10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

for the fiscal year ended December 31, 2017

Commission file number    1-10254

TOTALSYSTEM SERVICES, INC.

(Exact name of registrant as specified in its charter)

Georgia	58-1493818
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
One TSYS Way
Columbus, Georgia	31901
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (706) 644-6081

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.10 Par Value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:         NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES  [X] NO [  ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

YES [  ] NO [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. 

YES [X] NO [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES [X] NO [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X]	Accelerated Filer                [  ]
Non-accelerated filer    [  ] ( Do not check if a smaller reporting company)
	Smaller reporting company  [  ]
	Emerging growth company  [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES [  ] NO [X]

As of June 30, 2017, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $10,573,813,000 based on the closing sale price as reported on the New York Stock Exchange.

As of February 16, 2018, there were 181,725,568 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Incorporated Documents	Form 10-K Reference Locations
Portions of the Annual Report to Shareholders for the year ended December 31, 2017 (“Annual Report”)	Parts I, II, III and IV
Portions of the 2018 Proxy Statement for the Annual Meeting of Shareholders to be held April 26, 2018 (“Proxy Statement”)	Part III

Table of Contents

		Page
Part I
Safe Harbor Statement		1
Item 1.	Business	1
Item 1A.	Risk Factors	5
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	14
Item 3.	Legal Proceedings	14
Item 4.	Mine Safety Disclosures	14
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6.	Selected Financial Data	15
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 8.	Financial Statements and Supplementary Data	16
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	16
Item 9A.	Controls and Procedures	16
Item 9B.	Other Information	17
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	17
Item 11.	Executive Compensation	17
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	17
Item 13.	Certain Relationships and Related Transactions, and Director Independence	18
Item 14.	Principal Accountant Fees and Services	18
Part IV
Item 15.	Exhibits and Financial Statement Schedules	18
Item 16.	Form 10-K Summary	23

PART I

Safe Harbor Statement

We have included or incorporated by reference in this Annual Report on Form 10-K, and from time to time our management may make, statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are not historical facts but instead represent only our belief regarding future events, many of which by their nature are inherently uncertain and outside our control.  These statements include statements other than historical information or statements of current condition and may relate to our future plans, objectives and results, among other things, and also include  (without limitation) statements made in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this annual report.  It is possible that our actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements.  Important factors that could cause actual results to differ from those in the forward-looking statements include, among others, those discussed under “Risk Factors” in Part I, Item 1A of this annual report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this annual report.

Accordingly, you are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made.  We undertake no obligation to update publicly or revise any forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made, whether as a result of new information, future events or otherwise except as required by applicable law.  You should, however, consult further disclosures we may make in future filings of our Annual Reports on Form 10-K, Quarterly Reports on Form  10-Q and Current Reports on Form 8-K, and any amendments thereto.

Item 1. Business

Business. Based in Columbus, Georgia, and traded on the New York Stock Exchange under the symbol “TSS,” we are a global payment solutions provider that provides payment processing services, merchant services and related payment services to financial and nonfinancial institutions. In addition, we provide general purpose reloadable (“GPR”) prepaid and payroll cards, demand deposit accounts and other financial service solutions to the underbanked and other consumers and businesses. The services we provide are divided into three operating segments, Merchant Solutions, which accounted for 49% of our revenues in 2017, Issuer Solutions, which accounted for 36% of our revenues in 2017 and Netspend, which accounted for 15% of our revenues in 2017. 

Seasonality.  Due to the somewhat seasonal nature of the credit card industry, our revenues and results of operations have generally increased in the fourth quarter of each year because of increased transaction and authorization volumes during the traditional holiday shopping season.

Intellectual Property.  Our intellectual property portfolio is a component of our ability to be a leading provider of transaction processing and other payment-related services.  We diligently protect and work to build our intellectual property rights through patent, servicemark and trade secret laws.  We also use various licensed intellectual property to conduct our business.  In addition to using our intellectual property in our own operations, we grant licenses to certain of our clients to use our intellectual property.

Major Customers.  A significant amount of our revenues is derived from long-term contracts with large clients.  The loss of one of our large clients could have a material adverse effect on our financial position, results of operations and cash flows.  See “Major Customer” and “Operating Segments” under the “Financial Review” Section on pages 17 through 21, and Note 20 on pages 72 through 74 of the Annual Report which are incorporated in this document by reference.

Competition.  Each of our three business segments encounters vigorous competition in connection with the services it provides.

Issuer Solutions. Our Issuer Solutions segment encounters competition from credit card processing firms, third-party card processing software vendors and various other firms that provide products and services to credit card issuers in the United States and internationally. The United States market for third party processing for credit card issuers is primarily serviced by three vendors, including TSYS, with our largest competitor being a subsidiary

1

of First Data Corporation. We believe that as of December 31, 2017, we are the largest third party processor for credit card issuers in North America and one of the largest in Europe based on net revenues derived from solutions for credit card issuers. Further, we believe that during 2017 we provided issuer processing services for approximately 40% of the domestic Visa and Mastercard credit card accounts issued in the United States, approximately 80% issued in Canada and approximately 20% issued in TSYS’ Home European Markets (UK, Netherlands, Italy, Germany and Switzerland). The principal methods of competition between us and our competitors are system performance and reliability, servicing capability, breadth of features and functionality, disaster recovery capabilities and business continuity preparedness, data security, scalability and flexibility of infrastructure and price. 

Merchant Solutions.    Our Merchant Solutions segment competes with financial institutions and merchant acquirers who provide businesses with merchant services and related services. Our primary competitors include First Data Corporation (and its alliances), Worldpay, Inc., Global Payments Inc. and Elavon, Inc. Additionally, payment networks such as Visa and Mastercard are increasingly offering products and services that compete with our products and services. We also provide third party processing and related services to merchant acquirers, Independent Sales Organizations (“ISOs”) and financial institutions. We believe that as of December 31, 2017, we are the sixth largest merchant acquirer in the United States based on net revenue and one of the top two providers of third party processing services. The principal methods of competition between us and our competitors include quality of distribution partners, breadth of features and functionality, service levels, system performance and reliability, data security and price.

Netspend.    Our Netspend segment primarily competes with other prepaid program managers to provide the underbanked and other consumers and businesses with financial service solutions. Our primary competitors in this space include Green Dot Corporation, InComm and First Data Corporation. As of December 31, 2017, we believe that we are the largest prepaid program manager in the United States based on gross dollar volume (total spending on the accounts we manage) processed during 2017. The principal methods of competition between us and our competitors include diversity and strength of distribution, breadth and strength of innovative features and functionality, quality of service, reliability of system performance and security and price.

Regulation and Examination.  Government regulation affects key aspects of our business, in the U.S. as well as internationally.  In addition, we are registered with Visa, Mastercard, American Express and the Discover Network as a service provider and are subject to their respective rules which subject us to a variety of fines or penalties that may be levied by the card networks for certain acts or omissions. Set forth below is a brief summary of some of the significant laws and regulations that apply to us. These descriptions are not exhaustive and are qualified in their entirety by reference to the particular statutory or regulatory provision, which provisions are subject to change.

Banking Laws and Regulations.  Because we provide electronic payment processing services to banks and other financial institutions, we are subject to examination by the Federal Financial Institutions Examination Council (“FFIEC”), an interagency body comprised primarily of federal banking regulators, and also subject to examination by the various state financial regulatory agencies which supervise and regulate the financial institutions for which we provide electronic payment processing and other payment related services. The FFIEC examines large data processors in order to identify and mitigate risks associated with systemically significant service providers, including specifically the risks they may pose to the banking industry.

Money Transmitter and Payment Instrument Laws and Regulations.Our Netspend business is subject to money transfer and payment instrument licensing regulations. We have obtained licenses to operate as a money transmitter in 48 states and the District of Columbia. The remaining U.S. jurisdictions either do not currently regulate money transmitters or have rendered a regulatory determination or a legal interpretation that the money services laws of that jurisdiction do not require us to obtain a license in connection with the conduct of our business.

In those states where we are licensed as a money transmitter, our Netspend business is subject to direct supervision and regulation by the relevant state banking departments or similar agencies charged with enforcement of the money transmitter statutes and we must comply with various requirements, such as those related to the maintenance of a certain level of net worth, surety bonding, selection and oversight of our authorized agents, maintaining permissible investments in an amount equal to our outstanding payment obligations, recordkeeping and reporting and disclosures to consumers. Our Netspend business is also subject to periodic examinations by the relevant licensing authorities, which may include reviews of our compliance

2

practices, policies and procedures, financial position and related records, various agreements that we have with our issuing banks, distributors and other third parties, privacy and data security policies and procedures and other matters related to our business.

Privacy, Information Security, and Other Business Practices Regulation.    Aspects of our business are also subject, directly or indirectly, to business and trade practices regulation in the United States, the European Union and elsewhere.  For example, in the United States, we and our financial institution clients are, respectively, subject to the Federal Trade Commission’s and the federal banking regulators’ privacy and information safeguarding requirements under the Gramm-Leach-Bliley Act. These requirements limit the manner in which personal information may be collected, stored, used and disclosed. The Federal Trade Commission’s information safeguarding rules require us to develop, implement and maintain a written, comprehensive information security program containing safeguards that are appropriate for our size and complexity, the nature and scope of our activities and the sensitivity of any customer information at issue. Our financial institution clients in the United States are subject to similar requirements under the guidelines issued by the federal banking regulators. As part of their compliance with these requirements, each of our U.S. financial institution clients is expected to have a program in place for responding to unauthorized access to, or use of, customer information that could result in substantial harm or inconvenience to customers and they are also responsible for our compliance efforts as a major service provider.  In addition, regulators are proposing new laws or regulations which could require us to adopt certain cybersecurity and data handling practices. In many jurisdictions consumers must be notified in the event of a data breach, and such notification requirements continue to increase in scope and cost.  The changing privacy laws in the United States, Europe and elsewhere, including the adoption by the European Union of the General Data Protection Regulation, which will become effective in May 2018, create new individual privacy rights and impose increased obligations on companies handling personal data.  Information concerning our cybersecurity risks and how a cybersecurity incident could materially affect our business is discussed under the caption “Security breaches of our systems, including as a result of cyber-attacks, may damage client relations, our reputation and expose us to financial liability” under “Risk Factors” in Part I, Item IA of this annual report.

Anti-money Laundering and Counter Terrorist Regulation.  The Financial Crimes Enforcement Network of the U.S. Department of the Treasury (“FinCEN”) has issued a rule regarding the applicability of the Bank Secrecy Act's anti-money laundering provisions to “prepaid access programs.” This rulemaking clarifies the anti-money laundering obligations for entities, such as our Netspend business and its distributors, engaged in the provision and sale of prepaid access devices like our GPR prepaid cards. Our Netspend business has registered with FinCEN as a money services business. This registration results in our having direct responsibility to maintain and implement an anti-money laundering compliance program.

We are subject to anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and other laws that generally prohibit the making or offering of improper payments to foreign government officials and political figures for the purpose of obtaining or retaining business or to gain an unfair business advantage. In addition, as are all U.S. persons, we are also subject to regulations imposed by the U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”) which prohibit or restrict financial and other transactions with specified countries and designated individuals and entities such as terrorists and narcotics traffickers. We have procedures and controls in place which are designed to protect against having direct business dealings with such prohibited countries, individuals or entities. We also have procedures and controls in place which are designed to allow our processing clients to protect against having direct business dealings with such prohibited countries, individuals or entities.

The Dodd-Frank Act.    We and the rest of the financial services industry continue to experience increased legislative and regulatory scrutiny, including the enactment of additional legislative and regulatory initiatives such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Reform Act”) in 2010. The Reform Act has resulted in significant structural and other changes to the regulation of the financial services industry.  The Reform Act, among other things, provides for the regulation and oversight by the Board of Governors of the Federal Reserve System (“Board”) of debit interchange fees that are typically paid by acquirers and charged or received by a payment card network for the purpose of compensating an issuer for its involvement in an electronic debit transaction.  In accordance with the Reform Act, the Board capped the maximum U.S. debit interchange fee assessed for debit cards issued by large financial institutions at twenty-one cents per transaction plus five basis points, before applying a fraud prevention adjustment of up to an additional one cent. The cap on interchange fees has not had a significant negative impact on our business.

3

The Reform Act also created a new Consumer Financial Protection Bureau (“CFPB”) with responsibility for regulating consumer financial products and services and enforcing most federal consumer protection laws in the area of financial services, including consumer credit and the prepaid card industry. For example, the CFPB has promulgated a new rule regarding prepaid financial products, which, among other things, will establish new disclosure requirements specific to prepaid accounts, eliminate certain fees that may currently be imposed on prepaid accounts, and make it economically unfeasible for a prepaid card provider such as our Netspend business to offer courtesy overdraft protection on prepaid accounts. The rule is scheduled to become effective April 1, 2019.  Similarly, other future actions of the CFPB may make payment card or product transactions generally less attractive to card issuers, acquirers, consumers and merchants by further regulatory disclosures, payment card practices, fees, routing and other matters with respect to credit, debit and prepaid cards, and thus negatively impact our business.  In addition, the Reform Act created a Financial Stability Oversight Council that has the authority to determine whether nonbank financial companies such as TSYS should be supervised by the Board because they are systemically important to the U.S. financial system. To date, the Financial Stability Oversight Council does not appear to be focused on regulating entities such as TSYS.  However, any such future designation would result in increased regulatory burdens on our business. 

State Wage Payment Laws and Regulations. The use of payroll card programs as a means for an employer to remit wages or other compensation to its employees or independent contractors is governed by state labor laws related to wage payments, which laws are subject to change. The paycard portion of our Netspend business includes payroll cards and convenience checks and is designed to allow employers to comply with applicable state wage and hour laws. Most states permit the use of payroll cards as a method of paying wages to employees, either through statutory provisions allowing such use or, in the absence of specific statutory guidance, the adoption by state labor departments of formal or informal policies allowing for their use. Nearly every state allowing payroll cards places certain requirements and/or restrictions on their use as a wage payment method, the most common of which involve obtaining the prior written consent of the employee, limitations on fees and disclosure requirements.

Telephone Consumer Protection Act. We are subject to the Federal Telephone Consumer Protection Act and various state laws to the extent we place telephone calls and short message service (“SMS”) messages to clients and consumers. The Telephone Consumer Protection Act regulates certain telephone calls and SMS messages placed using automatic telephone dialing systems or artificial or prerecorded voices.

Escheat Laws.  We are subject to unclaimed or abandoned property laws in the United States and in foreign countries that require us to transfer to certain government authorities the unclaimed property of others that we hold when that property has been unclaimed for a certain period of time. Moreover, we are subject to audit by state regulatory authorities with regard to our escheatment practices.

Employees.  As of December 31, 2017, we had approximately 11,000 employees.

Available Information.  Our website address is www.tsys.com.  You may obtain free electronic copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports in the Investor Relations section of our website under the heading “SEC Filings.”  These reports are available on our website as soon as reasonably practicable after we electronically file them with the Securities and Exchange Commission.

We have adopted a Code of Business Conduct and Ethics for our directors, officers and employees and have also adopted Corporate Governance Guidelines.  Our Code of Business Conduct and Ethics, Corporate Governance Guidelines and the charters of our board committees are available in the Corporate Governance section of our website at www.tsys.com under “Investor Relations” then “Corporate Governance.”

For more information about our business see the “Financial Overview” Section on pages 12 and 13, the “Financial Review” Section on pages 14 through 32 and Note 1, Note 7, Note 14, Note 20, Note 22 and Note 25 of Notes to Consolidated Financial Statements on pages 38 through 51, pages 54 and 55, pages 63 through 65, pages 72 through 74, pages 74 through 76, and pages 77 and 78 of the Annual Report which are incorporated in this document by reference.

4

Item 1A. Risk Factors

This section highlights specific risks that could affect our business and us.  Although this section attempts to highlight key factors, please be aware that other risks may prove to be important in the future.  New risks may emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance.  In addition to the factors discussed elsewhere or incorporated by reference in this report, among the other factors that could cause actual results to differ materially are the following:

Security breaches of our systems, including as a result of cyber-attacks, may damage client relations, our reputation and expose us to financial liability.

In order to provide our services, we process, store and transmit sensitive business information and personal consumer information which may include credit and debit card numbers, names and addresses, social security numbers, driver’s license numbers, bank account numbers and other types of personal information or sensitive business information. Under the card network rules, various federal, state and international laws, and client contracts, we are responsible for information provided to us by financial institutions, merchants, ISOs and others and for our failure to protect this information. Some of this information is also processed and stored by financial institutions, merchants and other entities, as well as third-party service providers to whom we outsource certain functions and other agents, which we refer to collectively as our associated third parties.  The confidentiality of the sensitive business information and personal consumer information that resides on our systems and our associated third parties’ systems is critical to our business. While we maintain controls and procedures to protect the sensitive data we collect, we cannot be certain that these measures will be successful or sufficient to counter all current and emerging technology threats that are designed to breach these systems in order to gain access to confidential information.

Certain of our computer systems and certain of our associated third parties’ computer systems have been, and could be in the future, subject to breach, and our data protection measures may not prevent unauthorized access.  Information security risks for us and our competitors have substantially increased in recent years in part due to the proliferation of new technologies and the increased sophistication, resources and activities of hackers, terrorists, activists, organized crime, and other external parties, including hostile nation-state actors. The techniques used by these bad actors to obtain unauthorized access, disable or degrade service, sabotage systems or utilize payment systems in an effort to perpetrate financial fraud change frequently and are often difficult to detect.  Although we are not aware of any material breach of our computer systems or of our associated third parties’ computer systems that have had a material impact on us or caused us to incur material losses relating to cyber-attacks or other information security breaches to date, we and others in our industry are regularly the subject of attempts by bad actors to gain unauthorized access to these computer systems and data or to obtain, change or destroy confidential data (including personal consumer information of individuals) through a variety of means, including computer viruses, malware and phishing. In the future, these attacks may result in unauthorized individuals obtaining access to our confidential information or confidential information provided to us by financial institutions, merchants, ISOs and others, or otherwise accessing, damaging, or disrupting our computer systems or infrastructure. In addition, we expect bad actors to utilize increasingly sophisticated technology and techniques in the future to exploit vulnerabilities that may, or may not, be generally known. As a result, we must continuously develop and enhance our controls, processes, and practices designed to protect our computer systems, software, data and networks from attack, damage, or unauthorized access.    This continuous development and enhancement will require us to expend additional resources, including to investigate and remediate significant information security vulnerabilities detected. Despite our investments in security measures, we are unable to assure that any security measures will not be subject to system or human error.  In addition, insider or employee cyber and security threats also pose a risk to all large companies, including ours.  If one or more of the events described above were to occur, our computer systems or our associated third parties’ computer systems could be compromised and the information stored there could be accessed, publicly disclosed, lost, changed, controlled or stolen.  While we maintain insurance coverage that may cover certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses.

5

We could also be subject to liability for claims relating to misuse of personal consumer information, such as unauthorized marketing purposes and violation of data privacy laws. We cannot provide assurance that the contractual requirements related to security and privacy that we impose on our associated third parties’ who have access to customer data and personal consumer information will be followed or will be adequate to prevent the unauthorized use or disclosure of data. In addition, we have obligations under certain agreements to take certain protective measures to ensure the confidentiality of personal consumer information.

A breach of our systems processing or storing sensitive business information or personal consumer information may cause those systems to be unavailable; may cause our clients and consumers to lose confidence in our services or deter the use of electronic payments generally; significantly harm our reputation;  distract our management; delay future product rollouts; expose us to financial liability (as a result of uninsured liabilities, potential breaches of contract, litigation and penalties and fines from regulators and the card networks); result in the loss of our financial institution sponsorships; increase our risk of regulatory scrutiny; adversely affect our continued card network registration; cause us to modify our protective measures which would increase our expenses; and increase our expenses from containment and remediation costs, all of which could have a material adverse and long-term effect on our revenues, profitability, financial condition and future growth. Further, if we were to be removed from networks’ lists of PCI DSS compliant service providers, our existing clients may cease utilizing our services, and prospective clients may delay or choose not to consider us for their processing needs. In addition, card networks could refuse to allow us to process through their networks.

Consolidation among financial institutions and retail clients, including the merger of TSYS clients with entities that are not TSYS clients or the sale of portfolios by TSYS clients to entities that are not TSYS clients could materially impact our financial position and results of operation.

Consolidation among financial institutions, particularly in the area of credit card operations, and consolidation in the retail industry, continues to be a major risk.  Specifically, we face the risk that our clients may merge with entities that are not our clients, our clients may sell portfolios to entities that are not our clients or our financial institution clients may otherwise cease to exist, thereby negatively impacting our existing agreements and projected revenues with these clients.  In addition, consolidation among financial institutions has led to an increasingly concentrated client base at TSYS which results in a changing client mix toward larger clients.  Continued consolidation among financial institutions could increase the bargaining power of our current and future clients and further increase our client concentration.  Consolidation among financial institutions and retail clients and the resulting loss of any significant client by us could have a material adverse effect on our financial position and results of operations.

If we do not obtain new clients or renew or renegotiate our agreements on favorable terms with our clients, our business will suffer.

A significant amount of our revenues is derived from long-term contracts with large clients.  The financial position of these clients and their willingness to pay for our products and services are affected by general market positions, competitive pressures and operating margins within their industries.  When our long-term contracts expire, the time of renewal or renegotiation presents our clients with the opportunity to consider other providers, transition all or a portion of the services we provide in-house or seek lower rates for our services.  The loss of our contracts with existing clients or renegotiation of contracts at reduced rates or reduced service levels could have a material adverse effect on our financial position and results of operation.

For potential clients of our business segments, switching from one vendor of core processing or related services (or from an internally-developed system) to a new vendor is a significant undertaking. As a result, potential clients often resist change. We seek to overcome this resistance through strategies such as making investments to enhance the functionality of our systems. However, there can be no assurance that our strategies for overcoming potential clients’ reluctance to change vendors will be successful, and this resistance may adversely affect our growth.

Economic and geopolitical conditions could adversely affect our business.

A significant portion of our revenues is derived from the number of consumer payment transactions that we process which may be affected by, among other things, overall economic conditions. The payment processing

6

industry depends heavily upon the overall level of consumer, business and government spending. Any change in economic factors, including a sustained deterioration in general economic conditions or consumer confidence, particularly in the United States or Europe, or increases in interest rates in key countries in which we operate may adversely affect our financial performance by reducing the number or average purchase amount of transactions involving credit, debit, GPR prepaid and other payment-related cards. Future reductions in consumer spending through credit, debit, GPR prepaid and other payment-related card usage through methods that we process, including through an increase in the number of cash transactions, will result in our having fewer transactions to process and could result in a decrease in our revenues and profits. A weakening in the economy could also force some retailers to close, resulting in exposure to potential credit losses and declines in transactions. Additionally, credit card issuers may reduce credit limits and become more selective in their card issuance practices. Any of these developments could have a material adverse impact on our financial position and results of operation.  

Our ability to anticipate and respond to changing industry and client needs and preferences may affect our competitiveness or demand for our products, which may adversely affect our financial results.

The payment processing markets in which we compete are subject to rapid and significant technological changes, new product introductions, including mobile payment applications, evolving competitive landscape, developing industry standards, and changing client and consumer needs and preferences. We expect that new services and technologies applicable to the payment processing markets will continue to emerge. These changes in technology may limit the competitiveness of and demand for our services.  Also, our clients continue to adopt new technology for business and personal uses.  We must anticipate and respond to these changes in order to remain competitive within our markets.  If we are unable to effectively respond to these changes, the competitiveness of and demand for our services and products will be materially impaired and may result in our services being removed from the payments value chain.  Our future success will depend in part on our ability to anticipate and respond to new competitors and to develop or adapt to technological changes and evolving industry standards on a timely basis.  Our failure to do so could have a material adverse effect on our financial position and results of operation.

There may be a decline in the use of cards as a payment mechanism or adverse developments with respect to the card industry in general.

If the number of electronic payment transactions of the type we process does not continue to grow or if businesses or consumers do not continue to adopt our services, it could have a material adverse effect on the profitability of our business, financial position and results of operations.  We believe future growth in the use of credit, debit and GPR prepaid cards and other electronic payments will be driven by the cost, ease-of-use, and quality of products and services offered to consumers and businesses.  In order to consistently increase and maintain our profitability, businesses and consumers must continue to use electronic payment methods that we process, including credit, debit and GPR prepaid cards.

Conversions and deconversions of client portfolios may not occur as scheduled which may negatively impact our financial results.

The timing of the conversion of card portfolios of new payment processing clients to our processing systems and the deconversion of existing clients to other systems impacts our revenues and expenses.  Due to a variety of factors, conversions and deconversions may not occur as scheduled and this may have a material adverse effect on our financial position and results of operations.

Acquisitions and integrating such acquisitions create certain risks and may affect our financial results.

We have acquired businesses both in the U.S. and internationally and will continue to explore opportunities for strategic acquisitions in the future. The acquisition and integration of businesses involve a number of risks. Core risks are in the area of valuation (negotiating a fair price for the business based on inherently limited diligence) and integration and conversion (managing the complex process of integrating the acquired company's people, services, technology and other assets to realize the projected value of the acquired company and the synergies projected to be realized in connection with the acquisition). In addition, international acquisitions often involve additional or increased risks including, for example: managing geographically separated organizations, systems, and facilities; integrating personnel with diverse business backgrounds and organizational cultures; complying with foreign regulatory requirements; fluctuations in currency exchange rates; enforcement of

7

intellectual property rights in some foreign countries; difficulty entering new foreign markets due to, among other things, customer acceptance and business knowledge of those new markets; and general economic and political conditions.

If the integration and conversion process when acquiring a business does not proceed smoothly, the following factors, among others, could have an adverse effect on our financial position and results of operations, and result in a loss of projected synergies:

●if we are unable to successfully integrate the benefits plans, duties and responsibilities, and other factors of interest to the management and employees of the acquired business, we could lose employees to our competitors, which could significantly affect our ability to operate the business and complete the integration;

●if the integration process causes any delays with the delivery of our services, or the quality of those services, we could lose clients to our competitors, which would reduce our revenues and earnings;

●the acquisition may otherwise cause disruption to the acquired company’s business and operations and relationships with financial institution sponsors, customers, merchants, employees and other partners, as applicable;

●the acquisition and the related integration could divert the attention of our management from other strategic matters including possible acquisitions and alliances and planning for new product development; and

●the costs related to the integration of the acquired company’s business and operations into ours and the financing of the transaction may be greater than anticipated.

A negative perception of our company in the marketplace may affect our brands and reputation, which are key assets of our business.

Our brands and their attributes are key assets of our business.  The ability to attract and retain business clients and consumers to TSYS and Netspend branded products depends highly upon the external perceptions of our company and our industry’s quality of service, use and protection of account holder data, regulatory compliance, financial condition, corporate responsibility and other factors.  Negative perception or publicity, particularly in light of the rapid, widespread use of social media channels, could cause damage to our brands and reputation.

If business clients and consumers turn away from our brand and products, we may be required to incur additional liabilities and costs, result in greater regulatory or legislative scrutiny, and materially and adversely affect our financial position, results of operations and prospects for future growth and overall business.

Our business may be adversely affected by currency, geopolitical and other risks associated with foreign operations and, as we pursue international expansion, we may incur higher than anticipated costs and will become more susceptible to these risks.

We provide services to our clients worldwide.  As a result, our revenues derived from international operations are subject to risk of loss from foreign currency exchange rates.  Revenue and profit generated by international operations will increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates.  We have not entered into foreign exchange forward contracts to mitigate the risks associated with our foreign operations.  In addition, we may become subject to exchange control regulations that might restrict or prohibit the conversion of our foreign currency into U.S. dollars.  The occurrence of any of these factors could decrease the value of revenues we receive from international operations and adversely affect our financial position and results of operations.  In addition, our revenues derived from international operations are subject to risk of loss as a result of social and geopolitical instability and unfavorable political or diplomatic developments which could negatively impact our financial results.

In June 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union, commonly referred to as "Brexit." The referendum has caused, and may continue to cause, volatility in global stock markets and currency exchange rate fluctuations, resulting in a decline in the value of the British pound relative to the U.S. dollar. The actual exit of the United Kingdom from the European Union is planned for March 2019, with a two-year transitional period afterwards.  The United Kingdom and the European Union are negotiating the terms of the withdrawal.  Uncertainly over the terms of the United Kingdom’s departure from the

8

European Union could cause political and economic uncertainty in the United Kingdom and the rest of Europe, which could adversely affect our financial position and results of operations.  In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations in the United Kingdom and the European Union.  Because we conduct business in and have operations in the United Kingdom, we may incur additional costs and expenses as we adapt to potentially divergent regulatory frameworks from the rest of the European Union.  Any of these effects of Brexit, among others, could adversely affect our business and financial results.

We may also incur higher than anticipated costs as we expand internationally and grow our international client base.  If we are unable to successfully manage these expenses as our business expands, our financial position and results of operations could be negatively impacted. 

The costs and effects of pending and future litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect our financial position and results of operations.

We are from time to time involved in various litigation matters and governmental or regulatory investigations or similar matters arising out of our business.  Our insurance or indemnities may not cover all claims that may be asserted against it, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation.  Should the ultimate judgments or settlements in any pending litigation or future litigation or investigation significantly exceed our insurance coverage, they could have a material adverse effect on our financial position and results of operations.  In addition, we may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms, if at all.  For more information about our legal proceedings, see Item 3 of this annual report.

We operate in a competitive business environment, and if we are unable to compete effectively our financial position may be adversely affected.

The market for payment processing services is intensely competitive. Our payment solutions primarily compete against credit card processing firms, third party processing vendors, financial institutions, merchant acquirers and prepaid programs managers. If we are unable to differentiate ourselves from our competitors, drive value for our clients and/or effectively align our resources with our goals and objectives, we may not be able to compete effectively. We expect that the markets in which we compete will continue to attract new competitors and new technologies, including non-traditional competitors who offer certain innovations in payment methods.  There can be no assurance that we will be able to compete successfully against current or future competitors or that the competitive pressures we face in the markets in which we operate will not materially adversely affect our financial position and results of operations.

The market for prepaid cards, demand deposit accounts and alternative financial services is highly competitive and competition is increasing as more companies endeavor to address the needs of underbanked consumers.

When we acquired Netspend, we added an aspect to our business to complement our previous presence in the prepaid processing space to include GPR prepaid and payroll cards and alternative financial services. The alternative financial services industry, including the prepaid card market, is subject to intense and increasing competition. Our Netspend business, which now includes demand deposit accounts, directly competes with a number of companies that market open-loop prepaid cards and demand deposit accounts through retail and online distribution. In addition, we compete with banks that offer demand deposit accounts and other traditional issuers of debit cards. We also compete against large retailers who are seeking to integrate more financial services into their product offerings. We anticipate increased competition from alternative financial services providers who are often well-positioned to service the underbanked and who may wish to develop their own prepaid card or demand deposit account programs. The increased desire of banks, retailers and alternative financial services providers to develop and promote prepaid card and demand deposit account programs could have an adverse effect on the Netspend portion of our business. We also face strong price competition. To stay competitive, we may have to increase the incentives that we offer to our distributors and decrease the prices of our products and services, which could adversely affect our operating results.

Our Netspend business relies on certain relationships with issuing banks and distributors.  The loss of such relationships or if we are unable to maintain such relationships on terms that are favorable to us, our business, financial position and operating results may be materially adversely affected.

9

Our Netspend business relies on arrangements we have with issuing banks to provide us with critical products and services, including the FDIC-insured depository accounts tied to the cards and accounts we manage, access to the ATM networks, membership in the card associations and network organizations and other banking services. The majority of our active Netspend cards and accounts are issued or opened through Meta Payment Systems (“MetaBank”). If our relationship with MetaBank deteriorates, it could have an adverse impact on the Netspend business. If any material adverse event were to affect MetaBank, or one or more of our other issuing banks or if we were to lose MetaBank or one or more of the other issuing banks, we would be forced to find an alternative provider of these critical banking services for our Netspend business. It may not be possible to find a replacement bank on terms that are acceptable to us or at all. Any change in the issuing banks could disrupt the business or result in arrangements with new banks that are less favorable to us than those we have with our existing issuing banks, either of which could have a material adverse impact on our results of operations and our financial position. 

Furthermore, our Netspend business depends in large part on establishing agreements with distributors, primarily alternative financial services providers as well as grocery and convenience stores and other traditional retailers. Some of these distributors may endeavor to internally develop their own programs or enter into exclusive relationships with our competitors to distribute their products. The loss of, or a substantial decrease in revenues from, one or more of our top distributors could have a material adverse effect on the Netspend business and our operating results.

Changes in the laws, regulations, policies, credit card association rules or other industry standards affecting our business may impose costly compliance burdens and negatively impact our business.

There may be changes in the laws, regulations, credit card association rules or other industry standards that affect our operating environment in substantial and unpredictable ways in the U.S. as well as internationally.  For example, the Trump Administration has called for changes in existing regulatory requirements, including those applicable to financial services.  We cannot predict the impact, if any, of such changes on our business.  It is likely that some policies adopted by the new administration will benefit us, while others will negatively affect us.  Until we know what changes are adopted, we will not know whether in total we benefit from, or are negatively affected by, the changes.  More broadly, changes to statutes, regulations or industry standards, including interpretation and implementation of statutes, regulations or standards, could increase the cost of doing business or affect the competitive balance.  Regulation of the payments industry has increased significantly in recent years.  Failure to comply with laws, rules and regulations or standards to which we are subject in the U.S. as well as internationally, including the card network rules and rules with respect to privacy and information security, may result in the suspension or revocation of a license or registration, the limitation, suspension or termination of service, and the imposition of fines, sanctions or other penalties, which could have a material adverse effect on our financial position and results of operations, as well as damage our reputation.  Even if such a change to statutes, regulations or industry standards does not directly apply to us, the effects of such a change on our financial institution clients could result in material, indirect effects on the way we operate or the costs to operate our business and impair the demand for our services amongst our financial institution clients. 

We and the rest of the financial services industry continue to experience increased legislative and regulatory scrutiny, including the enactment of additional legislative and regulatory initiatives such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Reform Act”) in 2010. The Reform Act has resulted in significant structural and other changes to the regulation of the financial services industry. The Reform Act, among other things, provides for the regulation and oversight by the Board of Governors of the Federal Reserve System (“Board”) of debit interchange fees that are typically paid by acquirers and charged or received by a payment card network for the purpose of compensating an issuer for its involvement in an electronic debit transaction. The Reform Act also created a new Consumer Financial Protection Bureau (“CFPB”) with responsibility for regulating consumer financial products and services and enforcing most federal consumer protection laws in the area of financial services, including consumer credit and the prepaid card industry. The CFPB has mandated that supervised financial institutions, including our clients, are required to ensure that their service providers are in compliance with applicable federal consumer laws, which may increase regulatory oversight and our cost of doing business. In addition, the CFPB has promulgated a new rule regarding the prepaid industry which is expected to negatively impact our Netspend business and thus negatively impact our revenues and earnings when it becomes effective which is scheduled to occur on April 1, 2019. Furthermore, the Reform Act created a Financial Stability Oversight Council that has the authority to determine whether nonbank financial companies such as TSYS should be supervised by the Board because they are systemically important to the U.S.

10

financial system. Any such designation would result in increased regulatory burdens on our business. The overall impact of the Reform Act on TSYS is difficult to estimate. Current and future regulations as a result of the Reform Act may adversely affect our business or operations, directly or indirectly (if, for example, our clients’ businesses and operations are adversely affected). 

With respect to our Netspend business, because each distributor offers prepaid cards, reload services and/or money remittance services as an agent of Netspend, or another third party, we do not believe that the distributors themselves are required to become licensed as money transmitters in order to engage in such activity. However, there is a risk that a federal or state regulator will take a contrary position and initiate enforcement or other proceedings against a distributor, us, our issuing banks or our other service providers. If we are unsuccessful in making a persuasive argument that a distributor should not be subject to such licensing requirements and it is therefore deemed to be in violation of one or more of the state money transmitter statutes, it could result in the imposition of fines, the suspension of the distributor’s ability to offer some or all of our products and related services in the relevant jurisdiction, civil liability and criminal liability, each of which could negatively impact our financial position and results of operations. Furthermore, if the federal government or one or more state governments impose additional legislative or regulatory requirements on our Netspend business, the issuing banks or the distributors, or prohibit or limit the activities of our Netspend business as currently conducted, we may be required to modify or terminate some or all of our Netspend products and services offered in the relevant jurisdiction or certain of the issuing banks may terminate their relationship with us.

In addition, we are subject to tax laws in each jurisdiction where we do business.  Changes in tax laws or their interpretations could decrease the value of revenues we receive, the value of tax losses and tax credits carry forwards recorded on our balance sheet and the amount of our cash flow and have a material adverse effect on our financial position and results of operations.  Furthermore, changes in accounting policies can significantly affect how we calculate expenses and earnings.

We rely on financial institution sponsors in order to process Visa, Mastercard, American Express and Discover transactions. If these sponsorships are terminated and we are unable to secure new sponsors our business and results of operations will be materially and adversely affected.  

In order to provide our Visa, Mastercard, American Express and Discover transaction processing services, we must be either a direct participant or be registered as a merchant processor or service provider of Visa, Mastercard, American Express and Discover. Registration as a merchant processor or service provider is dependent upon our being sponsored by member banks of these credit card companies. If our sponsor banks should stop providing sponsorship for us, we would need to find another financial institution to provide those services or we would need to attain direct participation, either of which could prove to be difficult and expensive. If we are unable to find a replacement financial institution to provide sponsorship or attain direct participation, we may no longer be able to provide processing services to the affected customers, which would have a material adverse effect on our business and results of operations.

If we fail to comply with the applicable requirements of the card networks, they could seek to fine us, suspend us or terminate our registrations. If our merchants or independent sales organizations incur fines or penalties that we cannot collect from them, we could end up bearing the cost of such fines or penalties.

We are subject to card association and network rules that could subject us to a variety of fines or penalties that may be levied by the card networks for certain acts or omissions. The rules of the card networks are set by their boards, which may be influenced by card issuers, and some of those issuers are our competitors with respect to these processing services. Many banks directly or indirectly sell processing services to merchants in direct competition with us. These banks could attempt, by virtue of their influence on the networks, to alter the networks’ rules or policies to the detriment of non-members like us. The termination of our registrations or our status as a service provider or a merchant processor, or any changes in card association or other network rules or standards, including interpretation and implementation of the rules or standards, that increase the cost of doing business or limit our ability to provide transaction processing services to our customers, could have a material adverse effect on our financial position and results of operations. If a merchant or an ISO fails to comply with the applicable requirements of the card associations and networks, it could be subject to a variety of fines or penalties that may be levied by the card associations or networks. If we cannot collect such amounts from the applicable merchant or ISO, we could end up bearing such fines or penalties, resulting in lower earnings for us.

11

The providers of alternative financial services that distribute our Netspend products are subject to extensive and complex federal and state regulations and new regulations and/or changes to existing regulations could adversely affect their ability to offer Netpend products through their locations, which in turn could have an adverse impact on our business.

The distributors include a large number of companies in industries that are highly regulated, such as payday lending and it is possible that changes in the legal regime governing such businesses could limit their ability to distribute our Netspend products or adversely impact their business and thereby have an indirect adverse impact on our Netspend business. For example, a large number of states have either prohibited, or imposed substantial restrictions upon, the offering of “payday loans” and this activity continues to draw substantial scrutiny from federal and state legislatures, regulatory authorities and various consumer groups. Furthermore, the Reform Act grants supervisory authority over entities engaged in this activity to the CFPB, which recently promulgated regulations which may significantly impact the operations and/or viability of various entities. As a number of our Netspend distributors are engaged in offering payday loans, current and future legislative and regulatory restrictions that negatively impact their ability to continue their operations could have a corresponding negative impact on our ability to offer Netspend products through their locations, potentially resulting in a significant decline in revenue from the Netspend business.

We are subject to the business cycles and credit risk of our merchant customers and our independent sales organizations.

A recessionary economic environment could affect our merchants through a higher rate of business closures, resulting in lower revenues and earnings for us.  Our merchants are liable for any charges properly reversed by the card issuer on behalf of the cardholder.  Our merchants and ISOs are also liable for any fines, or penalties, that may be assessed by any card networks.  In the event, however, that we are not able to collect such amounts from the merchants or ISOs, due to merchant fraud, breach of contract, insolvency, bankruptcy or any other reason, we may be liable for any such charges which could have a material adverse effect on our financial position and results of operations.

We incur chargeback liability when our merchants refuse or cannot reimburse chargebacks resolved in favor of their customers. We cannot accurately anticipate these liabilities, which may adversely affect our financial results.

In the event a billing dispute between a cardholder and a merchant is not resolved in favor of the merchant, the transaction is normally “charged back” to the merchant and the purchase price is credited or otherwise refunded to the cardholder. If we are unable to collect such amounts from the merchant’s account or reserve account (if applicable), or if the merchant refuses or is unable, due to closure, bankruptcy or other reasons, to reimburse us for a chargeback, we bear the loss for the amount of the refund paid to the cardholder. We may experience significant losses from chargebacks in the future. Any increase in chargebacks not paid by our merchants could have a material adverse effect on our financial position and results of operation. We have policies to manage merchant-related credit risk and often mitigate such risk by requiring collateral and monitoring transaction activity. Notwithstanding our programs and policies for managing credit risk, it is possible that a default on such obligations by one or more of our merchants could have a material adverse effect on our business.

Fraudulent activities by merchants, prepaid card holders or others and losses from overdrawn cardholder accounts may adversely affect our financial results.

We have potential liability for fraudulent bankcard transactions or credits initiated by merchants or others, and our prepaid card programs expose us to threats involving the misuse of cards, collusion, fraud and identify theft.  Examples of merchant fraud include when a merchant knowingly uses a stolen or counterfeit bankcard or card number to record a false sales transaction, processes an invalid bankcard, or intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction. Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeit and fraud. It is possible that incidents of fraud could increase in the future. Failure to effectively manage risk and prevent fraud would increase our chargeback liability or other liability. Increases in chargebacks or other liability could have a material adverse effect on our financial position and results of operations.

12

Our systems and our third-party providers' systems may fail which could interrupt our service, cause us to lose business, increase our costs and expose us to liability.

We depend on the efficient and uninterrupted operation of our computer systems, software, data centers and telecommunications networks, as well as the systems and services of third parties.  A system outage or data loss could have a material adverse effect on our business, financial position and results of operations.  Not only would we suffer damage to our reputation in the event of a system outage or data loss, we may also be liable to third parties. Many of our contractual agreements with financial institutions require the payment of penalties if we do not meet certain operating standards. Our systems and operations or those of our third-party providers could be exposed to damage or interruption from events that may be outside our control.  Events that could cause system interruptions include, among other things, fire, natural disaster, power loss, telecommunications failure, terrorist acts, war, unauthorized entry and computer viruses or other defects. Defects in our systems or those of third parties, errors or delays in the processing of payment transactions, telecommunications failures, or other difficulties  could result in loss of revenue, loss of customers, loss of merchant and cardholder data, harm to our business or reputation, exposure to fraud losses or other liabilities, negative publicity, additional operating and development costs, fines and other sanctions imposed by card networks, and/or diversion of technical and other resources.  In addition, we have a third party risk management process in place through our global procurement program.  If we are unable to effectively manage the risk associated with our third party relationships, it could negatively impact our financial condition and results of operations.

We may experience software defects, computer viruses, and development delays, which could damage client relations, our potential profitability and expose us to liability.

Our services are based on sophisticated software and computing systems that often encounter development delays, and the underlying software may contain undetected errors, viruses, or defects. Defects in our software products and errors or delays in our processing of electronic transactions could result in additional development costs, diversion of technical and other resources from our other development efforts, loss of credibility with current or potential clients, harm to our reputation, fines imposed by card networks, or exposure to liability claims. In addition, we rely on technologies supplied to us by third parties that may also contain undetected errors, viruses or defects that could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to successfully manage our intellectual property and may be subject to infringement claims. 

In our rapidly developing legal framework, we rely on a combination of contractual rights and copyright, trademark, patent and trade secret laws to establish and protect our proprietary technology.  Despite our efforts to protect our intellectual property, third parties may infringe or misappropriate our intellectual property or may develop software or technology competitive to us.  Our competitors may independently develop similar technology, duplicate our products or services or design around our intellectual property rights.  We may have to litigate to enforce and protect our intellectual property rights, trade secrets and know-how or to determine their scope, validity or enforceability, which is expensive and could cause a diversion of resources and may not prove successful.  The loss of intellectual property protection or the inability to secure or enforce intellectual property protection could harm our business and ability to compete.

We may also be subject to costly litigation in the event our products and technology infringe upon another party’s proprietary rights.  Third parties may have, or may eventually be issued, patents that would be infringed by our products or technology.  Any of these third parties could make a claim of infringement against us with respect to our products or technology.  We may also be subject to claims by third parties for breach of copyright, trademark or license usage rights.  Any such claims and any resulting litigation could subject us to significant liability for damages.  An adverse determination in any litigation of this type could limit our ability to use the intellectual property subject to these claims and require us to design around a third party’s patent, which may not be possible, or to license alternative technology from another party, which may be costly.  In addition, litigation is time consuming and expensive to defend and could result in the diversion of the time and attention of our management and employees. 

13

If we lose key personnel or are unable to attract additional qualified personnel as we grow, our business could be adversely affected.

All of our businesses function at the intersection of rapidly changing technological, social, economic and regulatory developments that requires a wide ranging set of expertise and intellectual capital. To successfully compete and grow, we must recruit, develop and retain the necessary personnel who can provide the needed expertise across the entire spectrum of intellectual capital needs. In addition, we must develop our personnel to fulfill succession plans capable of maintaining continuity in the midst of the inevitable unpredictability of human capital. However, the market for qualified personnel is competitive and we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors. Our efforts to retain and develop personnel may also result in significant additional expenses, which could negatively affect our profitability. We cannot assure that key personnel, including executive officers, will continue to be employed or that we will be able to attract and retain qualified personnel in the future. Failure to retain or attract key personnel could have a material adverse effect on our business, financial position and results of operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 31, 2017, we and our subsidiaries owned 12 facilities encompassing approximately 1,446,568 square feet and leased 43 facilities encompassing approximately 1,391,932 square feet.  These facilities are used for operational, sales and administrative purposes.

	Owned Facilities		Leased Facilities
	Number	Square Footage	Number	Square Footage
Issuer Solutions	12	1,446,568	25	776,272
Merchant Solutions	—	—	15	459,515
Netspend	—	—	3	156,145

We believe that our facilities are suitable and adequate for our current business; however, we periodically review our space requirements and may acquire new space to meet the needs of our businesses or consolidate and dispose of or sublet facilities which are no longer required.

See Note 1, Note 8, Note 14 and Note 20 of Notes to Consolidated Financial Statements on pages on pages 38 through 51, page 55, pages 63 through 65, and pages 72 through 74 and “Property and Equipment” under the “Financial Review” Section on page 27 of the Annual Report which are incorporated in this document by reference.

Item 3. Legal Proceedings

See Note 14 of Notes to Consolidated Financial Statements on pages 63 through 65 of the Annual Report which is incorporated in this document by reference.

Item 4. Mine Safety Disclosures

Not Applicable.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Repurchases of Equity Securities

The “Quarterly Financial Data (Unaudited), Stock Price, Dividend Information” Section on page 81, Note18 of Notes to Consolidated Financial Statements on page 70 and 71 and “Stock Performance Graph” on page 82 of the Annual Report are incorporated in this document by reference.  The “Stock Performance Graph” is incorporated herein by reference; however, this information shall not be deemed to be “soliciting material” or to be

14

“filed” with the Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.

Item 6. Selected Financial Data

The “Selected Financial Data” Section which is set forth on page 12 of the Annual Report is incorporated in this document by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The “Financial Overview” and “Financial Review” Sections which are set forth on pages 12 through 32 of the Annual Report which includes the information encompassed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are incorporated in this document by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Foreign Exchange Risk. We are exposed to foreign exchange risk because we have assets, liabilities, revenues and expenses denominated in foreign currencies.   These currencies are translated into U.S. dollars at current exchange rates, except for revenues, costs and expenses and net income, which are translated at the average exchange rate for each reporting period. Net exchange gains or losses resulting from the translation of assets and liabilities of our foreign operations, net of tax, are accumulated in a separate section of shareholders’ equity entitled “accumulated other comprehensive income (loss), net.”  The amount of other comprehensive (loss) income, net of tax, related to foreign currency translation for the years ended December 31, 2017, 2016 and 2015 was:

(in millions)	2017		2016		2015
Comprehensive income (loss), net of tax	$	22.0	$	(30.5)	$	(21.4)

Currently, we do not use financial instruments to hedge our exposure to exchange rate changes.

The following table presents the carrying value of the net assets of our foreign operations in U.S. dollars at December 31, 2017:

(in millions)	December 31, 2017
Europe	$	186.3
China		127.5
Cyprus		42.4
Other		15.1

We record foreign currency translation adjustments associated with other balance sheet accounts.  See “Nonoperating Income (Expense)” under the “Financial Review” Section on page 22 of the Annual Report which is incorporated in this document by reference.  We maintain several cash accounts denominated in foreign currencies, primarily in US dollars and Euros. As we translate the foreign-denominated cash balances into U.S. dollars, the translated cash balance is adjusted upward or downward depending upon the foreign currency exchange movements.  The upward or downward adjustment is recorded as a gain or loss on foreign currency translation in our statements of income. As those cash accounts have increased, the upward or downward adjustments have increased.  We recorded a net translation gain of approximately $0.9 million for the year ended December 31, 2017 relating to the translation of foreign denominated balance sheet accounts, most of which were accounts receivable. The balance of the foreign-denominated accounts receivable accounts subject to risk of translation gains or losses at December 31, 2017 was approximately $14.7 million, the majority of which is denominated in U.S. dollars.

We provide financing to our international operation in Europe through an intercompany loan that requires the operation to repay the financing in U.S. dollars.  The functional currency of each operation is the respective local currency.  As we translate the foreign currency denominated financial statements into U.S. dollars, the translated balance of the financing (liability) is adjusted upward or downward to match the U.S. dollar obligation (receivable) on our financial statements.  The upward or downward adjustment is recorded as a gain or loss on foreign currency translation in other comprehensive income. 

15

The net asset account balance subject to foreign currency exchange rates between the local currencies and the U.S. dollar at December 31, 2017 was $38.9 million.

The following table presents the potential effect on income before income taxes of hypothetical shifts in the foreign currency exchange rate between the local currencies and the U.S. dollar of plus or minus 100 basis points, 500 basis points and 1,000 basis points based on the net asset account balance of $38.9 million at December 31, 2017.

	Effect of Basis Point Change
	Increase in basis point of				Decrease in basis point of
(in thousands)	100		500	1,000	100	500	1,000
Effect on income before income taxes	$	389	1,943	3,885	(389)	(1,943)	(3,885)

Interest Rate Risk. We are also exposed to interest rate risk associated with the investing of available cash.  We invest available cash in conservative short-term instruments and are primarily subject to changes in the short-term interest rates.

The following table provides information about our debt obligations that are sensitive to changes in interest rates.  The table presents principal cash flows and related weighted average interest rates by expected maturity dates.  The information is presented in U.S. dollar equivalents, which is our reporting currency.  The debt obligation’s actual cash flows are denominated in U.S. dollars.    

At December 31, 2017	Expected maturity date
Liabilities	2018			2019		2020		2021		2022	Thereafter		TOTAL
(US$ Equivalent in millions)
Long-term Debt:
Fixed Rate	$	550.0		—		—		750.0		—	1,300.0		$	2,600.0
Average interest rate		4.00	%	—		—		4.30	%	—	4.71	%		4.34	%
Variable Rate	$	10.0		40.0		40.0		480.0		—	—		$	570.0
Average interest rate		3.07	%	3.07	%	3.07	%	3.07	%	—	—			3.07	%

Item 8. Financial Statements and Supplementary Data

The “Quarterly Financial Data (Unaudited), Stock Price, Dividend Information” Section, which is set forth on page 81, and the “Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows, Consolidated Statements of Changes in Equity, Notes to Consolidated Financial Statements, Report of Independent Registered Public Accounting Firm and Management’s Report on Internal Control Over Financial Reporting,” which are set forth on pages 33 through 80 of the Annual Report are incorporated in this document by reference.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this annual report as required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended (“Exchange Act”).  This evaluation was carried out under the supervision and with the participation of our management, including our chief executive officer and chief financial officer.  Based on this evaluation, the chief executive officer and chief financial officer concluded that as of December 31, 2017, TSYS’ disclosure controls and procedures were designed and effective to ensure that the information required to be disclosed by TSYS in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and were also designed and effective to ensure that the information required to be disclosed in the reports that TSYS files or submits under the Exchange Act is accumulated and communicated to management, as appropriate to allow timely decisions regarding required disclosure. 

16

Management’s Report on Internal Control Over Financial Reporting and Report of Independent Registered Public Accounting Firm.  “Management’s Report on Internal Control Over Financial Reporting,” which is set forth on page 80 of the Annual Report, and “Report of Independent Registered Public Accounting Firm,” which is set forth on page 79 of the Annual Report, are incorporated in this document by reference.

Changes in Internal Control Over Financial Reporting.  No change in our internal control over financial reporting occurred during the fourth fiscal quarter covered by this annual report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Not Applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information included under the following captions in our Proxy Statement is incorporated in this document by reference:

· “PROPOSALS TO BE VOTED ON” – “PROPOSAL 1: ELECTION OF DIRECTORS,”

· “EXECUTIVE OFFICERS,” and

· “CORPORATE GOVERNANCE AND BOARD MATTERS” – “Committees of the  Board.”

We have a Code of Business Conduct and Ethics that applies to all directors, officers and employees, including our principal executive officer, our principal financial officer and our chief accounting officer.  You can find our Code of Business Conduct and Ethics in the Corporate Governance section of our website at www.tsys.com under “Investor Relations” then “Corporate Governance.”  We will post any amendments to the Code of Business Conduct and Ethics and any waivers that are required to be disclosed by the rules of either the SEC or the NYSE in the Corporate Governance section of our website.

Item 11. Executive Compensation

Information included under the following captions in our Proxy Statement is incorporated in this document by reference:

· “DIRECTOR COMPENSATION,” and

· “EXECUTIVE COMPENSATION” – “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Summary Compensation Table” and the Compensation Tables and Narratives which follow the Summary Compensation Table, and “CEO Pay Ratio” and “Compensation Committee Interlocks and Insider Participation.”

The information included under the heading “Compensation Committee Report” in our Proxy Statement is incorporated herein by reference; however, this information shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information pertaining to equity compensation plans is contained in Note 16 of Notes to Consolidated Financial Statements on pages 65 and 66 of the Annual Report and is incorporated in this document by reference.

17

Information included under the following captions in our Proxy Statement is incorporated in this document by reference:

· “STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS,” and

· “PRINCIPAL SHAREHOLDERS.”

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information included under the following captions in our Proxy Statement is incorporated in this document by reference:

· “CORPORATE GOVERNANCE AND BOARD MATTERS” – “Director Independence” and “Certain Relationships and Related Transactions.”

Item 14. Principal Accounting Fees and Services

Information included under the following captions in our Proxy Statement is incorporated in this document by reference:

· “RATIFICATION OF APPOINTMENT OF THE INDEPENDENT AUDITOR” – “Audit and Non-Audit Fees” and “Policy on Audit Committee Pre-Approval.”

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)  1.    Financial Statements

The following consolidated financial statements of TSYS are incorporated in this document by reference from pages 33 through 80 of the Annual Report.

Consolidated Balance Sheets - December 31, 2017 and 2016

Consolidated Statements of Income - Years Ended December 31, 2017, 2016 and 2015

Consolidated Statements of Comprehensive Income – Years Ended December 31, 2017, 2016 and 2015

Consolidated Statements of Cash Flows - Years Ended December 31, 2017, 2016 and 2015

Consolidated Statements of Changes in Equity - Years Ended December 31, 2017, 2016 and 2015

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Management’s Report on Internal Control Over Financial Reporting

      2.Financial Statement Schedules

The following consolidated financial statement schedule of TSYS is included:

Schedule II - Valuation and Qualifying Accounts - Years Ended

December 31, 2017, 2016 and 2015

All other schedules are omitted because they are inapplicable or the required information is included in the consolidated financial statements and notes thereto.

      3.Exhibits

The following exhibits are filed herewith or are incorporated to other documents previously filed with the SEC.  Exhibits 10.10 through 10.33 pertain to executive compensation plans and

18

arrangements.  With the exception of those portions of the Annual Report and Proxy Statement that are expressly incorporated by reference in this Form 10-K, such documents are not to be deemed filed as part of this Form 10-K.

Exhibit
Number	Description
2.1	Stock Purchase Agreement, dated January 26, 2016, by and among TSYS, Vista Equity Partners Fund V, L.P., Vista Equity Partners Fund V-A, L.P., Vista Equity Partners Fund V-B, L.P., Vista Equity Partners Fund V Executive, L.P., VEPF V FAF, L.P., Vista Equity Associates, LLC, and TransFirst Holdings Corp., incorporated by reference to Exhibit 2.1 of TSYS’ Current Report on Form 8-K filed with the SEC on January 27, 2016
2.2	Agreement and Plan of Merger, dated December 16. 2017, by and among Total System Services, Inc., PCP CYN Merger Sub, Inc., MW CYN Merger Sub, LLC, Cayan Holdings LLC, PCP MW Holding Corp., and Parthenon Investors IV L.P. solely in its capacity as representative of the equityholders, incorporated by reference to Exhibit 2.1 of TSYS’ Current Report on Form 8-K filed with the SEC on December 19, 2017
3.1	Articles of Incorporation of TSYS, as amended, incorporated by reference to Exhibit 3.1 of TSYS’ Current Report on Form 8-K filed with the SEC on April 30, 2009
3.2	Bylaws of TSYS, as amended, incorporated by reference to Exhibit 3.1 of TSYS’ Current Report on Form 8-K filed with the SEC on July 28, 2009
4.1	Indenture, dated as of May 22, 2013, between TSYS and Wells Fargo Bank, National Association, as trustee, incorporated by reference to Exhibit 4.1 of TSYS’ Current Report on Form 8-K filed with the SEC on May 22, 2013
4.2	Form of 2.375% Senior Note due 2018, incorporated by reference to Exhibit 4.2 of TSYS’ Current Report on Form 8-K filed with the SEC on May 22, 2013
4.3	Form of 3.750% Senior Note due 2023, incorporated by reference to Exhibit 4.3 of TSYS’ Current Report on Form 8-K filed with the SEC on May 22, 2013
4.4	Senior Indenture, dated March 17, 2016, between TSYS and Regions Bank as trustee, incorporated by reference to Exhibit 4.1 of TSYS’ Current Report on Form 8-K filed with the SEC on March 17, 2016
4.5	Form of 3.800% Senior Note due 2021, incorporated by reference to Exhibit 4.2 of TSYS’ Current Report on Form 8-K filed with the SEC on March 17, 2016
4.6	Form of 4.800% Senior Note due 2026, incorporated by reference to Exhibit 4.3 of TSYS’ Current Report on Form 8-K filed with the SEC on March 17, 2016
10.1	Credit Agreement of TSYS, dated as of September 10, 2012, with JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities LLC, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Regions Capital Markets and U.S. Bank National Association, as joint lead arrangers and joint bookrunners, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., Regions Bank and U.S. Bank National Association, as Syndication Agents, and the other lenders named therein, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on September 11, 2012

19

10.2	First Amendment, dated as of April 8, 2013, to the Credit Agreement of TSYS, dated as of September 10, 2012, with JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities LLC, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Regions Capital Markets and U.S. Bank National Association, as joint lead arrangers and joint bookrunners, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., Regions Bank and U.S. Bank National Association, as Syndication Agents, and the other lenders named therein, incorporated by reference to Exhibit 10.2 of TSYS’ Current Report on Form 8-K filed with the SEC on April 11, 2013
10.3	Second Amendment, dated as of January 26, 2016, to the Credit Agreement of TSYS, dated as of September 10, 2012, with JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities LLC, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Regions Capital Markets and U.S. Bank National Association, as joint lead arrangers and joint bookrunners, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., Regions Bank and U.S. Bank National Association, as Syndication Agents, and the other lenders named therein, incorporated by reference to Exhibit 10.2 of TSYS’ Current Report on Form 8-K filed with the SEC on January 27, 2016
10.4	Credit Agreement of TSYS, dated as of April 8, 2013, with JPMorgan Chase Bank, N.A., as Administrative Agent, The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Syndication Agent, Regions Bank and U.S. Bank National Association, as Documentation Agents, and other lenders party thereto, with J.P. Morgan Securities LLC, The Bank of Tokyo Mitsubishi UFJ, Ltd., Regional Capital Markets, and U.S. Bank National Association, as joint lead arrangers and joint bookrunners, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on April 11, 2013
10.5	First Amendment, dated as of January 26, 2016, to the Credit Agreement of TSYS, dated as of April 8, 2013, with JPMorgan Chase Bank, N.A., as Administrative Agent, The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Syndication Agent, Regions Bank and U.S. Bank National Association, as Documentation Agents, and other lenders party thereto, with J.P. Morgan Securities LLC, The Bank of Tokyo Mitsubishi UFJ, Ltd., Regional Capital Markets, and U.S. Bank National Association, as joint lead arrangers and joint bookrunners, incorporated by reference to Exhibit 10.3 of TSYS’ Current Report on Form 8-K filed with the SEC on January 27, 2016
10.6	Bridge Term Loan Facility Commitment Letter, dated January 26, 2016, by and among Total System Services, Inc., J.P. Morgan Securities LLC, JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of America N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank National Association, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on January 27, 2016
10.7	Credit Agreement of Total System Services, Inc., dated as of February 23, 2016, with JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer, Bank of America, N.A., as Syndication Agent and L/C Issuer, The Bank of Tokyo-Mitsubishi UFJ, LTD., U.S. Bank National Association and Wells Fargo Bank, National Association, as Co-Documentation Agents, and the other lenders party thereto, with J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of Tokyo-Mitsubishi UFJ, LTD., U.S. Bank National Association and Wells Fargo Securities, LLC as joint lead arrangers and joint bookrunners, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on February 23, 2016
10.8	Bilateral Loan Facility Commitment Letter, dated December 16, 2017, by and among Total System Services, Inc. and Bank of America N.A., incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on December 19, 2017
10.9	Credit Agreement, dated January 10, 2018, by and among Total System Services, Inc., Bank of America, N.A. as Administrative Agent, the other lenders party thereto from time to time and Bank of America Merrill Lynch, as sole lead arranger and sole bookrunner, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on January 11, 2018

20

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
	10.10	Amended and Restated Total System Services, Inc. Deferred Compensation Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed with the SEC on August 9, 2010
	10.11	Amended and Restated Total System Services, Inc. Directors’ Deferred Compensation Plan, incorporated by reference to Exhibit 10.2 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, filed with the SEC on August 7, 2008
	10.12	Wage Continuation Agreement of TSYS, incorporated by reference to Exhibit 10.7 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 1992, filed with the SEC on March 18, 1993
	10.13	Split Dollar Insurance Agreement of TSYS, incorporated by reference to Exhibit 10.10 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 1993, filed with the SEC on March 22, 1994
	10.14	Change of Control Agreement for executive officers of TSYS, incorporated by reference to Exhibit 10.17 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the SEC on February 29, 2008
	10.15	Split Dollar Insurance Agreement and related Executive Benefit Substitution Agreement, incorporated by reference to Exhibit 10.19 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2001, filed with the SEC on March 19, 2002
	10.16	Summary of Board of Directors Compensation, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 4, 2017
	10.17	Total System Services, Inc. 2012 Omnibus Plan (formerly named the 2008 Omnibus Plan), incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on May 4, 2012
	10.18	Form of Non-Employee Director Fully Vested Stock Option Agreement for the Total System Services, Inc. 2007 Omnibus Plan, incorporated by reference to Exhibit 10.37 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the SEC on February 28, 2011
	10.19	Form of Non-Employee Director Fully Vested Share Award Agreement for the Total System Services, Inc. 2007 Omnibus Plan, incorporated by reference to Exhibit 10.38 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the SEC on February 28, 2011
	10.20	Form of Indemnification Agreement for directors and executive officers of TSYS, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on July 26, 2007
	10.21	Form of Senior Executive Stock Option Agreement for 2013 stock option awards under the Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.3 of TSYS’ Quarterly Report on Form 10-Q for the Quarter ended March 31, 2013, filed with the SEC on May 8, 2013
	10.22	Form of Senior Executive Stock Option Agreement for 2014 stock option awards under the Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the Quarter ended March 31, 2014, filed with the SEC on May 8, 2014

21

10.23	Form of Senior Executive Stock Option Agreement for 2015 stock option awards under the Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the Quarter ended March 31, 2015, filed with the SEC on May 7, 2015
10.24	Form of Senior Executive Performance Share Agreement for 2015 performance share awards under the Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.2 of TSYS’ Quarterly Report on Form 10-Q for the Quarter ended March 31, 2015, filed with the SEC on May 7, 2015
10.25	Form of Amendment to Senior Executive Stock Option Agreement and Senior Executive Performance Share Agreement, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the Quarter ended September 30, 2015, filed with the SEC on November 5, 2015
10.26	Transition and Retirement Agreement, dated June 23, 2014, between Philip W. Tomlinson and Total System Services, Inc., incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on June 23, 2014
10.27	Restrictive Covenant Agreement, dated June 23, 2014, between Philip W. Tomlinson and Total System Services, Inc., incorporated by reference to Exhibit 10.2 of TSYS’ Current Report on Form 8-K filed with the SEC on June 23, 2014
10.28	Consulting Agreement, dated June 23, 2014, between Philip W. Tomlinson and Total System Services, Inc., incorporated by reference to Exhibit 10.3 of TSYS’ Current Report on Form 8-K filed with the SEC on June 23, 2014
10.29	Form of Stock Option Agreement for stock option awards under the Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC on May 5, 2016
10.30	Form of Performance Share Agreement for 2016 performance share awards under the Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.2 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC on May 5, 2016
10.31	Form of Performance Share Agreement for 2017 performance share awards under the Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.2 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 4, 2017
10.32	Total System Services, Inc. 2017 Omnibus Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on April 28, 2017
10.33	Letter Agreement regarding separation, dated September 21, 2017, between Total System Services, Inc. and Pamela A. Joseph, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended October 31, 2017, filed with the SEC on November 7, 2017
13.1	Certain specified pages of TSYS’ 2017 Annual Report to Shareholders which are incorporated herein by reference
21.1	Subsidiaries of Total System Services, Inc
23.1	Consent of Independent Registered Public Accounting Firm

22

24.1	Powers of Attorney contained on the signature pages of this 2017 Annual Report on Form 10-K and incorporated herein by reference
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Annual Report on Form 11-K for the Total System Services, Inc. 2012 Employee Stock Purchase Plan for the year ended December 31, 2017 (to be filed as an amendment hereto within 120 days of the end of the period covered by this report)
101	Interactive Data File

We agree to furnish the SEC, upon request, a copy of each instrument with respect to issues of long-term debt. The principal amount of any individual instrument, which has not been previously filed, does not exceed ten percent of the total assets of TSYS and our subsidiaries on a consolidated basis.

Item 16. Form 10-K Summary

Not Applicable.

23

Schedule II

Schedule — Valuation and Qualifying Accounts

TOTAL SYSTEM SERVICES, INC.

Schedule II

Valuation and Qualifying Accounts

(in thousands)

			Additions
			Changes in
	Balance at		allowances, charges to				Balance at
	beginning		expenses and changes				end
	of period		to other accounts		Deductions		of period
Year ended December 31, 2015:
Provision for doubtful accounts	$	3,222	(58)	(1)	(1,407)	(3)	$	1,757
Provision for billing adjustments	$	866	(114)	(1)	174	(3)	$	926
Provision for merchant losses	$	1,118	4,667	(1)	(4,419)	(3)	$	1,366
Transaction processing provisions - processing errors	$	4,630	6,976	(2)	(5,149)	(3)	$	6,457
Provision for fraud losses	$	6,312	41,264	(4)	(38,185)	(3)	$	9,391
Deferred tax valuation allowance	$	18,963	541	(5)	(1,058)	(6)	$	18,446
Year ended December 31, 2016:
Provision for doubtful accounts	$	1,757	6,970	(1)	(5,245)	(3)	$	3,482
Provision for billing adjustments	$	926	614	(1)	(180)	(3)	$	1,360
Provision for merchant losses	$	1,366	1,682	(1)	(1,009)	(3)	$	2,039
Transaction processing provisions - processing errors	$	6,457	3,669	(2)	(7,275)	(3)	$	2,851
Provision for fraud losses	$	9,391	49,362	(4)	(48,226)	(3)	$	10,527
Deferred tax valuation allowance	$	18,446	4,124	(5)	(1,269)	(6)	$	21,301
Year ended December 31, 2017:
Provision for doubtful accounts	$	3,482	10,796	(1)	(8,947)	(3)	$	5,331
Provision for billing adjustments	$	1,360	(627)	(1)	(186)	(3)	$	547
Provision for merchant losses	$	2,039	5,002	(1)	(2,715)	(3)	$	4,326
Transaction processing provisions - processing errors	$	2,851	6,714	(2)	(7,357)	(3)	$	2,208
Provision for fraud losses	$	10,527	51,194	(4)	(52,202)	(3)	$	9,519
Deferred tax valuation allowance	$	21,301	8,648	(5)	(418)	(6)	$	29,531

(1) Amount reflected includes charges to (recoveries of) bad debt expense which are classified in selling, general and administrative expenses and the charges for billing adjustment which are recorded against revenues.

(2) Amount reflected is the change in transaction processing provisions reflected in cost of services expenses.

(3) Accounts deemed to be uncollectible and written off during the year as it relates to bad debts. Amounts that relate to billing adjustments and transaction processing provisions reflect actual billing adjustments and processing errors charged against the allowances. Amounts that related to cardholder losses reflect write-offs against the provision for cardholder losses.

(4) Amount represents the charges in the provision for cardholder losses reflected in cost of services expenses.

(5) Amount represents an increase in the amount of deferred tax assets, which more likely than not, will not be realized.

(6) Amount represents a decrease in the amount of deferred tax assets, which more likely than not, will not be realized.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Total System Services, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TOTAL SYSTEM SERVICES, INC.

(Registrant)

Date: February 23, 2018	By:	/s/M. Troy Woods
		M. Troy Woods, Chairman, President and Chief Executive Officer (Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints M. Troy Woods and Paul M. Todd each of them, his true and lawful attorney(s)-in-fact and agent(s), with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this report and to file the same, with all exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney(s)-in-fact and agent(s) full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney(s)-in-fact and agent(s), or their substitute(s), may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated.

/s/M. Troy Woods	Date: February 23, 2018
M. Troy Woods Chairman, President and Chief Executive Officer (Principal Executive Officer)
/s/Paul M. Todd	Date: February 23, 2018
Paul M. Todd Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/Dorenda K. Weaver	Date: February 23, 2018
Dorenda K. Weaver, Chief Accounting Officer (Principal Accounting Officer)

/s/Thaddeus Arroyo	Date: February 23, 2018
Thaddeus Arroyo, Director
/s/Kriss Cloninger III	Date: February 23, 2018
Kriss Cloninger III, Director
/s/Walter W. Driver, Jr.	Date: February 23, 2018
Walter W. Driver, Jr., Director
/s/Sidney E. Harris	Date: February 23, 2018
Sidney E. Harris, Director
/s/William M. Isaac	Date: February 23, 2018
William M. Isaac, Director
/s/Mason H. Lampton	Date: February 23, 2018
Mason H. Lampton, Director
/s/Connie D. McDaniel	Date: February 23, 2018
Connie D. McDaniel, Director
/s/Richard A. Smith	Date: February 23, 2018
Richard A. Smith, Director
/s/Philip W. Tomlinson	Date: February 23, 2018
Philip W. Tomlinson, Director
/s/John T. Turner	Date: February 23, 2018
John T. Turner, Director
/s/Richard W. Ussery	Date: February 23, 2018
Richard W. Ussery, Director

EX-13.1

Exhibit 13.1

Selected Financial Data

The following financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and Financial Review sections of the Annual Report. The historical trends in Total System Services, Inc.'s (TSYS' or the Company’s) results of operations and financial position over the last five years are presented below.

