SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 2001 or
-----------------
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ___________
to_________________.
Commission file number 1-10254
TOTAL SYSTEM SERVICES, INC.
(Exact Name of Registrant as specified in its charter)
Georgia 58-1493818
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1600 First Avenue
Columbus, Georgia 31901
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (706) 649-2204
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $.10 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO___________
-----------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of February 15, 2002, 196,965,670 shares of the $.10 par value
common stock of Total System Services, Inc. were outstanding, and the aggregate
market value of the shares of $.10 par value common stock of Total System
Services, Inc. held by non-affiliates was approximately $643,461,000 (based upon
the closing per share price of such stock on said date.)
Portions of Registrant's Proxy Statement, including Financial Appendix,
dated March 8, 2002 are incorporated in Parts I, II, III and IV of this report.
Registrant's Documents Incorporated by Reference
Part Number and Item
Document Incorporated Number of Form 10-K
by Reference Into Which Incorporated
- --------------------- ------------------------
Pages F-3 through F-13, F-18 and F-19, Part I, Item 1, Business
F-21, and F-25 through F-27 of the
Financial Appendix to Registrant's Proxy
Statement in connection with its Annual
Shareholders' Meeting to be held on
April 18, 2002
Pages F-9 and F-10, F-18 through Part I, Item 2, Properties
F-21, and F-25 of
the Financial Appendix to Registrant's
Proxy Statement in connection with its
Annual Shareholders'
Meeting to be held on April 18, 2002
Page F-25 of the Financial Appendix to Part I, Item 3, Legal
Registrant's Proxy Statement in connection Proceedings
with its Annual Shareholders' Meeting
to be held on April 18, 2002
Page F-30 of the Financial Appendix Part II, Item 5, Market
to Registrant's Proxy Statement in for Registrant's Common
connection with its Annual Shareholders' Equity and Related
Meeting to be held on April 18, 2002 Stockholder Matters
Page F-2 of the Financial Appendix Part II, Item 6, Selected
to Registrant's Proxy Statement Financial Data
in connection with its Annual Shareholders'
Meeting to be held on April 18, 2002
Pages F-3 through F-13 of the Part II, Item 7, Management's
Financial Appendix Discussion and Analysis of
to Registrant's Proxy Statement in connection Financial Condition and
with its Annual Shareholders' Meeting to be held Results of Operations
on April 18, 2002
Pages F-14 through F-28, and F-30 Part II, Item 8, Financial
of the Financial Statements and Supplementary
Appendix to Registrant's Proxy Statement in Data
connection with its Annual Shareholders'
Meeting to be held on April 18, 2002
Pages 3 and 4, 7 and 8, and 28 and 29 Part III, Item 10,
of Registrant's Proxy Statement in Directors and Executive
connection with its Annual Officers of the Registrant
Shareholders' Meeting to be held
on April 18, 2002
Page 7, pages 19 through 21, and 24 and 25 Part III, Item 11,
of Registrant's Proxy Statement Executive Compensation
in connection with its Annual
Shareholders' Meeting to be held
on April 18, 2002
Pages 8 and 9, and 25 through 27 of Part III, Item 12, Security
Registrant's Proxy Statement in connection Ownership of Certain
with its Annual Shareholders' Beneficial Owners and
Meeting to be held on April 18, 2002 Management
Pages 25 through 28 Part III, Item 13,
of Registrant's Proxy Statement and Certain Relationships
pages F-19 and F-20 of the Financial and Related Transactions
Appendix to Registrant's Proxy
Statement in connection with its
Annual Shareholders' Meeting to be
held on April 18, 2002
Pages F-14 through F-28 of the Financial Part IV, Item 14, Exhibits,
Appendix to Registrant's Proxy Statement Financial Statement
in connection with its Annual Shareholders' Schedules and Reports
Meeting to be held on April 18, 2002 on Form 8-K
Cross Reference Sheet
Item No. Caption Page No.
