EX-99.1 2 d571381dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

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 Second Quarter Results and Raises 2013 Guidance with NetSpend Acquisition

COLUMBUS, Ga., July 23, 2013 — TSYS (NYSE: TSS) today reported results for the second quarter of 2013 and raised its 2013 guidance to include the acquisition of NetSpend Holdings, Inc. (NetSpend), which closed on July 1, 2013. TSYS’ results for the second quarter and year-to-date do not include the results for NetSpend for such periods.

For the second quarter, total revenues were $478.4 million, an increase of 3.4% as compared to 2012. Total revenues were impacted by a decrease of $3.0 million in reimbursable items for the quarter, as well as an unfavorable currency translation of $6.4 million. Revenues before reimbursable items for the quarter were $417.5 million, an increase of 4.7% over 2012, or 6.3% on a constant currency basis. Revenues before reimbursable items were impacted by an unfavorable currency translation of $6.2 million. TSYS’ operating income, excluding merger and acquisition expenses associated with NetSpend, was $96.6 million, an increase of 4.9% over 2012. On a GAAP basis, operating income was $95.3 million, an increase of 3.5% over 2012. Basic earnings per share (EPS), excluding expenses incurred in connection with the acquisition of NetSpend, was $0.34, a decrease of 4.3% over 2012. Basic EPS on a GAAP basis was $0.31, a decrease of 12.9% over 2012. Diluted EPS on a GAAP basis was $0.31, a decrease of 12.4% over 2012.

On a year-to-date basis, total revenues were $943.4 million, an increase of 2.1% as compared to 2012. Total revenues were impacted by a decrease of $8.3 million in reimbursable items, as well as an unfavorable currency translation of $10.4 million. Revenues before reimbursable items were $821.7 million, an increase of 3.5% over 2012 or 4.8% on a constant currency basis. Revenues before reimbursable items were impacted by an unfavorable currency translation of $10.2 million. TSYS’ operating income, excluding merger and acquisition expenses associated with NetSpend, was $174.9 million, a decrease of 1.1% over 2012. On a GAAP basis, operating income was $170.2 million, a decrease of 3.8% over 2012. Basic EPS, excluding expenses incurred in connection with the acquisition of NetSpend, was $0.67, an increase of 2.9% over 2012. Basic EPS on a GAAP basis was $0.61, a decrease of 6.0% over 2012. Diluted EPS on a GAAP basis was $0.61, a decrease of 5.9% over 2012.

 

2013

LOGO

 

TSYS Reports Second Quarter Results/p. 2

“Our financial results for the first six months met our expectations excluding currency translation adjustments and merger and acquisition expenses. The acquisition of NetSpend is a transformational event for us. NetSpend’s revenue has grown at a 22% CAGR over the past five years. The next two years will be very exciting as we work on the integration of NetSpend. We also plan on growing the prepaid program management business and converting the largest pipeline of accounts in our history over the next two years,” said Philip W. Tomlinson, chairman of the board and chief executive officer, TSYS.

“NetSpend is the second largest provider of general purpose reloadable (GPR) and Paycards in the U.S. With the NetSpend acquisition, TSYS gains entry into one of the fastest growing areas of payments which is expected to double over the next 4–5 years. The acquisition complements our already strong presence in the prepaid processing space,” said Tomlinson.

“There are an estimated 68 million U.S. consumers who are underserved. Only 17% of these consumers have ever used a GPR card, and NetSpend serves less than 5% of the overall market today. NetSpend has a leadership team with deep prepaid experience and a differentiated product offering customized for the consumers it serves. The opportunity to capture greater market share is within our reach. NetSpend’s mission is to empower consumers with the convenience, security and freedom to be self-banked, which aligns with TSYS’ brand promise to improve people’s lives and businesses by putting people at the center of payments,” said Tomlinson.

With the acquisition of NetSpend, TSYS is providing guidance on adjusted cash earnings per share and adjusted EBITDA as these metrics will provide a more meaningful measure of the company’s financial performance given the increased borrowing of $1.4 billion and the increase in amortization expense for acquisition intangibles. Beginning in the third quarter, NetSpend will be reported as TSYS’ fourth operating segment.

The new guidance ranges for 2013 as compared to 2012 include:

 

     2013 Revised Guidance*  
     Range
(in millions, except  per
share amounts)		      Range Percent
Change		  

Total revenues

    $ 2,137 to $2,180         14% to 17%   

Revenues before reimbursable items

    $ 1,898 to $1,936         17% to 20%   

Adjusted EBITDA**

    $ 639 to    $652         17% to 19%   

Adjusted cash EPS***

    $ 1.69 to   $1.72         16% to 18%   

 

* The guidance includes NetSpend’s operating results for six months of 2013, excludes one-time expenses incurred in connection with the NetSpend acquisition of $16.0 million, assumes approximately $33.5 million ($67 million on an annual basis) of acquisition intangible amortization associated with the NetSpend acquisition, no significant movement in foreign exchange rates, and assumes minimal synergies for 2013.
** Adjusted EBITDA is net income excluding equity in income of equity investments, nonoperating income/(expense), taxes, depreciation, amortization and stock-based compensation expenses and other non-recurring items.
*** Adjusted cash EPS is adjusted cash earnings divided by weighted average shares outstanding used for basic EPS calculations. Adjusted cash earnings is net income excluding the after-tax impact of stock-based compensation expenses, amortization of acquisition intangibles and other non-recurring items.

