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8-K - FORM 8-K - TOTAL SYSTEM SERVICES INCg21807e8vk.htm
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Exhibit 99.1
(TSYS LOGO) PRESS RELEASE  
 
(LINE LOGO)
Total System Services, Inc.
One TSYS Way
Post Office Box 2567
Columbus GA 31902-2567
  +1.706.649.2307
+1.706.649.5740
www.tsys.com
For immediate release:
Contacts:
Shawn Roberts
TSYS Investor Relations
+1.706.644.6081
shawnroberts@tsys.com
TSYS Reports Fourth Quarter and Full Year 2009 Results
Columbus, Ga., January 20, 2010 — TSYS (NYSE: TSS) today reported results for the fourth quarter and full year 2009. On a constant currency basis, TSYS’ total revenues for 2009 were $1,734.9 million, an increase of 0.8%. On a reported basis, total revenues declined 2.0% for the year to $1,688.1 million.
On a constant currency basis, TSYS’ total revenues for the fourth quarter were $430.9 million, a decrease of 0.4% as compared to last year. On a reported basis, total revenues increased 0.5% for the quarter to $434.8 million.
Basic earnings per share (EPS) from continuing operations were $0.31 for the fourth quarter, $0.01 ahead of consensus estimates and 9.0% below 2008. Full year EPS of $1.12 from continuing operations matched consensus estimates and was 11.2% below last year.
TSYS’ guidance for 2010 includes the impact of deconverted portfolios (whether as the result of bank failures, portfolio sales or otherwise), price compression, reduction in one-time termination fees and currency impact, and the current economic environment of the credit card market.
                                             
    2010 Guidance
    Range    
    (in millions, except per   Percent
    share amounts)   Change
Total revenues
  $ 1,616     to   $ 1,648       (4 %)   to     (2 %)
Reimbursable items
  $ 279     to   $ 284       3 %   to     5 %
Revenues before reimbursable items
  $ 1,337     to   $ 1,364       (6 %)   to     (4 %)
Income from continuing operations
  $ 187     to   $ 191       (15 %)   to     (13 %)
EPS from continuing operations
  $ 0.95     to   $ 0.97       (15 %)   to     (14 %)
Average Shares Outstanding
          197.7                              

Page 1 of 12


 

(TSYS LOGO) PRESS RELEASE  
 
(LINE LOGO)
“While 2010 is going to be a challenging year, we will continue to work aggressively to reduce our costs, including reducing staff, while expanding internationally and maintaining our technological advantage in the market place. We have an experienced and talented team at TSYS who will successfully execute our strategy to return growth to our business. In addition, with our strong balance sheet and cash flow, we will continue to aggressively pursue strategic acquisitions that diversify us and expand our presence in the payments processing business,” said Philip W. Tomlinson, chairman of the board and chief executive officer of TSYS.
Conference Call
TSYS will host its quarterly conference call at 5:00 p.m. ET on Wednesday, January 20. The conference call can be accessed via simultaneous Internet broadcast at tsys.com by clicking on the link under “Webcasts” on the main homepage. The replay will be archived for 12 months and will be available approximately 30 minutes after the completion of the call. A slide presentation to accompany the call will be available by clicking on the link under “Webcasts” on the main homepage of tsys.com.
Non-GAAP Measures
This release contains the non-GAAP financial measures of revenues and operating results on a constant currency basis to describe TSYS’ performance. Management uses these non-GAAP financial measures to better understand and assess TSYS’ operating results and financial performance. TSYS believes these non-GAAP financial measures provide meaningful additional information about TSYS to assist investors in understanding and evaluating its operating results.
Additional information about non-GAAP financial measures and a reconciliation of those measures to the most directly comparable GAAP measures are included on page 11 of this release.
About TSYS
TSYS (NYSE: TSS) is one of the world’s largest companies for outsourced payment services, offering a broad range of issuer- and acquirer-processing technologies that support consumer-finance, credit, debit, healthcare, loyalty and prepaid services for financial institutions and retail companies in the Americas, EMEA and Asia-Pacific regions. For more information contact news@tsys.com or log on to www.tsys.com. TSYS routinely posts all important information on its Web site.
This press release contains statements that constitute “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements regarding TSYS’ earnings forecast for 2010, and the assumptions underlying such statements including, with respect to TSYS’ earnings forecast for 2010: (1) the economy will not worsen during 2010; (2) there will be no deconversions of large clients during the year other than as previously announced; (3) there will be no significant movement in foreign currency exchange rates related to TSYS’ business during 2010; (4) the anticipated levels in employment, technology and other expenses, which are included in 2010 estimates, will be accomplished; (5) TSYS will not incur significant expenses associated with the conversion of new large clients or acquisitions, or any significant impairment of goodwill or other intangibles; and (6) there will be no significant movements in LIBOR, and no significant draws on the remaining balance of TSYS’

