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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 2010
Commission file number 1-10254
TOTAL SYSTEM SERVICES, INC.
(Exact name of registrant as specified in its charter)
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Georgia
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58-1493818 |
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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One TSYS Way |
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Columbus, Georgia
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31901 |
(Address of principal executive offices)
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(Zip Code) |
(Registrants telephone number, including area code) (706) 649-2310
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered |
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Common Stock, $.10 Par Value
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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 whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files)
YES 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 registrants
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.
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Large accelerated filer þ | |
Accelerated Filer o | |
Non-accelerated filer o | |
Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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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, 2010, the aggregate market value of the registrants common stock held by
non-affiliates of the registrant was approximately $2,565,112,000 based on the closing sale price
as reported on the New York Stock Exchange.
As
of February 23, 2011, there were 193,409,543 shares of the registrants common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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Incorporated Documents |
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Form 10-K Reference Locations |
Portions of the Annual Report to Shareholders
for the year ended December 31, 2010 (Annual Report)
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Parts I, II, III and IV |
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Portions of the 2011 Proxy Statement for the Annual
Meeting of Shareholders to be held May 3, 2011
(Proxy Statement)
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Part III |
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 Managements 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 Managements 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.
Business. Based in Columbus, Georgia, and traded on the New York Stock Exchange under the
symbol TSS, we are a global payment solutions provider that provides services to financial and
nonfinancial institutions. The services we provide are divided into three operating segments,
North America Services, which accounted for 54.0% of our revenues in 2010, International Services,
which accounted for 19.3% of our revenues in 2010, and Merchant Services, which accounted for 26.7%
of our revenues in 2010.
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.
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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 Customer. A significant amount of our revenues is derived from long-term contracts with
large clients, including our major customer during 2010, Bank of America Corporation. For the year
ended December 31, 2010, Bank of America Corporation accounted for approximately 12.9% of our total
revenues. As a result, the loss of Bank of America Corporation, or other large clients, could have
a material adverse effect on our financial position, results of operations and cash flows. See
Major Customer and Operating Segments under the Financial Review Section on page 16, and 16
through 19, respectively, and Note 22 on pages 56 through 58 of the Annual Report which are
incorporated in this document by reference.
Competition. We encounter vigorous competition in providing electronic payment services from
several different sources. TSYS core business is derived from third-party processing for issuers
and merchant acquirers. Most of the national market in third party processors is presently being
provided by approximately three vendors. We believe that as of December 31, 2010 we are the
largest third party card processor in the United States. In addition, we compete with banks and
acquirers who choose to process payments in house through proprietary systems and with 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, bankcard computer service firms and third-party software vendors within the United
States and from certain international processors, in-country providers and third-party software
vendors with respect to our International Services segment. In addition, 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 2010 we provided issuer processing services for 21% of the domestic consumer credit card
market, 43% of the Canadian credit card market and 16% of the Western European credit card market.
We also believe that during 2010 we held an 85% share of the Visa and MasterCard domestic
commercial card processing market. With respect to the Merchant Services Segment, we provide third
party processing services to merchant acquirers and Independent Sales Organizations (ISOs) and we
are a direct merchant acquirer through TSYS Merchant Solutions. We believe that we are the second
largest processor of merchant accounts and process transactions for approximately 21% of all
bankcard accepting merchant locations in the United States. Our direct merchant acquirer business
is ranked as the 10th largest merchant acquirer by dollar volume according to The Nilson
Report dated March 2010.
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
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and business continuity preparedness, data security, scalability and flexibility of
infrastructure and servicing capability. Other affiliates of First Data Corporation also compete
with us with respect to the provision of merchant services.
Backlog of Accounts. As of December 31, 2010, we had a pipeline of approximately 13.7 million
accounts, approximately 8.8 million of which are expected to be converted during 2011.
Regulation and Examination. Government regulation affects key aspects of our business, in the U.S. as well as internationally. We
are subject to examination by the Federal Financial Institutions Examination Council, an
interagency body comprised of federal banking and thrift regulators and the National Credit Union
Administration, and also subject to examination by the various state financial regulatory agencies
which supervise and regulate the financial institutions for which we provide electronic payment
processing 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 Commissions and the federal banking agency
information safeguarding requirements under the Gramm-Leach-Bliley Act. The Federal Trade
Commissions 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.
As are all U.S. citizens and U.S. entities, we are subject to regulations imposed by the 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.
