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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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, 2008
for the fiscal year ended December 31, 2008
Commission file number 1-10254
TOTAL SYSTEM SERVICES, INC.
(Exact name of registrant as specified in its charter)
| Georgia | 58-1493818 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| One TSYS Way Columbus, Georgia (Address of principal executive offices) |
31901 (Zip Code) |
(Registrant’s telephone number, including area code) (706) 649-2310
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 þ
NO o
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 o
NO þ
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 þ
NO o
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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
| (Do not check if a smaller reporting company) | ||||||
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
As of June 30, 2008, the aggregate market value of the registrant’s common stock held by
non-affiliates of the registrant was approximately $4,163,750,000 based on the closing sale price
as reported on the New York Stock Exchange.
As of February 19, 2009, there were 197,273,497 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, 2008 (“Annual Report”)
|
Parts I, II, III and IV | |
Portions of the 2009 Proxy Statement for the Annual
Meeting of Shareholders to be held April 29, 2009
(“Proxy Statement”)
|
Part III |
Table of Contents
Table of Contents
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. We provide electronic payment processing and related services to financial and
nonfinancial institutions. Services include processing consumer, retail, commercial, government
services, stored value and debit cards. Based in Columbus, Georgia, and traded on the New York
Stock Exchange under the symbol “TSS,” we provide services to financial and nonfinancial
institutions throughout the United States and internationally. We currently offer merchant
acquiring services to financial institutions and other organizations in the United States through
our wholly owned subsidiary, TSYS Acquiring Solutions, L.L.C., and in Japan through our majority
owned subsidiary, GP Network Corporation. We also offer optional value added products and services
to support our core processing services. Value added products and services include: risk management
tools and techniques, such as credit evaluation, fraud detection and prevention and behavior
analysis tools; and revenue enhancement tools and customer retention programs, such as loyalty
programs and bonus rewards.
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The services we provide are divided into three operating segments, North America Services,
which accounted for 68.7% of our revenues in 2008, Global Services, which accounted for 16.2% of
our revenues in 2008, and Merchant Services, which accounted for 15.2% of our revenues in 2008. In
addition, a new cost center, spin-related costs, was added for 2007 and 2008 to include information
regarding the spin-off by Synovus Financial Corp. (“Synovus”) to its shareholders of all of the
shares of TSYS stock formerly owned by Synovus on December 31, 2007. See Note 23 of Notes to
Consolidated Financial Statements on pages 81 and 82 of the Annual Report which is incorporated in
this document by reference for additional information about the spin-off.
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 electronic payment services provider. 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, including our major customers during 2008, Bank of America Corporation and
Capital One Financial Corporation. For the year ended December 31, 2008, Bank of America
Corporation and Capital One Financial Corporation accounted for approximately 11.4% and 16.8%,
respectively, of our total revenues. As a result, the loss of Bank of America Corporation or
Capital One Financial Corporation, or other large clients, could have a material adverse effect on
our financial position, results of operations and cash flows. See “Major Customers” and “Operating
Segments” under the “Financial Review” Section on pages 28 through 30, and page 38, respectively,
and Note 20 on pages 76 through 79 of the Annual Report which are incorporated in this document by
reference.
Competition. We encounter vigorous competition in providing electronic payment processing
services from several different sources. Most of the national market in third party card
processors is presently being provided by approximately three vendors. We believe that as of
December 31, 2008 we are the largest third party card processor in the United States. In addition,
we compete with in house processors and software vendors which provide their products to
institutions which process in house. We are presently encountering, and in the future anticipate
continuing to encounter, substantial competition from data processing and bankcard computer service
firms and other such third party vendors located throughout the United States and from certain
international processors with respect to our Global Services segment. In addition, the card
associations and payments networks such as Visa, MasterCard and Discover are increasingly offering
products and services that compete with our products and services. Based upon available market
share data that includes cards processed in house, we believe that
during 2008 42% of the domestic consumer credit card processing market was processed on a
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TSYS
system (includes licensed TSYS software). We also believe that during 2008 we held an 85% share of
the Visa and MasterCard domestic commercial card processing market. With respect to merchant
services, we believe that TSYS Acquiring Solutions is the second largest processor of merchant
accounts and holds an approximately 27% market share of all bankcard accepting merchant locations
in the U.S.
Our major competitor in the card processing industry is First Data Resources, LLC, a wholly
owned subsidiary of First Data Corporation, which provides card processing services. The principal
methods of competition between us and First Data Resources are price, system performance and
reliability, breadth of features and functionality, disaster recovery capabilities, data security,
scalability and flexibility of infrastructure and servicing capability. Certain other subsidiaries
of First Data Corporation also compete with us with respect to the provision of merchant services.
Backlog of Accounts. As of December 31, 2008, we had a pipeline of approximately 8.9 million
accounts associated with new clients. All but approximately 1.2 million of these accounts are
expected to be converted during 2009.
Regulation and Examination. We are subject to being examined, and are indirectly regulated,
by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National
Credit Union Administration, and the various state financial regulatory agencies which supervise
and regulate the financial institutions for which we provide electronic payment processing
services. Matters reviewed and examined by these federal and state financial institution regulatory
agencies have included our internal controls in connection with our present performance of
electronic payment processing services, and the agreements pursuant to which we provide such
services. 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.
