Exhibit 99.2
TSYS Announces Second Quarter 2005 Earnings
Page 4 of 9
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TSYS
Financial Highlights
(Unaudited)
(In thousands, except per share data)
--------------------------------------- --------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------- --------------------------------------
Percentage Percentage
2005 2004 Change 2005 2004 Change
------------ ------------ ---------- ----------- ----------- ----------
Revenues
Electronic payment processing
services $ 217,048 184,987 17.3 % $ 421,805 362,378 16.4 %
Merchant services 68,696 6,876 899.0 95,801 13,241 623.5
Other services 45,324 41,827 8.4 93,838 82,675 13.5
------------ ------------ ----------- -----------
Revenues before reimbursables 331,068 233,690 41.7 611,444 458,294 33.4
Reimbursable items 79,175 55,932 41.6 148,783 116,564 27.6
------------ ------------ ----------- -----------
Total revenues 410,243 289,622 41.6 760,227 574,858 32.2
------------ ------------ ----------- -----------
Expenses
Employment expenses 117,201 82,224 42.6 214,718 170,086 26.2
Net occupancy & equipment expenses 68,496 66,493 3.0 133,889 124,542 7.5
Other operating expense 69,025 37,701 83.0 120,185 72,252 66.3
------------ ------------ ----------- -----------
Expenses before reimbursables 254,722 186,418 36.6 468,792 366,880 27.8
Reimbursable items 79,175 55,932 41.6 148,783 116,564 27.6
------------ ------------ ----------- -----------
Total operating expenses 333,897 242,350 37.8 617,575 483,444 27.7
------------ ------------ ----------- -----------
Operating Income 76,346 47,272 61.5 142,652 91,414 56.0
------------ ------------ ----------- -----------
Other Income:
Interest income 1,078 537 100.8 2,297 1,042 120.5
Interest expense (105) (39) 172.0 (175) (782) (77.6)
Loss on foreign currency translation,
net (494) (30) nm (827) (101) 716.7
------------ ------------ ----------- -----------
Other Income (Expense) 479 468 2.3 1,295 159 717.1
------------ ------------ ----------- -----------
Income before Income Taxes, Minority
Interest and Equity in Income of
Joint Ventures 76,825 47,740 60.9 143,947 91,573 57.2
Income Taxes 26,729 18,471 44.7 51,409 35,226 45.9
Minority Interest (43) (67) (36.3) (112) (160) (29.8)
Equity in Income of Joint Ventures 590 6,684 (91.2) 4,340 12,260 (64.6)
------------ ------------ ----------- -----------
Net Income $ 50,643 35,886 41.1 % $ 96,766 68,447 41.4 %
============ ============ =========== ===========
Basic Earnings Per Share $ 0.26 0.18 41.0 % $ 0.49 0.35 41.2 %
============ ============ =========== ===========
Diluted Earnings Per Share $ 0.26 0.18 41.0 % $ 0.49 0.35 41.3 %
============ ============ =========== ===========
Dividend Declared Per Share $ 0.06 0.04 $ 0.10 0.06
============ ============ =========== ===========
Average Common Shares Outstanding 197,078 196,846 197,050 196,845
============ ============ =========== ===========
Average Common and Common
Equivalent Shares Outstanding 197,295 197,175 197,265 197,195
============ ============ =========== ===========
Effective Tax Rate 34.8% 34.2% 35.0% 34.2%
============ ============ =========== ===========
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EFFECTIVE INCOME TAX RATE CALCULATION
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Income taxes (A) $ 26,729 18,471 $ 51,409 35,226
============ ============ =========== ===========
Income before Income Taxes,
Minority Interest and Equity in
Income of Joint Ventures $ 76,825 47,740 $ 143,947 91,573
Adjustments: Equity in Income of Vital - 6,366 3,241 11,567
Minority Interest (43) (67) (112) (160)
------------ ------------ ----------- -----------
Adjusted Income before income taxes (B)$ 76,782 54,039 $ 147,076 102,980
============ ============ =========== ===========
Effective Tax Rate (A/B) 34.8% 34.2% 35.0% 34.2%
============ ============ =========== ===========
nm = not meaningful
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TSYS Announces Second Quarter 2005 Earnings
Page 5 of 9
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TSYS
Segment Breakdown
(Unaudited)
(In thousands)
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Three Months Ended June 30, 2005 Three Months Ended June 30, 2004
--------------------------------------------------- ----------------------------------------------------
Domestic- International- Merchant Domestic- International- Merchant
based support based support Processing Consoli- based support based support Processing Consoli-
services services Services dated services services Services dated
--------------------------------------------------- --------------------------------------------------
Revenue before
