UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2007

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from      To

Commission file number 1-10254

(Exact name of registrant as specified in its charter)

Georgia (State or other jurisdiction of incorporation or organization)		58-1493818 (I.R.S. Employer Identification No.)

1600 First Avenue, Post Office Box 1755, Columbus, Georgia 31902

(Address of principal executive offices)		(Zip Code)

(706) 649-2262
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Yes þ     No o

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

Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o

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

Yes o      No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

CLASS		OUTSTANDING AS OF: August 7, 2007
Common Stock, $0.10 par value		197,494,382 shares

 

 

TOTAL SYSTEM SERVICES, INC.
INDEX

		Page
		Number
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited) – June 30, 2007 and December 31, 2006		3
Condensed Consolidated Statements of Income (unaudited) – Three and six months ended June 30, 2007 and 2006		5
Condensed Consolidated Statements of Cash Flows (unaudited) – Six months ended June 30, 2007 and 2006		7
Notes to Unaudited Condensed Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosures About Market Risk		44
Item 4. Controls and Procedures		46
Part II. Other Information
Item 1A. Risk Factors		47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		47
Item 4. Submissions of Matters to a Vote of Security Holders		48
Item 6. Exhibits		49
Signatures		50
Exhibit Index		51
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32 SECTION 906 CERTIFICATIONS OF THE CEO/CFO

TOTAL SYSTEM SERVICES, INC.

		June 30,				December 31,
(in thousands, except per share information)		2007				2006
Assets
Current assets:
Cash and cash equivalents (includes $264.9 million and $241.0 million on deposit with a related party at 2007 and 2006, respectively)		$	452,194				389,123
Restricted cash (includes $10.6 million and $5.0 million on deposit with a related party at 2007 and 2006, respectively)			41,744				31,568
Accounts receivable, net of allowance for doubtful accounts and billing adjustments of $9.1 million and $11.0 million at 2007 and 2006, respectively (includes $1.3 million and $34 due from a related party at 2007 and 2006, respectively)			253,640				246,637
Deferred income tax assets			26,853				21,556
Prepaid expenses and other current assets			58,520				55,832
Total current assets			832,951				744,716
Property and equipment, net of accumulated depreciation and amortization of $248.2 million and $226.4 million at 2007 and 2006, respectively			272,560				271,321
Computer software, net of accumulated amortization of $348.4 million and $337.7 million at 2007 and 2006, respectively			198,192				216,450
Contract acquisition costs, net			159,829				167,449
Goodwill, net			141,973				133,337
Equity investments			62,796				62,064
Other intangible assets, net of accumulated amortization of $11.4 million and $9.6 million at 2007 and 2006, respectively			14,456				21,314
Other assets			21,742				17,590
Total assets		$	1,704,499				1,634,241

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

TOTAL SYSTEM SERVICES, INC.
Condensed Consolidated Balance Sheets (continued)
(Unaudited)

		June 30,				December 31,
(in thousands, except per share information)		2007				2006
Liabilities and Shareholders’ Equity
Current liabilities:
Accrued salaries and employee benefits		$	48,819				80,697
Accounts payable (includes $49 and $95 payable to related parties at 2007 and 2006, respectively)			31,024				31,589
Current portion of obligations under capital leases			3,987				3,156
Current portion of notes payable			2,021				—
Other current liabilities (includes $11.3 million and $11.2 million payable to related parties at 2007 and 2006, respectively)			160,818				180,345
Total current liabilities			246,669				295,787
Deferred income tax liabilities			75,468				75,019
Notes payable, excluding current portion			3,952				—
Obligations under capital leases, excluding current portion			5,682				3,625
Other long-term liabilities			36,706				36,221
Total liabilities			368,477				410,652
Minority interests in consolidated subsidiaries			7,022				6,229
Shareholders’ equity:
Common stock — $0.10 par value. Authorized 600,000 shares; 199,200 and 198,676 issued at 2007 and 2006, respectively; 197,495 and 196,912 outstanding at 2007 and 2006, respectively			19,920				19,868
Additional paid-in capital			81,317				66,677
Accumulated other comprehensive income, net			23,317				20,641
Treasury stock (1,706 shares at 2007 and 1,764 shares at 2006)			(34,312	)			(35,233	)
Retained earnings			1,238,758				1,145,407
Total shareholders’ equity			1,329,000				1,217,360
Total liabilities and shareholders’ equity		$	1,704,499				1,634,241

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

TOTAL SYSTEM SERVICES, INC.

		Three months ended
		June 30,
(in thousands, except per share information)		2007				2006
Revenues:
Electronic payment processing services (includes $1.5 million and $1.2 million from related parties for 2007 and 2006, respectively)		$	244,840				232,301
Merchant acquiring services			64,277				65,820
Other services (includes $2.2 million from related parties for both 2007 and 2006, respectively)			54,977				44,670
Revenues before reimbursable items			364,094				342,791
Reimbursable items (includes $0.7 million and $0.5 million from related parties for 2007 and 2006, respectively)			96,061				86,374
Total revenues			460,155				429,165
Expenses:
Salaries and other personnel expense			145,532				120,433
Net occupancy and equipment expense			67,953				75,703
Other operating expenses (includes $2.4 million and $2.6 million to related parties for 2007 and 2006, respectively)			54,693				61,924
Expenses before reimbursable items			268,178				258,060
Reimbursable items			96,061				86,374
Total expenses			364,239				344,434
Operating income			95,916				84,731
Nonoperating income (expense):
Interest income (includes $3.3 million and $1.8 million from related parties for 2007 and 2006, respectively)			6,159				3,425
Interest expense			(366	)			(85	)
Loss on foreign currency translation, net			(845	)			(363	)
Other			44				—
Total nonoperating income			4,992				2,977
Income before income taxes, minority interest and equity in income of equity investments			100,908				87,708
Income taxes			35,603				31,148
Income before minority interest and equity in income of equity investments			65,305				56,560
Minority interests in consolidated subsidiaries’ net income, net of tax			(602	)			(173	)
Equity in income of equity investments, net of tax			985				1,019
Net income		$	65,688				57,406
Basic earnings per share		$	0.33				0.29
Diluted earnings per share		$	0.33				0.29
Weighted average common shares outstanding			196,693				197,093
Increase due to assumed issuance of shares related to common equivalent shares			454				237
Weighted average common and common equivalent shares outstanding			197,147				197,330

