UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
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 (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Sixth Avenue, Post Office Box 1755, Columbus, Georgia 31902
(Address of principal executive offices) (Zip Code)
(706) 649-2310
(Registrant's telephone number, including area code)
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AS OF November 13, 1996
Common Stock, $.10 par value 129,289,680
<PAGE>
TOTAL SYSTEM SERVICES, INC.
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - September 30,
1996 and December 31, 1995 3
Consolidated Statements of Income - Three
months and nine months ended September 30,
1996 and 1995 4
Consolidated Statements of Cash Flows - Nine months
ended September 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 6. (a) Exhibits 15
(b) Reports on Form 8-K 15
Signatures 16
- 2 -
<PAGE>
<TABLE>
TOTAL SYSTEM SERVICES, INC.
Part I - Financial Information
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (includes
$23,268,022 and $16,742,926 on deposit
with a related party at 1996 and 1995,
respectively) $ 24,989,809 18,849,623
Short-term investments (includes
$5,000,000 and $0 invested with a
related party at 1996 and 1995,
respectively) 5,000,000 --
Accounts receivable, net of allowance
for doubtful accounts of $707,938 and
$714,374 at 1996 and 1995, respectively 55,891,553 49,614,779
Prepaid expenses and other current assets 12,587,424 9,362,500
----------- -----------
Total current assets 98,468,786 77,826,902
Property and equipment, less accumulated
depreciation and amortization of
$58,503,014 and $54,944,079 at 1996 and
1995, respectively 61,465,200 54,572,903
Computer software, less accumulated
amortization of $22,547,632 and
$16,317,318 at 1996 and 1995, respectively 38,295,115 39,215,561
Other assets 37,843,870 27,384,435
----------- -----------
Total assets $ 236,072,971 198,999,801
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 7,725,590 5,811,334
Current portion of long-term debt
and obligations under capital leases 214,929 243,786
Accrued employee benefits 11,363,404 10,412,551
Other current liabilities (includes
$1,568,640 and $1,578,899 payable to
related parties at 1996 and 1995,
respectively) 34,331,134 21,113,104
----------- -----------
Total current liabilities 53,635,057 37,580,775
Long-term debt and obligations under
capital leases, excluding current portion 549,556 686,955
Deferred income taxes 16,276,600 16,260,050
----------- -----------
Total liabilities 70,461,213 54,527,780
----------- -----------
Shareholders' equity:
Common stock - $.10 par value. Authorized
300,000,000 shares; issued 129,483,522
and 129,461,544 at 1996 and 1995,
respectively; 129,289,680 and 129,266,744
outstanding at 1996 and 1995, respectively 12,948,352 12,946,154
Additional paid-in capital 5,193,072 4,445,755
Treasury stock, at cost (473,544) (475,789)
Cumulative currency translation adjustments (1,516,840) (1,052,081)
Retained earnings 149,460,718 128,607,982
----------- -----------
Total shareholders' equity 165,611,758 144,472,021
----------- -----------
Total liabilities and
shareholders' equity $ 236,072,971 198,999,801
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE>
<TABLE>
TOTAL SYSTEM SERVICES, INC.
