TSYS (NYSE: TSS) today reported results for the fourth quarter and full year results for 2013.

Summary of Fourth Quarter and Full Year Financial Results Compared to 2012

  • Total revenues for the quarter were $600.8 million, an increase of 25.4%. For the year, total revenues were $2.1 billion, an increase of 14.0%. Total revenues for the quarter and year were negatively impacted by currency translation of $3.8 million and $20.6 million, respectively, as well as a decrease in reimbursable items of $2.7 million and $11.9 million, respectively.
  • Revenues before reimbursable items for the quarter were $543.0 million, an increase of 29.7%. For the year, revenues before reimbursable items were $1.9 billion, an increase of 16.9%. Revenues before reimbursable items were negatively impacted by currency translation of $3.9 million for the quarter and $20.3 million for the year.
  • Adjusted EBITDA* for the quarter was $184.2 million, an increase of 32.2%. For the year, adjusted EBITDA was $634.2 million, an increase of 16.0%.
  • Adjusted cash earnings per share (EPS)* for the quarter were $0.48, an increase of 26.9%. For the year, adjusted cash EPS was $1.72, an increase of 17.8%.
  • On a GAAP basis, net income attributable to common shareholders for the quarter was $65.7 million, an increase of 7.9%. For the year, net income attributable to common shareholders was $244.8 million, an increase of 0.2%.
  • Basic EPS for the quarter was $0.35, an increase of 6.2%. Diluted EPS was $0.34, an increase of 5.5%. For the year, basic EPS was $1.30, which was the same as last year. Diluted EPS was $1.29, a decrease of 0.2%.

* Note: Adjusted EBITDA and adjusted cash EPS are non-GAAP measures which are detailed later in this press release in the section "Reconciliation of GAAP to Non-GAAP Financial Measures."

"Our total revenues exceeded $2 billion for the first time in our history, and we met the high end of the range of our adjusted cash EPS guidance of $1.72. This was truly a transformational year for TSYS," said Philip W. Tomlinson, chairman and chief executive officer of TSYS.

"During the fourth quarter, we reduced our debt by $62.5 million, bringing our total reductions since the NetSpend acquisition to $124.9 million. Also during the quarter, we purchased 3.1 million shares of our stock for $97.6 million. We are pleased to announce our Board of Directors has approved increasing the number of shares that may be repurchased under our current share repurchase plan from up to 20 million shares to up to 28 million shares and extended the expiration date of the plan to April 30, 2015. With the increase, we have approximately 12 million shares available to be repurchased under the plan," said Tomlinson.

"Our guidance for 2014 is included in the table below and we expect another year of strong growth in revenues and adjusted cash EPS. We expect growth in total revenues of 17% to 19%, revenues before reimbursable items of 19% to 21%, adjusted EBITDA of 17% to 20%, and adjusted cash EPS of 11% to 13%. The results for 2013 and our guidance for 2014 reflect our focus on diversification, growth and the exceptional performance of our TSYS team," said Tomlinson.

    2014 Guidance
Range    
(in millions, except per Percent
share amounts) Change
Total revenues $2,491   to   $2,542 17%   to   19%
Revenues before reimbursable items $2,252 to $2,297 19% to 21%
Adjusted EBITDA $744 to $759 17% to 20%
Adjusted cash EPS attributable to TSYS common shareholders*

$1.90

to

$1.93

11%

to

13%
 
* Average Basic Weighted Shares 188.4

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, January 28. The conference call can be accessed via simultaneous Internet broadcast at tsys.com by clicking on the link under "Webcasts" on the main homepage. The replay will be archived for 12 months and will be available approximately 30 minutes after the completion of the call. A slide presentation to accompany the call will be available by clicking on the link under "Webcasts" on the main homepage of tsys.com.

Non-GAAP Measures

This press release contains information prepared in conformity with GAAP as well as non-GAAP information. It is management's intent to provide non-GAAP financial information to enhance understanding of its consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure and the corresponding GAAP financial measure are presented so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies.