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

TOTAL SYSTEM SERVICES, INC.
Condensed Consolidated Statements of Income
(Unaudited)

		Six months ended
		June 30,
(in thousands, except per share information)		2007				2006
Revenues:
Electronic payment processing services (includes $2.8 million and $2.5 million from related parties for 2007 and 2006, respectively)		$	475,004				453,362
Merchant acquiring services			124,957				129,769
Other services (includes $5.0 million and $3.8 million from related parties for 2007 and 2006, respectively)			107,744				89,212
Revenues before reimbursable items			707,705				672,343
Reimbursable items (includes $1.2 million and $0.9 million from related parties for 2007 and 2006, respectively)			182,053				169,112
Total revenues			889,758				841,455
Expenses:
Salaries and other personnel expense			285,974				241,763
Net occupancy and equipment expense			134,089				151,053
Other operating expenses (includes $4.7 million and $5.2 million to related parties for 2007 and 2006, respectively)			106,047				122,939
Expenses before reimbursable items			526,110				515,755
Reimbursable items			182,053				169,112
Total expenses			708,163				684,867
Operating income			181,595				156,588
Nonoperating income (expense):
Interest income (includes $6.6 million and $3.2 million from related parties for 2007 and 2006, respectively)			11,647				5,933
Interest expense			(576	)			(129	)
Loss on foreign currency translation, net			(162	)			(87	)
Other			58				—
Total nonoperating income			10,967				5,717
Income before income taxes, minority interest and equity in income of equity investments			192,562				162,305
Income taxes			70,494				56,113
Income before minority interest and equity in income of equity investments			122,068				106,192
Minority interests in consolidated subsidiaries’ net income, net of tax			(952	)			(264	)
Equity in income of equity investments, net of tax			1,845				1,871
Net income		$	122,961				107,799
Basic earnings per share		$	0.63				0.55
Diluted earnings per share		$	0.62				0.55
Weighted average common shares outstanding			196,591				197,089
Increase due to assumed issuance of shares related to common equivalent shares			490				245
Weighted average common and common equivalent shares outstanding			197,081				197,334

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

TOTAL SYSTEM SERVICES, INC.

		Six months ended
		June 30,
(in thousands)		2007				2006
Cash flows from operating activities:
Net income		$	122,961				107,799
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interests in consolidated subsidiaries’ net income, net of tax			952				264
Loss on foreign currency, net			162				87
Equity in income of equity investments, net of tax			(1,845	)			(1,871	)
Dividends received from equity investments			2,994				2,371
Depreciation and amortization			76,607				86,148
Share-based compensation			6,596				4,445
Impairment of developed software			620				—
Provisions for bad debt expenses and billing adjustments			148				224
Charges for transaction processing provisions			437				7,501
Deferred income tax benefit			(2,760	)			(17,041	)
Loss on disposal of equipment, net			23				105
(Increase) decrease in:
Accounts receivable			(6,150	)			(4,442	)
Prepaid expenses, other current assets and other long-term assets assets			(8,921	)			3,830
Increase (decrease) in:
Accounts payable			(814	)			451
Accrued salaries and employee benefits			(31,870	)			(41,590	)
Excess tax benefit from share-based payment arrangements			(3,869	)			—
Other current liabilities and other long-term liabilities			(35,765	)			(17,338	)
Net cash provided by operating activities			119,506				130,943
Cash flows from investing activities:
Purchases of property and equipment, net			(21,438	)			(14,306	)
Additions to licensed computer software from vendors			(4,810	)			(4,437	)
Additions to internally developed computer software			(7,458	)			(8,999	)
Cash used in acquisitions			(472	)			—
Additions to contract acquisition costs			(9,542	)			(22,339	)
Net cash used in investing activities			(43,720	)			(50,081	)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

TOTAL SYSTEM SERVICES, INC.
Condensed Consolidated Statements of Cash Flows (continued)
(Unaudited)

		Six months ended
		June 30,
(in thousands)		2007				2006
Cash flows from financing activities:
Dividends paid on common stock (includes $22.3 million and $19.2 million paid to related parties during 2007 and 2006, respectively)		$	(27,598	)			(23,683	)
Excess tax benefit from share-based payment arrangements			3,869				—
Principal payments on long-term debt borrowings and capital lease obligations			(1,744	)			(1,060	)
Proceeds from borrowings of long-term debt			6,805				—
Proceeds from exercise of stock options			5,112				—
Net cash used in financing activities			(13,556	)			(24,743	)
Effect of exchange rate changes on cash and cash equivalents			841				1,795
Net increase in cash and cash equivalents			63,071				57,914
Cash and cash equivalents at beginning of year			389,123				237,569
Cash and cash equivalents at end of period		$	452,194				295,483
Cash paid for interest		$	576				129
Cash paid for income taxes, net of refunds		$	93,087				81,886

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

TOTAL SYSTEM SERVICES, INC.

