FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 1-10254
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TOTAL SYSTEM SERVICES, INC. EMPLOYEE STOCK PURCHASE PLAN
TOTAL SYSTEM SERVICES, INC.
1600 FIRST AVENUE
COLUMBUS, GEORGIA 31901
(706) 649-2204
Exhibit 99.1
TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Financial Statements
December 31, 2001, 2000, and 1999
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Plan Administrator
Total System Services, Inc. Employee
Stock Purchase Plan:
We have audited the accompanying statements of financial condition of the Total
System Services, Inc. Employee Stock Purchase Plan as of December 31, 2001 and
2000 and the related statements of operations and changes in plan equity for
each of the years in the three-year period ended December 31, 2001. These
financial statements are the responsibility of the Plan's administrator. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of the Total System Services,
Inc. Employee Stock Purchase Plan as of December 31, 2001 and 2000 and the
results of its operations and changes in its plan equity for each of the years
in the three-year period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.
/s/KPMG LLP
March 1, 2002
TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Statements of Financial Condition
December 31, 2001 and 2000
Assets 2001 2000
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Common stock of Total System Services, Inc. at market value -
1,599,286 shares (cost $25,822,977) in 2001 and
1,612,733 shares (cost $21,969,189) in 2000 (note 2) $33,872,868 36,084,906
Dividends receivable 23,979 20,204
Contributions receivable 433,493 370,049
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$34,330,340 36,475,159
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Plan Equity
Plan equity (5,850 and 5,241 participants at
December 31, 2001 and 2000, respectively) $34,330,340 36,475,159
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See accompanying notes to financial statements.
2
TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Statements of Operations and Changes in Plan Equity
Years ended December 31, 2001, 2000, and 1999
2001 2000 1999
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Dividend income $ 93,195 75,035 60,016
Realized gain on distributions to participants
(note 4) 4,686,645 2,093,104 2,576,977
Unrealized appreciation (depreciation) in common
stock of Total System Services, Inc. (note 3) (6,065,826) 7,748,715 (13,058,157)
Contributions (notes 1 and 2):
Participants 6,650,650 5,684,730 5,141,574
Participating employers:
Total System Services, Inc. 2,518,911 2,220,960 2,071,247
Columbus Depot Equipment Company 149 365 411
TSYS Total Solutions, Inc. 264,872 239,780 183,889
Columbus Productions, Inc. 57,972 54,049 54,768
TSYS Canada, Inc. 18,592 16,278 17,887
DotsConnect, Inc. 56,101 28,769 --
Vital Processing Services, L.L.C 423,270 305,280 248,987
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Total employer contributions 3,339,867 2,865,481 2,577,189
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8,704,531 18,467,065 (2,702,401)
Withdrawals by participants - common stock of
Total System Services, Inc. at market value
(418,335 shares in 2001, 435,792 shares in 2000,
and 321,694 shares in 1999) (notes 2 and 4)
(10,849,350) (7,734,028) (6,230,333)
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Increase (decrease) in Plan equity
for the year (2,144,819) 10,733,037 (8,932,734)
Plan equity at beginning of year 36,475,159 25,742,122 34,674,856
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Plan equity at end of year $34,330,340 36,475,159 25,742,122
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See accompanying notes to financial statements.
3
TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 2001, 2000, and 1999
(1) Description of the Plan
The Total System Services, Inc. Employee Stock Purchase Plan (the Plan)
was implemented as of October 1, 1984. The Plan is designed to enable
participating Total System Services, Inc. (TSYS) and subsidiaries'
employees to purchase shares of common stock of TSYS at prevailing market
prices from contributions made by them and TSYS and subsidiaries (the
Participating Employers).
Synovus serves as the Plan administrator. State Street Bank and Trust
Company serves as the Plan agent, hereafter referred to as "Agent."
