Exhibit 99.1
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Total System Services, Inc. | ||
One TSYS Way | +1.706.649.2307 | |
Post Office Box 2567 | +1.706.649.5740 | |
Columbus GA 31902-2567 | www.tsys.com |
For immediate release:
Contacts:
Shawn Roberts
TSYS Investor Relations
+1.706.644.6081
shawnroberts@tsys.com
TSYS Investor Relations
+1.706.644.6081
shawnroberts@tsys.com
TSYS Reports Third Quarter Results
Meets Expectations
Columbus, Ga., October 27, 2009 —TSYS (NYSE: TSS) today reported third quarter total revenues of $432.3 million, a 4.9% increase over the second quarter of 2009. Compared to last year, total revenues were down 1.6%, which included an unfavorable impact of $10.3 million from foreign currency exchange rates during the quarter. On a non-GAAP basis, total revenues on a constant currency basis would have been $442.6 million.
Basic earnings per share (EPS) were $0.28 for the third quarter of 2009 and EPS from continuing operations were $0.29. TSYS completed the sale of TSYS Total Debt Management, a subsidiary of TSYS, and recognized a one-time loss in discontinued operations of $3.3 million in the quarter, or approximately $0.01 per share.
Despite the headwinds of foreign currency exchange rates and upfront costs related to international expansion, TSYS’ third quarter operating margins excluding reimbursable items increased sequentially by 87 basis points, and income from continuing operations increased 10.1%. This was a result of expense management, new business added and a slight increase in transactions.
Quarterly Highlights | Q3 2009 | vs. Q2 2009 | vs. Q3 2008 | |||||||||
Total Revenues | $432.3 million | Up $20.3 million | Down $7.2 million | |||||||||
Revenues before Reimbursable Items | $359.0 million | Up $8.2 million | Down $13.7 million | |||||||||
Operating Income | $87.9 million | Up $5.1 million | Down $7.4 million | |||||||||
Income from Continuing Operations | $58.3 million | Up $5.4 million | Down $5.9 million | |||||||||
Net Income | $55.0 million | Up $1.6 million | Down $9.0 million | |||||||||
Basic Earnings Per Share | 28 cents | Up 1 cent | Down 4 cents |
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“For the second quarter in a row, we are pleased to report sequential quarterly growth across the board in revenues, operating income and net income despite the challenging economic environment,” said Philip W. Tomlinson, chairman of the board and chief executive officer of TSYS.
“Our balance sheet remains very strong with cash increasing $76 million in the quarter and $209 million year-to-date to $420 million. Our accumulation of cash during these tough economic times is part of our plan to build a large capital base to deploy in support of our strategic plans. We have been aggressively pursuing acquisition opportunities around the globe and are confident we will accomplish this very important part of our corporate strategy,” said Tomlinson.
TSYS reaffirms its previously released guidance for 2009 of declines in revenues of 5% to 3% and net income of 13% to 11%.
Non-GAAP Measures
TSYS has included a schedule with this release that provides revenues and operating results on a constant currency basis. This non-GAAP measure presents third quarter and year-to-date 2009 financial results using the previous year’s foreign currency exchange rates. On a year-to-date constant currency basis, TSYS’ International Services segment’s total revenues grew 20.7% as compared to a reported GAAP decline of 0.6%, and operating income declined 8.7% versus a GAAP-reported decline of 30.7%.
This release contains non-GAAP financial measures to describe TSYS’ performance. The reconciliation of those measures to the most directly comparable GAAP measures is included in the financial tables of this release.
The non-GAAP financial measures of constant currency presented by TSYS are utilized by management to better understand and assess TSYS’ operating results and financial performance. TSYS also uses the non-GAAP financial measures to evaluate and assess TSYS’ financial performance against budget, as well as to evaluate financial performance for executive and management compensation purposes.
TSYS believes that non-GAAP financial measures are important to enable investors to understand and evaluate its ongoing operating results. Accordingly, TSYS includes non-GAAP financial measures when reporting its financial results to shareholders and investors in order to provide them with an additional tool to evaluate TSYS’ ongoing business operations. TSYS believes that the non-GAAP financial measures are representative of comparative financial performance that reflects the economic substance of TSYS’ current and ongoing business operations.
Although non-GAAP financial measures are often used to measure TSYS’ operating results and assess its financial performance, they are not necessarily comparable to similarly titled captions of other companies due to potential inconsistencies in the method of calculation.
TSYS provides reconciliations for each of its non-GAAP financial measures with its most directly comparable GAAP financial measure, whenever it is used. This enables shareholders and
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potential investors to easily assess the impact of any differences between the measure TSYS is presenting and similarly titled captions of other companies.
TSYS believes that its use of non-GAAP financial measures provides investors with the same key financial performance indicators that are utilized by management to assess TSYS’ operating results, evaluate the business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of non-GAAP financial measures to give shareholders and potential investors an opportunity to see TSYS as viewed by management, to assess TSYS with some of the same tools that management utilizes internally and to be able to compare such information with prior periods. TSYS believes that the presentation of GAAP financial measures alone would not provide its shareholders and potential investors with the ability to appropriately analyze its ongoing operational results, and therefore expected future results. TSYS therefore believes that inclusion of non-GAAP financial measures provides investors with additional information to help them better understand its financial statements just as management utilizes these non-GAAP financial measures to better understand the business, manage budgets and allocate resources.