Consolidated Statements of Income
(Unaudited)
<CAPTION>
Three months ended
September 30,
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Bankcard data processing services
(includes $5,062,612 and $3,780,983
from related parties for the three
months ended September 30, 1996 and
1995, respectively) $ 70,462,592 58,191,627
Other services 9,716,062 7,916,689
----------- -----------
Total revenues 80,178,654 66,108,316
----------- -----------
Expenses:
Salaries and other personnel expense 31,385,770 23,353,826
Net occupancy and equipment expense 22,049,463 16,883,059
Other operating expenses (includes
$2,451,803 and $1,713,976 to related
parties for the three months ended
September 30, 1996 and 1995,
respectively) 12,137,859 15,125,002
----------- -----------
Total operating expenses 65,573,092 55,361,887
----------- -----------
Equity in income of joint ventures 2,663,249 328,870
----------- -----------
Operating income 17,268,811 11,075,299
----------- -----------
Nonoperating income:
Gain(loss) on disposal of equipment, net (181,193) 67,103
Interest income, net (includes $337,714
and $149,136 from a related party for the
three months ended September 30, 1996
and 1995, respectively) 346,759 155,057
----------- -----------
Total nonoperating income 165,566 222,160
----------- -----------
Income before income taxes 17,434,377 11,297,459
Income taxes 6,087,467 3,907,549
----------- -----------
Net income $ 11,346,910 7,389,910
=========== ===========
Net income per share $ .09 .06
=========== ===========
Weighted average shares outstanding 129,289,565 129,262,588
=========== ===========
Cash dividends per common share $ .012 .011
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE>
<TABLE>
TOTAL SYSTEM SERVICES, INC.
Consolidated Statements of Income
(Unaudited)
Nine months ended
September 30,
------------------------
1996 1995
---------- --------
<S> <C> <C>
Revenues:
Bankcard data processing services
(includes $15,045,970 and $5,451,953
from related parties for the nine months
ended September 30, 1996 and 1995,
respectively) $ 198,125,300 156,007,944
Other services 27,644,720 22,613,906
----------- -----------
Total revenues 225,770,020 178,621,850
----------- -----------
Expenses:
Salaries and other personnel expense 91,865,416 68,419,687
Net occupancy and equipment expense 61,160,947 47,946,786
Other operating expenses (includes
$7,253,910 and $1,975,597 to related
parties for the nine months ended
September 30, 1996 and 1995, respectively) 40,278,912 33,724,928
----------- -----------
Total operating expenses 193,305,275 150,091,401
----------- -----------
Equity in income(loss) of joint ventures 5,037,075 (335,254)
----------- -----------
Operating income 37,501,820 28,195,195
----------- -----------
Nonoperating income:
Gain on disposal of equipment, net 58,159 145,610
Interest income, net (includes $892,895
and $421,783 from a related party for the
nine months ended September 30, 1996 and
1995, respectively) 918,056 447,327
----------- -----------
Total nonoperating income 976,215 592,937
----------- -----------
Income before income taxes 38,478,035 28,788,132
Income taxes 13,261,794 10,601,124
----------- -----------
Net income $ 25,216,241 18,187,008
=========== ===========
Net income per share $ .20 .14
=========== ===========
Weighted average shares outstanding 129,285,759 129,262,588
=========== ===========
Cash dividends per common share $ .034 .034
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 5 -
<PAGE>
<TABLE>
TOTAL SYSTEM SERVICES, INC.
Consolidated Statements of Cash Flows
<CAPTION>
Nine months ended
September 30,
-----------------------
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 25,216,241 18,187,008
Adjustments to reconcile net income
to net cash provided by operating activities:
Equity in (income)loss of joint ventures (5,037,075) 335,254
Depreciation and amortization 17,102,354 15,503,471
Provision for doubtful accounts 62,500 436,095
Deferred income tax expense 16,550 572,398
Gain on disposal of equipment, net (58,159) (145,610)
(Increase) decrease in:
Accounts receivable (6,339,274) (9,838,553)
Prepaid expenses and other assets (2,664,634) 1,200,611