- -------- ------- --------
Part I
Safe Harbor Statement 1
1. Business 2
2. Properties 4
3. Legal Proceedings 5
4. Submission of Matters to a Vote of 5
Security Holders
Part II
5. Market for Registrant's Common Equity 6
and Related Stockholder Matters
6. Selected Financial Data 6
7. Management's Discussion and Analysis 6
of Financial Condition and Results
of Operations
7A. Quantitative and Qualitative Disclosures 6
About Market Risk
8. Financial Statements and Supplementary 7
Data
9. Changes In and Disagreements With Accountants 8
on Accounting and Financial Disclosure
Part III
10. Directors and Executive Officers of 8
the Registrant
11. Executive Compensation 8
12. Security Ownership of Certain 8
Beneficial Owners and Management
13. Certain Relationships and Related 8
Transactions
Part IV
14. Exhibits, Financial Statement Schedules, 9
and Reports on Form 8-K
PART I
Safe Harbor Statement
Certain statements contained in this Annual Report on Form 10-K and the
exhibits hereto which are not statements of historical fact constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act (the "Act"). In addition, certain statements in future
filings by Total System Services, Inc. ("TSYS") with the Securities and Exchange
Commission, in press releases, and in oral and written statements made by or
with the approval of TSYS which are not statements of historical fact constitute
forward-looking statements within the meaning of the Act. Examples of
forward-looking statements include, but are not limited to: (i) projections of
revenues, income or loss, earnings or loss per share, the payment or non-payment
of dividends, capital structure and other financial items; (ii) statements of
plans and objectives of TSYS or its management or Board of Directors, including
those relating to products, services or conversions; (iii) statements of future
economic performance; and (iv) statements of assumptions underlying such
statements. Words such as "believes," "anticipates," "expects," "intends,"
"targeted," and similar expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such statements.
Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
contemplated by such forward-looking statements. A number of important factors
could cause actual results to differ materially from those contemplated by the
forward-looking statements. Many of these factors are beyond TSYS' ability to
control or predict. The factors include, but are not limited to: (i) lower than
anticipated internal growth rates for TSYS' existing clients; (ii) TSYS'
inability to control expenses and increase market share; (iii) TSYS' inability
to successfully bring new products to market, including, but not limited to,
stored value and e-commerce products; (iv) the inability of TSYS to grow its
business through acquisitions or successfully integrate acquisitions; (v) TSYS'
inability to increase the revenues derived from international sources; (vi)
adverse developments with respect to entering into contracts with new clients
and retaining current clients; (vii) the merger of TSYS clients with entities
that are not TSYS clients or the sale of portfolios by TSYS clients to entities
that are not TSYS clients; (viii) TSYS' inability to anticipate and respond to
technological changes, particularly with respect to e-commerce; (ix) adverse
developments with respect to the successful conversion of clients; (x) the
absence of significant changes in foreign exchange spreads between the United
States and the countries TSYS transacts business in, to include Mexico, United
Kingdom, Japan, Canada and the European Union; (xi) changes in consumer
spending, borrowing and saving habits, including a shift from credit to debit
cards; (xii) changes in laws, regulations, credit card association rules or
other industry standards affecting TSYS' business which require significant
product redevelopment efforts; (xiii) the effect of changes in accounting
policies and practices as may be adopted by the Financial Accounting Standards
Board or the Securities and Exchange Commission; (xiv) the costs and effects of
litigation; (xv) adverse developments with respect to the credit card industry
in general; (xvi) TSYS' inability to successfully manage any impact from slowing
economic conditions or consumer
1
spending; (xvii) the occurrence of catastrophic events that would impact TSYS'
or its major customers' operating facilities, communications systems and
technology, or that has a material negative impact on current economic
conditions or levels; (xviii) successfully managing the potential both for
patent protection and patent liability in the context of rapidly developing
legal framework for expansive software patent protection;(xix) decreases in card
activity; and (xx) overall market conditions.
Such forward-looking statements speak only as of the date on which such
statements are made, and TSYS undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.
Item 1. Business
Business. Established in 1983 as an outgrowth of an on-line accounting
and bankcard data processing system developed for Columbus Bank and Trust
Company, TSYS is now one of the world's largest electronic payments processors
of consumer credit, debit, commercial, stored value, chip and retail cards.
Based in Columbus, Georgia, and traded on the New York Stock Exchange under the
symbol "TSS," TSYS provides the electronic link between buyers and sellers with
a comprehensive on-line system of data processing services servicing issuing
institutions throughout the United States, Canada, Mexico, Honduras, the
Caribbean and Europe, representing more than 218 million cardholder accounts on
file as of December 31, 2001. TSYS currently offers merchant services to
financial institutions and other organizations in Japan. TSYS also offers value
added products and services to support its core processing services. Value added
products and services include: risk management tools and techniques, such as
credit evaluation, fraud detection and prevention and behavior analysis tools;
and revenue enhancement tools, such as loyalty programs and bonus rewards.
Synovus Financial Corp., a $16.7 billion asset, multi-financial services
company, owns 81.1 percent of TSYS.