 

2013

LOGO

 

TSYS Reports Second Quarter Results/p. 3

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, July 23. 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

The financial highlights section of this release and this release contain the non-GAAP financial measures of revenues and operating results on a constant currency basis, basic EPS excluding merger and acquisition costs, net of taxes, operating income excluding merger and acquisition costs, revenues excluding reimbursable items, adjusted EBITDA, and adjusted cash EPS to describe TSYS’ performance. Management uses these non-GAAP financial measures to better understand and assess TSYS’ operating results and financial performance. TSYS believes these non-GAAP financial measures provide meaningful additional information about TSYS to assist investors in understanding and evaluating its operating results.

Additional information about non-GAAP financial measures and a reconciliation of those measures to the most directly comparable GAAP measures are included on pages 13 to 15 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 PaymentsSM.” 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

LOGO

 

TSYS Reports Second Quarter Results/p. 4

Forward-Looking Statements

This press release contains “forward-looking statements” – that is, statements related to future, not past, events. Forward-looking statements often address our expected future business and financial performance and often contain words such as “expect,” “anticipate,” “intend,” “believe,” “should,” “plan,” “will,” “could,” and similar expressions. These forward-looking statements include, among others, statements regarding the NetSpend acquisition and the anticipated benefits from the NetSpend acquisition, the expected conversion of TSYS’ pipeline of accounts, TSYS’ revised earnings guidance for 2013 total revenues, revenues before reimbursable items, Adjusted EBITDA and Adjusted Cash EPS, and the assumptions underlying such statements. These statements are based on the current beliefs and expectations of TSYS’ management, are based on management’s assumptions and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results to differ materially from those contemplated by our forward-looking statements in this press release. Many of these factors are beyond TSYS’ ability to control or predict. These factors include, but are not limited to, TSYS’ ability to integrate NetSpend and achieve the anticipated growth opportunities and other benefits of the acquisition, the impact of consolidation among financial institutions and retail clients; TSYS ability to successfully renew or renegotiate agreements with its clients; the effect of current domestic and worldwide economic conditions; the material breach of security of any of TSYS’ systems; TSYS’ ability to adapt technology to changing industry and customer needs or trends; expenses TSYS incurs associated with the signing of a significant client; adverse developments with respect to the credit card industry in general, including a decline in the use of credit cards as a payment mechanism; the conversions and deconversions of clients; the impact of potential and completed acquisitions, including the costs associated therewith and TSYS’ ability to successfully integrate such acquisitions; risks associated with foreign operations, including adverse developments with respect to foreign currency exchange rates; the costs and effects of litigation, investigations or similar matters or adverse facts and developments relating thereto; TSYS’ ability to compete in a highly competitive market; changes occur in laws, rules, regulations, credit card association rules, the prepaid industry or other industry standards affecting TSYS and its clients; TSYS’ reliance on financial institution sponsors; the impact of business cycles and the credit risk of merchants; the costs associated with chargeback and fraud related liabilities; costs and reputational harm caused by interruptions in our processing systems; TSYS’ ability to protect its intellectual property and the costs associated therewith; and the loss of any key personnel and TSYS’ ability to attract qualified personnel. Additional risks and other factors that could cause actual results to differ materially from those contemplated in this release can be found in TSYS’ filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise.

— more —

 

2013

TSYS Announces Second Quarter 2013 Earnings

 

TSYS

Financial Highlights

(unaudited)

(in thousands, except per share data)

 

     Three Months Ended
June 30,		     Six Months Ended
June 30,		  
     2013     2012     Percent
Change		     2013     2012     Percent
Change		  

Total revenues

    $ 478,443        462,651        3.4 %    $ 943,439        923,813        2.1 % 

Cost of services

      317,656        312,669        1.6        638,214        630,927        1.2   

Selling, general and administrative expenses

      64,220        57,886        10.9        130,274        115,959        12.3   

NetSpend merger and acquisition expenses

      1,253        —          na        4,734        —          na   
  

 

 

    

 

 

      

 

 

    

 

 

    

Operating income

      95,314        92,096        3.5        170,217        176,927        (3.8 ) 

Nonoperating income (expenses)

      (620 )      (1,818 )      65.9        398        (2,223 )      nm   

NetSpend merger and acquisition expenses—bridge loan facility & bonds

      (6,934 )      —          na        (9,677 )      —          na   
  

 

