EX-99.1 2 d810116dex991.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 Third Quarter 2014 Total Revenues Increased 8.1%

Adjusted Earnings Per Share Increased 12.5%

COLUMBUS, Ga., Oct. 28, 2014 — TSYS (NYSE: TSS) today reported results for the third quarter of 2014.

“We had an outstanding third quarter as we saw our organic revenue grow 8.5%, consolidated adjusted operating margin increase to 28.9% and all four segments improve their adjusted operating margins on a sequential basis for the second quarter in a row,” said M. Troy Woods, president and chief executive officer of TSYS.

“Our incredibly strong foundation allows our team members to focus on growing our company in order to achieve our vision of being the leading global payment solutions provider,” added Woods.

Highlights for the third quarter of 2014 include:

 

  •   GAAP operating margin was 23.4%.

 

  •   Total revenues for the quarter were $616.9 million, an increase of 8.1%. Revenues before reimbursable items were $552.9 million, an increase of 8.5%.

 

  •   Adjusted EBITDA was $198.0 million, an increase of 10.4%.

 

  •   Income from continuing operations attributable to TSYS shareholders was $82.9 million, an increase of 27.9%.

 

  •   Adjusted earnings per share (EPS) from continuing operations was $0.56, an increase of 12.5%. On a GAAP basis, basic EPS from continuing operations was $0.45, an increase of 30.6%.

 

  •   Double-digit reported revenue growth in three segments.

 

  •   Total accounts on file exceeded 600 million for the first time.

 

  •   Successful roll-out of an enterprise solution to support Apple Pay.

 

1

LOGO

 

TSYS Reports Third Quarter 2014 Total Revenues Increased 8.1%/p.2

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, October 28. 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 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 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.

 

2

LOGO

 

TSYS Reports Third Quarter 2014 Total Revenues Increased 8.1%/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.

 

3

TSYS Announces Third Quarter 2014 Earnings

 

 

TSYS

Financial Highlights

(unaudited)

(in thousands, except per share data)

 

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
                 Percent                 Percent  
     2014     2013     Change     2014     2013     Change  

Total revenues

    $ 616,891        570,551        8.1 %    $ 1,811,774        1,481,202        22.3 % 

Cost of services

      407,391        377,147        8.0        1,246,763        983,143        26.8   

Selling, general and administrative expenses

      79,303        81,643        (2.9 )      252,866        212,408        19.0   

Merger and acquisition expenses

      790        7,282        (89.2 )      3,278        12,009        (72.7 ) 
  

 

 

    

 

 

      

 

 

    

 

 

    

Operating income

      129,407        104,479        23.9        308,867        273,642        12.9   

Nonoperating income (expenses)

      (508 )      (499 )      (1.8 )      (1,731 )      (86 )      nm   

Merger and acquisition expenses - bridge loan facility & other financing

      (9,489 )      (9,789 )      3.1        (28,464 )      (19,466 )      (46.2 ) 
  

 

 

    

 

 

      

 

 

    

 

 

    

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

      119,410        94,191        26.8        278,672        254,090        9.7   

Income taxes

      39,227        30,100        30.3        94,333        77,547        21.6   
  

 

 

    

 

 

      

 

 

    

 

 

    

Income before noncontrolling interests and equity in income of equity investments

      80,183        64,091        25.1        184,339        176,543        4.4   

Equity in income of equity investments, net of tax

      4,135        2,792        48.1        11,831        9,357        26.4   
  

 

 

    

 

 

      

 

 

    

 

 

    

Income from continuing operations, net of tax

      84,318        66,883        26.1        196,170        185,900        5.5   

Gain from discontinued operations, net of tax

      880        611        44.0        51,993        1,305        nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income

      85,198        67,494        26.2        248,163        187,205        32.6   

Net income attributable to noncontrolling interests

      (1,393 )      (3,144 )      55.7        (5,151 )      (8,110 )      36.5   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income attributable to TSYS common shareholders

    $ 83,805        64,350        30.2 %    $ 243,012        179,095        35.7 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Basic earnings per share:

             

Income from continuing operations to TSYS common shareholders*

    $ 0.45        0.34        30.6 %    $ 1.03        0.96        7.0 % 

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

      0.00        (0.00 )      nm        0.27        (0.01 )      nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Basic earnings per share (EPS)