	Years Ended December 31,
(in thousands, except per share data)	2017		2016	2015	2014	2013
Income Statement Data:
Total revenues	$	4,927,965	4,170,077	2,779,541	2,446,877	2,064,305
Operating income	$	734,044	573,382	534,107	431,640	382,500
Income from continuing operations, net of tax	$	592,216	325,972	367,630	280,751	254,542
Income from discontinued operations, net of tax		—	—	1,411	48,655	2,055
Net income	$	592,216	325,972	369,041	329,406	256,597
Net income attributable to noncontrolling interests		(6,031)	(6,334)	(4,997)	(6,534)	(11,847)
Net income attributable to TSYS common shareholders	$	586,185	319,638	364,044	322,872	244,750
Basic earnings per share (EPS)* attributable to TSYS common shareholders:
Income from continuing operations	$	3.19	1.74	1.97	1.48	1.31
Gain (loss) from discontinued operations		—	—	0.01	0.26	(0.01)
Net income	$	3.19	1.74	1.98	1.73	1.30
Diluted EPS* attributable to TSYS common shareholders:
Income from continuing operations	$	3.16	1.73	1.96	1.47	1.30
Gain (loss) from discontinued operations		—	—	0.01	0.25	(0.01)
Net income	$	3.16	1.73	1.97	1.72	1.29
Cash dividends declared per share	$	0.46	0.40	0.40	0.40	0.40

*Basic and diluted EPS amounts for continuing operations and net income may not total due to rounding.

	As of December 31,
(in thousands)	2017		2016	2015	2014	2013
Balance Sheet Data:
Total assets	$	6,331,689	6,366,177	3,877,895	3,725,652	3,677,077
Obligations under long-term borrowings, capital leases and license agreements, excluding current portion		2,628,002	3,313,276	1,377,541	1,397,483	1,426,260

Financial Overview

TSYS' revenues are derived from providing payment processing, merchant services and related payment services to financial and nonfinancial institutions, generally under long-term processing contracts. The Company also derives revenues by providing general-purpose reloadable (GPR) prepaid debit and payroll cards, demand deposit accounts and other financial service solutions to the underbanked and other consumers and businesses. The Company’s services are provided through three operating segments: Issuer Solutions, Merchant Solutions and Netspend.

Through the Company’s Issuer Solutions segment, TSYS processes information through its cardholder systems to financial and nonfinancial institutions throughout the United States and internationally. The Company’s Merchant Solutions segment provides merchant services to merchant acquirers and merchants primarily in the United States. The Company’s Netspend segment provides financial service solutions to consumers and businesses in the United States.

TSYS acquires other companies as part of its strategy for growth. On January 11, 2018, the Company completed its acquisition of Cayan Holdings LLC (“Cayan”), which became a part of the Merchant Solutions segment. Refer to Note 25 in the Notes to Consolidated Financial Statements for more information about the acquisition of Cayan. In April 2016, the Company completed the acquisition of all the outstanding stock of TransFirst Holdings Corp. (TransFirst). TransFirst is part of the Merchant Solutions segment. Refer to Note 22 in the Notes to Consolidated Financial Statements for more information about the acquisition of TransFirst.

12

The following table sets forth each segment’s revenues as a percentage of the Company’s total revenues:

	Years Ended December 31,
	2017		2016		2015
Merchant Solutions	49	%	44	%	20	%
Issuer Solutions	36		40		59
Netspend	15		16		21
Total revenues	100	%	100	%	100	%

Due to the somewhat seasonal nature of the payments industry, TSYS' revenues and results of operations have generally increased in the fourth quarter of each year because of increased transaction and authorization volumes during the traditional holiday shopping season. Furthermore, growth or declines in card and merchant portfolios of existing clients, the conversion of cardholder and merchant accounts of new clients to the Company's processing platforms, the receipt of fees for early contract termination and the loss of cardholder and merchant accounts either through purges or deconversions impact the results of operations from period to period.

Another factor which may affect TSYS' revenues and results of operations from time to time is consolidation in the financial services or retail industries either through the sale by a client of its business, its card portfolio or a segment of its accounts to a party which processes cardholder or merchant accounts internally or uses another third-party processor. A change in the economic environment in the retail sector, or a change in the mix of payments between cash and cards could favorably or unfavorably impact TSYS' financial position, results of operations and cash flows in the future.

TSYS' reported financial results will also be impacted by significant shifts in currency conversion rates. TSYS does not view foreign currency as an economic event for the Company but as a financial reporting consideration. Because changes in foreign currency exchange rates distort the operating growth rates, TSYS discloses the impact of foreign currency translation on its financial performance.

A significant amount of the Company's revenues are derived from long-term contracts with large clients. Processing contracts with large clients, representing a significant portion of the Company's total revenues, generally provide for discounts on certain services based on the size and activity of clients' portfolios. Therefore, revenues and the related margins are influenced by the client mix relative to the size of client portfolios, as well as the number and activity of individual cardholder or merchant accounts processed for each client.

Also impacting revenues is the impact of TransFirst. TransFirst’s results are part of the Merchant Solutions segment and are reported gross, which includes amounts paid for interchange and payment network fees, due to TransFirst’s relationship with its customers.

Regulation

Government regulation affects key areas of TSYS' business, in the United States of America (U.S.) as well as internationally. TSYS, along with the rest of the financial services industry, continues to experience increased legislative and regulatory scrutiny, including the enactment of additional legislative and regulatory initiatives such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (Financial Reform Act) in 2010. This legislation, which provides for sweeping financial regulatory reform, may have a significant and negative impact on the Company and its clients, which could impact TSYS' earnings through fee reductions, higher costs (both regulatory and implementation) and new restrictions on operations. The Financial Reform Act may also impact the competitive dynamics of the financial services industry in the U.S. by more adversely impacting large financial institutions, some of which are TSYS clients, and by adversely impacting the competitive position of U.S. financial institutions in comparison to foreign competitors in certain businesses.

The Financial Reform Act created a new Consumer Financial Protection Bureau (“CFPB”) with responsibility for regulating consumer financial products and services and enforcing most federal consumer protection laws in the area of financial services, including consumer credit and the prepaid card industry.  For example, the CFPB has promulgated a new rule regarding prepaid financial products, which, among other things, will establish new disclosure requirements specific to prepaid accounts, eliminate certain fees that may currently be imposed on prepaid accounts, and make it economically unfeasible for a prepaid provider such as the Company’s Netspend business to offer courtesy overdraft protection on prepaid accounts. The rule is scheduled to become effective in April 2019.  Similarly, other future actions of the CFPB may make payment card or product transactions generally less attractive to card issuers, acquirers, consumers and merchants by further regulatory disclosures, payment card practices, fees, routing and other matters with respect to credit, debit and prepaid cards, and thus negatively impact the Company’s business.

13

Financial Review

This Financial Review provides a discussion of critical accounting policies and estimates, related party transactions and off-balance sheet arrangements. This Financial Review also discusses the results of operations, financial position, and liquidity and capital resources of TSYS and outlines the factors that have affected its recent earnings, as well as those factors that may affect its future earnings. The accompanying Consolidated Financial Statements and related Notes are an integral part of this Financial Review and should be read in conjunction with it.

Critical Accounting Policies and Estimates

Risk factors that could affect the Company's future operating results and cause actual results to vary materially from expectations are listed in the Company's forward-looking statements. Negative developments in these or other risk factors could have a material adverse effect on the Company's financial position, results of operations and cash flows.

TSYS' financial position, results of operations and cash flows are impacted by the accounting policies the Company has adopted. Refer to Note 1 in the Consolidated Financial Statements for more information on the Company's basis of presentation and a summary of significant accounting policies.

Management believes that the following accounting policies are the most critical to fully understand and evaluate the Company's results. Within each critical policy, the Company makes estimates that require management's subjective or complex judgments about the effects of matters that are inherently uncertain.

A summary of the Company's critical accounting estimates applicable to the reportable operating segments follows:

Acquisitions — Purchase Price Allocation

TSYS' purchase price allocation methodology requires the Company to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. TSYS estimates the fair value of assets and liabilities based upon appraised values, the carrying value of the acquired assets and widely accepted valuation techniques, including the cost approach, discounted cash flows and market multiple analyses. TSYS adjusts the purchase price allocation, as necessary, up to one year after the acquisition closing date as TSYS obtains more information regarding asset valuations and liabilities assumed. Unanticipated events or circumstances may occur which could affect the accuracy of the Company's fair value estimates, including assumptions regarding industry economic factors and business strategies, and may result in an impairment or a new allocation of purchase price.

Goodwill

In accordance with the provisions of U.S. Generally Accepted Accounting Principles (GAAP), goodwill is required to be tested for impairment at least annually.  The Company tests goodwill for impairment during the second quarter or more frequently whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable.  Examples of potential triggering events include, but are not limited to, a deterioration in general economic conditions, industry and market considerations such as a deterioration in the environment in which the Company operates, cost factors such as increases in labor or other costs, overall financial performance such as negative or declining cash flows, other relevant entity-specific factors, events affecting a reporting unit or a sustained decrease in share price.

In evaluating goodwill for recoverability, the Company has the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment using discounted net cash flows for future periods estimated by management.  The combination of the income approach, utilizing the discounted cash flow (DCF) method, and the market approach, utilizing readily available market valuation multiples, is used to estimate the fair value of each reporting unit. Under the DCF method, the fair value of the asset reflects the present value of the projected earnings that will be generated by each asset after taking into account the revenues and expenses associated with the asset, the relative risk that the cash flows will occur, the contribution of other assets, and an appropriate discount rate to reflect the value of invested capital. To the extent the carrying amount of goodwill exceeds its fair value, an impairment charge is measured and recognized.  Cash flows are estimated for future periods based on historical data and projections provided by management. If the actual cash flows are not consistent with the Company's estimates, a material impairment charge may result and net income may be materially different than was initially recorded. Note 5 in the Consolidated Financial Statements contains a discussion of goodwill. The net carrying value of goodwill on the Company's Consolidated Balance Sheet as of December 31, 2017 was $3.3 billion.  The Company did not recognize any goodwill impairment charges during the years ended December 31, 2017, 2016 and 2015.

14

Long-lived Assets other than Goodwill

The Company reviews long-lived assets, such as property and equipment, intangibles subject to amortization, computer software and contract acquisition costs, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Examples of potential triggering events include, but are not limited to, a significant decrease in the market price of a long-lived asset or asset group, a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used, a significant adverse change in legal factors or business climate, an accumulation of costs significantly in excess of the originally expected amount, continuing losses associated with the use of a long-lived asset or asset group, or a current expectation that a long-lived asset or asset group will be sold or otherwise disposed of significantly before its previously estimated useful life.

In evaluating long-lived assets other than goodwill for recoverability, expected undiscounted future operating cash flows are estimated by management.  To the extent the carrying amount of a long-lived asset exceeds its fair value, an impairment charge is measured and recognized.  Assumptions and estimates about future cash flows and remaining useful lives are complex and subjective.  They can be affected by a variety of factors, including industry and economic trends, changes in the Company’s business strategy and changes in internal forecasts.  If the actual cash flows are not consistent with the Company’s estimates, a material impairment charge may result and net income may be materially different than was initially recorded.  The Company did not recognize any material impairment charges during the years ended December 31, 2017, 2016 and 2015.

Revenue Recognition

The Company recognizes revenues in accordance with the provisions of GAAP, which sets forth guidance as to when revenue is realized or realizable and earned when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the seller's price to the buyer is fixed or determinable; and (4) collectability is reasonably assured.

The Company evaluates its contractual arrangements that provide services to clients through a bundled sales arrangement in accordance with the provisions of GAAP to address the determination of whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting.

A deliverable in multiple element arrangements indicates any performance obligation on the part of the seller and includes any combination of obligations to perform different services, grant licenses or other rights. Revenue is allocated to the separate units of accounting in a multiple element arrangement based on relative fair values, provided the delivered element has standalone value to the customer and delivery of any undelivered items is probable and substantially within the Company's control. Evidence of fair value must be objective and reliable. An item has value to the customer on a standalone basis if it is sold separately by any vendor or the customer could resell the deliverable on a standalone basis.

There were no material changes or impact to revenue recognition during the years ended December 31, 2017, 2016 and 2015 due to any changes in the determination of the number of deliverables in an arrangement, units of accounting, or estimates of selling prices for existing contractual arrangements.

Income Taxes

In calculating its effective tax rate, the Company makes decisions regarding certain tax positions, including the timing and amount of deductions and allocations of income among various tax jurisdictions. The Company has various tax filing positions, including the timing and amount of deductions and credits, the establishment of reserves for audit matters and the allocation of income among various tax jurisdictions.

The Company makes estimates as to the amount of deferred tax assets and liabilities and records valuation allowances to reduce its deferred tax assets to reflect the amount that is more likely than not to be realized. The Company considers projected future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance. Actual results may differ from the Company's estimates. If the Company realizes a deferred tax asset or the Company was unable to realize a net deferred tax asset, an adjustment to the deferred tax asset would increase or decrease earnings, respectively, in the period the difference is recognized.

On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).  A key provision of this law that impacted TSYS was the reduction of the Federal corporate income tax rate from 35% to 21%.  This required us to remeasure our U.S. deferred tax assets and liabilities.  Another provision of the Tax Act that impacted TSYS during this

15

reporting period was the one-time transition tax on the deemed repatriation of foreign accumulated earnings.  Please see Note 13 for more detail concerning the impacts of the Tax Act.

Pursuant to the Tax Act, some amounts related to repatriation of foreign accumulated earnings and related to executive compensation may be considered provisional amounts pursuant to Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 118.  As such, these amounts may be adjusted during the measurement period ending December 31, 2018.

Off-Balance Sheet Arrangements

Operating Leases

As a method of funding its operations, TSYS employs noncancelable operating leases for computer equipment, software and facilities. These leases allow the Company to use the latest technology while avoiding the risk of ownership. Neither the assets nor obligations related to these leases are included on the balance sheet. Refer to Notes 1 and 14 in the Consolidated Financial Statements for further information on operating lease commitments.

Contractual Obligations

The Company has long-term obligations which consist of required minimum future payments under contracts with the Company’s distributors and other service providers.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, refer to Note 1 in the Notes to the Consolidated Financial Statements.

Results of Operations

Revenues

The Company generates revenues by providing transaction processing and other payment-related services. The Company's pricing for transactions and services is complex. Each category of revenue has numerous fee components depending on the types of transactions processed or services provided. TSYS reviews its pricing and implements pricing changes on an ongoing basis. In addition, standard pricing varies among its regional businesses, and such pricing can be customized further for customers through tiered pricing of various thresholds for volume activity. TSYS' revenues are based upon transactional information accumulated by its systems. The Company's revenues are impacted by currency translation of foreign operations, as well as doing business in the current economic environment.

The Company reviews revenue performance on a net revenue basis which is a non-GAAP measure. Net revenue is defined as total revenues less reimbursable items (such as postage), as well as merchant acquiring interchange and payment network fees charged by the card associations or payment networks that are recorded by TSYS as expense. The Company has included reimbursements received for out-of-pocket expenses as revenues and expenses. The largest reimbursable expense items for which TSYS is reimbursed by clients are postage and network association fees. The Company’s reimbursable items are impacted with changes in postal rates and changes in the volumes of mailing activities by its clients. Reimbursable items for the year ended December 31, 2017 were $260.2 million, an increase of $0.7 million or 0.3%, compared to $259.5 million for the same period last year. Reimbursable items for the year ended December 31, 2016 decreased $20.7 million, or 7.4%, compared to $280.2 million for the same period in 2015. Interchange and payment network fees related to the TransFirst business were $1.3 billion and $868.7 million for the year ended December 31, 2017 and 2016, respectively. 

TSYS' revenues in its Issuer Solutions segment are influenced by several factors, including volumes related to accounts on file (AOF) and transactions. TSYS estimates that approximately 49.8.% of the segment’s net revenue is AOF and transaction volume driven. The remaining 50.2% of net revenue is not AOF and transaction volume driven, and is derived from production and optional services TSYS considers to be value added products and services, custom programming and licensing arrangements.

TSYS’ revenues in its Merchant Solutions segment are influenced by several factors, including volumes related to transactions, dollar sales volume, value added services, monthly statement fees, compliance fees and miscellaneous services.

16

TSYS’ revenues in its Netspend segment primarily consist of a portion of the service fees collected from cardholders and interchange revenues received by Netspend’s prepaid card issuing banks in connection with the programs managed by Netspend.

A summary of the consolidated financial highlights is provided below:

	Years Ended December 31,				Percent Change
(in thousands, except per share data)	2017		2016	2015	2017 vs. 2016		2016 vs. 2015
Total revenues	$	4,927,965	4,170,077	2,779,541	18.2	%	50.0	%
Net revenue1	$	3,400,332	3,041,876	2,499,349	11.8		21.7
Operating income	$	734,044	573,382	534,107	28.0		7.4
Net income attributable to TSYS common shareholders	$	586,185	319,638	364,044	83.4		(12.2)
Basic earnings per share (EPS) attributable to TSYS common shareholders2	$	3.19	1.74	1.98	83.3		(12.0)
Diluted EPS attributable to TSYS common shareholders2	$	3.16	1.73	1.97	82.4		(11.8)
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA)3	$	1,197,673	1,040,551	833,920	15.1		24.8
Adjusted diluted EPS4 from continuing operations	$	3.37	2.80	2.46	20.2		14.5
Cash flows from operating activities	$	856,492	718,029	602,034	19.3		19.3
Free cash flow5	$	660,466	575,456	398,719	14.8		44.3

Refer to the reconciliation of GAAP to non-GAAP measures later in this section.

¹ Net revenue is total revenues less reimbursable items (such as postage), as well as merchant acquiring interchange and payment network fees charged by the credit card associations or payment networks that are recorded by TSYS as expense.

² Basic and diluted EPS is computed based on the two-class method in accordance with the guidance under GAAP. Refer to Note 24 in the Consolidated Financial Statements for more information on EPS.

³ Adjusted EBITDA is net income excluding equity in income of equity investments, intereset expense (net of interest income), nonoperating income/(expense), income taxes, depreciation, amortization, foreign currency translation gains/(losses), share-based compensation expenses, litigation, claims, judgments or settlements, and TransFirst and Cayan merger & acquisition expenses.

⁴ Adjusted diluted EPS is adjusted earnings divided by weighted average diluted shares outstanding used for diluted EPS calculations. Adjusted earnings is net income excluding the after-tax impact of share-based compensation expenses, amortization of acquisition intangibles, litigation, claims, judgments or settlements, and TransFirst and Cayan merger & acquisistion expenses.

⁵ Free cash flow is net cash provided by operating activities less capital expenditures.

Total revenues increased$757.9 million for the year ended December 31, 2017, compared to the year ended December 31, 2016, which increased$1.4 billion compared to the year ended December 31, 2015. The increase in total revenues for the year ended December 31, 2017, as compared to 2016, is primarily the result of the acquisition of TransFirst in April 2016 as well as organic growth.  The impact of the TransFirst acquisition on total revenues was a year-over-year increase of $419.7 million in 2017 and $1.2 billion in 2016. The increases in revenues for 2017 and 2016 include decreases of $15.5 million and $42.5 million, respectively, related to the effects of currency translation of the Company's foreign-based subsidiaries and branches.

Net revenue increased 11.8%, or $358.5 million, for the year ended December 31, 2017, compared to the year ended December 31, 2016, which increased 21.7%, or $542.5 million, compared to the year ended December 31, 2015. The increase in net revenue for the year ended December 31, 2017, as compared to the same period in 2016, is primarily the result of the acquisition of TransFirst in April 2016, as well as organic growth, partially offset by decreases associated with currency translation. The impact of the TransFirst acquisition on net revenue was $132.3 million for the year ended December 31, 2017.  The increase in net revenue for the year ended December 31, 2016, as compared to the same period in 2015, is primarily the result of the acquisition of TransFirst in April 2016, partially offset by decreases associated with currency translation. The impact of the TransFirst acquisition on net revenue was $380.7 million for the year ended December 31, 2016.

Major Customer

The Company works to maintain a large and diverse customer base across various industries. Although the Company does not have a major customer on a consolidated basis, a significant amount of the Company's revenues are derived from long-term contracts with large clients. TSYS derives revenues from providing various processing and other services to these clients, including processing of consumer and commercial accounts, as well as revenues for reimbursable items. The loss of one of the Company's large clients could have a material adverse effect on the Company's financial position, results of operations and cash flows.

Operating Segments

TSYS' services are provided through three operating segments: Issuer Solutions, Merchant Solutions and Netspend.

17

Issuer Solutions

The Company’s Issuer Solutions segment has many long-term customer contracts with card issuers providing account processing and output services for printing and embossing items. These contracts generally require advance notice prior to the end of the contract if a client chooses not to renew. Additionally, some contracts may permit early termination upon the occurrence of certain events such as a change in control. The termination fees paid upon the occurrence of such events are designed primarily to cover balance sheet exposure related to items such as capitalized conversion costs or client incentives associated with the contract and, in some cases, may cover a portion of lost future revenue and profit. Although these contracts may be terminated upon certain occurrences, the contracts provide the segment with a steady revenue stream since a vast majority of the contracts are honored through the contracted expiration date.

These services are provided throughout the period of each account's use, starting from a card-issuing client processing an application for a card. Services may include processing the card application, initiating service for the cardholder, processing each card transaction for the issuing retailer or financial institution and accumulating the account's transactions. Fraud management services monitor the unauthorized use of accounts which have been reported to be lost, stolen, or which exceed credit limits. Fraud detection systems help identify fraudulent transactions by monitoring each account holder's purchasing patterns and flagging unusual purchases. Other services provided include customized communications to cardholders, information verification associated with granting credit, debt collection and customer service.

Issuer Solutions revenues are generated from charges based on the number of AOF, transactions and authorizations processed, statements mailed, cards embossed and mailed, and other processing services for cardholder AOF. Cardholder AOF includes active and inactive consumer credit, retail, prepaid, stored value, government services and commercial card accounts.  TSYS’ clients also have the option to use fraud and portfolio management services. Collectively, these services are considered volume-based revenues.

Whether or not an account on file is active can impact TSYS' revenues differently. Active accounts are accounts that have had monetary activity either during the current month or in the past 90 days based on contractual definition. Inactive accounts are accounts that have not had a monetary transaction (such as a purchase or payment) in the past 90 days. The more active an account is, the more revenue is generated for TSYS (items such as transactions and authorizations processed and statements billed).

Occasionally, a client will purge inactive accounts from its portfolio. An inactive account typically will only generate an AOF charge. A processing client will periodically review its cardholder portfolio based upon activity and usage. Each client, based upon criteria individually set by the client, will flag an account to be "purged" from TSYS' system and deactivated.

A deconversion involves a client migrating all of its accounts to an in-house solution or another processor. Account deconversions include active and inactive accounts and can impact the Company's revenues significantly more than an account purge.

A sale of a portfolio typically involves a client selling a portion of its accounts to another party. A sale of a portfolio and a deconversion impact the Company's financial statements in a similar fashion, although a sale usually has a smaller financial impact due to the number of accounts typically involved.

Below is a summary of AOF for the Company’s Issuer Solutions segments:

(in millions)	As of December 31,			Percent Change
AOF	2017	2016	2015	2017 vs. 2016		2016 vs. 2015
Consumer	481.3	442.9	408.2	8.7	%	8.5	%
Commercial	54.2	47.9	45.4	13.2		5.4
Other	36.4	31.0	26.6	17.4		16.8
Traditional AOF1	571.9	521.8	480.2	9.6		8.7
Prepaid/Stored Value2	38.6	57.8	97.2	(33.3)		(40.5)
Government Services3	95.0	88.7	79.3	7.2		11.7
Commercial Card Single-Use4	92.0	83.2	75.8	10.7		9.8
Total AOF	797.5	751.5	732.5	6.1		2.6

¹ Traditional accounts include consumer, retail, commercial, debit and other accounts. These accounts are grouped together due to the tendency to have more transactional activity than prepaid, government services and single-use accounts.

² Prepaid does not include Netspend accounts. These accounts tend to have less transactional activity than the traditional accounts. Prepaid and stored value cards are issued by firms through retail establishments to be purchased by consumers to be used at a later date. These accounts tend to be the least active of all accounts on file.

³ Government services accounts are disbursements of student loan accounts issued by the Department of Education, which have minimal activity.

⁴ Commercial card single-use accounts are one-time use accounts issued by firms to book lodging and other travel related expenses.

18

Non-volume related revenues include processing fees which are not directly associated with AOF and transactional activity, such as value-added products and services, custom programming and certain other services, which are offered to TSYS’ processing clients.

Additionally, certain clients license the Company’s processing systems and process in-house. Since the accounts are processed outside of TSYS for licensing arrangements, the AOF and other volumes are not available to TSYS. Thus, volumes reported by TSYS do not include volumes associated with licensing.

Output and managed services include offerings such as card production, statement production, correspondence and call center support services.

The Issuer Solutions segment provides payment processing and related services to clients in North America and internationally. Growth in revenues and operating profit in this segment is derived from retaining and growing the core business and improving the overall cost structure. Growing the core business comes primarily from an increase in account usage, growth from existing clients and sales to new clients and the related account conversions. This segment’s financial results are impacted by foreign currency. Movements in foreign currency exchange rates as compared to the U.S. dollar can result in foreign denominated financial statements being translated into more or fewer U.S. dollars, which impacts the comparison to prior periods when the U.S. dollar was stronger or weaker. This segment had two major customers for the year ended December 31, 2017.

Below is a summary of the Issuer Solutions segment:

	Years Ended December 31,							Percent Change
(in thousands, except key indicators)	2017			2016		2015		2017 vs. 2016		2016 vs. 2015
Volume-based revenues	$	794,099		749,211		715,287		6.0	%	4.7	%
Non-volume related revenues:
Processing fees	$	309,746		296,021		298,310		4.6		(0.8)
Value-added, custom programming, licensing and other		254,847		233,424		233,493		9.2		(0.0)
Output and managed services		236,267		236,806		226,824		(0.2)		4.4
Total non-volume related revenues	$	800,860		766,251		758,627		4.5		1.0
Net revenue1	$	1,594,959		1,515,462		1,473,914		5.2		2.8
Adjusted segment operating income2	$	574,580		525,025		489,151		9.4		7.3
Adjusted segment operating margin3		36.0	%	34.6	%	33.2	%
Key indicators (in millions):
AOF		797.5		751.5		732.5		6.1		2.6
Transactions		21,575.6		19,858.1		18,248.1		8.6		8.8

¹ Net revenue is defined as total revenues less reimbursable items (such as postage), as well as, merchant acquiring interchange and assessment fees charged by the card associations or payment networks that are recorded by TSYS as expense.

² Adjusted segment operating income excludes acquisition intangible amortization and expenses associated with Corporate Administration and Other.

³ Adjusted segment operating margin equals adjusted segment operating income divided by net revenue.

For the year ended December 31, 2017, approximately 49.8% of TSYS’ Issuer Solutions segment net revenue was driven by the volume of accounts on file and transactions processed and approximately 50.2% was derived from non-volume based revenues.

Segment net revenues increased $79.5 million for 2017, as compared to 2016. The increase was attributable to an increase in new business and internal growth, partially offset by decreases related to $15.4 million in currency translation, client deconversions and price reductions. Segment net revenues increased$41.5 million for 2016, as compared to 2015. The increase was attributable to an increase in new business and internal growth, partially offset by decreases related to $39.7 million in currency translation, client deconversions, price reductions.

The increases in adjusted segment operating income for 2017 and 2016 were driven primarily by increases in revenues partially offset by increases in total operating expenses including severance costs, technology and other expenses.

19

Merchant Solutions

The Merchant Solutions segment provides merchant services and related services to clients based primarily in the United States. Merchant Solutions revenues are derived from providing processing services, acquiring solutions, related systems and integrated support services to merchant acquirers and merchants. Revenues from merchant services include processing all payment forms including credit, debit, prepaid, electronic benefit transfer and electronic check for merchants of all sizes across a wide array of market verticals. Merchant services include authorization and capture of transactions; clearing and settlement of transactions; information reporting services related to transactions; merchant billing services; and point-of-sale (POS) equipment sales and service. This segment had no major customers for the year ended December 31, 2017.

Below is a summary of the Merchant Solutions segment:

	Years Ended December 31,							Percent Change
(in thousands, except key indicators)	2017			2016		2015		2017 vs. 2016		2016 vs. 2015
Net revenue1	$	1,103,682		898,533		474,040		22.8	%	89.5	%
Adjusted segment operating income2	$	391,466		307,595		150,225		27.3		nm
Adjusted segment operating margin3		35.5	%	34.2	%	31.7	%
Key indicators:
Dollar sales volume (in millions)	$	124,165.1		97,735.1		48,072.7		27.0		nm
POS transactions  (in millions)		4,844.1		4,548.1		4,266.5		6.5		6.6
Net revenue per POS transaction	$	0.228		0.198		0.111		15.3		77.8
nm = not meaningful

¹ Net revenue is defined as total revenues less reimbursable items (such as postage), as well as, merchant acquiring interchange and payment network fees charged by the card associations or payment networks that are recorded by TSYS as expense.

² Adjusted segment operating income excludes acquisition intangible amortization and expenses associated with Corporate Administration and Other.

³ Adjusted segment operating margin equals adjusted segment operating income divided by net revenue.

With the acquisition of TransFirst in April 2016, TSYS included nine months for 2016 of TransFirst’s results as part of the Merchant Solutions segment. TransFirst’s revenues are reported gross, which includes amounts paid for interchange and payment network fees, as TransFirst is the principal in the contractual relationship with its customers. Expenses covering interchange and payment network fees are included in TransFirst’s cost of services and are directly attributable to processing fee revenues.  Merchant Solutions net revenue is defined as total revenues less merchant acquiring interchange and payment network fees charged by the card associations or payment networks that are recorded by TSYS as an expense.

The Merchant Solutions segment results are driven by dollar sales volume and the authorization and capture transactions processed at the point-of-sale and clearing and settlement transactions. This segment's authorization and capture transactions are primarily through dial-up or Internet connectivity.

For the year ended December 31, 2017, approximately 93.5% of TSYS’ Merchant Solutions segment net revenue was influenced by several factors, including volumes related to transactions and dollar sales volume. The remaining 6.5% of this segment’s net revenue was derived from value added services, chargebacks, managed services, investigation, risk and collection services performed.

The increase in adjusted segment operating income for 2017, as compared to 2016, was driven primarily by the acquisition of TransFirst in April 2016 as well as operating cost reductions in connection with the integration. The increase in adjusted segment operating income for 2016, as compared to 2015, was driven primarily by the acquisition of TransFirst in April 2016, partially offset by severance costs.

Netspend

Netspend provides GPR prepaid debit and payroll cards, demand deposit accounts and other financial service solutions to the underbanked and other consumers and businesses in the United States.  Netspend’s products provide customers with access to depository accounts insured by the Federal Deposit Insurance Corporation (FDIC) with a menu of pricing and features specifically tailored to their needs.  Netspend has an extensive distribution and reload network comprising financial service centers and other retail locations throughout the United States, and is a program manager for FDIC-insured depository institutions that issue the products that Netspend develops, promotes and distributes. Netspend currently has active agreements with six issuing banks.

The Netspend segment markets its products through multiple distribution channels, including alternative financial service providers, traditional retailers, direct-to-consumer and online marketing programs and contractual relationships with corporate

20

employers. This segment had no major customers and one major third-party distributor for the year ended December 31, 2017.

The Netspend segment’s revenues primarily consist of a portion of the service fees collected from cardholders and interchange revenues received by Netspend’s issuing banks and others in connection with the programs managed by this segment. Customers are charged fees for transactions including fees for Personal Identification Number (PIN) and signature-based purchase transactions made using their cards, for Automated Teller Machine (ATM) withdrawals or other transactions conducted at ATMs, for balance inquiries, and monthly maintenance fees among others. Customers are also charged fees associated with additional features and services offered in connection with certain products including the use of courtesy overdraft protection, bill payment options, custom card designs and card-to-card transfers of funds initiated through call centers. The Netspend segment also earns revenues from a portion of the interchange fees remitted by merchants when customers make purchase transactions using their products. Subject to applicable law, interchange fees are fixed by card associations and network organizations.   

Below is a summary of the Netspend segment:

	Years Ended December 31,							Percent Change
(in thousands, except key indicators)	2017			2016		2015		2017 vs. 2016		2016 vs. 2015
Net revenue1	$	746,870		663,579		580,377		12.6	%	14.3	%
Adjusted segment operating income2	$	182,082		160,371		137,837		13.5		16.3
Adjusted segment operating margin3		24.4	%	24.2	%	23.7	%
Key indicators (in millions):
Gross dollar volume4	$	32,034.8		28,722.3		24,274.9		11.5		18.3
Number of active cards5		4.9		4.3		3.9		14.2		10.3
Number of active cards with direct deposit6		2.4		2.1		1.9		12.1		12.7
Percentage of active cards with direct deposit		48.9	%	49.7	%	48.7	%

¹ Net revenue is defined as total revenues less reimbursable items (such as postage), as well as merchant acquiring interchange and payment network fees charged by the card associations or payment networks that are recorded by TSYS as expense.

² Adjusted segment operating income excludes acquisition intangible amortization and expenses associated with Corporate Administration and Other.

³ Adjusted segment operating margin equals adjusted segment operating income divided by net revenue.

⁴ Gross dollar volume represents the total dollar volume of debit transactions and cash withdrawals made using Netspend products.

⁵ Number of active cards represents the total number of cards that have had a PIN or signature-based purchase transaction, a point-of-sale load transaction or an ATM withdrawal within three months of the date of determination, adjusted to remove prepaid cards that consumers upgraded to a demand deposit account during the period.

⁶ Number of active cards with direct deposit represents the number of active cards that have had a direct deposit load within three months of the date of determination, adjusted to remove prepaid cards that consumers upgraded to a demand deposit account during the period.

Netspend segment revenues increased $83.3 million for 2017 from 2016. This increase was comprised of $48.6 million increase in service fee revenues and $34.7 million increase in interchange and other revenues. Netspend segment revenues increased $83.2 million for 2016, as compared to 2015. This increase was comprised of $66.6  million increase in service fee revenues and $16.6 million increase in interchange and other revenues.

For the year ended December 31, 2017, 69.5%  of revenues were derived from service fees charged to customers and 30.5% of revenues were derived from interchange and other revenues. Service fee revenues are driven by the number of active cards and in particular by the number of cards with direct deposit. Customers with direct deposit generally initiate more transactions and generate more revenues than those that do not take advantage of this feature. Interchange revenues are driven by gross dollar volume. Substantially all of the Netspend segment revenues were volume driven as they were driven by the active card and gross dollar volume indicators.

As discussed in Note 25 in the Consolidated Financial Statements, in January 2018, the CFPB announced that it has finalized updates to its 2016 prepaid rule. The CFPB’s prepaid rule put in place requirements for treatment of funds on lost or stolen cards, error resolution and investigation, upfront fee disclosures, access to account information, and overdraft features if offered in conjunction with prepaid accounts. The changes announced by the CFPB adjust requirements for resolving errors on unregistered accounts, provide greater flexibility for credit cards linked to digital wallets, and extend the effective date of the rule to April 2019. The Company will continue to review and interpret the new rule and analyze its expected impact on Netspend’s business.

Operating Expenses

The Company’s operating expenses were $4.2 billion,  $3.6 billion and $2.2 billion in 2017, 2016 and 2015, respectively. Operating expenses consist of cost of services and selling, general and administrative expenses. Cost of services describes the direct expenses incurred in performing a particular service for customers, including the cost of direct labor expense in

21

putting the service in saleable condition. Selling, general and administrative expenses are incurred in selling or marketing and for the direction of the enterprise as a whole, including accounting, legal fees, sales, investor relations and mergers and acquisitions.

The changes in operating expenses for the years ended December 31, 2017 and 2016 include decreases of $7.0 million and $26.0 million, respectively, related to the effects of currency translation of the Company's foreign-based subsidiaries. TransFirst had an incremental year-over-year impact on operating expenses of $417.3 million in 2017. Operating expenses for the year ended December 31, 2016 were also impacted by the TransFirst acquisition. Operating expenses increased $1.3 billion due to the acquisition of TransFirst in 2016. Operating expenses in 2017 and 2016 were also impacted by $1.9 million and $21.7 million, respectively, of litigation settlement, settlement discussions and related legal expenses. In 2017, TSYS incurred an expense associated with a special one-time cash bonus of $1,000 to certain employees as a result of the Company’s continued success and to share some of the savings that will result from the Tax Act legislation passed in December 2017.

The Company’s cost of services were $3.6 billion, $3.0 billion and $1.9 billion in 2017, 2016 and 2015, respectively. The increases in cost of services are due to increases in employment, severance, technology and facilities and other costs to support revenue growth and the acquisition of TransFirst. The Company’s selling, general and administrative expenses were $616.6 million, $603.6 million and $390.3 million in 2017, 2016 and 2015, respectively. The increases in selling, general and administrative costs in 2017 and 2016 were due primarily to the acquisition of TransFirst in April 2016 and litigation settlement and settlement discussions. Expenses in 2015 were also impacted by certain one-time state tax benefits of $15.6 million that resulted from prior years but were recognized in 2015. 

The Company’s transaction and integration expenses related to the acquisition of TransFirst in 2016 were $32.3 million for the year ended December 31, 2016. These expenses consist of costs related to the completion of the acquisition such as legal, accounting and professional fees, as well as, personnel costs for severance and retention.

Operating Income

Operating income increased 28.0% for the year ended December 31, 2017, compared to 2016. The Company’s operating profit margin for the year ended December 31, 2017 was 14.9%, compared to 13.8% in 2016. TSYS’ operating margins increased for the year ended December 31, 2017, as compared to 2016, due primarily to a decrease in the amount of acquisition and integration expenses. TSYS’ operating margins decreased for the year ended December 31, 2016, as compared to 2015, due primarily to the increase in acquisition and integration expenses, severance and the operating results and lower operating margin of TransFirst.

Nonoperating Income (Expense)

Nonoperating income (expense) consists of interest income, interest expense, and gains and losses on currency transactions. Nonoperating expense increased in 2017 as compared to 2016, and increased in 2016 as compared to 2015 primarily due to the increase in interest expense.

The following table provides a summary of nonoperating expense:

	Years Ended December 31,						Percent Change
(in thousands)	2017		2016		2015		2017 vs. 2016		2016 vs. 2015
Interest expense1	$	(118,221)		(115,363)		(40,701)	2.5	%	nm	%
Interest income		2,193		1,840		1,450	19.2		26.9
Currency translation (losses) gains, net		(907)		1,748		(388)	nm		nm
Other		453		(575)		(904)	nm		nm
Total	$	(116,482)		(112,350)		(40,543)	3.7		nm
nm = not meaningful

¹ Interest expense includes interest on bonds of $98.2 million, $84.6 million, and $33.7 million, respectively, for the years ended December 31, 2017, 2016 and 2015.

Interest expense for the year ended December 31, 2017 increased $2.9 million compared to 2016. The increase in interest expense in 2017 compared to 2016 is due to the debt financing of the acquisition of TransFirst in April 2016. Interest expense for the year ended December 31, 2016 increased $74.6 million compared to 2015. The increase in interest expense in 2016 compared to 2015 is due to the debt financing of the acquisition of TransFirst in April 2016. Refer to Notes 11 and 22 in the Consolidated Financial Statements for more information on long-term borrowings and acquisitions.

22

Income Taxes

Below is a summary of income tax expense:

	Years Ended December 31,							Percent Change
(in thousands)	2017			2016		2015		2017 vs. 2016		2016 vs. 2015
Income tax expense	$	65,878		161,175		151,364		(59.1)	%	6.5	%
Effective income tax rate		10.7	%	35.0	%	30.5	%

During 2017, the Company generated income tax credits in excess of its utilization capacity based on both the Company's current operations and with consideration of future tax planning strategies. Based upon these same considerations, the Company reassessed its need for valuation allowances in all jurisdictions. Accordingly, the Company experienced a net increase in its valuation allowance for deferred income tax assets of $8.2 million.

As a result of the Tax Cuts and Jobs Act of 2017, the Company realized a net tax benefit of $135.9 million. This was primarily the result of remeasuring deferred tax assets and deferred tax liabilities.

In 2017, TSYS reassessed its uncertain tax positions for all jurisdictions.  As a result, the Company increased unrecognized tax benefits by $7.3 million.

Refer to Note 13 in the Consolidated Financial Statements for more information on income taxes.

Equity in Income of Equity Investments

Below is a summary of TSYS' share of income from its interest in equity investments:

	Years Ended December 31,				Percent Change
(in thousands)	2017		2016	2015	2017 vs. 2016		2016 vs. 2015
Equity in income of equity investments, net of tax	$	40,532	26,115	25,430	55.2	%	2.7	%

The increases in equity income in 2017 and 2016 are the result of organic growth in China Union Pay Data Co., Ltd (CUP Data). Refer to Note 10 in the Consolidated Financial Statements for more information on equity investments.

Discontinued Operations

TSYS sold its Japan-based operations during 2014 and recorded income from discontinued operations, net of tax, of $1.4 million for 2015.

Net Income

The following table provides a summary of net income and EPS:

	Years Ended December 31,				Percent Change
(in thousands, except per share data)	2017		2016	2015	2017 vs. 2016		2016 vs. 2015
Net income	$	592,216	325,972	369,041	81.7	%	(11.7)	%
Net income attributable to noncontrolling interests		(6,031)	(6,334)	(4,997)	4.8		26.8
Net income attributable to TSYS common shareholders	$	586,185	319,638	364,044	83.4		(12.2)
Basic EPSattributable to TSYS common shareholders1	$	3.19	1.74	1.98	83.3		(12.0)
Diluted EPS attributable to TSYS common shareholders1	$	3.16	1.73	1.97	82.4		(11.8)

¹ Basic and diluted EPS is computed based on the two-class method in accordance with the guidance under GAAP. Refer to Note 24 in the Consolidated Financial Statements for more information on EPS.

Net income attributable to noncontrolling interests in 2017 decreased by $0.3 million from 2016 and increased $1.3 million in 2016 from 2015. The decrease in 2017 compared to 2016 is the result of TSYS acquiring an additional 10% ownership in Central Payment Co. LLC (CPAY) in 2017 partially offset by an increase in operating results of CPAY. Refer to Note 22 in the

23

Consolidated Financial Statements for more information. The increase in 2016 compared to 2015 is driven by the increased operating results of CPAY.

Non-GAAP Financial Measures

Management evaluates the Company's operating performance based upon operating margin on a net revenue basis, adjusted EBITDA, consolidated adjusted operating margin, adjusted diluted EPS and free cash flow which are all non-generally accepted accounting principles (non-GAAP) measures. TSYS also uses these non-GAAP financial measures to evaluate and assess TSYS' financial performance against budget.

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 measures of other companies due to potential inconsistencies in the method of calculation.

TSYS believes that its provision of non-GAAP financial measures provides investors with important 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 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 understand the business, manage budgets and allocate resources.

The following tables provide a reconciliation of GAAP to non-GAAP financial measures:

Net Revenue and Operating Margin on a Net Revenue Basis
	Years Ended December 31,
(in thousands)	2017			2016		2015
Operating income (GAAP) (a)	$	734,044		573,382		534,107
Total revenues (GAAP) (b)	$	4,927,965		4,170,077		2,779,541
Less: reimbursable items, interchange and payment network fees		1,527,633		1,128,201		280,192
Net revenue (non-GAAP) (c)	$	3,400,332		3,041,876		2,499,349
Operating margin (as reported) (GAAP) (a)/(b)		14.90	%	13.75	%	19.22	%
Operating margin on a net revenue basis (non-GAAP) (a)/(c)		21.59	%	18.85	%	21.37	%

24

Adjusted EBITDA
	Years Ended December 31,
(in thousands)	2017			2016			2015
Net income (GAAP)(a)	$	592,216			325,972			369,041
Adjust for:
Less: Income from discontinued operations		—			—			(1,411)
Less: Equity in income of equity investments		(40,532)			(26,115)			(25,430)
Add: Income tax expense		65,878			161,175			151,364
Add: Interest expense, net		116,028			113,523			39,251
Add: Depreciation and amortization		405,906			373,546			258,264
Add/Less: Loss/(gain) on foreign currency translation		907			(1,748)			388
Add/Less: Other nonoperating (income) expenses		(453)			575			904
Add: Share-based compensation		42,409			43,728			41,549
Add: TransFirst and Cayan M&A and integration expenses1		13,367			28,176			—
Add: Litigation, claims, judgments or settlements2		1,947			21,719			—
Adjusted EBITDA (non-GAAP)(b)	$	1,197,673			1,040,551			833,920
Total revenues (c)	$	4,927,965			4,170,077			2,779,541
Net income margin on total revenues (GAAP) (a)/(c)		12.0	%		7.8	%		13.3	%
Net revenue (d)	$	3,400,332			3,041,876			2,499,349
Adjusted EBITDA margin on net revenue (non-GAAP) (b)/(d)		35.2	%		34.2	%		33.4	%

¹ Costs associated with the TransFirst and Cayan acquisitions which are included in selling, general and administrative expenses and nonoperating expenses.

² Litigation settlement or settlement discussions and related legal expenses.

Adjusted Earnings and Adjusted Diluted Earnings Per Share
	Years Ended December 31,
(in thousands, except per share data)	2017		2016		2015
Income attributable to TSYS common shareholders from continuing operations (GAAP)	$	586,185	$	319,638		362,633
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization		207,172		188,887		91,418
Add: Share-based compensation		42,399		43,691		41,535
Add: TransFirst and Cayan M&A and integration expenses1		13,306		37,957		—
Add: Litigation, claims, judgments or settlements2		1,947		19,913		—
Less: Tax impact of adjustments3		(90,955)		(93,667)		(43,474)
Less: Impact of Tax Cuts and Jobs Act4		(135,871)		—		—
Adjusted earnings (non-GAAP)	$	624,183	$	516,419	$	452,112
Diluted EPS - Income from continuing operations attributable to TSYS common shareholders:
As reported (GAAP)	$	3.16		1.73		1.96
Adjusted diluted EPS (non-GAAP)	$	3.37		2.80		2.46
Weighted average diluted shares		185,430		184,448		185,239

¹ Costs associated with the TransFirst and Cayan acquisitions which are included in selling, general and administrative expenses and nonoperating expenses.

² Litigation settlement or settlement discussions and related legal expenses.

³ Certain of these merger and acquisition costs are nondeductible for income tax purposes. Income tax impact includes a discrete item as a result of the acquisition.

⁴ On December 22, 2017, President Trump signed into law the Tax Act. Based on its preliminary analysis of the Tax Act, including the reduction in the federal corporate tax rate, TSYS estimates that it will receive and additional, non-recurring income tax benefit of approximately $135.9 million due to the reduction of certain deferred tax liabilities and the repatriation of foreign earnings as a result of the Tax Act.

25

Free Cash Flow
	Years Ended December 31,
(in thousands)	2017		2016	2015
Net cash provided by operating activities (GAAP)	$	856,492	718,029	602,034
Capital expenditures		(196,026)	(142,573)	(203,315)
Free cash flow (non-GAAP)	$	660,466	575,456	398,719

Financial Position, Liquidity and Capital Resources

The Consolidated Statements of Cash Flows detail the Company's cash flows from operating, investing and financing activities. TSYS' primary methods for funding its operations and growth have been cash generated from current operations, the use of leases and the occasional use of borrowed funds to supplement financing of capital expenditures.

Cash Flows from Operating Activities

	Years Ended December 31,
(in thousands)	2017		2016	2015
Net income	$	592,216	325,972	369,041
Depreciation and amortization		405,906	373,546	258,264
Other noncash items and charges, net		(67,217)	106,033	51,172
Net change in current and other assets and current and other liabilities		(74,413)	(87,522)	(76,443)
Net cash provided by operating activities	$	856,492	718,029	602,034

TSYS' main source of funds is derived from operating activities, specifically net income. The increase in 2017, as compared to 2016, in net cash provided by operating activities was primarily the result of the combined increase of the net earnings of the Company and the impact of TransFirst. The increase in 2016, as compared to 2015, in net cash provided by operating activities was primarily the result of the combined increase of noncash charges, such as depreciation and amortization, the net earnings of the Company, and the impact of TransFirst.

Net change in current and other assets and current and other liabilities includes accounts receivable, prepaid expenses, other current assets and other assets, accounts payable, accrued salaries and employee benefits and other liabilities. The change in accounts receivable between the years is the result of timing of collections compared to billings. The change in accounts payable and other liabilities for each of the years presented is the result of the timing of receiving vendor invoices and the timing of payments.

Cash Flows from Investing Activities

	Years Ended December 31,
(in thousands)	2017		2016	2015
Cash used in acquisitions, net of cash acquired	$	-	(2,345,493)	(750)
Purchases of property and equipment		(70,039)	(51,132)	(54,640)
Additions to contract acquisition costs		(69,806)	(45,847)	(58,728)
Additions to internally developed computer software		(30,265)	(34,043)	(39,219)
Additions to licensed computer software from vendors		(25,916)	(11,551)	(50,729)
Other investing activities		(2,718)	(4,930)	42
Net cash used in investing activities	$	(198,744)	(2,492,996)	(204,024)

The major uses of cash for investing activities in 2017, 2016 and 2015 were for acquisitions, purchases of property and equipment, additions to contract acquisition costs, internally developed computer software and licensed computer software from vendors.

Cash Used in Acquisitions

In 2016, the Company used cash of $2.3 billion in connection with the acquisition of TransFirst.

26

Property and Equipment

Capital expenditures for property and equipment were $70.0 million in 2017, compared to $51.1 million in 2016 and $54.6 million in 2015. The majority of capital expenditures in 2017, 2016 and 2015 related to computer processing hardware. 

Contract Acquisition Costs

TSYS makes cash payments for processing rights, third-party development costs and other direct salary-related costs in connection with converting new customers to the Company's processing systems. The Company's investments in contract acquisition costs were $69.8 million in 2017, $45.8 million in 2016 and $58.7 million in 2015. The Company made cash payments for processing rights of $48.6 million, $25.8 million and $29.6 million in 2017, 2016 and 2015, respectively. Conversion cost additions were $21.3 million, $20.0 million and $29.1 million in 2017, 2016 and 2015, respectively. The decreases in conversion costs in 2017 and 2016, as compared to 2015, are primarily related to the timing of conversions of card portfolios. 

Internally Developed Computer Software Costs

Additions to capitalized software development costs, including enhancements to, and development of, processing systems were $30.3 million in 2017, $34.0 million in 2016 and $39.2 million in 2015. The changes in capitalized software development costs in 2017 and 2016, as compared to 2015, were the result of a decrease in the level of activity in a multi-year, multi-phase initiative that consists of enhancing TSYS’ issuing processing platforms. 

Licensed Computer Software from Vendors

Capital expenditures for licensed computer software from vendors for increases in processing capacity were $25.9 million in 2017, compared to $11.6 million in 2016 and $50.7 million in 2015. The higher capital expenditures in 2015 were due primarily to the extension of existing mainframe and distributed software agreements.

Purchases of Private Equity Investments

The Company is a party to partnership agreements in connection with investing in two Atlanta-based venture capital funds focused exclusively on investing in technology-enabled financial services companies. Pursuant to each limited partnership agreement, the Company has committed to invest up to $20.0 million in each fund so long as its ownership interest in each fund does not exceed 50%. The Company made investments in the funds of $2.7 million, $4.9 million and $3.5 million in 2017, 2016 and 2015, respectively.

Cash Flows from Financing Activities

	Years Ended December 31,
(in thousands)	2017		2016	2015
Proceeds from long-term borrowings	$	200,000	2,666,295	1,912
Proceeds from exercise of stock options		21,832	11,708	58,636
Excess tax benefit from share-based payment arrangements		-	9,905	24,357
Subsidiary dividends paid to noncontrolling shareholders		(5,997)	(5,548)	(5,028)
Purchase of noncontrolling interests		(70,000)	(5,878)	-
Debt issuance costs		-	(26,555)	-
Repurchases of common stock under plans and tax withholding		(284,237)	(30,275)	(242,235)
Dividends paid on common stock		(79,017)	(73,378)	(73,677)
Principal payments on long-term borrowings and capital lease obligations		(421,306)	(724,084)	(54,719)
Net cash provided by (used in) financing activities	$	(638,725)	1,822,190	(290,754)

Net cash used in financing activities for the year ended December 31, 2017 was primarily related to principal payments on long-term borrowings and capital lease obligations, repurchases of common stock, dividends paid on common stock, as well as the purchase of noncontrolling interests. Cash provided by financing activities for the year ended December 31, 2017 primarily relate to proceeds from long-term borrowings.

Net cash provided by financing activities for the year ended December 31, 2016 was primarily related to the proceeds from long-term borrowings in connection with the TransFirst acquisition. Cash used in financing activities for the year ended

27

December 31, 2016 primarily related to principal payments on long-term borrowings and capital lease obligations, as well as dividends paid on common stock.

Net cash used in financing activities for the year ended December 31, 2015 was primarily related to repurchases of common stock and principal payments on long-term borrowings and capital lease obligations.  Cash provided by financing activities for the year ended December 31, 2015 primarily related to proceeds from the exercise of stock options.

Refer to Notes 11 and 22 in the Consolidated Financial Statements for more information on the long-term debt financing and acquisitions.

Borrowings

Refer to Note 11 in the Consolidated Financial Statements for further information on borrowings.

Purchase of Noncontrolling Interest

In connection with the acquisition of CPAY, the Company is party to call and put arrangements with respect to the membership units that represent the remaining noncontrolling interest of CPAY. The call arrangement is exercisable by TSYS and the put arrangement is exercisable by the Seller. The put arrangement is outside the control of the Company by requiring the Company to purchase the Seller’s entire equity interest in CPAY at a put price at fair value. At the time of the original acquisition, the redemption of the put option was considered probable based upon the passage of time of the second anniversary date. The put arrangement is recorded on the consolidated balance sheet and is classified as redeemable noncontrolling interest in consolidated subsidiary outside of permanent equity.

In February 2017, the Company acquired an additional 10% equity interest in CPAY from a privately owned company for $70.0 million. This purchase reduced the remaining redeemable noncontrolling interest in CPAY to 15% of its total outstanding equity and extended the put call arrangement until April 2018. The transaction resulted in a decrease to noncontrolling interest of $9.8 million and a decrease to additional paid-in-capital of $60.2 million.

The put option was not redeemable on December 31, 2017, but redemption was considered probable based upon the passage of time toward the April 2018 date. The Company’s accounting policy is to accrete changes in the redemption value over the period from the date of issuance to the earliest redemption date, which the Company believes to be in 2018. The Company recorded accretion in fair value of $101.4 million for the year ended December 31, 2017 using the effective interest method.

Refer to Note 22 in the Consolidated Financial Statements for more information on this purchase.

Stock Repurchase Plan

In January 2015, TSYS announced that its Board had approved a stock repurchase plan to repurchase up to 20 million shares of TSYS stock. The shares may be purchased from time to time at prices considered appropriate. There is no expiration date for the plan. Through December 31, 2017, the Company purchased 9.5 million shares for approximately $549.0 million at an average price of $57.79.

Dividends

Dividends on common stock of $79.0 million were paid in 2017, compared to $73.4 million and $73.7 million in 2016 and 2015, respectively. The Company increased its quarterly dividend from $0.10 to $0.13 per share in July 2017. For 2017, the Company paid dividends of $0.46 per share, compared to dividends of $0.40 per share in 2016 and 2015.

Significant Noncash Transactions

During 2017, 2016 and 2015, the Company issued 329,051, 362,804 and 388,211 shares of common stock, respectively, to certain key employees and non-management members of its Board of Directors. The grants to certain key employees were issued in the form of nonvested stock bonus awards for services to be provided in the future by such officers and employees. The market value of the common stock at the date of issuance is amortized as share-based compensation expense over the vesting period of the awards. The grants to the Board of Directors were fully vested on the date of grant.

The Company acquired computer equipment under capital leases and software under license agreements in the amount of $40.8 million, $1.8 million and $4.1 million in 2017, 2016 and 2015, respectively.

28

Refer to Notes 17 and 21 in the Consolidated Financial Statements for more information on share-based compensation and significant noncash transactions.

Additional Cash Flow Information

Off-Balance Sheet Financing

TSYS uses various operating leases in its normal course of business. These "off-balance sheet" arrangements obligate TSYS to make payments for computer equipment, software and facilities. These computer and software lease commitments may be replaced with new lease commitments due to new technology. Management expects that, as these leases expire, they will be evaluated and renewed or replaced by similar leases based on need.

The following table summarizes future contractual cash obligations, including lease payments and software arrangements, as of December 31, 2017, for the next five years and thereafter:

	Contractual Cash Obligations
	Payments Due By Period
				1 Year or
(in thousands)	Total			Less	2-3 Years	4-5 Years	After 5 Years
Debt obligations (principal)	$	3,170,000	$	560,000	80,000	1,230,000	1,300,000
Debt obligations (interest)1		567,082		109,104	202,461	125,204	130,313
Operating leases		392,211		118,576	173,008	49,322	51,305
Purchase commitments		117,765		27,290	46,649	17,576	26,250
Redeemable noncontrolling interest		115,689		115,689	—	—	—
Capital lease obligations and license agreements		47,764		8,102	15,227	12,952	11,483
Total contractual cash obligations	$	4,410,512	$	938,761	517,345	1,435,054	1,519,351

¹ Amounts utilize prevailing interest rates as of December 31, 2017.

Income Taxes

The total liability for uncertain tax positions as of December 31, 2017 is $23.8 million. Refer to Note 13 in the Consolidated Financial Statements for more information on income taxes. The Company is not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, the Company does not expect any significant changes related to these obligations within the next twelve months.

Foreign Operations

TSYS operates internationally and is subject to adverse movements in foreign currency exchange rates. On June 23, 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the European Union (E.U.), commonly referred to as “Brexit.” As a result, global markets were adversely impacted, including currencies, and resulted in a decline in the value of the British pound, as compared to the U.S. dollar and other currencies. Uncertainty over the terms of the withdrawal of the U.K. from the E.U. may create global economic uncertainty, and have unknown social and geopolitical impact, which may adversely affect the Company’s business, results of operations and financial condition. TSYS has not entered into foreign exchange forward contracts to reduce its exposure to foreign currency rate changes. TSYS continues to analyze potential hedging instruments to safeguard it from significant foreign currency translation risks.

TSYS maintains operating cash accounts outside the United States. Refer to Note 3 in the Consolidated Financial Statements for more information on cash and cash equivalents. TSYS has adopted the permanent reinvestment exception under GAAP with respect to future earnings of certain foreign subsidiaries. While some of the foreign cash is available to repay intercompany financing arrangements, some remaining amounts may not be presently available to fund domestic operations and obligations without paying withholding taxes upon its repatriation. Demand on the Company’s cash has increased as a result of its strategic initiatives. TSYS funds these initiatives through a balance of internally generated cash, external sources of capital and, when advantageous, access to foreign cash in a tax efficient manner. Where local regulations limit an efficient intercompany transfer of amounts held outside of the U.S., TSYS will continue to utilize these funds for local liquidity needs. Under current law, balances available to be repatriated to the U.S. may be subject to foreign withholding taxes. Pursuant to the Tax Cuts and Jobs Act of 2017, TSYS has provided for the U.S. federal tax liability on these amounts for financial statement purposes. TSYS utilizes a variety of tax planning and financing strategies with the objective of having its worldwide cash available in the locations where it is needed.

29

Impact of Inflation

Although the impact of inflation on its operations cannot be precisely determined, the Company believes that by controlling its operating expenses and by taking advantage of more efficient computer hardware and software, it can minimize the impact of inflation.

Working Capital

TSYS may seek additional external sources of capital in the future. The form of any such financing will vary depending upon prevailing market and other conditions and may include short-term or long-term borrowings from financial institutions or the issuance of additional equity and/or debt securities such as local industrial revenue bonds. However, there can be no assurance that funds will be available on terms acceptable to TSYS. Management expects that TSYS will continue to be able to fund a significant portion of its capital expenditure needs through internally generated cash in the future, as evidenced by TSYS' current ratio of 1.1:1. As of December 31, 2017, TSYS had working capital of $90.2 million, compared to $602.3 million in 2016 and $519.3 million in 2015. The change in working capital was the result of $550 million of Senior Notes due June 1, 2018 being classified as short-term in June 2017.

Legal Proceedings

Refer to Note 14 in the Consolidated Financial Statements for information regarding the Company's commitments and contingencies including legal proceedings.

Forward-Looking Statements

Certain statements contained in this filing which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act (the Act). These forward-looking statements include, among others: (i) TSYS’ expectation with respect to the effect of recent accounting pronouncements; (ii) TSYS’ expectation that it will be able to fund a significant portion of its capital expenditure needs through internally generated cash in the future; (iii) TSYS’ belief with respect to lawsuits, claims and other complaints; (iv) TSYS’ expectation with respect to certain tax matters; (v) the Board’s intention to continue to pay cash dividends; and the assumptions underlying such statements. In addition, certain statements in future filings by TSYS with the Securities and Exchange Commission, in press releases, and in oral and written statements made by or with the approval of TSYS which are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenue, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans and objectives of TSYS or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “estimates,” “projects,” “plans,” “may,” “could,” “should,” “would,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying these statements.

These statements are based upon the current beliefs and expectations of TSYS’ management 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 to differ materially from those contemplated by the Company’s forward-looking statements. 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 incurs expenses associated with the signing of a significant client;

· organic growth rates for TSYS’ existing clients are lower than anticipated whether as a result of unemployment rates, card delinquencies and charge off rates or otherwise or attrition rates of existing clients are higher than anticipated;

· conversions and reconversions of client portfolios may not occur as scheduled;

· risks associated with foreign operations, including adverse developments with respect to foreign currency exchange rates, and in particular with respect to the current environment, adverse developments with respect to foreign currency  exchange rates as a result of the United Kingdom’s decision to leave the European Union (Brexit);

· adverse developments with respect to entering into contracts with new clients and retaining current clients;

30

· consolidation in the financial services and other industries, including the merger of TSYS clients with entities that are not TSYS processing clients, the sale of portfolios by TSYS clients to entities that are not TSYS processing clients and financial institutions which are TSYS clients otherwise ceasing to exist;

· the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on TSYS and its clients;

· adverse developments with respect to the payment card industry in general, including a decline in the use of cards as a payment mechanism;

· the impact of potential and completed acquisitions, particularly the completed TransFirst and Cayan acquisitions, including the costs associated therewith, their being more difficult to integrate than anticipated, and the inability to achieve the anticipated growth opportunities and other benefits of the acquisitions;

· the costs and effects of litigation, investigations or similar matters or adverse facts and developments relating thereto;

· the impact of the application of and/or changes in accounting principles;

· TSYS’ inability to timely, successfully and cost-effectively improve and implement processing systems to provide new products, increased functionality and increased efficiencies;

· TSYS’ reliance on financial institution sponsors;

· changes occur in laws, rules, regulations, credit card association rules, prepaid industry rules, or other industry standards affecting TSYS and its clients that may result in costly new compliance burdens on TSYS and its 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, and in particular the CFPB’s new rule regarding prepaid financial products;

· the success of Netspend’s business expansion strategies to offset the loss of revenue from the CFPB’s new rule regarding prepaid financial products which will depend on, among other things, the rate of adoption of Netspend’s new products both by consumers and its distribution partners, the rate of utilization of the various product features by cardholders and market and regulatory dynamics, and, in addition, the costs of compliance associated with the new rule;

· successfully managing the potential both for patent protection and patent liability in the context of rapidly developing legal framework for expansive patent protection;

· the effect of current domestic and worldwide economic and geopolitical conditions;

· the impact on TSYS’ business, as well as on the risks set forth above, of various domestic or international military or terrorist activities or conflicts;

· other risk factors described in the “Risk Factors” and other sections of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and other filings with the Securities and Exchange Commission; and

· TSYS’ ability to manage the foregoing and other risks.

These forward-looking statements speak only as of the date on which they are made and TSYS disclaims any obligation to update any forward-looking statement as a result of new information, future developments or otherwise except as required by law.

Subsequent Events

CFPB Finalizes Changes to Prepaid Accounts Rule

On January 25, 2018, the CFPB announced that it has finalized updates to its 2016 prepaid rule. The CFPB’s 2016 prepaid rule put in place requirements for treatment of funds on lost or stolen cards, error resolution and investigation, upfront fee disclosures, access to account information, and overdraft features if offered in conjunction with prepaid accounts. The changes announced by the CFPB adjust requirements for resolving errors on unregistered accounts, provide greater flexibility for credit cards linked to digital wallets, and extend the effective date of the rule by one year to April 2019.

Acquisition of Cayan

On December 18, 2017, TSYS announced it entered into an agreement to acquire Cayan, a payment technology company focused on integrated payment solutions and merchant acquiring, in an all cash transaction valued at approximately $1.05

31

billion.  On January 11, 2018, the Company completed the acquisition of Cayan. The Company funded the acquisition through a combination of cash-on-hand and proceeds from borrowings, including the credit agreement discussed below.

Term Loan Facility

On January 10, 2018, TSYS entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. as Administrative Agent, and other lenders party thereto from time to time. The Credit Agreement provides the Company with a $450 million two-year term loan facility (the “Term Loan Facility”).  The Term Loan Facility was used to finance, in part, the Company’s acquisition of Cayan.

Borrowings under the Credit Agreement will accrue interest at the base rate (as defined in the Credit Agreement) or, for certain euro-denominated borrowings, the London Interbank Offered Rate (“LIBOR”), in each case plus a margin based on the Company’s corporate credit ratings. The applicable margin for loans bearing interest based on LIBOR ranges from 1.000% to 1.750%. The applicable margin for loans bearing interest based on the base rate ranges from 0.000% to 0.750%.

The Credit Agreement contains customary covenants regarding, among other matters, the maintenance of insurance, the preservation and maintenance of the Company’s corporate existence, material compliance with laws and the payment of taxes and other material obligations. The Credit Agreement also contains financial covenants requiring the maintenance as of the end of each fiscal quarter of (i) a minimum fixed charge coverage ratio of 2.5 to 1.0 and (ii) a maximum consolidated leverage ratio of 3.5 to 1.0, which may be increased upon the occurrence of certain events (including the consummation of the acquisition of Cayan).

Management performed an evaluation of the Company’s activity as of the date these audited financial statements were issued and has concluded that, other than as set forth above, there are no significant events requiring disclosure.

