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TSYS Reports Second Quarter 2014 Total Revenues Increased 30.4%

Companies mentioned in this article: TSYS

COLUMBUS, Ga. -- (BUSINESS WIRE) -- TSYS (NYSE: TSS) today reported results for the second quarter of 2014.

Total revenues for the quarter were $602.0 million, an increase of 30.4%. Revenues before reimbursable items were $538.1 million, an increase of 34.2%. Adjusted EBITDA was $170.9 million, an increase of 22.0%. Income from continuing operations was $59.8 million. Adjusted earnings per share (EPS) from continuing operations were $0.45, an increase of 19.8%. On a GAAP basis, basic and diluted EPS from continuing operations were $0.32.

Total revenues year-to-date were $1.2 billion, an increase of 31.2%. Revenues before reimbursable items were $1.1 billion, an increase of 35.7%. Adjusted EBITDA was $320.5 million, an increase of 21.6%. Income from continuing operations was $109.1 million. Adjusted EPS from continuing operations was $0.83, an increase of 9.2%. On a GAAP basis, basic and diluted EPS from continuing operations were $0.58.

"We set another milestone this quarter with total revenues of over $600 million for the first time in TSYS’ history. It was an outstanding quarter with our consolidated adjusted operating margin improving 357 basis points over the first quarter to 24.94%," said Philip W. Tomlinson, chairman and chief executive officer of TSYS.

"Year to date, our free cash flow was $133.7 million, an increase of $54.9 million, or 69.6% over last year. During the quarter, we deployed $115.7 million of our capital by repurchasing 3.7 million shares,” added Tomlinson.

Also during the quarter, TSYS announced that Phil Tomlinson will retire as chief executive officer and that M. Troy Woods has been elected by the TSYS board of directors as president and chief executive officer, effective July 31, 2014. Tomlinson will continue to serve as executive chairman of the board of TSYS until the 2015 Annual Shareholders' Meeting.

“I am honored to have been chosen to carry the torch at this exciting time in our history. All of us here at TSYS are stewards of the tremendous business and cultural legacy we have been given. I feel particularly accountable for making sure we build on our strong foundation, grow this company and achieve our vision of being the leading global payment solutions provider,” stated Woods.

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, July 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 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 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 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 risks described 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 Six Months Ended
June 30, June 30,
Percent Percent
2014   2013   Change   2014   2013   Change
 
Total revenues $ 602,036 461,860 30.4 % $ 1,194,883 910,651 31.2 %
 
Cost of services 416,489 301,627 38.1 839,372 605,996 38.5
Selling, general and administrative expenses 85,602 64,345 33.0 173,616 130,765 32.8
Merger and acquisition expenses 1,182   1,246   (5.1 ) 2,435   4,727   (48.5 )
 
Operating income 98,763 94,642 4.4 179,460 169,163 6.1
 
Nonoperating income (expenses) (899 ) (590 ) (52.4 ) (1,223 ) 413 nm
Merger and acquisition expenses - bridge loan facility & other financing (9,486 ) (6,934 ) (36.8 ) (18,975 ) (9,677 ) (96.1 )
 
Income before income taxes, noncontrolling interests
and equity in income of equity investments 88,378 87,118 1.4 159,262 159,899 (0.4 )
Income taxes 30,771   29,984   2.6 55,106   47,447   16.1
Income before noncontrolling interests and
equity in income of equity investments 57,607 57,134 0.8 104,156 112,452 (7.4 )
Equity in income of equity investments, net of tax 3,600   2,749   31.0 7,696   6,565   17.2
Income from continuing operations, net of tax 61,207 59,883 2.2 111,852 119,017 (6.0 )
Income from discontinued operations, net of tax 50,133   678   nm 51,113   693   nm
Net income 111,340 60,561 83.8 162,965 119,710 36.1
Net income attributable to noncontrolling interests (1,436 ) (2,845 ) 49.5 (3,759 ) (4,965 ) 24.3
 
Net income attributable to TSYS common shareholders $ 109,904   57,716   90.4 % $ 159,206   114,745   38.7 %
 
Basic earnings per share:
Income from continuing operations to TSYS
common shareholders* $ 0.32 0.31 3.6 % $ 0.58 0.62 (5.8 ) %
Gain (Loss) from discontinued operations to TSYS
common shareholders* 0.27   (0.00 ) nm 0.27   (0.01 ) nm
Basic earnings per share (EPS) $ 0.59   0.31   91.8 % $ 0.85   0.61   38.9 %
 
