shares
of preferred stock, none of which are issued.
K. STOCK OPTIONS AND AWARDS
The Company has various plans that provide for the granting of stock
options and restricted stock awards to certain officers, employees and
non-employee members of the Company's Board of Directors. A total of 7.1
million shares of FFMC common stock has been authorized for issuance under
these plans. The Company has reserved the appropriate number of shares of
common stock to accommodate these plans and other outstanding options.
Options to purchase shares of the Company's common stock are generally
granted at not less than the common stock's fair market value at the date of
grant, have ten-year terms, and become exercisable in five equal annual
increments beginning six months after the grant date. In connection with the
Company's acquisitions, outstanding options under certain stock option plans
were assumed. These options were converted to options to purchase shares of
FFMC common stock and are exercisable on specified conditions and at specified
times not later than ten years from the date of grant. Options granted in 1992
include the assumption of 162,903 options at $.01 originally issued by GENEX
Services, Inc. A summary of stock option transactions is as follows:
- -------------------------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
Shares under option at January 1 1,424,811 1,855,144 1,792,706
Granted 575,500 155,714 275,668
Canceled (57,615) (78,172) (61,959)
Exercised (191,771) (507,875) (151,271)
------------------------------------------------------
Shares under option at December 31 1,750,925 1,424,811 1,855,144
======================================================
Average price of options exercised $ 14.10 $ 14.34 $ 11.00
At December 31:
Price range of outstanding options $.01 to $57.25 $.01 to $48.13 $.01 to $31.88
Options exercisable 1,078,721 1,052,772 1,287,423
Restrictions under restricted stock awards generally expire after two
to five years of continuous service from the grant date. The value of the
awards is determined using closing prices of the Company's common stock on the
grant date, and is amortized to expense on a straight-line basis over the
restriction period. The unamortized portion of such awards is reported as a
reduction in paid-in capital. A summary of stock award transactions is as
follows:
-45-
46
- ---------------------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
Restricted shares January 1 169,936 590,483 569,997
Granted 91,596 9,837 128,239
Canceled (12,154) (19,500) (23,208)
Vested (27,557) (410,884) (84,545)
-------------------------------------------------
Restricted shares at December 31 221,821 169,936 590,483
=================================================
Value of restricted shares granted (in millions) $4.7 $.4 $4.0
The above table does not include two awards (totalling 972,500
restricted shares) that were granted by the Company in the first quarter of
1994 and subsequently cancelled in the fourth quarter of 1994. FFMC had
granted these two awards to Mr. Patrick H. Thomas, its Chairman of the Board,
President and Chief Executive Officer, in connection with an employment
agreement covering a five year period beginning in 1995. Compensation expense
was being recognized over the restriction period. These awards were cancelled
based on a mutual agreement between the Company and Mr. Thomas, resulting in
the reversal of $4.9 million in award expense amortization. By the end of the
first quarter of 1995, the Company and Mr. Thomas will enter into a new
performance-based compensation arrangement for the five year period.
L. EMPLOYEE BENEFIT PLANS
FFMC and certain of its acquired entities (including Western Union)
maintain defined contribution savings plans covering virtually all of the
Company's full-time employees. The plans provide tax deferred amounts for each
participant, consisting of employee elective contributions and additional
discretionary Company contributions. The aggregate amounts charged to expense
in connection with these plans were $4.9 million in 1994, $2.9 million in 1993
and $2.4 million in 1992.
The Company has an employee stock purchase plan for which a total of
2,250,000 unissued shares have been reserved for purchase. Monies accumulated
through payroll deductions elected by eligible employees are used to effect
quarterly purchases of FFMC common stock at a 5% discount from the lower of the
market price at the beginning or end of the quarter.
FFMC does not offer post-retirement health care or other insurance
benefits for retired employees. Western Union plans in effect at the date of
acquisition provide for continued Company administration of these
post-retirement insurance programs. Under these plans all retiring Western
Union employees bear the entire cost of the premiums, except for union
employees for which these benefits are subsidized by the Company until the end
of the current collective bargaining agreement in 1997. In addition, the
Company signed agreements with Western Union's former owner that will pay FFMC
for its administrative services in continuing these coverages.