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We and the rest of the financial services industry continue to experience increased
legislative and regulatory scrutiny, including the enactment of additional legislative and
regulatory initiatives such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
Financial Reform Act). This legislation, which provides for significant financial regulatory
reform, may have a significant and negative impact on our clients, which could impact TSYS
earnings through fee reductions, higher costs (both regulatory and implementation) and new
restrictions on our operations. The Reform Act, among other things, provides for the regulation
and oversight by the Federal Reserve Board of debit interchange fees that are typically paid by
acquirers and charged or received by a payment card network for the purpose of compensating an
issuer for its involvement in an electronic debit transaction. The regulations pertaining to
interchange fees that will be adopted by the Federal Reserve Board will be effective in July 2011.
Although we cannot predict the impact that the debit interchange regulations will have on us, we do
not expect that they will have a significant negative impact on our business as it is predominantly
credit card related. The Reform Act also created a new Consumer Financial Protection Bureau which
will assume responsibility for most federal consumer protection laws in the area of financial
services, including consumer credit. The creation of the bureau and its actions may make payment
card transactions less attractive to card issuers, including TSYS clients, and thus negatively
impact our business. In addition, the Reform Act created a Financial Stability Oversight Council
that has the authority to determine whether nonbank financial companies such as TSYS should be
supervised by the Federal Reserve Board because they are systemically important to the U.S.
financial system. Any such designation would result in increased regulatory burdens on our
business.
Employees. As of December 31, 2010, we had 7,788 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 Investor Relations section of our website under the
heading SEC Filings. These reports are available on our website as soon as reasonably
practicable after we electronically file them with the Securities and Exchange Commission.
We have adopted a Code of Business Conduct and Ethics for our directors, officers
and employees and have also adopted Corporate Governance Guidelines. Our Code of
Business Conduct and Ethics, Corporate Governance Guidelines and the charters of
our board committees are available in the Corporate Governance section of our website at
www.tsys.com under Investor Relations then Corporate Governance.
For more information about our business see the Financial Overview Section on pages 9 and
10, the Financial Review Section on pages 10 through 27 and Note 1, Note 2, Note 8, Note 19, Note
22, Note 24, Note 25 and Note 28 of Notes to Consolidated Financial
Statements on pages 32 through
39, pages 41 and 42, pages 51 through 53, and pages 56 through 61 of the Annual
Report which are incorporated in this document by reference.
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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:
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. 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 a major customer. 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.
Economic conditions could adversely affect our business.
A significant portion of our revenues is derived from the number of consumer credit
transactions that we process which may be affected by, among other things, overall economic
conditions. As a result of current economic conditions in the United States, credit card issuers
have been reducing credit limits and closing accounts and are more selective with respect to whom
they issue credit cards which could negatively impact the number of accounts we have on
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file for our clients, for which we receive a fee, and internal growth rates for our clients.
Future reductions in consumer spending through credit card usage could have a material adverse
affect on our financial position and results of operations.
Security and privacy breaches in our systems and system failures may damage client relations, our
reputation and expose us to liability.
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 designed to ensure our systems will
not be inoperable. However, there is still a risk that a system outage or data loss may occur
which would not only damage our reputation but as a result of contractual commitments could also
require the payment of penalties to our clients if our systems do not meet certain operating
standards. 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 or any system interruption
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:
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cause our clients to lose confidence in our services; |
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harm our reputation; |
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expose us to financial liability; and |
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increase our expenses from potential remediation costs. |
Our ability to attract and retain clients and employees could be adversely affected to the
extent our reputation is damaged. 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.
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. 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.
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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.
Acquisitions and integrating such acquisitions create certain risks and may affect our financial
results.
We have acquired businesses both in the United States and internationally and will continue to
explore opportunities for strategic acquisitions in the future. The acquisition and integration of
businesses involves a number of risks. The core risks are in the areas of valuation (negotiating a
fair price for the business based on inherently limited diligence) and integration (managing the
complex process of integrating the acquired companys people, products, technology and other assets
so as to realize the projected value of the acquired company and the synergies projected to be
realized in connection with the acquisition). In addition, international acquisitions often
involve additional or increased risks including for example:
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managing geographically separated organizations, systems and facilities; |
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integrating personnel with diverse business backgrounds and organizational cultures; |
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complying with foreign regulatory requirements; |
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fluctuations in currency exchange rates; |
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difficulty entering new foreign markets due to, among other things, customer
acceptance and business knowledge of these new markets; and |
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general economic and political conditions. |
The process of integrating operations could cause an interruption of, or loss of momentum in,
the activities of one or more of our combined businesses and the possible loss of key personnel.
The diversion of managements attention and any delays or difficulties encountered in connection
with acquisitions and the integration of the two companies operations could have an adverse effect
on our financial position and results of operations.
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Our business may be adversely affected by risks associated with foreign operations.
