TSYS (R) News Release
For Immediate Release
| Contacts: | |||||||||
| James B. Lipham | Leo Berard | ||||||||
| Chief Financial Officer | Investor Relations | ||||||||
| 706.649.2262 | 706.649.5220 |
TSYS Reports 27.1% Increase in Net Income for Third Quarter 2002
Company Confirms 20% Growth in Earnings
Columbus, Ga., October 15, 2002 -- TSYSâ today announces that its financial results were in line with the Company’s forecast for the third quarter and first nine months of 2002. The company reaffirms its 20% annual earnings growth estimate for the full year.
Net income for the quarter ending September 30, 2002, increased 27.1%to $32.3 million, up from $25.5 million in the same period last year. Basic and diluted earnings per share for the third quarter increased to $0.16, up from $0.13 one year ago. Revenue for the third quarter was $234.9 million, an increase of 8.7%, compared with revenue of $216.1 million one year ago. Revenue for the third quarter of 2002, excluding the amounts for reimbursable charges such as postage and courier charges, was $178.6 million, an increase of 10.8%, compared to one year ago.
Net income for the first nine months of 2002 increased 20.6%to $88.6 million, up from $73.4 million in the same period last year. Basic and diluted earnings per share for the first nine months of 2002 increased to $0.45, up from $0.38 one year ago. Revenue for the first nine months of 2002, was $695.8 million, an increase of 6.6%, compared with revenue of $652.8 million one year ago. Revenue for the first nine months of 2002, excluding the amounts for reimbursable charges, was $522.6 million, an increase of 9.9%, compared to one year ago.
The third quarter results include a foreign currency translation gain of $2.1 million on the company’s short-term financing with its European operations. Excluding foreign currency translation gains, net income for the third quarter of 2002 increased 21.4% over the same period last year. For the first nine months of 2002, net income increased 18.6% over the same period last year excluding foreign currency translation gains.
“We are pleased with our continued history of earnings growth and to affirm that we believe we will meet our targets for the year,” said Richard W. Ussery, chairman and CEO of TSYS. “TSYS had another solid quarter with internal growth in accounts on file of existing
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TSYS Announces 27.1% Increase in Earnings for Third Quarter 2002/ Page 2 of 6
customers of 11.6%. Our continued focus on expense control delivered an operating margin excluding reimbursable items of 25.3% compared to 23.6% a year ago.”
Ussery continued, “ During the third quarter of 2002, we announced:
“We continue to proceed with our long-term growth strategy by pursuing new clients and acquiring new businesses,” said Ussery.
TSYS also announces today the signing of a letter of intent with Bank of Ireland to process its consumer and commercial accounts. Bank of Ireland will convert its accounts from its in-house system in the first half of 2003. After the conversion, TSYS will process more than 90 percent of the card accounts in Ireland and will service an estimated 14.2 million card accounts in Europe.
At the end of the third quarter in 2000, TSYS announced its goal of growing net income by 20-25% in each of the years 2001-2003. TSYS achieved this goal in 2001 when it reported 20.2% net income growth, and expects to achieve this goal in 2002. Consistent with the company’s previously communicated earnings guidance, to achieve this goal for 2003 would require, among other things, that TSYS sign a major client from which it would realize substantial revenues in 2003. TSYS has not yet been successful in signing the major client needed for it to achieve this goal and, accordingly, TSYS today realigns its forecast for 2003. TSYS now expects its 2003 net income to exceed its 2002 net income by 12-15%. The assumptions underlying 2003‘s net income forecast are an increase in revenues (excluding reimbursables) between 9-10%, an internal growth rate of accounts of existing clients of approximately 11% and a continued focus on expense management. Though TSYS remains optimistic about the possibilities of signing a major client, this forecast does not include any revenues or expenses associated with signing and converting a major client.
TSYS will host its quarterly conference call at 4:30 p.m. EDT, October 15, 2002. The conference call can be accessed atwww.tsys.com by clicking on the designated icon within the Highlights section of the site. The replay will be available 30–45 minutes after the call.
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TSYS Announces 27.1% Increase in Earnings for Third Quarter 2002/ Page 3 of 6
About TSYS
TSYS (NYSE: TSS) (www.tsys.com) brings integrity and innovation to the world of electronic payment services as the integral link between buyers and sellers in this rapidly evolving universe. For more information, contactnews@tsys.com.
