Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Jul. 31, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | TOTAL SYSTEM SERVICES INC | |
Entity Central Index Key | 721,683 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 184,238,052 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents (Note 3) | $ 427,589 | $ 425,354 |
Accounts receivable, net of allowances for doubtful accounts and billing adjustments of $4.8 million as of 2017 and 2016, respectively | 442,094 | 432,847 |
Prepaid expenses and other current assets (Note 3) | 157,325 | 164,488 |
Total current assets | 1,027,008 | 1,022,689 |
Goodwill (Note 2) | 3,271,975 | 3,270,952 |
Other intangible assets, net of accumulated amortization of $513.0 million and $420.6 million as of 2017 and 2016, respectively | 814,762 | 906,676 |
Intangible assets - computer software, net of accumulated amortization of $807.6 million and $757.4 million as of 2017 and 2016, respectively | 401,014 | 423,188 |
Property and equipment, net of accumulated depreciation and amortization of $509.6 million and $480.7 million as of 2017 and 2016, respectively (Note 7) | 280,636 | 282,345 |
Contract acquisition costs, net of accumulated amortization of $325.2 million and $309.7 million as of 2017 and 2016, respectively (Note 3) | 227,659 | 235,700 |
Equity investments, net | 158,540 | 133,556 |
Deferred income tax assets | 7,215 | 7,055 |
Other assets | 88,205 | 84,016 |
Total assets | 6,277,014 | 6,366,177 |
Current liabilities: | ||
Current portion of long-term borrowings (Note 4) | 571,007 | 48,040 |
Accounts payable | 53,124 | 38,712 |
Accrued salaries and employee benefits | 41,086 | 67,655 |
Current portion of obligations under capital leases and license agreements | 3,972 | 2,687 |
Other current liabilities (Note 3) | 273,991 | 263,259 |
Total current liabilities | 943,180 | 420,353 |
Long-term borrowings, excluding current portion (Note 4) | 2,560,277 | 3,312,215 |
Deferred income tax liabilities | 402,088 | 419,552 |
Obligations under capital leases and license agreements, excluding current portion | 3,791 | 1,061 |
Other long-term liabilities | 90,040 | 88,983 |
Total liabilities | 3,999,376 | 4,242,164 |
Redeemable noncontrolling interest in consolidated subsidiary | 13,102 | 24,093 |
Commitments and contingencies (Note 9) | ||
Shareholders’ Equity | ||
Common stock — $0.10 par value. Authorized 600,000 shares; 202,765 issued as of 2017 and 2016; 184,217 and 183,451 outstanding as of 2017 and 2016, respectively | 20,277 | 20,276 |
Additional paid-in capital | 238,148 | 279,627 |
Accumulated other comprehensive loss, net (Note 3) | (45,138) | (56,158) |
Treasury stock, at cost (18,548 and 19,314 shares as of 2017 and 2016, | (635,227) | (646,047) |
Retained earnings | 2,686,476 | 2,502,222 |
Total shareholders' equity | 2,264,536 | 2,099,920 |
Total liabilities and shareholders' equity | $ 6,277,014 | $ 6,366,177 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Accounts receivable, allowances for doubtful accounts and billing adjustments | $ 4.8 | $ 4.8 |
Computer software, accumulated amortization | 807.6 | 757.4 |
Property and equipment, accumulated depreciation and amortization | $ 509.6 | $ 480.7 |
Common stock, par value | $ 0.10 | $ 0.10 |
Common stock, authorized | 600,000 | 600,000 |
Common stock, issued | 202,765 | 202,765 |
Common stock, outstanding | 184,217 | 183,451 |
Treasury stock, shares | 18,548 | 19,314 |
Other intangible assets | ||
Intangible assets, accumulated amortization | $ 513 | $ 420.6 |
Contract Acquisition Costs | ||
Intangible assets, accumulated amortization | $ 325.2 | $ 309.7 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statements of Income | ||||
Total revenues (Note 7) | $ 1,222,375 | $ 1,151,587 | $ 2,407,100 | $ 1,890,965 |
Cost of services | 877,887 | 841,923 | 1,739,744 | 1,326,430 |
Selling, general and administrative expenses | 151,240 | 173,843 | 306,925 | 277,027 |
Total operating expenses | 1,029,127 | 1,015,766 | 2,046,669 | 1,603,457 |
Operating income | 193,248 | 135,821 | 360,431 | 287,508 |
Nonoperating expenses, net | (30,042) | (29,760) | (59,945) | (51,857) |
Income before income taxes and equity in income of equity investments | 163,206 | 106,061 | 300,486 | 235,651 |
Income taxes | 56,207 | 40,290 | 99,289 | 83,719 |
Income before equity in income of equity investments | 106,999 | 65,771 | 201,197 | 151,932 |
Equity in income of equity investments, net of tax | 9,513 | 5,977 | 22,422 | 12,224 |
Net income | 116,512 | 71,748 | 223,619 | 164,156 |
Net income attributable to noncontrolling interests | (1,498) | (2,040) | (2,737) | (3,820) |
Net income attributable to Total System Services, Inc. (TSYS) common shareholders | $ 115,014 | $ 69,708 | $ 220,882 | $ 160,336 |
Basic earnings per share (EPS) attributable to TSYS common shareholders (Note 10) | $ 0.62 | $ 0.38 | $ 1.20 | $ 0.87 |
Diluted EPS attributable to TSYS common shareholders (Note 10) | $ 0.62 | $ 0.38 | $ 1.19 | $ 0.87 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statements of Comprehensive Income | ||||
Net income | $ 116,512 | $ 71,748 | $ 223,619 | $ 164,156 |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments | 7,054 | (11,159) | 12,566 | (13,927) |
Postretirement healthcare plan adjustments | 123 | (391) | 247 | (781) |
Unrealized gain (loss) on available-for-sale securities | 66 | 682 | (1,793) | 643 |
Other comprehensive income (loss) | 7,243 | (10,868) | 11,020 | (14,065) |
Comprehensive income | 123,755 | 60,880 | 234,639 | 150,091 |
Comprehensive income attributable to noncontrolling interests | (1,499) | (2,040) | (2,738) | (3,488) |
Comprehensive income attributable to TSYS common shareholders | $ 122,256 | $ 58,840 | $ 231,901 | $ 146,603 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 223,619 | $ 164,156 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 203,537 | 172,552 |
Provisions for cardholder losses | 27,587 | 25,216 |
Share-based compensation | 20,055 | 20,724 |
Provisions for bad debt expenses and billing adjustments | 4,906 | 2,938 |
Charges for transaction processing provisions | 4,053 | 2,191 |
Amortization of debt issuance costs | 2,163 | 11,451 |
Dividends received from equity investments | 943 | 808 |
Loss (gain) on foreign currency | 824 | (1,469) |
Amortization of bond discount | 449 | 318 |
Loss on disposal of equipment, net | 428 | 289 |
Excess tax benefit from share-based payment arrangements | (8,034) | |
Deferred income tax (benefit) expense | (18,191) | 18,519 |
Equity in income of equity investments, net of tax | (22,422) | (12,224) |
Changes in operating assets and liabilities, net of effects of acquisitions: | ||
Accrued salaries and employee benefits | (27,160) | (27,554) |
Accounts receivable | (12,090) | (28,384) |
Prepaid expenses, other current assets and other long-term assets | 845 | (20,115) |
Accounts payable | 13,177 | (17,473) |
Other current liabilities and other long-term liabilities | (21,931) | 35,172 |
Net cash provided by operating activities | 400,792 | 339,081 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (26,739) | (20,669) |
Additions to contract acquisition costs | (14,655) | (31,276) |
Additions to internally developed computer software | (13,581) | (18,484) |
Additions to licensed computer software from vendors | (10,568) | (11,379) |
Cash used in acquisitions, net of cash acquired | (2,345,438) | |
Other investing activities | (759) | (1,730) |
Net cash used in investing activities | (66,302) | (2,428,976) |
Cash flows from financing activities: | ||
Principal payments on long-term borrowings and, capital lease obligations and license agreements | (234,093) | (435,953) |
Purchase of noncontrolling interest | (70,000) | (5,878) |
Dividends paid on common stock | (36,734) | (36,622) |
Subsidiary dividends paid to noncontrolling shareholders | (3,885) | (3,829) |
Repurchase of common stock under plans and tax withholding | (24) | (5,034) |
Debt issuance costs | (26,554) | |
Excess tax benefit from share-based payment arrangements | 8,034 | |
Proceeds from borrowings of long-term debt | 2,666,295 | |
Proceeds from exercise of stock options | 8,987 | 9,737 |
Net cash provided by (used in) financing activities | (335,749) | 2,170,196 |
Cash and cash equivalents: | ||
Effect of exchange rate changes on cash and cash equivalents | 3,494 | (4,310) |
Net increase in cash and cash equivalents | 2,235 | 75,991 |
Cash and cash equivalents at beginning of period | 425,354 | 389,328 |
Cash and cash equivalents at end of period | 427,589 | 465,319 |
Supplemental cash flow information: | ||
Interest paid | 57,405 | 81,808 |
Income taxes paid, net | $ 121,620 | $ 26,134 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note Business Total System Services, Inc.’s (TSYS’ or the Company’s) revenues are derived from providing payment processing, merchant services and related payment services to financial and nonfinancial institutions, generally under long-term processing contracts. The Company also derives revenues by providing general-purpose reloadable (GPR) prepaid debit cards and payroll cards and alternative financial services to underbanked consumers. The Company’s services are provided through three operating segments: Issuer Solutions, Merchant Solutions and Netspend. Through the Company's Issuer Solutions segment, TSYS processes information through its cardholder systems for financial and nonfinancial institutions throughout the United States and internationally. The Company's Merchant Solutions segment provides merchant services to merchant acquirers and merchants mainly in the United States. The Company’s Netspend segment provides prepaid program management services to consumers and businesses in the United States. Basis of Presentation The accompanying unaudited consolidated financial statements of TSYS include the accounts of TSYS and its wholly- and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all information and footnotes required by U.S. GAAP for complete financial statements. The preparation of the consolidated financial statements requires management of the Company to make estimates and assumptions relating to the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. These estimates and assumptions are developed based upon all information available. Actual results could differ from estimated amounts. All adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair presentation of financial position and results of operations for the periods covered by this report, have been included. Certain prior period amounts have been reclassified to conform to the current period’s presentation, which includes the following changes. The Company reclassified an immaterial amount of operating expenses between cost of services and selling, general and administrative expense on the income statement due to an error in classification in 2016. The Company had investments in private equity funds as of December 31, 2016 with a value of $22.6 million. During the six months ended June 30, 2017 and in prior periods, this investment was reclassified from other assets to equity investments on the balance sheets. The income statement impact was to reclassify an immaterial amount of gains and losses from nonoperating expenses to equity in income of equity investments. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s summary of significant accounting policies, consolidated financial statements and related notes appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission (SEC). Results of interim periods are not necessarily indicative of results to be expected for the year. Recently Adopted Accounting Pronouncements The Company adopted the following Accounting Standards Updates (ASUs) on January 1, 2017: ASU 2015-05 “ Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-04): Customers’ Accounting for Fees Paid in a Cloud Computing Agreement, ” which required changes to clarify, correct errors and make minor improvements to the Accounting Standards Codification (ASC). Most of the amendments in this Update do not require transition guidance and were effective upon issuance of this Update. Six amendments in this update clarify guidance or correct references in the ASC that could potentially result in changes in current practice because of either misapplication or misunderstanding of current guidance. The adoption of this ASU resulted in the Company's recording of acquired software as an intangible asset at present value rather than treating the software as a lease arrangement. The Company expects the annual impact of adopting the amendment to result in approximately $6.4 million of assets being recorded and $6.1 million of expense being characterized as amortization expense instead of rental expense during 2017. ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The adoption of this standard results in the excess tax benefits and deficiencies associated with share-based payments being recorded on the income statement at the time they are deducted on the income tax return instead of being recorded in additional paid-in capital. The excess tax benefits are recorded along with other income tax cash flows as an operating activity in the statement of cash flows. The Company recorded excess tax benefits of $6.8 million in its provision for income taxes rather than as an increase to additional paid-in capital for the six months ended June 30, 2017 on a prospective basis. Therefore, the prior period presented has not been adjusted. The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of diluted earnings per share using the treasury stock method, which did not have a material impact on its diluted earnings per share for the three and six months ended June 30, 2017. The Company elected to apply the presentation requirement for cash flows related to excess tax benefits prospectively, and thus, the prior period presented has not been adjusted. This adoption resulted in an increase in net cash provided by operating activities and a decrease in net cash from financing activities of $6.8 million for the six months ended June 30, 2017. ASU 2016-19 “ Technical Corrections,” which required changes to clarify, correct errors or make minor improvements to the ASC. Most of the amendments in this Update do not require transition guidance and were effective upon issuance of this Update. Six amendments in this Update clarify guidance or correct references in the ASC that could potentially result in changes in current practice because of either misapplication or misunderstanding of current guidance. Early adoption is permitted for the amendments that require transition guidance. The Company was impacted by the amendment to Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software , which adds a reference to guidance to use when accounting for internal-use software licensed from third parties that is within the scope of Subtopic 350-40. The transition guidance for that amendment is the same as the transition guidance in ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” to which the amendment relates and was adopted on a prospective basis. The adoption of this ASU resulted in the Company's recording of acquired software as an intangible asset at present value rather than treating the software as a lease arrangement. ASU 2017- 04 “Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment,” which modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. An entity should apply the amendments in this Update on a prospective basis. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted by all entities for interim or annual goodwill impairment test performed on testing dates after January 1, 2017. The Company early adopted this ASU in May 2017 in conjunction with its annual goodwill impairment testing. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows. New Accounting Pronouncements In May 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-09 “Compensation – Stock Compensation (Topic 718), Scope of Modification Accounting,” to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: 1. The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. 2. The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. 3. The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The ASU is effective for the Company on January 1, 2018. Early adoption is permitted, including adoption in any interim period, for (a) public business entities for reporting periods for which financial statements have not yet been issued and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows. In January 2017, the FASB issued ASU 2017-01 “Business Combinations (Topic 805), Clarifying the Definition of a Business,” which provides a more robust framework to use in determining when a set of assets and activities is a business. The framework assists entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. The ASU is effective for the Company on January 1, 2018. Early application of the amendments in this Update is allowed under certain circumstances. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows. In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842),” which introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the FASB’s new revenue recognition standard. The ASU also addresses other concerns related to the current leases model. The new guidance will be effective for fiscal years and interim periods within those years beginning after December 15, 2018. Early adoption will be permitted for all entities. The adoption of the new standard will result in the recording of all leases on the balance sheet. The Company has not determined the remaining effect on its ongoing financial reporting for adoption of this ASU. In February 2017, the FASB issued ASU 2017-05 “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets,” which defines the term in substance nonfinancial assets as financial assets promised to a counterparty in a contract if substantially all of the fair value of the assets promised to the counterparty is concentrated in nonfinancial assets. If substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets, then all of the financial assets promised to the counterparty are in substance nonfinancial assets within the scope of Subtopic 610-20. The amendments in this Update exclude all business and nonprofit activities from the scope of Subtopic 610-20. The amendments in the Update may be applied either retrospectively to each period presented in the financial statements or retrospectively with a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows. Recent Revenue Recognition Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The FASB has issued several additional ASUs since this time that add additional clarification to certain issues existing after the original ASU was released. All of the new standards are effective for the Company on January 1, 2018, with early adoption permitted no sooner than January 1, 2017. The standards permit the use of either the retrospective or cumulative effect transition method. The Company is in the process of determining the effect on its ongoing financial reporting for adoption of these ASUs. The Company is reviewing the requirements of the new revenue standard, and amendments described below, while following activities of the FASB and the American Institute of Certified Public Accountants (AICPA) for certain interpretive guidance applicable to IT outsourcers and payment processors. The Company is evaluating customer contracts under the new standard for each type of significant revenue stream (and related costs) to evaluate differences from current accounting. TSYS plans to adopt ASU 2014-09, as well as all other clarifications and technical guidance issued by the FASB and AICPA related to this new revenue standard, on January 1, 2018 using the modified retrospective transition method. Such adoption method will result in an adjustment to the opening balance of retained earnings (or other appropriate components of net assets in the statement of financial position) for the cumulative effect of applying the standard to contracts that are not completed on January 1, 2018. Under the modified retrospective transition method, the Company is required to disclose the impact of changes to financial statement line items due to the application of the new revenue standard, including an explanation of the reasons for any significant changes. The new standard is likely to change the amount and timing of revenue and costs for certain revenue streams; accelerate revenue for certain license arrangements; extend the amortization of certain costs such as commissions, incentive payments, and conversion costs; increase areas of judgment and related internal controls requirements, such as whether the Company might avail itself of opportunities to continue recognizing processing revenue as invoiced; change the presentation of revenue for certain contract arrangements; and require changes to the Company’s software systems to assist in both internally capturing accounting differences and externally reporting such differences through enhanced disclosure requirements. In this respect, the Company has completed its review of representative contracts and identification of policy and gap differences resulting from the adoption of the new revenue standard. The Company continues to implement a new revenue tool solution to facilitate compliance with the standard and expects to have this completed by mid-fourth quarter 2017. Finally, the Company has begun its review of additional remaining contracts, both to help quantify the cumulative impact of the standards at year end, as well as, to evaluate internal controls surrounding the adoption of the standard. The Company is still assessing the materiality of the standard’s adoption, including its impact on disclosures. In March 2016, the FASB issued ASU 2016-08 “ Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," which improves the operability and understandability of the implementation guidance on principal versus agent considerations by providing indicators as to which party controls the good or service provided to a customer (the principal). In April 2016, the FASB issued ASU 2016-10 “ Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” which clarifies two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients,” which affects only the following narrow aspects of Topic 606: Assessing the Collectability Criterion; Presentation of Sales and Other Taxes Collected from Customers; Noncash Consideration; Contract Modification at Transition; Completed Contracts at Transition; and Technical Correction. In December 2016, the FASB issued ASU 2016-20 “ Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, ” which affects only the following narrow aspects of Topic 606: Disclosure of Remaining Performance Obligations as it relates to entities such as processors which may not be required to estimate revenue under ASU 2014-09 due to direct allocation of variable consideration; Disclosure of Prior - Period Performance Obligations; Loan Guarantee Fees; Contract Costs – Impairment Testing; Contract Costs - Interaction of Impairment Testing with Guidance in Other Topics; Provisions for Losses on Construction-Type and Production Type Contracts; Contracts within the scope of Topic 944 (insurance) are excluded from the scope of Topic 606; Contract Modifications; Contract Asset versus Receivable; Refund Liability; Advertising Costs; Fixed - Odds Wagering Contracts in the Casino Industry . |
Fair Value Measurement
Fair Value Measurement | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurement | |
Fair Value Measurement | Note Refer to Note 3 of the Company’s audited financial statements for the year ended December 31, 2016, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, for a discussion regarding fair value measurement. Level 1 – Quoted prices for identical assets and liabilities in active markets. Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 – Unobservable inputs for the asset or liability. The Company had no transfers between Level 1, Level 2 or Level 3 assets during the six months ended June 30, 2017 and 2016. As of June 30, 2017, the Company had recorded goodwill in the amount of $3.3 billion. The Company performed its annual impairment testing of its goodwill balance as of May 31, 2017, and this test did not indicate any impairment. The fair value of the reporting units substantially exceeds their carrying value. |
Supplementary Balance Sheet Inf
Supplementary Balance Sheet Information | 6 Months Ended |
Jun. 30, 2017 | |
Supplementary Balance Sheet Information | |
Supplementary Balance Sheet Information | Note Cash and Cash Equivalents The Company maintains accounts outside the United States denominated in currencies other than the U.S. dollar. All amounts in domestic accounts are denominated in U.S. dollars. Cash and cash equivalent balances are summarized as follows: (in thousands) June 30, 2017 December 31, 2016 Cash and cash equivalents in domestic accounts $ 372,201 375,122 Cash and cash equivalents in foreign accounts 55,388 50,232 Total $ 427,589 425,354 Prepaid Expenses and Other Current Assets Significant components of prepaid expenses and other current assets are summarized as follows: (in thousands) June 30, 2017 December 31, 2016 Prepaid expenses $ 81,483 84,173 Supplies inventory 14,027 17,105 Income taxes receivable 3,238 - Other 58,577 63,210 Total $ 157,325 164,488 Contract Acquisition Costs, Net Significant components of contract acquisition costs, net of accumulated amortization, are summarized as follows: (in thousands) June 30, 2017 December 31, 2016 Conversion costs, net of accumulated amortization of $168.5 million and $164.4 million as of 2017 and 2016, respectively $ 140,478 144,173 Payments for processing rights, net of accumulated amortization of $156.7 million and $145.3 million as of 2017 and 2016, respectively 87,181 91,527 Total $ 227,659 235,700 Amortization expense related to contract acquisition costs is as follows: Three months ended June 30, Six months ended June 30, (in thousands) 2017 2016 2017 2016 Amortization expense related to: Conversion costs $ 7,157 7,282 15,330 14,440 Payments for processing rights 5,110 5,014 10,329 9,943 Other Current Liabilities Significant components of other current liabilities are summarized as follows: (in thousands) June 30, 2017 December 31, 2016 Deferred revenues $ 50,378 40,473 Accrued third-party commissions 31,763 28,310 Accrued expenses 30,008 32,861 Dividends payable 19,407 19,513 Litigation settlements 14,429 20,795 Accrued interest 18,974 19,029 Income taxes payable - 1,673 Other 109,032 100,605 Total $ 273,991 263,259 Accumulated Other Comprehensive Income (AOCI) The income tax effects allocated to and the cumulative balance of accumulated other comprehensive income (loss) attributable to TSYS shareholders are as follows: (a) (b) (c) (d) (a+d) (in thousands) Beginning Pretax Amount Tax Effect Net-of-Tax Ending Balance June 30, 2017 Foreign currency translation adjustments and transfers from noncontrolling interests $ (65,482) $ 14,266 1,700 $ 12,566 $ (52,916) Unrealized gain (loss) on available-for-sale securities 9,862 (2,780) (987) (1,793) 8,069 Change in AOCI related to postretirement healthcare plans (538) 388 141 247 (291) Total $ (56,158) $ 11,874 854 $ 11,020 $ (45,138) There were no reclassifications of AOCI to net income or to other accounts for the six months ended June 30, 2017. |
