EX-99.1 2 d759952dex991.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 2014 Total Revenues Increased 30.4%

Adjusted Earnings Per Share increased 19.8%

COLUMBUS, Ga., July 22, 2014 — TSYS (NYSE: TSS) today reported results for the second quarter of 2014.

Total revenues for the quarter were $602.0 million, an increase of 30.4%. Revenues before reimbursable items were $538.1 million, an increase of 34.2%. Adjusted EBITDA was $170.9 million, an increase of 22.0%. Income from continuing operations was $59.8 million. Adjusted earnings per share (EPS) from continuing operations were $0.45, an increase of 19.8%. On a GAAP basis, basic and diluted EPS from continuing operations were $0.32.

Total revenues year-to-date were $1.2 billion, an increase of 31.2%. Revenues before reimbursable items were $1.1 billion, an increase of 35.7%. Adjusted EBITDA was $320.5 million, an increase of 21.6%. Income from continuing operations was $109.1 million. Adjusted EPS from continuing operations was $0.83, an increase of 9.2%. On a GAAP basis, basic and diluted EPS from continuing operations were $0.58.

“We set another milestone this quarter with total revenues of over $600 million for the first time in TSYS’ history. It was an outstanding quarter with our consolidated adjusted operating margin improving 357 basis points over the first quarter to 24.94%,” said Philip W. Tomlinson, chairman and chief executive officer of TSYS.

“Year to date, our free cash flow was $133.7 million, an increase of $54.9 million, or 69.6% over last year. During the quarter, we deployed $115.7 million of our capital by repurchasing 3.7 million shares,” added Tomlinson.

 

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LOGO

 

TSYS Reports Second Quarter 2014 Total Revenues Increased 30.4%/p.2

Also during the quarter, TSYS announced that Phil Tomlinson will retire as chief executive officer and that M. Troy Woods has been elected by the TSYS board of directors as president and chief executive officer, effective July 31, 2014. Tomlinson will continue to serve as executive chairman of the board of TSYS until the 2015 Annual Shareholders’ Meeting.

“I am honored to have been chosen to carry the torch at this exciting time in our history. All of us here at TSYS are stewards of the tremendous business and cultural legacy we have been given. I feel particularly accountable for making sure we build on our strong foundation, grow this company and achieve our vision of being the leading global payment solutions provider,” stated Woods.

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, July 22. The conference call can be accessed via simultaneous Internet broadcast at tsys.com by clicking on the link under “Webcasts” on the main homepage. The replay will be archived for 12 months and will be available approximately 30 minutes after the completion of the call. A slide presentation to accompany the call will be available by clicking on the link under “Webcasts” on the main homepage of tsys.com.

Non-GAAP Measures

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

Additional information about non-GAAP financial measures, including, but not limited to, adjusted EBITDA and adjusted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures are included on pages 12 to 14 of this release.

About TSYS

At TSYS® (NYSE: TSS), we believe payments should revolve around people, not the other way around. We call this belief “People-Centered Payments®.” 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, Ga., U.S.A., with local offices spread across the Americas, EMEA and Asia-Pacific. TSYS is a member of The Civic 50 and was 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.

 

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TSYS Reports Second Quarter 2014 Total Revenues Increased 30.4%/p.3

Forward-Looking Statements

This press release contains “forward-looking statements” – that is, statements related to future, not past, events. Forward-looking statements often address our expected future business and financial performance and often contain words such as “expect,” “anticipate,” “intend,” “believe,” “should,” “plan,” “potential,” “will,” “could,” and similar expressions. These statements are based on the current beliefs and expectations of TSYS’ management, are based on management’s assumptions and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results or events to differ materially from those contemplated by our forward-looking statements in this press release. Many of these factors are beyond TSYS’ ability to control or predict. These factors include, but are not limited to, the risks described 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 —

 

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TSYS Announces Second Quarter 2014 Earnings

Page 4 of 14

 

TSYS

Financial Highlights

(unaudited)

(in thousands, except per share data)

 

     Three Months Ended
June 30,		     Six Months Ended
June 30,		  
     2014     2013     Percent
Change		     2014     2013     Percent
Change		  

Total revenues

    $ 602,036        461,860        30.4 %    $ 1,194,883        910,651        31.2 % 

