TSYS Reports First Quarter 2014 Total Revenues Increased 32.1%

TSYS (NYSE: TSS) today reported results for the first quarter of 2014 and announced the sale of its business interests in Japan. The accompanying financial statements have been adjusted to exclude the Japanese results from ongoing operations in 2014 and 2013 with those results reported as “discontinued operations” for all periods presented.

Total revenues for the quarter were $592.8 million, an increase of 32.1%. Revenues before reimbursable items were $532.8 million, an increase of 37.3%. The reported results for the quarter for both total revenues and revenues before reimbursable items exclude $16.2 million of revenue for Japan as a result of moving these results to discontinued operations. Adjusted EBITDA was $149.6 million, an increase of 21.2%. Income from continuing operations was $50.6 million. Adjusted cash earnings per share (EPS) from continuing operations was $0.38. On a GAAP basis, basic EPS from continuing operations was $0.26. Diluted EPS from continuing operations was $0.26.

"We are pleased with the first quarter as the financial results met or exceeded our plans. Our cash flow from operations was $148.7 million and our free cash flow was $101.5 million, which were increases of $96.3 million and $104.4 million, respectively, over last year. During the quarter, we also deployed $37.5 million of our capital to increase our stake in our Central Payment joint venture from 60% to 75% as it continues to outperform our expected goals," said Philip W. Tomlinson, chairman and chief executive officer of TSYS.

"Our revised guidance for 2014 is included in the table below and is only adjusted for the discontinued Japan operations. TSYS’ previous revenue guidance included approximately $70 million of revenue associated with its operations in Japan for 2014, and $68 million in 2013. The financial impact from the sale of our businesses in Japan had no material impact on our previous guidance. Revenue and earnings growth ranges remain strong year over year, while adjusted cash EPS remained the same. Our revised guidance for 2014 reflects our focus on diversification, growth and the exceptional performance of our TSYS team,” said Tomlinson.

TSYS’ new guidance is as follows:

2014 Revised Guidance
Range        
(in millions, except per share amounts) Percent

Change
Total revenues $2,422 to $2,471 17%     to     20%
Revenues before reimbursable items $2,182 to $2,226 20% to 22%
Adjusted EBITDA $732 to $746 17% to 20%
Adjusted cash EPS attributable to TSYS

 

 
common shareholders* $1.90

to
$1.93 10%

to
12%
 
* Average Basic Weighted Shares 188.4

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, April 22. 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 corresponding 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 and a reconciliation of those measures to the most directly comparable GAAP measures are included on pages 12 to 14 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’ earnings guidance for 2014 total revenues, revenues before reimbursable items, adjusted EBITDA, and adjusted cash 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, TSYS’ ability to integrate NetSpend and other acquisitions and achieve the anticipated growth opportunities and other benefits of the acquisitions; the effect of current domestic and worldwide economic conditions; the material breach of security of any of TSYS’ systems; 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; the deconversion of a significant client; changes occur in laws, rules, regulations, credit card association rules, the prepaid industry 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; 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
March 31,  
Percent
2014   2013   Change
 
Total revenues $ 592,848 448,791 32.1 %
 
Cost of services 422,883 304,369 38.9
Selling, general and administrative expenses 87,963 66,421 32.4
Merger and acquisition expenses 1,305   3,481   (62.5 )
 
Operating income 80,697 74,520 8.3
 
Nonoperating income (expenses) (324 ) 1,003 nm
Merger and acquisition expenses - bridge loan facility & other financing (9,489 ) (2,743 ) nm
 
Income before income taxes, noncontrolling interests
and equity in income of equity investments 70,884 72,780 (2.6 )
Income taxes 24,335   17,463   39.4
Income before noncontrolling interests and
equity in income of equity investments 46,549 55,317 (15.9 )
Equity in income of equity investments 4,096   3,817   7.3
Income from continuing operations, net of tax 50,645 59,134 (14.4 )
Income from discontinued operations, net of tax 980   15   nm
Net income 51,625 59,149 (12.7 )
Net income attributable to noncontrolling interests (2,322 ) (2,121 ) (9.5 )
 
