EX-99.1 6 ex99-1.txt ANNUAL REPORT ON FORM 11-K EMPLOYEE STOCK PURCHASE PLAN 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, 2003 ----------------------------------------------------- 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. EMPLOYEE STOCK PURCHASE PLAN TOTAL SYSTEM SERVICES, INC. 1600 FIRST AVENUE COLUMBUS, GEORGIA 31901 (706) 649-2204 TOTAL SYSTEM SERVICES, INC. EMPLOYEE STOCK PURCHASE PLAN Financial Statements December 31, 2003, 2002, and 2001 (With Independent Auditors' Report Thereon) Independent Auditors' Report The Plan Administrator Total System Services, Inc. Employee Stock Purchase Plan: We have audited the accompanying statements of financial condition of the Total System Services, Inc. Employee Stock Purchase Plan as of December 31, 2003 and 2002, and the related statements of operations and changes in plan equity for each of the years in the three-year period ended December 31, 2003. These financial statements are the responsibility of the Plan's administrator. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 statement presentation. We believe that our audits provide 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 Total System Services, Inc. Employee Stock Purchase Plan as of December 31, 2003 and 2002, and the results of its operations and changes in its plan equity for each of the years in the three-year period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. /s/KPMG LLP March 12, 2004 TOTAL SYSTEM SERVICES, INC. EMPLOYEE STOCK PURCHASE PLAN Statements of Financial Condition December 31, 2003 and 2002
Assets 2003 2002 ------------------- ------------------- Common stock of Total System Services, Inc. at market value - 1,748,194 shares (cost $31,386,554) in 2003 and 1,790,666 shares (cost $29,840,943) in 2002 (note 2) $ 54,421,275 24,173,986 Dividends receivable 31,149 30,500 Contributions receivable 534,764 487,962 ------------------- ------------------- $ 54,987,188 24,692,448 =================== =================== Plan Equity Plan equity (5,489 and 5,385 participants at December 31, 2003 and 2002, respectively) $ 54,987,188 24,692,448 =================== ===================
See accompanying notes to financial statements. 2 TOTAL SYSTEM SERVICES, INC. EMPLOYEE STOCK PURCHASE PLAN Statements of Operations and Changes in Plan Equity Years ended December 31, 2003, 2002, and 2001
2003 2002 2001 ------------------ ------------------ ------------------ Dividend income $ 123,777 108,225 93,195 Realized gain on distributions to participants (note 4) 4,026,165 1,913,128 4,686,645 Unrealized (depreciation) appreciation in common stock of Total System Services, Inc. (note 3) 28,701,678 (13,716,848) (6,065,826) Contributions (notes 1 and 2): Participants 8,147,986 7,575,583 6,650,650 Participating employers: Total System Services, Inc. 3,336,669 3,116,193 2,518,911 Columbus Depot Equipment Company 162 154 149 TSYS Total Solutions, Inc. -- -- 264,872 Columbus Productions, Inc. 45,584 49,355 57,972 TSYS Canada, Inc. 31,850 25,363 18,592 TSYS Total Debt Management, Inc. 56,446 62,385 -- ProCard, Inc. 95,316 27,653 -- DotsConnect, Inc. -- -- 56,101 Vital Processing Services, L.L.C. 481,998 511,160 423,270 Enhancement Services Corporation 15,092 -- -- TSYS Tech. Center 11,092 -- -- ------------------ ------------------ ------------------ Total employer contributions 4,074,209 3,792,263 3,339,867 ------------------ ------------------ ------------------ Increase (decrease) in Plan equity before withdrawals 45,073,815 (327,649) 8,704,531 Withdrawals by participants - common stock of Total System Services, Inc. at market value (631,575 shares in 2003, 441,103 shares in 2002, and 418,335 shares in 2001) (notes 2 and 4) (14,779,075) (9,310,243) (10,849,350) ------------------ ------------------ ------------------ Increase (decrease) in Plan equity for the year 30,294,740 (9,637,892) (2,144,819) Plan equity at beginning of year 24,692,448 34,330,340 36,475,159 ------------------ ------------------ ------------------ Plan equity at end of year $ 54,987,188 24,692,448 34,330,340 ================== ================== ==================
See accompanying notes to financial statements. 3 TOTAL SYSTEM SERVICES, INC. EMPLOYEE STOCK PURCHASE PLAN Notes to Financial Statements December 31, 2003, 2002, and 2001 (1) Description of the Plan The Total System Services, Inc. Employee Stock Purchase Plan (the Plan) was implemented as of October 1, 1984. The Plan is designed to enable participating Total System Services, Inc. (TSYS) and subsidiaries' employees to purchase shares of common stock of TSYS at prevailing market prices from contributions made by them and TSYS and subsidiaries (the Participating Employers). TSYS serves as the Plan administrator. Prior to August 1, 2002, the Plan agent was State Street Bank and Trust Company. Effective August 1, 2002, the Plan agent is Mellon Investor Services, LLC, hereafter referred to as "Agent." Prior to July 1, 2002, all employees who work twenty hours per week or more were eligible to participate in the Plan after completing three