Exhibit 99.1

 

 

Total System Services, Inc. One TSYS Way P.O. 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 Third Quarter 2013 Adjusted Cash EPS Increased 37.0%

COLUMBUS, Ga., October 22, 2013 — TSYS (NYSE: TSS) today reported results for the third quarter of 2013, which includes the operating results of our NetSpend acquisition that closed on July 1, 2013.

Summary of Third Quarter 2013 Financial Results Compared to 2012

 

•

Total revenues were $588.1 million, an increase of 25.6%. Total revenues were impacted by a negative currency translation of $6.4 million.

 

•

Revenues before reimbursable items were $527.0 million, an increase of 29.8%. Revenues before reimbursable items were impacted by a negative currency translation of $6.3 million.

 

•

Adjusted EBITDA* was $182.1 million, an increase of 32.1%.

 

•

Adjusted cash earnings per share (EPS)* were $0.49, an increase of 37.0%.

 

•

On a GAAP basis, net income attributable to common shareholders was $64.4 million, an increase of 6.7%. Basic EPS was $0.34, an increase of 5.8%. Diluted EPS was $0.34, an increase of 5.5%.

 

*

Note: Adjusted EBITDA and adjusted cash EPS are non-GAAP measures which are detailed later in this press release in the section “Reconciliation of GAAP to Non-GAAP Financial Measures.”

“This is the first quarter that NetSpend has been included in our consolidated financial statements and as our fourth operating segment. Their results were outstanding as revenues grew 22.2% over last year making a significant contribution to our overall results this quarter,” said Philip W. Tomlinson, chairman and chief executive officer of TSYS.

“Our free cash flow continues to be very strong. We applied over $60 million to reduce our debt as we move toward our goal of reducing our debt to EBITDA ratio. We will continue using cash to reduce debt over the next several quarters in anticipation of future acquisitions and share buybacks. Our balance sheet has grown to $3.8 billion as we continue our strategy of deploying capital to grow TSYS and maximize shareholder return,” said Tomlinson.

 

2013

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TSYS Reports Third Quarter 2013 Adjusted Cash EPS Increased 37.0%/p. 2

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, October 22. 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

TSYS’ financial information includes information prepared in conformity with GAAP as well as non-GAAP information. It is management’s intent to provide non-GAAP financial information to enhance understanding of its consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure and the corresponding GAAP financial measure are presented so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies.

Additional information about non-GAAP financial measures and a reconciliation of those measures to the most directly comparable GAAP measures are included on pages 12 to 16 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^SM.” By putting people at the center of every decision we make, TSYS supports financial institutions, businesses and governments in more than 80 countries. Through NetSpend, a TSYS Company, we empower consumers with the convenience, security, and freedom to be self-banked. TSYS offers issuer services and merchant payment acceptance for credit, debit, prepaid, healthcare and business solutions.

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, and has been named one of the 2013 World’s Most Ethical Companies by Ethisphere magazine. TSYS routinely posts all important information on its website, for more please visit us at www.tsys.com.

 

 

2013

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TSYS Reports Third Quarter 2013 Adjusted Cash EPS Increased 37.0%/p. 3

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,” “potential,” “will,” “could,” and similar expressions. These forward-looking statements include, among others, statements regarding TSYS’ goal of reducing its debt to EBITDA ratio, anticipated uses of cash in the future, 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 or events 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, TSYS’ ability to integrate NetSpend and other acquisitions and achieve the anticipated growth opportunities and other benefits of the acquisitions; the effect of current domestic and worldwide economic conditions; the material breach of security of any of TSYS’ systems; and risks associated with foreign operations, including adverse developments with respect to foreign currency exchange rates. Additional risks and other factors that could cause actual results or events 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 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. 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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2013

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TSYS Announces Third Quarter 2013 Earnings

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TSYS

Financial Highlights

(unaudited)

(in thousands, except per share data)

 

 