    $ 0.45        0.34        33.0 %    $ 1.30        0.95        36.8 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Diluted earnings per share:

             

Income from continuing operations to TSYS common shareholders*

    $ 0.44        0.34        30.4 %    $ 1.02        0.95        6.6 % 

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

      0.00        (0.00 )      nm        0.27        (0.01 )      nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Diluted EPS

    $ 0.45        0.34        32.8 %    $ 1.29        0.94        36.2 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Dividends declared per share

    $ 0.10        0.10        $ 0.30        0.30     
  

 

 

    

 

 

      

 

 

    

 

 

    

Amounts attributable to TSYS common shareholders:

             

Income from continuing operations, net of tax

    $ 82,925        64,834        27.9 %    $ 192,018        180,835        6.2 % 

Gain (Loss) from discontinued operations, net of tax

      880        (484 )      nm        50,994        (1,740 )      nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income

    $ 83,805        64,350        30.2 %    $ 243,012        179,095        35.7 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Non-GAAP measures:

             

Adjusted EPS from continuing operations

    $ 0.56        0.49        12.5 %    $ 1.38        1.25        10.4 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted EBITDA

    $ 198,040        179,446        10.4 %    $ 518,529        442,996        17.1 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

nm = not meaningful

* EPS amounts may not total due to rounding.

 

4

TSYS Announces Third Quarter 2014 Earnings

 

 

TSYS

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)

 

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  
     2014     2013      2014     2013  

Net income

    $ 85,198        67,494       $ 248,163        187,205   

Other comprehensive income (loss), net of tax:

          

Foreign currency translation adjustments as a result of discontinued operations

      —          —           3,514        —     

Foreign currency translation adjustments

      (11,329 )      7,222         (6,121 )      (6,489 ) 

Postretirement healthcare plan adjustments

      147        1,113         442        1,423   

Unrealized (loss) gain on available-for-sale securities

      (598 )      1,479         (640 )      1,479   
  

 

 

    

 

 

     

 

 

    

 

 

  

Other comprehensive income (loss)

      (11,780 )      9,814         (2,805 )      (3,587 ) 
  

 

 

    

 

 

     

 

 

    

 

 

  

Comprehensive income

      73,418        77,308         245,358        183,618   

Comprehensive income attributable to noncontrolling interests

      1,071        3,228         5,050        6,149   
  

 

 

    

 

 

     

 

 

    

 

 

  

Comprehensive income attributable to TSYS common shareholders

    $ 72,347        74,080       $ 240,308        177,469   
  

 

 

    

 

 

     

 

 

    

 

 

  

 

5

TSYS Announces Third Quarter 2014 Earnings

 

 

TSYS

Earnings Per Share

(unaudited)

(in thousands, except per share data)

 

 

    Three Months Ended     Three Months Ended     Nine Months Ended     Nine Months Ended  
    September 30, 2014     September 30, 2013     September 30, 2014     September 30, 2013  
    Common     Participating     Common     Participating     Common     Participating     Common     Participating  
    Stock     Securities     Stock     Securities     Stock     Securities     Stock     Securities  

Basic earnings per share:

                

Net income attributable to TSYS common shareholders

   $ 83,805          64,350        $ 243,012          179,095     

Less income allocated to nonvested awards

     (843 )      843        (605 )      605        (2,477 )      2,477        (968 )      968   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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

   $ 82,962        843        63,745        605      $ 240,535        2,477        178,127        968   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common shares outstanding ( b )

     183,692        1,885        187,726        1,799        184,641        1,918        187,001        1,034   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common shares and participating securities

     185,577          189,525          186,559          188,035     
 

 

 

      

 

 

      

 

 

      

 

 

    

Basic earnings per share ( a )/( b )

   $ 0.45        0.45        0.34        0.34      $ 1.30        1.29        0.95        0.94   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Diluted earnings per share:

                

Net income attributable to TSYS common shareholders

   $ 83,805          64,350        $ 243,012          179,095     

Less income allocated to nonvested awards

     (836 )      836        (601 )      601        (2,454 )      2,454        (962 )      962   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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

   $ 82,969        836        63,749        601      $ 240,558        2,454        178,133        962   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common shares outstanding