 

    

 

 

      

 

 

    

 

 

    

Income before income taxes, noncontrolling interests and equity in income of equity investments

      87,760        90,278        (2.8 )      160,938        174,704        (7.9 ) 

Income taxes

      29,947        24,553        22.0        47,793        54,108        (11.7 ) 
  

 

 

    

 

 

      

 

 

    

 

 

    

Income before noncontrolling interests and equity in income of equity investments

      57,813        65,725        (12.0 )      113,145        120,596        (6.2 ) 

Equity in income of equity investments

      2,748        2,252        22.0        6,565        5,026        30.6   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income

      60,561        67,977        (10.9 )      119,710        125,622        (4.7 ) 

Net income attributable to noncontrolling interests

      (2,845 )      (1,267 )      nm        (4,965 )      (2,516 )      (97.3 ) 
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income attributable to TSYS common shareholders

    $ 57,716        66,710        (13.5 )%    $ 114,745        123,106        (6.8 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Basic earnings per share

    $ 0.31        0.35        (12.9 )%    $ 0.61        0.65        (6.0 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Diluted earnings per share

    $ 0.31        0.35        (12.4 )%    $ 0.61        0.65        (5.9 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Dividends declared per share

    $ 0.10        0.10        $ 0.20        0.20     
  

 

 

    

 

 

      

 

 

    

 

 

    

Non-GAAP measures:

             

Basic EPS excluding M&A expenses, net of income taxes

    $ 0.34        0.35        (4.3 )%    $ 0.67        0.65        2.9 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted cash earnings per share

    $ 0.38        0.40        (3.5 )%    $ 0.77        0.73        5.2 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted EBITDA

    $ 142,324        140,338        1.4 %    $ 267,799        269,640        (0.7 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

 

nm = not meaningful

   

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Page 5 of 15

TSYS Announces Second Quarter 2013 Earnings

 

TSYS

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)

 

     Three Months Ended
June 30,		     Six Months Ended
June 30,		  
     2013     2012     2013     2012  

Net income

    $ 60,561        67,977      $ 119,710        125,622   

Other comprehensive income (loss), net of tax:

         

Foreign currency translation adjustments

      (1,064 )      (10,027 )      (13,711 )      (7,065 ) 

Postretirement healthcare plan adjustments

      155        23        310        287   
  

 

 

    

 

 

    

 

 

    

 

 

  

Other comprehensive income (loss)

      (909 )      (10,004 )      (13,401 )      (6,778 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Comprehensive income

      59,652        57,973        106,309        118,844   

Comprehensive income attributable to noncontrolling interests

      2,455        1,594        2,922        2,135   
  

 

 

    

 

 

    

 

 

    

 

 

  

Comprehensive income attributable to TSYS common shareholders

    $ 57,197        56,379      $ 103,387        116,709   
  

 

 

    

 

 

    

 

 

    

 

 

  

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Page 6 of 15

TSYS Announces Second Quarter 2013 Earnings

 

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, 2013     June 30, 2012     June 30, 2013     June 30, 2012  
    Common
Stock		     Participating
Securities		     Common
Stock		     Participating
Securities		     Common
Stock		     Participating
Securities		     Common
Stock		     Participating
Securities		  

Basic Earnings per share:

                

Net income

   $ 57,716          66,710        $ 114,745          123,106     

Less income allocated to nonvested awards

     (175 )      175        (224 )      224        (385 )      385        (421 )      421   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income allocated to common stock for EPS calculation ( a )

   $ 57,541        175        66,486        224      $ 114,360        385        122,685        421   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common shares outstanding ( b )

     187,147        591        188,420        650        186,633        644        188,236        658   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common shares and participating securities

     187,738          189,070          187,277          188,894     
 

 

 

      

 

 

      

 

 

      

 

 

    

Basic Earnings per share ( a )/( b )

   $ 0.31        0.30        0.35        0.34      $ 0.61        0.60        0.65        0.64   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Diluted Earnings per share:

                

Net income

   $ 57,716          66,710        $ 114,745          123,106     

Less income allocated to nonvested awards

     (175 )      175        (223 )      223        (382 )      382        (419 )      419   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income allocated to common stock for EPS calculation ( c )

   $ 57,541        175        66,487        223      $ 114,363        382        122,687        419   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common shares outstanding

     187,147        591        188,420        650        186,633        644        188,236        658   

Increase due to assumed issuance of shares related to common equivalent shares outstanding

     981          1,270          1,576          1,159     
 

 

 

      

 

 

      

 

 

      

 

 

    

Average common and common equivalent shares outstanding ( d )

     188,128        591        189,690        650        188,209        644        189,395        658   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common and common equivalent shares and participating securities

     188,719          190,340          188,853          190,053     
 

 

 

      

 

 

      

 

 

      

 

 

    

