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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the fiscal year ended December 31, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the transition period from to
Commission File No. 001-16427
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: Certegy Inc. 401(k) Plan. |
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Certegy Inc., 11720 Amber Park Drive, Alpharetta, Georgia 30004. |
Table of Contents
TABLE OF CONTENTS
| Report of Independent Registered Public Accounting Firm |
| Statements of Net Assets Available for Benefits |
| Statement of Changes in Net Assets Available for Benefits |
| Notes to Financial Statements |
| Supplemental Schedule |
| Schedule of Assets (Held at End of Year) |
| SIGNATURES |
| EX-23.1 CONSENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Certegy Inc. 401(k) Plan
As of December 31, 2003 and 2002
with Report of Independent Registered Public Accounting Firm
Table of Contents
Audited Financial Statements
and Supplemental Schedule
As of December 31, 2003 and 2002
Contents
| 1 | ||
| 2 | ||
| 3 | ||
| 4 | ||
| Schedule H, Line 4i – Schedule of Assets (Held at End of Year) |
11 | |
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Report of Independent Registered Public Accounting Firm
Certegy Inc. Group Plans Committee
Certegy Inc. 401(k) Plan
We have audited the accompanying statements of net assets available for benefits of the Certegy Inc. 401(k) Plan as of December 31, 2003 and 2002, and the related statement of changes in net assets available for benefits for the year ended December 31, 2003. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2003 and 2002, and the changes in its net assets available for benefits for the year ended December 31, 2003, in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2003 is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
| /s/ Ernst & Young, LLP |
| Atlanta, Georgia |
June 8, 2004
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Certegy Inc. 401(k) Plan
Statements of Net Assets Available for Benefits
| December 31 | ||||||
| 2003 |
2002 | |||||
| Assets |
||||||
| Investments, at fair value |
$ | 58,933,560 | $ | 48,112,295 | ||
| Receivables: |
||||||
| Employer contributions |
1,469,308 | 511,466 | ||||
| Other |
— | 820 | ||||
| Total receivables |
1,469,308 | 512,286 | ||||
| Total assets |
60,402,868 | 48,624,581 | ||||
| Net assets available for benefits |
$ | 60,402,868 | $ | 48,624,581 | ||
See accompanying notes.
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Certegy Inc. 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2003
| Additions |
||||
| Investment income: |
||||
| Interest and dividends |
$ | 507,998 | ||
| Net appreciation in fair value of investments |
8,956,999 | |||
| Total investment income |
9,464,997 | |||
| Contributions: |
||||
| Participant |
5,583,247 | |||
| Employer |
1,469,308 | |||
| Rollovers from qualified plans |
407,236 | |||
| Total contributions |
7,459,791 | |||
| Total additions |
16,924,788 | |||
| Deductions |
||||
| Distributions to participants |
(5,141,322 | ) | ||
| Administrative expenses |
(5,179 | ) | ||
| Total deductions |
(5,146,501 | ) | ||
| Net increase |
11,778,287 | |||
| Net assets available for benefits: |
||||
| Beginning of year |
48,624,581 | |||
| End of year |
$ | 60,402,868 | ||
See accompanying notes.
3
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Certegy Inc. 401(k) Plan
December 31, 2003
1. Description of the Plan
General
The following brief description of the Certegy Inc. 401(k) Plan (the “Plan”) is provided for informational purposes only. Participants should refer to the Plan document for more complete information.
The Plan is a defined contribution plan, which became effective July 3, 2001, and is subject to the Employee Retirement Income Security Act of 1974, as amended. Generally, all U.S. salaried employees of Certegy and its participating subsidiaries are eligible to participate in the Plan upon hire.
Contributions
Each participant may make basic contributions from 1% to 2% of his/her total salary (base salary only for highly compensated employees) through payroll deductions on a pretax or an after-tax basis. The Company will match 100% of the first 2% of salary contributed by participants during the Plan year. Participants may also make contributions of the next 3% to 6% of total salary, as defined (“plus contributions”). The Company match on plus contributions is discretionary. The Company elected not to make any contributions relative to plus contributions in 2003. In addition, each non-highly compensated participant may elect to make supplemental contributions of 7% to 20% of gross pay on a pretax or an after-tax basis through payroll deductions, subject to certain limits. Supplemental contributions are not matched.
