Exhibit 99.1

 

 

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 2014’s Fourth Quarter Adjusted EPS Grew 20.8%

And The Full Year Grew 13.2%

Provides 2015 Adjusted EPS Guidance Growth of 11-13%

COLUMBUS, Ga., Jan. 27, 2015 — TSYS (NYSE: TSS) today reported results for the fourth quarter and full year of 2014.

“We finished 2014 on a high note. Organic revenue grew 5.8%, year over year, with total revenues growing 18.5% and revenues before reimbursable items up 20.2%,” said M. Troy Woods, president and chief executive officer of TSYS.

Highlights for the fourth quarter of 2014 include:

 

•

Adjusted earnings per share (EPS) from continuing operations were $0.58, an increase of 20.8%. On a GAAP basis, basic EPS from continuing operations were $0.45, an increase of 28.8%.

 

•

Income from continuing operations attributable to TSYS’ shareholders was $83.2 million, an increase of 25.9%.

 

•

Adjusted EBITDA was $193.7 million, an increase of 7.0%.

 

•

Total revenues for the quarter were $635.1 million, an increase of 8.9%. Revenues before reimbursable items were $569.3 million, an increase of 8.4%.

 

•

Adjusted operating margin was 27.2%. GAAP operating margin was 19.3%.

 

•

TSYS repurchased 1.5 million shares during the quarter.

Highlights for the full year 2014 results include:

 

•

Adjusted EPS from continuing operations were $1.96, an increase of 13.2%. On a GAAP basis, basic EPS from continuing operations were $1.48, an increase of 12.8%.

 

•

Income from continuing operations attributable to TSYS’ shareholders was $275.2 million, an increase of 11.5%.

 

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TSYS Reports 2014’s Fourth Quarter Adjusted EPS Grew 20.8%

And The Full Year Grew 13.2%

 

•

Adjusted EBITDA was $712.3 million, an increase of 14.1%.

 

•

Total revenues were $2.4 billion, an increase of 18.5%. Revenues before reimbursable items were $2.2 billion, an increase of 20.2%.

 

•

Adjusted operating margin was 25.7%. GAAP operating margin was 17.6%.

 

•

TSYS repurchased 5.2 million shares for the year.

“With the purchase of 5.2 million shares of our stock during the year and our annual dividend of $0.40 per share, we deployed over 94% of available free cash flow to our shareholders in 2014. Including our purchase of 3.1 million shares in December of 2013, we repurchased 8.3 million shares of our stock deploying $262.9 million of capital during that 13 month period,” said Woods.

TSYS also announced that its Board of Directors has approved a new share repurchase plan that authorizes the repurchase of up to 20 million shares of TSYS stock, which replaces its existing share repurchase plan. The shares may be repurchased from time to time in the open market or in privately negotiated transactions at prices TSYS deems appropriate, subject to market conditions, business opportunities and other factors. This authorization has no expiration date and may be suspended or terminated at any time.

2015 Financial Outlook

“Our guidance for 2015 is included in the table below and we expect another year of strong growth in revenues and adjusted EPS. The results for 2014 and our guidance for 2015 reflect our focus on diversification, growth and the exceptional performance of our TSYS team,” said Woods.

 

		2015 Financial Outlook
		Range (in millions, except per share amounts)												Percent Change
Total revenues		$	2,620				to			$	2,660				7	%			to				9	%
Revenues before reimbursable items		$	2,370				to			$	2,410				8	%			to				10	%
Adjusted EPS attributable to TSYS common shareholders from continuing operations*		$	2.17				to			$	2.21				11	%			to				13	%

 

*	Average Basic Weighted Shares 186

 

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TSYS Reports 2014’s Fourth Quarter Adjusted EPS Grew 20.8%

And The Full Year Grew 13.2%

 

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, January 27. 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 13 to 16 of this release.

About TSYS

At TSYS^® (NYSE: TSS), we believe payments should revolve around people, not the other way around. We call this belief “People-Centered Payments^®.” By putting people at the center of every decision we make, TSYS supports financial institutions, businesses and governments in more than 80 countries. Through NetSpend^®, A TSYS Company, we empower consumers with the convenience, security, and freedom to be self-banked. TSYS offers issuer services and merchant payment acceptance for credit, debit, prepaid, healthcare and business solutions.

TSYS’ headquarters are located in Columbus, Ga., U.S.A., with local offices spread across the Americas, EMEA and Asia-Pacific. TSYS is a member of The Civic 50 and was named one of the 2013 World’s Most Ethical Companies by Ethisphere magazine. TSYS routinely posts all important information on its website. For more, please visit us at www.tsys.com.

