One TSYS Way Paul Todd
Post Office Box 1755Senior Executive Vice President &
Columbus, GA 31902-1755Chief Financial Officer
+1.706.649.4261 tel
June 21, 2017
Ms. Kathleen Collins
Accounting Branch Chief
Office of Information Technologies and Services
Division of Corporation Finance
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
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Re: | Total System Services, Inc. (“TSYS”) |
| Form 10-K for the Fiscal Year Ended December 31, 2016 Filed February 24, 2017 |
| File No. 001-10254 |
Dear Ms. Collins:
This letter is written in response to your Letter of Comment dated June 8, 2017 with respect to TSYS’ Annual Report on Form 10-K for the year ended December 31, 2016. For your convenience, the Staff’s comments have been incorporated verbatim below and the Company’s responses immediately follow each comment.
Exhibit 13.1
Results of Operations
Operating Segments, page 20
1. | Please explain what the amounts labeled as “Total revenues” for each of your operating segments are intended to represent. In this regard, these amounts do not appear to be a segment revenue measure and we are unable to locate the disclosure of these amounts elsewhere in your filing. |
TSYS included the GAAP measure “Total revenues” for each of its operating segments in the Results of Operations discussion. Total revenues is not a revenue measure TSYS uses to manage its operating segments. The Chief Operating Decision Maker uses net revenue to evaluate the performance of each segment. The Company disclosed Total revenues for each segment as supplemental data. However, to avoid any confusion, TSYS will, in future filings, remove segment Total revenues from its disclosure.
Ms. Kathleen Collins
United States Securities and Exchange Commission
June 20, 2017
Page 2
Non-GAAP Financial Measures, page 28
2. | Your calculation of EBITDA adjusts for nonoperating expenses which are not appropriately deducted from EBITDA, as defined. Please remove this adjustment from your calculation of EBITDA. Alternatively, you may remove the EBITDA subtotal. |
TSYS will, in future filings, remove the EBITDA subtotal.
Notes to Consolidated Financial Statements
Note 21 Segment Reporting, including Geographic Area Data and Major Customers, page 73
3. | Please remove Adjusted operating income, a non-GAAP measure, from your footnote disclosures. See Item 10(e)(1)(ii) of Regulation S-K. |
In future filings, TSYS will remove the non-GAAP measure of Adjusted operating income from its footnote disclosures.
4. | Please reconcile Adjusted segment operating income to consolidated income before income taxes. See ASC 280-10-50-30. |
The reconciliation of Adjusted segment operating income to consolidated income before income taxes is as follows:
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| Years Ended December 31, | ||||
(in thousands) |
| 2016 |
| 2015 |
| 2014 |
Adjusted operating income by segment: |
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North America Services | $ | 468,251 |
| 429,064 |
| 351,512 |
International Services |
| 56,774 |
| 60,087 |
| 55,123 |
Merchant Services |
| 307,595 |
| 150,225 |
| 134,872 |
Netspend |
| 160,371 |
| 137,837 |
| 128,285 |
Corporate Administration and Other |
| (135,996) |
| (109,036) |
| (107,175) |
Adjusted operating income by segment | $ | 856,995 |
| 668,177 |
| 562,617 |
Less: |
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Share-based compensation |
| 43,728 |
| 41,549 |
| 30,790 |
TransFirst and Netspend M&A and integration expenses |
| 28,176 |
| - |
| 3,217 |
Litigation, claims, judgments or settlements |
| 21,719 |
| - |
| - |
Acquisition intangible amortization |
| 189,990 |
| 92,521 |
| 96,970 |
Operating income |
| 573,382 |
| 534,107 |
| 431,640 |
Nonoperating expenses, net |
| (112,168) |
| (37,219) |
| (38,711) |
Income before income taxes and equity in income of equity | $ | 461,214 |
| 496,888 |
| 392,929 |
TSYS will include the reconciliation in future filings.
Ms. Kathleen Collins
United States Securities and Exchange Commission
June 20, 2017
Page 3
5. | It would appear, based on your discussion of net revenue by segment in your Operating Segments discussion in the Results of Operations section that “Segment net revenue” is your measure of segment revenue and would therefore represent a GAAP measure. Please confirm and revise your disclosures accordingly. See Question 104.01 of the updated Non-GAAP Compliance and Disclosure Interpretations issued on May 17, 2016. Therefore, it appears that “Segment revenue before reimbursable items” and “Segment external net revenue” are non-GAAP measures. If true, remove these non-GAAP measures from the footnotes or explain why revision is not required. See Item 10(e)(1)(ii) of Regulation S-K. |
“Segment net revenue” is the Company’s primary measure of segment revenue. TSYS will not refer to Segment net revenue as a non-GAAP measure in future filings.
“Segment revenue before reimbursable items” and “Segment external net revenue” are non-GAAP measures. In future filings, TSYS will remove these non-GAAP measures from the footnotes.
If you have any questions or wish to discuss any of our responses, please contact me at 706-649-4261.
Sincerely,
/s/ Paul M. Todd
Paul M. Todd
Senior Executive Vice President
& Chief Financial Officer
cc | Frank Knapp |
| Christine Dietz |