As of January 1, 2002, TSYS had four wholly owned subsidiaries: (1)
Columbus Depot Equipment Company, which sells and leases computer related
equipment associated with TSYS' transaction processing services; (2) Columbus
Productions, Inc., which provides full-service commercial printing and related
services; (3) TSYS Canada, Inc., which provides programming support and
assistance with the conversion of card portfolios to TS2; and (4) TSYS Total
Debt Management, Inc., which provides debt collection and bankruptcy management
services. DotsConnect, Inc., TSYS' e-commerce subsidiary, and TSYS Total
Solutions, Inc., TSYS' correspondence processing and teleservicing subsidiary,
were merged into TSYS on January 1, 2002 and currently operate as divisions of
TSYS.
TSYS also holds: (1) a 49% equity interest in a joint venture company
named Total System Services de Mexico, S.A. de C.V., which provides credit card
related services to Mexican banks; (2) a 50% interest in Vital Processing
Services L.L.C., a joint venture with Visa U.S.A. Inc., that offers fully
integrated merchant transaction and related electronic information services to
financial and nonfinancial institutions and their merchant customers; and (3) a
51.46% equity interest in GP Network Corporation, a company which provides
merchant processing services to
2
financial institutions and retailers in Japan.
The services provided by TSYS are divided into two operating segments,
transaction processing services and support services. Transaction processing
services, which includes the programming services provided by TSYS Canada, Inc.,
the electronic commerce services provided by DotsConnect, Inc. (a wholly owned
subsidiary of TSYS during 2001) and the merchant processing services provided by
GP Network Corporation, account for approximately 86% of TSYS' revenues. The
support services provided by TSYS' other subsidiaries, including the equipment
leasing services provided by Columbus Depot Equipment Company, the
correspondence processing and other services provided by TSYS Total Solutions,
Inc. (a wholly owned subsidiary of TSYS during 2001) and the commercial printing
services provided by Columbus Productions, Inc., are aggregated into the segment
referred to as support services.
Seasonality. Due to the somewhat seasonal nature of the credit card
industry, TSYS' revenues and results of operations have generally increased in
the fourth quarter of each year because of increased transaction and
authorization volumes during the traditional holiday shopping season.
Service Marks. TSYS owns the federally registered service marks TSYS,
TS2, TS1, Total System Services, Inc., THE TOTAL SYSTEM, TOTAL ACCESS, ACE, TSYS
Total Debt Management, Transaction Special Processing and TSP, to which TSYS
believes strong customer identification attaches. TSYS also owns other service
marks. Management does not believe the loss of these marks would have a material
impact on the business of TSYS.
Major Customers. A significant amount of TSYS' revenues are derived
from long-term contracts with significant customers, including certain major
customers. For the year ended December 31, 2001, Bank of America Corporation and
Providian Financial Corporation accounted for approximately 16% and 13%,
respectively, of TSYS' total revenues. As a result, the loss of Bank of America
Corporation or Providian Financial Corporation, or other major or significant
customers, could have a material adverse effect on TSYS' financial condition and
results of operations.
Competition. TSYS encounters vigorous competition in providing card
processing services from several different sources. Most of the national market
in third party card processors is presently being provided by approximately four
vendors. TSYS believes that it is the second largest third party card processor
in the United States. In addition, TSYS competes with in-house processors and
software vendors which provide their products to institutions which process
in-house. TSYS is presently encountering, and in the future anticipates
continuing to encounter, substantial competition from card associations, data
processing and bankcard computer service firms and other such third party
vendors located throughout the United States. Based upon available market share
data, TSYS estimates that at the end of 2001 it held a 20% share of the domestic
consumer card processing market, an 87% share of the Visa and MasterCard
domestic commercial card processing market, a 17% share of the domestic retail
card processing market and a 5% share of the domestic off-line debit processing
market. In addition to processing cards for United States clients, TSYS also
holds an approximately 28% share of the Mexican credit
3
card processing market, an approximately 20% share of the Canadian credit card
processing market and an approximately 18% share of the United Kingdom credit
card processing market. TSYS believes that it is the world's largest third party
processor of international accounts.
TSYS' major competitor in the card processing industry is First Data
Resources, Inc., a wholly owned subsidiary of First Data Corporation, which
provides card processing services, including authorization and data entry
services. The principal methods of competition between TSYS and First Data
Resources are price, quality, features and functionality and reliability of
service. Certain other subsidiaries of First Data Corporation also compete with
TSYS. In addition, there are a number of other companies which have the
necessary financial resources and the technological ability to develop or
acquire products and, in the future, to provide services similar to those being
offered by TSYS.