		Three Months Ended September 30,												Nine Months Ended September 30,
		2013				2012				Percent Change				2013				2012				Percent Change
Total revenues		$	588,074				468,059				25.6	%		$	1,531,513				1,391,872				10.0	%
Cost of services			394,641				315,685				25.0				1,032,856				946,612				9.1
Selling, general and administrative expenses			80,523				61,099				31.8				210,803				176,557				19.4
Merger and acquisition expenses			7,282				382				nm				12,009				882				nm
Operating income			105,628				90,893				16.2				275,845				267,821				3.0
Nonoperating income (expenses)			(545	)			(579	)			5.9				(147	)			(2,802	)			94.7
Merger and acquisition expenses - bridge loan facility & bonds			(9,789	)			—				na				(19,466	)			—				na
Income before income taxes, noncontrolling interests and equity in income of equity investments			95,294				90,314				5.5				256,232				265,019				(3.3	)
Income taxes			30,592				30,228				1.2				78,384				84,336				(7.1	)
Income before noncontrolling interests and equity in income of equity investments			64,702				60,086				7.7				177,848				180,683				(1.6	)
Equity in income of equity investments			2,792				1,957				42.7				9,357				6,983				34.0
Net income			67,494				62,043				8.8				187,205				187,666				(0.2	)
Net income attributable to noncontrolling interests			(3,144	)			(1,731	)			(81.6	)			(8,110	)			(4,248	)			(90.9	)
Net income attributable to TSYS common shareholders		$	64,350				60,312				6.7	%		$	179,095				183,418				(2.4	)%
Basic earnings per share (EPS)		$	0.34				0.32				5.8	%		$	0.95				0.97				(2.1	)%
Diluted EPS		$	0.34				0.32				5.5	%		$	0.94				0.97				(2.3	)%
Dividends declared per share		$	0.10				0.10							$	0.30				0.30
Non-GAAP measures:
Basic EPS excluding NetSpend M&A expenses, net of taxes		$	0.37				0.32				14.7	%		$	1.03				0.97				5.5	%
Adjusted cash EPS		$	0.49				0.36				37.0	%		$	1.25				1.09				14.7	%
Adjusted EBITDA		$	182,140				137,858				32.1	%		$	449,931				407,498				10.4	%

nm = not meaningful

 

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TSYS Announces Third Quarter 2013 Earnings

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TSYS

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)

 

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Net income		$	67,494				62,043			$	187,205				187,666
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			7,222				9,999				(6,489	)			2,935
Postretirement healthcare plan adjustments			1,113				(1,537	)			1,423				(1,250	)
Unrealized gain on available-for-sale securities			1,479				—				1,479				—
Other comprehensive income (loss)			9,814				8,462				(3,587	)			1,685
Comprehensive income			77,308				70,505				183,618				189,351
Comprehensive income attributable to noncontrolling interests			3,228				1,709				6,149				3,844
Comprehensive income attributable to TSYS common shareholders		$	74,080				68,796			$	177,469				185,507

 

 

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TSYS Announces Third Quarter 2013 Earnings

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TSYS

Earnings Per Share

(unaudited)

(in thousands, except per share data)

 

 

		Three Months Ended								Three Months Ended								Nine Months Ended								Nine Months Ended
		September 30, 2013								September 30, 2012								September 30, 2013								September 30, 2012
		Common				Participating				Common				Participating				Common				Participating				Common				Participating
		Stock				Securities				Stock				Securities				Stock				Securities				Stock				Securities
Basic earnings per share:
Net income		$	64,350								60,312							$	179,095								183,418
Less income allocated to nonvested awards			(605	)			605				(191	)			191				(968	)			968				(613	)			613
Net income allocated to common stock for EPS calculation (a)		$	63,745				605				60,121				191			$	178,127				968				182,805				613
Average common shares outstanding (b)			187,726				1,799				187,269				609				187,001				1,034				187,911				642
Average common shares and participating securities			189,525								187,878								188,035								188,553
Basic earnings per share (a)/(b)		$	0.34				0.34				0.32				0.31			$	0.95				0.94				0.97				0.96
Diluted earnings per share:
Net income		$	64,350								60,312							$	179,095								183,418
Less income allocated to nonvested awards			(601	)			601				(191	)			191				(962	)			962				(611	)			611
Net income allocated to common stock for EPS calculation (c)		$	63,749				601				60,121				191			$	178,133				962				182,807				611
Average common shares outstanding			187,726				1,799				187,269				609				187,001				1,034				187,911				642
Increase due to assumed issuance of shares related to common equivalent shares outstanding			1,758								1,218								1,565								1,138
Average common and common equivalent shares outstanding (d)			189,484				1,799				188,487				609				188,566				1,034				189,049				642
Average common and common equivalent shares and participating securities			191,283								189,096								189,600								189,691
Diluted earnings per share (c)/(d)		$	0.34				0.33				0.32				0.31			$	0.94				0.93				0.97				0.95