FFMC adopted Statement of Financial Accounting Standard No. 112,
"Employer's Accounting for Postemployment Benefits," (FAS 112) effective
January 1, 1994 relating primarily to the Company's short-term disability
benefits. The impact of adopting FAS 112 did not have a significant effect on
FFMC's results of operations.
-46-
47
M. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Summarized quarterly results for the two years ended December 31, 1994
are as follows (in millions, except per share data):
- -------------------------------------------------------------------------------------------------------------
1994 By Quarter First Second Third Fourth
- -------------------------------------------------------------------------------------------------------------
Revenues $455.1 $511.4 $536.5 $704.5
Expenses 405.5 452.5 468.7 612.5
---------------------------------------------------------
Income before income taxes 49.6 58.9 67.8 92.0
Income taxes 20.1 24.7 27.2 36.1
---------------------------------------------------------
Net income $ 29.5 $ 34.2 $ 40.6 $ 55.9
=========================================================
Earnings per common share $ 0.47 $ 0.55 $ 0.65 $ 0.89
=========================================================
- -------------------------------------------------------------------------------------------------------------
1993 By Quarter First Second Third Fourth
- -------------------------------------------------------------------------------------------------------------
Revenues $371.4 $416.0 $443.3 $528.9
Expenses 333.7 367.1 385.2 453.4
---------------------------------------------------------
Income before income taxes 37.7 48.9 58.1 75.5
Income taxes 15.1 19.8 24.3 29.2
---------------------------------------------------------
Net income $ 22.6 $ 29.1 $ 33.8 $ 46.3
=========================================================
Earnings per common share $ 0.37 $ 0.47 $ 0.54 $ 0.74
=========================================================
FFMC completed its merger with GENEX Services, Inc. (GENEX) during the
third quarter of 1994. This merger has been accounted for as a pooling of
interests. Accordingly, the previously reported results for all quarterly
periods prior to the merger have been restated to combine the results of FFMC
and GENEX. Per share amounts have been recalculated after adding the shares of
FFMC common stock issued to effect the merger to weighted average share
amounts.
-47-
48
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Shareholders of
First Financial Management Corporation
Atlanta, Georgia
We have audited the consolidated financial statements of First Financial
Management Corporation and subsidiaries (the "Company") as of December 31, 1994
and 1993, and for each of the three years in the period ended December 31,
1994, and have issued our report thereon dated January 27, 1995; such report is
included elsewhere in this Form 10-K. Our audits also included the financial
statement schedule of the Company, listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
January 27, 1995
-48-
49
FIRST FINANCIAL MANAGEMENT CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
Additions, charged to:
----------------------
Balance at Costs Balance
Beginning and Other at End
Description of Period Expenses Accounts (1) Deductions (2) of Period
- ---------------------------------------------------------------------------------------------------------------
RELATED TO AMOUNTS PRESENTED IN
BALANCE SHEET CAPTIONS:
Year Ended December 31, 1994
- ----------------------------
Allowance for doubtful accounts $5.0 $5.4 $2.4 ($5.1) $7.7
=====================================================================
Year Ended December 31, 1993
- ----------------------------
Allowance for doubtful accounts $5.9 $2.1 $.5 ($3.5) $5.0
=====================================================================
Year Ended December 31, 1992
- ----------------------------
Allowance for doubtful accounts $1.5 $4.5 $2.0 ($2.1) $5.9
=====================================================================
(1) Additional amounts added during the year are from acquired businesses,
representing balances at the date of acquisition.
(2) Amounts represent write-offs.
-49-
50
INDEX TO EXHIBITS
Sequentially
Exhibits Numbered Page
- -------- -------------
3.1 Restated Articles of Incorporation of First Financial Management Corporation
(filed May 13, 1994 as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994 and incorporated herein by
reference).
3.2 Bylaws, as amended through March 15, 1995.
4.1 See Articles V, VI and VIII of the Registrant's Restated Articles of
Incorporation (filed May 13, 1994 as an exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 and
incorporated herein by reference) and Articles 1, 2, 5 and 9 of the
Registrant's Bylaws, as amended through March 15, 1995, filed as Exhibit 3.2
hereto.
