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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, 2002 |
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. | |||
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| EX-23.1 CONSENT OF INDEPENDENT AUDITORS |
||
| EX-99.1 SECTION 906 CERTIFICATION |
||
Table of Contents
AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
Certegy Inc. 401(k) Plan
As of December 31, 2002 and 2001
with Report of Independent Auditors
Table of Contents
Certegy Inc. 401(k) Plan
Audited Financial Statements
and Supplemental Schedule
As of December 31, 2002 and 2001
Contents
| Report of Independent Auditors |
1 | |
| Audited Financial Statements: |
||
| Statements of Net Assets Available for Benefits |
2 | |
| Statement of Changes in Net Assets Available for Benefits |
3 | |
| Notes to Financial Statements |
4 | |
| Supplemental Schedule: |
||
| Schedule H, Line 4i – Schedule of Assets (Held at End of Year) |
11 | |
Table of Contents
Report of Independent Auditors
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, 2002 and 2001, and the related statement of changes in net assets available for benefits for the year ended December 31, 2002. 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits 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, 2002 and 2001, and the changes in its net assets available for benefits for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States.
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, 2002 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, GA
June 4, 2003
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Statements of Net Assets Available for Benefits
| December 31 |
|||||||
| 2002 |
2001 |
||||||
| Assets |
|||||||
| Investments, at fair value |
$ | 48,112,295 | $ | 50,764,902 | |||
| Receivables: |
|||||||
| Participant contributions |
— | 205,948 | |||||
| Employer contributions |
511,466 | 325,176 | |||||
| Other |
820 | 138,329 | |||||
| Total receivables |
512,286 | 669,453 | |||||
| Total assets |
48,624,581 | 51,434,355 | |||||
| Liabilities |
|||||||
| Other liabilities |
— | (4,999 | ) | ||||
| Net assets available for benefits |
$ | 48,624,581 | $ | 51,429,356 | |||
See accompanying notes.
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Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2002
| Additions: |
||||
| Investment income/(loss): |
||||
| Interest and dividends |
$ | 694,417 | ||
| Net depreciation in fair value of investments |
(7,712,588 | ) | ||
| Total investment loss |
(7,018,171 | ) | ||
| Contributions: |
||||
| Participant |
5,465,641 | |||
| Employer |
1,806,756 | |||
| Rollovers from qualified plans |
414,131 | |||
| Total contributions |
7,686,528 | |||
| Total additions |
668,357 | |||
| Deductions: |
||||
| Distributions to participants |
(3,463,562 | ) | ||
| Administrative expenses |
(9,570 | ) | ||
| Total deductions |
(3,473,132 | ) | ||
| Net decrease |
(2,804,775 | ) | ||
| Net assets available for benefits: |
||||
| Beginning of year |
51,429,356 | |||
| End of year |
$ | 48,624,581 | ||
See accompanying notes.
3
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Notes to Financial Statements
December 31, 2002
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 the participating companies of Certegy and its 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 2002. In addition, each nonhighly 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 may not exceed the maximum amount which, together with employer contributions to the Certegy Inc. U.S. Retirement Income Plan for a Plan year, 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.
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Certegy Inc. 401(k) Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Contributions (continued)
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. At December 31, 2002, unallocated contributions totaled approximately $875,300, which includes approximately $420,056 of losses. The required Company match for 2002 was approximately $1,386,700. To meet this requirement, the Company funded approximately $481,200 in early 2003, along with a $30,200 increase of market value in the unallocated account from the beginning of 2003. At December 31, 2001, unallocated contributions totaled approximately $914,800, of which approximately $130,000 related to earnings. Company contributions for 2001 were approximately $1,297,800, of which approximately $325,000 was funded by the Company in early 2002.
Vesting
Participants’ and Company contributions and earnings on contributions are at all times vested with those participants upon allocation.
Administration
The trustee of the Plan is Fidelity Management Trust Company (“Trustee”). Fidelity Investments Institutional Operations Company, Inc. 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.