 

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TSYS Announces Third Quarter 2013 Earnings

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TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

 

		Three Months Ended September 30,																Nine Months Ended September 30,
										Change																Change
		2013				2012				$				%				2013				2012				$				%
Revenues before reimbursable items
North America Services		$	217,257				203,497				13,760				6.8	%		$	637,379				613,111				24,268				4.0	%
International Services			95,399				98,184				(2,785	)			(2.8	)			281,201				293,722				(12,521	)			(4.3	)
Merchant Services			113,650				107,786				5,864				5.4				335,903				303,842				32,061				10.6
NetSpend			103,706				—				103,706				na				103,706				—				103,706				na
Intersegment revenues			(3,001	)			(3,415	)			414				12.1				(9,429	)			(10,753	)			1,324				12.3
Revenues before reimbursable items from external customers		$	527,011				406,052				120,959				29.8	%		$	1,348,760				1,199,922				148,838				12.4	%
Total revenues
North America Services		$	252,577				237,625				14,952				6.3	%		$	741,005				717,781				23,224				3.2	%
International Services			100,548				102,691				(2,143	)			(2.1	)			295,731				306,466				(10,735	)			(3.5	)
Merchant Services			135,616				132,746				2,870				2.2				404,975				383,167				21,808				5.7
NetSpend			103,706				—				103,706				na				103,706				—				103,706				na
Intersegment revenues			(4,373	)			(5,003	)			630				12.6				(13,904	)			(15,542	)			1,638				10.5
Revenues from external customers		$	588,074				468,059				120,015				25.6	%		$	1,531,513				1,391,872				139,641				10.0	%
Depreciation and amortization
North America Services		$	18,764				18,582				182				1.0	%		$	55,060				55,856				(796	)			(1.4	)%
International Services			11,117				14,182				(3,066	)			(21.6	)			34,424				41,052				(6,628	)			(16.1	)
Merchant Services			2,890				2,889				0				0.0				9,030				9,385				(355	)			(3.8	)
NetSpend			1,471				—				1,471				na				1,471				—				1,471				na
Segment depreciation and amortization			34,241				35,654				(1,413	)			(4.0	)			99,984				106,293				(6,309	)			(5.9	)
Acquisition intangible amortization			24,731				6,919				17,812				nm				41,142				18,924				22,218				nm
Corporate admin and other			475				670				(195	)			(29.1	)			1,364				2,112				(748	)			(35.4	)
Total depreciation and amortization		$	59,447				43,243				16,204				37.5	%		$	142,490				127,329				15,161				11.9	%
Adjusted segment operating income
North America Services		$	82,274				70,080				12,194				17.4	%		$	229,373				210,658				18,715				8.9	%
International Services			10,729				8,244				2,485				30.1				26,448				22,842				3,606				15.8
Merchant Services			40,230				40,909				(679	)			(1.7	)			118,521				119,036				(515	)			(0.4	)
NetSpend			31,248				—				31,248				na				31,248				—				31,248				na
Total adjusted segment operating income			164,481				119,233				45,248				37.9				405,590				352,536				53,054				15.0
Acquisition intangible amorization			(24,731	)			(6,919	)			(17,812	)			nm				(41,142	)			(18,924	)			(22,218	)			nm
NetSpend M&A operating expenses (non-recurring)			(7,282	)			—				(7,282	)			na				(12,009	)			—				(12,009	)			na
Corporate admin and other			(26,840	)			(21,421	)			(5,419	)			(25.3	)			(76,594	)			(65,791	)			(10,803	)			(16.4	)
Operating income		$	105,628				90,893				14,735				16.2	%		$	275,845				267,821				8,024				3.0	%
Other:
Reimbursable items:
North America Services		$	35,320				34,128				1,192				3.5	%		$	103,626				104,670				(1,044	)			(1.0	)%
International Services			5,149				4,507				642				14.2				14,530				12,744				1,786				14.0
Merchant Services			21,966				24,960				(2,994	)			(12.0	)			69,072				79,325				(10,253	)			(12.9	)
NetSpend			—				—				—				na				—				—				—				na
Intersegment revenues			(1,372	)			(1,588	)			216				13.6				(4,475	)			(4,789	)			314				6.6
Reimbursable items		$	61,063				62,007				(944	)			(1.5	)%		$	182,753				191,950				(9,197	)			(4.8	)%