 

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TSYS Reports 2014’s Fourth Quarter Adjusted EPS Grew 20.8%

And The Full Year Grew 13.2%

 

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 forward-looking statements include, among others, statements regarding TSYS’ expectation that it will have another year of strong growth in revenues and adjusted EPS and its earnings guidance for 2015 total revenues, revenues before reimbursable items and adjusted EPS, and the assumptions underlying such statements. These statements are based on the current beliefs and expectations of TSYS’ management, are based on management’s assumptions and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results 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 material breach of security of any of TSYS’ systems; TSYS’ ability to integrate acquisitions and achieve the anticipated growth opportunities and other benefits of the acquisitions; the effect of current domestic and worldwide economic conditions; risks associated with foreign operations, including adverse developments with respect to foreign currency exchange rates; expenses are incurred associated with the signing of a significant client; TSYS does not convert clients’ portfolios as scheduled; the deconversion of a significant client; changes occur in laws, rules, regulations, credit card association rules, prepaid industry rules or other industry standards affecting TSYS and our clients that may result in costly new compliance burdens on TSYS and our clients and lead to a decrease in the volume and/or number of transactions processed or limit the types and amounts of fees that can be charged to customers; the costs and effects of litigation, investigations or similar matters or adverse facts and developments relating thereto; adverse developments with respect to the payment card industry in general, including a decline in the use of cards as a payment mechanism; and growth rates of TSYS’ existing clients are lower than anticipated or attrition rates of existing clients are higher than anticipated. Additional risks and other factors that could cause actual results or events to differ materially from those contemplated in this release can be found in TSYS’ filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise.

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TSYS Announces Fourth Quarter 2014 Earnings

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TSYS

Financial Highlights

(unaudited)

(in thousands, except per share data)

 

		Three Months Ended												Twelve Months Ended
		December 31,												December 31,
										Percent												Percent
		2014				2013				Change				2014				2013				Change
Total revenues		$	635,104				583,103				8.9	%		$	2,446,877				2,064,305				18.5	%
Cost of services			422,129				386,295				9.3				1,668,892				1,369,438				21.9
Selling, general and administrative expenses			90,199				85,739				5.2				343,128				298,147				15.1
Merger and acquisition expenses			3				2,211				(99.9	)			3,217				14,220				(77.4	)
Operating income			122,773				108,858				12.8				431,640				382,500				12.8
Nonoperating income (expenses)			968				(718	)			nm				(763	)			(804	)			5.1
Merger and acquisition expenses—bridge loan facility & other financing			(9,484	)			(9,754	)			2.8				(37,948	)			(29,220	)			(29.9	)
Income before income taxes, noncontrolling interests and equity in income of equity investments			114,257				98,386				16.1				392,929				352,476				11.5
Income taxes			35,428				33,435				6.0				129,761				110,981				16.9
Income before noncontrolling interests and equity in income of equity investments			78,829				64,951				21.4				263,168				241,495				9.0
Equity in income of equity investments, net of tax			5,751				3,691				55.8				17,583				13,047				34.8
Income from continuing operations, net of tax			84,580				68,642				23.2				280,751				254,542				10.3
(Loss) Gain from discontinued operations, net of tax			(3,338	)			751				nm				48,655				2,055				nm
Net income			81,242				69,393				17.1				329,406				256,597				28.4
Net income attributable to noncontrolling interests			(1,382	)			(3,738	)			63.0				(6,534	)			(11,847	)			44.8
Net income attributable to TSYS common shareholders		$	79,860				65,655				21.6	%		$	322,872				244,750				31.9	%
Basic earnings per share(EPS):
Income from continuing operations to TSYS common shareholders*		$	0.45				0.35				28.8	%		$	1.48				1.31				12.8	%
(Loss) Gain from discontinued operations to TSYS common shareholders*			(0.02	)			(0.00	)			nm				0.26				(0.01	)			nm
Basic EPS		$	0.43				0.35				24.4	%		$	1.73				1.30				33.5	%
Diluted EPS
Income from continuing operations to TSYS common shareholders*		$	0.44				0.34				28.9	%		$	1.46				1.30				12.4	%
(Loss) Gain from discontinued operations to TSYS common shareholders*			(0.02	)			(0.00	)			nm				0.25				(0.01	)			nm
Diluted EPS		$	0.43				0.34				24.5	%		$	1.71				1.29				33.0	%
Dividends declared per share		$	0.10				0.10							$	0.40				0.40
Amounts attributable to TSYS common shareholders:
Income from continuing operations, net of tax		$	83,198				66,058				25.9	%		$	275,216				246,893				11.5	%
(Loss) Gain from discontinued operations, net of tax			(3,338	)			(403	)			nm				47,656				(2,143	)			nm
Net income		$	79,860				65,655				21.6	%		$	322,872				244,750				31.9	%
Non-GAAP measures:
Adjusted EPS from continuing operations		$	0.58				0.48				20.8	%		$	1.96				1.73				13.2	%
Adjusted EBITDA		$	193,738				181,097				7.0	%		$	712,267				624,093				14.1	%