Page 2 of 12


 

(TSYS LOGO) PRESS RELEASE  
 
(LINE LOGO)
revolving credit facility. These statements are based on the current beliefs and expectations of TSYS’ management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results to differ materially from those contemplated by our forward-looking statements in this press release. Many of these factors are beyond TSYS’ ability to control or predict. These factors include, but are not limited to: (1) one or more of the assumptions set forth above upon which TSYS’ 2010 earnings forecast is based is inaccurate; (2) adverse developments with respect to entering into contracts with new clients and retaining current clients; (3) continued consolidation and turmoil in the financial services and other industries during 2010, including the merger of TSYS clients with entities that are not TSYS processing clients, the sale of portfolios by TSYS clients to entities that are not TSYS processing clients and the seizure by banking regulators of TSYS clients; (4) TSYS is unable to control expenses and increase market share; (5) TSYS is unable to manage the impact of slowing economic conditions and consumer spending; (6) the material breach of security of any of TSYS’ systems; (7) the impact of acquisitions, including their being more difficult to integrate than anticipated; (8) changes occur in laws, rules, regulations, credit card association rules or other industry standards affecting TSYS’ business which require significant product development efforts or reduce the market demand for or value of its products; (9) adverse developments with respect to the credit card industry in general, including a decline in the use of credit cards as a payment mechanism; and (10) growth rates of TSYS’ existing clients are lower than anticipated whether as a result of unemployment rates, card delinquencies and charge-off rates or otherwise. Additional factors that could cause actual results to differ materially from those contemplated in this release can be found in TSYS’ filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise.
— more —

Page 3 of 12


 

TSYS Announces 2009 Earnings
Page 4 of 12
TSYS
Financial Highlights
(unaudited)
(in thousands, except per share data)
                                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
                    Percent                     Percent  
    2009     2008     Change     2009     2008     Change  
Revenues
                                               
Electronic payment processing services
  $ 239,795       247,748       (3.2 )%   $ 946,298       995,430       (4.9 )%
Merchant acquiring services
    70,429       69,649       1.1       277,434       261,537       6.1  
Other services
    52,527       50,468       4.1       194,152       199,787       (2.8 )
 
                                       
Revenues before reimbursable items
    362,751       367,865       (1.4 )     1,417,884       1,456,754       (2.7 )
Reimbursable items
    72,089       64,879       11.1       270,178       264,892       2.0  
 
                                       
Total revenues
    434,840       432,744       0.5       1,688,062       1,721,646       (2.0 )
 
                                       
 
                                               
Expenses
                                               
Salaries & other personnel expenses
    140,619       146,504       (4.0 )     581,650       586,295       (0.8 )
Net technology & facilities expenses
    77,644       75,390       3.0       301,820       297,265       1.5  
Spin related expenses
          1,272       (100.0 )           11,140       (100.0 )
Other operating expenses
    51,204       54,258       (5.6 )     192,381       193,379       (0.5 )
 
                                       
Expenses before reimbursable items
    269,467       277,424       (2.9 )     1,075,851       1,088,079       (1.1 )
Reimbursable items
    72,089       64,879       11.1       270,178       264,892       2.0  
 