Aspects of our business are also subject to privacy 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 agency
information safeguarding requirements under the Gramm-Leach-Bliley Act. 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 agencies. 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. In addition, one of our
subsidiaries, TSYS Total Debt Management, Inc., is subject to the Fair Debt Collection Practices
Act and various similar state laws in connection with its collections activity on behalf of certain
of our clients.
As are all U.S. citizens and U.S. entities, we are subject to regulations imposed by the
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U.S.
Treasury Office Department 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. However, due to the complexity of the payments systems to which our
clients belong, such as MasterCard and Visa, it is possible our computer systems may be used in the
processing of transactions involving countries or parties subject to OFAC administered sanctions.
Employees. As of December 31, 2008, we had 8,110 full-time equivalent 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 Investors section of our website under the heading
“Financials” and then under “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/ir/governance. Copies of these documents are also available in print upon written
request to the Corporate Secretary, Total System Services, Inc., One TSYS Way, Columbus, Georgia
31901.
For more information about our business see the “Financial Overview” Section on pages 18
through 20, the “Financial Review” Section on pages 20 through 45 and Note 1, Note 6, Note 17, Note
20 and Note 22 of Notes to Consolidated Financial Statements on pages 50 through 57, pages 60 and
61, pages 72 and 73, pages 76 through 79, and pages 80 and 81 of the Annual Report which are
incorporated in this document by reference.
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:
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Consolidation among financial institutions, 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, or the nationalization or seizure by banking regulators of TSYS clients, could materially
impact our financial position and results of operation.
Consolidation among financial institutions, particularly in the area of credit card
operations, 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 and, based on current economic conditions, our clients may be seized by banking
regulators or nationalized, thereby impacting our existing agreements and projected revenues with
these clients. Examples of recent consolidations involving TSYS clients include the acquisition by
JPMorgan Chase Bank of the assets of Washington Mutual Bank from the FDIC as receiver and the
acquisition by Wells Fargo of Wachovia. 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 consolidations among financial institutions could increase the
bargaining power of our current and future clients. Consolidation among financial institutions,
the nationalization of financial institutions or the seizure by banking regulators of financial
institutions 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 successfully renew or renegotiate our agreements with our clients, our business will
suffer.
A significant amount of our revenues is derived from long-term contracts with large clients,
including certain major customers. Consolidation among financial institutions has resulted in an
increasingly concentrated client base. 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. Renewal or renegotiation time
presents our clients with the opportunity to consider other providers. The loss or renegotiation
of our contracts with existing clients or a significant decline in the number of transactions we
process for them could have a material adverse effect on our financial position and results of
operation.
Deterioration in economic conditions could adversely affect our business.
A significant portion of our revenues is derived from the number of consumer transactions that
we process which may be affected by, among other things, overall economic conditions. General
economic conditions in the United States and certain other national economies where we operate
continue to show signs of weakening. A reduction in consumer spending through credit and debit
card usage could have a material adverse affect on our financial position and results of
operations.
Accounts on file may be lower than anticipated and internal growth rates for our existing clients
may be lower than anticipated.
Our electronic payment processing services revenues are generated from charges based
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on
several factors, one of which is the number of accounts on file. There is no guarantee that
accounts on file will be as we anticipate and this could have a material adverse effect on our
financial position and results of operations. Furthermore, a significant amount of our revenues is
derived from certain large clients and internal growth rates for these existing clients may be
lower than anticipated, thereby negatively impacting our business.
We may incur expenses associated with the signing of a significant client to our processing system
and in connection with our efforts to grow internationally or incur other costs that may hurt our
financial results.
We incur significant up-front expenses prior to converting a significant client to our
processing systems. In the event we enter into a processing contract with a significant client,
these expenses will directly affect our earnings results. In addition, we provide services to our
clients worldwide and plan to continue to expand our service offerings internationally in the
future. We are likely to incur costs in growing our business internationally, and there is no
guarantee that such international expansion will be successful. We may also incur other expenses
and costs, such as operating and marketing expenses. If we are unable to successfully manage these
expenses as our business develops, changes and expands, our financial position and results of
operations could be negatively impacted. In addition, changes in accounting policies can
significantly affect how we calculate expenses and earnings.
There may be a decline in the use of credit cards as a payment mechanism for consumers or adverse
developments with respect to the credit card industry in general.
If consumers do not continue to use credit cards as a payment mechanism for their transactions
or if there is a change in the mix of payments between cash, credit cards and debit cards, it could
have a material adverse effect on our financial position and results of operations. We believe
future growth in the use of credit cards 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, consumers and businesses must continue to use credit cards. Moreover,
if there is an adverse development in the credit card industry in general, such as new legislation
or regulation that makes it more difficult for our clients to do business, our financial position
and results of operations may be adversely affected.
We may not convert and deconvert clients’ portfolios as scheduled.
The timing of the conversion of card portfolios of new clients to our processing systems and
the deconversion of existing clients to other systems impacts our revenues and expenses. There is
no guarantee that conversions and deconversions will occur as scheduled and this may have a
material adverse effect on our financial position and results of operations.
