Exhibit 99.2
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, 2003
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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. DIRECTOR STOCK PURCHASE PLAN
TOTAL SYSTEM SERVICES, INC.
1200 FIRST AVENUE
COLUMBUS, GEORGIA 31901
(706) 649-2204
TOTAL SYSTEM SERVICES, INC.
DIRECTOR STOCK PURCHASE PLAN
Financial Statements
December 31, 2003, 2002, and 2001
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Plan Administrator
Total System Services, Inc. Director
Stock Purchase Plan:
We have audited the accompanying statements of financial condition of the Total
System Services, Inc. Director Stock Purchase Plan as of December 31, 2003 and
2002, and the related statements of operations and changes in plan equity for
each of the years in the three-year period ended December 31, 2003. 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. Director Stock Purchase Plan as of December 31, 2003 and 2002, 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, 2003 in conformity with accounting
principles generally accepted in the United States of America.
/s/KPMG LLP
March 12, 2004
TOTAL SYSTEM SERVICES, INC.
DIRECTOR STOCK PURCHASE PLAN
Statements of Financial Condition
December 31, 2003 and 2002
Assets 2003 2002
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Common stock of Total System Services, Inc. at market value -
181,445 shares (cost $2,044,510) in 2003 and 160,378 shares
(cost $1,622,077) in 2002 (note 2) $ 5,648,387 2,165,105
Dividends receivable 3,629 2,806
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$ 5,652,016 2,167,911
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Plan Equity
Plan equity (17 and 16 participants at December 31, 2003 and
2002, respectively) $ 5,652,016 2,167,911
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See accompanying notes to financial statements.
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TOTAL SYSTEM SERVICES, INC.
DIRECTOR STOCK PURCHASE PLAN
Statements of Operations and Changes in Plan Equity
Years ended December 31, 2003, 2002, and 2001
2003 2002 2001
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Dividend income $ 13,756 10,606 8,134
Realized gain on distributions to participants
(notes 2 and 4) -- 81,191 394,021
Unrealized appreciation (depreciation) in
common stock of Total System Services,
Inc. (note 3) 3,060,849 (1,243,550) (585,276)
Contributions (notes 1 and 2):
Participants 273,000 304,000 344,000
Total System Services, Inc. 136,500 152,000 172,000
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Increase (decrease) in Plan
equity before withdrawals 3,484,105 (695,753) 332,879
Withdrawals by participants:
Common stock of Total System Services, Inc.
at market value (0 shares in 2003, 8,752
shares in 2002, 22,472 shares in 2001) -
(notes 2 and 4) -- (165,037) (539,328)
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Increase (decrease) in Plan
equity for the year 3,484,105 (860,790) (206,449)
Plan equity at beginning of year 2,167,911 3,028,701 3,235,150
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Plan equity at end of year $ 5,652,016 2,167,911 3,028,701
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See accompanying notes to financial statements.
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TOTAL SYSTEM SERVICES, INC.
DIRECTOR STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 2003, 2002, and 2001
(1) Description of the Plan
The Total System Services, Inc. Director Stock Purchase Plan (Plan) was
implemented as of October 15, 1987. The Plan is designed to enable
participating Total System Services, Inc. (TSYS) directors to purchase
shares of common stock of TSYS at prevailing market prices from
contributions made by them and TSYS.
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."
Any person who currently serves or in the future is elected to serve as a
member, advisory member, or emeritus member of the board of directors of
TSYS is eligible to participate in the Plan. Prior to February 24, 2000,
cash contributions by a participant could not exceed $1,000 per calendar
quarter. Effective February 24, 2000, cash contributions by participants
cannot exceed $5,000 per calendar quarter. Contributions to the Plan are
to be made by TSYS in an amount equal to one-half of each participant's
contribution. Participants are immediately vested in their contributions
and TSYS' 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 or her 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.
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
2003 and 2002 market values are based on the closing price at year-end.
The December 31, 2003 and 2002 market values were $31.13 and $13.50 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 distribution to the
participants.
Contributions by TSYS and participating directors, as well as
withdrawals, are accounted for on the accrual basis.
Dividend income is accrued on the record date.
4 (Continued)
TOTAL SYSTEM SERVICES, INC.
DIRECTOR STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 2003, 2002, and 2001
The Plan's investments include common stock of TSYS which is exposed to
market and credit risks. Due to the level of risk associated with
investment securities, it is at least reasonably possible that changes in
the values of investment securities will occur in the near term and that
such changes could materially affect the amounts reported in the Plan's
financial statements.
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 TSYS. Cash dividends paid on common
stock of TSYS purchased under the Plan will be taxable 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.
Management of the Plan believes that the carrying amount of receivables
is a reasonable approximation of the fair value due to the short-term
nature of these instruments.
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:
2003 2002 2001
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Unrealized appreciation at end of year $ 3,603,877 543,028 1,786,578
Unrealized appreciation at beginning of
year 543,028 1,786,578 2,371,854
Unrealized appreciation
(depreciation) for the year $ 3,060,849 (1,243,550) (585,276)
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5 (Continued)
TOTAL SYSTEM SERVICES, INC.
DIRECTOR STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 2003, 2002, and 2001
(4) Realized Gain on Withdrawal Distributions to Participants
The gain realized on withdrawal distributions to participants is
summarized as follows:
2003 2002 2001
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Market value at dates of distribution or
redemption of common stock of TSYS $ --- 165,037 539,328
Less cost (computed on an average
cost basis) of shares of common
stock of TSYS distributed or
redeemed --- 83,846 145,307
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Total realized gain $ --- 81,191 394,021
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