Diluted earnings per share:
Income from continuing operations to TSYS
common shareholders* $ 0.32 0.31 3.1 % $ 0.58 0.61 (6.2 ) %
Gain (Loss)from discontinued operations to TSYS
common shareholders* 0.27   (0.00 ) nm 0.26   (0.01 ) nm
Diluted EPS $ 0.58   0.31   90.7 % $ 0.84   0.61   38.3 %
 
Dividends declared per share $ 0.10   0.10   $ 0.20   0.20  
 
Amounts attributable to TSYS common shareholders:
Income from continuing operations, net of tax $ 59,771 58,096 2.9 % $ 109,092 116,000 (6.0 ) %
Gain (Loss) from discontinued operations, net of tax 50,133   (380 ) nm 50,114   (1,255 ) nm
Net income $ 109,904   57,716   90.4 % $ 159,206   114,745   38.7 %
 

Non-GAAP measures:

Adjusted EPS from continuing operations $ 0.45   0.37   19.8 % $ 0.83   0.76   9.2 %
 
Adjusted EBITDA $ 170,894   140,105   22.0 % $ 320,489   263,551   21.6 %
 
 
nm = not meaningful
* EPS amounts may not total due to rounding.

 

                               
TSYS
Consolidated Statements of Comprehensive Income
(unaudited)
(in thousands)
                 
 
Three Months Ended Six Months Ended
June 30,   June 30,
 
2014   2013   2014   2013  
 
Net income $ 111,340 60,561 $ 162,965 119,710
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments as a
result of discontinued operations 3,514 - 3,514 -
Foreign currency translation adjustments 3,627 (1,064 ) 5,207 (13,711 )
Postretirement healthcare plan adjustments 371 155 296 310
Unrealized gain on available-for-sale securities (612 ) -   (42 ) -  
Other comprehensive income (loss) 6,900   (909 ) 8,975   (13,401 )
Comprehensive income 118,240 59,652 171,940 106,309
Comprehensive income attributable to
noncontrolling interests 1,152   2,455   3,979   2,922  
Comprehensive income attributable to
TSYS common shareholders $ 117,088   57,197   $ 167,961   103,387  
 
 
                                   
TSYS
Earnings Per Share
(unaudited)
(in thousands, except per share data)
             
 
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2014 June 30, 2013 June 30, 2014 June 30, 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 $ 109,904 57,716 $ 159,206 114,745
Less income allocated to nonvested awards (1,102 ) 1,102 (175 ) 175 (1,633 ) 1,633 (385 ) 385
Net income allocated to common stock for
EPS calculation ( a ) $ 108,802   1,102 57,541   175 $ 157,573   1,633 114,360   385
 
Average common shares outstanding ( b ) 184,491   1,882 187,147   591 185,123   1,935 186,633   644
 
Average common shares and participating securities 186,373   187,738   187,058   187,277  
 
Basic earnings per share ( a )/( b ) $ 0.59   0.59 0.31   0.30 $ 0.85   0.84 0.61   0.60
 
Diluted earnings per share:
Net income attributable to TSYS common shareholders $ 109,904 57,716 $ 159,206 114,745
Less income allocated to nonvested awards (1,092 ) 1,092 (175 ) 175 (1,617 ) 1,617 (382 ) 382
Net income allocated to common stock for
EPS calculation ( c ) $ 108,812   1,092 57,541   175 $ 157,589   1,617 114,363   382
 
Average common shares outstanding 184,491 1,882 187,147 591 185,123 1,935 186,633 644
Increase due to assumed issuance of shares related
to common equivalent shares outstanding 1,994     981     2,379     1,576    
 
Average common and common
equivalent shares outstanding ( d ) 186,485   1,882 188,128   591 187,502   1,935 188,209   644
 
Average common and common
equivalent shares and participating securities 188,367   188,719   189,437   188,853  
 
Diluted earnings per share ( c )/( d ) $ 0.58   0.58 0.31   0.30 $ 0.84   0.84 0.61   0.59
 
 
                               
TSYS
Segment Breakdown
(unaudited)
(in thousands)
     