nm = not meaningful

*	EPS amounts may not total due to rounding.

 

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TSYS Announces Fourth Quarter 2014 Earnings

Page 6 of 16

 

TSYS

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)

 

		Three Months Ended December 31,								Twelve Months Ended December 31,
		2014				2013				2014				2013
Net income		$	81,242				69,393			$	329,406				256,597
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment as a result of discontinued operations			—				—				3,514				—
Foreign currency translation adjustments			(13,410	)			2,407				(19,531	)			(4,081	)
Postretirement healthcare plan adjustments			147				473				(668	)			1,895
Unrealized (loss) gain on available-for-sale securities			(28	)			294				589				1,773
Other comprehensive income (loss)			(13,291	)			3,174				(16,096	)			(413	)
Comprehensive income			67,951				72,567				313,310				256,184
Comprehensive income attributable to noncontrolling interests			1,063				2,943				6,113				9,092
Comprehensive income attributable to TSYS common shareholders		$	66,888				69,624			$	307,197				247,092

 

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TSYS Announces Fourth Quarter 2014 Earnings

Page 7 of 16

 

TSYS

Earnings Per Share

(unaudited)

(in thousands, except per share data)

 

		Three Months Ended								Three Months Ended								Twelve Months Ended								Twelve Months Ended
		December 31, 2014								December 31, 2013								December 31, 2014								December 31, 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		$	79,860								65,655							$	322,872								244,750
Less income allocated to nonvested awards			(831	)			831				(643	)			643				(3,308	)			3,308				(1,595	)			1,595
Net income allocated to common stock for EPS calculation (a)
		$	79,029				831				65,012				643			$	319,564				3,308				243,155				1,595
Average common shares outstanding (b)			183,276				1,945				187,572				1,874				184,297				1,925				187,145				1,246
Average common shares and participating securities			185,221								189,446								186,222								188,391
Basic earnings per share (a)/(b)		$	0.43				0.43				0.35				0.34			$	1.73				1.72				1.30				1.28
Diluted earnings per share:
Net income attributable to TSYS common shareholders		$	79,860								65,655							$	322,872								244,750
Less income allocated to nonvested awards			(824	)			824				(638	)			638				(3,278	)			3,278				(1,585	)			1,585
Net income allocated to common stock for EPS calculation (c)
		$	79,036				824				65,017				638			$	319,594				3,278				243,165				1,585
Average common shares outstanding			183,276				1,945				187,572				1,874				184,297				1,925				187,145				1,246
Increase due to assumed issuance of shares related to common equivalent shares outstanding			1,964								2,176								2,205								1,648
Average common and common equivalent shares outstanding (d)			185,240				1,945				189,748				1,874				186,502				1,925				188,793				1,246
Average common and common equivalent shares and participating securities			187,185								191,622								188,427								190,039
Diluted earnings per share (c)/(d)		$	0.43				0.42				0.34				0.34			$	1.71				1.70				1.29				1.27

 

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TSYS Announces Fourth Quarter 2014 Earnings

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TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

