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TSYS Reports 2014's Fourth Quarter Adjusted EPS Grew 20.8% And The Full Year Grew 13.2%
[January 27, 2015]

TSYS Reports 2014's Fourth Quarter Adjusted EPS Grew 20.8% And The Full Year Grew 13.2%


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%.
  • 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

 

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.

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.

         
                                 
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.

 

             
                           
TSYS
Consolidated Statements of Comprehensive Income
(unaudited)
(in thousands)
 
 
Three Months Ended Twelve Months Ended
December 31, 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  
 
                   
                                         
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
 
                                         
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 amortization

(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 %
 
                                       
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 %
 

 

   
           
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  
 

 

   
           
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  
 

 

                 

 

 
 
 
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        
 
   
 
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.
 
           
 
Reconciliation of GAAP to Non-GAAP
                                   
Constant Currency Comparison
(unaudited)
(in thousands)
 
Three Months Ended December 31, Twelve Months Ended December 31,
Percent Percent
2014 2013 Change 2014 2013 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,
Percent Percent
2014 2013 Change 2014 2013 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 %
 

 

             
 
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,  
Percent Percent
Income from continuing operations attributable to 2014   2013   Change 2014   2013   Change
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   189,446   186,222     188,391  
 
* 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,  
Percent Percent
2014   2013   Change 2014   2013   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
 

 

         
 
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 Revenues before Adjusted Adjusted Segment Revenues before Adjusted
Operating Income   Reimbursable Items   Operating Margin Operating Income   Reimbursable Items   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 Revenues before Adjusted Adjusted Segment Revenues before Adjusted
Operating Income   Reimbursable Items   Operating Margin Operating Income Reimbursable Items 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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