Three Months Ended June 30,   Six Months Ended June 30,  
Change   Change  
2014   2013   $     %   2014   2013   $     %  
Revenues before reimbursable items
North America Services $ 233,217 214,526 18,691 8.7 % $ 457,585 420,122 37,463 8.9 %
International Services 84,732 76,626 8,106 10.6 161,505 153,013 8,492 5.5
Merchant Services 108,335 112,952 (4,617 ) (4.1 ) 212,960 222,253 (9,293 ) (4.2 )
NetSpend 116,833 - 116,833 na 249,473 - 249,473 na
Intersegment revenues (5,050 ) (3,175 ) (1,875 ) (59.1 ) (10,705 ) (6,428 ) (4,277 ) (66.5 )
Revenues before reimbursable items
from external customers $ 538,067   400,929   137,138   34.2 % $ 1,070,818   788,960   281,858   35.7 %
 
Total revenues
North America Services $ 273,324 248,640 24,684 9.9 % $ 535,502 488,429 47,073 9.6 %
International Services 90,466 81,504 8,962 11.0 172,844 162,395 10,449 6.4
Merchant Services 128,017 136,458 (8,441 ) (6.2 ) 250,707 269,359 (18,652 ) (6.9 )
NetSpend 116,833 - 116,833 na 249,473 - 249,473 na
Intersegment revenues (6,604 ) (4,742 ) (1,862 ) (39.3 ) (13,643 ) (9,532 ) (4,111 ) (43.1 )
Revenues from external customers $ 602,036   461,860   140,176   30.4 % $ 1,194,883   910,651   284,232   31.2 %
 
Depreciation and amortization
North America Services $ 20,928 18,213 2,715 14.9 % $ 41,204 36,296 4,908 13.5 %
International Services 9,761 9,450 311 3.3 19,566 20,149 (583 ) (2.9 )
Merchant Services 3,567 2,998 569 19.0 6,967 6,140 827 13.5
NetSpend 1,890   -   1,890   na 3,625   -   3,625   na

Segment depreciation and amortization

36,146 30,661 5,485 17.9 71,362 62,585 8,777 14.0
Acquisition intangible amortization 24,282 7,879 16,403 nm 48,595 16,411 32,184 nm
Corporate admin and other 533   466   67   14.4 1,038   861   177   20.6
Total depreciation and amortization $ 60,961   39,006   21,955   56.3 % $ 120,995   79,857   41,138   51.5 %
 
Adjusted segment operating income
North America Services $ 84,578 81,318 3,260 4.0 % $ 159,155 150,066 9,089 6.1 %
International Services 11,743 7,693 4,050 52.6 16,299 14,554 1,745 12.0
Merchant Services 32,896 41,302 (8,406 ) (20.4 ) 63,064 78,938 (15,874 ) (20.1 )
NetSpend 30,703   -   30,703   na 59,421   -   59,421   na
Total adjusted segment operating income 159,920 130,313 29,607 22.7 297,939 243,558 54,381 22.3

Acquisition intangible amortization

(24,282 ) (7,879 ) (16,403 ) nm (48,595 ) (16,411 ) (32,184 ) nm
NetSpend M&A operating expenses (1,182 ) (1,246 ) 64 5.1 (2,435 ) (4,727 ) 2,292 48.5
Share-based compensation (9,988 ) (5,211 ) (4,777 ) (91.7 ) (17,599 ) (9,804 ) (7,795 ) (79.5 )
Corporate admin and other (25,705 ) (21,335 ) (4,370 ) (20.5 ) (49,850 ) (43,453 ) (6,397 ) (14.7 )
Operating income $ 98,763   94,642   4,121   4.4 % $ 179,460   169,163   10,297   6.1 %
 
Other:
Reimbursable items:
North America Services $ 40,107 34,114 5,993 17.6 % $ 77,917 68,307 9,610 14.1 %
International Services 5,734 4,878 856 17.5 11,339 9,382 1,957 20.9
Merchant Services 19,682 23,506 (3,824 ) (16.3 ) 37,747 47,106 (9,359 ) (19.9 )
NetSpend - - - na - - - na
Intersegment revenues (1,554 ) (1,567 ) 13   0.8 (2,938 ) (3,104 ) 166   5.3
Reimbursable items $ 63,969   60,931   3,038   5.0 % $ 124,065   121,691   2,374   2.0 %
 
 
                                                       
TSYS
Segment Breakdown
(unaudited)
(in thousands)
                           
Other:
 