Matching contributions are net of any in-service after-tax withdrawals, lump-sum cash contributions, and roll-over contributions. Employer contributions for a Plan year may not exceed the maximum amount which, together with employer contributions to the Certegy Inc. U.S.
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Certegy Inc. 401(k) Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Contributions (continued)
Retirement Income Plan, is deductible under the Internal Revenue Code (the “Code”) or such other federal income tax statutory provision as may be applicable. In addition, a participant must be actively employed by the Company on December 31 to receive the matching contribution for that Plan year, unless termination prior to December 31 is due to retirement, disability or death, or a participant is age 65 or older upon termination. Matching contributions are automatically invested in the Certegy Stock Fund (“CSF”). However, once the initial contribution is made, the participant may transfer all or a part of the match from the CSF to any of the available investment options.
Contributions may be funded by the Company during the year and held as unallocated funds until contributions are determined as of the end of the Plan year. Earnings on these deposits are accumulated and may be used to reduce the total cash required for the Company contribution. The required Company match for 2003 of $1,469,308 was funded in early 2004. The required Company match for 2002 was approximately $1,386,700. At December 31, 2002, unallocated contributions totaled approximately $875,300, which included approximately $420,056 of losses. To meet the required contribution, the Company funded approximately $481,200 in early 2003, along with a $30,200 increase of market value in the unallocated account for the beginning of 2003.
Vesting
Participants’ and Company contributions and earnings on contributions are at all times vested with those participants upon allocation.
Administration
During 2003, the trustee of the Plan was changed from Fidelity Management Trust Company to SunTrust Banks, Inc. (“Trustee”). Financial Administrative Services Corporation (“FASCorp”) performs participant record keeping and other administrative duties for the Plan. The Certegy Inc. Group Plans Committee is appointed by the Company’s board of directors and oversees the Plan’s operations.
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Certegy Inc. 401(k) Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Investment Options
Participants may direct their elective deferrals in and among various investment options. Participants may change their investment elections and transfer money between investment options on a daily basis. The investment options consist of publicly traded mutual funds, including various mutual funds managed by affiliates of the Trustee, as well as two collective trusts. In addition, participants may elect to invest their contributions in the Company’s common stock through a unitized fund, which includes an investment in a money market fund for liquidity purposes. The balances for participants who previously invested in shares of Equifax common stock under the Equifax 401(k) Plan were transferred into the Frozen Equifax Stock Fund to which no further contributions can be made.
Benefits
Withdrawals from participant accounts may be made only for the following reasons: termination of employment, financial hardship, retirement, death, disability, or attainment of age 59½. Upon occurrence of one of these events and upon election of the participant, the Plan will distribute to the participant a portion of the entire participant’s account balance as specified in the Plan document. This lump-sum distribution is payable in cash, Company common stock, or a combination of the two at the participant’s election.
If a participant’s account balance is less than $5,000 upon retirement or termination, a distribution of the participant’s account will be made automatically.
The after-tax portion of a participant’s account balance is available for withdrawal at any time. In-service withdrawals of the Company-matching portion of a participant’s account are not allowed.
Participant Accounts
Individual accounts are maintained for each of the Plan’s participants to reflect the participant’s share of the Plan’s earnings (losses), Company contributions, and the participant’s contributions. Allocations of earnings (losses) are based on relative account balances and investment elections, as defined.
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Certegy Inc. 401(k) Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Loans to Participants
The Plan permits loans to be made to participants. Only one loan is permitted at a time, and the minimum loan amount is $1,000. Loans may generally be taken for up to 50% of a participant’s account balance but not exceeding $50,000. Loans are generally repaid through payroll deductions with a 5-year maximum limit, except for loans for home purchases which may have terms up to 15 years. Interest rates are set at the date of the loan at a rate equal to prime plus 1% on the first day of the calendar quarter in which the loan is taken. Loan fees for setup and maintenance are paid by the participant.
