TOTAL SYSTEM SERVICES INC - FORM 8-K - EX-99.1

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8-K - FORM 8-K - TOTAL SYSTEM SERVICES INC	d338697d8k.htm
EX-99.2 - EX-99.2 - TOTAL SYSTEM SERVICES INC	d338697dex992.htm

Exhibit 99.1





Total System Services, Inc.
One TSYS Way		+1.706.649.2307
Post Office Box 2567		+1.706.649.5740
Columbus GA 31902-2567		www.tsys.com

For immediate release:

Contacts:

Shawn Roberts

TSYS Investor Relations

+1.706.644.6081

shawnroberts@tsys.com

TSYS REPORTS EPS GROWTH OF 18.6% FOR THE FIRST QUARTER

COLUMBUS, Ga., April 24, 2012 — TSYS today reported results for the first quarter with basic earnings per share at $0.30, an increase of 18.6% over 2011. Total revenues for the quarter were $461.2 million, an increase of 7.4%. Revenues before reimbursable items were $395.2 million, an increase of 9.0% for the quarter.

“Our first quarter results continue to benefit from strong same client transaction growth, which was 14.4% in our card issuer processing business, when compared to last year. POS transactions, excluding deconverted clients in our indirect business, were up 11% and sales volume from our direct merchant business was up 20.9% over same quarter last year. Operating income was $84.8 million, resulting in an increase of 16.2% over last year. Our consolidated organic revenue growth of 7.7% for the quarter was the main driver in our results. This quarter represents the 8th consecutive quarter that we reported positive year-over-year growth in revenues before reimbursable items,” said Philip W. Tomlinson, chairman and chief executive officer of TSYS.

During the quarter, TSYS signed new contracts with Huntington Bancshares and Regions to process their credit card portfolios. In addition, a long-term agreement with The Royal Bank of Scotland for its UK, Irish and U.S. consumer credit and commercial businesses was renewed. “We continue to pursue our vision of being the leading global payment solutions provider through acquisitions and by putting people at the center of payments. We continue to believe TSYS will achieve our guidance of double digit growth in earnings per share and a solid top line revenue increase in 2012,” said Tomlinson.

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, April 24. 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.

Page 1 of 12

Non-GAAP Measures

The financial highlights section of 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 pages 11 and 12 of this release.

About TSYS

At TSYS, (NYSE: TSS), we believe payments should revolve around people — not the other way around. We call this belief “People-Centered Payments.” By putting people at the center of every decision we make, with unmatched customer service and industry insight, TSYS is able to support financial institutions, businesses and governments in more than 80 countries. Offering merchant payment-acceptance solutions as well as services in credit, debit, prepaid, mobile, chip, healthcare and more, we make it possible for those in the global marketplace to conduct safe and secure electronic transactions with trust and convenience.

TSYS’ headquarters are located in Columbus, Georgia, with local offices spread across the Americas, EMEA and Asia-Pacific. TSYS provides services to more than half of the top 20 international banks, is a Fortune 1000 company and was named one of the 2012 World’s Most Ethical Companies by Ethisphere magazine. For more information, please visit us at www.tsys.com.

Forward-Looking Statements

This press release contains “forward-looking statements” – that is, statements related to future, not past, events. Forward-looking statements often address our expected future business and financial performance and often contain words such as “expect,” “anticipate,” “intend,” “believe,” “should,” “plan,” “will,” “could,” and similar expressions. These forward-looking statements include, among others, statements regarding TSYS’ belief that it will achieve its guidance of double digit growth in earnings per share and a solid top line revenue increase in 2012, and the assumptions underlying such statements. These statements are based on the current beliefs and expectations of TSYS’ management, are based on management’s assumptions 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: continued consolidation and turmoil in the financial services and other industries during 2012, 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 nationalization or seizure by banking regulators of TSYS clients; TSYS is unable to control expenses and increase market share both domestically and internationally; TSYS is unable to manage the impact of slowing economic conditions and consumer spending; the material breach

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of security of any of TSYS’ systems; the impact of potential and completed acquisitions, including the costs associated therewith and their being more difficult to integrate than anticipated; adverse developments with respect to foreign currency exchange rates; expenses are incurred associated with the signing of a significant client; the deconversion of a significant client; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on TSYS and on our clients; changes occur in laws, rules, regulations, credit card association rules or other industry standards affecting TSYS and our clients that may result in costly new compliance burdens on TSYS and our clients and lead to a decrease in the volume and/or number of transactions processed; the costs and effects of litigation, investigations or similar matters or adverse facts and developments relating thereto; 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 internal 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 risks and other 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 most recent Annual Report on Form 10-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.