Note 1 — Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements of Total System Services, Inc.^® (TSYS^® or the Company) include the accounts of TSYS and its wholly owned subsidiaries and TSYS’ majority owned foreign subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, the Company evaluates its relationship with other entities to identify whether they are variable interest entities as defined by the Financial Accounting Standards Board’s (FASB’s) Interpretation No. 46(R) (FIN No. 46R), “Consolidation of 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 in accordance with FIN No. 46R.

     These financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. 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. All adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair presentation of financial position and results of operations for the periods covered by this report have been included.

     The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s summary of significant accounting policies, consolidated financial statements and related notes appearing in the Company’s 2006 annual report previously filed on Form 10-K. Results of interim periods are not necessarily indicative of results to be expected for the year.

     Certain reclassifications have been made to the 2006 financial statements to conform to the presentation adopted in 2007.

Note 2 — Supplementary Balance Sheet Information

Cash and Cash Equivalents

     Cash and cash equivalent balances are summarized as follows:

(in thousands)		June 30, 2007				December 31, 2006
Cash and cash equivalents in domestic accounts		$	398,707				344,197
Cash and cash equivalents in foreign accounts			53,487				44,926
Total		$	452,194				389,123

     The Company maintains 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.

Prepaid Expenses and Other Current Assets

     Significant components of prepaid expenses and other current assets are summarized as follows:

(in thousands)		June 30, 2007				December 31, 2006
Prepaid expenses		$	15,730				14,837
Supplies inventory			9,430				12,311
Other			33,360				28,684
Total		$	58,520				55,832

Contract Acquisition Costs, net

     Significant components of contract acquisition costs, net of accumulated amortization, are summarized as follows:

(in thousands)		June 30, 2007				December 31, 2006
Payments for processing rights, net		$	102,749				107,896
Conversion costs, net			57,080				59,553
Total		$	159,829				167,449

     Amortization related to payments for processing rights, which is recorded as a reduction of revenues, was $5.8 million and $7.2 million for the three months ended June 30, 2007 and 2006, respectively. For the six months ended June 30, 2007 and 2006, amortization related to payments for processing rights was $11.7 million and $13.8 million, respectively.

     Amortization expense related to conversion costs was $4.2 million and $4.5 million for the three months ended June 30, 2007 and 2006, respectively. For the six months ended June 30, 2007 and 2006, amortization related to conversion costs was $8.1 million and $9.4 million, respectively.

Other Current Liabilities

     Significant components of other current liabilities are summarized as follows:

(in thousands)		June 30, 2007				December 31, 2006
Client liabilities		$	46,331				36,161
Accrued expenses			36,426				44,578
Deferred revenues			23,271				19,311
Dividends payable			13,828				13,785
Transaction processing provisions			10,678				12,645
Accrued income taxes			8,731				25,384
Client postage deposits			2,386				6,736
Other			19,167				21,745
Total		$	160,818				180,345

Note 3 — Comprehensive Income

     For the three and six months ended June 30, comprehensive income is summarized below:

		Three months ended								Six months ended
		June 30,								June 30,
(in thousands)		2007				2006				2007				2006
Net income		$	65,688				57,406				122,961				107,799
Other comprehensive income:
Foreign currency translation adjustments, net of tax			2,783				4,295				2,676				4,706
Total		$	68,471				61,701				125,637				112,505

     The income tax effects allocated to and the cumulative balance of accumulated other comprehensive income are as follows:

		Beginning Balance				Pretax								Net-of-Tax				Ending Balance
(in thousands)		December 31, 2006				Amount				Tax Effect				Amount				June 30, 2007
Foreign currency translation adjustments		$	21,570			$	4,595				(1,919	)		$	2,676			$	24,246
Underfunded defined benefit postretirement plan			(929	)			—				—				—				(929	)
		$	20,641			$	4,595				(1,919	)		$	2,676			$	23,317

Note 4 – Segment Reporting and Major Customers

     The Company reports selected information about operating segments in accordance with Statement of Financial Accounting Standards No. 131 (SFAS No. 131), “Disclosures about Segments of an Enterprise and Related Information.” The Company’s segment information reflects the information that the chief operating decision maker (CODM) uses to make resource allocations and strategic decisions. The CODM at TSYS consists of the chairman of the board and chief executive officer, the president and the three senior executive vice presidents.

     Through online accounting and electronic payment processing systems, TSYS provides electronic payment processing and other services to card-issuing and merchant acquiring institutions in the United States and internationally. The Company has three reportable segments: domestic-based support services, international-based support services and merchant acquiring services.

     In April 2007, TSYS’ wholly-owned subsidiary, Enhancement Services Corporation, changed its name to TSYS Loyalty, Inc. (TSYS Loyalty).

     Domestic-based support services include electronic payment processing services and other services provided from within the United States. The domestic-based support services segment includes the financial results of TSYS, excluding its foreign branch offices and divisions, and including the following subsidiaries: Columbus Depot Equipment Company, Columbus Productions, Inc., TSYS Canada, Inc., TSYS Total Debt Management, Inc., ProCard, Inc., TSYS Technology Center, Inc., TSYS Prepaid, Inc., Merlin Solutions, L.L.C. and TSYS Loyalty and its wholly owned subsidiary, Golden Retriever Systems, L.L.C.

     International-based support services include electronic payment processing and other services provided from outside the United States. International-based support services include the financial results of GP Network Corporation, TSYS Japan Co., Ltd., TSYS Servicos de Transacoes Eletronicas Ltda., Total System Services Holding Europe LP and its subsidiaries and TSYS’ foreign branch offices and divisions. TSYS’ share of the equity earnings of its equity investments, Total System Services de México, S.A. de C.V. (TSYS de México) and China UnionPay Data Co., Ltd. (CUP Data), are included in international-based support services because TSYS de México’s and CUP Data’s operations and client bases are located outside the United States.

