Exhibit 99.2
TSYS Announces Third Quarter 2008 Earnings
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Page 4 of 7
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, | |||||||||||||||||||||||
Percentage | Percentage | |||||||||||||||||||||||
2008 | 2007 | Change | 2008 | 2007 | Change | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Electronic payment processing services* | $ | 250,066 | 240,608 | 3.9 | % | $ | 733,765 | 715,417 | 2.6 | % | ||||||||||||||
Merchant acquiring services | 64,540 | 65,163 | (1.0 | ) | 191,806 | 190,120 | 0.9 | |||||||||||||||||
Other services* | 68,193 | 53,251 | 28.1 | 189,645 | 161,190 | 17.7 | ||||||||||||||||||
Revenues before reimbursables | 382,799 | 359,022 | 6.6 | 1,115,216 | 1,066,727 | 4.5 | ||||||||||||||||||
Reimbursable items | 117,593 | 98,543 | 19.3 | 330,012 | 280,597 | 17.6 | ||||||||||||||||||
Total revenues | 500,392 | 457,565 | 9.4 | 1,445,228 | 1,347,324 | 7.3 | ||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Salaries & other personnel expense* | 153,263 | 144,990 | 5.7 | 449,246 | 430,966 | 4.2 | ||||||||||||||||||
Net occupancy & equipment expense* | 75,399 | 68,715 | 9.7 | 223,075 | 205,342 | 8.6 | ||||||||||||||||||
Spin related expenses* | 1,719 | 1,692 | 1.6 | 9,869 | 1,692 | nm | ||||||||||||||||||
Other operating expenses* | 56,510 | 52,406 | 7.8 | 152,696 | 155,913 | (2.1 | ) | |||||||||||||||||
Expenses before reimbursable items | 286,891 | 267,803 | 7.1 | 834,886 | 793,913 | 5.2 | ||||||||||||||||||
Reimbursable items | 117,593 | 98,543 | 19.3 | 330,012 | 280,597 | 17.6 | ||||||||||||||||||
Total operating expenses | 404,484 | 366,346 | 10.4 | 1,164,898 | 1,074,510 | 8.4 | ||||||||||||||||||
Operating income | 95,908 | 91,219 | 5.1 | 280,330 | 272,814 | 2.8 | ||||||||||||||||||
Nonoperating income: | ||||||||||||||||||||||||
Interest income | 2,572 | 6,983 | (63.2 | ) | 6,833 | 18,630 | (63.3 | ) | ||||||||||||||||
Interest expense | (2,737 | ) | (916 | ) | nm | (8,964 | ) | (1,492 | ) | nm | ||||||||||||||
Gain on foreign currency translation, net | 1,092 | 905 | 20.7 | 3,233 | 744 | nm | ||||||||||||||||||
Other | (992 | ) | 21 | nm | (278 | ) | 79 | nm | ||||||||||||||||
Nonoperating income | (65 | ) | 6,993 | (100.9 | ) | 824 | 17,961 | (95.4 | ) | |||||||||||||||
Income before income taxes, minority interest and equity in income of equity investments | 95,843 | 98,212 | (2.4 | ) | 281,154 | 290,775 | (3.3 | ) | ||||||||||||||||
Income taxes | 34,229 | 30,947 | 10.6 | 101,386 | 101,442 | (0.1 | ) | |||||||||||||||||
Income before minority interest and equity in income of equity investments | 61,614 | 67,265 | (8.4 | ) | 179,768 | 189,333 | (5.1 | ) | ||||||||||||||||
Minority interest | (374 | ) | (484 | ) | 22.7 | (1,322 | ) | (1,435 | ) | 7.9 | ||||||||||||||
Equity in income of equity investments | 2,834 | 2,021 | 40.2 | 5,326 | 3,865 | 37.8 | ||||||||||||||||||
Net income | $ | 64,074 | 68,802 | (6.9) | % | $ | 183,772 | 191,763 | (4.2) | % | ||||||||||||||
Basic earnings per share | $ | 0.33 | 0.35 | (6.5) | % | $ | 0.94 | 0.98 | (4.0) | % | ||||||||||||||
Diluted earnings per share | $ | 0.33 | 0.35 | (6.6) | % | $ | 0.93 | 0.97 | (4.1) | % | ||||||||||||||
Dividend declared per share | $ | 0.07 | 0.07 | $ | 0.21 | 0.21 | ||||||||||||||||||
Average common shares outstanding | 196,000 | 196,740 | 196,342 | 196,641 | ||||||||||||||||||||
Average common and common equivalent shares outstanding | 196,450 | 197,089 | 196,971 | 197,070 | ||||||||||||||||||||
* | Certain amounts have been previously reclassed to conform with the presentation adopted in 2008. | |
nm = | not meaningful |
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TSYS Announces Third Quarter 2008 Earnings
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Page 5 of 7
TSYS
Segment Breakdown