We provide services to our clients worldwide. As a result, our revenues derived from
international operations are subject to risk of loss from foreign currency exchange rates. Revenue
and profit generated by international operations will increase or decrease compared to prior
periods as a result of changes in foreign currency exchange rates. We have not entered into
foreign exchange forward contracts to mitigate the risks associated with our foreign operations.
In addition, we may become subject to exchange control regulations that might restrict or prohibit
the conversion of our foreign currency into U.S. dollars. The occurrence of any of these factors
could decrease the value of revenues we receive from international operations and adversely affect
our financial position and results of operations. In addition, our revenues derived from
international operations are subject to risk of loss as a result of social instability and
unfavorable political or diplomatic developments which could negatively impact our financial
results.
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
are involved in various litigation matters and from time to time may
be involved in governmental or regulatory 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
pending litigation or future litigation or investigation
significantly exceed our insurance coverage, they could have a material adverse effect on our
financial position and results of operations. In addition, we may not be able to obtain
appropriate types or levels of insurance in the future, nor may we be able to obtain adequate
replacement policies with acceptable terms, if at all. For more information about our legal
proceedings, see Item 3 of this annual report.
The ability to adapt technology to changing industry and customer needs or trends may affect our
competitiveness or demand for our products, which may adversely affect our financial results.
Changes
in technology may limit the competitiveness of and demand for our
services and may result in our disintermediation from the payments
value chain. The
electronic payments market in which we compete is subject to rapid and significant technological
changes, developing industry standards and changing customer needs and preferences. Also, our
customers continue to adopt new technology for business and personal uses. We must anticipate and
respond to these industry and customer changes in order to remain competitive. Our inability to
respond to new competitors and technological advancements could have a material adverse affect on
our financial position and results of operations.
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 in the U.S. as well as internationally.
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Changes to statutes, regulations or industry standards, including interpretation and
implementation of statutes, regulations or standards, could increase the cost of doing business or
affect the competitive balance. Regulation of the payments industry has increased significantly in
recent years. Failure to comply with laws, rules and regulations or standards to which we are
subject in the U.S. as well as internationally, including the card network rules and rules with respect to privacy and information
security, may result in the suspension or revocation of a license or registration, the limitation,
suspension or termination of service, and the imposition of fines, sanctions or other penalties,
which could have a material adverse effect on our financial position and results of operations, as
well as damage our reputation.
We and the rest of the financial services industry continue to experience increased
legislative and regulatory scrutiny, including the enactment of additional legislative and
regulatory initiatives such as the Dodd-Frank Wall Street Reform and Consumer Protection Act. This
legislation provides for significant financial regulatory reform. The Reform Act, among other
things, provides for the regulation and oversight by the Federal Reserve Board of debit interchange
fees that are typically paid by acquirers and charged or received by a payment card network for the
purpose of compensating an issuer for its involvement in an electronic debit transaction. The
Reform Act also created a new Consumer Financial Protection Bureau which will assume responsibility
for most federal consumer protection laws in the area of financial services, including consumer
credit. In addition, the Reform Act created a Financial Stability Oversight Council that has the
authority to determine whether nonbank financial companies such as TSYS should be supervised by the
Federal Reserve Board because they are systemically important to the U.S. financial system. Any
such designation would result in increased regulatory burdens on our business. The overall impact
of the Reform Act on TSYS is difficult to estimate, in part because regulations need to be adopted
by the Federal Reserve Board with respect to interchange fees, and by the Consumer Financial
Protection Bureau with respect to consumer financial products and services. These regulations may
adversely affect our business or operations, directly or indirectly (if, for example, our clients
businesses and operations are adversely affected). In addition, we are subject to tax laws in each
jurisdiction where we do business. Changes in tax laws or their interpretations could decrease the
value of revenues we receive, the value of tax losses and tax credits carry forwards recorded on
our balance sheet and the amount of our cash flow and have a material adverse effect on our
financial position and results of operations.
We are subject to the business cycles and credit risk of our merchant customers and our independent
sales organizations.
The current recessionary economic environment could affect our merchants through a higher rate
of bankruptcy filings, resulting in lower revenues and earnings for us. Our merchants are liable
for any charges properly reversed by the card issuer on behalf of the cardholder. Our merchants
and ISOs are also liable for any fines, or penalties, that may be assessed by any card networks.
In the event, however, that we are not able to collect such amounts from the merchants or ISOs, due
to merchant fraud, breach of contract, insolvency, bankruptcy or any other reason, we may be liable
for any such charges which could have a material adverse effect on our financial position and results
of operations.
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We incur chargeback liability when our merchants refuse or cannot reimburse chargebacks resolved in
favor of their customers. We cannot accurately anticipate these liabilities, which may adversely
affect our financial results.
