EX-99.1 2 g24080exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
     
(TSYS LOGO)
  PRESS RELEASE
     
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 Announces Second Quarter 2010 Financial Results
Columbus, Ga., July 21, 2010 — TSYS (NYSE: TSS) today reported results for the second quarter of 2010. Total revenues were $433.7 million, an increase of 5.3% over 2009. Operating income was down 4.2% compared to 2009 and was flat on a sequential quarter basis. Income from continuing operations attributable to TSYS shareholders decreased 5.2% to $49.6 million compared to last year. Basic and diluted earnings per share from continuing operations attributable to TSYS shareholders for the quarter was $0.25 down $0.02 or 5.2% from 2009’s $0.27.
“The quarter’s performance is highlighted by increased overall transaction volume and expense control. Through the first six months, same client revenues grew 3.6%. Excluding revenues from termination fees in both quarters and the impact of acquiring a controlling interest in First National Merchant Solutions, LLC (FNMS) in the second quarter, operating income was up 18.1% sequentially. Quarterly transaction volumes in each reporting segment were up. Same client transactions were up 5.1% in North America and up 3.8% in International. In the Merchant segment, merchant POS transactions and FNMS transaction volumes each grew 8.5% for the quarter. We are encouraged that these trends are key indicators of an improving economy,” said Philip W. Tomlinson, chairman of the board and chief executive officer of TSYS.
“The acquisition of FNMS on April 1, 2010, is a positive and allows us to further diversify across the payments value chain to capture a larger share of dollars spent on payment services. We continue to generate a healthy, strong cash flow, and we remain optimistic about our ability to achieve our guidance for 2010,” said Tomlinson.
Conference Call
TSYS will host its quarterly conference call at 5:00 p.m. ET on Wednesday, July 21. 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.

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(TSYS LOGO)   PRESS RELEASE
Non-GAAP Measures
This press release and the financial highlights section of this release contain the non-GAAP financial measures of operating income excluding revenues from termination fees and the impact of the acquisition of FNMS, and revenues and operating results on a constant currency basis, respectively, to describe TSYS’ performance. Management uses these non-GAAP financial measures to better understand and assess TSYS’ operating results and financial performance. TSYS believes these non-GAAP financial measures provide meaningful additional information about TSYS to assist investors in understanding and evaluating its operating results.
Additional information about non-GAAP financial measures and a reconciliation of those measures to the most directly comparable GAAP measures are included on page 10 of this release.
About TSYS
TSYS (NYSE: TSS) is one of the world’s largest companies for outsourced payment services, offering a broad range of issuer- and acquirer-processing technologies that support consumer-finance, credit, debit, healthcare, loyalty and prepaid services for financial institutions and retail companies in the Americas, EMEA and Asia-Pacific regions. For more information contact news@tsys.com or log on to www.tsys.com. TSYS routinely posts all important information on its Web site.
Forward-Looking Statements
This press release contains statements that constitute “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements regarding TSYS’ earnings guidance for 2010, and the assumptions underlying such statements including, with respect to TSYS’ earnings guidance for 2010: (1) the economy will not worsen during 2010; (2) there will be no deconversions of large clients during the year other than as previously announced; (3) there will be no significant movement in foreign currency exchange rates related to TSYS’ business during 2010; (4) the anticipated levels in employment, technology and other expenses, which are included in 2010 estimates, will be accomplished; (5) TSYS will not incur significant expenses associated with the conversion of new large clients or acquisitions, or any significant impairment of goodwill or other intangibles; and (6) there will be no significant movements in LIBOR, and no significant draws on the remaining balance of TSYS’ revolving credit facility. These statements are based on the current beliefs and expectations of TSYS’ management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results to differ materially from those contemplated by our forward-looking statements in this press release. Many of these factors are beyond TSYS’ ability to control or predict. These factors include, but are not limited to: (1) one or more of the assumptions set forth above upon which TSYS’ 2010 earnings guidance is based is inaccurate; (2) adverse developments with respect to entering into contracts with new clients and retaining current clients; (3) continued consolidation and turmoil in the financial services and other industries during 2010, including the merger of TSYS clients with entities that are not TSYS processing clients, the sale of portfolios by TSYS clients to entities that are not TSYS processing clients and the nationalization or seizure by banking regulators of TSYS clients; (4) TSYS is unable to control expenses and increase market share both domestically and internationally; (5) TSYS is unable to manage the impact of slowing economic conditions and consumer spending; (6) the material breach of security of any of TSYS’ systems; (7) the impact of potential and completed acquisitions, including the costs associated therewith and their being more difficult to integrate than anticipated; (8) changes occur in laws, rules, regulations, credit card association rules or other industry standards affecting TSYS’ business which