Net income attributable to TSYS common shareholders $ 49,303   57,028   (13.5 ) %
 
Basic earnings per share:
Income from continuing operations to TSYS
common shareholders* $ 0.26 0.31 (15.3 ) %
Loss from discontinued operations to TSYS
common shareholders* (0.00 ) (0.00 ) 97.9
Basic earnings per share (EPS) $ 0.26   0.31   (14.0 ) %
 
Diluted earnings per share:
Income from continuing operations to TSYS
common shareholders* $ 0.26 0.31 (15.8 ) %
Loss from discontinued operations to TSYS
common shareholders* (0.00 ) (0.00 ) 97.9
Diluted EPS $ 0.26   0.30   (14.6 ) %
 
Dividends declared per share $ 0.10   0.10  
 
Amounts attributable to TSYS common shareholders:
Income from continuing operations, net of tax $ 49,321 57,905 (14.8 ) %
Loss from discontinued operations, net of tax (18 ) (877 ) 97.9
Net income $ 49,303   57,028   (13.5 ) %
 

Non-GAAP measures:
Adjusted cash EPS from continuing operations $ 0.38   0.38   (1.1 ) %
 
Adjusted EBITDA $ 149,596   123,446   21.2 %
 
 
nm = not meaningful
* EPS amounts may not total due to rounding.

 
               
TSYS
Consolidated Statements of Comprehensive Income
(unaudited)
(in thousands)
       
 
Three Months Ended
March 31,
 
2014   2013  
 
Net income $ 51,625 59,149
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 1,581 (12,646 )
Postretirement healthcare plan adjustments (75 ) 155
Unrealized gain on available-for-sale securities 570   -  
Other comprehensive income (loss) 2,076   (12,491 )
Comprehensive income 53,701 46,658
Comprehensive income attributable to
noncontrolling interests 2,827   467  
Comprehensive income attributable to
TSYS common shareholders $ 50,874   46,191  
 
 
                 
TSYS
Earnings Per Share
(unaudited)
(in thousands, except per share data)
     
 
Three Months Ended Three Months Ended
March 31, 2014 March 31, 2013
Common Participating Common Participating
Stock Securities Stock Securities
 
Basic earnings per share:
Net income $ 49,303 57,028
Less income allocated to nonvested awards (516 ) 516 (209 ) 209
Net income allocated to common stock for
EPS calculation ( a ) $ 48,787   516 56,819   209
 
Average common shares outstanding ( b ) 185,763   1,989 186,108   699
 
Average common shares and participating securities 187,752   186,807  
 
Basic earnings per share ( a )/( b ) $ 0.26   0.26 0.31   0.30
 
Diluted earnings per share:
Net income $ 49,303 57,028
Less income allocated to nonvested awards (512 ) 512 (208 ) 208
Net income allocated to common stock for
EPS calculation ( c ) $ 48,791   512 56,820   208
 
Average common shares outstanding 185,763 1,989 186,108 699
Increase due to assumed issuance of shares related
to common equivalent shares outstanding 2,632     1,274    
 
Average common and common
equivalent shares outstanding ( d ) 188,395   1,989 187,382   699
 
Average common and common
equivalent shares and participating securities 190,384   188,081  
 
Diluted earnings per share ( c )/( d ) $ 0.26   0.26 0.30   0.30
 
 
                 
TSYS
Segment Breakdown
(unaudited)
(in thousands)  
     
Three Months Ended March 31,  
Change  
2014     2013     $   %  
Revenues before reimbursable items
North America Services $ 224,368 205,596 18,772 9.1 %
International Services 76,773 76,387 386 0.5
Merchant Services 104,625 109,301 (4,676 ) (4.3 )
NetSpend 132,640 - 132,640 na
Intersegment revenues (5,656 )   (3,252 )   (2,404 ) (73.9 )
Revenues before reimbursable items
from external customers $ 532,750     388,032     144,718   37.3 %
 