In the event a billing dispute between a cardholder and a merchant is not resolved in favor of
the merchant, the transaction is normally charged back to the merchant and the purchase price is
credited or otherwise refunded to the cardholder. If we are unable to collect such amounts from
the merchants account or reserve account (if applicable), or if the merchant refuses or is unable,
due to closure, bankruptcy or other reasons, to reimburse us for a chargeback, we bear the loss for
the amount of the refund paid to the cardholder. We may experience significant losses from
chargebacks in the future. Any increase in chargebacks not paid by our merchants could have a
material adverse affect on our financial position and results of operation.
Fraud by merchants or others may adversely affect our financial results.
We have potential liability for fraudulent bankcard transactions or credits initiated by
merchants or others. Examples of merchant fraud include when a merchant knowingly uses a stolen or
counterfeit bankcard or card number to record a false sales transaction, processes an invalid
bankcard, or intentionally fails to deliver the merchandise or services sold in an otherwise valid
transaction. Criminals are using increasingly sophisticated methods to engage in illegal
activities such as counterfeit and fraud. While we have systems and procedures designed to detect
and reduce the impact of fraud, we cannot assure the effectiveness of these measures. It is
possible that incidents of fraud could increase in the future. Failure to effectively manage risk
and prevent fraud would increase our chargeback liability or other liability. Increases in
chargebacks or other liability could have a material adverse effect on our financial position and
results of operations.
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
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 partys 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
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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 partys 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.
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 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.
|
|
|
Item 1B. |
|
Unresolved Staff Comments |
None.
As of December 31, 2010, we and our subsidiaries owned 14 facilities encompassing
approximately 1,445,546 square feet and leased 47 facilities encompassing approximately 814,113
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 |
|
|
|
8 |
|
|
|
208,097 |
|
International Services |
|
|
2 |
|
|
|
96,368 |
|
|
|
24 |
|
|
|
253,860 |
|
Merchant Services |
|
|
3 |
|
|
|
3,378 |
|
|
|
15 |
|
|
|
352,156 |
|
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 7, Note 19 and Note 22 of Notes to Consolidated Financial Statements on pages
32 through 39, page 41, pages 51 through 53, and pages 56 through 58 and Operating Expenses and
Property and Equipment under the Financial
Review Section on page 19, and page 21,
respectively, of the Annual Report which are incorporated in this document by reference.
11
|
|
|
Item 3. |
|
Legal Proceedings |
See
Note 19 of Notes to Consolidated Financial Statements on pages 51
through 53 of the Annual
Report which is incorporated in this document by reference.
|
|
|
Item 4. |
|
Removed and Reserved |
PART II
|
|
|
Item 5. |
|
Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Repurchases of Equity Securities |
The
Quarterly Financial Data (Unaudited), Stock Price, Dividend Information Section under the Financial
Review Section on page 64, Note 17 of Notes to Consolidated
Financial Statements on pages 49 and 50
and Stock Performance Graph on page 65 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 9 of the Annual Report is
incorporated in this document by reference.
|
|
|
Item 7. |
|
Managements Discussion and Analysis of Financial Condition and Results
of Operations |
The Financial Overview and Financial Review Sections which are set forth on pages 9
through 27 of the Annual Report which includes the information encompassed within Managements
Discussion and Analysis of Financial Condition and Results of Operations, are incorporated in this
document by reference.
|
|
|
Item 7A. |
|
Quantitative and Qualitative Disclosures About Market Risk |
Foreign Exchange Risk. We are exposed to foreign exchange risk because we have assets,
liabilities, revenues and expenses denominated in foreign currencies. These currencies are
translated into U.S. dollars at current exchange rates, except for revenues, costs and expenses and
net income, which are translated at the average exchange rate for each reporting period. Net
exchange gains or losses resulting from the translation of assets and liabilities of our foreign
operations, net of tax, are accumulated in a separate section of shareholders equity entitled
accumulated other comprehensive income (loss), net. The amount of other comprehensive (loss) income,
net of tax, related to foreign currency translation for the years ended December 31, 2010, 2009 and
2008 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
2010 |
|
2009 |
|
2008 |
Comprehensive income (loss), net of tax |
|
|
($7.5 |
) |
|
$ |
12.1 |
|
|
|
($35.1 |
) |
12
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, 2010:
|
|
|
|
|
(in millions) |
|
December 31, 2010 |
Europe |
|
$ |
184.5 |
|
China |
|
|
70.8 |
|
Japan |
|
|
14.2 |
|
Mexico |
|
|
6.6 |
|
Canada |
|
|
1.1 |
|
Other |
|
|
36.1 |
|
We record foreign currency translation adjustments associated with other balance sheet
accounts. See Nonoperating Income (Expense) under the Financial Review Section on page 19 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 British Pounds Sterling. 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 loss of approximately $162,000 for the year ended
December 31, 2010 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, 2010 was approximately $1.7 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. The 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, 2010 was $1.7 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 $1.7 million at December 31, 2010.