(unaudited)
(in thousands)
Segment Breakdown
(unaudited)
(in thousands)
Three Months Ended September 30, 2008 | Three Months Ended September 30, 2007 | |||||||||||||||||||||||||||||||||||||||
North American | Global | Merchant | Spin-Related | North American | Global | Merchant | Spin-Related | |||||||||||||||||||||||||||||||||
Services | Services | Services | Costs | Consolidated | Services | Services | Services | Costs | Consolidated | |||||||||||||||||||||||||||||||
Revenues before reimbursables | $ | 245,172 | 85,118 | 58,357 | — | 388,647 | 242,574 | 64,148 | 59,471 | — | 366,193 | |||||||||||||||||||||||||||||
Intersegment revenues | (5,205 | ) | (351 | ) | (292 | ) | — | (5,848 | ) | (6,960 | ) | (106 | ) | (105 | ) | — | (7,171 | ) | ||||||||||||||||||||||
Revenues before reimbursables from external customers | $ | 239,967 | 84,767 | 58,065 | — | 382,799 | 235,614 | 64,042 | 59,366 | — | 359,022 | |||||||||||||||||||||||||||||
Total revenues | $ | 345,881 | 88,090 | 74,613 | — | 508,584 | 323,973 | 66,779 | 76,185 | — | 466,937 | |||||||||||||||||||||||||||||
Intersegment revenues | (7,549 | ) | (351 | ) | (292 | ) | — | (8,192 | ) | (9,162 | ) | (106 | ) | (104 | ) | — | (9,372 | ) | ||||||||||||||||||||||
Revenues from external customers | $ | 338,332 | 87,739 | 74,321 | — | 500,392 | 314,811 | 66,673 | 76,081 | — | 457,565 | |||||||||||||||||||||||||||||
Depreciation and amortization | $ | 23,967 | 9,658 | 6,783 | — | 40,408 | 24,581 | 6,455 | 6,570 | — | 37,606 | |||||||||||||||||||||||||||||
Intersegment expenses | $ | 2,494 | (3,012 | ) | (7,638 | ) | — | (8,156 | ) | 3,515 | (4,996 | ) | (7,892 | ) | — | (9,373 | ) | |||||||||||||||||||||||
Segment operating income | $ | 63,786 | 16,751 | 17,090 | (1,719 | ) | 95,908 | 62,415 | 11,542 | 18,954 | (1,692 | ) | 91,219 | |||||||||||||||||||||||||||
Income before income taxes, minority interest and equity income of equity investments | 62,948 | 17,370 | 17,244 | (1,719 | ) | 95,843 | 68,514 | 12,130 | 19,260 | (1,692 | ) | 98,212 | ||||||||||||||||||||||||||||
Income tax expense | $ | 22,742 | 6,014 | 6,089 | (616 | ) | 34,229 | 19,999 | 4,033 | 6,915 | — | 30,947 | ||||||||||||||||||||||||||||
Equity in income of equity investments | $ | 670 | 2,164 | — | — | 2,834 | 1,027 | 994 | — | — | 2,021 | |||||||||||||||||||||||||||||
Net Income | $ | 40,876 | 13,146 | 11,155 | (1,103 | ) | 64,074 | 49,541 | 8,607 | 12,346 | (1,692 | ) | 68,802 | |||||||||||||||||||||||||||
Identifiable assets | 1,378,606 | 360,002 | 169,389 | — | 1,907,997 | |||||||||||||||||||||||||||||||||||
Intersegment eliminations | (320,524 | ) | (960 | ) | (16 | ) | — | (321,500 | ) | |||||||||||||||||||||||||||||||
Total assets | 1,058,082 | 359,042 | 169,373 | — | 1,586,497 | |||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2008 | Nine Months Ended September 30, 2007 | |||||||||||||||||||||||||||||||||||||||
North American | Global | Merchant | Spin-Related | North American | Global | Merchant | Spin-Related | |||||||||||||||||||||||||||||||||
Services | Services | Services | Costs | Consolidated | Services | Services | Services | Costs | Consolidated | |||||||||||||||||||||||||||||||
Revenues before reimbursables | $ | 730,192 | 230,107 | 171,777 | — | 1,132,076 | 736,246 | 175,154 | 174,160 | — | 1,085,560 | |||||||||||||||||||||||||||||
Intersegment revenues | (15,099 | ) | (1,040 | ) | (721 | ) | — | (16,860 | ) | (17,490 | ) | (701 | ) | (642 | ) | — | (18,833 | ) | ||||||||||||||||||||||
Revenues before reimbursables from external customers | $ | 715,093 | 229,067 | 171,056 | — | 1,115,216 | 718,756 | 174,453 | 173,518 | — | 1,066,727 | |||||||||||||||||||||||||||||
Total revenues | $ | 1,010,958 | 237,816 | 220,117 | — | 1,468,891 | 970,666 | 182,913 | 218,821 | — | 1,372,400 | |||||||||||||||||||||||||||||