Cost of services

      416,489        301,627        38.1        839,372        605,996        38.5   

Selling, general and administrative expenses

      85,602        64,345        33.0        173,616        130,765        32.8   

Merger and acquisition expenses

      1,182        1,246        (5.1 )      2,435        4,727        (48.5 ) 
  

 

 

    

 

 

      

 

 

    

 

 

    

Operating income

      98,763        94,642        4.4        179,460        169,163        6.1   

Nonoperating income (expenses)

      (899 )      (590 )      (52.4 )      (1,223 )      413        nm   

Merger and acquisition expenses - bridge loan facility & other financing

      (9,486 )      (6,934 )      (36.8 )      (18,975 )      (9,677 )      (96.1 ) 
  

 

 

    

 

 

      

 

 

    

 

 

    

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

      88,378        87,118        1.4        159,262        159,899        (0.4 ) 

Income taxes

      30,771        29,984        2.6        55,106        47,447        16.1   
  

 

 

    

 

 

      

 

 

    

 

 

    

Income before noncontrolling interests and equity in income of equity investments

      57,607        57,134        0.8        104,156        112,452        (7.4 ) 

Equity in income of equity investments

      3,600        2,749        31.0        7,696        6,565        17.2   
  

 

 

    

 

 

      

 

 

    

 

 

    

Income from continuing operations, net of tax

      61,207        59,883        2.2        111,852        119,017        (6.0 ) 

Income from discontinued operations, net of tax

      50,133        678        nm        51,113        693        nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income

      111,340        60,561        83.8        162,965        119,710        36.1   

Net income attributable to noncontrolling interests

      (1,436 )      (2,845 )      49.5        (3,759 )      (4,965 )      24.3   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income attributable to TSYS common shareholders

    $ 109,904        57,716        90.4 %    $ 159,206        114,745        38.7 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Basic earnings per share:

             

Income from continuing operations to TSYS common shareholders*

    $ 0.32        0.31        3.6 %    $ 0.58        0.62        (5.8 )% 

Gain (Loss) from discontinued operations to TSYS common shareholders*

      0.27        (0.00 )      nm        0.27        (0.01 )      nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Basic earnings per share (EPS)

    $ 0.59        0.31        91.8 %    $ 0.85        0.61        38.9 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Diluted earnings per share:

             

Income from continuing operations to TSYS common shareholders*

    $ 0.32        0.31        3.1 %    $ 0.58        0.61        (6.2 )% 

Gain (Loss) from discontinued operations to TSYS common shareholders*

      0.27        (0.00 )      nm        0.26        (0.01 )      nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Diluted EPS

    $ 0.58        0.31        90.7      $ 0.84        0.61        38.3 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Dividends declared per share

    $ 0.10        0.10      $ 0.20        0.20     
  

 

 

    

 

 

      

 

 

    

 

 

    

Amounts attributable to TSYS common shareholders:

             

Income from continuing operations, net of tax

    $ 59,771        58,096        2.9 %    $ 109,092        116,000        (6.0 )% 

Gain (Loss) from discontinued operations, net of tax

      50,133        (380 )      nm        50,114        (1,255 )      nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income

    $ 109,904        57,716        90.4 %    $ 159,206        114,745        38.7 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Non-GAAP measures:

         

Adjusted EPS from continuing operations

    $ 0.45        0.37        19.8 %    $ 0.83        0.76        9.2 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted EBITDA

    $ 170,894        140,105        22.0 %    $ 320,489        263,551        21.6 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

nm = not meaningful

* EPS amounts may not total due to rounding.

 

- more -

TSYS Announces Second Quarter 2014 Earnings

Page 5 of 14

 

TSYS

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)

 

     Three Months Ended
June 30,		     Six Months Ended
June 30,		  
     2014     2013     2014     2013  

Net income

    $ 111,340        60,561      $ 162,965        119,710   

Other comprehensive income (loss), net of tax:

       

Foreign currency translation adjustments as a result of discontinued operations

      3,514        —          3,514        —     

Foreign currency translation adjustments

      3,627        (1,064 )      5,207        (13,711 ) 

Postretirement healthcare plan adjustments

      371        155        296        310   

Unrealized gain on available-for-sale securities

      (612 )      —          (42 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Other comprehensive income (loss)