                                       
Total operating expenses
    341,556       342,303       (0.2 )     1,346,029       1,352,971       (0.5 )
 
                                       
 
                                               
Operating income
    93,284       90,441       3.1       342,033       368,675       (7.2 )
 
                                               
Nonoperating (expenses) income
    (279 )     5,003       nm       (3,441 )     5,772       nm  
 
                                       
 
Income from continuing operations before income taxes, noncontrolling interests and equity in income of equity investments
    93,005       95,444       (2.6 )     338,592       374,447       (9.6 )
Income taxes
    32,799       30,227       8.5       121,238       131,206       (7.6 )
 
                                       
Income from continuing operations before noncontrolling interests and equity in income of equity investments
    60,206       65,217       (7.7 )     217,354       243,241       (10.6 )
Equity in income of equity investments
    2,694       1,064       nm       6,985       7,397       (5.6 )
 
                                       
Income from continuing operations, net of tax
    62,900       66,281       (5.1 )     224,339       250,638       (10.5 )
(Loss) income from discontinued operations, net of tax
    (8 )     302       nm       (5,163 )     1,038       nm  
 
                                       
Net income
    62,892       66,583       (5.5 )     219,176       251,676       (12.9 )
Net income attributable to noncontrolling interests
    (2,678 )     (255 )     nm       (3,963 )     (1,576 )     nm  
 
                                       
 
Net income attributable to TSYS
  $ 60,214       66,328       (9.2 )%   $ 215,213       250,100       (13.9 )%
 
                                       
 
                                               
Basic earnings per share:
                                               
Income from continuing operations to TSYS common shareholders*
  $ 0.31       0.34       (8.9 )%   $ 1.12       1.26       (11.2 )%
 
                                       
(Loss) income from discontinued operations to TSYS common shareholders*
    0.00       0.00       nm       (0.03 )     0.01       nm  
 
                                       
Net income attributable to TSYS common shareholders*
  $ 0.31       0.34       (9.3 )%   $ 1.09       1.26       (13.7 )%
 
                                       
 
                                               
Diluted earnings per share:
                                               
Income from continuing operations to TSYS common shareholders*
  $ 0.31       0.34       (8.9 )%   $ 1.12       1.26       (11.3 )%
 
                                       
(Loss) income from discontinued operations to TSYS common shareholders*
    0.00       0.00       nm       (0.03 )     0.01       nm  
 
                                       
Net income attributable to TSYS common shareholders*
  $ 0.31       0.34       (9.4 )%   $ 1.09       1.26       (13.7 )%
 
                                       
 
                                               
Dividends declared per share
  $ 0.07       0.07             $ 0.28       0.28          
 
                                       
 
                                               
Amounts attributable to TSYS common shareholders:
                                               
Income from continuing operations, net of tax
  $ 60,222       66,026             $ 220,376       249,062          
(Loss) income from discontinued operations, net of tax
    (8 )     302               (5,163 )     1,038          
 
                                       
Net income
  $ 60,214       66,328             $ 215,213       250,100          
 
                                       
 
nm = not meaningful
 
Note: Certain amounts have been reclassified to conform with the presentation adopted in 2009.
 
*   Basic and diluted EPS amounts for continuing operations and net income do not total due to rounding.
 
Basic and diluted EPS is computed based on the two-class method in accordance with the update to Accounting Standards Codification 260 (ASC 260) (previously referred to as FSP EITF 03-6-1). EPS for 2009 and 2008 have been recast to show retroactive adoption of the ASC 260 update.
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TSYS Announces 2009 Earnings
Page 5 of 12
TSYS
Earnings Per Share
(unaudited)
(in thousands, except per share data)
                                                                 
    Three Months Ended     Three Months Ended     Twelve Months Ended     Twelve Months Ended  
    December 31, 2009     December 31, 2008     December 31, 2009     December 31, 2008  
    Common     Participating     Common     Participating     Common     Participating     Common     Participating  
    Stock     Securities     Stock     Securities     Stock     Securities     Stock     Securities  
Basic Earnings per share:
                                                               