Volumes: At Change  
FTEs (full-time equivalents)   6/30/2014     6/30/2013     #   %    
North America Services 4,673 4,252 421 9.9 %
International Services 2,382 2,287 95 4.2
Merchant Services 1,593 1,599 (6 ) (0.4 )
NetSpend 536 - 536 na
Corporate Admin and Other   594     483     111   23.0
FTEs - Continuing Operations   9,778     8,621     1,157   13.4 %
Discontinued Operations   -     91     (91 ) na
FTEs   9,778     8,712     1,066   12.2 %
 
At Change  
Total assets (in thousands)   6/30/2014     12/31/2013     $   %    
North America Services $ 3,258,409 3,215,333 43,076 1.3 %
International Services 356,610 417,379 (60,769 ) (14.6 )
Merchant Services 696,325 676,592 19,733 2.9
NetSpend 1,566,358 1,596,150 (29,792 ) (1.9 )
Intersegment assets   (2,199,793 )   (2,218,886 )   19,093   0.9
Total assets $   3,677,909     3,686,568     (8,659 ) (0.2 ) %
 
 
Three Months Ended June 30,   Six Months Ended June 30,  
Change   Change  
  2014   2013 Inc(Dec) %   2014     2013   Inc(Dec) %
North America Segment:
Accounts on File (AOF) (in millions) 510.3 430.7 79.6 18.5 %
Transactions (in millions) 2,696.7 2,235.0 461.7 20.7 % 5,024.3 4,248.4 775.9 18.3 %
 
International Segment:
AOF (in millions) 62.3 58.0 4.4 7.5 %
Transactions (in millions) 558.1 492.4 65.7 13.3 % 1,076.0 926.3 149.7 16.2 %
 
Merchant Segment:
Point-of-sale Transactions (in millions) 1,045.1 1,136.0 (90.9 ) (8.0 ) % 2,027.3 2,235.1 (207.8 ) (9.3 ) %
Dollar sales volume (in millions) $ 11,796.5 $ 11,028.0 $ 768.5 7.0 % $ 22,576.3 $ 21,160.0 $ 1,416.3 6.7 %
 
NetSpend Segment:
Gross Dollar Volume (in millions) $ 4,634.8 $ 3,948.0 $ 686.8 17.4 % $ 11,202.0 $ 9,326.7 $ 1,875.3 20.1 %
 
90-Day Active Cards (in thousands) 3,388.0 3,092.3 295.7 9.6
Direct Deposit 90-Day Active Cards (in thousands) 1,600.7 1,361.4 239.3 17.6
% of 90-Day Active Cards with Direct Deposit 47.2 % 44.0 %
 

 

       
TSYS
Balance Sheet
(unaudited)
(in thousands)
Jun 30, 2014 Dec 31, 2013
Assets
Current assets:
Cash and cash equivalents $ 250,957 247,700
Accounts receivable, net 281,338 255,773
Deferred income tax assets 12,082 14,158
Prepaid expenses and other current assets 103,558 95,109
Current assets of discontinued operations 4,003 41,193
   
Total current assets 651,938 653,933
Goodwill 1,550,817 1,541,574
Other intangible assets, net 442,661 481,419
Computer software, net 353,459 363,880
Property and equipment, net 274,507 259,968
Contract acquisition costs, net 211,007 184,828
Equity investments, net 99,634 94,133
Deferred income tax assets, net 394 3,972
Other assets 93,492 87,146
Long-Term assets of discontinued operations - 15,715
   
Total assets $ 3,677,909   3,686,568  
 
Liabilities
Current liabilities:
Accounts payable $ 44,078 33,651
Current portion of borrowings 34,383 34,257
Accrued salaries and employee benefits 26,814 38,339
Current portion of obligations under capital leases 8,777 22,662
Other current liabilities 204,837 159,170
Current liabilities of discontinued operations 4,003 9,136
   
Total current liabilities 322,892 297,215
Long-term borrowings, excluding current portion 1,411,217 1,428,251
Deferred income tax liabilities 194,203 228,727
Obligations under capital leases, excluding current portion 7,075 7,500
Other long-term liabilities 94,858 81,600
Long-term liabilities of discontinued operations - 1,197
   
Total liabilities 2,030,245   2,044,490  
Redeemable noncontrolling interest 22,210   39,652  
Equity
Shareholders' equity:
Common stock 20,279 20,279
Additional paid-in capital 158,415 165,841
Accumulated other comprehensive income, net 12,504 3,749
Treasury stock (412,669 ) (326,996 )
Retained earnings 1,839,904   1,718,204  
Total shareholders' equity 1,618,433   1,581,077  
Noncontrolling interests in consolidated subsidiaries 7,021   21,349  
Total equity 1,625,454   1,602,426  
Total liabilities and equity $ 3,677,909   3,686,568  
 