 

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TSYS Announces Third Quarter 2013 Earnings

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TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

 

		At								Change
		9/30/2013				12/31/2012				$				%
Other:
Volumes:
FTEs (full-time equivalents)
North America Services			4,370				3,964				406				10.2	%
International Services			2,436				2,624				(188	)			(7.2	)
Merchant Services			1,617				1,242				375				30.2
NetSpend			462				—				462				na
Corporate Admin and Other			544				415				129				31.1
FTEs			9,429				8,245				1,184				14.4	%
Total assets (in thousands)
North America Services		$	3,279,829				1,744,877				1,534,952				88.0	%
International Services			399,368				445,642				(46,274	)			(10.4	)
Merchant Services			685,400				703,725				(18,325	)			(2.6	)
NetSpend			1,624,850				—				1,624,850				na
Intersegment assets			(2,234,561	)			(870,406	)			(1,364,155	)			nm
Total assets		$	3,754,886				2,023,838				1,731,048				85.5	%

 

		Three Months Ended September 30,																Nine Months Ended September 30,
										Change																Change
		2013				2012				Inc(Dec)				%				2013				2012				Inc(Dec)				%
North America Segment:
Accounts on File (AOF) (in millions)																			461.4				413.4				48.0				11.6	%
Transactions (in millions)			2,395.8				2,036.6				359.2				17.6	%			6,644.2				5,907.7				736.5				12.5	%
International Segment:
AOF (in millions)																			59.3				53.0				6.4				12.0	%
Transactions (in millions)			525.5				415.1				110.4				26.6	%			1,452.2				1,200.5				251.7				21.0	%
Merchant Segment:
Point-of-sale Transactions (in millions)			1,090.0				1,225.1				(135.1	)			(11.0	)%			3,325.2				3,724.5				(399.3	)			(10.7	)%
Dollar sales volume (in millions)		$	10,963.2			$	9,946.5			$	1,016.7				10.2	%		$	32,123.2			$	27,956.5			$	4,167				14.9	%
NetSpend Segment:
Gross Dollar Volume (in millions)		$	3,780.9			$	—			$	3,780.9				na			$	3,780.9			$	—			$	3,780.9				na
90-Day Active Cards (in thousands)																			2,767.3				—				2,767.3				na
Direct Deposit 90-Day Active Cards (in thousands)																			1,261.1				—				1,261.1				na
% of 90-Day Active Cards with Direct Deposit																			45.6	%							45.6	%

 

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TSYS Announces Third Quarter 2013 Earnings

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TSYS

Balance Sheet

(unaudited)

(in thousands)

 