		Three Months Ended December 31,																Twelve Months Ended December 31,
										Change																Change
		2014				2013				$				%				2014				2013				$				%
Revenues before reimbursable items:
North America Services		$	255,539				223,266				32,273				14.5	%		$	954,082				860,645				93,437				10.9	%
International Services			92,895				90,595				2,300				2.5				341,785				321,484				20,301				6.3
Merchant Services			107,677				110,375				(2,698	)			(2.4	)			435,649				446,277				(10,628	)			(2.4	)
NetSpend			119,165				104,144				15,021				14.4				482,686				207,851				274,835				nm
Intersegment revenues			(5,975	)			(3,121	)			(2,854	)			(91.4	)			(21,224	)			(12,549	)			(8,675	)			(69.1	)
Revenues before reimbursable items from external customers		$	569,301				525,259				44,042				8.4	%		$	2,192,978				1,823,708				369,270				20.2	%
Total revenues:
North America Services		$	299,429				259,067				40,362				15.6	%		$	1,117,764				1,000,073				117,691				11.8	%
International Services			98,650				96,129				2,521				2.6				363,359				341,549				21,810				6.4
Merchant Services			125,296				128,075				(2,779	)			(2.2	)			510,120				533,050				(22,930	)			(4.3	)
NetSpend			119,165				104,144				15,021				14.4				482,686				207,851				274,835				nm
Intersegment revenues			(7,436	)			(4,312	)			(3,124	)			(72.4	)			(27,052	)			(18,218	)			(8,834	)			(48.5	)
Revenues from external customers		$	635,104				583,103				52,001				8.9	%		$	2,446,877				2,064,305				382,572				18.5	%
Depreciation and amortization:
North America Services		$	23,136				19,420				3,716				19.1	%		$	86,513				74,480				12,033				16.2	%
International Services			9,733				11,974				(2,241	)			(18.7	)			38,909				41,708				(2,799	)			(6.7	)
Merchant Services			3,980				3,004				976				32.5				14,571				12,034				2,537				21.1
NetSpend			1,730				1,651				79				4.8				7,509				3,121				4,388				nm
Segment depreciation and amortization			38,579				36,049				2,530				7.0				147,502				131,343				16,159				12.3
Acquisition intangible amortization			24,166				24,751				(585	)			(2.4	)			96,971				65,893				31,078				47.2
Corporate admin and other			446				468				(22	)			(4.7	)			2,147				1,790				357				19.9
Total depreciation and amortization		$	63,191				61,268				1,923				3.1	%		$	246,620				199,026				47,594				23.9	%
Adjusted segment operating income:
North America Services		$	99,620				87,110				12,510				14.4	%		$	351,512				321,619				29,893				9.3	%
International Services			22,849				17,986				4,863				27.0				55,123				42,068				13,055				31.0
Merchant Services			31,399				35,952				(4,553	)			(12.7	)			134,872				155,643				(20,771	)			(13.3	)
NetSpend			32,742				31,737				1,005				3.2				128,285				66,353				61,932				93.3
Total adjusted segment operating income			186,610				172,785				13,825				8.0				669,792				585,683				84,109				14.4
Acquisition intangible amorization			(24,166	)			(24,751	)			585				2.4				(96,971	)			(65,893	)			(31,078	)			(47.2	)
NetSpend M&A operating expenses			(3	)			(2,211	)			2,208				99.9				(3,217	)			(14,220	)			11,003				77.4
Share-based compensation			(7,771	)			(9,345	)			1,574				16.8				(30,790	)			(28,933	)			(1,857	)			(6.4	)
Corporate admin and other			(31,897	)			(27,620	)			(4,277	)			(15.5	)			(107,175	)			(94,137	)			(13,038	)			(13.9	)
Operating income		$	122,773				108,858				13,915				12.8	%		$	431,639				382,500				49,139				12.8	%
Other:
Reimbursable items:
North America Services		$	43,890				35,801				8,089				22.6	%		$	163,682				139,428				24,254				17.4	%
International Services			5,755				5,534				221				4.0				21,574				20,065				1,509				7.5
Merchant Services			17,619				17,700				(81	)			(0.5	)			74,471				86,773				(12,302	)			(14.2	)
NetSpend			—				—				—				na				—				—				—				na
Intersegment revenues			(1,461	)			(1,191	)			(270	)			(22.7	)			(5,828	)			(5,669	)			(159	)			(2.8	)
Reimbursable items		$	65,803				57,844				7,959				13.8	%		$	253,899				240,597				13,302				5.5	%

 

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TSYS Announces Fourth Quarter 2014 Earnings

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TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