Increase (decrease) in:
Accounts payable 1,914,256 2,454,603
Accrued expenses and other current
liabilities 13,891,972 7,213,095
----------- -----------
Net cash provided by operating activities 44,104,731 35,918,372
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (15,095,204) (8,084,356)
Additions to computer software (5,601,218) (5,912,220)
Proceeds from disposal of equipment 649,314 720,903
Investment in joint ventures (2,295,283) (3,455,865)
Increase in contract acquisition costs (6,095,211) (9,004,205)
Purchase of short-term investment (5,000,000) --
----------- -----------
Net cash used in investing activities (33,437,602) (25,735,743)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt -- 1,965,775
Principal payments on long-term debt and
capital lease obligations (166,256) (164,284)
Dividends paid on common stock (4,363,247) (4,362,613)
Proceeds from exercise of stock option 2,560 --
----------- -----------
Net cash used in financing activities (4,526,943) (2,561,122)
----------- -----------
Net increase in cash and cash equivalents 6,140,186 7,621,507
Cash and cash equivalents at
beginning of period 18,849,623 14,684,674
----------- -----------
Cash and cash equivalents at
end of period $ 24,989,809 22,306,181
=========== ===========
Cash paid for interest $ 16,872 80,250
=========== ===========
Cash paid for income taxes $ 13,011,752 10,842,190
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 6 -
<PAGE>
TOTAL SYSTEM SERVICES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements represent
the accounts of Total System Services, Inc. [service mark] (TSYS [registered
service mark]) and its wholly owned subsidiaries, Columbus Depot Equipment
Company [service mark] (CDEC [service mark]), Mailtek, Inc. [service mark]
(Mailtek), Lincoln Marketing, Inc. [service mark] (LMI) and Columbus
Productions, Inc. [service mark] (CPI). The statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all
information and footnotes necessary for fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. All adjustments, consisting of normal
recurring accruals, which, in the opinion of management, are necessary for a
fair statement of financial position and results of operations for the periods
covered by this report have been included. The accompanying unaudited
consolidated financial statements should be read in conjunction with the
Company's consolidated financial statements and related notes appearing in the
Company's 1995 annual report previously filed on Form 10-K. Certain
reclassifications have been made to the 1995 Consolidated Financial Statements
contained herein to conform with the presentation adopted in 1996.
Note 2 - Stock Split
On March 29, 1996, TSYS declared a two-for-one stock split, which was
effected on April 22, 1996, in the form of a 100% stock dividend on its $.10
par value common stock. All shareholders' equity, share and per share amounts
in the accompanying consolidated financial statements have been restated to
give effect to the split. Prior to the split, TSYS' charter was amended to
increase authorized shares from 100 million to 300 million.
Note 3 - Joint Venture
Effective May 1, 1996, Vital Processing Services L.L.C. ("Vital")
became operational. Vital is an equally owned joint venture between Visa
U.S.A.'s Merchant Bank Services ("Visa") and Total System Services, Inc., to
which TSYS contributed cash and other assets. The joint venture combines
Visa's point-of-sale processing operations and TSYS' merchant accounting and
settlement services and is being accounted for using the equity method of
accounting.
Note 4 - Supplementary Balance Sheet Information
A significant component of other assets included on the consolidated
balance sheets at September 30, 1996, and December 31, 1995, is contract
acquisition costs,
- 7 -
<PAGE>
Notes to Consolidated Financial Statements (continued)
net, of $18,599,386 and $17,628,448, respectively. Also, included in other
current liabilities at September 30, 1996 and December 31, 1995, are reserves
of $4,101,011 and $1,830,791, respectively, to cover transaction processing
provisions (see discussion included in Liquidity and Capital Resources).