Net income
  $ 60,214               66,328               215,213               250,100          
Less income allocated to nonvested awards
    (413 )     413       (521 )     521       (1,644 )     1,644       (2,069 )     2,069  
 
                                               
Net income allocated to common stock for EPS calculation ( a )
  $ 59,801       413       65,807       521       213,569       1,644       248,031       2,069  
 
                                               
 
                                                               
Average common shares outstanding ( b )
    195,835       1,356       195,403       1,551       195,623       1,511       196,106       1,640  
 
                                               
 
                                                               
Average common shares and participating securities
    197,191               196,954               197,134               197,746          
 
                                                       
 
                                                               
Basic Earnings per share ( a )/( b )
  $ 0.31       0.30       0.34       0.34       1.09       1.09       1.26       1.26  
 
                                               
 
                                                               
Diluted Earnings per share:
                                                               
Net income
  $ 60,214               66,328               215,213               250,100          
Less income allocated to nonvested awards
    (413 )     413       (520 )     520       (1,644 )     1,644       (2,069 )     2,069  
 
                                               
Net income allocated to common stock for EPS calculation ( c )
  $ 59,801       413       65,808       520       213,569       1,644       248,031       2,069  
 
                                               
 
                                                               
Average common shares outstanding
    195,835       1,356       195,403       1,551       195,623       1,511       196,106       1,640  
Increase due to assumed issuance of shares related to common equivalent shares outstanding
    63               1               63               20          
 
                                               
 
                                                               
Average common and common equivalent shares outstanding ( d )
    195,898       1,356       195,404       1,551       195,686       1,511       196,126       1,640  
 
                                               
 
                                                               
Average common and common equivalent shares and participating securities
    197,254               196,955               197,197               197,766          
 
                                                       
   
Diluted Earnings per share ( c )/( d )
  $ 0.31       0.30       0.34       0.34       1.09       1.09       1.26       1.26  
 
                                               
 
In June 2008, the Financial Accounting Standards Board (FASB) issued an update to the Accounting Standards Codification 260 (ASC 260), “Earnings Per Share” (previously referred to as FASB Staff Position Emerging Issues Task Force No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,”) and it became effective for TSYS beginning January 1, 2009. Under this standard, unvested awards of share-based payments with rights to receive dividends or dividend equivalents, such as our nonvested awards, are considered participating securities for purposes of calculating earnings per share (“EPS”). Under the two-class method required by ASC 260, a portion of net income is allocated to these participating securities and therefore is excluded from the calculation of EPS allocated to common stock, as shown in the table above. This update to ASC 260 requires retrospective applications for periods prior to the effective date and as a result, all prior period earnings per share data presented herein have been adjusted to conform to these provisions.
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TSYS Announces 2009 Earnings
Page 6 of 12
TSYS
Segment Breakdown
(unaudited)
(in thousands)
                                                                 
    Three Months Ended December 31,   Twelve Months Ended December 31,
                    Change                   Change  
    2009   2008   $   %   2009   2008   $   %  
Revenues before
reimbursable items
                                                               
North America Services
  $ 214,027       234,577       (20,550 )     (8.8 )%     880,668       938,442       (57,774 )     (6.2 )%
International Services
    96,264       77,254       19,010       24.6 %     322,697       307,361       15,336       5.0 %
Merchant Services
    58,676       62,690       (4,014 )     (6.4 )%     242,841       234,467       8,374       3.6 %
Intersegment revenues
    (6,216 )     (6,656 )     440       (6.6 )%     (28,322 )     (23,516 )     (4,806 )     20.4 %
 
                       
Revenues before reimbursable items from external customers
  $ 362,751       367,865       (5,114 )     (1.4 )%     1,417,884       1,456,754       (38,870 )     (2.7 )%
 
                       
   
Total revenues
                                                               
North America Services
  $ 253,579       282,269       (28,690 )     (10.2 )%     1,048,932       1,136,901       (87,969 )     (7.7 )%
International Services
    101,350       80,718       20,632       25.6 %     337,757       318,534       19,223       6.0 %
Merchant Services
    87,965       78,675       9,290       11.8 %     337,635       298,792       38,843       13.0 %
Intersegment revenues
    (8,054 )     (8,918 )     864       (9.7 )%     (36,262 )     (32,581 )     (3,681 )     11.3 %
 
