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EX-23.1 - EX-23.1 - TOTAL SYSTEM SERVICES INCd709108dex231.htm

Exhibit 99.1

FORM 11-K

(Mark One)

[X]                ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE

                     SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended          December 31, 2013                                                                            

OR

[ ]                TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE

                    SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          To                                                                                

Commission file number              1-10254                                                                                           

TOTAL SYSTEM SERVICES, INC. 2012 EMPLOYEE STOCK PURCHASE PLAN

TOTAL SYSTEM SERVICES, INC.

ONE TSYS WAY

COLUMBUS, GEORGIA 31901

(706) 649-2310


 

TOTAL SYSTEM SERVICES, INC.

2012 EMPLOYEE STOCK PURCHASE PLAN

Financial Statements

December 31, 2013 and 2012

(With Report of Independent Registered Public Accounting Firm Thereon)


Report of Independent Registered Public Accounting Firm

The Plan Administrator

Total System Services, Inc.

  2012 Employee Stock Purchase Plan:

We have audited the accompanying statements of financial condition of the Total System Services, Inc. 2012 Employee Stock Purchase Plan (the Plan) as of December 31, 2013 and 2012, and the related statements of operations and changes in plan equity for the year ended December 31, 2013 and period from inception (July 1, 2012) to December 31, 2012. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial condition of the Plan as of December 31, 2013 and 2012, and the results of its operations and changes in its plan equity for the year ended December 31, 2013 and period from inception (July 1, 2012) to December 31, 2012, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Atlanta, GA

April 11, 2014


TOTAL SYSTEM SERVICES, INC.

2012 EMPLOYEE STOCK PURCHASE PLAN

Statements of Financial Condition

December 31, 2013 and 2012

 

Assets               2013                      2012          

Common stock of Total System Services, Inc., at fair value – 1,911,887 and 2,002,641 shares (cost $38,547,202 and $37,856,766) in 2013 and 2012, respectively

    $     63,627,599            42,896,563      

Dividends receivable

      191,163            —      

Contributions receivable

      407,278            362,837      
   

 

 

    

 

 

 
  $         64,226,040                43,259,400      
   

 

 

    

 

 

 
Plan Equity       

Plan equity (3,575 and 3,216 active participants and 2,432 and 2,329 actively contributing participants at December 31, 2013 and 2012, respectively)

  $         64,226,040            43,259,400      
   

 

 

    

 

 

 

See accompanying notes to financial statements.

 

2


TOTAL SYSTEM SERVICES, INC.

2012 EMPLOYEE STOCK PURCHASE PLAN

Statements of Operations and Changes in Plan Equity

Year ended December 31, 2013 and Period from inception (July 1, 2012) to December 31, 2012

 

                2013                      2012          

Investment income (loss):

      

Dividend income

     $     783,650             395,846       

Realized gain on withdrawals/distributions to participants (note 6)

      3,369,243             862,186       

Unrealized appreciation (depreciation) in common stock of Total System Services, Inc. (note 5)

      20,040,603             (5,870,362)      
   

 

 

    

 

 

 

Total investment income (loss)

   

 

 

 

    24,193,496     

 

 

     (4,612,330)      
   

 

 

    

 

 

 

Contributions:

      

Participants

      7,936,752             3,845,750       

Participating Employers:

      

Total System Services, Inc.

      883,774             431,625       

Columbus Depot Equipment Company

      78             36       

Columbus Productions, Inc.

      5,068             2,659       

TSYS Canada, Inc.

      17,289             8,284       

TermNet Merchant Services, Inc.

      6,626             1,907       

TSYS Merchant Solutions, L.L.C.

      111,557             13,713       

TSYS Acquiring Solutions, L.L.C.

      49,537             46,299       

TSYS International

      124,811             66,534       

ProPay, Inc.

      15,996             —         

NetSpend corporation

      14,981             —         

Skylight Financial, Inc.