Other:
Volumes:																		At								Change
FTEs (full-time equivalents)																		12/31/2014				12/31/2013				#				%
North America Services																			4,724				4,484				240				5.4	%
International Services																			2,403				2,412				(9	)			(0.4	)
Merchant Services																			1,590				1,598				(8	)			(0.5	)
NetSpend																			552				470				82				17.4
Corporate Admin and Other																			583				547				36				6.6
FTEs—Continuing Operations																			9,852				9,511				341				3.6	%
Discontinued Operations																			—				84				(84	)			na
FTEs																			9,852				9,595				257				2.7	%
																		At								Change
Total assets (in thousands)																		12/31/2014				12/31/2013				$				%
North America Services																		$	3,326,730				3,215,333				111,397				3.5	%
International Services																			356,590				417,379				(60,789	)			(14.6	)
Merchant Services																			695,744				676,592				19,152				2.8
NetSpend																			1,555,273				1,596,150				(40,877	)			(2.6	)
Intersegment assets																			(2,202,283	)			(2,218,886	)			16,603				0.7
Total assets																		$	3,732,054				3,686,568				45,486				1.2	%
		Three Months Ended December 31,																Twelve Months Ended December 31,
										Change																Change
		2014				2013				Inc(Dec)				%				2014				2013				Inc(Dec)				%
North America Segment:
Accounts on File (AOF) (in millions)																			550.0				481.9				68.2				14.1	%
Transactions (in millions)			2,980.0				2,488.6				491.4				19.8	%			10,838.0				9,132.8				1,705.1				18.7	%
International Segment:
AOF (in millions)																			66.6				59.1				7.5				12.7	%
Transactions (in millions)			618.1				555.6				62.5				11.3	%			2,268.4				2,007.4				261.0				13.0	%
Merchant Segment:
Point-of-sale Transactions (in millions)			991.0				1,034.6				(43.6	)			(4.2	)%			4,052.7				4,359.8				(307.1	)			(7.0	)%
Dollar sales volume (in millions)		$	12,392.6			$	12,021.0				371.6				3.1	%		$	46,846.4			$	44,144.0			$	2,702.4				6.1	%
NetSpend Segment:
Gross Dollar Volume (in millions)		$	4,691.5			$	3,967.6			$	723.9				18.2	%		$	20,296.0			$	17,075.1			$	3,220.9				18.9	%
90-Day Active Cards (in thousands)																			1,610.2				1,321.1				289.1				21.9	%
Direct Deposit 90-Day Active Cards (in thousands)																			3,215.0				2,835.1				379.9				13.4	%
% of 90-Day Active Cards with Direct Deposit																			50.1	%			46.6	%

 

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TSYS

Balance Sheet

(unaudited)

(in thousands)

 

		Dec 31, 2014				Dec 31, 2013
Assets
Current assets:
Cash and cash equivalents		$	289,183				247,700
Accounts receivable, net			283,204				255,773
Deferred income tax assets			17,095				14,158
Prepaid expenses and other current assets			95,758				95,109
Current assets of discontinued operations			4,003				41,193
Total current assets			689,243				653,933
Goodwill			1,546,300				1,541,574
Other intangible assets, net			404,107				481,419
Computer software, net			366,148				363,880
Property and equipment, net			290,585				259,968
Contract acquisition costs, net			236,305				184,828
Equity investments, net			100,468				94,133
Deferred income tax assets, net			7,882				3,972
Other assets			91,016				87,146
Long-term assets of discontinued operations			—				15,715
Total assets		$	3,732,054				3,686,568
Liabilities
Current liabilities:
Accounts payable		$	48,793				33,651
Current portion of borrowings			43,784				34,257
Accrued salaries and employee benefits			38,001				38,339
Current portion of obligations under capital leases			7,127				22,662
Other current liabilities			154,805				159,170
Current liabilities of discontinued operations			4,003				9,136
Total current liabilities			296,513				297,215
Long-term borrowings, excluding current portion			1,398,132				1,428,251
Deferred income tax liabilities			205,868				228,727
Obligations under capital leases, excluding current portion			6,974				7,500
Other long-term liabilities			98,006				81,600
Long-term liabilities of discontinued operations			—				1,197
Total liabilities			2,005,493				2,044,490
Redeemable noncontrolling interest			22,492				39,652
Equity
Shareholders’ equity:
Common stock			20,278				20,279
Additional paid-in capital			175,695				165,841
Accumulated other comprehensive income (loss), net			(11,926	)			3,749
Treasury stock			(453,230	)			(326,996	)
Retained earnings			1,966,370				1,718,204
Total shareholders’ equity			1,697,187				1,581,077
Noncontrolling interests in consolidated subsidiaries			6,882				21,349
Total equity			1,704,069				1,602,426
Total liabilities and equity		$	3,732,054				3,686,568

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TSYS

Cash Flow

(unaudited)

(in thousands)

 