Diluted Earnings per share ( c )/( d )

   $ 0.31        0.30        0.35        0.34      $ 0.61        0.59        0.65        0.64   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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Page 7 of 15

TSYS Announces Second Quarter 2013 Earnings

 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
                 Change                 Change  
     2013     2012     $     %     2013     2012     $     %  

Revenues before reimbursable items

                 

North America Services

    $ 214,526        205,565        8,961        4.4 %    $ 420,122        409,614        10,508        2.6  % 

International Services

      93,209        99,047        (5,838 )      (5.9 )      185,802        195,538        (9,736 )      (5.0 ) 

Merchant Services

      112,952        97,701        15,251        15.6        222,253        196,056        26,197        13.4   

Intersegment revenues

      (3,175 )      (3,621 )      446        12.3        (6,428 )      (7,337 )      909        12.4   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Revenues before reimbursable items from external customers

    $ 417,512        398,692        18,820        4.7 %    $ 821,749        793,871        27,878        3.5  % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total revenues

                 

North America Services

    $ 248,640        239,557        9,083        3.8 %    $ 488,429        480,156        8,273        1.7  % 

International Services

      98,087        103,415        (5,328 )      (5.2 )      195,183        203,775        (8,592 )      (4.2 ) 

Merchant Services

      136,458        124,903        11,555        9.3        269,359        250,420        18,939        7.6   

Intersegment revenues

      (4,742 )      (5,224 )      482        9.2        (9,532 )      (10,538 )      1,006        9.5   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Revenues from external customers

    $ 478,443        462,651        15,792        3.4 %    $ 943,439        923,813        19,626        2.1  % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Depreciation and amortization

                 

North America Services

    $ 18,213        18,821        (608 )      (3.2 )%    $ 36,296        37,274        (978 )      (2.6 )% 

International Services

      11,492        15,006        (3,514 )      (23.4 )      24,343        27,917        (3,574 )      (12.8 ) 

Merchant Services

      10,362        8,668        1,694        19.5        21,515        17,453        4,062        23.3   

Corporate Admin and Other

      479        718        (239 )      (33.3 )      889        1,442        (553 )      (38.3 ) 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total depreciation and amortization

    $ 40,546        43,213        (2,667 )      (6.2 )%    $ 83,043        84,086        (1,043 )      (1.2 )% 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Segment operating income

                 

North America Services

    $ 79,896        72,231        7,665        10.6 %    $ 147,099        140,578        6,521        4.6  % 

International Services

      8,056        9,438        (1,382 )      (14.6 )      14,682        13,552        1,130        8.3   

Merchant Services

      33,590        32,950        640        1.9        62,917        67,169        (4,252 )      (6.3 ) 

Corporate Admin and Other

      (26,228 )      (22,523 )      (3,705 )      (16.4 )      (54,481 )      (44,372 )      (10,109 )      (22.8 ) 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Operating income

    $ 95,314        92,096        3,218        3.5 %    $ 170,217        176,927        (6,710 )      (3.8 )% 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Other:

                 

Reimbursable items:

                 

North America Services

    $ 34,114        33,992        122        0.4 %    $ 68,307        70,542        (2,235 )      (3.2 )% 

International Services

      4,878        4,368        510        11.7        9,381        8,237        1,144        13.9   

Merchant Services

      23,506        27,202        (3,696 )      (13.6 )      47,106        54,364        (7,258 )      (13.4 ) 

Intersegment revenues

      (1,567 )      (1,603 )      36        2.2        (3,104 )      (3,201 )      97        3.0   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Reimbursable items

    $ 60,931        63,959        (3,028 )      (4.7 )%    $ 121,690        129,942        (8,252 )      (6.4 )% 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

- more -

 

Page 8 of 15

TSYS Announces Second Quarter 2013 Earnings

 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

    Three Months Ended June 30,     Six Months Ended June 30,  
                Change                 Change  
    2013     2012     $     %     2013     2012     $     %  

Other:

                

Adjusted EBITDA

   $ 142,324        140,338        1,986        1.4  %    $ 267,799        269,640        (1,841 )      (0.7 )% 

Merger & acquisition expense

     (1,253 )      —          (1,253 )      nm        (4,734 )      —            nm   

Share-based compensation

     (5,211 )      (5,029 )      (182 )      3.6        (9,804 )      (8,627 )      (1,177 )      13.6   

Depreciation and amortization

     (40,546 )      (43,213 )      2,667        (6.2 )      (83,044 )      (84,086 )      1,042        1.2   

Nonopertaing expenses

     (7,554 )      (1,818 )      (5,736 )      315.5        (9,279 )      (2,223 )      (7,056 )      (317.4 ) 

Income taxes

     (29,947 )      (24,553 )      (5,394 )      22.0        (47,793 )      (54,108 )      6,315        11.7   

Equity in income of joint ventures

     2,748        2,252        496        22.0        6,565        5,026        1,539        30.6   
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Net income