     183,692        1,885        187,726        1,799        184,641        1,918        187,001        1,034   

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

     1,995          1,758          2,277          1,565     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common and common equivalent shares outstanding ( d )

     185,687        1,885        189,484        1,799        186,918        1,918        188,566        1,034   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common and common equivalent shares and participating securities

     187,572          191,283          188,836          189,600     
 

 

 

      

 

 

      

 

 

      

 

 

    

Diluted earnings per share ( c )/( d )

   $ 0.45        0.44        0.34        0.33      $ 1.29        1.28        0.94        0.93   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

6

TSYS Announces Third Quarter 2014 Earnings

 

 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
                Change                 Change  
    2014     2013     $     %     2014     2013     $     %  

Revenues before reimbursable items

                

North America Services

   $ 240,957        217,257        23,700        10.9 %    $ 698,543        637,379        61,164        9.6 % 

International Services

     87,385        77,876        9,509        12.2        248,890        230,889        18,001        7.8   

Merchant Services

     115,012        113,650        1,362        1.2        327,972        335,903        (7,931 )      (2.4 ) 

NetSpend

     114,048        103,706        10,342        10.0        363,521        103,706        259,815        nm   

Intersegment revenues

     (4,542 )      (3,001 )      (1,541 )      (51.3 )      (15,248 )      (9,428 )      (5,820 )      (61.7 ) 
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Revenues before reimbursable items from external customers

   $ 552,860        509,488        43,372        8.5 %    $ 1,623,678        1,298,449        325,229        25.0 % 
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total revenues

                

North America Services

   $ 282,833        252,577        30,256        12.0 %    $ 818,335        741,005        77,330        10.4 % 

International Services

     91,865        83,025        8,840        10.6        264,710        245,420        19,290        7.9   

Merchant Services

     134,117        135,616        (1,499 )      (1.1 )      384,824        404,975        (20,151 )      (5.0 ) 

NetSpend

     114,048        103,706        10,342        10.0        363,521        103,706        259,815        nm   

Intersegment revenues

     (5,972 )      (4,373 )      (1,599 )      (36.6 )      (19,616 )      (13,904 )      (5,712 )      (41.1 ) 
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Revenues from external customers

   $ 616,891        570,551        46,340        8.1 %    $ 1,811,774        1,481,202        330,572        22.3 % 
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Depreciation and amortization

                

North America Services

   $ 22,173        18,764        3,409        18.2 %    $ 63,377        55,060        8,317        15.1 % 

International Services

     9,610        9,584        26        0.3        29,176        29,734        (558 )      (1.9 ) 

Merchant Services

     3,624        2,890        734        25.4        10,591        9,029        1,562        17.3   

NetSpend

     2,155        1,471        684        46.5        5,779        1,471        4,308        nm   
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Segment depreciation and amortization

     37,562        32,709        4,853        14.8        108,923        95,294        13,629        14.3   

Acquisition intangible amortization

     24,210        24,731        (521 )      (2.1 )      72,805        41,142        31,663        77.0   

Corporate admin and other

     662        461        201        43.6        1,702        1,322        380        28.7   
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total depreciation and amortization

   $ 62,434        57,901        4,533        7.8 %    $ 183,430        137,758        45,672        33.2 % 
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Adjusted segment operating income

                

North America Services

   $ 92,736        84,443        8,293        9.8 %    $ 251,892        234,509        17,383        7.4 % 

International Services

     15,976        9,528        6,448        67.7        32,274        24,082        8,192        34.0   

Merchant Services

     40,409        40,753        (344 )      (0.8 )      103,473        119,691        (16,218 )      (13.5 ) 

NetSpend

     36,123        34,616        1,507        4.4        95,543        34,616        60,927        nm   
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total adjusted segment operating income

     185,244        169,340        15,904        9.4        483,182        412,898        70,284        17.0   

Acquisition intangible amorization

     (24,210 )      (24,731 )      521        2.1        (72,805 )      (41,142 )      (31,663 )      (77.0 ) 

NetSpend M&A operating expenses

     (779 )      (7,282 )      6,503        89.3        (3,213 )      (12,009 )      8,796        73.2   

Share-based compensation

     (5,420 )      (9,784 )      4,364        44.6        (23,019 )      (19,587 )      (3,432 )      (17.5 ) 