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TSYS Announces First Quarter 2012 Earnings

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TSYS

Financial Highlights

(unaudited)

(in thousands, except per share data)


	Three Months Ended March 31,
	2012			2011			Percent Change
Total revenues	$	461,162			429,430			7.4	%
Cost of services		318,258			301,492			5.6
Selling, general and administrative expenses		58,073			54,910			5.8

Operating income		84,831			73,028			16.2
Nonoperating expenses		(405	)		(728	)		44.4

Income before income taxes, noncontrolling interests and equity in income of equity investments		84,426			72,300			16.8
Income taxes		29,556			25,158			17.5

Income before noncontrolling interests and equity in income of equity investments		54,870			47,142			16.4
Equity in income of equity investments		2,774			2,270			22.2

Net income		57,644			49,412			16.7
Net income attributable to noncontrolling interests		(1,249	)		(622	)		nm

Net income attributable to TSYS common shareholders	$	56,395			48,790			15.6	%

Basic earnings per share	$	0.30			0.25			18.6	%

Diluted earnings per share	$	0.30			0.25			18.2	%

Dividends declared per share	$	0.10			0.07

nm = not meaningful

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TSYS Announces First Quarter 2012 Earnings

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TSYS

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)


	Three Months Ended March 31,
	2012			2011
Net income	$	57,644			49,412
Other comprehensive income, net of tax:
Foreign currency translation adjustments		2,963			10,271
Postretirement healthcare plan adjustments		263			(182	)

Other comprehensive income		3,226			10,089

Comprehensive income		60,870			59,501
Comprehensive income attributable to noncontrolling interests		(541	)		(721	)

Comprehensive income attributable to
TSYS common shareholders	$	60,329			58,780

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TSYS Announces First Quarter 2012 Earnings

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TSYS

Earnings Per Share

(unaudited)

(in thousands, except per share data)


	Three Months Ended					Three Months Ended
	March 31, 2012					March 31, 2011
	Common Stock			Participating Securities		Common Stock			Participating Securities
Basic Earnings per share:
Net income	$	56,395					48,790
Less income allocated to nonvested awards		(196	)		196		(191	)		191

Net income allocated to common stock for
EPS calculation ( a )	$	56,199			196		48,599			191

Average common shares outstanding ( b )		188,052			667		192,851			765

Average common shares and participating securities		188,719					193,616

Basic Earnings per share ( a )/( b )	$	0.30			0.29		0.25			0.25

Diluted Earnings per share:
Net income	$	56,395					48,790
Less income allocated to nonvested awards		(196	)		196		(191	)		191

Net income allocated to common stock for
EPS calculation ( c )	$	56,199			196		48,599			191

Average common shares outstanding		188,052			667		192,851			765
Increase due to assumed issuance of shares related to common equivalent shares outstanding		1,010					305

Average common and common equivalent shares outstanding ( d )		189,062			667		193,156			765

Average common and common equivalent shares and participating securities		189,729					193,921

Diluted Earnings per share ( c )/( d )	$	0.30			0.29		0.25			0.25

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TSYS Announces First Quarter 2012 Earnings

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TSYS

Segment Breakdown

(unaudited)

(in thousands)


	Three Months Ended March 31,
							Change
	2012			2011			$			%
Revenues before reimbursable items
North America Services		204,050			194,590			9,460			4.9	%
International Services		96,491			87,419			9,072			10.4	%
Merchant Services		98,356			86,519			11,837			13.7	%
Intersegment revenues		(3,718	)		(5,885	)		2,167			36.8	%

Revenues before reimbursable items from external customers		395,179			362,643			32,536			9.0	%

Total revenues
North America Services		240,599			230,558			10,041			4.4	%
International Services		100,360			90,710			9,650			10.6	%
Merchant Services		125,518			115,756			9,762			8.4	%
Intersegment revenues		(5,315	)		(7,594	)		2,279			30.0	%

Revenues from external customers		461,162			429,430			31,732			7.4	%

Depreciation and amortization
North America Services		18,454			19,466			(1,012	)		(5.2	)%
International Services		12,911			11,708			1,203			10.3	%
Merchant Services		8,786			9,146			(360	)		(3.9	)%
Corporate Admin		722			748			(26	)		(3.5	)%