Additional information about non-GAAP financial measures and a reconciliation of those measures to the most directly comparable GAAP measures are included on pages 13 to 15 of this release.

About TSYS

At TSYS, (NYSE: TSS), we believe payments should revolve around people -- not the other way around. We call this belief "People-Centered PaymentsSM." By putting people at the center of every decision we make, TSYS supports financial institutions, businesses and governments in more than 80 countries. Through NetSpend, a TSYS Company, we empower consumers with the convenience, security, and freedom to be self-banked. TSYS offers issuer services and merchant payment acceptance for credit, debit, prepaid, healthcare and business solutions.

TSYS' headquarters are located in Columbus, Georgia, with local offices spread across the Americas, EMEA and Asia-Pacific. TSYS provides services to more than half of the top 20 international banks, and has been named one of the 2013 World's Most Ethical Companies by Ethisphere magazine. TSYS routinely posts all important information on its website, for more please visit us at www.tsys.com.

Forward-Looking Statements

This press release contains "forward-looking statements" - that is, statements related to future, not past, events. Forward-looking statements often address our expected future business and financial performance and often contain words such as "expect," "anticipate," "intend," "believe," "should," "plan," "potential," "will," "could," and similar expressions. These forward-looking statements include, among others, statements regarding TSYS' earnings guidance for 2014 total revenues, revenues before reimbursable items, adjusted EBITDA, and adjusted cash EPS, and the assumptions underlying such statements. These statements are based on the current beliefs and expectations of TSYS' management, are based on management's assumptions and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results or events to differ materially from those contemplated by our forward-looking statements in this press release. Many of these factors are beyond TSYS' ability to control or predict. These factors include, but are not limited to, TSYS' ability to integrate NetSpend and other acquisitions and achieve the anticipated growth opportunities and other benefits of the acquisitions; the effect of current domestic and worldwide economic conditions; the material breach of security of any of TSYS' systems; risks associated with foreign operations, including adverse developments with respect to foreign currency exchange rates; expenses are incurred associated with the signing of a significant client; the deconversion of a significant client; changes occur in laws, rules, regulations, credit card association rules or other industry standards affecting TSYS and our clients that may result in costly new compliance burdens on TSYS and our clients and lead to a decrease in the volume and/or number of transactions processed; the costs and effects of litigation, investigations or similar matters or adverse facts and developments relating thereto; adverse developments with respect to the credit card industry in general, including a decline in the use of credit cards as a payment mechanism; and growth rates of TSYS' existing clients are lower than anticipated or attrition rates of existing clients are higher than anticipated. Additional risks and other factors that could cause actual results or events to differ materially from those contemplated in this release can be found in TSYS' filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise.

TSYS
Financial Highlights
(unaudited)
(in thousands, except per share data)
                       
Three Months Ended Twelve Months Ended
December 31, December 31,  
Percent Percent
2013   2012   Change 2013   2012   Change
 
Total revenues $ 600,840 479,100 25.4 % $ 2,132,353 1,870,972 14.0 %
 
Cost of services 403,475 315,698 27.8 1,436,331 1,262,310 13.8
Selling, general and administrative expenses 84,752 72,665 16.6 295,555 249,360 18.5
Merger and acquisition expenses 2,211   906   nm 14,220   1,650   nm
 
Operating income 110,402 89,831 22.9 386,247 357,652 8.0
 
Nonoperating income (expenses) (960 ) 5 nm (1,108 ) (2,798 ) 60.4
Merger and acquisition expenses - bridge loan facility & bonds (9,755 ) -   na (29,220 ) -   na
 

 

Income before income taxes, noncontrolling interests and equity in income of equity investments

99,687 89,836 11.0 355,919 354,854 0.3
Income taxes 33,985   30,767   10.5 112,369   115,102   (2.4 )

 

Income before noncontrolling interests and equity in income of equity investments

65,702 59,069 11.2 243,550 239,752 1.6
Equity in income of equity investments 3,691   3,188   15.8 13,047   10,171   28.3
Net income 69,393 62,257 11.5 256,597 249,923 2.7
Net income attributable to noncontrolling interests (3,738 ) (1,395 ) nm (11,847 ) (5,643 ) nm
 