Total revenues
North America Services $ 262,178 239,789 22,389 9.3 %
International Services 82,378 80,891 1,487 1.8
Merchant Services 122,690 132,901 (10,211 ) (7.7 )
NetSpend 132,640 - 132,640 na
Intersegment revenues (7,038 )   (4,790 )   (2,248 ) (46.9 )
Revenues from external customers $ 592,848     448,791     144,057   32.1 %
 
Depreciation and amortization
North America Services $ 20,276 18,083 2,193 12.1 %
International Services 9,805 10,699 (894 ) (8.4 )
Merchant Services 3,400 3,142 258 8.2
NetSpend 1,735     -     1,735   na

Segment depreciation and amortization
35,216 31,924 3,292 10.3
Acquisition intangible amortization 24,313 8,532 15,781 nm
Corporate admin and other 506     396     110   27.8
Total depreciation and amortization $ 60,035     40,852     19,183   47.0 %
 
Adjusted segment operating income
North America Services $ 74,578 68,748 5,830 8.5 %
International Services 4,555 6,861 (2,306 ) (33.6 )
Merchant Services 30,168 37,636 (7,468 ) (19.8 )
NetSpend 28,717     -     28,717   na
Total adjusted segment operating income 138,018 113,245 24,773 21.9

Acquisition intangible amortization
(24,313 ) (8,532 ) (15,781 ) nm
NetSpend M&A operating expenses (non-recurring) (1,253 ) (3,481 ) 2,228 64.0
Share-based compensation (7,611 ) (4,593 ) (3,018 ) (65.7 )
Corporate admin and other (24,144 )   (22,119 )   (2,025 ) (9.2 )
Operating income $ 80,697     74,520     6,177   8.3 %
 
Other:
Reimbursable items:
North America Services $ 37,810 34,193 3,617 10.6 %
International Services 5,605 4,504 1,101 24.4
Merchant Services 18,065 23,600 (5,535 ) (23.5 )
NetSpend - - - na
Intersegment revenues (1,382 )   (1,538 )   156   10.1
Reimbursable items $ 60,098     60,759     (661 ) (1.1 ) %
 
 
               
TSYS
Segment Breakdown
(unaudited)
(in thousands)
 
Other:
 
Volumes: At Change  
FTEs (full-time equivalents)   3/31/2014     12/31/2013     $   %    
North America Services 4,587 4,484 103 2.3 %
International Services 2,414 2,413 1 0.0
Merchant Services 1,595 1,599 (4 ) (0.3 )
NetSpend 508 470 38 8.1
Corporate Admin and Other   573     545     28   5.1
FTEs - Continuing Operations   9,677     9,511     166   1.7 %
Discontinued Operations   80     84     (4 ) (4.8 )
FTEs   9,757     9,595     162   1.7 %
 
Total assets (in thousands)
North America Services $ 3,247,258 3,215,333 31,925 1.0 %
International Services 410,902 417,379 (6,477 ) (1.6 )
Merchant Services 693,130 676,592 16,538 2.4
NetSpend 1,586,326 1,596,150 (9,824 ) (0.6 )
Intersegment assets   (2,219,689 )   (2,218,886 )   (803 ) (0.0 )
Total assets $   3,717,927     3,686,568     31,359   0.9 %
 
 
Three Months Ended March 31,  
Change  
  2014     2013   Inc(Dec) %    
North America Segment:
Accounts on File (AOF) (in millions) 495.5 422.8 72.7 17.2 %
Transactions (in millions) 2,327.6 2,013.4 314.2 15.6 %
 
International Segment:
AOF (in millions) 60.7 55.7 5.0 9.0 %
Transactions (in millions) 517.9 434.0 83.9 19.3 %
 
Merchant Segment:
Point-of-sale Transactions (in millions) 982.2 1,099.1 (116.9 ) (10.6 ) %
Dollar sales volume (in millions) $ 10,779.7 $ 10,132.3 $ 647.4 6.4 %
 
NetSpend Segment:
Gross Dollar Volume (in millions) $ 6,567.2 $ 5,378.7 $ 1,188.5 22.1 %
 