Long-Term Borrowings, Capital L
Long-Term Borrowings, Capital Lease Obligations and License Agreements | 6 Months Ended |
Jun. 30, 2017 | |
Long-Term Borrowings, Capital Lease Obligations and License Agreements | |
Long-Term Borrowings, Capital Lease Obligations and License Agreements | Note 4 — Long-Term Borrowings, Capital Lease Obligations and License Agreements Refer to Note 12 of the Company’s audited financial statements for the year ended December 31, 2016, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, for a discussion regarding long-term borrowings and capital lease obligations. During the six months ended June 30, 2017, the Company repaid $234 million on outstanding debt, capital lease obligations and license agreements. In addition, $550 million of Senior Notes due June 1, 2018 became short term as of June 30, 2017. |
Share-Based Compensation
Share-Based Compensation | 6 Months Ended |
Jun. 30, 2017 | |
Share-Based Compensation | |
Share-Based Compensation | Note 5 — Share-Based Compensation Refer to Notes 1 and 18 of the Company’s audited financial statements for the year ended December 31, 2016, which are included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, for a discussion regarding the Company’s share-based compensation plans and policy. Share-Based Compensation Share-based compensation costs are classified as selling, general and administrative expenses on the Company’s statements of income and corporate administration and other expenses for segment reporting purposes. TSYS’ share-based compensation costs are expensed, rather than capitalized, as these awards are typically granted to individuals not involved in capitalizable activities. Below is a summary of share-based compensation expense for the three and six months ended June 30, 2017 and 2016: Three months ended June 30, Six months ended June 30, (in thousands) 2017 2016 Percent Change 2017 2016 Percent Change Share-based compensation $ 11,008 12,566 (12.4) % $ 20,055 20,724 (3.2) % Nonvested Share Awards - Time-Based The Company granted shares of TSYS common stock to certain key employees. The nonvested stock bonus awards are typically for services to be provided in the future and vest over a period of up to four years. The market value of the TSYS common stock as of the date of issuance is charged as compensation expense over the vesting periods of the awards. As of June 30, 2017, there was approximately $29.7 million of unrecognized compensation cost related to time-based nonvested share awards. Six months ended June 30, 2017 2016 Number of shares granted 322,926 326,678 Market value ( in millions ) $ 17.6 15.0 Performance- and Market-Based Awards The Company granted performance- and market-based shares to certain key employees. The performance- and market-based goals are established by the Compensation Committee of the Board of Directors and will vest up to a maximum of 200%. During the first six months of 2017 and 2016, the Compensation Committee established performance goals based on adjusted diluted EPS, adjusted EPS, revenue growth, corporate accountability operating income (CAOI) growth, net revenue and revenues before reimbursable items. The Company’s market-based awards are based upon the Company’s Total Shareholder Return (TSR) as compared to the TSR of the companies in the S&P 500 over the performance period. Compensation expense for performance shares is measured on the grant date based on the quoted market price of TSYS common stock. The Company estimates the probability of achieving the goals through the performance period and expenses the awards on a straight-line basis. The fair value of market-based awards is estimated on the grant date using a Monte Carlo simulation model. The Company expenses market-based awards on a straight-line basis. Compensation costs related to performance- and market-based shares are recognized through the longer of the performance period or the vesting period. As of June 30, 2017, there was approximately $20.9 million of unrecognized compensation cost related to TSYS performance-based awards that is expected to be recognized through December 2019. As of June 30, 2017, there was approximately $3.6 million of unrecognized compensation cost related to TSYS market-based awards that is expected to be recognized through December 2019. The following table summarizes the performance-based awards granted during the first six months of 2017 and 2016: Year Performance Performance Number of Period Expensed 2017 December 2019 Net Revenue and Adjusted Diluted EPS 1 December 2019 2017 December 2017 Net Revenue and Adjusted Diluted EPS 1 December 2019 2016 December 2016 Revenues before Reimbursable Items 4 and Adjusted EPS 3 December 2016 2016 December 2017 Adjusted EPS 3 December 2017 2016 December 2018 Merchant Segment Net Revenue, Corporate Accountability Operating Income and attainment of synergies from TransFirst acquisition December 2018 2016 December 2018 Revenue Growth and CAOI Growth 2 December 2018 2016 December 2018 Merchant Segment Net Revenue and Corporate Accountability Operating Income December 2018 2016 December 2018 Adjusted EPS 3 December 2018 2016 December 2016 Revenues before Reimbursable Items 4 and Adjusted EPS 3 December 2018 1 Adjusted Diluted EPS is adjusted earnings divided by weighted average diluted shares outstanding used for diluted EPS calculations. Adjusted earnings is net income excluding the after-tax impact of share-based compensation expenses, amortization of acquisition intangibles, merger and acquisition expenses for completed acquisitions and litigation claims, judgments or settlement expenses and related legal expenses. 2 CAOI is adjusted segment operating income and includes corporate administrative expenses. Adjusted segment operating income is defined in Note 7. 3 Adjusted EPS is adjusted earnings divided by weighted average shares outstanding used for basic EPS. 4 Revenues before Reimbursable Items is total revenue less reimbursable items which consist of out-of-pocket expenses which are reimbursed by the Company’s clients. These expenses consist primarily of postage, access fees and third-party software. The following table summarizes the market-based awards granted during the first six months of 2017 and 2016: Year Performance Performance Number of Period Expensed 2017 December 2019 TSR December 2019 2016 December 2017 TSR December 2017 2016 December 2018 TSR December 2018 Stock Option Awards The Company granted stock options to certain key executives. The grants will vest over a period of up to three years. The weighted average fair value of the option grants was estimated on the date of grant using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions: Three months ended June 30, 2017 2016 Number of options granted 548,265 687,685 Weighted average exercise price $ 54.90 47.01 Risk-free interest rate 1.78 % 1.24 % Expected volatility 21.71 % 21.53 % Expected term (years) 4.6 4.5 Dividend yield 0.73 % 0.86 % Weighted average fair value $ 10.83 8.50 As of June 30, 2017, there was approximately $6.3 million of unrecognized compensation cost related to TSYS stock options that is expected to be recognized over a remaining weighted average period of 1.8 years. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Income Taxes | Note 6 — Income Taxes Refer to Notes 1 and 14 of the Company’s audited financial statements for the year ended December 31, 2016, which are included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, for a discussion regarding income taxes. TSYS is the parent of an affiliated group that files a consolidated U.S. federal income tax return and most state and foreign income tax returns on a separate entity basis. In the normal course of business, the Company is subject to examinations by these taxing authorities unless statutory examination periods lapse. TSYS is no longer subject to U.S. federal income tax examinations for years before 2011 and with few exceptions, the Company is no longer subject to income tax examinations from state and local or foreign tax authorities for years before 2010. There are currently federal income tax examinations in progress for the years 2011 through 2013. Additionally, a number of tax examinations are in progress by the relevant state tax authorities. Although TSYS is unable to determine the ultimate outcome of these examinations, TSYS believes that its liability for uncertain tax positions relating to these jurisdictions for such years is adequate. TSYS’ effective tax rate was 34.4% and 38.0% for the three months ended June 30, 2017 and 2016, respectively. TSYS’ effective tax rate was 33.0% and 35.5% for the six months ended June 30, 2017 and 2016, respectively. The primary differences in the 2017 effective income tax rates compared to the 2016 effective income tax rates reflect changes from the favorable discrete items related to the adoption of new accounting guidance regarding the treatment of excess tax benefits from share-based compensation. GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken in a tax return. The amount of unrecognized tax benefits were $18.3 million and $16.5 million as of June 30, 2017 and December 31, 2016, respectively, which resulted in an increase of $1.8 million during the period. TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax expense in the consolidated statements of income. Gross accrued interest and penalties on unrecognized tax benefits totaled $1.6 million and $1.8 million as of June 30, 2017 and December 31, 2016, respectively. The total amounts of unrecognized income tax benefits as of June 30, 2017 and December 31, 2016, that, if recognized, would affect the effective tax rates are $18.7 million and $17.0 million (net of the federal benefit on state tax issues), respectively, which include interest and penalties of $1.1 million and $1.2 million, respectively. TSYS does not expect any significant changes to its calculation of uncertain tax positions during the next twelve months. |
Segment Reporting and Major Cus
Segment Reporting and Major Customers | 6 Months Ended |
Jun. 30, 2017 | |
Segment Reporting, including Geographic Area Data and Major Customers | |