                       
Revenues from external
customers
  $ 434,840       432,744       2,096       0.5 %     1,688,062       1,721,646       (33,584 )     (2.0 )%
 
                       
   
Depreciation and amortization North America Services
  $ 20,920       24,014       (3,094 )     (12.9 )%     86,730       97,006       (10,276 )     (10.6 )%
International Services
    9,567       7,340       2,227       30.3 %     36,328       33,490       2,838       8.5 %
Merchant Services
    8,470       7,778       692       8.9 %     32,864       27,797       5,067       18.2 %
 
                       
Total depreciation and amortization
  $ 38,957       39,132       (175 )     (0.4 )%     155,922       158,293       (2,371 )     (1.5 )%
 
                       
   
Segment operating income North America Services
  $ 57,599       63,943       (6,344 )     (9.9 )%     234,512       265,858       (31,346 )     (11.8 )%
International Services
    18,324       12,425       5,899       47.5 %     43,238       48,362       (5,124 )     (10.6 )%
Merchant Services
    17,361       15,345       2,016       13.1 %     64,283       65,595       (1,312 )     (2.0 )%
Spin-related costs
          (1,272 )     1,272       (100.0 )%           (11,140 )     11,140       (100.0 )%
 
                       
Operating income
  $ 93,284       90,441       2,843       3.1 %     342,033       368,675       (26,642 )     (7.2 )%
 
                       
   
 
                                  At     Change
 
               
Total assets
                                    12/31/2009       12/31/2008     $         %  
 
               
North America Services
                                  $ 1,535,129       1,415,960       119,169       8.4 %
International Services
                                    379,606       324,313       55,293       17.0 %
Merchant Services
                                    215,855       212,779       3,076       1.4 %
Intersegment assets
                                    (419,636 )     (403,028 )     (16,608 )     4.1 %
 
                                               
Total assets
                                  $ 1,710,954       1,550,024       160,930       10.4 %
 
                                               
 
Note:   Revenues from North America 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 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 Services include TSYS Acquiring’s merchant acquiring and related services.
 
    Certain amounts have been reclassified to conform with the presentation adopted in 2009.
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TSYS Announces 2009 Earnings
Page 7 of 12
TSYS
Balance Sheet
(in thousands)
                 
    Dec 31, 2009     Dec 31, 2008  
    (unaudited)   (unaudited)  
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 449,955       211,365  
Restricted cash
    46,190       31,128  
Accounts receivable, net
    230,836       246,767  
Deferred income tax assets
    11,302       29,615  
Prepaid expenses and other current assets
    72,124       88,612  
Current assets of discontinued operations
          24,570  
     
Total current assets
    810,407       632,057  
Property and equipment, net
    289,198       291,341  
Computer software, net
    197,134       202,038  
Contract acquisition costs, net
    128,038       131,568  
Goodwill
    168,610       165,995  
Equity investments, net
    75,495       74,012  
Other intangible assets, net
    14,132       17,452  
Other assets
    27,940       28,316  
Long-term assets of discontinued operations
          7,245  
     
Total assets
  $ 1,710,954       1,550,024  
     
 
               
Liabilities
               
Current liabilities:
               
Current portion of notes payable
  $ 6,988       8,575  
Accrued salaries and employee benefits
    32,457       46,701  
Accounts payable
    21,729       32,440  
Current portion of obligations under capital leases
    6,289       6,344  
Other current liabilities
    153,316       130,751  
Current liabilities of discontinued operations
          10,993  
     
Total current liabilities
    220,779       235,804  
Notes payable, excluding current portion
    192,367       196,295  
Deferred income tax liabilities
    47,162       60,573  
Obligations under capital leases, excluding current portion
    12,756       13,576  
Other long-term liabilities
    48,443       40,709  
Long-term liabilities of discontinued operations
          2,217  
     