We have pursued various strategic acquisitions and these acquisitions may be more difficult to
integrate than anticipated.
We regularly explore opportunities for strategic acquisitions and expect to grow, in part,
through such acquisitions. Difficulty in integrating an acquired company may cause us not to
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realize expected revenue increases, cost savings, increases in geographic or product presence,
and/or other projected benefits of the acquisition. The integration could result in loss of key
employees, disruption of our business or the business of the acquired company, or otherwise
adversely affect our ability to maintain relationships with clients or achieve the anticipated
benefits of the acquisition. These factors could contribute to us not achieving the anticipated
benefits of the acquisition within the desired time frames, if at all.
Our business may be adversely affected by risks associated with foreign operations.
We provide services to our clients worldwide and plan to continue to expand our service
offerings internationally in the future. As a result, our business and revenues derived from
international operations are subject to risk of loss from foreign currency exchange rates, social
instability, changes in government policies, unfavorable political or diplomatic developments and
changes in legislation related to non-U.S. ownership. We have not entered into foreign exchange
forward contracts to mitigate the risks associated with our foreign operations. Any adverse change
in one of the factors listed above could impact our plans to continue to expand our business
internationally and adversely affect our financial position and results of operations.
The costs and effects of litigation, investigations or similar matters, or adverse facts and
developments related thereto, could materially affect our financial position and results of
operations.
We may be involved from time to time in a variety of litigation, investigations or similar
matters arising out of our business. Our insurance 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 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.
Changes in accounting policies and practices, as may be adopted by the regulatory agencies, the
Financial Accounting Standards Board, or other authoritative bodies, could materially impact our
financial statements.
Our accounting policies and methods are fundamental to how we record and report our financial
position and results of operations. From time to time, the regulatory agencies, the Financial
Accounting Standards Board, and other authoritative bodies change the financial accounting and
reporting standards that govern the preparation of our financial statements. These changes can be
hard to predict and can materially impact how we record and report our financial position and
results of operations.
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If we do not anticipate and respond to technological change or changes in industry standards, our
services could become obsolete and we could lose our clients.
Our success depends, in part, on our ability to timely, successfully and cost-effectively
improve and implement processing systems to provide new products, increased functionality and
increased efficiencies. The widespread adoption of new technologies could require us to make
substantial expenditures to modify or adopt our existing products and services, and we may not be
successful in improving and implementing our processing systems or in achieving market acceptance
of these new technologies. If competitors introduce new products and services embodying new
technologies, or if new industry standards and practices emerge, our existing product and service
offerings, proprietary technology and systems may become obsolete. Further, if we fail to adopt or
develop these new technologies or to adapt our products and services to emerging industry
standards, we may lose current and future clients, which could have a material adverse effect on
our financial position and results of operations. Our industry is changing rapidly. To remain
competitive, we must continue to enhance and improve the functionality and features of our
processing systems, products, services and technologies.
Changes in the laws, regulations, 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. 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. A number of regulations impacting the credit card industry were issued during
2008. We cannot predict whether new legislation will be enacted or whether any credit card
association rule or other industry standard will change, and if enacted or changed, the effect that
it would have on our financial position or results of operations. These changes may require us to
incur significant expenses to redevelop our products. Also, failure to comply with laws, rules and
regulations or standards to which we are subject could result in fines, sanctions or other
penalties, which could have a material adverse affect on our financial position and results of
operations, as well as damage our reputation.
We may not be able to successfully manage our intellectual property and may be subject to
infringement claims.
In the 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
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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 require us to design around a third
party’s patent or to license alternative technology from another party. 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. Any claim from third parties may result in limitation on our
ability to use the intellectual property subject to these claims.
Security
and privacy breaches in our systems and system failures may damage
client relations and our reputation.
The uninterrupted operation of our processing systems and the confidentiality of the client
information that resides on our systems is critical to our business.
We have security, backup and
recovery systems in place, as well as business continuity plans to ensure our systems will not be
inoperable. We also have what we believe to be sufficient security around our systems to prevent
unauthorized access. Any failures in our security and privacy measures could have a material
adverse effect on our financial position and results of operations. We electronically store
personal information, such as credit card numbers, about consumers who are customers of our clients. If we are unable to
protect, or our clients perceive that we are unable to protect, the security and privacy of our
electronic transactions, our growth could be materially adversely affected. A security or privacy
breach or a system failure may:
| • | cause our clients to lose confidence in our services; | ||
| • | harm our reputation; | ||
| • | expose us to financial liability; and | ||
| • | increase our expenses from potential remediation costs. |
While we believe we use proven applications designed for data security and integrity to
process electronic transactions, there can be no assurance that our use of these applications will
be sufficient to counter all current and emerging technology threats
designed to breach our systems in order to gain access to
confidential client information or our intellectual property or
assurance that our use of these applications will be sufficient to
address the security and privacy concerns of existing
and potential clients.
If we lose key personnel or are unable to attract additional qualified personnel, our business
could be adversely affected.