Segment Reporting, including Geographic Area Data and Major Customers | Note 7 — Segment Reporting and Major Customers Refer to Note 22 of the Company’s audited financial statements for the year ended December 31, 2016, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, for a discussion regarding segment reporting and major customers. At TSYS, the chief operating decision maker (CODM) is a group consisting of Senior Executive Management and above. In the first quarter of 2017, the CODM combined the North America Services and International Services segments for purposes of segment reporting into the new Issuer Solutions segment, since they provide similar services to similar customers and to reflect the manner in which decisions on allocation of resources are made. All prior periods were restated to reflect this change. This change is used to evaluate performance and assess resources starting in the first quarter of 2017. The information utilized by the CODM consists of the financial statements and the main metrics monitored are revenue growth and growth in profitability. The following table presents the Company’s total assets by segment: As of (in thousands) June 30, 2017 December 31, 2016 Issuer Solutions $ 5,881,507 5,892,410 Merchant Solutions 3,198,527 3,295,509 Netspend 1,432,787 1,474,595 Intersegment assets (4,235,807) (4,296,337) Total assets $ 6,277,014 6,366,177 The Company maintains property and equipment, net of accumulated depreciation and amortization, in the following geographic areas: As of (in thousands) June 30, 2017 December 31, 2016 United States $ 232,025 236,913 Europe 41,840 38,866 Other 6,771 6,566 Total $ 280,636 282,345 The following table presents the Company’s depreciation and amortization by segment: Three months ended June 30, Six months ended June 30, (in thousands) 2017 2016 2017 2016 Depreciation and amortization by segment: Issuer Solutions $ 35,735 35,649 72,588 71,268 Merchant Solutions 7,380 6,805 14,402 11,856 Netspend 4,180 3,116 8,272 6,224 Depreciation and amortization 47,295 45,570 95,262 89,348 Acquisition intangible amortization 50,943 58,486 106,111 81,407 Corporate Administration and Other 1,121 913 2,164 1,797 Total depreciation and amortization $ 99,359 104,969 203,537 172,552 The following tables reconcile geographic revenues to external revenues by operating segment based on the domicile of the Company’s customers: Three months ended June 30, 2017 (in thousands) Issuer Merchant Netspend Total United States $ 607,663 182,637 $ Europe 1 59 - 86,492 Canada 1 346 - 79,107 Other 1 305 - 8,356 Total $ 608,373 182,637 $ Six months ended June 30, 2017 (in thousands) Issuer Merchant Netspend Total United States $ 1,170,771 379,695 $ Europe 1 138 - 156,686 Canada 1 623 - 155,579 Other 1 626 - 25,520 Total $ 1,172,158 379,695 $ Three months ended June 30, 2016 (in thousands) Issuer Merchant Netspend Total United States $ 567,258 161,941 $ Europe 1 75,160 - - 75,160 Canada 1 73,072 65 - 73,137 Other 1 10,587 212 - 10,799 Total $ 567,535 161,941 $ Six months ended June 30, 2016 (in thousands) Issuer Merchant Netspend Total United States $ 704,978 346,139 $ Europe 1 144,973 - - 144,973 Canada 1 142,922 130 - 143,052 Other 1 30,476 406 - 30,882 Total $ 705,514 346,139 $ 1 Certain of these revenues are impacted by movements in foreign currency exchange rates. The following table presents the Company’s operating results by segment: Operating Segments Three months ended June 30, Six months ended June 30, (in thousands) 2017 2016 2017 2016 Adjusted operating income by segment 1 : Issuer Solutions (a) $ 147,277 128,493 281,150 263,570 Merchant Solutions (b) 101,996 89,915 193,275 128,272 Netspend (c) 46,044 42,481 94,692 84,682 Corporate Administration and Other (36,036) (33,340) (71,608) (62,808) Adjusted segment operating income (d) 259,281 227,549 497,509 413,716 Less: Share-based compensation 11,008 12,566 20,055 20,723 TransFirst M&A and integration expenses 2 4,165 20,676 9,034 24,078 Litigation, claims, judgments or settlements (83) - 1,878 - Acquisition intangible amortization 50,943 58,486 106,111 81,407 Operating income 193,248 135,821 360,431 287,508 Nonoperating expenses, net (30,042) (29,760) (59,945) (51,857) Income before income taxes and equity in income of equity investments $ 163,206 106,061 300,486 235,651 Net revenue by segment: Issuer Solutions (e) $ 392,760 377,862 780,015 755,871 Merchant Solutions (f) 278,588 261,467 539,149 382,079 Netspend (g) 183,065 162,620 380,530 347,613 Segment net revenue 854,413 801,949 1,699,694 1,485,563 Less: Intersegment revenues 10,345 7,012 22,734 18,982 Net revenue 3 (h) 844,068 794,937 1,676,960 1,466,581 Add: reimbursable items, interchange and assessments expenses 378,307 356,650 730,140 424,384 Total revenues $ 1,222,375 1,151,587 2,407,100 1,890,965 Adjusted segment operating margin on segment net revenue: Issuer Solutions (a)/(e) Merchant Solutions (b)/(f) Netspend (c)/(g) Adjusted segment operating margin on net revenue: (d)/(h) 1 Adjusted segment operating income excludes acquisition intangible amortization, TransFirst M&A and integration expenses, share-based compensation and expenses associated with Corporate Administration and Other. 2 Excludes share-based compensation 3 Net revenue is defined as total revenues less reimbursable items (such as postage), as well as, merchant acquiring interchange and assessment fees charged by the card associations or payment networks that are recorded by TSYS as expense . Major Customers For the three and six months ended June 30, 2017 and 2016, the Company did not have any major customers. |
Supplementary Cash Flow Informa
Supplementary Cash Flow Information | 6 Months Ended |
Jun. 30, 2017 | |
Supplementary Cash Flow Information | |
Supplementary Cash Flow Information | Note 8 — Supplementary Cash Flow Information Nonvested Awards The Company issued shares of common stock to certain key employees during the first six months of 2017 and 2016, respectively. The grants were issued under nonvested stock bonus awards for services to be provided in the future. Refer to Note 5 for more information. Equipment Acquired Under Capital Lease Obligations and Software Acquired Under License Agreements There was approximately $2.1 million of equipment acquired under capital lease obligations and $5.9 million of software acquired under license agreements in the first six months of 2017. During the first six months of 2016, the Company acquired approximately $720,000 of equipment under capital lease obligations. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 9 — Commitments and Contingencies Refer to Note 15 of the Company’s audited financial statements for the year ended December 31, 2016, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, for a discussion regarding commitments and contingencies. Legal Proceedings The Company is subject to various legal proceedings and claims and is also subject to information requests, inquiries and investigations arising out of the ordinary conduct of its business. The Company establishes accruals for litigation and similar matters when those matters present loss contingencies that TSYS determines to be both probable and reasonably estimable in accordance with GAAP. Legal costs are expensed as incurred. In the opinion of management, based on current knowledge and in part upon the advice of legal counsel, all matters not specifically discussed below are believed to be adequately covered by insurance, or, if not covered, the possibility of losses from such matters are believed to be remote or such matters are of such kind or involve such amounts that would not have a material adverse effect on the financial position, results of operations or cash flows of the Company if disposed of unfavorably. TelexFree Matter ProPay, Inc. (ProPay), a subsidiary of the Company, has been named as one of a number of defendants (including other merchant processors) in several purported class action lawsuits relating to the activities of TelexFree, Inc. and its affiliates and principals. TelexFree is a former merchant customer of ProPay. With regard to TelexFree, each purported class action lawsuit generally alleges that TelexFree engaged in an improper multi-tier marketing scheme involving voice-over Internet protocol telephone services. The plaintiffs in each of the purported class action complaints generally allege that the various merchant processor defendants, including ProPay, aided and abetted the improper activities of TelexFree. TelexFree filed for bankruptcy protection in Nevada. The bankruptcy proceeding was subsequently transferred to the Massachusetts Bankruptcy Court. Specifically, ProPay has been named as one of a number of defendants (including other merchant processors) in each of the following purported class action complaints relating to TelexFree: (i) Waldermara Martin, et al. v. TelexFree, Inc., et al. (Case No. BK-S-14-12524-ABL) filed on May 3, 2014 in the United States Bankruptcy Court District of Nevada, (ii) Anthony Cellucci, et al. v. TelexFree, Inc., et. al. (Case No. 4:14-BK-40987) filed on May 15, 2014 in the United States Bankruptcy Court District of Massachusetts, (iii) Maduako C. Ferguson Sr., et al. v. Telexelectric, LLP, et. al (Case No. 5:14-CV-00316-D) filed on June 5, 2014 in the United States District Court of North Carolina, (iv) Todd Cook v. TelexElectric LLP et al. (Case No. 2:14-CV-00134), filed on June 24, 2014 in the United States District Court for the Northern District of Georgia, (v) Felicia Guevara v. James M. Merrill et al., CA No. 1:14-cv-22405-DPG), filed on June 27, 2014 in the United State District Court for the Southern District of Florida, and (vi) Reverend Jeremiah Githere, et al. v. TelexElectric LLP et al. (Case No. 1:14-CV-12825-GAO), filed on June 30, 2014 in the United States District Court for the District of Massachusetts (together, the “Actions”). On October 21, 2014, the Judicial Panel on Multidistrict Litigation transferred and consolidated the Actions before the United States District Court for the District of Massachusetts (the “Consolidated Action”). Following the Judicial Panel on Multidistrict Litigation’s October 21, 2014 order, four additional cases arising from the alleged TelexFree scheme were transferred to the United States District Court for the District of Massachusetts for coordinated or consolidated proceedings, including (i) Paulo Eduardo Ferrari et al. v. Telexfree, Inc. et al. (Case No. 14-04080); (ii) Magalhaes v. TelexFree, Inc., et al., No. 14-cv-12437 (D. Mass.); (iii) Griffith v. Merrill et al., No. 14-CV-12058 (D. Mass.); Abelgadir v. Telexelectric, LLP, No. 14-09857 (S.D.N.Y.) In addition, on September 23, 2015, a putative class action relating to TelexFree was filed in the United States District Court for the District of Arizona, styled Rita Dos Santos, Putative Class Representatives and those Similarly Situated v. TelexElectric, LLP et al ., 2:15-cv-01906-NVW (the “Arizona Action”). The Arizona Action makes claims similar to those alleged in the consolidated action pending before the United States District Court for the District of Massachusetts. On September 29, 2015, a group of certain defendants to the Consolidated Action, including ProPay, filed a “tag along” notice with the Judicial Panel on Multidistrict Litigation, asking that the Arizona Action be transferred to the District of Massachusetts where it can be consolidated or coordinated with the Consolidated Action. On October 20, 2015, the Judicial Panel on Multidistrict Litigation transferred the Arizona Action to the District of Massachusetts. The United States District Court for the District of Massachusetts appointed lead plaintiffs’ counsel on behalf of the putative class of plaintiffs in the Consolidated Action. On March 31, 2015, the plaintiffs filed a First Consolidated Amended Complaint (the “Consolidated Complaint”). The Consolidated Complaint purports to bring claims on behalf of all persons who purchased certain TelexFree “memberships” and suffered a “net loss” between January 1, 2012 and April 16, 2014. The Consolidated Complaint supersedes the complaints filed prior to consolidation of the Actions, and alleges that ProPay aided and abetted tortious acts committed by TelexFree, and that ProPay was unjustly enriched in the course of providing payment processing services to TelexFree. On April 30, 2015, the plaintiffs filed a Second Consolidated Amended Complaint (the “Second Amended Complaint”), which amends and supersedes the Consolidated Complaint. Like the Consolidated Complaint, the Second Amended Complaint generally alleges that ProPay aided and abetted tortious acts committed by TelexFree, and that ProPay was unjustly enriched in the course of providing payment processing services to TelexFree Several defendants, including ProPay, moved to dismiss the Second Amended Complaint on June 2, 2015.Briefing on those motions closed on October 16, 2015. The court held a hearing on the motions to dismiss on November 2, 2015. At present, pursuant to a court order, all discovery in the action is stayed pending the resolution of parallel criminal proceedings against certain former principals of TelexFree, Inc. Despite that stay of discovery, the lead plaintiffs have subpoenaed documents previously produced by ProPay pursuant to the Federal Rules of Bankruptcy Procedure to the court-appointed trustee in the TelexFree bankruptcy proceeding. ProPay has filed a motion to quash that subpoena. ProPay’s motion remains pending before the Court. ProPay’s motion to dismiss also remains pending. On April 4, 2017, lead plaintiffs moved the court for leave to further amend the Second Amended Complaint, and submitted a proposed amendment with their motion. The proposed amendment seeks to add new defendants to the case but does not make any new or additional allegations against ProPay. ProPay, along with certain other defendants in the litigation, have not opposed the lead plaintiffs’ motion to further amend the Second Amended Complaint so long as the amendment, if allowed by the court, would not delay the court’s decision on the pending motions to dismiss. Lead plaintiffs’ motion for leave to amend is pending before the court. ProPay has also received various subpoenas, a seizure warrant and other inquiries requesting information regarding TelexFree from (i) the Commonwealth of Massachusetts, Securities Division, (ii) United States Securities and Exchange Commission, (iii) US Immigration and Customs Enforcement, and (iv) the bankruptcy Trustee of the Chapter 11 entities of TelexFree, Inc., TelexFree, LLC and TelexFree Financial, Inc. Pursuant to the seizure warrant served by the United States Attorney’s Office for the District of Massachusetts, ProPay delivered all funds associated with TelexFree held for chargeback and other purposes by ProPay to US Immigration and Customs Enforcement. In addition, ProPay received a notice of potential claim from the bankruptcy Trustee as a result of the relationship of ProPay with TelexFree and its affiliates. The above proceedings and actions are preliminary in nature. While the Company and ProPay intend to vigorously defend matters arising out of the relationship of ProPay with TelexFree and believe ProPay has substantial defenses related to these purported claims, the Company currently cannot reasonably estimate losses attributable to these matters. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share | |