32

Consolidated Balance Sheets

	December 31,
(in thousands, except per share data)	2017		2016
Assets
Current assets:
Cash and cash equivalents (Note 3)	$	450,357	425,354
Accounts receivable, net of allowances for doubtful accounts and billing adjustments of $5.9 million and $4.8 million as of 2017 and 2016, respectively		412,322	432,847
Prepaid expenses and other current assets (Note 4)		216,565	164,488
Total current assets		1,079,244	1,022,689
Goodwill (Notes 1 and 5)		3,264,071	3,270,952
Other intangible assets, net of accumulated amortization of $600.9 million and $420.6 million as of 2017 and 2016, respectively (Note 6)		727,146	906,676
Intangible assets - computer software, net of accumulated amortization of $849.3 million and  $757.4 million as of 2017 and 2016, respectively (Note 7)		383,715	423,188
Property and equipment, net of accumulated depreciation and amortization of $521.1 million and  $480.7 million as of 2017 and 2016, respectively (Note 8)		325,218	282,345
Contract acquisition costs, net of accumulated amortization of $342.7 million and $309.7 million as of 2017 and 2016, respectively (Note 9)		258,665	235,700
Equity investments, net (Note 10)		163,518	133,556
Deferred income tax assets (Note 13)		6,091	7,055
Other assets		124,021	84,016
Total assets	$	6,331,689	6,366,177
Liabilities
Current liabilities:
Current portion of long-term borrowings (Note 11)	$	559,050	48,040
Accounts payable		62,310	38,712
Accrued salaries and employee benefits		82,135	67,655
Current portion of obligations under capital leases and license agreements (Note 11)		6,762	2,687
Other current liabilities (Note 12)		278,835	263,259
Total current liabilities		989,092	420,353
Long-term borrowings, excluding current portion (Note 11)		2,591,949	3,312,215
Deferred income tax liabilities (Note 13)		238,317	419,552
Obligations under capital leases and license agreements, excluding current portion (Note 11)		36,053	1,061
Other long-term liabilities		119,596	88,983
Total liabilities		3,975,007	4,242,164
Redeemable noncontrolling interest in consolidated subsidiary		115,689	24,093
Commitments and contingencies (Note 14)
Shareholders' Equity
Shareholders’ equity:
Common stock- $0.10 par value. Authorized 600,000 shares; 202,765 issued as of 2017 and 2016; 180,903 and 183,451 outstanding as of 2017 and 2016, respectively		20,277	20,276
Additional paid-in capital		162,806	279,627
Accumulated other comprehensive loss, net (Note 19)		(36,148)	(56,158)
Treasury stock, at cost (21,862 and 19,314 shares as of 2017 and 2016, respectively (Note 18)		(909,960)	(646,047)
Retained earnings		3,004,018	2,502,222
Total shareholders’ equity		2,240,993	2,099,920
Total liabilities and shareholders' equity	$	6,331,689	6,366,177

See accompanying Notes to Consolidated Financial Statements

33

Consolidated Statements of Income

	Years Ended December 31,
(in thousands, except per share data)	2017		2016	2015
Total revenues (Note 20)	$	4,927,965	4,170,077	2,779,541
Cost of services		3,577,320	2,993,062	1,855,181
Selling, general and administrative expenses		616,601	603,633	390,253
Total operating expenses		4,193,921	3,596,695	2,245,434
Operating income		734,044	573,382	534,107
Nonoperating expenses, net		(116,482)	(112,350)	(40,543)
Income before income taxes and equity in income of equity investments		617,562	461,032	493,564
Income taxes (Note 13)		65,878	161,175	151,364
Income before equity in income of equity investments		551,684	299,857	342,200
Equity in income of equity investments, net of tax		40,532	26,115	25,430
Income from continuing operations, net of tax		592,216	325,972	367,630
Income from discontinued operations, net of tax		—	—	1,411
Net income	$	592,216	325,972	369,041
Net income attributable to noncontrolling interests		(6,031)	(6,334)	(4,997)
Net income attributable to Total System Services, Inc. (TSYS) common shareholders	$	586,185	319,638	364,044
Basic earnings per share (EPS) attributable to TSYS common shareholders (Note 24):
Income from continuing operations to TSYS common shareholders	$	3.19	1.74	1.97
Gain from discontinued operations to TSYS common shareholders		—	—	0.01
Net income attributable to TSYS common shareholders	$	3.19	1.74	1.98
Diluted EPS attributable to TSYS common shareholders (Note 24):
Income from continuing operations to TSYS common shareholders	$	3.16	1.73	1.96
Gain from discontinued operations to TSYS common shareholders		—	—	0.01
Net income attributable to TSYS common shareholders	$	3.16	1.73	1.97
Amounts attributable to TSYS common shareholders:
Income from continuing operations	$	586,185	319,638	362,633
Gain from discontinued operations		—	—	1,411
Net income	$	586,185	319,638	364,044

See accompanying Notes to Consolidated Financial Statements

34

Consolidated Statements of Comprehensive Income

	Years Ended December 31,
(in thousands)	2017		2016	2015
Net income	$	592,216	325,972	369,041
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		22,018	(30,801)	(21,719)
Postretirement healthcare plan adjustments		(592)	496	(1,567)
Unrealized (loss) gain on available-for-sale securities		(1,416)	7,359	1,398
Other comprehensive income (loss)		20,010	(22,946)	(21,888)
Comprehensive income		612,226	303,026	347,153
Comprehensive income attributable to noncontrolling interests		(6,031)	(6,002)	(4,727)
Comprehensive income attributable to TSYS common shareholders	$	606,195	297,024	342,426

See accompanying Notes to Consolidated Financial Statements

35

Consolidated Statements of Cash Flows

	Years Ended December 31,
(in thousands)	2017		2016	2015
Cash flows from operating activities:
Net income	$	592,216	325,972	369,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		405,906	373,546	258,264
Provisions for cardholder losses		51,194	49,363	41,264
Share-based compensation		42,409	43,728	41,549
Provisions for bad debt expenses and billing adjustments		10,169	7,584	4,495
Charges for transaction processing provisions		11,716	5,351	6,976
Amortization of debt issuance costs		4,307	13,570	1,841
Dividends received from equity investments		20,589	15,246	12,097
Loss (gain) on foreign currency		907	(1,748)	388
Amortization of bond discount		907	750	397
Loss on disposal of equipment, net		2,307	774	(397)
Loss on impairment		1,298	-	-
Excess tax benefit from share-based payment arrangements		-	(9,905)	(24,357)
Deferred income tax (benefit) expense		(172,488)	7,435	(4,083)
Gain on disposal of subsidiaries		-	-	(3,568)
Equity in income of equity investments, net of tax		(40,532)	(26,115)	(25,430)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accrued salaries and employee benefits		13,538	(2,597)	29,168
Accounts receivable		(29,729)	(73,235)	(39,218)
Prepaid expenses, other current assets and other long-term assets		3,089	(58,345)	(7,372)
Accounts payable		17,653	(12,562)	(3,987)
Other current liabilities and other long-term liabilities		(78,964)	59,217	(55,034)
Net cash provided by operating activities		856,492	718,029	602,034
Cash flows from investing activities:
Purchases of property and equipment		(70,039)	(51,132)	(54,640)
Additions to contract acquisition costs		(69,806)	(45,847)	(58,728)
Additions to internally developed computer software		(30,265)	(34,043)	(39,219)
Additions to licensed computer software from vendors		(25,916)	(11,551)	(50,729)
Cash used in acquisitions, net of cash acquired		-	(2,345,493)	(750)
Other investing activities		(2,718)	(4,930)	42
Net cash used in investing activities		(198,744)	(2,492,996)	(204,024)
Cash flows from financing activities:
Principal payments on long-term borrowings, capital lease obligations and license agreements		(421,306)	(724,084)	(54,719)
Purchase of noncontrolling interest		(70,000)	(5,878)	-
Dividends paid on common stock		(79,017)	(73,378)	(73,677)
Subsidiary dividends paid to noncontrolling shareholders		(5,997)	(5,548)	(5,028)
Repurchase of common stock under plans and tax withholding		(284,237)	(30,275)	(242,235)
Debt issuance costs		-	(26,555)	-
Excess tax benefit from share-based payment arrangements		-	9,905	24,357
Proceeds from borrowings of long-term debt		200,000	2,666,295	1,912
Proceeds from exercise of stock options		21,832	11,708	58,636
Net cash (used in) provided by financing activities		(638,725)	1,822,190	(290,754)
Cash and cash equivalents:
Effect of exchange rate changes on cash and cash equivalents		5,980	(11,197)	(7,111)
Net increase in cash and cash equivalents		25,003	36,026	100,145
Cash and cash equivalents at beginning of period		425,354	389,328	289,183
Cash and cash equivalents at end of period	$	450,357	425,354	389,328
Supplemental cash flow information:
Interest paid	$	112,705	84,420	40,425
Income taxes paid, net	$	269,113	87,428	171,455

See accompanying Notes to Consolidated Financial Statements

36

Consolidated Statements of Changes in Equity

			TSYS Shareholders
							Accumulated
	Redeemable					Additional	Other
	Noncontrolling		Common Stock			Paid-In	Comprehensive	Treasury	Retained	Noncontrolling
(in thousands, except per share data)	Interests		Shares	Dollars		Capital	Income (Loss)	Stock	Earnings	Interests	Total Equity
Balance as of December 31, 2014	$	22,492	202,775	$	20,278	171,270	(11,926)	(453,230)	1,966,370	6,882	$	1,699,644
Net income		5,945	-		-	-	-	-	364,044	(948)		363,096
Other comprehensive income  (Note 19)		-	-		-	-	(21,618)	-	-	(270)		(21,888)
Common stock issued from treasury shares for exercise of stock options (Note 17)		-	-		-	12,273	-	46,363	-	-		58,636
Common stock unissued due to forfeiture of nonvested awards		-	(6)		(1)	702	-	(701)	-	-		-
Common stock issued from treasury shares for nonvested awards (Note 17)		-	-		-	(7,982)	-	7,982	-	-		-
Share-based compensation (Note 17)		-	-		-	41,179	-	-	-	-		41,179
Common stock issued from treasury shares for dividend equivalents (Note 17)		-	-		-	186	-	163	-	-		349
Cash dividends declared ($0.40 per share)		-	-		-	-	-	-	(74,356)	-		(74,356)
Purchase of treasury shares (Note 18)		-	-		-	6	-	(242,241)	-	-		(242,235)
Subsidiary dividends paid to noncontrolling interests		(5,027)	-		-	-	-	-	-	-		-
Tax benefits associated with share-based compensation		-	-		-	24,257	-	-	-	-		24,257
Balance as of December 31, 2015		23,410	202,769		20,277	241,891	(33,544)	(641,664)	2,256,058	5,664		1,848,682
Net income		6,231	-		-	-	-	-	319,638	103		319,741
Other comprehensive income  (Note 19)		-	-		-	-	(22,614)	-		(332)		(22,946)
Common stock issued from treasury shares for exercise of stock options (Note 17)		-	-		-	1,824	-	9,884	-	-		11,708
Common stock unissued due to forfeiture of nonvested awards		-	(4)		(1)	1,197	-	(1,196)	-	-		-
Common stock issued from treasury shares for nonvested awards (Note 17)		-	-		-	(17,204)	-	17,204	-	-		-
Share-based compensation (Note 17)		-	-		-	42,457	-	-	-	-		42,457
Cash dividends declared ($0.40 per share)		-	-		-	-	-	-	(73,474)	-		(73,474)
Purchase of treasury shares (Note 18)		-	-		-	-	-	(30,275)	-	-		(30,275)
Subsidiary repurchase of noncontrolling interests		-	-		-	(443)	-	-	-	(5,435)		(5,878)
Subsidiary dividends paid to noncontrolling interests		(5,548)	-		-		-	-	-	-		-
Tax benefits associated with share-based compensation		-	-		-	9,905	-	-	-	-		9,905
Balance as of December 31, 2016		24,093	202,765		20,276	279,627	(56,158)	(646,047)	2,502,222	-		2,099,920
Net income		6,031	-		-	-	-	-	586,185	-		586,185
Other comprehensive income  (Note 19)		-	-		-	-	20,010	-	-	-		20,010
Common stock issued from treasury shares for exercise of stock options (Note 17)		-	-		-	10,474	-	11,358	-	-		21,832
Common stock unissued due to forfeiture of nonvested awards		-	-		1	1,230	-	(1,231)	-	-		-
Common stock issued from treasury shares for nonvested awards (Note 17)		-	-		-	(10,197)	-	10,197	-	-		-
Share-based compensation (Note 17)		-	-		-	43,234	-	-	-	-		43,234
Cash dividends declared ($0.46 per share)		-	-		-	-	-	-	(84,389)	-		(84,389)
Purchase of treasury shares (Note 18)		-	-		-	-	-	(284,237)	-	-		(284,237)
Adjustments to redemption value of redeemable noncontrolling interest		101,405	-		-	(101,405)	-	-	-	-		(101,405)
Subsidiary repurchase of noncontrolling interest		(9,843)	-		-	(60,157)	-	-	-	-		(60,157)
Subsidiary dividends paid to noncontrolling interest		(5,997)	-		-	-	-	-	-	-		-
Balance as of December 31, 2017	$	115,689	202,765	$	20,277	162,806	(36,148)	(909,960)	3,004,018	-	$	2,240,993

See accompanying Notes to Consolidated Financial Statements

37

Notes to Consolidated Financial Statements

Note 1: Basis of Presentation and Summary of Significant Accounting Policies

BUSINESS:  Total System Services, Inc.’s (TSYS’ or the Company’s) revenues are derived from providing payment processing, merchant services and related payment services to financial and nonfinancial institutions, generally under long-term processing contracts. The Company also derives revenues by providing general-purpose reloadable (GPR) prepaid debit and payroll cards, demand deposit accounts and other financial services to underbanked and other consumers and businesses. The Company’s services are provided through three operating segments: Issuer Solutions, Merchant Solutions and Netspend.

Through the Company’s Issuer Solutions segment, TSYS processes information through its cardholder systems to financial and nonfinancial institutions throughout the United States and internationally. The Company’s Merchant Solutions segment provides merchant services to merchant acquirers and merchants mainly in the United States. The Company’s Netspend segment provides services to consumers in the United States.

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:  The accompanying consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting principles (GAAP) include the accounts of TSYS and its wholly- and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities and to assess whether it is the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary, then that entity is included in the consolidated financial statements.

RISKS AND UNCERTAINTIES AND USE OF ESTIMATES:  Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, lower than anticipated growth from existing clients, an inability to attract new clients and grow internationally, loss of a major customer or other significant client, loss of a major supplier, an inability to grow through acquisitions or successfully integrate acquisitions, an inability to control expenses, technology changes, the impact of the application of and/or changes in accounting principles, financial services consolidation, changes in regulatory requirements, a decline in the use of cards as a payment mechanism, disruption of the Company's international operations, breach of the Company's security systems, a decline in the financial stability of the Company's clients and uncertain economic conditions. Negative developments in these or other risk factors could have a material adverse effect on the Company's financial position, results of operations and cash flows.

The Company has prepared the accompanying consolidated financial statements in conformity with U.S. GAAP. The preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. These estimates and assumptions are developed based upon all information available. Actual results could differ from estimated amounts.

ACQUISITIONS — PURCHASE PRICE ALLOCATION:  TSYS' purchase price allocation methodology requires the Company to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. TSYS estimates the fair value of assets and liabilities based upon appraised market values, the carrying value of the acquired assets and widely accepted valuation techniques, including the cost approach, discounted cash flows and market multiple analyses. Management determines the fair value of fixed assets and identifiable intangible assets such as developed technology or customer relationships, and any other significant assets or liabilities. TSYS adjusts the purchase price allocation, as necessary, up to one year after the acquisition closing date as TSYS obtains more information regarding asset valuations and liabilities assumed. Unanticipated events or circumstances may occur which could affect the accuracy of the Company's fair value estimates, including assumptions regarding industry economic factors and business strategies, and may result in an impairment or a new allocation of purchase price.

TSYS may allocate part of the purchase price of future acquisitions to contingent consideration as required by GAAP for business combinations. The fair value calculation of contingent consideration will involve a number of assumptions that are subjective in nature and which may differ significantly from actual results. TSYS may experience volatility in its earnings to some degree in future reporting periods as a result of these fair value measurements.

DISCONTINUED OPERATIONS: The Company sold all of its stock of GP Network Corporation (representing 54% ownership of the company) and all of its stock of TSYS Japan Godo Kaisha (representing 100% ownership of the company) in April 2014. In 2015, the Company recorded an additional gain of $1.4 million, net of tax, related to the return of cash that was placed in escrow during closing and tax adjustments associated with the transaction.

38

CASH AND CASH EQUIVALENTS:  Cash on hand and investments with a maturity of three months or less when purchased are considered to be cash equivalents.

ACCOUNTS RECEIVABLE:  Accounts receivable balances are stated net of allowances for doubtful accounts and billing adjustments.

TSYS records an allowance for doubtful accounts when it is probable that the accounts receivable balance will not be collected. When estimating the allowance for doubtful accounts, the Company takes into consideration such factors as its day-to-day knowledge of the financial position of specific clients, the industry and size of its clients, the overall composition of its accounts receivable aging, prior history with specific customers of accounts receivable write-offs and prior experience of allowances in proportion to the overall receivable balance. This analysis includes an ongoing and continuous communication with its largest clients and those clients with past due balances. A financial decline of any one of the Company's large clients could have a material adverse effect on collectability of receivables and thus the adequacy of the allowance for doubtful accounts.

Increases in the allowance for doubtful accounts are recorded as charges to bad debt expense and are reflected in selling, general and administrative expenses in the Company's Consolidated Statements of Income. Write-offs of uncollectible accounts are charged against the allowance for doubtful accounts.

TSYS records an allowance for billing adjustments for actual and potential billing discrepancies. When estimating the allowance for billing adjustments, the Company considers its overall history of billing adjustments, as well as its history with specific clients and known disputes. Increases in the allowance for billing adjustments are recorded as a reduction of revenues in the Company's Consolidated Statements of Income and actual adjustments to invoices are charged against the allowance for billing adjustments.

GOODWILL:  Goodwill results from the excess of cost over the fair value of net assets of businesses acquired. Goodwill is tested for impairment at least annually. Equity investment goodwill, which is not reported as goodwill in the Company's Consolidated Balance Sheet, but is reported as a component of the equity investment, was $48.8 million and $46.1 million as of December 31, 2017 and 2016, respectively.

OTHER INTANGIBLE ASSETS: Identifiable intangible assets relate primarily to merchant relationships, customer relationships, databases, channel relationships, covenants-not-to-compete, trade names and trade associations resulting from acquisitions. These identifiable intangible assets are amortized using the straight-line method over periods not exceeding the estimated useful lives, which range from three to ten years. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with GAAP. Amortization expenses are charged to selling, general and administrative expenses in the Company's Consolidated Statements of Income.

LICENSED COMPUTER SOFTWARE: The Company licenses software from third parties that is used in providing services to clients. Licensed software is obtained through perpetual licenses, term licenses, site licenses and through agreements based on processing capacity. Perpetual and site licenses are amortized using the straight-line method over their estimated useful lives which range from three to ten years. Term licenses are amortized over the term of the agreement. Mainframe software that is licensed based on processing capacity is amortized using a units-of-production basis over the estimated useful life of the software, generally not to exceed ten years. At each balance sheet date, the Company evaluates impairment losses on long-lived assets used in operations in accordance with GAAP.

ACQUISITION TECHNOLOGY INTANGIBLES: These identifiable intangible assets are software technology assets resulting from acquisitions. These assets are amortized using the straight-line method over periods not exceeding their estimated useful lives, which range from five to nine years. GAAP requires that intangible assets with estimated useful lives be amortized over their respective estimated useful lives to their residual values, and reviewed for impairment. Acquisition technology intangibles’ net book values are included in computer software, net in the accompanying balance sheets. Amortization expenses are charged to cost of services in the Company's Consolidated Statements of Income.

SOFTWARE DEVELOPMENT COSTS:  Costs of computer software to be sold, leased or otherwise marketed are capitalized once technological feasibility of the software product has been established. Costs incurred prior to establishing technological feasibility are expensed as incurred. Technological feasibility is established when the Company has completed a detailed program design and has determined that a product can be produced to meet its design specifications, including functions, features and technical performance requirements. Capitalization of costs ceases when the product is generally available to clients. In evaluating software development costs for recoverability, expected cash flows are estimated by management should events indicate a loss may have been triggered. The Company evaluates the unamortized capitalized costs of software development, the impairment of which is determined by expected undiscounted future operating cash flows of the

39

software as compared to the carrying amount of the software product. The amount by which the unamortized software development costs exceed the lower of the carrying amount or fair value is written off in the period that such determination is made. If the actual cash flows are not consistent with the Company's estimates, a material write-off may result and net income may be materially different than was initially recorded. Assumptions and estimates about future cash flows and remaining useful lives of software are complex and subjective. They can be affected by a variety of factors, including industry and economic trends, changes in the Company’s business strategy and changes in the internal forecasts. The amount by which the unamortized software development costs exceed the net realizable value is written off in the period that such determination is made. Software development costs are amortized using the straight-line method over its estimated useful life, which ranges from three to ten years.

The Company also develops software that is used internally. Internal-use software development costs are capitalized once: (1) the preliminary project stage is completed, (2) management authorizes and commits to funding a computer software project, and (3) it is probable that the project will be completed and the software will be used to perform the function intended. Costs incurred prior to meeting the qualifications are expensed as incurred. Capitalization of costs ceases when the project is substantially complete and ready for its intended use. Internal-use software development costs are amortized using the straight-line method over its estimated useful life which ranges from three to ten years. Software development costs may become impaired in situations where development efforts are abandoned due to the viability of the planned project becoming doubtful or due to technological obsolescence of the planned software product.

PROPERTY AND EQUIPMENT:  Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Buildings and improvements are depreciated over estimated useful lives of 5-40 years, computer and other equipment over estimated useful lives of 2-5 years, and furniture and other equipment over estimated useful lives of 3-15 years. The Company evaluates impairment losses on long-lived assets used in operations in accordance with the provisions of GAAP.All ordinary repairs and maintenance costs are expensed as incurred. Maintenance costs that extend the asset life are capitalized and amortized over the remaining estimated life of the asset.

CONTRACT ACQUISITION COSTS:  The Company capitalizes contract acquisition costs related to signing incentives for signing or renewing long-term contracts. The Company capitalizes internal conversion costs in accordance with GAAP.

Contract acquisition costs are amortized using the straight-line method over the contract term or the expected customer relationship period when a renewal is anticipated, beginning when the client's cardholder accounts are converted and producing revenues. The amortization of contract acquisition costs associated with cash payments for client incentives is included as a reduction of revenues in the Company's Consolidated Statements of Income. The amortization of contract acquisition costs associated with conversion activity is recorded as cost of services in the Company's Consolidated Statements of Income.

EQUITY METHOD INVESTMENTS:  TSYS' 49% investment in Total System Services de México, S.A. de C.V. (TSYS de México), an electronic payment processing support operation located in Toluca, México, is accounted for using the equity method of accounting, as is TSYS' 44.56% investment in China UnionPay Data Co., Ltd. (CUP Data) headquartered in Shanghai, China. The Company has entered into limited partnership agreements in connection with investing in two Atlanta-based venture capital funds focused exclusively on investing in technology-enabled financial services companies. TSYS' equity investments are recorded initially at cost and subsequently adjusted for equity in earnings, cash contributions and distributions, and foreign currency translation adjustments. 

INCOME TAXES:  Income taxes reflected in TSYS' consolidated financial statements are computed based on the taxable income of TSYS and its affiliated subsidiaries. A consolidated U.S. federal income tax return is filed for TSYS and its majority- owned U.S. subsidiaries. Additionally, income tax returns are also filed in states where TSYS and its subsidiaries have filing obligations and in foreign jurisdictions where TSYS has a foreign affiliate.

The Company accounts for income taxes in accordance with the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Reserves against the carrying value of a deferred tax asset are established when necessary to reflect the decreased likelihood of realization of a deferred asset in the future. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Income tax provisions require the use of management judgments, which are subject to challenge by various taxing authorities. Contingency reserves are periodically established where the amount of the contingency can be reasonably determined and is

40

likely to occur. Reductions in contingency reserves are recognized when tax disputes are settled or examination periods lapse.

Significant estimates used in accounting for income taxes relate to the determination of taxable income, the determination of temporary differences between book and tax basis, as well as estimates on the realizability of tax credits and net operating losses.

TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax expense in the Consolidated Statements of Income.

UP-FRONT DISTRIBUTOR AND PARTNER PAYMENTS: The Company makes up-front contractual payments to third-party distributors and partners. The Company assesses each up-front payment to determine whether it meets the criteria of an asset as defined by U.S. GAAP. If these criteria are met, the Company capitalizes the up-front payment and recognizes the capitalized amount as expense ratably over the benefit period, which is generally the contract period. If the contract requires the distributor or partner to perform specific acts (i.e., achieve a sales goal) and no other conditions exist for the distributor or partner to earn or retain the up-front payment, then the Company capitalizes the payment and recognizes it as an expense when the performance conditions have been met. Up-front distributor and partner payments are classified on the Consolidated Balance Sheets as other non-current assets and recorded as a cost of services in the Consolidated Statements of Income.

IMPAIRMENT OF LONG-LIVED ASSETS:  The Company reviews long-lived assets, such as property and equipment and intangibles subject to amortization, including contract acquisition costs and certain computer software, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If upon a triggering event the Company determines that the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet.

TRANSACTION PROCESSING PROVISIONS:  The Company has recorded an accrual for contract contingencies (performance penalties) and processing errors. A significant number of the Company's contracts with large clients contain service level agreements which can result in TSYS incurring performance penalties if contractually required service levels are not met. When providing for these accruals, the Company takes into consideration such factors as the prior history of performance penalties and processing errors incurred, actual contractual penalty charge rates in the Company's contracts, progress towards milestones and known processing errors. As of December 31, 2017 and 2016, the Company had transaction processing provisions of $2.2 million and $2.9 million, respectively. These accruals are included in other current liabilities in the accompanying Consolidated Balance Sheets. Increases and decreases in transaction processing provisions are charged to cost of services in the Company's Consolidated Statements of Income, and payments or credits for performance penalties and processing errors are charged against the accrual.

PROVISION FOR CARDHOLDER LOSSES: The Company is exposed to losses due to cardholder fraud, payment defaults and other forms of cardholder activity as well as losses due to non-performance of third parties who receive cardholder funds for transmittal to the issuing banks (banks that issue MasterCard International or Visa USA, Inc. branded cards to customers). The Company establishes a reserve for the losses it estimates will arise from processing customer transactions, debit card overdrafts, chargebacks for unauthorized card use and merchant-related chargebacks due to non-delivery of goods and services. These reserves are established based upon historical loss and recovery rates and cardholder activity for which specific losses can be identified. The provision for cardholder losses was approximately $9.5 million and $10.5 million as of December 31, 2017 and 2016, respectively. The charges to provisions for cardholder losses are included in cost of services in the Consolidated Statements of Income and other current liabilities in the Consolidated Balance Sheets. The Company regularly updates its reserve estimate as new facts become known and events occur that may impact the settlement or recovery of losses.

PROVISION FOR MERCHANT LOSSES:  The Company has potential liability for losses resulting from disputes between a cardholder and a merchant that arise as a result of, among other things, the cardholder's dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant's favor. In these cases, the transaction is "charged back" to the merchant, which means the purchase price is refunded to the customer by the card-issuing bank and charged to the merchant. If the merchant is unable to fund the refund, TSYS must do so. TSYS also bears the risk of reject losses arising from the fact that TSYS collects fees from its merchants after the monthly billing period. If the merchant has

41

gone out of business during such period, TSYS may be unable to collect such fees. TSYS maintains cash deposits or requires the pledge of a letter of credit from certain merchants, generally those with higher average transaction size where the card is not present when the charge is made or the product or service is delivered after the charge is made, in order to offset potential contingent liabilities such as chargebacks and reject losses that would arise if the merchant went out of business. Most chargeback and reject losses are charged to cost of services as they are incurred. However, the Company also maintains a provision against losses, including major fraud losses, which are both less predictable and involve larger amounts. The loss provision was established using historical loss rates, applied to recent bankcard processing volume. As of December 31, 2017 and 2016 , the Company had a merchant loss provision in the amount of $4.3 million and $2.0 million, respectively.

LEASES:  The Company is obligated under noncancelable leases for computer equipment, software and facilities. As these leases expire, they will be evaluated and renewed or replaced by similar leases based on need. For purposes of applying the accounting and reporting standards, leases are classified from the standpoint of the lessee as capital or operating leases.

Rental payments on operating leases are charged to expense over the lease term. If rental payments are not made on a straight-line basis, rental expense nevertheless shall be recognized on a straight-line basis unless another systematic and rational basis is more representative of the time pattern in which use benefit is derived from the leased property, in which case that basis shall be used.

Certain of the Company's operating leases are for office space. The Company will make various alterations (leasehold improvements) to the office space and capitalize these costs as part of property and equipment. Leasehold improvements are amortized on a straight-line basis over the useful life of the improvement or the term of the lease, whichever is shorter.

REDEEMABLE NONCONTROLLING INTEREST: In connection with the acquisition of Central Payment Co., LLC (CPAY), the Company is party to call and put arrangements with respect to the membership units that represent the remaining noncontrolling interest of CPAY. The call arrangement is exercisable by TSYS and the put arrangement is exercisable by the seller. The put arrangement is outside the control of the Company by requiring the Company to purchase the seller’s entire equity interest in CPAY at a put price at fair value. The put arrangement is recorded on the consolidated balance sheet and is classified as redeemable noncontrolling interest outside of permanent equity.

TREASURY STOCK:  The Company uses the cost method when it purchases its own common stock as treasury shares or issues treasury stock upon option exercises and displays treasury stock as a reduction of shareholders' equity.

FAIR VALUES OF FINANCIAL INSTRUMENTS:  The Company uses financial instruments in the normal course of its business. The carrying values of cash equivalents, accounts receivable, accounts payable, accrued salaries and employee benefits, and other current liabilities approximate their fair value due to the short-term maturities of these assets and liabilities. The fair value of the Company's long-term debt and obligations under capital leases is not significantly different from its carrying value.

Investments in equity method investments are accounted for using the equity method of accounting and pertain to privately held companies. The Company believes the fair values of its investments in equity method investments exceed their respective carrying values.

FOREIGN CURRENCY TRANSLATION:  The Company maintains several different foreign operations whose functional currency is their local currency. Foreign currency financial statements of the Company's Mexican and Chinese equity investments, the Company's wholly owned subsidiaries and the Company's majority owned subsidiaries, as well as the Company's division and branches in the United Kingdom and China, are translated into U.S. dollars at current exchange rates, except for revenues, costs and expenses, and net income which are translated at the average exchange rates for each reporting period. Net gains or losses resulting from the currency translation of assets and liabilities of the Company's foreign operations, net of tax when applicable, are accumulated in a separate section of shareholders' equity titled accumulated other comprehensive income (loss). Gains and losses on transactions denominated in currencies other than the functional currencies are included in determining net income for the period in which exchange rates change.

REVENUE RECOGNITION:   Revenue is recognized when it is realized or realizable and earned, which is deemed to occur when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. The Company accrues for rights of refund, processing errors or penalties, or other related allowances based on historical experience.

42

The Company's Issuer Solutions revenues are derived from long-term processing contracts with financial and nonfinancial institutions and are generally recognized as the services are performed. Payment processing services revenues are generated primarily from charges based on:

· The number of accounts on file;

· Transactions and authorizations processed;

· Statements mailed; and

· Cards embossed and mailed and other processing services for cardholder accounts on file.

Most of these contracts have prescribed annual revenue minimums, penalties for early termination, and service level agreements which may impact contractual fees if certain service levels are not achieved.

Revenue is recognized as the services are performed, primarily on a per unit basis. Processing contracts generally range from three to ten years in length. When providing payment processing services, the Company frequently enters into customer arrangements to provide multiple services that may also include conversion or implementation services, business process outsourcing services such as call center services, web-based services, and other payment processing-related services.  Revenue for these services is generally recognized as they are performed on a per unit basis each month or ratably over the term of the contract. 

The Company’s Merchant Solutions revenues are partially derived from relationships with thousands of individual merchants whose contracts range from thirty days to five years. Additionally, part of the revenues are derived from long-term processing contracts with large financial institutions, other merchant acquirers and merchant organizations which generally range from three to eight years and provide for penalties for early termination. Merchant services revenue is generated primarily from processing all payment forms including credit, debit and electronic benefits transfer for merchants of all sizes across a wide array of retail market segments.

The products and services offered include:

· Authorization and capture of electronic transactions;

· Clearing and settlement of electronic transactions;

· Information reporting services related to electronic transactions;

· Merchant billing services; and

· Point-of-sale terminal services.

Revenue is recognized for merchant services as those services are performed, primarily measured on a per unit basis. When providing merchant processing services, the Company frequently enters into customer arrangements to provide multiple services that may also include conversion or implementation services, business process outsourcing services such as call center services, terminal services, and other merchant processing-related services. Revenue for these services is generally recognized as they are performed on a per unit basis each month or ratably over the term of the contract. Revenues on point-of-sale terminal equipment are recognized upon the transfer of ownership and shipment of product.

With the acquisition of TransFirst Holdings Corp. (TransFirst) on April 1, 2016, TSYS included TransFirst’s results as part of the Merchant Solutions segment. TransFirst’s revenues are reported gross, which includes amounts paid for interchange and assessments, as TransFirst is the principal in the contractual relationship with its customers. Expenses covering interchange and payment network fees are included in TransFirst’s cost of services and are directly attributable to processing fee revenues and are recognized in the same period as the related revenue.

The Company’s Netspend revenues principally consist of a portion of the service fees collected from cardholders and interchange revenues received by the issuing banks in connection with the programs Netspend manages.

Cardholders are charged fees in connection with Netspend’s products and services as follows:

· Transactions - Cardholders are typically charged a fee for each Personal Identification Number (PIN) and signature-based purchase transaction made using their GPR cards, unless the cardholder is on a monthly or annual service plan, in which case the cardholder is instead charged a monthly or annual subscription fee, as applicable. Cardholders are also charged fees for Automated Teller Machines (ATM) withdrawals and other transactions conducted at ATMs.

43

· Customer Service and Maintenance - Cardholders are typically charged fees for balance inquiries made through Netspend’s call centers. Cardholders are also charged a monthly maintenance fee after a specified period of inactivity.

· Additional Products and Services - Cardholders are charged fees associated with additional products and services offered in connection with certain GPR cards, including the use of overdraft features, a variety of bill payment options, custom card designs and card-to-card transfers of funds initiated through the call centers.

· Other - Cardholders are charged fees in connection with the acquisition and reloading of the GPR cards at retailers and the Company receives a portion of these amounts in some cases.

Revenue resulting from the service fees charged to the cardholders described above is recognized when the fees are charged because the earnings process is substantially complete, except for revenue resulting from the initial activation of cards and annual subscription fees. Revenue resulting from the initial activation of cards is recognized ratably, net of commissions paid to distributors, over the average account life, which is approximately six months for GPR cards. Revenue resulting from annual subscription fees is recognized ratably over the annual period to which the fees relate.

Revenues also include fees charged in connection with program management and processing services the Company provides for private-label programs. Revenue resulting from these fees is recognized when the Company has fulfilled its obligations under the underlying service agreements.

Netspend derives revenue from a portion of the interchange fees remitted by merchants when cardholders make purchases using their GPR cards. Subject to applicable law, interchange fees are fixed by the card associations and network organizations (Networks). Interchange revenue is recognized net of sponsorship, licensing and processing fees charged by the Networks for services they provide in processing purchase transactions routed through them. Interchange revenue is recognized during the period that the purchase transactions occur. Also included in interchange revenue are fees earned from branding agreements with the Networks.

When a sale involves multiple deliverables, revenue recognition is affected by the determination of the number of deliverables in an arrangement, whether those deliverables may be separated into multiple units of accounting, and the standalone selling price of each unit of accounting which affects the amount of revenue allocated to each unit. Pursuant to Accounting Standards Codification (ASC) 605, the Company uses vendor-specific objective evidence (VSOE) of the standalone selling price of its services when it exists to determine the amount of revenue to allocate to each unit of accounting. The Company establishes VSOE using the price charged when the same service is sold separately (on a standalone basis). In most situations, the Company does not have sufficient VSOE. In these situations, TSYS considers whether sufficient third party evidence (TPE) of standalone selling price exists for the Company’s services. However, the Company typically is not able to determine TPE and has not used this measure of selling price due to the unique and proprietary nature of some of its services and the inability to reliably verify relevant standalone third party prices. When there is insufficient evidence of VSOE and TPE, the Company has made its best estimate of the standalone selling price (ESP) of that service for purposes of allocating revenue to each unit of accounting. When determining ESP, TSYS uses limited standalone sales data that do not meet the Company’s criteria to establish VSOE, management pricing strategies, residual selling price data when VSOE exists for a group of elements, the cost of providing the services and the related margin objectives. Consideration is also given to geographies in which the services are sold or delivered, customer classifications, and market conditions including competitor pricing strategies and benchmarking studies. Revenue is recognized when the revenue recognition criteria for each unit of accounting have been met.

There were no material changes or impact to revenue for current contractual arrangements during the years ended December 31, 2017, 2016 and 2015 due to any changes in the determination of the number of deliverables in an arrangement, units of accounting, or estimates of VSOE or ESP.

In many situations, the Company enters into arrangements with customers to provide conversion or implementation services in addition to processing services where the conversion or implementation services do not have standalone value. For these arrangements, conversion or implementation services that do not have standalone value, are recognized over the expected customer relationship (contract term) as the related processing services are performed.

The Company’s other services generally have standalone value and constitute separate units of accounting for revenue recognition purposes. Customer arrangements entered into prior to 2011 (prior to the adoption of Accounting Standards Update (ASU) 2009-13 “Multiple-Deliverable Revenue Arrangements,” an update to ASC Topic 605 “Revenue Recognition,” and formerly known as EITF 08-1, “Revenue Arrangements with Multiple Deliverables”) often included services for which sufficient objective and reliable evidence of fair value did not exist. In these situations, the deliverables were combined and recognized as a single unit of accounting based on the proportional performance for the combined unit. For pre-2011

44

arrangements that have not expired, have not been materially modified or amended, or terminated, the Company continues to recognize revenue in accordance with these policies in the accompanying consolidated financial statements. Beginning in 2011, services in new or materially modified arrangements of this nature were divided into separate units of accounting and revenue is now allocated to each unit of accounting based on the relative selling price method as disclosed above. As the services in the pre-2011 arrangements are generally delivered over the same term with consistent patterns of performance, there is no material difference in the timing or pattern of revenue recognition for each group of arrangements (pre-2011 arrangements and those new or materially modified thereafter).

The Company’s multiple element arrangements may include one or more elements that are subject to other topics including software revenue recognition and leasing guidance. The consideration for these multiple element arrangements is allocated to each group of deliverables – those subject to ASC 605-25 and those subject to other topics based on the revised guidance in ASU 2009-13. Arrangement revenue for each group of deliverables is then further separated, allocated, and recognized based on applicable guidance.

In regards to taxes assessed by a governmental authority imposed directly on a revenue producing transaction, the Company reports its revenues on a net basis.

REIMBURSABLE ITEMS:  Reimbursable items consist of out-of-pocket expenses which are reimbursed by the Company's clients. These expenses consist primarily of postage, access fees and third party software. Reimbursable items are recorded on a gross basis in total revenues and cost of services.

INTERCHANGE AND PAYMENT NETWORK FEES:  Interchange and payment network fees are charged by the card associations or payment networks.Depending upon the transaction type, the fees are a percentage of the transaction’s dollar value, a fixed amount, or a combination of the two methods. Certain interchange and payment network fees are recorded in both total revenues and cost of services.

SHARE-BASED COMPENSATION:  GAAP establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. A public entity must measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award.

The Company estimates forfeitures when recognizing compensation cost. The estimate of forfeitures will be adjusted by the Company as actual forfeitures differ from its estimates, resulting in compensation cost only for those awards that actually vest. The effect of the change in estimated forfeitures is recognized as compensation costs in the period the change in estimate occurred. In estimating its forfeiture rate, the Company stratified its data based upon historical experience to determine separate forfeiture rates for the different award grants. The Company currently estimates a forfeiture rate for existing stock option grants to TSYS non-executive employees, and other TSYS share-based awards. Currently, TSYS estimates a forfeiture rate in the range of 0% for executive level employees and up to 8% for other employees.

The Company has issued its vested awards to directors and nonvested awards to certain employees. The market value of the common stock at the date of issuance is recognized as compensation expense immediately for vested awards and over the vesting period of the nonvested awards. For nonvested award grants that have pro rata vesting, the Company recognizes compensation expense using the straight-line method over the vesting period of the award.

ADVERTISING:  Advertising costs are expensed as incurred or the first time the advertising takes place except for direct-response advertising and television advertising production costs. Direct-response advertising consists of commission paid to affiliate marketers for the new funded customer accounts generated by them. Direct-response advertising costs are capitalized and amortized over the average life of the new accounts, which is approximately one year. Television advertising production costs consist of the costs of developing and filming television ads. Television advertising production costs are capitalized when the production services are received and expensed in the period when the advertising first takes place. Advertising expense for 2017, 2016 and 2015 was $13.2 million, $11.5 million and $9.6 million, respectively.

NONCONTROLLING INTEREST:  Noncontrolling interest in earnings of subsidiaries represents the minority shareholders' share of the net income or loss of CPAY. Refer to Note 22 for more information on acquisitions.

EARNINGS PER SHARE: Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated to reflect the potential dilution that would occur if stock options or other contracts to issue common stock were exercised. Diluted EPS is calculated by dividing net income by weighted

45

average common and common equivalent shares outstanding. Common equivalent shares are calculated using the treasury stock method.

Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are "participating securities" as defined by GAAP, and therefore should be included in EPS using the two-class method.

The two-class method is an earnings allocation method for computing EPS when an entity's capital structure includes two or more classes of common stock or common stock and participating securities. It determines EPS based on dividends declared on common stock and participating securities and participation rights of participating securities in any undistributed earnings.

RECLASSIFICATIONS: The Company had investments in private equity funds as of December 31, 2016 with a value of $24.5 million. During the year ended December 31, 2017 and in prior periods, this investment was reclassified from other assets to equity investments on the consolidated balance sheets. The income statement impact was to reclassify an immaterial amount of gains and losses from nonoperating expenses to equity in income of equity investments.   

Recently Adopted Accounting Pronouncements

The Company adopted the following Accounting Standards Updates (ASUs) on January 1, 2017:

ASU 2017-04 “Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment,” which modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. An entity should apply the amendments in this Update on a prospective basis. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted by all entities for interim or annual goodwill impairment test performed on testing dates after January 1, 2017. The Company early adopted this ASU in May 2017 in conjunction with its annual goodwill impairment testing. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.

ASU 2016-19 “Technical Corrections,” which required changes to clarify, correct errors or make minor improvements to the ASC. Most of the amendments in this Update do not require transition guidance and were effective upon issuance of this Update. Six amendments in this Update clarify guidance or correct references in the ASC that could potentially result in changes in current practice because of either misapplication or misunderstanding of current guidance. Early adoption is permitted for the amendments that require transition guidance. The Company was impacted by the amendment to Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software, which adds a reference to guidance to use when accounting for internal-use software licensed from third parties that is within the scope of Subtopic 350-40. The transition guidance for that amendment is the same as the transition guidance in ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” to which the amendment relates and was adopted on a prospective basis. The adoption of this ASU resulted in the Company's recording of acquired software of $13.9 million as an intangible asset at present value rather than treating the software as a lease arrangement. During the year ended December 31, 2017, $5.3 million was classified as amortization expense instead of rental expense.

ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the consolidated statement of cash flows. The adoption of this standard results in the excess tax benefits and deficiencies associated with share-based payments being recorded on the income statement at the time they are deducted on the income tax return instead of being recorded in additional paid-in capital. The excess tax benefits are recorded along with other income tax cash flows as an operating activity in the statement of cash flows. The Company recorded excess tax benefits of $14.3 million in its provision for income taxes rather than as an increase to additional paid-in capital for the year ended December 31, 2017 on a prospective basis. Therefore, the prior period presented has not been adjusted. The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of diluted earnings per share using the treasury stock method, which did not have a material impact on its diluted earnings per share for the year ended December 31, 2017. The Company elected to apply the presentation requirement for cash flows related to excess tax benefits prospectively, and thus, the prior period presented has not been adjusted. This adoption resulted in an increase in net cash provided by operating activities and a decrease in net cash from financing activities of $14.3 million for the year ended December 31, 2017.

In March 2016, the FASB issued ASU 2016-07 ‘‘Simplifying the Transition to the Equity Method of Accounting,’’ which simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. The ASU further requires that unrealized holding gains or losses in accumulated other comprehensive

46

income related to an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the investment qualifies for the equity method. The guidance in the ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2016. Entities are required to apply the guidance prospectively to increases in the level of ownership interest or degree of influence occurring after the ASU’s effective date. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.

Recent Accounting Pronouncements

In February 2018, the FASB issued ASU 2018-02 “Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”  ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.  Consequently, the amendments in this ASU eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users.  The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.  Early adoption of the amendments in this ASU is permitted.  The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.  The Company is evaluating the effect of ASU 2018-02 on its consolidated financial statements.

In September 2017, the FASB issued ASU 2017-13 “Revenue Recognition (Topic 605), Revenues from Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842)”, which made amendments to SEC paragraphs pursuant to the Staff Announcement at the July 20, 2017 Emerging Issues Task Force (EITF) Meeting and rescission of prior SEC Staff Announcements and Observer comments. This guidance, which is effective immediately, generally relates to the adoption of ASC 606 and 842. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In May 2017, the FASB issued ASU 2017-09 “Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting,” to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: 

1.

The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.

2.

The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.

3.  The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.

The ASU is effective for the Company on January 1, 2018. Early adoption is permitted, including adoption in any interim period, for (a) public business entities for reporting periods for which financial statements have not yet been issued and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-01 “Business Combinations (Topic 805), Clarifying the Definition of a Business,” which provides a more robust framework to use in determining when a set of assets and activities is a business. The framework assists entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. The ASU is effective for the Company on January 1, 2018. Early application of the amendments in this Update is allowed under certain circumstances. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In November 2016, the FASB issued ASU 2016-18 ‘‘Statement of Cash Flows (Topic 230): Restricted Cash,’’ which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The ASU is effective for the Company on January 1,

47

2018. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows. The Company had restricted cash of $1.0 million, $ 0.5 million, and $0.2 million as of December 31, 2017, 2016 and 2017, respectively.

In October 2016, the FASB issued ASU 2016-16 ‘‘Income Taxes (Topic 740): Intra-Equity Transfers of Assets Other Than Inventory,’’ which requires that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. The ASU is effective for the Company on January 1, 2018. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU 2016-15 ‘‘Statement of Cash Flow (Topic 230): Classification of Certain Receipts and Cash Payments,’’ which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flow. The ASU is effective for the Company on January 1, 2018. Early adoption is permitted by all entities. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial instruments." The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are in the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted for periods beginning on or after January 1, 2019.  The Company is evaluating the effect of ASU 2016-13 on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842),” which introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the FASB’s new revenue recognition standard. The ASU also addresses other concerns related to the current leases model. The new guidance will be effective for fiscal years and interim periods within those years beginning after December 15, 2018. Early adoption will be permitted for all entities. The Company plans to adopt ASU 2016-02 on January 1, 2019.  While the Company is continuing to evaluate the effects of this ASU, the Company expects to record material right of use assets and lease liabilities on its consolidated balance sheet upon adoption.                                                                                                                                                                                                  

In January 2016, the FASB issued ASU 2016-01 ‘‘Recognition and Measurement of Financial Assets and Financial Liabilities,’’ which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. The ASU significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

Recent Revenue Recognition Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606),” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.  The FASB has issued several additional ASUs (included below) since this time that add additional clarification to certain issues existing after the original ASU was released. All of the new standards are effective for the Company on January 1, 2018. The standards permit the use of either the full retrospective or modified retrospective transition method.

In March 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," which improves the operability and understandability of the implementation guidance on principal versus agent considerations by providing indicators as to which party controls the good or service provided to a customer (the principal).

In April 2016, the FASB issued ASU 2016-10 “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” which clarifies two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas.

In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients,” which affects only the following narrow aspects of Topic 606: Assessing the

48

Collectability Criterion; Presentation of Sales and Other Taxes Collected from Customers; Noncash Consideration; Contract Modification at Transition; Completed Contracts at Transition; and Technical Correction.

In December 2016, the FASB issued ASU 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” which affects only the following narrow aspects of Topic 606: Disclosure of Remaining Performance Obligations as it relates to entities such as processors which may not be required to estimate revenue under ASU 2014-09 due to direct allocation of variable consideration; Disclosure of Prior - Period Performance Obligations; Loan Guarantee Fees; Contract Costs – Impairment Testing; Contract Costs - Interaction of Impairment Testing with Guidance in Other Topics; Provisions for Losses on Construction-Type and Production Type Contracts; Contracts within the scope of Topic 944 (Insurance) are excluded from the scope of Topic 606; Contract Modifications; Contract Asset versus Receivable; Refund Liability; Advertising Costs; Fixed - Odds Wagering Contracts in the Casino Industry.  

TSYS will adopt the new revenue standard, effective January 1, 2018, using the modified retrospective transition method. Under this method, the Company could elect to apply the cumulative effect method to either all contracts as of the date of initial application or only to contracts that are not complete as of that date. TSYS elected to apply the modified retrospective method to contracts that are not complete as of January 1, 2018. The cumulative impact of adopting the standard as of January 1, 2018 is expected to be an increase in opening retained earnings between $1.0 million and $4.0 million.  The most significant impact of adopting ASC 606 in 2018 is primarily the result of gross versus net presentation of interchange and payment network fees. In 2018, these fees collected on behalf of the payment networks and card issuers will be presented "net" of the amounts paid to them, as opposed to the "gross" presentation for certain of these fees in 2017.  As a result of this change, the Company’s total revenues for the year ending December 31, 2018 are expected to be lower by approximately $1.575 billion to $1.6 billion.  The Company’s diluted EPS for the year ending December 31, 2018 is expected to be lower by approximately $0.03 to $0.04 per share due primarily to changes in revenue recognition for certain contracts in the Issuer Solutions segment. The quantitative ranges provided represent management’s best estimate of the effect of adopting ASC 606 at the time of preparation of this Annual Report on Form 10-K. The actual impact of adopting ASC 606 is subject to change from this estimate, pending the completion of the Company’s assessment in the first quarter of 2018. The adoption of this guidance requires the implementation of new accounting processes, procedures and internal controls over financial reporting surrounding the adoption of the standard, periodic reporting and expanded disclosures. Additionally, the Company implemented a new revenue tool solution to facilitate compliance with the standard.

In preparation for adoption, the Company reviewed the requirements of the new revenue standard, and amendments described above, while following activities of the FASB and the American Institute of Certified Public Accountants (AICPA) for certain interpretive guidance applicable to Information Technology (IT) outsourcers and payment processors. The Company evaluated customer contracts under the new standard for each type of significant revenue stream (and related costs) to evaluate differences from current accounting, as described further below.

Issuer Solutions

Issuer Solutions revenues typically include a performance obligation to provide processing services to financial and non-financial institutions.  The Company has determined that these processing services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.   In many cases, Issuer Solutions arrangements may include additional performance obligations relating to loyalty redemption services and other professional services.  Similar to processing services, the Company has determined that loyalty redemption services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.  Professional services represent performance obligations that are satisfied over time.

The Company has determined that the vast majority of performance obligations to provide processing services and loyalty redemption services meet the allocation of variable consideration exception criteria (“direct allocation”) in that (a) the terms of a variable payment relate specifically to the entity’s efforts to satisfy the performance obligation or transfer the distinct service and (b) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective when considering all of the performance obligations and payment terms in the contract.  As a result, for those performance obligations qualifying for direct allocation, the Company will allocate and recognize variable consideration in the period it has the contractual right to invoice the customer. In certain instances when a performance obligation does not meet the criteria for direct allocation, the Company will recognize revenue either on a straight-line basis or a blended rate method (i.e., the estimated per transaction fee based on estimated total contract revenue and volumes, multiplied by the actual monthly transaction volume) over the term of the contract.  The Company determined that straight-line or blended rate are the most appropriate methods of measuring progress toward completion for performance obligations that do not meet the criteria for direct allocation. For professional services, the Company will recognize revenue based on the labor hours incurred for time and materials projects or on a straight-line basis for fixed fee projects.

49

For Issuer Solutions contracts that contain multiple performance obligations, the transaction price is allocated to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

The Issuer Solutions segment also enters into licensing arrangements with customers.  Under these arrangements, the Company provides the customer with a term license (functional IP), implementation services and unspecified upgrades and enhancements.  The Company has determined that these promised goods and services represent one combined performance obligation since the individual promised goods or services are not distinct in the context of the contract. The Company will recognize revenue over the contract period, on a straight-line basis, for this performance obligation. For separate performance obligations relating to professional services, revenue will be recognized on a percentage of completion basis.

Merchant Solutions

Merchant Solutions revenues typically include one performance obligation to provide processing services to individual merchants, large financial institutions, other merchant acquirers and merchant organizations.  The Company has determined that merchant processing services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.  Merchant Solutions arrangements also include other promised goods or services (such as point of sale terminals and merchant statement services) that are immaterial in the context of the contract.  As a result, the Company has determined that Merchant Solutions arrangements represent one performance obligation.

The Company has determined that the performance obligations to provide merchant processing services meet the allocation of variable consideration exception criteria (“direct allocation”) in that (a) the terms of a variable payment relate specifically to the entity’s efforts to satisfy the performance obligation or transfer the distinct service and (b) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective when considering all of the performance obligations and payment terms in the contract.  As a result, the Company will allocate and recognize variable consideration in the period it has the contractual right to invoice the customer. 

Gross vs. net presentation considerations for interchange and payment network fees

Interchange and payment network fees are charged by the card associations or payment networks. Depending upon the transaction type, the fees are a percentage of the transaction’s dollar value, a fixed amount, or a combination of the two methods. Interchange and payment network fees primarily relate to the Company’s Issuer Solutions and Merchant Solutions segments. With respect to interchange and payment network fees, the Company evaluated whether it is the principal or the agent.  With the adoption of ASC 606, the Company determined that interchange and payment network fees are not provided in return or exchange for services that the Company controls or acts as the principal, and, therefore, are not part of the consideration paid for its services.  These fees collected on behalf of the payment networks and card issuers will be presented “net” of the amounts paid to them. Accordingly, the Company is acting as an agent and presents the fees collected from merchants on behalf of the payment networks and card issuers net of the amounts paid to them.  In reaching this determination, the Company considered a number of factors including indicators of control such as the party primarily responsible and the party who has discretion in establishing prices.

Netspend

Netspend revenues include one performance obligation to provide account access and facilitate purchase transactions. The Company has determined that Netspend services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.  Further, the Company has determined that the performance obligation to provide account access and facilitate purchase transactions meets the criteria for the “as invoiced” practical expedient in that the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date.  As a result, the Company will recognize revenue in the amount to which the Company has a right to invoice.

Costs to obtain or fulfill a contract

The Company will capitalize the incremental costs of obtaining a contract with a customer if the Company expects to recover those costs. The incremental costs of obtaining a contract are those that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, a sales commission).  

The Company capitalizes the costs incurred to fulfill a contract only if those costs meet all of the following criteria:

50

a. The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.

b. The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.

c. The costs are expected to be recovered.

The Company will capitalize contract acquisition and fulfillment costs related to signing or renewing long-term contracts and costs related to cash payments for rights to provide processing services.

Contract acquisition and fulfillment cost will be amortized using the straight-line method over the expected period of benefit (ranging from 20 months to seven years or the longer of the contract term) beginning when the client’s cardholder accounts are converted or activated and producing revenues. The amortization of contract acquisition costs associated with cash payments for client incentives will be included as a reduction of revenues in the Company’s Consolidated Statements of Income. The amortization of contract fulfillment costs associated with conversion activity will be recorded as cost of services in the Company’s Consolidated Statements of Income.  The amortization of contract acquisition costs associated with sales commissions that qualify for capitalization will be recorded as selling, general and administrative expense in the Company’s Consolidated Statements of Income. Costs to obtain or fulfill a contract will be classified as contract cost assets in the Company’s Consolidated Balance Sheets.

Note 2 Fair Value Measurements

GAAP requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant level of inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

Level 1 — Quoted prices for identical assets and liabilities in active markets.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs for the asset or liability.

The Company had no transfers between Level 1, Level 2, or Level 3 during the years ended December 31, 2017, 2016 or 2015. Goodwill is assessed annually for impairment in the second quarter of each year using fair value measurement techniques. Specifically, goodwill impairment is determined using a two-step test. Step 0 is a qualitative analysis of relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit (RU) with its book value, including goodwill. If the fair value of the RU exceeds its book value, goodwill is considered not impaired. If the book value of the RU exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the fair value of the RU.

The estimate of fair value of the Company’s RUs is determined using various valuation techniques, including using an equally weighted combination of the market approach and the income approach. The market approach, which contains Level 2 inputs, utilizes readily available market valuation multiples to estimate fair value. The income approach is a valuation technique that utilizes the discounted cash flow (DCF) method, which includes Level 3 inputs. Under the DCF method, the fair value of the RU reflects the present value of the projected earnings that will be generated by each RU after taking into account the revenues and expenses associated with the asset, the relative risk that the cash flows will occur, the contribution of other assets, and an appropriate discount rate to reflect the value of the invested capital. Cash flows are estimated for future periods based upon historical data and projections by management.

As of December 31, 2017, the Company had recorded goodwill in the amount of $3.3 billion. The Company performed its annual impairment test of its goodwill balances as of May 31, 2017, and this test did not indicate any impairment. The fair value of the RUs substantially exceeds the carrying value. Refer to Note 5 for more information regarding goodwill.

The fair value of the Company’s long-term debt and obligations under capital leases is not significantly different from its carrying value, except for the Company’s Senior Notes, which are discussed in Note 11.

51

Note 3 Cash and Cash Equivalents

Cash and cash equivalent balances as of December 31, 2017 and 2016 are summarized as follows:

(in thousands)	2017		2016
Cash and cash equivalents in domestic accounts	$	396,577	375,122
Cash and cash equivalents in foreign accounts		53,780	50,232
Total	$	450,357	425,354

The Company maintains operating accounts outside the United States denominated in currencies other than the U.S. dollar. All amounts in domestic accounts are denominated in U.S. dollars.

Note 4 Prepaid Expenses and Other Current Assets

Significant components of prepaid expenses and other current assets as of December 31, 2017 and 2016 are summarized as follows:

(in thousands)	2017		2016
Prepaid expenses	$	65,159	84,173
Income taxes receivable		41,400	-
R&D state tax credit		22,642	-
Supplies inventory		17,072	17,105
Other		70,292	63,210
Total	$	216,565	164,488

Note 5 Goodwill

In 2016, the Company completed the TransFirst acquisition resulting in an additional $1.7 billion of goodwill being recorded. In addition, there was a downward adjustment to goodwill of $584,000 related to income tax reserves associated with the Netspend acquisition. In 2017, the Company adjusted the Netspend goodwill due to a tax adjustment of $1.8 million relating to uncertain tax positions.  In 2017, the Company decreased the Merchant Solutions goodwill due to deferred tax adjustments of $12.1 million and the write-off of a note receivable of $727,000 on the opening balance sheet of TransFirst.

The gross amount and accumulated impairment losses of goodwill as of December 31, 2017 and 2016 are as follows:

	2017
(in thousands)	Issuer Solutions		Merchant Solutions	Netspend	Consolidated
Gross amount	$	99,465	2,132,653	1,035,965	$	3,268,083
Accumulated impairment losses		(1,787)	(2,225)	-		(4,012)
Goodwill, net	$	97,678	2,130,428	1,035,965	$	3,264,071

	2016
	Issuer Solutions		Merchant Solutions	Netspend	Consolidated
Gross amount	$	96,733	2,144,061	1,034,170	$	3,274,964
Accumulated impairment losses		(1,787)	(2,225)	-		(4,012)
Goodwill, net	$	94,946	2,141,836	1,034,170	$	3,270,952

52

Below are the balances of goodwill as of December 31, 2017 and 2016 along with the related changes in carrying value.

(in thousands)	Issuer Solutions		Merchant Solutions		Netspend		Consolidated
Balance as of December 31, 2015	$	98,090		413,748		1,033,586	$	1,545,424
Netspend tax adjustment		-		-		584		584
TransFirst acquisition		-		1,728,088		-		1,728,088
Currency translation adjustments		(3,144)		-		-		(3,144)
Balance as of December 31, 2016	$	94,946		2,141,836		1,034,170	$	3,270,952
Netspend tax adjustment		-		-		1,795		1,795
TransFirst acquisition adjustments		-		(11,408)		-		(11,408)
Currency translation adjustments		2,732		-		-		2,732
Balance as of December 31, 2017	$	97,678		2,130,428		1,035,965	$	3,264,071

Refer to Note 22 for more information on acquisitions.

Note 6 Other Intangible Assets, Net

Significant components of other intangible assets as of December 31, 2017 and 2016 are summarized as follows:

	2017
(in thousands)	Gross		Accumulated Amortization	Net
Merchant relationships	$	588,000	(147,000)	$	441,000
Channel relationships		439,398	(200,540)		238,858
Customer relationships		167,222	(139,969)		27,253
Trade name		62,468	(58,068)		4,400
Covenants-not-to-compete		29,940	(20,815)		9,125
Database		28,000	(25,200)		2,800
Trade association		10,000	(7,750)		2,250
Favorable lease		3,006	(1,546)		1,460
Total	$	1,328,034	(600,888)	$	727,146

	2016
(in thousands)	Gross		Accumulated Amortization	Net
Merchant relationships	$	588,000	(63,000)	$	525,000
Channel relationships		439,600	(148,815)		290,785
Customer relationships		166,340	(122,465)		43,875
Trade name		62,397	(45,197)		17,200
Covenants-not-to-compete		29,940	(13,869)		16,071
Database		28,000	(19,600)		8,400
Trade association		10,000	(6,750)		3,250
Favorable lease		3,006	(911)		2,095
Total	$	1,327,283	(420,607)	$	906,676

Amortization related to other intangible assets, which is recorded in selling, general and administrative expenses, was $179.5 million, $163.8 million and $75.8 million for 2017, 2016 and 2015, respectively.

53

The weighted average useful life for each component of other intangible assets, and in total, as of December 31, 2017 is as follows:

	Weighted Average Amortization Period (Years)
Merchant relationships	7.0
Channel relationships	8.6
Customer relationships	8.2
Trade name	3.9
Covenants-not-to-compete	4.3
Database	5.0
Trade association	10.0
Favorable lease	5.1
Total	7.4

Estimated future amortization expense of other intangible assets as of December 31, 2017 for the next five years is:

(in thousands)
2018	$	162,131
2019		145,457
2020		140,193
2021		119,620
2022		99,420

Note 7 Intangible Assets - Computer Software, Net

Computer software as of December 31, 2017 and 2016 is summarized as follows:

(in thousands)	2017		2016
Licensed computer software	$	543,198	513,790
Software development costs		450,789	428,581
Acquisition technology intangibles		239,011	238,211
Total computer software		1,232,998	1,180,582
Less accumulated amortization:
Licensed computer software		360,160	315,591
Software development costs		325,443	307,190
Acquisition technology intangibles		163,680	134,613
Total accumulated amortization		849,283	757,394
Computer software, net	$	383,715	423,188

The Company held the following computer software under license agreements as of December 31, 2017 and 2016:

(in thousands)	2017		2016
Licensed computer software (acquired under license agreements)	$	24,421	23,665
Accumulated amortization		(15,918)	(14,634)
Licensed computer software, net	$	8,503	9,031

Amortization expense includes amounts for computer software acquired under license agreements. The Company had the following amortization expense related to computer software for the years ended December 31, 2017, 2016 and 2015:

(in thousands)	2017		2016	2015
Amortization expense related to:
Licensed computer software	$	51,247	45,655	41,823
Software development costs		27,461	26,478	22,740
Acquisition technology intangibles		28,267	26,217	16,734

54

The weighted average useful life for each component of computer software, and in total, as of December 31, 2017, is as follows:

	Weighted Average Amortization Period (Years)
Licensed computer software		5.8
Software development costs		6.0
Acquisition technology intangibles		6.1
Total		6.0

Estimated future amortization expense of licensed computer software, software development costs and acquisition technology intangibles as of December 31, 2017 for the next five years is:

(in thousands)	Licensed Computer Software		Software Development Costs	Acquisition Technology Intangibles
2018	$	45,008	23,503	25,793
2019		29,007	18,758	25,793
2020		24,388	14,588	20,134
2021		15,638	10,292	3,600
2022		12,606	6,138	-

Note 8 Property and Equipment, Net

Property and equipment balances as of December 31, 2017 and 2016 are as follows:

(in thousands)	2017		2016
Computer and other equipment	$	424,957	356,358
Buildings and improvements		262,499	246,577
Furniture and other equipment		141,927	141,836
Land		16,195	15,877
Other		724	2,387
Total property and equipment		846,302	763,035
Less accumulated depreciation and amortization		(521,084)	(480,690)
Property and equipment, net	$	325,218	282,345

The Company has various types of equipment under capital lease arrangements. The Company has the following amounts of equipment under capital lease obligations as of December 31, 2017 and 2016:

(in thousands)	2017		2016
Computer and other equipment (acquired under capital lease arrangements)	$	92,553	51,702
Furniture and other equipment (acquired under capital lease arrangements)		5,451	5,412
Total equipment		98,004	57,114
Less accumulated depreciation:
Computer and other equipment		(44,327)	(39,060)
Furniture and other equipment		(4,520)	(3,788)
Total accumulated depreciation		(48,847)	(42,848)
Total equipment, net	$	49,157	14,266

Depreciation and amortization expense includes amounts for computer equipment, furniture and other equipment acquired under capital lease. Depreciation and amortization expense related to property and equipment was $68.0 million, $62.5 million and $56.6 million for the years ended December 31, 2017, 2016 and 2015, respectively.

55

Note 9 Contract Acquisition Costs, Net

Significant components of contract acquisition costs as of December 31, 2017 and 2016 are summarized as follows:

(in thousands)	2017		2016
Conversion costs, net of accumulated amortization of $176.4 million and $164.4 million as of 2017 and 2016, respectively	$	139,249	144,173
Payments for processing rights, net of accumulated amortization of $166.3 million and $145.3 million as of 2017 and 2016, respectively		119,416	91,527
Total	$	258,665	235,700

Amortization expense related to contract acquisition costs for the years ended December 31, 2017, 2016 and 2015 is as follows:

(in thousands)		2017	2016	2015
Amortization expense related to:
Conversion costs	$	29,625	28,811	27,392
Payments for processing rights		21,357	19,804	17,039

The weighted average useful life for each component of contract acquisition costs, and in total, as of December 31, 2017 is as follows:

	Weighted Average Amortization Period (Years)
Conversion costs	13.1
Payments for processing rights	16.3
Total	14.7

Estimated future amortization expense of conversion costs and payments for processing rights as of December 31, 2017 for the next five years is:

(in thousands)	Conversion Costs		Payments for Processing Rights
2018	$	36,890	27,211
2019		29,673	24,210
2020		23,475	21,786
2021		21,491	19,275
2022		16,581	15,123

Note 10 Equity Investments

The Company has an equity investment in CUP Data and records its 44.56% ownership using the equity method of accounting. CUP Data is sanctioned by the People's Bank of China, China's central bank. CUP Data currently provides transaction processing, disaster recovery and other services for banks and bankcard issuers in China.

The Company also has an equity investment in TSYS de México and records its 49% ownership using the equity method of accounting. The operation prints statements and provides card-issuing support services to its clients.

The Company invests in limited partnership agreements in connection with investing in two Atlanta-based venture capital funds focused exclusively on investing in technology-enabled financial services companies.  Pursuant to each limited partnership agreement, the Company has committed to invest up to $20.0 million in each fund so long as its ownership interest in each fund does not exceed 50%. As of December 31, 2017 and 2016, the Company had made contributions to the funds of $22.8 million and $20.1 million, respectively.

TSYS' equity investments are recorded initially at cost and subsequently adjusted for equity in earnings, cash contributions and distributions, and foreign currency translation adjustments. TSYS believes the carrying value approximates the underlying net assets of the equity investments.

56

TSYS' equity in income of equity investments (net of tax) for the years ended December 31, 2017, 2016 and 2015 was $40.5 million, $26.1 million and $25.4 million, respectively.

A summary of TSYS' equity investments as of December 31, 2017 and 2016 is as follows:

(in thousands)	2017		2016
CUP Data	$	127,367	101,638
Other		36,151	31,918
Total	$	163,518	133,556

Note 11 Long-term Borrowings, Capital Lease Obligations and License Agreements

Long-term debt as of December 31, 2017 and 2016 consists of:

(in thousands)	2017		2016
3.800% Senior Notes due April 1, 2021 (5 year tranche), net of discount and debt issuance costs1	$	745,000	743,625
4.800% Senior Notes due April 1, 2026 (10 year tranche), net of discount and debt issuance costs1		743,042	742,383
2.375% Senior Notes due June 1, 2018 (5 year tranche), net of discount and debt issuance costs1		549,532	548,615
3.750% Senior Notes due June 1, 2023 (10 year tranche), net of discount and debt issuance costs1		544,780	543,947
LIBOR + 1.500%, unsecured term facility, due February 23, 2021, with quarterly principal and interest payments, net of debt issuance costs		368,645	697,832
LIBOR + 1.300%, unsecured revolving loan, due February 23, 2021, with monthly interest payments on outstanding balances		200,000	70,000
1.380% note payable due December 31, 2017, with monthly interest and principal payments		-	13,853
Total debt		3,150,999	3,360,255
Less current portion		(559,050)	(48,040)
Noncurrent portion of long-term debt	$	2,591,949	3,312,215

¹ As of December 31, 2017 and 2016, the estimated fair values of the Company’s Senior Notes totaled $2.684 billion and $2.678 billion, respectively. The estimated fair values of the Company’s Senior Notes were based on quoted prices in an active market and are considered to be level 1 measurements. 

Bilateral Loan Facility Commitment Letter

On December 16, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with PCP CYN Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company, MW CYN Merger Sub, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company, Cayan Holdings LLC, a Delaware limited liability company (“Cayan”), PCP MW Holding Corp., a Delaware corporation and equityholder of Cayan (“PCP”), and Parthenon Investors IV L.P., a Delaware limited partnership, solely in its capacity as the representative of the equityholders of Cayan and PCP. In connection with the execution of the Merger Agreement, on December 16, 2017, the Company entered into a commitment letter with Bank of America N.A. (the “Commitment Party”), pursuant to which the Commitment Party has committed to provide a $450.0 million two-year, bilateral loan facility (the “Bilateral Loan Facility”) to finance the mergers to the extent the Company has not obtained alternative financing to pay the merger consideration on or prior to the closing. See Note 25 for further discussion of the Company’s completion of the Cayan acquisition on January 11, 2018.

Senior Notes

Concurrently with entering into the Stock Purchase Agreement to acquire TransFirst, the Company obtained commitments for a $2.0 billion 364-day bridge term loan facility from JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of America N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd, U.S. Bank National Association, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association (collectively, the “Commitment Parties”). Thereafter, the Commitment Parties assigned portions of their commitments to certain other bridge facility lenders. Based on the terms of the bridge term loan facility commitment letter, upon entering into a credit agreement (the ‘2016 Credit Agreement”), the total commitments under the bridge term loan facility were reduced from $2.0 billion to $1.15 billion by the amount of a  $400 million term loan (the “Delayed Draw Term Loan”) commitment and the portion of a  $800 million unsecured

57

revolving credit facility (the “Revolving Loan Facility”) commitments in excess of $350 million. The bridge term loan facility was terminated in March 2016 after the issuance of the Notes described below.

On March 17, 2016, the Company closed its sale of $750 million aggregate principal amount of 3.800% Senior Notes due 2021 and $750 million aggregate principal amount of 4.800% Senior Notes due 2026 (collectively, the “2016 Notes”) pursuant to an agreement (the “Underwriting Agreement”) with J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the underwriters, whereby the Company agreed to sell and the Underwriters agreed to purchase the 2016 Notes from the Company, subject to and upon the terms and conditions set forth in the Underwriting Agreement. The Company used the net proceeds of the transaction to pay a portion of the approximately $2.35 billion purchase price of the Company’s acquisition of TransFirst and related fees and expenses. The 2016 Notes were issued pursuant to a Senior Indenture, dated as of March 17, 2016, between the Company and Regions Bank, as trustee. The balance as of December 31, 2017 was $745.0 million net of discount and debt issuance costs for the Senior Notes due April 1, 2021 and $743.0 million net of discount and debt issuance costs for the Senior Notes due April 1, 2026.

In May 2013, the Company closed its issuance of $550.0 million aggregate principal amount of 2.375% Senior Notes due 2018 and $550.0 million aggregate principal amount of 3.750% Senior Notes due 2023 (collectively, the “2013 Notes”) pursuant to an Underwriting Agreement with J.P. Morgan Securities LLC, as representative of certain underwriters (the “Underwriters”), whereby the Company agreed to sell and the Underwriters agreed to purchase the 2013 Notes from the Company, subject to and upon the terms and conditions set forth in the Underwriting Agreement. The interest on the 2013 Notes are payable semiannually. The Company paid fees in 2013 associated with the issuance of these 2013 Notes of approximately $8.9 million and recorded discounts of approximately $4.3 million that are being amortized over the life of the 2013 Notes. The Company used the net proceeds of the transaction to pay a portion of the $1.4 billion purchase price of the Company’s acquisition of Netspend and related fees and expenses. The 2013 Notes were issued pursuant to an Indenture dated as of May 22, 2013 between the Company and Wells Fargo Bank, National Association, as trustee. The balance as of December 31, 2017 was $549.5 million net of discount and debt issuance costs for the Senior Notes due June 2018 and $544.8 million net of discount and debt issuance costs for the Senior Notes due June 2023.

Term Loans and Other Borrowings

On February 23, 2016, the Company entered into the 2016 Credit Agreement with JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer, Bank of America, N.A., as Syndication Agent and L/C Issuer, The Bank of Tokyo-Mitsubishi UFJ, LTD., U.S. Bank National Association and Wells Fargo Bank, National Association, as Co-Documentation Agents, and the other lenders party thereto, with J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of Tokyo-Mitsubishi UFJ, LTD., U.S. Bank National Association and Wells Fargo Securities, LLC as joint lead arrangers and joint bookrunners. The 2016 Credit Agreement provided the Company with a $700 million five-year term loan facility (the “Term Loan Facility”) consisting of (i) a $300 million term loan (the “Refinancing Term Loan”) funded upon entry into the 2016 Credit Agreement and (ii) the Delayed Draw Term Loan. The 2016 Credit Agreement also provided the Company with the Revolving Loan Facility, which includes a $50 million sub-facility for the issuance of standby letters of credit. The balance as of December 31, 2017 was $368.6 million net of discount and debt issuance costs on the Term Loan Facility.

Borrowings under the 2016 Credit Agreement will accrue interest at the base rate (as defined in the 2016 Credit Agreement) or, for certain euro-denominated borrowings, the London Interbank Offered Rate (“LIBOR”), in each case plus a margin that is set based on the Company’s corporate credit ratings. The applicable margin for loans bearing interest based on LIBOR ranges from 0.900% to 1.500% for revolving loans and 1.000% to 1.750% for term loans. The applicable margin for loans bearing interest based on the base rate ranges from 0.000% to 0.500% for revolving loans and 0.000% to 0.750% for term loans. In addition, the Company will pay the lenders a facility fee ranging from 0.100% to 0.250% per annum, depending on the Company’s corporate credit ratings, on the commitments under the Revolving Loan Facility (regardless of usages) and the undrawn commitment amount in respect of the Delayed Draw Term Loan. Based on the Company’s current corporate credit ratings, (i) the applicable margin for loans accruing interest at the base rate is 0.500% for term loans and 0.300% for revolving loans and (ii) the applicable margin for loans accruing interest at LIBOR is 1.500% for term loans and 1.300% for revolving loans. The 2016 Credit Agreement contains customary covenants regarding, among other matters, the maintenance of insurance, the preservation and maintenance of the Company’s corporate existence, material compliance with laws and the payment of taxes and other material obligations. During the year ended December 31, 2017, the Company repaid $70.0 million on the Revolving Loan Facility. As of December 31, 2017, the outstanding balance on the Revolving Loan Facility was $200.0 million.

The Refinancing Term Loan was used to repay in full the Company’s outstanding loans and other obligations under that certain credit agreement, dated as of September 10, 2012, by and among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent thereunder, as amended, and that certain credit agreement, dated as of April 8, 2013, by and among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent thereunder, as amended. The Delayed Draw Term Loan was used to finance, in part, the TransFirst acquisition and

58

related transactions, upon satisfaction of a limited set of conditions precedent. The Revolving Loan Facility is available for draws for purposes of working capital and other general corporate purposes, including to finance, in part, the acquisition and related transactions upon satisfaction of a limited set of conditions precedent. The creditor group of the modified debt remained consistent before and after the debt was amended. Any exceptions were minor.

In December 2015, the Company entered into a $30.0 million financing agreement for perpetual software licenses. The agreement was paid during 2017 and no outstanding balance remains.

Debt Covenants

The 2013 and 2016 Notes also contain various affirmative and negative covenants, including those that create limitations on the Company’s:

· creation of liens;

· merging or selling assets unless certain conditions are met; and

· entering into sale/leaseback transactions.

The 2013 and 2016 Notes also contain a provision that requires the Company to repurchase all or any portion of a holder’s notes, at the holder’s option, if a Change in Control Repurchase Event occurs, as defined in the Prospectus Supplements for the 2013 and 2016 Notes offerings.

