EX-99.2 3 exhibit992.htm SUPPLEMENTAL INFORMATION PREPARED FOR USE WITH THE PRESS RELEASE

Exhibit 99.2


TSYS Announces Third Quarter 2006 Earnings

 

 

 

 

 

 

 

 

 

 

 

 

Page 6 of 11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TSYS
Financial Highlights
(Unaudited)
(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

Three months ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

 

 

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

2006

 

2005

 

Change

 

 

2006

 

2005

 

Change

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Electronic payment processing services

$

232,171

 

224,394

 

3.5

%

$

685,532

 

646,199

 

6.1

%

Merchant services

 

65,548

 

74,207

 

(11.7)

 

 

195,318

 

170,008

 

14.9

 

Other services

 

44,619

 

43,499

 

2.6

 

 

133,831

 

137,337

 

(2.6)

 

Revenues before reimbursables

 

342,338

 

342,100

 

0.1

 

 

1,014,681

 

953,544

 

6.4

 

Reimbursable items

 

99,477

 

79,869

 

24.6

 

 

268,589

 

228,652

 

17.5

 

Total revenues

 

441,815

 

421,969

 

4.7

 

 

1,283,270

 

1,182,196

 

8.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employment expenses

 

139,182

 

121,389

 

14.7

 

 

380,945

 

334,341

 

13.9

 

Net occupancy & equipment expenses

 

75,811

 

77,134

 

(1.7)

 

 

226,864

 

212,770

 

6.6

 

Other operating expense

 

55,088

 

71,245

 

(22.7)

 

 

178,027

 

191,449

 

(7.0)

 

Expenses before reimbursables

 

270,081

 

269,768

 

0.1

 

 

785,836

 

738,560

 

6.4

 

Reimbursable items

 

99,477

 

79,869

 

24.6

 

 

268,589

 

228,652

 

17.5

 

Total operating expenses

 

369,558

 

349,637

 

5.7

 

 

1,054,425

 

967,212

 

9.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

72,257

 

72,332

 

(0.1)

 

 

228,845

 

214,984

 

6.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

3,363

 

1,592

 

111.2

 

 

9,297

 

3,889

 

139.1

 

Interest expense

 

(235)

 

(84)

 

(179.8)

 

 

(364)

 

(259)

 

(40.5)

 

Gain (loss) on foreign currency translation, net

 

282

 

66

 

327.3

 

 

195

 

(761)

 

125.6

 

Other Income

 

3,410

 

1,574

 

116.6

 

 

9,128

 

2,869

 

218.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before Income Taxes, Minority Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and Equity in Income of Equity Investments

 

75,667

 

73,906

 

2.4

 

 

237,973

 

217,853

 

9.2

 

Income Taxes

 

22,380

 

26,777

 

(16.4)

 

 

78,492

 

78,186

 

0.4

 

Income before Minority Interest and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in Income of Equity Investments

 

53,287

 

47,129

 

13.1

 

 

159,481

 

139,667

 

14.2

 

Minority Interest

 

(183)

 

(64)

 

(185.9)

 

 

(448)

 

(176)

 

(154.5)

 

Equity in Income of Equity Investments

 

1,202

 

991

 

21.3

 

 

3,073

 

5,331

 

(42.4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

$

54,306

 

48,056

 

13.0

%

$

162,106

 

144,822

 

11.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

$

0.28

 

0.24

 

13.4

%

$

0.82

 

0.73

 

12.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share

$

0.28

 

0.24

 

13.3

%

$

0.82

 

0.73

 

12.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Declared Per Share

$

0.07

 

0.06

 

 

 

$

0.20

 

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Common Shares Outstanding

 

196,500

 

197,198

 

 

 

 

196,891

 

197,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Common and Common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equivalent Shares Outstanding

 

196,831

 

197,383

 

 

 

 

197,193

 

197,324

 

 

 

TSYS Announces Third Quarter 2006 Earnings

 

 

 

 

 

 

 

 

Page 7 of 11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TSYS

 

Segment Breakdown

 

(Unaudited)

 

(In thousands)

 

 

 

 

 

Three Months Ended September 30, 2006

 

Three Months Ended September 30, 2005

 

 

 