Net income attributable to TSYS common shareholders $ 65,655   60,862   7.9 % $ 244,750   244,280   0.2 %
 
Basic earnings per share (EPS) $ 0.35   0.33   6.2 % $ 1.30   1.30   0.0 %
 
Diluted EPS $ 0.34   0.32   5.5 % $ 1.29   1.29   (0.2 ) %
 
Dividends declared per share $ 0.10   0.10   $ 0.40   0.40  
 

Non-GAAP measures:

Adjusted cash EPS $ 0.48   0.37   26.9 % $ 1.72   1.46   17.8 %
 
Adjusted EBITDA $ 184,234   139,385   32.2 % $ 634,165   546,883   16.0 %
 
 
nm = not meaningful
 
TSYS
Consolidated Statements of Comprehensive Income
(unaudited)
(in thousands)
                   
 
Three Months Ended Twelve Months Ended
December 31,   December 31,
 
2013 2012 2013 2012
 
Net income $ 69,393 62,257 $ 256,597 249,923
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 2,407 (1,393 ) (4,082 ) 2,183
Postretirement healthcare plan adjustments 472 (415 ) 1,895 (1,666 )
Unrealized gain on available-for-sale securities 294 -   1,773   -  
Other comprehensive income (loss) 3,174 (1,808 ) (413 ) 517  
Comprehensive income 72,567 60,449 256,184 250,440

 

Comprehensive income attributable to noncontrolling interests

2,943 (177 ) 9,092   4,307  

 

Comprehensive income attributable to TSYS common shareholders

$ 69,624 60,626   $ 247,092   246,133  
 
 
                                                       
TSYS
Earnings Per Share
(unaudited)
(in thousands, except per share data)
                                 
 
Three Months Ended Three Months Ended Twelve Months Ended Twelve Months Ended
December 31, 2013 December 31, 2012 December 31, 2013 December 31, 2012
Common Participating Common Participating Common Participating Common Participating
Stock Securities Stock Securities Stock Securities Stock Securities
 
Basic earnings per share:
Net income $ 65,655 60,862 $ 244,750 244,280
Less income allocated to nonvested awards (643 ) 643 (186 ) 186 (1,595 ) 1,595 (800 ) 800

 

Net income allocated to common stock for EPS calculation (a)

$ 65,012   643 60,676   186 $ 243,155   1,595 243,480   800
 

Average common shares outstanding (b)

187,572   1,874 185,888   583 187,145   1,246 187,403   627
 
Average common shares and participating securities 189,446   186,471   188,391   188,030  
 

Basic earnings per share (a)/(b)

$ 0.35   0.34 0.33   0.32 $ 1.30   1.28 1.30   1.28
 
Diluted earnings per share:
Net income $ 65,655 60,862 $ 244,750 244,280
Less income allocated to nonvested awards (638 ) 638 (186 ) 186 (1,585 ) 1,585 (796 ) 796

Net income allocated to common stock for EPS calculation (c)

$ 65,017   638 60,676   186 $ 243,165   1,585 243,484   796
 
Average common shares outstanding 187,572 1,874 185,888 583 187,145 1,246 187,403 627

 

Increase due to assumed issuance of shares related to common equivalent shares outstanding

2,176     983     1,648     1,262    

 

Average common and common equivalent shares outstanding (d)

189,748   1,874 186,871   583 188,793   1,246 188,665   627

 

Average common and common equivalent shares and participating securities

191,622   187,454   190,039   189,292  
 

Diluted earnings per share (c)/(d)

$ 0.34   0.34 0.32   0.32 $ 1.29   1.27 1.29   1.27
                                             
TSYS
Segment Breakdown
(unaudited)
(in thousands)
                   