 
         
TSYS
Cash Flow
(unaudited)
(in thousands)
Six Months Ended June 30,
2014   2013
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 162,965 119,710
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in income of equity investments (7,696) (6,565)
Dividends received from equity investments - 1,016
Loss (Gain) on foreign currency 1,964 (72)
Depreciation and amortization 122,393 83,043
Amortization of debt issuance costs 906 6,315
Amortization of bond discount 190 39
Changes in fair value of private equity investments (234) (1,227)
Share-based compensation 17,599 9,804
Excess tax benefit from share-based compensation (5,771) (2,040)
Provisions for bad debt expense and billing adjustments 1,307 1,541
Charges for transaction processing provisions 2,966 7,093
Provision for fraud and other losses 21,535 -
Deferred income tax expense (8,474) 20,420
Loss on disposal of equipment, net 8 55
Gain on disposal of subsidiaries (85,310) -
Changes in operating assets and liabilities:
Accounts receivable (24,885) (8,031)
Prepaid expenses, other current assets and other long-term assets (16,869) (24,911)
Accounts payable 3,306 (34,602)
Accrued salaries and employee benefits (11,506) (7,989)
Other current liabilities and other long-term liabilities 65,048   (6,351)
Net cash provided by operating activities 239,442   157,248
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (37,152) (13,701)
Additions to licensed computer software from vendors (7,729) (27,711)
Additions to internally developed computer software (21,271) (12,522)
Proceeds from dispositions, net of expenses paid and cash disposed 45,049 -
Purchase of private equity investments (813) (1,006)
Additions to contract acquisition costs (39,623)   (24,506)
Net cash used in investing activities (61,539)   (79,446)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings and
capital lease obligations (34,467) (20,073)
Proceeds from borrowings of long-term borrowings - 1,095,661
Proceeds from exercise of stock options 22,284 19,449
Excess tax benefit from share-based compensation 5,771 2,040
Repurchase of common stock under plans and tax withholding (120,848) (6,268)
Debt issuance costs - (13,018)
Purchase of noncontrolling interests (37,500) -
Subsidiary dividends paid to noncontrolling shareholders (5,182) (4,139)
Dividends paid on common stock (37,633)   (18,758)
Net cash (used in) provided by financing activities (207,575)   1,054,894
 
CASH AND CASH EQUIVALENTS:
Effect of exchange rate changes on cash and cash equivalents 2,399   (6,099)
Net (decrease) increase in cash and cash equivalents (27,273) 1,126,597
Cash and cash equivalents at beginning of period 278,230   247,612
Cash and cash equivalents at end of period 250,957 1,374,209
Less cash and cash equivalents of
discontinued operations at end of period -   25,234
Cash and cash equivalents of continuing operations at end of period $ 250,957   1,348,975
 
 
Supplemental Information:              
Accounts on File
Total
(in millions)

June
2014

June
2013

%
Change

Consumer Credit 246.5 208.5 18.2
Retail 27.9   25.9 8.0
Total Consumer 274.4 234.4 17.1
Commercial 40.4 38.6 4.9
Other 20.4   15.3 32.7
Subtotal 335.2 288.3 16.3
Prepaid/Stored Value 117.7 102.8 14.4
Government Services 65.6 60.6 8.4
Commercial Card Single Use 54.2   37.0 46.4
Total AOF 572.7   488.7 17.2
 
 
 

Growth in Accounts on File (in millions):

June 2013 to
June 2014

June 2012 to
June 2013

Beginning balance 488.7 440.1
Change in accounts on file due to:
Internal growth of existing clients 38.4 35.2
New clients 71.9 76.1
Purges/Sales (25.4 ) (62.7 )
Deconversions (0.9 )   (0.0 )  
Ending balance 572.7     488.7    
 
 
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 second quarter 2014 financial results using the previous year’s foreign currency exchange rates. On a full year constant currency basis, TSYS’ total revenues grew 29.9% as compared to a reported GAAP increase of 31.2%.
 