Total liabilities
    521,507       549,174  
     
Equity
               
Shareholders’ equity:
               
Common stock
    20,086       20,036  
Additional paid-in capital
    139,742       126,889  
Accumulated other comprehensive income, net
    5,673       (6,627 )
Treasury stock
    (69,950 )     (69,641 )
Retained earnings
    1,080,250       920,292  
     
Total shareholders’ equity
    1,175,801       990,949  
     
Noncontrolling interests in consolidated subsidiaries
    13,646       9,901  
     
Total equity
    1,189,447       1,000,850  
     
Total liabilities and equity
  $ 1,710,954       1,550,024  
     
 
Note: Certain amounts have been reclassified to conform with the presentation adopted in 2009.
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TSYS Announces 2009 Earnings
Page 8 of 12
TSYS
Cash Flow
(unaudited)
(in thousands)
                 
    Twelve Months Ended December 31,
    2009   2008
     
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net income
  $ 219,176       251,676  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Equity in income of equity investments
    (6,985 )     (7,397 )
Dividends received from equity investments
    4,942       6,421  
Net loss (gain) on currency translation adjustments
    2,607       (10,481 )
Depreciation and amortization
    156,471       164,643  
Amortization of debt issuance costs
    154       154  
Share-based compensation
    16,128       24,733  
Excess tax benefit from share-based payment arrangements
    (6 )     (90 )
Provisions for bad debt expense and billing adjustments
    6,381       618  
Charges for transaction processing provisions
    6,556       3,172  
Deferred income tax benefit
    (3,864 )     (4,439 )
(Gain) loss on disposal of equipment, net
    375       182  
Loss on disposal of subsidiary
    5,713        
(Increase) decrease in:
               
Accounts receivable
    13,414       (15,490 )
Prepaid expenses, other current assets and other long-term assets
    27,893       (48,024 )
Increase (decrease) in:
               
Accounts payable
    (14,490 )     4,550  
Accrued salaries and employee benefits
    (11,697 )     (25,267 )
Other current liabilities and other long-term liabilities
    369       7,874  
     
Net cash provided by operating activities
    423,137       352,835  
     
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of property and equipment, net
    (34,017 )     (47,969 )
Additions to licensed computer software from vendors
    (20,059 )     (31,499 )
Additions to internally developed computer software
    (31,445 )     (21,777 )
Proceeds from disposition, net of expenses paid and cash disposed
    1,979        
Cash used in acquisitions, net of cash acquired
    (294 )     (50,017 )
Subsidiary repurchase of noncontrolling interest
          (343 )
Additions to contract acquisition costs
    (35,596 )     (41,456 )
     
Net cash used in investing activities
    (119,432 )     (193,061 )
     
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from borrowings of long-term debt
    5,334       18,575  
Principal payments on long-term debt borrowings and capital lease obligations
    (18,869 )     (67,631 )
Proceeds from exercise of stock options
    2       268  
Excess tax benefit from share-based payment arrangements
    6       90  
Repurchase of common stock
    (329 )     (35,698 )
Subsidiary dividends paid to noncontrolling shareholders
    (235 )     (241 )
Dividends paid on common stock
    (55,207 )     (55,449 )
     
Net cash used in financing activities
    (69,298 )     (140,086 )
     
 
               
CASH AND CASH EQUIVALENTS:
               
Effect of exchange rate changes on cash and cash equivalents
    (4,470 )     (10,188 )
     
Net increase in cash and cash equivalents
    229,937       9,500  
Cash and cash equivalents at beginning of period
    220,018       210,518  
     
Cash and cash equivalents at end of period
  $ 449,955       220,018  
     
 
Note: Certain amounts have been reclassified to conform with the presentation adopted in 2009.
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TSYS Announces 2009 Earnings
Page 9 of 12
Geographic Area Data:
The following geographic area data represents revenues for the three months ended December 31 based on where the client is domiciled:
                                         
    Three Months Ended December 31,
                                    Percent
(dollars in millions)   2009   %   2008   %   Change
     