Earnings Per Share | Note 10 – Earnings Per Share The following tables illustrate basic and diluted EPS for the three and six months ended June 30, 2017 and 2016: Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 (in thousands, except per share data) Common Common Common Common Basic EPS: Net income attributable to TSYS common shareholders $ 115,014 69,708 220,882 160,336 Less income allocated to nonvested awards (252) (347) (631) (850) Net income allocated to common stock for EPS calculation (a) $ 114,762 69,361 220,251 159,486 Average common shares outstanding (b) 183,741 183,724 183,484 183,489 Basic EPS (a)/(b) $ 0.62 0.38 1.20 0.87 Diluted EPS: Net income attributable to TSYS common shareholders $ 115,014 69,708 220,882 160,336 Less income allocated to nonvested awards (252) (346) (631) (847) Add income allocated to nonvested awards 1 252 - 631 - Net income allocated to common stock for EPS calculation (c) $ 115,014 69,362 220,882 159,489 Average common shares outstanding 183,741 183,724 183,484 183,489 Increase due to assumed issuance of shares related to common equivalent shares outstanding 1,121 874 1,093 846 Average nonvested awards 1 425 - 545 - Average common and common equivalent shares outstanding (d) 185,287 184,598 185,122 184,335 Diluted EPS (c)/(d) $ 0.62 0.38 1.19 0.87 Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 (in thousands, except per share data) Participating Securities Participating Securities Participating Securities Participating Securities Basic EPS: Net income allocated to nonvested awards (a) $ 252 347 $ 631 850 Nonvested awards (b) 412 934 536 989 Basic EPS (a)/(b) $ 0.61 0.37 $ 1.18 0.86 Diluted EPS: Net income allocated to nonvested awards (c) $ 250 346 $ 628 847 Average common and common equivalent shares outstanding (d) 412 934 536 989 Diluted EPS (c)/(d) $ 0.61 0.37 $ 1.17 0.86 1 In accordance with the diluted EPS guidance under the two-class method, the Company uses the approach – either the treasury stock method or the two-class method assuming a participating security is not exercised – that is more dilutive. In 2017, the Company used the two-class method. In 2016, the Company used the treasury stock method. The diluted EPS calculation excludes stock options and nonvested awards that are exercisable into 0.6 million and 0.5 million common shares for the three and six months ended June 30, 2017, respectively, and excludes 1.9 million and 2.0 million common shares for the three and six months ended June 30, 2016, respectively, because their inclusion would have been anti-dilutive. |
Acquisitions
Acquisitions | 6 Months Ended |
Jun. 30, 2017 | |
Acquisitions | |
Acquisitions | Note 11 — Acquisitions Refer to Note 24 of the Company’s audited financial statements for the year ended December 31, 2016, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, for a discussion regarding acquisitions. . Redeemable Noncontrolling Interest In February 2017, the Company acquired an additional 10% equity interest in Central Payment Co., LLC (CPAY) from a privately-owned company for $70.0 million. This purchase reduced the remaining redeemable noncontrolling interest in CPAY to 15% of its total outstanding equity and extended the put call arrangement until April 2018. The transaction resulted in a decrease to noncontrolling interest of $9.8 million and a decrease to additional paid-in capital of $60.2 million. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent Events | |
Subsequent Events | Note 12 — Subsequent Events On July 24, 2017, TSYS’ Board of Directors approved a 30% increase in the regular quarterly dividend payable on TSYS common stock from $0.10 per share to $0.13 per share, payable on October 2, 2017 to shareholders of record as of the close of business on September 21, 2017. Management performed an evaluation of the Company’s activity as of the date these financial statements were issued and has concluded that, other than as set forth above, there are no significant subsequent events requiring disclosure. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements of TSYS include the accounts of TSYS and its wholly- and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all information and footnotes required by U.S. GAAP for complete financial statements. The preparation of the consolidated financial statements requires management of the Company to make estimates and assumptions relating to the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. These estimates and assumptions are developed based upon all information available. Actual results could differ from estimated amounts. All adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair presentation of financial position and results of operations for the periods covered by this report, have been included. Certain prior period amounts have been reclassified to conform to the current period’s presentation, which includes the following changes. The Company reclassified an immaterial amount of operating expenses between cost of services and selling, general and administrative expense on the income statement due to an error in classification in 2016. The Company had investments in private equity funds as of December 31, 2016 with a value of $22.6 million. During the six months ended June 30, 2017 and in prior periods, this investment was reclassified from other assets to equity investments on the balance sheets. The income statement impact was to reclassify an immaterial amount of gains and losses from nonoperating expenses to equity in income of equity investments. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s summary of significant accounting policies, consolidated financial statements and related notes appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission (SEC). Results of interim periods are not necessarily indicative of results to be expected for the year. |
Recently Adopted, New and Recent Revenue Recognition Accounting Pronouncements | Recently Adopted Accounting Pronouncements The Company adopted the following Accounting Standards Updates (ASUs) on January 1, 2017: ASU 2015-05 “ Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-04): Customers’ Accounting for Fees Paid in a Cloud Computing Agreement, ” which required changes to clarify, correct errors and make minor improvements to the Accounting Standards Codification (ASC). Most of the amendments in this Update do not require transition guidance and were effective upon issuance of this Update. Six amendments in this update clarify guidance or correct references in the ASC that could potentially result in changes in current practice because of either misapplication or misunderstanding of current guidance. The adoption of this ASU resulted in the Company's recording of acquired software as an intangible asset at present value rather than treating the software as a lease arrangement. The Company expects the annual impact of adopting the amendment to result in approximately $6.4 million of assets being recorded and $6.1 million of expense being characterized as amortization expense instead of rental expense during 2017. ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The adoption of this standard results in the excess tax benefits and deficiencies associated with share-based payments being recorded on the income statement at the time they are deducted on the income tax return instead of being recorded in additional paid-in capital. The excess tax benefits are recorded along with other income tax cash flows as an operating activity in the statement of cash flows. The Company recorded excess tax benefits of $6.8 million in its provision for income taxes rather than as an increase to additional paid-in capital for the six months ended June 30, 2017 on a prospective basis. Therefore, the prior period presented has not been adjusted. The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of diluted earnings per share using the treasury stock method, which did not have a material impact on its diluted earnings per share for the three and six months ended June 30, 2017. The Company elected to apply the presentation requirement for cash flows related to excess tax benefits prospectively, and thus, the prior period presented has not been adjusted. This adoption resulted in an increase in net cash provided by operating activities and a decrease in net cash from financing activities of $6.8 million for the six months ended June 30, 2017. ASU 2016-19 “ Technical Corrections,” which required changes to clarify, correct errors or make minor improvements to the ASC. Most of the amendments in this Update do not require transition guidance and were effective upon issuance of this Update. Six amendments in this Update clarify guidance or correct references in the ASC that could potentially result in changes in current practice because of either misapplication or misunderstanding of current guidance. Early adoption is permitted for the amendments that require transition guidance. The Company was impacted by the amendment to Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software , which adds a reference to guidance to use when accounting for internal-use software licensed from third parties that is within the scope of Subtopic 350-40. The transition guidance for that amendment is the same as the transition guidance in ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” to which the amendment relates and was adopted on a prospective basis. The adoption of this ASU resulted in the Company's recording of acquired software as an intangible asset at present value rather than treating the software as a lease arrangement. ASU 2017- 04 “Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment,” which modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. An entity should apply the amendments in this Update on a prospective basis. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted by all entities for interim or annual goodwill impairment test performed on testing dates after January 1, 2017. The Company early adopted this ASU in May 2017 in conjunction with its annual goodwill impairment testing. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows. New Accounting Pronouncements In May 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-09 “Compensation – Stock Compensation (Topic 718), Scope of Modification Accounting,” to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: 1. The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. 2. The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. 3. The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The ASU is effective for the Company on January 1, 2018. Early adoption is permitted, including adoption in any interim period, for (a) public business entities for reporting periods for which financial statements have not yet been issued and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows. In January 2017, the FASB issued ASU 2017-01 “Business Combinations (Topic 805), Clarifying the Definition of a Business,” which provides a more robust framework to use in determining when a set of assets and activities is a business. The framework assists entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. The ASU is effective for the Company on January 1, 2018. Early application of the amendments in this Update is allowed under certain circumstances. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows. In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842),” which introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the FASB’s new revenue recognition standard. The ASU also addresses other concerns related to the current leases model. The new guidance will be effective for fiscal years and interim periods within those years beginning after December 15, 2018. Early adoption will be permitted for all entities. The adoption of the new standard will result in the recording of all leases on the balance sheet. The Company has not determined the remaining effect on its ongoing financial reporting for adoption of this ASU. In February 2017, the FASB issued ASU 2017-05 “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets,” which defines the term in substance nonfinancial assets as financial assets promised to a counterparty in a contract if substantially all of the fair value of the assets promised to the counterparty is concentrated in nonfinancial assets. If substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets, then all of the financial assets promised to the counterparty are in substance nonfinancial assets within the scope of Subtopic 610-20. The amendments in this Update exclude all business and nonprofit activities from the scope of Subtopic 610-20. The amendments in the Update may be applied either retrospectively to each period presented in the financial statements or retrospectively with a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows. Recent Revenue Recognition Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The FASB has issued several additional ASUs since this time that add additional clarification to certain issues existing after the original ASU was released. All of the new standards are effective for the Company on January 1, 2018, with early adoption permitted no sooner than January 1, 2017. The standards permit the use of either the retrospective or cumulative effect transition method. The Company is in the process of determining the effect on its ongoing financial reporting for adoption of these ASUs. The Company is reviewing the requirements of the new revenue standard, and amendments described below, while following activities of the FASB and the American Institute of Certified Public Accountants (AICPA) for certain interpretive guidance applicable to IT outsourcers and payment processors. The Company is evaluating customer contracts under the new standard for each type of significant revenue stream (and related costs) to evaluate differences from current accounting. TSYS plans to adopt ASU 2014-09, as well as all other clarifications and technical guidance issued by the FASB and AICPA related to this new revenue standard, on January 1, 2018 using the modified retrospective transition method. Such adoption method will result in an adjustment to the opening balance of retained earnings (or other appropriate components of net assets in the statement of financial position) for the cumulative effect of applying the standard to contracts that are not completed on January 1, 2018. Under the modified retrospective transition method, the Company is required to disclose the impact of changes to financial statement line items due to the application of the new revenue standard, including an explanation of the reasons for any significant changes. The new standard is likely to change the amount and timing of revenue and costs for certain revenue streams; accelerate revenue for certain license arrangements; extend the amortization of certain costs such as commissions, incentive payments, and conversion costs; increase areas of judgment and related internal controls requirements, such as whether the Company might avail itself of opportunities to continue recognizing processing revenue as invoiced; change the presentation of revenue for certain contract arrangements; and require changes to the Company’s software systems to assist in both internally capturing accounting differences and externally reporting such differences through enhanced disclosure requirements. In this respect, the Company has completed its review of representative contracts and identification of policy and gap differences resulting from the adoption of the new revenue standard. The Company continues to implement a new revenue tool solution to facilitate compliance with the standard and expects to have this completed by mid-fourth quarter 2017. Finally, the Company has begun its review of additional remaining contracts, both to help quantify the cumulative impact of the standards at year end, as well as, to evaluate internal controls surrounding the adoption of the standard. The Company is still assessing the materiality of the standard’s adoption, including its impact on disclosures. In March 2016, the FASB issued ASU 2016-08 “ Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," which improves the operability and understandability of the implementation guidance on principal versus agent considerations by providing indicators as to which party controls the good or service provided to a customer (the principal). In April 2016, the FASB issued ASU 2016-10 “ Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” which clarifies two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients,” which affects only the following narrow aspects of Topic 606: Assessing the Collectability Criterion; Presentation of Sales and Other Taxes Collected from Customers; Noncash Consideration; Contract Modification at Transition; Completed Contracts at Transition; and Technical Correction. In December 2016, the FASB issued ASU 2016-20 “ Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, ” which affects only the following narrow aspects of Topic 606: Disclosure of Remaining Performance Obligations as it relates to entities such as processors which may not be required to estimate revenue under ASU 2014-09 due to direct allocation of variable consideration; Disclosure of Prior - Period Performance Obligations; Loan Guarantee Fees; Contract Costs – Impairment Testing; Contract Costs - Interaction of Impairment Testing with Guidance in Other Topics; Provisions for Losses on Construction-Type and Production Type Contracts; Contracts within the scope of Topic 944 (insurance) are excluded from the scope of Topic 606; Contract Modifications; Contract Asset versus Receivable; Refund Liability; Advertising Costs; Fixed - Odds Wagering Contracts in the Casino Industry . |
Supplementary Balance Sheet I20
Supplementary Balance Sheet Information (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Supplementary Balance Sheet Information | |
Cash and Cash Equivalent Balances | (in thousands) June 30, 2017 December 31, 2016 Cash and cash equivalents in domestic accounts $ 372,201 375,122 Cash and cash equivalents in foreign accounts 55,388 50,232 Total $ 427,589 425,354 |
Significant Components of Prepaid Expenses and Other Current Assets | (in thousands) June 30, 2017 December 31, 2016 Prepaid expenses $ 81,483 84,173 Supplies inventory 14,027 17,105 Income taxes receivable 3,238 - Other 58,577 63,210 Total $ 157,325 164,488 |
Significant Components of Other Current Liabilities | (in thousands) June 30, 2017 December 31, 2016 Deferred revenues $ 50,378 40,473 Accrued third-party commissions 31,763 28,310 Accrued expenses 30,008 32,861 Dividends payable 19,407 19,513 Litigation settlements 14,429 20,795 Accrued interest 18,974 19,029 Income taxes payable - 1,673 Other 109,032 100,605 Total $ 273,991 263,259 |
Income Tax Effects Allocated to and Cumulative Balance of Accumulated Other Comprehensive Income (Loss) | (a) (b) (c) (d) (a+d) (in thousands) Beginning Pretax Amount Tax Effect Net-of-Tax Ending Balance June 30, 2017 Foreign currency translation adjustments and transfers from noncontrolling interests $ (65,482) $ 14,266 1,700 $ 12,566 $ (52,916) Unrealized gain (loss) on available-for-sale securities 9,862 (2,780) (987) (1,793) 8,069 Change in AOCI related to postretirement healthcare plans (538) 388 141 247 (291) Total $ (56,158) $ 11,874 854 $ 11,020 $ (45,138) |
Contract Acquisition Costs | |
Supplementary Balance Sheet Information | |
Significant Components of Contract Acquisition Costs, Net of Accumulated Amortization | (in thousands) June 30, 2017 December 31, 2016 Conversion costs, net of accumulated amortization of $168.5 million and $164.4 million as of 2017 and 2016, respectively $ 140,478 144,173 Payments for processing rights, net of accumulated amortization of $156.7 million and $145.3 million as of 2017 and 2016, respectively 87,181 91,527 Total $ 227,659 235,700 |
Amortization expense related to contract acquisition costs | Three months ended June 30, Six months ended June 30, (in thousands) 2017 2016 2017 2016 Amortization expense related to: Conversion costs $ 7,157 7,282 15,330 14,440 Payments for processing rights 5,110 5,014 10,329 9,943 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Share-Based Compensation | |
Summary of share-based compensation expense | Three months ended June 30, Six months ended June 30, (in thousands) 2017 2016 Percent Change 2017 2016 Percent Change Share-based compensation $ 11,008 12,566 (12.4) % $ 20,055 20,724 (3.2) % |
Summary of Time-Based Nonvested Share Awards Granted | Six months ended June 30, 2017 2016 Number of shares granted 322,926 326,678 Market value ( in millions ) $ 17.6 15.0 |
Summary of Performance-Based Awards Granted | Year Performance Performance Number of Period Expensed 2017 December 2019 Net Revenue and Adjusted Diluted EPS 1 December 2019 2017 December 2017 Net Revenue and Adjusted Diluted EPS 1 December 2019 2016 December 2016 Revenues before Reimbursable Items 4 and Adjusted EPS 3 December 2016 2016 December 2017 Adjusted EPS 3 December 2017 2016 December 2018 Merchant Segment Net Revenue, Corporate Accountability Operating Income and attainment of synergies from TransFirst acquisition December 2018 2016 December 2018 Revenue Growth and CAOI Growth 2 December 2018 2016 December 2018 Merchant Segment Net Revenue and Corporate Accountability Operating Income December 2018 2016 December 2018 Adjusted EPS 3 December 2018 2016 December 2016 Revenues before Reimbursable Items 4 and Adjusted EPS 3 December 2018 1 Adjusted Diluted EPS is adjusted earnings divided by weighted average diluted shares outstanding used for diluted EPS calculations. Adjusted earnings is net income excluding the after-tax impact of share-based compensation expenses, amortization of acquisition intangibles, merger and acquisition expenses for completed acquisitions and litigation claims, judgments or settlement expenses and related legal expenses. 2 CAOI is adjusted segment operating income and includes corporate administrative expenses. Adjusted segment operating income is defined in Note 7. 3 Adjusted EPS is adjusted earnings divided by weighted average shares outstanding used for basic EPS. 4 Revenues before Reimbursable Items is total revenue less reimbursable items which consist of out-of-pocket expenses which are reimbursed by the Company’s clients. These expenses consist primarily of postage, access fees and third-party software. |
Summary of Market-Based Awards Granted | The following table summarizes the market-based awards granted during the first six months of 2017 and 2016: Year Performance Performance Number of Period Expensed 2017 December 2019 TSR December 2019 2016 December 2017 TSR December 2017 2016 December 2018 TSR December 2018 |
Summary of Weighted Average Assumptions and Fair Value of Options | Three months ended June 30, 2017 2016 Number of options granted 548,265 687,685 Weighted average exercise price $ 54.90 47.01 Risk-free interest rate 1.78 % 1.24 % Expected volatility 21.71 % 21.53 % Expected term (years) 4.6 4.5 Dividend yield 0.73 % 0.86 % Weighted average fair value $ 10.83 8.50 |
Segment Reporting and Major C22
Segment Reporting and Major Customers (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Segment Reporting, including Geographic Area Data and Major Customers | |
Total Assets by Segment | As of (in thousands) June 30, 2017 December 31, 2016 Issuer Solutions $ 5,881,507 5,892,410 Merchant Solutions 3,198,527 3,295,509 Netspend 1,432,787 1,474,595 Intersegment assets (4,235,807) (4,296,337) Total assets $ 6,277,014 6,366,177 |
Property and Equipment, Net of Accumulated Depreciation and Amortization by Geographic Areas | As of (in thousands) June 30, 2017 December 31, 2016 United States $ 232,025 236,913 Europe 41,840 38,866 Other 6,771 6,566 Total $ 280,636 282,345 |
Depreciation and Amortization by segment | Three months ended June 30, Six months ended June 30, (in thousands) 2017 2016 2017 2016 Depreciation and amortization by segment: Issuer Solutions $ 35,735 35,649 72,588 71,268 Merchant Solutions 7,380 6,805 14,402 11,856 Netspend 4,180 3,116 8,272 6,224 Depreciation and amortization 47,295 45,570 95,262 89,348 Acquisition intangible amortization 50,943 58,486 106,111 81,407 Corporate Administration and Other 1,121 913 2,164 1,797 Total depreciation and amortization $ 99,359 104,969 203,537 172,552 |
Reconciliation of Geographic Revenues to External Revenues by Operating Segments | Three months ended June 30, 2017 (in thousands) Issuer Merchant Netspend Total United States $ 607,663 182,637 $ Europe 1 59 - 86,492 Canada 1 346 - 79,107 Other 1 305 - 8,356 Total $ 608,373 182,637 $ Six months ended June 30, 2017 (in thousands) Issuer Merchant Netspend Total United States $ 1,170,771 379,695 $ Europe 1 138 - 156,686 Canada 1 623 - 155,579 Other 1 626 - 25,520 Total $ 1,172,158 379,695 $ Three months ended June 30, 2016 (in thousands) Issuer Merchant Netspend Total United States $ 567,258 161,941 $ Europe 1 75,160 - - 75,160 Canada 1 73,072 65 - 73,137 Other 1 10,587 212 - 10,799 Total $ 567,535 161,941 $ Six months ended June 30, 2016 (in thousands) Issuer Merchant Netspend Total United States $ 704,978 346,139 $ Europe 1 144,973 - - 144,973 Canada 1 142,922 130 - 143,052 Other 1 30,476 406 - 30,882 Total $ 705,514 346,139 $ 1 Certain of these revenues are impacted by movements in foreign currency exchange rates. |