We are dependent upon the ability and experience of a number of highly skilled technical,
management and sales and marketing personnel who have substantial experience with our operations,
the rapidly changing transaction processing industry and markets in which we offer
our services. It is possible that the loss of the services of one or a combination of our key
personnel would have an adverse effect on our operations. Our success also depends on our
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ability
to continue to attract, manage and retain additional qualified management and technical personnel.
Competition for the best people, particularly those individuals with technology experience, is
intense. We cannot guarantee that we will continue to attract or retain such personnel.
Our financial condition and outlook may be adversely affected by damage to our reputation.
Our financial condition and outlook is highly dependent upon perceptions of our business
practices and reputation. Our ability to attract and retain clients and employees could be
adversely affected to the extent our reputation is damaged. Negative public opinion could result
from our actual or alleged conduct in any number of activities, including corporate governance,
regulatory compliance, mergers and acquisitions, disclosure and security breaches. Damage to our
reputation could give rise to legal risks, which, in turn, could increase the size and number of
litigation claims and damages asserted or subject us to enforcement actions, fines and penalties
and cause us to incur related costs and expenses.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2008, we and our subsidiaries owned 14 facilities encompassing
approximately 1,445,546 square feet and leased 45 facilities encompassing approximately 716,325
square feet. These facilities are used for operational, sales and administrative purposes.
| Owned Facilities | Leased Facilities | |||||||||||||||
| Number | Square Footage | Number | Square Footage | |||||||||||||
North America Services |
9 | 1,345,800 | 12 | 290,078 | ||||||||||||
Global Services |
2 | 96,368 | 26 | 197,754 | ||||||||||||
Merchant Services |
3 | 3,378 | 7 | 228,493 | ||||||||||||
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 5, Note 17 and Note 20 of Notes to Consolidated Financial Statements on pages
50 through 57, page 60, pages 72 and 73, and pages 76 through 79 and “Operating Expenses” and
“Property and Equipment” under the “Financial Review” Section on pages 34 through 36, and page 41,
respectively, of the Annual Report which are incorporated in this document by reference.
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Item 3. Legal Proceedings
See Note 17 of Notes to Consolidated Financial Statements on pages 72 and 73 of the Annual
Report which is incorporated in this document by reference.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Repurchases of Equity Securities
The “Quarterly Financial Data, Stock Price, Dividend Information” Section under the “Financial
Review” Section on page 86, Note 15 of Notes to Consolidated Financial Statements on page 71 and
“Stock Performance Graph” on page 87 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 “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 17 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 18
through 45 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.” The amount of other comprehensive loss, net of tax,
related to foreign currency
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translation for the year ended December 31, 2008 was $35.1
million. The amount of other comprehensive income net of tax, related to foreign currency
translation for the years ended December 31, 2007 and 2006 was $7.6 million and $15.9 million,
respectively. 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, 2008:
| (in millions) | December 31, 2008 | |||
Europe |
$ | 146.9 | ||
China |
68.9 | |||
Japan |
4.9 | |||
Mexico |
8.1 | |||
Canada |
0.8 | |||
Other |
21.0 | |||
We record foreign currency translation adjustments associated with other balance sheet
accounts. See “Nonoperating Income (Expense)” under the “Financial Review” Section on pages 36 and
37 of the Annual Report which is incorporated in this document by reference. We maintain several
cash accounts denominated in foreign currencies, primarily in Euros and GBP. 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 $8.3 million for the year ended December 31,
2008 relating to the translation of foreign denominated balance sheet accounts, most of which were
cash. The balance of the foreign-denominated cash accounts subject to risk of translation gains or
losses at December 31, 2008 was approximately $16.3 million, the majority of which is denominated
in Euros.
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. We consider the nature of this loan to be a long-term investment, and as such any
upward or downward adjustment is recorded as a gain or loss on foreign currency translation in
other comprehensive income.
The net asset account balance subject to foreign currency exchange rates between the local
currencies and the U.S. dollar at December 31, 2008 was $16.3 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 $16.3 million at December 31, 2008.
12
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| 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 |
$ | 163 | 816 | 1,633 | (163 | ) | (816 | ) | (1,633 | ) | ||||||||||||||
The foreign currency risks associated with other currencies is not significant.
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 (US), British Pounds (GBP) and Japanese YEN (YEN), as indicated in
parentheses.