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 Fidelity affiliates, as well as one collective trust. 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.
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Certegy Inc. 401(k) Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
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.
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 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.
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Certegy Inc. 401(k) Plan
Notes to Financial Statements (continued)
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 accounting principles generally accepted in the United States 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.
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 2002.
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, 2002 and 2001 are as follows:
| December 31, |
|||||||
| 2002 |
2001 |
||||||
| Certegy Inc. Common Stock |
$ | 10,691,795 | $ | 11,424,757 | |||
| Equifax Inc. Common Stock |
9,110,449 | 13,064,739 | |||||
| Spartan® U.S. Equity Index Fund |
4,738,498 | 6,342,473 | |||||
| Fidelity Retirement Government Money Market Portfolio |
4,842,926 | 3,628,878 | |||||
| Fidelity Asset Manager: Growth |
2,799,643 | 3,454,709 | |||||
| Fidelity Low-Priced Stock Fund |
2,536,359 | 2,070,222 | * | ||||
*Amount is less than 5% of Plan assets for 2001, but is shown for comparative purposes.
The net depreciation in the fair value of investments, as determined by quoted market prices, for the year ended December 31, 2002 is as follows:
| Common stock: |
||||
| Certegy Inc. |
$ | (4,022,326 | ) | |
| Equifax Inc. |
(37,394 | ) | ||
| Registered investment companies |
(3,652,868 | ) | ||
| $ | (7,712,588 | ) | ||
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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. Subsequent to this issuance of the determination letter, the Plan was amended. 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 435,511 and 333,862 shares of Certegy common stock, valued at $10,691,795 and $11,424,757 at December 31, 2002 and 2001, respectively.
The Plan offers investments in mutual funds and the collective trust issued by affiliates of the Trustee. These Fidelity affiliates receive investment management fees related to these mutual funds and the collective trust prior to any fund and/or the trust being allocated investment earnings or losses.
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EIN: 58-2606325 Plan Number: 004
Schedule H, Line 4i
Schedule of Assets (Held at End of Year)
December 31, 2002
| (a) | (b) Identity of Issue, Borrower, Lessor, or Similar Party |
(c) Description of Investment, Including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value |
(d) Cost |
(e) Current Value | |||||
| * |
Certegy Inc. | Common stock, 435,511 shares | (1) | $ | 10,691,795 | ||||
| Equifax Inc. | Common stock, 393,710 shares | (1) | 9,110,449 | ||||||
| Common/Collective Trust Funds: | |||||||||
| * |
Fidelity Investments |
Fidelity Managed Income Portfolio, 2,139,030 shares | (1) | 2,139,030 | |||||
| Money Market Funds: | |||||||||
| * |
Fidelity Investments |
Fidelity Institutional Cash Portfolio | (1) | 621,916 | |||||
| * |
Fidelity Investments |
Fidelity Retirement Government Money Market | (1) | 4,842,926 | |||||
| Shares of registered investment companies: | |||||||||
| * |
Fidelity Investments |
Spartan® U.S. Equity Index Fund, 152,119 shares | (1) | 4,738,498 | |||||
| * |
Fidelity Investments |
Fidelity U.S. Bond Index Fund, 138,125 shares | (1) | 1,552,523 | |||||
| * |
Fidelity Investments |
Fidelity Asset Manager™, 115,239 shares | (1) | 1,590,293 | |||||
| * |
Fidelity Investments |
Fidelity Asset Manager: Income, 37,471 shares | (1) | 406,938 | |||||
| * |