Regulation and Examination. TSYS is subject to being examined, and is
indirectly regulated, by the Office of the Comptroller of the Currency, the
Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of
Thrift Supervision, the National Credit Union Administration, and the various
state financial regulatory agencies which supervise and regulate the financial
institutions for which TSYS provides bankcard data processing services. Matters
reviewed and examined by these federal and state financial institution
regulatory agencies have included TSYS' internal controls in connection with its
present performance of bankcard data processing services, and the agreements
pursuant to which TSYS provides such services.
As the Federal Reserve Bank of Atlanta has approved Synovus' indirect
ownership of TSYS through Columbus Bank and Trust Company, TSYS is subject to
direct regulation by the Federal Reserve Board. TSYS was formed with the prior
written approval of, and is subject to regulation and examination by, the
Department of Banking and Finance of the State of Georgia as a subsidiary of
Columbus Bank and Trust Company. In addition, as TSYS and its subsidiaries
operate as subsidiaries of Columbus Bank and Trust Company, they are subject to
regulation by the Federal Deposit Insurance Corporation.
Employees. As of December 31, 2001, TSYS had 4,711 full-time employees.
See the "Financial Review" Section on pages F-3 through F-13 and Note
1, Note 4, Note 9, Note 11, Note 12 and Note 13 of Notes to Consolidated
Financial Statements on pages F-18 and F-19, page F-21, and pages F-25 through
F-27 of the Financial Appendix to TSYS' Proxy Statement in connection with its
Annual Shareholders' Meeting to be held on April 18, 2002 which are specifically
incorporated herein by reference.
Item 2. Properties
TSYS owns a 377,000 square foot production center which is located on a
40.4 acre tract of land in north Columbus, Georgia. Primarily a production
center, this facility houses TSYS' primary data processing computer operations,
statement preparation, mail handling, microfiche production, purchasing and card
production, as well as other related operations.
4
TSYS owns a 110,000 square foot building on a 23-acre site in Columbus,
Georgia, which accommodates current and future office space needs. TSYS Total
Solutions, Inc., which is included in the segment support services, occupies
approximately 82,500 square feet of this building. TSYS also owns a 104,000
square foot building on an 18-acre site in Columbus which functions as a second
data center.
TSYS entered into an operating lease for the purpose of financing its
540,000 square foot campus-type facility on approximately 46 acres of land in
downtown Columbus, Georgia. The campus facility serves as TSYS' corporate
headquarters and houses administrative, client contact and programming team
members. The campus facility consolidated most of TSYS' multiple Columbus
locations.
TSYS owns a 40,000 square foot building in York, England, 23,000 square
feet of which are occupied by TSYS, which houses client service and
administrative personnel for TSYS Europe.
All of the properties listed above are utilized by TSYS for card
processing services with the one exception noted above with respect to the space
occupied by TSYS Total Solutions, Inc.
TSYS Total Solutions, Inc. and Columbus Productions, Inc., which are
included in the segment support services, own a 72,000 square foot production
facility and own a 61,000 square foot production facility, respectively,
located in Columbus, Georgia.
All properties owned and leased by TSYS are in good repair and suitable
condition for the purposes for which they are used. In addition to its real
property, TSYS owns and/or leases a substantial amount of computer equipment.
See Note 1, Note 3, Note 4 and Note 9 of Notes to Consolidated
Financial Statements on pages F-18 through F-21, and page F-25 and "Operating
Expenses" under the Financial Review Section" on pages F-9 and F-10 of the
Financial Appendix to TSYS' Proxy Statement in connection with its Annual
Shareholders' Meeting to be held on April 18, 2002 which are specifically
incorporated herein by reference.
Item 3. Legal Proceedings
See Note 9 of Notes to Consolidated Financial Statements on page F-25
of the Financial Appendix to TSYS' Proxy Statement in connection with its Annual
Shareholders' Meeting to be held on April 18, 2002 which is specifically
incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
None.
5
PART II
Item 5. Market for Registrants Common Equity and Related Stockholder Matters
The "Quarterly Financial Data, Stock Price, Dividend Information
Section" which is set forth on page F-30 of the Financial Appendix to TSYS'
Proxy Statement in connection with its Annual Shareholders' Meeting to be held
on April 18, 2002 is specifically incorporated herein by reference.
On January 1, 2002, TSYS issued 2,175,000 shares of its common stock to
Synovus Financial Corp. in connection with its acquisition of TSYS Total Debt
Management, Inc. from Synovus. TSYS Total Debt Management, Inc. provides
third-party collection services.
The shares of TSYS stock referenced above were issued pursuant to the
exemption from registration set forth in Section 4(2) of the Securities Act of
1933.