| At December 31, 2008 | Expected maturity date | |||||||||||||||||||||||
| Liabilities | 2009 | 2010 | 2011 | 2012 | 2013 | TOTAL | ||||||||||||||||||
| (US$ Equivalent in millions) | ||||||||||||||||||||||||
Long-term Debt: |
||||||||||||||||||||||||
Fixed Rate (US) |
$ | 6.7 | 7.0 | 1.8 | — | — | $ | 15.5 | ||||||||||||||||
Average interest rate |
3.95 | % | 3.95 | % | 3.95 | % | 3.9 | % | ||||||||||||||||
Variable Rate (US) |
$ | — | — | — | 168.0 | — | $ | 168.0 | ||||||||||||||||
Average interest rate |
2.51 | % | 2.51 | % | ||||||||||||||||||||
Variable Rate (GBP) |
$ | 1.9 | — | 2.9 | — | — | $ | 4.8 | ||||||||||||||||
Average interest rate |
8.18 | % | 8.18 | % | 8.18 | % | ||||||||||||||||||
Variable Rate (YEN) |
$ | — | — | 16.6 | — | — | $ | 16.6 | ||||||||||||||||
Average interest rate |
1.81 | % | 1.81 | % | ||||||||||||||||||||
Item 8. Financial Statements and Supplementary Data
The “Quarterly Financial Data, Stock Price, Dividend Information” Section, which is set forth
on page 86, and the “Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated
Statements of Cash Flows, Consolidated Statements of Shareholders’ Equity and Comprehensive Income,
Notes to Consolidated Financial Statements, Report of Independent Registered Public Accounting Firm
(on consolidated financial statements), Management’s Report on Internal Control Over Financial
Reporting and Report of Independent Registered Public Accounting Firm (on the effectiveness of
internal control over financial reporting)” Sections, which are set forth on pages 46 through 85
of the Annual Report are incorporated in this document by reference.
13
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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 have concluded that as of
December 31, 2008, 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 also designed 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.
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 84 of the Annual Report, and “Report of Independent
Registered Public Accounting Firm (on the effectiveness of internal control over financial
reporting),” which is set forth on page 85 of the Annual Report, are incorporated in this document
by reference.
Changes in Internal Control Over Financial Reporting. Other than as set forth in the
paragraph below, 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.
We transitioned to a new service provider for pay and benefits processing during the fourth
quarter of 2008. This new system was implemented in October 2008. The transition is expected to
materially impact our internal control over financial reporting by providing more timely financial
and accounting information, reducing manual processes and providing a flexible architecture to
reduce data entry.
Item 9B. Other Information
None.
14
Table of Contents
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,” | ||
| • | “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE,” 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/ir/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.
Because our common stock is listed on the NYSE, our chief executive officer is required to
make, and he has made, an annual certification to the NYSE stating that he was not aware of any
violation by us of the corporate governance listing standards of the NYSE. Our chief executive
officer made his annual certification to that effect to the NYSE as of May 14, 2008. In addition,
we have filed, as exhibits to this Annual Report, the certifications of our chief executive officer
and chief financial officer required under Section 302 of the Sarbanes-Oxley Act of 2002.
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 related information which follow the Summary Compensation Table. |
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.
15
Table of Contents
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information pertaining to equity compensation plans is contained in Note 13 of Notes to
Consolidated Financial Statements on page 64 of the Annual Report and is incorporated in this
document by reference.
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:
| • | “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,” and | ||
| • | “CORPORATE GOVERNANCE AND BOARD MATTERS” – “Independence.” |
Item 14. Principal Accountant Fees and Services
Information included under the following captions in our Proxy Statement is incorporated in
this document by reference:
| • | “AUDIT COMMITTEE REPORT” – “KPMG LLP Fees and Services” (excluding the information under the main caption “AUDIT COMMITTEE REPORT”); and “Policy on Audit Committee Pre-Approval.” |
16
Table of Contents
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Financial Statements
The following consolidated financial statements of TSYS are incorporated in this document by
reference from pages 46 through 85 of the Annual Report.
Consolidated Balance Sheets — December 31, 2008 and 2007.
Consolidated Statements of Income — Years Ended December 31, 2008, 2007 and 2006.
Consolidated Statements of Cash Flows — Years Ended December 31, 2008, 2007 and
2006.
Consolidated Statements of Shareholders’ Equity and Comprehensive Income — Years
Ended December 31, 2008, 2007 and 2006.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm (on consolidated
financial statements).
Management’s Report on Internal Control Over Financial Reporting.
Report of Independent Registered Public Accounting Firm (on the effectiveness of internal
control over financial reporting).
2. Financial Statement Schedules
The following report of independent registered public accounting firm and consolidated
financial statement schedule of TSYS are included:
Report of Independent Registered Public Accounting Firm.
Schedule II — Valuation and Qualifying Accounts — Years Ended
December 31, 2008, 2007 and 2006.
All other schedules are omitted because they are inapplicable or the required
information is included in the consolidated financial statements and notes thereto.