		Sep 30, 2013				Dec 31, 2012
Assets
Current assets:
Cash and cash equivalents		$	396,860				247,612
Restricted cash			530				282
Accounts receivable, net			261,595				247,083
Deferred income tax assets			14,604				9,825
Prepaid expenses and other current assets			86,993				69,924
Total current assets			760,582				574,726
Goodwill			1,545,784				518,344
Property and equipment, net			259,865				260,389
Computer software, net			320,928				226,917
Contract acquisition costs, net			173,840				161,267
Other intangible assets, net			500,870				130,054
Equity investments, net			89,964				87,764
Deferred income tax assets, net			5,843				5,334
Other assets			97,210				59,043
Total assets		$	3,754,886				2,023,838
Liabilities
Current liabilities:
Accounts payable		$	44,119				63,370
Current portion of borrowings			27,688				27,361
Current portion of obligations under capital leases			23,153				13,263
Accrued salaries and employee benefits			29,502				26,243
Other current liabilities			173,190				100,282
Total current liabilities			297,652				230,519
Long-term borrowings, excluding current portion			1,494,397				174,859
Deferred income tax liabilities			220,846				48,074
Obligations under capital leases, excluding current portion			10,322				17,155
Other long-term liabilities			67,417				68,791
Total liabilities			2,090,634				539,398
Redeemable noncontrolling interest			39,303				39,505
Equity
Shareholders’ equity:
Common stock			20,280				20,247
Additional paid-in capital			162,111				141,793
Accumulated other comprehensive income (loss), net			(220	)			1,408
Treasury stock			(248,998	)			(287,301	)
Retained earnings			1,671,595				1,549,063
Total shareholders’ equity			1,604,768				1,425,210
Noncontrolling interests in consolidated subsidiaries			20,181				19,725
Total equity			1,624,949				1,444,935
Total liabilities and equity		$	3,754,886				2,023,838

 

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TSYS

Cash Flow

(unaudited)

(in thousands)

 

		Nine Months Ended September 30,
		2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	187,205				187,666
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of equity investments			(9,357	)			(6,983	)
Dividends received from equity investments			8,595				7,523
Net loss on foreign currency translation			612				2,259
Depreciation and amortization			142,490				127,329
Amortization of debt issuance costs			6,775				180
Amortization of bond discount			131				—
Changes in fair value of private equity investments			(1,227	)			—
Share-based compensation			19,587				12,348
Excess tax benefit from share-based payment arrangements			(2,727	)			(1,236	)
Provisions for bad debt expense and billing adjustments			2,193				813
Charges for transaction processing provisions			8,545				1,348
Provision for fraud and other losses			6,398				—
Deferred income tax expense			25,784				(2,355	)
Loss on disposal of equipment, net			78				77
Changes in operating assets and liabilities:
Restricted cash			(132	)			—
Accounts receivable			(6,721	)			1,730
Prepaid expenses, other current assets and other long-term assets			(12,478	)			4,406
Accounts payable			(41,055	)			6,688
Accrued salaries and employee benefits			(9,552	)			(13,567	)
Other current liabilities and other long-term liabilities			(17,659	)			5,761
Net cash provided by operating activities			307,486				333,987
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net			(24,897	)			(24,296	)
Additions to licensed computer software from vendors			(34,412	)			(19,385	)
Additions to internally developed computer software			(22,519	)			(15,202	)
Cash used in acquisitions, net of cash acquired			(1,314,660	)			(66,250	)
Purchase of private equity investments			(1,146	)			(2,370	)
Additions to contract acquisition costs			(36,824	)			(25,700	)
Net cash used in investing activities			(1,434,457	)			(153,203	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings and capital lease obligations			(82,644	)			(188,395	)
Proceeds from borrowings of long-term borrowings			1,395,661				158,633
Proceeds from exercise of stock options			27,488				9,451
Excess tax benefit from share-based payment arrangements			2,727				1,236
Repurchase of common stock under plans and tax withholding			(6,267	)			(61,556	)
Debt issuance costs			(13,471	)			(1,996	)
Subsidiary dividends paid to noncontrolling shareholders			(5,897	)			(2,797	)
Dividends paid on common stock			(37,514	)			(56,719	)
Net cash provided by (used in) financing activities			1,280,082				(142,143	)
CASH AND CASH EQUIVALENTS:
Effect of exchange rate changes on cash and cash equivalents			(3,862	)			1,591
Net increase in cash and cash equivalents			149,248				40,232
Cash and cash equivalents at beginning of period			247,612				316,337
Cash and cash equivalents at end of period		$	396,860				356,569