Corporate admin and other

     (25,428 )      (23,064 )      (2,364 )      (10.2 )      (75,278 )      (66,518 )      (8,760 )      (13.2 ) 
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Operating income

   $ 129,407        104,479        24,928        23.9 %    $ 308,867        273,642        35,225        12.9 % 
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Other:

                

Reimbursable items:

                

North America Services

   $ 41,876        35,320        6,556        18.6 %    $ 119,792        103,626        16,166        15.6 % 

International Services

     4,480        5,149        (669 )      (13.0 )      15,820        14,531        1,289        8.9   

Merchant Services

     19,105        21,966        (2,861 )      (13.0 )      56,852        69,072        (12,220 )      (17.7 ) 

NetSpend

     —          —          —          na        —          —          —          na   

Intersegment revenues

     (1,430 )      (1,372 )      (58 )      (4.2 )      (4,368 )      (4,476 )      108        2.4   
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Reimbursable items

   $ 64,031        61,063        2,968        4.9 %    $ 188,096        182,753        5,343        2.9 % 
 

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

7

TSYS Announces Third Quarter 2014 Earnings

 

 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

 

     At     Change  
     9/30/2014     9/30/2013     #     %  
Other:         

Volumes:

         

FTEs (full-time equivalents)

         

North America Services

      4,654        4,370        284        6.5 % 

International Services

      2,384        2,356        28        1.2   

Merchant Services

      1,608        1,617        (9 )      (0.6 ) 

NetSpend

      540        462        78        16.9   

Corporate Admin and Other

      584        536        48        9.0   
  

 

 

    

 

 

    

 

 

    

FTEs - Continuing Operations

      9,770        9,341        429        4.6 % 
  

 

 

    

 

 

    

 

 

    

Discontinued Operations

      —          88        (88 )      na   
  

 

 

    

 

 

    

 

 

    

FTEs

      9,770        9,429        341        3.6 % 
  

 

 

    

 

 

    

 

 

    
     At     Change  
Total assets (in thousands)    9/30/2014     12/31/2013     $     %  

North America Services

    $ 3,324,945        3,215,333        109,612        3.4 % 

International Services

      351,062        417,379        (66,317 )      (15.9 ) 

Merchant Services

      696,591        676,592        19,999        3.0   

NetSpend

      1,556,253        1,596,150        (39,897 )      (2.5 ) 

Intersegment assets

      (2,208,269 )      (2,218,886 )      10,617        0.5   
  

 

 

    

 

 

    

 

 

    

Total assets

    $ 3,720,582        3,686,568        34,014        0.9 % 
  

 

 

    

 

 

    

 

 

    

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
                   Change                 Change  
     2014      2013      Inc(Dec)     %     2014     2013     Inc(Dec)     %  

North America Segment:

                   

Accounts on File (AOF) (in millions)

                541.4        461.4        80.0        17.4 % 

Transactions (in millions)

      2,833.6         2,395.8         437.8        18.3 %      7,857.9        6,644.2        1,213.7        18.3 % 

International Segment:

                   

AOF (in millions)

                64.1        59.2        4.9        8.1 % 

Transactions (in millions)

      574.3         525.5         48.8        9.3 %      1,650.3        1,451.8        198.5        13.7 % 

Merchant Segment:

                   

Point-of-sale Transactions (in millions)

      1,034.4         1,090.0         (55.6 )      (5.1 )%      3,061.7        3,325.2        (263.5 )      (7.9 )% 

Dollar sales volume (in millions)

    $ 11,877.5       $ 10,963.2       $ 914.3        8.3 %    $ 34,453.8      $ 32,123.2      $ 2,330.6        7.3 % 

NetSpend Segment:

                   

Gross Dollar Volume (in millions)

    $ 4,409.3       $ 3,780.9       $ 628.4        16.6 %    $ 15,604.5      $ 13,107.6      $ 2,496.9        19.0 % 

90-Day Active Cards (in thousands)

                3,086.1        2,767.3        318.8        11.5 % 

Direct Deposit 90-Day Active Cards (in thousands)

                1,520.7        1,261.1        259.6        20.6 % 

% of 90-Day Active Cards with Direct Deposit

                49.3 %      45.6 %     

 