Annual Principal Payments on Long-term Debt

Required annual principal payments on long-term debt for the five years subsequent to December 31, 2017 are summarized as follows:

(in thousands)
2018	$	560,000
2019		40,000
2020		40,000
2021		1,230,000
2022		-

Capital Lease Obligations and License Agreements

Capital lease obligations and license agreements as of December 31, 2017 and 2016 consist of:

(in thousands)	2017		2016
Capital lease obligations	$	37,950	3,748
License agreements		4,865	-
Total capital lease obligations and license agreements		42,815	3,748
Less current portion		(6,762)	(2,687)
Noncurrent portion of capital leases and license agreements	$	36,053	1,061

The Company acquires various computer equipment, software, machinery and equipment and furniture and fixtures under capital lease obligations and license agreements. Refer to Notes 7, 8 and 21 for more information. The capital lease and license agreements obligations have various payment terms for each capital lease obligation, including single payment leases, monthly, quarterly and annually. The lease terms for the equipment and software range from one to six years.

59

The future minimum lease payments under capital leases and license agreements as of December 31, 2017 are summarized as follows:

(in thousands)		Capital Leases	License Agreements
2018	$	6,652	1,449
2019		6,204	1,621
2020		6,127	1,275
2021		6,127	691
2022		6,095	39
Thereafter		11,484	-
Total minimum lease payments		42,689	5,075
Less amount representing interest		(4,739)	(210)
Principal minimum lease payments	$	37,950	4,865

Note 12 Other Current Liabilities

Significant components of other current liabilities as of December 31, 2017 and 2016 are summarized as follows:

(in thousands)	2017		2016
Deferred revenues	$	52,913	40,473
Accrued expenses		38,018	32,861
Accrued third-party commissions		34,276	28,310
Dividends payable		24,886	19,513
Accrued interest		19,330	19,029
Litigation settlements		1,380	20,795
Income taxes payable		185	1,673
Other		107,847	100,605
Total	$	278,835	263,259

Note 13 Income Taxes

The provision for income taxes includes income taxes currently payable and those deferred because of temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities.

The components of income tax expense included in the Consolidated Statements of Income are as follows:

	Years Ended December 31,
(in thousands)	2017		2016	2015
Current income tax expense:
Federal	$	210,550	140,079	139,228
State		20,316	9,218	9,255
Foreign		7,500	4,443	4,762
Total current income tax expense		238,366	153,740	153,245
Deferred income tax (benefit) expense:
Federal		(178,879)	8,393	(2,198)
State		5,093	(65)	442
Foreign		1,298	(893)	(125)
Total deferred income tax (benefit) expense		(172,488)	7,435	(1,881)
Total income tax expense	$	65,878	161,175	151,364

	Years Ended December 31,
(in thousands)	2017		2016	2015
Components of income before income tax expense:
Domestic	$	603,260	454,628	485,191
Foreign		14,302	6,404	8,373
Total income before income tax expense	$	617,562	461,032	493,564

60

Income tax expense differs from the amounts computed by applying the statutory U.S. federal income tax rate of 35% to income before income taxes, noncontrolling interest and equity in income of equity investments as a result of the following:

	Years Ended December 31,
(in thousands)	2017		2016	2015
Computed "expected" income tax expense	$	216,147	161,425	173,911
Increase (decrease) in income tax expense resulting from:
International tax rate differential and equity income		11,953	8,715	8,367
State income tax expense, net of federal income tax effect		12,470	9,127	7,101
Increase (decrease) in valuation allowance		8,230	2,855	(517)
Tax credits		(20,998)	(15,695)	(28,831)
Share-based compensation		(14,310)	—	—
Deduction for domestic production activities		(17,150)	(12,950)	(11,550)
Re-measurement of deferred tax asset / deferred tax liability		(146,093)	—	—
Permanent differences and other, net		15,629	7,698	2,883
Total income tax expense	$	65,878	161,175	151,364

Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the net deferred tax liability as of December 31, 2017 and 2016 relate to the following:

	As of December 31,
(in thousands)	2017		2016
Deferred income tax assets:
Net operating loss and income tax credit carryforwards	$	35,089	34,490
Allowances for doubtful accounts and billing adjustments		852	1,512
Deferred revenue		17,813	27,461
Share-based compensation		15,170	25,497
Foreign currency translation		—	4,019
Other, net		14,915	38,341
Total deferred income tax assets		83,839	131,320
Less valuation allowance for deferred income tax assets		(29,531)	(21,301)
Net deferred income tax assets		54,308	110,019
Deferred income tax liabilities:
Excess tax over financial statement depreciation		(43,056)	(63,432)
Computer software development costs		(48,244)	(80,837)
Purchased intangibles		(42,467)	(344,547)
Foreign currency translation		(942)	—
Partnership interests		(143,908)	(18,776)
Other, net		(7,917)	(14,924)
Total deferred income tax liabilities		(286,534)	(522,516)
Net deferred income tax liabilities	$	(232,226)	(412,497)
Total net deferred tax assets (liabilities):
Noncurrent deferred tax asset	$	6,091	7,055
Noncurrent deferred tax liability		(238,317)	(419,552)
Net deferred tax liability	$	(232,226)	(412,497)

As of December 31, 2017, TSYS had recognized deferred tax assets from net operating losses, capital losses and federal and state income tax credit carryforwards of $6.6 million, $0.3 million and $28.2 million, respectively. As of December 31, 2016, TSYS had recognized deferred tax assets from net operating losses, capital losses, and federal and state income tax credit carryforwards of $8.5 million, $0.4 million, and $25.6 million, respectively. Additionally, net deferred income tax liabilities were decreased by $144.5 million as a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

61

Management believes it is more likely than not that TSYS will realize the benefits of these deductible differences, net of existing valuation allowances. The valuation allowance for deferred tax assets was $29.5 million and $21.3 million at December 31, 2017 and 2016, respectively. The increase in the valuation allowance for deferred income tax assets was $8.2 million for 2017. The increase relates to foreign tax credits and foreign net operating losses which, more likely than not, will not be realized in later years.

On December 22, 2017, the President signed into law the Tax Act. Some key provisions of this law impacted the Company. One such provision was the reduction of the Federal corporate income tax rate from 35% to 21%. This required the Company to remeasure its U.S. deferred tax assets and liabilities.  Upon remeasurement of such, TSYS recognized a benefit of $144.5 million as a discrete item in 2017.  Another provision of the Tax Act that impacted TSYS during this reporting period was the one-time transition tax on the deemed repatriation of foreign accumulated earnings.  This deemed repatriation mandated the Company to calculate effective tax rates of  15% and 8% respectively on cash and non-cash foreign accumulated earnings. Additionally, the Company was obligated to recognize certain tax credits and reassess the realizability of certain deferred tax assets. The net impact of this one-time transition tax was an expense of $4.9 million.

Additionally, the Tax Act provides for two U.S. tax base erosion provisions which begin in 2018. They are the global intangible low-taxed income (GILTI) and the base-erosion and anti-abuse tax (BEAT). TSYS’s calculation indicate no impact related to GILTI in 2017. However, TSYS will perform all necessary calculations, make any needed elections and report any 2018 impacts of GILTI as appropriate.  Currently, TSYS is not expected and does not expect to be impacted by BEAT in the future.

TSYS has adopted the permanent reinvestment exception under GAAP, with respect to earnings of certain foreign subsidiaries. As a result, TSYS considers foreign earnings related to these foreign operations to be permanently reinvested. However, pursuant to U.S. tax requirements,  a provision for U.S. federal and state incomes taxes has been made in the consolidated financial statements for those non-U.S. subsidiaries whose earnings were deemed to be repatriated. The amount of undistributed earnings considered to be “reinvested” which may be subject to tax upon distribution was approximately $103.3 million as of December 31, 2017.  Although TSYS does not intend to repatriate these earnings, a distribution of these non-U.S. earnings in the form of dividends, or otherwise, may subject the Company to withholding taxes payable to the various non-U.S. countries.

TSYS is the parent of an affiliated group that files a consolidated U.S. federal income tax return and most state and foreign income tax returns on a separate entity basis. In the normal course of business, the Company is subject to examinations by these taxing authorities unless statutory examination periods lapse. TSYS is no longer subject to U.S. federal income tax examinations for years before 2011 and with few exceptions, the Company is no longer subject to income tax examinations from state and local or foreign tax authorities for years before 2011. There are currently federal income tax examinations in progress for the years 2011 through 2013. Additionally, a number of tax examinations are in progress by the relevant state tax authorities. Although TSYS is unable to determine the ultimate outcome of these examinations, TSYS believes that its liability for uncertain tax positions relating to these jurisdictions for such years is adequate.

GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken in a tax return. During the year ended December 31, 2017, TSYS increased its liability for uncertain income tax positions by a net amount of approximately $7.3 million. The Company is not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, the Company does not expect any significant changes related to these obligations within the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax liabilities is as follows  1:

	Years Ended December 31,
(in millions)		2017	2016	2015
Beginning balance	$	16.5	13.1	6.7
Current activity:
Additions based on tax positions related to current year		4.9	3.4	2.3
Additions for tax positions of prior years		4.6	3.0	4.7
Reductions for tax positions of prior years		—	—	(0.6)
Decreases resulting from settlements with tax authorities		(2.2)	(3.0)	—
Net current activity		7.3	3.4	6.4
Ending balance	$	23.8	16.5	13.1

¹ Unrecognized state tax liabilities are not adjusted for the federal tax impact.

TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax expense in the Consolidated Statements of Income. Gross accrued interest and penalties on unrecognized tax benefits totaled $2.0 million and $1.8 million as of December 31, 2017 and December 31, 2016, respectively. The total amounts of unrecognized income

62

tax benefits as of December 31, 2017 and December 31, 2016 that, if recognized, would affect the effective tax rates are $24.5 million and $17.0 million (net of the federal benefit on state tax issues), respectively, which includes interest and penalties of $1.3 million and $1.2 million, respectively.

Note 14 Commitments and Contingencies

LEASE AND PURCHASE COMMITMENTS:  TSYS is obligated under noncancelable operating leases for computer equipment, software and facilities. Additionally, the Company has long-term obligations which consist of required minimum future payments under contracts with the Company’s distributors and other service providers.

The future minimum lease payments under noncancelable operating leases and purchase commitments with remaining terms greater than one year for the next five years and thereafter and in the aggregate as of December 31, 2017, are as follows:

(in thousands)
2018	$	145,866
2019		148,006
2020		71,651
2021		38,803
2022		28,095
Thereafter		77,555
Total future minimum commitment payments	$	509,976

The majority of computer equipment lease commitments come with a renewal option or an option to terminate the lease. These lease commitments may be replaced with new leases which allow the Company to continually update its computer equipment. Total rental expense under all operating leases in 2017, 2016 and 2015 was $134.0 million, $122.9 million and $124.8 million, respectively.

CONTRACTUAL COMMITMENTS:  In the normal course of its business, the Company maintains long-term processing contracts with its clients. These processing contracts contain commitments, including, but not limited to, minimum standards and time frames against which the Company's performance is measured. In the event the Company does not meet its contractual commitments with its clients, the Company may incur penalties and certain clients may have the right to terminate their contracts with the Company. The Company does not believe that it will fail to meet its contractual commitments to an extent that will result in amaterial adverse effect on its financial position, results of operations or cash flows.

CONTINGENCIES:

Legal Proceedings – General

The Company is subject to various legal proceedings and claims and is also subject to information requests, inquiries and investigations arising out of the ordinary conduct of its business. The Company establishes accruals for litigation and similar matters when those matters present loss contingencies that TSYS determines to be both probable and reasonably estimable in accordance with GAAP. Legal costs are expensed as incurred. In the opinion of management, based on current knowledge and in part upon the advice of legal counsel, all matters not specifically discussed below are believed to be adequately covered by insurance, or, if not covered, the possibility of losses from such matters are believed to be remote or such matters are of such kind or involve such amounts that would not have a material adverse effect on the financial position, results of operations or cash flows of the Company if disposed of unfavorably.

TelexFree Matter

ProPay, Inc. (ProPay), a subsidiary of the Company, has been named as one of a number of defendants (including other merchant processors) in several purported class action lawsuits relating to the activities of TelexFree, Inc. and its affiliates and principals. TelexFree is a former merchant customer of ProPay. With regard to TelexFree, each purported class action lawsuit generally alleges that TelexFree engaged in an improper multi-tier marketing scheme involving voice-over Internet protocol telephone services. The plaintiffs in each of the purported class action complaints generally allege that the various merchant processor defendants, including ProPay, aided and abetted the improper activities of TelexFree. TelexFree filed for

bankruptcy protection in Nevada. The bankruptcy proceeding was subsequently transferred to the Massachusetts Bankruptcy Court.

Specifically, ProPay has been named as one of a number of defendants (including other merchant processors) in each of the following purported class action complaints relating to TelexFree: (i) Waldermara Martin, et al. v. TelexFree, Inc., et al. (Case

63

No. BK-S-14-12524-ABL) (Bankr. D. Nev.); (ii) Anthony Cellucci, et al. v. TelexFree, Inc., et. al. (Case No. 4:14-BK-40987) (Bankr. D. Mass.); (iii) Maduako C. Ferguson Sr., et al. v. Telexelectric, LLP, et. al (Case No. 5:14-CV-00316-D) (E.D.N.C.); (iv) Todd Cook v. TelexElectric LLP et al. (Case No. 2:14-CV-00134) (N.D. Ga.); (v) Felicia Guevara v. James M. Merrill et al., CA No. 1:14-cv-22405-DPG) (S.D. Fla.); (vi) Reverend Jeremiah Githere, et al. v. TelexElectric LLP et al. (Case No. 1:14-CV-12825-GAO) (D. Mass.); (vii) Paulo Eduardo Ferrari et al. v. Telexfree, Inc. et al. (Case No. 14-04080) (Bankr. D. Mass); (viii) Magalhaes v. TelexFree, Inc., et al., No. 14-cv-12437 (D. Mass.); (ix) Griffith v. Merrill et al., No. 14-CV-12058 (D. Mass.); (x) Abelgadir v. Telexelectric, LLP, No. 14-09857 (S.D.N.Y.); and (xi) Rita Dos Santos, v. TelexElectric, LLP et al., 2:15-cv-01906-NVW (D. Ariz.) (together, the “Actions”).

On October 21, 2014, the Judicial Panel on Multidistrict Litigation (“JPML”) transferred and consolidated the Actions filed before that date to the United States District Court for the District of Massachusetts (the “Consolidated Action”). The JPML subsequently transferred the remaining Actions to the Consolidated Action.  The Consolidated Action is styled In Re: TelexFree Securities Litigation (4:14-md-02566-TSH) (D. Mass.).

The plaintiffs in the Consolidated Action filed a First Consolidated Amended Complaint on March 31, 2015 and filed a Second Consolidated Amended Complaint (the “Second Amended Complaint”) on April 30, 2015. The Second Amended Complaint, which supersedes the complaints filed prior to consolidation of the Actions, purports to bring claims on behalf of all persons who purchased certain TelexFree “memberships” and suffered a “net loss” between January 1, 2012 and April 16, 2014. With respect to ProPay, the Second Amended Complaint alleges that ProPay aided and abetted tortious acts committed by TelexFree, and that ProPay was unjustly enriched in the course of providing payment processing services to TelexFree. Several defendants, including ProPay, moved to dismiss the Second Amended Complaint on June 2, 2015. The court held a hearing on the motions to dismiss on November 2, 2015, but has not yet issued a ruling.

At present, pursuant to a court order, all discovery in the action is stayed pending the resolution of parallel criminal proceedings against certain former principals of TelexFree, Inc.  Despite that stay of discovery, the lead plaintiffs have subpoenaed documents previously produced by ProPay pursuant to the Federal Rules of Bankruptcy Procedure to the court-appointed trustee in the TelexFree bankruptcy proceeding.  ProPay has filed a motion to quash that subpoena.  ProPay’s motion remains pending before the Court.  On April 4, 2017, lead plaintiffs moved the court for leave to further amend the Second Amended Complaint, and submitted a proposed amendment with their motion. The proposed amendment seeks to add new defendants to the case but does not make any new or additional allegations against ProPay.  ProPay, along with certain other defendants in the litigation, have not opposed the lead plaintiffs’ motion to further amend the Second Amended Complaint so long as the amendment, if allowed by the court, would not delay the court’s decision on the pending motions to dismiss.  Lead plaintiffs’ motion for leave to amend is pending before the court.

ProPay has also received various subpoenas, a seizure warrant and other inquiries requesting information regarding TelexFree from (i) the Commonwealth of Massachusetts, Securities Division, (ii) United States Securities and Exchange Commission, (iii) US Immigration and Customs Enforcement, and (iv) the bankruptcy Trustee of the Chapter 11 entities of TelexFree, Inc., TelexFree, LLC and TelexFree Financial, Inc. Pursuant to the seizure warrant served by the United States Attorney’s Office for the District of Massachusetts, ProPay delivered all funds associated with TelexFree held for chargeback and other purposes by ProPay to US Immigration and Customs Enforcement. In addition, ProPay received a notice of potential claim from the bankruptcy Trustee as a result of the relationship of ProPay with TelexFree and its affiliates.

The above proceedings and actions are preliminary in nature. While the Company and ProPay intend to vigorously defend matters arising out of the relationship of ProPay with TelexFree and believe ProPay has substantial defenses related to these purported claims, the Company currently cannot reasonably estimate losses attributable to these matters.

GUARANTEES AND INDEMNIFICATIONS:  The Company has entered into processing and licensing agreements with its clients that include intellectual property indemnification clauses. Under these clauses, the Company generally agrees to indemnify its clients, subject to certain exceptions, against legal claims that TSYS' services or systems infringe on certain third party patents, copyrights or other proprietary rights. In the event of such a claim, the Company is generally obligated to hold the client harmless and pay for related losses, liabilities, costs and expenses, including, without limitation, court costs and

reasonable attorney's fees. The Company has not made any indemnification payments pursuant to these indemnification clauses.

A portion of the Company’s business is conducted through distributors that provide load and reload services to cardholders at their locations. Members of the Company’s distribution and reload network collect cardholder funds and remit them by electronic transfer to the issuing banks for deposit in the cardholder accounts. The Company’s issuing banks typically receive cardholders’ funds no earlier than three business days after they are collected by the distributor. If any distributor fails to remit cardholders’ funds to the Company’s issuing banks, the Company typically reimburses the issuing banks for the shortfall created thereby. The Company manages the risk associated with this process through a formalized set of credit standards, volume limits and deposit requirements for certain distributors and by typically maintaining the right to offset any settlement

64

shortfall against the commissions payable to the relevant distributor. To date, the Company has not experienced any significant losses associated with settlement failures and the Company had not recorded a settlement guarantee liability as of December 31, 2017. As of December 31, 2017 and 2016, the Company’s estimated gross settlement exposure was $16.7 million and $13.8 million, respectively.

GPR cardholders can incur charges in excess of the funds available in their accounts and are liable for the resulting overdrawn account balance. Although the Company generally declines authorization attempts for amounts that exceed the available balance in a cardholder's account, the application of the Networks' rules and regulations, the timing of the settlement of transactions and the assessment of subscription, maintenance or other fees can, among other things, result in overdrawn card accounts. The Company also provides, as a courtesy and in its discretion, certain cardholders with a "cushion" that allows them to overdraw their card accounts by up to $10. In addition, eligible cardholders may enroll in the issuing banks' overdraft protection programs and fund transactions that exceed the available balance in their accounts. The Company generally provides the funds used as part of these overdraft programs (one of the Company’s issuing banks will advance the first $1.0 million on behalf of its cardholders) and is responsible to the issuing banks for any losses associated with any overdrawn account balances. As of December 31, 2017 and 2016, cardholders’ overdrawn account balances totaled $25.5 million and $21.2 million, respectively. As of December 31, 2017 and 2016, the Company’s reserves for the losses it estimates will arise from processing customer transactions, debit card overdrafts, chargebacks for unauthorized card use and merchant-related chargebacks due to non-delivery of goods or services was $9.5 million and $10.5 million, respectively.

The Company has not recorded a liability for guarantees or indemnities in the accompanying consolidated balance sheet since the maximum amount of potential future payments under such guarantees and indemnities is not determinable.

PRIVATE EQUITY INVESTMENTS:The Company has limited partnership agreements with two Atlanta-based venture capital funds focused exclusively on investing in technology-enabled financial services companies. Pursuant to each limited partnership agreement, the Company has committed to invest up to $20.0 million in each fund so long as its ownership interest in each fund does not exceed 50%. As of December 31, 2017 and 2016, the Company had made contributions to the funds of $22.8 million and $20.1 million, respectively. The Company had investments, including equity in income, totaling $26.1 million and $22.8 million, respectively, as of December 31, 2017 and 2016. 

Note 15 Employee Benefit Plans

The Company provides benefits to its employees by offering employees participation in certain defined contribution plans. The employee benefit plans through which TSYS provided benefits to its employees during 2017 are described as follows:

RETIREMENT SAVINGS AND STOCK PURCHASE PLANS:  TSYS maintains a single plan, the TSYS Retirement Savings Plan, which is designed to reward all team members of TSYS U.S.-based companies with a uniform employer contribution. The terms of the plan provide for the Company to match 100% of the employee contribution up to 4% of eligible compensation. The Company can make discretionary contributions up to another 4% based upon business conditions.

The Company also maintains a stock purchase plan for employees. The Company contributes 15% of employee contributions. The funds are used to purchase presently issued and outstanding shares of TSYS common stock on the open market at fair market value for the benefit of participants. The Company's contributions to the plans charged to expense for the years ended December 31, 2017, 2016 and 2015 are as follows:

(in thousands)	2017		2016	2015
TSYS Retirement Savings Plan	$	23,113	21,077	24,169
TSYS Stock Purchase Plan		1,600	1,514	1,378

POSTRETIREMENT MEDICAL BENEFITS PLAN:  TSYS provides certain medical benefits to qualified retirees through a postretirement medical benefits plan, which is immaterial to the Company's consolidated financial statements. The measurement of the benefit expense and accrual of benefit costs associated with the plan do not reflect the effects of the 2003 Medicare Act. Additionally, the benefit expense and accrued benefit cost associated with the plan, as well as any potential impact of the effects of the 2003 Medicare Act, are not significant to the Company's consolidated financial statements.

Note 16 Equity

DIVIDENDS:  Dividends on common stock of $79.0 million were paid in 2017, compared to $73.4 million and $73.7 million in 2016 and 2015, respectively. 

65

EQUITY COMPENSATION PLANS:  The following table summarizes TSYS' equity compensation plans by category as of December 31, 2017:

	(a)	(b)		(c)
(in thousands, except per share data)                                                                                                    Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted- average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
Equity compensation plans approved by security holders	4,561	$ 37.15	1	14,888	2

The Company does not have any equity compensation plans that were not approved by security holders.

¹ Weighted-average exercise price represents 2.7 million options only and does not include restricted share units that have no exercise price.

² Shares available for future grants under the Total System Services, Inc. 2017 Omnibus Plan, which could be in the form of options, nonvested awards and performance shares.

Note 17 Share-Based Compensation

TSYS has various long-term incentive plans under which the Compensation Committee of the Board of Directors has the authority to grant share-based compensation to TSYS employees.

Share-Based Compensation and Long-Term Incentive Plans

TSYS maintains the Total System Services, Inc. 2017 Omnibus Plan, Total System Services, Inc. 2012 Omnibus Plan, Total System Services, Inc. 2007 Omnibus Plan, Total System Services, Inc. 2002 Long-Term Incentive Plan, Total System Services, Inc. 2000 Long-Term Incentive Plan and the Amended and Restated Netspend Holdings, Inc. 2004 Equity Incentive Plan for Options and Restricted Shares Assumed by Total System Services, Inc. to advance the interests of TSYS and its shareholders through awards that give employees and directors a personal stake in TSYS' growth, development and financial success. Awards under these plans are designed to motivate employees and directors to devote their best efforts to the business of TSYS. Awards will also help TSYS attract and retain the services of employees and directors who are in a position to make significant contributions to TSYS' success.

The plans are administered by the Compensation Committee of the Company's Board of Directors and enable the Company to grant nonqualified and incentive stock options, stock appreciation rights, restricted stock and restricted stock units, performance units or performance shares, cash-based awards and other stock-based awards.

All stock options must have a maximum life of no more than ten years from the date of grant. The exercise price will not be less than 100% of the fair market value of TSYS' common stock at the time of grant. Any shares related to awards which terminate by expiration, forfeiture, cancellation or otherwise without the issuance of shares, are settled in shares, or are exchanged with the Committee's permission, prior to the issuance of shares, forawards not involving shares, shall be available again for grant under theTotal System Services, Inc. 2017 Omnibus Plan. Effective as of, or prior to, April 27, 2017, no additional awards may be made from any of the other plans. The aggregate number of shares of TSYS stock which may be granted, or could have been granted, to participants pursuant to awards granted under the various plans may not exceed the following: Total System Services, Inc. 2017 Omnibus Plan – 15 million shares; Total System Services, Inc. 2012 Omnibus Plan - 17 million shares; Total System Services, Inc. 2007 Omnibus Plan - 5 million shares; Total System Services, Inc. 2002 Long – Term Incentive Plan - 9.4 million shares; and Total System Services, Inc. 2000 Long-Term Incentive Plan - 2.4 million shares.

Share-based compensation costs are classified as selling, general and administrative expenses on the Company’s consolidated statements of income and corporate administration and other expenses for segment reporting purposes. TSYS’ share-based compensation costs are expensed, rather than capitalized, as these awards are typically granted to individuals not involved in capitalizable activities. For the year ended December 31, 2017, share-based compensation was $42.4 million compared to $43.7 million and $41.5 million for the same periods in 2016 and 2015, respectively.

Nonvested Awards

The Company granted shares of TSYS common stock to certain key employees and non-management members of its Board of Directors. The grants to certain key employees were issued under nonvested stock bonus awards and are typically for services to be provided in the future and vest over a period of up to four years. The grants to the Board of Directors were fully vested on the date of grant. The market value of the TSYS common stock at the date of issuance is charged as compensation expense over the vesting periods or derived service periods.

66

The following table summarizes the number of shares granted each year:

	2017		2016	2015
Number of shares granted		329,051	362,804	388,211
Market value (in millions)	$	18.1	16.8	14.9

A summary of the status of TSYS' nonvested shares as of December 31, 2017, 2016 and 2015 and the changes during the periods are presented below:

	2017			2016			2015
(in thousands, except per share data)                                                                   Nonvested shares	Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value
Outstanding at beginning of year	863	$	37.78	1,146	$	31.11	1,769	$	26.75
Granted	329		55.06	363		46.23	388		38.38
Vested	(458)		36.01	(563)		29.95	(930)		26.05
Forfeited/canceled/adjusted	(100)		43.82	(84)		36.79	(81)		28.78
Outstanding at end of year	634	$	47.19	863	$	37.78	1,146	$	31.11

As of December 31, 2017, there was approximately $15.8 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a remaining weighted average period of 1.8 years.

Performance- and Market-Based Awards

The Company granted performance- and market-based shares to certain key executives. The Company has also granted performance-based shares to certain key employees. The performance- and market-based goals are established by the Compensation Committee of the Board of Directors and will vest up to a maximum of 200% of target.  During 2017 and 2016, the Compensation Committee established performance goals based on various financial and market-based measures.

Compensation expense for performance-based shares is measured on the grant date based on the quoted market price of TSYS common stock. The Company estimates the probability of achieving the goals through the performance period and expenses the awards on a straight-line basis over the derived service period. The fair value of market-based awards is estimated on the grant date using a Monte Carlo simulation model. The Company expenses market-based awards on a straight-line basis.  Compensation costs related to performance- and market-based shares are recognized through the longer of the performance period, the vesting period, or the derived service period. As of December 31, 2017, there was approximately $16.0 million of unrecognized compensation cost related to TSYS performance-based awards that is expected to be recognized through December 2018. As of December 31, 2017, there was approximately $1.6 million of unrecognized compensation cost related to TSYS market-based awards that is expected to be recognized through December 2018.

The following table summarizes the market-based awards granted during the years 2017, 2016 and 2015:

Year Awarded	Performance Period Ending	Performance Measure	Number of Shares Granted	Period Expensed Through
2017	December 2019	TSR	44,275	December 2019
2016	December 2017	TSR	6,403	December 2017
2016	December 2018	TSR	52,404	December 2018
2015	July 2016, 2017 and 2018	TSR	25,000	July 2018
2015	December 2017	TSR	57,982	December 2017

67

The following table summarizes the performance-based awards granted during the years 2017, 2016 and 2015:

Year Awarded	Performance Period Ending	Performance Measure	Number of Shares Granted	Period Expensed Through
2017	December 2019	Adjusted Diluted EPS1	103,297	December 2019
2017	December 2017	Net Revenue and Adjusted Diluted EPS1	146,094	December 2019
2017	December 2017	Issuer Solutions Segment Net Revenue and Adjusted Segment Operating Income2	26,145	December 2019
2016	December 2016	Revenues before Reimbursable Items4 and Adjusted EPS3	15,605	December 2016
2016	December 2017	Adjusted EPS3	14,940	December 2017
2016	December 2018	Merchant Segment Net Revenue, Corporate Accountability Operating Income (CAOI)2 and attainment of synergies from TransFirst acquisition	29,332	December 2018
2016	December 2018	Revenue Growth and CAOI Growth2	67,517	December 2018
2016	December 2018	Merchant Segment Net Revenue and CAOI2	78,220	December 2018
2016	December 2018	Adjusted EPS3	122,284	December 2018
2016	December 2016	Revenues before Reimbursable Items4 and Adjusted EPS3	144,995	December 2018
2015	December 2017	Adjusted EPS3	135,289	December 2017
2015	December 2015	Revenues before Reimbursable Items4 and Adjusted EPS3	165,543	December 2018

¹ Adjusted Diluted EPS is adjusted earnings divided by weighted average diluted shares outstanding used for diluted EPS calculations.Adjusted earnings is net income excluding the after-tax impact of share-based compensation expenses, amortization of acquisition intangibles, merger and acquisition expenses for completed acquisitions and litigation claims, judgments or settlement expenses and related legal expenses.

² CAOI is adjusted segment operating income and includes corporate administrative expenses. Adjusted segment operating income is defined in Note 20.

³ Adjusted EPS is adjusted earnings divided by weighted average shares outstanding used for basic EPS.

⁴ Revenues before Reimbursable Items is total revenue less reimbursable items which consist of out-of-pocket expenses which are reimbursed by the Company’s clients. These expenses consist primarily of postage, access fees and third-party software.

A summary of the awards authorized in each year is below:

	Total Number of Shares Awarded1	Potential Number of Performance-and Market-Based Shares to be Vested2	Year Potential Performance-and Market-Based Shares Will Fully Vest3
2017	319,811	596,192	2020
2016	531,700	903,364	2019
2015	383,814	687,015	2018

¹ Shares awarded does not include dividend equivalents

² Includes dividend equivalents

³ Represents year in which authorized performance and market-based shares will fully vest if they had been granted during 2017, 2016, and 2015, respectively.

A summary of the status of TSYS' performance- and market-based nonvested shares as of December 31, 2017, 2016 and 2015 and changes during those periods are presented below:

	2017			2016			2015
(in thousands, except per share data)                                                                 Performance- and market-based nonvested shares	Shares1	Weighted Average Grant Date Fair Value		Shares1	Weighted Average Grant Date Fair Value		Shares1	Weighted Average Grant Date Fair Value
Outstanding at beginning of year	982	$	33.43	918	$	31.19	766	$	25.86
Granted	618		52.48	540		45.91	384		36.84
Vested	(621)		14.85	(140)		37.91	(241)		22.92
Forfeited/canceled/adjusted	(174)		46.98	(336)		37.70	9		22.20
Outstanding at end of year	805	$	45.41	982	$	33.43	918	$	31.19

¹ Includes dividend equivalents

68

Stock Option Awards

Stock options generally become exercisable in three equal annual installments on the anniversaries of the date of grant and expire ten years from the date of grant. The required service period for retirement eligible employees is typically 12 or 18 months. For retirement eligible employees who retire prior to completing this required service period, the options vest on a pro-rata basis based upon the number of months employed during the full service period. For retirement eligible employees who retire after the required 18-month service period, the options become fully vested upon retirement. For retirement eligible employees who retire after the required 12-month service period, the option holder is deemed to have continued employment through the end of the vesting period and the options continue to vest in accordance with their terms.

During 2017, 2016 and 2015, the Company granted stock options to key TSYS executive officers and non-management members of its Board of Directors. The grants to key TSYS executive officers were issued for services to be provided in the future and vest over a period of three years. The grants to the Board of Directors were fully vested on the date of grant. The weighted average fair value of the options granted was estimated on the date of grant using the Black-Scholes-Merton option-pricing model.

The following table summarizes the weighted average assumptions, and the weighted average fair value of the options:

	2017			2016			2015
Number of options granted		550,527		687,685			613,473
Weighted average exercise price	$	54.97		47.01		$	39.01
Risk-free interest rate		1.78	%	1.24	%		1.73	%
Expected volatility		21.72	%	21.53	%		20.80	%
Expected term (years)		4.6		4.5			6.3
Dividend yield		0.73	%	0.86	%		1.04	%
Weighted average fair value	$	10.85		8.50		$	8.27

A summary of TSYS' stock option activity as of December 31, 2017, 2016 and 2015, and changes during the years ended on those dates is presented below:

	2017			2016			2015
Options:                                                                (in thousands, except per share data)	Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price
Outstanding at beginning of year	2,996	$	32.78	2,887	$	28.07	4,892	$	23.83
Granted	551		54.97	688		47.01	613		39.01
Exercised	(730)		30.05	(500)		23.43	(2,586)		22.68
Forfeited/canceled	(122)		52.76	(79)		43.49	(32)		20.79
Outstanding at end of year	2,695	$	37.15	2,996	$	32.78	2,887	$	28.07
Options exercisable at year-end	1,758	$	31.00	1,877	$	28.45	1,439	$	25.17
Weighted average fair value of options granted during the year		$	10.85		$	8.50		$	8.27

As of December 31, 2017 the average remaining contractual life and intrinsic value of TSYS’ outstanding and exercisable stock options were as follows:

	Outstanding		Exercisable
Average remaining contractual life (in years)		6.9	6.1
Aggregate intrinsic value (in thousands)	$	112,964	84,572

69

Shares Issued for Options Exercised

During 2017, 2016 and 2015, employees of the Company exercised options for shares of TSYS common stock that were issued from treasury. The table below summarizes these stock option exercises by year:

(in thousands)	Options Exercised and Issued from Treasury	Intrinsic Value
2017	730	$	23,629
2016	500		12,984
2015	2,586		67,702

For awards granted before January 1, 2006 that were not fully vested on January 1, 2006, the Company recorded the tax benefits from the exercise of stock options as increases to the "Additional paid-in capital" line item of the Consolidated Balance Sheets. Through December 31, 2016, if the Company recognized tax benefits, the Company recorded these tax benefits from share-based compensation costs as cash inflows in the financing section and cash outflows in the operating section in the Consolidated Statement of Cash Flows. The Company elected to use the short-cut method to calculate its historical pool of windfall tax benefits. As discussed in Note 1, the Company adopted ASU 2016-09 effective January 1, 2017 on a prospective basis.

As of December 31, 2017, there was approximately $2.9 million of total unrecognized compensation cost related to TSYS stock options that is expected to be recognized over a remaining weighted average period of 1.6 years.

Note 18 Treasury Stock

The following table summarizes shares held as treasury stock and their related carrying value as of December 31:

(in thousands)	Number of Treasury Shares	Treasury Shares Cost
2017	21,862	$	909,960
2016	19,314		646,047
2015	19,988		641,664

Stock Repurchase Plan

In April 2010, TSYS announced a stock repurchase plan to purchase up to 10 million shares of TSYS stock. The shares may be purchased from time to time over the next two years at prices considered attractive to the Company. By January 2014, the TSYS Board had approved several increases in the number of shares that could be repurchased under its share repurchase plan to up to 28 million shares of TSYS stock. The expiration date of the plan was extended to April 30, 2015. In January 2015, TSYS announced that its Board had approved a new stock repurchase plan to purchase up to 20 million shares of TSYS stock. The shares may be purchased from time to time at prices considered appropriate. There is no expiration date for the plan. The previous plan was terminated.

The table below summarizes these repurchases by year:

(in thousands, except per share data)	Total Number of Shares Purchased	Average Price Paid per Share		Repurchased Shares Cost
2017	3,850	$	73.41	$	282,645
2016	500		48.57		24,287
2015	5,150		47.01		242,085

70

The following table sets forth information regarding the Company's purchases of its common stock on a monthly basis during the three months ended December 31, 2017:

(in thousands, except per share data)	Total Number of Shares Purchased		Average Price Paid per Share1		Total Number of Cumulative shares Purchased as Part of Publicly announced Plans or Programs2	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs2
October 2017	300		$	71.26	6,350	13,650
November 2017	1,500			73.05	7,850	12,150
December 2017	1,667	1		75.22	9,500	10,500
Total	3,467	3	$	73.41

¹ Denotes a total of 16,837 shares (not rounded) in December withheld for payment of taxes.

² In January 2015, TSYS’ Board of Directors approved a stock repurchase plan to repurchase up to 20 million shares of TSYS stock.   The shares may be purchased from time to time at prices considered appropriate.  There is no expiration date for the plan.

³ Total number of shares purchased amounts may not total due to rounding.

Treasury Shares

In 2008, the Compensation Committee approved "share withholding for taxes" for all employee nonvested awards, and also for employee stock options under specified circumstances. The dollar amount of the income tax liability from each exercise is converted into TSYS shares and withheld at the statutory minimum. The shares are added to the treasury account and TSYS remits funds to the Internal Revenue Service to settle the tax liability. During 2017 and 2016, the Company acquired 20,875 shares for approximately $1.6 million and acquired 144,839 shares for approximately $6.0 million, respectively, as a result of share withholding for taxes.

Note 19 Other Comprehensive Income (Loss)

Comprehensive income (loss) for TSYS consists of net income, cumulative foreign currency translation adjustments, unrealized gains on available for sale securities and the recognition of an overfunded or underfunded status of a defined benefit postretirement plan recorded as a component of shareholders' equity. The income tax effects allocated to and the cumulative balance of each component of accumulated other comprehensive income (AOCI) (loss) are as follows:

(in thousands)	Beginning Balance		Pretax Amount	Tax Effect	Net-of-tax Amount		Ending Balance
As of December 31, 2014	$	3,749	(17,280)	(1,605)	(15,675)	$	(11,926)
Foreign currency translation adjustments	$	(13,592)	(22,997)	(1,548)	(21,449)	$	(35,041)
Transfer from noncontrolling interest (NCI)		28	-	-	-		28
Gain on available for sale securities		1,105	2,177	779	1,398		2,503
Change in AOCI related to postretirement healthcare plans		533	(2,449)	(882)	(1,567)		(1,034)
As of December 31, 2015	$	(11,926)	(23,269)	(1,651)	(21,618)	$	(33,544)
Foreign currency translation adjustments	$	(35,041)	(36,341)	(5,872)	(30,469)	$	(65,510)
Transfer from NCI		28	-	-	-		28
Gain on available for sale securities		2,503	11,394	4,035	7,359		9,862
Change in AOCI related to postretirement healthcare plans		(1,034)	775	279	496		(538)
As of December 31, 2016	$	(33,544)	(24,172)	(1,558)	(22,614)	$	(56,158)
Foreign currency translation adjustments	$	(65,510)	24,794	2,776	22,018	$	(43,492)
Transfer from NCI		28	-	-	-		28
Loss on available for sale securities		9,862	(2,050)	(634)	(1,416)		8,446
Change in AOCI related to postretirement healthcare plans		(538)	(682)	(90)	(592)		(1,130)
As of December 31, 2017	$	(56,158)	22,062	2,052	20,010	$	(36,148)

Consistent with its overall strategy of pursuing international investment opportunities, TSYS adopted the permanent reinvestment exception under GAAP, with respect to future earnings of certain foreign subsidiaries. Its decision to

71

permanently reinvest foreign earnings offshore means TSYS will no longer allocate taxes to foreign currency translation adjustments associated with these foreign subsidiaries accumulated in other comprehensive income.

Note 20 Segment Reporting, including Geographic Area Data and Major Customers

TSYS provides global payment processing and other services to card-issuing and merchant acquiring institutions in the United States and internationally through online accounting and electronic payment processing systems. Corporate expenses, such as finance, legal, human resources, mergers and acquisitions and investor relations are categorized as Corporate Administration and Other.

In the first quarter of 2017, the Company combined the North America Services and International Services segments for purposes of segment reporting into the new Issuer Solutions segment, since they provide similar services to similar customers and to reflect the manner in which decisions on allocation of resources are made. As a result, beginning in 2017, the Company reports its financial performance based on three operating segments - Issuer Solutions, Merchant Solutions and Netspend. All prior periods have been restated to conform to the new presentation. 

In April 2016, TSYS completed its acquisition of TransFirst which is part of the Merchant Solutions segment and its results are included in the following tables. Refer to Note 22 for more information on acquisitions.

Issuer Solutions includes electronic payment processing services and other services provided from within the North America region and internationally. Merchant Solutions includes electronic processing and other services provided to merchants and merchant acquirers. The Netspend segment provides GPR prepaid debit and payroll cards, demand deposit accounts and other financial service solutions to the underbanked and other consumers and businesses in the United States.

At TSYS, the chief operating decision maker (CODM) is a group consisting of Senior Executive Management. The information utilized by the CODM consists of the financial statements and the main metrics monitored are revenue growth and growth in profitability.

TSYS’ operating segments share certain resources, such as information technology support, that TSYS allocates based on various metrics depending on the nature of the service.  

Operating Segments	Years Ended December 31,
(in thousands)		2017	2016	2015
Adjusted operating income by segment:
Issuer Solutions (a)	$	574,580	525,025	489,151
Merchant Solutions (b)		391,466	307,595	150,225
Netspend (c)		182,082	160,371	137,837
Corporate Administration and Other		(148,564)	(135,996)	(109,036)
Adjusted segment operating income1 (d)		999,564	856,995	668,177
Less:
Share-based compensation		42,409	43,728	41,549
TransFirst and Cayan M&A and integration expenses2		13,367	28,176	-
Litigation, claims, judgments or settlements		1,947	21,719	-
Acquisition intangible amortization		207,797	189,990	92,521
Operating income		734,044	573,382	534,107
Nonoperating expenses, net		(116,482)	(112,350)	(40,543)
Income before income taxes and equity in income of equity investments	$	617,562	461,032	493,564
Net revenue by segment:
Issuer Solutions (e)	$	1,594,959	1,515,462	1,473,914
Merchant Solutions (f)		1,103,682	898,533	474,040
Netspend (g)		746,870	663,579	580,377
Segment net revenue		3,445,511	3,077,574	2,528,331
Less: intersegment revenues		45,179	35,698	28,982
Net revenue3 (h)		3,400,332	3,041,876	2,499,349
Add: reimbursable items, interchange and payment network fees		1,527,633	1,128,201	280,192
Total revenues	$	4,927,965	4,170,077	2,779,541
Adjusted segment operating margin on net revenue:
Issuer Solutions (a)/(e)		36.0%	34.6%	33.2%
Merchant Solutions (b)/(f)		35.5%	34.2%	31.7%
Netspend (c)/(g)		24.4%	24.2%	23.7%
Adjusted segment operating margin on net revenue (d)/(h)		29.4%	28.2%	26.7%

¹ Adjusted segment operating income excludes acquisition intangible amortization, TransFirst and Cayan M&A and integration expenses, share-based compensation and expenses associated with Corporate Administration and Other.

² Excludes share-based compensation

³ Net revenue is total revenues less reimbursable items (such as postage), as well as, merchant acquiring interchange and payment network fees charged by the card associations or payment networks that are recorded by TSYS as expense.  Adjusted segment operating income excludes acquisition intangible amortization, TransFirst and Cayan M&A expenses, share-based compensation and expenses associated with Corporate Administration and Other.

72

The following table presents the Company’s depreciation expense by segment:

Operating Segments	Years Ended December 31,
(in thousands)		2017	2016	2015
Depreciation and amortization:
Issuer Solutions	$	147,914	141,309	134,436
Merchant Solutions		29,477	25,553	18,268
Netspend		15,838	13,133	10,686
Segment depreciation and amortization		193,229	179,995	163,390
Acquisition intangible amortization		207,797	189,990	92,521
Corporate Administration and Other		4,880	3,561	2,353
Total depreciation and amortization	$	405,906	373,546	258,264

The following table presents the Company’s total assets by segment:

	As of December 31,
(in thousands)	2017		2016
Issuer Solutions	$	5,735,195	5,667,280
Merchant Solutions		3,136,395	3,295,509
Netspend		1,418,644	1,474,595
Intersegment assets		(3,958,545)	(4,071,207)
Total assets	$	6,331,689	6,366,177

The Company maintains property and equipment, net of accumulated depreciation and amortization, in the following geographic areas:

	As of
(in thousands)	December 31, 2017		December 31, 2016
United States	$	273,690	236,913
Europe		43,586	38,866
Other		7,942	6,566
Total	$	325,218	282,345

The following tables reconcile geographic revenues to external revenues by operating segment based on the domicile of the Company’s customers for the years ended December 31:

	2017
(in thousands)	Issuer         Solutions		Merchant Solutions	Netspend	Total		Percentage of Revenues
United States	$	1,051,292	2,428,327	745,235	$	4,224,854	85.7	%
Europe1		320,400	284	-		320,684	6.5
Canada1		313,674	1,496	-		315,170	6.4
Other1		66,102	1,155	-		67,257	1.4
Total	$	1,751,468	2,431,262	745,235	$	4,927,965	100.0	%

	2016
(in thousands)	Issuer                    Solutions		Merchant Solutions	Netspend	Total		Percentage of Revenues
United States	$	1,032,381	1,826,775	660,845	$	3,520,001	84.4	%
Europe1		306,894	227	-		307,121	7.4
Canada1		284,028	705	-		284,733	6.8
Other1		57,460	762	-		58,222	1.4
Total	$	1,680,763	1,828,469	660,845	$	4,170,077	100.0	%

73

	2015
(in thousands)	Issuer                    Solutions		Merchant Solutions	Netspend	Total		Percentage of Revenues
United States	$	981,588	548,079	580,377	$	2,110,044	75.9	%
Europe1		304,628	22	-		304,650	11.0
Canada1		288,728	355	-		289,083	10.4
Other1		75,085	679	-		75,764	2.7
Total	$	1,650,029	549,135	580,377	$	2,779,541	100.0	%

1Certain of these revenues are impacted by movements in foreign currency exchange rates.

MAJOR CUSTOMER:  For the years ended December 31, 2017, 2016 and 2015, the Company had no major customers.

Note 21 Supplemental Cash Flow Information

Nonvested Share Awards

The Company has issued shares of TSYS common stock to certain key employees and non-management members of its Board of Directors. The grants to certain key employees were issued in the form of nonvested stock bonus awards for services to be provided in the future by such officers and employees. The grants to the Board of Directors were fully vested on the date of grant. Refer to Note 18 for more information on nonvested share awards.

Equipment Acquired Under Capital Lease Obligations and Software Acquired Under License Agreements

The Company acquired computer equipment under capital leases and software under license agreements in the amount of $40.8 million, $1.8 million and $4.1 million in 2017, 2016 and 2015, respectively.

Software Acquired Under Direct Financing

The Company did not acquire any software under direct financing in 2017 or 2016. The Company acquired software under direct financing in the amount of $30.0 million in 2015. Refer to Note 11 for more information.

Note 22 Acquisitions

Redeemable Noncontrolling Interest - CPAY

2017

On February 3, 2017, the Company acquired an additional 10% equity interest in CPAY from a privately-owned company for $70.0 million. This purchase reduced the remaining redeemable noncontrolling interest in CPAY to 15% of its total outstanding equity and extended the put call arrangement until April 2018. The transaction resulted in a decrease to noncontrolling interest of $9.8 million and a decrease to additional paid-in-capital of $60.2 million

TransFirst

2017

In 2017, the Company decreased the Merchant Solutions goodwill due to deferred tax adjustments of $12.1 million and the write-off of a note receivable of $727,000 on the opening balance sheet of TransFirst.

2016

On April 1, 2016, the Company acquired all of the outstanding capital stock of TransFirst for an aggregate purchase price of $2.35 billion in cash as of the closing, which was subject to certain working capital and other adjustments, as described in the Purchase Agreement. TransFirst previously operated as a privately held company, under the ownership of Vista Equity Partners. The results of the newly acquired business are being reported by TSYS as part of the Merchant Solutions segment.

The Company funded the cash consideration and the payment of transaction related expenses through a combination of cash-on-hand and proceeds from debt financings, including proceeds drawn under the Company’s 2016 Credit Agreement and the proceeds from the issuance of the 2016 Notes, which together included proceeds of approximately $2.35 billion.

74

The goodwill amount of $1.7 billion arising from the acquisition is primarily attributable to the expansion of the Merchant Solutions Segment’s customer base, differentiated distribution channels and economies of scale expected from combining the operations of TSYS and TransFirst. All of the goodwill was assigned to TSYS’ Merchant Solutions segment. The goodwill recognized is not expected to be deductible for income tax purposes.

The following table summarizes the consideration paid for TransFirst and the initially recognized amounts of the identifiable assets acquired and liabilities assumed on April 1, 2016 (the acquisition date).  

(in thousands)
Consideration
Cash	$	2,351,400
Fair value of total consideration transferred	$	2,351,400
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	5,907
Accounts receivable, net		62,313
Property, equipment and software		12,726
Identifiable intangible assets		814,131
Deferred tax asset		2,244
Other assets		7,509
Deferred tax liability		(224,654)
Other liabilities		(56,864)
Total identifiable net assets		623,312
Goodwill		1,728,088
Total identifiable assets acquired and liabilities assumed	$	2,351,400

During 2016, there was a $55,000 increase in the purchase price due to the working capital adjustment required by the Purchase Agreement. In addition, there was a $2.0 million decrease in identifiable intangible assets, a $363,700 increase in liabilities and an $18.0 million increase in deferred tax liabilities that resulted in a net increase to goodwill of $20.4 million. The measurement period during which changes in assets, liabilities, equity interests, or items of consideration are subject to adjustment ends up to one year following the acquisition date.

Identifiable intangible assets acquired in the TransFirst acquisition include merchant relationships, channel relationships, current technology, the TransFirst trade name, not-to-compete agreements and a favorable lease. The identifiable intangible assets had no significant estimated residual value. These intangible assets are being amortized over their estimated useful lives of one to ten years based on the pattern of expected future economic benefit, which approximates a straight-line basis over the useful lives of the assets. The fair value of the acquired identifiable intangible assets of $814.1 million was estimated using the income approach (discounted cash flow and relief from royalty methods) and cost approach. The fair values and useful lives of the identified intangible assets were primarily determined using forecasted cash flows, which included estimates for certain assumptions such as revenues, expenses, attrition rates and royalty rates. The estimated fair value of identifiable intangible assets acquired in the acquisition and the related estimated weighted average useful lives are as follows:

(inmillions)		Fair Value	Weighted Average Useful Life (in years)
Merchant relationships	$	588.0	7.0
Channel relationships		121.0	10.0
Current technology		72.0	5.0
Trade name		16.0	1.0
Covenants not-to-compete		15.0	3.0
Favorable lease		2.1	5.6
Total acquired identifiable intangible assets	$	814.1	7.1

The fair value measurement of the identifiable intangible assets represents Level 2 and Level 3 measurements as defined by GAAP. Key assumptions include (a) cash flow projections based on market participant and internal data, (b) a discount rate of 8.5%, (c) a pre-tax royalty rate range of 1%-3%, (d) attrition rates of 11%-16%, (e) an effective tax rate of 40%, and (f) a terminal value based on a long-term sustainable growth rate of 3%.

75

In connection with the acquisition, TSYS incurred $32.3 million in acquisition related costs primarily related to professional, legal and accounting costs, and integration expenses which are recorded in selling, general and administrative expenses and $9.8 million related to the bridge term loan facility, which is included in interest expense. These costs are expensed as incurred and are included on the income statement for the twelve months ended December 31, 2016. The Company recorded $1.3 billion of revenue and $30.0 million of operating income since the acquisition date that is included in the consolidated results through the twelve months ended December 31, 2016 as a result of the TransFirst acquisition.

EMEA

2016

In March 2016, the Company completed the acquisition of the remaining 45% interest in TSYS Managed Services EMEA Limited (EMEA) from Merchants Limited. The Company acquired the outstanding stock from Merchants Limited for approximately £4.2 million, or $5.9 million, in cash. In connection with the purchase, the Company repaid the outstanding balance of the existing debt between EMEA and Merchants Limited of approximately £2.2 million, or $3.0 million.

Netspend

2017

In 2017, the Company adjusted the Netspend goodwill due to a tax adjustment of $1.8 million relating to uncertain tax positions.

2016

In 2016, TSYS adjusted the goodwill associated with the Netspend acquisition by $584,000 as a result of adjustments to the deferred tax assets acquired in the transaction.

2015

In September 2015, TSYS purchased certain assets for its Netspend segment for $750,000. The purchase qualifies as a business combination in accordance with GAAP. The Company recorded an acquisition technology intangible asset for the amount of the purchase price. This acquisition intangible asset represents software and is being amortized over a five year life. There were no other material assets included in the purchase. The acquisition included the employment of certain key employees which resulted in the transaction qualifying as a business combination.

In 2015, the Company adjusted goodwill for Netspend to include an additional $627,000 for a change in deferred taxes associated with the acquisition. For more information, refer to Note 5.

Note 23 Collaborative Arrangement

TSYS has a 45% ownership interest in an enterprise jointly owned with two other entities which operates aircraft for the owners' internal use. The arrangement allows each entity access to the aircraft and each entity pays for its usage of the aircraft. Each quarter, the net operating costs of the enterprise are shared among the owners.

76

Note 24 Earnings Per Share

The following table illustrates basic and diluted EPS under the guidance of GAAP for the years ended December 31, 2017, 2016 and 2015:

	2017		2016		2015
(in thousands, except per share data)	Common Stock		Common Stock		Common Stock
Basic EPS:
Net income attributable to TSYS common shareholders	$	586,185		319,638		364,044
Less income allocated to nonvested awards		(1,373)		(1,557)		(3,164)
Net income allocated to common stock for EPS calculation (a)	$	584,812		318,081		360,880
Average common shares outstanding (b)		183,309		182,744		182,465
Basic EPS (a)/(b)	$	3.19		1.74		1.98
Diluted EPS:
Net income attributable to TSYS common shareholders	$	586,185		319,638		364,044
Less income allocated to nonvested awards		(1,373)		(1,557)		(3,148)
Add income allocated to nonvested awards1		1,373		1,557		-
Net income allocated to common stock for EPS calculation (c)	$	586,185		319,638		360,896
Average common shares outstanding		183,309		182,744		182,465
Increase due to assumed issuance of shares related to common equivalent shares outstanding		1,162		813		1,157
Average nonvested awards1		959		891		-
Average common and common equivalent shares outstanding (d)		185,430		184,448		183,622
Diluted EPS (c)/(d)	$	3.16		1.73		1.97

¹ In accordance with the diluted EPS guidance under the two-class method, the Company uses the approach-either the treasury stock method or the two-class method assuming a participating security is not exercised- that is more dilutive. In 2017 and 2016, the Company used the two-class method. In 2015, the Company used the treasury stock method.

	2017		2016		2015
(in thousands, except per share data)	Participating Securities		Participating Securities		Participating Securities
Basic EPS:
Net income allocated to nonvested awards (a)	$	1,373		1,557		3,164
Nonvested awards (b)		435		911		1,617
Basic EPS (a)/(b)	$	3.16		1.71		1.96
Diluted EPS:
Net income allocated to nonvested awards (c)	$	1,366		1,552		3,148
Average common and common equivalent shares outstanding (d)		435		911		1,617
Diluted EPS (c)/(d)	$	3.14		1.70		1.95

The diluted EPS calculation excludes stock options and nonvested awards that are exercisable into 0.3 million, 0.4 million and 0.6 million common shares for the years ended December 31, 2017, 2016 and 2015, respectively, because their inclusion would have been anti-dilutive.

Note 25 Subsequent Events

CFPB Finalizes Changes to Prepaid Accounts Rule

On January 25, 2018, the Consumer Financial Protection Bureau (the CFPB) announced that it has finalized updates to its 2016 prepaid rule. The CFPB’s 2016 prepaid rule put in place requirements for treatment of funds on lost or stolen cards, error resolution and investigation, upfront fee disclosures, access to account information, and overdraft features if offered in conjunction with prepaid accounts. The changes announced by the CFPB adjust requirements for resolving errors on unregistered accounts, provide greater flexibility for credit cards linked to digital wallets, and extend the effective date of the rule by one year to April 2019.

77

Acquisition of Cayan

On December 18, 2017, TSYS announced it entered into an agreement to acquire Cayan, a payment technology company focused on integrated payment solutions and merchant acquiring, in an all cash transaction valued at approximately $1.05 billion. On January 11, 2018, the Company completed the acquisition of Cayan. The Company funded the acquisition through a combination of cash-on-hand and proceeds from borrowings, including the credit agreement discussed below.

Term Loan Facility

On January 10, 2018, TSYS entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. as Administrative Agent and other lenders party thereto from time to time. The Credit Agreement provides the Company with a $450 million two-year term loan facility (the “Term Loan Facility”).  The Term Loan Facility was used to finance, in part, the Company’s acquisition of Cayan.

Borrowings under the Credit Agreement will accrue interest at the base rate (as defined in the Credit Agreement) or, for certain euro-denominated borrowings, the London Interbank Offered Rate (“LIBOR”), in each case plus a margin based on the Company’s corporate credit ratings. The applicable margin for loans bearing interest based on LIBOR ranges from 1.000% to 1.750%. The applicable margin for loans bearing interest based on the base rate ranges from 0.000% to 0.750%.  

The Credit Agreement contains customary covenants regarding, among other matters, the maintenance of insurance, the preservation and maintenance of the Company’s corporate existence, material compliance with laws and the payment of taxes and other material obligations. The Credit Agreement also contains financial covenants requiring the maintenance as of the end of each fiscal quarter of (i) a minimum fixed charge coverage ratio of 2.5 to 1.0 and (ii) a maximum consolidated leverage ratio of 3.5 to 1.0, which may be increased upon the occurrence of certain events (including the consummation of the acquisition of Cayan).

Management performed an evaluation of the Company’s activity as of the date these audited financial statements were issued and has concluded that, other than as set forth above, there are no significant events requiring disclosure.

78

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
Total System Services, Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Total System Services, Inc. and subsidiaries (the Company) as of December 31, 2017 and 2016, the related consolidated statements of income, comprehensive income, cash flows and changes in equity for each of the years in the three-year period ended December 31, 2017, and the related notes and financial statement schedule (collectively, the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/KPMG LLP

We have served as the Company’s auditor since 1983.

Atlanta, Georgia

February 23, 2018

79

Management's Report on Internal Control Over Financial Reporting

The management of Total System Services, Inc. (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company maintains accounting and internal control systems which are intended to provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition, transactions are executed in accordance with management's authorization and accounting records are reliable for preparing financial statements in accordance with accounting principles generally accepted in the United States.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, risk.

The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2017.  

Based on our assessment, management believes that, as of December 31, 2017, the Company's internal control over financial reporting is effective based on those criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Control — Integrated Framework (2013).

KPMG LLP, the independent registered public accounting firm who audited the Company's consolidated financial statements, has issued an attestation report on the effectiveness of internal control over financial reporting as of December 31, 2017 that appears on the preceding page.

M. Troy Woods Chairman, President & Chief Executive Officer	Paul M. Todd Senior Executive Vice President & Chief Financial Officer

80

Quarterly Financial Data (Unaudited), Stock Price, Dividend Information

TSYS' common stock trades on the New York Stock Exchange (NYSE) under the symbol "TSS." Price and volume information appears under the abbreviation "TotlSysSvc" in NYSE daily stock quotation listings. As of February 16, 2018,  there were 17,430 holders of record of TSYS common stock, some of whom are holders in nominee name for the benefit of different shareholders.

The 2017 fourth quarter dividend of $0.13 per share was declared on December 11, 2017 and was paid on January 2, 2018, to shareholders of record on December 21, 2017. The 2016 fourth quarter dividend of $0.10 per share was declared on December 2, 2016, and was paid January 3, 2017, to shareholders of record on December 15, 2016. Total dividends declared in 2017 and in 2016 amounted to $84.4 million and $73.5 million, respectively. It is the present intention of the Board of Directors of TSYS to continue to pay cash dividends on its common stock.

Presented here is a summary of the unaudited quarterly financial data for the years ended December 31, 2017 and 2016.

(in thousands, except per share data)	First Quarter		Second Quarter	Third Quarter	Fourth Quarter
2017 Revenues	$	1,184,725	1,222,375	1,247,576	1,273,289
Cost of services		861,856	877,887	898,471	939,106
Operating income		167,183	193,248	199,692	173,921
Net income attributable to TSYS common shareholders		105,868	115,014	123,095	242,208
Basic earnings per share (EPS) attributable to TSYS common shareholders		0.58	0.62	0.67	1.33
Diluted EPS attributable to TSYS common shareholders		0.57	0.62	0.66	1.31
Cash dividends declared		0.10	0.10	0.13	0.13
Stock prices:
High		55.48	60.64	70.62	80.51
Low		49.69	51.88	57.53	65.44
Close		53.46	58.25	65.50	79.09
2016 Revenues	$	739,378	1,151,587	1,146,889	1,132,224
Cost of services		484,507	841,923	840,301	826,331
Operating income		151,687	135,821	155,327	130,547
Net income attributable to TSYS common shareholders		90,628	69,707	85,352	73,950
Basic EPS attributable to TSYS common shareholders		0.49	0.38	0.46	0.40
Diluted EPS attributable to TSYS common shareholders		0.49	0.38	0.46	0.40
Cash dividends declared		0.10	0.10	0.10	0.10
Stock prices:
High		48.55	54.81	56.43	51.61
Low		37.96	47.90	46.58	46.77
Close		47.58	48.50	47.15	49.03

81

STOCK PERFORMANCE GRAPH

The following graph compares the yearly percentage change in cumulative shareholder return on TSYS stock with the cumulative total return of the Standard & Poor's 500 Index and the Standard & Poor's Systems Software Index for the last five fiscal years (assuming a $100 investment on December 31, 2012 and reinvestment of all dividends).

	2012		2013		2014		2015		2016		2017
TSYS	$	100.00	$	157.72	$	163.02	$	241.19	$	239.42	$	388.99
S&P 500	$	100.00	$	132.39	$	150.51	$	152.59	$	170.84	$	208.14
S&P SS	$	100.00	$	132.90	$	163.47	$	180.59	$	204.49	$	280.92

82

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF TOTAL SYSTEM SERVICES, INC.

Ownership Percentage		Name	Place of Incorporation
	100%     Columbus Depot Equipment Company		Georgia
	100%     TSYS Managed Services Canada, Inc.		Ontario
	100%     TSYS U.S. Holdings, Inc.		Georgia
	100%     ProPay, Inc.		Utah
	100%     ProPay Financial Solutions Canada, Inc.		Utah
	100%     ProPay Global, Ltd.		England and Wales
	100%     ProPay Australia Pty Ltd		Australia
	85%     Central Payment Co., LLC		Delaware
	100%     Central Payment Deployment, Inc.		Delaware
	100%     PCP MW Holding Corp.		Delaware
	100%     Cayan Holdings LLC (1)		Delaware
	100%     Merchant Warehouse (NI) Ltd.		Northern Ireland
	100%     Cayan LLC		Delaware
	100%     Columbus Productions, Inc.		Georgia
	100%     TSYS Advisors, Inc.		Georgia
	100%     TSYS Servicos de Transacoes Eletronicas Ltda (2)		Brazil
	100%     TSYS International Management Limited (3)		England
	100%     Total System Services Processing Europe Limited		England
	100%     TSYS Europe (Netherlands) B.V.		Netherlands
	100%     TSYS Europe (Deutschland) GmBH		Germany
	100%     TSYS Europe (Italia) S.r.l		Italy
	100%     TSYS Card Tech Limited		England
	100%     TSYS Card Tech Services Limited		Cyprus
	100%     TSYS Card Tech Services (Malaysia) Limited		Malaysia
	100%     TSYS Card Tech Services India LLP (4)		India
	100%     TSYS – Rus L.L.C.		Russia
	100%     TSYS Managed Services EMEA Limited		England
	100%     TSYS Managed Services EMEA B.V.		Netherlands
	100%     TSYS Managed Services EMEA (Netherlands) B.V.		Netherlands
	100%     TSYS Acquiring Solutions, L.L.C.		Delaware
	100%     Infonox Software Private Limited (2)		India
	100%     NetSpend Holdings, Inc.		Delaware
	100%     NetSpend Corporation (5)		Delaware
	100%     Skylight Acquisition I, Inc.		Delaware
	100%     TransFirst Parent Corp.		Delaware
	100%     TransFirst Group, Inc.		Delaware
	100%     TSYS Merchant Solutions, LLC (6)		Delaware
	49%     Total System Services de Mexico, S.A. de C.V.		Mexico
	49%     TSYS Servicios Corporativos, S.A. de C.V.		Mexico
	44.56% China Unionpay Data Services Company Limited		China

(1)	50.55% is owned by Columbus Depot Equipment Company
(2)	Less than .1% is owned by Columbus Depot Equipment Company.
(3)	1% is owned by Columbus Depot Equipment Company.
(4)	1% is owned by TSYS Card Tech Services (Malaysia) Limited.
(5)	25% is owned by Skylight Acquisition I, Inc.
(6)	26.35% is owned by Columbus Depot Equipment Company and .22% is owned by TSYS U.S. Holdings, Inc.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Total System Services, Inc.:

We consent to the incorporation by reference in the registration statements (No. 333‑25401, No. 333-41775, No. 333-104142, No. 333-142791, No. 333-148449, No. 333-181790, No. 333-189733, and No. 333-217544) on Form S-8 and the registration statements (No. 333-221326 and No. 333-210148) on Form S-3 of Total System Services, Inc. of our report dated February 23, 2018, with respect to the consolidated balance sheets of  Total System Services, Inc. (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2017, and the related notes and financial statement schedule (collectively, the “consolidated financial statements”), and the effectiveness of internal control over financial reporting as of December 31, 2017, which report appears in the December 31, 2017 annual report on Form 10-K of Total System Services, Inc.

/s/KPMG LLP

Atlanta, Georgia
February 23, 2018

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, M. Troy Woods, certify that:

1.          I have reviewed this annual report on Form 10-K of Total System Services, Inc.;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.          The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)         Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)         Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.          The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	February 23, 2018	/s/ M. Troy Woods
		M. Troy Woods
		Chairman, President and
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Paul M. Todd, certify that:

1. I have reviewed this annual report on Form 10-K of Total System Services, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 23, 2018 /s/Paul M. Todd Paul M. Todd Senior Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF PERIODIC REPORT

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, M. Troy Woods, the Chairman, President and Chief Executive Officer of Total System Services, Inc. (the “Company”), and Paul M. Todd, the Senior Executive Vice President and Chief Financial Officer of the Company, hereby certify that, to the best of his knowledge:

(1)The Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 23, 2018/s/M. Troy Woods

M. Troy Woods

Chairman, President and

Chief Executive Officer

February 23, 2018/s/Paul M. Todd

Paul M. Todd

Senior Executive Vice President and

Chief Financial Officer

This certification “accompanies” the Form 10-K to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K, irrespective of any general incorporation language contained in such filing.)