     Merchant acquiring services include the financial results of TSYS Acquiring Solutions, L.L.C., and its wholly owned subsidiary TSYS POS Systems and Services, L.L.C.

		Domestic-				International-				Merchant
		based support				based support				acquiring
(in thousands)		services				services				services				Consolidated
Operating Segments
At June 30, 2007
Identifiable assets		$	1,582,154				337,571				182,751			$	2,102,476
Intersegment eliminations			(396,490	)			(1,302	)			(185	)			(397,977	)
Total assets		$	1,185,664				336,269				182,566			$	1,704,499
At December 31, 2006
Identifiable assets		$	1,517,299				308,713				210,117			$	2,036,129
Intersegment eliminations			(400,957	)			(894	)			(37	)			(401,888	)
Total assets		$	1,116,342				307,819				210,080			$	1,634,241
Three months ended June 30, 2007
Revenues before reimbursables		$	254,340				58,043				58,234			$	370,617
Intersegment revenues			(5,754	)			(372	)			(397	)			(6,523	)
Revenues before reimbursables from external customers		$	248,586				57,671				57,837			$	364,094
Segment total revenues		$	333,872				60,733				74,114			$	468,719
Intersegment revenues			(7,795	)			(372	)			(397	)			(8,564	)
Revenues from external customers		$	326,077				60,361				73,717			$	460,155
Depreciation and amortization		$	25,748				5,507				6,755			$	38,010
Intersegment expenses		$	2,982				(3,727	)			(7,821	)		$	(8,566	)
Segment operating income		$	68,860				10,872				16,184			$	95,916
Income before income taxes, minority interest and equity in income of equity investments		$	75,275				9,053				16,580			$	100,908
Income taxes		$	27,404				2,235				5,964			$	35,603
Equity in income of equity investments		$	—				985				—			$	985
Net income		$	48,172				6,900				10,616			$	65,688
Three months ended June 30, 2006
Revenues before reimbursables		$	253,313				34,145				60,144			$	347,602
Intersegment revenues			(4,778	)			—				(33	)			(4,811	)
Revenues before reimbursables from external customers		$	248,535				34,145				60,111			$	342,791
Segment total revenues		$	325,106				40,326				70,736			$	436,168
Intersegment revenues			(6,970	)			—				(33	)			(7,003	)
Revenues from external customers		$	318,136				40,326				70,703			$	429,165
Depreciation and amortization		$	31,692				4,795				6,499			$	42,986
Intersegment expenses		$	6,591				(5,531	)			(8,046	)		$	(6,986	)
Segment operating income		$	66,780				3,204				14,747			$	84,731
Income before income taxes, minority interest and equity in income of equity investments		$	70,001				2,389				15,318			$	87,708
Income taxes		$	23,443				1,926				5,779			$	31,148
Equity in income of equity investments		$	—				1,019				—			$	1,019
Net income		$	46,712				1,155				9,539			$	57,406
Six months ended June 30, 2007
Revenues before reimbursables		$	495,309				111,006				113,052			$	719,367
Intersegment revenues			(10,535	)			(595	)			(532	)			(11,662	)

		Domestic-				International-				Merchant
		based support				based support				acquiring
(in thousands)		services				services				services				Consolidated
Revenues before reimbursables from external customers		$	484,774				110,411				112,520			$	707,705
Segment total revenues		$	648,329				116,134				140,998			$	905,461
Intersegment revenues			(14,576	)			(595	)			(532	)			(15,703	)
Revenues from external customers		$	633,753				115,539				140,466			$	889,758
Depreciation and amortization		$	51,715				11,307				13,585			$	76,607
Intersegment expenses		$	6,389				(6,965	)			(15,123	)		$	(15,699	)
Segment operating income		$	130,447				23,001				28,147			$	181,595
Income before income taxes, minority interest and equity in income of equity investments		$	142,967				20,530				29,065			$	192,562
Income taxes		$	53,653				6,407				10,435			$	70,494
Equity in income of equity investments		$	—				1,845				—			$	1,845
Net income		$	89,734				14,596				18,630			$	122,961
Six months ended June 30, 2006
Revenues before reimbursables		$	497,756				64,858				119,006			$	681,620
Intersegment revenues			(9,212	)			—				(65	)			(9,277	)
Revenues before reimbursables from external customers		$	488,544				64,858				118,941			$	672,343
Segment total revenues		$	637,936				76,572				141,068			$	855,576
Intersegment revenues			(14,056	)			—				(65	)			(14,121	)
Revenues from external customers		$	623,880				76,572				141,003			$	841,455
Depreciation and amortization		$	63,603				8,773				13,772			$	86,148
Intersegment expenses		$	15,282				(13,105	)			(16,265	)		$	(14,088	)
Segment operating income		$	127,745				4,083				24,760			$	156,588
Income before income taxes, minority interest and equity in income of equity investments		$	133,481				3,116				25,708			$	162,305
Income taxes		$	43,914				2,493				9,706			$	56,113
Equity in income of equity investments		$	—				1,871				—			$	1,871
Net income		$	89,531				2,266				16,002			$	107,799

     Revenues for domestic-based support services and merchant acquiring services include electronic payment processing and other services provided from the United States to clients domiciled in the United States or other countries. Revenues for international-based support services include electronic payment processing and other services provided from facilities outside the United States to clients based predominantly outside the United States.

     The following geographic data presents revenues for the three and six months ended June 30, 2007 and 2006, respectively, based on the domicile of the Company’s customers.