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(TSYS LOGO)
  PRESS RELEASE
require significant product development efforts or reduce the market demand for or value of its products; (9) adverse developments with respect to the credit card industry in general, including a decline in the use of credit cards as a payment mechanism; and (10) 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 factors that could cause actual results to differ materially from those contemplated in this release can be found in TSYS’ filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise.
— more —

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TSYS Announces 2010 Earnings
Page 4 of 11
TSYS
Financial Highlights
(unaudited)
(in thousands, except per share data)
                                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
                    Percent                     Percent  
    2010     2009     Change     2010     2009     Change  
Total revenues
   $ 433,746       411,993       5.3 %   $ 849,100       820,927       3.4 %
 
                                                
Cost of services
     298,485       280,111       6.6       590,677       564,787       4.6  
Selling, general and administrative expenses
     55,963       49,103       14.0       100,054       95,246       5.0  
 
                                        
Operating income
     79,298       82,779       (4.2 )     158,369       160,894       (1.6 )
Nonoperating expenses
     (1,172 )     (2,278 )   nm       (1,433 )     (3,737 )   nm  
 
                                        
Income from continuing operations before income taxes, noncontrolling interests and equity in income of equity investments
     78,126       80,501       (3.0 )     156,936       157,157       (0.1 )
Income taxes
     28,099       29,229       (3.9 )     55,982       56,644       (1.2 )
 
                                        
Income from continuing operations before noncontrolling interests and equity in income of equity investments
     50,027       51,272       (2.4 )     100,954       100,513       0.4  
Equity in income of equity investments
     2,366       1,626       45.5       3,259       2,669       22.1  
 
                                        
Income from continuing operations, net of tax
     52,393       52,898       (1.0 )     104,213       103,182       1.0  
Loss from discontinued operations, net of tax
     84       1,120     nm       84       (2,223 )   nm  
 
                                        
Net income
     52,477       54,018       (2.9 )     104,297       100,959       3.3  
Net income attributable to noncontrolling interests
     (2,773 )     (571 )   nm       (3,267 )     (986 )   nm  
 
                                        
Net income attributable to TSYS common shareholders
   $ 49,704       53,447       (7.0 )%   $ 101,030       99,973       1.1 %
 
                                        
 
                                                
Basic earnings per share:
                                                
Income from continuing operations to TSYS common shareholders
   $ 0.25       0.27       (5.3 )%   $ 0.51       0.52       (1.3 )%
 
                                        
Loss from discontinued operations to TSYS common shareholders
     0.00       0.01     nm       0.00       (0.01 )   nm  
 
                                        
Net income attributable to TSYS common shareholders
   $ 0.25       0.27       (7.1 )%   $ 0.51       0.51       1.0 %
 
                                        
 
                                                
Diluted earnings per share:
                                                
Income from continuing operations to TSYS common shareholders
   $ 0.25       0.27       (5.2 )%   $ 0.51       0.52       (1.2 )%
 
                                        
Loss from discontinued operations to TSYS common shareholders
     0.00       0.01     nm       0.00       (0.01 )   nm  
 
                                        
Net income attributable to TSYS common shareholders
   $ 0.25       0.27       (7.0 )%   $ 0.51       0.51       1.0 %
 
                                        
 
                                                
Dividends declared per share
   $ 0.07       0.07             $ 0.14       0.14          
 
                                        
 
                                                
Amounts attributable to TSYS common shareholders:
                                                
Income from continuing operations, net of tax
   $ 49,620       52,327             $ 100,946       102,196          
(Loss) income from discontinued operations, net of tax
     84       1,120               84       (2,223 )        
 