      2,462             —         

Infonox on the Web

      —               5,806       
   

 

 

    

 

 

 

Total contributions

   

 

 

 

9,168,931     

 

 

     4,422,613       
   

 

 

    

 

 

 

Increase (decrease) in Plan equity before withdrawals

      33,362,427             (189,717)      

Withdrawals by participants – common stock of Total System Services, Inc., at fair value (463,451 and 197,181 shares, respectively) (note 6)

      (12,395,787)            (4,552,547)      

Rollover from predecessor plan, at fair value (note 1)

      —               48,001,664       
   

 

 

    

 

 

 

Increase in Plan equity

   

 

 

 

20,966,640     

 

 

     43,259,400       

Plan equity at beginning of year

      43,259,400             —         
   

 

 

    

 

 

 

Plan equity at end of year

  $  

 

 

 

64,226,040     

 

 

         43,259,400       
   

 

 

    

 

 

 

See accompanying notes to financial statements.

 

3


TOTAL SYSTEM SERVICES, INC.

2012 EMPLOYEE STOCK PURCHASE PLAN

Notes to Financial Statements

December 31, 2013 and 2012

 

  (1) Description of the Plan

On January 31, 2012, the board of directors of Total System Services, Inc. (TSYS) adopted the Total System Services, Inc. 2012 Employee Stock Purchase Plan (the Plan). The Plan was approved by the TSYS shareholders on May 1, 2012, and became effective as of July 1, 2012. On July 1, 2012, the plan assets of the predecessor plan, the Total System Services, Inc. Employee Stock Purchase Plan, were rolled over into the Plan. The Plan is designed to enable participating Total System Services, Inc. (TSYS) and participating subsidiaries’ employees to purchase shares of common stock of TSYS at prevailing market prices from contributions made by them and by TSYS and its subsidiaries (the Participating Employers).

TSYS serves as the Plan Administrator. The Plan agent is ComputerShare Shareowner Services, LLC, hereafter referred to as “Agent.”

All employees based in the United States who work 20 hours per week or more are eligible to participate in the Plan on the first payroll date after completing three months of continuous employment. Employees of TSYS or TSYS affiliates who are employed in a country other than the United States are not eligible to participate in the Plan unless the Plan is registered or qualified in the employee’s country of residence.

Participants contribute to the Plan through payroll deductions as a percentage of compensation. The maximum allowable contribution ranges from 3% to 7% of compensation based on years of service. The maximum amount of compensation that may be taken into account under the Plan on an annual basis is $250,000. The minimum allowable contribution is 1% of compensation. Matching contributions to the Plan are to be made by the Participating Employers in an amount equal to 0-50% of each participant’s contribution, with the percentage of the matching contribution to be set by the TSYS Board of Directors. As of December 31, 2013 and 2012, the Participating Employers’ match was 15%. Participants are immediately vested in their contributions and Participating Employers’ matching contributions.

The Plan provides, among other things, that all expenses of the Plan and its administration shall be paid by TSYS with the exception of brokers’ fees, commissions, and transaction costs, which are included in the cost of each participant’s investment in common stock of TSYS.

The Plan maintains an account balance for each participant equal to the number of shares of TSYS common stock purchased on his/her behalf, plus related investment income or loss. Each participant has the rights and powers of ordinary TSYS shareholders over the shares of common stock held for his or her benefit in the Plan, including the right to vote his or her shares. Each participant will receive cash dividends, stock dividends, stock splits and similar changes in ownership for the shares held in the Plan to the same extent as other ordinary TSYS shareholders.

The Plan requires that TSYS shares purchased under the Plan be held for six months, and after that time, each participant may withdraw all or some of his or her account balance. The participant may elect to receive the proceeds in the form of shares of common stock of TSYS or in a lump-sum cash distribution.

The Plan provides that upon termination of participation in the Plan, each former participant will receive, at his or her discretion, (i) the full number of shares of TSYS common stock held on his or her behalf by the Agent, together with a check for any fractional share interest, or (ii) a lump-sum cash distribution for the proceeds of the sale of all shares held on his or her behalf by the Agent.

 

  4   (Continued)


TOTAL SYSTEM SERVICES, INC.

2012 EMPLOYEE STOCK PURCHASE PLAN

Notes to Financial Statements

December 31, 2013 and 2012

 

Participation in the Plan shall automatically terminate upon termination of a participant’s employment whether by death, retirement, or otherwise.