		Three months ended June 30,								Six months ended June 30,
(in millions)		2007				2006				2007				2006
United States		$	362.5				360.3				700.3				710.2
Europe			49.0				36.2				95.0				68.9
Canada			30.8				24.0				60.8				46.1
Japan			6.1				4.5				11.4				8.4
Mexico			3.3				2.9				6.5				5.4
Other			8.5				1.3				15.8				2.5
Total		$	460.2				429.2				889.8				841.5

     The following table reconciles geographic revenues to revenues by reportable segment for the three months ended June 30, 2007 and 2006, respectively, based on the domicile of the Company’s customers.

		Domestic-based								International-based								Merchant acquiring
		support services								support services								services
(in millions)		2007				2006				2007				2006				2007				2006
United States		$	289.1				289.9				—				—				73.4				70.4
Europe			0.4				0.3				48.6				35.9				—				—
Canada			30.7				23.9				—				—				0.1				0.1
Japan			—				—				6.1				4.5				—				—
Mexico			3.3				2.9				—				—				—				—
Other			2.6				1.1				5.7				—				0.2				0.2
Total		$	326.1				318.1				60.4				40.4				73.7				70.7

     The following table reconciles geographic revenues to revenues by reportable segment for the six months ended June 30, 2007 and 2006, respectively, based on the domicile of the Company’s customers.

		Domestic-based								International-based								Merchant acquiring
		support services								support services								services
(in millions)		2007				2006				2007				2006				2007				2006
United States		$	560.5				569.8				—				—				139.8				140.4
Europe			0.9				0.7				94.1				68.2				—				—
Canada			60.5				45.8				—				—				0.3				0.3
Japan			—				—				11.4				8.4				—				—
Mexico			6.5				5.4				—				—				—				—
Other			5.4				2.2				10.0				—				0.4				0.3
Total		$	633.8				623.9				115.5				76.6				140.5				141.0

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

		At June 30,				At December 31,
(in millions)		2007				2006
United States		$	203.0				204.7
Europe			66.1				63.1
Japan			1.8				1.9
Canada			0.1				0.1
Other			1.6				1.5
Total		$	272.6				271.3

Major Customers

     For the three months ended June 30, 2007, the Company had three major customers which accounted for approximately 34.2%, or $157.3 million, of total revenues. For the three months ended June 30, 2006, these three major customers accounted for approximately 36.5%, or $156.5 million, of total revenues. For the six months ended June 30, 2007, the Company had three major customers which accounted for approximately 33.9%, or $301.9 million, of total revenues. For the six months ended June 30, 2006, these three major customers accounted for approximately 36.9%, or $310.6 million, of total revenues. Revenues from major

customers for the periods reported are primarily attributable to the domestic-based support services and merchant acquiring services segments.

		Three months ended June 30,																Six months ended June 30,
		2007								2006								2007								2006
						% of								% of								% of								% of
Revenue						Total								Total								Total								Total
(in millions)		Dollars				Revenues				Dollars				Revenues				Dollars				Revenues				Dollars				Revenues
Client 1		$	57.3				12.4			$	11.4				2.7			$	109.8				12.3			$	24.5				2.9
Client 2			55.5				12.1				101.8				23.7				104.3				11.7				198.1				23.5
Client 3			44.5				9.7				43.3				10.1				87.8				9.9				88.0				10.5
Totals		$	157.3				34.2			$	156.5				36.5			$	301.9				33.9			$	310.6				36.9

Note 5 – Share-Based Compensation

     The Company’s Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC, contains a discussion of the Company’s share-based compensation plans and policy.

Share-Based Compensation

     TSYS’ share-based compensation costs are included as expenses and classified as salaries and other personnel expenses. TSYS does not include amounts associated with share-based compensation as costs capitalized as software development and contract acquisition costs. For the three months ended June 30, 2007, share-based compensation was $3.5 million, compared to $2.2 million for the same period in 2006. Included in the $3.5 million amount for 2007 and $2.2 million amount for 2006 is approximately $1.7 million and $1.7 million, respectively, related to expensing the fair value of stock options. For the six months ended June 30, 2007, share-based compensation was $6.6 million, compared to $4.4 million for the same period in 2006. Included in the $6.6 million amount for 2007 and $4.4 million amount for 2006 is approximately $3.3 million and $3.5 million, respectively, related to expensing the fair value of stock options.

Nonvested Awards

     During the first six months of 2007, the Company issued 241,260 shares of TSYS common stock with a market value of $7.6 million to certain key employees and non-management members of its board of directors under nonvested stock bonus awards for services to be provided by such officers, directors and employees in the future. The market value of the common stock at the date of issuance is amortized as compensation expense over the vesting period of the awards.

     During the first six months of 2006, the Company issued 150,775 shares of TSYS common stock with a market value of $3.0 million to certain key employees and non-management members of its board of directors under nonvested stock bonus awards for services to be provided by such officers and directors in the future.

     As of June 30, 2007, there was approximately $13.9 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 2.4 years.

     During 2005, TSYS authorized a total grant of 126,087 shares of nonvested stock to two key executives with a performance-vesting

schedule (performance-vesting shares). These performance-vesting shares have seven one-year performance periods (2005-2011) during which the Compensation Committee establishes an earnings per share goal. Each year’s award is 20% of the total authorized shares. Compensation expense for each year’s award is measured on the grant date based on the quoted market price of TSYS common stock and is expensed on a straight-line basis for the year.

     As of June 30, 2007, there was approximately $488,000 of total unrecognized compensation cost related to nonvested performance-vesting share-based compensation arrangements. That cost is expected to be recognized over the remainder of 2007.

Stock Option Awards

     The Company did not grant any TSYS stock options during the six months ended June 30, 2007 and 2006, respectively.