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
17 |
|
|
|
87 |
|
|
|
173 |
|
|
|
(17 |
) |
|
|
(87 |
) |
|
|
(173 |
) |
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 obligations actual cash flows are
denominated in U.S. dollars (US), British Pounds Sterling (GBP) and Japanese YEN (YEN), as
indicated in parentheses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010 |
|
Expected maturity date |
Liabilities |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 |
|
TOTAL |
(US$ Equivalent in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate (US) |
|
$ |
14.9 |
|
|
|
13.3 |
|
|
|
13.4 |
|
|
|
|
|
|
|
|
|
|
$ |
41.6 |
|
Average interest rate |
|
|
1.80 |
% |
|
|
1.50 |
% |
|
|
1.50 |
% |
|
|
|
|
|
|
|
|
|
|
1.61 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Rate (US) |
|
$ |
|
|
|
|
168.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
168.0 |
|
Average interest rate |
|
|
|
|
|
|
0.90 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.90 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Rate (GBP) |
|
$ |
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.8 |
|
Average interest rate |
|
|
2.74 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.74 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Rate (YEN) |
|
$ |
23.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
23.9 |
|
Average interest rate |
|
|
0.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.98 |
% |
|
|
|
Item 8. |
|
Financial Statements and Supplementary Data |
The
Quarterly Financial Data (Unaudited), Stock Price, Dividend Information Section, which is set forth
on page 64, and the Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated
Statements of Cash Flows, Consolidated Statements of Equity and Comprehensive Income, Notes to
Consolidated Financial Statements, Report of Independent Registered Public Accounting Firm and
Managements Report on Internal Control Over Financial
Reporting, which are set forth on pages 28
through 63 of the Annual Report are incorporated in this document by reference.
14
|
|
|
Item 9. |
|
Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure |
None.
|
|
|
Item 9A. |
|
Controls and Procedures |
Evaluation of Disclosure Controls and Procedures. We have evaluated the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the period covered
by this annual report as required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended
(Exchange Act). This evaluation was carried out under the supervision and with the participation
of our management, including our chief executive officer and chief financial officer. Based on
this evaluation, the chief executive officer and chief financial officer concluded that as of
December 31, 2010, 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 SECs
rules and forms and were also designed and effective to ensure that the information required to be
disclosed in the reports that TSYS files or submits under the Exchange Act is accumulated and
communicated to management, as appropriate to allow timely decisions regarding required disclosure.
Managements Report on Internal Control Over Financial Reporting and Report of Independent
Registered Public Accounting Firm. Managements Report on Internal Control Over Financial
Reporting, which is set forth on page 63 of the Annual Report, and Report of Independent
Registered Public Accounting Firm, which is set forth on page 62 of the Annual Report, are
incorporated in this document by reference.
Changes in Internal Control Over Financial Reporting. No change in our internal control over
financial reporting occurred during the fourth fiscal quarter covered by this annual report that
materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
|
|
|
Item 9B. |
|
Other Information |
None.
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, |
15
|
|
|
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 under Investor Relations then Corporate
Governance. We will post any amendments to the Code of Business Conduct and Ethics and any
waivers that are required to be disclosed by the rules of either the SEC or the NYSE in the
Corporate Governance section of our website.
|
|
|
Item 11. |
|
Executive Compensation |
Information included under the following captions in our Proxy Statement is incorporated in
this document by reference:
|
|
|
DIRECTOR COMPENSATION; |
|
|
|
|
EXECUTIVE COMPENSATION Compensation Discussion and Analysis, Compensation
Committee Report, Risk Assessment of Compensation Programs and Compensation Tables
and Narratives; and |
|
|
|
|
CORPORATE GOVERNANCE AND BOARD MATTERS Committees of the Board
Compensation Committee Interlocks and Insider Participation. |
The information included under the heading Compensation Committee Report in our
Proxy Statement is incorporated herein by reference; however, this information shall not be deemed
to be soliciting material or to be filed with the Commission or subject to Regulation 14A or
14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.
|
|
|
Item 12. |
|
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters |
Information pertaining to equity compensation plans is contained in Note 15 of Notes to
Consolidated Financial Statements on page 46 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. |
16
|
|
|
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. |
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 28 through 63 of the Annual Report.