8

TSYS Announces Third Quarter 2014 Earnings

 

 

TSYS

Balance Sheet

(unaudited)

(in thousands)

 

 

     Sep 30, 2014     Dec 31, 2013  

Assets

     

Current assets:

     

Cash and cash equivalents

    $ 266,041        247,700   

Accounts receivable, net

      308,671        255,773   

Deferred income tax assets

      13,239        14,158   

Prepaid expenses and other current assets

      96,747        95,109   

Current assets of discontinued operations

      4,003        41,193   
  

 

 

    

 

 

  

Total current assets

      688,701        653,933   

Goodwill

      1,549,227        1,541,574   

Other intangible assets, net

      423,356        481,419   

Computer software, net

      365,004        363,880   

Property and equipment, net

      274,571        259,968   

Contract acquisition costs, net

      226,182        184,828   

Equity investments, net

      96,114        94,133   

Deferred income tax assets, net

      3,871        3,972   

Other assets

      93,556        87,146   

Long-term assets of discontinued operations

      —          15,715   
  

 

 

    

 

 

  

Total assets

    $ 3,720,582        3,686,568   
  

 

 

    

 

 

  

Liabilities

     

Current liabilities:

     

Accounts payable

    $ 54,507        33,651   

Current portion of borrowings

      40,684        34,257   

Accrued salaries and employee benefits

      29,479        38,339   

Current portion of obligations under capital leases

      6,359        22,662   

Other current liabilities

      166,362        159,170   

Current liabilities of discontinued operations

      4,003        9,136   
  

 

 

    

 

 

  

Total current liabilities

      301,394        297,215   

Long-term borrowings, excluding current portion

      1,409,999        1,428,251   

Deferred income tax liabilities

      191,873        228,727   

Obligations under capital leases, excluding current portion

      6,196        7,500   

Other long-term liabilities

      99,463        81,600   

Long-term liabilities of discontinued operations

      —          1,197   
  

 

 

    

 

 

  

Total liabilities

      2,008,925        2,044,490   
  

 

 

    

 

 

  

Redeemable noncontrolling interest

      22,197        39,652   
  

 

 

    

 

 

  

Equity

     

Shareholders’ equity:

     

Common stock

      20,278        20,279   

Additional paid-in capital

      165,161        165,841   

Accumulated other comprehensive income, net

      1,046        3,749   

Treasury stock

      (409,053 )      (326,996 ) 

Retained earnings

      1,905,112        1,718,204   
  

 

 

    

 

 

  

Total shareholders’ equity

      1,682,544        1,581,077   
  

 

 

    

 

 

  

Noncontrolling interests in consolidated subsidiaries

      6,916        21,349   
  

 

 

    

 

 

  

Total equity

      1,689,460        1,602,426   
  

 

 

    

 

 

  

Total liabilities and equity

    $ 3,720,582        3,686,568   
  

 

 

    

 

 

  

 

9

TSYS Announces Third Quarter 2014 Earnings

 

 

TSYS

Cash Flow

(unaudited)

(in thousands)

 

 

     Nine Months Ended September 30,  
     2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net income

    $ 248,163        187,205   

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

     

Equity in income of equity investments

      (11,831 )      (9,357 ) 

Dividends received from equity investments

      9,189        8,595   

Loss on foreign currency

      1,715        612   

Depreciation and amortization

      184,827        142,490   

Amortization of debt issuance costs

      1,361        6,775   

Amortization of bond discount

      286        131   

Changes in fair value of private equity investments

      (239 )      (1,227 ) 

Share-based compensation

      23,019        19,587   

Excess tax benefit from share-based compensation

      (6,538 )      (2,727 ) 

Provisions for bad debt expense and billing adjustments

      1,982        2,193   

Charges for transaction processing provisions

      5,081        8,545   

Provision for fraud and other losses

      29,923        6,398   

Deferred income tax expense

      (15,989 )      25,784   

Loss on disposal of equipment, net

      27        78   

Gain on disposal of subsidiaries

      (87,013 )      —     

Changes in operating assets and liabilities:

     

Accounts receivable

      (50,450 )      (6,721 ) 

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

      (10,784 )      (12,610 ) 

Accounts payable

      10,655        (41,055 ) 