     As of June 30, 2007, there was approximately $19,000 of total unrecognized compensation expense cost related to TSYS stock options that is expected to be recognized over a remaining weighted average period of 0.4 year.

Long-Term Incentive Plans – Synovus

     During the first six months of 2007, Synovus granted 102,653 stock options to key TSYS officers and key employees. The fair value of the option grant was $7.22 per option and was estimated on the date of grant using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions: risk-free interest rate of 4.78%; expected volatility of 21.76%; expected life of 6.0 years; and dividend yield of 2.60%.

     During the first six months of 2006, Synovus granted 304,933 stock options to key TSYS executive officers. The fair value of the option grant was $6.57 per option and was estimated on the date of grant using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions: risk-free interest rate of 4.48%; expected volatility of 25.1%; expected life of 6.0 years; and dividend yield of 2.80%. The expected life of 6.0 years was determined using the “simplified” method, as prescribed by SEC’s Staff Accounting Bulletin No. 107.

     As of June 30, 2007, there was $6.8 million of total unrecognized compensation expense cost related to Synovus stock options that is expected to be recognized over a remaining weighted average period of 1.1 years.

Earnings Per Share

     The diluted earnings per share calculation excludes stock options and nonvested awards that are convertible into 7,500 common shares for the three and six months ended June 30, 2007, respectively, and excludes 22,500 common shares for the three and six months ended June 30, 2006, respectively, because their inclusion would have been anti-dilutive.

Note 6 – Long-Term Debt

     On August 3, 2007, the Company’s European operation obtained a loan of approximately £33 million or approximately $67.7 million from a third party mainly to repay the U.S. parent loan that was used for the acquisitions. The loan is payable in 18 months at a rate of the one-month London Interbank Offered Rate (LIBOR) plus 45 basis points. The Company’s plan is to finance international expansion through its European operations. The loan will result in increased interest expense and will eliminate the foreign currency translation gains and losses associated with the Company’s intercompany note.

     In January 2007, the Company’s operation in Japan borrowed ¥250 million, or approximately $2.1 million, through a short-term note. The interest rate on the note is the Japan prime rate plus 375 basis points. The term of the note is one year.

     In November 2006, TSYS announced an agreement to form a new venture called TSYS Managed Services EMEA, Ltd. (TSYS Managed Services) with Merchants. Refer to Note 10 for more information about the acquisition of TSYS Managed Services.

     In connection with the formation of TSYS Managed Services, both TSYS and Merchants agreed to provide long-term financing arrangements to TSYS Managed Services to fund future growth and expansion. At the end of June 2007, the balance of the loan from Merchants was approximately £2.0 million, or approximately $3.9 million, payable in total in five years, at an interest rate of the London Interbank Offered Rate (LIBOR) plus 2%, with interest payable quarterly.

     TSYS maintains an unsecured credit agreement with Columbus Bank & Trust. The credit agreement has a maximum available principal balance of $5.0 million, with interest at prime. TSYS did not use the credit facility for the six months ended June 30, 2007 or 2006.

Note 7 — Supplementary Cash Flow Information

Contract Acquisition Costs

     Cash used for contract acquisition costs for the six months ended June 30, 2007 and 2006, respectively, are summarized as follows:

(in thousands)		June 30, 2007				June 30, 2006
Conversion costs		$	3,699				19,176
Payments for processing rights			5,843				3,163
Total		$	9,542				22,339

Nonvested Awards

     During the first quarter of 2007, the Company issued shares of common stock to certain key employees and non-management members of its board of directors under nonvested stock bonus awards for services to be provided by such key employees and directors in the future. Refer to Note 5 for more information.

Equipment and Software Acquired Under Capital Lease Obligations

     The Company acquired equipment and software under capital lease obligations in the amount of $4.1 million during 2007 related to a three year software agreement and $5,000 during 2006 related to equipment.

Note 8 – Legal Proceedings

     The Company is subject to lawsuits, claims and other complaints arising out of the ordinary conduct of its business. In the opinion of management, based in part upon the advice of legal counsel, all matters are believed to be adequately covered by insurance, or if not covered, are believed to be without merit or 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. The Company establishes reserves for expected future litigation exposures that TSYS determines to be both probable and reasonably estimable.

Note 9 – Guarantees and Indemnifications

     The Company has entered into processing and licensing agreements with clients that include intellectual property indemnification 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.

     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.

Note 10 – Business Combinations

TSYS Managed Services

     On November 16, 2006, TSYS announced an agreement with Merchants, a customer-contact company and a wholly owned subsidiary of Dimension Data, to deliver a comprehensive range of managed services to institutions across Europe, the Middle East and Africa. The agreement combines the call-center capabilities of Merchants with TSYS’ special business unit, both of which specialize in customer-servicing operations, including back-office, cross-selling and up-selling activities for financial institutions engaged in card issuing and merchant acquiring. The new venture is called TSYS Managed Services and includes existing Merchants centers that comprise more than 200 seats in Milton Keynes, England, near London, and Barneveld, The Netherlands, near Amsterdam. TSYS paid an aggregate consideration of approximately $2.8 million, including direct acquisition costs.

     Prior to the new agreement, TSYS contracted with Merchants to provide these services to TSYS’ international clients. TSYS consolidated TSYS Managed Services’ balance sheet and results of operations, as of November 16, 2006. The Company recorded the acquisition of majority ownership as a business combination requiring the Company to allocate the purchase price for the assets acquired and liabilities assumed based upon their relative fair values. The Company has preliminarily allocated $625,000 to goodwill related to TSYS Managed Services.

     The acquisition of TSYS Managed Services allows TSYS to deliver the same managed services to clients in Europe and the broader region as it does to its domestic clients. TSYS Managed Services operates as a separate, majority owned subsidiary of TSYS. Revenues associated with TSYS Managed Services are included in international-based support services for segment reporting purposes.