 

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Supplemental Information:

 

		Accounts on File
		Total
(in millions)		September 2013				September 2012				% Change
Consumer Credit			224.2				195.0				15.0
Retail			26.8				24.1				11.2
Total Consumer			251.0				219.1				14.6
Commercial			38.9				36.3				7.2
Other			16.9				11.1				52.5
Subtotal			306.7				266.4				15.1
Prepaid/Stored Value			110.7				114.3				(3.1	)
Government Services			61.6				48.8				26.2
Commercial Card Single Use			41.6				36.8				13.0
Total AOF			520.7				466.4				11.7

Growth in Accounts on File (in millions):

 

		September 2012 to September 2013				September 2011 to September 2012
Beginning balance			466.4				392.4
Change in accounts on file due to:
Internal growth of existing clients			36.5				30.3
New clients			63.8				75.5
Purges/Sales			(45.4	)			(29.0	)
Deconversions			(0.6	)			(2.8	)
Ending balance			520.7				466.4

 

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Reconciliation of GAAP to Non-GAAP Financial Measures

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 2013 financial results using the previous year’s foreign currency exchange rates. On a year-to-date constant currency basis, TSYS’ total revenues grew 11.2% as compared to a reported GAAP increase of 10.0%.

The schedule below also provides a reconciliation of basic EPS, excluding merger and acquisition costs, net of taxes, to basic EPS, and operating income, excluding merger and acquisition costs, to operating income. On a year-to-date basis, TSYS’ basic EPS excluding merger and acquisition costs grew 5.5% as compared to a reported GAAP decrease of 2.1%.

The schedule below also provides a reconciliation of basic EPS, adjusted for the after-tax impact of acquisition intangible amortization, share-based compensation and merger and acquisition costs, to adjusted cash EPS.

The schedule below also provides a reconciliation of segment operating income, adjusted for the impact of acquisition intangible amortization.

The schedule also provides a reconciliation of net income, adjusted for equity in income of equity investments, income taxes, nonoperating expense, depreciation and amortization, share-based compensation, and merger and acquisition expenses, to adjusted EBITDA.

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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Reconciliation of GAAP to Non-GAAP

 

 

Constant Currency Comparison

(unaudited)

(in thousands)

 

 

		Three Months Ended September 30,												Nine Months Ended September 30,
		2013				2012				Percent Change				2013				2012				Percent Change
Consolidated
Constant currency (1)		$	594,470				468,059				27.0	%		$	1,548,296				1,391,872				11.2	%
Foreign currency (2)			(6,396	)			—								(16,783	)			—
Total revenues		$	588,074				468,059				25.6	%		$	1,531,513				1,391,872				10.0	%
Constant currency (1)		$	533,297				406,052				31.3	%		$	1,365,215				1,199,922				13.8	%
Foreign currency (2)			(6,286	)			—								(16,455	)			—
Total revenues before reimbursable items		$	527,011				406,052				29.8	%		$	1,348,760				1,199,922				12.4	%
Constant currency (1)		$	106,459				90,893				17.1	%		$	277,856				267,821				3.7	%
Foreign currency (2)			(831	)			—								(2,011	)			—
Operating income		$	105,628				90,893				16.2	%		$	275,845				267,821				3.0	%
International Services
Constant currency (1)		$	107,050				102,691				4.2	%		$	312,715				306,466				2.0	%
Foreign currency (2)			(6,502	)			—								(16,984	)			—
Total revenues		$	100,548				102,691				(2.1	)%		$	295,731				306,466				(3.5	)%

 

(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.