Accrued salaries and employee benefits

      (8,462 )      (9,552 ) 

Other current liabilities and other long-term liabilities

      65,192        (17,659 ) 
  

 

 

    

 

 

  

Net cash provided by operating activities

      390,114        307,485   
  

 

 

    

 

 

  

CASH FLOWS FROM INVESTING ACTIVITIES:

     

Purchases of property and equipment, net

      (55,356 )      (24,896 ) 

Additions to licensed computer software from vendors

      (14,497 )      (34,412 ) 

Additions to internally developed computer software

      (31,263 )      (22,519 ) 

Proceeds from dispositions, net of expenses paid and cash disposed

      45,002        —     

Cash used in acquisitions, net of cash acquired

      (38,584 )      (1,314,660 ) 

Purchase of private equity investments

      (3,290 )      (1,146 ) 

Additions to contract acquisition costs

      (66,540 )      (36,824 ) 
  

 

 

    

 

 

  

Net cash used in investing activities

      (164,528 )      (1,434,457 ) 
  

 

 

    

 

 

  

CASH FLOWS FROM FINANCING ACTIVITIES:

     

Principal payments on long-term borrowings and capital lease obligations

      (48,682 )      (82,644 ) 

Proceeds from long-term borrowings

      —          1,395,661   

Proceeds from exercise of stock options

      26,877        27,488   

Excess tax benefit from share-based compensation

      6,538        2,727   

Repurchase of common stock under plans and tax withholding

      (120,894 )      (6,267 ) 

Debt issuance costs

      —          (13,471 ) 

Purchase of noncontrolling interests

      (37,500 )      —     

Subsidiary dividends paid to noncontrolling shareholders

      (6,369 )      (5,897 ) 

Dividends paid on common stock

      (56,159 )      (37,514 ) 
  

 

 

    

 

 

  

Net cash (used in) provided by financing activities

      (236,189 )      1,280,083   
  

 

 

    

 

 

  

CASH AND CASH EQUIVALENTS:

     

Effect of exchange rate changes on cash and cash equivalents

      (1,586 )      (3,863 ) 
  

 

 

    

 

 

  

Net (decrease) increase in cash and cash equivalents

      (12,189 )      149,248   

Cash and cash equivalents at beginning of period

      278,230        247,612   
  

 

 

    

 

 

  

Cash and cash equivalents at end of period

      266,041        396,860   

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

      —          27,667   
  

 

 

    

 

 

  

Cash and cash equivalents of continuing operations at end of period

    $ 266,041        369,193   
  

 

 

    

 

 

  

 

10

TSYS Announces Third Quarter 2014 Earnings

 

Supplemental Information:

 

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

Consumer Credit

      263.9         224.1         17.8   

Retail

      28.4         26.8         5.8   
  

 

 

     

 

 

     

Total Consumer

      292.3         250.9         16.5   

Commercial

      41.5         38.8         6.9   

Other

      21.2         16.9         25.3   
  

 

 

     

 

 

     

Subtotal

      355.0         306.6         15.8   

Prepaid/Stored Value

      125.1         110.7         13.0   

Government Services

      66.7         61.6         8.1   

Commercial Card Single Use

      58.7         41.7         41.0   
  

 

 

     

 

 

     

Total AOF

      605.5         520.6         16.3   
  

 

 

     

 

 

     

Growth in Accounts on File (in millions):

 

     September 2013 to
September 2014		     September 2012 to
September 2013		  

Beginning balance

      520.6        466.3   

Change in accounts on file due to:

     

Internal growth of existing clients

      39.6        36.5   

New clients

      76.0        63.8   

Purges/Sales

      (30.3 )      (45.4 ) 

Deconversions

      (0.4 )      (0.6 ) 
  

 

 

    

 

 

  

Ending balance

      605.5        520.6   
  

 

 

    

 

 

  

 

11

TSYS Announces Third Quarter 2014 Earnings

 

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 third quarter 2014 financial results using the previous year’s foreign currency exchange rates. On a full year constant currency basis, TSYS’ total revenues grew 21.1% as compared to a reported GAAP increase of 22.3%.

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 pre-discrete 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.

