Share-Based Compensation

9 Months Ended

Sep. 30, 2015

Share-Based Compensation

Note 6— Share-Based Compensation

Refer to Notes 1 and 19 of the Company’s audited financial statements for the year ended December 31, 2014, which are included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC, for a discussion regarding the Company’s share-based compensation plans and policy.

Share-Based Compensation

Share-based compensation costs are classified as selling, general and administrative expenses on the Company’s statements of income and corporate administration and other expenses typically for segment reporting purposes. TSYS’ share-based compensation costs are expensed, rather than capitalized, as these awards are typically granted to individuals not involved in capitalizable activities. For the three months ended September 30, 2015, share-based compensation was $11.3 million, compared to $5.4 million for the same period in 2014. For the nine months ended September 30, 2015, share-based compensation was $31.5 million, compared to $23.0 million for the same period in 2014.

Nonvested Share Awards

The Company granted shares of TSYS common stock to certain key employees and non-management members of its Board of Directors. The nonvested stock bonus awards to employees are typically for services to be provided in the future and vest over a period of up to four years. The stock bonus awards granted to the non-management members of the Board of Directors were fully vested on the date of issuance. The market value of the TSYS common stock as of the date of issuance is charged as compensation expense over the vesting periods of the awards.

	Nine months ended September 30,
	2015		2014
Number of shares granted		388,211		663,624
Market value (in millions )	$	14.9		20.3

Performance- and Market-Based Awards

The Company granted performance- and market-based shares to certain key executives. The Company has also granted performance-based shares to certain key employees. The performance- and market-based goals are established by the Compensation Committee of the Board of Directors and will vest, up to a maximum of 200%. During the first nine months of 2015 and 2014, the Compensation Committee established performance goals based on adjusted EPS, revenue growth and revenues before reimbursable items and market goals based on Total Shareholder Return (TSR) as compared to the TSR of the companies in the S&P 500 over the performance period.

Compensation expense for performance shares is measured on the grant date based on the quoted market price of TSYS common stock. The Company estimates the probability of achieving the goals through the performance period and expenses the awards on a straight-line basis. The fair value of market-based awards is estimated on the grant date using a Monte Carlo simulation model. The Company expenses market-based awards on a straight-line basis. Compensation costs related to performance- and market-based shares are recognized through the longer of the performance period or the vesting period. As of September 30, 2015, there was approximately $13.3 million of unrecognized compensation cost related to TSYS performance-based awards that is expected to be recognized through December 2018. As of September 30, 2015, there was approximately $2.0 million of unrecognized compensation cost related to TSYS market-based awards that is expected to be recognized through July 2018.

The following table summarizes the performance- and market- based awards granted during the first nine months of 2015 and 2014:

Year Awarded	Type of Award	Performance Period Ending	Performance Measure	Number of Shares Granted		Period Expensed Through
2015	Market	July 2016, 2017 and 2018	Total Shareholder Return		25,000	July 2018
2015	Performance	December 2017	Adjusted EPS		135,289	December 2017
2015	Market	December 2017	Total Shareholder Return		57,982	December 2017
2015	Performance	December 2015	Revenues before Reimbursable Items and Adjusted EPS		165,543	December 2018
2014	Performance	December 2016	Revenues before Reimbursable Items and Adjusted EPS		211,593	December 2016

Stock Option Awards

The Company granted stock options to certain key executives and non-management members of its Board of Directors. The grants to executives will vest over a period of up to three years. The grants to the non-management members of the Board of Directors were fully vested at the date of grant.

The weighted average fair value of the option grants was estimated on the date of grant using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions:

	Nine months ended September 30,
	2015			2014
Number of options granted		613,473			1,046,372
Weighted average exercise price	$	39.01			30.96
Risk-free interest rate		1.73	%		2.01	%
Expected volatility		20.80	%		25.06	%
Expected term (years)		6.3			6.5
Dividend yield		1.04	%		1.29	%
Weighted average fair value	$	8.27			7.66

As of September 30, 2015, there was approximately $4.1 million of unrecognized compensation cost related to TSYS stock options that is expected to be recognized over a remaining weighted average period of 1.5 years.