Fidelity Investments |
Fidelity Asset Manager: Growth, 233,888 shares | (1) | 2,799,643 | |||||
| * |
Fidelity Investments |
Fidelity Value Fund, 42,826 shares | (1) | 1,986,717 | |||||
| * |
Fidelity Investments |
Fidelity Low-Priced Stock Fund, 100,769 shares | (1) | 2,536,359 | |||||
| American Funds |
American Advantage International Equity Fund, 1,782 shares | (1) | 21,158 | ||||||
| Morgan Stanley Institutional Funds |
MSDW Equity Institutional Fund, 4,520 shares | (1) | 55,773 | ||||||
| MAS Funds |
MAS Mid-Cap Growth Portfolio, 13,758 shares | (1) | 163,171 | ||||||
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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, 2002
| (a) | (b) Identity of Issue, Borrower, Lessor, or Similar Party |
(c) Description of Investment, Including Maturity Date, Rate of Interest, Collateral, Par or Maturity ValueCost |
(d) Cost |
(e) Current Value | |||||
| Strong Funds |
Strong Government Securities Fund, 47,377 shares | (1) | 527,778 | ||||||
| Warburg Pincus Funds |
Warburg Pincus Capital Appreciation Fund, 28,562 shares | (1) | 347,031 | ||||||
| PIMCO Funds |
PIMCO Total Return Fund, 33,152 shares | (1) | 353,732 | ||||||
| INVESCO Funds Group |
INVESCO Equity Income Fund, 10,022 shares | (1) | 95,915 | ||||||
| * |
Fidelity Investments |
Fidelity Fund, 5,362 shares | (1) | 119,360 | |||||
| * |
Fidelity Investments |
Fidelity Equity Income Fund, 7,893 shares | (1) | 313,122 | |||||
| * |
Fidelity Investments |
Fidelity Aggressive Growth Fund, 67,118 shares | (1) | 751,051 | |||||
| * |
Fidelity Investments |
Fidelity Diversified International Fund, 25,477 shares | (1) | 437,186 | |||||
| * |
Fidelity Investments |
Fidelity Dividend Growth Fund, 19,516 shares | (1) | 435,591 | |||||
| * |
Fidelity Investments |
Fidelity Freedom Income Fund®, 4,392 shares | (1) | 46,551 | |||||
| Fidelity Freedom 2000 Fund®, 234 shares | (1) | 2,578 | |||||||
| Fidelity Freedom 2010 Fund®, 5,003 shares | (1) | 57,231 | |||||||
| Fidelity Freedom 2020 Fund®, 6,766 shares | (1) | 71,988 | |||||||
| Fidelity Freedom 2030 Fund®, 9,276 shares | (1) | 94,987 | |||||||
| * |
Fidelity Investments |
Spartan® International Index Fund, 2,541 shares | (1) | 51,180 | |||||
| * |
Fidelity Investments |
Fidelity Freedom 2040 FundSM, 7,713 shares | (1) | 45,200 | |||||
| Participant loans |
Varying maturities and interest rates from 7% to 10.5% | (1) | 1,104,625 | ||||||
| $ | 48,112,295 | ||||||||
*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.
| CERTEGY INC. 401(K) PLAN | ||||
| Date: June 27, 2003 | /s/ RICHARD D. GAPEN | |||
| Richard D. Gapen Representative of the Group Plans Committee, Sponsor and Administrator of the Plan | ||||
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EXHIBIT INDEX
| Exhibit No. | ||
| 23.1 |
Consent of Independent Auditors | |
| 99.1 |
Section 906 Certification | |
EXHIBIT 23.1
Consent of Independent Auditors
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 4, 2003, 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, 2002.
/s/ Ernst & Young LLP
Atlanta, Georgia
June 25, 2003
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C SEC. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Financial Statements of the Certegy Inc. 401(k) Plan (the “Plan”) of Certegy Inc. (the “Company”) on Form 11-K for the year ended December 31,2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard D. Gapen, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Plan. |
/s/ RICHARD D. GAPEN
Richard D. Gapen
Representative of the Group Plans Committee,
Sponsor and Administrator of the Plan
Date: June 27, 2003
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO CERTEGY INC. AND WILL BE RETAINED BY CERTEGY INC. AND FURNISHED TO THE SECURITIES & EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.