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2017	Feb. 16, 2018	Jun. 30, 2017
Document And Entity Information
Entity Registrant Name	TOTAL SYSTEM SERVICES INC
Entity Central Index Key	0000721683
Document Type	10-K
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		181,725,568
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Public Float			$ 10,573,813,000

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents (Note 3)	$ 450,357	$ 425,354
Accounts receivable, net of allowances for doubtful accounts and billing adjustments of $5.9 million and $4.8 million as of 2017 and 2016, respectively	412,322	432,847
Prepaid expenses and other current assets (Note 4)	216,565	164,488
Total current assets	1,079,244	1,022,689
Goodwill (Notes 1 and 5)	3,264,071	3,270,952
Other intangible assets, net of accumulated amortization of $600.9 million and $420.6 million as of 2017 and 2016, respectively (Note 6)	727,146	906,676
Intangible assets - computer software, net of accumulated amortization of $849.3 million and $757.4 million as of 2017 and 2016, respectively (Note 7)	383,715	423,188
Property and equipment, net of accumulated depreciation and amortization of $521.1 million and $480.7 million as of 2017 and 2016, respectively (Note 8)	325,218	282,345
Contract acquisition costs, net of accumulated amortization of $342.7 million and $309.7 million as of 2017 and 2016, respectively (Note 9)	258,665	235,700
Equity investments, net (Note 10)	163,518	133,556
Deferred income tax asset (Note 13)	6,091	7,055
Other assets	124,021	84,016
Total assets	6,331,689	6,366,177
Current liabilities:
Current portion of long-term borrowings (Note 11)	559,050	48,040
Accounts payable	62,310	38,712
Accrued salaries and employee benefits	82,135	67,655
Current portion of obligations under capital leases and license agreements (Note 11)	6,762	2,687
Other current liabilities (Note 12)	278,835	263,259
Total current liabilities	989,092	420,353
Long-term borrowings, excluding current portion (Note 11)	2,591,949	3,312,215
Deferred income tax liabilities (Note 13)	238,317	419,552
Obligations under capital leases and license agreements, excluding current portion (Note 11)	36,053	1,061
Other long-term liabilities	119,596	88,983
Total liabilities	3,975,007	4,242,164
Redeemable noncontrolling interest in consolidated subsidiary	115,689	24,093
Commitments and contingencies (Note 14)
Shareholders' Equity
Common stock- $0.10 par value. Authorized 600,000 shares; 202,765 issued as of 2017 and 2016; 180,903 and 183,451 outstanding as of 2017 and 2016, respectively	20,277	20,276
Additional paid-in capital	162,806	279,627
Accumulated other comprehensive loss, net (Note 19)	(36,148)	(56,158)
Treasury stock, at cost (21,862 and 19,314 shares as of 2017 and 2016, respectively (Note 18)	(909,960)	(646,047)
Retained earnings	3,004,018	2,502,222
Total shareholders' equity	2,240,993	2,099,920
Total liabilities and shareholders' equity	$ 6,331,689	$ 6,366,177

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Consolidated Balance Sheets
Accounts receivable, allowances for doubtful accounts and billing adjustments	$ 5,900	$ 4,800
Other intangible assets, accumulated amortization	600,888	420,607
Intangible assets - computer software, accumulated amortization	849,283	757,394
Property and equipment, accumulated depreciation and amortization	521,084	480,690
Contract acquisition costs, accumulated amortization	$ 342,700	$ 309,700
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized (in shares)	600,000,000	600,000,000
Common stock, issued (in shares)	202,765,000	202,765,000
Common stock, outstanding (in shares)	180,903,000	183,451,000
Treasury stock (in shares)	21,862,000	19,314,000

XML

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements of Income
Total revenues (Note 20)	$ 4,927,965	$ 4,170,077	$ 2,779,541
Cost of services	3,577,320	2,993,062	1,855,181
Selling, general and administrative expenses	616,601	603,633	390,253
Total operating expenses	4,193,921	3,596,695	2,245,434
Operating income	734,044	573,382	534,107
Nonoperating expenses, net	(116,482)	(112,350)	(40,543)
Income before income taxes and equity in income of equity investments	617,562	461,032	493,564
Income taxes (Note 13)	65,878	161,175	151,364
Income before equity in income of equity investments	551,684	299,857	342,200
Equity in income of equity investments, net of tax	40,532	26,115	25,430
Income from continuing operations, net of tax	592,216	325,972	367,630
Income from discontinued operations, net of tax			1,411
Net income	592,216	325,972	369,041
Net income attributable to noncontrolling interests	(6,031)	(6,334)	(4,997)
Net income attributable to Total System Services, Inc. (TSYS) common shareholders	$ 586,185	$ 319,638	$ 364,044
Basic earnings per share (EPS) attributable to TSYS common shareholders (Note 24):
Income from continuing operations to TSYS common shareholders (in dollars per share)	$ 3.19	$ 1.74	$ 1.97
Gain from discontinued operations to TSYS common shareholders (in dollars per share)			0.01
Net income attributable to TSYS common shareholders (in dollars per share)	3.19	1.74	1.98
Diluted EPS attributable to TSYS common shareholders (Note 24):
Income from continuing operations to TSYS common shareholders (in dollars per share)	3.16	1.73	1.96
Gain from discontinued operations to TSYS common shareholders (in dollars per share)			0.01
Net income attributable to TSYS common shareholders (in dollars per share)	$ 3.16	$ 1.73	$ 1.97
Amounts attributable to TSYS common shareholders:
Income from continuing operations	$ 586,185	$ 319,638	$ 362,633
Gain from discontinued operations			1,411
Net income attributable to Total System Services, Inc. (TSYS) common shareholders	$ 586,185	$ 319,638	$ 364,044

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements of Comprehensive Income
Net income	$ 592,216	$ 325,972	$ 369,041
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	22,018	(30,801)	(21,719)
Postretirement healthcare plan adjustments	(592)	496	(1,567)
Unrealized (loss) gain on available-for-sale securities	(1,416)	7,359	1,398
Other comprehensive income (loss)	20,010	(22,946)	(21,888)
Comprehensive income	612,226	303,026	347,153
Comprehensive income attributable to noncontrolling interests	(6,031)	(6,002)	(4,727)
Comprehensive income attributable to TSYS common shareholders	$ 606,195	$ 297,024	$ 342,426

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities:
Net income	$ 592,216	$ 325,972	$ 369,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	405,906	373,546	258,264
Provisions for cardholder losses	51,194	49,363	41,264
Share-based compensation	42,409	43,728	41,549
Provisions for bad debt expenses and billing adjustments	10,169	7,584	4,495
Charges for transaction processing provisions	11,716	5,351	6,976
Amortization of debt issuance costs	4,307	13,570	1,841
Dividends received from equity investments	20,589	15,246	12,097
Loss (gain) on foreign currency	907	(1,748)	388
Amortization of bond discount	907	750	397
Loss on disposal of equipment, net	2,307	774	(397)
Loss on impairment	1,298
Excess tax benefit from share-based payment arrangements		(9,905)	(24,357)
Deferred income tax (benefit) expense	(172,488)	7,435	(4,083)
Gain on disposal of subsidiaries			(3,568)
Equity in income of equity investments, net of tax	(40,532)	(26,115)	(25,430)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accrued salaries and employee benefits	13,538	(2,597)	29,168
Accounts receivable	(29,729)	(73,235)	(39,218)
Prepaid expenses, other current assets and other long-term assets	3,089	(58,345)	(7,372)
Accounts payable	17,653	(12,562)	(3,987)
Other current liabilities and other long-term liabilities	(78,964)	59,217	(55,034)
Net cash provided by operating activities	856,492	718,029	602,034
Cash flows from investing activities:
Purchases of property and equipment	(70,039)	(51,132)	(54,640)
Additions to contract acquisition costs	(69,806)	(45,847)	(58,728)
Additions to internally developed computer software	(30,265)	(34,043)	(39,219)
Additions to licensed computer software from vendors	(25,916)	(11,551)	(50,729)
Cash used in acquisitions, net of cash acquired		(2,345,493)	(750)
Other investing activities	(2,718)	(4,930)	42
Net cash used in investing activities	(198,744)	(2,492,996)	(204,024)
Cash flows from financing activities:
Principal payments on long-term borrowings and capital lease obligations	(421,306)	(724,084)	(54,719)
Purchase of noncontrolling interest	(70,000)	(5,878)
Dividends paid on common stock	(79,017)	(73,378)	(73,677)
Subsidiary dividends paid to noncontrolling shareholders	(5,997)	(5,548)	(5,028)
Repurchase of common stock under plans and tax withholding	(284,237)	(30,275)	(242,235)
Debt issuance costs		(26,555)
Excess tax benefit from share-based payment arrangements		9,905	24,357
Proceeds from borrowings of long-term debt	200,000	2,666,295	1,912
Proceeds from exercise of stock options	21,832	11,708	58,636
Net cash (used in) provided by financing activities	(638,725)	1,822,190	(290,754)
Cash and cash equivalents:
Effect of exchange rate changes on cash and cash equivalents	5,980	(11,197)	(7,111)
Net increase in cash and cash equivalents	25,003	36,026	100,145
Cash and cash equivalents at beginning of period	425,354	389,328	289,183
Cash and cash equivalents at end of period	450,357	425,354	389,328
Supplemental cash flow information:
Interest paid	112,705	84,420	40,425
Income taxes paid, net	$ 269,113	$ 87,428	$ 171,455

XML

Consolidated Statements of Changes in Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total
Balance at Dec. 31, 2014							$ 22,492
Changes in Redeemable Noncontrolling Interests
Net income							5,945
Subsidiary dividends paid to noncontrolling interests							(5,027)
Balance at Dec. 31, 2015							23,410
Balance at Dec. 31, 2014	$ 20,278	$ 171,270	$ (11,926)	$ (453,230)	$ 1,966,370	$ 6,882	1,699,644
Balance (in shares) at Dec. 31, 2014	202,775
Changes in Total Equity
Net income					364,044	(948)	363,096
Other comprehensive income (Note 19)			(21,618)			(270)	(21,888)
Common stock issued from treasury shares for exercise of stock options (Note 17)		12,273		46,363			58,636
Common stock unissued due to forfeiture of nonvested awards	$ (1)	702		(701)
Common stock unissued due to forfeiture of nonvested awards (in shares)	(6)
Common stock issued from treasury shares for nonvested awards (Note 17)		(7,982)		7,982
Share-based compensation (Note 17)		41,179					41,179
Common stock issued from treasury shares for dividend equivalents (Note 17)		186		163			349
Cash dividends declared ($0.46, $0.40 and $0.40 per share for the years ended December 31, 2017, 2016 and 2015, respectively)					(74,356)		(74,356)
Purchase of treasury shares (Note 18)		6		(242,241)			(242,235)
Tax benefits associated with share-based compensation		24,257					24,257
Balance at Dec. 31, 2015	$ 20,277	241,891	(33,544)	(641,664)	2,256,058	5,664	1,848,682
Balance (in shares) at Dec. 31, 2015	202,769
Changes in Redeemable Noncontrolling Interests
Net income							6,231
Subsidiary dividends paid to noncontrolling interests							(5,548)
Balance at Dec. 31, 2016							24,093
Changes in Total Equity
Net income					319,638	103	319,741
Other comprehensive income (Note 19)			(22,614)			(332)	(22,946)
Common stock issued from treasury shares for exercise of stock options (Note 17)		1,824		9,884			11,708
Common stock unissued due to forfeiture of nonvested awards	$ (1)	1,197		(1,196)
Common stock unissued due to forfeiture of nonvested awards (in shares)	(4)
Common stock issued from treasury shares for nonvested awards (Note 17)		(17,204)		17,204
Share-based compensation (Note 17)		42,457					42,457
Cash dividends declared ($0.46, $0.40 and $0.40 per share for the years ended December 31, 2017, 2016 and 2015, respectively)					(73,474)		(73,474)
Purchase of treasury shares (Note 18)				(30,275)			(30,275)
Subsidiary repurchase of noncontrolling interests		(443)				$ (5,435)	(5,878)
Tax benefits associated with share-based compensation		9,905					9,905
Balance at Dec. 31, 2016	$ 20,276	279,627	(56,158)	(646,047)	2,502,222		$ 2,099,920
Balance (in shares) at Dec. 31, 2016	202,765						202,765
Changes in Redeemable Noncontrolling Interests
Net income							$ 6,031
Adjustments to redemption value of redeemable noncontrolling interest							101,405
Subsidiary repurchase of noncontrolling interests							(9,843)
Subsidiary dividends paid to noncontrolling interests							(5,997)
Balance at Dec. 31, 2017							115,689
Changes in Total Equity
Net income					586,185		586,185
Other comprehensive income (Note 19)			20,010				20,010
Common stock issued from treasury shares for exercise of stock options (Note 17)		10,474		11,358			21,832
Common stock unissued due to forfeiture of nonvested awards	$ 1	1,230		(1,231)
Common stock issued from treasury shares for nonvested awards (Note 17)		(10,197)		10,197
Share-based compensation (Note 17)		43,234					43,234
Cash dividends declared ($0.46, $0.40 and $0.40 per share for the years ended December 31, 2017, 2016 and 2015, respectively)					(84,389)		(84,389)
Purchase of treasury shares (Note 18)				(284,237)			(284,237)
Adjustments to redemption value of redeemable noncontrolling interest		(101,405)					(101,405)
Subsidiary repurchase of noncontrolling interests		(60,157)					(60,157)
Balance at Dec. 31, 2017	$ 20,277	$ 162,806	$ (36,148)	$ (909,960)	$ 3,004,018		$ 2,240,993
Balance (in shares) at Dec. 31, 2017	202,765						202,765

XML

Consolidated Statements of Changes in Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements of Changes in Equity
Cash dividends declared, per share	$ 0.46	$ 0.40	$ 0.40

XML

Basis of Presentation and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Summary of Significant Accounting Policies

Note 1: Basis of Presentation and Summary of Significant Accounting Policies

BUSINESS:  Total System Services, Inc.’s (TSYS’ or the Company’s) revenues are derived from providing payment processing, merchant services and related payment services to financial and nonfinancial institutions, generally under long-term processing contracts. The Company also derives revenues by providing general-purpose reloadable (GPR) prepaid debit and payroll cards, demand deposit accounts and other financial services to underbanked and other consumers and businesses. The Company’s services are provided through three operating segments: Issuer Solutions, Merchant Solutions and Netspend.

Through the Company’s Issuer Solutions segment, TSYS processes information through its cardholder systems to financial and nonfinancial institutions throughout the United States and internationally. The Company’s Merchant Solutions segment provides merchant services to merchant acquirers and merchants mainly in the United States. The Company’s Netspend segment provides services to consumers in the United States.

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:  The accompanying consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting principles (GAAP) include the accounts of TSYS and its wholly- and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities and to assess whether it is the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary, then that entity is included in the consolidated financial statements.

RISKS AND UNCERTAINTIES AND USE OF ESTIMATES:  Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, lower than anticipated growth from existing clients, an inability to attract new clients and grow internationally, loss of a major customer or other significant client, loss of a major supplier, an inability to grow through acquisitions or successfully integrate acquisitions, an inability to control expenses, technology changes, the impact of the application of and/or changes in accounting principles, financial services consolidation, changes in regulatory requirements, a decline in the use of cards as a payment mechanism, disruption of the Company's international operations, breach of the Company's security systems, a decline in the financial stability of the Company's clients and uncertain economic conditions. Negative developments in these or other risk factors could have a material adverse effect on the Company's financial position, results of operations and cash flows.

The Company has prepared the accompanying consolidated financial statements in conformity with U.S. GAAP. The preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. These estimates and assumptions are developed based upon all information available. Actual results could differ from estimated amounts.

ACQUISITIONS — PURCHASE PRICE ALLOCATION:  TSYS' purchase price allocation methodology requires the Company to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. TSYS estimates the fair value of assets and liabilities based upon appraised market values, the carrying value of the acquired assets and widely accepted valuation techniques, including the cost approach, discounted cash flows and market multiple analyses. Management determines the fair value of fixed assets and identifiable intangible assets such as developed technology or customer relationships, and any other significant assets or liabilities. TSYS adjusts the purchase price allocation, as necessary, up to one year after the acquisition closing date as TSYS obtains more information regarding asset valuations and liabilities assumed. Unanticipated events or circumstances may occur which could affect the accuracy of the Company's fair value estimates, including assumptions regarding industry economic factors and business strategies, and may result in an impairment or a new allocation of purchase price.

TSYS may allocate part of the purchase price of future acquisitions to contingent consideration as required by GAAP for business combinations. The fair value calculation of contingent consideration will involve a number of assumptions that are subjective in nature and which may differ significantly from actual results. TSYS may experience volatility in its earnings to some degree in future reporting periods as a result of these fair value measurements.

DISCONTINUED OPERATIONS: The Company sold all of its stock of GP Network Corporation (representing 54% ownership of the company) and all of its stock of TSYS Japan Godo Kaisha (representing 100% ownership of the company) in April 2014. In 2015, the Company recorded an additional gain of $1.4 million, net of tax, related to the return of cash that was placed in escrow during closing and tax adjustments associated with the transaction.

CASH AND CASH EQUIVALENTS:  Cash on hand and investments with a maturity of three months or less when purchased are considered to be cash equivalents.

ACCOUNTS RECEIVABLE:  Accounts receivable balances are stated net of allowances for doubtful accounts and billing adjustments.

TSYS records an allowance for doubtful accounts when it is probable that the accounts receivable balance will not be collected. When estimating the allowance for doubtful accounts, the Company takes into consideration such factors as its day-to-day knowledge of the financial position of specific clients, the industry and size of its clients, the overall composition of its accounts receivable aging, prior history with specific customers of accounts receivable write-offs and prior experience of allowances in proportion to the overall receivable balance. This analysis includes an ongoing and continuous communication with its largest clients and those clients with past due balances. A financial decline of any one of the Company's large clients could have a material adverse effect on collectability of receivables and thus the adequacy of the allowance for doubtful accounts.

Increases in the allowance for doubtful accounts are recorded as charges to bad debt expense and are reflected in selling, general and administrative expenses in the Company's Consolidated Statements of Income. Write-offs of uncollectible accounts are charged against the allowance for doubtful accounts.

TSYS records an allowance for billing adjustments for actual and potential billing discrepancies. When estimating the allowance for billing adjustments, the Company considers its overall history of billing adjustments, as well as its history with specific clients and known disputes. Increases in the allowance for billing adjustments are recorded as a reduction of revenues in the Company's Consolidated Statements of Income and actual adjustments to invoices are charged against the allowance for billing adjustments.

GOODWILL:  Goodwill results from the excess of cost over the fair value of net assets of businesses acquired. Goodwill is tested for impairment at least annually. Equity investment goodwill, which is not reported as goodwill in the Company's Consolidated Balance Sheet, but is reported as a component of the equity investment, was $48.8 million and $46.1 million as of December 31, 2017 and 2016, respectively.

OTHER INTANGIBLE ASSETS: Identifiable intangible assets relate primarily to merchant relationships, customer relationships, databases, channel relationships, covenants-not-to-compete, trade names and trade associations resulting from acquisitions. These identifiable intangible assets are amortized using the straight-line method over periods not exceeding the estimated useful lives, which range from three to ten years. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with GAAP. Amortization expenses are charged to selling, general and administrative expenses in the Company's Consolidated Statements of Income.

LICENSED COMPUTER SOFTWARE: The Company licenses software from third parties that is used in providing services to clients. Licensed software is obtained through perpetual licenses, term licenses, site licenses and through agreements based on processing capacity. Perpetual and site licenses are amortized using the straight-line method over their estimated useful lives which range from three to ten years. Term licenses are amortized over the term of the agreement. Mainframe software that is licensed based on processing capacity is amortized using a units-of-production basis over the estimated useful life of the software, generally not to exceed ten years. At each balance sheet date, the Company evaluates impairment losses on long-lived assets used in operations in accordance with GAAP.

ACQUISITION TECHNOLOGY INTANGIBLES: These identifiable intangible assets are software technology assets resulting from acquisitions. These assets are amortized using the straight-line method over periods not exceeding their estimated useful lives, which range from five to nine years. GAAP requires that intangible assets with estimated useful lives be amortized over their respective estimated useful lives to their residual values, and reviewed for impairment. Acquisition technology intangibles’ net book values are included in computer software, net in the accompanying balance sheets. Amortization expenses are charged to cost of services in the Company's Consolidated Statements of Income.

SOFTWARE DEVELOPMENT COSTS:  Costs of computer software to be sold, leased or otherwise marketed are capitalized once technological feasibility of the software product has been established. Costs incurred prior to establishing technological feasibility are expensed as incurred. Technological feasibility is established when the Company has completed a detailed program design and has determined that a product can be produced to meet its design specifications, including functions, features and technical performance requirements. Capitalization of costs ceases when the product is generally available to clients. In evaluating software development costs for recoverability, expected cash flows are estimated by management should events indicate a loss may have been triggered. The Company evaluates the unamortized capitalized costs of software development, the impairment of which is determined by expected undiscounted future operating cash flows of the software as compared to the carrying amount of the software product. The amount by which the unamortized software development costs exceed the lower of the carrying amount or fair value is written off in the period that such determination is made. If the actual cash flows are not consistent with the Company's estimates, a material write-off may result and net income may be materially different than was initially recorded. Assumptions and estimates about future cash flows and remaining useful lives of software are complex and subjective. They can be affected by a variety of factors, including industry and economic trends, changes in the Company’s business strategy and changes in the internal forecasts. The amount by which the unamortized software development costs exceed the net realizable value is written off in the period that such determination is made. Software development costs are amortized using the straight-line method over its estimated useful life, which ranges from three to ten years.

The Company also develops software that is used internally. Internal-use software development costs are capitalized once: (1) the preliminary project stage is completed, (2) management authorizes and commits to funding a computer software project, and (3) it is probable that the project will be completed and the software will be used to perform the function intended. Costs incurred prior to meeting the qualifications are expensed as incurred. Capitalization of costs ceases when the project is substantially complete and ready for its intended use. Internal-use software development costs are amortized using the straight-line method over its estimated useful life which ranges from three to ten years. Software development costs may become impaired in situations where development efforts are abandoned due to the viability of the planned project becoming doubtful or due to technological obsolescence of the planned software product.

PROPERTY AND EQUIPMENT:  Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Buildings and improvements are depreciated over estimated useful lives of 5-40 years, computer and other equipment over estimated useful lives of 2-5 years, and furniture and other equipment over estimated useful lives of 3-15 years. The Company evaluates impairment losses on long-lived assets used in operations in accordance with the provisions of GAAP.All ordinary repairs and maintenance costs are expensed as incurred. Maintenance costs that extend the asset life are capitalized and amortized over the remaining estimated life of the asset.

CONTRACT ACQUISITION COSTS:  The Company capitalizes contract acquisition costs related to signing incentives for signing or renewing long-term contracts. The Company capitalizes internal conversion costs in accordance with GAAP.

Contract acquisition costs are amortized using the straight-line method over the contract term or the expected customer relationship period when a renewal is anticipated, beginning when the client's cardholder accounts are converted and producing revenues. The amortization of contract acquisition costs associated with cash payments for client incentives is included as a reduction of revenues in the Company's Consolidated Statements of Income. The amortization of contract acquisition costs associated with conversion activity is recorded as cost of services in the Company's Consolidated Statements of Income.

EQUITY METHOD INVESTMENTS:  TSYS' 49% investment in Total System Services de México, S.A. de C.V. (TSYS de México), an electronic payment processing support operation located in Toluca, México, is accounted for using the equity method of accounting, as is TSYS' 44.56% investment in China UnionPay Data Co., Ltd. (CUP Data) headquartered in Shanghai, China. The Company has entered into limited partnership agreements in connection with investing in two Atlanta-based venture capital funds focused exclusively on investing in technology-enabled financial services companies. TSYS' equity investments are recorded initially at cost and subsequently adjusted for equity in earnings, cash contributions and distributions, and foreign currency translation adjustments. 

INCOME TAXES:  Income taxes reflected in TSYS' consolidated financial statements are computed based on the taxable income of TSYS and its affiliated subsidiaries. A consolidated U.S. federal income tax return is filed for TSYS and its majority- owned U.S. subsidiaries. Additionally, income tax returns are also filed in states where TSYS and its subsidiaries have filing obligations and in foreign jurisdictions where TSYS has a foreign affiliate.

The Company accounts for income taxes in accordance with the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Reserves against the carrying value of a deferred tax asset are established when necessary to reflect the decreased likelihood of realization of a deferred asset in the future. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Income tax provisions require the use of management judgments, which are subject to challenge by various taxing authorities. Contingency reserves are periodically established where the amount of the contingency can be reasonably determined and is likely to occur. Reductions in contingency reserves are recognized when tax disputes are settled or examination periods lapse.

Significant estimates used in accounting for income taxes relate to the determination of taxable income, the determination of temporary differences between book and tax basis, as well as estimates on the realizability of tax credits and net operating losses.

TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax expense in the Consolidated Statements of Income.

UP-FRONT DISTRIBUTOR AND PARTNER PAYMENTS: The Company makes up-front contractual payments to third-party distributors and partners. The Company assesses each up-front payment to determine whether it meets the criteria of an asset as defined by U.S. GAAP. If these criteria are met, the Company capitalizes the up-front payment and recognizes the capitalized amount as expense ratably over the benefit period, which is generally the contract period. If the contract requires the distributor or partner to perform specific acts (i.e., achieve a sales goal) and no other conditions exist for the distributor or partner to earn or retain the up-front payment, then the Company capitalizes the payment and recognizes it as an expense when the performance conditions have been met. Up-front distributor and partner payments are classified on the Consolidated Balance Sheets as other non-current assets and recorded as a cost of services in the Consolidated Statements of Income.

IMPAIRMENT OF LONG-LIVED ASSETS:  The Company reviews long-lived assets, such as property and equipment and intangibles subject to amortization, including contract acquisition costs and certain computer software, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If upon a triggering event the Company determines that the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet.

TRANSACTION PROCESSING PROVISIONS:  The Company has recorded an accrual for contract contingencies (performance penalties) and processing errors. A significant number of the Company's contracts with large clients contain service level agreements which can result in TSYS incurring performance penalties if contractually required service levels are not met. When providing for these accruals, the Company takes into consideration such factors as the prior history of performance penalties and processing errors incurred, actual contractual penalty charge rates in the Company's contracts, progress towards milestones and known processing errors. As of December 31, 2017 and 2016, the Company had transaction processing provisions of $2.2 million and $2.9 million, respectively. These accruals are included in other current liabilities in the accompanying Consolidated Balance Sheets. Increases and decreases in transaction processing provisions are charged to cost of services in the Company's Consolidated Statements of Income, and payments or credits for performance penalties and processing errors are charged against the accrual.

PROVISION FOR CARDHOLDER LOSSES: The Company is exposed to losses due to cardholder fraud, payment defaults and other forms of cardholder activity as well as losses due to non-performance of third parties who receive cardholder funds for transmittal to the issuing banks (banks that issue MasterCard International or Visa USA, Inc. branded cards to customers). The Company establishes a reserve for the losses it estimates will arise from processing customer transactions, debit card overdrafts, chargebacks for unauthorized card use and merchant-related chargebacks due to non-delivery of goods and services. These reserves are established based upon historical loss and recovery rates and cardholder activity for which specific losses can be identified. The provision for cardholder losses was approximately $9.5 million and $10.5 million as of December 31, 2017 and 2016, respectively. The charges to provisions for cardholder losses are included in cost of services in the Consolidated Statements of Income and other current liabilities in the Consolidated Balance Sheets. The Company regularly updates its reserve estimate as new facts become known and events occur that may impact the settlement or recovery of losses.

PROVISION FOR MERCHANT LOSSES:  The Company has potential liability for losses resulting from disputes between a cardholder and a merchant that arise as a result of, among other things, the cardholder's dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant's favor. In these cases, the transaction is "charged back" to the merchant, which means the purchase price is refunded to the customer by the card-issuing bank and charged to the merchant. If the merchant is unable to fund the refund, TSYS must do so. TSYS also bears the risk of reject losses arising from the fact that TSYS collects fees from its merchants after the monthly billing period. If the merchant has gone out of business during such period, TSYS may be unable to collect such fees. TSYS maintains cash deposits or requires the pledge of a letter of credit from certain merchants, generally those with higher average transaction size where the card is not present when the charge is made or the product or service is delivered after the charge is made, in order to offset potential contingent liabilities such as chargebacks and reject losses that would arise if the merchant went out of business. Most chargeback and reject losses are charged to cost of services as they are incurred. However, the Company also maintains a provision against losses, including major fraud losses, which are both less predictable and involve larger amounts. The loss provision was established using historical loss rates, applied to recent bankcard processing volume. As of December 31, 2017 and 2016 , the Company had a merchant loss provision in the amount of $4.3 million and $2.0 million, respectively.

LEASES:  The Company is obligated under noncancelable leases for computer equipment, software and facilities. As these leases expire, they will be evaluated and renewed or replaced by similar leases based on need. For purposes of applying the accounting and reporting standards, leases are classified from the standpoint of the lessee as capital or operating leases.

Rental payments on operating leases are charged to expense over the lease term. If rental payments are not made on a straight-line basis, rental expense nevertheless shall be recognized on a straight-line basis unless another systematic and rational basis is more representative of the time pattern in which use benefit is derived from the leased property, in which case that basis shall be used.

Certain of the Company's operating leases are for office space. The Company will make various alterations (leasehold improvements) to the office space and capitalize these costs as part of property and equipment. Leasehold improvements are amortized on a straight-line basis over the useful life of the improvement or the term of the lease, whichever is shorter.

REDEEMABLE NONCONTROLLING INTEREST: In connection with the acquisition of Central Payment Co., LLC (CPAY), the Company is party to call and put arrangements with respect to the membership units that represent the remaining noncontrolling interest of CPAY. The call arrangement is exercisable by TSYS and the put arrangement is exercisable by the seller. The put arrangement is outside the control of the Company by requiring the Company to purchase the seller’s entire equity interest in CPAY at a put price at fair value. The put arrangement is recorded on the consolidated balance sheet and is classified as redeemable noncontrolling interest outside of permanent equity.

TREASURY STOCK:  The Company uses the cost method when it purchases its own common stock as treasury shares or issues treasury stock upon option exercises and displays treasury stock as a reduction of shareholders' equity.

FAIR VALUES OF FINANCIAL INSTRUMENTS:  The Company uses financial instruments in the normal course of its business. The carrying values of cash equivalents, accounts receivable, accounts payable, accrued salaries and employee benefits, and other current liabilities approximate their fair value due to the short-term maturities of these assets and liabilities. The fair value of the Company's long-term debt and obligations under capital leases is not significantly different from its carrying value.

Investments in equity method investments are accounted for using the equity method of accounting and pertain to privately held companies. The Company believes the fair values of its investments in equity method investments exceed their respective carrying values.

FOREIGN CURRENCY TRANSLATION:  The Company maintains several different foreign operations whose functional currency is their local currency. Foreign currency financial statements of the Company's Mexican and Chinese equity investments, the Company's wholly owned subsidiaries and the Company's majority owned subsidiaries, as well as the Company's division and branches in the United Kingdom and China, are translated into U.S. dollars at current exchange rates, except for revenues, costs and expenses, and net income which are translated at the average exchange rates for each reporting period. Net gains or losses resulting from the currency translation of assets and liabilities of the Company's foreign operations, net of tax when applicable, are accumulated in a separate section of shareholders' equity titled accumulated other comprehensive income (loss). Gains and losses on transactions denominated in currencies other than the functional currencies are included in determining net income for the period in which exchange rates change.

REVENUE RECOGNITION:   Revenue is recognized when it is realized or realizable and earned, which is deemed to occur when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. The Company accrues for rights of refund, processing errors or penalties, or other related allowances based on historical experience.

The Company's Issuer Solutions revenues are derived from long-term processing contracts with financial and nonfinancial institutions and are generally recognized as the services are performed. Payment processing services revenues are generated primarily from charges based on:

· The number of accounts on file;

· Transactions and authorizations processed;

· Statements mailed; and

· Cards embossed and mailed and other processing services for cardholder accounts on file.

Most of these contracts have prescribed annual revenue minimums, penalties for early termination, and service level agreements which may impact contractual fees if certain service levels are not achieved.

Revenue is recognized as the services are performed, primarily on a per unit basis. Processing contracts generally range from three to ten years in length. When providing payment processing services, the Company frequently enters into customer arrangements to provide multiple services that may also include conversion or implementation services, business process outsourcing services such as call center services, web-based services, and other payment processing-related services.  Revenue for these services is generally recognized as they are performed on a per unit basis each month or ratably over the term of the contract. 

The Company’s Merchant Solutions revenues are partially derived from relationships with thousands of individual merchants whose contracts range from thirty days to five years. Additionally, part of the revenues are derived from long-term processing contracts with large financial institutions, other merchant acquirers and merchant organizations which generally range from three to eight years and provide for penalties for early termination. Merchant services revenue is generated primarily from processing all payment forms including credit, debit and electronic benefits transfer for merchants of all sizes across a wide array of retail market segments.

The products and services offered include:

· Authorization and capture of electronic transactions;

· Clearing and settlement of electronic transactions;

· Information reporting services related to electronic transactions;

· Merchant billing services; and

· Point-of-sale terminal services.

Revenue is recognized for merchant services as those services are performed, primarily measured on a per unit basis. When providing merchant processing services, the Company frequently enters into customer arrangements to provide multiple services that may also include conversion or implementation services, business process outsourcing services such as call center services, terminal services, and other merchant processing-related services. Revenue for these services is generally recognized as they are performed on a per unit basis each month or ratably over the term of the contract. Revenues on point-of-sale terminal equipment are recognized upon the transfer of ownership and shipment of product.

With the acquisition of TransFirst Holdings Corp. (TransFirst) on April 1, 2016, TSYS included TransFirst’s results as part of the Merchant Solutions segment. TransFirst’s revenues are reported gross, which includes amounts paid for interchange and assessments, as TransFirst is the principal in the contractual relationship with its customers. Expenses covering interchange and payment network fees are included in TransFirst’s cost of services and are directly attributable to processing fee revenues and are recognized in the same period as the related revenue.

The Company’s Netspend revenues principally consist of a portion of the service fees collected from cardholders and interchange revenues received by the issuing banks in connection with the programs Netspend manages.

Cardholders are charged fees in connection with Netspend’s products and services as follows:

· Transactions - Cardholders are typically charged a fee for each Personal Identification Number (PIN) and signature-based purchase transaction made using their GPR cards, unless the cardholder is on a monthly or annual service plan, in which case the cardholder is instead charged a monthly or annual subscription fee, as applicable. Cardholders are also charged fees for Automated Teller Machines (ATM) withdrawals and other transactions conducted at ATMs.

· Customer Service and Maintenance - Cardholders are typically charged fees for balance inquiries made through Netspend’s call centers. Cardholders are also charged a monthly maintenance fee after a specified period of inactivity.

· Additional Products and Services - Cardholders are charged fees associated with additional products and services offered in connection with certain GPR cards, including the use of overdraft features, a variety of bill payment options, custom card designs and card-to-card transfers of funds initiated through the call centers.

· Other - Cardholders are charged fees in connection with the acquisition and reloading of the GPR cards at retailers and the Company receives a portion of these amounts in some cases.

Revenue resulting from the service fees charged to the cardholders described above is recognized when the fees are charged because the earnings process is substantially complete, except for revenue resulting from the initial activation of cards and annual subscription fees. Revenue resulting from the initial activation of cards is recognized ratably, net of commissions paid to distributors, over the average account life, which is approximately six months for GPR cards. Revenue resulting from annual subscription fees is recognized ratably over the annual period to which the fees relate.

Revenues also include fees charged in connection with program management and processing services the Company provides for private-label programs. Revenue resulting from these fees is recognized when the Company has fulfilled its obligations under the underlying service agreements.

Netspend derives revenue from a portion of the interchange fees remitted by merchants when cardholders make purchases using their GPR cards. Subject to applicable law, interchange fees are fixed by the card associations and network organizations (Networks). Interchange revenue is recognized net of sponsorship, licensing and processing fees charged by the Networks for services they provide in processing purchase transactions routed through them. Interchange revenue is recognized during the period that the purchase transactions occur. Also included in interchange revenue are fees earned from branding agreements with the Networks.

When a sale involves multiple deliverables, revenue recognition is affected by the determination of the number of deliverables in an arrangement, whether those deliverables may be separated into multiple units of accounting, and the standalone selling price of each unit of accounting which affects the amount of revenue allocated to each unit. Pursuant to Accounting Standards Codification (ASC) 605, the Company uses vendor-specific objective evidence (VSOE) of the standalone selling price of its services when it exists to determine the amount of revenue to allocate to each unit of accounting. The Company establishes VSOE using the price charged when the same service is sold separately (on a standalone basis). In most situations, the Company does not have sufficient VSOE. In these situations, TSYS considers whether sufficient third party evidence (TPE) of standalone selling price exists for the Company’s services. However, the Company typically is not able to determine TPE and has not used this measure of selling price due to the unique and proprietary nature of some of its services and the inability to reliably verify relevant standalone third party prices. When there is insufficient evidence of VSOE and TPE, the Company has made its best estimate of the standalone selling price (ESP) of that service for purposes of allocating revenue to each unit of accounting. When determining ESP, TSYS uses limited standalone sales data that do not meet the Company’s criteria to establish VSOE, management pricing strategies, residual selling price data when VSOE exists for a group of elements, the cost of providing the services and the related margin objectives. Consideration is also given to geographies in which the services are sold or delivered, customer classifications, and market conditions including competitor pricing strategies and benchmarking studies. Revenue is recognized when the revenue recognition criteria for each unit of accounting have been met.

There were no material changes or impact to revenue for current contractual arrangements during the years ended December 31, 2017, 2016 and 2015 due to any changes in the determination of the number of deliverables in an arrangement, units of accounting, or estimates of VSOE or ESP.

In many situations, the Company enters into arrangements with customers to provide conversion or implementation services in addition to processing services where the conversion or implementation services do not have standalone value. For these arrangements, conversion or implementation services that do not have standalone value, are recognized over the expected customer relationship (contract term) as the related processing services are performed.

The Company’s other services generally have standalone value and constitute separate units of accounting for revenue recognition purposes. Customer arrangements entered into prior to 2011 (prior to the adoption of Accounting Standards Update (ASU) 2009-13 “Multiple-Deliverable Revenue Arrangements,” an update to ASC Topic 605 “Revenue Recognition,” and formerly known as EITF 08-1, “Revenue Arrangements with Multiple Deliverables”) often included services for which sufficient objective and reliable evidence of fair value did not exist. In these situations, the deliverables were combined and recognized as a single unit of accounting based on the proportional performance for the combined unit. For pre-2011 arrangements that have not expired, have not been materially modified or amended, or terminated, the Company continues to recognize revenue in accordance with these policies in the accompanying consolidated financial statements. Beginning in 2011, services in new or materially modified arrangements of this nature were divided into separate units of accounting and revenue is now allocated to each unit of accounting based on the relative selling price method as disclosed above. As the services in the pre-2011 arrangements are generally delivered over the same term with consistent patterns of performance, there is no material difference in the timing or pattern of revenue recognition for each group of arrangements (pre-2011 arrangements and those new or materially modified thereafter).

The Company’s multiple element arrangements may include one or more elements that are subject to other topics including software revenue recognition and leasing guidance. The consideration for these multiple element arrangements is allocated to each group of deliverables – those subject to ASC 605-25 and those subject to other topics based on the revised guidance in ASU 2009-13. Arrangement revenue for each group of deliverables is then further separated, allocated, and recognized based on applicable guidance.

In regards to taxes assessed by a governmental authority imposed directly on a revenue producing transaction, the Company reports its revenues on a net basis.

REIMBURSABLE ITEMS:  Reimbursable items consist of out-of-pocket expenses which are reimbursed by the Company's clients. These expenses consist primarily of postage, access fees and third party software. Reimbursable items are recorded on a gross basis in total revenues and cost of services.

INTERCHANGE AND PAYMENT NETWORK FEES:  Interchange and payment network fees are charged by the card associations or payment networks.Depending upon the transaction type, the fees are a percentage of the transaction’s dollar value, a fixed amount, or a combination of the two methods. Certain interchange and payment network fees are recorded in both total revenues and cost of services.

SHARE-BASED COMPENSATION:  GAAP establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. A public entity must measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award.

The Company estimates forfeitures when recognizing compensation cost. The estimate of forfeitures will be adjusted by the Company as actual forfeitures differ from its estimates, resulting in compensation cost only for those awards that actually vest. The effect of the change in estimated forfeitures is recognized as compensation costs in the period the change in estimate occurred. In estimating its forfeiture rate, the Company stratified its data based upon historical experience to determine separate forfeiture rates for the different award grants. The Company currently estimates a forfeiture rate for existing stock option grants to TSYS non-executive employees, and other TSYS share-based awards. Currently, TSYS estimates a forfeiture rate in the range of 0% for executive level employees and up to 8% for other employees.

The Company has issued its vested awards to directors and nonvested awards to certain employees. The market value of the common stock at the date of issuance is recognized as compensation expense immediately for vested awards and over the vesting period of the nonvested awards. For nonvested award grants that have pro rata vesting, the Company recognizes compensation expense using the straight-line method over the vesting period of the award.

ADVERTISING:  Advertising costs are expensed as incurred or the first time the advertising takes place except for direct-response advertising and television advertising production costs. Direct-response advertising consists of commission paid to affiliate marketers for the new funded customer accounts generated by them. Direct-response advertising costs are capitalized and amortized over the average life of the new accounts, which is approximately one year. Television advertising production costs consist of the costs of developing and filming television ads. Television advertising production costs are capitalized when the production services are received and expensed in the period when the advertising first takes place. Advertising expense for 2017, 2016 and 2015 was $13.2 million, $11.5 million and $9.6 million, respectively.

NONCONTROLLING INTEREST:  Noncontrolling interest in earnings of subsidiaries represents the minority shareholders' share of the net income or loss of CPAY. Refer to Note 22 for more information on acquisitions.

EARNINGS PER SHARE: Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated to reflect the potential dilution that would occur if stock options or other contracts to issue common stock were exercised. Diluted EPS is calculated by dividing net income by weighted average common and common equivalent shares outstanding. Common equivalent shares are calculated using the treasury stock method.

Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are "participating securities" as defined by GAAP, and therefore should be included in EPS using the two-class method.

The two-class method is an earnings allocation method for computing EPS when an entity's capital structure includes two or more classes of common stock or common stock and participating securities. It determines EPS based on dividends declared on common stock and participating securities and participation rights of participating securities in any undistributed earnings.

RECLASSIFICATIONS: The Company had investments in private equity funds as of December 31, 2016 with a value of $24.5 million. During the year ended December 31, 2017 and in prior periods, this investment was reclassified from other assets to equity investments on the consolidated balance sheets. The income statement impact was to reclassify an immaterial amount of gains and losses from nonoperating expenses to equity in income of equity investments.      

Recently Adopted Accounting Pronouncements

The Company adopted the following Accounting Standards Updates (ASUs) on January 1, 2017:

ASU 2017-04 “Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment,” which modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. An entity should apply the amendments in this Update on a prospective basis. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted by all entities for interim or annual goodwill impairment test performed on testing dates after January 1, 2017. The Company early adopted this ASU in May 2017 in conjunction with its annual goodwill impairment testing. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.

ASU 2016-19 “Technical Corrections,” which required changes to clarify, correct errors or make minor improvements to the ASC. Most of the amendments in this Update do not require transition guidance and were effective upon issuance of this Update. Six amendments in this Update clarify guidance or correct references in the ASC that could potentially result in changes in current practice because of either misapplication or misunderstanding of current guidance. Early adoption is permitted for the amendments that require transition guidance. The Company was impacted by the amendment to Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software, which adds a reference to guidance to use when accounting for internal-use software licensed from third parties that is within the scope of Subtopic 350-40. The transition guidance for that amendment is the same as the transition guidance in ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” to which the amendment relates and was adopted on a prospective basis. The adoption of this ASU resulted in the Company's recording of acquired software of $13.9 million as an intangible asset at present value rather than treating the software as a lease arrangement. During the year ended December 31, 2017, $5.3 million was classified as amortization expense instead of rental expense.

ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the consolidated statement of cash flows. The adoption of this standard results in the excess tax benefits and deficiencies associated with share-based payments being recorded on the income statement at the time they are deducted on the income tax return instead of being recorded in additional paid-in capital. The excess tax benefits are recorded along with other income tax cash flows as an operating activity in the statement of cash flows. The Company recorded excess tax benefits of $14.3 million in its provision for income taxes rather than as an increase to additional paid-in capital for the year ended December 31, 2017 on a prospective basis. Therefore, the prior period presented has not been adjusted. The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of diluted earnings per share using the treasury stock method, which did not have a material impact on its diluted earnings per share for the year ended December 31, 2017. The Company elected to apply the presentation requirement for cash flows related to excess tax benefits prospectively, and thus, the prior period presented has not been adjusted. This adoption resulted in an increase in net cash provided by operating activities and a decrease in net cash from financing activities of $14.3 million for the year ended December 31, 2017.

In March 2016, the FASB issued ASU 2016-07 ‘‘Simplifying the Transition to the Equity Method of Accounting,’’ which simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. The ASU further requires that unrealized holding gains or losses in accumulated other comprehensive income related to an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the investment qualifies for the equity method. The guidance in the ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2016. Entities are required to apply the guidance prospectively to increases in the level of ownership interest or degree of influence occurring after the ASU’s effective date. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.

Recent Accounting Pronouncements

In February 2018, the FASB issued ASU 2018-02 “Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”  ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.  Consequently, the amendments in this ASU eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users.  The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.  Early adoption of the amendments in this ASU is permitted.  The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.  The Company is evaluating the effect of ASU 2018-02 on its consolidated financial statements.

In September 2017, the FASB issued ASU 2017-13 “Revenue Recognition (Topic 605), Revenues from Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842)”, which made amendments to SEC paragraphs pursuant to the Staff Announcement at the July 20, 2017 Emerging Issues Task Force (EITF) Meeting and rescission of prior SEC Staff Announcements and Observer comments. This guidance, which is effective immediately, generally relates to the adoption of ASC 606 and 842. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In May 2017, the FASB issued ASU 2017-09 “Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting,” to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: 

1.

The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.

2.

The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.

3.  The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.

The ASU is effective for the Company on January 1, 2018. Early adoption is permitted, including adoption in any interim period, for (a) public business entities for reporting periods for which financial statements have not yet been issued and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-01 “Business Combinations (Topic 805), Clarifying the Definition of a Business,” which provides a more robust framework to use in determining when a set of assets and activities is a business. The framework assists entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. The ASU is effective for the Company on January 1, 2018. Early application of the amendments in this Update is allowed under certain circumstances. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In November 2016, the FASB issued ASU 2016-18 ‘‘Statement of Cash Flows (Topic 230): Restricted Cash,’’ which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The ASU is effective for the Company on January 1, 2018. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows. The Company had restricted cash of $1.0 million, $ 0.5 million, and $0.2 million as of December 31, 2017, 2016 and 2017, respectively.

In October 2016, the FASB issued ASU 2016-16 ‘‘Income Taxes (Topic 740): Intra-Equity Transfers of Assets Other Than Inventory,’’ which requires that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. The ASU is effective for the Company on January 1, 2018. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU 2016-15 ‘‘Statement of Cash Flow (Topic 230): Classification of Certain Receipts and Cash Payments,’’ which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flow. The ASU is effective for the Company on January 1, 2018. Early adoption is permitted by all entities. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial instruments." The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are in the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted for periods beginning on or after January 1, 2019.  The Company is evaluating the effect of ASU 2016-13 on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842),” which introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the FASB’s new revenue recognition standard. The ASU also addresses other concerns related to the current leases model. The new guidance will be effective for fiscal years and interim periods within those years beginning after December 15, 2018. Early adoption will be permitted for all entities. The Company plans to adopt ASU 2016-02 on January 1, 2019.  While the Company is continuing to evaluate the effects of this ASU, the Company expects to record material right of use assets and lease liabilities on its consolidated balance sheet upon adoption.                                                                                                                                                                                                  

In January 2016, the FASB issued ASU 2016-01 ‘‘Recognition and Measurement of Financial Assets and Financial Liabilities,’’ which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. The ASU significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

Recent Revenue Recognition Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606),” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.  The FASB has issued several additional ASUs (included below) since this time that add additional clarification to certain issues existing after the original ASU was released. All of the new standards are effective for the Company on January 1, 2018. The standards permit the use of either the full retrospective or modified retrospective transition method.

In March 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," which improves the operability and understandability of the implementation guidance on principal versus agent considerations by providing indicators as to which party controls the good or service provided to a customer (the principal).

In April 2016, the FASB issued ASU 2016-10 “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” which clarifies two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas.

In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients,” which affects only the following narrow aspects of Topic 606: Assessing the Collectability Criterion; Presentation of Sales and Other Taxes Collected from Customers; Noncash Consideration; Contract Modification at Transition; Completed Contracts at Transition; and Technical Correction.

In December 2016, the FASB issued ASU 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” which affects only the following narrow aspects of Topic 606: Disclosure of Remaining Performance Obligations as it relates to entities such as processors which may not be required to estimate revenue under ASU 2014-09 due to direct allocation of variable consideration; Disclosure of Prior - Period Performance Obligations; Loan Guarantee Fees; Contract Costs – Impairment Testing; Contract Costs - Interaction of Impairment Testing with Guidance in Other Topics; Provisions for Losses on Construction-Type and Production Type Contracts; Contracts within the scope of Topic 944 (Insurance) are excluded from the scope of Topic 606; Contract Modifications; Contract Asset versus Receivable; Refund Liability; Advertising Costs; Fixed - Odds Wagering Contracts in the Casino Industry.  

TSYS will adopt the new revenue standard, effective January 1, 2018, using the modified retrospective transition method. Under this method, the Company could elect to apply the cumulative effect method to either all contracts as of the date of initial application or only to contracts that are not complete as of that date. TSYS elected to apply the modified retrospective method to contracts that are not complete as of January 1, 2018. The cumulative impact of adopting the standard as of January 1, 2018 is expected to be an increase in opening retained earnings between $1.0 million and $4.0 million.  The most significant impact of adopting ASC 606 in 2018 is primarily the result of gross versus net presentation of interchange and payment network fees. In 2018, these fees collected on behalf of the payment networks and card issuers will be presented "net" of the amounts paid to them, as opposed to the "gross" presentation for certain of these fees in 2017.  As a result of this change, the Company’s total revenues for the year ending December 31, 2018 are expected to be lower by approximately $1.575 billion to $1.6 billion.  The Company’s diluted EPS for the year ending December 31, 2018 is expected to be lower by approximately $0.03 to $0.04 per share due primarily to changes in revenue recognition for certain contracts in the Issuer Solutions segment. The quantitative ranges provided represent management’s best estimate of the effect of adopting ASC 606 at the time of preparation of this Annual Report on Form 10-K. The actual impact of adopting ASC 606 is subject to change from this estimate, pending the completion of the Company’s assessment in the first quarter of 2018. The adoption of this guidance requires the implementation of new accounting processes, procedures and internal controls over financial reporting surrounding the adoption of the standard, periodic reporting and expanded disclosures. Additionally, the Company implemented a new revenue tool solution to facilitate compliance with the standard.

In preparation for adoption, the Company reviewed the requirements of the new revenue standard, and amendments described above, while following activities of the FASB and the American Institute of Certified Public Accountants (AICPA) for certain interpretive guidance applicable to Information Technology (IT) outsourcers and payment processors. The Company evaluated customer contracts under the new standard for each type of significant revenue stream (and related costs) to evaluate differences from current accounting, as described further below.

Issuer Solutions

Issuer Solutions revenues typically include a performance obligation to provide processing services to financial and non-financial institutions.  The Company has determined that these processing services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.   In many cases, Issuer Solutions arrangements may include additional performance obligations relating to loyalty redemption services and other professional services.  Similar to processing services, the Company has determined that loyalty redemption services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.  Professional services represent performance obligations that are satisfied over time.

The Company has determined that the vast majority of performance obligations to provide processing services and loyalty redemption services meet the allocation of variable consideration exception criteria (“direct allocation”) in that (a) the terms of a variable payment relate specifically to the entity’s efforts to satisfy the performance obligation or transfer the distinct service and (b) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective when considering all of the performance obligations and payment terms in the contract.  As a result, for those performance obligations qualifying for direct allocation, the Company will allocate and recognize variable consideration in the period it has the contractual right to invoice the customer. In certain instances when a performance obligation does not meet the criteria for direct allocation, the Company will recognize revenue either on a straight-line basis or a blended rate method (i.e., the estimated per transaction fee based on estimated total contract revenue and volumes, multiplied by the actual monthly transaction volume) over the term of the contract.  The Company determined that straight-line or blended rate are the most appropriate methods of measuring progress toward completion for performance obligations that do not meet the criteria for direct allocation. For professional services, the Company will recognize revenue based on the labor hours incurred for time and materials projects or on a straight-line basis for fixed fee projects.

For Issuer Solutions contracts that contain multiple performance obligations, the transaction price is allocated to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

The Issuer Solutions segment also enters into licensing arrangements with customers.  Under these arrangements, the Company provides the customer with a term license (functional IP), implementation services and unspecified upgrades and enhancements.  The Company has determined that these promised goods and services represent one combined performance obligation since the individual promised goods or services are not distinct in the context of the contract. The Company will recognize revenue over the contract period, on a straight-line basis, for this performance obligation. For separate performance obligations relating to professional services, revenue will be recognized on a percentage of completion basis.

Merchant Solutions

Merchant Solutions revenues typically include one performance obligation to provide processing services to individual merchants, large financial institutions, other merchant acquirers and merchant organizations.  The Company has determined that merchant processing services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.  Merchant Solutions arrangements also include other promised goods or services (such as point of sale terminals and merchant statement services) that are immaterial in the context of the contract.  As a result, the Company has determined that Merchant Solutions arrangements represent one performance obligation.

The Company has determined that the performance obligations to provide merchant processing services meet the allocation of variable consideration exception criteria (“direct allocation”) in that (a) the terms of a variable payment relate specifically to the entity’s efforts to satisfy the performance obligation or transfer the distinct service and (b) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective when considering all of the performance obligations and payment terms in the contract.  As a result, the Company will allocate and recognize variable consideration in the period it has the contractual right to invoice the customer. 

Gross vs. net presentation considerations for interchange and payment network fees

Interchange and payment network fees are charged by the card associations or payment networks. Depending upon the transaction type, the fees are a percentage of the transaction’s dollar value, a fixed amount, or a combination of the two methods. Interchange and payment network fees primarily relate to the Company’s Issuer Solutions and Merchant Solutions segments. With respect to interchange and payment network fees, the Company evaluated whether it is the principal or the agent.  With the adoption of ASC 606, the Company determined that interchange and payment network fees are not provided in return or exchange for services that the Company controls or acts as the principal, and, therefore, are not part of the consideration paid for its services.  These fees collected on behalf of the payment networks and card issuers will be presented “net” of the amounts paid to them. Accordingly, the Company is acting as an agent and presents the fees collected from merchants on behalf of the payment networks and card issuers net of the amounts paid to them.  In reaching this determination, the Company considered a number of factors including indicators of control such as the party primarily responsible and the party who has discretion in establishing prices.

Netspend

Netspend revenues include one performance obligation to provide account access and facilitate purchase transactions. The Company has determined that Netspend services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.  Further, the Company has determined that the performance obligation to provide account access and facilitate purchase transactions meets the criteria for the “as invoiced” practical expedient in that the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date.  As a result, the Company will recognize revenue in the amount to which the Company has a right to invoice.

Costs to obtain or fulfill a contract

The Company will capitalize the incremental costs of obtaining a contract with a customer if the Company expects to recover those costs. The incremental costs of obtaining a contract are those that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, a sales commission).  

The Company capitalizes the costs incurred to fulfill a contract only if those costs meet all of the following criteria:

a. The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.

b. The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.

c. The costs are expected to be recovered.

The Company will capitalize contract acquisition and fulfillment costs related to signing or renewing long-term contracts and costs related to cash payments for rights to provide processing services.

Contract acquisition and fulfillment cost will be amortized using the straight-line method over the expected period of benefit (ranging from 20 months to seven years or the longer of the contract term) beginning when the client’s cardholder accounts are converted or activated and producing revenues. The amortization of contract acquisition costs associated with cash payments for client incentives will be included as a reduction of revenues in the Company’s Consolidated Statements of Income. The amortization of contract fulfillment costs associated with conversion activity will be recorded as cost of services in the Company’s Consolidated Statements of Income.  The amortization of contract acquisition costs associated with sales commissions that qualify for capitalization will be recorded as selling, general and administrative expense in the Company’s Consolidated Statements of Income. Costs to obtain or fulfill a contract will be classified as contract cost assets in the Company’s Consolidated Balance Sheets.

XML

Fair Value Measurement

12 Months Ended

Dec. 31, 2017

Fair Value Measurement

Fair Value Measurement

Note 2 Fair Value Measurements

GAAP requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant level of inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

Level 1 — Quoted prices for identical assets and liabilities in active markets.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs for the asset or liability.

The Company had no transfers between Level 1, Level 2, or Level 3 during the years ended December 31, 2017, 2016 or 2015. Goodwill is assessed annually for impairment in the second quarter of each year using fair value measurement techniques. Specifically, goodwill impairment is determined using a two-step test. Step 0 is a qualitative analysis of relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit (RU) with its book value, including goodwill. If the fair value of the RU exceeds its book value, goodwill is considered not impaired. If the book value of the RU exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the fair value of the RU.

The estimate of fair value of the Company’s RUs is determined using various valuation techniques, including using an equally weighted combination of the market approach and the income approach. The market approach, which contains Level 2 inputs, utilizes readily available market valuation multiples to estimate fair value. The income approach is a valuation technique that utilizes the discounted cash flow (DCF) method, which includes Level 3 inputs. Under the DCF method, the fair value of the RU reflects the present value of the projected earnings that will be generated by each RU after taking into account the revenues and expenses associated with the asset, the relative risk that the cash flows will occur, the contribution of other assets, and an appropriate discount rate to reflect the value of the invested capital. Cash flows are estimated for future periods based upon historical data and projections by management.

As of December 31, 2017, the Company had recorded goodwill in the amount of $3.3 billion. The Company performed its annual impairment test of its goodwill balances as of May 31, 2017, and this test did not indicate any impairment. The fair value of the RUs substantially exceeds the carrying value. Refer to Note 5 for more information regarding goodwill.

The fair value of the Company’s long-term debt and obligations under capital leases is not significantly different from its carrying value, except for the Company’s Senior Notes, which are discussed in Note 11.

XML

Cash and Cash Equivalents

12 Months Ended

Dec. 31, 2017

Cash and Cash Equivalents

Cash and Cash Equivalents

Note 3 Cash and Cash Equivalents

Cash and cash equivalent balances as of December 31, 2017 and 2016 are summarized as follows:

(in thousands)	2017		2016
Cash and cash equivalents in domestic accounts	$	396,577	375,122
Cash and cash equivalents in foreign accounts		53,780	50,232
Total	$	450,357	425,354

The Company maintains operating accounts outside the United States denominated in currencies other than the U.S. dollar. All amounts in domestic accounts are denominated in U.S. dollars.

XML

Prepaid Expenses and Other Current Assets

12 Months Ended

Dec. 31, 2017

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets

Note 4 Prepaid Expenses and Other Current Assets

Significant components of prepaid expenses and other current assets as of December 31, 2017 and 2016 are summarized as follows:

(in thousands)	2017		2016
Prepaid expenses	$	65,159	84,173
Income taxes receivable		41,400	-
R&D state tax credit		22,642	-
Supplies inventory		17,072	17,105
Other		70,292	63,210
Total	$	216,565	164,488

XML

Goodwill

12 Months Ended

Dec. 31, 2017

Goodwill

Goodwill

Note 5 Goodwill

In 2016, the Company completed the TransFirst acquisition resulting in an additional $1.7 billion of goodwill being recorded. In addition, there was a downward adjustment to goodwill of $584,000 related to income tax reserves associated with the Netspend acquisition. In 2017, the Company adjusted the Netspend goodwill due to a tax adjustment of $1.8 million relating to uncertain tax positions.  In 2017, the Company decreased the Merchant Solutions goodwill due to deferred tax adjustments of $12.1 million and the write-off of a note receivable of $727,000 on the opening balance sheet of TransFirst.

The gross amount and accumulated impairment losses of goodwill as of December 31, 2017 and 2016 are as follows:

	2017
(in thousands)	Issuer Solutions		Merchant Solutions	Netspend	Consolidated
Gross amount	$	99,465	2,132,653	1,035,965	$	3,268,083
Accumulated impairment losses		(1,787)	(2,225)	-		(4,012)
Goodwill, net	$	97,678	2,130,428	1,035,965	$	3,264,071

	2016
	Issuer Solutions		Merchant Solutions	Netspend	Consolidated
Gross amount	$	96,733	2,144,061	1,034,170	$	3,274,964
Accumulated impairment losses		(1,787)	(2,225)	-		(4,012)
Goodwill, net	$	94,946	2,141,836	1,034,170	$	3,270,952

Below are the balances of goodwill as of December 31, 2017 and 2016 along with the related changes in carrying value.

(in thousands)	Issuer Solutions		Merchant Solutions		Netspend		Consolidated
Balance as of December 31, 2015	$	98,090		413,748		1,033,586	$	1,545,424
Netspend tax adjustment		-		-		584		584
TransFirst acquisition		-		1,728,088		-		1,728,088
Currency translation adjustments		(3,144)		-		-		(3,144)
Balance as of December 31, 2016	$	94,946		2,141,836		1,034,170	$	3,270,952
Netspend tax adjustment		-		-		1,795		1,795
TransFirst acquisition adjustments		-		(11,408)		-		(11,408)
Currency translation adjustments		2,732		-		-		2,732
Balance as of December 31, 2017	$	97,678		2,130,428		1,035,965	$	3,264,071

Refer to Note 22 for more information on acquisitions.

XML

Other Intangible Assets, Net

12 Months Ended

Dec. 31, 2017

Other intangible assets

Intangible assets

Other Intangible Assets, net

Note 6 Other Intangible Assets, Net

Significant components of other intangible assets as of December 31, 2017 and 2016 are summarized as follows:

	2017
(in thousands)	Gross		Accumulated Amortization	Net
Merchant relationships	$	588,000	(147,000)	$	441,000
Channel relationships		439,398	(200,540)		238,858
Customer relationships		167,222	(139,969)		27,253
Trade name		62,468	(58,068)		4,400
Covenants-not-to-compete		29,940	(20,815)		9,125
Database		28,000	(25,200)		2,800
Trade association		10,000	(7,750)		2,250
Favorable lease		3,006	(1,546)		1,460
Total	$	1,328,034	(600,888)	$	727,146

	2016
(in thousands)	Gross		Accumulated Amortization	Net
Merchant relationships	$	588,000	(63,000)	$	525,000
Channel relationships		439,600	(148,815)		290,785
Customer relationships		166,340	(122,465)		43,875
Trade name		62,397	(45,197)		17,200
Covenants-not-to-compete		29,940	(13,869)		16,071
Database		28,000	(19,600)		8,400
Trade association		10,000	(6,750)		3,250
Favorable lease		3,006	(911)		2,095
Total	$	1,327,283	(420,607)	$	906,676

Amortization related to other intangible assets, which is recorded in selling, general and administrative expenses, was $179.5 million, $163.8 million and $75.8 million for 2017, 2016 and 2015, respectively.

The weighted average useful life for each component of other intangible assets, and in total, as of December 31, 2017 is as follows:

	Weighted Average Amortization Period (Years)
Merchant relationships	7.0
Channel relationships	8.6
Customer relationships	8.2
Trade name	3.9
Covenants-not-to-compete	4.3
Database	5.0
Trade association	10.0
Favorable lease	5.1
Total	7.4

Estimated future amortization expense of other intangible assets as of December 31, 2017 for the next five years is:

(in thousands)
2018	$	162,131
2019		145,457
2020		140,193
2021		119,620
2022		99,420

XML

Intangible Assets - Computer Software, Net

12 Months Ended

Dec. 31, 2017

Computer Software

Computer software

Intangible Assets - Computer Software, Net

Note 7 Intangible Assets - Computer Software, Net

Computer software as of December 31, 2017 and 2016 is summarized as follows:

(in thousands)	2017		2016
Licensed computer software	$	543,198	513,790
Software development costs		450,789	428,581
Acquisition technology intangibles		239,011	238,211
Total computer software		1,232,998	1,180,582
Less accumulated amortization:
Licensed computer software		360,160	315,591
Software development costs		325,443	307,190
Acquisition technology intangibles		163,680	134,613
Total accumulated amortization		849,283	757,394
Computer software, net	$	383,715	423,188

The Company held the following computer software under license agreements as of December 31, 2017 and 2016:

(in thousands)	2017		2016
Licensed computer software (acquired under license agreements)	$	24,421	23,665
Accumulated amortization		(15,918)	(14,634)
Licensed computer software, net	$	8,503	9,031

Amortization expense includes amounts for computer software acquired under license agreements. The Company had the following amortization expense related to computer software for the years ended December 31, 2017, 2016 and 2015:

(in thousands)	2017		2016	2015
Amortization expense related to:
Licensed computer software	$	51,247	45,655	41,823
Software development costs		27,461	26,478	22,740
Acquisition technology intangibles		28,267	26,217	16,734

The weighted average useful life for each component of computer software, and in total, as of December 31, 2017, is as follows:

	Weighted Average Amortization Period (Years)
Licensed computer software		5.8
Software development costs		6.0
Acquisition technology intangibles		6.1
Total		6.0

Estimated future amortization expense of licensed computer software, software development costs and acquisition technology intangibles as of December 31, 2017 for the next five years is:

(in thousands)	Licensed Computer Software		Software Development Costs	Acquisition Technology Intangibles
2018	$	45,008	23,503	25,793
2019		29,007	18,758	25,793
2020		24,388	14,588	20,134
2021		15,638	10,292	3,600
2022		12,606	6,138	-

XML

Property and Equipment, Net

12 Months Ended

Dec. 31, 2017

Property and Equipment, Net

Property and Equipment, net

Note 8 Property and Equipment, Net

Property and equipment balances as of December 31, 2017 and 2016 are as follows:

(in thousands)	2017		2016
Computer and other equipment	$	424,957	356,358
Buildings and improvements		262,499	246,577
Furniture and other equipment		141,927	141,836
Land		16,195	15,877
Other		724	2,387
Total property and equipment		846,302	763,035
Less accumulated depreciation and amortization		(521,084)	(480,690)
Property and equipment, net	$	325,218	282,345

The Company has various types of equipment under capital lease arrangements. The Company has the following amounts of equipment under capital lease obligations as of December 31, 2017 and 2016:

(in thousands)	2017		2016
Computer and other equipment (acquired under capital lease arrangements)	$	92,553	51,702
Furniture and other equipment (acquired under capital lease arrangements)		5,451	5,412
Total equipment		98,004	57,114
Less accumulated depreciation:
Computer and other equipment		(44,327)	(39,060)
Furniture and other equipment		(4,520)	(3,788)
Total accumulated depreciation		(48,847)	(42,848)
Total equipment, net	$	49,157	14,266

Depreciation and amortization expense includes amounts for computer equipment, furniture and other equipment acquired under capital lease. Depreciation and amortization expense related to property and equipment was $68.0 million, $62.5 million and $56.6 million for the years ended December 31, 2017, 2016 and 2015, respectively.

XML

Contract Acquisition Costs, Net

12 Months Ended

Dec. 31, 2017

Contract Acquisition Costs, Net

Contract Acquisition Costs, Net

Note 9 Contract Acquisition Costs, Net

Significant components of contract acquisition costs as of December 31, 2017 and 2016 are summarized as follows:

(in thousands)	2017		2016
Conversion costs, net of accumulated amortization of $176.4 million and $164.4 million as of 2017 and 2016, respectively	$	139,249	144,173
Payments for processing rights, net of accumulated amortization of $166.3 million and $145.3 million as of 2017 and 2016, respectively		119,416	91,527
Total	$	258,665	235,700

Amortization expense related to contract acquisition costs for the years ended December 31, 2017, 2016 and 2015 is as follows:

(in thousands)		2017	2016	2015
Amortization expense related to:
Conversion costs	$	29,625	28,811	27,392
Payments for processing rights		21,357	19,804	17,039

The weighted average useful life for each component of contract acquisition costs, and in total, as of December 31, 2017 is as follows:

	Weighted Average Amortization Period (Years)
Conversion costs	13.1
Payments for processing rights	16.3
Total	14.7

Estimated future amortization expense of conversion costs and payments for processing rights as of December 31, 2017 for the next five years is:

(in thousands)	Conversion Costs		Payments for Processing Rights
2018	$	36,890	27,211
2019		29,673	24,210
2020		23,475	21,786
2021		21,491	19,275
2022		16,581	15,123

XML

Equity Investments

12 Months Ended

Dec. 31, 2017

Equity Method Investments

Equity Investments

Note 10 Equity Investments

The Company has an equity investment in CUP Data and records its 44.56% ownership using the equity method of accounting. CUP Data is sanctioned by the People's Bank of China, China's central bank. CUP Data currently provides transaction processing, disaster recovery and other services for banks and bankcard issuers in China.

The Company also has an equity investment in TSYS de México and records its 49% ownership using the equity method of accounting. The operation prints statements and provides card-issuing support services to its clients.

The Company invests in limited partnership agreements in connection with investing in two Atlanta-based venture capital funds focused exclusively on investing in technology-enabled financial services companies.  Pursuant to each limited partnership agreement, the Company has committed to invest up to $20.0 million in each fund so long as its ownership interest in each fund does not exceed 50%. As of December 31, 2017 and 2016, the Company had made contributions to the funds of $22.8 million and $20.1 million, respectively.

TSYS' equity investments are recorded initially at cost and subsequently adjusted for equity in earnings, cash contributions and distributions, and foreign currency translation adjustments. TSYS believes the carrying value approximates the underlying net assets of the equity investments.

TSYS' equity in income of equity investments (net of tax) for the years ended December 31, 2017, 2016 and 2015 was $40.5 million, $26.1 million and $25.4 million, respectively.

A summary of TSYS' equity investments as of December 31, 2017 and 2016 is as follows:

(in thousands)	2017		2016
CUP Data	$	127,367	101,638
Other		36,151	31,918
Total	$	163,518	133,556

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements

12 Months Ended

Dec. 31, 2017

Long-term Borrowings, Capital Lease Obligations and License Agreements

Long-Term Borrowings, Capital Lease Obligations and License Agreements

Note 11 Long-term Borrowings, Capital Lease Obligations and License Agreements

Long-term debt as of December 31, 2017 and 2016 consists of:

(in thousands)	2017		2016
3.800% Senior Notes due April 1, 2021 (5 year tranche), net of discount and debt issuance costs1	$	745,000	743,625
4.800% Senior Notes due April 1, 2026 (10 year tranche), net of discount and debt issuance costs1		743,042	742,383
2.375% Senior Notes due June 1, 2018 (5 year tranche), net of discount and debt issuance costs1		549,532	548,615
3.750% Senior Notes due June 1, 2023 (10 year tranche), net of discount and debt issuance costs1		544,780	543,947
LIBOR + 1.500%, unsecured term facility, due February 23, 2021, with quarterly principal and interest payments, net of debt issuance costs		368,645	697,832
LIBOR + 1.300%, unsecured revolving loan, due February 23, 2021, with monthly interest payments on outstanding balances		200,000	70,000
1.380% note payable due December 31, 2017, with monthly interest and principal payments		-	13,853
Total debt		3,150,999	3,360,255
Less current portion		(559,050)	(48,040)
Noncurrent portion of long-term debt	$	2,591,949	3,312,215

¹ As of December 31, 2017 and 2016, the estimated fair values of the Company’s Senior Notes totaled $2.684 billion and $2.678 billion, respectively. The estimated fair values of the Company’s Senior Notes were based on quoted prices in an active market and are considered to be level 1 measurements. 

Bilateral Loan Facility Commitment Letter

On December 16, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with PCP CYN Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company, MW CYN Merger Sub, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company, Cayan Holdings LLC, a Delaware limited liability company (“Cayan”), PCP MW Holding Corp., a Delaware corporation and equityholder of Cayan (“PCP”), and Parthenon Investors IV L.P., a Delaware limited partnership, solely in its capacity as the representative of the equityholders of Cayan and PCP. In connection with the execution of the Merger Agreement, on December 16, 2017, the Company entered into a commitment letter with Bank of America N.A. (the “Commitment Party”), pursuant to which the Commitment Party has committed to provide a $450.0 million two-year, bilateral loan facility (the “Bilateral Loan Facility”) to finance the mergers to the extent the Company has not obtained alternative financing to pay the merger consideration on or prior to the closing. See Note 25 for further discussion of the Company’s completion of the Cayan acquisition on January 11, 2018.

Senior Notes

Concurrently with entering into the Stock Purchase Agreement to acquire TransFirst, the Company obtained commitments for a $2.0 billion 364-day bridge term loan facility from JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of America N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd, U.S. Bank National Association, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association (collectively, the “Commitment Parties”). Thereafter, the Commitment Parties assigned portions of their commitments to certain other bridge facility lenders. Based on the terms of the bridge term loan facility commitment letter, upon entering into a credit agreement (the ‘2016 Credit Agreement”), the total commitments under the bridge term loan facility were reduced from $2.0 billion to $1.15 billion by the amount of a  $400 million term loan (the “Delayed Draw Term Loan”) commitment and the portion of a  $800 million unsecured revolving credit facility (the “Revolving Loan Facility”) commitments in excess of $350 million. The bridge term loan facility was terminated in March 2016 after the issuance of the Notes described below.

On March 17, 2016, the Company closed its sale of $750 million aggregate principal amount of 3.800% Senior Notes due 2021 and $750 million aggregate principal amount of 4.800% Senior Notes due 2026 (collectively, the “2016 Notes”) pursuant to an agreement (the “Underwriting Agreement”) with J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the underwriters, whereby the Company agreed to sell and the Underwriters agreed to purchase the 2016 Notes from the Company, subject to and upon the terms and conditions set forth in the Underwriting Agreement. The Company used the net proceeds of the transaction to pay a portion of the approximately $2.35 billion purchase price of the Company’s acquisition of TransFirst and related fees and expenses. The 2016 Notes were issued pursuant to a Senior Indenture, dated as of March 17, 2016, between the Company and Regions Bank, as trustee. The balance as of December 31, 2017 was $745.0 million net of discount and debt issuance costs for the Senior Notes due April 1, 2021 and $743.0 million net of discount and debt issuance costs for the Senior Notes due April 1, 2026.

In May 2013, the Company closed its issuance of $550.0 million aggregate principal amount of 2.375% Senior Notes due 2018 and $550.0 million aggregate principal amount of 3.750% Senior Notes due 2023 (collectively, the “2013 Notes”) pursuant to an Underwriting Agreement with J.P. Morgan Securities LLC, as representative of certain underwriters (the “Underwriters”), whereby the Company agreed to sell and the Underwriters agreed to purchase the 2013 Notes from the Company, subject to and upon the terms and conditions set forth in the Underwriting Agreement. The interest on the 2013 Notes are payable semiannually. The Company paid fees in 2013 associated with the issuance of these 2013 Notes of approximately $8.9 million and recorded discounts of approximately $4.3 million that are being amortized over the life of the 2013 Notes. The Company used the net proceeds of the transaction to pay a portion of the $1.4 billion purchase price of the Company’s acquisition of Netspend and related fees and expenses. The 2013 Notes were issued pursuant to an Indenture dated as of May 22, 2013 between the Company and Wells Fargo Bank, National Association, as trustee. The balance as of December 31, 2017 was $549.5 million net of discount and debt issuance costs for the Senior Notes due June 2018 and $544.8 million net of discount and debt issuance costs for the Senior Notes due June 2023.

Term Loans and Other Borrowings

On February 23, 2016, the Company entered into the 2016 Credit Agreement with JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer, Bank of America, N.A., as Syndication Agent and L/C Issuer, The Bank of Tokyo-Mitsubishi UFJ, LTD., U.S. Bank National Association and Wells Fargo Bank, National Association, as Co-Documentation Agents, and the other lenders party thereto, with J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of Tokyo-Mitsubishi UFJ, LTD., U.S. Bank National Association and Wells Fargo Securities, LLC as joint lead arrangers and joint bookrunners. The 2016 Credit Agreement provided the Company with a $700 million five-year term loan facility (the “Term Loan Facility”) consisting of (i) a $300 million term loan (the “Refinancing Term Loan”) funded upon entry into the 2016 Credit Agreement and (ii) the Delayed Draw Term Loan. The 2016 Credit Agreement also provided the Company with the Revolving Loan Facility, which includes a $50 million sub-facility for the issuance of standby letters of credit. The balance as of December 31, 2017 was $368.6 million net of discount and debt issuance costs on the Term Loan Facility.