90-Day Active Cards (in thousands) 3,654.8 3,157.5 497.3 15.7
Direct Deposit 90-Day Active Cards (in thousands) 2,070.3 1,707.9 362.4 21.2
% of 90-Day Active Cards with Direct Deposit 56.6 % 54.1 %
 

 
         
TSYS
Balance Sheet
(unaudited)
(in thousands)
Mar 31, 2014   Dec 31, 2013
Assets  
Current assets:
Cash and cash equivalents $ 274,161 247,700
Accounts receivable, net 267,787 255,773
Deferred income tax assets 12,477 14,158
Prepaid expenses and other current assets 89,810 95,109
Current assets of discontinued operations 43,614 41,193
     
Total current assets 687,849 653,933
Goodwill 1,539,758 1,541,574
Other intangible assets, net 462,027 481,419
Computer software, net 359,696 363,880
Property and equipment, net 261,097 259,968
Contract acquisition costs, net 195,706 184,828
Equity investments, net 96,533 94,133
Deferred income tax assets, net 3,903 3,972
Other assets 97,410 87,146
Long-Term assets of discontinued operations 13,948 15,715
     
Total assets $ 3,717,927     3,686,568  
 
Liabilities
Current liabilities:
Accounts payable $ 49,722 33,651
Current portion of borrowings 34,320 34,257
Current portion of obligations under capital leases 10,625 22,662
Accrued salaries and employee benefits 28,188 38,339
Other current liabilities 195,708 159,170
Current liabilities of discontinued operations 6,675 9,136
     
Total current liabilities 325,238 297,215
Long-term borrowings, excluding current portion 1,419,742 1,428,251
Deferred income tax liabilities 229,649 228,727
Obligations under capital leases, excluding current portion 6,096 7,500
Other long-term liabilities 83,195 81,600
Long-term liabilities of discontinued operations 1,244 1,197
     
Total liabilities 2,065,164     2,044,490  
Redeemable noncontrolling interest 23,918     39,652  
Equity
Shareholders' equity:
Common stock 20,279 20,279
Additional paid-in capital 145,429 165,841
Accumulated other comprehensive income, net 5,320 3,749
Treasury stock (312,843 ) (326,996 )
Retained earnings 1,748,141     1,718,204  
Total shareholders' equity 1,606,326     1,581,077  
Noncontrolling interests in consolidated subsidiaries 22,519     21,349  
Total equity 1,628,845     1,602,426  
Total liabilities and equity $ 3,717,927     3,686,568  
 
 
         
TSYS
Cash Flow
(unaudited)
(in thousands)
Three Months Ended March 31,
2014     2013  
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 51,625 59,149
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in income of equity investments (4,096 ) (3,817 )
Net gain on foreign currency (425 ) (45 )
Depreciation and amortization 61,432 42,498
Amortization of debt issuance costs 452 2,860
Amortization of bond discount 94 -
Changes in fair value of private equity investments (312 ) (1,227 )
Share-based compensation 7,611 4,593
Excess tax benefit from share-based compensation (4,037 ) (536 )
Provisions for bad debt expense and billing
adjustments 749 376
Charges for transaction processing provisions 1,826 4,160
Provision for fraud and other losses 9,639 -
Deferred income tax expense 4,751 9,442
Loss on disposal of equipment, net 2 55
Changes in operating assets and liabilities:
Accounts receivable (11,418 ) (30,182 )
Prepaid expenses, other current assets and other long-term assets (3,170 ) (32,247 )
Accounts payable 15,738 5,745
Accrued salaries and employee benefits (9,986 ) (9,266 )
Other current liabilities and other long-term liabilities 28,231     879  
Net cash provided by operating activities 148,706     52,437  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (13,641 ) (6,481 )
Additions to licensed computer software from vendors (5,963 ) (29,904 )
Additions to internally developed computer software (9,735 ) (5,297 )
Purchase of private equity investments (822 ) (411 )
Additions to contract acquisition costs (17,903 )   (13,666 )
Net cash used in investing activities (48,064 )   (55,759 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings and
capital lease obligations (22,277 ) (9,784 )
Proceeds from exercise of stock options 9,539 2,551
Excess tax benefit from share-based compensation 4,037 536
Repurchase of common stock under plans and tax withholding (5,173 ) (5,501 )
Debt issuance costs - (3,534 )
Purchase of noncontrolling interests (37,500 ) -
Subsidiary dividends paid to noncontrolling shareholders (2,312 ) (953 )
Dividends paid on common stock (18,788 )   -  
Net cash used in financing activities (72,474 )   (16,685 )
 