Consolidated Balance Sheets December 31, 2010 and 2009.
Consolidated Statements of Income Years Ended December 31, 2010, 2009 and 2008.
Consolidated Statements of Cash Flows Years Ended December 31, 2010, 2009 and
2008.
Consolidated Statements of Equity and Comprehensive Income Years Ended December
31, 2010, 2009 and 2008.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm.
Managements Report on 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:
17
Report of Independent Registered Public Accounting Firm.
Schedule II
Valuation and Qualifying Accounts Years Ended December 31, 2010, 2009 and 2008.
All other schedules are omitted because they are inapplicable or the required
information is included in the consolidated financial statements and notes thereto.
3. Exhibits
The following exhibits are filed herewith or are incorporated to other documents
previously filed with the SEC. Exhibits 10.6 through 10.39 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
|
|
Articles of Incorporation of TSYS, as amended, incorporated by
reference to Exhibit 3.1 of TSYS Current Report on Form 8-K dated April 30,
2009. |
|
|
|
3.2
|
|
Bylaws of TSYS, as amended, incorporated by reference to
Exhibit 3.1 of TSYS Current Report on Form 8-K dated July 28, 2009. |
|
|
|
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
|
|
Indemnification and Insurance Matters Agreement by and among
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. |
|
|
|
10.3
|
|
Investment Agreement (excluding exhibits and schedules) dated
March 1, 2010 by and between First National Bank of Omaha and TSYS,
incorporated by reference to Exhibit 10.1 of TSYS Quarterly Report on Form
10-Q for the quarter ended March 31, 2010, as filed with the SEC on May 7,
2010. |
18
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
10.4
|
|
Assignment of Investment Agreement dated April 1, 2010 between
TSYS and Columbus Depot Equipment Company, a wholly owned subsidiary of TSYS,
incorporated by reference to Exhibit 10.2 of TSYS Quarterly Report on Form
10-Q for the quarter ended March 31, 2010, as filed with the SEC on May 7,
2010. |
|
|
|
10.5
|
|
Amended and Restated Limited Liability Company Agreement of
FNMS Holding, LLC (excluding exhibits and schedules) dated April 1, 2010 by and
between Columbus Depot Equipment Company, First National Bank of Omaha, FN
Merchant Partners, Inc. and FNMS Holding, LLC, incorporated by reference to
Exhibit 10.3 of TSYS Quarterly Report on Form 10-Q for the quarter ended March
31, 2010, as filed with the SEC on May 7, 2010. |
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
|
|
|
10.6
|
|
Director Stock Purchase Plan of TSYS, incorporated by reference
to Exhibit 10.4 of TSYS Annual Report on Form 10-K for the fiscal year ended
December 31, 2009, as filed with the SEC on March 1, 2010. |
|
|
|
10.7
|
|
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. |
|
|
|
10.8
|
|
Amended and Restated Total System Services, Inc. Deferred
Compensation Plan, incorporated by reference to Exhibit 10.1 of TSYS Quarterly
Report on Form 10-Q for the quarter ended June 30, 2010, as filed with the SEC
on August 9, 2010. |
|
|
|
10.9
|
|
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. |
|
|
|
10.10
|
|
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. |
|
|
|
10.11
|
|
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
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
10.12
|
|
Agreement in Connection With Personal Use of Company Aircraft,
incorporated by reference to Exhibit 10.15 of TSYS Annual Report on Form 10-K
for the fiscal year ended December 31, 2008, as filed with the SEC on February
27, 2009. |
|
|
|
10.13
|
|
Split Dollar Insurance Agreement of TSYS, incorporated by
reference to Exhibit 10.10 of TSYS Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, as filed with the SEC on March 22, 1994. |
|
|
|
10.14
|
|
Change of Control Agreement for executive officers of TSYS,
incorporated by reference to Exhibit 10.17 of TSYS Annual Report on Form 10-K
for the fiscal year ended December 31, 2007, as filed with the SEC on February
29, 2008. |
|
|
|
10.15
|
|
Split Dollar Insurance Agreement and related Executive Benefit
Substitution Agreement, incorporated by reference to Exhibit 10.19 of TSYS
Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as
filed with the SEC on March 19, 2002. |
|
|
|
10.16
|
|
Summary of Board of Directors Compensation. |
|
|
|
10.17
|
|
Form of Non-Employee Director Restricted Stock Award Agreement
for the Total System Services, Inc. 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. |