Operating Segments | Operating Segments Three months ended June 30, Six months ended June 30, (in thousands) 2017 2016 2017 2016 Adjusted operating income by segment 1 : Issuer Solutions (a) $ 147,277 128,493 281,150 263,570 Merchant Solutions (b) 101,996 89,915 193,275 128,272 Netspend (c) 46,044 42,481 94,692 84,682 Corporate Administration and Other (36,036) (33,340) (71,608) (62,808) Adjusted segment operating income (d) 259,281 227,549 497,509 413,716 Less: Share-based compensation 11,008 12,566 20,055 20,723 TransFirst M&A and integration expenses 2 4,165 20,676 9,034 24,078 Litigation, claims, judgments or settlements (83) - 1,878 - Acquisition intangible amortization 50,943 58,486 106,111 81,407 Operating income 193,248 135,821 360,431 287,508 Nonoperating expenses, net (30,042) (29,760) (59,945) (51,857) Income before income taxes and equity in income of equity investments $ 163,206 106,061 300,486 235,651 Net revenue by segment: Issuer Solutions (e) $ 392,760 377,862 780,015 755,871 Merchant Solutions (f) 278,588 261,467 539,149 382,079 Netspend (g) 183,065 162,620 380,530 347,613 Segment net revenue 854,413 801,949 1,699,694 1,485,563 Less: Intersegment revenues 10,345 7,012 22,734 18,982 Net revenue 3 (h) 844,068 794,937 1,676,960 1,466,581 Add: reimbursable items, interchange and assessments expenses 378,307 356,650 730,140 424,384 Total revenues $ 1,222,375 1,151,587 2,407,100 1,890,965 Adjusted segment operating margin on segment net revenue: Issuer Solutions (a)/(e) Merchant Solutions (b)/(f) Netspend (c)/(g) Adjusted segment operating margin on net revenue: (d)/(h) 1 Adjusted segment operating income excludes acquisition intangible amortization, TransFirst M&A and integration expenses, share-based compensation and expenses associated with Corporate Administration and Other. 2 Excludes share-based compensation 3 Net revenue is defined as total revenues less reimbursable items (such as postage), as well as, merchant acquiring interchange and assessment fees charged by the card associations or payment networks that are recorded by TSYS as expense . |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share | |
Basic and Diluted Earnings Per Share | Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 (in thousands, except per share data) Common Common Common Common Basic EPS: Net income attributable to TSYS common shareholders $ 115,014 69,708 220,882 160,336 Less income allocated to nonvested awards (252) (347) (631) (850) Net income allocated to common stock for EPS calculation (a) $ 114,762 69,361 220,251 159,486 Average common shares outstanding (b) 183,741 183,724 183,484 183,489 Basic EPS (a)/(b) $ 0.62 0.38 1.20 0.87 Diluted EPS: Net income attributable to TSYS common shareholders $ 115,014 69,708 220,882 160,336 Less income allocated to nonvested awards (252) (346) (631) (847) Add income allocated to nonvested awards 1 252 - 631 - Net income allocated to common stock for EPS calculation (c) $ 115,014 69,362 220,882 159,489 Average common shares outstanding 183,741 183,724 183,484 183,489 Increase due to assumed issuance of shares related to common equivalent shares outstanding 1,121 874 1,093 846 Average nonvested awards 1 425 - 545 - Average common and common equivalent shares outstanding (d) 185,287 184,598 185,122 184,335 Diluted EPS (c)/(d) $ 0.62 0.38 1.19 0.87 Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 (in thousands, except per share data) Participating Securities Participating Securities Participating Securities Participating Securities Basic EPS: Net income allocated to nonvested awards (a) $ 252 347 $ 631 850 Nonvested awards (b) 412 934 536 989 Basic EPS (a)/(b) $ 0.61 0.37 $ 1.18 0.86 Diluted EPS: Net income allocated to nonvested awards (c) $ 250 346 $ 628 847 Average common and common equivalent shares outstanding (d) 412 934 536 989 Diluted EPS (c)/(d) $ 0.61 0.37 $ 1.17 0.86 1 In accordance with the diluted EPS guidance under the two-class method, the Company uses the approach – either the treasury stock method or the two-class method assuming a participating security is not exercised – that is more dilutive. In 2017, the Company used the two-class method. In 2016, the Company used the treasury stock method. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies - Operating Segments (Details) | 6 Months Ended |
Jun. 30, 2017segment | |
Summary of Significant Accounting Policies | |
Operating segments | 3 |
Summary of Significant Accoun25
Summary of Significant Accounting Policies - Private Equiity Investments (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Equity investments | ||
Other assets | $ 88,205 | $ 84,016 |
Equity investments | $ 158,540 | 133,556 |
Private Equity Funds | ||
Equity investments | ||
Equity investments | 22,600 | |
Reclassification adjustment | Private Equity Funds | ||
Equity investments | ||
Other assets | $ (22,600) |
Summary of Significant Accoun26
Summary of Significant Accounting Policies - Adoption of ASU 2015-05 Intangibles – Goodwill and Other – Internal Use Software (Details) - ASU 2015-05 “Intangibles – Goodwill and Other – Internal Use Software - Expected $ in Millions | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Adoption of Accounting Standards Updates | |
Assets from acquired software | $ 6.4 |
Amortization expense | $ 6.1 |
Summary of Significant Accoun27
Summary of Significant Accounting Policies - Adoption of ASU 2016-09 - Improvements to Employee Share-Based Payment Accounting (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Statement | ||||
Provision for income taxes | $ (56,207) | $ (40,290) | $ (99,289) | $ (83,719) |
Statement of Cash Flows | ||||
Net cash provided by operating activities | 400,792 | 339,081 | ||
Net cash used in financing activities | 335,749 | $ (2,170,196) | ||
ASU 2016-09 Improvements to Employee Share-Based Payment Accounting | Excess tax benefits and deficiencies associated with share-based payments | ||||
Income Statement | ||||
Provision for income taxes | 6,800 | |||
Statement of Cash Flows | ||||
Net cash provided by operating activities | 6,800 | |||
Net cash used in financing activities | $ 6,800 |
Fair Value Measurement - Change
Fair Value Measurement - Changes in Fair Value Levels (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Fair Value Measurement | ||
Asset transfers out of Level 1 into Level 2 | $ 0 | $ 0 |
Asset transfers out of Level 2 into Level 1 | 0 | 0 |
Asset transfers into (out of) Level 3 | $ 0 | $ 0 |
Fair Value Measurement - Goodwi
Fair Value Measurement - Goodwill and Impairment Testing (Details) - USD ($) $ in Thousands | May 31, 2017 | Jun. 30, 2017 | Dec. 31, 2016 |
Fair Value Measurement | |||
Goodwill | $ 3,271,975 | $ 3,270,952 | |
Impairment of goodwill | $ 0 |
Supplementary Balance Sheet I30
Supplementary Balance Sheet Information - Cash and Cash Equivalent Balances (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Dec. 31, 2015 |
Supplementary Balance Sheet Information | ||||
Cash and cash equivalents in domestic accounts | $ 372,201 | $ 375,122 | ||
Cash and cash equivalents in foreign accounts | 55,388 | 50,232 | ||
Cash and cash equivalents | $ 427,589 | $ 425,354 | $ 465,319 | $ 389,328 |
Supplementary Balance Sheet I31
Supplementary Balance Sheet Information - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Supplementary Balance Sheet Information | ||
Prepaid expenses | $ 81,483 | $ 84,173 |
Supplies inventory | 14,027 | 17,105 |
Income taxes receivable | 3,238 | |
Other | 58,577 | 63,210 |
Total | $ 157,325 | $ 164,488 |
Supplementary Balance Sheet I32
Supplementary Balance Sheet Information - Contract Acquisition Costs, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Contract Acquisition Costs, Net | |||||
Finite-Lived Intangible Assets, Net | $ 227,659 | $ 227,659 | $ 235,700 | ||
Conversion costs | |||||
Contract Acquisition Costs, Net | |||||
Finite-Lived Intangible Assets, Net | 140,478 | 140,478 | 144,173 | ||
Accumulated amortization | 168,500 | 168,500 | 164,400 | ||
Amortization expense | 7,157 | $ 7,282 | 15,330 | $ 14,440 | |
Payments for processing rights | |||||
Contract Acquisition Costs, Net | |||||
Finite-Lived Intangible Assets, Net | 87,181 | 87,181 | 91,527 | ||
Accumulated amortization | 156,700 | 156,700 | $ 145,300 | ||
Amortization expense | $ 5,110 | $ 5,014 | $ 10,329 | $ 9,943 |
Supplementary Balance Sheet I33
Supplementary Balance Sheet Information - Other Current Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Supplementary Balance Sheet Information | ||
Deferred revenues | $ 50,378 | $ 40,473 |
Accrued third-party commissions | 31,763 | 28,310 |
Accrued expenses | 30,008 | 32,861 |
Dividends payable | 19,407 | 19,513 |
Litigation settlements | 14,429 | 20,795 |
Accrued interest | 18,974 | 19,029 |
Income taxes payable | 1,673 | |
Other | 109,032 | 100,605 |
Total | $ 273,991 | $ 263,259 |
Supplementary Balance Sheet I34
Supplementary Balance Sheet Information - Accumulated Other Comprehensive Income (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Beginning Balance | $ 2,099,920 |
Ending Balance | 2,264,536 |
Reclassifications of AOCI | 0 |
Foreign currency translation adjustments and transfers from noncontrolling interests | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Beginning Balance | (65,482) |
Pretax Amount | 14,266 |
Tax Effect | 1,700 |
Net-of-Tax Amount | 12,566 |
Ending Balance | (52,916) |
Unrealized gain (loss) on available-for-sale securities | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Beginning Balance | 9,862 |
Pretax Amount | (2,780) |
Tax Effect | (987) |
Net-of-Tax Amount | (1,793) |
Ending Balance | 8,069 |
Change in AOCI related to postretirement healthcare plans | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Beginning Balance | (538) |
Pretax Amount | 388 |
Tax Effect | 141 |
Net-of-Tax Amount | 247 |
Ending Balance | (291) |
Accumulated Other Comprehensive Income (Loss) (OCI) | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Beginning Balance | (56,158) |
Pretax Amount | 11,874 |
Tax Effect | 854 |
Net-of-Tax Amount | 11,020 |
Ending Balance | $ (45,138) |
Long-Term Borrowings, Capital35
Long-Term Borrowings, Capital Lease Obligations and License Agreements (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Long-Term Borrowings and Capital Lease Obligations | |||
Outstanding debt and capital lease obligations repaid | $ 234,093 | $ 435,953 | |
Current portion of long-term borrowings (Note 4) | 571,007 | $ 48,040 | |
2.375% Senior Notes due June 2018 | |||
Long-Term Borrowings and Capital Lease Obligations | |||
Current portion of long-term borrowings (Note 4) | $ 550,000 |
Share-Based Compensation - Expe
Share-Based Compensation - Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Share-Based Compensation | ||||
Share-based compensation expense | $ 11,008 | $ 12,566 | $ 20,055 | $ 20,723 |
Percent Change | (12.40%) | (3.20%) | ||
Selling, general and administrative expenses | ||||
Share-Based Compensation | ||||
Share-based compensation expense | $ 11,008 | $ 12,566 | $ 20,055 | $ 20,724 |
Share-Based Compensation - Nonv
Share-Based Compensation - Nonvested Share Awards - Time Based (Details) - Nonvested Share Awards - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unrecognized compensation cost (in dollars) | $ 29.7 | |
Granted | 322,926 | 326,678 |
Market value of stock awarded granted in connection with acquisition | $ 17.6 | $ 15 |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Award vesting period | 4 years |
Share-Based Compensation - Perf
Share-Based Compensation - Performance- and Market-Based Awards (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Performance and Market Based Awards | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage | 200.00% | |
Performance Based Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unrecognized compensation cost (in dollars) | $ 20.9 | |
Market Based Share Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unrecognized compensation cost (in dollars) | $ 3.6 | |
Performance Period Ending December 2019 | Performance Based Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 103,485 | |
Performance Period Ending December 2019 | Market Based Share Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 44,355 | |
Performance Period Ending December 2017 | Performance Based Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 249,845 | 14,940 |
Performance Period Ending December 2017 | Market Based Share Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 6,403 | |
Performance Period Ending December 2018 | Market Based Share Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 50,878 | |
Performance Period Ending December 2016, Measure One | Performance Based Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 15,605 | |
Performance Period Ending December 2016, Measure Two | Performance Based Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 144,995 | |
Performance Period Ending December 2018, Measure One | Performance Based Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 29,332 | |
Performance Period Ending December 2018, Measure Two | Performance Based Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 67,517 | |
Performance Period Ending December 2018, Measure Three | Performance Based Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 78,220 | |
Performance Period Ending December 2018, Measure Four | Performance Based Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted | 118,722 |
Share-Based Compensation - Stoc
Share-Based Compensation - Stock Option Awards (Details) - Stock Options - USD ($) $ / shares in Units, $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of options granted (in shares) | 548,265 | 687,685 |