                                        
Net income
   $ 49,704       53,447             $ 101,030       99,973          
 
                                        
     
 
nm = not meaningful
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TSYS Announces 2010 Earnings
Page 5 of 11
TSYS
Earnings Per Share
(unaudited)
(in thousands, except per share data)
                                                                 
    Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended  
    June 30, 2010     June 30, 2009     June 30, 2010     June 30, 2009  
    Common     Participating     Common     Participating     Common     Participating     Common     Participating  
    Stock     Securities     Stock     Securities     Stock     Securities     Stock     Securities  
Basic Earnings per share:
                                                                
Net income
   $ 49,704               53,447             $ 101,030             $ 99,973          
Less income allocated to nonvested awards
     (250 )     250       (413 )     413       (514 )     514       (816 )     816  
 
                                                
Net income allocated to common stock for EPS calculation ( a )
   $ 49,454       250       53,034       413     $ 100,516       514     $ 99,157       816  
 
                                                
 
                                                                
Average common shares outstanding ( b )
     196,347       998       195,634       1,530       196,254       1,007       195,466       1,614  
 
                                                
 
                                                                
Average common shares and participating securities
     197,345               197,164               197,261               197,080          
 
                                                        
 
                                                                
Basic Earnings per share ( a )/( b )
   $ 0.25       0.25       0.27       0.27     $ 0.51       0.51     $ 0.51       0.51  
 
                                                
 
                                                                
Diluted Earnings per share:
                                                                
Net income
   $ 49,704               53,447             $ 101,030             $ 99,973          
Less income allocated to nonvested awards
     (250 )     250       (413 )     413       (514 )     514       (815 )     815  
 
                                                
Net income allocated to common stock for EPS calculation ( c )
   $ 49,454       250       53,034       413     $ 100,516       514     $ 99,158       815  
 
                                                
 
                                                                
Average common shares outstanding
     196,347       998       195,634       1,530       196,254       1,007       195,466       1,614  
Increase due to assumed issuance of shares related to common equivalent shares outstanding
     85               351               87               358          
 
                                                
 
                                                                
Average common and common equivalent shares outstanding ( d )
     196,432       998       195,985       1,530       196,341       1,007       195,824       1,614  
 
                                                
 
                                                                
Average common and common equivalent shares and participating securities
     197,430               197,515               197,348               197,438          
 
                                                        
 
                                                                
Diluted Earnings per share ( c )/( d )
   $ 0.25       0.25       0.27       0.27     $ 0.51       0.51     $ 0.51       0.51  
 
                                                
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TSYS Announces 2010 Earnings
Page 6 of 11
TSYS
Segment Breakdown
(unaudited)
(in thousands)
                                                                 
    Three Months Ended June 30,   Six Months Ended June 30,
                    Change                   Change
    2010   2009   $   %   2010   2009   $   %
Revenues before reimbursable items
                                                                
North America Services
   $ 202,061       222,950       (20,889 )     (9.4 )%     417,371       446,732       (29,361 )     (6.6 )%
International Services
     74,769       73,283       1,486       2.0 %     151,050       143,867       7,183       5.0 %
Merchant Services
     94,748       62,153       32,595       52.4 %     153,411       120,359       33,052       27.5 %
Intersegment revenues
     (5,980 )     (7,664 )     1,684       (22.0 )%     (11,682 )     (14,791 )     3,109       (21.0 )%
                         
Revenues before reimbursable items from external customers
   $ 365,598       350,722       14,876       4.2 %     710,150       696,167       13,983       2.0 %
                         
 
                                                                
Total revenues
                                                                
North America Services
   $ 236,810       264,984       (28,174 )     (10.6 )%     491,038       533,773       (42,735 )     (8.0 )%
International Services
     77,987       76,433       1,554       2.0 %     157,379       150,234       7,145       4.8 %
Merchant Services
     126,765       80,338       46,427       57.8 %     215,974       155,836       60,138       38.6 %
Intersegment revenues
     (7,816 )     (9,762 )     1,946       (19.9 )%     (15,291 )     (18,916 )     3,625       (19.2 )%
                         
Revenues from external customers
   $ 433,746       411,993       21,753       5.3 %     849,100       820,927       28,173       3.4 %
                         
 
                                                                