This press release contains statements that constitute “forward-looking statements”within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 as amended by thePrivate Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements regarding TSYS’expected growth in net income for the years 2002 and 2003 and the assumptions underlying such statements, including, with respect to TSYS’expected increase in net income for 2003; an increase in revenues (excluding reimbursables) between 9-10%; an internal growth rate of accounts of existing clients of approximately 11%; and continued aggressive expense management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. A number of important factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this press release. Many of these factors are beyond TSYS’ability to control or predict. The factors include, but are not limited to, lower than anticipated revenues; lower than anticipated internal growth rates for TSYS’existing customers; TSYS’inability to control expenses and increase market share; hostilities in the Middle East or elsewhere; TSYS’inability to successfully bring new products to market, including, but not limited to, stored value and e-commerce products, loan processing products and other processing services; the inability of TSYS to grow its business through acquisitions; adverse developments with respect to entering into contracts with new clients and retaining current clients; TSYS’inability to increase the revenues derived from international sources; the merger of TSYS clients with entities that are not TSYS clients or the sale of portfolios by TSYS clients to entities that are not TSYS clients; TSYS’inability to anticipate and respond to technological changes, particularly with respect to e-commerce; adverse developments with respect to the successful conversion of clients; the absence of significant changes in foreign exchange spreads between the United States and the countries TSYS transacts business in, to include Mexico, United Kingdom, Japan, Canada and the European Union; adverse developments with respect to the credit card industry in general; TSYS’inability to successfully manage any impact from slowing economic conditions or consumer spending; the occurrence of catastrophic events that would impact TSYS’or its major customers’ operating facilities, communications systems and technology, or that has a material negative impact on current economic conditions or levels of consumer spending; revenues generated by sub-prime lending clients being less than anticipated; successfully managing the potential both for patent protection and patent liability in the context of rapidly developing legal framework for expansive software patent protection; and overall market conditions. Additional factors that could cause actual results to differ materially from those contemplated in this press release can be found in TSYS’filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations.
TSYS Announces 27.1% Increase in Earnings for Third Quarter 2002
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TSYS
Financial Highlights
(In thousands except per share data)
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Three months ended Nine months ended
September 30, September 30,
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Percentage Percentage
2002 2001 Change 2002 2001 Change
------------ -------------- ---------- -------------- ------------ -----------
Revenues
Electronic payment processing services $ 153,169 141,564 8.2 % $ 441,476 410,891 7.4 %
Other services 25,448 19,591 29.9 81,074 64,769 25.2
------------- ------------- -------------- --------------
Revenues before reimbursables 178,617 161,155 10.8 522,550 475,660 9.9
Reimbursable items 56,314 54,993 2.4 173,221 177,115 (2.2)
------------- ------------- -------------- --------------
Total revenues 234,931 216,148 8.7 695,771 652,775 6.6
------------- ------------- -------------- --------------
Expenses
Employment 75,874 66,850 13.5 212,613 190,652 11.5
Occupancy & equipment 43,921 41,346 6.2 128,604 126,266 1.9
Other 18,956 19,478 (2.7) 69,113 61,038 13.2
(Gain)/Loss on disposal of equipment (64) (1) nm (61) 93 nm
------------- ------------- -------------- --------------
Expenses before reimbursables 138,687 127,673 8.6 410,269 378,049 8.5
Reimbursable items 56,314 54,993 2.4 173,221 177,115 (2.2)
------------- ------------- -------------- --------------
Total operating expenses 195,001 182,666 6.8 583,490 555,164 5.1
Equity in Income of Joint Ventures 5,263 4,603 14.3 14,641 12,310 18.9
------------- ------------- -------------- --------------
Operating Income 45,193 38,085 18.7 126,922 109,921 15.5
Other Income 2,765 531 nm 4,078 2,125 91.9
------------- ------------- -------------- --------------
Income before Income Taxes 47,958 38,616 24.2 131,000 112,046 16.9
Income Taxes 15,612 13,157 18.7 42,410 38,617 9.8
------------- ------------- -------------- --------------
Net Income $ 32,346 25,459 27.1 $ 88,590 73,429 20.6
============= ============= ============== ==============
Basic Earnings Per Share $ 0.16 0.13 25.6 $ 0.45 0.38 19.3
============= ============= ============== ==============
Diluted Earnings Per Share $ 0.16 0.13 26.0 $ 0.45 0.38 19.5
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Dividend Declared Per Share $ 0.0175 0.0150 $ 0.0500 0.0450