Intersegment revenues | (21,902 | ) | (1,040 | ) | (721 | ) | — | (23,663 | ) | (23,733 | ) | (701 | ) | (642 | ) | — | (25,076 | ) | ||||||||||||||||||||||
Revenues from external customers | $ | 989,056 | 236,776 | 219,396 | — | 1,445,228 | 946,933 | 182,212 | 218,179 | — | 1,347,324 | |||||||||||||||||||||||||||||
Depreciation and amortization | $ | 73,994 | 26,150 | 20,019 | — | 120,163 | 76,272 | 17,762 | 20,179 | — | 114,213 | |||||||||||||||||||||||||||||
Intersegment expenses | $ | 7,941 | (9,201 | ) | (22,332 | ) | — | (23,592 | ) | 10,052 | (11,961 | ) | (23,162 | ) | — | (25,071 | ) | |||||||||||||||||||||||
Segment operating income | $ | 204,012 | 35,937 | 50,250 | (9,869 | ) | 280,330 | 194,474 | 32,702 | 47,330 | (1,692 | ) | 272,814 | |||||||||||||||||||||||||||
Income before income taxes, minority interest and equity income of equity investments | 203,126 | 36,989 | 50,908 | (9,869 | ) | 281,154 | 211,234 | 32,562 | 48,671 | (1,692 | ) | 290,775 | ||||||||||||||||||||||||||||
Income tax expense | $ | 73,013 | 13,226 | 18,134 | (2,987 | ) | 101,386 | 73,529 | 10,441 | 17,472 | — | 101,442 | ||||||||||||||||||||||||||||
Equity in income of equity investments | $ | 1,586 | 3,740 | — | — | 5,326 | 2,768 | 1,097 | — | — | 3,865 | |||||||||||||||||||||||||||||
Net Income | $ | 131,700 | 26,180 | 32,774 | (6,882 | ) | 183,772 | 140,474 | 21,782 | 31,199 | (1,692 | ) | 191,763 | |||||||||||||||||||||||||||
Note: | Revenues from North American 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 Global 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. | |
Effective February 1, 2008, TSYS merged the operations of Golden Retriever LLC with TSYS Acquiring Solutions, LLC. As a result of the merger, the results of Golden Retriever for prior periods have been reclassified to reflect the move from North American Services to the Merchant Services segment. | ||
Equity in income of equity investments for TSYS de Mexico has been reclassified from Global Services to North American Services. |
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TSYS Announces Third Quarter 2008 Earnings
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TSYS
Balance Sheet
(in thousands)
Balance Sheet
(in thousands)
Sept 30, 2008 | Dec 31, 2007 | |||||||
(unaudited) | (unaudited) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 309,004 | 210,518 | |||||
Restricted cash | 19,453 | 29,688 | ||||||
Accounts receivable, net | 260,843 | 256,970 | ||||||
Deferred income tax assets | 36,457 | 17,152 | ||||||
Prepaid expenses and other current assets | 68,875 | 72,250 | ||||||
Total current assets | 694,632 | 586,578 | ||||||
Property and equipment, net | 283,400 | 283,138 | ||||||
Computer software, net | 193,083 | 205,830 | ||||||
Contract acquisition costs, net | 150,845 | 151,599 | ||||||
Goodwill, net | 141,688 | 142,545 | ||||||
Equity investments, net | 85,187 | 80,905 | ||||||
Other intangible assets, net | 11,599 | 13,462 | ||||||
Other assets | 26,063 | 14,963 | ||||||
Total assets | $ | 1,586,497 | 1,479,020 | |||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Current portion of notes payable | $ | 70,184 | 8,648 | |||||
Accrued salaries and employee benefits | 51,244 | 85,142 | ||||||
Accounts payable | 36,504 | 41,817 | ||||||
Current portion of obligations under capital leases | 4,030 | 3,080 | ||||||
Other current liabilities | 144,025 | 135,108 | ||||||
Total current liabilities | 305,987 | 273,795 | ||||||
Notes payable, excluding current portion | 182,148 | 252,659 | ||||||
Deferred income tax liabilities | 72,782 | 67,428 | ||||||
Obligations under capital leases, excluding current portion | 7,062 | 3,934 | ||||||
Other long-term liabilities | 27,707 | 28,151 | ||||||
Total liabilities | 595,686 | 625,967 | ||||||