United States
  $ 291.6       67.1 %   $ 315.4       72.9 %     (7.5 )%
Europe
    79.9       18.4       65.0       15.0       23.0  
Canada
    39.0       9.0       32.3       7.5       20.7  
Japan
    15.3       3.5       11.2       2.6       36.7  
Mexico
    1.8       0.4       2.2       0.5       (19.8 )
Other
    7.2       1.6       6.6       1.5       8.5  
             
 
  $ 434.8       100.0 %   $ 432.7       100.0 %     0.5 %
             
The following geographic area data represents revenues for the twelve months ended December 31 based on where the client is domiciled:
                                         
    Twelve Months Ended December 31,
                                    Percent
(dollars in millions)   2009   %   2008   %   Change
     
United States
  $ 1,194.4       70.7 %   $ 1,253.0       72.8 %     (4.7 )%
Europe
    269.4       16.0       269.1       15.6       0.1  
Canada
    139.7       8.3       127.1       7.4       9.9  
Japan
    48.9       2.9       33.9       2.0       44.2  
Mexico
    8.2       0.5       13.4       0.8       (39.4 )
Other
    27.5       1.6       25.1       1.4       9.9  
             
 
  $ 1,688.1       100.0 %   $ 1,721.6       100.0 %     (2.0 )%
             
Geographic Area Revenue by Operating Segment:
The following table reconciles revenues by geography to revenues by reporting segment for the three months ended December 31:
                                                 
    Three Months Ended December 31,
    North America   International   Merchant
    Services   Services   Services
(dollars in millions)   2009   2008   2009   2008   2009   2008
     
United States
  $ 204.3       237.5                   87.3       77.9  
Europe
    0.2       0.2       79.7       64.8              
Canada
    38.9       32.2                   0.1       0.1  
Japan
                15.3       11.2              
Mexico
    1.8       2.2                          
Other
    2.1       2.3       4.9       4.1       0.2       0.2  
     
 
  $ 247.3       274.4       99.9       80.1       87.6       78.2  
     
The following table reconciles revenues by geography to revenues by reporting segment for the twelve months ended December 31:
                                                 
    Twelve Months Ended December 31,
    North America   International   Merchant
    Services   Services   Services
(dollars in millions)   2009   2008   2009   2008   2009   2008
     
United States
  $ 859.5       956.6       0.1       0.2       334.8       296.2  
Europe
    0.9       0.9       268.5       268.2              
Canada
    139.1       126.5                   0.6       0.6  
Japan
                48.9       33.9              
Mexico
    8.2       13.4                          
Other
    9.6       9.7       17.1       14.6       0.8       0.8  
     
 
  $ 1,017.3       1,107.1       334.6       316.9       336.2       297.6  
     
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TSYS Announces 2009 Earnings
Page 10 of 12
Supplemental Information:
                                         
    Accounts on File at December 31,
                                    Percent
(in millions)   2009   %   2008   %   Change
     
Consumer
    187.8       54.5 %     205.8       58.4 %     (8.8 )%
Retail
    42.9       12.4       52.9       15.0       (18.9 )
Commercial
    41.1       11.9       42.8       12.1       (4.0 )
Government services
    25.5       7.4       21.2       6.0       20.7  
Stored Value
    42.3       12.3       24.9       7.1       69.9  
Debit
    5.2       1.5       4.9       1.4       4.5  
             
 
    344.8       100.0 %     352.5       100.0 %     (2.2 )%
             
                           
        Percent
(in millions)   December 31, 2009   December 31, 2008   Change
QTD Average Accounts on File
    342.3       355.5       (3.7 )%
YTD Average Accounts on File
    347.9       365.7       (4.9 )%
                                         
    Accounts on File at December 31,
                                    Percent
(in millions)   2009   %   2008   %   Change
     
Domestic
    255.5       74.1 %     268.1       76.1 %     (4.7 )%
International
    89.3       25.9       84.4       23.9       5.9  
             
 
    344.8       100.0 %     352.5       100.0 %     (2.2 )%
             
 
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):
                 