reimbursables $ 239,567 30,480 64,864 334,911 207,894 25,796 - 233,690
Intersegment revenue (3,797) - (46) (3,843) - - - -
----------------------------------------------- --------------------------------------------------
Revenues before
reimbursables from
external customers $ 235,770 30,480 64,818 331,068 207,894 25,796 - 233,690
=============================================== ==================================================
Total revenue $ 305,284 35,128 76,103 416,515 262,113 27,511 - 289,624
Intersegment revenue (6,226) - (46) (6,272) (2) - - (2)
----------------------------------------------- --------------------------------------------------
Revenues from external
customers $ 299,058 35,128 76,057 410,243 262,111 27,511 - 289,622
=============================================== ==================================================
Depreciation and
amortization $ 28,096 4,248 4,439 36,783 23,484 3,187 - 26,671
=============================================== ==================================================
Segment operating income $ 63,099 (835) 14,082 76,346 40,498 6,774 - 47,272
=============================================== ==================================================
Income tax expense $ 21,897 (572) 5,404 26,729 13,758 2,537 2,176 18,471
=============================================== ==================================================
Equity in income of
joint ventures $ - 590 - 590 - 318 6,366 6,684
=============================================== ==================================================
Net Income $ 42,118 (336) 8,861 50,643 27,212 4,485 4,189 35,886
=============================================== ==================================================
Identifiable assets 1,239,956 180,384 200,936 1,621,276
Intersegment assets (298,461) (1) (4) (298,466)
------------------------------------------------
Total assets 941,495 180,383 200,932 1,322,810
================================================
Six Months Ended June 30, 2005 Six Months Ended June 30, 2004
--------------------------------------------------- ----------------------------------------------------
Domestic- International- Merchant Domestic- International- Merchant
based support based support Processing Consoli- based support based support Processing Consoli-
services services Services dated services services Services dated
--------------------------------------------------- --------------------------------------------------
Revenue before
reimbursables $ 469,089 61,328 86,152 616,569 409,512 48,782 - 458,294
Intersegment revenue (5,079) - (46) (5,125) - - - -
----------------------------------------------- --------------------------------------------------
Revenues before
reimbursables from
external customers $ 464,010 61,328 86,106 611,444 409,512 48,782 - 458,294
=============================================== ==================================================
Total revenue $ 595,810 71,743 100,929 768,482 522,733 52,129 - 574,862
Intersegment revenue (8,209) - (46) (8,255) (4) - - (4)
----------------------------------------------- --------------------------------------------------
Revenues from external
customers $ 587,601 71,743 100,883 760,227 522,729 52,129 - 574,858
=============================================== ==================================================
Depreciation and
amortization $ 55,555 8,016 5,951 69,522 46,763 6,018 - 52,781
=============================================== ==================================================
Segment operating income $ 123,511 2,006 17,135 142,652 80,071 11,343 - 91,414
=============================================== ==================================================
Income tax expense $ 42,628 1,067 7,714 51,409 27,140 4,130 3,956 35,226
=============================================== ==================================================
Equity in income of
joint ventures $ - 1,099 3,241 4,340 - 693 11,567 12,260
=============================================== ==================================================
Net Income $ 82,441 1,419 12,906 96,766 53,236 7,602 7,609 68,447
=============================================== ==================================================
Note: Revenues for domestic-based services include electronic payment
processing services and other services provided from the United States to
clients domiciled in the United States or other countries. Revenues from
international-based services include electronic payment processing
services and other services provided from outside the United States to
clients based mainly outside the United States. Revenues from merchant
processing services include Vital's merchant processing and related
services.