CASH AND CASH EQUIVALENTS:
Effect of exchange rate changes on cash and cash equivalents 1,015     (4,508 )
Net increase in cash and cash equivalents 29,183 (24,515 )
Cash and cash equivalents at beginning of period 278,230     247,612  
Cash and cash equivalents at end of period 307,413 223,097
Less cash and cash equivalents of
discontinued operations at end of period 33,252     22,324  
Cash and cash equivalents of continuing operations at end of period $ 274,161     200,773  
 
 
Supplemental Information:            
Accounts on File
Total
(in millions)

March2014

March2013

%Change
Consumer Credit 234.8 203.7 15.3
Retail 27.5   25.2 9.3
Total Consumer 262.3 228.9 14.6
Commercial 40.4 37.9 6.7
Other 19.7   13.4 46.5
Subtotal 322.4 280.2 15.1
Prepaid/Stored Value 120.0 107.3 11.8
Government Services 63.0 59.4 6.1
Commercial Card Single Use 50.8   31.6 60.8
Total AOF 556.2   478.5 16.2
 
 
 

Growth in Accounts on File (in millions):
March 2013 to

March 2014
March 2012 to

March 2013
Beginning balance

 

478.5

 

415.5
Change in accounts on file due to:
Internal growth of existing clients

 

38.6

 

32.2
New clients

 

64.6

 

77.1
Purges/Sales

 

 

(24.7

)

 

 

(44.6

)
Deconversions

 

 
 

(0.8

)
 

 

 
   

(1.7

)
   
Ending balance

 
   

556.2
   

 
     

478.5
     
 
 
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 first quarter 2014 financial results using the previous year’s foreign currency exchange rates. On a full year constant currency basis, TSYS’ total revenues grew 31.1% as compared to a reported GAAP increase of 32.1%.
 
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 cash EPS.
 

The tax rate used in the calculation of cash 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 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 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 March 31,
Percent
2014   2013   Change
Consolidated
Constant currency (1) $ 588,485 448,791 31.1 %
Foreign currency (2) 4,363   -
Total revenues $ 592,848   448,791 32.1 %
 
Constant currency (1) $ 528,701 388,032 36.3 %
Foreign currency (2) 4,049   -
Total revenues before reimbursable items $ 532,750   388,032 37.3 %
 
Constant currency (1) $ 78,152 74,520 4.9 %
Foreign currency (2) 2,545   -
Operating income $ 80,697   74,520 8.3 %
 
International Services
Constant currency (1) $ 78,134 80,891 (3.4) %
Foreign currency (2) 4,244   -
Total revenues $ 82,378   80,891 1.8 %
 
(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 March 31,
Percent
2014   2013   Change
Total revenues $ 592,848 448,791 32.1 %
Reimbursable items 60,098   60,759 (1.1)
Revenues before reimbursable items $ 532,750   388,032 37.3 %
 
 
Reconciliation of GAAP to Non-GAAP
   
Adjusted Cash Earnings
(unaudited)
(in thousands, except per share data)  
 
 
Three Months Ended March 31,  
Percent
Income from continuing operations attributable to 2014   2013   Change  
TSYS common shareholders $ 49,321 57,905 (14.8 ) %
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes 15,813 5,492 nm %
Add: Share-based compensation, net of taxes 5,017   3,148   59.4 %
Cash earnings 70,151 66,545 5.4 %
Add: NetSpend M&A expenses, net of taxes* (non-recurring) 1,204   5,222   (76.9 ) %
Cash earnings adjusted $ 71,355   71,767   (0.6 ) %
 