Item 6. Selected Financial Data
The "Selected Financial Data" Section which is set forth on page F-2 of
the Financial Appendix to TSYS' Proxy Statement in connection with its Annual
Shareholders' Meeting to be held on April 18, 2002 is specifically incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The "Financial Review" Section which is set forth on pages F-3 through
F-13 of the Financial Appendix to TSYS' Proxy Statement in connection with its
Annual Shareholders' Meeting to be held on April 18, 2002, which includes the
information encompassed within "Management's Discussion and Analysis of
Financial Condition and Results of Operations," is specifically incorporated
herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Exchange Risk. TSYS is exposed to foreign exchange risk because
it has revenues and expenses denominated in foreign currencies including Euro,
British Pound, Mexican Peso, Canadian Dollar and Japanese Yen. These currencies
are translated into U.S. dollars at current exchange rates, except for revenues,
costs and expenses, and net income, which are translated at the average exchange
rate for each reporting period. Net exchange gains or losses resulting from the
translation of assets and liabilities of TSYS' foreign operations, net of tax,
are accumulated in a separate section of shareholders' equity titled accumulated
other comprehensive loss. The amount of other comprehensive loss for the years
ended December 31, 2001, 2000 and 1999 was $1,841,657, $159,973 and $274,371,
respectively. Currently, TSYS does not use financial instruments to hedge its
exposure to exchange rate changes.
6
The carrying value of the assets of its foreign operations in Europe,
Mexico, Canada and Japan was approximately (in U.S. dollars) $75,100,000,
$4,000,000, $166,000 and $5,500,000, respectively, at December 31, 2001.
Interest Rate Risk. TSYS is also exposed to interest rate risk
associated with the investing of available cash and the lease on its campus
facilities. TSYS invests available cash in conservative short-term instruments
and is primarily subject to changes in the prime rate.
The payments under the operating lease arrangement of the campus
facilities are tied to the London Interbank Offered Rate ("LIBOR"). TSYS locks
into interest rates for six-month intervals. The extent that rates change in a
six-month period represents TSYS' exposure. The following represents the
potential effect on operating income of hypothetical shifts in the LIBOR of plus
or minus 50 basis points, 100 basis points and 150 points over a 12-month
period.
------------------------------------------------
Effect of a Basis Point Change of :
------------------------------------------------
--------------- --------------- ----------------
+/- 50 +/- 100 +/- 150
--------------- --------------- ----------------
Effect on operating income $ 143,000 287,000 430,000
--------------- --------------- ----------------
The lease is scheduled to expire in November 2002. However, TSYS has the
option to either renew the lease subject to prevailing market rates or to
purchase the property at the original cost of the property. As a result, TSYS
could have an interest rate risk in the future associated with a future
obligation with respect to the corporate campus.
Concentration of Credit Risk. TSYS works to maintain a large and
diverse customer base across various industries to minimize the credit risk of
any one customer to TSYS' accounts receivable amounts. In addition, TSYS
performs ongoing credit evaluations of its customers' and suppliers' financial
condition. TSYS does, however, have two major customers that account for a large
portion of its revenues, which subject it to credit risk. See Note 11 of Notes
to Consolidated Financial Statements on pages F-26 and F-27 of the Financial
Appendix to TSYS' Proxy Statement in connection with its Annual Shareholders'
Meeting to be held on April 18, 2002 which is specifically incorporated herein
by reference for description of major customers. In late 2001, one of TSYS'
major customers made several announcements regarding concerns about its
financial status, related changes in management and the sale of a portion of its
portfolio. As a result of the announcements, TSYS management is actively
monitoring the client's status through frequent interaction.
Item 8. Financial Statements and Supplementary Data
The "Quarterly Financial Data, Stock Price, Dividend Information"
Section, which is set forth on page F-30, and the "Consolidated Balance Sheets,
Consolidated Statements of Income, Consolidated Statements of Cash Flows,
Consolidated Statements of Shareholders' Equity and Comprehensive Income, Notes
to Consolidated Financial Statements and Report of Independent
7
Auditors" Sections, which are set forth on pages F-14 through F-28 of the
Financial Appendix to TSYS' Proxy Statement in connection with its Annual
Shareholders' Meeting to be held on April 18, 2002 are specifically incorporated
herein by reference.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The "ELECTION OF DIRECTORS" Section which is set forth on pages 3 and
4, the "EXECUTIVE OFFICERS" Section which is set forth on pages 7 and 8, and the
"SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" Section which is set
forth on pages 28 and 29 of TSYS' Proxy Statement in connection with its Annual
Meeting of Shareholders to be held on April 18, 2002 are specifically
incorporated herein by reference.