    December 2008 to   December 2007 to
    December 2009   December 2008
Beginning balance
    352.5       375.5  
Change in accounts on file due to:
               
Internal growth of existing clients
    25.2       36.5  
New clients
    28.1       22.7  
Purges/Sales
    (34.1 )     (46.3 )
Deconversions
    (26.9 )     (35.9 )
 
               
Ending balance
    344.8       352.5  
 
               
                 
Number of Employees (FTEs):   2009   2008
At December 31,
    7,620       8,110  
Quarterly average for period ended December 31,
    7,623       8,053  
YTD average for period ended December 31,
    7,898       7,691  
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TSYS Announces 2009 Earnings
Page 11 of 12
Reconciliation of GAAP to Non-GAAP
Non-GAAP Measures
The schedule below provides a reconciliation of revenues and operating results on a constant currency basis to reported revenues and operating income. This non-GAAP measure presents fourth quarter and year-to-date 2009 financial results using the previous year’s foreign currency exchange rates. On a year-to-date constant currency basis, TSYS’ total revenues grew 0.8% as compared to a reported GAAP decline of 2.0%, and operating income declined 5.3% versus a GAAP-reported decline of 7.2%.
The non-GAAP financial measures of constant currency presented by TSYS are utilized by management to better understand and assess TSYS’ operating results and financial performance. TSYS also uses the non-GAAP financial measures to evaluate and assess TSYS’ financial performance against budget, as well as to evaluate financial performance for executive and management compensation purposes.
TSYS believes that non-GAAP financial measures are important to enable investors to understand and evaluate its ongoing operating results. Accordingly, TSYS includes non-GAAP financial measures when reporting its financial results to shareholders and investors in order to provide them with an additional tool to evaluate TSYS’ ongoing business operations. TSYS believes that the non-GAAP financial measures are representative of comparative financial performance that reflects the economic substance of TSYS’ current and ongoing business operations.
Although non-GAAP financial measures are often used to measure TSYS’ operating results and assess its financial performance, they are not necessarily comparable to similarly titled captions of other companies due to potential inconsistencies in the method of calculation.
TSYS believes that its use of non-GAAP financial measures provides investors with the same key financial performance indicators that are utilized by management to assess TSYS’ operating results, evaluate the business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of non-GAAP financial measures to give shareholders and potential investors an opportunity to see TSYS as viewed by management, to assess TSYS with some of the same tools that management utilizes internally and to be able to compare such information with prior periods. TSYS believes that the presentation of GAAP financial measures alone would not provide its shareholders and potential investors with the ability to appropriately analyze its ongoing operational results, and therefore expected future results. TSYS therefore believes that inclusion of non-GAAP financial measures provides investors with additional information to help them better understand its financial statements just as management utilizes these non-GAAP financial measures to better understand the business, manage budgets and allocate resources.
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TSYS Announces 2009 Earnings
Page 12 of 12
Reconciliation of GAAP to Non-GAAP
Constant Currency Comparison
(unaudited)
(in thousands)
                                                 
    Three Months Ended December 31,   Twelve Months Ended December 31,
                    Percent                   Percent
    2009   2008   Change   2009   2008   Change
Consolidated
                                               
Constant currency (1)
  $ 430,944       432,744       (0.4 )%   $ 1,734,859       1,721,646       0.8 %
Foreign currency (2)
    3,896             0.9       (46,797 )           (2.7 )
                         
Total revenues
  $ 434,840       432,744       0.5 %   $ 1,688,062       1,721,646       (2.0 )%
                         
 
                                               
Constant currency (1)
  $ 92,599       90,441       2.4 %   $ 349,233       368,675       (5.3 )%
Foreign currency (2)
    685             0.8       (7,200 )           (2.0 )
                         
Operating income
  $ 93,284       90,441       3.1 %   $ 342,033       368,675       (7.2 )%
                         
 
(1)   Reflects current period results on a non-GAAP basis as if foreign currency rates did not change from the comparable prior year period.
 
(2)   Reflects the impact of calculated changes in foreign currency rates from the comparable period.
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