Total depreciation and amortization		40,873			41,068			(195	)		(0.5	)%

Segment operating income
North America Services		68,173			55,200			12,973			23.5	%
International Services		4,113			11,025			(6,912	)		(62.7	)%
Merchant Services		34,219			26,923			7,296			27.1	%
Corporate Admin		(21,674	)		(20,120	)		(1,554	)		(7.7	)%

Operating income		84,831			73,028			11,803			16.2	%

Other:
Reimbursable items:
North America Services		36,549			35,968			581			1.6	%
International Services		3,869			3,291			578			17.6	%
Merchant Services		27,162			29,237			(2,075	)		(7.1	)%
Intersegment revenues		(1,597	)		(1,709	)		112			6.6	%

Reimbursable items		65,983			66,787			(804	)		(1.2	)%

Volumes:
FTEs (full-time equivalents)
North America Services		3,886			4,299			(413	)		(9.6	)%
International Services		2,697			2,118			579			27.3	%
Merchant Services		1,213			1,134			79			7.0	%
Corporate Admin		407			373			34			9.1	%

FTEs		8,203			7,924			279			3.5	%


	At						Change
Total assets (in thousands)	3/31/2012			12/31/2011			$			%
North America Services		1,676,032			1,621,664			54,368			3.4	%
International Services		439,948			433,203			6,745			1.6	%
Merchant Services		498,586			487,858			10,728			2.2	%
Intersegment assets		(708,431	)		(684,333	)		(24,098	)		(3.5	)%

Total assets		1,906,135			1,858,392			47,743			2.6	%


	Three Months Ended March 31,
							Change
	2012			2011			Inc(Dec)			%
North America Segment:
Accounts on File (AOF) (in millions)		361.8			309.6			52.2			16.9	%
Transactions (in millions)		1,893.0			1,626.8			266.2			16.4	%
International Segment:
AOF (in millions)		54.1			47.2			6.9			14.7	%
Transactions (in millions)		383.0			326.0			57.0			17.5	%
Merchant Segment:
Point-of-sale Transactions (in millions)		1,219.7			1,206.8			12.9			1.1	%

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TSYS Announces First Quarter 2012 Earnings

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TSYS

Balance Sheet

(unaudited)

(in thousands)


	Mar 31, 2012			Dec 31, 2011
Assets
Current assets:
Cash and cash equivalents	$	370,955			316,337
Accounts receivable, net		253,732			248,541
Deferred income tax assets		7,695			12,872
Prepaid expenses and other current assets		80,598			72,431

Total current assets		712,980			650,181
Property and equipment, net		260,900			266,608
Computer software, net		205,027			215,244
Contract acquisition costs, net		161,464			162,987
Goodwill		356,121			355,498
Equity investments, net		85,891			82,924
Other intangible assets, net		79,440			81,250
Deferred income tax assets, net		4,970			4,069
Other assets		39,342			39,631

Total assets	$	1,906,135			1,858,392

Liabilities
Current liabilities:
Current portion of notes payable	$	181,301			181,251
Accrued salaries and employee benefits		13,971			33,004
Accounts payable		35,827			26,095
Current portion of obligations under capital leases		13,201			14,363
Other current liabilities		138,734			125,863

Total current liabilities		383,034			380,576
Notes payable, excluding current portion		34,269			39,104
Deferred income tax liabilities		36,064			32,889
Obligations under capital leases, excluding current portion		23,418			24,489
Other long-term liabilities		61,126			60,325

Total liabilities		537,911			537,383

Equity
Shareholders’ equity:
Common stock		20,245			20,186
Additional paid-in capital		129,104			125,948
Accumulated other comprehensive income, net		3,489			(445	)
Treasury stock		(221,927	)		(225,034	)
Retained earnings		1,418,140			1,380,634

Total shareholders’ equity		1,349,051			1,301,289

Noncontrolling interests in consolidated subsidiaries		19,173			19,720

Total equity		1,368,224			1,321,009

Total liabilities and equity	$	1,906,135			1,858,392

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TSYS Announces First Quarter 2012 Earnings

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TSYS

Cash Flow

(unaudited)

(in thousands)