Item 11. Executive Compensation
The "DIRECTORS' COMPENSATION" Section which is set forth on page 7, the
"EXECUTIVE COMPENSATION - Summary Compensation Table; Stock Option Exercises and
Grants; and Change in Control Arrangements" Sections which are set forth on
pages 19 through 21, and the "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION" Section which is set forth on pages 24 and 25 of TSYS' Proxy
Statement in connection with its Annual Meeting of Shareholders to be held on
April 18, 2002 are specifically incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The "STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS" Section which
is set forth on pages 8 and 9, the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T
AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Beneficial Ownership of TSYS Stock by
CB&T' Section which is set forth on pages 25 and 26, and the "RELATIONSHIPS
BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Synovus Stock
Ownership of Directors and Management" Section which is set forth on pages 26
and 27 of TSYS' Proxy Statement in connection with its Annual Meeting of
Shareholders to be held on April 18, 2002 are specifically incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
The "TRANSACTIONS WITH MANAGEMENT" Section which is set forth on page
25, the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS'
SUBSIDIARIES - Beneficial Ownership of TSYS Stock by CB&T" Section which
8
is set forth on pages 25 and 26, the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T
AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Interlocking Directorates of TSYS,
Synovus and CB&T" Section which is set forth on page 26, and the "RELATIONSHIPS
BETWEEN TSYS, SYNOVUS, CB&T, AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Bankcard
Data Processing Services Provided to CB&T and Certain of Synovus' Subsidiaries;
Other Agreements Between TSYS, Synovus, CB&T and Certain of Synovus'
Subsidiaries" Section which is set forth on pages 27 and 28 of TSYS' Proxy
Statement in connection with its Annual Meeting of Shareholders to be held on
April 18, 2002 are specifically incorporated herein by reference.
See also Note 2 of Notes to Consolidated Financial Statements on pages
F-19 and F-20 of the Financial Appendix to TSYS' Proxy Statement in connection
with its Annual Shareholders' Meeting to be held on April 18, 2002 which is
specifically incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The following Consolidated Financial Statements of TSYS are
specifically incorporated by reference from pages F-14 through F-28 of the
Financial Appendix to TSYS' Proxy Statement in connection with its Annual
Shareholders' Meeting to be held on April 18, 2002 to Item 8, Part II, Financial
Statements and Supplementary Data.
Consolidated Balance Sheets - December 31, 2001 and 2000.
Consolidated Statements of Income - Years Ended December 31,
2001, 2000 and 1999.
Consolidated Statements of Cash Flows - Years Ended December
31, 2001, 2000 and 1999.
Consolidated Statements of Shareholders' Equity and
Comprehensive Income - Years Ended December 31, 2001, 2000 and
1999.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
2. Index to Financial Statement Schedules
The following report of independent auditors and consolidated
financial statement schedule of Total System Services, Inc. are included:
9
Report of Independent Auditors.
Schedule II - Valuation and Qualifying Accounts - Years Ended
December 31, 2001, 2000 and 1999.
All other schedules are omitted because they are inapplicable
or the required information is included in the Notes to Consolidated Financial
Statements.
3. Exhibits
Exhibit
Number Description
----- -----------
3.1 Articles of Incorporation of Total System Services, Inc.
("TSYS"), as amended, incorporated by reference to Exhibit
4.1 of TSYS' Registration Statement on Form S-8 filed with
the Commission on April 18, 1997 (File No. 333-25401).
3.2 Bylaws of TSYS, as amended, incorporated by reference to
Exhibit 3.2 of TSYS' Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, as filed with the
Commission on March 16, 2000.
10. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.1 Director Stock Purchase Plan of TSYS, incorporated by
reference to Exhibit 10.1 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31, 1999, as filed
with the Commission on March 16, 2000.
10.2 Total System Services, Inc. 2002 Long-Term Incentive Plan.
10.3 Synovus Financial Corp. 2002 Long-Term Incentive Plan in
which executive officers of TSYS participate.
10.4 Synovus Financial Corp./Total System Services, Inc.
Deferred Compensation Plan.
10.5 Total System Services, Inc. 1992 Long-Term Incentive Plan,
which was renamed the Total System Services, Inc. 2000
Long-Term Incentive Plan, incorporated by reference to
Exhibit 10.5 of TSYS' Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, as filed with the
Commission on March 18, 1993.
10.6 Total System Services, Inc. Directors' Deferred
Compensation
10
Plan.
10.7 Wage Continuation Agreement of TSYS, incorporated by
reference to Exhibit 10.7 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31, 1992, as filed
with the Commission on March 18, 1993.