- 8 -
<PAGE>
TOTAL SYSTEM SERVICES, INC.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The following table sets forth certain revenue and expense items as
a percentage of total revenues and the percentage increases or decreases
in those items for the three months ended September 30:
Percentage of
Total Revenues Change in Dollars
-------------------- -----------------
1996 1995 1996 vs 1995
---- ---- ------------
Revenues:
Bankcard data processing
services 87.9% 88.0% 21.1%
Other services 12.1 12.0 22.7
----- -----
Total revenues 100.0 100.0 21.3
----- -----
Expenses:
Salaries and other
personnel expense 39.2 35.3 34.4
Net occupancy and
equipment expense 27.5 25.5 30.6
Other operating expenses 15.1 22.9 (19.7)
----- -----
Total operating
expense 81.8 83.7 18.4
----- -----
Equity in income of joint
ventures 3.3 0.5 nm
----- -----
Operating income 21.5 16.8 55.9
Nonoperating income 0.3 0.3 (25.5)
----- -----
Income before
income taxes 21.8 17.1 54.3
Income taxes 7.6 5.9 55.8
----- -----
Net income 14.2% 11.2% 53.5%
===== =====
nm - not meaningful
- 9 -
<PAGE>
Results of Operations (continued)
The following table sets forth certain revenue and expense items as
a percentage of total revenues and the percentage increases or decreases in
those items for the nine months ended September 30:
Percentage of
Total Revenues Change in Dollars
---------------------- -----------------
1996 1995 1996 vs 1995
---- ---- ------------
Revenues:
Bankcard data processing
services 87.8% 87.3% 27.0%
Other services 12.2 12.7 22.2
----- -----
Total revenues 100.0 100.0 26.4
----- -----
Expenses:
Salaries and other
personnel expense 40.7 38.3 34.3
Net occupancy and
equipment expense 27.1 26.8 27.6
Other operating expenses 17.8 18.9 19.4
----- -----
Total operating
expenses 85.6 84.0 28.8
----- -----
Equity in income(loss)
of joint ventures 2.2 (0.2) nm
----- -----
Operating income 16.6 15.8 33.0
Nonoperating income 0.4 0.3 64.6
----- -----
Income before
income taxes 17.0 16.1 33.7
Income taxes 5.8 5.9 25.1
----- -----
Net income 11.2% 10.2% 38.6%
===== =====
nm - not meaningful
Total revenues increased $14.1 million, or 21.3%, and $47.1 million, or
26.4%, during the three months and nine months ended September 30, 1996,
compared to the same periods in 1995.
Revenues from bankcard data processing services increased $12.3 million
or 21.1%, and $42.1 million, or 27.0%, in the three months and nine months
ended September 30, 1996, respectively, compared to the same periods of 1995.
Increased revenues from bankcard data processing are attributable to the
conversion of cardholder accounts of new customers and growth in the card
portfolios of existing customers. Increases in the volume of authorizations
and transactions associated with the additional cardholder
- 10 -
<PAGE>
Results of Operations (continued)
accounts, as well as growth in new services offered, also contributed to the
increased revenues. Another significant factor in the growth in bankcard data
processing revenues for the nine months ended September 30, 1996, is the more
than 3.5 million cardholder accounts being processed for Total System Services
de Mexico, S.A. de C.V. ("TSYS de Mexico"), TSYS' Mexican joint venture;
the conversion of these accounts to THE TOTAL SYSTEM [service mark] was
completed in July 1995.
Average cardholder accounts on file for the three months and nine months
ended September 30, 1996, were 75.7 million and 69.8 million, respectively;
average cardholder accounts on file for the same periods in 1995 were 57.2
million and 50.4 million. Cardholder accounts on file at September 30, 1996,
were 77.2 million, a 33.2% increase over the 58.0 million accounts on file at
September 30, 1995.
The joint venture between TSYS and Visa U.S.A., known as Vital Processing
Services L.L.C., became operational on May 1, 1996. Vital merges TSYS' back-
office merchant processing and Visa's Merchant Bank Services' point-of-sale
processing operations. On TSYS' consolidated income statement, the results of
operations of the joint venture subsequent to April 30, 1996, are included in
equity in the income of joint ventures. The change in classification of the
Company's revenues and expenses from its merchant operations to an equity
interest in the Vital joint venture, effective May 1, 1996, affects the
comparability between periods presented in the Company's income statements.
A significant amount of the Company's revenues is derived from certain
major customers who are processed under long-term contracts. For the three
months and nine months ended September 30, 1996, two customers accounted for
approximately 29% and 30% of total revenues, respectively. As a result, the
loss of one of the Company's major customers could have a material adverse
effect on the Company's results of operations.