Depreciation and amortization
                                                                
North America Services
   $ 18,891       20,799       (1,908 )     (9.2 )%     39,294       44,029       (4,735 )     (10.8 )%
International Services
     8,597       8,424       173       2.1 %     17,192       15,849       1,343       8.5 %
Merchant Services
     12,302       8,149       4,153       51.0 %     20,888       16,235       4,653       28.7 %
Corporate Admin
     612       922       (310 )     (33.6 )%     1,592       1,658       (66 )     (4.0 )%
                         
Total depreciation and amortization
   $ 40,402       38,294       2,108       5.5 %     78,966       77,771       1,195       1.5 %
                         
 
                                                                
Segment operating income
                                                                
North America Services
   $ 66,218       70,558       (4,340 )     (6.2 )%     136,006       142,052       (6,046 )     (4.3 )%
International Services
     11,673       12,836       (1,163 )     (9.1 )%     22,956       22,367       589       2.6 %
Merchant Services
     22,928       16,690       6,238       37.4 %     40,253       32,209       8,044       25.0 %
Corporate Admin
     (21,521 )     (17,305 )     (4,216 )     24.4 %     (40,846 )     (35,734 )     (5,112 )     14.3 %
                         
Operating income
   $ 79,298       82,779       (3,481 )     (4.2 )%     158,369       160,894       (2,525 )     (1.6 )%
                         
 
                                                                
Other:
                                                                
Reimbursable items:
                                                                
North America Services
   $ 34,749       42,035       (7,286 )     (17.3 )%     73,667       87,042       (13,375 )     (15.4 )%
International Services
     3,218       3,150       68       2.2 %     6,329       6,367       (38 )     (0.6 )%
Merchant Services
     32,017       18,185       13,832       76.1 %     62,563       35,477       27,086       76.3 %
Intersegment revenues
     (1,837 )     (2,097 )     260       (12.4 )%     (3,609 )     (4,127 )     518       (12.6 )%
                         
Reimbursable items
   $ 68,147       61,273       6,874       11.2 %     138,950       124,759       14,191       11.4 %
                         
 
                                                                
Volumes:
                                                                
FTEs (continuing operations)
                                                                
North America Services
                                     4,433       4,829       (396 )     (8.2 )%
International Services
                                     1,921       1,855       66       3.6 %
Merchant Services
                                     1,128       832       296       35.6 %
Corporate Admin
                                     334       359       (25 )     (7.0 )%
                                             
FTEs
                                     7,816       7,875       (59 )     (0.7 )%
                                             
 
                                                                
                                    At   Change
                                     
Total assets (in thousands)
                                     6/30/2010       12/31/2009     $   % 
                                     
North America Services
                                   $ 1,589,005       1,535,129       53,876       3.5 %
International Services
                                     380,211       379,606       605       0.2 %
Merchant Services
                                     504,426       215,855       288,571       133.7 %
Intersegment assets
                                     (577,778 )     (419,636 )     (158,142 )     37.7 %
                                             
Total assets
                                   $ 1,895,864       1,710,954       184,910       10.8 %
                                             
                                                                 
    Three Months Ended June 30,   Six Months Ended June 30,
                    Change                   Change
    2010   2009   Inc(Dec)   %   2010   2009   Inc(Dec)   %
North America Segment:
                                                                
Accounts on File (AOF) (in millions)
                                     290.7       311.7       (21.1 )     (6.8 )%
Transactions (in millions)
     1,563.7       1,522.3       41.3       2.7 %     3,021.9       3,003.3       18.6       0.6 %
 
                                                                
International Segment:
                                                                
AOF (in millions)
                                     42.1       37.8       4.4       11.6 %
Transactions (in millions)
     297.9       271.1       26.7       9.8 %     579.1       519.1       60.0       11.6 %
 
                                                                
Merchant Segment:
                                                                
POS Transactions (in millions)
     1,423.1       1,311.6       111.5       8.5 %     2,737.3       2,656.6       80.7       3.0 %
Certain amounts have been reclassified to conform with the presentation adopted in 2010.
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TSYS Announces 2010 Earnings
Page 7 of 11
TSYS
Balance Sheet
(in thousands)
                 
    Jun 30, 2010   Dec 31, 2009
    (unaudited)   (unaudited)
     