		Twelve Months Ended December 31,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	329,406				256,597
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of equity investments			(17,583	)			(13,047	)
Dividends received from equity investments			9,188				8,595
Loss on foreign currency			999				1,027
Depreciation and amortization			248,018				205,351
Amortization of debt issuance costs			1,817				7,269
Amortization of bond discount			383				225
Changes in fair value of private equity investments			(793	)			(966	)
Share-based compensation			30,790				28,933
Excess tax benefit from share-based compensation			(7,185	)			(3,528	)
Provisions for bad debt expense and billing adjustments			2,823				2,000
Charges for transaction processing provisions			9,468				7,458
Provision for fraud and other losses			38,381				11,912
Deferred income tax expense (benefit)			(13,274	)			26,945
Loss on disposal of equipment, net			(293	)			(79	)
Gain on disposal of subsidiaries			(86,961	)			—
Changes in operating assets and liabilities:
Accounts receivable			(33,406	)			(8,667	)
Prepaid expenses, other current assets and other long-term assets			(10,525	)			(571	)
Accounts payable			8,765				(52,042	)
Accrued salaries and employee benefits			414				(403	)
Other current liabilities and other long-term liabilities			50,661				(24,611	)
Net cash provided by operating activities			561,093				452,398
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net			(75,913	)			(40,598	)
Additions to licensed computer software from vendors			(29,638	)			(63,635	)
Additions to internally developed computer software			(41,501	)			(33,600	)
Proceeds from insurance recovery for loss on disposal			6,212				—
Proceeds from dispositions, net of expenses paid and cash disposed			44,979				—
Cash used in acquisitions, net of cash acquired			(38,584	)			(1,314,660	)
Purchase of private equity investments			(3,291	)			(1,378	)
Additions to contract acquisition costs			(88,871	)			(55,965	)
Net cash used in investing activities			(226,607	)			(1,509,836	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings and capital lease obligations			(69,940	)			(166,805	)
Proceeds from borrowings of long-term borrowings			1,396				1,395,661
Proceeds from exercise of stock options			34,869				40,691
Excess tax benefit from share-based compensation			7,185				3,528
Repurchase of common stock under plans and tax withholding			(170,515	)			(103,857	)
Debt issuance costs			—				(13,573	)
Purchase of noncontrolling interests			(37,500	)			—
Subsidiary dividends paid to noncontrolling shareholders			(7,172	)			(7,321	)
Dividends paid on common stock			(74,796	)			(56,510	)
Net cash (used in) provided by financing activities			(316,473	)			1,091,814
CASH AND CASH EQUIVALENTS:
Effect of exchange rate changes on cash and cash equivalents			(7,060	)			(3,758	)
Net increase in cash and cash equivalents			10,953				30,618
Cash and cash equivalents at beginning of period			278,230				247,612
Cash and cash equivalents at end of period			289,183				278,230
Less cash and cash equivalents of discontinued operations at end of period			—				(30,530	)
Cash and cash equivalents of continuing operations at end of period		$	289,183				247,700

 

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Supplemental Information:

 

		Total Accounts on File
(in millions)		December 2014				December 2013				% Change
Consumer Credit			270.0				228.9				18.0
Retail			28.4				27.8				2.2
Total Consumer			298.4				256.7				16.3
Commercial			41.6				39.9				4.2
Other			22.4				18.9				18.7
Subtotal			362.4				315.5				14.9
Prepaid/Stored Value			127.3				118.0				7.9
Government Services			67.4				62.2				8.2
Commercial Card Single Use			59.6				45.3				31.5
Total AOF			616.7				541.0				14.0

 

Growth in Accounts on File (in millions):
		December 2013 to December 2014		December 2012 to December 2013
Beginning balance		541.0			479.3
Change in accounts on file due to:
Internal growth of existing clients		40.0			37.6
New clients		75.3			61.2
Purges/Sales		(39.0)			(36.4	)
Deconversions		(0.6)			(0.7	)
Ending balance		616.7			541.0

 

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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 fourth quarter 2014 financial results using the previous year’s foreign currency exchange rates. On a full year constant currency basis, TSYS’ total revenues grew 17.8% as compared to a reported GAAP increase of 18.5%.

The schedule below also provides a reconciliation of basic EPS, adjusted for the after-tax impact of acquisition intangible amortization, share-based compensation and merger and acquisition costs, to adjusted EPS.

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

The schedule also provides a reconciliation of net income, adjusted for income from discontinued operations, equity in income of equity investments, income taxes, nonoperating expense, depreciation and amortization, share-based compensation, and merger and acquisition expenses, to adjusted EBITDA.