   $ 60,561        67,977        (7,416 )      (10.9 )%    $ 119,710        125,622        (1,178 )      (0.9 )% 
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    
                At     Change  
                            6/30/2013     12/31/2012     $     %  

Volumes:

                

FTEs (full-time equivalents)

                

North America Services

             4,252        3,964        288        7.3 % 

International Services

             2,371        2,624        (253 )      (9.6 ) 

Merchant Services

             1,599        1,242        357        28.7   

Corporate Admin and Other

             491        415        76        18.3   
         

 

 

    

 

 

    

 

 

    

FTEs

             8,713        8,245        468        5.7 % 
         

 

 

    

 

 

    

 

 

    
Total assets (in thousands)                                                

North America Services

           $ 2,935,826        1,744,877        1,190,949        68.3 % 

International Services

             388,144        445,642        (57,498 )      (12.9 ) 

Merchant Services

             696,189        703,725        (7,536 )      (1.1 ) 

Intersegment assets

             (831,982 )      (870,406 )      38,424        4.4   
         

 

 

    

 

 

    

 

 

    

Total assets

           $ 3,188,177        2,023,838        1,164,339        57.5 % 
         

 

 

    

 

 

    

 

 

    
    Three Months Ended June 30,     Six Months Ended June 30,  
                Change                 Change  
    2013     2012     Inc(Dec)     %     2013     2012     Inc(Dec)     %  

North America Segment:

                

Accounts on File (AOF) (in millions)

             430.7        387.3        43.4        11.2 % 

Transactions (in millions)

     2,235.0        2,003.8        231.2        11.5 %      4,248.4        3,871.0        377.3        9.7 % 

International Segment:

                

AOF (in millions)

             58.1        53.1        5.0        9.5 % 

Transactions (in millions)

     492.5        402.3        90.1        22.4 %      926.6        785.4        141.3        18.0 % 

Merchant Segment:

                

Point-of-sale Transactions (in millions)

     1,136.0        1,279.7        (143.7 )      (11.2 )%      2,235.2        2,499.4        (264.3 )      (10.6 )% 

Dollar sales volume (in millions)

   $ 11,028      $ 9,235      $ 1,793        19.4 %    $ 21,160      $ 18,010      $ 3,150        17.5 % 

- more -

 

Page 9 of 15

TSYS Announces Second Quarter 2013 Earnings

 

TSYS

Balance Sheet

(unaudited)

(in thousands)

 

     Jun 30, 2013     Dec 31, 2012  

Assets

     

Current assets:

     

Cash and cash equivalents

    $ 1,374,209        247,612   

Restricted cash

      713        282   

Accounts receivable, net

      250,124        247,083   

Deferred income tax assets

      8,355        9,825   

Prepaid expenses and other current assets

      90,091        69,924   
  

 

 

    

 

 

  

Total current assets

      1,723,492        574,726   

Goodwill

      517,243        518,344   

Property and equipment, net

      248,778        260,389   

Computer software, net

      243,138        226,917   

Contract acquisition costs, net

      166,045        161,267   

Other intangible assets, net

      118,923        130,054   

Equity investments, net

      94,447        87,764   

Deferred income tax assets, net

      5,873        5,334   

Other assets

      70,238        59,043   
  

 

 

    

 

 

  

Total assets

    $ 3,188,177        2,023,838   
  

 

 

    

 

 

  

Liabilities

     

Current liabilities:

     

Accounts payable

    $ 28,623        63,370   

Current portion of borrowings

      21,032        27,361   

Current portion of obligations under capital leases

      23,025        13,263   

Accrued salaries and employee benefits

      17,783        26,243   

Other current liabilities

      117,961        100,282   
  

 

 

    

 

 

  

Total current liabilities

      208,424        230,519   

Long-term borrowings, excluding current portion

      1,260,625        174,859   

Deferred income tax liabilities

      66,885        48,074   

Obligations under capital leases, excluding current portion

      13,303        17,155   

Other long-term liabilities

      65,021        68,791   
  

 

 

    

 

 

  

Total liabilities

      1,614,258        539,398   
  

 

 

    

 

 

  

Redeemable noncontrolling interest

      39,101        39,505   
  

 

 

    

 

 

  

Equity

     

Shareholders’ equity:

     

Common stock

      20,281        20,247   

Additional paid-in capital

      138,936        141,793   

Accumulated other comprehensive income (loss), net

      (9,950 )      1,408   

Treasury stock

      (259,661 )      (287,301 ) 

Retained earnings

      1,626,300        1,549,063   
  

 

 

    

 

 

  

Total shareholders’ equity

      1,515,906        1,425,210   
  

 

 

    

 

 

  

Noncontrolling interests in consolidated subsidiaries

      18,912        19,725   
  

 

 

    

 

 

  

Total equity

      1,534,818        1,444,935   
  

 