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Table of Contents
3. Exhibits
The following exhibits are filed herewith or are incorporated to other documents
previously filed with the SEC. Exhibits 10.9 through 10.41 pertain to executive compensation plans
and 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 | |
3.1
|
Amended and Restated Articles of Incorporation of TSYS, incorporated by reference to Exhibit 3.1 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC on February 29, 2008. | |
3.2
|
Bylaws of TSYS, as amended, incorporated by reference to Exhibit 3.1 of TSYS’ Current Report on Form 8-K dated October 30, 2008. | |
10.1
|
Credit Agreement of TSYS with Bank of America N.A., as Administrative Agent, the Royal Bank of Scotland plc, as Syndication Agent, and the other lenders named therein, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K dated December 27, 2007. | |
10.2
|
Agreement and Plan of Distribution, dated as of October 25, 2007, by and among Synovus Financial Corp., Columbus Bank and Trust Company and TSYS, incorporated by reference to Exhibit 2.1 of TSYS’ Current Report on Form 8-K dated October 25, 2007. | |
10.3
|
Amendment No. 1 to Agreement and Plan of Distribution by and among Synovus Financial Corp., Columbus Bank and Trust Company and TSYS, dated as of November 30, 2007, incorporated by reference to Exhibit 2.1 of TSYS’ Current Report on Form 8-K dated November 30, 2007. | |
10.4
|
Transition Services Agreement by and among Synovus Financial Corp. and TSYS, dated as of November 30, 2007, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K dated November 30, 2007. | |
10.5
|
Employee Matters Agreement by and among Synovus Financial Corp. and TSYS, dated as of November 30, 2007, incorporated by reference to Exhibit 10.2 of TSYS’ Current Report on Form 8-K dated November 30, 2007. | |
10.6
|
Indemnification and Insurance Matters Agreement by and among |
18
Table of Contents
| Exhibit | ||
| Number | Description | |
| Synovus Financial Corp. and TSYS, dated as of November 30, 2007, incorporated by reference to Exhibit 10.3 of TSYS’ Current Report on Form 8-K dated November 30, 2007. | ||
10.7
|
Master Confidential Disclosure Agreement by and among Synovus Financial Corp. and TSYS, dated as of November 30, 2007, incorporated by reference to Exhibit 10.4 of TSYS’ Current Report on Form 8-K dated November 30, 2007. | |
10.8
|
Tax Sharing Agreement by and among Synovus Financial Corp., Columbus Bank and Trust Company and TSYS, dated as of November 30, 2007, incorporated by reference to Exhibit 10.5 of TSYS’ Current Report on Form 8-K dated November 30, 2007. | |
| EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS | ||
10.9
|
Director Stock Purchase Plan of TSYS, incorporated by reference to Exhibit 10.1 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 1999, as filed with the SEC on March 16, 2000. | |
10.10
|
Total System Services, Inc. 2002 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.2 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as filed with the SEC on March 19, 2002. | |
10.11
|
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, 2008, as filed with the SEC on August 7, 2008. | |
10.12
|
Total System Services, Inc. 1992 Long-Term Incentive Plan, which was renamed the Total System Services, Inc. 2000 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.5 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the SEC on March 18, 1993. | |
10.13
|
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, as filed with the SEC on August 7, 2008. | |
10.14
|
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, as filed with the SEC on March 18, 1993. | |
19
Table of Contents
| Exhibit | ||
| Number | Description | |
10.15
|
Agreement in Connection With Personal Use of Company Aircraft. | |
10.16
|
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, as filed with the SEC on March 22, 1994. | |
10.17
|
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, as filed with the SEC on February 29, 2008. | |
10.18
|
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, as filed with the SEC on March 19, 2002. | |
10.19
|
Form of Stock Option Agreement for the Total System Services, Inc. 1992 (renamed 2000) and 2002 Long-Term Incentive Plans, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, as filed with the SEC on November 8, 2004. | |
10.20
|
Summary of Board of Directors Compensation, incorporated by reference to Exhibit 10.21 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as filed with the SEC on February 28, 2007. | |
10.21
|
Form of Restricted Stock Award Agreement for the TSYS 2002 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K dated January 20, 2005, as filed with the SEC on January 25, 2005. | |
10.22
|
Form of Performance-Based Restricted Stock Award Agreement for the TSYS 2002 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.2 of TSYS’ Current Report on Form 8-K dated January 20, 2005, as filed with the SEC on January 25, 2005. | |
10.23
|
Form of Non-Employee Director Restricted Stock Award Agreement for the TSYS 2002 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K dated February 1, 2005, as filed with the SEC on February 3, 2005. | |
10.24
|
Form of Stock Option Agreement for stock option awards under |
20
Table of Contents
| Exhibit | ||
| Number | Description | |
| the Total System Services, Inc. 2002 Long-Term Incentive Plan for grants made subsequent to January 17, 2006, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K dated January 17, 2006. | ||
10.25
|
Form of Restricted Stock Award Agreement for restricted stock awards under the Total System Services, Inc. 2002 Long-Term Incentive Plan for grants made subsequent to January 17, 2006, incorporated by reference to Exhibit 10.2 of TSYS’ Current Report on Form 8-K dated January 17, 2006. | |