Domestic-
based
support
services

International-
based
support
services

Merchant
processing
services

Consolidated

 

Domestic-
based

support
services

International-
based
support
services

Merchant
processing
services

Consolidated

 

 

 

 

 

 

 

 

 

Revenues before reimbursables

$

242,584

44,320

59,723

346,627

 

244,302

31,389

70,333

346,024

 

Intersegment revenues

 

(4,258)

-

(31)

(4,289)

 

(3,867)

-

(57)

(3,924)

 

Revenues before reimbursables

 

 

 

 

 

 

 

 

 

 

 

from external customers

$

238,326

44,320

59,692

342,338

 

240,435

31,389

70,276

342,100

 

Total revenues

$

325,919

51,591

70,592

448,102

 

308,889

37,862

81,948

428,699

 

Intersegment revenues

 

(6,256)

-

(31)

(6,287)

 

(6,673)

-

(57)

(6,730)

 

Revenues from external customers

$

319,663

51,591

70,561

441,815

 

302,216

37,862

81,891

421,969

 

Depreciation and amortization

$

32,156

5,328

6,674

44,158

 

29,503

4,399

7,587

41,489

 

Intersegment expenses

$

3,668

2,343

7,599

13,610

 

5,627

(4,294)

(8,064)

(6,731)

 

Segment operating income

$

48,666

7,946

15,645

72,257

 

52,834

6,137

13,361

72,332

 

Income before income taxes, minority interest

 

 

 

 

 

 

 

 

 

 

 

and equity income of equity investments

 

52,688

6,602

16,377

75,667

 

54,823

5,483

13,600

73,906

 

Income tax expense

$

14,722

(31)

7,689

22,380

 

18,381

3,227

5,169

26,777

 

Equity in income of equity investments

$

-

1,202

-

1,202

 

-

991

-

991

 

Net Income

$

38,821

6,797

8,688

54,306

 

36,238

3,353

8,465

48,056

 

Identifiable assets

 

1,410,363

285,917

240,979

1,937,259

 

 

 

 

 

 

Intersegment eliminations

 

(416,964)

(195)

(143)

(417,302)

 

 

 

 

 

 

Total assets

 

993,399

285,722

240,836

1,519,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2006

 

Nine Months Ended September 30, 2005

 

 

 

Domestic-
based
support
services

International-
based
support
services

Merchant
processing
services

Consolidated

 

Domestic-
based
support
services

International-
based
support
services

Merchant
processing
services

Consolidated

 

 

 

 

 

 

 

 

 

Revenues before reimbursables

$

740,341

109,178

178,729

1,028,248

 

713,390

92,717

156,486

962,593

 

Intersegment revenues

 

(13,471)

-

(96)

(13,567)

 

(8,946)

-

(103)

(9,049)

 

Revenues before reimbursables

 

 

 

 

 

 

 

 

 

 

 

from external customers

$

726,870

109,178

178,633

1,014,681

 

704,444

92,717

156,383

953,544

 

Total revenues

$

963,855

128,163

211,659

1,303,677

 

904,700

109,604

182,877

1,197,181

 

Intersegment revenues

 

(20,311)

-

(96)

(20,407)

 

(14,882)

-

(103)

(14,985)

 

Revenues from external customers

$

943,544

128,163

211,563

1,283,270

 

889,818

109,604

182,774

1,182,196

 

Depreciation and amortization

$

95,759

14,101

20,446

130,306

 

84,209

12,416

12,073

108,698

 

Intersegment expenses

$

18,949

(15,448)

(23,864)

(20,363)

 

24,861

(21,833)

(18,022)

(14,994)

 

Segment operating income

$

176,412

12,029

40,404

228,845

 

176,346

8,143

30,495

214,984

 

Income before income taxes, minority interest

 

 

 

 

 

 

 

 

 

 

 

and equity income of equity investments

 

186,170

9,718

42,085

237,973

 

180,558

6,345

30,950

217,853

 

Income tax expense

$

58,636

2,461

17,395

78,492

 

61,003

4,294

12,889

78,186

 

Equity in income of equity investments

$

-

3,073

-

3,073

 

-

2,090

3,241

5,331

 

Net Income

$

128,352

9,064

24,690

162,106

 

118,692

4,773

21,357

144,822

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

Revenues for domestic-based services include electronic payment processing services and other services provided from the United States to clients domiciled in the United States or other countries. Revenues from international-based services include electronic payment processing services and other services provided from outside the United States to clients based mainly outside the United States. Revenues from merchant processing services include Vital's merchant processing and related services.