Conference Call
TSYS will host its quarterly conference call at 5:00 p.m. EDT on Tuesday, October 27. The conference call can be accessed via simultaneous Internet broadcast at tsys.com by clicking on the “Conference Call” icon on the homepage. The replay will be archived for 12 months and will be available approximately 30 minutes after the completion of the call. A slide presentation to accompany the call will be available by clicking on the “Conference Call” icon on the homepage of tsys.com.
About TSYS
TSYS (NYSE: TSS) is one of the world’s largest companies for outsourced payment services, offering a broad range of issuer- and acquirer-processing technologies that support consumer-finance, credit, debit, healthcare, loyalty and prepaid services for financial institutions and retail companies in the Americas, EMEA and Asia-Pacific regions. For more information contact news@tsys.com or log on to www.tsys.com. TSYS routinely posts all important information on its Web site.
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 the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements regarding TSYS’ earnings forecast for 2009, and the assumptions underlying such statements. These statements are based on the current beliefs and expectations of TSYS’ management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results to differ materially from those contemplated by our forward-looking statements in this press release. Many of these factors are beyond TSYS’ ability to control or predict. These factors include, but are not limited to: (1) movements in LIBOR are greater than expected and draws on the remaining balance of the credit facility are greater than expected; (2) TSYS incurs expenses associated with the signing of a significant client; (3) adverse developments with respect to foreign currency exchange rates; (4) adverse developments with respect to entering into contracts with new clients and retaining current clients; (5) continued consolidation and turmoil in the financial services industry throughout 2009, including the merger of TSYS clients with entities that are not TSYS processing clients, the sale of portfolios by TSYS clients to entities that are not
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TSYS processing clients and the seizure by banking regulators of TSYS clients; (6) additional significant one-time spin costs are incurred; (7) TSYS is unable to control expenses and increase market share; (8) TSYS is unable to manage the impact of slowing economic conditions and consumer spending; (9) the material breach of security of any of TSYS’ systems; (10) the impact of acquisitions, including their being more difficult to integrate than anticipated; (11) changes occur in laws, rules, regulations, credit card association rules or other industry standards affecting TSYS’ business which require significant product development efforts or reduce the market demand for or value of its products; (12) adverse developments with respect to the credit card industry in general, including a decline in the use of credit cards as a payment mechanism; and (13) growth rates of TSYS’ existing clients are lower than anticipated whether as a result of unemployment rates, card delinquencies and charge-off rates or otherwise. Additional factors that could cause actual results to differ materially from those contemplated in this release can be found in TSYS’ filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports onForm 10-Q and Current Reports onForm 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. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise.
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TSYS Reports Third Quarter Results
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TSYS
Financial Highlights
(unaudited)
(in thousands, except per share data)
Financial Highlights
(unaudited)
(in thousands, except per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
Percent | Percent | |||||||||||||||||||||||
2009 | 2008 | Change | 2009 | 2008 | Change | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Electronic payment processing services | $ | 238,448 | 254,558 | (6.3 | )% | $ | 706,503 | 747,682 | (5.5 | )% | ||||||||||||||
Merchant acquiring services | 71,834 | 64,567 | 11.3 | 207,005 | 191,888 | 7.9 | ||||||||||||||||||
Other services | 48,684 | 53,579 | (9.1 | ) | 141,625 | 149,319 | (5.2 | ) | ||||||||||||||||
Revenues before reimbursable items | 358,966 | 372,704 | (3.7 | ) | 1,055,133 | 1,088,889 | (3.1 | ) | ||||||||||||||||
Reimbursable items | 73,330 | 66,742 | 9.9 | 198,089 | 200,013 | (1.0 | ) | |||||||||||||||||