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TSYS Announces Second Quarter 2005 Earnings
Page 6 of 9
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TSYS
Balance Sheet
(Unaudited)
(In thousands)
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June 30, December 31,
2005 2004
-------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 143,725 231,806
Restricted cash 27,841 24,993
Accounts receivable, net 209,546 144,827
Deferred income tax assets 6,169 10,791
Prepaid expenses and other current assets 48,135 35,739
-------------------------------------
Total current assets 435,416 448,156
Property and equipment, net 272,092 263,584
Computer software, net 290,585 268,647
Contract acquisition costs, net 159,767 132,428
Equity investments, net 3,888 54,400
Goodwill, net 111,988 70,561
Other intangible assets, net 15,323 4,692
Other assets 33,751 39,475
-------------------------------------
Total assets $ 1,322,810 1,281,943
=====================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 45,762 75,188
Accrued salaries and employee benefits 47,821 46,725
Current portion of debt and obligations under capital leases 2,123 1,828
Other current liabilities 155,760 154,162
-------------------------------------
Total current liabilities 251,466 277,903
Obligations under capital leases excluding current portion 3,455 4,508
Long-term debt 91 -
Deferred income tax liabilities 126,698 131,106
-------------------------------------
Total liabilities 381,710 413,517
-------------------------------------
Minority interests in consolidated subsidiaries 3,809 3,814
-------------------------------------
Shareholders' Equity:
Common stock 19,781 19,759
Additional paid-in capital 45,357 44,732
Accumulated other comprehensive income 10,006 15,373
Treasury stock (13,233) (13,573)
Retained earnings 875,380 798,321
-------------------------------------
Total shareholders' equity 937,291 864,612
------------------------------------
Total liabilities and shareholders' equity $ 1,322,810 1,281,943
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TSYS Announces Second Quarter 2005 Earnings
Page 7 of 9
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TSYS
Cash Flow
(Unaudited)
(In thousands)
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Six Months Ended June 30:
----------------------------------
2005 2004
----------------------------------
Cash flows from operating activities:
Net income $ 96,766 68,447
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interests in consolidated subsidiaries' net income 112 160
Equity in income of joint ventures (4,340) (12,260)
Loss on currency translation adjustments, net 827 101
Depreciation and amortization 69,522 52,781
Impairment of developed software 3,137 10,059
Charges for (recoveries of) bad debt expense and billing
adjustments 2,688 (1,373)
Charges for transaction processing provisions 4,595 4,865
Deferred income tax expense (benefit) 4,622 9,938
Loss on disposal of equipment, net 1,725 378
(Increase) decrease in:
Accounts receivable (35,782) 4,950
Prepaid expenses and other assets 1,142 (17,645)
Increase (decrease) in:
Accounts payable (47,132) 10,759
Accrued salaries and employee benefits (15,124) (13,811)
Billings in excess of costs and profits on uncompleted contracts - (16,166)
Other current liabilities (41,299) 11,272
----------------------------------
Net cash provided by operating activities 41,459 112,455
----------------------------------
Cash flows from investing activities:
Purchase of property and equipment, net (20,383) (39,326)
Additions to licensed computer software from vendors (12,020) (14,001)
Additions to internally developed computer software (9,015) (3,703)
Cash acquired in acquisition 38,799 -
Cash used in acquisition (95,538) -
Dividends received from joint ventures 1,659 15,876
Contract acquisition costs (10,981) (3,283)
----------------------------------
Net cash used in investing activities (107,479) (44,437)
----------------------------------
Cash flows from financing activities:
Purchases of common stock - (1,188)
Proceeds from borrowings of long-term debt 47,660 -
Principal payments on long-term debt borrowings (47,650) -
Principal payments on capital lease obligations and software obligations (791) (42,039)
Dividends paid on common stock (19,707) (7,873)
Proceeds from exercise of stock options 427 1,192
----------------------------------
Net cash used in financing activities (20,061) (49,908)
----------------------------------
Effect of foreign currency translation on cash and cash equivalents (2,000) 946
----------------------------------
Net decrease in cash and cash equivalents (88,081) 19,056
Cash and cash equivalents at beginning of year 231,806 122,874
----------------------------------
Cash and cash equivalents at end of period $ 143,725 141,930
==================================
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TSYS Announces Second Quarter 2005 Earnings
Page 8 of 9
Geographic Area Data:
The following geographic area data represents revenues for the three months
ended June 30 based on where the client is domiciled:
Three Months Ended June 30,
-------------------------------------------------
2005 % 2004 %
-------------------------------------------------
(dollars in millions):
United States $ 350.1 85.3 % 237.2 81.9 %
Europe 31.3 7.6 24.2 8.4
Canada* 22.4 5.5 21.3 7.3
Japan 3.9 1.0 3.4 1.2
Mexico 1.7 0.4 2.9 1.0
Other 0.8 0.2 0.6 0.2
-------------------------------------------------
$ 410.2 100.0 % 289.6 100.0 %
=================================================
The following geographic area data represents revenues for the six months ended
June 30 based on where the client is domiciled:
Six Months Ended June 30,
-------------------------------------------------
2005 % 2004 %
-------------------------------------------------
(dollars in millions):
United States $ 640.1 84.2 % 474.3 82.5 %
Europe 64.4 8.5 45.5 7.9
Canada* 43.5 5.7 41.0 7.1
Japan 7.6 1.0 6.9 1.2
Mexico 3.4 0.4 5.8 1.0
Other 1.2 0.2 1.4 0.3
-------------------------------------------------
$ 760.2 100.0 % 574.9 100.0 %
=================================================
Geographic Area Revenue by Operating Segment:
The following tables reconcile segment revenues to revenues by reporting
segment for the three months ended June 30:
Three Months Ended June 30,
----------------------------------------------------------------------
Domestic-based International-based Merchant processing
support services support services services
----------------------------------------------------------------------
2005 2004 2005 2004 2005 2004
----------------------------------------------------------------------
(dollars in millions):
United States $ 274.3 237.2 - - 75.8 -
Europe 0.1 0.1 31.2 24.1 - -
Canada* 22.3 21.3 - - 0.1 -
Japan - - 3.9 3.4 - -
Mexico 1.7 2.9 - - - -
Other 0.6 0.6 - - 0.2 -
----------------------------------------------------------------------
$ 299.0 262.1 35.1 27.5 76.1 -
======================================================================
The following tables reconcile segment revenues to revenues by reporting
segment for the six months ended June 30:
Six Months Ended June 30,
----------------------------------------------------------------------
Domestic-based International-based Merchant processing
support services support services services
----------------------------------------------------------------------
2005 2004 2005 2004 2005 2004
----------------------------------------------------------------------
(dollars in millions):
United States $ 539.6 474.3 - - 100.5 -
Europe 0.3 0.2 64.1 45.3 - -
Canada* 43.3 41.0 - - 0.2 -
Japan - - 7.6 6.9 - -
Mexico 3.4 5.8 - - - -
Other 1.0 1.4 - - 0.2 -
----------------------------------------------------------------------
$ 587.6 522.7 71.7 52.2 100.9 -
======================================================================
* These revenues include those generated from the Caribbean accounts owned by a
Canadian institution.
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TSYS Announces Second Quarter 2005 Earnings
Page 9 of 9
Supplemental Information:
Accounts on File at June 30:
------------------------------------------------------------------------
2005 % 2004 % % Change
------------------------------------------------------------------------
(in millions):
Consumer 230.0 59.2 % 152.0 53.0 % 51.3
Retail 92.2 23.7 86.5 30.1 6.5
Commercial 28.8 7.4 22.9 8.0 26.1
Government services/EBT 17.1 4.4 14.6 5.1 16.9
Stored Value 13.2 3.4 4.5 1.5 196.2
Debit 7.3 1.9 6.5 2.3 11.5
--------------------------------------------------------
388.6 100.0 % 287.0 100.0 % 35.4
========================================================
June 30, 2005 June 30, 2004
----------------- ----------------
QTD Average Accounts on File (in millions) 380.7 285.0
YTD Average Accounts on File (in millions) 348.2 281.6
Accounts on File at June 30:
------------------------------------------------------------------------
2005 % 2004 % % Change
------------------------------------------------------------------------
(in millions):
Domestic 335.5 86.3 % 240.1 83.7 % 39.7
International 53.1 13.7 46.9 16.3 13.2
--------------------------------------------------------
388.6 100.0 % 287.0 100.0 % 35.4
========================================================
Note: The accounts on file between domestic and international is based on the
geographic domicile of processing clients.
Growth in Accounts on File (in millions):
- -----------------------------------------------
June 2004 to June 2003 to
June 2005 June 2004
----------------- ----------------
Beginning balance 287.0 262.5
Change in accounts on file due to:
Internal growth of existing clients 38.5 29.6
New clients 69.3 6.6
Purges/Sales (5.0) (7.4)
Deconversions (1.2) (4.3)
----------------- ----------------
Ending balance 388.6 287.0
================= ================
Number of Employees (FTEs): 2005 2004
- ----------------------------------------------- ----------------- ----------------
At June 30, 6,475 5,519
Quarterly average for period ended June 30, 6,432 5,504
YTD average for period ended June 30, 6,111 5,564
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