10.8 Incentive Bonus Plan of Synovus Financial Corp. in which
executive officers of TSYS participate, incorporated by
reference to Exhibit 10.8 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31, 1992, as filed
with the Commission on March 18, 1993.
10.9 Agreement in connection with use of aircraft, incorporated
by reference to Exhibit 10.9 of TSYS' Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, as
filed with the Commission on March 18, 1993.
10.10 Split Dollar Insurance Agreement of TSYS, incorporated by
reference to Exhibit 10.10 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31, 1993, as filed
with the Commission on March 22, 1994.
10.11 Synovus Financial Corp. 1994 Long-Term Incentive Plan in
which executive officers of TSYS participate, incorporated
by reference to Exhibit 10.11 of TSYS' Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, as
filed with the Commission on March 9, 1995.
10.12 Synovus Financial Corp. Executive Bonus Plan in which
executive officers of TSYS participate, incorporated by
reference to Exhibit 10.12 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31, 1995, as filed
with the Commission on March 19, 1996.
10.13 Change of Control Agreements for executive officers of
TSYS, incorporated by reference to Exhibit 10.13 of TSYS'
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as filed with the Commission on
March 19, 1996.
10.14 Stock Option Agreement of Samuel A. Nunn, incorporated by
reference to Exhibit 10.14 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31, 1996, as filed
with the Commission on March 20, 1997.
11
10.15 Synovus Financial Corp. Deferred Stock Option Plan in
which executive officers of TSYS participate.
10.16 Vital Processing Services, L.L.C. Restricted Unit
Agreement for executive officers of TSYS, incorporated by
reference to Exhibit 10.16 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31, 2000, as filed
with the Commission on March 21, 2001.
10.17 Lease Agreement between First Security Bank, National
Association, and TSYS incorporated by reference to Exhibit
10.15 of TSYS' Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, as filed with the Commission
on March 23, 1998.
10.18 Synovus Financial Corp. 2000 Long-Term Incentive Plan in
which executive officers of TSYS participate, incorporated
by reference to Exhibit 10.16 of TSYS' Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, as
filed with the Commission on March 16, 2000.
10.19 Split Dollar Insurance Agreement and related Executive
Benefit Substitution Agreement of Synovus Financial Corp.
in which executive officers of TSYS participate.
20.1 Proxy Statement, including Financial Appendix, for the
Annual Meeting of Shareholders of TSYS to be held on April
18, 2002, certain pages of which are specifically
incorporated herein by reference.
21.1 Subsidiaries of Total System Services, Inc.
23.1 Independent Auditors' Consent.
24.1 Powers of Attorney contained on the signature pages of the
2001 Annual Report on Form 10-K.
99.1 Annual Report on Form 11-K for the Total System Services,
Inc. Employee Stock Purchase Plan for the year ended
December 31, 2001 (to be filed as an amendment hereto
within 120 days of the end of the period covered by this
report.)
99.2 Annual Report on Form 11-K for the Total System Services,
Inc. Director Stock Purchase Plan for the year ended
December 31, 2001 (to be filed as an amendment hereto
within 120 days of the
12
end of the period covered by this report.)
(b) Reports on Form 8-K
On October 16, 2001, TSYS filed a Form 8-K with the Commission
in connection with the announcement of its earnings for the third quarter of
2001.
On October 22, 2001, TSYS filed a Form 8-K with the Commission
in connection with the announcement of a 10-year extension to its long-term
credit card processing agreement with Providian Financial Corporation.
filings\tsys\new10k.doc
13
Independent Auditors' Report
The Board of Directors
Total System Services, Inc.:
Under date of January 15, 2002, we reported on the consolidated balance sheets
of Total System Services, Inc. and subsidiaries as of December 31, 2001 and
2000, and the related consolidated statements of income, cash flows, and
shareholders' equity and comprehensive income for each of the years in the
three-year period ended December 31, 2001, as contained in the Total System
Services, Inc. 2001 Annual Report to Shareholders. These consolidated financial
statements and our report thereon are incorporated by reference in the Total
System Services, Inc. Annual Report on Form 10-K for the year 2001. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedule as listed
in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/KPMG LLP
KPMG LLP
Atlanta, Georgia
January 15, 2002
14
TOTAL SYSTEM SERVICES, INC.