Total revenues | 432,296 | 439,446 | (1.6 | ) | 1,253,222 | 1,288,902 | (2.8 | ) | ||||||||||||||||
Expenses | ||||||||||||||||||||||||
Salaries & other personnel expenses | 148,180 | 150,262 | (1.4 | ) | 441,031 | 439,791 | 0.3 | |||||||||||||||||
Net technology & facilities expenses | 76,903 | 75,042 | 2.5 | 224,176 | 221,875 | 1.0 | ||||||||||||||||||
Spin related expenses | — | 1,719 | (100.0 | ) | — | 9,869 | (100.0 | ) | ||||||||||||||||
Other operating expenses | 46,027 | 50,391 | (8.7 | ) | 141,177 | 139,120 | 1.5 | |||||||||||||||||
Expenses before reimbursable items | 271,110 | 277,414 | (2.3 | ) | 806,384 | 810,655 | (0.5 | ) | ||||||||||||||||
Reimbursable items | 73,330 | 66,742 | 9.9 | 198,089 | 200,013 | (1.0 | ) | |||||||||||||||||
Total operating expenses | 344,440 | 344,156 | 0.1 | 1,004,473 | 1,010,668 | (0.6 | ) | |||||||||||||||||
Operating income | 87,856 | 95,290 | (7.8 | ) | 248,749 | 278,234 | (10.6 | ) | ||||||||||||||||
Nonoperating (expenses) income | 574 | (82 | ) | nm | (3,162 | ) | 770 | nm | ||||||||||||||||
Income from continuing operations before income taxes, noncontrolling interests and equity in income of equity investments | 88,430 | 95,208 | (7.1 | ) | 245,587 | 279,004 | (12.0 | ) | ||||||||||||||||
Income taxes | 31,795 | 34,091 | (6.7 | ) | 88,439 | 100,979 | (12.4 | ) | ||||||||||||||||
Income from continuing operations before noncontrolling interests and equity in income of equity investments | 56,635 | 61,117 | (7.3 | ) | 157,148 | 178,025 | (11.7 | ) | ||||||||||||||||
Equity in income of equity investments | 1,623 | 3,062 | (47.0 | ) | 4,291 | 6,333 | (32.2 | ) | ||||||||||||||||
Income from continuing operations, net of tax | 58,258 | 64,179 | (9.2 | ) | 161,439 | 184,358 | (12.4 | ) | ||||||||||||||||
(Loss) income from discontinued operations, net of tax | (2,932 | ) | 269 | nm | (5,155 | ) | 736 | nm | ||||||||||||||||
Net income | 55,326 | 64,448 | (14.2 | ) | 156,284 | 185,094 | (15.6 | ) | ||||||||||||||||
Net income attributable to the noncontrolling interests | (300 | ) | (374 | ) | 19.8 | (1,285 | ) | (1,322 | ) | 2.8 | ||||||||||||||
Net income attributable to TSYS | $ | 55,026 | 64,074 | (14.1 | )% | $ | 154,999 | 183,772 | (15.7 | )% | ||||||||||||||
Basic earnings per share: | ||||||||||||||||||||||||
Income from continuing operations to TSYS common shareholders* | $ | 0.29 | 0.32 | (9.0 | )% | $ | 0.81 | 0.92 | (12.1 | )% | ||||||||||||||
(Loss) income from discontinued operations to TSYS common shareholders* | (0.01 | ) | 0.00 | nm | (0.03 | ) | 0.00 | nm | ||||||||||||||||
Net income attributable to TSYS common shareholders* | $ | 0.28 | 0.32 | (13.9 | )% | $ | 0.79 | 0.93 | (15.3 | )% | ||||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||
Income from continuing operations to TSYS common shareholders* | $ | 0.29 | 0.32 | (8.9 | )% | $ | 0.81 | 0.92 | (12.1 | )% | ||||||||||||||
(Loss) income from discontinued operations to TSYS common shareholders* | (0.01 | ) | 0.00 | nm | (0.03 | ) | 0.00 | nm | ||||||||||||||||
Net income attributable to TSYS common shareholders* | $ | 0.28 | 0.32 | (13.9 | )% | $ | 0.79 | 0.93 | (15.3 | )% | ||||||||||||||
Dividends declared per share | $ | 0.07 | 0.07 | $ | 0.21 | 0.21 | ||||||||||||||||||
Amounts attributable to TSYS common shareholders: | ||||||||||||||||||||||||
Income from continuing operations, net of tax | $ | 57,958 | 63,805 | $ | 160,154 | 183,036 | ||||||||||||||||||
(Loss) income from discontinued operations, net of tax | (2,932 | ) | 269 | (5,155 | ) | 736 | ||||||||||||||||||
Net income | $ | 55,026 | 64,074 | $ | 154,999 | 183,772 | ||||||||||||||||||
nm = not meaningful
Note: | Certain amounts have been reclassified to conform with the presentation adopted in 2009. | |
* | Basic and diluted EPS amounts for continuing operations and net income do not total due to rounding. | |
Basic and diluted EPS is computed based on the two-class method in accordance with the update to Accounting Standards Codification 260 (ASC 260) (previously referred to as FSP EITF 03-6-1). EPS for 2009 and 2008 have been recast to show retroactive adoption of the ASC 260 update. |
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TSYS Reports Third Quarter Results
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TSYS
Earnings Per Share
(unaudited)
(in thousands, except per share data)
Earnings Per Share
(unaudited)
(in thousands, except per share data)
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
September 30, 2009 | September 30, 2008 | September 30, 2009 | September 30, 2008 | |||||||||||||||||||||||||||||