4.2* FFMC Savings Plus Plan, as amended and restated, effective January 1, 1991
(filed on November 5, 1990 as an exhibit to the Registrant's Registration
Statement on Form S-8 (File No. 33-37532) and incorporated herein by
reference).
4.3* Amendments 1 and 2 to the FFMC Savings Plus Plan, dated November 2, 1992 and
April 1, 1993, respectively (filed on August 12, 1994 as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
1994 and incorporated herein by reference).
4.4* Amendment 3 to the FFMC Savings Plus Plan, dated November 7, 1994.
-50-
51
INDEX TO EXHIBITS
Sequentially
Exhibits Numbered Page
- -------- -------------
4.5 Amended and Restated Credit Agreement dated as of June 25, 1992, amended and
restated as of November 8, 1994 between First Financial Management
Corporation, First Financial Bank, and The Chase Manhattan Bank (National
Association), as agent for the banks that are signatories to the Agreement.
The Exhibits and Schedules to the Amended and Restated Credit Agreement are
identified on a list of Exhibit and Schedules contained in the Table of
Contents to the Amended and Restated Credit Agreement, which list is
incorporated herein by reference. Such Exhibits and Schedules have been
omitted for purposes of this filing, but will be furnished supplementally to
the Commission upon request (filed on November 15, 1994 as an exhibit to the
Registrant's Current Report on Form 8-K and incorporated herein by
reference).
4.6 Warrant Agreement, dated June 15, 1989, between the Registrant and Wachovia
Bank and Trust Company, N.A. (filed on June 19, 1989 as an exhibit to
Registrant's Registration Statement on Form S-3 (File No. 33-29267) and
incorporated herein by reference).
4.7 Amendment dated September 5, 1989, to the Warrant Agreement, dated June 15,
1989, by and between the Registrant and Wachovia Bank and Trust Company,
N.A. (filed on September 6, 1989 as an exhibit to Amendment No. 1 to
Registrant's Registration Statement on Form S-3 (File No. 33-29267) and
incorporated herein by reference).
4.8 Indenture, dated as of December 5, 1994, between the Registrant and
NationsBank of Georgia, National Association, as Trustee (filed on December
5, 1994 as an exhibit to the Registrant's Amendment No. 2 to its
Registration Statement on Form S-3 (File No. 33-56327) covering an unlimited
amount of senior debt securities and incorporated herein by reference).
4.9 First Supplemental Indenture, dated as of December 5, 1994, between the
Company and NationsBank of Georgia, National Association, as Trustee (filed
on December 6, 1994 as an exhibit to the Registrant's Post Effective
Amendment No. 1 to Form S-3 covering $440,000,000 of Senior Convertible
Debentures due 1999 and incorporated herein by reference).
-51-
52
INDEX TO EXHIBITS
Sequentially
Exhibits Numbered Page
- -------- -------------
10.1 Agreement and Plan of Merger, dated July 6, 1992, by and among the
Registrant, PSC Acquisition Corporation and Payment Services
Company - U.S. The schedules to the Agreement and Plan of Merger
were omitted, but were identified in a list included therein and will be
furnished supplementally to the Commission upon request (filed on
November 16, 1992 as an exhibit to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1992 and
incorporated herein by reference).
10.2 Underwriting Agreement covering the Registrant's Senior Convertible
Debentures due 1999 (filed on December 6, 1994 as an exhibit to the
Registrant's Post Effective Amendment No. 1 to its Registration Statement on
Form S-3 (File No. 33-56327) and incorporated herein by reference).
10.3 Lease between Mack Paramus Affiliates, as lessor, and Western Union
Financial Services, Inc., as lessee, dated June 30, 1993, together with the
First Amendment to Lease, dated March 3, 1995, covering the Western Union
Financial Services, Inc. headquarters office in Paramus, New Jersey. The
Exhibits to the Lease are listed in the Table of Contents to the Lease,
which list is incorporated herein by reference. Such Exhibits (and Exhibits
to the First Amendment to Lease) have been omitted for purposes of filing,
but will be furnished to the Commission upon request.