Minority interests in consolidated subsidiaries | 9,554 | 8,580 | ||||||
Shareholders’ Equity: | ||||||||
Common stock | 20,036 | 19,966 | ||||||
Additional paid-in capital | 125,801 | 104,762 | ||||||
Accumulated other comprehensive income, net | 25,235 | 28,322 | ||||||
Treasury stock | (57,554 | ) | (34,138 | ) | ||||
Retained earnings | 867,739 | 725,561 | ||||||
Total shareholders’ equity | 981,257 | 844,473 | ||||||
Total liabilities and shareholders’ equity | $ | 1,586,497 | 1,479,020 | |||||
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TSYS Announces Third Quarter 2008 Earnings
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TSYS
Cash Flow
(unaudited)
(in thousands)
Cash Flow
(unaudited)
(in thousands)
Nine Months Ended September 30, | ||||||||
2008 | 2007 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 183,772 | 191,763 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Minority interests in consolidated subsidiaries’ net income | 1,322 | 1,435 | ||||||
Equity in income of equity investments | (5,326 | ) | (3,865 | ) | ||||
Dividends received from equity investments | 6,421 | 2,994 | ||||||
Gain on currency translation adjustments, net | (3,233 | ) | (744 | ) | ||||
Depreciation and amortization | 120,163 | 114,213 | ||||||
Amortization of debt issuance costs | 115 | — | ||||||
Share-based compensation | 21,260 | 9,881 | ||||||
Excess tax benefit from share-based payment arrangements | (82 | ) | (4,022 | ) | ||||
Asset impairments | — | 1,158 | ||||||
Provisions for bad debt expense and billing adjustments | 2,779 | 1,612 | ||||||
Charges for transaction processing provisions | 1,415 | 531 | ||||||
Deferred income tax benefit | (12,471 | ) | (6,828 | ) | ||||
Loss on disposal of equipment, net | 180 | 497 | ||||||
(Increase) decrease in: | ||||||||
Accounts receivable | (10,701 | ) | (5,627 | ) | ||||
Prepaid expenses, other current assets and other long-term assets | (10,539 | ) | (1,041 | ) | ||||
Increase (decrease) in: | ||||||||
Accounts payable | (1,150 | ) | 6,148 | |||||
Accrued salaries and employee benefits | (33,770 | ) | (9,341 | ) | ||||
Other current liabilities and other long-term liabilities | 23,428 | (51,286 | ) | |||||
Net cash provided by operating activities | 283,583 | 247,478 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment, net | (35,502 | ) | (36,420 | ) | ||||
Additions to licensed computer software from vendors | (22,797 | ) | (8,194 | ) | ||||
Additions to internally developed computer software | (14,976 | ) | (11,749 | ) | ||||
Cash used in acquisitions and equity investments | (1,459 | ) | (472 | ) | ||||
Additions to contract acquisition costs | (34,612 | ) | (20,878 | ) | ||||
Net cash used in investing activities | (109,346 | ) | (77,713 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from borrowings of long-term debt | 2,506 | 73,968 | ||||||
Principal payments on long-term debt borrowings and capital lease obligations | (11,501 | ) | (3,893 | ) | ||||
Proceeds from exercise of stock options | 266 | 5,258 | ||||||
Excess tax benefit from share-based payment arrangements | 82 | 4,022 | ||||||
Repurchase of common stock | (23,594 | ) | — | |||||
Subsidiary dividends paid to noncontrolling shareholders | (241 | ) | — | |||||
Subsidiary repurchase of minority interest | (343 | ) | — | |||||
Dividends paid on common stock | (41,358 | ) | (41,425 | ) | ||||
Net cash used in financing activities | (74,183 | ) | 37,930 | |||||
Effect of exchange rate changes on cash and cash equivalents | (1,568 | ) | (3,984 | ) | ||||
Net increase in cash and cash equivalents | 98,486 | 203,711 | ||||||
Cash and cash equivalents at beginning of year | 210,518 | 389,123 | ||||||
Cash and cash equivalents at end of period | $ | 309,004 | 592,834 | |||||
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