Borrowings under the 2016 Credit Agreement will accrue interest at the base rate (as defined in the 2016 Credit Agreement) or, for certain euro-denominated borrowings, the London Interbank Offered Rate (“LIBOR”), in each case plus a margin that is set based on the Company’s corporate credit ratings. The applicable margin for loans bearing interest based on LIBOR ranges from 0.900% to 1.500% for revolving loans and 1.000% to 1.750% for term loans. The applicable margin for loans bearing interest based on the base rate ranges from 0.000% to 0.500% for revolving loans and 0.000% to 0.750% for term loans. In addition, the Company will pay the lenders a facility fee ranging from 0.100% to 0.250% per annum, depending on the Company’s corporate credit ratings, on the commitments under the Revolving Loan Facility (regardless of usages) and the undrawn commitment amount in respect of the Delayed Draw Term Loan. Based on the Company’s current corporate credit ratings, (i) the applicable margin for loans accruing interest at the base rate is 0.500% for term loans and 0.300% for revolving loans and (ii) the applicable margin for loans accruing interest at LIBOR is 1.500% for term loans and 1.300% for revolving loans. The 2016 Credit Agreement contains customary covenants regarding, among other matters, the maintenance of insurance, the preservation and maintenance of the Company’s corporate existence, material compliance with laws and the payment of taxes and other material obligations. During the year ended December 31, 2017, the Company repaid $70.0 million on the Revolving Loan Facility. As of December 31, 2017, the outstanding balance on the Revolving Loan Facility was $200.0 million.

The Refinancing Term Loan was used to repay in full the Company’s outstanding loans and other obligations under that certain credit agreement, dated as of September 10, 2012, by and among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent thereunder, as amended, and that certain credit agreement, dated as of April 8, 2013, by and among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent thereunder, as amended. The Delayed Draw Term Loan was used to finance, in part, the TransFirst acquisition and related transactions, upon satisfaction of a limited set of conditions precedent. The Revolving Loan Facility is available for draws for purposes of working capital and other general corporate purposes, including to finance, in part, the acquisition and related transactions upon satisfaction of a limited set of conditions precedent. The creditor group of the modified debt remained consistent before and after the debt was amended. Any exceptions were minor.

In December 2015, the Company entered into a $30.0 million financing agreement for perpetual software licenses. The agreement was paid during 2017 and no outstanding balance remains.

Debt Covenants

The 2013 and 2016 Notes also contain various affirmative and negative covenants, including those that create limitations on the Company’s:

· creation of liens;

· merging or selling assets unless certain conditions are met; and

· entering into sale/leaseback transactions.

The 2013 and 2016 Notes also contain a provision that requires the Company to repurchase all or any portion of a holder’s notes, at the holder’s option, if a Change in Control Repurchase Event occurs, as defined in the Prospectus Supplements for the 2013 and 2016 Notes offerings.

Annual Principal Payments on Long-term Debt

Required annual principal payments on long-term debt for the five years subsequent to December 31, 2017 are summarized as follows:

(in thousands)
2018	$	560,000
2019		40,000
2020		40,000
2021		1,230,000
2022		-

Capital Lease Obligations and License Agreements

Capital lease obligations and license agreements as of December 31, 2017 and 2016 consist of:

(in thousands)	2017		2016
Capital lease obligations	$	37,950	3,748
License agreements		4,865	-
Total capital lease obligations and license agreements		42,815	3,748
Less current portion		(6,762)	(2,687)
Noncurrent portion of capital leases and license agreements	$	36,053	1,061

The Company acquires various computer equipment, software, machinery and equipment and furniture and fixtures under capital lease obligations and license agreements. Refer to Notes 7, 8 and 21 for more information. The capital lease and license agreements obligations have various payment terms for each capital lease obligation, including single payment leases, monthly, quarterly and annually. The lease terms for the equipment and software range from one to six years.

The future minimum lease payments under capital leases and license agreements as of December 31, 2017 are summarized as follows:

(in thousands)		Capital Leases	License Agreements
2018	$	6,652	1,449
2019		6,204	1,621
2020		6,127	1,275
2021		6,127	691
2022		6,095	39
Thereafter		11,484	-
Total minimum lease payments		42,689	5,075
Less amount representing interest		(4,739)	(210)
Principal minimum lease payments	$	37,950	4,865

XML

Other Current Liabilities

12 Months Ended

Dec. 31, 2017

Other Current Liabilities

Other Current Liabilities

Note 12 Other Current Liabilities

Significant components of other current liabilities as of December 31, 2017 and 2016 are summarized as follows:

(in thousands)	2017		2016
Deferred revenues	$	52,913	40,473
Accrued expenses		38,018	32,861
Accrued third-party commissions		34,276	28,310
Dividends payable		24,886	19,513
Accrued interest		19,330	19,029
Litigation settlements		1,380	20,795
Income taxes payable		185	1,673
Other		107,847	100,605
Total	$	278,835	263,259

XML

Income Taxes

12 Months Ended

Dec. 31, 2017

Income Taxes

Income Taxes

Note 13 Income Taxes

The provision for income taxes includes income taxes currently payable and those deferred because of temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities.

The components of income tax expense included in the Consolidated Statements of Income are as follows:

	Years Ended December 31,
(in thousands)	2017		2016	2015
Current income tax expense:
Federal	$	210,550	140,079	139,228
State		20,316	9,218	9,255
Foreign		7,500	4,443	4,762
Total current income tax expense		238,366	153,740	153,245
Deferred income tax (benefit) expense:
Federal		(178,879)	8,393	(2,198)
State		5,093	(65)	442
Foreign		1,298	(893)	(125)
Total deferred income tax (benefit) expense		(172,488)	7,435	(1,881)
Total income tax expense	$	65,878	161,175	151,364

	Years Ended December 31,
(in thousands)	2017		2016	2015
Components of income before income tax expense:
Domestic	$	603,260	454,628	485,191
Foreign		14,302	6,404	8,373
Total income before income tax expense	$	617,562	461,032	493,564

Income tax expense differs from the amounts computed by applying the statutory U.S. federal income tax rate of 35% to income before income taxes, noncontrolling interest and equity in income of equity investments as a result of the following:

	Years Ended December 31,
(in thousands)	2017		2016	2015
Computed "expected" income tax expense	$	216,147	161,425	173,911
Increase (decrease) in income tax expense resulting from:
International tax rate differential and equity income		11,953	8,715	8,367
State income tax expense, net of federal income tax effect		12,470	9,127	7,101
Increase (decrease) in valuation allowance		8,230	2,855	(517)
Tax credits		(20,998)	(15,695)	(28,831)
Share-based compensation		(14,310)	—	—
Deduction for domestic production activities		(17,150)	(12,950)	(11,550)
Re-measurement of deferred tax asset / deferred tax liability		(146,093)	—	—
Permanent differences and other, net		15,629	7,698	2,883
Total income tax expense	$	65,878	161,175	151,364

Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the net deferred tax liability as of December 31, 2017 and 2016 relate to the following:

	As of December 31,
(in thousands)	2017		2016
Deferred income tax assets:
Net operating loss and income tax credit carryforwards	$	35,089	34,490
Allowances for doubtful accounts and billing adjustments		852	1,512
Deferred revenue		17,813	27,461
Share-based compensation		15,170	25,497
Foreign currency translation		—	4,019
Other, net		14,915	38,341
Total deferred income tax assets		83,839	131,320
Less valuation allowance for deferred income tax assets		(29,531)	(21,301)
Net deferred income tax assets		54,308	110,019
Deferred income tax liabilities:
Excess tax over financial statement depreciation		(43,056)	(63,432)
Computer software development costs		(48,244)	(80,837)
Purchased intangibles		(42,467)	(344,547)
Foreign currency translation		(942)	—
Partnership interests		(143,908)	(18,776)
Other, net		(7,917)	(14,924)
Total deferred income tax liabilities		(286,534)	(522,516)
Net deferred income tax liabilities	$	(232,226)	(412,497)
Total net deferred tax assets (liabilities):
Noncurrent deferred tax asset	$	6,091	7,055
Noncurrent deferred tax liability		(238,317)	(419,552)
Net deferred tax liability	$	(232,226)	(412,497)

As of December 31, 2017, TSYS had recognized deferred tax assets from net operating losses, capital losses and federal and state income tax credit carryforwards of $6.6 million, $0.3 million and $28.2 million, respectively. As of December 31, 2016, TSYS had recognized deferred tax assets from net operating losses, capital losses, and federal and state income tax credit carryforwards of $8.5 million, $0.4 million, and $25.6 million, respectively. Additionally, net deferred income tax liabilities were decreased by $144.5 million as a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

Management believes it is more likely than not that TSYS will realize the benefits of these deductible differences, net of existing valuation allowances. The valuation allowance for deferred tax assets was $29.5 million and $21.3 million at December 31, 2017 and 2016, respectively. The increase in the valuation allowance for deferred income tax assets was $8.2 million for 2017. The increase relates to foreign tax credits and foreign net operating losses which, more likely than not, will not be realized in later years.

On December 22, 2017, the President signed into law the Tax Act. Some key provisions of this law impacted the Company. One such provision was the reduction of the Federal corporate income tax rate from 35% to 21%. This required the Company to remeasure its U.S. deferred tax assets and liabilities.  Upon remeasurement of such, TSYS recognized a benefit of $144.5 million as a discrete item in 2017.  Another provision of the Tax Act that impacted TSYS during this reporting period was the one-time transition tax on the deemed repatriation of foreign accumulated earnings.  This deemed repatriation mandated the Company to calculate effective tax rates of  15% and 8% respectively on cash and non-cash foreign accumulated earnings. Additionally, the Company was obligated to recognize certain tax credits and reassess the realizability of certain deferred tax assets. The net impact of this one-time transition tax was an expense of $4.9 million.

Additionally, the Tax Act provides for two U.S. tax base erosion provisions which begin in 2018. They are the global intangible low-taxed income (GILTI) and the base-erosion and anti-abuse tax (BEAT). TSYS’s calculation indicate no impact related to GILTI in 2017. However, TSYS will perform all necessary calculations, make any needed elections and report any 2018 impacts of GILTI as appropriate.  Currently, TSYS is not expected and does not expect to be impacted by BEAT in the future.

TSYS has adopted the permanent reinvestment exception under GAAP, with respect to earnings of certain foreign subsidiaries. As a result, TSYS considers foreign earnings related to these foreign operations to be permanently reinvested. However, pursuant to U.S. tax requirements,  a provision for U.S. federal and state incomes taxes has been made in the consolidated financial statements for those non-U.S. subsidiaries whose earnings were deemed to be repatriated. The amount of undistributed earnings considered to be “reinvested” which may be subject to tax upon distribution was approximately $103.3 million as of December 31, 2017.  Although TSYS does not intend to repatriate these earnings, a distribution of these non-U.S. earnings in the form of dividends, or otherwise, may subject the Company to withholding taxes payable to the various non-U.S. countries.

TSYS is the parent of an affiliated group that files a consolidated U.S. federal income tax return and most state and foreign income tax returns on a separate entity basis. In the normal course of business, the Company is subject to examinations by these taxing authorities unless statutory examination periods lapse. TSYS is no longer subject to U.S. federal income tax examinations for years before 2011 and with few exceptions, the Company is no longer subject to income tax examinations from state and local or foreign tax authorities for years before 2011. There are currently federal income tax examinations in progress for the years 2011 through 2013. Additionally, a number of tax examinations are in progress by the relevant state tax authorities. Although TSYS is unable to determine the ultimate outcome of these examinations, TSYS believes that its liability for uncertain tax positions relating to these jurisdictions for such years is adequate.

GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken in a tax return. During the year ended December 31, 2017, TSYS increased its liability for uncertain income tax positions by a net amount of approximately $7.3 million. The Company is not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, the Company does not expect any significant changes related to these obligations within the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax liabilities is as follows  1:

	Years Ended December 31,
(in millions)		2017	2016	2015
Beginning balance	$	16.5	13.1	6.7
Current activity:
Additions based on tax positions related to current year		4.9	3.4	2.3
Additions for tax positions of prior years		4.6	3.0	4.7
Reductions for tax positions of prior years		—	—	(0.6)
Decreases resulting from settlements with tax authorities		(2.2)	(3.0)	—
Net current activity		7.3	3.4	6.4
Ending balance	$	23.8	16.5	13.1

¹ Unrecognized state tax liabilities are not adjusted for the federal tax impact.

TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax expense in the Consolidated Statements of Income. Gross accrued interest and penalties on unrecognized tax benefits totaled $2.0 million and $1.8 million as of December 31, 2017 and December 31, 2016, respectively. The total amounts of unrecognized income tax benefits as of December 31, 2017 and December 31, 2016 that, if recognized, would affect the effective tax rates are $24.5 million and $17.0 million (net of the federal benefit on state tax issues), respectively, which includes interest and penalties of $1.3 million and $1.2 million, respectively.

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies

Commitments and Contingencies

Note 14 Commitments and Contingencies

LEASE AND PURCHASE COMMITMENTS:  TSYS is obligated under noncancelable operating leases for computer equipment, software and facilities. Additionally, the Company has long-term obligations which consist of required minimum future payments under contracts with the Company’s distributors and other service providers.

The future minimum lease payments under noncancelable operating leases and purchase commitments with remaining terms greater than one year for the next five years and thereafter and in the aggregate as of December 31, 2017, are as follows:

(in thousands)
2018	$	145,866
2019		148,006
2020		71,651
2021		38,803
2022		28,095
Thereafter		77,555
Total future minimum commitment payments	$	509,976

The majority of computer equipment lease commitments come with a renewal option or an option to terminate the lease. These lease commitments may be replaced with new leases which allow the Company to continually update its computer equipment. Total rental expense under all operating leases in 2017, 2016 and 2015 was $134.0 million, $122.9 million and $124.8 million, respectively.

CONTRACTUAL COMMITMENTS:  In the normal course of its business, the Company maintains long-term processing contracts with its clients. These processing contracts contain commitments, including, but not limited to, minimum standards and time frames against which the Company's performance is measured. In the event the Company does not meet its contractual commitments with its clients, the Company may incur penalties and certain clients may have the right to terminate their contracts with the Company. The Company does not believe that it will fail to meet its contractual commitments to an extent that will result in amaterial adverse effect on its financial position, results of operations or cash flows.

CONTINGENCIES:

Legal Proceedings – General

The Company is subject to various legal proceedings and claims and is also subject to information requests, inquiries and investigations arising out of the ordinary conduct of its business. The Company establishes accruals for litigation and similar matters when those matters present loss contingencies that TSYS determines to be both probable and reasonably estimable in accordance with GAAP. Legal costs are expensed as incurred. In the opinion of management, based on current knowledge and in part upon the advice of legal counsel, all matters not specifically discussed below are believed to be adequately covered by insurance, or, if not covered, the possibility of losses from such matters are believed to be remote or such matters are of such kind or involve such amounts that would not have a material adverse effect on the financial position, results of operations or cash flows of the Company if disposed of unfavorably.

TelexFree Matter

ProPay, Inc. (ProPay), a subsidiary of the Company, has been named as one of a number of defendants (including other merchant processors) in several purported class action lawsuits relating to the activities of TelexFree, Inc. and its affiliates and principals. TelexFree is a former merchant customer of ProPay. With regard to TelexFree, each purported class action lawsuit generally alleges that TelexFree engaged in an improper multi-tier marketing scheme involving voice-over Internet protocol telephone services. The plaintiffs in each of the purported class action complaints generally allege that the various merchant processor defendants, including ProPay, aided and abetted the improper activities of TelexFree. TelexFree filed for

bankruptcy protection in Nevada. The bankruptcy proceeding was subsequently transferred to the Massachusetts Bankruptcy Court.

Specifically, ProPay has been named as one of a number of defendants (including other merchant processors) in each of the following purported class action complaints relating to TelexFree: (i) Waldermara Martin, et al. v. TelexFree, Inc., et al. (Case No. BK-S-14-12524-ABL) (Bankr. D. Nev.); (ii) Anthony Cellucci, et al. v. TelexFree, Inc., et. al. (Case No. 4:14-BK-40987) (Bankr. D. Mass.); (iii) Maduako C. Ferguson Sr., et al. v. Telexelectric, LLP, et. al (Case No. 5:14-CV-00316-D) (E.D.N.C.); (iv) Todd Cook v. TelexElectric LLP et al. (Case No. 2:14-CV-00134) (N.D. Ga.); (v) Felicia Guevara v. James M. Merrill et al., CA No. 1:14-cv-22405-DPG) (S.D. Fla.); (vi) Reverend Jeremiah Githere, et al. v. TelexElectric LLP et al. (Case No. 1:14-CV-12825-GAO) (D. Mass.); (vii) Paulo Eduardo Ferrari et al. v. Telexfree, Inc. et al. (Case No. 14-04080) (Bankr. D. Mass); (viii) Magalhaes v. TelexFree, Inc., et al., No. 14-cv-12437 (D. Mass.); (ix) Griffith v. Merrill et al., No. 14-CV-12058 (D. Mass.); (x) Abelgadir v. Telexelectric, LLP, No. 14-09857 (S.D.N.Y.); and (xi) Rita Dos Santos, v. TelexElectric, LLP et al., 2:15-cv-01906-NVW (D. Ariz.) (together, the “Actions”).

On October 21, 2014, the Judicial Panel on Multidistrict Litigation (“JPML”) transferred and consolidated the Actions filed before that date to the United States District Court for the District of Massachusetts (the “Consolidated Action”). The JPML subsequently transferred the remaining Actions to the Consolidated Action.  The Consolidated Action is styled In Re: TelexFree Securities Litigation (4:14-md-02566-TSH) (D. Mass.).

The plaintiffs in the Consolidated Action filed a First Consolidated Amended Complaint on March 31, 2015 and filed a Second Consolidated Amended Complaint (the “Second Amended Complaint”) on April 30, 2015. The Second Amended Complaint, which supersedes the complaints filed prior to consolidation of the Actions, purports to bring claims on behalf of all persons who purchased certain TelexFree “memberships” and suffered a “net loss” between January 1, 2012 and April 16, 2014. With respect to ProPay, the Second Amended Complaint alleges that ProPay aided and abetted tortious acts committed by TelexFree, and that ProPay was unjustly enriched in the course of providing payment processing services to TelexFree. Several defendants, including ProPay, moved to dismiss the Second Amended Complaint on June 2, 2015. The court held a hearing on the motions to dismiss on November 2, 2015, but has not yet issued a ruling.

At present, pursuant to a court order, all discovery in the action is stayed pending the resolution of parallel criminal proceedings against certain former principals of TelexFree, Inc.  Despite that stay of discovery, the lead plaintiffs have subpoenaed documents previously produced by ProPay pursuant to the Federal Rules of Bankruptcy Procedure to the court-appointed trustee in the TelexFree bankruptcy proceeding.  ProPay has filed a motion to quash that subpoena.  ProPay’s motion remains pending before the Court.  On April 4, 2017, lead plaintiffs moved the court for leave to further amend the Second Amended Complaint, and submitted a proposed amendment with their motion. The proposed amendment seeks to add new defendants to the case but does not make any new or additional allegations against ProPay.  ProPay, along with certain other defendants in the litigation, have not opposed the lead plaintiffs’ motion to further amend the Second Amended Complaint so long as the amendment, if allowed by the court, would not delay the court’s decision on the pending motions to dismiss.  Lead plaintiffs’ motion for leave to amend is pending before the court.

ProPay has also received various subpoenas, a seizure warrant and other inquiries requesting information regarding TelexFree from (i) the Commonwealth of Massachusetts, Securities Division, (ii) United States Securities and Exchange Commission, (iii) US Immigration and Customs Enforcement, and (iv) the bankruptcy Trustee of the Chapter 11 entities of TelexFree, Inc., TelexFree, LLC and TelexFree Financial, Inc. Pursuant to the seizure warrant served by the United States Attorney’s Office for the District of Massachusetts, ProPay delivered all funds associated with TelexFree held for chargeback and other purposes by ProPay to US Immigration and Customs Enforcement. In addition, ProPay received a notice of potential claim from the bankruptcy Trustee as a result of the relationship of ProPay with TelexFree and its affiliates.

The above proceedings and actions are preliminary in nature. While the Company and ProPay intend to vigorously defend matters arising out of the relationship of ProPay with TelexFree and believe ProPay has substantial defenses related to these purported claims, the Company currently cannot reasonably estimate losses attributable to these matters.

GUARANTEES AND INDEMNIFICATIONS:  The Company has entered into processing and licensing agreements with its clients that include intellectual property indemnification clauses. Under these clauses, the Company generally agrees to indemnify its clients, subject to certain exceptions, against legal claims that TSYS' services or systems infringe on certain third party patents, copyrights or other proprietary rights. In the event of such a claim, the Company is generally obligated to hold the client harmless and pay for related losses, liabilities, costs and expenses, including, without limitation, court costs and

reasonable attorney's fees. The Company has not made any indemnification payments pursuant to these indemnification clauses.

A portion of the Company’s business is conducted through distributors that provide load and reload services to cardholders at their locations. Members of the Company’s distribution and reload network collect cardholder funds and remit them by electronic transfer to the issuing banks for deposit in the cardholder accounts. The Company’s issuing banks typically receive cardholders’ funds no earlier than three business days after they are collected by the distributor. If any distributor fails to remit cardholders’ funds to the Company’s issuing banks, the Company typically reimburses the issuing banks for the shortfall created thereby. The Company manages the risk associated with this process through a formalized set of credit standards, volume limits and deposit requirements for certain distributors and by typically maintaining the right to offset any settlement shortfall against the commissions payable to the relevant distributor. To date, the Company has not experienced any significant losses associated with settlement failures and the Company had not recorded a settlement guarantee liability as of December 31, 2017. As of December 31, 2017 and 2016, the Company’s estimated gross settlement exposure was $16.7 million and $13.8 million, respectively.

GPR cardholders can incur charges in excess of the funds available in their accounts and are liable for the resulting overdrawn account balance. Although the Company generally declines authorization attempts for amounts that exceed the available balance in a cardholder's account, the application of the Networks' rules and regulations, the timing of the settlement of transactions and the assessment of subscription, maintenance or other fees can, among other things, result in overdrawn card accounts. The Company also provides, as a courtesy and in its discretion, certain cardholders with a "cushion" that allows them to overdraw their card accounts by up to $10. In addition, eligible cardholders may enroll in the issuing banks' overdraft protection programs and fund transactions that exceed the available balance in their accounts. The Company generally provides the funds used as part of these overdraft programs (one of the Company’s issuing banks will advance the first $1.0 million on behalf of its cardholders) and is responsible to the issuing banks for any losses associated with any overdrawn account balances. As of December 31, 2017 and 2016, cardholders’ overdrawn account balances totaled $25.5 million and $21.2 million, respectively. As of December 31, 2017 and 2016, the Company’s reserves for the losses it estimates will arise from processing customer transactions, debit card overdrafts, chargebacks for unauthorized card use and merchant-related chargebacks due to non-delivery of goods or services was $9.5 million and $10.5 million, respectively.

The Company has not recorded a liability for guarantees or indemnities in the accompanying consolidated balance sheet since the maximum amount of potential future payments under such guarantees and indemnities is not determinable.

PRIVATE EQUITY INVESTMENTS:The Company has limited partnership agreements with two Atlanta-based venture capital funds focused exclusively on investing in technology-enabled financial services companies. Pursuant to each limited partnership agreement, the Company has committed to invest up to $20.0 million in each fund so long as its ownership interest in each fund does not exceed 50%. As of December 31, 2017 and 2016, the Company had made contributions to the funds of $22.8 million and $20.1 million, respectively. The Company had investments, including equity in income, totaling $26.1 million and $22.8 million, respectively, as of December 31, 2017 and 2016. 

XML

Employee Benefit Plans

12 Months Ended

Dec. 31, 2017

Employee Benefit Plans

Employee Benefit Plans

Note 15 Employee Benefit Plans

The Company provides benefits to its employees by offering employees participation in certain defined contribution plans. The employee benefit plans through which TSYS provided benefits to its employees during 2017 are described as follows:

RETIREMENT SAVINGS AND STOCK PURCHASE PLANS:  TSYS maintains a single plan, the TSYS Retirement Savings Plan, which is designed to reward all team members of TSYS U.S.-based companies with a uniform employer contribution. The terms of the plan provide for the Company to match 100% of the employee contribution up to 4% of eligible compensation. The Company can make discretionary contributions up to another 4% based upon business conditions.

The Company also maintains a stock purchase plan for employees. The Company contributes 15% of employee contributions. The funds are used to purchase presently issued and outstanding shares of TSYS common stock on the open market at fair market value for the benefit of participants. The Company's contributions to the plans charged to expense for the years ended December 31, 2017, 2016 and 2015 are as follows:

(in thousands)	2017		2016	2015
TSYS Retirement Savings Plan	$	23,113	21,077	24,169
TSYS Stock Purchase Plan		1,600	1,514	1,378

POSTRETIREMENT MEDICAL BENEFITS PLAN:  TSYS provides certain medical benefits to qualified retirees through a postretirement medical benefits plan, which is immaterial to the Company's consolidated financial statements. The measurement of the benefit expense and accrual of benefit costs associated with the plan do not reflect the effects of the 2003 Medicare Act. Additionally, the benefit expense and accrued benefit cost associated with the plan, as well as any potential impact of the effects of the 2003 Medicare Act, are not significant to the Company's consolidated financial statements.

XML

Equity

12 Months Ended

Dec. 31, 2017

Equity

Equity

Note 16 Equity

DIVIDENDS:  Dividends on common stock of $79.0 million were paid in 2017, compared to $73.4 million and $73.7 million in 2016 and 2015, respectively. 

EQUITY COMPENSATION PLANS:  The following table summarizes TSYS' equity compensation plans by category as of December 31, 2017:

	(a)	(b)		(c)
(in thousands, except per share data)                                                                                                    Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted- average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
Equity compensation plans approved by security holders	4,561	$ 37.15	1	14,888	2

The Company does not have any equity compensation plans that were not approved by security holders.

¹ Weighted-average exercise price represents 2.7 million options only and does not include restricted share units that have no exercise price.

² Shares available for future grants under the Total System Services, Inc. 2017 Omnibus Plan, which could be in the form of options, nonvested awards and performance shares.

XML

Share-Based Compensation

12 Months Ended

Dec. 31, 2017

Share-Based Compensation

Share-Based Compensation

Note 17 Share-Based Compensation

TSYS has various long-term incentive plans under which the Compensation Committee of the Board of Directors has the authority to grant share-based compensation to TSYS employees.

Share-Based Compensation and Long-Term Incentive Plans

TSYS maintains the Total System Services, Inc. 2017 Omnibus Plan, Total System Services, Inc. 2012 Omnibus Plan, Total System Services, Inc. 2007 Omnibus Plan, Total System Services, Inc. 2002 Long-Term Incentive Plan, Total System Services, Inc. 2000 Long-Term Incentive Plan and the Amended and Restated Netspend Holdings, Inc. 2004 Equity Incentive Plan for Options and Restricted Shares Assumed by Total System Services, Inc. to advance the interests of TSYS and its shareholders through awards that give employees and directors a personal stake in TSYS' growth, development and financial success. Awards under these plans are designed to motivate employees and directors to devote their best efforts to the business of TSYS. Awards will also help TSYS attract and retain the services of employees and directors who are in a position to make significant contributions to TSYS' success.

The plans are administered by the Compensation Committee of the Company's Board of Directors and enable the Company to grant nonqualified and incentive stock options, stock appreciation rights, restricted stock and restricted stock units, performance units or performance shares, cash-based awards and other stock-based awards.

All stock options must have a maximum life of no more than ten years from the date of grant. The exercise price will not be less than 100% of the fair market value of TSYS' common stock at the time of grant. Any shares related to awards which terminate by expiration, forfeiture, cancellation or otherwise without the issuance of shares, are settled in shares, or are exchanged with the Committee's permission, prior to the issuance of shares, forawards not involving shares, shall be available again for grant under theTotal System Services, Inc. 2017 Omnibus Plan. Effective as of, or prior to, April 27, 2017, no additional awards may be made from any of the other plans. The aggregate number of shares of TSYS stock which may be granted, or could have been granted, to participants pursuant to awards granted under the various plans may not exceed the following: Total System Services, Inc. 2017 Omnibus Plan – 15 million shares; Total System Services, Inc. 2012 Omnibus Plan - 17 million shares; Total System Services, Inc. 2007 Omnibus Plan - 5 million shares; Total System Services, Inc. 2002 Long – Term Incentive Plan - 9.4 million shares; and Total System Services, Inc. 2000 Long-Term Incentive Plan - 2.4 million shares.

Share-based compensation costs are classified as selling, general and administrative expenses on the Company’s consolidated statements of income and corporate administration and other expenses for segment reporting purposes. TSYS’ share-based compensation costs are expensed, rather than capitalized, as these awards are typically granted to individuals not involved in capitalizable activities. For the year ended December 31, 2017, share-based compensation was $42.4 million compared to $43.7 million and $41.5 million for the same periods in 2016 and 2015, respectively.

Nonvested Awards

The Company granted shares of TSYS common stock to certain key employees and non-management members of its Board of Directors. The grants to certain key employees were issued under nonvested stock bonus awards and are typically for services to be provided in the future and vest over a period of up to four years. The grants to the Board of Directors were fully vested on the date of grant. The market value of the TSYS common stock at the date of issuance is charged as compensation expense over the vesting periods or derived service periods.

The following table summarizes the number of shares granted each year:

	2017		2016	2015
Number of shares granted		329,051	362,804	388,211
Market value (in millions)	$	18.1	16.8	14.9

A summary of the status of TSYS' nonvested shares as of December 31, 2017, 2016 and 2015 and the changes during the periods are presented below:

	2017			2016			2015
(in thousands, except per share data)                                                                   Nonvested shares	Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value
Outstanding at beginning of year	863	$	37.78	1,146	$	31.11	1,769	$	26.75
Granted	329		55.06	363		46.23	388		38.38
Vested	(458)		36.01	(563)		29.95	(930)		26.05
Forfeited/canceled/adjusted	(100)		43.82	(84)		36.79	(81)		28.78
Outstanding at end of year	634	$	47.19	863	$	37.78	1,146	$	31.11

As of December 31, 2017, there was approximately $15.8 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a remaining weighted average period of 1.8 years.

Performance- and Market-Based Awards

The Company granted performance- and market-based shares to certain key executives. The Company has also granted performance-based shares to certain key employees. The performance- and market-based goals are established by the Compensation Committee of the Board of Directors and will vest up to a maximum of 200% of target.  During 2017 and 2016, the Compensation Committee established performance goals based on various financial and market-based measures.

Compensation expense for performance-based shares is measured on the grant date based on the quoted market price of TSYS common stock. The Company estimates the probability of achieving the goals through the performance period and expenses the awards on a straight-line basis over the derived service period. The fair value of market-based awards is estimated on the grant date using a Monte Carlo simulation model. The Company expenses market-based awards on a straight-line basis.  Compensation costs related to performance- and market-based shares are recognized through the longer of the performance period, the vesting period, or the derived service period. As of December 31, 2017, there was approximately $16.0 million of unrecognized compensation cost related to TSYS performance-based awards that is expected to be recognized through December 2018. As of December 31, 2017, there was approximately $1.6 million of unrecognized compensation cost related to TSYS market-based awards that is expected to be recognized through December 2018.

The following table summarizes the market-based awards granted during the years 2017, 2016 and 2015:

Year Awarded	Performance Period Ending	Performance Measure	Number of Shares Granted	Period Expensed Through
2017	December 2019	TSR	44,275	December 2019
2016	December 2017	TSR	6,403	December 2017
2016	December 2018	TSR	52,404	December 2018
2015	July 2016, 2017 and 2018	TSR	25,000	July 2018
2015	December 2017	TSR	57,982	December 2017

The following table summarizes the performance-based awards granted during the years 2017, 2016 and 2015:

Year Awarded	Performance Period Ending	Performance Measure	Number of Shares Granted	Period Expensed Through
2017	December 2019	Adjusted Diluted EPS1	103,297	December 2019
2017	December 2017	Net Revenue and Adjusted Diluted EPS1	146,094	December 2019
2017	December 2017	Issuer Solutions Segment Net Revenue and Adjusted Segment Operating Income2	26,145	December 2019
2016	December 2016	Revenues before Reimbursable Items4 and Adjusted EPS3	15,605	December 2016
2016	December 2017	Adjusted EPS3	14,940	December 2017
2016	December 2018	Merchant Segment Net Revenue, Corporate Accountability Operating Income (CAOI)2 and attainment of synergies from TransFirst acquisition	29,332	December 2018
2016	December 2018	Revenue Growth and CAOI Growth2	67,517	December 2018
2016	December 2018	Merchant Segment Net Revenue and CAOI2	78,220	December 2018
2016	December 2018	Adjusted EPS3	122,284	December 2018
2016	December 2016	Revenues before Reimbursable Items4 and Adjusted EPS3	144,995	December 2018
2015	December 2017	Adjusted EPS3	135,289	December 2017
2015	December 2015	Revenues before Reimbursable Items4 and Adjusted EPS3	165,543	December 2018

¹ Adjusted Diluted EPS is adjusted earnings divided by weighted average diluted shares outstanding used for diluted EPS calculations.Adjusted earnings is net income excluding the after-tax impact of share-based compensation expenses, amortization of acquisition intangibles, merger and acquisition expenses for completed acquisitions and litigation claims, judgments or settlement expenses and related legal expenses.

² CAOI is adjusted segment operating income and includes corporate administrative expenses. Adjusted segment operating income is defined in Note 20.

³ Adjusted EPS is adjusted earnings divided by weighted average shares outstanding used for basic EPS.

⁴ Revenues before Reimbursable Items is total revenue less reimbursable items which consist of out-of-pocket expenses which are reimbursed by the Company’s clients. These expenses consist primarily of postage, access fees and third-party software.

A summary of the awards authorized in each year is below:

	Total Number of Shares Awarded1	Potential Number of Performance-and Market-Based Shares to be Vested2	Year Potential Performance-and Market-Based Shares Will Fully Vest3
2017	319,811	596,192	2020
2016	531,700	903,364	2019
2015	383,814	687,015	2018

¹ Shares awarded does not include dividend equivalents

² Includes dividend equivalents

³ Represents year in which authorized performance and market-based shares will fully vest if they had been granted during 2017, 2016, and 2015, respectively.

A summary of the status of TSYS' performance- and market-based nonvested shares as of December 31, 2017, 2016 and 2015 and changes during those periods are presented below:

	2017			2016			2015
(in thousands, except per share data)                                                                 Performance- and market-based nonvested shares	Shares1	Weighted Average Grant Date Fair Value		Shares1	Weighted Average Grant Date Fair Value		Shares1	Weighted Average Grant Date Fair Value
Outstanding at beginning of year	982	$	33.43	918	$	31.19	766	$	25.86
Granted	618		52.48	540		45.91	384		36.84
Vested	(621)		14.85	(140)		37.91	(241)		22.92
Forfeited/canceled/adjusted	(174)		46.98	(336)		37.70	9		22.20
Outstanding at end of year	805	$	45.41	982	$	33.43	918	$	31.19

¹ Includes dividend equivalents

Stock Option Awards

Stock options generally become exercisable in three equal annual installments on the anniversaries of the date of grant and expire ten years from the date of grant. The required service period for retirement eligible employees is typically 12 or 18 months. For retirement eligible employees who retire prior to completing this required service period, the options vest on a pro-rata basis based upon the number of months employed during the full service period. For retirement eligible employees who retire after the required 18-month service period, the options become fully vested upon retirement. For retirement eligible employees who retire after the required 12-month service period, the option holder is deemed to have continued employment through the end of the vesting period and the options continue to vest in accordance with their terms.

During 2017, 2016 and 2015, the Company granted stock options to key TSYS executive officers and non-management members of its Board of Directors. The grants to key TSYS executive officers were issued for services to be provided in the future and vest over a period of three years. The grants to the Board of Directors were fully vested on the date of grant. The weighted average fair value of the options granted was estimated on the date of grant using the Black-Scholes-Merton option-pricing model.

The following table summarizes the weighted average assumptions, and the weighted average fair value of the options:

	2017			2016			2015
Number of options granted		550,527		687,685			613,473
Weighted average exercise price	$	54.97		47.01		$	39.01
Risk-free interest rate		1.78	%	1.24	%		1.73	%
Expected volatility		21.72	%	21.53	%		20.80	%
Expected term (years)		4.6		4.5			6.3
Dividend yield		0.73	%	0.86	%		1.04	%
Weighted average fair value	$	10.85		8.50		$	8.27

A summary of TSYS' stock option activity as of December 31, 2017, 2016 and 2015, and changes during the years ended on those dates is presented below:

	2017			2016			2015
Options:                                                                (in thousands, except per share data)	Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price
Outstanding at beginning of year	2,996	$	32.78	2,887	$	28.07	4,892	$	23.83
Granted	551		54.97	688		47.01	613		39.01
Exercised	(730)		30.05	(500)		23.43	(2,586)		22.68
Forfeited/canceled	(122)		52.76	(79)		43.49	(32)		20.79
Outstanding at end of year	2,695	$	37.15	2,996	$	32.78	2,887	$	28.07
Options exercisable at year-end	1,758	$	31.00	1,877	$	28.45	1,439	$	25.17
Weighted average fair value of options granted during the year		$	10.85		$	8.50		$	8.27

As of December 31, 2017 the average remaining contractual life and intrinsic value of TSYS’ outstanding and exercisable stock options were as follows:

	Outstanding		Exercisable
Average remaining contractual life (in years)		6.9	6.1
Aggregate intrinsic value (in thousands)	$	112,964	84,572

Shares Issued for Options Exercised

During 2017, 2016 and 2015, employees of the Company exercised options for shares of TSYS common stock that were issued from treasury. The table below summarizes these stock option exercises by year:

(in thousands)	Options Exercised and Issued from Treasury	Intrinsic Value
2017	730	$	23,629
2016	500		12,984
2015	2,586		67,702

For awards granted before January 1, 2006 that were not fully vested on January 1, 2006, the Company recorded the tax benefits from the exercise of stock options as increases to the "Additional paid-in capital" line item of the Consolidated Balance Sheets. Through December 31, 2016, if the Company recognized tax benefits, the Company recorded these tax benefits from share-based compensation costs as cash inflows in the financing section and cash outflows in the operating section in the Consolidated Statement of Cash Flows. The Company elected to use the short-cut method to calculate its historical pool of windfall tax benefits. As discussed in Note 1, the Company adopted ASU 2016-09 effective January 1, 2017 on a prospective basis.

As of December 31, 2017, there was approximately $2.9 million of total unrecognized compensation cost related to TSYS stock options that is expected to be recognized over a remaining weighted average period of 1.6 years.

XML

Treasury Stock

12 Months Ended

Dec. 31, 2017

Treasury Stock

Treasury Stock

Note 18 Treasury Stock

The following table summarizes shares held as treasury stock and their related carrying value as of December 31:

(in thousands)	Number of Treasury Shares	Treasury Shares Cost
2017	21,862	$	909,960
2016	19,314		646,047
2015	19,988		641,664

Stock Repurchase Plan

In April 2010, TSYS announced a stock repurchase plan to purchase up to 10 million shares of TSYS stock. The shares may be purchased from time to time over the next two years at prices considered attractive to the Company. By January 2014, the TSYS Board had approved several increases in the number of shares that could be repurchased under its share repurchase plan to up to 28 million shares of TSYS stock. The expiration date of the plan was extended to April 30, 2015. In January 2015, TSYS announced that its Board had approved a new stock repurchase plan to purchase up to 20 million shares of TSYS stock. The shares may be purchased from time to time at prices considered appropriate. There is no expiration date for the plan. The previous plan was terminated.

The table below summarizes these repurchases by year:

(in thousands, except per share data)	Total Number of Shares Purchased	Average Price Paid per Share		Repurchased Shares Cost
2017	3,850	$	73.41	$	282,645
2016	500		48.57		24,287
2015	5,150		47.01		242,085

The following table sets forth information regarding the Company's purchases of its common stock on a monthly basis during the three months ended December 31, 2017:

(in thousands, except per share data)	Total Number of Shares Purchased		Average Price Paid per Share1		Total Number of Cumulative shares Purchased as Part of Publicly announced Plans or Programs2	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs2
October 2017	300		$	71.26	6,350	13,650
November 2017	1,500			73.05	7,850	12,150
December 2017	1,667	1		75.22	9,500	10,500
Total	3,467	3	$	73.41

¹ Denotes a total of 16,837 shares (not rounded) in December withheld for payment of taxes.

² In January 2015, TSYS’ Board of Directors approved a stock repurchase plan to repurchase up to 20 million shares of TSYS stock.   The shares may be purchased from time to time at prices considered appropriate.  There is no expiration date for the plan.

³ Total number of shares purchased amounts may not total due to rounding.

Treasury Shares

In 2008, the Compensation Committee approved "share withholding for taxes" for all employee nonvested awards, and also for employee stock options under specified circumstances. The dollar amount of the income tax liability from each exercise is converted into TSYS shares and withheld at the statutory minimum. The shares are added to the treasury account and TSYS remits funds to the Internal Revenue Service to settle the tax liability. During 2017 and 2016, the Company acquired 20,875 shares for approximately $1.6 million and acquired 144,839 shares for approximately $6.0 million, respectively, as a result of share withholding for taxes.

XML

Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2017

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

Note 19 Other Comprehensive Income (Loss)

Comprehensive income (loss) for TSYS consists of net income, cumulative foreign currency translation adjustments, unrealized gains on available for sale securities and the recognition of an overfunded or underfunded status of a defined benefit postretirement plan recorded as a component of shareholders' equity. The income tax effects allocated to and the cumulative balance of each component of accumulated other comprehensive income (AOCI) (loss) are as follows:

(in thousands)	Beginning Balance		Pretax Amount	Tax Effect	Net-of-tax Amount		Ending Balance
As of December 31, 2014	$	3,749	(17,280)	(1,605)	(15,675)	$	(11,926)
Foreign currency translation adjustments	$	(13,592)	(22,997)	(1,548)	(21,449)	$	(35,041)
Transfer from noncontrolling interest (NCI)		28	-	-	-		28
Gain on available for sale securities		1,105	2,177	779	1,398		2,503
Change in AOCI related to postretirement healthcare plans		533	(2,449)	(882)	(1,567)		(1,034)
As of December 31, 2015	$	(11,926)	(23,269)	(1,651)	(21,618)	$	(33,544)
Foreign currency translation adjustments	$	(35,041)	(36,341)	(5,872)	(30,469)	$	(65,510)
Transfer from NCI		28	-	-	-		28
Gain on available for sale securities		2,503	11,394	4,035	7,359		9,862
Change in AOCI related to postretirement healthcare plans		(1,034)	775	279	496		(538)
As of December 31, 2016	$	(33,544)	(24,172)	(1,558)	(22,614)	$	(56,158)
Foreign currency translation adjustments	$	(65,510)	24,794	2,776	22,018	$	(43,492)
Transfer from NCI		28	-	-	-		28
Loss on available for sale securities		9,862	(2,050)	(634)	(1,416)		8,446
Change in AOCI related to postretirement healthcare plans		(538)	(682)	(90)	(592)		(1,130)
As of December 31, 2017	$	(56,158)	22,062	2,052	20,010	$	(36,148)

Consistent with its overall strategy of pursuing international investment opportunities, TSYS adopted the permanent reinvestment exception under GAAP, with respect to future earnings of certain foreign subsidiaries. Its decision to permanently reinvest foreign earnings offshore means TSYS will no longer allocate taxes to foreign currency translation adjustments associated with these foreign subsidiaries accumulated in other comprehensive income.

XML

Segment Reporting, including Geographic Area Data and Major Customers

12 Months Ended

Dec. 31, 2017

Segment Reporting, including Geographic Area Data and Major Customers

Segment Reporting, including Geographic Area Data and Major Customers

Note 20 Segment Reporting, including Geographic Area Data and Major Customers

TSYS provides global payment processing and other services to card-issuing and merchant acquiring institutions in the United States and internationally through online accounting and electronic payment processing systems. Corporate expenses, such as finance, legal, human resources, mergers and acquisitions and investor relations are categorized as Corporate Administration and Other.

In the first quarter of 2017, the Company combined the North America Services and International Services segments for purposes of segment reporting into the new Issuer Solutions segment, since they provide similar services to similar customers and to reflect the manner in which decisions on allocation of resources are made. As a result, beginning in 2017, the Company reports its financial performance based on three operating segments - Issuer Solutions, Merchant Solutions and Netspend. All prior periods have been restated to conform to the new presentation. 

In April 2016, TSYS completed its acquisition of TransFirst which is part of the Merchant Solutions segment and its results are included in the following tables. Refer to Note 22 for more information on acquisitions.

Issuer Solutions includes electronic payment processing services and other services provided from within the North America region and internationally. Merchant Solutions includes electronic processing and other services provided to merchants and merchant acquirers. The Netspend segment provides GPR prepaid debit and payroll cards, demand deposit accounts and other financial service solutions to the underbanked and other consumers and businesses in the United States.

At TSYS, the chief operating decision maker (CODM) is a group consisting of Senior Executive Management. The information utilized by the CODM consists of the financial statements and the main metrics monitored are revenue growth and growth in profitability.

TSYS’ operating segments share certain resources, such as information technology support, that TSYS allocates based on various metrics depending on the nature of the service.  

Operating Segments	Years Ended December 31,
(in thousands)		2017	2016	2015
Adjusted operating income by segment:
Issuer Solutions (a)	$	574,580	525,025	489,151
Merchant Solutions (b)		391,466	307,595	150,225
Netspend (c)		182,082	160,371	137,837
Corporate Administration and Other		(148,564)	(135,996)	(109,036)
Adjusted segment operating income1 (d)		999,564	856,995	668,177
Less:
Share-based compensation		42,409	43,728	41,549
TransFirst and Cayan M&A and integration expenses2		13,367	28,176	-
Litigation, claims, judgments or settlements		1,947	21,719	-
Acquisition intangible amortization		207,797	189,990	92,521
Operating income		734,044	573,382	534,107
Nonoperating expenses, net		(116,482)	(112,350)	(40,543)
Income before income taxes and equity in income of equity investments	$	617,562	461,032	493,564
Net revenue by segment:
Issuer Solutions (e)	$	1,594,959	1,515,462	1,473,914
Merchant Solutions (f)		1,103,682	898,533	474,040
Netspend (g)		746,870	663,579	580,377
Segment net revenue		3,445,511	3,077,574	2,528,331
Less: intersegment revenues		45,179	35,698	28,982
Net revenue3 (h)		3,400,332	3,041,876	2,499,349
Add: reimbursable items, interchange and payment network fees		1,527,633	1,128,201	280,192
Total revenues	$	4,927,965	4,170,077	2,779,541
Adjusted segment operating margin on net revenue:
Issuer Solutions (a)/(e)		36.0%	34.6%	33.2%
Merchant Solutions (b)/(f)		35.5%	34.2%	31.7%
Netspend (c)/(g)		24.4%	24.2%	23.7%
Adjusted segment operating margin on net revenue (d)/(h)		29.4%	28.2%	26.7%

¹ Adjusted segment operating income excludes acquisition intangible amortization, TransFirst and Cayan M&A and integration expenses, share-based compensation and expenses associated with Corporate Administration and Other.

² Excludes share-based compensation

³ Net revenue is total revenues less reimbursable items (such as postage), as well as, merchant acquiring interchange and payment network fees charged by the card associations or payment networks that are recorded by TSYS as expense.  Adjusted segment operating income excludes acquisition intangible amortization, TransFirst and Cayan M&A expenses, share-based compensation and expenses associated with Corporate Administration and Other.

The following table presents the Company’s depreciation expense by segment:

Operating Segments	Years Ended December 31,
(in thousands)		2017	2016	2015
Depreciation and amortization:
Issuer Solutions	$	147,914	141,309	134,436
Merchant Solutions		29,477	25,553	18,268
Netspend		15,838	13,133	10,686
Segment depreciation and amortization		193,229	179,995	163,390
Acquisition intangible amortization		207,797	189,990	92,521
Corporate Administration and Other		4,880	3,561	2,353
Total depreciation and amortization	$	405,906	373,546	258,264

The following table presents the Company’s total assets by segment:

	As of December 31,
(in thousands)	2017		2016
Issuer Solutions	$	5,735,195	5,667,280
Merchant Solutions		3,136,395	3,295,509
Netspend		1,418,644	1,474,595
Intersegment assets		(3,958,545)	(4,071,207)
Total assets	$	6,331,689	6,366,177

The Company maintains property and equipment, net of accumulated depreciation and amortization, in the following geographic areas:

	As of
(in thousands)	December 31, 2017		December 31, 2016
United States	$	273,690	236,913
Europe		43,586	38,866
Other		7,942	6,566
Total	$	325,218	282,345

The following tables reconcile geographic revenues to external revenues by operating segment based on the domicile of the Company’s customers for the years ended December 31:

	2017
(in thousands)	Issuer         Solutions		Merchant Solutions	Netspend	Total		Percentage of Revenues
United States	$	1,051,292	2,428,327	745,235	$	4,224,854	85.7	%
Europe1		320,400	284	-		320,684	6.5
Canada1		313,674	1,496	-		315,170	6.4
Other1		66,102	1,155	-		67,257	1.4
Total	$	1,751,468	2,431,262	745,235	$	4,927,965	100.0	%

	2016
(in thousands)	Issuer                    Solutions		Merchant Solutions	Netspend	Total		Percentage of Revenues
United States	$	1,032,381	1,826,775	660,845	$	3,520,001	84.4	%
Europe1		306,894	227	-		307,121	7.4
Canada1		284,028	705	-		284,733	6.8
Other1		57,460	762	-		58,222	1.4
Total	$	1,680,763	1,828,469	660,845	$	4,170,077	100.0	%

	2015
(in thousands)	Issuer                    Solutions		Merchant Solutions	Netspend	Total		Percentage of Revenues
United States	$	981,588	548,079	580,377	$	2,110,044	75.9	%
Europe1		304,628	22	-		304,650	11.0
Canada1		288,728	355	-		289,083	10.4
Other1		75,085	679	-		75,764	2.7
Total	$	1,650,029	549,135	580,377	$	2,779,541	100.0	%

1Certain of these revenues are impacted by movements in foreign currency exchange rates.

MAJOR CUSTOMER:  For the years ended December 31, 2017, 2016 and 2015, the Company had no major customers.

XML

Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2017

Supplemental Cash Flow Information

Supplemental Cash Flow Information

Note 21 Supplemental Cash Flow Information

Nonvested Share Awards

The Company has issued shares of TSYS common stock to certain key employees and non-management members of its Board of Directors. The grants to certain key employees were issued in the form of nonvested stock bonus awards for services to be provided in the future by such officers and employees. The grants to the Board of Directors were fully vested on the date of grant. Refer to Note 18 for more information on nonvested share awards.

Equipment Acquired Under Capital Lease Obligations and Software Acquired Under License Agreements

The Company acquired computer equipment under capital leases and software under license agreements in the amount of $40.8 million, $1.8 million and $4.1 million in 2017, 2016 and 2015, respectively.

Software Acquired Under Direct Financing

The Company did not acquire any software under direct financing in 2017 or 2016. The Company acquired software under direct financing in the amount of $30.0 million in 2015. Refer to Note 11 for more information.

XML

Acquisitions

12 Months Ended

Dec. 31, 2017

Acquisitions

Acquisitions

Note 22 Acquisitions

Redeemable Noncontrolling Interest - CPAY

2017

On February 3, 2017, the Company acquired an additional 10% equity interest in CPAY from a privately-owned company for $70.0 million. This purchase reduced the remaining redeemable noncontrolling interest in CPAY to 15% of its total outstanding equity and extended the put call arrangement until April 2018. The transaction resulted in a decrease to noncontrolling interest of $9.8 million and a decrease to additional paid-in-capital of $60.2 million

TransFirst

2017

In 2017, the Company decreased the Merchant Solutions goodwill due to deferred tax adjustments of $12.1 million and the write-off of a note receivable of $727,000 on the opening balance sheet of TransFirst.

2016

On April 1, 2016, the Company acquired all of the outstanding capital stock of TransFirst for an aggregate purchase price of $2.35 billion in cash as of the closing, which was subject to certain working capital and other adjustments, as described in the Purchase Agreement. TransFirst previously operated as a privately held company, under the ownership of Vista Equity Partners. The results of the newly acquired business are being reported by TSYS as part of the Merchant Solutions segment.

The Company funded the cash consideration and the payment of transaction related expenses through a combination of cash-on-hand and proceeds from debt financings, including proceeds drawn under the Company’s 2016 Credit Agreement and the proceeds from the issuance of the 2016 Notes, which together included proceeds of approximately $2.35 billion.

The goodwill amount of $1.7 billion arising from the acquisition is primarily attributable to the expansion of the Merchant Solutions Segment’s customer base, differentiated distribution channels and economies of scale expected from combining the operations of TSYS and TransFirst. All of the goodwill was assigned to TSYS’ Merchant Solutions segment. The goodwill recognized is not expected to be deductible for income tax purposes.

The following table summarizes the consideration paid for TransFirst and the initially recognized amounts of the identifiable assets acquired and liabilities assumed on April 1, 2016 (the acquisition date).

(in thousands)
Consideration
Cash	$	2,351,400
Fair value of total consideration transferred	$	2,351,400
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	5,907
Accounts receivable, net		62,313
Property, equipment and software		12,726
Identifiable intangible assets		814,131
Deferred tax asset		2,244
Other assets		7,509
Deferred tax liability		(224,654)
Other liabilities		(56,864)
Total identifiable net assets		623,312
Goodwill		1,728,088
Total identifiable assets acquired and liabilities assumed	$	2,351,400

During 2016, there was a $55,000 increase in the purchase price due to the working capital adjustment required by the Purchase Agreement. In addition, there was a $2.0 million decrease in identifiable intangible assets, a $363,700 increase in liabilities and an $18.0 million increase in deferred tax liabilities that resulted in a net increase to goodwill of $20.4 million. The measurement period during which changes in assets, liabilities, equity interests, or items of consideration are subject to adjustment ends up to one year following the acquisition date.

Identifiable intangible assets acquired in the TransFirst acquisition include merchant relationships, channel relationships, current technology, the TransFirst trade name, not-to-compete agreements and a favorable lease. The identifiable intangible assets had no significant estimated residual value. These intangible assets are being amortized over their estimated useful lives of one to ten years based on the pattern of expected future economic benefit, which approximates a straight-line basis over the useful lives of the assets. The fair value of the acquired identifiable intangible assets of $814.1 million was estimated using the income approach (discounted cash flow and relief from royalty methods) and cost approach. The fair values and useful lives of the identified intangible assets were primarily determined using forecasted cash flows, which included estimates for certain assumptions such as revenues, expenses, attrition rates and royalty rates. The estimated fair value of identifiable intangible assets acquired in the acquisition and the related estimated weighted average useful lives are as follows:

(inmillions)		Fair Value	Weighted Average Useful Life (in years)
Merchant relationships	$	588.0	7.0
Channel relationships		121.0	10.0
Current technology		72.0	5.0
Trade name		16.0	1.0
Covenants not-to-compete		15.0	3.0
Favorable lease		2.1	5.6
Total acquired identifiable intangible assets	$	814.1	7.1

The fair value measurement of the identifiable intangible assets represents Level 2 and Level 3 measurements as defined by GAAP. Key assumptions include (a) cash flow projections based on market participant and internal data, (b) a discount rate of 8.5%, (c) a pre-tax royalty rate range of 1%-3%, (d) attrition rates of 11%-16%, (e) an effective tax rate of 40%, and (f) a terminal value based on a long-term sustainable growth rate of 3%.

In connection with the acquisition, TSYS incurred $32.3 million in acquisition related costs primarily related to professional, legal and accounting costs, and integration expenses which are recorded in selling, general and administrative expenses and $9.8 million related to the bridge term loan facility, which is included in interest expense. These costs are expensed as incurred and are included on the income statement for the twelve months ended December 31, 2016. The Company recorded $1.3 billion of revenue and $30.0 million of operating income since the acquisition date that is included in the consolidated results through the twelve months ended December 31, 2016 as a result of the TransFirst acquisition.

EMEA

2016

In March 2016, the Company completed the acquisition of the remaining 45% interest in TSYS Managed Services EMEA Limited (EMEA) from Merchants Limited. The Company acquired the outstanding stock from Merchants Limited for approximately £4.2 million, or $5.9 million, in cash. In connection with the purchase, the Company repaid the outstanding balance of the existing debt between EMEA and Merchants Limited of approximately £2.2 million, or $3.0 million.

Netspend

2017

In 2017, the Company adjusted the Netspend goodwill due to a tax adjustment of $1.8 million relating to uncertain tax positions.

2016

In 2016, TSYS adjusted the goodwill associated with the Netspend acquisition by $584,000 as a result of adjustments to the deferred tax assets acquired in the transaction.

2015

In September 2015, TSYS purchased certain assets for its Netspend segment for $750,000. The purchase qualifies as a business combination in accordance with GAAP. The Company recorded an acquisition technology intangible asset for the amount of the purchase price. This acquisition intangible asset represents software and is being amortized over a five year life. There were no other material assets included in the purchase. The acquisition included the employment of certain key employees which resulted in the transaction qualifying as a business combination.

In 2015, the Company adjusted goodwill for Netspend to include an additional $627,000 for a change in deferred taxes associated with the acquisition. For more information, refer to Note 5.

XML

Collaborative Arrangement

12 Months Ended

Dec. 31, 2017

Collaborative Arrangement

Collaborative Arrangement

Note 23 Collaborative Arrangement

TSYS has a 45% ownership interest in an enterprise jointly owned with two other entities which operates aircraft for the owners' internal use. The arrangement allows each entity access to the aircraft and each entity pays for its usage of the aircraft. Each quarter, the net operating costs of the enterprise are shared among the owners.

XML

Earnings Per Share

12 Months Ended

Dec. 31, 2017

Earnings Per Share

Earnings Per Share

Note 24 Earnings Per Share

The following table illustrates basic and diluted EPS under the guidance of GAAP for the years ended December 31, 2017, 2016 and 2015:

	2017		2016		2015
(in thousands, except per share data)	Common Stock		Common Stock		Common Stock
Basic EPS:
Net income attributable to TSYS common shareholders	$	586,185		319,638		364,044
Less income allocated to nonvested awards		(1,373)		(1,557)		(3,164)
Net income allocated to common stock for EPS calculation (a)	$	584,812		318,081		360,880
Average common shares outstanding (b)		183,309		182,744		182,465
Basic EPS (a)/(b)	$	3.19		1.74		1.98
Diluted EPS:
Net income attributable to TSYS common shareholders	$	586,185		319,638		364,044
Less income allocated to nonvested awards		(1,373)		(1,557)		(3,148)
Add income allocated to nonvested awards1		1,373		1,557		-
Net income allocated to common stock for EPS calculation (c)	$	586,185		319,638		360,896
Average common shares outstanding		183,309		182,744		182,465
Increase due to assumed issuance of shares related to common equivalent shares outstanding		1,162		813		1,157
Average nonvested awards1		959		891		-
Average common and common equivalent shares outstanding (d)		185,430		184,448		183,622
Diluted EPS (c)/(d)	$	3.16		1.73		1.97

¹ In accordance with the diluted EPS guidance under the two-class method, the Company uses the approach-either the treasury stock method or the two-class method assuming a participating security is not exercised- that is more dilutive. In 2017 and 2016, the Company used the two-class method. In 2015, the Company used the treasury stock method.

	2017		2016		2015
(in thousands, except per share data)	Participating Securities		Participating Securities		Participating Securities
Basic EPS:
Net income allocated to nonvested awards (a)	$	1,373		1,557		3,164
Nonvested awards (b)		435		911		1,617
Basic EPS (a)/(b)	$	3.16		1.71		1.96
Diluted EPS:
Net income allocated to nonvested awards (c)	$	1,366		1,552		3,148
Average common and common equivalent shares outstanding (d)		435		911		1,617
Diluted EPS (c)/(d)	$	3.14		1.70		1.95

The diluted EPS calculation excludes stock options and nonvested awards that are exercisable into 0.3 million, 0.4 million and 0.6 million common shares for the years ended December 31, 2017, 2016 and 2015, respectively, because their inclusion would have been anti-dilutive.

XML

Subsequent Events

12 Months Ended

Dec. 31, 2017

Subsequent Events

Subsequent Events

Note 25 Subsequent Events

CFPB Finalizes Changes to Prepaid Accounts Rule

On January 25, 2018, the Consumer Financial Protection Bureau (the CFPB) announced that it has finalized updates to its 2016 prepaid rule. The CFPB’s 2016 prepaid rule put in place requirements for treatment of funds on lost or stolen cards, error resolution and investigation, upfront fee disclosures, access to account information, and overdraft features if offered in conjunction with prepaid accounts. The changes announced by the CFPB adjust requirements for resolving errors on unregistered accounts, provide greater flexibility for credit cards linked to digital wallets, and extend the effective date of the rule by one year to April 2019.

Acquisition of Cayan

On December 18, 2017, TSYS announced it entered into an agreement to acquire Cayan, a payment technology company focused on integrated payment solutions and merchant acquiring, in an all cash transaction valued at approximately $1.05 billion. On January 11, 2018, the Company completed the acquisition of Cayan. The Company funded the acquisition through a combination of cash-on-hand and proceeds from borrowings, including the credit agreement discussed below.

Term Loan Facility

On January 10, 2018, TSYS entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. as Administrative Agent and other lenders party thereto from time to time. The Credit Agreement provides the Company with a $450 million two-year term loan facility (the “Term Loan Facility”).  The Term Loan Facility was used to finance, in part, the Company’s acquisition of Cayan.

Borrowings under the Credit Agreement will accrue interest at the base rate (as defined in the Credit Agreement) or, for certain euro-denominated borrowings, the London Interbank Offered Rate (“LIBOR”), in each case plus a margin based on the Company’s corporate credit ratings. The applicable margin for loans bearing interest based on LIBOR ranges from 1.000% to 1.750%. The applicable margin for loans bearing interest based on the base rate ranges from 0.000% to 0.750%.  

The Credit Agreement contains customary covenants regarding, among other matters, the maintenance of insurance, the preservation and maintenance of the Company’s corporate existence, material compliance with laws and the payment of taxes and other material obligations. The Credit Agreement also contains financial covenants requiring the maintenance as of the end of each fiscal quarter of (i) a minimum fixed charge coverage ratio of 2.5 to 1.0 and (ii) a maximum consolidated leverage ratio of 3.5 to 1.0, which may be increased upon the occurrence of certain events (including the consummation of the acquisition of Cayan).

Management performed an evaluation of the Company’s activity as of the date these audited financial statements were issued and has concluded that, other than as set forth above, there are no significant events requiring disclosure.

XML

Schedule II Schedule - Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2017

Schedule II Schedule - Valuation and Qualifying Accounts

Schedule II Schedule - Valuation and Qualifying Accounts

Schedule II

Schedule — Valuation and Qualifying Accounts

TOTAL SYSTEM SERVICES, INC.

Schedule II

Valuation and Qualifying Accounts

(in thousands)

			Additions
			Changes in
	Balance at		allowances, charges to				Balance at
	beginning		expenses and changes				end
	of period		to other accounts		Deductions		of period
Year ended December 31, 2015:
Provision for doubtful accounts	$	3,222	(58)	(1)	(1,407)	(3)	$	1,757
Provision for billing adjustments	$	866	(114)	(1)	174	(3)	$	926
Provision for merchant losses	$	1,118	4,667	(1)	(4,419)	(3)	$	1,366
Transaction processing provisions - processing errors	$	4,630	6,976	(2)	(5,149)	(3)	$	6,457
Provision for fraud losses	$	6,312	41,264	(4)	(38,185)	(3)	$	9,391
Deferred tax valuation allowance	$	18,963	541	(5)	(1,058)	(6)	$	18,446
Year ended December 31, 2016:
Provision for doubtful accounts	$	1,757	6,970	(1)	(5,245)	(3)	$	3,482
Provision for billing adjustments	$	926	614	(1)	(180)	(3)	$	1,360
Provision for merchant losses	$	1,366	1,682	(1)	(1,009)	(3)	$	2,039
Transaction processing provisions - processing errors	$	6,457	3,669	(2)	(7,275)	(3)	$	2,851
Provision for fraud losses	$	9,391	49,362	(4)	(48,226)	(3)	$	10,527
Deferred tax valuation allowance	$	18,446	4,124	(5)	(1,269)	(6)	$	21,301
Year ended December 31, 2017:
Provision for doubtful accounts	$	3,482	10,796	(1)	(8,947)	(3)	$	5,331
Provision for billing adjustments	$	1,360	(627)	(1)	(186)	(3)	$	547
Provision for merchant losses	$	2,039	5,002	(1)	(2,715)	(3)	$	4,326
Transaction processing provisions - processing errors	$	2,851	6,714	(2)	(7,357)	(3)	$	2,208
Provision for fraud losses	$	10,527	51,194	(4)	(52,202)	(3)	$	9,519
Deferred tax valuation allowance	$	21,301	8,648	(5)	(418)	(6)	$	29,531

(1) Amount reflected includes charges to (recoveries of) bad debt expense which are classified in selling, general and administrative expenses and the charges for billing adjustment which are recorded against revenues.

(2) Amount reflected is the change in transaction processing provisions reflected in cost of services expenses.

(3) Accounts deemed to be uncollectible and written off during the year as it relates to bad debts. Amounts that relate to billing adjustments and transaction processing provisions reflect actual billing adjustments and processing errors charged against the allowances. Amounts that related to cardholder losses reflect write-offs against the provision for cardholder losses.

(4) Amount represents the charges in the provision for cardholder losses reflected in cost of services expenses.

(5) Amount represents an increase in the amount of deferred tax assets, which more likely than not, will not be realized.

(6) Amount represents a decrease in the amount of deferred tax assets, which more likely than not, will not be realized.

XML

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Intangible assets

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:  The accompanying consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting principles (GAAP) include the accounts of TSYS and its wholly- and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities and to assess whether it is the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary, then that entity is included in the consolidated financial statements.

RISKS AND UNCERTAINTIES AND USE OF ESTIMATES

RISKS AND UNCERTAINTIES AND USE OF ESTIMATES:  Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, lower than anticipated growth from existing clients, an inability to attract new clients and grow internationally, loss of a major customer or other significant client, loss of a major supplier, an inability to grow through acquisitions or successfully integrate acquisitions, an inability to control expenses, technology changes, the impact of the application of and/or changes in accounting principles, financial services consolidation, changes in regulatory requirements, a decline in the use of cards as a payment mechanism, disruption of the Company's international operations, breach of the Company's security systems, a decline in the financial stability of the Company's clients and uncertain economic conditions. Negative developments in these or other risk factors could have a material adverse effect on the Company's financial position, results of operations and cash flows.

The Company has prepared the accompanying consolidated financial statements in conformity with U.S. GAAP. The preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. These estimates and assumptions are developed based upon all information available. Actual results could differ from estimated amounts.

ACQUISITIONS - PURCHASE PRICE ALLOCATION

ACQUISITIONS — PURCHASE PRICE ALLOCATION:  TSYS' purchase price allocation methodology requires the Company to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. TSYS estimates the fair value of assets and liabilities based upon appraised market values, the carrying value of the acquired assets and widely accepted valuation techniques, including the cost approach, discounted cash flows and market multiple analyses. Management determines the fair value of fixed assets and identifiable intangible assets such as developed technology or customer relationships, and any other significant assets or liabilities. TSYS adjusts the purchase price allocation, as necessary, up to one year after the acquisition closing date as TSYS obtains more information regarding asset valuations and liabilities assumed. Unanticipated events or circumstances may occur which could affect the accuracy of the Company's fair value estimates, including assumptions regarding industry economic factors and business strategies, and may result in an impairment or a new allocation of purchase price.

TSYS may allocate part of the purchase price of future acquisitions to contingent consideration as required by GAAP for business combinations. The fair value calculation of contingent consideration will involve a number of assumptions that are subjective in nature and which may differ significantly from actual results. TSYS may experience volatility in its earnings to some degree in future reporting periods as a result of these fair value measurements.

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS: The Company sold all of its stock of GP Network Corporation (representing 54% ownership of the company) and all of its stock of TSYS Japan Godo Kaisha (representing 100% ownership of the company) in April 2014. In 2015, the Company recorded an additional gain of $1.4 million, net of tax, related to the return of cash that was placed in escrow during closing and tax adjustments associated with the transaction.

CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS:  Cash on hand and investments with a maturity of three months or less when purchased are considered to be cash equivalents.

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE:  Accounts receivable balances are stated net of allowances for doubtful accounts and billing adjustments.

TSYS records an allowance for doubtful accounts when it is probable that the accounts receivable balance will not be collected. When estimating the allowance for doubtful accounts, the Company takes into consideration such factors as its day-to-day knowledge of the financial position of specific clients, the industry and size of its clients, the overall composition of its accounts receivable aging, prior history with specific customers of accounts receivable write-offs and prior experience of allowances in proportion to the overall receivable balance. This analysis includes an ongoing and continuous communication with its largest clients and those clients with past due balances. A financial decline of any one of the Company's large clients could have a material adverse effect on collectability of receivables and thus the adequacy of the allowance for doubtful accounts.

Increases in the allowance for doubtful accounts are recorded as charges to bad debt expense and are reflected in selling, general and administrative expenses in the Company's Consolidated Statements of Income. Write-offs of uncollectible accounts are charged against the allowance for doubtful accounts.

TSYS records an allowance for billing adjustments for actual and potential billing discrepancies. When estimating the allowance for billing adjustments, the Company considers its overall history of billing adjustments, as well as its history with specific clients and known disputes. Increases in the allowance for billing adjustments are recorded as a reduction of revenues in the Company's Consolidated Statements of Income and actual adjustments to invoices are charged against the allowance for billing adjustments.

GOODWILL

GOODWILL:  Goodwill results from the excess of cost over the fair value of net assets of businesses acquired. Goodwill is tested for impairment at least annually. Equity investment goodwill, which is not reported as goodwill in the Company's Consolidated Balance Sheet, but is reported as a component of the equity investment, was $48.8 million and $46.1 million as of December 31, 2017 and 2016, respectively.

SOFTWARE DEVELOPMENT COSTS

SOFTWARE DEVELOPMENT COSTS:  Costs of computer software to be sold, leased or otherwise marketed are capitalized once technological feasibility of the software product has been established. Costs incurred prior to establishing technological feasibility are expensed as incurred. Technological feasibility is established when the Company has completed a detailed program design and has determined that a product can be produced to meet its design specifications, including functions, features and technical performance requirements. Capitalization of costs ceases when the product is generally available to clients. In evaluating software development costs for recoverability, expected cash flows are estimated by management should events indicate a loss may have been triggered. The Company evaluates the unamortized capitalized costs of software development, the impairment of which is determined by expected undiscounted future operating cash flows of the software as compared to the carrying amount of the software product. The amount by which the unamortized software development costs exceed the lower of the carrying amount or fair value is written off in the period that such determination is made. If the actual cash flows are not consistent with the Company's estimates, a material write-off may result and net income may be materially different than was initially recorded. Assumptions and estimates about future cash flows and remaining useful lives of software are complex and subjective. They can be affected by a variety of factors, including industry and economic trends, changes in the Company’s business strategy and changes in the internal forecasts. The amount by which the unamortized software development costs exceed the net realizable value is written off in the period that such determination is made. Software development costs are amortized using the straight-line method over its estimated useful life, which ranges from three to ten years.

The Company also develops software that is used internally. Internal-use software development costs are capitalized once: (1) the preliminary project stage is completed, (2) management authorizes and commits to funding a computer software project, and (3) it is probable that the project will be completed and the software will be used to perform the function intended. Costs incurred prior to meeting the qualifications are expensed as incurred. Capitalization of costs ceases when the project is substantially complete and ready for its intended use. Internal-use software development costs are amortized using the straight-line method over its estimated useful life which ranges from three to ten years. Software development costs may become impaired in situations where development efforts are abandoned due to the viability of the planned project becoming doubtful or due to technological obsolescence of the planned software product.

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT:  Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Buildings and improvements are depreciated over estimated useful lives of 5-40 years, computer and other equipment over estimated useful lives of 2-5 years, and furniture and other equipment over estimated useful lives of 3-15 years. The Company evaluates impairment losses on long-lived assets used in operations in accordance with the provisions of GAAP.All ordinary repairs and maintenance costs are expensed as incurred. Maintenance costs that extend the asset life are capitalized and amortized over the remaining estimated life of the asset.

CONTRACT ACQUISITION COSTS

CONTRACT ACQUISITION COSTS:  The Company capitalizes contract acquisition costs related to signing incentives for signing or renewing long-term contracts. The Company capitalizes internal conversion costs in accordance with GAAP.