Common | Participating | Common | Participating | Common | Participating | Common | Participating | |||||||||||||||||||||||||
Stock | Securities | Stock | Securities | Stock | Securities | Stock | Securities | |||||||||||||||||||||||||
Basic Earnings per share: | ||||||||||||||||||||||||||||||||
Net income | $ | 55,026 | 64,074 | 154,999 | 183,772 | |||||||||||||||||||||||||||
Less income allocated to nonvested awards | (407 | ) | 407 | (543 | ) | 543 | (1,225 | ) | 1,225 | (1,546 | ) | 1,546 | ||||||||||||||||||||
Net income allocated to common stock for EPS calculation (a) | $ | 54,619 | 407 | 63,531 | 543 | 153,774 | 1,225 | 182,226 | 1,546 | |||||||||||||||||||||||
Average common shares outstanding (b) | 195,721 | 1,465 | 196,000 | 1,680 | 195,552 | 1,564 | 196,342 | 1,670 | ||||||||||||||||||||||||
Average common shares and participating securities | 197,186 | 197,680 | 197,116 | 198,012 | ||||||||||||||||||||||||||||
Basic Earnings per share (a)/(b) | $ | 0.28 | 0.28 | 0.32 | 0.32 | 0.79 | 0.78 | 0.93 | 0.93 | |||||||||||||||||||||||
Diluted Earnings per share: | ||||||||||||||||||||||||||||||||
Net income | $ | 55,026 | 64,074 | 154,999 | 183,772 | |||||||||||||||||||||||||||
Less income allocated to nonvested awards | (407 | ) | 407 | (543 | ) | 543 | (1,225 | ) | 1,225 | (1,546 | ) | 1,546 | ||||||||||||||||||||
Net income allocated to common stock for EPS calculation (c) | $ | 54,619 | 407 | 63,531 | 543 | 153,774 | 1,225 | 182,226 | 1,546 | |||||||||||||||||||||||
Average common shares outstanding | 195,721 | 1,465 | 196,000 | 1,680 | 195,552 | 1,564 | 196,342 | 1,670 | ||||||||||||||||||||||||
Increase due to assumed issuance of shares related to common equivalent shares outstanding | 63 | 22 | 63 | 71 | ||||||||||||||||||||||||||||
Average common and common equivalent shares outstanding (d) | 195,784 | 1,465 | 196,022 | 1,680 | 195,615 | 1,564 | 196,413 | 1,670 | ||||||||||||||||||||||||
Average common and common equivalent shares and participating securities | 197,249 | 197,702 | 197,179 | 198,083 | ||||||||||||||||||||||||||||
Diluted Earnings per share (c)/(d) | $ | 0.28 | 0.28 | 0.32 | 0.32 | 0.79 | 0.78 | 0.93 | 0.93 | |||||||||||||||||||||||
In June 2008, the Financial Accounting Standards Board (FASB) issued an update to the Accounting Standards Codification 260 (ASC 260), “Earnings Per Share” (previously referred to as FASB Staff Position Emerging Issues Task Force No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,”)and it became effective for TSYS beginning January 1, 2009. Under this standard, unvested awards of share-based payments with rights to receive dividends or dividend equivalents, such as our nonvested awards, are considered participating securities for purposes of calculating earnings per share (“EPS”). Under the two-class method required by ASC 260, a portion of net income is allocated to these participating securities and therefore is excluded from the calculation of EPS allocated to common stock, as shown in the table above. This update to ASC 260 requires retrospective applications for periods prior to the effective date and as a result, all prior period earnings per share data presented herein have been adjusted to conform to these provisions.
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TSYS Reports Third Quarter Results
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TSYS
Segment Breakdown
(unaudited)
(in thousands)
Segment Breakdown
(unaudited)
(in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||
2009 | 2008 | $ | % | 2009 | 2008 | $ | % | |||||||||||||||||||||||||
Revenues before reimbursable items | ||||||||||||||||||||||||||||||||
North America Services | $ | 219,910 | 235,076 | (15,166 | ) | (6.5) | % | 666,641 | 703,865 | (37,224 | ) | (5.3) | % | |||||||||||||||||||
International Services | 82,566 | 85,119 | (2,553 | ) | (3.0) | % | 226,433 | 230,107 | (3,674 | ) | (1.6) | % | ||||||||||||||||||||
Merchant Services | 63,805 | 58,357 | 5,448 | 9.3 | % | 184,165 | 171,777 | 12,388 | 7.2 | % | ||||||||||||||||||||||
Intersegment revenues | (7,315 | ) | (5,848 | ) | (1,467 | ) | 25.1 | % | (22,106 | ) | (16,860 | ) | (5,246 | ) | 31.1 | % | ||||||||||||||||
Revenues before reimbursable items from external customers | $ | 358,966 | 372,704 | (13,738 | ) | (3.7) | % | 1,055,133 | 1,088,889 | (33,756 | ) | (3.1) | % | |||||||||||||||||||
Total revenues | ||||||||||||||||||||||||||||||||
North America Services | $ | 261,580 | 284,935 | (23,355 | ) | (8.2) | % | 795,354 | 854,632 | (59,278 | ) | (6.9) | % | |||||||||||||||||||