TSYS believes that non-GAAP financial measures are important to enable investors to understand and evaluate its ongoing operating results. Accordingly, TSYS includes non-GAAP financial measures when reporting its financial results to shareholders and potential investors in order to provide them with an additional tool to evaluate TSYS’ ongoing business operations. TSYS believes that the non-GAAP financial measures are representative of comparative financial performance that reflects the economic substance of TSYS’ current and ongoing business operations.

Although non-GAAP financial measures are often used to measure TSYS’ operating results and assess its financial performance, they are not necessarily comparable to similarly titled captions of other companies due to potential inconsistencies in the method of calculation.

TSYS believes that its use of non-GAAP financial measures provides investors with the same key financial performance indicators that are utilized by management to assess TSYS’ operating results, evaluate the business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of non-GAAP financial measures to give shareholders and potential investors an opportunity to see TSYS as viewed by management, to assess TSYS with some of the same tools that management utilizes internally and to be able to compare such information with prior periods. TSYS believes that the presentation of GAAP financial measures alone would not provide its shareholders and potential investors with the ability to appropriately analyze its ongoing operational results, and therefore expected future results. TSYS therefore believes that inclusion of non-GAAP financial measures provides investors with additional information to help them better understand its financial statements just as management utilizes these non-GAAP financial measures to better understand the business, manage budgets and allocate resources.

 

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Reconciliation of GAAP to Non-GAAP

Constant Currency Comparison

(unaudited)

(in thousands)

 

		Three Months Ended December 31,												Twelve Months Ended December 31,
		2014				2013				Percent Change				2014				2013				Percent Change
Consolidated
Constant currency (1)		$	638,111				583,103				9.4	%		$	2,431,947				2,064,305				17.8	%
Foreign currency (2)			(3,007	)			—								14,930				—
Total revenues		$	635,104				583,103				8.9	%		$	2,446,877				2,064,305				18.5	%
Constant currency (1)		$	572,166				525,259				8.9	%		$	2,178,951				1,823,708				19.5	%
Foreign currency (2)			(2,865	)			—								14,027				—
Total revenues before reimbursable items		$	569,301				525,259				8.4	%		$	2,192,978				1,823,708				20.2	%
Constant currency (1)		$	122,786				108,858				12.8	%		$	422,646				382,500				10.5	%
Foreign currency (2)			(13	)			—								8,994				—
Operating income		$	122,773				108,858				12.8	%		$	431,640				382,500				12.8	%
International Services
Constant currency (1)		$	101,655				96,129				5.7	%		$	348,595				341,549				2.1	%
Foreign currency (2)			(3,005	)			—								14,764				—
Total revenues		$	98,650				96,129				2.6	%		$	363,359				341,549				6.4	%

 

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

(2)	Reflects the impact of calculated changes in foreign currency rates from the comparable period.

Revenues Before Reimbursable Items

(unaudited)

(in thousands)

 

		Three Months Ended December 31,												Twelve Months Ended December 31,
		2014				2013				Percent Change				2014				2013				Percent Change
Total revenues		$	635,104				583,103				8.9	%		$	2,446,877				2,064,305				18.5	%
Reimbursable items			65,803				57,844				13.8				253,899				240,597				5.5
Revenues before reimbursable items		$	569,301				525,259				8.4	%		$	2,192,978				1,823,708				20.2	%

 

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Reconciliation of GAAP to Non-GAAP

Adjusted Earnings per Share

(unaudited)

(in thousands, except per share data)

 

		Three Months Ended December 31,												Twelve Months Ended December 31,
		2014				2013				Percent Change				2014				2013				Percent Change
Income from continuing operations attributable to TSYS common shareholders		$	83,198				66,058				25.9	%		$	275,216				246,893				11.5	%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes		$	17,747				16,609				6.9	%			65,127				43,743				48.9	%
Add: Share-based compensation, net of taxes			5,777				6,405				(9.8	)			20,944				19,830				5.6
Add: NetSpend M&A expenses, net of taxes*			3				1,318				(99.8	)			3,115				15,251				(79.6	)
Adjusted earnings		$	106,725				90,390				18.1	%		$	364,402				325,717				11.9	%
Basic EPS—Income from continuing operations attributable to TSYS common shareholders
As reported (GAAP)		$	0.45				0.35				28.8	%		$	1.48				1.31				12.8	%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes			0.10				0.09				9.2				0.35				0.23				50.6
Add: Share-based compensation, net of taxes			0.03				0.03				(7.7	)			0.11				0.11				6.8
Add: NetSpend M&A expenses, net of taxes*			—				0.01				(100.0	)			0.02				0.08				(79.4	)
Adjusted EPS **		$	0.58				0.48				20.8	%		$	1.96				1.73				13.2	%
Average common shares and participating securities			185,221				189,447								186,222				188,389