 

 

 

- more -

 

 

 

TSYS Announces Third Quarter 2006 Earnings

 

 

 

 

Page 8 of 11

 

 

 

 

 

 

 

 

 

TSYS

Balance Sheet

(Unaudited)

(In thousands)

 

 

 

 

 

 

Sept. 30, 2006

Dec 31, 2005

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

$

255,722

237,569

 

Restricted cash

 

38,069

29,688

 

Accounts receivable, net

 

233,359

184,532

 

Deferred income tax assets

 

20,147

15,264

 

Prepaid expenses and other current assets

 

45,365

45,236

 

Total current assets

 

592,662

512,289

 

Computer software, net

 

230,715

267,988

 

Property and equipment, net

 

266,993

267,979

 

Contract acquisition costs, net

 

172,988

163,861

 

Goodwill, net

 

143,595

112,865

 

Equity investments, net

 

60,410

42,731

 

Other intangible assets, net

 

26,349

13,580

 

Other assets

 

26,245

29,604

 

Total assets

$

1,519,957

1,410,897

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

$

44,673

29,464

 

Accrued salaries and employee benefits

 

65,451

84,348

 

Current portion of obligations under capital leases

 

2,337

2,078

 

Other current liabilities

 

163,557

161,122

 

Total current liabilities

 

276,018

277,012

 

Deferred income tax liabilities

 

72,145

89,478

 

Obligations under capital leases excluding current portion

 

1,740

3,555

 

Other long-term liabilities

 

30,636

24,398

 

Total liabilities

 

380,539

394,443

 

Minority interest in consolidated subsidiary

 

4,114

3,682

 

Shareholders' Equity:

 

 

 

 

Common stock

 

19,840

19,797

 

Additional paid-in capital

 

62,635

50,666

 

Treasury stock

 

(34,601)

(12,841)

 

Accumulated other comprehensive income

 

15,305

5,685

 

Retained earnings

 

1,072,125

949,465

 

Total shareholders' equity

 

1,135,304

1,012,772

 

Total liabilities and shareholders' equity

$

1,519,957

1,410,897

 

 

 

 

 

 

- more -

 

 

 

TSYS Announces Third Quarter 2006 Earnings

 

 

 

 

 

Page 9 of 11

 

 

 

 

 

 

 

 

 

 

 

TSYS

 

Cash Flow

 

(Unaudited)

 

(In thousands)

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

2006

2005

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net income

$

162,106

144,822

 

 

Adjustments to reconcile net income to net cash provided by

 

 

 

 

 

operating activities:

 

 

 

 

 

Minority interests in consolidated subsidiaries' net income

 

448

176

 

 

Equity in income of equity investments

 

(3,073)

(5,331)

 

 

(Gain) loss on currency translation adjustments, net

 

(195)

761

 

 

Depreciation and amortization

 

130,306

108,698

 

 

Share-based compensation

 

6,574

849

 

 

Excess tax benefit from share-based payment arrangements

 

1,800

-

 

 

Impairment of developed software

 

-

3,619

 

 

Charges for (recoveries of) bad debt expense and billing

 

 

 

 

 

adjustments

 

948

5,451

 

 

Charges for transaction processing provisions

 

7,914

7,634

 

 

Deferred income tax (benefit) expense

 

(24,150)

6,574

 

 

Loss on disposal of equipment, net

 

105

1,802

 

 

(Increase) decrease in:

 

 

 

 

 

Accounts receivable

 

(40,765)

(40,072)

 

 

Prepaid expenses and other assets

 

8,923

6,962

 

 

Increase (decrease) in:

 

 

 

 

 

Accounts payable

 

14,323

(59,241)

 

 

Accrued salaries and employee benefits

 

(18,936)

4,408

 

 

Other liabilities

 

(14,849)

(63,175)

 

 

Net cash provided by operating activities

 

231,479

123,937

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchase of property and equipment, net