International Services | 86,172 | 88,090 | (1,918 | ) | (2.2) | % | 236,406 | 237,816 | (1,410 | ) | (0.6) | % | ||||||||||||||||||||
Merchant Services | 93,834 | 74,613 | 19,221 | 25.8 | % | 249,670 | 220,117 | 29,553 | 13.4 | % | ||||||||||||||||||||||
Intersegment revenues | (9,290 | ) | (8,192 | ) | (1,098 | ) | 13.4 | % | (28,208 | ) | (23,663 | ) | (4,545 | ) | 19.2 | % | ||||||||||||||||
Revenues from external customers | $ | 432,296 | 439,446 | (7,150 | ) | (1.6) | % | 1,253,222 | 1,288,902 | (35,680 | ) | (2.8) | % | |||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||||||||||||||
North America Services | $ | 20,757 | 23,550 | (2,793 | ) | (11.9) | % | 65,810 | 72,992 | (7,182 | ) | (9.8) | % | |||||||||||||||||||
International Services | 10,278 | 9,658 | 620 | 6.4 | % | 26,761 | 26,150 | 611 | 2.3 | % | ||||||||||||||||||||||
Merchant Services | 8,159 | 6,783 | 1,376 | 20.3 | % | 24,394 | 20,019 | 4,375 | 21.9 | % | ||||||||||||||||||||||
Total depreciation and amortization | $ | 39,194 | 39,991 | (797 | ) | (2.0) | % | 116,965 | 119,161 | (2,196 | ) | (1.8) | % | |||||||||||||||||||
Segment operating income | ||||||||||||||||||||||||||||||||
North America Services | $ | 60,703 | 63,168 | (2,465 | ) | (3.9) | % | 176,914 | 201,916 | (25,002 | ) | (12.4) | % | |||||||||||||||||||
International Services | 9,691 | 16,751 | (7,060 | ) | (42.1) | % | 24,913 | 35,937 | (11,024 | ) | (30.7) | % | ||||||||||||||||||||
Merchant Services | 17,462 | 17,090 | 372 | 2.2 | % | 46,922 | 50,250 | (3,328 | ) | (6.6) | % | |||||||||||||||||||||
Spin-related costs | — | (1,719 | ) | 1,719 | (100.0) | % | — | (9,869 | ) | 9,869 | (100.0) | % | ||||||||||||||||||||
Operating income | $ | 87,856 | 95,290 | (7,434 | ) | (7.8) | % | 248,749 | 278,234 | (29,485 | ) | (10.6) | % | |||||||||||||||||||
Total assets | ||||||||||||||||||||||||||||||||
North America Services | $ | 1,502,435 | 1,378,651 | 123,784 | 9.0 | % | 1,502,435 | 1,378,651 | 123,784 | 9.0 | % | |||||||||||||||||||||
International Services | 363,257 | 360,002 | 3,255 | 0.9 | % | 363,257 | 360,002 | 3,255 | 0.9 | % | ||||||||||||||||||||||
Merchant Services | 228,944 | 169,388 | 59,556 | 35.2 | % | 228,944 | 169,388 | 59,556 | 35.2 | % | ||||||||||||||||||||||
Intersegment assets | (418,369 | ) | (321,499 | ) | (96,870 | ) | 30.1 | % | (418,369 | ) | (321,499 | ) | (96,870 | ) | 30.1 | % | ||||||||||||||||
Total assets | $ | 1,676,267 | 1,586,542 | 89,725 | 5.7 | % | 1,676,267 | 1,586,542 | 89,725 | 5.7 | % | |||||||||||||||||||||
Note: | Revenues from North America Services include electronic payment processing services and other services provided from the United States to clients domiciled in the United States or other countries. Revenues from International Services include electronic payment processing services and other services provided from outside the United States to clients based mainly outside the United States. | |
Revenues from Merchant Services include TSYS Acquiring’s merchant acquiring and related services. | ||
Certain amounts have been reclassified to conform with the presentation adopted in 2009. |
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TSYS Reports Third Quarter Results
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TSYS
Balance Sheet
(in thousands)
Balance Sheet
(in thousands)
September 30, 2009 | Dec 31, 2008 | |||||||
(unaudited) | (unaudited) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 420,141 | 211,365 | |||||
Restricted cash | 26,317 | 31,128 | ||||||
Accounts receivable, net | 240,753 | 246,767 | ||||||
Deferred income tax assets | 16,440 | 29,615 | ||||||
Prepaid expenses and other current assets | 74,678 | 88,612 | ||||||
Current assets of discontinued operations | — | 24,570 | ||||||
Total current assets | 778,329 | 632,057 | ||||||
Property and equipment, net | 286,554 | 291,341 | ||||||
Computer software, net | 198,249 | 202,038 | ||||||
Contract acquisition costs, net | 127,021 | 131,568 | ||||||
Goodwill | 168,423 | 165,995 | ||||||
Equity investments, net | 72,936 | 74,012 | ||||||
Other intangible assets, net | 15,082 | 17,452 | ||||||
Other assets | 29,673 | 28,316 | ||||||
Long-term assets of discontinued operations | — | 7,245 | ||||||
Total assets | $ | 1,676,267 | 1,550,024 | |||||
Liabilities | ||||||||
Current liabilities: | ||||||||
Current portion of notes payable | $ | 6,919 | 8,575 | |||||
Accrued salaries and employee benefits | 28,529 | 46,701 | ||||||
Accounts payable | 36,387 | 32,440 | ||||||
Current portion of obligations under capital leases | 5,423 | 6,344 | ||||||