Three Months Ended December 31, Twelve Months Ended December 31,
Change Change
2013 2012 $ % 2013 2012 $ %
Revenues before reimbursable items
North America Services $ 223,266 213,639 9,627 4.5 % $ 860,645 826,750 33,895 4.1 %
International Services 108,332 102,427 5,905 5.8 389,532 396,149 (6,617 ) (1.7 )
Merchant Services 110,375 105,855 4,520 4.3 446,277 409,698 36,579 8.9
NetSpend 104,144 - 104,144 na 207,851 - 207,851 na
Intersegment revenues (3,121 ) (3,352 ) 231   6.9 (12,550 ) (14,106 ) 1,556   11.0

 

Revenues before reimbursable items from external customers

$ 542,996   418,569   124,427   29.7 % $ 1,891,755   1,618,491   273,264   16.9 %
 
Total revenues
North America Services $ 259,067 247,612 11,455 4.6 % $ 1,000,072 965,393 34,679 3.6 %
International Services 113,866 107,000 6,866 6.4 409,597 413,467 (3,870 ) (0.9 )
Merchant Services 128,074 129,413 (1,339 ) (1.0 ) 533,049 512,580 20,469 4.0
NetSpend 104,144 - 104,144 na 207,851 - 207,851 na
Intersegment revenues (4,311 ) (4,925 ) 614   12.5 (18,216 ) (20,468 ) 2,252   11.0
Revenues from external customers $ 600,840   479,100   121,740   25.4 % $ 2,132,353   1,870,972   261,381   14.0 %
 
Depreciation and amortization
North America Services $ 19,420 18,816 604 3.2 % $ 74,480 74,673 (193 ) (0.3 ) %
International Services 13,554 13,980 (426 ) (3.0 ) 47,978 55,033 (7,055 ) (12.8 )
Merchant Services 3,004 2,699 305 11.3 12,034 12,083 (49 ) (0.4 )
NetSpend 1,651   -   1,651   na 3,121   -   3,121   na
Segment depreciation and amortization 37,629 35,495 2,134 6.0 137,613 141,789 (4,176 ) (2.9 )
Acquisition intangible amortization 24,751 7,340 17,411 nm 65,893 26,264 39,629 nm
Corporate admin and other 482   446   36   8.1 1,846   2,558   (712 ) (27.8 )
Total depreciation and amortization $ 62,862   43,281   19,581   45.2 % $ 205,352   170,610   34,742   20.4 %
 
Adjusted segment operating income
North America Services $ 85,205 78,834 6,371 8.1 % $ 314,577 289,492 25,085 8.7 %
International Services 19,463 6,584 12,879 nm 45,911 29,427 16,484 56.0
Merchant Services 35,526 37,248 (1,722 ) (4.6 ) 154,047 156,284 (2,237 ) (1.4 )
NetSpend 28,470   -   28,470   na 59,717   -   59,717   na
Total adjusted segment operating income 168,664 122,666 45,998 37.5 574,252 475,203 99,049 20.8

Acquisition intangible amortization

(24,751 ) (7,340 ) (17,411 ) nm (65,893 ) (26,264 ) (39,629 ) nm
NetSpend M&A operating expenses (non-recurring) (2,211 ) - (2,211 ) na (14,220 ) - (14,220 ) na
Corporate admin and other (31,300 ) (25,495 ) (5,805 ) (22.8 ) (107,892 ) (91,287 ) (16,605 ) (18.2 )
Operating income $ 110,402   89,831   20,571   22.9 % $ 386,247   357,652   28,595   8.0 %
 
Other:
Reimbursable items:
North America Services $ 35,801 33,973 1,828 5.4 % $ 139,427 138,643 784 0.6 %
International Services 5,534 4,573 961 21.0 20,065 17,318 2,747 15.9
Merchant Services 17,699 23,558 (5,859 ) (24.9 ) 86,772 102,882 (16,110 ) (15.7 )
NetSpend - - - na - - - na
Intersegment revenues (1,190 ) (1,573 ) 383   24.3 (5,666 ) (6,362 ) 696   10.9
Reimbursable items $ 57,844   60,531   (2,687 ) (4.4 ) % $ 240,598   252,481   (11,883 ) (4.7 ) %
                                         