TSYS Card Tech

     On July 11, 2006, TSYS acquired Card Tech, Ltd., a privately owned London-based payments firm, and related companies, increasing TSYS’ card issuing and merchant acquiring capabilities and extending its geographic reach to Asia Pacific, Europe, the Middle East and Africa. TSYS paid an aggregate consideration of approximately $59.5 million, including direct acquisition costs.

     Card Tech, Ltd. was established in 1989 and maintains service centers in London, England; Dubai, United Arab Emirates; Nicosia, Cyprus; Kuala Lumpur, Malaysia; and Noida, India.

     Card Tech, Ltd. has implemented its payments software for six of the 25 largest global banks and three of the largest global card issuers. TSYS formed and/or acquired five companies in connection with the Card Tech, Ltd. acquisition, which the Company collectively refers to as TSYS Card Tech.

     TSYS Card Tech’s software applications are utilized globally. TSYS Card Tech offers a server-based system with an established global footprint for comprehensive issuing and acquiring services. TSYS Card

Tech offers products and services for installment loans, credit, debit, merchant acquiring and prepaid payment platforms in addition to fraud, risk management, authorizations, chargebacks, e-commerce and m-commerce solutions designed for the bankcard market. TSYS Card Tech’s applications are browser-based, multilingual, multicurrency and multi-country (including double-byte-enabled).

     TSYS consolidated TSYS Card Tech’s balance sheet and results of operations as of July 11, 2006. The Company is in the process of finalizing the purchase price allocation and has preliminarily allocated approximately $32.7 million to goodwill, approximately $19.1 million to other identifiable intangible assets and the remaining amounts to other assets and liabilities acquired. The preliminary purchase price allocation is presented below:

(in thousands)
Cash and cash equivalents		$	4,265
Intangible assets			19,100
Goodwill			32,700
Other assets			12,095
Total assets acquired			68,160
Other liabilities			8,693
Total liabilities assumed			8,693
Net assets acquired		$	59,467

     Revenues associated with TSYS Card Tech are included in electronic payment processing services and are included in international–based support services for segment reporting purposes.

Pro forma

     The pro forma impact of the TSYS Card Tech and TSYS Managed Services acquisitions on revenues and net income for periods prior to the acquisition was not material.

Note 11 – Income Taxes

     TSYS is a member 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 2004 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 2001. There is currently no Federal tax examination in progress. However, a number of tax examinations are in progress by the relevant state and foreign tax authorities.

     TSYS adopted the provisions of FASB Interpretation No. 48, “Accounting for Income Taxes – an Interpretation of FASB Statement 109” (FIN 48) on January 1, 2007. This interpretation prescribed 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.

     As a result of the implementation of FIN 48, the Company recognized approximately a $2.0 million increase in the liability for unrecognized income tax benefits, which was accounted for as a reduction to the January 1, 2007, balance of retained earnings. This adjustment was the cumulative effect of applying a different measurement standard in accounting for uncertainty in income taxes. During the six months ended June 30, 2007, TSYS increased its income tax reserve by $4.2 million (net of the federal benefit) including $0.7 million in interest, in response to new information impacting the potential resolution of material

uncertain tax positions. Approximately $1.8 million of the net increase in reserves related to Federal timing differences that were not recorded through the consolidated statements of income in the second quarter of 2007.

     A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (1):

		Three months ended				Six months ended
(in millions)		June 30, 2007				June 30, 2007
Beginning balance		$	10.7				7.4
Current activity:
Additions based on tax positions related to current year			—				0.4
Additions for tax positions of prior years			1.6				4.5
Reductions for tax positions of prior years			—				—
Settlements			—				—
Net, current activity			1.6				4.9
Ending balance		$	12.3				12.3

     TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax expense in the consolidated statements of income. Accrued interest and penalties on unrecognized tax benefits totaled $1.4 million and $3.4 million as of January 1, 2007 and June 30, 2007, respectively. The total amounts of unrecognized income tax benefits as of January 1, 2007 and June 30, 2007 that, if recognized, would affect the effective tax rates are $6.2 million and $9.8 million (net of the Federal benefit on State tax issues) respectively, which includes interest of $.9 million and $2.0 million.

Note 12 – Subsequent Event

     On August 3, 2007, the Company’s European operation obtained a loan of approximately £33 million or approximately $67.7 million from a third party mainly to repay the U.S. parent loan that was used for the acquisitions. Refer to Note 6 for more information on the long-term financing arrangement.

TOTAL SYSTEM SERVICES, INC.

Financial Overview

     Total System Services, Inc.’s (TSYS’ or the Company’s) revenues are derived from providing electronic payment processing and related services to financial and nonfinancial institutions, generally under long-term processing contracts.

     For a detailed discussion regarding the Company’s Operations, see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

     A summary of the financial highlights for 2007, as compared to 2006, is provided below:

		Three months ended												Six months ended
		June 30,												June 30,
(in millions, except per share										Percent												Percent
data and employees)		2007				2006				Change				2007				2006				Change
Revenues before reimbursables		$	364.1				342.8				6.2	%		$	707.7				672.3				5.3	%
Total revenues			460.2				429.2				7.2				889.8				841.5				5.7
Operating income			95.9				84.7				13.2				181.6				156.6				16.0
Net income			65.7				57.4				14.4				123.0				107.8				14.1
Basic earnings per share (EPS)			0.33				0.29				14.7				0.63				0.55				14.4
Diluted EPS			0.33				0.29				14.5				0.62				0.55				14.2
Other:
Average accounts on file (AOF)			433.6				415.8				4.3				426.0				427.5				(0.4	)
Average full-time equivalent employees (FTE)			6,783				6,540				3.7				6,755				6,592				2.5