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 June 30, Six Months Ended June 30,
Percent Percent
2014 2013 Change 2014 2013 Change
Consolidated
Constant currency (1) $ 594,799 461,860 28.8 % $ 1,183,283 910,651 29.9 %
Foreign currency (2) 7,237 - 11,600 -
Total revenues $ 602,036 461,860 30.4 % $ 1,194,883 910,651 31.2 %
 
Constant currency (1) $ 531,303 400,929 32.5 % $ 1,060,005 788,960 34.4 %
Foreign currency (2) 6,764 - 10,813 -
Total revenues before reimbursable items $ 538,067 400,929 34.2 % $ 1,070,818 788,960 35.7 %
 
Constant currency (1) $ 95,381 94,642 0.8 % $ 173,533 169,163 2.6 %
Foreign currency (2) 3,382 - 5,927 -
Operating income $ 98,763 94,642 4.4 % $ 179,460 169,163 6.1 %
 
International Services
Constant currency (1) $ 83,300 81,504 2.2 % $ 161,434 162,395 (0.6 ) %
Foreign currency (2) 7,166 - 11,410 -
Total revenues $ 90,466 81,504 11.0 % $ 172,844 162,395 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 June 30, Six Months Ended June 30,
Percent Percent
2014 2013 Change 2014 2013 Change
Total revenues $ 602,036 461,860 30.4 % $ 1,194,883 910,651 31.2 %
Reimbursable items 63,969 60,931 5.0 124,065 121,691 2.0
Revenues before reimbursable items $ 538,067 400,929 34.2 % $ 1,070,818 788,960 35.7 %
 
 
Reconciliation of GAAP to Non-GAAP
                               
Adjusted Earnings per Share
(unaudited)
(in thousands, except per share data)
       
 
Three Months Ended June 30, Six Months Ended June 30,
Percent Percent
Income from continuing operations attributable to 2014   2013   Change 2014   2013   Change
TSYS common shareholders $ 59,771 58,096 90.4 % $ 109,092 116,000 (6.0 ) %
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes $ 15,799 5,048 nm % 31,612 10,538 nm %
Add: Share-based compensation, net of taxes 6,584 3,573 84.3 % 11,601 6,719 72.7 %
Add: NetSpend M&A expenses, net of taxes* 1,122   3,288   (65.9 ) % 2,325   8,510   (72.7 ) %
Adjusted earnings $ 83,276   70,005   19.0 % $ 154,630   141,767   9.1 %
 
Basic EPS - Income from continuing operations attributable to
TSYS common shareholders
As reported (GAAP) $ 0.32   0.31   3.6 % $ 0.58   0.62   (5.8 ) %
 
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes 0.08 0.03 nm % 0.17 0.06 nm %
Add: Share-based compensation, net of taxes 0.04 0.02 85.8 % 0.06 0.04 72.7 %
Add: NetSpend M&A expenses, net of taxes* 0.01   0.02   (65.7 ) % 0.01   0.05   (72.7 ) %
Adjusted EPS ** $ 0.45   0.37   19.8 % $ 0.83   0.76   9.2 %
 
Average common shares and participating securities 186,373   187,738   187,058   187,277  
 
* 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 June 30, Six Months Ended June 30,
Percent Percent
2014   2013   Change 2014   2013   Change
Net income $ 111,340 60,561 83.8 % $ 162,965 119,710 36.1 %
Adjust for:
Deduct: Income from discontinued operations (50,133 ) (678 ) nm % (51,113 ) (693 ) nm %
Deduct: Equity in income of equity investments (3,600 ) (2,749 ) (31.0 ) % (7,696 ) (6,565 ) (17.2 ) %
Add: Income taxes 30,771 29,984 2.6 % 55,106 47,447 16.1 %
Add: Nonoperating expense 10,385 7,524 38.0 % 20,198 9,264 nm %
Add: Depreciation and amortization 60,961   39,006   56.3 % 120,995   79,857   51.5 %
EBITDA 159,724 133,648 19.5 % 300,455 249,020 20.7 %
Adjust for:
Add: Share-based compensation 9,988 5,211 91.7 % 17,599 9,804 79.5 %
Add: NetSpend M&A operating expenses* 1,182   1,246   (5.1 ) % 2,435   4,727   (48.5 ) %
Adjusted EBITDA $ 170,894   140,105   22.0 % $ 320,489   263,551   21.6 %
 
nm = not meaningful
* Excludes share-based compensation
 

 


Copyright © Business Wire 2014
Contact:

TSYS Investor Relations
Shawn Roberts, +1.706.644.6081
shawnroberts@tsys.com