TSYS

Segment Breakdown
(unaudited)
(in thousands)
                 
Other:
 
Volumes: At       Change    
FTEs (full-time equivalents) 12/31/2013   12/31/2012   $   %
North America Services 4,484 4,096 388 9.5 %
International Services 2,489 2,404 85 3.5
Merchant Services 1,599 1,481 118 8.0
NetSpend 470 - 470 na
Corporate Admin and Other   553       425       128   30.1
FTEs   9,595       8,406       1,189   14.1 %
 
 
Total assets (in thousands)
North America Services $ 3,241,964 1,744,877 1,497,087 85.8 %
International Services 417,855 445,642 (27,787 ) (6.2 )
Merchant Services 676,592 703,725 (27,133 ) (3.9 )
NetSpend 1,594,197 - 1,594,197 na
Intersegment assets   (2,243,852 )     (870,406 )     (1,373,446 ) nm
Total assets $   3,686,756       2,023,838       1,662,918   82.2 %
 
 
Three Months Ended December 31, Twelve Months Ended December 31,
Change       Change      
2013   2012   Inc(Dec)   % 2013   2012   Inc(Dec)   %
North America Segment:
Accounts on File (AOF) (in millions) 481.9 424.8 57.0 13.4 %
Transactions (in millions) 2,488.6 2,194.7 293.9 13.4 % 9,132.8 8,102.3 1,030.5 12.7 %
 
International Segment:
AOF (in millions) 59.2 54.6 4.6 8.5 %
Transactions (in millions) 555.7 474.0 81.7 17.2 % 2,007.9 1,674.5 333.4 19.9 %
 
Merchant Segment:
Point-of-sale Transactions (in millions) 1,034.6 1,153.2 (118.6 ) (10.3 ) % 4,359.8 4,877.6 (517.8 ) (10.6 ) %
Dollar sales volume (in millions) $ 12,021.0 $ 11,038.0 $ 983.0 8.9 % $ 44,144.0 $ 38,994.0 $ 5,150 13.2 %
 
NetSpend Segment:
Gross Dollar Volume (in millions) $ 3,967.6 $ 3,265.4 $ 702.2 21.5 % $ 17,075.1 $ 13,156.0 $ 3,919.1 29.8 %
 
90-Day Active Cards (in thousands) 2,835.1 - 2,835.1 na
Direct Deposit 90-Day Active Cards (in thousands) 1,321.1 - 1,321.1 na
% of 90-Day Active Cards with Direct Deposit 46.6 % 46.6 %
 
 
               
TSYS
Balance Sheet
(unaudited)
(in thousands)
    Dec 31, 2013     Dec 31, 2012
Assets    
Current assets:
Cash and cash equivalents $ 278,230 247,612
Restricted cash 753 282
Accounts receivable, net 264,238 247,083
Deferred income tax assets 14,958 9,825
Prepaid expenses and other current assets 95,942 69,924
   
Total current assets 654,121 574,726
Goodwill 1,543,179 518,344
Property and equipment, net 265,216 260,389
Computer software, net 369,773 226,917
Contract acquisition costs, net 184,890 161,267
Other intangible assets, net 481,419 130,054
Equity investments, net 94,133 87,764
Deferred income tax assets, net 5,840 5,334
Other assets 88,185 59,043
   
Total assets $ 3,686,756   2,023,838  
 
Liabilities
Current liabilities:
Accounts payable $ 36,463 63,370
Current portion of borrowings 34,257 27,361
Current portion of obligations under capital leases 23,032 13,263
Accrued salaries and employee benefits 38,775 26,243
Other current liabilities 168,736 100,282
   
Total current liabilities 301,263 230,519
Long-term borrowings, excluding current portion 1,428,251 174,859
Deferred income tax liabilities 224,867 48,074
Obligations under capital leases, excluding current portion 7,500 17,155
Other long-term liabilities 82,797 68,791
   