	•		The impact of acquisitions on consolidated total revenues for the three and six months ended June 30, 2007 was $11.0 million and $19.6 million, respectively. The impact of acquisitions on consolidated revenues before reimbursable items for the three and six months ended June 30, 2007 was $15.0 million and $27.6 million, respectively. Refer to Other Services revenues on pages 30 and 31 for the characterization from reimbursable items to other services revenues for the TSYS Managed Services acquisition. The impact of acquisitions on consolidated total expenses for the three and six months ended June 30, 2007 was $9.2 million and $16.4 million, respectively. The impact of acquisitions on consolidated expenses before reimbursable items for the three and six months ended June 30, 2007 was $13.2 million and $24.5 million, respectively.
	•		Cash flows from operating activities were $119.5 million for the six months ended June 30, 2007, compared to $130.9 million for the same period in 2006.

     Significant highlights for 2007 include:

Domestic

	•		TSYS successfully completed the pilot program for the Wal-Mart MoneyCard, issued by GE and reloaded through Green Dot’s national reloading network. The Visa-branded prepaid product was first piloted in November of 2006 with TSYS, and was available in 2,600 Wal-Mart stores at the end of July 2007.
	•		JP Morgan Chase & Co. (Chase) discontinued its processing agreement at the end of July 2007 according to the original schedule and began processing in-house using a modified version of TSYS’ processing system.
	•		During the first quarter, TSYS completed the Capital One conversion.

International

	•		TSYS introduced Chip and PIN Secure Payments in Cyprus with the introduction of EMV cards through partnerships with three Cyprus-based banks, Marfin Popular Bank (formerly Laiki Bank, Cyprus), Hellenic Bank and Universal Bank. The Commercial Bank of Qatar also issued its first EMV card program utilizing TSYS’ card-management solution, PRIME.
	•		TSYS launched the Rewards card pilot program in the United Kingdom with Norwich Union (NU), which is now the second program that NU has live on the TSYS Prepaid platform.
	•		TSYS announced that CUP Data, TSYS’ joint venture with China UnionPay, has recently begun providing processing services for Huaxia Bank Co., Ltd, one of China’s largest nationwide banks. CUP Data now provides processing services for three of the four largest issuing banks in China that use outsourced services to support their payment programs.
	•		TSYS signed a contract extension with Spira de México, S.A. de C.V. (Spira), to continue processing its consumer-credit portfolio. Under terms of the agreement, TSYS will continue to provide risk management, portfolio management and reporting tools to Spira.
	•		TSYS’ PRIME card- and merchant-management system was chosen by Norway’s largest financial-services group, DnB NOR Bank ASA, to manage the fast-growing cards portfolio of its market-leading credit-card operator, DnB NOR Kort. DnB NOR Kort has plans to further expand its service solutions for DnB NOR Kort customers.

Merchant Acquiring

	•		The Company renewed merchant-processing service agreements with Merchant Management Systems, Sage Payment Solutions and Moneris Solutions covering its U.S. portfolio.
	•		TSYS signed agreements to provide merchant-processing services for Clearent, National Processing Company (formerly Iron Triangle Payment Systems), mPay Gateway and The Bancorp Bank.

Corporate

•

Synovus Financial Corp.’s (Synovus) Board of Directors has appointed a special committee of independent directors to make a recommendation with respect to whether to distribute Synovus’ ownership interest in TSYS to Synovus’ shareholders. Synovus owns 80.8% of the outstanding shares of TSYS stock. Although no specific timeframe for committee and Board deliberations

			has been defined, Synovus has stated that it hopes to be able to announce the Board’s decision no later than Synovus’ third quarter analyst call.
	•		TSYS expects that any decision by Synovus to proceed with a spin-off likely will be conditioned, among other things, on a pre-spin cash dividend being paid by TSYS to all of TSYS’ shareholders, including Synovus. In light of the expected consideration of this matter by the Synovus special committee and Board, the TSYS Board of Directors has formed a special committee of independent TSYS directors to consider the terms of any proposed spin-off by Synovus of its ownership interest in TSYS, including the size of the pre-spin cash dividend. No assurances can be given regarding the timing or terms of any spin-off, or whether any spin-off will in fact occur.

Industry

     A number of companies in the electronic payment processing and merchant acquiring services industries have recently announced transactions pursuant to which they were being acquired, being spun from their current owner to the public or filing initial public offering statements in anticipation of becoming a publicly traded entity.

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, 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.

Critical Accounting Policies and Estimates

     The Company’s financial position, results of operations and cash flows are impacted by the accounting policies the Company has adopted. In order to gain a full understanding of the Company’s financial statements, one must have a clear understanding of the accounting policies employed.

     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. For a detailed discussion regarding the Company’s risk factors, see “Item 1A: Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

     For a detailed discussion regarding the Company’s critical accounting policies and estimates, see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. There have been no material changes to the Company’s critical accounting policies, estimates and assumptions or the judgments affecting the application of those estimates and assumptions in 2007.

Related Party Transactions

     The Company provides electronic payment processing and other services to its parent company, Synovus and its affiliates, and to the Company’s equity investment, Total System Services de México, S.A. de. C.V. (TSYS de México). The services are performed under contracts that are similar to its contracts with other customers. The Company believes the terms and conditions of transactions between the Company and these related parties are comparable to those which could have been obtained in transactions with unaffiliated parties. The Company’s margins with respect to related party transactions are comparable to margins recognized in transactions with unrelated third parties. The amounts related to these transactions are disclosed on the face of TSYS’ consolidated financial statements.