TSYS has had two successful conversions of certain Bank of America
cardholder accounts to TS2. Conversions to TS2 of remaining portions of Bank
of America's cardholder accounts are currently expected to continue into
1997. Management believes all of Bank of America's cardholder accounts will
be successfully converted to TS2.
During the second quarter, TSYS and Bank of America amended their
processing agreement to, among other things, eliminate the financial penalties
and termination rights associated with prior conversion delays. The conversion
and processing of Bank of America's cardholder accounts is not expected to
have a material impact on TSYS' 1996 financial condition or results of
operations.
Revenues from other services, primarily generated by TSYS' wholly owned
subsidiaries, increased 22.7% and 22.2% for the three months and nine months
ended September 30, 1996, compared to the same periods in 1995. The increase
in revenues can
- 11 -
<PAGE>
Results of Operations (continued)
be attributed primarily to increased business from existing customers and the
acquisition of two significant new customers by one subsidiary of TSYS.
Total operating expenses increased 18.4% and 28.8% for the three months
and nine months ended September 30, 1996, compared to the same periods in 1995.
Increases in expenses are reflected in most categories and are attributable to
the addition of personnel and equipment; the cost of materials associated with
the services provided by all companies, particularly the supplies related to
processing the increased number of accounts on THE TOTAL SYSTEM; certain
processing provisions, and expenses associated with the converion of customers
to TS2.
Employment expenses increased 34.4% and 34.3% for the three months and
nine months ended September 30, 1996, respectively, compared to the same
periods in 1995. The average number of employees in the third quarter of 1996
increased to 2,551, a 23.9% increase over the 2,059 in the same period of 1995.
For the nine months ended September 30, 1996, the average number of employees
was 2,456, an 18.8% increase over the 2,068 in the same period of 1995. In
addition to the growth in number of employees, the increase in employment
expenses is attributable to normal salary increases and related employee
benefits. Nonemployee compensation, primarily temporary help and contract
programmers, increased 55.8% and 35.3% for the three months and nine months
ended September 30, 1996, compared to the same periods in 1995; nonemployee
compensation is included in employment expenses. At October 31, 1996, TSYS
had 2,564 full-time and 91 part-time employees.
Net occupancy and equipment expense was up 30.6% and 27.6% for the third
quarter and first nine months of 1996, respectively, over the same periods in
1995. Equipment and software rentals, the largest components of occupancy and
equipment expense, were up 45.4% and 36.5% in the third quarter and first nine
months of 1996, respectively, compared to the same periods of 1995. Due to
rapidly changing technology in computer equipment, TSYS fills a substantial
portion of its equipment needs through operating leases. Computer upgrades and
other additional equipment were leased subsequent to the first half of 1995 to
accomodate increased volumes due to growth in the number of accounts being
processed.
Other operating expenses decreased 19.7% for the three months ended
September 30, 1996, and increased 19.4% for the nine months ended September
30, 1996, compared to the same periods in 1995. Management fees totaling $2.4
million and $7.2 million were paid to affiliated companies for various
services in the three months and nine months ended September 30, 1996,
respectively, compared to $1.7 million and $1.9 million, respectively,
for the same periods of 1995. The majority of these management fees
resulted from the formation of Synovus Services Corp. and are included in
other operating expenses in the third quarter and first nine months of 1996,
but were primarily reflected as salaries and other personnel expenses prior
to July of 1995. Other factors contributing to the
- 12 -
<PAGE>
Results of Operations (continued)
year-to-date increase in other operating expenses were supplies associated
with processing the increased number of accounts and increased travel costs.
Other operating expenses also increased as a result of certain provisions made
for processing commitments and contingencies. These provisions were
established in view of the increased risks associated with the significant
increase in the number of accounts being processed. Factors contributing to
the decrease in other expenses in the third quarter of 1996 were a significant
reduction in the use of outside professional services as well as a decrease
in provisions for processing commitments.