Total liabilities 2,044,678   539,398  
Redeemable noncontrolling interest 39,652   39,505  
Equity
Shareholders' equity:
Common stock 20,279 20,247
Additional paid-in capital 165,841 141,793
Accumulated other comprehensive income (loss), net 3,749 1,408
Treasury stock (326,996 ) (287,301 )
Retained earnings 1,718,204   1,549,063  
Total shareholders' equity 1,581,077   1,425,210  
Noncontrolling interests in consolidated subsidiaries 21,349   19,725  
Total equity 1,602,426   1,444,935  
Total liabilities and equity $ 3,686,756   2,023,838  
 
 
               
TSYS
Cash Flow
(unaudited)
(in thousands)
    Twelve Months Ended December 31,
2013     2012
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 256,597 249,923

Adjustments to reconcile net income to net cash provided by operating activities:

Equity in income of equity investments (13,047 ) (10,171 )
Dividends received from equity investments 8,595 7,524
Net loss on foreign currency 1,027 2,012
Depreciation and amortization 205,352 170,610
Amortization of debt issuance costs 7,269 298
Amortization of bond discount 225 -
Changes in fair value of private equity investments (966 ) (898 )
Share-based compensation 28,933 18,621
Excess tax benefit from share-based payment arrangements (3,528 ) (1,259 )

Provisions for bad debt expense and billing adjustments

2,000 1,054
Charges for transaction processing provisions 7,458 2,803
Provision for fraud and other losses 11,912 -
Deferred income tax expense 25,720 285
Loss on disposal of equipment, net (79 ) 324
Changes in operating assets and liabilities:
Restricted cash (392 ) -
Accounts receivable (8,667 ) 2,855
Prepaid expenses, other current assets and other long-term assets (179 ) (2,945 )
Accounts payable (52,042 ) 37,206
Accrued salaries and employee benefits (403 ) (7,083 )
Other current liabilities and other long-term liabilities (23,386 ) (15,406 )
Net cash provided by operating activities 452,399   455,753  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (40,598 ) (31,395 )
Additions to licensed computer software from vendors (64,729 ) (33,001 )
Additions to internally developed computer software (32,506 ) (19,285 )
Cash used in acquisitions, net of cash acquired (1,314,660 ) (188,698 )
Purchase of private equity investments (1,378 ) (3,031 )
Additions to contract acquisition costs (55,965 ) (34,384 )
Net cash used in investing activities (1,509,836 ) (309,794 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on long-term borrowings and capital lease obligations

(166,805 ) (200,052 )
Proceeds from borrowings of long-term borrowings 1,395,661 150,000
Proceeds from exercise of stock options 40,691 9,672
Excess tax benefit from share-based payment arrangements 3,528 1,259
Repurchase of common stock under plans and tax withholding (103,857 ) (74,939 )
Debt issuance costs (13,575 ) (2,073 )
Subsidiary dividends paid to noncontrolling shareholders (7,321 ) (2,797 )
Dividends paid on common stock (56,510 ) (94,035 )
Net cash provided by (used in) financing activities 1,091,813   (212,965 )
 
CASH AND CASH EQUIVALENTS:
Effect of exchange rate changes on cash and cash equivalents (3,758 ) (1,719 )
Net increase in cash and cash equivalents 30,618 (68,725 )
Cash and cash equivalents at beginning of period 247,612   316,337  
Cash and cash equivalents at end of period $ 278,230   247,612  
 
 
Supplemental Information:            
Accounts on File
Total
(in millions) December December %
2013   2012   Change
Consumer Credit 229.0 200.5 14.2
Retail 27.8 25.0 11.0
Total Consumer 256.8 225.5 13.9
Commercial 39.9 37.1 7.6
Other 18.9 12.8 47.6
Subtotal 315.6 275.4 14.6
Prepaid/Stored Value 118.0 115.9 1.8
Government Services 62.2 57.0 9.2
Commercial Card Single Use 45.3 31.1 45.4
Total AOF 541.1 479.4 12.9
 

Growth in Accounts on File (in millions):