 

12

TSYS Announces Third Quarter 2014 Earnings

 

Reconciliation of GAAP to Non-GAAP

 

 

Constant Currency Comparison

(unaudited)

(in thousands)

 

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
                   Percent                   Percent  
     2014      2013      Change     2014      2013      Change  

Consolidated

                 

Constant currency (1)

    $ 610,554         570,551         7.0 %    $ 1,793,838         1,481,202         21.1 % 

Foreign currency (2)

      6,337         —             17,936         —        
  

 

 

     

 

 

       

 

 

     

 

 

     

Total revenues

    $ 616,891         570,551         8.1 %    $ 1,811,774         1,481,202         22.3 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Constant currency (1)

    $ 546,782         509,488         7.3 %    $ 1,606,786         1,298,449         23.7 % 

Foreign currency (2)

      6,078         —             16,892         —        
  

 

 

     

 

 

       

 

 

     

 

 

     

Total revenues before reimbursable items

    $ 552,860         509,488         8.5 %    $ 1,623,678         1,298,449         25.0 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Constant currency (1)

    $ 126,327         104,479         20.9 %    $ 299,860         273,642         9.6 % 

Foreign currency (2)

      3,080         —             9,007         —        
  

 

 

     

 

 

       

 

 

     

 

 

     

Operating income

    $ 129,407         104,479         23.9 %    $ 308,867         273,642         12.9 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

International Services

                 

Constant currency (1)

    $ 85,506         83,025         3.0 %    $ 246,940         245,420         0.6 % 

Foreign currency (2)

      6,359         —             17,770         —        
  

 

 

     

 

 

       

 

 

     

 

 

     

Total revenues

    $ 91,865         83,025         10.6 %    $ 264,710         245,420         7.9 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

 

(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 September 30,     Nine Months Ended September 30,  
                   Percent                   Percent  
     2014      2013      Change     2014      2013      Change  

Total revenues

    $ 616,891         570,551         8.1 %    $ 1,811,774         1,481,202         22.3 % 

Reimbursable items

      64,031         61,063         4.9        188,096         182,753         2.9   
  

 

 

     

 

 

       

 

 

     

 

 

     

Revenues before reimbursable items

    $ 552,860         509,488         8.5 %    $ 1,623,678         1,298,449         25.0 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

 

13

TSYS Announces Third Quarter 2014 Earnings

 

Reconciliation of GAAP to Non-GAAP

 

 

Adjusted Earnings per Share

(unaudited)

(in thousands, except per share data)

 

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
                   Percent                   Percent  
     2014      2013      Change     2014      2013      Change  

Income from continuing operations attributable to TSYS common shareholders

    $ 82,925         64,834         27.9 %    $ 192,018         180,835         6.2 % 

Adjust for amounts attributable to TSYS common shareholders:

                 

Add: Acquisition intangible amortization, net of taxes

    $ 15,762         16,595         (5.0 )%      47,374         27,134         74.6 % 

Add: Share-based compensation, net of taxes

      3,573         6,706         (46.7 )      15,174         13,425         13.0   

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

      786         5,424         (85.5 )      3,111         13,934         (77.7 ) 
  

 

 

     

 

 

       

 

 

     

 

 

     

Adjusted earnings

    $ 103,046         93,559         10.1 %    $ 257,677         235,328         9.5 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

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

                 

As reported (GAAP)

    $ 0.45         0.34         30.6 %    $ 1.03         0.96         7.0 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Adjust for amounts attributable to TSYS common shareholders:

                 

Add: Acquisition intangible amortization, net of taxes

      0.08         0.09         (3.1 )      0.25         0.14         76.0   

Add: Share-based compensation, net of taxes

      0.02         0.04         (45.5 )      0.08         0.07         13.9   

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

      0.00         0.03         (85.3 )      0.02         0.07         (77.5 ) 
  

 

 

     

 

 

       

 

 

     

 

 

     

Adjusted EPS **

    $ 0.56         0.49         12.5 %    $ 1.38         1.25         10.4 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Average common shares and participating securities

      185,577         189,525           186,559         188,035      
  

 

 

     

 

 

       

 

 

     

 

 

     

 

* 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 September 30,     Nine Months Ended September 30,  
                 Percent                 Percent  
     2014     2013     Change     2014     2013     Change  