 

 

Revenues Before Reimbursable Items

(unaudited)

(in thousands)

 

 

		Three Months Ended September 30,												Nine Months Ended September 30,
		2013				2012				Percent Change				2013				2012				Percent Change
Total Revenues		$	588,074				468,059				25.6	%		$	1,531,513				1,391,872				10.0	%
Reimbursable Items			61,063				62,007				(1.5	)			182,753				191,950				(4.8	)
Revenues Before Reimbursable Items		$	527,011				406,052				29.8	%		$	1,348,760				1,199,922				12.4	%

 

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Reconciliation of GAAP to Non-GAAP

 

 

Operating Income and Basic EPS Excluding Merger and Acquisition Costs (M&A)

(unaudited)

(in thousands, except per share data)

 

 

		Three Months Ended September 30,												Nine Months Ended September 30,
		2013				2012				Percent Change				2013				2012				Percent Change
Operating income		$	105,628				90,893				16.2	%		$	275,845				267,821				3.0	%
Add: NetSpend M&A operating expenses (non-recurring)			7,282				—				na				12,009				—				na
Operating income excluding merger and acquisition costs		$	112,910				90,893				24.2	%		$	287,854				267,821				7.5	%
		2013				2012				Percent Change				2013				2012				Percent Change
Net income attributable to TSYS common shareholders (a)		$	64,350				60,312				6.7	%		$	179,095				183,418				(2.4	)%
Add: NetSpend M&A expenses, net of taxes* (non-recurring)			5,424				—				na				13,934				—				na
Net income attributable to TSYS common shareholders (c)		$	69,774				60,312				15.7	%		$	193,029				183,418				5.2	%
Average common shares outstanding (b)			189,525				187,878								188,035				188,553
Basic earnings per share (a)/(b)		$	0.34				0.32				5.8	%		$	0.95				0.97				(2.1	)%
Basic earnings per share excluding merger and acquisition expenses (c)/(b)		$	0.37				0.32				14.7	%		$	1.03				0.97				5.5	%

* - Certain merger and acquisition costs are nondeductible for income tax purposes

 

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Reconciliation of GAAP to Non-GAAP

 

 

Adjusted Cash Earnings

(unaudited)

(in thousands, except per share data)

 

 

 

		Three Months Ended September 30,												Nine Months Ended September 30,
		2013				2012				Percent Change				2013				2012				Percent Change
Net income attributable to TSYS common shareholders (a)		$	64,350				60,312				6.7	%		$	179,095				183,418				(2.4	)%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes		$	16,420				4,383				nm			$	27,532				12,746				nm
Add: Share-based compensation, net of taxes			6,635				2,489				nm				13,622				8,480				60.6	%
Cash earnings			87,405				67,184				30.1	%			220,250				204,644				7.6	%
Add: NetSpend M&A expenses, net of taxes* (non-recurring)			5,424				—				na				13,934				—				na
Cash earnings adjusted		$	92,829				67,184				38.2	%		$	234,184				204,644				14.4	%
Basic EPS - Net income attributable to TSYS Common Shareholders
As reported (GAAP)		$	0.34				0.32							$	0.95				0.97
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes			0.09				0.02								0.15				0.07
Add: Share-based compensation, net of taxes			0.04				0.01								0.07				0.05
Cash earnings per share			0.46				0.36								1.17				1.09
Add: NetSpend M&A expenses, net of taxes* (non-recurring)			0.03				—								0.07				—
Adjusted cash EPS **		$	0.49				0.36							$	1.25				1.09
Average common shares and participating securities			189,525				187,878								188,035				188,553

 

*	Certain merger and acquisition costs are nondeductible for income tax purposes

**	Adjusted cash EPS amounts may not total due to rounding.

 

 

Adjusted EBITDA

(unaudited)

(in thousands)

 

 

 

		Three Months Ended September 30,												Nine Months Ended September 30,
Net income		$	67,494				62,043				8.8	%		$	187,205				187,666				(0.2	)%
Adjust for:
Deduct: Equity in income of equity investments			(2,792	)			(1,957	)			(42.7	)%			(9,357	)			(6,983	)			(34.0	)%
Add: Income taxes			30,592				30,228				1.2	%			78,384				84,336				(7.1	)%
Add: Nonoperating expense			10,334				579				nm				19,613				2,802				nm
Add: Depreciation and amortization			59,447				43,243				37.5	%			142,490				127,329				11.9	%
EBITDA			165,075				134,136				23.1	%			418,335				395,150				5.9	%
Adjust for:
Add: Share-based compensation			9,784				3,722				nm				19,587				12,348				58.6	%
Add: NetSpend M&A operating expenses (non-recurring)			7,282				—				na				12,009				—				na
Adjusted EBITDA		$	182,140				137,858				32.1	%		$	449,931				407,498				10.4	%