Schedule II
Valuation and Qualifying Accounts
Additions
----------
Changes in
allowances, charges to
Balance at expenses and changes Balance at
beginning to other accounts -- Deductions-- end
of period describe describe of period
--------------------------------------------------------------------
Year ended December 31, 1999:
Provision for doubtful accounts and billing adjustments $ 1,860,592 3,553,157(987,053) $ 4,426,696
--------------------------------------------------------------------
$ 1,860,592 3,553,157 (987,053) $ 4,426,696
====================================================================
Transaction processing accruals $ 4,541,318 6,910,080(5,305,536) $ 6,145,862
--------------------------------------------------------------------
$ 4,541,318 6,910,080 (5,305,536) $ 6,145,862
====================================================================
Year ended December 31, 2000:
Provision for doubtful accounts and billing adjustments $ 4,426,696 1,825,486(407,704) $ 5,844,478
--------------------------------------------------------------------
$ 4,426,696 1,825,486 (407,704) $ 5,844,478
====================================================================
Transaction processing accruals $ 6,145,862 5,726,889(3,155,295) $ 8,717,456
--------------------------------------------------------------------
$ 6,145,862 5,726,889 (3,155,295) $ 8,717,456
====================================================================
Year ended December 31, 2001:
Provision for doubtful accounts and billing adjustments $ 5,844,478 569,433(1,043,071) $ 5,370,840
--------------------------------------------------------------------
$ 5,844,478 569,433 (1,043,071) $ 5,370,840
====================================================================
Transaction processing accruals $ 8,717,456 1,438,241(4,829,143) $ 5,326,554
--------------------------------------------------------------------
$ 8,717,456 1,438,241 (4,829,143) $ 5,326,554
====================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Amount reflected includes charges to bad debt expense which are classified in other operating expenses and the charges for
billing adjustments which are recorded against revenues.
Amount reflected is the change in transaction processing accruals reflected in other operating expenses.
Accounts deemed to be uncollectible and written off during the year as it relates to bad debts. Amounts that relate to
billing adjustments and transaction processing accruals reflect actual billing adjustments and processing errors charged
against the allowances.
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Total System Services, Inc. has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TOTAL SYSTEM SERVICES, INC.
(Registrant)
March 18, 2002 By: /s/Richard W. Ussery
--------------------------------------------
Richard W. Ussery,
Chairman and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James H. Blanchard, Richard W. Ussery and
Philip W. Tomlinson, and each of them, his true and lawful attorney(s)-in-fact
and agent(s), with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any or all
amendments to this report and to file the same, with all exhibits and schedules
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney(s)-in-fact and agent(s) full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney(s)-in-fact and agent(s), or their substitute(s), may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, this report has been signed by the following
persons in the capacities and on the dates indicated.
/s/James H. Blanchard Date: March 18, 2002
- ---------------------------------------------------
James H. Blanchard,
Director and Chairman of the
Executive Committee
/s/Richard W. Ussery Date: March 18, 2002
- ---------------------------------------------------
Richard W. Ussery,
Chairman of the Board
and Principal Executive Officer
/s/Philip W. Tomlinson Date: March 18, 2002
- ---------------------------------------------------
Philip W. Tomlinson,
President
and Director
/s/James B. Lipham Date: March 18, 2002
- ---------------------------------------------------
James B. Lipham,
Executive Vice President, Treasurer, Principal
Accounting and Financial Officer
/s/Richard Y. Bradley Date: March 18, 2002
- ---------------------------------------------------
Richard Y. Bradley,
Director
Date: March __, 2002
- ---------------------------------------------------
G. Wayne Clough,
Director
/s/Gardiner W. Garrard, Jr. Date: March 18, 2002
- ---------------------------------------------------
Gardiner W. Garrard, Jr.,
Director
Date: March __, 2002
- ---------------------------------------------------
Sidney E. Harris,
Director
/s/John P. Illges, III Date: March 18, 2002
- ---------------------------------------------------
John P. Illges, III,
Director
Date: March __, 2002
- ---------------------------------------------------
Alfred W. Jones III,
Director
/s/Mason H. Lampton Date: March 18, 2002
- ---------------------------------------------------
Mason H. Lampton,
Director
Date: March __, 2002
- ---------------------------------------------------
Samuel A. Nunn,
Director
/s/H. Lynn Page Date: March 18, 2002
- ---------------------------------------------------
H. Lynn Page,
Director
Date: March __, 2002
- ---------------------------------------------------
W. Walter Miller, Jr.,
Director
/s/William B. Turner Date: March 18, 2002
- ---------------------------------------------------
William B. Turner,
Director
/s/James D. Yancey Date: March 18, 2002
- ---------------------------------------------------
James D. Yancey,
Director
Date: March __, 2002
- ---------------------------------------------------
Rebecca K. Yarbrough,
Director