Net income

    $ 85,198        67,494        26.2 %    $ 248,163        187,205        32.6 % 

Adjust for:

             

Deduct: Income from discontinued operations

      (880 )      (611 )      (44.0 )      (51,993 )      (1,305 )      nm   

Deduct: Equity in income of equity investments

      (4,135 )      (2,792 )      (48.1 )      (11,831 )      (9,357 )      (26.4 ) 

Add: Income taxes

      39,227        30,100        30.3        94,333        77,547        21.6   

Add: Nonoperating expense

      9,997        10,288        (2.8 )      30,195        19,552        54.4   

Add: Depreciation and amortization

      62,434        57,901        7.8        183,430        137,758        33.2   
  

 

 

    

 

 

      

 

 

    

 

 

    

EBITDA

    $ 191,841        162,380        18.1 %    $ 492,297        411,400        19.7 % 

Adjust for:

             

Add: Share-based compensation

      5,420        9,784        (44.6 )      23,019        19,587        17.5   

Add: NetSpend M&A operating expenses*

      779        7,282        (89.3 )      3,213        12,009        (73.2 ) 
  

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted EBITDA

    $ 198,040        179,446        10.4 %    $ 518,529        442,996        17.1 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

nm = not meaningful

* Excludes share-based compensation

 

14

TSYS Announces Third Quarter 2014 Earnings

 

Reconciliation of GAAP to Non-GAAP

 

 

Segment Operating Margin and Consolidated Adjusted Operating Margin

(unaudited)

(in thousands)

 

 

    Three Months Ended September 30, 2014     Three Months Ended September 30, 2013  
    Adjusted Segment     Revenues before     Adjusted     Adjusted Segment     Revenues before     Adjusted  
    Operating Income     Reimbursable Items     Operating Margin     Operating Income     Reimbursable Items     Operating Margin  

North America Services

   $ 92,736        240,957        38.49 %    $ 84,443        217,257        38.87 % 

International Services

     15,976        87,385        18.28        9,528        77,876        12.23   

Merchant Services

     40,409        115,012        35.13        40,753        113,650        35.86   

NetSpend

     36,123        114,048        31.67        34,616        103,706        33.38   

Intersegment

     —          (4,542 )        —          (3,001 )   

Corporate admin and other

     (25,428 )      —            (23,064 )      —       
 

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted operating margin

   $ 159,816        552,860        28.91 %    $ 146,276        509,488        28.71 % 

Acquisition intangible amortization

     (24,210 )          (24,731 )     

NetSpend M&A operating expenses

     (779 )          (7,282 )     

Share-based compensation

     (5,420 )          (9,784 )     
 

 

 

    

 

 

      

 

 

    

 

 

    

Operating income and margin (US GAAP)

   $ 129,407        552,860        23.41 %    $ 104,479        509,488        20.51 % 
 

 

 

    

 

 

      

 

 

    

 

 

    
    Nine Months Ended September 30, 2014     Nine Months Ended September 30, 2013  
    Adjusted Segment     Revenues before     Adjusted     Adjusted Segment     Revenues before     Adjusted  
    Operating Income     Reimbursable Items     Operating Margin     Operating Income     Reimbursable Items     Operating Margin  

North America Services

   $ 251,892        698,543        36.06 %    $ 234,509        637,379        36.79 % 

International Services

     32,274        248,890        12.97        24,082        230,889        10.43   

Merchant Services

     103,473        327,972        31.55        119,691        335,903        35.63   

NetSpend

     95,543        363,521        26.28        34,616        103,706        33.38   

Intersegment

     —          (15,248 )        —          (9,428 )   

Corporate admin and other

     (75,278 )      —            (66,518 )      —       
 

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted operating margin

   $ 407,904        1,623,678        25.12 %    $ 346,380        1,298,449        26.68 % 

Acquisition intangible amortization

     (72,805 )          (41,142 )     

NetSpend M&A operating expenses

     (3,213 )          (12,009 )     

Share-based compensation

     (23,019 )          (19,587 )     
 

 

 

    

 

 

      

 

 

    

 

 

    

Operating income and margin (US GAAP)

   $ 308,867        1,623,678        19.02 %    $ 273,642        1,298,449        21.07 % 
 

 

 

    

 

 

      

 

 

    

 

 

    

 

15