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 387,993       449,955  
Restricted cash
     8,199       46,190  
Accounts receivable, net
     231,598       231,325  
Deferred income tax assets
     7,692       11,302  
Prepaid expenses and other current assets
     102,921       72,124  
     
Total current assets
     738,403       810,896  
Property and equipment, net
     293,046       289,198  
Computer software, net
     215,643       197,134  
Contract acquisition costs, net
     125,495       128,038  
Goodwill
     317,755       168,121  
Equity investments, net
     75,751       75,495  
Other intangible assets, net
     92,735       14,132  
Other assets
     37,036       27,940  
     
Total assets
   $ 1,895,864       1,710,954  
     
 
                
Liabilities
                
Current liabilities:
                
Current portion of notes payable
   $ 5,319       6,988  
Accrued salaries and employee benefits
     16,601       32,457  
Accounts payable
     48,300       21,729  
Current portion of obligations under capital leases
     10,024       6,289  
Other current liabilities
     128,411       153,316  
     
Total current liabilities
     208,655       220,779  
Notes payable, excluding current portion
     191,097       192,367  
Deferred income tax liabilities
     51,145       47,162  
Obligations under capital leases, excluding current portion
     33,807       12,756  
Other long-term liabilities
     44,811       48,443  
     
Total liabilities
     529,515       521,507  
     
Redeemable noncontrolling interest
     113,347       —  
     
Equity
                
Shareholders’ equity:
                
Common stock
     20,130       20,086  
Additional paid-in capital
     146,553       139,742  
Accumulated other comprehensive income, net
     (11,044 )     5,673  
Treasury stock
     (70,519 )     (69,950 )
Retained earnings
     1,153,670       1,080,250  
     
Total shareholders’ equity
     1,238,790       1,175,801  
     
Noncontrolling interests in consolidated subsidiaries
     14,212       13,646  
     
Total equity
     1,253,002       1,189,447  
     
Total liabilities and equity
   $ 1,895,864       1,710,954  
     

 

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TSYS Announces 2010 Earnings
Page 8 of 11
TSYS
Cash Flow
(unaudited)
(in thousands)
                 
    Six Months Ended June 30,
    2010   2009
     
CASH FLOWS FROM OPERATING ACTIVITIES:
                
Net income
   $ 104,297       100,959  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Equity in income of equity investments
     (3,259 )     (2,669 )
Dividends received from equity investments
     2,698       4,718  
Net loss (gain) on currency translation adjustments
     136       3,953  
Depreciation and amortization
     78,966       77,967  
Amortization of debt issuance costs
     77       77  
Share-based compensation
     7,956       9,237  
Excess tax benefit from share-based payment arrangements
     (111 )     (6 )
Provisions for bad debt expense and billing adjustments
     (366 )     646  
Charges for transaction processing provisions
     2,109       4,014  
Deferred income tax benefit
     2,749       (6,502 )
(Gain) loss on disposal of equipment, net
     11       9  
Gain on disposal of subsidiary
     (131 )     —  
(Increase) decrease in:
                
Accounts receivable
     (2,698 )     22,198  
Prepaid expenses, other current assets and other long-term assets
     2,827       18,830  
Increase (decrease) in:
                
Accounts payable
     27,277       (7,376 )
Accrued salaries and employee benefits
     (14,031 )     (20,218 )
Other current liabilities and other long-term liabilities
     (12,799 )     13,258  
     
Net cash provided by operating activities
     195,708       219,095  
     
 
                
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Purchases of property and equipment, net
     (17,189 )     (13,784 )
Additions to licensed computer software from vendors
     (20,812 )     (12,709 )
Additions to internally developed computer software
     (9,406 )     (12,918 )
Cash used in acquisitions, net of cash acquired
     (148,531 )     (293 )
Additions to contract acquisition costs
     (19,888 )     (17,105 )
     
Net cash used in investing activities
     (215,826 )     (56,809 )
     
 
                
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Proceeds from borrowings of long-term debt
     —       5,334  
Principal payments on long-term debt borrowings and capital lease obligations
     (7,858 )     (9,786 )
Proceeds from exercise of stock options
     378       2  
Excess tax benefit from share-based payment arrangements
     111       6  
Repurchase of common stock
     (1,075 )     (329 )
Subsidiary dividends paid to noncontrolling shareholders
     (250 )     (235 )
Dividends paid on common stock
     (27,605 )     (27,595 )
     