 

    

 

 

  

Total liabilities and equity

    $ 3,188,177        2,023,838   
  

 

 

    

 

 

  

- more -

 

Page 10 of 15

TSYS Announces Second Quarter 2013 Earnings

 

TSYS

Cash Flow

(unaudited)

(in thousands)

 

     Six Months Ended June 30,  
     2013     2012  

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net income

    $ 119,710        125,622   

Adjustments to reconcile net income to net cash provided by operating activities:

     

Equity in income of equity investments

      (6,565 )      (5,026 ) 

Dividends received from equity investments

      1,016        1,098   

Net loss on foreign currency translation

      (72 )      1,635   

Depreciation and amortization

      83,043        84,086   

Amortization of debt issuance costs

      6,315        94   

Amortization of bond discount

      39        —     

Changes in fair value of private equity investments

      (1,227 )      —     

Share-based compensation

      9,804        8,626   

Excess tax benefit from share-based payment arrangements

      (2,040 )      (653 ) 

Provisions for bad debt expense and billing adjustments

      1,541        356   

Charges for transaction processing provisions

      7,093        971   

Deferred income tax expense

      20,420        1,746   

Loss on disposal of equipment, net

      55        29   

Changes in operating assets and liabilities:

     

Restricted cash

      (404 )      —     

Accounts receivable

      (8,031 )      (376 ) 

Prepaid expenses, other current assets and other long-term assets

      (24,507 )      (4,691 ) 

Accounts payable

      (34,602 )      2,743   

Accrued salaries and employee benefits

      (7,989 )      (18,602 ) 

Other current liabilities and other long-term liabilities

      (6,351 )      5,746   
  

 

 

    

 

 

  

Net cash provided by operating activities

      157,248        203,404   
  

 

 

    

 

 

  

CASH FLOWS FROM INVESTING ACTIVITIES:

     

Purchases of property and equipment, net

      (13,701 )      (13,810 ) 

Additions to licensed computer software from vendors

      (27,711 )      (17,278 ) 

Additions to internally developed computer software

      (12,522 )      (10,121 ) 

Cash used in acquisitions, net of cash acquired

      —          (1,750 ) 

Purchase of private equity investments

      (1,006 )      (623 ) 

Additions to contract acquisition costs

      (24,506 )      (16,740 ) 
  

 

 

    

 

 

  

Net cash used in investing activities

      (79,446 )      (60,322 ) 
  

 

 

    

 

 

  

CASH FLOWS FROM FINANCING ACTIVITIES:

     

Principal payments on long-term borrowings and capital lease obligations

      (20,073 )      (13,038 ) 

Proceeds from borrowings of long-term borrowings

      1,095,661        8,633   

Proceeds from exercise of stock options

      19,449        4,698   

Excess tax benefit from share-based payment arrangements

      2,040        653   

Repurchase of common stock under plans and tax withholding

      (6,268 )      (338 ) 

Debt issuance costs

      (13,018 )      —     

Subsidiary dividends paid to noncontrolling shareholders

      (4,139 )      (1,087 ) 

Dividends paid on common stock

      (18,758 )      (37,809 ) 
  

 

 

    

 

 

  

Net cash provided by (used in) financing activities

      1,054,894        (38,288 ) 
  

 

 

    

 

 

  

CASH AND CASH EQUIVALENTS:

     

Effect of exchange rate changes on cash and cash equivalents

      (6,099 )      (2,488 ) 
  

 

 

    

 

 

  

Net increase in cash and cash equivalents

      1,126,597        102,306   

Cash and cash equivalents at beginning of period

      247,612        316,337   
  

 

 

    

 

 

  

Cash and cash equivalents at end of period

    $ 1,374,209        418,643   
  

 

 

    

 

 

  

- more -

 

Page 11 of 15

TSYS Announces Second Quarter 2013 Earnings

 

Supplemental Information:

 

     Accounts on File  
     Total  
(in millions)    June
2013		      June
2012		      %
Change		  

Consumer Credit

      208.6         199.4         4.7   

Retail

      25.9         25.2         2.8   
  

 

 

     

 

 

     

Total Consumer

      234.5         224.6         4.5   

Commercial

      38.6         36.1         6.7   

Other

      15.3         9.6         60.5   
  

 

 

     

 

 

     

Subtotal

      288.4         270.3         6.7   

Prepaid/Stored Value

      102.8         105.4         (2.4 ) 

Government Services

      60.6         30.8         96.4   

Commercial Card Single Use

      37.0         34.0         8.8   
  

 

 

     

 

 

     

Total AOF

      488.8         440.5         11.0   
  

 

 

     

 

 

     

Growth in Accounts on File (in millions):

     June 2012 to
June 2013		     June 2011 to
June 2012		  

Beginning balance

      440.5        376.0   

Change in accounts on file due to:

     

Internal growth of existing clients

      35.2        33.9   

New clients

      76.1        51.0   

Purges/Sales

      (62.7 )      (17.6 ) 

Deconversions

      (0.3 )      (2.8 ) 
  

 

 

    

 

 

  

Ending balance

      488.8        440.5   
  

 

 

    

 

 

  

- more

 

Page 12 of 15

TSYS Announces Second Quarter 2013 Earnings

 

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 2013 financial results using the previous year’s foreign currency exchange rates. On a year-to-date constant currency basis, TSYS’ total revenues grew 3.2% as compared to a reported GAAP increase of 2.1%.