 

(21,203)

(33,540)

 

 

Additions to licensed computer software from vendors

 

(9,650)

(10,049)

 

 

Additions to internally developed computer software

 

(13,699)

(17,435)

 

 

Cash acquired in acquisition

 

4,341

38,798

 

 

Cash used in acquisitions

 

(74,919)

(95,796)

 

 

Dividends received from equity investments

 

2,371

1,658

 

 

Contract acquisition costs

 

(39,578)

(11,756)

 

 

Net cash used in investing activities

 

(152,337)

(128,120)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from borrowings of long-term debt

 

-

48,143

 

 

Principal payments on long-term debt borrowings and

 

 

 

 

 

capital lease obligations

 

(1,561)

(49,360)

 

 

Proceeds from exercise of stock options

 

3,725

2,920

 

 

Repurchase of common stock

 

(21,843)

-

 

 

Excess tax benefit from share-based payment arrangements

 

(1,800)

-

 

 

Dividends paid on common stock

 

(37,504)

(27,582)

 

 

Net cash used in financing activities

 

(58,983)

(25,879)

 

 

Effect of foreign currency translation on cash and cash equivalents

 

(2,006)

(2,388)

 

 

Net increase in cash and cash equivalents

 

18,153

(32,450)

 

 

Cash and cash equivalents at beginning of year

 

237,569

231,806

 

 

Cash and cash equivalents at end of period

$

255,722

199,356

 

 

 

 

 

 

 

 

- more -

 

 

 

TSYS Announces Third Quarter 2006 Earnings

 

 

 

 

 

 

 

 

Page 10 of 11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographic Area Data:

 

 

 

 

 

 

 

 

 

 

The following geographic area data represents revenues for the three months ended September 30 based on where the client is domiciled:

 

 

 

 

 

 

Three Months Ended September 30,

 

(dollars in millions):

 

2006

%

 

 

2005

%

 

% Chg

 

United States

$

359.6

81.4

%

$

358.1

84.9

%

0.4

%

Europe*

 

43.7

9.9

 

 

34.2

8.1

 

27.6

 

Canada

 

25.4

5.8

 

 

23.2

5.5

 

9.5

 

Japan

 

5.0

1.1

 

 

4.0

0.9

 

26.8

 

Mexico

 

3.2

0.7

 

 

1.9

0.5

 

63.2

 

Other*

 

4.9

1.1

 

 

0.6

0.1

 

nm

 

 

$

441.8

100.0

%

$

422.0

100.0

%

4.7

%

 

 

 

 

 

 

 

 

 

 

 

The following geographic area data represents revenues for the nine months ended September 30 based on where the client is domiciled:

 

 

 

 

 

 

Nine Months Ended September 30,

 

(dollars in millions):

 

2006

%

 

 

2005

%

 

% Chg

 

United States

$

1,069.8

83.3

%

$

998.0

84.4

%

7.2

%

Europe*

 

112.6

8.8

 

 

98.9

8.4

 

14.5

 

Canada

 

71.5

5.6

 

 

66.6

5.6

 

7.3

 

Japan

 

13.4

1.0

 

 

11.6

1.0

 

15.5

 

Mexico

 

8.5

0.7

 

 

5.3

0.4

 

60.9

 

Other*

 

7.5

0.6

 

 

1.8

0.2

 

nm

 

 

$

1,283.3

100.0

%

$

1,182.2

100.0

%

8.5

%

 

Geographic Area Revenue by Operating Segment:

 

 

 

 

 

 

 

 

The following table reconciles segment revenues to revenues by reporting segment for the three months ended September 30:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

Domestic-based

 

 

International-based

 

Merchant processing

 

 

 

support services

 

 

support services

 

services

 

(dollars in millions):

 

2006

2005

 

 

2006

2005

 

2006

2005

 

United States

$

289.4

276.4

 

 

-

-

 

70.3

81.7

 

Europe*

 

0.4

0.4

 

 

43.3

33.9

 

-

-

 

Canada

 

25.2

23.0

 

 

-

-

 

0.1

0.1

 

Japan

 

-

-

 

 

5.0

4.0

 

-

-

 

Mexico

 

3.2

1.9

 

 

-

-

 

-

-

 