|
|
|
10.18
|
|
Form of Stock Option Agreement for stock option 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 10.1 of
TSYS Current Report on Form 8-K dated January 17, 2006. |
|
|
|
10.19
|
|
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. |
|
|
|
10.20
|
|
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. |
20
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
10.21
|
|
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. |
|
|
|
10.22
|
|
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. |
|
|
|
10.23
|
|
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. |
|
|
|
10.24
|
|
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. |
|
|
|
10.25
|
|
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. |
|
|
|
10.26
|
|
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. |
|
|
|
10.27
|
|
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. |
|
|
|
10.28
|
|
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. |
21
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
10.29
|
|
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. |
|
|
|
10.30
|
|
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. |
|
|
|
10.31
|
|
Form of Performance Share Agreement for 2009 performance share
awards under the Total System Services, Inc. 2007 and 2008 Omnibus Plans,
incorporated by reference to Exhibit 10.38 of TSYS Annual Report on Form 10-K
for the fiscal year ended December 31, 2008, as filed with the SEC on February
27, 2009. |
|
|
|
10.32
|
|
Form of Amended and Revised Stock Option Agreement for 2008
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. |
|
|
|
10.33
|
|
Form of Amended and Revised Stock Option Agreement for 2009
stock option awards under the Total System Services, Inc. 2007 and 2008 Omnibus
Plans, incorporated by reference to Exhibit 10.40 of TSYS Annual Report on
Form 10-K for the fiscal year ended December 31, 2008, as filed with the SEC on
February 27, 2009. |
|
|
|
10.34
|
|
Form of Stock Option Agreement for 2010 stock option awards
under the Total System Services, Inc. 2008 Omnibus Plan, incorporated by
reference to Exhibit 10.4 of TSYS Quarterly Report on Form 10-Q for the
quarter ended March 31, 2010, as filed with the SEC on May 7, 2010. |
|
|
|
10.35
|
|
Form of Performance Share Agreement for 2010 performance share
awards under the Total System Services, Inc. 2008 Omnibus Plan, incorporated by
reference to Exhibit 10.5 of TSYS Quarterly Report on Form 10-Q for the
quarter ended March 31, 2010, as filed with the SEC on May 7, 2010. |
|
|
|
10.36
|
|
Form of Performance-Based Special Stock Option Agreement for
performance-based stock option awards under the Total System Services, Inc.
2008 Omnibus Plan, incorporated by reference to Exhibit 10.6 of TSYS Quarterly
Report on Form 10-Q for the quarter ended March 31, 2010, as filed with the SEC
on May 7, 2010. |
22
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
10.37
|
|
Form of Non-Employee Director Fully Vested Stock Option
Agreement for the Total System Services, Inc. 2007 Omnibus Plan. |
|
|
|
10.38
|
|
Form of Non-Employee Director Fully Vested Share Award
Agreement for the Total System Services, Inc. 2007 Omnibus Plan. |
|
|
|
10.39
|
|
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. |
|
|
|
13.1
|
|
Certain specified pages of TSYS 2010 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
2010 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, 2010 (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, 2010 (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
Report of Independent Registered Public Accounting Firm
The Board of Directors
Total System Services, Inc.:
Under date of February 25, 2011, we reported on the consolidated balance sheets of Total System
Services, Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated
statements of income, cash flows, and equity and comprehensive income for each of the years in the
three-year period ended December 31, 2010, as contained in the 2010 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, 2010. 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 Companys 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. Our report refers to changes in the manner in which the Company
accounts for noncontrolling interests as of January 1, 2009 (note 1) and earnings per share as of
January 1, 2009 (notes 1 and 27).
/s/ KPMG LLP
Atlanta, Georgia
February 25, 2011
Schedule II
Schedule Valuation and Qualifying Accounts
TOTAL SYSTEM SERVICES, INC.
