Exhibit 99.1
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, 2002
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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
TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Financial Statements
December 31, 2002, 2001, and 2000
(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, 2002 and
2001, and the related statements of operations and changes in plan equity for
each of the years in the three-year period ended December 31, 2002. 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, 2002 and 2001, 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, 2002 in conformity with accounting
principles generally accepted in the United States of America.
April 11, 2003
/s/KPMG LLP
TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Statements of Financial Condition
December 31, 2002 and 2001
2002 2001
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ASSETS
Common stock of Total System Services, Inc. at market value -
1,790,666 shares (cost $29,840,943) in 2002 and
1,599,286 shares (cost $25,822,977) in 2001 (note 2) $ 24,173,986 33,872,868
Dividends receivable 30,500 23,979
Contributions receivable 487,962 433,493
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$ 24,692,448 34,330,340
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PLAN EQUITY
Plan equity (5,385 and 5,850 participants at
December 31, 2002 and 2001, respectively) $ 24,692,448 34,330,340
============ ============
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, 2002, 2001, and 2000
2002 2001 2000
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Dividend income $ 108,225 93,195 75,035
Realized gain on distributions to participants
(note 4) 1,913,128 4,686,645 2,093,104
Unrealized (depreciation) appreciation in common
stock of Total System Services, Inc. (note 3) (13,716,848) (6,065,826) 7,748,715
Contributions (notes 1 and 2):
Participants 7,575,583 6,650,650 5,684,730
Participating employers:
Total System Services, Inc. 3,116,193 2,518,911 2,220,960
Columbus Depot Equipment Company 154 149 365
TSYS Total Solutions, Inc. -- 264,872 239,780
Columbus Productions, Inc. 49,355 57,972 54,049
TSYS Canada, Inc. 25,363 18,592 16,278
TSYS Total Debt Management, Inc. 62,385 -- --
ProCard, Inc. 27,653 -- --
DotsConnect, Inc. -- 56,101 28,769
Vital Processing Services, L.L.C. 511,160 423,270 305,280
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Total employer contributions 3,792,263 3,339,867 2,865,481
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(Decrease) increase in Plan equity
before withdrawals (327,649) 8,704,531 18,467,065
Withdrawals by participants - common stock of
Total System Services, Inc. at market value
(441,103 shares in 2002, 418,335 shares in 2001,
and 435,792 shares in 2000) (notes 2 and 4) (9,310,243) (10,849,350) (7,734,028)
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(Decrease) increase in Plan equity
for the year (9,637,892) (2,144,819) 10,733,037
Plan equity at beginning of year 34,330,340 36,475,159 25,742,122
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Plan equity at end of year $ 24,692,448 34,330,340 36,475,159
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See accompanying notes to financial statements.
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TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 2002, 2001, and 2000
(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).
TSYS serves as the Plan administrator. Prior to August 1, 2002, the Plan
agent was State Street Bank and Trust Company. Effective August 1, 2002,
the Plan agent is Mellon Investor Services, LLC, hereafter referred to as
"Agent."
Prior to July 1, 2002, all employees who work twenty hours per week or
more were eligible to participate in the Plan after completing three
months of continuous employment prior to the beginning of a calendar
quarter. Effective July 1, 2002, the Plan was amended to allow employees
who work 20 hours per week or more to become eligible to participate in
the plan on the first payroll date after completing three months of
continuous employment. Effective December 31, 2002, employees of TSYS or
TSYS affiliates who are employed in a country other than the United
States and are eligible to participate in a compensatory stock plan
sponsored by TSYS or TSYS affiliates similar to the Plan that has been
established pursuant to the laws of that country are not eligible to
participate in the Plan. Participants contribute to the Plan through
payroll deductions as a percentage of compensation. The minimum
contribution is 0.5%, and the maximum contribution ranges from 3% to 7%,
based on years of service. Effective July 1, 2002, the minimum allowable
contribution is 1%. 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 each participant may withdraw at any time all or
some of his account balance. The participant may elect to receive the
proceeds in the form of shares of common stock of TSYS or in a lump-sum
cash distribution. Prior to January 23, 2002, participants who had
previously withdrawn shares from their Plan account remained eligible to
participate, but with certain exceptions were precluded from receiving
matching contributions from the Plan sponsor for a specified period of
time. Effective January 23, 2002, the Plan was amended to allow employees
to make unlimited withdrawals without their employer matching
contributions being suspended.
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.
(2) SUMMARY OF ACCOUNTING POLICIES
The investment in common stock of TSYS is stated at market value. The
2002 and 2001 market values are based on the closing price at year-end.
The December 31, 2002 and 2001 market values were $13.50 and $21.18 per
share, respectively.
(Continued)
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TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 2002, 2001, and 2000
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, 2002, 2001, and 2000, 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 $1,827, $28,587, and $22,650 for
the years ended December 31, 2002, 2001, and 2000, 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 (DEPRECIATION) APPRECIATION IN COMMON STOCK OF TSYS
Changes in unrealized (depreciation) appreciation in common stock of TSYS
are as follows:
2002 2001 2000
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Unrealized (depreciation) appreciation
at end of year $ (5,666,957) 8,049,891 14,115,717
Unrealized appreciation at beginning
of year 8,049,891 14,115,717 6,367,002
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Unrealized (depreciation)
appreciation for the year $ (13,716,848) (6,065,826) 7,748,715
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(Continued)
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TOTAL SYSTEM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 2002, 2001, and 2000
(4) REALIZED GAIN ON WITHDRAWAL DISTRIBUTIONS TO PARTICIPANTS
The gain realized on withdrawal distributions to participants is
summarized as follows:
2002 2001 2000
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Market value at dates of distribution or
redemption of shares of common
stock of TSYS $ 9,310,243 10,849,350 7,734,028
Less cost (computed on an average
cost basis) of shares of common
stock of TSYS distributed or
redeemed 7,397,115 6,162,705 5,640,924
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Total realized gain $ 1,913,128 4,686,645 2,093,104
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