Contract acquisition costs are amortized using the straight-line method over the contract term or the expected customer relationship period when a renewal is anticipated, beginning when the client's cardholder accounts are converted and producing revenues. The amortization of contract acquisition costs associated with cash payments for client incentives is included as a reduction of revenues in the Company's Consolidated Statements of Income. The amortization of contract acquisition costs associated with conversion activity is recorded as cost of services in the Company's Consolidated Statements of Income.

EQUITY METHOD INVESTMENTS

EQUITY METHOD INVESTMENTS:  TSYS' 49% investment in Total System Services de México, S.A. de C.V. (TSYS de México), an electronic payment processing support operation located in Toluca, México, is accounted for using the equity method of accounting, as is TSYS' 44.56% investment in China UnionPay Data Co., Ltd. (CUP Data) headquartered in Shanghai, China. The Company has entered into limited partnership agreements in connection with investing in two Atlanta-based venture capital funds focused exclusively on investing in technology-enabled financial services companies. TSYS' equity investments are recorded initially at cost and subsequently adjusted for equity in earnings, cash contributions and distributions, and foreign currency translation adjustments.

INCOME TAXES

INCOME TAXES:  Income taxes reflected in TSYS' consolidated financial statements are computed based on the taxable income of TSYS and its affiliated subsidiaries. A consolidated U.S. federal income tax return is filed for TSYS and its majority- owned U.S. subsidiaries. Additionally, income tax returns are also filed in states where TSYS and its subsidiaries have filing obligations and in foreign jurisdictions where TSYS has a foreign affiliate.

The Company accounts for income taxes in accordance with the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Reserves against the carrying value of a deferred tax asset are established when necessary to reflect the decreased likelihood of realization of a deferred asset in the future. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Income tax provisions require the use of management judgments, which are subject to challenge by various taxing authorities. Contingency reserves are periodically established where the amount of the contingency can be reasonably determined and is likely to occur. Reductions in contingency reserves are recognized when tax disputes are settled or examination periods lapse.

Significant estimates used in accounting for income taxes relate to the determination of taxable income, the determination of temporary differences between book and tax basis, as well as estimates on the realizability of tax credits and net operating losses.

TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax expense in the Consolidated Statements of Income.

UP-FRONT DISTRIBUTOR AND PARTNER PAYMENTS

UP-FRONT DISTRIBUTOR AND PARTNER PAYMENTS: The Company makes up-front contractual payments to third-party distributors and partners. The Company assesses each up-front payment to determine whether it meets the criteria of an asset as defined by U.S. GAAP. If these criteria are met, the Company capitalizes the up-front payment and recognizes the capitalized amount as expense ratably over the benefit period, which is generally the contract period. If the contract requires the distributor or partner to perform specific acts (i.e., achieve a sales goal) and no other conditions exist for the distributor or partner to earn or retain the up-front payment, then the Company capitalizes the payment and recognizes it as an expense when the performance conditions have been met. Up-front distributor and partner payments are classified on the Consolidated Balance Sheets as other non-current assets and recorded as a cost of services in the Consolidated Statements of Income.

IMPAIRMENT OF LONG-LIVED ASSETS

IMPAIRMENT OF LONG-LIVED ASSETS:  The Company reviews long-lived assets, such as property and equipment and intangibles subject to amortization, including contract acquisition costs and certain computer software, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If upon a triggering event the Company determines that the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet.

TRANSACTION PROCESSING PROVISIONS

TRANSACTION PROCESSING PROVISIONS:  The Company has recorded an accrual for contract contingencies (performance penalties) and processing errors. A significant number of the Company's contracts with large clients contain service level agreements which can result in TSYS incurring performance penalties if contractually required service levels are not met. When providing for these accruals, the Company takes into consideration such factors as the prior history of performance penalties and processing errors incurred, actual contractual penalty charge rates in the Company's contracts, progress towards milestones and known processing errors. As of December 31, 2017 and 2016, the Company had transaction processing provisions of $2.2 million and $2.9 million, respectively. These accruals are included in other current liabilities in the accompanying Consolidated Balance Sheets. Increases and decreases in transaction processing provisions are charged to cost of services in the Company's Consolidated Statements of Income, and payments or credits for performance penalties and processing errors are charged against the accrual.

PROVISION FOR CARDHOLDER LOSSES

PROVISION FOR CARDHOLDER LOSSES: The Company is exposed to losses due to cardholder fraud, payment defaults and other forms of cardholder activity as well as losses due to non-performance of third parties who receive cardholder funds for transmittal to the issuing banks (banks that issue MasterCard International or Visa USA, Inc. branded cards to customers). The Company establishes a reserve for the losses it estimates will arise from processing customer transactions, debit card overdrafts, chargebacks for unauthorized card use and merchant-related chargebacks due to non-delivery of goods and services. These reserves are established based upon historical loss and recovery rates and cardholder activity for which specific losses can be identified. The provision for cardholder losses was approximately $9.5 million and $10.5 million as of December 31, 2017 and 2016, respectively. The charges to provisions for cardholder losses are included in cost of services in the Consolidated Statements of Income and other current liabilities in the Consolidated Balance Sheets. The Company regularly updates its reserve estimate as new facts become known and events occur that may impact the settlement or recovery of losses.

PROVISION FOR MERCHANT LOSSES

PROVISION FOR MERCHANT LOSSES:  The Company has potential liability for losses resulting from disputes between a cardholder and a merchant that arise as a result of, among other things, the cardholder's dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant's favor. In these cases, the transaction is "charged back" to the merchant, which means the purchase price is refunded to the customer by the card-issuing bank and charged to the merchant. If the merchant is unable to fund the refund, TSYS must do so. TSYS also bears the risk of reject losses arising from the fact that TSYS collects fees from its merchants after the monthly billing period. If the merchant has gone out of business during such period, TSYS may be unable to collect such fees. TSYS maintains cash deposits or requires the pledge of a letter of credit from certain merchants, generally those with higher average transaction size where the card is not present when the charge is made or the product or service is delivered after the charge is made, in order to offset potential contingent liabilities such as chargebacks and reject losses that would arise if the merchant went out of business. Most chargeback and reject losses are charged to cost of services as they are incurred. However, the Company also maintains a provision against losses, including major fraud losses, which are both less predictable and involve larger amounts. The loss provision was established using historical loss rates, applied to recent bankcard processing volume. As of December 31, 2017 and 2016 , the Company had a merchant loss provision in the amount of $4.3 million and $2.0 million, respectively.

LEASES

LEASES:  The Company is obligated under noncancelable leases for computer equipment, software and facilities. As these leases expire, they will be evaluated and renewed or replaced by similar leases based on need. For purposes of applying the accounting and reporting standards, leases are classified from the standpoint of the lessee as capital or operating leases.

Rental payments on operating leases are charged to expense over the lease term. If rental payments are not made on a straight-line basis, rental expense nevertheless shall be recognized on a straight-line basis unless another systematic and rational basis is more representative of the time pattern in which use benefit is derived from the leased property, in which case that basis shall be used.

Certain of the Company's operating leases are for office space. The Company will make various alterations (leasehold improvements) to the office space and capitalize these costs as part of property and equipment. Leasehold improvements are amortized on a straight-line basis over the useful life of the improvement or the term of the lease, whichever is shorter.

REDEEMABLE NONCONTROLLING INTEREST

REDEEMABLE NONCONTROLLING INTEREST: In connection with the acquisition of Central Payment Co., LLC (CPAY), the Company is party to call and put arrangements with respect to the membership units that represent the remaining noncontrolling interest of CPAY. The call arrangement is exercisable by TSYS and the put arrangement is exercisable by the seller. The put arrangement is outside the control of the Company by requiring the Company to purchase the seller’s entire equity interest in CPAY at a put price at fair value. The put arrangement is recorded on the consolidated balance sheet and is classified as redeemable noncontrolling interest outside of permanent equity.

TREASURY STOCK

TREASURY STOCK:  The Company uses the cost method when it purchases its own common stock as treasury shares or issues treasury stock upon option exercises and displays treasury stock as a reduction of shareholders' equity.

FAIR VALUES OF FINANCIAL INSTRUMENTS

FAIR VALUES OF FINANCIAL INSTRUMENTS:  The Company uses financial instruments in the normal course of its business. The carrying values of cash equivalents, accounts receivable, accounts payable, accrued salaries and employee benefits, and other current liabilities approximate their fair value due to the short-term maturities of these assets and liabilities. The fair value of the Company's long-term debt and obligations under capital leases is not significantly different from its carrying value.

Investments in equity method investments are accounted for using the equity method of accounting and pertain to privately held companies. The Company believes the fair values of its investments in equity method investments exceed their respective carrying values.

FOREIGN CURRENCY TRANSLATION

FOREIGN CURRENCY TRANSLATION:  The Company maintains several different foreign operations whose functional currency is their local currency. Foreign currency financial statements of the Company's Mexican and Chinese equity investments, the Company's wholly owned subsidiaries and the Company's majority owned subsidiaries, as well as the Company's division and branches in the United Kingdom and China, are translated into U.S. dollars at current exchange rates, except for revenues, costs and expenses, and net income which are translated at the average exchange rates for each reporting period. Net gains or losses resulting from the currency translation of assets and liabilities of the Company's foreign operations, net of tax when applicable, are accumulated in a separate section of shareholders' equity titled accumulated other comprehensive income (loss). Gains and losses on transactions denominated in currencies other than the functional currencies are included in determining net income for the period in which exchange rates change.

REVENUE RECOGNITION

REVENUE RECOGNITION:   Revenue is recognized when it is realized or realizable and earned, which is deemed to occur when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. The Company accrues for rights of refund, processing errors or penalties, or other related allowances based on historical experience.

The Company's Issuer Solutions revenues are derived from long-term processing contracts with financial and nonfinancial institutions and are generally recognized as the services are performed. Payment processing services revenues are generated primarily from charges based on:

· The number of accounts on file;

· Transactions and authorizations processed;

· Statements mailed; and

· Cards embossed and mailed and other processing services for cardholder accounts on file.

Most of these contracts have prescribed annual revenue minimums, penalties for early termination, and service level agreements which may impact contractual fees if certain service levels are not achieved.

Revenue is recognized as the services are performed, primarily on a per unit basis. Processing contracts generally range from three to ten years in length. When providing payment processing services, the Company frequently enters into customer arrangements to provide multiple services that may also include conversion or implementation services, business process outsourcing services such as call center services, web-based services, and other payment processing-related services.  Revenue for these services is generally recognized as they are performed on a per unit basis each month or ratably over the term of the contract. 

The Company’s Merchant Solutions revenues are partially derived from relationships with thousands of individual merchants whose contracts range from thirty days to five years. Additionally, part of the revenues are derived from long-term processing contracts with large financial institutions, other merchant acquirers and merchant organizations which generally range from three to eight years and provide for penalties for early termination. Merchant services revenue is generated primarily from processing all payment forms including credit, debit and electronic benefits transfer for merchants of all sizes across a wide array of retail market segments.

The products and services offered include:

· Authorization and capture of electronic transactions;

· Clearing and settlement of electronic transactions;

· Information reporting services related to electronic transactions;

· Merchant billing services; and

· Point-of-sale terminal services.

Revenue is recognized for merchant services as those services are performed, primarily measured on a per unit basis. When providing merchant processing services, the Company frequently enters into customer arrangements to provide multiple services that may also include conversion or implementation services, business process outsourcing services such as call center services, terminal services, and other merchant processing-related services. Revenue for these services is generally recognized as they are performed on a per unit basis each month or ratably over the term of the contract. Revenues on point-of-sale terminal equipment are recognized upon the transfer of ownership and shipment of product.

With the acquisition of TransFirst Holdings Corp. (TransFirst) on April 1, 2016, TSYS included TransFirst’s results as part of the Merchant Solutions segment. TransFirst’s revenues are reported gross, which includes amounts paid for interchange and assessments, as TransFirst is the principal in the contractual relationship with its customers. Expenses covering interchange and payment network fees are included in TransFirst’s cost of services and are directly attributable to processing fee revenues and are recognized in the same period as the related revenue.

The Company’s Netspend revenues principally consist of a portion of the service fees collected from cardholders and interchange revenues received by the issuing banks in connection with the programs Netspend manages.

Cardholders are charged fees in connection with Netspend’s products and services as follows:

· Transactions - Cardholders are typically charged a fee for each Personal Identification Number (PIN) and signature-based purchase transaction made using their GPR cards, unless the cardholder is on a monthly or annual service plan, in which case the cardholder is instead charged a monthly or annual subscription fee, as applicable. Cardholders are also charged fees for Automated Teller Machines (ATM) withdrawals and other transactions conducted at ATMs.

· Customer Service and Maintenance - Cardholders are typically charged fees for balance inquiries made through Netspend’s call centers. Cardholders are also charged a monthly maintenance fee after a specified period of inactivity.

· Additional Products and Services - Cardholders are charged fees associated with additional products and services offered in connection with certain GPR cards, including the use of overdraft features, a variety of bill payment options, custom card designs and card-to-card transfers of funds initiated through the call centers.

· Other - Cardholders are charged fees in connection with the acquisition and reloading of the GPR cards at retailers and the Company receives a portion of these amounts in some cases.

Revenue resulting from the service fees charged to the cardholders described above is recognized when the fees are charged because the earnings process is substantially complete, except for revenue resulting from the initial activation of cards and annual subscription fees. Revenue resulting from the initial activation of cards is recognized ratably, net of commissions paid to distributors, over the average account life, which is approximately six months for GPR cards. Revenue resulting from annual subscription fees is recognized ratably over the annual period to which the fees relate.

Revenues also include fees charged in connection with program management and processing services the Company provides for private-label programs. Revenue resulting from these fees is recognized when the Company has fulfilled its obligations under the underlying service agreements.

Netspend derives revenue from a portion of the interchange fees remitted by merchants when cardholders make purchases using their GPR cards. Subject to applicable law, interchange fees are fixed by the card associations and network organizations (Networks). Interchange revenue is recognized net of sponsorship, licensing and processing fees charged by the Networks for services they provide in processing purchase transactions routed through them. Interchange revenue is recognized during the period that the purchase transactions occur. Also included in interchange revenue are fees earned from branding agreements with the Networks.

When a sale involves multiple deliverables, revenue recognition is affected by the determination of the number of deliverables in an arrangement, whether those deliverables may be separated into multiple units of accounting, and the standalone selling price of each unit of accounting which affects the amount of revenue allocated to each unit. Pursuant to Accounting Standards Codification (ASC) 605, the Company uses vendor-specific objective evidence (VSOE) of the standalone selling price of its services when it exists to determine the amount of revenue to allocate to each unit of accounting. The Company establishes VSOE using the price charged when the same service is sold separately (on a standalone basis). In most situations, the Company does not have sufficient VSOE. In these situations, TSYS considers whether sufficient third party evidence (TPE) of standalone selling price exists for the Company’s services. However, the Company typically is not able to determine TPE and has not used this measure of selling price due to the unique and proprietary nature of some of its services and the inability to reliably verify relevant standalone third party prices. When there is insufficient evidence of VSOE and TPE, the Company has made its best estimate of the standalone selling price (ESP) of that service for purposes of allocating revenue to each unit of accounting. When determining ESP, TSYS uses limited standalone sales data that do not meet the Company’s criteria to establish VSOE, management pricing strategies, residual selling price data when VSOE exists for a group of elements, the cost of providing the services and the related margin objectives. Consideration is also given to geographies in which the services are sold or delivered, customer classifications, and market conditions including competitor pricing strategies and benchmarking studies. Revenue is recognized when the revenue recognition criteria for each unit of accounting have been met.

There were no material changes or impact to revenue for current contractual arrangements during the years ended December 31, 2017, 2016 and 2015 due to any changes in the determination of the number of deliverables in an arrangement, units of accounting, or estimates of VSOE or ESP.

In many situations, the Company enters into arrangements with customers to provide conversion or implementation services in addition to processing services where the conversion or implementation services do not have standalone value. For these arrangements, conversion or implementation services that do not have standalone value, are recognized over the expected customer relationship (contract term) as the related processing services are performed.

The Company’s other services generally have standalone value and constitute separate units of accounting for revenue recognition purposes. Customer arrangements entered into prior to 2011 (prior to the adoption of Accounting Standards Update (ASU) 2009-13 “Multiple-Deliverable Revenue Arrangements,” an update to ASC Topic 605 “Revenue Recognition,” and formerly known as EITF 08-1, “Revenue Arrangements with Multiple Deliverables”) often included services for which sufficient objective and reliable evidence of fair value did not exist. In these situations, the deliverables were combined and recognized as a single unit of accounting based on the proportional performance for the combined unit. For pre-2011 arrangements that have not expired, have not been materially modified or amended, or terminated, the Company continues to recognize revenue in accordance with these policies in the accompanying consolidated financial statements. Beginning in 2011, services in new or materially modified arrangements of this nature were divided into separate units of accounting and revenue is now allocated to each unit of accounting based on the relative selling price method as disclosed above. As the services in the pre-2011 arrangements are generally delivered over the same term with consistent patterns of performance, there is no material difference in the timing or pattern of revenue recognition for each group of arrangements (pre-2011 arrangements and those new or materially modified thereafter).

The Company’s multiple element arrangements may include one or more elements that are subject to other topics including software revenue recognition and leasing guidance. The consideration for these multiple element arrangements is allocated to each group of deliverables – those subject to ASC 605-25 and those subject to other topics based on the revised guidance in ASU 2009-13. Arrangement revenue for each group of deliverables is then further separated, allocated, and recognized based on applicable guidance.

In regards to taxes assessed by a governmental authority imposed directly on a revenue producing transaction, the Company reports its revenues on a net basis.

REIMBURSABLE ITEMS

REIMBURSABLE ITEMS:  Reimbursable items consist of out-of-pocket expenses which are reimbursed by the Company's clients. These expenses consist primarily of postage, access fees and third party software. Reimbursable items are recorded on a gross basis in total revenues and cost of services.

INTERCHANGE AND PAYMENT NETWORK FEES

INTERCHANGE AND PAYMENT NETWORK FEES:  Interchange and payment network fees are charged by the card associations or payment networks.Depending upon the transaction type, the fees are a percentage of the transaction’s dollar value, a fixed amount, or a combination of the two methods. Certain interchange and payment network fees are recorded in both total revenues and cost of services.

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION:  GAAP establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. A public entity must measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award.

The Company estimates forfeitures when recognizing compensation cost. The estimate of forfeitures will be adjusted by the Company as actual forfeitures differ from its estimates, resulting in compensation cost only for those awards that actually vest. The effect of the change in estimated forfeitures is recognized as compensation costs in the period the change in estimate occurred. In estimating its forfeiture rate, the Company stratified its data based upon historical experience to determine separate forfeiture rates for the different award grants. The Company currently estimates a forfeiture rate for existing stock option grants to TSYS non-executive employees, and other TSYS share-based awards. Currently, TSYS estimates a forfeiture rate in the range of 0% for executive level employees and up to 8% for other employees.

The Company has issued its vested awards to directors and nonvested awards to certain employees. The market value of the common stock at the date of issuance is recognized as compensation expense immediately for vested awards and over the vesting period of the nonvested awards. For nonvested award grants that have pro rata vesting, the Company recognizes compensation expense using the straight-line method over the vesting period of the award.

ADVERTISING

ADVERTISING:  Advertising costs are expensed as incurred or the first time the advertising takes place except for direct-response advertising and television advertising production costs. Direct-response advertising consists of commission paid to affiliate marketers for the new funded customer accounts generated by them. Direct-response advertising costs are capitalized and amortized over the average life of the new accounts, which is approximately one year. Television advertising production costs consist of the costs of developing and filming television ads. Television advertising production costs are capitalized when the production services are received and expensed in the period when the advertising first takes place. Advertising expense for 2017, 2016 and 2015 was $13.2 million, $11.5 million and $9.6 million, respectively.

NONCONTROLLING INTEREST

NONCONTROLLING INTEREST:  Noncontrolling interest in earnings of subsidiaries represents the minority shareholders' share of the net income or loss of CPAY. Refer to Note 22 for more information on acquisitions.

EARNINGS PER SHARE

EARNINGS PER SHARE: Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated to reflect the potential dilution that would occur if stock options or other contracts to issue common stock were exercised. Diluted EPS is calculated by dividing net income by weighted average common and common equivalent shares outstanding. Common equivalent shares are calculated using the treasury stock method.

Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are "participating securities" as defined by GAAP, and therefore should be included in EPS using the two-class method.

The two-class method is an earnings allocation method for computing EPS when an entity's capital structure includes two or more classes of common stock or common stock and participating securities. It determines EPS based on dividends declared on common stock and participating securities and participation rights of participating securities in any undistributed earnings.

RECLASSIFICATIONS

RECLASSIFICATIONS: The Company had investments in private equity funds as of December 31, 2016 with a value of $24.5 million. During the year ended December 31, 2017 and in prior periods, this investment was reclassified from other assets to equity investments on the consolidated balance sheets. The income statement impact was to reclassify an immaterial amount of gains and losses from nonoperating expenses to equity in income of equity investments.  

Recently Adopted and Recent Accounting Pronouncements and Recent Revenue Recognition Accounting Pronouncements

Recently Adopted Accounting Pronouncements

The Company adopted the following Accounting Standards Updates (ASUs) on January 1, 2017:

ASU 2017-04 “Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment,” which modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. An entity should apply the amendments in this Update on a prospective basis. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted by all entities for interim or annual goodwill impairment test performed on testing dates after January 1, 2017. The Company early adopted this ASU in May 2017 in conjunction with its annual goodwill impairment testing. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.

ASU 2016-19 “Technical Corrections,” which required changes to clarify, correct errors or make minor improvements to the ASC. Most of the amendments in this Update do not require transition guidance and were effective upon issuance of this Update. Six amendments in this Update clarify guidance or correct references in the ASC that could potentially result in changes in current practice because of either misapplication or misunderstanding of current guidance. Early adoption is permitted for the amendments that require transition guidance. The Company was impacted by the amendment to Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software, which adds a reference to guidance to use when accounting for internal-use software licensed from third parties that is within the scope of Subtopic 350-40. The transition guidance for that amendment is the same as the transition guidance in ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” to which the amendment relates and was adopted on a prospective basis. The adoption of this ASU resulted in the Company's recording of acquired software of $13.9 million as an intangible asset at present value rather than treating the software as a lease arrangement. During the year ended December 31, 2017, $5.3 million was classified as amortization expense instead of rental expense.

ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the consolidated statement of cash flows. The adoption of this standard results in the excess tax benefits and deficiencies associated with share-based payments being recorded on the income statement at the time they are deducted on the income tax return instead of being recorded in additional paid-in capital. The excess tax benefits are recorded along with other income tax cash flows as an operating activity in the statement of cash flows. The Company recorded excess tax benefits of $14.3 million in its provision for income taxes rather than as an increase to additional paid-in capital for the year ended December 31, 2017 on a prospective basis. Therefore, the prior period presented has not been adjusted. The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of diluted earnings per share using the treasury stock method, which did not have a material impact on its diluted earnings per share for the year ended December 31, 2017. The Company elected to apply the presentation requirement for cash flows related to excess tax benefits prospectively, and thus, the prior period presented has not been adjusted. This adoption resulted in an increase in net cash provided by operating activities and a decrease in net cash from financing activities of $14.3 million for the year ended December 31, 2017.

In March 2016, the FASB issued ASU 2016-07 ‘‘Simplifying the Transition to the Equity Method of Accounting,’’ which simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. The ASU further requires that unrealized holding gains or losses in accumulated other comprehensive income related to an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the investment qualifies for the equity method. The guidance in the ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2016. Entities are required to apply the guidance prospectively to increases in the level of ownership interest or degree of influence occurring after the ASU’s effective date. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.

Recent Accounting Pronouncements

In February 2018, the FASB issued ASU 2018-02 “Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”  ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.  Consequently, the amendments in this ASU eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users.  The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.  Early adoption of the amendments in this ASU is permitted.  The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.  The Company is evaluating the effect of ASU 2018-02 on its consolidated financial statements.

In September 2017, the FASB issued ASU 2017-13 “Revenue Recognition (Topic 605), Revenues from Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842)”, which made amendments to SEC paragraphs pursuant to the Staff Announcement at the July 20, 2017 Emerging Issues Task Force (EITF) Meeting and rescission of prior SEC Staff Announcements and Observer comments. This guidance, which is effective immediately, generally relates to the adoption of ASC 606 and 842. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In May 2017, the FASB issued ASU 2017-09 “Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting,” to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: 

1.

The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.

2.

The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.

3.  The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.

The ASU is effective for the Company on January 1, 2018. Early adoption is permitted, including adoption in any interim period, for (a) public business entities for reporting periods for which financial statements have not yet been issued and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-01 “Business Combinations (Topic 805), Clarifying the Definition of a Business,” which provides a more robust framework to use in determining when a set of assets and activities is a business. The framework assists entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. The ASU is effective for the Company on January 1, 2018. Early application of the amendments in this Update is allowed under certain circumstances. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In November 2016, the FASB issued ASU 2016-18 ‘‘Statement of Cash Flows (Topic 230): Restricted Cash,’’ which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The ASU is effective for the Company on January 1, 2018. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows. The Company had restricted cash of $1.0 million, $ 0.5 million, and $0.2 million as of December 31, 2017, 2016 and 2017, respectively.

In October 2016, the FASB issued ASU 2016-16 ‘‘Income Taxes (Topic 740): Intra-Equity Transfers of Assets Other Than Inventory,’’ which requires that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. The ASU is effective for the Company on January 1, 2018. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU 2016-15 ‘‘Statement of Cash Flow (Topic 230): Classification of Certain Receipts and Cash Payments,’’ which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flow. The ASU is effective for the Company on January 1, 2018. Early adoption is permitted by all entities. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial instruments." The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are in the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted for periods beginning on or after January 1, 2019.  The Company is evaluating the effect of ASU 2016-13 on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842),” which introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the FASB’s new revenue recognition standard. The ASU also addresses other concerns related to the current leases model. The new guidance will be effective for fiscal years and interim periods within those years beginning after December 15, 2018. Early adoption will be permitted for all entities. The Company plans to adopt ASU 2016-02 on January 1, 2019.  While the Company is continuing to evaluate the effects of this ASU, the Company expects to record material right of use assets and lease liabilities on its consolidated balance sheet upon adoption.                                                                                                                                                                                                  

In January 2016, the FASB issued ASU 2016-01 ‘‘Recognition and Measurement of Financial Assets and Financial Liabilities,’’ which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. The ASU significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial position, results of operations or cash flows.

Recent Revenue Recognition Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606),” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.  The FASB has issued several additional ASUs (included below) since this time that add additional clarification to certain issues existing after the original ASU was released. All of the new standards are effective for the Company on January 1, 2018. The standards permit the use of either the full retrospective or modified retrospective transition method.

In March 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," which improves the operability and understandability of the implementation guidance on principal versus agent considerations by providing indicators as to which party controls the good or service provided to a customer (the principal).

In April 2016, the FASB issued ASU 2016-10 “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” which clarifies two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas.

In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients,” which affects only the following narrow aspects of Topic 606: Assessing the Collectability Criterion; Presentation of Sales and Other Taxes Collected from Customers; Noncash Consideration; Contract Modification at Transition; Completed Contracts at Transition; and Technical Correction.

In December 2016, the FASB issued ASU 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” which affects only the following narrow aspects of Topic 606: Disclosure of Remaining Performance Obligations as it relates to entities such as processors which may not be required to estimate revenue under ASU 2014-09 due to direct allocation of variable consideration; Disclosure of Prior - Period Performance Obligations; Loan Guarantee Fees; Contract Costs – Impairment Testing; Contract Costs - Interaction of Impairment Testing with Guidance in Other Topics; Provisions for Losses on Construction-Type and Production Type Contracts; Contracts within the scope of Topic 944 (Insurance) are excluded from the scope of Topic 606; Contract Modifications; Contract Asset versus Receivable; Refund Liability; Advertising Costs; Fixed - Odds Wagering Contracts in the Casino Industry.  

TSYS will adopt the new revenue standard, effective January 1, 2018, using the modified retrospective transition method. Under this method, the Company could elect to apply the cumulative effect method to either all contracts as of the date of initial application or only to contracts that are not complete as of that date. TSYS elected to apply the modified retrospective method to contracts that are not complete as of January 1, 2018. The cumulative impact of adopting the standard as of January 1, 2018 is expected to be an increase in opening retained earnings between $1.0 million and $4.0 million.  The most significant impact of adopting ASC 606 in 2018 is primarily the result of gross versus net presentation of interchange and payment network fees. In 2018, these fees collected on behalf of the payment networks and card issuers will be presented "net" of the amounts paid to them, as opposed to the "gross" presentation for certain of these fees in 2017.  As a result of this change, the Company’s total revenues for the year ending December 31, 2018 are expected to be lower by approximately $1.575 billion to $1.6 billion.  The Company’s diluted EPS for the year ending December 31, 2018 is expected to be lower by approximately $0.03 to $0.04 per share due primarily to changes in revenue recognition for certain contracts in the Issuer Solutions segment. The quantitative ranges provided represent management’s best estimate of the effect of adopting ASC 606 at the time of preparation of this Annual Report on Form 10-K. The actual impact of adopting ASC 606 is subject to change from this estimate, pending the completion of the Company’s assessment in the first quarter of 2018. The adoption of this guidance requires the implementation of new accounting processes, procedures and internal controls over financial reporting surrounding the adoption of the standard, periodic reporting and expanded disclosures. Additionally, the Company implemented a new revenue tool solution to facilitate compliance with the standard.

In preparation for adoption, the Company reviewed the requirements of the new revenue standard, and amendments described above, while following activities of the FASB and the American Institute of Certified Public Accountants (AICPA) for certain interpretive guidance applicable to Information Technology (IT) outsourcers and payment processors. The Company evaluated customer contracts under the new standard for each type of significant revenue stream (and related costs) to evaluate differences from current accounting, as described further below.

Issuer Solutions

Issuer Solutions revenues typically include a performance obligation to provide processing services to financial and non-financial institutions.  The Company has determined that these processing services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.   In many cases, Issuer Solutions arrangements may include additional performance obligations relating to loyalty redemption services and other professional services.  Similar to processing services, the Company has determined that loyalty redemption services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.  Professional services represent performance obligations that are satisfied over time.

The Company has determined that the vast majority of performance obligations to provide processing services and loyalty redemption services meet the allocation of variable consideration exception criteria (“direct allocation”) in that (a) the terms of a variable payment relate specifically to the entity’s efforts to satisfy the performance obligation or transfer the distinct service and (b) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective when considering all of the performance obligations and payment terms in the contract.  As a result, for those performance obligations qualifying for direct allocation, the Company will allocate and recognize variable consideration in the period it has the contractual right to invoice the customer. In certain instances when a performance obligation does not meet the criteria for direct allocation, the Company will recognize revenue either on a straight-line basis or a blended rate method (i.e., the estimated per transaction fee based on estimated total contract revenue and volumes, multiplied by the actual monthly transaction volume) over the term of the contract.  The Company determined that straight-line or blended rate are the most appropriate methods of measuring progress toward completion for performance obligations that do not meet the criteria for direct allocation. For professional services, the Company will recognize revenue based on the labor hours incurred for time and materials projects or on a straight-line basis for fixed fee projects.

For Issuer Solutions contracts that contain multiple performance obligations, the transaction price is allocated to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

The Issuer Solutions segment also enters into licensing arrangements with customers.  Under these arrangements, the Company provides the customer with a term license (functional IP), implementation services and unspecified upgrades and enhancements.  The Company has determined that these promised goods and services represent one combined performance obligation since the individual promised goods or services are not distinct in the context of the contract. The Company will recognize revenue over the contract period, on a straight-line basis, for this performance obligation. For separate performance obligations relating to professional services, revenue will be recognized on a percentage of completion basis.

Merchant Solutions

Merchant Solutions revenues typically include one performance obligation to provide processing services to individual merchants, large financial institutions, other merchant acquirers and merchant organizations.  The Company has determined that merchant processing services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.  Merchant Solutions arrangements also include other promised goods or services (such as point of sale terminals and merchant statement services) that are immaterial in the context of the contract.  As a result, the Company has determined that Merchant Solutions arrangements represent one performance obligation.

The Company has determined that the performance obligations to provide merchant processing services meet the allocation of variable consideration exception criteria (“direct allocation”) in that (a) the terms of a variable payment relate specifically to the entity’s efforts to satisfy the performance obligation or transfer the distinct service and (b) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective when considering all of the performance obligations and payment terms in the contract.  As a result, the Company will allocate and recognize variable consideration in the period it has the contractual right to invoice the customer. 

Gross vs. net presentation considerations for interchange and payment network fees

Interchange and payment network fees are charged by the card associations or payment networks. Depending upon the transaction type, the fees are a percentage of the transaction’s dollar value, a fixed amount, or a combination of the two methods. Interchange and payment network fees primarily relate to the Company’s Issuer Solutions and Merchant Solutions segments. With respect to interchange and payment network fees, the Company evaluated whether it is the principal or the agent.  With the adoption of ASC 606, the Company determined that interchange and payment network fees are not provided in return or exchange for services that the Company controls or acts as the principal, and, therefore, are not part of the consideration paid for its services.  These fees collected on behalf of the payment networks and card issuers will be presented “net” of the amounts paid to them. Accordingly, the Company is acting as an agent and presents the fees collected from merchants on behalf of the payment networks and card issuers net of the amounts paid to them.  In reaching this determination, the Company considered a number of factors including indicators of control such as the party primarily responsible and the party who has discretion in establishing prices.

Netspend

Netspend revenues include one performance obligation to provide account access and facilitate purchase transactions. The Company has determined that Netspend services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.  Further, the Company has determined that the performance obligation to provide account access and facilitate purchase transactions meets the criteria for the “as invoiced” practical expedient in that the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date.  As a result, the Company will recognize revenue in the amount to which the Company has a right to invoice.

Costs to obtain or fulfill a contract

The Company will capitalize the incremental costs of obtaining a contract with a customer if the Company expects to recover those costs. The incremental costs of obtaining a contract are those that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, a sales commission).  

The Company capitalizes the costs incurred to fulfill a contract only if those costs meet all of the following criteria:

a. The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.

b. The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.

c. The costs are expected to be recovered.

The Company will capitalize contract acquisition and fulfillment costs related to signing or renewing long-term contracts and costs related to cash payments for rights to provide processing services.

Contract acquisition and fulfillment cost will be amortized using the straight-line method over the expected period of benefit (ranging from 20 months to seven years or the longer of the contract term) beginning when the client’s cardholder accounts are converted or activated and producing revenues. The amortization of contract acquisition costs associated with cash payments for client incentives will be included as a reduction of revenues in the Company’s Consolidated Statements of Income. The amortization of contract fulfillment costs associated with conversion activity will be recorded as cost of services in the Company’s Consolidated Statements of Income.  The amortization of contract acquisition costs associated with sales commissions that qualify for capitalization will be recorded as selling, general and administrative expense in the Company’s Consolidated Statements of Income. Costs to obtain or fulfill a contract will be classified as contract cost assets in the Company’s Consolidated Balance Sheets.

Other intangible assets

Intangible assets

OTHER INTANGIBLE ASSETS, LICENSED COMPUTER SOFTWARE and ACQUISITION TECHNOLOGY INTANGIBLES

OTHER INTANGIBLE ASSETS: Identifiable intangible assets relate primarily to merchant relationships, customer relationships, databases, channel relationships, covenants-not-to-compete, trade names and trade associations resulting from acquisitions. These identifiable intangible assets are amortized using the straight-line method over periods not exceeding the estimated useful lives, which range from three to ten years. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with GAAP. Amortization expenses are charged to selling, general and administrative expenses in the Company's Consolidated Statements of Income.

Licensed computer software

Intangible assets

OTHER INTANGIBLE ASSETS, LICENSED COMPUTER SOFTWARE and ACQUISITION TECHNOLOGY INTANGIBLES

LICENSED COMPUTER SOFTWARE: The Company licenses software from third parties that is used in providing services to clients. Licensed software is obtained through perpetual licenses, term licenses, site licenses and through agreements based on processing capacity. Perpetual and site licenses are amortized using the straight-line method over their estimated useful lives which range from three to ten years. Term licenses are amortized over the term of the agreement. Mainframe software that is licensed based on processing capacity is amortized using a units-of-production basis over the estimated useful life of the software, generally not to exceed ten years. At each balance sheet date, the Company evaluates impairment losses on long-lived assets used in operations in accordance with GAAP.

Acquisition (current) technology intangibles

Intangible assets

OTHER INTANGIBLE ASSETS, LICENSED COMPUTER SOFTWARE and ACQUISITION TECHNOLOGY INTANGIBLES

ACQUISITION TECHNOLOGY INTANGIBLES: These identifiable intangible assets are software technology assets resulting from acquisitions. These assets are amortized using the straight-line method over periods not exceeding their estimated useful lives, which range from five to nine years. GAAP requires that intangible assets with estimated useful lives be amortized over their respective estimated useful lives to their residual values, and reviewed for impairment. Acquisition technology intangibles’ net book values are included in computer software, net in the accompanying balance sheets. Amortization expenses are charged to cost of services in the Company's Consolidated Statements of Income.

XML

Cash and Cash Equivalents (Tables)

12 Months Ended

Dec. 31, 2017

Cash and Cash Equivalents

Schedule of cash and cash equivalent balances

(in thousands)	2017		2016
Cash and cash equivalents in domestic accounts	$	396,577	375,122
Cash and cash equivalents in foreign accounts		53,780	50,232
Total	$	450,357	425,354

XML

Prepaid Expenses and Other Current Assets (Tables)

12 Months Ended

Dec. 31, 2017

Prepaid Expenses and Other Current Assets

Schedule of significant components of prepaid expenses and other current assets

(in thousands)	2017		2016
Prepaid expenses	$	65,159	84,173
Income taxes receivable		41,400	-
R&D state tax credit		22,642	-
Supplies inventory		17,072	17,105
Other		70,292	63,210
Total	$	216,565	164,488

XML

Goodwill (Tables)

12 Months Ended

Dec. 31, 2017

Goodwill

Schedule of gross amount, accumulated impairment losses and changes in carrying value of goodwill by segment

The gross amount and accumulated impairment losses of goodwill as of December 31, 2017 and 2016 are as follows:

	2017
(in thousands)	Issuer Solutions		Merchant Solutions	Netspend	Consolidated
Gross amount	$	99,465	2,132,653	1,035,965	$	3,268,083
Accumulated impairment losses		(1,787)	(2,225)	-		(4,012)
Goodwill, net	$	97,678	2,130,428	1,035,965	$	3,264,071

	2016
	Issuer Solutions		Merchant Solutions	Netspend	Consolidated
Gross amount	$	96,733	2,144,061	1,034,170	$	3,274,964
Accumulated impairment losses		(1,787)	(2,225)	-		(4,012)
Goodwill, net	$	94,946	2,141,836	1,034,170	$	3,270,952

Below are the balances of goodwill as of December 31, 2017 and 2016 along with the related changes in carrying value.

(in thousands)	Issuer Solutions		Merchant Solutions		Netspend		Consolidated
Balance as of December 31, 2015	$	98,090		413,748		1,033,586	$	1,545,424
Netspend tax adjustment		-		-		584		584
TransFirst acquisition		-		1,728,088		-		1,728,088
Currency translation adjustments		(3,144)		-		-		(3,144)
Balance as of December 31, 2016	$	94,946		2,141,836		1,034,170	$	3,270,952
Netspend tax adjustment		-		-		1,795		1,795
TransFirst acquisition adjustments		-		(11,408)		-		(11,408)
Currency translation adjustments		2,732		-		-		2,732
Balance as of December 31, 2017	$	97,678		2,130,428		1,035,965	$	3,264,071

XML

Other Intangible Assets, Net (Tables) - Other intangible assets

12 Months Ended

Dec. 31, 2017

Intangible assets

Schedule of significant components of other intangible assets

Significant components of other intangible assets as of December 31, 2017 and 2016 are summarized as follows:

	2017
(in thousands)	Gross		Accumulated Amortization	Net
Merchant relationships	$	588,000	(147,000)	$	441,000
Channel relationships		439,398	(200,540)		238,858
Customer relationships		167,222	(139,969)		27,253
Trade name		62,468	(58,068)		4,400
Covenants-not-to-compete		29,940	(20,815)		9,125
Database		28,000	(25,200)		2,800
Trade association		10,000	(7,750)		2,250
Favorable lease		3,006	(1,546)		1,460
Total	$	1,328,034	(600,888)	$	727,146

	2016
(in thousands)	Gross		Accumulated Amortization	Net
Merchant relationships	$	588,000	(63,000)	$	525,000
Channel relationships		439,600	(148,815)		290,785
Customer relationships		166,340	(122,465)		43,875
Trade name		62,397	(45,197)		17,200
Covenants-not-to-compete		29,940	(13,869)		16,071
Database		28,000	(19,600)		8,400
Trade association		10,000	(6,750)		3,250
Favorable lease		3,006	(911)		2,095
Total	$	1,327,283	(420,607)	$	906,676

Schedule of weighted average useful life for each component of other intangible assets

The weighted average useful life for each component of other intangible assets, and in total, as of December 31, 2017 is as follows:

	Weighted Average Amortization Period (Years)
Merchant relationships	7.0
Channel relationships	8.6
Customer relationships	8.2
Trade name	3.9
Covenants-not-to-compete	4.3
Database	5.0
Trade association	10.0
Favorable lease	5.1
Total	7.4

Schedule of estimated future amortization expense of other intangible assets

Estimated future amortization expense of other intangible assets as of December 31, 2017 for the next five years is:

(in thousands)
2018	$	162,131
2019		145,457
2020		140,193
2021		119,620
2022		99,420

XML

Intangible Assets - Computer Software, Net (Tables) - Computer Software

12 Months Ended

Dec. 31, 2017

Computer software

Summary of computer software and computer software under license agreements

Computer software as of December 31, 2017 and 2016 is summarized as follows:

(in thousands)	2017		2016
Licensed computer software	$	543,198	513,790
Software development costs		450,789	428,581
Acquisition technology intangibles		239,011	238,211
Total computer software		1,232,998	1,180,582
Less accumulated amortization:
Licensed computer software		360,160	315,591
Software development costs		325,443	307,190
Acquisition technology intangibles		163,680	134,613
Total accumulated amortization		849,283	757,394
Computer software, net	$	383,715	423,188

The Company held the following computer software under license agreements as of December 31, 2017 and 2016:

(in thousands)	2017		2016
Licensed computer software (acquired under license agreements)	$	24,421	23,665
Accumulated amortization		(15,918)	(14,634)
Licensed computer software, net	$	8,503	9,031

Schedule of amortization expense related to computer software

(in thousands)	2017		2016	2015
Amortization expense related to:
Licensed computer software	$	51,247	45,655	41,823
Software development costs		27,461	26,478	22,740
Acquisition technology intangibles		28,267	26,217	16,734

Schedule of weighted average useful life for each component of computer software

The weighted average useful life for each component of computer software, and in total, as of December 31, 2017, is as follows:

	Weighted Average Amortization Period (Years)
Licensed computer software		5.8
Software development costs		6.0
Acquisition technology intangibles		6.1
Total		6.0

Schedule of estimated future amortization expense of licensed computer software, software development costs and acquisition technology intangibles

Estimated future amortization expense of licensed computer software, software development costs and acquisition technology intangibles as of December 31, 2017 for the next five years is:

(in thousands)	Licensed Computer Software		Software Development Costs	Acquisition Technology Intangibles
2018	$	45,008	23,503	25,793
2019		29,007	18,758	25,793
2020		24,388	14,588	20,134
2021		15,638	10,292	3,600
2022		12,606	6,138	-

XML

Property and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2017

Property and Equipment, Net

Schedule of property and equipment balances

(in thousands)	2017		2016
Computer and other equipment	$	424,957	356,358
Buildings and improvements		262,499	246,577
Furniture and other equipment		141,927	141,836
Land		16,195	15,877
Other		724	2,387
Total property and equipment		846,302	763,035
Less accumulated depreciation and amortization		(521,084)	(480,690)
Property and equipment, net	$	325,218	282,345

Schedule of equipment under capital lease arrangements

(in thousands)	2017		2016
Computer and other equipment (acquired under capital lease arrangements)	$	92,553	51,702
Furniture and other equipment (acquired under capital lease arrangements)		5,451	5,412
Total equipment		98,004	57,114
Less accumulated depreciation:
Computer and other equipment		(44,327)	(39,060)
Furniture and other equipment		(4,520)	(3,788)
Total accumulated depreciation		(48,847)	(42,848)
Total equipment, net	$	49,157	14,266

XML

Contract Acquisition Costs, Net (Tables)

12 Months Ended

Dec. 31, 2017

Contract Acquisition Costs, Net

Schedule of significant components, amortization expense, weighted average useful life and estimated future amortization of contract acquisition costs

Significant components of contract acquisition costs as of December 31, 2017 and 2016 are summarized as follows:

(in thousands)	2017		2016
Conversion costs, net of accumulated amortization of $176.4 million and $164.4 million as of 2017 and 2016, respectively	$	139,249	144,173
Payments for processing rights, net of accumulated amortization of $166.3 million and $145.3 million as of 2017 and 2016, respectively		119,416	91,527
Total	$	258,665	235,700

Amortization expense related to contract acquisition costs for the years ended December 31, 2017, 2016 and 2015 is as follows:

(in thousands)		2017	2016	2015
Amortization expense related to:
Conversion costs	$	29,625	28,811	27,392
Payments for processing rights		21,357	19,804	17,039

The weighted average useful life for each component of contract acquisition costs, and in total, as of December 31, 2017 is as follows:

	Weighted Average Amortization Period (Years)
Conversion costs	13.1
Payments for processing rights	16.3
Total	14.7

Estimated future amortization expense of conversion costs and payments for processing rights as of December 31, 2017 for the next five years is:

(in thousands)	Conversion Costs		Payments for Processing Rights
2018	$	36,890	27,211
2019		29,673	24,210
2020		23,475	21,786
2021		21,491	19,275
2022		16,581	15,123

XML

Equity Investments (Tables)

12 Months Ended

Dec. 31, 2017

Equity Method Investments

Summary of TSYS Equity Investments

(in thousands)	2017		2016
CUP Data	$	127,367	101,638
Other		36,151	31,918
Total	$	163,518	133,556

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements (Tables)

12 Months Ended

Dec. 31, 2017

Long-term Borrowings, Capital Lease Obligations and License Agreements

Summary of long-term debt

(in thousands)	2017		2016
3.800% Senior Notes due April 1, 2021 (5 year tranche), net of discount and debt issuance costs1	$	745,000	743,625
4.800% Senior Notes due April 1, 2026 (10 year tranche), net of discount and debt issuance costs1		743,042	742,383
2.375% Senior Notes due June 1, 2018 (5 year tranche), net of discount and debt issuance costs1		549,532	548,615
3.750% Senior Notes due June 1, 2023 (10 year tranche), net of discount and debt issuance costs1		544,780	543,947
LIBOR + 1.500%, unsecured term facility, due February 23, 2021, with quarterly principal and interest payments, net of debt issuance costs		368,645	697,832
LIBOR + 1.300%, unsecured revolving loan, due February 23, 2021, with monthly interest payments on outstanding balances		200,000	70,000
1.380% note payable due December 31, 2017, with monthly interest and principal payments		-	13,853
Total debt		3,150,999	3,360,255
Less current portion		(559,050)	(48,040)
Noncurrent portion of long-term debt	$	2,591,949	3,312,215

¹ As of December 31, 2017 and 2016, the estimated fair values of the Company’s Senior Notes totaled $2.684 billion and $2.678 billion, respectively. The estimated fair values of the Company’s Senior Notes were based on quoted prices in an active market and are considered to be level 1 measurements. 

Schedule of required annual principal payments on long-term debt

Required annual principal payments on long-term debt for the five years subsequent to December 31, 2017 are summarized as follows:

(in thousands)
2018	$	560,000
2019		40,000
2020		40,000
2021		1,230,000
2022		-

Schedule of capital lease obligations and license agreements

(in thousands)	2017		2016
Capital lease obligations	$	37,950	3,748
License agreements		4,865	-
Total capital lease obligations and license agreements		42,815	3,748
Less current portion		(6,762)	(2,687)
Noncurrent portion of capital leases and license agreements	$	36,053	1,061

Schedule of future minimum lease payments under capital leases and license agreements

The future minimum lease payments under capital leases and license agreements as of December 31, 2017 are summarized as follows:

(in thousands)		Capital Leases	License Agreements
2018	$	6,652	1,449
2019		6,204	1,621
2020		6,127	1,275
2021		6,127	691
2022		6,095	39
Thereafter		11,484	-
Total minimum lease payments		42,689	5,075
Less amount representing interest		(4,739)	(210)
Principal minimum lease payments	$	37,950	4,865

XML

Other Current Liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Other Current Liabilities

Schedule of significant components of other current liabilities

(in thousands)	2017		2016
Deferred revenues	$	52,913	40,473
Accrued expenses		38,018	32,861
Accrued third-party commissions		34,276	28,310
Dividends payable		24,886	19,513
Accrued interest		19,330	19,029
Litigation settlements		1,380	20,795
Income taxes payable		185	1,673
Other		107,847	100,605
Total	$	278,835	263,259

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Taxes

Schedule of components of income tax expense

	Years Ended December 31,
(in thousands)	2017		2016	2015
Current income tax expense:
Federal	$	210,550	140,079	139,228
State		20,316	9,218	9,255
Foreign		7,500	4,443	4,762
Total current income tax expense		238,366	153,740	153,245
Deferred income tax (benefit) expense:
Federal		(178,879)	8,393	(2,198)
State		5,093	(65)	442
Foreign		1,298	(893)	(125)
Total deferred income tax (benefit) expense		(172,488)	7,435	(1,881)
Total income tax expense	$	65,878	161,175	151,364

Schedule of components of income before income tax expense

	Years Ended December 31,
(in thousands)	2017		2016	2015
Components of income before income tax expense:
Domestic	$	603,260	454,628	485,191
Foreign		14,302	6,404	8,373
Total income before income tax expense	$	617,562	461,032	493,564

Schedule of reconciliation of income tax expense to amounts computed by applying statutory income tax rate

	Years Ended December 31,
(in thousands)	2017		2016	2015
Computed "expected" income tax expense	$	216,147	161,425	173,911
Increase (decrease) in income tax expense resulting from:
International tax rate differential and equity income		11,953	8,715	8,367
State income tax expense, net of federal income tax effect		12,470	9,127	7,101
Increase (decrease) in valuation allowance		8,230	2,855	(517)
Tax credits		(20,998)	(15,695)	(28,831)
Share-based compensation		(14,310)	—	—
Deduction for domestic production activities		(17,150)	(12,950)	(11,550)
Re-measurement of deferred tax asset / deferred tax liability		(146,093)	—	—
Permanent differences and other, net		15,629	7,698	2,883
Total income tax expense	$	65,878	161,175	151,364

Schedule of significant components of net deferred tax liability

	As of December 31,
(in thousands)	2017		2016
Deferred income tax assets:
Net operating loss and income tax credit carryforwards	$	35,089	34,490
Allowances for doubtful accounts and billing adjustments		852	1,512
Deferred revenue		17,813	27,461
Share-based compensation		15,170	25,497
Foreign currency translation		—	4,019
Other, net		14,915	38,341
Total deferred income tax assets		83,839	131,320
Less valuation allowance for deferred income tax assets		(29,531)	(21,301)
Net deferred income tax assets		54,308	110,019
Deferred income tax liabilities:
Excess tax over financial statement depreciation		(43,056)	(63,432)
Computer software development costs		(48,244)	(80,837)
Purchased intangibles		(42,467)	(344,547)
Foreign currency translation		(942)	—
Partnership interests		(143,908)	(18,776)
Other, net		(7,917)	(14,924)
Total deferred income tax liabilities		(286,534)	(522,516)
Net deferred income tax liabilities	$	(232,226)	(412,497)
Total net deferred tax assets (liabilities):
Noncurrent deferred tax asset	$	6,091	7,055
Noncurrent deferred tax liability		(238,317)	(419,552)
Net deferred tax liability	$	(232,226)	(412,497)

Schedule of reconciliation of unrecognized tax liabilities

	Years Ended December 31,
(in millions)		2017	2016	2015
Beginning balance	$	16.5	13.1	6.7
Current activity:
Additions based on tax positions related to current year		4.9	3.4	2.3
Additions for tax positions of prior years		4.6	3.0	4.7
Reductions for tax positions of prior years		—	—	(0.6)
Decreases resulting from settlements with tax authorities		(2.2)	(3.0)	—
Net current activity		7.3	3.4	6.4
Ending balance	$	23.8	16.5	13.1

¹ Unrecognized state tax liabilities are not adjusted for the federal tax impact.

XML

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies

Schedule of future minimum lease payments under noncancelable operating leases and purchase commitments

The future minimum lease payments under noncancelable operating leases and purchase commitments with remaining terms greater than one year for the next five years and thereafter and in the aggregate as of December 31, 2017, are as follows:

(in thousands)
2018	$	145,866
2019		148,006
2020		71,651
2021		38,803
2022		28,095
Thereafter		77,555
Total future minimum commitment payments	$	509,976

XML

Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2017

Employee Benefit Plans

Schedule of contributions to plans charged to expense

(in thousands)	2017		2016	2015
TSYS Retirement Savings Plan	$	23,113	21,077	24,169
TSYS Stock Purchase Plan		1,600	1,514	1,378

XML

Equity (Tables)

12 Months Ended

Dec. 31, 2017

Equity

Summary of equity compensation plans by category

	(a)	(b)		(c)
(in thousands, except per share data)                                                                                                    Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted- average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
Equity compensation plans approved by security holders	4,561	$ 37.15	1	14,888	2

The Company does not have any equity compensation plans that were not approved by security holders.

¹ Weighted-average exercise price represents 2.7 million options only and does not include restricted share units that have no exercise price.

² Shares available for future grants under the Total System Services, Inc. 2017 Omnibus Plan, which could be in the form of options, nonvested awards and performance shares.

XML

Share-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2017

Share-based Compensation

Summary of status and changes for nonvested shares

	2017			2016			2015
(in thousands, except per share data)                                                                   Nonvested shares	Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value
Outstanding at beginning of year	863	$	37.78	1,146	$	31.11	1,769	$	26.75
Granted	329		55.06	363		46.23	388		38.38
Vested	(458)		36.01	(563)		29.95	(930)		26.05
Forfeited/canceled/adjusted	(100)		43.82	(84)		36.79	(81)		28.78
Outstanding at end of year	634	$	47.19	863	$	37.78	1,146	$	31.11

Summary of awards authorized and status and changes for performance and market based nonvested shares

A summary of the awards authorized in each year is below:

	Total Number of Shares Awarded1	Potential Number of Performance-and Market-Based Shares to be Vested2	Year Potential Performance-and Market-Based Shares Will Fully Vest3
2017	319,811	596,192	2020
2016	531,700	903,364	2019
2015	383,814	687,015	2018

¹ Shares awarded does not include dividend equivalents

² Includes dividend equivalents

³ Represents year in which authorized performance and market-based shares will fully vest if they had been granted during 2017, 2016, and 2015, respectively.

A summary of the status of TSYS' performance- and market-based nonvested shares as of December 31, 2017, 2016 and 2015 and changes during those periods are presented below:

	2017			2016			2015
(in thousands, except per share data)                                                                 Performance- and market-based nonvested shares	Shares1	Weighted Average Grant Date Fair Value		Shares1	Weighted Average Grant Date Fair Value		Shares1	Weighted Average Grant Date Fair Value
Outstanding at beginning of year	982	$	33.43	918	$	31.19	766	$	25.86
Granted	618		52.48	540		45.91	384		36.84
Vested	(621)		14.85	(140)		37.91	(241)		22.92
Forfeited/canceled/adjusted	(174)		46.98	(336)		37.70	9		22.20
Outstanding at end of year	805	$	45.41	982	$	33.43	918	$	31.19

¹ Includes dividend equivalents

Summary of weighted average assumptions, and weighted average fair value of options

	2017			2016			2015
Number of options granted		550,527		687,685			613,473
Weighted average exercise price	$	54.97		47.01		$	39.01
Risk-free interest rate		1.78	%	1.24	%		1.73	%
Expected volatility		21.72	%	21.53	%		20.80	%
Expected term (years)		4.6		4.5			6.3
Dividend yield		0.73	%	0.86	%		1.04	%
Weighted average fair value	$	10.85		8.50		$	8.27

Summary of stock option activity, changes, remaining contractual life and intrinsic value

	2017			2016			2015
Options:                                                                (in thousands, except per share data)	Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price
Outstanding at beginning of year	2,996	$	32.78	2,887	$	28.07	4,892	$	23.83
Granted	551		54.97	688		47.01	613		39.01
Exercised	(730)		30.05	(500)		23.43	(2,586)		22.68
Forfeited/canceled	(122)		52.76	(79)		43.49	(32)		20.79
Outstanding at end of year	2,695	$	37.15	2,996	$	32.78	2,887	$	28.07
Options exercisable at year-end	1,758	$	31.00	1,877	$	28.45	1,439	$	25.17
Weighted average fair value of options granted during the year		$	10.85		$	8.50		$	8.27

As of December 31, 2017 the average remaining contractual life and intrinsic value of TSYS’ outstanding and exercisable stock options were as follows:

	Outstanding		Exercisable
Average remaining contractual life (in years)		6.9	6.1
Aggregate intrinsic value (in thousands)	$	112,964	84,572

Summary of options exercised for shares of common stock

(in thousands)	Options Exercised and Issued from Treasury	Intrinsic Value
2017	730	$	23,629
2016	500		12,984
2015	2,586		67,702

Nonvested Share Awards

Share-based Compensation

Summary of shares granted

	2017		2016	2015
Number of shares granted		329,051	362,804	388,211
Market value (in millions)	$	18.1	16.8	14.9

Market Based Share Awards

Share-based Compensation

Summary of shares granted

Year Awarded	Performance Period Ending	Performance Measure	Number of Shares Granted	Period Expensed Through
2017	December 2019	TSR	44,275	December 2019
2016	December 2017	TSR	6,403	December 2017
2016	December 2018	TSR	52,404	December 2018
2015	July 2016, 2017 and 2018	TSR	25,000	July 2018
2015	December 2017	TSR	57,982	December 2017

Performance Based Awards

Share-based Compensation

Summary of shares granted

Year Awarded	Performance Period Ending	Performance Measure	Number of Shares Granted	Period Expensed Through
2017	December 2019	Adjusted Diluted EPS1	103,297	December 2019
2017	December 2017	Net Revenue and Adjusted Diluted EPS1	146,094	December 2019
2017	December 2017	Issuer Solutions Segment Net Revenue and Adjusted Segment Operating Income2	26,145	December 2019
2016	December 2016	Revenues before Reimbursable Items4 and Adjusted EPS3	15,605	December 2016
2016	December 2017	Adjusted EPS3	14,940	December 2017
2016	December 2018	Merchant Segment Net Revenue, Corporate Accountability Operating Income (CAOI)2 and attainment of synergies from TransFirst acquisition	29,332	December 2018
2016	December 2018	Revenue Growth and CAOI Growth2	67,517	December 2018
2016	December 2018	Merchant Segment Net Revenue and CAOI2	78,220	December 2018
2016	December 2018	Adjusted EPS3	122,284	December 2018
2016	December 2016	Revenues before Reimbursable Items4 and Adjusted EPS3	144,995	December 2018
2015	December 2017	Adjusted EPS3	135,289	December 2017
2015	December 2015	Revenues before Reimbursable Items4 and Adjusted EPS3	165,543	December 2018

¹ Adjusted Diluted EPS is adjusted earnings divided by weighted average diluted shares outstanding used for diluted EPS calculations.Adjusted earnings is net income excluding the after-tax impact of share-based compensation expenses, amortization of acquisition intangibles, merger and acquisition expenses for completed acquisitions and litigation claims, judgments or settlement expenses and related legal expenses.

² CAOI is adjusted segment operating income and includes corporate administrative expenses. Adjusted segment operating income is defined in Note 20.

³ Adjusted EPS is adjusted earnings divided by weighted average shares outstanding used for basic EPS.

⁴ Revenues before Reimbursable Items is total revenue less reimbursable items which consist of out-of-pocket expenses which are reimbursed by the Company’s clients. These expenses consist primarily of postage, access fees and third-party software.

XML

Treasury Stock (Tables)

12 Months Ended

Dec. 31, 2017

Treasury Stock

Summary of shares held as treasury stock and related carrying value

The following table summarizes shares held as treasury stock and their related carrying value as of December 31:

(in thousands)	Number of Treasury Shares	Treasury Shares Cost
2017	21,862	$	909,960
2016	19,314		646,047
2015	19,988		641,664

Summary of repurchases under stock repurchase plan by year

(in thousands, except per share data)	Total Number of Shares Purchased	Average Price Paid per Share		Repurchased Shares Cost
2017	3,850	$	73.41	$	282,645
2016	500		48.57		24,287
2015	5,150		47.01		242,085

Schedule of purchases of common stock on a monthly basis

The following table sets forth information regarding the Company's purchases of its common stock on a monthly basis during the three months ended December 31, 2017:

(in thousands, except per share data)	Total Number of Shares Purchased		Average Price Paid per Share1		Total Number of Cumulative shares Purchased as Part of Publicly announced Plans or Programs2	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs2
October 2017	300		$	71.26	6,350	13,650
November 2017	1,500			73.05	7,850	12,150
December 2017	1,667	1		75.22	9,500	10,500
Total	3,467	3	$	73.41

¹ Denotes a total of 16,837 shares (not rounded) in December withheld for payment of taxes.

² In January 2015, TSYS’ Board of Directors approved a stock repurchase plan to repurchase up to 20 million shares of TSYS stock.   The shares may be purchased from time to time at prices considered appropriate.  There is no expiration date for the plan.

³ Total number of shares purchased amounts may not total due to rounding.

XML

Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Dec. 31, 2017

Other Comprehensive Income (Loss)

Schedule of income tax effects allocated to and cumulative balance of each component of accumulated other comprehensive income (loss)

(in thousands)	Beginning Balance		Pretax Amount	Tax Effect	Net-of-tax Amount		Ending Balance
As of December 31, 2014	$	3,749	(17,280)	(1,605)	(15,675)	$	(11,926)
Foreign currency translation adjustments	$	(13,592)	(22,997)	(1,548)	(21,449)	$	(35,041)
Transfer from noncontrolling interest (NCI)		28	-	-	-		28
Gain on available for sale securities		1,105	2,177	779	1,398		2,503
Change in AOCI related to postretirement healthcare plans		533	(2,449)	(882)	(1,567)		(1,034)
As of December 31, 2015	$	(11,926)	(23,269)	(1,651)	(21,618)	$	(33,544)
Foreign currency translation adjustments	$	(35,041)	(36,341)	(5,872)	(30,469)	$	(65,510)
Transfer from NCI		28	-	-	-		28
Gain on available for sale securities		2,503	11,394	4,035	7,359		9,862
Change in AOCI related to postretirement healthcare plans		(1,034)	775	279	496		(538)
As of December 31, 2016	$	(33,544)	(24,172)	(1,558)	(22,614)	$	(56,158)
Foreign currency translation adjustments	$	(65,510)	24,794	2,776	22,018	$	(43,492)
Transfer from NCI		28	-	-	-		28
Loss on available for sale securities		9,862	(2,050)	(634)	(1,416)		8,446
Change in AOCI related to postretirement healthcare plans		(538)	(682)	(90)	(592)		(1,130)
As of December 31, 2017	$	(56,158)	22,062	2,052	20,010	$	(36,148)

XML

Segment Reporting, including Geographic Area Data and Major Customers (Tables)

12 Months Ended

Dec. 31, 2017

Segment Reporting, including Geographic Area Data and Major Customers

Schedule of operating income and revenue by segment

Operating Segments	Years Ended December 31,
(in thousands)		2017	2016	2015
Adjusted operating income by segment:
Issuer Solutions (a)	$	574,580	525,025	489,151
Merchant Solutions (b)		391,466	307,595	150,225
Netspend (c)		182,082	160,371	137,837
Corporate Administration and Other		(148,564)	(135,996)	(109,036)
Adjusted segment operating income1 (d)		999,564	856,995	668,177
Less:
Share-based compensation		42,409	43,728	41,549
TransFirst and Cayan M&A and integration expenses2		13,367	28,176	-
Litigation, claims, judgments or settlements		1,947	21,719	-
Acquisition intangible amortization		207,797	189,990	92,521
Operating income		734,044	573,382	534,107
Nonoperating expenses, net		(116,482)	(112,350)	(40,543)
Income before income taxes and equity in income of equity investments	$	617,562	461,032	493,564
Net revenue by segment:
Issuer Solutions (e)	$	1,594,959	1,515,462	1,473,914
Merchant Solutions (f)		1,103,682	898,533	474,040
Netspend (g)		746,870	663,579	580,377
Segment net revenue		3,445,511	3,077,574	2,528,331
Less: intersegment revenues		45,179	35,698	28,982
Net revenue3 (h)		3,400,332	3,041,876	2,499,349
Add: reimbursable items, interchange and payment network fees		1,527,633	1,128,201	280,192
Total revenues	$	4,927,965	4,170,077	2,779,541
Adjusted segment operating margin on net revenue:
Issuer Solutions (a)/(e)		36.0%	34.6%	33.2%
Merchant Solutions (b)/(f)		35.5%	34.2%	31.7%
Netspend (c)/(g)		24.4%	24.2%	23.7%
Adjusted segment operating margin on net revenue (d)/(h)		29.4%	28.2%	26.7%

¹ Adjusted segment operating income excludes acquisition intangible amortization, TransFirst and Cayan M&A and integration expenses, share-based compensation and expenses associated with Corporate Administration and Other.

² Excludes share-based compensation

³ Net revenue is total revenues less reimbursable items (such as postage), as well as, merchant acquiring interchange and payment network fees charged by the card associations or payment networks that are recorded by TSYS as expense.  Adjusted segment operating income excludes acquisition intangible amortization, TransFirst and Cayan M&A expenses, share-based compensation and expenses associated with Corporate Administration and Other.

Schedule of depreciation expense by segment

Operating Segments	Years Ended December 31,
(in thousands)		2017	2016	2015
Depreciation and amortization:
Issuer Solutions	$	147,914	141,309	134,436
Merchant Solutions		29,477	25,553	18,268
Netspend		15,838	13,133	10,686
Segment depreciation and amortization		193,229	179,995	163,390
Acquisition intangible amortization		207,797	189,990	92,521
Corporate Administration and Other		4,880	3,561	2,353
Total depreciation and amortization	$	405,906	373,546	258,264

Schedule of total assets by segment

	As of December 31,
(in thousands)	2017		2016
Issuer Solutions	$	5,735,195	5,667,280
Merchant Solutions		3,136,395	3,295,509
Netspend		1,418,644	1,474,595
Intersegment assets		(3,958,545)	(4,071,207)
Total assets	$	6,331,689	6,366,177

Schedule of property and equipment, net by geographic area

	As of
(in thousands)	December 31, 2017		December 31, 2016
United States	$	273,690	236,913
Europe		43,586	38,866
Other		7,942	6,566
Total	$	325,218	282,345

Schedule of reconciliation of geographic revenues to external revenues by operating segment

	2017
(in thousands)	Issuer         Solutions		Merchant Solutions	Netspend	Total		Percentage of Revenues
United States	$	1,051,292	2,428,327	745,235	$	4,224,854	85.7	%
Europe1		320,400	284	-		320,684	6.5
Canada1		313,674	1,496	-		315,170	6.4
Other1		66,102	1,155	-		67,257	1.4
Total	$	1,751,468	2,431,262	745,235	$	4,927,965	100.0	%

	2016
(in thousands)	Issuer                    Solutions		Merchant Solutions	Netspend	Total		Percentage of Revenues
United States	$	1,032,381	1,826,775	660,845	$	3,520,001	84.4	%
Europe1		306,894	227	-		307,121	7.4
Canada1		284,028	705	-		284,733	6.8
Other1		57,460	762	-		58,222	1.4
Total	$	1,680,763	1,828,469	660,845	$	4,170,077	100.0	%

	2015
(in thousands)	Issuer                    Solutions		Merchant Solutions	Netspend	Total		Percentage of Revenues
United States	$	981,588	548,079	580,377	$	2,110,044	75.9	%
Europe1		304,628	22	-		304,650	11.0
Canada1		288,728	355	-		289,083	10.4
Other1		75,085	679	-		75,764	2.7
Total	$	1,650,029	549,135	580,377	$	2,779,541	100.0	%

1Certain of these revenues are impacted by movements in foreign currency exchange rates.

XML

Acquisitions (Tables) - TransFirst

12 Months Ended

Dec. 31, 2017

Summary of consideration paid and recognized identifiable assets acquired and liabilities assumed

The following table summarizes the consideration paid for TransFirst and the initially recognized amounts of the identifiable assets acquired and liabilities assumed on April 1, 2016 (the acquisition date).

(in thousands)
Consideration
Cash	$	2,351,400
Fair value of total consideration transferred	$	2,351,400
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	5,907
Accounts receivable, net		62,313
Property, equipment and software		12,726
Identifiable intangible assets		814,131
Deferred tax asset		2,244
Other assets		7,509
Deferred tax liability		(224,654)
Other liabilities		(56,864)
Total identifiable net assets		623,312
Goodwill		1,728,088
Total identifiable assets acquired and liabilities assumed	$	2,351,400

Schedule of estimated fair value of identifiable intangible assets acquired and weighted average useful lives

(inmillions)		Fair Value	Weighted Average Useful Life (in years)
Merchant relationships	$	588.0	7.0
Channel relationships		121.0	10.0
Current technology		72.0	5.0
Trade name		16.0	1.0
Covenants not-to-compete		15.0	3.0
Favorable lease		2.1	5.6
Total acquired identifiable intangible assets	$	814.1	7.1

XML

Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2017

Earnings Per Share

Schedule of basic and diluted EPS

	2017		2016		2015
(in thousands, except per share data)	Common Stock		Common Stock		Common Stock
Basic EPS:
Net income attributable to TSYS common shareholders	$	586,185		319,638		364,044
Less income allocated to nonvested awards		(1,373)		(1,557)		(3,164)
Net income allocated to common stock for EPS calculation (a)	$	584,812		318,081		360,880
Average common shares outstanding (b)		183,309		182,744		182,465
Basic EPS (a)/(b)	$	3.19		1.74		1.98
Diluted EPS:
Net income attributable to TSYS common shareholders	$	586,185		319,638		364,044
Less income allocated to nonvested awards		(1,373)		(1,557)		(3,148)
Add income allocated to nonvested awards1		1,373		1,557		-
Net income allocated to common stock for EPS calculation (c)	$	586,185		319,638		360,896
Average common shares outstanding		183,309		182,744		182,465
Increase due to assumed issuance of shares related to common equivalent shares outstanding		1,162		813		1,157
Average nonvested awards1		959		891		-
Average common and common equivalent shares outstanding (d)		185,430		184,448		183,622
Diluted EPS (c)/(d)	$	3.16		1.73		1.97

¹ In accordance with the diluted EPS guidance under the two-class method, the Company uses the approach-either the treasury stock method or the two-class method assuming a participating security is not exercised- that is more dilutive. In 2017 and 2016, the Company used the two-class method. In 2015, the Company used the treasury stock method.