10.26
|
Total System Services, Inc. 2007 Omnibus Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K dated April 24, 2007, as filed with the SEC on April 25, 2007. | |
10.27
|
Form of Restricted Stock Award Agreement for restricted stock awards under the Total System Services, Inc. 2007 Omnibus Plan, incorporated by reference to Exhibit 10.3 of TSYS’ Current Report on Form 8-K dated April 24, 2007, as filed with the SEC on April 25, 2007. | |
10.28
|
Form of Performance-Based Restricted Stock Award Agreement for performance-based restricted stock awards under the Total System Services, Inc. 2007 Omnibus Plan, incorporated by reference to Exhibit 10.4 of TSYS’ Current Report on Form 8-K dated April 24, 2007. | |
10.29
|
Form of Revised Stock Option Agreement for stock option awards under the Total System Services, Inc. 2007 Omnibus Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K dated February 5, 2008. | |
10.30
|
Total System Services, Inc. 2008 Omnibus Plan, incorporated by reference to Exhibit 10.30 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC on February 29, 2008. | |
10.31
|
Form of Performance-Based Restricted Stock Award Agreement for performance-based restricted stock awards under the Total System Services, Inc. 2008 Omnibus Plan, incorporated by reference to Exhibit 10.3 of TSYS’ Current Report on Form 8-K dated January 2, 2008. |
21
Table of Contents
| Exhibit | ||
| Number | Description | |
10.32
|
Form of Restricted Stock Unit Agreement for restricted stock unit awards under the Total System Services, Inc. 2008 Omnibus Plan, incorporated by reference to Exhibit 10.4 of TSYS’ Current Report on Form 8-K dated January 2, 2008. | |
10.33
|
Form of Revised Stock Option Agreement for stock option awards under the Total System Services, Inc. 2008 Omnibus Plan, incorporated by reference to Exhibit 10.2 of TSYS’ Current Report on Form 8-K dated February 5, 2008. | |
10.34
|
Form of Retention Restricted Stock Award Agreement for retention restricted stock awards under the Total System Services, Inc. 2008 Omnibus Plan, incorporated by reference to Exhibit 10.3 of TSYS’ Current Report on Form 8-K dated February 5, 2008. | |
10.35
|
Form of Performance-Based Retention Restricted Stock Award Agreement for performance-based restricted stock awards under the Total System Services, Inc. 2008 Omnibus Plan, incorporated by reference to Exhibit 10.4 of TSYS’ Current Report on Form 8-K dated February 5, 2008. | |
10.36
|
Form of Revised Restricted Stock Award Agreement for restricted stock awards under the Total System Services, Inc. 2008 Omnibus Plan, incorporated by reference to Exhibit 10.5 of TSYS’ Current Report on Form 8-K dated February 5, 2008. | |
10.37
|
Form of Amended and Revised Stock Option Agreement for stock option awards under the Total System Services, Inc. 2007 Omnibus Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K dated March 28, 2008. | |
10.38
|
Form of Performance Share Agreement for performance share awards under the Total System Services, Inc. 2007 and 2008 Omnibus Plans. | |
10.39
|
Form of Amended and Revised Stock Option Agreement for stock option awards under the Total System Services, Inc. 2008 Omnibus Plan, incorporated by reference to Exhibit 10.3 of TSYS’ Current Report on Form 8-K dated March 28, 2008. | |
10.40
|
Form of Amended and Revised Stock Option Agreement for stock option awards under the Total System Services, Inc. 2007 and 2008 Omnibus Plans for grants made subsequent to January 26, 2009. | |
10.41
|
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 dated July 25, 2007. | |
22
Table of Contents
| Exhibit | ||
| Number | Description | |
13.1
|
Certain specified pages of TSYS’ 2008 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. | |
24.1
|
Powers of Attorney contained on the signature pages of this 2008 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. Employee Stock Purchase Plan for the year ended December 31, 2008 (to be filed as an amendment hereto within 120 days of the end of the period covered by this report.) | |
99.2
|
Annual Report on Form 11-K for the Total System Services, Inc. Director Stock Purchase Plan for the year ended December 31, 2008 (to be filed as an amendment hereto within 120 days of the end of the period covered by this report.) |
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.
23
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors
Total System Services, Inc.:
Total System Services, Inc.:
Under date of February 26, 2009, we reported on the consolidated balance sheets of Total System
Services, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated
statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the
years in the three-year period ended December 31, 2008, as contained in the 2008 annual report to
shareholders. These consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year ended December 31, 2008. In connection
with our audits of the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule as listed in the accompanying index. This
financial statement schedule is the responsibility of the Company’s management. Our responsibility
is to express an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in Notes 1 and 18 to the consolidated financial statements, effective January 1, 2007,
the Company adopted the recognition and disclosure provisions of FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes- an Interpretation of FASB Statement No. 109.
As discussed in Note 16 to the consolidated financial statements, the Company adopted the
recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158,
Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, as of
December 31, 2006.
/s/ KPMG LLP
Atlanta, Georgia
February 26, 2009
February 26, 2009
Table of Contents
TOTAL SYSTEM SERVICES, INC.