      6,900        (909 )      8,975        (13,401 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Comprehensive income

      118,240        59,652        171,940        106,309   

Comprehensive income attributable to noncontrolling interests

      1,152        2,455        3,979        2,922   
  

 

 

    

 

 

    

 

 

    

 

 

  

Comprehensive income attributable to TSYS common shareholders

    $ 117,088        57,197      $ 167,961        103,387   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

- more -

TSYS Announces Second Quarter 2014 Earnings

Page 6 of 14

 

TSYS

Earnings Per Share

(unaudited)

(in thousands, except per share data)

 

    Three Months Ended
June 30, 2014		     Three Months Ended
June 30, 2013		     Six Months Ended
June 30, 2014		     Six Months Ended
June 30, 2013		  
    Common
Stock		     Participating
Securities		     Common
Stock		     Participating
Securities		     Common
Stock		     Participating
Securities		     Common
Stock		     Participating
Securities		  

Basic earnings per share:

                

Net income attributable to TSYS common shareholders

   $ 109,904          57,716        $ 159,206          114,745     

Less income allocated to nonvested awards

     (1,102 )      1,102        (175 )      175        (1,633 )      1,633        (385 )      385   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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

   $ 108,802        1,102        57,541        175      $ 157,573        1,633        114,360        385   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common shares outstanding (b)

     184,491        1,882        187,147        591        185,123        1,935        186,633        644   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common shares and participating securities

     186,373          187,738          187,058          187,277     
 

 

 

      

 

 

      

 

 

      

 

 

    

Basic earnings per share (a)/(b)

   $ 0.59        0.59        0.31        0.30      $ 0.85        0.84        0.61        0.60   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Diluted earnings per share:

                

Net income attributable to TSYS common shareholders

   $ 109,904          57,716        $ 159,206          114,745     

Less income allocated to nonvested awards

     (1,092 )      1,092        (175 )      175        (1,617 )      1,617        (382 )      382   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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

   $ 108,812        1,092        57,541        175      $ 157,589        1,617        114,363        382   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common shares outstanding

     184,491        1,882        187,147        591        185,123        1,935        186,633        644   

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

     1,994          981          2,379          1,576     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common and common equivalent shares outstanding (d)

     186,485        1,882        188,128        591        187,502        1,935        188,209        644   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common and common equivalent shares and participating securities

     188,367          188,719          189,437          188,853     
 

 

 

      

 

 

      

 

 

      

 

 

    

Diluted earnings per share (c)/(d)

   $ 0.58        0.58        0.31        0.30      $ 0.84        0.84        0.61        0.59   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

- more -

TSYS Announces Second Quarter 2014 Earnings

Page 7 of 14

 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
                 Change                 Change  
     2014     2013     $     %     2014     2013     $     %  

Revenues before reimbursable items

                 

North America Services

    $ 233,217        214,526        18,691        8.7 %    $ 457,585        420,122        37,463        8.9 % 

International Services

      84,732        76,626        8,106        10.6        161,505        153,013        8,492        5.5   

Merchant Services

      108,335        112,952        (4,617 )      (4.1 )      212,960        222,253        (9,293 )      (4.2 ) 

NetSpend

      116,833        —          116,833        na        249,473        —          249,473        na   

Intersegment revenues

      (5,050 )      (3,175 )      (1,875 )      (59.1 )      (10,705 )      (6,428 )      (4,277 )      (66.5 ) 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Revenues before reimbursable items from external customers

    $ 538,067        400,929        137,138        34.2 %    $ 1,070,818        788,960        281,858        35.7 % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total revenues

                 

North America Services

    $ 273,324        248,640        24,684        9.9 %    $ 535,502        488,429        47,073        9.6 % 

International Services

      90,466        81,504        8,962        11.0        172,844        162,395        10,449        6.4   

Merchant Services

      128,017        136,458        (8,441 )      (6.2 )      250,707        269,359        (18,652 )      (6.9 ) 

NetSpend

      116,833        —          116,833        na        249,473        —          249,473        na   

Intersegment revenues

      (6,604 )      (4,742 )      (1,862 )      (39.3 )      (13,643 )      (9,532 )      (4,111 )      (43.1 ) 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Revenues from external customers

    $ 602,036        461,860        140,176        30.4 %    $ 1,194,883        910,651        284,232        31.2 % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Depreciation and amortization