Basic EPS - Income from continuing operations attributable to
TSYS common shareholders
As reported (GAAP) $ 0.26   0.31   (15.3 ) %
 
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes 0.08 0.03 nm %
Add: Share-based compensation, net of taxes 0.03   0.02   58.0 %
Cash earnings per share 0.37 0.36 4.9 %
Add: NetSpend M&A expenses, net of taxes* (non-recurring) 0.01   0.03   (77.1 ) %
Adjusted cash EPS ** $ 0.38   0.38   (1.1 ) %
 
Average common shares and participating securities 187,752   186,807  
 
* Certain merger and acquisition costs are nondeductible for income tax purposes
** Adjusted cash EPS amounts may not total due to rounding.
                 
Adjusted EBITDA
(unaudited)
(in thousands)
 
Three Months Ended March 31,  
Percent
2014   2013   Change  
Net income $ 51,625 59,149 (12.7 ) %
Adjust for:
Deduct: Income from discontinued operations (980 ) (15 ) nm %
Deduct: Equity in income of equity investments (4,096 ) (3,817 ) (7.3 ) %
Add: Income taxes 24,335 17,463 39.4 %
Add: Nonoperating expense 9,813 1,740 nm %
Add: Depreciation and amortization 60,035   40,852   47.0 %
EBITDA 140,732 115,372 22.0 %
Adjust for:
Add: Share-based compensation 7,611 4,593 65.7 %
Add: NetSpend M&A operating expenses *(non-recurring) 1,253   3,481   (64.0 ) %
Adjusted EBITDA $ 149,596   123,446   21.2 %
 
nm = not meaningful
* Excludes share-based compensation
 

 
                       
TSYS
Financial Highlights
(unaudited)
(in thousands, except per share data)
         

 

Twelve

Months
Three Months Ended

Ended
March 31,   June 30,   Sept 30,   Dec 31,   Dec 31,
 
2013   2013   2013   2013   2013  
 
Total revenues $ 448,791 461,860 570,551 583,103 2,064,305
 
Cost of services 304,369 301,627 377,147 386,295 1,369,438
Selling, general and administrative expenses 66,421 64,345 81,643 85,739 298,147
Merger and acquisition expenses 3,481   1,246   7,282   2,211   14,220  
 
Operating income 74,520 94,642 104,479 108,858 382,500
 
Nonoperating income (expenses) 1,003 (590 ) (499 ) (718 ) (804 )
Merger and acquisition expenses - bridge loan facility & other financing (2,743 ) (6,934 ) (9,789 ) (9,754 ) (29,220 )
 
Income before income taxes, noncontrolling interests
and equity in income of equity investments 72,780 87,118 94,191 98,386 352,476
Income taxes 17,463   29,984   30,100   33,435   110,982  
Income before noncontrolling interests and
equity in income of equity investments 55,317 57,134 64,091 64,951 241,494
Equity in income of equity investments 3,817   2,748   2,792   3,691   13,048  
Income from continuing operations, net of tax 59,134 59,882 66,883 68,642 254,542
income from discontinued operations, net of tax 15   678   611   751   2,055  
Net income 59,149 60,560 67,494 69,393 256,597
Net income attributable to noncontrolling interests (2,121 ) (2,844 ) (3,144 ) (3,738 ) (11,847 )
 
Net income attributable to TSYS common shareholders $ 57,028   57,716   64,350   65,655   244,750  
 
Basic earnings per share:
Income from continuing operations to TSYS
common shareholders* $ 0.31 0.31 0.34 0.35 1.31
Loss from discontinued operations to TSYS
common shareholders* (0.00 ) (0.00 ) (0.00 ) (0.00 ) (0.01 )
Basic earnings per share (EPS) $ 0.31   0.31   0.34   0.35   1.30  
 
Diluted earnings per share:
Income from continuing operations to TSYS
common shareholders* $ 0.31 0.31 0.34 0.34 1.30
Loss from discontinued operations to TSYS
common shareholders* (0.00 ) (0.00 ) (0.00 ) (0.00 ) (0.01 )
Diluted EPS $ 0.30   0.31   0.34   0.34   1.29  
 