10.4 Lease between the Northwestern Mutual Life Insurance Company, as lessor, and
Endata, Inc., as lessee, dated December 23, 1985 for Endata, Inc.'s
headquarters at 501 Great Circle Road, Nashville, Tennessee (filed on March
31, 1986 as an exhibit to Endata, Inc.'s Annual Report on Form 10-K for 1985
(File No. 0-11357) and incorporated herein by reference).
10.5 Lease between Parkway, Ltd., as landlord, and National Bancard Corporation,
as tenant, dated December 28, 1987, together with Addendum to Lease
Agreement, dated February 22, 1988, for the NaBANCO Building in Sunrise,
Florida (filed on March 14, 1988 as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1987 and incorporated
herein by reference).
-52-
53
INDEX TO EXHIBITS
Sequentially
Exhibits Numbered Page
- -------- -------------
10.6 Lease, together with related Rider, dated February 6, 1989, between Rowe
Properties-Data Limited Partnership, as Lessor, and The Computer Company as
Lessee, covering First Health Services Corporation's facilities at Innsbrook
Corporate Center in Glen Allen, Virginia, together with a Guaranty, dated
February 2, 1989, guaranteeing Lessor's obligations under the Lease (filed
on March 27, 1990 as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1989 and incorporated herein by
reference).
10.7 Lease, dated February 28, 1990, as amended by the First Amendment dated June
22, 1990, between Frank J. Hanna, Jr., as Lessor, and Nationwide Credit,
Inc. (Nationwide), as Lessee, covering Nationwide's headquarters facility at
2258 Northwest Parkway, Marietta, Georgia. (1)
10.8 Lease Agreement between VPM 1988-1 Ltd., as landlord, and Payment Services
Company, as tenant, dated March 27, 1990, together with First Amendment to
Lease Agreement (dated July 9, 1990), Second Amendment to Lease Agreement
(dated February 21, 1992), Third Amendment to Lease Agreement (dated October
5, 1992), Fourth Amendment to Lease Agreement (dated April 5, 1993) and
Fifth Amendment to Lease Agreement (dated December 15, 1993). The Exhibits
to the Lease Agreement and related Amendments are listed at the end of such
documents, and these lists are incorporated herein by reference. Such
Exhibits have been omitted for purposes of filing, but will be furnished to
the Commission upon request.
-53-
54
INDEX TO EXHIBITS
Sequentially
Exhibits Numbered Page
- -------- -------------
10.9 Lease Agreement between TriNet Essential Facilities X, Inc., as
landlord, and First Health Strategies, Inc. (a wholly owned subsidiary
of the Registrant), as tenant, dated November 1, 1994, together with
Exhibits B and C to the Lease Agreement, covering a First Health Strategies,
Inc. office facility in Salt Lake City, Utah. All other Exhibits to the
Lease Agreement are listed in the Table of Contents to the Lease
Agreement, which list is incorporated herein by reference. Such
Exhibits have been omitted for purposes of filing, but will be furnished
to the Commission upon request.
10.10 Office Building Lease between Weprec Powers Pointe Corporation, as landlord,
and First Financial Management Corporation, as tenant, dated March 8, 1995,
together with Exhibit F to the Office Building Lease, covering the
Registrant's new corporate headquarters office in Atlanta, Georgia. All
other Exhibits to the Office Building Lease are listed in the Table of
Contents to the Office Building Lease, which list is incorporated herein by
reference. Such Exhibits have been omitted for purposes of filing, but will
be furnished supplementally to the Commission upon request.
10.11* The Registrant's 1982 Incentive Stock Plan, as amended through January 31,
1990. (1)
10.12* The Registrant's 1988 Incentive Stock Plan, as amended through January 30,
1991. (1)
10.13* Amendment to the Registrant's 1988 Incentive Stock Plan, dated March 22,
1994 (filed on August 12, 1994 as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994 and incorporated
herein by reference).
10.14* Amendment to the Registrant's 1988 Incentive Stock Plan, dated February 24,
1995.
10.15* First Financial Management Corporation Performance Units Incentive Plan, as
amended through May 1, 1991 (filed on November 14, 1991 as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 1991 and incorporated herein by reference).