Net cash used in financing activities
     (36,299 )     (32,603 )
     
 
                
CASH AND CASH EQUIVALENTS:
                
Effect of exchange rate changes on cash and cash equivalents
     (5,545 )     (3,422 )
     
Net increase in cash and cash equivalents
     (61,962 )     126,261  
Cash and cash equivalents at beginning of period
     449,955       220,019  
     
Cash and cash equivalents at end of period
   $ 387,993       346,280  
     
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TSYS Announces 2010 Earnings
Page 9 of 11
Supplemental Information:
                                         
    Accounts on File at June 30,
                                    Percent
(in millions)   2010   %   2009   %   Change
     
Consumer
     180.9       54.3 %     191.1       54.7 %     (5.4 )%
Commercial
     48.2       14.5       44.4       12.7       8.4  
Stored Value
     47.6       14.3       34.3       9.9       38.7  
Government services
     27.0       8.1       22.4       6.4       20.4  
Retail
     23.6       7.1       51.8       14.8       (54.3 )
Debit
     5.0       1.5       5.4       1.5       (6.2 )
Healthcare
     0.5       0.2       0.1       —     nm  
             
 
     332.8       100.0 %     349.5       100.0 %     (4.8 )%
             
                 
    June 2009 to   June 2008 to
Growth in Accounts on File (in millions):   June 2010   June 2009
Beginning balance
     349.5       372.9  
Change in accounts on file due to:
                
Internal growth of existing clients
     22.5       30.6  
New clients
     31.4       23.1  
Purges/Sales
     (41.2 )     (37.0 )
Deconversions
     (29.4 )     (40.1 )
 
                
Ending balance
     332.8       349.5  
 
                
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TSYS Announces 2010 Earnings
Page 10 of 11
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 2010 financial results using the previous year’s foreign currency exchange rates. On a year-to-date constant currency basis, TSYS’ total revenues grew 2.9% as compared to a reported GAAP increase of 3.4%, and operating income decreased 1.6% versus a GAAP-reported decrease of 1.6%. The schedule below also provides a reconciliation of operating income excluding revenues from termination fees and the impact of the acquisition of FNMS to reported operating income.
The non-GAAP financial measures of constant currency and operating income excluding revenues from termination fees and the impact of the FNMS acquisition 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 2010 Earnings
Page 11 of 11
Reconciliation of GAAP to Non-GAAP
Constant Currency Comparison
(unaudited)
(in thousands)
                         
    Three Months Ended June 30,
                    Percent
    2010   2009   Change
     
Consolidated
                        
Constant currency (1)
   $ 435,083       411,993       5.6 %
Foreign currency (2)
     (1,337 )     —       (0.3 )
             
Total revenues
   $ 433,746       411,993       5.3 %
             
 
                        
Constant currency (1)
   $ 80,064       82,779       (3.3 )%
Foreign currency (2)
     (766 )     —       (0.9 )
             
Operating income
   $ 79,298       82,779       (4.2 )%
             
                         
    Six Months Ended June 30,
                    Percent
    2010   2009   Change
     
Consolidated
                        
Constant currency (1)
   $ 844,602       820,927       2.9 %
Foreign currency (2)
     4,498       —       0.5  
             
Total revenues
   $ 849,100       820,927       3.4 %
             
 
                        
Constant currency (1)
   $ 158,312       160,894       (1.6 )%
Foreign currency (2)
     57       —       0.0  
             
Operating income
   $ 158,369       160,894       (1.6 )%
             
 
(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.
Operating income Excluding Impact of FNMS and Termination Fees
(unaudited)
(in thousands)
                         
    Three Months Ended
    June 30,   March 31,   Percent
    2010   2010   Change
     
Consolidated
                        
Operating income
   $ 79,298       79,071       0.3 %
Less:
                        
Termination Fees
     10,753       23,838          
Acquisition of FNMS
     2,196       (966 )        
             
Operating income excluding termination fees and FNMS
   $ 66,349       56,199       18.1 %
             
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