============= ============= ============== ==============
Average Common Shares Outstanding 197,049,470 194,778,566 197,005,655 194,770,776
============= ============= ============== ==============
Average Common and Common
Equivalent Shares Outstanding 197,358,091 195,712,903 197,608,446 195,649,308
============= ============= ============== ==============
Other (in millions)
- -------------------------------------------
Depreciation and amortization $ 15.3 12.9 18.6 $ 44.5 40.2 10.9
============= ============= ============== ==============
Note: nm = not meaningful
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TSYS Announces 27.1% Increase in Earnings for Third Quarter 2002
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TSYS
Segment Breakdown
(In thousands)
Three Months Ended September 30, 2002 Three Months Ended September 30, 2001
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Domestic-based International-based Domestic-based International-based
Transaction Transaction Transaction Transaction
Processing Processing Consolidated Processing Processing Consolidated
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Total revenue $ 218,517 16,701 235,218 204,075 12,309 216,384
Intersegment revenue (1) (286) (287) (2) (234) (236)
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Revenues from external customers $ 218,516 16,415 234,931 204,073 12,075 216,148
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Equity in income of joint ventures $ 5,045 218 5,263 4,179 424 4,603
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Segment operating income $ 44,443 750 45,193 40,211 (2,126) 38,085
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Income tax expense $ 14,742 870 15,612 14,002 (845) 13,157
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Net Income $ 30,824 1,522 32,346 26,784 (1,325) 25,459
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Nine Months Ended September 30, 2002 Nine Months Ended September 30, 2001
----------------------------------------------- ------------------------------------------
Domestic-based International-based Domestic-based International-based
Transaction Transaction Transaction Transaction
Processing Processing Consolidated Processing Processing Consolidated
----------------------------------------------- ------------------------------------------
Total revenue $ 648,407 48,444 696,851 633,386 20,188 653,574
Intersegment revenue (4) (1,076) (1,080) (5) (794) (799)
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Revenues from external customers $ 648,403 47,368 695,771 633,381 19,394 652,775
=============================================== ==========================================
Equity in income of joint ventures $ 13,963 678 14,641 10,733 1,577 12,310
=============================================== ==========================================
Segment operating income $ 124,508 2,414 126,922 124,178 (14,257) 109,921
=============================================== ==========================================
Income tax expense $ 40,763 1,647 42,410 43,938 (5,321) 38,617
=============================================== ==========================================
Net Income $ 86,034 2,556 88,590 82,409 (8,980) 73,429
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Supplemental Information: Sep 2002 Sep 2001 % Chg
---------------------------------------------------------
Accounts on File (in millions):
Consumer 141.0 117.4 20.1%
Retail 75.4 77.4 (2.6%)
Commercial 19.4 17.6 10.1%
----------------------------------------
235.8 212.4 11.0%
========================================
Sep 2002 Sep 2001 % Chg
---------------------------------------------------------
Accounts on File (in millions):
Domestic 206.5 185.8 11.1%
International 29.3 26.6 10.0%
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235.8 212.4 11.0%
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Cash Flow Information: Nine Months Ending:
(in thousands) Sep 2002 Sep 2001
----------------------------------------
Cash flows from operating activities:
Net income 88,590 73,429
Adjustments to net income provided by operating activities:
Minority interest in consolidated subsidiary's net income 133 92
Equity in income of joint ventures (14,641) (12,310)
Depreciation and amortization 44,521 40,152
Provision for doubtful accounts and billing adjustments 3,405 157
Provision for transaction processing accruals 5,666 (1,311)
Other 5,839 (46,186)
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Net cash provided by (used in) operating activities 133,513 54,023
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Cash flows from investing activities:
Purchase of property and equipment (9,627) (24,127)
Additions to computer software (42,259) (34,066)
Increase in contract acquisition costs (34,317) (12,710)
Other 23,481 11,373
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Net cash used in investing activities (62,722) (59,530)
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Net cash used in financing activities (9,120) (8,013)
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Net increase (decrease) in cash and cash equivalents 61,671 (13,520)
Cash and cash equivalents at beginning of year 55,961 80,072
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Cash and cash equivalents at end of period 117,632 66,552
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