Schedule II
Valuation and Qualifying Accounts
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
Changes in |
|
|
|
|
|
|
|
|
Balance at |
|
allowances, charges to |
|
|
|
|
|
Balance at |
|
|
beginning |
|
expenses and changes |
|
|
|
|
|
end |
|
|
of period |
|
to other accounts |
|
Deductions |
|
of period |
Year ended December 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
$ |
4,957 |
|
|
|
(1,590 |
)(1) |
|
|
(677 |
) (3) |
|
$ |
2,690 |
|
Provision for billing adjustments |
|
$ |
4,780 |
|
|
|
1,331 |
(1) |
|
|
(798) |
(3) |
|
$ |
5,313 |
|
Transaction processing accruals
- processing errors |
|
$ |
8,525 |
|
|
|
3,151 |
(2) |
|
|
(6,259 |
) (3) |
|
$ |
5,417 |
|
Year ended December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
$ |
2,690 |
|
|
|
980 |
(1) |
|
|
(2,054) |
(3) |
|
$ |
1,616 |
|
Provision for billing adjustments |
|
$ |
5,313 |
|
|
|
5,011 |
(1) |
|
|
(5,623) |
(3) |
|
$ |
4,701 |
|
Transaction processing accruals
- processing errors |
|
$ |
5,417 |
|
|
|
4,056 |
(2) |
|
|
(3,989) |
(3) |
|
$ |
5,484 |
|
Year ended December 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
$ |
1,616 |
|
|
|
500 |
(1) |
|
|
(134) |
(3) |
|
$ |
1,982 |
|
Provision for billing adjustments |
|
$ |
4,701 |
|
|
|
(1,297 |
) (1) |
|
|
(844) |
(3) |
|
$ |
2,560 |
|
Transaction processing accruals
- processing errors |
|
$ |
5,484 |
|
|
|
3,891 |
(2) |
|
|
(4,235) |
(3) |
|
$ |
5,140 |
|
|
|
|
(1) |
|
Amount reflected includes charges to (recoveries of) bad debt expense which are classified in selling, general and administrative expenses and the
charges for billing adjustment which are recorded against revenues. |
|
(2) |
|
Amount reflected is the change in transaction processing accruals reflected in cost of services expenses. |
|
(3) |
|
Accounts deemed to be uncollectible and written off during the year as it relates to bad debts. Amounts that relate to
billing adjustments and transaction processing accruals reflect actual billing adjustments and processing errors charged against the allowances. |
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 25, 2011 |
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 25, 2011 |
|
|
|
Philip W. Tomlinson, |
|
|
Principal Executive Officer |
|
|
and Chairman of the Board |
|
|
|
|
|
/s/ M. Troy Woods
|
|
Date: February 25, 2011 |
|
|
|
M. Troy Woods, |
|
|
President and Director |
|
|
|
|
|
/s/ James B. Lipham
|
|
Date: February 25, 2011 |
|
|
|
James B. Lipham, |
|
|
Senior Executive Vice President |
|
|
and Principal Financial Officer |
|
|
|
|
|
/s/ Dorenda K. Weaver
|
|
Date: February 25, 2011 |
|
|
|
Dorenda K. Weaver, |
|
|
Chief Accounting Officer |
|
|
|
|
|
/s/ Richard E. Anthony
|
|
Date: February 25, 2011 |
|
|
|
Richard E. Anthony, |
|
|
Director |
|
|
|
|
|
/s/ James H. Blanchard
|
|
Date: February 25, 2011 |
|
|
|
James H. Blanchard, |
|
|
Director and Chairman of the |
|
|
Executive Committee |
|
|
|
|
|
/s/ Richard Y. Bradley
|
|
Date: February 25, 2011 |
|
|
|
Richard Y. Bradley, |
|
|
Director |
|
|
|
|
|
/s/ Kriss Cloninger III
|
|
Date: February 25, 2011 |
|
|
|
Kriss Cloninger III, |
|
|
Director |
|
|
|
|
|
/s/ Walter W. Driver, Jr.
|
|
Date: February 25, 2011 |
|
|
|
Walter W. Driver, Jr., |
|
|
Director |
|
|
|
|
|
/s/ Gardiner W. Garrard, Jr.
|
|
Date: February 25, 2011 |
|
|
|
Gardiner W. Garrard, Jr., |
|
|
Director |
|
|
|
|
|
/s/ Sidney E. Harris
|
|
Date: February 25, 2011 |
|
|
|
Sidney E. Harris, |
|
|
Director |
|
|
|
|
|
/s/ Mason H. Lampton
|
|
Date: February 25, 2011 |
|
|
|
Mason H. Lampton, |
|
|
Director |
|
|
|
|
|
/s/ H. Lynn Page
|
|
Date: February 25, 2011 |
|
|
|
H. Lynn Page, |
|
|
Director |
|
|
|
|
|
/s/ W. Walter Miller, Jr.
|
|
Date: February 25, 2011 |
|
|
|
W. Walter Miller, Jr., |
|
|
Director |
|
|
|
|
|
/s/ John T. Turner
|
|
Date: February 25, 2011 |
|
|
|
John T. Turner, |
|
|
Director |
|
|
|
|
|
/s/ Richard W. Ussery
|
|
Date: February 25, 2011 |
|
|
|
Richard W. Ussery, |
|
|
Director |
|
|
|
|
|
/s/ James D. Yancey
|
|
Date: February 25, 2011 |
|
|
|
James D. Yancey, |
|
|
Director |
|
|
|
|
|
/s/ Rebecca K. Yarbrough
|
|
Date: February 25, 2011 |
|
|
|
Rebecca K. Yarbrough, |
|
|
Director |
|
|