TSYS'share of income from its equity in joint ventures was $2.7 million
and $5.0 million for the third quarter and first nine months of 1996,
respectively. TSYS has a 49% and 50% interest in Total System Services de
Mexico, S.A. de C.V. and Vital Processing Services L.L.C., respectively.
Vital became operational May 1, 1996.
TSYS de Mexico continues to perform as expected, although current
production volumes are showing signs of decreasing. The Mexican economy
continues to stabilize relative to 1995; however, there remains uncertainty
in the Mexican economy which management continues to monitor.
Interest income, net, includes interest expense of $12,264 and $66,452
and interest income of $359,023 and $221,509 for the third quarters of 1996
and 1995, respectively. For the first nine months of 1996 and 1995,
respectively, interest expense was $41,921 and $108,262, and interest income
was $959,977 and $555,589. Interest expense has decreased due to a reduction
in debt outstanding. The increase in interest income is the result of
fluctuations in cash available for investment and short-term interest rates.
Additionally, in the third quarter of 1996, $5.0 million was invested in a
six-month certificate of deposit at a higher rate of interest.
TSYS' effective income tax rate for the third quarter of 1996 was
34.9%, compared to 34.6% for the same period in 1995. For the nine months
ended September 30, 1996, the effective tax rate was 34.5%, compared to 36.8%
for the nine months ended September 30, 1995. The decline in TSYS' effective
tax rate is primarily due to certain effective tax planning strategies.
- 13 -
<PAGE>
Liquidity and Capital Resources
During the third quarter of 1996, TSYS purchased property and equipment
of $3.5 million for total purchases of $15.1 million in the first nine
months of 1996. Computer software increased during the third quarter by $2.2
million, bringing the total additions for 1996 to $5.6 million; additions
were primarily purchased software. Dividends on common stock of $1.5 million
were paid in the third quarter of 1996, bringing the total dividends paid in
1996 to $4.4 million.
In the third quarter of 1996, TSYS reevaluated its business insurance
risks and determined it was more cost effective to accept the financial impact
for normal risks associated with its business as a processor of significant
transaction levels and utilize insurance to protect TSYS from catastrophic
events. As a result, TSYS increased its coverage for errors and omissions
and raised its deductible amount. TSYS has increased its accrual for
provisions considered part of normal transaction processing risks. At
September 30, 1996, the reserve for such risks was $4.1 million, compared to
$1.8 million at December 31, 1995. These risks primarily relate to customer
reimbursements or adjustments as a result of transaction processing errors
which are inherent in the processing of the volume of business done by TSYS.
During the first quarter of 1996, TSYS announced its decision to remain
in Columbus, Georgia, and build a new campus-type facility on 50 acres of land
north of downtown Columbus. The decision was based on a commitment by the
state of Georgia to collegiate high-tech education and cooperation by the
city of Columbus in making available a suitable building site. The campus
facility will consolidate most of TSYS' multiple Columbus locations and will
facilitate future growth. The campus development will be a multi-year phased
project with initial construction scheduled to begin by mid 1997. Financing
for the project is expected to be through the internal generation of funds
and the use of funds from external sources, possibly through the issuance of
industrial revenue bonds. On October 22, 1996, TSYS announced it has
commissioned Cousins Properties Incorporated, headquartered in Atlanta,
Georgia, for consultation and development management of the new campus.
TSYS may seek external sources of capital in the future. The form of any
such financing will vary depending upon prevailing market and other conditions
and may include short-term or long-term borrowings from financial institutions,
or the issuance of additional equity securities and/or industrial revenue
bonds. However, there can be no assurance that funds will be available on
terms acceptable to TSYS. Management expects that TSYS will continue to be
able to fund a significant portion of its capital expenditure needs through
internally generated cash in the future. At September 30, 1996, TSYS had
working capital of $39.8 million compared to $40.2 million at December 31,
1995.
- 14 -
<PAGE>
TOTAL SYSTEM SERVICES, INC.