Schedule II
Valuation and Qualifying Accounts
(in thousands)
Schedule II
Valuation and Qualifying Accounts
(in thousands)
| Additions | ||||||||||||||||
| Changes in | ||||||||||||||||
| allowances, charges to | ||||||||||||||||
| Balance at | expenses and changes | |||||||||||||||
| beginning | to other accounts — | Deductions — | Balance at end | |||||||||||||
| of period | describe | describe | of period | |||||||||||||
Year ended December 31, 2006: |
||||||||||||||||
Provision for doubtful accounts |
$ | 7,044 | (164 | )(1) | (1,209 | )(3) | $ | 5,671 | ||||||||
| $ | 7,044 | (164 | ) | (1,209 | ) | $ | 5,671 | |||||||||
Provision for billing adjustments |
$ | 5,570 | 1,779 | (1) | (2,046 | )(3) | $ | 5,303 | ||||||||
| $ | 5,570 | 1,779 | (2,046 | ) | $ | 5,303 | ||||||||||
Transaction processing provisions — contractual
contingencies |
$ | — | 1,250 | (2) | — | (3) | $ | 1,250 | ||||||||
| $ | — | 1,250 | — | $ | 1,250 | |||||||||||
Transaction processing accruals — processing
errors |
$ | 9,453 | 9,731 | (2) | (7,789 | )(3) | $ | 11,395 | ||||||||
| $ | 9,453 | 9,731 | (7,789 | ) | $ | 11,395 | ||||||||||
Year ended December 31, 2007: |
||||||||||||||||
Provision for doubtful accounts |
$ | 5,671 | 900 | (1) | (1,209 | )(3) | $ | 5,362 | ||||||||
| $ | 5,671 | 900 | (1,209 | ) | $ | 5,362 | ||||||||||
Provision for billing adjustments |
$ | 5,303 | 332 | (1) | (851 | )(3) | $ | 4,784 | ||||||||
| $ | 5,303 | 332 | (851 | ) | $ | 4,784 | ||||||||||
Transaction processing provisions — contractual
contingencies |
$ | 1,250 | (1,250 | )(2) | — | (3) | $ | — | ||||||||
| $ | 1,250 | (1,250 | ) | — | $ | — | ||||||||||
Transaction processing accruals — processing
errors |
$ | 11,395 | 1,285 | (2) | (4,155 | )(3) | $ | 8,525 | ||||||||
| $ | 11,395 | 1,285 | (4,155 | ) | $ | 8,525 | ||||||||||
Year ended December 31, 2008: |
||||||||||||||||
Provision for doubtful accounts |
$ | 5,362 | (1,336 | )(1), (4) | (1,038 | )(3) | $ | 2,988 | ||||||||
| $ | 5,362 | (1,336 | ) | (1,038 | ) | $ | 2,988 | |||||||||
Provision for billing adjustments |
$ | 4,784 | 2,205 | (1) | (1,648 | )(3) | $ | 5,341 | ||||||||
| $ | 4,784 | 2,205 | (1,648 | ) | $ | 5,341 | ||||||||||
Transaction processing provisions — contractual
contingencies |
$ | — | — | (2) | — | (3) | $ | — | ||||||||
| $ | — | — | — | $ | — | |||||||||||
Transaction processing accruals — processing
errors |
$ | 8,525 | 3,172 | (2) | (6,280 | )(3) | $ | 5,417 | ||||||||
| $ | 8,525 | 3,172 | (6,280 | ) | $ | 5,417 | ||||||||||
| (1) | Amount reflected includes charges to (recoveries of) bad debt expense which are classified in other operating expenses and the charges for billing adjustments which are recorded against revenues. | |
| (2) | Amount reflected is the change in transaction processing accruals reflected in other operating 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 accruals reflect actual billing adjustments and processing errors charged against the allowances. | |
| (4) | Includes $0.3 million of doubtful accounts on November 3, 2008 related to consolidating the financial results of Infonox. |
Table of Contents
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) |
||||
| February 26, 2009 | By: | /s/ Philip W. Tomlinson | ||
| Philip W. Tomlinson, | ||||
| Principal Executive Officer and Chairman of the Board | ||||
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Philip W. Tomlinson and M. Troy Woods and 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/ Philip W. Tomlinson
|
Date: February 26, 2009 | |
Principal Executive Officer
and Chairman of the Board |
||
/s/ M. Troy Woods
|
Date: February 26, 2009 | |
President and Director |
||
/s/ James B. Lipham
|
Date: February 26, 2009 | |
Senior Executive Vice President
and Principal Financial Officer |
Table of Contents
/s/ Dorenda K. Weaver
|
Date: February 26, 2009 | |
Chief Accounting Officer |
||
/s/ Richard E. Anthony
|
Date: February 26, 2009 | |
Director |
||
/s/ James H. Blanchard
|
Date: February 26, 2009 | |
Director and Chairman of the
Executive Committee |
||
/s/ Richard Y. Bradley
|
Date: February 26, 2009 | |
Director |
||
/s/ Kriss Cloninger III
|
Date: February 26, 2009 | |
Director |
||
/s/ Walter W. Driver, Jr.
|
Date: February 26, 2009 | |
Director |
||
/s/ Gardiner W. Garrard, Jr.
|
Date: February 26, 2009 | |
Director |
||
/s/ Sidney E. Harris
|
Date: February 26, 2009 | |
Director |
||
| Date: , 2009 | ||
Director |
Table of Contents
/s/ Mason H. Lampton
|
Date: February 26, 2009 | |
Director |
||
/s/ H. Lynn Page
|
Date: February 26, 2009 | |
Director |
||
/s/ W. Walter Miller, Jr.
|
Date: February 26, 2009 | |
Director |
||
/s/ John T. Turner
|
Date: February 26, 2009 | |
Director |
||
/s/ Richard W. Ussery
|
Date: February 26, 2009 | |
Director |
||
/s/ James D. Yancey
|
Date: February 26, 2009 | |
Director |
||
| Date: , 2009 | ||
Director |