All employees who work twenty hours per week or more are eligible to
participate in the Plan after completing three months of continuous
employment prior to the beginning of a calendar quarter. Participants who
have previously withdrawn shares from their Plan account remain eligible
to participate, but with certain exceptions, are precluded from receiving
matching contributions from the Plan sponsor for a specified period of
time. A participant may contribute to the Plan based on a formula through
payroll deductions in multiples of $1 with a minimum deduction of $10 per
month and a maximum deduction not to exceed a specified percentage of
compensation (ranging from 3% to 7%). Effective January 1, 1999,
participants initially joining the Plan, requesting reinstatement in the
Plan or making a change under the Plan must select their payroll
deduction amount as a percentage of compensation, with a minimum
contribution level of 0.5%. Participants in the Plan prior to January 1,
1999 may continue contributing to the Plan through payroll deductions in
whole dollar amounts. Contributions to the Plan are to be made by the
Participating Employers in an amount equal to one-half of each
participant's contribution. Participants are immediately vested in their
contributions and Participating Employers' matching contributions.
The Plan provides, among other things, that all expenses of the Plan and
its administration shall be paid by TSYS with the exception of brokers'
fees, commissions, postage, and transaction costs which are included in
the cost of each participant's investment in common stock of TSYS.
The Plan provides that upon withdrawal from the Plan, each participant
may elect to receive the proceeds from his account balance in the form of
shares of common stock of TSYS and a check for any fractional shares and
cash held, a lump-sum cash distribution, or a combination of both.
Effective January 23, 2002, the Plan was amended to allow employees to
make unlimited withdrawals without their employer matching contributions
being suspended for a specific period of time.
TSYS expects to maintain the Plan indefinitely, but reserves the right to
terminate or amend the Plan at any time, provided, however, that no
termination or amendment shall affect or diminish any participant's right
to the benefit of contributions made by him or TSYS prior to the date of
such amendment or termination.
4 (Continued)
TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 2001, 2000, and 1999
(2) Summary of Accounting Policies
The investment in common stock of TSYS is stated at market value. The
2001 and 2000 market values are based on the closing price at year-end.
The December 31, 2001 and 2000 market values were $21.18 and $22.375 per
share, respectively.
The realized gain on distributions to participants is determined by
computing the difference between the average cost per share of common
stock and the market value per share at the date of the distribution to
the participants.
Contributions to and withdrawals from the Plan are accounted for on the
accrual basis. Common stock contributions are recorded at fair value.
During the years ended December 31, 2001, 2000, and 1999, TSYS
contributed one share of stock to each new employee, upon reaching three
months of employment with TSYS. Such contributions were made to the
employees' accounts with the Plan, and resulted in an increase of
employer contributions of approximately $28,587, $22,650, and $25,000 for
the years ended December 31, 2001, 2000, and 1999, respectively.
Effective January 23, 2002, the Plan was amended to eliminate this gift
stock program.
Dividend income is accrued on the record date.
The Plan is not qualified under Sections 401(a) or 501(a) of the Internal
Revenue Code of 1986, as amended. The Plan does not provide for income
taxes because any income is taxable to the participants. Participants in
the Plan must treat as compensation income their pro rata share of
contributions made to the Plan by their employer. Cash dividends paid on
common stock of TSYS purchased under the Plan will be taxed to the
participants on a pro rata basis for Federal and state income tax
purposes during the year any such dividend is received by the participant
or the Plan. Upon disposition of the common stock of TSYS purchased under
the Plan, participants must treat any gain or loss as long-term or
short-term capital gain or loss depending upon when such disposition
occurs.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, and changes therein, and disclosure of
contingent assets and liabilities. Actual results could differ from those
estimates.
(3) Unrealized Appreciation (Depreciation) in Common Stock of TSYS
Changes in unrealized appreciation (depreciation) in common stock of TSYS
are as follows:
2001 2000 1999
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Unrealized appreciation at end of year $ 8,049,891 14,115,717 6,367,002
Unrealized appreciation at beginning of year 14,115,717 6,367,002 19,425,159
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Unrealized appreciation
(depreciation) for the year $ (6,065,826) 7,748,715 (13,058,157)
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5 (Continued)
TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 2001, 2000, and 1999
(4) Realized Gain on Withdrawal Distributions to Participants
The gain realized on withdrawal distributions to participants is
summarized as follows:
2001 2000 1999
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Market value at dates of distribution or
redemption of shares of common stock of TSYS $ 10,849,350 7,734,028 6,230,333
Less cost (computed on an average cost basis)
of shares of common stock of TSYS
distributed or redeemed 6,162,705 5,640,924 3,653,356
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Total realized gain $ 4,686,645 2,093,104 2,576,977
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