Other current liabilities | 150,042 | 130,751 | ||||||
Current liabilities of discontinued operations | — | 10,993 | ||||||
Total current liabilities | 227,300 | 235,804 | ||||||
Notes payable, excluding current portion | 196,156 | 196,295 | ||||||
Deferred income tax liabilities | 52,757 | 60,573 | ||||||
Obligations under capital leases, excluding current portion | 12,827 | 13,576 | ||||||
Other long-term liabilities | 47,073 | 40,709 | ||||||
Long-term liabilities of discontinued operations | — | 2,217 | ||||||
Total liabilities | 536,113 | 549,174 | ||||||
Equity | ||||||||
Shareholders’ equity: | ||||||||
Common stock | 20,086 | 20,036 | ||||||
Additional paid-in capital | 137,052 | 126,889 | ||||||
Accumulated other comprehensive income, net | 7,975 | (6,627 | ) | |||||
Treasury stock | (69,950 | ) | (69,641 | ) | ||||
Retained earnings | 1,033,851 | 920,292 | ||||||
Total shareholders’ equity | 1,129,014 | 990,949 | ||||||
Noncontrolling interests in consolidated subsidiaries | 11,140 | 9,901 | ||||||
Total equity | 1,140,154 | 1,000,850 | ||||||
Total liabilities and equity | $ | 1,676,267 | 1,550,024 | |||||
Note: Certain amounts have been reclassified to conform with the presentation adopted in 2009.
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TSYS Reports Third Quarter Results
Page 9 of 12
Page 9 of 12
TSYS
Cash Flow
(unaudited)
(in thousands)
Cash Flow
(unaudited)
(in thousands)
Nine Months Ended September 30, | ||||||||
2009 | 2008 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 156,284 | 185,094 | |||||
Adjustments to reconcile net income attributable to TSYS to net cash provided by operating activities: | ||||||||
Equity in income of equity investments | (4,291 | ) | (6,333 | ) | ||||
Dividends received from equity investments | 4,942 | 6,421 | ||||||
Net loss (gain) on currency translation adjustments | 2,857 | (3,233 | ) | |||||
Depreciation and amortization | 117,514 | 124,852 | ||||||
Amortization of debt issuance costs | 115 | 115 | ||||||
Share-based compensation | 13,245 | 21,260 | ||||||
Excess tax benefit from share-based payment arrangements | (6 | ) | (82 | ) | ||||
Provisions for bad debt expense and billing adjustments | 3,855 | 2,779 | ||||||
Charges for transaction processing provisions | 4,993 | 1,415 | ||||||
Deferred income tax benefit | (3,716 | ) | (12,471 | ) | ||||
(Gain) loss on disposal of equipment, net | (20 | ) | 180 | |||||
Loss on disposal of subsidiary | 5,701 | — | ||||||
(Increase) decrease in: | ||||||||
Accounts receivable | 6,095 | (10,701 | ) | |||||
Prepaid expenses, other current assets and other long-term assets | 23,770 | (14,722 | ) | |||||
Increase (decrease) in: | ||||||||
Accounts payable | (331 | ) | (1,150 | ) | ||||
Accrued salaries and employee benefits | (16,166 | ) | (33,770 | ) | ||||
Other current liabilities and other long-term liabilities | 18,215 | 19,252 | ||||||
Net cash provided by operating activities | 333,056 | 278,906 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment, net | (21,344 | ) | (35,502 | ) | ||||
Additions to licensed computer software from vendors | (18,710 | ) | (18,614 | ) | ||||
Additions to internally developed computer software | (19,367 | ) | (14,976 | ) | ||||
Proceeds from disposition, net of expenses paid and cash disposed | 1,991 | — | ||||||
Cash used in acquisitions | (294 | ) | (965 | ) | ||||
Subsidiary repurchase of noncontrolling interest | — | (343 | ) | |||||
Additions to contract acquisition costs | (23,711 | ) | (34,612 | ) | ||||
Net cash used in investing activities | (81,435 | ) | (105,012 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from borrowings of long-term debt | 5,334 | 2,506 | ||||||
Principal payments on long-term debt borrowings and capital lease obligations | (13,178 | ) | (11,501 | ) | ||||
Proceeds from exercise of stock options | 2 | 266 | ||||||
Excess tax benefit from share-based payment arrangements | 6 | 82 | ||||||
Repurchase of common stock | (329 | ) | (23,594 | ) | ||||
Subsidiary dividends paid to noncontrolling shareholders | (235 | ) | (241 | ) | ||||
Dividends paid on common stock | (41,406 | ) | (41,358 | ) | ||||
Net cash used in financing activities | (49,806 | ) | (73,840 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (1,693 | ) | (1,568 | ) | ||||
Net increase in cash and cash equivalents | 200,122 | 98,486 | ||||||
Cash and cash equivalents at beginning of period | 220,019 | 210,518 | ||||||
Cash and cash equivalents at end of period | $ | 420,141 | 309,004 | |||||
Note: Certain amounts have been reclassified to conform with the presentation adopted in 2009.