 

*	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 December 31,												Twelve Months Ended December 31,
		2014				2013				Percent Change				2014				2013				Percent Change
Net income		$	81,242				69,393				17.1	%		$	329,406				256,597				28.4	%
Adjust for:
Deduct: Loss (Income) from discontinued operations			3,338				(751	)			nm				(48,655	)			(2,055	)			nm
Deduct: Equity in income of equity investments			(5,751	)			(3,691	)			(55.8	)			(17,583	)			(13,047	)			(34.8	)
Add: Income taxes			35,428				33,435				6.0				129,761				110,981				16.9
Add: Nonoperating expense			8,516				10,472				(18.7	)			38,711				30,024				28.9
Add: Depreciation and amortization			63,191				61,268				3.1				246,620				199,026				23.9
EBITDA		$	185,964				170,126				9.3	%		$	678,260				581,526				16.6	%
Adjust for:
Add: Share-based compensation			7,771				9,345				(16.8	)			30,790				28,933				6.4
Add: NetSpend M&A operating expenses*			3				1,626				(99.8	)			3,217				13,634				(76.4	)
Adjusted EBITDA		$	193,738				181,097				7.0	%		$	712,267				624,093				14.1	%

 

nm	= not meaningful

*	Excludes share-based compensation

 

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Reconciliation of GAAP to Non-GAAP

Segment Operating Margin and Consolidated Adjusted Operating Margin

(unaudited)

(in thousands)

 

		Three Months Ended December 31, 2014												Three Months Ended December 31, 2013
		Adjusted Segment Operating Income				Revenues before Reimbursable Items				Adjusted Operating Margin				Adjusted Segment Operating Income				Revenues before Reimbursable Items				Adjusted Operating Margin
North America Services		$	99,620				255,539				38.98	%		$	87,110				223,266				39.02	%
International Services			22,849				92,895				24.60				17,986				90,595				19.85
Merchant Services			31,399				107,677				29.16				35,952				110,375				32.57
NetSpend			32,742				119,165				27.48				31,737				104,144				30.47
Intersegment			—				(5,975	)							—				(3,121	)
Corporate admin and other			(31,897	)			—								(27,620	)			—
Adjusted operating margin		$	154,713				569,301				27.18	%		$	145,165				525,259				27.64	%
Acquisition intangible amortization			(24,166	)											(24,751	)
NetSpend M&A operating expenses			(3	)											(2,211	)
Share-based compensation			(7,771	)											(9,345	)
Operating income and margin*		$	122,773				569,301				21.57	%		$	108,858				525,259				20.72	%
Reimbursable items							65,803												57,844
Operating margin (US GAAP)		$	122,773				635,104				19.33	%		$	108,858				583,103				18.67	%
		Twelve Months Ended December 31, 2014												Twelve Months Ended December 31, 2013
		Adjusted Segment Operating Income				Revenues before Reimbursable Items				Adjusted Operating Margin				Adjusted Segment Operating Income				Revenues before Reimbursable Items				Adjusted Operating Margin
North America Services		$	351,512				954,082				36.84	%		$	321,619				860,645				37.37	%
International Services			55,123				341,785				16.13				42,068				321,484				13.09
Merchant Services			134,872				435,649				30.96				155,643				446,277				34.88
NetSpend			128,285				482,686				26.58				66,353				207,851				31.92
Intersegment			—				(21,224	)							—				(12,549	)
Corporate admin and other			(107,175	)			—								(94,137	)			—
Adjusted operating margin		$	562,617				2,192,978				25.66	%		$	491,546				1,823,708				26.95	%
Acquisition intangible amortization			(96,971	)											(65,893	)
NetSpend M&A operating expenses			(3,217	)											(14,220	)
Share-based compensation			(30,790	)											(28,933	)
Operating income and margin*		$	431,639				2,192,978				19.68	%		$	382,500				1,823,708				20.97	%
Reimbursable items							253,899												240,597
Operating margin (US GAAP)		$	431,639				2,446,877				17.64	%		$	382,500				2,064,305				18.53	%

 

*	Operating margin on revenue before reimbursable items

 

 

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