Plan Termination
Although the Company intends for the Plan to be permanent, the Plan provides that the Company has the right to discontinue contributions or terminate the Plan at any time. If the Plan is terminated, the Trustee will determine as of the termination date the value of the account balance of each participant, former participant, and beneficiary. The Trustee will then make a distribution in a time and manner solely determined by the Board of Directors of the Company.
2. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements of the Plan are prepared on the accrual basis of accounting.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the Plan’s management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
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Certegy Inc. 401(k) Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Administrative Expenses
The Plan provides that all administrative expenses are paid by the Plan. However, the Company may, in its sole discretion, choose to pay all or part of these expenses. Accordingly, the Company paid certain expenses in 2003.
Valuation of Plan Investments
Investments of the Plan, except the Managed Income Portfolio, are carried at fair value as determined by quoted market prices. Participant loans are recorded at the principal amount outstanding plus accrued interest, which approximates fair value.
The Managed Income Portfolio is a collective trust that invests in guaranteed investment contracts and synthetic investment contracts and is valued at estimated fair value as determined by the Trustee.
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Certegy Inc. 401(k) Plan
Notes to Financial Statements (continued)
3. Investments
The fair values of individual investments that represent 5% or more of the Plan’s net assets as of December 31, 2003 and 2002 are as follows:
| December 31 | ||||||
| 2003 |
2002 | |||||
| Certegy Inc. Common Stock |
$ | 12,895,022 | $ | 10,691,795 | ||
| Equifax Inc. Common Stock |
7,433,577 | 9,110,449 | ||||
| Spartan® U.S. Equity Index Fund |
— | 4,738,498 | ||||
| Fidelity Retirement Government Money Market Portfolio |
— | 4,842,926 | ||||
| Fidelity Asset Manager: Growth Fidelity Low-Priced Stock Fund |
|
— — |
|
2,799,643 2,536,359 | ||
| SunTrust Retirement-500 Index FD Class-BSU-50B |
6,394,887 | — | ||||
| STI Classic Prime Quality Money Market TSU-PMM |
4,895,463 | — | ||||
| STI Classic Life Vision Growth & Inc, T |
3,759,037 | — | ||||
| STI Classic Small Cap Value Equity FD, TSU-SCE |
3,589,026 | — | ||||
| SunTrust Retirement Stable Asset Fund |
3,181,607 | — | ||||
| Goldman Sachs Mid-Value Fund-A |
3,020,614 | — | ||||
The net appreciation in the fair value of investments, as determined by quoted market prices, for the year ended December 31, 2003 follows:
| Common stock: |
|||
| Certegy Inc. |
$ | 3,534,226 | |
| Equifax Inc. |
406,560 | ||
| Registered investment companies |
4,258,036 | ||
| Common/Collective Trust Funds |
758,177 | ||
| $ | 8,956,999 | ||
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Certegy Inc. 401(k) Plan
Notes to Financial Statements (continued)
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated July 26, 2002, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the “Code”) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan administrator believes that the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax exempt.
5. Related-Party Transactions
All transactions in the Certegy common stock held within the CSF are related-party transactions. The Plan held 366,806 and 435,511 shares of Certegy common stock, valued at $12,895,022 and $10,691,795 at December 31, 2003 and 2002, respectively.
6. Risk and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.
7. Subsequent Events
In March 2004 the Company acquired Crittson Financial Services LLC and Game Financial Corporation. The Company has not determined the effect of these transactions on the Plan.