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 2.9% as compared to a reported GAAP decrease of 6.0%.

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 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.

- more -

 

Page 13 of 15

TSYS Announces Second Quarter 2013 Earnings

 

Reconciliation of GAAP to Non-GAAP

 

Constant Currency Comparison

(unaudited)

(in thousands)

  

  

  

     Three Months Ended June 30,     Six Months Ended June 30,  
     2013     2012      Percent
Change		     2013     2012      Percent
Change		  

Consolidated

               

Constant currency (1)

    $ 484,810        462,651         4.8 %    $ 953,825        923,813         3.2 % 

Foreign currency (2)

      (6,367 )      —             (10,386 )      —        
  

 

 

    

 

 

       

 

 

    

 

 

     

Total revenues

    $ 478,443        462,651         3.4 %    $ 943,439        923,813         2.1 % 
  

 

 

    

 

 

       

 

 

    

 

 

     

Constant currency (1)

    $ 423,726        398,692         6.3 %    $ 831,918        793,871         4.8 % 

Foreign currency (2)

      (6,214 )      —             (10,169 )      —        
  

 

 

    

 

 

       

 

 

    

 

 

     

Total revenues before reimbursable items

    $ 417,512        398,692         4.7 %    $ 821,749        793,871         3.5 % 
  

 

 

    

 

 

       

 

 

    

 

 

     

Constant currency (1)

    $ 96,426        92,096         4.7 %    $ 171,398        176,927         (3.1 )% 

Foreign currency (2)

      (1,112 )      —             (1,181 )      —        
  

 

 

    

 

 

       

 

 

    

 

 

     

Operating income

    $ 95,314        92,096         3.5 %    $ 170,217        176,927         (3.8 )% 
  

 

 

    

 

 

       

 

 

    

 

 

     

International Services

               

Constant currency (1)

    $ 104,480        103,415         1.0 %    $ 205,665        203,775         0.9 % 

Foreign currency (2)

      (6,393 )      —             (10,482 )      —        
  

 

 

    

 

 

       

 

 

    

 

 

     

Total revenues

    $ 98,087        103,415         (5.2 )%    $ 195,183        203,775         (4.2 )% 
  

 

 

    

 

 

       

 

 

    

 

 

     

 

(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.

 

Basic EPS Excluding Merger and Acquisition Costs

(unaudited)

(in thousands)

  

  

  

     Three Months Ended June 30,     Six Months Ended June 30,  
     2013      2012      Percent
Change		     2013      2012      Percent
Change		  

Net income attributable to TSYS common shareholders (a)

    $ 57,716         66,710         (13.5 )%    $ 114,745         123,106         (6.8 )% 

Add: Merger and acquisition expenses, net of taxes*

      5,653         —             10,875         —        
  

 

 

     

 

 

       

 

 

     

 

 

     

Net income attributable to TSYS common shareholders (c)

    $ 63,369         66,710         (5.0 )%    $ 125,620         123,106         2.0 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Average common shares outstanding (b)

      187,738         189,070           187,277         188,894      
  

 

 

     

 

 

       

 

 

     

 

 

     

Basic Earnings per share (a)/(b)

    $ 0.31         0.35         (12.9 )%    $ 0.61         0.65         (6.0 )% 
  

 

 

     

 

 

       

 

 

     

 

 

     

Basic Earnings per share excluding merger and acquisition expenses (c)/(b)

    $ 0.34         0.35         (4.3 )%    $ 0.67         0.65         2.9 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

 

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

 

Operating Income Excluding Merger and Acquisition Costs

(unaudited)

(in thousands)

  

  

  

     Three Months Ended June 30,     Six Months Ended June 30,  
     2013      2012      Percent
Change		     2013      2012      Percent
Change		  

Operating income

    $ 95,314         92,096         3.5 %    $ 170,217         176,927         (3.8 )% 

Add: Merger and acquisition expenses

      1,253         —             4,734         —        
  

 

 

     

 

 

       

 

 

     

 

 

     

Operating income excluding merger and acquisition costs

    $ 96,567         92,096         4.9 %    $ 174,951         176,927         (1.1 )% 
  

 

 

     

 

 

       

 

 

     

 

 

     

Revenues Before Reimbursable Items

(unaudited)

(in thousands)

  

  

  