    
      December 2012 to December 2011 to
December 2013   December 2012
Beginning balance 479.4 404.2
Change in accounts on file due to:
Internal growth of existing clients 37.6 31.5
New clients 61.2 80.1
Purges/Sales (36.4) (33.6)
Deconversions (0.7) (2.8)
Ending balance 541.1 479.4
 
 

Reconciliation of GAAP to Non-GAAP Financial Measures

 
Non-GAAP Measures
 

The schedule below provides a reconciliation of revenues and operating results on a constant currency basis to reported revenues and operating income. This non-GAAP measure presents fourth quarter and full year 2013 financial results using the previous year's foreign currency exchange rates. On a full year constant currency basis, TSYS' total revenues grew 15.1% as compared to a reported GAAP increase of 14.0%.

 
The schedule below also provides a reconciliation of basic EPS, adjusted for the after-tax impact of acquisition intangible amortization, share-based compensation and merger and acquisition costs, to adjusted cash EPS.
 

The tax rate used in the calculation of cash EPS for the quarter and year is equal to an estimate of our annual effective tax rate on GAAP income. This effective rate is estimated annually and may be adjusted during the year to take into account events or trends that materially impact the effective tax rate including, but not limited to, significant changes resulting from tax legislation, material changes in the mix of revenues and expenses by entity and other significant events.

 
The schedule also provides a reconciliation of net income, adjusted for equity in income of equity investments, income taxes, nonoperating expense, depreciation and amortization, share-based compensation, and merger and acquisition expenses, to adjusted EBITDA.
 
TSYS believes that non-GAAP financial measures are important to enable investors to understand and evaluate its ongoing operating results. Accordingly, TSYS includes non-GAAP financial measures when reporting its financial results to shareholders and investors in order to provide them with an additional tool to evaluate TSYS' ongoing business operations. TSYS believes that the non-GAAP financial measures are representative of comparative financial performance that reflects the economic substance of TSYS' current and ongoing business operations.
 
Although non-GAAP financial measures are often used to measure TSYS' operating results and assess its financial performance, they are not necessarily comparable to similarly titled captions of other companies due to potential inconsistencies in the method of calculation.
 
TSYS believes that its use of non-GAAP financial measures provides investors with the same key financial performance indicators that are utilized by management to assess TSYS' operating results, evaluate the business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of non-GAAP financial measures to give shareholders and potential investors an opportunity to see TSYS as viewed by management, to assess TSYS with some of the same tools that management utilizes internally and to be able to compare such information with prior periods. TSYS believes that the presentation of GAAP financial measures alone would not provide its shareholders and potential investors with the ability to appropriately analyze its ongoing operational results, and therefore expected future results. TSYS therefore believes that inclusion of non-GAAP financial measures provides investors with additional information to help them better understand its financial statements just as management utilizes these non-GAAP financial measures to better understand the business, manage budgets and allocate resources.
 
 
Reconciliation of GAAP to Non-GAAP
                                     
Constant Currency Comparison
(unaudited)
(in thousands)
               
Three Months Ended December 31, Twelve Months Ended December 31,
Percent Percent
2013 2012 Change 2013 2012 Change
Consolidated
Constant currency (1) $ 604,665 479,100 26.2 % $ 2,152,961 1,870,972 15.1 %
Foreign currency (2) (3,825 ) - (20,608 ) -
Total revenues $ 600,840   479,100 25.4 % $ 2,132,353   1,870,972 14.0 %
 
Constant currency (1) $ 546,849 418,569 30.6 % $ 1,912,063 1,618,491 18.1 %
Foreign currency (2) (3,853 ) - (20,308 ) -
Total revenues before reimbursable items $ 542,996   418,569 29.7 % $ 1,891,755   1,618,491 16.9 %
 
Constant currency (1) $ 110,186 89,831 22.7 % $ 388,042 357,652 8.5 %
Foreign currency (2) 216   - (1,795 ) -
Operating income $ 110,402   89,831 22.9 % $ 386,247   357,652 8.0 %
 
International Services
Constant currency (1) $ 117,806 107,000 10.1 % $ 430,521 413,467 4.1 %
Foreign currency (2) (3,940 ) - (20,924 ) -
Total revenues $ 113,866   107,000 6.4 % $ 409,597   413,467 (0.9 ) %
 
(1) Reflects current period results on a non-GAAP basis as if foreign currency rates did not change from the comparable prior year period.
(2) Reflects the impact of calculated changes in foreign currency rates from the comparable period.
                                     