TSYS expects to maintain the Plan indefinitely, but reserves the right to terminate or amend the Plan at any time, provided, however, that no termination or amendment shall affect or diminish any participant’s right to the benefit of contributions made by him or her, or his or her Participating Employer prior to the date of such amendment or termination.

TSYS reserves the right to suspend Participating Employer contributions to the Plan if its board of directors feels that TSYS’ financial condition warrants such action.

 

  (2) Summary of Significant Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

The Plan’s investment in common stock of TSYS is stated at fair value, which is based on the closing price at year-end obtained by using market quotations on the principal public exchange market for which such securities are traded. The December 31, 2013 and 2012, fair value was $33.28 and $21.42 per share, respectively.

The Plan’s investment in the common stock of TSYS is exposed to market and credit risks. Due to the level of risk associated with investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the Plan’s financial statements.

The realized gain or loss on distributions to participants is determined by computing the difference between the average cost per share and the fair value per share at the date of the distribution to the participants, less transaction costs.

Contributions to the Plan by TSYS and participating employees are accounted for on the accrual basis. Withdrawals are accounted for upon distribution. At December 31, 2013 and 2012, Plan investments include 22,795 and 15,024 shares held by 69 and 30, respectively, terminated employees, who had not yet requested distribution in accordance with the terms of the Plan.

Purchases and sales of TSYS common stock are reflected on a trade-date basis. Dividend income is accrued on the record date.

 

  5   (Continued)


TOTAL SYSTEM SERVICES, INC.

2012 EMPLOYEE STOCK PURCHASE PLAN

Notes to Financial Statements

December 31, 2013 and 2012

 

 

  (3) Fair Value Measurements

The Plan determines the fair value of its assets consistent with the provisions of the accounting standard for fair value measurements and disclosures. The accounting standard provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy under the accounting standard are described below:

Level 1 – inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Plan has the ability to access.

Level 2 – inputs use other inputs that are observable, either directly or indirectly. These inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 – inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.

In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Plan’s investment in TSYS common stock is considered a Level 1 input under the fair value hierarchy.

Management of the Plan also believes that the carrying amount of the receivables is a reasonable approximation of fair value due to their short-term nature.

 

  (4)

Tax Status of the Plan

The Plan is not qualified under Sections 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended. The Plan does not provide for income taxes because any income is taxable to the participants. Participants in the Plan must treat as compensation income their pro rata share of contributions made to the Plan by their Participating Employer. Cash dividends paid on common stock of TSYS purchased under the Plan will be taxable to the participants on a pro rata basis for Federal and state income tax purposes during the year any such dividend is received by the participant or the Plan. Upon disposition of the common stock of TSYS purchased under the Plan, participants must treat any gain or loss as long-term or short-term capital gain or loss depending upon when such disposition occurs.

 

  (5) Unrealized Appreciation (Depreciation) in Common Stock of TSYS

Changes in unrealized appreciation (depreciation) in common stock of TSYS are as follows:

 

        2013      2012  

Unrealized appreciation at beginning of period

  $     5,039,797             —       

Unrealized appreciation from predecessor plan

      —             10,910,159       

Unrealized appreciation at end of period

      25,080,400             5,039,797       
   

 

 

    

 

 

 

Total unrealized appreciation (depreciation)

    $         20,040,603                 (5,870,362)       
   

 

 

    

 

 

 

 

  6   (Continued)


TOTAL SYSTEM SERVICES, INC.

2012 EMPLOYEE STOCK PURCHASE PLAN

Notes to Financial Statements

December 31, 2013 and 2012

 

  (6) Realized Gain on Withdrawal/Distributions to Participants

The gain realized on withdrawal/distributions to participants is summarized as follows:

 

                2013                      2012          

Market value at dates of distribution or redemption of shares of common stock of TSYS

  $         12,395,788             4,552,547       

Less cost (computed on an average cost basis) of shares of common stock of TSYS distributed or redeemed

      9,026,545             3,690,361       
   

 

 

    

 

 

 

Total realized gain

    $     3,369,243                     862,186       
   

 

 

    

 

 

 

 

  7