     Three Months Ended June 30,     Six Months Ended June 30,  
     2013      2012      Percent
Change		     2013      2012      Percent
Change		  

Total Revenues

    $ 478,443         462,651         3.4 %    $ 943,439         923,813         2.1 % 

Reimbursable Items

      60,931         63,959           121,690         129,942      
  

 

 

     

 

 

       

 

 

     

 

 

     

Revenues Before Reimbursable Items

    $ 417,512         398,692         4.7 %    $ 821,749         793,871         3.5 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

- more -

 

Page 14 of 15

TSYS Announces Second Quarter 2013 Earnings

 

Reconciliation of GAAP to Non-GAAP

Adjusted Cash Earnings Per Share

(unaudited)

(in thousands except per share data)

 

    Three Months Ended     YTD     Three Months Ended     Six Months Ended  
    Mar 31,
2012		     Jun 30,
2012		     Sep 30,
2012		     Dec 31,
2012		     Dec 31,
2012		     Mar 31,
2013		     Jun 30,
2013		     Jun 30,
2013		     Jun 30,
2012		  

Net Income Available to TSYS Common Shareholders

                  

As reported (GAAP)

   $ 56,395      $ 66,710      $ 60,312      $ 60,862      $ 244,280      $ 57,028      $ 57,716      $ 114,745      $ 123,106   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjust for amounts attributable to TSYS common shareholders (net of taxes):

                  

Acquisition intangible amortization

     3,933        4,409        4,383        4,528        17,282        6,096        4,847        10,848        8,355   

Share-based compensation

     2,363        3,686        2,489        4,169        12,683        3,494        3,431        6,917        6,004   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Cash earnings

     62,691        74,805        67,184        69,559        274,245        66,618        65,994        132,510        137,465   

M&A expenses

     —          —          —          —          —          5,222        5,653        10,875        —     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Cash earnings adjusted

   $ 62,691      $ 74,805      $ 67,184      $ 69,559      $ 274,245      $ 71,840      $ 71,647      $ 143,385      $ 137,465   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Basic EPS—Net Income Available to TSYS Common Shareholders

                  

As reported (GAAP)

   $ 0.30      $ 0.35      $ 0.32      $ 0.33      $ 1.30      $ 0.31      $ 0.31      $ 0.61      $ 0.65   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjust for amounts attributable to TSYS common shareholders (net of taxes):

                  

Acquisition intangible amortization

     0.02        0.02        0.02        0.02        0.09        0.03        0.03        0.06        0.04   

Share-based compensation

     0.01        0.02        0.01        0.02        0.07        0.02        0.02        0.04        0.03   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Cash earnings per share

     0.33        0.40        0.36        0.37        1.46        0.36        0.35        0.71        0.73   

M&A expenses

     —          —          —          —          —          0.03        0.03        0.06        —     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted cash earnings per share

   $ 0.33      $ 0.40      $ 0.36      $ 0.37      $ 1.46      $ 0.38      $ 0.38      $ 0.77      $ 0.73   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common shares and participating securities

     188,718        189,070        187,878        186,471        188,030        186,807        187,738        187,277        188,894   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

* Basic and cash EPS amounts do not total due to rounding.

Adjusted EBITDA

(unaudited)

(in thousands )

 

    Three Months Ended     YTD     Three Months Ended     Six Months Ended  
    Mar 31,
2012		     Jun 30,
2012		     Sep 30,
2012		     Dec 31,
2012		     Dec 31,
2012		     Mar 31,
2013		     Jun 30,
2013		     Jun 30,
2013		     Jun 30,
2012		  

Net income

   $ 57,644      $ 67,977      $ 62,043      $ 62,257      $ 249,921      $ 59,149      $ 60,561      $ 119,710      $ 125,622   

Adjusted for:

                  

Deduct: Equity in Income of Equity Investments

     (2,774 )      (2,252 )      (1,957 )      (3,188 )      (10,171 )      (3,817 )      (2,748 )      (6,565 )      (5,026 ) 

Add: Income Taxes

     29,556        24,553        30,228        30,767        115,104        17,845        29,947        47,793        54,108   

Add: Nonoperating expense

     405        1,818        579        (5 )      2,797        1,726        7,554        9,279        2,223   

Add: Depreciation and amortization

     40,873        43,213        43,243        43,281        170,610        42,498        40,546        83,044        84,086   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA

     125,704        135,309        134,136        133,112        528,261        117,401        135,860        253,261        261,013   

Adjust for:

                  

Add: Share-based compensation

     3,598        5,029        3,722        6,273        18,622        4,593        5,211        9,804        8,627   

Add: NetSpend merger and acquisition operating expenses

     —          —          —          —          —          3,481        1,253        4,734        —     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

   $ 129,302      $ 140,338      $ 137,858      $ 139,385      $ 546,883      $ 125,475      $ 142,324      $ 267,799      $ 269,640   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

- more -

 

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