-54-
55
INDEX TO EXHIBITS
Sequentially
Exhibits Numbered Page
- -------- -------------
10.16* Directors' Restricted Stock Award Plan, together with Form of
Director's Restricted Stock Award Agreement (filed on March 31, 1987
as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1986 and incorporated herein by reference).
10.17* 1990 Directors' Stock Option Plan. (Filed on August 14, 1990 as an exhibit
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1990 and incorporated herein by reference.)
10.18* Endata, Inc. Amended Stock Option Plan (filed on October 17, 1986 as an
exhibit to Post-Effective Amendment No. 1 to Endata, Inc.'s Registration
Statement on Form S-8 (File No. 2-97925) and incorporated herein by
reference), together with an Amendment to Endata Inc.'s Amended Stock Option
Plan, dated October 30, 1987, and two forms of letters specifying the manner
in which each Endata, Inc. Stock Option was converted into an option to
purchase the Registrant's stock and forms of the Endata Incentive and Non-
Qualified Stock Option Agreements (filed on March 14, 1988 as an exhibit to
the Registrant's Annual Report on Form 10-K for the year ended December
31,1987 and incorporated herein by reference).
10.19* FFMC 1990 Employee Stock Purchase Plan adopted December 15, 1989, as amended
on October 24, 1990 (1), and amendment thereto adopted on July 24, 1991,
effective October 1, 1991 (filed on August 14, 1991 as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
1991 and incorporated herein by reference).
10.20* Employment Agreement, dated January 31, 1989, between the Registrant and
Patrick H. Thomas (filed on March 31, 1989 as an exhibit to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1988 and
incorporated herein by reference). This Employment Agreement was superseded
effective January 1, 1995 by the Employment Agreement listed as Exhibit
10.32.
10.21* Employment Agreement, dated January 31, 1989, between the Registrant and M.
Tarlton Pittard (filed on March 31, 1989 as an exhibit to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1988 and
incorporated herein by reference).
-55-
56
INDEX TO EXHIBITS
Sequentially
Exhibits Numbered Page
- -------- -------------
10.22* Employment Agreement, dated February 15, 1991, Termination of prior
Employment Agreement, Termination of Employee Death Benefit
Agreement, and First Amendment to Deferred Compensation Agreement,
all between the Registrant (or Georgia Federal Bank, FSB) and
Richard D. Jackson. (1)
10.23* Form of Restricted Stock Award Agreement between the Registrant and each of
the following officers covering awards under the 1988 Incentive Stock Plan,
on January 31 1990, to M. Tarlton Pittard and Richard D. Jackson. (1)
10.24* Non-Qualified Stock Option, dated February 5, 1988, granted by the
Registrant to Patrick H. Thomas (filed on March 14, 1988 as an exhibit to
the Registrant's Annual Report on Form 10-K for the year ended December 31,
1987 and incorporated herein by reference).
10.25* Form of Non-Qualified Stock Option Agreement as issued to the Registrant's
Executive Officers under the 1988 Incentive Stock Plan (filed on March 30,
1994 as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993 and incorporated herein by reference).
10.26* Form of Restricted Stock Award Agreement between the Registrant and each of
the following officers covering awards under the 1988 Incentive Stock Plan
on May 1, 1991, to Richard D. Jackson, M. Tarlton Pittard and Stephen D.
Kane (filed on August 14, 1991 as an exhibit to the Registrant's Quarterly
Report on Form 10-K for the quarter ended June 30, 1991 and incorporated
herein by reference).
10.27* Form of Restricted Stock Award Agreement between the Registrant and each of
the following officers covering awards on January 31, 1989 under the 1988
Incentive Stock Plan: Patrick H. Thomas, M. Tarlton Pittard and Stephen D.
Kane (filed on March 31, 1989 as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988 and incorporated
herein by reference).
10.28* Resolution of the Compensation Committee of the Registrant's Board of
Directors, dated June 24, 1993, accelerating to December 31, 1993 the date
on which restrictions lapsed on stock awards previously issued to Patrick H.
Thomas, M. Tarlton Pittard and Stephen D. Kane (filed on March 30, 1994 as
an exhibit to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference).