Revenues Before Reimbursable Items
(unaudited)
(in thousands)
 
Three Months Ended December 31, Twelve Months Ended December 31,
Percent Percent
2013   2012 Change 2013   2012 Change
Total Revenues $ 600,840 479,100 25.4 % $ 2,132,353 1,870,972 14.0 %
Reimbursable Items 57,844   60,531 (4.4 ) 240,598   252,481 (4.7 )
Revenues Before Reimbursable Items $ 542,996   418,569 29.7 % $ 1,891,755   1,618,491 16.9 %
 
 
                                     
Reconciliation of GAAP to Non-GAAP
                                     
Adjusted Cash Earnings
(unaudited)
(in thousands, except per share data)
               
Three Months Ended December 31, Twelve Months Ended December 31,
Percent Percent
2013 2012 Change 2013 2012 Change
Net income attributable to TSYS common shareholders (a) $ 65,655 60,862 7.9 % $ 244,750 244,280 0.2 %
 
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes $ 16,615 4,640 nm % $ 43,759 17,282 nm %
Add: Share-based compensation, net of taxes 6,408   4,272   50.0 % 19,838   12,683   56.4 %
Cash earnings 88,678 69,774 27.1 % 308,347 274,245 12.4 %
Add: NetSpend M&A expenses, net of taxes* (non-recurring) 1,317   -   na % 15,251   -   na %
Cash earnings adjusted $ 89,995   69,774   29.0 % $ 323,598   274,245   18.0 %
 
Basic EPS - Net income attributable to TSYS common shareholders
As reported (GAAP) $ 0.35   0.33   6.2 % $ 1.30   1.30   0.0 %
 
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes 0.09 0.02 nm % 0.23 0.09 nm %
Add: Share-based compensation, net of taxes 0.03   0.02   47.6 % 0.11   0.07   56.0 %
Cash earnings per share 0.47 0.37 25.1 % 1.64 1.46 12.2 %
Add: NetSpend M&A expenses, net of taxes* (non-recurring) 0.01   -   na % 0.08   -   na %
Adjusted cash EPS ** $ 0.48   0.37   26.9 % $ 1.72   1.46   17.8 %
 
Average common shares and participating securities 189,446   186,471   188,391   188,030  
 
* Certain merger and acquisition costs are nondeductible for income tax purposes
** Adjusted cash EPS amounts may not total due to rounding.
     
Adjusted EBITDA
(unaudited)
(in thousands)
 
Three Months Ended December 31, Twelve Months Ended December 31,
Percent Percent
2013   2012   Change 2013   2012   Change
Net income $ 69,393 62,257 11.5 % $ 256,597 249,923 2.7 %
Adjust for:
Deduct: Equity in income of equity investments (3,691 ) (3,188 ) (15.8 ) % (13,047 ) (10,171 ) (28.3 ) %
Add: Income taxes 33,985 30,767 10.5 % 112,369 115,102 (2.4 ) %
Add: Nonoperating expense 10,715 (5 ) nm % 30,328 2,798 nm %
Add: Depreciation and amortization 62,862   43,281   45.2 % 205,352   170,610   20.4 %
EBITDA 173,264 133,112 30.2 % 591,599 528,262 12.0 %
Adjust for:
Add: Share-based compensation 9,345 6,273 49.0 % 28,933 18,621 55.4 %
Add: NetSpend M&A operating expenses *(non-recurring) 1,625   -   na % 13,633   -   na %
Adjusted EBITDA $ 184,234   139,385   32.2 % $ 634,165   546,883   16.0 %
 
* Excludes share-based compensation

TSYS Investor Relations
Shawn Roberts, +1-706-644-6081
shawnroberts@tsys.com