	Three Months Ended March 31,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	57,644			49,412
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of equity investments		(2,774	)		(2,270	)
Dividends received from equity investments		—			13
Net loss (gain) on currency translation adjustments		504			352
Depreciation and amortization		40,873			41,068
Amortization of debt issuance costs		47			26
Share-based compensation		3,598			4,332
Excess tax expense (benefit) from share-based payment arrangements		510			(103	)
Asset impairments		—			773
Provisions for (recoveries of) bad debt expense and billing adjustments		(144	)		204
Charges for transaction processing provisions		1,063			1,296
Deferred income tax expense (benefit)		6,425			3,874
(Gain) loss on disposal of equipment, net		(2	)		(1,497	)
Changes in operating assets and liabilities:
Accounts receivable		(5,424	)		2,971
Prepaid expenses, other current assets and other long-term assets		(7,379	)		14,046
Accounts payable		9,825			(4,635	)
Accrued salaries and employee benefits		(19,111	)		(13,800	)
Other current liabilities and other long-term liabilities		12,942			6,109

Net cash provided by operating activities		98,597			102,171

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net		(4,648	)		(5,960	)
Additions to licensed computer software from vendors		(2,593	)		(1,280	)
Additions to internally developed computer software		(4,435	)		(4,478	)
Proceeds from sale of tradename		—			4,500
Cash used in acquisitions, net of cash acquired		(1,750	)		—
Purchase of private equity investments		(499	)		—
Additions to contract acquisition costs		(5,099	)		(7,202	)

Net cash used in investing activities		(19,024	)		(14,420	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt borrowings and capital lease obligations		(6,505	)		(8,551	)
Proceeds from borrowings of long-term debt		—			—
Proceeds from exercise of stock options		2,701			1,119
Excess tax expense (benefit) from share-based payment arrangements		(510	)		103
Repurchase of common stock		—			(35,700	)
Purchase of noncontrolling interests		—			(174,050	)
Subsidiary dividends paid to noncontrolling shareholders		(1,087	)		—
Dividends paid on common stock		(18,913	)		(13,556	)

Net cash used in financing activities		(24,314	)		(230,635	)

CASH AND CASH EQUIVALENTS:
Effect of exchange rate changes on cash and cash equivalents		(641	)		577

Net increase (decrease) in cash and cash equivalents		54,618			(142,307	)
Cash and cash equivalents at beginning of period		316,337			394,795

Cash and cash equivalents at end of period	$	370,955			252,488

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TSYS Announces First Quarter 2012 Earnings

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Supplemental Information:


	Accounts on File
	Total
(in millions)	March 2012		March 2011		% Change
Consumer Credit		197.2		183.4		7.5
Government Services		30.5		29.0		5.4
Retail		25.3		24.6		2.7

Total Consumer		253.0		237.0		6.8
Commercial		65.0		51.1		27.2
Other		9.4		6.3		48.4

Subtotal		327.4		294.4		11.2
Prepaid/Stored Value		88.5		62.3		42.0

Total AOF		415.9		356.7		16.6

Growth in Accounts on File (in millions):


	March 2011 to March 2012	March 2010 to March 2011
Beginning balance	356.7	323.3
Change in accounts on file due to:
Internal growth of existing clients	36.7	23.1
New clients	41.8	32.4
Purges/Sales	(18.5)	(18.4)
Deconversions	(0.8)	(3.7)

Ending balance	415.9	356.7

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TSYS Announces First Quarter 2012 Earnings

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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 year-to-date 2012 financial results using the previous year’s foreign currency exchange rates. On a year-to-date constant currency basis, TSYS’ total revenues grew 7.6% as compared to a reported GAAP increase of 7.4%

The non-GAAP financial measures of constant currency and revenues, with respect to year-to-date revenues and basic EPS 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 First Quarter 2012 Earnings

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Reconciliation of GAAP to Non-GAAP

Constant Currency Comparison

(unaudited)

(in thousands)


	Three Months Ended March 31,
	2012			2011		Percent Change
Consolidated
Constant currency (1)	$	462,251			429,430		7.6	%
Foreign currency (2)		(1,089	)		—

Total revenues	$	461,162			429,430		7.4	%

Constant currency (1)	$	84,411			73,028		15.6	%
Foreign currency (2)		420			—

Operating income	$	84,831			73,028		16.2	%

International Services
Constant currency (1)	$	101,531			90,710		11.9	%
Foreign currency (2)		(1,171	)		—

Total revenues	$	100,360			90,710		10.6	%

(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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TOTAL SYSTEM SERVICES INC - FORM 8-K - EX-99.1 - April 24, 2012

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