                 

North America Services

    $ 20,928        18,213        2,715        14.9 %    $ 41,204        36,296        4,908        13.5 % 

International Services

      9,761        9,450        311        3.3        19,566        20,149        (583 )      (2.9 ) 

Merchant Services

      3,567        2,998        569        19.0        6,967        6,140        827        13.5   

NetSpend

      1,890        —          1,890        na        3,625        —          3,625        na   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Segment depreciation and amortization

      36,146        30,661        5,485        17.9        71,362        62,585        8,777        14.0   

Acquisition intangible amortization

      24,282        7,879        16,403        nm        48,595        16,411        32,184        nm   

Corporate admin and other

      533        466        67        14.4        1,038        861        177        20.6   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total depreciation and amortization

    $ 60,961        39,006        21,955        56.3 %    $ 120,995        79,857        41,138        51.5 % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Adjusted segment operating income

                 

North America Services

    $ 84,578        81,318        3,260        4.0 %    $ 159,155        150,066        9,089        6.1 % 

International Services

      11,743        7,693        4,050        52.6        16,299        14,554        1,745        12.0   

Merchant Services

      32,896        41,302        (8,406 )      (20.4 )      63,064        78,938        (15,874 )      (20.1 ) 

NetSpend

      30,703        —          30,703        na        59,421        —          59,421        na   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total adjusted segment operating income

      159,920        130,313        29,607        22.7        297,939        243,558        54,381        22.3   

Acquisition intangible amorization

      (24,282 )      (7,879 )      (16,403 )      nm        (48,595 )      (16,411 )      (32,184 )      nm   

NetSpend M&A operating expenses

      (1,182 )      (1,246 )      64        5.1        (2,435 )      (4,727 )      2,292        48.5   

Share-based compensation

      (9,988 )      (5,211 )      (4,777 )      (91.7 )      (17,599 )      (9,804 )      (7,795 )      (79.5 ) 

Corporate admin and other

      (25,705 )      (21,335 )      (4,370 )      (20.5 )      (49,850 )      (43,453 )      (6,397 )      (14.7 ) 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Operating income

    $ 98,763        94,642        4,121        4.4 %    $ 179,460        169,163        10,297        6.1 % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Other:

                 

Reimbursable items:

                 

North America Services

    $ 40,107        34,114        5,993        17.6 %    $ 77,917        68,307        9,610        14.1 % 

International Services

      5,734        4,878        856        17.5        11,339        9,382        1,957        20.9   

Merchant Services

      19,682        23,506        (3,824 )      (16.3 )      37,747        47,106        (9,359 )      (19.9 ) 

NetSpend

      —          —          —          na        —          —          —          na   

Intersegment revenues

      (1,554 )      (1,567 )      13        0.8        (2,938 )      (3,104 )      166        5.3   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Reimbursable items

    $ 63,969        60,931        3,038        5.0 %    $ 124,065        121,691        2,374        2.0 % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

- more -

TSYS Announces Second Quarter 2014 Earnings

Page 8 of 14

 

 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

  

Other:

     
Volumes:    At     Change  
FTEs (full-time equivalents)    6/30/2014     6/30/2013     #     %  

North America Services

      4,673        4,252        421        9.9 % 

International Services

      2,382        2,287        95        4.2   

Merchant Services

      1,593        1,599        (6 )      (0.4 ) 

NetSpend

      536        —          536        na   

Corporate Admin and Other

      594        483        111        23.0   
  

 

 

    

 

 

    

 

 

    

FTEs - Continuing Operations

      9,778        8,621        1,157        13.4 % 
  

 

 

    

 

 

    

 

 

    

Discontinued Operations

      —          91        (91 )      na   
  

 

 

    

 

 

    

 

 

    

FTEs

      9,778        8,712        1,066        12.2 % 
  

 

 

    

 

 

    

 

 

    
     At     Change  
Total assets (in thousands)    6/30/2014     12/31/2013     $     %  

North America Services

    $ 3,258,409        3,215,333        43,076        1.3 % 

International Services

      356,610        417,379        (60,769 )      (14.6 ) 

Merchant Services

      696,325        676,592        19,733        2.9   

NetSpend

      1,566,358        1,596,150        (29,792 )      (1.9 ) 