-56-
57
INDEX TO EXHIBITS
Sequentially
Exhibits Numbered Page
- -------- -------------
10.29* Employment Agreement, dated January 29, 1992, between the
Registrant and Stephen D. Kane (filed on March 23, 1992 as an exhibit
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991 and incorporated herein by reference).
10.30 Agreement, dated May 7, 1993, by and among National Bancard Corporation,
CMSC Corporation and First Financial Bank (filed on May 14, 1993 as an
exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1993 and incorporated herein by reference).
10.31 Agreement, Plan of Reorganization and Plan of Merger, dated as of July 28,
1993 by and among First Financial Management Corporation, Tomahawk
Acquisition Corporation, Pennant Acquisition Corporation, International
Banking Technologies, Inc., Prime Consulting Group, Inc. and The
Shareholders of International Banking Technologies, Inc. and Prime
Consulting Group, Inc. The Schedules to this Agreement, Plan of
Reorganization and Plan of Merger are identified on a list of schedules
contained at the end of the Table of Contents to such Agreement, which list
is incorporated herein by reference. All schedules were omitted for
purposes of filing but will be furnished supplementally to the Commission
upon request (filed on August 13, 1993 as an exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and
incorporated herein by reference).
10.32* Employment Agreement, dated March 22, 1994, between the Registrant and
Patrick H. Thomas (filed on March 30, 1994 as an exhibit to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.33* First Amendment, dated December 21, 1994, to Employment Agreement, dated
March 22, 1994, between the Registrant and Patrick H. Thomas.
10.34* Second Amendment, dated March 13, 1995, to Employment Agreement, dated March
22, 1994, between the Registrant and Patrick H. Thomas, together with two
Restricted Stock Award Agreements (both dated March 13, 1995) constituting
Exhibits A and B, respectively, to the Second Amendment.
10.35* Non-Qualified Stock Option, dated March 22, 1994, granted by the Registrant
to Patrick H. Thomas (filed on March 30, 1994 as an exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993
and incorporated herein by reference).
-57-
58
INDEX TO EXHIBITS
Sequentially
Exhibits Numbered Page
- -------- -------------
10.36 Agreement, Plan of Reorganization and Plan of Merger, dated June 30,
1994, by and among First Financial Management Corporation, Bluebird
Acquisition Corporation, Gencan Acquisition Corporation, GENEX Services,
Inc., GENEX Services of Canada, Ltd. The Schedules to this Agreement,
Plan of Reorganization and Plan of Merger are identified on a list of
schedules contained at the end of the Table of Contents to such agreement,
which list is incorporated herein by reference. All schedules were
omitted for purposes of filing but will be furnished supplementally to
the Commission upon request (filed on August 12, 1994 as an exhibit
to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994 and incorporated herein by reference ).
10.37 Stock Purchase Agreement, dated October 20, 1994 by and between New Valley
Corporation and First Financial Management Corporation. The Exhibits and
Schedules to the Stock Purchase Agreement are identified on a list of
Exhibits and Schedules contained in the Table of Contents to the Stock
Purchase Agreement, which list is incorporated herein by reference. Such
Exhibits and Schedules have been omitted for purposes of filing, but will be
furnished supplementally to the Commission upon request (filed on November
4, 1994 as an exhibit to the Registrant's Current Report on Form 8-K and
incorporated herein by reference).
10.38 Amendment No. 1, dated November 14, 1994, to Stock Purchase Agreement, dated
October 20, 1994, by and between New Valley Corporation and First Financial
Management Corporation (filed on November 15, 1994 as an exhibit to the
Registrant's Current Report on Form 8-K and incorporated herein by reference).
10.39* Employment Agreement, dated April 20, 1990, between Western Union
Corporation and Robert J. Amman (an Executive Officer of the Registrant),
together with Amendment to Employment Agreement, dated January 30, 1991.
21.1 List of Subsidiaries.
23.1 Consent of Independent Auditors.
-58-
59
INDEX TO EXHIBITS
Sequentially
Exhibits Numbered Page
- -------- -------------
27.1 Financial Data Schedule (for SEC use only).
- -----------------------------
* Indicates management contract or compensatory plan or arrangement.
(1) Filed on April 1, 1991 as an exhibit to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1990 and incorporated
herein by reference.
-59-