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TSYS Reports Third Quarter Results
Page 10 of 12
Page 10 of 12
Geographic Area Data:
The following geographic area data represents revenues for the three months ended September 30 based on where the client is domiciled:
Three Months Ended September 30, | ||||||||||||||||||||
Percent | ||||||||||||||||||||
(dollars in millions) | 2009 | % | 2008 | % | Change | |||||||||||||||
United States | $ | 304.9 | 70.5 | % | $ | 313.4 | 71.3 | % | (2.7) | % | ||||||||||
Europe | 70.4 | 16.3 | 77.0 | 17.5 | (8.6 | ) | ||||||||||||||
Canada | 36.5 | 8.5 | 31.8 | 7.3 | 14.7 | |||||||||||||||
Japan | 11.5 | 2.6 | 7.2 | 1.6 | 60.0 | |||||||||||||||
Mexico | 2.1 | 0.5 | 3.5 | 0.8 | (39.0 | ) | ||||||||||||||
Other | 6.9 | 1.6 | 6.5 | 1.5 | 5.9 | |||||||||||||||
$ | 432.3 | 100.0 | % | $ | 439.4 | 100.0 | % | (1.6) | % | |||||||||||
The following geographic area data represents revenues for the nine months ended September 30 based on where the client is domiciled:
Nine Months Ended September 30, | ||||||||||||||||||||
Percent | ||||||||||||||||||||
(dollars in millions) | 2009 | % | 2008 | % | Change | |||||||||||||||
United States | $ | 902.8 | 72.0 | % | $ | 937.7 | 72.7 | % | (3.7) | % | ||||||||||
Europe | 188.9 | 15.1 | 204.1 | 15.8 | (7.5 | ) | ||||||||||||||
Canada | 100.7 | 8.0 | 94.7 | 7.4 | 6.2 | |||||||||||||||
Japan | 33.6 | 2.7 | 22.8 | 1.8 | 47.9 | |||||||||||||||
Mexico | 6.3 | 0.5 | 11.2 | 0.9 | (43.4 | ) | ||||||||||||||
Other | 20.9 | 1.7 | 18.4 | 1.4 | 13.6 | |||||||||||||||
$ | 1,253.2 | 100.0 | % | $ | 1,288.9 | 100.0 | % | (2.8) | % | |||||||||||
Geographic Area Revenue by Operating Segment:
The following table reconciles revenues by geography to revenues by reporting segment for the three months ended September 30:
Three Months Ended September 30, | ||||||||||||||||||||||||
North America | International | Merchant | ||||||||||||||||||||||
Services | Services | Services | ||||||||||||||||||||||
(dollars in millions) | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||
United States | $ | 211.8 | 239.4 | — | — | 93.1 | 74.0 | |||||||||||||||||
Europe | 0.2 | 0.2 | 70.2 | 76.8 | — | — | ||||||||||||||||||
Canada | 36.4 | 31.7 | — | — | 0.1 | 0.1 | ||||||||||||||||||
Japan | — | — | 11.5 | 7.2 | — | — | ||||||||||||||||||
Mexico | 2.1 | 3.5 | — | — | — | — | ||||||||||||||||||
Other | 2.5 | 2.5 | 4.2 | 3.8 | 0.2 | 0.2 | ||||||||||||||||||
$ | 253.0 | 277.3 | 85.9 | 87.8 | 93.4 | 74.3 | ||||||||||||||||||
The following table reconciles revenues by geography to revenues by reporting segment for the nine months ended September 30:
Nine Months Ended September 30, | ||||||||||||||||||||||||
North America | International | Merchant | ||||||||||||||||||||||
Services | Services | Services | ||||||||||||||||||||||
(dollars in millions) | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||
United States | $ | 655.2 | 719.1 | — | 0.2 | 247.6 | 218.4 | |||||||||||||||||
Europe | 0.6 | 0.7 | 188.3 | 203.4 | — | — | ||||||||||||||||||
Canada | 100.3 | 94.3 | — | — | 0.4 | 0.4 | ||||||||||||||||||
Japan | — | — | 33.6 | 22.8 | — | — | ||||||||||||||||||
Mexico | 6.3 | 11.2 | — | — | — | — | ||||||||||||||||||
Other | 7.6 | 7.4 | 12.8 | 10.4 | 0.5 | 0.6 | ||||||||||||||||||
$ | 770.0 | 832.7 | 234.7 | 236.8 | 248.5 | 219.4 | ||||||||||||||||||
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TSYS Reports Third Quarter
Results Page 11 of 12
Results Page 11 of 12
Supplemental Information:
Accounts on File at September 30, | ||||||||||||||||||||
Percent | ||||||||||||||||||||
(in millions) | 2009 | % | 2008 | % | Change | |||||||||||||||
Consumer | 189.2 | 55.3 | % | 211.1 | 59.4 | % | (10.4 | )% | ||||||||||||