Intersegment assets

      (2,199,793 )      (2,218,886 )      19,093        0.9   
  

 

 

    

 

 

    

 

 

    

Total assets

    $ 3,677,909        3,686,568        (8,659 )      (0.2 )% 
  

 

 

    

 

 

    

 

 

    

 

    Three Months Ended June 30,     Six Months Ended June 30,  
                Change           Change  
    2014     2013     Inc(Dec)     %     2014     2013     Inc(Dec)     %  

North America Segment:

            

Accounts on File (AOF) (in millions)

             510.3        430.7        79.6        18.5 % 

Transactions (in millions)

     2,696.7        2,235.0        461.7        20.7 %      5,024.3        4,248.4        775.9        18.3 % 

International Segment:

            

AOF (in millions)

             62.3        58.0        4.4        7.5 % 

Transactions (in millions)

     558.1        492.4        65.7        13.3 %      1,076.0        926.3        149.7        16.2 % 

Merchant Segment:

            

Point-of-sale Transactions (in millions)

     1,045.1        1,136.0        (90.9 )      (8.0 )%      2,027.3        2,235.1        (207.8 )      (9.3 )% 

Dollar sales volume (in millions)

   $ 11,796.5      $ 11,028.0      $ 768.5        7.0 %    $ 22,576.3      $ 21,160.0      $ 1,416.3        6.7 % 

NetSpend Segment:

            

Gross Dollar Volume (in millions)

   $ 4,634.8      $ 3,948.0      $ 686.8        17.4 %    $ 11,202.0      $ 9,326.7      $ 1,875.3        20.1 % 

90-Day Active Cards (in thousands)

             3,388.0        3,092.3        295.7        9.6   

Direct Deposit 90-Day Active Cards (in thousands)

             1,600.7        1,361.4        239.3        17.6   

% of 90-Day Active Cards with Direct Deposit

             47.2 %      44.0 %     

 

- more -

TSYS Announces Second Quarter 2014 Earnings

Page 9 of 14

 

TSYS

Balance Sheet

(unaudited)

(in thousands)

 

     Jun 30, 2014     Dec 31, 2013  

Assets

     

Current assets:

     

Cash and cash equivalents

    $ 250,957        247,700   

Accounts receivable, net

      281,338        255,773   

Deferred income tax assets

      12,082        14,158   

Prepaid expenses and other current assets

      103,558        95,109   

Current assets of discontinued operations

      4,003        41,193   
  

 

 

    

 

 

  

Total current assets

      651,938        653,933   

Goodwill

      1,550,817        1,541,574   

Other intangible assets, net

      442,661        481,419   

Computer software, net

      353,459        363,880   

Property and equipment, net

      274,507        259,968   

Contract acquisition costs, net

      211,007        184,828   

Equity investments, net

      99,634        94,133   

Deferred income tax assets, net

      394        3,972   

Other assets

      93,492        87,146   

Long-Term assets of discontinued operations

      —          15,715   
  

 

 

    

 

 

  

Total assets

    $ 3,677,909        3,686,568   
  

 

 

    

 

 

  

Liabilities

     

Current liabilities:

     

Accounts payable

    $ 44,078        33,651   

Current portion of borrowings

      34,383        34,257   

Accrued salaries and employee benefits

      26,814        38,339   

Current portion of obligations under capital leases

      8,777        22,662   

Other current liabilities

      204,837        159,170   

Current liabilities of discontinued operations

      4,003        9,136   
  

 

 

    

 

 

  

Total current liabilities

      322,892        297,215   

Long-term borrowings, excluding current portion

      1,411,217        1,428,251   

Deferred income tax liabilities

      194,203        228,727   

Obligations under capital leases, excluding current portion

      7,075        7,500   

Other long-term liabilities

      94,858        81,600   

Long-term liabilities of discontinued operations

      —          1,197   
  

 

 

    

 

 

  

Total liabilities

      2,030,245        2,044,490   
  

 

 

    

 

 

  

Redeemable noncontrolling interest

      22,210        39,652   
  

 

 

    

 

 

  

Equity

     

Shareholders’ equity:

     

Common stock

      20,279        20,279   

Additional paid-in capital

      158,415        165,841   

Accumulated other comprehensive income, net

      12,504        3,749   

Treasury stock

      (412,669 )      (326,996 ) 