	2017		2016		2015
(in thousands, except per share data)	Participating Securities		Participating Securities		Participating Securities
Basic EPS:
Net income allocated to nonvested awards (a)	$	1,373		1,557		3,164
Nonvested awards (b)		435		911		1,617
Basic EPS (a)/(b)	$	3.16		1.71		1.96
Diluted EPS:
Net income allocated to nonvested awards (c)	$	1,366		1,552		3,148
Average common and common equivalent shares outstanding (d)		435		911		1,617
Diluted EPS (c)/(d)	$	3.14		1.70		1.95

XML

Basis of Presentation and Summary of Significant Accounting Policies - Operating Segments (Details)	12 Months Ended
	Dec. 31, 2017 segment
Basis of Presentation and Summary of Significant Accounting Policies
Operating segments	3

XML

Basis of Presentation and Summary of Significant Accounting Policies - Discontinued Operations (Details) - GP Network Corporation and TSYS Japan Godo Kaisha - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2015
Discontinued operations, for sale | GP Network Corporation
Discontinued operations
Ownership prior to sale of stock (as a percent)	54.00%
Discontinued operations, for sale | TSYS Japan Godo Kaisha
Discontinued operations
Ownership prior to sale of stock (as a percent)	100.00%
Discontinued operations, sold
Discontinued operations
Additional gain recorded		$ 1.4

XML

Basis of Presentation and Summary of Significant Accounting Policies - Goodwill (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Basis of Presentation and Summary of Significant Accounting Policies
Equity investment goodwill	$ 48.8	$ 46.1

XML

Basis of Presentation and Summary of Significant Accounting Policies - Estimated Useful Lives of Other Intangible Assets and Computer Software Intangible Assets (Details)	12 Months Ended
	Dec. 31, 2017
Other intangible assets | Minimum
Computer software
Estimated useful life	3 years
Other intangible assets | Maximum
Computer software
Estimated useful life	10 years
Computer software under perpetual and site licenses | Minimum
Computer software
Estimated useful life	3 years
Computer software under perpetual and site licenses | Maximum
Computer software
Estimated useful life	10 years
Mainframe software license | Maximum
Computer software
Estimated useful life	10 years
Acquisition (current) technology intangibles | Minimum
Computer software
Estimated useful life	5 years
Acquisition (current) technology intangibles | Maximum
Computer software
Estimated useful life	9 years
Software development costs, client use | Minimum
Computer software
Estimated useful life	3 years
Software development costs, client use | Maximum
Computer software
Estimated useful life	10 years
Software development costs, internal use | Minimum
Computer software
Estimated useful life	3 years
Software development costs, internal use | Maximum
Computer software
Estimated useful life	10 years

XML

Basis of Presentation and Summary of Significant Accounting Policies - Estimated Useful lives of Property and Equipment (Details)	12 Months Ended
	Dec. 31, 2017
Buildings and improvements | Minimum
Property and equipment
Estimated useful life	5 years
Buildings and improvements | Maximum
Property and equipment
Estimated useful life	40 years
Computer and other equipment | Minimum
Property and equipment
Estimated useful life	2 years
Computer and other equipment | Maximum
Property and equipment
Estimated useful life	5 years
Furniture and other equipment | Minimum
Property and equipment
Estimated useful life	3 years
Furniture and other equipment | Maximum
Property and equipment
Estimated useful life	15 years

XML

Basis of Presentation and Summary of Significant Accounting Policies - Equity Method Investments (Details)	Dec. 31, 2017
TSYS de Mexico
Equity method investments
Equity method investment ownership (as a percent)	49.00%
China Union Pay Data Co., Ltd
Equity method investments
Equity method investment ownership (as a percent)	44.56%

XML

Basis of Presentation and Summary of Significant Accounting Policies - Loss Provisions (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Merchant losses
Loss provisions
Accrual for losses	$ 4.3	$ 2.0
Other current liabilities | Transaction processing contract contingencies (performance penalties) and processing errors
Loss provisions
Accrual for losses	2.2	2.9
Other current liabilities | Cardholder losses
Loss provisions
Accrual for losses	$ 9.5	$ 10.5

XML

Basis of Presentation and Summary of Significant Accounting Policies - Revenue (Details)	12 Months Ended
	Dec. 31, 2017
Revenue
Account life for GPR cards	6 months
Minimum | Merchant contract
Revenue
Term of contract	30 days
Minimum | Merchant processing contracts
Revenue
Term of contract	3 years
Maximum | Merchant contract
Revenue
Term of contract	5 years
Maximum | Merchant processing contracts
Revenue
Term of contract	8 years

XML

Basis of Presentation and Summary of Significant Accounting Policies - Forfeiture Rates of Share-Based Awards and Advertising Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Advertising
Advertising expenses	$ 13.2	$ 11.5	$ 9.6
Executive officers
Share-based Compensation
Estimated forfeiture rate	0.00%
Other employees
Share-based Compensation
Estimated forfeiture rate	8.00%

XML

Basis of Presentation and Summary of Significant Accounting Policies - Reclassification of Private Equity Investments (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Equity method investments
Other assets	$ 124,021	$ 84,016
Equity investments	$ 163,518	133,556
Atlanta-based venture capital fund limited partnership private equity
Equity method investments
Equity investments		24,500
Atlanta-based venture capital fund limited partnership private equity | Reclassification adjustment
Equity method investments
Other assets		$ (24,500)

XML

Basis of Presentation and Summary of Significant Accounting Policies - ASU 2016-19 Technical Corrections Related to Intangibles (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Prospective adoption
Assets from acquired software	$ 1,232,998	$ 1,180,582
ASU 2016-19 Technical Corrections
Prospective adoption
Assets from acquired software	13,900
Amortization expense	$ 5,300

XML

Basis of Presentation and Summary of Significant Accounting Policies - Adoption of ASU 2016-09 - Improvements to Employee Share-Based Payment Accounting (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Statement
Provision for income taxes	$ (65,878)	$ (161,175)	$ (151,364)
Statement of Cash Flows
Net cash provided by operating activities	856,492	718,029	602,034
Net cash used in financing activities	638,725	$ (1,822,190)	$ 290,754
ASU 2016-09 Improvements to Employee Share-Based Payment Accounting
Income Statement
Provision for income taxes	14,300
Statement of Cash Flows
Net cash provided by operating activities	14,300
Net cash used in financing activities	$ 14,300

XML

Basis of Presentation and Summary of Significant Accounting Policies - Restricted Cash (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Basis of Presentation and Summary of Significant Accounting Policies
Restricted cash	$ 1.0	$ 0.5	$ 0.2

XML

Basis of Presentation and Summary of Significant Accounting Policies - Adoption of ASU 2016-09 - Adoption of New Revenue Standard (Details) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($) $ / shares	Dec. 31, 2017 USD ($) item $ / shares	Dec. 31, 2016 USD ($) $ / shares	Dec. 31, 2015 USD ($) $ / shares	Jan. 01, 2018 USD ($)
Adoption of Accounting Standards Updates
Retained earnings		$ 3,004,018	$ 2,502,222
Total revenues		$ 4,927,965	$ 4,170,077	$ 2,779,541
Diluted EPS | $ / shares		$ 3.16	$ 1.73	$ 1.97
Number of methods to calculate interchange and payment network fees | item		2
Minimum
Adoption of Accounting Standards Updates
Expected period of benefit of contract with customer		20 months
Maximum
Adoption of Accounting Standards Updates
Expected period of benefit of contract with customer		7 years
Licensing arrangements with customers
Adoption of Accounting Standards Updates
Number of performance obligations | item		1
Merchant processing contracts
Adoption of Accounting Standards Updates
Number of performance obligations | item		1
Provide account access and facilitate purchase transactions
Adoption of Accounting Standards Updates
Number of performance obligations | item		1
Difference between Revenue Guidance in Effect before and after Topic 606 | Expected | Minimum | Accounting Standards Update 2014-09
Adoption of Accounting Standards Updates
Retained earnings					$ 1,000
Total revenues	$ (1,575,000)
Diluted EPS | $ / shares	$ (0.03)
Difference between Revenue Guidance in Effect before and after Topic 606 | Expected | Maximum | Accounting Standards Update 2014-09
Adoption of Accounting Standards Updates
Retained earnings					$ 4,000
Total revenues	$ (1,600,000)
Diluted EPS | $ / shares	$ (0.04)

XML

Fair Value Measurement - Changes in Fair Value Levels (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Fair Value Measurement
Asset transfers out of Level 1 into Level 2	$ 0	$ 0	$ 0
Asset transfers out of Level 2 into Level 1	0	0	0
Asset transfers into (out of) Level 3	0	0	0
Liability transfers out of Level 1 into Level 2	0	0	0
Liability transfers out of Level 2 into Level 1	0	0	0
Liability transfers into (out of) Level 3	$ 0	$ 0	$ 0

XML

Fair Value Measurement - Goodwill and Impairment Testing (Details) - USD ($) $ in Thousands	May 31, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Fair Value Measurement
Goodwill		$ 3,264,071	$ 3,270,952	$ 1,545,424
Impairment of goodwill	$ 0

XML

Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash and Cash Equivalents
Cash and cash equivalents in domestic accounts	$ 396,577	$ 375,122
Cash and cash equivalents in foreign accounts	53,780	50,232
Cash and cash equivalents	$ 450,357	$ 425,354	$ 389,328	$ 289,183

XML

Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Prepaid Expenses and Other Current Assets
Prepaid expenses	$ 65,159	$ 84,173
Income taxes receivable	41,400
R and D state tax credit	22,642
Supplies inventory	17,072	17,105
Other	70,292	63,210
Total	$ 216,565	$ 164,488

XML

Goodwill - Changes from Acquisitions (Details) - USD ($)	9 Months Ended	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
TransFirst
Goodwill
Goodwill recorded from acquisition			$ 1,728,088,000
Goodwill adjustment	$ 20,400,000
NetSpend, Inc.
Goodwill
Tax adjustment (increase) decrease to goodwill		$ (1,795,000)	(584,000)	$ (627,000)
Merchant Solutions
Goodwill
Goodwill adjustment		727,000
Merchant Solutions | TransFirst
Goodwill
Goodwill recorded from acquisition			$ 1,728,088,000
Tax adjustment (increase) decrease to goodwill		12,100,000
Goodwill adjustment		$ 727,000

XML

Goodwill - Gross Amount and Accumulated Impairment Losses by Segment (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Goodwill
Gross amount	$ 3,268,083	$ 3,274,964
Accumulated impairment losses	(4,012)	(4,012)
Goodwill, net	3,264,071	3,270,952	$ 1,545,424
Issuer Solutions
Goodwill
Gross amount	99,465	96,733
Accumulated impairment losses	(1,787)	(1,787)
Goodwill, net	97,678	94,946	98,090
Merchant Solutions
Goodwill
Gross amount	2,132,653	2,144,061
Accumulated impairment losses	(2,225)	(2,225)
Goodwill, net	2,130,428	2,141,836	413,748
Netspend
Goodwill
Gross amount	1,035,965	1,034,170
Goodwill, net	$ 1,035,965	$ 1,034,170	$ 1,033,586

XML

Goodwill - Changes in Carrying Value by Segment (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Goodwill
Balance	$ 3,270,952,000	$ 1,545,424,000
Currency translation adjustments	2,732,000	(3,144,000)
Balance	3,264,071,000	3,270,952,000	$ 1,545,424,000
NetSpend, Inc.
Goodwill
Tax adjustment	1,795,000	584,000	627,000
TransFirst
Goodwill
Acquisition		1,728,088,000
Acquisition adjustments	(11,408,000)
Issuer Solutions
Goodwill
Balance	94,946,000	98,090,000
Currency translation adjustments	2,732,000	(3,144,000)
Balance	97,678,000	94,946,000	98,090,000
Merchant Solutions
Goodwill
Balance	2,141,836,000	413,748,000
Balance	2,130,428,000	2,141,836,000	413,748,000
Merchant Solutions | TransFirst
Goodwill
Tax adjustment	(12,100,000)
Acquisition		1,728,088,000
Acquisition adjustments	(11,408,000)
Netspend
Goodwill
Balance	1,034,170,000	1,033,586,000
Balance	1,035,965,000	1,034,170,000	$ 1,033,586,000
Netspend | NetSpend, Inc.
Goodwill
Tax adjustment	$ 1,795,000	$ 584,000

XML

Other Intangible Assets, Net - Significant Components (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Intangible assets
Other intangible assets, Gross	$ 1,328,034	$ 1,327,283
Other intangible assets, Accumulated Amortization	(600,888)	(420,607)
Other intangible assets, Net	727,146	906,676
Merchant relationships
Intangible assets
Other intangible assets, Gross	588,000	588,000
Other intangible assets, Accumulated Amortization	(147,000)	(63,000)
Other intangible assets, Net	441,000	525,000
Channel relationships
Intangible assets
Other intangible assets, Gross	439,398	439,600
Other intangible assets, Accumulated Amortization	(200,540)	(148,815)
Other intangible assets, Net	238,858	290,785
Customer relationships
Intangible assets
Other intangible assets, Gross	167,222	166,340
Other intangible assets, Accumulated Amortization	(139,969)	(122,465)
Other intangible assets, Net	27,253	43,875
Trade name
Intangible assets
Other intangible assets, Gross	62,468	62,397
Other intangible assets, Accumulated Amortization	(58,068)	(45,197)
Other intangible assets, Net	4,400	17,200
Covenants not-to-compete
Intangible assets
Other intangible assets, Gross	29,940	29,940
Other intangible assets, Accumulated Amortization	(20,815)	(13,869)
Other intangible assets, Net	9,125	16,071
Database
Intangible assets
Other intangible assets, Gross	28,000	28,000
Other intangible assets, Accumulated Amortization	(25,200)	(19,600)
Other intangible assets, Net	2,800	8,400
Trade association
Intangible assets
Other intangible assets, Gross	10,000	10,000
Other intangible assets, Accumulated Amortization	(7,750)	(6,750)
Other intangible assets, Net	2,250	3,250
Favorable lease
Intangible assets
Other intangible assets, Gross	3,006	3,006
Other intangible assets, Accumulated Amortization	(1,546)	(911)
Other intangible assets, Net	$ 1,460	$ 2,095

XML

Other Intangible Assets, Net - Amortization Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Other intangible assets | Selling, general and administrative expenses
Intangible assets
Amortization related to other intangible assets	$ 179.5	$ 163.8	$ 75.8

XML

Other Intangible Assets, Net - Weighted Average Useful Life (Details)	12 Months Ended
	Dec. 31, 2017
Other intangible assets
Intangible assets
Weighted Average Amortization Period	7 years 4 months 24 days
Merchant relationships
Intangible assets
Weighted Average Amortization Period	7 years
Channel relationships
Intangible assets
Weighted Average Amortization Period	8 years 7 months 6 days
Customer relationships
Intangible assets
Weighted Average Amortization Period	8 years 2 months 12 days
Trade name
Intangible assets
Weighted Average Amortization Period	3 years 10 months 24 days
Covenants not-to-compete
Intangible assets
Weighted Average Amortization Period	4 years 3 months 18 days
Database
Intangible assets
Weighted Average Amortization Period	5 years
Trade association
Intangible assets
Weighted Average Amortization Period	10 years
Favorable lease
Intangible assets
Weighted Average Amortization Period	5 years 1 month 6 days

XML

Other Intangible Assets, Net - Estimated Future Amortization Expense (Details) - Other intangible assets $ in Thousands	Dec. 31, 2017 USD ($)
Intangible assets
2018	$ 162,131
2019	145,457
2020	140,193
2021	119,620
2022	$ 99,420

XML

Intangible Assets - Computer Software, Net - Summary (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Computer software
Computer software, Gross	$ 1,232,998	$ 1,180,582
Computer software, Accumulated Amortization	849,283	757,394
Computer software, Net	383,715	423,188
Licensed computer software
Computer software
Computer software, Gross	543,198	513,790
Computer software, Accumulated Amortization	360,160	315,591
Software development costs
Computer software
Computer software, Gross	450,789	428,581
Computer software, Accumulated Amortization	325,443	307,190
Acquisition (current) technology intangibles
Computer software
Computer software, Gross	239,011	238,211
Computer software, Accumulated Amortization	$ 163,680	$ 134,613

XML

Intangible Assets - Computer Software, Net - License Agreements (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Computer software
Computer software, Gross	$ 1,232,998	$ 1,180,582
Computer software, accumulated amortization	(849,283)	(757,394)
Computer software, Net	383,715	423,188
License Agreements
Computer software
Computer software, Gross	24,421	23,665
Computer software, accumulated amortization	$ (15,918)	$ (14,634)

XML

Intangible Assets - Computer Software, Net - Amortization Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Licensed computer software
Computer software
Amortization expense	$ 51,247	$ 45,655	$ 41,823
Software development costs
Computer software
Amortization expense	27,461	26,478	22,740
Acquisition (current) technology intangibles
Computer software
Amortization expense	$ 28,267	$ 26,217	$ 16,734

XML

Intangible Assets - Computer Software, Net - Weighted Average Useful Life (Details)	12 Months Ended
	Dec. 31, 2017
Computer Software
Computer software
Weighted Average Amortization Period	6 years
Licensed computer software
Computer software
Weighted Average Amortization Period	5 years 9 months 18 days
Software development costs
Computer software
Weighted Average Amortization Period	6 years
Acquisition (current) technology intangibles
Computer software
Weighted Average Amortization Period	6 years 1 month 6 days

XML

Intangible Assets - Computer Software, Net - Estimated Future Amortization Expense (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Licensed computer software
Computer software
2018	$ 45,008
2019	29,007
2020	24,388
2021	15,638
2022	12,606
Software development costs
Computer software
2018	23,503
2019	18,758
2020	14,588
2021	10,292
2022	6,138
Acquisition (current) technology intangibles
Computer software
2018	25,793
2019	25,793
2020	20,134
2021	$ 3,600

XML

Property and Equipment, Net - Balances (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Property and equipment
Property and equipment, gross	$ 846,302	$ 763,035
Less accumulated depreciation and amortization	(521,084)	(480,690)
Property and equipment, net	325,218	282,345
Computer and other equipment
Property and equipment
Property and equipment, gross	424,957	356,358
Buildings and improvements
Property and equipment
Property and equipment, gross	262,499	246,577
Furniture and other equipment
Property and equipment
Property and equipment, gross	141,927	141,836
Land
Property and equipment
Property and equipment, gross	16,195	15,877
Other
Property and equipment
Property and equipment, gross	$ 724	$ 2,387

XML

Property and Equipment, Net - Amounts under Capital Lease Obligations (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Various equipment under capital lease arrangements
Gross	$ 98,004	$ 57,114
Accumulated Amortization	(48,847)	(42,848)
Net	49,157	14,266
Computer and other equipment
Various equipment under capital lease arrangements
Gross	92,553	51,702
Accumulated Amortization	(44,327)	(39,060)
Furniture and other equipment
Various equipment under capital lease arrangements
Gross	5,451	5,412
Accumulated Amortization	$ (4,520)	$ (3,788)

XML

Property and Equipment, Net - Depreciation and Amortization Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Property and Equipment, Net
Depreciation and amortization expense related to property and equipment	$ 68.0	$ 62.5	$ 56.6

XML

Contract Acquisition Costs, Net - Significant Components (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Contractual arrangements
Contract acquisition costs, net of accumulated amortization	$ 258,665	$ 235,700
Contract acquisition costs, accumulated amortization	342,700	309,700
Conversion
Contractual arrangements
Contract acquisition costs, net of accumulated amortization	139,249	144,173
Contract acquisition costs, accumulated amortization	176,400	164,400
Processing rights
Contractual arrangements
Contract acquisition costs, net of accumulated amortization	119,416	91,527
Contract acquisition costs, accumulated amortization	$ 166,300	$ 145,300

XML

Contract Acquisition Costs, Net - Amortization Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Conversion
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Amortization expense related to contract acquisition costs	$ 29,625	$ 28,811	$ 27,392
Processing rights
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Amortization expense related to contract acquisition costs	$ 21,357	$ 19,804	$ 17,039

XML

Contract Acquisition Costs, Net - Weighted Average Useful Life (Details)	12 Months Ended
	Dec. 31, 2017
Contractual arrangements
Weighted average useful life for each component of contract acquisition costs	14 years 8 months 12 days
Conversion
Contractual arrangements
Weighted average useful life for each component of contract acquisition costs	13 years 1 month 6 days
Processing rights
Contractual arrangements
Weighted average useful life for each component of contract acquisition costs	16 years 3 months 18 days

XML

Contract Acquisition Costs, Net - Estimated Future Amortization on Payments for Processing and Conversion (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Conversion
Contractual arrangements
2018	$ 36,890
2019	29,673
2020	23,475
2021	21,491
2022	16,581
Processing rights
Contractual arrangements
2018	27,211
2019	24,210
2020	21,786
2021	19,275
2022	$ 15,123

XML

Equity Investments - Ownership and Contributions (Details) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) fund	Dec. 31, 2016 USD ($)
Atlanta-based venture capital fund limited partnership private equity | Maximum
Equity investments
Ownership interest (as a percent)	50.00%
China Union Pay Data Co., Ltd
Equity investments
Equity method investment ownership (as a percent)	44.56%
TSYS de Mexico
Equity investments
Equity method investment ownership (as a percent)	49.00%
Atlanta-based venture capital fund limited partnership private equity
Equity investments
Number of investment funds | fund	2
Cumulative contributions to the funds	$ 22.8	$ 20.1
Atlanta-based venture capital fund limited partnership private equity | Maximum
Equity investments
Commitment to invest	$ 20.0

XML

Equity Investments -Equity in Income and Carrying Amounts (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Equity investments
Equity in income of equity investments, net of tax	$ 40,532	$ 26,115	$ 25,430
Equity investments, net (Note 10)	163,518	133,556
China Union Pay Data Co., Ltd
Equity investments
Equity investments, net (Note 10)	127,367	101,638
Other
Equity investments
Equity investments, net (Note 10)	$ 36,151	$ 31,918

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - Summary of Long-term Debt (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 17, 2016	Dec. 31, 2015	May 31, 2013
Long-Term Borrowings
Total debt	$ 3,150,999	$ 3,360,255
Less current portion	(559,050)	(48,040)
Noncurrent portion of long-term debt	2,591,949	3,312,215
3.800% Senior Notes due April 1, 2021
Long-Term Borrowings
Total debt	$ 745,000	$ 743,625
Debt instruments
Stated interest rate (as a percent)	3.80%	3.80%	3.80%
Term	5 years	5 years
4.800% Senior Notes due April 1, 2026
Long-Term Borrowings
Total debt	$ 743,042	$ 742,383
Debt instruments
Stated interest rate (as a percent)	4.80%	4.80%	4.80%
Term	10 years	10 years
2.375% Senior Notes due June 1, 2018
Long-Term Borrowings
Total debt	$ 549,532	$ 548,615
Debt instruments
Stated interest rate (as a percent)	2.375%	2.375%			2.375%
Term	5 years	5 years
3.750% Senior Notes due June 1, 2023
Long-Term Borrowings
Total debt	$ 544,780	$ 543,947
Debt instruments
Stated interest rate (as a percent)	3.75%	3.75%		3.75%	3.75%
Term	10 years	10 years
Unsecured term facility, due February 23, 2021
Long-Term Borrowings
Total debt	$ 368,645	$ 697,832
Unsecured revolving loan, due February 23, 2021
Long-Term Borrowings
Total debt	$ 200,000	70,000
1.380% note payable due December 31, 2017
Long-Term Borrowings
Total debt		$ 13,853
Debt instruments
Stated interest rate (as a percent)	1.38%	1.38%
LIBOR | Unsecured term facility, due February 23, 2021
Debt instruments
Margin added to variable rate (as a percent)	1.50%	1.50%
LIBOR | Unsecured revolving loan, due February 23, 2021
Debt instruments
Margin added to variable rate (as a percent)	1.30%	1.30%

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - Fair Value of Senior Notes (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Estimated fair value | Senior Notes | Level 1
Fair value disclosure
Fair value of long-term debt	$ 2,684	$ 2,678

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - Bilateral Loan Facility Commitment (Details) - Consummation of Merger Agreement and alternative financing not obtained - Bilateral Loan Facility Commitment Letter - Term Loan Facility dated as of January 10, 2018	Dec. 16, 2017 USD ($)
Long-Term Borrowings
Financing agreement amount	$ 450,000,000
Term	2 years

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - Bridge Term Loan Facility (Details) - USD ($)	Feb. 23, 2016	Jan. 26, 2016	Feb. 22, 2016
Credit Agreement dated as of February 23, 2016 | Delayed Draw Term Loan
Short-term facility
Principal amount	$ 400,000,000
Credit Agreement dated as of February 23, 2016 | Revolving Loan Facility
Short-term facility
Amount of facility	800,000,000
Bridge term loan facility
Short-term facility
Principal amount	1,150,000,000	$ 2,000,000,000	$ 2,000,000,000
Term		364 days
Decrease in loan amount	$ 350,000,000

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - 2016 Senior Notes (Details) - USD ($)	Apr. 01, 2016	Dec. 31, 2017	Dec. 31, 2016	Mar. 17, 2016
Long-Term Borrowings
Amount outstanding, net of discount and debt issuance costs		$ 3,150,999,000	$ 3,360,255,000
TransFirst
Long-Term Borrowings
Purchase price of acquisition	$ 2,351,400,000
3.800% Senior Notes due April 1, 2021
Long-Term Borrowings
Principal amount				$ 750,000,000
Stated interest rate (as a percent)		3.80%	3.80%	3.80%
Amount outstanding, net of discount and debt issuance costs		$ 745,000,000	$ 743,625,000
4.800% Senior Notes due April 1, 2026
Long-Term Borrowings
Principal amount				$ 750,000,000
Stated interest rate (as a percent)		4.80%	4.80%	4.80%
Amount outstanding, net of discount and debt issuance costs		$ 743,042,000	$ 742,383,000

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - 2013 Senior Notes (Details) - USD ($)	Jul. 01, 2013	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	May 31, 2013
Long-Term Borrowings
Amount outstanding, net of discount and debt issuance costs		$ 3,150,999,000	$ 3,360,255,000
2013 Notes
Long-Term Borrowings
Fees associated with the issuance					$ 8,900,000
Discount on issuance					4,300,000
2.375% Senior Notes due June 1, 2018
Long-Term Borrowings
Principal amount					$ 550,000,000
Stated interest rate (as a percent)		2.375%	2.375%		2.375%
Amount outstanding, net of discount and debt issuance costs		$ 549,532,000	$ 548,615,000
3.750% Senior Notes due June 1, 2023
Long-Term Borrowings
Principal amount					$ 550,000,000
Stated interest rate (as a percent)		3.75%	3.75%	3.75%	3.75%
Amount outstanding, net of discount and debt issuance costs		$ 544,780,000	$ 543,947,000
NetSpend, Inc.
Long-Term Borrowings
Purchase price of acquisition	$ 1,400,000,000

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - 2016 Credit Agreement (Details) - USD ($)		12 Months Ended
	Feb. 23, 2016	Dec. 31, 2017	Dec. 31, 2016
Long-Term Borrowings
Amount outstanding, net of discount and debt issuance costs		$ 3,150,999,000	$ 3,360,255,000
Credit Agreement dated as of February 23, 2016 | Term Loan Facility
Long-Term Borrowings
Principal amount	$ 700,000,000
Term	5 years
Amount outstanding, net of discount and debt issuance costs		368,600,000
Credit Agreement dated as of February 23, 2016 | Refinancing Term Loan
Long-Term Borrowings
Principal amount	$ 300,000,000
Credit Agreement dated as of February 23, 2016 | Delayed Draw Term Loan
Long-Term Borrowings
Principal amount	400,000,000
Credit Agreement dated as of February 23, 2016 | Revolving Loan Facility
Long-Term Borrowings
Maximum borrowing capacity	800,000,000
Outstanding balance		200,000,000
Amounts repaid		$ 70,000,000
Credit Agreement dated as of February 23, 2016 | Standby letters of credit
Long-Term Borrowings
Maximum borrowing capacity	$ 50,000,000
Credit Agreement dated as of February 23, 2016 | Minimum | Delayed Draw Term Loan
Long-Term Borrowings
Commitment fee on undrawn commitment (as a percent)		0.10%
Credit Agreement dated as of February 23, 2016 | Minimum | Revolving Loan Facility
Long-Term Borrowings
Commitment fee regardless of usage (as a percent)		0.10%
Credit Agreement dated as of February 23, 2016 | Maximum | Delayed Draw Term Loan
Long-Term Borrowings
Commitment fee on undrawn commitment (as a percent)		0.25%
Credit Agreement dated as of February 23, 2016 | Maximum | Revolving Loan Facility
Long-Term Borrowings
Commitment fee regardless of usage (as a percent)		0.25%
LIBOR | Credit Agreement dated as of February 23, 2016 | Term Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		1.50%
LIBOR | Credit Agreement dated as of February 23, 2016 | Revolving Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		1.30%
LIBOR | Credit Agreement dated as of February 23, 2016 | Minimum | Term Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		1.00%
LIBOR | Credit Agreement dated as of February 23, 2016 | Minimum | Revolving Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		0.90%
LIBOR | Credit Agreement dated as of February 23, 2016 | Maximum | Term Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		1.75%
LIBOR | Credit Agreement dated as of February 23, 2016 | Maximum | Revolving Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		1.50%
Base rate | Credit Agreement dated as of February 23, 2016 | Term Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		0.50%
Base rate | Credit Agreement dated as of February 23, 2016 | Revolving Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		0.30%
Base rate | Credit Agreement dated as of February 23, 2016 | Minimum | Term Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		0.00%
Base rate | Credit Agreement dated as of February 23, 2016 | Minimum | Revolving Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		0.00%
Base rate | Credit Agreement dated as of February 23, 2016 | Maximum | Term Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		0.75%
Base rate | Credit Agreement dated as of February 23, 2016 | Maximum | Revolving Loan Facility
Long-Term Borrowings
Margin added to variable rate (as a percent)		0.50%

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - Perpetual Software License (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Long-Term Borrowings
Amount outstanding	$ 3,150,999,000	$ 3,360,255,000
1.380% note payable due December 31, 2017
Long-Term Borrowings
Financing agreement amount			$ 30,000,000
Amount outstanding		$ 13,853,000

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - Annual Principal Payments on Long-Term Debt (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Required annual principal payments on long-term debt
2018	$ 560,000
2019	40,000
2020	40,000
2021	$ 1,230,000

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - Components of Capital Lease Obligations and License Agreements (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Long-Term Borrowings
Capital lease obligations	$ 42,815	$ 3,748
Less current portion	(6,762)	(2,687)
Obligations under capital leases, excluding current portion	36,053	1,061
Capital Lease obligations
Long-Term Borrowings
Capital lease obligations	37,950	$ 3,748
License agreements
Long-Term Borrowings
Capital lease obligations	$ 4,865

XML

Long-term Borrowings, Capital Lease Obligations and License Agreements - Term and Future Minimum Lease Payments under Capital Leases and License Agreements (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Capital Lease obligations
Future minimum lease payments
2018	$ 6,652
2019	6,204
2020	6,127
2021	6,127
2022	6,095
Thereafter	11,484
Total minimum lease payments	42,689
Less amount representing interest	(4,739)
Principal minimum lease payments	37,950
License agreements
Future minimum lease payments
2018	1,449
2019	1,621
2020	1,275
2021	691
2022	39
Total minimum lease payments	5,075
Less amount representing interest	(210)
Principal minimum lease payments	$ 4,865
Minimum | Capital Lease obligations
Various equipment under capital lease arrangements
Term of obligation	1 year
Maximum | Capital Lease obligations
Various equipment under capital lease arrangements
Term of obligation	6 years

XML

Other Current Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Other Current Liabilities
Deferred revenues	$ 52,913	$ 40,473
Accrued expenses	38,018	32,861
Accrued third-party commissions	34,276	28,310
Dividends payable	24,886	19,513
Accrued interest	19,330	19,029
Litigation settlements	1,380	20,795
Income taxes payable	185	1,673
Other	107,847	100,605
Total	$ 278,835	$ 263,259

XML

Income Taxes - Components of Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Current income tax expense:
Federal	$ 210,550	$ 140,079	$ 139,228
State	20,316	9,218	9,255
Foreign	7,500	4,443	4,762
Total current income tax expense	238,366	153,740	153,245
Deferred income tax (benefit) expense:
Federal	(178,879)	8,393	(2,198)
State	5,093	(65)	442
Foreign	1,298	(893)	(125)
Total deferred income tax (benefit) expense	(172,488)	7,435	(1,881)
Total income tax expense	$ 65,878	$ 161,175	$ 151,364

XML

Income Taxes - Components of Income before Income Tax Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Components of income before income tax expense:
Domestic	$ 603,260	$ 454,628	$ 485,191
Foreign	14,302	6,404	8,373
Income before income taxes and equity in income of equity investments	$ 617,562	$ 461,032	$ 493,564

XML

Income Taxes - Reconciliation to Amount Computed by Applying Statutory Tax Rate (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Taxes
Statutory U.S. federal income tax rate (as a percent)	35.00%	35.00%	35.00%
Computed "expected" income tax expense	$ 216,147	$ 161,425	$ 173,911
International tax rate differential and equity income	11,953	8,715	8,367
State income tax expense, net of federal income tax effect	12,470	9,127	7,101
Increase (decrease) in valuation allowance	8,230	2,855	(517)
Tax credits	(20,998)	(15,695)	(28,831)
Share-Based Compensation	(14,310)
Deduction for domestic production activities	(17,150)	(12,950)	(11,550)
Re-measurement of deferred tax asset / deferred tax liability	(146,093)
Permanent differences and other, net	15,629	7,698	2,883
Total income tax expense	$ 65,878	$ 161,175	$ 151,364

XML

Income Taxes - Significant Net Deferred Tax Liability Components (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Deferred income tax assets:
Net operating loss and income tax credit carryforwards	$ 35,089	$ 34,490
Allowances for doubtful accounts and billing adjustments	852	1,512
Deferred revenue	17,813	27,461
Share-based compensation	15,170	25,497
Foreign currency translation		4,019
Other, net	14,915	38,341
Total deferred income tax assets	83,839	131,320
Less valuation allowance for deferred income tax assets	(29,531)	(21,301)
Net deferred income tax assets	54,308	110,019
Deferred income tax liabilities:
Excess tax over financial statement depreciation	(43,056)	(63,432)
Computer software development costs	(48,244)	(80,837)
Purchased intangibles	(42,467)	(344,547)
Foreign currency translation	(942)
Partnership interests	(143,908)	(18,776)
Other, net	(7,917)	(14,924)
Total deferred income tax liabilities	(286,534)	(522,516)
Net deferred income tax liabilities	(232,226)	(412,497)
Total net deferred tax assets (liabilities):
Noncurrent deferred tax asset	6,091	7,055
Noncurrent deferred tax liability	(238,317)	(419,552)
Net deferred income tax liabilities	(232,226)	(412,497)
Recognized deferred tax assets
Carryforwards of net operating losses	6,600	8,500
Carryforwards of capital losses	300	400
Federal and state income tax credit carryforwards	28,200	$ 25,600
Tax Cut and Jobs Acts of 2017
Decrease to net deferred income tax liabilities	144,500
Valuation allowance
Increase in the valuation allowance for deferred income tax assets	$ 8,200

XML

Income Taxes - Tax Cuts and Jobs Act of 2017 (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Tax Cut and Jobs Acts of 2017
Federal corporate income tax rate (as a percent)		35.00%	35.00%	35.00%
Tax benefit recognized upon remeasurement of deferred tax assets and liabilities		$ 144.5
Effective tax rate on cash foreign accumulated earnings (as a percent)		15.00%
Effective tax rate on non-cash foreign accumulated earnings (as a percent)		8.00%
One-time net transition tax expense		$ 4.9
Impact related to GILTI		$ 0.0
Expected
Tax Cut and Jobs Acts of 2017
Federal corporate income tax rate (as a percent)	21.00%

XML

Income Taxes - Undistributed Earnings of Foreign Subsidiaries (Detail) $ in Millions	Dec. 31, 2017 USD ($)
Income Taxes
Undistributed earnings	$ 103.3

XML

Income Taxes - Reconciliation of Unrecognized Tax Benefits (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reconciliation of the beginning and ending amount of unrecognized tax liabilities
Beginning Balance	$ 16.5	$ 13.1	$ 6.7
Additions based on tax positions related to current year	4.9	3.4	2.3
Additions for tax positions of prior years	4.6	3.0	4.7
Reductions for tax positions of prior years			(0.6)
Decreases resulting from settlements with tax authorities	2.2	3.0
Net, current activity	7.3	3.4	6.4
Ending Balance	23.8	16.5	$ 13.1
Income Tax Uncertainties [Abstract]
Gross accrued interest and penalties on unrecognized tax benefits	2.0	1.8
Unrecognized income tax benefits that, if recognized, would affect the effective tax rates	24.5	17.0
Unrecognized income tax benefits that, if recognized, would affect the effective tax rates , interest and penalties	$ 1.3	$ 1.2

XML

Commitments and Contingencies - Lease and Purchase Commitments (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Future minimum lease payments under noncancelable operating leases and purchase commitments
2018	$ 145,866
2019	148,006
2020	71,651
2021	38,803
2022	28,095
Thereafter	77,555
Total future minimum commitment payments	509,976
Operating lease rental expense
Rental expense under all operating leases	$ 134,000	$ 122,900	$ 124,800

XML

Commitments and Contingencies - Legal Proceedings (Details)	12 Months Ended
	Dec. 31, 2017 defendant
TelexFree Matter | Minimum | Propay
Commitments and Contingencies
Number of defendants	1

XML

Commitments and Contingencies - Guarantees and Indemnifications (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Guarantees and indemnifications
Estimated gross settlement exposure	$ 16,700,000	$ 13,800,000
Cardholder overdraft limit	10
Cardholders' overdrawn account balances	25,500,000	21,200,000
Cardholders' loss reserve	9,500,000	$ 10,500,000
Recorded a liability for guarantees or indemnities	$ 0
Minimum
Guarantees and indemnifications
Period after collection of cardholders' funds they are received by Issuing Bank	3 days
Maximum
Guarantees and indemnifications
Advance on behalf of cardholders	$ 1,000,000

XML

Commitments and Contingencies - Private Equity Investments (Details) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) fund	Dec. 31, 2016 USD ($)
Atlanta-based venture capital fund limited partnership private equity | Maximum
Commitments
Ownership interest (as a percent)	50.00%
Atlanta-based venture capital fund limited partnership private equity
Commitments
Number of investment funds | fund	2
Cumulative contributions to the funds	$ 22.8	$ 20.1
Investments	26.1	$ 22.8
Atlanta-based venture capital fund limited partnership private equity | Maximum
Commitments
Commitment to invest	$ 20.0

XML

Employee Benefit Plans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Retirement Savings Plan
Employee contribution matched (as a percent)	100.00%
Contributions charged to expense	$ 23,113	$ 21,077	$ 24,169
Stock purchase plan
Employee contribution matched (as a percent)	15.00%
Contributions charged to expense	$ 1,600	$ 1,514	$ 1,378
Maximum
Retirement Savings Plan
Eligible employee compensation for matching contribution (as a percent)	4.00%
Company discretionary contributions (as a percent)	4.00%

XML

Equity -Dividends (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Equity
Dividends paid on common stock	$ 79,017	$ 73,378	$ 73,677

XML

Equity - Equity Compensation Plans (Details) - $ / shares shares in Thousands		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock Options
Equity compensation plans
Weighted-average exercise price of outstanding options, warrants and rights (in dollars per share)		$ 37.15	$ 32.78	$ 28.07	$ 23.83
Number of securities to be issued upon exercise of outstanding options (in shares)		2,695	2,996	2,887	4,892
Equity compensation plans approved by security holders
Equity compensation plans
Number of securities to be issued upon exercise of outstanding options, warrants and rights (in shares)		4,561
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (in shares)	[1]	14,888
Equity compensation plans approved by security holders | Stock Options
Equity compensation plans
Weighted-average exercise price of outstanding options, warrants and rights (in dollars per share)	[2]	$ 37.15

[1] Weighted-average exercise price represents 2.7 million options only and does not include restricted share units that have no exercise price.Shares available for future grants under the Total System Services, Inc. 2017 Omnibus Plan, which could be in the form of options, nonvested awards and performance shares

[2] Weighted-average exercise price represents 2.7 million options only and does not include restricted share units that have no exercise price.

XML

Share-Based Compensation - General (Detail) - shares	12 Months Ended
	Dec. 31, 2017	Apr. 26, 2017
Total System Services, Inc. 2017 Omnibus Plan
Share-based Compensation
Aggregate number of shares of stock which may be granted under plan	15,000,000
Total System Services, Inc. 2012 Omnibus Plan
Share-based Compensation
Aggregate number of shares of stock which may be granted under plan		17,000,000
Total System Services, Inc. 2007 Omnibus Plan
Share-based Compensation
Aggregate number of shares of stock which may be granted under plan		5,000,000
Total System Services, Inc. 2002 Long-Term Incentive Plan
Share-based Compensation
Aggregate number of shares of stock which may be granted under plan		9,400,000
Total System Services, Inc. 2000 Long-Term Incentive Plan
Share-based Compensation
Aggregate number of shares of stock which may be granted under plan		2,400,000
Stock Options
Share-based Compensation
Life of award	10 years
Stock Options | Minimum
Share-based Compensation
Exercise price percentage of fair market value of common stock	100.00%
Stock Options | Maximum
Share-based Compensation
Life of award	10 years

XML

Share-Based Compensation - Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-Based Compensation
Share-based compensation	$ 42,409	$ 43,728	$ 41,549
Selling, general and administrative expenses
Share-Based Compensation
Share-based compensation	$ 42,400	$ 43,700	$ 41,500

XML

Share-Based Compensation - Nonvested Awards - Vesting and Grants Cost (Details) - Nonvested Share Awards - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Shares granted
Number of shares granted	329,051	362,804	388,211
Market value	$ 18.1	$ 16.8	$ 14.9
Certain key employees | Maximum
Share-based Compensation
Award vesting period	4 years

XML

Share-Based Compensation - Nonvested Awards - Activity and Unrecognized Compensation Cost (Details) - Nonvested Share Awards - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Shares
Outstanding at beginning of year (in shares)	863,000	1,146,000	1,769,000
Granted (in shares)	329,051	362,804	388,211
Vested (in shares)	(458,000)	(563,000)	(930,000)
Forfeited/canceled/adjusted (in shares)	(100,000)	(84,000)	(81,000)
Outstanding at end of year (in shares)	634,000	863,000	1,146,000
Weighted Average Grant Date Fair Value
Outstanding at beginning of year (in dollars per share)	$ 37.78	$ 31.11	$ 26.75
Granted (in dollars per share)	55.06	46.23	38.38
Vested (in dollars per share)	36.01	29.95	26.05
Forfeited/canceled/adjusted (in dollars per share)	43.82	36.79	28.78
Outstanding at end of year (in dollars per share)	$ 47.19	$ 37.78	$ 31.11
Unrecognized compensation cost
Unrecognized compensation cost	$ 15.8
Weighted average period of recognition of unrecognized compensation cost	1 year 9 months 18 days

XML

Share-Based Compensation - Performance and Market-Based Award Vesting and Unrecognized Compensation Cost (Details) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($)
Performance Based Awards
Share-based Compensation
Unrecognized compensation cost (in dollars)	$ 16.0
Performance Based Awards | Maximum
Share-based Compensation
Vesting percentage	200.00%
Market Based Share Awards
Share-based Compensation
Unrecognized compensation cost (in dollars)	$ 1.6
Market Based Share Awards | Maximum
Share-based Compensation
Vesting percentage	200.00%

XML

Share-Based Compensation - Market- Based Awards Granted (Details) - Market Based Share Awards - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Performance Period Ending December 2019
Share-based Compensation
Number of shares granted	44,275
Performance Period Ending December 2017
Share-based Compensation
Number of shares granted		6,403	57,982
Performance Period Ending December 2018
Share-based Compensation
Number of shares granted		52,404
Performance Period Ending July 2016, 2017 and 2018
Share-based Compensation
Number of shares granted			25,000

XML

Share-Based Compensation - Performance-Based Awards Granted (Details) - Performance Based Awards - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Performance Period Ending December 2019
Share-based Compensation
Number of shares granted	103,297
Performance Period Ending December 2017, Tranche One
Share-based Compensation
Number of shares granted	146,094
Performance Period Ending December 2017 Tranche Two
Share-based Compensation
Number of shares granted	26,145
Performance Period Ending December 2016, Tranche One
Share-based Compensation
Number of shares granted		15,605
Performance Period Ending December 2017
Share-based Compensation
Number of shares granted		14,940	135,289
Performance Period Ending December 2018, Tranche One
Share-based Compensation
Number of shares granted		29,332
Performance Period Ending December 2018, Tranche Two
Share-based Compensation
Number of shares granted		67,517
Performance Period Ending December 2018, Tranche Three
Share-based Compensation
Number of shares granted		78,220
Performance Period Ending December 2018, Tranche Four
Share-based Compensation
Number of shares granted		122,284
Performance Period Ending December 2016, Tranche Two
Share-based Compensation
Number of shares granted		144,995
Performance Period Ending December 2015
Share-based Compensation
Number of shares granted			165,543

XML

Share-Based Compensation - Performance and Market-Based Awards Authorized (Details) - Performance and Market Based Awards - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation
Total Number of Shares Awarded	319,811	531,700	383,814
Potential Number of Performance and Market-Based Shares to be Vested	596,192	903,364	687,015

XML

Share-Based Compensation - Performance and Market-Based Nonvested Activity (Details) - Performance and Market Based Awards - $ / shares shares in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Shares
Outstanding at beginning of year (in shares)	982	918	766
Granted (in shares)	618	540	384
Vested (in shares)	(621)	(140)	(241)
Forfeited/canceled/adjusted	(174)	(336)	9
Outstanding at end of year (in shares)	805	982	918
Weighted Average Grant Date Fair Value
Outstanding at beginning of year (in dollars per share)	$ 33.43	$ 31.19	$ 25.86
Granted (in dollars per share)	52.48	45.91	36.84
Vested (in dollars per share)	14.85	37.91	22.92
Forfeited/canceled/adjusted (in dollars per share)	46.98	37.70	22.20
Outstanding at end of year (in dollars per share)	$ 45.41	$ 33.43	$ 31.19

XML

Share-Based Compensation - Stock Option Award Vesting and Weighted Average Assumptions (Details) - Stock Options - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation
Award vesting period	3 years
Award expiration period	10 years
Weighted average assumptions and weighted average fair value of options
Number of options granted (in shares)	550,527	687,685	613,473
Weighted average exercise price (in dollars per share)	$ 54.97	$ 47.01	$ 39.01
Risk-free interest rate (as a percent)	1.78%	1.24%	1.73%
Expected volatility (as a percent)	21.72%	21.53%	20.80%
Expected term	4 years 7 months 6 days	4 years 6 months	6 years 3 months 18 days
Dividend yield (as a percent)	0.73%	0.86%	1.04%
Weighted average fair value (in dollars per share)	$ 10.85	$ 8.50	$ 8.27
Maximum
Share-based Compensation
Award expiration period	10 years
Retirement-eligible employees | Minimum
Share-based Compensation
Required service period for retirement eligible employees	12 months
Retirement-eligible employees | Maximum
Share-based Compensation
Required service period for retirement eligible employees	18 months
Executive officers
Share-based Compensation
Award vesting period	3 years	3 years	3 years

XML

Share-Based Compensation - Stock Option Activity (Details) - Stock Options - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Options:
Outstanding at beginning of year (in shares)	2,996,000	2,887,000	4,892,000
Granted (in shares)	550,527	687,685	613,473
Exercised (in shares)	(730,000)	(500,000)	(2,586,000)
Forfeited/canceled (in shares)	(122,000)	(79,000)	(32,000)
Outstanding at end of year (in shares)	2,695,000	2,996,000	2,887,000
Options exercisable at year-end (in shares)	1,758,000	1,877,000	1,439,000
Weighted Average Exercise Price
Outstanding at beginning of year (in dollars per share)	$ 32.78	$ 28.07	$ 23.83
Granted (in dollars per share)	54.97	47.01	39.01
Exercised (in dollars per share)	30.05	23.43	22.68
Forfeited/canceled (in dollars per share)	52.76	43.49	20.79
Outstanding at end of year (in dollars per share)	37.15	32.78	28.07
Options exercisable at year-end (in dollars per share)	31.00	28.45	25.17
Stock options
Weighted average fair value of options granted during the year (in dollars per share)	$ 10.85	$ 8.50	$ 8.27
Outstanding, Average remaining contractual life	6 years 10 months 24 days
Outstanding, Aggregate intrinsic value	$ 112,964
Exercisable, Average remaining contractual life	6 years 1 month 6 days
Exercisable, Aggregate intrinsic value	$ 84,572

XML

Share-Based Compensation - Stock Options Exercised and Unrecognized Compensation Cost (Details) - Stock Options - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Common stock issued from treasury for options exercised
Options Exercised and Issued from Treasury	730	500	2,586
Intrinsic Value	$ 23,629	$ 12,984	$ 67,702
Unrecognized compensation cost
Unrecognized compensation cost	$ 2,900
Weighted average period of recognition of unrecognized compensation cost	1 year 7 months 6 days

XML

Treasury Stock - Summary and Related Carrying Value (Details) - USD ($) shares in Thousands, $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Treasury Stock
Number of Treasury Shares	21,862	19,314	19,988
Treasury Shares Cost	$ 909,960	$ 646,047	$ 641,664

XML

Treasury Stock - Stock Repurchase Plans and Repurchases by Year (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended				3 Months Ended	12 Months Ended			34 Months Ended	35 Months Ended	36 Months Ended
	Dec. 31, 2017	Nov. 30, 2017	Oct. 31, 2017	Apr. 30, 2010	Dec. 31, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Oct. 31, 2017	Nov. 30, 2017	Dec. 31, 2017	Jan. 31, 2015	Jan. 31, 2014
Stock Repurchase Plan
Total Number of Shares Purchased	1,667,000	1,500,000	300,000		3,467,000
Average Price Paid per Share	$ 75.22	$ 73.05	$ 71.26		$ 73.41
Repurchased Shares Cost						$ 284,237	$ 30,275	$ 242,235
Stock repurchase plans
Stock Repurchase Plan
Total Number of Shares Purchased						3,850,000	500,000	5,150,000
Average Price Paid per Share						$ 73.41	$ 48.57	$ 47.01
Repurchased Shares Cost						$ 282,645	$ 24,287	$ 242,085
April 2010 stock repurchase plan
Stock Repurchase Plan
Shares authorized to be repurchased				10,000,000									28,000,000
Period over which shares may be purchased				2 years
January 2015 stock repurchase plan
Stock Repurchase Plan
Shares authorized to be repurchased												20,000,000
Total Number of Shares Purchased									6,350,000	7,850,000	9,500,000

XML

Treasury Stock - Purchases of Common Stock on a Monthly Basis (Details) - $ / shares	1 Months Ended				3 Months Ended	12 Months Ended		34 Months Ended	35 Months Ended	36 Months Ended
	Dec. 31, 2017	Nov. 30, 2017	Oct. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2017	Dec. 31, 2016	Oct. 31, 2017	Nov. 30, 2017	Dec. 31, 2017	Jan. 31, 2015
Equity, Class of Treasury Stock [Line Items]
Total Number of Shares Purchased/Total Number of Cumulative shares Purchased as Part of Publicly announced Plans or Programs	1,667,000	1,500,000	300,000		3,467,000
Average Price Paid per Share	$ 75.22	$ 73.05	$ 71.26		$ 73.41
Shares withheld for payment of taxes				16,837		20,875	144,839
January 2015 stock repurchase plan
Equity, Class of Treasury Stock [Line Items]
Total Number of Shares Purchased/Total Number of Cumulative shares Purchased as Part of Publicly announced Plans or Programs								6,350,000	7,850,000	9,500,000
Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs	10,500,000	12,150,000	13,650,000		10,500,000	10,500,000		13,650,000	12,150,000	10,500,000
Shares authorized to be repurchased											20,000,000

XML

Treasury Stock - Share Withholding for Taxes (Details) - USD ($) $ in Millions	1 Months Ended	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Treasury Stock
Shares acquired for withholding for taxes on employee awards	16,837	20,875	144,839
Value of shares acquired for withholding for taxes on employee awards		$ 1.6	$ 6.0

XML

Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other comprehensive income (loss)
Beginning Balance	$ 2,099,920
Pretax Amount	22,062	$ (24,172)	$ (23,269)	$ (17,280)
Tax Effect	2,052	(1,558)	(1,651)	(1,605)
Net-of-tax Amount	20,010	(22,614)	(21,618)	(15,675)
Ending Balance	2,240,993	2,099,920
Accumulated Other Comprehensive Income (Loss)
Other comprehensive income (loss)
Beginning Balance	(56,158)	(33,544)	(11,926)	3,749
Ending Balance	(36,148)	(56,158)	(33,544)	(11,926)
Foreign currency translation adjustments
Other comprehensive income (loss)
Beginning Balance	(65,510)	(35,041)	(13,592)
Pretax Amount	24,794	(36,341)	(22,997)
Tax Effect	2,776	(5,872)	(1,548)
Net-of-tax Amount	22,018	(30,469)	(21,449)
Ending Balance	(43,492)	(65,510)	(35,041)	(13,592)
Transfer from noncontrolling interest (NCI)
Other comprehensive income (loss)
Beginning Balance	28	28	28
Ending Balance	28	28	28	28
Available-for-sale securities
Other comprehensive income (loss)
Beginning Balance	9,862	2,503	1,105
Pretax Amount	(2,050)	11,394	2,177
Tax Effect	(634)	4,035	779
Net-of-tax Amount	(1,416)	7,359	1,398
Ending Balance	8,446	9,862	2,503	1,105
Postretirement healthcare plans
Other comprehensive income (loss)
Beginning Balance	(538)	(1,034)	533
Pretax Amount	(682)	775	(2,449)
Tax Effect	(90)	279	(882)
Net-of-tax Amount	(592)	496	(1,567)
Ending Balance	$ (1,130)	$ (538)	$ (1,034)	$ 533

XML

Segment Reporting, including Geographic Area Data and Major Customers - Operating Results (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) segment	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Segment Reporting
Number of reportable operating segments | segment	3
Adjusted operating income	$ 999,564	$ 856,995	$ 668,177
Share-based compensation	42,409	43,728	41,549
Operating income	734,044	573,382	534,107
Nonoperating expenses, net	(116,482)	(112,350)	(40,543)
Income before income taxes and equity in income of equity investments	617,562	461,032	493,564
Net revenue	3,400,332	3,041,876	2,499,349
Add: reimbursable items, interchange and assessment expenses	1,527,633	1,128,201	280,192
Total revenues	4,927,965	4,170,077	2,779,541
Issuer Solutions
Segment Reporting
Total revenues	1,751,468	1,680,763	1,650,029
Merchant Solutions
Segment Reporting
Total revenues	2,431,262	1,828,469	549,135
Netspend
Segment Reporting
Total revenues	745,235	660,845	580,377
Operating Segments
Segment Reporting
Net revenue	$ 3,445,511	$ 3,077,574	$ 2,528,331
Operating margin on net revenue	29.40%	28.20%	26.70%
Operating Segments | Issuer Solutions
Segment Reporting
Adjusted operating income	$ 574,580	$ 525,025	$ 489,151
Net revenue	$ 1,594,959	$ 1,515,462	$ 1,473,914
Operating margin on net revenue	36.00%	34.60%	33.20%
Operating Segments | Merchant Solutions
Segment Reporting
Adjusted operating income	$ 391,466	$ 307,595	$ 150,225
Net revenue	$ 1,103,682	$ 898,533	$ 474,040
Operating margin on net revenue	35.50%	34.20%	31.70%
Operating Segments | Netspend
Segment Reporting
Adjusted operating income	$ 182,082	$ 160,371	$ 137,837
Net revenue	$ 746,870	$ 663,579	$ 580,377
Operating margin on net revenue	24.40%	24.20%	23.70%
Corporate Administration and Other
Segment Reporting
Adjusted operating income	$ (148,564)	$ (135,996)	$ (109,036)
Intersegment
Segment Reporting
Net revenue	(45,179)	(35,698)	(28,982)
Segment Reconciling Items
Segment Reporting
TransFirst and Cayan M&A and integration expenses	13,367	28,176
Litigation, claims, judgements or settlements	1,947	21,719
Acquisition intangible amortization	$ 207,797	$ 189,990	$ 92,521

XML

Segment Reporting, including Geographic Area Data and Major Customers - Depreciation and Amortization (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting
Total depreciation and amortization	$ 405,906	$ 373,546	$ 258,264
Operating Segments
Segment Reporting
Depreciation and amortization	193,229	179,995	163,390
Operating Segments | Issuer Solutions
Segment Reporting
Depreciation and amortization	147,914	141,309	134,436
Operating Segments | Merchant Solutions
Segment Reporting
Depreciation and amortization	29,477	25,553	18,268
Operating Segments | Netspend
Segment Reporting
Depreciation and amortization	15,838	13,133	10,686
Segment Reconciling Items
Segment Reporting
Acquisition intangible amortization	207,797	189,990	92,521
Corporate Administration and Other
Segment Reporting
Depreciation and amortization	$ 4,880	$ 3,561	$ 2,353

XML

Segment Reporting, including Geographic Area Data and Major Customers - Total Assets by Segment (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Segment Reporting
Total assets	$ 6,331,689	$ 6,366,177
Operating Segments | Issuer Solutions
Segment Reporting
Total assets	5,735,195	5,667,280
Operating Segments | Merchant Solutions
Segment Reporting
Total assets	3,136,395	3,295,509
Operating Segments | Netspend
Segment Reporting
Total assets	1,418,644	1,474,595
Intersegment
Segment Reporting
Total assets	$ (3,958,545)	$ (4,071,207)

XML

Segment Reporting, including Geographic Area Data and Major Customers - Property and Equipment, net (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Property and equipment, net, by geographic areas
Property and equipment, net of accumulated depreciation and amortization	$ 325,218	$ 282,345
United States
Property and equipment, net, by geographic areas
Property and equipment, net of accumulated depreciation and amortization	273,690	236,913
Europe
Property and equipment, net, by geographic areas
Property and equipment, net of accumulated depreciation and amortization	43,586	38,866
Other
Property and equipment, net, by geographic areas
Property and equipment, net of accumulated depreciation and amortization	$ 7,942	$ 6,566

XML

Segment Reporting, including Geographic Area Data and Major Customers - Geographic Revenues to External Revenues (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Geographic revenues to external revenues by operating segment
Total revenues	$ 4,927,965	$ 4,170,077	$ 2,779,541
Percentage of Revenues	100.00%	100.00%	100.00%
United States
Geographic revenues to external revenues by operating segment
Total revenues	$ 4,224,854	$ 3,520,001	$ 2,110,044
Percentage of Revenues	85.70%	84.40%	75.90%
Europe
Geographic revenues to external revenues by operating segment
Total revenues	$ 320,684	$ 307,121	$ 304,650
Percentage of Revenues	6.50%	7.40%	11.00%
Canada
Geographic revenues to external revenues by operating segment
Total revenues	$ 315,170	$ 284,733	$ 289,083
Percentage of Revenues	6.40%	6.80%	10.40%
Other
Geographic revenues to external revenues by operating segment
Total revenues	$ 67,257	$ 58,222	$ 75,764
Percentage of Revenues	1.40%	1.40%	2.70%
Issuer Solutions
Geographic revenues to external revenues by operating segment
Total revenues	$ 1,751,468	$ 1,680,763	$ 1,650,029
Issuer Solutions | United States
Geographic revenues to external revenues by operating segment
Total revenues	1,051,292	1,032,381	981,588
Issuer Solutions | Europe
Geographic revenues to external revenues by operating segment
Total revenues	320,400	306,894	304,628
Issuer Solutions | Canada
Geographic revenues to external revenues by operating segment
Total revenues	313,674	284,028	288,728
Issuer Solutions | Other
Geographic revenues to external revenues by operating segment
Total revenues	66,102	57,460	75,085
Merchant Solutions
Geographic revenues to external revenues by operating segment
Total revenues	2,431,262	1,828,469	549,135
Merchant Solutions | United States
Geographic revenues to external revenues by operating segment
Total revenues	2,428,327	1,826,775	548,079
Merchant Solutions | Europe
Geographic revenues to external revenues by operating segment
Total revenues	284	227	22
Merchant Solutions | Canada
Geographic revenues to external revenues by operating segment
Total revenues	1,496	705	355
Merchant Solutions | Other
Geographic revenues to external revenues by operating segment
Total revenues	1,155	762	679
Netspend
Geographic revenues to external revenues by operating segment
Total revenues	745,235	660,845	580,377
Netspend | United States
Geographic revenues to external revenues by operating segment
Total revenues	$ 745,235	$ 660,845	$ 580,377

XML

Supplemental Cash Flow Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Supplemental Cash Flow Information
Acquisitions of computer equipment under capital leases and software under license agreements	$ 40.8	$ 1.8	$ 4.1
Acquisition of software under direct financing agreements	$ 0.0	$ 0.0	$ 30.0

XML

Acquisitions - Redeemable Noncontrolling Interest (Details) - USD ($) $ in Thousands		12 Months Ended
	Feb. 03, 2017	Dec. 31, 2017	Dec. 31, 2016
Redeemable Noncontrolling Interest
Purchase of noncontrolling interest	$ 70,000	$ 70,000	$ 5,878
Decrease to noncontrolling interest from acquisition of additional interest in subsidiary	9,800	9,843
Decrease from acquisition of noncontrolling interest		60,157	5,878
Additional Paid-In Capital
Redeemable Noncontrolling Interest
Decrease from acquisition of noncontrolling interest	$ 60,200	$ 60,157	$ 443
Central Payments Co., LLC
Redeemable Noncontrolling Interest
Noncontrolling equity interest acquired (as a percent)	10.00%
Noncontrolling equity interest (as a percent)	15.00%

XML

Acquisitions - TransFirst - Goodwill Decrease (Details) - USD ($)	9 Months Ended	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2017
TransFirst
Acquisitions
Goodwill adjustment	$ 20,400,000
Merchant Solutions
Acquisitions
Goodwill adjustment		$ 727,000
Merchant Solutions | TransFirst
Acquisitions
Decrease to goodwill due to deferred tax adjustments		12,100,000
Goodwill adjustment		$ 727,000

XML

Acquisitions - TransFirst - Consideration and Recognized Assets and Liabilities (Details) - USD ($)		9 Months Ended
	Apr. 01, 2016	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2015
Recognized amounts of identifiable assets acquired and liabilities assumed:
Goodwill		$ 3,270,952,000	$ 3,264,071,000	$ 1,545,424,000
TransFirst
Consideration
Cash	$ 2,351,400,000
Fair value of total consideration transferred	2,351,400,000
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	5,907,000
Accounts receivable, net	62,313,000
Property equipment and software	12,726,000
Total acquired identifiable intangible assets	814,131,000
Deferred tax asset	2,244,000
Other assets	7,509,000
Deferred tax liability	(224,654,000)
Other liabilities	(56,864,000)
Total identifiable net assets	623,312,000
Goodwill	1,728,088,000
Total identifiable assets acquired and liabilities assumed	$ 2,351,400,000
Adjustments to purchase price and recognized assets and liabilities
Increase in purchase price due to working capital adjustments		55,000
Decrease in identifiable intangible assets		2,000,000
Increase in liabilities		363,700
Increase in deferred tax liabilities		18,000,000
Goodwill adjustment		$ 20,400,000

XML

Acquisitions - TransFirst - Identifiable Intangible Assets (Details) - USD ($) $ in Thousands		12 Months Ended
	Apr. 01, 2016	Dec. 31, 2017
Merchant relationships
Identifiable intangible assets acquired
Weighted Average Amortization Period		7 years
Channel relationships
Identifiable intangible assets acquired
Weighted Average Amortization Period		8 years 7 months 6 days
Acquisition (current) technology intangibles
Identifiable intangible assets acquired
Weighted Average Amortization Period		6 years 1 month 6 days
Trade name
Identifiable intangible assets acquired
Weighted Average Amortization Period		3 years 10 months 24 days
Covenants not-to-compete
Identifiable intangible assets acquired
Weighted Average Amortization Period		4 years 3 months 18 days
Favorable lease
Identifiable intangible assets acquired
Weighted Average Amortization Period		5 years 1 month 6 days
TransFirst
Identifiable intangible assets acquired
Total acquired identifiable intangible assets	$ 814,131
Weighted Average Amortization Period	7 years 1 month 6 days
TransFirst | Minimum
Identifiable intangible assets acquired
Weighted Average Amortization Period		1 year
TransFirst | Maximum
Identifiable intangible assets acquired
Weighted Average Amortization Period		10 years
TransFirst | Amortizable intangible assets | Level 2 and Level 3 measurements
Key fair value assumptions
Discount rate (as a percent)	8.50%
Effective tax rate (as a percent)	40.00%
Long-term sustainable growth rate (as a percent)	3.00%
TransFirst | Amortizable intangible assets | Level 2 and Level 3 measurements | Minimum
Key fair value assumptions
Pre-tax royalty rate (as a percent)	1.00%
Attrition rate (as a percent)	11.00%
TransFirst | Amortizable intangible assets | Level 2 and Level 3 measurements | Maximum
Key fair value assumptions
Pre-tax royalty rate (as a percent)	3.00%
Attrition rate (as a percent)	16.00%
TransFirst | Merchant relationships
Identifiable intangible assets acquired
Total acquired identifiable intangible assets	$ 588,000
Weighted Average Amortization Period	7 years
TransFirst | Channel relationships
Identifiable intangible assets acquired
Total acquired identifiable intangible assets	$ 121,000
Weighted Average Amortization Period	10 years
TransFirst | Acquisition (current) technology intangibles
Identifiable intangible assets acquired
Total acquired identifiable intangible assets	$ 72,000
Weighted Average Amortization Period	5 years
TransFirst | Trade name
Identifiable intangible assets acquired
Total acquired identifiable intangible assets	$ 16,000
Weighted Average Amortization Period	1 year
TransFirst | Covenants not-to-compete
Identifiable intangible assets acquired
Total acquired identifiable intangible assets	$ 15,000
Weighted Average Amortization Period	3 years
TransFirst | Favorable lease
Identifiable intangible assets acquired
Total acquired identifiable intangible assets	$ 2,100
Weighted Average Amortization Period	5 years 7 months 6 days

XML

Acquisitions - TransFirst - Acquisition Costs and Actual Operating Results since Acquisition (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)
Bridge term loan facility | Interest expense
Acquisitions
Costs related to facility	$ 9.8
TransFirst
Acquisitions
Revenue since acquisition date	1,300.0
Operating income since acquisition date	30.0
TransFirst | Selling, general and administrative expenses
Acquisitions
Acquisition-related costs	$ 32.3

XML

Acquisitions - EMEA (Details) - TSYS Managed Services EMEA Limited (EMEA) £ in Millions, $ in Millions	1 Months Ended
	Mar. 31, 2016 GBP (£)	Mar. 31, 2016 USD ($)
Acquisitions
Interest acquired (as a percent)	45.00%	45.00%
Cash paid	£ 4.2	$ 5.9
Outstanding existing debt repaid	£ 2.2	$ 3.0

XML

Acquisitions - Netspend (Details) - USD ($)	1 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Acquisition (current) technology intangibles
Acquisitions
Life of asset		6 years 1 month 6 days
Purchase of assets, September 2015 | Netspend
Acquisitions
Cash paid	$ 750,000
Purchase of assets, September 2015 | Netspend | Acquisition (current) technology intangibles
Acquisitions
Life of asset	5 years
NetSpend, Inc.
Acquisitions
Adjustments to goodwill for tax adjustments		$ 1,795,000	$ 584,000	$ 627,000
NetSpend, Inc. | Netspend
Acquisitions
Adjustments to goodwill for tax adjustments		$ 1,795,000	$ 584,000

XML

Collaborative Arrangement (Details)	12 Months Ended
	Dec. 31, 2017 entity
Collaborative Arrangement
Ownership interest in collaborative arrangement enterprise (as a percent)	45.00%
Number of other owners	2

XML

Earnings Per Share - Common Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Basic EPS:
Net income	$ 586,185	$ 319,638	$ 364,044
Less income allocated to nonvested awards	(1,373)	(1,557)	(3,164)
Net income allocated to common stock for EPS calculation	$ 584,812	$ 318,081	$ 360,880
Nonvested awards (in shares)	183,309	182,744	182,465
Basic EPS	$ 3.19	$ 1.74	$ 1.98
Diluted EPS:
Net income	$ 586,185	$ 319,638	$ 364,044
Less income allocated to nonvested awards	(1,373)	(1,557)	(3,148)
Add income allocated to nonvested awards	1,373	1,557
Net income allocated to common stock for EPS calculation	$ 586,185	$ 319,638	$ 360,896
Average common shares outstanding	183,309	182,744	182,465
Increase due to assumed issuance of shares related to common equivalent shares outstanding	1,162	813	1,157
Average nonvested awards	959	891
Average common and common equivalent shares outstanding	185,430	184,448	183,622
Diluted EPS	$ 3.16	$ 1.73	$ 1.97

XML

Earnings Per Share - Participating Securities (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Basic EPS:
Nonvested awards (in shares)	183,309	182,744	182,465
Basic EPS	$ 3.19	$ 1.74	$ 1.98
Diluted EPS:
Average common and common equivalent shares outstanding(d)	185,430	184,448	183,622
Diluted EPS	$ 3.16	$ 1.73	$ 1.97
Participating Securities
Basic EPS:
Net income allocated to nonvested awards	$ 1,373	$ 1,557	$ 3,164
Nonvested awards (in shares)	435	911	1,617
Basic EPS	$ 3.16	$ 1.71	$ 1.96
Diluted EPS:
Net income allocated to nonvested awards	$ 1,366	$ 1,552	$ 3,148
Average common and common equivalent shares outstanding(d)	435	911	1,617
Diluted EPS	$ 3.14	$ 1.70	$ 1.95

XML

Earnings Per Share - Anti-dilutive Securities (Details) - shares shares in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Earnings Per Share
Anti-dilutive stock options and nonvested awards excluded from diluted EPS calculation	0.3	0.4	0.6

XML

Subsequent Events (Details)	Jan. 25, 2018	Jan. 11, 2018 USD ($)	Jan. 10, 2018 USD ($)	Dec. 18, 2017 USD ($)
Cayan | Cayan acquisition agreement
Subsequent Events
Agreement amount				$ 1,050,000,000
Subsequent Events
Subsequent Events
Period of extended effective date of Consumer Financial Protection Bureau prepaid rule changes	1 year
Subsequent Events | Term Loan Facility dated as of January 10, 2018
Subsequent Events
Financing agreement amount			$ 450,000,000
Term			2 years
Subsequent Events | Term Loan Facility dated as of January 10, 2018 | Minimum
Subsequent Events
Fixed charge coverage ratio financial covenant			2.5
Subsequent Events | Term Loan Facility dated as of January 10, 2018 | Maximum
Subsequent Events
Consolidated leverage ratio financial covenant			3.5
Subsequent Events | Term Loan Facility dated as of January 10, 2018 | LIBOR | Minimum
Subsequent Events
Margin added to variable rate (as a percent)			1.00%
Subsequent Events | Term Loan Facility dated as of January 10, 2018 | LIBOR | Maximum
Subsequent Events
Margin added to variable rate (as a percent)			1.75%
Subsequent Events | Term Loan Facility dated as of January 10, 2018 | Base rate | Minimum
Subsequent Events
Margin added to variable rate (as a percent)			0.00%
Subsequent Events | Term Loan Facility dated as of January 10, 2018 | Base rate | Maximum
Subsequent Events
Margin added to variable rate (as a percent)			0.75%
Subsequent Events | Cayan
Subsequent Events
Cash transaction		$ 1,050,000,000

XML

Schedule II Schedule - Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Doubtful accounts
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	$ 3,482	$ 1,757	$ 3,222
Additions - Changes in allowances, charges to expenses and changes to other accounts	10,796	6,970	(58)
Deductions	(8,947)	(5,245)	(1,407)
Balance at end of period	5,331	3,482	1,757
Billing adjustments
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	1,360	926	866
Additions - Changes in allowances, charges to expenses and changes to other accounts	(627)	614	(114)
Deductions	(186)	(180)	174
Balance at end of period	547	1,360	926
Merchant losses
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	2,039	1,366	1,118
Additions - Changes in allowances, charges to expenses and changes to other accounts	5,002	1,682	4,667
Deductions	(2,715)	(1,009)	(4,419)
Balance at end of period	4,326	2,039	1,366
Transaction processing
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	2,851	6,457	4,630
Additions - Changes in allowances, charges to expenses and changes to other accounts	6,714	3,669	6,976
Deductions	(7,357)	(7,275)	(5,149)
Balance at end of period	2,208	2,851	6,457
Fraud losses
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	10,527	9,391	6,312
Additions - Changes in allowances, charges to expenses and changes to other accounts	51,194	49,362	41,264
Deductions	(52,202)	(48,226)	(38,185)
Balance at end of period	9,519	10,527	9,391
Deferred tax valuation allowance
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	21,301	18,446	18,963
Additions - Changes in allowances, charges to expenses and changes to other accounts	8,648	4,124	541
Deductions	(418)	(1,269)	(1,058)
Balance at end of period	$ 29,531	$ 21,301	$ 18,446