Other*

 

4.7

0.5

 

 

-

-

 

0.2

0.1

 

 

$

322.9

302.2

 

 

48.3

37.9

 

70.6

81.9

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table reconciles segment revenues to revenues by reporting segment for the nine months ended September 30:

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

Domestic-based

 

 

International-based

 

Merchant processing

 

 

 

support services

 

 

support services

 

Services

 

(dollars in millions):

 

2006

2005

 

 

2006

2005

 

2006

2005

 

United States

$

859.0

815.7

 

 

-

-

 

210.8

182.1

 

Europe*

 

1.1

1.0

 

 

111.5

98.0

 

-

-

 

Canada

 

71.1

66.4

 

 

-

-

 

0.4

0.3

 

Japan

 

-

-

 

 

13.4

11.6

 

-

-

 

Mexico

 

8.5

5.3

 

 

-

-

 

-

-

 

Other*

 

7.0

1.4

 

 

-

-

 

0.5

0.4

 

 

$

946.7

889.8

 

 

124.9

109.6

 

211.7

182.8

 

 

 

 

 

 

 

 

 

 

 

 

 

*Geographic area revenue by operating segment has been restated in 2005 to reflect the changes in operating segment.

 

nm = not meaningful

 

 

 

 

 

 

 

 

 

 

- more -

 

 

 

 

TSYS Announces Third Quarter 2006 Earnings

Page 11 of 11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Information:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts on File at September 30,

 

 

(in millions)

 

2006

%

 

2005

%

 

% Change

 

 

Consumer

 

259.3

64.8

%

264.1

61.4

%

(1.8)

%

 

Retail*

 

51.5

12.9

 

85.4

19.9

 

(39.7)

 

 

Commercial

 

32.5

8.1

 

30.1

7.0

 

7.9

 

 

Government services/EBT

 

20.7

5.2

 

18.3

4.3

 

13.3

 

 

Stored Value*

 

31.7

7.9

 

24.7

5.7

 

28.3

 

 

Debit

 

4.3

1.1

 

7.5

1.7

 

(41.7)

 

 

 

 

400.0

100.0

%

430.1

100.0

%

(7.0)

%

 

 

 

 

 

 

 

 

 

 

 

 

* Certain accounts previously classified as Retail have been reclassified as Stored Value to conform with the presentation adopted in the second quarter of 2006.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

September 30, 2006

 

 

September 30, 2005

 

% Change

 

 

QTD Average Accounts on File

 

385.8

 

 

 

424.6

 

 

(9.2)

%

 

YTD Average Accounts on File

 

413.6

 

 

 

389.4

 

 

6.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts on File at September 30,

 

 

(in millions)

 

2006

%

 

2005

%

 

% Change

 

 

Domestic

 

334.8

 

83.7

%

 

375.3

 

87.3

%

 

(10.8)

%

 

 

International

 

65.2

 

16.3

 

 

54.8

 

12.7

 

 

19.0

 

 

 

 

 

400.0

 

100.0

%

 

430.1

 

100.0

%

 

(7.0)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: The accounts on file between domestic and international is based on the geographic domicile of processing clients.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Growth in Accounts on File (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

September 2005 to September 2006

 

 

September 2004 to September 2005

 

 

 

 

 

Beginning balance

 

430.1

 

 

 

315.3

 

 

 

 

 

 

Change in accounts on file due to:

 

 

 

 

 

 

 

 

 

 

 

 

Internal growth of existing clients

 

38.0

 

 

 

44.5

 

 

 

 

 

 

New clients

 

33.1

 

 

 

79.3

 

 

 

 

 

 

Purges/Sales

 

(13.9)

 

 

 

(7.9)

 

 

 

 

 

 

Deconversions

 

(87.3)

 

 

 

(1.1)

 

 

 

 

 

 

Ending balance

 

400.0

 

 

 

430.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Employees (FTEs):

 

2006

 

 

2005

 

 

 

 

 

At September 30,

 

6,779

 

 

 

6,522

 

 

 

 

 

 

Quarterly average for period ended September 30,

6,639

 

 

 

6,483

 

 

 

 

 

 

YTD average for period ended September 30,

 

6,616

 

 

 

6,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- ### -