Retained earnings

      1,839,904        1,718,204   
  

 

 

    

 

 

  

Total shareholders’ equity

      1,618,433        1,581,077   
  

 

 

    

 

 

  

Noncontrolling interests in consolidated subsidiaries

      7,021        21,349   
  

 

 

    

 

 

  

Total equity

      1,625,454        1,602,426   
  

 

 

    

 

 

  

Total liabilities and equity

    $ 3,677,909        3,686,568   
  

 

 

    

 

 

  

 

- more -

TSYS Announces Second Quarter 2014 Earnings

Page 10 of 14

 

TSYS

Cash Flow

(unaudited)

(in thousands)

 

     Six Months Ended June 30,  
     2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net income

    $ 162,965        119,710   

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

     

Equity in income of equity investments

      (7,696 )      (6,565 ) 

Dividends received from equity investments

      —          1,016   

Loss (Gain) on foreign currency

      1,964        (72 ) 

Depreciation and amortization

      122,393        83,043   

Amortization of debt issuance costs

      906        6,315   

Amortization of bond discount

      190        39   

Changes in fair value of private equity investments

      (234 )      (1,227 ) 

Share-based compensation

      17,599        9,804   

Excess tax benefit from share-based compensation

      (5,771 )      (2,040 ) 

Provisions for bad debt expense and billing adjustments

      1,307        1,541   

Charges for transaction processing provisions

      2,966        7,093   

Provision for fraud and other losses

      21,535        —     

Deferred income tax expense

      (8,474 )      20,420   

Loss on disposal of equipment, net

      8        55   

Gain on disposal of subsidiaries

      (85,310 )      —     

Changes in operating assets and liabilities:

     

Accounts receivable

      (24,885 )      (8,031 ) 

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

      (16,869 )      (24,911 ) 

Accounts payable

      3,306        (34,602 ) 

Accrued salaries and employee benefits

      (11,506 )      (7,989 ) 

Other current liabilities and other long-term liabilities

      65,048        (6,351 ) 
  

 

 

    

 

 

  

Net cash provided by operating activities

      239,442        157,248   
  

 

 

    

 

 

  

CASH FLOWS FROM INVESTING ACTIVITIES:

     

Purchases of property and equipment, net

      (37,152 )      (13,701 ) 

Additions to licensed computer software from vendors

      (7,729 )      (27,711 ) 

Additions to internally developed computer software

      (21,271 )      (12,522 ) 

Proceeds from dispositions, net of expenses paid and cash disposed

      45,049        —     

Purchase of private equity investments

      (813 )      (1,006 ) 

Additions to contract acquisition costs

      (39,623 )      (24,506 ) 
  

 

 

    

 

 

  

Net cash used in investing activities

      (61,539 )      (79,446 ) 
  

 

 

    

 

 

  

CASH FLOWS FROM FINANCING ACTIVITIES:

     

Principal payments on long-term borrowings and capital lease obligations

      (34,467 )      (20,073 ) 

Proceeds from borrowings of long-term borrowings

      —          1,095,661   

Proceeds from exercise of stock options

      22,284        19,449   

Excess tax benefit from share-based compensation

      5,771        2,040   

Repurchase of common stock under plans and tax withholding

      (120,848 )      (6,268 ) 

Debt issuance costs

      —          (13,018 ) 

Purchase of noncontrolling interests

      (37,500 )      —     

Subsidiary dividends paid to noncontrolling shareholders

      (5,182 )      (4,139 ) 

Dividends paid on common stock

      (37,633 )      (18,758 ) 
  

 

 

    

 

 

  

Net cash (used in) provided by financing activities

      (207,575 )      1,054,894   
  

 

 

    

 

 

  

CASH AND CASH EQUIVALENTS:

     

Effect of exchange rate changes on cash and cash equivalents

      2,399        (6,099 ) 
  

 

 

    

 

 

  

Net (decrease) increase in cash and cash equivalents

      (27,273 )      1,126,597   

Cash and cash equivalents at beginning of period

      278,230        247,612   
  

 

 

    

 

 

  

Cash and cash equivalents at end of period

      250,957        1,374,209   

Less cash and cash equivalents of discontinued operations at end of period

      —          25,234   
  

 

 