Retail | 39.2 | 11.4 | 51.1 | 14.4 | (23.4 | ) | ||||||||||||||
Commercial | 46.0 | 13.4 | 41.8 | 11.7 | 10.1 | |||||||||||||||
Government services | 24.6 | 7.2 | 20.5 | 5.8 | 19.9 | |||||||||||||||
Stored Value | 37.8 | 11.1 | 26.1 | 7.3 | 45.0 | |||||||||||||||
Debit | 5.3 | 1.6 | 4.9 | 1.4 | 8.8 | |||||||||||||||
342.1 | 100.0 | % | 355.5 | 100.0 | % | (3.8 | )% | |||||||||||||
Percent | ||||||||||||
(in millions) | September 30, 2009 | September 30, 2008 | Change | |||||||||
QTD Average Accounts on File | 351.7 | 365.5 | (3.8 | )% | ||||||||
YTD Average Accounts on File | 349.8 | 369.1 | (5.2 | )% |
Accounts on File at September 30, | ||||||||||||||||||||
Percent | ||||||||||||||||||||
(in millions) | 2009 | % | 2008 | % | Change | |||||||||||||||
Domestic | 253.2 | 74.0 | % | 272.6 | 76.7 | % | (7.1 | )% | ||||||||||||
International | 88.9 | 26.0 | 82.9 | 23.3 | 7.3 | |||||||||||||||
342.1 | 100.0 | % | 355.5 | 100.0 | % | (3.8 | )% | |||||||||||||
Note: The accounts on file between domestic and international is based on the geographic domicile of processing clients.
September 2008 to | September 2007 to | |||||||
Growth in Accounts on File(in millions): | September 2009 | September 2008 | ||||||
Beginning balance | 355.5 | 357.1 | ||||||
Change in accounts on file due to: | ||||||||
Internal growth of existing clients | 29.6 | 38.7 | ||||||
New clients | 25.7 | 27.8 | ||||||
Purges/Sales | (31.3 | ) | (33.1 | ) | ||||
Deconversions | (37.4 | ) | (35.0 | ) | ||||
Ending balance | 342.1 | 355.5 | ||||||
Number of Employees (FTEs): | 2009 | 2008 | ||||||
At September 30, | 7,720 | 7,772 | ||||||
Quarterly average for period ended September 30, | 7,893 | 7,761 | ||||||
YTD average for period ended September 30, | 7,991 | 7,519 |
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TSYS Reports Third Quarter Results
Page 12 of 12
Page 12 of 12
Reconciliation of GAAP to Non-GAAP
Constant Currency Comparison
(unaudited)
(in thousands)
(unaudited)
(in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
Percent | Percent | |||||||||||||||||||||||
2009 | 2008 | Change | 2009 | 2008 | Change | |||||||||||||||||||
Consolidated | ||||||||||||||||||||||||
Constant currency (1) | $ | 442,627 | 439,446 | 0.7 | % | $ | 1,303,914 | 1,288,902 | 1.2 | % | ||||||||||||||
Foreign currency (2) | (10,331 | ) | — | (2.4 | ) | (50,692 | ) | — | (3.9 | ) | ||||||||||||||
Total revenues | $ | 432,296 | 439,446 | (1.6 | )% | $ | 1,253,222 | 1,288,902 | (2.8 | )% | ||||||||||||||
Constant currency (1) | $ | 89,534 | 95,290 | (6.0 | )% | $ | 256,634 | 278,234 | (7.8 | )% | ||||||||||||||
Foreign currency (2) | (1,678 | ) | — | (1.8 | ) | (7,885 | ) | — | (2.8 | ) | ||||||||||||||
Operating income | $ | 87,856 | 95,290 | (7.8 | )% | $ | 248,749 | 278,234 | (10.6 | )% | ||||||||||||||
International Services | ||||||||||||||||||||||||
Constant currency (1) | $ | 96,503 | 88,090 | 9.6 | % | $ | 287,098 | 237,816 | 20.7 | % | ||||||||||||||
Foreign currency (2) | (10,331 | ) | — | (11.7 | ) | (50,692 | ) | — | (21.3 | ) | ||||||||||||||
Total revenues | $ | 86,172 | 88,090 | (2.2 | )% | $ | 236,406 | 237,816 | (0.6 | )% | ||||||||||||||
Constant currency (1) | $ | 11,369 | 16,751 | (32.1 | )% | $ | 32,798 | 35,937 | (8.7 | )% | ||||||||||||||
Foreign currency (2) | (1,678 | ) | — | (10.0 | ) | (7,885 | ) | — | (21.9 | ) | ||||||||||||||
Operating income | $ | 9,691 | 16,751 | (42.1 | )% | $ | 24,913 | 35,937 | (30.7 | )% | ||||||||||||||
(1) | Reflects current period results on a non-GAAP basis as if foreign currency rates did not change from the comparable prior year period. | |
(2) | Reflects the impact of calculated changes in foreign currency rates from the comparable period. |
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