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
a) Exhibits
(11) - Statement re Computation of Per Share Earnings
(27) - Financial Data Schedule (For SEC use only)
b) Form 8-K filed during the quarter ended September 30, 1996
1. The report dated September 16, 1996, included the following important
event:
On September 16, 1996, Total System Services, Inc. ("Registrant")
announced that it is expected that earnings for 1996 will exceed
current analysts' estimates by approximately 10%.
- 15 -
<PAGE>
TOTAL SYSTEM SERVICES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TOTAL SYSTEM SERVICES, INC.
Date: November 13, 1996 by: /s/ Richard W. Ussery
---------------------
Richard W. Ussery
Chairman of the Board
and Chief Executive
Officer
Date: November 13, 1996 by: /s/ James B. Lipham
---------------------
James B. Lipham
Chief Financial Officer
- 16 -
<PAGE>
<TABLE>
TOTAL SYSTEM SERVICES, INC.
Statement re Computation of Per Share Earnings
The following computations set forth the calculations of primary and fully
diluted earnings per share for the three months and nine months ended September
30, 1996 and 1995:
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
-------------------- --------------------
Fully Fully
Primary Diluted Primary Diluted
Earnings Earnings Earnings Earnings
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 11,346,910 $ 11,346,910 $ 25,216,241 $ 25,216,241
=========== =========== =========== ===========
Weighted average
number of common
shares outstanding 129,289,565 129,289,565 129,285,759 129,285,759
Increase due to
assumed issuance of
shares related to
stock options
outstanding 164,151 167,193 160,594 167,193
----------- ----------- ----------- -----------
Adjusted weighted
average number of
common and common
equivalent shares
outstanding 129,453,716 129,456,758 129,446,353 129,452,952
=========== =========== =========== ===========
Net income per
common and common
equivalent share $ .09 $ .09 $ .20 $ .20
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1995 September 30, 1995
-------------------- --------------------
Fully Fully
Primary Diluted Primary Diluted
Earnings Earnings Earnings Earnings
Per Share Per Share Per Share Per Share
<S> <C> <C> <C> <C>
Net income $ 7,389,910 $ 7,389,910 $ 18,187,008 $ 18,187,008
=========== =========== =========== ===========
Weighted average
number of common
shares outstanding 129,262,588 129,262,588 129,262,588 129,262,588
Increase due to
assumed issuance of
shares related to
stock options
outstanding 130,690 138,680 124,752 138,680
----------- ----------- ----------- -----------
Adjusted weighted
average number of
common and common
equivalent shares
outstanding 129,393,278 129,401,268 129,387,340 129,401,268
=========== =========== =========== ===========
Net income per
common and common
equivalent share $ .06 $ .06 $ .14 $ .14
=========== =========== ========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000721683
<NAME> TOTAL SYSTEM SERVICES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 24,989,809
<SECURITIES> 0
<RECEIVABLES> 56,599,491
<ALLOWANCES> 707,938
<INVENTORY> 0
<CURRENT-ASSETS> 93,468,786
<PP&E> 119,968,214
<DEPRECIATION> 58,503,014
<TOTAL-ASSETS> 236,072,971
<CURRENT-LIABILITIES> 53,635,057
<BONDS> 0
0
0
<COMMON> 12,948,352
<OTHER-SE> 152,663,406
<TOTAL-LIABILITY-AND-EQUITY> 236,072,971
<SALES> 225,770,020
<TOTAL-REVENUES> 225,770,020
<CGS> 0
<TOTAL-COSTS> 193,305,275
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 38,478,035
<INCOME-TAX> 13,261,794
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,216,241
<EPS-PRIMARY> .20<F1>
<EPS-DILUTED> 0
<FN>
<F1> On March 29, 1996, TSYS announced a two-for-one stock split that was
issued on April 22, 1996, to shareholders of record as of April 11, 1996.
Financial data schedules have not been restated for prior periods for this
recapitalization.
</FN>
</TABLE>