    

 

 

  

Cash and cash equivalents of continuing operations at end of period

    $ 250,957        1,348,975   
  

 

 

    

 

 

  

 

- more -

TSYS Announces Second Quarter 2014 Earnings

Page 11 of 14

 

Supplemental Information:

 

     Accounts on File  
     Total  
(in millions)    June
2014		      June
2013		      %
Change		  

Consumer Credit

      246.5         208.5         18.2   

Retail

      27.9         25.9         8.0   
     

 

 

     

 

 

     

Total Consumer

      274.4         234.4         17.1   

Commercial

      40.4         38.6         4.9   

Other

      20.4         15.3         32.7   
     

 

 

     

 

 

     

Subtotal

      335.2         288.3         16.3   

Prepaid/Stored Value

      117.7         102.8         14.4   

Government Services

      65.6         60.6         8.4   

Commercial Card Single Use

      54.2         37.0         46.4   
     

 

 

     

 

 

     

Total AOF

      572.7         488.7         17.2   
     

 

 

     

 

 

     

Growth in Accounts on File (in millions):

     June 2013 to
June 2014		     June 2012 to
June 2013		  

Beginning balance

      488.7        440.1   

Change in accounts on file due to:

     

Internal growth of existing clients

      38.4        35.2   

New clients

      71.9        76.1   

Purges/Sales

      (25.4 )      (62.7 ) 

Deconversions

      (0.9 )      (0.0 ) 
  

 

 

    

 

 

  

Ending balance

      572.7        488.7   
  

 

 

    

 

 

  

 

- more -

TSYS Announces Second Quarter 2014 Earnings

Page 12 of 14

 

Reconciliation of GAAP to Non-GAAP Financial Measures

Non-GAAP Measures

The schedule below provides a reconciliation of revenues and operating results on a constant currency basis to reported revenues and operating income. This non-GAAP measure presents second quarter 2014 financial results using the previous year’s foreign currency exchange rates. On a full year constant currency basis, TSYS’ total revenues grew 29.9% as compared to a reported GAAP increase of 31.2%.

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 EPS.

The tax rate used in the calculation of adjusted EPS for the quarter and year is equal to an estimate of our annual effective tax rate on GAAP income. This effective rate is estimated annually and may be adjusted during the year to take into account events or trends that materially impact the effective tax rate including, but not limited to, significant changes resulting from tax legislation, material changes in the mix of revenues and expenses by entity and other significant events.

The schedule also provides a reconciliation of net income, adjusted for income from discontinued operations, 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 potential 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 -

TSYS Announces Second Quarter 2014 Earnings

Page 13 of 14

 

Reconciliation of GAAP to Non-GAAP

Constant Currency Comparison

(unaudited)

(in thousands)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2014      2013      Percent
Change		     2014      2013      Percent
Change		  

Consolidated

                 

Constant currency (1)

    $ 594,799         461,860         28.8 %    $ 1,183,283         910,651         29.9 % 

Foreign currency (2)

      7,237         —             11,600         —        
  

 

 

     

 

 

       

 

 

     

 

 

     

Total revenues

    $ 602,036         461,860         30.4 %    $ 1,194,883         910,651         31.2 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Constant currency (1)

    $ 531,303         400,929         32.5 %    $ 1,060,005         788,960         34.4 % 

Foreign currency (2)

      6,764         —             10,813         —        
  

 

 

     

 

 

       

 

 

     

 

 

     

Total revenues before reimbursable items

    $ 538,067         400,929         34.2 %    $ 1,070,818         788,960         35.7 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Constant currency (1)

    $ 95,381         94,642         0.8 %    $ 173,533         169,163         2.6 % 

Foreign currency (2)

      3,382         —             5,927         —        
  

 

 

     

 

 

       

 

 

     

 

 

     

Operating income

    $ 98,763         94,642         4.4 %    $ 179,460         169,163         6.1 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

International Services

     

Constant currency (1)

    $ 83,300         81,504         2.2 %    $ 161,434         162,395         (0.6 )% 

Foreign currency (2)

      7,166         —             11,410         —        
  

 

 

     

 

 

       

 

 

     

 

 

     

Total revenues

    $ 90,466         81,504         11.0 %    $ 172,844         162,395         6.4 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

 

(1) Reflects current period results on a non-GAAP basis as if foreign currency rates did not change from the comparable prior year period.
(2) Reflects the impact of calculated changes in foreign currency rates from the comparable period.