 

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Reconciliation of GAAP to Non-GAAP

 

 

Adjusted Segment Operating Income

(unaudited)

(in thousands)

 

		Three Months Ended																Nine Months Ended
		Mar 31, 2013				Jun 30, 2013				Sep 30, 2013								Sep 30, 2013
Adjusted segment operating income
North America Services		$	67,202			$	79,896			$	82,274							$	229,373
International Services			7,147				8,572				10,729								26,448
Merchant Services			37,338				40,953				40,230								118,521
NetSpend			—				—				31,248								31,248
Total adjusted segment operating income			111,688				129,421				164,481								405,590
Adjust for:
Acquisition intangible amortization			(8,532	)			(7,879	)			(24,731	)							(41,142	)
NetSpend M&A operating expenses (non-recurring)			(3,481	)			(1,246	)			(7,282	)							(12,009	)
Corporate administration and other			(24,772	)			(24,982	)			(26,840	)							(76,594	)
Operating income		$	74,903			$	95,314			$	105,628							$	275,845
		Three Months Ended																Nine Months Ended				YTD
		Mar 31, 2012				Jun 30, 2012				Sep 30, 2012				Dec 31, 2012				Sep 30, 2012				Dec 31, 2012
Adjusted segment operating income
North America Services		$	68,347			$	72,231			$	70,080			$	78,835			$	210,658			$	289,493
International Services			4,637				9,962				8,244				6,584				22,843				29,427
Merchant Services			39,684				38,443				40,909				37,248				119,036				156,284
NetSpend			—				—				—				—				—				—
Total adjusted segment operating income			112,668				120,635				119,233				122,667				352,537				475,203
Adjust for:
Acquisition intangible amortization			(5,989	)			(6,015	)			(6,919	)			(7,340	)			(18,924	)			(26,264	)
NetSpend M&A operating expenses (non-recurring)			—				—				—				—				—				—
Corporate administration and other			(21,848	)			(22,524	)			(21,421	)			(25,495	)			(65,792	)			(91,287	)
Operating income		$	84,831			$	92,096			$	90,893			$	89,831			$	267,821			$	357,652

Segment Depreciation and Amortization

(unaudited)

(in thousands)

 

		Three Months Ended																Nine Months Ended
		Mar 31, 2013				Jun 30, 2013				Sep 30, 2013								Sep 30, 2013
Depreciation and amortization
North America Services		$	18,083			$	18,213			$	18,764							$	55,060
International Services			12,331				10,976				11,117								34,424
Merchant Services			3,142				2,998				2,890								9,030
NetSpend			—				—				1,471								1,471
Segment depreciation and amortization			33,555				32,188				34,241								99,984
Acquisition intangible amortization			8,532				7,879				24,731								41,142
Corporate administration and other			410				479				475								1,364
Total depreciation and amortization		$	42,498			$	40,546			$	59,447							$	142,490
		Three Months Ended																Nine Months Ended				YTD
		Mar 31, 2012				Jun 30, 2012				Sep 30, 2012				Dec 31, 2012				Sep 30, 2012				Dec 31, 2012
Depreciation and amortization
North America Services		$	18,453			$	18,821			$	18,582			$	18,816			$	55,856			$	74,673
International Services			12,387				14,483				14,182				13,980				41,052				55,033
Merchant Services			3,320				3,175				2,889				2,699				9,385				12,083
NetSpend			—				—				—				—				—				—
Segment depreciation and amortization			34,160				36,479				35,654				35,495				106,293				141,789
Acquisition intangible amortization			5,989				6,015				6,919				7,340				18,924				26,264
Corporate administration and other			723				719				669				446				2,112				2,558
Total depreciation and amortization		$	40,873			$	43,213			$	43,243			$	43,281			$	127,329			$	170,610

 

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