Dividends declared per share $ 0.10   0.10   0.10   0.10   0.40  
 
Amounts attributable to TSYS common shareholders:
Income from continuing operations, net of tax $ 57,905 58,096 64,834 66,058 246,893
Loss from discontinued operations, net of tax (877 ) (380 ) (484 ) (403 ) (2,143 )
Net income $ 57,028   57,716   64,350   65,655   244,750  
 

Non-GAAP measures:
Adjusted cash EPS from continuing operations $ 0.38   0.37   0.49   0.48   1.72  
 
Adjusted EBITDA $ 123,446   140,105   179,445   181,097   624,093  
 
Note: Prior periods restated for discontinued operations.
nm = not meaningful
* EPS amounts may not total due to rounding.

 
 
               
TSYS
Segment Breakdown
(unaudited)
(in thousands)
 

 

Twelve

Months
Three Months Ended  

Ended
Mar 31, Jun 30, Sep 30, Dec 31, Dec 31,
2013   2013   2013   2013     2013  
Revenues before reimbursable items
North America Services $ 205,596 214,526 217,257 223,266 860,645
International Services 76,387 76,626 77,876 90,595 321,484
Merchant Services 109,301 112,952 113,650 110,375 446,278
NetSpend - - 103,706 104,144 207,850
Intersegment revenues (3,252 ) (3,175 ) (3,001 ) (3,121 ) (12,549 )
Revenues before reimbursable items
from external customers $ 388,032   400,929   509,488   525,259   1,823,708  
 
Total revenues
North America Services $ 239,789 248,640 252,577 259,067 1,000,073
International Services 80,891 81,504 83,025 96,129 341,549
Merchant Services 132,901 136,458 135,616 128,075 533,050
NetSpend - - 103,706 104,144 207,850
Intersegment revenues (4,790 ) (4,742 ) (4,373 ) (4,312 ) (18,217 )
Revenues from external customers $ 448,791   461,860   570,551   583,103   2,064,305  
 
Depreciation and amortization
North America Services $ 18,083 18,213 18,764 19,420 74,480
International Services 10,699 9,450 9,585 11,974 41,708
Merchant Services 3,142 2,998 2,890 3,004 12,034
NetSpend -   -   1,470   1,651   3,121  

Segment depreciation and amortization
31,924 30,661 32,709 36,049 131,343
Acquisition intangible amortization 8,532 7,879 24,731 24,751 65,893
Corporate admin and other 395   466   461   468   1,790  
Total depreciation and amortization $ 40,851   39,006   57,901   61,268   199,026  
 
Adjusted segment operating income
North America Services $ 68,748 81,318 84,443 87,110 321,619
International Services 6,861 7,693 9,528 17,986 42,068
Merchant Services 37,636 41,302 40,753 35,952 155,643
NetSpend -   -   34,616   31,737   66,353  
Total adjusted segment operating income 113,245 130,313 169,340 172,785 585,683

Acquisition intangible amortization
(8,532 ) (7,879 ) (24,732 ) (24,751 ) (65,894 )
NetSpend M&A operating expenses (non-recurring) (3,481 ) (1,246 ) (7,282 ) (2,211 ) (14,220 )
Share-based compensation (4,593 ) (5,211 ) (9,784 ) (9,345 ) (28,933 )
Corporate admin and other (22,119 ) (21,334 ) (23,063 ) (27,620 ) (94,136 )
Operating income $ 74,520   94,643   104,479   108,858   382,500  
 
Other:
Reimbursable items:
North America Services $ 34,193 34,114 35,320 35,801 139,428
International Services 4,504 4,878 5,149 5,534 20,065
Merchant Services 23,600 23,506 21,966 17,700 86,772
NetSpend - - - - -
Intersegment revenues (1,538 ) (1,567 ) (1,372 ) (1,191 ) (5,668 )
Reimbursable items $ 60,759   60,931   61,063   57,844   240,597  
 

Note: prior periods restated for discontinued operations and the reclassification of all share-based compensation as corporate administration costs
 

 

Copyright Business Wire 2010

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