Revenues Before Reimbursable Items

(unaudited)

(in thousands)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2014      2013      Percent
Change		     2014      2013      Percent
Change		  

Total revenues

    $ 602,036         461,860         30.4 %    $ 1,194,883         910,651         31.2 % 

Reimbursable items

      63,969         60,931         5.0        124,065         121,691         2.0   
  

 

 

     

 

 

       

 

 

     

 

 

     

Revenues before reimbursable items

    $ 538,067         400,929         34.2 %    $ 1,070,818         788,960         35.7 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

 

- more -

TSYS Announces Second Quarter 2014 Earnings

Page 14 of 14

 

Reconciliation of GAAP to Non-GAAP

Adjusted Earnings per Share

(unaudited)

(in thousands, except per share data)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2014      2013      Percent
Change		     2014      2013      Percent
Change		  

Income from continuing operations attributable to TSYS common shareholders

    $ 59,771         58,096         90.4 %    $ 109,092         116,000         (6.0 )% 

Adjust for amounts attributable to TSYS common shareholders:

                 

Add: Acquisition intangible amortization, net of taxes

    $ 15,799         5,048         nm %      31,612         10,538         nm % 

Add: Share-based compensation, net of taxes

      6,584         3,573         84.3 %      11,601         6,719         72.7 % 

Add: NetSpend M&A expenses, net of taxes*

      1,122         3,288         (65.9 )%      2,325         8,510         (72.7 )% 
  

 

 

     

 

 

       

 

 

     

 

 

     

Adjusted earnings

    $ 83,276         70,005         19.0 %    $ 154,630         141,767         9.1 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Basic EPS - Income from continuing operations attributable to TSYS common shareholders

                 

As reported (GAAP)

    $ 0.32         0.31         3.6 %    $ 0.58         0.62         (5.8 )% 
  

 

 

     

 

 

       

 

 

     

 

 

     

Adjust for amounts attributable to TSYS common shareholders:

                 

Add: Acquisition intangible amortization, net of taxes

      0.08         0.03         nm %      0.17         0.06         nm % 

Add: Share-based compensation, net of taxes

      0.04         0.02         85.8 %      0.06         0.04         72.7 % 

Add: NetSpend M&A expenses, net of taxes*

      0.01         0.02         (65.7 )%      0.01         0.05         (72.7 )% 
  

 

 

     

 

 

       

 

 

     

 

 

     

Adjusted EPS **

    $ 0.45         0.37         19.8 %    $ 0.83         0.76         9.2 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Average common shares and participating securities

      186,373         187,738           187,058         187,277      
  

 

 

     

 

 

       

 

 

     

 

 

     

 

* Certain merger and acquisition costs are nondeductible for income tax purposes
** Adjusted EPS amounts may not total due to rounding.

Adjusted EBITDA

(unaudited)

(in thousands)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2014     2013     Percent
Change		     2014     2013     Percent
Change		  

Net income

    $ 111,340        60,561        83.8 %    $ 162,965        119,710        36.1 % 

Adjust for:

             

Deduct: Income from discontinued operations

      (50,133 )      (678 )      nm %      (51,113 )      (693 )      nm % 

Deduct: Equity in income of equity investments

      (3,600 )      (2,749 )      (31.0 )%      (7,696 )      (6,565 )      (17.2 )% 

Add: Income taxes

      30,771        29,984        2.6 %      55,106        47,447        16.1 % 

Add: Nonoperating expense

      10,385        7,524        38.0 %      20,198        9,264        nm % 

Add: Depreciation and amortization

      60,961        39,006        56.3 %      120,995        79,857        51.5 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

EBITDA

      159,724        133,648        19.5 %      300,455        249,020        20.7 % 

Adjust for:

             

Add: Share-based compensation

      9,988        5,211        91.7 %      17,599        9,804        79.5 % 

Add: NetSpend M&A operating expenses*

      1,182        1,246        (5.1 )%      2,435        4,727        (48.5 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted EBITDA

    $ 170,894        140,105        22.0 %    $ 320,489        263,551        21.6 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

nm = not meaningful

* Excludes share-based compensation