months of continuous employment prior to the beginning of a calendar quarter. Effective July 1, 2002, the Plan was amended to allow employees who work 20 hours per week or more to become eligible to participate in the plan on the first payroll date after completing three months of continuous employment. Effective December 31, 2002, employees of TSYS or TSYS affiliates who are employed in a country other than the United States and are eligible to participate in a compensatory stock plan sponsored by TSYS or TSYS affiliates similar to the Plan that has been established pursuant to the laws of that country are not eligible to participate in the Plan. Participants contribute to the Plan through payroll deductions as a percentage of compensation. The minimum contribution was 0.5%, and the maximum contribution ranges from 3% to 7%, based on years of service. Effective July 1, 2002, the minimum allowable contribution is 1% of compensation. Contributions to the Plan are to be made by the Participating Employers in an amount equal to one-half of each participant's contribution. 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, postage, and transaction costs which are included in the cost of each participant's investment in common stock of TSYS. The Plan provides that each participant may withdraw at any time 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. Prior to January 23, 2002, participants who had previously withdrawn shares from their Plan account remained eligible to participate, but with certain exceptions were precluded from receiving matching contributions from the Plan sponsor for a specified period of time. Effective January 23, 2002, the Plan was amended to allow employees to make unlimited withdrawals without their employer matching contributions being suspended. 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/her or TSYS prior to the date of such amendment or termination. (2) Summary of Accounting Policies The investment in common stock of TSYS is stated at market value. The 2003 and 2002 market values are based on the closing price at year-end. The December 31, 2003 and 2002 market values were $31.13 and $13.50 per share, respectively. 4 (Continued) TOTAL SYSTEM SERVICES, INC. EMPLOYEE STOCK PURCHASE PLAN Notes to Financial Statements December 31, 2003, 2002, and 2001 The realized gain on distributions to participants is determined by computing the difference between the average cost per share of common stock and the market value per share at the date of the distribution to the participants. Contributions to and withdrawals from the Plan are accounted for on the accrual basis. Common stock contributions are recorded at fair value. During the years ended December 31, 2002 and 2001, TSYS contributed one share of stock to each new employee, upon reaching three months of employment with TSYS. Such contributions were made to the employees' accounts with the Plan, and resulted in an increase of employer contributions of approximately $1,827 and $28,587 for the years ended December 31, 2002 and 2001, respectively. Effective January 23, 2002, the Plan was amended to eliminate this gift stock program. Dividend income is accrued on the record date. The Plan's investments include common stock of TSYS which 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 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 employer. Cash dividends paid on common stock of TSYS purchased under the Plan will be taxed 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. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Management of the Plan believes that the carrying amount of receivables is a reasonable approximation of the fair value due to the short-term nature of these instruments. 5 (Continued) TOTAL SYSTEM SERVICES, INC. EMPLOYEE STOCK PURCHASE PLAN Notes to Financial Statements December 31, 2003, 2002, and 2001 (3) Unrealized (Depreciation) Appreciation in Common Stock of TSYS Changes in unrealized (depreciation) appreciation in common stock of TSYS are as follows:
2003 2002 2001 ----------- ------------- ------------ Unrealized appreciation (depreciation at end of year $23,034,721 (5,666,957) 8,049,891 Unrealized (depreciation) appreciation at beginning of year (5,666,957) 8,049,891 14,115,717 ----------- ------------- ------------ Unrealized appreciation (depreciation) for the year $28,701,678 (13,716,848) (6,065,826) =========== ============= ============
(4) Realized Gain on Withdrawal Distributions to Participants The gain realized on withdrawal distributions to participants is summarized as follows:
2003 2002 2001 ----------- ------------- ------------ Market value at dates of distribution or redemption of shares of common stock of TSYS $14,779,075 9,310,243 10,849,350 Less cost (computed on an average cost basis) of shares of common stock of TSYS distributed or redeemed 10,752,910 7,397,115 6,162,705 ----------- ------------ ------------ Total realized gain $ 4,026,165 1,913,128 4,686,645 =========== ============= ============
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