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Supplemental Schedule
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Certegy Inc. 401(k) Plan
EIN: 58-2606325 Plan Number: 004
Schedule H, Line 4i
Schedule of Assets (Held at End of Year)
December 31, 2003
| (a) |
(b) Identity of Issue, Borrower, |
(c) Description of Investment, Including |
(d) Cost |
(e) Current Value | |||||
| * |
Certegy Inc. |
Common stock, 366,806 shares |
(1 | ) | 12,895,022 | ||||
| Equifax Inc. |
Common stock, 285,098 shares |
(1 | ) | 7,433,577 | |||||
| Common/Collective Trust Funds: |
|||||||||
| * |
SunTrust Investments |
SunTrust Retirement Stable Asset Fund, 94,163 shares |
(1 | ) | 3,181,607 | ||||
| * |
SunTrust Investments |
SunTrust Retirement 500 Index FD Class BSU-50B, 774,000 |
(1 | ) | 6,394,887 | ||||
| Money Market Funds: |
|||||||||
| * |
SunTrust Investments |
STI Classic Prime Quality Money Market TSU-PMM, 4,895,463 shares |
(1 | ) | 4,895,463 | ||||
| Shares of registered investment Companies: |
|||||||||
| MFS Funds |
MFS Massachusetts Investors Growth Fund, 133,667 shares |
(1 | ) | 1,513,106 | |||||
| Putnam Funds |
Putnam International Equity Fund-A, 29,861 shares |
(1 | ) | 616,925 | |||||
| Templeton Funds |
Templeton Foreign Fund, 53,245 shares |
(1 | ) | 566,529 | |||||
| Goldman Sachs |
Goldman Sachs MID Value Fund-A, 105,468 shares |
(1 | ) | 3,020,614 | |||||
| * |
SunTrust Investments |
STI Classic Small Cap Value Equity FD, TSU-SCE, 205,793 shares |
(1 | ) | 3,589,026 | ||||
| * |
SunTrust Investments |
STI Classic Life Vision Aggressive GWTH TSU-LVM, 21,473 shares |
(1 | ) | 215,588 | ||||
| * |
SunTrust Investments |
STI Classic Life Vision Moderate GRTH, TSU-LVB, 223,152 shares |
(1 | ) | 2,231,519 | ||||
| * |
SunTrust Investments |
STI Classic US Government Securities, T, 39,594 shares |
(1 | ) | 417,721 | ||||
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Certegy Inc. 401(k) Plan
EIN: 58-2606325 Plan Number: 004
Schedule H, Line 4i
Schedule of Assets (Held at End of Year) (continued)
December 31, 2003
| (a) |
(b) Identity of Issue, Borrower, |
(c) Description of Investment, Including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value |
(d) Cost |
(e) Current Value | ||||||
| MFS Funds |
MFS New Discovery Fund, 20,136 shares |
(1 | ) | 309,091 | ||||||
| T. Rowe Price |
T. Rowe Price MID-CAP Growth Fund-R, 39,711 shares |
(1 | ) | 1,693,673 | ||||||
| AllianceBernstein Funds |
AllianceBernstein Growth & Income Fund, 297,235 shares |
(1 | ) | 1,004,654 | ||||||
| * |
SunTrust Investments |
STI Classic Capital Appreciation Fund, TSU-CG, 81,052 shares |
(1 | ) | 985,596 | |||||
| * |
SunTrust Investments |
STI Classic Life Vision Growth & INC, T, 353,625 shares |
(1 | ) | 3,759,037 | |||||
| MFS Funds |
MFS Research Bond Fund, 297,235 shares |
(1 | ) | 2,935,771 | ||||||
| Participant loans |
Varying maturities and interest rates from 5% to 10.5% |
1,274,154 | ||||||||
| $ | 58,933,560 | |||||||||
| * | Represents a party-in-interest. |
| (1) | Cost information has not been included in column (d) because investments are participant-directed. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned duly authorized officer.
| Date: June 24, 2004 |
CERTEGY INC. 401(K) PLAN | |||
| /s/ RICHARD D. GAPEN | ||||
| Richard D. Gapen | ||||
| Representative of the Group Plans Committee of Certegy Inc., Sponsor and Administrator of the Plan | ||||
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EXHIBIT INDEX
| Exhibit No. |
||
| 23.1 | Consent of the Independent Registered Public Accounting Firm | |
14
Consent of the Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-64462) pertaining to the 401(k) Plan of Certegy Inc. of our report dated June 8, 2004, with respect to the financial statements and schedule of the Certegy Inc. 401(k) Plan included in this Annual Report (Form 11-K) for the year ended December 31, 2003.
| /s/ Ernst & Young, LLP |
| Atlanta, Georgia |
June 24, 2004