Weighted average exercise price (in dollars per share) | $ 54.90 | $ 47.01 |
Risk-free interest rate (as a percent) | 1.78% | 1.24% |
Expected volatility (as a percent) | 21.71% | 21.53% |
Expected term | 4 years 7 months 6 days | 4 years 6 months |
Dividend yield (as a percent) | 0.73% | 0.86% |
Weighted average fair value (in dollars per share) | $ 10.83 | $ 8.50 |
Unrecognized compensation cost (in dollars) | $ 6.3 | |
Unrecognized compensation cost related to non vested share-based compensation arrangements, remaining weighted average recognition period | 1 year 9 months 18 days | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Award vesting period | 3 years |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Income Taxes | |||||
Effective tax rate (as a percent) | 34.40% | 38.00% | 33.00% | 35.50% | |
Amount of unrecognized tax benefits | $ 18.3 | $ 18.3 | $ 16.5 | ||
Increase in unrecognized tax benefits | 1.8 | ||||
Gross accrued interest and penalties on unrecognized tax benefits | 1.6 | 1.6 | 1.8 | ||
Unrecognized income tax benefits that, if recognized, would affect the effective tax rates | 18.7 | 18.7 | 17 | ||
Unrecognized income tax benefits that, if recognized, would affect the effective tax rates , interest and penalties | 1.1 | 1.1 | $ 1.2 | ||
Significant changes to uncertain tax positions during the next twelve months | $ 0 | $ 0 |
Segment Reporting and Major C41
Segment Reporting and Major Customers - Total Assets by Segment (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Segment Reporting | ||
Total assets | $ 6,277,014 | $ 6,366,177 |
Operating Segments | Issuer Solutions | ||
Segment Reporting | ||
Total assets | 5,881,507 | 5,892,410 |
Operating Segments | Merchant Solutions | ||
Segment Reporting | ||
Total assets | 3,198,527 | 3,295,509 |
Operating Segments | Netspend | ||
Segment Reporting | ||
Total assets | 1,432,787 | 1,474,595 |
Intersegment | ||
Segment Reporting | ||
Total assets | $ (4,235,807) | $ (4,296,337) |
Segment Reporting and Major C42
Segment Reporting and Major Customers - Property and Equipment, net (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Property and equipment, net, by geographic areas | ||
Property and equipment, net of accumulated depreciation and amortization | $ 280,636 | $ 282,345 |
United States | ||
Property and equipment, net, by geographic areas | ||
Property and equipment, net of accumulated depreciation and amortization | 232,025 | 236,913 |
Europe | ||
Property and equipment, net, by geographic areas | ||
Property and equipment, net of accumulated depreciation and amortization | 41,840 | 38,866 |
Other | ||
Property and equipment, net, by geographic areas | ||
Property and equipment, net of accumulated depreciation and amortization | $ 6,771 | $ 6,566 |
Segment Reporting and Major C43
Segment Reporting and Major Customers - Depreciation and Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Segment Reporting | ||||
Total depreciation and amortization | $ 99,359 | $ 104,969 | $ 203,537 | $ 172,552 |
Operating Segments | ||||
Segment Reporting | ||||
Depreciation and amortization | 47,295 | 45,570 | 95,262 | 89,348 |
Operating Segments | Issuer Solutions | ||||
Segment Reporting | ||||
Depreciation and amortization | 35,735 | 35,649 | 72,588 | 71,268 |
Operating Segments | Merchant Solutions | ||||
Segment Reporting | ||||
Depreciation and amortization | 7,380 | 6,805 | 14,402 | 11,856 |
Operating Segments | Netspend | ||||
Segment Reporting | ||||
Depreciation and amortization | 4,180 | 3,116 | 8,272 | 6,224 |
Segment Reconciling Items | ||||
Segment Reporting | ||||
Acquisition intangible amortization | 50,943 | 58,486 | 106,111 | 81,407 |
Corporate Administration and Other | ||||
Segment Reporting | ||||
Depreciation and amortization | $ 1,121 | $ 913 | $ 2,164 | $ 1,797 |
Segment Reporting and Major C44
Segment Reporting and Major Customers - Geographic Revenues to External Revenues (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Geographic revenues to external revenues by operating segment | ||||
Total revenues | $ 1,222,375 | $ 1,151,587 | $ 2,407,100 | $ 1,890,965 |
United States | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 1,048,420 | 992,491 | 2,069,315 | 1,572,058 |
Europe | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 86,492 | 75,160 | 156,686 | 144,973 |
Canada | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 79,107 | 73,137 | 155,579 | 143,052 |
Other | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 8,356 | 10,799 | 25,520 | 30,882 |
Issuer Solutions | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 431,365 | 422,111 | 855,247 | 839,312 |
Issuer Solutions | United States | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 258,120 | 263,292 | 518,849 | 520,941 |
Issuer Solutions | Europe | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 86,433 | 75,160 | 156,548 | 144,973 |
Issuer Solutions | Canada | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 78,761 | 73,072 | 154,956 | 142,922 |
Issuer Solutions | Other | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 8,051 | 10,587 | 24,894 | 30,476 |
Merchant Solutions | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 608,373 | 567,535 | 1,172,158 | 705,514 |
Merchant Solutions | United States | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 607,663 | 567,258 | 1,170,771 | 704,978 |
Merchant Solutions | Europe | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 59 | 138 | ||
Merchant Solutions | Canada | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 346 | 65 | 623 | 130 |
Merchant Solutions | Other | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 305 | 212 | 626 | 406 |
Netspend | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | 182,637 | 161,941 | 379,695 | 346,139 |
Netspend | United States | ||||
Geographic revenues to external revenues by operating segment | ||||
Total revenues | $ 182,637 | $ 161,941 | $ 379,695 | $ 346,139 |
Segment Reporting and Major C45
Segment Reporting and Major Customers - Operating Results (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Segment Reporting | ||||
Share-based compensation expense | $ 11,008 | $ 12,566 | $ 20,055 | $ 20,723 |
Operating income | 193,248 | 135,821 | 360,431 | 287,508 |
Nonoperating expenses, net | (30,042) | (29,760) | (59,945) | (51,857) |
Income before income taxes and equity in income of equity investments | 163,206 | 106,061 | 300,486 | 235,651 |
Net revenue | 844,068 | 794,937 | 1,676,960 | 1,466,581 |
Add: reimbursable items, interchange and assessment expenses | 378,307 | 356,650 | 730,140 | 424,384 |
Total revenues | 1,222,375 | 1,151,587 | 2,407,100 | 1,890,965 |
Issuer Solutions | ||||
Segment Reporting | ||||
Total revenues | 431,365 | 422,111 | 855,247 | 839,312 |
Merchant Solutions | ||||
Segment Reporting | ||||
Total revenues | 608,373 | 567,535 | 1,172,158 | 705,514 |
Netspend | ||||
Segment Reporting | ||||
Total revenues | 182,637 | 161,941 | 379,695 | 346,139 |
Operating Segments | ||||
Segment Reporting | ||||
Adjusted operating income | 259,281 | 227,549 | 497,509 | 413,716 |
Income before income taxes and equity in income of equity investments | 163,206 | 106,061 | 300,486 | 235,651 |
Net revenue | $ 854,413 | $ 801,949 | $ 1,699,694 | $ 1,485,563 |
Operating margin on net revenue | 30.70% | 28.60% | 29.70% | 28.20% |
Operating Segments | Issuer Solutions | ||||
Segment Reporting | ||||
Adjusted operating income | $ 147,277 | $ 128,493 | $ 281,150 | $ 263,570 |
Net revenue | $ 392,760 | $ 377,862 | $ 780,015 | $ 755,871 |
Operating margin on net revenue | 37.50% | 34.00% | 36.00% | 34.90% |
Operating Segments | Merchant Solutions | ||||
Segment Reporting | ||||
Adjusted operating income | $ 101,996 | $ 89,915 | $ 193,275 | $ 128,272 |
Net revenue | $ 278,588 | $ 261,467 | $ 539,149 | $ 382,079 |
Operating margin on net revenue | 36.60% | 34.40% | 35.90% | 33.60% |
Operating Segments | Netspend | ||||
Segment Reporting | ||||
Adjusted operating income | $ 46,044 | $ 42,481 | $ 94,692 | $ 84,682 |
Net revenue | $ 183,065 | $ 162,620 | $ 380,530 | $ 347,613 |
Operating margin on net revenue | 25.20% | 26.10% | 24.90% | 24.40% |
Corporate Administration and Other | ||||
Segment Reporting | ||||
Adjusted operating income | $ (36,036) | $ (33,340) | $ (71,608) | $ (62,808) |
Intersegment | ||||
Segment Reporting | ||||
Net revenue | (10,345) | (7,012) | (22,734) | (18,982) |
Segment Reconciling Items | ||||
Segment Reporting | ||||
TransFirst M&A and integration expenses | 4,165 | 20,676 | 9,034 | 24,078 |
Litigation, claims, judgements or settlements | (83) | 1,878 | ||
Acquisition intangible amortization | $ 50,943 | $ 58,486 | $ 106,111 | $ 81,407 |
Supplementary Cash Flow Infor46
Supplementary Cash Flow Information - Additional Information (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Supplemental cash flow information: | ||
Equipment acquired under capital lease obligations | $ 2,100 | $ 720,000 |
Software acquired under license agreements | $ 5,900 |
Commitments and Contingencies (
Commitments and Contingencies (Detail) - TelexFree Matter | Oct. 21, 2014claim | Jun. 30, 2017defendant |
Propay | ||
Commitments and Contingencies | ||
Number of additional claims | claim | 4 | |
Minimum | ||
Commitments and Contingencies | ||
Number of defendants | defendant | 1 |
Earnings Per Share - Common Sto
Earnings Per Share - Common Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Basic EPS: | ||||
Net income attributable to TSYS common shareholders | $ 115,014 | $ 69,708 | $ 220,882 | $ 160,336 |
Basic EPS | $ 0.62 | $ 0.38 | $ 1.20 | $ 0.87 |
Diluted EPS: | ||||
Net income attributable to TSYS common shareholders | $ 115,014 | $ 69,708 | $ 220,882 | $ 160,336 |
Diluted EPS | $ 0.62 | $ 0.38 | $ 1.19 | $ 0.87 |
Common Stock | ||||
Basic EPS: | ||||
Net income attributable to TSYS common shareholders | $ 115,014 | $ 69,708 | $ 220,882 | $ 160,336 |
Less income allocated to nonvested awards | (252) | (347) | (631) | (850) |
Net income allocated to common stock for EPS calculation | $ 114,762 | $ 69,361 | $ 220,251 | $ 159,486 |
Average common shares outstanding | 183,741 | 183,724 | 183,484 | 183,489 |
Basic EPS | $ 0.62 | $ 0.38 | $ 1.20 | $ 0.87 |
Diluted EPS: | ||||
Net income attributable to TSYS common shareholders | $ 115,014 | $ 69,708 | $ 220,882 | $ 160,336 |
Less income allocated to nonvested awards | (252) | (346) | (631) | (847) |
Add income allocated to nonvested awards | 252 | 631 | ||
Net income allocated to common stock for EPS calculation | $ 115,014 | $ 69,362 | $ 220,882 | $ 159,489 |
Average common shares outstanding | 183,741 | 183,724 | 183,484 | 183,489 |
Increase due to assumed issuance of shares related to common equivalent shares outstanding | 1,121 | 874 | 1,093 | 846 |
Average nonvested awards | 425 | 545 | ||
Average common and common equivalent shares outstanding | 185,287 | 184,598 | 185,122 | 184,335 |
Diluted EPS | $ 0.62 | $ 0.38 | $ 1.19 | $ 0.87 |
Earnings Per Share - Participat
Earnings Per Share - Participating Securities (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Basic EPS: | ||||
Basic EPS | $ 0.62 | $ 0.38 | $ 1.20 | $ 0.87 |
Diluted EPS: | ||||
Diluted EPS | $ 0.62 | $ 0.38 | $ 1.19 | $ 0.87 |
Participating Securities | ||||
Basic EPS: | ||||
Net income allocated to nonvested awards | $ 252 | $ 347 | $ 631 | $ 850 |
Average common shares outstanding | 412 | 934 | 536 | 989 |
Basic EPS | $ 0.61 | $ 0.37 | $ 1.18 | $ 0.86 |
Diluted EPS: | ||||
Net income allocated to nonvested awards(c) | $ 250 | $ 346 | $ 628 | $ 847 |
Average common and common equivalent shares outstanding(d) | 412 | 934 | 536 | 989 |
Diluted EPS | $ 0.61 | $ 0.37 | $ 1.17 | $ 0.86 |
Earnings Per Share - Anti-dilut
Earnings Per Share - Anti-dilutive Securities (Details) - shares shares in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Earnings Per Share | ||||
Anti-dilutive stock options and nonvested awards excluded from diluted EPS calculation | 0.6 | 1.9 | 0.5 | 2 |
Acquisitions - Redeemable Nonco
Acquisitions - Redeemable Noncontrolling Interest (Details) - USD ($) $ in Thousands | 1 Months Ended | 6 Months Ended | |
Feb. 28, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | |
Redeemable Noncontrolling Interest | |||
Purchase of noncontrolling interest | $ 70,000 | $ 5,878 | |
Central Payments Co., LLC | |||
Redeemable Noncontrolling Interest | |||
Noncontrolling equity interest acquired (as a percent) | 10.00% | ||
Purchase of noncontrolling interest | $ 70,000 | ||
Noncontrolling equity interest (as a percent) | 15.00% | ||
Central Payments Co., LLC | Additional Paid-In Capital | |||
Redeemable Noncontrolling Interest | |||
Decrease from acquisition of noncontrolling interest | $ 60,200 | ||
Central Payments Co., LLC | |||
Redeemable Noncontrolling Interest | |||
Decrease to noncontrolling interest | $ 9,800 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Jul. 24, 2017 | Jun. 30, 2017 |
Subsequent Events | ||
Common stock dividend (in dollars per share) | $ 0.10 | |
Subsequent Events | ||
Subsequent Events | ||
Increase in regular quarterly dividend payable on common stock (as a percent) | 30.00% | |
Common stock dividend (in dollars per share) | $ 0.13 |